Texas-Sunnyvale Sublease - Kmart Corp. and Dal-Tile
SUBLEASE
This sublease is made as of the 3 day of February, 1997 between KMART
CORPORATION, 3100 West Big Beaver Road, Troy, Michigan 48084 ("Sublessor"), and
DAL-TILE Corporation, a Pennsylvania corporation having an address 7834 C.F.
Hawn Freeway, Dallas Texas 75217 ("Sublessee").
Recitals:
--------
A. Metropolitan Life Insurance Company, a New York corporation, ("Prime
Lessor") and Sublessor entered into that certain lease, dated February, 1989,
(the "Prime Lease"), whereby the Prime Lessor leased to Sublessor certain land
and building in the City of Sunnyvale, Dallas County, Texas together with
certain non-exclusive rights and easements, all as more fully described on
Exhibit "A" attached hereto and made a part hereof (the "Demised Premises").
B. Sublessor and Sublessee desire to enter into a Sublease of the Demised
Premises upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the Demised Premises, the rents
reserved herein and the mutual benefits to be derived by Sublessor and
Sublessee, the parties hereby agree as follows:
1. Base Rent. Sublessee agrees to pay to Sublessor annual rent ("Base
---------
Rent") as follows: a) for the first two months of the term of this Sublease the
Base Rent shall be abated; b) for the third month through the thirty-sixth month
of the term of this Sublease, the Base Rent shall be One Million One Hundred Ten
Thousand Three Hundred Seventy Five and no/100 Dollars ($1,110,375.00) payable
in monthly installments of Ninety Two Thousand Five Hundred Thirty One and
25/100 Dollars ($92,531.25) each; c) for the thirty-seventh month through the
seventy second month of the term of this Sublease, the annual Base Rent shall be
One Million One Hundred Fifty Seven Thousand Six Hundred Twenty Five and 00/100
Dollars ($1,157,625.00) payable in monthly installments of Ninety Six Thousand
Four Hundred Sixty Eight and 75/100 Dollars ($96,468.75) each; d) if Sublessee
shall elect to extend the term hereof, for the First Extended Term of this
Sublease, the Basic Rent shall be One Million Two Hundred Fifty Two Thousand One
Hundred Twenty Five and 00/100 Dollars ($1,252,125.00) payable in monthly
installments of One Hundred Four Thousand Three Hundred Forty Three and 75/100
Dollars ($104,343.75) each; and e) for the Second Extended Term of this Sublease
the Base Rent shall be One Million Three Hundred Forty Six Thousand Six Thousand
Twenty Five and 00/100 Dollars ($1,346,625.00), payable in monthly installments
of One Hundred Twelve Thousand Two Hundred Eighteen and 75/100 Dollars
($112,218.75). Each installment shall be due on the first day of each calendar
month, and provided that Sublessor is able to obtain the agreement of Prime
Lessor as set forth in Section 6(e) below, shall be made at such place as may
from time to time be designated by Sublessor, in writing, and without previous
demand, setoff or deduction whatsoever; in the event that Sublessor is unable to
obtain the agreement of Prime Lessor as set forth in Section 6(e), then and in
that event, Sublessee shall pay a portion
<PAGE>
of the Basic Rent directly to Prime Lessor each month equal to the installment
of rent due to Prime Lessor under the Prime Lease, and shall pay the balance of
the Basic Rental installment each month to Sublessor and deliver therewith a
copy of the check for rent sent to the Prime Lessor. If the term of this
Sublease commences on a day other than the first of the month or ends on a day
other than the last day of the month (for a reason other than termination of the
Sublease on account of Sublessee's default), Base Rent for such month shall be
prorated. Prorated Base Rent for any such partial first month of the term hereof
shall be paid on the date on which the term commences and Base Rent for a
partial final month of the term shall be prorated on a daily basis and be
refunded to Sublessee.
2. Sublease Term. (a) Primary Term. Sublessor hereby subleases and
------------- ------------
demises to Sublessee and Sublessee hereby subleases and takes from Sublessor the
Demised Premises for an initial term commencing on the earlier of the thirty
first day from the date hereof or the date upon which the conditions of Sections
22(c) and 22(d) of the Prime Lease are satisfied (the "Term Commencement Date")
and ending on January 30, 2003 (the "Primary Term"). Sublessor agrees to deliver
to Sublessee and Sublessee agrees to accept from Sublessor exclusive possession
of the Demised Premises on the Term Commencement Date and Sublessee shall
thereafter have all of the rights and obligations of Tenant under the Prime
Lease, except as hereinafter set forth. Sublessor hereby agrees that Sublessee
shall have the benefit of all representations, rights and covenants provided to
Sublessor under the Prime Lease as fully and completely as if such
representations, rights and covenants were made by Prime Lessor directly to
Sublessee. From and after the date of this Sublease until the Term Commencement
Date, Sublessee shall have a license to enter upon the Demised Premises at
reasonable times and upon reasonable notice, in order to minimize interference
with the conduct of Sublessor's business and from time to time to make
inspections and investigations, to show the Demised Premises to contractors, to
professional consultants and others. All such entries by Sublessee and its
employees, agents, and invitees shall be at Sublessee's own risk and expense and
Sublessee agrees to indemnify Sublessor from and against any loss, cost,
liability or damage which results from Sublessee's rights of entry provided for
herein.
(b) Extension Terms. Sublessee shall have the option to extend the
---------------
term of Sublease for two successive terms, the first of which ("First Extended
Term") shall be for a period of six (6) years, and the second of which ("Second
Extended Term") shall commence at the end of the First Extended Term and shall
terminate on March 14, 2014, provided:
(i) Sublessee shall give Sublessor written notice of the
exercise of its option not less than nine (9) months prior to the expiration of
the then existing term hereof;
(ii) Sublessee shall not at the time of such exercise or at the
commencement of the extension term, be in default under the terms of this
Sublease; and
(iii) each such extension term shall be upon the terms and
conditions as set forth herein.
3. Prime Lease Obligations. (a) Sublessor shall be responsible for the
-----------------------
maintenance and repair of the roof of the Demised Premises.
2
<PAGE>
(b) Except as otherwise specifically provided herein, Sublessee agrees
to pay and perform Sublessor's obligations under the Prime Lease which are to be
performed after the date hereof, other than the obligation to pay the annual
rental required under the terms of Section 3, of the Prime Lease ("Prime Lease
Rent"). All payments to be made to governmental authorities and other third
parties shall be made by Sublessee on or before the due date. All such payments
shall be made directly to such governmental authorities or third parties.
Sublessor may from time to time request and Sublessee shall supply evidence of
payment. Sublessee shall have the same rights with respect to the timing and
manner of payments as Sublessor would have had under the Prime Lease including,
without limitation, the right to contest the imposition or amount of any tax or
other governmental assessment or levy, or the application to Sublessee or the
Demised Premises of any law, rule, regulation, order, ordinance or other form of
governmental regulation, to the same extent that Sublessor could do so under the
Prime Lease. Sublessor shall forward to Sublessee immediately upon receipt all
bills, invoices, statements, notices, orders or communications of any kind
concerning or pertainig to any matter or thing for which Sublessee is or may be
responsible hereunder.
(c) All amounts which Sublessee is required to pay pursuant to this
Sublease (other than Base Rent), together with every fine, penalty, interest and
cost which may be added for non-payment or late payment thereof, (other than
non-payment or late payment attributable to Sublessor's failure or delay in
forwarding bills invoices, statements or notices relating to such required
payment), shall constitute additional rent ("Additional Rent"). In the event
that Sublessee shall fail to make any payment of Additional Rent for five (5)
days following notice that the same was not paid when due, Sublessor shall have
the right to make such payment on Sublessee's behalf and to demand reimbursement
of such amount from Sublessee.
(d) If any installment of Base Rent shall not be paid on its due date,
Sublessee shall pay to Sublessor, on demand, interest at the rate provided for
late payments of Prime Lease Rent under the Prime Lease (or the highest interest
rate allowed by law, whichever is lower) on the amount of such installment from
the due date thereof until paid. Sublessee shall pay to Sublessor, on demand,
interest at such rate on all overdue Additional Rent paid by Sublessor on behalf
of Sublessee from the date of payment by Sublessor until repaid by Sublessee.
(e) Sublessor agrees that it will pay to Prime Lessor, on or before
the date due, all installments of annual rent which are due under the Prime
Lease and shall otherwise comply with all terms and conditions of the Prime
Lease which are not undertaken by Sublessee under this Sublease. Sublessor
agrees that it will, upon request of Sublessee, pursue any rights which it may
have under the Prime Lease against the Prime Lessor in the event that the Prime
Lessor shall fail to comply with a request by the Sublessee under the Prime
Lease.
4. Use. The Demised Premises are agreed to contain 472,500 square feet
---
and may be used by Sublessee solely as a warehouse and distribution facility and
not for any manufacturing activities. The foregoing notwithstanding, Sublessee
shall not use the Demised Premises nor permit the Demised Premises to be used,
directly or indirectly, for: a massage parlor, adult book store or pornographic
display of any nature; gas station, auto service or repair center; junk yard or
dump; dry cleaner; or any use involving the operation of a below ground storage
tank or the use or sale on the Demised Premises of toxic, hazardous or explosive
substances, in violation of applicable law.
3
<PAGE>
5. Title and Condition of Demised Premises. Sublessor will remove all of
---------------------------------------
its equipment from the Demised Premises, except the security system and
equipment utilized in the operation of the building and systems, prior to tender
of possession. Except as specifically provided in Section 7, (a)(v) below, (a).
The Demised Premises are subleased to Sublessee in their present condition by
Sublessor, without representation or warranty, subject to: (i) the Prime Lease
and all other easements, agreements, covenants and matters of record, (ii) all
taxes not yet due and payable, and (iii) subject to paragraph 4 above, all
applicable zoning rules, restrictions, regulations, resolutions and ordinances
and building restrictions and governmental regulations now or hereafter in
effect.
(b) By execution of this Sublease, Sublessee acknowledges and agrees
that it shall accept the Demised Premises on the Term Commencement Date in its
then "as is" and "where is" condition, provided that there has been no change or
deterioration in the Demised Premises from the date hereof other than change or
deterioration caused by Sublessee's use of the Demised Premises. Sublessee
acknowledges and agrees that neither Sublessor nor its agents or employees has
made any express warranty or representation regarding the physical or
environmental condition of the Demised Premises, the quality or workmanship of
the Demised Premises, latent or patent, or the fitness of the Demised Premises
for any particular use or purpose and that no such representation or warranty
shall be implied by law, it being agreed that all such risks are to be borne by
Sublessee.
(c) Sublessor makes no representation or warranty, express or
implied, with respect to the necessity (or lack of necessity) for or
availability of any permits, licenses or other governmental authorizations in
order to modify, alter or change the Demised Premises or to operate the Demised
Premises for the uses intended by Sublessee, it being agreed that all such risks
are to be borne by Sublessee.
(d) Upon termination of this Sublease, Sublessee shall remove all of
its equipment from the Demised Premises, repair any damage caused by such
removal and return the Demised Premises, broom clean and in the same condition
as received, ordinary wear and tear excepted.
6. The Prime Lease. (a) This Sublease and all rights of Sublease
---------------
hereunder and with respect to the Demised Premises are subject to the terms,
conditions and provisions of the Prime Lease. Sublessee shall have all of the
rights of Sublessor vis a vis the Landlord to enforce the obligations of the
Landlord under the Prime Lease.
(b) Without limitation of the foregoing:
(i) if Sublease desires to take any action, including structural
changes within the Demised Premises, and the Prime Lease would require the
Sublessor obtain the consent of the Prime Lessor before undertaking any action
of the same kind, Sublessee shall not undertake the same without the prior
written consent of Sublessor. Sublessor may condition its consent on the consent
of the Prime Lessor being obtained, and may require Sublessee to contact the
Prime Lessor directly for such consent but Sublessor shall not otherwise
unreasonably withhold, delay or condition its consent;
(ii) Sublessor shall also have all rights, and all privileges,
options, reservations and remedies, granted or allowed to, or held by, the Prime
Lessor under the
4
<PAGE>
Prime Lease to the extent that the exercise of those rights is not inconsistent
with the terms of the Sublease;
(iii) Sublessee shall maintain insurance of the kinds required to
be maintained by Sublessor under the Prime Lease and including any rights of
self insurance subject to the Net Worth Requirement under the Prime Lease, and
the consent of Prime Lessor. All policies of liability insurance shall name the
Prime Lessor and Sublessor as additional insured and all physical damage
insurance shall insure Prime Lessor as its interest may appear; provided, that
Sublessee shall not be entitled to any insurance proceeds from policies which
may be carried by Sublessor, and if Sublessor is required to repair or restore
improvements and betterments to the Demised Premises insured by Sublessee,
Sublessee shall make available all insurance proceeds for such repair or
restoration to Prime Lessor; provided, however, that at the election of
Sublessee, Sublessor will maintain the insurance required to be maintained under
the Prime Lease, and Sublessee shall reimburse Sublessor therefore at the rate
of Forty Seven Thousand Two Hundred Fifty and no/100 Dollars (47,250.00) per
annum payable in equal monthly installment of Three Thousand Nine Hundred Thirty
Seven and 50/100 Dollars ($3,937.50) in advance on the first of each calendar
month;
(iv) Neither Sublessor nor Sublessee shall do anything or suffer
or permit anything to be done which results in a default under the Prime Lease
or permit the Prime Lease to be canceled or terminated. Sublessor shall not
attempt or agree to amend modify, cancel or reject the Prime Lease without the
prior written consent of Sublessee which may be withheld or granted in
Sublessor's sole discretion.
(c) Notwithstanding anything contained herein or in the Prime Lease
which may appear to be to the contrary, Sublessor and Sublessee hereby agree as
follows
(i) Sublessee shall not assign, or otherwise transfer or permit
the transfer of the Sublease or any interest of Sublessee in this Sublease, by
operation of law or otherwise, or permit the use of the Demised Premises or any
part thereof by any persons other than Sublessee and Sublessee's employees, or
sublet the Demised Premises or any part thereof, except to the extent Sublessor
gives consent to a subletting or assignment; provided that no consent shall be
required for a full or partial assignment of this Sublease or a sub-sublease of
all or any portion of the Demised Premises to an entity which controls, is
controlled by or under common control with the Sublessee. Sublessor agrees that
it will not unreasonably withhold, delay or condition its consent to a proposed
subletting or assignment for which its consent is required, provided that
Sublessee shall remain liable under this Sublease;
(ii) neither rental nor other payments hereunder shall abate by
reason of any damage to or destruction of all or part of the Demised Premises or
the Building unless, and then only to the extent that, rent actually abates
under the Prime Lease with respect to the Demised Premises on account of such
event;
(iii) in the event of any conflict between the terms, conditions
and provisions of the Prime Lease and of this Sublease, the terms, conditions
and provisions of this Sublease shall govern and control.
5
<PAGE>
(d) Except as provided herein it is expressly understood and agreed that
Sublessor does not assume and shall not have any of the obligations or
liabilities of the Prime Lessor under the Prime Lease and that Sublessor is not
making the representations or warranties, if any, made by the Prime Lessor in
the prime Lease. With respect to work, services, repairs and restorations or the
performance of other obligations required of the Prime Lessor under the Prime
Lease, Sublessor's sole obligation with respect thereto shall be to request the
same, upon written request from Sublessee, and to use diligent efforts to abtain
the same from the Prime Lessor. Sublessor shall have the right to deal directly
with the Prime Lessor concerning the performance of Prime Lessor's obligations
under the Prime Lease. Sublessor shall not be liable in damages, nor shall rent
abate hereunder, for or on account of any failure by the Prime Lessor to perform
the obligations and duties imposed on it under the Prime Lease, except as set
forth in Section 6(c)(ii) above.
(e) Sublessor shall use its best commercially reasonable efforts to
obtain an agreement from Prime Lessor for the benefit of Sublessee, that Prime
Lessor shall give written notice of any default under the Prime Lease to
Sublessee and thereafter Sublessee shall have fifteen (15) days to cure such
default.
7. Representations and Warranties.
------------------------------
(a) Sublessor. Sublessor represents and warrants to Sublessee as
---------
follows:
(i) Sublessor is a corporation, duly organized, validly existing
and in good standing in the State of Michigan; it has full power and authority
to enter into this Sublease with Sublessee; it has duly authorized the execution
and delivery of this Sublease; the Sublease has been duly executed and delivered
and constitutes a valid and binding obligation of Sublessor, enforceable in
accordance with its terms; the execution and delivery of the Sublease does not
violate or contravene any document, instrument, agreement, rule, regulation or
order to which Sublessor is a party or by or under which Sublessor is bound; no
consent or approval of any person or entity is required for this Sublease which
has not been obtained. As of the execution and delivery of the Sublease,
Sublessor is solvent, and will not be rendered insolvent by the transaction
contemplated herein;
(ii) There is no litigation pending, or to Sublessor's best
knowledge, threatened by any person or entity which does or could affect the
Demised Premises, or the Prime Lease, or this Sublease; Sublessor has not been
notified that there is any violation of law at or with respect to the Demised
Premises;
(iii) The Prime Lease is in full force and effect, and has not been
terminated, amended, or modified except as indicated above. To the best of
Sublessor's knowledge and belief no default by Sublessor or Prime Lessor exists
under the Prime Lease and no event or act has occurred which, with the giving of
notice or passage of time or both, could ripen into a default under the Prime
Lease;
(iv) To the best of Sublessor's knowledge and belief, no
underground storage tanks are located on the Demised Premises;
6
<PAGE>
(v) The Demised Premises will be delivered broom clean,
equipment in proper working order and bolts will be removed or flush cut
and holes in the floor caused by equipment removal or excessive wear by material
handling equipment will be repaired to the extent required for safety;
(vi) The Commencement Date of the Prime Lease is March 15, 1989
and the Prime Lease shall terminate March 31, 2014;
(vii) On July 12, 1996, Sublessor sent written notice to Prime
Lessor of its intention to discontinue its operation at the Demised Premises and
of its desire to assign or sublet the Demised Premises, and that on the Term
Commencement Date, Sublessor shall not have received a notice of termination of
the Prime Lease from Prime Lessor.
(b) Sublessee represents and warrants to Sublessor that: (i)
Sublessee is a corporation, duly organized, validly existing and in good
standing under the laws of The State of Pennslyvania and has the power to own
its property and assets and carry on its business in the State of Texas;
(ii) the execution of this Sublease constitutes the binding
obligation of Sublessee;
(iii) the sublease of the Demised Premises will not conflict with
or result in a breach of Sublessee's Articles of Incorporation or By-laws or any
material agreement to which Sublessee is a party or by which it may be bound, or
violate any state or federal governmental law, statute, ordinance or regulation.
8. Notices, Demands and Other Instruments. All notices, demands or other
--------------------------------------
communications given pursuant to this Sublease shall be in writing and shall be
deemed given on the date mailed if mailed by nationally recognized overnight
courier or by registered or certified mail, return receipt requested, with
postage prepaid if: (a) when mailed to Sublessor, it is addressed to Sublessor
at its address set forth above, marked "Attention: Vice President - Corporate
Facilities," and (b) when mailed to Sublessee, it is addressed to Sublessee at
its address set forth above. The parties may specify any other address in the
United States with fifteen (15) days' notice.
To Sublessor: Kmart Corporation.
3100 West Big Beaver Road
Troy, Michigan 48084
Attn: Vice President Real Estate
Telecopier: 810-643-2689
With a copy to: Dickinson Wright, Moon, VanDusen
and Freeman
225 West Washington Street, #400
Chicago, Illinois 60606
Attention: Ronald B. Grais
Telecopier: 312-220-0021
7
<PAGE>
To Sublessee: Dal-Tile Corporation
7834 Hawn Freeway
Dallas, TX 75217
Attn: Manager-Real Estate
Telecopier: 214-309-4934
With a copy to: Godwin & Carlton
901 Main Street
Suite 3300
Dallas, TX 75202-3714
Attn: Joshua Mond
Telecopier: 214-760-7332
9. Separability. If any provision of this Sublease or its application to
------------
any persor or circumstance shall be declared invalid or unenforceable, the
remaining provisions of this Sublease, or the application of such provision to
persons or circumstances other than those to which it is invalid or
unenforceable, shall not be affected thereby and each provision shall be valid
and enforceable to the extent permitted by law.
10. Binding Effect. All provisions contained in this Sublease shall be
--------------
binding upon, inure to the benefit of, and be enforceable by, the respective
successors and assigns of Sublessor and Sublessee. If Sublessor acquires a fee
interest in the Demised Premises, this Sublease shall not be affected and shall
continue as a direct lease of the Demised Premises between Sublessor and
Sublessee.
11. Interpretation, Amendment and Modification. This Sublease shall be
-------------------------------------------
interpreted under the laws of the State of Texas. The Section and subsection
captions are for the convenient reference of the parties only and are not
intended to and shall not be deemed to modify the interpretation of the Section
or subsection from that which is indicated by the text of the Section or
subsection alone. All of the representations, warranties and indemnities
contained in this Sublease shall survive indefinitely the expiration or
termination of this Sublease. This Sublease is the product of negotiation and
the parties agree that it shall not be interpreted against the drafter. This
Sublease contains the entire agreement between the parties with respect to the
Demised Premises and all prior negotiations or agreements, whether oral or
written, are superseded and merged herein. This Sublease may not be changed or
amended except by a writing duly authorized and executed by the party against
whom enforcement is sought.
12. Brokers. Each party hereby represents and warranties to the other that
-------
it has had no dealings with any real estate broker or agent in connection with
this Sublease excepting only Russ Peterson of Dallas, Texas, whose commission
shall be paid upon Sublessee's occupancy by Sublessor in accordance with the
agreement between broker and Sublessor and subject to rent offset and that it
knows of no other real estate broker or agent who is or might be entitled to a
commission in connection with this Sublease. Each party agrees to protect,
defend, indemnify and hold the other harmless from and against any and all
claims inconsistent with the foregoing representations and warranty for any
brokerage, finders or similar fee or commission in connection with this Sublease
if such claims are based on or relate to any act of the indemnifying party which
is contrary to the foregoing representations and warrantiies.
8
<PAGE>
13. Memorandum of Sublease. This Sublease shall not be recorded. If a
----------------------
party records this Sublease, it shall be a default hereunder by such party.
Sublessor and Sublessee shall, simultaneously with the execution of this
Sublease, enter into a short form memorandum of this Sublease and Sublessee
shall pay the cost to record the memorandum and any transfer, conveyance or
similar tax due as a result of the subleasing of the Demised Premises or the
recording of the memorandum.
14. Indemnification. (a) Indemnification by Sublessee. Sublessee agrees
--------------- ----------------------------
that it will indemnify and hold Sublessor, and its successors in interest
hereunder, harmless from and against any loss, cost, expense, damage (including
consequential or incidental damage), penalty or liability which Sublessor does
incur as a result of or arising from
(i) Sublessee's use of the Demised Premises during the term;
(ii) the breach or violation of any representation, warranty,
covenant or agreement made by Sublessee hereunder;
(iii) Sublessee's failure to perform its obligations under this
Sublease or to perform those of the obligations under the Prime Lease which
Sublessee has agreed to perform on Sublessor's behalf.
(b) Indemnification by Sublessor. Sublessor agrees that it will
----------------------------
indemnify and hold Sublessee, and its successors in interest hereunder, harmless
from and against any loss, cost, expense, damage (including consequential or
incidental damage), penalty or liability which Sublessee does incur as a result
of or arising from
(i) the condition or use of the demised Premises prior to the
Sublease Term Commencement Date;
(ii) the breach or violation of any representation, warranty,
covenant or agreement made by Sublessor hereunder.
(iii) the failure of Sublessor to perform its obligations under
this Sublease or to perform those of its obligations under the Prime Lease which
remain the primary responsibility of Sublessor, or
(iv) any act or omission done or made by Sublessor which results
in the termination, cancellation or rejection of the Prime Lease and/or the
Sublease, or the inability of Sublessee to have the full benefit of the rights
provided to Sublessee hereunder.
(c) In no event shall Sublessee or Sublessor be required to indemnify
or hold harmless any person or entity for any loss, cost, damage, penalty or
liability which is the result of the negligence or willful misconduct of the
person or entity seeking indemnification.
15. Rental Deposit. Upon the Term Commencement Date, Sublessee shall
--------------
prepay the monthly installments of Base Rent for the eleventh and twelfth months
of the Primary Term, in the amount of Ninety Two Thousand Five Hundred Thirty
One and 25/100 Dollars ($92,531.25) each respectively.
9
<PAGE>
16. Condition Precedent. This Sublease is subject to consent thereto by
-------------------
Prime Lessor either by lapse of time under Section 22 (b) of the Prime lease or
by written consent to the terms of this Sublease, within thirty (30) days of the
date hereof. If Prime Lessor refuses to consent to this Sublease, or elects to
negotiate directly with Sublessee in accordance with Section 22(b) of the Prime
Lease, this Sublease shall simultaneously terminate and neither party shall have
any further rights or obligations under the Sublease and each party hereby
releases the other from any cost, loss, damage, claim, liability, expense, fee
or charge related to, arising from or involving this Sublease or the Demised
Premises.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed as of the date first above written.
WITNESSED: KMART CORPORATION
("Sublessor")
/s/ [ILLEGIBLE]
-------------------- By: /s/ [ILLEGIBLE]
-----------------------------------
-------------------- Its: Real Estate Rep:
---------------------------------------------
Dickinson, Wright:
Approved:_____________________________
Reviewed (see comments): /s/ ILLEGIBLE
--------------
DAL-TILE CORPORATION
("Sublessee")
By: /s/ James Eckelberger
-------------------------------
James Eckelberger
/s/ [ILLEGIBLE] Its: Vice President
--------------------
10
<PAGE>
EXHIBIT A
---------
K MART ADDITION, an Addition to the City of Sunnyvale, Dallas County, Texas,
according to the Plat recorded in Volume 87118, Page 1904, Map Records, Dallas
County, Texas, and being more particularly described by metes and bounds as
follows:
Beginning at an iron rod found at the Northeast corner of Lot 1, Block 8 of
SAMUEL PARK FARMS WEST, an Addition to the City of Mesquite, Texas, according to
the Plat recorded in Volume 83216, Page 3409, Map Records, Dallas County, Texas,
said iron rod also being in the West right-of-way line of Planters Road;
THENCE South 89 degrees 33 minutes 38 seconds West, along the North line of said
SAMUEL PARK FARMS WEST, a distance of 1669,48 feet to an iron rod found in
place;
THENCE North 0 degrees 05 minutes 25 seconds West, 970.81 feet to an iron rod
found in place;
THENCE North 89 degrees 33 minutes 38 seconds East, 1237.00 East to an iron rod
found in place in the aforementioned West right-of-way line of Planters Road;
THENCE along said West right-of-way line as follows;
1) Southeasterly, 8.04 feet along a curve to the left having a radius of
1030.00 feet, a central angle of 0 dgrees 26 minutes 50 seconds and a chord
bearing South 46 degrees 18 minutes 50 seconds East a distance of 8.04 feet to
an iron rod found in place at the-end of said curve;
2) South 46 degrees 32 minutes 20 seconds East, 373.37 feet to an iron rod
found in place at the beginning of a curve to the right;
3) Southeasterly, 398.27 feet along said curve to the right having a radius of
495.00 feet, a central angle of 46 degrees 05 minutes 58 seconds and a chord
bearing South 23 degrees 29 minutes 21 seconds East a distance of 387.81 feet to
a ??? found cut in concrete at the end of said curve;
4) South 0 degrees 26 minutes 22 seconds East, 349.63 feet to the PLACE OF
BEGINNING and containing 35.000 acres (1,524,600 square feet) of land.
<PAGE>
EXHIBIT "C"
THIS LEASE (the "Lease") made and entered into as of the _____
day of February, 1989, by and between METROPLITAN LIFE INSURANCE
COMPANY, a New York corporation having its principal office at One
Madison Avenue, New York, New York 10010 (herein referred to as
"Landlord"), and K MART CORPORATION, a Michigan corporation having
its principal office at 3100 West Big Beaver Road, Troy, Michigan
48084 (herein referred to as "Tenant"),
WITNESSETH: That in consideration of the rents, covenants, and
conditions herein set forth, landlord and Tenant do hereby covenant,
promise and agree as follows:
Demised
Premises 1. Without representation or warranty, express or implied,
-------- Landlord does demise unto Tenant and Tenant does take from Landlord,
for the "Lease Term" (hereinafter defined), the following property:
That certain tract or parcel of real property which is more
particularly described on Exhibit "A" attached hereto and made a
part hereof (the "Land"), together with the building(s) and/or
improvements existing on the Land on the date hereof and all
additional buildings and/or improvements hereafter erected or
constructed on the Land (the "Improvements"); subject, however, to
the matters listed on Exhibit "B" attached hereto and made a part
hereof.
Said Land and Improvements, together with any right, title or
interest of Landlord in or to any licenses, rights, privileges and
easements appurtenant thereto, shall be hereinafter collectively
referred to as the "demised premises".
Term 2. The term of this Lease shall commence upon the date of this
---- Lease (the "Commencement Date") and shall terminate upon such date
as shall be twenty-five (25) years from the last day of the month
during which the Commencement Date occurs (the "Initial Lease Term);
provided however, the term of this Lease may be extended as provided
in Article 12 hereof. The phrase "Lease Term", as used in this
Lease, shall mean the Initial Lease Term, together with any
extension(s) pursuant to Article 12 hereof.
Annual
Rental 3. Tenant shall, during the Lease Term, pay to Landlord, at
------ such place as Landlord shall designate in writing from time to time,
an annual rental in the following amounts:
Years 1-5: $1,040,910 per annum
Years 6-10: $1,092,956 per annum
Years 11-15: $1,147,604 per annum
Years 16-20: $1,204,984 per annum
Years 21-25: $1,265,233 per annum
Rental During Option Period
---------------------------
1st five-year option - $1,391,756.00 per annum
2nd five-year option - $1,530,931.00 per annum
3rd five-year option - $1,684,024.00 per annum
4th five-year option - $1,852,427.00 per annum
5th five-year option - $2,037,670.00 per annum
6th five-year option - $2,241,437.00 per annum
<PAGE>
The annual rentals listed above shall be paid by Tenant to Landlord
without deduction or offset, except as expressly provided in Articles
20 and 21 hereof, in equal monthly installments on the first day of
each month, in advance, commencing on the Commencement Date; provided
however, in the event the Commencement Date shall not be the first day
of a calendar month, then the rental for such month shall be prorated
(on the basis of a rental of $1,040,910.00 per annum) upon a daily
basis and shall be in addition to rental for the first year of the
Lease Term in the amount of $1,040,910.00 as provided above in this
Article 3; it being understood between Landlord and Tenant that the
first year of the Lease term shall be a period of twelve (12) months,
plus the number of days which exist between the Commencement Date and
the last day of the month during which the Commencement Date occurs.
The annual rental to be paid by Tenant hereunder shall be absolutely
net to Landlord and free of any operating expenses relative to the
demised premises, so that this Lease shall yield the annual rentals
specified above, net to Landlord, throughout the Lease Term.
Real
Estate
Tax 4. Tenant shall pay and discharge all ad valorem real estate
---
taxes and assessments of any nature which shall be levied against the
demised premises during the Lease Term.
Tenant shall pay and be liable for all sales and use taxes and
other similar taxes, if any, levied or imposed by any city, state,
county or other governmental body having authority. Tenant shall also
be liable for and shall pay all taxes levied or assessed against
Tenant's property or equipment located in or upon the demised
premises, or any part thereof. Notwithstanding the immediately
preceding sentence, Tenant shall not be chargeable with, nor be
obligated to pay, any income, profit, inheritance, estate, succession,
gift, franchise or transfer taxes which are or may be imposed upon
Landlord, its successors or assigns, and which do not result from
Tenant's use of the demised premises, by whatsoever authority imposed
or howsoever designated.
Taxes and assessments payable by Tenant pursuant to this Article
4 for the last year of the Lease Term shall be prorated based upon
actual tax and/or assessments statements, if available; otherwise, the
proration shall be made based upon the most recent tax and/or
assessment statements available.
Written evidence of the payment by Tenant of taxes and
assessments pursuant to this Article 4 shall be furnished by Tenant to
Landlord not later than ten (10) days prior to the date upon which any
such taxes or assessments would become delinquent.
Tenant shall have the right to contest, with such right to be
exercised reasonably and in good faith, the validity or the amount of
any tax or assessment levied against the demised premises by such
appellate or other proceedings as may be appropriate in the
jurisdiction and may defer payment of such obligations, pay same under
protest, or take such other steps as Tenant may reasonably deem
appropriate; provided that, (i) neither the demised premises, nor any
part thereof or interest therein, would be, in Landlord's sole
opinion, in any danger of being sold, forfeited, lost or interfered
with, and (ii) Tenant
-2-
<PAGE>
shall furnish such security as may be required in any legal
proceeding or as shall be reasonably requested by Landlord.
Landlord shall cooperate in the institution and prosecution of
any such proceedings in a reasonable manner (but without cost or
expense to Landlord) and will execute any documents reasonably
required therefor. All costs and expenses of such proceedings
shall be borne solely by Tenant and any refunds or rebates
secured thereby shall belong to Tenant. Tenant shall not withhold
payment of taxes which will cause any taxing authority to impose
a tax lien against the demised premises, or any part thereof, and
shall indemnify and hold Landlord harmless from any loss, cost or
expense incurred by Landlord including, without limitation,
attorneys' fees, as a result of any such contest(s) or
proceeding(s).
5. Article 5 is Intentionally Deleted.
6. Article 6 is Intentionally Deleted.
7. Article 7 is Intentionally Deleted.
8. Article 8 is Intentionally Deleted.
9. Article 9 is Intentionally Deleted.
10. Article 10 is Intentionally Deleted.
Landlord's
Covenant
not to
Build 11. Landlord covenants that it will not erect any buildings
-----
or other structures on the land described in Exhibit "A" during
the Lease Term.
Options
Extend
Lease 12. Tenant shall have the right and option to extend the
-----
term of this Lease for six (6) successive additional periods of
five (5) years each, such extended term to begin, as the case may
be, upon the expiration of the Initial Lease Term or upon the
expiration of the then current extension following the expiration
of the Initial Lease Term and each such extension shall be upon
the same terms and conditions as herein set forth, except as
otherwise provided herein. If Tenant shall elect to exercise one
or more of the aforesaid option(s), it shall do so, in each case,
by giving written notice to Landlord not less than six (6) months
prior to the expiration of the then current term of this Lease.
Time is of the essence with respect to each notice of Tenant's
election to extend the term of this Lease and the failure of
Tenant to provide written notice to Landlord on or before six (6)
months prior to the expiration of the then current term of this
Lease, shall be deemed to be an irrevocable waiver of any further
rights to Tenant to extend the term of this Lease.
Purchase
Options 13. Anything in this Lease contained to the contrary
-------
notwithstanding, and without in any manner affecting or limiting
any of the rights, options or estates granted to Tenant under
this Lease, if the Landlord, at any time during the Lease Term,
receives one or more bona fide offers from third parties to
purchase the demised premises, and if any such offer is
acceptable to the Landlord, then Landlord shall notify Tenant in
writing, giving the price, terms and conditions of such offer,
and
-3-
<PAGE>
Tenant shall have ten (10) days from and after the receipt of
such notice from Landlord in which to elect to purchase the
demised premises for the consideration and on the terms and
conditions contained in the bona fide offer. If Tenant does not
elect to purchase said demised premises and Landlord thereafter
sells the demised premises, the purchaser shall take the demised
premises, subject to and burdened with all the terms, provisions
and conditions of this Lease, excluding this Article 13, the
former landlord shall be relieved of all obligations hereunder,
and the rights of the Tenant under this Lease as against the new
owner shall not be lessened or diminished by reason of the change
of ownership. Tenant's failure at any time to exercise its option
under this Article 13 in the manner and within the time period
specified above shall be deemed to be an irrevocable waiver by
Tenant of such option. The date of closing of the subject sales
transaction and the procedure to be followed with respect to the
closing of the subject transaction shall be as specified in
Landlord's notice. The purchase option granted to Tenant under
this Article 13 shall be personal to Tenant and shall terminate
upon the assignment of this Lease or the subletting of all or any
portion of the demised premises by Tenant. The provisions of this
Article 13 shall not be applicable to the transfer, conveyance or
assignment, by whatsoever means, of the demised premises, or any
portion thereof, or interest therein, and/or this Lease to an
"Affiliate" of Landlord. As used in this Article 13, the term
"Affiliate" shall mean any person or entity under common control
of a person or entity which controls Landlord or which is
controlled by Landlord.
Repairs 14. Tenant shall, at Tenant's sole cost and expense,
------- undertake all maintenance and repairs with respect to the demised
premises including, without limitation, structural and
non-structural repairs and replacements, and Tenant shall, during
and throughout the Lease Term, take good care of the demised
premises and maintain the demised premises in good, safe and
tenantable condition. With respect to any structural repairs or
replacements, Tenant shall, after obtaining Landlord's prior
written consent to the extent required pursuant to this Article
14, promptly cause all necessary structural repairs and
replacements to be made in quality and class equal to the
condition of such structural portions on the date of this Lease,
and upon completion shall furnish to Landlord "as built" plans
and specifications for the work so performed. As used herein, the
phrase "structural portions" refers to the foundation, exterior
walls, members supporting the roof and the roof, but excludes, by
way of example and not by way of limitation, interior walls,
doors, molding, trim, window frames, door frames, closure,
devices, hardware and plate glass. With respect to non-structural
repairs or replacements, Tenant, after obtaining Landlord's
consent to the extent required pursuant to this Article 14, shall
promptly cause all necessary non-structural repairs and
replacements to be made in quality and class equal to the
condition of the demised premises on the date of this Lease. In
the event that Landlord considers it necessary that any
maintenance, replacements, renewals or repairs required by the
provision of this Article 14 be made by Tenant, Landlord may
request Tenant to undertake such repairs, renewals, replacements,
or maintenance; and upon Tenant's failure or refusal to do so
promptly, and in any event in case of an emergency, Landlord
shall have the right, but not the obligation, to perform such
maintenance or to make such repairs, renewals or replacements,
Tenant hereby waiving any claim for damage caused thereby. Any
-4-
<PAGE>
sum so expended by Landlord shall be promptly reimbursed to
Landlord by Tenant; and any such amount shall bear interest from
the date on which Landlord expends such sum to the date of
payment by Tenant at the then highest lawful contract rate which
Tenant is authorized to pay under applicable law, not to exceed
18% per annum. Any such sum for which Tenant becomes liable to
reimburse Landlord may be treated by Landlord as rent and be
payable to Landlord on the first (1st) day of the next succeeding
month. In the event that Landlord performs any such maintenance
or makes any such repairs, renewals or replacements or undertakes
to do so, Landlord shall not be liable to Tenant for any loss or
damage which may occur to Tenant's equipment and property located
within or on the demised premises incident to such action by
Landlord. Tenant need not obtain the consent of Landlord before
undertaking repairs or replacements pursuant to this Article 14
or alterations pursuant to Article 15, provided, in the case of
non-structural repairs, replacements, changes and alternations,
the costs of all such non-structural repairs, replacements,
changes and alternations made during any calendar year do not
exceed $200,000.00 in the aggregate; and provided, further that
in the case of structural repairs, replacements, changes and
alterations, the costs of all such structural repairs,
relacements, changes and alterations made during any calendar
year do not exceed $75,000.00 in the aggregate. In the event the
costs of repairs, replacements, changes, and alterations proposed
to be made would cause the aggregate costs of such repairs,
replacements and alterations to exceed the limits for a calendar
year set forth in the immediately preceding sentence of this
Article 14, then Tenant shall obtain the consent of Landlord to
such repairs, replacements, changes and alterations proposed to
be made before the same are commenced, which consent shall not be
unreasonably withheld or delayed by Landlord.
Alterations
and Addi-
tional Con-
struction 15. Tenant may, at its own expense at any time, subject to
---------
the conditions hereinafter set forth in this Article 15, (a)
after obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed, erect or
construct additional buildings or structures ("Additional
Improvements") on any portion of the Land; (b) make such
alterations or changes, structural or non-structural, in and to
the buildings on the Land as it may deem necessary or suitable
after obtaining the consent of Landlord to the extent required
under the provisions of Article 14; or (c) after obtaining the
prior written consent of Landlord, demolish the whole or any part
of any building at any time standing on the Land; provided that,
if Tenant obtains Landlord's prior written consent to demolish a
building on the Land, Tenant will replace the building which was
demolished with a structure equal to or greater in value than the
building demolished (the demolition of a building and the
replacement thereof being referred to in this Article 15 as
"Demolition Improvements").
In the event Tenant obtains the prior written consent of Landlord
for Additional Improvements or Demolition Improvement, the
following terms and conditions shall be applicable to Tenant's
making Additional Improvements or Demolition Improvements:
-5-
<PAGE>
(a) In connection with the design and construction (including
demolition work, if any) of Additional Improvements or Demolition
Improvements, Tenant shall comply with and observe all laws, codes, rules,
regulations and restrictions applicable to (i) such design and construction
and (ii) the demised premises.
(b) The erection or construction of neither Additional Improvements
nor Demolition Improvements shall adversely affect the Value (as
hereinafter defined) of the demised premises.
(c) Prior to the commencement of any work to erect or construct
(including demolition work, if any) Additional Improvements or Demolition
Improvements, Tenant shall cause to be issued to Landlord an unconditional
irrevocable sight draft letter of credit ("Letter of Credit") issued by a
national banking institution acceptable to Landlord in an amount equal to
125% of the Costs (as hereinafter defined). The term of the Letter of
Credit shall be for a period extending twelve (12) months beyond the
Completed Date (as hereinafter defined).
(d) Completion (as hereinafter defined) of the Additional Improvements
or Demolition Improvements must occur within 180 days after the Completion
Date, and, notwithstanding anything to the contrary contained in this
Lease, Tenant shall be deemed to be in default under the terms of this
Lease if Completion does not occur within said 180 day period.
(e) Landlord, as separate covenants with Tenant and without imposing
conditions on the right of Landlord to draw on the Letter of Credit by
sight draft or restricting the obligation of the issuing bank to pay upon
said Letter of Credit upon presentation of a sight draft from Landlord
identifying the Letter of Credit, shall have the right to draw on the
Letter of Credit only during the last sixty (60) days of the term of the
Letter of Credit or at such earlier date on which Tenant shall be in
default under the terms of this Lease.
(f) In the event Tenant is in default under the provisions of
subparagraph (d) of this Article 15, Landlord shall have the right, but not
the obligation, in its sole discretion, to (i) cause the Additional
Improvements or Demolition Improvements to be completed in whole or in part
to the satisfaction of Landlord and/or (ii) cause the Additional
Improvements or Demolition Improvements to be removed in whole or in part
from the Land. For the purposes of performing all work which may be
necessary to the full exercise of the rights granted to Landlord pursuant
to this subparagraph (f), Landlord, its agents, contractors and consultants
and their respective agents, employees, contractors and materialmen shall
have the right to enter upon and use the demised premises without being or
becoming liable for any damages resulting to Tenant from such actions.
(g) Landlord may use the proceeds obtained from payment to it on the
Letter of Credit to pay (i) all costs and expenses of work performed
pursuant to the provisions of subparagraph (f) of this Article 15,
-6-
<PAGE>
including but not limited to architectural, engineering and consultant's
fees, all charges for work performed and materials furnished and reasonable
fees of independent legal counsel and (ii) all charges for labor performed,
services rendered and materials furnished in connection with the Additional
Improvements or Demolition Improvements performed, rendered or furnished
prior to the date Landlord exercises its rights under subparagraph (f) of
this Article 15 which have not been paid by Tenant. In the event such
proceeds are insufficient to make all payments authorized in this
paragraph, Tenant shall be and remain liable to Landlord for the payment of
any deficiency. In the event any of such proceeds remain unexpended by
Landlord thirty (30) days after the last date on which any contractor,
subcontractor, laborer or materialman who performs labor or furnishes
labor, material or services in connection with the Additional Improvements
or Demolition Improvements or work which may be performed pursuant to
subparagraph (f) could perfect a lien pursuant to the provisions of Chapter
53 of the Texas Property Code, as amended, such remaining proceeds shall be
paid to Tenant.
(h) Upon request from Landlord, Tenant agrees to promptly furnish to
Landlord such information and documentation relating to the design and
construction of Additional Improvements of Demolition Improvements and
Landlord may reasonably request, including but not limited to construction
contracts and subcontracts, agreements with architects and engineers,
working plans and specifications, permits and licenses, inspection reports,
draw requests and cost certifications. Upon Completion, Tenant shall
furnish to Landlord a complete set of the as-built plans and
specifications for the Additional Improvements or Demolition Improvements
and an as-built survey of the demised premises after Completion certified
to Landlord in substantially the form of the Survey Certificate attached as
Exhibit "D" to that certain Agreement of Sale dated ______________ between
Tenant, as Seller, and Landlord, as Buyer, covering the demised premises.
For the purposes of this Article 15 the term "Completion" is defined to
mean the substantial completion of the Additional Improvements or Demolition
Improvements in accordance with the plans and specifications therefor as
evidenced by (i) a certificate addressed to Landlord and Tenant, in form and
substance acceptable to Landlord, from Tenant's independent architect to the
effect that the Additional Improvements or Demolition Improvements have been
built in accordance with the plans and specifications, are in compliance with
all codes, rules, regulations and restrictions applicable to (x) such
construction or (y) the demised premises and have been substantially completed,
(ii) the issuance to Tenant of a certificate of occupancy for the Additional
Improvements or Demolition Improvements by the governmental authority having
jurisdiction to issue the same and (iii) the written certification by Tenant to
Landlord, in form and substance satisfactory to Landlord, that the Additional
Improvements or Demolition Improvements have been constructed in accordance with
the plans and specifications therefor and in compliance with all laws, codes,
rules, regulations and restrictions applicable thereto, that after Completion
the demised premises are in compliance with all laws, codes,
-7-
<PAGE>
rules, regulations and restrictions applicable to the demised
premises, that the Additional Improvements and Demolition
Improvements do not impair the Value of the demised premises
and that all bills and charges for labor performed, services
rendered and materials furnished in connection with the
Additional Improvements of Demolition Improvements have been
paid, said certification to be accompanied by lien waivers or
releases from all contractors, subcontractors, materialmen and
laborers who performed services or labor or furnished materials
with respect to the Additional Improvements or demolition
Improvements. The term "Completion Date" is defined for the
purposes of this Article 15 as the original date specified in
the initial construction contract, before any amendments,
modifications or changes thereto or change orders relating
thereto, for substantial completion of the Additional
Improvements or Demolition Improvements, a copy or which
contract shall be furnished by Tenant to Landlord. The term
"Costs" is defined for the purposes of this Article 15 to mean
the greater of (i) the estimated total costs and expenses
(including all "soft costs") of designing and constructing
(including demolition costs, if any) the Additional
Improvements or Demolition Improvements as submitted in writing
to Landlord by Tenant at the time Tenant requests the consent
of Landlord as provided in this Article 15 or (ii) if Landlord,
in its sole discretion, disagrees with the estimate submitted
by Tenant, then such estimated total costs and expenses as
Landlord may determine, in its sole discretion, and submit to
Tenant within thirty (30) days after receipt of Tenant's
estimate. The term "Value" as used in this Article 15 is
defined to mean the fair market value of the demised premises
assuming the completion of the Additional Improvements or
Demolition Improvements, as estimated by Landlord in its sole
discretion. The reference to "structural changes", as used in
clause (b) of the first paragraph of this Article 15, shall not
include the moving of non-loadbearing partitions, minor
plumbing or minor electrical work, modification and
rearrangement of fixtures or other minor changes.
Any costs connected with filing applications for
building permits or authorizations for any work permitted under
Article 14 or this Article 15, or processing or obtaining the
same shall be borne by Tenant. Landlord, at Tenant's cost,
shall cooperate with Tenant in securing building or other
permits or authorizations required from time to time for any
work permitted under Article 14 or this Article 15 or for
installations by Tenant permitted under Article 14 or this
Article 15.
Utilities
--------- 16. Tenant shall pay all charges for utility services
furnished to the demised premises during the Lease Term and
Landlord shall not be responsible for any interruption in or
termination of any or all of said services.
Govern-
mental
Regula-
tions
----- 17. (a) Tenant shall, at its own expense, observe and
comply with all rules, orders and regulations of all duly
constituted public authorities including, without limitation,
the environmental laws, rules, regulations and orders referred
to in Article 17(b) and all restrictions, covenants, agreement
and other matters of record on the date of this Lease effecting
the Land and/or the
-8-
<PAGE>
Improvements. Tenant shall have the right to diligently contest, by proper
proceedings conducted reasonably and in good faith and without cost to Landlord,
the validity or application of any such rule, order or regulation and may
postpone compliance therewith until the final determination of any such
proceeding, provided that:
(i) Neither the demised premises, nor any part thereof or interest
therein, would be in any danger of being sold, forfeited, lost of
interfered with;
(ii) Landlord would not be in any danger of any civil or any
criminal penalty for the failure to comply therewith;
(iii) Tenant shall have furnished such security, if any, as may be
required in any such proceedings or may be requested by Landlord; and
(iv) Nothing contained herein shall be construed as providing
Tenant with the right to contest any sum billed to Tenant by Landlord.
(b) "Hazardous Materials" shall mean (a) any "hazardous waste" as defined
by the Resource Conservation and Recovery Act of 1976 ( 42 U.S.C. Section 6901
et seq.), as amended from time to time, and regulations promulgated thereunder;
(b) any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1080 ( 42 U.S.C. Section 9601 et
seq.) ("CERLA"), as amended from time to time, and regulations promulgated
thereunder; (c) asbestos; (d) polychlorinated biphenyls; (e) Underground or
above ground storage tanks, whether empty, filled or partially filled with any
substance; (f) any substance the presence of which on the demised premises is
prohibited by any Governmental Requirements; (g) any other substance which by
any Governmental Requirements requires special handling or notification of any
federal, state or local governmental entity in its collection, storage,
treatment, or disposal; (h) urea formaldehyde insulation; (i) "toxic chemicals,"
"hazardous chemicals", or "extremely hazardous substances," under either the
Emergency Planning and Community Right to Know Act of 1986 or the Occupational
Safety and Health Act of 1970; (j) any "pollutant" within the meaning of the
federal Clean Water Act and the regulations promulgated thereunder, including
within the definitions found in 40 CFR (S) 122.2; (k) any "waste" within the
meaning of the Texas Water Code, including within the definition thereof in
Section 26.001; (l) any substance governed by the Toxic Substances Control Act
(15 U.S.C. (S) 2601); and ( m) any "hazardous waste" or "solid waste" within the
meaning of the Texas Solid Waste Act, with particular reference to the
definitions of such terms which appear in TEX. REV. CIV. STAT. ANN. Art. 4477-7,
(S) 2.
(i) Neither Tenant nor the demised premises shall become subject to
any private or governmental lien or judicial or administrative notice,
order or action relating to Hazardous Materials or subject to any public or
governmental lien or judicial or administrative notice, order or action
relating to any environmental problems, impairments, or liabilities with
respect to the demised premises, as a result of Tenant's use of the demised
premises.
<PAGE>
(ii) Tenant shall immediately notify Landlord should
Tenant become aware of (1) any Hazardous Materials in, upon
or under the demised premises, (2) any lien, action or
notice of the nature described in subparagraph (b) (i) of
this Article 17 relating, directly or indirectly, to the
demised premises, or (3) any litigation or threat of
litigation relating to any alleged unauthorized release of
any Hazardous Material from or the existence of any
Hazardous Material in, on or under the demised premises.
(iii) Tenant hereby covenants and agrees not to do or
take any action or omit or fail to take any such action
which will result in the introduction of any Hazardous
Materials in, on or under the demised premises.
Liens and
Encumb-
rances
------ 18. Tenant will not, directly or indirectly, create or
permit to be created or to remain, and will promptly discharge,
any mortgage, lien, security interest, encumbrance, or charge
on, pledge of, or conditional sale or other title retention
agreement with respect to the demised premises or any part
thereof, Tenant's interest therein, the rents accruing
hereunder, or any other sum payable to Landlord under this
Lease. Should any mechanic's or materialman's lien or liens or
encumbrances or affidavits claiming liens or encumbrances be
filed against the demised premises, or any part thereof, or
interest therein, for any reason whatsoever incident to the acts
or omissions of Tenant, or of any contractor, subcontractor,
laborer performing labor, or materialmen furnishing materials
at or for the demised premises or by reason of any specially
fabricated materials, whether or not placed upon the demised
premises, Tenant shall cause the same to be canceled or
discharged of record by payment within fifteen (15) days of the
filing thereof, or at such earlier time as shall be necessary to
prevent the foreclosure thereof.
Insurance
--------- 19. Throughout the Lease Term, Tenant shall, at its own
expense, be obligated to have procured and shall be obligated to
maintain insurance against loss or damage by fire and such other
hazards as are included in so-called "extended coverage" and
against malicious mischief and against such other insurable
hazards as, under good insurance practices, from time to time
are insured against for structures similar to the Improvements
in Dallas, Texas (the "Minimum Insurance"). The amount of such
insurance shall be not less than eighty percent (80%) of the
full replacement costs of the Improvements without reduction for
depreciation. "Full replacement costs", as used in this Article
19, means the costs of replacing the Improvements; exclusive of
the costs of excavations, foundations and footings below the
lowest basement floor.
Notwithstanding the foregoing provisions of this Article 19,
at any time during the Lease Term that Tenant's net worth,
determined as hereinafter provided in this Article 19, shall
have exceeded One Hundred Million and No/100 Dollars
($100,000,000.00) throughout the immediately preceding fiscal
year of Tenant (the "Net Worth Requirement"), Tenant shall have
the right, upon not less than thirty (30) days' prior written
notice to Landlord and any mortgagee of Landlord, to self-insure
the Improvements for perils which could be covered by the
Minimum Insurance. Tenant shall promptly furnish to
-10-
<PAGE>
Landlord, upon Landlord's request, quarterly financial statements for Tenant
prepared in accordance with generally accepted accounting principles and signed
or certified by an officer of Tenant, and Tenant shall furnish to Landlord not
later than June 1 of each year during the Lease Term an annual report, which
will include audited financial statements, for Tenant for the preceding fiscal
year of Tenant ended January 31. Provided each of the financial statements
required to be furnished to Landlord by Tenant reflect Tenant's net worth to be
$100,000,000.00 or more the Net Worth Requirement shall be deemed satisfied;
however, in the event any of the aforesaid financial statements shall reflect a
net worth for Tenant of less than $100,000,000.00, then Landlord may give
written notice to Tenant that Tenant does not satisfy the Net Worth Requirement
and that Tenant must immediately cease to be self insured under this Article 19.
Tenant may not thereafter elect to be self insured under this Article 19 unless
and until the financial statements for Tenant included in an annual report
furnished to Landlord after the date of its notice of non-compliance to Tenant
reflect a net worth for Tenant of $100,000,000.00, or more. Landlord hereby
acknowledges that Tenant has furnished evidence of its satisfaction of the Net
Worth Requirement as of the date of this Lease and that Landlord has been
advised of Tenant's intent to self-insure the Improvements during the Lease
Term; provided that, Tenant continues to satisfy the Net Worth Requirement.
Tenant hereby acknowledges and agrees that during any time that Tenant shall
have failed to obtain and shall fail to maintain the Minimum Insurance in the
amount of not less than eighty percent (80%) of the full replacement cost of the
Improvements, Tenant shall be deemed to be a self-insurer and, in the event of
any casualty loss or damage to any of the Improvements, Tenant shall be
obligated to pay to Landlord, as additional rent, an amount equal to eighty
percent (80%) of the full replacement cost of such Improvements, with such
additional rent being due and payable to Landlord by Tenant upon the first day
of the first month following written notice from Landlord to Tenant of the
amount of additional rent so due and owing by Tenant to Landlord.
In addition, Tenant shall obtain and keep in force, during and throughout
the Lease Term, a policy of comprehensive public liability insurance insuring
Landlord and Tenant, as their respective interests may appear, against any
liability arising out of the ownership, use, occupancy or maintenance of the
demised premises. Such insurance shall be in an amount of not less than One
Million Dollars ($1,000,000,000.00) for injury to or death of one person in any
one accident or occurrence and in an amount not less than Five Million Dollars
($5,000,000.00) for injury to or death of more than one person. Such insurance
shall further insure Landlord and Tenant against liability for property damage
of at least Five Hundred Thousand Dollars ($500,000.00). The limits of said
insurance shall not, however, limit the liability of Tenant hereunder. In
addition, said policy of comprehensive public liability insurance shall insure
Landlord with respect to the contractual indemnification of Landlord by Tenant
for which provision is made in Article 29 of this Lease. In the event that
Tenant shall fail to secure and maintain said policy of comprehensive public
liability insurance, Landlord may, at Landlord's sole option and without any
requirement with respect thereto, procure and maintain the same; and the cost of
any such policy shall be considered as an operating
-11-
<PAGE>
expense of Tenant which shall be repaid to Landlord on demand,
with interest accruing on any sums so expended by Landlord at the
then highest lawful contract rate which Tenant is authorised to
pay under the laws of the State of Texas from the date on which
Landlord expended such sums to the date of payment.
Notwithstanding the foregoing, so long as Tenant satisfies the Net
Worth Requirement, Tenant's general corporate public liability
insurance shall be deemed to satisfy the public liability
insurance requirements of this Article 19, and Tenant may self
insure for losses under $50,000,000.00.
Policies of insurance procured and maintained pursuant to
this Article 19 shall be payable to Landlord. Tenant shall furnish
to Landlord and Landlord's mortgagee, if any, certificates from
the insuring company showing the existence of the insurance
required by this Article 19. In case of casualty loss or damage,
Tenant shall have no right to adjust the loss or execute proof
thereof in the name of Landlord without the prior written consent
of Landlord.
Casualty 20. Should the whole or any part of the demised premises be
-------- partially or totally destroyed by fire or any other casualty after
the commencement of this Lease, Tenant shall give prompt written
notice thereof to Landlord, generally describing the nature and
the extent of such damage. Should over fifty (50%) percent of the
usable area (as such term is defined in the third subparagraph (a)
of Article 21) in the building existing on the Land as of the date
of this Lease be destroyed during the last three years of the
Lease Term, Tenant shall have the right, at its option, to
terminate this Lease by giving written notice to Landlord within
thirty (30) days after the casualty. In the event of the
termination of this Lease by Tenant as provided in the immediately
preceding sentence of this Article 20, the following provision
shall apply:
(a) All the insurance proceeds payable as a result of
such casualty shall be paid and belong to Landlord. In the
event the Improvements are self insured at the time of the
loss, Tenant shall pay to Landlord or as Landlord may
direct, an amount equivalent to the insurance proceeds that
would have been paid had insurance been in force, but not to
exceed eighty (80%) percent of the full replacement costs of
the Improvements.
(b) Tenant shall have sixty (60) days, rent free,
within which to remove its property from the demised
premises.
(c) All unearned rent and other charges paid in advance
shall be refunded to Tenant.
If Tenant does not terminate or does not have the right to
terminate this Lease as provided above, then the following
provisions shall be applicable:
(a) Within forty-five (45) days after the date of the
casualty and before work is commenced to repair or restore
the demised premises to substantially the same condition as
before the casualty ("Restoration Work"), Tenant shall cause
to be issued to Landlord by a national banking institution
acceptable to Landlord an unconditional irrevocable sight
draft letter of credit ("Letter of
-12-
<PAGE>
Credit") in an amount equal to 125% of the Costs (as hereinafter defined). The
Letter of Credit shall be for a term extending for a period of twelve (12)
months beyond the Completion Date (as hereinafter defined). Notwithstanding
anything to the contrary contained in this Lease, if prior to the date of the
casualty the originally named Landlord herein shall have transferred, conveyed
or assigned the demised premises and/or this Lease to a party which is not an
Affiliate of such Landlord (as the term Affiliate is defined in Article 13)
payment on the Letter of Credit other than during the last sixty (60) days of
the term thereof may be conditioned upon a certification by the then Landlord to
the issuing bank the Tenant is in default under this Lease.
(b) All of the insurance proceeds payable under insurance policies
maintained by Tenant pursuant to Article 19 as a result of the casualty shall be
paid to Landlord. In the event the Improvements are self-insured at the time of
the casualty, Tenant shall pay to Landlord on or before the expiration of
forty-five (45) days after the date of the casualty an amount equivalent to the
insurance proceeds that would have been paid had insurance been in force, but
not to exceed eighty (80) percent of the full replacement cost of the
Improvements, unless Tenant shall have theretofore furnished to Landlord the
Letter of Credit.
(c) Not later than forty-five (45) days after the date of the casualty,
Tenant shall commence the Restoration Work. Completion (as hereinafter defined)
of the Restoration Work must occur within 180 days after the Completion Date,
and, notwithstanding anything to the contrary contained in this Lease, Tenant
shall be deemed to be in default under the terms of this Lease if Completion
does not occur within said 180 day period. Tenant shall be obligated to repair
and restore the demised premises to substantially the same condition as before
the casualty, notwithstanding the fact that insurance proceeds or proceeds from
self insurance may not be adequate to pay the Costs in full.
(d) There shall be no abatement of rental or other charges payable by
Tenant under the terms of this Lease during the period of repairs or
restoration.
(e) Landlord, as separate covenants with Tenant and without imposing
conditions on the right of Landlord to draw on the Letter of Credit by sight
draft or restricting the obligation of the issuing bank to pay upon said Letter
of Credit upon presentation of a sight draft from Landlord identifying the
Letter of Credit, shall have the right to draw on the Letter of Credit only
during the last sixty (60) days of the term of the Letter of Credit or at such
earlier date on which Tenant shall be in default under the terms of this Lease.
(f) In the event Tenant is in default under the provisions of the second
subparagraph (c) of this Article 20, Landlord shall have the right, but not the
obligation, in its sole discretion, to cause the Restoration Work to be
completed in whole or in part to the satisfaction of Landlord. For the purposes
of
-13-
<PAGE>
performing all work which may be necessary to the full exercise of the
rights granted to Landlord pursuant to this subparagraph (f), Landlord, its
agents, contractors and consultants and their respective agents, employees,
contractors and materialmen shall have the right to enter upon and use the
demised premises without being or becoming liable for any damages resulting
to Tenant from such actions.
(g) Landlord may use the insurance proceeds and proceeds obtained
from payment to it on the Letter of Credit to pay (i) all costs and
expenses of work performed pursuant to the provisions of subparagraph (f)
of this Article 20, including but not limited to architectural, engineering
and consultant's fees, all charges for work performed and materials
furnished and reasonable fees of independent legal counsel and (ii) all
charges for labor performed, services rendered and materials furnished in
connection with the Restoration Work performed, rendered or furnished
prior to the date Landlord exercises its rights under subparagraph (f) of
this Article 20 which have not been paid by Tenant. In the event such
proceeds are insufficient to make all payments authorized in this
paragraph, Tenant shall be and remain liable to Landlord for the payment
of any deficiency. In the event any of such proceeds remain unexpended by
Landlord thirty (30) days after the last date on which any contractor,
subcontractor, laborer or materialman who performs labor or furnishes
labor, material or services in connection with the Restoration Work or work
which may be performed pursuant to subparagraph (f) could perfect a lien
pursuant to the provisions of Chapter 53 of the Texas Property Code, as
amended, such remaining proceeds shall be paid to Tenant.
(h) Upon request from Landlord, Tenant agrees to promptly furnish to
Landlord such information and documentation relating to the design and
construction of Restoration Work as Landlord may reasonably request,
including but not limited to construction contracts and subcontracts,
agreements with architects and engineers, working plans and specifications,
permits and licenses, inspection reports, draw requests and cost
certifications. Upon Completion, Tenant shall furnish to Landlord a
complete set of the as-built plans and specifications for the Restoration
Work and an as-built survey of the demised premises after Completion
certified to Landlord in substantially the form of the Survey Certificate
attached as Exhibit "D" to that certain Agreement of Sale dated ___________
between Tenant, as Seller, and Landlord, as Buyer, covering the demised
premises.
(i) In connection with the design and construction (including
demolition work, if any) of Restoration Work, Tenant shall comply with and
observe all laws, codes, rules, regulations, and restrictions applicable to
(i) such design and construction and (ii) the demised premises.
For the purposes of this Article 20 the term "Completion" is defined to
mean the substantial completion of the Restoration Work in accordance with the
plans and specifications therefor as evidenced by (i) a certificate
-14-
<PAGE>
addressed to Landlord and Tenant, in form and substance acceptable to
Landlord, from Tenant's independent architect to the effect that the
Restoration Work has been built in accordance with the plans and
specifications, are in compliance with all codes, rules, regulations
and restrictions applicable to (x) such construction or (y) the
demised premises and have been substantially completed, (ii) the
issuance to Tenant of a certificate of occupancy for the Restoration
Work by the governmental authority having jurisdiction to issue the
same and (iii) the written certification by Tenant to Landlord, in
form and substance satisfactory to Landlord, that the Restoration Work
has been constructed in accordance with the plans and specifications
therefor and in compliance with all laws, codes, rules, regulations
and restrictions applicable thereto, that after Completion the demised
premises are in compliance with all laws, codes, rules, regulations
and restrictions applicable to the demised premises, that the
Restoration Work does not impair the Value of the demised premises and
that all bills and charges for labor performed, services rendered and
materials furnished in connection with the Restoration Work have been
paid, said certification to be accompanied by lien waivers or releases
from all contractors, subcontractors, materialmen and laborers who
performed services or labor or furnished materials with respect to the
Restoration Work. The term "Completion Date" is defined for the
purposes of this Article 20 as the original date specified in the
initial construction contract, before any amendments, modifications or
changes thereto or change orders relating thereto, for substantial
completion of the Restoration Work, a copy of which contract shall be
furnished by Tenant to Landlord. The term "Costs" is defined for the
purposes of this Article 20 to mean the greater of (i) the estimated
total costs and expenses (including all "soft costs") of designing and
constructing (including demolition costs, if any) the Restoration Work
as submitted in writing to Landlord by Tenant prior to commencement of
the Restoration Work or (ii) if Landlord, in its sole discretion,
disagrees with the estimate submitted by Tenant, then such estimated
total costs and expenses as Landlord may determine, in its sole
discretion, and submit to Tenant within twenty (20) days after receipt
of Tenant's estimate. The term "Value" as used in this Article 20 is
defined to mean the fair market value of the demised premises assuming
the completion of the Restoration Work, as estimated by Landlord in
its sole discretion.
Any costs connected with filing applications for building permits
or authorizations for any work required under this Article 20, or
processing or obtaining the same shall be borne by Tenant. Landlord,
at Tenant's cost, shall cooperate with Tenant in securing building or
other permits or authorizations required from time to time for any
work required under this Article 20.
Eminent
Domain 21. As used herein, the term "Taking" refers to a permanent
------ taking during the Lease Term of all or any part of the demised
premises or of Tenant's leasehold interest with respect thereto, as
the result of or in lieu of or in anticipation of the exercise of the
right of condemnation or of eminent domain for any public or
quasi-public use under any governmental law, ordinance or regulation
including, without limitation, a sale to a condemning authority in
lieu of condemnation. As used herein, the term "Total Taking" shall
refer to a Taking of the whole
-15-
<PAGE>
or substantially the whole of the demised premises. As used herein, the
term "Partial Taking" shall refer to a Taking of less than the whole of the
Improvements or the demised premises. As used herein, the term "Tender
Date" shall refer to the earlier of (i) the date physical possession of the
demised premises or any portion thereof is tendered to the condemning
authority or (ii) the date physical possession of the demised premises or
any portion thereof is taken by the condemning authority. As used in
this Article 21, the term "Restoration Work" is defined to mean the work
necessary to repair and restore the demised premises to substantially the
same condition as before the Partial Taking insofar as possible. For the
purposes of this Article 21 the term "Completion" is defined to mean the
substantial completion of the Restoration Work in accordance with the plans
and specifications therefor as evidenced by (i) a certificate addressed to
Landlord and Tenant, in form and substance acceptable to Landlord, from
Tenant's independent architect to the effect that the Restoration Work has
been built in accordance with the plans and specifications, are in
compliance with all codes, rules, regulations and restrictions applicable
to (x) such construction or (y) the demised premises and have been
substantially completed, (ii) the issuance to Tenant of a certificate of
occupancy for the Restoration Work by the governmental authority having
jurisdiction to issue the same and (iii) the written certification by
Tenant to Landlord, in form and substance satisfactory to Landlord, that
the Restoration Work has been constructed in accordance with the plans and
specifications therefor and in compliance with all laws, codes, rules,
regulations and restrictions applicable thereto, that after Completion the
demised premises are in compliance with all laws, codes, rules,
regulations and restrictions applicable to the demised premises, and that
all bills and charges for labor performed, services rendered and materials
furnished in connection with the Restoration Work have been paid, said
certification to be accompanied by lien waivers or releases from all
contractors, subcontractors, materialmen and laborers who performed
services or labor or furnished materials with respect to the Restoration
Work. The term "Completion Date" is defined for the purposes of this
Article 21 as the original date specified in the initial construction
contract, before any amendments, modifications or changes thereto or change
orders relating thereto, for substantial completion of the Restoration
Work, a copy of which contract shall be furnished by Tenant to Landlord.
The term "Costs" is defined for the purposes of this Article 21 to mean the
greater of (i) the estimated total costs and expenses (including all "soft
costs") of designing and constructing (including demolition costs, if any)
the Restoration Work as submitted in writing to Landlord by Tenant prior to
commencement of the Restoration Work or (ii) if Landlord, in its sole
discretion, disagrees with the estimate submitted by Tenant, then such
estimated total costs and expenses as Landlord may determine, in its sole
discretion, and submit to Tenant within twenty (20) days after receipt of
Tenant's estimate. The term "Value" as used in this Article 21 is defined
to mean the fair market value of the demised premises assuming the
completion of the Restoration Work, as estimated by Landlord in its sole
discretion.
Any costs connected with filing applications for building permits or
authorizations for any work required under this Article 21, or processing
or obtaining the same shall be borne by Tenant. Landlord, at Tenant's cost,
-16-
<PAGE>
shall cooperate with Tenant in securing building or other permits or
authorizations required from time to time for any work required under this
Article 21.
In the event of a Total Taking during the Lease Term, such Total Taking
shall be deemed to have caused this Lease to terminate and the Lease Term to
expire on the Tender Date.
If at any time during the Lease Term a Partial Taking occurs, then:
(a) If the Partial Taking involves a Taking of more than
75,000 square feet of usable area (as defined in the third paragraph (a)
of this Article 21) in the building existing on the Land on the date of
this Lease, Tenant shall have the option to terminate this Lease by
giving Landlord written notice of such termination within thirty (30)
days after the Tender Date of the usable area, such termination to be
effective as of the date of the tender or taking of physical possession.
(b) If the Partial Taking results in the total denial of
access by Tenant to (i) any utility necessary to service the
demised premises, (ii) all of the parking areas on the Land or (iii) the
building located on the Land as of the date of this Lease, or if as a
result of such Partial Taking the parking area or spaces on the demised
premises remaining after such Partial Taking are inadequate to satisfy
zoning or parking ordinances or regulations applicable to the demised
premises as applied to the Improvements existing on the date of this
Lease or restrictive covenants applicable to the demised premises
improved only by the Improvements existing on the date of this lease
(the requirements of which shall be reduced by any modifications or
waivers thereof made or granted prior to the date of the Partial Taking)
and substitute or alternate areas for parking necessary to bring the
demised premises into compliance with such ordinances, regulations or
restrictive covenants are not available on the demised premises for
reasons other than the construction of additional buildings or
structures on the demised premises by Tenant after the date of this
Lease, Tenant shall have the option to terminate the Lease by giving
Landlord written notice of such termination within thirty (30) days
after the Tender Date of that portion of the demised premises involved
in the Taking, such termination to be effective as of the date of the
Tender Date.
(c) If more than 75,000 square feet of usable area in the
building existing on the Land as of the date of this Lease is involved
in the Partial Taking, Landlord shall have the option to terminate this
Lease by giving Tenant written notice of such termination within thirty
(30) days after the Tender Date of the usable area, such termination to
be effective as of the last described date.
In the event this Lease should be terminated pursuant to this Article
21, any rent paid for occupancy subsequent to the effective termination date
shall be refunded to Tenant, and Tenant shall have sixty (60) days, rent free,
within which to remove its property from the demised premises.
-17-
<PAGE>
If this Lease is not terminated as provided above in this Article 21
as a result of a Partial Taking, then the following provisions shall be
applicable:
(a) Within forty-five (45) days after the Tender Date and before
Restoration Work is commenced Tenant shall cause to be issued to
Landlord by a national banking institution acceptable to Landlord an
unconditional irrevocable sight draft letter of credit ("Letter of
Credit") in an amount equal to 125% of the Costs. The Letter of Credit
shall be for a term extending for a period of twelve (12) months
beyond the Completion Date.
(b) All damages awarded for such Partial Taking shall be
deposited in an account with a national banking institution acceptable
to Landlord under the joint control of Landlord and Tenant. Upon
Completion by Tenant there shall be disbursed from such joint account
to Tenant an amount up to the Costs, and any balance remaining in the
joint Account after such disbursement shall be disbursed to Landlord.
(c) Not later than forty-five (45) days after the Tender Date,
Tenant shall commence the Restoration Work. Completion of the
Restoration Work must occur within 180 days after the Completion Date,
and, notwithstanding anything to the contrary contained in this Lease,
Tenant shall be deemed to be in default under the terms of this Lease
if Completion does not occur within said 180 day period. Tenant shall
be obligated to repair and restore the demised premises to
substantially the same condition as before the Partial Taking,
notwithstanding the fact that damages awarded for such Partial Taking
may not be adequate to pay the Costs in full.
(d) Landlord, as separate covenants with Tenant and without
imposing conditions on the right of Landlord to draw on the Letter of
Credit by sight draft or restricting the obligation of the issuing
bank to pay upon said Letter of Credit upon presentation of a sight
draft from Landlord identifying the Letter of Credit, shall have the
right to draw on the Letter of Credit only during the last sixty (60)
days of the term of the Letter of Credit or at such earlier date on
which Tenant shall be in default under the terms of this Lease.
(e) In the event Tenant is in default under the provisions of the
second subparagraph (c) of this Article 21, Landlord shall have the
right, but not the obligation, in its sole discretion, to cause the
Restoration Work to be completed in whole or in part to the
satisfaction of Landlord. For the purposes of performing all work
which may be necessary to the full exercise of the rights granted to
Landlord pursuant to this subparagraph (e), Landlord, its agents,
contractors and consultants and their respective agents, employees,
contractors and materialmen shall have the right to enter upon and use
the demised premises without being or becoming liable for any damages
resulting to Tenant from such actions.
-18-
<PAGE>
(f) Landlord may use the proceeds from the Condemnation Award and
proceeds obtained from payment to it on the Letter of Credit to pay (i) all
costs and expenses of work performed pursuant to the provisions of
subparagraph (e) of this Article 21, including but not limited to
architectural, engineering and consultant's fees, all charges for work
performed and materials furnished and reasonable fees of independent legal
counsel and (ii) all charges for labor performed, services rendered and
materials furnished in connection with the Restoration Work performed,
rendered or furnished prior to the date Landlord exercises its rights
under subparagraph (e) of this Article 21 which have not been paid by
Tenant. In the event such proceeds are insufficient to make all payments
authorized in this paragraph, Tenant shall be paid and remain liable to
Landlord for the payment of any deficiency. In the event any of such
proceeds remain unexpended by Landlord thirty (30) days after the last date
on which any contractor, subcontractor, laborer or materialman who performs
labor or furnishes labor, material or services in connection with the
Restoration Work or work which may be performed pursuant to subparagraph
(e) could perfect a lien pursuant to the provision of Chapter 53 of the
Texas Property Code, as amended, such remaining proceeds shall be paid to
Tenant.
(g) Upon request from Landlord, Tenant agrees to promptly furnish to
Landlord such information and documentation relating to the design and
construction of Restoration Work as Landlord may reasonably request,
including but not limited to construction contracts and subcontracts,
agreements with architects and engineers, working plans and specifications,
permits and licenses, inspection reports, draw requests and cost
certifications. Upon Completion, Tenant shall furnish to Landlord a
complete set of the as-built plans and specifications for the Restoration
Work and an as-built survey of the demised premises after Completion
certified to Landlord in substantially the form of the Survey Certificate
attched as Exhibit "D" to that certain Agreement of Sale dated
______________ between Tenant, as Seller, and Landlord, as Buyer, covering
the demised premises.
(h) In connection with the design and construction (including
demolition work, if any) of Restoration Work, Tenant shall comply with and
observe all laws, codes, rules, regulations and restrictions applicable to
(i) such design and construction and (ii) the demised premises.
If a Partial Taking involves less than 75,000 square feet of usable area in
the building existing on the Land on the date of this Lease, then the annual
rent rate payable during the remainder of the Lease Term commencing with the
first day of the first full calendar month following the calendar month in which
the Tender Date occurs shall be the greater of the following:
(a) The annual rent payable pursuant to the provisions of Article 3
multiplied by a fraction the numerator of which is the number of square
feet of usable area remaining in the building existing on the Land after
the Partial Taking and the denominator of which is the number of square
feet of usable area in
-19-
<PAGE>
such building immediately prior to such Partial Taking. For
the purposes of this Article 21, the term "usable area" is
defined to mean the gross square footage of building area
enclosed within the interior surface of the exterior walls of
the building, and, as of the date of this Lease, is deemed to
be 470,182 square feet; or
(b) An annual rental computed in accordance with the
following formula: ($11,500,000.00 minus Net Award) X Rental
Percentage. For the purposes of the above stated formula the
term "Net Award" is defined to mean the award made to the
Landlord or the proceeds of sale realized by Landlord
resulting from a taking for public or quasi-public purposes
less (i) attorneys fees and other costs and expenses incurred
by Landlord in connection with obtaining the award or
consummating the sale and (ii) the portion of such award or
proceeds used by Landlord and/or made available to Tenant to
pay for or reimburse Tenant for the Costs of Restoration
Work. For the purposes of the above stated formula "Rental
Percentage" is defined to mean the percentage set forth below
for the year in which the Tender Date Occurs:
Years 1-5 9.1 %
Years 6-10 9.5 %
Years 11-15 10.0 %
Years 16-20 10.5 %
Years 21-25 11.0 %
1st Renewal option 12.1 %
2nd Renewal option 13.3 %
3rd Renewal option 14.6 %
4th Renewal option 16.1 %
5th Renewal option 17.7 %
6th Renewal option 19.5 %
Provided, however, in no event shall the Tenant be required to
pay rent at an annual rental rate which exceeds the annual
rental rates set forth in Article 3 of this Lease. There shall
be no other abatement of rental or other charges payable by
Tenant as a result of a Partial Taking under this Lease.
All damages awarded for a Taking hereunder which results in a
termination of this Lease shall belong to the Landlord; nothing
herein contained, however, shall prevent Tenant from claiming,
proving, collecting (from the condemning authority) and
retaining any damages separately awarded to the Tenant by the
condemnor for Tenant's fixtures and leasehold improvements,
relocation costs, lost business or for any other damage
separately compensable to Tenant by the condemnor without
causing or resulting in a reduction of any award to Landlord.
Landlord makes no representation or warranty that any such
separate award or compensation is available under applicable
law.
Assignment
and Subletting
-------------- 22. (a) Tenant shall not (i) assign this Lease or any
interest therein, or (ii) sublease the demised premises or any
portion thereof except in accordance with the terms and
covenants of this Article 22. Any attempted assignment or
sublease by Tenant in violation of the terms and covenants of
this Article 22 shall be void. If Tenant is not a natural
person, the acquisition of a controlling interest in Tenant
shall be deemed to be an assignment for
-20-
<PAGE>
purposes hereof. As used herein, the phrase "controlling interest" shall mean
ownership of in excess of forty-nine percent (49%) of the voting interest in
Tenant. Notwithstanding the provisions of this Article 22, Tenant may, upon
written notice to Landlord but without the necessity of obtaining Landlord's
consent and without the necessity to comply with the provisions of subparagraph
(b) of this Article 22, assign this Lease or sublet the demised premises to an
"Affiliate." As used herein, the term "Affiliate" shall mean any entity under
common control of a person or entity which controls Tenant or which is
controlled by Tenant. Notwithstanding any assignment or sublease to an
Affiliate, Tenant shall remain liable for payment of all rents and the
performance and compliance with all other obligations and liabilities imposed
upon Tenant hereunder.
(b) In the event Tenant desires to assign this Lease or sublet all (but not
less than all) of the demised premises, Tenant shall give Landlord written
notice thereof ("Tenant's Notice"). If, as of the date of Tenant's Notice,
Tenant has received or made a proposal for an assignment of the Lease or a
sublease of the entire demised premises or has had communications with a third
party regarding the same, Tenant's Notice shall identify the party to or from
whom the proposal was made or received or the party with whom Tenant has had
communications regarding a possible assignment or sublease. Landlord may request
from Tenant such additional information and materials relating to the aforesaid
proposal or communications as may be within Tenant's knowledge or control.
During a period of two hundred ten (210) days after receipt of Tenant's Notice
("Negotiation Period"), Landlord shall have an absolute right to negotiate
directly with third parties (including the party or parties identified in
Tenant's Notice) for a lease covering the demised premises. At any time prior to
the expiration of the Negotiation Period, Landlord may terminate this Lease by
giving Tenant written notice of termination ("Landlord's Notice") and this Lease
shall terminate thirty (30) days after the date of Landlord's Notice. In the
event Landlord does not give Landlord's Notice as provided in the immediately
preceding sentence, then from and after the expiration of the Negotiation Period
Tenant shall have the right to assign this Lease or sublease the entire demised
premises (but not less than all of the demised premises) without the necessity
for obtaining Landlord's consent, provided (i) any such assignment or sublease
is subject to the terms and provisions of this Lease, including but not limited
to subparagraphs (c) and (d) of this Article 22 and Article 47 and (ii) Tenant
shall remain primarily liable for payment of all rents and the performance and
compliance with all other obligations and liabilities imposed upon Tenant under
this Lease notwithstanding such assignment or sublease.
(c) Notwithstanding the provisions of subparagraphs (a) and (b) of this
Article 22, no assignment of this Lease or sublease of the demised premises
pursuant to the provisions of subparagraphs (a) or (b) of this Article 22 shall
be effective until such time as Landlord receives evidence satisfactory to
Landlord that (i) the proposed subtenant or assignee will use the demised
premises in accordance with Article 47 hereof, for the remainder of the Lease
Term, or for the entire term of any sublease, if such expires prior to the
-21-
<PAGE>
expiration of the Lease Term; (ii) the occupancy of the demised
premises by the proposed third party would not increase fire hazards,
require substantial alterations to the demised premises, or adversely
affect the reputation and image of the demised premises; and (iii) the
third party is not owned or controlled by a foreign government,
involved in lobbying activities, or reputed to be involved in illegal
or illicit activities.
(d) No assignment or sublease by Tenant permitted
under the terms of this Article 22 shall be effective until Tenant has
furnished Landlord with a true and correct copy of the assignment or
sublease and, with respect to an assignment or sublease pursuant to
subparagraph (b) of this Article 22, until Landlord has been furnished
with the evidence as required by subparagraph (c) of this Article 22.
In the event of an assignment or sublease by Tenant pursuant to the
provisions of subparagraph (b) of this Article 22, no assignee or
sublessee or any subsequent assignee or sublessee shall have (i) any
options to extend the term of this Lease as provided in Article 12
beyond the expiration of the then current term of this Lease; (ii) any
right to make Additional Improvements or Demolition Improvements
pursuant to Article 15; or (iii) any right to self-insure in any of
the amounts or against any of the perils as provided in Article 19.
Notwithstanding any assignment or sublease made in compliance with
this Article 22 or the collection by Landlord of rent from any
assignee or sublessee, Tenant shall remain primarily 1iable for
payment of all rents and the performance and compliance with all other
obligations and liabilities imposed upon Tenant under this Lease.
Signs 23. During the Lease Term and the continued occupancy of the
----- entire demised premises by Tenant, the demised premises shall be
referred to by only such designation as Tenant may indicate. Landlord
expressly recognizes that Tenant claims the service mark and trademark
"K mart" as valid and exclusive property of Tenant, and Landlord
agrees that it shall not either during the Lease Term or thereafter,
directly or indirectly, contest the validity of said mark "K mart" or
any of Tenant's registrations pertaining thereto in the United States
or elsewhere, nor adopt or use said mark or any term, word, mark or
designation which is in any aspect similar to the mark of Tenant.
Landlord further agrees that it will not at any time do or cause to be
done any act or thing directly or indirectly, contesting or in any way
impairing or tending to impair any part of the Tenant's right, title
and interest in the aforesaid mark, and Landlord shall not in any
manner represent that it has ownership interest in the aforesaid mark
or registrations therefor, and specifically acknowledges that any use
thereof pursuant to this Lease shall not create in Landlord any right,
title or interest in the aforesaid mark.
Ingress
and
Egress 24. Landlord warrants, as a consideration for Tenant
------ entering into this Lease, that it will refrain from taking any steps
to interfere with the ingress and egress facilities to public streets
and highways in the number and substantially in the locations existing
on the date of this Lease, subject to unavoidable temporary closings
or temporary relocations necessitated by public authority, or other
circumstances beyond Landlord's control.
-22-
<PAGE>
Landlord's
Remedies
-------- 25. (a) The following events shall be deemed to be
events of default by Tenant under this Lease: (i) Tenant shall
fail to pay any rent or other sum of money due hereunder and such
failure shall continue for a period of ten (10) business days
after the date such sum is due; (ii) Tenant shall fail to comply
with any provision of this Lease or any other agreement between
Landlord and Tenant not requiring the payment of money, all of
which terms, provisions and covenants shall be deemed material
and such failure shall continue for a period of thirty (30) days
after written notice of such default is delivered to Tenant, or
if such condition cannot reasonably be cured within such thirty
(30) day period, Tenant shall fail to commence to cure such
condition within such thirty (30) day period and/or shall
thereafter fail to prosecute such cure diligently and
continuously to completion within ninety (90) days of the date of
Landlord's notice of such default; (iii) the leasehold hereunder
demised shall be taken on execution or other process of law in
any action against Tenant; (iv) Tenant shall cease to do business
in (except for temporary periods necessary to prepare the demised
premises or a portion thereof for occupancy by an assignee or
sublessee permitted under the terms of this Lease) or abandon any
portion of the demised premises; (v) Tenant shall become
insolvent or unable to pay its debts as they become due, or
Tenant notifies Landlord that it anticipates either condition; or
(vi) a receiver or trustee shall be appointed for Tenant's
leasehold interest in the demised premises or for all or a
substantial part of the assets of Tenant and such receiver or
trustee shall not be discharged within (90) days of appointment.
(b) Upon the occurrence of any event or events of
default by Tenant, Landlord shall have the option to pursue any
one or more of the following remedies without any notice [except
for such notice expressly required by Article 25(a)(ii) or
applicable law] or demand for possession whatsoever (and without
limiting the generality of the foregoing, Tenant hereby
specifically waives notice and demand for payment of rent or
other obligations due and waives any and all other notices or
demand requirements except as imposed by applicable law): (i)
terminate this Lease, in which event Tenant shall immediately
surrender the demised premises to Landlord; (ii) terminate
Tenant's right to occupy the demised premises and re-enter and
take possession of the demised premises (without terminating this
Lease); (iii) enter upon the demised premises 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 effecting compliance with Tenant's
obligations under this Lease, and Tenant further agrees that
landlord shall not be liable for any damages resulting to the
Tenant from such action; and (iv) exercise all other remedies
available to Landlord at law or in equity including, without
limitation, injunctive relief of all varieties.
(c) In the event Landlord elects to re-enter or take
possession of the demised premises after Tenant's default, Tenant
hereby waives notice of such re-entry or repossession except to
the extent required by law and of Landlord's intent to re-enter
or retake possession. Landlord may, without prejudice to any
other remedy which it may have for possession arrearages in or
future rent, expel or remove Tenant and any other person who may
-23-
<PAGE>
be occupying said demised premises or any part thereof. The rental provisions
for holding over of Article 32 hereof shall apply with respect to the period
from and after the giving of notice of such repossession by Landlord. In
addition, Landlord may change or alter the locks and other security devices on
the doors to the demised premises after having a notice posted on the demised
premises as to the location of a key to such new locks and any right to obtain
such a key. All Landlord's remedies shall be cumulative and not exclusive.
Forbearance by Landlord to enforce one or more of the remedies herein provided
upon an event of default shall not be deemed or construed to constitute a waiver
of such default.
(d) In the event that Landlord elects to terminate this Lease, then,
notwithstanding such termination, Tenant shall be liable for and shall pay to
Landlord the sum of all rents and other indebtedness accrued to the date of such
termination, plus, as damages, an amount equal to the total of (i) the cost of
recovering the demised premises, (ii) the cost of removing land storing Tenant's
and other occupant's property located therein, (iii) the costs of reletting the
demised premises, or portion thereof, (including, without limitation, brokerage
commission), and (iv) the cost of collecting such amounts from Tenant hereunder.
(e) In the event that Landlord elects to take possession of the demised
premises and terminate Tenant's right to occupy the demised premises without
terminating this Lease, Tenant shall remain liable, and shall pay to Landlord,
monthly, on demand, any deficiency between the total rental due under this Lease
for the remainder of the Lease Term and rents, if any, which Landlord is able to
collect from another tenant(s) for the demised premises, or portion thereof,
during the remainder of the Lease Term ("Rental Deficiency"). In addition,
Tenant shall be liable for and shall pay to Landlord, on demand, an amount equal
to (i) the cost of recovering possession of the demised premises, (ii) the cost
of removing and storing Tenant's or any other occupant's property located
therein, (iii) the costs of reletting the demised premises, or applicable
portion thereof, whether accomplished in one or more phases (including without
limitation, brokerage alterations and additions to the demised premises, or
applicable portion thereof, whether accomplished in one or more phases,
reasonably required to relet the demised premises, (v) the cost of collection of
the rent accruing from any such reletting, and (vi) the cost of collecting any
sums billable to Tenant by Landlord hereunder. Landlord may file suit to recover
any sums falling due under the terms hereof, from time to time, and no delivery
to or recovery by Landlord of any portion of the sums due Landlord hereunder
shall be any defense in any action to recover any unpaid amount not theretofore
reduced to judgment in favor of Landlord. Landlord shall be obligated to use
reasonable efforts to relet the demised premises by engaging the services of a
management company, leasing agent and/or real estate brokerage firm to attempt
to obtain another tenant or tenants, but the acceptability of a proposed tenant
and the terms and conditions of any such reletting shall be within the sole
discretion of Landlord. Any sums received by Landlord through reletting shall
reduce the sums owing by Tenant to Landlord hereunder, but in no event shall
Tenant be entitled to any excess of any sums obtained by reletting over and
above the sums owing
-24-
<PAGE>
by Tenant to Landlord. For the purpose of such reletting,
Landlord is authorized to decorate or to make any repairs,
changes, alterations, or additions in and to the demised
premises or applicable portion thereof, reasonably necessary
or advisable to relet the demised premises. No reletting
shall be construed as an election on the part of Landlord to
terminate this Lease unless a written notice of such
intention is given to Tenant by Landlord. Notwithstanding any
such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous
default. In the alternative, Landlord may elect to
immediately recover as damages, in lieu of the Rental
Deficiency, a sum equal to the difference between (i) the
total rent due under this Lease for the remainder of the
Lease Term, and (ii) the then fair market rental value of the
demised premises during such period, discounted to present
value at the prime interest rate charged by Chase Manhattan
Bank, N.A. as announced or published by such bank as of the
date Landlord took possession of the demised premises and
terminated Tenant's right to occupy the same ("Discounted
Future Rent"). In such event, Landlord shall have no
responsibility to attempt to relet the demised premises or to
apply any rentals received by Landlord as a result of any
such reletting (other than rentals received by Landlord from
other tenants for the demised premises prior to the exercise
by Landlord of its election to recover damages in lieu of the
Rental Deficiency) to Tenant's obligations hereunder; and the
aggregate amount of all damages due to Landlord, including
the Discounted Future Rent hereunder, shall be immediately
due and payable to Landlord upon demand.
(f) This Article 25 shall be enforceable to the
maximum extent not prohibited by applicable law, and the
unenforceability of any portion thereof shall not thereby
render unenforceable any other portion. No act or thing done
by Landlord or its agents during the Lease Term shall be
deemed an acceptance of an attempted surrender of the demised
premises, and no agreement to accept a surrender of the
demised premises shall be valid unless made in writing and
signed by Landlord. No re-entry or taking of possession of
the demised premises by Landlord shall be construed as an
election on Landlord's part to terminate this Lease unless a
written notice of such termination is given to Tenant.
(g) Landlord shall be in default hereunder in the
event Landlord has not begun and pursued with reasonable
diligence the cure of any failure of Landlord to meet its
obligations hereunder within ninety (90) days of the receipt
by Landlord of written notice from Tenant of the alleged
failure to perform. Tenant hereby covenants that, prior to
the exercise by Tenant of any remedies to terminate this
Lease, it will give the mortgagees holding mortgages on the
demised premises notice and a reasonable time to cure any
default by Landlord.
Bankruptcy 26. Article 26 is Intentionally Deleted.
----------
Quiet Enjoyment 27. Landlord covenants, represents and warrants that it
---------------
has full right and power to execute and perform this Lease
and to grant the estate demised herein and that Tenant, on
payment of the rent and performance of the covenants and
agreements hereof, shall peaceably and
-25-
<PAGE>
quietly have, hold and enjoy the demised premises during the Lease
Term.
Mortgage
Subor-
dination 28. Tenant accepts this Lease subject and subordinate to
-------- any mortgage, deed of trust or other lien presently existing or
hereafter arising upon the demised premises, and to any renewals,
modifications, consolidations, refinancing and extensions thereof,
but Tenant agrees that any such mortgagee shall have the right at
any time to subordinate such mortgage, deed of trust or other lien
to this Lease on such terms and subject to such conditions as such
mortgagee may deem appropriate in its discretion. Within ten (10)
business days after written request from Landlord, Tenant agrees to
execute such further instruments subordinating this Lease or
attorning to the holder of any such liens as Landlord may request.
Tenant agrees that it will, within ten (10) business days after
written request by Landlord execute and deliver to such persons as
Landlord shall request a statement in the form attached hereto as
Exhibit "C" furnishing the information required therein and further
stating such other matters as Landlord shall reasonably require.
Landlord shall as a condition to Tenant's subordination of the
Lease as provided herein obtain and deliver to Tenant a
non-disturbance agreement from any Landlord's mortgagee, similar in
form and content to the form of Subordination, Non-Disturbance and
Attornment Agreement attached hereto as Exhibit "D" and made a part
hereof.
Tenant
Indemnifies
Landlord 29. During the Lease Term, Tenant shall indemnify and save
-------- Landlord harmless against all expenses, losses, costs, penalties,
claims or demands of whatsoever nature arising from Tenant's use of
the demised premises, except those which shall result from and are
in the amount attributable to the willful misconduct or negligence
of Landlord.
Tenant's
Right to
Cure
Defaults 30. In the event Landlord shall neglect to pay when due
-------- any obligations on any mortgage or encumbrance affecting title to
the demised premises and to which this Lease shall be subordinate
and for which Tenant has not received a Subordination Non-
disturbance and Attornment Agreement, then Tenant may, after the
continuance of any such default for thirty (30) days after written
notice thereof by Tenant (specifying the nature of such default),
pay said principal, interest or other charges all on behalf of and
at the expense of Landlord, and Landlord shall on demand pay Tenant
forthwith the amount so paid by Tenant, together with interest
thereon at the highest lawful contract rate which Landlord is
authorized to pay under applicable law not to exceed 18% per annum,
and Tenant may withhold any and all rental payments thereafter due
to Landlord, and apply the same to the payment of such in-
debtedness.
Condition
of Premises
at Termina-
tion 31. At the expiration or earlier termination of the Lease
---- Term, Tenant shall surrender the demised premises, together with
alterations, additions and improvements then
-26-
<PAGE>
a part thereof, in good order and condition, ordinary wear, tear
and use thereof excepted. All trade fixtures located on the
demised premises on the date of this Lease other than the trade
fixtures described on Exhibit "F", attached hereto and made a
part hereof, are and shall remain the property of Landlord. The
trade fixtures described in Exhibit "F" and all replacements and
substitutions thereof installed at the expense of Tenant or other
occupant shall remain the property of Tenant or such other
occupant, and Tenant shall repair any damage to the buildings
resulting from their removal; provided however, Tenant shall, at
any time and from time to time during the Lease Term, have the
option to relinquish its property rights with respect to such
trade fixtures, which option shall be exercised by notice of such
relinquishment to Landlord, and from and after the exercise of
said option the property specified in said notice shall be the
property of Landlord.
Holding
Over
---- 32. In the absence of any written agreement to the
contrary, if Tenant should remain in occupancy of the demised
premises after the expiration of the Lease Term or earlier
termination of this Lease, it shall so remain as a tenant from
month-to-month and all provisions of this Lease applicable to
such tenancy shall remain in full force and effect, except that
rent hereunder shall be at the rate of one hundred fifty percent
(150%) of the rent payable by Tenant on the last day of the
Lease Term.
33. This Article 33 is Intentionally Deleted.
Notices 34. Notices required under this Lease shall be in
------- writing and deemed to be properly served on receipt thereof
if sent by certified or registered mail to Landlord at the last
address where rent was paid, with a copy to 8150 N. Central
Expressway, Suite 1201, Dallas, Texas 75206, Attention:
Assistant Vice President, Real Estate Investments, and to
Metropolitan Life Insurance Company, 5420 LBJ Freeway, Two
Lincoln Centre, Suite 1300, Dallas, Texas 75240, Attention:
Vice President, Real Estate Investments, or to Tenant at its
principal office in Troy, Michigan, Attention: Vice President,
Real Estate, or to any subsequent address which Landlord or
Tenant shall designate for such purpose. Date of notice shall
be the date on which such notice is deposited in a post office
of the United States Postal Service.
Captions
and
Definitions 35. Marginal captions of this Lease are solely for
----------- convenience of reference and shall not in any way limit or
amplify the terms and provisions thereof. The necessary
grammatical changes which shall be required to make the
provisions of this Lease apply (a) in the plural sense if there
shall be more than one Landlord, and (b) to any Landlord which
shall be either corporation, an association, a partnership, or
an individual, male or female, shall in all instances be
assumed as though in each case fully expressed. Unless
otherwise provided, upon the termination of this Lease under
any of the Articles hereof, the parties hereto shall be
relieved of any further liability hereunder except as to acts,
omissions or defaults occurring prior to such termination.
-27-
<PAGE>
Successors
and
Assigns
------- 36. The conditions, covenants and agreements contained in
this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors,
administrators, successors and assigns. All covenants and
agreements of this Lease shall run with the Land.
Memorandum
of Lease
-------- 37. The parties hereto have simultaneously with the
execution and delivery of this Lease executed and delivered a
Memorandum of Lease which Landlord shall, at its sole expense,
cause to be recorded within (60) days following delivery of
this Lease and returned to Tenant by Landlord after return from the
County Clerk's Office where recorded. Such Memorandum of Lease
shall be in form and content identical to the form of Memorandum of
Lease Attached hereto as Exhibit "E" and incorporated herein by
reference for all purposes. Upon the expiration or termination of
this Lease and Tenant's removal from the demised premises, whether
by expiration of the Lease Term, event of default, or otherwise, at
the written request of Landlord, Tenant shall execute and deliver
to Landlord a document in form and content acceptable to Landlord,
which shall be in recordable form, and shall evidence the
cancellation and termination of this Lease and the Memorandum of
Lease. Tenant's obligations to execute and deliver such document of
release shall survive the termination of this Lease and may be
enforced by Landlord in an action for specific performance of the
provisions of this Article 37. In addition, Tenant shall indemnify
and save Landlord harmless from and against any and all losses,
costs and expenses including, without limitation, reasonable
attorneys' fees, and other incidental and consequential costs,
claims, damages or obligations incurred by Landlord and arising out
of Tenant's failure to execute and deliver such documents as are
required by this Article 37 within thirty (30) days after being
requested to do so by Landlord including, without limitation, any
additional interest, expenses, nonrefundable fees or commissions,
or other costs and expenses associated with any sale, financing or
refinancing of any improvements that are delayed or withdrawn
because of the failure of Tenant to execute and deliver such
documents to Landlord within the time period specified.
No Waiver
--------- 38. The failure of either Landlord or Tenant to declare an
event of default immediately upon its occurrence, or delay in
taking any action in connection with an event of default, shall not
constitute a waiver of the default, but said party shall have the
right to declare the default at any time and take such action as is
lawful or authorized under this Lease.
Estoppel
Certificate 39. Article 39 is Intentionally Deleted.
-----------
No Brokers
---------- 40. Landlord and Tenant each represents and warrants to the
other that except as provided for in Article 16 of the Agreement of
Sale between Landlord and Tenant, dated _________, 1989 (the
"Contract"), providing for the purchase of the demised premises by
Landlord from Tenant,
-28-
<PAGE>
it has not entered into any agreement with, or otherwise had any
dealings with, any broker or agent in connection with the
negotiation or execution of this Lease which could form the basis
of any claim by any such broker or agent for a brokerage fee,
commission, finder's fee, or any other compensation of any kind or
nature in connection with the negotiation or execution of this
Lease, and Landlord and Tenant shall each indemnify and hold
harmless the other from any costs (including, but not limited to,
court costs, investigation costs and attorneys' fees), expenses or
liability for commissions or other compensation claimed by any
broker or agent with respect to this Lease which arise out of any
agreement or dealings by such party, or alleged agreement or
dealings by such party, with any such agent or broker.
Severability 41. In case any of the provisions of this Lease shall for any
------------ reason be held to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any
other provision hereof, and this Lease shall be construed as if
such invalid, illegal or unenforceable provision had never been
contained herein.
Entire
Agreement 42. It is expressly agreed by Landlord and Tenant, as a
--------- material consideration for the execution of this Lease, that this
Lease, with the specific references to written extrinsic
documents, if any, is the entire agreement of the parties; that
there are, and were, no verbal representations, warranties,
understandings, stipulations, agreements or promises pertaining to
this Lease or the expressly mentioned written extrinsic documents
not incorporated in writing in this Lease or in the Contract or in
that certain Agreement dated of even date executed by Tenant and
containing representations and warranties with respect to
environmental matters (the "Environmental Certificate"). Landlord
and Tenant expressly agree that there are and shall be no implied
warranties of merchantability, habitability, fitness for a
particular purpose or of any other kind arising out of this Lease
and there are no warranties which extend beyond those expressly
set forth in this Lease; except as otherwise provided in the
Contract or the Environmental Certificate. It is likewise agreed
that this Lease shall be governed by the laws of the State of
Texas and may not be altered, waived, amended or extended except
by an instrument in writing signed by both Landlord and Tenant.
Attorney's
Fees 43. In the event either party files suit to enforce the
---- performance of or obtain damages caused by a default under any of
the terms of this Lease, the party against whom a judgment is
rendered shall pay the prevailing party's reasonable attorneys'
fees.
Personal
Liability 44. In no event shall Landlord be liable to Tenant either for
--------- (a) any loss or damage that may be occasioned by or through the
acts or omissions of Landlord or of any employee or agent of
Landlord or of any other persons whomsoever, or (b) any
consequential damages regardless of causation. With respect to
tort claims against Landlord, Landlord shall not be liable to
Tenant or to any other person for any act or omission of Landlord
or of its
-29-
<PAGE>
repairs thereto (provided Landlord shall never be under any obligation to
do so) and Tenant shall not be entitled to any abatement or reduction of
rent by reason thereof.
IN WITNESS WHEREOF, the parties hereto have executed these presents in
triplicate and affixed their seals as of the day and year first above
written.
LANDLORD:
WITNESS: METROPOLITAN LIFE INSURANCE COMPANY
___________________________ By:_____________________________________
_____________________________________
Its _________________________________
___________________________
TENANT:
WITNESS: K MART CORPORATION
___________________________ By:_____________________________________
_____________________________________
Its /s/ M. L. SKILES. VICE PRESIDENT
---------------------------------
___________________________
-31-
<PAGE>
EXHIBIT "C"
THIS LEASE (the "Lease") made and entered into as of the _____
day of February, 1989 by and between METROPOLITAN LIFE INSURANCE
COMPANY, a New York corporation having its principal office at One
Madison Avenue, New York, New York 10010 (herein referred to as
"Landlord"), and K MART CORPORATION, a Michigan corporation having
its principal office at 3100 West Big Beaver Road, Troy, Michigan
48084 (herein referred to as "Tenant"),
WITNESSETH: That in consideration of the rents, covenants, and
conditions herein set forth, Landlord and Tenant do hereby covenant,
promise and agree as follows:
Demised
Premises 1. Without representation or warranty, express or implied,
-------- Landlord does demise unto Tenant and Tenant does take from Landlord,
for the "Lease Term" (hereinafter defined), the following property:
That certain tract or parcel of real property which is more
particularly described on Exhibit "A" attached hereto and made a part
hereof (the "Land"), together with the building(s) and/or
improvements existing on the Land on the date hereof and all
additional buildings and/or improvements hereafter erected or
constructed on the Land (the "Improvements"); subject, however, to
the matters listed on Exhibit "B" attached hereto and made a part
hereof.
Said Land and Improvements, together with any right, title or
interest of Landlord in or to any licenses, rights, privileges and
easements appurtenant thereto, shall be herein after collectively
referred to as the "demised premises".
Term 2. The term of this lease shall commence upon the date of this
---- Lease (the "Commencement Date") and shall terminate upon such date as
shall be twenty-five (25) years from the last day of the month during
which the Commencement Date occurs (the "Initial Lease Term);
provided however, the term of this Lease may be extended as provided
in Article 12 hereof. The phrase "Lease Term", as used in this Lease,
shall mean the Initial Lease Term, together with any extension(s)
pursuant to Article 12 hereof.
Annual
Rental 3. Tenant shall, during the Lease Term, pay to Landlord, at such
------ place as Landlord shall designate in writing from time to time, an
annual rental in the following amounts:
89-94 Years 1-5: $1,040,910 per annum
94-99 Years 6-10: $1,092,956 per annum
99-01 Years 11-15: $1,147,604 per annum
01-09 Years 16-20: $1,204,984 per annum
09-19 Years 21-25: $1,265,233 per annum
Rental During Option Period
---------------------------
1st five-year option - $1,391,756.00 per annum
2nd five-year option - $1,530,931.00 per annum
3rd five-year option - $1,684,024.00 per annum
4th five-year option - $1,852,427.00 per annum
5th five-year option - $2,037,670.00 per annum
6th five-year option - $2,241,437.00 per annum.
<PAGE>
The annual rentals listed above shall be paid by Tenant to
Landlord without deduction or offset, except as expressly
provided in Articles 20 and 21 hereof, in equal monthly
installments on the first day of each month, in advance,
commencing on the Commencement Date; provided however, in the
event the Commencement Date shall not be the first day of a
calendar month, then the rental for such month shall be prorated
(on the basis of a rental of $1,040,910.00 per annum) upon a
daily basis and shall be in addition to rental for the first
year of the Lease Term in the amount of $1,040,910.00 as
provided above in this Article 3; it being understood between
Landlord and Tenant that the first year of the Lease Term shall
be a period of twelve (12) months, plus the number of days which
exist between the Commencement Date and the last day of the
month during which the Commencement Date occurs. The annual
rental to be paid by Tenant hereunder shall be absolutely net to
Landlord and free of any operating expenses relative to the
demised premises, so that this Lease shall yield the annual
rentals specified above, net to Landlord, throughout the Lease
Term.
Real
Estate
Tax 4. Tenant shall pay and discharge all ad valorem real
--- estate taxes and assessments of any nature which shall be levied
against the demised premises during the Lease Term.
Tenant shall pay and be liable for all sales and use
taxes and other similar taxes, if any, levied or imposed by any
city, state, county or other governmental body having authority.
Tenant shall also be liable for and shall pay all taxes levied
or assessed against Tenant's property or equipment located in or
upon the demised premises, or any part thereof. Notwithstanding
the immediately preceding sentence, Tenant shall not be
chargeable with, nor be obligated to pay, any income, profit,
inheritance, estate, succession, gift, franchise or transfer
taxes which are or may be imposed upon Landlord, its successors
or assigns, and which do not result from Tenant's use of the
demised premises, by whatsoever authority imposed or howsoever
designated.
Taxes and assessments payable by Tenant pursuant to this
Article 4 for the last year of the Lease Term shall be prorated
based upon actual tax and/or assessments statements, if
available; otherwise, the proration shall be made based upon the
most recent tax and/or assessment statements available.
Written evidence of the payment by Tenant of taxes and
assessments pursuant to this Article 4 shall be furnished by
Tenant to Landlord not later than ten (10) days prior to the
date upon which any such taxes or assessments would become
delinquent.
Tenant shall have the right to contest, with such right
to be exercised reasonably and in good faith, the validity or
the amount of any tax or assessment levied against the demised
premises by such appellate or other proceedings as may be
appropriate in the jurisdiction and may defer payment of such
obligations, pay same under protest, or take such other steps as
Tenant may reasonably deem appropriate; provided that, (i)
neither the demised premises, nor any part thereof or interest
therein, would be, in Landlord's sole opinion, in any danger of
being sold, forfeited, lost or interfered with, and (ii) Tenant
-2-
<PAGE>
shall furnish such security as may be required in any legal
proceeding or as shall be reasonably requested by Landlord.
Landlord shall cooperate in the institution and prosecution
of any such proceedings in a reasonable manner (but without
cost or expense to Landlord) and will execute any documents
reasonably required therefor. All costs and expenses of
such proceedings shall be borne solely by Tenant and any
refunds or rebates secured thereby shall belong to Tenant.
Tenant shall not withold payment of taxes which will cause
any taxing authority to impose a tax lien against the
demised premises, or any part thereof, and shall indemnify
and hold Landlord harmless from any loss, cost or expense
incurrred by Landlord including, without limitation,
attorneys' fees, as a result of any such contest(s) or
proceeding(s).
5. Article 5 is Intentionally Deleted.
6. Article 6 is Intentionally Deleted.
7. Article 7 is Intentionally Deleted.
8. Article 8 is Intentionally Deleted.
9. Article 9 is Intentionally Deleted.
10. Article 10 is Intentionally Deleted.
Landlord's
Covenant
not to
Build
----- 11. Landlord covenants that it will not erect any
buildings or other structures on the land described in
Exhibit "A" during the Lease Term.
Options
Extend
Lease
----- 12. Tenant shall have the right and option to extend
the term of this Lease for six (6) successive additional
periods of five (5) years each, such extended term to
begin, as the case may be, upon the expiration of the
Initial Lease Term or upon the expiration of the then
current extension following the expiration of the Initial
Lease Term and each such extension shall be upon the same
terms and conditions as herein set forth, except as
otherwise provided herein. If Tenant shall elect to
exercise one or more of the aforesaid option(s), it shall
do so, in each case, by giving written notice to Landlord
not less than six (6) months prior to the expiration of the
then current term of this Lease. Time is of the essence
with respect to each notice of Tenant's election to extend
the term of this Lease and the failure of Tenant to provide
written notice to Landlord on or before six (6) months
prior to the expiration of the then current term of this
Lease, shall be deemed to be an irrevocable waiver of any
further rights of Tenant to extend the term of this Lease.
Purchase
Options
------- 13. Anything in this Lease contained to the contrary
nothwithstanding, and without in any manner affecting or
limiting any of the rights, options or estates granted to
Tenant under this Lease, if the Landlord, at any time
during the Lease Term, receives one or more bona fide
offers from third parties to purchase the demised premises,
and if any such offer is acceptable to the Landlord, then
Landlord shall notify Tenant in writing, giving the price,
terms and conditions of such offer, and
-3-
<PAGE>
Tenant shall have ten (10) days from and after the receipt of such
notice from Landlord in which to elect to purchase the demised
premises for the consideration and on the terms and conditions
contained in the bona fide offer. If Tenant does not elect to
purchase said demised premises and Landlord thereafter sells the
demised premises, the purchaser shall take the demised premises,
subject to and burdened with all the terms, provisions and
conditions of this Lease, excluding this Article 13, the former
landlord shall be relieved of all obligations hereunder, and the
rights of the Tenant under this Lease as against the new owner shall
not be lessened or diminished by reason of the change of ownership.
Tenant's failure at any time to exercise its option under this
Article 13 in the manner and within the time period specified above
shall be deemed to be an irrevocable waiver by Tenant of such
option. The date of closing of the subject sales transaction and the
procedure to be followed with respect to the closing of the subject
transaction shall be as specified in Landlord's notice. The purchase
option granted to Tenant under this Article 13 shall be personal to
Tenant and shall terminate upon the assignment of this Lease or the
subletting of all or any portion of the demised premises by Tenant.
The provisions of this Article 13 shall not be applicable to the
transfer, conveyance or assignment, by whatsoever means, of the
demised premises, or any portion thereof, or interest therein,
and/or this Lease to an "Affiliate" of Landlord. As used in this
Article 13, the term "Affiliate" shall mean any person or entity
under common control of a person or entity which controls Landlord
or which is controlled by Landlord.
Repairs
------- 14. Tenant shall, at Tenant's sole cost and expense, undertake
all maintenance and repairs with respect to the demised premises
including, without limitation, structural and non-structural repairs
and replacements, and Tenant shall, during and throughout the Lease
Term, take good care of the demised premises and maintain the
demised premises in good, safe and tenantable condition. With
respect to any structural repairs or replacements, Tenant shall,
after obtaining Landlord's prior written consent to the extent
required pursuant to this Article 14, promptly cause all necessary
structural repairs and replacements to be made in quality and class
equal to the condition of such structural portions on the date of
this Lease, and upon completion shall furnish to Landlord "as built"
plans and specifications for the work so performed. As used herein,
the phrase "structural portions" refers to the foundation, exterior
walls, members supporting the roof and the roof, but excludes, by
way of example and not by way of limitation, interior walls, doors,
molding, trim, window frames, door frames, closure devices, hardware
and plate glass. With respect to non-structural repairs or
replacements, Tenant, after obtaining Landlord's consent to the
extent required pursuant to this Article 14, shall promptly cause
all necessary non-structural repairs and replacements to be made in
quality and class equal to the condition of the demised premises on
the date of this Lease. In the event that Landlord considers it
necessary that any maintenance, replacements, renewals or repairs
required by the provision of this Article 14 be made by Tenant,
Landlord may request Tenant to undertake such repairs, renewals,
replacements or maintenance; and upon Tenant's failure or refusal to
do so promptly, and in any event in case of an emergency, Landlord
shall have the right, but not the obligation, to perform such
maintenance or to make such repairs, renewals or replacements,
Tenant hereby waiving any claim for damage caused thereby. Any
-4-
<PAGE>
sum so expended by Landlord shall be promptly reimbursed to
Landlord by Tenant; and any such amount shall bear interest from
the date on which Landlord expends such sum to the date of
payment by Tenant at the then highest lawful contract rate which
Tenant is authorized to pay under applicable law, not to exceed
18% per annum. Any such sum for which Tenant becomes liable to
reimburse Landlord may be treated by Landlord as rent and be
payable to Landlord on the first (1st) day of the next succeeding
month. In the event that Landlord performs any such maintenance
or makes any such repairs, renewals or replacements or undertakes
to do so, Landlord shall not be liable to Tenant for any loss or
damage which may occur to Tenant's equipment and property located
within or on the demised premises incident to such action by
Landlord. Tenant need not obtain the consent of Landlord before
undertaking repairs or replacements pursuant to this Article 14
or alterations pursuant to Article 15, provided, in the case of
non-structural repairs, replacements, changes and alterations,
the costs of all such non-structural repairs, replacements,
changes and alterations made during any calendar year do not
exceed $200,000.00 in the aggregate; and provided, further that
in the case of structural repairs, replacements, changes and
alterations, the costs of all such structural repairs,
replacements, changes and alterations made during any calendar
year do not exceed $75,000.00 in the aggregate. In the event the
costs of repairs, replacements, changes and alterations proposed
to be made would cause the aggregate costs of such repairs,
replacements and alterations to exceed the limits for a calendar
year set forth in the immediately preceding sentence of this
Article 14, then Tenant shall obtain the consent of Landlord to
such repairs, replacements, changes and alterations proposed to
be made before the same are commenced, which consent shall not be
unreasonably withheld or delayed by Landlord.
Alterations
and Addi-
tional Con-
struction 15. Tenant may, at its own expense at any time,
--------- subject to the conditions hereinafter set forth in this Article
15, (a) after obtaining the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed,
erect or construct additional buildings or structures
("Additional Improvements") on any portion of the Land; (b) make
such alterations or changes, structural or non-structural, in and
to the buildings on the Land as it may deem necessary or suitable
after obtaining the consent of Landlord to the extent required
under the provisions of Article 14; or (c) after obtaining the
prior written consent of Landlord, demolish the whole or any part
of any building at any time standing on the Land; provided that,
if Tenant obtains Landlord's prior written consent to demolish a
building on the Land, Tenant will replace the building which was
demolished with a structure equal to or greater in value than the
building demolished (the demolition of a building and the
replacement thereof being referred to in this Article 15 as
"Demolition Improvements").
In the event Tenant obtains the prior written consent of
Landlord for Additional Improvements or Demolition Improvements,
the following terms and conditions shall be applicable to
Tenant's making Additional Improvements or Demolition
Improvements:
-5-
<PAGE>
(a) In connection with the design and construction (including demolition
work, if any) of Additional Improvements or Demolition Improvements, Tenant
shall comply with and observe all laws, codes, rules, regulations and
restrictions applicable to (i) such design and construction and (ii) the demised
premises.
(b) The erection or construction of neither Additional Improvements nor
Demolition Improvements shall adversely affect the Value (as hereinafter
defined) of the demised premises.
(c) Prior to the commencement of any work to erect or construct (including
demolition work, if any) Additional Improvements or Demolition Improvements,
Tenant shall cause to be issued to Landlord an unconditional irrevocable sight
draft letter of credit ("Letter of Credit") issued by a national banking
institution acceptable to Landlord in an amount equal to 125% of the Costs (as
hereinafter defined). The term of the Letter of Credit shall be for a period
extending twelve (12) months beyond the Completion Date (as hereinafter
defined).
(d) Completion (as hereinafter defined) of the Additional Improvements or
Demolition Improvements must occur within 180 days after the Completion Date,
and, notwithstanding anything to the contrary contained in this Lease, Tenant
shall be deemed to be in default under the terms of this Lease if Completion
does not occur within said 180 day period.
(e) Landlord, as separate covenants with Tenant and without imposing
conditions on the right of Landlord to draw on the Letter of Credit by sight
draft or restricting the obligation of the issuing bank to pay upon said Letter
of Credit upon presentation of a sight draft from Landlord identifying the
Letter of Credit, shall have the right to draw on the Letter of Credit only
during the last sixty (60) days of the term of the Letter of Credit or at such
earlier date on which Tenant shall be in default under the terms of this Lease.
(f) In the event Tenant is in default under the provisions of subparagraph
(d) of this Article 15, Landlord shall have the right, but not the obligation,
in its sole discretion, to (i) cause the Additional Improvements or Demolition
Improvements to be completed in whole or in part to be satisfaction of Landlord
and/or (ii) cause the Additional Improvements or Demolition Improvements to be
removed in whole or in part from Land. For the purposes of performing all work
which may be necessary to the full exercise of the rights granted to Landlord
pursuant to this subparagraph (f), Landlord, its agents, contractors and
consultants and their respective agents, employees, contractors and materialmen
shall have the right to enter upon and use the demised premises without being or
becoming liable for any damages resulting to Tenant from such actions.
(g) Landlord may use the proceeds obtained from payment to it on the Letter
of Credit to pay (i) all costs and expenses of work performed pursuant to the
provisions of subparagraph (f) of this Article 15,
-6-
<PAGE>
including but not limited to architectural, engineering and
consultant's fees, all charges for work performed and
materials furnished and reasonable fees of independent legal
counsel and (ii) all charges for labor performed, services
rendered and materials furnished in connection with the
Additional Improvements or Demolition Improvements
performed, rendered or furnished prior to the date Landlord
exercises its rights under subparagraph (f) of this Article
15 which have not been paid by Tenant. In the event such
proceeds are insufficient to make all payments authorized in
this paragraph, Tenant shall be and remain liable to
Landlord for the payment of any deficiency. In the event any
of such proceeds remain unexpended by Landlord thirty (30)
days after the last date on which any contractor,
subcontractor, laborer or materialman who performs labor or
furnishes labor, material or services in connection with the
Additional Improvements or Demolition Improvements or work
which may be performed pursuant to subparagraph (f) could
perfect a lien pursuant to the provisions of Chapter 53 of
the Texas Property Code, as amended, such remaining proceeds
shall be paid to Tenant.
(h) Upon request from Landlord, Tenant agrees to
promptly furnish to Landlord such information and
documentation relating to the design and construction of
Additional Improvements or Demolition Improvements as
Landlord may reasonably request, including but not limited
to construction contracts and subcontracts, agreements with
architects and engineers, working plans and specifications,
permits and licenses, inspection reports, draw requests and
cost certifications. Upon Completion, Tenant shall furnish
to Landlord a complete set of the as-built plans and
specifications for the Additional Improvements or Demolition
Improvements and an as-built survey of the demised premises
after Completion certified to Landlord in substantially the
form of the Survey Certificate attached as Exhibit "D" to
that certain Agreement of Sale dated ______________ between
Tenant, as Seller, and Landlord, as Buyer, covering the
demised premises.
For the purposes of this Article 15 the term "Completion" is
defined to mean the substantial completion of the Additional
Improvements or Demolition Improvements in accordance with the
plans and specifications therefor as evidenced by (i) a
certificate addressed to Landlord and Tenant, in form and
substance acceptable to Landlord, from Tenant's independent
architect to the effect that the Additional Improvements or
Demolition Improvements have been built in accordance with the
plans and specifications, are in compliance with all codes,
rules, regulations and restrictions applicable to (x) such
construction or (y) the demised premises and have been
substantially completed, (ii) the issuance to Tenant of a
certificate of occupancy for the Additional Improvements or
Demolition Improvements by the governmental authority having
jurisdiction to issue the same and (iii) the written
certification by Tenant to Landlord, in form and substance
satisfactory to Landlord, that the Additional Improvements or
Demolition Improvements have been constructed in accordance with
the plans and specifications therefor and in compliance with all
laws, codes, rules, regulations and restrictions applicable
thereto, that after Completion the demised premises are in
compliance with all laws, codes,
-7-
<PAGE>
rules, regulations and restrictions applicable to the
demised premises, that the Additional Improvements and
Demolition Improvements do not impair the Value of the
demised premises and that all bills and charges for labor
performed, services rendered and materials furnished in
connection with the Additional Improvements or Demolition
Improvements have been paid, said certification to be
accompanied by lien waivers or releases from all
contractors, subcontractors, materialmen and laborers who
performed services or labor or furnished materials with
respect to the Additional Improvements or Demolition
Improvements. The term "Completion Date" is defined for the
purposes of this Article 15 as the original date specified
in the initial construction contract, before any amendments,
modifications or changes thereto or change orders relating
thereto, for substantial completion of the Additional
Improvements or Demolition Improvements, a copy of which
contract shall be furnished by Tenant to Landlord. The term
"Costs" is defined for the purposes of this Article 15 to
mean the greater of (i) the estimated total costs and
expenses (including all "soft costs") of designing and
constructing (including demolition costs, if any) the
Additional Improvements or Demolition Improvements as
submitted in writing to Landlord by Tenant at the time
Tenant requests the consent of Landlord as provided in this
Article 15 or (ii) if Landlord, in its sole discretion,
disagrees with the estimate submitted by Tenant, then such
estimated total costs and expenses as Landlord may
determine, in its sole discretion, and submit to Tenant
within thirty (30) days after receipt of Tenant's estimate.
The term "Value" as used in this Article 15 is defined to
mean the fair market value of the demised premises assuming
the completion of the Additional Improvements or Demolition
Improvements, as estimated by Landlord in its sole
discretion. The reference to "structural changes", as used
in clause (b) of the first paragraph of this Article 15,
shall not include the moving of non-loadbearing partitions,
minor plumbing or minor electrical work, modification and
rearrangement of fixtures or other minor changes.
Any costs connected with filing applications for
building permits or authorizations for any work permitted
under Article 14 or this Article 15, or processing or
obtaining the same shall be borne by Tenant. Landlord, at
Tenant's cost, shall cooperate with Tenant in securing
building or other permits or authorizations required from
time to time for any work permitted under Article 14 or this
Article 15 or for installations by Tenant permitted under
Article 14 or this Article 15.
Utilities 16. Tenant shall pay all charges for utility services
--------- furnished to the demised premises during the Lease Term and
Landlord shall not be responsible for any interruption in or
termination of any or all of said services.
Governmental
Regulations 17. (a) Tenant shall, at its own expense, observe and
----------- comply with all rules, orders and regulations of all duly
constituted public authorities including, without
limitation, the environmental laws, rules, regulations and
orders referred to in Article 17(b) and all restrictions,
covenants, agreements and other matters of record on the
date of this Lease effecting the Land and/or the
-8-
<PAGE>
Improvements. Tenant shall have the right to diligently
contest, by proper proceedings conducted reasonably and in
good faith and without cost to Landlord, the validity or
application of any such rule, order or regulation and may
postpone compliance therewith until the final determination
of any such proceeding, provided that:
(i) Neither the demised premises, nor any part
thereof, or interest therein, would be in any danger of
being sold, forfeited, lost or interfered with;
(ii) Landlord would not be in any danger of any
civil or any criminal penalty for the failure to comply
therewith;
(iii) Tenant shall have furnished such security,
if any, as may be required in any such proceedings or
may be requested by Landlord; and
(iv) Nothing contained herein shall be construed
as providing Tenant with the right to contest any sum
billed to Tenant by Landlord.
(b) "Hazardous Materials" shall mean (a) any
"hazardous waste" as defined by the Resource Conservation
and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.),
as amended from time to time, and regulations promulgated
thereunder; (b) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and
Liability Act of 1080 (42 U.S.C. Section 9601 et seq.)
("CERCLA"), as amended from time to time, and regulations
promulgated thereunder; (c) asbestos; (d) polychlorinated
biphenyls; (e) underground or above ground storage tanks,
whether empty, filled or partially filled with any
substance; (f) any substance the presence of which on the
demised premises is prohibited by any Governmental
Requirements; (g) any other substance which by any
Governmental Requirements requires special handling or
notification of any federal, state or local governmental
entity in its collection, storage, treatment, or disposal;
(h) urea formaldehyde insulation; (i) "toxic chemicals,"
"hazardous chemicals", or "extremely hazardous substances,"
under either the Emergency Planning and Community Right to
Know Act of 1986 or the Occupational Safety and Health Act
of 1970; (j) any "pollutant" within the meaning of the
federal Clean Water Act and the regulations promulgated
thereunder, including within the definitions found in 40 CFR
(S) 122.2; (k) any "waste" within the meaning of the Texas
Water Code, including within the definition thereof in
Section 26.001; (l) any substance governed by the Toxic
Substances Control Act (15 U.S.C (S) 2601); and (m) any
"hazardous waste" or "solid waste" within the meaning of the
Texas Solid Waste Act, with particular reference to the
definitions of such terms which appear in TEX. REV. CIV.
STAT. ANN. Art. 4477-7, (S) 2.
(i) Neither Tenant nor the demised premises
shall become subject to any private or governmental
lien or judicial or administrative notice, order or
action relating to Hazardous Materials or subject to
any public or governmental lien or judicial or
administrative notice, order or action relating to any
environmental problems, impairments, or liabilities
with respect to the demised premises, as a result of
Tenant's use of the demised premises.
-9-
<PAGE>
(ii) Tenant shall immediately notify Landlord should
Tenant become aware of (1) any Hazardous Materials in, upon
or under the demised premises, (2) any lien, action or
notice of the nature described in subparagraph (b)(i) of
this Article 17 relating, directly or indirectly, to the
demised premises, or (3) any litigation or threat of
litigation relating to any alleged unauthorized release of
any Hazardous Material from or in the existence of any
Hazardous Material in, on or under the demised premises.
(iii) Tenant hereby covenants and agrees not to do or
take any action or omit or fail to take any such action
which will result in the introduction of any Hazardous
Materials in, on or under the demised premises.
Liens and
Encumbrances
------------ 18. Tenant will not, directly or indirectly, create or
permit to be created or to remain, and will promptly discharge,
any mortgage, lien, security interest, encumbrance, or charge on,
pledge of, or conditional sale or other title retention agreement
with respect to the demised premises or any part thereof,
Tenant's interest therein, the rents accruing hereunder, or any
other sum payable to Landlord under this Lease. Should any
mechanic's or materialman's lien or liens or encumbrances or
affidavits claiming liens or encumbrances be filed against the
demised premises, or any part thereof, or interest therein, for
any reason whatsoever incident to the acts or omissions of
Tenant, or of any contractor, subcontractor, laborer performing
labor, or materialmen furnishing materials at or for the demised
premises or by reason of any specially fabricated materials,
whether or not placed upon the demised premises, Tenant shall
cause the same to be canceled or discharged of record by payment
within fifteen (15) days of filing thereof, or at such earlier
time as shall be necessary to prevent the foreclosure thereof.
Insurance 19. Throughout the Lease Term, Tenant shall, at its own
--------- expense, be obligated to have procured and shall be obligated to
maintain insurance against loss or damage by fire and such other
hazards as are included in so-called "extended coverage" and
against malicious mischief and against such other insurable
hazards as, under good insurance practices, from time to time are
insured against for structures similar to the Improvements in
Dallas, Texas (the "Minimum Insurance"). The amount of such
insurance shall not be less than eighty percent (80%) of the full
replacement costs of the Improvements without reduction for
depreciation. "Full replacement costs", as used in this Article
19, means the costs of replacing the Improvements; exclusive of
the cost of excavations, foundations and footings below the
lowest basement floor.
Notwithstanding the foregoing provisions of this Article 19,
at any time during the Lease Term that Tenant's net worth,
determined as hereinafter provided in this Article 19, shall have
exceed One Hundred Million and No/100 Dollars ($100,000,000.00)
throughout the immediately preceding fiscal year of Tenant (the
"Net Worth Requirement"), Tenant shall have the right, upon not
less than thirty (30) days' prior written notice to Landlord and
any mortgagee of Landlord, to self-insure the Improvements for
perils which could be covered by the Minimum Insurance. Tenant
shall promptly furnish to
-10-
<PAGE>
Landlord, upon Landlord's request, quarterly financial statements for Tenant
prepared in accordance with generally accepted accounting principles and signed
or certified by an officer of Tenant, and Tenant shall furnish to Landlord not
later than June 1 of each year during the Lease Term an annual report, which
will include audited financial statements, for Tenant for the preceding fiscal
year of Tenant ended January 31. Provided each of the financial statements
required to be furnished to Landlord by Tenant reflect Tenant's net worth to be
$100,000,000.00 or more the Net Worth Requirement shall be deemed satisfied;
however, in the event any of the aforesaid financial statements shall reflect a
net worth for Tenant of less than $100,000,000.00, then Landlord may give
written notice to Tenant that Tenant does not satisfy the Net Worth Requirement
and that Tenant must immediately cease to be self insured under this Article 19.
Tenant may not thereafter elect to be self insured under this Article 19 unless
and until the financial statements for Tenant included in an annual report
furnished to Landlord after the date of its notice of non-compliance to Tenant
reflect a net worth for Tenant of $100,000,000.00 or more. Landlord hereby
acknowledges that Tenant has furnished evidence of its satisfaction of the Net
Worth Requirement as of the date of this Lease and that Landlord has been
advised of Tenant's intent to self-insure the Improvements during the Lease
Term; provided that, Tenant continues to satisfy the Net Worth Requirement.
Tenant hereby acknowledges and agrees that during any time that Tenant shall
have failed to obtain and shall fail to maintain the Minimum Insurance in the
amount of not less than eighty percent (80%) of the full replacement cost of
the Improvements, Tenant shall be deemed to be self-insurer and, in the event of
any casualty loss or damage to any of the Improvements, Tenant shall be
obligated to pay to Landlord, as additional rent, an amount equal to eighty
percent (80%) of the full replacement cost of such Improvements, with such
additional rent being due and payable to Landlord by Tenant upon the first day
of the first month following written notice from Landlord to Tenant of the
amount of additional rent so due and owing by Tenant to Landlord.
In addition, Tenant shall obtain and keep in force, during and throughout
the Lease Term, a policy of comprehensive public liability insurance insuring
Landlord and Tenant, as their respective interests may appear, against any
liability arising out of the ownership, use, occupancy or maintenance of the
demised premises. Such insurance shall be in an amount of not less than One
Million Dollars ($1,000,000.00) for injury to or death of one person in any one
accident or occurrence and in an amount not less than Five Million Dollars
($5,000,000.00) for injury to or death of more than one person. Such insurance
shall further insure Landlord and Tenant against liability for property damage
of at least Five Hundred Thousand Dollars ($500,000.00). The limits of said
insurance shall not, however, limit the liability of Tenant hereunder. In
addition, said policy of comprehensive public liability insurance shall insure
Landlord with respect to the contractual indemnification of Landlord by Tenant
for which provision is made in Article 29 of this Lease. In the event that
Tenant shall fail to secure and maintain said policy of comprehensive public
liability insurance, Landlord may, at Landlord's sole option and without any
requirement with respect thereto, procure and maintain the same; and the cost of
any such policy shall be considered as an operating
-11-
<PAGE>
expense of Tenant which shall be repaid to Landlord on demand, with
interest accruing on any sums so expended by Landlord at the then
highest lawful contract rate which Tenant is authorized to pay under
the laws of the State of Texas from the date on which Landlord
expended such sums to the date of payment. Notwithstanding the
foregoing, so long as Tenant satisfies the Net Worth Requirement,
Tenant's general corporate public liability insurance shall be deemed
to satisfy the public liability insurance requirements of this Article
19, and Tenant may self insure for losses under $50,000,000.00.
Policies of insurance procured and maintained pursuant to this
Article 19 shall be payable to Landlord. Tenant shall furnish to
Landlord and Landlord's mortgagee, if any, certificates from the
insuring company showing the existence of the insurance required by
this Article 19. In case of casualty loss or damage, Tenant shall have
no right to adjust the loss or execute proof thereof in the name of
Landlord without the prior written consent of Landlord.
Casualty 20. Should the whole or any part of the demised premises be
-------- partially or totally destroyed by fire or any other casualty after the
commencement of this Lease, Tenant shall give prompt written notice
thereof to Landlord, generally describing the nature and the extent of
such damage. Should over fifty (50%) percent of the usable are (as
such term is defined in the third subparagraph (a) of Article 21) in
the building existing on the Land as of the date of this Lease be
destroyed during the last three years of the Lease Term, Tenant shall
have the right, at its option, to terminate this Lease by giving
written notice to Landlord within thirty (30) days after the casualty.
In the event of the termination of this Lease by Tenant as provided in
the immediately preceding sentence of this Article 20, the following
provision shall apply:
(a) All the insurance proceeds payable as a result of such
casualty shall be paid and belong to Landlord. In the event the
Improvements are self insured at the time of the loss, Tenant
shall pay to Landlord or as Landlord may direct, an amount
equivalent to the insurance proceeds that would have been paid
had insurance been in force, but not to exceed eighty (80%)
percent of the full replacement costs of the Improvements.
(b) Tenant shall have sixty (60) days, rent free, within
which to remove its property from the demised premises.
(c) All unearned rent and other charges paid in advance
shall be refunded to Tenant.
If Tenant does not terminate or does not have the right to terminate
this Lease as provided above, then the following provisions shall be
applicable:
(a) Within forty-five (45) days after the date of the
casualty and before work is commenced to repair or restore the
demised premises to substantially the same condition as before
the casualty ("Restoration Work"), Tenant shall cause to be
issued to Landlord by a national banking institution acceptable
to Landlord an unconditional irrevocable sight draft letter of
credit ("Letter of
-12-
<PAGE>
Credit") in an amount equal to 125% of the Costs (as hereinafter
defined). The Letter of Credit shall be for a term extending for
a period of twelve (12) months beyond the Completion Date (as
hereinafter defined). Notwithstanding anything to the contrary
contained in this Lease, if prior to the date of the casualty the
originally named Landlord herein shall have transferred, conveyed
or assigned the demised premises and/or this Lease to a party
which is not an Affiliate of such Landlord (as the term Affiliate
is defined in Article 13) payment on the Letter of Credit other
than during the last sixty (60) days of the term thereof may be
conditioned upon a certification by the then Landlord to the
issuing bank the Tenant is in default under this Lease.
(b) All of the insurance proceeds payable under insurance
policies maintained by Tenant pursuant to Article 19 as a result
of the casualty shall be paid to Landlord. In the event the
Improvements are self-insured at the time of the casualty, Tenant
shall pay to Landlord on or before the expiration of forty-five
(45) days after the date of the casualty an amount equivalent to
the insurance proceeds that would have been paid had insurance
been in force, but not to exceed eighty (80) percent of the full
replacement cost of the Improvements, unless Tenant shall have
theretofore furnished to Landlord the Letter of Credit.
(c) Not later than forty-five (45) days after the date of
the casualty, Tenant shall commence the Restoration Work.
Completion (as hereinafter defined) of the Restoration Work must
occur within 180 days after the Completion Date, and,
notwithstanding anything to the contrary contained in this Lease,
Tenant shall be deemed to be in default under the terms of this
Lease if Completion does not occur within said 180 day period.
Tenant shall be obligated to repair and restore the demised
premises to substantially the same condition as before the
casualty, notwithstanding the fact that insurance proceeds or
proceeds from self insurance may not be adequate to pay the Costs
in full.
(d) There shall be no abatement of rental or other charges
payable by Tenant under the terms of this Lease during the period
of repairs or restoration.
(e) Landlord, as separate covenants with Tenant and without
imposing conditions on the right of Landlord to draw on the
Letter of Credit by sight draft or restricting the obligation of
the issuing bank to pay upon said Letter of Credit upon
presentation of a sight draft from Landlord identifying the
Letter of Credit, shall have the right to draw on the Letter of
Credit only during the last sixty (60) days of the term of the
Letter of Credit or at such earlier date on which Tenant shall be
in default under the terms of this Lease.
(f) In the event Tenant is in default under the provisions
of the second subparagraph (c) of this Article 20, Landlord shall
have the right, but not the obligation, in its sole discretion,
to cause the Restoration Work to be completed in whole or in part
to the satisfaction of Landlord. For the purposes of
-13-
<PAGE>
performing all work which may be necessary to the full
exercise of the rights granted to Landlord pursuant to this
subparagraph (f), Landlord, its agents, contractors and
consultants and their respective agents, employees,
contractors and materialmen shall have the right to enter
upon and use the demised premises without being or becoming
liable for any damages resulting to Tenant from such
actions.
(g) Landlord may use the insurance proceeds and
proceeds obtained from payment to it on the Letter of Credit
to pay (i) all costs and expenses of work performed pursuant
to the provisions of subparagraph (f) of this Article 20,
including but not limited to architectural, engineering and
consultant's fees, all charges for work performed and
materials furnished and reasonable fees of independent legal
counsel and (ii) all charges for labor performed, services
rendered and materials furnished in connection with the
Restoration Work performed, rendered or furnished prior to
the date Landlord exercises its rights under subparagraph
(f) of this Article 20 which have not been paid by Tenant.
In the event such proceeds are insufficient to make all
payments authorized in this paragraph, Tenant shall be and
remain liable to Landlord for the payment of any deficiency.
In the event any of such proceeds remain unexpended by
Landlord thirty (30) days after the last date on which any
contractor, subcontractor, laborer or materialman who
performs labor or furnishes labor, material or services in
connection with the Restoration Work or work which may be
performed pursuant to subparagraph (f) could perfect a lien
pursuant to the provisions of Chapter 53 of the Texas
Property code, as amended, such remaining proceeds shall be
paid to Tenant.
(h) Upon request from Landlord, Tenant agrees to
promptly furnish to Landlord such information and
documentation relating to the design and construction of
Restoration Work as Landlord may reasonably request,
including but not limited to construction contracts and sub-
contracts, agreements with architects and engineers,
working plans and specifications, permits and licenses,
inspection reports, draw requests and cost certifications.
Upon Completion, Tenant shall furnish to Landlord a complete
set of the as-built plans and specifications for the
Restoration Work and an as-built survey of the demised
premises after Completion certified to Landlord in
substantially the form of the Survey Certificate attached as
Exhibit "D" to that certain Agreement of Sale dated
_________________ between Tenant, as Seller, and Landlord,
as Buyer, covering the demised premises.
(i) In connection with the design and construction
(including demolition work, if any) of Restoration Work,
Tenant shall comply with and observe all laws, codes, rules,
regulations and restrictions applicable to (i) such design
and construction and (ii) the demised premises.
For the purposes of this Article 20 the term "Completion" is
defined to mean the substantial completion of the Restoration
Work in accordance with the plans and specifications therefor
as evidenced by (i) a certificate
-14-
<PAGE>
addressed to Landlord and Tenant, in form and substance
acceptable to Landlord, from Tenant's independent architect to
the effect that the Restoration Work has been built in accordance
with the plans and specifications, are in compliance with all
codes, rules, regulations and restrictions applicable to (x) such
construction or (y) the demised premises and have been
substantially completed, (ii) the issuance to Tenant of a
certificate of occupancy for the Restoration Work by the
governmental authority having jurisdiction to issue the same and
(iii) the written certification by Tenant to Landlord, in form
and substance satisfactory to Landlord, that the Restoration Work
has been constructed in accordance with the plans and
specifications therefor and in compliance with all laws, codes,
rules, regulations and restrictions applicable thereto, that
after Completion the demised premises are in compliance with all
laws, codes, rules, regulations and restrictions applicable to
the demised premises, that the Restoration Work does not impair
the Value of the demised premises and that all bills and charges
for labor performed, services rendered and materials furnished in
connection with the Restoration Work have been paid, said
certification to be accompanied by lien waivers or releases from
all contractors, subcontractors, materialmen and laborers who
performed services or labor or furnished materials with respect
to the Restoration Work. The term "Completion Date" is defined
for the purposes of this Article 20 as the original date
specified in the initial construction contract, before any
amendments, modifications or changes thereto or change orders
relating thereto, for substantial completion of the Restoration
Work, a copy of which contract shall be furnished by Tenant to
Landlord. The term "Costs" is defined for the purposes of this
Article 20 to mean the greater of (i) the estimated total costs
and expenses (including all "soft costs") of designing and
constructing (including demolition costs, if any) the Restoration
Work as submitted in writing to Landlord by Tenant prior to
commencement of the Restoration Work or (ii) if Landlord, in its
sole discretion, disagrees with the estimate submitted by Tenant,
then such estimated total costs and expenses as Landlord may
determine, in its sole discretion, and submit to Tenant within
twenty (20) days after receipt of Tenant's estimate. The term
"Value" as used in this Article 20 is defined to mean the fair
market value of the demised premises assuming the completion of
the Restoration Work, as estimated by Landlord in its sole
discretion.
Any costs connected with filing applications for building
permits or authorizations for any work required under this
Article 20, or processing or obtaining the same shall be borne by
Tenant. Landlord, at Tenant's cost, shall cooperate with Tenant
in securing building or other permits or authorizations required
from time to time for any work required under this Article 20.
Eminent
Domain 21. As used herein, the term "Taking" refers to a permanent
------ taking during the Lease Term of all or any part of the demised
premises or of Tenant's leasehold interest with respect thereto,
as the result of or in lieu of or in anticipation of the exercise
of the right of condemnation or of eminent domain for any public
or quasi-public use under any governmental law, ordinance or
regulation including, without limitation, a sale to a condemning
authority in lieu of condemnation. As used herein, the term
"Total Taking" shall refer to a Taking of the whole
-15-
<PAGE>
or substantially the whole of the demised premises. As used herein, the term
"Partial Taking" shall refer to a Taking of less than the whole of the
Improvements or the demised premises. As used herein, the term "Tender Date"
shall refer to the earlier of (i) the date physical possession of the demised
premises or any portion thereof is tendered to the condemning authority or (ii)
the date physical possession of the demised premises or any portion thereof is
taken by the condemning authority. As used in this Article 21, the term
"Restoration Work" is defined to mean the work necessary to repair and restore
the demised premises to substantially the same condition as before the Partial
Taking insofar as possible. For the purposes of this Article 21 the term
"Completion" is defined to mean the substantial completion of the Restoration
Work in accordance with the plans and specifications therefor as evidenced by
(i) a certificate addressed to Landlord and Tenant, in form and substance
acceptable to Landlord, from Tenant's independent architect to the effect that
the Restoration Work has been built in accordance with the plans and
specifications, are in compliance with all codes, rules, regulations and
restrictions applicable to (x) such construction or (y) the demised premises and
have been substantially completed, (ii) the issuance to Tenant of a certificate
of occupancy for the Restoration Work by the governmental authority having
jurisdiction to issue the same and (iii) the written certification by Tenant to
Landlord, in form and substance satisfactory to Landlord, that the Restoration
Work has been constructed in accordance with the plans and specifications
therefor and in compliance with all laws, codes, rules, regulations and
restrictions applicable thereto, that after Completion the demised premises are
in compliance with all laws, codes, rules, regulations and restrictions
applicable to the demised premises, and that all bills and charges for labor
performed, services rendered and materials furnished in connection with the
Restoration Work have been paid, said certification to be accompanied by lien
waivers or releases from all contractors, subcontractors, materialmen and
laborers who performed services or labor or furnished materials with respect to
the Restoration Work. The term "Completion Date" is defined for the purposes of
this Article 21 as the original date specified in the initial construction
contract, before any amendments, modifications or changes thereto or change
orders relating thereto, for substantial completion of the Restoration Work, a
copy of which contract shall be furnished by Tenant to Landlord. The term
"Costs" is defined for the purposes of this Article 21 to mean the greater of
(i) the estimated total costs and expenses (including all "soft costs") of
designing and constructing (including demolition costs, if any) the Restoration
Work as submitted in writing to Landlord by Tenant prior to commencement of the
Restoration Work or (ii) if Landlord, in its sole discretion, disagrees with the
estimate submitted by Tenant, then such estimated total costs and expenses as
Landlord may determine, in its sole discretion, and submit to Tenant within
twenty (20) days after receipt of Tenant's estimate. The term "Value" as used in
this Article 21 is defined to mean the fair market value of the demised premises
assuming the completion of the Restoration Work, as estimated by Landlord in its
sole discretion.
Any costs connected with filing applications for building permits or
authorizations for any work required under this Article 21, or processing or
obtaining the same shall be borne by Tenant. Landlord, at Tenant's cost,
-16-
<PAGE>
shall cooperate with Tenant in securing building or other permits or
authorizations required from time to time for any work required under this
Article 21.
In the event of a Total Taking during the Lease Term, such Total Taking
shall be deemed to have caused this Lease to terminate and the Lease Term to
expire on the Tender Date.
If at any time during the Lease Term a Partial Taking occurs, then:
(a) If the Partial Taking involves a Taking of more than 75,000
square feet of usable area (as defined in the third paragraph (a) of this
Article 21) in the building existing on the Land on the date of this Lease,
Tenant shall have the option to terminate this Lease by giving Landlord
written notice of such termination within thirty (30) days after the Tender
Date of the usable area, such termination to be effective as of the date
of the tender or taking of physical possession.
(b) If the Partial Taking results in the total denial of access
by Tenant to (i) any utility necessary to service the demised premises,
(ii) all of the parking areas on the Land or (iii) the building located on
the Land as of the date of this Lease, or if as a result of such Partial
Taking the parking area or spaces on the demised premises remaining after
such Partial Taking are inadequate to satisfy zoning or parking ordinances
or regulations applicable to the demised premises as applied to the
Improvements existing on the date of this Lease or restrictive covenants
applicable to the demised premises improved only by the Improvements
existing on the date of this lease (the requirements of which shall be
reduced by any modifications or waivers thereof made or granted prior to
the date of the Partial Taking) and substitute or alternate areas for
parking necessary to bring the demised premises into compliance with such
ordinances, regulations or restrictive covenants are not available on the
demised premises for reasons other than the construction of additional
buildings or structures on the demised premises by Tenant after the date of
this Lease, Tenant shall have the option to terminate the Lease by giving
Landlord written notice of such termination within thirty (30) days after
the Tender Date of that portion of the demised premises involved in the
Taking, such termination to be effective as of the date of the Tender Date.
(c) If more than 75,000 square feet of usable area in the
building existing on the Land as of the date of this Lease is involved in
the Partial Taking, Landlord shall have the option to terminate this Lease
by giving Tenant written notice of such termination within thirty (30) days
after the Tender Date of the usable area, such termination to be effective
as of the last described date.
In the event this Lease shall be terminated pursuant to this Article 21,
any rent paid for occupancy subsequent to the effective termination date shall
be refunded to Tenant, and Tenant shall have sixty (60) days, rent free, within
which to remove its property from the demised premises.
-17-
<PAGE>
If this Lease is not terminated as provided above in
this Article 21 as a result of a Partial Taking, then the
following provisions shall be applicable:
(a) Within forty-five (45) days after the Tender
Date and before Restoration Work is commenced Tenant
shall cause to be issued to Landlord by a national
banking institution acceptable to Landlord an
unconditional irrevocable sight draft letter of credit
("Letter of Credit") in an amount equal to 125% of the
Costs. The Letter of Credit shall be for a term
extending for a period of twelve (12) months beyond the
Completion Date.
(b) All damages awarded for such Partial Taking
shall be deposited in an account with a national banking
institution acceptable to Landlord under the joint
control of Landlord and Tenant. Upon Completion by
Tenant there shall be disbursed from such joint account
to Tenant an amount up to the Costs, and any balance
remaining in the joint account after such disbursement
shall be disbursed to Landlord.
(c) Not later than forty-five (45) days after
the Tender Date, Tenant shall commence the Restoration
work. Completion of the Restoration Work must occur
within 180 days after the Completion Date, and,
notwithstanding anything to the contrary contained in
this Lease, Tenant shall be deemed to be in default
under the terms of this Lease if Completion does not
occur within said 180 day period. Tenant shall be
obligated to repair and restore the demised premises to
substantially the same condition as before the Partial
Taking, notwithstanding the fact that damages awarded
for such Partial Taking may not be adequate to pay the
Costs in full.
(d) Landlord, as separate covenants with Tenant
and without imposing conditions on the right of Landlord
to draw on the Letter of Credit by sight draft or
restricting the obligation of the issuing bank to pay
upon said Letter of Credit upon presentation of a sight
draft from Landlord identifying the Letter of Credit,
shall have the right to draw on the Letter of Credit
only during the last sixty (60) days of the term of the
Letter of Credit or at such earlier date on which Tenant
shall be in default under the terms of this Lease.
(e) In the event Tenant is in default under the
provisions of the second subparagraph (c) of this
Article 21, Landlord shall have the right, but not the
obligation, in its sole discretion, to cause the
Restoration Work to be completed in whole or in part to
the satisfaction of Landlord. For the purposes of
performing all work which may be necessary to the full
exercise of the rights granted to Landlord pursuant to
this subparagraph (e), Landlord, its agents, contractors
and consultants and their respective agents, employees,
contractors and materialmen shall have the right to
enter upon and use the demised premises without being or
becoming liable for any damages resulting to Tenant from
such actions.
-18-
<PAGE>
(f) Landlord may use the proceeds from the Condemnation Award
and proceeds obtained from payment to it on the Letter of Credit to
pay (i) all costs and expenses of work performed pursuant to the
provisions of subparagraph (e) of this Article 21, including but not
limited to architectural, engineering and consultant's fees, all
charges for work performed and materials furnished and reasonable
fees of independent legal counsel and (ii) all charges for labor
performed, services rendered and materials furnished in connection
with the Restoration work performed, rendered or furnished prior to
the date Landlord exercises its rights under subparagraph (e) of this
Article 21 which have not been paid by Tenant. In the event such
proceeds are insufficient to make all payments authorized in this
paragraph, Tenant shall be and remain liable to Landlord for the
payment of any deficiency. In the event any of such proceeds remain
unexpended by Landlord thirty (30) days after the last date on which
any contractor, subcontractor, laborer or materialman who performs
labor or furnishes labor, material or services in connection with the
Restoration Work or work which may be performed pursuant to
subparagraph (e) could perfect a lien pursuant to the provisions of
Chapter 53 of the Texas Property Code, as amended, such remaining
proceeds shall be paid to tenant.
(g) Upon request from Landlord, Tenant agrees to promptly
furnish to Landlord such information and documentation relating to
the design and construction of Restoration Work as Landlord may
reasonably request, including but not limited to construction
contracts and subcontracts, agreements with architects and engineers,
working plans and specifications, permits and licenses, inspection
reports, draw requests and cost certifications. Upon Completion,
Tenant shall furnish to Landlord a complete set of the as-built plans
and specifications for the Restoration Work and an as-built survey of
the demised premises after Completion certified to Landlord in
substantially the form of the Survey Certificate attached as Exhibit
"D" to that certain Agreement of Sale dated ____________ between
Tenant, as Seller, and Landlord, as Buyer, covering the demised
premises.
(h) In connection with the design and construction (including
demolition work, if any) of Restoration Work, Tenant shall comply
with and observe all laws, codes, rules, regulations and restrictions
applicable to (i) such design and construction and (ii) the demised
premises.
If a Partial Taking involves less than 75,000 square feet of usable
area in the building existing on the Land on the date of this Lease, then
the annual rent rate payable during the remainder of the Lease Term
commencing with the first day of the first full calendar month following
the calendar month in which the Tender Date occurs shall be the greater
of the following:
(a) The annual rent payable pursuant to the provisions of
Article 3 multiplied by a fraction the numerator of which is the
number of square feet of usable area remaining in the building
existing on the Land after the Partial Taking and the denominator of
which is the number of square feet of usable area in
-19-
<PAGE>
such building immediately prior to such Partial Taking. For
the purposes of this Article 21, the term "usable area" is
defined to mean the gross square footage of building area
enclosed within the interior surface of the exterior walls
of the building, and, as of the date of this Lease, is
deemed to be 470,182 square feet; or
(b) An annual rental computed in accordance with the
following formula: ($11,500,000.00 minus Net Award) X Rental
Percentage. For the purposes of the above stated formula the
term "Net Award" is defined to mean the award made to the
Landlord or the proceeds of sale realized by Landlord
resulting from a taking for public or quasi-public purposes
less (i) attorneys fees and other costs and expenses
incurred by Landlord in connection with obtaining the award
or consummating the sale and (ii) the portion of such award
or proceeds used by Landlord and/or made available to Tenant
to pay for or reimburse Tenant for the Costs of Restoration
Work. For the purposes of the above stated formula "Rental
Percentage" is defined to mean the percentage set forth
below for the year in which the Tender Date occurs:
Years 1-5 9.1%
Years 6-10 9.5%
Years 11-15 10.0%
Years 16-20 10.5%
Years 21-25 11.0%
1st Renewal Option 12.1%
2nd Renewal Option 13.3%
3rd Renewal Option 14.6%
4th Renewal Option 16.1%
5th Renewal Option 17.7%
6th Renewal Option 19.5%
Provided, however, in no event shall the Tenant be required
to pay rent at an annual rental rate which exceeds the
annual rental rates set forth in Article 3 of this Lease.
There shall be no other abatement of rental or other charges
payable by Tenant as a result of a Partial Taking under this
Lease.
All damages awarded for a Taking hereunder which
results in a termination of this Lease shall belong to the
Landlord; nothing herein contained, however, shall prevent
Tenant from claiming, proving, collecting (from the
condemning authority) and retaining any damages separately
awarded to the Tenant by the condemnor for Tenant's
fixtures and leasehold improvements, relocation costs, lost
business or for any other damage separately compensable to
Tenant by the condemnor without causing or resulting in a
reduction of any award to Landlord. Landlord makes no
representation or warranty that any such separate award or
compensation is available under applicable law.
Assignment
and Sub-
letting 22. (a) Tenant shall not (i) assign this Lease or any
------- interest therein, or (ii) sublease the demised premises or
any portion thereof except in accordance with the terms and
covenants of this Article 22. Any attempted assignment or
sublease by Tenant in violation of the terms and covenants
of this Article 22 shall be void. If Tenant is not a natural
person, the acquisition of a controlling interest in Tenant
shall be deemed to be an assignment for
-20-
<PAGE>
purposes hereof. As used herein, the phrase "controlling interest" shall mean
ownership of in excess of forty-nine percent (49%) of the voting interest in
Tenant. Notwithstanding the provisions of this Article 22, Tenant may, upon
written notice to Landlord but without the necessity of obtaining Landlord's
consent and without the necessity to comply with the provisions of subparagraph
(b) of this Article 22, assign this Lease or sublet the demised premises to an
"Affiliate." As used herein, the term "Affiliate" shall mean any entity under
common control of a person or entity which controls Tenant or which is
controlled by Tenant. Notwithstanding any assignment or sublease to Affiliate,
Tenant shall remain liable for payment of all rents and the performance and
compliance with all other obligations and liabilities imposed upon Tenant
hereunder.
(b) In the event Tenant desires to assign this Lease or sublet all
(but not less than all) of the demised premises, Tenant shall give Landlord
written notice thereof ("Tenant's Notice"). If, as of the date of Tenant's
Notice, Tenant has received or made a proposal for an assignment of the Lease or
a sublease of the entire demised premises or has had communications with a third
party regarding the same, Tenant's Notice shall identify the party to or from
whom the proposal was made or received or the party with whom Tenant has had
communications regarding a possible assignment or sublease. Landlord may
request from Tenant such additional information and materials relating to the
aforesaid proposal or communications as may be within Tenant's knowledge or
control. During a period of two hundred ten (210) days after receipt of
Tenant's Notice ("Negotiation Period"), Landlord shall have an absolute right to
negotiate directly with third (including the party or parties identified in
Tenant's Notice) for a lease covering the demised premises. At any time prior
to the expiration of the Negotiation Period, Landlord may terminate this Lease
by giving Tenant written notice of termination ("Landlord's Notice") and this
Lease shall terminate thirty (30) days after the date of Landlord's Notice. In
the event Landlord does not give Landlord's Notice as provided in the
immediately preceding sentence, then from and after the expiration of the
Negotiation Period Tenant shall have the right to assign this Lease or sublease
the entire demised premises (but not less than all of the demised premises)
without the necessity for obtaining Landlord's consent, provided (i) any such
assignment or sublease is subject to the terms and provisions of this Lease,
including but not limited to subparagraphs (c) and (d) of this Article 22 and
Article 47 and (ii) Tenant shall remain primarily liable for payment of all
rents and the performance and compliance with all other obligations and
liabilities imposed upon Tenant under this Lease notwithstanding such
assignment or sublease.
(c) Notwithstanding the provisions of subparagraphs (a) and (b) of
this Article 22, no assignment of this Lease or sublease of the demised premises
pursuant to the provisions of subparagraphs (a) or (b) of this Article 22 shall
be effective until such time as Landlord receives evidence satisfactory to
Landlord that (i) the proposed subtenant or assignee will use the demised
premises in accordance with Article 47 hereof, for the remainder of the Lease
Term, or for the entire term of any sublease, if such expires prior to the
-21-
<PAGE>
expiration of the Lease Term; (ii) the occupancy of the
demised premises by the proposed third party would not
increase fire hazards, require substantial alterations
to the demised premises, or adversely affect the
reputation and image of the demised premises; and (iii)
the third party is not owned or controlled by a foreign
government, involved in lobbying activities, or reputed
to be involved in illegal or illicit activities.
(d) No assignment or sublease by Tenant permitted
under the terms of this Article 22 shall be effective
until Tenant has furnished Landlord with a true and
correct copy of the assignment or sublease and, with
respect to an assignment or sublease pursuant to
subparagraph (b) of this Article 22, until Landlord has
been furnished with the evidence as required by
subparagraph (c) of this Article 22. In the event of an
assignment or sublease by Tenant pursuant to the
provisions of subparagraph (b) of this Article 22, no
assignee or sublessee or any subsequent assignee or
sublessee shall have (i) any options to extend the term
of this Lease as provided in Article 12 beyond the
expiration of the then current term of this Lease; (ii)
any right to make Additional Improvements or Demolition
Improvements pursuant to Article 15; or (iii) any right
to self-insure in any of the amounts or against any of
the perils as provided in Article 19. Notwithstanding
any assignment or sublease made in compliance with this
Article 22 or the collection by Landlord or rent from
any assignee or sublessee, Tenant shall remain primarily
liable for payment of all rents and the performance and
compliance with all other obligations and liabilities
imposed upon Tenant under this Lease.
Signs
----- 23. During the Lease Term and the continued
occupancy of the entire demised premises by Tenant, the
demised premises shall be referred to by only such
designation as Tenant may indicate. Landlord expressly
recognizes that Tenant claims the service mark and
trademark "K mart" as valid and exclusive property of
Tenant, and Landlord agrees that it shall not either
during the Lease Term or thereafter, directly or
indirectly, contest the validity of said mark "K mart"
or any of Tenant's registrations pertaining thereto in
the United States or elsewhere, nor adopt or use said
mark or any term, word, mark or designation which is in
any aspect similar to the mark of Tenant. Landlord
further agrees that it will not at any time do or cause
to be done any act or thing directly or indirectly,
contesting or in any way impairing or tending to impair
any part of the Tenant's right, title and interest in
the aforesaid mark, and Landlord shall not in any manner
represent that it has ownership interest in the
aforesaid mark or registrations therefor, and
specifically acknowledges that any use thereof pursuant
to this Lease shall not create in Landlord any right,
title or interest in the aforesaid mark.
Ingress
and
Egress
------ 24. Landlord warrants, as a consideration for
Tenant entering into this Lease, that it will refrain
from taking any steps to interfere with the ingress and
egress facilities to public streets and highways in the
number and substantially in the locations existing on
the date of this Lease, subject to unavoidable temporary
closings or temporary relocations necessitated by public
authority, or other circumstances beyond Landlord's
control.
-22-
<PAGE>
Landlord's
Remedies 25. (a) The following events shall be deemed to be
-------- events of default by Tenant under this Lease: (i) Tenant shall
fail to pay any rent or other sum of money due hereunder and such
failure shall continue for a period of ten (10) business days
after the date such sum is due; (ii) Tenant shall fail to comply
with any provision of this Lease or any other agreement between
Landlord and Tenant not requiring the payment of money, all of
which terms, provisions and covenants shall be deemed material
and such failure shall continue for a period of thirty (30) days
after written notice of such default is delivered to Tenant, or
if such condition cannot reasonably be cured within such thirty
(30) day period, Tenant shall fail to commence to cure such
condition within such (30) day period and/or shall thereafter
fail to prosecute such cure diligently and continuously to
completion within ninety (90) days of the date of Landlord's
notice of such default; (iii) the leasehold hereunder demised
shall be taken on execution or other process of law in any action
against Tenant; (iv) Tenant shall cease to do business in (except
for temporary periods necessary to prepare the demised premises
or a portion thereof for occupancy by an assignee or sublessee
permitted under the terms of this Lease) or abandon any portion
of the demised premises; (v) Tenant shall become insolvent or
unable to pay its debts as they become due, or Tenant notifies
Landlord that it anticipates either condition; or (vi) a receiver
or trustee shall be appointed for Tenant's leasehold interest in
the demised premises or for all or a substantial part of the
assets of Tenant and such receiver or trustee shall not be
discharged within (90) days of appointment.
(b) Upon the occurrence of any event or events of
default by Tenant, Landlord shall have the option to pursue any
one or more of the following remedies without any notice (except
for such notice expressly required by Article 25(a)(ii) or
applicable law) or demand for possession whatsoever (and without
limiting the generality of the foregoing, Tenant hereby
specifically waives notice and demand for payment of rent or
other obligations due and waives any and all other notices or
demand requirements except as imposed by applicable law): (i)
terminate this Lease, in which event Tenant shall immediately
surrender the demised premises to Landlord; (ii) terminate
Tenant's right to occupy the demised premises and re-enter and
take possession of the demised premises (without terminating this
Lease); (iii) enter upon the demised premises 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 effecting compliance with Tenant's
obligations under this Lease, and Tenant further agrees that
Landlord shall not be liable for any damages resulting to the
Tenant from such action; and (iv) exercise all other remedies
available to Landlord at law or in equity including, without
limitation, injunctive relief of all varieties.
(c) In the event Landlord elects to re-enter or take
possession of the demised premises after Tenant's default, Tenant
hereby waives notice of such re-entry or repossession except to
the extent required by law and of Landlord's intent to re-enter
or retake possession. Landlord may, without prejudice to any
other remedy which it may have for possession or arrearages in or
future rent, expel or remove Tenant and any other person who may
-23-
<PAGE>
be occupying said demised premises or any part thereof. The
rental provisions for holding over of Article 32 hereof shall
apply with respect to the period from and after the giving of
notice of such repossession by Landlord. In addition, Landlord
may change or alter the locks and other security devices on the
doors to the demised premises after having a notice posted on the
demised premises as to the location of a key to such new locks
and any right to obtain such a key. All Landlord's remedies shall
be cumulative and not exclusive. Forbearance by Landlord to
enforce one or more of the remedies herein provided upon an event
of default shall not be deemed or construed to constitute a
waiver of such default.
(d) In the event that Landlord elects to terminate
this Lease, then, notwithstanding such termination, Tenant shall
be liable for and shall pay to Landlord the sum of all rents and
other indebtedness accrued to the date of such termination, plus,
as damages, an amount equal to the total of (i) the cost of
recovering the demised premises, (ii) the cost of removing and
storing Tenant's and other occupant's property located therein,
(iii) the costs of reletting the demised premises, or portion
thereof (including, without limitation, brokerage commissions),
and (iv) the cost of collecting such amounts from Tenant
hereunder.
(e) In the event that Landlord elects to take
possession of the demised premises and terminate Tenant's right
to occupy the demised premises without terminating this Lease,
Tenant shall remain liable, and shall pay to Landlord, monthly,
on demand, any deficiency between the total rental due under this
Lease for the remainder of the Lease Term and rents, if any,
which Landlord is able to collect from another tenant(s) for the
demised premises, or portion thereof, during the remainder of the
Lease Term ("Rental Deficiency"). In addition, Tenant shall be
liable for and shall pay to Landlord, on demand, an amount equal
to (i) the cost of recovering possession of the demised premises,
(ii) the cost of removing and storing Tenant's or any other
occupant's property located therein, (iii) the costs of reletting
the demised premises, or applicable portion thereof, whether
accomplished in one or more phases (including without limitation,
brokerage commissions), (iv) the cost of decorations, changes,
alterations and additions to the demised premises, or applicable
portion thereof, whether accomplished in one or more phases,
reasonably required to relet the demised premises, (v) the cost
of collection of the rent accruing from any such reletting, and
(vi) the cost of collecting any sums billable to Tenant by
Landlord hereunder. Landlord may file suit to recover any sums
falling due under the terms hereof, from time to time, and no
delivery to or recovery by Landlord of any portion of the sums
due Landlord hereunder shall be any defense in any action to
recover any unpaid amount not theretofore reduced to judgment in
favor of Landlord. Landlord shall be obligated to use reasonable
efforts to relet the demised premises by engaging the services of
a management company, leasing agent and/or real estate brokerage
firm to attempt to obtain another tenant or tenants, but the
acceptability of a proposed tenant and the terms and conditions
of any such reletting shall be within the sole discretion of
Landlord. Any sums received by Landlord through reletting shall
reduce the sums owing by Tenant to Landlord hereunder, but in no
event shall Tenant be entitled to any excess of any sums obtained
by reletting over and above the sums owing
-24-
<PAGE>
by Tenant to Landlord. For the purpose of such reletting,
Landlord is authorized to decorate or to make any repairs,
changes, alterations, or additions in and to the demised
premises or applicable portion thereof, reasonably necessary
or advisable to relet the demised premises. No reletting
shall be construed as an election on the part of Landlord to
terminate this Lease unless a written notice of such
intention is given to Tenant by Landlord. Notwithstanding
any such reletting without termination, Landlord may at any
time thereafter elect to terminate this Lease for such
previous default. In the alternative, Landlord may elect to
immediately recover as damages, in lieu of the Rental
Deficiency, a sum equal to the difference between (i) the
total rent due under this Lease for the remainder of the
Lease Term, and (ii) the then fair market rental value of
the demised premises during such period, discounted to
present value at the prime interest rate charged by Chase
Manhattan Bank, N.A. as announced or published by such bank
as of the date Landlord took possession of the demised
premises and terminated Tenant's right to occupy the same
("Discounted Future Rent"). In such event, Landlord shall
have no responsibility to attempt to relet the demised
premises or to apply any rentals received by Landlord as a
result of any such reletting (other than rentals received by
Landlord from other tenants for the demised premises prior
to the exercise by Landlord of its election to recover
damages in lieu of the Rental Deficiency) to Tenant's
obligations hereunder; and the aggregate amount of all
damages due to Landlord, including the Discounted Future
Rent hereunder, shall be immediately due and payable to
Landlord upon demand.
(f) This Article 25 shall be enforceable to the
maximum extent not prohibited by applicable law, and the
unenforceability of any portion thereof shall not thereby
render unenforceable any other portion. No act or thing done
by Landlord or its agents during the Lease Term shall be
deemed an acceptance of an attempted surrender of the
demised premises, and no agreement to accept a surrender of
the demised premises shall be valid unless made in writing
and signed by Landlord. No re-entry or taking of possession
of the demised premises by Landlord shall be construed as an
election on Landlord's part to terminate this Lease unless a
written notice of such termination is given to Tenant.
(g) Landlord shall be in default hereunder in the
event Landlord has not begun and pursued with reasonable
diligence the cure of any failure of Landlord to meet its
obligations hereunder within ninety (90) days of the receipt
by Landlord of written notice from Tenant of the alleged
failure to perform. Tenant hereby covenants that, prior to
the exercise by Tenant of any remedies to terminate this
Lease, it will give the mortgagees holding mortgages on the
demised premises notice and a reasonable time to cure any
default by Landlord.
Bank-
ruptcy 26. Article 26 is Intentionally Deleted.
------
Quiet
Enjoyment 27. Landlord covenants, represents and warrants that it
--------- has full right and power to execute and perform this Lease
and to grant the estate demised herein and that Tenant, on
payment of the rent and performance of the covenants and
agreements hereof, shall peaceably and
-25-
<PAGE>
quietly have, hold and enjoy the demised premises during the
Lease Term.
Mortgage
Subor-
dination 28. Tenant accepts this Lease subject and subordinate
-------- to any mortgage, deed of trust or other lien presently
existing or hereafter arising upon the demised premises, and
to any renewals, modifications, consolidations, refinancing
and extensions thereof, but Tenant agrees that any such
mortgagee shall have the right at any time to subordinate
such mortgage, deed of trust or other lien to this Lease on
such terms and subject to such conditions as such mortgagee
may deem appropriate in its discretion. Within ten (10)
business days after written request from Landlord, Tenant
agrees to execute such further instruments subordinating
this Lease or attorning to the holder of any such liens as
Landlord may request. Tenant agrees that it will, within ten
(10) business days after written request by Landlord,
execute and deliver to such persons as Landlord shall
request a statement in the form attached hereto as Exhibit
"C" furnishing the information required therein and further
stating such other matters as Landlord shall reasonably
require. Landlord shall as a condition to Tenant's
subordination of the Lease as provided herein obtain and
deliver to Tenant a non-disturbance agreement from any
Landlord's mortgage, similar in form and content to the form
of Subordination, Non-Disturbance and Attornment Agreement
attached hereto as Exhibit "D" and made a part hereof.
Tenant
Indemnifies
Landlord 29. During the Lease Term, Tenant shall indemnify and
-------- save Landlord harmless against all expenses, losses, costs,
penalties, claims or demands of whatsoever nature arising
from Tenant's use of the demised premises, except those
which shall result from and are in the amount attributable
to the willful misconduct or negligence of Landlord.
Tenant's
Right to
Cure
Defaults 30. In the event Landlord shall neglect to pay when
-------- due any obligations on any mortgage or encumbrance affecting
title to the demised premises and to which this Lease shall
be subordinate and for which Tenant has not received a
Subordination Non-disturbance and Attornment Agreement, then
Tenant may, after the continuance of any such default for
thirty (30) days after written notice thereof by Tenant
(specifying the nature of such default), pay said principal,
interest or other charges all on behalf of and at the
expense of Landlord, and Landlord shall on demand pay Tenant
forthwith the amount so paid by Tenant, together with
interest thereon at the highest lawful contract rate which
Landlord is authorized to pay under applicable law not to
exceed 18% per annum, and Tenant may withhold and all
rental payments thereafter due to Landlord, and apply the
same to the payment of such indebtedness.
Condition
of Premises
at Termina-
tion 31. At the expiration or earlier termination of the
---- Lease Term, Tenant shall surrender the demised premises,
together with alterations, additions and improvements then
-26-
<PAGE>
a part thereof, in good order and condition, ordinary wear, tear and
use thereof excepted. All trade fixtures located on the demised
premises on the date of this Lease other than the trade fixtures
described on Exhibit "F", attached hereto and made a part hereof,
are and shall remain the property of Landlord. The trade fixtures
described in Exhibit "F" and all replacements and substitutions
thereof installed at the expense of Tenant or other occupant shall
remain the property of Tenant or such other occupant, and Tenant
shall repair any damage to the buildings resulting from their
removal; provided however, Tenant shall, at any time and from time
to time during the Lease Term, have the option to relinquish its
property rights with respect to such trade fixtures, which option
shall be exercised by notice of such relinquishment to Landlord, and
from and after the exercise of said option the property specified in
said notice shall be the property of Landlord.
Holding
Over 32. In the absence of any written agreement to the contrary,
---- if Tenant should remain in occupancy of the demised premises after
the expiration of the Lease Term or earlier termination of this
Lease, it shall so remain as a tenant from month-to-month and all
provisions of this Lease applicable to such tenancy shall remain in
full force and effect, except that rent hereunder shall be at the
rate of one hundred fifty percent (150%) of the rent payable by
Tenant on the last day of the Lease Term.
33. This Article 33 is Intentionally Deleted.
Notices 34. Notices required under this Lease shall be in writing and
------- deemed to be properly served on receipt thereof if sent by certified
or registered mail to Landlord at the last address where rent was
paid, with a copy to 8150 N. Central Expressway, Suite 1201, Dallas,
Texas 75206, Attention: Assistant Vice President, Real Estate
Investments, and to Metropolitan Life Insurance Company, 5420 LBJ
Freeway, Two Lincoln Centre, Suite 1300, Dallas, Texas 75240,
Attention: Vice President, Real Estate Investments, or to Tenant at
its principal office in Troy, Michigan, Attention: Vice President,
Real Estate, or to any subsequent address which Landlord or Tenant
shall designate for such purpose. Date of notice shall be the date
on which such notice is deposited in a post office of the United
States Postal Service.
Captions
and
Defini-
tions 35. Marginal captions of this Lease are solely for convenience
----- of reference and shall not in any way limit or amplify the terms and
provisions thereof. The necessary grammatical changes which shall be
required to make the provisions of this Lease apply (a) in the
plural sense if there shall be more than one Landlord, and (b) to
any landlord which shall be either corporation, an association, a
partnership, or an individual, male or female, shall in all
instances be assumed as though in each case fully expressed. Unless
otherwise provided, upon the termination of this Lease under any of
the Articles hereof, the parties hereto shall be relieved of any
further liability hereunder except as to acts, omissions or defaults
occurring prior to such termination.
-27-
<PAGE>
Successors
and
Assigns 36. The conditions, covenants and agreements contained in
-------
this Lease shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors,
administrators, successors and assigns. All covenants and
agreements of this Lease shall run with the Land.
Memorandum
of Lease 37. The parties hereto have simultaneously with the
--------
execution and delivery of this Lease executed and delivered a
Memorandum of Lease which Landlord shall, at its sole expense,
cause to be recorded within sixty (60) days following delivery
of this Lease and returned to Tenant by Landlord after return
from the County Clerk's Office where recorded. Such Memorandum
of Lease shall be in form and content identical to the form of
Memorandum of Lease attached hereto as Exhibit "E" and
incorporated herein by reference for all purposes. Upon the
expiration or termination of this Lease and tenant's removal
from the demised premises, whether by expiration of the Lease
Term, event of default, or otherwise, at the written request
of Landlord, Tenant shall execute and deliver to Landlord a
document in form and content acceptable to Landlord, which
shall be in recordable form, and shall evidence the
cancellation and termination of this Lease and the Memorandum
of Lease. Tenant's obligations to execute and deliver such
document of release shall survive the termination of this
Lease and may be enforced by Landlord in an action for
specific performance of the provisions of this Article 37. In
addition, Tenant shall indemnify and save Landlord harmless
from and against any and all losses, costs and expenses
including, without limitation, reasonable attorney's fees, and
other incidental and consequential costs, claims, damages or
obligations incurred by Landlord and arising out of Tenant's
failure to execute and deliver such documents as are required
by this Article 37 within thirty (30) days after being
requested to do so by Landlord including, without limitation,
any additional interest, expenses, non-refundable fees or
commissions, or other costs and expenses associated with any
sale, financing or refinancing of any improvements that are
delayed or withdrawn because of the failure of Tenant to
execute and deliver such documents to Landlord within the time
period specified.
No Waiver 38. The failure of either Landlord or Tenant to declare an
---------
event of default immediately upon its occurrence, or delay in
taking any action in connection with an event of default,
shall not constitute a waiver of the default, but said party
shall have the right to declare the default at any time and
take such action as is lawful or authorized under this Lease.
Estoppel
Certificate 39. Article 39 is Intentionally Deleted.
-----------
No Brokers 40. Landlord and Tenant each represents and warrants to
----------
the other that except as provided for in Article 16 of the
Agreement of Sale between Landlord and Tenant, dated
____________, 1989 (the "Contract"), provided for the purchase
of the demised premises by Landlord from Tenant,
-28-
<PAGE>
it has not entered into any agreement with, or otherwise had any
dealings with, any broker or agent in connection with the
negotiation or execution of this Lease which could form the basis
of any claim by any such broker or agent for a brokerage fee,
commission, finder's fee, or any other compensation of any kind
or nature in connection with the negotiation or execution of this
Lease, and Landlord and Tenant shall each indemnify and hold
harmless the other from any costs (including, but not limited to,
court costs, investigation costs and attorneys' fees), expenses
or liability for commissions or other compensation claimed by any
broker or agent with respect to this Lease which arise out of any
agreement or dealings by such party, or alleged agreement or
dealings by such party, with any such agent or broker.
Sever-
ability 41. In case any of the provisions of this Lease shall for
------- any reason be held to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any
other provision hereof, and this Lease shall be construed as if
such invalid, illegal or unenforceable provision had never been
contained herein.
Entire
Agree-
ment 42. It is expressly agreed by Landlord and Tenant, as a
---- material consideration for the execution of this Lease, that this
Lease with the specific references to written extrinsic
documents, if any, is the entire agreement of the parties; that
there are, and were, no verbal representations, warranties,
understandings, stipulations, agreements or promises pertaining
to this Lease or the expressly mentioned written extrinsic
documents not incorporated in writing in this Lease or in the
Contract or in that certain Agreement dated of even date executed
by Tenant and containing representations and warranties with
respect to environmental matters (the "Environmental
Certificate"). Landlord and Tenant expressly agree that they are
and shall be no implied warranties of merchantability,
habitability, fitness for a particular purpose or of any other
kind arising out of this Lease and there are no warranties which
extend beyond those expressly set forth in this Lease; except as
otherwise provided in the Contract or the Environmental
Certificate. It is likewise agreed that this Lease shall be
governed by the laws of the State of Texas and may not be
altered, waived, amended or extended except by an instrument in
writing signed by both Landlord and Tenant.
Attorney's
Fees 43. In the event either party files suit to enforce the
---- performance of or obtain damages caused by a default under any of
the terms of this Lease, the party against whom a judgement is
rendered shall pay the prevailing party's reasonable attorneys'
fees.
Personal
Liability 44. In no event shall Landlord be liable to Tenant either
--------- for (a) any loss or damage that may be occasioned by or through
the acts or omissions of Landlord or of any employee or agent of
Landlord or of any other persons whomsoever, or (b) any
consequential damages regardless of causation. With respect to
tort claims against Landlord, Landlord shall not be liable to
Tenant or to any other person for any act or omission of Landlord
or of its
-29-
<PAGE>
repairs thereto (provided Landlord shall never be under
any obligation to do so) and Tenant shall not be
entitled to any abatement or reduction of rent by reason
thereof.
IN WITNESS WHEREOF, the parties hereto have
executed these presents in triplicate and affixed their
seals as of the day and year first above written.
LANDLORD:
WITNESS: METROPOLITAN LIFE INSURANCE
COMPANY
____________________ By:_________________________________
_________________________________
Its______________________________
____________________
TENANT:
WITNESS: K MART CORPORATION
____________________ By:_________________________________
_________________________________
Its: M. L. SKILES. VICE PRESIDENT
____________________ ---------------------------------
-31-