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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended January 30, 2000
Commission file number 000-12704
WILLIAMS-SONOMA, INC.
(Exact Name of Registrant as Specified in Its Charter)
CALIFORNIA 94-2203880
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3250 VAN NESS AVENUE, SAN FRANCISCO, CA 94109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 421-7900
Securities registered pursuant to Section 12(b) of the Act: Common Stock
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark 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 checkmark 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 Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 31, 2000, the approximate aggregate market value of voting
stock held by non-affiliates of the Registrant was $1,345,162,000 using the
closing sales price on this day of $31.00. It is assumed for purposes of this
computation an affiliate includes all persons registered as Registrant insiders
with the Securities and Exchange Commission, as well as the Registrant's
Associate Stock Incentive Plan.
As of March 31, 2000, 55,554,438 shares of the Registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following documents have been incorporated herein by
reference:
1) Registrant's Annual Report to Shareholders for the Fiscal Year ended
January 30, 2000 (the "1999 Annual Report") in Parts I and II hereof and
attached hereto as Exhibit 13;
2) Registrant's Proxy Statement for the 2000 Annual Meeting (the "Proxy
Statement") in Part III hereof.
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WILLIAMS-SONOMA, INC.
FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED JANUARY 30, 2000
TABLE OF CONTENTS
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PART I
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder 6
Matters
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 7A. Quantitative and Qualitative disclosure about market risk 6
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 7
PART III
Item 10. Directors and Executive Officers of the Registrant 8
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners and Management 8
Item 13. Certain Relationships and Related Transactions 8
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 9
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PART I
ITEM 1. BUSINESS
Williams-Sonoma, Inc. and its subsidiaries (the Company) are specialty retailers
of products for the home. The retail segment sells its products through its
three retail concepts: Williams-Sonoma, Pottery Barn and Hold Everything. The
direct-to-customer segment sells similar products through its five direct-mail
catalogs, Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Hold Everything and
Chambers, and the Internet (Williams-Sonoma only). Based on net sales in fiscal
1999, retail accounted for 62.8% of the business and direct-to-customer
accounted for 37.2%. The principal concepts in both retail and
direct-to-customer are Williams-Sonoma and Pottery Barn, which sell cookware
essentials and contemporary tableware and home furnishings, respectively. The
Pottery Barn Kids catalog was introduced in January 1999. In June 1999, the
Company launched its Williams-Sonoma Internet Wedding and Gift Registry web site
and in November 1999 the Company launched its Williams-Sonoma e-commerce site.
The Company believes that it is one of the country's largest specialty retailers
of products for the home, and that the Company's five merchandising concepts
together can fulfill a customer's home-centered needs.
RETAIL STORES
The retail segment has three merchandising concepts: Williams-Sonoma, Pottery
Barn and Hold Everything. Williams-Sonoma stores offer a wide selection of
culinary and serving equipment, including cookware, cookbooks, cutlery, informal
dinnerware, glassware and table linen. In addition, these stores carry a variety
of quality foods, including a line of Williams-Sonoma food products, such as
gourmet coffees and pasta sauces. Pottery Barn stores feature a large assortment
of items in casual home furnishings, flatware and table accessories from around
the world that are designed to be combined to create a dynamic look in the home.
The Hold Everything concept was developed by the Company to offer innovative
solutions to household storage needs by providing efficient organization
solutions for every room in the house.
As of January 30, 2000 the Company operated 344 retail stores, located in 39
states and the District of Columbia. This represents 185 Williams-Sonoma, 117
Pottery Barn, 32 Hold Everything, and 10 outlet stores, of which 128
Williams-Sonoma and 100 Pottery Barn stores are large-format. The prototypical
1999 large-format stores range from 5,700 - 8,800 selling square feet for
Pottery Barn stores, and 2,700-6,300 selling square feet for Williams-Sonoma
stores and enable the Company to more clearly display merchandise. Large-format
stores accounted for 76% of retail sales in fiscal 1999 versus 68% of retail
sales in fiscal 1998. In fiscal 2000, the Company plans to increase leased
square footage by approximately 22%. Planned store openings in fiscal 2000
include the introduction of six Pottery Barn Kids retail locations.
DIRECT-TO-CUSTOMER OPERATIONS
The Company's direct-to-customer business began in 1972 when it introduced its
flagship catalog, "A Catalog for Cooks," which markets the Williams-Sonoma
brand. Since then, it has expanded its direct-to-customer business to include
the four other concepts - Pottery Barn, Pottery Barn Kids, Hold Everything, and
Chambers. Of these five merchandising concepts, Pottery Barn has been the major
source of sales growth in the direct-to-customer division for the last several
years. Fiscal 1999 sales for Pottery Barn Kids, which debuted in January 1999,
were more than double the Company's original sales plan. Management believes
that the success of the Pottery Barn brand and its extension, Pottery Barn Kids,
reflects the Company's continuing investment in product design and quality, and
the consumer recognition achieved through the Pottery Barn catalogs and design
studio stores. The Company expects to introduce a Pottery Barn Bed and Bath
catalog in the second quarter of fiscal 2000.
The Company sends its catalogs to addresses from its proprietary customer list,
as well as to names from lists which the Company receives in exchange or rents
from other mail order merchandisers, magazines and other companies. In
accordance with prevailing industry practice, the Company rents its list to
other merchandisers. The Company's customer list is continually updated to
include new prospects and eliminate non-responders.
In May 1999, the Company sold the Gardeners Eden catalog to Brookstone, Inc. to
allow greater focus on existing company brands and the Internet. As a result of
the sale, the Company recognized a $3,962,000 pre-tax gain ($2,437,000
after-tax).
In June 1999 the Company launched its Williams-Sonoma Internet Wedding and Gift
Registry web site and in November 1999 the Company launched its Williams-Sonoma
e-commerce site. Management expects to add a Pottery Barn e-commerce site in the
summer of fiscal 2000.
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The direct-to-customer business complements the retail business by building
customer awareness of a brand and acting as an effective advertising vehicle. In
addition, the Company believes that the mail order catalogs and the Internet act
as a cost efficient means of testing market acceptance of new products.
SUPPLIERS
The Company purchases its merchandise from numerous foreign and domestic
manufacturers and importers, none of which accounted for more than 3% of
purchases during fiscal 1999. Approximately 49% of the Company's payments for
merchandise were to foreign vendors, most of which are located in Europe and
Asia.
MANAGEMENT INFORMATION SYSTEMS
In fiscal 1999, the Company spent approximately $25 million on information
systems development, which includes the Internet. In fiscal 2000, the Company is
planning to spend approximately $30 million on information systems which will
include development of a Pottery Barn e-commerce site.
COMPETITION AND SEASONALITY
The specialty retail business is highly competitive. The Company's specialty
retail stores, mail order catalogs and the Internet compete with other retail
stores, including specialty stores and department stores, other mail order
catalogs and other e-commerce web sites. The substantial sales growth in the
direct-to-customer industry within the last decade has encouraged the entry of
many new competitors and an increase in competition from established companies.
The Company competes on the basis of the quality of its merchandise, service to
its customers and its proprietary customer list.
The Company's business is subject to substantial seasonal variations in demand.
Historically, a significant portion of the Company's sales and net income have
been realized during the period from October through December, and levels of net
sales and net income have generally been significantly lower during the period
from January through September. The Company believes this is the general pattern
associated with the direct-to-customer and retail industries. In anticipation of
its peak season, the Company hires a substantial number of additional employees
in its retail stores and direct-to-customer processing and distribution areas,
and incurs significant fixed catalog production and mailing costs. (See
Quarterly Financial Information on page 57 of the 1999 Annual Report which is
incorporated herein by reference).
EMPLOYEES
At January 30, 2000, the Company employed approximately 18,000 persons,
approximately 4,800 of whom were full-time employees. During the fiscal 1999
peak season the Company hired approximately 7,000 temporary employees in its
stores and in its direct-to-customer processing and distribution areas.
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ITEM 2. PROPERTIES
The Company's corporate offices are located in two facilities in San Francisco,
California. The primary headquarters building is security for a mortgage
agreement entered into with a bank in 1994. The second corporate office is held
under a lease.
Two of the Company's distribution facilities are leased from two partnerships
whose partners include directors, executive officers and/or significant
shareholders of the Company. (See Note F of the Company's Consolidated
Financial Statements).
In fiscal 1998, the Company leased a 750,000 square foot retail distribution
facility located in Olive Branch, Mississippi. The lease covers 22.5 years with
two optional five-year renewals. Rental payments for the primary term, which
commenced in July 1999, are payable at an average annual rate of $3,100,000. In
September 1999, the lease was amended to include a 261,000 square-foot
expansion. Rent for the expansion commenced in January 2000 and is estimated at
an average annual rate of $855,000.
In January 2000, the Company entered into an agreement to lease an additional
1,100,000 square-foot distribution facility in Olive Branch, Mississippi. The
lease covers a 23-year term with two optional five-year renewals. Rent will
commence upon completion of the facility, currently anticipated to be August
2000. Rental payments for the primary term are estimated to average $4,500,000
annually. These estimated rental payments are subject to adjustment upon
completion of construction and finalization of costs.
The Company's net selling area, at January 30, 2000, totaled approximately
1,497,000 square feet of leased space for 344 stores compared to approximately
1,217,000 square feet for 298 stores at the end of the prior year. All of the
existing stores are leased by the Company with original lease terms ranging from
3 to 23 years extending through 2022, except for one store lease with a 49-year
term extending though 2040. Most store leases require the payment of minimum
rentals against percentage rentals based on store sales. Certain leases contain
renewal options for periods of up to 20 years. (See Note E of the Company's
Consolidated Financial Statements).
In February 2000 the Company purchased a 204,000 square foot office building in
San Francisco, California, for the purpose of consolidating certain headquarters
staff and to provide for future growth. The purchase price of $80,000,000 was
financed by amending the Company's existing letter of credit agreement to add a
$75,000,000 revolving line of credit. (See Note C of the Company's Consolidated
Financial Statements).
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company. The Company
is, however, involved in routine litigation arising in the ordinary course of
its business, and, while the results of the proceedings cannot be predicted with
certainty, the Company believes that the final outcome of such matters will not
have a materially adverse effect on the Company's consolidated financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of the 1999 fiscal year.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The Company's common stock is currently traded on the New York Stock Exchange
(NYSE) under the ticker symbol "WSM". Information contained under the caption
"Common Stock" on page 57 of the 1999 Annual Report is incorporated herein by
reference. The closing sales price of the Company's stock in the New York Stock
Exchange (NYSE) on March 31, 2000 was $31.00.
SHAREHOLDERS
The number of shareholders of record as of March 31, 2000 was approximately 564.
This number excludes shareholders whose stock is held in nominee or street name
by brokers.
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on its common stock. In
addition, the Company is prohibited from doing so by certain covenants in its
bank credit agreement and is limited to a maximum dollar amount as determined in
accordance with covenants in its 7.2% Senior Note agreement. (See Note C of the
Company's Consolidated Financial Statements).
STOCK SPLITS
There were no stock splits during fiscal year 1999.
ITEM 6. SELECTED FINANCIAL DATA
Information contained under the caption "Five Year Selected Financial Data" on
page 37 of the 1999 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information contained under the caption "Management's Discussion and Analysis"
on pages 38 - 42 of the 1999 Annual Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Information contained under the caption "Quantitative and Qualitative Disclosure
About Market Risk" on page 41 of the 1999 Annual Report is incorporated herein
by reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following documents are incorporated by reference to pages 43 through 55 of
the 1999 Annual Report to Shareholders filed as Exhibit 13 to this Annual Report
on Form 10-K:
Independent Auditors' Report
Consolidated Balance Sheets as of January 30, 2000 and January 31, 1999
Consolidated Statements of Earnings for the years ending January 30,
2000, January 31, 1999 and February 1, 1998
Consolidated Statements of Shareholders' Equity for the years ending
January 30, 2000, January 31, 1999 and February 1, 1998
Consolidated Statements of Cash Flows for the years ending January 30,
2000, January 31, 1999 and February 1, 1998
Notes to Consolidated Financial Statements
The unaudited quarterly information contained under the caption "Quarterly
Financial Information" on page 56 of the 1999 Annual Report is incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained in the table under the caption "Election of Directors" in
the Proxy Statement is incorporated herein by reference.
Information contained on page 1 of the Proxy Statement in the last paragraph
under the caption "Voting Securities and Principal Shareholders" is incorporated
herein by reference.
At each Annual Meeting, directors are elected to serve until the next annual
meeting of shareholders or until the election and qualification of their
successors. Subject to the amendment approval by the shareholders, the Company's
Bylaws provide for not less than seven nor more than thirteen directors, the
exact number following the May 31, 2000 Annual Meeting having been fixed by the
Board of Directors at eleven.
Executive officers of the Company are elected by the Board of Directors at the
annual organizational meeting held immediately following the Annual Meeting and
serve at the pleasure of the Board. Information contained in the first table
under the caption "Information Concerning Executive Officers" on page 8 of the
Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to the aggregate cash compensation paid by the Company to
each of its five most highly-compensated executive officers for the fiscal year
ended January 30, 2000, is contained under the caption "Executive Compensation"
on pages 9 through 12 of the Proxy Statement and is incorporated herein by
reference (except the information contained in the Compensation Committee Report
and the Performance Graph).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a) Information with respect to those persons known to the Company to be
beneficial owners of more than 5% of its common stock, as of March 31,
2000, is contained under the caption "Voting Securities and Principal
Shareholders" on pages 1 through 4 of the Proxy Statement and is
incorporated herein by reference.
b) Information concerning the beneficial ownership of the Company's common
stock by its directors, by each executive officer named in the "Summary
Compensation Table" set forth on page 9 of the Proxy Statement, and by
its directors and officers as a group, as of March 31, 2000, is
contained in the tables under the captions "Voting Securities and
Principal Shareholders" and "Election of Directors" on pages 1 through
10 of the Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions is
contained under the caption "Certain Transactions" on page 7 of the Proxy
Statement and is incorporated herein by reference (see Note F of Notes to
Consolidated Financial Statements).
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Documents filed as part of the Form 10-K: See Item 8 for a list of
Financial Statements incorporated herein by reference.
(a)(2) Financial Statement Schedules
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Independent Auditors' Report on Financial Statement Schedule 10
Schedule II Valuation and Qualifying Accounts 11
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Schedules other than those referred to above have been omitted because
they are not required or are not applicable.
(b) Reports on Form 8-K: No Form 8-K filings were made during the last
quarter of the fiscal year ended January 30, 2000.
(c) Exhibits: See Exhibit Index on pages 14 through 19.
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INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
of Williams-Sonoma, Inc.:
We have audited the consolidated financial statements of Williams-Sonoma, Inc.
and subsidiaries as of January 30, 2000 and January 31, 1999, and for each of
the three fiscal years in the period ended January 30, 2000, and have issued our
report thereon dated March 24, 2000; such financial statements and report are
included in your 1999 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of
Williams-Sonoma, Inc. and subsidiaries listed in Item 14(a)(2). This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Deloitte & Touche LLP
- -----------------------------------
San Francisco, California
March 24, 2000
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SCHEDULE II
WILLIAMS-SONOMA, INC. & SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
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COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
----------------------------------- ------------ ------------ -------------- ----------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
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Fiscal year ended February 1, 1998:
Allowance for Doubtful Accounts $ 186,000 $ 20,000 -- $ 206,000
Fiscal year ended January 31, 1999:
Allowance for Doubtful Accounts $ 206,000 $ 24,000 -- $ 230,000
Fiscal year ended January 30, 2000:
Allowance for Doubtful Accounts $ 230,000 $ 20,000 -- $ 250,000
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
WILLIAMS-SONOMA, INC.
Date: April 26, 2000 By /s/ W. Howard Lester
-------------------------
Chairman and Chief Executive Officer
Director
Pursuant to the requirements of Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Date: April 26, 2000 /s/ W. Howard Lester
-----------------------------------
W. Howard Lester
Chairman
Chief Executive Officer
Director
Date: April 26, 2000 /s/ John W. Tate
-----------------------------------
John W. Tate
Senior Vice President
Chief Financial Officer
Date: April 26, 2000 /s/ Sharon McCollam
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Sharon McCollam
Vice President, Finance
Date: April 26, 2000 /s/ Charles E. Williams
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Charles E. Williams
Founder and Vice-Chairman
Director
Date: April 26, 2000 /s/ Gary G. Friedman
-----------------------------------
Gary G. Friedman
Chief Merchandising Officer
President-Retail Division
Director
Date: April 26, 2000 /s/ Patrick J. Connolly
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Patrick J. Connolly
Executive Vice President
General Manager-Catalog
Assistant Secretary and Director
Date: April 26, 2000 /s/ Adrian D.P. Bellamy
-----------------------------------
Adrian D.P. Bellamy
Director
Date: April 26, 2000 /s/ James M. Berry
-----------------------------------
James M. Berry
Director
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Date: April 26, 2000 /s/ Nathan Bessin
-----------------------------------
Nathan Bessin
Director
Date: April 26, 2000 /s/ Janet Emerson
-----------------------------------
Janet Emerson
Director
Date: April 26, 2000 /s/ James A. McMahan
-----------------------------------
James A. McMahan
Director
Date: April 26, 2000 /s/ John E. Martin
-----------------------------------
John E. Martin
Director
Date: April 26, 2000 /s/ Edward A. Mueller
-----------------------------------
Edward A. Mueller
Director
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EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE
FISCAL YEAR ENDED JANUARY 30, 2000
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EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE NO.
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3.1 Restated Articles of Incorporation (incorporated by reference
to Exhibit 3.1 to the Company's Report on Form 10-Q for the
period ended October 29, 1995, as filed with the Commission on
December 12, 1995)
3.1A Certificate of Amendment of Restated Articles of Incorporation
3.2 Restated Bylaws of Registrant (incorporated by reference to
Exhibit 99.1 to the Company's Report on Form 8-K filed with
Commission on October 4, 1999)
10.1 1983 Incentive Stock Option Plan and Form of Agreement
(incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-1, as filed with the
Commission on May 25, 1983)
10.1A 1976 Stock Option Plan and Form of Agreement as amended
(incorporated by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the fiscal year ended January
31, 1993 as filed with the Commission on May 3, 1993)
10.1B Amended and Restated 1993 Stock Option Plan and Form of
Agreement (incorporated by reference to Exhibit 10.1B to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 1, 1998 as filed with the Commission April 22, 1998)
10.2 Warehouse - distribution facility lease dated July 1, 1983
between the Lester-McMahan Partnership as lessor and
incorporated by reference to Exhibit 10.28 to the Company's
Report on Form 10-Q for the period ended September 30, 1983, as
filed with the Commission on October 14, 1983)
10.2A The Amendment, dated December 1, 1985, to the lease for the
distribution center, dated July 1, 1983 between the Company as
lessee and the Lester-McMahan Partnership as lessor
(incorporated by reference to Exhibit 10.48 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
3, 1985, as filed with the Commission on April 26, 1985)
10.2B The Sublease, dated as of August 1, 1990, by and between
Hewson-Memphis Partners and the Company (incorporated by
reference to Exhibit 10 to the Company's Report on Form 10-Q
for the period ended October 28, 1990, as filed with the
Commission on December 12, 1990)
10.2C Second Amendment to Lease between the Company and the
Lester-McMahan Partnership, dated December 1, 1993
(incorporated by reference to Exhibit 10.27 to the Company's
Annual Report on Form 10-K for the fiscal year ended January
30, 1994 as filed with the Commission on April 29, 1994)
10.2D Second Amendment to Sublease between the Company and
Hewson-Memphis Partners, dated September 1, 1994 (incorporated
by reference to Exhibit 10.38 to the Company's Report on Form
10-Q for the period ended October 30, 1994 as filed with the
Commission on December 13, 1994)
10.2E Third Amendment to Sublease between the Company and
Hewson-Memphis Partners, dated October 24, 1995 (incorporated
by reference to Exhibit 10.2E to the Company's Report on Form
10-Q for the period ended October 29, 1995 as filed with the
Commission on December 12, 1995)
10.3 Memorandum of Understanding between the Company and the State
of Mississippi, Mississippi Business Finance Corporation,
Desoto County, Mississippi, the City of Olive Branch,
Mississippi and Hewson Properties, Inc., dated August 24, 1998
(incorporated by reference to Exhibit 10.6 to the Company's
Report on Form 10-Q for the period ended August 2, 1998 as
filed with the Commission on September 14, 1998)
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EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE NO.
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10.3A Olive Branch distribution facility lease between the Company as lessee
and Hewson/Desoto Phase I, L.L.C. as lessor, dated December 1, 1998
(incorporated by reference to Exhibit 10.3D to the Company's
Annual Report on Form 10-K for the year ended January 31, 1999,
as filed with the Commission on April 30, 1999)
10.3B First amendment to the Lease Agreement for the Company's
distribution facility located in Olive Branch, Mississippi,
dated as of September 1, 1999, between the Company as lessee
and Hewson/Desoto Phase I, LLC as lessor
10.4 The lease for the Company's Corporate Offices at 100 North
Point Street, San Francisco, California dated January 13, 1986,
between the Company as lessee and Northpoint Investors as
lessor (incorporated by reference to Exhibit 10.49 to the
Company's Annual Report on Form 10-K for the year ended
February 3, 1985, as filed with the Commission on April 26,
1985)
10.4A First amendment to the lease for the Company's Corporate
Offices at 100 North Point Street, San Francisco, California
dated January 5, 1996, between the Company as lessee and
Northpoint Investors as lessor (incorporated by reference to
Exhibit 10.3 A to the Company's Annual Report on Form 10-K for
the year ended January 28, 1996, as filed with the Commission
on April 26, 1996)
10.5 Williams-Sonoma, Inc. Employee Profit Sharing and Stock Incentive Plan
effective as of February 1, 1989 (incorporated by reference to Exhibit
4.2 of the Company's Form S-8 (File No. 33-33693) filed February 22,
1990)
10.5A Williams-Sonoma, Inc. Employee Profit Sharing and Stock Incentive Plan
Trust Agreement, dated September 20, 1989 (incorporated by reference to
Exhibit 4.2 of the Company's Form S-8 (File No. 33-33693) filed February
22, 1990)
10.5B Amendment Number One to the Williams-Sonoma, Inc. Employee Profit Sharing
and Stock Incentive Plan, dated April 27, 1990 (incorporated by reference
to the Company's Form S-8 (File No. 333-82205) filed July 2, 1999)
10.5C Amendment Number Two to the Williams-Sonoma, Inc. Employee Profit Sharing
and Stock Incentive Plan, dated December 12, 1990 (incorporated by
reference to the Company's Form S-8 (File No. 333-82205) filed July 2,
1999)
10.5D Amendment Number Three to the Williams-Sonoma, Inc. Employee Profit
Sharing and Stock Incentive Plan, dated March 10, 1992 (incorporated by
reference to the Company's Form S-8 (File No. 333-82205) filed July 2,
1999)
10.5E Amendment Number Four to the Williams-Sonoma, Inc. Employee Profit
Sharing and Stock Incentive Plan, dated June 9, 1993 (incorporated by
reference to the Company's Form S-8 (File No. 333-82205) filed July 2,
1999)
10.5F Amendment Number Five to the Williams-Sonoma, Inc. Employee Profit
Sharing and Stock Incentive Plan, dated December 23, 1993 (incorporated
by reference to the Company's Form S-8 (File No. 333-82205) filed July 2,
1999)
10.5G Amendment Number Six to the Williams-Sonoma, Inc. Employee Profit Sharing
and Stock Incentive Plan, dated May 6, 1996 (incorporated by reference to
the Company's Form S-8 (File No. 333-82205) filed July 2, 1999)
10.5H Amendment Number Seven to the Williams-Sonoma, Inc. Employee Profit
Sharing and Stock Incentive Plan, dated May 1, 1997 (incorporated by
reference to the Company's Form S-8 (File No. 333-82205) filed July 2,
1999)
10.5I Amendment Number Eight to the Williams-Sonoma, Inc. Employee Profit
Sharing and Stock Incentive Plan, dated September 16, 1997 (incorporated
by reference to the Company's Form S-8 (File No. 333-82205) filed July 2,
1999)
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE NO.
------ ------------------- --------
<S> <C> <C>
10.5J Amendment Number Nine to the Williams-Sonoma, Inc. Employee Profit
Sharing and Stock Incentive Plan, dated September 30, 1998 (incorporated
by reference to the Company's Form S-8 (File No. 333-82205) filed July 2,
1999)
10.5K Amendment Number Ten to the Williams-Sonoma, Inc. Employee Profit Sharing
and Stock Incentive Plan, dated December 31, 1998 (incorporated by
reference to the Company's Form S-8 (File No. 333-82205) filed July 2,
1999)
10.6 Purchase and Sale Agreement between the Company and
Bancroft-Whitney, a division of Thomson Legal Publishing, Inc.,
dated December 14, 1993 (incorporated by reference to Exhibit
10.29 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 30, 1994 as filed with the Commission
on April 29, 1994)
10.6A Indemnity Agreement by the Company in favor of Bank of America,
NT & SA, dated December 1, 1993 (incorporated by reference to
Exhibit 10.28 to the Company's Annual Report on Form 10-K for
the fiscal year ended January 30, 1994 as filed with the
Commission on April 29, 1994)
10.7 Note Agreement for $40,000,000 7.2% Senior Notes, dated August
1, 1995 (incorporated by reference to Exhibit 10.9 to the
Company's Report on Form 10-Q for the period ended July 30,
1995 as filed with the Commission on September 12, 1995)
10.7A Guaranty Agreement for $40,000,000 Senior Notes, dated August
1, 1995 (incorporated by reference to Exhibit 10.9A to the
Company's Report on Form 10-Q for the period ended July 30,
1995 as filed with the Commission on September 12, 1995)
10.7B Intercreditor Agreement for $40,000,000 Senior Notes, dated
August 1, 1995 (incorporated by reference to Exhibit 10.9B to
the Company's Report on Form 10-Q for the period ended July 30,
1995 as filed with the Commission on September 12, 1995)
10.8 Amended and Restated Standing Loan Agreement between the
Company and Bank of America, NT & SA, dated June 1, 1997
(incorporated by reference to Exhibit 10.1 to the Company's
Report on Form 10-Q for the period ended May 4, 1997 as filed
with the Commission on June 17, 1997).
10.9 Credit Agreement between the Company and Bank of America, NT &
SA, dated June 1, 1997 (incorporated by reference to Exhibit
10.2 to the Company's Report on Form 10-Q for the period ended
May 4, 1997 as filed with the Commission on June 17, 1997).
10.9A Agreement re: Intercreditor Agreement, dated May 22, 1997
(incorporated by reference to Exhibit 10.2A to the Company's
Report on Form 10-Q for the period ended May 4, 1997 as filed
with the Commission on June 17, 1997).
10.9B Continuing Guaranty from Pottery Barn East, Inc. to Bank of
America, NT & SA, dated June 1, 1997 (incorporated by reference
to Exhibit 10.2B to the Company's Report on Form 10-Q for the
period ended May 4, 1997 as filed with the Commission on June
17, 1997).
10.9C Continuing Guaranty from Hold Everything, Inc. to Bank of
America, NT & SA, dated June 1, 1997 (incorporated by reference
to Exhibit 10.2C to the Company's Report on Form 10-Q for the
period ended May 4, 1997 as filed with the Commission on June
17, 1997).
10.9D Continuing Guaranty from Williams-Sonoma Stores, Inc. to Bank
of America, NT & SA, dated June 1, 1997 (incorporated by
reference to Exhibit 10.2D to the Company's Report on Form 10-Q
for the period ended May 4, 1997 as filed with the Commission
on June 17, 1997).
10.9E Continuing Guaranty from Chambers Catalog Company, Inc. to Bank
of America, NT & SA, dated June 1, 1997 (incorporated by
reference to Exhibit 10.2E to the Company's Report on Form 10-Q
for the period ended May 4, 1997 as filed with the Commission
on June 17, 1997).
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE NO.
------ ------------------- --------
<S> <C> <C>
10.9F Continuing Guaranty from Gardeners Eden, Inc. to Bank of America, NT &
SA, dated June 1, 1997 (incorporated by reference to Exhibit 10.2F to the
Company's Report on Form 10-Q for the period ended May 4, 1997
as filed with the Commission on June 17, 1997).
10.10 Letter of Credit Agreement between the Company and Bank of
America, NT & SA dated June 1, 1997 (incorporated by reference
to Exhibit 10.3 to the Company's Report on Form 10-Q for the
period ended May 4, 1997 as filed with the Commission on June
17, 1997)
10.10A One Bank Guaranty from Pottery Barn East, Inc. to Bank of
America, NT & SA, dated June 1, 1997 (incorporated by reference
to Exhibit 10.3A to the Company's Report on Form 10-Q for the
period ended May 4, 1997 as filed with the Commission on June
17, 1997).
10.10B One Bank Guaranty from Hold Everything, Inc. to Bank of
America, NT & SA, dated June 1, 1997 (incorporated by reference
to Exhibit 10.3B to the Company's Report on Form 10-Q for the
period ended May 4, 1997 as filed with the Commission on June
17, 1997).
10.10C One Bank Guaranty from Williams-Sonoma Stores, Inc. to Bank of
America, NT & SA, dated June 1, 1997 (incorporated by reference
to Exhibit 10.3C to the Company's Report on Form 10-Q for the
period ended May 4, 1997 as filed with the Commission on June
17, 1997).
10.10D One Bank Guaranty from Chambers Catalog Company, Inc. to Bank
of America, NT & SA, dated June 1, 1997 (incorporated by
reference to Exhibit 10.3D to the Company's Report on Form 10-Q
for the period ended May 4, 1997 as filed with the Commission
on June 17, 1997).
10.10E One Bank Guaranty from Gardeners Eden, Inc. to Bank of America,
NT & SA, dated June 1, 1997 (incorporated by reference to
Exhibit 10.3E to the Company's Report on Form 10-Q for the
period ended May 4, 1997 as filed with the Commission on June
17, 1997).
10.10F First Amendment to Syndicated Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated May 29, 1998 (incorporated by reference to
Exhibit 10.2 to the Company's Report on Form 10-Q for the
period ended August 2, 1998 as filed with the Commission on
September 14, 1998).
10.10G Second Amendment to Syndicated Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated June 30, 1998 (incorporated by reference to
Exhibit 10.4 to the Company's Report on Form 10-Q for the
period ended August 2, 1998 as filed with the Commission on
September 14, 1998)
10.10H Second Amendment to Letter of Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated May 29, 1998 (incorporated by reference to
Exhibit 10.3 to the Company's Report on Form 10-Q for the
period ended August 2, 1998 as filed with the Commission on
September 14, 1998)
10.10I Third Amendment to Letter of Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated June 30, 1998 (incorporated by reference to
Exhibit 10.5 to the Company's Report on Form 10-Q for the
period ended August 2, 1998 as filed with the Commission on
September 14, 1998)
10.10J Fourth Amendment to Letter of Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated May 26, 1999 (incorporated by reference to
Exhibit 10.1 to the Company's Report on Form 10-Q for the
period ended August 1, 1999 as filed with the Commission on
September 13, 1999)
10.10K Third Amendment to Syndicated Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated November 13, 1999 (incorporated by reference
to Exhibit 10.2 to the Company's Report on Form 10-Q for the
period ended August 1, 1999 as filed with the Commission on
September 13, 1999)
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE NO.
------ ------------------- --------
<S> <C> <C>
10.10L Guarantee by Williams-Sonoma Stores, LLC in favor of Bank of
America National Trust and Savings Association, dated November
13, 1998 (incorporated by reference to Exhibit 10.3 to the
Company's Report on Form 10-Q for the period ended August 1,
1999 as filed with the Commission on September 13, 1999)
10.10M Fifth Amendment to Letter of Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated September 22, 1999 (incorporated by
reference to Exhibit 10.1 to the Company's Report on Form 10-Q
for the period ended October 31, 1999 as filed with the
Commission on December 13, 1999)
10.10N Fourth Amendment to Syndicated Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated September 22, 1999 (incorporated by
reference to Exhibit 10.2 to the Company's Report on Form 10-Q
for the period ended October 31, 1999 as filed with the
Commission on December 13, 1999)
10.10O Sixth Amendment to Letter of Credit Agreement between the
Company and Bank of America National Trust and Savings
Association, dated October 29, 1999 (incorporated by reference
to Exhibit 10.3 to the Company's Report on Form 10-Q for the
period ended October 31, 1999 as filed with the Commission on
December 13, 1999)
10.10P Fifth Amendment to Syndicated Credit Agreement between the Company and
Bank of America National Trust and Savings Association, dated as of
February 7, 2000
10.10Q Seventh Amendment to Letter of Credit Agreement between the Company and
Bank of America National Trust and Savings Association, dated as of
February 7, 2000
10.10R Continuing Guaranty from Williams-Sonoma Retail Services, Inc. to Bank of
America (formerly NT & SA), dated June 1, 1997 entered into as of
February 7, 2000.
10.10S Continuing Guaranty from Williams-Sonoma Direct, Inc. to Bank of America
(formerly NT & SA), dated June 1, 1997 entered into as of February 7,
2000.
10.10T Continuing Guaranty from Pottery Barn Kids, Inc. to Bank of America
(formerly NT & SA), dated June 1, 1997 entered into as of February 7,
2000.
10.10U One Bank Guaranty from Williams-Sonoma Retail Services, Inc. to Bank of
America (formerly NT & SA), dated June 1, 1997 entered into as of
February 7, 2000.
10.10V One Bank Guaranty from Williams-Sonoma Direct, Inc. to Bank of America
(formerly NT & SA), dated June 1, 1997 entered into as of February 7,
2000.
10.10W One Bank Guaranty from Pottery Barn Kids, Inc. to Bank of America
(formerly NT & SA), dated June 1, 1997 entered into as of February 7,
2000.
10.11 Second Amendment and Restatement of the Williams-Sonoma, Inc.
Executive Deferral Plan dated November 23, 1998 (incorporated
by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1999 as filed
with the Commission on April 30, 1999)
10.12 Office lease between TJM Properties, L.L.C. and Williams-Sonoma, Inc.,
dated as of February 13, 1998 (incorporated by reference to Exhibit 10.16
to the Company's Annual Report on Form 10-K for the fiscal year ended
February 1, 1998 as filed with the Commission on April 22, 1998)
10.13 Purchase and sale agreement and Escrow Instructions, dated as
of December 14, 1999, between the Company and Levi Strauss &
Co.
10.14 The lease for an additional Company distribution facility
located in Olive Branch, Mississippi, dated as of November 15,
1999, between the Company as lessee and Hewson/Desoto Partners,
LLC as lessor.
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE NO.
------ ------------------- --------
<S> <C> <C>
10.14A Lease Guarantee from Williams-Sonoma Retail Services, Inc in
favor of Hewson/Desoto Partners, LLC dated as of November 15,
1999
11 Statement re computation of per share earnings (Incorporated
herein by reference to Note G Earnings Per Share on page 51 of
the Company's Annual Report for the fiscal year ended January
30, 2000)
13 Annual Report to security holders
21 Subsidiaries
23.1 Independent Auditors' Consent
27 Financial Data Schedule (FDS) for January 30, 2000
</TABLE>
19
<PAGE> 1
EXHIBIT 3.1A
[SEAL/LOGO]
STATE OF CALIFORNIA OFFICE OF THE
SECRETARY OF STATE
[SEAL]
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 2 page(s) has been compared with the record
on file in this office, of which it purports to be a copy, and that it is full,
true and correct.
[SEAL] IN WITNESS WHEREOF, I execute this
certificate and affix the Great Seal of
the State of California this day of
JUN 17 1999
/s/ BILL JONES
Secretary of State
<PAGE> 2
[ ENDORSED o FILED ]
[ IN THE OFFICE OF THE SECRETARY OF STATE ]
[ OF THE STATE OF CALIFORNIA ]
[ JUN 09 1999 ]
[ BILL JONES, SECRETARY OF STATE ]
CERTIFICATE OF AMENDMENT OF
RESTATED ARTICLES OF INCORPORATION
OF
WILLIAMS-SONOMA, INC.
Dennis A. Chantland certifies that:
1. He is the Executive Vice President and the Secretary of
Williams-Sonoma, Inc., a California corporation.
2. Article IV of the Restated Articles of Incorporation of this
corporation is amended to read in its entirety as follows:
ARTICLE IV
"Notwithstanding that applicable law would otherwise permit action to
be taken with the approval of a lesser percentage, each of the following
actions shall require the affirmative vote of not less than two-thirds of
the outstanding shares of this corporation entitled to vote:
(a) a merger or consolidation of this corporation;
(b) the sale or other disposition by this corporation or a subsidiary
of assets that constitute substantially all of the assets of this
corporation and its subsidiaries on a consolidated basis; or
(c) the adoption of any plan or proposal for dissolution or
liquidation of this corporation;
provided that the provisions of this Article IV shall not apply to any such
transaction solely between this corporation and one or more Controlled
Entities or between two or more Controlled Entities. "Controlled Entity"
means a legal entity of which 50% or more of the outstanding equity
entitled to vote is owned, directly or indirectly, by this corporation.
"Notwithstanding any other provision of these Restated Articles of
Incorporation or Bylaws of this corporation and notwithstanding that a
lesser percentage may be specified by law, these Restated Articles of
Incorporation or the Bylaws of this corporation, the affirmative vote of
not less than two-thirds of the outstanding shares of this corporation
entitled to vote shall be required to amend or repeal, or adopt any
provision inconsistent with this Article IV."
3. The foregoing amendment to Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing amendment to Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the California General Corporation Law. The total number of outstanding shares
of the
<PAGE> 3
corporation is 55,808,325. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was not less
than two-thirds of the outstanding shares entitled to vote.
The undersigned further declares under penalty of perjury under the laws
of the State of California that the matters set forth in this certificate are
true and correct of his own knowledge.
Executed at San Francisco, California, this 7th day of June, 1999.
/s/ DENNIS A. CHANTLAND
--------------------------------------
Dennis A. Chantland,
Executive Vice President and Secretary
[SEAL]
-2-
<PAGE> 1
Exhibit 10.3B
FIRST AMENDMENT TO LEASE AGREEMENT
BY AND BETWEEN
HEWSON/DESOTO PHASE I, L.L.C.
AND
WILLIAMS-SONOMA RETAIL DISTRIBUTION CENTER, INC.
DATED: AS OF SEPTEMBER 1, 1999
PREPARED BY:
BAKER, DONELSON, BEARMAN & CALDWELL
<PAGE> 2
2000 FIRST TENNESSEE BUILDING
165 MADISON AVENUE
MEMPHIS, TENNESSEE 38103
<PAGE> 3
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "Amendment"), entered into
as of the 1st day of September, 1999, by and between HEWSON/DESOTO PHASE I,
L.L.C., an Arizona limited liability company (the "Landlord"), and
WILLIAMS-SONOMA RETAIL DISTRIBUTION CENTER, INC., a California corporation (the
"Tenant");
W I T N E S S E T H, that:
The Original Lease (as hereinafter defined), as modified by this
Amendment, constitutes a financing agreement for the purposes of Sections
57-10-409 and 27-7-22.3 of the Mississippi Code of 1972, as amended.
By means of a Lease Agreement dated as of December 1, 1998 by and
between Landlord and Williams-Sonoma, Inc., a California corporation ("Original
Tenant"), recorded at Book 79, Page 520 of the Land Deed Records, Chancery
Clerk's Office, DeSoto County, Mississippi (the "Original Lease"), Landlord
leased to Original Tenant that entire certain parcel of land (the "Property"),
containing 66.847 acres, more or less, and the easements and appurtenances
thereto, located in the County of DeSoto, State of Mississippi, as described in
EXHIBIT "A" attached hereto and made a part hereof, together with the building,
and on-site and off-site improvements as described therein (the "Original
Improvements") (the Property and the Original Improvements being herein
sometimes called the "Original Project"). The Original Project was financed
through the issuance of $30,300,000 Taxable Industrial Development Revenue
Bonds, Series 1998 (Hewson/DeSoto Phase I, L.L.C. Project) (the "Series 1998
Bonds") by the Mississippi
<PAGE> 4
Business Finance Corporation (the "Issuer"), pursuant to a Loan Agreement dated
as of December 1, 1998 between the Issuer and Landlord (the "Original Loan
Agreement"). The Bonds were issued pursuant to a Trust Indenture (the "Original
Indenture") of even date therewith executed by and between the Issuer and Union
Planters National Bank, N.A., as Trustee (the "Original Trustee"), and were
secured by a deed of trust of even date therewith and executed by Landlord in
favor of the Issuer (the "Original Deed of Trust"), which was assigned by the
Issuer to the Original Trustee pursuant to the Indenture. Interests of various
parties in the Original Project were subject to the Tenant Estoppel,
Subordination, Non-Disturbance and Attornment Agreement (the "Original
Non-Disturbance Agreement") of even date therewith by and among the Landlord,
the Original Tenant, the Issuer and the Original Trustee. Subsequent to the
issuance of the Series 1998 Bonds, the Original Tenant assigned its interests
under the Original Lease to the Tenant, a wholly owned subsidiary of Original
Tenant, by means of an Assignment of Lease dated as of July 1, 1999 (the
"Assignment").
The Rental Commencement Date and Occupancy Commencement Date under the
Original Lease occurred on July 6, 1999, the date upon which Tenant commenced
actual productive use of the Original Project as a distribution center. Prior to
such date, Tenant installed in the Original Project certain fixtures (the
"Original Fixtures") and equipment (the "Original Equipment") not subject to the
Original Lease.
The parties now wish to amend the Original Lease to provide for an
addition to the Original Improvements as described more fully herein. Landlord
hereby leases to Tenant, and Tenant hereby hires from Landlord, for a term equal
to the remainder of the Primary Term (as defined in the Original Lease), the
Addition to be constructed on the Property, and on-site and
2
<PAGE> 5
off-site improvements, all as described in the 1999 Plans (as defined in the
First Supplement to Loan Agreement, as hereinafter defined) attached hereto as
EXHIBIT "B" (the "Addition"). Tenant shall, during the course of and upon
completion of the construction of the Addition, at the Tenant's sole cost and
expense, install in the Addition certain fixtures (the "Addition Fixtures") and
equipment (the "Addition Equipment").
The Addition will be financed with the proceeds of the $8,900,000
Taxable Industrial Development Revenue Bonds, Series 1999 (Hewson/DeSoto Phase
I, LLC Project) issued by the Issuer pursuant to a First Supplemental Trust
Indenture of even date herewith (the "First Supplemental Indenture") by and
between the Issuer and First Tennessee Bank National Association as successor
trustee (the "Trustee"). Such bonds (the "Series 1999 Bonds") will be Additional
Bonds (as defined in the Original Indenture), the proceeds of which will be
loaned to the Landlord by Issuer pursuant to the Original Loan Agreement, as
modified by a First Supplement to Loan Agreement of even date herewith (the
"First Supplement to Loan Agreement"). Landlord represents and warrants that all
requirements set forth in the Original Indenture and the Original Loan Agreement
for the issuance of Additional Bonds have been satisfied. The Series 1999 Bonds
will be secured on a parity with the Series 1998 Bonds. Documents executed to
secure the Series 1998 Bonds will be amended to reflect the issuance of the
Series 1999 Bonds and to subject the collateral pledged thereunder to a parity
lien for holders of Series 1999 Bonds.
Based upon the foregoing, and for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Landlord and Tenant agree
to the foregoing
3
<PAGE> 6
recitals and agree to modify the Lease upon the following terms, provisions,
conditions and limitations, and the parties respectively covenant and agree to
such modifications as follows:
1. Definitions. Unless the context otherwise requires or unless
otherwise amended or defined herein, definitions of capitalized terms used in
the Original Lease shall be deemed to be amended by, and to have the meanings
set forth in, the First Supplemental Indenture and First Supplement to Loan
Agreement, and shall be incorporated herein. Capitalized terms used herein which
are defined in the Original Lease, which are not amended by the First
Supplemental Indenture or First Supplement to Loan Agreement, and which are not
otherwise defined herein shall have the meaning set forth in the Original Lease.
In addition, definitions set forth in the Recitals of this Amendment are
incorporated herein. Furthermore, the following definitions of capitalized terms
in the Original Lease shall be amended as follows:
(a) "Basic Rent" shall mean the sum of Basic Rent (as defined in the
Original Lease) plus Addition Basic Rent (as defined below in
Section 2.1.A(c)).
(a) "Company Payments" shall mean the sum of Company Payments (as
defined in the Original Lease) plus Addition Company Payments (as
defined below in Section 2.1.A(c)).
(a) "Equipment" shall mean the Original Equipment and Addition
Equipment taken as a whole.
(a) "Fixtures" shall mean the Original Fixtures and Addition Fixtures
taken as a whole.
(a) "Global Basic Rent" shall mean the sum of Global Basic Rent (as
defined in the Original Lease) plus Addition Global Basic Rent
(as defined below in Section 2.1.A(a)).
(a) "Improvements" shall mean the Original Improvements and the
Addition taken as a whole.
5
<PAGE> 7
(a) "Project" shall mean the Property, the Original Improvements, and
the Addition.
(a) "Rent" shall mean Basic Rent, Addition Basic Rent, Company
Payments, Addition Company Payments, Additional Rent and Addition
Additional Rent (as defined below in Section 2.2.A(a)).
2. Occupancy of the Addition. (a) There shall be added to the Original
Lease immediately following Section 1.2 thereof the following Section 1.2.A:
1.2.A. Occupancy . (a) The parties hereto understand and agree
that the Addition is anticipated to be complete and ready for occupancy
as evidenced by a Certificate of Occupancy to be issued by the relevant
jurisdiction on or about the 10th day of January, 2000 (the "Estimated
Addition Completion Date"). Landlord shall exert its best efforts toward
the end that the Improvements be completed on or before January 10,
2000. Landlord agrees to give Tenant written notice as to whether or not
the Addition will be completed by the Estimated Addition Completion Date
as soon as possible, but in any event not later than thirty (30) days
prior to the Estimated Addition Completion Date.
(b) Tenant's responsibility for payment of amounts set forth in
Sections 2.1.A and 2.2.A hereof shall commence on that date (the
"Addition Rental Commencement Date") which is the earliest of (i) ten
(10) business days following receipt by the Tenant of a copy of those
items required under Section 3.04 of the First Supplement to Loan
Agreement, (ii) that date on which Tenant commences actual productive
use (as distinct from installation of Addition Fixtures and Addition
Equipment) of the Addition as part of the existing distribution
facility, or (iii) April 30, 2000. Tenant's occupancy of the Addition
shall commence on that date (the "Addition Occupancy Commencement Date")
which is the earlier of (1) ten (10) business days following receipt by
the Tenant of a copy of those items required under Section 3.04 of the
First Supplement to Loan Agreement or (2) that date on which Tenant
commences actual productive use (as distinct from installation of
Addition Fixtures and Addition Equipment) of the Addition as part of the
existing distribution facility. Notwithstanding anything to the contrary
herein, Tenant shall have no obligation to pay Addition Company Payments
until after the Addition Occupancy Commencement Date and until after all
amounts (if any) due to Tenant under the Agreement and Indemnification
of even date herewith (the "Indemnification Agreement") have been paid
in full.
6
<PAGE> 8
(c) Tenant's obligation to pay those amounts set forth in
Sections 2.1.A and 2.2.A hereof (other than Addition Company Payments)
shall arise on the Addition Rental Commencement Date regardless of any
disputes which may occur between Landlord and Tenant concerning
construction of the Addition, subject to the provisions of paragraph
7.7.A of this Amendment.
(d) The Landlord shall construct or cause to be constructed the
Addition substantially in accordance with the 1999 Plans and the 1999
Construction Budget (as defined in the First Supplement to Loan
Agreement) attached hereto as Exhibit "C." The Landlord shall obtain all
approvals requisite to the construction of the Addition, and shall
construct the Addition in material compliance with all federal, State
and local laws and regulations. On or before the Addition Occupancy
Commencement Date, the Landlord will furnish to the Tenant copies of all
required permits and authorizations except those permits and
authorizations which Tenant must obtain, authorizing the occupancy and
uses of the Addition for the purposes contemplated by the Tenant. The
Landlord will take such action and institute such proceedings as shall
be necessary to cause and require all contractors and material suppliers
to complete their contracts, including the correction of any defective
work, and the Landlord agrees that the Tenant may, from time to time, in
its own name, or in the name of the Landlord, take such action as may be
necessary or advisable, as determined by the Tenant, to assure that the
construction of the Addition will proceed in an efficient and
workmanlike manner. Any amounts recovered as damages, refunds,
adjustments or otherwise in connection with the foregoing (a) shall be
paid to the Tenant if the Tenant has corrected, at its own expense, the
matter which gave rise to such default or breach, or (b) shall be paid
to the Landlord if the Landlord has corrected, at its own expense, the
matter which gave rise to such default or breach, or (c) shall be paid
to the Landlord if the matter which gave rise to such default or breach
has not yet been corrected and if such payment is prior to the Addition
Occupancy Commencement Date (in which event Landlord shall thereafter
promptly apply such amount to the correction of such matter, with the
balance, if any, disposed of as set forth in Section 3.05 of the First
Supplement to Loan Agreement), or (d) shall be paid to the Tenant if the
matter which gave rise to such default or breach has not yet been
corrected and if such payment is after the Addition Occupancy
Commencement Date (in which event Tenant shall thereafter promptly apply
such amount to the correction of such matter, with the balance, if any,
disposed of as set forth in Section 3.2(b) of the Original Lease).
7
<PAGE> 9
(b) There shall be added to the Original Lease immediately following
Section 1.3 thereof the following Section 1.3.A:
1.3.A. Addition Fixtures; Addition Equipment . The parties hereto
understand and agree that the Landlord has no responsibility whatsoever
regarding the delivery and installation of the Addition Fixtures and
Addition Equipment in the Addition, and that the Lease and the Tenant's
covenants and agreements contained herein are in no way conditioned upon
such delivery or installation.
3. Rental Terms for the Addition. (a) There shall be added to the
Original Lease immediately following Section 2.1 thereof the following Section
2.1.A:
2.1.A Addition Rent. (a) From and after the Addition Rental
Commencement Date, Tenant shall pay Addition Global Basic Rent, subject
to adjustment as provided in Section 2.6.A hereof; "Addition Global
Basic Rent" being defined (i) during the portion of the Primary Term
remaining after such date as the sum of Addition Basic Rent (as defined
below) and Addition Company Payments (as defined below) (provided,
however, that Tenant shall have no obligation to pay Addition Company
Payments until after the Addition Occupancy Commencement Date and until
after all amounts due to Tenant under the Indemnification Agreement have
been paid in full); and (ii) during the Option Periods, on the same
terms as set forth in Section 2.7 of the Lease (provided, however, that
during said Option Periods all Addition Global Basic Rent shall also
constitute Addition Company Payments hereunder).
(b) During the portion of the Primary Term remaining after the
Addition Rental Commencement Date, the Addition Global Basic Rent shall
be payable in the amounts set forth in Exhibit "D" attached hereto (the
"Addition Rent Schedule") and made a part hereof, subject to adjustment
of the Addition Basic Rent as provided in Section 2.6.A hereof. Any such
Addition Basic Rent adjustment will be documented by an amended Exhibit
"D," agreed to by the parties, at the time of such adjustment. During
any Option Period, the Addition Global Basic Rent shall be determined as
set forth in Section 2.7 of the Lease.
<PAGE> 10
(c) From and after the Addition Rental Commencement Date through
the end of the Primary Term, and so long as any Series 1999 Bonds remain
Outstanding or the Indenture has not been released, Tenant shall timely
pay to Trustee in accordance with the terms of the Loan Agreement at
First Tennessee Bank National Association, 4385 Poplar Avenue, Memphis,
Tennessee 38117, Attention: Corporate Trust Services, or such other
person or at such other place as Trustee designates in writing to
Tenant, without previous demand therefor and without deduction or
offset, the amount of quarterly payments of interest accruing on
Outstanding Series 1999 Bonds and semi-annual 1999 Mandatory Sinking
Fund Payments (as defined in the First Supplemental Indenture) due on
the Series 1999 Bonds (the "Addition Basic Rent"). Attached as part of
Exhibit "D" is a schedule of payments of Addition Basic Rent over the
term of the Series 1999 Bonds assuming no prepayments and assuming no
change in the rate of interest borne by the Series 1999 Bonds as
described in Section 2.6.A(b). All payments of Addition Basic Rent by
Tenant to Trustee shall be credited against Tenant's obligation to pay
Addition Global Basic Rent. Attached as part of Exhibit "D" is a
schedule of Addition Company Payments for the portion of the Primary
Term remaining after the Addition Rental Commencement Date, assuming no
prepayment under Section 2.6.A(a). Provided that all amounts due to
Tenant under the Indemnification Agreement have been paid in full, from
and after the Addition Occupancy Commencement Date and during the
portion of the Primary Term remaining after such date, Tenant shall pay
such amounts (the "Addition Company Payments") to Landlord, ? Hewson
Properties, Inc. at 4636 E. University Drive, Suite 265, Phoenix,
Arizona 85034, or to such other person or place as Landlord designates
in writing to Tenant, quarterly (on the same day as quarterly interest
payments are due on the Series 1999 Bonds), without previous demand
therefor, in an amount equal to one-quarter (_) of the difference
between (i) the then applicable Addition Global Basic Rent (as adjusted
in Section 2.6.A hereof during the remaining portion of the Primary
Term) for the applicable lease year, and (ii) the Addition Basic Rent
for the applicable lease year ("lease year" being the successive one (1)
year periods). During any Option Period, all Addition Global Basic Rent
shall be deemed to be Addition Company Payments for purposes of the
Lease, and shall be paid to Landlord quarterly as set forth in this
Section 2.1.A(c).
(d) Notwithstanding any other provision hereof, in the event that
the Addition Occupancy Commencement Date occurs on a date other than a
quarterly interest payment date on the Series 1999 Bonds, the Addition
Company Payments due hereunder shall be prorated for such portion of a
quarterly interest period.
<PAGE> 11
(b) There shall be added to the Original Lease immediately following
Section 2.2 thereof the following Section 2.2.A:
2.2.A. Net-Net-Net Lease of Addition. (a) The Original Lease, as
modified by this Amendment, constitutes what is commonly known as a
"net-net-net lease," it being understood that the Trustee and the
Landlord shall receive the Addition Basic Rent and Addition Company
Payments, respectively, free and clear of any and all impositions,
taxes, liens, charges or expenses of any nature whatsoever in connection
with Landlord's ownership and leasing of the Project.
(b) In addition to the Addition Global Basic Rent provided for in
Section 2.1.A hereof, from and after the Addition Rental Commencement
Date, the Tenant shall pay to Landlord or to third parties as provided
elsewhere (particularly in Sections 2.3.A hereof and 2.4. of the
Original Lease) as additional rent ("Addition Additional Rent") all
impositions, taxes, payments or fees in lieu of taxes, insurance
premiums, operating charges, costs and expenses relating to the Addition
which arise or may be contemplated under any provisions of the Lease
during the portion of the Primary Term remaining following the Addition
Rental Commencement Date and any Option Periods. Upon the failure of
Tenant to pay any of such costs, charges or expenses, Landlord shall
have the same rights and remedies as otherwise provided in the Lease for
the failure of Tenant to pay Addition Basic Rent. It is the intention of
the parties hereto that Tenant shall in no event be entitled to any
abatement of or reduction in Addition Global Basic Rent payable
hereunder except as expressly provided herein. Any present or future law
to the contrary shall not alter this agreement of the parties.
Amounts payable by Tenant hereunder shall include, but not be
limited to, the following:
(i) Insurance premiums required to maintain the insurance
policies attributable to the Addition described in Article IV of
the Original Lease;
(i) Expenses of occupying, operating, altering, maintaining and
repairing the Addition throughout the term of the Lease; and
(i) All taxes, assessments, fees in lieu of taxes and other
governmental charges with respect to the Addition, as set forth
in Section 6.2 of the Original Loan Agreement, except as
provided in
<PAGE> 12
Section 2.4 of the Original Lease and except as prorated
pursuant to Section 2.3.A(a) of this Amendment, and all other
expenses and charges (including any asserted by the Issuer or
the Trustee, including but not limited to Trustee's regular and
extraordinary fees, as to all of which Landlord shall be
entitled to prompt reimbursement by Tenant) which during the
term of this Lease shall be levied, assessed or imposed by any
governmental authority upon or with respect to, or incurred in
connection with the ownership, possession, occupation,
operation, alteration, maintenance, repair or use of the
Addition.
If at any time during the term of the Lease under the laws of the
State of Mississippi or any political subdivision thereof in which the
Addition is situated, a tax or excise on rents or other tax, however
described, is levied or assessed by said State or political subdivision
against Landlord or the rentals set forth in Section 2.1.A hereof,
Tenant covenants to pay and discharge such tax or excise on rents or
other tax, but only to the extent of the amount thereof which is
lawfully assessed or imposed upon Landlord and which was so assessed or
imposed as a direct result of Landlord's interest in the Addition, or of
this Amendment or of the rentals accruing hereunder, it being the
intention of the parties hereto that all sums payable by Tenant
hereunder (including, without limitation, Addition Basic Rent, Addition
Company Payments, Addition Additional Rent and all other sums due
hereunder) shall be paid to Landlord absolutely net without offset of
any kind or deduction of any nature whatsoever except as expressly
provided in this Amendment with respect to Addition Company Payments.
Any payment or discharge by Tenant of any tax or excise on rents or
other tax referred to in the preceding sentence shall not be deemed to
be Addition Additional Rent. Nothing in this Amendment shall be
construed to require Tenant to pay any franchise, estate, inheritance,
succession, capital levy or transfer tax of Landlord, or any income,
excess profits or revenue tax or any other tax or impost charged or
levied against Landlord upon the rentals payable by Tenant under this
Amendment, except to the extent hereinabove provided. In the case of any
assessment for public improvement wherein the cost of the public
improvement is permitted to be paid in installments, then and in such
event only, such installments falling due during the term of this
Amendment shall be paid by Tenant, and all such installments falling due
subsequent to the term of this Amendment shall be paid by Landlord,
notwithstanding the provisions of Section 2.3.A hereof. For the purpose
of the foregoing sentence, an installment is due on the last day prior
to the date upon which such an installment becomes delinquent.
Upon the occurrence and continuation of an event of default
hereunder (an "Event of Default"), the Landlord may require the Tenant
to deposit with the Trustee (or Landlord if there is no Trustee) in an
escrow account bearing interest
<PAGE> 13
for the benefit of Tenant (i) an amount equal to (A) all taxes which are
due and payable which Tenant is obligated to pay under this Section,
including accrued ad valorem taxes, if any, or, in the alternative all
amounts due as payments or fees in lieu of taxes, with respect to the
Addition plus (B) any then delinquent insurance premiums allocable to
the Addition with respect to the insurance required under Section 4.1 of
the Original Lease, and (ii) thereafter, each month, an amount equal to
one-twelfth (1/12th) of the annual charges for taxes to be paid under
this Section 2.2.A and insurance premiums.
Tenant covenants to cooperate fully with Landlord in taking any
actions necessary to apply for and receive ad valorem tax relief for the
Addition, including, but not limited to, meeting the requirements of
Mississippi Code Section 27-31-101 and Section 27-31-104. Tenant
expressly acknowledges that no right of offset with respect to payment
of Addition Basic Rent to the Trustee or the payment of other amounts
(except Addition Company Payments) hereunder shall arise in the event of
the loss of ad valorem tax relief. Landlord agrees that, so long as
Tenant is not in default hereunder, if any actions on the part of
Landlord result in the occurrence of an event of default under the Loan
Agreement or leads to a foreclosure on the Deed of Trust or any other
event the result of which is the loss of ad valorem tax relief under the
Loan Agreement, Landlord will indemnify Tenant to the extent Tenant is
required under this Section 2.2.A to pay ad valorem taxes in excess of
the payments in lieu of taxes which otherwise would have been paid by
Tenant hereunder.
(c) Tenant agrees, within six (6) months following the earlier of
(i) the Addition Occupancy Commencement Date or (ii) the date of
issuance of the Series 1999 Bonds, the Tenant will certify in writing to
the Landlord as to the number of jobs created or, if prior to the
Addition Occupancy Commencement Date, anticipated to be created, as a
result of the Addition.
(d) Tenant will reimburse Landlord with respect to certain
environmental inspection matters as follows:
(i) On an annual basis, Tenant will reimburse Landlord for
the costs of a "walk-through" inspection of the Addition by a
qualified environmental engineer reasonably acceptable to Tenant.
(ii) If such inspection yields evidence of any potential
environmental hazards related to Tenant's use and occupancy of
the Addition, Tenant will reimburse Landlord for such additional
environmental inspections and reports as are deemed reasonably
necessary by such engineer.
<PAGE> 14
(c) There shall be added to the Original Lease immediately following
Section 2.3 thereof the following Section 2.3.A:
2.3.A Proration of Addition Taxes . (a) The taxes, fees in lieu
of taxes, and other charges and expenses with respect to the Addition,
described in Section 2.2.A(a) hereof, shall be prorated when appropriate
between Landlord and Tenant in order that all of such taxes and other
charges and expenses allocable to the Addition which relate to the
period subsequent to the termination of the term of the Lease shall be
borne by Landlord and in order that all of such taxes and other charges
and expenses allocable to the Addition which relate to the term of the
Lease shall be borne by Tenant. Such proration shall be computed in
accordance with generally accepted accrual accounting principles and
Landlord and Tenant shall each indemnify and hold the other harmless
from any taxes and other charges and expenses relating to their
respective periods of responsibility which may have become a charge upon
the other.
(b) Tenant shall not enter into any non-terminable contracts or
agreements with respect to the Addition extending beyond the term of the
Lease without the prior written consent of Landlord, which consent
Landlord may not withhold unreasonably and arbitrarily.
(d) There shall be added to the Original Lease immediately following
Section 2.6 thereof the following Section 2.6.A:
<PAGE> 15
2.6.A Addition Global Basic Rent Adjustment . (a) The parties
hereto contemplate that the Costs of the Addition provided for hereunder
will equal the aggregate sum of Eight Million Nine Hundred Thousand
Dollars ($8,900,000.00) (such amount being herein also sometimes called
the "Addition Target Cost"). If the Addition is completed for less than
the Addition Target Cost (resulting in the transfer of such surplus
amount of Series 1999 Bond proceeds from the 1999 Accounts (as defined
in the First Supplemental Indenture) within the Acquisition Fund to the
Bond Fund (each as defined in the Original Loan Agreement) under Section
5.01(b) of the First Supplemental Indenture, the application of such
amount by the Trustee under Section 3.01(d) of the First Supplemental
Indenture to the redemption of Series 1999 Bonds at par pro rata at the
earliest possible date and the corresponding reduction in the amount of
principal and interest payments due on the Series 1999 Bonds), the
Addition Global Basic Rent during the portion of the Primary Term
remaining after the Addition Occupancy Commencement Date shall be
reduced as follows: (1) Addition Basic Rent during such period shall be
reduced proportionately, and (2) quarterly Addition Company Payments
shall be reduced by an amount equal to (x) the product of one-half
percent (0.5%) times such surplus amount of Series 1999 Bond proceeds
divided by (y) four (4).
(b) The Series 1999 Bonds are subject to an interest rate
increase on July 1, 2009, or if such day is not a business day, the next
succeeding business day (the "1999 Rate Adjustment Date"), as provided
in Section 2.02 of the First Supplemental Indenture, up to a maximum of
thirteen percent (13%) per annum. Landlord and Tenant agree that, upon
receiving notice from the Trustee that such an increase in rate has
occurred, the Addition Basic Rent component of the Addition Global Basic
Rent during the remaining portion of the Primary Term shall be increased
accordingly.
(c) Following the occurrence of any circumstances set forth in
Section 6.9 of the Original Loan Agreement requiring or permitting the
partial prepayment of Series 1999 Bonds, such amounts will be used to
redeem Series 1999 Bonds as provided in Section 3.01(e) of the First
Supplemental Indenture. If any such redemption occurs during the portion
of the Primary Term remaining after the Addition Occupancy Commencement
Date, the Addition Basic Rent component of the Addition Global Basic
Rent during such period shall be reduced proportionately.
4. Right of Offset. There shall be added to the Original Lease
immediately following Section 7.7 thereof the following Section 7.7.A:
<PAGE> 16
7.7.A Right of Offset. So long as Tenant has not exercised any
right to terminate the Lease as set forth in Section 10.24(a) of the
Original Lease, any breach by Landlord of any term or provision hereof
shall, in addition to those rights set forth in Section 10.24(a) of the
Original Lease, give Tenant the right to offset sums due Tenant from
Landlord as a result thereof against sums payable hereunder to Landlord
as Addition Company Payments. In addition, Tenant shall have the right
to offset Addition Company Payments owed to Landlord hereunder against
sums owed Tenant from time to time pursuant to the Indemnification
Agreement (as defined in Section 1.2.A of this Amendment). So long as
any Series 1999 Bonds remain Outstanding, or the Indenture has not been
released, then notwithstanding a breach by Landlord, Tenant shall remain
liable for the payment of all Addition Basic Rent to the Trustee and
payment of other amounts (except Addition Company Payments) hereunder
until termination of the Lease by Tenant as provided in the Original
Lease.
5. Reaffirmation of Provisions of Articles III, IV, V and VI of the
Original Lease. Subject to the last sentence of this paragraph, the Landlord and
the Tenant reaffirm, ratify and restate the provisions of Articles III, IV, V
and VI of the Original Lease relating to insurance, financial covenants, damage,
destruction and condemnation and other provisions included therein, and agree
that such provisions shall be equally applicable to the Addition and Addition
Basic Rent payable hereunder. References in said Articles to "Occupancy
Commencement Date" shall, with respect to the Addition, be deemed to refer to
the Addition Occupancy Commencement Date. References therein to "Completion
Date" shall, if the applicable damage, destruction or condemnation relates only
to the Addition and occurs after the Completion Date, be deemed to refer to the
1999 Completion Date. References in Section 6.4 of the Original Lease to
"Tenant" shall be deemed to refer to the Original Tenant.
6. Notices. Section 10.2 of the Original Lease is amended by deleting
subsection (iii) and inserting in lieu thereof the following:
<PAGE> 17
"(iii) To Trustee, at First Tennessee Bank National Association,
4385 Poplar Avenue, Memphis, Tennessee 38117, Attention: Corporate Trust
Services."
7. Benefits of the Act. There shall be added to the Original Lease
immediately following Section 10.10 thereof the following Section 10.10.A:
10.10.A Benefits of the Act. Landlord and Tenant acknowledge that
the Series 1999 Bonds are being issued pursuant to the provisions of
Section 57-10-401 et seq. of the Mississippi Code of 1972, as amended
(the "Act"), so that Tenant may obtain certain benefits provided by the
Act as set forth in Section 4.05 of the First Supplement to Loan
Agreement. Tenant hereby acknowledges and accepts the obligations set
forth in Section 4.05 of the First Supplement to Loan Agreement on its
behalf, and said Section is hereby incorporated herein by reference. In
order to comply with the requirements of Section 57-10-409 of the Act,
Tenant hereby covenants and agrees as follows:
(a) The Original Lease as amended by this Amendment may be
assigned by Tenant (other than to an affiliate thereof) only upon
the prior written consent of the Issuer following the adoption of
a resolution by the Issuer to such effect.
(b) Upon a default by Tenant in the payment of Addition
Basic Rent hereunder, the Trustee, on behalf of the Issuer, may
exercise the rights and remedies available under the Indenture
and the Loan Agreement, including, but not limited to,
acceleration of the Bonds, foreclosure of the Deed of Trust and
termination of the Lease.
8. Miscellaneous. (a) All references in the Original Lease to sections
in Article I or II shall be deemed to refer to the corresponding sections added
by this Amendment as well. By way of example and not limitation, the reference
in the second line of Section 2.4(a) of the
<PAGE> 18
Original Lease to "Section 2.2(a) above" shall be deemed to refer to "Section
2.2(a) of the Original Lease and Section 2.2.A(a) of the Amendment."
(b) The Original Lease shall be deemed amended in all other respects
necessary to subject the Addition to its terms, and to make the Addition part of
the Project.
(c) Landlord and Tenant reaffirm all terms and provisions of the
Original Lease not expressly amended hereby, and make all representations and
warranties set forth therein as of the date hereof. Except as set forth in this
Amendment, the Original Lease shall be unchanged and remains in full force and
effect.
(d) This Amendment may be executed in any number of counterparts, each
of which shall be an original and the counterparts shall constitute but one and
the same instrument.
(e) This Amendment is to be governed and construed in accordance with
the internal laws of the State of Mississippi, without regard to principles of
conflicts of laws.
<PAGE> 19
9. Joinder of Original Tenant. Williams-Sonoma, Inc., as Original Tenant
under the Original Lease, joins herein to acknowledge and agree that,
notwithstanding the Assignment, it remains jointly and severally liable for the
performance of the obligations created by the Original Lease, and is jointly and
severally liable for the performance of the obligations created by this
Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Lease Agreement as of the day and year first above written.
HEWSON/DESOTO PHASE I, L.L.C., an
Arizona limited liability company
BY: HEWSON PROPERTIES, INC., a
California corporation
By: /s/s Gary J. Hewson
----------------------------------
Gary J. Hewson, Chief Executive
Officer
LANDLORD
WILLIAMS-SONOMA RETAIL DISTRIBUTION
CENTER, INC., a California corporation
By: /s/ Jerry Owens
-------------------------------------
Title: VP Operation
----------------------------------
TENANT
WILLIAMS-SONOMA, INC., a California
corporation
By:
-------------------------------------
Title:
----------------------------------
ORIGINAL TENANT
<PAGE> 20
STATE OF TENNESSEE
COUNTY OF SHELBY
Personally appeared before me, TONYA S. COCHRAN, the undersigned
authority in and for the said county and state, on this the 7th day of
September, 1999, within my jurisdiction, the within-named GARY J. HEWSON, who
acknowledged himself to be Chief Executive Officer of HEWSON PROPERTIES, INC., a
California corporation, which corporation is the manager of HEWSON/DESOTO PHASE
I, L.L.C., an Arizona limited liability company (the "Maker"), and that for and
on behalf of said corporation and as its act and deed as manager of the Maker
and for and on behalf of the Maker and as its act and deed, he executed and
delivered the foregoing instrument after having been duly authorized so to do.
------------------------------------------
Notary Public
My Commission Expires:
- ----------------------
STATE OF TENNESSEE
COUNTY OF SHELBY
Personally appeared before me, TONYA S. COCHRAN, the undersigned
authority in and for the said county and state, on this the 7th day of
September, 1999, within my jurisdiction, the within-named JERRY E. OWENS, who
acknowledged that he is Vice-President and Assistant Secretary of
WILLIAMS-SONOMA RETAIL DISTRIBUTION CENTER, INC. and that for and on behalf of
the said corporation, and as its act and deed, he executed and delivered the
above and foregoing instrument, after first having been duly authorized by said
corporation to do so.
------------------------------------------
Notary Public
My Commission Expires:
- ----------------------
<PAGE> 21
STATE OF TENNESSEE
COUNTY OF SHELBY
Personally appeared before me, TONYA S. COCHRAN, the undersigned
authority in and for the said county and state, on this the 7th day of
September, 1999, within my jurisdiction, the within-named DUANE WEEKS, who
acknowledged that he is Senior Vice-President of WILLIAMS-SONOMA, INC., a
California corporation, and that for and on behalf of the said corporation, and
as its act and deed, he executed and delivered the above and foregoing
instrument, after first having been duly authorized by said corporation to do
so.
------------------------------------------
Notary Public
My Commission Expires:
- ----------------------
<PAGE> 22
EXHIBIT "A"
Real Property Description
TRACT I:
LOCATED IN DESOTO COUNTY, MISSISSIPPI:
BEING A SURVEY OF PART OF THE SOUTHEAST QUARTER OF THE NORTHEAST QUARTER, PART
OF THE SOUTHWEST QUARTER OF THE NORTHEAST QUARTER, PART OF THE NORTHWEST QUARTER
OF THE NORTHEAST QUARTER AND PART OF THE NORTHEAST QUARTER OF THE NORTHEAST
QUARTER, SECTION 25, TOWNSHIP 1 SOUTH, RANGE 6 WEST, DESOTO COUNTY MISSISSIPPI
AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHEAST CORNER OF SAID SECTION 25; THENCE S89
degrees32'11"W ALONG THE NORTH LINE OF SAID SECTION 25 A DISTANCE OF
80.00 FEET TO A POINT; THENCE S00 degrees31'04"E ALONG A LINE THAT IS
80.00 FEET WEST OF AND PARALLEL TO THE EAST LINE OF SAID SECTION 25 A
DISTANCE OF 491.49 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING S00
degrees31'04"E ALONG A LINE THAT IS 80.00 FEET WEST OF AND PARALLEL TO
THE EAST LINE OF SAID SECTION 25 A DISTANCE OF 1485.00 FEET TO A POINT;
THENCE S89 degrees13'30"W A DISTANCE OF 1957.52 FEET TO A POINT; THENCE
N00 degrees46'30"W A DISTANCE OF 1484.99 FEET TO A POINT; THENCE N89
degrees13'30"E A DISTANCE OF 1964.19 FEET TO THE POINT OF BEGINNING AND
CONTAINING 2,911,841 SQUARE FEET OR 66.847 ACRES.
TRACT II:
THE RIGHTS BENEFITTING THE FOREGOING TRACT I CREATED BY (A) THAT CERTAIN
RECIPROCAL STORM WATER DRAINAGE AGREEMENT BY AND BETWEEN HEWSON/DESOTO SOUTH,
LLC AND HEWSON/DESOTO PHASE I, LLC DATED AS OF THE 1ST DAY OF DECEMBER, 1998,
(B) THAT CERTAIN RECIPROCAL STORM WATER DETENTION AND DRAINAGE AGREEMENT BY AND
BETWEEN HEWSON/DESOTO PHASE I, LLC AND WILLIAMS-SONOMA, INC. DATED AS OF THE 1ST
DAY OF DECEMBER, 1998, (C) THAT CERTAIN RECIPROCAL CONNECTOR EASEMENT AGREEMENT
BY AND BETWEEN HEWSON/DESOTO PHASE I, L.L.C. AND WILLIAMS-SONOMA, INC. DATED AS
OF DECEMBER 1, 1998 AND (D) THAT CERTAIN PARKING EASEMENT AGREEMENT BY AND
BETWEEN HEWSON/DESOTO PHASE I, L.L.C. AND WILLIAMS-SONOMA, INC. DATED AS OF
DECEMBER 1, 1998, EACH RECORDED IN THE OFFICE OF THE CHANCERY CLERK, DESOTO
COUNTY, MISSISSIPPI ON DECEMBER 11, 1998.
<PAGE> 23
EXHIBIT "B"
Plans for Addition Building and Improvements
See Attached
2
<PAGE> 24
RETAIL DISTRIBUTION CAMPUS, BUILDING ADDITION,
WILLIAMS-SONOMA, OLIVE BRANCH, MS
Parcel Two 260,640 S.F. Building Expansion
Plans by H&M Design Services, P.C.
<TABLE>
<CAPTION>
Final
Sheet # Prepared by: Sheet Title Date Revision Date
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cover H-M Drawing Index 8/20/99
- ---------------------------------------------------------------------------------------------------------
CE - 1.0 RSM Grading & Drainage Plan 8/17/99
- ---------------------------------------------------------------------------------------------------------
A - 1.0 H-M Site Concrete Paving Plan 8/20/99
- ---------------------------------------------------------------------------------------------------------
A - 1.1 H-M Building Additional Floor Plan 7/22/99 8/20/99
- ---------------------------------------------------------------------------------------------------------
A - 1.2 H-M Enlarged Area Floor Plans 8/20/99
- ---------------------------------------------------------------------------------------------------------
A - 2.1 H-M Room Finish & Door Schedules/Details 7/22/99 8/20/99
- ---------------------------------------------------------------------------------------------------------
A - 3.1 H-M Building Addition Elevations 7/22/99 8/20/99
- ---------------------------------------------------------------------------------------------------------
A - 3.2 H-M Tilt-Up Wall Panel Elevations 7/22/99
- ---------------------------------------------------------------------------------------------------------
A - 3.3 H-M Tilt-Up Wall Panel Elevations 7/22/99 8/20/99
- ---------------------------------------------------------------------------------------------------------
A - 3.4 H-M Tilt-Up Wall Panel Elevations 7/22/99
- ---------------------------------------------------------------------------------------------------------
A - 4.1 H-M Wall Sections 7/22/99
- ---------------------------------------------------------------------------------------------------------
A - 4.2 H-M Wall Sections 8/20/99
- ---------------------------------------------------------------------------------------------------------
A - 5.1 H-M Architectural Details 7/22/99 8/20/99
- ---------------------------------------------------------------------------------------------------------
A - 7.1 H-M Building Addition Roof Plan 7/22/99
- ---------------------------------------------------------------------------------------------------------
A - 7.2 H-M Flashing Detail 7/22/99
- ---------------------------------------------------------------------------------------------------------
A - 8.1 H-M Roof Opening Plan (Section "A") 7/22/99
- ---------------------------------------------------------------------------------------------------------
A - 8.2 H-M Roof Opening Plan (Section "B") 7/22/99
- ---------------------------------------------------------------------------------------------------------
C - 1.1 H-M Building Addition Foundation Plan 7/22/99
- ---------------------------------------------------------------------------------------------------------
C - 2.1 H-M Foundation Sections and Details 7/22/99
- ---------------------------------------------------------------------------------------------------------
C - 2.2 H-M Misc. Plans & Details 8/20/99
- ---------------------------------------------------------------------------------------------------------
S - 1.1 H-M Building Addition Roof Framing Plan 7/22/99
- ---------------------------------------------------------------------------------------------------------
S - 2.1 H-M Framing Sections & Details 7/22/99
- ---------------------------------------------------------------------------------------------------------
M - 1.1 H-M Site Utilities Plan 8/20/99
- ---------------------------------------------------------------------------------------------------------
M - 3.1 H-M Building Additional Plumbing Plans 8/20/99
- ---------------------------------------------------------------------------------------------------------
M - 3.2 H-M Enlarged Area Plumbing Plans 8/20/99
- ---------------------------------------------------------------------------------------------------------
M - 4.1 H-M Building Addtion HVAC Plan 8/20/99
- ---------------------------------------------------------------------------------------------------------
M - 4.2 H-M HVAC Details, Schedules & Notes 8/20/99
- ---------------------------------------------------------------------------------------------------------
M - 5.1 H-M Fire Protection Sprinkler Requirement Plan 8/18/99
- ---------------------------------------------------------------------------------------------------------
E - 1.1 H-M Electrical Site Plan 8/12/99
- ---------------------------------------------------------------------------------------------------------
E - 2.1 H-M Lighting Plan (Section "A") 8/2/99
- ---------------------------------------------------------------------------------------------------------
E - 2.2 H-M Lighting Plan (Section "B") 8/3/99
- ---------------------------------------------------------------------------------------------------------
E - 2.3 H-M Luminaire Schedule & Mounting Detail 8/11/99
- ---------------------------------------------------------------------------------------------------------
E - 3.1 H-M Power Plan (Section "A") 8/12/99
- ---------------------------------------------------------------------------------------------------------
E - 3.2 H-M Power Plan (Section "B") 8/12/99
- ---------------------------------------------------------------------------------------------------------
E - 4.1 H-M One Line Diagram 8/12/99
- ---------------------------------------------------------------------------------------------------------
E - 4.2 H-M Fan Control Panel Schedule 8/13/99
- ---------------------------------------------------------------------------------------------------------
E - 4.3 H-M Panelboard Schedules 8/16/99
- ---------------------------------------------------------------------------------------------------------
E - 5.1 H-M Systems Plan (Section "A") 8/20/99
- ---------------------------------------------------------------------------------------------------------
E - 5.2 H-M Systems Plan (Section "B") 8/20/99
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 25
EXHIBIT "C"
1999 Construction Budget
See Attached
C-1
<PAGE> 26
EXHIBIT "C" TO FIRST AMENDMENT TO LEASE AGREEMENT
PHASE TWO
COST PROJECTION - WILLIAMS-SONOMA PROJECT 09/02/99
ASSUMPTIONS:
- -- ------- ------- ------- ------- ----- --------- --------- ----------
- ADDITION TO EXISTING OLIVE BRANCH DISTRIBUTION BUILDING
- 6 MONTH DEVELOPMENT TIMEFRAME
- 9.25% RATE FOR CAPITALIZED INTEREST FUND
BOND ISSUANCE WILL BE: $8,898,599
- -- ------- ------- ------- ------- ----- --------- --------- ----------
SUMMARY SQUARE FOOTAGE 260,640 S.F.
- -- ------- ------- ------- ------- ----- --------- --------- ----------
<TABLE>
<CAPTION>
% OF
HARD COSTS: PER S.F. TOTAL TOTAL
-------- ------ ----------
<S> <C> <C> <C>
SHELL BUILDING & SITEWORK - 27.24 87.1% 7,100,798
GROSS RECEIPTS TAX SAVINGS (est.) (0.38) -1.2% (100,703)
GRADING & STORM DRAINAGE 0.35 1.1% 82,262
PAYMENT & PERFORMANCE BOND 0.18 0.6% 45,957
TENANT IMPROVEMENTS - 0.00 0.0% 0
LAND - INCLUDED IN PRIOR ISSUANCE 0.00 0.0% 0
SOFT COSTS:
ARCHITECTURAL & ENGINEERING - 0.96 2.8% 247,963
PERMITS & UTILITY FEES - 0.06 0.2% 22,000
EARNED INTEREST (5.0%) (0.28) -0.8% (68,482)
EQUITY FINANCING INTEREST (8.0%) 0.00 0.0% 970
PROPERTY TAX - 0.01 0.0% 2,000
INSURANCE - 0.08 0.2% 21,000
LEGAL & ACCOUNTING - 0.26 0.8% 67,000
DEVELOPER'S OVERHEAD (3%)* 1.00 2.9% 260,000
TITLE RECORD - 0.05 0.1% 13,000
APPRAISALS/CONSULTANTS/TOXICS- 0.21 0.6% 54,200
TRAVEL 0.15 0.4% 40,000
CONTINGENCY (5% OF HARD COSTS) 1.57 4.0% 368,916
--------- -------- ----------
TOTAL DEPOSIT TO PROJ. CONSTR. FUND 31.29 91.6% 8,154,871
TOTAL UNDERWRITER'S DISCOUNT 0.43 1.3% 111,250
UNDERWRITER'S & BOND COUNSEL 0.21 0.8% 55,000
BOND ISSUANCE FEES 0.18 0.5% 43,000
DEPOSIT TO CAPITALIZED INTEREST FUND 2.05 6.0% 534,478
--------- --------- ----------
TOTAL USES 34.14 100.0% 8,398,599
- -- ------- ------- ------- ------- ----- --------- --------- ----------
</TABLE>
* Developer's Overhead will be 3% of the final amount of the Series 1999 Bond
after redemption of excess proceeds.
C-2
<PAGE> 27
EXHIBIT "C"
COST PROJECTION SUPPORT SCHEDULE
<TABLE>
<S> <C> <C> <C>
BREAKDOWN ARCH. & ENGINEER
Proposal Amount 7,193,060 Owens Contract 199,953
Less: Site Grading (92,262) Will-Hayes 3,000
--------- Reaves & Sweeney Civil 15,000
Net Total Building Cost 7,100,798 Topo, ALTA, etc. 20,000
Landscape Design 0
Other 10,000
-------
Total 247,953
CONSULTANTS
SITEWORK Construction consultant 6,000
Appraisal 7,200
Site Grading 92,262 Soils 3,000
Phase One 0
Consulting Fees 5,000
Sprinkler consultants 3,000
Construction testing 30,000
-------
Total 54,200
LEGAL
Tax Attorney 3,000
Reviewing Bond Attorney 25,000 BOND ISSUANCE FEES
Lease Counsel 20,000
Construction Contracts 6,000 Financial Advisor 7,000
Arch & Eng Contract 3,000 Validation 500
Accounting & Tax Prep 10,000 Trustee & Counsel Fees 9,000
W-S Lease & Bond Counsel 0 POS/Official Statement 5,500
--------- Issuer's Fee 15,000
Total 67,000 Miscellaneous Fees 6,000
-------
Underwriter's Counsel 21,000 Total 43,000
Bond Counsel 34,000
</TABLE>
C-3
<PAGE> 28
WILLIAMS-SONOMA CASH FLOW PROJECTIONS
CONSTRUCTION AND LEASEUP INTEREST CARRY -
<TABLE>
<CAPTION>
MONTH
--------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8
------ ------- --------- --------- --------- --------- --------- ---------
SOURCES OF FUNDS: Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 Jan-2000 Feb-2000 TOTALS
- ----------------- ------ ------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MEMBER LOAN TO LLC 29,100 57,294 (115,391) 0
CUMULATIVE LLC FUNDING 29,100 116,384 0 0 0 0 0 0 0
------ ------- --------- --------- --------- --------- --------- --------- ---------
BOND FINANCING 0 0 6,598,589 0 0 0 0 0
CUMULATIVE BOND FUNDING 0 0 6,598,589 0 0 0 0 0 6,598,589
------ ------- --------- --------- --------- --------- --------- --------- ---------
TOTAL SOURCES OF FUNDS 29,100 57,294 6,732,205 0 0 0 0 0 6,598,589
------ ------- --------- --------- --------- --------- --------- --------- ---------
USES OF FUNDS:
SHELL BUILDING & SITEWORK - 2,130,238 1,426,150 1,420,180 1,420,188 710,080 7,000,798
GROSS RECEIPTS TAX SAVINGS (est.) (100,703) ( 100,703)
GRADING & STORM DRAINAGE 92,282 92,282
PAYMENT & PERFORMANCE BOND 45,957 45,957
TENANT IMPROVEMENTS - 0
LAND - INCLUDED IN PRIOR ISSUANCE 0
SOFT COSTS:
ARCHITECTURAL & ENGINEERING - 123,977 123,977 247,853
PERMITS & UTILITY FEES - 22,000 22,000
EARNED INTEREST (50%) (26,655) (19,650) (13,090) (5,752) (3,099) (68,482)
EQUITY FINANCING INTEREST (8.0%) 194 776 970
PROPERTY TAX - 2,000 2,000
INSURANCE - 21,000 21,000
LEGAL & ACCOUNTING - 13,400 13,400 13,400 13,400 13,400 67,000
DEVELOPER'S OVERHEAD (3%) 250,000 250,000
TITLE RECORD - 13,000 13,000
APPRAISAL/CONSULTANTS/TOXICS - 9,033 9,033 9,033 9,033 9,033 9,033 54,200
TRAVEL - 6,667 6,667 6,667 6,667 6,667 6,667 40,000
CONTINGENCY (5% OF HARD COSTS) 0 0 113,423 71,008 71,008 30,469 358,916
------ ------- --------- --------- --------- --------- --------- --------- ---------
TOTAL MONTHLY DRAWS FROM PROJ
CON. FUND 29,100 37,294 2,365,103 1,524,358 1,631,154 1,761,118 836,747 0 8,154,871
TOTAL UNDERWRITER'S DISCOUNT 111,250 111,250
PURCHASER'S & BOND COUNSEL 55,000 55,000
BOND ISSUANCE FEES 43,000 43,000
DEPOSIT TO CAPITALIZED
INTEREST FUND 534,478 534,478
------ ------- --------- --------- --------- --------- --------- --------- ---------
TOTAL USES 29,100 37,294 3,128,830 1,624,358 1,631,154 1,761,116 636,747 0 8,898,699
CUMULATIVE BALANCE 29,100 116,394 2,501,487 4,125,854 5,757,008 7,310,124 8,154,871 8,154,871
PER S.F. UNIT COST 0.11 0.45 9.00 16.83 22.09 28.84 31.29 31.29
BOND INTEREST (9.75%) 50,302 68,593 68,593 68,593 68,593 68,593 393,269
FINANCING INTEREST ON
LOAN (8.0%) 194 776 970
</TABLE>
C-4
<PAGE> 29
EXHIBIT "D"
Addition Rent Schedule
See Attached
<PAGE> 30
EXHIBIT "D"
<TABLE>
<CAPTION>
GLOBAL
LEASE BASIC COMPANY BASIC
QRTS DATE INTEREST SINK FUND RENT PAYMENT RENT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0 01/01/00 $274,417 $0 $274,417 $11,125 $285,542
1 04/01/00 $205,813 $0 $205,813 $11,125 $216,938
2 07/01/00 $205,813 $65,000 $270,813 $11,125 $281,938
3 10/01/00 $204,309 $0 $204,309 $11,125 $215,434
4 01/01/01 $204,309 $70,000 $274,309 $11,125 $285,434
5 04/01/01 $202,691 $0 $202,691 $11,125 $213,816
6 07/01/01 $202,691 $70,000 $272,691 $11,125 $283,816
7 10/01/01 $201,072 $0 $201,072 $11,125 $212,197
8 01/01/02 $201,072 $75,000 $276,072 $11,125 $287,197
9 04/01/02 $199,338 $0 $199,338 $11,125 $210,463
10 07/01/02 $199,338 $75,000 $274,338 $11,125 $285,463
11 10/01/02 $197,603 $0 $197,603 $11,125 $208,728
12 01/01/03 $197,603 $85,000 $282,603 $11,125 $293,728
13 04/01/03 $195,638 $0 $195,638 $11,125 $206,763
14 07/01/03 $195,638 $85,000 $280,638 $11,125 $291,763
15 10/01/03 $193,672 $0 $193,672 $11,125 $204,797
16 01/01/04 $193,672 $90,000 $283,672 $11,125 $294,797
17 04/01/04 $191,591 $0 $191,591 $11,125 $202,716
18 07/01/04 $191,591 $95,000 $286,591 $11,125 $297,716
19 10/01/04 $189,394 $0 $189,394 $11,125 $200,519
20 01/01/05 $189,394 $100,000 $289,394 $11,125 $300,519
21 04/01/05 $187,081 $0 $187,081 $11,125 $198,206
22 07/01/05 $187,081 $105,000 $292,081 $11,125 $303,206
23 10/01/05 $184,653 $0 $184,653 $11,125 $195,778
24 01/01/06 $184,653 $105,000 $289,653 $11,125 $300,778
25 04/01/06 $182,225 $0 $182,225 $11,125 $193,350
26 07/01/06 $182,225 $110,000 $292,225 $11,125 $303,350
27 10/01/06 $179,681 $0 $179,681 $11,125 $190,806
28 01/01/07 $179,681 $120,000 $299,681 $11,125 $310,806
29 04/01/07 $176,906 $0 $176,906 $11,125 $188,031
30 07/01/07 $176,906 $125,000 $301,906 $11,125 $313,031
31 10/01/07 $174,016 $0 $174,016 $11,125 $185,141
32 01/01/08 $174,016 $130,000 $304,016 $11,125 $315,141
33 04/01/08 $171,009 $0 $171,009 $11,125 $182,134
34 07/01/08 $171,009 $135,000 $306,009 $11,125 $317,134
35 10/01/08 $167,888 $0 $167,888 $11,125 $179,013
36 01/01/09 $167,888 $140,000 $307,888 $11,125 $319,013
</TABLE>
<PAGE> 31
EXHIBIT "D"
<TABLE>
<CAPTION>
GLOBAL
LEASE BASIC COMPANY BASIC
QRTS DATE INTEREST SINK FUND RENT PAYMENT RENT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
37 04/01/09 $164,650 $0 $164,650 $11,125 $175,775
38 07/01/09 $164,650 $145,000 $309,650 $11,125 $320,775
39 10/01/09 $161,297 $0 $161,297 $11,125 $172,422
40 01/01/10 $161,297 $155,000 $316,297 $11,125 $327,422
41 04/01/10 $157,713 $0 $157,713 $11,125 $168,838
42 07/01/10 $157,713 $160,000 $317,713 $11,125 $328,838
43 10/01/10 $154,013 $0 $154,013 $11,125 $165,138
44 01/01/11 $154,013 $170,000 $324,013 $11,125 $335,138
45 04/01/11 $150,081 $0 $150,081 $11,125 $161,206
46 07/01/11 $150,081 $180,000 $330,081 $11,125 $341,206
47 10/01/11 $145,919 $0 $145,919 $11,125 $157,044
48 01/01/12 $145,919 $180,000 $325,919 $11,125 $337,044
49 04/01/12 $141,756 $0 $141,756 $11,125 $152,881
50 07/01/12 $141,756 $190,000 $331,756 $11,125 $342,881
51 10/01/12 $137,363 $0 $137,363 $11,125 $148,488
52 01/01/13 $137,363 $205,000 $342,363 $11,125 $353,488
53 04/01/13 $132,622 $0 $132,622 $11,125 $143,747
54 07/01/13 $132,622 $210,000 $342,622 $11,125 $353,747
55 10/01/13 $127,766 $0 $127,766 $11,125 $138,891
56 01/01/14 $127,766 $220,000 $347,766 $11,125 $358,891
57 04/01/14 $122,678 $0 $122,678 $11,125 $133,803
58 07/01/14 $122,678 $230,000 $352,678 $11,125 $363,803
59 10/01/14 $117,359 $0 $117,359 $11,125 $128,484
60 01/01/15 $117,359 $240,000 $357,359 $11,125 $368,484
61 04/01/15 $111,809 $0 $111,809 $11,125 $122,934
62 07/01/15 $111,809 $250,000 $361,809 $11,125 $372,934
63 10/01/15 $106,028 $0 $106,028 $11,125 $117,153
64 01/01/16 $106,028 $270,000 $376,028 $11,125 $387,153
65 04/01/16 $99,784 $0 $99,784 $11,125 $110,909
66 07/01/16 $99,784 $280,000 $379,784 $11,125 $390,909
67 10/01/16 $93,309 $0 $93,309 $11,125 $104,434
68 01/01/17 $93,309 $285,000 $378,309 $11,125 $389,434
69 04/01/17 $86,719 $0 $86,719 $11,125 $97,844
70 07/01/17 $86,719 $305,000 $391,719 $11,125 $402,844
71 10/01/17 $79,666 $0 $79,666 $11,125 $90,791
72 01/01/18 $79,666 $315,000 $394,666 $11,125 $405,791
73 04/01/18 $72,381 $0 $72,381 $11,125 $83,506
</TABLE>
<PAGE> 32
EXHIBIT "D"
<TABLE>
<CAPTION>
GLOBAL
LEASE BASIC COMPANY BASIC
QRTS DATE INTEREST SINK FUND RENT PAYMENT RENT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
74 07/01/18 $72,381 $335,000 $407,381 $11,125 $418,506
75 10/01/18 $64,634 $0 $64,634 $11,125 $75,759
76 01/01/19 $64,634 $345,000 $409,634 $11,125 $420,759
77 04/01/19 $56,656 $0 $56,656 $11,125 $67,781
78 07/01/19 $56,656 $365,000 $421,656 $11,125 $432,781
79 10/01/19 $48,216 $0 $48,216 $11,125 $59,341
80 01/01/20 $48,216 $380,000 $428,216 $11,125 $439,341
81 04/01/20 $39,428 $0 $39,428 $11,125 $50,553
82 07/01/20 $39,428 $400,000 $439,428 $11,125 $450,553
83 10/01/20 $30,178 $0 $30,178 $11,125 $41,303
84 01/01/21 $30,178 $415,000 $445,178 $11,125 $456,303
85 04/01/21 $20,581 $0 $20,581 $11,125 $31,706
86 07/01/21 $20,581 $435,000 $455,581 $11,125 $466,706
87 10/01/21 $10,522 $0 $10,522 $11,125 $21,647
88 01/01/22 $10,522 $455,000 $465,522 $0 $465,522
$12,349,829 $8,900,000 $21,249,829 $979,000 $22,228,829
</TABLE>
<PAGE> 1
EXHIBIT 10.10P
FIFTH AMENDMENT TO SYNDICATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
February 7, 2000, is entered into by and among WILLIAMS-SONOMA, INC. (the
"Company"), BANK OF AMERICA, N.A. (formerly known as Bank of America National
Trust and Savings Association), as agent for itself and the Banks (the
"Agent"), and the several financial institutions party to the Credit Agreement
(collectively, the "Banks").
RECITALS
A. The Company, Banks, and Agent are parties to a Credit Agreement dated
as of June 1, 1997 (as previously amended, the "Credit Agreement") pursuant to
which the Agent and the Banks have extended certain credit facilities to the
Company.
B. The L/C Agreement (as defined in the Credit Agreement) is being amended
to add a facility for up to $75,000,000 in cash advances by BofA to the Company.
C. The Banks are willing to amend the Credit Agreement, subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 7.05(i) is hereby amended and restated as follows:
(i) Additional indebtedness to BofA (or another replacement
lender) in principal amount not to exceed $75,000,000) outstanding at
any one time;
(b) All references to the L/C Agreement in the Credit Agreement
shall be deemed to refer to the L/C Agreement as amended as described in
Recital B above. In particular, the pro rata sharing provisions in paragraph
2.15(d) shall be deemed to apply to all credit outstanding under the L/C
Agreement, as amended.
3. Representations and Warranties. The Company hereby represents and
warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including Governmental Authority) in order
to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.
1
<PAGE> 2
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Agent and
the Banks or any other Person.
4. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment
shall be deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all such counterparts together shall
constitute but one document (and any other document required herein) may be
delivered by any party thereto to be followed promptly by mailing of a hard
copy original, and that receipt by the Agent of a facsimile transmitted
document purportedly bearing the signature of a Bank or the Company shall bind
such Bank or the Company, respectively, with the same force and effect as the
delivery of a hard copy original. Any failure by the Agent to receive the hard
copy executed original of such document shall not diminish the binding effect
of receipt of the facsimile transmitted executed original of such document of
the party whose hard copy page was not received by the Agent.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 10.01 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent, upon
demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
BANK OF AMERICA, N.A., as Agent WILLIAMS-SONOMA, INC.
By /s/ PATRICK W. ZETZMAN By /s/ JOHN W. TATE
----------------------------- --------------------------
PATRICK W. ZETZMAN JOHN W. TATE
Title Vice President Chief Financial Officer
-------------------------
BANK OF AMERICA, N.A., as a Bank THE BANK OF NEW YORK
By /s/ GINGER TRIMBLE By
----------------------------- -------------------------
GINGER TRIMBLE
Title Vice President Title
-------------------------- ----------------------
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
WILLIAMS-SONOMA, INC.
By
-------------------------------- By
Title --------------------------------
---------------------------- Title
-----------------------------
By
--------------------------------
Title
-----------------------------
BANK OF AMERICA, N.A.; as a Bank
THE BANK OF NEW YORK
By
-------------------------------- By /s/ CHARLOTTE SOHN FUIKS
Title --------------------------------
CHARLOTTE SOHN FUIKS
---------------------------- Title V.P.
-----------------------------
<PAGE> 5
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
The undersigned, each a guarantor with respect to the Company's obligations
under the Credit Agreement, each hereby (i) acknowledge and consent to the
execution, delivery and performance by the Company of the foregoing Fifth
Amendment to Syndicated Credit Agreement, and (ii) reaffirm and agree that the
guaranty to which the undersigned is party is in full force and effect, and
guaranties all of the obligations of the Company under the Agreement, as
amended.
Dated as of February 7, 2000 WILLIAMS-SONOMA STORES, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
HOLD EVERYTHING, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
CHAMBERS CATALOG
COMPANY, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
POTTERY BARN, INC., formerly known
as POTTERY BARN EAST, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
WILLIAMS-SONOMA STORES, LLC
By Williams-Sonoma, Inc., its sole
member
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
4
<PAGE> 6
POTTERY BARN KIDS, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
WILLIAMS-SONOMA DIRECT, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
WILLIAMS-SONOMA RETAIL
SERVICES, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
5
<PAGE> 1
EXHIBIT 10.10Q
SEVENTH AMENDMENT TO LETTER OF CREDIT AGREEMENT
This amendment dated as of February 7, 2000, is between Bank of
America, N.A., formerly known as Bank of America National Trust and Savings
Association (the "Bank") and Williams-Sonoma, Inc. (the "Borrower").
RECITALS
A. The Bank and the Borrower entered into a certain Letter of Credit
Agreement dated as of June 1, 1997 (as previously amended, the "Agreement").
B. The Bank and the Borrower desire to amend the Agreement.
AGREEMENT
1. Definitions. Capitalized terms used but not defined to this
Amendment shall have the meanings given to them in the Agreement.
2. Amendment. Article 2A, which was added to the Agreement by the
Fifth Amendment, is a amended and restarted in its entirety as follow:
2A.1 Line of Credit Amount. From the effective date of the Seventh
Amendment to this Agreement until May 31, 2001 (the "Revolver Expiration Date"),
the Bank will provide a line of credit to the Borrower. The amount of the line
of credit (the "Revolver Commitment") is $75,000,000. This is a revolving line
of credit providing for cash advances. During the availability period, the
Borrower may repay principal amounts and reborrow them. The Borrower agrees not
to permit the outstanding principal balance of advances under the line of credit
to exceed the Revolver Commitment. Amounts advanced under this line of credit
shall be used to fund the acquisition of an office building to be occupied by
the Borrower and its subsidiaries and for related expenses.
2A.2 Interest Rate. Unless the Borrower elects an optional interest
rate as described below, principal amounts outstanding under this line of credit
shall bear interest at the Base Rate (as defined in the Syndicated Credit
Agreement) plus the Applicable Margin (as defined below).
2A.3 Repayment Terms. The Borrower will pay interest on each
Payment Date, as defined in the Syndicated Credit Agreement, until payment in
full of any principal outstanding under this line of credit. The Borrower will
repay in full all principal and any unpaid interest or other charges outstanding
under this line of credit no later than the Revolver Expiration Date. Any
interest period for an optional interest rate (as described below) shall expire
no later than the Revolver Expiration Date.
2A.4 Optional Interest Rates. Instead of the interest based on the
Base Rate, the Borrower may elect to have all or portions of the principal
amount outstanding under this facility bear interest at the London Rate plus the
Applicable Margin or the Cayman Rate plus the Applicable Margin. The London Rate
and Cayman Rate shall have the meanings as defined in the Syndicated Credit
Agreement.
<PAGE> 2
2A.5 Fees. On the effective date of the Seventh Amendment to this
Agreement, the Borrower shall pay to the Bank under Facility 2, a
commitment fee equal to 0.100% of the Revolver Commitment.
2A.6 Applicable Margin and Fee. The Applicable Margin shall be
the following amounts per annum:
Applicable Margin
(in basis points per annum)
Base Rate + London/Cayman Rate +
----------- --------------------
0 87.5
The Applicable Margin with respect to London and Cayman Rates shall be
increased above the amounts stated in the foregoing table in the following
cases: (a) During any period in which the principal amount outstanding under
this facility exceeds 33% of the Revolver Commitment, the Applicable Margin
shall be increased by 12.5 basis points; and (b) during any period in which the
principal amount outstanding under this facility exceeds 66% of the Revolver
Commitment, the Applicable Margin shall be increased by 25.0 basis points.
2A.7 Incorporation of Terms. The terms and conditions specified
in paragraphs 2.04(a), (b) and (c), 2.12 and Article 3 of the Syndicated
Credit Agreement are incorporated by reference as though fully set forth
in this Agreement; provided, however, that each reference to the Agent in
such paragraphs shall be deemed to refer to the Bank in its individual
capacity as a lender; and provide that the terms "Base Rate Loan," "Cayman
Rate Loan" and "London Rate Loan" shall refer to amounts outstanding under
this Agreement which are bearing interest at the respective interest
rates.
2A.8 Default Rate. While any Event of Default exists or after
acceleration, the Borrower shall, at the Bank's option, pay interest at a
rate which is two (2.0) percentage points higher than the rate which would
otherwise apply under this Agreement.
3. Representations and Warranties. When the Borrower signs this
Amendment, the Borrower represents and warrants to the Bank that the
representations and warranties in Article 5 of the Agreement, as applied to the
Agreement as amended hereby, are true and correct as of the date of this
Amendment as if made on the date of this Amendment.
4. Conditions. This Amendment will be effective when the Bank
receives the following items, in form and content acceptable to the Bank:
(a) Evidence that the execution, delivery, and performance by the
Borrower of this Amendment and any instrument or agreement required under
this Amendment have been duly authorized;
(b) A Guarantor Acknowledgment and Consent in the form attached
hereto.
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<PAGE> 3
(c) An amendment from the Banks party to the Syndicated Credit
Agreement (as defined in the Agreement).
5. Effect of Amendment. Except as provided in this Amendment, all of
the terms and conditions of the Agreement shall remain in full force and effect.
This Amendment is executed as of the date first stated above.
BANK OF AMERICA, N.A. WILLIAMS-SONOMA, INC.
By /s/ GINGER TRIMBLE By /s/ JOHN W. TATE
------------------------------ -----------------------------
John W. Tate
Title: Vice President Chief Financial Officer
--------------------------
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<PAGE> 4
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
The undersigned, each a guarantor with respect to the Borrower's obligations to
the Bank under the Agreement, each hereby (i) acknowledge and consent to the
execution, delivery and performance by the Borrower of the foregoing Seventh
Amendment to the Letter of Credit Agreement, and (ii) reaffirm and agree that
the guaranty to which the undersigned is party is in full force and effect, and
guaranties all of the obligations of the Borrower under the Agreement, as
amended.
Dated as of February 7, 2000 WILLIAMS-SONOMA STORES, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
HOLD EVERYTHING, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
CHAMBERS CATALOG COMPANY, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
POTTERY BARN, INC., formerly known
as POTTERY BARN EAST, INC.
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
WILLIAMS-SONOMA STORES, LLC
By Williams-Sonoma, Inc., its sole
Member
By /s/ JOHN W. TATE
-------------------------------------
John W. Tate
Chief Financial Officer
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POTTERY BARN KIDS, INC.
By /s/ JOHN W. TATE
-----------------------------
John W. Tate
Chief Financial Officer
WILLIAMS-SONOMA DIRECT, INC.
By /s/ JOHN W. TATE
-----------------------------
John W. Tate
Chief Financial Officer
WILLIAMS-SONOMA RETAIL SERVICES, INC.
By /s/ JOHN W. TATE
-----------------------------
John W. Tate
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.10R
GUARANTY
This Guaranty is entered into as of February 7, 2000, by
Williams-Sonoma Retail Services, Inc. (the "Guarantor"), in favor of Bank of
America, N.A. (formerly known as Bank of America National Trust and Savings
Association), as agent for the financial institutions from time to time party to
that certain Credit Agreement dated as of June 1, 1997 (the "Banks") (in such
capacity, the "Agent") and such Banks.
Recitals
A. Williams-Sonoma, Inc. (the "Company"), the Agent and the Banks
entered into a Credit Agreement dated as of June 1, 1997. The Credit Agreement
as now in effect or hereafter extended, renewed, modified, supplemented, amended
or restated is hereinafter called the "Credit Agreement".
B. The Banks are willing to make certain Loans to the Company as
provided in the Credit Agreement on the condition (among others) that the
Guarantor enter into this Guaranty.
C. The Guarantor as a Subsidiary of the Company will derive
substantial and direct benefits (which benefits are hereby acknowledged by the
Guarantor) from the Loans and other benefits to be provided to the Company under
the Credit Agreement.
D. In order to induce the Banks to make such Loans available to the
Company as provided in the Credit Agreement, and for other valuable
consideration, the Guarantor issues this Guaranty.
1. Definitions. Unless otherwise defined herein, capitalized terms used
in this Guaranty have the meanings given to them from time to time in the Credit
Agreement.
2. Guaranty.
2.1 Guaranty. The Guarantor hereby irrevocably, absolutely and
unconditionally guarantees the full and punctual payment or performance when
due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all of the Obligations. This Guaranty
constitutes a guaranty of payment and performance when due and not of
collection, and the Guarantor specifically agrees that it shall not be necessary
or required that the Agent or any Bank exercise any right, assert any claim or
demand or enforce any remedy whatsoever against the Company (or any other
Person) before or as a condition to the obligations of the Guarantor hereunder.
The Agent or any Bank may permit the indebtedness of the Company to the Agent or
any Bank to include indebtedness other than the Obligations, and may apply any
amounts received from any source, other than from the Guarantor, to that portion
of Company's indebtedness to the Agent or any Bank which is not a part of the
Obligations.
2.2 Obligations Independent. The obligations hereunder are
independent of the obligations of the Company, and a separate action or actions
may be brought and prosecuted against the Guarantor whether action is brought
against the Company or whether the Company be joined in any such action or
actions.
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<PAGE> 2
2.3 Authorization of Renewals, Etc. The Guarantor authorizes the
Agent and each Bank, without notice or demand and without affecting its
liability hereunder, from time to time,
(a) to renew, compromise, extend, accelerate or otherwise change
the time for payment, or otherwise change the terms, of the Obligations,
including increase or decrease of the rate of interest thereon, or otherwise
change the terms of the Credit Agreement or any other Loan Document;
(b) to receive and hold security for the payment of this Guaranty
or the Obligations and exchange, enforce, waive, release, fail to perfect, sell,
or otherwise dispose of any such security;
(c) to apply such security and direct the order or manner of sale
thereof as the Agent, or any Bank, as the case may be, in its or their
discretion may determine; and
(d) to release or substitute any one or more of any endorsers or
guarantors of the Obligations.
The Guarantor further agrees the performance or occurrence of any of the acts or
events described in clauses (a), (b), (c), and (d) above with respect to
indebtedness or other obligations of the Company, other than the Obligations, to
the Agent or any Bank, shall not affect the liability of the Guarantor
hereunder.
2.4 Waiver of Certain Rights. The Guarantor waives any right to
require the Agent or any Bank:
(a) to proceed against the Company or any other Person;
(b) to proceed against or exhaust any security for the
Obligations or any other indebtedness of the Company to the Agent or any Bank;
or
(c) to pursue any other remedy in the Agent's or any such Bank's
power whatsoever.
2.5 Waiver of Certain Defenses. The Guarantor waives any defense
arising by reason of any claim that the Guarantor's obligations exceed or are
more burdensome than those of the Company. The Guarantor waives all fights and
defenses arising out of an election of remedies by the Agent or any Bank, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for the Obligations, has destroyed the Guarantor's rights of
subrogation and reimbursement against the Company by operation of Section 580d
of the California Code of Civil Procedure (if applicable) or otherwise. The
Guarantor waives any benefit of, and any right to participate in, any security
or other guaranty now or hereafter held by the Agent or any Bank securing the
Obligations.
2.6 Waiver of Presentments, Etc. The Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest notices of
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<PAGE> 3
dishonor and notices of acceptance of this Guaranty and of the existence,
creation, or incurring of new or additional Obligations or any other
indebtedness of Company to the Agent or any Bank.
2.7 Information Relating to Company. The Guarantor acknowledges and
agrees that it shall have the sole responsibility, for obtaining from the
Company such information concerning the Company's financial condition or
business operations as the Guarantor may require, and that neither the Agent nor
any Bank has any duty at any time to disclose to the Guarantor any information
relating to the business operations or financial condition of the Company.
2.8 Right of Setoff. In addition to any rights and remedies of the
Banks provided by law, if Guarantor has failed to make any payment due hereunder
upon demand, each Bank is authorized at any time and from time to time, without
prior notice to the Guarantor, any such notice being waived by the Guarantor to
the fullest extent permitted by law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Bank to or for the credit or the
account of the Guarantor against any and all obligations of the Guarantor now or
hereafter existing under this Guaranty or any other Loan Document, irrespective
of whether or not the Agent or such Bank shall have made demand under this
Guaranty or any other Loan Document and although such obligations may be
contingent or unmatured. Each Bank agrees promptly to notify the Guarantor and
the Agent after any such set-off and application made by such Bank; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section 2.8 are
in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which such Bank may have.
2.9 Subordination. Any obligations of the Company to the Guarantor,
now or hereafter existing, including, but not limited to, obligations to the
Guarantor as subrogee of the Agent or any Bank or resulting from the Guarantor's
performance under this Guaranty, are hereby fully subordinated in priority of
payment to the Obligations and all other indebtedness of the Company to the
Agent or any Bank.
2.10 Reinstatement of Guaranty. If any payment or transfer of any
interest in property by the Company to the Agent or any Bank in fulfillment of
any Obligation is rescinded or must at any time (including after the return or
cancellation of this Guaranty) be returned, in whole or in part, by the Agent or
any Bank to the Company or any other Person, upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, this Guaranty shall be reinstated
with respect to any such payment or transfer, regardless of any such prior
return or cancellation.
2.11 Powers. It is not necessary for the Agent or any Bank to inquire
into the powers of the Company or of the officers, directors, partners or agents
acting or purporting to act on its behalf, and any Obligations made or created
in reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
2.12 Taxes. (a) Subject to compliance with Section 9.10 of the Credit
Agreement, any and all payments by the Guarantor to each Bank or the Agent under
this
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<PAGE> 4
Guaranty shall be made free and clear of, and without deduction or withholding
for, any Taxes, Other Taxes or Further Taxes. In addition, the Guarantor shall
pay all Other Taxes.
(b) If the Guarantor shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received and retained
had no such deductions or withholdings been made;
(ii) the Guarantor shall make such deductions and
withholdings;
(iii) the Guarantor shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Guarantor shall also pay to each Bank or the
Agent for the account of such Bank, at the time interest is paid,
Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Guarantor agrees to indemnify and hold harmless each
Bank and the Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii)
Further Taxes in the amount that the respective Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such Taxes, Other
Taxes or Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within 30 days after the date the Bank or the Agent makes written demand
therefor.
(d) Within 30 days after the date of any payment by the Guarantor
of Taxes, Other Taxes or Further Taxes, the Guarantor shall furnish to each Bank
or the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) For purposes of this Section, (i) "Taxes" means any and all
present or future taxes, levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agent, respectively, taxes imposed
on or measured by its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Bank or the Agent, as the case
may be, is organized or maintains a lending office; (4) "Other Taxes" means any
present or future stamp, court or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Guaranty; and (iii)
"Further Taxes" means any and all present or future taxes, levies. assessments,
imposts, duties, deductions, fees, withholdings or similar charges (including,
without limitation, net
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<PAGE> 5
income taxes and franchise taxes), and all liabilities with respect thereto,
imposed by any jurisdiction on account of amounts payable or paid pursuant to
this Section.
3. Representations and Warranties. The Guarantor represents and warrants
to the Agent and each Bank as follows:
3.1 Existence and Power. The Guarantor (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization: (b) has the power and authority and all
governmental licenses, authorizations, consents and approvals to own its assets,
carry on its business and to execute, deliver, and perform its obligations
under, this Guaranty and any other Loan Document to which it is a party; (c) is
duly qualified as a foreign limited liability company, and licensed and in good
standing, under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license; and (d) is in compliance with all Requirements of Law; except, in
each case, to the extent that the failure to do so could not reasonably be
expected to have a Material Adverse Effect. "Material Adverse Effect" means (a)
a material adverse change in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or prospects of the
Guarantor, its parent and affiliates, taken as a whole; (b) a material
impairment of the ability of the Guarantor to perform its obligations under this
Guaranty; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Guarantor of this Guaranty and any other
Loan Document to which it is a party.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Guarantor of this Guaranty and any other Loan Document to
which it is party, have been duly authorized, and do not and will not (a)
contravene the terms of any of the Guarantor's Organization Documents; (b)
violate or result in any breach or contravention of, or the creation of any lien
under, any document evidencing any Contractual Obligation to which the Guarantor
is a party or any order, injunction, writ or decree of any Governmental
Authority to which the Guarantor or its property is subject; or (c) violate any
Requirement of Law.
3.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Guarantor of
this Guaranty or any other Loan Document to which it is a party.
3.4 Binding Effect. This Guaranty and each other Loan Document to
which the Guarantor is a party constitute the legal, valid and binding
obligations of the Guarantor, enforceable against the Guarantor in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
3.5 Regulated Entities. None of the Guarantor, any Person controlling
the Guarantor or any Subsidiary of the Guarantor is (a) an "Investment Company"
within the meaning of the Investment Company Act of 1940; or (b) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any
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<PAGE> 6
state public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur or guarantee Indebtedness.
4. Miscellaneous
4.1 Application of Payments on Guaranty. All payments required to be
made by the Guarantor hereunder shall, unless otherwise expressly provided
herein, be made to the Agent for the account of the Banks at the Agent's Payment
Office. The Agent will promptly distribute to each Bank its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Payments received from the Guarantor shall, unless otherwise
expressly provided herein, be applied to costs, fees, or other expenses due
under the Loan Documents, any interest (including interest due under subsection
2.10(c) of the Credit Agreement, any principal due under the Loan Documents and
any other Obligations, in such order as the Agent, with the consent of or at the
request of the Majority Banks, shall determine.
4.2 Assignments, Participations, Confidentiality. Any Bank may from
time to time, without notice to the Guarantor and without affecting the
Guarantor's obligations hereunder, transfer its interest in the Obligations to
Participants and Assignees as provided in the Credit Agreement. The Guarantor
agrees that each such transfer will give rise to a direct obligation of the
Guarantor to each such Participant and Assignee and that each such Participant
and Assignee shall have the same rights and benefits under this Guaranty as it
would have if it were a Bank party to the Credit Agreement and this Guaranty.
The Guarantor, the Agent and each Bank agree that the provisions of Section
10.09 of the Credit Agreement shall apply to all information identified as
"confidential" or "secret" by the Guarantor and provided to the Agent or such
Bank by the Guarantor or any Subsidiary of the Guarantor under this Guaranty or
any other Loan Document to which the Guarantor is a party.
4.3 Loan Document. This Guaranty is a Loan Document executed and
delivered pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof. Without limiting the generality of the foregoing,
the provisions of Sections 1.02 and 1.03 of the Credit Agreement shall apply to
the interpretation and administration of this Guaranty as if such provisions
were incorporated herein, with all references to the "Agreement" in such
Sections being deemed to be references to this Guaranty.
4.4 Waivers: Writing Required. No delay or omission by the Agent or
any Bank to exercise any right under this Guaranty shall impair any such right,
nor shall it be construed to be a waiver thereof. No waiver of any single breach
or default under this Guaranty shall be deemed a waiver of any other breach or
default. Any amendment or waiver of any provision of this Guaranty must be in
writing and signed by the Guarantor and the Agent, with the written consent of
the Majority Banks or all of the Banks, in accordance with the terms of Section
10.01 of the Credit Agreement
4.5 Remedies. All rights and remedies provided in this Guaranty and
any instrument or agreement referred to herein are cumulative and are not
exclusive of any rights or remedies otherwise provided by law. Any single or
partial exercise of any right or remedy shall not preclude the further exercise
thereof or the exercise of any other right or remedy.
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<PAGE> 7
4.6 Costs and Expenses. The Guarantor agrees to pay or reimburse the
Agent and each Bank within five Business Days after demand for all costs and
expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Guaranty (including in connection with any "workout" or restructuring
regarding amounts due under this Guaranty, and including in any Insolvency
Proceeding or appellate proceeding).
4.7 Severability. The illegality or unenforceability of any provision
of this Guaranty or any instrument or agreement referred to herein shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Guaranty or any instrument or agreement referred to herein.
4.8 Governing Law and Jurisdiction. (a) THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE AGENT, THE GUARANTOR AND THE BANKS SHALL RETAIN
ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY AND
ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA
OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY
EXECUTION AND DELIVERY OF THIS GUARANTY, EACH OF THE GUARANTOR, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GUARANTOR, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTOR, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY CALIFORNIA LAW.
4.9 Waiver of Jury Trial. THE GUARANTOR, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE GUARANTOR, THE BANKS AND THE AGENT EACH AGREE THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR
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<PAGE> 8
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.
4.10 Entire Agreement. This Guaranty (a) integrates all the terms and
conditions mentioned herein or incidental hereto, (b) supersedes all oral
negotiations and prior writings with respect to the subject matter hereof, and
(c) is intended by the parties as the final expression of the agreement With
respect to the terms and conditions set forth in this Guaranty and any such
instrument, agreement and document and as the complete and exclusive statement
of the terms agreed to by the parties.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officers as of the day and year first above written.
WILLIAMS-SONOMA RETAIL SERVICES, INC.
By /s/ JOHN W. TATE
---------------------------------------
John W. Tate, Chief Financial, Officer
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<PAGE> 1
EXHIBIT 10.10S
GUARANTY
This Guaranty is entered into as of February 7, 2000, by
Williams-Sonoma Direct, Inc. (the "Guarantor"), in favor of Bank of America,
N.A. (formerly known as Bank of America National Trust and Savings Association),
as agent for the financial institutions from time to time party to that certain
Credit Agreement dated as of June 1, 1997 (the "Banks") (in such capacity, the
"Agent") and such Banks.
Recitals
A. Williams-Sonoma, Inc. (the "Company"), the Agent and the Banks
entered into a Credit Agreement dated as of June 1, 1997. The Credit Agreement
as now in effect or hereafter extended, renewed, modified, supplemented, amended
or restated is hereinafter called the "Credit Agreement".
B. The Banks are willing to make certain Loans to the Company as
provided in the Credit Agreement on the condition (among others) that the
Guarantor enter into this Guaranty.
C. The Guarantor as a Subsidiary of the Company will derive
substantial and direct benefits (which benefits are hereby acknowledged by the
Guarantor) from the Loans and other benefits to be provided to the Company under
the Credit Agreement.
D. In order to induce the Banks to make such Loans available to the
Company as provided in the Credit Agreement, and for other valuable
consideration, the Guarantor issues this Guaranty.
1. Definitions. Unless otherwise defined herein, capitalized terms used
in this Guaranty have the meanings given to them from time to time in the Credit
Agreement.
2. Guaranty.
2.1 Guaranty. The Guarantor hereby irrevocably, absolutely and
unconditionally guarantees the full and punctual payment or performance when
due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all of the Obligations. This Guaranty
constitutes a guaranty of payment and performance when due and not of
collection, and the Guarantor specifically agrees that it shall not be necessary
or required that the Agent or any Bank exercise any right, assert any claim or
demand or enforce any remedy whatsoever against the Company (or any other
Person) before or as a condition to the obligations of the Guarantor hereunder.
The Agent or any Bank may permit the indebtedness of the Company to the Agent or
any Bank to include indebtedness other than the Obligations, and may apply any
amounts received from any source, other than from the Guarantor, to that portion
of Company's indebtedness to the Agent or any Bank which is not a part of the
Obligations.
2.2 Obligations Independent. The obligations hereunder are
independent of the obligations of the Company, and a separate action or actions
may be brought and prosecuted against the Guarantor whether action is brought
against the Company or whether the Company be joined in any such action or
actions.
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<PAGE> 2
2.3 Authorization of Renewals, Etc. The Guarantor authorizes the
Agent and each Bank, without notice or demand and without affecting its
liability hereunder, from time to time,
(a) to renew, compromise, extend, accelerate or otherwise change
the time for payment, or otherwise change the terms, of the Obligations,
including increase or decrease of the rate of interest thereon, or otherwise
change the terms of the Credit Agreement or any other Loan Document;
(b) to receive and hold security for the payment of this Guaranty
or the Obligations and exchange, enforce, waive, release, fail to perfect, sell,
or otherwise dispose of any such security;
(c) to apply such security and direct the order or manner of sale
thereof as the Agent, or any Bank, as the case may be, in its or their
discretion may determine; and
(d) to release or substitute any one or more of any endorsers or
guarantors of the Obligations.
The Guarantor further agrees the performance or occurrence of any of the acts or
events described in clauses (a), (b), (c), and (d) above with respect to
indebtedness or other obligations of the Company, other than the Obligations, to
the Agent or any Bank, shall not affect the liability of the Guarantor
hereunder.
2.4 Waiver of Certain Rights. The Guarantor waives any right to
require the Agent or any Bank:
(a) to proceed against the Company or any other Person;
(b) to proceed against or exhaust any security for the
Obligations or any other indebtedness of the Company to the Agent or any Bank;
or
(c) to pursue any other remedy in the Agent's or any such Bank's
power whatsoever.
2.5 Waiver of Certain Defenses. The Guarantor waives any defense
arising by reason of any claim that the Guarantor's obligations exceed or are
more burdensome than those of the Company. The Guarantor waives all fights and
defenses arising out of an election of remedies by the Agent or any Bank, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for the Obligations, has destroyed the Guarantor's rights of
subrogation and reimbursement against the Company by operation of Section 580d
of the California Code of Civil Procedure (if applicable) or otherwise. The
Guarantor waives any benefit of, and any right to participate in, any security
or other guaranty now or hereafter held by the Agent or any Bank securing the
Obligations.
2.6 Waiver of Presentments, Etc. The Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest notices of
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dishonor and notices of acceptance of this Guaranty and of the existence,
creation, or incurring of new or additional Obligations or any other
indebtedness of Company to the Agent or any Bank.
2.7 Information Relating to Company. The Guarantor acknowledges and
agrees that it shall have the sole responsibility, for obtaining from the
Company such information concerning the Company's financial condition or
business operations as the Guarantor may require, and that neither the Agent nor
any Bank has any duty at any time to disclose to the Guarantor any information
relating to the business operations or financial condition of the Company.
2.8 Right of Setoff. In addition to any rights and remedies of the
Banks provided by law, if Guarantor has failed to make any payment due hereunder
upon demand, each Bank is authorized at any time and from time to time, without
prior notice to the Guarantor, any such notice being waived by the Guarantor to
the fullest extent permitted by law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Bank to or for the credit or the
account of the Guarantor against any and all obligations of the Guarantor now or
hereafter existing under this Guaranty or any other Loan Document, irrespective
of whether or not the Agent or such Bank shall have made demand under this
Guaranty or any other Loan Document and although such obligations may be
contingent or unmatured. Each Bank agrees promptly to notify the Guarantor and
the Agent after any such set-off and application made by such Bank; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section 2.8 are
in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which such Bank may have.
2.9 Subordination. Any obligations of the Company to the Guarantor,
now or hereafter existing, including, but not limited to, obligations to the
Guarantor as subrogee of the Agent or any Bank or resulting from the Guarantor's
performance under this Guaranty, are hereby fully subordinated in priority of
payment to the Obligations and all other indebtedness of the Company to the
Agent or any Bank.
2.10 Reinstatement of Guaranty. If any payment or transfer of any
interest in property by the Company to the Agent or any Bank in fulfillment of
any Obligation is rescinded or must at any time (including after the return or
cancellation of this Guaranty) be returned, in whole or in part, by the Agent or
any Bank to the Company or any other Person, upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, this Guaranty shall be reinstated
with respect to any such payment or transfer, regardless of any such prior
return or cancellation.
2.11 Powers. It is not necessary for the Agent or any Bank to inquire
into the powers of the Company or of the officers, directors, partners or agents
acting or purporting to act on its behalf, and any Obligations made or created
in reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
2.12 Taxes. (a) Subject to compliance with Section 9.10 of the Credit
Agreement, any and all payments by the Guarantor to each Bank or the Agent under
this
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Guaranty shall be made free and clear of, and without deduction or withholding
for, any Taxes, Other Taxes or Further Taxes. In addition, the Guarantor shall
pay all Other Taxes.
(b) If the Guarantor shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received and retained
had no such deductions or withholdings been made;
(ii) the Guarantor shall make such deductions and
withholdings;
(iii) the Guarantor shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Guarantor shall also pay to each Bank or the
Agent for the account of such Bank, at the time interest is paid,
Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Guarantor agrees to indemnify and hold harmless each
Bank and the Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii)
Further Taxes in the amount that the respective Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such Taxes, Other
Taxes or Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within 30 days after the date the Bank or the Agent makes written demand
therefor.
(d) Within 30 days after the date of any payment by the Guarantor
of Taxes, Other Taxes or Further Taxes, the Guarantor shall furnish to each Bank
or the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) For purposes of this Section, (i) "Taxes" means any and all
present or future taxes, levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agent, respectively, taxes imposed
on or measured by its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Bank or the Agent, as the case
may be, is organized or maintains a lending office; (4) "Other Taxes" means any
present or future stamp, court or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Guaranty; and (iii)
"Further Taxes" means any and all present or future taxes, levies. assessments,
imposts, duties, deductions, fees, withholdings or similar charges (including,
without limitation, net
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income taxes and franchise taxes), and all liabilities with respect thereto,
imposed by any jurisdiction on account of amounts payable or paid pursuant to
this Section.
3. Representations and Warranties. The Guarantor represents and warrants
to the Agent and each Bank as follows:
3.1 Existence and Power. The Guarantor (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization: (b) has the power and authority and all
governmental licenses, authorizations, consents and approvals to own its assets,
carry on its business and to execute, deliver, and perform its obligations
under, this Guaranty and any other Loan Document to which it is a party; (c) is
duly qualified as a foreign limited liability company, and licensed and in good
standing, under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license; and (d) is in compliance with all Requirements of Law; except, in
each case, to the extent that the failure to do so could not reasonably be
expected to have a Material Adverse Effect. "Material Adverse Effect" means (a)
a material adverse change in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or prospects of the
Guarantor, its parent and affiliates, taken as a whole; (b) a material
impairment of the ability of the Guarantor to perform its obligations under this
Guaranty; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Guarantor of this Guaranty and any other
Loan Document to which it is a party.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Guarantor of this Guaranty and any other Loan Document to
which it is party, have been duly authorized, and do not and will not (a)
contravene the terms of any of the Guarantor's Organization Documents; (b)
violate or result in any breach or contravention of, or the creation of any lien
under, any document evidencing any Contractual Obligation to which the Guarantor
is a party or any order, injunction, writ or decree of any Governmental
Authority to which the Guarantor or its property is subject; or (c) violate any
Requirement of Law.
3.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Guarantor of
this Guaranty or any other Loan Document to which it is a party.
3.4 Binding Effect. This Guaranty and each other Loan Document to
which the Guarantor is a party constitute the legal, valid and binding
obligations of the Guarantor, enforceable against the Guarantor in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
3.5 Regulated Entities. None of the Guarantor, any Person controlling
the Guarantor or any Subsidiary of the Guarantor is (a) an "Investment Company"
within the meaning of the Investment Company Act of 1940; or (b) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any
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state public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur or guarantee Indebtedness.
4. Miscellaneous
4.1 Application of Payments on Guaranty. All payments required to be
made by the Guarantor hereunder shall, unless otherwise expressly provided
herein, be made to the Agent for the account of the Banks at the Agent's Payment
Office. The Agent will promptly distribute to each Bank its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Payments received from the Guarantor shall, unless otherwise
expressly provided herein, be applied to costs, fees, or other expenses due
under the Loan Documents, any interest (including interest due under subsection
2.10(c) of the Credit Agreement, any principal due under the Loan Documents and
any other Obligations, in such order as the Agent, with the consent of or at the
request of the Majority Banks, shall determine.
4.2 Assignments, Participations, Confidentiality. Any Bank may from
time to time, without notice to the Guarantor and without affecting the
Guarantor's obligations hereunder, transfer its interest in the Obligations to
Participants and Assignees as provided in the Credit Agreement. The Guarantor
agrees that each such transfer will give rise to a direct obligation of the
Guarantor to each such Participant and Assignee and that each such Participant
and Assignee shall have the same rights and benefits under this Guaranty as it
would have if it were a Bank party to the Credit Agreement and this Guaranty.
The Guarantor, the Agent and each Bank agree that the provisions of Section
10.09 of the Credit Agreement shall apply to all information identified as
"confidential" or "secret" by the Guarantor and provided to the Agent or such
Bank by the Guarantor or any Subsidiary of the Guarantor under this Guaranty or
any other Loan Document to which the Guarantor is a party.
4.3 Loan Document. This Guaranty is a Loan Document executed and
delivered pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof. Without limiting the generality of the foregoing,
the provisions of Sections 1.02 and 1.03 of the Credit Agreement shall apply to
the interpretation and administration of this Guaranty as if such provisions
were incorporated herein, with all references to the "Agreement" in such
Sections being deemed to be references to this Guaranty.
4.4 Waivers: Writing Required. No delay or omission by the Agent or
any Bank to exercise any right under this Guaranty shall impair any such right,
nor shall it be construed to be a waiver thereof. No waiver of any single breach
or default under this Guaranty shall be deemed a waiver of any other breach or
default. Any amendment or waiver of any provision of this Guaranty must be in
writing and signed by the Guarantor and the Agent, with the written consent of
the Majority Banks or all of the Banks, in accordance with the terms of Section
10.01 of the Credit Agreement
4.5 Remedies. All rights and remedies provided in this Guaranty and
any instrument or agreement referred to herein are cumulative and are not
exclusive of any rights or remedies otherwise provided by law. Any single or
partial exercise of any right or remedy shall not preclude the further exercise
thereof or the exercise of any other right or remedy.
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4.6 Costs and Expenses. The Guarantor agrees to pay or reimburse the
Agent and each Bank within five Business Days after demand for all costs and
expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Guaranty (including in connection with any "workout" or restructuring
regarding amounts due under this Guaranty, and including in any Insolvency
Proceeding or appellate proceeding).
4.7 Severability. The illegality or unenforceability of any provision
of this Guaranty or any instrument or agreement referred to herein shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Guaranty or any instrument or agreement referred to herein.
4.8 Governing Law and Jurisdiction. (a) THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE AGENT, THE GUARANTOR AND THE BANKS SHALL RETAIN
ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY AND
ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA
OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY
EXECUTION AND DELIVERY OF THIS GUARANTY, EACH OF THE GUARANTOR, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GUARANTOR, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTOR, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY CALIFORNIA LAW.
4.9 Waiver of Jury Trial. THE GUARANTOR, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE GUARANTOR, THE BANKS AND THE AGENT EACH AGREE THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR
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THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.
4.10 Entire Agreement. This Guaranty (a) integrates all the terms and
conditions mentioned herein or incidental hereto, (b) supersedes all oral
negotiations and prior writings with respect to the subject matter hereof, and
(c) is intended by the parties as the final expression of the agreement With
respect to the terms and conditions set forth in this Guaranty and any such
instrument, agreement and document and as the complete and exclusive statement
of the terms agreed to by the parties.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officers as of the day and year first above written.
WILLIAMS-SONOMA DIRECT, INC.
By /s/ JOHN W. TATE
---------------------------------------
John W. Tate, Chief Financial, Officer
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<PAGE> 1
EXHIBIT 10.10T
GUARANTY
This Guaranty is entered into as of February 7, 2000, by
Pottery Barn Kids, Inc. (the "Guarantor"), in favor of Bank of
America, N.A. (formerly known as Bank of America National Trust and Savings
Association), as agent for the financial institutions from time to time party to
that certain Credit Agreement dated as of June 1, 1997 (the "Banks") (in such
capacity, the "Agent") and such Banks.
Recitals
A. Williams-Sonoma, Inc. (the "Company"), the Agent and the Banks
entered into a Credit Agreement dated as of June 1, 1997. The Credit Agreement
as now in effect or hereafter extended, renewed, modified, supplemented, amended
or restated is hereinafter called the "Credit Agreement".
B. The Banks are willing to make certain Loans to the Company as
provided in the Credit Agreement on the condition (among others) that the
Guarantor enter into this Guaranty.
C. The Guarantor as a Subsidiary of the Company will derive
substantial and direct benefits (which benefits are hereby acknowledged by the
Guarantor) from the Loans and other benefits to be provided to the Company under
the Credit Agreement.
D. In order to induce the Banks to make such Loans available to the
Company as provided in the Credit Agreement, and for other valuable
consideration, the Guarantor issues this Guaranty.
1. Definitions. Unless otherwise defined herein, capitalized terms used
in this Guaranty have the meanings given to them from time to time in the Credit
Agreement.
2. Guaranty.
2.1 Guaranty. The Guarantor hereby irrevocably, absolutely and
unconditionally guarantees the full and punctual payment or performance when
due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all of the Obligations. This Guaranty
constitutes a guaranty of payment and performance when due and not of
collection, and the Guarantor specifically agrees that it shall not be necessary
or required that the Agent or any Bank exercise any right, assert any claim or
demand or enforce any remedy whatsoever against the Company (or any other
Person) before or as a condition to the obligations of the Guarantor hereunder.
The Agent or any Bank may permit the indebtedness of the Company to the Agent or
any Bank to include indebtedness other than the Obligations, and may apply any
amounts received from any source, other than from the Guarantor, to that portion
of Company's indebtedness to the Agent or any Bank which is not a part of the
Obligations.
2.2 Obligations Independent. The obligations hereunder are
independent of the obligations of the Company, and a separate action or actions
may be brought and prosecuted against the Guarantor whether action is brought
against the Company or whether the Company be joined in any such action or
actions.
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<PAGE> 2
2.3 Authorization of Renewals, Etc. The Guarantor authorizes the
Agent and each Bank, without notice or demand and without affecting its
liability hereunder, from time to time,
(a) to renew, compromise, extend, accelerate or otherwise change
the time for payment, or otherwise change the terms, of the Obligations,
including increase or decrease of the rate of interest thereon, or otherwise
change the terms of the Credit Agreement or any other Loan Document;
(b) to receive and hold security for the payment of this Guaranty
or the Obligations and exchange, enforce, waive, release, fail to perfect, sell,
or otherwise dispose of any such security;
(c) to apply such security and direct the order or manner of sale
thereof as the Agent, or any Bank, as the case may be, in its or their
discretion may determine; and
(d) to release or substitute any one or more of any endorsers or
guarantors of the Obligations.
The Guarantor further agrees the performance or occurrence of any of the acts or
events described in clauses (a), (b), (c), and (d) above with respect to
indebtedness or other obligations of the Company, other than the Obligations, to
the Agent or any Bank, shall not affect the liability of the Guarantor
hereunder.
2.4 Waiver of Certain Rights. The Guarantor waives any right to
require the Agent or any Bank:
(a) to proceed against the Company or any other Person;
(b) to proceed against or exhaust any security for the
Obligations or any other indebtedness of the Company to the Agent or any Bank;
or
(c) to pursue any other remedy in the Agent's or any such Bank's
power whatsoever.
2.5 Waiver of Certain Defenses. The Guarantor waives any defense
arising by reason of any claim that the Guarantor's obligations exceed or are
more burdensome than those of the Company. The Guarantor waives all fights and
defenses arising out of an election of remedies by the Agent or any Bank, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for the Obligations, has destroyed the Guarantor's rights of
subrogation and reimbursement against the Company by operation of Section 580d
of the California Code of Civil Procedure (if applicable) or otherwise. The
Guarantor waives any benefit of, and any right to participate in, any security
or other guaranty now or hereafter held by the Agent or any Bank securing the
Obligations.
2.6 Waiver of Presentments, Etc. The Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest notices of
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dishonor and notices of acceptance of this Guaranty and of the existence,
creation, or incurring of new or additional Obligations or any other
indebtedness of Company to the Agent or any Bank.
2.7 Information Relating to Company. The Guarantor acknowledges and
agrees that it shall have the sole responsibility, for obtaining from the
Company such information concerning the Company's financial condition or
business operations as the Guarantor may require, and that neither the Agent nor
any Bank has any duty at any time to disclose to the Guarantor any information
relating to the business operations or financial condition of the Company.
2.8 Right of Setoff. In addition to any rights and remedies of the
Banks provided by law, if Guarantor has failed to make any payment due hereunder
upon demand, each Bank is authorized at any time and from time to time, without
prior notice to the Guarantor, any such notice being waived by the Guarantor to
the fullest extent permitted by law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Bank to or for the credit or the
account of the Guarantor against any and all obligations of the Guarantor now or
hereafter existing under this Guaranty or any other Loan Document, irrespective
of whether or not the Agent or such Bank shall have made demand under this
Guaranty or any other Loan Document and although such obligations may be
contingent or unmatured. Each Bank agrees promptly to notify the Guarantor and
the Agent after any such set-off and application made by such Bank; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section 2.8 are
in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which such Bank may have.
2.9 Subordination. Any obligations of the Company to the Guarantor,
now or hereafter existing, including, but not limited to, obligations to the
Guarantor as subrogee of the Agent or any Bank or resulting from the Guarantor's
performance under this Guaranty, are hereby fully subordinated in priority of
payment to the Obligations and all other indebtedness of the Company to the
Agent or any Bank.
2.10 Reinstatement of Guaranty. If any payment or transfer of any
interest in property by the Company to the Agent or any Bank in fulfillment of
any Obligation is rescinded or must at any time (including after the return or
cancellation of this Guaranty) be returned, in whole or in part, by the Agent or
any Bank to the Company or any other Person, upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, this Guaranty shall be reinstated
with respect to any such payment or transfer, regardless of any such prior
return or cancellation.
2.11 Powers. It is not necessary for the Agent or any Bank to inquire
into the powers of the Company or of the officers, directors, partners or agents
acting or purporting to act on its behalf, and any Obligations made or created
in reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
2.12 Taxes. (a) Subject to compliance with Section 9.10 of the Credit
Agreement, any and all payments by the Guarantor to each Bank or the Agent under
this
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<PAGE> 4
Guaranty shall be made free and clear of, and without deduction or withholding
for, any Taxes, Other Taxes or Further Taxes. In addition, the Guarantor shall
pay all Other Taxes.
(b) If the Guarantor shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received and retained
had no such deductions or withholdings been made;
(ii) the Guarantor shall make such deductions and
withholdings;
(iii) the Guarantor shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Guarantor shall also pay to each Bank or the
Agent for the account of such Bank, at the time interest is paid,
Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Guarantor agrees to indemnify and hold harmless each
Bank and the Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii)
Further Taxes in the amount that the respective Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such Taxes, Other
Taxes or Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within 30 days after the date the Bank or the Agent makes written demand
therefor.
(d) Within 30 days after the date of any payment by the Guarantor
of Taxes, Other Taxes or Further Taxes, the Guarantor shall furnish to each Bank
or the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) For purposes of this Section, (i) "Taxes" means any and all
present or future taxes, levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agent, respectively, taxes imposed
on or measured by its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Bank or the Agent, as the case
may be, is organized or maintains a lending office; (4) "Other Taxes" means any
present or future stamp, court or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Guaranty; and (iii)
"Further Taxes" means any and all present or future taxes, levies. assessments,
imposts, duties, deductions, fees, withholdings or similar charges (including,
without limitation, net
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<PAGE> 5
income taxes and franchise taxes), and all liabilities with respect thereto,
imposed by any jurisdiction on account of amounts payable or paid pursuant to
this Section.
3. Representations and Warranties. The Guarantor represents and warrants
to the Agent and each Bank as follows:
3.1 Existence and Power. The Guarantor (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization: (b) has the power and authority and all
governmental licenses, authorizations, consents and approvals to own its assets,
carry on its business and to execute, deliver, and perform its obligations
under, this Guaranty and any other Loan Document to which it is a party; (c) is
duly qualified as a foreign limited liability company, and licensed and in good
standing, under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license; and (d) is in compliance with all Requirements of Law; except, in
each case, to the extent that the failure to do so could not reasonably be
expected to have a Material Adverse Effect. "Material Adverse Effect" means (a)
a material adverse change in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or prospects of the
Guarantor, its parent and affiliates, taken as a whole; (b) a material
impairment of the ability of the Guarantor to perform its obligations under this
Guaranty; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Guarantor of this Guaranty and any other
Loan Document to which it is a party.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Guarantor of this Guaranty and any other Loan Document to
which it is party, have been duly authorized, and do not and will not (a)
contravene the terms of any of the Guarantor's Organization Documents; (b)
violate or result in any breach or contravention of, or the creation of any lien
under, any document evidencing any Contractual Obligation to which the Guarantor
is a party or any order, injunction, writ or decree of any Governmental
Authority to which the Guarantor or its property is subject; or (c) violate any
Requirement of Law.
3.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Guarantor of
this Guaranty or any other Loan Document to which it is a party.
3.4 Binding Effect. This Guaranty and each other Loan Document to
which the Guarantor is a party constitute the legal, valid and binding
obligations of the Guarantor, enforceable against the Guarantor in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
3.5 Regulated Entities. None of the Guarantor, any Person controlling
the Guarantor or any Subsidiary of the Guarantor is (a) an "Investment Company"
within the meaning of the Investment Company Act of 1940; or (b) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any
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state public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur or guarantee Indebtedness.
4. Miscellaneous
4.1 Application of Payments on Guaranty. All payments required to be
made by the Guarantor hereunder shall, unless otherwise expressly provided
herein, be made to the Agent for the account of the Banks at the Agent's Payment
Office. The Agent will promptly distribute to each Bank its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Payments received from the Guarantor shall, unless otherwise
expressly provided herein, be applied to costs, fees, or other expenses due
under the Loan Documents, any interest (including interest due under subsection
2.10(c) of the Credit Agreement, any principal due under the Loan Documents and
any other Obligations, in such order as the Agent, with the consent of or at the
request of the Majority Banks, shall determine.
4.2 Assignments, Participations, Confidentiality. Any Bank may from
time to time, without notice to the Guarantor and without affecting the
Guarantor's obligations hereunder, transfer its interest in the Obligations to
Participants and Assignees as provided in the Credit Agreement. The Guarantor
agrees that each such transfer will give rise to a direct obligation of the
Guarantor to each such Participant and Assignee and that each such Participant
and Assignee shall have the same rights and benefits under this Guaranty as it
would have if it were a Bank party to the Credit Agreement and this Guaranty.
The Guarantor, the Agent and each Bank agree that the provisions of Section
10.09 of the Credit Agreement shall apply to all information identified as
"confidential" or "secret" by the Guarantor and provided to the Agent or such
Bank by the Guarantor or any Subsidiary of the Guarantor under this Guaranty or
any other Loan Document to which the Guarantor is a party.
4.3 Loan Document. This Guaranty is a Loan Document executed and
delivered pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof. Without limiting the generality of the foregoing,
the provisions of Sections 1.02 and 1.03 of the Credit Agreement shall apply to
the interpretation and administration of this Guaranty as if such provisions
were incorporated herein, with all references to the "Agreement" in such
Sections being deemed to be references to this Guaranty.
4.4 Waivers: Writing Required. No delay or omission by the Agent or
any Bank to exercise any right under this Guaranty shall impair any such right,
nor shall it be construed to be a waiver thereof. No waiver of any single breach
or default under this Guaranty shall be deemed a waiver of any other breach or
default. Any amendment or waiver of any provision of this Guaranty must be in
writing and signed by the Guarantor and the Agent, with the written consent of
the Majority Banks or all of the Banks, in accordance with the terms of Section
10.01 of the Credit Agreement
4.5 Remedies. All rights and remedies provided in this Guaranty and
any instrument or agreement referred to herein are cumulative and are not
exclusive of any rights or remedies otherwise provided by law. Any single or
partial exercise of any right or remedy shall not preclude the further exercise
thereof or the exercise of any other right or remedy.
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4.6 Costs and Expenses. The Guarantor agrees to pay or reimburse the
Agent and each Bank within five Business Days after demand for all costs and
expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Guaranty (including in connection with any "workout" or restructuring
regarding amounts due under this Guaranty, and including in any Insolvency
Proceeding or appellate proceeding).
4.7 Severability. The illegality or unenforceability of any provision
of this Guaranty or any instrument or agreement referred to herein shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Guaranty or any instrument or agreement referred to herein.
4.8 Governing Law and Jurisdiction. (a) THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE AGENT, THE GUARANTOR AND THE BANKS SHALL RETAIN
ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY AND
ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA
OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY
EXECUTION AND DELIVERY OF THIS GUARANTY, EACH OF THE GUARANTOR, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GUARANTOR, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTOR, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY CALIFORNIA LAW.
4.9 Waiver of Jury Trial. THE GUARANTOR, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE GUARANTOR, THE BANKS AND THE AGENT EACH AGREE THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR
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THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.
4.10 Entire Agreement. This Guaranty (a) integrates all the terms and
conditions mentioned herein or incidental hereto, (b) supersedes all oral
negotiations and prior writings with respect to the subject matter hereof, and
(c) is intended by the parties as the final expression of the agreement With
respect to the terms and conditions set forth in this Guaranty and any such
instrument, agreement and document and as the complete and exclusive statement
of the terms agreed to by the parties.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officers as of the day and year first above written.
POTTERY BARN KIDS, INC.
By /s/ JOHN W. TATE
---------------------------------------
John W. Tate, Chief Financial, Officer
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EXHIBIT 10.10U
ONE BANK GUARANTY
This Guaranty is entered into as of February 7, 2000, by Williams-Sonoma
Retail Services, Inc. (the "Guarantor"), in favor of Bank of America, N.A.
(formerly known as Bank of America National Trust and Savings Association - the
"Bank").
Recitals
A. Williams-Sonoma, Inc. (the "Company") and the Bank entered into
a Letter of Credit Agreement dated as of June 1, 1997. The Letter of Credit
Agreement as now in effect or hereafter extended, renewed, modified,
supplemented, amended or restated is hereinafter called the "Credit Agreement".
B. The Bank is willing to issue letters of credit for the account
of the Company as provided in the Credit Agreement on the condition (among
others) that the Guarantor enter into this Guaranty.
C. The Guarantor as a Subsidiary of the Company will derive
substantial and direct benefits (which benefits are hereby acknowledged by the
Guarantor) from the letters of credit to be issued for the account of the
Company under the Credit Agreement.
D. In order to induce the Bank to make such letters of credit
available to the Company as provided in the Credit Agreement, and for other
valuable consideration, the Guarantor issues this Guaranty.
1. Definitions. Unless otherwise defined herein, capitalized terms used in
this Guaranty have the meanings given to them from time to time in the Credit
Agreement, or, as applicable, in the Syndicated Credit Agreement (as defined in
the Credit Agreement).
2. Guaranty.
2.1 Guaranty. The Guarantor hereby irrevocably, absolutely and
unconditionally guarantees the full and punctual payment or performance when
due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all of the obligations of the Company to
the Bank under the Credit Agreement and under the letters of credit issued
pursuant to the Credit Agreement (the "Obligations'). This Guaranty constitutes
a guaranty of payment and performance when due and not of collections and the
Guarantor specifically agrees that it shall not be necessary or required that
the Bank exercise any right, assert any claim or demand or enforce any remedy
whatsoever against the Company (or any other Person) before or as a condition to
the obligations of the Guarantor hereunder. The Bank may permit the indebtedness
of the Company to the Bank to include indebtedness other than the Obligations,
and may apply any amounts received from any source, other than from the
Guarantor, to that portion of Company's indebtedness to the Bank which is not a
part of the Obligations.
2.2 Obligations Independent. The obligations hereunder are
independent of the obligations of the Company, and a separate action or actions
may be brought and prosecuted against the Guarantor whether action is brought
against the Company or whether the Company be joined in any such action or
actions.
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2.3 Authorization of Renewals, Etc. The Guarantor authorizes the
Bank, without notice or demand and without affecting its liability hereunder,
from time to time:
(a) to renew, compromise, extend, accelerate or otherwise
change the time for payment or otherwise change the terms, of the Obligations,
including increase or decrease of the rate of interest thereon, or otherwise
change the terms of the Credit Agreement or any letter of credit;
(b) to receive and hold security for the payment of this
Guaranty or the Obligations and exchange, enforce, waive, release, fail to
perfect, sell, or otherwise dispose of any such security;
(c) to apply such security and direct the order or manner
of sale thereof as the Bank in its discretion may determine; and
(d) to release or substitute any one or more of any
endorsers or guarantors of the Obligations.
The Guarantor further agrees the performance or occurrence of any of the acts or
events described in clauses (a), (b), (c), and (d) above with respect to
indebtedness or other obligations of the Company, other than the Obligations, to
the Bank, shall not affect the liability of the Guarantor hereunder.
2.4 Waiver of Certain Rights. The Guarantor waives any right to
require the Bank:
(a) to proceed against the Company or any other Person;
(b) to proceed against or exhaust any security for the
Obligations or any other indebtedness of the Company to the Bank; or
(c) to pursue any other remedy in the Bank's power
whatsoever.
2.5 Waiver of Certain Defenses. The Guarantor waives any defense
arising by reason of any claim that the Guarantor's obligations exceed or are
more burdensome than those of the Company. The Guarantor waives all rights and
defenses arising out of an election of remedies by the Bank, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for the Obligations, has destroyed the Guarantor's rights of subrogation and
reimbursement against the Company by operation of Section 580d of the California
Code of Civil Procedure (if applicable) or otherwise. The Guarantor waives any
benefit of, and any right to participate in, any security or other guaranty now
or hereafter held by the Bank securing the Obligations.
2.6 Waiver of Presentments, Etc. The Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
Obligations or any other indebtedness of Company to the Bank.
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<PAGE> 3
2.7 Information Relating to Company. The Guarantor acknowledges and
agrees that it shall have the sole responsibility for obtaining from the Company
such information concerning the Company's financial condition or business
operations as the Guarantor may require, and that the Bank does not have any
duty at any time to disclose to the Guarantor any information relating to the
business operations or financial condition of the Company.
2.8 Right of Setoff. In addition to any rights and remedies of the
Bank provided by law, if Guarantor has failed to make any payment due hereunder
upon demand, the Bank is authorized at any time and from time to time, without
prior notice to the Guarantor, any such notice being waived by the Guarantor to
the fullest extent permitted by law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Guarantor against any and all obligations of the Guarantor now or
hereafter existing under this Guaranty, irrespective of whether or not the Bank
shall have made demand under this Guaranty and although such obligations may be
contingent or unmatured. The Bank agrees promptly to notify the Guarantor after
any such set-off and application made by the Bank: provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section 2-8 are in addition to
the other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
2.9 Subordination. Any obligations of the Company to the Guarantor,
now or hereafter existing, including, but not limited to, obligations to the
Guarantor as subrogee of the Bank or resulting from the Guarantor's performance
under this Guaranty, are hereby fully subordinated in priority of payment to the
Obligations and all other indebtedness of the Company to the Bank.
2.10 Reinstatement of Guaranty, If any payment or transfer of any
interest in property by the Company to the Bank in fulfillment of any Obligation
is rescinded or must at any time (including after the return or cancellation of
this Guaranty) be returned, in whole or in part, by the Bank to the Company or
any other Person, upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, this Guaranty shall be reinstated with respect to any such
payment or transfer, regardless of any such prior return or cancellation.
2.11 Powers. It is not necessary for the Bank to inquire into the
powers of the Company or of the officers, directors, partners or agents acting
or purporting to act on its behalf, and any Obligations made or created in
reliance upon the professed exercise of such powers. shall be guaranteed
hereunder.
2.12 Taxes. (a) Subject to compliance with Section 9.10 of the
Syndicated Credit Agreement, any and all payments by the Guarantor to the Bank
under this Guaranty shall be made free and clear of, and without deduction or
withholding for, any Taxes, Other Taxes or Further Taxes. In addition, the
Guarantor shall pay all Other Taxes.
(b) If the Guarantor shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to the Bank, then:
(1) the sum payable shall be increased as necessary
so that, after making all required deductions and withholdings
(including deductions and withholdings
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applicable to additional sums payable under this Section), the Bank
receives and retains an amount equal to the sum it would have received
and retained had no such deductions or withholdings been made;
(ii) the Guarantor shall make such deductions and
withholdings;
(iii) the Guarantor shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority
in accordance with applicable law; and
(iv) the Guarantor shall also pay to the Bank, at
the time interest is paid, Further Taxes in the amount that the Bank
specifies as necessary to preserve the after-tax yield the Bank would
have received if such Taxes, Other Taxes or Further Taxes had not been
imposed.
(c) The Guarantor agrees to indemnify and hold harmless the
Bank for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further Taxes
in the amount that the respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank makes written demand therefor.
(d) Within 30 days after the date of any payment by the
Guarantor of Taxes, Other Taxes or Further Taxes, the Guarantor shall furnish to
the Bank the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the Bank.
(e) For purposes of this Section, (i) "Taxes" means any and
all present or future taxes, levies, assessments, imposts, duties, deductions,
fees, withholdings or similar charges. and all liabilities with respect thereto,
excluding, in the case of the Bank, taxes imposed on or measured by its net
income by the jurisdiction (or any political subdivision thereof) under the laws
of which the Bank is organized or maintains a lending office; (ii) "Other Taxes"
means any present or future stamp, court or documentary taxes or any other
excise or property taxes, charges or similar levies which arise from any payment
made hereunder or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Guaranty; and (iii)
"Further Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges (including,
without limitation, net income taxes and franchise taxes), and all liabilities
with respect thereto, imposed by any jurisdiction on account of amounts payable
or paid pursuant to this Section.
3. Representations and Warranties, The Guarantor represents and warrants
to the Bank as follows:
3.1 Existence and Power. The Guarantor (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization; (b) has the power and authority and all
governmental licenses, authorizations, consents and approvals to own its assets,
carry on its business and to execute, deliver, and perform its obligations
under, this Guaranty; (c) is duly qualified as a foreign limited liability
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<PAGE> 5
company, and licensed and in good standing, under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification or license; and (d) is in compliance with
all Requirements of Law; except, in each case, to the extent that the failure to
do so could not reasonably be expected to have a Material Adverse Effect.
"Material Adverse Effect" means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of the Guarantor, its parent and affiliates, taken as
a whole; (b) a material impairment of the ability of the Guarantor to perform
its obligations under this Guaranty; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Guarantor of
this Guaranty.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Guarantor of this Guaranty have been duly authorized, and do
not and will not (a) contravene the terms of any of the Guarantor's Organization
Documents; (b) Violate or result in any breach or contravention of, or the
creation of any lien under, any document evidencing any Contractual Obligation
to which the Guarantor is a party or any order, injunction, writ or decree of
any Governmental Authority to which the Guarantor or its property is subject; or
(c) violate any Requirement of Law.
3.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Guarantor of
this Guaranty.
3.4 Binding Effect. This Guaranty constitutes the legal, valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
3.5 Regulated Entities. None of the Guarantor, any Person
controlling the Guarantor or any Subsidiary of the Guarantor is (a) an
"Investment Company" within the meaning of the Investment Company Act of 1940;
or (b) subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation limiting its
ability to incur or guarantee Indebtedness.
4. Miscellaneous
4.1 Application of Payments on Guaranty. All payments required to
be made by the Guarantor hereunder shall, unless otherwise expressly provided
herein, be made to the Bank at the Bank's office. Payments received from the
Guarantor shall, unless otherwise expressly provided herein, be applied to
interest, principal, costs, fees, or other expenses due under the Credit
Agreement in such order as the Bank shall determine.
4.2 Assignments, Participations, Confidentiality. The Bank may from
time to time, without notice to the Guarantor and without affecting the
Guarantor's obligations hereunder, transfer its interest in the Obligations to
participants and assignees as provided in the Credit Agreement. The Guarantor
agrees that each such transfer will give rise to a direct
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<PAGE> 6
obligation of the Guarantor to each such participant and assignee and that each
such participant and assignee shall have the same rights and benefits under this
Guaranty as it would have if it were a Bank party to the Credit Agreement and
this Guaranty. The Guarantor and the Bank agree that the provisions of Section
10.09 of the Syndicated Credit Agreement shall apply to all information
identified as "confidential" or "secret" by the Guarantor and provided to the
Bank by the Guarantor or any Subsidiary of the Guarantor under this Guaranty or
any other Loan Document to which the Guarantor is a party.
4.3 Loan Document. This Guaranty is executed and delivered pursuant
to the Credit Agreement and shall (unless otherwise expressly indicated herein)
be construed, administered and applied in accordance with the terms and
provisions thereof. Without limiting the generality of the foregoing, the
provisions of Sections 1.02 and 1.03 of the Syndicated Credit Agreement shall
apply to the interpretation and administration of this Guaranty as if such
provisions were incorporated herein, with all references to the "Agreement" in
such Sections being deemed to be references to this Guaranty.
4.4 Waivers; Writing Required. No delay or omission by the Bank to
exercise any right under this Guaranty shall impair any such right, nor shall it
be construed to be a waiver thereof. No waiver of any single breach or default
under this Guaranty shall be deemed a waiver of any other breach or default. Any
amendment or waiver of any provision of this Guaranty must be in writing and
signed by the Guarantor and the Bank.
4.5 Remedies. All rights and remedies provided in this Guaranty and
any instrument or agreement referred to herein are cumulative and are not
exclusive of any rights or remedies otherwise provided by law. Any single or
partial exercise of any right or remedy shall not preclude the further exercise
thereof or the exercise of any other right or remedy.
4.6 Costs and Expenses. The Guarantor agrees to pay or reimburse
the Bank within five Business Days after demand for all costs and expenses
(including Attorney Costs) incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Guaranty (including in connection with any "workout" or restructuring regarding
amounts due under this Guaranty, and including in any Insolvency Proceeding or
appellate proceeding).
4.7 Severability. The illegality or unenforceability of any
provision of this Guaranty or any instrument or agreement referred to herein
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Guaranty or any instrument or agreement referred to
herein.
4.8 Governing Law and Jurisdiction. (a) THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE GUARANTOR AND THE BANK SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY
MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES
FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS
GUARANTY, EACH OF THE GUARANTOR AND THE BANK CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE NON-
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EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GUARANTOR AND THE BANK
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING. WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. THE
GUARANTOR AND THE BANK EACH WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
4.9 Waiver of Jury Trial. THE GUARANTOR AND THE BANK EACH WAIVES THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR AND THE
BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT To A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
4.10 Entire Agreement. This Guaranty (a) integrates all the terms
and conditions mentioned herein or incidental hereto, (b) supersedes all oral
negotiations and prior writings with respect to the subject matter hereof, and
(c) is intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in this Guaranty and any such
instrument, agreement and document and as the complete and exclusive statement
of the terms agreed to by the parties.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officers as of the day and year first above written.
WILLIAMS-SONOMA RETAIL SERVICES, INC.
By /s/ JOHN W. TATE
---------------------------------------
John W. Tate, Chief Financial Officer
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EXHIBIT 10.10V
ONE BANK GUARANTY
This Guaranty is entered into as of February 7, 2000, by Williams-Sonoma
Direct, Inc. (the "Guarantor"), in favor of Bank of America, N.A. (formerly
known as Bank of America National Trust and Savings Association - the "Bank").
Recitals
A. Williams-Sonoma, Inc. (the "Company") and the Bank entered into
a Letter of Credit Agreement dated as of June 1, 1997. The Letter of Credit
Agreement as now in effect or hereafter extended, renewed, modified,
supplemented, amended or restated is hereinafter called the "Credit Agreement".
B. The Bank is willing to issue letters of credit for the account
of the Company as provided in the Credit Agreement on the condition (among
others) that the Guarantor enter into this Guaranty.
C. The Guarantor as a Subsidiary of the Company will derive
substantial and direct benefits (which benefits are hereby acknowledged by the
Guarantor) from the letters of credit to be issued for the account of the
Company under the Credit Agreement.
D. In order to induce the Bank to make such letters of credit
available to the Company as provided in the Credit Agreement, and for other
valuable consideration, the Guarantor issues this Guaranty.
1. Definitions. Unless otherwise defined herein, capitalized terms used in
this Guaranty have the meanings given to them from time to time in the Credit
Agreement, or, as applicable, in the Syndicated Credit Agreement (as defined in
the Credit Agreement).
2. Guaranty.
2.1 Guaranty. The Guarantor hereby irrevocably, absolutely and
unconditionally guarantees the full and punctual payment or performance when
due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all of the obligations of the Company to
the Bank under the Credit Agreement and under the letters of credit issued
pursuant to the Credit Agreement (the "Obligations'). This Guaranty constitutes
a guaranty of payment and performance when due and not of collections and the
Guarantor specifically agrees that it shall not be necessary or required that
the Bank exercise any right, assert any claim or demand or enforce any remedy
whatsoever against the Company (or any other Person) before or as a condition to
the obligations of the Guarantor hereunder. The Bank may permit the indebtedness
of the Company to the Bank to include indebtedness other than the Obligations,
and may apply any amounts received from any source, other than from the
Guarantor, to that portion of Company's indebtedness to the Bank which is not a
part of the Obligations.
2.2 Obligations Independent. The obligations hereunder are
independent of the obligations of the Company, and a separate action or actions
may be brought and prosecuted against the Guarantor whether action is brought
against the Company or whether the Company be joined in any such action or
actions.
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2.3 Authorization of Renewals, Etc. The Guarantor authorizes the
Bank, without notice or demand and without affecting its liability hereunder,
from time to time:
(a) to renew, compromise, extend, accelerate or otherwise
change the time for payment or otherwise change the terms, of the Obligations,
including increase or decrease of the rate of interest thereon, or otherwise
change the terms of the Credit Agreement or any letter of credit;
(b) to receive and hold security for the payment of this
Guaranty or the Obligations and exchange, enforce, waive, release, fail to
perfect, sell, or otherwise dispose of any such security;
(c) to apply such security and direct the order or manner
of sale thereof as the Bank in its discretion may determine; and
(d) to release or substitute any one or more of any
endorsers or guarantors of the Obligations.
The Guarantor further agrees the performance or occurrence of any of the acts or
events described in clauses (a), (b), (c), and (d) above with respect to
indebtedness or other obligations of the Company, other than the Obligations, to
the Bank, shall not affect the liability of the Guarantor hereunder.
2.4 Waiver of Certain Rights. The Guarantor waives any right to
require the Bank:
(a) to proceed against the Company or any other Person;
(b) to proceed against or exhaust any security for the
Obligations or any other indebtedness of the Company to the Bank; or
(c) to pursue any other remedy in the Bank's power
whatsoever.
2.5 Waiver of Certain Defenses. The Guarantor waives any defense
arising by reason of any claim that the Guarantor's obligations exceed or are
more burdensome than those of the Company. The Guarantor waives all rights and
defenses arising out of an election of remedies by the Bank, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for the Obligations, has destroyed the Guarantor's rights of subrogation and
reimbursement against the Company by operation of Section 580d of the California
Code of Civil Procedure (if applicable) or otherwise. The Guarantor waives any
benefit of, and any right to participate in, any security or other guaranty now
or hereafter held by the Bank securing the Obligations.
2.6 Waiver of Presentments, Etc. The Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
Obligations or any other indebtedness of Company to the Bank.
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2.7 Information Relating to Company. The Guarantor acknowledges and
agrees that it shall have the sole responsibility for obtaining from the Company
such information concerning the Company's financial condition or business
operations as the Guarantor may require, and that the Bank does not have any
duty at any time to disclose to the Guarantor any information relating to the
business operations or financial condition of the Company.
2.8 Right of Setoff. In addition to any rights and remedies of the
Bank provided by law, if Guarantor has failed to make any payment due hereunder
upon demand, the Bank is authorized at any time and from time to time, without
prior notice to the Guarantor, any such notice being waived by the Guarantor to
the fullest extent permitted by law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Guarantor against any and all obligations of the Guarantor now or
hereafter existing under this Guaranty, irrespective of whether or not the Bank
shall have made demand under this Guaranty and although such obligations may be
contingent or unmatured. The Bank agrees promptly to notify the Guarantor after
any such set-off and application made by the Bank: provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section 2-8 are in addition to
the other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
2.9 Subordination. Any obligations of the Company to the Guarantor,
now or hereafter existing, including, but not limited to, obligations to the
Guarantor as subrogee of the Bank or resulting from the Guarantor's performance
under this Guaranty, are hereby fully subordinated in priority of payment to the
Obligations and all other indebtedness of the Company to the Bank.
2.10 Reinstatement of Guaranty, If any payment or transfer of any
interest in property by the Company to the Bank in fulfillment of any Obligation
is rescinded or must at any time (including after the return or cancellation of
this Guaranty) be returned, in whole or in part, by the Bank to the Company or
any other Person, upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, this Guaranty shall be reinstated with respect to any such
payment or transfer, regardless of any such prior return or cancellation.
2.11 Powers. It is not necessary for the Bank to inquire into the
powers of the Company or of the officers, directors, partners or agents acting
or purporting to act on its behalf, and any Obligations made or created in
reliance upon the professed exercise of such powers. shall be guaranteed
hereunder.
2.12 Taxes. (a) Subject to compliance with Section 9.10 of the
Syndicated Credit Agreement, any and all payments by the Guarantor to the Bank
under this Guaranty shall be made free and clear of, and without deduction or
withholding for, any Taxes, Other Taxes or Further Taxes. In addition, the
Guarantor shall pay all Other Taxes.
(b) If the Guarantor shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to the Bank, then:
(1) the sum payable shall be increased as necessary
so that, after making all required deductions and withholdings
(including deductions and withholdings
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applicable to additional sums payable under this Section), the Bank
receives and retains an amount equal to the sum it would have received
and retained had no such deductions or withholdings been made;
(ii) the Guarantor shall make such deductions and
withholdings;
(iii) the Guarantor shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority
in accordance with applicable law; and
(iv) the Guarantor shall also pay to the Bank, at
the time interest is paid, Further Taxes in the amount that the Bank
specifies as necessary to preserve the after-tax yield the Bank would
have received if such Taxes, Other Taxes or Further Taxes had not been
imposed.
(c) The Guarantor agrees to indemnify and hold harmless the
Bank for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further Taxes
in the amount that the respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank makes written demand therefor.
(d) Within 30 days after the date of any payment by the
Guarantor of Taxes, Other Taxes or Further Taxes, the Guarantor shall furnish to
the Bank the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the Bank.
(e) For purposes of this Section, (i) "Taxes" means any and
all present or future taxes, levies, assessments, imposts, duties, deductions,
fees, withholdings or similar charges. and all liabilities with respect thereto,
excluding, in the case of the Bank, taxes imposed on or measured by its net
income by the jurisdiction (or any political subdivision thereof) under the laws
of which the Bank is organized or maintains a lending office; (ii) "Other Taxes"
means any present or future stamp, court or documentary taxes or any other
excise or property taxes, charges or similar levies which arise from any payment
made hereunder or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Guaranty; and (iii)
"Further Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges (including,
without limitation, net income taxes and franchise taxes), and all liabilities
with respect thereto, imposed by any jurisdiction on account of amounts payable
or paid pursuant to this Section.
3. Representations and Warranties, The Guarantor represents and warrants
to the Bank as follows:
3.1 Existence and Power. The Guarantor (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization; (b) has the power and authority and all
governmental licenses, authorizations, consents and approvals to own its assets,
carry on its business and to execute, deliver, and perform its obligations
under, this Guaranty; (c) is duly qualified as a foreign limited liability
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<PAGE> 5
company, and licensed and in good standing, under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification or license; and (d) is in compliance with
all Requirements of Law; except, in each case, to the extent that the failure to
do so could not reasonably be expected to have a Material Adverse Effect.
"Material Adverse Effect" means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of the Guarantor, its parent and affiliates, taken as
a whole; (b) a material impairment of the ability of the Guarantor to perform
its obligations under this Guaranty; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Guarantor of
this Guaranty.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Guarantor of this Guaranty have been duly authorized, and do
not and will not (a) contravene the terms of any of the Guarantor's Organization
Documents; (b) Violate or result in any breach or contravention of, or the
creation of any lien under, any document evidencing any Contractual Obligation
to which the Guarantor is a party or any order, injunction, writ or decree of
any Governmental Authority to which the Guarantor or its property is subject; or
(c) violate any Requirement of Law.
3.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Guarantor of
this Guaranty.
3.4 Binding Effect. This Guaranty constitutes the legal, valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
3.5 Regulated Entities. None of the Guarantor, any Person
controlling the Guarantor or any Subsidiary of the Guarantor is (a) an
"Investment Company" within the meaning of the Investment Company Act of 1940;
or (b) subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation limiting its
ability to incur or guarantee Indebtedness.
4. Miscellaneous
4.1 Application of Payments on Guaranty. All payments required to
be made by the Guarantor hereunder shall, unless otherwise expressly provided
herein, be made to the Bank at the Bank's office. Payments received from the
Guarantor shall, unless otherwise expressly provided herein, be applied to
interest, principal, costs, fees, or other expenses due under the Credit
Agreement in such order as the Bank shall determine.
4.2 Assignments, Participations, Confidentiality. The Bank may from
time to time, without notice to the Guarantor and without affecting the
Guarantor's obligations hereunder, transfer its interest in the Obligations to
participants and assignees as provided in the Credit Agreement. The Guarantor
agrees that each such transfer will give rise to a direct
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<PAGE> 6
obligation of the Guarantor to each such participant and assignee and that each
such participant and assignee shall have the same rights and benefits under this
Guaranty as it would have if it were a Bank party to the Credit Agreement and
this Guaranty. The Guarantor and the Bank agree that the provisions of Section
10.09 of the Syndicated Credit Agreement shall apply to all information
identified as "confidential" or "secret" by the Guarantor and provided to the
Bank by the Guarantor or any Subsidiary of the Guarantor under this Guaranty or
any other Loan Document to which the Guarantor is a party.
4.3 Loan Document. This Guaranty is executed and delivered pursuant
to the Credit Agreement and shall (unless otherwise expressly indicated herein)
be construed, administered and applied in accordance with the terms and
provisions thereof. Without limiting the generality of the foregoing, the
provisions of Sections 1.02 and 1.03 of the Syndicated Credit Agreement shall
apply to the interpretation and administration of this Guaranty as if such
provisions were incorporated herein, with all references to the "Agreement" in
such Sections being deemed to be references to this Guaranty.
4.4 Waivers; Writing Required. No delay or omission by the Bank to
exercise any right under this Guaranty shall impair any such right, nor shall it
be construed to be a waiver thereof. No waiver of any single breach or default
under this Guaranty shall be deemed a waiver of any other breach or default. Any
amendment or waiver of any provision of this Guaranty must be in writing and
signed by the Guarantor and the Bank.
4.5 Remedies. All rights and remedies provided in this Guaranty and
any instrument or agreement referred to herein are cumulative and are not
exclusive of any rights or remedies otherwise provided by law. Any single or
partial exercise of any right or remedy shall not preclude the further exercise
thereof or the exercise of any other right or remedy.
4.6 Costs and Expenses. The Guarantor agrees to pay or reimburse
the Bank within five Business Days after demand for all costs and expenses
(including Attorney Costs) incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Guaranty (including in connection with any "workout" or restructuring regarding
amounts due under this Guaranty, and including in any Insolvency Proceeding or
appellate proceeding).
4.7 Severability. The illegality or unenforceability of any
provision of this Guaranty or any instrument or agreement referred to herein
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Guaranty or any instrument or agreement referred to
herein.
4.8 Governing Law and Jurisdiction. (a) THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE GUARANTOR AND THE BANK SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY
MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES
FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS
GUARANTY, EACH OF THE GUARANTOR AND THE BANK CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE NON-
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<PAGE> 7
EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GUARANTOR AND THE BANK
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING. WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. THE
GUARANTOR AND THE BANK EACH WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
4.9 Waiver of Jury Trial. THE GUARANTOR AND THE BANK EACH WAIVES THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR AND THE
BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT To A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
4.10 Entire Agreement. This Guaranty (a) integrates all the terms
and conditions mentioned herein or incidental hereto, (b) supersedes all oral
negotiations and prior writings with respect to the subject matter hereof, and
(c) is intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in this Guaranty and any such
instrument, agreement and document and as the complete and exclusive statement
of the terms agreed to by the parties.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officers as of the day and year first above written.
WILLIAMS-SONOMA DIRECT, INC.
By /s/ JOHN W. TATE
---------------------------------------
John W. Tate, Chief Financial Officer
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<PAGE> 1
EXHIBIT 10.10W
ONE BANK GUARANTY
This Guaranty is entered into as of February 7, 2000, by Pottery Barn
Kids, Inc. (the "Guarantor"), in favor of Bank of America, N.A. (formerly known
as Bank of America National Trust and Savings Association - the "Bank").
Recitals
A. Williams-Sonoma, Inc. (the "Company") and the Bank entered into
a Letter of Credit Agreement dated as of June 1, 1997. The Letter of Credit
Agreement as now in effect or hereafter extended, renewed, modified,
supplemented, amended or restated is hereinafter called the "Credit Agreement".
B. The Bank is willing to issue letters of credit for the account
of the Company as provided in the Credit Agreement on the condition (among
others) that the Guarantor enter into this Guaranty.
C. The Guarantor as a Subsidiary of the Company will derive
substantial and direct benefits (which benefits are hereby acknowledged by the
Guarantor) from the letters of credit to be issued for the account of the
Company under the Credit Agreement.
D. In order to induce the Bank to make such letters of credit
available to the Company as provided in the Credit Agreement, and for other
valuable consideration, the Guarantor issues this Guaranty.
1. Definitions. Unless otherwise defined herein, capitalized terms used in
this Guaranty have the meanings given to them from time to time in the Credit
Agreement, or, as applicable, in the Syndicated Credit Agreement (as defined in
the Credit Agreement).
2. Guaranty.
2.1 Guaranty. The Guarantor hereby irrevocably, absolutely and
unconditionally guarantees the full and punctual payment or performance when
due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all of the obligations of the Company to
the Bank under the Credit Agreement and under the letters of credit issued
pursuant to the Credit Agreement (the "Obligations'). This Guaranty constitutes
a guaranty of payment and performance when due and not of collections and the
Guarantor specifically agrees that it shall not be necessary or required that
the Bank exercise any right, assert any claim or demand or enforce any remedy
whatsoever against the Company (or any other Person) before or as a condition to
the obligations of the Guarantor hereunder. The Bank may permit the indebtedness
of the Company to the Bank to include indebtedness other than the Obligations,
and may apply any amounts received from any source, other than from the
Guarantor, to that portion of Company's indebtedness to the Bank which is not a
part of the Obligations.
2.2 Obligations Independent. The obligations hereunder are
independent of the obligations of the Company, and a separate action or actions
may be brought and prosecuted against the Guarantor whether action is brought
against the Company or whether the Company be joined in any such action or
actions.
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<PAGE> 2
2.3 Authorization of Renewals, Etc. The Guarantor authorizes the
Bank, without notice or demand and without affecting its liability hereunder,
from time to time:
(a) to renew, compromise, extend, accelerate or otherwise
change the time for payment or otherwise change the terms, of the Obligations,
including increase or decrease of the rate of interest thereon, or otherwise
change the terms of the Credit Agreement or any letter of credit;
(b) to receive and hold security for the payment of this
Guaranty or the Obligations and exchange, enforce, waive, release, fail to
perfect, sell, or otherwise dispose of any such security;
(c) to apply such security and direct the order or manner
of sale thereof as the Bank in its discretion may determine; and
(d) to release or substitute any one or more of any
endorsers or guarantors of the Obligations.
The Guarantor further agrees the performance or occurrence of any of the acts or
events described in clauses (a), (b), (c), and (d) above with respect to
indebtedness or other obligations of the Company, other than the Obligations, to
the Bank, shall not affect the liability of the Guarantor hereunder.
2.4 Waiver of Certain Rights. The Guarantor waives any right to
require the Bank:
(a) to proceed against the Company or any other Person;
(b) to proceed against or exhaust any security for the
Obligations or any other indebtedness of the Company to the Bank; or
(c) to pursue any other remedy in the Bank's power
whatsoever.
2.5 Waiver of Certain Defenses. The Guarantor waives any defense
arising by reason of any claim that the Guarantor's obligations exceed or are
more burdensome than those of the Company. The Guarantor waives all rights and
defenses arising out of an election of remedies by the Bank, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for the Obligations, has destroyed the Guarantor's rights of subrogation and
reimbursement against the Company by operation of Section 580d of the California
Code of Civil Procedure (if applicable) or otherwise. The Guarantor waives any
benefit of, and any right to participate in, any security or other guaranty now
or hereafter held by the Bank securing the Obligations.
2.6 Waiver of Presentments, Etc. The Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
Obligations or any other indebtedness of Company to the Bank.
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<PAGE> 3
2.7 Information Relating to Company. The Guarantor acknowledges and
agrees that it shall have the sole responsibility for obtaining from the Company
such information concerning the Company's financial condition or business
operations as the Guarantor may require, and that the Bank does not have any
duty at any time to disclose to the Guarantor any information relating to the
business operations or financial condition of the Company.
2.8 Right of Setoff. In addition to any rights and remedies of the
Bank provided by law, if Guarantor has failed to make any payment due hereunder
upon demand, the Bank is authorized at any time and from time to time, without
prior notice to the Guarantor, any such notice being waived by the Guarantor to
the fullest extent permitted by law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Guarantor against any and all obligations of the Guarantor now or
hereafter existing under this Guaranty, irrespective of whether or not the Bank
shall have made demand under this Guaranty and although such obligations may be
contingent or unmatured. The Bank agrees promptly to notify the Guarantor after
any such set-off and application made by the Bank: provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section 2-8 are in addition to
the other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
2.9 Subordination. Any obligations of the Company to the Guarantor,
now or hereafter existing, including, but not limited to, obligations to the
Guarantor as subrogee of the Bank or resulting from the Guarantor's performance
under this Guaranty, are hereby fully subordinated in priority of payment to the
Obligations and all other indebtedness of the Company to the Bank.
2.10 Reinstatement of Guaranty, If any payment or transfer of any
interest in property by the Company to the Bank in fulfillment of any Obligation
is rescinded or must at any time (including after the return or cancellation of
this Guaranty) be returned, in whole or in part, by the Bank to the Company or
any other Person, upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, this Guaranty shall be reinstated with respect to any such
payment or transfer, regardless of any such prior return or cancellation.
2.11 Powers. It is not necessary for the Bank to inquire into the
powers of the Company or of the officers, directors, partners or agents acting
or purporting to act on its behalf, and any Obligations made or created in
reliance upon the professed exercise of such powers. shall be guaranteed
hereunder.
2.12 Taxes. (a) Subject to compliance with Section 9.10 of the
Syndicated Credit Agreement, any and all payments by the Guarantor to the Bank
under this Guaranty shall be made free and clear of, and without deduction or
withholding for, any Taxes, Other Taxes or Further Taxes. In addition, the
Guarantor shall pay all Other Taxes.
(b) If the Guarantor shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to the Bank, then:
(1) the sum payable shall be increased as necessary
so that, after making all required deductions and withholdings
(including deductions and withholdings
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applicable to additional sums payable under this Section), the Bank
receives and retains an amount equal to the sum it would have received
and retained had no such deductions or withholdings been made;
(ii) the Guarantor shall make such deductions and
withholdings;
(iii) the Guarantor shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority
in accordance with applicable law; and
(iv) the Guarantor shall also pay to the Bank, at
the time interest is paid, Further Taxes in the amount that the Bank
specifies as necessary to preserve the after-tax yield the Bank would
have received if such Taxes, Other Taxes or Further Taxes had not been
imposed.
(c) The Guarantor agrees to indemnify and hold harmless the
Bank for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further Taxes
in the amount that the respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank makes written demand therefor.
(d) Within 30 days after the date of any payment by the
Guarantor of Taxes, Other Taxes or Further Taxes, the Guarantor shall furnish to
the Bank the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the Bank.
(e) For purposes of this Section, (i) "Taxes" means any and
all present or future taxes, levies, assessments, imposts, duties, deductions,
fees, withholdings or similar charges. and all liabilities with respect thereto,
excluding, in the case of the Bank, taxes imposed on or measured by its net
income by the jurisdiction (or any political subdivision thereof) under the laws
of which the Bank is organized or maintains a lending office; (ii) "Other Taxes"
means any present or future stamp, court or documentary taxes or any other
excise or property taxes, charges or similar levies which arise from any payment
made hereunder or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Guaranty; and (iii)
"Further Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges (including,
without limitation, net income taxes and franchise taxes), and all liabilities
with respect thereto, imposed by any jurisdiction on account of amounts payable
or paid pursuant to this Section.
3. Representations and Warranties, The Guarantor represents and warrants
to the Bank as follows:
3.1 Existence and Power. The Guarantor (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization; (b) has the power and authority and all
governmental licenses, authorizations, consents and approvals to own its assets,
carry on its business and to execute, deliver, and perform its obligations
under, this Guaranty; (c) is duly qualified as a foreign limited liability
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<PAGE> 5
company, and licensed and in good standing, under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification or license; and (d) is in compliance with
all Requirements of Law; except, in each case, to the extent that the failure to
do so could not reasonably be expected to have a Material Adverse Effect.
"Material Adverse Effect" means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of the Guarantor, its parent and affiliates, taken as
a whole; (b) a material impairment of the ability of the Guarantor to perform
its obligations under this Guaranty; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Guarantor of
this Guaranty.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Guarantor of this Guaranty have been duly authorized, and do
not and will not (a) contravene the terms of any of the Guarantor's Organization
Documents; (b) Violate or result in any breach or contravention of, or the
creation of any lien under, any document evidencing any Contractual Obligation
to which the Guarantor is a party or any order, injunction, writ or decree of
any Governmental Authority to which the Guarantor or its property is subject; or
(c) violate any Requirement of Law.
3.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Guarantor of
this Guaranty.
3.4 Binding Effect. This Guaranty constitutes the legal, valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
3.5 Regulated Entities. None of the Guarantor, any Person
controlling the Guarantor or any Subsidiary of the Guarantor is (a) an
"Investment Company" within the meaning of the Investment Company Act of 1940;
or (b) subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation limiting its
ability to incur or guarantee Indebtedness.
4. Miscellaneous
4.1 Application of Payments on Guaranty. All payments required to
be made by the Guarantor hereunder shall, unless otherwise expressly provided
herein, be made to the Bank at the Bank's office. Payments received from the
Guarantor shall, unless otherwise expressly provided herein, be applied to
interest, principal, costs, fees, or other expenses due under the Credit
Agreement in such order as the Bank shall determine.
4.2 Assignments, Participations, Confidentiality. The Bank may from
time to time, without notice to the Guarantor and without affecting the
Guarantor's obligations hereunder, transfer its interest in the Obligations to
participants and assignees as provided in the Credit Agreement. The Guarantor
agrees that each such transfer will give rise to a direct
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<PAGE> 6
obligation of the Guarantor to each such participant and assignee and that each
such participant and assignee shall have the same rights and benefits under this
Guaranty as it would have if it were a Bank party to the Credit Agreement and
this Guaranty. The Guarantor and the Bank agree that the provisions of Section
10.09 of the Syndicated Credit Agreement shall apply to all information
identified as "confidential" or "secret" by the Guarantor and provided to the
Bank by the Guarantor or any Subsidiary of the Guarantor under this Guaranty or
any other Loan Document to which the Guarantor is a party.
4.3 Loan Document. This Guaranty is executed and delivered pursuant
to the Credit Agreement and shall (unless otherwise expressly indicated herein)
be construed, administered and applied in accordance with the terms and
provisions thereof. Without limiting the generality of the foregoing, the
provisions of Sections 1.02 and 1.03 of the Syndicated Credit Agreement shall
apply to the interpretation and administration of this Guaranty as if such
provisions were incorporated herein, with all references to the "Agreement" in
such Sections being deemed to be references to this Guaranty.
4.4 Waivers; Writing Required. No delay or omission by the Bank to
exercise any right under this Guaranty shall impair any such right, nor shall it
be construed to be a waiver thereof. No waiver of any single breach or default
under this Guaranty shall be deemed a waiver of any other breach or default. Any
amendment or waiver of any provision of this Guaranty must be in writing and
signed by the Guarantor and the Bank.
4.5 Remedies. All rights and remedies provided in this Guaranty and
any instrument or agreement referred to herein are cumulative and are not
exclusive of any rights or remedies otherwise provided by law. Any single or
partial exercise of any right or remedy shall not preclude the further exercise
thereof or the exercise of any other right or remedy.
4.6 Costs and Expenses. The Guarantor agrees to pay or reimburse
the Bank within five Business Days after demand for all costs and expenses
(including Attorney Costs) incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Guaranty (including in connection with any "workout" or restructuring regarding
amounts due under this Guaranty, and including in any Insolvency Proceeding or
appellate proceeding).
4.7 Severability. The illegality or unenforceability of any
provision of this Guaranty or any instrument or agreement referred to herein
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Guaranty or any instrument or agreement referred to
herein.
4.8 Governing Law and Jurisdiction. (a) THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE GUARANTOR AND THE BANK SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY
MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES
FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS
GUARANTY, EACH OF THE GUARANTOR AND THE BANK CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE NON-
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<PAGE> 7
EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GUARANTOR AND THE BANK
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING. WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. THE
GUARANTOR AND THE BANK EACH WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
4.9 Waiver of Jury Trial. THE GUARANTOR AND THE BANK EACH WAIVES THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR AND THE
BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT To A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
4.10 Entire Agreement. This Guaranty (a) integrates all the terms
and conditions mentioned herein or incidental hereto, (b) supersedes all oral
negotiations and prior writings with respect to the subject matter hereof, and
(c) is intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in this Guaranty and any such
instrument, agreement and document and as the complete and exclusive statement
of the terms agreed to by the parties.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officers as of the day and year first above written.
POTTERY BARN KIDS, INC.
By /s/ JOHN W. TATE
---------------------------------------
John W. Tate, Chief Financial Officer
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<PAGE> 1
Exhibit 10.13
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
Between
LEVI STRAUSS & CO.,
a Delaware corporation
as seller
and
WILLIAM-SONOMA, INC.,
a California corporation
as Buyer
Dated as of December 14, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Execution of Agreement ............................................ 1
2. Property Subject to Agreement ..................................... 1
2.1. Land ........................................................ 1
2.2. Improvements ................................................ 1
2.3. ATM Lease ................................................... 1
2.4. Contracts ................................................... 1
2.5. Personal Property ........................................... 2
2.6. Certain Personal Property, Parking, Generator Access, and
Continued Occupancy ......................................... 2
3. Purchase Price, Payment of Purchase Price and Liquidated
Damages ........................................................... 3
3.1. Purchase Price .............................................. 3
3.2. Payment of Purchase Price ................................... 3
3.3. Intentionally deleted ....................................... 3
3.4. Deposit as Liquidated Damages ............................... 3
4. "As Is, Where Is" Sale ............................................ 4
4.1. Disclaimer and Release ...................................... 4
5. Title to Property ................................................. 6
6. Conditions Precedent to Closing ................................... 7
6.1. Conditions .................................................. 7
6.2. Effect of Failure of Conditions ............................. 7
7. Escrow and Closing ................................................ 7
7.1. Escrow Instructions ......................................... 7
7.2. Closing ..................................................... 7
7.3. Deliveries By Seller ........................................ 7
7.4. Deliveries By Buyer ......................................... 8
7.5. Other Instruments ........................................... 8
7.6. Prorations and Apportionments ............................... 9
7.7. Closing Costs and Expenses .................................. 9
7.8. Insurance; Utilities ........................................ 10
7.9. Close of Escrow ............................................. 10
7.10. Notification; Closing Statements ............................ 10
8. Representations, Warranties and Covenants ......................... 10
8.1. Buyer's Representations and Warranties ...................... 10
8.2. Seller's Representations and Warranties ..................... 11
8.3. Continuation and Survival of Representations and
Warranties .................................................. 11
8.4. Limitation of Liability ..................................... 11
9. Possession ........................................................ 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
10. Loss By Fire or Other Casualty: Condemnation............... 12
10.1. Damage or Destruction.............................. 12
10.2. Condemnation....................................... 12
11. Miscellaneous.............................................. 13
11.1. Notices............................................ 13
11.2. Brokers and Finders................................ 14
11.3. Successors and Assigns............................. 15
11.4. Recording.......................................... 15
11.5. Amendments......................................... 15
11.6. Interpretation..................................... 15
11.7. Governing Law...................................... 15
11.8. Entire Agreement................................... 15
11.9. Attorneys' Fees and Costs.......................... 15
11.10. Time of Essence.................................... 15
11.11. Consultant Reports................................. 15
11.12. No Waiver.......................................... 15
11.13. Further Acts....................................... 15
11.14. No Intent To Benefit Third Parties................. 16
11.15. Performance Due On Day Other Than Business Day..... 16
11.16. Confidentiality.................................... 16
11.17. "Real Estate Reporting Person"..................... 16
11.18. Venue.............................................. 16
11.19. No Joint Venture; Not an Offer..................... 16
11.20. Counterparts....................................... 17
</TABLE>
<PAGE> 4
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT SECTION REFERENCE
<S> <C>
A - Legal Description 2.1
B - Access Agreement 2.6
C - Grant Deed 7.3
D - Bill of Sale 7.3
E - Assignment of Lease 7.3
F - Assignment of Contracts 7.3
G - Notice to Tenant 7.3
H - Delivered Documents 4.1
</TABLE>
iii
<PAGE> 5
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
This PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (the "Agreement")
is made as of December 14, 1999 (the "Effective Date"), by and between Levi
Strauss & Co., a Delaware corporation ("Seller"), and Williams-Sonoma, Inc., a
California corporation ("Buyer").
R E C I T A L S
A. Seller owns that certain Property (as hereafter defined) commonly
known as Icehouse One and Icehouse Two, in the City and County of San Francisco,
State of California, as more particularly described below.
B. Buyer desires to purchase the Property from Seller, and Seller
desires to sell the Property to Buyer, on the terms and conditions set forth
herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing recitals and mutual
agreements set forth herein, and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer agree as follows:
1. EXECUTION OF AGREEMENT
This Agreement shall be effective as of the Effective Date set forth
above.
2. PROPERTY SUBJECT TO AGREEMENT
On and subject to the terms and conditions of this Agreement, Seller
hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller
all of Seller's right, title and interest in and to the following:
2.1 Land. That certain land described in Exhibit A attached
hereto, and all appurtenant rights, privileges and easements thereto
(collectively, the "Land").
2.2 Improvements. All of Seller's right, title and interest in and
to all buildings, structures, fixtures (but specifically excluding any
improvements or fixtures that are the property of Bank of America under the ATM
Lease), landscaping and other improvements located on the Land (collectively,
the "Improvements"). The Land and the Improvements are collectively referred to
herein as the "Real Property;"
2.3 ATM Lease. All of Seller's right, title and interest as lessor
in and to the ATM lease with Bank of America, to the extent it is in effect on
the Closing Date (the "ATM Lease");
2.4 Contracts. To the extent transferable without consent, all of
Seller's right, title and interest in and to any and all service contracts for
the Real Property in effect on the Closing Date (collectively, the "Contracts");
and
<PAGE> 6
2.5 Personal Property. The tangible personal property owned by
Seller and described in the Bill of Sale (the "Personal Property"). The Land,
the Improvements, the ATM Lease, the Contracts and the Personal Property are
collectively referred to herein as the "Property."
2.6 Certain Personal Property, Parking, Generator Access, and
Continued Occupancy.
(a) Except for the Personal Property described in the Bill
of Sale, the Property shall not include, and Seller shall have the right to
remove from the Property, its computers, copiers and other office equipment, and
its furniture, work stations, signage, emblems, trade materials, logos and art
work from the Property.
(b) Pursuant to an agreement of record dated October 24,
1973 ("Parking Agreement"), the owner of the Levi's Plaza property is to make
available for rental up to 120 off-street parking spaces in parking facilities
within or near Levi's Plaza and/or within a permissible distance from the
Property as provided in such Parking Agreement. For the term of Seller's
existing leases of space in Levi's Plaza (as amended from time to time and as
extended under options or otherwise), or for so long as Seller (or any
successor-in-interest to Seller by way of merger, consolidation, the sale of all
or substantially all of Seller's assets or stock, or other business arrangement)
is a tenant or occupant of any portion of the Levi's Plaza property, to the
extent Buyer elects to rent more than sixty (60) parking spaces under the
Parking Agreement, Buyer agrees to use its best efforts to satisfy its right to
rent more than sixty (60) parking spaces under the Parking Agreement by renting
any excess over such sixty (60) of such parking spaces in parking facilities
other than the garage at 1155 Battery Street. If in Seller's reasonable judgment
it may be necessary or appropriate to seek any municipal consents or to amend
the Parking Agreement to implement the foregoing agreement, Buyer shall support
and cooperate with Seller in such efforts. At Seller's request, the parties
shall execute and cause to be recorded at Closing a memorandum of the parties'
agreement described in this Section 2.6(b).
(c) Seller currently uses a generator located on the ground
floor of Icehouse One to serve certain important electrical needs for Seller's
premises at Levi's Plaza. Pursuant to the Access Agreement attached hereto as
Exhibit B (the "Access Agreement"), Buyer agrees to grant to Seller continued
access and the right to use such area of the Property for the use, operation and
maintenance of the generator.
(d) For a period not to exceed the later of the date which
is (i) seventy-five (75) days following the Closing, or (ii) May 1, 2000, Seller
shall be permitted to continue to occupy rent-free and conduct its business in a
portion of the Property, consisting of approximately 30,000 square feet,
comprised of the 7th floor of Ice House One, the 1st floor of Ice House Two, and
the Ice House One 1st floor switch and IT server room. Seller shall continue to
own and shall have the right to remove its office and telecommunications
equipment and furniture located in the space, and, upon the termination of such
occupancy, Seller agrees, if so requested by Buyer, to repair any material
damage to the Property caused by Seller's removal of its furniture and equipment
from such space. The parties shall cooperate in good faith to provide for
Buyer's phased occupancy of the Property.
The provisions of this Section 2.6 shall survive the Closing.
2
<PAGE> 7
3. PURCHASE PRICE, PAYMENT OF PURCHASE PRICE AND LIQUIDATED DAMAGES
3.1 Purchase Price. Buyer agrees to pay, and Seller agrees to
accept, as consideration for the conveyance of the Property to Buyer, the sum of
Eighty Million Dollars ($80,000,000.00) (the "Purchase Price"). The Purchase
Price shall be payable in full as set forth below.
3.2 Payment of Purchase Price. The Purchase Price shall be paid by
Buyer as follows:
(a) Concurrently with its execution and delivery of this
Agreement to Seller, Buyer shall deposit the sum of Seven Million Five Hundred
Thousand Dollars ($7,500,000.00) (the "Deposit") in immediately available funds
with Seller. The Deposit is and shall be non-refundable to Buyer, and may be
used and retained by Seller, subject to return to Buyer only in the event Seller
defaults under this Agreement, as provided in Section 3.4.
(b) The balance of the Purchase Price (i.e., the Purchase
Price minus the Deposit, and all credits and prorations in favor of Buyer, if
any), together with Buyer's share of all closing costs and any prorations
charged to Buyer, shall be placed into Escrow (as defined below) by wire
transfer of immediately available funds not later than one business day before
the Closing Date. Buyer shall cause Escrow Holder to pay to Seller, by wire
transfer of immediately available funds to an account designated by Seller, the
Purchase Price (as adjusted by Seller's share of credits, prorations and closing
costs) no later than 11:00 a.m. (Pacific Time) on the Closing Date.
3.3 Intentionally deleted.
3.4 Deposit as Liquidated Damages. IF THE SALE OF THE PROPERTY AS
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED, THEN UNLESS BUYER HAS VALIDLY AND
TIMELY EXERCISED ITS TERMINATION RIGHTS SET FORTH IN ARTICLE 10, OR UNLESS THE
FAILURE TO CONSUMMATE THE SALE IS DUE SOLELY TO A DEFAULT OF SELLER, SELLER
SHALL BE ENTITLED TO RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES. THE PARTIES
ACKNOWLEDGE THAT SELLER'S ACTUAL DAMAGES IN THE EVENT OF SUCH A DEFAULT BY BUYER
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY
PLACING THEIR INITIALS BELOW, THE PARTIES AGREE AND ACKNOWLEDGE THAT THE DEPOSIT
HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF
SELLER'S DAMAGES. THE PARTIES FURTHER ACKNOWLEDGE THAT THE DEPOSIT HAS BEEN
AGREED UPON AS SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER IN THE EVENT OF
SUCH A DEFAULT ON THE PART OF BUYER OR A FAILURE TO CLOSE AS PROVIDED ABOVE,
OTHER THAN THE OBLIGATIONS OF BUYER HEREIN WHICH EXPRESSLY SURVIVE TERMINATION
OR CANCELLATION HEREOF. IN ADDITION, BUYER SHALL PAY ALL TITLE AND ESCROW
CANCELLATION CHARGES.
IF THE CLOSING FAILS TO OCCUR DUE SOLELY TO A DEFAULT OF SELLER, THEN THIS
AGREEMENT SHALL TERMINATE AND BUYER, AS ITS SOLE AND EXCLUSIVE REMEDY, SHALL BE
ENTITLED TO THE RETURN OF THE DEPOSIT, AND NEITHER PARTY SHALL HAVE ANY FURTHER
RIGHTS OR OBLIGATIONS TO THE OTHER HEREUNDER OTHER THAN THE OBLIGATIONS
3
<PAGE> 8
WHICH EXPRESSLY SURVIVE TERMINATION OR CANCELLATION HEREOF. IN ADDITION, SELLER
SHALL PAY ALL TITLE AND ESCROW CANCELLATION CHARGES. AS MATERIAL AND SUBSTANTIAL
INDUCEMENT TO SELLER TO ENTER INTO THIS AGREEMENT, BUYER HEREBY IRREVOCABLY
WAIVES AND AGREES NOT TO CLAIM OR ASSERT ANY RIGHT WHICH BUYER MAY HAVE TO (a)
SPECIFIC PERFORMANCE OR ANY OTHER EQUITABLE REMEDY, (b) RECORD OR FILE A LIS
PENDENS OR OTHER MATTER AFFECTING TITLE TO OR ANY INTEREST IN THE PROPERTY, (c)
CLAIM A VENDEE'S LIEN UPON THE PROPERTY, OR (d) DAMAGES AGAINST SELLER.
NOTWITHSTANDING THE FOREGOING, IN THE EVENT THAT SELLER HAS BREACHED THIS
AGREEMENT BY WRONGFULLY REFUSING TO CONVEY TITLE TO THE PROPERTY AS PROVIDED
HEREIN, BUYER MAY PURSUE AN ACTION FOR SPECIFIC PERFORMANCE AGAINST SELLER
PROVIDED THAT (e) SELLER SHALL NOT BE REQUIRED TO PERFORM ANY ACT IN CONNECTION
WITH SUCH CONVEYANCE, EXCEPT AS SPECIFICALLY PROVIDED FOR HEREIN, AND (f) BUYER
SHALL COMMENCE ANY SUCH ACTION FOR SPECIFIC PERFORMANCE WITHIN FIFTEEN (15) DAYS
OF SELLER'S WRONGFUL REFUSAL TO CONVEY TITLE TO THE PROPERTY AS PROVIDED HEREIN.
BUYER SHALL NOT BE ENTITLED TO RECORD A LIS PENDENS AGAINST THE PROPERTY OTHER
THAN IN CONNECTION AND CONCURRENTLY WITH THE FILING OF SUCH SPECIFIC PERFORMANCE
ACTION.
Buyer's Initials ___________ Seller's Initials __________
4. "AS IS, WHERE IS" SALE
4.1 Disclaimer and Release. As an essential inducement to Seller
to sell the Property to Buyer on the terms and conditions set forth in this
Agreement, Buyer acknowledges, understands and agrees as follows:
(a) "AS IS, WHERE IS." Except as expressly provided in the
representations and warranties in Section 8.2 hereof, the sale of the Property
hereunder is and will be made on an "As Is, Where Is" basis and Seller has not
made, does not make and specifically disclaims and negates any representations,
warranties or guaranties of any kind or character whatsoever, whether express or
implied, oral or written, past, present or future of, as to, concerning or with
respect to the Property or any other matter whatsoever.
(b) Sophisticated Buyer. Buyer represents that it is a
sophisticated purchaser who is familiar with the ownership and operation of real
estate projects similar to the Property and Buyer acknowledges that Buyer has
had adequate opportunity to complete all physical, financial and other
examinations relating to the Property that it deems necessary, and will acquire
the same solely on the basis of such examinations, and not any information
provided or to be provided by Seller (other than as expressly provided in
Section 8.2). Buyer has had the opportunity to perform such investigations as it
deems necessary, and to review the documents and materials provided by Seller or
its agents, including those referenced on ExhibitH hereof, and shall assume the
risk that adverse matters, including, but not limited to, construction defects
and adverse physical and environmental conditions, may exist, and may not have
been revealed by Buyer's investigations.
(c) Disclaimers. Without limiting the generality of
subsection (a) or (b) above, other than as expressly provided in Section 8.2
below, neither Seller nor any of its agents, brokers, attorneys or employees has
made or does make any representations or
4
<PAGE> 9
warranties, whether oral or written, express or implied, including without
limitation, with respect to (i) the quality, nature, adequacy and physical
condition and aspects of the Property, including, but not limited to, the
structural elements or seismic aspects of the Property, foundation, roof,
appurtenances, access, landscaping, parking facilities, electrical, mechanical,
HVAC, plumbing, sewage, and other utility systems, facilities and appliances,
and the square footage within all or any part of the Improvements, (ii) the
quality, nature, adequacy, and physical condition of soils, geology and any
groundwater, (iii) the development potential of the Property, (iv) the zoning or
other legal status of the Property or any other public or private restrictions
on use, or any easements or appurtenant rights respecting, the Property, (v) the
compliance of the Property or its operation with any applicable codes, laws,
regulations, statutes, ordinances, covenants, conditions and restrictions of any
governmental or quasi-governmental entity or of any other person or entity, (vi)
the presence or absence of Hazardous Materials in, on, under or about the
Property or any adjoining or neighboring property, (vii) the condition of title
to the Property, or (viii) the ATM Lease, Contracts, or other agreements
affecting the Property. Seller expressly disclaims and negates as to the
Property (ix) any implied or express warranty of merchantability; (x) any
implied or express warranty of fitness for a particular purpose; and (xi) any
other implied or express warranty with respect to the Property. All documents,
reports, studies and other information or materials delivered or disclosed to
Buyer by Seller or anyone on behalf of Seller (the "Due Diligence Materials"),
if any, are solely for Buyer's convenience and are or will be obtained from a
variety of sources. Seller has not made any independent investigation or
verification of Due Diligence Materials, and makes no representation as to the
accuracy or completeness of Due Diligence Materials. Seller shall not be liable
for any negligent misrepresentation or any failure to investigate the Property
nor shall Seller be bound or liable in any manner by any verbal or written
statement, representations, appraisals, environmental assessment reports, or
other information pertaining to the Property or the operation thereof, furnished
by Seller or any of Seller's agents, consultants, brokers or employees. As used
herein, "Hazardous Materials" means any chemical, compound, material, mixture,
living organism or substance that is now or hereafter becomes defined or listed
in, or otherwise classified pursuant to any Environmental Law as a hazardous
substance, hazardous material, hazardous waste, extremely hazardous waste,
infectious waste, toxic substance, toxic pollutant or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity or
toxicity, and shall include, without limitation, any polychlorinated biphenyls
(PCBs), asbestos, lead-based paint or building materials, radon, petroleum,
natural gas, natural gas liquids, liquified natural gas or synthetic gas usable
for fuel (or mixtures of natural gas and such synthetic gas). "Environmental
Laws" shall mean any and all present and future federal, state and local laws
(whether under common law, statute, rule, regulation or otherwise), requirements
under permits issued pursuant to these laws, and other requirements of
governmental authorities relating to the environment, to any Hazardous Material
or to any activity involving Hazardous Materials, and shall include, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Federal Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), and all other
applicable provisions of federal, state and local laws related to the
environment.
(d) RELEASE. BUYER RELEASES SELLER AND ALL PARTIES RELATED
TO OR AFFILIATED WITH SELLER, INCLUDING WITHOUT LIMITATION SELLER'S OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS, CONTRACTORS AND EMPLOYEES (EACH, A "SELLER
RELATED PARTY") FROM ALL CLAIMS WHICH ANY BUYER OR ANY PARTY RELATED TO OR
AFFILIATED WITH BUYER (EACH, A "BUYER RELATED PARTY") HAS OR MAY HAVE ARISING
FROM OR RELATED TO ANY MATTER OR THING RELATED TO OR IN CONNECTION WITH THE
PROPERTY,
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INCLUDING, WITHOUT LIMITATION, THE DOCUMENTS AND INFORMATION REFERRED TO HEREIN,
THE CONTRACTS, THE ATM LEASE AND THE TENANT THEREUNDER, ANY CONSTRUCTION
DEFECTS, ERRORS OR OMISSIONS IN DESIGN OR CONSTRUCTION, ANY ENVIRONMENTAL,
STRUCTURAL OR PHYSICAL CONDITIONS, AND ANY NATURAL HAZARD DISCLOSURES REQUIRED
UNDER GOVERNMENT CODE SECTIONS 8589.3, 8589.4 AND 51183.5 AND PUBLIC RESOURCES
CODE SECTIONS 2621.9, 2694 AND 4136, AND BUYER SHALL NOT LOOK TO SELLER OR ANY
SELLER RELATED PARTY IN CONNECTION WITH THE FOREGOING FOR ANY REDRESS OR RELIEF.
NOTWITHSTANDING THE FOREGOING, THIS RELEASE SHALL NOT APPLY TO ANY BREACH OF THE
REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN SECTION 8.2 OR TO THOSE
OBLIGATIONS OF SELLER UNDER THIS AGREEMENT WHICH ARE EXPRESSLY STATED HEREIN TO
SURVIVE THE CLOSING. THIS RELEASE SHALL BE GIVEN FULL FORCE AND EFFECT ACCORDING
TO EACH OF ITS TERMS AND PROVISIONS, INCLUDING THOSE RELATING TO UNKNOWN AND
UNSUSPECTED CLAIMS, DAMAGES AND CAUSES OF ACTION, AND IN THAT REGARD BUYER
HEREBY EXPRESSLY WAIVES ALL RIGHTS AND BENEFITS IT MAY NOW HAVE OR HEREAFTER
ACQUIRE UNDER CALIFORNIA CIVIL CODE SECTION 1542 WHICH PROVIDES:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."
Initials of Buyer __________
(e) Conspicuous. To the extent required to be operative, the
parties acknowledge that the disclaimers or warranties contained herein are
"conspicuous" disclaimers for purposes of any applicable law, rule, regulation
or order.
(f) Indemnity. Buyer shall indemnify, defend (using counsel
reasonably satisfactory to Seller) and hold Seller and each and every Seller
Related Party harmless from and against any claims, liens, expenses, costs
(including, without limitation, attorneys' fees, including allocated costs of
in-house counsel), liabilities, damages, losses, demands, actions or causes of
action of whatever kind or nature arising out of or in any way connected,
directly or indirectly, with Buyer's use, operation, improvement, sale or lease
of the Property after the Closing.
5. TITLE TO PROPERTY
Buyer heretofore has reviewed and approved the title report and all
exceptions referred to therein dated October 26, 1999 from Chicago Title
Insurance Company ("Title Company"), and any supplements thereto as may have
been obtained by or delivered to Buyer (collectively "Title Report"), and the
ALTA Survey dated December 3, 1999, prepared by Martin M. Ron Assoc., Inc., and
Buyer has approved the Title Report, the Survey, and all matters related to the
condition of title to the Property. At the Closing, Seller shall convey to Buyer
fee title to the Property, subject to all matters of record (including without
limitation those disclosed by the
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Title Report) by execution and delivery of a Grant Deed (the "Grant Deed") in
the form attached hereto as Exhibit C. Buyer's sole recourse for a defect in
title shall be to enforce Buyer's rights under its Owner's Title Policy issued
by the Title Company, and Seller shall have no liability to Buyer based upon any
defect in or other matter related to the title acquired by Buyer. The Owner's
Title Policy may include such reasonable endorsements as Buyer may reasonably
require, provided that (i) Buyer shall have obtained prior to the Effective Date
of this Agreement the commitment of the Title Company to issue such
endorsements, (ii)the issuance of such endorsements shall not be a condition to
Buyer's obligations hereunder, and (iii)any such endorsements shall be at
Buyer's sole cost.
6. CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions. The following conditions are conditions precedent
to Seller's obligation to sell the Property:
(a) Compliance by Buyer. Buyer shall have complied with each
and every covenant and condition of this Agreement to be kept or complied with
by Buyer.
(b) Representations and Warranties. All of Buyer's
representations and warranties set forth in Section 8.1 hereof shall be true and
correct in all material respects as of the Closing Date.
6.2 Effect of Failure of Conditions. In the event that there shall
be failure of any of the conditions contained in Section 6.1, Seller may
terminate this Agreement and the Deposit shall be retained by Seller as provided
in Section 3.4 above. If Seller so elects to terminate this Agreement, neither
party shall have any further rights or obligations hereunder, except for those
rights and obligations which expressly survive termination.
7. ESCROW AND CLOSING
7.1 Escrow Instructions. Escrow herein (the "Escrow") shall be
established at Chicago Title Insurance Company, 388 Market Street, Suite 1300,
San Francisco, California ("Escrow Holder"). This Agreement shall serve as the
instructions to Escrow Holder to consummate the purchase and sale as
contemplated hereby. Seller and Buyer agree to execute such additional and
supplementary escrow instructions as may be appropriate to enable Escrow Holder
to comply with the terms of this Agreement. If there is any conflict between the
provisions of this Agreement and any supplementary escrow instructions, however,
the terms of this Agreement shall control.
7.2 Closing. The closing hereunder (the "Closing") shall be the
date the Grant Deed is recorded, which date shall be no earlier than January 31,
2000 and no later than February 14, 2000 (the "Closing Date"), time being of the
essence.
7.3 Deliveries By Seller. Seller shall deposit with Escrow Holder,
on or before the Closing Date in time sufficient to permit Escrow Holder to
record and close the Escrow on the Closing Date, the following:
(a) The Grant Deed, duly executed and notarized and
otherwise in recordable form;
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(b) The Access Agreement, duly executed and notarized and
otherwise in recordable form, in the form of Exhibit B attached hereto;
(c) A Non-Foreign Affidavit, ("Seller's Non-Foreign
Affidavit") executed by Seller and satisfying the requirements of Section 1445
of the United States Internal Revenue Code of 1986, as amended (the "IRC");
(d) A Bill of Sale, in the form of Exhibit D attached
hereto, conveying, without warranty, the Personal Property;
(e) Two executed counterparts of an Assignment and
Assumption of Lease (the "Assignment of Lease"), the form of which is attached
hereto as Exhibit E, pursuant to which Seller shall assign to Buyer, and Buyer
shall assume from Seller, all of Seller's rights and obligations under the ATM
Lease;
(f) Two executed counterparts of an Assignment and
Assumption of Contracts (the "Assignment of Contracts"), the form of which is
attached hereto as Exhibit F, pursuant to which Seller shall assign to Buyer,
and Buyer shall assume from Seller, all of Seller's rights and obligations under
the Contracts;
(g) An executed Tenant Notice Letter ("Tenant Notice
Letter") in the form of Exhibit G attached; and
(h) A closing statement approved and executed by the Seller.
7.4 Deliveries by Buyer. Buyer shall deliver to Escrow Holder, on
or before the Closing Date in time sufficient to permit Escrow Holder to record
and close the Escrow on the Closing Date, the following:
(a) Cash or other good funds sufficient to pay the Purchase
Price, the closing costs and any other amounts payable by Buyer in order to
permit Escrow Holder to close the Escrow;
(b) An executed and notarized Access Agreement;
(c) Two executed counterparts of the Assignment of Leases;
(d) Two executed counterparts of the Assignment of
Contracts;
(e) An executed Tenant Notice Letter; and
(f) A closing statement approved and executed by the Buyer.
7.5 Other Instruments. Seller and Buyer shall each deposit any
other documents or instruments that may be reasonably required by the other
party and/or Escrow Holder, or that are otherwise required to close the escrow
and consummate the purchase and sale of the Property in accordance with the
terms hereof.
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7.6 Prorations and Apportionments.
(a) General real estate taxes and assessments against the
Property shall be prorated as of the Closing Date, based on a three hundred
sixty-five (365) day year. Seller shall be charged (or credited, if already
paid) for taxes and assessments incurred up to (but not including) the Closing
Date and Buyer shall be charged for all of the same on and after the Closing
Date. Notwithstanding anything to the contrary in the foregoing, Seller shall
retain the right to receive all refunds for overpayments of real property taxes
and assessments to the extent paid by Seller and attributable to the period of
time prior to the Closing Date, and Seller shall have the sole right to
prosecute an appeal or claim with respect to such amounts.
(b) All rentals, tenant charges and reimbursements under the
ATM Lease in respect to the month in which the Closing Date occurs (the "Current
Month") shall be prorated as of the Closing Date. All of these amounts for the
Current Month which have been received as of the Closing Date shall be prorated
on a per diem basis based upon the number of days in the Current Month prior to,
but not including, the Closing Date (which shall be allocated to Seller) and the
number of days in the Current Month from and after the Closing Date (which shall
be allocated to Buyer).
(c) Prepaid rentals and other prepaid tenant charges for
periods after the Current Month, and the current balance of the security
deposit, if any (including any portion thereof which may be designated as
prepaid rent), under the ATM Lease, if and to the extent that such deposit is in
Seller's actual possession and has not been otherwise applied by Seller to any
obligations of the tenant under the ATM Lease, shall be credited against the
Purchase Price, and upon the closing of the transaction contemplated hereby,
Buyer shall assume full responsibility for the security deposit to be refunded
to the tenant under the ATM Lease (to the extent the same is required to be
refunded by the terms of the ATM Lease).
(d) All charges under Contracts and any other expenses of
the Property shall be prorated on a per diem basis based upon the number of days
in the then current billing period for such service provider or other payee
prior to, but not including, the Closing Date (which shall be allocated to
Seller), and the number of days in such current billing period from and after
the Closing Date (which shall be allocated to the Buyer), and assuming that all
charges are incurred uniformly during such current billing period. If actual
bills for such current billing period are unavailable as of the Closing Date,
then such proration shall be made on an estimated basis based upon the most
recently issued bills, subject to readjustment upon receipt of actual bills. Any
amount shown to be owed by Seller as a result of the foregoing proration shall
be credited to Buyer at the Closing, and any amounts shown to be owed to Seller
as a result of the foregoing proration shall be credited to Seller at Closing.
(e) Prior to Closing, Buyer and Seller shall review and
approve the prorations set forth in this Section 7.6. If the actual amounts to
be prorated are not known as of the Closing Date, the prorations shall be made
on the basis of the best information then available. When actual figures are
later received, a cash settlement thereof will promptly be made between Seller
and Buyer by delivery of a check or cashier's check to the party that is owed a
sum of money, which check shall be delivered within ten (10) business days after
the parties have calculated such post-closing prorations. The provisions of this
Section shall survive the Closing.
7.7 Closing Costs and Expenses. Buyer shall pay all recording
costs, title insurance premiums, the cost of any title endorsements, and the
Escrow Holder's fees. Seller shall pay the City and County of San Francisco
documentary transfer taxes. Each party shall pay
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its own attorneys' fees. Any other closing costs shall be allocated in
accordance with local custom.
7.8 Insurance; Utilities. Buyer acknowledges that Seller will
cause its policies of casualty and liability insurance, if any, to be terminated
with respect to the Property as of the Closing Date. Buyer shall be responsible
for obtaining its own insurance and utilities as of the Closing Date and
thereafter. All utilities shall be transferred to Buyer's name as of the Closing
Date. Any deposits for utilities made by Seller shall be refunded to Seller and
Buyer shall arrange for any required replacements therefor.
7.9 Close of Escrow. Provided that (i) Escrow Holder has received
the documents and funds described in Sections 7.3, 7.4 and 7.5 hereof, and (ii)
Escrow Holder has not received prior written notice from either party to the
effect that an agreement of either party made hereunder has not been performed
or to the effect that any condition set forth herein has not been satisfied or
waived, Escrow Holder is authorized and instructed at 8:00 a.m. on the Closing
Date (or as soon thereafter as practicable) to:
(a) Cause the Grant Deed and the Access Agreement to be
recorded in the Recorder's Office of the City and County of San Francisco;
(b) Deliver, in the manner specified by Seller in separate
instructions to Escrow Holder, the Purchase Price to Seller, less Seller's share
of prorations as required herein;
(c) Deliver one fully executed original of the Assignment of
Lease and the Assignment of Contracts to each of Seller and Buyer;
(d) Deliver Seller's Non-Foreign Affidavit to Buyer;
(e) Deliver the Bill of Sale to Buyer;
(f) Deliver to Bank of America the Tenant Notice Letter; and
(g) Deliver to Buyer and Seller copies of the final closing
statements.
7.10 Notification; Closing Statements. If Escrow Holder cannot
comply with the instructions herein (or as may be provided later), Escrow Holder
is not authorized to cause the recording or delivery of any of the foregoing
documents. If Escrow Holder is unable to cause the recording, Escrow Holder
shall notify the parties without delay. Immediately after the Closing, Escrow
Holder shall deliver to Buyer and Seller, respectively, at their addresses
listed in Section 11.1 hereof, a true, correct and complete copy of the Seller's
and Buyer's Closing Statements, in forms customarily prepared by Escrow Holder,
as well as all other instruments and documents to be delivered to Buyer and
Seller.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Buyer's Representations and Warranties. Buyer represents and
warrants to Seller as follows as of the Effective Date and as of the Closing
Date:
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(a) Buyer is a California corporation duly formed, validly
existing and in good standing under the laws of the State of California, and
Buyer has full power and authority to enter into this Agreement and to
consummate the transactions contemplated herein;
(b) This Agreement and all documents executed by Buyer that
are to be delivered to Seller at the Closing are, and at the time of the Closing
will be duly authorized, executed and delivered by Buyer and the person(s)
executing this Agreement and all such documents on behalf of Buyer is (are) and
shall be duly authorized to so execute and deliver this Agreement and such
documents on behalf of Buyer; and
(c) No representations of any kind (whether oral or written,
express or implied) have been made by Seller to Buyer except as specifically
provided in Section 8.2 hereof, and Buyer hereby represents and warrants to
Seller that Buyer is acquiring the Property solely in reliance on Buyer's own
evaluation thereof.
8.2 Seller's Representations and Warranties. Seller represents and
warrants to Buyer as follows as of the Effective Date and as of the Closing
Date:
(a) Seller is a corporation duly formed, validly existing
and in good standing under the laws of the State of Delaware, and Seller has
full corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated herein; and
(b) This Agreement and all documents executed by Seller that
are to be delivered to Buyer at the Closing are, and at the time of Closing will
be, duly authorized, executed and delivered by Seller, and the person(s)
executing this Agreement and all such documents on behalf of Seller is(are) and
shall be duly authorized to so execute and deliver this Agreement and such
documents on behalf of Seller.
8.3 Continuation and Survival of Representations and Warranties.
All representations and warranties by Buyer contained herein or made in writing
pursuant to this Agreement are intended to and shall remain true and correct as
of the time of Closing, shall be deemed to be material, and, together with all
conditions, covenants and indemnities made by Buyer contained herein or pursuant
to this Agreement, shall survive the execution and delivery of this Agreement
and the Closing, or any termination of this Agreement. No claim for a breach of
any representation or warranty of Seller shall be actionable or payable (A) if
the breach in question results from or is based on a condition, state of facts
or other matter which was known to Buyer at or prior to Closing, (B) unless the
valid claims for all such breaches collectively aggregate more than Two Hundred
Fifty Thousand Dollars ($250,000.00), in which event the full amount of such
claims shall be actionable, and (C) unless (i) written notice containing a
description of the specific nature of such breach shall have been given by Buyer
to Seller within six (6) months following the Closing, and (ii) an action shall
have been commenced by Buyer against Seller with respect to such breach prior to
thirty (30) days following the expiration of said six (6) month period. Unless
each of the foregoing conditions has been satisfied, any claim based on a breach
of any such representation and warranty shall be deemed to have been waived, and
such representations and warranties shall be of no further force or effect.
8.4 Limitation of Liability. Any claims brought by Buyer against
Seller (i) for default under or breach of this Agreement, (ii) for breach of any
representation or warranty or covenant of Seller, or (iii) pursuant to any
provisions of any of the documents delivered by Seller to Buyer at Closing or in
connection with any and all documents executed pursuant hereto or in
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connection herewith, must be asserted, if at all, and a complaint must be filed,
if at all, no later than the date which is six (6) months following the Closing
Date, and any liability of Seller in connection therewith shall be limited, in
the aggregate, to One Million Dollars ($1,000,000). Seller shall have no
liability to Buyer for any of the matters specified above in clauses (i)-(iii)
of this Section 8.4 unless the loss resulting from such matter exceeds, in the
aggregate, Two Hundred Fifty Thousand Dollars ($250,000.00). Any claim which is
not asserted or as to which a complaint is not filed within the time specified
in this section shall not be valid or effective and Seller shall have no
liability with respect thereto.
9. POSSESSION
Seller shall deliver possession of the Property to Buyer on the
Closing Date, subject to the rights of the tenant under the ATM Lease and
Seller's rights under the Access Agreement.
10. LOSS BY FIRE OR OTHER CASUALTY: CONDEMNATION
10.1 Damage or Destruction.
(a) For purposes of this Section 10.1, the term "materially
destroyed or damaged" shall mean damage or destruction that would cost in excess
of Five Million Dollars ($5,000,000) to repair. If, before the Closing, the
Improvements are materially destroyed or damaged by an insured casualty either
party may elect to terminate this Agreement by notice to the other party given
within thirty (30) days of the date of such casualty. If, before the Closing,
the Improvements are damaged to any extent and such casualty is not insured by
Seller, Seller may elect to terminate this Agreement by notice to Buyer given
within thirty (30) days of the date of such casualty. In the event either party
elects to terminate this Agreement as provided above, this Agreement shall be of
no further force or effect and, except for those provisions which expressly
survive termination, neither Buyer nor Seller shall have any further rights,
duties, liabilities or obligations to the other by reason thereof. In the event
of such termination, the cancellation costs (if any) of the Title Company and
Escrow Holder shall be borne equally by Buyer and Seller, each party shall bear
its own costs incurred hereunder, and the Deposit, less Buyer's share of Title
Company and Escrow Holder cancellation costs, shall be returned to Buyer. In the
event that this Agreement is not terminated by either party pursuant to this
Section 10.1(a), Buyer shall be obligated to purchase the Property as
contemplated herein, Seller shall assign to Buyer all Seller's rights to
proceeds under Seller's policy of casualty insurance, and the Purchase Price
shall be reduced by the amount of any insurance deductible; provided that in the
case of any uninsured loss, the Purchase Price shall be reduced by the
reasonable cost of repairing the damage or destruction resulting therefrom.
(b) If, before the Closing, the Improvements are damaged,
such damage would cost less than Five Million Dollars ($5,000,000) to repair,
and such damage is covered by Seller's insurance (allowing for standard
deductibles), then this Agreement shall not terminate, Buyer shall be obligated
to purchase the Property as contemplated herein, Seller shall assign to Buyer
all Seller's rights to proceeds under Seller's policy of casualty insurance, and
the Purchase Price shall be reduced by the amount of any insurance deductible.
10.2 Condemnation.
(a) If, before the Closing, all of the Property shall be
taken by condemnation or eminent domain (or deed given under threat of eminent
domain), this
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Agreement shall be automatically terminated. Thereafter, this Agreement shall be
null and void and of no further force or effect and, except for those provisions
which expressly survive termination, neither Buyer nor Seller shall have any
further rights, duties, liabilities or obligations to the other by reason
thereof. In the event of such termination, the cancellation costs of the Title
Company and Escrow Holder shall be borne equally by Buyer and Seller, each party
shall bear its own costs incurred hereunder, and the Deposit, less Buyer's share
of Title Company and Escrow Holder cancellation costs, shall be returned to
Buyer.
(b) If, before the Closing, a material portion of the
Property shall be taken by condemnation or eminent domain (or deed given under
threat of eminent domain), then Buyer, at Buyer's option, may terminate this
Agreement by providing written notice of such termination to Seller within ten
(10) days of Buyer's receipt of written notice of the taking (Buyer's failure to
give such notice within such period shall be deemed an election not to terminate
this Agreement). If Buyer does not so terminate this Agreement, paragraph (c),
below, shall apply. If Buyer elects to terminate this Agreement under this
paragraph (b), this Agreement shall be of no further force or effect and, except
for those provisions which expressly survive termination, neither Buyer nor
Seller shall have any further rights, duties, liabilities or obligations to the
other by reason thereof. For purposes of this Section 10.2, the term "material
portion" shall mean any portion of the Property having a value in excess of Five
Million Dollars ($5,000,000) or that materially impairs the access to the
Property. In the event of such termination, the cancellation costs of the Title
Company and Escrow Holder shall be borne equally by Buyer and Seller, each party
shall bear its own costs incurred hereunder, and the Deposit, less Buyer's share
of Title Company and Escrow Holder cancellation costs, shall be returned to
Buyer.
(c) If this Agreement is not terminated in accordance with
the foregoing, Buyer shall accept title to the Property subject to such taking.
In such event, at the Closing the Seller's interest, if any, in proceeds from
the taking of the Property condemned shall be assigned by Seller to Buyer.
11. MISCELLANEOUS
The provisions of this Article 11 shall survive Closing and any
termination of this Agreement.
11.1. Notices. Any communication, notice or demand of any kind
whatsoever that either party may be required or may desire to give to or serve
upon the other shall be in writing, addressed to the parties at the addresses
set forth below, and delivered by personal service, by Federal Express or other
national overnight delivery service, or by registered or certified mail, postage
prepaid, return receipt requested:
If to Seller: Levi Strauss & Co.
1155 Battery Street
San Francisco, CA 94111
Attention: Susan E. Shipley
Vice President - Real Estate
Facsimile No.: (415) 501-3960
Telephone No.: (415) 501-7759
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With copy to: Hoffman, Finney & Sandel
505 Montgomery Street, Suite 1530
San Francisco, CA 94111
Attention: Charles P. Sandel
Facsimile No.: (415) 362-7441
Telephone No.: (415) 362-2200
If to Buyer: Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
Attention: Mr. Richard Myers
Facsimile No.: (415) 439-8277
Telephone No.: (415) 615-8370
If to Escrow Holder: Chicago Title Company
388 Market Street, Suite 1300
San Francisco, CA 94111
Attention: Nicole Carr
Facsimile No.: (415) 956-2175
Telephone No.: (415) 788-0871
Any such notice shall be deemed delivered as follows: (a) if
personally delivered, the date of delivery to the address of the person set
forth above to receive such notice; (b) if sent by "next business day" Federal
Express or other reputable overnight courier service, the next business day
after being sent; or (c) if sent by facsimile transmission, the date transmitted
to the person to receive such notice if sent by 5:00 p.m. Pacific Time and the
next business day if sent after 5:00 p.m. Pacific Time, provided that there is
evidence of such transmission printed by the sending machine. Any notice sent by
facsimile transmission must be confirmed by personally delivering or mailing a
copy of the notice sent by facsimile transmission. Any party may change its
address for notice by written notice given to the other at least three (3)
business days before the effective date of such change in the manner provided in
this Section.
11.2. Brokers and Finders.
(a) Buyer and Seller each represent to the other that
they have not dealt with any brokers or finders in connection with the purchase
and sale of the Property, except for Grubb & Ellis Company, whose commission, if
any is due, shall be paid by Seller pursuant to a separate written agreement
between Grubb & Ellis and Seller.
(b) In the event of a claim for broker's fees,
finder's fees, commissions or other similar compensation in connection herewith:
(i) Buyer, if such claim is based upon any agreement alleged to have been made
by Buyer, shall indemnify and defend Seller against and hold Seller harmless
(using counsel reasonably satisfactory to Seller) from any and all damages,
liabilities, costs, expenses and losses (including, without limitation,
attorneys' fees and costs) that Seller sustains or incurs by reason of such
claim; and (ii) Seller, if such claim is based upon any agreement alleged to
have been made by Seller, shall indemnify and defend Buyer against and hold
Buyer harmless (using counsel reasonably satisfactory to Buyer) from any and all
damages, liabilities, costs, expenses and losses (including, without limitation,
attorneys' fees and costs) that Buyer sustains or incurs by reason of such
claim. The provisions of this subsection shall survive the termination of this
Agreement or the Closing.
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11.3. Successors and Assigns. Buyer shall not assign its
rights and obligations under this Agreement, without the prior written consent
of Seller, which consent Seller may grant or withhold in its sole and absolute
discretion. Buyer, in the event of any such assignment, shall not be released
from any obligations hereunder and shall remain bound by all of the obligations
set forth in this Agreement. Subject to the foregoing, this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective heirs, administrators, successors and assigns.
11.4. Recording. Neither this Agreement nor any notice or
memorandum hereof shall be recorded in any public record.
11.5. Amendments. This Agreement may be amended or modified
only by a written instrument executed by both parties.
11.6 Interpretation. Words used in the singular shall include
the plural, and vice-versa, and any gender shall be deemed to include the other.
The captions and headings of the Articles and Sections of this Agreement are for
convenience of reference only, and shall not be deemed to define or limit the
provisions hereof. Each party and its counsel have reviewed and revised this
Agreement and each shall be deemed to have drafted it. The terms of this
Agreement shall be fairly construed and the usual rule of construction, to the
effect that any ambiguities herein should be resolved against the drafting
party, shall not be employed.
11.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
11.8. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous oral or written representations,
statements, documents, understandings and agreements with respect thereto.
11.9. Attorneys' Fees and Costs. If either Buyer or Seller
brings any suit or other proceeding with respect to the subject matter or the
enforcement of this Agreement, the prevailing party (as determined by the court,
agency or other authority before which such suit or proceeding is commenced), in
addition to such other relief as may be awarded, shall be entitled to recover
reasonable attorneys' fees, expenses and costs of investigation actually
incurred.
11.10. Time of Essence. Time is of the essence of this
Agreement.
11.11. Consultant Reports. If the transaction contemplated
herein fails to close for any reason, Buyer shall deliver to Seller, at no cost
to Seller, the results and/or copies of all such information, surveys, reports,
tests, and studies, if any, provided for Buyer by third party consultants.
11.12. No Waiver. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver, nor shall a waiver in any instance constitute a waiver in any subsequent
instance. No waiver shall be binding unless executed in writing by the party
making the waiver.
11.13. Further Acts. Each party, at the request of the other,
shall execute, acknowledge or have notarized (if appropriate) and deliver in a
timely manner such additional
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documents, and do such other additional acts, also in a timely manner, as may be
reasonably required in order to accomplish the intent and purposes of this
Agreement.
11.14. No Intent To Benefit Third Parties. Seller and Buyer do
not intend by any provision of this Agreement to confer any right, remedy or
benefit upon any third party, and no third party shall be entitled to enforce,
or otherwise shall acquire any right, remedy or benefit by reason of, any
provision of this Agreement.
11.15. Performance Due On Day Other Than Business Day. If the
time period for the performance of any act called for under this Agreement
expires on a Saturday, Sunday or any other day on which banking institutions in
the State of California are authorized or obligated by law or executive order to
close (a "Holiday"), the act in question may be performed on the next succeeding
day that is not a Saturday, Sunday or Holiday.
11.16. Confidentiality. Until the Closing, Buyer and its
partners, members, attorneys, agents, contractors, employees and consultants
will treat the information disclosed to it by Seller (including, without
limitation, any Due Diligence Materials) and the existence of the transaction
contemplated herein as confidential, giving it the same care as Buyer's own
confidential information, and make no use of any such disclosed information
except in connection with the transaction contemplated herein or to the extent
required by court or legal requirements. Buyer shall instruct each of its
attorneys, agents, contractors, employees and consultants as to the existence of
this confidentiality agreement and the necessity of complying herewith and shall
obtain their agreement to maintain confidentiality to the same extent as
provided herein. In the event that this Agreement terminates for any reason,
Buyer shall promptly return copies of all such confidential information to
Seller and shall not retain any copies thereof, and shall retrieve all
confidential information and copies or extracts thereof from its attorneys,
agents, contractors, employees and consultants, and return the same to Seller.
Notwithstanding any provision of this Agreement that calls for the Deposit to be
returned to Buyer in the event of a termination of this Agreement, the parties
agree that the Deposit shall not be returned to Buyer unless and until Buyer has
fulfilled its obligation to return to Seller such confidential information as
provided herein. In the event of a breach or threatened breach of this
provision, Seller shall be entitled to an injunction restraining Buyer and/or
its agents, contractors, employees and consultants from disclosing, in whole or
in part, any such confidential information. Nothing herein shall be construed as
prohibiting Seller from pursuing any other available remedy at law or in equity
for such breach or threatened breach. Prior to the Closing, Buyer shall not,
without the prior written consent of Seller, distribute any press release or
make any other public announcement regarding this Agreement, the transaction
contemplated hereby, the Property, or the proposed sale of the Property.
11.17. "Real Estate Reporting Person". The parties hereto
agree that the Escrow Holder is hereby designated as the "real estate reporting
person" for purposes of complying with Section 6045 of the IRC.
11.18. Venue. Each of the parties hereto consents to the
jurisdiction of any court in the City and County of San Francisco, California
for any action arising out of matters related to this Agreement. Each of the
parties hereto waives the right to commence an action in connection with this
Agreement in any court outside of such County.
11.19. No Joint Venture; Not an Offer. Nothing set forth in
this Agreement shall be construed to create a joint venture between Buyer and
Seller nor shall presentation of drafts
16
<PAGE> 21
hereof by one party to the other be deemed an offer. This Agreement shall only
become a binding and enforceable contract upon execution hereof by both parties.
11.20. Counterparts. This Agreement may be executed in one or
more counterparts. All counterparts so executed shall constitute one contract,
binding on all parties, even though all parties are not signatory to the same
counterpart. Facsimile signatures shall be binding.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the dates written below.
Dated:
SELLER:
LEVI STRAUSS & CO.,
a Delaware corporation
By: /s/ JOSEPH M. MAURER
---------------------------------------
Name: Joseph M. Maurer
-------------------------------------
Title: Vice President & Treasurer
------------------------------------
BUYER:
WILLIAMS-SONOMA, INC.,
a California corporation
By: /s/ J. RICHARD MYERS
---------------------------------------
Name: J. Richard Myers
-------------------------------------
Title: Vice President Facilities
------------------------------------
17
<PAGE> 22
EXHIBIT A
LEGAL DESCRIPTION
CITY OF SAN FRANCISCO
PARCEL ONE:
BEGINNING AT THE POINT OF INTERSECTION OF THE SOUTHERLY LINE OF UNION STREET
WITH THE EASTERLY LINE OF ICE HOUSE ALLEY, FORMERLY GAINES STREET; RUNNING
THENCE EASTERLY ALONG SAID SOUTHERLY LINE OF UNION STREET, 120 FEET TO THE
WESTERLY LINE OF BATTERY STREET; THENCE AT A RIGHT ANGLE, SOUTHERLY ALONG SAID
WESTERLY LINE OF BATTERY STREET, 100 FEET; THENCE AT A RIGHT ANGLE, WESTERLY
120 FEET TO THE EASTERLY LINE OF ICE HOUSE ALLEY; THENCE NORTHERLY ALONG SAID
EASTERLY LINE OF ICE HOUSE ALLEY, 100 FEET TO THE POINT OF BEGINNING.
BEING A PORTION OF 50 VARA BLOCK NO. 29
PARCEL TWO:
BEGINNING AT THE POINT OF INTERSECTION OF THE EASTERLY LINE OF SANSOME STREET
WITH THE SOUTHERLY LINE OF UNION STREET; RUNNING THENCE EASTERLY ALONG SAID
SOUTHERLY LINE OF, UNION STREET, 120 FEET TO THE WESTERLY LINE OF ICE HOUSE
ALLEY; FORMERLY GAINES STREET; THENCE AT A RIGHT ANGLE, SOUTHERLY ALONG SAID
WESTERLY LINE OF ICE HOUSE ALLEY, 177.523 FEET, MORE OR LESS, TO A POINT DISTANT
THEREON 97.50 FEET NORTHERLY FROM THE NORTHERLY LINE OF GREEN STREET; THENCE AT
A RIGHT ANGLE, WESTERLY 120 FEET TO THE EASTERLY LINE OF SANSOME STREET; THENCE
NORTHERLY ALONG SAID EASTERLY LINE OF SANSOME STREET, 177.523 FEET, MORE OR
LESS, TO THE POINT OF BEGINNING.
BEING A PORTION OF 50 VARA BLOCK NO. 29.
PARCEL THREE:
ALL THAT AIR SPACE AND SUBSURFACE AREA BELOW A HORIZONTAL PLANE AT ELEVATION
89.75 FEET CITY DATUM, THE BOUNDARIES OF WHICH, IF PROJECTED VERTICALLY
DOWNWARD, WILL INTERCEPT AND ENCOMPASS THE FOLLOWING DESCRIBED PARCEL OF LAND:
BEGINNING AT THE INTERSECTION OF THE SOUTHERLY LINE OF UNION STREET WITH THE
EASTERLY LINE OF ICE HOUSE ALLEY, FORMERLY GAINES STREET; AND THENCE RUNNING
SOUTHERLY ALONG SAID LINE OF ICE HOUSE, 100.00 FEET; THENCE AT A RIGHT ANGLE,
WESTERLY 5.00 FEET; THENCE AT A RIGHT ANGLE, NORTHERLY, PARALLEL WITH SAID LINE
OF ICE HOUSE ALLEY, 100.00 FEET; THENCE AT A RIGHT ANGLE, EASTERLY 5.00 FEET TO
THE POINT OF BEGINNING.
PARCEL FOUR:
ALL THAT AIR SPACE AND SUBSURFACE ARE BELOW A HORIZONTAL PLANE AT ELEVATION
89.75 FEET CITY DATUM, THE BOUNDARIES OF WHICH, IF PROJECTED VERTICALLY
DOWNWARD, WILL INTERCEPT AND ENCOMPASS THE FOLLOWING DESCRIBED PARCEL OF LAND:
BEGINNING AT THE INTERSECTION OF THE SOUTHERLY LINE OF UNION STREET WITH THE
WESTERLY LINE OF ICE HOUSE ALLEY, FORMERLY GAINES STREET; AND THENCE RUNNING
SOUTHERLY ALONG SAID LINE OF ICE HOUSE, 100.00 FEET; THENCE AT A RIGHT ANGLE,
EASTERLY 5.00 FEET; THENCE AT A RIGHT ANGLE, NORTHERLY, PARALLEL WITH SAID LINE
OF ICE HOUSE ALLEY, 100.00 FEET; THENCE AT A RIGHT ANGLE, WESTERLY 5.00 FEET TO
THE POINT OF BEGINNING.
<PAGE> 23
PARCEL FIVE:
ALL THAT AIR SPACE BETWEEN A HORIZONTAL PLANE AT ELEVATION 93.75 FEET CITY
DATUM AND A HORIZONTAL PLANE AT ELEVATION 89.75 FEET CITY DATUM, THE BOUNDARIES
OF WHICH, IF PROJECTED VERTICALLY DOWNWARD, WILL INTERCEPT AND ENCOMPASS THE
FOLLOWING DESCRIBED PARCEL OF LAND:
BEGINNING AT A POINT ON THE EASTERLY LINE OF ICE HOUSE ALLEY, FORMERLY GAINES
STREET, DISTANT THEREON 39.00 FEET SOUTHERLY FROM THE SOUTHERLY LINE OF UNION
STREET; AND THENCE RUNNING SOUTHERLY ON SAID LINE OF ICE HOUSE ALLEY, 1.00 FOOT;
THENCE AT A RIGHT ANGLE, WESTERLY 35.00 FEET TO THE WESTERLY LINE OF SAID ICE
HOUSE ALLEY; THENCE AT A RIGHT ANGLE, NORTHERLY ALONG THE LAST SAID LINE OF ICE
HOUSE ALLEY, 1.00 FOOT; THENCE AT A RIGHT ANGLE, EASTERLY 35.00 FEET TO SAID
EASTERLY LINE OF ICE HOUSE ALLEY AND THE POINT OF BEGINNING.
PARCEL SIX:
ALL THAT AIR SPACE BETWEEN A HORIZONTAL PLANE AT ELEVATION 93.75 FEET CITY
DATUM AND A HORIZONTAL PLANE AT ELEVATION 89.75 FEET CITY DATUM, THE BOUNDARIES
OF WHICH, IF PROJECTED VERTICALLY DOWNWARD, WILL INTERCEPT AND ENCOMPASS THE
FOLLOWING DESCRIBED PARCEL OF LAND:
BEGINNING AT A POINT ON THE EASTERLY LINE OF ICE HOUSE ALLEY, FORMERLY GAINES
STREET, DISTANT THEREON 74.00 FEET SOUTHERLY FROM THE SOUTHERLY LINE OF UNION
STREET; AND THENCE RUNNING SOUTHERLY ON SAID LINE OF ICE HOUSE ALLEY, 1.00
FOOT; THENCE AT A RIGHT ANGLE, WESTERLY 35.00 FEET TO THE WESTERLY LINE OF
SAID ICE HOUSE ALLEY; THENCE AT A RIGHT ANGLE, NORTHERLY ALONG THE LAST SAID
LINE OF ICE HOUSE ALLEY, 1.00 FOOT; THENCE AT A RIGHT ANGLE, EASTERLY 35.00
FEET TO SAID EASTERLY LINE OF ICE HOUSE ALLEY AND THE POINT OF BEGINNING.
PARCEL SEVEN:
ALL THE AIR SPACE BETWEEN A HORIZONTAL PLANE AT ELEVATION 89.75 FEET CITY DATUM
AND A HORIZONTAL PLANE AT ELEVATION 19.75 FEET CITY DATUM, THE BOUNDARIES OF
WHICH, IF PROJECTED VERTICALLY DOWNWARD, WILL INTERCEPT AND ENCOMPASS THE
FOLLOWING DESCRIBED PARCEL OF LAND:
COMMENCING AT A POINT ON THE WESTERLY LINE OF ICE HOUSE ALLEY, FORMERLY GAINES
STREET, DISTANT THEREON 40.00 FEET SOUTHERLY FROM THE SOUTHERLY LINE OF UNION
STREET; AND THENCE RUNNING WESTERLY AT RIGHT ANGLE TO SAID LINE OF ICE HOUSE
ALLEY, 5.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING WESTERLY
ALONG THE WESTERLY PROLONGATION OF THE LAST SAID COURSE, PARALLEL WITH SAID
LINE OF UNION STREET, 25.00 FEET; THENCE AT A RIGHT ANGLE SOUTHERLY 34.00 FEET;
THENCE AT A RIGHT ANGLE, EASTERLY 25.00 FEET; THENCE AT A RIGHT ANGLE,
NORTHERLY 34.00 FEET TO THE TRUE POINT OF BEGINNING.
LOT 001, BLOCK 0112 (AFFECTS PARCEL ONE)
LOT 009, BLOCK 0112 (AFFECTS PARCEL TWO)
2
<PAGE> 24
EXHIBIT B
ACCESS AGREEMENT
RECORDING REQUESTED AND WHEN
RECORDED RETURN TO:
GRANT OF EASEMENT
THIS GRANT OF EASEMENT (the "Easement") is made and entered into as of the
_____ day of ____________, 2000, by and between _________________________
("Grantor") and Levi Strauss & Co., a Delaware corporation ("LS&CO").
W I T N E S S E T H:
- - - - - - - - - -
A. Grantor is the owner of that certain real property located in the
City and County of San Francisco, California, commonly known as Ice House One
and Ice House Two, 151 Union Street, San Francisco, and more particularly
described on Exhibit "A" attached hereto (the "Ice House Property"). Grantor
acquired the Ice House Property from LS&CO.
B. LS&CO occupies a portion of the real property across Union Street
from the Ice House Property, located in the City and County of San Francisco,
California, commonly known as Levi's Plaza, and more particularly described on
Exhibit "B" attached hereto (the "Levi's Plaza Property").
C. There is located in the electrical room on the ground floor of the
Ice House One building a generator ("Generator") and an uninterruptible power
system ("UPS"). The Generator and UPS provide emergency power through a gutter
that travels through the Ice House Property under Union Street and connects to
electrical power facilities in the Levi's Plaza Property, to supply emergency
electrical power to LS&CO's premises at the Levi's Plaza Property.
D. LS&CO requires the continued use of the Generator and UPS, and
continued access to the portions of the Ice House Property in which are located
the electrical room, the Generator, the UPS and the gutter connecting those
facilities with the Levi's Plaza Property electrical facilities for the
continued use, maintenance, repair and replacement of the Generator, the UPS,
and their associated cabling, gutter, conduit, connections and other elements of
such systems (collectively the "Equipment"). Grantor has agreed to grant to
LS&CO easements and other rights to enable LS&CO to continue to use, maintain,
repair and replace the Generator, the UPS and the Equipment, as described
herein.
<PAGE> 25
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which is hereby acknowledged, and in consideration of the promises and the
mutual agreements hereinafter set forth, the parties agree as follows:
1. Utility Easement. Grantor hereby grants, transfers and conveys
to LS&CO an easement (the "Utility Easement") in and over that portion of the
Ice House Property where the Generator, the UPS and the Equipment related to the
maintenance of electric service to LS&CO's premises at the Levi's Plaza Property
are located as of the date of this Easement. The area of the Utility Easement is
generally described as the area shown on the _____________ Map attached hereto
as Exhibit "C" as the cross hatched area identified as the "Utility Easement."
(a) Use. The Utility Easement shall include an easement for
twenty-four (24) hour access by LS&CO and its agents, employees, contractors,
subtenants and invitees (the "LS&CO Parties") to the Generator, UPS and the
Equipment, and to the area of the Ice House Property in which the Utility
Easement is located, for the purpose of the installation, maintenance,
inspection, repair, replacement, modification and removal of the Generator, UPS
and the Equipment. (As used in this Easement, the term "Maintenance Activities"
shall refer to the installation, maintenance, inspection, testing, repair,
replacement, modification or removal by LS&CO of the Generator, UPS, and
Equipment, and any elements or components thereof).
(b) Maintenance Activities Concerning the Utility Easement.
LS&CO, at LS&CO's sole cost and expense, shall be responsible for all
Maintenance Activities conducted by LS&CO in connection with the Generator, UPS
and Equipment. To the extent that any Maintenance Activities conducted by LS&CO
within the Utility Easement results in damage to the pavement surface within the
Utility Easement, LS&CO shall, at LS&CO's sole cost and expense, restore such
pavement to substantially the then-existing condition of the pavement
surrounding any such damaged area.
(c) Generator. LS&CO and Grantor shall in good faith
cooperate to determine whether and to what extent the Generator may be used by
Grantor. In all events, LS&CO shall have no liability and Grantor fully releases
LS&CO of and from any and all claims, damages, costs, losses and liability
related to the Generator, UPS or Equipment, including, without limitation, any
of the same caused by or arising from any change or interruption in the
functioning of or discontinuance of the use of the Generator, UPS or Equipment,
whether due to repairs, maintenance, failure of utility service or any other
cause whatsoever.
2. Easements to Run With the Land. The Easements granted herein
and all terms, rights, conditions, obligations, restrictions, covenants and
limitations contained herein with respect to such Easements, shall burden and
run with the Ice House Property, and shall benefit LS&CO and its premises at the
Levi's Plaza Property.
3. Enforcement. Enforcement of the covenants contained in this
Easement may be by legal or equitable proceedings against any person violating
any restriction, covenant, condition or agreement herein contained, either to
restrain or enjoin such violation or to recover damages.
4. Amendments. This Easement may be modified, amended, or
terminated only by a written agreement executed by Grantor, LS&CO and LS&CO or
their respective
20
<PAGE> 26
successors and assigns and no other persons shall have any rights whatsoever to
join in, prevent or otherwise affect or limit any such modification, amendment
or termination.
5. Costs. In the event of any litigation between the parties
arising out of the obligations of the parties under this Easement, the
non-prevailing party shall pay the prevailing party's costs and expenses of such
litigation, including without limitation reasonable attorneys' fees.
6. Severability. Invalidation of any of the provisions contained
in this Easement or of the application thereof to any person, by legislation,
judgement or court order, shall have no effect upon any of the other provisions
hereof, or the application thereof to any other person, and the same shall
remain in full force and effect.
7. Captions. The headings of the paragraphs of this Easement are
for convenience only and are not a part of this Easement and do not in any way
limit or amplify the terms and provisions of this Easement.
8. Entire Agreement. This Easement contains the entire agreement
between the parties relating to the rights herein granted and the obligations
herein assumed.
9. Governing Law. This Easement shall be governed by and
construed according to the laws of the State of California.
10. Binding Effect. This Easement shall bind and inure to the
benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Easement as of
the date first above written.
GRANTOR: GRANTEE:
______________________________, LEVI STRAUSS & CO.,
a _____________________________ a Delaware corporation
By: ______________________________
By: _______________________________
Title: ___________________________
Title:_____________________________
3
<PAGE> 27
STATE OF CALIFORNIA )
) ss.
County of ________________ )
On , 2000, before me, _______________________, a Notary Public, personally
appeared __________________________________________________ personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(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 authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s) or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature [SEAL]
---------------------------------------------
STATE OF CALIFORNIA )
) ss.
County of ________________ )
On , 2000, before me, _______________________, a Notary Public, personally
appeared ___________________________________________________ personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(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 authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s) or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature [SEAL]
----------------------------------------------
4
<PAGE> 28
EXHIBIT C
GRANT DEED
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MAIL TAX STATEMENTS TO:
- ------------------------------
- ------------------------------
- ------------------------------
- ------------------------------
Documentary Transfer Tax is not of public record and is shown on a separate
sheet.
GRANT DEED
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
LEVI STRAUSS & CO., a Delaware corporation, hereby grants to
____________________, a __________________, the real property located in the
City of San Francisco, County of San Francisco, State of California, described
on ExhibitA attached hereto and made a part hereof, subject to the exceptions to
title described on Exhibit B attached hereto and made a part hereof.
Executed as of this ____ day of ____________, 1999.
LEVI STRAUSS & CO.,
a Delaware corporation
By:________________________________
Name:______________________________
Its:_______________________________
<PAGE> 29
EXHIBIT D
BILL OF SALE
BILL OF SALE
THIS BILL OF SALE is executed as of _____________, 1999, by and
between LEVI STRAUSS & CO., a Delaware corporation ("Transferor"), and
___________________________, a ___________________________ ("Transferee"),
pursuant to that certain Purchase and Sale agreement dated as of
___________________, 1999 (the "Purchase Agreement"), by and between Transferor
and Transferee.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged,
Transferor does hereby grant, bargain, sell, convey, assign, transfer and set
over unto Transferee, absolutely and not as security, all of the following
property, to the extent of Transferor's right, title and interest therein the
tangible personal property described on Schedule 1 attached hereto and
incorporated herein by this reference (the "Transferred Property").
TRANSFEROR IS NOT MAKING ANY WARRANTIES OR REPRESENTATIONS OF ANY
KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE TRANSFERRED PROPERTY,
INCLUDING, WITHOUT LIMITATION: (I) VALUE, CONDITION, MERCHANTABILITY,
MARKETABILITY, PROFITABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR USE OR
PURPOSE OF ANY OF THE TRANSFERRED PROPERTY, (II) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS INCORPORATED INTO ANY OF THE TRANSFERRED PROPERTY, AND
(III) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE TRANSFERRED
PROPERTY. TRANSFEREE AGREES THAT WITH RESPECT TO THE TRANSFERRED PROPERTY,
TRANSFEREE HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR
INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF TRANSFEROR. TRANSFEREE REPRESENTS
THAT IT IS A KNOWLEDGEABLE BUYER AND THAT IT IS RELYING SOLELY ON ITS OWN
EXPERTISE AND THAT OF TRANSFEREE'S CONSULTANTS, AND THAT TRANSFEREE WILL CONDUCT
SUCH INSPECTIONS AND INVESTIGATIONS OF THE TRANSFERRED PROPERTY, INCLUDING, BUT
NOT LIMITED TO, THE PHYSICAL CONDITION THEREOF, AS IT DEEMS REASONABLE,
NECESSARY OR APPROPRIATE, AND SHALL RELY UPON SAME, AND UPON CLOSING, SHALL
ASSUME THE RISKS THAT ADVERSE MATTERS, INCLUDING, BUT NOT LIMITED TO, ADVERSE
PHYSICAL CONDITION, MAY NOT HAVE BEEN REVEALED BY TRANSFEREE'S INSPECTIONS AND
INVESTIGATIONS. TRANSFEREE ACKNOWLEDGES AND AGREES THAT UPON CLOSING, TRANSFEROR
IS CONVEYING TO TRANSFEREE AND TRANSFEREE HEREBY ACCEPTS THE TRANSFERRED
PROPERTY "AS IS, WHERE IS" WITH ALL FAULTS, AND THERE ARE NO ORAL AGREEMENTS,
WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE TRANSFERRED
PROPERTY, BY TRANSFEROR OR ANY THIRD PARTY.
This Bill of Sale may be executed in counterparts, each of which
shall be deemed an original, but such counterparts, when taken together, shall
constitute one agreement.
IN WITNESS WHEREOF, Transferor and Transferee have executed this
Bill of Sale as of the day and year first above written.
<PAGE> 30
TRANSFEROR:
LEVI STRAUSS & CO.,
a Delaware corporation
By:_______________________________________
Name:_____________________________________
Its:______________________________________
TRANSFEREE:
_________________________________________,
a ________________________________________
By:_______________________________________
Name:_____________________________________
Its:______________________________________
2
<PAGE> 31
SCHEDULE 1
TO
BILL OF SALE
NONE.
3
<PAGE> 32
EXHIBIT E
Assignment and Assumption of Lease
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is made
this __________ day of_______________, 1999, by LEVI STRAUSS & CO., a Delaware
corporation ("Assignor"), to ___________________________, a _________________
("Assignee"):
RECITALS:
A. Assignor and Assignee have entered into that certain Purchase
and Sale Agreement dated as of ____________________, 1999 (the "Purchase
Agreement"), with respect to certain real property commonly known as 151 Union
Street, San Francisco, California, as more particularly described on Exhibit A
to the Purchase Agreement (the "Property").
B. Pursuant to the Purchase Agreement, Assignor is obligated to
assign to Assignee all of its right, title and interest in and to that certain
Lease between Assignor and Bank of America dated ____________________, 19_____
(the "Lease").
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Assignor hereby assigns, sells,
transfers, sets over and delivers unto Assignee, effective as of the Closing
Date (as defined below), all of its estate, right, title and interest in and to
the Lease, together with all security deposits paid to and held by Assignor
under the Lease.
1. The term "Lease" as used herein shall mean the Lease and all
renewals, modifications, amendments or other agreements, if any, affecting the
Lease, entered into by Assignor or its predecessors in interest, together with
all rents, issues and profits thereunder. For purposes of this Assignment, the
"Closing Date" shall be the date of the Closing (as defined in the Purchase
Agreement).
2. Assignee hereby accepts the foregoing assignment, and assumes
the performance of all of the terms, covenants and conditions imposed upon
Assignor accruing or arising under the Lease on or after the Closing.
3. If either party hereto fails to perform any of its obligations
under this Assignment or, if a dispute arises between the parties hereto
concerning the meaning or interpretation of any provision of this Assignment,
and an action is filed, the prevailing party in any such action shall be
entitled to recover from the other party, in addition to any other relief that
may be granted, its court costs and reasonable attorneys' fees and
disbursements, including such incurred in connection with any appeal.
4. This Assignment shall be binding upon and inure to the benefit
of the successors, assigns, personal representatives, heirs and legatees of the
respective parties thereto.
22
<PAGE> 33
5. This Assignment shall be governed by and construed in
accordance with the laws of the State of California.
6. Assignee hereby agrees to indemnify and hold harmless
Assignor, Assignor's agents, officers, directors, shareholders and employees,
and their respective successors and assigns from and against any and all claims,
liens, damages, demands, causes of action, losses, liabilities, lawsuits,
judgments, costs and expenses, including reasonable attorneys' fees to the
extent resulting from or relating to Assignor's obligations under the Lease as
of or subsequent to the Closing.
7. This Assignment may be executed in counterparts, each of which
shall be deemed an original, but such counterparts, when taken together, shall
constitute one agreement.
8. For purposes of this Assignment, the "Closing Date" shall be
the date of the Closing (as defined in the Purchase Agreement).
IN WITNESS WHEREOF, Assignor and Assignee have executed and
delivered this Assignment as of the day and year first above written.
ASSIGNOR:
LEVI STRAUSS & CO.,
a Delaware corporation
By:_______________________________________
Name:_____________________________________
Its:______________________________________
ASSIGNEE:
_________________________________________,
a ________________________________________
By:_______________________________________
Name:_____________________________________
Its:______________________________________
2
<PAGE> 34
EXHIBIT F
Assignment and Assumption of Service Contracts
ASSIGNMENT
AND ASSUMPTION OF SERVICE CONTRACTS
THIS ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS (this
"Assignment") is made this ___day of ____________, 1999, by LEVI STRAUSS & CO.,
a Delaware corporation ("Assignor") to ____________________, a
__________________ ("Assignee").
RECITALS:
A. Assignor and Assignee have entered into that certain Purchase
and Sale Agreement dated as of ____________________, 1999 (the "Purchase
Agreement"), with respect to certain real property commonly known as 151 Union
Street, San Francisco, California, as more particularly described on Exhibit A
to the Purchase Agreement (the "Property").
B. Pursuant to the Purchase Agreement, Assignor is obligated to
assign to Assignee all of its right, title and interest in and to certain
Contracts between Assignor and third parties.
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, effective as of the Closing Date
(as defined below), Assignor hereby assigns and transfers unto Assignee all of
Assignor's right, title, claim and interest in and under all of the service
contracts listed on Schedule 1 attached hereto (the "Service Contracts").
ASSIGNOR AND ASSIGNEE FURTHER HEREBY AGREE AND COVENANT AS FOLLOWS:
1. Effective as of the Closing Date (as defined below), Assignor
hereby assigns to Assignee all of its right, title and interest in and to the
Service Contracts, and Assignee hereby accepts such assignment and assumes all
of the owner's obligations under the Service Contracts.
2. If either party hereto fails to perform any of its obligations
under this Assignment or, if a dispute arises between the parties hereto
concerning the meaning or interpretation of any provision of this Assignment,
and an action is filed, the prevailing party in any such action shall be
entitled to recover from the other party, in addition to any other relief that
may be granted, its court costs and reasonable attorneys' fees and
disbursements, including such incurred in connection with any appeal.
3. This Assignment may be signed in counterparts and all
counterparts so executed shall constitute one contract, binding on all parties
hereto, even though all parties are not signatory to the same counterpart.
4. This Assignment shall be binding on and inure to the benefit
of the parties hereto, their heirs, executors, administrators, successors in
interest and assigns.
<PAGE> 35
5. Assignee hereby agrees to indemnify Assignor and hold Assignor
and Assignor's agents, officers, directors, shareholders and employees, and
their respective successors and assigns harmless from and against any and all
claims, liens, damages, demands, causes of action, liabilities, lawsuits,
judgments, losses, costs and expenses (including but not limited to reasonable
attorneys' fees and expenses) to the extent resulting from the owner's
obligations under the Service Contracts that relate to the period on or after
the Closing Date.
6. This Assignment shall be governed by and construed and in
accordance with the laws of the State of California.
7. For purposes of this Assignment, the "Closing Date" shall be
the date of the Closing (as defined in the Purchase Agreement).
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment the day and year first above written.
ASSIGNOR:
LEVI STRAUSS & CO.,
a Delaware corporation
By:_______________________________________
Name:_____________________________________
Its:______________________________________
ASSIGNEE:
_________________________________________,
a ________________________________________
By:_______________________________________
Name:_____________________________________
Its:______________________________________
2
<PAGE> 36
SCHEDULE 1
TO
ASSIGNMENT OF SERVICE CONTRACTS
LIST OF CONTRACTS
3
<PAGE> 37
EXHIBIT G
NOTICE TO TENANT
VIA REGISTERED MAIL
Re: 151 Union Street, San Francisco, California
Dear Tenant:
You are hereby notified that as of the above date, Levi Strauss & Co. has
transferred that certain real property commonly known as 151 Union Street office
building, in San Francisco, California, including its interest in your Lease to
_________________________("Buyer") who is assuming all responsibility for
security deposits held under your lease in the amount of _____________.
You are hereby directed to make all future rental payments and other
amounts due under the terms of your Lease to Buyer at the following address:
Attention:
You are hereby directed to cause all insurance required under your lease
to be issued in favor of Buyer and a certificate evidencing same to be delivered
to Buyer at the above address. All future notices with respect to your lease
should be delivered to Buyer at the above address.
Very truly yours,
LEVI STRAUSS & CO.,
a Delaware corporation
By:_______________________________________
Name:_____________________________________
Its:______________________________________
<PAGE> 38
EXHIBIT H
DELIVERED DOCUMENTS
October 26, 1999 Title Report and exceptions
ALTA Survey
Grubb & Ellis Offering Memorandum
OB&A Building Assessment Report, dated November 30, 1999
ALTA Survey, revised 12/3/99
Revisions to OB&A Report (undated)
Property Tax bills for 97/98, 98/99 and 99/2000
Seismic Performance and Risk Analysis, prepared by Forell/Elsesser Engineers
with Charles C.Thiel Jr., dated March 1995
Seismic Risk Assessment of the Icehouse, prepared by EMG, dated November 9, 1999
Draft Seismic Performance and Risk Analysis for Ice House Buildings, prepared by
Telesis Engineers, dated September 13, 1999
<PAGE> 1
Exhibit 10.14
INDEXING INSTRUCTIONS:
Part of the Northeast Quarter, Section 25,
Township 1 South, Range 6 West,
and
Part of the Southeast Quarter, Section 24,
Township 1 South, Range 6 West,
DeSoto County Mississippi
LEASE AGREEMENT
BY AND BETWEEN
HEWSON/DESOTO PARTNERS, L.L.C.
AND
WILLIAMS-SONOMA RETAIL SERVICES, INC.
DATED: AS OF NOVEMBER 15, 1999
PREPARED BY:
BAKER, DONELSON, BEARMAN & CALDWELL
<PAGE> 2
2000 FIRST TENNESSEE BUILDING
165 MADISON AVENUE
MEMPHIS, TENNESSEE 38103
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
Section Page
- ------- ----
<S> <C>
ARTICLE I
TERM..........................................................................3
1.1 Initial Term............................................................3
1.2 Improvements; Occupancy.................................................3
1.3 Fixtures; Equipment.....................................................6
1.4 Option Periods..........................................................6
ARTICLE II
RENT..........................................................................8
2.1 Rent....................................................................8
2.2 Net-Net-Net Lease......................................................10
2.3 Proration of Taxes.....................................................14
2.4 Payment of Taxes; Payment Deferral.....................................15
2.5 Evidence of Tax Payment................................................16
2.6 Global Basic Rent Adjustment...........................................16
2.7 Option Period Rent Rates...............................................17
ARTICLE III
USE, OPERATION, MAINTENANCE AND ALTERATION...................................20
3.1 Use & Occupancy........................................................20
3.2 Use of Insurance Proceeds..............................................24
3.3 Alterations; Improvements..............................................28
3.4 Signage................................................................31
3.5 Liens; Encumbrances....................................................31
3.6 Indemnification........................................................32
3.7 Inspection of Project..................................................32
3.8 Landlord's Entry to Project Following Default..........................33
ARTICLE IV
INSURANCE....................................................................33
4.1 Insurance Requirements.................................................33
4.2 Form of Policy.........................................................35
4.3 Notice of Damage or Destruction........................................37
4.4 Net Proceeds...........................................................37
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
Section ----
- -------
<S> <C>
ARTICLE V
CONDEMNATION................................................................................37
5.1 Notice of Condemnation..................................................................37
5.2 Partial Condemnation....................................................................38
5.3 Substantial Condemnation; Condemnation in Excess of $5,000,000..........................39
ARTICLE VI
SALES, MORTGAGES, ETC. AND GENERAL CONDITIONS...............................................42
6.1 Assignment by Tenant....................................................................42
6.2 Exercise of Rights or Remedies by Landlord..............................................44
6.3 Tenant's Right of First Refusal.........................................................44
6.4 Financial Covenants of Lessee...........................................................44
6.5 Compliance with Bond Documents by Landlord..............................................50
6.6 Financial Statements....................................................................50
ARTICLE VII
DEFAULT.....................................................................................51
7.1 Events of Default.......................................................................51
7.2 Landlord Remedies.......................................................................53
7.3 Re-Entry................................................................................57
7.4 Remedies Cumulative.....................................................................57
7.5 Lessee's Indemnification; Attorney Fees.................................................57
7.6 Mutual Indemnification; Costs...........................................................58
7.7 Right of Offset.........................................................................58
7.8 Certification by Subtenants.............................................................59
ARTICLE VIII
ARBITRATION.................................................................................59
8.1 Submission to Board of Arbitrators......................................................59
ARTICLE IX
COVENANT OF QUIET ENJOYMENT.................................................................61
9.1 Quiet Enjoyment; Non-Disturbance........................................................61
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE X
MISCELLANEOUS.....................................................................................61
10.1 Tenancy Beyond Lease Term.................................................................61
10.2 Notices...................................................................................62
10.3 Definition of "Landlord.".................................................................63
10.4 Headings; Table of Contents...............................................................63
10.5 Counterparts..............................................................................64
10.6 Governing Law.............................................................................64
10.7 Cure on Behalf of Landlord................................................................64
10.8 Binding on Successors and Assigns.........................................................64
10.9 Authority of Signatories..................................................................64
10.10 Benefits of the Act.......................................................................65
10.11 [RESERVED.]...............................................................................66
10.12 Waivers...................................................................................66
10.13 Mechanic's Liens..........................................................................66
10.14 Utilities.................................................................................67
10.15 [RESERVED.]...............................................................................67
10.16 Cure on Behalf of Tenant..................................................................67
10.17 Severability..............................................................................67
10.18 Venue.....................................................................................68
10.19 [RESERVED.]...............................................................................68
10.20 Waiver of Jury Trial......................................................................68
10.21 Waiver of Right of Recovery...............................................................69
10.22 Design and Construction Indemnity.........................................................69
10.23 Landlord Waiver of Liens..................................................................70
10.24 Tenant Right to Terminate.................................................................70
10.25 Litigation................................................................................72
10.26 Costs of Action...........................................................................72
10.27 Nondisturbance............................................................................72
10.28 Tenant Subordination of Lease.............................................................73
10.29 Agency....................................................................................73
10.30 Amendment.................................................................................74
</TABLE>
Exhibits:
Exhibit "A" Real Property Description A-1
Exhibit "B" Plans for Building and Improvements and Construction Budget B-1
Exhibit "C" Rent Schedule C-1
Exhibit "D" Environmental Notices D-1
iii
<PAGE> 6
Exhibit "E" Easements Affecting Real Property E-1
Exhibit "F" Existing Indebtedness F-1
iv
<PAGE> 7
LEASE AGREEMENT
THIS LEASE, entered into as of the 15th day of November, 1999, by and
between HEWSON/DESOTO PARTNERS, L.L.C., an Arizona limited liability company
(the "Landlord"), and WILLIAMS-SONOMA RETAIL SERVICES, INC., a California
corporation (the "Tenant");
W I T N E S S E T H, that:
This Lease constitutes a financing agreement for the purposes of
Sections 57-10-409 and 27-7-22.3 of the Mississippi Code of 1972, as amended.
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
for the term of this Lease, at the rental and subject to the provisions herein
set forth, that entire certain parcel of land (the "Property"), containing sixty
point nine eight three (60.983) acres, more or less, and the easements and
appurtenances thereto, located in the County of DeSoto, State of Mississippi, as
described in Exhibit "A" attached hereto and made a part hereof, together with
the building, and on-site and off-site improvements, all as described in the
Plans (as defined in the Loan Agreement, as hereinafter defined) in Exhibit "B,"
attached hereto (the "Improvements") (the Property and Improvements being herein
sometimes called the "Project"). The Tenant shall, during the course of and upon
completion of the construction of the Improvements, at the Tenant's sole cost
and expense, install in the Improvements certain fixtures ("Fixtures") and
equipment (the "Equipment"). The Project is to be financed through the issuance
of
v
<PAGE> 8
$42,500,000 Taxable Industrial Development Revenue Bonds, Series 1999
(Hewson/DeSoto Partners, L.L.C. Project) (the "Bonds") by the Mississippi
Business Finance Corporation (the "Issuer"), pursuant to a Loan Agreement of
even date herewith between the Issuer and Landlord (the "Loan Agreement"). The
Bonds are issued pursuant to the Trust Indenture ("Indenture") of even date
herewith executed by and between the Issuer and First Tennessee Bank National
Association, as Trustee (the "Trustee"), and are secured by a deed of trust of
even date herewith and executed by Landlord in favor of the Issuer (the "Deed of
Trust"), which has been assigned by the Issuer to the Trustee pursuant to the
Indenture. Interests of various parties in the Project are further subject to a
Tenant Estoppel, Subordination, Non-Disturbance and Attornment Agreement (the
"Non-Disturbance Agreement") of even date herewith by and among the Landlord,
the Tenant, the Issuer and the Trustee.
Tenant expressly acknowledges that, as security for Landlord's
obligations under the Loan Agreement and as additional security for the Bonds,
the Landlord has assigned its interests hereunder to the Issuer pursuant to an
Assignment of Rents, Leases and Profits of even date herewith (the
"Assignment"), the Issuer's interest in which has been assigned to the Trustee
pursuant to the Indenture. As such, any rights or obligations of Landlord
hereunder, including, but not limited to, approvals, consents and enforcement of
remedies may, but need not be, exercised or performed by the Trustee and/or the
holders of any Bonds (the "Holders" or the "Bondholders") so long as any of the
Bonds remain Outstanding (as defined in the Indenture). So long as the Tenant is
not in default under this Lease, such approvals or consents shall not be
unreasonably withheld unless this Lease or the Loan Agreement otherwise
specifically provides. When no Bonds remain Outstanding and the Loan Agreement
has been terminated and the Indenture released, references to the Trustee herein
shall have no further force or effect.
2
<PAGE> 9
This Lease is made upon the following terms, provisions, conditions and
limitations, and the parties respectively covenant and agree as follows:
1 ARTICLE
TERM
1
1.1. Initial Term. The initial term of this Lease shall commence on the
Occupancy Commencement Date (as hereinafter defined) and continues until January
1, 2023 (the "Primary Term"). Thereafter, as used herein, unless the context
shall otherwise require, the phrase "term of this Lease" shall mean the Primary
Term plus the option periods exercised pursuant to Section 1.4 hereof.
(a). Improvements; Occupancy. The parties hereto understand and agree that the
Improvements to be erected as part of the Project are anticipated to be complete
and ready for occupancy as evidenced by a Certificate of Occupancy to be issued
by the relevant jurisdiction on or about August 31, 2000 ("Estimated Completion
Date"). Landlord shall exert its best efforts toward the end that the
Improvements be completed on or before August 31, 2000. Landlord agrees to give
Tenant written notice as to whether or not the Improvements will be completed by
the Estimated Completion Date as soon as possible, but in any event not later
than thirty (30) days prior to the Estimated Completion Date.
(b) Tenant's responsibility for payment of amounts set forth in Article II
hereof shall commence on that date (the "Rental Commencement Date") which is the
earliest of (i) ten (10) business days following receipt by the Tenant of a copy
of those items required under
3
<PAGE> 10
Section 4.4 of the Loan Agreement, (ii) that date on which Tenant commences
actual productive use (as distinct from installation of Fixtures and Equipment)
of the Project as a distribution facility, or (iii) January 31, 2001. Tenant's
occupancy of the Project shall commence on that date (the "Occupancy
Commencement Date") which is the earlier of (i) ten (10) business days following
receipt by the Tenant of a copy of those items required under Section 4.4 of the
Loan Agreement or (ii) that date on which Tenant commences actual productive use
(as distinct from installation of Fixtures and Equipment) of the Project as a
distribution facility. Notwithstanding anything to the contrary herein, Tenant
shall have no obligation to pay Company Payments (as hereinafter defined) until
after the Occupancy Commencement Date and until after all amounts (if any) due
to Tenant under the Agreement and Indemnification (as hereinafter defined) have
been paid in full.
(c)
(d) Tenant's obligation to pay those amounts set forth in Article II hereof
(other than Company Payments) shall arise on the Rental Commencement Date
regardless of any disputes which may occur between Landlord and Tenant
concerning construction of the Improvements, subject to the provisions of
paragraph 7.7.
(e)
(f) The Landlord shall construct or cause to be constructed the Improvements
substantially in accordance with the Plans and the Construction Budget attached
hereto as Exhibit "B"; provided, however, that Landlord and Tenant may update
and revise the Plans as they may mutually agree. The Landlord shall obtain all
approvals requisite to the construction of the Project, and shall construct the
Project in material compliance with all federal, State and local laws and
regulations. On or before the Occupancy Commencement Date, the Landlord will
furnish to the Tenant copies of all required permits and authorizations except
those permits and
4
<PAGE> 11
authorizations which Tenant must obtain, authorizing the occupancy and uses of
the Project for the purposes contemplated by the Tenant. The Landlord will take
such action and institute such proceedings as shall be necessary to cause and
require all contractors and material suppliers to complete their contracts,
including the correction of any defective work, and the Landlord agrees that the
Tenant may, from time to time, in its own name, or in the name of the Landlord,
take such action as may be necessary or advisable, as determined by the Tenant,
to assure that the construction of the Improvements will proceed in an efficient
and workmanlike manner. Any amounts recovered as damages, refunds, adjustments
or otherwise in connection with the foregoing (a) shall be paid to the Tenant if
the Tenant has corrected, at its own expense, the matter which gave rise to such
default or breach, or (b) shall be paid to the Landlord if the Landlord has
corrected, at its own expense, the matter which gave rise to such default or
breach, or (c) shall be paid to the Landlord if the matter which gave rise to
such default or breach has not yet been corrected and if such payment is prior
to the Occupancy Commencement Date (in which event Landlord shall thereafter
promptly apply such amount to the correction of such matter, with the balance,
if any, disposed of as set forth in Section 4.5 of the Loan Agreement), or (d)
shall be paid to the Tenant if the matter which gave rise to such default or
breach has not yet been corrected and if such payment is after the Occupancy
Commencement Date (in which event Tenant shall thereafter promptly apply such
amount to the correction of such matter, with the balance, if any, disposed of
as set forth in Section 3.2(b) of this Lease).
1.2. Fixtures; Equipment. The parties hereto understand and agree that the
Landlord has no responsibility whatsoever regarding the delivery and
installation of the Fixtures and Equipment in the Project, and that this Lease
and the Tenant's covenants and agreements contained herein are in no way
conditioned upon such delivery or installation.
1.3
5
<PAGE> 12
(a). Option Periods. In addition to the Primary Term of this Lease and in
partial consideration of Tenant's entering into this Lease, Landlord hereby
grants to Tenant an option to extend the term of this Lease for an additional
period equal to five (5) years plus the number of months (if any), rounded to
the nearest whole month by which the Rental Commencement Date precedes the
Occupancy Commencement Date, commencing at the conclusion of the Primary Term
(hereinafter referred to as the "First Option Period") at the rental to be
determined in accordance with Section 2.7(a) and (b) hereof, but otherwise upon
the same terms and conditions as those set forth in this Lease.
(b)
(c) In addition to the Primary Term of this Lease and in addition to the First
Option Period and in partial consideration of Tenant's entering into this Lease,
Landlord hereby grants to Tenant an additional option to further extend the term
of this Lease for an additional five (5) year period commencing at the
conclusion of the First Option Period (hereinafter referred to as the "Second
Option Period") at the rental to be determined in accordance with Section 2.7(a)
and (c) hereof, but otherwise upon the same terms and conditions as those set
forth in this Lease, together with any additions or amendments made for the
First Option Period.
(d)
(e) [RESERVED.]
(f) [RESERVED.]
(g)
(i) The options under this Section 1.4 may be exercised solely at the
discretion of Tenant. Tenant may exercise the option for the First
Option Period by delivering written notice of such exercise to Landlord
at any time prior to that date which precedes the conclusion of the
Primary Term of this Lease by one (1) year (the "First Option Exercise
Date"). If
6
<PAGE> 13
Tenant has not delivered to Landlord written notice of Tenant's exercise
of the option for the First Option Period by the First Option Exercise
Date, the options for the First Option Period and the Second Option
Period under this Section 1.4 shall lapse and be deemed of no further
effect.
(i) Tenant may exercise the option for the Second Option Period by
delivering written notice of such exercise to Landlord at any time
during the First Option Period prior to that date which precedes the
conclusion of the First Option Period by one (1) year (the "Second
Option Exercise Date"). If Tenant has not delivered to Landlord written
notice of Tenant's exercise of the option for the Second Option Period
by the Second Option Exercise Date, the option for the Second Option
Period under this Section 1.4 shall lapse and be deemed of no further
effect.
(i) Neither the option for the First Option Period nor the option for
the Second Option Period may be exercised at any time during which
Tenant is in default under any of the terms of this Lease.
(a) As used hereinafter, "Option Period" shall be deemed to mean either the
First Option or the Second Option Period.
7
<PAGE> 14
1 ARTICLE RENT
(a) Rent. From and after the Rental Commencement Date, Tenant shall pay Global
Basic Rent, subject to adjustment as provided in Section 2.6 hereof; "Global
Basic Rent" being defined (i) during the Primary Term as the sum of Basic Rent
(as defined below) and Company Payments (as defined below) (provided, however,
that Tenant shall have no obligation to pay Company Payments until after the
Occupancy Commencement Date and until after all amounts due to Tenant under the
Agreement and Indemnification have been paid in full); and (ii) during the
Option Periods, as set forth in Section 2.7 hereof (provided, however, that
during said Option Periods all Global Basic Rent shall also constitute Company
Payments hereunder).
(a) During the Primary Term, the Global Basic Rent shall be payable in the
amounts set forth in Exhibit "C" attached hereto ("Rent Schedule") and made a
part hereof, subject to adjustment of the Basic Rent as provided in Section 2.6
hereof. Any such Basic Rent adjustment will be documented by an amended Exhibit
"C," agreed to by the parties, at the time of such adjustment. During any Option
Period, the Global Basic Rent shall be determined as set forth in Section 2.7
hereof.
(b)
(c) From and after the Rental Commencement Date and so long as any Bonds remain
Outstanding or the Indenture has not been released during the Primary Term,
Tenant shall timely pay to Trustee in accordance with the terms of the Loan
Agreement at First Tennessee Bank National Association, 4385 Poplar Avenue,
Memphis, Tennessee 38117, Attention: Corporate
8
<PAGE> 15
Trust Department, or such other person or at such other place as Trustee
designates in writing to Tenant, without previous demand therefor and without
deduction or offset, the amount of quarterly payments of interest accruing on
Outstanding Bonds and semi-annual Mandatory Sinking Fund Payments (as defined in
the Indenture) due on the Bonds (the "Basic Rent"). Attached as part of Exhibit
"C" is a schedule of payments of Basic Rent over the term of the Bonds assuming
no prepayments and assuming no change in the rate of interest borne by the Bonds
as described in Section 2.6(b). All payments of Basic Rent by Tenant to Trustee
shall be credited against Tenant's obligation to pay Global Basic Rent. Attached
as part of Exhibit "C" is a schedule of Company Payments for the Primary Term
assuming no prepayment under Section 2.6(a). Provided that all amounts due to
Tenant under the Agreement and Indemnification have been paid in full, from and
after the Occupancy Commencement Date and during the Primary Term, Tenant shall
pay such amounts ("Company Payments") to Landlord, ? Hewson Properties, Inc. at
4636 E. University Drive, Suite 265, Phoenix, Arizona 85034, or to such other
person or place as Landlord designates in writing to Tenant, quarterly (on the
same day as quarterly interest payments are due on the Bonds), without previous
demand therefor, in an amount equal to one-quarter (_) of the difference between
(i) the then applicable Global Basic Rent (as adjusted in Section 2.6 hereof
during the Primary Term) for the applicable lease year and (ii) the Basic Rent
for the applicable lease year ("lease year" being the successive one (1) year
periods). During any Option Period, all Global Basic Rent shall be deemed to be
Company Payments for purposes of this Lease, and shall be paid to Landlord
quarterly as set forth in this Section 2.1(c).
(d)
(e) Notwithstanding any other provision hereof, in the event that the Occupancy
Commencement Date occurs on a date other than a quarterly interest payment date
on the Bonds,
9
<PAGE> 16
the Company Payments due hereunder shall be prorated for such portion of a
quarterly interest period.
(f)
(g) Net-Net-Net Lease. This Lease constitutes what is commonly known as a
"net-net-net lease," it being understood that the Trustee and the Landlord shall
receive the Basic Rent and Company Payments, respectively, free and clear of any
and all impositions, taxes, liens, charges or expenses of any nature whatsoever
in connection with Landlord's ownership and leasing of the Project. In addition
to the Global Basic Rent provided for in Section 2.1 hereof, from and after the
Rental Commencement Date, the Tenant shall pay to Landlord or to third parties
as provided herein (particularly in Sections 2.3 and 2.4) as additional rent
("Additional Rent") all impositions, taxes, payments or fees in lieu of taxes,
insurance premiums, operating charges, costs and expenses which arise or may be
contemplated under any provisions of this Lease during the Primary Term and any
Option Periods. Upon the failure of Tenant to pay any of such costs, charges or
expenses, Landlord shall have the same rights and remedies as otherwise provided
in this Lease for the failure of Tenant to pay Basic Rent. It is the intention
of the parties hereto that Tenant shall in no event be entitled to any abatement
of or reduction in Global Basic Rent payable hereunder except as expressly
provided herein. Any present or future law to the contrary shall not alter this
agreement of the parties.
10
<PAGE> 17
Amounts payable by Tenant hereunder shall include, but not be limited
to, the following:
(i) Insurance premiums required to maintain the insurance policies
described in Article IV hereof;
(i) Expenses of occupying, operating, altering, maintaining and
repairing the Project throughout the term of this Lease; and
(i) All taxes, assessments, fees in lieu of taxes and other governmental
charges, as set forth in Section 6.2 of the Loan Agreement, except as
hereinafter provided in subsection 2.4 and except as prorated pursuant
to Section 2.3(a) of this Lease, and all other expenses and charges
(including any asserted by the Issuer or the Trustee, including but not
limited to Trustee's regular and extraordinary fees, as to all of which
Landlord shall be entitled to prompt reimbursement by Tenant) which
during the term of this Lease shall be levied, assessed or imposed by
any governmental authority upon or with respect to, or incurred in
connection with the ownership, possession, occupation, operation,
alteration, maintenance, repair or use of the Project.
If at any time during the term of this Lease under the laws of the State
of Mississippi or any political subdivision thereof in which the Project is
situated, a tax or excise on rents or other tax, however described, is levied or
assessed by said State or political subdivision against Landlord or the rentals
set forth in Section 2.1 hereof, Tenant covenants to pay and discharge such tax
or excise on rents or other tax, but only to the extent of the amount thereof
which is lawfully assessed or imposed upon Landlord and which was so assessed or
imposed as a direct
11
<PAGE> 18
result of Landlord's interest in the Project, or of this Lease or of the rentals
accruing hereunder, it being the intention of the parties hereto that all sums
payable by Tenant hereunder (including, without limitation, Basic Rent, Company
Payments, Additional Rent and all other sums, all of which are herein sometimes
collectively called "Rent") shall be paid to Landlord absolutely net without
offset of any kind or deduction of any nature whatsoever except as expressly
provided in this Lease with respect to Company Payments. Any payment or
discharge by Tenant of any tax or excise on rents or other tax referred to in
the preceding sentence shall not be deemed to be Additional Rent. Nothing in
this Lease shall be construed to require Tenant to pay any franchise, estate,
inheritance, succession, capital levy or transfer tax of Landlord, or any
income, excess profits or revenue tax or any other tax or impost charged or
levied against Landlord upon the rentals payable by Tenant under this Lease,
except to the extent hereinabove provided. In the case of any assessment for
public improvement wherein the cost of the public improvement is permitted to be
paid in installments, then and in such event only, such installments falling due
during the term of this Lease shall be paid by Tenant, and all such installments
falling due subsequent to the term of this Lease shall be paid by Landlord,
notwithstanding the provisions of Section 2.3 hereof. For the purpose of the
foregoing sentence, an installment is due on the last day prior to the date upon
which such an installment becomes delinquent.
Upon the occurrence and continuation of an event of default hereunder
(an "Event of Default"), the Landlord may require the Tenant to deposit with the
Trustee (or Landlord if there is no Trustee) in an escrow account bearing
interest for the benefit of Tenant (i) an amount equal to (A) all taxes which
are due and payable which Tenant is obligated to pay under this Section,
including accrued ad valorem taxes, if any, or, in the alternative all amounts
due as payments or fees in lieu of taxes, with respect to the Project plus (B)
any then delinquent insurance premiums
12
<PAGE> 19
with respect to the insurance required under Section 4.1 hereof, and (ii)
thereafter, each month, an amount equal to one-twelfth (1/12th) of the annual
charges for taxes to be paid under this Section 2.2 and insurance premiums.
Tenant covenants to cooperate fully with Landlord in taking any actions
necessary to apply for and receive ad valorem tax relief for the Property,
including, but not limited to, meeting the requirements of Mississippi Code
Section 27-31-101 and Section 27-31-104. Tenant expressly acknowledges that no
right of offset with respect to payment of Basic Rent to the Trustee or the
payment of other amounts (except Company Payments) hereunder shall arise in the
event of the loss of ad valorem tax relief. Landlord agrees that, so long as
Tenant is not in default hereunder, if any actions on the part of Landlord
result in the occurrence of an event of default under the Loan Agreement or
leads to a foreclosure on the Deed of Trust or any other event the result of
which is the loss of ad valorem tax relief under the Loan Agreement, Landlord
will indemnify Tenant to the extent Tenant is required under this Section 2.2.
to pay ad valorem taxes in excess of the payments in lieu of taxes which
otherwise would have been paid by Tenant hereunder.
(a) Tenant agrees, within six (6) months following the earlier of (i) the
Occupancy Commencement Date or (ii) the date of issuance of the Series 1999
Bonds, the Tenant will certify in writing to the Landlord as to the number of
jobs created or, if prior to the Occupancy Commencement Date, anticipated to be
created, as a result of the Project.
(b)
(c) Tenant will reimburse Landlord with respect to certain environmental
inspection matters as follows:
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(i) On an annual basis, Tenant will reimburse Landlord for the costs of
a "walk-through" inspection of the Project by a qualified environmental
engineer reasonably acceptable to Tenant.
(i) If such inspection yields evidence of any potential environmental
hazards related to Tenant's use and occupancy of the Project, Tenant
will reimburse Landlord for such additional environmental inspections
and reports as are deemed reasonably necessary by such engineer.
(a) Proration of Taxes. The taxes, fees in lieu of taxes, and other charges and
expenses described in Section 2.2(a) above shall be prorated when appropriate
between Landlord and Tenant in order that all of such taxes and other charges
and expenses which relate to the period prior to the Occupancy Commencement Date
and the period subsequent to the termination of the term of this Lease shall be
borne by Landlord and in order that all of such taxes and other charges and
expenses which relate to the term of this Lease shall be borne by Tenant. Such
proration shall be computed in accordance with generally accepted accrual
accounting principles and Landlord and Tenant shall each indemnify and hold the
other harmless from any taxes and other charges and expenses relating to their
respective periods of responsibility which may have become a charge upon the
other.
(b)
(c) Tenant shall not enter into any non-terminable contracts or agreements with
respect to the Project extending beyond the term of this Lease without the prior
written consent of Landlord, which consent Landlord may not withhold
unreasonably and arbitrarily.
(d)
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(e) Payment of Taxes; Payment Deferral. Tenant shall pay each sum payable
pursuant to Section 2.2(a) above prior to the time that such sum becomes
delinquent; provided, however, that if any authority having jurisdiction or
alleging to have jurisdiction assesses real estate taxes or assessments (or fees
in lieu thereof), personal property taxes or assessments (or fees in lieu
thereof), or assesses or levies any other charges against the Project as
contemplated and provided in this Lease, and Tenant deems the same or any of
them excessive, improper or illegal, Tenant may defer payment thereof to the
extent permitted by law so long as the validity or amount thereof is contested
by Tenant in good faith. In such event, if an Event of Default has occurred and
is continuing, Tenant, if requested by Landlord or Trustee so to do, shall
furnish to Landlord and Trustee a corporate surety bond, satisfactory to
Landlord and Trustee as beneficiary, in an amount equal to the aggregate of (a)
the taxes, assessments, or other charges so assessed, plus (b) all penalties and
interest which may reasonably be estimated to be incurred if such contest is
adversely determined thereon at the annual rate provided for by law. In the
event that during the period of such deferred payment, and while such Event of
Default remains unwaived or uncured, such penalties and interest increase to an
amount beyond the amount of such bond, Tenant shall furnish to Landlord and
Trustee such additional corporate surety bond or bonds, satisfactory to Landlord
and Trustee as beneficiary, in such amount as may be necessary to fully cover
such increases in said taxes, assessments, or other charges and penalties and
interest thereon as aforesaid.
(f) With the exception of Global Basic Rent, which shall be due and payable as
set forth in Section 2.1, Tenant shall pay, within twenty (20) days after
receipt of Landlord's written demand and supporting documentation therefor
unless otherwise specified herein, all amounts which Tenant shall otherwise be
obligated to pay to Landlord or otherwise by reason of the provisions
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of this Lease, provided that Tenant shall not be required to pay any amount
prior to the date such amount is due and payable hereunder.
(g)
1.2 Evidence of Tax Payment. At any time upon request, Tenant shall provide
Landlord with a true copy of a receipted bill, if available, for any tax,
assessment or other governmental charge which has become due and payable by
Tenant under this Lease or any other evidence reasonably satisfactory to
Landlord of the payment thereof.
1.3
(a) Global Basic Rent Adjustment. If upon completion of the Project (in
accordance with Section 4.4 of the Loan Agreement) funds remain in the
Acquisition Fund [resulting in the transfer of such surplus amount from the
Acquisition Fund to the Bond Fund (each as defined in the Loan Agreement) under
Section 5.3(b) of the Indenture, the application of such amount by the Trustee
under Section 5.4(a) of the Indenture to the redemption of Bonds at par pro rata
at the earliest possible date and the corresponding reduction in the amount of
principal and interest payments due on the Bonds], the Basic Rent during the
portion of the Primary Term occurring after the Occupancy Commencement Date
shall be reduced proportionately. Further, to the extent that the Costs of the
Project, as defined in Section 1.1 of the Loan Agreement, necessary to effect
completion of the Project as contemplated by Section 4.4 of the Loan Agreement,
are less than Forty-Two Million Five Hundred Thousand Dollars ($42,500,000.00),
quarterly Company Payments shall be reduced by an amount equal to (x) the
product of 0.5% times the difference between $42,500,000 and such lesser actual
Costs of the Project divided by (y) four (4).
(b)
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(c) The Bonds are subject to an interest rate increase on January 1, 2011 or if
such day is not a business day, the next succeeding business day (the "Rate
Adjustment Date"), as provided in Section 2.2 of the Indenture, up to a maximum
of thirteen percent (13%) per annum. Landlord and Tenant agree that, upon
receiving notice from the Trustee that such an increase in rate has occurred,
the Basic Rent component of the Global Basic Rent during the remaining portion
of the Primary Term shall be increased accordingly.
(d)
(e) Following the occurrence of any circumstances set forth in Section 6.9 of
the Loan Agreement requiring or permitting the partial prepayment of Bonds, such
amounts will be used to redeem Bonds as provided in Section 3.1 of the
Indenture. If any such redemption occurs during the Primary Term, the Basic Rent
component of the Global Basic Rent during the remaining portion of the Primary
Term shall be reduced proportionately.
(f)
(g) Option Period Rent Rates. The Global Basic Rent for the First Option Period
and for any subsequent Option Period shall be determined as set forth
hereinafter prior to the commencement of each such Option Period by negotiation
between the parties hereto and shall, within the limitations hereinafter set
forth, be based on a negotiated fair market rental rate based upon the
prevailing rental rate for similar industrial space in the vicinity of Olive
Branch, Mississippi including southeast Shelby County, Tennessee, comparably
improved (without reference, however, to Tenant's Fixtures and Equipment), and
of substantially similar age, quality, layout, building size and land size as
that existing in the Project ("Fair Market Rental").
(h)
(i) If the parties hereto fail to reach agreement on the Global Basic Rent for
any Option Period within thirty (30) days prior to the commencement of such
Option Period, the Fair Market
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Rental determination underlying the relevant amount of Global Basic Rent for
such Option Period shall be determined as follows:
(j)
(i) Landlord and Tenant shall each appoint a qualified, licensed,
experienced real estate appraiser, who is a Member of the American
Institute of Appraisers, and who is familiar with the rentals being
charged in the vicinity of Olive Branch, Mississippi, including
southeast Shelby County, Tennessee for industrial space of a similar
kind and nature, the appointment of each appraiser to be made within
fifteen (15) days following written notice of either party to the other
of the necessity of making such appointment.
(i) The two (2) appraisers, as so selected, shall themselves select a
third appraiser whose qualifications meet those set forth for the first
two (2) appraisers, the appointment of the third appraiser to take place
within fifteen (15) days following the appointment of the first two (2)
appraisers.
(i) The three (3) appraisers shall then reach a determination as to
whether the parties shall employ, as the Fair Market Rental upon which
the Global Basic Rent for the Option Period in dispute will be based,
the rentals proposed by the Landlord or the rentals proposed by the
Tenant.
(i) The decision of a majority of the three (3) appraisers shall be
binding.
(i) Each party shall pay the costs, fees and expenses of its own
appraiser, and the cost of the third appraiser shall be shared equally
by the parties. If either party shall fail to
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select an appraiser within the time set forth above, the non-defaulting
party may select such appraiser for the defaulting party. If two (2)
appraisers, as selected, fail to agree upon an appointed third
appraiser, both appraisers shall be dismissed and the matter shall be
submitted to arbitration under the applicable provisions of the American
Arbitration Association.
(a) During the First Option Period, the Global Basic Rent shall be the Fair
Market Rental of the Project.
(b)
(c) During the Second Option Period, the Global Basic Rent shall be the Fair
Market Rental of the Project.
(d)
(e) [RESERVED.]
(f)
(g) [RESERVED.]
(h)
(i) Any rental payment not made when due shall be subject to the Default Rate
(as defined in the Loan Agreement).
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1 ARTICLE
USE, OPERATION, MAINTENANCE AND ALTERATION
1
(a) Use & Occupancy. Tenant agrees to use and occupy the Project as a
distribution facility, for any other lawful uses in connection with its
business, and for other permitted related uses, all of which shall be consistent
with the provisions of Section 57-10-401, et seq. of the Mississippi Code of
1972, as amended, and for no other purpose. Tenant further agrees that in the
use and occupancy of the Project and in the conduct of its business therein,
Tenant will comply with all requirements of all applicable laws, ordinances,
orders and regulations of all governmental authorities having jurisdiction.
Tenant represents that, to its best knowledge, no Hazardous Substances (as
hereinafter defined) have been stored, processed or disposed of on or released
or discharged (including ground water contamination) from the Property which
would materially and adversely affect the value of the Project and no above or
underground storage tanks exist on the Property, and except as set forth on
Exhibit "D" attached hereto, no private or governmental lien or judicial or
administrative notice or action related to Hazardous Substances or other
environmental matters has been filed against the Property or otherwise issued to
or received by Tenant with respect to the Property.
Tenant will maintain at all times, from and after the Occupancy
Commencement Date, all the Property in material compliance with all
Environmental Laws (as hereinafter defined), will handle any Hazardous
Substances located, stored, used or processed at the Property in material
compliance with all Environmental Laws and will not dispose of, release,
discharge, handle, use, process or store any Hazardous Substances in violation
of any Environmental Laws, and will
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promptly notify the Landlord and Trustee following receipt of any notice,
action, lien or other similar action alleging either the location of any
Hazardous Substances or the violation of any Environmental Laws with respect to
the Property.
As used herein, "Environmental Laws" means all local, state or federal
laws, rules or regulations pertaining to environmental regulation, contamination
or cleanup, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1976 or any state lien or superlien
or environmental cleanup statutes.
Also as used herein, "Hazardous Substances" shall mean and include all
hazardous and toxic substances, wastes or materials, any pollutants or
contaminants (including, without limitation, asbestos and raw materials which
include hazardous constituents), or any other similar substances or materials
which are included under or regulated by any Environmental Laws.
The Tenant agrees to indemnify and save the Landlord, the Issuer and the
Trustee harmless from any and all claims, damages, demands, expenses,
liabilities and losses of any nature whatsoever (including, without limitation,
all reasonable attorney's fees and expenses) asserted by or on behalf of any
person arising out of, resulting from, or in any way connected with any and all
claims, demands, judgments, damages, actions, causes of action, injuries,
administrative orders, consent agreements and orders, liabilities, penalties,
costs, and expenses of any kind whatsoever including claims arising out of loss
of life, injury to persons, property, or business and/or damages to natural
resources in connection with the activities of Tenant from and after the
Occupancy Commencement Date which (i) arises out of the actual, alleged or
threatened discharge, dispersal, release, storage, treatment, generation,
disposal or escape of
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pollutants or other toxic or Hazardous Substances, including any solid, liquid,
gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste (including materials to be recycled,
reconditioned or reclaimed), or (ii) actually or allegedly arises out of the
use, specification or inclusion of any product, material or process containing
chemicals, the failure to detect the existence or proportion of chemicals in the
soil, air, surface water or groundwater, or the performance or failure to
perform the abatement of any pollution source or the replacement or removal of
any soil, water, surface water or groundwater containing chemicals, in each case
caused by the act or omission of Tenant from and after the Occupancy
Commencement Date.
(a) Subject to Tenant's rights under Sections 3.2 and 5.3 hereof, throughout the
Primary Term of this Lease (and all Option Periods) Tenant will, at its own
expense, keep the Project, including, but not limited to, the HVAC and roof of
the building, in good condition, repair and working order (ordinary wear and
tear excepted) making all repairs and replacements thereto (whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen), and
operate the Project in a sound and economic manner (provided, however, that
nothing contained herein shall be construed to impair any rights of Tenant
against third parties). Notwithstanding the foregoing, but subject to the
provisions of Section 10.21, Landlord shall be responsible for all damages (and
repairs necessitated thereby) caused by Landlord, its agents, employees,
invitees and/or contractors. Nothing contained in this Lease shall give Tenant
any right to offset against amounts due as Basic Rent for claims it may have
against Landlord. Subject to Tenant's rights under Sections 3.2 and 5.3 hereof,
at its expense Tenant will maintain the Project in compliance with (i) all laws,
ordinances, orders and regulations of all governmental authorities applicable to
the Project, and (ii) all requirements of those insurance companies with which
Tenant maintains
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the insurance policies required by Article IV hereof (provided, however, that
nothing contained herein shall be construed to impair any rights of Tenants
against third parties). Tenant also shall comply with and abide by all
covenants, restrictions, conditions and other matters, if any, to which title to
the Project is subject as of the Occupancy Commencement Date, including, without
limitation, those certain easements described on Exhibit "E" hereto, and shall
comply with all such matters becoming effective subsequent to the Occupancy
Commencement Date if such matters were created by the acts of or agreed to by
Tenant. A final unappealable judgment of any court of competent jurisdiction or
the admission by Tenant in any action or proceeding that Tenant has violated any
laws, statutes, ordinances, rules, regulations, requirements or such matters
affecting title in the use of the Project shall conclusively determine that fact
as between the Landlord and the Tenant. In connection with any repairs, renewals
or replacements which are covered by warranties received by Landlord in
connection with the construction or purchase of the Project, Landlord shall
exert its best efforts to cause the issuer of such warranties, if any, to make
such repairs, renewals or replacements.
(b)
(c) In the event that any building, structure or other improvement erected or
made by Tenant, at any time during the term of this Lease, shall encroach upon
any property, street, right-of-way, easement or set-back line or shall violate
the agreements or conditions contained in any restrictive covenant affecting the
Project, then, promptly after written request of the Trustee or of any person
affected by any such encroachment, violation, hindrance, obstruction or
impairment, the Tenant shall, at its expense, either: (i) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation, hindrance, obstruction or
impairment; or (ii) make such changes in the buildings,
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structures or other improvements and take such other action as shall be
necessary to remove such encroachments, hindrances or obstructions or to end
such violations or impairments.
(d)
(e) The Tenant anticipates that the Project will result in the creation of one
hundred twenty-five (125) full-time equivalent jobs.
(f)
(g) Use of Insurance Proceeds. In the event of damage or destruction resulting
in an award of Net Proceeds (as defined in Section 4.4 hereof) in excess of
$5,000,000, Tenant shall not be required to repair or restore the Project if,
while any Bonds remain Outstanding, the award is made during the last year of
the term of this Lease, or if no Bonds remain Outstanding, during the last year
of the Primary Term or any Option Period, unless the Tenant has previously
exercised an option to extend for the next ensuing Option Period (if any then
be). If the Tenant has exercised its option to extend for the next ensuing
Option Period, Tenant shall be obligated to repair and restore the portion of
the Project remaining after the event of damage or destruction as provided
above. In the event that Tenant has not exercised its option to extend and is
not, therefore, obligated to repair or restore the Project as provided above,
the Landlord shall be required to promptly repair and restore the Project in
accordance with Section 7.1(a) of the Loan Agreement. If, while the Bonds remain
Outstanding or the Indenture has not been released, such repair or restoration
2accesby Landlord is not commenced and prosecuted promptly, Tenant agrees to
promptly repair and restore the Project [in which event, Landlord will indemnify
Tenant for any and all costs and expenses incurred by Tenant with respect
thereto, Tenant expressly acknowledging that no right of offset with respect to
payment of Basic Rent to Trustee or the payment of other amounts (except Company
Payments) hereunder shall arise in such event]. If the building is structurally
sound and the remaining portions accessible, Tenant shall have the
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option to remain in the unrestored building on the Property until the end of the
Primary Term of this Lease, or the then current Option Period, as the case may
be, at which time the Tenant's rights of continued occupancy shall cease and
terminate for all purposes.
(h)
(i) If the Project shall be less than totally damaged or destroyed at any time
that any Bonds remain Outstanding, the Loan Agreement has not been terminated or
the Indenture has not been released, if the loss is covered by hazard insurance,
subject to the provisions of Section 3.2(a), Net Proceeds of insurance resulting
from any claim in an amount less than $500,000 shall be paid to Tenant and shall
be used promptly to repair and restore the Project. If such Net Proceeds are in
excess of $500,000, such amounts shall be made payable to and deposited with the
Trustee and disbursed in accordance with the provisions of Section 7.1(a) of the
Loan Agreement. If the partial loss is in excess of $500,000 and is not an
insured loss, or if insurance proceeds required to be deposited with the Trustee
are insufficient to cover costs of repair and reconstruction, subject to Section
3.2(a), Tenant shall deposit sums sufficient to cover repair and reconstruction
costs with the Trustee who shall disburse in accordance with Section 7.1(a) of
the Loan Agreement. If all Bonds have been redeemed, the Loan Agreement
terminated and the Indenture released, all Net Proceeds shall be made payable to
Tenant for use in repair and restoration of the Project. In either a case of an
insured or uninsured loss, subject to the provisions of this Section 3.2(a),
Tenant shall promptly replace, repair, rebuild or restore the Project to
substantially the same condition, value and utility as an operating entity as
existed prior to such damage or destruction, with such changes, alterations and
modifications (including the substitution and addition of other property) as may
be desired by Tenant and submitted to the Trustee for approval, if required in
accordance with Section 3.3 hereof, and as will not impair the overall operating
utility, use, value or service capacity or the character of the Project. Tenant
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shall pay over to the Landlord any balance of such Net Proceeds of insurance
remaining after payment of all costs of such restoration.
(j)
(i) If the Project shall be totally destroyed at any time, whether or
not any Bonds remain Outstanding, or the Loan Agreement terminated or
the Indenture released, and if there has been no default hereunder,
Tenant shall have a period of forty-five (45) days from the date of
destruction to decide whether or not to reconstruct the Project, or to
terminate this Lease. If, while any Bonds remain Outstanding, Tenant
elects by written notice to Landlord and Trustee to terminate the Lease,
Landlord shall direct the Trustee to effect a redemption of the Bonds in
whole under Section 3.1(a) of the Indenture with the Net Proceeds of
insurance. If there is any deficiency in Net Proceeds necessary to
redeem the Bonds, Tenant shall pay such amounts; if there are any excess
Net Proceeds following redemption, Landlord shall be entitled to such
amounts. If Tenant elects to repair or reconstruct the Project, Net
Proceeds of insurance shall be deposited with the Trustee and disbursed
in accordance with the provisions of Section 7.1(b) of the Loan
Agreement. If the loss is not an insured loss, or if insurance proceeds
are insufficient to cover the costs of repair and reconstruction, Tenant
shall deposit sums sufficient to cover repair and reconstruction costs
with the Trustee who shall disburse in accordance with Section 7.1(b) of
the Loan Agreement. Following reconstruction of the Project in
accordance with Section 7.1(b) of the Loan Agreement, Landlord shall be
entitled to receive any unexpended Net Proceeds of insurance.
(i) If at any time following an election by Tenant to repair or
reconstruct the Project under this Section, an Event of Default shall
occur hereunder and be continuing, the
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Trustee must obtain the written consent of sixty-six and two-thirds
percent (66?%) of Bondholders for Tenant to obtain funds from the
insurance loss trust account held by Trustee pursuant to the Indenture,
which consent shall not be unreasonably withheld or delayed. While
obtaining such consent, the Trustee may cease to honor requisitions for
disbursements for repair and reconstruction and may proceed to
accelerate the Bonds under the Indenture.
(i) Landlord agrees to join in any direction necessary to effect the
exercise by Tenant of the options set forth in subsection (i).
(i) For the purposes of this section (c), "totally destroyed" shall mean
damage or destruction to the extent of fifty percent (50%) or more of
the usable floor space in the building on the Project or which has the
effect of reducing Tenant's distribution capacity in the building on the
Project to fifty percent (50%) or less of full, pre-casualty capacity.
(a) All such replacements, repairs, rebuilding or restoration made pursuant to
this Section, whether or not requiring the expenditure of the Tenant's own
money, shall automatically become a part of the Project, as if the same were
specifically described herein.
(b)
(c) At all times prior to the termination of this Lease in accordance with
subsection (c) above following total destruction of the Project, Tenant shall
remain liable for Global Basic Rent and all other expenses payable by Tenant in
accordance with this Lease.
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(a) Alterations; Improvements. The provisions of this Section 3.3 shall be
subject to, and, if in conflict with, superseded by, the provisions of Section
3.2 hereof. Subject to the preceding sentence, and subject to the Loan
Agreement, Tenant may make, from time to time, permanent remodeling,
alterations, improvements or expansions to the Project which the parties hereto
understand and intend to constitute fixtures and permanent accessions to the
Project ("Permanent Improvements"), subject, however, in all cases to the
following conditions, which Tenant shall observe and perform:
(b)
(i) Prior to making any alterations, improvements or expansions to the
Project which: (A) do not affect the outside or facade of the building
or do not involve removal of any part of any floor, load-bearing wall,
column, girder or other support, or do not affect roof load and (B)
involve a cost which Tenant reasonably and in good faith estimates to be
less than Five Hundred Thousand Dollars ($500,000.00), Tenant shall
furnish to Landlord and Trustee information (including sketches and
drawings which may be prepared by officers or employees of Tenant) as to
the proposed changes in walls and partitions or relocations thereof and
plans and specifications, if available, covering any proposed work, but
Tenant may proceed forthwith to make such specified alterations or
improvements. The cost of all such improvements shall be paid by Tenant.
(i) Prior to making any alterations, improvements or expansions to the
Project which: (A) affect the outside or facade of the building, or
involve removal of any part of any floor, load-bearing wall, column,
girder or other support, or affect roof load, or (B) involve a cost
which Tenant reasonably and in good faith estimates to be Five Hundred
Thousand Dollars ($500,000.00) or more, Tenant shall furnish to Landlord
and
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Trustee plans and specifications or other detailed information covering
the proposed work, and Tenant shall not commence such work unless within
thirty (30) business days thereafter, Landlord and Trustee shall either
approve or shall not advise Tenant of Landlord's disapproval of such
plans and specifications, which approval Landlord and Trustee will not
unreasonably withhold. Tenant acknowledges that Trustee will submit the
proposed alteration, improvement or expansion to the Project to the
Bondholders and Trustee will either approve or disapprove of such
proposed work based upon the recommendation of Holders of sixty-six and
two-thirds percent (66?%) of the Bonds then Outstanding with the
affirmative recommendation of such Holders not to be unreasonably
withheld or delayed. The cost of all such improvements shall be paid by
Tenant, and such improvements shall automatically become a part of the
Project as if the same were specifically described herein.
Such Permanent Improvements shall become part of the Project and shall
be subject to this Lease. In addition, the parties hereto understand and intend
that such Permanent Improvements shall be subject to the lien of the Deed of
Trust.
(a) The parties hereto intend that any Fixtures and Equipment installed by
Tenant for its use during the term hereof shall be and remain personal property,
shall not constitute fixtures and shall not become part of the Project subject
to this Lease, nor shall the lien of the Deed of Trust attach thereto. Any such
items shall be and remain the property of Tenant and may be removed by Tenant
upon the termination of this Lease. Tenant shall effect such removal solely at
Tenant's expense, subject to the following qualifications:
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(b)
(i) Tenant at its own expense shall repair any damage to the Project
caused by such removal, including, without limitation, damage caused by
removal of air-conditioning installations, equipment, air ducts and
vents, conduits of every nature, false floors and floor ramps,
electrical switches, panels and electrical wiring which were installed
by the Tenant. Such repairs shall include safe and proper covering of
any and all exposed wiring occasioned by removal of any electrical
equipment, including computers. In no event shall Tenant be entitled to
remove any items not installed and paid for by the Tenant.
(i) Any alterations or improvements installed in accordance with the
terms of this Lease on the Project whether before or after the Occupancy
Commencement Date and not removed by Tenant upon termination of this
Lease shall forthwith become the property of Landlord. However, should
Tenant fail to remove any alterations or improvements to the Project
which Tenant is required to remove, then and in such event, Landlord may
cause the same to be removed at Tenant's expense, and Tenant shall
reimburse Landlord for (A) the reasonable cost of the removal; (B) the
reasonable cost of repairing any damage to the Project caused by such
removal; (C) rent lost from successor lessees during the period of time
reasonably required for such removal; and (D) any other damages suffered
by Landlord as a result thereof.
1.1 Signage. Tenant may install a sign or signs on or in the Project which sign
or signs may be selected by Tenant in its discretion. Tenant shall remove all
such signs at the termination of this Lease and shall promptly repair, to the
reasonable satisfaction of Landlord, any damage to the Project caused by such
removal.
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1.2
1.3 Liens; Encumbrances. Except as provided in Section 2.4 hereof, Tenant shall
not create or permit to be created or to exist any lien or encumbrance which
might be or become a lien or encumbrance against the Project, except any lien
against Landlord caused by Landlord's actions or inactions and not by Tenant's
actions or inactions. If such lien or encumbrance arises from a matter other
than taxes or assessments by a governmental body, or the payment of amounts in
lieu of taxes to a governmental body, Tenant may defer payment and suffer the
lien to the extent permitted by law so long as the validity or amount thereof is
contested by Tenant in good faith and Tenant has secured a court order from a
court of competent jurisdiction or reasonable assurance from competent legal
counsel that in the interim and during said contest no action can be taken
against the Project by the party holding such lien. If at any time while an
Event of Default has occurred hereunder and is continuing a lien or encumbrance
arises from Tenant's acts or omissions, Tenant, if requested by Landlord or
Trustee so to do, shall furnish to Landlord and Trustee a corporate surety bond
or bonds, satisfactory in form and substance to Landlord and Trustee, in an
amount equal to the amount of the lien, plus all applicable penalties and
interest thereon, which are estimated to accrue during the period of the
contest, such bond to be issued by an insurance company satisfactory to Landlord
and Trustee. In the event that, while an Event of Default has occurred and is
continuing during the period of Tenant's good faith contest, such penalties and
interest increase to an amount beyond the amount of such corporate surety bond,
Tenant shall furnish to Landlord and Trustee such additional bond or bonds,
similarly satisfactory to Landlord and Trustee, in form and substance, in such
amounts as may be necessary to fully cover the lien and all penalties and
interest thereon and likewise issued by an insurance company satisfactory to
Landlord and Trustee.
1.4
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1.5 Indemnification . Subject to the provisions of Section 10.21, Tenant does
hereby indemnify Landlord against any liability, penalty, expense or damages
which Landlord may incur or to which Landlord may be subjected by reason of
Tenant's possession, occupation, operation, alteration, maintenance, repair or
use of the Project.
1.6
1.7 Inspection of Project. Landlord, Issuer and Trustee shall be entitled to
make reasonable visits to examine and inspect the Project during normal business
hours (but shall be under no obligation to make any such visits or inspections),
all in compliance with Section 12.5 of the Loan Agreement. Such inspections
shall be scheduled at least twenty-four (24) hours in advance so as not to
unduly interfere with Tenant's business activities, except that in case of
emergency, Landlord may enter the Project without prior notice to Tenant.
1.8
1.9 Landlord's Entry to Project Following Default. At any time following the
tenth (10th) day after Tenant shall have received from Landlord any notice of
default hereunder and continuing until Tenant shall have cured such default, and
at any time within twelve (12) months prior to the termination of the term of
this Lease, Tenant shall permit Landlord and any authorized representatives of
Landlord to enter the Project during normal business hours to exhibit the same
for the purpose of future leasing and to display on the Project usual "For
Lease" signs. At any time during the term of this Lease, Landlord and any
authorized representatives of Landlord may enter the Project during normal
business hours to exhibit the Project for the purpose of sale or of mortgage or
other hypothecation. So long as Tenant is not in default hereunder, Landlord
shall give Tenant at least twenty-four (24) hours prior notice of Landlord's
intent to enter to exhibit the Project, and such entry shall be made so as not
unreasonably to interfere with Tenant's use of the Project.
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1 ARTICLE
INSURANCE
1
1.1 Insurance Requirements. Tenant shall maintain insurance against such risks
and in such amounts as the Landlord and Trustee shall reasonably determine to be
proper for buildings and commercial facilities of like size and type, and shall
pay as the same become due and payable, all premiums with respect thereto,
including, but not necessarily limited to:
(a) All risk or broad form named perils coverage at all times equal to
one hundred percent (100%) of the replacement cost of the Improvements
exclusive of excavations and foundations. Earthquake coverage equal to
one hundred percent (100%) of the replacement cost of the Improvements
exclusive of excavations and foundations (so long as commercially
available);
(a) comprehensive general liability insurance with $5,000,000.00 minimum
single limit for injury to persons or property, but in no event less
than that provided under the Tenant's primary and, if any, excess
coverage;
(a) worker's compensation coverage, disability benefits insurance and
any other type of insurance required by the laws of the State of
Mississippi;
(a) Rental value insurance in an amount equal to twelve (12) months of
all Basic Rent payable hereunder.
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Any of the insurance required in paragraphs (a) through (d), inclusive,
may provide an all risk deductible provision in an amount not exceeding $500,000
and an earthquake deductible provision not to exceed fifteen percent (15%) of
the building's replacement cost value. The Tenant shall be a self-insurer to the
extent of the amount of the deductibles obtained.
Until such time as the construction of the Improvements shall have been
completed, Landlord shall maintain builder's risk insurance to the full
insurable value (with deductible provision not to exceed $500,000) of the
Improvements, and Landlord shall be a self-insurer to the extent of the amount
of the deductible so obtained. During such construction period, Tenant shall
have the responsibility for maintaining any insurance coverage it deems
necessary with respect to the Fixtures and Equipment installed by Tenant at the
Project. Following the Occupancy Commencement Date, Tenant covenants to maintain
insurance coverage in an amount equal to full replacement value with respect to
any of its property located at the Project, with a deductible provision in an
amount not exceeding $500,000.00.
The insurance required of Tenant by this Section 4.1 shall be maintained
in full force and effect at all times following the Occupancy Commencement Date.
Each insurance policy provided in accordance with this Section 4.1 shall
include a provision to the effect that any act or omission of Tenant or
Landlord, as the case may be, shall not prejudice Issuer's or Trustee's rights
thereunder. Any insurance provided for in this Article IV may be effected by a
policy or policies of blanket insurance provided that the amount of the total
insurance allocated to the Improvements shall be such as to furnish in
protection the equivalent of separate policies in the amounts herein required.
Subject to Section 3.2 hereof,
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Tenant shall remain liable and responsible to Landlord for keeping the Project
in good repair and condition whether or not covered by insurance and whether or
not said insurance coverage is adequate to repair and/or replace the
Improvements.
(a) Form of Policy. Each insurance policy required by Section 4.1 hereof (i)
shall be issued by a financially responsible insurer (or insurers) of recognized
standing, legally authorized to write the respective insurance, (ii) shall be in
such form and with such provisions (including, without limitation, the loss
payable clause, the waiver of subrogation clause and the designation of the
named insured parties) as are generally considered standard provisions for the
type of insurance involved, and (iii) shall prohibit cancellation or
modification by the insurer without at least thirty (30) day's prior written
notice to the Landlord and the Trustee. Prior to the expiration of any such
policy, the Tenant shall furnish the Landlord and Trustee satisfactory evidence
that the policy has been renewed or replaced, unless Trustee shall have informed
Tenant in writing that such insurance is no longer required. Without limiting
the generality of the foregoing, all insurance policies maintained pursuant to
Section 4.1(a) hereof shall name the Landlord, Tenant, Issuer and Trustee as the
parties insured thereunder as their respective interests may appear; all
insurance policies maintained pursuant to Section 4.1(b) hereof shall name the
Tenant as the insured and the Landlord and Trustee as additional insureds; and
each such policy shall provide that losses thereunder shall be adjusted with the
insurer by the Tenant or Landlord, on behalf of the insured parties, in the case
of the policy described in Section 4.1(a) hereof, with the approval of the
Trustee as to settlement of any claims in excess of $500,000, but all such
adjustments shall be subject to the provisions hereof. If there is any claim in
excess of $500,000.00 for loss or damage covered under the policy described in
Section 4.1(a) hereof, all
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proceeds of insurance resulting therefrom shall be paid directly and solely to
the Trustee for application as provided in Section 7.1 of the Loan Agreement.
(b)
(c) Certificates and opinions of the insurers or an agent or agents of the
insurers acceptable to the Trustee, shall be deposited with the Trustee on or
before the Occupancy Commencement Date, upon renewals of policies and at any
other time, at the request of the Trustee.
(d)
1.2 Notice of Damage or Destruction. If the Project shall be damaged or
destroyed (in whole or in part) at any time, Tenant shall promptly give written
notice thereof to the Landlord and the Trustee.
1.3
1.4 Net Proceeds. As used herein, "Net Proceeds," when used with respect to any
insurance or condemnation award, means the gross proceeds from the insurance or
condemnation award with respect to which that term is used remaining after the
payment of all expenses [including reasonable and documented attorney's fees and
any Extraordinary Expense (as defined in the Loan Agreement) of the Trustee]
incurred in the collection thereof.
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1 ARTICLE
CONDEMNATION
1
1.1 Notice of Condemnation. Forthwith upon receipt by Tenant or Landlord of any
notice of the institution of any proceeding for the taking of the Project or any
part thereof by the exercise of any power of condemnation affecting the Project
or any part thereof, the party receiving such notice shall promptly give written
notice thereof to the other party, and the Trustee. Subject to Section 7.4 of
the Loan Agreement, Tenant, in cooperation with Landlord, shall have the right
to participate in any such proceedings and to be represented by counsel for the
purpose of protecting its interest hereunder. Landlord and Tenant shall each
bear their own expenses incurred in such proceeding. Notwithstanding anything to
the contrary above, as long as the Bonds remain Outstanding and the Indenture
has not been released, any awards in excess of $500,000.00 resulting from the
damages to or taking of the Project, including without limitation any awards for
the fee estate of the Landlord, shall be paid solely and directly to Trustee for
application in accordance with Section 7.2(a) of the Loan Agreement.
(a) Partial Condemnation. If at any time any part of title to, or the partial
use of the Project shall be taken by condemnation or pursuant to the exercise of
the power of eminent domain by any governmental authority ("Condemnation") and
any Bonds are still Outstanding, the Loan Agreement has not been terminated or
the Indenture has not been released and satisfied, Net Proceeds of Condemnation
resulting from any award in an amount less than $500,000 shall be paid to Tenant
and used promptly to replace such condemned portion of the Project. If Net
Proceeds of Condemnation are in excess of $500,000, at any time when Bonds
remain
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Outstanding, the Loan Agreement has not been terminated and the Indenture has
not been released, such amount shall be paid solely and directly to the Trustee
and disbursed in accordance with Section 7.2(a) of the Loan Agreement; at any
time the Bonds have been redeemed, the Loan Agreement has been terminated and
the Indenture has been released such amounts shall be disbursed in accordance
with Section 5.2(c). In the event such proceeds are insufficient to restore the
Project, subject to Section 5.3, Tenant shall pay the additional amounts
necessary to carry out such restorations, and if Tenant has been obligated by
this Section 5.2 to deposit Net Proceeds of Condemnation with Trustee, Tenant
shall deposit such additional amount with the Trustee. All such amounts
deposited with the Trustee shall be used to promptly restore the Project
(excluding any part thereof not taken by Condemnation) to substantially the same
condition, value and utility as an operating entity as existed prior to such
Condemnation.
(b)
(c) If any Bonds remain Outstanding, or the Indenture has not been released,
then any balance of such proceeds of any Condemnation award remaining after
payment of all costs of such restoration shall be used to redeem Bonds at par
pro rata under Section 3.1(e) of the Indenture. Tenant shall be entitled, under
Section 2.6(c) hereof, to a proportionate reduction in the Basic Rent component
of Global Basic Rent.
(d)
(e) Any balance of such Net Proceeds of Condemnation remaining after payment of
all costs of such restoration and, if any Bonds are then Outstanding, after
redemption of all such Bonds as provided in the preceding subsection (b), shall
be allocated solely to Landlord.
(f)
(g) Substantial Condemnation; Condemnation in Excess of $5,000,000 . In the
event that a taking by eminent domain or condemnation will affect substantially
all [fifty percent (50%) or
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more] of the usable floor space in the Improvements or will have the effect of
reducing Tenant's distribution capacity in the Improvements to fifty percent
(50%) or less of full, pre-condemnation capacity, Tenant shall have the option,
to be exercised by delivery of a written notice to Landlord and Trustee within
forty-five (45) days after Tenant's receipt of notice from Landlord or the
condemning authority of such taking, to terminate this Lease. While any Bonds
remain Outstanding, upon receipt of such notice, Landlord shall direct the
Trustee to effect a redemption of the Bonds in whole under Section 3.1(a) of the
Indenture with the Net Proceeds of Condemnation. If there is any deficiency in
Net Proceeds necessary to redeem Bonds, Landlord will pay such amounts; any
excess Net Proceeds following redemption shall be allocated solely to Landlord.
If Landlord fails to pay the deficiency, then Tenant shall either: (i) pay such
deficiency required to redeem the Bonds; or (ii) promptly repair or restore the
Project in accordance with Section 7.2 of the Loan Agreement [in which event,
Landlord will indemnify Tenant for any and all costs and expenses incurred by
Tenant with respect thereto, Tenant expressly acknowledging that no right of
offset with respect to payment of Basic Rent to Trustee or the payment of other
amounts (except Company Payments) hereunder shall arise in such event]. Such
termination of this Lease shall only be effective upon the happening of the
earlier of the following events:
(h)
(i) The date of delivery of possession to the condemning authority;
or
(i) A date mutually agreed to by Tenant and Landlord which shall not
be less than one (1) year from the date that Tenant gives notice
to Landlord of Tenant's intent to terminate.
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(a) Subject to the provisions of Sections 5.2(a) and 5.3 hereof, in the event
that the taking by eminent domain or condemnation will affect less than fifty
percent (50%) of the usable floor space in the Improvements or will not have the
effect of reducing Tenant's distribution capacity in the Improvements to fifty
percent (50%) or less of full, pre-casualty capacity, or in the event Tenant
elects not to exercise the option to terminate set forth in Section 5.3(a)
above, this Lease shall remain in full force and effect.
(b)
(c) In the event of a taking by eminent domain or Condemnation resulting in an
award of Net Proceeds in excess of $5,000,000, Tenant shall not be required to
repair or restore the Project if, while any Bonds remain Outstanding the taking
is intended to take place during the last year of the Primary Term of this
Lease, or if no Bonds remain Outstanding, during the last year of the Primary
Term or any Option Period, unless the Tenant has previously exercised an option
to extend for the next ensuing Option Period (if any then be). If the Tenant has
exercised its option to extend for the next ensuing Option Period, Tenant shall
be obligated to repair and restore the portion of the Project remaining after
the condemnation as provided above. In the event that Tenant has not exercised
its option to extend and is not, therefore, obligated to repair or restore the
Project as provided above, the Landlord shall be required to promptly repair and
restore the Project in accordance with Section 7.2 of the Loan Agreement. If,
while the Bonds remain Outstanding or the Indenture has not been released, such
repair or restoration by Landlord is not commenced and prosecuted promptly,
Tenant agrees to promptly repair and restore the Project [in which event,
Landlord will indemnify Tenant for any and all costs and expenses incurred by
Tenant with respect thereto, Tenant expressly acknowledging that no right of
offset with respect to payment of Basic Rent to Trustee or the payment of other
amounts (except Company Payments) hereunder shall arise in such event]. If the
building is structurally sound and the
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remaining portions accessible, Tenant shall have the option to remain in the
unrestored building on the Property until the end of the Primary Term of this
Lease, or the then current Option Period, as the case may be, at which time the
Tenant's rights of continued occupancy shall cease and terminate for all
purposes.
(d)
(e) All such replacements, repairs, rebuilding, or restoration made pursuant to
Sections 5.2 and 5.3 hereof, whether or not requiring the expenditure of the
Tenant's own money, shall automatically become a part of the Project, as if the
same were specifically described herein.
(f)
(g) At all times prior to the termination of this Lease in accordance with
subsection (a) above following total Condemnation of the Project, Tenant shall
remain liable for Global Basic Rent and all other expenses payable by Tenant in
accordance with this Lease (provided, however, that Tenant shall be entitled to
offset against Company Payments any amount due from Landlord to Tenant).
(h)
(i) If at any time following an election by Tenant to replace the Project under
this Section, an Event of Default shall occur hereunder and be continuing, the
Trustee must obtain the written consent of sixty-six and two-thirds percent
(66?%) of Bondholders for Tenant to obtain funds from the condemnation trust
account held by Trustee pursuant to the Indenture, which consent shall not be
unreasonably withheld or delayed. While obtaining such consent, the Trustee may
cease to honor requisitions for disbursements for costs of replacement and may
proceed to accelerate the Bonds under the Indenture.
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1 ARTICLE
SALES, MORTGAGES, ETC. AND GENERAL CONDITIONS
1
(a) Assignment by Tenant. Except as hereinafter provided, and subject to the
Loan Agreement, the Indenture, the Deed of Trust, and the Non-Disturbance
Agreement, Tenant shall not transfer, assign or hypothecate this Lease or its
interest hereunder without the written consent of Landlord and Bondholders,
which consent shall not be unreasonably withheld; provided that no transfer,
assignment or hypothecation shall release Tenant from any obligation or
liability under this Lease, and the person or persons to whom this Lease may be
transferred or assigned shall also assume all the obligations of Tenant under
this Lease. A copy of any such proposed assignment shall be delivered to
Landlord and Trustee in advance of its consenting thereto. No subletting and no
acceptance by Landlord of any rent or other sum of money from a sublessee, and
no recognition by Landlord of any subletting shall release Tenant from any of
its obligations under this Lease.
(a) Notwithstanding the provisions of the foregoing Section 6.1(a), subject to
the covenants set forth in Section 6.4 hereof, Tenant shall have the right to
transfer or assign this Lease or sublet the Project or any portion thereof
without the Landlord's consent or the consent of Bondholders to any corporation
more than fifty percent (50%) of the stock of which is owned by Parent (as
defined in Section 6.4 below), or to any corporation more than fifty percent
(50%) of the stock of which is owned by any corporation owning more than fifty
percent (50%) of Tenant's stock, or to any corporation surviving or resulting
from a merger or consolidation to which Tenant may be a party (providing that
Parent shall own more than 50% of the stock of
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such surviving corporation), or to any corporation succeeding to all or a
substantial portion of the assets of Tenant (providing that Parent shall own
more than 50% of the stock of such successor corporation); provided, that no
such transfer or assignment shall relieve or release Tenant from any obligation
or liability under this Lease, and the party or parties to whom this Lease may
be transferred or assigned shall assume all the obligations of Tenant hereunder.
The sale of stock by Parent or any shareholder of Parent, or the merger or
consolidation of Parent with or into any other entity, shall not constitute an
assignment of this Lease.
(b)
1.2 Exercise of Rights or Remedies by Landlord. No assignment by Tenant of this
Lease or its interest hereunder and no subletting by Tenant of the Project or
any part thereof, whether with or without the consent of Landlord, shall affect
Landlord's right to exercise any of its rights or remedies hereunder directly
against Tenant.
1.3
1.4 Tenant's Right of First Refusal. Subject to the Loan Agreement, the
Indenture, the Deed of Trust, and the Non-Disturbance Agreement, if Landlord
receives a bona fide offer, from a party not affiliated with Tenant, whether or
not solicited by Landlord, to purchase the Landlord's interest in the Project
and Landlord is willing to accept such offer, Landlord shall give Tenant written
notice of the amount and terms of said offer and the identity of the proposed
purchaser. Tenant shall have the option, exercisable within thirty (30) days
after receipt of such notice, to purchase the Landlord's interest in the Project
on the same terms as those contained in the offer. Landlord may not sell until
after said thirty (30) day period and may then sell only in accordance with the
terms and to the party making the original offer. Any deviation from the
original offer constitutes a new offer and must be submitted to Tenant in
accordance with this
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Section. There shall occur no merger of the fee and leasehold interests
hereunder as a result of acquisition of both estates by the same party.
1.5
1.6 Financial Covenants of Lessee. For purposes of this Section 6.4, the term
"Group" shall mean each of Williams-Sonoma, Inc., a California corporation and
owner of all issued and outstanding stock of Tenant ("Parent"), Tenant, and all
other wholly-owned subsidiaries of Parent; and "Consolidated Group" shall mean
Parent, Tenant, and all other wholly-owned subsidiaries of Parent on a
consolidated basis. For so long as any Bonds remain Outstanding and the Loan
Agreement has not been terminated or the Indenture released, Tenant agrees that:
1.7
(a) The Group will not incur additional Indebtedness or merge or consolidate
with any other entity if, after giving effect to such Indebtedness, merger or
consolidation on a pro forma basis (including pro forma application of the net
proceeds therefrom), the ratio of (i) the sum of (A) the Consolidated Net Income
plus (B) an amount equal to any net loss realized upon the sale or other
disposition of any business segment or capital asset (to the extent such loss
was deducted in computing such Consolidated Net Income), plus (C) any provision
for taxes utilized in computing net loss under clause (B) hereof, plus (D)
Consolidated Interest Expense plus one-third (?) of operating lease (including
this Lease) base rent (before contingency and pass-through payments), plus (E)
provision for federal and state income taxes (b) to (ii) Consolidated Interest
Expense plus one-third (?) of operating lease (including this Lease) base rent
(before contingency/and pass-through payments) for any six (6) (as determined by
Tenant) of the immediately preceding eight (8) full fiscal quarters immediately
preceding the date of such proposed incurrence of indebtedness, merger or
consolidation, is less than 2.0 to 1.0; provided, however, that the foregoing
restrictions shall not apply to the incurrence by the
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Consolidated Group of Existing Indebtedness, Permitted Refinancing Indebtedness,
and Indebtedness incurred in connection with Fixtures and Equipment to be
located at the Project; and further provided, however, that accrual of interest
and accretion of accreted value shall not be deemed to be an incurrence of
Indebtedness for purposes of this Section 6.4(a).
(c)
(d) The Group will not permit Consolidated Net Worth (plus deferred catalog
charges not to exceed 10% of Consolidated Net Worth) to be less than
$120,000,000 plus 25% of cumulative Consolidated Net Income (if positive) from
the first day of the first fiscal quarter of Tenant beginning after the date
hereof to the last day of the fiscal quarter of Tenant ending immediately prior
to the date of measurement.
For purposes of this Section 6.4:
A. "Consolidated Interest Expense" means the sum of (without
duplication) (i) the cash and non-cash interest expense of the Consolidated
Group, determined in accordance with Generally Accepted Accounting Principles
(including, without limitation, non-cash interest payments, all net payments and
receipts in respect of Interest Rate Agreements, and the interest component of
rental payments under capital leases), (ii) amortization of debt discount in
connection with any Indebtedness of the Consolidated Group, and (iii)
amortization of costs associated with the issuance of any Indebtedness of the
Consolidated Group; provided, however, that one-time fees paid in connection
with the issuance of any Permitted Refinancing Indebtedness incurred by the
Consolidated Group or a member thereof, shall not be included in Consolidated
Interest Expense.
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B. "Consolidated Net Income" means, for any period, without duplication,
the aggregate of the Net Income of the Consolidated Group for such period,
determined in accordance with Generally Accepted Accounting Principles;
provided, however, that (i) the Net Income of any entity that is not a member of
the Consolidated Group or is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid to a member of the Consolidated Group; (ii) the Net Income of any entity
that is a subsidiary of Parent [other than a subsidiary of which at least eighty
percent (80%) of the capital stock having ordinary voting power is owned by the
Parent directly or indirectly through one or more subsidiaries] shall be
included only to the extent of the lesser of (a) the amount of dividends or
distributions paid to a member of the Consolidated Group, and (b) the Net Income
of such entity; (iii) the Net Income of any entity acquired by a member of the
Consolidated Group in a pooling of interests transaction for any period prior to
the date of such acquisition, shall be excluded; and (iv) there shall be
excluded from such Net Income, the Net Income (only if positive) of any member
of the Consolidated Group to the extent that the declaration or payment of
dividends or similar distributions by such member of such Net Income is not at
the time permitted by operation of the terms of its charter, or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such member.
C. "Consolidated Net Worth" means, as of any date, the consolidated
equity of the common and preferred stockholders of the Parent determined on a
consolidated basis in accordance with Generally Accepted Accounting Principles,
less (i) all write-ups (other than write-ups of assets of a going concern
business made within one year after the acquisition of such business) subsequent
to January 31, 2000 in the book value of any asset owned by a
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member of the Consolidated Group, (ii) all investments in unconsolidated
subsidiaries of Parent and in entities that are not subsidiaries of Parent
(other than cash equivalents, marketable securities and other assets held for
sale outside of the ordinary course of business and long term receivables
resulting from the sale of assets or businesses), and (iii) all unamortized debt
discount and expense, unamortized deferred charges (excluding deferred income
taxes), goodwill, patents, trademarks, service marks, trade names, copyrights,
organization and developmental expenses and other intangible items, all of the
foregoing as determined in accordance with Generally Accepted Accounting
Principles; provided, however, that in determining the consolidated equity of
any entity, the Net Income of such entity shall be calculated in the same manner
as that specified for the determination of Net Income.
D. "Existing Indebtedness" means the Indebtedness of the Consolidated
Group set forth on Exhibit "F" hereto.
E. "Indebtedness" means all obligations of the Consolidated Group for
borrowed money which in accordance with Generally Accepted Accounting Principles
should be classified on the balance sheet of the Consolidated Group as
liabilities, and in any event shall include all obligations of the Consolidated
Group for (a) borrowed money; (b) for the deferred portion of the purchase price
of assets (other than trade payables not more than 120 days past due); (c)
secured by any liens upon property or assets owned by the Consolidated Group,
even though the Consolidated Group has not assumed or become liable for the
payment of such obligations; (d) created or accruing under any conditional sale
or other title retention agreement with respect to property acquired by the
Consolidated Group, notwithstanding the fact that the rights and remedies of the
seller, lender or lessor under such agreement in the event of default are
limited to
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repossession or sale of the property sold; (e) the non-interest portion of
capitalized lease obligations; and (f) guaranties of obligations of others of
the character referred to in this definition.
F. "Interest Rate Agreement" shall mean any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge arrangement, to or under which
any member of the Consolidated Group is or becomes a party or beneficiary.
G. "Net Income" for any period means, with respect to an entity, the net
income (loss) for such period, determined in accordance with Generally Accepted
Accounting Principles; provided, however, that (i) the net income of any entity
(other than a subsidiary of such entity) in which such entity has a joint
interest with a third party shall be included only to the extent of the amount
of dividends or distributions paid to such entity by such other entity during
such period, (ii) the net income of any entity (other than a subsidiary of such
entity) acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (iii) the net income of such
entity shall be reduced by any net after tax gains from any asset sale which
gains were included in net income during such period, (iv) the net income of
such entity, except as already adjusted pursuant to (iii) above, shall not
include, without duplication, any gains which are classified as extraordinary
items in accordance with Generally Accepted Accounting Principles (other than
tax benefits realized in connection with the tax treatment of such entity's net
operating loss carry forwards incurred after the acquisition), and (v) the net
income of such entity shall not include any unrealized gains from investments
other than gains which reverse losses in such period.
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H. "Permitted Refinancing Indebtedness" means any Indebtedness of the
Consolidated Group issued in exchange for, or the net proceeds of which are used
to extend, refinance, renew, replace, defease, or refund other Indebtedness of
the Consolidated Group permitted to be incurred under the terms of this Lease,
provided, however, that (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount plus accrued interest (or accreted value, if applicable) and
premium (if any) of the Indebtedness so exchanged, extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable and
documented expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final stated maturity later than the final
maturity of, and has a weighted average life to maturity equal to or greater
than the weighted average life to maturity of, the Indebtedness being exchanged,
extended, refinanced, renewed, replaced, defeased or refunded; and (iii) such
Permitted Refinancing Indebtedness is incurred by the member of the Consolidated
Group which is the obligor on the Indebtedness being exchanged, extended,
refinanced, renewed, replaced, defeased or refunded.
1.1 Compliance with Bond Documents by Landlord . Tenant agrees that no provision
hereof requiring or permitting the action or inaction of the Tenant or the
action or inaction of the Landlord shall be applicable if it should cause
Landlord to fail to comply in any respect with Landlord's obligations under the
Loan Agreement, the Deed of Trust, the Indenture or the Guaranty.
1.2
1.3 Financial Statements . For so long as any Bonds remain Outstanding and the
Loan Agreement has not been terminated or the Indenture has not been released,
Tenant agrees to
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furnish to the Trustee and each Bondholder, within one hundred twenty (120) days
after the end of each fiscal year of the Parent, audited consolidated financial
statements as of the close of such fiscal year for the Consolidated Group. Such
audited financial statements, which shall include comparative financial
information for the immediately preceding fiscal year, shall be prepared and
certified by Deloitte & Touche or another nationally recognized independent
certified public accounting firm showing the financial condition of the
Consolidated Group at the close of such year and the results of operations of
the Consolidated Group during such year; and within sixty (60) days after the
end of each of the first three (3) quarters of each fiscal year, similar
financial statements (but not including consolidating financial statements) for
the Consolidated Group to those described above, not audited but certified by
the chief financial officer for the Consolidated Group, such balance sheet to be
as of the end of such quarter and such statements of income and surplus to be
for the period from the beginning of such fiscal year to the end of such
quarter, in each case subject only to year-end adjustments. The quarterly
Consolidated Group-prepared financial statements and the annual audited
financial statements shall be accompanied by statements certified by an
authorized Consolidated Group representative to the effect that (i) with respect
to loan agreements (or equivalent documents) unrelated to the Bonds, it has
received no notice of any defaults thereunder, and (ii) is not currently in
default under the Lease or if such a default exists, describing the default.
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1 ARTICLE
DEFAULT
1
1.1 Events of Default. The following shall constitute Events of Default
hereunder:
1.2
(a) If payment of any Basic Rent or Additional Rent, each as adjusted, is not
made within five (5) days of the date when due or if default shall be made in
the due and punctual payment of any Company Payments, as adjusted, payable under
this Lease or any part thereof when and as the same shall become due and payable
in accordance with the terms of this Lease.
(a) If default shall be made by Tenant in keeping, observing or performing any
of the terms, covenants, agreements, provisions, conditions or limitations
contained in this Lease on Tenant's part to be kept, observed or performed,
other than those referred to in the foregoing subsection (a) of this Section,
and such default shall continue for a period of thirty (30) days after written
notice thereof from Landlord or Trustee to Tenant, or in the case of such a
default or a contingency which cannot with due diligence and in good faith be
cured within said thirty (30) days, the Tenant should fail to proceed promptly
and with due diligence and in good faith to cure the same and thereafter to
prosecute the curing of such default with due diligence and in good faith [it
being intended that in connection with a default not susceptible of being cured
with due diligence and in good faith within thirty (30) days that the time
within which to cure the same shall be extended for such a period as may be
necessary for the curing thereof with due diligence and in good faith]. The
foregoing is subject to the proviso that no grace period shall apply to Tenant's
obligations hereunder to keep the Project insured.
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(b)
(c) An order for relief shall be entered in any federal bankruptcy proceeding in
which the Tenant is the debtor; or bankruptcy, receivership, insolvency,
reorganization, relief, dissolution, liquidation or other similar proceedings
shall be instituted by or against the Tenant or all or any part of the property
of the Tenant under the Federal Bankruptcy Code or any other law of the United
States or any bankruptcy or insolvency law of any state of competent
jurisdiction unless, if such proceedings are instituted against the Tenant, such
proceedings are dismissed or discharged within sixty (60) days after they are
instituted.
(d)
(e) The Tenant shall have become insolvent or unable to pay its debts as they
mature, cease doing business as a going concern, make an assignment for the
benefit of creditors, admit in writing its inability to pay its debts as they
become due, or if a trustee, receiver or liquidator shall be appointed for the
Tenant or for any substantial portion of the assets of the Tenant and such
appointment shall not be vacated within sixty (60) days.
(f)
(g) If Tenant shall abandon the Project; provided that as long as Tenant shall
continue to pay rent and maintain and protect the Project in accordance with the
terms of this Lease, Tenant shall not be deemed to have abandoned the Project.
(h)
(i) Any certification, representation or warranty made by the Tenant herein
shall prove to have been false when made or deemed to have been made.
(j)
(k) Landlord Remedies. If an Event of Default shall occur and shall not have
been remedied within any applicable grace period, and in the manner hereinbefore
provided,
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Landlord, without prejudice to any other right or remedy of Landlord hereunder
or by law, and notwithstanding any waiver of any prior breach of condition or
Event of Default hereunder, may at its option, and without further demand or
notice, the same being expressly waived:
(l)
(i) Terminate this Lease and retake possession of the Project,
and thereupon all rights of Tenant hereunder (and of parties
claiming by, through or under Tenant) shall come to an end, as
fully as if such were the last day of the whole term
hereinbefore specified, and Tenant hereby covenants peaceably
and quietly to yield up and surrender to Landlord the Project
and all Permanent Improvements thereon, consistent with the
provisions of this Lease covering such Permanent Improvements;
and Tenant shall execute and deliver to Landlord such instrument
or instruments as shall be required by Landlord to properly
evidence termination of Tenant's rights hereunder and its
interest herein. In the event of such termination of this Lease,
Landlord shall have the right to repossess the Project and such
Permanent Improvements (consistent with the provisions of this
Lease covering such Permanent Improvements) as well as the right
to sue for and recover from Tenant:
(A) the worth at the time of the award of any unpaid Rent
which had been earned at the time of such termination;
plus
(A) the worth at the time of the award of the amount by
which the unpaid Rent which would have been earned after
termination until the time of award
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exceeds the amount of such rental loss Tenant proves
could have been reasonably avoided; plus
(A) the worth at the time of the award of the amount by
which the unpaid Rent for the balance of the term after
the time of award exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; plus
(A) any other amount necessary to compensate Landlord for
all of the detriment proximately caused by Tenant's
failure to perform its obligations under this Lease or
which in the ordinary course of events would be likely
to result therefrom including, but not limited to,
payment of any and all installments for public
improvements falling due during the term of this Lease
under Section 2.2(a)(iii) hereof; plus
(A) such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to by time by
applicable law.
As used in paragraphs (A), (B) and (C) of this subsection (a)(i), the
"worth at the time of award" is computed by allowing interest at the
prime rate of interest as published from time to time in the "Money
Rates" section of The Wall Street Journal (the "prime rate") plus 1% or
by determining present value using a discount rate equal to the prime
rate plus 1%; or
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(i) Landlord may terminate Tenant's right of possession and may
repossess the Project by forcible entry and detainer suit, by
taking peaceful possession or otherwise, without terminating
this Lease, and may sue for and recover all rents and other sums
including damages at any time and from time to time accruing
hereunder and exercise all such other rights as may be provided
by law. Landlord's efforts to relet the Project or any part
thereof or acts of maintenance or preservation and Landlord's
appointment of a receiver to protect Landlord's interest under
this Lease shall not constitute a termination of Tenant's right
to possession; and no reentry or taking possession of the
Project by Landlord shall be construed an election to terminate
this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court
of competent jurisdiction. Notwithstanding any attempted
reletting without termination by Landlord because of any default
by Tenant, Landlord may, at any time after such attempt, elect
to terminate this Lease for any such default.
In the event of any default by Tenant, Landlord shall also have the
right, with or without terminating this Lease, to reenter the Project and remove
all persons and property from the Project; such property may be removed and
stored in public warehouse or elsewhere at the cost of and for the account of
Tenant; if Tenant does not remove such property from either the Project or the
storage area selected by Landlord in accordance with the above provision within
thirty (30) days from the effective date of said default, such property shall be
deemed to be abandoned and, at the option of Landlord, shall become the property
of Landlord.
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(a) Mention in this Lease of any particular remedy shall not preclude Landlord
from any other remedy, at law or in equity, including but not limited to the
right of injunction, as if reentry, summary proceedings or other remedies were
not provided for.
(b)
(c) The Tenant shall have an affirmative obligation to notify the Trustee
immediately upon its knowledge of the occurrence of any "Event of Default" as
defined in Section 7.1 hereof.
(d)
1.2 Re-Entry. The terms "enter," "re-enter," "entry" and "re-entry," as used in
this Lease, are not restricted to their technical legal meaning.
1.3
1.4 Remedies Cumulative. Each right or remedy of either party provided for in
this Lease shall be cumulative and shall be in addition to every other right or
remedy provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or the beginning of the
exercise by a party of any one or more of the rights or remedies provided for in
this Lease or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by that party of
any or all other rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise.
1.5
(a) Lessee's Indemnification; Attorney Fees. Tenant covenants and agrees to
pay, and to indemnify Landlord against the payment of all costs and charges,
including reasonable counsel fees, incurred by Landlord in obtaining possession
of the Project after default by Tenant or upon expiration or earlier termination
of the term of this Lease, provided Landlord prevails in any action or
proceeding (except arbitration) brought to obtain, or to determine the right to,
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possession. This covenant shall include payment of all reasonable and documented
costs and charges of the Issuer and the Trustee, including reasonable counsel
fees of each.
(b)
(c) Tenant further agrees that if Tenant defaults under any of the provisions of
this Lease and the Issuer or the Trustee on behalf of the Bondholders or in its
individual capacity employs attorneys or incurs other expenses in connection
with such default, including but not limited to, seeking legal advice with
regards to enforcement rights and for the collection of Basic Rent and
Additional Rent or the enforcement of performance or of observance of any
obligation or agreement on the part of the Tenant herein contained, or legal
advice with respect thereto, the Tenant agrees that it will on demand therefor
pay to the Issuer or the Trustee the reasonable fees of such attorneys and such
other reasonable and documented expenses as may be incurred by the Issuer and
the Trustee.
(d)
1.6 Mutual Indemnification; Costs. Each party ("indemnitor") covenants and
agrees to pay, and to indemnify the other ("indemnitee") against, all costs and
charges, including reasonable counsel fees, incurred by the indemnitee in
enforcing any agreement or covenant of the indemnitor herein contained, provided
the indemnitee prevails in any action or proceeding (except arbitration) brought
to secure such enforcement.
1.7
1.8 Right of Offset. So long as Tenant has not exercised any right to terminate
this Lease as set forth in Section 10.24(a) hereof, any breach by Landlord of
any term or provisions hereof shall, in addition to those rights set forth in
Section 10.24(a) hereof, give Tenant the right to offset sums due Tenant from
Landlord as a result thereof against sums payable hereunder to Landlord as
Company Payments. In addition, Tenant shall have the right to offset Company
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Payments owed to Landlord hereunder against sums owed Tenant from time to time
pursuant to that certain Agreement and Indemnification of even date herewith
among Tenant, Parent, Landlord, Hewson Properties, Inc. and Gary J. Hewson. So
long as any Bonds remain Outstanding or the Indenture has not been released,
then notwithstanding a breach by Landlord, Tenant shall remain liable for the
payment of all Basic Rent to the Trustee and payment of other amounts (except
Company Payments) hereunder until the termination of this Lease by Tenant as
provided herein.
1.9
1.10 Certification by Subtenants. Upon request by Landlord, Tenant shall
furnish to Landlord (i) written certification from each subtenant of space
within the Project, confirming the amount of rent due under such subtenant's
lease, stating whether any offsets or defenses exist against the sublessor
thereunder, and covering such other matters as Landlord may reasonably require,
and (ii) such other certifications by Tenant as Landlord may reasonably require
with respect to the physical condition of the Project and Tenant's compliance
with the provisions hereof.
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1 ARTICLE
ARBITRATION
1
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1.1 Submission to Board of Arbitrators . If at any time, or from time to time
during the term of this Lease, any dispute shall arise between Landlord and
Tenant, and (i) such dispute shall relate to damage, destruction, alterations or
improvements to, or the taking by eminent domain or the condemnation of, the
Project, or (ii) this Lease shall specifically identify such dispute as subject
to arbitration, or (iii) Landlord and Tenant shall have agreed in writing to
resolve such dispute by arbitration; then and only then shall such dispute be
submitted to a board of arbitrators. The board of arbitrators shall be three (3)
in number, one to be named by each of the parties hereto no later than thirty
(30) days after the parties hereto have agreed to submit such dispute to
arbitration or no later than thirty (30) days after the parties hereto shall
agree that such dispute cannot be resolved between themselves, and the third
arbitrator shall be selected by the two arbitrators previously named. The
decision of any two of such arbitrators shall be final and conclusive on the
parties hereto. All arbitrators hereto shall be independent, disinterested
persons with experience in the area of the dispute; any question arising between
the parties hereto related to value of the Project shall be determined by
qualified, licensed appraisers who are members of the American Institute of Real
Estate Appraisers or similarly qualified persons, and all questions concerning
the structure of the building on the Project shall be determined by engineers,
architects or similarly qualified persons. If the two arbitrators designated by
the parties fail to select a third arbitrator within fifteen (15) days after the
appointment by such parties, then the parties may apply to any Chancellor of the
Chancery Court of DeSoto County, Mississippi to designate a third arbitrator. If
either party hereto shall fail to designate an arbitrator within said thirty
(30) days, the other party shall have the right to appoint a second arbitrator.
The parties to the arbitration shall have the right to offer evidence and
testify at the hearings, to be represented by counsel and to cross-examine
witnesses (but the arbitrators may not determine issues and questions not
submitted to arbitration and not framed by the facts and
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data presented by the parties during such hearings). Subject to the foregoing,
the arbitration shall be conducted in accordance with the then applicable rules
of the American Arbitration Association.
1 ARTICLE
COVENANT OF QUIET ENJOYMENT
1
1.1 Quiet Enjoyment; Non-Disturbance . Landlord covenants and agrees that
Tenant, upon paying the Rents reserved herein and observing and keeping the
covenants, agreements and stipulations of this Lease on its part to be kept
shall lawfully, peaceably and quietly hold, occupy and enjoy the Project during
the term of this Lease, without hindrance, ejection or molestation by Landlord
or any person or persons claiming under Landlord or claiming by a title superior
to Landlord. Contemporaneously with the execution of this Lease, Landlord and
Tenant have joined in the execution of the Non-Disturbance Agreement.
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1 ARTICLE
MISCELLANEOUS
1
1.1 Tenancy Beyond Lease Term . If Landlord has not leased the Project to others
or does not require the use of the Project for itself and if Tenant holds
possession of the Project after the expiration or termination of the term of
this Lease, Tenant shall become a tenant from month to month upon the terms and
conditions herein contained, so far as applicable, at a monthly rental in an
amount equal to one hundred fifty percent (150%) of the average Global Basic
Rent which was in effect during the Primary Term or Option Term, as applicable,
and which shall be payable in advance, and Tenant shall continue to be such a
month to month tenant until thirty (30) days after Tenant shall have given to
Landlord or Landlord shall have given to Tenant a written notice of intention to
terminate such monthly tenancy.
1.1 Notices . All notices, demands and requests which may or are required to be
given to another party hereunder shall be in writing, and each shall be deemed
to have been properly given (a) on the day given when served personally on an
executive officer or general partner of the party to whom such notice is to be
given, (b) on the following Business Day (as defined in the Loan Agreement) when
sent by reputable overnight courier service, or when sent by telecopy (confirmed
promptly by mail), or (c) on the fifth (5th) Business Day following the Business
Day when sent postage prepaid by first class mail, registered or certified,
return receipt requested, by deposit thereof in a duly constituted United States
Post Office or branch thereof located in one of the states of the United States
of America in a sealed envelope addressed as follows:
1.2
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(i) To Landlord, ? Hewson Properties, Inc., 4636 E. University Drive,
Suite 265, Phoenix, Arizona 85034, or such other address as Landlord may
from time to time designate.
(i) To Tenant, at 3250 Van Ness, San Francisco, California 94109,
Attention: President, or such other address as Tenant may from time to
time designate.
(i) To Trustee, at First Tennessee Bank National Association, 165
Madison Avenue, Memphis, Tennessee 38103, Attention: Dennis D.
Gillespie.
A duplicate copy of each notice, certificate or other communication
given hereunder to Tenant and/or Landlord shall also be given to Trustee.
1.1 Definition of "Landlord." The term "Landlord" as used in this Lease so far
as covenants and agreements on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Landlord's interest
in this Lease at the time in question, and in the event of any transfer or
transfers of such interest authorized herein, except a transfer by way of
security, Landlord herein named (and in case of any subsequent transfer, the
then transferor) shall be automatically freed and relieved from and after the
date of such transfer of all personal liability as respects the performance of
any covenants or agreements on the part of Landlord contained in this Lease
thereafter to be performed; provided, that any funds in the hands of Landlord or
the then transferor at the time of such transfer, in which Tenant has an
interest, shall be turned over to the transferee and any amount then due and
payable to Tenant by Landlord or the then transferor under any provision of this
Lease, shall be paid to Tenant;
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provided further that, upon any such transfer, the transferee shall be deemed to
have assumed, subject to the limitations of this Section 10.3, all of the
covenants, agreements and conditions in the Lease contained to be performed on
the part of Landlord; it being intended hereby that the covenants and agreements
contained in this Lease on the part of Landlord shall subject as aforesaid, be
binding on Landlord, its successors and assigns, only during and in respect of
their respective successive periods of ownership.
1.2
1.3 Headings; Table of Contents . The headings of the Articles and the
numberings of the Sections and Subsections in this Lease are inserted as a
matter of convenience to the parties and shall not affect the construction of
this Lease. The wording of this Lease has been agreed upon by both parties
hereto and therefore no party hereto is deemed to be the author thereof.
1.4
1.5 Counterparts . This Lease may be executed in any number of counterparts,
each of which shall be an original and the counterparts shall constitute but one
and the same instrument.
1.6
1.7 Governing Law . This Lease is to be governed and construed in accordance
with the internal laws of the State of Mississippi, without regard to principles
of conflicts of laws.
1.8
1.9 Cure on Behalf of Landlord . In the event that there shall occur a default
under any mortgage, deed of trust, security agreement, reimbursement agreement,
and/or bond affecting Landlord's interest in the Project, or if any other lien
or encumbrance is created which may be prior to Tenant's interest hereunder and
threatens Tenant's interest hereunder, Tenant may, upon giving Landlord written
notice at least ten (10) days prior to doing so, take such action, including the
payment of money, as may be required to cure such defect, or to discharge such
lien or
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encumbrance, and may deduct such sums and/or its cost and expenses in taking
such action, from the Company Payments due hereunder as they may become due.
1.10
1.11 Binding on Successors and Assigns . Except as otherwise provided herein,
this Lease shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, successors and assigns.
1.12
(a) Authority of Signatories . Landlord represents and warrants that the person
executing this Lease on behalf of Landlord is a duly authorized member of
Landlord or is its or his duly authorized attorney-in-fact.
(b)
(c) Tenant represents and warrants that all corporate and other proceedings
required to be taken by or on the part of Tenant and its Board of Directors for
the authorization, execution and delivery of this Lease and the performance of
the agreements set forth herein have been duly taken and that the person
executing this Lease on behalf of Tenant has been duly authorized to act for and
in behalf of Tenant.
(d)
1.13 Benefits of the Act. Landlord and Tenant acknowledge that the Bonds are
being issued pursuant to the provisions of Section 57-10-401 et seq. of the
Mississippi Code of 1972, as amended (the "Act"), so that Tenant may obtain
certain benefits provided by the Act as set forth in Section 5.6 of the Loan
Agreement. Tenant hereby acknowledges and accepts the obligations set forth in
Section 5.6 of the Loan Agreement on its behalf, and said Section is hereby
incorporated herein by reference. In order to comply with the requirements of
Section 57-10-409 of the Act, Tenant hereby covenants and agrees as follows:
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1.14
(a) This Lease may be assigned by Tenant (other than to an affiliate thereof)
only upon the prior written consent of the Issuer following the adoption of a
resolution by the Issuer to such effect.
(b)
(c) Upon a default by Tenant in the payment of Basic Rent hereunder, the
Trustee, on behalf of the Issuer, may exercise the rights and remedies available
under the Indenture and the Loan Agreement, including but not limited to
acceleration of the Bonds, foreclosure of the Deed of Trust and termination of
this Lease.
(d)
1.15 [RESERVED.]
1.16
1.17 Waivers . Neither failure by either party to insist upon the strict
performance of any term or condition of this Lease, or to exercise any right or
remedy available on a breach thereof, nor acceptance by Landlord of full or
partial Basic Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term or condition. No term or condition
of this Lease required to be performed by a party hereto, and no breach thereof,
shall be waived, altered or modified, except by a written instrument executed by
the party making such waiver. No waiver of any breach shall be taken to
constitute a waiver of any other breach, or of a subsequent breach of the same
covenants; and each term or condition shall continue in full force and effect
with respect to any other then existing or subsequent breach thereof.
1.18
1.19 Mechanic's Liens . Under no circumstances shall either party create or
permit the creation of or suffer to exist, any mechanic's lien to be filed
against the Project other than
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Permitted Encumbrances (as defined in the Loan Agreement), by reason of any
work, labor, services or material supplied or claimed to have been supplied to
the Tenant or to the Landlord. Tenant shall promptly take all steps necessary to
discharge and remove any such lien, except Permitted Encumbrances, created by
the action or inaction of Tenant. Nothing in this Lease shall be construed in
any way as constituting the consent or request of either party, expressed or
implied, by inference or otherwise, to any contractor, subcontractor, laborer or
materialman for the performance of any labor or the furnishing of any materials
for any improvement, alteration, or repair of or to the Project that would give
rise to the assertion of any mechanics' or materialmen's lien claim against the
Project, or as giving either party the right, power or authority to contract for
or to permit the rendering of any service or the furnishing of any material that
would give rise to the filing of any mechanic's lien claim against the Project.
1.20
1.21 Utilities . All heat, water, electric current, gas, or other utilities used
in the Project during the Primary Term and the Option Periods shall be paid for
by the Tenant. In addition, should usage of such utilities during the
construction of the Project exceed that occasioned by construction, due to
installation of Equipment and/or Fixtures by Tenant, Tenant agrees to pay such
additional costs.
1.22
1.23 [RESERVED.]
1.24
1.25 Cure on Behalf of Tenant . If the Tenant shall be in default hereunder, and
the Tenant shall not have cured such default within the applicable notice period
set forth herein, the Landlord may, at its option, in addition to any other
rights and remedies, cure such default on behalf of the Tenant, in which event
the Tenant shall reimburse the Landlord for all sums paid to
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effect such cure, together with interest thereon at the Default Rate (as defined
in the Loan Agreement), and together with such reasonable attorney's fees as the
Landlord may have incurred in connection with such matter. Any such sum so paid
by the Landlord, together with any interest and attorney's fees, as above
provided, shall be due on the next rental installment date following the date of
such cure by Landlord.
1.26
1.27 Severability . If any term or provision of this Lease, or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby; and each term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by applicable law.
1.28
1.29 Venue . As an integral part of the consideration for the Landlord's
willingness to enter into this Lease, it is expressly understood and agreed that
no suit or action shall be commenced by either party, or by any successor,
personal representative, or assignee of either party, with respect to this Lease
or any of the provisions hereof, other than in a state court of competent
jurisdiction in DeSoto County, Mississippi, or in the United States District
Court for the Northern District of Mississippi, Delta Division, and not
elsewhere.
1.30
1.31 [RESERVED.]
1.32
1.33 Waiver of Jury Trial . TO THE FARTHEST EXTENT PERMITTED BY APPLICABLE LAW,
EACH PARTY TO THIS LEASE AGREEMENT HEREBY WAIVES
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ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a)
ARISING UNDER THIS LEASE AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT, OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALING OF THE PARTIES HERETO
WITH RESPECT TO THIS LEASE AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS LEASE AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR COPY
OF THIS SECTION WITH ANY COURT AS EVIDENCE OF SUCH AGREEMENT.
1.34
1.35 Waiver of Right of Recovery . Tenant and Landlord hereby waive and release
any and all right of recovery against the other, including employees and agents,
arising during the term of this Lease for any and all loss or damage to any
property located within or constituting a part of the Project which loss or
damage arises from the perils covered by an all risk policy or which right of
recovery arises from loss of earnings or rents resulting from damage caused by
such a peril. This mutual waiver is in addition to any other waiver or release
contained in this Lease. Landlord and Tenant shall each have their insurance
policies issued in such form as to waive any right of subrogation which might
otherwise exist.
1.36
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1.37 Design and Construction Indemnity . With respect to the manner of design
and construction of the Project, Landlord agrees at Tenant's option, to save
Tenant harmless from and indemnify and defend Tenant against any and all injury,
loss, damage, liability (or any claims in respect of the foregoing), costs or
expenses (including, without limitation, attorney's fees, reasonable
investigation and discovery costs), of whatever nature, to any person or
property caused or claimed to be caused by or resulting from any act, omission
or negligence of Landlord or its employees or agents, provided that Tenant, upon
becoming aware of such claim or damage, shall promptly notify Landlord as soon
as reasonably possible. The provisions of this paragraph as to property damage
shall be subject to the provisions of paragraph 10.21 regarding waiver of
subrogation; and the provisions of this paragraph shall further be subject to
the proviso that any obligation of Landlord to Tenant hereunder with respect to
matters covered by insurance required to be maintained by Tenant hereunder shall
be limited so as to assume that the deductible provision in such policy of
insurance does not exceed (A) $50,000 (thereby limiting Landlord's obligation
hereunder to $50,000 per claim) in the case of insurance coverage required to be
maintained by Tenant under Section 4.1(a)-(d) and (B) $500,000 (thereby limiting
Landlord's liability hereunder to $500,000 per claim) in the case of insurance
coverage on Tenant's personal property required to be maintained by Tenant under
Section 4.1.
1.38
1.39 Landlord Waiver of Liens . Landlord waives such liens, if any, to which it
may have a right with respect to the merchandise, furniture, trade fixtures and
other personal property of Tenant located on or about the Property and shall
from time to time execute such documents as Tenant may reasonably request to
acknowledge such waiver.
1.40
70
<PAGE> 77
(a) Tenant Right to Terminate . Provided that all Bonds are redeemed, the Loan
Agreement terminated and the Indenture released, if Landlord should be in
default in the performance of any of its obligations under this Lease, which
default continues for a period of more than thirty (30) days after receipt of
written notice from Tenant specifying such default, or if such default is of a
nature to require more than thirty (30) days for remedy and continues beyond the
time reasonably necessary to cure [provided Landlord must have undertaken
procedures to cure the default within such thirty (30) day period and diligently
pursue such efforts to cure to completion], Tenant may, in addition to availing
itself of any other remedies available at law and in equity, at its option, upon
written notice, terminate this Lease, or may incur any reasonable expense
necessary to perform the obligation of Landlord specified in such notice and
deduct such expense from the Company Payments next becoming due.
(b)
(c) So long as the Bonds remain Outstanding, or the Indenture has not been
released, the obligation of the Tenant to pay Basic Rent and Additional Rent as
provided herein and to make all other payments (other than Company Payments),
provided for in this Lease and to maintain the Project in accordance with this
Lease and to perform its other obligations under the Lease shall be absolute and
unconditional, irrespective of any defense or any rights of set-off, recoupment
or counterclaim it might otherwise have against the Landlord. During such
period, the Tenant (i) will not suspend or discontinue any such payment (other
than Company Payments), (ii) will perform all of its other agreements under this
Lease, and (iii) will not terminate this Lease [other than such termination as
is provided for hereunder in subparagraph (a)] for any cause including, without
limitation, any acts or circumstances that may constitute an eviction or
constructive eviction, failure of consideration, failure of title, or commercial
frustration of purpose, or any damage to or destruction of the Project, or the
taking
71
<PAGE> 78
by eminent domain of title to or the rights to temporary use of all or any part
of the Project or any change in the tax or other laws of the United States, the
State or any political subdivision of either thereof, or any failure of the
Issuer to perform and observe any agreement or covenant, whether express or
implied, or any duty, liability or obligation arising out of or connected with
this Lease. Notwithstanding the foregoing, the Tenant may, at its own cost and
expense, in its own name, prosecute or defend any action or proceedings or take
any other action involving third persons which the Tenant deems reasonably
necessary in order to secure or protect its right of possession, use and
occupancy of the Project and other rights hereunder. Nothing contained herein
shall be construed to prevent or restrict the Tenant from asserting any rights
which the Tenant may have against the Landlord under this Lease or under any
provision of law.
(d)
1.41 Litigation . If either party becomes a party to any litigation concerning
this Lease or the Project by reason of any act or omission of the other party or
its authorized representatives, and not by any act or omission of the party that
becomes a party to that litigation or any act or omission of its authorized
representatives, the party that causes the other party to become involved in the
litigation shall be liable to that party for reasonable attorney's fees, court
costs, investigation expenses, discovery costs and costs of appeal incurred by
it in the litigation.
1.42
1.43 Costs of Action . If either party commences an action against the other
party arising out of or in connection with this Lease, the prevailing party
shall be entitled to have and recover from the losing party, reasonable
attorney's fees, costs of suit, investigation costs and discovery costs,
including costs of appeal. When this Lease imposes upon a party an obligation to
indemnify the other, the indemnification obligation shall include the obligation
to pay the
72
<PAGE> 79
indemnitee's reasonable attorney's fees, costs and disbursements, whether the
indemnitee be the plaintiff or defendant.
1.44
1.45 Nondisturbance . Landlord covenants to obtain from any secured party
benefitting from an encumbrance on the Project [and each lessor, if any, whose
interest in the Project is paramount to Landlord's ("Overlessor")] at the time
of the execution hereof, or at any time prior to the recordation of the
Memorandum of Lease, an executed non-disturbance agreement assuring Tenant that
notwithstanding any default by Landlord to the lender or Overlessor, or any
foreclosure or deed in lieu thereof (or Overlessor's termination proceedings),
Tenant's rights under this Lease shall continue in full force and effect and its
possession of the Project shall remain undisturbed except in accordance with the
provisions of this Lease so long as Tenant is not in default hereunder so as to
prevent Lease termination and that the proceeds of any insurance recovery or
condemnation award shall be used for the purposes stated in this Lease.
1.46
1.47 Tenant Subordination of Lease . Tenant shall upon Landlord's request,
subordinate this Lease in the future to any first lien placed by Landlord on the
Project, with an insurance company, bank or any other institutional lender,
provided that such lender executes a non-disturbance agreement providing that if
Tenant is not then in default under this Lease, this Lease shall not terminate
as a result of the foreclosure of such lien, or conveyance in lieu thereof,
Tenant's rights under this Lease shall continue in full force and effect and its
possession be undisturbed except in accordance with the provisions of this
Lease, and that the proceeds of any insurance recovery or condemnation award
shall be used for the purposes stated in this Lease. Tenant will, upon request
of the lienholder, be a party to such an agreement, and will agree that
73
<PAGE> 80
if such lienholder succeeds to the interests of Landlord, Tenant will recognize
said lienholder (or successor in interest of the lienholder) as its Landlord
under the terms of this Lease.
1.48
1.49 Agency . Nothing contained in this Lease shall be deemed or construed by
the parties hereto or by any third person to create the relationship of
principal and agent, or of partnership, or of joint venture, or of any other
association between the parties other than Landlord and Tenant, or to prevent
Landlord or Tenant from entering into ventures in direct competition with the
Project.
1.50
1.51 Amendment . This Lease may be amended only by a written instrument executed
by the Landlord and the Tenant. Additionally, prior to full payment of the Bonds
(or provision for payment thereof having been made in accordance with the
Indenture), except for amendments entered into in connection with a refunding of
the Bonds and except for modifications, amendments and changes relating to
Company Payments, the Landlord and the Tenant shall not alter, modify or amend
in any material respect any of the terms of this Lease without the prior written
approval of the Holders of sixty-six and two-thirds percent (66?%) of the Bonds,
which consent absent the existence and continuance of an Event of Default by
Tenant hereunder, shall not be unreasonably withheld.
1.52
[SIGNATURE PAGE FOLLOWS]
74
<PAGE> 81
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
HEWSON/DESOTO PARTNERS, L.L.C., an
Arizona limited liability company
BY: HEWSON PROPERTIES, INC., a
California corporation
By: /s/ GARY J. HEWSON
----------------------------------
Title: Chief Executive Officer
-------------------------------
LANDLORD
WILLIAMS-SONOMA RETAIL SERVICES, INC., a
California corporation
By: JERRY OWENS
-------------------------------------
Title: VP Distribution
----------------------------------
TENANT
<PAGE> 82
STATE OF
COUNTY OF
Personally appeared before me, ______________________________, the
undersigned authority in and for the said county and state, on this the ____ day
of _______________, 1999, the within-named ______________________________ who
acknowledged that __he is _______________ of WILLIAMS-SONOMA RETAIL SERVICES,
INC. and that for and on behalf of the said corporation, and as its act and
deed, __he executed and delivered the above and foregoing instrument, after
first having been duly authorized by said corporation to do so.
________________________________________
Notary Public
My Commission Expires:
______________________
STATE OF________________
COUNTY OF_______________
Personally appeared before me, ______________________________, the
undersigned authority in and for the said county and state, on this the _____
day of _______________, 1999, within my jurisdiction, the within-named
_______________________________, who acknowledged himself to be _______________
of HEWSON PROPERTIES, INC., a California corporation, which corporation is the
manager of HEWSON/DESOTO PARTNERS, L.L.C., an Arizona limited liability company
(the "Maker"), and that for and on behalf of said corporation and as its act and
deed as manager of the Maker and for and on behalf of the Maker and as its act
and deed, he executed and delivered the foregoing instrument after having been
duly authorized so to do.
________________________________________
Notary Public
My Commission Expires:
______________________
<PAGE> 83
EXHIBIT "A"
Real Property Description
TRACT I:
LOCATED IN DESOTO COUNTY, MISSISSIPPI:
BEING A SURVEY OF PART OF THE NORTHEAST QUARTER OF THE NORTHEAST QUARTER, PART
OF THE NORTHWEST QUARTER OF THE NORTHEAST QUARTER, SECTION 25, TOWNSHIP 1 SOUTH,
RANGE 6 WEST, DESOTO COUNTY MISSISSIPPI AND PART OF THE SOUTHWEST QUARTER OF THE
SOUTHEAST QUARTER AND PART OF THE SOUTHEAST QUARTER OF THE SOUTHEAST QUARTER,
SECTION 24, TOWNSHIP 1 SOUTH, RANGE 6 WEST, DESOTO COUNTY MISSISSIPPI AND BEING
MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHEAST CORNER OF SAID SECTION 25; THENCE S89
degrees32'11"W ALONG THE NORTH LINE OF SAID SECTION 25 A DISTANCE OF
80.00 FEET TO THE POINT OF BEGINNING; THENCE S00 degrees31'04"E ALONG A
LINE THAT IS 80.00 FEET WEST OF AND PARALLEL TO THE EAST LINE OF SAID
SECTION 25 A DISTANCE OF 491.49 FEET TO A POINT; THENCE S89
degrees13'30"W A DISTANCE OF 1964.19 FEET TO A POINT; THENCE N00
degrees46'30"W A DISTANCE OF 1351.48 FEET TO A POINT; THENCE N89
degrees13'30"E A DISTANCE OF 1965.03 FEET TO A POINT; THENCE S00E51'56"E
ALONG A LINE THAT IS 80.00 FEET WEST OF AND PARALLEL TO THE EAST LINE OF
SAID SECTION 24 A DISTANCE OF 860.00 FEET TO THE POINT OF BEGINNING AND
CONTAINING 2,656,423 SQUARE FEET OR 60.983 ACRES.
TRACT II:
The rights benefitting and burdening the foregoing Tract I created by
(a) the Reciprocal Storm Water Detention and Drainage Agreement recorded on
December 11, 1998, at 2:57 p.m. in Book 79, Page 486, of the Chancery Clerk's
Office, DeSoto County, Mississippi, and re-recorded on January 21, 1999, at 4:14
p.m. in Book 80, Page 182 in said Chancery Clerk's Office and (b) the Reciprocal
Connector Easement recorded on December 11, 1998, at 3:00 p.m. in Book 079, Page
511, of the Chancery Clerk's Office, DeSoto County, Mississippi.
<PAGE> 84
EXHIBIT "B"
Plans for Building and Improvements and Construction Budget
See Attached
1
<PAGE> 85
RETAIL DISTRIBUTION CAMPUS, SECOND BUILDING, WILLIAMS SONOMA, OLIVE BRANCH, MS
PHASE II
Plans by H + M Design Services
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Final
Sheet # Prepared by: Sheet Title Date Revision Date
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CE - 1.1 RSM Site Plan 11/16/99
- ----------------------------------------------------------------------------------------------------------
CE - 2.1 RSM Grading & Drainage Plan 8/25/99
- ----------------------------------------------------------------------------------------------------------
CE - 3.1 RSM Erosion Control Plan 8/12/99
- ----------------------------------------------------------------------------------------------------------
CE - 3.2 RSM Erosion Control Details 9/22/99
- ----------------------------------------------------------------------------------------------------------
A - 1.1 H-M Faciltiy Floor Plan 11/18/99
- ----------------------------------------------------------------------------------------------------------
A - 1.2 H-M Enlarged Office Floor Plan 11/18/99
- ----------------------------------------------------------------------------------------------------------
A - 1.3 H-M DC Section 1/Enlarged Area Floor Plans 11/18/99
- ----------------------------------------------------------------------------------------------------------
A - 1.4 H-M Enlarged Area Floor Plans Shipping/Receiving Offices 11/18/99
- ----------------------------------------------------------------------------------------------------------
A - 1.5 H-M Enlarged Tunnel Floor Plan 11/17/99
- ----------------------------------------------------------------------------------------------------------
A - 2.1 H-M Door Schedule 11/19/99
- ----------------------------------------------------------------------------------------------------------
A - 2.2 H-M Room Finish Schedule Door & Window Details 11/19/99
- ----------------------------------------------------------------------------------------------------------
A - 3.1 H-M Building Elevations 11/10/99
- ----------------------------------------------------------------------------------------------------------
A - 3.2 H-M Enlarged Elevations 11/3/99
- ----------------------------------------------------------------------------------------------------------
A - 3.3 H-M North Wall Tilt-Up Wall Panel Elevations 11/12/99
- ----------------------------------------------------------------------------------------------------------
A - 3.4 H-M North/West Wall Tilt-Up Wall Panel Elevations 11/3/99
- ----------------------------------------------------------------------------------------------------------
A - 3.5 H-M West/South Wall Tilt-Up Wall Panel Elevations 11/1/99
- ----------------------------------------------------------------------------------------------------------
A - 3.6 H-M South Wall Tilt-Up Wall Panel Elevations 11/10/99
- ----------------------------------------------------------------------------------------------------------
A - 3.7 H-M East Wall Tilt-Up Wall Panel Elevations 11/5/99
- ----------------------------------------------------------------------------------------------------------
A - 3.8 H-M Column Line 11 Firewall Tilt-Up Wall Panel Elevations 11/3/99
- ----------------------------------------------------------------------------------------------------------
A - 3.9 H-M Column Line 26 Firewall Tilt-Up Wall Panel Elevations 11/8/99
- ----------------------------------------------------------------------------------------------------------
A - 4.10 H-M Wall Sections 11/19/99
- ----------------------------------------------------------------------------------------------------------
A - 4.1 H-M Wall Sections 11/16/99
- ----------------------------------------------------------------------------------------------------------
A - 4.2A H-M Wall Sections 11/4/99
- ----------------------------------------------------------------------------------------------------------
A - 4.2 H-M Wall Sections 11/5/99
- ----------------------------------------------------------------------------------------------------------
A - 4.3 H-M Wall Sections 11/16/99
- ----------------------------------------------------------------------------------------------------------
A - 4.6 H-M Wall Sections 10/27/99
- ----------------------------------------------------------------------------------------------------------
A - 4.7 H-M Wall Sections 11/17/99
- ----------------------------------------------------------------------------------------------------------
A - 4.8 H-M Wall Sections 11/18/99
- ----------------------------------------------------------------------------------------------------------
A - 4.9 H-M Wall Sections 11/18/99
- ----------------------------------------------------------------------------------------------------------
A - 6.1 H-M Glass and Glazing Elevations 11/19/99
- ----------------------------------------------------------------------------------------------------------
A - 6.2 H-M Glass and Glazing Details 11/19/99
- ----------------------------------------------------------------------------------------------------------
A - 7.1 H-M Faciltiy Roof Plans 11/16/99
- ----------------------------------------------------------------------------------------------------------
C - 1.1 H-M Partial Foundation Plan 9/29/99
- ----------------------------------------------------------------------------------------------------------
C - 1.2 H-M Partial Foundation Plan 9/29/99
- ----------------------------------------------------------------------------------------------------------
C - 1.3 H-M Partial Foundation Plan 9/29/99
- ----------------------------------------------------------------------------------------------------------
C - 1.4 H-M Partial Reinforcing Details 11/0/99
- ----------------------------------------------------------------------------------------------------------
C - 1.5 H-M Partial Reinforcing Details 11/0/99
- ----------------------------------------------------------------------------------------------------------
C - 1.6 H-M Office Foundation Plan 6/0/99
- ----------------------------------------------------------------------------------------------------------
C - 2.1 H-M Sections and Details 9/29/99
- ----------------------------------------------------------------------------------------------------------
C - 2.2 H-M Sections and Details 9/29/99
- ----------------------------------------------------------------------------------------------------------
S - 1.1 H-M Partial Roof Framing Plan 6/0/99
- ----------------------------------------------------------------------------------------------------------
S - 1.2 H-M Partial Roof Framing Plan 6/0/99
- ----------------------------------------------------------------------------------------------------------
S - 1.3 H-M Partial Roof Framing Plan 6/0/99
- ----------------------------------------------------------------------------------------------------------
S - 2.1 H-M Sections and Details 6/0/99
- ----------------------------------------------------------------------------------------------------------
M - 1.1 H-M Site Utilities Plans 10/21/99
- ----------------------------------------------------------------------------------------------------------
M - 2.1 H-M Facilty Underground Plumbing Plan 10/20/99
- ----------------------------------------------------------------------------------------------------------
M - 2.2 H-M Enlarged Office Underground Plumbing Plan 11/3/99
- ----------------------------------------------------------------------------------------------------------
M - 2.3 H-M Enlarged Areas Underground Plumbing Plan 11/3/99
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 86
<TABLE>
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
M - 2.4 H-M Enlarged Areas Underground Plumbing Plan 11/27/99
- ----------------------------------------------------------------------------------------------------------
M - 2.5 H-M Underground Riser Diagrams 11/3/99
- ----------------------------------------------------------------------------------------------------------
M - 3.1 H-M Faciltiy Overhead Plumbing Plan 10/28/99
- ----------------------------------------------------------------------------------------------------------
M - 3.2 H-M Enlarged Office Underground Plumbing Plan 11/3/99
- ----------------------------------------------------------------------------------------------------------
M - 3.3 H-M Enlarged Areas Underground Plumbing Plan 11/3/99
- ----------------------------------------------------------------------------------------------------------
M - 3.4 H-M Enlarged Areas Underground Plumbing Plan 10/28/99
- ----------------------------------------------------------------------------------------------------------
M - 3.5 H-M Overhead Riser Diagrams 11/3/99
- ----------------------------------------------------------------------------------------------------------
M - 4.1 H-M Faciltiy HVAC Plan 11/11/99
- ----------------------------------------------------------------------------------------------------------
M - 4.2 H-M Office HVAC Plan 11/19/99
- ----------------------------------------------------------------------------------------------------------
M - 4.3 H-M DC Section /Enlarged Area HVAC Plans 11/17/99
- ----------------------------------------------------------------------------------------------------------
M - 4.4 H-M Enlarged Area HVAC Plans Shipping /Receiving Offices 11/17/99
- ----------------------------------------------------------------------------------------------------------
M - 4.5 H-M Enlarged Tunnel HVAC Plan 11/15/99
- ----------------------------------------------------------------------------------------------------------
M - 4.6 H-M HVAC Details and Schedules 11/19/99
- ----------------------------------------------------------------------------------------------------------
M - 4.7 H-M HVAC Details and Notes 11/19/99
- ----------------------------------------------------------------------------------------------------------
E - 1.1 H-M Site Electrical Site Plan 10/21/99
- ----------------------------------------------------------------------------------------------------------
E - 1.2 H-M Facility Grounded Plan 11/1/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1 H-M Facility Lighting Key Plan 11/3/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1A H-M Lighting Plan (Section A) 11/17/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1BD H-M Lighting Location Plan (Section B) 11/18/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1CD H-M Lighting Location Plan (Section C) 11/11/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1CD H-M Lighting Plan (Section C) 11/15/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1D H-M Lighting Location Plan (Section D) 11/8/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1E H-M Lighting Plan (Section E) 11/8/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1FD H-M Lighting Location Plan (Section F) 11/11/99
- ----------------------------------------------------------------------------------------------------------
E - 2.1F H-M Lighting Plan (Section F) 11/16/99
- ----------------------------------------------------------------------------------------------------------
E - 2.3 H-M Office Lighting Plan 11/17/99
- ----------------------------------------------------------------------------------------------------------
E - 2.4 H-M Enlarged Office Lighting Plan 11/1/99
- ----------------------------------------------------------------------------------------------------------
E - 2.5 H-M Enlarged Office Lighting Plan 11/1/99
- ----------------------------------------------------------------------------------------------------------
E - 2.7 H-M Luminaire Schedule and Details 11/1/99
- ----------------------------------------------------------------------------------------------------------
E - 3.1 H-M Facility Power Key Plan 11/9/99
- ----------------------------------------------------------------------------------------------------------
E - 3.1A H-M Power Plan (Section A) 11/10/99
- ----------------------------------------------------------------------------------------------------------
E - 3.1B H-M Power Plan (Section B) 11/10/99
- ----------------------------------------------------------------------------------------------------------
E - 3.1C H-M Power Plan (Section C) 11/10/99
- ----------------------------------------------------------------------------------------------------------
E - 3.1D H-M Power Plan (Section D) 11/8/99
- ----------------------------------------------------------------------------------------------------------
E - 3.1E H-M Power Plan (Section E) 11/8/99
- ----------------------------------------------------------------------------------------------------------
E - 3.1F H-M Power Plan (Section F) 11/8/99
- ----------------------------------------------------------------------------------------------------------
E - 3.4 H-M Enlarged Office Power Plan 11/17/99
- ----------------------------------------------------------------------------------------------------------
E - 3.5 H-M Enlarged Office Power Plan 11/17/99
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 87
EXHIBIT "C"
Rent Schedule
See Attached
1
<PAGE> 88
EXHIBIT "C"
<TABLE>
<CAPTION>
GLOBAL
LEASE BASIC COMPANY BASIC Annual
QRTS DATE INTEREST SINK FUND RENT PAYMENT RENT Rent
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 09/01/00 $0 $0 $0 $17,708 $17,708
2 10/01/00 $318,750 $0 $318,750 $53,125 $371,875
3 01/01/01 $956,250 $0 $956,250 $53,125 $1,009,375 1,398,958.33
4 04/01/01 $956,250 $0 $956,250 $53,125 $1,009,375
5 07/01/01 $956,250 $325,000 $1,281,250 $53,125 $1,334,375
6 10/01/01 $948,938 $0 $948,938 $53,125 $1,002,063
7 01/01/02 $948,938 $335,000 $1,283,938 $53,125 $1,337,063 4,682,875.00
8 04/01/02 $941,400 $0 $941,400 $53,125 $994,525
9 07/01/02 $941,400 $350,000 $1,291,400 $53,125 $1,344,525
10 10/01/02 $933,525 $0 $933,525 $53,125 $986,650
11 01/01/03 $933,525 $370,000 $1,303,525 $53,125 $1,356,650 4,682,350.00
12 04/01/03 $925,200 $0 $925,200 $53,125 $978,325
13 07/01/03 $925,200 $385,000 $1,310,200 $53,125 $1,363,325
14 10/01/03 $916,538 $0 $916,538 $53,125 $969,663
15 01/01/04 $916,538 $400,000 $1,316,538 $53,125 $1,369,663 4,680,975.00
16 04/01/04 $907,538 $0 $907,538 $53,125 $960,663
17 07/01/04 $907,538 $420,000 $1,327,538 $53,125 $1,380,663
18 10/01/04 $898,088 $0 $898,088 $53,125 $951,213
19 01/01/05 $898,088 $440,000 $1,338,088 $53,125 $1,391,213 4,683,750.00
20 04/01/05 $888,188 $0 $888,188 $53,125 $941,313
21 07/01/05 $888,188 $460,000 $1,348,188 $53,125 $1,401,313
22 10/01/05 $877,838 $0 $877,838 $53,125 $930,963
23 01/01/06 $877,838 $480,000 $1,357,838 $53,125 $1,410,963 4,684,550.00
24 04/01/06 $867,038 $0 $867,038 $53,125 $920,163
25 07/01/06 $867,038 $500,000 $1,367,038 $53,125 $1,420,163
26 10/01/06 $855,788 $0 $855,788 $53,125 $908,913
27 01/01/07 $855,788 $525,000 $1,380,788 $53,125 $1,433,913 4,683,150.00
28 04/01/07 $843,975 $0 $843,975 $53,125 $897,100
29 07/01/07 $843,975 $545,000 $1,388,975 $53,125 $1,442,100
30 10/01/07 $831,713 $0 $831,713 $53,125 $884,838
31 01/01/08 $831,713 $570,000 $1,401,713 $53,125 $1,454,838 4,678,875.00
32 04/01/08 $818,888 $0 $818,888 $53,125 $872,013
33 07/01/08 $818,888 $595,000 $1,413,888 $53,125 $1,467,013
34 10/01/08 $805,500 $0 $805,500 $53,125 $858,625
35 01/01/09 $805,500 $625,000 $1,430,500 $53,125 $1,483,625 4,681,275.00
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
GLOBAL
LEASE BASIC COMPANY BASIC Annual
QRTS DATE INTEREST SINK FUND RENT PAYMENT RENT Rent
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
36 04/01/09 $791,438 $0 $791,438 $53,125 $844,563
37 07/01/09 $791,438 $650,000 $1,441,438 $53,125 $1,494,563
38 10/01/09 $776,813 $0 $776,813 $53,125 $829,938
39 01/01/10 $776,813 $680,000 $1,456,813 $53,125 $1,509,938 4,679,000.00
40 04/01/10 $761,513 $0 $761,513 $53,125 $814,638
41 07/01/10 $761,513 $710,000 $1,471,513 $53,125 $1,524,638
42 10/01/10 $745,538 $0 $745,538 $53,125 $798,663
43 01/01/11 $745,538 $745,000 $1,490,538 $53,125 $1,543,663 4,681,600.00
44 04/01/11 $728,775 $0 $728,775 $53,125 $781,900
45 07/01/11 $728,775 $775,000 $1,503,775 $53,125 $1,556,900
46 10/01/11 $711,338 $0 $711,338 $53,125 $764,463
47 01/01/12 $711,338 $810,000 $1,521,338 $53,125 $1,574,463 4,677,725.00
48 04/01/12 $693,113 $0 $693,113 $53,125 $746,238
49 07/01/12 $693,113 $850,000 $1,543,113 $53,125 $1,596,238
50 10/01/12 $673,988 $0 $673,988 $53,125 $727,113
51 01/01/13 $673,988 $885,000 $1,558,988 $53,125 $1,612,113 4,681,700.00
52 04/01/13 $654,075 $0 $654,075 $53,125 $707,200
53 07/01/13 $654,075 $925,000 $1,579,075 $53,125 $1,632,200
54 10/01/13 $633,263 $0 $633,263 $53,125 $686,388
55 01/01/14 $633,263 $970,000 $1,603,263 $53,125 $1,656,388 4,682,175.00
56 04/01/14 $611,438 $0 $611,438 $53,125 $664,563
57 07/01/14 $611,438 $1,010,000 $1,621,438 $53,125 $1,674,563
58 10/01/14 $588,713 $0 $588,713 $53,125 $641,838
59 01/01/15 $588,713 $1,060,000 $1,648,713 $53,125 $1,701,838 4,682,800.00
60 04/01/15 $564,863 $0 $564,863 $53,125 $617,988
61 07/01/15 $564,863 $1,105,000 $1,669,863 $53,125 $1,722,988
62 10/01/15 $540,000 $0 $540,000 $53,125 $593,125
63 01/01/16 $540,000 $1,155,000 $1,695,000 $53,125 $1,748,125 4,682,225.00
64 04/01/16 $514,013 $0 $514,013 $53,125 $567,138
65 07/01/16 $514,013 $1,205,000 $1,719,013 $53,125 $1,772,138
66 10/01/16 $486,900 $0 $486,900 $53,125 $540,025
67 01/01/17 $486,900 $1,260,000 $1,746,900 $53,125 $1,800,025 4,679,325.00
68 04/01/17 $458,550 $0 $458,550 $53,125 $511,675
69 07/01/17 $458,550 $1,320,000 $1,778,550 $53,125 $1,831,675
70 10/01/17 $428,850 $0 $428,850 $53,125 $481,975
71 01/01/18 $428,850 $1,375,000 $1,803,850 $53,125 $1,856,975 4,682,300.00
72 04/01/18 $397,913 $0 $397,913 $53,125 $451,038
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
GLOBAL
LEASE BASIC COMPANY BASIC Annual
QRTS DATE INTEREST SINK FUND RENT PAYMENT RENT Rent
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
73 07/01/18 $397,913 $1,440,000 $1,837,913 $53,125 $1,891,038
74 10/01/18 $365,513 $0 $365,513 $53,125 $418,638
75 01/01/19 $365,513 $1,505,000 $1,870,513 $53,125 $1,923,638 4,684,350.00
76 04/01/19 $331,650 $0 $331,650 $53,125 $384,775
77 07/01/19 $331,650 $1,570,000 $1,901,650 $53,125 $1,954,775
78 10/01/19 $296,325 $0 $296,325 $53,125 $349,450
79 01/01/20 $296,325 $1,640,000 $1,936,325 $53,125 $1,989,450 4,678,450.00
80 04/01/20 $259,425 $0 $259,425 $53,125 $312,550
81 07/01/20 $259,425 $1,715,000 $1,974,425 $53,125 $2,027,550
82 10/01/20 $220,838 $0 $220,838 $53,125 $273,963
83 01/01/21 $220,838 $1,795,000 $2,015,838 $53,125 $2,068,963 4,683,025.00
84 04/01/21 $180,450 $0 $180,450 $53,125 $233,575
85 07/01/21 $180,450 $1,875,000 $2,055,450 $53,125 $2,108,575
86 10/01/21 $138,263 $0 $138,263 $53,125 $191,388
87 01/01/22 $138,263 $1,960,000 $2,098,263 $53,125 $2,151,388 4,684,925.00
88 04/01/22 $94,163 $0 $94,163 $53,125 $147,288
89 07/01/22 $94,163 $2,045,000 $2,139,163 $53,125 $2,192,288
90 10/01/22 $48,150 $0 $48,150 $53,125 $101,275
91 01/01/23 $48,150 $2,140,000 $2,188,150 $0 $2,188,150 4,629,000.00
$57,099,525 $42,500,000 $99,599,525 $4,745,833 $104,345,358 $104,345,358
</TABLE>
This rent schedule assumes the building is delivered on schedule on 8/30/00. The
interest payment paid by Williams-Sonoma on 10/1/00 is for the month of
September. The capitalized interest fund will cover the months of July and
August. This schedule assumes no mandatory redemption of bond proceeds and no
interest rate reset.
<PAGE> 91
EXHIBIT "D"
Environmental Notices
NONE
<PAGE> 92
EXHIBIT "E"
Easements Affecting Real Property
1. 15' Utility Easement in favor of City of Olive Branch, Mississippi,
running parallel with the west edge of the 80' road right-of-way for Polk Lane,
recorded on August 25, 1998 at 1:04 p.m. in Book 338, Page 562, of the Land Deed
Records, Chancery Clerk's Office, DeSoto County, Mississippi.
2. 15' Right-of-Way Easement in favor of North Central Mississippi
Electric Power Association, running parallel with the west edge of the 80' road
right-of-way for Polk Lane, recorded on August 25, 1998 at 1:03 p.m. in Book
338, Page 559, of the Land Deed Records, Chancery Clerk's Office, DeSoto County,
Mississippi.
3. Subdivision Restrictions, Building Lines and Easements of record in
Plat Book 64, Page 34, of the Chancery Court Clerk's Office, DeSoto County,
Mississippi.
4. Reciprocal Storm Water Detention and Drainage Agreement recorded on
December 11, 1998 at 2:57 p.m. in Book 79, Page 486, of the Chancery Court
Clerk's Office, DeSoto County, Mississippi, and re-recorded on January 21, 1999
at 4:14 p.m. in Book 80, Page 182 in said Chancery Court Clerk's Office.
5. Reciprocal Connector Easement of record on December 11, 1998 at 3:00
p.m. in Book 079, Page 511, of the Chancery Court Clerk's Office, DeSoto County,
Mississippi.
6. Parking Easement Agreement recorded on December 11, 1998 at 2:59 p.m.
in Book 079, Page 503, of the Chancery Court Clerk's Office, DeSoto County,
Mississippi.
<PAGE> 93
EXHIBIT "F"
Existing Indebtedness
1
<PAGE> 1
EXHIBIT 10.14A
LEASE GUARANTY
In order to induce HEWSON /DESOTO PARTNERS, LLC, ("Landlord") to execute
a certain Lease Agreement dated as of November 15, 1999 (the "Lease") between
Landlord and WILLIAMS-SONOMA RETAIL SERVICES, INC., a California corporation
("Tenant"), covering certain premises situated in the City of Olive Branch,
Mississippi described on Exhibit "A" hereto, the undersigned (hereinafter
referred to as "Guarantor") hereby guarantees unto Landlord the payment and
performance of (a) all of the Basic Rent, Additional Rent (as such terms are
defined in the Lease) and other sums or charges which may ever become due and
payable by Tenant under the Lease, including, without limitation, rent that
becomes due and payable by reason of the exercise of any power to accelerate
granted to Landlord under the Lease, (collectively, the "Rents"), and any
damages or other sums that become payable on account of any default by Tenant
under the Lease, and the Company Payments (as defined in the Lease) due Landlord
thereunder, and (b) all of the other obligations, liabilities and duties of
Tenant under the Lease [the Rents, Company Payments and other obligations,
liabilities and duties described in the foregoing clauses (a) and (b) being
hereinafter collectively referred to as the "Obligations"].
Upon the occurrence of an event of a default by Tenant in the payment or
performance of any of the Obligations, Guarantor shall on demand pay the amount
due to Landlord and perform all of the other Obligations of Tenant with respect
to which Tenant is then in default. For the purposes hereof, the term "Tenant"
shall include any assignee of Tenant and the term "Lease" shall include any
amendment of the Lease effected by Landlord and Tenant. Notwithstanding anything
contained herein to the contrary, Guarantor's obligations shall be limited to
those provided herein.
Landlord shall not be required, before invoking the benefits of this
guaranty, to institute suit against or exhaust its remedies with respect to
Tenant or any other person liable for the Obligations or to enforce its rights
with respect to any security which shall have ever been given to secure the
payment and performance of the Obligations; and the obligations of Guarantor
hereunder shall not be released or impaired in any way by any action for the
collection or enforcement of the Obligations, or any failure of Landlord to give
Guarantor any notice of any kind under any circumstances whatsoever with respect
to or in connection with the Obligations. Suit may be brought and maintained
against Guarantor without the joinder of Tenant or any other person, and in the
event that there is more than one (1) guarantor of the Obligations, Landlord may
(a) bring suit against all guarantors jointly and severally or against any one
or more of them, (b) compromise or settle with any one or more of such
guarantors for such consideration as Landlord may deem proper, and (c) release
one or more of the guarantors from liability without impairing the liability of
the guarantors not so released; and no action brought by Landlord against any
guarantor of the Obligations shall impair the right of Landlord to bring suit
against any remaining guarantor or guarantors, including Guarantor hereunder.
The obligations of Guarantor shall be irrevocable and unconditional,
irrespective of the genuineness, validity, regularity or enforceability of the
Lease or any security given for the Obligations or any other circumstances which
might otherwise constitute a legal or equitable discharge of a surety or
guarantor, and Guarantor waives the benefit of all principles or
<PAGE> 2
provisions of law, statutory or otherwise, which are or might be in conflict
with the terms of this guaranty, and agrees that the obligations of Guarantor
shall not be affected by any circumstances, whether or not referred to in this
guaranty, which might otherwise constitute a legal or equitable discharge of a
surety or a guarantor. Specifically, Guarantor waives the benefits of any rights
of sureties and guarantors under the laws of the State of Mississippi. Without
limiting the generality of the foregoing Guarantor agrees that Landlord may, in
its sole and absolute discretion, without notice to or consent by Guarantor, and
without in any way releasing or impairing any liability or obligation of
Guarantor hereunder (a) waive compliance by Tenant with any of its Obligations
or covenants under the Lease or waive any default thereunder, or grant any other
indulgence with respect to the Lease, (b) modify, amend or change any provision
of the Lease, (c) grant extensions or renewals of the Lease or the Obligations,
or effect any release, compromise or settlement in connection therewith,
including any release of the liability of Tenant or any guarantor or other
person liable on the Obligations or any part thereof, (d) transfer its interest
in the premises covered by the Lease or its rights under this guaranty
(including specifically the anticipated assignment of certain of Landlord's
rights under this guaranty and the Lease to the Mississippi Business Finance
Corporation as issuer ("Issuer") of its $42,500,000 Taxable Industrial
Development Revenue Bonds, Series 1999 (Hewson/Desoto Partners, L.L.C. Project)
("Bonds") pursuant to an Assignment of Rents and Leases (the "Assignment"),
which will in turn be assigned by the Issuer to First Tennessee Bank National
Association as trustee ("Trustee") for the holders of the Bonds pursuant to a
Trust Indenture of even date herewith between Issuer and Trustee and the
conveyance and assignment by Landlord to Hewson/Phase II Partners, L.L.C. of the
premises and of its rights under the Lease, (e) consent to the assignment by
Tenant of its rights under the Lease, and (f) deal in all respects with Tenant
and the Obligations as if this guaranty were not in effect. Guarantor further
waives (1) acceptance or notices of acceptance of this guaranty, (2) notices to
Guarantor of any kind in any circumstances whatsoever, including, without
limitation, notice of dishonor and, except as otherwise herein provided, notice
of any default by Tenant under the Lease and all waivers or indulgences granted
by Landlord to Tenant under the Lease, and (3) diligence, presentment and suit
on the part of Landlord in the enforcement of any of the Obligations.
This guaranty shall be enforceable despite any exculpation from
liability granted to Tenant under the Lease, with the same force and effect as
if no such exculpation from liability had been granted to Tenant.
Guarantor agrees to pay the reasonable attorneys' fees and all other
costs and expenses incurred by Landlord in order to enforce its rights under
this guaranty.
In the event any payment by Tenant to Landlord is held to constitute a
preference under the bankruptcy laws, or if for any other reason Landlord is
required to refund such payment or pay the amount thereof to any other party,
such payment by Tenant to Landlord shall not constitute a release of Guarantor
from any liability hereunder, but Guarantor agrees to pay such amount to
Landlord upon demand.
2
<PAGE> 3
Until the Obligations have been paid in full, Guarantor shall not have
any right of subrogation unless such right is expressly granted in writing by
Landlord.
Landlord shall apply all payments received by it from Tenant, Guarantor
or any other guarantor under any other instrument, or realized by it from any
security as follows: first, to payment of Basic Rent then due and payable;
second, to payment of Additional Rent then due and payable; third, to payment of
any damages or other sums then payable on account of any default by Tenant;
fourth, to payment of Company Payments then due and payable; and fifth, to
payments of any Obligations then due and payable.
All the obligations of Guarantor arising hereunder shall be binding on
its successors and assigns. The word "person" as used herein includes natural
persons and entities of all kinds.
This guaranty shall be construed in accordance with and governed by the
laws of the State of Mississippi.
EXCEPT TO THE EXTENT PROHIBITED BY LAW, THE GUARANTOR WAIVES TRIAL BY
JURY IN CONNECTION WITH ANY ACTION OR PROCEEDING OF ANY NATURE WHATSOEVER
ARISING UNDER, OUT OF OR IN CONNECTION WITH THIS GUARANTY, WHETHER ARISING UNDER
STATUTE (INCLUDING ANY FEDERAL OR STATE CONSTITUTION) OR UNDER THE LAW OF
CONTRACT, TORT OR OTHERWISE AND INCLUDING, WITHOUT LIMITATION, ANY CHALLENGE TO
THE LEGALITY, VALIDITY, BINDING EFFECT OR ENFORCEABILITY OF THIS PARAGRAPH. THE
GUARANTOR CONSENTS TO THE JURISDICTION OF THE MISSISSIPPI COURTS AND CONSENTS TO
SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL.
3
<PAGE> 4
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. Guarantor acknowledges and agrees that Landlord does not intend to
assign its rights to Company Payments pursuant to the Assignment, and that upon
enforcement of its rights under this guaranty by Trustee, sums due hereunder in
respect of Company Payments shall not be paid to Trustee. Landlord acknowledges
and agrees that notwithstanding anything to the contrary herein contained,
Guarantor may assert any and all defenses of the Tenant arising under the Lease
to the payment of Company Payments, and any and all rights of set-off,
recoupment and counterclaim of the Tenant arising under the Lease with respect
to Company Payments to Guarantor's obligations with respect to Company Payments
hereunder.
Executed this ____ day of ____________________, 1999.
WILLIAMS-SONOMA, INC.
By: /s/ Jerry Owens
---------------------------------
Title: VP Operation
------------------------------
GUARANTOR
4
<PAGE> 1
EXHIBIT 13
Five-Year Selected Financial Data
<TABLE>
<CAPTION>
Dollars and amounts in thousands except percentages,
per share amounts and retail stores data Jan. 30 Jan. 31 Feb. 1 Feb. 2 Jan. 28
2000 1999 1998 1997(2) 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations
Net sales $1,383,993 $1,103,954 $ 933,257 $ 811,758 $ 644,653
Gross margin 571,027 453,012 376,481 318,579 234,318
Earnings before income taxes 110,721 90,745 70,022 39,197 4,373
Net earnings 68,100 54,897 41,347 22,742 2,536
Basic net earnings per share(1) 1.22 1.01 .81 .45 .05
Diluted net earnings per share(1) $ 1.16 $ .96 $ .75 $ .43 $ .05
Operating margin 8.2% 8.3% 7.9% 5.4% 1.4%
Financial Position
Working capital $ 194,093 $ 172,866 $ 134,524 $ 96,568 $ 39,076
Long-term debt and other liabilities 40,453 44,649 89,789 89,319 46,757
Total assets 738,942 576,245 477,229 404,417 319,096
Return on assets 10.6% 10.7% 10.2% 7.7% 2.6%
Shareholders' equity 383,309 302,030 193,198 146,038 121,653
Shareholders' equity per share (book value)(1) $ 6.80 $ 5.42 $ 3.74 $ 2.86 $ 2.39
Return on equity 19.9% 22.2% 24.4% 17.0% 2.1%
Debt-to-equity ratio 12.1% 16.9% 46.5% 61.2% 38.4%
Retail Stores
Store Count
Williams-Sonoma 185 163 152 145 139
Classic 57 65 78 89 97
Grand Cuisine 128 98 74 56 42
Pottery Barn 117 96 88 76 67
Classic 17 19 34 43 47
Design Studio 100 77 54 33 20
Hold Everything 32 33 32 32 32
Outlets 10 6 4 3 2
Number of stores at year-end 344 298 276 256 240
Comparable store sales growth 6.4% 5.0% 2.8% 4.6% 3.4%
Store selling area at year-end (sq. ft.) 1,497,382 1,217,047 1,015,778 839,112 690,256
Gross leasable area at year-end (sq. ft.) 2,308,488 1,887,560 1,553,137 1,264,531 1,023,003
Direct-to-Customer sales(3)
Catalogs mailed in year 191,810 163,067 154,475 136,489 131,800
Direct-to-customer sales growth 34.2% 15.7% 11.2% 19.1% 16.2%
Direct-to-customer sales as percent of total sales 37.2% 34.8% 35.5% 36.7% 38.8%
</TABLE>
(1) Per share amounts have been restated to reflect the 2-for-1 stock split in
May 1998.
(2) The year ended February 2, 1997 includes 53 weeks
(3) Direct-to-customer sales include catalog and Internet sales.
37
<PAGE> 2
Management's Discussion and Analysis
NET SALES
Net sales consists of the following components:
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
Dollars in thousands Jan. 30, 2000 % Total Jan. 31, 1999 % Total Feb. 1, 1998 % Total
------------- ------- ------------- ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Retail sales $ 869,078 62.8% $ 720,320 65.2% $601,738 64.5%
Direct-to-customer sales 514,915 37.2% 383,634 34.8% 331,519 35.5%
Total net sales $1,383,993 100.0% $1,103,954 100.0% $933,257 100.0%
</TABLE>
Net sales for Williams-Sonoma, Inc. and subsidiaries (the Company) for the 52
weeks ended January 30, 2000 (fiscal 1999) were $1,383,993,000 -- an increase of
$280,039,000 (25.4%) over net sales for the 52 weeks ended January 31, 1999
(fiscal 1998). Net sales for fiscal 1998 increased 18.3% over net sales for the
52 weeks ended February 1, 1998 (fiscal 1997). Direct-to-customer sales include
catalog and Internet sales.
Historically, the Company had not recorded sales returns on the accrual basis of
accounting because the difference between the cash and accrual basis of
accounting was not material to the results of operations. In fiscal 1999, the
Company began recording sales returns on the accrual basis of accounting.
Because the effect of this change was insignificant to fiscal 1998 and 1997, the
Company recorded the effect of this change in the current year. The impact of
recording this change in fiscal 1999 for current and prior years is a reduction
in net earnings of $3,206,000, or $0.05 diluted earnings per share.
RETAIL SALES
<TABLE>
<CAPTION>
Year Ended
Dollars in thousands Jan. 30, 2000 Jan. 31, 1999 Feb. 1, 1998
------------- ------------- ------------
<S> <C> <C> <C>
Retail sales $ 869,078 $ 720,320 $ 601,738
Retail sales growth percentage 20.7% 19.7% 17.2%
Comparable store sales growth 6.4% 5.0% 2.8%
Number of stores - beginning of year 298 276 256
Number of new stores 58 57
44
Number of closed stores 12 35
24
Number of stores - end of year 344 298 276
Store selling square footage at year-end (sq. ft.) 1,497,382 1,217,047 1,015,778
Store leased square footage at year end (sq. ft.) 2,308,488 1,887,560 1,553,137
</TABLE>
Retail sales for fiscal 1999 increased 20.7% over retail sales for fiscal 1998
primarily due to new store openings. During fiscal 1999, the Company opened 58
stores (30 large-format Williams-Sonoma, 23 large-format Pottery Barn, 1 Hold
Everything and 4 Outlets), and closed 12 smaller stores (8 Williams-Sonoma, 2
Pottery Barn and 2 Hold Everything). Pottery Barn accounted for 55.9% of the
growth in selling square footage from fiscal year-end 1998 to fiscal year-end
1999 and 58.2% of the growth in retail sales as measured for the same period.
For the comparable periods of fiscal 1998 and fiscal 1997, Pottery Barn
accounted for 65.5% of the growth in selling square footage and 60.2% of the
growth in retail sales. Total retail sales in fiscal 1998 increased 19.7% over
retail sales in fiscal 1997, principally due to a net increase of 22 stores.
Comparable stores are defined as those whose gross square feet did not change by
more than 20% in the previous 12 months and which have been open for at least 12
months. Comparable store sales are computed monthly for purposes of this
analysis. Comparable store sales grew 6.4% in fiscal 1999 and 5.0% in fiscal
1998.
38
<PAGE> 3
Same-store sales growth in Pottery Barn and Williams-Sonoma, the Company's
primary concepts, were strong in fiscal 1999, with both being above 5%.
The prototypical 1999 large-format stores range from 5,700 - 8,800 selling
square feet (8,800 - 15,000 gross square feet) for Pottery Barn stores and 2,700
- - 6,300 selling square feet (3,800 - 7,800 gross square feet) for
Williams-Sonoma. As of the end of fiscal 1999, 228 stores (128 Williams-Sonoma
and 100 Pottery Barn) were large-format, comprising 77.8% of the Company's total
selling square footage. Large-format stores accounted for 76% of retail sales in
fiscal 1999, as compared to 68% in fiscal 1998. In fiscal 2000, the Company
plans to increase leased square footage by approximately 22%. Planned store
openings in fiscal 2000 include the introduction of six Pottery Barn Kids retail
locations.
DIRECT-TO-CUSTOMER SALES
<TABLE>
<CAPTION>
Year Ended
January 30, 2000 January 31, 1999 February 1, 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
Catalog sales $504,967 $383,634 $331,519
Internet sales 9,948 -- --
Total direct-to-customer sales $514,915 $383,634 $331,519
Percent growth in direct-to-customer sales 34.2% 15.7% 11.2%
Percent growth in number of catalogs mailed 17.6% 5.6% 13.2%
</TABLE>
Direct-to-customer sales increased 34.2% in fiscal 1999 and 15.7% in fiscal
1998, as compared to the same periods of the respective prior years. The
increases in both years were primarily due to the strength of Pottery Barn.
Excluding the Gardeners Eden catalog, which was sold in May 1999, Pottery Barn
and Pottery Barn Kids accounted for 59.5% and 36.2%, respectively, of the growth
in fiscal 1999 catalog sales. The number of pages mailed and number of catalogs
mailed for Pottery Barn increased 45.4% and 19.8%, respectively, for fiscal 1999
as compared to fiscal 1998. Fiscal 1999 sales for Pottery Barn Kids, which
debuted in January 1999, were more than double the Company's original sales
plan. Management believes that the success of the Pottery Barn brand reflects
the Company's continuing investment in product design and quality, and the
consumer recognition achieved through its Pottery Barn catalogs and design
studio stores. The Company expects to introduce a Pottery Barn Bed & Bath
catalog in the second quarter of 2000.
Sales for Williams-Sonoma catalog increased 8.5% in fiscal 1999 as compared to
the same period of the prior year. The Company attributes this in part to the
redesign of the Williams-Sonoma catalog, which was introduced in the second
quarter of fiscal 1999.
In June 1999 the Company launched its Williams-Sonoma Internet Wedding and Gift
Registry Web site and in November 1999 the Company launched its Williams-Sonoma
e-commerce site. Combined sales from these sites was $9,948,000 in fiscal 1999.
Management expects to add a Pottery Barn e-commerce site in the summer of fiscal
2000.
The Company sold Gardeners Eden to Brookstone, Inc. to allow greater focus on
existing Company brands and the Internet. As a result of the sale, the Company
recognized a $3,962,000 pre-tax gain ($2,437,000 after-tax).
COST OF GOODS SOLD AND OCCUPANCY
Cost of goods sold and occupancy expenses expressed as a percent of net sales
for fiscal 1999 decreased 0.3 percentage points to 58.7% from 59.0% in fiscal
1998, principally due to a lower cost of merchandise. The Company believes this
is a direct result of its investment in product development, sourcing and
quality control personnel over the last several years. Occupancy expenses
expressed as a percent of net sales remained flat in fiscal 1999 as compared to
the same
39
<PAGE> 4
period of the prior year. A higher depreciation expense rate related to systems
development and the expansion of the Company's distribution facilities was
offset by improvement in other occupancy expense rates due to increased sales
volume.
In fiscal 1998, cost of goods sold and occupancy expenses expressed as a percent
of net sales declined 0.7 percentage points, primarily as a result of lower cost
of merchandise.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses expressed as a percent of net sales
increased 0.7 percentage points in fiscal 1999 to 33.4% from 32.7% in fiscal
1998, primarily due to an increased employment expense rate. The increased
employment rate was partially due to higher than planned direct-to-customer
demand in the fourth quarter, resulting in labor inefficiencies at the Company's
direct-to-customer distribution facility. The Company also continued to develop
the infrastructure required for the brand extensions and accelerated growth
expected in the coming year, which resulted in increased expenses.
In fiscal 1998, selling, general and administrative expenses as a percent of net
sales increased 0.3 percentage points, from 32.4% in fiscal 1997 to 32.7%. The
increase is principally due to higher employment costs in the stores and
distribution facility, partially offset by an improved advertising expense rate.
INTEREST EXPENSE
Net interest expense increased $1,082,000, from $1,363,000 in fiscal 1998 to
$2,445,000 in fiscal 1999, principally due to reduced short-term investment
income. Net interest expense in fiscal 1998 decreased $2,427,000 over net
interest expense in fiscal 1997, primarily as a result of the conversion of the
Company's $40,000,000 Convertible Notes.
INCOME TAXES
The Company's effective tax rate was 38.5% for fiscal 1999, as compared to 39.5%
in fiscal 1998 and 41.0% in fiscal 1997. These reductions in the effective tax
rate over the last several years reflect decreases in state taxes resulting from
revisions in the corporate structure which are being undertaken in order to
conform more closely to the Company's operations.
LIQUIDITY AND CAPITAL RESOURCES
For fiscal 1999, cash provided by operating activities was $105,721,000
representing an increase of $25,994,000 from the $79,727,000 of cash provided by
operating activities for fiscal 1998. The $79,727,000 of operating cash provided
in fiscal 1998 represented an increase of $3,854,000 as compared to fiscal 1997.
The fiscal 1999 increase in operating cash is primarily attributable to an
increase in net earnings. In addition, a significant increase in the level of
merchandise inventories was mostly offset by increases in accounts payable and
accrued expenses. An increase in inventory levels was planned to improve order
fulfillment rates in the direct-to-customer business. However, merchandise
inventory levels were above management's expectations at the end of fiscal 1999.
The Company anticipates that inventory levels will be back in line with
forecasted sales in the second half of fiscal 2000.
Net cash used in investing activities was $116,400,000 for fiscal 1999 as
compared to $76,728,000 in fiscal 1998 and $59,146,000 in fiscal 1997. Fiscal
1999 purchases of property and equipment were $120,209,000, which includes
approximately $70,442,000 for stores, $18,720,000 for warehouse and computer
equipment in a new leased distribution facility and $25,455,000 for systems
development, including the Internet. Net proceeds from the sale of the assets of
the Gardeners Eden catalog were $9,101,000. Additionally, there were net
proceeds from the sale of land of $2,091,000 and a $7,500,000 deposit on a new
corporate headquarters building, as discussed below. The fiscal 1998
expenditures were primarily for new stores and information systems. Gross
capital expenditures in fiscal 2000 are projected to be approximately
$230,000,000, including approximately $75,000,000 for the purchase of a new
corporate headquarters building, $80,000,000 for stores, and approximately
$30,000,000 for systems development, including the Internet.
For fiscal 1999, cash used in financing activities was $3,786,000, comprised
primarily of repayment of long-term debt and repurchases of the Company's common
stock, partially offset by proceeds from stock option exercises. For fiscal
40
<PAGE> 5
1998 and fiscal 1997, cash provided by financing activities was $7,095,000 and
$1,685,000, respectively, principally due to proceeds from the exercise of stock
options.
The Company's amended and restated syndicated line of credit agreement, which
expires on May 31, 2001, provides for $50,000,000 in cash advances, and contains
certain restrictive loan covenants, including minimum tangible net worth, a
minimum out-of-debt period, fixed charge coverage requirements and a prohibition
on payment of cash dividends. In addition, the Company has a $65,000,000 letter
of credit agreement with its lead bank, which was amended in February 2000 as
discussed below. As of January 30, 2000, the Company had no borrowings
outstanding under the line of credit facility and $39,361,000 in outstanding
letters of credit.
In February 2000 the Company purchased a 204,000 square foot office building in
San Francisco, California, for the purpose of consolidating certain headquarters
staff and to provide for future growth. The purchase price of $80,000,000 was
financed by amending the Company's existing letter of credit agreement to add a
$75,000,000 revolving line of credit at an interest rate of IBOR plus 0.875%.
The amended letter of credit agreement expires on May 31, 2001.
By the end of the third quarter of fiscal 2000, the Company expects to replace
its current line of credit and letter of credit agreements with a long-term
agreement in order to meet increased working capital needs associated with the
Company's growth plans.
In April 1998, the Company notified the holders of the Convertible Notes of the
Company's intention to redeem the Convertible Notes. Prior to such redemption,
substantially all of the Convertible Notes were converted into 3,064,000 shares
of the Company's common stock. As a result, the Company recorded a net increase
to paid-in capital of $39,004,000, representing $39,999,000 from the conversion
of the Convertible Notes, net of $995,000 of related unamortized debt issuance
costs.
In fiscal 1998, the Company leased a 750,000 square foot retail distribution
facility located in Olive Branch, Mississippi. The lease covers 22.5 years with
two optional five-year renewals. Rental payments for the primary term, which
commenced in July 1999, are payable at an average annual rate of $3,100,000. In
September 1999, the lease was amended to include a 261,000 square-foot
expansion. Rent for the expansion commenced in January 2000 and is estimated at
an average annual rate of $855,000.
In January 2000, the Company entered into an agreement to lease an additional
1,100,000 square-foot distribution facility in Olive Branch, Mississippi. The
lease covers a 23-year term with two optional five-year renewals. Rent will
commence upon completion of the facility, currently anticipated to be August
2000. Rental payments for the primary term are estimated to average $4,500,000
annually. These estimated rental payments are subject to adjustment upon
completion of construction and finalization of costs.
In March 2000, the Company repurchased 825,000 shares of its common stock for
approximately $18,500,000.
IMPACT OF INFLATION
The impact of inflation on results of operations has not been significant.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risks, which include changes in U.S. interest
rates and, to a lesser extent, foreign exchange rates. The Company does not
engage in financial transactions for trading or speculative purposes.
Interest Rate Risk.
The interest payable on the Company's bank line of credit is based on variable
interest rates and therefore affected by changes in market interest rates. If
interest rates on existing variable rate debt rose .85 basis points (a 10%
change from the bank's reference rate as of January 30, 2000), the Company's
results from operations and cash flows would not be materially affected. In
addition, the Company has fixed and variable income investments consisting of
cash equivalents and short-term investments, which are also affected by changes
in market interest rates. In February 2000 the Company incurred additional
variable rate debt in connection with the purchase of a corporate headquarters
building. The Company does not use derivative financial instruments in its
investment portfolio.
Foreign Currency Risks.
41
<PAGE> 6
The Company enters into a significant amount of purchase obligations outside of
the U.S. which are settled in U.S. Dollars and, therefore, has only minimal
exposure to foreign currency exchange risks. The Company does not hedge against
foreign currency risks and believes that foreign currency exchange risk is
immaterial.
SEASONALITY
The Company's business is subject to substantial seasonal variations in demand.
Historically, a significant portion of the Company's sales and net income have
been realized during the period from October through December, and levels of net
sales and net income have generally been significantly lower during the period
from January through September. The Company believes this is the general pattern
associated with the direct-to-customer and retail industries. In anticipation of
its peak season, the Company hires a substantial number of additional employees
in its retail stores and direct-to-customer processing and distribution areas,
and incurs significant fixed catalog production and mailing costs.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the matters discussed in
this Annual Report to Shareholders are forward-looking statements that are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those set forth in such forward-looking statements. Such
risks and uncertainties include, without limitation, the Company's ability to
continue to improve planning and control processes and other infrastructure
issues, the potential for construction and other delays in store openings, the
potential for changes in consumer spending patterns, consumer preferences and
overall economic conditions, the Company's dependence on foreign suppliers, and
increasing competition in the specialty retail business. Other factors that
could cause actual results to differ materially from those set forth in such
forward-looking statements include the risks and uncertainties detailed in the
Company's most recent annual report on Form 10-K and its other filings with the
Securities and Exchange Commission.
42
<PAGE> 7
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Year Ended
Dollars and shares in thousands, except per share amounts Jan. 30, 2000 Jan. 31, 1999 Feb. 1, 1998
------------- ------------- ------------
<S> <C> <C> <C>
Net sales $1,383,993 $1,103,954 $933,257
Cost of goods sold and occupancy expenses 812,966 650,942 556,776
Gross margin 571,027 453,012 376,481
Selling, general and administrative expenses 461,823 360,904 302,669
Gain on sale of assets 3,962 -- --
Interest expense - net 2,445 1,363 3,790
Earnings before income taxes 110,721 90,745 70,022
Income taxes 42,621 35,848 28,675
Net earnings $ 68,100 $ 54,897 $ 41,347
Basic earnings per share $ 1.22 $ 1.01 $ .81
Diluted earnings per share $ 1.16 $ .96 $ .75
Shares used in calculation of earnings per share:
Basic 55,817 54,267 51,297
Diluted 58,612 57,655 56,666
</TABLE>
See Notes to Consolidated Financial Statements.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock Retained
Dollars and shares in thousands Shares Amount Earnings Total
------ -------- -------- --------
<S> <C> <C> <C> <C>
Balance at February 2, 1997 51,088 $ 49,960 $ 96,078 $146,038
Exercise of stock options and tax
benefit from disqualifying dispositions 592 5,813 -- 5,813
Net earnings -- -- 41,347 41,347
Balance at February 1, 1998 51,680 55,773 137,425 193,198
Exercise of stock options and tax
benefit from disqualifying dispositions 1,028 14,931 -- 14,931
Conversion of Convertible Notes into common stock 3,064 39,004 -- 39,004
Net earnings -- -- 54,897 54,897
Balance at January 31, 1999 55,772 109,708 192,322 $302,030
Exercise of stock options and tax
benefit from disqualifying dispositions 773 17,917 -- 17,917
Repurchase of common stock (166) (4,738) -- (4,738)
Net earnings -- -- 68,100 68,100
Balance at January 30, 2000 56,379 $122,887 $260,422 $383,309
</TABLE>
See Notes to Consolidated Financial Statements.
43
<PAGE> 8
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Dollars in thousands, except per share amounts Jan. 30, 2000 Jan. 31, 1999
------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 92,843 $107,308
Accounts receivable (less allowance for doubtful
accounts of $250 and $230) 22,427 20,082
Merchandise inventories 257,342 173,160
Prepaid expenses and other assets 13,326 8,985
Prepaid catalog expenses 14,677 13,154
Deferred income taxes 9,265 4,077
Total current assets 409,880 326,766
Property and equipment - net 313,171 243,119
Investments and other assets (less accumulated
amortization of $649 and $544) 15,891 6,360
Total assets $738,942 $576,245
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $102,462 $ 70,964
Accrued expenses 33,971 24,003
Customer deposits 40,087 26,659
Income taxes payable 26,062 19,529
Current portion of long-term obligations 5,839 6,368
Other liabilities 7,366 6,377
Total current liabilities 215,787 153,900
Deferred lease credits 90,873 72,327
Long-term debt and other liabilities 40,453 44,649
Deferred income tax liability 8,520 3,339
Commitments and contingencies -- --
Shareholders' equity
Preferred stock, $.01 par value,
Authorized 7,500,000 shares, none issued -- --
Common stock, $.01 par value, authorized 126,562,500 shares,
issued and outstanding, 56,378,958 and 55,771,935 shares, respectively 122,887 109,708
Retained earnings 260,422 192,322
Total shareholders' equity 383,309 302,030
Total liabilities and shareholders' equity $738,942 $576,245
</TABLE>
See Notes to Consolidated Financial Statements.
44
<PAGE> 9
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended
Dollars in thousands Jan. 30, 2000 Jan. 31, 1999 Feb. 1, 1998
------------- ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Earnings $ 68,100 $ 54,897 $ 41,347
Adjustments to reconcile net earnings to net cash used
In operating activities:
Depreciation and amortization 45,211 33,021 28,871
Net (gain)loss on disposal of assets (931) 289 (132)
Amortization of deferred lease incentives (8,699) (6,605) (4,853)
Change in deferred income taxes (7) 503 3,238
Tax benefit from exercise of stock options 10,488 7,221 3,507
Other -- -- 3,022
Change in:
Accounts receivable (2,345) (4,844) (3,320)
Merchandise inventories (86,854) (40,709) (21,749)
Prepaid catalog expenses (3,152) 442 (1,671)
Prepaid expenses and other assets (4,342) (994) 683
Accounts payable 31,498 12,468 (5,913)
Accrued expenses and other liabilities 22,976 (1,050) 9,911
Deferred lease incentives 27,245 22,775 21,431
Income taxes payable 6,533 2,313 1,501
Net cash provided by operating activities 105,721 79,727 75,873
Cash flows from investing activities:
Purchase of property and equipment (120,209) (78,934) (59,299)
Proceeds from sale of property and equipment 11,192 2,206 --
Deposit on purchase of headquarters building (7,500) -- --
Other 117 -- 153
Net cash used in investing activities (116,400) (76,728) (59,146)
Cash flows from financing activities:
Borrowings under line of credit 158,480 53,825 41,000
Repayments under line of credit (158,480) (53,825) (41,000)
Repurchase of common stock (4,738) -- --
Repayments of long-term debt (6,477) (615) (621)
Proceeds from exercise of stock options 7,429 7,710 2,306
Net cash provided by (used in) financing activities (3,786) 7,095 1,685
Net increase (decrease) in cash and cash equivalents (14,465) 10,094 18,412
Cash and cash equivalents at beginning of period 107,308 97,214 78,802
Cash and cash equivalents at end of period $ 92,843 $ 107,308 $ 97,214
Non-cash financing transaction:
Conversion of Convertible Notes to common stock $ -- $ 39,004 $ --
</TABLE>
See Notes to Consolidated Financial Statements.
45
<PAGE> 10
Notes to Consolidated Financial Statements
Note A Summary of Significant Accounting Policies
Williams-Sonoma, Inc. and its subsidiaries (the Company) are specialty retailers
of products for the home. The retail segment sells its products through its
three retail concepts: Williams-Sonoma, Pottery Barn and Hold Everything. The
direct-to-customer segment sells similar products through its five direct-mail
catalogs, Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Hold Everything and
Chambers and the Internet (Williams-Sonoma only). Based on net sales in fiscal
1999, retail accounted for 62.8% of the business and direct-to-customer
accounted for 37.2%. The principal concepts in both retail and
direct-to-customer are Williams-Sonoma and Pottery Barn, which sell cookware
essentials and contemporary tableware and home furnishings, respectively. The
catalogs reach customers throughout the United States, while the three retail
businesses currently operate 344 stores in 39 states and Washington D.C.
Significant intercompany transactions and accounts have been eliminated.
Fiscal Year: The Company's fiscal year ends on the Sunday closest to
January 31. Fiscal years 1999, 1998 and 1997 ended on January 30, 2000, January
31, 1999 and February 1, 1998, respectively and each fiscal year consisted of 52
weeks.
Fair Value of Financial Instruments: The carrying value of cash and cash
equivalents, accounts receivable, investments, accounts payable and debt
approximates their estimated fair values.
Cash equivalents: Cash equivalents consist of short-term investments with
original maturities of 90 days or less.
Merchandise inventories: Merchandise inventories are stated at the lower
of cost (weighted-average method) or market. In fiscal 1999, approximately 49.4%
of the Company's payments for merchandise were to foreign vendors, most of which
are located in Europe and Asia.
Prepaid catalog expenses: Prepaid catalog expenses consist of the cost to
produce, print and distribute catalogs. Such costs are amortized over the
expected sales volume of each catalog. Typically, over 90% of the cost of a
catalog is amortized in the first four months. Catalog advertising expenses
amounted to $132,326,000, $108,425,000 and $94,169,000 in fiscal 1999, 1998 and
1997, respectively.
Property and equipment: Property and equipment are stated at cost.
Depreciation is computed using the straight-line method based upon the estimated
remaining useful lives of the assets ranging from 3 to 49 years. Amortization of
improvements to leased properties is based upon the shorter of the remaining
term of the applicable lease or the estimated useful lives of such assets.
Whenever events or changes in circumstances have indicated that the carrying
amount of its assets might not be recoverable, the Company, using its best
estimates based on reasonable and supportable assumptions and projections, has
reviewed for impairment the carrying value of long-lived assets.
Capitalized software costs: Capitalized computer software, included in
property and equipment, reflects costs related to internally developed or
purchased software that are capitalized and amortized on a straight line basis,
generally over a three to five year period. Internally developed software costs
are capitalized in accordance with Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use"
Investments and other assets: Investments and other assets include certain
investments, long-term deposits, lease rights and interests which are being
amortized over the life of the respective leases (5 to 49 years), and
debt-issuance costs which are amortized over the life of the debt.
Deferred lease incentives: Deferred lease incentives include construction
allowances received from landlords, which are amortized on a straight-line basis
over the initial lease term. For leases which contain fixed escalations of the
minimum annual lease payment during the original term of the lease, the Company
recognizes rental expense on a straight-line basis and records the difference
between rent expense and the amount currently payable as deferred lease
incentives.
Net Sales: Sales are recorded, net of estimated returns, when merchandise
is shipped from warehouses for catalog and Internet sales or purchased by the
customer at retail locations. Historically, the Company had not recorded sales
returns on the accrual basis of accounting because the difference between the
cash and accrual basis of accounting was not material to the results of
operations. In fiscal 1999, the Company began recording sales returns on the
accrual
46
<PAGE> 11
basis of accounting. Because the effect of this change was insignificant to
fiscal 1998 and 1997, the Company recorded the effect of this change in the
current year. The impact of recording this change in fiscal 1999 for current and
prior years is a reduction in net earnings of $3,206,000, or $0.05
diluted earnings per share.
Income taxes: Income taxes are accounted for using the asset and liability
method. Under this method, deferred income taxes arise from temporary
differences between the tax basis of assets and liabilities and their reported
amounts in the consolidated financial statements.
Earnings Per Share: Basic earnings per share is computed as net income
divided by the weighted average number of common shares outstanding for the
period. Diluted net earnings per share is computed based on the weighted average
number of common shares outstanding for the period, plus common stock
equivalents consisting of shares subject to stock options and shares from
assumed conversion of convertible debt. Earnings per share, number of shares and
stock options for all periods presented have been restated to reflect a 2-for-1
stock split in May 1998.
Stock-based awards: The Company accounts for stock-based awards to employees
using the intrinsic value method in accordance with Accounting Principles Board
Opinion (APB) NO. 25, "Accounting for Stock Issued to Employees." Accordingly,
no compensation expense has been recognized in the financial statements for
employee stock arrangements.
Comprehensive income: Comprehensive income consists of net income and
other comprehensive income (income, expenses, gains and losses that currently
bypass the income statement and are reported directly as a separate component of
equity). The Company's comprehensive income equals net income for all periods
presented.
New accounting pronouncement: Statement of Financial Accounting Standards
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities" establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for years beginning after June 15, 2000. The impact of adoption of
the standard by the Company has not yet been determined.
Management 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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassifications: Certain items in the prior years' consolidated financial
statements have been reclassified to conform to the fiscal 1999 presentation.
Note B Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
Dollars in thousands Jan. 30, 2000 Jan. 31, 1999
------------- -------------
<S> <C> <C>
Land and buildings $ 12,658 $ 12,689
Leasehold improvements 250,106 201,170
Fixtures and equipment 166,466 122,861
Software 44,125 23,625
Construction in progress 7,313 11,242
480,668 371,587
Less accumulated depreciation and amortization 167,497 128,468
Total property and equipment - net 313,171 243,119
</TABLE>
47
<PAGE> 12
Note C Borrowing Arrangements
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Dollars in thousands Jan. 30, 2000 Jan. 31, 1999
------------- -------------
<S> <C> <C>
Senior notes 34,286 40,000
Mortgage 6,279 6,404
Obligations under capital leases and other liabilities 5,727 4,613
46,292 51,017
Less current maturities 5,839 6,368
Total long-term debt $40,453 $44,649
</TABLE>
In April 1998, the Company notified the holders of the Convertible
Notes of the Company's intention to redeem the Convertible Notes. Prior to such
redemption, substantially all of the Convertible Notes were converted into
3,064,000 shares of the Company's common stock. As a result, the Company
recorded a net increase to paid-in capital of $39,004,000, representing
$39,999,000 from the conversion of the Convertible Notes, net of $995,000 of
related unamortized debt issuance costs.
The Company has $40,000,000 of Senior Notes which are due in August
2005, and interest is payable semi-annually at 7.2%. Annual principal payments
of $5,714,000 began in August 1999, and continue through August 2004. The
remaining principal amount is due and payable upon maturity. The Senior Notes
contain certain restrictive loan covenants, including minimum net-worth
requirements, fixed-charge coverage ratios and limitations on current and funded
debt.
The Company has an agreement with a bank for a $7,000,000 mortgage at
LIBOR plus 1.25%. The Company fixed the interest rate at 7.8% through an
interest-rate swap agreement with the bank. Interest and nominal principal
payments are due quarterly. Upon maturity of the mortgage in March 2001, a lump
sum payment of $6,154,000 will be due. The mortgage is secured by the corporate
headquarters building.
The Company's amended and restated syndicated line of credit
facility, which expires on May 31, 2001, provides for $50,000,000 in cash
advances, and contains certain restrictive loan covenants, including minimum
tangible net worth, a minimum out-of-debt period, fixed charge coverage
requirements and a prohibition on payment of cash dividends. In addition, the
Company has a $65,000,000 letter of credit agreement with its lead bank which
was amended in February 2000 as discussed below. As of January 30, 2000, the
Company had no borrowings outstanding under the line of credit facility and
$39,361,000 in outstanding letters of credit.
In February 2000 the Company purchased a 204,000 square foot office
building in San Francisco, California, for the purpose of consolidating certain
headquarters staff and to provide for future growth. The purchase price of
$80,000,000 was financed by amending the Company's existing letter of credit
agreement to add a $75,000,000 revolving line of credit. The amended agreement
expires on May 31, 2001.
By the end of the third quarter of fiscal 2000, the Company expects
to replace its current line of credit and letter of credit agreements with a
long-term agreement in order to meet increased working capital needs associated
with the Company's growth plans.
Interest expense was $4,221,000, $4,093,000 and $5,705,000 for fiscal
1999, 1998 and 1997, respectively. Interest paid was $4,390,000, $4,568,000 and
$5,828,000 for the same periods.
Accounts payable at January 30, 2000, and January 31, 1999, includes
cash overdrafts of $22,667,000 and $17,109,000, respectively, for checks issued
and not presented to the bank for payment.
As of January 30, 2000, the Company's debt (excluding the February
2000 borrowings), is scheduled to mature as follows: $5,839,000 in fiscal year
2000, $12,734,000 in fiscal year 2001, $5,852,000 in fiscal year 2002,
$5,763,000 in fiscal year 2003, $5,714,000 in fiscal year 2004 and $10,390,000
thereafter.
48
<PAGE> 13
Note D Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Dollars in thousands Year Ended
Jan. 30, 2000 Jan. 31, 1999 Feb. 1, 1998
------------- ------------- ------------
<S> <C> <C> <C>
Current payable
Federal $ 36,034 $29,182 $20,261
State 6,594 6,163 5,176
Total current 42,628 35,345 25,437
Deferred
Federal (12) 336 2,609
State 5 167 629
Total deferred (7) 503 3,238
Total provision $ 42,621 $35,848 $28,675
</TABLE>
Income taxes paid were $26,639,000, $26,371,000 and $20,702,000 for fiscal 1999,
1998 and 1997, respectively. A reconciliation of income taxes at the federal
statutory corporate rate to the effective rate is as follows:
<TABLE>
<CAPTION>
Year Ended
Jan. 30, 2000 Jan. 31, 1999 Feb. 1, 1998
------------- ------------- ------------
<S> <C> <C> <C>
Federal income taxes at the statutory rate 35.0% 35.0% 35.0%
State income tax rate, less federal benefit 3.5% 4.5% 5.5%
Other -- -- 0.5%
Total 38.5% 39.5% 41.0%
</TABLE>
Significant components of the Company's deferred tax accounts are as follow:
<TABLE>
<CAPTION>
Jan. 30, 2000 Jan. 31, 1999
------------- -------------
Dollars in thousands
Deferred Deferred Deferred Deferred
Tax Assets Tax Liabilities Tax Assets Tax Liabilities
---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C>
Current:
Compensation $ 4,087 -- $ 3,437 --
Inventory 7,419 -- 4,284 --
Accrued liabilities 3,669 $ 258 1,773 $ 182
Deferred catalog costs -- 5,652 -- 5,235
Total current 15,175 5,910 9,494 5,417
Non-current:
Depreciation -- 4,225 -- 1,648
Deferred rent 821 -- 773 --
Deferred lease incentives -- 5,116 -- 2,464
Capital loss -- -- 5,160 --
Valuation allowance -- -- (5,160) --
Total non-current 821 9,341 773 4,112
Total $15,996 $15,251 $10,267 $9,529
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax assets will not be realized. The Company had
established a valuation allowance as of January 31, 1999 due to the uncertainty
of realizing future tax benefits from its capital loss carryforwards. Due to the
expiration of the capital loss carryforward as of January 30, 2000, the deferred
tax asset and applicable valuation allowance have been eliminated.
Note E Leases
The Company leases store locations, its warehouses, corporate headquarters, call
centers and certain equipment under operating and capital leases for original
terms ranging from 3 to 23 years extending through 2022, except for one store
lease with a 49 year term extending though 2040. Most store leases require the
payment of minimum rentals against percentage rentals based on store sales.
Certain leases contain renewal options for periods of up to 20 years.
In fiscal 1998, the Company leased a 750,000 square foot retail
distribution facility located in Olive Branch, Mississippi. The lease covers
22.5 years with two optional five-year renewals. Rental payments for the primary
term, which commenced in July 1999, are payable at an average annual rate of
$3,100,000. In September 1999, the lease was amended to include a 261,000
square-foot expansion. Rent for the expansion commenced in January 2000 and is
estimated at an average annual rate of $855,000.
49
<PAGE> 14
In January 2000, the Company entered into an agreement to lease an
additional 1,100,000 square-foot distribution facility in Olive Branch,
Mississippi. The lease covers a 23-year term with two optional five-year
renewals. Rent will commence upon completion of the facility, currently
anticipated to be August 2000. Rental payments for the primary term are
estimated to average $4,500,000 annually. These estimated rental payments are
subject to adjustment upon completion of construction and finalization of costs.
The estimated rental payments have been included in the lease commitment table
below.
Total rental expense for all operating leases was as follows:
<TABLE>
<CAPTION>
Year Ended
Dollars in thousands Jan. 30, 2000 Jan. 31, 1999 Feb. 1, 1998
------------- ------------- ------------
<S> <C> <C> <C>
Minimum rent expense $50,580 $43,320 $35,431
Equipment rent 9,745 8,056 6,767
Contingent rent expense 10,046 6,138 5,584
Total rent expense $70,371 $57,514 $47,782
</TABLE>
The aggregate minimum annual rental payments under noncancelable operating
leases in effect at January 30, 2000 were as follows:
Dollars in thousands
<TABLE>
<S> <C>
Fiscal 2000 $ 78,161
Fiscal 2001 78,181
Fiscal 2002 75,048
Fiscal 2003 71,239
Fiscal 2004 67,768
Later years 459,401
Total minimum lease commitment $829,798
</TABLE>
Note F Related Party Lease Transactions -
Two of the Company's distribution facilities are leased from two partnerships
whose partners include directors, executive officers and/or significant
shareholders of the Company.
The Company has an agreement to lease a distribution facility which
expires in June, 2004. The lessor is a partnership comprised of W. Howard
Lester, chairman, chief executive officer and significant shareholder of the
Company and James A. McMahan, a director and significant shareholder of the
Company. The partnership financed the construction through the sale of
$6,300,000 principal amount of industrial development bonds due June 2008. The
partnership financed the construction of additional space through the sale of
$2,900,000 principal amount of industrial development bonds due 2010. The
Company's lease with the partnership was amended to include additional rent plus
interest on the new bonds for the same lease term as the original lease. Rental
payments consist of the basic annual rent of $618,000, plus interest on the
bonds (a floating rate equal to 55% of the prime rate of a designated bank),
applicable taxes, insurance and maintenance expenses.
The Company has an agreement to lease another distribution facility.
The lessor is a partnership that includes Messrs. Lester and McMahan. The lease
has an initial, non-cancelable term of 15 years ending in July 2006, with three
optional five year renewals. Rentals (including interest on the bonds, sinking
fund payments and fees) for the primary term are payable at an average rate of
$2,700,000 per year plus applicable taxes, insurance and maintenance expenses.
The partnership financed the construction of the distribution facility through
the sale of $10,550,000, 10.36% principal amount of industrial development bonds
due August 2015. The lessor financed the construction of an expansion through
the sale of $9,825,000, 9.01% principal amount of industrial development bonds
due in August 2015.
50
<PAGE> 15
After the option periods, the Company is obligated to renew each
lease annually so long as the bonds which financed the specific projects remain
outstanding.
Note G Earnings Per Share
The following is a reconciliation of net earnings and the number of shares used
in the basic and diluted earnings per share computations:
<TABLE>
<CAPTION>
Net Weighted Per-Share
Earnings Average Shares Amount
-------- -------------- ---------
<S> <C> <C> <C>
1999
Basic $68,100 55,817 $1.22
Effect of dilutive stock options -- 2,795
Diluted 68,100 58,612 1.16
1998
Basic 54,897 54,267 1.01
Effect of assumed conversion of Convertible Notes 212 1,021
Effect of dilutive stock options -- 2,367
Diluted 55,109 57,655 .96
1997
Basic 41,347 51,297 .81
Effect of assumed conversion of Convertible Notes 1,239 3,065
Effect of dilutive stock options -- 2,304
Diluted $42,586 56,666 $ .75
</TABLE>
Options for which the exercise price was greater than the average market price
of common shares for the period were not included in the computation of diluted
earnings per share. These options to purchase shares were 25,000 in fiscal 1999,
9,500 in fiscal 1998 and 15,000 in fiscal 1997.
In March 2000, the Company repurchased 825,000 shares of its common stock for
approximately $18,500,000.
Note H: Stock Options
The Company's 1993 Stock Option Plan (the 1993 Plan), as amended, provides for
grants of incentive and non-qualified stock options up to an aggregate of
8,500,000 shares. All incentive stock option grants made under the 1993 Plan
have a maximum term of ten years, except those issued to 10% shareholders which
have a term of five years. The exercise price of all incentive stock options is
100% of the fair market value of the stock at the option grant date or 110% for
a 10% shareholder.
In fiscal 1998, the Board of Directors adopted a resolution to reprice all
outstanding stock options with an exercise price greater than $19.31, the market
price at the time of the resolution. Accordingly, approximately 1,225,000
options were repriced to $19.31.
The following table reflects the aggregate activity under the Company's stock
option plans, including the repricing:
51
<PAGE> 16
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
--------- ----------------
<S> <C> <C>
Balance at February 2, 1997 3,960,318 7.12
Granted (weighted average fair value of $9.70) 1,364,700 15.01
Exercised 593,382 3.77
Canceled 155,526 9.70
Balance at February 1, 1998 4,576,110 9.82
Granted (weighted average fair value of $13.53) 2,558,350 22.57
Exercised 1,028,630 29.29
Canceled 1,558,848 23.06
Balance at January 31, 1999 4,546,982 13.00
Granted (weighted average fair value of $19.39) 1,836,075 30.63
Exercised 772,063 9.59
Canceled 591,350 16.12
Balance at January 30, 2000 5,019,644 19.61
Exercisable, February 1, 1998 1,939,598 6.71
Exercisable, January 31, 1999 1,752,638 8.22
Exercisable, January 30, 2000 1,773,015 11.17
</TABLE>
Options to purchase 1,938,107 shares were available for grant on January 30,
2000.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" (SFAS No. 123), requires the disclosure of pro forma
net earnings and earnings per share as if the Company had adopted the fair value
method. Under SFAS No. 123, the fair value of stock-based awards to employees is
calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock option awards. These models also require subjective assumptions,
including future stock price volatility and expected time to exercise, which
greatly affect the calculated values.
The Company's calculations are based on a single option valuation
approach and forfeitures are recognized as they occur. However, the impact of
outstanding unvested stock options granted prior to 1995 has been excluded from
the pro forma calculation, accordingly, the 1997, 1998 and 1999 pro forma
adjustments are not indicative of future periods pro forma adjustments. Had
compensation cost been determined consistent with SFAS No. 123, the Company's
net earnings and earnings per share would have been changed to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
Year Ended
Dollars in thousands, except per share amounts Jan. 30, 2000 Jan. 31, 1999 Feb. 1, 1998
------------- ------------- ------------
<S> <C> <C> <C>
Net earnings
As reported $68,100 $54,897 $41,347
Pro forma 59,606 -- --
Pro forma - basic(1) -- 50,058 38,639
Pro forma - diluted(1) -- 50,270 39,878
Basic earnings per share
As reported 1.22 1.01 .81
Pro forma 1.07 .92 .76
Diluted earnings per share
As reported 1.16 .96 .75
Pro forma $ 1.03 $ .88 $ .71
</TABLE>
(1) Within fiscal 1998 and fiscal 1997, pro forma basic and diluted net
earnings are different due to the assumed conversion of the Convertible
Notes, which were converted in April 1998.
The fair value of each option grant was estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
Year Ended
Jan. 30, 2000 Jan. 31, 1999 Feb. 1, 1998
------------- ------------- ------------
<S> <C> <C> <C>
Dividend yield -- -- --
Volatility 59.6% 60.0% 61.0%
Risk-free interest 5.2% 5.6% 6.5%
Expected term (years) 6.7 5.7 6.0
</TABLE>
52
<PAGE> 17
The following table summarizes information about stock options outstanding at
January 30, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Weighted Weighted
Number Average Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Jan. 30, 2000 Life (Years) Price at Jan. 30, 2000 Price
------------- ------------ -------- ---------------- --------
<S> <C> <C> <C> <C> <C>
Range of exercise prices
$ 2.56 - $ 9.41 1,005,389 4.1 $ 6.18 850,149 $ 5.65
$10.44 - $18.19 1,081,390 6.5 13.58 581,328 13.16
$18.38 - $19.31 1,038,040 8.2 19.23 261,338 19.19
$21.56 - $29.00 1,040,075 9.1 28.17 12,300 21.73
$29.75 - $53.75 854,750 9.5 33.06 67,900 30.62
$ 2.56 - $53.75 5,019,644 7.4 $19.61 1,773,015 $11.17
</TABLE>
Note I Associate Stock-Incentive Plan -
The Company has a defined contribution retirement plan, the "Williams
Sonoma, Inc. Associate Stock-Incentive Plan", (the Plan) for eligible employees,
which is intended to be qualified under Internal Revenue Code Sections 401(a)
and 401(k). The plan permits eligible employees to make salary deferral
contributions in accordance with Internal Revenue Code Section 401(k). Each
participant may choose to have his/her salary deferral contributions and
earnings thereon invested in one or more of a money market reserve fund, a
balanced mutual fund, or a fund investing in stock of the Company. All amounts
contributed by the Company are invested in stock of the Company. The Company's
matching contribution is 100% of the first 6% of a participant's pay (4% for
highly-compensated individuals) which the participant elects to contribute as
salary deferral contributions. The Company's contributions were $2,822,000 in
fiscal 1999, $2,098,000 in fiscal 1998 and $1,331,147 in fiscal 1997.
Note J Commitments and Contingencies
The Company is party to various legal proceedings arising from normal business
activities. Management believes that the resolution of these matters will not
have an adverse material effect on the Company's financial statements taken as a
whole.
Note K Segment Reporting
Williams-Sonoma, Inc. has two reportable segments: retail and
direct-to-customer. The retail segment sells products for the home through its
three retail concepts: Williams-Sonoma, Pottery Barn and Hold Everything. The
direct-to-customer segment sells similar products through its five direct-mail
catalogs: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Hold
Everything and Chambers, and the Internet (Williams-Sonoma only).
These reportable segments are strategic business units that offer similar
home-centered products. They are managed separately because the business units
utilize two distinct distribution and marketing strategies.
The accounting policies of the segments, where applicable, are the same as those
described in the summary of significant accounting policies. The Company uses
earnings before unallocated corporate overhead, interest and taxes to evaluate
segment profitability. Unallocated assets include corporate cash and
equivalents, the net book value of corporate facilities and related information
systems, deferred tax amounts and other corporate long-lived assets.
In 1999 the Company sold its Gardeners Eden catalog business to Brookstone, Inc.
As a result of this sale, the Company recorded a $3,962,000 pre-tax gain, which
is reflected in direct-to-customer earnings before income taxes in the segment
information below.
53
<PAGE> 18
SEGMENT INFORMATION
<TABLE>
<CAPTION>
Dollars in thousands
Direct-to-
Retail Customer Unallocated Total
------ ---------- ----------- -----
<S> <C> <C> <C> <C>
1999
Revenues $869,078 $514,915 $ -- $1,383,993
Depreciation and amortization expense 30,951 7,719 6,451 45,211
Earnings before income taxes 114,526 70,218 (74,023) 110,721
Assets 425,375 160,076 153,491 738,942
Capital expenditures 89,994 17,770 12,445 120,209
1998
Revenues 720,320 383,634 -- 1,103,954
Depreciation and amortization expense 24,054 3,954 5,013 33,021
Earnings before income taxes 88,670 58,045 (55,970) 90,745
Assets 335,882 91,585 148,778 576,245
Capital expenditures 65,374 8,930 4,630 78,934
1997
Revenues 601,738 331,519 -- 933,257
Depreciation and amortization expense 20,146 3,489 5,236 28,871
Earnings before income taxes 77,151 41,916 (49,045) 70,022
Assets 272,610 73,742 130,877 477,229
Capital expenditures $ 50,077 $ 3,468 $ 5,754 $ 59,299
</TABLE>
54
<PAGE> 19
Independent Auditors' Report
To the Board of Directors and the Shareholders of Williams-Sonoma, Inc.:
We have audited the accompanying consolidated balance sheets of
Williams-Sonoma, Inc. and subsidiaries (the Company) as of January 30, 2000 and
January 31, 1999, and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the three fiscal years in the
period ending January 30, 2000. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Williams-Sonoma, Inc. and
subsidiaries as of January 30, 2000, and January 31, 1999, and the results of
its operations and its cash flows for each of the three fiscal years in the
period ending January 30, 2000, in conformity with generally accepted accounting
principles.
San Francisco, California
March 24, 2000
55
<PAGE> 20
Quarterly Financial Information
(Unaudited)
<TABLE>
<CAPTION>
Fiscal 1999 Quarter Ended
Dollars in thousands, except per share amounts May 2 August 1(2) October 31 January 30
----- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales $258,676 $264,000 $324,148 $537,169
Gross margin 98,783 97,922 131,400 242,923
Earnings before income taxes 5,410 11,436 15,271 78,604
Net earnings 3,274 6,918 9,239 48,669
Basic earnings per share .06 .12 .17 .87
Diluted earnings per share .06 .12 .16 .82
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998 Quarter Ended
Dollars in thousands, except per share amounts May 3(1) August 2 November 1 January 31
------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $206,210 $215,262 $241,298 $441,184
Gross margin 78,286 80,014 94,804 199,907
Earnings before income taxes 3,639 6,515 8,470 72,121
Net earnings 2,147 3,844 4,998 43,908
Basic earnings per share .04 .07 .09 .79
Diluted earnings per share .04 .07 .09 .75
</TABLE>
(1) These per share amounts have been restated to reflect the 2-for-1 stock
split in May 1998.
(2) Earnings include a $2,437,000 after-tax gain for the sale of the assets of
Gardeners Eden.
Common Stock
Williams-Sonoma's common stock is traded on the New York Stock Exchange
(NYSE) under the symbol WSM. The following table sets forth the high and low
closing prices on the NYSE for the periods indicated.
On March 22, 2000, there were 563 shareholders of record, excluding
shareholders whose stock is held in nominee or street name by brokers. The
Company's present policy is to retain its earnings to finance future growth, and
it does not intend to pay cash dividends. In addition, the Company's bank line
of credit prohibits payment of cash dividends (see Note C of Notes to
Consolidated Financial Statements).
<TABLE>
<CAPTION>
Fiscal 1999 High Low
---- ---
<S> <C> <C>
1st Quarter 38 1/2 25 5/8
2nd Quarter 38 3/8 26
3rd Quarter 53 3/4 34 5/16
4th Quarter 59 3/16 31 1/8
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998 High Low
---- ---
<S> <C> <C>
1st Quarter(1) 31 1/2 20 3/8
2nd Quarter 36 1/2 25 7/8
3rd Quarter 31 7/8 17 9/16
4th Quarter 40 5/16 27 9/16
</TABLE>
(1) These amounts have been restated to reflect the 2-for-1 stock split in May
1998.
56
<PAGE> 1
EXHIBIT 21
Exhibit 21: Subsidiaries of Williams-Sonoma, Inc.
As of Fiscal Year End January 30, 2000
<TABLE>
<CAPTION>
Subsidiary Name State/Date of Incorporation
- --------------- ---------------------------
<S> <C>
Williams-Sonoma Stores, Inc. California, October 11, 1984
Pottery Barn, Inc. California, August 18, 1986
Hold Everything, Inc. California, September 30, 1986
Chambers Catalog Company, Inc. California, February 1, 1995
Pottery Barn Kids, Inc. California, June 23, 1998
Williams-Sonoma Stores LLC Delaware, July 29, 1998
Williams-Sonoma Retail Services, Inc. California, January 25, 1999
Williams-Sonoma Direct, Inc. California, August 9, 1999
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 2-89801, No. 33-28490, No. 33-33693, No. 33-60787, No. 33-65656,
No. 333-48247, No. 333-39811, No. 333-58833 and No. 333-82205 on Form S-8,
and No. 333-07851 on Form S-3 of Williams-Sonoma, Inc. of our reports dated
March 24, 2000, appearing in and incorporated by reference in the Annual Report
on Form 10-K of Williams-Sonoma, Inc. for the fiscal year ended January 30,
2000.
/s/ Deloitte & Touche LLP
San Francisco, California
April 26, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED JANUARY 30, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-2000
<PERIOD-END> JAN-30-2000
<CASH> 92,843
<SECURITIES> 0
<RECEIVABLES> 22,427
<ALLOWANCES> 0
<INVENTORY> 257,342
<CURRENT-ASSETS> 409,880
<PP&E> 480,668
<DEPRECIATION> 167,497
<TOTAL-ASSETS> 738,942
<CURRENT-LIABILITIES> 215,787
<BONDS> 35,466
0
0
<COMMON> 11,466
<OTHER-SE> 371,843
<TOTAL-LIABILITY-AND-EQUITY> 738,942
<SALES> 1,383,993
<TOTAL-REVENUES> 1,383,993
<CGS> 812,966
<TOTAL-COSTS> 1,274,789
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,445
<INCOME-PRETAX> 110,721
<INCOME-TAX> 42,621
<INCOME-CONTINUING> 68,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,100
<EPS-BASIC> 1.22<F1>
<EPS-DILUTED> 1.16
<FN>
<F1>
</FN>
</TABLE>
