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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
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Commission File Number: 0-26063
barnesandnoble.com inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-4048787
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
76 Ninth Avenue, New York, NY 10011
(Address of Principal Executive Offices) (Zip Code)
(212) 414-6000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K [ ]
The aggregate market value of the Common Stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on March 17,
2000 as reported on the NASDAQ National Market System, was approximately
$259,190,839.
Number of shares of $.001 par value Class A Common Stock, Class B Common Stock
and Class C Common Stock outstanding as of March 17, 2000 was 30,270,463, one
and one, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III is incorporated by reference to a
definitive proxy statement to be filed by the Registrant not later than April
29, 2000 pursuant to Regulation 14A.
This document contains 52 pages.
Exhibit index located on pages 27 - 31.
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Table of Contents
Part I Page:
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Item 1. Business................................................... 3
Item 2. Properties................................................. 14
Item 3. Legal Proceedings.......................................... 15
Item.4. Submission of Matters to a Vote of Security Holders........ 15
Part II
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Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................ 16
Item 6. Selected Financial Data.................................... 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results Of Operations........................ 18
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk................................................ 26
Item 8. Financial Statements and Supplementary Data................ 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Disclosure.................................. 26
Part III
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Item 10. Directors and Executive Officers of the Registrant......... 26
Item 11. Executive Compensation..................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 26
Item 13. Certain Relationships and Related Transactions............. 26
Part IV
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Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................ 27
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PART I
Item 1. BUSINESS
General
Prior to October 31, 1998, the business of barnesandnoble.com llc
("B&N.com") was conducted by a wholly owned subsidiary of Barnes & Noble, Inc.
("Barnes & Noble"), which subsidiary was originally incorporated on January 14,
1997 in the State of Delaware under the name Barnes & Noble Online, Inc. ("B&N
Online"). As of October 31, 1998, B&N Online contributed substantially all of
its assets and liabilities to B&N.com and Bertelsmann A.G. ("Bertelsmann")
contributed $150 million in cash to B&N.com. Bertelsmann subsequently
contributed an additional $50 million in cash to B&N.com. The completion of the
foregoing transaction resulted in Barnes & Noble and Bertelsmann each having a
50% beneficial interest in B&N.com.
On March 10, 1999, barnesandnoble.com inc. (the "Company") was
established as a new Delaware subsidiary wholly-owned by Barnes & Noble. Prior
to the effective date of the Registration Statement filed in connection with the
Company's Initial Public Offering (the "Offering") the Company filed an Amended
Charter which, among other things, reclassified its outstanding Common Stock to
one share of Class B Common Stock. The Company then issued one share of Class C
Common Stock constituting a 50.0% interest in the Company to a wholly-owned
subsidiary of Bertelsmann. The foregoing transactions in this paragraph are
collectively referred to as the "Recapitalization." Following the
Recapitalization, Barnes & Noble and Bertelsmann each had a 50% beneficial
interest in the Company through their ownership of all of the outstanding Class
B and Class C Common Stock.
In connection with the Offering, the Company issued 28,750,000 shares of
Class A Common Stock to the public and immediately thereafter contributed the
proceeds to B&N.com in exchange for 28,750,000 Membership Units in B&N.com.
Immediately following the Offering, Barnes & Noble and Bertelsmann each owned an
approximate 40.0% interest in B&N.com, with the remaining 20.0% interest owned
by the Company. As of December 31, 1999 the Company owned an approximate 20.3%
interest in B&N.com and Barnes & Noble and Bertelsmann owned approximately
39.85% each. The Company's Class B Common Stock and Class C Common Stock
(collectively, "High Vote Stock") are convertible into shares of Class A Common
Stock at any time by the holder thereof on a one-for-one basis. The holders of
Class A Common Stock and High Vote Stock generally have identical rights, except
that each holder of Class A Common Stock is entitled to one vote per share and
each holder of High Vote Stock is entitled to the number of votes per share
equal to: (i) ten, multiplied by the sum of (a) the aggregate number of High
Vote Stock owned by such holder and (b) the aggregate number of Membership Units
owned by such holder; divided by (ii) the number of shares of High Vote Stock
owned by such holder. As a result of their ownership of High Vote Stock, Barnes
& Noble and Bertelsmann each beneficially control 48.9% of the voting power
(97.8% in the aggregate) of the Company's voting stock. The Company's sole
business is to act as the sole Manager of B&N.com. As sole Manager of B&N.com,
the Company controls all of the affairs of B&N.com. Barnes & Noble and
Bertelsmann, as a result of their ownership of the High Vote Stock and
Membership Units, control both the Company and B&N.com.
B&N.com has pursued a strategy of focusing on the sale of a broad range
of knowledge, information, education and entertainment related products. Since
opening its initial online store in March 1997, B&N.com has sold products to
over 4.7 million customers in 224 countries. B&N.com has created a model for
e-commerce based upon a compelling value proposition. B&N.com's suite of online
stores is anchored by its online bookstore, and also includes online stores
offering software, magazines, music, prints & posters and related products, all
seamlessly integrated within B&N.com's Web site located at www.bn.com. B&N.com's
online bookstore, which contains over
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1 million in-print titles and 15.6 million items available for sale in
out-of-print, offers customers an easy-to-search catalog of virtually every book
currently in print, as well as an extended searchable catalog of millions of
out-of-print, previously-owned and rare books. B&N.com, through Barnes & Noble,
has the largest in-stock position of books available for immediate shipping to
customers. In addition to a comprehensive selection of books and related
products, B&N.com offers its customers fast delivery, deep discounts, easy and
secure ordering, rich editorial content and community experience.
According to Media Metrix, in January 2000, B&N.com's Web site was the
fourth most trafficked shopping site and was among the top 25 largest Web
properties on the Internet. Distribution and co-marketing agreements with major
Web portals and content sites, such as America Online ("AOL"), MSN and Lycos,
have extended B&N.com's brand and consumer exposure to its online stores.
B&N.com has also established a network of remote storefronts across the Internet
by creating direct links with over 360,000 affiliate Web sites. B&N.com is also
a leader in business-to-business e-commerce with its unique Business Solutions
program.
During 1999, B&N.com introduced many major enhancements to its online
stores, including the full rollout of its online music store. It launched its
Prints & Posters Gallery, a unique collection of images that can be produced on
demand on museum-quality canvas or high-quality paper, and its free electronic
greeting card ("eCards") service, an exclusive selection of greeting card images
that can be personalized and enhanced with animation and music. B&N.com On the
Go, a company-wide wireless strategy designed to allow customers to shop at
B&N.com from wireless devices such as the Palm VII handheld computer from Palm
Computing, was established in late 1999. In December 1999, B&N.com announced the
expansion of its presence in the online magazine subscription market through the
investment and acquisition of an equity stake in Enews.com, subsequently
completed in January 2000. In February 2000, B&N.com launched bnRadio, the first
Internet radio service linked to an e-commerce company that allows customers to
listen to full-length songs and excerpts from audio books. The full rollout of
video and DVD product lines are anticipated in 2000.
The Company believes that B&N.com's relationships with Barnes & Noble,
the nation's largest bookseller, and Bertelsmann, one of the world's largest
media companies, provide B&N.com with meaningful advantages relative to other
online retailers in its category, including:
o The superior brand recognition of the Barnes & Noble trade name,
which is a strong motivating factor in attracting customers,
especially with regard to the post-early adopter market of
consumers who have yet to make an online purchase;
o The use of Barnes & Noble's state-of-the-art distribution center as
its primary product supplier, which enables B&N.com to offer over
750,000 in-stock book titles for fast delivery, representing the
largest standing inventory of any online bookseller and to benefit
from cost savings as B&N.com lessens reliance on wholesalers, a
more expensive sourcing alternative;
o The enterprise value of Barnes & Noble and Bertelsmann, including
Barnes & Noble's network of over 1,000 retail bookstores nationwide
and Bertelsmann's position as one of the largest integrated media
companies in the world, which provides significant advantages in
attracting strategic partnerships;
o The ability to conduct cross-marketing, co-promotion and customer
acquisition programs with Bertelsmann's U.S. book clubs, which
provide B&N.com with: (i) access to millions of established book
buyers; (ii) the opportunity to directly promote its online store
to this vast audience of proven buyers; and
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(iii) a potential new stream of customers that it will be able to
acquire at a significantly lower acquisition cost as compared to
customers acquired via its other marketing channels;
o The potential ability to directly link and cross-promote B&N.com's
online stores with the online stores operated or intended to be
operated by Bertelsmann's Books Online ("BOL") in the United
Kingdom, Germany, France, the Netherlands and Italy, which will
enable B&N.com to more rapidly acquire new streams of international
customers, as well as to offer its existing customer base access to
a vast selection of foreign language books, which the Company
believes will help B&N.com further strengthen customer loyalty and
repeat business; and
o Ongoing access to the substantial book selling and direct marketing
knowledge and experience of the management of Barnes & Noble and
Bertelsmann.
Industry Background
E-Commerce. The new arena of e-commerce provides retailers with the
opportunity to serve a rapidly growing market due to increased consumer
acceptance of the Internet as an alternative shopping channel. According to
Jupiter Communications' November 1999 report, US online shopping for 1999 was
estimated at $14.9 billion and is expected to reach $78 billion in the year
2003. The total number of US online buyers at the end of 1999 was estimated at
28.8 million and is forecasted to grow to approximately 85 million by the end of
the year 2003, which represents approximately 54% of overall US online
households. The Company believes that these figures will continue to grow as
Internet use becomes easier and more pleasurable through higher-speed access and
less expensive and alternative Internet access devices.
The Internet also provides e-commerce companies with an opportunity to
serve a global market. Jupiter Communications' September 1999 estimates project
that the number of Internet-connected households worldwide will grow from
approximately 100.1 million at the end of 1999 to approximately 156.6 million by
the end of 2003. IDC estimates that the number of Web users worldwide will
exceed 315 million by the end of 2002.
The Book Industry. The size of the U.S. consumer book market, according
to Veronis Suhler, an investment banking firm specializing in, among other
things, the publishing industry, was $16.9 billion in 1998 and is expected to
grow to $22.5 billion by the year 2003. Worldwide book sales, according to
Euromonitor, were expected to be $82 billion in 1999 and are anticipated to grow
to approximately $93 billion by the year 2002. B&N.com's early history with
non-U.S. consumers indicates that the demand for U.S. published books abroad is
large and relatively untapped.
Online Shopping Forecast. Industry analysts, including Forrester Research
and Jupiter Communications, forecast continued and accelerating acceptance of
the Internet as a channel that consumers will turn to for a wide range of
products. Within the categories where B&N.com has placed its primary focus,
namely books and complementary information-based products such as music, video
and software, industry analysts forecast a large and rapidly growing market for
online sales. Forrester Research estimates that U.S. online sales of books will
grow to nearly $3.3 billion by 2004. In addition, Forrester Research estimates
U.S. online sales in 2004 for music to be $4.3 billion, software to be $3.3
billion and video to be $1.7 billion.
Products That Are Well Suited for E-Commerce. The book, music, video and
software businesses are particularly well suited for e-commerce because an
online store has virtually unlimited shelf space and can offer
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consumers anywhere the convenience of browsing through vast product information
databases. The use of sophisticated search engines and personalized services
enables users to locate books and music, for example, with convenience and speed
and to get advance notice about titles in their areas of personal interest.
Editorial content, such as synopses, excerpts, review and editorial
recommendations, and in the case of music, downloadable sound samples, make for
a more-educated and entertaining purchasing decision. The Company believes that
the presence of an online store on consumers' desktops will, in and of itself,
stimulate demand and expand the marketplace. Additionally, the Company believes
that new technology, such as portable electronic books and print-on-demand
publishing, will greatly add to the range of content that an online retailer can
offer.
Business Strategy
B&N.com has pursued a strategy of focusing on the sale of a broad range
of knowledge, information, education and entertainment related products. To
achieve this objective, B&N.com has focused its efforts on providing the highest
possible levels of value and service, which it believes are reflected in the
completeness of its product selection, the ease-of-use of its Web site, the
price of its products and the speed of delivery it can offer its customers.
While the principal focus of B&N.com is online bookselling, it continues to seek
opportunities that expand its product offering to complementary information,
entertainment and intellectual property-based products, and to present them to
customers with the highest contextual relevance. It is B&N.com's goal to be
recognized as the most innovative and customer-focused of e-commerce merchants,
making online purchasing a simple, personal and gratifying experience that
results in the highest levels of customer loyalty.
Central to achieving these objectives, B&N.com's operating strategy is
focused on rapidly extending its brand and increasing its customer and revenue
base by:
Continually Enhancing the User Experience. B&N.com is committed to
making every aspect of browsing and shopping in its online stores an easy
and pleasurable experience. It makes continual efforts to improve the
design, layout and navigation of all elements of its Web site, as well as
to ensure that the site's performance metrics are competitive, especially
with regard to page download times and the speed of all search functions.
B&N.com also strives to make the entire ordering and checkout process
easy, intuitive, fast and secure.
Offering a Large Product Selection and Fast Delivery. B&N.com
offers one of the largest selections of books, currently over 1 million
in-print titles and 15.6 million items available for sale in
out-of-print, of any online bookseller. This includes virtually every
English-language book currently in print as well as millions of
out-of-print, pre-owned and rare books. B&N.com's online databases act as
a highly searchable catalog for the spectrum of English-language books.
B&N.com, through Barnes & Noble, maintains the largest in-stock position
of any online bookseller, enabling it to uniquely serve customers by
having over 750,000 titles available for immediate shipping. Preparing
two distribution centers for operation in 2000 will bring the number of
titles available to over one million and enhance the expediting of
products as well. B&N.com's music store is rapidly growing as well,
currently having over 200,000 titles available for purchase. Over 9,500
images are available for printing on museum-quality canvas or
high-quality paper and are printed and shipped on demand from B&N.com's
strategic partner BuyEnlarge.com Inc.
Expanding Its Product Offering. B&N.com intends to be the best
place to buy books online as well as the most authoritative source for
information about books and authors. While B&N.com's major focus is and
will be selling books, the Company believes that offering complementary
information products such as
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magazines, software, music and videos, is a natural extension of
bookselling. B&N.com launched its magazine and software online stores
during 1998 and began a limited introduction of music and video products
in late 1998. In July of 1999, the full rollout of music was completed.
In October 1999, B&N.com launched its Prints & Posters Gallery and eCards
service. In January 2000, the Company completed an acquisition of
approximately 32 percent of Enews.com, the largest retailer of magazine
subscriptions on the Internet, to expand its presence in the online
magazine subscription market. Concurrently the Company entered into a
marketing agreement with Enews.com, the exclusive seller of magazines on
B&N.com's Web site, offering competitively priced subscriptions to nearly
1,000 titles. The full rollout of the video product line is expected to
be completed in 2000. Furthermore, the Company believes that B&N.com's
entire range of technologies, inclusive of its database and search
engine, automated shopping cart, and other related EDI interfaces with
vendors will enable it to position itself as a delivery mechanism for
downloadable content, such as electronic books. B&N.com's recently
announced eBook initiative with Microsoft is expected to provide
B&N.com's millions of customers with access to eBook titles designed to
deliver an on-screen computer reading experience rivaling that offered by
traditional paper-based text.
Building Brand Awareness and Driving Customer Acquisition through
Advertising and Promotion. B&N.com will continue to invest in building
its online brand and in communicating the benefits and convenience of
shopping at its online stores. The Company believes that B&N.com is well
positioned to benefit from the large post-early-adopter market that is
just beginning to access the internet, many of whom have yet to make
their first online purchase. A variety of media, including online, radio,
television, print and outdoor advertising, was selectively deployed in
1999 to further B&N.com's goal of rapidly growing its customer base. The
Company began 1999 with 1.3 million customers and grew this base to
almost 4 million by year-end. Customer retention has also been growing
steadily, with repeat business rising from 52 percent in 1998 to 66
percent in December 1999. B&N.com also benefits from the cross-marketing
with Barnes & Noble retail stores, wherever possible, as well as from
cross-marketing with Bertelsmann's U.S. book clubs and with Bertelsmann's
internet business BOL in Europe. In all of its advertising and promotion
initiatives, B&N.com seeks to continuously drive down new customer
acquisition cost, as well as to get customers to return to the site more
frequently and to increase the size of their average purchase per visit.
Leveraging its Relationship with Barnes & Noble. The Company
believes that B&N.com's relationship with Barnes & Noble provides it with
competitive advantages, including the ability to use the Barnes & Noble
state-of-the-art distribution center as its primary supplier, leverage
its well-respected brand name and utilize the substantial bookselling
experience of its management.
Strengthening and Expanding Strategic Alliances. B&N.com will
continue to provide its major strategic partners with merchandising
support, strengthening their ability to generate sales for B&N.com and to
promote B&N.com's brand. The Company believes that B&N.com's connections
to Barnes & Noble and Bertelsmann enables B&N.com to negotiate more
competitively for new strategic and marketing partners as major media and
content companies place a high value on these connections.
Increasing the Number of Web Sites in its Affiliate Network.
B&N.com's affiliate network, which was launched in October 1997,
currently has over 360,000 members. The affiliate network, which began
1999 with 48,000 members, is among the fastest-growing in e-commerce.
Continuing to Invest in Technology. The Company believes that
B&N.com currently utilizes a state-of-the-art interactive e-commerce
platform. B&N.com plans to continue to invest in technologies that
improve its
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ability to support its future growth while offering customers the most
convenient, user friendly and secure online shopping experience possible.
In particular, B&N.com plans to invest in technologies that serve to
enhance its ability to conduct personalized one-to-one marketing.
Pursuing Acquisitions and Strategic Relationships. B&N.com pursues
acquisitions, joint ventures and other similar strategic investments and
relationships with complementary businesses and companies in order to
augment or expand its current offerings. Examples of recent strategic
relationships include the following:
o In January 2000 B&N.com announced an agreement to develop and
market a co-branded credit card with MBNA America Bank, N.A., the
world's largest independent credit card company. B&N.com expects
the agreement to generate more than $25 million in revenues over
the five-year term of the agreement, which allows B&N.com to market
its products to MBNA's tens of millions of customers, among the
largest credit card customer bases in the world. The deal is the
first example of B&N.com's ability to monetize customers over
multiple channels, and is an example of the Company's ability to
attract industry-leading strategic partners.
o In January 2000 B&N.com and Microsoft announced that they would
develop an eBook Superstore using Microsoft Reader software. The
eBook initiative will provide B&N.com's millions of customers with
access to thousands of eBook titles through Microsoft Reader, a new
software application designed to deliver an on-screen computer
reading experience rivaling that offered by traditional paper-based
text.
o In December 1999 B&N.com announced its plan to expand its presence
in the growing online magazine subscription market by acquiring an
equity stake of up to 40 percent in Enews.com, the largest retailer
of magazine subscriptions on the Internet.
o B&N.com also launched B&N.com On the Go in December 1999, a
company-wide wireless strategy designed to allow customers to shop
at bn.com from wireless devices such as the Palm VII handheld
computer from Palm Computing.
B&N.com's Online Stores
The principal focus of B&N.com is online bookselling, which generated
approximately 93%, 98% and 100% of B&N.com's total revenues for the years ended
December 31, 1999, 1998 and 1997, respectively. However, B&N.com continues to
seek out opportunities to expand its product offering to complementary
information, entertainment and intellectual property-based products, and to
present them to customers with the highest contextual relevance. Accordingly, in
addition to its online bookstore, B&N.com provides online stores for software,
magazines, music, prints & posters and other information-based products of a
complementary nature. All of its online stores are seamlessly integrated and
presented to customers with B&N.com's single Web site. B&N.com's initial online
bookstore, launched in 1997, was augmented by the introduction of a magazine
store and a software store in 1998. Music, the Prints & Posters Gallery and
eCards were launched in 1999 and a full rollout of the video and DVD store is
planned for 2000.
The Company believes that the following factors make B&N.com's online
bookstore an easy and convenient way to shop for books:
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Large Selection. B&N.com's online database lists virtually every
book in print, offering over one million titles from over 30,000
publishers. B&N.com's search engine and sort capabilities allow consumers
to search and browse through the vast database in an intuitive and easy
way, with accurate and meaningful results received on virtually every
search. In October 1998, pursuant to an agreement with Advanced Book
Exchange, Inc., B&N.com introduced its out-of-print books. In December
1999 B&N.com began sourcing out-of-print books through a second,
non-commissioned vendor, ALIBRIS. B&N.com's combined
in-print/out-of-print book selection is currently over 1 million in-print
titles and 15.6 million items available for sale in out-of-print.
B&N.com's music store, to date, contains over 200,000 selections of music
titles available for purchase. An extensive collection of over 9,500
prints are currently available in the Prints & Posters Gallery. In
addition to the products available for sale, B&N.com also offers
approximately 2,000 eCards, electronic greeting card images which can be
customized and sent free of charge, and bnRadio, an internet radio
service that allows customers to listen to full-length songs and excerpts
from audio books.
Large Standing Inventory for Fast Delivery. The Company believes
that consumers will increasingly demand an assured in-stock position and
fast delivery from online booksellers. It also believes that B&N.com
offers the fastest delivery on the largest number of titles of any online
bookseller because the Barnes & Noble distribution center is able to
provide B&N.com with immediate shipment on over 750,000 titles. Preparing
two distribution centers for operation in Memphis and Reno in 2000, with
the most advanced materials handling equipment and related technology,
will offer even faster delivery and bring the number of available titles
to over one million.
Easy and Secure Ordering. B&N.com seeks to ensure that all
transactions are safe and secure. B&N.com has created a set of
applications that allow customers to establish an account to store an
address book, credit card information and shipping preferences.
Rich Editorial Content. B&N.com strives to provide its users with
the most accurate and authoritative online database about books and
authors. B&N.com's online database currently includes editorial content
such as synopses, book reviews, author biographies and user reviews on
over 1 million titles. Included in this content are book reviews from
many respected industry sources, such as The New York Times Book Review,
Publisher's Weekly and Kirkus Reviews. B&N.com's Web site includes a
microsite featuring the highly acclaimed `Reader's Catalog', a listing of
over 40,000 recommended titles, individually selected and reviewed by an
editorial board under the supervision of the New York Review of Books.
B&N.com's in-house group of editorial experts also write and commission
feature articles, columns and interviews.
Online Community. B&N.com has introduced author chats to its online
bookstore that are a natural extension of the type of community building
activities pioneered in Barnes & Noble's superstores. It was the first
online bookseller to introduce a regular series of real-time author
chats. In 1999, it started adding musicians in its online chats as well.
Since going online in May, 1997, over 1,050 authors and musicians from a
wide variety of genres have participated in these events, including JK
Rowling, Hillary Rodham Clinton, Beck, LeAnn Rimes and Michael Crichton.
B&N.com also encourages users to write their own book and music reviews.
As a result, B&N.com's Web site contains thousands of readers and
listeners reviews.
Personalized Services. B&N.com's e-nnouncements program allows
users to sign up for free e-mail book reviews. Users sign up by area of
interest and receive monthly bulletins about new and noteworthy
publications, handpicked by B&N.com's editors.
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High Level of Customer Service. The Company believes that high
levels of customer service and support are critical to retain and expand
B&N.com's customer base. B&N.com monitors orders from the time they are
placed through delivery by providing numerous points of electronic,
telephonic and personal communication to its customers. B&N.com's
customer service representatives are available seven days a week and
maintain constant customer service availability via e-mail.
B&N.com's magazine store currently offers customers the ability to obtain
subscriptions to over 1,000 magazines in 25 categories with support through
Enews.com. Subscriptions are offered at extremely competitive prices.
B&N.com's software store currently offers approximately 2,000 software
titles in eight major categories, including software for business and
productivity, games, kids and entertainment and for home and reference. The
titles that B&N.com offers encompass a title mix that represents 80% of all of
the software sold in the U.S.
B&N.com's music store currently offers over 200,000 music titles in
sixteen major categories. The site also contains more than 20,000 artist
biographies, more than 50,000 music reviews and album ratings.
B&N.com's Prints & Posters Gallery offers over 9,500 images that can be
produced on demand on museum-quality canvas or high-quality paper.
B&N.com's bnRadio, an Internet radio service that allows customers to
listen to more than 25,000 full-length songs and three-to-five minute selections
from hundreds of audio books can be accessed at http://music.bn.com/radio/. The
site features access to B&N.com's music store and audio book section.
During 2000, B&N.com plans to expand its offering of videos and DVDs by
introducing an online video store as well as other complementary information and
entertainment-based products.
Marketing and Promotion
Online Strategic Alliances. Since inception, B&N.com has aggressively
pursued strategic alliances with premier online companies and high-traffic Web
sites in order to drive traffic to its online stores. The Company believes that
B&N.com's affiliation with Barnes & Noble and Bertelsmann greatly facilitates
its ability to enter into agreements with many high profile portal and content
sites. B&N.com's largest strategic alliance is with AOL. In November 1997, it
entered into a four-year agreement with AOL to be the exclusive bookseller on
AOL's commercial service, which is the largest online service of any kind,
serving approximately 17 million members. B&N.com has also entered into
strategic alliances with MSN, Microsoft, Lycos, ZDNet, Disney, The New York
Times, CNN, TicketMaster and USA Today.
Affiliate Network. In addition to securing alliances with high-traffic
Web sites, B&N.com has established an affiliate network consisting of over
360,000 Web sites operated by third parties, whereby Web site operators can earn
referral fees by linking users from their sites to B&N.com's online stores.
B&N.com believes that its affiliate program goes beyond that of other online
retailers by: (i) paying higher referral fees; (ii) enabling members to take
content from B&N.com's online bookstore to enhance their merchandising; and
(iii) providing members with real-time reporting and analysis tools. About 4,000
affiliates are added each week to B&N.com's network.
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<PAGE>
Reciprocal Marketing Program. B&N.com has multiple reciprocal marketing
programs with leading e-commerce companies such as 1-800-FLOWERS.COM,
Expedia.com, jcrew.com, LL.Bean.com, PETsMART.com, PlanetRx.com and
VitaminShoppe.com. The program gives B&N.com access to new customers and revenue
opportunities through extensive online and offline marketing with the
participating companies. For instance, when customers complete shopping
transactions on a participants' site, they will find links to B&N.com. In
return, when B&N.com customers complete their transactions, they find links to
the various companies. Joint marketing initiatives are in progress to reward
customers with special offers. This program will allow B&N.com access to
millions of online buyers who have not yet purchased from the B&N.com site.
Advertising. During 1999 B&N.com continued its comprehensive national
print, radio, television and online banner campaign to significantly increase
awareness of B&N.com's Web site. It intends to continue to advertise in each of
those forms of media, allocating expenditures in relation to the effectiveness
of the advertising.
International. B&N.com believes that the demand for U.S. published books
abroad is substantial and untapped. B&N.com implements a cross-linking and
cross-marketing program with the Web sites operated by BOL in the United
Kingdom, Germany, France, the Netherlands and Italy, pursuant to which BOL
customers who wish to order from B&N.com are linked to B&N.com's Web site.
Order Fulfillment
B&N.com utilizes an extensive electronic shopping network for order
fulfillment, which is connected to the Barnes & Noble distribution center and
various book wholesalers, including the Ingram Book Company ("Ingram"), Baker &
Taylor and Bookazine. From these sources, B&N.com can quickly obtain
approximately 900,000 different titles, the majority of which are currently
sourced from the Barnes & Noble distribution center. Orders for music are
fulfilled through AEC One Stop Group, Inc. ("AEC").
Internet customer orders are processed at B&N.com's fulfillment center in
central New Jersey, which is in close proximity to the Barnes & Noble
distribution center. Additionally, B&N.com has a dedicated customer service
group in northern New Jersey.
In the second quarter of 2000, B&N.com anticipates opening its own
distribution center in Memphis, Tennessee. A second distribution center is
expected to open in Reno, Nevada within the next twelve months. These facilities
will have the most advanced materials handling equipment and technology for
direct to consumer fulfillment.
Technology
B&N.com believes that it currently has a state-of-the-art interactive
e-commerce platform, and it plans to continue to invest in technologies that
will enable B&N.com to offer its customers the most convenient and user-friendly
online shopping experience possible. B&N.com has been able to quickly establish
suites of "best of breed" solutions by following a strategy of leveraging
existing systems and the best demonstrated processes of Barnes & Noble,
licensing existing commercial technology when available and focusing its
internal development efforts on those proprietary systems necessary to provide
the highest level of value and service to its customers. The overall mix of
technologies and applications currently in use by B&N.com allow it to support a
distributed, scalable and secure e-commerce environment.
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B&N.com uses the latest Intel-based Server Technology provided by Compaq
in a fully redundant configuration to power its Web site, which is hosted in two
separate locations. At these locations, B&N.com maintains computers that store
its web pages in electronic form and transmits them to requesting users. Such
storage and transmittal is referred to as hosting. B&N.com maintains its primary
host location in its corporate headquarters in New York. A second host location
is operated by a third party, which provides additional capacity and full
redundancy. All hosting locations are configured with excess Internet
telecommunications capacity to avoid slow response time and nine separate
Internet service providers are used. By maintaining redundant host locations,
B&N.com has significantly reduced its exposure to downtime and service outages.
B&N.com's integrated systems and tools provide functionality in the
following areas:
Title Database and Search Functionality. B&N.com has been able to
establish a comprehensive and accurate book database by employing a
multi-channel data sourcing strategy. B&N.com obtains its primary title
data directly from Barnes & Noble. Weekly updates are automatically sent
to B&N.com's servers. B&N.com complements this primary title database
content feed with data from multiple external sources and is able to
systematically evaluate data, identify inconsistencies and correct
inaccuracies. B&N.com has also developed a powerful proprietary search
engine. This software allows a user to search for books using a variety
of criteria, including author, title, keywords, subject area, ISBN
number, book format, subject, price and a series of children's age
ranges. Search results can then be sorted by user-defined sequences
including "bestseller", "date published", a "Readers Catalog highly
recommended book", or in alphabetical sequence.
E-Commerce. B&N.com has developed its e-commerce applications using
the Microsoft SiteServer Architecture. Working with Microsoft, B&N.com
has created a set of server applications that allow customers to
establish an account to store an address book, credit cards and ordering
preferences. A customer needs to set up an account only once. Once the
account has been established the customer can shop the traditional
"e-commerce" path by adding items to their shopping cart. Options for
gift certificates, gift-wrap, gift message and the ability to select from
a variety of shipping methods are available for customers.
Community and Interactivity. B&N.com has established several
applications to facilitate interaction with its customers. An
"Auditorium", which uses Microsoft's Chat technology, is used to host
real-time author chats each night on B&N.com's online bookstore. Since
going online in May, 1997, over 1,050 authors and musicians from a wide
variety of genres have participated in these chats.
Order Processing. B&N.com has created a proprietary application to
expedite orders into the fulfillment process. This application has
real-time connectivity to Barnes & Noble's distribution center as well
as other third party suppliers. In addition to immediately securing the
inventory for the customer, application logic determines the best
possible choice of shipping warehouse by evaluating purchase margin,
postage cost and customer delivery time.
Order Fulfillment and Customer Service. B&N.com has developed
propriety applications which enable it to receive products and assign it
to customers based upon various ordering, handling and shipping criteria.
B&N.com has also developed proprietary e-mail applications which are used
for customer service.
Sales Tracking and Analysis. B&N.com licenses technology from Be
Free Inc. to support its affiliate program. The software provides
sophisticated sales tracking for the members of the affiliate network
with real
12
<PAGE>
time reporting and analysis tools. B&N.com has built a comprehensive data
warehouse to store and analyze customer, sales and online bookstore
activity data.
Competition
Both the e-commerce market and retail bookselling business are highly
competitive. Since the introduction of e-commerce to the Internet, the number of
e-commerce Web sites competing for customer attention has increased rapidly. The
Company expects future competition to intensify given the relative ease with
which new Web sites can be developed. The Company believes that the primary
competitive factors in e-commerce are brand recognition, site content, ease of
use, price, fulfillment speed, customer support and reliability. The Company
believes that B&N.com's success will depend heavily upon its ability to provide
a compelling and satisfying shopping experience. The Company believes that other
factors that will affect B&N.com's success include B&N.com's continued ability
to attract experienced marketing, technology, operations and management talent.
The nature of the Internet as an electronic marketplace (which may, among other
things, facilitate competitive entry and comparison-shopping) may render it
inherently more competitive than traditional retailing formats. Increased
competitiveness among online retailers may result in reduced operating margins,
loss of market share and a diminished brand franchise.
With respect to the sale of books, which constitutes B&N.com's largest
source of revenue, B&N.com currently competes with numerous booksellers
including other Internet-based companies such as Amazon.com, and traditional
book retailers. With respect to the sale of music, software and videos, B&N.com
competes with numerous merchants including other Internet-based companies, such
as Amazon.com, Cdnow, Reel.com, Beyond.com and traditional retailers. B&N.com's
main online competitor, Amazon.com, has a longer online operating history and a
larger existing customer base than B&N.com. B&N.com is aware that Amazon.com has
and may continue to adopt aggressive pricing and marketing strategies. B&N.com
is also aware of other online retailers that are offering substantial discounts
on products, including books, music, software and videos, which are subsidized
by advertising revenue from their Web sites. An increase in the prevalence of
this type of business model could lead to additional pricing pressures on
B&N.com's products. If and when B&N.com decides to add additional products in
its online stores, it will most probably face intense competition for those
products as well.
Seasonality
B&N.com experiences seasonality in its business, reflecting a combination
of seasonal fluctuations in Internet usage and traditional retail seasonality
patterns.
Government Regulation and Legal Uncertainties
E-commerce is new and rapidly changing, and federal and state regulation
relating to the Internet and e-commerce is evolving. Currently, there are few
laws or regulations directly applicable to the access of the Internet or
e-commerce on the Internet. Due to the increasing popularity of the Internet, it
is possible that laws and regulations may be enacted with respect to the
Internet, covering issues such as user privacy, pricing, taxation, content,
copyrights, distribution, antitrust and quality of products and services.
Additionally, the rapid growth of e-commerce, may trigger the development of
tougher consumer protection laws. The adoption of such laws or regulations could
reduce the rate of growth of the Internet, which could potentially decrease the
usage of B&N.com's online stores or could otherwise have a material adverse
effect on B&N.com's business. In addition, applicability to the Internet of
existing laws governing issues such as property ownership, copyrights and other
intellectual property issues, taxation, libel, obscenity and personal privacy is
uncertain. The vast majority of such laws were adopted prior
13
<PAGE>
to the advent of the Internet and related technologies and, as a result, do not
contemplate or address the unique issues of the Internet and related
technologies.
Further, several telecommunications carriers have requested the Federal
Communications Commission ("FCC") to regulate telecommunications over the
Internet. Due to the increasing use of the Internet and the burden it has placed
on the current telecommunications infrastructure, telephone carriers have
requested the FCC to regulate Internet service providers and online service
providers and impose fees on those providers. If the FCC imposes access fees,
the costs of using the Internet could increase dramatically. This could result
in the reduced cost of the Internet, as a medium for commerce, which could have
a material adverse effect on B&N.com's business, financial condition, results of
operations or prospects.
Employees
As of February 29, 2000, B&N.com employed approximately 1,237 full-time
and part-time employees. B&N.com also employs independent contractors to perform
duties in various departments, including software development, editorial and
administration. B&N.com's employees are not represented by unions, and B&N.com
considers its relationship with its employees to be excellent. B&N.com believes
that its success is dependent on its ability to attract and retain qualified
personnel in numerous areas.
Item 2. PROPERTIES
B&N.com's principal administrative, marketing and technical facilities
are located in New York, New York and are covered by two leases. The leases are
for approximately 150,000 square feet of office space and expire in 2015. The
rent is approximately $1 million in 1999, $3 million in 2000, $4 million per
year through 2007, and $6 million per year thereafter.
B&N.com currently leases a 380,000 square foot building in Memphis,
Tennessee for distribution purposes. The lease term is five years commencing in
January 2000. The annual rent is approximately $1.1 million.
B&N.com entered into an agreement to lease 600,000 square feet of space
in Reno, Nevada for a second distribution facility. The building will be
completed and ready for occupancy in stages throughout 2000. The lease is for a
period of ten years commencing with substantial completion of the facility.
Annual rent for the entire completed facility will be approximately $2.1 million
for years one through five and approximately $2.4 million for years six through
ten. Four five-year options to renew are included in the terms of the lease.
B&N.com leases 30,000 square feet in New Jersey for its customer service
operations. The lease term is ten years commencing June 1, 1999. Annual rent for
years one through five is approximately $700,000. Annual rent for years five
through ten is approximately $750,000. The lease may be renewed for one
five-year period at an agreed upon prevailing fair market value rate.
Barnes & Noble leases a 300,000 square foot facility located in New
Jersey, of which B&N.com utilizes approximately 100,000 square feet for its
current fulfillment operations. B&N.com currently pays Barnes & Noble $31,800
per month for its proportionate share of such lease. This lease expires in March
2003, however, Barnes & Noble has an option to extend the lease for up to three
additional successive two-year periods.
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<PAGE>
Item 3. LEGAL PROCEEDINGS
B&N.com is involved in various routine legal proceedings incidental to the
conduct of its business. The Company does not believe that any of these legal
proceedings will have a material adverse effect on the financial condition,
results of operations or cash flows of B&N.com.
In August 1998, The Intimate Bookshop, Inc. and its owner, Wallace
Kuralt, filed a lawsuit in the United States District Court for the Southern
District of New York against a predecessor of the Company, Barnes & Noble, Inc.,
Borders Group, Inc. and others, alleging violation of the Robinson-Patman Act
and other federal law, New York statutes governing trade practices and common
law. In March 2000 a Second Amended Complaint was served on the Company and
other defendants alleging a single cause of action for violations of the
Robinson-Patman Act. The Second Amended Complaint claims that the Intimate
Bookshop, Inc. has suffered damages of $10,000,000 or more and requests treble
damages, costs, attorneys' fees and interest, as well as declaratory and
injunctive relief prohibiting the defendants from violating the Robinson-Patman
Act. The Company and B&N.com intend to vigorously defend this action.
In March 1998, the American Booksellers Association and 26 independent
bookstores filed a lawsuit in the United States District Court for the Northern
District of California against Barnes & Noble, Inc. and Borders Group Inc.
alleging violations of the Robinson-Patman Act, the California Unfair Trade
Practice Act and the California Unfair Competition Law. The Complaint seeks
injunctive and declaratory relief; treble damages on behalf of each of the
bookstore plaintiffs, and, with respect to the California bookstore plaintiffs,
any other damages permitted by California law; disgorgement of money, property
and gains wrongfully obtained in connection with the purchase of books for
resale, or offered for resale, in California from March 18, 1994 until the
action is completed and pre-judgment interest on any amounts awarded in the
action, as well as attorney fees and costs. In October 1999, the Company and
B&N.com were added as defendants in the action. The Company and B&N.com intend
to vigorously defend this action.
On October 21, 1999, Amazon.com, Inc. ("Amazon") filed a lawsuit against
the Company and B&N.com in the United States District Court for the Western
District of Washington alleging that B&N.com's use of its Express Lane one-click
ordering system infringes upon Amazon's patent for its 1-Click ordering system.
The complaint seeks injunctive and declaratory relief and treble damages, as
well as attorneys fees and costs. The Company and B&N.com have filed a
counterclaim for a declaratory judgment that the Amazon patent at issue is
invalid. On December 1, 1999, the Court granted Amazon's motion for a
preliminary injunction. As a result, consistent with the Court's order, B&N.com
replaced its Express Lane feature with an Express Checkout feature requiring two
clicks. The Company and B&N.com intend to vigorously defend this action.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
15
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Class A Common Stock is listed on the NASDAQ National Market
under the symbol "BNBN" and began trading on May 25, 1999. On March 17, 2000,
the Company had 546 shareholders of record. The Company's Class A Common Stock
price at the close of business on March 17, 2000 was $8 9/16 per share.
The table below sets forth the high and low sale prices of the Company's
Class A Common Stock for the periods indicated, as reported by the NASDAQ
National Market.
High Low
---- ---
1999
----
May 25 through June 30 $ 26 5/8 $ 14 1/4
Third Quarter $ 20 7/8 $ 15
Fourth Quarter $ 23 1/2 $ 14 1/16
The Company has not declared or paid any dividends on its Common Stock and
B&N.com has not made any distributions to its members, since their respective
dates of inception. Both the Company and B&N.com do not currently anticipate
paying any dividends or distributions, except for amounts which may be
distributed by B&N.com to cover income tax liabilities, if any, of its members
arising from the taxable income of B&N.com. Cash distributions by B&N.com may
also be restricted by future debt covenants. The Company currently intends to
cause B&N.com to retain future earnings, if any, to finance the expansion of the
business of B&N.com.
Item 6. SELECTED FINANCIAL DATA (thousands of dollars, except per share data)
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and notes thereto appearing elsewhere
in this Form 10-K.
16
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<TABLE>
<CAPTION>
barnesandnoble.com inc. and subsidiary || barnesandnoble.com llc and its predecessor
-------------------------------------- || ------------------------------------------
(Consolidated) ||
Pro forma ||
year ended May 25, 1999 || January 1, Year Ended December 31,
December 31, to December 31, || 1999 to -----------------------------
1999 (1)(2) 1999 (3) || May 24, 1999 (4) 1998(4) 1997(4)
---------------- --------------- || ----------------- ------------- -----------
||
<S> <C> <C> || <C> <C> <C>
Statement of Operations Data: ||
Net sales $ 202,567 $ 148,263 || $ 54,304 $ 61,834 $ 11,949
Cost of sales 159,937 117,850 || 42,087 47,569 10,117
--------- --------- || --------- --------- ---------
Gross profit 42,630 30,413 || 12,217 14,265 1,832
--------- --------- || --------- --------- ---------
Operating expenses: ||
Marketing and sales 111,553 79,257 || 32,296 70,423 8,855
Technology & web site development 21,006 15,058 || 5,948 8,532 3,256
General and administrative 32,714 22,765 || 9,949 19,166 3,273
--------- --------- || --------- --------- ---------
Total operating expense 165,273 117,080 || 48,193 98,121 15,384
--------- --------- || --------- --------- ---------
Operating loss (122,643) (86,667) || (35,976) (83,856) (13,552)
Interest income, net 20,238 18,615 || 1,623 708 -
--------- --------- || --------- --------- ---------
Loss before minority interest (102,405) (68,052) || (34,353) (83,148) (13,552)
Minority interest 54,253 54,253 || - - -
--------- --------- || --------- --------- ---------
Net loss-historical (48,152) $ (13.799) || (34,353) (83,148) (13,552)
========= || ========= =========
Pro forma adjustment to ||
minority interest (5) 27,534 || 27,534 66,518 10,842
--------- || --------- --------- ---------
Net loss-pro forma (2) $ (20,618) || $ (6,819) $ (16,630) $ (2,710)
========= || ========= ========= =========
||
Basic and diluted net loss ||
per common share (6) $ (0.72) $ (0.48) || $ (0.24) $ (0.58) $ (0.09)
Basic and diluted weighted average common ||
shares outstanding (6) 28,778 28,797 || 28,750 28,750 28,750
||
Basic and diluted loss before minority ||
interest per share (6)(7) $ (0.72) $ (0.48) || $ (0.24) $ (0.58) $ (0.09)
Basic and diluted weighted average shares ||
outstanding, if converted (6)(7) 143,939 144,064 || 143,750 143,750 143,750
||
Balance Sheet Data: ||
Cash and cash equivalents $ 247,403 || $ 96,940 $ -
Long term marketable securities 71,852 || - -
Working capital 429,674 || 78,681 3,176
Total assets 679,518 || 202,144 26,327
Minority interest (8) 482,896 || - -
Equity $ 120,682 || $ 169,149 $ 19,213
</TABLE>
(1) Includes the historical results of barnesandnoble.com llc for the entire
year and the historical results of the Company from May 25, 1999.
barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
(2) The pro forma amounts do not give effect to the assumed charges to
operating results which might have resulted had the Company's Initial
Public Offering occurred at the beginning of the repective periods.
(3) barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
(4) Includes the historical results of barnesandnoble.com llc and its
predecessor.
(5) Represents the approximate 80% interest of Barnes & Noble and Bertelsmann
in the net loss of barnesandnoble.com llc for periods prior to May 25,
1999.
(6) For periods prior to May 25, 1999, reflects the pro forma effect of the
shares issued in the Company's Initial Public Offering assuming they were
issued at the beginning of 1997.
(7) Includes the conversion of membership units in barnesandnoble.com llc held
by Barnes & Noble and Bertelsmann into outstanding shares of the Company.
(8) Represents the approximate 80% interest in Barnes & Noble and Bertelsmann
in the equity of barnesandnoble.com llc.
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<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
This report may contain certain forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) and
information relating to the Company and B&N.com that are based on the beliefs of
the management of the Company as well as assumptions made by and information
currently available to the management of the Company. When used in this report,
the words "anticipate," "believe," "estimate," "expect," "intend," "plan" and
similar expressions, as they relate to the Company, B&N.com or the management of
the Company, identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events, the outcome of which
is subject to certain risks, including among others general economic and market
conditions, changes in product demand, the growth rate of Internet usage and
e-commerce, possible disruptions in the Company's or B&N.com's computer or
telephone systems, possible increases in shipping rates or interruptions in
shipping service, effects of competition, possible work stoppages or increases
in labor costs or labor shortages, unanticipated adverse litigation results or
effects, the performance of B&N.com's current and future investments and new
product initiatives, unanticipated costs associated with B&N.com's new
warehouses or the failure to successfully integrate those warehouses into
B&N.com's distribution network, unanticipated costs or affects associated with
Year 2000 compliance problems of the Company or B&N.com or their service or
supply providers, the factors described below under "Quarterly Results of
Operations," changes in tax and other governmental rules and regulations
applicable to the Company or B&N.com and other factors that may be outside of
the Company's control. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described herein as anticipated,
believed, estimated, expected, intended or planned. Subsequent written and oral
forward-looking statements attributable to the Company, B&N.com or persons
acting on their behalf are expressly qualified in their entirety by the
cautionary statements in this paragraph.
Overview
The Company is a holding company whose sole asset is its 20.3% equity
interest in B&N.com and whose sole business is acting as sole manager of
B&N.com. B&N.com launched its initial online store in March 1997 and since that
time has become the fourth largest e-commerce Web site, based on the Media
Metrix January 2000 report.
B&N.com has pursued a strategy of focusing on the sale of a broad range
of knowledge, information, education and entertainment related products. Through
February 2000, B&N.com has offered for sale both new and out-of -print books,
music, software, magazine subscriptions and prints & posters. In October 1999,
the Company also launched eCards, offering an exclusive selection of over 1,700
unique images that can be personalized and enhanced with animation and music.
The eCards can be sent for free through e-mail. The Company intends to continue
to expand its product offering within the broad categories of knowledge,
information, education and entertainment including entering into the video and
DVD category in 2000.
The results of operations discussed hereafter include the pro forma
results of the Company and B&N.com for the year ended December 31, 1999 and the
historical results of B&N.com and its predecessors for the years ended December
31, 1998 and 1997. In view of the rapidly changing nature of B&N.com's business
and its limited operating history, the Company believes that period-to-period
comparisons of the operating results of B&N.com,
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<PAGE>
including gross profit margin and operating expenses as a percentage of sales
are not necessarily meaningful and should not be relied upon as an indication of
future performance. Additionally, no analysis has been provided regarding
B&N.com's historical period of January 1, 1999 to May 24, 1999, as well as the
Company's historical period May 25, 1999 to December 31, 1999, as the Company
believes that such an analysis would not be meaningful, since there was no
change in the net asset basis of the Company due to the Recapitalization.
Results of Operations
Net Sales
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
Net sales $ 202,567 228% $ 61,834 417% $11,949
Net sales are composed of sales of books, music, software, prints &
posters and related products, net of returns, as well as outbound shipping and
handling charges. In 1999, sales more than tripled from $61.8 million in 1998 to
$202.0 million in 1999. Growth in net sales reflects a significant increase in
units sold due to the growth of B&N.com's customer base and repeat purchases
from B&N.com's existing customers, in addition to the introduction of music and
prints & posters product lines during 1999. During 1999, B&N.com's cumulative
customer base more than tripled to approximately 4 million customers. Repeat
customer orders increased to 66% as of the year end December 31, 1999 from 52%
as of the year end December 31, 1998. International sales represented 6.3%,
10.0% and 10.0% of net sales for the years ended December 31, 1999, 1998 and
1997, respectively. B&N.com expects that sales from new product categories to be
introduced in 2000, coupled with its growing market share in its core business,
will result in significant sales growth in the future.
Gross Profit
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
Gross profit $ 42,630 199% $ 14,265 679% $1,832
Gross margin 21.0% 23.1% 15.3%
Gross profit is net sales less the cost of sales, which consists of the
cost of merchandise sold to customers, and outbound and inbound shipping costs.
Gross profit increased due to the Company's increased sales volume, however,
gross margin decreased in 1999 to 21.0% from 23.1%. The decrease in gross margin
is due primarily to the increase, from 40% to 50%, in the discount offered on
New York Times best sellers and the introduction of music during the third
quarter of 1999, which has a lower gross margin than books. Gross margin
increased in 1998 to 23.1% from 15.3% primarily as a result of an improvement
in merchandise mix
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The Company intends to expand its operations by promoting new or
complementary products or sales formats and by expanding the breadth and depth
of its product and service offerings. Gross margins attributable to new business
activities may be lower than those associated with the Company's existing
business activities. The Company does believe improvements to gross margin due
to better product mix, marketing partnerships, leverage in the marketplace and
internal fulfillment are expected in the future.
Marketing and Sales
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Marketing and sales $ 111,553 58% $ 70,423 695% $8,855
Percentage of net sales 55.1% 113.9% 74.1%
</TABLE>
Marketing and sales expenses consist primarily of advertising and
promotional expenditures, as well as payroll and related expenses for personnel
engaged in marketing, selling, editorial, fulfillment and customer service
activities. Fulfillment activities include receiving of goods, picking of goods
for shipment and assembly for shipment. All fulfillment costs, including the
cost of operating and staffing distribution centers and customer service, are
included in marketing and sales. Marketing and sales expenses increased
primarily due to the increases in B&N.com's advertising and promotional
expenditures and increased payroll and related costs associated with fulfilling
customer demand. Such expenses decreased as a percentage of net sales due to the
significant increase in net sales. B&N.com is focusing on lowering the cost of
customer acquisition while continuing to pursue its aggressive branding and
marketing campaign. Fixed fulfillment costs are expected to increase in 2000 as
a result of the additional fixed costs associated with two new distribution
facilities. B&N.com expects fulfillment costs as a percentage of sales to also
be higher in 2000.
Accounting standard setters are currently reviewing financial statements
of internet companies in order to achieve a consensus with respect to the
financial statement presentation of certain items. Included in this review is
the current practice of including certain warehouse and fulfillment costs in
marketing and sales expense instead of in cost of sales. During 1999 and 1998
B&N.com included warehouse and customer service costs of $28,634 and $10,914,
respectively, in marketing and sales expense. Also being reviewed by accounting
standard setters is the practice of classifying certain coupon redemption costs
as marketing and sales expense instead of as a reduction to sales. B&N.com has
included in marketing expenses approximately $6 million, or 3% of sales, of
coupon redemptions for the full year ended 1999. No coupons were redeemed in
1998. Had B&N.com treated coupon redemptions as a reduction to sales and
marketing expense in 1999, gross margin would have decreased from 21.0% to 18.6%
and marketing and sales expense as a percentage of sales would have decreased
from 55.1% to 53.7%. In addition, the accounting standard setters are reviewing
Web site development costs. The Company's accounting for the features, content
and functionality of B&N.com's online stores, transaction-processing systems,
telecommunications infrastructure and network operations is described in Note 2
to the financial statements.
20
<PAGE>
Technology and Web Site Development
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Technology & Web site $ 21,006 146% $ 8,532 162% $3,256
development
Percentage of net sales 10.4% 13.8% 27.2%
</TABLE>
Technology and Web site development expenses consist principally of
payroll and related expenses for web page production, editorial and network
operations personnel and consultants, and infrastructure related to systems and
telecommunications. As a percentage of net sales, technology and Web site
development expenses have steadily decreased, demonstrating the leveraging of
these expenses. The increase in technology and Web site development expenses in
dollars, was primarily attributable to increased staffing and associated costs
related to enhancing the features, content and functionality of B&N.com's Web
site and transaction-processing systems. Technology and Web site development
expenses are also a result of increased investments in systems and
telecommunications infrastructure, including investments associated with entry
into music and print & poster sales and the development of eCards and expenses
required to support the significant increase in net sales. B&N.com believes that
continued investment in technology and Web site development is critical to
attaining its strategic objectives. As a result, B&N.com expects technology and
Web site development expenses to continue to increase. B&N.com has evaluated all
software development projects that were in progress as of December 31, 1999 to
determine whether or not it was no longer probable that any of the projects
would be placed in service. Based on that evaluation, B&N.com expects to
complete and put in service all software development projects that existed as of
year end.
General and Administrative
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
General and administrative $ 32,714 71% $ 19,166 486% $3,273
Percentage of net sales 16.1% 31.0% 27.4%
</TABLE>
General and administrative expenses consist of payroll and related
expenses for executive, finance and administrative personnel, recruiting,
professional fees and other general corporate expenses including costs to
process credit card transactions. The increase in general and administrative
expenses was primarily a result of expenses associated with the hiring of
additional personnel and professional fees related to B&N.com's growth and
expanded activities and an increase in depreciation and amortization. Such
expenses decreased as a percentage of net sales from the year ended December 31,
1998 to the year ended December 31, 1999 due to the significant increase in net
sales and the effects of leveraging these expenses over a larger sales base.
B&N.com expects general and administrative expenses
21
<PAGE>
to increase as B&N.com expands its staff and incurs additional costs related to
the growth of its business, however, B&N.com expects continued decreases of
general and administrative expenses as a percentage of sales as it leverages
these expenses over higher sales.
Interest Income, Net
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Interest income, net $ 20,238 2,758% $ 708 N/A --
Percentage of net sales 10.0% 1.1% --
</TABLE>
Interest income on cash and marketable securities increased in 1999 due
to the higher cash and marketable securities balances resulting from the
Company's financing activities. In addition to the approximately $484.4 million
raised through the Company's initial public offering, the Company has received
$200 million of capital investment by B&N.com's members since November 1998.
Income Taxes
The Company has not generated any taxable income to date and therefore
has not paid any federal income taxes since inception. The Company has provided
a full valuation allowance on the deferred tax asset, consisting primarily of
net operating loss carryforwards, because of uncertainty regarding its
realizability.
Seasonality
B&N.com experiences seasonality in its business, reflecting a combination
of seasonal fluctuations in Internet usage and traditional retail seasonality
patterns.
Quarterly Results of Operations
The Company expects that B&N.com may experience significant fluctuations
in its future quarterly operating results due to a variety of factors, many of
which are outside B&N.com's control. Factors that may adversely affect B&N.com's
quarterly operating results include: (i) B&N.com's ability to retain existing
customers, attract new customers at a steady rate and maintain customer
satisfaction; (ii) B&N.com's ability to acquire product and to manage
fulfillment operations; (iii) B&N.com's ability to maintain gross margins in its
existing business and in future product lines and markets; (iv) the development,
announcement, or introduction of new sites, service and products by B&N.com and
its competitors; (v) price competition; (vi) B&N.com's ability to upgrade and
develop its systems and infrastructure; (vii) the level of use of the Internet
and increasing consumer acceptance of the Internet for the purchase of consumer
products such as those offered by B&N.com; (viii) B&N.com's ability to attract
new and qualified personnel in a timely and effective manner; (ix) the level of
traffic on B&N.com's online stores; (x) B&N.com's ability to manage effectively
its development of new business segments and markets; (xi) B&N.com's ability to
successfully manage the integration of operations and technology of acquisitions
and other business combinations; (xii) technical difficulties, system downtime
or Internet brownouts; (xiii) the amount and
22
<PAGE>
timing of operating costs and capital expenditures relating to expansion of
B&N.com's business, operations and infrastructure; (xiv) the level of returns
experienced by B&N.com; (xv) governmental regulation and taxation policies;
(xvi) disruptions in service by common carriers due to strikes or otherwise;
(xvii) general economic conditions including those specific to the Internet,
e-commerce and book industry; and (xviii) the factors described above under
"Forward Looking Statements."
Liquidity and Capital Resources
The Company finished 1999 with a debt-free balance sheet. At December 31,
1999, the Company's cash, cash equivalents and short-term marketable securities
were $478.0 million, compared to $96.9 million on December 31, 1998. In
addition, at December 31, 1999 the Company had $71.9 million in long-term
marketable securities, compared with no long-term marketable securities at
December 31, 1998. On May 25, 1999, the Company completed an initial public
offering of 28,750,000 shares of Class A Common Stock at a price of $18 per
share. The net proceeds to the Company from the offering were approximately
$484.4 million. At the completion of the initial public offering, the Company
received additional capital contributions of $50.0 million and reclassified
$50.4 million from restricted cash to marketable securities.
Net cash flows used in operating activities were $58.4 million, $54.7
million and $14.4 million for the years ended December 31, 1999, 1998 and 1997,
respectively. Cash used in 1999 was primarily attributable to a net loss of
$48.2 million after minority interest of $54.2 million. In addition, receivables
increased $13.1 million and merchandise inventories increased $2.3 million. This
was partially offset by depreciation and amortization of $13.8 million, an
increase in payables to affiliates of $3.9 million, a $19.2 million increase in
accounts payable, an increase in accrued liabilities of $19.8 million and a
decrease of $2.6 million in prepaid expenses and other current assets. Cash used
in 1998 was primarily attributable to a net loss of $83.1 million. In addition,
net receivables increased $2.0 million, merchandise inventories increased $1.0
million, prepaid expenses and other current assets increased $1.5 million and
accounts payable decreased $3.9 million. This was partially offset by
depreciation and amortization of $6.8 million, an increase in payables to
affiliates of $13.2 million and a $16.5 million increase in accrued liabilities.
Cash used in 1997 was primarily attributable to a net loss of $13.6 million. In
addition, net receivables totaling $0.4 million, purchase of merchandise
inventories totaling $0.6 million and increases in prepaid expenses and other
current assets totaling $9.2 million utilized cash in 1997. This was partially
offset by depreciation and amortization of $2.3 million, an increase in payables
of $3.9 million and a $3.3 million increase in accrued liabilities.
Net cash used in investing activities of $327.9 million for the year
ended December 31, 1999 was attributable to a $302.5 million increase in
marketable securities, purchases of fixed assets totaling $71.9 million and a
$3.9 million increase in other non-current assets, partially offset by a $50.4
million decrease in restricted cash. Net cash used in investing activities of
$81.5 million for the year ended December 31, 1998 was primarily attributable to
purchases of fixed assets totaling $31.0 million and an increase in restricted
cash of $50.4 million. Net cash used in investing activities of $18.3 million
for the year ended December 31, 1997 was primarily attributable to purchases of
fixed assets.
Net cash flows from financing activities were $536.8 million for the year
ended December 31, 1999, primarily due to proceeds of $484.4 million from the
Company's initial public offering and capital contributions of $50.0 million.
Net cash flows from financing activities of $233.1 million and $32.8 million for
the years ended December 31, 1998 and 1997, respectively, resulted entirely from
capital contributions.
At December 31, 1999, the Company's principal sources of liquidity
consisted of $247.4 million of cash and cash equivalents and $230.6 million of
short-term marketable securities. Long term marketable securities totaled
23
<PAGE>
$71.9 million. Preparing two distribution centers for operation in 2000 is
expected to require continued significant capital expenditures. Total capital
expenditures to complete the Memphis facility are expected to be approximately
$5 million in 2000, while total capital expenditures for the Reno facility are
expected to be approximately $20 million over the next twelve months. The
distribution centers are being established to enhance service and availability
to customers and improve purchasing efficiencies. Expenditures to stock
inventories at both facilities will also occur over the next twelve months. As
of December 31, 1999, the Company's remaining principal commitments consisted of
obligations outstanding under operating leases and commitments for advertising,
marketing and promotion arrangements. The Company anticipates a continued
increase in its capital expenditures consistent with anticipated growth in
operations, infrastructure and personnel.
The Company believes that current cash and cash equivalent balances and
short-term investments will be sufficient to meet its anticipated cash needs for
at least 12 months. However, any projection of future cash needs and cash flows
is subject to substantial uncertainty. If current cash and short term
investments in addition to cash generated from operations is insufficient to
satisfy the Company's liquidity requirements, the Company may seek to sell
additional equity or debt securities or to obtain a credit facility. The sale of
additional equity or convertible debt securities could result in additional
dilution to the Company's stockholders. There can be no assurance that financing
will be available in amounts or on terms acceptable to the Company, if at all.
In addition, the Company will, from time to time, consider the acquisition of or
investment in complementary businesses, products and technologies, which might
increase the Company's liquidity requirements or cause the Company to issue
additional equity or debt securities.
Year 2000 Compliance
Beginning in the Year 2000, the date fields coded in some software
products and computer systems needed to accept four digit entries in order to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems needed to be upgraded or replaced in
order to comply with such Year 2000 requirements. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
B&N.com developed a remediation plan for the Year 2000 issue that involved
identification, assessment and testing of the equipment and systems affected,
including:
o an assessment of information technology (IT) equipment and systems, which
includes web servers and web serving technology;
o an assessment of non-information technology (non-IT) embedded systems such as
building security, voice mail, fire prevention, climate control and other
systems; and
o the readiness of significant third party vendors and suppliers of services.
24
<PAGE>
The evaluation, covered the following phases:
o development of an inventory of all IT equipment and systems and non-IT
systems that were potentially affected;
o determination of those systems that required repair or replacement;
o repair or replacement of those systems;
o testing of those repaired or replaced systems; and
o creation of contingency plans in the event of Year 2000 failures.
To date, less than 10% of assessed systems have required repair or
replacement. Non-IT systems and internally developed programs were reviewed, and
were not considered to be date sensitive to the Year 2000. Based on this
evaluation, the Company's management did not believe that B&N.com's systems and
programs presented Year 2000 issues.
The Company has not experienced any material Year 2000 problems. However,
there can be no assurance that problems will not arise for the Company, its
suppliers or others with whom the Company does business with in 2000. The
Company intends to continue to monitor its compliance, as well as the compliance
of others whose operations are material to its business.
Costs to Address Year 2000 Compliance
To date, B&N.com has incurred approximately $1.0 million in connection
with identifying or evaluating Year 2000 compliance issues. Most of these
expenses have related to the opportunity cost of time spent by B&N.com's
employees evaluating its software, the current versions of its products and Year
2000 compliance matters generally. The Company expects that B&N.com's future
Year 2000 costs will be minimal and will be funded from cash on hand. However,
the full impact of the Year 2000 issues cannot be determined at this time. The
failure by certain third parties to address their Year 2000 issues on a timely
basis could adversely affect B&N.com's business.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters beginning after June 15, 2000. SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are to be recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. B&N.com does not expect that the adoption of SFAS 133 will
have a material impact on its consolidated financial statements because B&N.com
does not currently hold any derivative instruments.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB No. 101"), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 101 did not impact the
Company's revenue recognition policies.
25
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Exhibit (a) (1)
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required in this item is incorporated herein by reference
to portions of the Proxy Statement for Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission within 120 days of the close
of the fiscal year ended December 31, 1999.
Item 11. EXECUTIVE COMPENSATION
The information required in this item is incorporated herein by reference
to portions of the Proxy Statement for Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission within 120 days of the close
of the fiscal year ended December 31, 1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in this item is incorporated herein by reference
to portions of the Proxy Statement for Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission within 120 days of the close
of the fiscal year ended December 31, 1999.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in this item is incorporated herein by reference
to portions of the Proxy Statement for Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission within 120 days of the close
of the fiscal year ended December 31, 1999.
26
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements: Page(s)
Reports of Independent Certified Public Accountants F-1
Balance Sheets F-3
Statements of Operations F-4
Consolidated Statement of Stockholders' Equity F-5
Statements of Members' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
(a) (2) Financial Statement Schedules:
None.
All schedules are omitted because the required information is not
present or is not present in amounts sufficient to require
submission of the schedule or because the information required is
given in the consolidated financial statements or notes thereto.
(a) (3) Exhibits
Exhibit No. Description
3.1 Form of Amended and Restated Certificate of Incorporation of the
Company. (Incorporated herein by reference to Exhibit 3.1 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
3.2 Form of Amended and Restated By-laws of the Company. (Incorporated
herein by reference to Exhibit 3.2 in Amendment No. 2 of the
Company's Registration Statement No. 333-64211, filed May 6, 1999)
10.1 Form of the Company's 1999 Incentive Plan. (Incorporated herein by
reference to Exhibit 10.1 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
27
<PAGE>
10.2 Interactive Services Agreement, dated as of July 31, 1997, by and
between the Company and Lycos, Inc. (Incorporated herein by
reference to Exhibit 10.2 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.3 Interactive Marketing Agreement, dated as of November 1, 1997, by
and between the Company and America Online, Inc. (Incorporated
herein by reference to Exhibit 10.3 in Amendment No. 2 of the
Company's Registration Statement No. 333-64211, filed May 6, 1999)
10.4 Ecommerce Merchant Agreement, dated as of October 27, 1997, between
the Company and Microsoft Corporation, together with Amendment No. 4
to Ecommerce Merchant Agreement. (Incorporated herein by reference
to Exhibit 10.4 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.5 Formation Agreement, effective as of 11:59 p.m., October 31, 1998,
among Bertelsmann AG, BOL.US Online, Inc., Barnes & Noble, Inc., the
Company, B&N.com Holding Corp. and B&N.com Member Corp.
(Incorporated herein by reference to Exhibit 10.5 in Amendment No. 2
of the Company's Registration Statement No. 333-64211, filed May 6,
1999)
10.6 Form of Second Amended and Restated Limited Liability Company
Agreement of barnesandnoble.com llc. (Incorporated herein by
reference to Exhibit 10.6 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.7 Form of Stockholders Agreement between Barnes & Noble, Inc. and
Bertelsmann AG. (Incorporated herein by reference to Exhibit 10.7 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.8 Technology Sharing and Licensing Agreement, dated as of October 31,
1998, between barnesandnoble.com llc, as Licensor and BOL.Global,
Inc., as Licensee. (Incorporated herein by reference to Exhibit 10.8
in Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.9 Technology Sharing and Licensing Agreement, dated as of October 31,
1998, between barnesandnoble.com llc, as Licensee and BOL.Global,
Inc., as Licensor. (Incorporated herein by reference to Exhibit 10.9
in Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.10 Amended and Restated Services Agreement, dated as of October 31,
1998, among the Company, barnesandnoble.com llc and Barnes & Noble,
Inc. (Incorporated herein by reference to Exhibit 10.10 in Amendment
No. 2 of the Company's Registration Statement No. 333-64211, filed
May 6, 1999)
10.11 Amended and Restated Services Agreement, dated as of October 31,
1998, among the Company, barnesandnoble.com llc and Marboro Books
Corp. (Incorporated herein by reference to Exhibit 10.11 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
28
<PAGE>
10.12 Amended and Restated Trademark License Agreement, dated as of
October 31, 1998, between Barnes & Noble College Bookstores, Inc.
and barnesandnoble.com llc. (Incorporated herein by reference to
Exhibit 10.12 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.13 Trademark License Agreement dated as of October 31, 1998, between
BOL.Global, Inc. and barnesandnoble.com llc. (Incorporated herein by
reference to Exhibit 10.13 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.14 Supply Agreement, dated as of October 31, 1998, between
barnesandnoble.com llc and Barnes & Noble, Inc. (Incorporated herein
by reference to Exhibit 10.14 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.15 Amended and Restated Database and Software License Agreement, dated
as of October 31, 1998, among the Company, barnesandnoble.com llc
and Barnes & Noble, Inc. (Incorporated herein by reference to
Exhibit 10.15 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.16 Form of Amendment No. 1 to the Amended and Restated Services
Agreement, among the Company, barnesandnoble.com llc and Barnes &
Noble, Inc. (Incorporated herein by reference to Exhibit 10.16 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.17 Form of Amendment No. 1 to the Amended and Restated Services
Agreement, among the Company, barnesandnoble.com llc and Marboro
Books Corp. (Incorporated herein by reference to Exhibit 10.17 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.18 Form of Amendment No. 1 to the Amended and Restated Trademark
License Agreement, between Barnes & Noble College Bookstores, Inc.
and barnesandnoble.com llc. (Incorporated herein by reference to
Exhibit 10.18 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.19 Form of Amendment No. 1 to the Trademark License Agreement, between
BOL.Global, Inc. and barnesandnoble.com llc. (Incorporated herein by
reference to Exhibit 10.19 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.20 Form of Amendment No. 1 to the Supply Agreement, between
barnesandnoble.com llc and Barnes & Noble Inc. (Incorporated herein
by reference to Exhibit 10.20 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.21 Form of Amendment No. 1 to the Amended and Restated Database and
Software License Agreement, among the Company, barnesandnoble.com
llc and Barnes & Noble Inc. (Incorporated herein by reference to
Exhibit 10.21 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
29
<PAGE>
10.22 Indenture of Lease and Amendments thereto, dated as of June 7, 1994,
between SDI Technologies, Inc., as Landlord, and B.Dalton
Bookseller, Inc., as Tenant. (Incorporated herein by reference to
Exhibit 10.22 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.23 Lease, dated as of June 30, 1997, between P.A. Building Company, as
Landlord, and Barnes & Noble, Inc., as Tenant. (Incorporated herein
by reference to Exhibit 10.23 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.24 Employment Agreement (Chief Executive Officer), dated as of November
1, 1998, among barnesandnoble.com llc, Barnes & Noble, Inc.,
Bertelsmann A.G. and Jonathan Bulkeley. (Incorporated herein by
reference to Exhibit 10.24 in Amendment No.2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.25 Deferred Compensation Plan of the Company. (Incorporated herein by
reference to Exhibit 10.25 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.26 Retirement Plan of the Company. (Incorporated herein by reference to
Exhibit 10.26 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.27 Form of Amendment No. 1 to the Technology Sharing and License
Agreement, between BOL.Global, Inc., as Licensor, and
barnesandnoble.com llc, as Licensee. (Incorporated herein by
reference to Exhibit 10.27 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.28 Form of Amendment No. 1 to the Technology Sharing and License
Agreement, between BOL.Global, Inc., as Licensee, and
barnesandnoble.com llc, as Licensor. (Incorporated herein by
reference to Exhibit 10.28 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.29 Employment Termination Agreement, dated as of February 22, 1999,
between barnesandnoble.com llc and Jeffrey Killeen. (Incorporated
herein by reference to Exhibit 10.29 in Amendment No. 2 of the
Company's Registration Statement No. 333-64211, filed May 6, 1999)
10.30 Amendment No. 1 to Second Amended and Restated Limited Liability
Company Agreement of barnesandnoble.com llc.
10.31 Amended and Restated Industrial Lease Agreement effective as of July
27, 1999 between Industrial Developments International (Tennessee),
L.P., as landlord and barnesandnoble.com llc, as tenant.
10.32 Lease Agreement, dated September 8, 1999, between ProLogis
Development Services Incorporated, as landlord, and
barnesandnoble.com llc, as tenant.
10.33 Agreement of Lease, dated as of October 1, 1999, between 111 Chelsea
LLC, as landlord, and barnesandnoble.com llc, as tenant.
30
<PAGE>
10.34 Assignment, Assumption and Consent Agreement and Amendment to Lease
dated as of October 1, 1999, among Barnes & Noble, Inc., as
assignor, barnesandnoble.com llc, as assignee and 111 Chelsea LLC,
as landlord.
23.1 Consent of BDO Seidman, LLP.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
barnesandnoble.com inc.
-----------------------
(Registrant)
Date: March 29, 2000 By: /s/ STEPHEN RIGGIO
-------------------
Stephen Riggio
Vice Chairman and Acting Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant in the
capacities and on the dates indicated:
Name Capacity Date
- - ---- -------- ----
/s/ LEONARD RIGGIO Chairman of the Board March 29, 2000
- - ---------------------------
Leonard Riggio
/s/ STEPHEN RIGGIO Vice Chairman and March 29, 2000
- - --------------------------- Acting Chief Executive Officer
Stephen Riggio (Principal Executive Officer)
/s/ MARIE J. TOULANTIS Chief Financial Officer March 29, 2000
- - --------------------------- (Principal Accounting and
Marie J. Toulantis Financial Officer)
/s/ MICHAEL N. ROSEN Secretary and Director March 29, 2000
- - ---------------------------
Michael N. Rosen
/s/ THOMAS MIDDELHOFF Director March 29, 2000
- - ---------------------------
Thomas Middelhoff
/s/ MARKUS WILHELM Director March 29, 2000
- - ---------------------------
Markus Wilhelm
/s/ KLAUS EIERHOFF Director March 29, 2000
- - ---------------------------
Klaus Eierhoff
/s/ JAN MICHIEL HESSELS Director March 29, 2000
- - ---------------------------
Jan Michiel Hessels
/s/ WILLIAM RIELLY Director March 29, 2000
- - ---------------------------
William Rielly
32
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
barnesandnoble.com inc.
We have audited the accompanying consolidated balance sheet of
barnesandnoble.com inc. and subsidiary, as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period May 25, 1999 to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
barnesandnoble.com inc. and subsidiary at December 31, 1999, and the results of
their operations and their cash flows for the period May 25, 1999 to December
31, 1999 in conformity with generally accepted accounting principles.
New York, New York
February 7, 2000
BDO Seidman, LLP
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
barnesandnoble.com llc
We have audited the accompanying balance sheet of barnesandnoble.com llc,
and its predecessor, as of December 31, 1998 and the related statements of
operations, members' equity and cash flows for the period January 1, 1999 to May
24, 1999 and the years ended December 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, on the basis described in Note 1 to the
financial statements, the financial position of barnesandnoble.com llc and its
predecessor at December 31, 1998, and the results of their operations and their
cash flows for the period January 1, 1999 to May 24, 1999 and the years ended
December 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
New York, New York
February 7, 2000
BDO Seidman, LLP
F-2
<PAGE>
BALANCE SHEETS
(thousands of dollars, except per share data)
<TABLE>
<CAPTION>
barnesandnoble.com inc. ||
and subsidiary ||
(Consolidated) || barnesandnoble.com llc
December 31, || December 31,
1999 || 1998
------------ || ------------
<S> <C> || <C>
ASSETS: ||
Current assets: ||
Cash and cash equivalents $ 247,403 || $ 96,940
Marketable securities 230,644 || -
Receivables, net 15,520 || 2,387
Merchandise inventories 3,886 || 1,579
Prepaid expenses and other current assets 8,161 || 10,770
--------- || --------
Total current assets 505,614 || 111,676
--------- || --------
Fixed assets, net 97,854 || 39,770
Restricted cash - || 50,393
Long term marketable securities 71,852 || -
Other non-current assets 4,198 || 305
--------- || --------
Total assets $ 679,518 || $202,144
========= || ========
||
LIABILITIES AND EQUITY ||
Current liabilities: ||
Accounts payable $ 19,204 || $ -
Accrued liabilities 39,627 || 19,804
Due to affiliate 17,109 || 13,191
--------- || --------
Total current liabilities 75,940 || 32,995
--------- || --------
Minority interest 482,896 || -
--------- || --------
Stockholders' equity: ||
Preferred Stock: $0.001 par value; 50,000,000 shares ||
authorized; none issued and outstanding - || -
Common Stock Series A; $0.001 par value; 750,000,000 ||
shares authorized; 29,347,067 and 0 shares issued and ||
outstanding, respectively 29 || -
Common Stock Series B; $0.001 par value; 1,000 shares ||
authorized; 1 and 0 shares issued and outstanding, ||
respectively - || -
Common Stock Series C; $0.001 par value; 1,000 shares ||
authorized; 1 and 0 shares issued and outstanding, ||
respectively - || -
Paid-in capital 134,452 || -
Accumulated deficit (13,799) || -
Members' equity - || 169,149
--------- || --------
Total equity 120,682 || 169,149
--------- || --------
Commitments and contingencies ||
Total liabilities and equity $ 679,518 || $202,144
========= || ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
STATEMENTS OF OPERATIONS
(thousands of dollars, except per share data)
<TABLE>
<CAPTION>
barnesandnoble.com inc. and subsidiary || barnesandnoble.com llc and its predecessor
-------------------------------------- || ------------------------------------------
(Consolidated) ||
Pro forma ||
year ended May 25, 1999 || January 1, Year Ended December 31,
December 31, to December 31, || 1999 to ---------------------------------
1999 (1)(2) 1999 (3) || May 24, 1999 (4) 1998 (4) 1997 (4)
----------- ----------- || ---------------- --------------- --------------
<S> <C> <C> ||<C> <C> <C>
Net sales $ 202,567 $ 148,263 || $ 54,304 $ 61,834 $ 11,949
||
Cost of sales 159,937 117,850 || 42,087 47,569 10,117
--------- --------- || -------- --------- --------
||
Gross Profit 42,630 30,413 || 12,217 14,265 1,832
--------- --------- || -------- --------- --------
||
Operating expenses: ||
Marketing and sales 111,553 79,257 || 32,296 70,423 8,855
Technology and web site ||
development 21,006 15,058 || 5,948 8,532 3,256
General and administrative 32,714 22,765 || 9,949 19,166 3,273
--------- --------- || -------- --------- --------
Total operating expenses 165,273 117,080 || 48,193 98,121 15,384
--------- --------- || -------- --------- --------
||
||
Loss from operations (122,643) (86,667) || (35,976) (83,856) (13,552)
Interest income, net 20,238 18,615 || 1,623 708 -
--------- --------- || -------- --------- --------
Loss before minority interest (102,405) (68,052) || (34,353) (83,148) (13,552)
||
Minority interest 54,253 54,253 || - - -
--------- --------- || -------- --------- --------
Net loss-historical (48,152) $ (13,799) || (34,353) (83,148) (13,552)
========= ||
||
Pro forma adjustment to ||
minority interest (5) 27,534 || 27,534 66,518 10,842
--------- || -------- --------- --------
Net loss-pro forma (2) $ (20,618) || $ (6,819) $ (16,630) $ (2,710)
========= || ======== ========= ========
||
Basic and diluted net loss per ||
common share (6) $ (0.72) $ (0.48) || $ (0.24) $ (0.58) $ (0.09)
Basic and diluted weighted average ||
common shares outstanding (6) 28,778 28,797 || 28,750 28,750 28,750
||
Basic and diluted loss before ||
minority interest per share (6)(7) $ (0.72) $ (0.48) || $ (0.24) $ (0.58) $ (0.09)
Basic and diluted weighted average ||
shares outstanding, if ||
converted (6) (7) 143,939 144,064 || 143,750 143,750 143,750
</TABLE>
(1) Include the historical results of barnesandnoble.com llc for the entire year
and the historical results of the Company from May 25, 1999.
barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
(2) The pro forma amounts do not give effect to the assumed charges to operating
results which might have resulted had the Company's Initial Public Offering
occurred at the beginning of the respective periods.
(3) barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
(4) Includes the historical results of barnesandnoble.com llc and its
predecessor.
(5) Represents the approximate 80% interest of Barnes & Noble and Bertelsmann in
the net loss of barnesandnoble.com llc for periods prior to May 25, 1999.
(6) For periods prior to May 25, 1999, reflects the pro forma effect of the
shares issued in the Company's Initial Public Offering assuming they were
issued at the beginning of 1997.
(7) Includes the conversion of membership units in barnesandnoble.com llc held
by Barnes & Noble and Bertelsmann into outstanding shares of the
Company.
See accompanying notes to financial statements.
F-4
<PAGE>
barnesandnoble.com inc. and subsidiary
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands of dollars)
Common
Stock Paid in Accumulated
Series A Capital Deficit
-------- ------- -------
Balance, May 24, 1999 $ - $ - $ -
Issuance of common stock in IPO 29 484,353 -
Exercise of stock options - 2,452 -
Capital contribution from
Bertelsmann - 50,000 -
Acquisition of
barnesandnoble.com llc - 134,796 -
Reclassification to minority
interest (1) - (537,149) -
Net loss, May 25, 1999 -
December 31, 1999, net of
$54,253 minority interest - - (13,799)
-------------------------------------------
Balance, December 31, 1999 $ 29 $ 134,452 $ (13,799)
===========================================
(1) To adjust minority interest based on net book equity of barnesandnoble.com
llc (after contribution of the proceeds from the Company's initial public
offering) multiplied by the ownership percentage in that entity of Barnes &
Noble and Bertelsmann.
See accompanying notes to financial statements
F-5
<PAGE>
barnesandnoble.com llc and predecessor
STATEMENTS OF MEMBERS' EQUITY
(in thousands of dollars)
<TABLE>
<CAPTION>
Accumulated Capital Members'
Loss Contributions Equity
----------- ------------- --------
<S> <C> <C> <C>
Balance, January 1, 1997 $ - $ - $ -
Capital contributions from
Barnes & Noble, Inc., net - 32,765 32,765
Net loss, year ended
December 31, 1997 (13,552) - (13,552)
---------------------------------------
Balance, December 31, 1997 (13,552) 32,765 19,213
Capital contribution from
Barnes & Noble, Inc., net - 83,084 83,084
Capital contribution from
Bertelsmann - 150,000 150,000
Net loss, year ended
December 31, 1998 (83,148) - (83,148)
---------------------------------------
Balance, December 31, 1998 (96,700) 265,849 169,149
Net loss, January 1, 1999-
May 24, 1999 (34,353) - (34,353)
---------------------------------------
Balance, May 24, 1999 $(131,053) $265,849 $ 134,796
=======================================
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
barnesandnoble.com inc. ||
and subsidiary || barnesandnoble.com llc and its predecessor
------------------------------- || ------------------------------------------
(Consolidated) ||
Pro forma || Year
Year Ended May 25, 1999 || January 1, Ended December 31,
December 31, to December 31, || 1999 to ------------------------
1999 1999 (1) || May 24, 1999 1998 1997
-------------- -------------- || ------------ ---------- ----------
<S> <C> <C> || <C> <C> <C>
Cash flows from operating activities: ||
Net loss $ (48,152) $ (13,799) || $(34,353) $ (83,148) $ (13,552)
Adjustments to reconcile net loss to net ||
cash flows from operating activities: ||
Depreciation and amortization 13,848 9,336 || 4,512 6,823 2,280
Loss on sale of fixed assets - - || - 205 -
Increase in receivables, net (13,133) (11,894) || (1,239) (1,957) (430)
Increase in merchandise inventories (2,307) (1,747) || (560) (964) (615)
Decrease (increase) in prepaid expenses ||
and other current assets 2,609 2,284 || 325 (1,525) (9,245)
Increase (decrease) in accounts payable 19,204 16,683 || 2,521 (3,857) 3,857
Increase (decrease) in due to affiliate 3,918 8,878 || (4,960) 13,191 -
Increase (decrease) in accrued liabilities 19,823 27,855 || (8,032) 16,547 3,257
Minority interest in loss (54,253) (54,253) || - - -
--------- --------- || -------- --------- ---------
Net cash flows used in operating activities (58,443) (16,657) || (41,786) (54,685) (14,448)
--------- --------- || -------- --------- ---------
||
Cash flows from investing activities: ||
Purchases of fixed assets (71,889) (63,973) || (7,916) (31,035) (18,233)
Purchases of marketable securities (302,496) (302,496) || - - -
Decrease (increase) in restricted cash 50,393 - || 50,393 (50,393) -
Proceeds from sale of fixed assets - - || - 200 -
Net assets of barnesandnoble.com llc at ||
date of acquisition - 97,729 || (97,729) - -
(Increase) decrease in other non-current ||
assets (3,936) (4,034) || 98 (231) (84)
--------- --------- || -------- --------- ---------
Net cash flows used in investing activities (327,928) (272,774) || (55,154) (81,459) (18,317)
--------- --------- || -------- --------- ---------
||
Cash flows from financing activities: ||
Proceeds from initial public offering 484,382 484,382 || - - -
Capital contributions from members 50,000 50,000 || - 233,084 32,765
Proceeds from exercise of stock options 2,452 2,452 || - - -
--------- --------- || -------- --------- ---------
Net cash flows from financing activities 536,834 536,834 || - 233,084 32,765
--------- --------- || -------- --------- ---------
||
Net change in cash and cash equivalents 150,463 247,403 || (96,940) 96,940 -
Cash and cash equivalents at beginning ||
of period 96,940 - || 96,940 - -
--------- --------- || -------- --------- ---------
Cash and cash equivalents at end of period $ 247,403 $ 247,403 || $ - $ 96,940 $ -
========= ========= || ======= ========= ========
</TABLE>
(1) barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
See accompanying notes to financial statements.
F-7
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
1. Business
barnesandnoble.com inc. (the "Company") is a holding company whose sole
asset is a 20.3% equity interest in barnesandnoble.com llc ("B&N.com"), an
online retailer of knowledge, information, education and entertainment related
products, and whose sole business is currently acting as sole manager of
B&N.com. As sole manager of B&N.com, the Company controls all of the affairs of
B&N.com and as a result, B&N.com is consolidated with the Company. Barnes &
Noble, Inc. ("Barnes & Noble") and Bertelsmann A.G. ("Bertelsmann") each
beneficially own a 39.85% equity interest (equivalent to an aggregate of
115,000 Membershiup Units) in B&N.com. Each Membership Unit held by these
companies is convertible into one share of the Company's Class A Common Stock.
As reflected in the statements of operations, the loss before minority interest
represents the total loss for the period and the net loss represents the portion
of the loss attributable to the Company subsequent to the commencement of its
activities.
Prior to October 31, 1998, the business of B&N.com was conducted by a
wholly owned subsidiary of Barnes & Noble, which subsidiary was originally
incorporated on January 14, 1997 in the State of Delaware under the name Barnes
& Noble Online, Inc. ("B&N Online"). Effective October 31, 1998, Barnes & Noble
and Bertelsmann completed a transaction that established B&N.com as the owner
and operator of the business (the "Formation Transaction"). In connection with
the Formation Transaction, B&N Online contributed substantially all of its
assets and liabilities to B&N.com at their historical cost and Bertelsmann
contributed $150 million and contributed an additional $50 million in cash prior
to the effective date of the public offering. B&N.com accounted for the
investment made by Bertelsmann in B&N.com as a capital contribution. The
completion of the foregoing transactions resulted in Barnes & Noble and
Bertelsmann each having a 50% beneficial interest in B&N.com, and B&N Online
changing its name to B&N Sub Corp.
On March 10, 1999, Barnes & Noble caused B&N Sub Corp. to establish the
Company. On May 24, 1999, B&N Sub Corp. transferred its ownership of the Company
to B&N.com Holding Corp ("BN.com Holding Corp."). This resulted in Barnes &
Noble owning 100% of BN.com Holding Corp. which owns 100% of the Company.
Subsequent to that, the Company filed an amended charter which, among other
things, reclassified its outstanding common stock to one share of Class B Common
Stock. The Company then issued a share of Class C Common Stock constituting a
50% interest in the Company to a wholly owned subsidiary of Bertelsmann. The
completion of the foregoing transactions resulted in Barnes & Noble and
Bertelsmann each having a 50% beneficial interest in the Company through their
ownership of all of the outstanding Class B and Class C Common Stock.
On May 25, 1999 the Company sold 28,750 shares of Class A Common Stock in a
public offering (the "Offering"). The Company used the $484,382 in proceeds of
the Offering to acquire its interest in B&N.com. The acquisition of the
ownership interest in B&N.com was treated as a reorganization of entities under
common control in a manner similar to a pooling of interests, analogous to the
type of transaction described in Emerging Issues Task Force Issue 97-2 ("EITF
97-2"). Accordingly, the net assets of B&N.com contributed by Barnes & Noble
were reported in the consolidated financial statements at Barnes & Noble's
historical cost, and the minority interests in B&N.com were based on the net
book equity of B&N.com (after contribution of the proceeds from the Offering)
multiplied by the ownership percentages of Barnes & Noble and Bertelsmann.
F-8
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
The financial information of B&N.com and the Company's business which was
previously conducted by a wholly-owned subsidiary of Barnes & Noble is included
in the accompanying financial statements as predecessor information.
References to 1999 are to the Company as of the year end and to the Company
and its predecessor to the full year. References prior to 1999 are for B&N.com
and its predecessor. Operating information included in these notes for 1999 is
presented on a full year basis because, as a result of the reorganization
described above, it is not considered meaningful to present separate data for
the periods before and after May 25, 1999.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the period reported. Actual results
could differ from those estimates.
Restricted Cash
The amount classified as restricted cash as of December 31, 1998 in the
accompanying financial statements represents the portion of the Bertelsmann
investment remaining in a reserve account, including accumulated interest. In
connection with the Company's Offering, Bertelsmann contributed $50,000, at
which time, the restricted cash became available to B&N.com.
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market as
determined on a first-in, first-out basis. B&N.com purchases a substantial
majority of its products from two major vendors, Ingram Book Group ("Ingram")
and Barnes & Noble. Ingram accounted for 22.5%, 25.9% and 50.1% of B&N.com's
inventory purchases during the years ended December 31, 1999, 1998 and 1997,
respectively. Barnes & Noble accounted for 58.9%, 60.3% and 38.5% of B&N.com's
inventory purchases during the years ended December 31, 1999, 1998 and 1997,
respectively. Barnes & Noble charges B&N.com the cost associated with such
purchases, plus incremental overhead incurred by Barnes & Noble in connection
with providing such inventory.
Fixed Assets
Fixed assets are carried at cost, less accumulated depreciation and
amortization. Computers and equipment are depreciated using the straight-line
method over their estimated useful lives of 3 to 10 years. Leasehold
improvements are capitalized and amortized over the shorter of their estimated
useful lives or the terms of the respective leases. In March 1998, the
Accounting Standards Executive Committee issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). SOP 98-1 requires all costs related to the
development of internal use software other than those
F-9
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
incurred during the application development stage to be expensed as incurred.
Costs incurred during the application development stage are required to be
capitalized and amortized over the estimated useful life of the software.
Accordingly, direct internal and external costs associated with the development
of the features, content and functionality of B&N.com's online store,
transaction-processing systems, telecommunications infrastructure and network
operations, incurred during the application development stage, have been
capitalized, and are amortized over the estimated useful lives of three years.
B&N.com has evaluated all software development projects that were in progress as
of December 31, 1999 to determine whether or not it was no longer probable that
any of the projects would be placed in service. Based on that evaluation,
B&N.com expects to complete and put in service all software development projects
that existed as of year end.
Impairment of Long-Lived Assets
B&N.com reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable in accordance with Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("SFAS No. 121"). Recoverability of assets held and
used is measured by a comparison of the carrying amount of an asset to
undiscounted pre-tax future net cash flows expected to be generated by that
asset. An impairment loss is recognized for the amount by which the carrying
amount of the assets exceeds the fair value of the assets. To date no such
impairment has been recognized.
Fair Value of Financial Instruments
The carrying amounts for the Company's cash and cash equivalents, accounts
payable and other liabilities approximate fair value. The fair value for
marketable securities is based on quoted market prices which approximate cost.
Net Sales
Sales of B&N.com's products are recognized, net of estimated returns, at
the time the products are shipped to customers. International net sales were
$12,817, $6,212 and $1,200 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Advertising Costs
B&N.com expenses the costs of advertising for magazines, television, radio
and other media the first time the advertising takes place. Advertising expense
was $41,845, $32,435 and $3,100 for the years ended December 31, 1999, 1998 and
1997, respectively.
Technology and Web site Development
Development expenses included in the accompanying statements of operations
consist principally of indirect development costs and all costs associated with
the maintenance of the features, content and functionality of B&N.com's online
stores, transaction-processing systems, telecommunications infrastructure and
network operations.
Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing net earnings (loss)
by the weighted-average number of common shares outstanding during the period.
Diluted earnings per share reflect, in periods in which they have a dilutive
effect, the impact of common shares issuable upon exercise of stock options.
Accordingly, diluted net loss per share for the period May 25, 1999 to December
31, 1999 excludes the effect of outstanding stock options.
F-10
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
Net loss per share for the period May 25, 1999 to December 31, 1999 is also
presented on an "if-converted" basis which assumes the outstanding Membership
Units of B&N.com were converted into 115,000 shares of the Company and the
minority interest in the net loss was eliminated.
Income Taxes
Through October 31, 1998, B&N.com, as a wholly owned subsidiary, was
included in Barnes & Noble's U.S. consolidated income tax returns. As such, any
benefit for income taxes due to losses generated by B&N.com were realized and
recognized by Barnes & Noble. Effective November 1, 1998, the operations of the
entity were contributed to a limited liability company, and as such is not
considered a taxable entity for Federal income tax purposes and most state
income tax purposes. Any taxable income or losses recorded subsequent to the
formation of the limited liability company are reported by the members on their
respective income tax returns. As a result, no tax benefits have been allocated
to B&N.com for its losses for all periods presented.
Concentration of Credit Risk
B&N.com is subject to concentrations of credit risk from its holdings of
cash, cash equivalents and short term investments. B&N.com's credit risk is
managed by investing its cash in high-quality money market instruments and
securities of the U.S. government and its agencies, foreign governments and
high-quality corporate issuers. In addition, B&N.com's accounts receivable are
not significant and are due from domestic banks. B&N.com believes it had no
unusual concentrations of credit risk at December 31, 1999 and 1998.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters beginning after June 15, 2000. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are to be recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction. The
Company does not expect that the adoption of SFAS 133 will have a material
impact on its consolidated financial statements because B&N.com does not
currently hold any derivative instruments.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB No. 101"), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 101 did not impact the
Company's revenue recognition policies.
3. Investments
B&N.com invests certain of its excess cash in debt instruments of the U.S.
Government and its agencies, and of high quality corporate issuers. All highly
liquid instruments with an original maturity of three months or less are
considered cash equivalents; those with original maturities greater than three
months are considered marketable securities. B&N.com classified investments in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities".
F-11
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
At December 31, 1999, short-term investments in marketable securities
consist primarily of U.S. Treasury Securities, U.S. government agency securities
and investments in high quality corporate issuers and were classified as
held-to-maturity. Unrealized holding gains and losses at December 31, 1999 were
not significant.
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
December 31,
1999 1998
--------- ---------
AOL marketing advances .....................$ 2,780 $ 1,400
Other marketing advances ................... 2,899 7,905
Other current assets ....................... 2,482 1,465
--------- ---------
$ 8,161 $ 10,770
========= =========
On November 1, 1997, B&N.com and America Online ("AOL") formed a strategic
alliance pursuant to an Interactive Marketing Agreement (the "AOL Agreement")
which provides for B&N.com to be featured as the exclusive online book retailer
within AOL's commercial service which as of December 31, 1999 has approximately
20 million subscribers, excluding AOL.com. The AOL Agreement also gives B&N.com
an extensive package of placements and visibility throughout the AOL service. In
consideration of the marketing, promotion, advertising and other services AOL
will provide under the AOL Agreement, B&N.com will pay AOL a total of $40,000
over the term of the AOL Agreement, of which $18,000 has been paid as of
December 1999, and $11,000 will be paid in each of the years 2000 and 2001. The
AOL Agreement also contains revenue sharing provisions for sales above specified
amounts. B&N.com amortizes the payments associated with the AOL Agreement based
on impressions over the subsequent 12 months.
5. Fixed Assets
Fixed assets, at cost, consist of the following:
December 31,
1999 1998
---------- ----------
Computers and equipment ....................$ 56,363 $ 22,319
Leasehold improvements ..................... 10,699 8,418
Software ................................... 34,236 16,938
Construction in Progress ................... 18,263 -
---------- ----------
119,561 47,675
Less accumulated depreciation .............. 21,707 7,905
---------- ----------
Fixed assets, net .................$ 97,854 $ 39,770
========== ==========
Total capital expenditures to complete the construction in progress are
expected to be approximately $25,000.
F-12
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
6. Accrued Liabilities
Accrued liabilities consist of the following:
December 31,
1999 1998
--------- ---------
Accrued advertising ....................$ 12,990 $ 10,727
Accrued fixed assets ................... 12,644 3,156
Accrued compensation ................... 3,470 2,509
Other .................................. 10,523 3,412
--------- ---------
$ 39,627 $ 19,804
========= =========
7. Stockholders' Equity
There are three classes of common stock authorized: Class A Common Stock
("Class A Common"), Class B Common Stock ("Class B Common") and Class C Common
Stock ("Class C Common"). The holders of Class A Common generally have rights
identical to holders of Class B Common and Class C Common (collectively "High
Vote Stock"), except that each holder of Class A Common is entitled to one vote
per share and each holder of High Vote Stock is entitled to the number of votes
per share equal to: (i) ten, multiplied by the sum of (a) the aggregate number
of High Vote Stock owned by such holder and (b) the aggregate number of
Membership Units owned by such holder; divided by (ii) the number of shares of
High Vote Stock owned by such holder. Pursuant to the Company's Amended and
Restated Certificate of Incorporation ( the "Amended Charter"), each of the
holders of the High Vote Stock has the right to directly elect three of the
Company's directors. Otherwise, holders of Class A Common and High Vote Stock
(collectively "Common Stock") generally will vote together as a single class on
all matters (including the election of the directors who are not elected
directly by the holders of the High Vote Stock) presented to the stockholders
for their vote or approval except as otherwise required by applicable Delaware
law.
The Board of Directors is authorized to issue up to an aggregate of 50
million shares of Preferred Stock. The rights and characteristics of the
Preferred Stock are at the discretion of the Board of Directors. There is no
Preferred Stock outstanding.
8. Lease Commitments
B&N.com currently leases warehouse facilities, office space and equipment
under noncancelable operating leases. Rental expense under operating lease
agreements was $2,265, $1,317 and $200 for the years ended December 31, 1999,
1998 and 1997, respectively.
F-13
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
Future minimum lease payments under noncancelable operating leases as of
December 31, 1999 are:
Future
Year ending Minimum Lease
December 31, Payments
-----------------------------------------------------
2000...................................$ 6,331
2001................................... 8,224
2002................................... 8,292
2003................................... 7,872
2004................................... 7,826
Thereafter............................. 70,923
--------------
$ 109,468
==============
9. Employees' Retirement and Defined Contribution Plans
B&N.com maintains a noncontributory defined benefit pension plan (the
"Pension Plan") for the benefit of substantially all of its employees who meet
certain eligibility requirements, primarily age and length of service. Benefits
provided by the Pension Plan are based on years of credited service and covered
earnings for Social Security benefits. B&N.com's contributions to the Pension
Plan are generally in amounts determined by independent consulting actuaries.
The Pension Plan was separated from the Barnes & Noble Pension Plan as of
October 31, 1998. Pension expense allocable to B&N.com for 1999 was $90 and for
the last two months of 1998 was not material. Norwest Bank is the trustee for
the Pension Plan and all assets are managed by Fidelity Investments.
Actuarial assumptions used in determining the funded status of the Pension
Plan are as follows:
December 31,
1999 1998
-------- --------
Discount rate (beginning of year).................... 7.25% 7.25%
Discount rate (end of year).......................... 7.75% 7.25%
Expected long-term rate of return on plan assets..... 9.50% 9.50%
Assumed rate of compensation increase................ 4.75% 4.25%
F-14
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
The following table sets forth the funded status of the Pension Plan and the
pension liability recognized for the Pension Plan in the accompanying balance
sheets:
December 31,
1999 1998
-------- --------
Actuarial present value of benefit obligation:
Vested benefits .................................$ (158) $ (160)
Non-vested benefits ............................. (73) (115)
-------- --------
Accumulated benefit obligation ...................... (231) (275)
Effect of projected future compensation increases ... (271) (363)
-------- --------
Projected benefit obligation ........................ (502) (638)
Plan assets at market value ......................... 430 429
-------- --------
Projected benefit obligation in excess of
plan assets ...................................... (72) (209)
Unrecognized net loss ............................... (6) -
Unrecognized net obligation remaining ............... - -
Unrecognized prior service cost ..................... (12) 209
-------- --------
Pension liability ...............................$ (90) $ -
======== ========
B&N.com, through Barnes & Noble, also sponsors a defined contribution plan
(the "Savings Plan") for the benefit of substantially all of its employees who
meet certain eligibility requirements, primarily age and length of service. The
Savings Plan allows employees to invest up to 15% of their current gross cash
compensation on a pre-tax or post-tax basis, at their option. Participants have
investment options of various mutual funds. B&N.com's contributions to the
Savings Plan are generally in amounts based upon a certain percentage of the
employees' pre-tax contributions and are in Barnes & Noble stock. B&N.com
charged $100 to employee benefit expenses for each of the years ended December
31,1999 and 1998.
10. Stock Incentive Plan
As of December 31, 1998, B&N.com had one incentive plan (the "1998 Plan")
under which stock options were granted to key officers, employees, consultants,
advisors, and managers of B&N.com and its subsidiaries and affiliates. The
Compensation Committee of the Board of Managers was responsible for the
administration of the 1998 Plan. Generally, options were granted at fair market
value, began vesting one year after grant in 25% increments, were to expire ten
years from issuance and were conditioned upon continual employment during the
vesting period. Options granted under the 1998 Plan were replaced with options
to purchase shares of the Class A Common Stock of the Company under the
Company's 1999 Incentive Plan (the "1999 Plan"). The 1999 Plan is substantially
the same as the 1998 Plan, and is administered by the Compensation Committee of
the Company's Board of Directors. The 1999 Plan allows the Company to grant
options to purchase 25,500 shares of the Company's Class A Common Stock.
F-15
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
A summary of the status of stock options as of December 31, 1999 issued under
the 1998 Plan is presented below:
Outstanding Options
-----------------------------
Weighted Average
Number of Exercise Price
Shares Per Share
--------- ----------------
Balance December 31, 1998 ............. 18,155 $ 3.94
Options granted .............. 5,903 15.20
Options canceled ............. (3,870) 5.87
Options exercised ............ (597) 4.11
--------- --------
Balance December 31, 1999 ............. 19,591 $ 6.95
========= ========
During 1998 option grants of 5,060 and 4,140 were made to Leonard Riggio
and Jonathan Bulkeley, respectively.
The following table summarizes information as of December 31, 1999
concerning outstanding and exercisable options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Remaining Exercise Exercise
Price Number Contractual Price Number Price
Per Share Outstanding Life (in years) Per Share Exercisable Per Share
--------- ----------- --------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
3.48-4.06 12,639 8.63 $ 3.90 4,869 $ 3.90
4.35-6.09 2,544 8.73 4.56 777 5.03
15.75-16.88 1,999 9.60 15.82 0 0
17.69-18.00 2,017 9.43 17.98 225 18.00
18.38-19.31 392 9.81 18.61 0 0
-------- ------- -------- ------- --------
19,591 8.85 $ 6.95 5,871 $ 4.59
======== ======= ======== ======= ========
</TABLE>
During the year ended December 31, 1999, all option grants were granted at
fair value and as a result there was no compensation expense recorded for
options granted.
F-16
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
Had the Company determined the compensation cost of employee stock options
based on the fair value of the stock option grant dates in accordance with the
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), the Company's pro forma loss before minority
interest would have been increased to the pro forma amounts below:
Year Ended
December 31,
------------
1999 1998
------------ ------------
Pro forma loss before minority interest:
As reported $ (102,405) $ (83,148)
Pro forma SFAS 123 (107,336) (84,800)
Basic and diluted loss per share before
minority interest:
As reported (0.72) (0.58)
Pro forma SFAS 123 (0.75) (0.59)
The fair value for each option granted was estimated at the date of grant
using the Black-Scholes option pricing model, one of the allowable valuation
methods under SFAS 123, with the following assumptions:
Year Ended
December 31,
------------
1999 1998
------------- -----------
Average risk free interest rates 5.25% 5.25%
Average expected life (in years) 5.00 5.00
Volatility 57.50% N/A
The weighted-average fair value of the options granted during the years
1999 and 1998 was estimated to be $8.34 and $0.91, respectively, for options
granted at fair market value.
11. Litigation
B&N.com is involved in various routine legal proceedings incidental to the
conduct of its business. The Company does not believe that any of these legal
proceedings will have a material adverse effect on the financial condition,
results of operations or cash flows of B&N.com.
In August 1998, The Intimate Bookshop, Inc. and its owner, Wallace Kuralt,
filed a lawsuit in the United States District Court for the Southern District of
New York against a predecessor of the Company, Barnes & Noble, Borders Group,
Inc. and others, alleging violation of the Robinson-Patman Act and other federal
law, New York statutes governing trade practices and common law. In March 2000,
a Second Amended Complaint was served on the Company and other defendants
alleging a single cause of action for violations of the Robinson-Patman Act. The
Second Amended Complaint claims that the Intimate Bookshop, Inc. has suffered
damages of $10,000 or more and requests treble damages, costs, attorneys' fees
and interest, as well as declaratory and injunctive relief prohibiting the
defendants from violating the Robinson-Patman Act. The Company and B&N.com
intend to vigorously defend this action.
F-17
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
In March 1998, the American Booksellers Association and 26 independent
bookstores filed a lawsuit in the United States District Court for the Northern
District of California against Barnes & Noble and Borders Group Inc. alleging
violations of the Robinson-Patman Act, the California Unfair Trade Practice Act
and the California Unfair Competition Law. The Complaint seeks injunctive and
declaratory relief; treble damages on behalf of each of the bookstore
plaintiffs, and, with respect to the California bookstore plaintiffs, any other
damages permitted by California law; disgorgement of money, property and gains
wrongfully obtained in connection with the purchase of books for resale, or
offered for resale, in California from March 18, 1994 until the action is
completed and pre-judgment interest on any amounts awarded in the action, as
well as attorney fees and costs. In October 1999, the Company and B&N.com were
added as defendants in the action. The Company and B&N.com intend to vigorously
defend this action.
On October 21, 1999, Amazon.com, Inc. ("Amazon") filed a lawsuit against
the Company and B&N.com in the United States District Court for the Western
District of Washington alleging that B&N.com's use of its Express Lane one-click
ordering system infringes upon Amazon's patent for its 1-Click ordering system.
The complaint seeks injunctive and declaratory relief and treble damages, as
well as attorneys fees and costs. The Company and B&N.com have filed a
counterclaim for a declaratory judgment that the Amazon patent at issue is
invalid. On December 1, 1999, the Court granted Amazon's motion for a
preliminary injunction. As a result, consistent with the Court's order, B&N.com
replaced its Express Lane feature with an Express Checkout feature requiring two
clicks. The Company and B&N.com intend to vigorously defend this action.
12. Related Party Transactions
Through its distribution facilities, Barnes & Noble accounted for
approximately 58.9%, 60.3% and 38.5% or $64,112, $26,929 and $3,900, of
B&N.com's purchases during the years ended December 31, 1999, 1998 and 1997,
respectively. B&N.com has entered into an agreement (the "Supply Agreement")
with Barnes & Noble whereby Barnes & Noble charges B&N.com the costs associated
with such purchases plus incremental overhead incurred by Barnes & Noble in
connection with providing such inventory. As of December 31, 1999 and 1998,
$18,495 and $13,250, respectively, was payable to Barnes & Noble in connection
with such purchases. The Supply Agreement is subject to certain termination
provisions.
B&N.com has entered into agreements (the "Services Agreements") whereby
B&N.com receives various services from Barnes & Noble and its subsidiaries,
including, among other things, services for payroll processing, benefits
administration, insurance (property and casualty, medical, dental and life), tax
and traffic. In accordance with the terms of the Services Agreements, B&N.com
has paid, and expects to continue to pay, fees to Barnes & Noble and its
subsidiaries in an amount equal to the direct costs plus incremental expenses
associated with providing such services. B&N.com paid $1,672, $870 and $200 for
such services during the years ended December 31, 1999, 1998 and 1997,
respectively. The Services Agreements are subject to certain termination
provisions.
B&N.com subleases from Barnes & Noble approximately one-third of a 300,000
square foot warehouse facility located in New Jersey. B&N.com paid Barnes &
Noble $473, $271 and $0 for such subleased space during the years ended December
31, 1999, 1998 and 1997, respectively.
F-18
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
Since 1998, B&N.com has used the music distributor AEC One Stop Group, Inc.
("AEC'), as its primary supplier, to fulfill its orders for music and to provide
a music database. Subsequent to an agreement between AEC and B&N.com, AEC's
parent corporation was acquired by an investor group in which Leonard Riggio,
the Company's Chairman, was a significant minority investor. B&N.com paid AEC
$2,908 in connection with this agreement during the year ended December 31,
1999. At December 31, 1999, $4,508 was payable to AEC in connection with this
agreement.
B&N.com has entered into an agreement (the "License Agreement") with Barnes
& Noble College Bookstores, Inc., of which the principal stockholder is also a
principal stockholder/director/executive officer of Barnes & Noble and the
Company. Pursuant to the License Agreement, B&N.com has been granted an
exclusive license (the "License") to use the Barnes & Noble name and trademark
(excluding sales of college textbooks). The License Agreement is subject to
certain limitation provisions.
B&N.com has entered into an agreement (the "Database and Software License
Agreement") whereby B&N.com licenses from Barnes & Noble, the right to use
Barnes & Noble's title database, inventory sourcing and special order software.
The Database and Software License Agreement is renewable and is subject to
certain termination provisions.
B&N.com has entered into a Trademark License Agreement with Bertelsmann
Online ("BOL") (the "BOL Trademark License Agreement"), pursuant to which
B&N.com was granted a non-exclusive license to use BOL's name and trademark in
its operations and to sublicense the BOL name in accordance with the terms of
the license as the Class C Directors, in their sole discretion, see fit. The
License remains effective until B&N.com either defaults or becomes subject to
certain bankruptcy events.
B&N.com has entered into Technology Sharing and License Agreements with BOL
("the Technology Sharing License Agreements"), the subsidiary through which
Bertelsmann conducts its Internet business, pursuant to which BOL granted
B&N.com a license to view, access and use BOL's computer technology and systems,
and B&N.com granted BOL a license to view, access and use B&N.com's computer
technology and systems. These agreements remain effective until (i) the date
both parties mutually agree to terminate, or (ii) from and after the date either
Barnes & Noble or Bertelsmann cease having an equity interest of ten percent
(10%) or more in B&N.com. Following termination, each party may continue to use
in perpetuity any technology it obtained from the other prior to such
termination.
B&N.com believes that the transactions discussed above, as well as the
terms of any future transactions and agreements (including renewals of any
existing agreements) between B&N.com and its affiliates, are and will be at
least as favorable to B&N.com as could be obtained from unaffiliated parties.
The Board of Directors must approve in advance any proposed transaction or
agreement and will utilize such procedures in evaluating the terms and
provisions of such proposed transaction or agreement as are appropriate in light
of the fiduciary duties of directors under Delaware law.
F-19
<PAGE>
barnesandnoble.com inc. and predecessors
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)
13. Subsequent Events
In January 2000, B&N.com acquired approximately 32% of Enews.com, the
largest retailer of magazine subscriptions on the Internet, for $26,428 in cash
and stock valued at $12,857, to expand its presence in the growing on-line
magazine subscription market.
On February 29, 2000, the Company repriced 5,994 of 16,086 outstanding
options which were originally granted at an average exercise price of $16.15.
The new exercise price for the options is $8.00, the closing market price of the
Company's stock as of February 28, 2000. Based on current accounting literature,
the Company expects to account for these repriced options as variable options in
the future.
In March 2000, B&N.com paid Jonathan Bulkeley $10,940 for the surrender
of one million stock options which was charged to expense at that time.
F-20
<PAGE>
AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF BARNESANDNOBLE.COM LLC
THIS AMENDMENT NO. 1 (this "Amendment") amends the Second Amended
and Restated Limited Liability Company Agreement (the "Restated Agreement") of
barnesandnoble.com llc, a Delaware limited liability company (the "Company"),
made and entered into, effective as of May 28, 1999, by and among Barnes &
Noble, Inc., a corporation organized and existing under the laws of Delaware,
with its principal place of business at 122 Fifth Avenue, New York, New York
10011 ("BN"), B&N.com Holding Corp., a corporation organized and existing under
the laws of Delaware, with its principal place of business at 122 Fifth Avenue,
New York, New York 10011 ("BN Holding"), barnesandnoble.com inc., a corporation
organized and existing under the laws of Delaware, with its principal place of
business at 76 Ninth Avenue, New York, New York 10011 (the "Public Corp."),
Bertelsmann AG, an Aktiengesellschaft organized and existing under the laws of
Germany, with its principal place of business at Carl-Bertelsmann-Strasse 270,
33311 Gutersloh, Germany ("BAG"), and BOL.US Online, Inc., a corporation
organized and existing under the laws of Delaware, with its principal place of
business at 1540 Broadway, New York, New York 10036 ("USO").
WHEREAS, the Company was formed as a limited liability company
pursuant to the Delaware Limited Liability Company Law (6 Del. C.ss. 18-101, et
seq.) by the filing of a Certificate of Formation with the Office of the
Secretary of State of the State of Delaware on October 27, 1998;
WHEREAS, the parties entered into the Restated Agreement to reflect
the addition of the Public Corp. as a Member and the sole Manager of the LLC
pursuant to the terms and conditions of the Restated Agreement; and
WHEREAS, the parties hereto desire to amend the Restated Agreement,
effective as of May 28, 1999, to accurately reflect their understanding with
respect to Section 5.4(c) and Schedule I of the Restated Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Amendment to Section 5.4(c). Section 5.4(c) of the Restated
Agreement is hereby amended and restated in its entirety to read as follows:
"When the Gross Asset Value of a Company asset differs from its
basis for federal or other income tax purposes, solely for purposes of the
relevant tax and not for purposes of computing Capital Account balances, income,
gain, loss, deduction and credit with respect to such asset shall be allocated
among the Members (i) with respect to any contributions of assets to the Company
on or after May 28, 1999, under the traditional method allowed pursuant to
Treasury Regulations Section 1.704-3(b), unless otherwise determined by BN
Holding and USO, and (ii) with respect to all contributions of assets to the
Company before May 28, 1999, under the remedial allocation method under Treasury
Regulation Section 1.704-3(d). The members
<PAGE>
agree that, as of October 31, 1998, all such differences related to goodwill,
and the corresponding remedial allocations shall be made ratably over a fifteen
(15) year period."
Amendment to Schedule I. Schedule I of the Restated Agreement is
hereby amended and replaced in its entirety by Schedule I attached hereto.
References. Any references in the Restated Agreement to "the
Agreement", "this Agreement", "hereof", "herein", "hereunder" or terms of
similar import shall mean the Restated Agreement as amended by this Amendment.
No Other Changes. Except as amended hereby, all other terms and
provisions of the Restated Agreement remain unchanged and in full force and
effect.
Counterparts. This Amendment may be executed in counterparts which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
this 14th day of January, 2000, effective and effectuating their agreement as of
May 28, 1999.
Bertelsmann AG
By: /s/ Thomas Middelhoff
--------------------------
Name: Thomas Middelhoff
Title: Chief Executive Officer
BOL.US Online, Inc.
By: /s/ Robert Sorrentino
--------------------------
Name: Robert Sorrentino
Title: President
Barnes & Noble, Inc.
By: /s/ Leonard Riggio
--------------------------
Name: Leonard Riggio
Title: Chairman
B&N.com Holding Corp.
2
<PAGE>
By: /s/ Leonard Riggio
--------------------------
Name: Leonard Riggio
Title: Chairman
barnesandnoble.com inc.
By: /s/ Leonard Riggio
--------------------------
Name: Leonard Riggio
Title: Chairman
3
<PAGE>
SCHEDULE I
MEMBERS; MEMBERSHIP UNITS; CAPITAL ACCOUNTS
Member Membership Units Capital Account
- - ------ ---------------- ---------------
barnesandnoble.com inc. 28,750,002 $ 517,500,000
Membership Units
B&N.com Holding Corp. 57,500,000 $1,035,000,000
Membership Units
BOL.US Online, Inc. 57,500,000 $1,035,000,000
Membership Units
4
<PAGE>
AMENDED AND RESTATED INDUSTRIAL LEASE AGREEMENT
BETWEEN
INDUSTRIAL DEVELOPMENTS INTERNATIONAL (TENNESSEE), L.P.
AS LANDLORD
AND
BARNESANDNOBLE.COM LLC
AS TENANT
<PAGE>
LEASE INDEX
-----------
Section Subject
------- -------
1 Basic Lease Provisions
2 Demised Premises
3 Term
4 Base Rent
5 Security Deposit
6 Operating Expenses and Additional Rent
7 Use of Demised Premises
8 Insurance
9 Utilities
10 Maintenance and Repairs
11 Tenant's Personal Property; Indemnity
12 Tenant's Fixtures
13 Signs
14 Landlord's Lien
15 Governmental Regulations
16 Environmental Matters
17 Construction of Demised Premises
18 Tenant Alterations and Additions
19 Services by Landlord
20 Fire and Other Casualty
21 Condemnation
22 Tenant's Default
23 Landlord's Right of Entry
24 Lender's Rights
25 Estoppel Certificate
26 Landlord's Liability
27 Notices
28 Brokers
29 Assignment and Subleasing
30 Termination or Expiration
31 Intentionally Omitted
32 Late Payments
33 Rules and Regulations
34 Quiet Enjoyment
35 Miscellaneous
36 Special Stipulations
37 Intentionally omitted
38 Authority
39 No Offer Until Executed
Exhibit "A" Demised Premises
Exhibit "B" Preliminary Plans
Exhibit "C" Special Stipulations
Exhibit "D" Rules and Regulations
Exhibit "E-1" Tenant's Certificate of Authority
Exhibit "E-2" Landlord's Certificate of Authority
<PAGE>
Exhibit "F" Sign Criteria
Exhibit "G" Form SNDA
<PAGE>
AMENDED AND RESTATED INDUSTRIAL LEASE AGREEMENT
-----------------------------------------------
THIS AMENDED AND RESTATED INDUSTRIAL LEASE AGREEMENT (the "Lease") is
made to be effective as of the 27th day of July, 1999 (the "Lease Date") by and
between Industrial Developments International (Tennessee), L.P., a Georgia
limited partnership ("Landlord"), and BARNESANDNOBLE.COM LLC, a Delaware limited
liability company ("Tenant") (the words "Landlord" and "Tenant" to include their
respective legal representatives, successors and permitted assigns where the
context requires or permits).
W I T N E S S E T H:
<TABLE>
<CAPTION>
1. Basic Lease Provisions. The following constitute the basic
provisions of this Lease:
<S> <C>
(a) Demised Premises Address: 6000 Freeport Avenue, Suite 101
Memphis, Tennessee 38141
(b) Demised Premises Square Footage: approximately 380,000 sq. ft.
(c) Building Square Footage: approximately 540,000 sq. ft.
(d) Annual Base Rent (based on $2.89/sq. foot, and subject to adjustment as provided in
Special Stipulation 9 on Exhibit C hereto):
Lease Year 1 $915,170.00
Lease Year 2 $1,098,204.00
Lease Year 3 $1,098,204.00
Lease Year 4 $1,098,204.00
Lease Year 5 $1,098,204.00
Lease Year 6 $183,034.00
(2 months)
(e) Monthly Base Rent Installments (based on $2.89/sq. foot, and subject to adjustment as
provided in Special Stipulation 9 on Exhibit C hereto):
Lease Year 1
(Months 1-2) $0.00
(Months 3-12) $91,517.00
Lease Year 2 $91,517.00
Lease Year 3 $91,517.00
Lease Year 4 $91,517.00
Lease Year 5 $91,517.00
Lease Year 6 $91,517.00
(2 months)
(f) Lease Commencement Date: The later to occur of (i) "substantial completion" of the
Improvements, or (ii) November 15, 1999
(g) Base Rent Commencement Date: Sixty (60) days after the Lease Commencement Date, but in
no event earlier than January 15, 2000
(h) Expiration Date: The day immediately preceding the fifth (5th) anniversary of the Base
Rent Commencement Date.
(i) Primary Term: 62 months
(j) Tenant's Operating Expense Percentage: 70.37%, subject to adjustment as provided in
Special Stipulation 9 on Exhibit C hereto.
(k) Security Deposit: See Section 5 hereof
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
(l) Permitted Use: Distribution and warehousing of books (including books on tape, disks and
CD-ROM), magazines, periodicals, computer software, compact discs and other forms of
recorded music and video tapes, together with consumer products reasonably related to any of
the foregoing, and office and administrative uses reasonably ancillary thereto
(collectively, the "Initial Use"), or for distribution and warehousing (but not
manufacturing) of any other retail consumer goods and products; provided, however, that
Tenant shall obtain Landlord's prior written consent to a use which is different from the
Initial Use and which involves the distribution, warehousing or other handling or use of
either (1) Hazardous Substances, or other substances or materials which would materially
increase the risk of Contamination (as defined in Section 16) or have a material adverse
affect on the value or marketability of the Building if a Contamination involving such other
substance or material occurs, or (2) noxious substances or materials which would likely
interfere with the business operations of any other tenant and occupant of the Project, or
violate any of the terms or conditions of this Lease, including, without limitation, Section
16 hereof.
(m) Address for notice:
Landlord: Industrial Developments International (Tennessee), L.P.
c/o Industrial Developments International, Inc.
3424 Peachtree Road, N.E., Suite 1500
Atlanta, Georgia 30326
Attn: Vice President - Operations
Tenant: barnesandnoble.com llc
76 Ninth Avenue
New York, New York 10011
Attn: William Duffy
(n) Address for rental payments:
Industrial Developments International (Tennessee), L.P.
c/o IDI Services Group, Inc.
P. O. Box 281464
Atlanta, Georgia 30384-1464
(o) Broker(s): Benchmark Associates, Inc. (Tenant's Broker)
Attn: Mr. David Haut
IDI Services Group, Inc. (Landlord's Broker)
Attn: Mr. Kurt Nelson
</TABLE>
2. Demised Premises. For and in consideration of the rent hereinafter
reserved and the mutual covenants hereinafter contained, Landlord does hereby
lease and demise unto Tenant, and Tenant does hereby hire, lease and accept,
from Landlord all upon the terms and conditions hereinafter set forth the
following premises, referred to as the "Demised Premises", as outlined on
Exhibit A attached hereto and incorporated herein: approximately 380,000 square
feet of space, approximately 28,244 square feet of which is office space, having
an address as set forth in Section 1(a), located within Building G (the
"Building"), which contains a total of approximately 540,000 square feet and is
located within Chickasaw Distribution Center (the "Project"), located in Shelby
County, Tennessee. In addition, Tenant shall have the non-exclusive right to use
and enjoy the Building Common Area (as hereinafter defined), as shown on Exhibit
A hereto, subject to the terms and conditions of this Lease.
3. Term. To have and to hold the Demised Premises for a preliminary term
(the "Preliminary Term") commencing on the Lease Date and ending on the Lease
Commencement Date as set forth in Section 1(f), and a primary term (the "Primary
Term") commencing on the Lease Commencement Date and terminating on the
Expiration Date as set forth in Section 1(h), as the Lease Commencement Date and
the Expiration Date may be revised pursuant to Section 17 (the Preliminary Term,
the Primary Term, and any and all extensions thereof, herein referred to as the
"Term"). The term "Lease Year" shall mean each one (1) year period of the Term
(or portion thereof if the last Lease Year of the Term is less than one (1) full
year) beginning on the Lease Commencement Date, and each anniversary thereof,
and ending on the day immediately prior to the next succeeding anniversary of
the Lease Commencement Date.
4. Base Rent. Tenant shall pay to Landlord at the address set forth in
Section 1(n), as base rent for the Demised Premises, commencing on the Base Rent
Commencement Date and continuing throughout the Term in lawful money of the
United States, the annual amount set forth in Section 1(d) payable in equal
monthly installments as set forth in Section 1(e) (the "Base Rent"), payable in
advance and, except as otherwise provided herein, without demand and without
abatement, reduction, set-off or deduction, on the first day of each calendar
month during the Term. If the Base Rent Commencement Date shall fall on a day
other than the first day of a calendar month, the Base Rent shall be apportioned
pro rata
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on a per diem basis (i) for the period between the Base Rent Commencement Date
and the first day of the following calendar month (which pro rata payment shall
be due and payable on the first day of the month immediately following the Base
Rent Commencement Date), and (ii) for the last partial month of the Term, if
applicable. No payment by Tenant or receipt by Landlord of rent hereunder shall
be deemed to be other than on account of the amount due, and no endorsement or
statement on any check or any letter accompanying any check or payment of rent
shall be deemed an accord and satisfaction, and Landlord may accept such check
as payment without prejudice to Landlord's right to recover the balance of such
installment or payment of rent or pursue any other remedies available to
Landlord.
5. Security Deposit. If at any time there shall remain one hundred
eighty (180) days left in the Term without any then available renewal option
hereunder having been validly exercised by Tenant, Tenant agrees that, prior to
such one hundred eightieth (180th) day, Tenant will have delivered to Landlord
an Irrevocable Letter of Credit in the amount of the Monthly Base Rent
Installment applicable for the month which includes such one hundred eightieth
(180th) day (the "Security Deposit"), in a form and from a financial institution
reasonably acceptable to Landlord, and that Tenant shall cause the same to be
maintained in full force and effect throughout the remainder of the Term, and
during the thirty (30) day period after the later of (a) the Expiration Date or
(b) the date that Tenant delivers possession of the Demised Premises to
Landlord, as security for the full and faithful performance by Tenant of each
and every term, covenant and condition of this Lease. The Security Deposit may
be commingled with Landlord's other funds or held by Landlord in a separate
interest bearing account, with interest paid to Landlord, as Landlord may elect.
In the event that Tenant is in default under this Lease beyond any applicable
grace or cure period, Landlord may retain the security Deposit for the payment
of any sum due Landlord or which Landlord may expend or be required to expend by
reason of Tenant's default or failure to perform; provided, however, that any
such retention by Landlord shall not be or be deemed to be an election of
remedies by Landlord or viewed as liquidated damages, it being expressly
understood and agreed that Landlord shall have the right to pursue any and all
other remedies available to it under the terms of this Lease or otherwise. In
the event all or any portion of the Security Deposit is so retained by Landlord,
Tenant shall, within five (5) days of demand therefor from Landlord, replenish
the Security Deposit to the full amount set forth in Section 1(k). In the event
that Tenant shall comply with all of the terms, covenants and conditions of this
Lease, the security deposit shall be returned to Tenant within thirty (30) days
after the later of (a) the Expiration Date or (b) the date that Tenant delivers
possession of the Demised Premises to Landlord. In the event of a sale of the
Building, Landlord shall have the right to transfer the security deposit to the
purchaser, and upon acceptance by such purchaser, Landlord shall be released
from all liability for the return of the security deposit. Tenant shall not
assign or encumber the money deposited as security, and neither Landlord nor its
successors or assigns shall be bound by any such assignment or encumbrance.
6. Operating Expenses and Additional Rent. (See Special Stipulations 3
and 10 on Exhibit C hereto)
(a) Tenant agrees to pay as Additional Rent (as defined in
Section 6(b) below) its proportionate share of Operating Expenses (as
hereinafter defined). "Operating Expenses" shall be defined as all reasonable
expenses for operation, repair, replacement and maintenance as necessary to keep
the Building and the common areas, driveways, and parking areas associated
therewith (collectively, the "Building Common Area") in good order, condition
and repair, including but not limited to, utilities for the Building Common
Area, expenses associated with the driveways and parking areas (including
sealing and restriping, and snow, trash and ice removal), security systems for
the Building Common Area, fire detection and prevention systems for the Building
Common Area, lighting facilities, landscaped areas, walkways, painting and
caulking, directional signage, curbs, drainage strips, sewer lines, all
maintenance, repair and replacement costs required to be paid for or contributed
toward by Landlord pursuant to any applicable access, driveway, shared truck
court or other such easements benefiting the Building (subject, with respect to
any replacements or improvement of a capital nature made thereunder, to the same
limitations on passing through the costs of capital replacements or improvements
as are set forth in the fourth (4th) sentence of this Section 6), all real
property taxes and special assessments imposed upon the Building, the Building
Common Area and the land on which the Building and the Building Common Area are
constructed, all costs of insurance paid by Landlord with respect to the
Building and the Building Common Area, and costs of improvements to the Building
and the Building Common Area required by any law, ordinance or regulation
applicable to the Building and the Building Common Area generally (and not
because of the particular use of or alterations within the Building or the
Building Common Area by a particular tenant), which cost shall be amortized on a
straight line basis over the useful life of such improvement in accordance with
generally accepted accounting principles ("GAAP"); provided, however, that no
such cost to comply with any such law, ordinance or regulation shall be included
in Operating Expenses to the extent the Building or Building Common Area failed
to comply with any such law, ordinance or regulation in effect as of the Lease
Commencement Date. Notwithstanding anything to the contrary contained herein,
Operating Expenses shall not include expenses for the costs of any maintenance
and repair required to be performed by Landlord at its own expense under Section
(10)(b). Further, Operating Expenses shall not include the costs for capital
replacements and/or improvements unless such costs (i) are incurred for the
purpose of causing a material decrease in the Operating Expenses of the Building
or the Building Common Area, provided such costs are amortized (and included in
Operating Expenses as so amortized) on a straight line basis over the useful
life of such improvement in accordance with GAAP, (ii) are incurred with respect
to improvements made to comply with laws, ordinances or regulations as described
above, or (iii) constitute a commercially reasonable deductible, not to exceed
$20,000.00, paid by Landlord in the event of a casualty under any
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casualty insurance carried by Landlord. The proportionate share of Operating
Expenses to be paid by Tenant shall be a percentage of the Operating Expenses
based upon the proportion that the square footage of the Demised Premises bears
to the total square footage of the Building (such figure referred to as
"Tenant's Operating Expense Percentage" and, subject to adjustment as provided
herein, set forth in Section 1(j)). Prior to or promptly after the beginning of
each calendar year during the Term, Landlord shall estimate the total amount of
Operating Expenses to be paid by Tenant during each such calendar year and
Tenant shall pay to Landlord one-twelfth (1/12) of such sum on the first day of
each calendar month during each such calendar year, or part thereof, during the
Term. Within a reasonable time after the end of each calendar year (but not
later than one hundred twenty (120) days after the end of each such calendar
year), Landlord shall submit to Tenant a reasonably detailed statement of the
actual amount of Operating Expenses for such calendar year, and the actual
amount owed by Tenant, and within thirty (30) days after receipt of such
statement, Tenant shall pay any deficiency between the actual amount owed and
the estimates paid during such calendar year, or in the event of overpayment,
Landlord shall credit the amount of such overpayment toward the next installment
of Operating Expenses owed by Tenant or remit such overpayment to Tenant if the
Term has expired or has been terminated and no Event of Default exists
hereunder. The obligations in the immediately preceding sentence shall survive
the expiration or any earlier termination of this Lease. If the Lease
Commencement Date shall fall on other than the first day of the calendar year,
and/or if the Expiration Date shall fall on other than the last day of the
calendar year, Tenant's proportionate share of the Operating Expenses for such
calendar year shall be apportioned prorata.
(b) Any amounts required to be paid by Tenant hereunder (in
addition to Base Rent) and any charges or expenses incurred by Landlord on
behalf of Tenant under the terms of this Lease shall be considered "Additional
Rent" payable in the same manner and upon the same terms and conditions as the
Base Rent reserved hereunder except as set forth herein to the contrary. Any
failure on the part of Tenant to pay such Additional Rent when and as the same
shall become due shall entitle Landlord to the remedies available to it for
non-payment of Base Rent. Tenant's obligations for payment of Additional Rent
shall begin to accrue on the Base Rent Commencement Date.
(c) If applicable in the jurisdiction where the Demised Premises
are located, Tenant shall pay and be liable for all rental, sales, use and
inventory taxes or other similar taxes, if any, on the amounts payable by Tenant
hereunder levied or imposed by any city, state, county or other governmental
body having authority, such payments to be in addition to all other payments
required to be paid Landlord by Tenant under the terms of this Lease. Such
payment shall be made by Tenant directly to such governmental body if billed to
Tenant, or if billed to Landlord, such payment shall be paid concurrently with
the payment of the Base Rent, Additional Rent, or such other charge upon which
the tax is based, all as set forth herein.
7. Use of Demised Premises.
(a) The Demised Premises shall be used for the Permitted
Use set forth in Section 1(l) and for no other purpose.
(b) Tenant will permit no liens to attach or exist against
the Demised Premises, and shall not commit any waste.
(c) The Demised Premises shall not be used for any illegal
purposes, and Tenant shall not allow, suffer, or permit any vibration, noise,
odor, light or other effect to occur within or around the Demised Premises that
could constitute a nuisance or trespass for Landlord or any occupant of the
Building or an adjoining building, its customers, agents, or invitees. Upon
notice by Landlord to Tenant that any of the aforesaid prohibited uses are
occurring, Tenant agrees to promptly remove or control the same. Notwithstanding
the foregoing, Landlord acknowledges and agrees that this subparagraph (c) shall
not be deemed to prohibit vibrations, odors and/or noises that are customarily
associated with the operation of a warehouse facility for the uses permitted
herein including, without limitation, loading and unloading of trucks, and the
use of conveyor belts, generators, and heating, ventilating and air conditioning
units and air compressors.
(d) Tenant shall not in any way violate any law, ordinance or
restrictive covenant affecting the Demised Premises, and shall not in any manner
use the Demised Premises so as to cause cancellation of, prevent the use of, or
increase the rate of, the fire and extended coverage insurance policy required
hereunder. Except as expressly set forth below in this subsection 7(d), Landlord
makes no (and does hereby expressly disclaim any) covenant, representation or
warranty as to the Permitted Use being allowed by or being in compliance with
any applicable laws, rules, ordinances or restrictive covenants now or hereafter
affecting the Demised Premises, and any zoning letters, copies of zoning
ordinances or other information from any governmental agency or other third
party provided to Tenant by Landlord or any of Landlord's agents or employees
shall be for informational purposes only, Tenant hereby expressly acknowledging
and agreeing that Tenant shall conduct and rely solely on its own due diligence
and investigation with respect to the compliance of the Permitted Use with all
such applicable laws, rules, ordinances and restrictive covenants and not on any
such information provided by Landlord or any of its agents or employees.
Landlord hereby represents to Tenant that, as of the Lease Date, (i) neither the
current zoning classification applicable to the Demised Premises nor the
Declaration of Protective Covenants established by Landlord and currently
encumbering the Building (the "Declaration") prohibits Tenant from operating a
warehouse/distribution facility for the Initial Use twenty-four (24) hours a
day, three hundred
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sixty-five (365) days a year, and (ii) none of the title exceptions listed in
Schedule B-Section 2 of the copy of that certain Lawyer's Title Insurance
Company lender's title insurance policy having Bank of America (as hereinafter
defined) as the insured, a copy of which has been delivered by Landlord to
Tenant, prohibits Tenant from conducting general warehousing and distribution
operations within and from the Demised Premises.
(e) In the event insurance premiums pertaining to the Demised
Premises, the Building, or the Building Common Area, whether paid by Landlord or
Tenant, are increased over the least hazardous rate available due to the nature
of the use of the Demised Premises by Tenant, to the extent such increase is
solely a result of Tenant's use of the Demised Premises, Tenant shall pay such
additional amount as Additional Rent, provided Landlord's insurance company
delivers to Tenant a certification showing the manner in which Tenant's use has
brought about such increase. To Landlord's actual knowledge, as of the Lease
Date Tenant's use of the Demised Premises for the Permitted Use (as opposed to
Tenant's manner of use) shall not cause an increase in Landlord's insurance
rates.
8. Insurance.
(a) Tenant covenants and agrees that from and after the Lease
Commencement Date or any earlier date upon which Tenant enters or occupies the
Demised Premises or any portion thereof, Tenant will carry and maintain, at its
sole cost and expense, the following types of insurance, in the amounts
specified and in the form hereinafter provided for:
(i) Liability insurance in the Commercial General
Liability form (or reasonable equivalent thereto) covering the Demised Premises
(including any portion of the Building Common Area fenced in by Tenant pursuant
to Special Stipulation 12 of Exhibit C hereto) and Tenant's use thereof against
claims for bodily injury or death, property damage and product liability
occurring upon, in or about the Demised Premises, such insurance to be written
on an occurrence basis (not a claims made basis), to be in combined single
limits amounts not less than $3,000,000.00 and to have general aggregate limits
of not less than $5,000,000.00 for each policy year. The insurance coverage
required under this Section 8(a)(i) shall, in addition, extend to any liability
of Tenant arising out of the indemnities provided for in Section 11 and, if
necessary, the policy shall contain a contractual endorsement to that effect.
(ii) Insurance covering (A) all of the items
included in the leasehold improvements constructed in the Demised Premises by or
at the expense of Landlord (collectively, the "Improvements"), including but not
limited to demising walls and the heating, ventilating and air conditioning
system and (B) Tenant's trade fixtures, fencing, merchandise and personal
property from time to time in, on or upon the Demised Premises (including any
portion of the Building Common Area fenced in by Tenant pursuant to Special
Stipulation 12 of Exhibit C hereto), in an amount not less than one hundred
percent (100%) of their full replacement value from time to time during the
Term, providing protection against perils included within the standard form of
"all-risks" fire and casualty insurance policy, together with insurance against
sprinkler damage, vandalism and malicious mischief. Any policy proceeds from
such insurance relating to the Improvements shall be used solely for the repair,
construction and restoration or replacement of the Improvements damaged or
destroyed unless this Lease shall cease and terminate under the provisions of
Section 20.
(b) All policies of the insurance provided for in Section 8(a)
shall be issued in form reasonably acceptable to Landlord by insurance companies
with a rating of not less than "A," and financial size of not less than Class
XII, in the most current available "Best's Insurance Reports", and licensed to
do business in the state in which the Building is located. Each and every such
policy:
(i) shall name Landlord, Lender (as defined in
Section 24), and any other party reasonably designated by Landlord, as an
additional insured. In addition, the coverage described in Section 8(a)(ii)(A)
relating to the Improvements shall also name Landlord as "loss payee";
(ii) shall be delivered to Landlord, in the form of
an insurance certificate reasonably acceptable to Landlord as evidence of such
policy, prior to the Lease Commencement Date and thereafter within thirty (30)
days prior to the expiration of each such policy, and, as often as any such
policy shall expire or terminate. Renewal or additional policies shall be
procured and maintained by Tenant in like manner and to like extent;
(iii) shall contain a provision that the insurer
will give to Landlord and such other parties in interest at least fifteen (15)
days notice in writing in advance of any material change, cancellation,
termination or lapse, or the effective date of any reduction in the amounts of
insurance; and
(iv) shall be written as a primary policy which
does not contribute to and is not in excess of coverage which Landlord may
carry.
(c) In the event that Tenant shall fail to carry and maintain
the insurance coverages set forth in this Section 8, Landlord may upon thirty
(30) days notice to Tenant (unless such coverages will lapse in which event no
such notice shall be necessary) procure such policies of insurance and Tenant
shall promptly reimburse Landlord therefor.
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(d) Landlord and Tenant hereby waive any rights each may have
against the other on account of any loss or damage occasioned to Landlord or
Tenant, as the case may be, with respect to their respective property, the
Demised Premises, its contents or to the other portions of the Building, arising
from any risk covered by all risks fire and extended coverage insurance of the
type and amount required to be carried hereunder, provided that such waiver does
not invalidate such policies or prohibit recovery thereunder. The parties hereto
shall cause their respective insurance companies insuring the property of either
Landlord or Tenant against any such loss, to waive any right of subrogation that
such insurers may have against Landlord or Tenant, as the case may be.
9. Utilities. During the Term, Tenant shall promptly pay as billed to
Tenant all costs and charges for gas, steam, electricity, fuel, light, power,
telephone, heat and any other utility or service used or consumed in or
servicing the Demised Premises, all of which (other than water and sewer service
to the Demised Premises) shall be separately metered and billed to Tenant. The
cost of water and sewer service to the Demised Premises shall be passed through
to Tenant by Landlord (at Landlord's actual cost) on a prorata basis as an
Operating Expense under Section 6 hereof. In no event shall such charges include
any Landlord-imposed surcharge, administrative fee, overhead or profit. In the
event Tenant's use of any utility not separately metered to the Demised Premises
is in excess of the average use by other tenants, Landlord shall have the right
to install a meter for such utility, at Tenant's expense, and bill Tenant for
Tenant's actual use, or to increase equitably Tenant's proportionate share of
the cost of such utility based on such excess use. If Tenant fails to pay any
utility bills or charges, Landlord may, at its option and upon reasonable notice
to Tenant, pay the same and in such event, the amount of such payment, together
with interest thereon at the Interest Rate as defined in Section 32 from the
date of such payment by Landlord, will be added to Tenant's next due payment as
Additional Rent.
10. Maintenance and Repairs.
(a) Subject to Landlord's obligations under Section 17 hereof,
Tenant shall, at its own cost and expense, maintain in good condition and repair
the interior of the Demised Premises, including but not limited to the heating,
air conditioning and ventilation systems, glass, windows and doors, sprinkler,
all components of any plumbing and sewage systems located within or under the
Demised Premises [i.e., inside of the exterior walls and the middle of any
interior demising walls of the Demised Premises, and/or within or under the
floor slab or the underlying foundation], fixtures, interior walls, floors
(including floor slabs, unless specifically reserved unto Landlord in subsection
(b) below), ceilings, storefronts, gutters, flashing and downspouts, plate
glass, skylights, all electrical facilities and equipment including, without
limitation, lighting fixtures, lamps, fans and any exhaust equipment and
systems, electrical motors, and all other appliances and equipment (including,
without limitation, dock levelers, dock shelters, dock seals and dock lighting)
of every kind and nature located in, upon or (to the extent exclusively serving
the Demised Premises) about the Demised Premises, except as to such maintenance
and repair as is the obligation of Landlord pursuant to Section 10(b). During
the Term, Tenant shall maintain in full force and effect a service contract for
the maintenance of the heating, ventilation and air conditioning systems with an
entity reasonably acceptable to Landlord. Tenant shall deliver to Landlord (i) a
copy of said service contract prior to the Lease Commencement Date, and (ii)
thereafter, a copy of a renewal or substitute service contract within thirty
(30) days prior to the expiration of the existing service contract. Tenant's
obligation shall exclude any maintenance and repair required because of the act
or negligence of Landlord, its employees, contractors or agents, which shall be
the responsibility of Landlord.
(b) Landlord shall, at its own cost and expense, maintain in
good condition and repair the roof (including, without limitation, keeping the
same free of leaks), foundation (beneath the floor slab, provided that Landlord
shall repair any damage to the floor slab resulting solely from improperly
compacted subgrade located beneath the same), exterior walls, columns, and
structural frame of the Building. Landlord's obligation shall exclude the cost
of any maintenance or repair required because of the act or negligence of Tenant
or Tenant's agents, contractors, employees and invitees (collectively, "Tenant's
Affiliates"), the cost of which shall be the responsibility of Tenant.
(c) Unless the same is caused solely by the negligent action or
inaction of Landlord, its employees or agents, and is not covered by the
insurance required to be carried by Tenant pursuant to the terms of this Lease,
Landlord shall not be liable to Tenant or to any other person for any damage
occasioned by failure in any utility system or by the bursting or leaking of any
vessel or pipe in or about the Demised Premises, or for any damage occasioned by
water coming into the Demised Premises or arising from the acts or neglects of
occupants of adjacent property or the public.
(d) Landlord shall give Tenant two (2) days prior written notice
of any repairs or replacements required of Landlord pursuant to subsection 10(b)
above to, or which would otherwise materially adversely affect the normal
operation of Tenant's business in, the Demised Premises [except in the case of
an emergency posing significant risk of physical damage to the Demised Premises
or any other part of the Building, including, without limitation, Tenant's
property located within the Demised Premises, or injury to persons, in which
event Landlord shall only be required to give such notice (including oral notice
to any on-site, management personal, provided such oral notice is followed by
written notice given in the manner provided for notices herein within three (3)
days of such oral notice) as is reasonable under the circumstances]. Landlord
shall use reasonable efforts to perform such repairs or replacements in a manner
that does not interfere with the operation of Tenant's business at the Demised
Premises (or any portion thereof).
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(e) If (i) Landlord has failed to commence any repair of the
Demised Premises, as required in subsection 10(b) above, within seven (7) days
after written notice from Tenant specifying which repair Landlord has failed to
perform (or, in the case of leaks in the roof of the Demised Premises that
otherwise meet the conditions required for "self-help" hereinbelow, within
twenty-four (24) hours after written notice from Tenant specifying same), or
(ii) Landlord has failed to complete any repair of the Demised Premises, as
required in subsection 10(b) above, within thirty (30) days after written notice
from Tenant specifying which repair Landlord has failed to complete (provided
such repair is reasonably capable of being completed within such thirty (30) day
period), and, in Tenant's reasonable opinion, "self-help" measures are necessary
in an emergency situation to prevent significant physical damage to the Demised
Premises (including Tenant's property located within the Demised Premises) or
injury to persons, Tenant may exercise such self-help to perform or complete
such repair, as the case may be, after giving Landlord such notice of Tenant's
intent to do so as is reasonable under the circumstances (it being acknowledged
that oral notice may be appropriate in certain emergency situations, but that
any such oral notice must be followed by written notice given in the manner
provided for notices herein within three (3) days of such oral notice);
provided, however, that in performing any such self-help with respect to the
roof of the Demised Premises, Tenant (i) shall only use a manufacturer approved,
licensed roof contractor, and (ii) shall not void or impair any applicable roof
warranty. Tenant shall be entitled to recover from Landlord the reasonable and
actual out-of-pocket cost of any such self-help measures, and Landlord shall pay
such amount to Tenant within forty-five (45) days after Tenant's request for
reimbursement as described below. In addition, any requests for reimbursement
made by Tenant shall be accompanied by such documentation as Landlord shall
reasonably require showing the actual costs incurred by Tenant, and by full and
final lien waivers from all contractors performing the work. If Landlord has not
paid to Tenant such amount or given Tenant notice of its objection to such
amount within such forty-five (45) day period, or if Landlord's objection to
such amount is resolved against Landlord by agreement of the parties or by a
court of competent jurisdiction to which the dispute has been submitted by
either party, then Tenant may offset the reasonable and actual out-of pocket
cost of such self-help measures from future Monthly Base Rent Installments next
coming due hereunder until Tenant has been reimbursed in full therefor, such
offset for any given month to be up to, but not to exceed, one-half (1/2) of the
Monthly Base Rental Installment due for such month.
11. Tenant's Personal Property; Indemnity. All of Tenant's personal
property in the Demised Premises (including any portion of the Building Common
Area enclosed by fencing installed by Tenant pursuant to Special Stipulation 12
of Exhibit C hereto) shall be and remain at Tenant's sole risk. Landlord, its
agents, employees and contractors, shall not be liable for, and Tenant hereby
releases Landlord from, any and all liability for theft of such personal
property or any damage to such personal property occasioned by any act of God or
by any acts, omissions or negligence of any persons, other than to the extent
occasioned by the negligence of Landlord or its agents, employees or
contractors. Landlord, its agents, employees and contractors, shall not be
liable for any injury to the person or property of Tenant or other persons
within the Demised Premises (including any portion of the Building Common Area
enclosed by fencing installed by Tenant pursuant to Special Stipulation 12 of
Exhibit C hereto), Tenant expressly agreeing to indemnify and save Landlord, its
agents, employees and contractors, harmless, in all such cases, except to the
extent caused by the negligence of Landlord, its agents, employees and
contractors. Tenant further agrees to indemnify and reimburse Landlord for any
costs or expenses, including, without limitation, attorneys' fees, that Landlord
reasonably may incur in investigating, handling or litigating any such claim
against Landlord by a third person, unless such claim arose from the negligence
of Landlord, its agents, employees or contractors. Landlord agrees to indemnify
and save Tenant harmless from and against any claims, actions, damages, losses,
costs or expenses, including, without limitation, attorneys' fees, that Tenant
reasonably may suffer or incur as a result of any injury to person or property
in or about the Building Common Area (excluding any portion of the Building
Common Area enclosed by fencing installed by Tenant pursuant to Special
Stipulation 12 of Exhibit C hereto) resulting from the negligence or willful
misconduct of Landlord or its employees or agents, except to the extent caused
by the negligence or willful misconduct of Tenant or its agents, employees,
invitees or contractors. The provisions of this Section 11 shall survive the
expiration or earlier termination of this Lease with respect to any damage,
injury or death occurring before such expiration or termination, and are in any
event subject to the provisions of Section 8(d) hereof.
12. Tenant's Fixtures. Tenant shall have the right to install in the
Demised Premises trade fixtures required by Tenant or used by it in its
business, and if installed by Tenant, to remove any or all such trade fixtures
from time to time during and upon termination or expiration of this Lease,
provided no Event of Default, as defined Section 22, then exists; provided,
however, that Tenant shall repair and restore any damage or injury to the
Demised Premises (to the condition in which the Demised Premises existed prior
to such installation) caused by the installation and/or removal of any such
trade fixtures.
13. Signs. No sign, advertisement or notice shall be inscribed, painted,
affixed, or displayed on the windows or exterior walls of the Demised Premises
or on any public area of the Building, except in such places, numbers, sizes,
colors and styles as are approved in advance in writing by Landlord, and which
conform to all applicable laws, ordinances, or covenants affecting the Demised
Premises. Any and all signs installed or constructed by or on behalf of Tenant
pursuant hereto shall be installed, maintained and removed by Tenant at Tenant's
sole cost and expense. Notwithstanding the foregoing, Tenant shall have the
right, at Tenant's sole cost and expense, to attach one (1) sign on the exterior
of the Building of such size and in such location and manner as are approved in
advance by Landlord in writing (which approval shall not be unreasonably
withheld), provided such sign otherwise complies with this Section 13 and with
the sign criteria for the Project, a copy of which is attached hereto as Exhibit
F.
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14. Landlord's Lien. Notwithstanding any other provision hereof to the
contrary, Tenant does hereby grant to Landlord, and Landlord shall have at all
times, a security interest in and a valid first lien upon all of the personal
property and trade fixtures of Tenant situated in and upon the Demised Premises
to secure the obligations of Tenant for all Base Rent, Additional Rent and other
sums to become due hereunder and the performance by Tenant of each and all of
Tenant's other covenants and obligations hereunder. The security interest and
lien granted herein may be foreclosed in the manner and form provided by law for
the foreclosure of chattel mortgages or in any other manner provided or
permitted by law. Landlord does hereby agree to subordinate the lien granted
herein, as well as any statutory lien granted to Landlord, to the lien of any
institutional lender providing purchase money financing to Tenant, or to any the
lien of the IDB (as defined in Special Stipulation 8 on Exhibit C hereto), if
required, that is secured by Tenant's trade fixtures, equipment, inventory or
other personal property located at the Demised Premises, all pursuant to a
landlord lien subordination agreement in form and substance reasonably
satisfactory to Landlord.
15. Governmental Regulations. Tenant shall promptly comply throughout
the Term, at Tenant's sole cost and expense, with all present and future laws,
ordinances, orders, rules, regulations or requirements of all federal, state and
municipal governments and appropriate departments, commissions, boards and
officers thereof (collectively, "Governmental Requirements") relating to (a) all
or any part of the Demised Premises, and (b) to Tenant's use or manner of use of
the Demised Premises and/or to Tenant's manner of use of the Building Common
Area. Tenant shall also observe and comply with the requirements of all policies
of public liability, fire and other policies of insurance at any time in force
with respect to the Demised Premises. Without limiting the foregoing, if as a
result of one or more Governmental Requirements it is necessary, from time to
time during the Term, to perform an alteration or modification of the Demised
Premises (a "Code Modification") to the extent made necessary as a result of the
specific use being made by Tenant of the Demised Premises or any other
alteration performed by Tenant with respect to the Demised Premises, then such
Code Modification shall be the sole and exclusive responsibility of Tenant in
all respects; any such Code Modification shall be promptly performed by Tenant
at its expense in accordance with the applicable Governmental Requirement and
with Section 18 hereof. If as a result of one or more Governmental Requirements
it is necessary from time to time during the Term to perform a Code Modification
which (i) would be characterized as a capital expenditure under generally
accepted accounting principles and (ii) is not made necessary as a result of the
specific use being made by Tenant of the Demised Premises (as distinguished from
an alteration or modification which would be required to be made by the owner of
any warehouse-office building comparable to the Building irrespective of the use
thereof by any particular occupant), or by any other alteration performed by
Tenant with respect to the Demised Premises, then (a) Landlord shall have the
obligation to perform the Code Modification at its expense, (b) the cost of such
Code Modification shall be amortized on a straight-line basis over the useful
life of the item in question, as determined in accordance with GAAP, and (c)
Tenant shall be obligated to pay (as Additional Rent, payable in the same manner
and upon the same terms and conditions as the Base Rent reserved hereunder) for
the portion of such amortized costs attributable to the remainder of the Term,
including any extensions thereof (if exercised). Tenant shall promptly send to
Landlord a copy of any written notice received by Tenant requiring a Code
Modification.
16. Environmental Matters.
(a) For purposes of this Lease:
(i) "Contamination" as used herein means
the presence of or release of Hazardous Substances (as hereinafter defined) into
any environmental media from, upon, within, below, into or on any portion of the
Demised Premises, the Building, the Building Common Area or the Project so as to
require remediation, cleanup or investigation under any applicable Environmental
Law (as hereinafter defined).
(ii) "Environmental Laws" as used herein
means all federal, state, and local laws, regulations, orders, permits,
ordinances or other requirements, which exist now or as may exist hereafter,
concerning protection of human health, safety and the environment, all as may be
amended from time to time.
(iii) "Hazardous Substances" as used
herein means any hazardous or toxic substance, material, chemical, pollutant,
contaminant or waste as those terms are defined by any applicable Environmental
Laws (including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq. ("CERCLA") and the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. ["RCRA"]) and any
solid wastes, polychlorinated biphenyls, urea formaldehyde, asbestos,
radioactive materials, radon, explosives, petroleum products and oil.
(b) Landlord represents that, except as revealed to Tenant in
writing by Landlord, to Landlord's actual knowledge, (i) Landlord has not
treated, stored or disposed of any Hazardous Substances upon or within the
Building and/or Building Common Area, nor, to Landlord's actual knowledge, has
any predecessor owner of the Building and/or Building Common Area, (ii) no
Hazardous Substances are present on or under the Building and/or Building Common
Area as of the Lease Date, and (iii) no underground storage tanks exist at or
under the Building and/or Building Common Area.
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(c) Tenant covenants that all its activities, and the activities
of Tenant's Affiliates (as defined in Section 10(b)), on the Demised Premises,
the Building, or the Project during the Term will be conducted in compliance
with Environmental Laws. Tenant warrants that it is currently in compliance with
all applicable Environmental Laws and that there are no pending or threatened
notices of deficiency, notices of violation, orders, or judicial or
administrative actions involving alleged violations by Tenant of any
Environmental Laws. Tenant, at Tenant's sole cost and expense, shall be
responsible for obtaining all permits or licenses or approvals under
Environmental Laws necessary for Tenant's operation of its business on the
Demised Premises and shall make all notifications and registrations required by
any applicable Environmental Laws. Tenant, at Tenant's sole cost and expense,
shall at all times comply with the terms and conditions of all such permits,
licenses, approvals, notifications and registrations and with any other
applicable Environmental Laws. Tenant warrants that it has obtained all such
permits, licenses or approvals and made all such notifications and registrations
required by any applicable Environmental Laws necessary for Tenant's operation
of its business on the Demised Premises.
(d) Tenant shall not cause or permit any Hazardous Substances to
be brought upon, kept or used in or about the Demised Premises, the Building, or
the Project without the prior written consent of Landlord, which consent shall
not be unreasonably withheld; provided, however, that the consent of Landlord
shall not be required for the use at the Demised Premises of cleaning supplies,
toner for photocopying machines and other similar materials, in containers and
quantities reasonably necessary for and consistent with normal and ordinary use
by Tenant in the routine operation or maintenance of Tenant's office equipment
or in the routine janitorial service, cleaning and maintenance for the Demised
Premises. For purposes of this Section 16, Landlord shall be deemed to have
reasonably withheld consent if Landlord determines that the presence of such
Hazardous Substance within the Demised Premises could result in a risk of harm
to person or property or otherwise negatively affect the value or marketability
of the Building or the Project.
(e) Tenant shall not cause or permit the release of any
Hazardous Substances by Tenant or Tenant's Affiliates into any environmental
media such as air, water or land, or into or on the Demised Premises, the
Building or the Project in any manner that violates any Environmental Laws. If
such release shall occur, Tenant shall (i) take all steps reasonably necessary
to contain and control such release and any associated Contamination, (ii) clean
up or otherwise remedy such release and any associated Contamination to the
extent required by, and take any and all other actions required under,
applicable Environmental Laws and (iii) notify and keep Landlord reasonably
informed of such release and response.
(f) Regardless of any consents granted by Landlord pursuant to
Section 16(d) allowing Hazardous Substances upon the Demised Premises, Tenant
shall under no circumstances whatsoever cause or permit (i) any activity on the
Demised Premises which would cause the Demised Premises to become subject to
regulation as a hazardous waste treatment, storage or disposal facility under
RCRA or the regulations promulgated thereunder, (ii) the discharge of Hazardous
Substances into the storm sewer system serving the Project or (iii) the
installation of any underground storage tank or underground piping on or under
the Demised Premises.
(g) Tenant shall and hereby does indemnify Landlord and hold
Landlord harmless from and against any and all expense, loss, and liability
suffered by Landlord (except to the extent that such expenses, losses, and
liabilities arise out of Landlord's own negligence or willful act), by reason of
the storage, generation, release, handling, treatment, transportation, disposal,
or arrangement for transportation or disposal, of any Hazardous Substances
(whether accidental, intentional, or negligent) by Tenant or Tenant's Affiliates
or by reason of Tenant's breach of any of the provisions of this Section 16.
Such expenses, losses and liabilities shall include, without limitation, (i) any
and all expenses that Landlord may incur to comply with any Environmental Laws;
(ii) any and all costs that Landlord may incur in studying or remedying any
Contamination at or arising from the Demised Premises, the Building, or the
Project; (iii) any and all costs that Landlord may incur in studying, removing,
disposing or otherwise addressing any Hazardous Substances; (iv) any and all
fines, penalties or other sanctions assessed upon Landlord; and (v) any and all
legal and professional fees and costs incurred by Landlord in connection with
the foregoing. The indemnity contained herein shall survive the expiration or
earlier termination of this Lease. Landlord shall indemnify Tenant and hold
Tenant harmless from and against any and all expenses, losses and liabilities
actually suffered by Tenant (with the exception of any and all consequential
damages, including but not limited to the loss of use of the Demised Premises,
lost profits and loss of business, and those expenses, losses, and liabilities
arising from Tenant's own negligence or willful act) as a result of a
governmental authority having jurisdiction ordering a cleanup, removal or other
remediation by Tenant of any Hazardous Substances placed on, under or about the
Demised Premises by Landlord or its agents or employees.
17. Construction of Demised Premises.
(a) Within thirty (30) days following the Lease Date, Landlord
shall prepare, at Landlord's sole cost and expense, and submit to Tenant a set
of plans and specifications and/or construction drawings (collectively, the
"Plans and Specifications") covering all work to be performed by Landlord in
constructing the Improvements (as defined in Section 8(a)(ii)), which Plans and
Specifications shall be based on the preliminary plans and specifications set
forth on Exhibit B attached hereto and incorporated herein, including, without
limitation, Tenant's operational plan (the "Operational Plan") incorporated
therein
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<PAGE>
by reference (collectively, the "Performance Specifications"), it being agreed
by Landlord and Tenant that, unless specifically noted on a separate summary
sheet attached to the final Plans and Specifications and agreed to and initialed
by authorized employees or agents of Landlord and Tenant, in the event of any
conflict between the Plans and Specifications and such Performance
Specifications, the latter shall control. Tenant shall have five (5) business
days after receipt of the plans and specifications in which to review and to
give to Landlord written notice of its approval of the plans and specifications
or its requested changes to the Plans and Specifications. Tenant shall have no
right to request any changes to the plans and specifications which would
materially alter the exterior appearance or basic nature of the Building, as the
same exist as of the Lease Date or are otherwise contemplated by the Performance
Specifications. If Tenant fails to approve or request changes to the Plans and
Specifications by five (5) business days after its receipt thereof, then Tenant
shall be deemed to have approved the Plans and Specifications and the same shall
thereupon be final. If Tenant requests any changes to the Plans and
Specifications, Landlord shall make those changes which are reasonably requested
by Tenant and shall within ten (10) days of its receipt of such request submit
the revised portion of the Plans and specifications to Tenant. Tenant may not
thereafter disapprove the revised portions of the Plans and specifications
unless Landlord has unreasonably failed to incorporate reasonable comments of
Tenant and, subject to the foregoing, the Plans and specifications, as modified
by said revisions, shall be deemed to be final upon the submission of said
revisions to Tenant. Tenant acknowledges that the Improvements are being
constructed on a "fast track" basis and that Landlord shall have the right and
option to submit various parts of the proposed Plans and Specifications from
time to time during the aforesaid thirty (30) day period and the time period for
approval of any part of the proposed plans and specifications shall commence
upon receipt of each submission. Tenant shall at all times in its review of the
plans and specifications, and of any revisions thereto, act reasonably and in
good faith. Tenant's approval of the final Plans and Specifications shall not
constitute an opinion or agreement by Tenant that the Demised Premises will be
structurally sufficient or that the final Plans and Specifications comply with
applicable building codes and laws. After Tenant has approved the Plans and
Specifications or the Plans and Specifications have otherwise been finalized
pursuant to the procedures set forth hereinabove, any subsequent changes to the
Plans and Specifications requested by Tenant shall be at Tenant's sole cost and
expense and subject to Landlord's written approval, which approval shall not be
unreasonably withheld, conditioned or delayed. If, after the Plans and
specifications have been finalized pursuant to the procedures set forth
hereinabove, Tenant requests any further changes to the Plans and specifications
and, as a result thereof, completion of construction of the Improvements is
delayed solely due to Tenant's changes (and Landlord gives Tenant reasonable
evidence of the date that substantial completion of the Improvements would have
occurred but for delays caused by Tenant's changes), the Term shall nevertheless
begin, and Tenant's obligation to pay Base Rent hereunder shall nevertheless
begin, on the Lease Commencement Date and the Base Rent Commencement Date,
respectively, that would have occurred hereunder but for such Tenant changes.
(b) Landlord shall use reasonable speed and diligence to
"substantially complete" the Improvements, at Landlord's sole cost and expense,
and have the Demised Premises ready for occupancy on or before November 15,
1999. If the Demised Premises are not substantially complete on that date, such
failure to complete shall not in any way affect the obligations of Tenant
hereunder except that the Lease Commencement Date, the Base Rent Commencement
Date, and the Expiration Date shall be postponed one day for each day
substantial completion is delayed until the Demised Premises are substantially
complete, unless the delay is caused by Tenant's disapproval of any revised
portions of the Plans and specifications (except to the extent Tenant's
disapproval is as a result of Landlord having failed reasonably to incorporate
reasonable comments of Tenant), or by change orders requested by Tenant after
approval of the Plans and Specifications; provided, however, that (x) in the
event the Demised Premises are not substantially complete on or before November
15, 1999, as extended by "Construction Delay" (as defined below), and provided
Tenant has not exercised its right to terminate this Lease as provided in part
(y) of this sentence, then for each day after the ultimate Base Rent
Commencement Date Tenant shall receive "free" Base Rent (i.e., Base Rent shall
be waived) on a one (1) for one (1) basis for each day substantial completion
was delayed beyond November 15, 1999, as extended by Construction Delay, and (y)
in the event that Landlord is unable to achieve substantial completion on or
before February 15, 2000, as extended by Construction Delay, Tenant may, at its
option and as its sole and exclusive remedy, terminate this Lease by written
notice to Landlord given on or before February 29, 2000 (provided that
substantial completion has not occurred prior to Landlord's receipt of said
termination notice), and thereafter neither Landlord nor Tenant shall have any
further obligation hereunder. Except as set forth in this subsection (b), no
liability whatsoever shall arise or accrue against Landlord by reason of its
failure to deliver or afford possession of the Demised Premises, and Tenant
hereby releases and discharges Landlord from and of any claims for damage, loss,
or injury of every kind whatsoever as if this Lease were never executed. For
purposes of this Lease, the term "Construction Delay" shall mean delays incurred
by reason of Tenant's failure to deliver the Operation Plan by August 1, 1999,
Tenant's failure to approve the Plans and Specifications as set forth in Section
17(a) or changes requested by Tenant in the Plans and Specifications after
Tenant's approval thereof, and for such additional time as is equal to the time
lost by Landlord or Landlord's contractors or suppliers in connection with the
performance of Landlord's work and/or the construction of the Demised Premises
and related improvements due to industry-wide strikes or other labor troubles
that are not specific to Landlord or the Demised Premises, governmental
restrictions and limitations not known to Landlord (or reasonably capable of
being known to Landlord) as of the Lease Date, war or other national emergency,
non-availability of materials or supplies, delay in transportation, accidents,
floods, fire, damage or other casualties, weather or other conditions, acts or
omissions of Tenant, or delays by utility companies in bringing utility lines to
the Demised Premises to the extent not resulting from Landlord's failure to
order or apply for the same in a timely manner. For purposes of this Lease, the
term "substantial completion" or any grammatical variation
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thereof shall mean sufficient completion of construction of the Demised Premises
in accordance with the Plans and Specifications (including the Performance
Specifications) so that Tenant can lawfully occupy the Demised Premises for the
uses permitted herein, subject only to minor punchlist items, the completion of
which will not interfere with such permitted uses by Tenant, as evidenced by the
delivery by Landlord to Tenant of (i) a Certificate of Occupancy or its
equivalent (or Temporary Certificate of Occupancy or its equivalent) for the
Demised Premises issued by the appropriate governmental authority if so required
by applicable law, and (ii) a Certificate of Substantial Completion on standard
AIA Form G-704 certified by Landlord's architect, working in good faith together
with such duly licensed Tennessee architect, if any, as may be selected by
Tenant as Tenant's architect by written notice to Landlord given, if at all,
within thirty (30) days of the Lease Date.
(c) Upon substantial completion of the Demised Premises, a
representative of Landlord and a representative of Tenant together shall inspect
the Demised Premises and generate a punchlist of defective or uncompleted items
relating to the completion of construction of the Improvements (the
"Punchlist"). Landlord shall use reasonable efforts to complete such incomplete
work and remedy such defective work as is set forth on the Punchlist within
thirty (30) days after the Punchlist is prepared and agreed upon by Landlord and
Tenant, subject to Punchlist Delay (as defined below). All construction work
performed by Landlord shall be deemed approved by Tenant in all respects except
for items of said work which are not completed or do not conform to the Plans
and Specifications and which are included on the Punchlist. For purposes of this
Lease, "Punchlist Delay" shall mean such additional time as is equal to the time
lost by Landlord or Landlord's contractors or suppliers in connection with the
performance of Landlord's work and/or the construction of the Building or the
Demised Premises and related improvements due to industry-wide strikes or other
labor troubles that are not specific to Landlord or the Demised Premises,
governmental restrictions and limitations not known to Landlord (or reasonably
capable of being known to Landlord) as of the Lease Date, war or other national
emergency, non-availability of materials or supplies, delay in transportation,
accidents, floods, fire, damage or other casualties, weather or other
conditions, acts or omissions of Tenant, or delays by utility companies in
bringing utility lines to the Building or the Demised Premises to the extent not
resulting from Landlord's failure to order or apply for the same in a timely
manner.
(d) Upon substantial completion of the Demised Premises and the
creation of the Punchlist, Tenant shall execute and deliver to Landlord a letter
of acceptance in which Tenant (i) accepts the Demised Premises subject only to
Landlord's completion of the items listed on the Punchlist and (ii) confirms the
Lease Commencement Date, the Base Rent Commencement Date and the Expiration
Date.
(e) Landlord hereby warrants to Tenant (i) that the materials
and equipment furnished by Landlord's contractors in the initial construction of
the Building (including all plumbing, utility lines and sewage systems serving
the same) and the performance and completion of the Improvements to be
constructed pursuant hereto will be of good quality and new, (ii) that during
the one (1) year period following the Lease Commencement Date, such materials
and equipment and the work of such contractors shall be free from defects
(subject to the limitations inherent in the quality required or permitted
hereunder or in the Plans and Specifications, including the Performance
Specifications), (iii) that such work will conform to the Plans and
Specifications, and (iv) that the design and construction of the Building and
the Improvements will comply in all material respects with the Performance
Specifications. This warranty shall exclude damages or defects caused by Tenant
or Tenant's Affiliates, improper or insufficient maintenance, improper
operation, or normal wear and tear under normal usage.
18. Tenant Alterations and Additions.
(a) Tenant shall not make or permit to be made any alterations,
improvements, or additions to the Demised Premises (a "Tenant's Change"),
without first obtaining on each occasion Landlord's prior written consent (which
consent Landlord agrees not to unreasonably withhold or delay) and Lender's
prior written consent (if such consent is required); provided, however, that
Tenant shall have the right without Landlord's (or Lender's) prior written
consent to make a Tenant's Change which is non-structural and which requires an
expenditure of less than $75,000.00 for any one Tenant's Change and less than
$200,000.00 in the aggregate either for the initial Term or for any extended
Term, provided that Tenant shall, at Landlord's option and request and at
Tenant's sole cost and expense, remove any such non-structural Tenant's Change
for which Landlord's consent was not obtained (or was obtained but was
conditioned upon removal) and/or restore the Demised Premises to its condition
prior to such non-structural Tenant's Change upon the termination or expiration
of this Lease. As part of its approval process, if applicable, Landlord may
require that Tenant submit plans and specifications to Landlord, for Landlord's
approval or disapproval, which approval shall not be unreasonably withheld or
delayed. All Tenant's Changes shall be performed in accordance with all legal
requirements applicable thereto and in a good and workmanlike manner with
first-class materials. Tenant shall maintain insurance reasonably satisfactory
to Landlord during the construction of all Tenant's Changes. If, where
Landlord's approval is required or otherwise requested by Tenant, Landlord at
the time of giving its approval to any Tenant's Change notifies Tenant in
writing that approval is conditioned upon restoration, then Tenant shall, at its
sole cost and expense and at Landlord's option and request upon the termination
or expiration of this Lease, remove the same and restore the Demised Premises to
its condition prior to such Tenant's Change. No Tenant's Change shall be
structural in nature or impair the structural strength of the Building or reduce
its value. Tenant shall pay the full cost of any Tenant's Change. Except as
otherwise provided herein and in Section 12, all Tenant's Changes and all
repairs and all other property attached to or installed on the Demised Premises
by
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or on behalf of Tenant shall immediately upon completion or installation thereof
be and become part of the Demised Premises and the property of Landlord without
payment therefor by Landlord and shall be surrendered to Landlord upon the
expiration or earlier termination of this Lease. No term or condition of this
subsection (a) shall be deemed to prohibit Tenant from installing and removing
its trade fixtures (including, without limitation, Tenant's machinery,
generators, and racks and conveyor system), in accordance with Section 12
hereof.
(b) To the extent permitted by law, all of Tenant's contracts
and subcontracts for such Tenant's Changes shall provide that no lien shall
attach to or be claimed against the Demised Premises or any interest therein
other than Tenant's leasehold interest in the Demised Premises, and that all
subcontracts let thereunder shall contain the same provision. Whether or not
Tenant furnishes the foregoing, Tenant agrees to hold Landlord harmless against
all liens, claims and liabilities of every kind, nature and description which
may arise out of or in any way be connected with such work. Tenant shall not
permit the Demised Premises to become subject to any mechanics', laborers' or
materialmen's lien on account of labor, material or services furnished to Tenant
or claimed to have been furnished to Tenant in connection with work of any
character performed or claimed to have been performed for the Demised Premises
by, or at the direction or sufferance of Tenant and if any such liens are filed
against the Demised Premises, Tenant shall promptly discharge the same;
provided, however, that Tenant shall have the right to contest, in good faith
and with reasonable diligence, the validity of any such lien or claimed lien if
Tenant shall give to Landlord, within thirty (30) days after demand, such
security as may be reasonably satisfactory to Landlord to assure payment thereof
(or bond over any such lien with a surety company licensed to do business in
Tennessee) and to prevent any sale, foreclosure, or forfeiture of Landlord's
interest in the Demised Premises by reason of non-payment thereof; provided
further that on final determination of the lien or claim for lien, Tenant shall
immediately pay any judgment rendered, with all proper costs and charges, and
shall have the lien released and any judgment satisfied. If Tenant fails to post
such security or bond or does not diligently contest such lien, Landlord may,
upon thirty (30) days notice to Tenant, without investigation of the validity of
the lien claim, discharge such lien and Tenant shall reimburse Landlord upon
demand for all costs and expenses incurred in connection therewith, which
expenses shall include any attorneys' fees, paralegals' fees and any and all
costs associated therewith, including litigation through all trial and appellate
levels and any costs in posting bond to effect a discharge or release of the
lien. Nothing contained in this Lease shall be construed as a consent on the
part of Landlord to subject the Demised Premises to liability under any lien law
now or hereafter existing of the state in which the Demised Premises are
located.
19. Services by Landlord. Landlord shall be responsible for providing
for maintenance of, and at all time during the Term shall keep in good condition
and repair, the Building Common Area, and, except as required by Section 10(b)
hereof, Landlord shall be responsible for no other services whatsoever. Tenant,
by payment of Tenant's share of the Operating Expenses, shall pay Tenant's pro
rata share of the expenses incurred by Landlord hereunder pursuant to Section 6
hereof.
20. Fire and Other Casualty. In the event the Demised Premises are
damaged by fire or other casualty insured or required hereunder to be insured by
Landlord, Landlord agrees to promptly restore and repair the Demised Premises at
Landlord's expense, including the Improvements to be insured by Tenant but only
to the extent Landlord receives insurance proceeds or adequate alternative funds
from Tenant for the restoration of such Improvements to be insured by Tenant.
Notwithstanding the foregoing, in the event that the Demised Premises are (i) in
the reasonable opinion of Landlord's project architect and Tenant's architect
selected pursuant to subsection 17(b) above, acting in cooperation (or such
other architect as Landlord or Tenant, as the case may be, may select as its
architect for purposes of this Section 20 by written notice to the other within
five (5) days of such casualty), so destroyed that they cannot be repaired or
rebuilt within one hundred eighty (180) days after the date of such damage,
joint notice of such determination (the "Determination Notice") to be given to
Landlord and Tenant by such architects within thirty (30) days of such casualty;
or (ii) destroyed or damaged in any material respect during the last Lease Year
of the Term (without Tenant having validly extended or thereupon agreeing to
extend the Term pursuant to an existing renewal option ), then in the event only
part (i) of the immediately preceding sentence applies, then Tenant (not
Landlord) may terminate and cancel this Lease effective as of the date of such
casualty by giving written notice to the Landlord within thirty (30) days after
Tenant's receipt of the Determination Notice, and in the event part (ii) of the
immediately preceding sentence applies, then either Landlord or Tenant may
terminate and cancel this Lease effective as of the date of such casualty by
giving written notice to the other party within thirty (30) days after the date
of such casualty. Upon the giving of any such termination notice, all
obligations hereunder with respect to periods from and after the effective date
of termination shall thereupon cease and terminate. If no such termination
notice is given, Landlord shall make such repair or restoration of the Demised
Premises to the approximate condition existing prior to such casualty [but, as
to the Improvements to be insured by Tenant hereunder, only to the extent of
insurance proceeds received by Landlord, provided that nothing herein shall
relieve Tenant of its obligation under Section 30(b) hereof to return the
Demised Premises to Landlord at the expiration of the Term in substantially the
same condition (i.e., with substantially the same Improvements and in good
condition and repair) as existed at the Lease Commencement Date, subject to any
Tenant's Changes made in accordance with Section 18 hereof], promptly and in
such manner as not to unreasonably interfere with Tenant's use and occupancy of
the Demised Premises (if Tenant is still occupying the Demised Premises). Base
Rent and Additional Rent shall proportionately abate during the time that the
Demised Premises or any part thereof are unusable by reason of any such damage
thereto (except to the extent they remain unusable due to the lack of available
insurance proceeds with respect to the Improvements to be insured by Tenant). If
Landlord fails to
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commence restoration within the earlier of thirty (30) days after receipt of all
insurance proceeds payable as a result of such casualty (Landlord hereby
agreeing to use reasonable efforts to settle any claim promptly following such
casualty), or sixty (60) days after the date of such casualty (as such period
shall be extended until Landlord shall have received adequate proceeds to
restore the Improvements to be insured by Tenant), Tenant may perform the
restoration after giving Landlord written notice of its intent to perform such
restoration, and Landlord shall reimburse Tenant for the reasonable costs of
such restoration actually incurred by Tenant up to the amount of insurance
proceeds payable to Landlord (or which would be payable to Landlord had Landlord
carried the insurance required to be carried by it herein) as a result of such
casualty, within thirty (30) days after Tenant's request for reimbursement as
described below. Any requests for reimbursement made by Tenant shall be
accompanied by such documentation as Landlord shall reasonably require showing
the actual costs incurred by Tenant, together with full and final lien waivers
from all contractors performing the work. If Landlord has not paid to Tenant
such amount or given Tenant notice of reasonable objection to such amount within
such thirty (30) day period, or if Landlord's objection to such amount is
resolved against Landlord by agreement of the parties or by a court of competent
jurisdiction to which the dispute has been submitted by either party, then
Tenant may offset the reasonable and actual out-of pocket cost of such
restoration from future Monthly Base Rent Installments next coming due hereunder
until Tenant has been reimbursed in full therefor, such offset for any given
month to be up to, but not to exceed, one-half (1/2) of the Monthly Base Rental
Installment due for such month.
21. Condemnation.
(a) If (i) all of the Demised Premises is taken or condemned for
a public or quasi-public use, (ii) a material portion of the Demised Premises
(which shall include one-third (1/3) or more of the loading docks exclusively
serving the Demised Premises) is taken or condemned for a public or quasi-public
use and the remaining portion thereof is not usable by Tenant in the reasonable
opinion of Landlord and Tenant, cooperating together in good faith, (iii) if a
taking or condemnation reduces the number of parking spaces in Tenant's
Exclusive Parking Area (as hereinafter defined) to below 250 spaces and Landlord
is unable to provide reasonable alternative parking, or (iv) if in connection
with a taking or condemnation access to Tenant's Exclusive Parking Area or the
loading area serving the Demised Premises is taken and no alternative access
reasonably acceptable to Tenant is provided by Landlord, this Lease shall
terminate as of the earlier of the date title to the condemned real estate vests
in the condemnor or the date on which (i) Tenant is deprived of possession of
the Demised Premises or (ii) such amount of (or access to) Tenant's Exclusive
Parking Area, as the case may be. In such event, the Base Rent herein reserved
and all Additional Rent and other sums payable hereunder shall be apportioned
and paid in full by Tenant to Landlord to that date, all Base Rent, Additional
Rent and other sums payable hereunder prepaid for periods beyond that date shall
forthwith be repaid by Landlord to Tenant, and neither party shall thereafter
have any liability hereunder, except that any obligation or liability of either
party, actual or contingent, under this Lease which has accrued on or prior to
such termination date shall survive.
(b) If only part of the Demised Premises is taken or condemned
for a public or quasi-public use and this Lease does not terminate pursuant to
Section 21(a), Landlord shall, to the extent of the award it receives, restore
the Demised Premises to a condition and to a size as nearly comparable as
reasonably possible to the condition and size thereof immediately prior to the
taking, and there shall be an equitable adjustment to the Base Rent and
Additional Rent based on the actual loss of use of the Demised Premises suffered
by Tenant from the taking.
(c) Landlord shall be entitled to receive the entire award in
any proceeding with respect to any taking provided for in this Section 21,
without deduction therefrom for any estate vested in Tenant by this Lease, and
Tenant shall receive no part of such award. Nothing herein contained shall be
deemed to prohibit Tenant from making a separate claim, against the condemnor,
to the extent permitted by law, for the value of Tenant's moveable trade
fixtures, machinery and moving expenses, provided that the making of such claim
shall not and does not adversely affect or diminish Landlord's award.
22. Tenant's Default.
(a) The occurrence of any one or more of the following events
shall constitute an "Event of Default" of Tenant under this Lease:
(i) if Tenant fails to pay Base Rent or
any Additional Rent hereunder as and when such rent becomes due and such failure
shall continue for more than ten (10) days after Landlord gives written notice
to Tenant of such failure;
(ii) if Tenant fails to pay Base Rent or
any Additional Rent on time more than three (3) times in any period of twelve
(12) months, notwithstanding that such payments have been made within the
applicable cure period;
(iii) if Tenant fails to take possession of
the Demised Premises on the Lease Commencement Date or promptly thereafter;
(iv) if Tenant permits to be done anything
which creates a lien upon the Demised Premises and fails to discharge or bond
such lien, or post security with Landlord acceptable to Landlord within thirty
(30) days after receipt by Tenant of written notice thereof;
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(v) if Tenant fails to maintain in force
all policies of insurance required by this Lease and such failure shall continue
for more than ten (10) days after Landlord gives Tenant written notice of such
failure;
(vi) if any petition is filed by or
against Tenant or any guarantor of this Lease under any present or future
section or chapter of the Bankruptcy Code, or under any similar law or statute
of the United States or any state thereof (which, in the case of an involuntary
proceeding, is not permanently discharged, dismissed, stayed, or vacated, as the
case may be, within ninety (90) days of commencement), or if any order for
relief shall be entered against Tenant or any guarantor of this Lease in any
such proceedings;
(vii) if Tenant or any guarantor of this
Lease becomes insolvent or makes a transfer in fraud of creditors or makes an
assignment for the benefit of creditors;
(viii) if a receiver, custodian, or trustee
is appointed for the Demised Premises or for all or substantially all of the
assets of Tenant or of any guarantor of this Lease, which appointment is not
vacated within ninety (90) days following the date of such appointment; or
(ix) if Tenant fails to perform or observe
any other term of this Lease and such failure shall continue for more than
thirty (30) days after Landlord gives Tenant written notice of such failure, or,
if such failure cannot be corrected within such thirty (30) day period, if
Tenant does not commence to correct such default within said thirty (30) day
period and thereafter diligently prosecute the correction of same to completion
within a reasonable time.
(b) Upon the occurrence of any one or more Events of Default,
Landlord may, at Landlord's option, without any demand or notice whatsoever
(except as expressly required in this Section 22):
(i) Terminate this Lease by giving Tenant notice
of termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination and all rights of Tenant under this
Lease and in and to the Demised Premises shall terminate. Tenant shall remain
liable for all obligations under this Lease arising up to the date of such
termination, and Tenant shall surrender the Demised Premises to Landlord on the
date specified in such notice; or
(ii) Terminate this Lease as provided in Section
22(b)(i) hereof and recover from Tenant all damages (to the exclusion of
consequential damages) Landlord may incur by reason of Tenant's default,
including, without limitation, an amount which, at the date of such termination,
is calculated as follows: (1) the value of the excess, if any, of (A) the Base
Rent, Additional Rent and all other sums which would have been payable hereunder
by Tenant for the period commencing with the day following the date of such
termination and ending with the Expiration Date had this Lease not been
terminated (the "Remaining Term"), over (B) the aggregate reasonable rental
value of the Demised Premises for the Remaining Term (which excess, if any shall
be discounted to present value at the "Treasury Yield" as defined below for the
Remaining Term); plus (2) the costs of recovering possession of the Demised
Premises and all other expenses incurred by Landlord due to Tenant's default,
including, without limitation, reasonable attorney's fees; plus (3) the unpaid
Base Rent and Additional Rent earned as of the date of termination plus any
interest and late fees due hereunder, plus other sums of money and damages owing
on the date of termination by Tenant to Landlord under this Lease or in
connection with the Demised Premises. The amount as calculated above shall be
deemed immediately due and payable. The payment of the amount calculated in
subparagraph (ii)(1) shall not be deemed a penalty but shall merely constitute
payment of liquidated damages, it being understood and acknowledged by Landlord
and Tenant that actual damages to Landlord are extremely difficult, if not
impossible, to ascertain. "Treasury Yield" shall mean the rate of return in
percent per annum of Treasury Constant Maturities for the length of time
specified as published in document H.15(519) (presently published by the Board
of Governors of the U.S. Federal Reserve System titled "Federal Reserve
Statistical Release") for the calendar week immediately preceding the calendar
week in which the termination occurs. If the rate of return of Treasury Constant
Maturities for the calendar week in question is not published on or before the
business day preceding the date of the Treasury Yield in question is to become
effective, then the Treasury Yield shall be based upon the rate of return of
Treasury Constant Maturities for the length of time specified for the most
recent calendar week for which such publication has occurred. If no rate of
return for Treasury Constant Maturities is published for the specific length of
time specified, the Treasury Yield for such length of time shall be the weighted
average of the rates of return of Treasury Constant Maturities most nearly
corresponding to the length of the applicable period specified. If the
publishing of the rate of return of Treasury Constant Maturities is ever
discontinued, then the Treasury Yield shall be based upon the index which is
published by the Board of Governors of the U.S. Federal Reserve System in
replacement thereof or, if no such replacement index is published, the index
which, in Landlord's reasonable determination, most nearly corresponds to the
rate of return of Treasury Constant Maturities. In determining the aggregate
reasonable rental value pursuant to subparagraph (ii)(1)(B) above, the parties
hereby agree that, at the time Landlord seeks to enforce this remedy, all
relevant factors should be considered, including, but not limited to, (a) the
length of time remaining in the Term, (b) the then current market conditions in
the general area in which the Building is located, (c) the likelihood of
reletting the Demised Premises for a period of time equal to the remainder of
the Term, (d) the net effective rental rates then being obtained by landlords
for similar type space of similar
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size in similar type buildings in the general area in which the Building is
located, (e) the vacancy levels in the general area in which the Building is
located, (f) current levels of new construction that will be completed during
the remainder of the Term and how this construction will likely affect vacancy
rates and rental rates and (g) inflation; or
(iii) Intentionally omitted;
(iv) Without terminating this Lease, in its own
name but as agent for Tenant, enter into and upon and take possession of the
Demised Premises or any part thereof. Any property remaining in the Demised
Premises may be removed and stored in a warehouse or elsewhere at the cost of,
and for the account of, Tenant without Landlord being deemed guilty of trespass
or becoming liable for any loss or damage which may be occasioned thereby unless
caused by Landlord's negligence. Thereafter, Landlord may, but shall not be
obligated to, lease to a third party the Demised Premises or any portion thereof
as the agent of Tenant upon such terms and conditions as Landlord may deem
necessary or desirable in order to relet the Demised Premises. The remainder of
any rentals received by Landlord from such reletting, after the payment of any
indebtedness due hereunder from Tenant to Landlord, and the payment of any costs
and expenses of such reletting, shall be held by Landlord to the extent of and
for application in payment of future rent owed by Tenant, if any, as the same
may become due and payable hereunder. If such rentals received from such
reletting shall at any time or from time to time be less than sufficient to pay
to Landlord the entire sums then due from Tenant hereunder, Tenant shall pay any
such deficiency to Landlord. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this Lease
for any such previous default provided same has not been cured; or
(v) Without terminating this Lease, and with or
without notice to Tenant, enter into and upon the Demised Premises and, without
being liable for prosecution or any claim for damages therefor, maintain the
Demised Premises and repair or replace any damage thereto or do anything or make
any payment for which Tenant is responsible hereunder. Tenant shall reimburse
Landlord immediately upon demand for any expenses which Landlord incurs in thus
effecting Tenant's compliance under this Lease and Landlord shall not be liable
to Tenant for any damages with respect thereto; or
(vi) Intentionally omitted; or
(vii) With or without terminating this Lease, allow the
Demised Premises to remain unoccupied and collect rent from Tenant as it comes
due; or
(viii) Pursue such other remedies as are available at
law or equity.
(c) If this Lease shall terminate as a result of or while there
exists an Event of Default hereunder, any funds of Tenant held by Landlord may
be applied by Landlord to any damages payable by Tenant (whether provided for
herein or by law) as a result of such termination or default.
(d) Neither the commencement of any action or proceeding, nor
the settlement thereof, nor entry of judgment thereon shall bar Landlord from
bringing subsequent actions or proceedings from time to time, nor shall the
failure to include in any action or proceeding any sum or sums then due be a bar
to the maintenance of any subsequent actions or proceedings for the recovery of
such sum or sums so omitted.
(e) No agreement to accept a surrender of the Demised Premises
and no act or omission by Landlord or Landlord's agents during the Term shall
constitute an acceptance or surrender of the Demised Premises unless made in
writing and signed by Landlord. No re-entry or taking possession of the Demised
Premises by Landlord shall constitute an election by Landlord to terminate this
Lease unless a written notice of such intention is given to Tenant. No provision
of this Lease shall be deemed to have been waived by either party unless such
waiver is in writing and signed by the party making such waiver. Landlord's
acceptance of Base Rent or Additional Rent in full or in part following an Event
of Default hereunder shall not be construed as a waiver of such Event of
Default. No custom or practice which may grow up between the parties in
connection with the terms of this Lease shall be construed to waive or lessen
either party's right to insist upon strict performance of the terms of this
Lease, without a written notice thereof to the other party.
(f) If an Event of Default shall occur, Tenant shall pay to
Landlord, on demand, all expenses incurred by Landlord as a result thereof,
including reasonable attorneys' fees, court costs and expenses actually
incurred; provided, however, that Landlord and Tenant shall each reimburse the
other for the reasonable and actual attorneys' fees incurred by such other party
in connection with any litigation initiated by Landlord or Tenant, as the case
may be, pursuant to this Lease which results in a final, unappealable judgment
as to the merits in the other party's favor.
23. Landlord's Right of Entry. Tenant agrees to permit Landlord and the
authorized representatives of Landlord and of Lender to enter upon the Demised
Premises at all reasonable times for the purposes of inspecting the Demised
Premises and Tenant's compliance with this Lease, and making any necessary
repairs thereto; provided that, except in the case of an emergency posing
significant physical damage to the Demised Premises, including, without
limitation, Tenant's property located within the Demised Premises, or injury to
persons, Landlord shall give Tenant at least forty-eight (48) hours prior
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written notice of Landlord's intended entry upon the Demised Premises. Nothing
herein shall imply any duty upon the part of Landlord to do any work required of
Tenant hereunder, and the performance thereof by Landlord shall not constitute a
waiver of Tenant's default in failing to perform it. Landlord shall not be
liable for inconvenience, annoyance, disturbance or other damage to Tenant by
reason of making such repairs or the performance of such work in the Demised
Premises or on account of bringing materials, supplies and equipment into or
through the Demised Premises during the course thereof, and the obligations of
Tenant under this Lease shall not thereby be affected; provided, however, that
Landlord shall use reasonable efforts not to disturb or otherwise interfere with
Tenant's operations in the Demised Premises in making such repairs or performing
such work. Landlord also shall have the right to enter the Demised Premises at
all reasonable times during the Term to exhibit the Demised Premises to any
prospective purchaser or mortgagee thereof, and at all reasonable times during
the last six (6) months of the Term to exhibit the Demised Premises to any
prospective tenant thereof.
24. Lender's Rights.
(a) For purposes of this Lease:
(i) "Lender" as used herein means the holder of a
Mortgage;
(ii) "Mortgage" as used herein means any or all
mortgages, deeds to secure debt, deeds of trust or other instruments in the
nature thereof which may now or hereafter affect or encumber Landlord's title to
the Demised Premises, and any amendments, modifications, extensions or renewals
thereof.
(b) This Lease and all rights of Tenant hereunder are and shall
be subject and subordinate to the lien and security title of any Mortgage
provided that the holder of said Mortgage agrees not to disturb Tenant's
possession of the Demised Premises or otherwise diminish Tenant's rights
hereunder so long as Tenant is not in default hereunder beyond any applicable
grace or cure period, as evidenced by a subordination and non-disturbance
agreement signed by said holder which agreement shall include (i) conditions
substantially in the form contained in Section 24(e) of this Lease, (ii) a
requirement that said holder be given notice and opportunity to cure a landlord
default and (iii) other commercially reasonable provisions customarily required
by such holder and reasonably acceptable to Tenant. Tenant shall promptly
execute such a subordination and non-disturbance agreement upon Landlord's
request.. Tenant recognizes and acknowledges the right of Lender to foreclose or
exercise the power of sale against the Demised Premises under any Mortgage.
(c) Tenant shall, in confirmation of the subordination set forth
in Section 24(b) and notwithstanding the fact that such subordination is
self-operative, and no further instrument or subordination shall be necessary,
upon demand, at any time or times, execute, acknowledge, and deliver to Landlord
or to Lender any and all instruments requested by either of them to evidence
such subordination, provided that such instrument contains the non-disturbance
provisions referred to in Section 24(b) above.
(d) At any time during the Term, Lender may, by written notice
to Tenant, make this Lease superior to the lien of its Mortgage. If requested by
Lender, Tenant shall, upon demand, at any time or times, execute, acknowledge,
and deliver to Lender, any and all instruments that may be reasonably necessary
to make this Lease superior to the lien of any Mortgage.
(e) If Lender (or Lender's nominee, or other purchaser at
foreclosure) shall hereafter succeed to the rights of Landlord under this Lease,
whether through possession or foreclosure action or delivery of a new lease,
Tenant shall, if requested by such successor, attorn to and recognize such
successor as Tenant's landlord under this Lease without change in the terms and
provisions of this Lease and shall promptly execute and deliver any instrument
that may be reasonably necessary to evidence such attornment, provided that such
successor shall not be bound by (i) any payment of Base Rent or Additional Rent
for more than one month in advance, except prepayments in the nature of security
for the performance by Tenant of its obligations under this Lease, and then only
if such prepayments have been deposited with and are under the control of such
successor, (ii) any provision of any amendment to the Lease to which Lender has
not consented (unless such amendment merely confirms the occurrence of an event
or a decision by Landlord or Tenant which is expressly contemplated by a
specific provision hereof), (iii) the defaults of any prior landlord under this
Lease, unless the same shall be continuing, or (iv) any offset rights arising
out of the defaults of any prior landlord under this Lease (unless if such right
of offset is expressly provided in this Lease and Lender has been given notice
of an opportunity to cure Landlord's default which gave rise to Tenant's offset
right). Upon such attornment, this Lease shall continue in full force and effect
as a direct lease between each successor landlord and Tenant, subject to all of
the terms, covenants and conditions of this Lease.
(f) Tenant hereby acknowledges that the Building is currently
subject to a Mortgage in favor of Bank of America, N.A. d/b/a NationsBank, N.A.
("Bank of America"). It shall be a condition of this Lease and of Tenant's
obligation to accept the Demised Premises that Landlord deliver a subordination,
non-disturbance and attornment agreement to Tenant, executed by Bank of America
and to be executed by Tenant, substantially in the form attached hereto as
Exhibit G, with such modifications as Tenant may reasonably request. In the
event there is any other Mortgage at any time during the Term, Landlord shall
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use reasonable efforts to cause the Lender to enter into a subordination,
nondisturbance and attornment agreement with Tenant reasonably satisfactory to
Tenant and consistent with this Section 24.
25. Estoppel Certificate. Landlord and Tenant agree, at any time, and
from time to time, within fifteen (15) days after written request of the other,
to execute, acknowledge and deliver a statement in writing in recordable form to
the requesting party and/or its designee certifying that: (i) this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that the same is in full force and effect, as modified), (ii) the dates to which
Base Rent, Additional Rent and other charges have been paid, (iii) whether or
not, to the best of its knowledge, there exists any failure by the requesting
party to perform any term, covenant or condition contained in this Lease, and,
if so, specifying each such failure, (iv) (if such be the case) Tenant has
unconditionally accepted the Demised Premises and is conducting its business
therein, and (v) and as to such additional matters as may be reasonably
requested, it being intended that any such statement delivered pursuant hereto
may be relied upon by the requesting party and by any purchaser of title to the
Demised Premises or by any mortgagee or any assignee thereof or any party to any
sale-leaseback of the Demised Premises, or the landlord under a ground lease
affecting the Demised Premises.
26. Landlord Liability. No owner of the Demised Premises, whether or not
named herein, shall have liability hereunder after it ceases to hold title to
the Demised Premises, provided any transferee assume in writing Landlord's
obligations under this Lease arising from and after the date of such transfer.
Neither Landlord nor any officer, director, shareholder, partner or principal of
Landlord, whether disclosed or undisclosed, shall be under any personal
liability with respect to any of the provisions of this Lease. In the event
Landlord is in breach or default with respect to Landlord's obligations or
otherwise under this Lease, Tenant shall look solely to the equity of Landlord
in the Building (and any future rents and profits derived therefrom) for the
satisfaction of Tenant's remedies. It is expressly understood and agreed that
Landlord's liability under the terms, covenants, conditions, warranties and
obligations of this Lease shall in no event exceed the loss of Landlord's equity
interest in the Building. Notwithstanding the foregoing provisions of this
Section 26, Industrial Developments International (Tennessee), L.P. ("IDI") (but
not its officers, directors, shareholders, employees, partners or principals)
shall be personally liable for the completion of the construction and
installation of the Improvements in accordance with the Plans and
Specifications, and, other than any collateral or other grants or assignments
made in connection with any construction financing of such work, IDI shall not
grant a security interest in, nor assign or convey any of its ownership of, the
Demised Premises prior to substantial completion of such work, unless, in
connection with any such conveyance, IDI agrees to remain liable for completion
of all such work (and provides Tenant with reasonable evidence of such
agreement).
27. Notices. Any notice required or permitted to be given or served by
either party to this Lease shall be deemed given when made in writing, and
either (i) personally delivered, (ii) deposited with the United States Postal
Service, postage prepaid, by registered or certified mail, return receipt
requested, or (iii) delivered by licensed overnight delivery service providing
proof of delivery, properly addressed to the address set forth in Section 1(m)
(as the same may be changed by giving written notice of the aforesaid in
accordance with this Section 27). If any notice mailed is properly addressed
with appropriate postage but returned for any reason, such notice shall be
deemed to be effective notice and to be given on the date of mailing. The time
period in which a party must respond to any such notice given by deposit with
the United States Postal Service pursuant to part (ii) hereof shall commence
upon such party's actual receipt of such notice as evidenced by the return
receipt,
28. Brokers. Landlord and Tenant hereby represent and warrant, each to
the other that, except for those parties set forth in Section 1(o) (the
"Brokers"), the representing party has not engaged or had any conversations or
negotiations with any broker, finder or other third party concerning the leasing
of the Demised Premises to Tenant who would be entitled to any commission or fee
based on the execution of this Lease. Landlord and Tenant hereby indemnify each
other against and from any claims for any brokerage commissions (except those
payable to the Brokers, all of which are payable by Landlord pursuant to a
separate agreement) and all costs, expenses and liabilities in connection
therewith, including, without limitation, reasonable attorneys' fees and
expenses, for any breach of the foregoing representation by the indemnifying
party. The foregoing indemnification shall survive the termination of this Lease
for any reason. Tenant hereby acknowledges and agrees that notwithstanding any
affiliation between Benchmark Associates and IDI Services Group, Inc. for
commission sharing or any other purposes, IDI Service Group, Inc. is only
representing Landlord in connection with this Lease and Tenant hereby expressly
waives any conflict of interest to which such affiliation may give rise.
29. Assignment and Subleasing.
(a) Tenant may not assign, mortgage, pledge, encumber or
otherwise transfer this Lease, or any interest hereunder, or sublet the Demised
Premises, in whole or in part, without on each occasion first obtaining the
prior express written consent of Landlord, which consent Landlord shall not
unreasonably withhold. Any change in control of Tenant resulting from a merger,
consolidation, stock transfer or asset sale shall be considered an assignment or
transfer which requires Landlord's prior written consent.
(b) Notwithstanding subsection (a) of this Section 29, provided
that no Event of Default has occurred and is then continuing, Tenant shall have
the right, upon fifteen (15) days prior written
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notice to Landlord, (i) to sublet all or part of the Demised Premises to Barnes
& Noble, Inc. or Bertlesmann, Inc., Tenant's parent companies (each a "Parent"),
or to any entity which is a direct or indirect wholly-owned subsidiary of Tenant
or of either Parent (any of such entities being herein called a "Parent
Affiliate"); or (ii) to assign this Lease (x) to a Parent or a Parent Affiliate
or to (y) a successor corporation into which or with which Tenant is merged or
consolidated or which acquired substantially all of Tenant's assets and property
or stock, provided that, with respect to an assignment pursuant to (ii)(y), such
successor corporation assumes substantially all of the obligations and
liabilities of Tenant and, after such transaction, shall have a tangible net
worth at least equal to $150,000,000.00, as determined in accordance with GAAP
(or a lesser amount if Tenant shall deliver to Landlord in connection therewith
a letter of credit in form and from a bank or other financial institution
reasonably satisfactory to Landlord in the amount of the lesser of Annual Base
Rent for the last full year of the then current Term, or Annual Base Rent for
the remainder of the then current Term (the latter, if applicable, to be
increased from time to time to the Annual Base Rent for the last full year of
any subsequent renewal Terms if and when applicable). Any sublease or assignment
pursuant to and in compliance with this subsection (b) shall be referred to
herein as a "Related Assignment". With respect to any Related Assignment, Tenant
shall provide in its notice to Landlord such information as may be reasonably
required by Landlord to determine that the requirements of this subsection (b)
have been satisfied. Nothing in this Section 29 shall prohibit Tenant from (i)
allowing portions of the Demised Premises (not to exceed more than twenty-five
percent (25%) of the floor area thereof in the aggregate at any one time) to be
used by unrelated third parties for the warehousing and distribution of retail
consumer goods that are compatible with Tenant's consumer goods (and which are
to be distributed to Tenant's internet customers from the Demised Premises),
provided that the goods warehoused and sold and the other activities conducted
by such third parties in and from the Demised Premises are in compliance with
the Permitted Use provisions hereof and with all of the other terms and
conditions of this Lease,, and (ii) engaging a third party logistics manager to
coordinate Tenant's operations from the Demised Premises. Any third parties
using or operating from or within the Demised Premises pursuant to part (i)
and/or part (ii) of the immediately preceding sentence shall be deemed to
constitute "Tenant's Affiliates" or to otherwise constitute employees or agents
of Tenant for all purposes of this Lease.
(c) If Tenant desires to assign this Lease or sublet the Demised
Premises or any part thereof, Tenant shall give Landlord written notice no later
than thirty (30) days in advance of the proposed effective date of any proposed
assignment or sublease, specifying (i) the name and business of the proposed
assignee or sublessee, (ii) the amount and location of the space within the
Demised Premises proposed to be subleased, (iii) the proposed effective date and
duration of the assignment or subletting and (iv) the proposed rent or
consideration to be paid to Tenant by such assignee or sublessee. Tenant shall
promptly supply Landlord with financial statements and other information as
Landlord may reasonably request to evaluate the proposed assignment or sublease.
Landlord shall have a period of twenty (20) days following receipt of such
notice and other information requested by Landlord within which to notify Tenant
in writing that Landlord elects: (i) to terminate this Lease as to the space so
affected as of the proposed effective date set forth in Tenant's notice, in
which event Tenant shall be relieved of all further obligations hereunder as to
such space, except for obligations under Sections 11 and 28 and all other
provisions of this Lease which expressly survive the termination hereof; or (ii)
to permit Tenant to assign or sublet such space; or (iii) to refuse, in
Landlord's reasonable discretion, to consent to Tenant's assignment or
subleasing of such space and to continue this Lease in full force and effect as
to the entire Demised Premises. If Landlord should fail to notify Tenant in
writing of such election within the aforesaid twenty (20) day period, Landlord
shall be deemed to have elected option (ii) above. Tenant agrees to reimburse
Landlord for reasonable legal fees and any other reasonable costs incurred by
Landlord in connection with any requested assignment or subletting. Tenant shall
deliver to Landlord copies of all documents executed in connection with any
permitted assignment or subletting, which documents shall be in form and
substance reasonably satisfactory to Landlord and which shall require such
assignee to assume performance of all terms of this Lease on Tenant's part to be
performed. This subsection (c) shall not apply to any related assignment.
(d) No acceptance by Landlord of any rent or any other sum of
money from any assignee, sublessee or other category of transferee shall be
deemed to constitute Landlord's consent to any assignment, sublease, or
transfer. Permitted subtenants or assignees shall become liable directly to
Landlord for all obligations of Tenant hereunder, without, however, relieving
Tenant of any of its liability hereunder. No such assignment, subletting,
occupancy or collection shall be deemed the acceptance of the assignee, tenant
or occupant, as Tenant, or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this Lease. Any assignment or sublease
consented to by Landlord shall not relieve Tenant (or its assignee) from
obtaining Landlord's consent to any subsequent assignment or sublease.
30. Termination or Expiration.
(a) No termination of this Lease prior to the normal ending
thereof, by lapse of time or otherwise, shall affect Landlord's right to collect
rent for the period prior to termination thereof.
(b) At the expiration or earlier termination of the Term of this
Lease, Tenant shall surrender the Demised Premises and all improvements,
alterations and additions thereto, and keys therefor to Landlord, clean and
neat, and in substantially the same condition (i.e., with substantially the same
Improvements and in good condition and repair) as existed at the Lease
Commencement Date, subject to any Tenant's Changes made in accordance with
Section 18 hereof, and excepting normal wear and tear, condemnation and casualty
other than that required to be insured against by Tenant hereunder.
-19-
<PAGE>
(c) If Tenant remains in possession of the Demised Premises
after expiration of the Term, with or without Landlord's acquiescence and
without any express agreement of the parties, Tenant shall be a
tenant-at-sufferance at the greater of (i) one hundred sixty-five percent (165%)
of the then current fair market base rental value of the Demised Premises or
(ii) one hundred sixty-five percent (165%) of the Base Rent in effect at the end
of the Term. Tenant shall also continue to pay all other Additional Rent due
hereunder during any holdover period described above or below in this
subparagraph (c) (including the Selected Holdover Period, and any holdover
period thereafter, as applicable), and there shall be no renewal of this Lease
by operation of law. Notwithstanding the foregoing, Tenant may notify Landlord
in writing at least one hundred eighty (180) days prior to the expiration of the
then current Term that Tenant desires to hold over in the Demised Premises for
between one (1) and six (6) months (such period selected by Tenant being the
"Selected Holdover Period"), whereupon Tenant shall be entitled to remain in
possession of the Demised Premises during such Selected Holdover Period and
shall pay to Landlord on the first day of each month during the Selected
Holdover Period Base Rent at the rate of one hundred twenty-five percent (125%)
of the Base Rent in effect at the end of the then current Term. If Tenant shall
remain in possession of the Demised Premises after the expiration of the
Selected Holdover Period with or without Landlord's acquiescence and without any
express agreement of the parties, then Tenant shall be a tenant-at-sufferance at
the greater of, (A) with respect to the first six (6) months of such additional
holdover period, (i) one hundred sixty-five percent (165%) of the then current
fair market base rental value of the Demised Premises or (ii) one hundred
sixty-five percent (165%) of the Base Rent that was in effect at the end of the
Term (exclusive of the Selected Holdover Period), and, (B) with respect to any
months thereafter, (i) two hundred fifteen percent (215%) of the then current
fair market base rental value of the Demised Premises or (ii) two hundred
fifteen percent (215%) of the Base Rent that was in effect at the end of the
Term (exclusive of the Selected Holdover Period). No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Demised Premises shall reinstate, continue or extend the Term
or Tenant's right of possession.
31. Intentionally Omitted.
32. Late Payments. In the event any installment of rent, inclusive of
Base Rent, or Additional Rent or other sums due hereunder, if any, is not paid
(i) within five (5) days after Tenant's receipt of written notice of such
failure to pay on the first two (2) occasions during any twelve (12) month
period, or (ii) as and when due with respect to any subsequent late payments in
any twelve (12) month period, Tenant shall pay an administrative fee equal to
three percent (3%) of such past due amount, plus interest on the amount past due
at the lesser of (i) the maximum interest rate allowed by law or (ii) a rate of
fifteen percent (15%) per annum (the "Interest Rate") to defray the additional
expenses incurred by Landlord in processing such payment.
33. Rules and Regulations. Tenant agrees to abide by the rules and
regulations set forth on Exhibit D attached hereto, as well as other rules and
regulations reasonably promulgated by Landlord from time to time, so long as
such rules and regulations are uniformly enforced against all tenants of
Landlord in the Building and do not materially diminish the rights or increase
the obligations of Tenant hereunder.
34. Quiet Enjoyment. So long as Tenant has not committed an Event of
Default hereunder, Landlord agrees that Tenant shall have the right to quietly
use and enjoy the Demised Premises for the Term.
35. Miscellaneous.
(a) The parties hereto hereby covenant and agree that, except as
otherwise provided herein, Landlord shall receive the Base Rent, Additional Rent
and all other sums payable by Tenant hereinabove provided as net income from the
Demised Premises, without any abatement, reduction, set-off, counterclaim,
defense or deduction whatsoever.
(b) If any clause or provision of this Lease is determined to be
illegal, invalid or unenforceable under present or future laws effective during
the Term, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and that in lieu of
such illegal, invalid or unenforceable clause or provision there shall be
substituted a clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
(c) All rights, powers, and privileges conferred hereunder upon
the parties hereto shall be cumulative, but not restrictive to those given by
law.
(d) Time is of the essence of this Lease.
(e) No failure of Landlord or Tenant to exercise any power given
Landlord or Tenant hereunder or to insist upon strict compliance by Landlord or
Tenant with its obligations hereunder, and no custom or practice of the parties
at variance with the terms hereof shall constitute a waiver of Landlord's or
Tenant's rights to demand exact compliance with the terms hereof.
-20-
<PAGE>
(f) This Lease contains the entire agreement of the parties
hereto as to the subject matter of this Lease and no representations,
inducements, promises or agreements, oral or otherwise, between the parties not
embodied herein shall be of any force and effect. This Lease, entered into as of
October 22, 1999, but with an effective date of July 27, 1999, is an amendment
to and restatement of that certain Industrial Lease Agreement between Landlord
and Tenant originally dated as of September 1, 1999 [but with a true effective
date of July, 1999 per the Amendment (as hereinafter defined)], the same having
been amended by Lease Amendment dated July, 1999 (the "Amendment"; as so
amended, the "Original Lease"); this Amended and Restated Industrial Lease
Agreement supercedes and replaces the Original Lease in its entirety, and such
Original Lease shall no longer be of any force or effect. The masculine (or
neuter) pronoun, singular number shall include the masculine, feminine and
neuter gender and the singular and plural number.
(g) This contract shall create the relationship of landlord and
tenant between Landlord and Tenant; no estate shall pass out of Landlord;
Tenant's interest shall not be subject to levy and sale, and shall not be
assignable by Tenant except as expressly set forth herein.
(h) Under no circumstances shall Tenant have the right to record
this Lease; provided, however, that upon Tenant's request, Landlord and Tenant
shall enter into a recordable Memorandum of Lease, provided such Memorandum of
Lease does not disclose the rent payable by Tenant hereunder, and further
provided that such Memorandum of Lease is in form reasonably acceptable to
Landlord (it being hereby agreed that any such Memorandum of Lease may reference
the Right of First Refusal contained in Special Stipulation 6 hereof, but shall
not reference the Right of First Notice contained in Special Stipulation 7
hereof).
(i) The captions of this Lease are for convenience only and are
not a part of this Lease, and do not in any way define, limit, describe or
amplify the terms or provisions of this Lease or the scope or intent thereof.
(j) This Lease may be executed in multiple counterparts, each of
which shall constitute an original, but all of which taken together shall
constitute one and the same agreement.
(k) This Lease shall be interpreted under the laws of the State
where the Demised Premises are located.
(l) The parties acknowledge that this Lease is the result of
negotiations between the parties, and in construing any ambiguity hereunder no
presumption shall be made in favor of either party. No inference shall be made
from any item which has been stricken from this Lease other than the deletion of
such item.
(m) The provisions of this Lease shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
36. Special Stipulations. The Special Stipulations attached hereto as
Exhibit C, are incorporated herein and made a part hereof, and to the extent of
any conflict between the foregoing provisions and the Special Stipulations, the
Special Stipulations shall govern and control.
37. Intentionally omitted.
38. Authority. If Tenant is not a natural person, Tenant shall cause its
corporate secretary or general partner, as applicable, to execute the
certificate attached hereto as Exhibit E-1. Tenant is authorized by all required
corporate or partnership action to enter into this Lease and the individual(s)
signing this Lease on behalf of Tenant are each authorized to bind Tenant to its
terms. Landlord shall cause its corporate secretary or the corporate secretary
of its general partner, as applicable, to execute the certificate attached
hereto as Exhibit E-2. Landlord is authorized by all required corporate or
partnership action to enter into this Lease and the individual(s) signing this
Lease on behalf of Landlord are authorized to bind Landlord to its terms.
39. No Offer Until Executed. The submission of this Lease to Tenant for
examination or consideration does not constitute an offer to lease the Demised
Premises and this Lease shall become effective, if at all, only upon the
execution and delivery thereof by Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
under seals, the day and year first above written.
-21-
<PAGE>
LANDLORD:
Industrial Developments International (Tennessee),
L.P., a Georgia limited partnership
By: IDI (Tennessee), Inc., a Georgia corporation,
its sole general partner
By: /s/Timothy L. Gunter
----------------------------
Name: Timothy L. Gunter
Title: Secretary
Attest: /s/G. Bryan Blasingame, Jr.
----------------------------
Name: G. Bryan Blasingame, Jr.
Title: Assistant Secretary
[Corporate Seal]
[Signatures continued on next page]
-22-
<PAGE>
TENANT:
barnesandnoble.com llc, a Delaware
limited liability company
By: barnesandnoble.com inc., its Managing Member
By: /s/William F. Duffy
Name: William F. Duffy
Title: Vice President, Operations
[Corporate Seal]
-23-
<PAGE>
ATTESTATION
Landlord:
- - --------
STATE OF
---------------------------------
COUNTY OF
-----------------------------
BEFORE ME, a Notary Public in and for said County, personally appeared
__________________________ and, known to me to be the person(s) who, as
___________________________________ and ____________________________________,
respectively, of IDI (Tennessee), Inc., a Georgia corporation, the corporation
which executed the foregoing instrument in its capacity as general partner of
Landlord, signed the same, and acknowledged to me that they did so sign said
instrument in the name and upon behalf of said corporation, in its capacity as
general partner of Landlord, that the same is their free act and deed and they
were duly authorized thereunto by the corporation and the partnership.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed
my official seal, this day __ of ____________________________, 19___.
__________________________________
Notary Public
My Commission Expires:
[Acknowledgments continued on next page]
-24-
<PAGE>
Tenant:
- - ------
STATE OF
--------------------------------
COUNTY OF
----------------------------
BEFORE ME, a Notary Public in and for said County, personally appeared
__________________________, known to me to be the person who, as
___________________________________ of barnesandnoble.com inc., the corporation
which executed the foregoing instrument in its capacity as the managing member
of Tenant, signed the same, and acknowledged to me that he did so sign said
instrument in the name and upon behalf of said corporation as an officer of said
corporation, that the same is his free act and deed as such officer and he was
duly authorized thereunto by its board of directors; and that the seal affixed
to said instrument is the corporate seal of said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed
my official seal, this day of _________________________, 19___ .
____________________________________
Notary Public
My Commission Expires:
-25-
<PAGE>
EXHIBIT A
Demised Premises
[Diagram]
a-1
<PAGE>
EXHIBIT B
[Diagram]
b-1
<PAGE>
EXHIBIT C
Special Stipulations
The Special Stipulations set forth herein are hereby incorporated into
the body of the lease to which these Special Stipulations are attached (the
"Lease"), and to the extent of any conflict between these Special Stipulations
and the preceding language, these Special Stipulations shall govern and control.
1. Extension Option
(a) Landlord hereby grants to Tenant four (4) consecutive options to
extend the Term for a period of five (5) years each time (each such period to be
referred to herein as an "Option Period"), each such option to be exercised by
Tenant giving written notice of its exercise to Landlord in the manner provided
in this Lease at least two hundred ten (210) days prior to (but not more than
three hundred (300) days prior to) the expiration of the Term, as it may have
been previously extended. No extension option may be exercised by Tenant if an
Event of Default has occurred and is then continuing at the time of exercise of
the option.
(b) If Tenant exercises its option[s] to extend the Term, Landlord
shall, within thirty (30) days after the receipt of Tenant's notice of exercise,
notify Tenant in writing of the following:
(i) Landlord's reasonable determination of the Base Rent for
the Demised Premises (including any Refusal Space, as hereinafter
defined) during the applicable Option Period based on ninety-five
percent (95%) of the market rate for such space, as reasonably
determined by Landlord taking into account all relevant factors for
space of this type in the Memphis, Tennessee area (which notice shall
also remind Tenant that it has ten (10) days in which either to accept
Landlord's determination of the Base Rent for the Demised Premises
during the applicable Option Period or to select an appraiser pursuant
to this Special Stipulation 1 in the event Tenant disagrees with such
determination by Landlord of the Base Rent for the Demised Premises
during the applicable Option Period). Tenant shall have ten (10) days
from its receipt of Landlord's notice to notify Landlord in writing
that Tenant does not agree with Landlord's determination of ninety-five
percent (95%) of the market rate for such space and that Tenant elects
to determine the Prevailing Market Rate (as defined and calculated
below). If Tenant does not notify Landlord of such election within ten
(10) days of its receipt of Landlord's notice, Base Rent for the
applicable Option Period for purposes of this subpart (i) of this
Special Stipulation 1 shall be as set forth in Landlord's notice to
Tenant. The phrase "Prevailing Market Rate" shall mean ninety-five
percent (95%) of the then prevailing market rate for base minimum
rental calculated on a per square foot basis for leases covering
buildings comparable to the Building (as adjusted for any variances
between such buildings and the Building) located in the area of
Memphis, Tennessee (hereinafter referred to as the "Market Area"). The
Prevailing Market Rate shall be determined by an appraisal procedure as
follows: in the event that Tenant notifies Landlord that Tenant
disagrees with Landlord's determination of ninety-five percent (95%) of
the then market rate and that Tenant elects to determine the Prevailing
Market Rate, then Tenant shall specify, in such notice to Landlord,
Tenant's selection of a real estate appraiser who shall act on Tenant's
behalf in determining the Prevailing Market Rate. Within twenty (20)
days after Landlord's receipt of Tenant's selection of a real estate
appraiser, Landlord, by written notice to Tenant, shall designate a
real estate appraiser, who shall act on Landlord's behalf in the
determination of the Prevailing Market Rate. Within twenty (20) days of
the selection of Landlord's appraiser, the two (2) appraisers shall
render a joint written determination of the Prevailing Market Rate,
which determination shall take into consideration any differences
between the Building and those buildings comparable to the Building
located in the Market Area, including without limitation age, location,
setting and type of building. If the two (2) appraisers are unable to
agree upon a joint written determination within said twenty (20) day
period, the two appraisers shall select a third appraiser within such
twenty (20) day period. Within twenty (20) days after the appointment
of the third appraiser, the third appraiser shall render a written
determination of the Prevailing Market Rate by selecting, without
change, the determination of one (1) of the original appraisers as to
the Prevailing Market Rate and such determination shall be final,
conclusive and binding. All appraisers selected in accordance with this
subparagraph shall have at least ten (10) years prior experience in the
commercial leasing market of the Market Area and shall be members of
the American Institute of Real Estate Appraisers or similar
professional organization. If either Landlord or Tenant fails or
refuses to select an appraiser, the other appraiser shall alone
determine the Prevailing Market Rate. Landlord and Tenant agree that
they shall be bound by the determination of Prevailing Market Rate
pursuant to this paragraph. Landlord shall bear the fee and expenses of
its appraiser; Tenant shall bear the fee and expenses of its appraiser;
and Landlord and Tenant shall share equally the fee and expenses of the
third appraiser, if any;
(ii) Landlord's determination of Base Rent for the Demised
Premises during the applicable Option Period based on CPI (as
hereinafter defined), which amount shall be determined by multiplying
the Annual Base Rent in effect during the Lease Year in which the
determination is made (blended to take into account any space added to
the Demised Premises pursuant to Special Stipulations 6 or 7 or
otherwise, and, for purposes of the first (1st) renewal Term only,
using $2.79 as the deemed "Annual Base Rental" rate in effect for the
initial Demised Premises during the Lease Year in which the
determination is made notwithstanding anything in Section 1 of this
Lease
c-1
<PAGE>
to the contrary) by a fraction, the numerator of which shall be
the CPI most recently published prior to the date on which Landlord's
determination is made and the denominator of which shall be the CPI on
the first day of the immediately preceding "five (5) year" Term, or
extended Term, as the case may be. In making such calculations, no
effect shall be given to existing rent concessions or abatements, if
any. For purposes of this section, "CPI" shall mean the Consumer Price
Index published by the Bureau of Labor Statistics of the United States
Department of Labor for Urban Wage Earners and Clerical Workers:
Selected Areas, All Items Index, U.S. City Average (1982-84=100); and
(iii) Landlord's determination of Base Rent for the Demised
Premises during the applicable Option Period based on a fixed increase,
which amount shall be determined by multiplying the Annual Base Rent in
effect during the Lease Year in which such determination is made
(blended to take into account any space added to the Demised Premises
pursuant to Special Stipulations 6 or 7 or otherwise, and, for purposes
of the first (1st) renewal Term only, using $2.79 as the deemed "Annual
Base Rental" rate in effect for the initial Demised Premises during the
Lease Year in which the determination is made notwithstanding anything
in Section 1 of this Lease to the contrary) by one hundred twelve and
one-half percent (112.5%).
Tenant shall have ten (10) days from its receipt of Landlord's notice to notify
Landlord in writing that Tenant elects to retract its option to extend the Term,
in which case (i) Tenant shall reimburse Landlord upon demand for Landlord's
actual out-of-pocket expenses associated with the appraisal approach set forth
in subpart (i) above, if applicable, and (ii) the Term, as it may have been
previously extended, shall expire on its scheduled expiration date and Tenant's
option (and any remaining subsequent options) to extend the Term shall be void
and of no further force and effect. If Tenant does not notify Landlord of such
retraction within ten (10) days of its receipt of Landlord's notice, Landlord
and Tenant hereby agree that the Base Rent that will be in effect for the
applicable Option Period shall be the lowest of the Base Rent determinations
made in accordance with clauses (i), (ii) and (iii) above; provided, however,
that (A) with respect to the first (1st) renewal Term only, an additional $.10
shall be added to the lowest of the per square foot rental rate determinations
made in accordance with clauses (i), (ii) and (iii) above, which additional $.10
per square foot shall later be backed out of the Annual Base Rental rate in
effect for the first (1st) renewal Term for purposes of making the per square
foot rental rate determinations for the second (2nd) renewal Term (if
applicable) in accordance with clauses (ii) and (iii) above, and (B) in no event
shall the Annual Base Rent for the applicable Option Period be less than the
Annual Base Rent rate in effect during the Lease Year immediately preceding the
applicable Option Period. In the event Tenant does not validly exercise (or
exercises but retracts as permitted herein) the first (1st) renewal option
granted herein, then prior to the expiration of the then current Term, Tenant
shall pay to Landlord the sum of One Hundred Ninety Thousand and No/100 Dollars
($190,000.00) in immediately available funds.
(c) Except for the Base Rent, which shall be determined as set forth in
subparagraph (b) above, leasing of the Demised Premises by Tenant for the
applicable Option Period shall be subject to all of the same terms and
conditions set forth in this Lease, including Tenant's obligation to pay
Tenant's share of Operating Expenses as provided in this Lease; provided,
however, that any improvement allowances, rent abatements or other concessions
applicable to the Demised Premises during the initial Term shall not be
applicable during any such extended term, nor shall Tenant have any additional
extension options unless expressly provided for in this Lease. Landlord and
Tenant shall enter into an amendment to this Lease to evidence Tenant's exercise
of its renewal option. If this Lease is guaranteed, it shall be a condition of
Landlord's granting the renewal that Tenant deliver to Landlord a reaffirmation
of the guaranty in which the guarantor acknowledges Tenant's exercise of its
renewal option and reaffirms that the guaranty is in full force and effect and
applies to said renewal.
2. Early Entry. Provided Tenant shall have first obtained any and all permits
and other governmental authorizations required in connection therewith, Tenant
shall have the right to enter the Demised Premises for the period commencing
October 1, 1999 and ending with the Lease Commencement Date (the "Early Entry
Period") in order to install its equipment and racking provided that during said
period: (i) Tenant shall comply with all terms and conditions of this Lease
other than the obligation to pay Base Rent or Additional Rent, (ii) Tenant shall
not begin operation of its business (Landlord hereby acknowledging that the
installation of racking and a conveyor system, and acceptance of inventory,
shall not constitute "operation of business"), and (iii) Tenant shall not
interfere with Landlord's completion of the Demised Premises. Landlord hereby
agrees that on or before the commencement of the Early Entry Period, as such
date may be extended by Construction Delay, Landlord shall deliver to Tenant
approximately 150,000 square feet of secure (i.e., all walls and doors
constructed) warehouse space within the Demised Premises, complete with lights,
floor, floor seal and sprinkler system installed in accordance with the Plans
and Specifications (and in compliance with applicable building codes to the
extent necessary to allow Tenant to exercise is rights under this Special
Stipulation 2), said space being delineated in the Operational Plan comprising a
part of the Performance Specifications.
3. Operating Expenses - Cap on Controllable Expenses. Landlord and Tenant hereby
acknowledge and agree that for purposes of calculating Tenant's proportionate
share of Operating Expenses (as Tenant's proportionate share may have been
adjusted to account for any changes in the size of the Demised Premises due to
any expansions or reductions) for the Building and the Building Common Area
attributable to all items except taxes, utilities, insurance, and snow removal
(which four (4) items shall be referred to collectively herein as the
"Non-Controllable Expenses," and Operating Expenses attributable to all items
c-2
<PAGE>
other than the Non-Controllable Expenses being referred to collectively herein
as "Controllable Expenses"), such Controllable Expenses shall not exceed $0.05
per square foot of the Building in calendar year 1999 (the "Initial Cap"), which
Initial Cap shall be increased each calendar year thereafter by the lesser of
(a) the increase, if any, in CPI for the period beginning with December 31 of
the previous calendar year and ending with December 31 of the calendar year in
question, or (b) ten percent (10%) (such lesser amount for the calendar year in
question being referred to as the "Cap" for such calendar year). The amount
attributable to Controllable Expenses for the Building and the Building Common
Area for any calendar year after 1999, for purposes of determining the amount of
Tenant's proportionate share of Operating Expenses for such calendar year only
(as Tenant's proportionate share may have been adjusted to account for any
changes in the size of the Demised Premises due to any expansions or
reductions), shall never exceed the Cap applicable to such calendar year. Any
proration of Tenant's share of Operating Expenses for any partial calendar year
included within the Term shall be prorated in accordance with the last sentence
of Section 6(a) of the Lease.
4. Reimbursable Costs and Tenant Allowance Work.
(a) Landlord and Tenant hereby agree that Landlord shall pay for and
install the heating, air conditioning and ventilation system (such installation
to be in accordance with Section 14.4 of the Performance Specifications) and the
energy management system in the warehouse portion of the Demised Premises, and
that the combined cost thereof, less the sum of $90,000.00 (the "Net Combined
Cost"), shall be reimbursed by Tenant to Landlord in full within ten (10)
calendar days following Tenant's receipt of a bill therefor from Landlord
(accompanied by a paid invoice or other evidence reasonably satisfactory to
Tenant of the cost incurred by Landlord for such work), which bill may be
delivered by Landlord at any time after substantial completion of the
Improvements.
(b) Landlord and Tenant hereby acknowledge that Landlord is providing
an allowance with respect to the following portions of Landlord's work within
the Demised Premises (collectively, the "Allowance Work"): electrical
distribution for Tenant's equipment, the alarm system, the mezzanine related
sprinkler system and the computer room; the total allowance with respect to the
Allowance Work being in the amount of $290,000.00 (which total is hereinafter
referred to as the "Maximum Allowance", and which Maximum Allowance may be
allocated between and among the Allowance Work items, and/or any upgrades or
changes made by Tenant in the Plans and Specifications for which Tenant would be
obligated to pay pursuant to the terms and conditions hereof, in such manner as
Tenant may elect). Upon substantial completion of the Improvements, Landlord
shall deliver to Tenant a bill for all amounts expended in connection with the
Allowance Work and/or such upgrades or changes in excess of the Maximum
Allowance, and Tenant agrees to pay such bill in full to Landlord within ten
(10) calendar days following receipt of such bill. If the actual aggregate cost
attributable to the Allowance Work, less any cost savings resulting solely from
any reduction in the scope of the Plans and Specification made by Tenant (the
"Net Work Cost"), is less than the Maximum Allowance, the difference between the
Maximum Allowance and such Net Work Cost (such difference being referred to
herein as the "Net Savings"), up to a maximum equal to the Net Combined Cost,
shall be credited by Landlord against the Net Combined Cost owing from Tenant to
Landlord pursuant to part (a) of this Special Stipulation 4 above. Tenant shall
not be entitled to any payment or other remuneration from Landlord for any Net
Savings in excess of The Net Combined Cost. For an illustration of the operation
of this Stipulation 4 (and for illustration purposes only), if (i) the Net
Combined Cost under subparagraph (a) above is $700,000.00, and (ii) the actual
aggregate cost attributable to the Allowance Work is $300,000.00, and there is a
cost savings resulting solely from a reduction in the scope of the Plans and
Specification made by Tenant equal to $100,000.00, for a Net Work Cost of
$200,000.00, then the Net Savings would be calculated as follows: $290,000.00
(the Maximum Allowance) - $200,000.00 (the Net Work Cost) = $90,000.00 (the Net
Savings), and Tenant would only be responsible for reimbursing Landlord for
$610,000.00 of the Net Combined Cost [i.e., $700,000.00 - $90,000.00 =
$610,000.00]. For purposes of this Special Stipulation 4, the cost of
performance of the Allowance Work shall be deemed to include, but not be limited
to, the cost of plans and specifications, permits and all tenant buildout
attributable or allocable thereto.
(c) After a final determination is made pursuant to this Special
Stipulation 4 regarding any amounts or credits owing from one party to the other
and after all such payments or credits are made, Landlord and Tenant shall, upon
request of either Landlord or Tenant, execute and deliver an amendment and
restatement of this Lease which will delete this Special Stipulation 4 in its
entirety and any reference elsewhere in this Lease to the provisions of this
Special Stipulation 4.
5. Intentionally omitted.
6. Right of First Refusal. So long as the Lease is in full force and effect and
no Event of Default has occurred and is then continuing, Landlord hereby grants
to Tenant a right of first refusal (the "Right of First Refusal") to expand the
Demised Premises to include all or any portion of the remaining 160,000 square
feet of space within the Building (the "Refusal Space"), subject to the terms
and conditions set forth herein. The Right of First Refusal shall be subject to
the following terms and conditions:
(a) Tenant's then current financial condition, as revealed by its most
current financial statements (which shall include quarterly and annual financial
statements, including income statements, balance sheets, and cash flow
statements, as required by Landlord), must demonstrate that Tenant meets
financial criteria reasonably acceptable to Landlord.
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(b) The term of the Right of First Refusal shall commence as of the
Lease Date and continue throughout the first eleven (11) Lease Years of the Term
(the "Refusal Period"), assuming any such Lease Years after the initial Term are
in effect as a result of Tenant having exercised the applicable extension
options hereunder.
(c) Subject to the other terms of this Right of First Refusal, after
any part of the Refusal Space has or will become "Available Refusal Space" (as
defined herein) for leasing by Landlord, Landlord shall not, during the Refusal
Period, lease to another tenant that available portion of the Refusal Space
without first offering Tenant the right to lease such Refusal Space.
(i) Space shall be deemed to become "Available Refusal Space"
in the event Landlord, during the Refusal Period, either (1) receives a bona
fide proposal for the lease of some or all of the Refusal Space from a third
party that Landlord desires to secure, the terms of which are acceptable to
Landlord, or (2) makes a bona fide proposal for the lease of some or all of the
Refusal Space to a third party that Landlord desires to secure and that such
third party is willing to accept.
(ii) Notwithstanding subsection (c)(i) above, the Refusal
Space shall not be deemed to become "Available Refusal Space" if the space is
assigned or subleased by the current tenant of the space; or re-let by a current
tenant of the space by renewal, extension, or renegotiation.
(d) Consistent with subsection (c) above, Landlord shall not lease any
such Available Refusal Space to another tenant unless and until Landlord has
first offered the Available Refusal Space to Tenant in writing (the "Offer").
The Offer shall contain the following terms that have been offered by Landlord
to the third party and that such third party is willing to accept, or by the
third party to Landlord and such terms are acceptable to Landlord: (i) a
description of the Available Refusal Space (which description shall include the
square footage amount and location of such Available Refusal Space) and an
attached floor plan that shows the Available Refusal Space; (ii) the date on
which Landlord expects the Available Refusal Space to be leased; (iii) the Base
Rent for the Available Refusal Space; and (iv) the increase in Tenant's
Operating Expense Percentage as defined in Paragraph 1(j) of the Lease. Upon
receipt of the Offer, Tenant shall have the right, for a period of three (3)
business days after receipt of the Offer, to exercise the Right of First Refusal
by giving Landlord written notice that Tenant desires to lease the Available
Refusal Space upon the terms and conditions as are contained in the Offer.
(e) If, within such three (3) business-day period, Tenant exercises the
Right of First Refusal, then Landlord and Tenant shall amend the Lease to
include the Available Refusal Space subject to the same terms and conditions as
the Lease, as modified by the terms and conditions of the Offer.
(f) If, within such three (3) business-day period, Tenant declines or
fails to exercise the Right of First Refusal, Landlord shall then have the right
to lease the Available Refusal Space as long as Landlord enters into a lease
with a third party under the basic terms and conditions contained in the Offer.
If Landlord does not enter into a lease with a third party under the terms and
conditions contained in the Offer within one hundred eighty (180) days after
Tenant receives the Offer, or if Landlord desires to materially alter or modify
the terms and conditions of the Offer, Landlord shall be required to present the
altered or modified Offer to Tenant pursuant to this Right of First Refusal, in
the same manner that the original Offer was submitted to Tenant.
.
(g) In the event that the Available Refusal Space is leased to such a
third party, this Right of First Refusal shall continue throughout the Refusal
Term, but shall be subordinate to any extension or renewal options contained in
said third party lease. Further, if at the end of the term of said third party
lease, said third party tenant desires to remain in the Available Refusal Space,
Landlord shall be entitled to renew said lease and this Right of First Refusal
shall be subject and subordinate to said renewal.
(h) Without limiting the foregoing, Landlord hereby agrees that, if as
of the beginning of the second Lease Year of this Lease or at any time
thereafter during the remainder of the Refusal Period the Refusal Space is or
becomes "Available Offer Space" (as defined herein), Landlord shall provide
Tenant with prompt written notice thereof (provided that IDI shall thereafter be
under no obligation whatsoever to accept, entertain, or negotiate or enter into
any agreement in respect of any such Available Offer Space other than in
accordance with the foregoing right of first refusal provisions of this Special
Stipulation 6, if and when applicable). The Refusal Space shall be deemed to be
"Available Offer Space" if and when there exists no written lease or occupancy
agreement in full force and effect with respect thereto, provided that the
Refusal Space shall not be deemed to be "Available Offer Space" if the space is
(a) assigned or subleased by the current tenant of the space; or (b) re-let by
the current tenant of the space by renewal, extension, or renegotiation or (c)
leased on a temporary basis for a period of less than twelve (12) months without
any right to extend.
(i) This Right of First Refusal is personal to barnesandnoble.com llc
(and any assignee pursuant to part (ii) of the first sentence of subsection
29(b) of this Lease) and shall become null and void upon the occurrence of an
assignment of the Lease (except for an assignment allowed without Landlord's
consent under part (ii) of the first sentence of subsection 29(b) of this Lease)
or a sublet of all of the Demised Premises (other than pursuant to part (i) of
the first sentence of subsection 29(b) of the Lease).
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The parties shall promptly execute an amendment to this Lease to reflect the
addition of any portion of the Refusal Space to the Demised Premises pursuant to
the terms of this Special Stipulation 6.
7. Right of First Notice.
(a) So long as the Lease is in full force and effect and no Event of
Default has occurred and is then continuing, and so long as Industrial
Developments International (Tennessee), L.P. ("IDI") is the "Landlord" under
this Lease, IDI hereby agrees to notify Tenant in writing prior to IDI 's sale,
lease or commencement of development of the adjacent site within the Project
located to the west of the Building, which site is currently owned by IDI and is
designated as the "Building A Site" on the Site Plan. Tenant shall have the
right to respond to such notice, within ten (10) calendar days after IDI 's
delivery of such notice, by delivering to IDI a proposal for the lease
(including an expansion of the Building onto the Building A Site) or purchase of
such site by Tenant. Tenant hereby acknowledges that IDI shall be under no
obligation whatsoever to accept, entertain, or negotiate or enter into any
agreement in respect of, Tenant's proposal. If within such ten (10)-day period,
Tenant declines or fails to submit such proposal, or IDI and Tenant do not enter
into any binding agreement to the contrary, then IDI shall be entitled to
proceed with the sale, lease or development of the Building A Site upon such
terms and conditions as IDI may elect in its sole and absolute discretion, and
shall no longer be subject to this Special Stipulation 7. Tenant's right to
receive notice of the sale, lease or development of the Building A Site is
personal to barnesandnoble.com llc (and any assignee pursuant to part (ii) of
the first sentence of subsection 29(b) of this Lease) and shall become null and
void upon the occurrence of an assignment of the Lease (except for an assignment
allowed without Landlord's consent under part (ii) of the first sentence of
subsection 29(b) of this Lease) or a sublet of all of the Demised Premises
(other than pursuant to part (i) of the first sentence of subsection 29(b) of
the Lease).
(b) The following transactions shall be excluded from IDI's obligation
to provide Tenant with the notice set forth in subsection (a) above:
(i) A sale of the Building A Site by foreclosure or transfer
in lieu of foreclosure of a deed to secure debt loan.
(ii) A sale of the Building A Site to the appropriate
condemning authority pursuant to eminent domain or under threat of
eminent domain.
8. PILOT Program. Tenant shall have the right to attempt to reduce the real
estate taxes and other impositions for the Demised Premises by participating in
the Payment In Lieu Of Taxes ("PILOT Program") available through the City of
Memphis and Shelby County, Tennessee. Tenant shall be responsible for preparing
and filing the application for such PILOT Program and paying all fees in
connection therewith. Landlord will cooperate with Tenant (which cooperation
shall include attendance at meetings or hearings, supplying supporting
documentation and executing documents reasonably required to obtain the benefits
of the Pilot Program) in its attempt to participate in the PILOT Program but
Landlord shall not be obligated to incur any expenses in connection with such
cooperation. Tenant shall promptly reimburse to Landlord any and all of
Landlord's expenses related to the PILOT Program, including, but not limited to,
attorneys' fees and the cost of a leasehold title insurance policy insuring
Landlord's interest in the Demised Premises if the PILOT Program requires
Landlord to convey title to the Building (any such conveyance to be subject to
Bank of America's, or any other then current Lender's, prior written consent,
which consent Landlord hereby agrees to diligently and in good faith pursue,
and, if so consented to, to be subject to Bank of America's, or such other
Lender's, Mortgage; provided, however, that in the event any such Lender does
not consent to any such conveyance upon the terms and conditions set forth
herein, Landlord shall and does hereby agree promptly to pay the note evidenced
by any such Mortgage, and to satisfy or release the Building from the lien of
such Mortgage, in full). Tenant agrees to prepare and file such application and
pursue participation of the Demised Premises in the PILOT Program in a manner
reasonably acceptable to Landlord so as to minimize to the greatest extent
reasonably possible any adverse affect on Landlord's ability to sell, finance or
market the Demised Premises. If the City of Memphis or Shelby County, Tennessee
elects not to include the Demised Premises in the PILOT Program or Tenant is
unable to qualify the Demised Premises for participation in the PILOT Program,
Tenant shall nevertheless remain fully obligated to pay the real estate taxes
and other impositions as described in Section 6 of this Lease without any change
or reduction in such obligations and such Tenant's obligations under this Lease
shall not be affected in any way whatsoever. In the event that Tenant is
successful in making the Demised Premises part of the PILOT Program, (a)
Landlord shall pass through to Tenant all reductions or abatements applicable to
the Demised Premises, and (b) Landlord and Tenant agree and acknowledge that:
(i) Participation in the PILOT Program requires Landlord to
convey title to the Demised Premises to The Industrial Development
Board of the City of Memphis and County of Shelby, Tennessee (the
"IDB") with a leaseback of the Demised Premises to Landlord (the "PILOT
Lease") and thus, this Lease shall automatically become a sublease for
the term of the PILOT Lease and subject to the terms and conditions of
the PILOT Lease. Tenant shall execute any and all documents reasonably
necessary to confirm the status of this Lease as a sublease of the
PILOT Lease, and that this Lease shall survive and become a prime lease
if the Term shall extend beyond the term of the PILOT Lease.
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(ii) Tenant shall review and approve the PILOT Lease and shall
comply with all terms and conditions thereof. Tenant acknowledges that
Additional Rent under this Lease to be paid by Tenant shall include any
payments Landlord is required to make under the PILOT Lease. Tenant
shall indemnify Landlord from and against all claims, damages, costs
and expenses, including, without limitation, reasonable attorneys' fees
and court costs, which Landlord may suffer as a result of a default
under the PILOT Lease caused by the acts or omissions of Tenant.
(iii) The documents to be executed by Landlord to implement
the PILOT Program must be in a form reasonably acceptable to Landlord.
The PILOT Lease must contain an option in favor of Landlord to purchase
the Demised Premises for One Dollar (or such greater amount acceptable
to Landlord and Tenant, which shall be paid by Tenant) (the "Option")
and Landlord shall receive a leasehold title insurance policy, the cost
of which shall be paid by Tenant, insuring Landlord's interest as
tenant under the PILOT Lease and the Option.
9. Measurement of Demised Premises. Within sixty (60) calendar days after
substantial completion of the Demised Premises, either party may have the
Demised Premises and Building measured by a licensed architect other than the
project architect for the initial design of the Demised Premises, based on a
"drip-line" measurement from the outside of the exterior walls of the Building
and the Demised Premises and to the middle of any demising wall of the Demised
Premises. The architect shall be subject to the other party's prior approval,
which approval shall not be unreasonably withheld or delayed. The square footage
so certified by such architect shall conclusively determine the square footage
of the Building (the "Building Square Footage") and the square footage of the
Demised Premises (the "Demised Premises Square Footage") for all purposes under
this Lease, including, without limitation, calculation of Annual Base Rent and
Monthly Base Rent Installments. If the Building Square Footage and the Demised
Premises Square Footage differ from the amounts set forth in Sections 1(b) and
1(c) above, the Annual Base Rent and Monthly Base Rent Installments shall be
adjusted on the basis of the square footage of the Building and the Demised
Premises so certified by such architect, using the rental rates per square foot
set forth in Section 1(d) above. In addition, Tenant's Operating Expense
Percentage in Section 1(j) shall be adjusted as necessary. If neither party
elects to have the Demised Premises and Building measured in accordance with
this Special Stipulation 9, then the square footage of the Demised Premises and
Building shall be deemed to be as set forth in Sections 1(b) and 1(c) above.
10. Operating Expense Exclusions. Notwithstanding any contrary provision in
the Lease, Operating Expenses for any calendar year shall exclude (in addition
to any exclusions set forth in Section 6 of this Lease) the following:
(a) work that Landlord performs for any other tenant or prospective
tenant of the Project;
(b) repairs or other work (including rebuilding) occasioned by fire,
windstorm or other casualty or by condemnation to the extent that Landlord is
reimbursed by insurance proceeds or would have been reimbursed if Landlord had
maintained the insurance policies required herein;
(c) any costs that are separately charged to and payable by tenants
or for which Landlord is compensated by insurance proceeds or warranties (or
would have been compensated if Landlord had maintained the insurance policies
required herein);
(d) leasing commissions and expenses of procuring tenants, including
lease concessions;
(e) advertising or promotional costs including advertising or
promotional costs incurred by any owners' or tenant association;
(f) depreciation, except as provided herein, and except on
materials, tools, supplies and vendor-type equipment purchased by Landlord to
enable Landlord to supply services Landlord might otherwise contract for with a
third party where such depreciation would otherwise have been included in the
charge for such third party's services, all as determined in accordance with
GAAP, and when depreciation is permitted or required, the item shall be
amortized over its reasonably anticipated useful life;
(g) interest on debts or amortization on any mortgage or other debt
instrument encumbering the Building;
(h) rent payable under any lease to which this Lease is subject;
(i) costs and expenses of enforcing leases against tenants,
including legal fees;
(j) any administrative fee, office overhead and/or managing agents'
commissions, and salaries of off-premises personnel (other than maintenance
personnel, which shall be prorated on a reasonable basis to account for any
other Buildings owned by Landlord and maintained by such maintenance personnel);
(k) expenses resulting from any violation by Landlord of the terms
of any lease of space in the Project or of any ground or underlying lease or any
mortgage;
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(l) the repair of any part of the Building Common Area that was
inadequately designed or defectively constructed;
(m) expenses for vacant or vacated space, including utility,
security and renovating costs for such space;
(n) reserves for future expenses;
(o) all costs and expenses associated with compliance with
Environmental Laws; and
(p) assessments under the Declaration.
For purposes of determining Tenant's share of Operating Expenses, but
without limiting anything in Section 6(c) of this Lease, taxes shall not include
any: (1) income, excise, profits, estate, inheritance, succession, gift,
transfer, franchise, capital, or other tax or assessment upon Landlord; (2)
fine, penalty, cost or interest for any tax or assessment, or part thereof,
which Landlord or Lender failed to timely pay (except if same are caused solely
by Tenant's failure to timely pay its taxes); (3) assessment for a public
improvement arising from the initial construction of the Building or Project;
and (4) fees imposed upon Landlord in connection with Landlord's development of
the Building and/or Project. All assessments imposed during the Term which are
permitted to be included within taxes hereunder shall, for the purposes of
computing Tenant's share of Operating Expenses, be deemed to have been paid in
the maximum number of installments permitted by the applicable taxing authority.
11. Inspection Rights.
(a) Landlord's books and records pertaining to the calculation of
Operating Expenses for any calendar year within the Term may be inspected by
Tenant (or by an independent certified accountant) at Tenant's expense, at any
reasonable time within one (1) year after Tenant's receipt of Landlord's
statement for Operating Expenses; provided that Tenant shall give Landlord not
less than fifteen (15) days' prior written notice of any such inspection. If
Landlord's calculation of Tenant's share of Operating Expenses for the inspected
calendar year was incorrect, then Tenant shall be entitled to a credit against
future Base Rent for said overpayment (or a refund of any overpayment if the
Term has expired) or Tenant shall pay to Landlord the amount of any
underpayment, as the case may be. If Tenant's inspection proves that Landlord's
calculation of Tenant's share of Operating Expenses for the inspected calendar
year resulted in an overpayment by more that five percent (5%) of Tenant's
share, Landlord shall also pay the reasonable fees and expenses of Tenant's
independent professionals, if any, conducting said inspection.
(b) All of the information obtained through Tenant's inspection with
respect to financial matters (including, without limitation, costs, expenses,
income) and any other matters pertaining to Landlord, the Demised Premises, the
Building and/or the Project as well as any compromise, settlement, or adjustment
reached between Landlord and Tenant relative to the results of the inspection
shall be held in strict confidence by Tenant and its officers, agents, and
employees; and Tenant shall cause its independent professionals and any of its
officers, agents or employees to be similarly bound. The obligations within this
subsection (b) shall survive the expiration or earlier termination of the Lease.
12. Parking. Landlord acknowledges and agrees that Tenant shall have the
exclusive use of (i) forty-five (45) loading docks serving the Demised Premises,
and (ii) the parking area located within that portion of the Building Common
Area labeled "Tenant's Exclusive Parking Area" on Exhibit A (which shall contain
approximately 300 parking spaces). During the initial Term or any extended term
of this Lease, Tenant shall have the right to construct and maintain, at its
sole cost and expense, a fence either around Tenant's Exclusive Parking Area or
in such a manner as to divide and separate it from the remainder of the Building
Common Area. Any such construction shall be performed pursuant to plans and
specifications reasonably satisfactory to Landlord and in compliance with any
and all applicable laws, statutes, ordinances, regulations and protective
covenants (including any architectural review requirements thereof). If Tenant
elects to install any such fence, Tenant shall, at its sole cost and expense,
keep and maintain such fence in good condition and repair, and shall, to the
extent any such fencing fully encloses any portions of the Building Common Area,
provide Landlord with access to such portions of the Building Common Area in
order to perform Landlord's repair, replacement and maintenance obligations with
respect thereto. Nothing herein shall limit Tenant's obligation to pay its
proportionate share of Operating Expenses for the entire Building Common Area
pursuant to Section 6 of this Lease. If Tenant should fail to perform its
obligations in the immediately preceding sentence as to maintenance of the
fencing, Landlord shall have the right, following reasonable prior notice to
Tenant and Tenant's failure to cure or to undertake to cure such failure and to
diligently pursue same to completion, to enter into any such fenced in area,
without liability or trespass therefor, and to perform such obligations of
Tenant, and Tenant shall reimburse Landlord upon demand for all reasonable
amounts incurred by Landlord in so doing, which amounts shall bear interest at
the lesser of (i) the maximum interest rate allowed by law or (ii) a rate of
fifteen percent (15%) per annum, from the date of such demand by Landlord until
paid. prior to the expiration of the Term or within ten (10) days following any
earlier termination of this Lease, Tenant shall, at Landlord's option, remove
any such fencing and repair any damage to the Building or the Building Common
Area resulting from such removal, all at Tenant's sole cost and expense. The
obligations of Tenant in this Special Stipulation 12 which, by their nature, are
to survive the expiration or any earlier termination of the Lease, shall so
survive. Landlord agrees that, during the Term of this Lease, it will not
construct or permit to be constructed any building,
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tower or other such structure or improvement of a permanent nature, or plant any
tree or other growing plant, or make any other material change whatsoever in
Tenant's Exclusive Parking Area, except as necessitated by any Governmental
Requirement. Notwithstanding the foregoing, Landlord shall have the right within
such area to plant trees and other growing plants pursuant to a landscape plan
which provides for the uniform distribution of trees throughout the Building
Common Area, and which has been approved by Tenant (such approval not to be
unreasonably withheld or delayed).
13. Building Compliance With Law. Landlord represents and warrants to Tenant
that, to Landlord's actual knowledge, the design and construction of the
Building and the Improvements materially complies with all applicable federal,
state, county and municipal laws, ordinances and codes in effect as of the Lease
Commencement Date relating to warehousing and distribution buildings similar to
the Building generally and/or relating to Tenant's use of the Demised Premises
in accordance with the Operational Plan.
14. Landlord Insurance.
(a) Landlord shall maintain at all times during the Term of this Lease,
with such deductible as Landlord in its sole judgment determines advisable,
insurance on the "All-Risk" or equivalent form on a Replacement Cost Basis
against loss or damage to the Building. Such insurance shall be in the amount of
80% of the replacement value of the Building (excluding all fixtures and
property required to be insured by Tenant under this Lease).
(b) Landlord shall maintain at all times during the Term commercial
liability insurance with limits at least equal to the amount as Tenant is
required to maintain pursuant to Section 8(a)(i) of this Lease.
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EXHIBIT D
Rules And Regulations
These Rules and Regulations have been adopted by Landlord for the mutual benefit
and protection of all the tenants of the Building in order to insure the safety,
care and cleanliness of the Building and the preservation of order therein. In
the event of any conflict between the terms of this Exhibit D and the terms of
the Lease, the terms of the Lease shall control.
1. The sidewalks shall not be obstructed or used for any purpose other
than ingress and egress. No tenant and no employees of any tenant shall go upon
the roof of the Building without the consent of Landlord.
2. No awnings or other projections shall be attached to the outside
walls of the Building without Landlord's prior written consent, which consent
shall not be unreasonably withheld.
3. The plumbing fixtures shall not be used for any purpose other than
those for which they were constructed, and no sweepings, rubbish, rags or other
substances, including Hazardous Substances, shall be thrown therein.
4. No tenant shall cause or permit any objectionable or offensive odors
to be emitted from the Demised Premises.
5. The Demised Premises shall not be used for lodging or sleeping or for
any immoral or illegal purposes.
6. No tenant shall make, or permit to be made any unseemly or disturbing
noises, sounds or vibrations or disturb or interfere with tenants of this or
neighboring buildings or premises or those having business with them, except
warehouse noises and sounds customarily associated with operation of a warehouse
facility for the uses permitted in this Lease.
7. Each tenant must, upon the termination of this tenancy, return to
Landlord all keys of stores, offices, and rooms, either furnished to, or
otherwise procured by, such tenant, and in the event of the loss of any keys so
furnished, such tenant shall pay to Landlord the cost of replacing the same or
of changing the lock or locks opened by such lost key if Landlord shall deem it
necessary to make such change.
8. Canvassing, soliciting and peddling in the Building and the Project
are prohibited and each tenant shall cooperate to prevent such activity.
9. Landlord will direct electricians as to where and how telephone or
telegraph wires are to be introduced. No boring or cutting for wires or
stringing of wires will be allowed without written consent of Landlord, which
consent is not to be unreasonably withheld or delayed.
10. Parking spaces associated with the Building are intended for the
exclusive use of passenger automobiles. Except for intermittent deliveries, no
vehicles other than passenger automobiles may be parked in a parking space
without the express written permission of Landlord. Trucks and tractor trailers
may only be parked at designated areas of the Building. Trucks and tractor
trailers shall not block access to the Building.
11. No tenant shall use any area within the Project for storage purposes
other than the interior of the Demised Premises.
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EXHIBIT E-1
TENANT'S CERTIFICATE OF AUTHORITY
CORPORATION
The undersigned, Secretary of BARNESANDNOBLE.COM LLC, a Delaware
limited liability company ("Tenant"), hereby certifies as follows to Industrial
Developments International (Tennessee), L.P., a Georgia limited partnership
("Landlord"), in connection with Tenant's proposed lease of premises in Building
G, at Chickasaw Distribution Center, Shelby County, Tennessee (the "Premises"):
1. Tenant is duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has applied for qualification to do
business in the State of Tennessee (and will provide Landlord with evidence of
such qualification having been achieved within fifteen (15) days of the Lease
Date).
2. That the following named persons, acting individually, are each
authorized and empowered to negotiate and execute, on behalf of Tenant, a lease
of the Premises and that the signature opposite the name of each individual is
an authentic signature:
- - -------------------- -------------------- ---------------------
(name) (title) (signature)
- - -------------------- -------------------- ---------------------
(name) (title) (signature)
- - -------------------- -------------------- ---------------------
(name) (title) (signature)
3. That the foregoing authority was conferred upon the person(s) named
above by the Board of Directors of Tenant's managing member, at a duly convened
meeting held _____________, 19___.
--------------------------------
Secretary
[CORPORATE SEAL]
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<PAGE>
EXHIBIT E-2
LANDLORD'S CERTIFICATE OF AUTHORITY
CORPORATION
The undersigned, Secretary of IDI (Tennessee), Inc., a Georgia
corporation, as sole general partner of INDUSTRIAL DEVELOPMENTS INTERNATIONAL
(TENNESSEE), L.P., a Georgia limited partnership ("Landlord"), hereby certifies
as follows to barnesandnoble.com llc, a Delaware limited liability company
("Tenant"), in connection with Tenant's proposed lease of premises in Building
G, at Chickasaw Distribution Center, Shelby County, Tennessee (the "Premises"):
1. Landlord is duly formed, validly existing and in good standing under
the laws of the State of Georgia, and duly qualified to do business in the State
of Tennessee.
2. That the following named persons, acting individually, are each
authorized and empowered to negotiate and execute, on behalf of IDI (Tennessee),
Inc., as the general partner of Landlord, a lease of the Premises and that the
signature opposite the name of each individual is an authentic signature:
- - -------------------- -------------------- ---------------------
(name) (title) (signature)
- - -------------------- -------------------- ---------------------
(name) (title) (signature)
- - -------------------- -------------------- ---------------------
(name) (title) (signature)
3. Landlord has obtained all requisite partnership consent to enter
into the lease of the Premises and IDI (Tennessee), Inc. is authorized to
execute the lease on behalf of Landlord.
--------------------------------
Secretary
[CORPORATE SEAL]
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Exhibit F
Sign Criteria
General Requirements. All signs, including directional and temporary
signs, must be approved in writing by the Architectural Committee prior to
installation. The location, size, color and construction of signs must be in
keeping with the character of the park. Unless otherwise approved in writing by
the Architectural Committee, only one (1) Structure-mounted sign per tenant is
acceptable. Additionally, unless otherwise approved in writing by the
Architectural Committee, the only ground-mounted signs that are permissible are
those belonging to a tenant who occupies more than forty percent (40%) of the
total square footage of the Structure located on a particular Lot. Except as set
forth herein, only signs identifying the occupant's name shall be permitted. All
signs must be either attached to the Structure or ground-mounted and adhere to
the guidelines set forth herein.
Structure-Mounted Signs. All signs to be mounted on a Structure shall:
(a) be installed so as to be parallel to and contiguous with the
Structure wall;
(b) not project more than fifteen (15) inches from the Structure
wall;
(c) at its tallest and widest points, the sign dimensions
shall not exceed 66% of the height, nor 66% of the
width, of the face of the structure above the
storefront;
(d) have letters constructed as separate pieces of individual
construction (pieces may match bn.com's logo);
(e) be of a design and material compatible with the design of the
structure on which it will be installed;
(f) be of a color matching the structures' primary accent color
(i.e., painted reveal) or a dark bronze color to match the
storefronts. The sign colors may match bn.com's prototype
colors including the orange accent; and
(g) not contain any internal lighting, unless the Architectural
Committee allows any other tenant to do so.
Ground-Mounted Signs. All ground-mounted signs shall:
--------------------
(a) be installed at least ten (10) feet away from any boundary of
the Lot in which sign is erected;
(b) not be closer than three (3) feet from a driveway or
parking area serving the lot in which such sign is to
be installed;
(c) not have a gross surface area of more than fifty (50) square
feet;
(d) not exceed six (6) feet in height from ground elevation; and
(e) be connected to the ground along the entire base length of the
sign;
(f) have a base being of a design and material similar to that of
the Structure located on the Lot on which such sign is to be
installed, with the face of such sign being of a design and
material compatible with the design of said Structure;
(g) be surrounded by landscaping; and
(h) not contain any internal lighting.
-1-
<PAGE>
EXHIBIT G
---------
Form of SNDA
Bank of America Tennessee Form SNDA
This Instrument Prepared By And
Return To:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Tammi D. Parker, Esq.
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
This Subordination, Non-Disturbance and Attornment Agreement (this
"Agreement") dated ___________________, 1999, is made among barnesandnoble.com
llc ("Tenant"), Industrial Developments International (Tennessee), L.P.
("Landlord"), and Bank of America, N.A., a national banking association formerly
known as NationsBank, N.A., a national banking association ("Mortgagee").
WHEREAS, Mortgagee is the owner of a promissory note (herein, as it may
have been or may be from time to time renewed, extended, amended or
supplemented, called the "Note") dated September 30, 1998, executed by Landlord,
payable to the order of Mortgagee, bearing interest and payable as therein
provided, and secured by, among other things, a Tennessee Construction Mortgage,
Deed of Trust, Assignment, Security Agreement and Financing Statement (herein,
as it may have been or may be from time to time renewed, extended, amended or
supplemented, called the "Mortgage"), recorded or to be recorded in the real
property records of Shelby County, Tennessee, covering, among other property,
the land (the "Land") described in Exhibit "A" of the Mortgage, and the
improvements ("Improvements") now and hereafter located thereon (such Land and
Improvements being herein together called the "Property");
WHEREAS, Tenant is the tenant under a lease from Landlord dated
____________, 1999 (herein, as it may from time to time be renewed, extended,
amended or supplemented, called the "Lease"), covering a portion of the Property
(said portion being herein referred to as the "Premises"); and
WHEREAS, the term "Landlord" as used herein means the present landlord
under the Lease or, if the landlord's interest is transferred in any manner, the
successor(s) or assign(s) occupying the position of landlord under the Lease at
the time in question;
THEREFORE, in consideration of the mutual agreements herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Subordination. Tenant agrees and covenants that the Lease and the
rights of Tenant thereunder, all of Tenant's right, title and interest in and to
the property covered by the Lease, and any lease thereafter executed by Tenant
covering any part of the Property, are and shall be subordinate and inferior to
(a) the Mortgage and the rights of Mortgagee thereunder, and all right, title
and interest of Mortgagee in the Property, and (b) all other security documents
now or hereafter securing payment of any indebtedness of the Landlord (or any
prior landlord) to Mortgagee which cover or affect the Property (the "Security
Documents"). This Agreement is not intended and shall not be construed to
subordinate the Lease to any mortgage, deed of trust or other security document
other than those referred to in the preceding sentence, securing the
indebtedness to Mortgagee. Without limitation of any other provision hereof,
Mortgagee may, at its option and without joinder or further consent of Tenant,
Landlord, or anyone else, at any time after the date hereof subordinate the lien
of the Mortgage (or any other lien or security interest held by Mortgagee which
covers or affects the Property) to the Lease by executing an instrument which is
intended for that purpose and which specifies such subordination; and, in the
event of any such election by Mortgagee to subordinate, Tenant will execute any
documents required to
- 1 -
<PAGE>
evidence such subordination; provided however, notwithstanding that the Lease
may by unilateral subordination by Mortgagee hereafter be made superior to the
lien of the Mortgage, the provisions of the Mortgage relative to the rights of
Mortgagee with respect to proceeds arising from an eminent domain taking
(including a voluntary conveyance by Landlord) and/or insurance payable by
reason of damage to or destruction of the Premises shall be prior and superior
to and shall control over any contrary provisions in the Lease.
2. Non-Disturbance. Mortgagee agrees that so long as the Lease is in
full force and effect and Tenant is not in default in the payment of rent,
additional rent or other payments or in the performance of any of the other
terms, covenants or conditions of the Lease on Tenant's part to be performed
(beyond the period, if any, specified in the Lease within which Tenant may cure
such default),
a. Tenant's possession of the Premises under the Lease
shall not be disturbed or interfered with by Mortgagee in the exercise of any of
its rights under the Mortgage, including any foreclosure or conveyance in lieu
of foreclosure, and
b. Mortgagee will not join Tenant as a party defendant
for the purpose of terminating Tenant's interest and estate under the Lease in
any proceeding for foreclosure of the Mortgage.
3. Attornment.
----------
a. Tenant covenants and agrees that in the event of
foreclosure of the Mortgage, whether by power of sale or by court action, or
upon a transfer of the Property by conveyance in lieu of foreclosure (the
purchaser at foreclosure or the transferee in lieu of foreclosure, including
Mortgagee if it is such purchaser or transferee, being herein called "New
Owner"), Tenant shall attorn to the New Owner as Tenant's new landlord, and
agrees that the Lease shall continue in full force and effect as a direct lease
between Tenant and New Owner upon all of the terms, covenants, conditions and
agreements set forth in the Lease and this Agreement, except for provisions
which are impossible for New Owner to perform; provided, however, that in no
event shall the New Owner be:
(1) liable for any act, omission, default,
misrepresentation, or breach of warranty, of any previous landlord (including
Landlord) or obligations accruing prior to New Owner's actual ownership of the
Property;
(2) subject to any offset, defense, claim or
counterclaim which Tenant might be entitled to assert against any previous
landlord (including Landlord);
(3) bound by any payment of rent, additional
rent or other payments, made by Tenant to any previous landlord (including
Landlord) for more than one (1) month in advance;
(4) bound by any amendment, or modification of
the Lease hereafter made, or consent by any previous landlord (including
Landlord) under the Lease to any assignment or sublease hereafter granted,
without the written consent of Mortgagee; or
(5) liable for any deposit that Tenant may have
given to any previous landlord (including Landlord) which has not, as such, been
transferred to New Owner.
b. The provisions of this Agreement regarding attornment by
Tenant shall be self-operative and effective without the necessity of execution
of any new lease or other document on the part of any party hereto or the
respective heirs, legal representatives, successors or assigns of any such
party. Tenant agrees, however, to execute and deliver at any time and from time
to time, upon the request of Landlord or of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, any instrument or
certificate which, in the reasonable judgment of Landlord or of such holder(s),
may be necessary or appropriate in any such foreclosure proceeding or otherwise
to evidence such attornment, including, if requested, a new lease of the
Premises on the same terms and conditions as the Lease for the then unexpired
term of the Lease.
4. Estoppel Certificate. Tenant agrees to execute and deliver from time
to time, upon the request of Landlord or of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, a certificate
regarding the status of the Lease, consisting of statements, if true (or if not,
specifying why not), () that the Lease is in full force and effect, (b) the date
through which
- 2 -
<PAGE>
rentals have been paid, (c) the date of the commencement of the term of the
Lease, (d) the nature of any amendments or modifications of the Lease, (e) that
no default, or state of facts which with the passage of time or notice (or both)
would constitute a default, exists under the Lease, and (f) such other matters
as may be reasonably requested including any certifications required under
Section 25 of the Lease.
5. Acknowledgment and Agreement by Tenant. Tenant acknowledges
and agrees as follows:
a. Tenant acknowledges that Landlord has executed and
delivered to Mortgagee in connection with the financing of the Property an
Assignment of Lessor's Interest in Leases. Tenant hereby expressly consents to
such assignment and agrees that such assignment shall, in all respects, be
superior to any interest Tenant has in the Lease of the Property, subject to the
provisions of this Agreement. Tenant will not amend, alter, terminate, or waive
any provision of, or consent to the amendment, alteration, termination or waiver
of any provision of the Lease without the prior written consent of Mortgagee,
and no termination of the Lease, whether pursuant to the terms of the Lease or
otherwise, will be effective without the prior written consent of Mortgagee.
Tenant shall not prepay any rents or other sums due under the lease for more
than one (1) month in advance of the due date therefor. Tenant acknowledges that
Mortgagee will rely upon this instrument in connection with such financing.
b. Mortgagee, in making any disbursements to Landlord, is
under no obligation or duty to oversee or direct the application of the proceeds
of such disbursements, and such proceeds may be used by Landlord for purposes
other than improvement of the Property.
c. From and after the date hereof, in the event of any act or
omission by Landlord which would give Tenant the right, either immediately or
after the lapse of time, to terminate the Lease or to claim a partial or total
eviction, Tenant will not exercise any such right (i) until it has given written
notice of such act or omission to the Mortgagee; and (ii) until the same period
of time as is given to Landlord under the Lease to cure such act or omission
shall have elapsed following such giving of notice to Mortgagee and following
the time when Mortgagee shall have become entitled under the Mortgage to remedy
the same, but in any event 30 days after receipt of such notice or such longer
period of time as may be necessary to cure or remedy such default, act, or
omission including such period of time necessary to obtain possession of the
Property and thereafter cure such default, act, or omission, during which period
of time Mortgagee shall be permitted to cure or remedy such default, act or
omission; provided, however, that Mortgagee shall have no duty or obligation to
cure or remedy any breach or default. It is specifically agreed that Tenant
shall not, as to Mortgagee, require cure of any such default which is personal
to Landlord, and therefore not susceptible to cure by Mortgagee.
d. In the event that Mortgagee notifies Tenant of a default
under the Mortgage, Note, or Security Documents and demands that Tenant pay its
rent and all other sums due under the Lease directly to Mortgagee, Tenant shall
honor such demand and pay the full amount of its rent and all other sums due
under the Lease directly to Mortgagee or as otherwise required pursuant to such
notice beginning with the payment next due after such notice of default, without
inquiry as to whether a default actually exists under the Mortgage, Security
Documents or otherwise in connection with the Note, and notwithstanding any
contrary instructions of or demands from Landlord.
e. Tenant shall send a copy of any notice or statement under
the Lease to Mortgagee at the same time such notice or statement is sent to
Landlord if such notice or statement has a material impact on the economic
terms, operating covenants or duration of the Lease.
f. Tenant has no right or option of any nature whatsoever,
whether pursuant to the Lease or otherwise, to purchase the Premises or the
Property, or any portion thereof or any interest therein, and to the extent that
Tenant has had, or hereafter acquires, any such right or option, same is hereby
acknowledged to be subject and subordinate to the Mortgage and is hereby waived
and released as against Mortgagee.
g. This Agreement satisfies any condition or requirement in
the Lease relating to the granting of a non-disturbance agreement and Tenant
waives any requirement to the contrary in the Lease.
h. Mortgagee and any New Owner shall have no liability to
Tenant or any other party for any conflict between the provisions of the Lease
and the provisions of any other lease affecting the Property, including, but not
limited to, any provisions relating to exclusive or
- 3 -
<PAGE>
non-conforming uses or rights, renewal options and options to expand, and in the
event of such a conflict, Tenant shall have no right to cancel the Lease or take
any other remedial action against Mortgagee or New Owner, or against any other
party for which Mortgagee or any New Owner would be liable.
i. Mortgagee and any New Owner shall have no obligation nor
incur any liability with respect to the erection or completion of the
improvements in which the Premises are located or for completion of the Premises
or any improvements for Tenant's use and occupancy, either at the commencement
of the term of the Lease or upon any renewal or extension thereof or upon the
addition of additional space, pursuant to any expansion rights contained in the
Lease.
j. Mortgagee and any New Owner shall have no obligation nor
incur any liability with respect to any warranties of any nature whatsoever,
whether pursuant to the Lease or otherwise, including, without limitation, any
warranties respecting use, compliance with zoning, Landlord's title, Landlord's
authority, habitability, fitness for purpose or possession.
k. In the event that Mortgagee or any New Owner shall acquire
title to the Premises or the Property, Mortgagee or such New Owner shall have no
obligation, nor incur any liability, beyond Mortgagee's or New Owner's then
equity interest, if any, in the Property or the Premises, and Tenant shall look
exclusively to such equity interest of Mortgagee or New Owner, if any, for the
payment and discharge of any obligations imposed upon Mortgagee or New Owner
hereunder or under the Lease or for recovery of any judgment from Mortgagee, or
New Owner, and in no event shall Mortgagee, New Owner, nor any of their
respective officers, directors, shareholders, agents, representatives, servants,
employees or partners ever be personally liable for such judgment.
l. Nothing herein contained is intended, nor shall it be
construed, to abridge or adversely affect any right or remedy of Landlord under
the Lease in the event of any default by Tenant in the payment of rent and/or
any other sums due under the Lease or in the performance of any of the other
terms, covenants or conditions of the Lease on Tenant's part to be performed.
m. Landlord has not agreed to any abatement of rent or other
sums or period of "free rent" for the Premises unless same is specifically
provided in the Lease, and Tenant agrees that in the event Mortgagee, or any New
Owner becomes the owner of the Property, no agreement for abatement of rent or
any other sum not specifically provided in the Lease will be binding on
Mortgagee or New Owner.
n. Tenant has never permitted, and will not permit, the
generation, treatment, storage or disposal of any hazardous substance as defined
under federal, state, or local law, on the Premises or Property except for such
substances of a type and only in a quantity normally used in connection with the
occupancy or operation of buildings (such as non-flammable cleaning fluids and
supplies normally used in the day to day operation of first class establishments
similar to the Improvements), which substances are being held, stored, and used
in strict compliance with federal, state and local laws. Tenant shall be solely
responsible for and shall reimburse Landlord for any loss, liability, claim or
expense, including without limitation, cleanup and all other expenses, that
Landlord may incur by reason of Tenant's violation of the requirements of this
Paragraph 5(n).
6. Acknowledgment and Agreement by Landlord. Landlord, as landlord
under the Lease and grantor under the Mortgage, acknowledges and agrees for
itself and its heirs, representatives, successors and assigns, that: (a) this
Agreement does not constitute a waiver by Mortgagee of any of its rights under
the Mortgage, Note, or Security Documents, or in any way release Landlord from
its obligations to comply with the terms, provisions, conditions, covenants,
agreements and clauses of the Mortgage, Note, or Security Documents; (b) the
provisions of the Mortgage, Note, or Security Documents remain in full force and
effect and must be complied with by Landlord; and (c) Tenant is hereby
authorized to pay its rent and all other sums due under the Lease directly to
Mortgagee upon receipt of a notice as set forth in paragraph 5(d) above from
Mortgagee and that Tenant is not obligated to inquire as to whether a default
actually exists under the Mortgage, Security Documents or otherwise in
connection with the Note. Landlord hereby releases and discharges Tenant of and
from any liability to Landlord resulting from Tenant's payment to Mortgagee in
accordance with this Agreement. Landlord represents and warrants to Mortgagee
that a true and complete copy of the Lease has been delivered by Landlord to
Mortgagee.
7. Lease Status. Landlord and Tenant certify to Mortgagee that neither
Landlord nor Tenant has knowledge of any default on the part of the other under
the Lease, that the Lease is
- 4 -
<PAGE>
bona fide and contains all of the agreements of the parties thereto with respect
to the letting of the Premises and that all of the agreements and provisions
therein contained are in full force and effect.
8. Notices. All notices, requests, consents, demands and other
communications required or which any party desires to give hereunder shall be in
writing and shall be deemed sufficiently given or furnished if delivered by
personal delivery, by telegram, telex, or facsimile, by expedited delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, at the addresses specified at the end of this Agreement
(unless changed by similar notice in writing given by the particular party whose
address is to be changed). Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery service or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or, in the case of telegram, telex or
facsimile, upon receipt. Notwithstanding the foregoing, no notice of change of
address shall be effective except upon receipt. This Paragraph 8 shall not be
construed in any way to affect or impair any waiver of notice or demand provided
in this Agreement or in the lease or in any document evidencing, securing or
pertaining to the loan evidenced by the Note or to require giving of notice or
demand to or upon any person in any situation or for any reason.
9. Miscellaneous.
a. This Agreement supersedes any inconsistent provision of the
Lease.
b. Nothing contained in this Agreement shall be construed to
derogate from in any way impair, or affect the lien, security interest or
provisions of the Mortgage, Note, or Security Documents.
c. This Agreement shall inure to the benefit of the parties
hereto, their respective successors and permitted assigns, and any New Owner,
and its heirs, personal representatives, successors and assigns; provided,
however, that in the event of the assignment or transfer of the interest of
Mortgagee, all obligations and liabilities of the assigning Mortgagee under this
Agreement shall terminate, and thereupon all such obligations and liabilities
shall be the responsibility of the party to whom Mortgagee's interest is
assigned or transferred; and provided further that the interest of Tenant under
this Agreement may not be assigned or transferred without the prior written
consent of Mortgagee.
d. THIS AGREEMENT AND ITS VALIDITY, ENFORCEMENT AND
INTERPRETATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TENNESSEE AND
APPLICABLE UNITED STATES FEDERAL LAW EXCEPT ONLY TO THE EXTENT, IF ANY, THAT THE
LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED NECESSARILY CONTROL.
e. The words "herein", "hereof", "hereunder" and other similar
compounds of the word "here" as used in this Agreement refer to this entire
Agreement and not to any particular section or provision.
f. This Agreement may not be modified orally or in any manner
other than by an agreement in writing signed by the parties hereto or their
respective successors in interest.
g. If any provision of the Agreement shall be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not apply to or affect any other provision hereof, but
this Agreement shall be construed as if such invalidity, illegibility, or
unenforceability did not exist.
h. If any bankruptcy proceedings shall hereafter commence with
respect to Landlord, and if the Lease is rejected by the trustee pursuant to
Section 365(h) of the United States Bankruptcy Code, Tenant agrees with
Mortgagee (i) not to treat such lease as terminated and (ii) to remain in
possession of the Premises.
[SIGNATURES BEGIN ON NEXT PAGE]
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and sealed as of the date first above written.
TENANT:
------
Barnesandnoble.com LLC
By:__________________________________
Name:
Title:
Attest:______________________________
Name:
Title:
[CORPORATE SEAL]
STATE OF ____________
COUNTY OF _________
Personally appeared before me, ________________, a Notary Public in and
for said State and County duly commissioned and qualified,
______________________ and ______________________, with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence), and who upon
oath acknowledged that they executed the within instrument for the purposes
therein contained and who further acknowledged that they are the
___________________ and _______________ respectively of barnesandnoble.com llc,
a Delaware limited liability company (the "Tenant"), and are authorized by the
Tenant to execute this instrument on behalf of the Tenant.
Witness my hand, at office, this ____ day of ___________, 1999.
__________________________________
NOTARY PUBLIC
[AFFIX NOTARIAL SEAL]
My Commission Expires:
__________________________
LANDLORD:
Industrial Developments
International (Tennessee), L.P.,
a Georgia limited partnership
By: IDI (Tennessee), Inc., a Georgia
corporation, its sole general
partner
By:____________________________
Name:_____________________
Title:____________________
Attest:________________________
Name:_____________________
Title:____________________
[Corporate Seal]
- 6 -
<PAGE>
STATE OF ____________
COUNTY OF _________
Personally appeared before me, ________________, a Notary Public in and
for the said State and County duly commissioned and qualified,
______________________ and _________________________ with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence), and who upon
oath acknowledged that they executed the within instrument for the purposes
therein contained and who further acknowledged that they are the
___________________ and __________________ respectively of IDI (Tennessee),
Inc., a Georgia corporation and sole general partner of Industrial Developments
International (Tennessee), L.P., a Georgia limited partnership (the "Landlord"),
and are authorized by IDI (Tennessee), Inc. as sole general partner of the
Landlord to execute this instrument on behalf of the Landlord.
Witness my hand, at office, this ____ day of ___________, 1999.
NOTARY PUBLIC
[AFFIX NOTARIAL SEAL]
My Commission Expires:
_____________________________
MORTGAGEE:
---------
BANK OF AMERICA, N.A., formerly known
as NationsBank, N.A.
By:
Name:
Title:
[BANK SEAL]
STATE OF ____________
COUNTY OF _________
Personally appeared before me, ________________, a Notary Public in and
for the said State and County duly commissioned and qualified,
___________________, with whom I am personally acquainted (or proved to me on
the basis of satisfactory evidence), and who upon oath acknowledged that
_____________________ executed the within instrument for the purposes therein
contained and who further acknowledged that _________________ is the
________________ of Bank of America, N.A., formerly known as NationsBank, N.A.
(the "Mortgagee"), and is authorized by the Mortgagee to execute this instrument
on behalf of the Mortgagee.
Witness my hand, at office, this ____ day of ___________, 1999.
NOTARY PUBLIC
[AFFIX NOTARIAL SEAL]
My Commission Expires:
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<PAGE>
ADDRESS OF TENANT:
- - -----------------
barnesandnoble.com llc
76 Ninth Avenue
New York, New York 10011
Attn: William Duffy
ADDRESS OF LANDLORD:
- - -------------------
Industrial Developments International (Tennessee), L.P.
c/o Industrial Developments International, Inc.
3424 Peachtree Road, N.E., Suite 1500
Atlanta, Georgia 30326
Attn: Vice President - Operations
ADDRESS OF MORTGAGEE:
- - --------------------
NationsBank, N.A.
NationsBank Plaza - Sixth Floor
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Real Estate Banking Group
- 8 -
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 8th day of September, 1999 (the
"Commencement Date") between ProLogis Development Services Incorporated, a
Delaware corporation, having its principal office at 14100 East 35th Place,
Aurora, Colorado 80011 ("Landlord"), and the Tenant named below ("Tenant").
Tenant: barnesandnoble.com llc
Tenant's representative, William F. Duffy, Vice President of Operations
address, and phone no.: 76 Ninth Avenue, 11th Floor
New York, NY 10011
(212) 414-6006
Premises: The Land and the Building, together with (x)
any and all other improvements and structures
(now or hereafter erected) on the Land, and
(y) all of Landlord's right, title and
interest in and to all easements, rights and
other matters appurtenant to the Land or the
Building and in and to any land lying in the
bed of any roads adjacent to the Land.
Project: That certain industrial project commonly known
as Damonte Ranch Trade Center I, which
industrial project is composed of the parcels
of land lying and being in the County of
Washoe, State of Nevada, as more particular
described in Exhibit B annexed hereto,
together with any improvements now or
hereafter erected thereon.
Building: That certain building that is to be erected by
Landlord in accordance with Addendum 2 of this
Lease, which building is to contain
approximately 600,000 rentable square feet of
space.
Land: That certain parcel of land lying and being in
the County of Washoe and State of Nevada, as
more particularly described in Exhibit A
annexed hereto.
<PAGE>
Common Area Land: That certain parcel of land lying and being in
the County of Washoe and State of Nevada, as
more particularly described in Exhibit C
annexed hereto.
Tenant's Project
Proportionate
Share: 33.96% (subject to downward adjustment as
provided for under this Lease). Tenant's
Project Proportionate Share has been
calculated based on the fraction, the
numerator of which is the square footage of
the Building (for purposes of this estimate is
deemed to be 600,000) and the denominator of
which is the maximum buildable area contained
within the Project (which maximum buildable
area Landlord represents and warrants is, as
of the Commencement Date, 1,766,727 square
feet, it being agreed that (x) Tenant's sole
remedy in the event of a breach of such
representation and warranty shall be a
re-calculation of Tenant's Project
Proportionate Share and a reduction, both
retroactively and prospectively, in the
Additional Rent for the Common Area Land (as
defined below) and (y) in no event shall
Tenant's Project Proportionate Share ever
exceed 33.96%)
Lease Term: Beginning on the Commencement Date and ending
on the last day of the 120th full calendar
month following the Rent Commencement Date (as
hereinafter defined), the term "Lease Term" to
include any renewal or extension terms.
Rent Commencement
Date: Thirty (30) days following "Substantial
Completion of the Base Building Work" (as such
term is defined in Addendum 2).
Initial Monthly Base
Rent: $174,000.00 (subject to adjustment in
accordance with Addendum 1 and the second
paragraph of Paragraph 4).
2
<PAGE>
Initial Estimated Monthly
Additional Rent
Payments for the Common
Area Land: $6,000.00 (which is composed of the
Association Fees (estimated at $1,500), the
Property Management Fee (estimated at $3,000),
and the Insurance Fee (estimated at $1,500),
such terms being defined below)
Initial Estimated Monthly
Base Rent and
Additional Rent for Common
Area Land Payments: $180,000.00
Security Deposit: $180,000.00
Broker: Benchmark Associates, Inc./David Haut; C.B.
Richard Ellis/Dave Simonsen
Addenda: Addendum 1 (Base Rent Adjustments); Addendum 2
(Construction); Addendum 3 (Renewal Options);
Addendum 4 (Right of First Offer); Addendum 5
(Letter of Credit)
Granting Clause. In consideration of the terms, covenants, and
conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord,
the Premises, to have and to hold for the Lease Term, subject to the terms,
covenants and conditions of this Lease.
Acceptance of Premises. Subject to (i) Punch List items (as defined
in Addendum 2), (ii) all of Landlord's obligations and warranties as set forth
in Paragraphs 3, 10, 15, 16, 30 and 43 of this Lease, and (iii) any latent
defects, Tenant shall accept the Premises in its as-is condition as of the Rent
Commencement Date. Except for Punch List Items or as otherwise provided in
Paragraphs 3, 10, 15, 16, 30 and 43 of this Lease, in no event shall Landlord
have any obligation to repair or cure any defects in the Premises (except for
latent defects).
Landlord represents and warrants, to Landlord's knowledge, that:
(i) as of the Commencement Date, there are no deed restrictions, use
restrictions or other restrictive covenants (including, without limitation, the
Declaration (as hereinafter defined) and the other Permitted Encumbrances (as
hereinafter defined)) that would adversely affect Tenant's Intended Use (as
defined below) of the Premises; (ii) on the Rent Commencement Date, Tenant shall
be able to operate in the Premises twenty-four (24) hours a day, seven (7) days
a week, three hundred sixty-five (365) days a year for general warehouse
purposes; (iii) as of the
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Commencement Date, there are no Legal Requirements or restrictive covenants
(including, without limitation, the Declaration and the other Permitted
Encumbrances) that would affect the ability to construct and operate the
Premises in accordance with the Performance Specifications (as defined in
Addendum 2); (iv) as of the Commencement Date, there are no liens, encumbrances,
security interests, charges, reservations, easements, rights-of-way, restrictive
covenants, conditions, limitations, or any other burden covering or affecting
the Land, other than those (the "Permitted Encumbrances") listed on Exhibit D
annexed hereto and made a part hereof; (v) as of the Commencement Date, the Land
is directly accessible from Old Virginia Road, which is a public road (as shown
on Parcel Map No. 4387) under construction and which is contiguous to the Land;
(vi) as of the Commencement Date, all utility, water and sewer services
necessary for the construction of the Building in accordance with the
Performance Specifications and the operation and use thereof for the Intended
Use are available at the boundaries of the Land; and (vii) as of the
Commencement Date, the Land is zoned OC-I. For purposes of this paragraph,
Landlord's knowledge shall mean the actual knowledge of David Morze and John
Hanson, after appropriate due inquiry and investigation. Landlord represents and
warrants to Tenant that no employee of Landlord has any material knowledge that
is not possessed by David Morze or John Hanson about any of the matters that are
the subject of the representations and warranties contained in the foregoing
clauses (i) through (vii).
Use. Tenant may use the Premises for the following uses twenty-four
(24) hours a day, seven (7) days a week, three hundred sixty-five (365) days a
year (such uses for such time periods, collectively, the "Intended Use"): (i) as
a warehouse facility for the purpose of receiving, shipping, storing, processing
and selling products, materials and merchandise (which may include, without
limitation, the receiving, shipping, storing, processing and selling of books,
books on tape, books on computer disk, books on CD-ROM, magazines, periodicals,
computer software, compact discs and other forms of recorded music and
videotapes, together with any other consumer products), (ii) for general,
executive and administrative offices, and (iii) for all lawful uses ancillary to
the uses described in the preceding clauses (i) and (ii) of this sentence. In
addition, Tenant may use the Premises for any other legally permitted use which
shall not reduce the value of the Project. Tenant shall not permit any
objectionable smoke, dust, gas, noise, or vibrations (other than vibrations from
any generator) to emanate from the Premises, or take any other action, that
would constitute a nuisance or would unreasonably disturb, unreasonably
interfere with, or endanger Landlord or any tenants of the Project. Landlord
acknowledges and agrees that Tenant's Intended Use will not violate any of the
restrictions in the preceding sentence.
Except as otherwise expressly set forth in the Lease, including,
without limitation, Paragraph 43 of the Lease, Tenant shall comply with all
Legal Requirements (as defined below) relating to the Premises. Notwithstanding
the foregoing, if (i) a new Legal Requirement is enacted during the Lease Term,
and (ii) repairs, alterations or modifications to the Premises are necessary and
legally required (i.e. the Premises is not grandfathered) in order for the
Premises to comply with such new Legal Requirement, then Landlord shall make
those necessary repairs, modifications or alterations to the Premises. Upon
completion thereof, (i) Landlord shall furnish Tenant with a statement setting
forth the actual out-of-pocket cost to Landlord of such repairs, modifications
or alterations to the Premises (together with invoices and other evidence
reasonably necessary to corroborate such cost), and (ii) the actual
out-of-pocket cost of such repairs,
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modifications or alterations to the Premises shall be amortized on a straight
line basis in equal monthly installments over a period equal to the useful life
thereof under GAAP (as defined below), and such monthly installments shall
thereafter be payable by Tenant to Landlord on the first day of each calendar
month during the Lease Term until the sooner of (i) the last day of Lease Term
and (ii) the last day of such useful life (it being agreed that Tenant shall not
be responsible for any portion of such costs that relates to the portion of such
useful life that extends beyond the Lease Term). Any installment payable
pursuant to the preceding sentence for a partial month shall be appropriately
prorated. For purposes of this Lease, the term "Legal Requirements" shall mean
all laws, statutes, codes, ordinances, orders and regulations of any or all of
the federal, state or local government or governmental (or quasi-governmental)
authority having jurisdiction over the Land, the Building and/or the Premises,
whether now or hereafter in force. Tenant shall have the right at its expense to
contest, by appropriate legal proceedings conducted in good faith and with due
diligence, the validity or application, in whole or in part, of any Legal
Requirements with which Tenant is obligated to comply and, so long as such
proceeding is being conducted in good faith and with due diligence and deferral
of compliance does not subject Landlord to civil penalties (unless Tenant elects
to pay such penalties) or criminal prosecution, Tenant may defer compliance
pending the outcome of such contest. Landlord shall, upon request by Tenant,
reasonably cooperate with any such contest (at no expense to Landlord, unless
Tenant pays such expense) and shall promptly execute and deliver to Tenant any
documents, information, consents or other materials required or reasonably
desirable to prosecute such contest. Notwithstanding the fact that the
Commencement Date occurred on the date of this Lease, Tenant shall have no
obligations or liabilities under this Lease unless and until the Rent
Commencement Date occurs, except as and to the extent provided in the next
succeeding sentence; provided, however, that any occupation of the Premises by
Tenant prior to the Rent Commencement Date shall be subject to all obligations
of Tenant under this Lease, except the obligation to pay Base Rent, Additional
Rent for the Common Area Land (as defined below), the Additional Rental Amount
(as defined in Addendum 2), utility charges and Taxes (as defined below).
Notwithstanding the foregoing, if, prior to the Rent Commencement Date, Tenant
occupies any portion of the Building for the conduct of its business for the
Intended Use (as opposed to the prosecution of Tenant's Initial Work (as defined
in Addendum 2) or the use of the Premises for the activities described in the
definition of "Substantial Completion of Base Building Shell" as contained in
the Workletter) for more than 30 days, then Tenant shall pay to Landlord as
additional rent an amount equal to: (i) the initial Base Rent (calculated on a
per diem basis based on a 365 day year), in the event that Tenant so occupies at
least half of the Building; or (ii) one-half of the initial Base Rent
(calculated on a per diem basis based on a 365 day year), in the event that
Tenant so occupies less than one-half of the Building, in each such instance,
for each day in the period commencing 31 days after the first date on which
Tenant so occupies the Premises for the conduct of its business for the Intended
Use and ending on the day before the Rent Commencement Date. No occupancy of any
portion of the Building as described preceding sentence shall (i) be deemed to
be an agreement by Tenant that any portion of the Base Building Work has been
Substantially Completed (as defined in Addendum 2) or (ii) otherwise relieve
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Landlord from any of its obligations under Addendum 2 (including, without
limitation, its obligation to pay Tenant the Liquidated Damages (as defined in
Addendum 2)).
Base Rent. Tenant shall pay Base Rent in the amount set forth
above. The Security Deposit shall be due and payable on the date hereof, and the
first month's Base Rent and the first monthly installment of estimated
Additional Rent for Common Area Land shall be due and payable on the Rent
Commencement Date. Tenant promises to pay to Landlord in advance, without
demand, deduction or set-off (except as expressly provided in this Lease),
monthly installments of Base Rent on or before the first day of each calendar
month succeeding the Rent Commencement Date. Payments of Base Rent for any
fractional calendar month shall be appropriately prorated. All payments required
to be made by Tenant to Landlord hereunder shall be payable at such address in
the United States as Landlord may specify from time to time by written notice
delivered in accordance herewith. The obligation of Tenant to pay Base Rent and
other sums to Landlord and the obligations of Landlord under this Lease are
independent obligations. Tenant shall have no right at any time to abate, reduce
or set-off any rent due hereunder except as may be expressly provided in this
Lease.
Within ten (10) days after the Substantial Completion of the
Building Shell (as defined in Addendum 2), Landlord, at Landlord's cost and
expense, shall have Landlord's project architect measure the square footage of
the Building from dripline to dripline on each side of the exterior of the outer
walls of the Building. If the measured square footage of the Building (as
finally determined under this paragraph) is less than 600,000 square feet, then
this Lease shall be amended to reflect the actual measured square footage of the
Building, the monthly Base Rent under the Lease shall be reduced (both
retroactively and for the remainder of the Lease Term) by $3.48 per year for
each square foot by which the Building is less than 600,000 square feet, and
Tenant's Project Proportionate Share and Additional Rent for the Common Area
Land shall be adjusted accordingly (both retroactively and for the remainder of
the Lease Term). Within 5 days after Landlord's architect determines the square
footage of the Building in accordance with the method contained in the first
sentence of this paragraph, Landlord shall cause Landlord's project architect to
certify to Landlord and Tenant in writing such determination of the square
footage of the Building. Tenant's architect may review such certification and if
Tenant's architect disputes such measurement, then Landlord's project architect
and Tenant's architect shall use good faith efforts to try and resolve the
dispute over the measurement. In connection therewith, Tenant's architect shall
have the right to measure the Building in accordance with the method of
measurement set forth in the first sentence of this paragraph. If the two
architects are unable to resolve the dispute over the measurement within 15
days, then the two architects shall choose a third architect who is impartial
and independent and the third architect shall measure the total square footage
of the Building in accordance with the terms of this paragraph and the third
architect's measurement of the square footage of the Building shall be final and
binding on both Landlord and Tenant. If the measured square footage of the
Building (as finally determined under this paragraph) is equal to or greater
than 600,000 square feet, then the Lease shall not be amended or modified.
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Security Deposit. The Security Deposit shall be held by Landlord as
security for the performance of Tenant's obligations under this Lease. The
Security Deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon each occurrence of an Event of Default
(hereinafter defined), Landlord may use all or part of the Security Deposit to
pay delinquent payments due under this Lease, and the cost of any damage,
injury, expense or liability caused by such Event of Default, without prejudice
to any other remedy provided herein or provided by law. Tenant shall pay
Landlord on demand the amount that will restore the Security Deposit to its
original amount. Landlord's obligation respecting the Security Deposit is that
of a debtor, not a trustee; no interest shall accrue thereon. The Security
Deposit shall be the property of Landlord, and unless used by Landlord as set
forth above, shall be paid to Tenant within 30 days of the expiration or
termination of this Lease. Landlord shall be released from any obligation with
respect to the Security Deposit upon transfer of this Lease and the Premises to
a person or entity assuming Landlord's obligations under this Paragraph 5. At
Tenant's election, the Security Deposit may be in the form of an unconditional,
irrevocable letter of credit from a bank reasonably acceptable to Landlord, and
in substantially similar form as attached hereto as Addendum 5 to this Lease or
in another form reasonably acceptable to Landlord. The letter of credit shall
either provide that it shall automatically renew during each year of the Lease
Term or shall otherwise be renewed at least 30 days prior to its expiration
during the term of the Lease (it being agreed that Tenant may elect at any time
to substitute cash for the letter of credit). The letter of credit shall provide
that it may be drawn down upon by Landlord at any time Landlord delivers its
sight draft to the bank, together with a "drawing" request in the form of
Exhibit E annexed hereto. If Landlord sells or conveys the Premises, Tenant
shall, at Landlord's request (and at no expense to Tenant), cooperate in having
the letter of credit transferred to the purchaser. If the letter of credit is
ever drawn upon by Landlord pursuant to the terms of the Lease and Addendum 5 to
the Lease, Tenant shall within ten (10) days thereafter cause the letter of
credit to be restored to its original amount. Landlord shall not draw on the
letter of credit unless and until (i) an Event of Default occurs or (ii) the
expiration or termination of the Lease Term occurs and Tenant has defaulted in
its obligations under Paragraph 21 below.
Additional Rent Payments for the Common Area Land. Landlord will
maintain in good order and repair the Common Area Land and Landlord hereby
grants to Tenant, its agents, employees and invitees the nonexclusive right to
use the Common Area Land in common with other tenants of the Project. Commencing
on the Rent Commencement Date, during each month of the Lease Term, on the same
date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12,
as reasonably estimated by Landlord from time to time, of Tenant's Project
Proportionate Share of the projected Additional Rent for the Common Area Land
for the applicable calendar year. Payments thereof for any fractional calendar
month or fractional calendar year shall be appropriately prorated. The term
"Additional Rent for the Common Area Land" means, for any calendar year all or
any part of which occurs during the Lease Term, only the following costs and
expenses: (A) the actual charges or assessments levied against the Premises for
such calendar year pursuant to the Declaration (the "Association Fee") (it being
agreed, however, that (x) the Association Fee for the 12-month period following
the Rent Commencement Date shall, for purposes of this Lease, be capped at $.03
per square foot of the
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Building and (y) in no event shall the Association Fee include, and in no event
shall Tenant be obligated to pay or reimburse Landlord for, (i) any penalties,
late charges, interest, fines or assessments resulting from a default by
Landlord under the Declaration or (ii) any amounts payable under the Declaration
on account of Capital (as defined below) improvements, repairs or replacements,
other than in connection with landscaping); (B) property management fee equal to
$3,000 per month increased annually by 3% ("Property Management Fee"); and all
(C) of Landlord's insurance cost for both the Premises and the Common Area Land
for such calendar year ("Insurance Fee"). Notwithstanding anything to the
contrary contained herein, Tenant shall not be obligated to pay or reimburse
Landlord for Association Fees on account of any calendar year to the extent that
Association Fees for such calendar year have increased by more than five percent
(5%) per annum, compounded annually on a cumulative basis ("Cap"), from the
Association Fees for (I) in the case of the initial term of this Lease, the
calendar year in which the Rent Commencement Date occurs (it being agreed that
the Association Fee for such first calendar year shall in no event exceed $.03
per square foot of the Building) and (II) in the case of any renewal term, the
calendar year in which the first day of such renewal term occurs (it being
agreed, however, that, for purposes of such renewal term only, the Association
Fee for the calendar year in which the first day of such renewal term occurs
shall not (x) include the cost of any Capital improvements, repairs,
replacements or reserves of any kind, and (y) be subject to the Cap). In no
event shall any Additional Rent for the Common Area Land be payable by Tenant
for, during or on account of any period prior to the Rent Commencement Date. For
purposes of this Lease, a repair, replacement or improvement shall be "Capital"
if, in accordance with generally accepted accounting principles consistently
applied ("GAAP"), the costs associated with such repair, replacement or
improvement are generally capitalized.
Landlord shall provide Tenant within 120 days following the final
day of each calendar year during the Lease Term an itemized statement setting
forth in reasonable detail the actual Additional Rent for Common Area Land for
such year (which statement shall be accompanied by invoices and such other
reasonable corroborating documentation as Tenant may request from time to time).
If Tenant's total estimated payments of Additional Rent for Common Area Land on
account of any such calendar year are less than Tenant's Project Proportionate
Share of actual Additional Rent for the Common Area Land for such year (as
limited by the Cap), then Tenant shall pay the difference to Landlord within 30
days after demand, and if more, then Landlord shall retain such excess and
credit it against Tenant's next payments due on account of Additional Rent for
the Common Area Land (or if there is less than 6 months remaining in the Lease
Term, or if the Lease Term has terminated or expired, Landlord shall refund such
excess to Tenant). The estimated Additional Rent for the Common Area Land set
forth in this paragraph of this Lease and any other operating expenses for the
Premises or for Items as set forth in Paragraph 11 of this Lease are only
estimates, and Landlord makes no guaranty or warranty that such estimates will
be accurate.
Utilities. Tenant shall pay directly to the utility provider
servicing the Premises for all water, gas, electricity, heat, light, power,
telephone, sewer, sprinkler services, refuse and trash collection, and other
utilities and services used on the Premises, all maintenance charges for
utilities, and any storm sewer charges or other similar charges for utilities
imposed by any
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governmental entity or utility provider, together with any taxes, penalties,
surcharges or the like pertaining to Tenant's use of the Premises. Landlord, as
part of the Base Building Work, shall (x) install all telephone, gas, water,
sanitary sewer and electric utilities in accordance with the Performance
Specifications and in a manner consistent with "Class A" warehouse facilities in
the Reno, Nevada area (provided that in the event of any inconsistency between
such standards, the Performance Specifications shall control) and (y) install
any other utilities that are customarily installed in "Class A" warehouse
facilities in the Reno, Nevada area (excluding any telecommunication equipment
or lines beyond the point of connection to the Building). Prior to the Rent
Commencement Date, Landlord shall at its expense cause all of the utilities
described in the preceding sentence to be separately metered, such that user
charges for such utilities will be charged directly to Tenant by the utility
provider. No interruption or failure of utilities shall result in the
termination of this Lease or the abatement of rent, except as otherwise provided
for in the following paragraph.
Notwithstanding anything to the contrary contained in this Lease,
if an interruption or cessation of utilities results from a cause within the
Landlord's reasonable control and the Premises or any portion thereof are not
usable by Tenant for the conduct of Tenant's business as a result thereof, Base
Rent, the Additional Rental Amount and applicable Additional Rent for Common
Area Land shall be abated for the period which commences three (3) business days
after the date Tenant gives to Landlord notice of such interruption until such
utilities are restored.
Taxes. "Taxes" shall mean all real property taxes, assessments and
governmental charges which shall be levied, assessed or imposed against the
Premises during the Lease Term; the parties hereby acknowledge that the Premises
constitute a separate tax parcel (i.e., Parcel 1 of Parcel 1 of Parcel Map No.
3487, APN: 140-010-09) provided, however, that if, at any time during the Lease
Term, the methods of a taxation prevailing on the date hereof shall be altered
so that in lieu of, in addition to, or as a substitute for, the whole or any
part of the items referred to above now levied, assessed or imposed on real
estate or upon the owner or owners of real estate, there shall be levied,
assessed or imposed any franchise tax, any excise, transaction, sales for
privilege tax, assessment, levy or charge measured by or based, in whole or in
part, upon the rents from the Premises the same shall be included within Taxes,
provided, however, that the terms of the legislation imposing any such tax,
assessment, levy or charge or any other factors, documents or instruments
evidence that such tax, assessment, levy or charge was intended to serve as a
real estate tax. Notwithstanding the foregoing, "Taxes" shall not include: (A)
any inheritance, estate, succession, transfer, gains, mortgage recording, gift,
franchise, corporation, income or profit tax or capital levy; and (B) any
special non-recurring assessments arising as a result of the development of the
Project (and not specifically related to the Premises). Assessments included
within Taxes shall, regardless of how actually paid, be deemed to be paid in the
maximum number of installments permitted by the taxing authority imposing any
such assessment.
Commencing on the Rent Commencement Date and thereafter throughout
the Lease Term, Tenant shall, in the manner set forth in this Paragraph 8, pay
the Taxes for each tax
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or fiscal year (a "Tax Year") of the relevant taxing authority occurring within
the Lease Term. If, however, (i) the Rent Commencement Date shall occur on a day
other than the first day of any such Tax Year, then the Tenant's payment of
Taxes for such Tax Year shall be a pro-rated amount (computed on a per diem
basis), based upon the number of days within such Tax Year occurring from and
after the Rent Commencement Date, or (ii) the expiration of this Lease shall
occur on a day other than the last day of a Tax Year, then Tenant's payment of
Taxes for such tax or fiscal year shall be a pro-rated amount (computed on a per
diem basis), based upon the number of days within such Tax Year occurring within
the Lease Term.
Landlord shall cause each taxing authority having jurisdiction over
the Premises to send statements for Taxes directly to Tenant and Tenant shall
make timely payment of all such Taxes, subject to the provisions of Paragraph
8(b) hereof. Tenant shall, upon written request of Landlord, furnish Landlord
with (i) evidence that Taxes have been paid in accordance with this Paragraph
8(b) and 8(c) all correspondence sent to, or received by, Tenant from
governmental authorities regarding Taxes. If Landlord is unable to cause any
such taxing authority to render statements for Taxes directly to Tenant, then,
Landlord, at anytime prior to the end of any Tax Year may deliver to Tenant a
statement for Taxes for such Tax Year. Tenant, for each such Tax Year, shall pay
to Landlord the amount set forth on such statement for such Tax Year in equal
installments in the same number of installments as Taxes are required to be paid
to the such taxing authority, with each such installment being due on the later
to occur of (x) the date that is thirty (30) days prior to the due date of the
corresponding installment of Taxes and (y) the date that is ten (10) business
days after the date that Tenant receives the statement from Landlord. Landlord
shall, together with the provision of any statement to Tenant, provide Tenant
with a copy of any tax bill to which such statement applies. If there shall be
any increase in Taxes for any Tax Year, whether prior to, during or after such
Tax Year, or if there shall be any decrease in Taxes for any such Tax Year,
whether prior to, during or after such Tax Year, then Tenant's payment for Taxes
for such Tax Year shall be recalculated and (i) if there has been an
underpayment, Tenant shall pay to Landlord, within 30 days after Landlord's
request therefor, the amount of such underpayment, or (ii) if there has been an
overpayment, Landlord shall, within 30 days after Tenant's request therefor,
refund to Tenant the amount of such overpayment.
If with respect to any Tax Year for which Tenant shall have made
payment of Taxes, Landlord shall receive a refund of any portion of Taxes,
Landlord, within 30 days after Tenant's request therefor, shall pay to Tenant
the amount of such refund.
Tenant shall, at its sole cost and expense, have the right to file
a protest with respect to the assessed valuation of the Premises and commence
any administrative or judicial proceeding as may be necessary in connection
therewith. Tenant shall keep Landlord informed of the progress of any such
proceeding, including, by providing copies of any correspondence and other
documents submitted in connection therewith. Landlord, at Tenant's cost and
expense, shall fully cooperate with Tenant with respect to any such protest and
proceeding, including, without limitation, by promptly providing Tenant with
copies of all relevant materials, documents, contracts, invoices and, if
necessary, by attending meetings and/or appearing at proceedings. Tenant shall
indemnify, defend and hold harmless Landlord from and against all
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liabilities, damages, interest, penalties and expenses (including reasonable
attorneys' fees and expenses), resulting from or incurred in connection with any
such protest or proceeding by Tenant.
Insurance. (a) Landlord, throughout the Lease Term, shall maintain
(i) commercial liability insurance, including a contractual liability
endorsement, and (ii) all risk property insurance covering the full replacement
cost of the Building. All insurance to be maintained by Landlord pursuant to
this Paragraph 9, (i) shall be carried in favor of Landlord and shall name
Tenant as an additional insured (for commercial liability insurance only), (ii)
shall be in such form normally carried by prudent owners of premises similarly
situated, due regard given to the type of premises (i.e., size, age, condition),
its construction and its use and occupancy, (iii) shall be issued by domestic
insurance companies, licensed to do business in the State of Nevada and having a
Best's rating of AVIII or better or the then equivalent of such rating and
having a policyholders surplus of at least $100,000,000, and (iv) shall be
written on policies which have a term of not less than one year, and which shall
provide that no cancellation, non-renewal, change or reduction in the coverages
afforded under said policies will be effective until at least thirty (30) days'
prior written notice of such cancellation or reduction has been given to Tenant.
Certificates of the foregoing insurance shall be delivered by Landlord to Tenant
on or prior to the Rent Commencement Date Landlord may, but is not obligated to,
maintain such other insurance and additional coverages as it may deem reasonably
necessary, including, but not limited to, rent loss insurance; provided,
however, such other insurance and additional coverage shall be consistent (in
both type and limit) with insurance maintained in connection with industrial
warehouse buildings owned by institutional landlords in the Reno, Nevada area.
The cost of all insurance maintained by Landlord under this Paragraph 9 shall be
competitive with the cost of comparable insurance available from other insurance
carriers. The Project or Building may be included in a blanket policy (in which
case the cost of such insurance allocable to the Project or Building will be
reasonably allocated by Landlord based upon the insurer's cost calculations),
provided that such blanket policy (i) complies in all respects with the terms of
this Paragraph 9, (ii) expressly identifies the Premises as being covered by
such blanket insurance policy, and (iii) does not provide for any possibility of
reduction of coverage by reason of any damage to any other property named in
such blanket insurance policy.
Tenant, at its expense, shall maintain during the Lease Term: all
risk property insurance covering the full replacement cost of all property and
improvements installed or placed in the Premises by Tenant at Tenant's expense;
worker's compensation insurance with no less than the minimum limits required by
law; employer's liability insurance with such limits as required by law; and
commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 for property damage,
personal injuries, or deaths of persons occurring in or about the Premises.
Landlord may from time to time require reasonable increases in any such limits,
such increases to be consistent with the insurance limits required by comparable
landlords at comparable projects. The commercial liability policies shall name
Landlord as an additional insured, insure on an occurrence and not a claims-made
basis, be issued by insurance companies which are domestic insurance companies,
licensed to do business
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in the State of Nevada and having a Best's rating of AVIII or better or the then
equivalent of such rating and having a policyholders surplus of at least
$100,000,000, not be cancelable unless 30 days prior written notice shall have
been given to Landlord, contain a hostile fire endorsement and a contractual
liability endorsement and provide primary coverage to Landlord (any policy
issued to Landlord providing duplicate or similar coverage shall be deemed
excess over Tenant's policies). Such policies or certificates thereof shall be
delivered to Landlord by Tenant upon the earlier of (i) the Rent Commencement
Date, or (ii) the date Tenant occupies the Premises for any reason whatsoever,
including without limitation, the date Tenant enters onto the Premises to
conduct the Initial Tenant Work and upon each renewal of said insurance.
The all risk property or comparable insurance obtained by Landlord
and Tenant shall include a waiver of subrogation by the insurers and all rights
based upon an assignment from its insured, against Landlord or Tenant, their
officers, directors, members, employees, managers, agents, invitees and
contractors, in connection with any loss or damage thereby insured against.
Neither party nor its officers, directors, employees, members, managers,
invitees or agents shall be liable to the other for loss or damage caused by any
risk coverable by all risk property insurance, and each party waives any claims
against the other party, and its officers, directors, employees, members
managers, invitees and agents for such loss or damage. The failure of a party to
insure its property shall not void this waiver.
Subject to Tenant's rent abatement rights contained in Paragraph 7
above, Landlord and its agents and employees shall not be liable for, and Tenant
hereby waives all claims against such parties for, business interruption and
losses occasioned thereby sustained by Tenant or any person claiming through
Tenant resulting from any accident or occurrence in or upon the Premises or the
Project from any cause whatsoever, including without limitation, damage caused
in whole or in part, directly or indirectly, by the negligence of Landlord or
its agents, contractors or employees, it being agreed that the foregoing release
of liability and waiver shall apply only to the extent that such business
interruption and losses can be covered by customary business interruption
insurance.
Tenant and its subtenants, assignees, invitees, employees, members
and agents shall not be liable for, and Landlord hereby waives all claims
against Tenant and its subtenants, assignees, invitees, employees, members and
agents for loss of rents derived from the Premises sustained by Landlord or any
person claiming through Landlord resulting from any accident or occurrence in or
upon the Premises or in or about the Project from any cause whatsoever,
including, without limitation, damage caused in whole or in part, directly or
indirectly, by the negligence of Tenant or its subtenants, assignees, invitees,
employees, contractors, members or agents, it being agreed that the foregoing
release of liability and waiver shall apply only to the extent such rent
interruption and losses can be covered by customary rental interruption
insurance.
Landlord's Repairs. For the Lease Term, Landlord shall maintain,
repair, and replace, at its expense, the following portions of the Premises
(such portions of the Premises being collectively the "Landlord's Structural
Obligations"): (i) all utility lines servicing the Premises to
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the points of connection within the Building, (ii) all elements of the roof,
including the roof membrane and the skylights, and (iii) all elements of the
slab, foundation, floor, footings, piers and exterior walls of the Building so
that such Landlord's Structural Obligations are in good condition, reasonable
wear and tear excluded, and, subject to the provisions of Paragraph 9(c) above,
any damage or injury to the Building or Premises (including, without limitation,
the slab and the structure of the Premises) caused by the negligence and/or
willful misconduct of Tenant, its agents, contractors, employees and invitees
excluded. Notwithstanding anything to the contrary contained in the foregoing in
clause (iii) above, it is the stated intent of Landlord and Tenant that the
Landlord shall not be responsible for maintaining or repairing cracks and other
surface repair items in the slab or floor caused by normal wear and tear and/or
normal forklift traffic over the slab or floor (it being agreed, however, that
nothing in this sentence shall be deemed to limit Landlord's obligations under
Paragraph 43 below). Subject to Paragraph 43, the term "walls" as used in this
Paragraph 10 shall not include windows, glass or plate glass, doors or overhead
doors, special store fronts, dock bumpers, dock plates or levelers, or office
entries. Tenant shall promptly give Landlord written notice of any repair
required by Landlord pursuant to this Paragraph 10, after which Landlord shall
have a reasonable opportunity to repair. Subject to the provisions of Paragraph
9(c) above, Landlord shall also be responsible for any damage to the Premises
caused by the negligence or willful misconduct of Landlord or its agents,
employees or contractors at the Premises.
In the event of an emergency (being defined for purposes hereof as
an imminent threat of injury to persons or material damage to Tenant's
equipment, inventory or other property at the Premises or any other event that
impedes more than 20% of Tenant's business operations at the Premises, Tenant
shall have the right to make such temporary, emergency repairs to the Premises
as may be reasonably necessary to (x) prevent material damage to Tenant's
equipment, inventory or other property at the Premises, (y) repair an imminent
threat of personal injury to persons at the Premises, or (z) repair the
condition that is the cause of any material impediment to Tenant's business
operations at the Premises; provided Tenant has either (i) notified Landlord's
representative, as soon as possible under the circumstances, of such emergency
by telephone (with subsequent written notice as soon as practicable), and
Landlord has failed to initiate (and diligently continue to pursue all necessary
emergency repairs within twenty-four (24) hours of such notification, or (ii)
Tenant has attempted in good faith to notify Landlord's representative of such
emergency by telephone (with subsequent written notice as soon as practicable)
and has been unsuccessful in its attempts to contact such representative for a
period of twenty-four (24) hours. If because of the circumstances it is
necessary for Tenant to act immediately (i.e. Tenant does not reasonably have
time to notify Landlord), then Tenant may do so without prior notice to Landlord
provided that Tenant uses commercially reasonable efforts to notify Landlord of
such actions as soon as possible. In the event that Tenant makes any emergency
repairs to the Premises in accordance with this paragraph, Landlord shall
reimburse Tenant, up to the Self-Help Maximum (as defined below), for the
actual, reasonable, out-of-pocket third party costs incurred by Tenant (as
evidenced by written invoices or other reasonable evidence) in making such
emergency repairs. The term "Self Help Maximum" shall mean (i) the aggregate sum
of $25,000 for each emergency that occurs during each lease year (other than
Catastrophic Emergencies (as defined below)), such sum to increase each year of
the Lease Term
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following the first lease year by the percentage increases in the Consumer Price
Index (over the amount of the Consumer Price Index as of the Rent Commencement
Date), or (ii) the aggregate sum of $200,000 for each Catastrophic Emergency
that occurs during each lease year. For purposes hereof, (i) the term
"Catastrophic Emergency" means any emergency with respect to the roof that will
require Tenant to expend more than $25,000 to alleviate such emergency; and (ii)
the term "Consumer Price Index" means the Consumer Price Index for All Urban
Consumers (Revised Series) (CPI-U) All Items, U.S. City Average (1982-1984
equals 100) of the United States Department of Labor, Bureau of Labor
Statistics. If Landlord fails to reimburse Tenant for the reasonable,
out-of-pocket costs incurred by Tenant in making such repairs, up to but not to
exceed the Self Help Maximum with respect to such emergency, within 30 days
after demand therefor, accompanied by supporting evidence of the costs incurred
by Tenant, then Tenant may either (i) bring an action for damages against
Landlord to recover such costs, together with interest thereon at the Interest
Rate from the due date therefor (i.e., the date 30 days after demand), and
reasonable attorney's fees incurred by Tenant in bringing such action for
damages, or (ii) offset such amount against the Base Rent and Additional Rental
Amount due under this Lease, with interest accruing 30 days after such amount
was due. The self help remedy granted to Tenant under this Paragraph in the
event of an emergency is in addition to, and not in lieu or limitation of, any
and all other remedies granted to Tenant under this Lease. Subject to the
provisions of Paragraph 9(c) above, Tenant shall be responsible for any damage
to the Premises caused by the negligence or willful misconduct of Tenant or its
agents, employees or contractors at the Premises.
Tenant's exercise of its right to self help or offset Base Rent and
the Additional Rental Amount shall in no way be an acknowledgment of or be
construed as an agreement by Landlord that such payment (or work) required is
the obligation of Landlord and shall in no way hinder the Landlord from
disputing such claims and Base Rent and Additional Rental Amount offsets by
Tenant. In the event of a dispute, and if Landlord prevails, Tenant shall
promptly reimburse Landlord for all amounts paid by Landlord to Tenant, or any
amounts offset by Tenant or any amounts on which Landlord has prevailed,
whichever is appropriate, plus interest at the Interest Rate from the date the
amount was offset or paid. Further the prevailing party shall be entitled to
reasonable attorneys' fees and costs incurred in the offset dispute.
If and only if requested by Tenant in writing, Landlord shall make
any reasonably necessary Capital repairs or replacements to the Premises for
which Tenant is responsible under Paragraph 11 below. Upon completion thereof,
(i) Landlord shall furnish Tenant with a statement setting forth the actual
out-of-pocket cost to Landlord of any such Capital repairs or replacements
(together with invoices and other evidence reasonably necessary to corroborate
such cost) and (ii) the actual out-of-pocket cost to Landlord of such Capital
repairs or replacements to the Premises shall be amortized on a straight line
basis in equal monthly installments over a period equal to the useful life
thereof under GAAP, and such monthly installments shall thereafter be payable by
Tenant to Landlord on the first day of each calendar month during the Lease Term
until the sooner of (i) the last day of Lease Term and (ii) the last day of such
useful life (it being agreed that Tenant shall not be responsible for any
portion of such costs that relates to the portion of such useful life that
extends beyond the Lease Term).
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Landlord expressly acknowledges and agrees that the reimbursement obligation
contained in the preceding sentence shall not apply to any Capital repairs or
replacements that Landlord is required to make under (i) any of the other
provisions of this Paragraph 10, or (ii) any of the provisions of Paragraphs 3,
15, 16, 30 and 43 of this Lease. Any installment payable pursuant to the this
paragraph for a partial month shall be appropriately prorated. Landlord shall
competitively bid the performance of such Capital repairs or replacements in
accordance with the Bidding Procedures (as defined in Addendum 2).
Tenant's Repairs. (a) Subject to Landlord's obligations in
Paragraphs 3, 9, 10, 15, 16, 30 and 43, Tenant, at its sole cost and expense,
shall be responsible for the maintenance, repair and replacement of all portions
of the Premises, Building and Land and for all costs and expenses related
thereto (including, without limitation, paving and parking areas, alleys,
driveways, mowing, landscaping, exterior painting, dock and loading areas, truck
doors, plumbing from and after the point of connection to the Building, fire
sprinklers and fire protection systems, entries, doors, windows, interior walls,
and the interior side of demising walls heating, ventilation and air
conditioning systems, lighting, electrical and utility systems from and after
the point of connection to the Building and other mechanical and building
systems; amounts paid to contractors and subcontractors for work or services
performed in connection with any of the foregoing; security services, if any;
and trash collection, sweeping and removal). Except as set forth in the last
paragraph of Paragraph 10 above, such repair and replacements may include
Capital expenditures and repairs whose benefit may extend beyond the Lease Term.
Heating, ventilation and air conditioning systems and other mechanical and
building systems serving the Premises shall be maintained at Tenant's expense
pursuant to maintenance service contracts entered into by Tenant. If, (i) Tenant
fails to make any repair for which Tenant is responsible pursuant to this
Paragraph 11 within thirty (30) days after notice thereof from Landlord (except
in case of emergency) (unless such performance will, due to the nature of the
obligation, require a period of time in excess of thirty (30) days, then after
such period of time as is reasonably necessary) and (ii) Tenant's failure to
make such repair has a material adverse effect on any structural component of
the Building or otherwise results in a hazardous condition, then, Landlord may,
at its option, make such repair, and Tenant shall pay the actual, reasonable,
out-of-pocket third party costs incurred by the Landlord (as evidenced by
written invoices or other reasonable evidence), within 30 days after demand. If
Tenant fails to pay such amount within 30 days after demand, then such amount
shall accrue interest at the Interest Rate.
(b) Notwithstanding anything contained herein to the contrary,
Tenant shall have the right, from time to time and for such periods of time as
Tenant shall desire throughout the Lease Term, to require Landlord (without cost
to Tenant) to provide asset management services to Tenant as may be necessary
for Tenant to maintain the Premises in accordance with the provisions of
Paragraph 11(a) hereof. Such asset management services shall include, but not be
limited to, the hiring of contractors, subcontractors and suppliers on behalf of
Tenant for each of the items of maintenance and repair (each an "Item") for
which Tenant is responsible under Paragraph 11(a) hereof using competitive
bidding procedures with entities which are not affiliated with Landlord (with
each such hiring being subject to Tenant's prior written approval,
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such approval not to be unreasonably withheld or delayed), appropriately
supervising each such contractor, subcontractor and supplier, and providing
Tenant with such periodic reports, as Tenant may reasonably require, with
respect to each of the Items, and any other management or operational services
reasonably requested by Tenant which are customary for the maintenance and
operation of a first-class warehouse facility in Reno, Nevada (collectively the
"Asset Management Services"). On or before each November 1 during the Lease
Term, Landlord shall provide Tenant with a budget setting forth Landlord's good
faith estimate of the Additional Rent for the Premises (as defined below) for
all Items for the immediately succeeding calendar year. For purposes hereof, the
term "Additional Rent for the Premises" shall mean, for any calendar year all or
any part of which occurs during the Lease Term, the actual, third-party
out-of-pocket costs and expenses incurred by Landlord in connection with all the
Items provided by Landlord with respect to such calendar year. If Tenant
requests that Landlord provide such Asset Management Services, then during each
month of the Lease Term, on the same date that Base Rent is due, Tenant shall
pay Landlord an amount equal to 1/12 of the annual cost, as reasonably estimated
by Landlord from time to time, of the Additional Rent for the Premises for the
Items requested. Notwithstanding the foregoing, in no event shall Tenant be
obligated to pay Additional Rent for the Premises on account of any calendar
year to the extent that the Additional Rent for the Premises for such calendar
year has increased by more than five percent (5%) per annum, compounded annually
on a cumulative basis ("Premises Cap"), from the Additional Rent for the
Premises for (I) in the case of the initial term of this Lease, the first full
calendar year during which Landlord performs the Asset Management Services and
(II) in the case of any renewal term, the calendar year in which the first day
of such renewal term occurs (it being agreed that, for purposes of such renewal
term only, the Additional Rent for the Premises for the calendar year in which
the first day of such renewal term occurs shall not be subject to the Premises
Cap). Notwithstanding anything to the contrary contained herein, if, in
connection with the performance of its obligations under this Paragraph 11(b),
Landlord performs any reasonably necessary Capital repairs or replacements to
the Premises, then the provisions of the last paragraph of Paragraph 10 above,
and not this Paragraph 11(b), shall govern with respect to the reimbursement of
Landlord for such Capital repairs or improvements.
Tenant-Made Alterations and Trade Fixtures. For purposes of this
Lease, the following definitions shall apply:
"Tenant-Made Alteration" shall mean any alteration, addition or
improvement performed by, or to be performed by, Tenant in or about the
Premises.
"Material Tenant-Made Alteration" shall mean any Tenant-Made
Alteration that will have an effect on the structural soundness of the Building,
including, without limitation the slab or floor of the Building, or cause a
penetration of the roof of the Building.
Tenant, without any need to obtain Landlord's consent or approval,
shall have the right to perform any Tenant-Made Alterations in and about the
Premises, other than Material Tenant-Made Alterations. In addition, Tenant, upon
obtaining Landlord's consent, which may be withheld only if a Material
Tenant-Made Alteration would have an adverse affect on the
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structural soundness of the Building, including, without limitation, the floor
or slab of the Building or invalidate any Landlord roof warranty for the
Building (the "Approval Criteria"), shall have the right to perform Material
Tenant-Made Alterations in and about the Premises. Landlord shall not perform
any alterations in or about the Premises except as otherwise required or
permitted under this Lease. Landlord's approval of Tenant's plans and
specifications for any work or Tenant-Made Alterations performed for or on
behalf of Tenant shall not be deemed to be a representation by Landlord that
such plans and specifications comply with applicable Legal Requirement or
insurance requirements or that the alterations, additions and improvements
constructed in accordance with such plans and specifications will be adequate
for Tenant's use. Landlord and Tenant hereby acknowledge and agree that Tenant's
construction and/or placement of one or more racking systems, a conveyor and
related equipment and any mezzanine structure in the Building and on the
Premises are both Tenant-Made Alterations that do not require Landlord's prior
written consent (and Tenant may, without Landlord's consent, bolt the same to
the slab); provided however, Tenant hereby agrees that upon the expiration or
earlier termination of this Lease, Tenant shall remove, at Tenant's sole cost
and expense, such racking systems, conveyor and related equipment and mezzanine
structures and shall, at Tenant's sole cost and expense, repair any damage to
the Premises caused by Tenant's removal of the racking system (such removal and
repair obligations for the racking system being set forth in and governed by
paragraph (e) below), conveyor system and mezzanine structure.
Tenant, prior to commencing any Material Tenant-Made Alteration,
shall give Landlord written notice thereof, and to the extent that good
construction practice requires plans and specifications to be prepared with
respect to such Tenant-Made Alteration, such notice shall be accompanied by a
copy of such plans and specifications. In the case of any Material Tenant-Made
Alteration, Landlord, within ten (10) business days after its receipt of such
notice, shall either (i) give its written consent to the Material Tenant-Made
alteration, or (ii) deny its consent and request revisions or modifications to
such Material Tenant-Made Alteration (but only if and to the extent that the
proposed Material Tenant-Made Alteration fails to meet the Approval Criteria).
Notwithstanding anything in this Lease to the contrary, if during the Lease
Term, Tenant removes from the Premises any items in the Performance
Specifications (defined in Addendum 2) installed by Landlord at Landlord's cost
and expense as part of the Base Building Work (defined in Addendum 2) ("Base
Improvements"), then, except for the in-rack sprinkler system and heads
referenced in Section 8.1.3 of the Performance Specifications which shall be
excluded from the Base Improvements and which Tenant shall not be obligated to
replace or restore, Tenant, upon or prior to the expiration or sooner
termination of the Lease, shall replace all such Base Improvements it has
removed from the Premises with other items or equipment of comparable size, age,
make and quality to that of the removed Base Improvements (taking into
consideration the condition that such Base Improvements would have been in if
they had remained throughout the Lease Term, it being agreed, however, that if
Tenant removes any Base Improvements that are typical office improvements, then
Tenant, upon the re-installation thereof, shall replace such office improvements
with new office improvements).
Tenant at its own expense may perform all Tenant-Made Alterations
with contractors and subcontractors of Tenant's own choosing. Tenant shall
perform all Tenant-Made
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Alterations in a good and workmanlike manner and in accordance with all Legal
Requirements. Landlord shall, upon Tenant's request (and at no cost to
Landlord), furnish or execute promptly any documents, information, consents or
other materials which are necessary or reasonably desirable in connection with
Tenant's efforts to obtain any license or permit for the making of any
Tenant-Made Alteration. Landlord shall not be entitled to impose upon Tenant any
charges or fees of any kind (including, without limitation, charges or fees for
profit, overhead, or supervision) in connection with any Tenant-Made
Alterations, except that Tenant shall pay to Landlord, within 30 days after
Tenant's receipt of Landlord's demand therefor, Landlord's reasonable
out-of-pocket costs and expenses of any third party architect or engineer
employed by Landlord for reviewing mechanical and structural plans and
specifications relating to any Material Tenant-Made Alteration. Throughout the
performance of Tenant-Made Alterations, either Tenant or Tenant's general
contractor shall carry (i) commercial general liability insurance, with
completed operation endorsement, for any occurrence in or about the Premises,
with a combined single limit of not less than $1,000,000 and (ii) employer's
liability insurance in the statutory limit. With respect to all such insurance,
Landlord and any mortgagee of the Premises whose name and address have been
furnished to Tenant shall be named as additional insureds. All such insurance
shall be issued by insurers that satisfy the requirements in Paragraph 9.
Throughout the performance of any Tenant-Made Alteration, each contractor and
subcontractor engaged in such Tenant-Made Alteration shall carry worker's
compensation and disability insurance in statutory limits.
Any and all Tenant-Made Alterations made by, or on behalf of,
Tenant in, to or upon the Premises and Tenant's Property (as defined below)
installed on the Premises by (or on behalf of) Tenant, shall remain the property
of Tenant and may be removed from the Premises at any time during the Lease
Term, provided that any damage caused by such removal shall be repaired by
Tenant. Tenant may (subject to the next succeeding sentence) elect not to remove
any or all of its Tenant-Made Alterations, Tenant's Initial Work, its fixtures
or Tenant's Property, in which case the same shall become the property of
Landlord upon Tenant's surrender of the Premises. Notwithstanding the foregoing,
at the expiration or earlier termination of the Term, Tenant shall remove (i)
its movable business equipment and other movable personal property, (ii) any
Extraordinary Fixture (as defined below) in respect of which Landlord, in
accordance with Paragraph (f) below, has not waived (or been deemed to have
waived) its right to cause Tenant to remove, and (iii) any trade fixtures
("Tenant's Trade Fixtures") installed by Tenant in the Building, including the
warehouse racking system to be installed in the Premises by or for Tenant (it
being agreed that (x) in removing any trade fixtures from the Building that are
bolted to the slab, Tenant shall only be required to cut and file the bolts
connecting such trade fixtures to the slab, rather than remove such bolts from
the slab, and (y) Tenant shall not be required to remove the wiring relating to
such trade fixtures that will be imbedded in the slab, behind walls and doors
and below the floor). Moreover, for purposes of this Lease, the term "Tenant's
Property" shall mean all office furniture and equipment, movable partitions,
communications equipment and other articles of movable personal property owned
or leased by Tenant and located in the Premises.
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Tenant shall have the right from time to time and at any time to
give a notice (each, an "Extraordinary Fixture Advice Notice") to Landlord
requesting Landlord's advice as to whether any proposed Tenant-Made Alteration
will constitute an Extraordinary Fixture. Within 10 business days after
Landlord's receipt of any Extraordinary Fixture Advice Notice, Landlord shall
notify Tenant (each a "Removal Notice") (i) whether, in Landlord's opinion, any
of the alterations, additions or improvements described in such Extraordinary
Fixture Advice Notice constitute an Extraordinary Fixture (and identifying same)
and (ii) which items of those identified as Extraordinary Fixtures, Tenant must
remove at the expiration or earlier termination of this Lease. If Landlord (i)
gives a Removal Notice stating that in Landlord's opinion the alterations,
additions or improvements (or any of them) described in the Extraordinary
Fixture Advice Notice in question constitute an Extraordinary Fixture, but that
Landlord will not require Tenant to remove the same at the expiration or earlier
termination of this Lease, or (ii) fails to give a Removal Notice with respect
to any of the alterations, additions or improvements described in the applicable
Extraordinary Fixture Advice Notice within 10 days after receipt of such
Extraordinary Fixture Advice Notice, then, in either such event, Landlord shall
have waived its right to cause Tenant to remove such alterations, additions or
improvements, and Tenant shall not be obligated to remove the same. For purposes
of this Lease, "Extraordinary Fixture" means an alteration, addition,
improvement or fixture which, at the time of installation, (aa) is not the type
of improvement that is customarily found in a standard warehouse and/or office
installation in the Reno, Nevada area and (bb) is materially more expensive to
remove than the type of improvement that is customarily found in a standard
warehouse and/or office installation in the Reno, Nevada area.
Signs. Subject to the Declaration (as defined below) and any
applicable Legal Requirements, Tenant may install any exterior lights,
decorations, balloons, flags, pennants, banners, or painting, or erect or
install any signs, windows or door lettering, placards, decorations, or
advertising media of any type which can be viewed from the exterior of the
Premises, without Landlord's prior written consent. Upon surrender or vacation
of the Premises, Tenant, at its sole cost and expense, shall remove all signs
and repair, paint, and/or replace the building facia surface to which its signs
are attached. Tenant shall obtain all applicable governmental permits and
approvals for sign and exterior treatments (and Landlord shall cooperate with
Tenant in connection therewith, including, without limitation, by signing any
applications in connection therewith). Subject to the Declaration, any
applicable Legal Requirements and Landlord's reasonable approval, Tenant may
place directional signs as appropriate throughout the Project for the benefit of
its customers. Landlord represents to Tenant that, to Landlord's knowledge, as
of the Commencement Date, other than the Declaration, there are no other signage
restrictions or controls that adversely affect Tenant's ability to install any
signage on the Building. Landlord agrees to use commercially reasonable efforts
to obtain a variance from the necessary parties to enhance the signage size on
the east half of the Building facing Highway 395. For purposes of this
paragraph, Landlord's knowledge shall mean the actual knowledge of David Morze
and John Hanson, after due investigation and inquiry. Landlord represents and
warrants to Tenant that no employee of Landlord has any material knowledge that
is not possessed by David Morze or John Hanson about any of the matters that are
the subject of the representations and warranties contained in this paragraph.
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Parking. Intentionally deleted.
Restoration. If the Building shall be partially or totally damaged
or destroyed by fire or other casualty, then, unless this Lease is terminated as
hereinafter provided, and whether or not the damage or destruction shall have
resulted from the fault or neglect of Tenant or its employees, agents,
contractors or invitees, Landlord, at its sole expense, shall perform Landlord's
Restoration Work (as hereinafter defined) with reasonable dispatch and
continuity. For purposes hereof, the term "Landlord's Restoration Work" shall
mean all of the work necessary to repair and restore the Premises (including,
without limitation, all the building systems) to substantially the same
condition as that in which they were in immediately prior to the happening of
the fire or other casualty (it being agreed that Landlord's Restoration Work
shall not include the repair and restoration of (w) any Tenant-Made Alterations,
(x) Tenant's Initial Work installed by Tenant, (y) any Tenant's Trade Fixtures,
and/or (z) any Tenant's Property). Notwithstanding anything to the contrary in
this Paragraph 15, in the event a fire or other casualty to the Premises occurs
that is covered by the all risk insurance referenced in Paragraph 9(a) above,
Tenant shall, within 30 days after demand therefor, pay to Landlord the lesser
of (i) the amount of any deductible in respect of the insurance adjustment
relating to such fire or other casualty and (ii) $25,000 (it being agreed that,
in any event, the payment of such amount by Tenant is not a condition precedent
to any of Landlord's obligations under this Paragraph 15).
If the Premises shall be partially damaged or destroyed or rendered
untenantable or inaccessible as a result of a fire or other casualty, then the
Base Rent, the Additional Rental Amount and all other rent payable under this
Lease (including any amounts payable under Sections 6 and 8 above) shall be
abated in proportion to the area of the Premises that has been rendered
untenantable, inaccessible or unfit for Tenant's use and occupancy for the
period from the date of such damage or destruction until the earlier of (a) the
last day of a reasonable period (beginning on the date on which Landlord's
Restoration Work is substantially completed and Tenant has reasonable access to
the Premises) for Tenant to repair and restore any Tenant's Initial Work,
Tenant-Made Alterations, Tenant Trade Fixtures and Tenant's Property damaged as
a result of such fire or other casualty and (b) the date on which Tenant
reoccupies the Premises (or such portion thereof) for the normal conduct of its
business (as opposed to the repair or restoration of any of Tenant's Initial
Work, Tenant's Trade Fixtures, Tenant-Made Alterations or Tenant's Property). If
the Premises shall be totally damaged or destroyed or rendered untenantable or
inaccessible, then the Base Rent, the Additional Rental Amount and all other
rent payable under this Lease (including any amounts payable under Sections 6
and 8 above) shall abate from the date of the damage or destruction until the
earlier of (a) the last day of a reasonable period (beginning on the date on
which Landlord's Restoration Work is substantially completed and Tenant has
reasonable access to the Premises) for Tenant to repair and restore any Tenant's
Initial Work, Tenant-Made Alterations, Tenant Fixtures and Tenant's Property
damaged as a result of such fire or other casualty and (b) the date on which
Tenant reoccupies the Premises (or such portion thereof) for the normal conduct
of its business (as opposed to the repair or restoration of any of Tenant's
Initial Work, Tenant's Trade Fixtures, Tenant-Made Alterations or Tenant's
Property).
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If the Building or any portion thereof shall be damaged or
destroyed by fire or other casualty, then Landlord, within thirty (30) days
after the occurrence of the fire or other casualty, shall furnish to Tenant an
estimate (the "Estimate"), prepared and certified by an architect selected by
Landlord and reasonably acceptable to Tenant, of the date (the "Estimated Date")
by which Landlord expects (in good faith) the Landlord's Restoration Work to be
completed. If the Estimated Date shall be a date later than one hundred eighty
(180) days after the date of the fire or other casualty, then Tenant may, at its
option, terminate this Lease by giving written notice to Landlord within thirty
(30) days after Tenant's receipt of the Estimate. In any case where the Estimate
does not give rise to Tenant's termination right as aforesaid (as well as any
case where Tenant does not elect to exercise its termination right as
aforesaid), Tenant shall have the right to terminate this Lease, if for any
reason, Landlord's Restoration Work is not completed by the Outside Restoration
Date (as defined below). Tenant may exercise the termination right described in
the preceding sentence by delivering written notice thereof to Landlord at any
time following the Outside Restoration Date and prior to the date Landlord
completes Landlord's Restoration Work. If Tenant terminates this Lease as
provided in this Paragraph 15, then such termination shall be effective on the
date specified in Tenant's notice of termination but no later than one hundred
eighty (180) days after the date of such notice as if said date were the date
fixed for the expiration of the Lease Term. Any Base Rent, Additional Rental
Amount or other amounts paid by Tenant for a period beyond the date of
termination of this Lease or for any period of abatement shall promptly be
refunded by Landlord to Tenant. For purposes of this Lease, the term "Outside
Restoration Date", with respect to any fire or other casualty, shall mean the
Estimated Date for the Landlord's Restoration Work in connection with such fire
or other casualty; provided, however, that the Outside Restoration Date shall be
postponed by one day for each day that Landlord is actually delayed in
completing such Landlord's Restoration Work as a result of one or more Force
Majeure Events (but in no event shall the Outside Restoration Date be extended
by Force Majeure Events by more than 60 days) or any delays caused by Tenant,
its agents, employees, consultants, contractors and invitees.
If (i) the Building shall be damaged or destroyed by fire or other
casualty during the last 12 months of the then current Lease Term, (ii) the
Estimate indicates that Landlord's Restoration Work will require a period of
time which exceeds 20% of the then remaining Lease Term, and (iii) Tenant, on or
prior to the date of the fire or other casualty shall not have elected to extend
the then current Lease Term in accordance with the provisions of Addendum 3
hereto (assuming Tenant had the right to do so), then and in such events, either
Landlord or Tenant shall have the right, to be exercised by written notice to
the other party given within thirty (30) days the electing party's receipt of
the Estimate, to terminate this Lease. If either party terminates this Lease as
provided in this Paragraph 15, then such termination shall be effective on the
date specified in such party's notice of termination but no later than one
hundred eighty (180) days after the date of such notice as if said date were the
date fixed for the expiration of the Lease Term; and any Base Rent, Additional
Rental Amount or other amounts paid by Tenant for a period beyond the date of
such termination of this Lease or for any period of abatement shall promptly be
refunded by Landlord to Tenant.
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Notwithstanding anything to the contrary contained in Paragraph 15
above, if Tenant, within thirty (30) days after its receipt of a termination
notice from Landlord given pursuant to Paragraph 15 above, shall elect to extend
the then current term of this Lease in accordance with the provisions of
Addendum 3 hereto (assuming Tenant has the right to do so), then Landlord's
termination notice shall be rendered null and void, this Lease shall remain in
full force and effect, and Landlord, at its sole expense, shall perform
Landlord's Restoration Work.
If the named Landlord herein (i.e., ProLogis Development Services
Incorporated) shall transfer its interest in the Premises to a third party,
then, from and after the effective date of such transfer, the following
provision of this Section 15(f) shall apply:
For purposes of this Lease, the term the "Depository" shall
mean any commercial bank having a net worth of at least $500,000,000 as
designated by Landlord and approved by Tenant (which approval shall not
be unreasonably withheld, conditioned or delayed). All funds held by
Depository shall at all times be deposited in trust for the benefit of
Landlord and Tenant pursuant to the terms of this Lease in an account or
accounts maintained in the State of Nevada.
All insurance required to be maintained by Landlord under
Section 9 above shall name the Depository as the loss payee. All
insurance proceeds to be paid (the "Deposited Sums") in connection with
any insurance to be maintained by Landlord under such Section 9 shall be
paid to the Depository. In the event, and to the extent, that Landlord is
required to perform any Landlord's Restoration Work, the Depository shall
disburse such proceeds to Landlord, from time to time and as and to the
extent Landlord's Restoration Work progresses, but not more often than
monthly upon receipt of a request therefor prepared by Landlord and
consented to in writing by Tenant, which consent shall not be
unreasonably withheld or delayed, provided that Landlord shall have
provided Tenant with the following:
A certificate of Landlord (1) requesting payment
of a specified amount of the Deposited Sums to Landlord or
to persons whose names and addresses shall be stated, (2)
describing in reasonable detail the services or materials
theretofore applied to Landlord's Restoration Work, (3)
stating that such specified amount does not exceed the cost
of the services and materials previously supplied, and (4)
stating that the cost of the services and materials has not
been previously made the basis of any withdrawal of any of
the Deposited Sums; and
A certificate of an engineer or architect selected
and paid by Landlord who shall be reasonably satisfactory to
Tenant, stating (1) that the services and materials
described in the accompanying certificate of Landlord were
necessary or appropriate to Landlord's Restoration Work, (2)
that the amount specified in such certificate of Landlord is
not in excess of the cost of the services and materials
supplied,
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(3) the additional amount, if any, estimated as being
required to complete and pay for Landlord's Restoration
Work, and (4) that the work theretofore has been done in
accordance with the plans and specifications thereof.
(III) After the completion of and payment for Landlord's
Restoration Work, the balance, if any, of the Deposited Sums shall be
paid first to Tenant, up to the amount that Tenant shall have paid to
Landlord pursuant to Section 9 above (i.e., the amount of the deductible
paid by Tenant to Landlord), and the balance to Landlord.
(IV) Upon the designation of the Depository or the
substitution of a new Depository, the parties and the Depository shall
execute an agreement, in form reasonably satisfactory to the Depository,
which shall provide that the Depository shall receive, hold and disburse
any monies deposited with it pursuant to and in accordance with the terms
of this Lease
Condemnation. If any part of the Premises should be taken for any
public or quasi-public use under governmental law, ordinance, or regulation, or
by right of eminent domain, or by private purchase in lieu thereof (a "Taking"
or "Taken"), and the Taking (a) is of more than (i) 20% of the rentable area of
the Building or (ii) 20% of the parking area on the Land or (b) would otherwise
prevent or materially interfere with Tenant's use of the Premises for the normal
conduct of its business, then upon written notice by Tenant this Lease shall
terminate and Base Rent and all other sums payable under this Lease shall be
apportioned as of said date. If part of the Premises shall be Taken, and this
Lease is not terminated as provided above, the Base Rent and all other sums
payable under this Lease payable hereunder during the unexpired Lease Term shall
be reduced to such extent as may be fair and reasonable under the circumstances
and Landlord shall proceed with due diligence to perform any work necessary to
restore the remaining portions of the Premises to the condition that they were
in immediately prior to the Taking, or as near thereto as possible. In the event
of the Taking of the entire Premises, this Lease shall terminate as of the date
of such Taking. In the event of any such Taking, Landlord shall be entitled to
receive the entire price or award from any such Taking without any payment to
Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such
award. Tenant shall have the right, to the extent that same shall not diminish
Landlord's award, to make a separate claim against the condemning authority (but
not Landlord) for such compensation as may be separately awarded or recoverable
by Tenant for moving expenses, the unamortized amount of any Tenant-Made
Alterations, damage to Tenant's Trade Fixtures and Tenant's Property, if a
separate award for such items is made to Tenant.
Assignment and Subletting. Without Landlord's prior written consent
which may only be withheld pursuant to the terms set forth below, Tenant shall
not assign this Lease or enter into a sublease that demises more than 300,000
rentable square feet of the Building (any such sublease being a "Triggering
Sublease") or mortgage, pledge, or hypothecate its leasehold interest, and any
attempt to do any of the foregoing shall be void and of no effect.
Notwithstanding the above, without Landlord's prior written consent, Tenant may
(x) assign this
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Lease or sublet the entire Premises, or any part thereof, to any Tenant
Affiliate, or (y) sublet the Premises to any third party other than pursuant to
a Triggering Sublease. The term "Tenant Affiliate" shall mean an entity that is
a Qualified Business Group Holder, a Related Entity or a Successor. The term
"Qualified Business Group Holder" means any entity that acquires all or
substantially all of the business of any division of, or other operational group
within, Tenant, which division or other operational group occupied space in the
Premises prior to such acquisition (including an entity created pursuant to a
spin-off of such division or other group, or an entity acquiring such business
pursuant to an out-sourcing program). The term "Related Entity" means any
corporation or other business entity that controls, is controlled by or is under
common control with Tenant. For purposes of the preceding sentence, "control"
means either (i) ownership or voting control, directly or indirectly, of 30% or
more of the voting stock, membership, partnership interests or other beneficial
ownership interests of the entity in question or (ii) the power (whether by
contract or otherwise) to direct the management and policies of such entity.
Notwithstanding the foregoing, Landlord acknowledges and agrees that each of (a)
Barnes & Noble, Inc., (b) Bertelsmann, Inc. and (c) any entity that controls, or
is controlled by, or is under common control with either Barnes & Noble, Inc. or
Bertelsmann, Inc. (with control having the meaning described in the preceding
sentence) shall, for all purposes of this Section 17 constitute a Related Entity
at all times during the Lease Term. The term "Successor" means any one of the
following: (i) an entity resulting from a merger, consolidation, reorganization
or recapitalization of or with Tenant or (ii) a purchaser (or other transferee)
of all or substantially of (a) Tenant's assets and all or substantially all of
such Tenant's liabilities (including the liabilities of Tenant hereunder) or (b)
the stock, membership, or partnership interest in Tenant. Tenant shall reimburse
Landlord for all of Landlord's reasonable out-of-pocket expenses in connection
with any assignment or sublease.
If Tenant desires to assign this Lease other than to a Tenant
Affiliate, or enter into a Triggering Sublease other than with a Tenant
Affiliate, then Tenant shall give Landlord notice (each, a "Transfer Notice") of
such desire. Each Transfer Notice shall be accompanied by a statement setting
forth in reasonable detail the identity of the proposed assignee or subtenant,
the nature of its business and its proposed use of the Premises. Landlord shall
approve or disapprove a proposed assignment or Triggering Sublease described in
any Transfer Notice within 10 business days after Landlord's receipt of such
Transfer Notice and the information required pursuant to the provisions of the
preceding sentence. If Landlord fails to approve or disapprove such proposed
assignment or Triggering Sublease within such 10 business day period, then such
proposed assignment or Triggering Sublease shall be deemed approved.
Notwithstanding anything in this Paragraph 17 to the contrary, if there is an
assignment or sublease involving any portion of the Premises, Tenant covenants
to promptly notify Landlord of such assignment or sublease within thirty (30)
days after such assignment or sublease becomes effective and to set forth in
reasonable detail the identity of the proposed assignee or subtenant, the nature
of its business and its use of the Premises. Landlord may withhold its consent
to any proposed assignment or any Triggering Sublease for only one of the
following reasons:
(i) if the proposed assignee or subtenant will use Hazardous
Materials in materially larger quantities or of materially greater environmental
risk than the Hazardous Materials used
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by Tenant at the Premises and Tenant will not execute Landlord's standard
environmental addendums attached hereto as Exhibit G to this Lease; 8.
(ii) the proposed assignee or subtenant has a poor record or
reputation pertaining to environmental matters; and
(iii) if the proposed assignee or subtenant's use of the Premises
is in violation of the Declaration or Legal Requirements.
Any approved assignment or sublease shall be expressly subject to
the terms and conditions of this Lease. Tenant shall provide to Landlord all
information concerning the assignee or sublessee as Landlord may reasonably
request.
Notwithstanding any assignment or subletting under this Lease,
including, without limitation, any assignment or sublease (including a
Triggering Sublease and any other type of sublease) to a Tenant Affiliate or to
an independent third party, Tenant shall at all times remain fully responsible
and liable for the payment of the rent (including, without limitation, Base Rent
and Additional Rent) and for compliance with all of Tenant's other obligations
under this Lease (regardless of whether Landlord's approval has been obtained
for any such assignments or sublettings). Except in connection with an
assignment to a Tenant Affiliate, in the event that Tenant shall receive rent
and any bonus or other consideration due and payable by an assignee (or a
combination of the rental payable under such assignment plus any bonus or other
consideration therefor or incident thereto) and such amount exceeds the rental
payable under this Lease (after deducting required tenant improvements,
reasonable brokerage fees, and reasonable attorney's fees and the net,
unamortized or undepreciated cost of Tenant's Initial Work, Tenant's Trade
Fixtures, Tenant's Property and any Tenant-Made Alterations, determined on the
basis of Tenant's Federal income tax returns), then Tenant shall be bound and
obligated to pay Landlord as additional rent hereunder 50% of all such excess
rental and other excess consideration within 10 days following receipt thereof
by Tenant. Tenant shall be entitled to receive 100% of all profits from a
sublease of the Premises.
If this Lease is assigned or if the Premises is subleased (whether
in whole or in part) or in the event of the mortgage, pledge, or hypothecation
of Tenant's leasehold interest or grant of any concession or license within the
Premises or if the Premises is occupied in whole or in part by anyone other than
Tenant, then upon an Event of Default by Tenant hereunder Landlord may collect
rent from the assignee, sublessee, mortgagee, pledgee, party to whom the
leasehold interest was hypothecated, concessionee or licensee or other occupant
and apply the amount collected to the next rent payable hereunder; and all such
rentals collected by Tenant shall be held in trust for Landlord and immediately
forwarded to Landlord. No such transaction or collection of rent or application
thereof by Landlord, however, shall be deemed a waiver of these provisions or a
release of Tenant from the further performance by Tenant of its covenants,
duties, or obligations hereunder.
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Indemnification. (a) Except for the negligence or willful
misconduct of Landlord, its agents, employees or contractors, and to the extent
permitted by law, Tenant covenants and agrees to indemnify, defend and hold
harmless Landlord, and Landlord's agents and employees, from and against any and
all losses, liabilities, damages, costs and expenses (including attorneys' fees)
resulting from claims by third parties for injuries or death to any person
occurring in or about the Project and arising from the use and occupancy of the
Premises or from the negligence or willful misconduct of Tenant, its subtenants,
assignees, employees, contractors, invitees and agents. The furnishing of
insurance required hereunder shall not be deemed to limit Tenant's obligations
under this Paragraph 18.
(b) Except for the negligence or willful misconduct of Tenant, any
assignee or subtenant of Tenant, or their agents, employees or contractors, and
to the extent permitted by law, Landlord covenants and agrees to indemnify and
save Tenant, its employees and agents harmless of and from any and all claims,
costs, expenses and liabilities, including, without limitation, attorneys' fees,
arising on account of or by reason of claims by third parties for injuries or
death to persons resulting from the negligence or willful misconduct of Landlord
or its agents, employees, or contractors; subject, however, to the provisions of
the last paragraph of Paragraph 25 of this Lease. This indemnity does not cover
claims arising from the presence or release of Hazardous Materials.
(c) If any claim that is within the scope of any indemnity set
forth in this Lease is asserted against any indemnified party, or any legal
action with respect to any such claim is commenced against an indemnified party,
such indemnified party shall promptly notify the indemnifying party. The
indemnifying party shall have the right to assume the defense with counsel
chosen by the indemnifying party subject to the approval of the indemnified
party (such approval not to be unreasonably withheld) or by the indemnifying
party's insurance company. If the indemnifying party so assumes the defense, the
indemnifying party shall not be responsible for the fees of any separate counsel
employed by the indemnified party.
Inspection and Access. Landlord and its agents, representatives,
and contractors may, upon reasonable prior notice to Tenant (except in the case
of an emergency), enter the Premises at any reasonable time to inspect the
Premises and to make such repairs as may be required or permitted pursuant to
this Lease and for any purpose that relates to the performance of Landlord's
obligations under this Lease. Landlord and Landlord's representatives may, upon
reasonable prior notice to Tenant, enter the Premises during business hours for
the purpose of showing the Premises to prospective purchasers and, during the
last 9 months of the Lease Term, to prospective tenants. Tenant may request that
any entry pursuant to this paragraph be at a reasonably convenient time other
than the time specified in Landlord's notice or that such entry be during hours
other than during business hours on business days (except in an emergency). Such
rights of entry shall be subject to Tenant's reasonable security regulations or
procedures, provided that Tenant shall have given Landlord prior written notice
thereof. Tenant shall have the right to designate one or more portions of the
Premises as "security areas" and if Tenant does so designate one or more
portions of the Premises as "security areas", then Landlord shall not have
access to such designated security areas, unless Landlord is accompanied by a
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representative of Tenant. During the prosecution and immediately after the
completion of any repairs that Landlord is so required or permitted to make,
Landlord shall clean the Premises and shall remove any tools, equipment,
supplies and debris therefrom. Landlord shall not store materials or tools in
the Premises in connection with any such repairs and construction and shall not
bring onto the Premises any materials in excess of those materials reasonably
necessary to effect the repairs to be performed that day. Landlord shall use
commercially reasonable efforts to minimize interference with Tenant's business
operations on the Premises upon a Landlord entry onto the Premises.
Quiet Enjoyment. Tenant shall, subject to the terms of this Lease,
at all times during the Lease Term, have peaceful and quiet enjoyment of the
Premises against any person claiming by, through or under Landlord.
Surrender. Upon termination of the Lease Term or earlier
termination of Tenant's right of possession, Tenant shall surrender the Premises
to Landlord in compliance with the applicable provisions of Sections 12(b),
12(c) and 12(e) above and broom clean and in good order, condition and repair,
ordinary wear and tear, damages for which Landlord is responsible under this
Lease, and casualty loss and condemnation excepted. Any Tenant's Property,
Extraordinary Fixture, Tenant-Made Alterations and Tenant's Trade Fixtures not
removed by Tenant as permitted or required herein on the expiration or within 15
days after the termination of this Lease shall be deemed abandoned and may be
stored, removed, and disposed of by Landlord at Tenant's expense (except that
any Tenant-Made Alterations, any Extraordinary Fixtures, any Tenant's Trade
Fixtures and any items of Tenant's Property that Tenant was not required to
remove and that Landlord so stores, removes or disposes of shall be stored,
removed and disposed of at Landlord's expense, rather than at Tenant's expense),
and Tenant waives all claims against Landlord for any damages resulting from
Landlord's retention and disposition of such property. All obligations of Tenant
and Landlord hereunder not fully performed as of the termination of the Lease
Term shall survive the termination of the Lease Term, including without
limitation, indemnity obligations, payment obligations with respect to
Additional Rent for the Common Area Land and obligations concerning the
condition and repair of the Premises.
Holding Over. If Tenant retains possession of the Premises after
the termination of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any expansion
or renewal option or other similar right or option) shall be applicable during
such holdover period, except that Tenant shall pay Landlord from time to time,
upon demand, as Base Rent for the holdover period, an amount equal to the
following (i) 150% of the Base Rent in effect on the termination date, computed
on a monthly basis for each month or part thereof during such holding over for
the first 60 days following the expiration of the Lease Term, (ii) 200% of the
Base Rent in effect on the termination date, computed on a monthly basis for
each month or part thereof during such holding over for the period commencing 61
days following the expiration of the Lease Term and ending 60 days later, (iii)
250% of the Base Rent in effect on the termination date, computed on a monthly
basis for each month or part thereof during such holding over for the period
commencing 122 days following the expiration of the
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Lease Term and ending 60 days later, (iv) 300% of the Base Rent in effect on the
termination date, computed on a monthly basis for each month or part thereof
during such holding over for the period commencing 183 days following the
expiration of the Lease Term and ending when Tenant's holdover ends. All other
payments shall continue under the terms of this Lease. The amounts payable
pursuant to the two preceding sentences shall constitute the sole amounts for
which Tenant shall be responsible in the case of such a holdover, and in no
event shall Tenant be liable for any damages suffered by Landlord as a result
thereof. No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided, and
this Paragraph 22 shall not be construed as consent for Tenant to retain
possession of the Premises.
Events of Default. Each of the following events shall be an event
of default ("Event of Default") by Tenant under this Lease:
Tenant shall fail to pay any installment of Base Rent or any
other payment required herein when due, and such failure shall
continue for a period of 5 business days after notice from Landlord
to Tenant that such payment was due.
Tenant or any guarantor or surety of Tenant's obligations
hereunder shall (A) make a general assignment for the benefit of
creditors; (B) commence any case, proceeding or other action
seeking to have an order for relief entered on its behalf as a
debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts or seeking appointment of a
receiver, trustee, custodian or other similar official for it or
for all or of any substantial part of its property (collectively a
"proceeding for relief").
Any insurance required to be maintained by Tenant pursuant
to this Lease shall be canceled or terminated or shall expire or
shall be reduced or materially changed, except, in each case, as
permitted in this Lease and after 3 days' prior notice by Landlord.
Intentionally deleted.
Tenant shall attempt or there shall occur any assignment or
other transfer of Tenant's interest in or with respect to this
Lease except as otherwise permitted in this Lease and such failure
shall go uncured for a period of five (5) business days after
notice from Landlord to Tenant.
Tenant shall fail to discharge or bond any lien placed upon
the Premises in violation of this Lease within 45 days after notice
of any such lien or encumbrance is filed against the Premises.
Tenant shall fail to comply with any provision of this Lease
other than those specifically referred to in this Paragraph 23, and
except as otherwise expressly provided herein, such default shall
continue for more than 30 days after Landlord shall have given
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Tenant written notice of such default, provided that if any such
failure cannot be remedied within such 30 day period, Tenant shall
have failed to commence such remedy within such 30 day period and
to diligently continue to pursue such remedy.
Landlord's Remedies. Upon each occurrence of an Event of Default
and so long as such Event of Default shall be continuing, Landlord may at any
time thereafter at its election: terminate this Lease or Tenant's right of
possession, (but Tenant shall remain liable as hereinafter provided) and/or
pursue any other remedies at law or in equity except to the extent expressly
limited hereby. Upon the termination of this Lease or termination of Tenant's
right of possession, it shall be lawful for Landlord, without formal demand or
notice of any kind, to re-enter the Premises by summary dispossession
proceedings or any other legal proceeding and to remove Tenant and all persons
and property therefrom. If Landlord re-enters the Premises, Landlord shall have
the right to keep in place and use, or remove and store, all of the furniture,
fixtures and equipment at the Premises.
If Landlord terminates this Lease, Landlord may recover from Tenant
the sum of: all Base Rent and all other amounts accrued hereunder to the date of
such termination; the cost of reletting the whole or any part of the Premises,
including without limitation brokerage fees and/or leasing commissions incurred
by Landlord, and costs of removing and storing Tenant's or any other occupant's
property, repairing, altering, remodeling, or otherwise putting the Premises
into condition acceptable to a new tenant or tenants, and all reasonable
expenses incurred by Landlord in pursuing its remedies, including reasonable
attorneys' fees and court costs; and the excess of the then present value of the
Base Rent and other amounts payable by Tenant under this Lease as would
otherwise have been required to be paid by Tenant to Landlord during the period
following the termination of this Lease measured from the date of such
termination to the expiration date stated in this Lease, over the then present
value of the aggregate fair market rental value for the same period which Tenant
establishes Landlord can reasonably expect to recover by reletting the Premises
for such period, taking into consideration the availability of acceptable
tenants and other market conditions affecting leasing. Such present values shall
be calculated at a discount rate equal to the 90-day U.S. Treasury bill rate at
the date of such termination.
If Landlord terminates Tenant's right of possession (but not this
Lease), Landlord may relet the Premises for the account of Tenant for such rent
and upon such terms as shall be satisfactory to Landlord without thereby
releasing Tenant from any liability hereunder and without demand or notice of
any kind to Tenant. For the purpose of such reletting Landlord is authorized to
make any repairs, changes, alterations, or additions in or to the Premises as
Landlord deems reasonably necessary or desirable. If the Premises are not relet
for any period or periods, then Tenant shall pay to Landlord as liquidated
damages a sum equal to the amount of the rental reserved in this Lease for such
period or periods as and when such rents are due under this Lease in respect of
such period or periods, plus the cost of recovering possession of the Premises
(including attorneys' fees and costs of suit), the unpaid Base Rent and other
amounts accrued hereunder at the time of repossession, and the costs incurred in
any attempt by Landlord to relet the Premises. If the Premises are relet and a
sufficient sum shall not be realized from
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such reletting [after first deducting therefrom, for retention by Landlord, the
unpaid Base Rent accrued as of the date of such re-letting and other amounts
accrued hereunder at the time of reletting, the cost of recovering possession
(including attorneys' fees and costs of suit), all of the costs and expense of
repairs, changes, alterations, and additions, the expense of such reletting
(including without limitation brokerage fees and leasing commissions) and the
cost of collection of the rent accruing therefrom] to satisfy the rent provided
for in this Lease to be paid, then Tenant shall pay, as liquidated damages, the
amount of any such deficiency between the Base Rent and all other amounts due
under this Lease for the applicable period prior to the scheduled expiration
date of this Lease and the net amount, if any, of the rents collected on account
of the lease or leases of the Premises for each month of the same period. Any
liquidated damages payable pursuant to this paragraph shall be paid in monthly
installments by Tenant on the first day of each month of the unexpired Lease
Term. Any such payments due Landlord shall be made upon demand therefor from
time to time and Tenant agrees that Landlord may file suit to recover any sums
falling due from time to time. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect in writing to terminate
this Lease for such previous breach. Notwithstanding anything contained herein
to the contrary, if Landlord terminates Tenant's right to possession without
terminating the Lease after an Event of Default, Landlord shall use commercially
reasonable efforts to relet the Premises; provided, however, (a) Landlord shall
not be obligated to accept any tenant proposed by Tenant, (b) Landlord shall
have the right to lease any other space controlled by Landlord first, and (c)
any proposed tenant shall meet all of Landlord's leasing criteria.
Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises and/or a termination of this Lease by Landlord, whether by
agreement or by operation of law, it being understood that such surrender and/or
termination can be effected only by the written agreement of Landlord and
Tenant. Any law, usage, or custom to the contrary notwithstanding, either party
shall have the right at all times to enforce the provisions of this Lease in
strict accordance with the terms hereof; and the failure of either party at any
time to enforce its rights under this Lease strictly in accordance with same
shall not be construed as having created a custom in any way or manner contrary
to the specific terms, provisions, and covenants of this Lease or as having
modified the same. Tenant and Landlord further agree that forbearance or waiver
by either party to enforce its rights pursuant to this Lease or at law or in
equity, shall not be a waiver of either party's right to enforce one or more of
its rights in connection with any subsequent default. A receipt by Landlord of
rent or other payment with knowledge of the breach of any covenant hereof shall
not be deemed a waiver of such breach, and no waiver by either party of any
provision of this Lease shall be deemed to have been made unless expressed in
writing and signed by either party. The terms "enter," "re-enter," "entry" or
"re-entry," as used in this Lease, are not restricted to their technical legal
meanings. Any reletting of the Premises shall be on such terms and conditions as
Landlord in its sole discretion may determine (including without limitation a
term different than the remaining Lease Term, rental concessions, alterations
and repair of the Premises, lease of less than the entire Premises to any tenant
and leasing any or all other portions of the Project before reletting the
Premises). Notwithstanding anything to the contrary contained in this Lease,
except as and to the extent otherwise set forth in this Paragraph
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24, Landlord hereby waives any right it may have under Nevada law (whether
statutory, common law or otherwise) to accelerate Base Rent, the Additional
Rental Amount or Additional Rent for the Common Area Land.
Notwithstanding any provisions of this Lease to the contrary, to
the extent permitted by applicable law, in no event shall either party be liable
to the other for consequential damages, even in cases of negligence, willful
misconduct or breach of this Lease, and each party hereby waives and releases
the other party from any and all liability for consequential damages suffered by
either party under this Lease.
Tenant's Remedies/Limitation of Liability. Except as otherwise
expressly set forth in this Lease, Landlord shall not be in default hereunder
unless Landlord fails to perform any of its obligations under this Lease
(including, without limitation, its obligations under Paragraphs 10 and 43 of
this Lease and its obligations with respect to any Punch List items) within 7
days after receipt of written notice from Tenant specifying such failure (unless
such performance will, due to the nature of the obligation, require a period of
time in excess of 7 days, then provided that Landlord commences such performance
within such seven (7) day period, Landlord shall have as much time as is
reasonably necessary as long as Landlord diligently pursues such performance, up
to a maximum amount of 150 days). All obligations of Landlord hereunder shall be
construed as covenants, not conditions. If Landlord is in default hereunder,
Tenant's remedies shall include, without limitation, the right (a) to take
commercially reasonable actions to cure such default on behalf of and at the
sole cost and expense of Landlord, in which event Landlord shall reimburse
Tenant for its reasonable, out-of-pocket costs and expenses incurred and paid in
connection therewith within 30 days after Tenant's delivery to Landlord of an
invoice therefor, together with reasonable supporting documentation for such
reasonable costs and expenses, and/or (b) to exercise any other actions
available at law or to bring an action for injunctive relief, and/or (c) to
bring an action for damages. If Landlord fails to reimburse Tenant for the
reasonable costs, fees and expenses incurred by Tenant in taking curative
actions under clause (a) above within 30 days after demand therefor, Tenant may
bring an action for damages against Landlord to recover such costs, fees and
expenses, together with interest thereon at the Interest Rate from the due date
therefor (i.e. the date 30 business days after demand), and reasonable
attorney's fees incurred by Tenant in bringing such action for damages. Upon
Tenant obtaining a court ordered judgment against Landlord for damages as
described herein, Tenant may offset such amounts together with interest at the
Interest Rate from the due date therefor (being the date that is 30 days
following Landlord's receipt of a demand therefor) against the Base Rent,
Additional Rental Amount and all other amounts payable hereunder. Additionally,
if Landlord is in default under this Lease during the last six (6) months of the
Lease Term (including any renewals or extensions of the Lease Term), Tenant
exercises its right of self help under this Paragraph 25, and Landlord does not
timely reimburse Tenant for such costs and expenses incurred by Tenant in taking
such curative actions, then Tenant may pay its Base Rent and Additional Rental
Amount for the remainder of the Lease Term (up to six months only) into an
escrow account managed by an independent third party until the matter is decided
by a court of law.
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Tenant's exercise of its right to self help or to offset Base Rent
and the Additional Rental Amount or to escrow Base Rent and the Additional
Rental Amount under this Paragraph 25 shall in no way be an acknowledgment of or
be construed as an agreement by Landlord that such payment (or work) required is
the obligation of Landlord and shall in no way hinder the Landlord from
disputing such claims and Base Rent and Additional Rental Amount offsets and
escrows by Tenant. In the event of a dispute, and if Landlord prevails, Tenant
shall promptly reimburse Landlord for all amounts paid by Landlord to Tenant, or
any amounts offset or escrowed by Tenant or any amounts on which Landlord has
prevailed, whichever is appropriate, plus interest at the Interest Rate from the
date the amount was offset, escrowed or paid. Further the prevailing party shall
be entitled to reasonable attorneys' fees and costs incurred in the offset or
escrow dispute.
All obligations of Landlord under this Lease will be binding upon
Landlord only during the period of its ownership of the Premises and not
thereafter. The term "Landlord" in this Lease shall mean only the owner, for the
time being of the Premises, and in the event of the transfer by such owner of
its interest in the Premises, such owner shall thereupon be released and
discharged from all obligations of Landlord thereafter accruing, and the new
owner shall automatically be deemed to have assumed all obligations of
"Landlord" under the Lease commencing from the Commencement Date.
Any liability of Landlord for a default by Landlord under the
Lease, or a breach by Landlord of any of its obligations under the Lease, shall
be limited solely to its interest in the Project, and in no event shall any
personal liability be asserted against Landlord in connection with the Lease nor
shall any recourse be had to any other property or assets of Landlord. If Tenant
obtains a final court ordered judgment against Landlord, then Landlord's
interest in the Project shall be deemed to include: (i) the rents or other
income from the Project received by Landlord, (ii) the net proceeds received by
Landlord from the sale, financing or other disposition of all or any part of
Landlord's right, title and interest in the Project, (iii) the net proceeds
received by Landlord from any condemnation or conveyance in lieu of condemnation
of all or any portion of the Project, and (iv) the net proceeds of insurance
received by Landlord from any casualty loss of all or any portion of the
Project.
Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL
BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS
LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
Subordination. Landlord represents and warrants that, as of the
date hereof, (i) there are no mortgages that constitute a lien or charge on the
whole or any portion of the Land, other than that certain mortgage (the
"Existing Mortgage"), dated June 11, 1998, made by Landlord's
predessor-in-interest in favor of ProLogis Trust, in the original principal
amount of $25,269,697.00, (ii) there are no ground or underlying leases covering
the whole or any portion
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of the Land or the Building, and (iii) ProLogis Trust, a Maryland real estate
investment trust, is the holder of the Existing Mortgage. Simultaneously with
the execution of this Lease, Landlord shall obtain for and deliver to Tenant an
agreement in the form annexed hereto as Exhibit H from the present holder of the
Existing Mortgage. With respect to any mortgage (each a "Future Mortgage") that
hereafter become a lien or charge upon the Premises, Tenant agrees to
subordinate this Lease to the lien of such Future Mortgage, by written
agreement, but only if, simultaneously therewith, the holder of such Future
Mortgage executes and delivers to Tenant (whether as part of the agreement of
subordination or otherwise) a Non-Disturbance Agreement (as defined below). As
used in this Lease, the term "Non-Disturbance Agreement" shall mean an agreement
between the holder of a Future Mortgage and Tenant either in the form annexed
hereto as Exhibit H, or in such other form as shall be proposed by such holder
of a Future Mortgage, as long as such other form, as compared to the form
annexed hereto as Exhibit H does not, in any material respect, increase the
obligations or liabilities of Tenant or decrease the rights or remedies of
Tenant, and, in all cases, in recordable form. Notwithstanding the foregoing
provisions of this Paragraph 27, in no event shall Tenant be required to
subordinate this Lease to the lien of any Future Mortgage if the holder of such
Future Mortgage is an affiliate of Landlord. If Tenant and any mortgagee enter
into a Non-Disturbance Agreement and such Non-Disturbance Agreement contains a
provision that requires that the Tenant, upon request of such mortgagee, pay
directly to such mortgagee any or all Base Rent and additional rent thereafter
coming due under this Lease, then, whether or not Landlord is a party to such
Non-Disturbance Agreement, (i) Landlord hereby authorizes Tenant to pay directly
to such mortgagee all Base Rent and additional rent thereafter coming due under
this Lease, without any further authorization by Landlord and notwithstanding
any protest by Landlord, and (ii) Landlord hereby agrees that any sums paid by
Tenant to such mortgagee pursuant to such mortgagee's request shall be deemed to
have been paid by Tenant to Landlord under this Lease, and Tenant shall have no
liability to Landlord whatsoever for any sums so paid by Tenant directly to such
mortgagee, whether or not Landlord protest the same.
Mechanic's Liens. Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from all loss, cost or
expense based on or arising out of asserted claims or liens against the
leasehold estate or against the interest of Landlord in the Premises or under
this Lease as a result of any such amount payable by Tenant. Tenant shall give
Landlord immediate written notice of the placing of any lien or encumbrance
against the Premises and cause such lien or encumbrance to be discharged or
bonded within 45 days of the notice of the filing or recording thereof;
provided, however, Tenant may contest such liens or encumbrances as long as such
contest prevents foreclosure of the lien or encumbrance and Tenant causes such
lien or encumbrance to be bonded or insured over in a manner satisfactory to
Landlord within such 45 day period.
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Estoppel Certificates. Both parties agree, from time to time,
within 20 days after request of the other, to execute and deliver to the other,
or the other's designee, an estoppel certificate reasonably requested by the
other, stating that this Lease is in full force and effect, the date to which
rent has been paid, that to the best knowledge of the certifying party, the
other party is not in default hereunder (or specifying in detail the nature of
the other's default), the termination date of this Lease and such other matters
pertaining to this Lease as may be requested by the other (provided that the
matters requested are reasonable and customary). If (i) either party (the
"certifying party") fails or refuses to execute and deliver an estoppel
certificate in a form annexed hereto as Exhibit I to the other party within
twenty (20) days after the certifying party receives such estoppel certificate,
and (ii) such failure continues for five (5) days after the certifying party
receives notice of such failure, then the certifying party shall automatically
and without further act be deemed to have certified that the information set
forth in such estoppel certificate is true and correct.
Environmental Requirements. Except for Hazardous Material contained
in products used by Tenant (i) in de minimis quantities for ordinary cleaning,
(ii) in de minimis quantities for office purposes and (iii) in de minimis
quantities for warehouse purposes, Tenant shall not cause or permit its agents,
employees, subtenants, contractors or invitees to bring any Hazardous Material
upon the Premises or transport, store, use, generate, manufacture or release any
Hazardous Material in or about the Premises without Landlord's prior written
consent. Tenant, at its sole cost and expense, shall operate its business in the
Premises in strict compliance with all Environmental Requirements (defined
below) and shall remediate in a manner in compliance with Environmental
Requirements any Hazardous Materials released on or from the Project by Tenant,
its agents, employees, contractors, subtenants or invitees. Tenant shall
complete and certify to Landlord disclosure statements as reasonably requested
by Landlord from time to time (but not more often than twice in any calendar
year) relating to Tenant's transportation, storage, use, generation, manufacture
or release of Hazardous Materials on the Premises. The term "Environmental
Requirements" means all applicable present and future statutes, regulations,
ordinances, rules, codes, judgments, orders or other similar enactments of any
governmental authority or agency regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the environment,
including without limitation, the following: the Comprehensive Environmental
Response, Compensation and Liability Act; the Resource Conservation and Recovery
Act; and all state and local counterparts thereto, and any regulations or
policies promulgated or issued thereunder. The term "Hazardous Materials" means
and includes any substance, material, waste, pollutant, or contaminant listed or
defined as hazardous or toxic, under any Environmental Requirements, asbestos
and petroleum, including crude oil or any fraction thereof, natural gas liquids,
liquified natural gas, or synthetic gas usable for fuel (or mixtures of natural
gas and such synthetic gas). As defined in Environmental Requirements, Tenant is
and shall be deemed to be the owner of all Hazardous Materials brought on the
Premises by Tenant, its agents, employees, contractors or invitees, and the
wastes, by-products, or residues generated, resulting, or produced therefrom.
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Subject to the provisions of Article 24 hereof, Tenant shall
indemnify, defend, and hold Landlord harmless from and against any and all
losses (including, without limitation, diminution in value of the Premises or
the Project and loss of rental income from the Project), claims, demands,
actions, suits, damages (including, without limitation, punitive damages),
expenses (including, without limitation, remediation, removal, repair,
corrective action, or cleanup expenses), and costs (including, without
limitation, reasonable attorneys' fees, consultant fees or expert fees and
including, without limitation, removal or management of any asbestos brought
into the property or disturbed in breach of the requirements of this Paragraph
30), which are brought or recoverable against, or suffered or incurred by
Landlord as a result of any release of Hazardous Materials for which Tenant is
obligated to remediate as provided above or any other breach of the requirements
under this Paragraph 30 by Tenant, its agents, employees, contractors,
subtenants, assignees or invitees, regardless of whether Tenant had knowledge of
such noncompliance. The obligations of Tenant under this Paragraph 30 shall
survive any termination of this Lease.
Landlord shall have access to, and a right to perform reasonable
inspections and tests of the Premises to determine Tenant's compliance with
Environmental Requirements (but not more often than once in any calendar year),
its obligations under this Paragraph 30, or the environmental condition of the
Premises. Access shall be granted to Landlord upon Landlord's prior notice to
Tenant and at such times and in such a manner so as to minimize, so far as may
be reasonable under the circumstances, any disturbance to Tenant's operations.
Such inspections and tests shall be conducted at Landlord's expense, unless such
inspections or tests reveal that Tenant has not complied with any Environmental
Requirement in a manner which materially and adversely affects the value of the
Premises or the Project, in which case Tenant shall reimburse Landlord for the
reasonable cost of such inspection and tests. Landlord's receipt of or
satisfaction with any environmental assessment in no way waives any rights that
Landlord holds against Tenant.
Notwithstanding anything to the contrary in this Paragraph 30,
Tenant shall have no liability of any kind to Landlord as to Hazardous Materials
on the Premises caused or permitted by: (i) Landlord, its agents, employees,
contractors or invitees; or (ii) any other tenants in the Project or their
agents, employees, contractors, subtenants, assignees or invitees; or (iii) any
other person or entity located outside of the Premises or the Project.
If: (i) Hazardous Materials are hereafter discovered on the Project
during Landlord's (or any affiliate of Landlord's) ownership of the Project (or
the relevant portion thereof, including the Premises), and such Hazardous
Materials were not introduced onto the Project by Tenant or its agents,
employees, contractors, subtenants or invitees, and the presence of such
Hazardous Materials results in any contamination, damages, or injury to the
Premises that materially and adversely affects Tenant's occupancy or use of the
Premises or human health, or (ii) Landlord, its agents, contractors or employees
release any Hazardous Materials onto the Premises; then, in either such event,
Landlord shall promptly take all actions at its sole expense as are necessary to
remediate such Hazardous Materials as required by Environmental Requirements in
order to permit Tenant to use and occupy the Premises for the Intended Use and
without restrictions or
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limitations on such use and occupancy that were not imposed on such use and
occupancy prior to the discovery of such Hazardous Materials. Actual or
threatened action or litigation by any governmental authority is not a condition
prerequisite to Landlord's obligations under this paragraph. If Landlord fails
to commence such remediation or if Landlord commences such remediation and fails
to diligently prosecute same to completion, then Tenant, as its sole and
exclusive remedies with respect to the matters referred to in clause (i) of this
paragraph only, (it being understood that Tenant's remedies shall not be so
limited in the event of an occurrence under clause (ii) of this paragraph) may
either: (a) terminate this Lease by written notice (a "Termination Notice") to
Landlord after expiration of 30 days following a notice to Landlord that Tenant
intends to terminate this Lease if Landlord does not promptly commence or
diligently prosecute the remediation to completion within such 30 day period; or
(b) commence an action against Landlord to enforce Landlord's obligations
hereunder. Base Rent and Additional Rent for Common Area Land shall be equitably
adjusted if and to the extent and during the period the Premises are unsuitable
for Tenant's business as the result of the presence of Hazardous Materials as
hereinabove described. Notwithstanding anything herein to the contrary, if
Landlord within ten (10) days after its receipt of a Termination Letter obtains
a letter from the appropriate governmental authority that no further remediation
is required prior to the effective date of any such termination, then such
termination shall be null and void and this Lease shall remain in full force and
effect.
Landlord represents and warrants, to Landlord's knowledge, that as
of the Commencement Date, except for information contained in the Phase I
Environmental Assessment Report dated August 21, 1997, as amended by letter
report dated June 9, 1998 and prepared by SECOR International Incorporated,
there has not been (i) any violation of Environmental Requirements pertaining to
the Land, or (ii) any release of Hazardous Materials on the Land. For purposes
of this paragraph, Landlord's knowledge shall mean the actual knowledge of Dave
Morze and John Hanson, without any duty of inquiry or investigation. Landlord
represents and warrants to Tenant that no employee of Landlord has any material
knowledge that is not possessed by David Morze or John Hanson about any of the
matters that are the subject of the representations and warranties contained in
this paragraph.
Rules and Regulations. Tenant shall, at all times during the Lease
Term and any extension thereof, comply with the rules and regulations attached
hereto. In the event of any conflict between said rules and regulations and
other provisions of this Lease, the other terms and provisions of this Lease
shall control. Landlord shall not have any liability or obligation for the
breach of any rules or regulations by other tenants in the Project.
Security Service. Tenant acknowledges and agrees that, while
Landlord may patrol the Project, Landlord is not providing any security services
with respect to the Premises and that Landlord shall not be liable to Tenant
for, and Tenant waives any claim against Landlord with respect to, any loss by
theft or any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises.
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Force Majeure. Neither Landlord nor Tenant shall be held
responsible for delays in the performance of its obligations hereunder when
caused by any of the following events to the extent beyond the applicable
party's reasonable control: strikes, lockouts, labor disputes, acts of God
(which for purposes of the performance by Landlord of the Base Building Work,
shall include weather delays, but only if and to the extent that weather delays
exceed 21 days on a cumulative basis or to such extent as there is a continual
weather delay beyond 7 consecutive days), inability to obtain labor or materials
or reasonable substitutes therefor, new governmental restrictions that are
promulgated after the Rent Commencement Date, governmental regulations that are
promulgated after the Rent Commencement Date, governmental controls that are
enacted after the Rent Commencement Date, delay in issuance of permits (provided
(x) that Landlord complies with industry standard in the submittal process of
such permits to the appropriate governmental authority and (y) with respect to
the Base Building Work, such delay shall be governed by Section 2.02(f) of
Addendum 2, rather than this definition), enemy or hostile governmental action,
civil commotion, fire or other casualty (any of the foregoing events, "Force
Majeure"). Notwithstanding the foregoing in this Paragraph 33, in no event shall
any of the following events constitute an event of Force Majeure (and the
applicable party shall not be relieved of its obligations hereunder as a result
thereof): (i) any financial inability of either party to perform its obligations
under this Lease, (ii) any contractor or subcontractor defaults, (iii) any
inability of Landlord to timely perform its obligations under Addendum 2 as a
result of (x) any delays in obtaining (or failure to obtain) any consents,
approvals or authorizations that are required to be obtained under the
Declaration, (y) any term, condition or provision of the Declaration that
affects the ability of Landlord to timely perform such obligations or (z) any
act, or failure to act, by the Declarant, the ALC or the TCMA (as all such terms
are defined in the Declaration).
Entire Agreement. This Lease (together with all of the exhibits and
addenda attached hereto) and the guaranty delivered to Tenant by Prologis Trust
on the date hereof constitute the complete agreement of Landlord and Tenant with
respect to the subject matter hereof. No representations, inducements, promises
or agreements, oral or written, have been made by Landlord or Tenant, or anyone
acting on behalf of Landlord or Tenant, which are not contained herein or in
such guaranty, and any prior agreements, promises, negotiations, or
representations are superseded by this Lease and such guaranty. This Lease may
not be amended except by an instrument in writing signed by both parties hereto.
Severability. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby. It is also the intention of the parties to this Lease
that in lieu of each clause or provision of this Lease that is illegal, invalid
or unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.
Brokers. Landlord and Tenant represent and warrant to the other
that neither has dealt with any broker,
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agent or other person in connection with this transaction and that no broker,
agent or other person brought about this transaction, other than the broker, if
any, set forth on the first page of this Lease, and Landlord and Tenant agree to
indemnify and hold the other harmless from and against any claims by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Landlord or Tenant with regard to
this leasing transaction. Landlord and Tenant hereby acknowledge and agree that
the broker(s) referenced on the first page of this Lease shall be entitled to a
leasing commission from Landlord by virtue of this Lease, which leasing
commission shall be deemed earned and shall be paid by Landlord to said
broker(s) in accordance with, and subject to the terms of, a separate written
agreement.
Miscellaneous. Any payments or charges due from Tenant to Landlord
hereunder shall be considered rent for all purposes of this Lease.
This Lease may be executed in one or more counterparts each of
which shall together constitute a single document.
All notices required or permitted to be given under this Lease
shall be in writing and shall be sent by registered or certified mail, return
receipt requested, or by a reputable national overnight courier service, postage
prepaid, or by hand delivery addressed to the parties at their addresses on the
signature page, and (i) in the case of notices to Landlord, with a copy sent to
Landlord at 14100 East 35th Place, Aurora, Colorado 80011, and (ii) in the case
of notices to Tenant, with a copy sent to: (aa) barnesandnoble.com llc, 76 Ninth
Avenue, 11th Floor, New York, NY 10011, Attn: William F. Duffy, Vice President
of Operations, and (bb) Robinson Silverman Pearce Aronsohn & Berman LLP, 1290
Avenue of the Americas, New York, New York 10104, Attn: Michael N. Rosen, Esq.
Either party may by notice given aforesaid change its address for all subsequent
notices. Except where otherwise expressly provided to the contrary, notice shall
be deemed given upon receipt or refusal of receipt.
Except as otherwise expressly provided in this Lease or as
otherwise required by law, in any instance in this Lease for which Landlord's
consent or approval is required, such consent or approval shall not be
unreasonably withheld, conditioned or delayed.
Intentionally deleted.
Landlord, at anytime after the date hereof and within ten (10) days
after its receipt of a request therefor, shall execute, acknowledge and deliver
to Tenant (i) a memorandum of lease in respect of this Lease, sufficient for
recording and in form of Exhibit J annexed hereto and made a part hereof, which
memorandum may be recorded by Tenant, and (ii) any other instrument(s) necessary
to the effective recordation of such memorandum of lease. Simultaneously with
the execution of such a memorandum of lease, Tenant shall execute and deliver to
Landlord an instrument (the "Release") releasing such memorandum of lease from
the applicable real property records; provided, however, that the Release shall
be held in escrow by a third party law firm reasonably acceptable to Landlord
and Tenant, and shall not be released from escrow
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until the expiration or sooner termination of this Lease (and Landlord, Tenant
and the escrow agent shall execute a mutually agreeable escrow agreement to that
effect).
The normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto. (n) (o) The
submission by Landlord to Tenant of this Lease shall have no binding force or
effect, shall not constitute an option for the leasing of the Premises, nor
confer any right or impose any obligations upon either party until execution of
this Lease by both parties.
Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
If Tenant fails to pay Landlord any Base Rent or other amounts due
under this Lease by the date such amount is due (any such failure, a
"Non-Payment Event") and such failure shall continue for a period of ten (10)
days after written notice (each, a "Late Notice"), then such past due amount
shall bear interest at the Interest Rate (as defined below) from the due date
therefor until the date paid. Notwithstanding the preceding sentence, if (and
only if) (a) a Non-Payment Event occurs and continues for five (5) days and (b)
within the 365-day period preceding the date of such occurrence, at least two
other Non-Payment Events shall have also occurred in respect of which Tenant
shall have received Late Notices, then (x) Landlord shall have no obligation to
give to Tenant a Late Notice in respect of the Non-Payment Event in question,
and (y) the past due amount in connection with such Non-Payment Event shall bear
interest at the Interest Rate from the due date therefor until the date paid,
and (z) Tenant shall pay Landlord a late charge equal to three percent (3%) of
the past due amount. For purposes hereof, the term "Interest Rate" shall mean
the lesser of (i) two percent (2%) above the so-called annual "Base Rate" of
interest publicly announced by Citibank, N.A., New York, New York (or any
successor thereof) from time to time, as its interest rate charged for unsecured
loans to its corporate customers, but in no event greater than the highest
lawful rate from time to time in effect and (ii) the highest rate permitted by
applicable law. It is expressly the intent of Landlord and Tenant at all times
to comply with applicable law governing the maximum rate or amount of any
interest payable on or in connection with this Lease. If applicable law is ever
judicially interpreted so as to render usurious any interest called for under
this Lease, or contracted for, charged, taken, reserved, or received with
respect to this Lease, then it is Landlord's and Tenant's express intent that
all excess amounts theretofore collected by Landlord or Tenant, as the case may
be, be credited on the applicable obligation (or, if the obligation has been or
would thereby be paid in full, refunded to Tenant or Landlord as the case may
be), and the provisions of this Lease immediately shall be deemed reformed and
the amounts thereafter collectible hereunder reduced, without the necessity of
the execution of any new document, so as to comply with the applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
hereunder.
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Construction and interpretation of this Lease shall be governed by
the laws of the state in which the Project is located, excluding any principles
of conflicts of laws.
Time is of the essence as to the performance of Tenant's and
Landlord's obligations under this Lease.
All exhibits and addenda attached hereto are hereby incorporated
into this Lease and made a part hereof.
Within two (2) years from the Commencement Date, upon Tenant's
request, from time to time within such two (2) year period, Landlord shall
provide up to $60,000.00 of Insight software logistics consulting services to
Tenant at no cost to Tenant.
Landlord's Lien/Security Interest. Intentionally deleted.
Limitation of Liability of Trustees, Shareholders, and Officers of
ProLogis Trust. Any obligation or liability whatsoever of ProLogis Trust, a
Maryland real estate investment trust, which may arise at any time under this
Lease or any obligation or liability which may be incurred by it pursuant to any
other instrument, transaction, or undertaking contemplated hereby shall not be
personally binding upon, nor shall resort for the enforcement thereof be had to
the property of, its trustees, directors, shareholders, officers, employees or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort, or otherwise.
Restriction on Transfer of the Premises. Landlord hereby covenants
and agrees that Landlord shall not, without Tenant's prior written consent,
which consent may be withheld by Tenant in its sole and absolute discretion,
sell, convey or otherwise transfer its interests in the Premises prior to the
Rent Commencement Date In the event of a breach by Landlord of the covenant
contained in this Paragraph 40, Tenant, in addition to any and all other rights
and remedies which Tenant may have against Landlord under this Lease, at law or
in equity, shall be entitled to terminate this Lease upon ten (10) days' prior
written notice to Landlord and, upon such termination, this Lease shall
terminate and be of no further force and effect. Landlord and Tenant hereby
represent and warrant to each other that the Landlord's restriction on transfer
of the Premises as set forth herein shall in no event restrict Landlord from
transferring its ownership interests in the Premises and this Lease at any time
following the Rent Commencement Date.
Intentionally omitted.
Corporate Authority. Tenant represents and warrants that (i) it has
full corporate right and authority to lease the Premises from Landlord and to
otherwise enter into this Lease on the terms and conditions set forth herein and
(ii) the officer executing this Lease on behalf of Tenant has the full corporate
right, authority and power to execute and deliver this Lease on behalf of
Tenant. Landlord represents and warrants that (i) it is the sole owner in fee
simple of the Land, (ii) it has full corporate right and authority to lease the
Premises to Tenant and to otherwise enter
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into this Lease on the terms and conditions set forth herein and (iii) the
officer executing this Lease on behalf of Landlord has the full right, authority
and power to execute and deliver this Lease on behalf of Landlord.
Warranties. Landlord warrants and covenants to Tenant that, upon
the Rent Commencement Date, the Base Building Work will be free from defects in
workmanship and material for the twenty-four (24) month period ("Warranty
Period") following the Rent Commencement Date. In amplification and not in
limitation of the preceding sentence, if at anytime during the Warranty Period,
any of the Base Building Work (including any equipment and/or materials
installed at the Premises in connection with the Base Building Work) (a) is
found to be defective, or (b) requires adjustment due to a defect or such
adjustment is customary in connection with the installation and initial
operation of such portion of the Base Building Work (e.g., a building system
which requires periodic adjustment in connection with the installation and "fine
tuning" of such system to make such system fully operational), or (c) fails to
conform to any Legal Requirements that were enacted prior to the Rent
Commencement Date, then Landlord shall correct such defect, adjustment or
nonconformity promptly after receipt of written notice from Tenant to do so.
Landlord shall bear the costs of correcting such defective or nonconforming Base
Building Work. On or prior to the Rent Commencement Date, (x) Landlord shall
cause Landlord's general contractor to issue all of the general contractor
warranties and guarantees relating to the Base Building Work to both Landlord
and Tenant and (y) Landlord shall deliver to Tenant an original of, and assign
to Tenant, all Landlord's right, title and interest in and to, each of the other
warranties and guarantees shown on Exhibit L annexed hereto, in the forms
annexed hereto, from each of the contractors, subcontractors and suppliers shown
on such warranties and guarantees. Landlord shall cooperate with Tenant, at
Tenant's expense, (unless any such warranty or guaranty relates to an item for
which Landlord is responsible under the terms of this Lease, in which case, such
cooperation shall be at Landlord's expense) in all of Tenant's efforts to
enforce any and all such warranties and/or guarantees (whether or not assigned
or assignable to Tenant).
Notwithstanding the preceding paragraph or anything else in the
Lease to the contrary, if at anytime during the Lease Term (as the same may be
renewed or extended), it is determined that any of the Base Building Work
(including any equipment and/or materials installed at the Premises in
connection with the Base Building Work) was not constructed by Landlord and
delivered to Tenant on the Rent Commencement Date strictly in accordance with
the terms and provisions of the Performance Specifications, then Landlord shall
promptly correct any such matters after receipt of written notice from Tenant to
do so and Landlord shall bear all the costs of correcting such matter; provided,
however, that with respect to the items indicated in the Performance
Specifications as being required to comply with the Performance Specifications
only as of the Rent Commencement Date, Landlord shall have no further
obligations under this paragraph with respect thereto following Tenant's
acceptance of each such item on the Rent Commencement Date (it being agreed that
nothing contained herein shall relieve Landlord of its obligations and
liabilities under the immediately preceding paragraph with respect to each such
item).
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Attorneys' Fees. In the event of any legal action or proceeding
brought by either party against the other arising out of this Lease, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred in such action. Such amounts shall be included in any judgment
rendered in any such action or proceeding.
Declaration. (a) Landlord represents to Tenant that as of the
Commencement Date: (i) Landlord has delivered to Tenant a true and complete copy
(together with all exhibits thereto) of: (x) that certain Final Development
Agreement (the "Development Agreement") dated April 14, 1998, and made between
County of Washoe and Nevada Tri Partners, a memorandum of which was recorded on
May 15, 1999 in the Official Records of Washoe County in Book 5274, Page 734 as
Document No. 2221194; and (y) that certain declaration of covenants, conditions
and restrictions and reservation of easements (the "Covenants") for Damonte
Ranch Trade Center I (the "Development Agreement" and the "Covenants" are
hereinafter collectively referred to as the "Declaration"); (ii) to Landlord's
knowledge the Declaration has not been modified, amended or terminated; (iii) to
Landlord's knowledge, the Declaration is currently in full force and effect; and
(iv) to Landlord's knowledge, no default exists under the Declaration. For
purposes of this paragraph, Landlord's knowledge shall mean the actual knowledge
of David Morze and John Hanson, after appropriate due inquiry and investigation.
Landlord represents and warrants to Tenant that no employee of Landlord has any
material knowledge that is not possessed by David Morze and John Hanson about
any of the matters that are the subject of the representations and warranties
contained in the foregoing representations and warranties.
Landlord shall throughout the Lease Term: (i) perform and observe
all of the material terms, covenants, provisions and conditions of the
Declaration on Landlord's part to be performed and observed; (ii) defend,
indemnify and hold harmless Tenant from and against any and all claims, demands,
causes of action, suits, actual damages, liabilities and actual expenses of any
nature arising out of or in connection with a default by Landlord under the
Declaration; and (iii) use commercially reasonable efforts (without the
obligation to commence litigation) to cause each of the other tenants and
occupants of any buildings owned by Landlord (or an affiliate of Landlord) and
located within the Project to comply with all of the material covenants,
provisions and conditions of the Declaration.
Landlord shall, immediately upon receipt, forward to Tenant a copy
of any and all notices and/or demands received by Landlord under or pursuant to
the Declaration, which relate to, or could adversely affect, Tenant's use or
occupancy of the Premises, the conduct of Tenant's business therein or Tenant's
rights pursuant to this Lease.
Landlord shall not amend or modify (or consent to any amendment or
modification of) the Declaration if such amendment or modification could
diminish the rights or increase the obligations of Tenant thereunder or under
this Lease, or could adversely affect Tenant's use or occupancy of the Premises
or the conduct of Tenant's business therein, without first obtaining Tenant's
prior written consent, such consent not to be unreasonably withheld or delayed.
Landlord agrees that it will place (or cause to be placed) a provision in all
future leases executed by Landlord (or an affiliate of Landlord) at the Project
setting forth that Landlord's
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tenants must comply with applicable Legal Requirements and the Declaration.
Additionally, Landlord shall use commercially reasonable efforts (without the
obligation to commence litigation) to enforce the terms and provisions of the
Declaration on other property owned by Landlord (or an affiliate of Landlord)
within the Project.
Landlord shall use commercial reasonable efforts to obtain from the
"Declarant" under the Declaration, within thirty (30) days after the date
hereof, a letter agreement made in favor of Tenant providing for Declarant's
agreement: (i) to make any material modifications or amendments to the
Declaration, without Tenant's reasonable prior approval; and (ii) to provide
Tenant with a copy of any notices of default sent by Declarant to Landlord under
the Declaration simultaneously with the delivery of such notice to Landlord,
provided, however, that Landlord's failure to obtain such letter agreement shall
not be deemed to be a default of Landlord under this Lease. 24.
As between Landlord and Tenant, in the event of any conflict
between the terms and provisions of the Declaration and the terms and provisions
of this Lease, the terms and provisions of this Lease shall control in all
respects.
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1.
2. IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
3.
4.
5.
6. TENANT: LANDLORD:
barnesandnoble.com llc ProLogis Development Services Incorporated
By: /s/ William Duffy By: /s/ John W. Seiple, Jr.
--------------------------- ---------------------------
Title: Vice President, Operations Title: Senior Vice President
--------------------------- ---------------------------
Address: Address:
76 Ninth Avenue, 11th Floor 47775 Fremont Blvd.
New York, NY 10011 Fremont, CA 94538
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Rules and Regulations
1. The sidewalk, entries, and driveways of the Project shall not be
obstructed by Tenant, or its agents, or used by them for any purpose
other than ingress and egress to and from the Premises.
1. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs or who shall in any manner do any act in
violation of these Rules and Regulations.
1. No auction, public or private, will be permitted on the Premises or
the Project.
1. The Premises shall not be used for any immoral or illegal purposes
or for any purpose other than that specified in the Lease. No gaming
devices shall be operated in the Premises.
1. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage.
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ADDENDUM 1
BASE RENT ADJUSTMENTS
---------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED SEPTEMBER 8, 1999, BETWEEN
PROLOGIS DEVELOPMENT SERVICES INCORPORATED
and
barnesandnoble.com, llc
The monthly Base Rent for Month 1 through Month 60 shall be $174,000,
subject to adjustments as provided in Addendum 2 to the Lease. Once the monthly
Base Rent for Month 1 through Month 60 is determined, then the monthly Base Rent
for Month 61 through Month 120 shall be determined by multiplying the monthly
Base Rent for Month 1 through Month 60 by 113%.
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ADDENDUM 2
----------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED SEPTEMBER 8, 1999 BETWEEN
PROLOGIS DEVELOPMENT SERVICES INCORPORATED
and
barnesandnoble.com llc
WORKLETTER
----------
I. DEFINITIONS
1.01. Definitions. All capitalized terms used in this Workletter and
not defined herein shall have the meaning ascribed thereto in the lease (the
"Lease") to which this Workletter is annexed. In addition, for the purposes of
this Workletter the following terms shall have the following meanings:
"Performance Specifications" shall mean those certain
performance specifications and criteria annexed to this Workletter as
Schedule 1, together with all exhibits and attachments thereto
(including, without limitation, the Operational Plan and the Site
Plan), as the same may be modified or supplemented by any Change Order
(as defined below).
"Base Building Work" shall mean all of the work, materials and
equipment necessary to construct the Building and other improvements on
the Land in accordance with the Performance Specifications, using at
least the specifications set forth in the Minimum Design Criteria.
"Base Building Plans" shall mean the scaled, dimensioned and
coordinated architectural and engineering working drawings that will
describe the Base Building Work, as such scaled, dimensioned and
coordinated architectural and engineering working drawings (a) have
been approved (or deemed approved) by Tenant in accordance with Section
2.01(c) below and (b) may be changed in accordance with the provisions
of Section 2.01(e) and Section 2.03 below.
"Minimum Design Criteria" shall mean the minimum design
criteria referenced in Schedule 3 annexed hereto.
"Tenant's Initial Work" shall mean all work, equipment and
improvements which, in Tenant's opinion, are necessary or desirable to
prepare the Premises for Tenant's occupancy, other than the Base
Building Work.
"Milestone" shall have the meaning ascribed to it in Section
2.07 below.
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"Tenant Late Day" shall mean each day of actual delay suffered
by Landlord in completing any Milestone as a result of one or more of
the following events: (i) each day in any period beginning on the day
after the day on which Tenant is required to furnish a response under
this Workletter and ending on the day on which Tenant furnishes such a
response; (ii) Tenant's improper or negligent interference with
Landlord's obtainment of any Permit (as defined below), Tenant's
improper interference with the work necessary to complete such
Milestone or Tenant's unreasonable withholding of approval to the
Proposed Base Building Plans; (iii) Tenant's failure to comply with its
obligations under this Workletter; (iv) Tenant's failure to obtain the
proper permits and governmental approvals for Tenant's Initial Work; or
(v) the occurrence of one or more Tenant Late Payment Events (as
defined below); provided, however, that no Tenant Late Day shall be
deemed to have occurred unless (x) the Construction Minutes (as defined
below) delivered to Tenant in accordance with Section 2.08(b) below
immediately after the occurrence of the event that is the cause of such
Tenant Late Day state that such occurrence could result in a Tenant
Late Day and (y) the Construction Minutes delivered to Tenant in
accordance with Section 2.08(b) below immediately after the occurrence
of such Tenant Late Day indicate that the same has occurred.
"Substantially Completed" shall mean, with respect to any
portion of the Base Building Work, that such portion of the Base
Building Work has been completed, other than minor details or minor
adjustments (collectively, "Punch List Items") that do not affect
Tenant's ability to occupy the applicable portion of the Premises for
the prosecution of Tenant's Initial Work or, as the case may be, for
the ordinary use of the Building for the Intended Use (it being agreed
that, in any event, Landlord shall nevertheless remain obligated to
complete the Punch List Items applicable to each portion of the Base
Building Work in accordance with the terms and provisions of this
Workletter).
"Substantial Completion of the First-Half Dried-In
Construction" shall mean that all of the following have occurred: (I)
the following work has been completed (in accordance with the
Performance Specifications, the Base Building Plans, all applicable
Legal Requirements and the Declaration) with respect to the eastern
one-half of the Building (the eastern one-half of the Building being
referred to herein as the "Applicable Portion of the Building"): the
exterior walls are erected, the roof structure and roofing work are
complete to the point where the Building is dry, overhead electrical
and mechanical work in the Building is complete to allow fixturizing of
the Building, electrical service to the Building has been energized,
overhead mechanical equipment in the Building has been installed, the
high bay lighting fixtures in the Building have been installed and are
functional, the Building floor has been cleaned and sealed and truck
access to the Building from Old Virginia Road shall be available, (II)
the Applicable Portion of the Building is in such a condition that
Tenant is able to install its racking, conveyor and other equipment,
subject to Tenant obtaining the permits described in the parenthetical
in the immediately succeeding clause (III); and (III) Landlord has
obtained all governmental licenses, permits and approvals with respect
to the Applicable Portion of
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the Building that may be necessary for Tenant to commence and proceed
with the prosecution of Tenant's Initial Work in the Applicable Portion
of the Building (other than any licenses, permits and approvals
required in connection with Tenant's Initial Work).
"Substantial Completion of the Dried-In Construction" shall
mean that all of the following have occurred: (I) the following work
has been completed (in accordance with the Performance Specifications,
the Base Building Plans, the Declaration and all applicable Legal
Requirements) with respect to the entire Building: the exterior walls
are erected, the roof structure and roofing work are complete to the
point where the Building is dry, overhead electrical and mechanical
work in the Building is complete to allow fixturizing of the Building,
electrical service to the Building has been energized, overhead
mechanical equipment in the Building has been installed, the high bay
lighting fixtures in the Building have been installed and are
functional, the Building floor has been cleaned and sealed and truck
access to the Building from Old Virginia Road shall be available; (II)
the Building is in such a condition that Tenant is able to install its
racking, conveyor and other equipment, subject to Tenant obtaining the
permits described in the parenthetical in the immediately succeeding
clause (III); and (III) Landlord has obtained all governmental
licenses, permits and approvals with respect to the Building that may
be necessary for Tenant to commence and proceed with the prosecution of
Tenant's Initial Work (other than any licenses, permits and approvals
required in connection with Tenant's Initial Work).
"Substantial Completion of the Building Shell" shall mean that
all of the following have occurred: (I) Substantial Completion of the
Dried-In Construction has occurred, (II) an operable restroom has been
installed in the Building; and (III) Landlord has obtained a temporary
certificate of occupancy for the Building that allows delivery and
receipt of goods and products in connection with the Intended Use.
"Substantial Completion of the Base Building Work" shall mean
that all of the following conditions have been satisfied: (I) the Base
Building Work has been Substantially Completed in accordance with the
Performance Specifications, the Base Building Plans, the Declaration
and all applicable Legal Requirements (except for exterior painting and
landscaping work, which shall be completed by Landlord within 30 days
thereafter); (II) Landlord has delivered to Tenant a certificate,
addressed to Tenant and executed by Landlord's architect, stating that
the Base Building Work has been Substantially Completed in accordance
with Performance Specifications, the Base Building Plans, the
Declaration and all applicable Legal Requirements; (III) Landlord has
obtained (and evidenced such obtainment to Tenant's reasonable
satisfaction) (x) a "final" (not a temporary) certificate of occupancy
or its equivalent for the entire Building that permits Tenant to use,
operate and occupy the Premises for the Intended Use, and (y) all other
certificates, permits and approvals with respect to the Building as may
be necessary for Tenant lawfully to use, operate and occupy the
Premises for the Intended Use; (IV) Tenant has vehicular and pedestrian
access to and from the Land via Old Virginia Road at no less than the
access points shown on the Site Plan annexed to the
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Performance Specifications; and (V) the entire Premises shall be
available for, and tendered to, Tenant for its exclusive use and
possession, broom clean and free of all construction debris, except for
debris relating the completion of any Punch List items or any debris or
other work being conducted in the Premises by Tenant to complete
Tenant's Initial Work.
"Capped Base Building Work Items" shall mean all of the
portions of the Base Building Work that, pursuant to the Performance
Specifications, are subject to a monetary allowance or a monetary cap
(by way of example only, the portions of the Base Building Work
described in Sections 10.1.1 and 8.1.3 of the Performance
Specifications are Capped Base Building Work Items).
II. BASE BUILDING WORK
2.01. Base Building Plans; Permit Submissions. (a) Landlord, promptly
after the date hereof, shall cause Landlord's architect to prepare proposed
scaled, dimensioned and coordinated architectural and engineering working
drawings that describe the Base Building Work (the "Proposed Base Building
Plans"). The Proposed Base Building Plans shall fully incorporate, and shall be
fully consistent with, the Performance Specifications and shall provide for no
less than the specifications set forth in the Minimum Design Criteria. Tenant,
at no cost or expense to Tenant, shall (as and to the extent reasonably
requested by Landlord) cooperate with Landlord and Landlord's architect in
connection with the preparation of the Proposed Base Building Plans and shall
respond to any inquiries of Landlord during the development of the Proposed Base
Building Plans within five (5) days after Tenant's receipt of a written notice
requesting such response.
(b) In connection with the construction of the Base Building Work on a
"fast track" basis, Landlord shall submit the Proposed Base Building Plans to
Tenant for its approval in the following parts on or before the following dates
(and the provisions of this Article II shall apply separately as to each such
part):
Portion of Proposed Base Building Plans Submission Date by Landlord
--------------------------------------- ---------------------------
Preliminary Office Space Plan September 15, 1999
Preliminary Shell Drawings September 13, 1999
- - ---------
Shell Construction Drawings September 24, 1999
- - ---------
Office Space Plan Construction Drawings November 8, 1999
(c) Within five (5) days after receipt by Tenant of any of the
foregoing parts of the Proposed Base Building Plans (together with a notice from
Landlord stating that the same
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constitute the Proposed Base Building Plans), Tenant (i) shall give its written
approval thereto or (ii) if Tenant reasonably believes that such parts of the
Proposed Base Building Plans (x) are not consistent with, or do not adequately
incorporate, the Performance Specifications and/or do not provide for
specifications that are at least equal to the specifications contained in the
Minimum Design Criteria or (y) do not comply with applicable Legal Requirements
or the Declaration (the "Base Building Plans Approval Criteria"), shall request
in writing revisions or modifications to the Proposed Base Building Plans (but
only to the extent that the same fail to comply with the Base Building Plans
Approval Criteria). If Tenant shall fail to respond with its approval or request
for revisions/modification within the time period(s) provided above, such
failure shall be deemed Tenant's approval of the Proposed Base Building Plans.
Landlord, within five (5) days after its receipt of Tenant's request for
revisions or modifications to the Proposed Base Building Plans shall submit such
revisions or modifications to Tenant. Within five (5) days following receipt by
Tenant of such revisions or modifications, Tenant shall give its written
approval thereto or shall request other revisions or modifications therein (but
relating only to the extent Landlord has failed to comply with Tenant's earlier
requests).
(d) Landlord expressly acknowledges and agrees that (notwithstanding
anything to the contrary in the Lease or this Workletter): (I) If there is any
conflict or inconsistency between the Minimum Design Criteria and any portion of
the Performance Specifications, then (x) such portion of the Performance
Specifications shall govern and control, and (y) the Base Building Plans shall
be prepared, and the Base Building Work shall be performed, in accordance with
such portion of the Performance Specifications (rather than the conflicting
portion(s) of the Minimum Design Criteria); (II) if there is any conflict or
inconsistency between the Base Building Plans and any portion of the Performance
Specifications, then (x) such portion of the Performance Specifications shall
govern and control, and (y) the Base Building Work shall be performed in
accordance with such portion of the Performance Specifications (rather than the
conflicting portion(s) of the Base Building Plans); and (III) Tenant's approval
of the Base Building Plans (or any component thereof or any changes thereto)
shall not in any way (A) be deemed to be an agreement by Tenant that the Base
Building Plans adequately reflect and incorporate the Performance
Specifications, (B) be deemed to be an agreement by Tenant that, upon completion
of the construction thereof, the Premises will be in conformance with the
Performance Specifications, (C) be deemed to be a waiver of, or to otherwise
relieve Landlord from, any of Landlord's obligations in Section 43 of the Lease,
(D) be deemed to be a waiver of, or to otherwise relive Landlord from, any of
Landlord's other obligations in the Lease and this Workletter, or (E) be deemed
to be an agreement that the work contemplated by the Base Building Plans
complies with applicable Legal Requirements or the Declaration.
(e) Landlord shall not make any changes to the Base Building Plans
without the prior written consent of Tenant in each instance, except that
Landlord may make changes to the Base Building Plans without Tenant's consent if
(i) such changes are consistent with the Performance Specifications and (ii)
such changes will not result in any increased architectural or engineering costs
to Tenant in connection with Tenant's Plans (as defined below).
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(f) Landlord, in accordance with industry standards, (i) shall submit
accurate and complete applications for each of the permits (each, a "Permit"
and, collectively, the "Permits") described on Schedule 4 annexed hereto on or
before the submission date therefor that is specified on such Schedule 4 , and
(ii) shall thereafter take all commercially reasonable action necessary to
obtain each Permit by the anticipated obtainment date therefor that is specified
on such Schedule 4. If Landlord (i) complies with all of its obligations under
the preceding sentence with respect to any Permit and (ii) fails to obtain such
Permit by the anticipated obtainment date therefor (as specified on such
Schedule 4), then each day of actual delay suffered by Landlord in completing
any Milestone as a result of such failure shall constitute an event of Force
Majeure. Notwithstanding anything to the contrary contained in the Lease or this
Workletter, in no event shall Landlord's failure to obtain any permits,
approvals or licenses other than the Permits constitute an event of Force
Majeure.
2.03 Change Orders (a) Tenant shall, subject to the provisions of this
Section 2.03, be permitted (i) prior to the completion of the Base Building
Plans, to direct changes to the Performance Specifications (in which event
Landlord shall cause Landlord's architect/engineer to incorporate such changes
into the Proposed Base Building Plans), and (ii) following the completion of the
Base Building Plans, to direct changes to the Performance Specifications and/or
the actual Base Building Plans (in which event Landlord shall cause Landlord's
architect/engineer to incorporate such changes into the Base Building Plans)
(any change described in the preceding clauses (i) and (ii), a "Change Order").
Tenant shall pay to Landlord, within 30 days after Tenant's receipt of a demand
therefor (together with such corroborating materials as may be reasonably
requested by Tenant), Landlord's reasonable out-of-pocket costs and expenses of
any third party architect, engineer, contractor or consultant employed by
Landlord for reviewing any proposed Change Order. Any Change Order requested by
Tenant shall be governed by the following provisions of this Section 2.03.
(b) Price Adjustment/Time Adjustment: If Tenant proposes to make a
Change Order, then Tenant shall notify Landlord in writing of such proposed
Change Order. Within five (5) Business Days after its receipt of any proposed
Change Order, Landlord shall furnish Tenant with a statement (each, a
"Landlord's Change Order Statement") setting forth Landlord's good faith
reasonable estimate of (1) all the costs and expenses that will either be saved
or incurred by Landlord in connection with (x) incorporating the proposed Change
Order into the Base Building Plans and (y) the performance of the work necessary
to perform such proposed Change Order (the "Price Adjustment") and (2) the
number of days (either positive or negative) by which the time required to
complete one or more of the Milestones will be increased or decreased by such
Change Order (such number of days as applicable to any Milestone, the "Time
Adjustment"). Within five (5) Business Days after receipt by Tenant of the
applicable Landlord's Change Order Statement, Tenant shall in writing either (a)
accept the Price Adjustment and the Time Adjustment set forth in Landlord's
Change Order Statement, by signing same and returning it to Landlord (subject to
the final determination of the Price Adjustment and the Time Adjustment in
accordance with the provisions of Sections 2.03(c) and 2.03(d) below,
respectively), or (b) withdraw such Change Order (it being agreed that if Tenant
makes any changes to any Landlord's Change Order Statement and returns it to
Landlord, Tenant shall be
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deemed to have rejected same). Landlord shall be obligated to implement only
those Change Orders that are accepted by Tenant in accordance with the preceding
sentence. Notwithstanding the foregoing, Landlord does not have to accept any
proposed Change Order (X) that will have an effect (to more than a de minimis
extent) on (i) the footprint of the Building, (ii) the Building elevation (other
than the elevation of the office areas and the cafeteria areas), (iii) the
Building's clear height, or (iv) the Building's structural design or (Y) that
requires Landlord to install any racking system, mezzanine structure, or
conveyor system in the Building. To the extent that Tenant, in connection with
any Change Order, specifies any items that Landlord reasonably indicates in
writing to Tenant are not recommended by Landlord, then Tenant shall assume full
responsibility during the Lease Term for the performance of such items.
Notwithstanding anything to the contrary in this Workletter, in no event shall
there be any Time Adjustment for any of the Change Orders described on Schedule
5 annexed hereto, provided that Tenant requests such Change Order by the outside
date therefor that is specified on such Schedule 5 .
In connection with the Initial Slab Change Order (as defined below),
Landlord and Tenant, promptly after the date hereof, shall employ value
engineering to determine, by September 20, 1999, to what extent the Initial Slab
Change Order in its current scope will be required (in accordance with the
recommendation of Landlord's structural engineer). Landlord shall use reasonable
good faith efforts to eliminate the extent to which the Initial Slab Change
Order is required (it being agreed that in no event shall Landlord be required
to reduce the scope of the Initial Slab Change Order unless Landlord receives
written confirmation from its structural engineer that the reduced scope will be
adequate to accommodate the Performance Specifications). If and to the extent
that Landlord, in the good faith exercise of its judgment, determines that the
Initial Slab Change Order is required, then (notwithstanding anything to the
contrary contained herein) the following provisions shall apply thereto: (i)
Landlord shall competitively bid the work associated with the Initial Slab
Change Order in accordance with the Bidding Procedures (as defined below); (ii)
there shall be no Time Adjustment or Price Adjustment (as such terms are used in
this Workletter) for the Initial Slab Change Order; and (iii) in lieu of there
being a Price Adjustment with respect to the Initial Slab Change Order, the
lesser of the following amounts shall be added to the annual Base Rent (and
increased after the 60th month following the Rent Commencement Date in
accordance with Addendum 1 to the Lease): (a) $27,700 (i.e., 10% of 277,000) and
(b) 10% of the actual out-of-pocket costs incurred by Landlord in performing the
Initial Slab Change Order (in the scope required by Landlord). For purposes
hereof, the term "Initial Slab Change Order" means the change order relating to
the slab that is described on Schedule 5 annexed hereto.
(c) Price Adjustment: For any Change Order, the final Price Adjustment
binding on Landlord and Tenant with respect to such Change Order shall be equal
to (I) in the case of any Change Order that results in an increase in the cost
to Landlord of the Base Building Work, the lesser of (x) the amount of the Price
Adjustment set forth in the Landlord's Change Order Statement, and (y) the
out-of-pocket costs and expenses actually incurred or paid by Landlord in
performing such Change Order; and (II) in the case of any Change Order that
results in a decrease in the cost to Landlord to perform the Base Building Work,
the greater of (x) the amount of the Price Adjustment set forth in the
Landlord's Change Order Statement, and (y) the
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actual amount by which the cost to Landlord to perform the Base Building Work
was decreased as a result of such Change Order. In no event shall Landlord be
entitled to any supervision, overhead, administration or similar fee or charge
with respect to any Change Order. In connection with any Change Order that
Tenant reasonably believes will result in a positive Price Adjustment in excess
of $10,000, Tenant shall have the right to cause Landlord to competitively bid
the work associated with such Change Order in accordance with the Bidding
Procedures. Landlord shall keep and make available to Tenant itemized records
pertaining to each Price Adjustment. For purposes hereof, the term "Cumulative
Price Adjustment" shall mean the sum of the final Price Adjustments for all
Change Orders, other than (x) any Change Orders ("Non-Fixture Change Orders")
that relate to items of work that, when completed, will not be attached to or
built into the Building and (y) the Initial Slab Change Order. If there is any
dispute relating to the Price Adjustment for a Change Order that results in a
decrease in the cost to Landlord to perform the Base Building Work, then such
dispute shall be resolved by mutual agreement of Landlord's architect and
Tenant's architect; provided, however, that if such architects are unable to
reach mutual agreement within 15 days, then such dispute shall be resolved by
arbitration in accordance with Section 4.01 below (except that the arbitrator
shall be an independent third-party architect having at least 15 years
experience in the area of industrial/warehouse construction)
(d) Time Adjustment: For any Change Order, the final Time Adjustment
binding on Landlord and Tenant in connection with such Change Order shall be
equal to (I) in the case of any Change Order that results in an increase in the
number of days to complete one or Milestones, the lesser of (x) the Time
Adjustment set forth in the applicable Landlord's Change Order and (y) the
number of days by which the time required to complete such Milestone(s) is
actually increased by such Change Order, and (II) in the case of any Change
Order that results in a decrease in the number of days to complete one or more
Milestones, the number of days by which the time required to complete such
Milestone(s) is actually decreased by such Change Order. Any dispute under this
subparagraph (d) shall be resolved by mutual agreement of Landlord's architect
and Tenant's architect; provided, however, that if such architects are unable to
reach mutual agreement within 15 days, then such dispute shall be resolved by
arbitration in accordance with Section 4.01 below (except that the arbitrator
shall be an independent third-party architect having at least 15 years
experience in the area of industrial/warehouse construction). For purposes
hereof, the term "Cumulative Time Adjustment", shall mean, as to any Milestone,
the sum of the final Time Adjustments applicable to such Milestone.
2.04 Capped Base Building Work Items. (a) Landlord shall competitively
bid the work associated with each of the Capped Base Building Work Items in
accordance with the Bidding Procedures. For purposes of this Workletter, the
term "Bidding Procedures" means, with respect to (i) any work to be performed by
Landlord in connection with the Capped Base Building Work Items or (ii) any
other work that, pursuant to this Workletter or the Lease, Landlord is required
to competitively bid (in either case, the "Bid Work"), the following procedures:
Upon approval by Tenant of the applicable portions of the Base Building Plans,
Landlord shall solicit competitive bids for the Bid Work on a fixed price lump
sum basis from a minimum of two (2) qualified bidders (as reasonably determined
by Landlord) who are not affiliated with Landlord, consistent with construction
practices in Reno, Nevada (it being agreed,
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however, that Landlord shall use commercially reasonable efforts to solicit
competitive bids from at least three (3) qualified bidders, as reasonably
determined by Landlord, who are not affiliated with Landlord). Landlord
simultaneously with the delivery of same to prospective bidders, shall submit
the bid packages and the invitations to bid to Tenant. Landlord shall review the
responsiveness of all bids in the presence of its respective representatives and
consultants (and Tenant and its representatives and consultants may, at Tenant's
option, participate in such review). Tenant and Tenant's representatives and
consultants shall have the right (but not the obligation) to attend and
participate in (i) the opening of the sealed bids and (ii) any meetings between
Landlord and the bidders at which Landlord negotiates the final contract price
(the "Final Contract Price") with each of the bidders. The "Selected Contract
Price" for the work in question shall mean the Final Contract Price of the
lowest responsive bidder (i.e., the lowest bidder that is responsive to bidding
documents), unless Landlord and Tenant agree to select a different bidder, in
which case the Selected Contract Price for such work shall mean the Final
Contract Price of the bidder so selected by Landlord and Tenant.
(b) Upon completion by Landlord of all of the Capped Base Building Work
Items, Landlord shall furnish to Tenant a statement setting forth in reasonable
detail (i) the Selected Contract Price with respect to each of the Capped Base
Building Work Items, and (ii) the aggregate sum (the "Total Cost of the Capped
Items") of the Selected Contract Prices for all of the Capped Base Building Work
Items (which statement shall be accompanied by such corroborating documentation
as Tenant may reasonably request).
(c) If the Total Cost of the Capped Items (as finally determined) shall
exceed the aggregate monetary allowance (the "Aggregate Capped Items Allowance")
allocated to all of the Capped Base Building Work Items under the Performance
Specifications, then the Rent Adjustment Amount (as defined below) shall be
increased by the amount of such excess. If the Total Cost of the Capped Items
shall be less than the Aggregate Capped Items Allowance, then the Rent
Adjustment Amount shall be decreased by the amount by which the Total Cost of
the Capped Items is less than the Aggregate Capped Items Allowances.
2.05 Rent Adjustment; Payments to Landlord. (a) For purposes of this
Workletter, the term "Rent Adjustment Amount" shall mean, subject to Section
2.05(d) below, an amount equal to the sum of the following (as such amount shall
be increased or decreased in accordance with Section 2.04(c) above): (i) an
amount equal to zero, plus (ii) an amount equal to the Cumulative Price
Adjustment, if the Cumulative Price Adjustment is a positive number, or minus
(iii) an amount equal to the Cumulative Price Adjustment, if the Cumulative
Price Adjustment is a negative number.
(b) Within sixty (60) days after both (i) the Cumulative Price
Adjustment has been determined, and (ii) the Total Cost of the Capped Items has
been determined, Landlord shall furnish Tenant with a statement (the "Rent
Adjustment Statement"), certified by Landlord, setting forth the Rent Adjustment
Amount, together with a list of the Price Adjustments used to compute the Rent
Adjustment Amount.
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(c) If the Rent Adjustment Amount is a positive amount that is less
than or equal to $900,000.00, then the annual Base Rent shall be increased by an
amount equal to 10% of the Rent Adjustment Amount. If the Rent Adjustment Amount
is a positive amount that is more than $900,000.00, then (in lieu of the Base
Rent increase described in the preceding sentence) (a) the annual Base Rent
shall be increased by an amount equal to $90,000.00, and (b) commencing on the
Rent Commencement Date, Tenant shall pay to Landlord as additional rent an
annual amount (the "Additional Rental Amount") equal to 15.86% of the amount by
which the Rent Adjustment Amount exceeds $900,000.00 but is less than or equal
to $2,400,000.00, which annual amount shall be payable in equal monthly
installments on the first day of each calendar month that occurs during the
period commencing on the Rent Commencement Date and ending on the last day of
the initial Lease Term. (i.e., the initial 10 year term of the Lease), and any
Additional Rental Amount payable for any partial calendar month shall be
appropriately prorated. If the Rent Adjustment Amount is a positive amount that
exceeds $2,400,000.00, then (in addition to the amounts described in the
preceding sentence) Tenant, within 30 days after demand therefor, shall pay to
Landlord the amount of such excess (without duplication of any of the amounts
payable pursuant to the immediately following subparagraph (d)).
(d) Notwithstanding the foregoing, if either (I) (A) Tenant requests
and accepts a Change Order that will result in an increase in the cost to
Landlord of the Base Building Work, and (B) at the time such Change Order is
accepted, the sum of all the final Price Adjustments is a positive amount that
exceeds $2,400,000, or (II) Tenant requests and accepts a Change Order that is a
Non-Fixture Change Order, then (instead of adding the cost of such work to the
Rent Adjustment Amount as provided above) the following provisions shall apply
to such Change Order:
(i) Tenant, as and to the extent the work necessary to perform
such Change Order is completed, shall pay to Landlord the cost
of such work in progress payments (but no more often than
monthly), each of which progress payments shall be due and
payable to Landlord within 15 days after Tenant's receipt of
the following (collectively, a "Disbursement Request"): (x) an
invoice from Landlord requesting payment of a specified
portion of the cost of such work and describing in reasonable
detail the services or materials furnished in connection with
such work, and (y) a certificate from Landlord's architect (on
an appropriate AIA Form), certifying (1) that the services and
materials for which payment is being sought were necessary or
appropriate in connection with such work, (2) that the amount
specified in such invoice of Landlord is not in excess of the
cost of the services and materials supplied in connection with
such work and (3) that such work was completed in accordance
with the Base Building Plans and the Performance
Specifications.
(ii) Notwithstanding anything to the contrary contained
herein, in no event shall any of the amounts paid by Tenant
pursuant to this Section 2.05(d) be included in the
calculation of the Rent Adjustment Amount (and thereby added
to the Base Rent).
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(iii) If Tenant fails to pay Landlord any amount due under
this Section 2.05(d) within 15 days after its receipt of a
Disbursement Request therefor, then such amount shall bear
interest at the Interest Rate from the due date therefor until
paid. If Tenant fails to pay Landlord any amount due under
this Section 2.05(d) within 25 days after its receipt of a
Disbursement Request therefor, and such failure continues for
5 days after William F. Duffy (or his successor) receives
written notice of such failure, then such failure shall
constitute a "Tenant Late Payment Event".
(e) If the Rent Adjustment Amount is a negative amount that is less
than or equal to $900,000.00, then the annual Base Rent shall be decreased by an
amount equal to 10% of the Rent Adjustment Amount. There shall be no other
decrease in the annual Base Rent (other than the preceding sentence) if the Rent
Adjustment Amount is a negative amount, including, without limitation, if the
Rent Adjustment Amount is a negative amount greater than $900,000.
(f) Promptly after the Rent Adjustment Amount is determined in
accordance with this Section 2.05, a retroactive adjustment in Base Rent shall
be made and the appropriate payment shall be made by one party hereto to the
other.
2.06. Performance of Base Building Work. Landlord, at its sole cost and
expense (except as and to the extent expressly set forth above), shall perform
the Base Building Work. Landlord shall commence the Base Building Work promptly
after the date hereof and shall prosecute the same with diligence and continuity
until completion, using only new first-class materials. Landlord shall perform
the Base Building Work in accordance with (i) the Performance Specifications,
(ii) the Base Building Plans, (ii) all Change Orders approved by Tenant, (iii)
good construction practices, (iv) the Minimum Design Criteria and (v) all Legal
Requirements and the Declaration. Landlord shall at its sole cost and expense
obtain all proper zoning and land development approvals from all necessary
governmental authorities for the prosecution of the Base Building Work. Landlord
shall also obtain (i) the building permit and all other permits, licenses and
inspections necessary for the proper prosecution and completion of the Base
Building Work and (ii) all permits and licenses (including a permanent
certificate of occupancy or its equivalent) necessary for Tenant lawfully to use
and occupy the Premises pursuant to the Lease for the Intended Use. Landlord
shall pay for, as part of the Base Building Work, the cost of the building
permit and all other permits, licenses (including a permanent certificate of
occupancy), impact fees and inspections necessary for the proper prosecution and
completion of Base Building Work. In amplification and not in lieu of the
foregoing, (x) Landlord shall be responsible to obtain and pay for all
improvements (including, without limitation egress lines, fire extinguishers,
and emergency and exit lighting) necessary to obtain all such permits, licenses
and inspections and (y) all requirements of any governmental authority or other
governing body with respect to off-site improvements are to be provided by and
are the responsibility of Landlord at its sole cost and expense. Notwithstanding
anything in this Lease or Workletter to the contrary, Tenant shall be solely
responsible, at its sole cost and expense, to obtain any and all permits
necessary in connection with Tenant's Initial Work.
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2.07. Milestones and Milestone Dates. (a) Each of the following stages
of completion of the Base Building Work is herein called a "Milestone": (I)
Substantial Completion of the First-Half Dried-In Construction (hereinafter, the
"First Milestone"); (II) Substantial Completion of the Dried-In Construction
(hereinafter, the "Second Milestone"); (III) Substantial Completion of the
Building Shell (hereinafter, the "Third Milestone"); and (IV) Substantial
Completion of the Base Building Work (hereinafter, the "Fourth Milestone"). None
of the foregoing Milestones shall be deemed to have been completed unless and
until Tenant shall have received a statement, certified by Landlord's architect,
stating that the Milestone in question has been completed and setting forth the
date on which such Milestone was completed. Landlord shall use commercially
reasonable efforts to give Tenant at least 5 days prior notice of Landlord's
anticipated completion of each Milestone.
(b) Landlord shall complete the First Milestone on or prior to February
23, 2000 (the "First Milestone Completion Date"); provided, however, that the
First Milestone Completion Date shall be postponed beyond February 23, 2000 for
each day that Landlord is actually delayed in completing the First Milestone as
a result of (x) one or more Tenant Late Days that occur between the date hereof
and the completion of the First Milestone and (y) one or more Force Majeure
Events that occur between the date hereof and the completion of the First
Milestone. Moreover, the First Milestone Completion Date shall be (aa) further
postponed by the number of days equal to the Cumulative Time Adjustment
applicable to the First Milestone, if such Cumulative Time Adjustment is a
positive number or (bb) accelerated by the number of days equal to the
Cumulative Time Adjustment applicable to the First Milestone, if such Cumulative
Time Adjustment is a negative number. Landlord shall complete the Second
Milestone on or prior to March 15, 2000 (the "Second Milestone Completion
Date"); provided, however, that the Second Milestone Completion Date shall be
postponed beyond March 15, 2000 for each day that Landlord is actually delayed
in completing the Second Milestone as a result of (x) one or more Tenant Late
Days that occur between the date hereof and the completion of the Second
Milestone and (y) one or more Force Majeure Events that occur between the date
hereof and the completion of the Second Milestone. Moreover, the Second
Milestone Completion Date shall be (aa) further postponed by the number of days
equal to the Cumulative Time Adjustment applicable to the Second Milestone, if
such Cumulative Time Adjustment is a positive number or (bb) accelerated by the
number of days equal to the Cumulative Time Adjustment applicable to the Second
Milestone, if such Cumulative Time Adjustment is a negative number. Landlord
shall complete the Third Milestone on or prior to March 31, 2000 (the "Third
Milestone Completion Date"); provided, however, that the Third Milestone
Completion Date shall be postponed beyond March 31, 2000 for each day that
Landlord is actually delayed in completing the Third Milestone as a result of
(x) one or more Tenant Late Days that occur between the date hereof and the
completion of the Third Milestone and (y) one or more Force Majeure Events that
occur between the date hereof and the completion of the Third Milestone.
Moreover, the Third Milestone Completion Date shall be (aa) further postponed by
the number of days equal to the Cumulative Time Adjustment applicable to the
Third Milestone, if such Cumulative Time Adjustment is a positive number or (bb)
accelerated by the number of days equal to the Cumulative Time Adjustment
applicable to the Third Milestone, if such Cumulative Time Adjustment is a
negative
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number. Landlord shall complete the Fourth Milestone on or prior to April 15,
2000 (the "Fourth Milestone Completion Date"); provided, however, that the
Fourth Milestone Completion Date shall be postponed beyond April 15, 2000 for
each day that Landlord is actually delayed in completing the Fourth Milestone as
a result of (x) one or more Tenant Late Days that occur between the date hereof
and the completion of the Fourth Milestone and (y) one or more Force Majeure
Events that occur between the date hereof and the completion of the Fourth
Milestone. Moreover, the Fourth Milestone Completion Date shall be (aa) further
postponed by the number of days equal to the Cumulative Time Adjustment
applicable to the Fourth Milestone, if such Cumulative Time Adjustment is a
positive number or (bb) accelerated by the number of days equal to the
Cumulative Time Adjustment applicable to the Fourth Milestone, if such
Cumulative Time Adjustment is a negative number. Notwithstanding anything to the
contrary in the Lease or this Workletter, in no event shall Landlord be deemed
to have been actually delayed in causing any Milestone to occur by a Force
Majeure Event unless Landlord, within ten (10) business days after the
occurrence of such event of Force Majeure, shall notify Tenant of such event of
Force Majeure or such Force Majeure Event shall be set forth in the Construction
Minutes delivered to Tenant in accordance with Section 2.08(b) below and of the
fact that the same is going to delay Landlord in causing such Milestone to
occur. For purposes of this Workletter, the painting and landscape work shall be
substantially completed no later than May 15, 2000 and shall not be included as
part of the Base Building Work to be completed by the Fourth Milestone
Completion Date.
(c) The term "Milestone Completion Date" shall mean (as the case may
be) (i) with respect to the First Milestone, the First Milestone Completion
Date; (ii) with respect to the Second Milestone, the Second Milestone Completion
Date; (iii) with respect to the Third Milestone, the Third Milestone Completion
Date; and (iv) with respect to Fourth Milestone, the Fourth Milestone Completion
Date. If Landlord shall fail for any reason to complete any Milestone by the
Milestone Completion Date applicable thereto (as such Milestone Completion Date
may be postponed pursuant to the express provisions of Section 2.07(b) above),
then, for each day that any Milestone is not completed by the Milestone
Completion Date applicable thereto (as such Milestone Completion Date may be
postponed pursuant to the express provisions of Section 2.07(b) above), Landlord
shall pay to Tenant the following amounts (collectively the "Liquidated
Damages"):
(A) For each of the first fourteen (14) days that Landlord fails
to complete any Milestone by the Milestone Completion Date
applicable thereto, Landlord shall pay to Tenant $5,800
(representing 1 day's Base Rent); and
(B) If such Milestone is not completed by the fourteenth day
(14th) following the Milestone Completion Date applicable
thereto, then (in addition to the amount set forth in the
preceding clause (A)), Landlord shall pay to Tenant an amount
equal to the product of (i) $17,400 (representing 3 day's Base
Rent), multiplied by (ii) the number of days in the period
commencing on the fifteenth (15th) day following such
Milestone Completion Date, and ending on the forty-second
(42nd) day
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following such Milestone Completion Date, during which such
Milestone remains uncompleted; and
(C) If such Milestone is not completed by the forty-third (43rd)
day following the Milestone Completion Date applicable
thereto, then (in addition to the amounts set forth in the
preceding clauses (A) and (B)), Landlord shall pay to Tenant
an amount equal to the product of (i) $11,600 (representing 2
day's Base Rent), multiplied by (ii) the number of days in the
period commencing on the forty-third (43rd) day following such
Milestone Completion Date, and ending on the sixty-third
(63rd) day following such Milestone Completion Date, during
which such Milestone remains uncompleted; and
(D) If such Milestone is not completed by the sixty-fourth (64th)
day following the Milestone Completion Date applicable
thereto, then (in addition to the amounts set forth in the
preceding clauses (A), (B) and (C)), Landlord shall pay to
Tenant an amount equal to the product of (i) $5,800
(representing 1 days' Base Rent), multiplied by (ii) the
number of days in the period commencing on such sixty-fourth
(64th) day and ending on the date (if ever) on which such
Milestone is completed.
Tenant hereby acknowledges and agrees that (except as provided in the
immediately succeeding sentence) the Liquidated Damages shall be Tenant's sole
and exclusive remedy under this Lease or at law or in equity for Landlord's
failure to complete the Milestones by the Milestone Completion Dates, Tenant
hereby waiving all other remedies available to Tenant under this Lease or at law
or in equity (except as provided in the immediately succeeding sentence) in the
event Landlord fails to timely meet the Milestone Completion Dates.
Notwithstanding the preceding sentence, Tenant shall be entitled to the remedy
of specific performance if Landlord fails to complete any Milestone by the
Milestone Completion Date applicable thereto. Landlord and Tenant hereby agree
that it would be impracticable or extremely difficult to affix damages if
Landlord fails to meet the Milestone Completion Dates as set forth above and the
Liquidated Damages represent a reasonable estimate of Tenant's damages. All
amounts payable by Landlord to Tenant under this Section 2.07(c) shall be paid
within thirty (30) days after a demand therefor. If Landlord fails to pay Tenant
all or any portion of any amount due under this Section 2.07(c) by the due date
therefor, then such past due amount shall bear interest at the Interest Rate
from the due date therefor until the date paid, and Tenant may deduct and
set-off such amount (together with such interest) until exhausted, against all
Base Rent and any other amounts due and payable under the Lease (at Tenant's
option, before or after the expiration of any other offsets or credits in
Tenant's favor). The obligations of Landlord under this Section 2.07(c) shall
survive the termination, cancellation or expiration of the Lease.
2.08. Inspection and Monitoring by Tenant; Construction Meetings; "As
Built" Drawings. (a) Tenant, Tenant's architect, Tenant's engineers, Tenant's
contractors, Tenant's representatives, and any agents of Tenant shall have
access to the Building at all times during business hours, and at all other
reasonable times upon reasonable prior written notice, in order to
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inspect the Base Building Work and monitor the progress thereof. Tenant may have
a representative present at the Premises at all times during the performance of
the Base Building Work.
(b) From and after the date hereof, Landlord shall conduct weekly
construction meetings (to be held on Tuesday of each week) to discuss the
performance and progress of the Base Building Work; Landlord shall use
commercially reasonable efforts to give Tenant reasonable advance notice of each
such meeting and Tenant's representatives shall have the right to attend such
meetings. Landlord, within two (2) business days after each such weekly
construction meeting, shall deliver to the representatives of Tenant set forth
on Schedule 6 annexed hereto (at their addresses set forth on such Schedule 6) a
copy of the minutes (the "Construction Minutes") of each such construction
meeting, which minutes Landlord shall cause to be prepared by its contractor.
The Construction Minutes of each such weekly construction meeting shall clearly
specify (i) any events that have occurred since the previous weekly construction
meeting (or, in the case of the first such meeting, since the date hereof) that
could result in a Tenant Late Day and (ii) any Tenant Late Days that have
occurred since the previous weekly meeting (or, in the case of the first such
meeting, since the date hereof).
(c) Landlord shall use commercially reasonable efforts to (i) keep
Tenant apprised of the progress of the Base Building Work on at least a weekly
basis, (ii) promptly notify Tenant of any actual or anticipated delays, and
(iii) promptly notify Tenant of any problems or anticipated problems with
respect to the Base Building Work or any portion thereof. Landlord shall
maintain at the Premises for inspection by Tenant and Tenant's architect during
Business Hours one record copy of (i) the Base Building Plans, together with all
field notes and changes of Landlord's contractor marked on said plans during the
course of construction, (ii) the progress schedule, any progress schedules
prepared by any subcontractor, and all updates, supplements and amendments
thereto; (iii) specifications and samples prepared in connection with the Base
Building Work; and (iv) all drawings, diagrams, schedules, brochures and other
data or information specially prepared for or otherwise provided in connection
with the Base Building Work to illustrate some portion of the Base Building Work
or any product, material or system to be installed or utilized in connection
therewith. All of the foregoing shall be maintained in good order and marked
currently to record all changes made during construction of the Building and the
Parking Area. Within ninety (90) days after the Base Building Work is
Substantially Completed, Landlord shall deliver to Tenant four (4) copies of
"as-built" drawings and plans for the Base Building Work showing all changes
made during the course of performing the Base Building Work, together with four
(4) copies of an "as-built" survey of the Building, the parking area and the
Land showing all existing easements, rights of way, building set-back lines and
improvements. Landlord shall also furnish to Tenant, promptly after completion
thereof, two complete sets of shop drawings and operation and maintenance
manuals with respect to the Base Building Work.
2.09 Correcting Base Building Punch List Items and Defective Work. (a)
Within five (5) business days following the later to occur of (i) Substantial
Completion of the Base Building Work and (ii) the date that is ten (10) days
after Tenant receives notice that such
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Milestone has been (or is about to be) completed, Landlord and Tenant shall
jointly inspect the Base Building Work and shall jointly compose a Punch List of
items needing completion (it being agreed, however, that if it is not possible
to determine at such time whether any components of the Base Building Work have
been completed, because of seasonal reasons or otherwise, then Landlord and
Tenant, as soon as practicable after such determination can be made, shall
inspect such components and compose a Punch List of items with respect thereto
needing completion). Within thirty (30) days after any Punch List is so
composed, Landlord shall install, complete, repair or otherwise remedy all such
items listed on such Punch List; provided, however, that it shall not be an
event of default if, because of the nature of the work at issue, Landlord cannot
complete such work within such thirty (30) day period, as long as Landlord
commences such work within such thirty day period and thereafter diligently
prosecutes the same to completion.
2.10 Outside Termination Date. If for any reason (including Force
Majeure Events) Substantial Completion of the Base Building Work does not occur
by the Limitation Date (as defined below), then, in addition to Liquidated
Damages and the right to specific performance (but excluding all other rights
and remedies available to Tenant at law or in equity or otherwise under this
Lease), Tenant shall have the right, at any time after the Limitation Date, but
prior to the date upon which Substantial Completion of the Base Building Work
occurs, to terminate the Lease by serving written notice to Landlord, in which
event the Lease shall terminate and be deemed null and void. The failure of
Tenant to exercise its right of termination hereunder shall not relieve Landlord
of its obligation to cause the Substantial Completion of the Base Building Work
to occur or be deemed a waiver of the other remedies available to Tenant under
this Workletter (i.e., the Liquidated Damages and specific performance). For
purposes hereof, the term "Limitation Date" shall mean October 31, 2000;
provided, however, that the Limitation Date shall be postponed by one day for
each Tenant Late Day that occurs prior to the Substantial Completion of the Base
Building Work.
2.11 Acceptance. Within thirty (30) days after the Rent Commencement
Date, Landlord and Tenant shall execute and deliver to Landlord a letter
confirming the Rent Commencement Date.
2.12 Miscellaneous. (a) Landlord acknowledges that Tenant will use
non-union labor in connection with its prosecution of Tenant's Initial Work, and
in no event shall the utilization of such labor constitute a Tenant Late Day.
Landlord shall use only non-union contractors for the Base Building Work and
will insure that there will be no labor disputes relative to the prosecution of
Tenant's Initial Work.
(b) Landlord hereby designates John Hanson to serve as Landlord's
representative and Tenant hereby designates Taner Kiranbay to serve as Tenant's
representative during the design and construction of the Base Building Work. All
communications between Landlord and Tenant relating to the design and
construction of the Base Building Work shall be forwarded to or made by such
party's representative.
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(c) Any dispute with respect to this Workletter (other than any
disputes under Section 2.01(c) above) that is not resolved by the parties within
15 days shall be settled by arbitration in accordance with Section 4.01 of this
Workletter.
(d) Landlord represents and warrants that, to Landlord's knowledge,
based on Exhibit 1 to the Performance Specifications, smoke curtains, in-rack
sprinklers and fire proofing of steel are not required in order for the Premises
to comply with Legal Requirements (other than in-rack sprinklers in the
multi-level Pallet Pick Mezzanine area and bin supported mezzanine area). For
purposes of this paragraph, Landlord's knowledge shall mean the actual knowledge
of David Morze and John Hanson, after appropriate due inquiry and investigation.
Landlord represents and warrants to Tenant that no employee of Landlord has any
material knowledge that is not possessed by David Morze or John Hanson about any
of the matters that are the subject of the representation and warranty contained
in this paragraph.
(e) For purposes of this Article II, the term "Legal Requirements" (as
defined in the Lease) shall include, without limitation, all onsite and offsite
drainage requirements, zoning, seismic (except as and to the extent set forth in
the Performance Specifications), NFPA and ADA requirements.
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III. Tenant's Initial Work
3.01. Tenant's Initial Work; Preparation and Approval of Tenant's
Plans. Except as and to the extent otherwise set forth in this Article III, the
installation, performance and removal of Tenant's Initial Work shall be governed
by Section 12 of the Lease (as if the same were Tenant-Made Alterations). If any
portion of Tenant's Initial Work shall constitute a Material Tenant-Made
Alteration, then Tenant, at its expense, shall prepare and submit to Landlord
(i) architectural drawings of such portion of Tenant's Initial Work and (ii)
specifications for such portion of Tenant's Initial Work (such architectural
drawings and specifications are herein collectively referred to as the "Tenant's
Plans"). Within ten (10) days after receipt by Landlord of Tenant's Plans,
Landlord (i) shall give its written approval thereto or (ii) if Landlord
reasonably believes that the work set forth on Tenant's Plans will have an
adverse effect on the structural integrity of the Building or will penetrate the
roof and thereby invalidate the roof warranty (the "Tenant's Initial Work
Approval Criteria"), shall request revisions or modifications to the Tenant's
Plans (but only to the extent the same fail to comply with the Tenant's Initial
Work Approval Criteria). Tenant may thereafter submit such revisions or
modifications to Landlord. Within seven (7) days following receipt by Landlord
of such revisions or modifications, Landlord shall give its written approval
thereto or shall request other revisions or modifications therein (but relating
only to the extent Tenant has failed to comply with Landlord's earlier
requests). The preceding two sentences shall be implemented repeatedly until
Landlord gives its written approval to the Tenant's Plans. If Landlord shall
fail to respond to Tenant's Plans with its approval or request for
revisions/modification within the time period(s) provided above, such failure
shall be deemed Landlord's approval of Tenant's Plans. The Tenant's Plans as
approved or deemed approved by Landlord shall herein be referred to as the
"Final Tenant's Plans". At any time after the Final Tenant's Plans are approved
(or deemed approved) by Landlord and thereafter throughout Tenant's prosecution
of the Tenant's Initial Work, Tenant shall be permitted to direct changes in the
Tenant's Initial Work (it being agreed, however, that Tenant must obtain
Landlord's consent in accordance with the foregoing provisions of this Section
3.01(a) before prosecuting any such change that constitutes a Material
Tenant-Made Alteration, and the foregoing approval provisions of this Section
3.01(a) shall be applied to such proposed change). Tenant, at Tenant's option,
may submit the Tenant's Plans to Landlord for its approval in one or more parts
(and, in any case where the same are submitted in more than one part, the
provisions of this Article III shall apply separately as to each such part).
Landlord, at no cost to Tenant, shall cooperate (and cause Landlord's architect
and contractor to cooperate) with Tenant and Tenant's architect in preparing the
Tenant's Plans.
(b) Notwithstanding anything to the contrary in the Lease or this
Workletter, in no event shall Tenant be required to obtain Landlord's prior
consent in connection with (i) the installation of Tenant's racking systems in
the Building, (ii) the installation of any mezzanine in the Building, (iii) the
installation of any conveyors or other equipment in the Building or (iv) the
installation in the Building of any of the other items shown on the Operational
Plan attached to the Performance Specifications as Exhibit 1.
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(c) Commencing on Substantial Completion of the First-Half Dried-In
Construction and thereafter throughout Landlord's prosecution of the Base
Building Work, Tenant shall be permitted upon the Premises and may,
simultaneously with Landlord's prosecution of the Base Building Work, prosecute
Tenant's Initial Work. Without limiting the generality of the foregoing,
Landlord shall permit Tenant to bring and store on the Premises all equipment,
supplies and other property required or appropriate in connection with Tenant's
Initial Work, and shall furnish temporary power to the Premises. Notwithstanding
anything herein to the contrary, Tenant shall be solely responsible, at its sole
cost and expenses, for obtaining any and all applicable permits, approvals and
licenses in connection with Tenant's Initial Work. Tenant does hereby agree to
assume all risk of loss or damage to its machinery, equipment, fixtures, and
other personal property, except for any loss or damage resulting from the
negligence or willful misconduct of Landlord or its agents, employees or
contractors and to indemnify, defend, and hold Landlord harmless from any and
all liability, loss, or damage arising from any injury to the property of
Landlord, its contractors, subcontractors, or materialmen, and any death or
personal injury to any person or persons arising out of such occupancy or
installation, except to the extent that any such liability, loss, or damage is
occasioned by the negligence or willful misconduct of Landlord or its agents,
employees or contractors. To the extent Tenant uses any of Landlord's
contractors or subcontractors in connection with the installation of its
improvements, Tenant acknowledges and agrees that Landlord's work shall take
priority over that of the Tenant and that Tenant shall not divert Landlord's
contractors or subcontractors from the performance of their work obligations for
Landlord.
(d) Landlord shall from time to time, upon request of Tenant,
supply, at no additional charge to Tenant, architectural services to assist
Tenant with its office layout and design in the Building (including, without
limitation, electrical, phone, data lines, etc.).
IV. ARBITRATION
Except as otherwise provided in this Workletter, any dispute under this
Workletter shall be resolved by arbitration in accordance with the Commercial
Arbitration Rules (Expedited Procedures) of the American Arbitration
Association, subject to the requirement that a single arbitrator unaffiliated
with either party shall decide each matter in dispute within 15 days of the date
of his selection, based solely upon the written statements of position submitted
by each party. The parties consent to the jurisdiction of any appropriate court
to enforce these arbitration provisions and to enter judgments upon the decision
of the arbitration. Unless otherwise required by state law, arbitration shall be
conducted in the Reno, Nevada area. In the event of an arbitration, the losing
party shall pay the cost of arbitrator and the arbitration, but each party shall
bear its own attorneys' fees and costs in preparing for and participating in
such arbitration.
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ADDENDUM 3
FOUR RENEWAL OPTIONS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED AS OF SEPTEMBER 8, 1999, BETWEEN
PROLOGIS DEVELOPMENT SERVICES INCORPORATED
AND
BARNESANDNOBLE.COM LLC
<PAGE>
(a) Provided that as of the time of the giving of the First Extension Notice no
Event of Default exists, then Tenant shall have the right to extend the Lease
Term for an additional term of five (5) years (such additional term is
hereinafter called the "First Extension Term") commencing on the day following
the expiration of the Lease Term (hereinafter referred to as the "Commencement
Date of the First Extension Term"). Tenant shall give Landlord notice
(hereinafter called the "First Extension Notice") of its election to extend the
term of the Lease Term at least nine (9) months prior to the scheduled
expiration date of the Lease Term.
(b)
(c) Provided that as of the time of the giving of the Second Extension Notice no
Event of Default exists and provided Tenant has exercised its option for the
First Extension Term; then Tenant shall have the right to extend the Lease Term
for an additional term of five (5) years (such additional term is hereinafter
called the "Second Extension Term") commencing on the day following the
expiration of the First Extension Term (hereinafter referred to as the
"Commencement Date of the Second Extension Term"). Tenant shall give Landlord
notice (hereinafter called the "Second Extension Notice") of its election to
extend the term of the Lease Term at least nine (9) months prior to the
scheduled expiration date of the First Extension Term.
(d)
(e) Provided that as
of the time of the giving of the Third Extension Notice no Event of Default
exists and provided Tenant has exercised its option for the Second Extension
Term; then Tenant shall have the right to extend the Lease Term for an
additional term of five (5) years (such additional term is hereinafter called
the "Third Extension Term") commencing on the day following the expiration of
the Second Extension Term (hereinafter referred to as the "Commencement Date of
the Third Extension Term"). Tenant shall give Landlord notice (hereinafter
called the "Third Extension Notice") of its election to extend the term of the
Lease Term at least nine (9) months prior to the scheduled expiration date of
the Second Extension Term.
(f)
(g) Provided that as of the time of the giving of
the Fourth Extension Notice no Event of Default exists and provided Tenant has
exercised its option for the Third Extension Term; then Tenant shall have the
right to extend the Lease Term for an additional term of five (5) years (such
additional term is hereinafter called the "Fourth Extension Term") commencing on
the day following the expiration of the Third Extension Term (hereinafter
referred to as the "Commencement Date of the Fourth Extension Term"). Tenant
shall give Landlord notice
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(hereinafter called the "Fourth Extension Notice") of its election to extend the
term of the Lease Term at least nine (9) months prior to the scheduled
expiration date of the Third Extension Term.
(h)
(i) The Base Rent payable by Tenant to Landlord during the First Extension Term
shall be equal to the greater of: (i) the Base Rent applicable during the last
year of the initial Lease Term; and (ii) the lesser of: (1) 97% of the then
prevailing market rate for comparable space in the Project and comparable
buildings in the vicinity of the Project taking into account all relevant
factors; (2) the product obtained by multiplying the Base Rent for the twelve
(12) month period immediately prior to the relevant extension term by a
fraction, the denominator of which is the CPI in effect on the date that is five
(5) years prior to the "Commencement Date" of the then applicable extension term
and the numerator of which is the CPI most recently published prior to the date
that Landlord sends Landlord's Rent Notice (as hereinafter defined); and (3)
115% of the Base Rent in effect for the twelve (12) month period immediately
prior to the "Commencement Date" of the First Extension Term.
(j)
(k) The Base Rent payable by Tenant to Landlord during the Second Extension Term
shall be equal to the greater of: (i) the Base Rent applicable during the last
year of the First Extension Term; and (ii) the lesser of: (1) 97% of the then
prevailing market rate for comparable space in the Project and comparable
buildings in the vicinity of the Project taking into account all relevant
factors; (2) the product obtained by multiplying the Base Rent for the twelve
(12) month period immediately prior to the relevant extension term by a
fraction, the denominator of which is the CPI in effect on the date that is five
(5) years prior to the "Commencement Date" of the then applicable extension term
and the numerator of which is the CPI most recently published prior to the date
that Landlord sends the Landlord Rent Notice; and (3) 115% of the Base Rent in
effect for the twelve (12) month period immediately prior to the "Commencement
Date" of the Second Extension Term.
(l)
(m) The Base Rent payable by Tenant to Landlord during the Third Extension Term
shall be equal to the greater of: (i) the Base Rent applicable during the last
year of the Second Extension Term; and (ii) 100% of the then prevailing market
rate for comparable space in the Project and comparable buildings in the
vicinity of the Project taking into account all relevant factors.
(n)
(o) The Base Rent payable by Tenant to Landlord during the Fourth Extension Term
shall be equal to the greater of: (i) the Base Rent applicable during the last
year of the Third Extension Term; and (ii) 100% of the then prevailing market
rate for comparable space in the Project and comparable buildings in the
vicinity of the Project taking into account all relevant factors.
(p)
(q) Within fifteen (15) days after Landlord's receipt of each Extension Notice
(but, in no event, earlier then the date that is eight (8) months and fifteen
(15) days prior to the anticipated "Commencement Date" of the relevant Extension
Term), Landlord shall notify ("Landlord's Rent Notice") Tenant of its
determination of the Base Rent under each of the formula set forth above as may
be applicable to such extension term, and Tenant shall advise Landlord of any
objection (a "Tenant Objection Notice") to the Base Rent amounts contained in
Landlord's Rent Notice within fifteen (15) days after Tenant's receipt of
Landlord's Rent Notice. Failure to
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respond within the fifteen (15) day period shall constitute Tenant's acceptance
of such Base Rent, provided that Landlord shall have included a statement in
Landlord's Rent Notice that Tenant's failure to respond to Landlord's Rent
Notice within fifteen (15) days shall be deemed to be Tenant's acceptance of the
Base Rent set forth in Landlord's Rent Notice. In addition, Tenant shall have
the right, within such fifteen (15) day period, to rescind the applicable
Extension Notice, in which event, the Lease Term (as the same may have been
previously extended) shall expire on the then scheduled expiration date and
Tenant shall have no further rights to extend the Lease Term. If Tenant sends
Landlord a Tenant Objection Notice, then Landlord and Tenant shall commence
negotiations to attempt to agree upon the Base Rent within thirty (30) days
after Landlord's receipt of Tenant Objection Notice. If the parties cannot agree
on the Base Rent for such extension term, each acting in good faith but without
any obligation to agree, then the Lease Term shall not be extended and shall
terminate on its scheduled termination date and Tenant shall have no further
right hereunder or any remedy by reason of the parties' failure to agree unless
Tenant invokes the arbitration procedure provided below to determine the Base
Rent for such extension term by sending Landlord notice of Tenant's election
within five (5) business days after the expiration of such thirty (30) day
period.
(r)
(s) Arbitration to determine the Base Rent (including the then prevailing market
rate) shall be in accordance with the Arbitration Rules of the American
Arbitration Association. Unless otherwise required by state law, arbitration
shall be conducted in the metropolitan area where the Project is located by a
single arbitrator unaffiliated with either party, which arbitrator shall have at
least ten (10) years' experience in commercial leasing in Reno, Nevada and shall
be a member of the American Institute of Certified Real Estate Appraisers.
Landlord and Tenant shall each submit to the arbitrator their respective
proposal of the Base Rent, including the then prevailing market rate, together
with any and all information that each such party believes is relevant to the
determination of the Base Rent, including the then prevailing market rent, as
applied to an extension of this Lease, provided, however, that the amount of the
Base Rent contained in Landlord's Rent Notice shall be the amount submitted by
Landlord to the arbitrator as Landlord's proposal. The arbitrator must choose
between Landlord's proposal and the Tenant's proposal and may not compromise
between the two or select some other amount. The cost of the arbitration shall
be paid by Landlord if the then prevailing market rate is that proposed by
Landlord and by Tenant if the then prevailing market rate is that proposed by
Tenant. If the arbitrator has not determined the Base Rent as of the end of the
Lease Term or applicable extension term thereof, Tenant shall pay 105 percent of
the Base Rent in effect under the Lease as of the end of the Lease Term or the
applicable extension term thereof until Base Rent is determined as provided
herein. Upon such determination, Landlord and Tenant shall make the appropriate
adjustments to the payments between them.
(t)
(u) The parties consent to the jurisdiction of any appropriate court to enforce
the arbitration provisions of this Addendum and to enter judgment upon the
decision of the arbitrator.
(v)
(w) Except for the Base Rent as determined above and except as otherwise
expressly provided for in Articles 6 and 10 of the Lease, Tenant's occupancy of
the Premises during the applicable
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extension term shall be on the same terms and conditions as are in effect
immediately prior to the expiration of the initial Lease Term or the applicable
extension term.
(x)
(y) If Tenant does not send the applicable Extension Notice within the period
set forth in Paragraph (a), (b), (c) or (d), Tenant's right to extend the Lease
Term shall automatically terminate. Time is of the essence as to the giving of
the applicable extension notice as set forth herein and the notice of Tenant's
objection under Paragraph (i).
(z)
(aa) Except as otherwise agreed to in writing by Landlord or Tenant, Landlord
shall have no obligation to refurbish or otherwise improve the Premises for the
applicable extension term. Except as otherwise provided for herein and under the
Lease, the Premises shall be tendered on the commencement date of the applicable
extension term in "as-is" condition.
(bb)
(cc) If the Lease is extended for the applicable extension term, then Landlord
shall prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Lease Term and the other provisions applicable thereto.
(dd)
(ee) If Tenant exercises its right to extend the term of the Lease for the
applicable extension term pursuant to this Addendum, the term "Lease Term" as
used in the Lease, shall be construed to include, when practicable, the
applicable extension term except as provided in Paragraph (l) above.
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ADDENDUM 4
RIGHT OF FIRST OFFER
--------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED SEPTEMBER 8, 1999, BETWEEN
PROLOGIS DEVELOPMENT SERVICES INCORPORATED
and
BARNESANDNOBLE.COM LLC
(a) For purposes hereof, the term "Offer Space" shall mean the Premises
or any portion thereof.
(b) Landlord hereby agrees that if, from time to time and at any time
during the Lease Term (as the same may be renewed or extended), Landlord desires
to convey all or any portion of the Offer Space, then Landlord shall so notify
Tenant (each, an "Offer Notice"), which notice shall contain the following
information: (i) the proposed sales price; (ii) the desired closing date, which
shall not be less than forty-five (45) days after the date Tenant receives the
applicable Offer Notice; and (iii) all of the other material economic terms and
conditions that are material to a sale of such Offer Space. Each Offer Notice
shall constitute an offer to Tenant to purchase the Offer Space covered thereby
(the "Right of First Offer to Purchase") on the terms and conditions set forth
in such Offer Notice including, without limitation, the sales price set forth
therein.
(c) Tenant shall have fifteen (15) business days to accept such an
offer with respect to any Offer Space. If Tenant fails to accept such an offer
with respect to any Offer Space within such fifteen (15) business day period,
then (1) Tenant shall be deemed to have rejected such offer, and (2) Landlord,
for a period of one (1) year from the date of the applicable Offer Notice, shall
be free to sell such Offer Space to any prospective purchaser (which sale shall
be subject to this Lease, if the Offer Space comprises the Premises), for a
price of not less than ninety five percent (95%) of the net effective sales
price set forth in the applicable Offer Notice and otherwise on terms and
conditions no more materially advantageous to the purchaser than the terms and
conditions set forth in such Offer Notice and in the event of such sale Tenant
shall have no further right with respect to the Offered Space under this
Addendum 4. If such Offer Space is not sold and title thereto transferred within
such one (1) year period (for a price of not less than ninety five percent (95%)
of the net effective sales price set forth in the Offer Notice and otherwise on
terms and conditions no more materially advantageous to the purchaser than the
terms and conditions set forth in the Offer Notice), then Tenant's Right of
First Offer to Purchase such Offer Space shall remain in full force and effect
(i.e., Landlord shall again offer such Offer Space to Tenant in accordance with
the foregoing). If (x) Tenant rejects or is deemed to have rejected any offer to
sell any Offer Space in accordance with this Addendum and (y) within twelve (12)
months after such rejection Landlord desires to sell such Offer Space to a third
party on terms and conditions (the "New Offer Terms") that are materially more
advantageous (economically) to such third party than the terms and conditions
contained in the Offer Notice in question (including, without limitation, if
Landlord desires to sell such Offer Space to a third
70
<PAGE>
party for a net effective sales price that is less than ninety five percent
(95%) of the net effective sales price for such Offer Space, as set forth in the
applicable Offer Notice) then Landlord, before conveying such Offer Space to
such third party, shall again offer such Offer Space to Tenant in accordance
with the foregoing provisions of this Addendum on the New Offer Terms.
(c) If Tenant accepts any such offer for any Offer Space, Landlord and
Tenant (or any designee of Tenant) shall close title to such Offer Space in
accordance with and pursuant to the terms and conditions set forth in the Offer
Notice. In connection therewith, Landlord and Tenant promptly shall enter into a
customary contract of sale that incorporates the terms and provisions set forth
in the Offer Notice.
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ADDENDUM 5
FORM OF LETTER OF CREDIT
------------------------
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED _____________________, 1999, BETWEEN
PROLOGIS DEVELOPMENT SERVICES INCORPORATED
and
barnesandnoble.com, llc
[LETTERHEAD OF LETTER OF CREDIT BANK]
[DATE]
ProLogis Development Services Incorporated
14100 East 35th Place
Aurora, Colorado 80011
Attention: Legal Department
Re: Irrevocable Transferrable Letter of Credit
No.____________________________
Beneficiary:
By order of our client, ____________________ (the "Applicant"), we
hereby establish this Irrevocable Transferrable Letter of Credit No. ________ in
your favor for an amount up to but not exceeding the aggregate sum of Two
Hundred Eight Thousand Five Hundred and No/100 Dollars ($208,500.00) (as reduced
from time to time in accordance with the terms hereof, the "Letter of Credit
Amount"), effective immediately, and expiring on the close of business at our
office at the address set forth above one year from the date hereof unless
renewed as hereinafter provided.
Funds under this Letter of Credit are available to you on or prior to
the expiry date against presentation by you of your (i) sight drafts drawn on us
in the form of Annex 1 hereto, indicating this Letter of Credit number and (ii)
request in the form of Annex 2 hereto (such sight draft and request, together
referred to as a "Drawing Request"), sight draft(s), completed and signed by one
of your officers. Presentation of your Drawing Requests may be made by you to us
at the address set forth above or may be made by facsimile transmission, to the
following facsimile number ___________. You may present to us one or more
Drawing Requests from time to time prior to the expiry date in an aggregate
amount not to exceed the Letter of Credit Amount
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<PAGE>
then in effect (it being understood that the honoring by us of each Drawing
Request shall reduce the Letter of Credit Amount then in effect).
This Letter of Credit will be automatically renewed for a one-year
period upon the expiration date set forth above and upon each anniversary of
such date, unless at least sixty (60) days prior to such expiration date, or
prior to any anniversary of such date, we notify both you and the Applicant in
writing by certified mail that we elect not to so renew the Letter of Credit.
This Letter of Credit sets forth in full the terms of our undertaking
and such undertaking shall not in any way be modified, amended or amplified by
reference to any document or instrument referred to herein or in which this
Letter of Credit is referred to or to which this Letter of Credit relates, and
no such reference shall be deemed to incorporate herein by reference any
document or instrument.
All bank charges and commissions incurred in this transaction are for
the Applicant's account.
This Letter of Credit is transferrable by you and your successors and
assigns any number of times in its entirety and not in part, but only by
delivery to us of a Notice of Assignment in the form of Annex 3 hereto.
We hereby agree with the drawers, endorsers, and bona fide holders of
drafts drawn under and in compliance with the terms of this Letter of Credit
that such drafts will be duly honored upon presentation to the drawee from our
own funds and not the funds of the Applicant and shall be available to such
drawers, endorsers, and bona fide holders, as the case may be, on or before
noon, New York time, on the Business Day (defined below) next following the date
on which such drafts are received by us. "Business Day" shall mean any day which
is not a Saturday, Sunday or day on which we are required or authorized by law
to be closed in New York, New York.
To the extent not inconsistent with the express terms hereof, this
Letter of Credit shall be governed by, and construed in accordance with, the
terms of the Uniform Customs and Practice for Commercial Documentary Credits
(1993 Revision), I.C.C. Publication No. 500 (the "UCP 500") and as to matters
not governed by the UCP 500, this Letter of Credit shall be governed by and
construed in accordance with the laws of the State of New York.
Very truly yours,
[NAME OF LETTER OF CREDIT BANK]
By:
---------------------------------
Name:
Title:
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<PAGE>
ANNEX 1
SIGHT DRAFT
______________ , 199_
For value received, at sight pay to the order of [Name of Landlord],
the sum of [Amount in words] [Amount in Figures] United States Dollars drawn
under [Name of Letter of Credit Bank] Irrevocable Transferrable Letter of Credit
No. ________ dated _________________, 199_____.
PROLOGIS DEVELOPMENT SERVICES INCORPORATED
By:
---------------------------------
Name:
Title:
74
<PAGE>
75
<PAGE>
ANNEX 2
DRAWING REQUEST
_________ ,199_
[NAME AND ADDRESS OF LETTER
OF CREDIT BANK]
Re: Irrevocable Transferrable Letter of Credit No._______ (the "Letter
of Credit")
The undersigned (the "Beneficiary"), hereby certifies to [Name of
Letter of Credit Bank] (the "Issuer") that:
(a) The Beneficiary is making a request for payment in lawful currency
of the United States of America under Irrevocable Transferrable Letter of Credit
No. (the "Letter of Credit") in the _______________ amount of $___________.
(b) The Letter of Credit Amount (as defined in the Letter of Credit) as
of the date hereof and prior to payment of the amount demanded in this Drawing
Request is $___________ . The amount requested by this Drawing Request does not
exceed the Letter of Credit Amount.
[(c) Demand is made for payment under the Letter of Credit as a result
of the occurrence and continuation of an Event of Default (as defined in the
Lease Agreement).]
Please wire transfer the proceeds of the drawing to the following
account of the Beneficiary at the financial institution indicated below:
____________________________________
____________________________________
____________________________________
Unless otherwise defined, all capitalized terms used herein have the
meanings provided in, or by reference in, the Letter of Credit.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Drawing Request as of the ___ day of _______________, 199__.
PROLOGIS DEVELOPMENT SERVICES INCORPORATED
By:
------------------------------------------
Name:
Title:
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<PAGE>
ANNEX 3
NOTICE OF ASSIGNMENT
____________, 199_
[NAME AND ADDRESS OF
LETTER OF CREDIT BANK]
Re: Irrevocable Transferable Letter of Credit No.
The undersigned (the "Beneficiary"), hereby notifies [Name of Letter of
Credit Bank] (the "Issuer") that it has irrevocably assigned the
above-referenced Letter of Credit to ______________ (the "Assignee") with an
address at ________________ effective as of the date the Issuer receives this
Notice of Assignment. The Assignee acknowledges and agrees that the Letter of
Credit Amount may have been reduced pursuant to the terms thereof, and that the
Assignee is bound by any such reduction.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Notice of Assignment as of this _____ day of _______, 199_.
PROLOGIS DEVELOPMENT SERVICES INCORPORATED
By:
------------------------------------------
Name:
Title:
Agreed:
[Assignee]
____________________
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79
<PAGE>
80
<PAGE>
Exhibit A to Lease Agreement
----------------------------
[Diagram]
81
<PAGE>
Exhibit B to Lease Agreement
----------------------------
[Diagram]
82
<PAGE>
Exhibit C to Lease Agreement
----------------------------
[Diagram]
83
<PAGE>
Exhibit D to Lease Agreement
----------------------------
Those encumbrances listed on Schedule B to the Preliminary Report
#992107340, dated as of July 29, 1999, of Stewart Title of Northern Nevada,
Reno, Nevada, but only to the extent such encumbrances pertain to Parcel 1 of
Parcel Map. No. 3487 filed in the office of the County Recorder of Washoe
County, State of Nevada, on March 19, 1999 as File No. 2318611; provided,
however, that (notwithstanding the foregoing) the following exceptions described
on said Schedule B do not encumber the Property and shall not constitute
Permitted Encumbrances: 5, 6 and 21.
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Exhibit E to Lease Agreement
----------------------------
DRAWING REQUEST
______________, 199__
[NAME AND ADDRESS OF LETTER
OF CREDIT BANK]
Re: Irrevocable Transferrable Letter of Credit No. ____ (the "Letter of Credit")
The undersigned (the "Beneficiary"), hereby certifies to [Name of
Letter of Credit Bank] (the "Issuer") that:
(a) The Beneficiary is making a request for payment in lawful currency
of the United States of America under Irrevocable Transferrable Letter of Credit
No. ____ (the "Letter of Credit") in the amount of $ ________.
(b) The Letter of Credit Amount (as defined in the Letter of Credit) as
of the date hereof and prior to payment of the amount demanded in this Drawing
Request is $__________ . The amount requested by this Drawing Request does not
exceed the Letter of Credit Amount.
(c) Demand is made for payment under the Letter of Credit as a result
of the occurrence and continuation of an Event of Default (as defined in the
Lease Agreement).
Please wire transfer the proceeds of the drawing to the following
account of the Beneficiary at the financial institution indicated below:
__________________________
__________________________
__________________________
Unless otherwise defined, all capitalized terms used herein have the
meanings provided in, or by reference in, the Letter of Credit.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Drawing Request as of the ___ day of _______________, 199__.
__________________________
By: __________________________
Name:
Title:
85
<PAGE>
Exhibit F to Lease Agreement
----------------------------
[Intentionally Omitted]
86
<PAGE>
Exhibit G to Lease Agreement
----------------------------
STORAGE AND USE OF PERMITTED HAZARDOUS MATERIALS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED __________, 19__, BETWEEN
_________________________
and
_________________________
Permitted Hazardous Materials and Use.
Tenant has requested Landlord's consent to use the Hazardous Materials
listed below in its business at the Premises (the "Permitted Hazardous
Materials"). Subject to the conditions set forth herein, Landlord hereby
consents to the Use (hereinafter defined) of the Permitted Hazardous Materials.
Any Permitted Hazardous Materials on the Premises will be generated, used,
received, maintained, treated, stored, or disposed in a manner consistent with
good engineering practice and in compliance with all Environmental Requirements.
Permitted Hazardous Materials (including maximum quantities):
______________
______________
______________
The storage, uses or process involving the Permitted Hazardous
Materials (the "Use") are described below.
Use [If limited to receiving and storage, so specify]:
______________
______________
______________
No Current Investigation. Tenant represents and warrants that
it is not currently subject to an inquiry, regulatory investigation, enforcement
order, or any other proceeding regarding the generation, use, treatment,
storage, or disposal of a Hazardous Material.
Notice and Reporting. Tenant immediately shall notify Landlord
in writing of any spill, release, discharge, or disposal of any Hazardous
Material in, on or under the Premises or the Project. All reporting obligations
imposed by Environmental Requirements are strictly the responsibility of Tenant.
Tenant shall supply to Landlord within 5 business days after Tenant
87
<PAGE>
first receives or sends the same, copies of all claims, reports, complaints,
notices, warnings or asserted violations relating in any way to Tenant's use of
the Premises.
Indemnification. Tenant's indemnity obligation under the Lease with
respect to Hazardous Materials shall include indemnification for the
liabilities, expenses and other losses described therein as a result of the Use
of the Hazardous Materials or the breach of Tenant's obligations or
representations set forth above. It is the intent of this provision that Tenant
be strictly liable to Landlord as a result of the Use of Hazardous Materials
without regard to the fault or negligence of Tenant, Landlord or any third
party.
Disposal Upon Lease Termination. At the expiration or earlier
termination of the Lease, Tenant, at its sole cost and expense, shall: (i)
remove and dispose off-site any drums, containers, receptacles, structures, or
tanks storing or containing Hazardous Materials (or which have stored or
contained Hazardous Materials) and the contents thereof; (ii) remove, empty, and
purge all underground and above ground storage tank systems, including connected
piping, of all vapors, liquids, sludges and residues; and (iii) restore the
Premises to its original condition. Such activities shall be performed in
compliance with all Environmental Requirements and to the satisfaction of
Landlord. Landlord's satisfaction with such activities or the condition of the
Premises does not waive, or release Tenant from, any obligations hereunder.
88
<PAGE>
Exhibit H to Lease Agreement
----------------------------
89
<PAGE>
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
THE STATE OF NEVADA ss.
ss.
COUNTY OF WASHOE ss.
THIS AGREEMENT is made as of September 8, 1999, among Prologis Trust,
formerly known as Security Capital Industrial Trust ("Lender"),
barnesandnoble.com llc (hereinafter called "Tenant"), and ProLogis Development
Services Incorporated (hereinafter called "Landlord").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Lender has made or has agreed to make loans to Landlord (the
"Loan"), to be evidenced by promissory notes executed by Landlord payable to the
order of each Lender (the "Notes"), bearing interest as therein specified;
WHEREAS, the Notes are secured by, among other things, a Deed of Trust,
Security Agreement, Financing Statement and Assignment of Rental (the "Deed of
Trust"), creating a first lien upon that certain tract of real property
described in Exhibit A attached hereto (the "Property"), and an Assignment of
Leases and Rents (all such security instruments and all security instruments now
or hereafter executed between Landlord and Lender in connection with the Loan,
the Notes, or the Property, and all renewals, extensions, modifications, and/or
increases thereof to be referred to hereinafter collectively as the "Collateral
Documents");
90
<PAGE>
WHEREAS, Tenant and Landlord have executed that certain written lease,
dated the 8th day of September, 1999 (the "Lease"), a memorandum of which was
recorded as Document No. _________________, Official Records, Washoe County,
Nevada, covering all or a portion of the Property (the "Demised Premises");
WHEREAS, Tenant and Landlord have requested that Lender agree that it
will not disturb Tenant's possession of the Demised Premises and Lender has
agreed to do so provided that Tenant expressly subordinates the Lease and all of
Tenant's rights thereunder to the Collateral Documents and the liens and
security interests created thereby and that Tenant agrees to attorn to Lender or
a subsequent purchaser of the Demised Premises;
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, Lender, Landlord, and
Tenant hereby agree as follows:
Subordination. The Lease and all of Tenant's rights thereunder are,
shall be, shall remain, and are expressly made subordinate and inferior to the
liens and security interests created by the Collateral Documents, and Tenant
also agrees that the liens and security interests created by the Collateral
Documents shall be and remain prior and superior to the Lease and to all of the
rights of the Tenant thereunder, regardless of how often or in what manner the
Notes, together with the liens securing the same, and any of the Collateral
Documents, may be renewed, extended, increased, changed, or altered.
Non-Disturbance. So long as Tenant is not in default in the payment of
basic rent or percentage rent or additional rent (each as applicable under the
Lease) beyond any applicable notice and grace periods provided for under the
Lease or in the performance of any of the terms, covenants, or conditions of the
Lease on Tenant's part to be performed beyond any applicable notice and grace
periods provided for under the Lease, Tenant's use and possession of the Demised
Premises and Tenant's rights and privileges under the Lease, or any extensions
91
<PAGE>
or renewals thereof approved by Lender, shall not be terminated, diminished or
interfered with or affected in any manner by Lender in the exercise of any of
its rights under the Deed of Trust or otherwise, (ii) Tenant's occupancy of the
Demised Premises shall not be disturbed by Lender in any manner in the exercise
of any of Lender's rights under the Collateral Documents during the term of the
Lease or any such extensions or renewals thereof, and (iii) Lender will not join
Tenant as a party defendant in any action or proceeding for the purpose of
terminating Tenant's interest and estate under the Lease because of any default
by Landlord, as grantor, under the Deed of Trust or otherwise.
Attornment. In the event that any proceedings are brought for the
foreclosure of the Deed of Trust or if the Demised Premises are conveyed to
Lender by deed in lieu of foreclosure, Tenant shall attorn to Lender or the
purchaser upon any such conveyance or foreclosure sale or trustee's sale and
shall recognize Lender or such purchaser as Landlord under the Lease. Such
attornment shall be effective and self-operative without the execution of any
further instrument on the part of either of the parties hereto. Tenant agrees,
however, to execute and deliver at any time and from time to time, upon the
request of Landlord or of any holder(s) of any of the indebtedness or other
obligations secured by the Deed of Trust and other Collateral Documents or any
such purchaser (1) any instrument or certificate, reasonably requested by
Landlord or of such holder(s) or such purchaser, which may be necessary or
appropriate in any such foreclosure proceeding or otherwise to evidence such
attornment, and (2) an instrument of certificate regarding the status of the
Lease, consisting of statements, if true, (i) that the Lease is in full force
and effect, (ii) the date through which rentals have been paid, (iii) the date
of the commencement of the term of the Lease, (iv) the nature of any amendments
or modifications to the Lease, (v) that, to the best of Tenant's knowledge, no
default, or state of facts, which with the passage of time or notice would
constitute a default, exists on the part of either party to the Lease, and (vi)
the date on which payment of additional rents and/or percentage rents, if any,
are due under the terms of the Lease.
92
<PAGE>
Lender's Obligations. If Lender shall succeed to the interest of
Landlord under the Lease in any manner, of if any purchaser acquires the Demised
Premises upon any foreclosure of the Deed of Trust or any trustee's sale under
the Deed of Trust, Lender or such purchaser, as the case may be, in the event of
attornment shall have the same remedies by entry, action, or otherwise in the
event of any default by Tenant in the payment of rent or additional rent or in
the performance of any of the terms, covenants, and conditions of the Lease on
Tenant's part to be performed that Landlord had or would have had if Lender or
such purchaser had not succeeded to the interest of Landlord. From and after any
such attornment, Lender or such purchaser shall be bound to Tenant under all of
the terms, covenants, and conditions of the Lease as if Lender or such purchaser
had executed the Lease as Landlord, and Tenant shall from and after the
succession to the interest of Landlord under the Lease by Lender or such
purchaser have the same remedies against Lender or such purchaser for the breach
of an agreement contained in the Lease that Tenant might have had under the
Lease against the Landlord if Lender or such purchaser had not succeeded to the
interest of Landlord, provided further, however, that Lender or such purchaser
shall not be:
(a) liable for any action or omission of any prior landlord
(including Landlord), it being understood, however, that (i)
the foregoing is not intended to relieve Lender or such
purchaser of any liability arising by reason of its acts or
omissions from and after the date that it succeeds to the
interests of Landlord, including a continuation of the failure
of the prior Landlord to perform its obligations under the
Lease; and (ii) the foregoing shall in no way diminish
Tenant's Express Set-Off Rights (as hereinafter defined), even
if such rights exist by reason of circumstances occurring
before the date on which Lender or such purchaser succeeds to
Landlord's interest under the Lease; or
(a) bound by any rent which Tenant might have paid for more than
the current month to any prior landlord (including Landlord);
or
93
<PAGE>
(a) bound by any amendment or modification of the Lease made
without its written consent, which consent shall not be
unreasonably withheld, conditioned or delayed; or
(a) subject to any offsets or defenses which Tenant might be
entitled to assert against Landlord it being understood,
however, that the foregoing shall in no way diminish Tenant's
Express Set-Off Rights, even if such rights exist by reason or
circumstances occurring before the date on which Purchaser
acquires Landlord's interest in the Lease; or
(a) liable for any security deposits except to the extent received
from Landlord.
Notwithstanding the foregoing, in the event that Lender or any such
purchaser is an affiliate or is otherwise related to Landlord (or any prior
Landlord) then in such event, clauses 4(a) - 4(e) hereof shall have no
application and in the event that such Lender or purchaser shall succeed to the
interests of Landlord under the Lease then such Lender or purchaser shall be
responsible for all of the obligations of Landlord under the Lease as if such
Lender or purchaser shall have originally executed the Lease as the landlord
thereunder.
For purposes of this Agreement, the term "Tenant's Express Set-Off
Rights" shall mean Tenant's rights to any abatement, credit or setoff that are
expressly provided for in the Lease or the exhibits annexed thereto, regardless
of whether such rights arise by reason of a failure or default by Landlord or a
failure or default by a Lender or a purchaser.
No Waiver. Nothing herein contained is intended, nor shall it be
construed, to abridge or adversely affect any right or remedy of Landlord
provided for under the Lease in the event of default by Tenant in the payment of
any rent or in the performance of any of the terms, covenants or conditions of
the Lease on Tenant's part to be performed.
94
<PAGE>
Notices. Any notice or communication required or permitted hereunder
shall be given in writing, sent by United States mail, postage prepaid,
registered or certified mail, addressed as follows:
To Lender: ProLogis Trust
14100 E. 35th Place
Aurora, Colorado 80011
Attention: Legal Department
To Tenant: Barnes & Noble/Bn.com
76 Ninth Avenue, 11th Floor
New York, New York 10011
Attention: William F. Duffy
To Landlord: ProLogis Development Services Incorporated
14100 E. 35th Place
Aurora, Colorado 80011
Attention: Legal Department
or to such other address or in care of such other person as hereinafter shall be
designated in writing by the applicable party, and shall be deemed to have been
given as of the date of deposit in an official receptacle of the United States
mail in the manner aforesaid.
Governing Law. The validity and construction of this Agreement shall be
governed by the laws of the State of Nevada.
95
<PAGE>
Modifications and Successors. This Agreement may not be modified orally
or in any manner other than by an agreement in writing signed by the parties
hereto or their respective successors in interest. This Agreement shall inure to
the benefit of and be binding upon the parties hereto, their successors and
assigns, and any purchaser or purchasers at foreclosure of the Demised Premises,
and their respective heirs, personal representatives, successors and assigns.
Counterparts. This Agreement may be executed in several counterparts,
and all so executed shall constitute one agreement, binding on all parties
hereto, notwithstanding that all parties are not signatories to the original or
the same counterpart.
96
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto caused this
Agreement to be duly executed as of the day and year first above written.
Lender:
ProLogis Trust
By: /s/ David Morze
--------------------------
Name: David Morze
--------------------------
Title: Senior Vice President
--------------------------
LANDLORD:
ProLogis Development Services Incorporated
By: /s/ John W. Seiple
--------------------------
Name: John W. Seiple
--------------------------
Title: Senior Vice President
--------------------------
TENANT:
barnesandnoble.com llc
______________________
By: /s/ William F. Duffy
--------------------------
Name: William F. Duffy
--------------------------
Title: Vice President, Operations
--------------------------
97
<PAGE>
THE STATE OF __________ ss.
ss.
COUNTY OF _____________ ss.
This instrument was acknowledged before me on this ______ day of
______________, 19___, by ________________________________________ of
__________________________, a ____________________________, on behalf of said
___________.
_______________________
Notary Public Signature
(PERSONALIZED SEAL, if any)
THE STATE OF __________ ss.
ss.
COUNTY OF _____________ ss.
This instrument was acknowledged before me on this ______ day of
_______________, 19___, by ________________________________________ of
_____________________________________, on behalf thereof.
_______________________
Notary Public Signature
(PERSONALIZED SEAL, if any)
98
<PAGE>
THE STATE OF __________ ss.
ss.
COUNTY OF _____________ ss.
This instrument was acknowledged before me on this _______ day of
__________________, 19___, by ________________________________ of
_________________________________________________, on behalf thereof.
_______________________
Notary Public Signature
(PERSONALIZED SEAL, if any)
99
<PAGE>
Exhibit A to Exhibit H to Lease Agreement
-----------------------------------------
Parcel 1 of PARCEL MAP NO. 3487, according to the map thereof, filed in
the office of the County Recorder of Washoe County, State of Nevada, on March
19, 1999 as File No. 2318611, and any and all existing or future improvements
located thereon.
100
<PAGE>
Exhibit I to Lease Agreement
----------------------------
Form of Tenant's Estoppel Certificate
[Letterhead of Tenant]
[Date]
[Name and Address of Landlord]
Re: Lease (the "Lease", dated ____________, between
_________________ ("Landlord") and _____________________
("Tenant") Premises:
Dear Sir or Madam:
Tenant hereby certifies the following information as of the date of
this certificate:
1. The Lease is in full force and effect and has not been
modified, supplemented, or amended, except as set forth on
Schedule I annexed hereto.
101
<PAGE>
2. The Base Rent due under the Lease has been paid through
____________.
3. Except as otherwise provided in the Lease or on Schedule II
annexed hereto, no payment of Base Rent or additional rent has
been paid by Tenant more than thirty days in advance.
4. Except as set forth on Schedule III annexed hereto, to the
best of Tenant's knowledge, as of the date hereof, Landlord is
not in default under the terms of the Lease.
[TENANT]
By: _____________________________
Name:
Title:
102
<PAGE>
Form of Tenant's Estoppel Certificate
-------------------------------------
[Letterhead of Landlord]
[Date]
[Name and Address of Tenant]
Re: Lease (the "Lease", dated ____________, between
_________________ ("Landlord") and _____________________
("Tenant") Premises:
Dear Sir or Madam:
Landlord hereby certifies the following information as of the date of
this certificate:
1. The Lease is in full force and effect and has not been
modified, supplemented, or amended, except as set forth on
Schedule I annexed hereto. ----------
2. The Base Rent due under the Lease has been paid through
____________.
103
<PAGE>
3. Except as otherwise provided in the Lease or on Schedule II
annexed hereto, no payment ----------- of Base Rent or
additional rent has been paid by Tenant more than thirty days
in advance.
4. Except as set forth on Schedule III annexed hereto, to the
best of Tenant's knowledge, as of the date hereof, Landlord is
not in default under the terms of the Lease.
[LANDLORD]
By: _____________________________
Name:
Title:
104
<PAGE>
Exhibit J to Lease Agreement
----------------------------
RECORD AND RETURN TO:
- - --------------------
David Blaivas, Esq.
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
PROPERTY DESCRIPTION
- - --------------------
Parcel 1 of Parcel Map No. 3487, APN: 140-010-09
County of Washoe
State of Nevada
Memorandum of Lease
This Memorandum of Lease is made the 8th day of September, 1999, by and
between PROLOGIS DEVELOPMENT SERVICES INCORPORATED, a Delaware corporation,
having its principal office at 14100 East 35th Place, Aurora, Colorado 80011
105
<PAGE>
("Landlord") and barnesandnoble.com llc, a Delaware limited liability company
having an office at 76 Ninth Avenue, 11th Floor, New York, New York 10011
("Tenant").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Landlord (as successor in interest to SCI Development Services
Incorporated) is the sole owner in fee simple of the piece, parcel or tract of
land lying and being in the County of Washoe and State of Nevada, more
particularly described in Schedule I annexed hereto (the "Land");
WHEREAS, Landlord, as landlord, and Tenant, as tenant, have entered
into a lease, dated September 8, 1999 (the "Lease"), covering the Land and all
improvements now or hereafter erected thereon (including, without limitation,
that certain building (the "Building") that is to be erected by Landlord on the
Land and that is to contain approximately 600,000 square feet of space);
WHEREAS, the Land and the Building are part of that certain industrial
project (the "Project") commonly known as Damonte Ranch Trade Center I, which
industrial project is composed of the parcels of land lying and being in the
County of Washoe, State of Nevada, as more particular described in Schedule II
annexed hereto, together with any improvements now or hereafter erected thereon;
and
WHEREAS, Landlord and Tenant desire to have a Memorandum of Lease
recorded in the official public records of real property of Washoe County,
Nevada.
106
<PAGE>
NOW, THEREFORE, Landlord and Tenant hereby state the following for
recording:
I.
Description of Premises
The premises demised by the Lease (the "Premises") consist of, inter
alia, the Land and the Building, together with (x) any and all other
improvements and structures (now or hereafter erected) on the Land, and (y) all
of Landlord's right, title and interest in and to all easements, rights and
other matters appurtenant to the Land or the Building and in and to any land
lying in the bed of any roads adjacent to the Land.
II.
Date of Commencement and Term of Lease
1. The Commencement Date of the Lease is September 8, 1999. The Rent
Commencement Date (as defined in the Lease) will occur 30 days after the
Substantial Completion of the Base Building Work (as defined in the Lease),
which is estimated to occur on or before April 15, 2000, subject to certain
delays, as provided in the Lease.
2. The initial term of the Lease will commence on the Commencement Date
and shall end on the last day of the 120th full calendar month following the
Rent Commencement Date.
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<PAGE>
III.
Extension Terms
Tenant may extend the term of the Lease for four (4) additional
extension terms of five (5) years each, upon the terms and conditions set forth
in the Lease.
IV.
Right of First Offer
Tenant has a right of first offer to purchase the Premises, upon the
terms and conditions set forth in the Lease.
V.
Signage
Tenant has the right, subject to the terms and conditions of the Lease,
to place directional signs as appropriate throughout the Project for the benefit
of its customers.
108
<PAGE>
VI.
Other Provisions
Notice is hereby given that the Lease contains additional terms,
covenants, conditions and provisions not set forth in or referred to in this
Memorandum of Lease.
* * * * *
THIS MEMORANDUM OF LEASE IS NOT A COMPLETE SUMMARY OF THE LEASE. The
provisions of this Memorandum of Lease shall not be construed to interpret, vary
or modify the terms, covenants, conditions or provisions of the Lease and in the
event of any conflict between the terms hereof and the terms of the Lease, the
terms of the Lease shall control. A true copy of the Lease is located at the
Premises.
[Remainder of Page Intentionally Blank]
109
<PAGE>
EXECUTED IN MULTIPLE COUNTERPARTS each of which shall have the force
and effect of an original, as of the day and year first above written.
TENANT: LANDLORD:
barnesandnoble.com llc ProLogis Development Services Incorporated
By: /s/ William F. Duffy By: /s/ John W. Seiple, Jr.
------------------------------ -----------------------------
Title: Vice President, Operations Title: Senior Vice President
--------------------------- ----------------------
Address: Address:
76 Ninth Avenue, 11th Floor 47775 Fremont Blvd.
New York, NY 10011 Fremont, CA 94538
110
<PAGE>
Schedule I to Exhibit J
-----------------------
Parcel 1 of PARCEL MAP NO. 3487, according to the map thereof, filed in
the office of the County Recorder of Washoe County, State of Nevada, on March
19, 1999 as File No. 2318611.
111
<PAGE>
Schedule II to Exhibit J
------------------------
Parcels 1 and 2 of PARCEL MAP NO. 3487, according to the map thereof,
filed in the office of the County Recorder of Washoe County, State of Nevada, on
March 19, 1999 as File No. 2318611.
Parcels 1 and 2 of PARCEL MAP NO. 3488, according to the map thereof,
filed in the office of the County Recorder of Washoe County, State of Nevada, on
March 19, 1999 as File No. 2318612.
An easement for temporary access as set forth in an instrument recorded
June 16, 1998, as Document No. 2221195 of Official Records.
An easement for sanitary sewer as set forth in an instrument recorded
June 16, 1998, as Document No. 2221193 of Official Records.
112
<PAGE>
Exhibit K to Lease Agreement
----------------------------
[Intentionally Omitted]
113
<PAGE>
Exhibit L to Lease Agreement
----------------------------
[Forms of Warranties and Guarantees]
114
<PAGE>
================================================================================
---------------
AGREEMENT OF LEASE
---------------
111 CHELSEA LLC
LANDLORD
AND
BARNESANDNOBLE.COM LLC
TENANT
---------------
PREMISES: Portions of the Ninth Floor
111 Eighth Avenue
(a/k/a 76 Ninth Avenue)
New York, New York 10011
DATED: as of October 1, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
DEFINITIONS ............................................................ 1
ARTICLE 1. DEMISE, PREMISES, TERM, RENT................................ 7
ARTICLE 2. USE AND OCCUPANCY........................................... 8
ARTICLE 3. ALTERATIONS.................................................11
ARTICLE 4. CONDITION OF THE PREMISES; LANDLORD'S WORK..................14
ARTICLE 5. REPAIRS; FLOOR LOAD.........................................17
ARTICLE 6. REAL ESTATE TAXES AND LABOR RATE INCREASES..................19
ARTICLE 7. LEGAL REQUIREMENTS..........................................24
ARTICLE 8. SUBORDINATION AND NON-DISTURBANCE; ESTOPPEL CERTIFICATES....26
ARTICLE 9. SERVICES....................................................29
ARTICLE 10. INSURANCE...................................................40
ARTICLE 11. DESTRUCTION OF THE PREMISES; PROPERTY LOSS OR DAMAGE........42
ARTICLE 12. EMINENT DOMAIN..............................................44
ARTICLE 13. ASSIGNMENT AND SUBLETTING...................................45
ARTICLE 14. ACCESS TO PREMISES..........................................54
ARTICLE 15. CERTIFICATE OF OCCUPANCY....................................56
ARTICLE 16. DEFAULT.....................................................56
ARTICLE 17. REMEDIES AND DAMAGES........................................59
ARTICLE 18. FEES AND EXPENSES...........................................61
ARTICLE 19. NO REPRESENTATIONS BY LANDLORD..............................61
ARTICLE 20. END OF TERM.................................................62
ARTICLE 21. QUIET ENJOYMENT.............................................62
ARTICLE 22. NO WAIVER; NON-LIABILITY....................................63
ARTICLE 23. WAIVER OF TRIAL BY JURY.....................................64
ARTICLE 24. INABILITY TO PERFORM........................................64
ARTICLE 25. BILLS AND NOTICES...........................................65
ARTICLE 26. RULES AND REGULATIONS.......................................65
ARTICLE 27. BROKER......................................................66
ARTICLE 28. INDEMNITY...................................................66
ARTICLE 29. REDUCED PREMISES............................................67
ARTICLE 30. RIGHT OF FIRST OFFER........................................68
ARTICLE 31. LANDLORD'S CONTRIBUTION.....................................71
ARTICLE 32. SECURITY DEPOSIT............................................73
ARTICLE 33. BUILDING NAME AND SIGNAGE; FLAGPOLE.........................77
ARTICLE 34. GUARANTY OF LEASE...........................................78
ARTICLE 35. MISCELLANEOUS...............................................78
-i-
<PAGE>
EXHIBITS
Exhibit A: Floor Plan of Space A
Exhibit B: Floor Plan of Space B
Exhibit C: Floor Plan of Space C
Exhibit D: Form of Letter of Credit
Exhibit E: Rules and Regulations
Exhibit F: Approved Contractors
Exhibit G: Certificate of Occupancy
Exhibit H: Form of Existing Mortgagee Non-Disturbance Agreement
Exhibit I: Roof Space
Exhibit J: Article 29 Space
Exhibit K: Section 2.3 Occupancies
Exhibit L: Section 30.2 Occupancies
Exhibit M: Intentionally Deleted
Exhibit N: Existing Emergency Stairwell
Exhibit O: Form of Agreement and Guaranty
Exhibit P: Floor Plan of the Remaining B Space
Exhibit P-1: Lease Modifications Re: Remaining B Space
Exhibit Q: Louver Locations
Exhibit R: Center Shaft Location
-ii-
<PAGE>
AGREEMENT OF LEASE ("Lease"), dated as of October 1, 1999,
between 111 CHELSEA LLC, a Delaware limited liability company with an address
c/o Taconic Investment Partners LLC, 1500 Broadway, New York, New York 10036
("Landlord"), and BARNESANDNOBLE.COM LLC, a Delaware limited liability company
with an address at 111 Eighth Avenue (a/k/a 76 Ninth Avenue), New York, New York
10011 ("Tenant").
W I T N E S S E T H:
The parties hereto, for themselves, their legal
representatives, successors and assigns, covenant and agree as follows.
DEFINITIONS
Additional Rent: Tenant's Tax Payment, Tenant's Labor Rate Payment, and any and
all other sums, other than Fixed Rent, payable by Tenant to
Landlord under this Lease.
Affiliate: With respect to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such first
Person.
Alterations: Alterations, installations, improvements, additions or other
physical changes (other than decorations, movable fixtures and
equipment) in or about the Premises or elsewhere in the
Building.
Bertelsmann: Bertelsmann AG, a business entity organized pursuant to the
laws of the Federal Republic of Germany.
B&N Inc.: Barnes & Noble, Inc., a Delaware corporation.
Base Rate: The annual rate of interest publicly announced from time to
time by Citibank, N.A., New York, New York (or any successor
thereto) as its "base rate", or such other term as may be used
by Citibank, N.A. from time to time for the rate presently
referred to as its base rate.
Building: All the buildings, equipment and other improvements and
appurtenances of every kind and description now located or
hereafter erected, constructed or placed upon the land and any
and all alterations, renewals, replacements, additions and
substitutions thereto, presently known by the address of 111
Eighth Avenue (a/k/a 76 Ninth Avenue), New York, New York.
Building Systems: The mechanical, electrical, heating, ventilating, air
conditioning, elevator, plumbing, sanitary, life-safety and
other service systems of the Building, but shall not include
the portions of such systems installed in the Premises or
elsewhere in the Building by Tenant.
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Business Days: All days, excluding Saturdays, Sundays, and all days observed
by either the State of New York, the United States of America
or by the labor unions servicing the Building as legal
holidays.
Commencement As to Space A, October 1, 1999. As to Space B and Space C, the
Date: respective Delivery Dates for Space B and Space C.
Control: As to any Person: (a) the ownership, directly or indirectly,
of more than thirty per cent (30%) of (i) the outstanding
voting stock of a corporation, or (ii) the beneficial
ownership interests, however characterized, of any other
entity, or (b) the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of
voting securities or other ownership interests, by statute, or
by contract.
Default Rate: A rate per annum equal to four (4) percentage points above the
Base Rate.
Delivery Date: As to each of Space A, Space B and Space C, the date upon
which Landlord delivers possession of such Space, whether or
not the portions of Landlord's Work applicable to such Space
have been Substantially Completed.
Entity: Defined in Section 13.10(a).
Environmental
Laws: All Legal Requirements now or hereafter in effect relating to
the environment, health, safety or Hazardous Materials.
Expiration Date: February 28, 2015.
Governmental
Authority: Any of the United States of America, the State of New York,
the City of New York, any political subdivision thereof and
any agency, department, commission, board, bureau or
instrumentality of any of the foregoing, now existing or
hereafter created, having jurisdiction over the Real Property
or any portion thereof or the vaults, curbs, sidewalks,
streets and areas adjacent thereto.
Guarantor: barnesandnoble.com inc., a Delaware corporation, and any other
Person which shall from time to time guaranty to Landlord the
payment and performance of all or any portion of the
obligations of Tenant under this Lease.
Guaranty: The Agreement and Guaranty, dated as of the date hereof, made
by Guarantor to Landlord, in the form attached to this Lease
as Exhibit O, and any amendment, modification, restatement,
confirmation or extension thereof, and any other agreement
pursuant to which any Guarantor shall
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from time to time guaranty to Landlord the payment and
performance of all or any portion of the obligations of Tenant
under this Lease.
Hazardous
Materials: Any substances, materials or wastes regulated by any
Governmental Authority or deemed or defined as a "hazardous
substance", "hazardous material", "toxic substance", "toxic
pollutant", "contaminant", "pollutant", "solid waste",
"hazardous waste" or words of similar import under applicable
Legal Requirements, including oil and petroleum products,
natural or synthetic gas, polychlorinated biphenyls, asbestos
in any form, urea formaldehyde, radon gas, or the emission of
non-ionizing radiation, microwave radiation or electromagnetic
fields at levels in excess of those (if any) specified by any
Governmental Authority or which may cause a health hazard or
danger to property, or the emission of any form of ionizing
radiation.
Initial
Alterations: Defined in Section 4.3.
Landlord's
Contribution: Defined in Section 31.1.
Landlord's Work: Defined in Section 4.2.
Legal
Requirements: All present and future laws, rules, orders, ordinances,
regulations, statutes requirements, codes, executive orders,
rules of common law, and any judicial interpretations thereof,
extraordinary as well as ordinary, of all Governmental
Authorities, including the Americans with Disabilities Act (42
U.S.C.ss.12,101 et seq.), New York City Local Law 58 of 1987,
and any law of like import, and all rules, regulations and
government orders with respect thereto, and of any applicable
fire rating bureau, or other body exercising similar
functions, affecting the Real Property or the maintenance, use
or occupation thereof, or any street or sidewalk comprising a
part of or in front thereof or any vault in or under the
Building.
Mortgage: Any mortgage or trust indenture which may now or hereafter
affect the Real Property, the Building or any Superior Lease
and the leasehold interest created thereby, and all renewals,
extensions, supplements, amendments, modifications,
consolidations and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
Mortgagee: Any mortgagee, trustee or other holder of a Mortgage.
Permitted Use: The use by Tenant of the Premises as executive, administrative
and/or general offices and the lawful uses ancillary thereto
described in Article 2, and for no other purpose.
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Person: Any individual, corporation, partnership, limited liability
company, limited liability partnership, joint venture, estate,
trust, unincorporated association, business trust,
tenancy-in-common or other entity, or any Governmental
Authority.
Premises: Collectively, Space A, Space B and Space C, as and when
delivered to Tenant.
Premises Area: The Rentable Square Foot area of (i) from the Space A Delivery
Date until the Space B Delivery Date, Space A, hereby deemed
and agreed to be 46,053 Rentable Square Feet; plus (ii) from
the Space B Delivery Date until the Space C Delivery Date,
Space B, hereby deemed and agreed to be 25,763 Rentable Square
Feet (such that during such period the Premises Area of the
entire Premises (comprising Space A and Space B) shall be
deemed to be 71,816 Rentable Square Feet); plus (iii) from the
Space C Delivery Date until the Expiration Date, Space C,
hereby deemed and agreed to be 18,324 Rentable Square Feet
(such that during such period the Premises Area of the entire
Premises (comprising Space A, Space B and Space C) shall be
deemed to be 90,140 Rentable Square Feet), as such Premises
Area may be increased or decreased from time to time pursuant
to this Lease.
Real Property: The Building, together with the plot of land upon which it
stands.
Rentable Square
Feet: The deemed rentable area of the Building or any portion
thereof, computed on the basis of the current standard
employed by Landlord on the date hereof with respect to the
calculation of the deemed Rentable Square Foot area of the
Building, and according to such calculation, the Building is
deemed to contain 2,300,000 Rentable Square Feet of Space;
provided, however, that in no event shall such deemed Rentable
Square Footage constitute or imply any representation or
warranty by Landlord as to the actual size of any floor or
other portion of the Building, including the Premises.
Rules and
Regulations: The rules and regulations attached to this Lease as Exhibit E,
and such additional rules and regulations as Landlord may
reasonably adopt from time to time in accordance with the
provisions of Article 26.
Roof
Equipment: As defined in Section 9.7.
Roof Space: As defined in Section 9.7.
Security Deposit: As defined in Section 32.1.
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Space: Any of Space A, Space B or Space C.
Space A: A portion of the ninth (9th) floor of the Building,
substantially as shown on the floor plan attached as Exhibit A
to this Lease.
Space B: A portion of the ninth (9th) floor of the Building,
substantially as shown on the floor plan attached as Exhibit B
to this Lease.
Space C: A portion of the ninth (9th) floor of the Building,
substantially as shown on the floor plans attached as Exhibit
C to this Lease.
Space A Rent
Commencement March 1, 2000.
Date:
Space B Rent
Commencement The later of (i) 150 days following the Space B Delivery Date,
Date: or (ii) June 1, 2000.
Space C Rent
Commencement The later of (i) 150 days following the Space C Delivery Date,
Date: or (ii) November 1, 2000.
Substantial
Completion: As to any construction performed by any party in the Premises,
including the Initial Alterations, any other Alterations, or
Landlord's Work, that such work has been completed
substantially in accordance with (i) the provisions of this
Lease applicable thereto, (ii) the plans and specifications
for such work, and (iii) all applicable Legal Requirements,
except for minor details of construction, decoration and
mechanical adjustments, if any, the noncompletion of which
does not materially interfere with Tenant's use of the
Premises, or which, in accordance with good construction
practice, should be completed after the completion of other
work to be performed in the Premises.
Superior Lease: Any ground or underlying lease of the Real Property or any
part thereof heretofore or hereafter made by Landlord and all
renewals, extensions, supplements, amendments and
modifications thereof.
Superior Lessor: A lessor under a Superior Lease.
Tenant's
Alterations: All Alterations, including the Initial Alterations and the
installation of Roof Equipment, in and to the Premises and
elsewhere in the Building which may be made by or on behalf of
Tenant prior to and during the Term, or any renewal thereof.
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Tenant Delay: Any delay which results from any act, neglect, failure to act
(where this Lease or Legal Requirements impose a duty to act)
or omission of any Tenant Party, including delays due to
Tenant's changes in or additions to, or interference with, any
work to be done by Landlord, or delays by Tenant beyond the
periods set forth herein in submission of information,
approving working drawings or estimates or giving
authorizations or approvals.
Tenant Party: Any of Tenant, any Affiliate of Tenant, any subtenant or any
other occupant of the Premises, or any of their respective
direct or indirect partners, officers, shareholders,
directors, members, trustees, beneficiaries, employees,
principals, contractors, licensees, servants, agents or
representatives.
Tenant's Other
Lease: That certain Agreement of Lease, dated as of June 30, 1997,
between Landlord's predecessor-in-interest, as landlord, and
Tenant's predecessor-in-interest, as tenant, as amended by (i)
letter agreement of even date therewith, (ii) letter
agreement, dated July 1, 1997, (iii) Modification of Lease
Agreement dated as of January ___, 1998, (iv) Amendment of
Lease dated as of September 1, 1998, and (v) Assignment,
Assumption and Consent Agreement and Amendment to Lease, of
even date herewith, pursuant to which the tenant's interest in
Tenant's Other Lease is being assigned to and assumed by
Tenant. Landlord and Tenant mutually acknowledge that, except
as may be expressly set forth herein, this Lease and Tenant's
Other Lease represent separate and distinct agreements and
legal interests.
Tenant's
Property: Tenant's movable fixtures and movable partitions, telephone
and other communications equipment, computer systems,
furniture, trade fixtures, furnishings, and other items of
personal property which are removable without material damage
to the Premises or Building.
Term: The term of this Lease, which shall commence on the
Commencement Date and shall expire on the Expiration Date.
Transaction
Expenses: All actual, reasonable and customary costs and expenses
incurred by Tenant in effectuating a subletting or assignment,
including brokerage commissions, advertising costs, attorney's
fees and disbursements, remodeling and redecorating costs in
connection with such subletting or assignment, rental
abatements or concessions to the subtenant or assignee, and
any fees or cost reimbursements paid to Landlord pursuant to
this Lease in connection with Landlord's review or approval of
such subletting or assignment.
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Unavoidable
Delays: As defined in Article 24.
ARTICLE 1. DEMISE, PREMISES, TERM, RENT
Section 1.1 Landlord hereby leases to Tenant, and Tenant
hereby hires from Landlord, the Premises, for the Term to commence, as to Space
A on October 1, 1999 and as to each of Space B and Space C on the applicable
Delivery Date for such Space, and to end on the Expiration Date, at an annual
rent ("Fixed Rent") as follows:
(a) For the portion of the Term commencing on the Space A Rent
Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent
for Space A as follows:
(i) One Million Three Hundred Eighty One Thousand
Five Hundred Ninety and 00/100 Dollars ($1,381,590.00) per annum
($115,132.50 per month) for the period commencing on the Space A Rent
Commencement Date and ending one day prior to the fifth (5th)
anniversary of the Commencement Date for Space A;
(ii) One Million Five Hundred Nineteen Thousand Seven
Hundred Forty Nine and 00/100 Dollars ($1,519,749.00) per annum
($126,645.75 per month) for the period commencing on the fifth (5th)
anniversary of the Commencement Date for Space A and ending one day
prior to the tenth (10th) anniversary of the Commencement Date for
Space A; and
(iii) One Million Six Hundred Fifty Seven Thousand
Nine Hundred Eight and 00/100 Dollars ($1,657,908.00) per annum
($138,159.00 per month) for the period commencing on the tenth (10th)
anniversary of the Commencement Date for Space A and ending on the
Expiration Date.
(b) For the portion of the Term commencing on the Space B Rent
Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent
for Space B as follows:
(i) Seven Hundred Seventy Two Thousand Eight Hundred
Ninety and 00/100 Dollars ($772,890.00) per annum ($64,407.50 per
month) for the period commencing on the Space B Rent Commencement Date
and ending one day prior to the fifth (5th) anniversary of the
Commencement Date for Space A;
(ii) Eight Hundred Fifty Thousand One Hundred Seventy
Nine and 00/100 Dollars ($850,179.00) per annum ($70,848.25 per month)
for the period commencing on the fifth (5th) anniversary of the
Commencement Date for Space A and ending one day prior to the tenth
(10th) anniversary of the Commencement Date for Space A; and
(iii) Nine Hundred Twenty Seven Thousand Four Hundred
Sixty Eight and 00/100 Dollars ($927,468.00) per annum ($77,289.00 per
month) for the period
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commencing on the tenth (10th) anniversary of the Commencement Date for
Space A and ending on the Expiration Date.
(c) For the portion of the Term commencing on the Space C Rent
Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent
for Space C as follows:
(i) Five Hundred Forty Nine Thousand Seven Hundred
Twenty and 00/100 Dollars ($549,720.00) per annum ($45,810.00 per
month) for the period commencing on the Space C Rent Commencement Date
and ending one day prior to the fifth (5th) anniversary of the
Commencement Date for Space A; and
(ii) Six Hundred Four Thousand Six Hundred Ninety Two
and 00/100 Dollars ($604,692.00) per annum ($50,391.00 per month) for
the period commencing on the fifth (5th) anniversary of the
Commencement Date for Space A Rent and ending one day prior to the
tenth (10th) anniversary of the Commencement Date for Space A; and
(iii) Six Hundred Fifty Nine Thousand Six Hundred
Sixty Four and 00/100 Dollars ($659,664.00) per annum ($54,972.00 per
month) for the period commencing on the tenth (10th) anniversary of the
Commencement Date for Space A and ending on the Expiration Date.
Tenant agrees to pay Fixed Rent to Landlord, without notice or demand, in lawful
money of the United States, in monthly installments in advance on the first
(1st) day of each calendar month during the Term, at the office of Landlord or
such other place as Landlord may designate, without any set-off, offset,
abatement or deduction whatsoever, except as expressly set forth herein. Fixed
Rent and Additional Rent shall be payable by check drawn upon a bank which is a
member of the New York Clearinghouse Association or by wire transfer of
immediately available funds.
Section 1.2 Notwithstanding anything to the contrary set forth
in Section 1.1, Tenant shall have no obligation to pay Tenant's Tax Payment or
Tenant's Labor Rate Payment applicable to (a) Space A, on account of the period
commencing on the Commencement Date for Space A and ending on the day prior to
the Space A Rent Commencement Date; (b) Space B, on account of the period
commencing on the Delivery Date for Space B and ending on the day prior to the
Space B Rent Commencement Date; and (c) Space C, on account of the period
commencing on the Delivery Date for Space C and ending on the day prior to the
Space C Rent Commencement Date. Nothing contained herein shall affect Tenant's
obligation to make any other payment under this Lease during the aforementioned
periods.
ARTICLE 2. USE AND OCCUPANCY
Section 2.1 (a) Tenant shall use and occupy the Premises for
the Permitted Use and for no other purpose. Tenant shall not use or occupy or
permit the use or occupancy of any part of the Premises in any manner not
permitted hereunder, or which in Landlord's reasonable judgment would adversely
affect (a) the rendition of any service required to be
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furnished to any tenant or other occupant of the Building, (b) the use or
enjoyment of any part of the Building by any other tenant or other occupant, or
(c) the appearance of the Building.
(b) Tenant, incidental to its executive, administrative and
general office use, shall have the right to use a portion or portions of the
Premises (i) for storage of office supplies and (ii) as a pantry or pantries for
use solely by Tenant, which may contain reheating but not cooking equipment,
including items such as a microwave, coffee maker, sink, ice maker, dishwasher,
hot water heater and refrigerator, upon and subject to the satisfaction of the
following conditions, at Tenant's sole cost and expense and subject to and in
accordance with all applicable Legal Requirements and the provisions of this
Lease (including the provisions of Article 3) and with such other reasonable
regulations as Landlord may adopt from time to time in accordance with the
provisions of Article 26: (x) no cooking or other preparation of food (other
than the reheating of food by microwave and the preparation of beverages) shall
be done in any such pantry, (y) no food or beverages will be kept or served in
the Premises in a manner or under any conditions which result in fumes or odors
being emitted from, or detectable outside of, the Premises, and (z) such portion
or portions of the Premises shall be at all times maintained by Tenant in a
clean and sanitary condition and free of refuse (including use of extermination
services whenever reasonably required).
Section 2.2 Tenant shall not use or permit the Premises or any
part thereof to be used: (a) for the business of printing or other manufacturing
of any kind, (b) as a retail branch of a bank or savings and loan association,
or as a retail loan company, or as a retail stock broker's or dealer's office,
(c) except as permitted herein, for the storage of merchandise, (d) for the
distribution, by mail-order or otherwise, of merchandise, except in connection
with Tenant's business of selling books at retail by means of the Internet, (e)
as a restaurant or bar or for the sale of food or beverages, (f) as a news or
cigar stand, (g) as an employment agency, labor union office, school,
physician's or dentist's office, dance or music studio, (h) as a barber shop or
beauty salon, (i) for the sale to the public visiting the Premises, at retail or
otherwise, of any goods or products, (j) by the United States Government, the
City or State of New York, any Governmental Authority, any foreign government,
the United Nations or any agency or department of any of the foregoing or any
Person having sovereign or diplomatic immunity, (k) for the rendition of
medical, dental or other therapeutic or diagnostic services, or (l) for the
conduct of an auction.
Section 2.3 (a) Landlord anticipates that the Delivery Date
for Space B will occur on January 1, 2000 and that the Delivery Date for Space C
will occur on June 1, 2000; provided, however, that Landlord shall not be
subject to any liability for failure of either such Delivery Date to occur on
such dates (or on any other date or dates), and the validity of this Lease shall
not be impaired under such circumstances, nor shall the same be construed to
extend the term of this Lease. The foregoing shall constitute an express
negation of Section 223-a of the New York Real Property Law or any successor law
or ordinance, which shall be inapplicable hereto, and Tenant hereby waives any
right to rescind this Lease which Tenant might otherwise have thereunder.
(b) Notwithstanding the foregoing provisions of Section
2.3(a), if the Delivery Date for Space B shall not occur on or before September
1, 2000, unless such failure is due to Tenant Delay, then, as Tenant's sole and
exclusive remedy for such delay in the Delivery Date for
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Space B, Tenant shall have the right to terminate this Lease with respect to
both Space B (subject to the final sentence of this Section 2.3(b)) and Space C.
Tenant shall exercise such termination right by giving notice to Landlord no
later than September 10, 2000, and such termination will be effective on the
date which shall be thirty (30) days after the date such notice is given, upon
which date this Lease with respect to Space B (subject to the final sentence of
this Section 2.3(b)) and Space C shall come to an end and terminate, and
thereafter neither party shall have any liability to the other hereunder with
respect to Space B (subject to the final sentence of this Section 2.3(b)) and
Space C; provided, however, however, that if the Delivery Date for Space B shall
occur at any time within thirty (30) days following Landlord's receipt of such
notice by Tenant, such termination shall be void and of no force and effect,
and, subject to Tenant's rights pursuant to Section 2.3(c), Tenant shall have no
further right to terminate this Lease with respect to Space B and Space C
pursuant to this Section 2.3(b). Notwithstanding the foregoing, if Tenant shall
terminate this lease with respect to Space B and Space C pursuant hereto, such
termination shall not apply to that portion of Space B shown on Exhibit P (the
"Remaining B Space"), and the Remaining B Space shall be deemed automatically to
be added to the Premises as a part of Space A, the floor plan in Exhibit P shall
be deemed added to Exhibit A, the provisions of Sections 1.1, 6.1(b), 6.4, and
31.1(a) shall be modified as provided in Exhibit P-1 (and any other appropriate
adjustments shall be made to the amounts payable by Tenant on account of other
items of Additional Rent to reflect such reduction in the Premises), and the
provisions of Sections 2.3(a) and 2.3(d) shall apply as if the date of such
termination with respect to Space B (except the Remaining B Space) and Space C
were the Delivery Date for the Remaining B Space.
(c) Notwithstanding the foregoing provisions of Section
2.3(a), if the Delivery Date for Space C shall not occur on or before February
1, 2001, unless such failure is due to Tenant Delay, then, as Tenant's sole and
exclusive remedy for such delay in the Delivery Date for Space C, Tenant shall
have the right to terminate this Lease with respect to Space C only, by notice
to Landlord given no later than February 10, 2001, such termination to be
effective on the date which shall be thirty (30) days after the date such notice
is given, upon which date this Lease with respect to Space C only shall come to
an end and terminate, and thereafter neither party shall have any liability to
the other hereunder with respect to Space C. Notwithstanding anything to the
contrary contained herein, if the Delivery Date for Space C shall occur at any
time within thirty (30) days following Landlord's receipt of such notice by
Tenant, such termination shall be void and of no force and effect, and Tenant
shall have no further right to terminate this Lease with respect to Space C only
pursuant to this Section 2.3(c).
(d) In the event of any holding over by any tenant or occupant
of Space B beyond January 1, 2000, or by any tenant or occupant of Space C
beyond June 1, 2000, Landlord will (i) promptly take commercially reasonable
actions to obtain possession of such Space, including commencing and diligently
prosecuting (to completion, if necessary) appropriate legal proceedings against
any such holdover tenant or occupant, and (ii) keep Tenant advised of the
progress of such proceedings.
(e) Landlord represents that to the best of its knowledge, as
of the date of this Lease, the tenants and other occupants of each Space, and
the respective expiration dates with respect to each such Space, are as set
forth on Exhibit K attached to this Lease.
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Section 2.4 Tenant shall have the right to use the existing
emergency stairwell shown on Exhibit N as a means of ingress and egress for
Tenant's employees solely between the Premises and the premises demised pursuant
to Tenant's Other Lease, provided that Tenant first installs a card-key security
system satisfactory to Landlord which permits access to and from such stairwell
solely for such purpose. Such installation by Tenant shall be deemed an
Alteration for all purposes of this Lease. Landlord makes no representation with
respect to the compliance with applicable Legal Requirements of Tenant's use of
such stairwell pursuant to this Section 2.4.
ARTICLE 3. ALTERATIONS
Section 3.1 Tenant shall not make any Alterations without
Landlord's prior written consent in each instance, provided that Tenant's
changing of wall coverings, carpeting, paint or other decorative Alterations
(collectively, "Decorative Alterations") shall not be deemed to be Alterations
requiring such consent. Landlord's consent shall be granted or denied in
Landlord's sole discretion; provided, however, that Landlord shall not
unreasonably withhold its consent to Alterations proposed to be made by Tenant
provided that such Alterations (a) are non-structural and do not affect the
Building Systems or services, (b) are performed only by contractors approved in
writing by Landlord (subject to and in accordance with the provisions of Section
3.2(b) below), (c) do not affect any part of the Building other than the
Premises and (d) do not adversely affect any service required to be furnished by
Landlord to Tenant or to any other tenant or occupant of the Building.
Section 3.2 (a) Prior to making any Alterations (excluding
Decorative Alterations), Tenant shall (i) submit to Landlord, for Landlord's
written approval, detailed plans and specifications therefor in form reasonably
satisfactory to Landlord, (ii) if such Alterations require a filing with any
Governmental Authority or require the consent of such authority, then such plans
and specifications shall (A) be prepared and certified by a registered architect
or licensed engineer, and (B) comply with all Legal Requirements to the extent
necessary for such governmental filing or consent, (iii) at its expense, obtain
all required permits, approvals and certificates, (iv) furnish to Landlord
duplicate original policies or certificates of insurance which evidence worker's
compensation coverage (covering all persons to be employed by Tenant, and all
contractors and subcontractors supplying materials or performing work in
connection with such Alterations), comprehensive general liability (including
property damage coverage) insurance, comprehensive form automobile liability
insurance and Builder's Risk coverage (issued on a completed value basis) all in
such form, with such companies, for such periods and in such amounts as Landlord
may reasonably require, naming Landlord and any Superior Lessor and any
Mortgagee whose name and address has been furnished to Tenant as additional
insureds, and (v) with respect to any Alteration (other than the Initial
Alterations) costing more than $100,000.00 to complete, furnish to Landlord such
evidence of Tenant's ability to complete and to fully and completely pay for
such Alteration as is reasonably satisfactory to Landlord. All Alterations shall
be performed by Tenant at Tenant's sole cost and expense (A) in a good and
workmanlike manner using materials of first class quality, (B) in compliance
with all Legal Requirements, and (C) substantially in accordance with the plans
and specifications previously approved by Landlord. Tenant shall at its cost and
expense obtain all approvals, consents and permits required for such Alterations
from every Governmental Authority having or claiming jurisdiction prior to,
during and upon completion of such Alterations. Tenant shall promptly
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reimburse Landlord, as Additional Rent and upon demand, for any and all
reasonable costs and expenses incurred by Landlord in connection with Landlord's
review of Tenant's plans and specifications (not to exceed $5,000.00 for any
such Alterations for which Tenant's plans and specifications are submitted
concurrently (i.e., on a non-"fast track" basis)).
(b) Landlord shall not unreasonably withhold, condition or
delay its approval of the contractors proposed to be used by Tenant for Tenant's
Alterations, provided that in the case of the mechanical, electrical, plumbing
and fire safety trades, Tenant shall select its contractors and sub-contractors
from Landlord's list of approved contractors. Attached hereto as Exhibit F is a
list of contractors currently approved by Landlord for the performance of work
in the Building, which list may be modified by Landlord from time to time.
(c) Notwithstanding the foregoing provisions of this Article
3, Tenant shall be permitted to make minor, non-structural alterations to the
Premises ("Minor Alterations") upon prior notice to Landlord, but without the
necessity of procuring Landlord's consent thereto, provided that the estimated
cost of each such Minor Alteration does not exceed $200,000.00 in any one
instance. The provisions of Sections 3.2(a) and 3.2(b) shall be applicable to
Minor Alterations. Prior to commencing any Minor Alteration, Tenant shall
furnish Landlord with (i) working drawings or plans for such Minor Alteration in
sufficient detail to permit Landlord to determine that such Alteration complies
with the requirements hereof, and (ii) the names of the contractors proposed to
be used by Tenant for such Minor Alteration.
(d) Upon completion of any Alterations, Tenant, at its
expense, shall promptly obtain certificates of final approval of such
Alterations as may be required by any Governmental Authority, and (except with
respect to Decorative Alterations), shall furnish Landlord with copies thereof
(together with "as-built" plans and specifications for such Alterations (or, in
case of any Minor Alterations, final plans and specifications reflecting the
final configuration thereof) prepared on an Autocad Computer Assisted Drafting
and Design System (or such other system or medium as Landlord may reasonably
accept) using naming conventions issued by the American Institute of Architects
in June, 1990 (or such other naming convention as Landlord may reasonably
accept) and magnetic computer media of such record drawings and specifications,
translated into DXF format or another format reasonably acceptable to Landlord).
Section 3.3 (a) All Tenant's Alterations shall become the
property of Landlord upon the expiration or sooner termination of this Lease.
Landlord may condition its approval of kitchen facilities, vaults, raised
floors, internal stairways, slab penetrations, private bathrooms or any other
Alterations not constituting ordinary office installations on a requirement that
Tenant agrees in writing to remove such Alterations at the end of the Term as
set forth in this Section 3.3 (any such Alterations which Landlord so requires
Tenant to agree to remove, "Non-Standard Alterations"). If Landlord does not
specify at the time of its approval that an Alteration constitutes a
Non-Standard Alteration, Tenant shall have no obligation to remove such
Alteration upon the expiration or sooner termination of this Lease. On the
Expiration Date or earlier termination of the Term or any renewal thereof (i)
Tenant shall remove Tenant's Property from the Premises, and (ii) unless
Landlord notifies Tenant no later than sixty (60) days prior to the Expiration
Date that any or all of the Non-Standard Alterations shall not be removed from
the Premises, Tenant shall remove the Non-Standard Alterations from the
Premises, at Tenant's sole
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cost and expense. Tenant shall repair and restore in a good and workmanlike
manner (reasonable wear and tear excepted) any damage to the Premises and the
Building caused by such removal of Tenant's Property and the Non-Standard
Alterations. Any of the Non-Standard Alterations or Tenant's Property which
Tenant is required to remove and which are not so removed by Tenant at or prior
to the Expiration Date or earlier termination of the Term shall be deemed
abandoned and may, at the election of Landlord, either be retained as Landlord's
property or be removed from the Premises by Landlord at Tenant's expense.
Notwithstanding the foregoing, Tenant's HVAC System (as defined in Section 9.7)
and any electric generator and other related equipment, including mountings,
supports, fuel lines, pumps, piping, and meters, if any, which Landlord may
permit Tenant to install in the Premises or elsewhere in the Building, shall not
be so removed from the Premises by Tenant. The covenants and agreements set
forth in this Section 3.3 shall survive the expiration or earlier termination of
this Lease.
(b) Landlord agrees to respond to any written request for
approval of contractors proposed to be engaged to perform Alterations within
five (5) Business Days after Tenant's request therefor. Landlord agrees to
respond to any written request for approval of plans and specifications for
Alterations proposed to be made by Tenant within twelve (12) Business Days (or
within fifteen (15) Business Days, in case such request relates to Tenant's
Initial Alterations) after receipt by Landlord of such written request, together
with substantially complete and detailed architectural, structural, mechanical
and engineering plans and specifications as required for such Alteration
(collectively, "Tenant's Plans"), and Landlord agrees that Tenant's Plans may be
submitted, and will be reviewed by Landlord, on a "fast track" basis (i.e.,
architectural, mechanical and structural plans may be submitted sequentially).
In addition, Landlord agrees to respond to any resubmission of Tenant's Plans
within five (5) Business Days after written resubmission, unless substantial
revisions are required to Tenant's Plans, in which event in which event Landlord
shall respond to Tenant within a reasonable time thereafter. If Landlord shall
disapprove all or any portion of Tenant's Plans, Landlord shall inform Tenant of
the grounds for such disapproval with reasonable specificity. If Landlord fails
to approve or disapprove Tenant's Plans or a contractor proposed by Tenant on or
before the end of the applicable review period set forth herein, Tenant shall
have the right to provide Landlord with a second written request for approval (a
"Second Request"), which shall specifically identify Tenant's Plans or the
contractor, as the case may be, to which such request relates, and set forth in
bold capital letters the following statement: IF LANDLORD FAILS TO RESPOND
WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN TENANT SHALL BE
ENTITLED TO COMMENCE CONSTRUCTION IN ACCORDANCE WITH THE PLANS AND
SPECIFICATIONS (OR TO ENGAGE THE CONTRACTOR) PREVIOUSLY SUBMITTED TO LANDLORD
AND TO WHICH LANDLORD HAS FAILED TO TIMELY RESPOND. In the event that Landlord
fails to respond to a Second Request within five (5) Business Days after receipt
by Landlord, then the Tenant's Plans or revisions thereto, or Tenant's
engagement of a contractor, as the case may be, for which the Second Request is
submitted, shall be deemed to be approved by Landlord, and Tenant shall be
entitled to engage the contractor for which approval was requested, or commence
construction of the Alteration or portion thereof to which Tenant's Plans
relate, provided that in the case of performing Alterations, Tenant's Plans have
been appropriately filed in accordance with applicable Legal Requirements, all
permits and
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approvals required to be issued by any Governmental Authority shall have been
duly issued, and Tenant shall otherwise have complied with all provisions of
this Lease applicable to Alterations.
Section 3.4 If, because of any alleged act or omission of
Tenant or any Tenant Party, any mechanic's lien, U.C.C. financing statement or
other lien, charge or order for the payment of money shall be filed against
Landlord, or against all or any portion of the Premises, the Building or the
Real Property, Tenant shall, at its own cost and expense, cause the same to be
discharged of record, by bonding or otherwise, within thirty (30) days after
receipt of notice thereof, and Tenant shall indemnify, defend and save Landlord
harmless against and from all costs, expenses, liabilities, suits, penalties,
claims and demands (including reasonable attorneys' fees and disbursements)
resulting therefrom (subject to reimbursement by Landlord in the event that it
shall be finally adjudicated that the acts or omissions of Landlord or another
tenant in the building shall have given rise to such lien, charge or order).
Section 3.5 Tenant shall not, at any time prior to or during
the Term, directly or indirectly employ, or permit the employment of, any
contractor, mechanic or laborer in the Premises, whether in connection with any
Alteration or otherwise, if in Landlord's sole judgment such employment will
interfere or cause any conflict with other contractors, mechanics, or laborers
engaged in the construction, maintenance or operation of the Building by
Landlord, Tenant or others, or the use and enjoyment of other tenants or
occupants of the Building.
ARTICLE 4. CONDITION OF THE PREMISES; LANDLORD'S WORK
Section 4.1 Tenant has examined the Premises and agrees to
accept possession of each Space in its "as is" condition on the applicable
Delivery Date subject to the performance of Landlord's Work, and Tenant further
agrees that, except for the performance of such Landlord's Work and the making
of Landlord's Contribution as expressly set forth in this Article 4, Landlord
shall have no obligation to perform any work, supply any materials, incur any
expenses or make any installations in order to prepare the Premises for Tenant's
occupancy. The taking of possession of each Space by Tenant shall be conclusive
evidence as against Tenant that at the time such possession was so taken, such
Space was in the condition required hereunder, provided, however, that if Tenant
shall subsequently become aware of any latent defects in Landlord's Work or
latent defects existing in the Premises (or the Building Systems serving the
Premises) at the time such possession was so taken, which latent defects are the
responsibility of Landlord to repair pursuant to Article 5 (but excluding any
latent defects in Tenant's Alterations or arising from the negligence or
misconduct of Tenant or any Tenant Party), Tenant shall give Landlord notice of
any such latent defects promptly upon Tenant's becoming aware thereof, and
Landlord shall repair the same in accordance with the provisions of Article 5,
but the existence of any such latent defects shall not be deemed to modify the
Delivery Date hereunder.
Section 4.2 (a) With due diligence and reasonable promptness
following (y) the Commencement Date, as to Space A, and (z) the Delivery Date
for each of Space B and Space C, Landlord shall perform the following work in
the applicable Space, at Landlord's sole cost and in accordance with all Legal
Requirements ("Landlord's Work"): (i) demolish any existing improvements,
including piping and electrical conduit, which (x) are not then being used by
tenants or other occupants of any space in the Building (including use by
Landlord for any
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purpose relating to operation of the Building or any Building Systems), and (y)
Landlord reasonably anticipates will not subsequently be used by tenants or
other occupants of any space in the Building (unless Tenant notifies Landlord
that any such improvements will subsequently be used by Tenant in connection
with the Permitted Use), and abate any asbestos containing materials ("ACM")
within such Space in accordance with all Legal Requirements, and provide Tenant
with a New York City Department of Environmental Protection Form ACP-5 in
connection therewith; (ii) provide Class E System tie-in points for Tenant's use
in accordance with Legal Requirements; (iii) remove all remaining 9" x 9" floor
tiles in such Space; (iv) remove the two (2) fresh air intake ducts and attached
louver located in Space B; and (v) remove the existing air handling unit located
in Space C. Landlord shall provide Tenant reasonable access to the Premises
during the process of Landlord's demolition work pursuant hereto, and shall use
reasonable efforts to accommodate Tenant's suggestions relating to adjustments
in the demolition process to accommodate conditions disclosed by such process;
provided, however, that Landlord shall have no obligation to employ contractors
or labor at "overtime" or other premium pay rates or to incur any other
"overtime" costs or any other additional expenses whatsoever, unless Tenant
shall pay to Landlord all of Landlord's incremental increased costs to do so. In
such event Tenant shall pay, as Additional Rent upon presentation of appropriate
invoices, all such additional costs incurred by Landlord in connection
therewith. Notwithstanding anything to the contrary set forth in Section 1.1, in
the event that Landlord shall not have Substantially Completed, as to (X) Space
A, the items of Landlord's Work identified in Sections 4.2(a)(i), (ii) and (iii)
on or prior to November 17, 1999, (Y) Space B, the items of Landlord's Work
identified in Sections 4.2(a)(i), (ii), (iii) and (iv) on or prior to the date
which shall be twenty-one (21) days following the Delivery Date for Space B, and
(Z) Space C, the items of Landlord's Work identified in Sections 4.2(a)(i),
(ii), (iii) and (v) on or prior to the date which shall be twenty-one (21) days
following the Delivery Date for Space C, then in each such case, as Tenant's
sole and exclusive remedy for such failure to timely Substantially Complete such
Landlord's Work, the Rent Commencement Date with respect to such Space shall be
extended by one (1) day for each day of delay beyond November 17, 1999 or such
twenty-first (21st) day, as applicable, in the Substantial Completion of
Landlord's Work in such Space until the date upon which Landlord shall
Substantially Complete such Landlord's Work to such Space.
(b) Notwithstanding Landlord's compliance with its obligations
to abate ACM pursuant to Section 4.2(a)(i), in the event the performance of
Tenant's Initial Alterations, in accordance with Tenant's plans for the Initial
Alterations as approved by Landlord, causes the Premises to become out of
compliance with any Legal Requirements applicable to ACM, Tenant shall within
seven (7) days of the occurrence of such state of facts provide to Landlord a
copy of a written report prepared at Tenant's expense by a New York City
Department of Environmental Protection-certified asbestos investigator setting
forth in reasonable detail (i) such state of facts, and (ii) the abatement work
(solely within the Premises) such investigator reasonably deems necessary in
order to abate such condition in accordance with all Legal Requirements. Subject
to Unavoidable Delays and Landlord's right to contest such Legal Requirements,
Landlord shall reasonably promptly thereafter cause the abatement work specified
in such report to be commenced and thereafter prosecuted to completion with
reasonable diligence by a contractor selected by Landlord in its sole
discretion; and throughout the performance of such abatement work by Landlord,
Fixed Rent, Tenant's Tax Payment and Tenant's Labor Rate Payment shall
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abate as to the affected portion of the Premises to the extent, and for the
period of time that Tenant shall be displaced from such portion of the Premises
as a result of such work by Landlord (or, if Fixed Rent, Tenant's Tax Payment
and Tenant's Labor Rate Payment are then currently abated pursuant to Section
1.2, such abatement shall be extended day-for-day by such period of time).
Landlord shall give Tenant reasonable advance notice of the commencement of such
work (and phases thereof) and Tenant shall, at Tenant's sole cost and without
any liability to Landlord whatsoever (except for the rent abatement hereinabove
set forth), delay the commencement or continuance of Tenant's Initial
Alterations, relocate its operations and personnel within the Premises and
otherwise cooperate with Landlord as necessary in order to facilitate such work
by Landlord. Landlord shall use reasonable efforts to minimize interference with
Tenant's access to and use and occupancy of the Premises in performing such
work; provided, however, that Landlord shall have no obligation to employ
contractors or labor at "overtime" or other premium pay rates or to incur any
other "overtime" costs or additional expenses whatsoever. Any such work shall be
at the expense of Landlord, provided, however, that Tenant shall bear such
expense with respect to any and all such abatement work performed due to Tenant
bringing any ACM into the Building in connection with the performance of
Tenant's Alterations or Tenant's Property (and Tenant shall directly pay
Landlord's contractor with respect to all such work within ten (10) Business
Days after receipt from Landlord of an invoice therefor).
Section 4.3 Landlord acknowledges that Tenant intends to
perform certain Alterations in order to prepare the Premises for its occupancy
(collectively, the "Initial Alterations"), which alterations shall, subject to
all the terms, covenants and conditions of this Lease applicable to Alterations,
include (i) the installation of a sprinkler system or other fire suppression
system reasonably satisfactory to Landlord, (ii) the installation of exterior
louvers as reasonably required by Tenant through the Building's existing window
openings at the locations on the Fifteenth Street and Sixteenth Street sides of
the Building shown on the floor plan attached as Exhibit Q to this Lease, (iii)
connection to the existing Building toilet exhaust riser for one (1)
supplemental private bathroom, (iv) the installation of noise suppression
materials and/or equipment with respect to any of Tenant's Property reasonably
designated by Landlord, including Tenant's HVAC System (as defined in Section
9.7), if any, reasonably satisfactory to Landlord, and (v) the renovation of the
two (2) existing bathrooms on the ninth avenue side lobby of the ninth floor of
the Building in order to meet the requirements of the Americans With
Disabilities Act of 1990, as amended (the "ADA") in Space A, which bathrooms
shall throughout the Term remain accessible to the common areas of the ninth
floor of the Building and which renovations shall be completed by Tenant as a
part of the Initial Alterations, all in compliance with applicable Legal
Requirements. Notwithstanding anything set forth in this Article 4, Landlord
agrees to make Landlord's Contribution toward the cost of the Initial
Alterations, subject to and in accordance with Article 31.
Section 4.4 Upon the request of Tenant, Landlord, at Tenant's
cost and expense (limited to an amount equal to all out of pocket expenses
incurred by Landlord to third parties), shall join in any applications for any
permits, approvals or certificates from any Governmental Authority required to
be obtained by Tenant, and shall sign such applications reasonably promptly
after request by Tenant (provided that (i) the provisions of the applicable
Legal Requirement shall require that Landlord join in such application, and (ii)
such application is acceptable to Landlord) and shall otherwise cooperate with
Tenant in connection therewith,
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provided that Landlord shall not be obligated to incur any cost or expense,
including attorneys' fees and disbursements, or suffer or incur any liability,
in connection therewith.
Section 4.5 Notwithstanding anything set forth in Article 2 or
this Article 4, Landlord and Tenant acknowledge that following the Delivery Date
for each Space, the performance of Landlord's Work in such Space will in
accordance with good construction practice (and except as expressly set forth
below) necessitate that Tenant not commence the Initial Alterations in such
Space until Landlord's Work in such Space is Substantially Complete.
Notwithstanding the foregoing, Landlord may, but shall not be obligated to,
afford Tenant access to Space A, Space B and Space C following the Delivery Date
for such Space but prior to the completion of Landlord's Work therein (any such
access subsequent to the Delivery Date but prior to the completion of Landlord's
Work in such Space being herein referred to as "Early Access") in order for
Tenant to commence performance of the Initial Alterations in such Space (but
Landlord shall use reasonable efforts to afford Tenant Early Access to Space C).
Landlord's grant of permission to Tenant for Early Access shall be at Landlord's
sole discretion, and shall be revocable by Landlord at will, immediately upon
notice from Landlord to Tenant that any of following conditions have not been
satisfied or no longer continue to be satisfied: (A) Tenant shall not commence
any portion of the Initial Alterations which is dependent upon the completion of
a related item of Landlord's Work until, in accordance with sound construction
practice, such item of Landlord's Work has been substantially completed, (B)
Tenant's access to or activities in such Space during the period of Early Access
shall not increase the cost to Landlord of Landlord's Work, unless Tenant agrees
in writing to pay Landlord for any such increase in the cost of Landlord's Work,
and shall not delay the progress of Landlord's Work, and (C) Tenant shall have
complied with all applicable provisions of this Lease with respect to the
commencement of the Initial Alterations, including the provisions of Articles 3
and 10.
ARTICLE 5. REPAIRS; FLOOR LOAD
Section 5.1 (a) Landlord shall maintain in condition customary
for buildings similar to the Building in Manhattan, and shall repair and
replace, to the extent necessary to achieve such condition, the Building Systems
and the public portions of the Building, both exterior and interior, and the
structural elements thereof, including the roof, foundation and curtain wall.
Tenant, at Tenant's expense, shall take good care of the Premises and the
fixtures, systems, equipment and appurtenances therein, and make all
non-structural repairs thereto as and when needed to preserve them in good
working order and condition, except for reasonable wear and tear, obsolescence
and damage for which Tenant is not responsible pursuant to the provisions of
Articles 11 and 12. Tenant shall throughout the Term, at Tenant's sole cost and
expense, cause the Premises to be exterminated on a periodic basis such that the
Premises and adjoining portions of the Building do not become infested with
vermin, employing such exterminators and such exterminating company or companies
as shall be reasonably acceptable to Landlord. Landlord shall throughout the
Term maintain Landlord's standard vermin extermination program in the Building's
public areas. Notwithstanding the foregoing, all damage or injury to the
Premises or to any other part of the Building, or to its fixtures, equipment and
appurtenances, caused by or resulting from negligence or misconduct of, or
Alterations made by, Tenant or any Tenant Party shall be repaired at Tenant's
expense, (a) by Tenant to the satisfaction of Landlord (if the required repairs
are non-structural and do not affect any Building System), or (b) by Landlord
(if the
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required repairs are structural or affect any Building System). Tenant also
shall repair all damage to the Building and the Premises caused by the making of
any Alterations by Tenant or by the moving of Tenant's Property. All of such
repairs shall be of quality or class equal to the original work or construction.
If Tenant fails after twenty (20) days' notice to proceed with due diligence to
make repairs required to be made by Tenant, Landlord may make such repairs at
the expense of Tenant, and Tenant shall pay the costs and expenses thereof
incurred by Landlord, with interest at the Default Rate, as Additional Rent
within fifteen (15) days after rendition of a bill or statement therefor.
(b) Landlord represents to Tenant that, to the best of
Landlord's knowledge, all Building Systems for which Landlord is responsible
under this Lease, including elevators, heating systems, sprinkler systems, fire
detection and life safety systems and other Building Systems, will remain fully
functional and perform their normal operations on and after January 1, 2000,
without interruption or malfunction as a result of the passage from the year
1999 to the year 2000. Landlord shall make all repairs, alterations or
replacements to any Building Systems required in order to eliminate any such
interruptions or malfunctions resulting from the passage from the year 1999 to
the year 2000.
Section 5.2 Tenant shall not place a load upon any floor of
the Premises exceeding the floor load per square foot which such floor was
designed to carry and which is allowed by law. Tenant shall not move any safe,
heavy equipment, business machines, freight, bulky matter or fixtures into or
out of the Building without Landlord's prior consent. If such safe, equipment,
freight, bulky matter or fixtures requires special handling, Tenant shall employ
only persons holding a Master Rigger's license to do such work.
Section 5.3 There shall be no allowance to Tenant for a
diminution of rental value, no constructive eviction of Tenant and no liability
on the part of Landlord by reason of inconvenience, annoyance or injury to
business arising from Landlord making, or failing to make, any repairs,
alterations, additions or improvements in or to any portion of the Building or
the Premises, or in or to fixtures, appurtenances or equipment thereof. Landlord
shall use reasonable efforts to minimize interference with Tenant's access to
and use and occupancy of the Premises in making any repairs, alterations,
additions or improvements; provided, however, that Landlord shall have no
obligation to employ contractors or labor at overtime or other premium pay rates
or to incur any other overtime costs or additional expenses whatsoever.
Section 5.4 Notwithstanding anything to the contrary contained
in any other provision of this Lease, in the event that (a) Tenant is unable to
use the Premises for the ordinary conduct of Tenant's business, due to
Landlord's breach of an obligation under this Lease to provide services, perform
repairs, or comply with Legal Requirements, in each case other than as a result
of Unavoidable Delays, and such condition continues for a period in excess of
seven (7) consecutive days (or, if Tenant's inability to use the Premises
results, in whole or in part, from Unavoidable Delays and such condition
continues for a period in excess of fifteen (15) consecutive days) after Tenant
gives a notice to Landlord (the "Abatement Notice") stating that Tenant's
inability to use the Premises is solely due to such condition, (b) Tenant does
not actually use or occupy the Premises during such period, and (c) such
condition has not resulted from the negligence or misconduct of Tenant or any
Tenant Party, then Fixed Rent, Tenant's Tax Payment
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and Tenant's Labor Rate Payment shall be abated as to the Premises or affected
portion on a per diem basis for the period commencing on the eighth (8th) day
(or sixteenth (16th) day, if such condition results, in whole or in part, from
Unavoidable Delays, as the case may be) after Tenant gives the Abatement Notice,
and ending on the earlier of (i) the date Tenant reoccupies the Premises for the
ordinary conduct of its business, or (ii) the date on which such condition is
substantially remedied and Landlord has notified Tenant thereof.
Section 5.5 Tenant shall not require, permit, suffer or allow
the cleaning of any window in the Premises from the outside in violation of
Section 202 of the New York Labor Law or any successor statute thereto, or of
any other Legal Requirement.
ARTICLE 6. REAL ESTATE TAXES AND LABOR RATE INCREASES
Section 6.1 The following terms shall have the meanings set
forth below:
(a) "Taxes" shall include the aggregate amount of (i) all real
estate taxes, assessments (special or otherwise), sewer and water rents, rates
and charges and any other governmental levies, impositions or charges, whether
general, special, ordinary, extraordinary, foreseen or unforeseen, which may be
assessed, levied or imposed upon all or any part of the Real Property, and (ii)
any expenses (including attorneys' fees and disbursements and experts' and other
witness' fees) incurred in contesting any of the foregoing or the Assessed
Valuation (as defined in Section 6.1(d)) of all or any part of the Real
Property. If at any time after the date hereof the methods of taxation
prevailing at the date hereof shall be altered so that in lieu of or as an
addition to or as a substitute for the whole or any part of the taxes,
assessments, rents, rates, charges, levies or impositions now assessed, levied
or imposed upon all or any part of the Real Property, there shall be assessed,
levied or imposed (A) a tax, assessment, levy, imposition or charge based on the
rents received therefrom whether or not wholly or partially as a capital levy or
otherwise, (B) a tax, assessment, levy, imposition or charge measured by or
based in whole or in part upon all or any part of the Real Property and imposed
upon Landlord, (C) a license fee measured by the rents or (D) any other tax,
assessment, levy, imposition, charges or license fee however described or
imposed, then all such taxes, assessments, levies, impositions, charges or
license fees or the part thereof so measured or based shall be deemed to be
Taxes; provided, however, that any such taxes, fees or charges which are in
"addition to" taxes otherwise payable under this Section 6.1(a) shall (1) only
be deemed Taxes if such taxes shall be imposed upon owners of commercial office
buildings in Manhattan generally, and treated by such owners as constituting
real estate taxes for the purpose of calculating similar lease tax escalation
provisions, and (2) be calculated on the basis that the Real Property is the
only asset of Landlord. Taxes shall not include franchise, gift, inheritance,
estate, sales, income or profit taxes imposed upon Landlord, any Superior Lessor
or any Mortgagee by any Governmental Authority, or any penalties imposed for
late payment of Taxes.
(b) "Tenant's Share" means Two and 2/1000ths percent (2.002%);
provided, however, that, from and after the Space B Delivery Date, "Tenant's
Share" shall be and be deemed modified to mean Three and 122/1000ths percent
(3.122%); provided, further, that, from and after the Space C Delivery Date,
"Tenant's Share" shall be and be deemed modified to mean Three and 92/100ths
percent (3.92%).
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(c) "Base Taxes" means the Taxes payable for the Tax Year
commencing on July 1, 1999 and ending June 30, 2000.
(d) "Assessed Valuation" means the amount for which the Real
Property is assessed pursuant to applicable provisions of the New York City
Charter and of the Administrative Code of the City of New York for the purpose
of imposition of Taxes.
(e) "Tax Year" means the period July 1 through June 30 (or
such other period as may be duly adopted by the City of New York as its fiscal
year for real estate tax purposes).
(f) "Comparison Year" means, with respect to Taxes, any Tax
Year commencing subsequent to the 1999/2000 Tax Year.
(g) "Landlord's Statement" means an instrument or instruments
containing a comparison of either (i) the Base Taxes and the Taxes payable for
any Comparison Year, or (ii) the Base Labor Rates and the Labor Rates applicable
to any Comparison Year.
(h) "Tenant's Tax Payment" means Tenant's Share of the excess
of the Taxes payable for any Comparison Year over the Base Taxes.
Section 6.2 (a) If the Taxes payable for any Comparison Year
(any part or all of which falls within the Term) shall exceed the Base Taxes,
Tenant shall pay Tenant's Tax Payment to Landlord. Tenant shall pay Tenant's Tax
Payment in two semiannual installments in advance on the first day of June (with
respect to the period July 1 through December 31 following such payment date)
and December (with respect to the period January 1 through June 30 following
such payment date), each installment equal to one-half of Tenant's Tax Payment
for such Comparison Year, except that if Landlord has not received tax bills for
the following Tax Year in time to bill the June 1 installment of Tenant's Tax
Payment, Landlord may estimate the payment due on June 1, based on Landlord's
estimate of Taxes for the following Tax Year. If, upon issuance of the tax bills
for any Tax Year, the estimated amount resulted in (i) an underpayment by
Tenant, Tenant shall pay to Landlord the amount of the underpayment within ten
(10) Business Days after notice from Landlord, or (ii) an overpayment by Tenant,
Landlord shall apply a credit in the amount of the overpayment against future
installments of Fixed Rent under this Lease, and if any such credit remains
outstanding as of the Expiration Date, Landlord will pay the amount thereof to
Tenant within a reasonable time thereafter. Each of the parties' respective
obligations hereunder in the case of overpayment or underpayment shall survive
the expiration or earlier termination of this Lease.
(b) If at any time during the Term, Taxes are required to be
paid (either to the appropriate taxing authorities or as a tax escrow to the
holder of a Superior Lease or Mortgage) on any other date or dates than as
presently required, then Tenant's Tax Payments shall be correspondingly
accelerated or revised so that such payments are due at least thirty (30) days
prior to the date payments are due to the taxing authorities, Lessor or
Mortgagee, as appropriate. The benefit of any discount for any early payment or
prepayment of Taxes relating to all or any part of the Real Property shall
accrue solely to the benefit of Landlord and Taxes shall be computed without
subtracting such discount. Upon request by Tenant, Landlord will furnish
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Tenant with copies of all available tax bills for the current Tax Year or the
immediately preceding Tax Year with respect to the Real Property.
(c) Only Landlord shall be eligible to institute Tax reduction
or other proceedings to reduce the Assessed Valuation of the Real Property, and
the filing of any such proceeding by Tenant without Landlord's prior written
consent shall constitute a default hereunder. At no time shall any recomputation
be made hereunder of Base Taxes for any Comparison Year, nor shall any
adjustment be made of Additional Rent theretofore paid or payable on account of
Tenant's Tax Payment hereunder, by reason of any reduction or increase in the
Taxes payable for the 1999/2000 Tax Year by final determination of legal
proceedings, settlement or otherwise, and Tenant shall not receive or be
entitled to claim any credit or refund in connection therewith. The provisions
of this Section 6.2 shall survive the expiration or earlier termination of this
Lease. Nothing herein contained shall obligate Landlord to file any application
or institute any proceeding seeking a reduction in Taxes or Assessed Valuation.
To the best of Landlord's knowledge as of the date of this Lease, the Real
Property is not (and will not be) the subject of any tax abatement, tax
exemption or tax incentive program, or otherwise specially assessed or
classified for purposes of the imposition of Taxes, which would affect the
amount of Base Taxes, and Landlord has not applied for any such abatement,
exemption or incentive program.
(d) Tenant's Tax Payment shall be made as provided in this
Section 6.2 regardless of the fact that Tenant may be exempt, in whole or in
part, from the payment of any taxes by reason of Tenant's diplomatic or other
tax exempt status or for any other reason whatsoever, it being understood that
the foregoing shall not be construed to affect the calculation of Taxes pursuant
to Section 6.1(a).
(e) Tenant shall pay to Landlord, as Additional Rent upon
demand, any occupancy tax or rent tax now in effect or hereafter enacted, if
payable by Landlord in the first instance or hereafter required to be paid by
Landlord.
(f) If the Expiration Date shall occur on a date other than
June 30, any Additional Rent payable by Tenant to Landlord under this Section
6.2 for the Comparison Year in which the Expiration Date shall occur shall be
apportioned in that percentage which the number of days in the period from June
30 to the Expiration Date, inclusive, shall bear to the total number of days in
such Comparison Year. In the event of a termination of this Lease, any
Additional Rent under this Section 6.2 shall be paid or adjusted within thirty
(30) days after submission of Landlord's Statement. In no event shall Fixed Rent
ever be reduced by operation of this Section 6.2 and the rights and obligations
of Landlord and Tenant under the provisions of this Section 6.2 with respect to
any Additional Rent shall survive the expiration or earlier termination of this
Lease.
Section 6.3 The following terms shall have the meanings set
forth below:
(a) "R.A.B." shall mean the Realty Advisory Board on Labor
Relations, Incorporated, or its successor.
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(b) "Local 32B-32J" shall mean Local 32B-32J of the Building
Service Employees International Union, AFL-CIO, or its successor.
(c) "Class A Office Buildings" shall mean office buildings so
categorized under any agreement between R.A.B. and Local 32B-32J, regardless of
the designation given to such office buildings in any such agreement.
(d) "Labor Rates" shall mean a sum equal to the regular hourly
wage rate required to be paid to Others (as defined below) employed in Class A
Office Buildings pursuant to an agreement between R.A.B. and Local 32B-32J;
provided, however, that:
(i) if any such agreement shall require Others in
Class A Office Buildings to be regularly employed on days or during
hours when overtime or other premium pay rates are in effect pursuant
to such agreement, then the term "regular hourly wage rate", as used in
this Section 6.3 shall mean the average hourly wage rate for the hours
in a calendar week during which Others are required to be regularly
employed;
(ii) if no such agreement is in effect as of October
1st of any Comparison Year with respect to Others, then the term
"regular hourly wage rate", as used in this Section 6.3 shall mean the
regular hourly wage rate actually paid to Others employed in the
Building by Landlord or by an independent contractor engaged by
Landlord, provided, however, that upon the effectiveness of such
agreement, such regular hourly wage rate shall be adjusted to that
provided in such agreement, effective retroactively to the effective
date of such agreement; and
(iii) the term "regular hourly wage rate" shall
exclude all benefits of any kind, including those payable directly to
taxing authorities or others on account of the employment and all
welfare, pension and fringe employee benefits and payments of any kind
paid or given pursuant to such agreement.
(e) "Others" shall mean that classification of employee
engaged in the general maintenance and operation of Class A Office Buildings
most nearly comparable to the classification now applicable to "others" in the
current agreement between R.A.B. and Local 32B-32J.
(f) "Base Labor Rates" shall mean an amount equal to the sum
of (i) one-half (1/2) of the Labor Rates in effect for calendar year 1999, plus
(ii) one-half (1/2) of the Labor Rates in effect for calendar year 2000.
(g) "Tenant's Labor Rate Payment" is defined in Section
6.4(a).
(h) "Comparison Year" means, with respect to Labor Rates, any
calendar year commencing subsequent to December 31, 1999.
Section 6.4 (a) If the Labor Rates in effect for any
Comparison Year (any part or all of which falls within the Term) shall be
greater than the Base Labor Rates, then Tenant shall pay, as Additional Rent for
such Comparison Year and continuing thereafter until a new
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Landlord's Statement is rendered to Tenant, an amount ("Tenant's Labor Rate
Payment") equal to (i) the number of cents (inclusive of any fractions of a
cent) by which the Labor Rates in effect for such Comparison Year exceed the
Base Labor Rates, multiplied by (ii) (X) 46,053 (from and after the Space A
Delivery Date), plus (Y) 25,763 (from and after the Space B Delivery Date), plus
(Z) 18,324 (from and after the Space C Delivery Date).
(b) At any time prior to, during or after any Comparison Year
Landlord shall render to Tenant a Landlord's Statement showing (i) a comparison
of the Labor Rates for the Comparison Year with the Base Labor Rates, and (ii)
the amount of Tenant's Labor Rate Payment resulting from such comparison.
Landlord's failure to render a Landlord's Statement during or with respect to
any Comparison Year shall not prejudice Landlord's right to render a Landlord's
Statement during or with respect to any subsequent Comparison Year and shall not
eliminate or reduce Tenant's obligation to pay Tenant's Labor Rate Payment
pursuant to this Article 6 for such Comparison Year, provided that Landlord
shall not be entitled to issue a Landlord's Statement or corrected Landlord's
Statement later than two (2) years after the end of the Comparison Year to which
such Landlord's Statement relates. Upon written request to do so, Landlord shall
promptly give Tenant a copy of any written notice actually received by Landlord
of changes in the Labor Rates which will result in an increase in Tenant's Labor
Rate Payment for the Comparison Year in which such request is made.
(c) Tenant's Labor Rate Payment shall be payable by Tenant on
the first day of the month following the furnishing to Tenant of a Landlord's
Statement, in equal monthly installments, each such installment to be equal to
1/12th of Tenant's Labor Rate Payment for such Comparison Year multiplied by the
number of months (and any fraction thereof) of the Term then elapsed since the
commencement of such Comparison Year, continuing monthly thereafter until
rendition of the next succeeding Landlord's Statement.
(d) The provisions of this Section 6.4 shall be effective
irrespective of whether or not (i) the Building is classified as a Class A
office building from time to time, or (ii) any Building employees are members of
Local 32B-32J. Tenant acknowledges and agrees that the computation of Labor
Rates hereunder is intended to serve solely as a formula for an agreed rental
adjustment, rather than an actual operating expense calculation, and is not
intended to reflect the actual cost to Landlord of wages at the Building or any
increases or decreases in such cost.
Section 6.5 (a) If the Expiration Date shall occur on a date
other than December 31, any Additional Rent under this Article 6 for the
Comparison Year in which the Expiration Date shall occur shall be apportioned in
that percentage which the number of days in the period from January 1 to the
Expiration Date, inclusive, shall bear to the total number of days in such
Comparison Year. In the event of a termination of this Lease, any Additional
Rent under this Article 6 shall be paid or adjusted within thirty (30) days
after submission of a Landlord's Statement. In no event shall Fixed Rent ever be
reduced by operation of this Section 6.5 and the rights and obligations of
Landlord and Tenant under the provisions of this Article 6 with respect to any
Additional Rent shall survive the expiration or earlier termination of this
Lease.
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(b) The computations of Additional Rent under this Article 6
relating to Labor Rates are intended to constitute a formula for an agreed
rental adjustment and may or may not constitute an actual reimbursement to
Landlord for costs and expenses paid by Landlord with respect to the Building.
Section 6.6 Landlord's failure to render a Landlord's
Statement with respect to any Comparison Year shall not prejudice Landlord's
right to thereafter render a Landlord's Statement with respect thereto or with
respect to any subsequent Comparison Year, nor shall the rendering of a
Landlord's Statement prejudice Landlord's right to thereafter render a corrected
Landlord's Statement for that Comparison Year, provided that Landlord shall not
be entitled to issue a Landlord's Statement or corrected Landlord's Statement
later than two (2) years after the end of the Comparison Year to which such
Landlord's Statement relates. Subject to the foregoing, nothing herein contained
shall restrict Landlord from issuing a Landlord's Statement at any time there is
an increase in Taxes or Labor Rates during any Comparison Year or any time
thereafter.
Section 6.7 If any capital improvement is made to the Real
Property during any calendar year during the Term to effectuate compliance with
any Legal Requirements enacted after the date of this Lease (including the cost
of compliance with Legal Requirements enacted prior to the date of this Lease if
such compliance is required pursuant to any amendment, modification or
reinterpretation thereof which is imposed or enacted after the date of this
Lease), then Tenant shall pay to Landlord, within ten (10) Business Days after
demand therefor, Tenant's Proportionate Share of the reasonable annual
amortization (based upon the reasonable useful life of the item, but in no event
less than ten (10) years), with interest at the Base Rate, of the cost of such
improvement in each calendar year during the Term during which such amortization
occurs.
ARTICLE 7. LEGAL REQUIREMENTS
Section 7.1 Tenant, at its sole expense, shall comply with all
Legal Requirements applicable to the Premises or the use and occupancy thereof
by Tenant, and make all repairs or Alterations required thereby, whether
structural or nonstructural, ordinary or extraordinary, unless otherwise
expressly provided herein; provided, however, that Tenant shall not be obligated
to comply with any Legal Requirement requiring any structural Alteration to the
Premises unless the application of such Legal Requirement arises from (i)
Tenant's manner of use or occupancy of the Premises (as distinguished from the
use or occupancy of the Premises for office purposes generally), (ii) any cause
or condition created by or on behalf of any Tenant Party (including any
Alterations), (iii) the breach of any of Tenant's obligations under this Lease,
(iv) any Hazardous Material having been brought into the Building by any Tenant
Party or (v) the enforcement, by any Governmental Authority or as a consequence
of private action, of Title I of the Americans With Disabilities Act. 42 U.S.C.
ss. 12101 (et seq.) or New York City Local Law 58 of 1987 with respect to any
condition at the Premises. Tenant shall not do or permit to be done any act or
thing upon the Premises which will invalidate or be in conflict with Landlord's
insurance policies, and shall not do or permit anything to be done in or upon
the Premises, or use the Premises in a manner, or bring or keep anything
therein, which shall increase the rates for casualty or liability insurance
applicable to the Building. If, as a result of any act or omission by Tenant or
by reason of Tenant's failure to comply with the provisions of this Article 7,
the
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insurance rates for the Building shall be increased, then Tenant shall desist
from doing or permitting to be done any such act or thing and shall reimburse
Landlord, as Additional Rent hereunder, for that part of all insurance premiums
thereafter paid by Landlord which shall have been charged because of such act,
omission or failure by Tenant, and shall make such reimbursement within ten (10)
Business Days after demand by Landlord.
Section 7.2 Tenant, at its expense, shall comply with all
Environmental Laws and with any directive of any Governmental Authority which
shall impose any violation, order or duty upon Landlord or Tenant under any
Environmental Laws with respect to the Premises or the use or occupation
thereof. Tenant's obligations hereunder with respect to Hazardous Materials
shall extend only to those matters arising or resulting from (a) the actual or
alleged presence of Hazardous Materials on the Premises or in the Building which
is actually caused or permitted to be brought into the Premises by Tenant
subsequent to the delivery of the Premises to Tenant hereunder, and (b) any
Environmental Claim (defined below) relating in any way to Tenant's operation or
manner of use of the Premises or the Building.
Section 7.3 Tenant shall provide Landlord with copies of all
communications and related materials regarding the Premises which Tenant shall
receive from or send to (a) any Governmental Authority relating in any way to
any Environmental Laws, or (b) any Person with respect to any claim based upon
any Environmental Laws or relating in any way to Hazardous Materials (any such
claim, an "Environmental Claim"). Landlord or its agents may perform an
environmental inspection of the Premises for any commercially reasonable purpose
at any time during the Term, upon prior notice to Tenant except in an emergency.
Landlord shall use reasonable efforts to minimize interference with Tenant's use
and occupancy of the Premises for any commercially reasonable purpose and shall
promptly restore any damage to the Premises which may be caused by any such
inspection, provided that Landlord shall have no obligation to employ
contractors or labor at overtime or other premium pay rates or to incur any
other overtime costs or additional expenses whatsoever, unless Tenant shall
first pay to Landlord Landlord's reasonable estimate of all incremental cost
increases to do so. In such event Tenant shall pay, as Additional Rent upon
presentation of appropriate invoices, all additional costs incurred by Landlord
in connection therewith.
Section 7.4 Tenant, at its expense, after notice to Landlord,
may contest by appropriate proceedings prosecuted diligently and in good faith,
the validity or applicability to the Premises or Tenant of any Legal
Requirement, provided that: (a) Landlord shall not be subject to criminal
penalty or to prosecution for a crime, or any other fine or charge, nor shall
the Premises or any part thereof or the Real Property or any part thereof be
subject to being condemned or vacated, nor shall the Real Property or any part
thereof be subjected to any lien or encumbrance, by reason of non-compliance or
otherwise by reason of such contest; (b) no unsafe or hazardous condition shall
remain unremedied; (c) such non-compliance or contest shall not constitute or
result in any violation of any Superior Lease or Superior Mortgage, or if any
such Superior Lease or Superior Mortgage shall permit such non-compliance or
contest on condition of the taking of action or furnishing of security by
Landlord, such action shall be taken and such security shall be furnished at the
expense of Tenant; (d) if Landlord so requires, Tenant shall furnish to Landlord
the bond of a surety company, in form and substance reasonably satisfactory to
Landlord, in an amount equal to one hundred ten percent (110%) of the cost (as
reasonably
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estimated by Landlord) of compliance with such contested Environmental Law or
other Legal Requirement, or such other security reasonably satisfactory in all
respect to Landlord; (e) such non-compliance or contest shall not prevent
Landlord from obtaining any and all permits and licenses in connection with the
operation of the Building; and (f) Tenant shall keep Landlord advised as to the
status of such proceedings, including any settlement thereof. Tenant agrees to
indemnify, defend and save Landlord harmless from and against any loss,
liability, damage or expense arising out of any such deferral of compliance or
contest, including reasonable attorneys' fees and disbursements.
Section 7.5. (a) Landlord, at its expense (except as otherwise
provided herein), shall comply with all Legal Requirements, including those
requiring the performance of alterations, additions, improvements, replacements
or repairs (whether the same are structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen) in, to or upon the Building (excluding
the Premises, to the extent Tenant is obligated to comply with such Legal
Requirements pursuant to Section 7.1), only to the extent that the failure to
effect such compliance would subject Tenant to material liability or materially
adversely affect (A) Tenant's use or occupancy of the Premises for the Permitted
Use, (B) Tenant's access to the Premises, (C) the provision of Building services
which Landlord is required by this Lease to provide to Tenant, or (D) Tenant's
ability to perform Alterations which would otherwise be permitted hereunder.
(b) Notwithstanding the provisions of Section 7.5(a), Landlord
may defer compliance with any Legal Requirements which it is obligated to comply
with hereunder, so long as Landlord shall be contesting the validity or
applicability thereof in good faith by appropriate proceedings, provided that
(i) Tenant shall not be subject to criminal penalty or to prosecution for a
crime, or any other fine or charge (unless Landlord pays such other fine or
charge), (ii) neither the Premises (or any part thereof) nor any part of the
Building or Real Property which affects the Premises or Tenant's use and
occupancy thereof, shall be subject to being condemned or vacated, by reason of
non-compliance or otherwise by reason of such contest, (iii) such non-compliance
or contest shall not prevent Tenant from lawfully occupying the Premises for the
Permitted Use or performing any Alterations in the Premises, or obtaining any
and all permits and licenses required to be obtained by it in connection
therewith, and (iv) Landlord, after request by Tenant, shall use reasonable
efforts to keep Tenant advised as to the status of such proceedings.
ARTICLE 8. SUBORDINATION AND NON-DISTURBANCE; ESTOPPEL
CERTIFICATES
Section 8.1 This Lease, and all rights of Tenant hereunder,
are and shall be subject and subordinate in all respects to all Mortgages and
Superior Leases. This Section 8.1 shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver any instrument that
Landlord or any Superior Lessor or Mortgagee may reasonably request to evidence
such subordination.
Section 8.2 In the event of any act or omission of Landlord
which would give Tenant the right, immediately or after lapse of a period of
time, to cancel or terminate this lease,
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or to claim a partial or total eviction, Tenant shall not exercise such right
(a) until it has given written notice of such act or omission to each Mortgagee
and Superior Lessor whose name and address shall previously have been furnished
to Tenant in writing, and (b) unless such act or omission shall be one which is
not capable of being remedied by Landlord or such Mortgagee or Superior Lessor
within a reasonable period of time, until a reasonable period for remedying such
act or omission shall have elapsed following the giving of such notice and
following the time when such Mortgagee or Superior Lessor shall have become
entitled under such Mortgage or Superior Lease, as the case may be, to remedy
the same (which reasonable period shall in no event be less than the period to
which Landlord would be entitled under this Lease or otherwise, after similar
notice, to effect such remedy), provided such Mortgagee or Superior Lessor shall
with due diligence give Tenant written notice of its intention to remedy such
act or omission, and such Mortgagee or Superior Lessor shall commence and
thereafter continue with reasonable diligence to remedy such act or omission. If
more than one Mortgagee or Superior Lessor shall become entitled to any
additional cure period under this Section 8.2, such cure periods shall run
concurrently, not consecutively.
Section 8.3 If a Mortgagee or Superior Lessor shall succeed to
the rights of Landlord under this Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, then at the request of
such party so succeeding to Landlord's rights ("Successor Landlord") and upon
Successor Landlord's written agreement to accept Tenant's attornment, Tenant
shall attorn to and recognize Successor Landlord as Tenant's landlord under this
Lease, and shall promptly execute and deliver any instrument that Successor
Landlord may reasonably request to evidence such attornment. Upon such
attornment this Lease shall continue in full force and effect as, or as if it
were, a direct lease between Successor Landlord and Tenant upon all of the
terms, conditions and covenants as are set forth in this Lease and shall be
applicable after such attornment except that Successor Landlord shall not:
(a) be liable for any previous act or omission of
Landlord under this Lease (provided, however, that nothing contained
herein shall be deemed to relieve Mortgagee or Successor Landlord of
any liability arising by reason of Mortgagee's or Successor Landlord's
acts or omissions from and after the date that Mortgagee or Successor
Landlord shall become landlord under this Lease, and Mortgagee or
Successor Landlord, as landlord under this Lease, shall be obligated to
properly maintain, operate and repair the Premises in accordance with
the provisions of this Lease, notwithstanding the fact that any
condition requiring such maintenance or repair may have arisen prior to
the date of any such foreclosure, or assignment in lieu of foreclosure,
of this Mortgage);
(b) be subject to any offset which shall have
theretofore accrued to Tenant against Landlord; or
(c) be bound by any previous modification of this
Lease, not expressly provided for in this Lease, or by any previous
prepayment of more than one month's fixed rent, unless such
modification or prepayment shall have been expressly approved in
writing by such Mortgagee or Superior Lessor.
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SECTION 8.4 Notwithstanding the foregoing provisions of this
Article 8, as a condition to Tenant's agreement hereunder to subordinate
Tenant's interest in this Lease to any Mortgages or Superior Leases, Landlord
shall obtain from each Mortgagee or Superior Lessor an agreement, in recordable
form (and (i) with respect to the existing Mortgage, in the form attached to
this Lease as Exhibit H, and (ii) with respect to any Mortgages or Superior
Leases entered into after the date hereof, in the form attached to this Lease as
Exhibit H with such modifications thereto as shall be reasonably requested by
the Mortgagee under such Mortgage, provided that such modifications shall not
substantially (A) decrease Tenant's rights or increase Tenant's obligations
under such Non-Disturbance Agreement or (B) decrease the Mortgagee's obligations
or increase Mortgagee's rights under such Non-Disturbance Agreement), pursuant
to which such Mortgagee or Superior Lessor shall agree that if and so long as no
Event of Default hereunder shall have occurred and be continuing, the leasehold
estate granted to Tenant and the rights of Tenant pursuant to this Lease to
quiet and peaceful possession of the Premises shall not be terminated, modified,
affected or disturbed by any action which such Mortgagee or Lessor may take to
foreclose any such Mortgage or Superior Lease, and that any Successor Landlord
shall recognize this Lease as being in full force and effect as if it were a
direct lease between such Successor Landlord and Tenant upon all of the terms,
covenants, conditions and options granted to Tenant under this Lease, except as
otherwise provided in Section 8.3 (any such agreement, a "Non-Disturbance
Agreement"). Upon written request from Landlord, Tenant shall promptly execute
and deliver any such Non-Disturbance Agreement. Landlord represents to Tenant
that as of the date of this Lease (i) 111 8th Funding Company, Inc. ("Lender")
is the sole Mortgagee of the Building and the Real Property; and (ii) there are
no Superior Leases affecting the Building or the Real Property. If Landlord
fails to deliver to Tenant a Non-Disturbance Agreement executed by Lender within
thirty (30) days following the execution and delivery of this Lease, then Tenant
shall have the right to terminate this Lease by notice to Landlord, such
termination to be effective on the date which shall be thirty (30) days after
the date such notice is given, upon which date this Lease shall come to an end
and terminate, and neither party shall have any liability to the other
hereunder, and Landlord shall return to Tenant the Security Deposit (as defined
in Section 32.1) and any prepaid rent deposited by Tenant hereunder.
Notwithstanding anything to the contrary contained herein, if Landlord shall
deliver such Non Disturbance Agreement executed by Lender, to Tenant at any time
within ten (10) days following Landlord's receipt of such notice by Tenant, such
termination shall be void and of no force and effect, and Tenant shall have no
further right to terminate this Lease pursuant to this Section 8.4. Tenant shall
have the right to record any Non-Disturbance Agreement in the Register's Office,
provided that Tenant shall pay all costs, taxes and expenses necessary for the
recordation of such Non-Disturbance Agreement.
Section 8.5 Each party agrees, at any time and from time to
time, as requested by the other party, upon not less than ten (10) Business
Days' prior notice, to execute and deliver to the other a written statement
executed and acknowledged by such party (a) stating that this Lease is then in
full force and effect and has not been modified (or if modified, setting forth
all modifications), (b) setting forth the then annual Fixed Rent, (c) setting
forth the date to which the Fixed Rent and Additional Rent have been paid, (d)
stating whether or not, to the best knowledge of the signatory, the other party
is in default under this Lease, and if so, setting forth the specific nature of
all such defaults, (e) stating the amount of the Security Deposit, (f) stating
whether there are any subleases affecting the Premises, (g) stating the address
of the signatory to which all
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notices and communication under the Lease shall be sent, the Commencement Date
and the Expiration Date, and (h) as to any other matters reasonably requested by
the party requesting such certificate. The parties acknowledge that any
statement delivered pursuant to this Section 8.5 may be relied upon by others
with whom the party requesting such certificate may be dealing, including any
purchaser or owner of the Real Property or the Building, or of Landlord's
interest in the Real Property or the Building or any Superior Lease, or by any
Mortgagee or Superior Lessor, or by any prospective or actual sublessee of the
Premises or assignee of this Lease, or permitted transferee of or successor to
Tenant.
ARTICLE 9. SERVICES
Section 9.1 Landlord shall provide, at Landlord's expense,
except as otherwise set forth herein, the following services:
Section 9.2 Electricity
(a) Landlord, at Landlord's expense, subject to the provisions
of this Article 9, shall make available to Tenant 1400 amperes (from a 1600
ampere switch), 460 volts, 3-phase, 4-wire AC electric capacity dedicated to
Tenant for use in the Premises (the "Basic Capacity"). Landlord, at Tenant's
expense, shall, as an Alteration, bring all such Basic Capacity from the bus
duct in Landlord's electrical closet "C" on the ninth floor of the Building to
the Premises and distribute it therein. In the event that Tenant shall require
electric capacity in excess of the Basic Capacity, then upon request, and
subject to the availability of additional electrical capacity in the Building,
as determined by Landlord in its sole judgment, Landlord shall make additional
electric power available to Tenant, at a location in the basement of the
Building to be designated by Landlord, and Tenant shall be solely responsible,
at Tenant's sole cost and expense for the installation of all risers and other
electrical facilities and equipment required in order to deliver such additional
electric power to the Premises and distribute it therein (and shall use
Landlord's designated electrical contractor to perform the tap into the
Building's electrical system in the basement of the Building), and Tenant shall
pay to Landlord a one-time charge equal to Landlord's then-applicable rate per
ampere (which is currently equal to $300.00 per ampere) for additional power,
multiplied by each ampere in excess of the Basic Capacity so provided by
Landlord. Tenant covenants that Tenant's use and consumption of electric current
shall not at any time exceed the electric capacity required to be supplied to
the bus duct on the ninth floor by Landlord from time to time pursuant to this
Section 9.2, nor exceed the capacity of any of the electrical facilities and
installations in or otherwise serving or being used in the Premises. Tenant
shall pay Landlord, as Additional Rent, at any time and from time to time, but
no more frequently than monthly, for its consumption of electrical energy at the
Premises, as provided herein. Notwithstanding the foregoing, in the event Tenant
shall terminate this Lease with respect to Space B or Space C in accordance with
Section 2.3, the Basic Capacity shall be reduced by an amount proportionate to
the ratio of the area of such Space to the aggregate area of Spaces A, B and C.
(b) The calculations and determinations of the charges for
electric energy consumed by Tenant shall be based on the readings of one or more
submeters to be installed reasonably promptly by Landlord at Tenant's sole
expense, applied to Landlord's Electricity Cost,
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as defined in Section 9.2(c). Tenant shall pay for electricity consumed as
determined thereunder as measured and calculated from time to time by such
submeter or submeters, plus Landlord's charge for overhead and supervision,
which charge shall not exceed seven percent (7%) of such payment by Tenant. In
addition, Tenant shall pay to Landlord, as Additional Rent (i) the fees and
expenses of Landlord's electrical contractor for services rendered by such
contractor in the maintenance and repair of such submeter(s), and (ii) the
amount of any taxes imposed by any Governmental Authority on Landlord's receipts
from the sale of electricity to Tenant.
(c) "Landlord's Electricity Cost" means the cost per kilowatt
hour and cost per kilowatt demand, adjusted by time of day factors, fuel
adjustment charges and other applicable rate adjustments, to Landlord for the
purchase of electricity from the public utility or other electricity provider
furnishing electricity service to the Building from time to time (the
"Electricity Provider"), including sales and other taxes imposed by any
Governmental Authority on Landlord's purchase of electricity. If at any time
during the Term the cost elements comprising Landlord's Electricity Cost shall
be increased by the Electricity Provider, or Landlord's Electricity Cost shall
be increased for any other reason, then effective as of the date of such
increase, Tenant's payment for submetered electricity under this Section 9.2
shall be proportionately increased. Landlord reserves the right to contract with
different Electricity Providers from time to time in its sole judgment, and
without reference to whether any Electricity Provider selected by Landlord
provides lower rates than any other electricity supplier. Currently, Landlord's
Electricity Cost is based upon Consolidated Edison Company's Service
Classification rate schedule S.C. #4 Rate II as in effect on the Commencement
Date.
(d) During the period beginning on the Commencement Date and
ending on the date upon which the submeters to be installed by Landlord in the
Premises become operational, Tenant shall pay to Landlord a fixed fee for
electric energy supplied to the Premises of (i) during the period prior to the
date upon which Tenant first occupies all or any portion of the Premises for the
conduct of its business, an amount per annum equal to One and 00/100 Dollar
($1.00) multiplied by the number of Rentable Square Feet in the delivered
portion of the Premises, in equal monthly installments on the first (1st) day of
each month during such period, and (ii) from and after the date upon which
Tenant first occupies all or any portion of the Premises for the conduct of its
business, an amount per annum equal to Four and 00/100 Dollars ($4.00)
multiplied by the number of Rentable Square Feet in the delivered portion of the
Premises, in equal monthly installments on the first (1st) day of each month
during such period, through the date upon which such submeters become
operational.
(e) Tenant covenants that Tenant's use and consumption of
electric current shall not at any time exceed the capacity of any of the
electrical facilities and installations in or otherwise serving or being used in
any Space and Tenant shall, upon the submission by Landlord to Tenant of written
notice, promptly cease the use of any of Tenant's electrical equipment which
Landlord reasonably believes will cause Tenant to exceed such capacity. Any
additional feeders, risers, electrical facilities and other such installations
required for electric service to the Premises will be supplied by Landlord, at
Tenant's expense, upon Landlord's prior consent in each instance, which consent
shall not be unreasonably withheld or delayed, provided that, in Landlord's
reasonable judgment, such additional electrical facilities and installations,
feeders or risers are necessary and are permissible under Legal Requirements
(including the New York
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State Energy Conservation Construction Code) and insurance regulations and the
installation of such feeders or risers will not cause permanent damage or injury
to the Building or the Premises or cause or create a dangerous or hazardous
condition or entail excessive or unreasonable alterations or repairs or
interfere with, or disturb, other tenants or occupants of the Building. In
addition, Landlord shall have no obligation to consent to such additional
feeders, risers, electrical facilities and installations if in Landlord's
reasonable judgment, the same would give Tenant a disproportionate amount of the
electrical current supplied to the Building at the expense of, or in derogation
of the needs of other tenants or occupants of the Building. Notwithstanding
anything to the contrary set forth in the immediately preceding sentence,
Landlord will cooperate with Tenant if Tenant seeks to obtain additional
electric service to the Building from the Electricity Provider, provided that
Landlord shall not be required to incur any expenses (unless Landlord shall be
reimbursed therefor by Tenant within ten (10) days after demand) or incur any
liability in connection with such action by Tenant.
(f) Except as otherwise expressly provided herein, Landlord
shall not in any way be liable or responsible to Tenant for any loss, damage or
expense which Tenant may sustain or incur as a result of the unavailability of
or interruption in the supply of electric current to the Premises or a change in
the quantity or character or nature of such current and such change,
interruption or unavailability shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of rent (except that Tenant's liability to pay Landlord for electricity under
this Section 9.2 shall cease as of the date of such disturbance), or relieve
Tenant from any of its obligations under this Lease, or impose any liability
upon Landlord or its agents, by reason of inconvenience or annoyance to Tenant,
or injury to or interruption of Tenant's business, or otherwise.
(g) Landlord reserves the right to discontinue furnishing
electricity to Tenant in the Premises on not less than sixty (60) days' notice
to Tenant. If Landlord exercises such right to discontinue, or is compelled to
discontinue furnishing electricity to Tenant, this Lease shall continue in full
force and effect and shall be unaffected thereby, except only that from and
after the effective date of such discontinuance, Landlord shall not be obligated
to furnish electricity to Tenant, and Tenant shall have no further obligation to
pay Landlord for electricity supplied to the Premises. If Landlord so
discontinues furnishing electricity to Tenant, Tenant shall arrange to obtain
electricity directly from the Electricity Provider. Such electricity may be
furnished to Tenant by means of the then existing electrical facilities serving
the Premises to the extent that the same are available, suitable and safe for
such purposes. All meters and all additional panel boards, feeders, risers,
wiring and other equipment which may be required by Tenant to obtain electricity
directly from the Electricity Provider shall be installed by Landlord, at the
sole cost and expense of (i) Landlord, if Landlord voluntarily discontinues such
service, or (ii) Tenant, if (A) Landlord is compelled to discontinue such
service by the Electricity Provider or pursuant to applicable Legal
Requirements, or (B) such discontinuance arises out of the acts or omissions of
Tenant. Landlord will not voluntarily discontinue furnishing electricity to
Tenant until Tenant is able to receive electricity directly from the Electricity
Provider unless the Electricity Provider is not prepared to furnish electricity
to the Premises on the date required as a result of Tenant's delay or negligence
in arranging for service or Tenant's refusal to take any other action reasonably
requested by the Electricity Provider.
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(h) If submetering of electricity in the Building is hereafter
prohibited by any Legal Requirement, or by any order or ruling of the Public
Service Commission of the State of New York, then Tenant shall apply, within ten
(10) days of Tenant's receiving notice thereof, to the Electricity Provider in
order to obtain direct electric service, and Tenant shall bear all costs and
expenses necessary to comply with all rules and regulations of the Electricity
Provider pertinent thereto, and from and after the date upon which Tenant
procures direct electric service, Landlord shall be relieved of any further
obligation to furnish electricity to Tenant pursuant to this Section 9.2. Such
electricity may be furnished to Tenant by means of the then existing electrical
facilities serving the Premises, including Building feeders and risers, to the
extent that the same are suitable and safe for such purposes.
(i) Landlord acknowledges that Tenant has advised Landlord
that: (i) Tenant and the New York City Industrial Development Agency, a New York
public benefit corporation (the "IDA"), intend to enter into an agreement,
detailing a package of financial incentives that are to be made available to
Tenant or an Affiliate of Tenant (the "Incentive Program") by the New York City
Economic Development Corp. ("EDC"), (ii) pursuant to the Incentive Program,
Tenant shall be entitled to certain exemptions, abatements and/or savings in the
cost of electricity used by Tenant at the Premises (including certain savings
pursuant to Con Ed's Business Incentive Rate Program) (collectively,
"Electricity Savings"), and (iii) Electricity Savings may be made available to
Tenant pursuant to reductions in the total cost incurred by Landlord to provide
electricity to the Building (whether the Electricity Provider is Con Ed or any
other entity). In connection with the foregoing, Landlord hereby agrees that if
and to the extent the total cost incurred by Landlord to provide electricity to
the Building during a particular billing period is reduced as a result of
Electricity Savings pursuant to the Incentive Program, then such Electricity
Savings shall be for the account of and the sole property of Tenant, directly
payable solely to and/or earned by Tenant. If and so long as Tenant is paying
Landlord for electricity pursuant to Sections 9.2(a), 9.2(b) and/or 9.2(d), then
the amount of any Electricity Savings which are expressly indicated (including
the specific amount of such reduction) on Landlord's statement from the
Electricity Provider, shall be offset against and deducted from Additional Rent
otherwise due from Tenant to Landlord for the next following billing period. If
Tenant shall not be paying Landlord for electricity (including if electricity is
obtained by Tenant pursuant to Sections 9.2(g) or 9.2(h)), then such Electricity
Savings shall be for the account of and the sole property of Tenant, directly
payable solely to and/or earned by Tenant. Landlord agrees (at no cost to
Landlord) to cooperate with Tenant (by, for example, executing any necessary
documents, forms, applications and surveys) to facilitate Tenant's obtaining the
Electricity Savings pursuant to the Incentive Program.
Section 9.3 Heat, Ventilation And Air-Conditioning
(a) Landlord shall provide heat to the Premises on Business
Days from 8:00 A.M. to 6:00 P.M., when required in Landlord's judgment for the
comfortable use and occupancy of the Premises, through use of the Building
standard perimeter radiator heating system serving the Premises (the "Building
Heating System").
(b) Anything in this Section 9.3 to the contrary
notwithstanding, Landlord shall not be responsible if the normal operation of
the Building Heating System shall fail to
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provide heat to all interior portions of the Premises at reasonable
temperatures. Tenant at all times shall cooperate fully with Landlord and shall
abide by the regulations and requirements which Landlord may reasonably
prescribe for the proper functioning and protection of the Building Heating
System.
(c) Landlord shall not be required to furnish heat during
periods other than the hours and days set forth in this Section 9.3 for the
furnishing and distributing of such services ("Overtime Periods"), unless
Landlord has received advance notice from Tenant requesting such service not
less than twenty-four (24) hours prior to the time when such service shall be
required; provided, however, that Landlord shall use reasonable efforts to
furnish heat during Overtime Periods on less than twenty-four (24) hours notice
if requested to do so by Tenant. Accordingly, if Landlord shall furnish heat to
the Premises at the request of Tenant during Overtime Periods, Tenant shall pay
Landlord, as Additional Rent within ten (10) days after demand, for such
services at the standard rate then fixed by Landlord for the Building, which
rate as of the date of this Lease is $75.00 per hour, subject to increase during
the Term to reflect increases in Landlord's costs.
(d) Landlord shall have no obligation to provide
air-conditioning or ventilation services to the Premises. Landlord acknowledges
that Tenant desires to install Tenant's HVAC System (as defined in Section 9.7),
as part of the Initial Alterations to be installed, subject to the provisions of
Article 3, at a location on the roof of the Building as provided in Section 9.7.
Section 9.4 Elevators. (a) Landlord shall provide passenger
elevator service to the Premises on Business Days from 8:00 A.M. to 6:00 P.M.
and freight elevator facilities on a non-exclusive basis, on Business Days from
8:00 A.M. to 4:45 P.M. ("Freight Business Hours"), without charge, and shall
have one passenger elevator available at all other times. Such elevator service
shall be subject to such rules and regulations as Landlord may reasonably
promulgate from time to time with respect thereto. Landlord shall have the right
to change the operation or manner of operation of any of the elevators in the
Building and/or to discontinue, temporarily or permanently, the use of any one
or more cars in any of the passenger, freight or truck elevator banks; provided
that in no event (other than for repairs or maintenance or due to Unavoidable
Delays) shall the Premises be serviced during Business Hours by fewer than three
(3) passenger elevator cars and one (1) freight elevator car. Landlord shall
afford Tenant access to the Premises 24 hours per day, 7 days per week. In
addition, if Tenant shall terminate this Lease with respect to Space B and Space
C pursuant to Section 2.3(c), then all Tenant Parties and their respective
invitees shall thereafter exclusively use the passenger elevators located on the
Ninth Avenue side of the Building, and shall not use the passenger elevators
located on the Eighth Avenue side of the Building.
(b) During the performance of Tenant's Initial Alterations and
during Tenant's move-in, Tenant shall have the right to use the freight elevator
without charge during Freight Business Hours for the delivery of construction
materials and for moving into (but not out of) the Premises provided that such
usage (i) shall be on a non-exclusive "first come first served" basis, and (ii)
shall be subject to Landlord's reasonable determination as to the availability
of such freight elevators. Landlord will make the freight elevator available to
Tenant during other than
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Freight Business Hours, reasonably promptly (subject to availability) after
request by Tenant, and Tenant shall pay as Additional Rent the charge therefor
established by Landlord from time to time, payable within ten (10) Business Days
of rendition of a bill therefor. As of the date hereof, Landlord's current
charge for freight elevator service during other than Freight Business Hours is
$115.00 per hour, which charge is subject to increase to reflect increases in
Landlord's costs of providing such service (including the charges for a hoisting
engineer).
Section 9.5 Cleaning and Rubbish Removal. Tenant shall, at
Tenant's sole cost, provide cleaning services at the Premises pursuant to
reasonable rules and regulations established by Landlord from time to time, and
use a cleaning contractor approved by Landlord in the exercise of its reasonable
judgment. Tenant shall, at Tenant's sole cost, provide refuse and rubbish
removal service at the Premises at times, and pursuant to regulations,
reasonably established by Landlord from time to time.
Section 9.6 Water. Landlord shall furnish cold water in such
quantities as Landlord deems sufficient for ordinary drinking, lavatory and
cleaning purposes to the Premises. If Tenant requires, uses or consumes water
for any purpose in addition to ordinary lavatory, cleaning and drinking purposes
(including any water required for use in any pantry), Landlord may install a
water meter and thereby measure Tenant's consumption of water for all purposes.
Tenant shall (a) pay to Landlord the cost of any such meters and their
installation, (b) at Tenant's sole cost and expense, keep any such meters and
any such installation equipment in good working order and repair, and (c) pay to
Landlord, as Additional Rent, as and when billed therefor for water consumed,
Landlord's cost for water plus seven percent (7%) which Landlord's cost may
include (without duplication of any Tenant's Tax Payment) sewer rents, charges
or any other taxes, rents, levies or charges which now or hereafter are
assessed, imposed or shall become a lien upon the Premises or the Real Property
pursuant to law, order or regulation made or issued in connection with any such
metered use, consumption, maintenance or supply of water, water system, or
sewage or sewage connection or system (and in default in making such payment
Landlord may pay such charges and collect the same from Tenant). Landlord agrees
that Tenant shall have the right to connect Tenant's sprinkler system to the
standpipe provided therefor, and there shall be no charge for use of water from
such standpipe.
Section 9.7 Roof Equipment
(a) Landlord hereby grants to Tenant, for Tenant's own use
commencing on the Commencement Date and not for resale purposes, a license of an
area of the roof above the 17th floor of the Building, as shown on Exhibit I to
this Lease, containing approximately 700 square feet (the "Roof Space") for the
installation by Tenant of (i) a floor packaged direct expansion water cooled air
conditioning system, including a two cell, cross flow induced draft cooling
tower with a capacity not in excess of 454 tons of condenser water and with
pumps and auxiliary equipment ("Tenant's HVAC System") and (ii) Tenant's
telecommunications equipment, antenna and satellite dish (collectively, together
with related cabling, pumps, mountings and supports, the "Roof Equipment"), at a
location or locations within the Roof Space reasonably designated by Landlord
and reasonably acceptable to Tenant. In connection therewith, and subject to the
rights of other existing tenants in the Building, Landlord shall make available
to Tenant reasonable access to the roof for the construction, installation,
upgrade,
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maintenance, repair, operation and use of the Roof Equipment. Tenant shall be
responsible for all reinforcement and bracing, if any, reasonably required by
Landlord to enable the roof of the Building to support the Roof Equipment. If
any of the Roof Equipment generates noise likely, in Landlord's reasonable
judgment, to disturb other tenants or occupants of the Building, then Tenant
shall install sound attenuated acoustic enclosures reasonably satisfactory to
Landlord designed to eliminate such noise or reduce such noise to acceptable
levels. If Tenant requires riser space for conduit connecting the Premises to
the Roof Equipment, Landlord shall make available to Tenant, for Tenant's use
solely in connection with the Roof Equipment, in the "Center Shaft" as shown on
the floor plan attached as Exhibit R, riser space sufficient for the
installation, at Tenant's expense, of telecommunications lines, cabling and
supply and condenser water return lines reasonably required for the operation of
the Roof Equipment, as more particularly set forth in Section 9.8. All work in
connection with the installation of such riser, including core drilling, if
required, shall be performed by Tenant at Tenant's sole cost and expense,
including the reasonable cost of a fire watch and related supervisory costs
relating to any core drilling, which shall be performed in such a manner and at
such times as Landlord shall reasonably prescribe. Landlord shall make available
to Tenant reasonable access within the core for purposes of such installation
work. References herein to the Roof Equipment shall be deemed to include such
riser and any conduits therein.
(b) The installation of the Roof Equipment shall constitute an
Alteration and shall be performed by Tenant at Tenant's sole cost and expense
(including any costs and expenses in connection with reinforcing the roof of the
Building, if required) in accordance with and subject to the provisions of
Article 3. Tenant shall pay a license fee to Landlord for the Roof Space, as
Additional Rent in advance on the first day of each month during the Term, as
follows: (i) during the period from the Commencement Date through the day before
the fifth (5th) anniversary of the Commencement Date, the product of the square
foot area of the Roof Space, multiplied by Eighteen and 00/100 Dollars ($18.00),
(ii) during the period from the fifth (5th) anniversary of the Commencement Date
through the day before the tenth (10th) anniversary of the Commencement Date,
the product of the square foot area of the Roof Space, multiplied by Twenty-One
and 00/100 Dollars ($21.00), and (iii) during the period from the tenth (10th)
anniversary of the Commencement Date through the Expiration Date, the product of
the square foot area of the Roof Space, multiplied by Twenty-Four and 00/100
Dollars ($24.00). All of the provisions of this Lease shall apply to the
installation, use and maintenance of the Roof Equipment, including all
provisions relating to compliance with Legal Requirements (including all FCC
rules and regulations), insurance, indemnity, repairs and maintenance. The
license granted to Tenant in this Section 9.7 shall not be assignable by Tenant
separately from this Lease.
(c) Landlord retains the right to use the portion of the roof
on which the Roof Equipment is located for any purpose whatsoever. Tenant shall
have reasonable access to the Roof Equipment at all times, and Landlord shall
not interfere with Tenant's use of the Roof Equipment so as to cause Tenant's
operation thereof to be materially interrupted or impaired. Tenant shall use the
Roof Equipment so as not to cause any material interference with Landlord's use
of the roof, including the use by Landlord or other tenants or occupants of the
Building of other equipment thereon (including data transmission or other
similar or dissimilar equipment), or damage to or interference with the
operation of the Building or the Building Systems. If any of Tenant's Roof
Equipment materially interferes with any equipment installed by Landlord or
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any tenant leasing space in the Building as of the date of this Lease, or
interferes with the operation of the Building or the Building Systems, then
Tenant, at its sole cost and expense, shall take all steps necessary to
eliminate such interference, and if Tenant shall fail to eliminate such
interference, Tenant shall relocate the Roof Equipment to another area on the
roof reasonably designated by Landlord. Notwithstanding the foregoing, if
Landlord shall require Tenant to relocate Tenant's cooling tower pursuant
hereto, Landlord shall bear all costs and expenses in connection with such
relocation, and Landlord shall provide condenser water to Tenant on an interim
basis until Tenant's cooling tower is relocated and operational. In the event
Tenant fails, within ten (10) days after notice, to relocate or remove the Roof
Equipment, Landlord may do so, and Tenant shall promptly reimburse Landlord for
any costs and expenses incurred by Landlord in connection therewith. If such
interference or disturbance still occurs despite such relocation, or if Landlord
shall determine, in its reasonable judgment, that the Roof Equipment (i) may
cause a health hazard or danger to property, or (ii) is not in accordance with
governmental or quasi-governmental standards for non-ionizing radiation for
occupational and/or general public levels, then Tenant, at its sole cost and
expense, shall promptly remove the Roof Equipment from the roof of the Building.
(d) Landlord may at its option, at any time during the Term
after reasonable prior notice to Tenant (except in the event of an emergency)
relocate the Roof Equipment to another area on the roof designated by Landlord,
provided that such relocation of the Roof Equipment does not cause the operation
thereof to be interrupted or impaired, other than temporarily, and except as set
forth in Section 9.7(c), such relocation is performed at Landlord's sole cost
and expense. Landlord shall use reasonable efforts to minimize the duration of
such interruption, and agrees to employ contractors or labor at overtime or
other premium pay rates and to incur other reasonable overtime costs and
additional expenses, provided that Tenant shall first pay to Landlord Landlord's
reasonable estimate of all incremental cost increases to do so. In such event
Tenant shall pay, as Additional Rent upon presentation of appropriate invoices,
all additional costs incurred by Landlord in connection therewith.
(e) Landlord shall not have any obligations with respect to
the Roof Equipment or compliance with any Legal Requirements (including the
obtaining of any required permits or licenses, or the maintenance thereof)
relating thereto, nor shall Landlord be responsible for any damage that may be
caused to Tenant or the Roof Equipment by any other tenant or occupant of the
Building. Landlord makes no representation that the Roof Equipment (if same
includes communications equipment) will be able to receive or transmit
communication signals without interference or disturbance (whether or not by
reason of the installation or use of similar equipment by others on the roof)
and Tenant agrees that Landlord shall not be liable to Tenant therefor.
Notwithstanding the foregoing, upon request by Tenant, Landlord, at Tenant's
cost and expense, shall join in any applications for any permits, approvals or
certificates from any Governmental Authority required to be obtained by Tenant,
and shall sign such applications reasonably promptly after request by Tenant,
and shall otherwise cooperate with Tenant in connection therewith, provided that
Landlord shall not be obligated to incur any cost or expense (other than
incidental administrative expenses), including attorneys' fees and
disbursements, or suffer or incur any liability, in connection therewith.
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(f) Tenant shall (i) be solely responsible for any damage
caused as a result of its use of the Roof Equipment, (ii) promptly pay any tax,
license, permit or other fees or charges imposed pursuant to any Legal
Requirements relating to the installation, maintenance or use of the Roof
Equipment, (iii) promptly comply with all precautions and safeguards required by
Landlord's insurance company and all Governmental Authorities, and (iv) promptly
and diligently perform all necessary repairs or replacements to, or maintenance
of, the Roof Equipment, provided, however, that if Tenant's failure after five
(5) days' notice from Landlord to so repair, replace or maintain the Roof
Equipment materially jeopardizes in any way Landlord's or any other tenant's
property located on the roof or within the Building, Landlord may, at Landlord's
option, elect to perform such repairs, replacements or maintenance at Tenant's
sole cost and expense. Landlord shall give Tenant reasonable prior notice of its
election to perform such repairs, except in an emergency.
(g) The privileges granted Tenant under this Section 9.7
merely constitute a license and shall not, now or at any time after the
installation of the Roof Equipment, be deemed to grant Tenant a leasehold or
other real property interest in the Building or any portion thereof, including
the Building's roof. The license granted to Tenant in this Section 9.7 shall
continue until and automatically terminate and expire upon the expiration or
earlier termination of this Lease and the termination of such license shall be
self-operative and no further instrument shall be required to effect such
termination. Notwithstanding the foregoing, upon request by Landlord, Tenant, at
Tenant's sole cost and expense, shall promptly execute and deliver to Landlord,
in recordable form, any certificate or other document reasonably required by
Landlord confirming the termination of Tenant's right to use the roof of the
Building upon the expiration or sooner termination of this Lease.
(h) The Roof Equipment shall be treated for all purposes of
this Lease as Tenant's Property. If requested by Landlord, Tenant shall cause
the Roof Equipment and all equipment and installations appurtenant thereto to be
designated as one or more separate tax lots by the City of New York for all
purposes of assessment and payment of Taxes, and Tenant shall pay all Taxes
imposed thereon directly to the taxing authorities, without deduction or offset
against Rent under this Lease. If for any reason Tenant fails (with or without
Landlord's consent thereto) to so cause the Roof Equipment to be designated as
one or more separate tax lots, Tenant shall pay to Landlord monthly, as
Additional Rent upon demand, the amount, determined by Landlord in its
reasonable discretion, by which Taxes imposed upon the Building have been
increased on account of Tenant's installation of the Roof Equipment.
Section 9.8 Conduit. Landlord will make available to Tenant,
without additional charge, riser space in the "Center Shaft" as shown on Exhibit
R (except as set forth in (b) below) sufficient to accommodate the following:
(a) the two (2) two1/2-inch (2 1/2") diameter electrical conduits and such other
electrical conduits as shall be required in order to deliver the Basic Capacity
to the Premises, (b) four (4) four-inch (4"), one (1) one1/2-inch (1 1/2") and
one (1) one-inch (1") diameter riser conduit sleeves for telecommunications
lines and cabling and security systems in the number eighteen freight elevator
shaft, (c) two (2) ten-inch (10") diameter riser conduit sleeves for condenser
water supply and return lines connecting the Roof Equipment to the Premises, (d)
the electrical conduits required in order to deliver EPS (if any) to the
Premises, and (e) four (4) four-inch (4") diameter riser conduit sleeves
connecting the Premises
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to the premises demised to Tenant pursuant to Tenant's Other Lease. If Tenant
requires additional riser space for electrical and telecommunications conduits
or for use in connection with the Roof Equipment, then upon request by Tenant,
subject to availability of riser space in the Building, Landlord will make
available riser space at Landlord's then-current rates for riser space in the
Building, which rates are currently as follows: (i) for riser space not
exceeding two inches (2") in diameter, an annual charge of $5.00 per lineal
foot, and (ii) for riser space in excess of two inches (2") in diameter but not
exceeding four inches (4") in diameter, an annual charge of $10.00 per lineal
foot. All work in connection with the installation of such conduit, including
core drilling, if required, shall be performed by Tenant at Tenant's sole cost
and expense, including the reasonable cost of a fire watch and related
supervisory costs relating to any core drilling, which shall be performed in
such a manner and at such times as Landlord shall reasonably prescribe. Landlord
shall make available to Tenant reasonable access within the Building core for
purposes of such installation work.
Section 9.9 Listings in Building Directory. Landlord shall, at
the request of Tenant, maintain listings on the Building directory in the
Building lobby of the names of Tenant and any officers or employees of Tenant
(or any permitted Subtenant) provided that the number of listings shall be in
the same proportion to the capacity of the Building directory as the rentable
area of the Premises is to the rentable area of the Building. Tenant shall
deliver to Landlord, on or prior to the Commencement Date, a list of all names
to be included in the directory. Tenant may deliver revised listings to Landlord
from time to time throughout the Term (but Landlord shall not be obligated to
revise the directory more often than once a month).
Section 9.10 No Warranty of Landlord. Landlord does not
warrant that any of the services to be provided by Landlord to Tenant hereunder,
or any other services which Landlord may supply (a) will be adequate for
Tenant's particular purposes or as to any other particular need of Tenant, or
(b) will, subject to the provisions of the fourth sentence of this Section 9.10,
be free from interruption, and Tenant acknowledges that any one or more such
services may be interrupted or suspended by reason of Unavoidable Delays.
Landlord reserves the right to stop, interrupt or reduce service of the Building
Systems by reason of Unavoidable Delays, or for repairs, additions, alterations,
replacements or improvements which are, in the judgment of Landlord, necessary
to be made, until said repairs, alterations, replacements or improvements shall
have been completed. Any such interruption or discontinuance of service, or the
exercise of such right by Landlord to suspend or interrupt such service shall
not (i) constitute an actual or constructive eviction, or disturbance of
Tenant's use and possession of the Premises, in whole or in part, (ii) entitle
Tenant to any compensation or to any abatement or diminution of Fixed Rent or
Additional Rent, (iii) relieve Tenant from any of its obligations under this
Lease, or (iv) impose any responsibility or liability upon Landlord or its
agents by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business, or otherwise. Landlord shall use reasonable
efforts to minimize interference with Tenant's access to and use and occupancy
of the Premises in making any repairs, alterations, additions, replacements,
decorations or improvements; provided, however, that Landlord shall have no
obligation to employ contractors or labor at "overtime" or other premium pay
rates or to incur any other "overtime" costs or additional expenses whatsoever.
Landlord shall not be required to furnish any services except as expressly
provided in this Article 9.
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Section 9.11 Life Safety System. Landlord shall provide life
safety service to the Premises, in accordance with Legal Requirements, through
the Building's Class E System to the data gathering panels serving the Premises.
In connection therewith Landlord will provide points of connection to Building's
Class E System sufficient for the Permitted Use.
Section 9.12 Emergency Generator.
(a) Landlord shall make available to Tenant for use in the
Premises 350 amperes of 460-volt emergency electric power service ("EPS")
available to Tenant for use in the Premises from the Building's emergency
electric generator (the "Generator") as provided in this Section 9.12, for the
balance of the Term. Landlord shall install (i) an automatic transfer switch
(the "Transfer Switch"), in the Premises at a location to be reasonably
designated by Tenant, sufficient to supply a total connected load of up 350
amperes of EPS at 460 volts to the Premises, and (ii) a connection from the
Generator to the Transfer Switch.
(b) Tenant shall pay Landlord for EPS as follows:
(i) Tenant shall pay all actual costs and expenses
incurred by Landlord in making EPS available to the
Premises, including the actual costs to furnish and install
the Transfer Switch and all cabling and other devices
necessary to connect the Generator to the Transfer Switch,
within ten (10) days after demand by Landlord; and
(ii) (A) Tenant shall pay an annual fee (the "EPS
Fee") for the period commencing on the date on which Landlord
makes EPS available to the Premises but not earlier than
January 1, 2000 through the Expiration Date, irrespective of
whether or not emergency power is ever required or used by
Tenant, in the amount of $150.00 per ampere per year. The EPS
Fee shall be payable by Tenant to Landlord as Additional Rent
in advance in equal monthly installments on the first day of
each month during the Term in which EPS is made available to
Tenant pursuant to this Section 9.12.
(c) Tenant understands and agrees that EPS will be supplied to
Tenant only if there is an interruption or failure in the supply of electric
current to the Premises due to service failure or in connection with customary,
routine testing of Tenant's electrical systems and under no other circumstances.
(d) Tenant shall be responsible for the payment of any
occupancy tax and any other tax (other than Landlord's income tax) imposed upon
the Additional Rent paid by Tenant pursuant to this Section 9.12.
(e) The privilege of using the EPS service described in this
Section 9.12 cannot be transferred or assigned by Tenant except in connection
with an assignment of this Lease permitted under Sections 13.1, 13.10 or 13.11,
or otherwise with the express written consent of Landlord, which may be withheld
in Landlord's sole discretion, and under no circumstances can this privilege be
transferred or assigned to any party who is not a tenant under this Lease.
Tenant
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acknowledges that the Generator (and any replacement or substitute therefor),
and all connections thereto, are and shall remain the sole property of Landlord
and may not be removed by Tenant.
(f) Landlord shall have the right, in Landlord's sole
discretion, at any time and from time to time during the EPS Term, upon not less
than thirty (30) days' prior written notice to Tenant, to relocate the Generator
to another area of the Building, and/or to substitute another Building generator
in lieu of the Generator, in either case at Landlord's expense. Tenant shall
cooperate with Landlord to effectuate any such relocation or substitution of the
Generator, provided that Landlord shall promptly reimburse any reasonable
out-of-pocket expenses incurred by Tenant in connection therewith.
(g) Upon and subject to the provisions of this Lease, Landlord
shall, at Landlord's expense, maintain and repair the Generator in accordance
with the manufacturer's recommendations and good industry standards, and shall
maintain such service contracts and take such other actions as may be necessary
in Landlord's reasonable judgment to keep the Generator in good working order
during the EPS Term; provided, however, so long as Landlord shall comply with
its obligations pursuant to this subsection (g), Landlord shall not be liable in
any way to Tenant for any delay, interruption, failure, variation or defect in
or with regard to the Generator or EPS. In no event shall Landlord be liable to
Tenant for special, indirect or consequential damages which may result from any
such delay, interruption, failure, variation or defect.
ARTICLE 10. INSURANCE
Section 10.1 Tenant, at its expense, shall obtain and keep in
full force and effect a policy of commercial general liability insurance
including premises - operations and contractual liability under which the
insurer agrees to insure Tenant's obligations under Article 28 and under which
Tenant is named as the insured and Landlord, Landlord's asset manager,
Landlord's managing agent for the Building and any Superior Lessors and any
Mortgagees (whose names shall have been furnished to Tenant) are named as
additional insureds, which insurance shall provide primary coverage without
contribution from any other insurance carried by or for the benefit of Landlord,
Landlord's asset manager, Landlord's managing agent and any Superior Lessors or
Mortgagees named as additional insureds. Tenant's primary commercial general
liability policy shall contain a provision that the policy shall be
noncancellable unless thirty (30) days' written notice shall have been given to
Landlord and Landlord shall similarly receive thirty (30) days' notice of any
material change in coverage. The minimum limits of liability shall be a combined
single limit with respect to each occurrence in an amount of not less than
$5,000,000 per location general aggregate limit; provided, however, that
Landlord shall retain the right to require Tenant to increase said coverage to
that amount of insurance which in Landlord's reasonable judgment is then being
customarily required by prudent landlords of comparable buildings in the City of
New York, and provided further that Landlord shall require similar increases of
other tenants of space in the Building comparable to the Premises, to the extent
Landlord shall then have the right to do so under applicable leases. Tenant
shall also obtain and keep in full force and effect during the Term (a)
insurance against loss or damage by fire, and such other risks and hazards as
are insurable under then available standard forms of "all risk" insurance
policies with extended coverage (including theft, sprinkler leakage, and boiler
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and machinery, if applicable), to Tenant's Property and Tenant's Alterations for
the full insurable value thereof or on a replacement cost basis; (b) Workers'
Compensation Insurance, as required by law; (c) New York Disability Benefits Law
Policy; (d) Business Interruption Insurance; and (e) such other insurance in
such amounts as Landlord may reasonably require from time to time. All insurance
required to be carried by Tenant pursuant to the terms of this Lease shall be
effected under valid and enforceable policies issued by reputable and
independent insurers permitted to do business in the State of New York, and
rated in Best's Insurance Guide, or any successor thereto (or if there be none,
an organization having a national reputation) as having a Best's Rating of "A-"
and a "Financial Size Category" of at least "XI" or if such ratings are not then
in effect, the equivalent thereof.
Section 10.2 (a) Each party hereto does hereby waive any and
all rights of recovery against the other and against the officers, employees,
partners, agents and representatives of the other, for loss of or damage to the
property of the waiving party to the extent such loss or damage is insured
against under any insurance policy carried by Landlord or Tenant hereunder. In
addition, the parties hereto shall procure an appropriate clause in, or
endorsement on, any fire or extended coverage insurance covering the Premises,
the Building and personal property, fixtures and equipment located thereon or
therein, pursuant to which the insurance companies waive subrogation or consent
to a waiver of right of recovery and subject to obtaining such clauses or
endorsements of waiver of subrogation or consent to a waiver of right of
recovery, hereby agree not to make any claim against or seek to recover from the
other for any loss or damage to its property or the property of others resulting
from fire or other hazards covered by such fire and extended coverage insurance;
provided, however, that the release, discharge, exoneration and covenant not to
sue herein contained shall be limited by and coextensive with the terms and
provisions of the waiver of subrogation clause or endorsements or clauses or
endorsements consenting to a waiver of right of recovery. If the payment of an
additional premium is required for the inclusion of such waiver of subrogation
or consent to waiver provision, each party shall advise the other of the amount
of any such additional premiums and the other party at its own election may, but
shall not be obligated to, pay the same. If such other party shall not elect to
pay such additional premium, the first party shall not be required to obtain
such waiver of subrogation or consent to waiver provision. Tenant acknowledges
that Landlord shall not carry insurance on and shall not be responsible for
damage to, Tenant's Alterations (if any) or Tenant's Property, and that Landlord
shall not carry insurance against, or be responsible for any loss suffered by
Tenant due to, interruption of Tenant's business.
(b) As to each party hereto, provided such party's right of
full recovery under the applicable insurance policy is not adversely affected,
such party hereby releases the other (its servants, agents, contractors,
employees and invitees) with respect to any claim (including a claim for
negligence) which it might otherwise have against the other party for loss,
damages or destruction of the type covered by such insurance with respect to its
property by fire or other casualty i.e., in the case of Landlord, as to the
Building, and, in the case of Tenant, as to Tenant's Property and Tenant's
Alterations (including rental value or business interruption, as the case may
be) occurring during the Term.
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Section 10.3 On or prior to the Commencement Date, Tenant
shall deliver to Landlord appropriate certificates of insurance required to be
carried by Tenant pursuant to this Article 10, including evidence of waivers of
subrogation required pursuant to Section 10.2. Evidence of each renewal or
replacement of a policy shall be delivered by Tenant to Landlord at least ten
(10) days prior to the expiration of such policy.
Section 10.4 Landlord agrees to maintain (a) insurance against
loss or damage to the Building by fire and such other risks and hazards as are
insurable under then available forms of "all risk" insurance policies with
extended coverage, and (b) a policy of commercial general liability insurance,
in each case with minimum limits of liability in amounts comparable to insurance
maintained by other prudent landlords of comparable office buildings in the City
of New York.
ARTICLE 11. Destruction of the Premises; Property Loss or
Damage
Section 11.1 (a) If the Premises shall be damaged by fire or
other casualty, or if the Building shall be so damaged that Tenant shall be
deprived of reasonable access to the Premises, Tenant shall give prompt notice
thereof to Landlord, and the damage shall be repaired by and at the expense of
Landlord to substantially the condition prior to the damage, including Tenant's
Alterations, but excluding Tenant's Property. Until such repairs shall be
substantially completed, Fixed Rent and Additional Rent shall be reduced in the
proportion which the area of the part of the Premises which is neither usable
nor used by Tenant bears to the Premises Area (provided, however, in the event
that ninety percent (90%) or more of the floor area of the Premises shall be so
damaged so as not to be usable, and Tenant is unable to conduct its business in
the remaining portion of the Premises, or if the Premises shall be rendered
inaccessible, then Fixed Rent and Additional Rent shall be entirely abated).
Tenant shall pay to Landlord all proceeds of insurance policies covering
Tenant's Alterations, and such proceeds shall be used by Landlord in the repair
of Tenant's Alterations. Landlord shall have no obligation to repair any damage
to, or to replace, any of Tenant's Property.
(b) Concurrently with the collection of any insurance proceeds
attributable to damage to Tenant's Alterations (or the payment by Tenant to
Landlord of an amount equal to such insurance proceeds, pending collection of
such proceeds from its insurer), and as a condition precedent to Landlord's
obligation to commence those repairs to Tenant's Alterations required to be
performed by Landlord pursuant to this Section 11.1, Tenant shall pay to
Landlord (i) the amount of any deductible under the policy insuring Tenant's
Alterations, and (ii) the amount, if any, by which the cost of repairing and
restoring Tenant's Alterations, as estimated by a reputable independent
contractor designated by Landlord, exceeds the available insurance proceeds
therefor; provided, however, that Tenant may dispute the reasonableness of such
estimate by arbitration of the issue in accordance with the procedural
provisions set forth in Section 30.6. If the arbitrator determines such estimate
to have been reasonable, Tenant's payment shall be calculated based upon such
estimate; and if the arbitrator determines such estimate to have been
unreasonable, the arbitrator shall, without hearing any additional submission of
evidence or arguments by the parties, further determine the highest reasonable
estimate, and Tenant's payment shall be calculated based upon such estimate. The
amounts
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finally determined to be due in accordance with this Section 11.1(b) constitute
Additional Rent under this Lease and shall be payable by Tenant to Landlord upon
demand.
Section 11.2 (a) If the Building shall be so damaged by fire
or other casualty that, in Landlord's reasonable opinion, substantial
alteration, demolition, or reconstruction of the Building shall be required
(whether or not the Premises shall have been damaged or rendered untenantable),
then in any of such events, Landlord may, not later than sixty (60) days
following the date of the damage, give Tenant a notice in writing terminating
this Lease, provided (i) Landlord similarly terminates the leases of other
tenants in the Building covering at least twenty-five percent (25%) of the
Rentable Square Footage (exclusive of the Premises) of the then leased space in
the Building, and (ii) Landlord does not restore the Premises and lease the same
for office purposes.
(b) If this Lease is so terminated, the Term shall expire upon
the tenth (10th) day after such notice is given, and Tenant shall vacate the
Premises and surrender the same to Landlord. Upon the termination of this Lease
under the conditions provided for in this Section 11.2, Tenant's liability for
Fixed Rent and Additional Rent shall cease as of the date of such fire or other
casualty, and any prepaid portion of Fixed Rent or Additional Rent for any
period after such date shall be refunded by Landlord to Tenant.
(c) If this Lease is terminated pursuant to the provisions of
this Article 11, then Landlord shall collect the insurance proceeds of policies
providing coverage for Tenant's Alterations as provided in Section 11.1(a).
Landlord shall retain such proceeds to the extent of sums, if any, advanced by
Landlord to Tenant with respect to any of Tenant's Alterations. The balance of
such proceeds, if any, shall be paid to Tenant.
Section 11.3 (a) If the Premises are damaged by fire or other
casualty and are rendered wholly untenantable thereby, or if the Building shall
be so damaged that Tenant shall be deprived of reasonable access to the
Premises, and if Landlord shall not elect to terminate this Lease as permitted
by this Article 11, Landlord shall, within sixty (60) days following the date of
the damage, cause a contractor or architect selected by Landlord to give notice
(the "Restoration Notice") to Tenant of the date by which such contractor or
architect believes the restoration of the Premises shall be Substantially
Completed. If the Restoration Notice shall indicate that reasonable access to
the Premises shall not be restored, or the restoration shall not be
Substantially Completed on or before the date which shall be nine (9) months
following the date of such damage or destruction or prevention of access, Tenant
shall have the right to terminate this Lease by giving written notice (the
"Termination Notice") to Landlord not later than thirty (30) days following
receipt of the Restoration Notice. If Tenant gives a Termination Notice, this
Lease shall be deemed cancelled and terminated as of the date of the giving of
the Termination Notice as if such date were the Expiration Date, and Fixed Rent
and Additional Rent shall be apportioned and shall be paid or refunded, as the
case may be up to and including the date of such damage or destruction.
Notwithstanding anything set forth to the contrary in this Article 11, in the
event that a fire or other casualty rendering the Premises wholly untenantable
shall occur during the final year of the Term, either Landlord or Tenant may
terminate this Lease by giving the other party a Termination Notice as set forth
herein. As used in this Section 11.3(a), the term "wholly untenantable" shall be
deemed to include a condition
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whereby less than all of the Premises shall be untenantable, but the undamaged
portion shall be inadequate for the reasonable operation of Tenant's business at
the Premises.
(b) If (i) Tenant shall have had the right to give a
Termination Notice pursuant to Section 11.3(a) but shall not have done so, and
Landlord fails thereafter to Substantially Complete the restoration of the
Premises on or before the date which is thirty (30) days following the later to
occur of (y) nine (9) months following the date of such damage or destruction,
or (z) the date set forth in the Restoration Notice, or (ii) if Tenant shall not
have had the right to give a Termination Notice pursuant to Section 11.3(a) and
thereafter Landlord shall fail to substantially complete the restoration of the
Premises on or before the date which is nine (9) months following the date of
such damage or destruction, then in either of such events Tenant shall again
have the right to terminate this Lease by giving a Termination Notice (a "Second
Termination Notice"), and, unless Landlord Substantially Completes the
restoration of the Premises within thirty (30) days following the giving of such
Second Termination Notice, this Lease shall be deemed canceled and terminated as
set forth in Section 11.3(a).
Section 11.4 This Article 11 constitutes an express agreement
governing any case of damage or destruction of the Premises or the Building by
fire or other casualty, and Section 227 of the Real Property Law of the State of
New York, which provides for such contingency in the absence of an express
agreement, and any other law of like nature and purpose now or hereafter in
force shall have no application in any such case.
ARTICLE 12. EMINENT DOMAIN
Section 12.1 (a) If (i) all of the floor area of the Premises,
or so much thereof as shall render the Premises wholly untenantable, shall be
acquired or condemned for any public or quasi-public use or purpose, or (ii) a
portion of the Real Property, not including the Premises, shall be so acquired
or condemned, but by reason of such acquisition or condemnation, Tenant no
longer has means of access to the Premises, then this Lease and the Term shall
end as of the date of the vesting of title with the same effect as if that date
were the Expiration Date. In the event of any termination of this Lease and the
Term pursuant to the provisions of this Article 12, Fixed Rent and Additional
Rent shall be apportioned as of the date of such termination and any prepaid
portion of Fixed Rent or Additional Rent for any period after such date shall be
refunded by Landlord to Tenant.
(b) If the part of the Real Property so acquired or condemned
contains more than twenty-five percent (25%) of the total area of the Premises
immediately prior to such acquisition or condemnation, or if, by reason of such
acquisition or condemnation Tenant no longer has reasonable means of access to
the Premises, Tenant may terminate this Lease by notice to Landlord given within
thirty (30) days following the date upon which Tenant receives notice of such
acquisition or condemnation. If Tenant so notifies Landlord, this Lease shall
terminate and the Term shall end and expire upon the thirtieth (30th) day
following the giving of such notice.
Section 12.2 In the event of any such acquisition or
condemnation of all or any part of the Real Property, Landlord shall be entitled
to receive the entire award for any such
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acquisition or condemnation. Tenant shall have no claim against Landlord or the
condemning authority for the value of any unexpired portion of the Term or
Tenant's Alterations, and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 12.2 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the then value of any Tenant's Property included in such taking
and for any moving expenses, provided such award shall be made by the condemning
authority in addition to, and shall not result in a reduction of, the award made
by it to Landlord.
Section 12.3 If only a part of the Real Property shall be so
acquired or condemned then, subject to Section 12.1, this Lease and the Term
shall continue in force and effect. If a part of the Premises shall be so
acquired or condemned and this Lease and the Term shall not be terminated,
Landlord, at Landlord's expense, shall restore that part of the Premises not so
acquired or condemned so as to constitute tenantable Premises. From and after
the date of the vesting of title, Fixed Rent and Additional Rent shall be
reduced in the proportion which the area of the part of the Premises so acquired
or condemned bears to the total area of the Premises immediately prior to such
acquisition or condemnation.
ARTICLE 13. ASSIGNMENT AND SUBLETTING
Section 13.1 Except as otherwise expressly provided herein,
Tenant, for itself, its heirs, distributees, executors, administrators, legal
representatives, successors and assigns, expressly covenants that it shall not
assign, mortgage, pledge, encumber, or otherwise transfer this Lease, nor sublet
(nor underlet), nor suffer, nor permit the Premises or any part thereof to be
used or occupied by others (whether for desk space, mailing privileges or
otherwise), without the prior written consent of Landlord in each instance. If
this Lease is assigned, or if the Premises or any part thereof are sublet or
occupied by anybody other than Tenant, or if this Lease or the Premises are
encumbered (whether by operation of law or otherwise) without Landlord's
consent, then Landlord may, after default by Tenant beyond applicable grace or
notice periods, collect rent from the assignee, subtenant or occupant, and apply
the net amount collected to Fixed Rent and Additional Rent, but no assignment,
subletting, occupancy or collection shall be deemed a waiver by Landlord of the
provisions hereof, the acceptance by Landlord of the assignee, subtenant or
occupant as a tenant, or a release by Landlord of Tenant from the further
performance by Tenant its obligations under this Lease, and Tenant shall remain
fully liable therefor. The consent by Landlord to any assignment or subletting
shall not in any way be construed to relieve Tenant from obtaining the express
consent in writing of Landlord to any further assignment or subletting. In no
event shall any permitted subtenant assign or encumber its sublease or further
sublet all or any portion of its sublet space, or otherwise suffer or permit the
sublet space or any part thereof to be used or occupied by others, without
Landlord's prior written consent in each instance. Any assignment, sublease,
mortgage, pledge, encumbrance or transfer in contravention of the provisions of
this Article 13 shall be void.
Section 13.2 (a) If Tenant shall, at any time or from time to
time, during the Term desire to assign this Lease or sublet all or part of the
Premises, Tenant shall give notice (a "Tenant's Notice") thereof to Landlord,
which Tenant's Notice shall set forth: (i) with respect to an assignment of this
Lease, the date Tenant desires the assignment to be effective and any
consideration Tenant would receive under such assignment, (ii) with respect to a
sublet of all or a
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part of the Premises (x) the dates upon which Tenant desires the sublease term
to commence and expire, (y) the rental rate and other material business terms
upon which Tenant would sublet such premises, and (z) a description of the
Premises showing the portion to be sublet, the effective or commencement date of
which shall be not less than thirty (30) nor more than one hundred and eighty
(180) days after the giving of such notice, (iii) a statement setting forth in
reasonable detail the identity of the proposed assignee or subtenant, the nature
of its business and its proposed use of the Premises, (iv) current financial
information with respect to the proposed assignee or subtenant, including its
most recent financial report, and (v) an agreement by Tenant to indemnify
Landlord against liability resulting from any claims that may be made against
Landlord by the proposed assignee or subtenant or by any brokers or other
Persons claiming a commission or similar compensation in connection with the
proposed assignment or sublease. Tenant's Notice shall be deemed an offer from
Tenant to Landlord whereby Landlord (or Landlord's designee) may, at its option,
(I) sublease such space (the "Leaseback Space") from Tenant upon the terms and
conditions set forth in Section 13.4, or terminate the Lease with respect to
only the Leaseback Space, or (II) if the proposed transaction is (1) an
assignment of this Lease or (2) a subletting of fifty percent (50%) or more of
the rentable area of the Premises, terminate this Lease.
(b) Landlord agrees to respond to any Tenant's Notice given in
accordance with Section 13.2(a) within twenty (20) days after request, provided
the Tenant's Notice complies in all material respects with the requirements of
Section 13.2(a). If Landlord fails to either approve or disapprove the requested
assignment or subletting on or before the end of such twenty-day period, Tenant
shall have the right to provide Landlord with a second written request for
approval (a "Second Request"), which shall include all material previously
delivered to Landlord together with Tenant's Notice, and set forth in bold
capital letters the following statement: IF LANDLORD FAILS TO RESPOND WITHIN
FIVE (5) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN TENANT SHALL BE
ENTITLED TO ENTER INTO THE PROPOSED [ASSIGNMENT] [ SUBLEASE] DESCRIBED IN THE
NOTICE ENCLOSED HEREWITH, WHICH WAS PREVIOUSLY SUBMITTED TO LANDLORD AND TO
WHICH LANDLORD HAS FAILED TO TIMELY RESPOND. In the event that Landlord fails to
respond to a Second Request within five (5) Business Days after receipt by
Landlord, the proposed assignment or sublease as to which the Second Request is
submitted shall be deemed to be approved by Landlord, and Tenant shall be
entitled to enter into such transaction, provided that such assignment or
sublease complies with the requirements of this Article 13 and all other
provisions of this Lease applicable thereto.
Section 13.3 If Landlord exercises its option to terminate
this Lease with respect to all or a portion of the Premises pursuant to Section
13.2, then this Lease shall terminate and expire (in its entirety or as it
relates to the portion of the Premises identified in the Tenant's Notice, as
applicable) on the date that such assignment or sublease was to be effective or
commence, as the case may be, and the Fixed Rent and Additional Rent due
hereunder shall be paid and apportioned to such date. In such event, Landlord
and Tenant, upon request of either party, shall enter into an amendment of this
Lease ratifying and confirming such total or partial termination, and setting
forth appropriate modifications, if any, to the terms and provisions hereof.
Following such termination, Landlord shall be free to and shall have no
liability to
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Tenant if Landlord should lease the Premises (or any part thereof) to Tenant's
prospective assignee or subtenant.
Section 13.4 If Landlord exercises its option to sublet the
Leaseback Space, such sublease to Landlord or its designee (as subtenant) shall
be at a rental rate equal to the product of (i) the lesser of (A) the rental
rate per rentable square foot of Fixed Rent and Additional Rent then payable
pursuant to this Lease, or (B) the rental rate per rentable square foot of rent
and additional rent set forth in Tenant's Notice, multiplied by (ii) the number
of rentable square feet of the Leaseback Space, and shall be for the same term
as that of the proposed subletting, and such sublease shall:
(a) be upon such other terms and conditions as are
contained in Tenant's Notice, and be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of this Lease,
except such as are irrelevant or inapplicable, and except as expressly
set forth in this Article 13 to the contrary;
(b) give the subtenant the unqualified and
unrestricted right, without Tenant's permission, to assign such
sublease or any interest therein and/or to sublet the space covered by
such sublease or any part or parts of such space and to make any and
all changes, alterations and improvements in the space covered by such
sublease, provided that such changes, alterations or improvements do
not materially adversely affect Tenant's use and occupancy of the
portion of the Premises other than the Leaseback Space; and if the
proposed sublease will result in all or substantially all of the
Premises being sublet, grant Landlord or its designee the option to
extend the term of such sublease for the balance of the Term less one
day, and provided further that, if the term of such sublease is twelve
(12) or more months shorter than the Term, the Premises being sublet
shall be suitable for the Permitted Use upon expiration of the sublease
term;
(c) provide that any assignee or further subtenant of
Landlord or its designee, may, at Landlord's option, be permitted to
make alterations, decorations and installations in such space or any
part thereof, provided that such changes, alterations or improvements
do not materially adversely affect Tenant's use and occupancy of the
portion of the Premises other than the Leaseback Space, and shall also
provide in substance that any such alterations, decorations and
installations in such space therein made by any assignee or subtenant
of Landlord or its designee may be removed, in whole or in part, by
such assignee or subtenant, at its option, prior to or upon the
expiration or other termination of such sublease; provided, however,
that such assignee or subtenant shall, at its sole cost and expense,
repair any damage and injury caused by such removal; and provided
further that, if the term of such sublease is twelve (12) or more
months shorter than the Term, the Premises being sublet shall be
suitable for the Permitted Use upon expiration of the sublease term;
and
(d) provide that (i) the parties to such sublease
expressly negate any intention that any estate created under such
sublease be merged with any other estate held by either of said
parties, (ii) any assignment or sublease by Landlord or its designee
(as the subtenant) may be for any purpose or purposes that Landlord, in
Landlord's
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uncontrolled discretion, shall deem suitable or appropriate,
provided that the use of the Leaseback Space for such purpose or
purposes shall not unreasonably interfere with Tenant's use and
occupancy of the portion of the Premises other than the Leaseback
Space, (iii) Tenant shall, at Tenant's sole cost and expense, at all
times provide and permit reasonably appropriate means of ingress to and
egress from such space so sublet by Tenant to Landlord or its designee,
(iv) Landlord may make such alterations as may be required or deemed
necessary by Landlord to physically separate the subleased space from
the balance of the Premises and to comply with any legal or insurance
requirements relating to such separation (all at Tenant's sole cost and
expense, unless such alterations would be the subtenant's obligation to
perform or pay for pursuant to the proposed sublease), provided,
however, that Landlord shall use reasonable efforts to minimize the
duration of such alterations and interference by reason thereof with
Tenant's access to and use and occupancy of the portion of the Premises
other than the Leaseback Space, (v) at the expiration of the term of
such sublease, Tenant will accept the space covered by such sublease in
its then existing condition, subject to the obligations of the
subtenant to make such repairs thereto as may be necessary to preserve
the premises demised by such sublease in good order and condition, and
provided that Tenant shall have no obligation under this Lease to
restore any Alterations or other changes, decorations or installations
made by or on behalf of such subtenant, or any damage caused by
Landlord's removal of alterations, decorations or installations, and
provided further that, if the term of such sublease is twelve (12) or
more months shorter than the Term, the Premises being sublet shall be
suitable for the Permitted Use upon expiration of the sublease term;
and (vi) Tenant shall have no obligation to provide services of any
kind to the Leaseback Space, provided, however, that Tenant shall
permit Landlord, Landlord's agents and public utilities servicing the
Leaseback Space to erect, use and maintain all concealed ducts, pipes
and conduits in and through the Premises as Landlord shall reasonably
require, provided that the exercise of such rights shall not materially
affect the layout or reduce the floor area of the Premises.
Section 13.5 (a) If Landlord exercises its option to sublet
the Leaseback Space, Landlord shall indemnify and save Tenant harmless from all
obligations under this Lease as to the Leaseback Space during the period of time
it is so sublet to Landlord, except as to any obligation which arises out of or
results from the negligence or willful misconduct of Tenant or any Tenant Party.
(b) Performance by Landlord, or its designee, under a sublease
of the Leaseback Space shall be deemed performance by Tenant of any similar
obligation under this Lease and any default under any such sublease shall not
give rise to a default under a similar obligation contained in this Lease nor
shall Tenant be liable for any default under this Lease or deemed to be in
default hereunder, unless such default is occasioned by or arises from the
negligence or willful misconduct of Tenant or any Tenant Party.
(c) Tenant shall have no obligation, at the expiration or
earlier termination of the Term, to remove any alteration, installation or
improvement made in the Leaseback Space by Landlord (or Landlord's designee).
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(d) Any consent required of Tenant, as Landlord under the
sublease, shall be deemed granted if consent with respect thereto is granted by
Landlord under this Lease, and any failure of Landlord (or its designee) to
comply with the provisions of the sublease other than with respect to the
payment of Fixed Rent and Additional Rent to Tenant, shall not constitute a
default thereunder or hereunder if Landlord shall have consented to such
non-compliance.
Section 13.6 In the event Landlord does not exercise either
option provided to it pursuant to Section 13.2, and provided that no Event of
Default shall have occurred and be continuing under this Lease as of the time
Landlord's consent is requested by Tenant, Landlord's consent (which must be in
writing, subject to the provisions of Section 13.2(b)) to the proposed
assignment or sublease shall not be unreasonably withheld or delayed; provided,
however, that:
(a) Tenant shall have complied with the provisions of
Section 13.2, and Landlord shall not have exercised any of its options
thereunder within the time permitted therefor;
(b) In Landlord's judgment, the proposed assignee or
subtenant is engaged in a business or activity, and the Premises, or
the relevant part thereof, will be used in a manner, which (i) is in
keeping with the then standards of the Building, and (ii) does not
violate the restrictions set forth in Article 2;
(c) The proposed assignee or subtenant has sufficient
financial worth considering the responsibility involved, and Landlord
has been furnished with evidence thereof;
(d) In the event Landlord has comparable space in the
Building available for lease, then (i) neither the proposed assignee or
subtenant nor any Person which, directly or indirectly, controls, is
controlled by, or is under common control with, the proposed assignee
or subtenant, is then an occupant of any part of the Building, and (ii)
the proposed assignee or subtenant is not a Person (or Affiliate of a
Person) with whom Landlord or Landlord's agent is then, or has been
within the previous four (4) month period, negotiating in connection
with rental of space in the Building;
(e) The form of the proposed sublease or instrument
of assignment shall be reasonably satisfactory to Landlord and shall
comply with the applicable provisions of this Article 13, and Tenant
shall deliver a true and complete original, fully executed counterpart
of such sublease or other instrument to Landlord promptly upon the
execution and delivery thereof;
(f) Tenant and its proposed subtenant or assignee, as
the case may be, shall execute and deliver to Landlord an agreement, in
form and substance reasonably satisfactory to Landlord, setting forth
the terms and conditions upon which Landlord shall have granted its
consent to such assignment or subletting, and the agreement of Tenant
and such subtenant or assignee, as the case may be, to be bound by the
provisions of this Article 13;
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(g) There shall not be more than four (4) subtenants
of the Premises;
(h) The amount of the aggregate rent to be paid by
the proposed subtenant shall not be twenty percent (20%) or more below
the then current market rent per rentable square foot for the Premises,
determined as though the Premises were vacant, and the rental and other
terms and conditions of the sublease shall be substantially the same as
those contained in Tenant's Notice;
(i) Tenant shall reimburse Landlord, as Additional
Rent upon demand, for (A) the reasonable costs and expenses incurred by
Landlord in connection with the assignment or sublease, including the
costs of investigations as to the acceptability of the proposed
assignee or subtenant and the cost of reviewing plans and
specifications proposed to be made in connection therewith, and (B)
Landlord's reasonable legal fees and disbursements incurred in
connection with the granting of any requested consent and the
preparation of Landlord's written consent to the sublease or
assignment;
(j) Tenant shall not have (i) advertised or
publicized in any way the availability of the Premises without prior
notice of and approval by Landlord, or (ii) advertised or publicized in
any way (or caused or permitted to be advertised or publicized in any
way) the Premises for sublease or assignment at a rental rate
materially less than the fixed rent and additional rent at which
Landlord is then offering to lease comparable space in the Building for
a comparable term;
(k) The proposed occupancy shall not impose a
material extra burden upon services to be supplied by Landlord to
Tenant, unless Tenant and such proposed subtenant or assignee shall
agree with Landlord in writing to pay the costs of such additional
services; and
(l) The proposed subtenant or assignee shall not be
entitled, directly or indirectly, to diplomatic or sovereign immunity
and shall be subject to the service of process in, and the jurisdiction
of the courts of New York State.
Except for any sublease by Tenant to Landlord or its designee pursuant to this
Article 13, each sublease pursuant to this Section 13.6 shall be subject to all
of the covenants, agreements, terms, provisions and conditions contained in this
Lease. Notwithstanding any such sublease to Landlord or any such sublease to any
other subtenant, or any acceptance of Fixed Rent or Additional Rent by Landlord
from any subtenant, Tenant will remain fully liable for the payment of the Fixed
Rent and Additional Rent due and to become due hereunder and for the performance
of all the covenants, agreements, terms, provisions and conditions contained in
this Lease on Tenant's part to be observed and performed, and for all acts and
omissions of any licensee or subtenant or anyone claiming under or through any
subtenant which shall be in violation of any of the obligations of this Lease,
and any such violation shall be deemed to be a violation by Tenant. If Landlord
shall decline to give its consent to any proposed assignment or sublease, or if
Landlord shall exercise either of its options under Section 13.2, Tenant shall
indemnify, defend and hold harmless Landlord against and from any and all
losses, liabilities, damages, costs, and expenses (including reasonable
attorneys' fees and disbursements) resulting from any claims that
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may be made against Landlord by the proposed assignee or subtenant arising from
or in connection with such proposed assignment or subletting, or by any brokers
or other Persons (with whom Tenant or its proposed assignee or subtenant may
have dealt) claiming a commission or similar compensation in connection with the
proposed assignment or sublease.
Section 13.7 In the event that (a) Landlord fails to exercise
either of its options under Section 13.2 and consents to a proposed assignment
or sublease, and (b) Tenant fails to execute and deliver the assignment or
sublease to which Landlord consented within one hundred twenty (120) days after
the giving of such consent, then, Tenant shall again comply with all of the
provisions and conditions of Section 13.2 before assigning this Lease or
subletting all or part of the Premises.
Section 13.8 With respect to each and every sublease
authorized by Landlord under the provisions of this Lease, it is further agreed
that:
(a) No sublease shall be for a term ending later than
one day prior to the Expiration Date of this Lease;
(b) No sublease shall be delivered, and no subtenant
shall take possession of the Premises or any part thereof, until an
executed counterpart of such sublease has been delivered to Landlord
and approved in writing by Landlord (or deemed approved pursuant to
Section 13.2(a) or (b)); and
(c) Each sublease shall be subject and subordinate to
this Lease and to the matters to which this Lease is or shall be
subordinate, and each subtenant by entering into a sublease is deemed
to have agreed that in the event of termination, re-entry or
dispossession by Landlord under this Lease, Landlord may, at its
option, take over all of the right, title and interest of Tenant, as
sublandlord, under such sublease, and such subtenant shall, at
Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that Landlord shall not (i) be
liable for any previous act or omission of Tenant under such sublease
(except to the extent such act or omission is a default under the
Sublease and continues beyond the date on which Landlord succeeds to
Tenant's interest, provided that the subtenant gives notice of such act
or omission to Landlord prior to such takeover by Landlord), (ii) be
subject to any counterclaim, offset or defense, not expressly provided
in such sublease, which theretofore accrued to such subtenant against
Tenant, (iii) be bound by any previous modification of such sublease
not consented to in writing by Landlord, or by any previous prepayment
of more than one month's Fixed Rent or of any Additional Rent, or (iv)
be obligated to perform any work in the subleased space or to prepare
it for occupancy, and in connection with such attornment, the subtenant
shall execute and deliver to Landlord any instruments Landlord may
reasonably request to evidence and confirm such attornment. Each
subtenant or licensee of Tenant shall be deemed, automatically upon and
as a condition of its occupying or using the Premises or any part
thereof, to have agreed to be bound by the terms and conditions set
forth in this Article 13. The provisions of this Article 13 shall be
self-operative and no further instrument shall be required to give
effect to this provision.
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Section 13.9 If Landlord shall consent to any assignment of
this Lease or to any sublease, or if Tenant shall enter into any other
assignment or sublease permitted hereunder, Tenant shall, in consideration
therefor, pay to Landlord, as Additional Rent:
(a) In the case of an assignment, on the effective
date of the assignment, an amount equal to fifty percent (50%) of (i)
all sums and other consideration paid to Tenant by the assignee for or
by reason of such assignment (including sums paid for Tenant's
Property, less, in the case of a sale thereof, the then net unamortized
or undepreciated cost thereof, determined on the basis of Tenant's
federal income tax returns) less (ii) all Transaction Expenses
reasonably and actually incurred by Tenant in connection with such
assignment; or
(b) In the case of a sublease, an amount equal to
fifty percent (50%) of (i) all rents, additional charges or other
consideration payable to Tenant under the sublease in excess of the
Fixed Rent and Additional Rent accruing during the term of the sublease
in respect of the subleased space (at the rate per square foot payable
by Tenant hereunder) pursuant to the terms hereof (including sums paid
for the sale or rental of Tenant's Property, less, in the case of the
sale thereof, the then net unamortized or undepreciated cost thereof,
determined on the basis of Tenant's federal income tax returns) less
(ii) all Transaction Expenses reasonably and actually incurred by
Tenant in connection with such sublease. The sums payable under this
clause shall be paid by Tenant to Landlord as Additional Rent as and
when paid by the subtenant to Tenant.
Section 13.10 (a) Subject to the provisions of Section 13.11,
if Tenant is a corporation, limited liability company, limited partnership,
limited liability partnership, general partnership, business trust, foundation,
or any other legal entity (any of the foregoing, an "Entity"), and a majority of
the outstanding voting stock, membership interests, partnership interests or
other legal or equitable ownership interests of any kind (any of the foregoing,
"Ownership Interests") are not publicly traded on a recognized stock exchange or
over-the-counter market, then any transfer (by one or more transfers), of a
majority of the Ownership Interests of Tenant shall be deemed an assignment of
this Lease for all purposes of this Article 13. The term "transfer" shall be
deemed to include the issuance of new Ownership Interests resulting in a
majority of the Ownership Interests of Tenant being held by Persons (other than
barnesandnoble.com inc.) which do not hold a majority of the Ownership Interests
of Tenant on the date hereof, except in the case of a public offering of
Ownership Interests on a recognized stock exchange or over-the-counter market.
The transfer of a majority of the Ownership Interests of Tenant through one or
more transfers on a recognized stock exchange or over-the-counter market shall
not be deemed an assignment of this Lease for purposes of this Article 13.
(b) If Tenant is an Entity, and Tenant is merged or
consolidated with another Entity, or if substantially all of Tenant's assets are
transferred to another Entity, then such merger, consolidation or transfer of
assets shall be deemed an assignment of this Lease for all purposes of this
Article 13. Notwithstanding the foregoing, Landlord's consent shall not be
required for such assignment, and the provisions of Sections 13.2, 13.6 and 13.9
shall not be applicable thereto, so long as each of the following conditions
have been satisfied: (i) such merger, consolidation or transfer of assets shall
have been made for a legitimate independent business purpose and not for
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the principal purpose of transferring this Lease, (ii) the successor to Tenant
or transferee of substantially all of Tenant's assets shall have a net worth,
computed in accordance with generally accepted accounting principles
consistently applied of not less than $300,000,000.00 (the "Successor Net
Worth"), (unless barnesandnoble.com inc. is the successor to Tenant or is the
transferee of such assets, in which case barnesandnoble.com inc. shall have a
net worth, computed in accordance with generally accepted accounting principles
consistently applied, at least equal to the net worth of Tenant immediately
prior to such merger, consolidation or transfer) and (iii) proof satisfactory to
Landlord of the Successor Net Worth (or, in the case of Guarantor
(barnesandnoble.com inc.), a net worth at least equal to the net worth of Tenant
immediately prior to such merger, consolidation or transfer) shall have been
delivered to Landlord at least ten (10) days prior to the effective date of any
such transaction. Notwithstanding the foregoing, in the event that the Successor
Net Worth shall be less than $300,000,000.00, Tenant may satisfy the condition
set forth in Subsection 13.10(b)(ii) as follows: (A) if the Successor Net Worth
is less than $300,000,000.00 but more than $250,000,000.00, Tenant shall
increase the Security Deposit by $500,000.00 above the Security Deposit then
held by Landlord, (B) if the Successor Net Worth is less than $250,000,000.00
but more than $200,000,000.00, Tenant shall increase the Security Deposit by
$1,000,000.00 above the Security Deposit then held by Landlord, and (C) if the
Successor Net Worth is less than $200,000,000.00, Tenant shall provide Landlord
with a Guaranty or Guarantys, substantially in the form attached as Exhibit O to
this Lease, of Tenant's obligations under this Lease executed by B&N Inc. and/or
by Bertelsmann, provided that at the time of execution and delivery of such
Guaranty, Tenant shall provide to Landlord reasonable evidence that such
guarantor(s) shall have a net worth, computed in accordance with generally
accepted accounting principles consistently applied, of not less than
$300,000,000.00 in the aggregate.
(c) The limitations set forth in this Section 13.10 shall be
deemed to apply to assignees of this Lease, if any, and any transfer of
Ownership Interests in, or any merger, consolidation or transfer of assets of,
any such assignee in violation of this Section 13.10 shall be deemed to be an
assignment of this Lease in violation of Section 13.1.
(d) A material modification or amendment or an extension of a
sublease shall be deemed a sublease for the purposes of Section 13.1, and a
takeover agreement shall be deemed a transfer of this Lease for the purposes of
Section 13.1.
Section 13.11 Tenant may, without Landlord's consent but upon
not less than ten (10) days prior notice to Landlord, assign this Lease or
sublet all or any portion of the Premises to any wholly owned subsidiary,
Affiliate or parent of Tenant, Bertelsmann or B&N Inc. (any of the foregoing, a
"Permitted Occupant"), or permit any Permitted Occupant to occupy all or any
portion of the Premises, provided that each Permitted Occupant shall be engaged
in a business or activity which is in keeping with the standards of the Building
and which is a Permitted Use. The provisions of Sections 13.2, 13.6, 13.9 and
13.10 shall not be applicable to any such assignment, subleasing or occupancy.
Any assignment or subleasing to, or occupancy by, any such Permitted Occupant
shall not relieve, release, impair or discharge any of Tenant's obligations
under this Lease. Each notice to Landlord with respect to any assignment,
subleasing or occupancy granted pursuant to this Section 13.11 shall include (i)
the name and the nature of
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the business or occupation of such Permitted Occupant, and (ii) the terms of
such assignment, subleasing or occupancy.
Section 13.12 (a) Any assignment or transfer, whether made
with Landlord's consent pursuant to Section 13.1 or without Landlord's consent
to the extent permitted under Sections 13.10 and 13.11, shall be made only if,
and shall not be effective until, the assignee shall execute, acknowledge and
deliver to Landlord an agreement in form and substance reasonably satisfactory
to Landlord whereby the assignee shall assume the obligations of this Lease on
the part of Tenant to be performed or observed from and after the effective date
of such assignment or transfer, and whereby the assignee shall agree that the
provisions in Section 13.1 shall, notwithstanding such assignment or transfer,
continue to be binding upon it in respect of all future assignments and
transfers.
(b) The joint and several liability of Tenant and any
immediate or remote successor in interest of Tenant and the due performance of
the obligations of this Lease on Tenant's part to be performed or observed shall
not be discharged, released or impaired in any respect by any agreement or
stipulation made by Landlord, or any grantee or assignee of Landlord by way of
mortgage or otherwise, extending the time, or modifying any of the obligations
of this Lease, or by any waiver or failure of Landlord, or any grantee or
assignee of Landlord by way of mortgage or otherwise, to enforce any of the
obligations of this Lease.
(c) The listing of any name other than that of Tenant, whether
on the doors of the Premises or the Building directory, or otherwise, shall not
operate to vest any right or interest in this Lease or in the Premises, nor
shall it be deemed to be the consent of Landlord to any assignment or transfer
of this Lease or to any sublease of Premises or to the use or occupancy thereof
by others. Any such listing shall constitute a privilege extended by Landlord,
revocable at Landlord's will by notice to Tenant, provided that Landlord shall
not unreasonably revoke such privilege as to any Affiliate of Tenant, or any
subtenant of Tenant or assignee of this Lease approved by Landlord pursuant to
this Article 13 (or without Landlord's approval, to the extent permitted
pursuant to Section 13.11).
ARTICLE 14. ACCESS TO PREMISES
Section 14.1 Tenant shall permit Landlord, Landlord's agents
and public utilities servicing the Building to erect, use and maintain concealed
ducts, pipes and conduits in and through the Premises. Landlord or Landlord's
agents shall have the right to enter the Premises at all reasonable times upon
reasonable prior notice (except no such prior notice shall be required in case
of emergency), which notice may be oral, to examine the same, to show them to
prospective purchasers, Mortgagees, Superior Lessors or lessees of the Building
and their respective agents and representatives or (during the last twelve (12)
months of the Term) prospective tenants of the Premises, and to make such
repairs, alterations, improvements or additions (a) as Landlord may deem
necessary to the Premises or to any other portion of the Building, or (b) which
Landlord may elect to perform following Tenant's failure to make repairs or
perform any work which Tenant is obligated to make or perform under this Lease
after expiration of any applicable notice and cure periods, or (c) for the
purpose of complying with Legal Requirements, and Landlord shall be allowed to
take all material into and upon the Premises that may be reasonably required
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therefor without the same constituting an eviction or constructive eviction of
Tenant in whole or in part and Fixed Rent and Additional Rent will not be abated
while said repairs, alterations, improvements or additions are being made, by
reason of loss or interruption of business of Tenant, or otherwise. Landlord
shall use reasonable efforts to minimize the duration thereof and interference
by reason thereof with Tenant's access to and use and occupancy of the Premises
in making any repairs, alterations, additions or improvements pursuant to this
Section 14.1, provided that Landlord shall have no obligation to employ
contractors or labor at overtime or other premium pay rates or to incur any
other overtime costs or additional expenses whatsoever, unless Tenant shall
first pay to Landlord Landlord's reasonable estimate of all incremental cost
increases to do so. In such event Tenant shall pay, as Additional Rent upon
presentation of appropriate invoices, all additional costs incurred by Landlord
in connection therewith. Notwithstanding the foregoing, as to any rights
exercised by Landlord to make repairs, alterations, conditions and improvements
within the Premises, Landlord agrees that such exercise shall not affect the
layout or reduce the floor area of the Premises, except to a de minimis extent.
Landlord shall promptly repair and restore any damage to the Premises, including
Tenant's Alterations or Tenant's Property, caused by such exercise of Landlord's
rights, at Tenant's sole cost and expense (if such exercise was in response to
any act or omission constituting a default by Tenant), or at Landlord's sole
cost and expense (in all other cases).
Section 14.2 If Tenant shall not be present when for any
reason entry into the Premises shall be necessary, Landlord or Landlord's agents
may enter the same without rendering Landlord or such agents liable therefor (if
during such entry Landlord or Landlord's agents shall accord reasonable care to
Tenant's Property), and without in any manner affecting this Lease. Nothing
herein contained, however, shall be deemed or construed to impose upon Landlord
any obligation, responsibility or liability whatsoever for the care, supervision
or repair of the Building or any part thereof, other than as herein provided.
Section 14.3 Landlord shall have the right from time to time
to alter the Building and, without the same constituting an actual or
constructive eviction and without incurring any liability to Tenant therefor, to
change the arrangement or location of entrances or passageways, doors and
doorways, and corridors, elevators, stairs, toilets, or other public parts of
the Building and (subject to the provisions of Article 33) to change the name,
number or designation by which the Building is commonly known, provided that
(except as may be permitted pursuant to the provisions of Article 29) such
alterations or changes do not interfere (except to a de minimis extent) with
Tenant's layout, usable floor area, use or enjoyment of the Premises, or access
to the Building or Premises. All parts (except surfaces facing the interior of
the Premises) of all walls, windows and doors bounding the Premises (including
exterior Building walls, exterior core corridor walls, exterior doors and
entrances other than doors and entrances solely servicing the Premises), all
balconies, terraces and roofs adjacent to the Premises, all space in or adjacent
to the Premises used for shafts, stacks, stairways, chutes, pipes, conduits,
ducts, fan rooms, heating, air cooling, plumbing and other mechanical
facilities, service closets and other Building facilities are not part of the
Premises, and Landlord shall have the use thereof, as well as access thereto
through the Premises for the purposes of operation, maintenance, alteration and
repair.
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ARTICLE 15. CERTIFICATE OF OCCUPANCY
Tenant shall not at any time use or occupy the Premises in
violation of the certificate of occupancy at such time issued for the Premises
or for the Building and in the event that any department of the City or State of
New York shall hereafter contend or declare by notice, violation, order or in
any other manner whatsoever that the Premises are used for a purpose which is a
violation of such certificate of occupancy, Tenant shall, upon five (5) days'
written notice from Landlord or any Governmental Authority, immediately
discontinue such use of the Premises. Failure by Tenant to discontinue such use
after such notice shall be considered a default in the fulfillment of a material
covenant of this Lease and Landlord shall have the right to terminate this Lease
immediately, and in addition thereto shall have the right to exercise any and
all rights and privileges and remedies given to Landlord by and pursuant to the
provisions of Articles 16 and 17. Landlord represents that a true and complete
copy of the current certificate of occupancy for the Building is attached as
Exhibit G. Landlord will not amend or modify the existing Certificate of
Occupancy for the Building as to prevent the use of the Premises for the
Permitted Use.
ARTICLE 16. DEFAULT
Section 16.1 Each of the following events shall be an "Event
of Default" hereunder:
(a) if Tenant defaults in the payment when due of any
installment of Fixed Rent or Additional Rent, and such default shall
continue for a period of seven (7) days after notice thereof from
Landlord; provided, however, that if Tenant shall default in the timely
payment of Fixed Rent or Additional Rent such that Landlord has given a
notice hereunder more than three (3) times in any period of twelve (12)
consecutive months which notices shall have made specific reference to
Landlord's right to terminate pursuant to this Section 16.1, then,
notwithstanding that such defaults shall have each been cured within
the applicable period provided above, upon any further similar default,
Landlord may serve a five days' notice of termination upon Tenant
without affording to Tenant an opportunity to cure such further
default; or
(b) if Tenant's interest in this Lease is transferred
in violation of Article 13; or
(c) if the Premises are abandoned; or
(d) (i) if Tenant or any Guarantor admits in
writing its inability to pay its debts as they become due; or
(ii) if Tenant or any Guarantor commences or
institutes any case, proceeding or other action (A) seeking
relief as a debtor, or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts under any existing or
future law of any jurisdiction, domestic or
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foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all
or any substantial part of its property; or
(iii) if Tenant or any Guarantor makes a
general assignment for the benefit of creditors; or
(iv) if any case, proceeding or other action
is commenced or instituted against Tenant or any Guarantor (A)
seeking to have an order for relief entered against it as
debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with
respect to it or its debts under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, or (B)
seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of
its property, which either (1) results in any such entry of an
order for relief, adjudication of bankruptcy or insolvency or
such an appointment or the issuance or entry of any other
order having a similar effect, or (2) remains undismissed for
a period of one hundred twenty (120) days; or
(v) if any case, proceeding or other action
is commenced or instituted against Tenant or any Guarantor
seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial
part of its property which results in the entry of an order
for any such relief which has not been vacated, discharged, or
stayed or bonded pending appeal within one hundred twenty
(120) days from the entry thereof; or
(vi) if Tenant or any Guarantor takes any
action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in
Subsections 16.1(d)(ii), (iii), (iv) or (v); or
(vii) if a trustee, receiver or other
custodian is appointed for any substantial part of the assets
of Tenant or any Guarantor, which appointment is not vacated
or effectively stayed within seven (7) Business Days, or if
any such vacating or stay does not thereafter remain in
effect; or
(e) if Tenant defaults in the observance or
performance of any other term, covenant or condition of this Lease on
Tenant's part to be observed or performed and Tenant fails to remedy
such default within thirty (30) days after notice by Landlord to Tenant
of such default, or, if such default is of such a nature that it cannot
be completely remedied within said period of thirty (30) days, if
Tenant fails to commence to remedy such default within such thirty-day
period, or fails thereafter to diligently prosecute to completion all
steps necessary to remedy such default; or
(f) if any Guarantor defaults beyond applicable grace
and notice periods in the payment or performance of any of its
obligations under any Guaranty; or
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(g) if there shall be any default beyond applicable
grace and notice periods under Tenant's Other Lease.
Notwithstanding the foregoing, if any of the acts set forth in Subsections
16.1(d)(i), (ii), (iii), (iv) or (v) is the act of any Guarantor, such act shall
not be an Event of Default if Tenant shall, within five (5) days after the date
on which such act occurs, deliver to Landlord proof satisfactory to Landlord
that Tenant (or a substitute Guarantor acceptable to Landlord in its sole
discretion which provides Landlord with a Guaranty, substantially in the form
attached as Exhibit O to this Lease) then has a net worth, computed in
accordance with generally accepted accounting principles consistently applied,
of not less than $300,000,000.00.
Section 16.2 If an Event of Default occurs, Landlord may at
any time thereafter give written notice to Tenant stating that this Lease and
the Term shall expire and terminate on the date specified in such notice, which
date shall not be less than seven (7) days after the giving of such notice. If
Landlord gives such notice, this Lease and the Term and all rights of Tenant
under this Lease shall expire and terminate as if the date set forth in such
notice were the Fixed Expiration Date and Tenant immediately shall quit and
surrender the Premises, but Tenant shall remain liable as hereinafter provided.
Anything contained herein to the contrary notwithstanding, if such termination
shall be stayed by order of any court having jurisdiction over any proceeding
described in Section 16.1(d), or by federal or state statute, then, following
the expiration of any such stay, or if the trustee appointed in any such
proceeding, Tenant or Tenant as debtor-in-possession shall fail to assume
Tenant's obligations under this Lease within the period prescribed therefor by
law or within one hundred twenty (120) days after entry of the order for relief
or as may be allowed by the court, or if said trustee, Tenant or Tenant as
debtor-in-possession shall fail to provide adequate protection of Landlord's
right, title and interest in and to the Premises or adequate assurance of the
complete and continuous future performance of Tenant's obligations under this
Lease, Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on seven (7) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon the expiration of said seven (7)
day period this Lease shall cease and expire as set forth above and Tenant,
Tenant as debtor-in-possession or said trustee shall immediately quit and
surrender the Premises as aforesaid.
Section 16.3 If, at any time, (a) Tenant shall comprise two
(2) or more Persons, (b) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (c) Tenant's interest in this
Lease shall have been assigned, the word "Tenant," as used in Section 16.1(d),
shall be deemed to mean any one or more of the Persons primarily or secondarily
liable for Tenant's obligations under this Lease. Any monies received by
Landlord from or on behalf of Tenant during the pendency of any proceeding of
the types referred to in Section 16.1(d) shall be deemed paid as compensation
for the use and occupation of the Premises and the acceptance of any such
compensation by Landlord shall not be deemed an acceptance of Fixed Rent and/or
Additional Rent or a waiver on the part of Landlord of any rights under this
Lease.
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ARTICLE 17. REMEDIES AND DAMAGES
Section 17.1 (a) If an Event of Default shall occur, and this
Lease and the Term shall expire and come to an end as provided in Article 16:
(i) Tenant shall quit and peacefully surrender the
Premises to Landlord, and Landlord and its agents may immediately, or
at any time after such Event of Default or after the date upon which
this Lease and the Term shall expire and come to an end, re-enter the
Premises or any part thereof, without notice, either by summary
proceedings, or by any other applicable action or proceeding, or by
legal force or other legal means (without being liable to indictment,
prosecution or damages therefor), and may repossess the Premises and
dispossess Tenant and any other Persons from the Premises and remove
any and all of their property and effects from the Premises; and
(ii) Landlord, at Landlord's option, may relet the
whole or any part or parts of the Premises from time to time, either in
the name of Landlord or otherwise, to such tenant or tenants, for such
term or terms ending before, on or after the Expiration Date, at such
rental or rentals and upon such other conditions, which may include
concessions and free rent periods, as Landlord, in its sole discretion,
may determine; provided, however, that Landlord shall have no
obligation to relet the Premises or any part thereof and shall in no
event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or
failure to collect any rent due upon any such reletting, and no such
refusal or failure shall operate to relieve Tenant of any liability
under this Lease or otherwise affect any such liability, and Landlord,
at Landlord's option, may make such repairs, replacements, alterations,
additions, improvements, decorations and other physical changes in and
to the Premises as Landlord, in its sole discretion, considers
advisable or necessary in connection with any such reletting or
proposed reletting, without relieving Tenant of any liability under
this Lease or otherwise affecting any such liability.
(b) Tenant hereby waives the service of any notice of
intention to re-enter or to institute legal proceedings to that end which may
otherwise be required to be given under any present or future law. Tenant, on
its own behalf and on behalf of all Persons claiming through or under Tenant,
including all creditors, does further hereby waive any and all rights which
Tenant and all such Persons might otherwise have under any present or future law
to redeem the Premises, or to re-enter or repossess the Premises, or to restore
the operation of this Lease, after (i) Tenant shall have been dispossessed by a
judgment or by warrant of any court or judge, (ii) any re-entry by Landlord, or
(iii) any expiration or termination of this Lease and the Term, whether such
dispossess, re-entry, expiration or termination shall be by operation of law or
pursuant to the provisions of this Lease. The words "re-enter", "re-entry" and
"re-entered" as used in this Lease shall not be deemed to be restricted to their
technical legal meanings. In the event of a breach or threatened breach by
Tenant, or any Persons claiming through or under Tenant, of any term, covenant
or condition of this Lease, Landlord shall have the right to enjoin such breach
and the right to invoke any other remedy allowed by law or in equity as if
re-entry, summary proceedings and other special remedies were not provided in
this Lease for such
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breach. The rights to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.
Section 17.2 (a) If this Lease and the Term shall expire and
come to an end as provided in Article 16, or by or under any summary proceeding
or any other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 17.1, or by or under any summary proceeding or any other
action or proceeding, then, in any of such events:
(i) Tenant shall pay to Landlord all Fixed Rent and
Additional Rent payable under this Lease by Tenant to Landlord to the
date upon which this Lease and the Term shall have expired and come to
an end or to the date of re-entry upon the Premises by Landlord, as the
case may be;
(ii) Tenant also shall be liable for and shall pay to
Landlord, as damages, any deficiency (the "Deficiency") between (A)
Fixed Rent and Additional Rent for the period which otherwise would
have constituted the unexpired portion of the Term (conclusively
presuming the Additional Rent for each year thereof to be the same as
was payable for the year immediately preceding such termination or
re-entry), and (B) the net amount, if any, of rents collected under any
reletting effected pursuant to the provisions of Subsection 17.1(a)(ii)
for any part of such period (first deducting from the rents collected
under any such reletting all of Landlord's expenses in connection with
the termination of this Lease, Landlord's re-entry upon the Premises
and with such reletting including all repossession costs, brokerage
commissions, legal expenses, attorneys' fees and disbursements,
alteration costs and other expenses of preparing the Premises for such
reletting). Tenant shall pay the Deficiency in monthly installments on
the days specified in this Lease for payment of installments of Fixed
Rent, and Landlord shall be entitled to recover from Tenant each
monthly Deficiency as the same shall arise. No suit to collect the
amount of the Deficiency for any month shall prejudice Landlord's right
to collect the Deficiency for any subsequent month by a similar
proceeding; and
(iii) whether or not Landlord shall have collected
any monthly Deficiency as aforesaid, Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord, on demand, in
lieu of any further Deficiency as and for liquidated and agreed final
damages, a sum equal (A) to the amount by which the Fixed Rent and
Additional Rent for the period which otherwise would have constituted
the unexpired portion of the Term (conclusively presuming the
Additional Rent for each year thereof to be the same as was payable for
the year immediately preceding such termination or re-entry) exceeds
(B) the then fair and reasonable rental value of the Premises,
including Additional Rent for the same period, both discounted to
present value at the rate of five percent (5%) per annum less (C) the
aggregate amount of Deficiencies previously collected by Landlord
pursuant to the provisions of Subsection 17.2(a)(ii) for the same
period. If, before presentation of proof of such liquidated damages to
any court, commission or tribunal, Landlord shall have relet the
Premises or any part thereof for the period which otherwise would have
constituted the unexpired portion of the Term, or any part thereof, the
amount of net rents collected in connection with such reletting shall
be
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deemed, prima facie, to be the fair and reasonable rental value for the
part or the whole of the Premises so relet during the term of the
reletting.
(b) If Landlord shall relet the Premises, or any part thereof,
together with other space in the Building, the net rents collected under any
such reletting and the expenses of any such reletting shall be equitably
apportioned for the purposes of this Section 17.2. Tenant shall in no event be
entitled to any rents collected or payable under any reletting, whether or not
such rents shall exceed the Fixed Rent reserved in this Lease. Nothing contained
in Article 16 or this Article 17 shall be deemed to limit or preclude the
recovery by Landlord from Tenant of the maximum amount allowed to be obtained as
damages by any statute or rule of law, or of any sums or damages to which
Landlord may be entitled in addition to the damages set forth in this Section
17.2.
ARTICLE 18. FEES AND EXPENSES
Section 18.1 If an Event of Default shall occur under this
Lease, or if Tenant shall fail to comply with its obligations under this Lease
and the preservation of property or the safety of any tenant, occupant or other
person is threatened, Landlord may, after reasonable prior notice to Tenant
except in an emergency, perform the same for the account of Tenant or make any
expenditure or incur any obligation for the payment of money for the account of
Tenant. All amounts expended by Landlord in connection with the foregoing,
including reasonable attorneys' fees and disbursements in instituting,
prosecuting or defending any action or proceeding or recovering possession, and
the cost thereof, with interest thereon at the Default Rate, shall be deemed to
be Additional Rent hereunder and shall be paid by Tenant to Landlord within
twenty (20) days of rendition of any bill or statement to Tenant therefor.
Section 18.2 If Tenant shall fail to pay any installment of
Fixed Rent and/or Additional Rent when due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent and/or Additional Rent, as the case
may be, as a late charge and as Additional Rent, a sum equal to interest at the
Default Rate on the amount unpaid, computed from the date such payment was due
to and including the date of payment, provided, however, that on not more than
one (1) occasion during any twelve (12) consecutive monthly period during the
Term, Tenant's failure to pay an installment of Fixed Rent or Additional Rent
when due shall not require the payment of interest at the Default Rate on such
overdue amount, provided such installment of Fixed Rent or Additional Rent shall
be paid prior to the expiration of the applicable grace period provided in
Section 16.1 or elsewhere in this Lease.
ARTICLE 19. NO REPRESENTATIONS BY LANDLORD
Except as expressly set forth in this Lease, Landlord and
Landlord's agents have made no warranties, representations, statements or
promises with respect to (a) the rentable and usable areas of the Premises or
the Building, (b) the amount of any current or future Labor Rates or Taxes, (c)
the compliance with applicable Legal Requirements of the Premises or the
Building, or (d) the suitability of the Premises for any particular use or
purpose. No rights, easements or licenses are acquired by Tenant under this
Lease, by implication or otherwise, except as expressly set forth herein. This
Lease (including any Exhibits referred to herein and all
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supplementary agreements provided for herein) contains the entire agreement
between the parties and all understandings and agreements previously made
between Landlord and Tenant are merged in this Lease, which alone fully and
completely expresses their agreement. Tenant is entering into this Lease after
full investigation, and is not relying upon any statement or representation made
by Landlord not embodied in this Lease.
ARTICLE 20. END OF TERM
Section 20.1 Upon the expiration or other termination of this
Lease, Tenant shall quit and surrender to Landlord the Premises, vacant, broom
clean, in good order and condition, ordinary wear and tear and damage for which
Tenant is not responsible under the terms of this Lease excepted, and Tenant
shall remove all of Tenant's Property from the Premises, and this obligation
shall survive the expiration or sooner termination of the Term. If the last day
of the Term or any renewal thereof falls on Saturday or Sunday, this Lease shall
expire on the Business Day immediately preceding. Tenant expressly waives, for
itself and for any Person claiming through or under Tenant, any rights which
Tenant or any such Person may have under the provisions of Section 2201 of the
New York Civil Practice Law and Rules and of any successor law of like import
then in force in connection with any holdover summary proceedings which Landlord
may institute to enforce the foregoing provisions of this Article 20.
Section 20.2 Tenant acknowledges that Tenant or any Tenant
Party remaining in possession of the Premises after the expiration or earlier
termination of this Lease would create an unusual hardship for Landlord and for
any prospective tenant. Tenant therefore covenants that if for any reason Tenant
or any Tenant Party shall fail to vacate and surrender possession of the
Premises or any part thereof on or before the expiration or earlier termination
of this Lease and the Term, then Tenant's continued possession of the Premises
shall be as a "month-to-month" tenant, during which time, without prejudice and
in addition to any other rights and remedies Landlord may have hereunder or at
law, Tenant shall pay to Landlord for each month and for each portion of any
month during which Tenant holds over, an amount equal to one and one half (1
1/2) times the total monthly amount of Fixed Rent and Additional Rent payable
hereunder. The provisions of this Section 20.2 shall not in any way be deemed to
(a) permit Tenant to remain in possession of the Premises after the Expiration
Date or sooner termination of this Lease or (b) imply any right of Tenant to use
or occupy the Premises upon expiration or termination of this Lease and the
Term, and no acceptance by Landlord of payments from Tenant after the Expiration
Date or sooner termination of the Term shall be deemed to be other than on
account of the amount to be paid by Tenant in accordance with the provisions of
this Article 20. Tenant's obligations under this Article 20 shall survive the
expiration or earlier termination of this Lease.
ARTICLE 21. QUIET ENJOYMENT
For so long as this Lease is in full force and effect, Tenant
may peaceably and quietly enjoy the Premises without hindrance by Landlord or
any Person lawfully claiming through or under Landlord, subject, nevertheless,
to the terms and conditions of this Lease.
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ARTICLE 22. NO WAIVER; NON-LIABILITY
Section 22.1 No act or thing done by Landlord or Landlord's
agents during the Term shall be deemed an acceptance of a surrender of the
Premises, and no agreement to accept such surrender shall be valid unless in
writing and signed by Landlord. No employee of Landlord or of Landlord's agents
shall have any power to accept the keys of the Premises prior to the termination
of this Lease. The delivery of keys to any employee of Landlord or of Landlord's
agents shall not operate as a termination of this Lease or a surrender of the
Premises. Any Building employee to whom any property shall be entrusted by or on
behalf of Tenant shall be deemed to be acting as Tenant's agent with respect to
such property and neither Landlord nor its agents shall be liable for any damage
to property of Tenant or of others entrusted to employees of the Building, nor
for the loss of or damage to any property of Tenant by theft or otherwise.
Section 22.2 The failure of Landlord to seek redress for
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease, or any of the Rules and Regulations set forth or
hereafter adopted by Landlord, shall not prevent a subsequent act, which would
have originally constituted a violation, from having all of the force and effect
of an original violation. The receipt by Landlord of Fixed Rent and/or
Additional Rent with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. The failure of Landlord to enforce any of
the Rules and Regulations set forth, or hereafter adopted, against Tenant or any
other tenant in the Building shall not be deemed a waiver of any such Rules and
Regulations. Landlord shall not enforce the Rules and Regulations against Tenant
in a discriminatory manner. No provision of this Lease shall be deemed to have
been waived by Landlord, unless such waiver be in writing signed by Landlord. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
Fixed Rent or any Additional Rent shall be deemed to be other than on account of
the next installment of Fixed Rent or Additional Rent, as the case may be, or as
Landlord may elect to apply same, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as Fixed Rent or
Additional Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Fixed Rent or Additional Rent or pursue any other remedy in this
Lease provided. Any executory agreement hereafter made shall be ineffective to
change, modify, discharge or effect an abandonment of this Lease in whole or in
part unless such executory agreement is in writing and signed by the party
against whom enforcement of the change, modification, discharge or abandonment
is sought. All references in this Lease to the consent or approval of Landlord
shall be deemed to mean the written consent or approval of Landlord and no
consent or approval of Landlord shall be effective for any purpose unless such
consent or approval is set forth in a written instrument executed by Landlord.
Section 22.3 (a) Except to the extent arising from the
negligence or willful misconduct of Landlord or its agents, employees or
contractors, neither Landlord nor its agents shall be liable for any injury or
damage to persons or property or interruption of Tenant's business resulting
from fire, explosion, falling plaster, steam, gas, electricity, water, rain or
snow or leaks from any part of the Building or from the pipes, appliances or
plumbing works or from the roof, street or subsurface or from any other place or
by dampness or by any other cause of whatsoever nature provided, however, that
Tenant shall, in accordance with Section 10.2, first
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look for recovery to any insurance required to be carried by Tenant pursuant to
the terms of this Lease; nor shall Landlord or its agents be liable for any such
damage caused by other tenants or persons in the Building or caused by
construction of any private, public or quasi-public work; nor shall Landlord be
liable for any latent defect in the Premises or in the Building (except that
Landlord shall be required to repair the same to the extent provided in Article
5). Nothing in the foregoing shall affect any right of Landlord to the indemnity
from Tenant to which Landlord may be entitled under Article 28 in order to
recoup for payments made to compensate for losses of third parties.
(b) If, at any time or from time to time, any windows of the
Premises are temporarily closed, darkened or bricked-up for any reason
whatsoever, or any of such windows are permanently closed, darkened or
bricked-up if required by any Legal Requirement or related to any construction
upon property adjacent to the Real Property by parties other than Landlord,
Landlord shall not be liable for any damage Tenant may sustain thereby and
Tenant shall not be entitled to any compensation therefor nor abatement of Fixed
Rent or Additional Rent nor shall the same release Tenant from its obligations
hereunder nor constitute an eviction or constructive eviction of Tenant from the
Premises. Landlord shall take such reasonable measures as may be available to
Landlord (without the commencement or prosecution of legal action or the
expenditure of money) to minimize the period of time during which any such
windows are temporarily closed, darkened or bricked up. Landlord shall not
voluntarily close or darken such windows except temporarily in connection with
repairs or maintenance permitted or required hereunder.
ARTICLE 23. WAIVER OF TRIAL BY JURY
The respective parties hereto shall and they hereby do waive
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the
Premises, or for the enforcement of any remedy under any statute, emergency or
otherwise. If Landlord commences any summary proceeding against Tenant, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding (unless failure to impose such counterclaim would preclude
Tenant from asserting in a separate action the claim which is the subject of
such counterclaim), and will not seek to consolidate such proceeding with any
other action which may have been or will be brought in any other court by
Tenant.
ARTICLE 24. INABILITY TO PERFORM
This Lease and the obligation of Tenant to pay Fixed Rent and
Additional Rent hereunder and the obligations of Landlord and Tenant to perform
all of the other covenants and agreements hereunder will not be affected,
impaired or excused because the other party hereto is unable to fulfill any of
its obligations under this Lease expressly or impliedly to be performed by such
party or because such party is unable to make, or is delayed in making any
repairs, additions, alterations, improvements or decorations or is unable to
supply or is delayed in supplying any equipment or fixtures, if either Landlord
or Tenant is prevented or delayed from so
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doing by reason of strikes or labor troubles or by accident, or by any cause
whatsoever reasonably beyond such party's control, including laws, governmental
preemption in connection with a national emergency or by reason of any Legal
Requirements or by reason of the conditions of supply and demand which have been
or are affected by war or other emergency ("Unavoidable Delays"), but a party's
inability to pay any amount of money shall in no event be deemed an Unavoidable
Delay.
ARTICLE 25. BILLS AND NOTICES
Except as otherwise expressly provided in this Lease, any
bills, statements, consents, notices, demands, requests or other communications
given or required to be given under this Lease shall be in writing and shall be
deemed sufficiently given or rendered if delivered by hand (against a signed
receipt), sent by a nationally recognized overnight courier service, or sent by
registered or certified mail (return receipt requested) and addressed:
if to Tenant, (a) at Tenant's address at the Premises,
Attention: Marie J. Toulantis (or, if a regularly scheduled rent bill
or rent escalation statement, Mike Caputo), or (b) at any place where
Tenant or any agent or employee or Tenant may be found if mailed
subsequent to Tenant's abandoning or surrendering the Premises, in
either case (except if a routine bill or statement), with a copy to
Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the
Americas, New York, New York 10104, Attention: Michael N. Rosen, Esq.;
or
if to Landlord, as follows: 111 Chelsea LLC, c/o Taconic
Investment Partners LLC, 1500 Broadway, New York, New York 10036,
Attention: Mr. Paul Pariser, with a copy to: Schulte Roth & Zabel LLP,
900 Third Avenue, New York, New York 10022, Attention: Robert S. Nash,
Esq.
Any such bill, statement, consent, notice, demand, request or other
communication given as provided in this Article 25 shall be deemed to have been
rendered or given (i) on the date when it shall have been hand delivered, (ii)
three (3) Business Days from the date when it shall have been mailed, or (iii)
one (1) Business Day from the date when it shall have been sent by overnight
courier service.
ARTICLE 26. RULES AND REGULATIONS
Landlord reserves the right, from time to time, to adopt
additional reasonable and non-discriminatory Rules and Regulations and to
reasonably amend the Rules and Regulations then in effect on a nondiscriminatory
basis. Tenant and all Tenant Parties shall comply with the Rules and
Regulations, as so supplemented or amended. Nothing contained in this Lease
shall be construed to impose upon Landlord any duty or obligation to enforce the
Rules and Regulations or terms, covenants or conditions in any other lease
against any other tenant, and Landlord shall not be liable to Tenant for
violation of the same by any other tenant, its employees, agents, visitors or
licensees. If there shall be any inconsistencies between this Lease and the
Rules and Regulations, the provisions of this Lease shall prevail.
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ARTICLE 27. BROKER
Section 27.1 Each of Landlord and Tenant represents and
warrants to the other that it has not dealt with any broker in connection with
this Lease other than Insignia/Edward S. Gordon Company, Inc. ("Broker") and
that to the best of its knowledge and belief, no other broker, finder or similar
Person procured or negotiated this Lease or is entitled to any fee or commission
in connection herewith. Landlord has agreed to pay or cause to be paid a
commission to Broker in connection with this Lease pursuant to a separate
written agreement.
Section 27.2 Each of Landlord and Tenant shall indemnify,
defend, protect and hold the other party harmless from and against any and all
losses, liabilities, damages, claims, judgments, fines, suits, demands, costs,
interest and expenses of any kind or nature (including reasonable attorneys'
fees and disbursements) which the indemnified party may incur by reason of any
claim of or liability to any broker, finder or like agent (other than Broker)
arising out of any dealings claimed to have occurred between the indemnifying
party and the claimant in connection with this Lease, or the above
representation being false. The provisions of this Article 27 shall survive the
expiration or earlier termination of the Term.
ARTICLE 28. INDEMNITY
Section 28.1 Tenant shall not do or permit any act or thing to
be done upon the Premises which may subject Landlord to any liability or
responsibility for injury, damages to persons or property or to any liability by
reason of any violation of law or of any Legal Requirement, but shall exercise
such control over the Premises as to fully protect Landlord against any such
liability. Tenant shall defend, indemnify and save harmless Landlord from and
against (a) all claims of whatever nature against Landlord arising from any act,
omission or negligence of Tenant or any Tenant Party, (b) all claims against
Landlord arising from any accident, injury or damage whatsoever caused to any
person or to the property of any person and occurring during the Term in or
about the Premises, (c) all claims against Landlord arising from any accident,
injury or damage occurring outside of the Premises but anywhere within or about
the Real Property, where such accident, injury or damage results or is claimed
to have resulted from an act, omission or negligence of Tenant or any Tenant
Party, and (d) any breach, violation or nonperformance of any covenant,
condition or agreement in this Lease set forth and contained on the part of
Tenant to be fulfilled, kept, observed and performed. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, fines, suits, demands, costs and expenses of any kind or nature
(including reasonable attorneys' fees and disbursements) incurred in or in
connection with any such claim or proceeding brought thereon, and the defense
thereof.
Section 28.2 Tenant agrees to defend, indemnify and hold
harmless Landlord and any partner, shareholder, director, officer, principal,
employee or agent, directly and indirectly, of Landlord, from and against all
obligations (including removal and remedial actions), losses, claims, suits,
judgments, liabilities, penalties, damages (including consequential and punitive
damages), costs and expenses (including reasonable attorneys' and consultants'
fees and expenses) of any kind or nature whatsoever that may at any time be
incurred by, imposed on or asserted against Landlord or any such party directly
or indirectly based on, or arising or
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resulting from (a) the actual or alleged presence of Hazardous Materials on the
Premises or in the Building which is caused or (provided same is within Tenant's
reasonable control) permitted by Tenant, and (b) any Environmental Claim
relating in any way to Tenant's operation or use of the Premises or the
Building. The provisions of this Section 28.2 shall survive the expiration or
sooner termination of this Lease.
Section 28.3 In no event shall Tenant be obligated to defend,
indemnify or save harmless Landlord or any partner, shareholders, director,
officer, principal, employee or agent of Landlord against any loss, cost or
damage to the extent such loss, cost or damage is caused solely by the
negligence or misconduct of such party claiming a right to be indemnified.
ARTICLE 29. REDUCED PREMISES
Throughout the Term, including renewals and extensions, Tenant
agrees that Landlord shall have the right, upon Landlord's giving Tenant not
less than thirty (30) days prior written notice, to recapture a portion or
portions of the Premises solely for the purpose of (a) installing additional
elevator(s) in the Building, together with such space as may be required for
lobbies and other common areas, (b) improving the Building Systems, or (c)
constructing public corridors to create access to rentable space now existing or
to be constructed in the future on the floor(s) on which the Premises are
located (any or all of the foregoing work, "Building Improvements"). The amount
of such recaptured space which may be taken by Landlord pursuant to this Article
29 shall be limited to the areas shown on Exhibit J to this Lease (which
Landlord and Tenant hereby deem and agree consists of 1,800 Rentable Square Feet
of space), and within such areas, such space as is reasonably and actually
required for the proper installation, access and operation of such Building
Improvements. Tenant shall provide Landlord with access to the Premises to
perform the work to install and maintain the Building Improvements, including
the right to take all necessary materials and equipment into the Premises,
without the same constituting an eviction, and Tenant shall not be entitled to
any damages by reason of loss or interruption of business or otherwise. Landlord
shall use reasonable efforts to minimize interference with Tenant's access to
and use and occupancy of the Premises in making any Building Improvements;
provided, however, that Landlord shall have no obligation to employ contractors
or labor at overtime or other premium pay rates or to incur any other overtime
costs or additional expenses whatsoever, unless reimbursed by Tenant therefor
within ten (10) days after demand. Promptly following the completion of any
Building Improvements, Landlord shall at Landlord's expense make such repairs to
and restoration of the Premises and reasonable access thereto (including
installation of demising walls) as may be reasonably required as a direct result
thereof. Upon the earlier of (i) the date set forth for such recapture in
Landlord's notice described above, or (ii) the date on which Landlord's work in
the space to be recaptured renders such space unusable by Tenant for the
ordinary conduct of its business therein, the Lease shall be deemed
automatically amended by the deletion of such recaptured space from the
Premises, Fixed Rent and Additional Rent shall be reduced in the proportion
which the area of the part of the Premises so recaptured bears to the total area
of the Premises immediately prior thereto, and Tenant shall promptly vacate and
surrender such portion of the Premises to Landlord, and Landlord shall pay
Tenant an amount equal to (i) Tenant's actual out-of-pocket costs in performing
any Tenant's Alterations made to such recaptured space, minus (ii) the amount of
Landlord's Contribution applied to the performance of such Tenant's
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Alterations, amortized on a straight-line basis over a ten-year period (measured
from the date of substantial completion of the Alteration in question). Except
as otherwise specifically set forth in this Article 29, the terms and conditions
of this Lease shall not be modified by reason of any such recapture of space,
Building Improvements or the maintenance thereof.
ARTICLE 30. RIGHT OF FIRST OFFER
Section 30.1 If at any time prior to the tenth (10th)
anniversary of the Commencement Date, Landlord shall propose to lease all or any
portion of the space on the ninth (9th) floor of the Building which is
contiguous to the Premises as then constituted (all or any such portion of such
space, an "Expansion Space"), Landlord shall in each such case deliver notice
thereof to Tenant (the "Expansion Notice") setting forth (i) a description of
the Expansion Space in question, (ii) the Fixed Rent, (iii) the number of
Rentable Square Feet (determined in accordance with the standard set forth in
Section 30.4(e), (iv) the amount of electrical power (which shall be the
then-Building standard number of watts per square foot) for the Expansion Space,
and (v) the date Landlord anticipates that such Expansion Space will become
available for leasing. Provided that all of the conditions precedent set forth
in this Article 30 are fully satisfied by Tenant, Tenant shall have the option
(the "Expansion Option"), exercisable by Tenant delivering written notice to
Landlord (an "Acceptance Notice") within ten (10) business days of the giving by
Landlord of the Expansion Notice, to lease the Expansion Space upon the terms
and conditions set forth in this Article 30, and this Lease shall thereupon be
modified as provided in Section 30.4. Time shall be of the essence as to
Tenant's giving of any Acceptance Notice. The Expansion Option may be exercised
only with respect to all of the Expansion Space which is the subject of an
Expansion Notice. If Tenant fails to timely give an Acceptance Notice with
respect to any Expansion Space, Landlord shall be free to lease such Expansion
Space to any third party or to otherwise dispose of such Expansion Space, and
Tenant shall have no further rights hereunder to lease any such Expansion Space;
provided, however, that if Landlord leases such Expansion Space to a third
party, and subsequently (but prior to the tenth anniversary of the Commencement
Date) such Expansion Space becomes available for leasing, then Tenant's rights
under this Article 30 shall again be applicable to such Expansion Space.
Section 30.2 For purposes of this Article 30, the phrase
"available for leasing" shall mean that on the date set forth in the Expansion
Notice as being the date Landlord anticipates that such Expansion Space will
become available for leasing, (a) no party leases or occupies the Expansion
Space, whether pursuant to a written lease or other written agreement, and (b)
no party holds any written option or right to lease and/or occupy the Expansion
Space, or to renew its lease and/or right(s) of occupancy therefor. In addition,
so long as a tenant or other occupant leases or occupies a portion of the
Expansion Space, Landlord shall be free to extend any such tenancy or occupancy,
whether or not pursuant to a written lease or other agreement, and such space
shall not be deemed to be available for leasing, unless Landlord shall then have
given Tenant an Expansion Notice with respect to such space. In no event shall
Landlord be liable to Tenant for any failure by any then existing tenant or
occupant to vacate any of the Expansion Space. Landlord agrees that from and
after the date hereof, it will not grant any rights to any tenant or other
occupant of the Building with respect to the Expansion Space unless such rights
are subordinate to the rights granted Tenant hereunder, except (i) to tenants or
other occupants leasing or occupying such portions of the Expansion Space as of
the date hereof, or (ii)
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to new tenants or occupants of a portion of the Expansion Space after Landlord
shall have duly offered such Expansion Space to Tenant pursuant to this Article
30 and Tenant shall have failed to timely give an Acceptance Notice with respect
to such Expansion Space. Landlord represents that to the best of its knowledge,
as of the date of this Lease, the tenants and other occupants leasing or
occupying premises which may become subject to the provisions of Section 30.1
are as set forth on Exhibit L annexed hereto.
Section 30.3 Tenant shall have no right to exercise the
Expansion Option unless all of the following conditions have been satisfied on
the date of the Acceptance Notice and on the Expansion Space Commencement Date
(as defined in Section 30.4):
(a) No Event of Default shall have occurred and be
continuing under this Lease; and
(b) The named Tenant hereunder (or a permitted
assignee, sublessee, successor or transferee pursuant to Section 13.10,
but not any other assignee or successor tenant), or its Affiliates
shall occupy not less than seventy five percent (75%) of the rentable
area of the Premises.
Section 30.4 Provided that Tenant timely delivers an
Acceptance Notice, then, effective as of the date on which Landlord delivers the
Expansion Space to Tenant (the "Expansion Space Commencement Date"):
(a) the Expansion Space shall be added to and be
deemed to be a part of the Premises for all purposes of this Lease
(except as otherwise provided in this Article 30);
(b) the Expansion Space shall be delivered "as is",
and Landlord shall not be obligated to perform any work with respect
thereto;
(c) Fixed Rent for the Expansion Space shall be
determined as of the Expansion Space Commencement Date, and shall be
the greater of (i) ninety five percent (95%) of the fair market rental
(the "FMV") for the Expansion Space as set forth in the Expansion
Notice, or (ii) the total of the per square foot amount of Fixed Rent
then payable under this Lease, multiplied by the number of rentable
square feet contained in the Expansion Space;
(d) Tenant shall pay Tenant's Tax Payment and
Tenant's Labor Rate Payment with respect to the Expansion Space in
accordance with the Base Taxes and the Base Labor Rate applicable
thereto as set forth in Article 6;
(e) Tenant's Share shall be proportionately increased
to reflect the inclusion of the Expansion Space in the Premises, and
the Premises Area shall be deemed to have been increased by the number
of Rentable Square Feet contained in the Expansion Space (as determined
in accordance with the standard of measurement then employed by
Landlord); and
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(f) Each Guarantor shall execute and deliver to
Landlord a reconfirmation of its guaranty, in form and substance
satisfactory to Landlord.
Section 30.5 If Landlord shall be prevented from delivering
possession of any portion of the Expansion Space to Tenant as provided for in
this Article 30 due to the holding over or retention of possession of any tenant
or any other occupant after using reasonable efforts to obtain possession
thereof, including, if necessary in Landlord's reasonable judgment, the
initiation and diligent prosecution of appropriate legal proceedings against any
such holdover tenant or other occupant, Landlord shall not be subject to any
liability for failure to give possession of the Expansion Space to Tenant, the
validity of this Lease shall not be impaired thereby, and Tenant shall take
possession of the Expansion Space when, as and if such space can be delivered to
Tenant; provided, however, that (a) Landlord shall keep Tenant advised of the
progress of Landlord's efforts to obtain possession of such space, and (b)
Tenant shall have no obligation to lease any Expansion Space as to which
Landlord offers to deliver possession to Tenant more than one (1) year after the
date of the applicable Acceptance Notice.
Section 30.6 (a) If Tenant shall, within ten (10) days of the
giving by Landlord of the Expansion Notice, dispute Landlord's calculation of
the FMV for the Expansion Space as set forth in an Expansion Notice, such
dispute shall be submitted to arbitration and shall be determined by a single
arbitrator appointed in accordance with the American Arbitration Association
Real Estate Valuation Arbitration Proceeding Rules. Such arbitrator shall be
impartial and shall have not less than ten (10) years' experience in the New
York metropolitan area in a calling related to the leasing of commercial space
in buildings comparable to the Building, and the fees of such arbitrator shall
be shared by Landlord and Tenant.
(b) Within fifteen (15) days following the appointment of such
arbitrator, each party shall attend a hearing before such arbitrator wherein
each party shall submit a report setting forth its determination of the FMV of
the Expansion Space, together with such information on comparable rentals, or
such other evidence, as such party shall deem relevant.
(c) The arbitrator shall, within fifteen (15) days following
such hearing and submission of evidence, render his or her decision by selecting
the determination of FMV of the Expansion Space submitted by either Landlord or
Tenant which, in the judgment of the arbitrator, most nearly reflects the FMV of
the Expansion Space. It is expressly understood that the decision of such
arbitrator shall be final and binding upon the parties hereto.
(d) (i) For purposes of the foregoing arbitration
the Expansion Space shall be considered in its "as is" condition, reasonable
wear and tear excepted.
(ii) Additionally, for purposes of the determination
of the FMV of the Expansion Space, whether by estimate of Landlord or by
arbitration, Landlord or such arbitrator shall take into account the then
current rentals or occupancy fees which Landlord shall then be receiving for the
renting of or granting of use or occupancy rights for comparable office space in
the Building for the Permitted Use, taking into account rent concessions,
abatement periods and construction allowances then being granted for comparable
space. The Base Taxes and the Base Labor Rate applicable to Tenant's Tax Payment
and Tenant's Labor Rate Payment, respectively,
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to be made by Tenant with respect to the Expansion Space pursuant to Article 6,
shall not be modified for purposes of the determination of the FMV for the
Expansion Space hereunder; provided, however, that the determination of the FMV
hereunder shall take into account the Base Taxes, the Base Labor Rates, and the
amounts payable hereunder for Tenant's Tax Payment and Tenant's Labor Rate
Payment, in assessing comparable rental rates.
(iii) It is expressly understood that any
determination of the FMV for the Expansion Space shall be based on the
assumptions and criteria stated in this Article 30, and that the arbitrator
shall not have the power to add to, modify or change any of the provisions of
this Lease.
(e) After a determination has been made of the FMV for the
Expansion Space (whether or not determined in accordance with this Section
30.6), the parties shall execute and deliver to each other an agreement setting
forth the Fixed Rent therefor as hereinabove determined, and the other terms,
provisions, covenants and conditions of the leasing of the Expansion Space,
which terms, conditions, covenants and provisions shall be as set forth in
Section 30.4.
(f) If the final determination of Fixed Rent for the Expansion
Space shall not be made on or before the Expansion Space Commencement Date in
accordance with the provisions of this Article 30, then pending such final
determination, Tenant shall pay as the Fixed Rent for the Expansion Space the
amount of Fixed Rent as set forth by Landlord in the Rental Notice. If, based
upon the final determination of such Fixed Rent as provided herein, the payments
made by Tenant on account of Fixed Rent were (i) less than the Fixed Rent as
finally determined in accordance with the provisions hereof, Tenant shall pay to
Landlord the amount of such deficiency within ten (10) days after demand
therefor, or (ii) greater than Fixed Rent as finally determined in accordance
with the provisions hereof, Landlord shall, at Landlord's option, either credit
the amount of such excess against the next installments of Fixed Rent due under
this Lease, or refund the amount of such excess to Tenant.
ARTICLE 31. LANDLORD'S CONTRIBUTION
Section 31.1 (a) Landlord shall contribute toward the actual
cost of the Initial Alterations (including carpeting, wall covering, telephone
and computer installations and wiring, and "soft costs" incurred in connection
with such alterations, including architectural, consulting, engineering and
legal fees, provided that such "soft costs" shall not exceed ten percent (10%)
of Landlord's Contribution) an amount ("Landlord's Contribution") equal to the
lesser of (a) One Million Eight Hundred Seventeen Thousand Eight Hundred and
00/100 Dollars ($1,817,800.00) (subject, however, to reduction in the amounts
set forth in Subsections 31.1(a)(ii) and 31.1(a)(iii) in the event that Tenant
shall exercise one or more of its rights of partial termination pursuant to
Section 2.3), or (b) the aggregate amount of all costs and expenses actually
incurred by Tenant in connection with the Initial Alterations; provided,
however, that this Lease shall be in full force and effect and no Event of
Default shall have occurred and be continuing hereunder, and provided, further,
that Landlord's Contribution shall be payable in stages commencing on the
Delivery Date with respect to each Space, in the following maximum amounts:
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(i) with respect to Space A, (a) Fifteen Thousand and
00/100 Dollars ($15,000.00) toward Tenant's renovation of the two (2)
existing bathrooms on the ninth avenue side lobby of the ninth floor of
the Building in order to comply with the requirements of the ADA in
Space A as more particularly set forth in Section 4.3(v), and (b) Nine
Hundred Twenty One Thousand Sixty and 00/100 Dollars ($921,060.00) for
the other items of Tenant's Initial Alterations applicable to Space A;
(ii) with respect to Space B, Five Hundred Fifteen
Thousand Two Hundred Sixty and 00/100 Dollars ($515,260.00); and
(iii) with respect to Space C, Three Hundred Sixty
Six Thousand Four Hundred Eighty and 00/100 Dollars ($366,480.00).
(b) Any cost of the Initial Alterations in excess of
Landlord's Contribution shall be paid by Tenant. Tenant shall not be entitled to
receive any portion of Landlord's Contribution with respect to each Space (and
with respect to Tenant's bathroom renovations as set forth in Section
31.1(a)(i)) if such funds are not actually expended by Tenant in the performance
of the Initial Alterations for such Space (or in the performance of such
bathroom renovations, as applicable), nor shall Tenant have any right to apply
any unexpended portion of Landlord's Contribution as a credit against Fixed
Rent, Additional Rent or any other obligation of Tenant hereunder. No part of
Landlord's Contribution may be assigned by Tenant prior to actual payment
thereof by Landlord to Tenant.
(c) A portion of the Initial Alterations, to be constructed at
a cost of $1,817,800 (subject to reduction as set forth in Section 31.1(a)),
shall be deemed to be paid for from Landlord's Contribution, and such portion of
the Initial Alterations shall not be deemed alterations, additions or
improvements made at Tenant's expense, and Landlord shall be the owner of such
portion of the Initial Alterations for all purposes (including financial
reporting and income tax purposes).
Section 31.2 Landlord shall make progress payments to Tenant
on a monthly basis, for the work performed during the previous month, less a
retainage of 10% of each progress payment (the "Retainage"). Each of Landlord's
progress payments will be limited to an amount equal to (a) the aggregate
amounts (reduced by the Retainage) theretofore paid by Tenant (as certified by
an authorized officer of Tenant and by Tenant's independent, licensed architect)
to Tenant's contractors, subcontractors and material suppliers (excluding any
payments for which Tenant has previously been reimbursed out of previous
disbursements from Landlord's Contribution), multiplied by (b) a fraction, the
numerator of which is the amount of Landlord's Contribution applicable to the
Space (or such bathroom renovations, if applicable) which is the subject of the
advance requested by Tenant, and the denominator of which is the total contract
price (or, if there is no specified or fixed contract price for the Initial
Alterations, then Landlord's reasonable estimate thereof) for the performance of
all of the Initial Alterations to be made to the Space (or such bathroom
renovations, if applicable) which is the subject of the advance requested by
Tenant, as shown on the plans and specifications approved by Landlord. Provided
that Tenant delivers requisitions to Landlord on or prior to the first (1st) day
of any month, such progress payments shall be made within thirty (30) days next
following the delivery to Landlord of
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requisitions therefor, signed by a financial officer of Tenant, which
requisitions shall set forth the names of each contractor and subcontractor to
whom payment is due, and the amount thereof, and shall be accompanied by (i)
with the exception of the first requisition, copies of partial waivers of lien
from all contractors, subcontractors and material suppliers covering all work
and materials which were the subject of previous progress payments by Landlord
and Tenant, (ii) a written certification from Tenant's architect that the work
for which the requisition is being made has been completed substantially in
accordance with the plans and specifications approved by Landlord, and (iii)
such other documents and information as Landlord may reasonably request. Any
requisitions made following the first (1st) day of any month shall be paid no
later than the last day of the month following the month in which such
requisitions are made. Landlord shall disburse the Retainage with respect to any
Space upon submission by Tenant to Landlord of a requisition therefor,
accompanied by all documentation required under this Section 31.2, together with
(A) proof of the satisfactory completion of all required inspections and
issuance of any required approvals, permits and sign-offs for the Initial
Alterations for such Space by all Governmental Authorities having jurisdiction
thereover, (B) final "as-built" plans and specifications for the Initial
Alterations for such Space as required pursuant to Section 3.2(d), and (C) the
issuance of final lien waivers by all contractors, subcontractors and material
suppliers covering all of the Initial Alterations for such Space; provided,
however, that notwithstanding Tenant's failure to deliver final lien waivers
from one or more such contractors, subcontractors or suppliers providing
materials or services costing, in the aggregate, no more than five percent (5%)
of the total amount of Landlord's Contribution, and provided that Tenant shall
deliver to Landlord a written notification stating that Tenant is engaged in a
bona fide dispute with such contractor, subcontractor or supplier, then Landlord
shall disburse to Tenant that portion of the Retainage for which Tenant has duly
delivered lien waivers to Landlord. Notwithstanding anything to the contrary set
forth in this Section 31.2, if Tenant fails to pay when due any sums due and
payable to any of Tenant's contractors or material suppliers, then unless Tenant
shall have notified Landlord that Tenant is disputing sums due to such
contractor or material supplier, and subject to the provisions of the
immediately preceding sentence, Landlord shall have the right, but not the
obligation, upon fifteen (15) days notice to Tenant, to promptly pay to such
contractor or supplier all sums so due from Tenant, and sums so paid by Landlord
shall be deducted from the amount of Landlord's Contribution then unpaid (to the
extent of such unpaid amount), and the balance of such sums so due from Tenant
shall be deemed Additional Rent and shall be paid by Tenant within ten (10) days
after Landlord delivers to Tenant an invoice therefor. If Landlord fails to
disburse Landlord's Contribution or any portion thereof when required after all
conditions therefor have been met by Tenant as set forth in this Section 31.2,
then, if such failure of Landlord shall continue for thirty (30) days following
notice from Tenant of such failure, Tenant shall have the right to apply the
amount of such installment of Landlord's Contribution not paid by Landlord as an
offset against the next ensuing installment(s) of Fixed Rent becoming due under
this Lease.
ARTICLE 32. SECURITY DEPOSIT
Section 32.1 Tenant has deposited with Landlord the sum of
Five Million and 00/100 Dollars ($5,000,000.00) as security for the full and
faithful performance of every provision of this Lease to be performed by Tenant
(all or any part of such amount, the "Security Deposit"). If an Event of Default
shall have occurred with respect to any provision of this Lease,
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including but not limited to (i) the provisions relating to the payment of Fixed
Rent and Additional Rent, or (ii) any default beyond applicable notice and grace
periods under Tenant's Other Lease; then Landlord may use, apply or retain all
or any part of the Security Deposit for the payment of any Fixed or Additional
Rent or any other sum in default or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of such Event of
Default, or to compensate Landlord for any other loss, cost or damage to which
Landlord is entitled pursuant to this Lease by reason of such Event of Default.
Landlord shall give Tenant notice contemporaneously with such use or application
of any portion of the Security Deposit. Tenant shall, within five (5) days after
the giving of such notice, deposit with Landlord cash in an amount sufficient to
restore the Security Deposit to the amount then required pursuant to the terms
of this Article 32 (Tenant's obligation to make such payment shall be deemed a
requirement that Tenant pay an item of Additional Rent) and Tenant's failure to
do so shall be a breach of this Lease. Landlord shall deposit the Security
Deposit, if in cash, in an interest-bearing account in a bank with a branch in
New York State; however, Landlord shall not, unless otherwise required by Legal
Requirements, pay interest to Tenant on the Security Deposit, and if Landlord is
required to maintain the Security Deposit in an interest bearing account,
Landlord will retain the maximum amount permitted under Legal Requirements as a
bookkeeping and administrative charge. Tenant shall not assign or encumber any
part of the Security Deposit, and no assignment or encumbrance by Tenant of all
of any part of the Security Deposit shall be binding upon Landlord, whether made
prior to, during, or after the Term. Landlord shall not be required to exhaust
its remedies against Tenant or against the Security Deposit before having
recourse to any other form of security held by Landlord and recourse by Landlord
to any Security Deposit shall not affect any remedies of Landlord which are
provided in this Lease or which are available to Landlord in law or in equity.
If Tenant shall fully and faithfully perform every covenant and provision of
this Lease to be performed and observed by Tenant, the Security Deposit or any
balance thereof shall be returned to Tenant within thirty (30) days after the
expiration or sooner termination (other than a termination pursuant to Article
16) of the Term and Tenant's surrender to Landlord of the Premises. In the event
the Building is sold, Landlord shall transfer the Security Deposit to the new
owner and Landlord shall thereupon be released by Tenant from all liability for
the return of said Security Deposit; and Tenant agrees to look to the new owner
solely for the return of the Security Deposit. A lease of the entire Building
shall be deemed a transfer within the meaning of the foregoing sentence.
Landlord shall use reasonable efforts to notify or cause Tenant to be notified
in the event of any transfer of the Building.
Section 32.2 In lieu of a cash deposit, Tenant may deliver to
Landlord a clean, irrevocable, non-documentary and unconditional letter of
credit (the "Letter of Credit") issued by and drawn upon any commercial bank,
trust company, national banking association or savings and loan association
having offices for banking purposes in the City of New York and which is a
member of the New York Clearinghouse Association (the "Issuing Bank") and which
(or the parent company of which) shall have outstanding unsecured, uninsured and
unguaranteed indebtedness, or shall have issued a letter of credit or other
credit facility that constitutes the primary security for any outstanding
indebtedness (which is otherwise uninsured and unguaranteed), that is then
rated, without regard to qualification of such rating by symbols such as "+" or
"-" or numerical notation, "Aa" or better by Moody's Investors Service and "AA"
or better by Standard & Poor's Corporation, and has combined capital, surplus
and undivided profits
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of not less than $500,000,000.00, which Letter of Credit shall have a term of
not less than one year, be in form and content satisfactory to Landlord (and
substantially as shown on Exhibit D to this Lease), be for the account of
Landlord, be in the amount of the Security Deposit then required to be deposited
hereunder, and be fully transferable by Landlord to successor owners of the
Building without the payment of any fees or charges, it being agreed that if any
such fees or charges shall be so imposed, such fees or charges shall be paid by
Tenant. The Letter of Credit shall provide that it shall be deemed automatically
renewed, without amendment, for consecutive periods of one year each thereafter
during the term of this Lease, unless the Issuing Bank sends notice (the
"Non-Renewal Notice") to Landlord by certified mail, return receipt requested,
not less than thirty (30) days next preceding the then expiration date of the
Letter of Credit that it elects not to have such Letter of Credit renewed.
Additionally, the Letter of Credit shall provide that Landlord shall have the
right, exercisable within twenty (20) days of its receipt of the Non-Renewal
Notice, by sight draft on the Issuing Bank, to receive the monies represented by
the existing Letter of Credit and to hold such proceeds pursuant to the terms of
this Section 32.2 as a cash security pending the replacement of such Letter of
Credit. If an Event of Default shall have occurred and be continuing with
respect to any provision of this Lease, including but not limited to the
provisions relating to the payment of Fixed Rent and Additional Rent, Landlord
may apply or retain the whole or any part of the cash security so deposited or
may notify the Issuing Bank and thereupon receive all the monies represented by
the Letter of Credit and use, apply, or retain the whole or any part of such
proceeds, as provided in this Section 32.2. Any portion of the cash proceeds of
the Letter of Credit not so used or applied by Landlord in satisfaction of the
obligations of Tenant as to which such Event of Default shall have occurred
shall be deposited by Landlord and retained in an interest-bearing account as
provided in Section 32.1. If Landlord applies or retains any part of the cash
security or proceeds of the Letter of Credit, as the case may be, Tenant shall,
within five (5) days after written demand therefor, deposit with Landlord the
amount so applied or retained so that Landlord shall have the full Security
Deposit required pursuant to Section 32.1 on hand at all times during the Term.
If Tenant shall fully and faithfully comply with all of the terms, provisions,
covenants and conditions of this Lease, the Letter of Credit shall be returned
to Tenant within thirty (30) days after the Expiration Date and after delivery
of possession of the Premises to Landlord. In the event of a sale of Landlord's
interest in the Premises, within thirty (30) days of notice of such sale or
leasing, Tenant, at Tenant's sole cost and expense, shall arrange for the
transfer of the Letter of Credit to the new landlord, as designated by Landlord,
or have the Letter of Credit reissued in the name of the new landlord and
Landlord shall thereupon be released by Tenant from all liability for the return
of the Letter of Credit; provided, however, that if the Letter of Credit is
reissued, Landlord shall return the original Letter of Credit issued in
Landlord's name to Tenant.
Section 32.3 (a) Notwithstanding anything set forth in this
Article 32 to the contrary, and provided that each of the conditions set forth
in Section 32.3(b) shall have been satisfied, then reasonably promptly after
notice from Tenant to Landlord, signed by an authorized financial officer of
Tenant and certifying that the condition set forth in Section 32.3(b)(ii) has
been satisfied, the Security Deposit shall be reduced to $3,002,292.00.
(b) The following are the conditions precedent to the
reduction of the Security Deposit as provided in Section 32.3(a):
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(i) no Event of Default shall have occurred and be continuing
with respect to any provision of this Lease, including the provisions
relating to the payment of Fixed Rent and Additional Rent;
(ii) Tenant shall have submitted to Landlord true and complete
copies of (A) if Tenant is a publicly traded Entity, Tenant's annual
financial statements as filed with the Securities and Exchange
Commission, or (B) if Tenant is not a publicly traded Entity, Tenant's
annual financial statements for the preceding three (3) fiscal years of
Tenant (the "Financial Statements"), audited by a firm of certified
public accountants reasonably satisfactory to Landlord, (including
B.D.O. Seidman), and substantially in the form of Tenant's financial
statement delivered by Tenant to Landlord immediately prior to the
execution and delivery of this Lease, showing that:
(A) for the eight (8) immediately preceding fiscal
quarters of Tenant (which shall not include any fiscal quarter
all or part of which falls within calendar year 1999 or
earlier years), Tenant shall have achieved positive "Net Cash
Flow from Operating Activities" after payment of all operating
expenses and debt service, as evidenced in the Statement of
Cash Flows contained in the Financial Statements; and
(B) Tenant has a net worth, computed in accordance
with generally accepted accounting principles consistently
applied, of not less than Three Hundred Million and 00/100
Dollars ($300,000,000.00).
(c) If Tenant has deposited the Security Deposit in cash,
Landlord shall refund to Tenant the amounts by which the Security Deposit is
reduced pursuant hereto, within fifteen (15) days after notice from Tenant
pursuant to Section 32.3(a). If Tenant has provided a Letter of Credit, then,
provided that Tenant tenders to Landlord a replacement Letter of Credit (which
replacement must meet the applicable requirements set forth in Section 32.2) for
the appropriately reduced amount of the Security Deposit, Landlord shall
exchange the Letter of Credit then held by Landlord for the replacement Letter
of Credit tendered by Tenant. Tenant may, in lieu of replacing the Letter of
Credit, cause the Letter of Credit to be amended as of the date of such
reduction to reflect the reduced Security Deposit pursuant hereto.
Section 32.4 Notwithstanding anything set forth in this
Article 32 to the contrary: (a) if Tenant shall provide Landlord with a
Guaranty, substantially in the form attached as Exhibit O to this Lease, of
Tenant's obligations under this Lease executed by Bertelsmann, then the Security
Deposit shall be reduced to $1,500,000.00; and (b) if Tenant shall provide
Landlord with a guaranty, substantially in the form attached as Exhibit O to
this Lease, of Tenant's obligations under this Lease executed by B&N Inc., then
the Security Deposit shall be reduced to $3,002,292.00, provided that at the
time of execution and delivery of any such Guaranty, Tenant shall provide to
Landlord reasonable evidence that such guarantor shall have a net worth,
computed in accordance with generally accepted accounting principles
consistently applied, of not less than $300,000,000.00.
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ARTICLE 33. BUILDING NAME AND SIGNAGE; FLAGPOLE
Section 33.1 The Building may be designated and known by any
name Landlord may choose and such designated name may be changed from time to
time in Landlord's sole discretion. Tenant shall not refer to or otherwise
characterize the Building, in any written material generated or circulated by
Tenant, as the "barnesandnoble.com Building" or any other name identifying the
Building with Tenant, and shall not place any signage anywhere in or on the
Building or the Premises, except as specifically permitted in this Section 33.1.
So long as the named Tenant hereunder and its Affiliates ("Original Tenant")
(i.e., exclusive of any subtenants who are not Affiliates) shall be in actual
occupancy for the conduct of its business of not less than the greater of (a)
ninety (90%) percent of the then Demised Premises or (b) 125,000 Rentable Square
Feet of space (the "Signage Threshold"), Original Tenant may install and
maintain, at Tenant's sole cost, at locations reasonably designated by Landlord:
(i) two signs identifying Original Tenant, to be located below the existing
signs identifying Insignia/Edward S. Gordon Company, Inc. or the then managing
agent of the Building on the exterior of the Ninth Avenue side of the Building,
(ii) two signs identifying Original Tenant, to be located on the wall currently
housing the Building directory in the lobby on the Ninth Avenue side of the
Building and (iii) a flag identifying Original Tenant on one of the existing
flagpoles (designated by Landlord) attached to the exterior of the ninth floor
side of the Building; provided that such signage and flag (A) shall not diminish
access to and from the Building by other tenants, other occupants of the
Building and the general public, (B) shall not reduce the size or accessibility
of the Ninth Avenue Building entrance, (C) shall be subject to and in accordance
with all Legal Requirements and all precautions and safeguards required by
Landlord's insurance company, and (D) shall be approved by Landlord as to size,
materials and design (which approval shall not be unreasonably withheld or
delayed). Landlord may at any time during the Term after reasonable prior notice
to Tenant and at Landlord's sole cost and expense relocate any of Tenant's signs
or flag to locations designated by Landlord and reasonably acceptable to Tenant,
in order to accommodate any changes in the arrangement or location of, or other
renovations, improvements or modifications to, any public parts of the Building,
provided that such relocation does not cause the visibility of such signs or
flag to be interrupted or impaired, other than temporarily. Tenant shall be
solely responsible for any damage caused as a result of its use of, and shall be
solely responsible to promptly and diligently perform all necessary repairs or
replacements to, or maintenance of, the flagpole used by Tenant, provided,
however, that if Tenant's failure after five (5) days' notice from Landlord to
so repair, replace or maintain the flagpole materially jeopardizes in any way
Landlord's or any other tenant's property located on or within the Building,
Landlord may, at Landlord's option, elect to perform such repairs, replacements
or maintenance at Tenant's sole cost and expense. Landlord shall give Tenant
reasonable prior notice of its election to perform such repairs, except in an
emergency. Landlord represents that to the best of its knowledge, as of the date
of this Lease, no other Person has the right to use the flagpole to be
designated for Tenant's use; provided, however, that Tenant shall, at Landlord's
request, promptly remove its flag if Landlord shall become aware of any such
right of any other Person, and Tenant agrees that Landlord shall not be liable
to Tenant in connection therewith.
Section 33.2 If and when Original Tenant is no longer in
actual occupancy of the Signage Threshold, then (i) Tenant shall, at Landlord's
request, remove all of the signage
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theretofore installed by Tenant pursuant to Section 33.1 and repair and restore
in a good and workmanlike manner any damage to the Building caused by such
removal.
Section 33.3 So long as Original Tenant shall be in actual
occupancy of not less than the Signage Threshold, Landlord shall not name the
Building for Borders Booksellers or Amazon.com, and, to the extent that
Landlord's consent or approval is required or Landlord is otherwise in a
position to make such determination, Landlord shall not cause or permit to be
placed in the Building lobbies or on the Building exterior any signage
identifying such companies, provided, however, that Landlord may maintain
listings on the Building directory of the names of such companies, their
Affiliates, officers or employees for so long as any of such Persons occupy
space in the Building.
ARTICLE 34. GUARANTY OF LEASE
Simultaneously with the execution and delivery of this Lease
and as a condition to the effectiveness hereof, Tenant has delivered to Landlord
an Agreement and Guaranty, executed by barnesandnoble.com inc., a Delaware
corporation, in the form attached to this Lease as Exhibit O.
ARTICLE 35. MISCELLANEOUS
Section 35.1 (a) The obligations of Landlord under this Lease
shall not be binding upon Landlord named herein after the sale, conveyance,
assignment or transfer by such Landlord (or upon any subsequent landlord after
the sale, conveyance, assignment or transfer by such subsequent landlord) of its
interest in the Building or the Real Property, as the case may be, and in the
event of any such sale, conveyance, assignment or transfer, Landlord shall be
and hereby is entirely freed and relieved of all covenants and obligations of
Landlord hereunder, and the transferee of Landlord's interest in the Building or
the Real Property, as the case may be, shall be deemed to have assumed all
obligations under this Lease, whether accruing prior or subsequent to such sale,
conveyance, assignment or transfer. Prior to any such sale, conveyance,
assignment or transfer, the liability of Landlord for Landlord's obligations
under this Lease shall be limited to Landlord's interest in the Real Property
and Tenant shall not look to any other property or assets of Landlord or the
property or assets of any of the Exculpated Parties (defined below) in seeking
either to enforce Landlord's obligations under this Lease or to satisfy a
judgment for Landlord's failure to perform such obligations.
(b) Notwithstanding anything contained herein to the contrary,
Tenant shall look solely to Landlord to enforce Landlord's obligations hereunder
and no partner, shareholder, director, officer, principal, employee or agent,
directly or indirectly, of Landlord (collectively, the "Exculpated Parties")
shall be personally liable for the performance of Landlord's obligations under
this Lease. Tenant shall not seek any damages against any of the Exculpated
Parties.
Section 35.2 (a) Wherever in this Lease Landlord's consent or
approval is required, if Landlord shall refuse such consent or approval, Tenant
in no event shall be entitled to make, nor shall Tenant make, any claim, and
Tenant hereby waives any claim, for money damages (nor shall Tenant claim any
money damages by way of set-off, counterclaim or defense)
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based upon any claim or assertion by Tenant that Landlord unreasonably withheld
or unreasonably delayed its consent or approval. Tenant's sole remedy shall be
an action or proceeding to enforce any such provision, for specific performance,
injunction or declaratory judgment.
(b) In any instance where Landlord has specifically agreed
that it will not unreasonably withhold its consent to a proposed assignment of
this Lease or a subletting of all or a portion thereof, Tenant may dispute the
reasonableness of the withholding by Landlord of such consent by arbitration of
the issue in the City of New York in accordance with the rules and regulations
for commercial matters then prevailing of the American Arbitration Association
or its successor (the "AAA") pursuant to a submission effected within ten (10)
Business Days after notice of the withholding of consent has been given by
Landlord to Tenant. Provided the rules and regulations of the AAA so permit, (i)
the AAA shall, within two (2) Business Days after such submission or
application, select a single arbitrator having at least ten (10) years'
experience in the leasing management and/or operation commercial properties
similar to the Building, (ii) the arbitration shall commence two Business Days
thereafter, and (iii) the arbitrator shall make a determination within three
Business Days after the conclusion of the presentation of Landlord's and
Tenant's cases, which determination shall be limited to a decision upon whether
Landlord's withholding of consent was reasonable. The arbitrator's determination
shall be final and binding upon the parties, whether or not a judgment shall be
entered in any court. All actions necessary to implement such decision shall be
undertaken as soon as possible, but in no event later than ten (10) Business
Days after the rendering of such decision. The arbitrator's determination may be
entered in any court having jurisdiction thereof. All fees payable to the AAA
for services rendered in connection with the resolution of the dispute shall be
paid by the unsuccessful party.
Section 35.3 (a) All of the Exhibits attached to this Lease
are incorporated in and made a part of this Lease, but, in the event of any
inconsistency between the terms and provisions of this Lease and the terms and
provisions of the Exhibits hereto, the terms and provisions of this Lease shall
control. This Lease may not be changed, modified, terminated or discharged, in
whole or in part, except by a writing, executed by the party against whom
enforcement of the change, modification, termination or discharge is to be
sought. Wherever appropriate in this Lease, personal pronouns shall be deemed to
include the other genders and the singular to include the plural. Wherever a
period of time is stated in this Lease as commencing or ending on any particular
date, such period of time shall be deemed inclusive of such stated commencement
and ending dates. The captions hereof are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this Lease nor the intent of any provision thereof. All Article and Section
references set forth herein shall, unless the context otherwise specifically
requires, be deemed references to the Articles and Sections of this Lease.
Whenever the words "include", "includes", or "including" are used in this Lease,
they shall be deemed to be followed by the words "without limitation".
(b) This Lease shall be governed in all respects by the laws
of the State of New York applicable to agreements executed in and to be
performed wholly within said State.
(c) If any term, covenant, condition or provision of this
Lease, or the application thereof to any person or circumstance, shall ever be
held to be invalid or
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unenforceable, then in each such event the remainder of this Lease or the
application of such term, covenant, condition or provision to any other person
or any other circumstance (other than those as to which it shall be invalid or
unenforceable) shall not be thereby affected, and each term, covenant, condition
and provision hereof shall remain valid and enforceable to the fullest extent
permitted by law.
(d) If at the commencement of, or at any time or times during
the Term, the Fixed Rent and Additional Rent reserved in this Lease shall not be
fully collectible by reason of any Legal Requirement, Tenant shall enter into
such agreements and take such other steps (without additional expense to Tenant)
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents which may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved therefor under this Lease). Upon the termination of such legal
rent restriction prior to the expiration of the Term, (i) Fixed Rent and
Additional Rent shall become and thereafter be payable hereunder in accordance
with the amounts reserved in this Lease for the periods following such
termination, and (ii) Tenant shall pay to Landlord, if legally permissible, an
amount equal to (A) the items of Fixed Rent and Additional Rent which would have
been paid pursuant to this Lease but for such legal rent restriction less (B)
the rents paid by Tenant to Landlord during the period or periods such legal
rent restriction was in effect.
(e) The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, successors, and, except as otherwise provided
in this Lease, their assigns.
Section 35.4 Except as expressly provided to the contrary in
this Lease, Tenant agrees that all disputes arising, directly or indirectly, out
of or relating to this Lease, and all actions to enforce this Lease, shall be
dealt with and adjudicated in the state courts of New York or the Federal courts
sitting in New York City; and for that purpose hereby expressly and irrevocably
submits itself to the jurisdiction of such courts. Tenant hereby irrevocably
appoints the Secretary of the State of New York as its authorized agent upon
which process may be served in any such action or proceeding.
Section 35.5 Tenant hereby irrevocably waives, with respect to
itself and its property, any diplomatic or sovereign immunity of any kind or
nature, and any immunity from the jurisdiction of any court or from any legal
process, to which Tenant may be entitled, and agrees not to assert any claims of
any such immunities in any action brought by Landlord under or in connection
with this Lease. Tenant acknowledges that the making of such waivers, and
Landlord's reliance on the enforceability thereof, is a material inducement to
Landlord to enter into this Lease.
[NO FURTHER TEXT ON THIS PAGE]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Landlord and Tenant have respectively
executed this Lease as of the day and year first above written.
111 CHELSEA LLC, Landlord
a Delaware limited liability company
By: Taconic Chelsea Holdings LLC,
a Delaware limited liability company,
managing member
By: Taconic SL Principals LLC,
a Delaware limited liability company,
managing member
By: /s/Paul E. Pariser
----------------------------
Name: Paul E. Pariser
Title: Member
BARNESANDNOBLE.COM LLC, Tenant
a Delaware limited liability company
By: /s/Marie J. Toulantis
-----------------------------------
Name: Marie J. Toulantis
Title: Chief Financial Officer
Tenant's Federal Tax Identification Number: 13-4027879
<PAGE>
EXHIBIT A
---------
FLOOR PLAN OF SPACE A
---------------------
The floor plan which follows is intended solely to identify the general outline
of Space A, and should not be used for any other purpose. All areas, dimensions
and locations are approximate, and any physical conditions indicated may not
exist as shown.
[Diagram Exhibit]
A-1
<PAGE>
EXHIBIT B
---------
FLOOR PLAN OF SPACE B
---------------------
The floor plan which follows is intended solely to identify the general outline
of Space B, and should not be used for any other purpose. All areas, dimensions
and locations are approximate, and any physical conditions indicated may not
exist as shown.
[Diagram Exhibit]
B-1
<PAGE>
EXHIBIT C
---------
FLOOR PLAN OF SPACE C
---------------------
The floor plan which follows is intended solely to identify the general outline
of Space C, and should not be used for any other purpose. All areas, dimensions
and locations are approximate, and any physical conditions indicated may not
exist as shown.
[Diagram Exhibit]
C-1
<PAGE>
EXHIBIT D
---------
FORM OF LETTER OF CREDIT
[LETTERHEAD OF ISSUING BANK]
LETTER OF CREDIT DEPARTMENT
Issue Date: _________ ___, 199_
Our Number: ________________
No.________________________________________
Irrevocable Commercial Letter of Credit
Applicant:
Beneficiary: ____________________________
Amount (U.S.): $______________
Expiry: ____________ ___, 19__
Gentlemen:
For the account of Applicant we hereby establish this Irrevocable
Letter of Credit No. _____________________ in your favor for an amount of up to
$_______________ effective immediately, available by your drafts at sight when
accompanied by this Irrevocable Letter of Credit and the following document:
Beneficiary's statement purportedly signed by an officer of
Beneficiary or Beneficiary's authorized managing agent,
reading:
"The amount of this drawing under Irrevocable Letter
of Credit No. _____________ is being drawn pursuant to Lease
dated __________________ ____ 199_, by and between
______________________, as Landlord, and _________________, as
Tenant".
All drafts must be marked "Drawn under ____________________ Bank,
Irrevocable Letter of Credit No. ____________ dated _____________, 19___."
It is a condition of this Irrevocable Letter of Credit that it shall be
fully transferable by Beneficiary without any fees or charges payable by
Beneficiary in connection therewith.
It is a condition of this Irrevocable Letter of Credit that it shall be
automatically extended for additional periods of one year from the present or
future expiration date, unless at least 30 days prior to such expiration date we
notify you in writing by certified or registered mail,
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return receipt requested, at the above address, that we elect not to renew this
Irrevocable Letter of Credit for such additional period. Upon receipt by you of
such notice you may draw drafts on us at sight for an amount not to exceed the
balance remaining in this Irrevocable Letter of Credit within the then
applicable expiry date.
We hereby agree with you that drafts drawn under and in accordance with
the terms of this Irrevocable Letter of Credit will be duly honored by us on
delivery of this Irrevocable Letter of Credit and the document so specified,
when presented at this office.
This credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500; provided, however, that in the event the expiration date
occurs during an interruption of our business of the type described in Article
17 of such publication, then the expiration date shall be deemed to be
automatically extended until the date which shall be five (5) days after the
resumption of our business.
------------------------------
Authorized Signature
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<PAGE>
EXHIBIT E
---------
RULES AND REGULATIONS
---------------------
1. The rights of tenants in the entrances, corridors,
elevators of the Building are limited to ingress to and egress from tenants'
premises for tenants and their employees, licenses and invitees, and no tenant
shall use, or permit the use of, the entrances, corridors, or elevators for any
other purpose. No tenant shall invite to such tenant's premises, or permit the
visit of, persons in such numbers or under such conditions as to interfere with
the use and enjoyment of any of the entrances, corridors, elevators and other
facilities of the Building by other tenants. Fire exits and stairways are for
emergency use only, and shall not be used for any other purposes by the tenants,
their employees, licensees or invitees. No tenant shall encumber or obstruct, or
permit the encumbrance or obstruction of, any of the sidewalks, entrances,
corridors, elevators, fire exits or stairways of the Building. Landlord reserves
the right to control and operate the public portions of the Building and the
public facilities, as well as facilities furnished for the common use of
tenants, in such manner as it reasonably deems best for the benefit of tenants
generally.
2. Tenant's employees shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof.
3. Tenant shall not alter the exterior appearance of the
Building by installing signs, advertisements, notices or other graphics on
exterior walls, or interior surfaces visible from outside, without prior written
permission from Landlord. Similarly, electrical fixtures hung in offices or
other spaces along the perimeter of the Building which affect its exterior
appearance must be fluorescent and a quality, type, design and bulb color,
previously approved in writing by Building management.
4. The cost of repairing any damage to the public portions of
the Building or the public facilities or to any facilities used in common with
other tenants, caused by a tenant or the employees, licensees or invitees of the
tenant, shall be paid by such tenant.
5. The requirements of tenants will be attended to only upon
application at the Building Management Office. Employees of the Building shall
not perform any work or do anything outside of their regular assigned duties,
unless under special instructions from the Building Management Office.
6. Except as specifically provided in the Lease, Tenant shall
have no right of access to the roof of the Building and shall not install,
repair or replace any satellite dish, antennae, fan, air conditioner or other
devices on the roof of the Building without the prior written consent of
Landlord. Any such device installed without such written consent shall be
subject to removal, at Tenant's expense, without notice, at any time.
7. Exterior signs on doors and any directory tablet must be
approved by Landlord.
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8. No awnings or other projections over or around the windows
shall be installed by any tenant and only such window blinds as are permitted by
Landlord shall be used in any tenant's premises.
9. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building.
The water and service closets and other plumbing fixtures in or serving any
tenant's premises shall not be used for any purpose other than the purpose for
which they were designed or constructed and no sweepings, rubbish, rags, acids
or other foreign substances shall be deposited therein. All damages resulting
from any misuse of the fixtures shall be borne by the tenant who, or whose
servants, employees, agents, visitors or licensees, shall have caused the same.
10. Tenant shall not disturb others. This rule prohibits any
noise audible from the hallway, adjoining office suites or outside whether
created by musical instruments, radios, television sets, group activities or any
other source.
11. All hand trucks used in the Building shall be equipped
with rubber tires and side guards.
12. No tenant shall install wires, conduit, sleeves or similar
installations in Building shaftways without prior written consent of Landlord,
and as Landlord may direct.
13. Each tenant shall, at its expense, provide artificial
light in the premises demised to such tenant for Landlord's agents, contractors
and employees while performing janitorial or other cleaning services and making
repairs or alterations therein.
14. Tenants shall not permit any cooking or food odors
emanating from their demised premises to be detectable in any other portions of
the Building.
15. Tenants shall provide Building management provided with
keys or combinations to all locks, bolts or other mechanical security systems
except those protecting high security areas. Upon vacating the Building, tenants
must return keys to storerooms, offices and toilets or pay replacement costs.
16. All entrance doors in each tenant's premises shall be left
locked when the tenant's premises are not in use. Entrance doors shall not be
left open at any time.
17. Tenants shall not keep pets, bicycles, or other vehicles
in their premises without prior written approval by Landlord. Exceptions are
made for seeing-eye dogs and conveyances required by handicapped persons.
18. Regular suppliers of outside services must be approved by
Building management, which may establish hours or other conditions for entrance
to the Building. Such suppliers include vendors of food, spring water, ice,
towels, barbering, shoe shining and other products and services.
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19. Canvassing, soliciting and peddling of products or
services are prohibited in the Building, and tenants shall cooperate with
Landlord in attempting to prevent such acts in the Building.
20. Landlord may refuse admission to the Building outside of
normal hours to any person not having a pass issued by Landlord or not properly
identified, and may require all persons admitted to or leaving the Building
outside of normal business hours to register. Tenant's employees, agents and
visitors shall be permitted to enter and leave the Building whenever appropriate
arrangements have been previously made between Landlord and Tenant. Each tenant
shall be responsible for all persons for whom such person requests such
permission and shall be liable to Landlord for all acts of such persons. Any
person whose presence in the Building at any time shall, in the reasonable
judgment of Landlord, be prejudicial to the safety, character, reputation and
interests of the Building or its tenants may be denied access to the Building or
may be rejected therefrom. In case of invasion, riot, public excitement or other
commotion, Landlord may prevent all access to the Building during the
continuance of the same, by closing the doors or otherwise, for the safety of
the tenants and protection of property in the building. Landlord may require any
person leaving the Building with any package or other object to exhibit a pass
from the tenant from whose premises the package or object is being removed, but
the establishment and enforcement of such requirements shall not impose any
responsibility on Landlord for the protection of any tenant against the removal
of property from the premises of the tenant. Landlord shall in no way be liable
to any tenant for injury or loss arising from the admission, exclusion or
ejection of any person to or from the tenant's premises or the Building under
the provisions of this rule.
21. Tenant, at its sole cost and expense, shall cause the
Premises to be exterminated from time to time to the reasonable satisfaction of
the Building Management Office, and shall employ such exterminators therefor as
shall be approved by the Building Management Office.
22. Tenants shall not serve or permit the serving of alcoholic
beverages in the its premises unless Tenant shall have procured host liquor
liability insurance, issued by companies and in amounts reasonably satisfactory
to Landlord, naming Landlord and its managing agent as additional insureds.
23. The Building loading docks may be used only for loading
and unloading procedures. Tenants may not use the loading dock area for parking.
Tenants may not place any dumpsters at the loading docks or any other portion of
the Building without the prior written approval of Landlord.
24. No shutdowns of any Building systems will be permitted
without prior written approval of Landlord and supervision by the Building
engineer.
25. Tenant's contractors or vendors may not use any space
within the Building outside the Premises for storage or moving of materials or
equipment or for the location of a field office or facilities for the employees
of such contractors or vendors without obtaining Landlord's prior written
approval for each such use. Landlord shall have the right to terminate such use
and
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remove all such contractor's or vendor's materials, equipment and other
property from such space, without Landlord being liable to tenant or to such
contractor or vendor, and the cost of such termination and removal shall be paid
by Tenant to Landlord.
26. Tenants are required to have a full service maintenance
contract covering their supplemental HVAC, Uninterrupted Power Supply (UPS) and
Automatic Transfer systems, and to provide copies of such contracts to the
Building management office.
27. The Building reserves the right to restrict the use of
certain materials (i.e., Omega sprinkler heads and piping manufactured in The
Republic of China) in the building based on notifications that declare the
materials unsafe.
28. Trucks using the Tenant Shipping Platforms on the ground
floor of the building, and the upper Floor Truck Lobbies will load and discharge
at the place or places thereat and therein as indicated by the duly authorized
representative of Landlord in charge of such operation.
29. Trucks using the Tenant Shipping Platforms on the ground
floor of the building, and the upper floor truck lobbies, will load and
discharge at the place or places thereat and therein as indicated by the duly
authorized representative of Landlord in charge of such operation.
30. Elevators for freight handling service will be operated
during Business Hours on Business Days, unless special arrangement is made with
Landlord for operation at other times.
31. The use of the private right of way and the truck
elevators will be subject to and under the reasonable direction and control of
the duly authorized representative of Landlord in charge of such operation. When
in the interest of continuity of service or in the interest of the common
service, Tenant's freight departing from or arriving at the building by truck
may at the direction of Landlord be handled over and through the Tenant Shipping
Platforms on the ground floor and the freight elevators. Landlord reserves the
right to direct such handling in lieu of truck elevator service.
32. In the interest of preserving the continuity of freight
elevator service, freight will not be floored upon the freight elevator, but
will at all times be handled and moved upon suitable vehicles of the indoor
industrial wheeler type permitting such freight to be economically and
expeditiously wheeled on and off the freight elevators. Freight which cannot be
handled upon such equipment will be handled in such alternative manner as may be
approved by Landlord.
33. (a) The Tenant Shipping Platforms located on first or
ground floor of the Building are designed to accomplish the immediate transfer
and movement of freight between the freight elevators and trucks. The use of
such facility by Tenant or any of its agents, servants, employees,
representatives or contractors will be confined to such purpose, under the
reasonable
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direction and control of the duly authorized representative of Landlord in
charge of such operation.
(b) No storage or holding of freight on such Tenant Shipping
Platforms awaiting the arrival of trucks, or awaiting transfer by Tenant from
such Tenant Shipping Platforms to the Premises, will be permitted. No
automobiles of Tenant or any Tenant Party may enter on or be stored in any
portion of the building, except in areas designated by Landlord, and provided
Tenant pays for such parking at rates designated by Landlord, its agents or
parking lessees.
(c) Any violation of this rule or disregard of directions
issued by Landlord will give Landlord the right to handle, transfer, remove or
store such freight in or to other premises in the building. When such handling,
transfer, removal or storage is performed by Landlord, and when it shall be
deemed necessary by Landlord to preserve the continuity of common service
provided by this facility, any and all expense will be at Tenant's sole cost and
expense. Landlord will not be responsible for any loss or damage which any such
freight may suffer by such handling, removing or storage.
34. Neither Tenant nor any Tenant Party will at any time be
permitted to operate any freight, passenger or truck elevator.
35. The Building is equipped with scuppers for carrying off
water which may result from sprinkler operation or other causes. Tenant shall
not, under any circumstances, deposit or permit to be deposited sweepings or any
other rubbish in such scuppers, and Tenant will keep the scuppers within the
Premises at all times free of any and all rubbish, sweepings, and other
obstructions of any nature whatsoever.
36. Tenant shall not, under any circumstances, permit the
accumulation of sweepings or any other rubbish in the expansion joints of the
Building, or in any other portions of the Building outside of the Premises, and
all such sweepings or rubbish shall be removed daily by Tenant in such manner as
Landlord shall direct. Tenant will keep the Building's expansion joints free of
any and all rubbish, sweepings and any other obstruction of any nature
whatsoever. Tenant will not place machinery or equipment in a position so that
such machinery or equipment straddles an expansion joint, or erect a partition
which intersects an expansion joint, unless one end of such machinery, equipment
or partition is free to permit the expansion and contraction of such expansion
joint.
37. If any electrical or telephone installations made or
operated by Tenant shall emit any electromagnetic interference, Tenant shall
immediately discontinue use of such installations until such electromagnetic
interference is eliminated to Landlord's satisfaction.
38. Tenant shall deliver to Landlord evidence that all
systems, equipment and installations used by Tenant in the Building containing
time- and date-related codes and internal programs, whether computerized or
otherwise, shall continue through the Term, including and beyond 11:59 p.m. on
December 31, 1999 (the "Millennium Date Change") without any material failure or
interruption and at substantially the same level of performance as would have
been
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provided in the absence of the Millennium Date Change. Additionally, all of
Tenant's systems, equipment and installations shall be tested for operational
compatibility with the following dates: 2/29/2000 and 01/01/2001. Tenant shall
submit evidence of such compliance no later than 90 days following the
Commencement Date.
39. Landlord reserves the right at any time and from time to
time, to rescind, alter, waive, modify, add to or delete, in whole or in part,
any of these Rules and Regulations in order to protect the comfort, convenience
and safety of all tenants at the Building. Tenant shall not have any rights or
claims against Landlord by reason of non-enforcement of these rules and
regulations against any tenant, and such non-enforcement will not constitute a
waiver as to Tenant.
40. If there shall be any inconsistencies between the text of
the main body of the Lease and these Rules and Regulations, the provisions of
the Lease shall prevail.
E-6
<PAGE>
EXHIBIT F
---------
APPROVED CONTRACTORS
--------------------
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
CONSTRUCTION VENDOR LIST
- - --------------------------------------------------------------------------------
<S> <C>
Mr. Frank Sciame Mr. Al Hot
President President
F.J. Sciame Construction Co., Inc. Fast Track Construction
80 South Street 450 West 33rd Street
New York, N.Y. 10038 New York, N.Y. 10001
Tel: (212) 232-2200 Tel: (212) 279-0110
Fax: (212) 248-5299 Fax: (212) 279-9239
Mr. Anthony Genovese Christopher H. Gallin
Executive Vice President John Gallin & Sons, Inc.
HRH Construction Interiors, Inc. 40 Gold Street
One Park Avenue New York, N.Y. 10018
New York, N.Y. 10016 Tel: (212) 267-8624
Tel: (212) 616-3100 Fax: (212) 962-7201
Fax: (212) 696-4091
Mr. Irving Koven Mr. Peter Dove
Ambassador Construction Co., Inc. Dominant Construction
41 East 42nd Street 523 Route 33
New York, N.Y. 10017 Orangeburg, N.Y. 10962
Tel: (212) 922-1020 Tel: (914) 398-3900
Fax: (212) 949-9762 Fax: (914) 398-3106
Mr. Chris Philips Mr. Stephen S. Thomsen
Vice President Thomsen Construction Co., Inc.
Tishman Construction Corp. 180 Varick Street
666 Fifth Avenue 12th Floor
New York, N.Y. 10103 New York, N.Y. 10014
Tel: (212) 708-6824 Tel: (212) 647-1412
Fax: (212) 399-3643 Fax: (212) 647-1249
Lehrer McGovern Bovis Mr. George J. Figliolia
200 Park Avenue New York City Builders Group
New York, N.Y. 10166 One Wall Street, 4th Floor
Tel: (212) 592-6700 New York, N.Y. 10005
Fax: (212) 592-6988 Tel: (212) 635-0760
Fax: (212) 635-0767
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
John Berry
Westside Interiors Alfred J. Tosto
462 Beattie Road Regional Manager
Rock Tavern, N.Y. 12575 Gnome Group, Inc.
Tel: (914) 496-8005 111 8th Avenue
Fax: (914) 496-2912 New York, N.Y. 10011
Tel: (212) 807-1991
Fax: (212) 807-6266
George Paleski
Lehr Construction Corp.
902 Broadway
New York, NY 10010
Tel: (212) 353-1160
Fax: (212) 505-8169
</TABLE>
SUBCONTRACTORS
<TABLE>
<CAPTION>
WORK CATEGORY SUB-CONTRACTOR NAME ESTIMATING CONTACT
------------- ------------------- ------------------
<S> <C> <C>
ACCESS FLOORING ARI PRODUCTS TERRY BARONE
One Madison Street (201) 773-2777
East Rutherford, NJ 07073 F (201) 773-9717
RAISED FLOOR INSTALLATION, INC. ERIC LAGERSTROM
19 Sebago Street (201) 778-2444
Clifton, NJ 07013 F (201) 778-8052
COMPUTER FLOORS, INC.
19 Richmond Street (201) 340-3666
Clifton, NJ 07011 F (201) 340-1565
APPLIANCES & ACCESSORIES GRINGER SALES LESTER RAWITZ
29 First Avenue (212) 475-2013
New York, NY 10003 F (212) 982-1935
JENTEEN PARTNERS BARBARA MAUCERI
21 Woodfern Street (908) 755-2127
Edison, NJ 08820 F (908) 769-7284
AHC APPLIANCE CO. JAY TAU
392 Felter Avenue (516) 569-1700
Hewlett, NY 11557 F (516) 569-1864
SALES DIRECTION KEN MULLER
441 Sawmill River Road (914) 476-1593
Yonkers, NY 10701 F (914) 476-5894
ARCHITECTURAL METAL & GLASS LEXINGTON GLASS MICHAEL PECHMAN
50 North 1st Street (718) 782-1776
Brooklyn, NY 11211 F (718) 387-5163
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
WORK CATEGORY SUB-CONTRACTOR NAME ESTIMATING CONTACT
------------- ------------------- ------------------
<S> <C> <C>
METRALITE JEFF SILVERSTEIN
132-70 34th Avenue (718) 961-1770
Flushing, NY 11354 F (718) 359-6541
F & F ARCH. GLASS & METALS ERIC FRANCK
79 Orchard Street (718) 402-7710
Demarest, NJ 07627 F (718) 993-2792
CHECKER GLASS CORP. ANDY SHEER
5 Commercial Avenue (516) 294-8818
Garden City, NY 11530 F (516) 742-4583
CARPETING, VCT & BASE RESOURCE LASHER/WHITE DAVID WHITE
165 West 18th Street (212) 366-0666
New York, NY 10011 F (212) 627-8015
CONSOLIDATED CARPET WORKSHOP AL BELLINGTON
1181 Grand Street (718) 456-8207
Brooklyn, NY 11211 F (718) 497-3487
DUPONT FLOORING SYSTEM KEVIN GERBER
95 Madison Avenue (212) 376-5355
New York, NY 10016 F (212) 376-5356
SHERLAND & FARRINGTON ED STRAUSS
155 6th Avenue (212) 206-7500
New York, NY 10013 F (212) 206-7517
CERAMIC TILE & STONE G. M. CROCETTI, INC. DON TENAGLIA
3960 Merritt Avenue (718) 994-0900
Bronx, NY 10466 F (718) 994-4505
F. LANZILOTTA & SON, INC. RICH LANZILOTTA
421 Doughty Blvd. (516) 239-7893
Inwood, NY 11696 F (516) 239-8422
NAVILLUS TILE INC. KEVIN O'SULLIVAN
30-30 Northern Blvd. (718) 784-0500
Long Island City, NY 11101 F (718) 392-1754
WILKSTONE DAVE WILKINSON
128 19th Avenue (973) 684-5100
Patterson, NJ 07513 F (973) 684-4907
CONCRETE, MASONRY & PLASTER EUROTECH MASONRY FAY DEVLIN
532 West 30th Street (212) 594-7474
New York, NY 10001 F (212) 594-1849
CIROCCO-OZZIMO CONT. INC. GREG OZZIMO
99 Rome Street (516) 847-0185
Farmingdale, NY 11735 F (516) 847-0054
NAVILLUS TILE INC. KEVIN O'SULLIVAN
30-30 Northern Blvd. (718) 784-0500
Long Island City, NY 11101 F (718) 392-1754
DEMOLITION PATRIOT CONTRACTING CORP. MIKE REVELLO
19-21 Brook Street (201) 413-9800
Jersey City, NJ 07302 F (201) 309-0550
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
WORK CATEGORY SUB-CONTRACTOR NAME ESTIMATING CONTACT
------------- ------------------- ------------------
<S> <C> <C>
LIBERTY CONTRACTING FRANK CALI
71 South Newman Street (201) 488-9300
Hackensack, NJ 07601 F (201) 488-7166
RITEWAY INTERNAL REMOVAL, INC. LEROY BARROCA
64-05 34th Avenue (718) 458-8900
Woodside, NY 11377 F (718) 899-0515
FORTUNE DEMOLITION JAY PATEL
185 Dey Street (201) 795-9200
Jersey City, NJ 07306 F (201) 653-2066
DRYWALL & CARPENTRY CURTIS PARTITIONS SUDARSHAN NARULA
505 8th Avenue (212) 695-5575
New York, NY 10018 F (212) 967-1120
GLENN PARTITIONS BILL SCHNEIDER
78 Morton Street (212) 243-2800
New York, NY 10014 F (212) 645-7539
NASTASI ASSOCIATES BOB POLIZZO
147 Herricks Road (516) 746-1800
Garden City Park, NY 11040 F (516) 746-6796
NEW AMSTERDAM INTERIORS, INC. KEVIN McNICHOLAS
292 Fifth Avenue (212) 714-3543
New York, NY 10001 F (212) 714-3510
ELECTRICAL & FIRE ALARM FOREST ELEC. CORP. PHIL ALTHEIM
2 Penn Plaza (212) 318-1500
New York, NY 10121 F (212) 318-1791
R.B. SAMUELS, INC. DAVE SAMUELS
352 Park Avenue South (212) 686-6700
New York, NY 10010 F (212) 213-4089
NEAD ELECTRIC ANTHONY DELELLO
186 Griffith Street (212) 925-9590
Jersey City, NJ 07307 F (201) 656-4954
UNITY ELECTRIC RICHARD SCARPELLI
65-45 Fresh Meadow Lane (718) 539-4300
Flushing, NY 11365 F (718) 353-4866
FABRIC PANELS WALLCOUSTICS KEVIN BROWN
106 Ramapo Plaza (800) 851-0084
Pomona, NY 10970 F (914) 362-3586
LENCORE ACOUSTICS CORP. KENNETH DREWES
2220 Hewlett Avenue (516) 223-4747
Merrick, NY 11566 F (516) 223-4785
NOVAWALL-REGIONAL WALL SYSTEMS HARVEY COOK
3900 Webster Avenue (718) 324-6767
Bronx, NY 10470 F (718) 324-2140
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
WORK CATEGORY SUB-CONTRACTOR NAME ESTIMATING CONTACT
------------- ------------------- ------------------
<S> <C> <C>
DFB ELLIOT FEIN
21-07 Borden Avenue (718) 729-8310
Long Island City, NY 11101 F (718) 706-0526
FOLDING PARTITION FLEX-WALL SYSTEMS GARY GIBALDI
115 South Corona Avenue (516) 561-3900
Valley Stream, NY 11580 F (516) 561-3983
MODERNFOLD/STYLES, INC. BILL TARR
168 South Van Brunt Street (201) 871-0150
Englewood, NJ 07631 F (201) 871-9848
NATIONAL FOLDING WALL EDMUND GRECO
P.O. Box 174 (908) 727-0200
Bordentown Ave./Cheesequake F (908) 727-0201
Oldbridge, NJ 08857
HVAC REACT INDUSTRIES, INC. JEFF PLATINSKY
3402 Review Avenue (718) 392-4000
Long Island City, NY 11101 F (718) 392-1522
BP AIR BOB BARBERA
116 Greenpoint Avenue (718) 383-2100
Greenpoint, NY 11222 F (718) 389-8539
WYANT A/C CORP. ROCCO PALAZZOLO
5-35 51st Avenue (718) 392-6000
Log Island City, NY 11101 F (718) 392-6616
KABACK ENTERPRISES IRVING GERBER
41 West Street (212) 645-5100
New York, NY 10010 F (212) 645-8962
B&G MECHANICAL GERRY SCELZO
Bronx, NY 10451 (718) 665-4700
HARDWARE SECURE DOOR & HARDWARE ALEX KACHKA
265 46th Street (718) 492-1222
Brooklyn, NY 11220 F (718) 492-1222
WEINSTEIN & HOLTZMAN IRA HYMOWITZ
29 Park Row (212) 233-4651
New York, NY 10038 F (212) 571-5301
AAA LOCKSMITH PETER
44 West 46th Street (212) 840-3939
New York, NY 10036 F (212) 921-5086
HOLLOW METAL ACME STEEL DOOR CORP. JOE LICARI
513 Porter Avenue (718) 384-7800
Brooklyn, NY 11222 F (718) 599-0582
SECURE DOOR & HARDWARE ALEX KACHKA
265 46th Street (718) 492-1222
Brooklyn, NY 11220 F (718) 492-1222
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
WORK CATEGORY SUB-CONTRACTOR NAME ESTIMATING CONTACT
------------- ------------------- ------------------
<S> <C> <C>
WEINSTEIN & HOLTZMAN IRA HYMOWITZ
29 Park Row (212) 233-4651
New York, NY 10038 F (212) 571-5301
POST ROAD IRON WORKS IRENE WALKER
345 West Putnam Avenue (203) 869-6322
Greenwich, CT 06830 F (203) 869-0288
LATH & ACOUSTICS NASTASI ASSOCIATES BOB POLIZZO
129-09 26th Avenue (718) 886-7100
Kearny, NJ 07032 F (718) 321-2099
SUPERIOR ACOUSTICS, INC. KEN MCGUIGAN
270 Indian Head Road (718) 894-2417
Kingspark, NY 11754 F (516) 269-4478
NATIONAL ACOUSTICS JIM MCQUADE
515 W. 36th Street (212) 695-1252
New York, NY 10018 F (212) 695-4539
CURTIS PARTITION SUDARSHAN NARULA
505 8th Avenue (212) 695-5575
New York, NY 10018 F (212) 967-1120
LIGHT FIXTURES JDC LIGHTING JAMES ROSELLE
15 West 36th Street (212) 594-8869
New York, NY 10018 F (212) 967-1242
SHELTON LIGHTING KEVIN WELTMAN
134-40 West 26th Street (212) 255-8555
New York, NY 10001 F (212) 645-2543
HALLMARK ELECTRICAL SUPPLIES CORP. GARY A. SIEGEL
542 Wortman Avenue (718) 272-7400
Brooklyn, NY 11208 F (718) 257-9244
PROJECT LIGHTING BARRY KESTENBERG
3358 Lorelei Drive (212) 420-7200
Yorktown, Hts., NY 10598 F (914) 243-9208
MILLWORK JARRETT WOODWORKING JOHN PAGNOTTA
1314 Blondell Avenue (718) 931-8333
Bronx, NY 10461 F (718) 518-1145
MIELACH / WOODWORK PETER MIELACH
9 Kilmer Court (732) 287-1100
Edison, NJ 08817 F (732) 287-9383
ISLAND ARCH. MILLWORK EDWARD RUFRANO
3133 Howard Place (516) 737-0020
Ronkonkoma, NY 11779 F (516) 737-7518
HIRD/BLAKER CLIFF BLAKER
620 East 132nd Street (718) 665-3434
Bronx, NY 10474 F (718) 665-0524
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
WORK CATEGORY SUB-CONTRACTOR NAME ESTIMATING CONTACT
------------- ------------------- ------------------
<S> <C> <C>
PLUMBING ABBA PLUMBING CORP. JOHN HARSTICK
12-11 43rd Avenue (718) 389-1200
Long Island City, NJ 11101 F (718) 389-7781
LAB PLUMBING RICHARD BISSO
530 West 50th Street (212) 246-9690
New York, NY 10019 F (212) 581-4929
PAR PLUMBING MARTY LEVINE
60 North Prospect Avenue (516) 887-4000
Lynbrook, NY 11563 F (516) 592-9089
L.S. MILLER LARRY MILLER
1 Haig Drive (516) 242-3196
Dix Hills, NY 11746 F (516) 243-4985
PAINTING & WALLCOVERING BOND PAINTING KEN SPRECHTER
42 West 38th Street (212) 944-0070
New York, NY 10018 F (212) 944-8499
711 N.Y. PAINTING & DECORATING CO., INC. BILL DICHTER
47-36 11th Street (718) 784-7775
Long Island City, NY 11101 F (718) 784-1222
HUDSON SHATZ PAINTING COMPANY RICH GOETINGER
429 East 53rd Street (212) 757-6363
New York, NY 10019 F (212) 265-2178
PROJECTION SCREENS JENTEEN PARTNERS ART DOVER
21 Woodfern Street (908) 755-2127
Edison, NJ 08820 F (908) 769-7284
GRINGER SALES LESTER RAWITZ
29 First Avenue (212) 475-2013
New York, NY 10003 F (212) 982-1935
RAVEN SCREEN CORP. MARTY SOSS
112 Spring Street (914) 782-1844
Monroe, NY 10950 F (914) 782-1840
SPRINKLER RAEL SPRINKLER DAVID ISRAEL
601 Merrick Road (516) 593-2000
Lynbrook, NY 115643 F (516) 593-9635
SIRINA FIRE PROTECTION CORP. JACK GILLEN
128 Charlotte Avenue (516) 942-0400
Hicksville, NY 11801 F (516) 942-0415
ABBA PLUMBING CORP. JEAN SPIVAK
12-11 43rd Avenue (718) 389-1200
Long Island City, NJ 11101 F (718) 389-7781
PREFERRED MECHANICAL SEAN MACKIN
895 BROADWAY 460-9670
New York, N.Y. 10003 F 387-9298
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
WORK CATEGORY SUB-CONTRACTOR NAME ESTIMATING CONTACT
------------- ------------------- ------------------
<S> <C> <C>
STRUCTURAL STEEL KOENIG IRONWORKS NORM ROSENBAUM
223-225 West 19th Street (212) 924-4334
New York, NY 10011 F (212) 633-0149
BURGESS STEEL EUGENE GUERIN
200 West Forest Avenue (201) 871-3500
Englewood, NJ 07631 F (201) 871-8750
POST ROAD IRON WORKS IRENE WALKER
345 West Putnam Avenue (203) 869-6322
Greenwich, CT 06830 F (203) 869-0288
TARRANT STEEL INC. PAUL RALPH
617 Elm Street (201) 955-1680
Kearny, NJ 07032
TOILET PARTITION GRINGER SALES LESTER RAWITZ
29 First Avenue (212) 475-2013
New York, NY 10003 F (212) 982-1935
JENTEEN PARTNERS PRISCILLA SIEGEL
21 Woodfern Street (908) 755-2127
Edison, NJ 08820 F (908) 769-7284
KNICKERBOCKER MARIO MARTINOLICH
PO Box 3035 (516) 546-0550
Freeport, NY 11520 F (516) 546-0549
LEJAC METAL SPECIALTIES TODD
135 Aspinall Street (516) 334-0855
Westbury, NY 11590
TEL/DATA CABLING US INFORMATION SYSTEMS (USIS) PAM SOSS
15 North Mill Road (914) 358-7755
(CWA) Nyack, NY 10960 F (914) 358-7882
(IF REQUIRED) LINEAR TECHNOLOGIES PETER PULEO
27 West 24th Street - 2nd floor (212) 645-9000
New York, NY 10010 F (212) 645-9005
INTELLIGENT BUILDING SYSTEMS JERRY FORREST
230 West 41st Street (212) 376-5322
New York, NY 10036 F (212) 376-5325
WINDMILL COMMUNICATIONS KEN KATZ
15 West 37th Street - 11th floor (212) 730-5959
New York, NY 10018 F (212) 730-6661
WOOD FLOORING HOBOKEN WOODWORK BRIAN SAKOSITS
979 3rd Avenue (212) 759-5917
New York, NY 10022 F (212) 593-0268
METRO FLOORING ZANDRA KAUFMAN
241-15 N. Conduit Avenue (212) 686-8111
Rosedale, NY 11422 F (212) 686-7127
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
WORK CATEGORY SUB-CONTRACTOR NAME ESTIMATING CONTACT
------------- ------------------- ------------------
<S> <C> <C>
HAYWOOD BERK BARBARA
180 Varick Street (212) 242-0047
New York, NY 10014 F (212) 242-0995
DESIGNED FLOORING JOE MATURA
142 Bristol Drive (516) 921-3147
Woodbury, NY 11797 F (516) 946-7516
WINDOW TREATMENT DFB (TRAK TEX) ELLIOT FEIN
21-07 Borden Avenue (718) 729-8310
Long Island City, NY 11101 F (718) 729-0526
INTERNATIONAL BLINDS DAVID J. KLEIN
200 Park Avenue South, Suite 1707 (212) 473-2000
New York, NY 10003 F (212) 353-3400
LVC BLINDS JOHN VanCALCAR
176 Kansas Street (201) 525-0222
Hackensack, NJ 07601 F (201) 525-0345
CITY VIEW BLINDS MOSHE GOLD
167 Clymer Street (718) 486-5511
Brooklyn, NY 11211 F (718) 387-3026
</TABLE>
F-9
<PAGE>
EXHIBIT G
---------
CERTIFICATE OF OCCUPANCY
------------------------
[Exhibit on file]
G-1
<PAGE>
EXHIBIT H
---------
FORM OF NON-DISTURBANCE AGREEMENT
---------------------------------
RECORDING REQUESTED BY AND
WHEN RECORDED PLEASE RETURN TO:
STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK, NEW YORK 10038-4982
ATTN: BRIAN DIAMOND, ESQ.
- - -------------------------------------------------------------------------------
(SPACE ABOVE THIS LINE FOR RECORDER'S USE)
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
(this "Agreement"), is entered into as of the ___ day of October, 1999, by and
among BARNESANDNOBLE.COM LLC, a Delaware limited liability company ("Tenant"),
111 CHELSEA LLC, a Delaware limited liability company ("Landlord"), and 111 8TH
FUNDING COMPANY, a Delaware corporation ("Lender").
WITNESSETH:
WHEREAS, this Agreement affects the Property described in
Exhibit A attached hereto;
WHEREAS, the terms "Tenant", "Landlord", "Lender", "Premises",
"Leases", "Property", "Loan", "Assignment of Leases and Rents", "Note", and
"Mortgage" are defined in the Schedule of Definitions attached hereto as Exhibit
B;
WHEREAS, Landlord and Tenant have entered into the Leases
covering the Premises in the Property;
WHEREAS, Lender is the holder of the Note evidencing the Loan,
and secured by, inter alia, the Mortgage covering the Property;
H-1
<PAGE>
WHEREAS, the parties hereto desire to expressly confirm the
subordination of the Leases to the Mortgage and the Assignment of Leases and
Rents; and
WHEREAS, Tenant has requested that Lender agree not to disturb
Tenant's possessory rights in the Premises in the event Lender should foreclose
the Mortgage or the Assignment of Leases and Rents or Lender should otherwise
come into possession of the Premises and, provided that Tenant is not then in
default under the Leases beyond applicable grace and notice periods and provided
further that Tenant attorns to Lender or the purchaser at any foreclosure sale
of the Property or purchaser in lieu of foreclosure, Lender is willing to agree
to such request, upon and subject to the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and of other good and valuable consideration, the parties agree
as follows:
1. Subordination; Consent.
Subject to the provisions of this Agreement, anything to the
contrary in the Leases notwithstanding, the Leases and the leasehold estates
created thereby, and all of Tenant's rights thereunder, are and shall be and
shall at all times remain subject, subordinate and inferior to the Mortgage and
the Assignment of Leases and Rents and all rights of Lender thereunder and to
any and all renewals, revisions, modifications, consolidations, replacements and
extensions thereof. Lender's execution of this Agreement shall be deemed to
satisfy any requirement in the Mortgage that Lender consent to the execution of
the Ninth Floor Lease and the Assignment.
2. Acknowledgment and Agreement by Tenant.
Tenant acknowledges and agrees that:
(a) Tenant has been advised of the existence of the Mortgage
and the agreements evidencing and securing the Loan; and
(b) From and after the date hereof, in the event of any act or
omission by Landlord which would give Tenant the right, either immediately or
after the lapse of time, to terminate either Lease, to claim a partial or total
eviction, to withhold any rent, and/or to otherwise refuse to meet any of
Tenant's obligations to perform under either Lease, Tenant will not exercise any
such right:
(i) until it has given written notice of such act or
omission to Lender; and
(ii) until the same period of time, if any, as is
given to Landlord under such Lease to cure such act or omission and an
additional period of time of thirty (30) days shall have elapsed
following Lender's receipt of such notice; provided, however, that with
respect to any default, other than a monetary default, so long as
Lender shall be acting reasonably to remedy such default, such thirty
(30) day period shall be extended by the number of days reasonably
required for Lender to obtain possession of the Property and to cure
such default.
H-2
<PAGE>
(c) Tenant has notice that the Leases and the rents and all
other sums due thereunder have been assigned or are to be assigned to Lender as
security for the Loan secured by the Mortgage and the Assignment of Leases and
Rents. In the event Lender notifies Tenant of the occurrence of a default under
the Mortgage and demands that Tenant pay its rents and all other sums due or to
become due under the Leases directly to Lender, Tenant shall honor such demand
and pay its rent and all other sums due under the Leases directly to Lender or
as otherwise authorized in writing by Lender. Landlord hereby irrevocably
authorizes Tenant to make the foregoing payments to Lender upon such notice and
demand.
(d) Tenant shall send a copy of any notices regarding monetary
issues, any notices regarding material non-monetary issues, and all notices of
termination and default given to Landlord under either Lease to Lender at the
same time and in the same manner such notice is sent to Landlord.
(e) Within ten (10) days after Lender's request, Tenant shall
deliver to Lender and/or to any person designated by Lender, estoppel
certificates executed by Tenant, in recordable form, certifying (if such be the
case) that each Lease is in full force and effect, the date and amount of
Tenant's most recent payment of rent under each Lease, that there are no
defenses or offsets outstanding under either Lease (or stating those claimed by
Tenant, as the case may be) and such other information about Tenant or the
Leases as Lender may reasonably request.
(f) This Agreement satisfies any condition or requirement in
the Leases relating to the granting of a nondisturbance agreement.
(g) Anything in the Leases to the contrary notwithstanding, in
the event that Lender shall acquire title to, or shall take possession of, the
Premises or the Property, Lender shall have no obligation, nor incur any
liability, beyond Lender's then interest, if any, in the Property and Tenant
shall look exclusively to such interest of Lender, if any, in the Premises or
the Property for the payment and discharge of any obligations imposed upon
Lender hereunder or under the Lease and Lender is hereby released and relieved
of any other obligations hereunder and under the Lease. Tenant agrees that with
respect to any money judgment which may be obtained or secured by Tenant against
Lender, Tenant shall look solely to the estate or interest owned by Lender in
the Premises or the Property and the rental income therefrom paid by Tenant to
Lender, and Tenant shall not collect or attempt to collect any such judgment out
of any other assets of Lender or Lender's shareholders, principals, officers,
directors, agents or employees.
3. Nondisturbance, Attornment and New Lease.
(a) In the event Lender shall come into possession of
or acquire title to either or both Premises as a result of the enforcement or
foreclosure of the Mortgage, the Note or the Assignment of Leases and Rents, or
by means of the delivery to Lender of a deed-in-lieu of foreclosure, or as a
result of any other means:
(i) Lender agrees that Tenant's rights and
obligations under the Leases (subject to the terms hereof) shall not be
affected nor shall Tenant be disturbed in its
H-3
<PAGE>
possession of the Premises for any reason other than one which would
entitle Landlord to terminate the Leases or either of them, under their
terms or at law or in equity, or would cause, without any further
action by Landlord, the termination of the Leases or either of them, or
would entitle Landlord to dispossess the Tenant from the Premises;
provided, however, that at the time Lender comes into possession of, or
acquires title to, the Premises, Tenant is not in default under either
Lease beyond applicable grace and notice periods, which default would
cause, without any further action of Landlord, the termination of such
Lease, or would entitle Landlord to dispossess Tenant from the
Premises; and
(ii) Tenant shall be bound to Lender under all of the
terms, covenants and conditions of the Leases for the balance of the
term thereof remaining and any extensions or renewals thereof which may
be effected in accordance with any option therefor in the Leases, with
the same force and effect as if Lender were the landlord under the
Leases, and Tenant does hereby attorn to Lender as its landlord, said
attornment to be effective and self-operative without the execution of
any further instruments on the part of any of the parties hereto
immediately upon Lender coming into possession of, or acquiring title
to, the Premises. Tenant agrees, however, upon the election of and
written demand by Lender, within sixty (60) days after Lender receives
title to or acquires possession of the Premises, as the case may be, to
execute an instrument in confirmation of the foregoing provisions,
reasonably satisfactory to Lender, in which Tenant shall acknowledge
such attornment and shall set forth the terms and conditions of its
tenancy.
(b) In the event any person or entity other than Lender shall
come into possession of or acquire title to the Premises as a result of the
enforcement or foreclosure of the Mortgage, the Note or the Assignment of Leases
and Rents, or in the event that Landlord conveys its estate in the Premises to
any person or entity other than Lender, or in the event that Landlord's estate
in the Premises passes to a person or entity other than Lender by operation of
law or any other means (such person or entity being referred to hereinafter as a
"Successor Owner"), then in any of said events:
(i) Tenant's rights and obligations under the Leases
(subject to the terms hereof) shall not be affected nor shall Tenant be
disturbed in its possession of the Premises by Successor Owner for any
reason other than one which would entitle Landlord to terminate the
Leases or either of them, under their terms or at law or in equity, or
would cause, without any further action by Landlord, the termination of
the Leases or either of them, or would entitle Landlord to dispossess
Tenant from the Premises; provided, however, that at the time Successor
Owner comes into possession of, or acquires title to, the Premises,
Tenant is not in default under either Lease beyond applicable grace and
notice periods, which default would cause, without any further action
of Landlord, the termination of such Lease, or would entitle Landlord
to dispossess Tenant from the Premises; and
(ii) Tenant shall be bound to Successor Owner under
all of the terms, covenants and conditions of the Leases for the
balance of the term thereof remaining and any extensions or renewals
thereof which may be effected in accordance with any option
H-4
<PAGE>
therefor in the Leases, with the same force and effect as if Successor
Owner were the Landlord under the Leases, and Tenant does hereby attorn
to Successor Owner as its Landlord, said attornment to be effective and
self-operative without the execution of any further instruments on the
part of any of the parties hereto immediately upon Successor Owner
coming into possession of, or acquiring title to, the Premises. Tenant
agrees, however, upon the election of Successor Owner, within sixty
(60) days after Successor Owner receives title to the Premises, to
execute an instrument in confirmation of the foregoing provisions,
reasonably satisfactory to Successor Owner, in which Tenant shall
acknowledge such attornment and shall set forth the terms and
conditions of its tenancy.
(c) In the event Lender or any Successor Owner shall come into
possession of or acquire title to the Premises, as aforesaid, neither Lender nor
Successor Owner shall be:
(i) liable for any act, omission or default of any
prior landlord under the applicable Lease (including, without
limitation, Landlord); provided, however, that nothing contained herein
shall be deemed to relieve Lender or Successor Owner of any liability
arising by reason of Lender's or Successor Owner's acts or omissions
from or after the date that Lender or Successor Owner shall become
landlord under such Lease, and Lender or Successor Owner, as landlord
under such Lease, shall be obligated to properly maintain, operate and
repair the Premises in accordance with the provisions of such Lease,
notwithstanding the fact that any condition requiring such maintenance
or repair may have arisen prior to the date of any such foreclosure, or
assignment in lieu of foreclosure, of the Mortgage; or
(ii) subject to any offsets or defenses which Tenant
might have against any prior landlord under such Lease (including,
without limitation, Landlord); or
(iii) bound by any rent or additional rent which
Tenant might have paid for more than the then current month to any
prior landlord under such Lease (including Landlord) or by any security
deposit, cleaning deposit or other prepaid charge which Tenant might
have paid in advance to any prior landlord under such Lease (including,
without limitation, Landlord), except to the extent any such security
deposit or other sum shall actually have been received by Successor
Owner; or
(iv) bound by any amendment or modification of such
Lease made without Lender's written consent, in accordance with the
terms of the Mortgage; or
(v) bound by any agreement of any landlord under such
Lease (including, without limitation, Landlord) with respect to the
completion of any improvements at the Property or the Premises or for
the payment or reimbursement to Tenant of any contribution to the cost
of the completion of any such improvements; provided, however, that:
(A) with respect to the Ninth Floor Lease,
if Successor Owner fails to commence and thereafter pursue the
completion of any such improvements, or fails to make any such payment
or reimbursement when due, in either case relating to
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<PAGE>
Space B or Space C (as defined in the Lease), after notice to do so
from Tenant specifying the date when the commencement of such
completion, payment or reimbursement is due and accompanied by
appropriate backup information, then, as Tenant's sole and exclusive
remedy, Tenant shall have the right to terminate the Ninth Floor Lease
solely with respect to such Space, by notice to Successor Owner given
no later than thirty (30) days after the date when the commencement of
such completion, payment or reimbursement is due, such termination to
be effective thirty (30) days after the date such notice is given, upon
which date the Ninth Floor Lease shall be deemed automatically amended
by the deletion of such Space from the Premises, Fixed Rent and
Additional Rent shall be reduced in the proportion which the area of
such Space bears to the total area of the Premises immediately prior
thereto, and Tenant shall promptly vacate and surrender such Space to
Successor Owner. Notwithstanding anything to the contrary contained
herein, if Successor Owner shall commence such completion, payment or
reimbursement at any time within thirty (30) days following Successor
Owner's receipt of such notice by Tenant, such termination shall be
void and of no force and effect, and Tenant shall have no further right
to terminate the Ninth Floor Lease with respect to such Space pursuant
to this Section 3(c)(v); and
(B) As of the date hereof, B&N Inc. (as
defined in Exhibit B hereto) has not received payment of a construction
allowance in the amount of $1,275,720 pursuant to a letter agreement
dated June 30, 1997 modifying the Eleventh Floor Lease (the
"Construction Claim"), and B&N Inc. has demanded payment therefor from
Landlord. Notwithstanding anything contained in this Agreement to the
contrary, by entering into this Agreement, Tenant or B&N Inc., as the
case may be, does not herein waive or release any claims, rights,
causes of action or defenses, including without limitation Tenant's or
B&N Inc., as the case may be, right to commence any action or
proceeding to recover the Construction Claim which may be available to
Tenant or B&N Inc., as the case may be, against any person.
(d) New Lease. Tenant agrees, upon demand of Lender or any
Successor Owner which shall have come into possession or acquired title to the
Premises, as aforesaid, to execute a lease of either Premises (as tenant) with
Lender or Successor Owner (as landlord) upon the same terms and conditions as
the applicable Lease between Tenant and Landlord, which lease shall cover any
unexpired term of such Lease existing at the time of such conveyance of title.
4. Acknowledgment and Agreement by Landlord.
Landlord, as landlord under the Leases and mortgagor under the
Mortgage, acknowledges and agrees for itself and its heirs, successors and
assigns, that:
(a) This Agreement does not: (i) constitute a waiver by Lender
of any of its rights under the Mortgage and the Assignment of Leases and Rents
and/or (ii) in any way release Landlord from its obligations to comply with the
terms, provisions, conditions, covenants, agreements and clauses of the Mortgage
and the Assignment of Leases and Rents.
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<PAGE>
(b) The provisions of the Mortgage and the Assignment of
Leases and Rents remain in full force and effect and must be complied with by
Landlord.
(c) In the event Lender notifies Tenant of the occurrence of
any default under the Mortgage and demands that Tenant pay its rent and all
other sums due under the Leases or either of them directly to Lender, Landlord
acknowledges and agrees that Tenant shall have the right and obligation to pay
all such rent and other sums due under the Leases directly to Lender or as
otherwise authorized in writing by Lender. Lender agrees to send Landlord copies
of all such notices given to Tenant pursuant to this Section 4(c).
(d) Landlord shall not agree to any amendment or modification
of the Leases without Lender's prior written consent, in accordance with the
terms of the Mortgage, which consent may be given or withheld in Lender's sole
and absolute discretion.
5. Miscellaneous.
(a) Any notice, demand, consent, approval, direction,
agreement or other communication (a "Notice") required or permitted hereunder or
under any other documents in connection herewith shall be in writing and shall
be addressed to the parties hereto at their addresses shown on Exhibit B hereto.
All Notices shall be (i) personally delivered (including delivery by Federal
Express or other comparable nation-wide overnight courier service) to the
aforementioned addresses, in which case they shall be deemed delivered on the
date of delivery or the first business day thereafter if delivered other than on
a business day or after 5:00 p.m. New York City time) to said addresses; (ii)
sent by certified mail, return receipt requested, in which case they shall be
deemed delivered on the delivery date shown on the receipt unless delivery is
refused or delayed by the addressee in which event they shall be deemed
delivered on the date of deposit in the U.S. Mail; or (iii) sent by means of a
facsimile transmittal machine, in which case they shall be deemed delivered on
the date of receipt with receipt thereof confirmed by telephonic acknowledgment
or first business day thereafter if delivered other than on a business day or
after 5:00 p.m. New York City time.
(b) This Agreement shall bind and inure to the benefit of all
of the parties hereto, their successors and assigns; provided, however, that in
the event of the assignment or transfer of the interest of Lender hereunder, all
obligations and liabilities of Lender under this Agreement shall terminate, and
thereupon all such obligations and liabilities shall be the responsibility of
the party to whom Lender's interest is assigned or transferred; and provided
further that the interest of Tenant under this Agreement may not be assigned or
transferred.
(c) This Agreement shall be governed by and construed in
accordance with the law of the State of New York.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
H-7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
111 8TH FUNDING COMPANY, Lender
a Delaware corporation
By:___________________________
Name:
Title:
BARNESANDNOBLE.COM LLC, Tenant
a Delaware limited liability company
By:___________________________
Name:
Title:
111 CHELSEA LLC, Landlord
a Delaware limited liability company
By: Taconic Chelsea Holdings LLC,
a Delaware limited liability company,
its managing member
By: Taconic SL Principals LLC,
a Delaware limited liability company,
its managing member
By:___________________________
Name: Paul E. Pariser
Title: Member
H-8
<PAGE>
ACKNOWLEDGMENTS
---------------
COUNTY OF __________________ )
ss.:
STATE OF____________________ )
On this ___ day of October in the year 1999 before me, the
undersigned, a notary public in and for said State, personally appeared
___________ __________________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity, and that by his/her signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.
-------------------------
Notary Public
COUNTY OF __________________ )
ss.:
STATE OF____________________ )
On this ___ day of October in the year 1999 before me, the
undersigned, a notary public in and for said State, personally appeared
___________ __________________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity, and that by his/her signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.
-------------------------
Notary Public
H-9
<PAGE>
COUNTY OF __________________ )
ss.:
STATE OF____________________ )
On this ___ day of October in the year 1999 before me, the
undersigned, a notary public in and for said State, personally appeared
___________ __________________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity, and that by his/her signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.
-------------------------
Notary Public
H-10
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION OF PROPERTY
ALL that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:
BEGINNING at the corner formed by the intersection of the northerly side of West
15th Street and the westerly side of Eighth Avenue;
RUNNING THENCE westerly along the northerly side of West 15th Street, 800 feet
to the easterly side of Ninth Avenue;
THENCE northerly along the easterly side of Ninth Avenue, 206 feet 6 inches to
the southerly side of West 16th Street;
THENCE easterly along the southerly side of West 16th Street, 800 feet to the
westerly side of Eighth Avenue; and
THENCE southerly along the westerly side of Eighth Avenue, 206 feet 6 inches to
the northerly side of West 15th Street, the point of place of BEGINNING.
A-1
<PAGE>
EXHIBIT B
---------
SCHEDULE OF DEFINITIONS
"Lender" means 111 8th Funding Company, a Delaware
corporation. All notices to Lender shall be sent to:
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Attention: Mr. __________
Facsimile: (212) 837-____
and a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: Brian Diamond, Esq.
Facsimile: (212) 806-6006
"Assignment of Leases and Rents" means an Assignment of Leases
and Rents, dated as of July 9, 1999, encumbering the Property, executed by
Landlord, as assignor, to Lender, as assignee, as the same may be amended,
modified or otherwise altered, securing repayment of the Loan evidenced by the
Note and securing certain other obligations, recorded or to be recorded in the
Office of the City Register for New York County (the "Register's Office").
"Mortgage" means a Mortgage and Security Agreement and
Assignment of Leases and Rents, dated as of July 9, 1999, encumbering the
Property, executed by Landlord, as Mortgagor, to Lender, as Mortgagee, as the
same may be amended, modified, extended, consolidated, split or restated,
securing repayment of the Loan evidenced by the Note and securing certain other
obligations, recorded or to be recorded in the Register's Office.
"Landlord" means 111 Chelsea LLC, a Delaware limited liability
company. All notices to Landlord shall be sent in accordance with the terms of
the Lease.
"Leases" means, collectively, (i) that certain lease (the
"Ninth Floor Lease"), dated as of October 1, 1999, between Landlord and Tenant,
covering the Premises, and (ii) that certain Agreement of Lease, dated as of
June 30, 1997, between Landlord's predecessor-in-interest, P.A. Building Company
("PA") as landlord, and Tenant's predecessor-in-interest, Barnes & Noble, Inc.
("B&N Inc."), as tenant, as amended by (i) letter agreement of even date
therewith, between PA and B&N Inc., (ii) letter agreement, dated July 1, 1997,
between PA and B&N Inc. (iii) Modification of Lease Agreement dated as of
January 1998, between Landlord and B&N Inc. and (iv) Amendment of Lease dated as
of September 1, 1998, between Landlord and B&N Inc., and as further amended by
Assignment, Assumption and Consent Agreement and Amendment to Lease, dated as of
October 1, 1999, among Landlord, B&N Inc. and Tenant (the "Assignment"),
B-1
<PAGE>
pursuant to which the tenant's interest in the Eleventh Floor Lease was assigned
to Tenant (as so amended and assigned, the "Eleventh Floor Lease").
"Loan" means a first mortgage loan from Lender to Landlord in
the original principal amount of $225,000,000.00, which Loan is evidenced by the
Note and secured by the Mortgage and by the Assignment of Leases and Rents.
"Note" means that certain Note executed by Landlord in favor
of Lender dated as of July 9, 1999 in the original principal amount of
$225,000,000.00, as the same may be amended, modified, extended, consolidated,
split or restated.
"Premises" means, collectively, (i) certain space (the "Ninth
Floor Space") consisting of up to approximately 90,140 square feet on the ninth
(9th)) floor of the improvements which are located upon the Property, as more
fully described in the Ninth Floor Lease, and (ii) certain space (the "Eleventh
Floor Space") consisting of approximately 76,654 Rentable Square Feet on the
eleventh (11th) floor of the improvements which are located upon the Property,
as more fully described in the Eleventh Floor Lease.
"Property" means the real property commonly known as 111
Eighth Avenue, New York, New York 10011, and more particularly described in
Exhibit A to the Agreement to which this Schedule is attached, together with the
improvements thereon.
"Tenant" means barnesandnoble.com llc, a Delaware limited
liability company. All notices to Tenant shall be sent in accordance with the
terms of the Leases.
B-2
<PAGE>
EXHIBIT I
---------
ROOF SPACE
----------
The roof plan which follows is intended solely to identify the general outlines
of the Roof Space and should not be used for any other purpose. All areas,
dimensions and locations are approximate, and any physical conditions
indicated may not exist as shown.
[Diagram Exhibit]
I-1
<PAGE>
EXHIBIT J
---------
ARTICLE 29 SPACE
----------------
The floor plan which follows is intended solely to identify the general outlines
of the Article 29 Space and locations are approximate, and any physical
conditions indicated may not exist as shown.
[Diagram Exhibit]
J-1
<PAGE>
EXHIBIT K
---------
SECTION 2.3 OCCUPANCIES
-----------------------
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
SPACE AS AREA (SEE
INDICATED ATTACHED TERMINATION DATES COMMENTS
IN LEASE PLAN) TENANT
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SPACE A M CBS 9/30/99 An executed Termination Agreement gives
K Landlord a right to terminate the lease
upon 30 days written notice to Tenant.
Landlord delivered notice to the tenant on
August 23, 1999, designating September 30,
1999 as the termination date.
----------------------------------------------------------------------------------------------------
L Cowan & Tout 9/28/99 Landlord has the right to terminate the
sublease on 60 days written notice.
Landlord delivered notice to the tenant
on July 30, 1999, designating September
28, 1999 as the termination date.
- - ---------------------------------------------------------------------------------------------------------------------
SPACE B B Frontier Global 12/31/99 Landlord has certain relocation rights
Center upon 60 days prior written notice to the
tenant. Pursuant to a Termination
Agreement, the tenant must surrender the
space as of December 31, 1999 and relocate
to the 2nd Floor.
---------------------------------------------------------------------------------------------------
C Vacant NA Currently vacant
---------------------------------------------------------------------------------------------------
D The Effects House 11/30/99 Lease expiration date
---------------------------------------------------------------------------------------------------
E Vacant NA Currently vacant
- - ---------------------------------------------------------------------------------------------------------------------
SPACE C J CBS (Office Space) 5/31/00 Lease expiration date
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
K-1
<PAGE>
EXHIBIT L
---------
SECTION 30.2 OCCUPANCIES
------------------------
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
AREA (SEE APPROXIMATE
ATTACHED PLAN) RENTABLE SQUARE
TENANT FEET LEASE EXPIRATIONS
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A Cowan & Tout 35,000 12/31/04
- - -------------------------------------------------------------------------------------------------------
F BT North America 18,000 12/31/00
- - -------------------------------------------------------------------------------------------------------
G Knight Maintenance 6,500 09/30/07
- - -------------------------------------------------------------------------------------------------------
H Urban Office Products 4,500 12/31/00
- - -------------------------------------------------------------------------------------------------------
I Abel Bainson & Butz 1,600 11/30/00
- - -------------------------------------------------------------------------------------------------------
</TABLE>
L-1
<PAGE>
EXHIBIT M
---------
[Intentionally Deleted]
-----------------------
M-3-1
<PAGE>
EXHIBIT N
---------
EXISTING EMERGENCY STAIRWELL
----------------------------
[Diagram Exhibit]
N-1
<PAGE>
EXHIBIT O
---------
FORM OF AGREEMENT AND GUARANTY
------------------------------
AGREEMENT AND GUARANTY (this "Guaranty") made as of October
___, 1999, by BARNESANDNOBLE.COM inc., a Delaware corporation with its principal
office at 122 Fifth Avenue, New York, New York 10011 ("Guarantor") to 111 EIGHTH
AVENUE LLC ("Landlord"), a Delaware limited liability company with an office c/o
Taconic Investment Partners LLC, 1500 Broadway, New York, New York 10036.
W I T N E S S E T H:
WHEREAS:
A. Landlord has been requested by barnesandnoble.com llc, a
Delaware limited liability company with its principal office at 111 Eighth
Avenue, New York, New York 10011 ("Tenant"), to enter into an Agreement of
Lease, dated as of the date hereof (the "Lease"), whereby Landlord would lease
to Tenant, and Tenant would hire and rent from Landlord, a portion of the ninth
(9th) floor, as more particularly described in the Lease (the "Premises"), in
the building known as 111 Eighth Avenue, New York, New York.
B. Guarantor owns, directly or indirectly, certain equity
interests in Tenant, and will derive substantial benefit from the execution and
delivery of the Lease.
C. Guarantor acknowledges that Landlord would not enter into
the Lease unless this Guaranty accompanied the execution and delivery of the
Lease.
NOW, THEREFORE, in consideration of the execution and delivery
of the Lease and of other good and valuable consideration, the receipt and
sufficiency whereof are hereby acknowledged by Guarantor:
1. DEFINITIONS. Defined terms used in this Guaranty and not
otherwise defined have the meanings assigned to them in the Lease.
2. COVENANTS OF GUARANTOR.
(a) Guarantor absolutely, unconditionally and irrevocably
guarantees, as a primary obligor and not merely as a surety: (i) the full and
prompt payment of all Fixed Rent, Additional Rent and all other sums and charges
payable by Tenant under the Lease, and (ii) the full and timely performance of
all covenants, terms, conditions, obligations and agreements to be performed by
Tenant under the Lease (all of the obligations described in clauses (i) and
(ii), collectively, the "Obligations"). If an Event of Default shall occur under
the Lease, Guarantor will, without notice or demand, promptly pay and perform
all of the Obligations, and pay to Landlord when due all Fixed Rent and
Additional Rent payable by Tenant under the Lease, together with all damages,
costs and expenses to which Landlord is entitled pursuant to the Lease or under
applicable Legal Requirements.
O-1
<PAGE>
(b) Guarantor agrees with Landlord that (i) any action, suit
or proceeding of any kind or nature whatsoever (an "Action") commenced by
Landlord against Guarantor to collect Fixed Rent, Additional Rent and any other
sums and charges due under the Lease for any month or months shall not prejudice
in any way Landlord's rights to collect any such amounts due for any subsequent
month or months throughout the Term in any subsequent Action, (ii) Landlord may,
at its option, without prior notice or demand, join Guarantor in any Action
against Tenant in connection with or based upon the Lease or any of the
Obligations, (iii) Landlord may seek and obtain recovery against Guarantor in an
Action against Tenant or in any independent Action against Guarantor without
Landlord first asserting, prosecuting, or exhausting any remedy or claim against
Tenant or against any security of Tenant held by Landlord under the Lease, and
(iv) Guarantor will be conclusively bound in any jurisdiction by a judgment in
any Action by Landlord against Tenant, as if Guarantor were a party to such
Action, even though Guarantor is not joined as a party in such Action.
3. GUARANTOR'S OBLIGATIONS UNCONDITIONAL.
(a) This Guaranty is an absolute and unconditional guaranty of
payment and of performance, and not of collection, and shall be enforceable
against Guarantor without the necessity of the commencement by Landlord of any
Action against Tenant, and without the necessity of any notice of nonpayment,
nonperformance or nonobservance, or any notice of acceptance of this Guaranty,
or of any other notice or demand to which Guarantor might otherwise be entitled,
all of which Guarantor hereby expressly waives in advance.
(b) If the Lease is renewed, or the Term extended, for any
period beyond the Expiration Date, either pursuant to any option granted under
the Lease or otherwise, or if Tenant holds over beyond the Expiration Date, the
obligations of Guarantor hereunder shall extend and apply to the full and
faithful performance and observance of all of the Obligations under the Lease
during any renewal, extension or holdover period.
(c) This Guaranty is a continuing guarantee and will remain in
full force and effect notwithstanding, and the liability of Guarantor hereunder
shall be absolute and unconditional irrespective of: (i) any modifications or
amendments of the Lease, (ii) any releases or discharges of Tenant other than
the full release and complete discharge of all of the Obligations, (iii) any
extension of time that may be granted by Landlord to Tenant, (iv) any assignment
or transfer of all of any part of Tenant's interest under the Lease, (v) any
subletting of the Premises, (vi) any changed or different use of the Premises,
(vii) any other dealings or matters occurring between Landlord and Tenant,
(viii) the taking by Landlord of any additional guarantees from other persons or
entities, (ix) the releasing by Landlord of any other guarantor, (x) Landlord's
release of any security provided under the Lease, or (xi) Landlord's failure to
perfect any landlord's lien or other security interest available under
applicable Legal Requirements. Guarantor hereby consents, prospectively, to
Landlord's taking or entering into any or all of the foregoing actions.
O-2
<PAGE>
4. WAIVERS OF GUARANTOR.
(a) Guarantor waives (i) notice of acceptance of this
Guaranty, (ii) notice of any actions taken by Landlord or Tenant under the Lease
or any other agreement or instrument relating thereto, (iii) notice of any and
all defaults by Tenant in the payment of Fixed Rent, Additional Rent or other
charges, or of any other defaults by Tenant under the Lease, (iv) all other
notices, demands and protests, and all other formalities of every kind in
connection with the enforcement of the Obligations, omission of or delay in
which, but for the provisions of this Section 4, might constitute grounds for
relieving Guarantor of its obligations hereunder, and (v) any requirement that
Landlord protect, secure, perfect or insure any security interest or lien, or
any property subject thereto, or exhaust any right or take any action against
Tenant or any other Person or any collateral.
(b) Guarantor waives trial by jury of any and all issues
arising in any Action upon, under or in connection with this Guaranty, the
Lease, the Obligations, and any and all negotiations or agreements in connection
therewith.
5. SUBROGATION. Guarantor waives and disclaims any claim or
right against Tenant by way of subrogation or otherwise in respect of any
payment that Guarantor may be required to make hereunder, to the extent that
such claim or right would cause Guarantor to be a "creditor" of Tenant for
purposes of the United States Bankruptcy Code (11 U.S.C. ss.101 et seq., as
amended), or any other Federal, state or other bankruptcy, insolvency,
receivership or similar Legal Requirement. If any amount shall be paid to
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid and performed in full, Guarantor shall hold
such amount in trust for Landlord and shall pay such amount to Landlord
immediately following receipt by Guarantor, to be applied against the
Obligations, whether matured or unmatured, in such order as Landlord may
determine. Guarantor hereby subordinates any liability or indebtedness of Tenant
now or hereafter held by Guarantor to the obligations of Tenant to Landlord
under the Lease.
6. REPRESENTATIONS AND WARRANTIES OF GUARANTOR. Guarantor
represents and warrants that:
(a) Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified to do business in each jurisdiction where the conduct of its business
requires such qualification and has full requisite corporate power and authority
to enter into and perform its obligations under this Guaranty.
(b) The execution, delivery and performance by Guarantor of
this Guaranty does not and will not (i) contravene applicable Legal Requirements
or any contractual restriction binding on or affecting Guarantor or any of its
properties, or (ii) result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties.
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<PAGE>
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required for the due execution, delivery and performance by Guarantor of this
Guaranty.
(d) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms.
(e) There is no action, suit or proceeding pending or
threatened against or otherwise affecting Guarantor before any court or other
Governmental Authority or any arbitrator which may adversely affect Guarantor's
ability to perform its obligations under this Guaranty.
(f) Guarantor owns, directly or indirectly, approximately
17.86% of the issued and outstanding equity interests of Tenant.
(g) Guarantor has reviewed and acknowledges having notice of
all the provisions of the Lease and each of the documents, agreements and
instruments executed and delivered in connection with the Lease.
(h) The financial statements and accompanying letters and
documents of Guarantor, if any, made available to Landlord in connection with
the Lease (collectively, the "Financial Statements") are true, complete and
correct in all respects, and fairly present the net worth of Guarantor as of the
date thereof, and, since the date of such Financial Statements, there has been
no material adverse change in Guarantor's net worth.
7. NOTICES. All consents, notices, demands, requests,
approvals or other communications given under this Guaranty shall be given as
provided the Lease, as follows:
(a) if to Guarantor at Guarantor's address set forth on the
first page of this Guaranty, Attention: Marie J. Toulantis; and
(b) if to Landlord, as follows: 111 Eighth Avenue LLC, c/o
Taconic Investment Partners LLC, 1500 Broadway, New York, New York
10036, Attention: Mr. Paul Pariser, with a copy to: Schulte Roth &
Zabel LLP, 900 Third Avenue, New York, New York 10022, Attention:
Robert S. Nash, Esq.; or
to such other addresses as either Landlord or Guarantor may designate by notice
given to the other in accordance with the provisions of this Section 7.
8. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.
(a) Guarantor hereby irrevocably (i) submits to the
jurisdiction of any New York State or Federal court sitting in New York City in
any Action arising out of or relating to this Guaranty, and (ii) agrees that all
claims in respect of such Action may be heard and determined in such New York
State or Federal court. Such service may be made by mailing or delivering a copy
of such process to Guarantor in care of the Process Agent at the Process Agent's
address, and Guarantor hereby irrevocably authorizes and directs the Process
Agent to accept such service on its behalf. As an alternative method of service,
Guarantor also irrevocably
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<PAGE>
consents to the service of any and all process in any such Action by the mailing
of copies of such process to Guarantor at its address specified in Section 7
hereof. Guarantor agrees that a final judgment in any such Action shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner permitted under Legal Requirements.
(b) Guarantor irrevocably waives, to the fullest extent
permitted by Legal Requirements, and agrees not to assert, by way of motion, as
a defense or otherwise (i) any objection which it may have or may hereafter have
to the laying of the venue of any such Action brought any of the courts
described in Section 8(a), (ii) any claim that any such Action brought in any
such court has been brought in an inconvenient forum, or (iii) any claim that
Guarantor is not personally subject to the jurisdiction of any such courts.
Guarantor agrees that final judgment in any such Action brought in any such
court shall be conclusive and binding upon Guarantor and may be enforced by
Landlord in the courts of any state, in any federal court, and in any other
courts having jurisdiction over Guarantor or any of its property, and Guarantor
agrees not to assert any defense, counterclaim or right of set-off in any Action
brought by Landlord to enforce such judgment.
(c) Nothing in this Section 8 shall limit or affect Landlord's
right to (i) serve legal process in any other manner permitted by Legal
Requirements, or (ii) bring any Action against Guarantor or its property in the
courts of any other jurisdictions.
(d) Guarantor hereby irrevocably waives, with respect to
itself and its property, any diplomatic or sovereign immunity of any kind or
nature, and any immunity from the jurisdiction of any court or from any legal
process, to which Guarantor may be entitled, and agrees not to assert any claims
of any such immunities in any Action brought by Landlord under or in connection
with this Guaranty. Guarantor acknowledges that the making of such waivers, and
Landlord's reliance on the enforceability thereof, is a material inducement to
Landlord to enter into the Lease.
(e) Guarantor agrees to execute, deliver and file all such
further instruments as may be necessary under the laws of the State of New York,
in order to make effective (i) the appointment of the Process Agent, (ii) the
consent by Guarantor to jurisdiction of the state courts of New York and the
federal courts sitting in New York, and (iii) all of the other provisions of
this Section 8.
9. MISCELLANEOUS.
(a) The provisions, covenants and guaranties of this Guaranty
shall be binding upon Guarantor and its successors and assigns, and shall inure
to the benefit of Landlord and its successors and assigns, and shall not be
deemed waived or modified unless such waiver or modification is specifically set
forth in writing, executed by Landlord or its successors and assigns, and
delivered to Guarantor.
(b) Whenever the words "include", "includes", or "including"
are used in this Guaranty, they shall be deemed to be followed by the words
"without limitation", and, whenever the circumstances or the context requires,
the singular shall be construed as the plural, the
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<PAGE>
masculine shall be construed as the feminine and/or the neuter and vice versa.
This Guaranty shall be interpreted and enforced without the aid of any canon,
custom or rule of law requiring or suggesting construction against the party
drafting or causing the drafting of the provision in question.
(c) The provisions of this Guaranty shall be governed by and
interpreted solely in accordance with the internal laws of the State of New
York, without giving effect to the principles of conflicts of law.
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of October ___, 1999.
GUARANTOR:
BARNESANDNOBLE.COM INC.
By:__________________________________
Name:
Title:
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of October, 199__, before me, the undersigned,
personally appeared _______________________, personally known to me or proved to
me on the basis of satisfactory evidence to be the individual(s) whose name(s)
is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s) or the person
upon behalf of which the individual(s) acted, executed the instrument.
------------------------------------
Notary Public
(Affix Notarial Stamp)
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<PAGE>
EXHIBIT P
---------
Floor Plan of the Remaining B Space
-----------------------------------
The floor plan which follows is intended solely to identify the general outline
of the Remaining B Space, and should not be used for any other purpose. All
areas, dimensions and locations are approximate, and any physical conditions
indicated may not exist as shown.
[Diagram Exhibit]
P-1
<PAGE>
EXHIBIT P-1
-----------
Lease Modifications regarding Remaining B Space
-----------------------------------------------
If, as and when Tenant shall terminate the Lease with respect to Space
B and Space C pursuant to the provisions of Section 2.3(c), this Lease shall be
deemed amended as set forth in Section 2.3(c) and as follows:
The Definitions of "Premises" and "Premises Area" shall be
deemed deleted and replaced with the following:
Premises: Space A
Premises Area: 48,560 Rentable Square Feet, as such Premises
Area may be increased or decreased from time
to time pursuant to this Lease.
Section 1.1(a) shall be deemed deleted and replaced with the
following:
(a) For the portion of the Term commencing on the Space A
Delivery Date and ending on the Expiration Date, Tenant shall pay Fixed Rent for
Space A as follows:
(i) One Million Four Hundred Fifty Six Thousand Eight
Hundred and 00/100 Dollars ($1,456,800.00) per annum ($121,400.00 per
month) for the period commencing on the Space A Delivery Date and
ending one day prior to the fifth (5th) anniversary of the Space A
Delivery Date;
(ii) One Million Six Hundred Two Thousand Four
Hundred Eighty and 00/100 Dollars ($1,602,480.00) per annum
($133,540.00 per month) for the period commencing on the fifth (5th)
anniversary of the Space A Delivery Date and ending one day prior to
the tenth (10th) anniversary of the Space A Delivery Date; and
(iii) One Million Seven Hundred Forty Eight Thousand
One Hundred Sixty and 00/100 Dollars ($1,748,160.00) per annum
($145,680.00 per month) for the period commencing on the tenth (10th)
anniversary of the Space A Delivery Date and ending on the Expiration
Date.
Section 1.1(b) and Section 1.1(c) shall be deemed deleted and
of no further force and effect.
Section 6.1(b) shall be deemed deleted and replaced with the
following:
(b) "Tenant's Share" means Two and 111/1000ths percent
(2.111%).
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<PAGE>
Section 6.4(a) shall be deemed deleted and replaced with the
following:
Section 6.4 (a) If the Labor Rates in effect for any
Comparison Year (any part or all of which falls within the Term) shall be
greater than the Base Labor Rates, then Tenant shall pay, as Additional Rent for
such Comparison Year and continuing thereafter until a new Landlord's Statement
is rendered to Tenant, an amount ("Tenant's Labor Rate Payment") equal to (i)
the number of cents (inclusive of any fractions of a cent) by which the Labor
Rates in effect for such Comparison Year exceed the Base Labor Rates, multiplied
by (ii) (X) 46,053 (from and after the Space A Delivery Date, less the Remaining
B Space), plus (Y) 2,507 (from and after the date of delivery of the Remaining B
Space).
Section 9.2(a) shall be amended as follows: "1400 amperes"
shall be deemed deleted and replaced with "732 amperes".
Section 31.1(a) shall be deemed deleted and replaced with the
following:
Section 31.1 (a) Landlord shall contribute toward the actual
cost of the Initial Alterations (including carpeting, wall covering, telephone
and computer installations and wiring, and "soft costs" incurred in connection
with such alterations, including architectural, consulting, engineering and
legal fees, provided that such "soft costs" shall not exceed ten percent (10%)
of Landlord's Contribution) an amount ("Landlord's Contribution") equal to the
lesser of (a) Nine Hundred Seventy One Thousand Two Hundred and 00/100 Dollars
($971,200.00), or (b) the aggregate amount of all costs and expenses actually
incurred by Tenant in connection with the Initial Alterations; provided,
however, that this Lease shall be in full force and effect and no Event of
Default shall have occurred and be continuing hereunder, and provided, further,
that Landlord's Contribution shall be payable in stages commencing on the
Delivery Date with respect to each Space, in the following maximum amounts:
(i) with respect to Space A, less the Remaining B
Space, Nine Hundred Twenty One Thousand Sixty and 00/100 Dollars
($921,060); and
(ii) with respect to the Remaining B Space, Fifty
Thousand One Hundred Forty and 00/100 Dollars ($50,140.00).
Section 31.1(c) shall be amended as follows: "$1,817,800"
shall be deemed deleted and replaced with "$971,200".
P-2
<PAGE>
EXHIBIT Q
---------
Louver Locations
----------------
The floor plan which follows is intended solely to identify the locations in
which Tenant may install certain louvers as part of Tenant's Initial
Alterations, and should not be used for any other purpose. All areas, dimensions
and locations are approximate, and any physical conditions indicated may not
exist as shown.
[Diagram Exhibit]
Q-1
<PAGE>
EXHIBIT R
---------
Center Shaft Location
---------------------
The floor plan which follows is intended solely to identify the location of the
"Center Shaft" for purposes of Sections 9.7(a) and 9.8, and should not be used
for any other purpose. All areas, dimensions and locations are approximate, and
any physical conditions indicated may not exist as shown.
[Diagram Exhibit]
R-1
<PAGE>
ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT
--------------------------------------------
AND AMENDMENT TO LEASE
----------------------
ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT AND AMENDMENT TO LEASE
(this "Agreement") dated as of October 1, 1999 by and among BARNES & NOBLE,
INC., a Delaware corporation, having an office at 122 Fifth Avenue, New York,
New York 10011 ("Assignor"), BARNESANDNOBLE.COM LLC, a Delaware limited
liability company, having an office at 111 Eighth Avenue, New York, New York
10011 ("Assignee") and 111 CHELSEA LLC, a Delaware limited liability company
("Landlord").
RECITALS
--------
A. Assignor is the holder of the tenant's interest in that certain
Agreement of Lease (the "Original Lease"), dated as of June 30, 1997, between
Landlord's predecessor-in-interest, P.A. Building Company ("PA") as landlord,
and Assignor, as tenant, which Original Lease was amended by (i) letter
agreement of even date with the Original Lease, between PA and Assignor (the
"PBI Letter"), (ii) letter agreement, dated July 1, 1997, between PA and
Assignor (iii) Modification of Lease Agreement dated as of January 1998, between
Landlord and Assignor and (iv) Amendment of Lease dated as of September 1, 1998,
between Landlord and Assignor, and as so amended, is referred to herein as the
"Lease". The Lease, as so amended, demises a portion of the eleventh (11th)
floor consisting of approximately 76,654 Rentable Square Feet (the "11th Floor
Space"), a portion of the roof space consisting of approximately 523 Rentable
Square Feet (the "Roof Space") and a portion of the Upper Sub Basement
consisting of approximately 561 Rentable Square Feet (the "Basement Space")
(collectively, the "Premises") of the building known as 111 Eighth Avenue, New
York, New York 10011 (the "Building"). For purposes of this Agreement, the term
"Rentable Square Feet" shall mean the deemed rentable area of the Building or
any portion thereof, computed on the basis of the current standard employed by
Landlord on the date hereof with respect to the calculation of the deemed
Rentable Square Foot area of the Building; provided, however, that in no event
shall such deemed Rentable Square Footage constitute or imply any representation
or warranty by Landlord as to the actual size of any floor or other portion of
the Building, including the Premises.
B. Assignor desires to assign unto Assignee all of Assignor's
right, title and interest as tenant in, to and under the Lease, and Assignee
desires to succeed to the interest of Assignor, and to assume the obligations of
Assignor under the Lease.
C. Article 41 of the Lease provides that the Lease may not be
assigned without the written consent of Landlord.
D. Landlord is willing to consent to the assignment of the Lease
from Assignor to Assignee upon the terms and conditions set forth herein.
E. Assignee and Landlord desire to further amend the Lease.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other
good and valuable consideration, paid by each of the parties hereto to each
other party, the receipt and
<PAGE>
sufficiency of which is hereby acknowledged, and in further consideration of the
provisions herein, the parties hereto agree as follows:
1. Effective Date. The "Effective Date" of this Agreement shall be
the date upon which all of the following shall have occurred (each of which
shall be a condition concurrent with the others):
(a) Each of Assignor, Assignee and Landlord shall have
unconditionally received a fully executed original counterpart of this
Agreement;
(b) Each of Assignee and Landlord shall have unconditionally
received a fully executed original counterpart of that certain Agreement of
Lease, of even date herewith, between Landlord and Assignee (the "Ninth Floor
Lease");
(c) Landlord shall have unconditionally received from Assignee
the cash Security Deposit by wire transfer of immediately available funds, or
the Letter of Credit (as such terms are defined in Article 32 of the Ninth Floor
Lease); and
(d) Landlord shall have returned to Assignor the Letter of
Credit referred to in Article 72 of the Lease.
It shall be a condition precedent to the occurrence of the
Effective Date that there then exist no Event of Default under the Lease. If for
any reason the Effective Date shall not have occurred on or before October 30,
1999, Landlord shall have the right to terminate this Agreement by written
notice to Assignor and Assignee. Promptly after the occurrence of the Effective
Date, Landlord, Assignor and Assignee shall confirm the Effective Date in
writing.
2. Assignment and Assumption; Indemnities.
Effective as of the Effective Date:
(a) Assignor hereby assigns and transfers to Assignee, its
successors and permitted assigns, all of Assignor's right, title and interest as
tenant in, to and under the Lease, subject to the rent, terms, covenants and
conditions of the Lease.
(b) Assignee hereby assumes the performance of all of the terms,
covenants, conditions and obligations of the tenant under the Lease, arising or
accruing from and after the Effective Date, and agrees to pay all amounts due
thereunder, including, without limitation, the rent and any other charges
reserved by or provided for in the Lease, on the next rent day and monthly
thereafter until the expiration or earlier termination of the Lease and will
perform all of the terms, covenants and conditions of the Lease arising or
accruing from and after the Effective Date, all with the same force and effect
as if Assignee had signed the Lease originally as tenant named therein.
(c) Landlord does hereby release Assignor of and from any and
all claims, damages, obligations, liabilities, actions and causes of action, of
every kind and nature whatsoever arising under, out of or in connection with,
the Lease and the Premises, from and
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<PAGE>
after the Effective Date, except that nothing herein contained shall be deemed
to constitute a release or discharge of Assignor with respect to any obligation
or liability accrued or incurred under the Lease up to and including the
Effective Date.
3. Consent. Effective as of the Effective Date, Landlord consents
to the assignment and assumption set forth in Section 2(a) and Section 2(b)
above, subject to and in reliance upon the representations, warranties,
covenants, terms and conditions contained in this Agreement, provided, however,
that notwithstanding such assignment, Assignor shall remain liable for all of
its obligations to be performed or observed under the Lease arising during the
period of time prior to the Effective Date. Nothing contained herein shall be
deemed to release or discharge Assignor from any obligation or responsibility
arising under the Lease during the period prior to the Effective Date.
4. Representations, Warranties and Acknowledgments.
(a) Assignor and Assignee each represents, warrants and
acknowledges to Landlord as follows:
(i) No money or other consideration has been or will be paid
or given to Assignor by Assignee for this assignment or the right to
use or occupy the Premises.
(ii) This Agreement embodies the complete and entire
agreement between Assignor and Assignee with respect to the assignment
of the Lease.
(iii) All landlord work required pursuant to the Lease has
been satisfactorily completed and there are no concessions, inducements
or work to which the tenant under the Lease is entitled (except that
Assignor does not herein waive or release any claims, rights, causes of
action or defenses it may have relating to a construction allowance in
the amount of $1,275,720 which Assignor claims is due to it pursuant to
the PBI Letter).
(iv) To the best of Assignor's and Assignee's knowledge, and
subject to the provisions of Paragraph 4(a)(iii) above, (X) Landlord is
not in default in the performance or observance of any of the terms,
covenants, conditions or obligations on Landlord's part to be performed
or observed under the Lease, (Y) no event has occurred which with the
giving of notice or the passage of time, or both, would constitute a
default by Landlord under the terms of the Lease and (Z) there are no
current rights of off-set, counterclaims, or credits against rent or
other charges under the Lease.
(v) Except for this Agreement and the written instruments
comprising the Lease (as defined above), there are not, as of the date
hereof, any amendments, modifications, written instruments or other
oral or written agreements which amend or modify the provisions of the
Lease.
(vi) Assignee acknowledges that Assignee is fully familiar
with the condition of the Premises, and agrees to accept possession
thereof in its "as is"
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<PAGE>
condition on the Effective Date. Assignor's and Assignee's execution of
this Agreement shall be conclusive evidence as against both Assignee
and Assignor that the Premises are in good and satisfactory condition
at the time of such execution.
(b) Landlord hereby represents and warrants to Assignee and,
with respect to clause (ii) below, to Assignor, as follows:
(i) The Lease (except as modified hereby) is unmodified and
in full force and effect as of the date hereof.
(ii) To the best of Landlord's knowledge, Assignor is not in
default in the performance or observance of any of the terms,
covenants, conditions or obligations on Assignor's part to be performed
or observed under the Lease, (Y) no event has occurred which with the
giving of notice or the passage of time, or both, would constitute a
default by Assignor under the terms of the Lease and (Z) there are no
current rights of off-set, counterclaims, or credits against rent or
other charges under the Lease.
(c) Landlord and Assignee mutually acknowledge that, except as
may be expressly set forth herein, the Lease and the Ninth Floor Lease represent
separate and distinct agreements and legal interests.
5. Further Assignment or Subletting. Assignee hereby agrees that
the terms, conditions, restrictions and prohibitions set forth in the Lease
regarding subletting and assignment (as modified hereby), including, without
limitation, as set forth in Exhibit B annexed to this Agreement, shall,
notwithstanding this Agreement, (i) continue to be binding upon Assignee with
respect to all future assignments and transfers of the Lease and all future
sublettings of the Premises, and (ii) apply to Assignee with the same effect as
if Assignee had been the original tenant named in the Lease. This Agreement
shall not be construed either as a consent by Landlord to, or as permitting, any
other or further assignment or transfer of the Lease, whether in whole or in
part, or any further subletting of the Premises or any part thereof, or as a
waiver of the restrictions and prohibitions set forth in the Lease regarding
subletting and assignment.
6. Remedies for Default. In the event of any default by Assignor or
Assignee in the full performance and observance of any of their respective
obligations hereunder or in the event that any representation or warranty of
Assignor or Assignee, or both, made herein shall prove to be false or misleading
in any material respect, such event may, at Landlord's option, be deemed an
event of default under the Lease and the Ninth Floor Lease, and Landlord shall
have the right to and may pursue all of the rights, powers and remedies provided
for in the Lease or in the Ninth Floor Lease or at law or in equity or by
statute or otherwise with respect to defaults.
7. Amendment of Lease. Effective as of the Effective Date, the
Lease shall be deemed amended as follows:
(a) All references to "Tenant herein named on the date of this
Lease", or words of like effect, shall be deemed to mean Assignee on the date of
this Agreement;
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<PAGE>
(b) All references in the Lease to "Sylvan Lawrence Company,
Inc." or to "SLC" (except those contained in Article 63 thereof, it being agreed
that Article 63 of the Lease shall not apply to the transactions contemplated by
this Agreement) shall be deemed to refer to Insignia/Edward S. Gordon Company,
Inc. or any successor thereto as Landlord's managing agent for the Building.
(c) The term of the Lease is hereby extended to be coterminous
with the term of the Ninth Floor Lease, unless the Lease be sooner terminated
pursuant to the provisions of the Lease. Accordingly, all references to the
"Expiration Date" in this Agreement and in the Lease shall be deemed to mean
February 28, 2015.
(d) For the portion of the term of the Lease commencing on the
Effective Date and ending on October 31, 2007, Tenant shall pay all fixed rent
as set forth in the Lease.
(e) For the portion of the term of the Lease commencing on
November 1, 2007 and ending on the Expiration Date, Tenant shall pay fixed rent
as follows:
(i) for the 11th Floor Space, for the portion of the Lease
term commencing on November 1, 2007 and ending one day prior to the
tenth (10th) anniversary of the Space A Delivery Date (as defined in
the Ninth Floor Lease), Two Million Five Hundred Twenty Nine Thousand
Five Hundred Eighty Two and 00/100 Dollars ($2,529,582.00) per annum
($210,798.50 per month);
(ii) for the 11th Floor Space, for the portion of the Lease
term commencing on the tenth (10th) anniversary of the Space A Delivery
Date and ending on the Expiration Date, Two Million Seven Hundred Fifty
Nine Thousand Five Hundred Forty Four and 00/100 Dollars
($2,759,544.00) per annum ($229,962.00 per month);
(iii) subject to Section 7(f) below, for the Basement Space,
for the portion of the Lease term commencing on November 1, 2007 and
ending one day prior to the tenth (10th) anniversary of the Space A
Delivery Date, Eleven Thousand Seven Hundred Eighty One and 00/100
Dollars ($11,781.00) per annum ($981.75 per month); and
(iv) subject to Section 7(f) below, for the Basement Space,
for the portion of the Lease term commencing on the tenth (10th)
anniversary of the Space A Delivery Date and ending on the Expiration
Date, Thirteen Thousand Four Hundred Sixty Four and 00/100 Dollars
($13,464.00) per annum ($1,122.00 per month).
(f) Notwithstanding anything set forth in this Agreement to the
contrary, Tenant shall have the right to terminate this Lease with respect to
the Basement Space only, by notice to Landlord given no later than November 1,
2006, such termination to be effective on October 31, 2007, upon which date this
Lease with respect to the Basement Space only shall come to an end and
terminate, and thereafter neither party shall have any liability to the other
hereunder with respect to the Basement Space.
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<PAGE>
(g) For the portion of the term of the Lease commencing on the
Effective Date and ending on October 31, 2007, Tenant shall pay all additional
rent as set forth in the Lease.
(h) For the portion of the term of the Lease commencing on
November 1, 2007 and ending on the Expiration Date, Tenant shall continue to pay
all additional rent due under the Lease, except as follows:
(i) the Emergency Generator Fee, as defined in Section
79.01(ii) of the Lease, shall be Thirty Three Thousand Six Hundred and
00/100 Dollars ($33,600.00) per annum ($2,800.00 per month);
(ii) the provisions of Articles 39 and 40 of the Lease shall
be deleted in their entirety, and the provisions of Article 6 of the
Ninth Floor Lease shall be deemed incorporated into the Lease in their
place and stead, as if such Article 6 were set forth in its entirety in
the Lease (without such incorporation in any way affecting the
application of such Article 6 to the Ninth Floor Lease), except that
(A) in Section 6.1(b) "Tenant's Share" (as it applies to the Lease)
shall be Three and 333/1000ths percent (3.333%) and (B) the factor set
forth in Section 6.4 (a)(ii) (as it applies to the Lease) shall be
76,654; and
(iii) the provisions of Section 78.13(i) of the Lease shall
be deleted in their entirety, and Tenant shall pay to Landlord a
license fee for the Cooling Tower Area in advance on the first day of
each month as follows: (i) during the period from November 1, 2007
through the day before the tenth (10th) anniversary of the Commencement
Date (as defined in the Ninth Floor Lease), the product of the square
foot area of the Cooling Tower Area (hereby deemed and agreed to be 523
square feet), multiplied by Twenty-One and 00/100 Dollars ($21.00), and
(ii) during the period from the tenth (10th) anniversary of such
Commencement Date through the Expiration Date, the product of the
square foot area of the Cooling Tower Area, multiplied by Twenty-Four
and 00/100 Dollars ($24.00).
(i) Upon any default beyond applicable grace and notice periods
under the Ninth Floor Lease, Assignee shall be deemed in default under the Lease
such that (without limiting Landlord's remedies pursuant to the Lease and at
law), (i) Landlord may serve the three (3) days' notice of cancellation of the
Lease and further proceed as provided in Section 17 of the Lease, or (ii)
Landlord may exercise all of its rights under Paragraph 7(j) of this Agreement,
or both.
(j) Upon any default by Assignee under the Lease beyond
applicable grace and notice periods, Landlord may use, apply or retain all or
any part of the Security Deposit (as such term is defined in the Ninth Floor
Lease) for the payment of any rent or any other sum in default under the Lease
or for the payment of any other amount which Landlord may spend or become
obligated to spend by reason of such default under the Lease, or to compensate
Landlord for any other loss, cost or damage to which Landlord is entitled
pursuant to the Lease or applicable legal requirements by reason of a default
beyond applicable grace and notice periods
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under the Lease, and Assignee shall thereupon deposit sums with Landlord
sufficient to restore the Security Deposit, in the same manner as if Landlord
had so used, applied or retained all or such part of the Security Deposit,
pursuant to the provisions of the Ninth Avenue Lease, upon an Event of Default
by Assignee under the Ninth Avenue Lease.
(k) The provisions of Articles 31 and 72 of the Lease shall be
deemed deleted from the Lease, it being agreed by Assignee that the Security
Deposit identified in Paragraph 7(j) of this Agreement shall be security for all
of Assignee's obligations under the Lease in accordance with the provisions of
Paragraph 7(j) of this Agreement.
(l) Article 27 of the Lease shall be deleted in its entirety,
and the following shall be substituted therefor:
ARTICLE 27. BILLS AND NOTICES
Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other
communications given or required to be given under this Lease shall be
in writing and shall be deemed sufficiently given or rendered if
delivered by hand (against a signed receipt), sent by a nationally
recognized overnight courier service, or sent by registered or
certified mail (return receipt requested) and addressed:
if to Tenant, (a) at Tenant's address at the Premises, Attention: Marie
J. Toulantis (or, if a regularly scheduled rent bill or rent escalation
statement, Mike Caputo), or (b) at any place where Tenant or any agent
or employee or Tenant may be found if mailed subsequent to Tenant's
abandoning or surrendering the demised premises, in either case (except
if a routine bill or statement), with a copy to Robinson Silverman
Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York,
New York 10104, Attention: Michael N. Rosen, Esq.; or
if to Landlord, as follows: 111 Chelsea LLC, c/o Taconic Investment
Partners LLC, 1500 Broadway, New York, New York 10036, Attention: Mr.
Paul E. Pariser, with a copy to: Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, New York 10022, Attention: Robert S. Nash, Esq.
Any such bill, statement, consent, notice, demand, request or other
communication given as provided in this Article 27 shall be deemed to
have been rendered or given (i) on the date when it shall have been
hand delivered, (ii) three (3) Business Days from the date when it
shall have been mailed, or (iii) one (1) Business Day from the date
when it shall have been sent by overnight courier service.
(m) The first sentence of Footnote 30G. of the Lease shall be
modified by deleting the words "Building Manager (presently Edward Alexander)
and the Director of
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Leasing at the Building (presently Leon Grossman)" and substituting therefor the
words "Building Manager (presently Domenico Flavoni)".
(n) The words "P.A. Building Company" in Footnote 39D. of the
Lease shall be deleted, and the words "111 Chelsea LLC" substituted therefor.
(o) The Rules and Regulations annexed to the Lease shall be
deleted in their entirety, and the Rules and Regulations annexed as Exhibit A to
this Agreement shall be substituted therefor.
(p) The provisions of Articles 11 and 41 of the Lease shall be
deleted in their entirety, and the provisions annexed as Exhibit B to this
Agreement shall be substituted therefor.
8. Broker. Each of Assignor, Assignee and Landlord represents and
warrants to the others that it has dealt with no broker, agent or other person
other than Insignia/Edward S. Gordon Company, Inc. ("Broker") in connection with
this Amendment. Each of Assignor, Assignee and Landlord agrees to indemnify and
hold the others harmless from and against any claims by any other broker, agent
or other person claiming a commission or other form of compensation by virtue of
having dealt with the indemnifying party with regard to this Agreement. The
provisions of this Section 8 shall survive the expiration or earlier termination
of the Lease.
9. IDA Incentive Program. Landlord acknowledges that Assignee has
advised Landlord that: (i) Assignee and the New York City Industrial Development
Agency, a New York public benefit corporation (the "IDA"), intend to enter into
an agreement, detailing a package of financial incentives that are to be made
available to Assignee or an Affiliate of Assignee (the "Incentive Program") by
the New York City Economic Development Corp. ("EDC"), (ii) pursuant to the
Incentive Program, Assignee shall be entitled to certain exemptions, abatements
and/or savings in the cost of electricity used by Assignee at the Premises
(including certain savings pursuant to Con Ed's Business Incentive Rate Program)
(collectively, "Electricity Savings"), and (iii) Electricity Savings may be made
available to Assignee pursuant to reductions in the total cost incurred by
Landlord to provide electricity to the Building (whether the Electricity
Provider is Con Ed or any other entity). In connection with the foregoing,
Landlord hereby agrees that if and to the extent the total cost incurred by
Landlord to provide electricity to the Building during a particular billing
period is reduced as a result of Electricity Savings pursuant to the Incentive
Program, then such Electricity Savings shall be for the account of and the sole
property of Assignee, directly payable solely to and/or earned by Assignee. If
and so long as Assignee is paying Landlord for electricity pursuant to the
provisions of the Lease, then any Electricity Savings which are expressly
indicated (including the specific amount of such reduction) on Landlord's
statement from the Electricity Provider, or are otherwise indicated (including
the specific amount of such reduction) in writing from the Electricity Provider
or from the IDA or EDC as arising out of the Incentive Program, shall be for the
account of and the sole property of Assignee, shall be deemed to be directly
payable solely to and/or earned by Assignee during an Electricity Provider's
billing period, and the amount of such Electricity Savings shall be offset
against and deducted from Additional Rent otherwise due from Assignee to
Landlord
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for the next following billing period. If Assignee shall not be paying Landlord
for electricity (including if electricity is obtained by Assignee pursuant to
the provisions of the Lease, then such Electricity Savings shall be for the
account of and the sole property of Assignee, directly payable solely to and/or
earned by Assignee. Landlord agrees (at no cost to Landlord) to cooperate with
Assignee (by, for example, executing any necessary documents, forms,
applications and surveys) to facilitate Assignee's obtaining the Electricity
Savings pursuant to the Incentive Program.
10. Miscellaneous.
(a) When used in this Agreement, the singular includes the
plural and the plural includes the singular, the word "or" is not exclusive and
the word "including" is not limiting. All Article and Section references set
forth herein shall, unless the context otherwise specifically requires, be
deemed references to the Articles and Sections of this Agreement. Whenever the
words "include", "includes", or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation".
(b) This Agreement will be interpreted and enforced in
accordance with its provisions and without the aid of any custom or rule of law
requiring or suggesting construction against the party drafting or causing the
drafting of the provisions in question.
(c) The provisions of this Agreement shall supersede any
inconsistent provisions contained in the Lease, regardless of whether such
inconsistent provisions are contained in the printed portions of the Lease or in
any rider, exhibit or schedule annexed thereto and made a part thereof, or in
any amendment, modification, letter, notice or other written instrument executed
in connection therewith or sent pursuant thereto.
(d) The covenants, agreements, terms, provisions and conditions
contained in this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
(e) The captions contained in this Agreement are for reference
only and shall in no way define, limit or extend the scope or intent of this
Agreement, nor shall such captions affect the construction hereof.
(f) This Agreement may be executed in several counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement.
(g) Each party hereto represents and warrants that it has full
right, power and authority to enter into this agreement and that the person
executing this Agreement on behalf of such party is duly authorized to do so.
(h) All capitalized terms and words used in this instrument
shall have the same meaning as set forth in the Lease unless a contrary meaning
is expressly set forth herein.
(i) Any notices or other communications given or required to be
given under this Agreement shall be effective only if in writing and delivered
in the manner and to the addresses set forth in the Lease.
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(j) Notwithstanding any provisions of this Agreement to the
contrary, if Landlord fails to deliver to Assignee a Non-Disturbance Agreement
executed by Lender (as such terms are defined in the Ninth Floor Lease) within
thirty (30) days following the execution and delivery of this Agreement, then,
at Assignee's election exercised by notice to Landlord, this Agreement shall be
and be deemed null and void, and the Lease shall continue (and shall be deemed
to have continued) in full force and effect between Assignor and Landlord as if
this Agreement had not been executed, all effective on the date which shall be
thirty (30) days after the date such notice is given. Notwithstanding anything
to the contrary contained herein, if Landlord shall deliver such Non Disturbance
Agreement executed by Lender to Assignee at any time within ten (10) days
following Landlord's receipt of such notice by Assignee, such notice shall be
void and of no force and effect, and Assignee shall have no further right to
make such election pursuant to this Section 9(j).
[No further text on this page - Signature page follows]
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IN WITNESS WHEREOF, Assignor, Assignee and Landlord have
executed this Assignment, Assumption and Consent Agreement and Amendment of
Lease as of the date first set forth above.
BARNES & NOBLE, INC.,
a Delaware corporation
By:/s/Michael Archbold
------------------------------
Name: Michael Archbold
Title: Vice President
BARNESANDNOBLE.COM LLC,
a Delaware limited liability company
By:/s/Marie J. Toulantis
------------------------------
Name: Marie J. Toulantis
Title: Chief Financial Officer
111 CHELSEA LLC,
a Delaware limited liability company
By: Taconic Chelsea Holdings LLC,
a Delaware limited liability company,
managing member
By: Taconic SL Principals LLC,
a Delaware limited liability
company, managing member
By:/s/ Paul E. Pariser
--------------------
Name: Paul E. Pariser
Title: Member
<PAGE>
EXHIBIT A
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors, elevators of
the Building are limited to ingress to and egress from tenants' premises for
tenants and their employees, licenses and invitees, and no tenant shall use, or
permit the use of, the entrances, corridors, or elevators for any other purpose.
No tenant shall invite to such tenant's premises, or permit the visit of,
persons in such numbers or under such conditions as to interfere with the use
and enjoyment of any of the entrances, corridors, elevators and other facilities
of the Building by other tenants. Fire exits and stairways are for emergency use
only, and shall not be used for any other purposes by the tenants, their
employees, licensees or invitees. No tenant shall encumber or obstruct, or
permit the encumbrance or obstruction of, any of the sidewalks, entrances,
corridors, elevators, fire exits or stairways of the Building. Landlord reserves
the right to control and operate the public portions of the Building and the
public facilities, as well as facilities furnished for the common use of
tenants, in such manner as it reasonably deems best for the benefit of tenants
generally.
2. Tenant's employees shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof.
3. Tenant shall not alter the exterior appearance of the Building
by installing signs, advertisements, notices or other graphics on exterior
walls, or interior surfaces visible from outside, without prior written
permission from Landlord. Similarly, electrical fixtures hung in offices or
other spaces along the perimeter of the Building which affect its exterior
appearance must be fluorescent and a quality, type, design and bulb color,
previously approved in writing by Building management.
4. The cost of repairing any damage to the public portions of the
Building or the public facilities or to any facilities used in common with other
tenants, caused by a tenant or the employees, licensees or invitees of the
tenant, shall be paid by such tenant.
5. The requirements of tenants will be attended to only upon
application at the Building Management Office. Employees of the Building shall
not perform any work or do anything outside of their regular assigned duties,
unless under special instructions from the Building Management Office.
6. Except as specifically provided in the Lease, Tenant shall have
no right of access to the roof of the Building and shall not install, repair or
replace any satellite dish, antennae, fan, air conditioner or other devices on
the roof of the Building without the prior written consent of Landlord. Any such
device installed without such written consent shall be subject to removal, at
Tenant's expense, without notice, at any time.
7. Exterior signs on doors and any directory tablet must be
approved by Landlord.
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8. No awnings or other projections over or around the windows shall
be installed by any tenant and only such window blinds as are permitted by
Landlord shall be used in any tenant's premises.
9. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building.
The water and service closets and other plumbing fixtures in or serving any
tenant's premises shall not be used for any purpose other than the purpose for
which they were designed or constructed and no sweepings, rubbish, rags, acids
or other foreign substances shall be deposited therein. All damages resulting
from any misuse of the fixtures shall be borne by the tenant who, or whose
servants, employees, agents, visitors or licensees, shall have caused the same.
10. Tenant shall not disturb others. This rule prohibits any noise
audible from the hallway, adjoining office suites or outside whether created by
musical instruments, radios, television sets, group activities or any other
source.
11. All hand trucks used in the Building shall be equipped with
rubber tires and side guards.
12. No tenant shall install wires, conduit, sleeves or similar
installations in Building shaftways without prior written consent of Landlord,
and as Landlord may direct.
13. Each tenant shall, at its expense, provide artificial light in
the premises demised to such tenant for Landlord's agents, contractors and
employees while performing janitorial or other cleaning services and making
repairs or alterations therein.
14. Tenants shall not permit any cooking or food odors emanating
from their demised premises to be detectable in any other portions of the
Building.
15. Tenants shall provide Building management provided with keys or
combinations to all locks, bolts or other mechanical security systems except
those protecting high security areas. Upon vacating the Building, tenants must
return keys to storerooms, offices and toilets or pay replacement costs.
16. All entrance doors in each tenant's premises shall be left
locked when the tenant's premises are not in use. Entrance doors shall not be
left open at any time.
17. Tenants shall not keep pets, bicycles, or other vehicles in
their premises without prior written approval by Landlord. Exceptions are made
for seeing-eye dogs and conveyances required by handicapped persons.
18. Regular suppliers of outside services must be approved by
Building management, which may establish hours or other conditions for entrance
to the Building. Such suppliers include vendors of food, spring water, ice,
towels, barbering, shoe shining and other products and services.
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19. Canvassing, soliciting and peddling of products or services are
prohibited in the Building, and tenants shall cooperate with Landlord in
attempting to prevent such acts in the Building.
20. Landlord may refuse admission to the Building outside of normal
hours to any person not having a pass issued by Landlord or not properly
identified, and may require all persons admitted to or leaving the Building
outside of normal business hours to register. Tenant's employees, agents and
visitors shall be permitted to enter and leave the Building whenever appropriate
arrangements have been previously made between Landlord and Tenant. Each tenant
shall be responsible for all persons for whom such person requests such
permission and shall be liable to Landlord for all acts of such persons. Any
person whose presence in the Building at any time shall, in the reasonable
judgment of Landlord, be prejudicial to the safety, character, reputation and
interests of the Building or its tenants may be denied access to the Building or
may be rejected therefrom. In case of invasion, riot, public excitement or other
commotion, Landlord may prevent all access to the Building during the
continuance of the same, by closing the doors or otherwise, for the safety of
the tenants and protection of property in the building. Landlord may require any
person leaving the Building with any package or other object to exhibit a pass
from the tenant from whose premises the package or object is being removed, but
the establishment and enforcement of such requirements shall not impose any
responsibility on Landlord for the protection of any tenant against the removal
of property from the premises of the tenant. Landlord shall in no way be liable
to any tenant for injury or loss arising from the admission, exclusion or
ejection of any person to or from the tenant's premises or the Building under
the provisions of this rule.
21. Tenant, at its sole cost and expense, shall cause the Premises
to be exterminated from time to time to the reasonable satisfaction of the
Building Management Office, and shall employ such exterminators therefor as
shall be approved by the Building Management Office.
22. Tenants shall not serve or permit the serving of alcoholic
beverages in the its premises unless Tenant shall have procured host liquor
liability insurance, issued by companies and in amounts reasonably satisfactory
to Landlord, naming Landlord and its managing agent as additional insureds.
23. The Building loading docks may be used only for loading and
unloading procedures. Tenants may not use the loading dock area for parking.
Tenants may not place any dumpsters at the loading docks or any other portion of
the Building without the prior written approval of Landlord.
24. No shutdowns of any Building systems will be permitted without
prior written approval of Landlord and supervision by the Building engineer.
25. Tenant's contractors or vendors may not use any space within
the Building outside the Premises for storage or moving of materials or
equipment or for the location of a field office or facilities for the employees
of such contractors or vendors without obtaining Landlord's prior written
approval for each such use. Landlord shall have the right to terminate such use
and
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remove all such contractor's or vendor's materials, equipment and other property
from such space, without Landlord being liable to tenant or to such contractor
or vendor, and the cost of such termination and removal shall be paid by Tenant
to Landlord.
26. Tenants are required to have a full service maintenance
contract covering their supplemental HVAC, Uninterrupted Power Supply (UPS) and
Automatic Transfer systems, and to provide copies of such contracts to the
Building management office.
27. The Building reserves the right to restrict the use of certain
materials (i.e., Omega sprinkler heads and piping manufactured in The Republic
of China) in the building based on notifications that declare the materials
unsafe.
28. Trucks using the Tenant Shipping Platforms on the ground floor
of the building, and the upper Floor Truck Lobbies will load and discharge at
the place or places thereat and therein as indicated by the duly authorized
representative of Landlord in charge of such operation.
29. Trucks using the Tenant Shipping Platforms on the ground floor
of the building, and the upper floor truck lobbies, will load and discharge at
the place or places thereat and therein as indicated by the duly authorized
representative of Landlord in charge of such operation.
30. Elevators for freight handling service will be operated during
Business Hours on Business Days, unless special arrangement is made with
Landlord for operation at other times.
31. The use of the private right of way and the truck elevators
will be subject to and under the reasonable direction and control of the duly
authorized representative of Landlord in charge of such operation. When in the
interest of continuity of service or in the interest of the common service,
Tenant's freight departing from or arriving at the building by truck may at the
direction of Landlord be handled over and through the Tenant Shipping Platforms
on the ground floor and the freight elevators. Landlord reserves the right to
direct such handling in lieu of truck elevator service.
32. In the interest of preserving the continuity of freight
elevator service, freight will not be floored upon the freight elevator, but
will at all times be handled and moved upon suitable vehicles of the indoor
industrial wheeler type permitting such freight to be economically and
expeditiously wheeled on and off the freight elevators. Freight which cannot be
handled upon such equipment will be handled in such alternative manner as may be
approved by Landlord.
33. (a) The Tenant Shipping Platforms located on first or ground
floor of the Building are designed to accomplish the immediate transfer and
movement of freight between the freight elevators and trucks. The use of such
facility by Tenant or any of its agents, servants, employees, representatives or
contractors will be confined to such purpose, under the reasonable
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direction and control of the duly authorized representative of Landlord in
charge of such operation.
(b) No storage or holding of freight on such Tenant Shipping
Platforms awaiting the arrival of trucks, or awaiting transfer by Tenant from
such Tenant Shipping Platforms to the Premises, will be permitted. No
automobiles of Tenant or any Tenant Party may enter on or be stored in any
portion of the building, except in areas designated by Landlord, and provided
Tenant pays for such parking at rates designated by Landlord, its agents or
parking lessees.
(c) Any violation of this rule or disregard of directions issued by
Landlord will give Landlord the right to handle, transfer, remove or store such
freight in or to other premises in the building. When such handling, transfer,
removal or storage is performed by Landlord, and when it shall be deemed
necessary by Landlord to preserve the continuity of common service provided by
this facility, any and all expense will be at Tenant's sole cost and expense.
Landlord will not be responsible for any loss or damage which any such freight
may suffer by such handling, removing or storage.
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EXHIBIT B
ASSIGNMENT AND SUBLETTING PROVISIONS
Section 41.1 Except as otherwise expressly provided herein, Tenant,
for itself, its heirs, distributees, executors, administrators, legal
representatives, successors and assigns, expressly covenants that it shall not
assign, mortgage, pledge, encumber, or otherwise transfer this Lease, nor sublet
(nor underlet), nor suffer, nor permit the Premises or any part thereof to be
used or occupied by others (whether for desk space, mailing privileges or
otherwise), without the prior written consent of Landlord in each instance. If
this Lease is assigned, or if the Premises or any part thereof are sublet or
occupied by anybody other than Tenant, or if this Lease or the Premises are
encumbered (whether by operation of law or otherwise) without Landlord's
consent, then Landlord may, after default by Tenant beyond applicable grace or
notice periods, collect rent from the assignee, subtenant or occupant, and apply
the net amount collected to all fixed rent and additional rent due hereunder,
but no assignment, subletting, occupancy or collection shall be deemed a waiver
by Landlord of the provisions hereof, the acceptance by Landlord of the
assignee, subtenant or occupant as a tenant, or a release by Landlord of Tenant
from the further performance by Tenant its obligations under this Lease, and
Tenant shall remain fully liable therefor. The consent by Landlord to any
assignment or subletting shall not in any way be construed to relieve Tenant
from obtaining the express consent in writing of Landlord to any further
assignment or subletting. In no event shall any permitted subtenant assign or
encumber its sublease or further sublet all or any portion of its sublet space,
or otherwise suffer or permit the sublet space or any part thereof to be used or
occupied by others, without Landlord's prior written consent in each instance.
Any assignment, sublease, mortgage, pledge, encumbrance or transfer in
contravention of the provisions of this Article 41 shall be void.
Section 41.2 (a) If Tenant shall, at any time or from time to time
during the term of this Lease, desire to assign this Lease or sublet all or part
of the Premises, Tenant shall give notice (a "Tenant's Notice") thereof to
Landlord, which Tenant's Notice shall set forth: (i) with respect to an
assignment of this Lease, the date Tenant desires the assignment to be effective
and any consideration Tenant would receive under such assignment, (ii) with
respect to a sublet of all or a part of the Premises (x) the dates upon which
Tenant desires the sublease term to commence and expire, (y) the rental rate and
other material business terms upon which Tenant would sublet such premises, and
(z) a description of the Premises showing the portion to be sublet, the
effective or commencement date of which shall be not less than thirty (30) nor
more than one hundred and eighty (180) days after the giving of such notice,
(iii) a statement setting forth in reasonable detail the identity of the
proposed assignee or subtenant, the nature of its business and its proposed use
of the Premises, (iv) current financial information with respect to the proposed
assignee or subtenant, including its most recent financial report, and (v) an
agreement by Tenant to indemnify Landlord against liability resulting from any
claims that may be made against Landlord by the proposed assignee or subtenant
or by any other brokers or by any Person ("Person" being defined for purposes of
this Article 41 as an individual, corporation, partnership, limited liability
company, limited liability partnership, joint venture, estate, trust,
unincorporated association, business trust, tenancy-in-common or other entity,
or any governmental authority)
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claiming a commission or similar compensation in connection with the proposed
assignment or sublease. Tenant's Notice shall be deemed an offer from Tenant to
Landlord whereby Landlord (or Landlord's designee) may, at its option, (I)
sublease such space (the "Leaseback Space") from Tenant upon the terms and
conditions set forth in Section 41.4, or terminate this Lease with respect to
only the Leaseback Space, or (II) if the proposed transaction is (1) an
assignment of this Lease or (2) a subletting of fifty percent (50%) or more of
the rentable area of the Premises, terminate this Lease.
(b) Landlord agrees to respond to any Tenant's Notice given in
accordance with Section 41.2(a) within twenty (20) days after request, provided
the Tenant's Notice complies in all material respects with the requirements of
Section 41.2(a). If Landlord fails to either approve or disapprove the requested
assignment or subletting on or before the end of such twenty-day period, Tenant
shall have the right to provide Landlord with a second written request for
approval (a "Second Request"), which shall include all material previously
delivered to Landlord together with Tenant's Notice, and set forth in bold
capital letters the following statement: IF LANDLORD FAILS TO RESPOND WITHIN
FIVE (5) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN TENANT SHALL BE
ENTITLED TO ENTER INTO THE PROPOSED [ASSIGNMENT] [ SUBLEASE] DESCRIBED IN THE
NOTICE ENCLOSED HEREWITH, WHICH WAS PREVIOUSLY SUBMITTED TO LANDLORD AND TO
WHICH LANDLORD HAS FAILED TO TIMELY RESPOND. In the event that Landlord fails to
respond to a Second Request within five (5) Business Days after receipt by
Landlord, the proposed assignment or sublease as to which the Second Request is
submitted shall be deemed to be approved by Landlord, and Tenant shall be
entitled to enter into such transaction, provided that such assignment or
sublease complies with the requirements of this Article 41 and all other
provisions of this Lease applicable thereto.
Section 41.3 If Landlord exercises its option to terminate this
Lease with respect to all or a portion of the Premises pursuant to Section 41.2,
then this Lease shall terminate and expire (in its entirety or as
it relates to the portion of the Premises identified in the Tenant's Notice, as
applicable) on the date that such assignment or sublease was to be effective or
commence, as the case may be, and the fixed rent and additional rent due
hereunder shall be paid and apportioned to such date. In such event, Landlord
and Tenant, upon request of either party, shall enter into an amendment of this
Lease ratifying and confirming such total or partial termination, and setting
forth appropriate modifications, if any, to the terms and provisions hereof.
Following such termination, Landlord shall be free to and shall have no
liability to Tenant if Landlord should lease the Premises (or any part thereof)
to Tenant's prospective assignee or subtenant.
Section 41.4 If Landlord exercises its option to sublet the
Leaseback Space, such sublease to Landlord or its designee (as subtenant) shall
be at a rental rate equal to the product of (i) the lesser of (A) the rental
rate per rentable square foot of fixed rent and additional rent then payable
pursuant to this Lease, or (B) the rental rate per rentable square foot of rent
and additional rent set forth in Tenant's Notice, multiplied by (ii) the number
of rentable square feet of the Leaseback Space, and shall be for the same term
as that of the proposed subletting, and such sublease shall:
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(a) be upon such other terms and conditions as are contained in
Tenant's Notice, and be expressly subject to all of the covenants,
agreements, terms, provisions and conditions of this Lease, except such as
are irrelevant or inapplicable, and except as expressly set forth in this
Article 41 to the contrary;
(b) give the subtenant the unqualified and unrestricted right,
without Tenant's permission, to assign such sublease or any interest
therein and/or to sublet the space covered by such sublease or any part or
parts of such space and to make any and all changes, alterations and
improvements in the space covered by such sublease, provided that such
changes, alterations or improvements do not materially adversely affect
Tenant's use and occupancy of the portion of the Premises other than the
Leaseback Space; and if the proposed sublease will result in all or
substantially all of the Premises being sublet, grant Landlord or its
designee the option to extend the term of such sublease for the balance of
the term of this Lease less one day, and provided further that, if the term
of such sublease is twelve (12) or more months shorter than the term of
this Lease, the Premises being sublet shall be suitable for the Permitted
Use upon expiration of the sublease term;
(c) provide that any assignee or further subtenant of Landlord or
its designee, may, at Landlord's option, be permitted to make alterations,
decorations and installations in such space or any part thereof, provided
that such changes, alterations or improvements do not materially adversely
affect Tenant's use and occupancy of the portion of the Premises other than
the Leaseback Space, and shall also provide in substance that any such
alterations, decorations and installations in such space therein made by
any assignee or subtenant of Landlord or its designee may be removed, in
whole or in part, by such assignee or subtenant, at its option, prior to or
upon the expiration or other termination of such sublease; provided,
however, that such assignee or subtenant shall, at its sole cost and
expense, repair any damage and injury caused by such removal; and provided
further that, if the term of such sublease is twelve (12) or more months
shorter than the term of this Lease, the Premises being sublet shall be
suitable for the Permitted Use upon expiration of the sublease term; and
(d) provide that (i) the parties to such sublease expressly negate
any intention that any estate created under such sublease be merged with
any other estate held by either of said parties, (ii) any assignment or
sublease by Landlord or its designee (as the subtenant) may be for any
purpose or purposes that Landlord, in Landlord's uncontrolled discretion,
shall deem suitable or appropriate, provided that the use of the Leaseback
Space for such purpose or purposes shall not unreasonably interfere with
Tenant's use and occupancy of the portion of the Premises other than the
Leaseback Space, (iii) Tenant shall, at Tenant's sole cost and expense, at
all times provide and permit reasonably appropriate means of ingress to and
egress from such space so sublet by Tenant to Landlord or its designee,
(iv) Landlord may make such alterations as may be required or deemed
necessary by Landlord to physically separate the subleased space from the
balance of the Premises and to comply with any legal or insurance
requirements relating to such separation (all at Tenant's sole cost and
expense, unless such alterations would be the subtenant's obligation to
perform or pay for pursuant to the proposed
B-3
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sublease), provided, however, that Landlord shall use reasonable efforts to
minimize the duration of such alterations and interference by reason
thereof with Tenant's access to and use and occupancy of the portion of the
Premises other than the Leaseback Space, (v) at the expiration of the term
of such sublease, Tenant will accept the space covered by such sublease in
its then existing condition, subject to the obligations of the subtenant to
make such repairs thereto as may be necessary to preserve the premises
demised by such sublease in good order and condition, and provided that
Tenant shall have no obligation under this Lease to restore any Alterations
or other changes, decorations or installations made by or on behalf of such
subtenant, or any damage caused by Landlord's removal of alterations,
decorations or installations, and provided further that, if the term of
such sublease is twelve (12) or more months shorter than the term of this
Lease, the Premises being sublet shall be suitable for the Permitted Use
upon expiration of the sublease term; and (vi) Tenant shall have no
obligation to provide services of any kind to the Leaseback Space,
provided, however, that Tenant shall permit Landlord, Landlord's agents and
public utilities servicing the Leaseback Space to erect, use and maintain
all concealed ducts, pipes and conduits in and through the Premises as
Landlord shall reasonably require, provided that the exercise of such
rights shall not materially affect the layout or reduce the floor area of
the Premises.
Section 41.5 (a) If Landlord exercises its option to sublet the
Leaseback Space, Landlord shall indemnify and save Tenant harmless from all
obligations under this Lease as to the Leaseback Space during the period of time
it is so sublet to Landlord, except as to any obligation which arises out of or
results from the negligence or willful misconduct of Tenant or any Affiliate (as
defined in Section 41.6(d)) of Tenant, any subtenant or any other occupant of
the Premises, or any of their respective direct or indirect partners, officers,
shareholders, directors, members, trustees, beneficiaries, employees,
principals, contractors, licensees, servants, agents or representatives (each, a
"Tenant Party").
(b) Performance by Landlord, or its designee, under a sublease of
the Leaseback Space shall be deemed performance by Tenant of any similar
obligation under this Lease and any default under any such sublease shall not
give rise to a default under a similar obligation contained in this Lease nor
shall Tenant be liable for any default under this Lease or deemed to be in
default hereunder, unless such default is occasioned by or arises from the
negligence or willful misconduct of Tenant or any Tenant Party.
(c) Tenant shall have no obligation, at the expiration or earlier
termination of the term of this Lease, to remove any alteration, installation or
improvement made in the Leaseback Space by Landlord (or Landlord's designee).
(d) Any consent required of Tenant, as Landlord under the sublease,
shall be deemed granted if consent with respect thereto is granted by Landlord
under this Lease, and any failure of Landlord (or its designee) to comply with
the provisions of the sublease other than with respect to the payment of fixed
rent and additional rent to Tenant, shall not constitute a default thereunder or
hereunder if Landlord shall have consented to such non-compliance.
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<PAGE>
Section 41.6 In the event Landlord does not exercise either option
provided to it pursuant to Section 41.2, and provided that no Event of Default
shall have occurred and be continuing under this Lease as of the time Landlord's
consent is requested by Tenant, Landlord's consent (which must be in writing,
subject to the provisions of Section 41.2(b)) to the proposed assignment or
sublease shall not be unreasonably withheld or delayed; provided, however, that:
(a) Tenant shall have complied with the provisions of Section 41.2,
and Landlord shall not have exercised any of its options thereunder within
the time permitted therefor;
(b) In Landlord's judgment, the proposed assignee or subtenant is
engaged in a business or activity, and the Premises, or the relevant part
thereof, will be used in a manner, which (i) is in keeping with the then
standards of the Building, and (ii) does not violate the restrictions set
forth in Article 2 of this Lease;
(c) The proposed assignee or subtenant has sufficient financial
worth considering the responsibility involved, and Landlord has been
furnished with evidence thereof;
(d) In the event Landlord has comparable space in the Building
available for lease, then (i) neither the proposed assignee or subtenant
nor any Affiliate of the proposed assignee or subtenant is then an occupant
of any part of the Building, and (ii) the proposed assignee or subtenant is
not a Person or an Affiliate of a Person with whom Landlord or Landlord's
agent is then, or has been within the previous four (4) month period,
negotiating in connection with rental of space in the Building ("Affiliate"
being defined for purposes of this Article 41 as any Person that, directly
or indirectly, through one or more intermediaries, Controls, is Controlled
by, or is under common Control) ("Control" as to any Person being defined
for purposes of this Article 41 as: (a) the ownership, directly or
indirectly, of more than thirty per cent (30%) of (i) the outstanding
voting stock of a corporation, or (ii) the beneficial ownership interests,
however characterized, of any other entity, or (b) the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities or other ownership interests, by statute, or by
contract);
(e) The form of the proposed sublease or instrument of assignment
shall be reasonably satisfactory to Landlord and shall comply with the
applicable provisions of this Article 41, and Tenant shall deliver a true
and complete original, fully executed counterpart of such sublease or other
instrument to Landlord promptly upon the execution and delivery thereof;
(f) Tenant and its proposed subtenant or assignee, as the case may
be, shall execute and deliver to Landlord an agreement, in form and
substance reasonably satisfactory to Landlord, setting forth the terms and
conditions upon which Landlord shall have granted its consent to such
assignment or subletting, and the agreement of Tenant
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<PAGE>
and such subtenant or assignee, as the case may be, to be bound by the
provisions of this Article 41;
(g) There shall not be more than four (4) subtenants of the
Premises;
(h) The amount of the aggregate rent to be paid by the proposed
subtenant shall not be twenty percent (20%) or more below the then current
market rent per rentable square foot for the Premises, determined as though
the Premises were vacant, and the rental and other terms and conditions of
the sublease shall be substantially the same as those contained in Tenant's
Notice;
(i) Tenant shall reimburse Landlord, as additional rent upon
demand, for (A) the reasonable costs and expenses incurred by Landlord in
connection with the assignment or sublease, including the costs of
investigations as to the acceptability of the proposed assignee or
subtenant and the cost of reviewing plans and specifications proposed to be
made in connection therewith, and (B) Landlord's reasonable legal fees and
disbursements incurred in connection with the granting of any requested
consent and the preparation of Landlord's written consent to the sublease
or assignment;
(j) Tenant shall not have (i) advertised or publicized in any way
the availability of the Premises without prior notice of and approval by
Landlord, or (ii) advertised or publicized in any way (or caused or
permitted to be advertised or publicized in any way) the Premises for
sublease or assignment at a rental rate materially less than the fixed rent
and additional rent at which Landlord is then offering to lease comparable
space in the Building for a comparable term;
(k) The proposed occupancy shall not impose a material extra burden
upon services to be supplied by Landlord to Tenant, unless Tenant and such
proposed subtenant or assignee shall agree with Landlord in writing to pay
the costs of such additional services; and
(l) The proposed subtenant or assignee shall not be entitled,
directly or indirectly, to diplomatic or sovereign immunity and shall be
subject to the service of process in, and the jurisdiction of the courts of
New York State.
Except for any sublease by Tenant to Landlord or its designee pursuant to this
Article 41, each sublease pursuant to this Section 41.6 shall be subject to all
of the covenants, agreements, terms, provisions and conditions contained in this
Lease. Notwithstanding any such sublease to Landlord or any such sublease to any
other subtenant, or any acceptance of fixed rent or additional rent by Landlord
from any subtenant, Tenant will remain fully liable for the payment of the fixed
rent and additional rent due and to become due hereunder and for the performance
of all the covenants, agreements, terms, provisions and conditions contained in
this Lease on Tenant's part to be observed and performed, and for all acts and
omissions of any licensee or subtenant or anyone claiming under or through any
subtenant which shall be in violation of any of the obligations of this Lease,
and any such violation shall be deemed to be a violation by Tenant. If Landlord
shall decline to give its consent to any proposed assignment or sublease, or
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<PAGE>
if Landlord shall exercise either of its options under Section 2, Tenant shall
indemnify, defend and hold harmless Landlord against and from any and all
losses, liabilities, damages, costs, and expenses (including reasonable
attorneys' fees and disbursements) resulting from any claims that may be made
against Landlord by the proposed assignee or subtenant arising from or in
connection with such proposed assignment or subletting, or by any brokers or
other Persons (with whom Tenant or its proposed assignee or subtenant may have
dealt) claiming a commission or similar compensation in connection with the
proposed assignment or sublease.
Section 41.7 In the event that (a) Landlord fails to exercise
either of its options under Section 41.2 and consents to a proposed assignment
or sublease, and (b) Tenant fails to execute and deliver the assignment or
sublease to which Landlord consented within one hundred twenty (120) days after
the giving of such consent, then, Tenant shall again comply with all of the
provisions and conditions of Section 41.2 before assigning this Lease or
subletting all or part of the Premises.
Section 41.8 With respect to each and every sublease authorized by
Landlord under the provisions of this Lease, it is further agreed that:
(a) No sublease shall be for a term ending later than one day prior
to the Expiration Date of this Lease;
(b) No sublease shall be delivered, and no subtenant shall take
possession of the Premises or any part thereof, until an executed
counterpart of such sublease has been delivered to Landlord and approved in
writing by Landlord (or deemed approved pursuant to Section 41.2(a) or
(b)); and
(c) Each sublease shall be subject and subordinate to this Lease
and to the matters to which this Lease is or shall be subordinate, and each
subtenant by entering into a sublease is deemed to have agreed that in the
event of termination, re-entry or dispossession by Landlord under this
Lease, Landlord may, at its option, take over all of the right, title and
interest of Tenant, as sublandlord, under such sublease, and such subtenant
shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not (i)
be liable for any previous act or omission of Tenant under such sublease
(except to the extent such act or omission is a default under the Sublease
and continues beyond the date on which Landlord succeeds to Tenant's
interest, provided that the subtenant gives notice of such act or omission
to Landlord prior to such takeover by Landlord), (ii) be subject to any
counterclaim, offset or defense, not expressly provided in such sublease,
which theretofore accrued to such subtenant against Tenant, (iii) be bound
by any previous modification of such sublease not consented to in writing
by Landlord, or by any previous prepayment of more than one month's fixed
rent or of any additional rent, or (iv) be obligated to perform any work in
the subleased space or to prepare it for occupancy, and in connection with
such attornment, the subtenant shall execute and deliver to Landlord any
instruments Landlord may reasonably request to evidence and confirm such
attornment. Each subtenant or licensee of Tenant shall be deemed,
automatically upon and as a condition of its occupying or using the
Premises or any part thereof, to have
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<PAGE>
agreed to be bound by the terms and conditions set forth in this Article
41. The provisions of this Article 41 shall be self-operative and no
further instrument shall be required to give effect to this provision.
Section 41.9 If Landlord shall consent to any assignment of this
Lease or to any sublease, or if Tenant shall enter into any other assignment or
sublease permitted hereunder, Tenant shall, in consideration therefor, pay to
Landlord, as additional rent:
(a) In the case of an assignment, on the effective date of the
assignment, an amount equal to (i) prior to November 1, 2007, one hundred
percent (100%), and (ii) on or after November 1, 2007, fifty percent (50%)
of (i) all sums and other consideration paid to Tenant by the assignee for
or by reason of such assignment, including sums paid for Tenant's movable
fixtures and movable partitions, telephone and other communications
equipment, computer systems, furniture, trade fixtures, furnishings, and
other items of personal property which are removable without material
damage to the Premises or Building ("Tenant's Property"), less, in the case
of a sale thereof, the then net unamortized or undepreciated cost thereof,
determined on the basis of Tenant's federal income tax returns) less (ii)
all actual, reasonable and customary costs and expenses incurred by Tenant
in effectuating a subletting or assignment, including brokerage
commissions, advertising costs, attorney's fees and disbursements,
remodeling and redecorating costs in connection with such subletting or
assignment, rental abatements or concessions to the subtenant or assignee,
and any fees or cost reimbursements paid to Landlord pursuant to this Lease
in connection with Landlord's review or approval of such subletting or
assignment ("Transaction Expenses"), reasonably and actually incurred by
Tenant in connection with such assignment; or
(b) In the case of a sublease, an amount equal to (i) prior to
November 1, 2007, one hundred percent (100%), and (ii) on or after November
1, 2007, fifty percent (50%) of (i) all rents, additional charges or other
consideration payable to Tenant under the sublease in excess of the fixed
rent and additional rent accruing during the term of the sublease in
respect of the subleased space (at the rate per square foot payable by
Tenant hereunder) pursuant to the terms hereof (including sums paid for the
sale or rental of Tenant's Property, less, in the case of the sale thereof,
the then net unamortized or undepreciated cost thereof, determined on the
basis of Tenant's federal income tax returns) less (ii) all Transaction
Expenses reasonably and actually incurred by Tenant in connection with such
sublease. The sums payable under this clause shall be paid by Tenant to
Landlord as additional rent as and when paid by the subtenant to Tenant.
Section 41.10 (a) Subject to the provisions of Section 41.11, if
Tenant is a corporation, limited liability company, limited partnership, limited
liability partnership, general partnership, business trust, foundation, or any
other legal entity (any of the foregoing, an "Entity"), and a majority of the
outstanding voting stock, membership interests, partnership interests or other
legal or equitable ownership interests of any kind (any of the foregoing,
"Ownership Interests") are not publicly traded on a recognized stock exchange or
over-the-counter market, then any transfer (by one or more transfers), of a
majority of the Ownership Interests of Tenant shall be deemed an assignment of
this Lease for all purposes of this Article 41. The term "transfer" shall be
deemed to include the issuance of new Ownership Interests resulting in a
majority of the Ownership Interests of Tenant being held by Persons (other than
barnesandnoble.com inc.) which do not hold a majority of the Ownership
B-8
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Interests of Tenant on the date hereof, except in the case of a public offering
of Ownership Interests on a recognized stock exchange or over-the-counter
market. The transfer of a majority of the Ownership Interests of Tenant through
one or more transfers on a recognized stock exchange or over-the-counter market
shall not be deemed an assignment of this Lease for purposes of this Article 41.
(b) If Tenant is an Entity, and Tenant is merged or consolidated
with another Entity, or if substantially all of Tenant's assets are transferred
to another Entity, then such merger, consolidation or transfer of assets shall
be deemed an assignment of this Lease for all purposes of this Article 41.
Notwithstanding the foregoing, Landlord's consent shall not be required for such
assignment, and the provisions of Sections 41.2, 41.6 and 41.9 shall not be
applicable thereto, so long as each of the following conditions have been
satisfied: (i) such merger, consolidation or transfer of assets shall have been
made for a legitimate independent business purpose and not for the principal
purpose of transferring this Lease, (ii) the successor to Tenant or transferee
of substantially all of Tenant's assets shall have a net worth, computed in
accordance with generally accepted accounting principles consistently applied of
not less than $300,000,000.00 (the "Successor Net Worth"), (unless
barnesandnoble.com inc. is the successor to Tenant or is the transferee of such
assets, in which case barnesandnoble.com inc. shall have a net worth, computed
in accordance with generally accepted accounting principles consistently
applied, at least equal to the net worth of Tenant immediately prior to such
merger, consolidation or transfer) and (iii) proof satisfactory to Landlord of
the Successor Net Worth (or, in the case of barnesandnoble.com inc., a net worth
equal to the net worth of Tenant immediately prior to such merger, consolidation
or transfer) shall have been delivered to Landlord at least ten (10) days prior
to the effective date of any such transaction. Notwithstanding the foregoing, in
the event that the Successor Net Worth shall be less than $300,000,000.00,
Tenant may satisfy the condition set forth in Subsection 41.10(b)(ii) as
follows: (A) if the Successor Net Worth is less than $300,000,000.00 but more
than $250,000,000.00, Tenant shall increase the Security Deposit by $500,000.00
above the Security Deposit then held by Landlord, (B) if the Successor Net Worth
is less than $250,000,000.00 but more than $200,000,000.00, Tenant shall
increase the Security Deposit by $1,000,000.00 above the Security Deposit then
held by Landlord, and (C) if the Successor Net Worth is less than
$200,000,000.00 Tenant shall provide Landlord with a Guaranty, substantially in
the form attached as Exhibit O to the Ninth Floor Lease, of Tenant's obligations
under this Lease executed by Barnes & Noble, Inc., a Delaware corporation, or by
Bertelsmann AG, a business entity organized pursuant to the laws of the Federal
Republic of Germany, provided that at the time of execution and delivery of such
Guaranty, Tenant shall provide to Landlord reasonable evidence that such
Guarantor shall have a net worth, computed in accordance with generally accepted
accounting principles consistently applied, of not less than $300,000,000.00.
(c) The limitations set forth in this Section 41.10 shall be deemed
to apply to assignees of this Lease, if any, and any transfer of Ownership
Interests in, or any merger, consolidation or transfer of assets of, any such
assignee in violation of this Section 41.10 shall be deemed to be an assignment
of this Lease in violation of Section 41.1.
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<PAGE>
(d) A material modification or amendment or an extension of a
sublease shall be deemed a sublease for the purposes of Section 41.1, and a
takeover agreement shall be deemed a transfer of this Lease for the purposes of
Section 41.1.
Section 41.11 Tenant may, without Landlord's consent but upon not
less than ten (10) days prior notice to Landlord, assign this Lease or sublet
all or any portion of the Premises to any wholly owned subsidiary, Affiliate or
parent of Tenant, Bertelsmann AG or Barnes & Noble, Inc. (any of the foregoing,
a "Permitted Occupant"), or permit any Permitted Occupant to occupy all or any
portion of the Premises, provided that each Permitted Occupant shall be engaged
in a business or activity which is in keeping with the standards of the Building
and which is a Permitted Use. The provisions of Sections 41.2, 41.6, 41.9 and
41.10 shall not be applicable to any such assignment, subleasing or occupancy.
Any assignment or subleasing to, or occupancy by, any such Permitted Occupant
shall not relieve, release, impair or discharge any of Tenant's obligations
under this Lease. Each notice to Landlord with respect to any assignment,
subleasing or occupancy granted pursuant to this Section 41.11 shall include (i)
the name and the nature of the business or occupation of such Permitted
Occupant, and (ii) the terms of such assignment, subleasing or occupancy.
Section 41.12 (a) Any assignment or transfer, whether made with
Landlord's consent pursuant to Section 41.1 or without Landlord's consent to the
extent permitted under Sections 41.10 and 41.11, shall be made only if, and
shall not be effective until, the assignee shall execute, acknowledge and
deliver to Landlord an agreement in form and substance reasonably satisfactory
to Landlord whereby the assignee shall assume the obligations of this Lease on
the part of Tenant to be performed or observed from and after the effective date
of such assignment or transfer, and whereby the assignee shall agree that the
provisions in Section 41.1 shall, notwithstanding such assignment or transfer,
continue to be binding upon it in respect of all future assignments and
transfers.
(b) The joint and several liability of Tenant and any immediate or
remote successor in interest of Tenant and the due performance of the
obligations of this Lease on Tenant's part to be performed or observed shall not
be discharged, released or impaired in any respect by any agreement or
stipulation made by Landlord, or any grantee or assignee of Landlord by way of
mortgage or otherwise, extending the time, or modifying any of the obligations
of this Lease, or by any waiver or failure of Landlord, or any grantee or
assignee of Landlord by way of mortgage or otherwise, to enforce any of the
obligations of this Lease.
(c) The listing of any name other than that of Tenant, whether on
the doors of the Premises or the Building directory, or otherwise, shall not
operate to vest any right or interest in this Lease or in the Premises, nor
shall it be deemed to be the consent of Landlord to any assignment or transfer
of this Lease or to any sublease of Premises or to the use or occupancy thereof
by others. Any such listing shall constitute a privilege extended by Landlord,
revocable at Landlord's will by notice to Tenant, provided that Landlord shall
not unreasonably revoke such privilege as to any Affiliate of Tenant, or any
subtenant of Tenant or assignee of this Lease approved by Landlord pursuant to
this Article 41 (or without Landlord's approval, to the extent permitted
pursuant to Section 41.11).
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
barnesandnoble.com inc.
New York, New York
We hereby consent to the incorporation by reference of our report dated February
7, 2000 relating to the consolidated financial statements of barnesandnoble.com
inc. (the "Company"), incorporated by reference into the prospectuses
constituting a part of the Company's registration statement No. 333-79261 on
Form S-8.
We also consent to the references to us under the caption "Experts" in the
prospectuses.
BDO Seidman, LLP
New York, New York
March 28, 2000
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAR-30-1999
<PERIOD-END> DEC-31-1999
<CASH> 247,403
<SECURITIES> 302,496
<RECEIVABLES> 15,520
<ALLOWANCES> 0
<INVENTORY> 3,886
<CURRENT-ASSETS> 505,614
<PP&E> 119,561
<DEPRECIATION> 21,707
<TOTAL-ASSETS> 679,518
<CURRENT-LIABILITIES> 75,940
<BONDS> 0
0
0
<COMMON> 29
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<TOTAL-LIABILITY-AND-EQUITY> 679,518
<SALES> 148,263
<TOTAL-REVENUES> 148,263
<CGS> 117,850
<TOTAL-COSTS> 117,850
<OTHER-EXPENSES> 117,080
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (18,615)
<INCOME-PRETAX> (13,799)
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