LEASE ACQUISITIONS – WARTS N’ ALL Presented By: Susan Parker Myers, Esq. 24 Hour Fitness USA, Inc. Gregg Ankenman, Esq. Wendel, Rosen, Black & Dean LLP

Introduction

Overview of what we will discuss: Alternative deal structures Administrative and legal process for acquiring and integrating an existing lease or group of leases Particular lease clauses that impact transferability and integration of leases

We Will Discuss Issues in Three Broad Categories: Threshold issues Key operational and legal issues General consistency with existing lease portfolio

Fundamental Requirements for Deal to Work Threshold Issues Fundamental Requirements for Deal to Work

Deal Structure Alternatives Lease Assignment Sublease Acquisition of Stock/Ownership Interest Acquisition in Bankruptcy

Assignment/Sublease Rights and Requirements Landlord consent required? Standards: Reasonability vs. Sole Discretion Requirements New worth and other financial Management and operating experience Critical mass Timing

Will Transaction Trigger Negative Consequences? Rent increase? CAM or other NNN charge reset? Recapture/termination rights

Transferability of Key Tenant Rights Renewal Options Exclusive Use Co-Tenancy Kick Out Rights

Permitted Uses/Trade Name Is use restricted? Reasonableness standard for landlord consent to use change? Is landlord consent required to change trade name? Will any existing exclusive or prohibited uses prevent anticipated use?

Key Operational Issues Can You Operate Your Business Under the Lease?

Radius Restrictions Will this location trigger a radius violation in an existing lease? Will an existing location trigger a violation in the to be acquired lease?

Operating Covenant/Penalties Is there an operating covenant? Negotiated right to go dark? Will location be closed during transition? Will closing trigger a default, penalties or termination right?

Required Hours of Operation Are required days and hours of operation workable? What are the penalties?

Alterations/Signage Initial remodel/signage Seasonal signs/displays Be sure you can convert premises into your store Seasonal signs/displays Are your standard marketing practices allowed?

Percentage Rent Do percentage rent rate and structure fit anticipated new operation? Adequate gross sales definition and exclusions?

Parking Rights and Protections Is parking adequate in number and proximity of spaces? Are there exclusive or prohibited parking areas? Protected area? After hours lighting and access?

Exclusive Use Rights Are there exclusive use rights? Do rights protect anticipated use after transfer? Do protected uses allow for use as it may evolve over time?

Relocation Does landlord have right to relocate the premises? Are parameters for relocated premises adequate? Are triggering events acceptable?

General Lease Consistency With Portfolio

General Lease Consistency With Portfolio Consider other lease clauses important to your business or leasing practices Evaluate risks and practical concerns from inconsistencies with lease portfolio

General Lease Consistency With Portfolio Compliance with laws Maintenance and repair Obligation to remove improvements on surrender NNN protections and cap Rights to do future corporate transactions and assignments/subleases

General Lease Consistency With Portfolio Defaults and remedies Adequate notice and cure periods Rent acceleration Obligation to repay tenant improvement allowance Get estoppel

General Lease Consistency With Portfolio Timing of payments and reports Non-disturbance Effect of default by original tenant

Remember – Look Before You Leap.

Wendel, Rosen, Black & Dean LLP Thank You Presented By: Susan Parker Myers, Esq. 24 Hour Fitness USA, Inc. Gregg Ankenman, Esq. Wendel, Rosen, Black & Dean LLP