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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD
FROM _________ TO _________
COMMISSION FILE NUMBER 000-21250
THE GYMBOREE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2615258
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 AIRPORT BOULEVARD, SUITE 200, BURLINGAME, CALIFORNIA 94010-1912
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650)-579-0600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of each exchange on which registered
COMMON STOCK, $0.001 PAR VALUE NASDAQ NATIONAL MARKET
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), 12 months and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of 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. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 31, 1998, was approximately $624,492,064, based upon
the last price reported for such date on the NASDAQ National Market.
As of March 31, 1998, 24,134,959 shares of the registrant's common stock
were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended January 31, 1998 (hereinafter referred to as the "1997 Annual
Report to Stockholders") are incorporated into Parts II and IV.
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 20, 1998 (hereinafter referred to as the "1997
Proxy Statement") are incorporated into Part III.
The exhibit index is located on page 20.
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THE GYMBOREE CORPORATION
TABLE OF CONTENTS
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PAGE
NUMBER
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<S> <C> <C>
PART I
ITEM 1. BUSINESS................................................................................ 4
ITEM 2. PROPERTIES.............................................................................. 13
ITEM 3. LEGAL PROCEEDINGS....................................................................... 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................... 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................... 14
ITEM 6. SELECTED FINANCIAL DATA................................................................. 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS... 14
ITEM 7A QUANTITATIVE AND QUALITATIVE EXPOSURES ON MARKET RISK................................... 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................. 15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES... 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................................... 15
ITEM 11. EXECUTIVE COMPENSATION.................................................................. 15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................... 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................... 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.................................. 15
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PART 1
ITEM 1. BUSINESS
The Gymboree Corporation and its wholly-owned subsidiaries ("Gymboree"
or the "Company") is a leading specialty retailer of high quality apparel and
accessories for children ages newborn to seven years old. The Company operates a
chain of stores, primarily in regional shopping malls and in selected suburban
and urban locations. As of February 28, 1998, the Company operated 443 stores in
the United States, Canada and Europe. Under the GYMBOREE(R) brand name, the
Company designs and contract manufactures children's active-wear for sale
exclusively by Gymboree. The Company's apparel is characterized by bright
colors, bold fun prints with complex embroidery, comfort, functionality and
durability. The Company also offers directed parent-child developmental play
programs for children ages newborn to five years old at approximately 390
franchised locations and 12 Company-operated locations.
This annual report on Form 10-K contains certain forward-looking
statements reflecting the Company's current expectations. Such forward looking
statements include statements regarding the Company's plans to open additional
stores in the U.S., Canada and Europe, the Company's plans to relocate some
higher volume stores and the Company's plans to continue offering franchises for
sales in new market areas in the future. There can be no assurance that the
Company's actual future performance will meet such expectations. Factors that
could cause future performance to vary from current expectations include, but
are not limited to, the factors discussed in the "Business" section, and in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of the 1997 Annual Report to Stockholders incorporated by
reference in this annual report on Form 10-K.
BUSINESS STRATEGY
The Company's business strategy consists of the following principal
elements:
- HIGH QUALITY APPAREL. Gymboree strives to offer its customers high
quality apparel with an excellent price/value relationship. The
Company designs its merchandise to be comfortable, functional, safe
and durable by placing particular emphasis on high quality fabrics
and detailed garment construction.
- BRAND NAME RECOGNITION. Gymboree has developed a clearly
recognizable brand image through its distinctive design,
merchandising and retailing. Customers associate Gymboree with high
quality, brightly colored children's clothing sold in an attractive
and friendly environment.
- INTEGRATED OPERATIONS: DESIGN, CONTRACT PRODUCTION AND RETAILING.
The Company believes that the vertical integration of its operations
enables it to identify and respond to market trends, maintain
rigorous product quality standards and closely monitor the
distribution of its products.
- EXCLUSIVE DISTRIBUTION CHANNEL. Gymboree products are sold
exclusively through its retail stores and, to a very limited extent,
through its play programs. During fiscal 1997, the Company began the
Gymboree Gift Center at www.gymboree.com. This web site allows
customers to purchase selected items primarily intended for gifts.
- MERCHANDISE FOCUS. Gymboree apparel is designed, contract
manufactured and merchandised by line. Merchandise is displayed on
the walls of each Gymboree store in a manner designed to enhance
visual appeal and maximize customer convenience by enabling
customers to select among an assortment of coordinated items and
accessories. The Company offers a broad range of styles, themes and
colors, as opposed to relying primarily on certain key items. To
maintain the freshness of its merchandise, the Company typically
introduces between 30 and 40 new lines of boy's, girl's and infant's
apparel each year.
- RESPONSIVE CUSTOMER SERVICE. Customer service and satisfaction are
defining features of the Gymboree corporate culture. Assisting
customers in merchandise selection and outfit coordination is the
top priority of Gymboree team members. The Company believes that
this customer service in combination with its merchandise encourages
multiple item purchases per customer.
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STORE EXPANSION STRATEGY
Gymboree seeks to significantly increase its current store base by
opening new stores in major metropolitan malls, certain secondary regional malls
and in select downtown street locations that satisfy its demographic and
financial return criteria. In fiscal 1997, the Company opened 82 new stores and
relocated / expanded 16 existing stores. Over the past year, the average size of
new stores has increased to approximately 1,800 square feet. The Company plans
to open 80 to 100 new stores in the U.S. during fiscal 1998, 8 of which were
opened as of February 28, 1998. As indicated in the table below, the Company has
achieved increasing geographic diversification within the United States in
recent years. The Company continued its international expansion by opening six
additional retail stores in Canada and its first six stores in Europe during
fiscal 1997. During fiscal 1998, the Company is planning to open approximately
10 to 15 new stores in Europe and 8 to 12 additional stores in Canada. The
Company's ability to continue to expand successfully in the future will depend
on a number of factors, including the availability of suitable store locations,
the negotiation of acceptable lease terms, the Company's financial resources and
the ability to control the operational aspects of this growth.
Gymboree expanded from two stores in California in 1986 to 426 stores in
48 states and the District of Columbia, 11 stores in Canada and 6 stores in
Europe, as of February 28, 1998. The following table sets forth, by geographic
region, the net number of stores opened and closed during each of the periods
indicated:
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FISCAL YEAR
-------------------------------------------------------------------
PRIOR TO
1992 1992 1993 1994 1995 1996 1997 1998(1) TOTAL
-------- ---- ---- ---- ---- ---- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
East 35 8 9 14 14 17 23 4 124
Midwest 7 10 9 12 19 25 10 2 94
South 6 9 10 23 26 12 29 1 116
West 32 5 12 8 11 16 7 1 92
Europe 0 0 0 0 0 0 6 0 6
Canada 0 0 0 0 0 5 6 0 11
-- -- -- -- -- -- -- -- ---
Total 80 32 40 57 70 75 81 8 443
== == == == == == == == ===
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(1) Includes stores opened through February 28, 1998.
SITE SELECTION. In selecting new store sites, the Company typically
looks for high traffic locations ranging from 1,500 to 3,000 square feet in
regional malls, specialty centers and suburban main street locations. The
Company's real estate department conducts extensive analysis of potential store
sites and bases its selection on the performance of other specialty retail
tenants, size of the market and demographics of the surrounding area. In
evaluating a store location, placement of the store relative to retail traffic
patterns and the number of young children in the trade area are important
considerations. Although the Company's current stores are located primarily in
regional malls, the Company has opened stores in alternative locations. In
addition, the Company plans to relocate some higher volume stores within the
same malls where it anticipates receiving a competitive advantage. There can be
no assurance that the Company will continue to be successful in either obtaining
favorable sites for its new stores or negotiating favorable lease terms for such
sites.
NEW STORE ECONOMICS. The Company's average cost for leasehold
improvements, furniture and fixtures for stores opened in fiscal 1997 was
approximately $226,000 per store, before landlord construction allowances. In
addition, working capital requirements on these same stores, consisting almost
entirely of inventory purchases, averaged approximately $67,000 per store.
Average preopening costs per store, which are expensed as incurred, were $15,000
during fiscal 1997. Gymboree stores have typically achieved profitability at the
store operating level within their first full quarter of operation, although
there can be no assurance that new stores will continue to achieve the same
levels of profitability.
PRODUCTS AND MERCHANDISING
Gymboree's merchandise has evolved significantly over time. Prior to
1988, the Company offered unisex apparel for children ages six months to five
years and a selection of non-apparel products, including toys. Since 1989, the
Company has broadened its apparel merchandise assortment by developing separate
boy's and girl's lines for children ages eighteen months to seven years,
distinguishing assortments for appropriate ages: CradleGym(R) - newborn to 12
months; GymBaby(R) - newborn to three years and GymKids(R) - for children ages
three to seven years. Gymboree currently offers customers an assortment of high
quality, comfortable, fully coordinated
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lines of GYMBOREE(R) brand apparel and accessories, consisting primarily of
pants, tops, overalls, dresses, socks, hats, crib shoes, swimwear, sweaters,
outerwear, underwear and, to a limited extent, shoes. The Company's
merchandising strategy focuses upon the quality and design of its apparel
products and planned introduction of new product lines. The Company strives to
create a distinctive look for its merchandise to enhance brand recognition and
stimulate repeat purchases. Gymboree apparel is designed, contract manufactured,
purchased and merchandised by line on a seasonal basis.
Each of the Company's stores features 11 major merchandising lines per
year and a seasonal line of swimwear. Each merchandise line generally consists
of approximately 60 clothing items, encompassing matching tops and bottoms, with
similar color pallets, patterns and designs. Additionally, each line features a
wide selection of related accessories that complement the apparel, such as
coordinated socks, hats, crib shoes and hair accessories. In order to maintain
the freshness of its merchandise, the Company regularly updates its assortments
by rotating each line on an eleven to thirteen week selling cycle. Although
Gymboree generally is unable to reorder items after a line has been purchased,
the Company carefully monitors its rotation schedule and has the ability to move
up the set-up of new lines based on selling demand. Merchandise in each line
generally flows through a structured markdown process.
Gymboree's customized wall systems display each merchandise line as a
separate coordinated group. This presentation maximizes customer convenience in
selection, creates a visually attractive selling environment and assists team
members in the process of wardrobing, which, the Company believes, stimulates
multiple purchases of matching items. Boy's and girl's lines are generally
displayed on opposite walls and accessories are located adjacent to the
coordinated line. A typical store offers approximately 200 to 250 styles of
apparel and approximately 100 to 120 accessories and other non-apparel items.
FASHION TRENDS AND CHANGING CONSUMER PREFERENCES
The Company's sales and profitability depend upon the continued demand
by its customers for its apparel and accessories. The Company believes that its
success depends in large part upon its ability to anticipate, gauge and respond
in a timely manner to changing consumer demands and fashion trends and upon the
appeal of the Company's products. There can be no assurance that the demand for
the Company's apparel or accessories will not decline or that the Company will
be able to anticipate, gauge and respond to changes in fashion trends. If demand
for the Company's apparel and accessories were to decline or if the Company were
to misjudge fashion trends, the Company's business, financial condition and
results of operations could be materially adversely affected.
DESIGN, SOURCING AND CONTRACT MANUFACTURING
Gymboree apparel is characterized by colorful and distinctive designs,
quality fabrications and construction and an excellent price/value relationship.
The Company sources soft, comfortable and durable fabrics. The Company's
merchandising and design team creates unique color combinations and original
patterns for these fabrics and emphasizes functional features such as grow cuffs
which allow for extended use of tops, pants and overalls as children grow.
The Company manages the production of Gymboree apparel from the initial
product concept, through color and pattern design, fabric development, sample
approval, testing and garment manufacturing. The Company believes that the
vertical integration of its operations and the coordinated efforts of its
merchandising and design, production, and financial planning teams enable
Gymboree to create its distinctive offerings. The merchandising and design team
determines the styles for merchandise based on an evaluation of current style
trends as well as a review of the popularity of the prior year's products. This
team works closely with the Company's financial planning team to select garment
styles for each season. In conjunction with foreign buying agents, the
production team arranges fabric sourcing and garment production while the
quality team ensures that the final products satisfy Gymboree's detailed
specifications and strict quality and safety standards. The process from initial
product concept/design to finished product requires approximately ten months.
Fabric and production commitments are made approximately six months before
receipt of the finished garments at the Company's distribution center.
Throughout the design process, Gymboree's financial planning team
prepares financial plans for each line of clothing on an item-by-item basis.
Certain proposed items in a line may be revised or replaced as a result of this
team's financial analysis. This team also monitors inventories on a daily basis,
prepares seasonal plans and develops unit production forecasts.
The majority of Gymboree apparel is manufactured to its specifications
by approximately 60 independent manufacturers. Key countries in the Far East
include China, Indonesia, Philippines, Thailand, Sri Lanka and Saipan. Other
manufacturing regions include Honduras, Israel and the United States. The
Company sources its fabric raw material from approximately 15 vendors. In fiscal
1997,
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the Company's product assortment was approximately 70% knit and 30% woven. In
fiscal 1997, one vendor accounted for approximately 70% of the Company's cotton
knit fabric purchases. Although the Company believes that other sources could be
identified to satisfy its requirements for its cotton knit fabrics, the loss of
this vendor, or a delay in obtaining fabric from this vendor, could have a
material adverse effect on the Company's business and operating results. The
Company does business with all of its vendors in United States currency and has
not historically experienced any material difficulties as a result of any
foreign political, economic or social instabilities, although there can be no
assurance that it will not experience such difficulties in the future. The
Company has no long-term contracts with suppliers and typically transacts
business on an order-by-order basis.
Gymboree's quality control team arranges with independent testing
laboratories to test fabrics prior to cutting against established performance
standards for quality and safety. During the prototype sampling stage and
following manufacturing, the technical teams subject the merchandise to tests
which ensure that construction, workmanship and fit, as well as the style and
appearance of the garments, satisfy Gymboree's stringent specifications.
Subsequently, the production and quality control teams review the garment test
and bulk production inspection results to verify that the quality is consistent
with Gymboree's high standards. Gymboree generally does not purchase its
finished apparel products until manufacturing has been completed and the
products have been approved by independent testing labs and Gymboree's quality
control and production teams.
DEPENDENCE ON NEW PRODUCTS.
The Company's continued growth and success will depend in large part on
its ability to successfully develop and introduce new products that are
perceived to represent an improvement in style, functionality or value compared
to products available in the marketplace. Failure to regularly develop and
introduce new products successfully could materially and adversely impact the
Company's future growth and profitability. In addition, the Company intends to
introduce certain new products and concepts, such as a new "Kid Cool" retail
concept that will offer apparel, footwear and accessories to boys and girl ages
six through 12, that may represent a significant shift in concept, design and
target market demographics from its traditional products. These new products may
have short life cycles, thereby requiring more frequent product introductions
than the Company's traditional product lines. Furthermore, these products and
the introduction of more products could dilute the Company's image as a leading
supplier of childrens' apparel in the 0-7 age range and lead to a reduced demand
for its existing products.
RELIANCE ON FOREIGN AND UNAFFILIATED MANUFACTURERS.
The Company currently relies on unaffiliated manufacturers to produce
substantially all of its products. The Company has no long-term contracts with
its manufacturing sources, and it competes with other companies for production
facilities and import quota capacity. Gymboree's products are currently
manufactured to its specifications by independent factories located primarily in
the Far East, principally in China, Indonesia, Philippines, Thailand, Sri Lanka
and Saipan. In the event any of the Company's key manufacturers were unable or
unwilling to continue to manufacture the Company's products, the Company would
have to rely on other current manufacturing sources or identify and qualify new
unaffiliated manufacturers. In such event, there can be no assurance that the
Company would be able to qualify such manufacturers for existing or new products
in a timely manner or that such manufacturers would allocate sufficient capacity
to the Company in order to meet its requirements. Any significant delay in the
Company's ability to obtain adequate supplies of its products from its current
or alternative sources, would materially and adversely affect the Company's
business and results of operations. Although the Company believes that it has
good relationships with its unaffiliated principal mills and manufacturing
sources and maintains good control with respect to product specifications and
quality, the Company's future success will depend in large measure upon its
ability to maintain such relationships both directly and through its independent
agents, and there can be no assurance that these manufacturers will continue to
produce products that are consistent with the Company's standards. In this
regard, the Company has occasionally received, and may in the future continue to
receive, shipments of product from unaffiliated manufacturers that fail to
conform to the Company's quality control standards. In such event, unless the
Company is able to obtain replacement products in a timely manner, the Company
risks the loss of revenue resulting from the sale of such products and related
increased administrative and shipping costs. The failure of any key unaffiliated
manufacturer to supply products that conform to the Company's standards could
materially and adversely affect the Company's results of operations and its
reputation in the marketplace.
Although the Company believes that it has good relationships with its
principal manufacturing sources, the Company's future success is substantially
dependent upon its ability to maintain such relationships. If the Company
experiences significant increased demand, which cannot be assured, or if an
existing unaffiliated manufacturer needs to be replaced, the Company will need
to significantly expand its manufacturing capacity, both from current and new
manufacturing sources. There can be no assurance that
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such additional manufacturing capacity will be available when required on terms
that are acceptable to the Company. In addition, approximately 70% of the
Company's cotton knit fabric, representing a substantial majority of total
fabric purchased, is currently sourced from a single vendor. The loss of this
vendor, or a delay in obtaining fabrics from this vendor, could have a material
adverse effect on the Company's operating results.
The Company's business is subject to the risks generally associated with
doing business abroad, such as foreign governmental regulations, political
unrest, disruptions or delays in shipments and changes in economic conditions in
countries in which the Company's mills and contract manufacturing sources are
located. Gymboree cannot predict the effect that such factors will have on its
business arrangements with foreign mills and contract manufacturing sources. If
any such factors were to render the conduct of business in a particular country
undesirable or impractical, or if the Company's current foreign contract
manufacturing sources or mills were to cease doing business with the Company for
any reason, the Company's business and operating results could be adversely
affected. The Company's business is also subject to the risks associated with
the imposition of additional United States legislation and regulations relating
to imported apparel products, including quotas, duties, taxes and other charges
or restrictions on imported apparel. The Company cannot predict whether
additional United States quotas, duties, taxes or other charges or restrictions
will be imposed upon the importation of its products in the future, or what
effect any such actions would have on its business, financial condition and
results of operations.
STORE OPERATIONS
The primary objective of store management is to maximize sales by
providing superior customer service. Store management is principally responsible
for sales training and implementing performance evaluation systems. In a
continuing effort to minimize team members' time away from customers,
operational procedures are reviewed and streamlined by the store operations
group prior to implementation at the store level. This group is also responsible
for field and store staffing, daily sales motivation and central office to store
communications. The Company's merchandising group also interacts with store
personnel and is responsible for developing merchandise presentation plans that
can be effectively implemented at the store level.
Store operations are managed through 46 operating districts, divided
into six geographic regions for the U.S. and Canada, while Europe is comprised
of one district and one region. Each District Team Leader is responsible for
approximately eight stores. Stores are typically staffed with a team leader, two
assistant team leaders and several team members which varies with store volume.
During the holiday selling season, team member levels are substantially
increased to accommodate peak traffic levels.
A number of Gymboree programs offer incentives to both team members and
team leaders. Team members receive compensation primarily in the form of hourly
wages. Incentive structures are designed to maximize team members' average sales
transactions. Scheduling procedures allocate payroll hours to team members based
upon sales performance rather than simple availability. Other programs provide
bonuses or cash awards to high achieving team members during contest periods, or
to all team members of a store based on store sales achievements. District Team
Leaders and Regional Team Directors receive compensation in the form of
salaries, performance-based bonuses and stock options.
CUSTOMER SERVICE
Customer service is a defining feature of the Gymboree corporate
culture. The Company believes that knowledgeable and enthusiastic team members
have a direct impact on profitability. Gymboree places great emphasis on the
selling function through consistent and on-going training and evaluation systems
which are initiated by the central office and administered by field management
at all levels. The Company's store and District Team Leaders and Regional Team
Director spend the majority of their work week on Gymboree selling floors,
providing leadership by coaching the sales staff and evaluating their team's
abilities to sell products using the Company supported MATCHmatics(R) sales
approach.
Customer service is a high priority for Gymboree store team members.
Gymboree's customer focus is emphasized in recruiting and, as measured by sales,
is the primary component in the on-going evaluation of team members. The Company
minimizes team members' time spent on administrative functions by centrally
determining merchandise display and replenishment, markdowns and basic labor
scheduling. By emphasizing friendliness, product knowledge and personal
attention, the Company believes that Gymboree has established a reputation for
excellent customer service.
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STORE ENVIRONMENT
Gymboree stores are designed to create an energetic and enjoyable
shopping environment. The brightly lit stores and glass store fronts allow the
colorful in-store environments to attract customers from the outside. Stores are
constructed in an open manner which enables customers to see virtually all
product offerings from the store's entrance.
Customers enter the stores under natural wood arches supported by giant
children's building blocks. The dramatic archways and Gymboree's logo attract
the customer's attention, even from a distance. The Company believes that the
playful image created by its store fronts is carried into the stores and
maintained through product presentation and enthusiastic store personnel.
Inside the store, merchandise is displayed on store walls by coordinated
apparel lines, which allows easy accessibility and provides ample floor space
for customers to maneuver strollers within the store. While parents shop,
children are encouraged to play with small toys throughout the store and to
enjoy Gymboree videos which run continuously throughout the day.
MARKETING AND PROMOTION
Whereas Gymboree previously relied on "grass roots"--type word of mouth
advertising, Gymboree significantly changed in the strategic marketing of the
Gymboree brand during 1997. An increased focus on synergy between the Stores and
Play Programs helped fuel more successful direct marketing, advertising and
promotional efforts. Cross promotional activities with other large strategically
appropriate brands like Procter and Gamble's Cheer Laundry Detergent were also
successfully launched. A renewed emphasis on Gymboree's core equities--Color and
Quality spurred our new tag line: "Quality Clothes. Colorful Kids."
NEW BUSINESS OPPORTUNITIES
The Company launched its web site at www.gymboree.com during fiscal
1997. This web site, also known as the Gymboree Gift Center, is designed to
assist customers as a one-stop shopping connection for Gymboree gift sets for
children between the ages of 0 and 7 years old.
MERCHANDISE DISTRIBUTION
The Company's merchandise is shipped primarily via conference ocean
carriers from the foreign ports to the Port of Oakland, California for the U.S.
merchandise, Toronto, Ontario, Canada and Shannon, Ireland for its Canadian and
European merchandise, respectively. Contract manufacturers or vendors are
required to complete manufacturing and deliver merchandise to the Company's
foreign consolidator within a designated ship window. This ship window ensures
timely delivery of the purchase orders to the Company's U.S., Canadian and Irish
distribution centers using cost-effective ocean transportation. A multi-country
consolidation program was established in 1997 which enables the Company to bring
full ocean containers into those countries, thereby minimizing shipping cost per
unit.
The Company's transportation department coordinates the transportation
of all purchase orders and monitors the timeliness of these shipments. Customs
clearance takes place at the Port of Oakland for its U.S. goods, Toronto for
its Canadian goods, and Shannon, Ireland for its European goods. Samples of
all items are reviewed by U.S. or local Customs prior to the actual shipment of
merchandise from the Far East. This process reduces the customs clearance time
and speeds the delivery of the merchandise to the Company.
The Company's U.S. merchandise is received, checked, processed and
distributed through its U.S. distribution center in Dixon, California. This
distribution center is a Company-owned 300,000 square foot facility which opened
in January, 1998. New lines are received at the distribution center "just in
time." The merchandise is processed, packed by store and delivered on a targeted
in-store date approximately once per month. Merchandise is then replenished on a
weekly basis based on store sell-through. Merchandise for distribution to Europe
is shipped directly from the factory to a 26,000 square foot leased facility in
Shannon, Ireland where it is processed for delivery to the European stores.
Merchandise destined for Canadian stores is shipped directly from a factory or
from the U.S. distribution center to a third-party distribution center in
Toronto, Canada.
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Outbound transportation is coordinated through the Company's
transportation department. Store orders are consolidated by region and shipped
via truckload carriers into the downstream terminals of regional
less-than-truckload carriers. This allows the Company to build full trailers,
thereby reducing the delivery cost per unit.
MANAGEMENT INFORMATION SYSTEMS
Gymboree's information systems provide integration of store,
merchandising, distribution and financial systems. These systems operate on Unix
and NT platforms. Sales are updated daily in the merchandise reporting systems
by polling sales information from each store's in-store system. In 1997, the
Company successfully rolled out a new in-store system consisting of PC registers
that provide price look-up, scanning of bar-coded tickets, credit authorization
and check verification. Through automated two-way electronic communication with
each store, sales information, payroll hours and store initiated transfers are
uploaded to the host system, and price changes are downloaded to the in-store
system. The communication with the stores also enables the Company to receive
physical inventory details. Information obtained from daily polling results in
automatic merchandise replenishment in response to the specific unit inventory
requirements of each store. The Company evaluates information obtained through
daily reporting to implement merchandising decisions regarding markdowns and
allocation of merchandise.
The Company has developed a comprehensive plan designed to ensure that
all mission critical systems are year 2000 compliant. This plan includes testing
of all business functions with vendors and suppliers. Many existing computer
systems and applications, and other control devices, only use two digits to
identify a year in the date field, without considering the impact of the
upcoming change in the millennium. As a result, such systems and applications
could fail or create erroneous results unless corrected so that they can process
data related to the year 2000. The Company relies on its systems, applications
and devices in operating and monitoring all major aspects of its business,
including financial systems (such as general ledger, accounts payable and
payroll modules), customer services, infrastructure, embedded computer chips,
networks and telecommunications equipment. The Company also relies, directly and
indirectly, on external systems of business enterprises such as suppliers,
creditors, financial organizations and of governmental entities, both domestic
and international, for accurate exchange of data. The Company's current estimate
is that the costs associated with the year 2000 issue, and the consequences of
incomplete or untimely resolution of the year 2000 issue, will not have a
material effect on the Company's financial statements for any given year.
However, despite the Company's efforts to address the year 2000 impact on its
internal systems, the Company has not fully identified such impact or whether it
can resolve it without disruption of its business and without incurring
significant expense. In addition, even if the internal systems of the Company
are not materially affected by the year 2000 issue, the Company could be
affected through disruption in the operation of the enterprises with which the
Company interacts.
The Company believes that its information systems are essential in
achieving its growth plans and maintaining a competitive industry position. The
Company is committed to utilizing technology as a competitive advantage.
PLAY PROGRAMS
As of January 31, 1998, the Company's Play Programs included 12
Company-operated play centers in California and approximately 390
franchisee-operated play centers, of which approximately 80% of the play centers
are located in the United States, and the remaining 20% are located in foreign
countries, including Australia, Canada, Colombia, France, Indonesia, Korea,
Mexico, Singapore and Taiwan. The Company believes that its Play Programs
provide attractive cross-marketing opportunities for Gymboree stores and further
strengthen the GYMBOREE(R) brand name recognition with retail customers. See
"--Marketing and Promotion."
The Gymboree Play Programs are designed to enhance early childhood
development through fun-filled sensory and motor activities, which engage
children through sight, touch, sound and movement. Motor skill development is
stimulated through physical play and exercise in an exciting, safe environment
which includes colorful, developmentally appropriate play equipment. The
Gymboree Play Program generally involves weekly 45-minute classes offered
throughout the year. Classes are designed to interest and challenge children
through activities that are tailored to enhance mental and physical development
as well as to provide opportunities for socializing. In addition to sliding,
climbing, jumping and running, classes include music, structured play
activities, games and a finale featuring a colorful parachute, songs, bubbles
and GYMBO(R) the clown. Parents are generally present at play classes and
participate in the activities with their children.
10
<PAGE> 11
Gymboree classes are offered to children ages newborn to six years old.
CradleGym (newborn through 3 months) focuses on parent support and discussion
topics, as well as parent-child interaction through music, gentle movement and
at-home play ideas. In BabyGym classes (3-12 months) babies and parents enjoy
exploring the play equipment, socializing and music as well as an opportunity to
exchange parenting information. The Gymboree I, II and III programs (1-2 1/2
years) focus on developing balance, refining motor skills and building toddler
confidence and self-esteem through activities and play. In GymGrad classes (2
1/2-4 years), children are introduced to pre-sport skills and non-competitive
games which are designed to promote physical development and social skills such
as cooperation. GymKids (4-5 years) is a parent-optional program which
emphasizes drama, creative movement and pre-sport skills.
The Company's standard franchise agreement provides for an initial term
of ten years. Upon signing the franchise agreement, each domestic and Canadian
franchisee currently pays an initial fee ranging from $35,000 for the
franchisee's first play center location to $20,000 for the fourth (and each
subsequent) location, and each international (excluding Canadian) franchisee
pays an initial fee ranging from $75,000 to $500,000. The franchises are
renewable for one additional ten year term, and Gymboree receives no fee upon
the renewal of the franchise from domestic franchisees. The Company receives a
royalty of 6% of each domestic franchisee's gross receipts from operations, and
a fee of approximately $10,500 upon the transfer of a franchise from one
domestic franchisee to another. Currently, Gymboree supplies the franchisees
with program aids, equipment and consumer products and conducts initial and
ongoing training programs.
Gymboree will continue offering franchises for sale in new market areas
in fiscal 1998.
TRADEMARKS AND SERVICE MARKS
The Company is the owner in the United States of the trademark and
service mark "GYMBOREE", and the trademarks "GYMBO" and "GYMBABY", among others.
These marks and certain other of the Company's marks are registered in the
United States Patent and Trademark Office, and the mark "GYMBOREE" is also
registered, or is the subject of pending applications, in approximately 45
foreign countries. Each federal registration is renewable indefinitely if the
mark is still in use at the time of renewal. The Company's rights in the
"GYMBOREE" mark and other marks are a significant part of the Company's
business. Accordingly, the Company intends to maintain its mark and the related
registrations. The Company is not aware of any material claims of infringement
or other challenges to the Company's right to use its mark in the United States.
The Company believes that its registered and common law trademarks have
significant value and that some of its trademarks are instrumental to its
ability to create and sustain demand for and market its products. The Company
believes that there are no currently pending challenges to the use or
registration of any of the Company's registered trademarks. There can be no
assurance, however, that the Company's trademarks do not or will not violate the
proprietary rights of others, that they would be upheld if challenged or that
the Company would, in such an event, not be prevented from using its trademarks,
any of which could have a material adverse effect on the Company and its
business. In addition, the Company could incur substantial costs to defend legal
actions taken against it relating to the Company's use of trademarks, which
could have a material adverse effect on the Company's results of operations and
financial condition.
From time to time, the Company discovers products in the marketplace
that are counterfeit reproductions of the Company's products or that otherwise
infringe upon trademark rights held by the Company. If the Company is
unsuccessful in challenging a third party's products on the basis of trademark
infringement, continued sales of such product by that or any other third party
could adversely impact the Gymboree brand, result in the shift of consumer
preferences away from the Company and generally have a material adverse effect
on the Company's results of operations and financial condition.
COMPETITION
The children's apparel segment of the specialty retail business is
highly competitive. The Company competes on a national level with GapKids (a
part of The Gap, Inc.) and certain leading department stores as well as certain
discount retail chains such as Kids 'R' Us (a division of Toys 'R' Us, Inc.).
Gymboree also competes with a wide variety of local and regional specialty
stores and with certain other retail chains. Many of these competitors are
larger and have substantially greater financial, marketing and other resources
than the Company, and there can be no assurance that the Company will be able to
compete successfully with them in the future. The principal competitive factors
in the Company's market include selection, price, style, quality and variety of
merchandise, price, brand-name recognition, customer service, convenience and
the location and attractiveness of the stores. Increased competition
11
<PAGE> 12
may reduce sales and gross margins, increase operating expenses and decrease
profit margins. There can be no assurance that the Company will be able to
compete successfully in the future.
ECONOMIC CONDITIONS; DEPENDENCE ON CONSUMER SPENDING
The Company's financial performance is sensitive to changes in overall
economic conditions, which have an impact on consumer spending trends. The
success of the Company's operations depends upon a number of factors relating to
consumer spending, including future economic conditions affecting disposable
consumer income such as employment, business conditions, interest rates and tax
rates. There can be no assurance that consumer spending will not decline in
response to economic conditions, thereby adversely affecting the Company's
growth, net sales and profitability. The Company's stores are located primarily
in enclosed regional malls. Consequently, the ability of the Company to sustain
its level of sales is dependent in part on a high volume of mall traffic. Mall
traffic may be adversely affected by, among other things, economic downturns,
the closing of anchor department stores or changes in consumer preferences, all
of which are beyond the Company's control. Shifts in consumer discretionary
spending to other products or a general reduction in the level of such spending
could also adversely affect the Company. There can be no assurance that the
foregoing factors will not adversely affect the Company's business, financial
condition and results of operations in the future.
DEPENDENCE ON KEY PERSONNEL; NEW MANAGEMENT.
In the past year, the Company has made significant changes in its executive
officers and management team. These new senior personnel, among others, have
extensive national retail and wholesale experience and have effected certain
product development, merchandising, marketing and operational strategy changes.
There can be no assurance that the Company will successfully assimilate these
new executives and make strategic modifications to certain of its past operating
policies in a timely and efficient manner. Furthermore, the continued success of
the Company is largely dependent on the personal efforts and abilities of its
senior management and certain other key personnel and on the Company's ability
to retain current management and to attract and retain qualified personnel in
the future. The loss of certain key employees or the Company's inability to
retain other qualified employees could have a material adverse effect on the
Company's results of operations and financial condition.
NEED FOR ADDITIONAL CAPITAL.
Various elements of the Company's business and growth strategies, including
its plans to broaden existing product lines, introduce new products and a 2nd
retail concept, may require the Company to maintain higher inventory levels
which could require additional capital. There can be no assurance that funds
will be available to the Company on terms satisfactory to the Company when
needed. To the extent that the Company raises additional equity capital, it
could have a dilutive effect on existing stockholders.
TEAM MEMBERS
As of January 31, 1998, the Company had over 6,500 team members. In addition,
a significant number of seasonal team members are hired during each holiday
selling season. None of the Company's team members is represented by a labor
union, and the Company believes that its relationship with its team members is
good.
EXECUTIVE OFFICERS
The following table sets forth information regarding the officers of the
Company.
<TABLE>
<S> <C> <C>
Stuart G. Moldaw 71 Chairman of the Board of Directors
Gary White 46 President, Chief Executive Officer and Director
Edward Loseman 48 Senior Vice President, Sourcing and Logistics
Mindy C. Meads 46 Senior Vice President, General Merchandise
Manager
Kenneth F. Meyers 36 Senior Vice President, Human Resources
Mary P. Shepard 43 Senior Vice President, Chief Financial Officer
R. Mark Systrad 44 Senior Vice President, Operations
</TABLE>
12
<PAGE> 13
Stuart G. Moldaw has been the Chairman of the Board of Directors of the
Company since January 1994, and has been a director of the Company since May
1982. Mr. Moldaw previously served as Chairman of the Board of Directors of the
Company from January 1990 through January 1993. From 1980 through February 1990,
Mr. Moldaw served as a general partner of U.S. Venture Partners and he is
currently a special venture partner of U.S. Venture Partners. From February 1987
through January 1988, Mr. Moldaw served as Chief Executive Officer of Ross
Stores, Inc., an off-price retailer, and is currently a director and Chairman
Emeritus of Ross Stores, Inc.
Gary White has been the Company's President and Chief Executive Officer,
and a director since February 1997, and served as a Senior Vice President and
the Chief Operating Officer of the Company from January 1996 until February
1997. Prior to joining the Company, Mr. White served as Executive Vice President
of Mervyn's, a division of Dayton Hudson Corporation. Mr. White was employed by
Dayton Hudson Corporation since 1976 having served in various positions as an
officer with Dayton Hudson Corporation from January 1988 to January 1996.
Mr. Edward A Loseman joined the Company as Senior Vice President of
Sourcing and Logistics in January 1998. Prior to joining the Company, Mr.
Loseman was Vice President of Sourcing for GUESS? Inc. since 1996, and Vice
President of Manufacturing Services for Polo/Ralph Lauren from 1992 to 1996.
Ms. Mindy C. Meads joined the Company as Senior Vice President and
General Merchandise Manager in March 1996. Previously, Ms. Meads was with Lands'
End, Inc. as Senior Vice President of Merchandising & Design since 1994 and Vice
President, General Merchandise Manager from 1991 until 1994.
Mr. Kenneth F. Meyers joined the Company as Senior Vice President, Human
Resources in March, 1997. Previously, Mr. Meyers was Vice President, Human
Resources at Walt Disney Imagineering from 1995 to 1997. Prior to Disney, Mr.
Meyers held executive positions in human resources at United Technologies
Corporation.
Ms. Mary P. Shepard has been the Senior Vice President and Chief
Financial Officer since February, 1998. Previously, Ms. Shepard was with Safeway
Inc., as Vice President and Chief Financial Officer, Supply Operations since
1993 and Controller, Supply Operations from 1991 until 1993.
Mr. R. Mark Syrstad joined Gymboree as Senior Vice President, Operations
in March, 1997. Prior to joining Gymboree, Mr. Syrstad was the Principal of
Matryx Management Group, a retailing and consumer products industry consultancy
firm. From 1989 to 1993, Mr. Syrstad was President and Chief Executive Officer
of Motherhood Maternity. From 1987 to 1989, Mr. Syrstad was President of the
Stride-Rite Children's Group, a division of the Stride-Rite Corporation.
ITEM 2. PROPERTIES
As of January 1998, the Company's corporate campus was located in two
office buildings in Burlingame, California, which the Company occupies under
leases expiring between 1999 and 2003.
During 1997, the Company completed construction on a new 300,000 square
foot distribution center on 15 acres located in Dixon, California. The Company
has an option agreement on contiguous land for an additional six acres. The
Company is phasing out of the Hayward distribution center during the first
quarter of 1998. The Company leases a distribution center in Shannon, Ireland
for its European operations, and utilizes a third party-owned and operated
distribution center in Toronto, Ontario, Canada for its Canadian operations.
At January 31, 1998, the Company's 435 stores included an aggregate of
approximately 684,000 square feet of space. The Company's stores are all leased,
typically for a ten-year term. In most cases, the Company pays a minimum rent
plus a percentage rent based on the store's net sales in excess of a certain
threshold. Substantially all of the leases require the Company to pay insurance,
utilities, real estate taxes and repair and maintenance expenses. See Note 3 of
Notes to Consolidated Financial Statements in the Company's Annual Report to
Stockholders, filed as Exhibit 13.1 to this Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
None.
13
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market under
the symbol "GYMB". The following table sets forth the quarterly high and low
sale prices per share, as reported on the NASDAQ National Market.
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
---------------------- ---------------------- ----------------------
HIGH LOW HIGH LOW HIGH LOW
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $27.250 $21.750 $29.000 $17.750 $28.250 $21.500
Second Quarter 27.625 22.625 35.750 20.125 32.375 20.875
Third Quarter 27.750 23.875 33.675 23.375 37.250 18.750
Fourth Quarter 28.875 23.875 34.750 21.250 25.125 14.375
</TABLE>
As of March 31, 1998, the number of holders of record of the Company's
Common Stock was approximately 750. The Company has never declared or paid cash
dividends on its Common Stock and anticipates that all future earnings will be
retained for development of its business. The payment of any future dividends
will be at the discretion of the Company's Board of Directors and will depend
upon, among other things, future earnings, capital requirements, the financial
condition of the Company and general business conditions.
During fiscal 1997, the Board of Directors authorized common stock
repurchase programs whereby the Company could buy back up to $60 million of its
Common Stock. As of January 31, 1998, 1,922,000 shares were repurchased by the
Company for an aggregate amount of $49,646,000.
In March 1997, the Company adopted a Stockholder Rights Plan (the
"Plan"). The Plan entails a dividend of one right for each outstanding share of
the Company's Common Stock. The rights are represented by and traded with the
Company's Common Stock. There are no separate certificates or market for the
rights. The rights do not become exercisable or trade separately from the Common
Stock unless 17.5% or more of the Common Stock of the Company has been acquired,
or after a tender or exchange offer is made for 17.5% or greater ownership of
the Company's Common Stock. Should the rights become exercisable, each right
will entitle the holder thereof to buy 1/1,000th of a share of the Company's
Series A Preferred Stock at an exercise price of $125. Each 1/1,000th of a share
of the new Series A Preferred Stock will essentially be the economic equivalent
of one share of Common Stock. Under certain circumstances, the rights "flip-in"
and become rights to buy the Company's Common Stock at a 50% discount. Under
certain other circumstances, the rights "flip-over" and become rights to buy an
acquirer's Common Stock at a 50% discount.
The rights may be redeemed by the Company for $0.01 per right at any
time on or prior to the fifth day (or a later date as determined by the Board of
Directors) following the first public announcement by the Company of the
acquisition of beneficial ownership of 17.5% of the Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by
reference to page 10 of the 1997 Annual Report to Stockholders filed as Exhibit
13.1 to this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated herein by
reference to pages 11 through 13 of the 1997 Annual Report to Stockholders filed
as Exhibit 13.1 to this Annual Report on Form 10-K and Annual Report to
Stockholders filed as Exhibit 13.1 to this Annual Report on Form 10-K.
14
<PAGE> 15
ITEM 7A. QUANTITATIVE AND QUALITATIVE EXPOSURES ON MARKET RISK
Not yet applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by
reference to pages 14 through 23 of the 1997 Annual Report to Stockholders filed
as Exhibit 13.1 to this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by
reference to the sections entitled "Election of Directors - Nominees" and
"Additional Information-Compliance with Section 16(a) of the Securities Exchange
Act" in the 1997 Proxy Statement. See also Item 1.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the sections entitled "Election of Directors - Compensation of
Directors" and "Additional Information - Executive Compensation" in the 1997
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the section entitled "Additional Information - Security Ownership"
in the 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the sections entitled "Additional Information - Employment
Contracts and Termination of Employment and Change-in-Control Arrangements","
Additional Information - Compensation Committee Interlocks and Insider
Participation" and "Transactions with Related Parties" in the 1997 Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS
The following documents are incorporated by reference to pages 14
through 23 of the 1997 Annual Report to Stockholders filed as Exhibit 13.1 to
this Annual Report on Form 10-K.
Consolidated Balance Sheets as of January 31, 1998 and February 2, 1997
Consolidated Statements of Income for each of the three fiscal years
ended January 31, 1998
Consolidated Statements of Cash Flows for the three fiscal years ended
January 31, 1998
Consolidated Statements of Stockholders' Equity for the three fiscal
years ended January 31, 1998
Notes to Consolidated Financial Statements
Independent Auditors' Report
15
<PAGE> 16
(A)(2) FINANCIAL STATEMENT SCHEDULES
Financial statement schedules have been omitted because they are not required
or are not applicable.
(A)(3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Registrant.(1)
3.2 Bylaws of Registrant.(1)
4.1 Article III of Restated Certificate of Incorporation of
Registrant (See Exhibits 3.1).(1)
4.2 Form of certificate for Common Stock.(1)
10.1 1983 Incentive Stock Option Plan, with form of stock Option
Agreement.(1)
10.2 1993 Stock Option Plan, with form of Stock Option Agreement.(2)
10.3 1993 Employee Stock Purchase Plan.(1)
10.4 Amended Line of Credit Agreement with Bank of America dated
October 27, 1995.(3)
10.5 Line of Credit Agreement with CoreStates Bank dated August 2,
1994.(3)
10.6 Amended Lease Agreement for 700 Airport Blvd., Suite 200,
Burlingame, California.(3)
10.7 Amended Lease Agreement for distribution center.(4)
10.8 California Uniform Franchise Offering Circular, including form
of Franchise Agreement.(1)
10.11 Restricted Stock Purchase Agreement with Nancy J. Pedot.(3)
10.12 Lease Agreement for 770 Airport Blvd., Burlingame, CA.(5)
10.13 Deferred Compensation Agreement.(5)
10.14 Lease Agreement for Bays 140-141, Shannon Free Zone, Shannon,
Ireland, dated May 6, 1997.
10.15 Lease Agreement for 111 Anza Blvd., Burlingame, California
dated January 8, 1998.
10.16 Amendment No. 1 to the Amended and Restated Line of Credit
Agreement with Bank of America, dated July 17,1997.
10.17 Amendment No. 2 to the Amended and Restated Line of Credit
Agreement with Bank of America, dated August 11, 1997.
10.18 Amendment No. 3 to the Amended and Restated Line of Credit
Agreement and Waiver with Bank of America, dated January 9,
1998.
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.19 Amendment No. 4 to the Amended and Restated Line of Credit
Agreement with Bank of America, dated January 30, 1998.
10.20 Amendment No. 5 to the Amended and Restated Line of Credit
Agreement with Bank of America, dated March 9, 1998.
10.21 Amendment No. 6 to Amended and Restated Line of Credit
Agreement with Bank of America, dated March 9, 1998.
10.22 Acquisition and Development Agreement for Dixon, California
Distribution Facility with Carl D. Panattoni and and Wickland
Properties, dated November, 1996.
10.23 Standard Form of Contractor Agreement with DPR Construction,
Inc. for construction of Dixon, California Distribution Facility
dated May 5, 1997.
11.1 Statement re Computation of Net Income Per Share.
13.1 1997 Annual Report to Stockholders
21.1 Subsidiaries of the Registrant
23.1 Independent Auditors' Consent
24.1 Power of Attorney (included in Part IV of this Form 10-K under the
caption "Signatures").
27.1 Financial Data Schedules
27.2 Financial Data Schedules
27.3 Financial Data Schedules
27.4 Financial Data Schedules
27.5 Financial Data Schedules
</TABLE>
(B) REPORTS ON FORM 8-K
A report filed on Form 8-K was filed on December 15, 1997, announcing
the resignation of James P. Curley from his position as Senior Vice President,
Chief Financial Officer, Chief Administrative Officer and a member of the
Company's Board of Directors, effective as of January 31, 1998.
- ------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 filed with the Commission on February 18,1993 ( File No.
33-58322), as amended.
(2) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 filed with the Commission on February 18, 1993 (File No.
33-58322), as amended by numbers 33-60310, 33-90452, 33-94594 and
333-10811.
(3) Incorporated by reference to the Registrant's 1994 Annual Report on Form
10-K filed with the Commission on April 24, 1995.
(4) Incorporated by reference to the Registrant's 1995 Annual Report on Form
10-K filed with the Commission on May 2, 1996.
(5) Incorporated by reference to the Registrant's 1996 Annual Report on Form
10-K filed with the Commission on May 5, 1997.
17
<PAGE> 18
THE GYMBOREE CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE GYMBOREE CORPORATION
April 20. 1998 By: /s/ Gary White
- ------------------ ------------------------------------------
(Date) Gary White
President and Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Gymboree Corporation, a
Delaware corporation, do hereby constitute and appoint Gary White the lawful
attorney and agent, with power and authority to do any and all acts and things
and to execute any and all instruments which said attorney and agent determine
may be necessary or advisable or required to enable said corporation to comply
with the Securities Act, and any rules or regulations or requirements of the
Securities and Exchange Commission in connection with this Form 10-K. Without
limiting the generality of the foregoing power and authority, the powers granted
include the power and authority to sign the names of the undersigned officers
and directors in the capacities indicated below to this Form 10-K, to any and
all amendments, and supplements to this Form 10-K, and to any and all
instruments or documents filed as part of or in conjunction with this Form 10-K
or amendments or supplements thereof, and each of the undersigned hereby
ratifies and confirms all that said attorney and agent shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
18
<PAGE> 19
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Stuart G. Moldaw Chairman of the Board of Directors April 20, 1998
- --------------------------------------------
Stuart G. Moldaw
/s/ Gary White President and Chief Executive Officer and April 20, 1998
- -------------------------------------------- Director
Gary White
/s/ Arthur S. Berliner Director April 20, 1998
- --------------------------------------------
Arthur S. Berliner
/s/ Jerome A. Chazen Director April 20, 1998
- --------------------------------------------
Jerome A. Chazen
/s/ Mary P. Shepard Senior Vice President and Chief Financial April 20, 1998
- -------------------------------------------- Officer (Principal financial and
Mary P. Shepard accounting officer of the registrant)
/s/ Walter F. Loeb Director April 20, 1998
- --------------------------------------------
Walter F. Loeb
/s/ Barbara L. Rambo Director April 20, 1998
- --------------------------------------------
Barbara L. Rambo
/s/ Peter L. Thigpen Director April 20, 1998
- --------------------------------------------
Peter L. Thigpen
/s/ William U. Westerfield Director April 20, 1998
- --------------------------------------------
William U. Westerfield
</TABLE>
19
<PAGE> 20
THE GYMBOREE CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
10.14 Lease Agreement for Bays 140-141, Shannon Free Zone, Shannon,
Ireland, dated May 6, 1997.
10.15 Lease Agreement for 111 Anza Blvd., Burlingame, California dated
January 8, 1998.
10.16 Amendment No. 1 to the Amended and Restated Line of Credit Agreement
with Bank of America, dated July 17, 1997.
10.17 Amendment No. 2 to the Amended and Restated Line of Credit Agreement
with Bank of America, dated August 11, 1997.
10.18 Amendment No. 3 to the Amended and Restated Line of Credit and
Waiver with Bank of America, dated January 9, 1998.
10.19 Amendment No. 4 to the Amended and Restated Line of Credit Agreement
with Bank of America, dated January 30, 1998.
10.20 Amendment No. 5 to Amended and Restated Line of Credit Agreement
with Bank of America, dated March 9, 1998.
10.21 Amendment No. 6 to the Amended and Restated Line of Credit Agreement
with Bank of America, dated March 9, 1998.
10.22 Acquisition and Development Agreement for Dixon, California
Distribution Facility with Carl D. Panattoni and and Wickland
Properties, dated November __, 1996.
10.23 Standard Form of Contractor Agreement with DPR Construction,
Inc. for construction of Dixon, California Distribution Facility
dated May 5, 1997.
11.1 Statement re: Computation of Net Income per Share
13.1 1997 Annual Report to Stockholders
21.1 Subsidiaries of the Registrant
23.1 Independent Auditors' Consent
24.1 Power of Attorney (included in Part IV of this Form 10-K under the
caption "Signatures").
27.1 Financial Data Schedules
27.2 Financial Data Schedules
27.3 Financial Data Schedules
27.4 Financial Data Schedules
27.5 Financial Data Schedules
</TABLE>
20
<PAGE> 1
EXHIBIT 10.14
DATED THIS DAY OF 1997
- --------------------------------------------------------------------------------
LAND REGISTRY
COUNTY CLARE FOLIOS 183SL &
25634
SHANNON FREE AIRPORT DEVELOPMENT COMPANY LIMITED
FIRST PART
- -AND-
GYMBOREE INDUSTRIES LIMITED
SECOND PART
- -AND-
THE GYMBOREE CORPORATION AND GYMBOREE INDUSTRIES HOLDINGS LIMITED
THIRD PART
L E A S E
BAYS 140-141, SHANNON FREE ZONE, COUNTY CLARE
CONNOLLY, SELLORS, GERAGHTY, FITT
SOLICITORS
6/7 GLENTWORTH STREET,
LIMERICK
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THIS INDENTURE made the day of 1997
BETWEEN SHANNON FREE AIRPORT DEVELOPMENT COMPANY LIMITED having its Registered
Office at Shannon Airport in the County of Clare (hereinafter called "SHANNON
DEVELOPMENT" which expression shall include the person or persons for the time
being entitled to the reversion immediately expectant on the term hereby
granted) of the First Part, GYMBOREE INDUSTRIES LIMITED having its Registered
Office at 1 EARLSFORT CENTRE, HATCH STREET IN THE CITY OF DUBLIN (hereinafter
called "THE LESSEE" which expression shall include its successors and permitted
assigns) of the Second Part and THE GYMBOREE CORPORATION having its Principal
Office at 700 AIRPORT BOULEVARD, SUITE 200, BURLINGAME, CA D4010-1912 and
GYMBOREE INDUSTRIES HOLDINGS LIMITED having its Registered Office at 1
EARLSFORT CENTRE, HATCH STREET IN THE CITY OF DUBLIN (hereinafter collectively
called "THE PROMOTER") of the Third Part.
WITNESSETH:
1. TERM:
In consideration of the rent hereinafter reserved, the covenants on the
part of the Lessee to be performed and observed and the terms and
conditions hereinafter contained Shannon Development hereby demises unto
the Lessee ALL THAT AND THOSE the premises described in the First Schedule
hereto (hereinafter called "THE PREMISES") to hold the same for the term of
10 years from the 6th day of May 1997 subject to the rent set out in the
First Schedule hereto and to the terms and conditions contained in the
Second Schedule hereto.
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2. LESSEE'S COVENANT:
The Lessee hereby covenants with Shannon Development to observe all the
terms and conditions on the part of the Lessee contained in the Second and
Third Schedules hereto as if each term and condition applicable to the
Lessee was incorporated as a separate covenant with Shannon Development.
3. SHANNON DEVELOPMENT'S COVENANT:
Shannon Development hereby covenants with the Lessee to observe all the
terms and conditions on the part of Shannon Development contained in the
Second Schedule hereto as if each term and condition applicable to Shannon
Development was incorporated as a separate covenant with the Lessee.
4. LAND ACT 1966 CERTIFICATE:
IT IS HEREBY CERTIFIED by the Lessee that it is a qualified person within
the meaning of Section 45 of the Land Act; 1965 by virtue of the fact that
it is a company incorporated under the laws of a Member State of the
European Union.
5. FINANCE CERTIFICATE:
IT IS HEREBY CERTIFIED by the parties hereto that the amount or value or
the aggregate amount or value of the consideration (other than rent) does
not exceed IRL.5,000.
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6. FINANCE CERTIFICATE:
IT IS HEREBY CERTIFIED that Section 112 of the Finance Act, 1990 does not
apply to the within demise as it is in respect of a factory premises only
and there are no houses or apartments included in the demise.
7. FINANCE CERTIFICATE:
IT IS HEREBY CERTIFIED that no part of the consideration for this Lease is
attributable (or deemed to be attributable) to residential accommodation
8. COMPANIES ACT, 1990 CERTIFICATE:
IT IS HEREBY CERTIFIED that Shannon Development and the Lessee are not
parties connected to each other which would require this transaction to be
ratified by resolution of either of them.
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DEMISED PREMISES
PREMISES:
ALL THAT AND THOSE the factory premises at [ ]
called "THE ESTATE") in the County of Clare as is [ ]
hereto annexed and thereon outlined in Red together with the factory premises
erected thereon and known or to be known as Bays 140-141 together with the
right of the Lessee to pass and repass with or without vehicles at all times
and for all purposes along the roads coloured yellow on the said map and along
all roads on the Estate leading from the Premises to the Public Roadway and the
free passage of water, gas, oil, effluent and other utilities through the
conduits in or under or over the Estate and serving the Premises.
MINING RIGHTS:
All mines, minerals, quarries and royalties whatsoever in or under the Premises
during the term of the demise are excepted and reserved unto Shannon
Development out of the demise. Shannon Development or any other person for the
time being entitled to the benefit of such mines, minerals, quarries and
royalties shall have a right of ingress, egress and regress in respect of the
Premises with or without vehicles, horses, carriages or machinery in order to
obtain the benefit of such exceptions and reservations subject to compensation
to the Lessee for disturbance and loss arising from the working of any such
mines, minerals or quarries.
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WAYLEAVE RIGHT:
The right is hereby reserved to Shannon Development to enter upon the Premises
or any part thereof for the purpose of laying, installing and maintaining
thereon and therein all water and sewage mains or pipes as Shannon Development
may from time to time consider desirable or necessary for the benefit of its
other tenants on the Estate or otherwise.
RENT AND GALE DAYS:
Subject to the provisions of Clause 1 of the Second Schedule hereof, the Rent
shall be IRE.63,100.00 per annum for the first year of the term hereby created,
IRE.88,340.00 per annum for the second year of the term hereby created and
IRE.100,960 per annum for the third, fourth and fifth years of the term hereby
created and shall be payable in advance by four equal quarterly instalments on
the first day of January, the first day of April, the first day of July and the
first day October in each calendar year the first and last payments being
apportioned as appropriate from the date of possession of the Premises and to
the date of vacating same. For the purpose of this Lease the term "Rent" shall
mean the Rent reserved by Clause 1 of the Second Schedule hereof as increased in
accordance with the provisions of Clause 2 of the Second Schedule hereof.
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TERMS AND CONDITIONS OF DEMISE
1. RENT:
The yearly Rent payable under the Lease shall be payable by four equal
quarterly instalments payable in advance on the first day of January, the
first day of April, the first day of July and the first day of October in
each calendar year the Rent to be paid clear of all deductions PROVIDED
ALWAYS that in the first year of the term the rent shall be apportioned as
between the first day of January, 199 and the actual date on which the
Lessee enters into possession and provided always that on termination of
the Lease the Lessee shall pay the rent due up to the date of its vacating
the Premises.
2. RENT REVIEW
The Rent at the election of Shannon Development shall be reviewed at or
upon the completion of the first five years of the term hereby created (the
term being computed from the date of commencement of the said term and
being hereinafter referred to as "THE RENT REVIEW DATE") and from and after
the Rent Review Date the yearly Rent payable in respect of the Premises for
the five year period next following such Rent Review Date shall be such
yearly Rent (hereinafter called "THE REVISED RENT") as shall be specified
in a Notice (hereinafter referred to as "THE RENT REVIEW NOTICE") served by
Shannon Development on the Lessee and as shall in the opinion of Shannon
Development represent the open market Rent on
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the Premises as between a willing Lessor and a willing Lessee with vacant
possession but without any regard being had to goodwill, the fact that the
Lessee has been in occupation of the Premises, and any effect on rent of
any improvement (within the meaning of the Landlord and Tenant Acts 1931 to
1980 or any Acts amending or extending same) and in all other respects on
the terms and conditions of this demise including the proviso for five
yearly rent reviews and taking into account the Rents then appertaining in
respect of similar premises in the vicinity of the Premises or on
Industrial Estates generally and to rents and any formula for calculation
of rents (if any) which shall then be currently chargeable and in use by
Shannon Development in respect of the letting or leasing of Industrial
Premises on any Industrial Estates in the vicinity of the Premises owned or
developed by Shannon Development or otherwise let or leased by Shannon
Development PROVIDED ALWAYS that if Shannon Development shall not serve
such notice as aforesaid for the review of rent prior to or within twelve
months after the Review Date it shall nevertheless be entitled to do so at
any time prior to the expiry of the term hereby created upon the same terms
and conditions as are hereinbefore provided save that the Revised Rent
shall be deemed in such circumstances to be payable by the Lessee from the
next gale day immediately following service of the Rent Review Notice and
the Rent payable immediately prior to that Notice shall continue to be the
Rent payable until the Rent Review shall be held under the terms of this
Lease AND FURTHER PROVIDED that should the Lessee object to any such Rent
and if after negotiation Shannon Development and the Lessee shall (within 3
months of the service of a Rent Review Notice) be unable to agree to the
amount of any Rent reviewed as aforesaid the same shall on application by
either Shannon Development or the Lessee to submitted to the arbitration of
a practising Valuer to be agreed by Shannon Development and the Lessee or
in default of
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agreement to be nominated by the President or other Chief Officer for the
time being of the Royal Institute of Chartered Surveyors in Ireland
PROVIDED ALWAYS that in considering such matter such Valuer shall take into
account the Rents then currently reserved by Shannon Development (whether
as a result of Rent Reviews or otherwise) in respect of Industrial Premises
leased by Shannon Development on Industrial Estates owned or operated by
Shannon Development and such other matters as are set out above for the
purpose of determining the Revised Rent and in so deciding such Valuer
shall be deemed to be acting as an Arbitrator and accordingly the
provisions of the Arbitration Act, 1954 (as amended by subsequent
legislation) shall apply and this Lease for the purpose of the said Act
shall be deemed to be an Arbitration Agreement AND PROVIDED that in no
circumstances shall the rent payable hereunder following a rent review be
less that the rent payable by the Lessee immediately prior to the Rent
Review Date. Notwithstanding the foregoing the Lessee shall be entitled to
call for a review of the Rent at any time by notice in writing to Shannon
Development ("THE LESSEE'S NOTICE") if at the date which is three months
prior to the Rent Review Date Shannon Development has not served a Rent
Review Notice. If the Lessee and Shannon Development have not within three
months of the service of the Lessee's Notice been able to agree the amount
of the Rent the same shall be subject to the same procedure as applies to a
Lessee's objection to the Rent in a Rent Review Notice.
3. If the monies payable by the Lessee to Shannon Development under this Lease
or any covenant or provision thereof shall be due but unpaid for
twenty-eight days the Lessee shall be liable to pay Interest to Shannon
Development at the rate of 2% per annum above the pending rate on
commercial overdrafts charged by the Bank
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of Ireland, such interest to be calculated daily from the date on which the
rent or other sum became due until the actual date of payment or if there
shall be no such rate the aforesaid rent or sum shall bear interest at the
rate of 2% over the cost of six months funds in the Dublin Interbank Market
PROVIDED ALWAYS that the provisions of this Clause shall not prejudice any
other right or remedy of Shannon Development in respect of any breach of
any of the covenants on the part of the Lessee herein contained.
4. OUTGOINGS:
In addition to the Rent the Lessee shall pay and discharge all taxes,
rates, duties, charges, assessments and impositions whatsoever whether
parliamentary, municipal, county, union, district or any other description
which may now or at any time hereafter be assessed, charged or imposed on
the Premises or any part thereof or the Rent payable thereout and whether
payable by the owner or occupier (Shannon Development's proportion of
Capital and Income Tax excepted) Shannon Development having responsibility
for any period prior to occupation by the Lessee. The Lessee shall also, at
the discretion of Shannon Development, bear with the owners or occupiers of
the other units on the Estate, the reasonable cost and expense of all
necessary Estate security and any other service reasonably deemed
necessary by Shannon Development (acting reasonably) in the interest of
good Estate management.
5. LOCAL OR PUBLIC AUTHORITIES:
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The Lessee shall execute all works which any county or district council or
other local or public body may require to be carried out in respect of the
Premises by the Lessee (save in respect of breaches of statutory or local
authority requirements predating this Lease).
6. PLANNING NOTICES:
Without prejudice to the generality of Clause 5 of the Second Schedule
hereof but subject to the terms thereof, the Lessee shall:
6.1 On receipt of any notice, order or request pursuant to the Local
Government (Planning and Development) Act, 1963 or any regulations
made thereunder forthwith notify Shannon Development of such receipt
and furnish to Shannon Development a copy of any such notice, order or
request.
6.2 Forthwith comply with all the requirements and conditions of such
notice, order or request in strict accord with the provisions thereof
and procure and furnish to Shannon Development a certificate or other
evidence of such compliance.
6.3 Indemnify Shannon Development from and against all actions, claims,
suits, demands, penalties or fines for or in respect of any failure to
satisfactorily and completely comply with the requirements of any such
notice, order or request.
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7. FACTORIES ACT REQUIREMENTS:
The Lessee shall comply with all the requirements of the Factories Act,
1955 or any Act or Acts amending the same or any Rules or Regulations made
or to be made thereunder and in particular but without prejudice to the
generality of this Clause shall ensure that the Heating System referred to
in Clause 14 of the Second Schedule hereof shall from time to time and as
often as may be necessary be inspected by a competent Surveyor and
certified as complying with the requirements of the Factories Act, 1955 or
any Act or Acts amending or extending the same and produce on demand by
Shannon Development satisfactory evidence of such compliance with the
requirements of such Act or Acts.
8. ADDITIONAL STRUCTURES:
No structure, building, boarding, fence or other erection of any kind
whatsoever shall be placed on the Premises save in accordance with the
written approval of Shannon Development first being had and obtained such
approval not to be unreasonably withheld or delayed. In its approval
Shannon Development may (acting reasonably) regulate the position for the
work the plans and elevations for the work, design, colours and materials
to be used and the apparatus and equipment to be employed in the course of
such work and for the purpose of seeking Shannon Development's approval
under this Clause the Lessee shall submit such detailed plans and
specifications as Shannon Development may reasonably require showing inter
alia the precise location and elevations of any structures or buildings
proposed and the nature and dimensions of apparatus and equipment intended
to be used in or on the construction of the work.
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9. ALTERATIONS:
The Lessee shall not make any alterations in the plans external
construction, height of roof or walls of any structure or building which
may be already erected on the Premises or which may hereafter be erected or
in the height of the boundary walls or fences of the Premises.
10. REPAIRS AND MAINTENANCE/REPAIRS:
The Lessee will at all times hereafter well and sufficiently repair,
maintain, cleanse and keep the Premises externally and internally in good
and substantial repair, condition and state of decoration provided that
nothing herein contained shall require the Lessee to put the Premises into
any better state of repair than exists at the date of this Lease. The
Lessee's obligation under this Clause shall include all fences, drains,
sewers, all services (whether plumbing, water, electrical or mechanical)
and other conveniences and appurtenances within the boundary of and
exclusively serving the Premises. On the termination of this Lease, the
Lessee shall surrender up the Premises in a good and complete state of
repair, condition and decoration as reflects due performance of this
covenant.
11. REPAINTING FREQUENCY:
In addition to the obligations contained in Clause 10 of this Schedule, the
Lessee shall once every fifth year and in the last year of the term of this
Lease (whether determined by effluxion of time or otherwise) paint the
internal walls, woodwork and
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ironwork and all other parts of the Premises painted by Shannon Development
at the commencement of the lease, with two coats at least of good quality
oil paint or such other paint as may be first approved of in writing by
Shannon Development (such approval not to be unreasonably withheld). In
addition, the Lessee shall in the same year tar creosote, distemper,
whitewash or otherwise treat as appropriate such other parts of the
Premises that are not painted. All such work shall be done in good and
workmanlike manner to the satisfaction of Shannon Development (acting
reasonably) and in conformity with the colour scheme first approved of in
writing by Shannon Development, such approval not to be unreasonably
withheld.
12. NOTICE TO REPAIR:
The Lessee shall permit Shannon Development or the Minister for Transport,
Energy & Communications or their respective agents and all other persons
authorised by either of them at all reasonable times during the term to
enter upon the Premises with or without workmen or others to view the state
of repair and condition thereof. If Shannon Development gives Notice to the
Lessee of any defects or want of repair found at the Premises (which Notice
may be delivered to the Lessee by leaving it for him on the Premises) the
Lessee shall within three calendar months after the date of such Notice or
sooner if requisite, repair and make good any such defect or want according
to the Notice.
13. MAINTENANCE OF ROADS:
During the term of this Lease or until such time as they are handed over to
the Local Authority (whichever is the lesser period) Shannon Development
shall keep
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the roads on the Estate leading from the Premises to the public roadways
and the conduits serving the Premises in good and passable order, repair
and condition excepting damage for which the Lessee is liable under the
Lease.
14. MAINTENANCE OF HEATING SYSTEM:
The Lessee shall keep and maintain any boiler or furnace or other heating
unit or system installed in the Premises (hereinafter referred to generally
as "the Heating System") in good working order, repair and condition and
shall forthwith notify Shannon Development of any lack of repair or defect
occurring or arising in such Heating System and shall from time to time
when necessary replace, renew and reinstate to the entire satisfaction of
Shannon Development any parts thereof which may become broken, lost, worn
out or unfit for use. In the event of the Heating System becoming totally
unfit or unsuitable for the purpose for which it was originally intended
the Lessee shall at its own cost replace the same with the Heating System
of a similar type and fully suited for the purpose for which the original
Heating System was intended.
15. ALTERATION OF HEATING SYSTEM:
The Lessee shall not alter, take down or remove the Heating System or any
part thereof without the previous consent in writing of Shannon Development
(such consent not to be unreasonable withheld) and shall not make any
replacement, renewal or reinstatement as provided in Clause 14 of the
Second Schedule hereof without the like consent or before such part or new
Heating System has first been approved of by Shannon Development in
writing.
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16. CONNECTIONS TO MAIN SERVICE/WATER SUPPLY:
Should Shannon Development make a supply of water available to the Premises
such supply shall be in accordance with such conditions of supply with all
reasonable amendments alterations and extensions thereto as Shannon
Development may publish from time to time. For this purpose publication
shall be deemed to be duly effected if a copy of the conditions and any
amendments or alterations or extensions thereto is available in the office
of the Secretary of Shannon Development during normal office hours
PROVIDED THAT Shannon Development shall have notified the Lessee by
ordinary prepaid post addressed to the Lessee of the fact of the making of
any amendment, alteration or extension to the said conditions but however
without obligation upon Shannon Development to indicate the terms or extent
of any such amendment, alteration or extension. The Lessee shall be deemed
to have knowledge of such conditions and any amendments, alterations or
extensions made thereto from time to time whether or not availing of the
opportunity for inspection. By entering into this Lease the Lessee shall be
deemed to have bound itself to the acceptance of such conditions.
17. WASTAGE:
The Lessee shall use reasonable endeavours to ensure that there shall be no
wastage of water on the Premises.
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18. INTERRUPTION OF SUPPLIES:
The Lessee shall make no claim against Shannon Development in respect of
the temporary cutting off or interruption of any supply of water made
available to the Premises in accordance with the provisions of Clause 16
of the Second Schedule hereof which may be necessary from time to time for
maintenance or other purposes provided that Shannon Development shall use
its best endeavours to return the supply of water as soon as possible.
19. DISPOSAL OF EFFLUENT:
The Lessee shall ensure that the discharge or disposal of any industrial
or trade waste or effluent into any drains or sewer systems serving the
Premises or the adjoining premises shall be in strict accord and
compliance with the requirements of all Statutes and Statutory Orders and
Regulations in force from time to time and that any such discharge or
disposal shall not block or otherwise interfere with the full operation of
the drains or sewer systems serving the Premises or adjoining premises.
Without prejudice to the generality of this clause the Lessee shall not
discharge any industrial or trade waste or effluent into any drains or
sewer systems serving the Premises or adjoining Premises save in accord
with such reasonable standard conditions as Shannon Development may
publish from time to time. The Lessee shall also comply with all EU and
Statutory and Shannon Development's published Regulations in respect of
environmental control. For this purpose publication shall be deemed to be
duly effected if a copy of the conditions and any amendments or
alterations or extensions thereto is available in the office of the
Secretary of Shannon Development during normal office hours PROVIDED THAT
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Shannon Development shall have notified the Lessee by ordinary prepaid post
addressed to the Lessee of the fact of the making of any amendment,
alteration or extension to the said conditions but however without
obligation upon Shannon Development to indicate the terms or extent of any
such amendment, alteration or extension. The Lessee shall be deemed to
have knowledge of such conditions and any amendments, alterations or
extensions made thereto from time to time whether or not availing of the
opportunity for inspection. By entering into this Lease the Lessee shall
be deemed to have bound itself to the acceptance of such conditions and
FURTHER PROVIDED that in the event of any conflict between such standard
conditions and the provisions of, any Statute or Statutory Regulations or
order in force at any time latter provision shall have and be given
absolute precedence. The Lessee will not make any connections to the
Shannon Development's services without the prior approval of Shannon
Development (such approval not to be unreasonably withheld). The Lessee
may be required to pay reasonable maintenance charges to Shannon
Development in respect of the conveying of effluent on its behalf subject
to due notice. The Lessee shall indemnify Shannon Development against all
actions claims costs or demands arising directly from discharges from
Shannon Development's sewerage system which can be attributed in whole or
in part to the Lessee provided that an equitable allowance shall be made in
the Lessee's favour in the event that such discharges can be partly
attributed to a third party. The Lessee shall indemnify Shannon
Development from all actions claims costs or demands arising as a result of
non compliance by the Lessee with the requirements of any statutory license
and/or any environmental conditions as may be deemed necessary by Shannon
Development and/or its agents. Any costs incurred by Shannon Development
in monitoring effluent or as a result of effluent discharge by the Lessee
which does not comply with an issued
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statutory regulation and Shannon Development's standard conditions shall be
recoverable in full by Shannon Development from the Lessee.
20. DISPOSAL OF REFUSE
The Lessee shall not place or allow or permit to be placed waste material
refuse machinery or equipment to accumulate upon the Premises or the
curtilage thereof and shall ensure that no such waste material refuse
machinery or equipment from the Premises shall be dumped placed or left on
any adjoining property or premises or on any property or Premises on the
Estate and the Lessee shall further have all such waste material and refuse
promptly and effectively disposed of in such manner that such disposal
shall not cause or be likely to cause damage, annoyance or inconvenience to
Shannon Development or to the tenants of Shannon Development or occupiers
of any other property or premises on the Estate.
21. INSURANCE:
21.1 The Lessee shall keep the Premises insured against loss or damage
by fire, explosion, storm, tempest, flood, aircraft accident,
riot and civil commotion and such risks as arise from the
Lessee's user of the Premises and against malicious injury and
damage in the joint names of Shannon Development and the Lessee.
The Insurance shall be for a sum of money sufficient to cover the
full cost of reinstating the Premises. The Lessee shall further
effect and keep in full force an insurance indemnifying Shannon
Development against loss of Rent during any
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period in which the Premises shall be wholly or partially unfit
for occupation by reason of any of the risks above set forth.
21.2 The Lessee shall not do or permit to be done upon the Premises
anything nor keep or allow or permit to be kept on the Premises
any hazardous or dangerous substance or material which may render
Shannon Development or the owner of adjoining premises liable to
pay any increased or penal premium in respect of any insurance
policies effected by Shannon Development or the owners of
adjoining Premises or which might render such insurance policies
void or voidable or in any way prejudice the rights of or
increase responsibilities of Shannon Development or the owners of
adjoining Premises under such insurance policies.
21.3 If the Premises or any part thereof shall at any time during the
term be destroyed or damaged the Lessee shall apply all monies
received in respect of such Insurance with all reasonable speed
in building repairing and otherwise reinstating the Premises
according to its original plan or elevation thereof or in such
other manner as shall be previously approved of in writing by
Shannon Development. If the monies in respect of such insurance
shall be insufficient for that purpose the Lessee will make good
the deficiency out of the Lessee's own money.
21.4 The Lessee will insure against public liability and against risks
peculiar to the undertaking of the Lessee as well as against
employer liability and workmens compensation and shall indemnify
Shannon Development
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against all loss or damage in respect of all such risks. The
Lessee shall have regard to the reasonable requirements of
Shannon Development in relation to any such insurance and shall,
upon request, provide reasonable details to Shannon Development
of all such Insurance and shall keep it at all times in full
force and operation.
21.5 The Insurance referred to in this Clause 21 hereof shall be
placed with an Insurance Company licensed for the Republic of
Ireland AND the Lessee will, whenever required, produce to
Shannon Development the Policy and Policies of Insurance and the
receipts showing payment of the premiums thereon.
22. ILLUMINATED SIGNS OR FLOODLIGHTS:
The Lessee shall not without the consent in writing of Shannon Development
(which consent shall not be unreasonably withheld) erect place or affix in
on or to the Premises or any structure or building erected thereon any
external light floodlight illuminated sign or suchlike. For the purpose of
obtaining any such consent the Lessee shall submit to Shannon Development
full particulars of any light, floodlight, illuminated sign or the like
proposed to be erected, placed or affixed in or on the Premises with
details of the characteristics intensities and colours thereof and will
also supply such other particulars and information in relation thereto as
Shannon Development may require.
23. SIGNS AND ADVERTISEMENTS
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The Lessee shall not exhibit or permit to be exhibited on any part of the
Premises any bill, placard, notice or advertisement whatsoever without the
previous consent in writing of Shannon Development PROVIDED ALWAYS however
that nothing in this clause shall prohibit the Lessee from displaying such
notice as may be required to be displayed by the Factories Act, 1955 or any
other Act amending or extending the same.
24. FIRE FIGHTING EQUIPMENT:
The Lessee shall keep and maintain on the Premises adequate fire prevention
and fire control apparatus and shall ensure that such apparatus is at all
times in good and reliable working order.
25. TOXIC OR HAZARDOUS MATERIALS:
25.1 The Lessee shall not bring on to or keep any toxic or hazardous
substances or materials on the Premises save in accordance with
such Statutory Regulations or reasonable special regulations of
Shannon Development as may be applicable from time to time.
25.2 The Lessee shall be responsible for all damage caused to the
Premises and other adjoining property of Shannon Development or
its other lessees in any way caused by or arising from any toxic,
hazardous or other substances brought by the Lessee on to the
Premises or from the Lessee's user of the Premises (whether
permitted by the provisions of this Lease or otherwise) and the
Lessee shall indemnify Shannon
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Development against all claims actions costs demands or otherwise for
death, injury or damage to any person caused by or arising from such
substances or materials as aforesaid or from the Lessee's use of the
Premises or from fire originating in or spreading therefrom.
26. EMISSION OF SMOKE:
The Lessee shall not cause or permit the emission from the Premises or any
part thereof or from any structure buildings or other erections thereon of
smoke fumes or discharge of any nature which may infringe any other Clause
in this Lease or cause damage to any adjoining property or cause annoyance
or nuisance to the owners or occupiers of adjoining property.
27. ALIENATION
The Lessee shall not sub-lease, assign, alienate or part with possession of
the Premises or any part thereof without the written consent of Shannon
Development, which consent shall not be unreasonably withheld or delayed.
28. PROTECTION OF AIRPORT FACILITIES:
28.1 The Lessee shall be responsible for the cost of making good any
damage (not being normal wear and tear) caused by the Lessee or
the Lessee's servants, agents and invitees to airport roads,
services and other property of Shannon Development or the
Minister at or in the vicinity of the airport.
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28.2 The Lessee shall not at any time during the term hereby created
install or place in or on or to the Premises or any buildings or
structures thereon any apparatus or equipment of a nature which
may cause interference with radio aids to navigation or radio
communication and will submit to the Minister full particulars of
any such apparatus and/or equipment proposed for installation or
placement as aforesaid.
28.3 The Lessee shall not do or permit to be done on the Premises or
in or on any building or structure thereon any act matter or
thing which may be reasonably foreseen to constitute a danger to
aircraft, airport services, installations or to oil or petrol
storage depots and shall cause to use or to allow any such
apparatus and/or equipment to be proposed for installation or
placement as aforesaid.
28.4 No structure, building or erection on the Premises shall
constitute or be an obstruction to aircraft or to the navigation
of aircraft to or from or in the vicinity of the airport. If the
Minister by Notice in writing to the Lessee requires any such
erection structure or building to be removed or altered to the
requirements of the Minister on the ground that it constitutes an
obstruction as aforesaid the Lessee shall effect the necessary
removal or alteration within such time as the Minister shall
stipulate.
28.5 The Lessee's obligations under this Clause shall operate
notwithstanding that the Minister may have previously approved
the erection, structure or building in question or
notwithstanding that it may have been placed on the Premises
without any objection by the Minister or by Shannon
<PAGE> 25
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Development it being the true intent and meaning of this provision that the
Minister may at any time require the removal or alteration of any such
erection, structure or building as he shall think proper in accordance with
the development of and variation in the technique of the navigation of
aircraft but the Minister shall compensate and indemnify the Lessee in
respect of any removal or alteration of any erection, structure or building
previously approved by him (the Minister).
28.6 The Lessee shall not cause or permit the emission from the Premises or any
part thereof or from any structure buildings or other erections thereon of
smoke or fumes or discharge of any nature which may be reasonably
anticipated to cause risk or hazard to the navigation of aircraft to or
from or in the vicinity of the airport or which may infringe any other
clause in this Lease or cause damage to any adjoining property or cause
annoyance or nuisance to the owners or occupiers of adjoining property.
28.7 The Lessee shall, at the expense of the Minister, erect, place and attach
in or on the Premises such obstruction or warning lights as the Minister
may direct for the purpose of indicating any position of any obstruction or
for the purpose of signalling or supplying information to persons
navigating aircraft to from or in the vicinity or the airport.
28.8 The Lessee shall not install or maintain on the Premises or permit to be
installed or maintained any apparatus installations or machinery of a
character which interferes with the effective working of any systems for
the time being operated at or in the vicinity of the airport for the
purpose
<PAGE> 26
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of giving information to assisting signalling or directing the navigation
of aircraft at or in the vicinity of the airport or which may cause
confusion in such systems (whether existing at the present time or at any
time in the future) or with communications or signals to or from aircraft
using the communications and navigational services of the airport. If the
Minister considers any such apparatus installation or machinery causes
interference as aforesaid and gives Notice thereof to the Lessee the Lessee
shall immediately discontinue the use of the apparatus installations or
machinery or modify the use and operation thereof or remove them from the
Premises as the Minister may require. If the Minister requires that use of
any apparatus installations or machinery previously approved by him to be
discontinued or modified or removed the Lessee shall be entitled to
compensation by the Minister as provided in the Lease dated the 13th day of
July, 1967 between the Minister for Transport and Power and Shannon
Development and the Lease dated the 12th day of November, 1979 between the
Minister for Tourism and Transport and Shannon Development ("THE HEAD
LEASES").
28.9 The Lessee shall preserve all airport services or installations now or
hereafter placed on the Premises or crossing at or near the Premises from
all damages incurred by the Lessee or the Lessee's
<PAGE> 27
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This Lease is granted subject to all Statutes and Statutory Regulations
which now or at any time hereafter may affect the airport or the Premises.
The Lessee shall observe all the requirements of all such Statutes and
Statutory Regulations and ensure that the use of the Premises is consistent
with the same.
30. MINISTER'S WAYLEAVE
The Lessee shall permit the Minister to enter upon the Premises and there
place overhead and underground pipes and lines to draw supplies of water
and of electricity from any system of supply installed by the Lessee
(subject to paying therefor at rates equivalent to those binding on the
Lessee) and to avail of drains or sewer and sanitary installations made by
the Lessee but not limited to reserve capacity available in these services
and so as not to restrict the full supply for the requirements of the
Lessee AND PROVIDED ALWAYS that should such pipes and lines or other works
be erected so as to interfere with the full enjoyment and use of the
Premises by the Lessee the Lessee shall be entitled to the benefit of an
indemnity by the Minister against interference loss or damage occasioned
thereby as provided in the Head Leases.
31. SPECIAL RISKS:
The Lessee enters upon these presents in the full knowledge of the user to
which the airport is put and of the special risks of danger to persons and
property arising therefrom and the Lessee accepts such risks inherent in
such user and shall indemnify and keep effectually indemnified Shannon
Development and the Minister from and against all claims, actions, suits or
demands in respect of any matter
<PAGE> 28
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arising from or attributable to such special danger. Shannon Development
for its part shall indemnify and keep effectually indemnified the Lessee
from and against all claims, accidents, suits or demands in respect of any
matter arising from or attributable to such special danger insofar as the
same relates to the property or business of Shannon Development at the
Airport.
32. SAVING OF MINISTER'S RIGHTS:
Nothing in these presents contained shall be deemed to be a waiver by the
Minister of the provisions of the Customs Free Airport Act, 1947 or of any
amendments or extensions thereof or statutory enactment nor or hereafter
affecting the airport or made thereunder and the Lessee shall observe and
confirm with all the requirements of the Acts and the Customs FreeAirport
Act, 1947 or any such amendment or extension thereof or statutory enactment
now or hereafter affecting the airport or the demised premises.
33. USE OF PREMISES:
The Lessee shall use the Premises only for such industrial or commercial
purposes as the Minister for Enterprise & Employment may authorise by
Licence issued by him under the provisions of Section 2(1) of the Customs
Free Airport (Amendment) Act, 1958 or any Act or Acts amending or extending
the same.
33.1 The Lessee shall not use or permit the use of the Premises or permit
the said Premises or any part thereof to be used for the purpose of
any public body or society or religious or charitable institution.
Neither shall the
<PAGE> 29
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Lessee at any time hold or permit to be held on the Premises any
exhibition or public meeting or public entertainment without the
consent in writing of Shannon Development.
33.2 The Lessee shall not do or permit to be done on the Premises any act
or thing which might be or grow to be a nuisance or to the annoyance,
damage or inconvenience of the neighbourhood or the property adjoining
or near the Premises or of the owners or occupiers of any such
property.
34. COMPENSATION BY MINISTER:
If any circumstances or event should arise or occur in which compensation
shall become payable to the Lessee by the Minister under the provisions of
the Head Leases Shannon Development shall not be obliged to make any
payment to the Lessee in respect thereof but Shannon Development shall, if
so required, assign to the Lessee the benefit of the relevant covenant or
conditions in the Head Leases.
35. SURRENDER AND RESTORATION OF PREMISES:
The Lessee shall upon the termination of this Lease (whether determined by
effluxion of time or otherwise) peaceably deliver up the Premises and all
additions thereto to Shannon Development in such good order repair and
condition as reflects due performance of the Lessee's repair obligations
herein contained, and in the event of the Premises having been altered,
whether with permission granted under this Lease or otherwise shall restore
the Premises to its original condition making good any damage caused by the
original alteration or by the restoration
<PAGE> 30
- 30 -
work unless Shannon Development shall in writing have directed that such
restoration work shall not be carried out or otherwise effected.
36. TERMINATION:
If the Rent herein reserved or any part thereof shall at any time be in
arrears and unpaid for the space of 28 days after it shall have become due
(whether the same shall have been lawfully demanded or not) or if the
Licence referred to in the Third Schedule hereto is withdrawn or if the
Lessee shall be guilty of any breach of the covenants terms and conditions
of this Lease and fail to make good such breach within a reasonable time
or if the Lessee shall enter into liquidation whether voluntary or
otherwise or enter into agreement or make any arrangements with its
creditors for liquidation of its debts by composition or otherwise or if a
Receiver shall be-appointed over any of the property of the Lessee then
and in any of the said cases it shall be lawful for Shannon Development:-
36.1 To terminate this Lease by serving 90 days Notice of Termination on
the Lessee expiring on any date such Notice to be served by ordinary
prepaid post upon the Lessee addressed to the Premises. On
expiration of such Notice this Lease shall absolutely cease and
determine but without prejudice to any claim by Shannon Development
against the Lessee arising out of any antecedent breach of any of the
conditions, covenants or terms of this Lease.
36.2 To re-enter upon the Premises or any part thereof in the name of the
whole and thereupon this demise shall cease and determine but without
<PAGE> 31
- 31 -
prejudice to any rights of action by Shannon Development in respect
of any breach by the Lessee of the Lessee's covenants terms and
conditions herein contained.
36.3 If at such time as the Lessee has vacated the Premises after the
determination of the term hereby granted whether by effluxion of time
or otherwise any property of the Lessee remains in or on the Premises
and the Lessee shall fail to remove same within twenty one days of
being requested to do so by Shannon Development, then and in any such
case, Shannon Development may (without being obliged to do so and in
any event without prejudice to such other rights as Shannon
Development may have in that behalf) as agent of the Lessee (and
Shannon Development is hereby appointed by the Lessee to act as such
agent and in such capacity to act as Shannon Development shall in its
absolute discretion deem fit) sell or otherwise dispose of such
property and shall then hold to the order of the Lessee the proceeds
of sale (if any) after deducting the costs and expenses of removal,
storage (including loss of or reduction in rent received by Shannon
Development on account of such property remaining on the Premises in
storage pending the sale or disposal of the property) and such other
costs properly incurred or suffered by Shannon Development PROVIDED
THAT the Lessee shall indemnify Shannon Development against any
liability incurred by it to any third party whose property is sold or
disposed of by Shannon Development in the mistaken but bona fide
belief that (which shall be presumed unless the contrary is proved)
such property belongs to the
<PAGE> 32
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Lessee and was liable to be dealt with as such pursuant to this
sub-clause.
37. BREAK OPTION:
Subject to payment up to date of all Rent and other outgoings payable
hereunder and to satisfactory performance and observance in all material
respects of the covenants of the Lessee's part herein contained, the
Lessee shall have the option of terminating the Lease on
37.1 The fifth anniversary of the commencement of the term hereby created
on giving not less than two years prior written notice to Shannon
Development or on the payment by the Lessee of a sum equivalent to
two years Rent to Shannon Development in lieu of such notice; or
37.2 At any time during the term hereby created on giving not less than
one year's prior written notice to Shannon Development or on the
payment by the Lessee of a sum equivalent to one year's Rent in lieu
of such notice PROVIDED that the Lessee requires to terminate this
demise for the purpose of re-locating to a larger or its own premises
on the Estate.
38. QUIET ENJOYMENT:
On the Lessee paying the Rent hereby reserved and performing and observing
the conditions and agreements of this Lease the Lessee shall and may
peaceably hold
<PAGE> 33
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and enjoy the Premises during the term of this Lease without any
interruption by Shannon Development or any person lawfully claiming under
or in trust for it.
<PAGE> 34
-34-
The Lessee shall only use the Premises for such purposes as are authorised by
the Licence issued to the Lessee under Section 2(1) of the Customs Free Airport
Act, 1958 or any Act amending or extending same and shall only use the Premises
while such Licence is in existence.
<PAGE> 35
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GUARANTEE BY THE PROMOTER
WHEREAS Gymboree Industries Limited ("GYMBOREE") the Lessee in the foregoing
Lease was promoted and introduced to Shannon Development by the Promoters and
the Lease was granted by Shannon Development on the recommendation of the
Promoters. In consideration of the grant of the foregoing Lease by Shannon
Development to Gymboree at the request and upon the proposal of the Promoters
the Promoters HEREBY GUARANTEE as a joint and several liability the due
performance by Gymboree of all the terms and conditions in the said Lease
binding upon Gymboree AND UNDERTAKE as a joint and several liability to
indemnify and save harmless and keep effectually indemnified Shannon Development
from and against all loss or damage arising by from or through default or
neglect of Gymboree in respect of the covenants binding upon Gymboree in the
foregoing Lease contained and in particular in respect of the payment by
Gymboree to Shannon Development of any monies due or to become due or payable by
Gymboree to Shannon Development by reason of any of the terms, covenants or
conditions of the foregoing Lease and shall upon demand pay to Shannon
Development any monies due or payable at any time by Gymboree to Shannon
Development under the terms or provisions of the said Lease. For the avoidance
of doubt the indemnity herein contained shall lapse upon the lawful and agreed
assignment of the said Lease by Gymboree.
DATED THIS DAY OF 19
<PAGE> 36
IN WITNESS WHEREOF the Common Seals of the parties hereto have been hereunto
affixed the day and year first herein written.
PRESENT when the Seal of
THE GYMBOREE CORPORATION
was affixed hereto:
By /s/ JAMES PATRICK CURLEY
-------------------------------
James Patrick Curley
Senior Vice President, CFO and CAO
PRESENT when the Common Seal of
GYMBOREE INDUSTRIES HOLDINGS
LIMITED was affixed hereto:
By /s/ JAMES PATRICK CURLEY Director
-------------------------------
James Patrick Curley
By /s/ WALTER J. BLUM Director
-------------------------------
Walter J. Blum
PRESENT when the Common Seal of
SHANNON FREE AIRPORT DEVELOPMENT
COMPANY LIMITED was affixed hereto:
<PAGE> 37
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PRESENT when the Common Seal of
GYMBOREE INDUSTRIES LIMITED
was affixed hereto:
By /s/ JAMES PATRICK CURLEY Director
-------------------------------
James Patrick Curley
By /s/ WALTER J. BLUM Director
-------------------------------
Walter J. Blum
<PAGE> 1
EXHIBIT 10.15
[RAISER PROPERTY MANAGEMENT LETTERHEAD]
OFFICE LEASE
STANDARD AGREEMENT
THIS LEASE, dated January 8, 1998, between SeaBreeze I Venture ("Lessor")
and The Gymboree Corporation, ("Lessee").
1. PREMISES: Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, for the term and subject to the agreements, conditions and
provisions hereinafter set forth, to each and all of which Lessor and
Lessee hereby mutually agree, the following described premises (the
"Premises") Suites 120 & 130 consisting of approximately 6,990 rentable
square feet located at 111 Anza Boulevard, Burlingame, CA. As used in this
Lease the term "Building" means the land and other real property described
in Exhibit A attached hereto, the building constructed or being constructed
thereon, and all other improvements on or appurtenances located thereon.
2. TERMS, COMPLETION OF IMPROVEMENTS: The term of this lease shall commence
on March 1, 1998, and, unless sooner terminated as hereinafter provided,
shall end on March 31, 2003. If Lessor, for any reason whatsoever, cannot
deliver possession of the Premises to Lessee at the commencement of said
term, in accordance with the terms hereof, this Lease shall not be void or
voidable, nor shall Lessor be liable to Lessee for any loss or damage
resulting therefrom, but in that event, rental shall be waived for the
period between the commencement for said term and the time when Lessor can
deliver possession. No delay in delivery of possession shall operate to
extend the term hereof.
3. RENTAL: (a) Lessee shall pay to Lessor throughout the term of this Lease
as rental for the Premises ($___) (the "Base Rent") (subject to adjustment
as provided in paragraphs 3(b), 3(c) and 4 below) which rental shall be
payable monthly in installments of --See Addendum to Lease-- Dollars ($___)
each on or before the first day of the first full calendar month of the
term hereof and on or before the final day of each and every successive
calendar month thereafter during the term hereof. In the event the term of
this Lease commences on a day other than the first day of a calendar month,
then the monthly rental for the first and last fractional months of the
term hereof shall be appropriately prorated. Rental shall be paid to
Lessor, without deduction or offset, in lawful money of the United States
of America at 800 S. Claremont St., Suite 201, San Mateo, CA 94402, or to
such other person or at such other place as Lessor may from time to time
designate in writing.
(b) In the event the sum of Operating Expenses for the Base Year (as that
term is defined in paragraph 4(a) and real property taxes and assessments
for the Base Tax Year (as that term is defined in paragraph 4(b)) exceeds
_____ per square foot of rentable area in the Building, the Base Rent set
forth in paragraph 3(a) above shall be increased by Lessee's Percentage
Share (as that term is defined in paragraph 4(a) of such excess (the
"Adjusted Base Rent"). Lessor shall notify Lessee in writing within sixty
(60) days following the end of the Base Year for Operating Expenses or the
Base Tax Year, whichever is later, of any such adjustment, including the
amount of the Adjusted Base Rent payable thereafter and the amount of
additional rent payable from the commencement of the Lease term through the
last day of the month in which notice is given, which additional rent shall
be due and payable thirty (30) days after receipt of notice thereof.
(c) The Adjusted Base Rent shall be subject to increase every n/a at the
commencement of the lease year (the "Adjustment Dates") as follows: (i) the
basis for computing the adjustment shall be the final Consumer Price Index
for all Urban Consumers for the San Francisco Oakland Metropolitan Area
published by the United States Department of Labor, Bureau of Labor
Statistics (the "Index"), which is published for the month most recently
preceding the commencement of the term hereof (the "Beginning Index"). If
the index published most recently preceding an Adjustment Date (the
"Adjustment Index") has increased with respect to the Beginning Index, the
rental for the period until the next Adjustment Date shall be increased by
the amount obtained by multiplying the Adjusted Base Rent by a fraction,
the numerator of which is the difference between the Adjustment Index and
the Beginning Index, and the denominator of which is the Beginning Index.
In no event shall the rental payable under this paragraph 3(c) be less than
the Adjusted Base Rent set forth in paragraph 3(b) above. (ii) If the Index
is changed so that the base year differs from that used as of the month
immediately preceding the month in which the commencement of the term
hereof occurs, the lender shall be converted in accordance with the
conversion factor published by the United States Department of Labor,
Bureau of Labor Statistics. If the Index is discontinued or revised during
the term, such other government index or computation with which it is
replaced shall be used in order to obtain substantially the same result as
would be obtained if the Index had not been discontinued or revised.
4. LESSEE'S SHARE OF INCREASED COSTS: (a) The rental payable during each
calendar year or part thereof during the term of this Lease subsequent to
the calendar year 1998 (the calendar year 1998 being hereinafter referred
to as the "Base Year") shall be increased by Lessee's Percentage Share of
the total dollar increase, if any, in Operating Expenses paid or incurred
by Lessor in such year over Operating Expenses paid or incurred by Lessor
in the Base Year. In no event shall the rental payable under this paragraph
4(a) be less than the Base Rent, as the same may from time to time be
adjusted, referred to in paragraph 3 above. As used herein, "Lessee's
Percentage Share" shall be 6.85%. See Addendum paragraph 5 for additional
terms. As used herein, "Operating Expenses" shall mean (i) all costs of
management, operation and maintenance of the Building, including, without
limitation, wages, salaries and payroll burden of employees, janitorial,
maintenance, guard, and other services, Building office rent or rental
value, power, water, waste disposal and other utilities, materials and
supplies, maintenance and repairs, insurance, and depreciation on personal
property, and (ii) the cost or portion thereof property allocable to the
Building (amortized over such reasonable period as Lessor shall determine
together with interest at the rate of 2% over prime per annum on the
(unamortized balance) of any capital improvements made to the Building by
Lessor after the Base Year that reduce other Operating Expenses or made to
the Building by Lessor after the date of this Lease that are repaired under
any governmental law or regulation that was not applicable to the Building
at the time it was constructed; provided, however, that Operating Expenses
shall not include taxes covered under paragraph 4(b) below, depreciation on
the Building (other than depreciation on exterior window draperies provided
by Lessor and carpeting in public corridors and common areas), costs of
tenants' improvements, real estate brokers' commissions, interest and
capital items other than those referred to in clause (ii) above,
Page 1
<PAGE> 2
(b) The rental payable during each tax year (July 1 through June 30) In the
term hereof subsequent to the tax year ending June 30, 1998 or, if the
assessed valuation of the Building for such tax year does not reflect a
valuation as a substantially completed building, then subsequent to the
first tax year for which the assessed valuation of the Building seller is a
valuation as a substantially completed building (the "Base Tax Year") shall
be increased by Lessee's Percentage Share of the total dollar increase, if
any, in real property taxes and assessments (and any tax levied wholly or
partly in lieu thereof) levied against the Building for such tax year, over
such losses for the Base Tax Year, provided that in no event shall the
rental payable hereunder be less than the Base Rent, as the same may from
time to time be adjusted, referred to in paragraph 3 above.
(c) During December of each calendar year or as soon thereafter as
practicable, Lessor shall give Lessee written notice of its estimate of
amounts payable under paragraphs 4(a) and 4(b) above for the ensuing
calendar year. On or before the first day of each month during the ensuing
calendar year, Lessee shall pay to Lessor one-twelfth (1/12) of such
estimated amounts; provided that, if such notice is not given in December,
Lessee shall continue to pay of the basis of the prior year's estimate
until the month after such notice is given. If at any time or times it
appears to Lessor that the amounts payable under other paragraph 4(a) or
4(b) above for the current calendar year will vary from its estimate by
more that 5% Lessor shall, by written notice in Lessee, revise its estimate
for such year, and subsequent payments by Lessee for such year shall be
based upon such revised estimate.
(d) Within ninety (90) days after the close of each calendar year or as
soon after such 90-day period as practicable, Lessor shall deliver to
Lessee a statement of amounts payable under paragraphs 4(a) and 4(b) above
for such calendar year certified by certified accountants designated by
Lessor and such certified statements shall be conclusively binding upon
Lessor and Lessee. If such statement shows an amount owing by Lessee that
is less than the estimated payments for such calendar year previously
made by Lessee, it shall be accompanied by a refund of the excess by
lessor to Lessee. If such statement shows an amount owing by Lessee that
is more than the estimated payments for such calendar year previously made
by Lessee, Lessee shall pay the deficiency to lessor within thirty (30)
days after delivery of the statement.
(e) If, for any reason other than the default of Lessee, this Lease shall
terminate on a day other than the last day of a calendar year, the amount
of increase (if any) in rental payable by Lessee applicable to the
calendar year in which such termination shall occur shall be prorated on
the basis which the number of days from the commencement of such calendar
year to and including such termination date bears to three hundred and
sixty-five (365).
5. USE: The Premises shall be used for general office purposes and no other.
Lessee shall not do or permit to be done in or about the Premises, nor
bring or keep or permit to be brought or kept therein, anything which is
prohibited by or will in any way conflict with any law, statute, ordinance
or governmental rule or regulation now in force or which may hereafter be
enacted or promulgated, or which is prohibited by the standard form of the
insurance policy, or will in any way increase the existing rate of or
affect any fire or other insurance upon the Building or any of its
contents or cause a cancellation of any insurance policy covering the
Building or any part thereof or any of its contents. Lessee shall not do or
permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of other tenants of the Building, or
injure or annoy them, or use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor shall Lessee
cause, maintain or permit any nuisance in, on or about the Premises or
commit or suffer to be committed any waste in, on or about the Premises.
6. SERVICES: (a) Lessor shall maintain the public and common areas of the
Building, including lobbies, stairs, elevators, corridors and restrooms,
the windows in the Building, the mechanical, plumbing and electrical
equipment serving the Building, and the structure itself in reasonably
good order and condition except for damage occasioned by the act of
Lessee, which damage shall be repaired by Lessor at Lessee's expense.
(b) Lessor shall furnish the Premises with (i) electricity for lighting
and the operation of office machines, (ii) heat and air conditioning from
8:00 a.m. to 6:00 p.m. Monday through Friday, excluding holidays,
reasonably required for the comfortable occupation of the Premises, (iii)
elevator service, (iv) lighting replacement (for building standard
lights,) (v) restroom supplies, and (vi) window washing with reasonable
frequency, all during the times and in the manner that such services are
customarily furnished in comparable office buildings in the area. Lessor
shall be responsible for furnishing daily janitorial service on the
Premises. Lessor shall not be in default hereunder or be liable for any
damages directly or indirectly resulting from, nor shall the rental herein
reserved be abated by reason of (x) the installation, use or interruption
of use of any equipment in connection with the furnishing of any of the
foregoing services, (y) failure to furnish or delay in furnishing any such
services when such failure or delay is caused by accident or any
condition beyond the reasonable control of Lessor or by the making of
necessary repairs or improvements to the Premises or to the Building, or
(z) the limitation, curtailment, rationing or restriction on use of water
or electricity, gas or any other form of energy serving the Premises or
the Building. Lessor shall use reasonable efforts diligently to remedy any
interruption in the furnishing of such services.
(c) Whenever heat generating machines or equipment or lighting other than
building standard lights are used on the Premises by Lessee which affect
the temperature otherwise maintained by the air conditioning system.
Lessor shall have the right to install supplementary air conditioning
units in the Premises, and the costs thereof, including the cost of
installation and the cost of operation and maintenance thereof, shall be
paid by Lessee to Lessor upon billing by Lessor. If Lessee installs
lighting requiring power in excess of that required for normal desk-top
office equipment or normal copying equipment. Lessee shall pay Lessor upon
billing for the cost of such excess power as additional rent, together
with the cost of installing any additional risers or other facilities and
accent lighting. Except for typical standard office equipment such as
telephones, PC's, and copy equipment that may be necessary to furnish such
excess power to the Premises.
(d) Notwithstanding any other provision hereof, in the event that any law,
ordinance or other governmental regulation now or hereafter in effect shall
impose a limit on the allocation in the Building of any utility or other
service, whether or not the same is to be supplied to the Premises by
landlord under this paragraph 7, then Lessee shall not use or cause to be
consumed on the Premises, nor shall Lessor be required to provide to the
Premises hereunder, such utility or other service in an amount or in a
manner which would result in the violation by Lessor or Lessee of such
law, ordinance or regulation.
7. TAXES PAYABLE BY LESSEE: In addition to the monthly rental and other
charges to be paid by Lessee hereunder, Lessee shall reimburse Lessor upon
demand for any and all taxes payable by Lessor (other than net income
taxes) whether or not now customary or within the contemplation of the
parties hereto: (a) upon, measured by or reasonably attributable to the
cost or value of Lessee's equipment, furniture, fixtures and other personal
property located in the Premises or by the cost or value of any leasehold
improvements made in or to the Premises by or for Lessee, other than
building standard tenant improvements made by Lessor, regardless of whether
title to such improvements shall be in Lessee or Lessor; (b) upon or
measured by the monthly rental payable hereunder, including without
limitation, any gross income tax or excise tax levied by the City of
Burlingame, the County of San Mateo, the State of California, the Federal
Government or any other governmental body with respect to the receipt of
such rental; (c) upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy by
Lessee of the Premises or any portion thereof; (d) upon this transaction or
any document to which Lessee is a party creating or transferring an
interest or an estate in the Premises. In the event that it shall not be
lawful for Lessee so to reimburse Lessor, the monthly rental payable to
Lessor under this Lease shall be revised to not Lessor the same net rental
after imposition of any such tax upon Lessor as would have been payable to
Lessor prior to the imposition of any such tax.
8. ALTERATIONS: Lessee will not make or suffer to be made any alterations,
additions or improvements to or of the Premises or any part thereof, or
attach any fixtures or equipment thereto, without first obtaining Lessor's
written consent, which consent shall not be unreasonably withheld, unless
otherwise agreed upon by the parties. All alterations, additions, fixtures
and improvements, whether temporary or permanent in character, made in or
upon the Premises either by Lessee or Lessor, shall immediately become
Lessor's property and at the end of the term hereof, shall remain on the
Premises without compensation to Lessee. (See Addendum. Paragraph 6 for
additional terms)
9. LIENS: Lessee shall keep the Premises and the Building free from any liens
arising out of any work performed, materials furnished or obligations
incurred by Lessee. Lessor shall have the right to post and keep posted on
the Premises any notices that may be provided by law or which Lessor may
deem to be proper for the protection of the Lessor, the Premises and the
Building from such liens.
Page 2
<PAGE> 3
10. REPAIRS: By entry hereunder Lessee accepts the Premises as being in the
condition in which Lessor is obligated to deliver the Premises, Lessee
shall, at all times during the term hereof and at Lessee's sole cost and
expense, keep the Premises and every part thereof in good condition and
repair, ordinary wear and tear, damage thereto by fire, earthquake, act
of God or the elements excepted, Lessee hereby waiving all rights to
make repairs at the expense of Lessor or in lieu thereof to vacate the
Premises as provided by California Civil Code Section 1942 or any other
law, statute or ordinance now or hereafter in effect. Lessee shall at
the end of the form hereof surrender to Lessor the Premises and all
alterations, additions and improvements thereto in the same condition as
when received, ordinary wear and tear and damage by fire, earthquake,
act of God or elements excepted. Lessor has no obligation and has made
no promise to alter, remodel, improve, repair, decorate or paint the
Premises or any part thereof, except as specifically herein set forth.
No representations respecting the condition of the Premises or the
Building have been made by Lessor to Lessee, except as specifically
herein set forth.
11. DESTRUCTION OR DAMAGE: If the Premises or the Building are damaged by
fire, earthquake, act of God or the elements, Lessor shall forthwith
repair the same, subject to the provisions of this section hereinafter
set forth, and provided such repairs can, in Lessor's opinion, be made
within sixty (60) days, and this Lease shall remain in full force and
effect except that, if there shall be damage to the Premises and such
damage is not the result of negligence of willful misconduct of Lessee
or Lessee's employees or invitees, an abatement of rental shall be
allowed Lessee for such part of the Premises as shall be rendered
unusable by Lessee in the conduct of its business during the time such
part is so unusable. If such repairs cannot, in Lessor's opinion, be
made within sixty (60) days, Lessor may, at its option, upon written
notice to Lessee within thirty (30) days after the date of such fire or
other casualty, repair or restore such damage, this Lease continuing in
full force and effect, but the rent to be partially abated as
hereinabove provided. If Lessor does not so elect to make such repairs
which cannot be made within sixty (60) days, then Lessor may and
(provided the damage affects the Premises or common areas necessary to
Lessee's occupancy) Lessee may, by written notice to the other given not
less than thirty-one (31) nor more than sixty (60) days after the date
of such fire or other casualty, terminate this Lease as of the date of
such fire or other casualty. Lessor shall not be required to repair any
injury or damage by fire, earthquake, act of God or the elements, or to
make any repairs or replacements, of any improvements installed in the
Premises by or for Lessee, other than building standard tenant
improvements made by Lessor, and Lessee shall, at Lessee's sole cost and
expenses, repair and restore its portion of such improvements. A total
destruction of the building shall automatically terminate this Lease.
Lessee waives California Civil Code Sections 1932(2) and 1933(4)
providing for termination of hiring upon destruction of the thing hired.
12. INSURANCE AND WAIVER OF SUBROGATION: Lessee shall obtain and, at all
times during the term hereof, keep in force, at its own cost, fire and
casualty insurance in the amount of One Hundred (100) percent of the
actual replacement cost of improvements to the Premises constructed by
or for Lessee and general liability insurance with limits of not less
than One Million Dollars ($1,000,000.00) for injury or death of any
number of persons in one occurrence, and not less than Two hundred fifty
thousand Dollars ($250,000.00) for damage to property. The insurance
prescribed by this paragraph shall be issued by companies rated at least
AAA by Dest's Insurance Reports (Property Liability) or otherwise
acceptable to Lessor, shall name Lessor as an additional insured, and
shall provide that such policies cannot be cancelled without thirty (30)
days prior notice to Lessor. Lessor and Lessee shall each obtain from
their respective insurers under all policies of fire, theft, public
liability, workmen's compensation and other insurance maintained by
either of them at any time during the term hereof insuring or covering
the Building or any portio thereof or operations therein, and such
notices shall contain, a waiver of all rights of subrogation which the
Insurer of one party might have against the other party, and Lessor and
Lessee shall each indemnify the other against any loss or expense,
including reasonable attorney's fees, resulting from the failure to
obtain such waives.
13. INSURANCE AND INDEMNIFICATION: Lessee hereby waives all claims against
Lessor for damage to any property or injury to or death of any person
in, upon or about the Premises of the Building arising at any time and
from any cause other than solely by reason of the gross negligence or
willful act of Lessor, its employees or contractors, and Lessee shall
hold Lessor harmless from any damage to any property or injury to or
death of any person arising from the use of the Premises or the Building
by Lessee, except such as is caused solely by gross negligence or
willful act of Lessor, its contractors or employees. The foregoing
indemnity obligation of Lessee shall include reasonable attorney's fees,
investigation costs and all other reasonable costs and expenses incurred
by Lessor from the first notice that any claim or demand is to be made
or may be made. The provisions of this paragraph 13 shall survive the
termination of this Lease with respect to any damage, injury or death
occurring prior to such termination.
14. COMPLIANCE WITH LEGAL REQUIREMENTS: Lessee shall at its sole cost and
expense promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements of any board of fire
underwriter or other similar body now or hereafter constituted, with any
direction or occupancy certificate issued pursuant to any law by any
public officer or officers, as well as the provisions of all recorded
documents affecting the Premises, insofar as any thereof relate to or
affect the condition, use or occupancy of the Premises, excluding
requirements of structural changes not related to or affected by
improvements made by or for Lessee or Lessee's acts.
15. ASSIGNMENT AND SUBLETTING; EARLY TERMINATION: In the event Lessee
should desire to assign this Lease or sublet the Leased Premises or any
part thereof, Lessee shall give Lessor written notice of such desire at
least ninety (90) days in advance of the date on which Lessee desires to
make such assignment or sublease. Lessor shall then have a period of
seven (7) business days following receipt of such notice within which to
notify Lessee in writing that Lessor elects either (i) to terminate this
Lease as to the space so affected as of the date so specified by Lessee
in which event Lessee will be relieved of all further obligations
hereunder as to such space, or (ii) to permit Lessee to assign or sublet
such space, subject, however, to prior written approval of the proposed
assignee or sublessee by Lessor, such consent not to be unreasonably
withheld. If Lessor should fail to notify Lessee in writing by such
election within said 30-day period, Lessor shall be deemed to have
elected option (ii) above, but written approval by Lessor of the
proposed assignee or sublessee shall be required. Any rent or other
consideration realized by Lessee under any such sublease and assignment
in excess of the rental payable hereunder, after amortization of the
reasonable cost of work in excess of Building Standard for which Tenant
has paid and reasonable subletting and assignment costs, shall be paid
in its entirety to Lessor. Lessee's obligation to pay over Lessor's
portion of the consideration shall constitute an obligation for rental
hereunder unless otherwise agreed by the parties. No assignment or
subletting by Lessee shall relieve Lessee of any obligation under this
Lease. Any assignment or subletting which conflicts with the provisions
hereof shall be void.
16. RULES: Lessee shall faithfully observe and comply with the rules and
regulations as follows and, after notice thereof, all reasonable
modifications thereof and additions thereto from time to time
promulgated in writing by Lessor. Lessor shall not be responsible to
Lessee for the nonperformance by any other tenant or occupant of the
Building of any of said rules and regulations.
17. ENTRY BY LESSOR: Lessor may enter the Premises at reasonable hours to
(a) inspect the same, (b) exhibit the same to prospective purchasers,
lenders or tenants, (c) determine whether Lessee is complying with all
its obligations hereunder, (d) supply janitor service and any other
service to be provided by Lessor to Lessee hereunder, (e) post notices
of nonresponsibility, and (f) make repairs required of Lessor under the
terms hereof or repairs to any adjoining space or utility services or
make repairs, alterations or improvements to any other portion of the
Building; provided, however, that all such work shall be done as
promptly as reasonably possible and so as to cause as little
interference to Lessee as reasonably possible. Lessee hereby waives any
claim for damages for any injury or inconvenience to or inconvenience
with Lessee's business, any loss of occupancy or quiet enjoyment of the
Premises or any other loss occasioned by such entry, except such as is
caused by the gross negligence or willful act of Lessor, contractors, or
employees. Lessor shall at all times have and retain a key with which to
unlock all of the doors in, on or about the Premises (excluding Lessee's
vaults, safes and similar areas designated in writing by Lessee and
Lessor in advance); and Lessor shall have the right to use any and all
means which Lessor may deem proper to open said doors in an emergency in
order to obtain entry to the Premises, and any entry to the Premises
obtained by Lessor by any of said means, or otherwise, shall not under
any circumstances be constructed or deemed to be a forcible or unlawful
entry into or a detainer of the Premises or an eviction, actual or
constructive, of Lessee for the Premises, or any portion thereof.
18. EVENTS OF DEFAULT: The occurrence of any one or more of the following
events ("Events of Default") shall constitute a breach of this Lease by
Lessee: (a) if Lessee shall fail to pay any rental when and as the same
becomes due and payable; or (b) if Lessee shall fail to pay any other
sum when and as the same becomes due and payable and such failure shall
continue for more than then (10) days; or (c) if Lessee shall fail to
perform or observe any either term hereof or the rules and regulations
described in paragraph 17 to be performed or observed by Lessee, such
failure shall continue for more than thirty (30) days after notice
thereof from Lessor, and Lessee shall not within such period commence,
with due diligence and dispatch the curing of such default; or (d) if
Lessee shall make a general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due
or shall file a petition in bankruptcy, or shall be adjudicated as
bankrupt or insolvent, or shall file a petition in any proceeding
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under
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any present or future stature, law or regulation, or shall file an
answer admitting or fail timely to contest the material allegations of a
position filed against it in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of Lessee or any material part of its properties; or (c) if
within ninety (90) days after the commencement of any proceeding against
Lessee seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not
have been dismissed, or if, within ninety (90) days after the
appointment without the consent or acquiescence of Lessee, of any
trustee, receiver or liquidator of Lessee or of any material part of its
properties, such appointment shall not have been vacated; or (1) if this
Lease or any estate of Lessee hereunder shall be levied upon under any
attachment or execution and such attachment or execution is not vacated
within ten (10) days.
19. TERMINATION UPON DEFAULT: If an Event of Default shall occur, Lessor
at any time thereafter may give a written termination notice to Lessee,
and on the date specified in such notice (which shall be not less than
three days after the giving of such notice) Lessee's right to possession
shall terminate and this Lease shall terminate, unless on or before such
date all arrears or rental and all other sums payable by Lessee under
this Lease (together with the late charges and interest provided for in
paragraph 33 hereof) and all costs and expenses incurred by or on behalf
of Lessor hereunder shall have been paid by Lessee and all other
breaches of this Lease by Lessee at the time existing shall have been
fully remedied to the satisfaction of Lessor. Upon such termination,
Lessor may recover from Lessee; (a) the worth at the time of award of
the unpaid rental which has been earned as of the time of termination;
(b) the worth at the time of award of the amount by which the unpaid
rental which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Lessee proves could
have been reasonably avoided; (c) the worth at the time of award of the
amount by which the unpaid rental for the balance of the term of this
Lease after the time of award exceeds the amount of such rental loss
that Lessee proves could be reasonably avoided; and (d) any other amount
necessary to compensate Lessor for all the detriment proximately caused
by Lessee's failure to perform its obligations under this Lease or which
in the ordinary course of events would be likely to result therefrom.
The "worth at the time of award" of the amounts referred to in clauses
(a) and (b) above shall be computed by allowing interest at the rate of
ten percent (10%) per annum. The worth at the time of award of the
amount referred to in clause (c) above shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%). For the purpose of
determining unpaid rental under clauses (a), (b) and (c) above, the
monthly rent reserved in this Lease shall be deemed to be the sum of the
rental due under paragraph 3 above and the amounts last payable by
Lessee pursuant to paragraph 4 above and any other monetary obligations
of Lessee hereunder.
20. CONTINUATION AFTER DEFAULT: Even though Lessee has breached this Lease
and abandoned the Premises, this Lease shall continue in effect for so
long as Lessor does not terminate Lessee's right to possession, and
Lessor may enforce all its rights and remedies under this Lease,
including the right to recover the rental as it becomes due under this
Lease. Acts of maintenance or preservation of efforts to relet the
Premises or the appointment of a receiver upon the initiative of Lessor
to protect Lessor interest under this Lease shall not constitute a
termination of Lessee's right to possession.
21. OTHER RELIEF: The remedies provided for in this Lease are in addition
to any other remedies available to Lessor at law or in equity by statute
or otherwise.
22. LESSOR'S RIGHT TO CURE DEFAULTS: All agreements and provisions to be
performed by Lessee under any of the terms of this Lease shall be at its
sole cost and expense and without any abatement of rental except as
expressly provided herein. If Lessee shall fail to pay any sum of money,
other than rental, required to be paid by it hereunder or shall fail to
perform any other act on its part to be performed hereunder and such
failure shall continue for ten (10) days, with regard to any monetary
default, and for thirty (30) days, with respect to any other default
hereunder, after notice thereof by Lessor, Lessor may, but shall not be
obligated so to do, and without waiving or releasing Lessee from any
obligations of Lessee, make any such payment or perform any such other
act on Lessee's part to be made or performed as in this Lease provided.
All sums so paid by Lessor and all necessary incidental costs shall be
deemed additional rent hereunder and shall be payable to lessor on
demand, and Lessor shall have (in addition to any other right or remedy
of Lessor) the same rights and remedies in event of the nonpayment
thereof by Lessee as in the case of default by Lessee in the payment of
rental.
23. ATTORNEY'S FEES: In the event of any action or proceeding brought by
either party against the other under this Lease, the prevailing party
shall be entitled to recover for the fees of its attorney's in such
action or proceeding such amount as the court may adjudge reasonable.
24. EMINENT DOMAIN: If all or any part of the Premises shall be taken as a
result of the exercise of the power of eminent domain, this Lease shall
terminate as to the part so taken as of the date of taking, and, in the
case of a partial taking, either Lessor or Lessee shall have the right
to terminate this Lease as to the balance of the premises by written
notice to the other within thirty (30) days after such date; provided,
however, that a condition to the exercise by Lessee of such right to
terminate shall be that the portion of the Premises taken shall be of
such extent and nature as substantially to handicap, impede or impair
Lessee's use of the balance of the Premises. In the event of any taking,
Lessor shall be entitled to any and all compensation, damages, income,
rent, awards, or any interest therein whatsoever which may be paid or
made in connection therewith, and Lessee shall have no claim against
Lessor for the value of any unexpired terms of this Lease or otherwise.
In the event of partial taking of the Premises which does not result in
a termination of this Lease, the monthly rental thereafter to be paid
shall be equitably reduced.
25. SUBORDINATION: This Lease shall be subject and subordinated of all
times to (a) all ground or underlying leases which may hereafter be
executed affecting the Building, and (b) the lien of all mortgages and
deeds of trust in any amount or amounts whatsoever now or hereafter
placed on or against the Building or on or against Lessor's interest or
estate therein or on or against all such ground or underlying leases,
all at the option of the holder(s) thereof and without the without the
necessity of having further Instruments executed on the part of Lessee
to effectuate such authorization. Notwithstanding the foregoing, (x) in
the event of termination for any reason whatsoever of any such ground or
underlying lease, this Lease shall not be barred, terminated, cut off or
foreclosed nor shall the rights and possession of Lessee hereunder be
distributed if Lessee shall not then be in default in the payment of
rental or other sums or be otherwise in default under the terms of this
Lease, and Lessee shall attorn to the Lessor of any such ground or
underlying lease, or, if requested, enter into a new lease for the
balance of the original or extended term hereof then remaining upon the
same terms and provisions as are in this Lease contained; (y) in the
event of a foreclosure of any such mortgage or deed of trust or any
other action or proceeding for the enforcement thereof, or of any sale
thereunder, this Lease will not be barred, terminated, cut off or
foreclosed nor will the rights and possession of Lessee thereunder be
disturbed if Lessee shall not then be in default in the payment of
rental or other sums or be otherwise in default under the terms of this
Lease, and Lessee shall attorn to the purchaser at such foreclosure,
sale or other action or proceeding; and (z) Lessee agrees to execute and
deliver upon demand such further instruments evidencing such
subordination of this Lease to such ground or underlying leases, and to
the lien of any such mortgages or deeds of trust as may reasonably be
required by Lessor.
26. NO MERGER: The voluntary or other surrender of this Lease by Lessee, or
a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Lessor terminate all or any existing subleases or
subtenancies, or may, at the option of Lessor, operate as an assignment
to it of any or all such subleases or subtenancies.
27. SALE: In the event the original Lessor hereunder, or any successor
owner of the Building, shall see or convey the Building, all liabilities
and obligations on the part of the original Lessor, or such successor
owner, under this Lease accruing thereafter shall terminate, and
thereupon all such liabilities and obligations accruing after the date
of sale or conveyance shall be binding upon the new owner. Lessee
agrees to attorn to such new owner, provided Lessee's rights and
possession of Lessee's premises shall not be disturbed.
28. ESTOPPEL CERTIFICATE: At any time and from time to time but on not less
than ten (10) days prior written request by Lessor, Lessee shall
execute, acknowledge and deliver to Lessor, promptly upon request, an
estoppel certificate in the form of Exhibit C hereto. Any such
certificate may be relied upon by any prospective purchaser, mortgagee
or beneficiary under any deed of trust of the Building or any part
thereof.
29. NO LIGHT, AIR OR VIEW EASEMENT: Any diminution or shutting off of
light, air or view by any structure which may be erected on lands
adjacent to the Building shall in no way affect this Lease or impose any
liability on Lessor.
30. HOLDING OVER: If, without objection by Lessor, Lessee holds possession
of the Premises after expiration of the term of this Lease, Lessee shall
become a tenant from month to month upon the terms herein specified but
at a monthly rental equivalent to the then prevailing monthly rental
paid by Lessee at the expiration of the term of this Lease pursuant to
all the provisions of paragraphs 3 and 4 above payable in advance on or
before the first day of each month. Each party shall give the other
written notice at least one month prior to the date of termination of
such monthly tenancy of its intention to terminate such tenancy.
Notwithstanding the foregoing, if Lessee holds possession of the
Premises after expiration or sooner termination of the term of this
Lease notwithstanding Lessor's objection, Lessee shall pay monthly
rental 175% the amounts otherwise then payable under the terms hereof.
31. ABANDONMENT: If Lessee shall abandon or surrender the Premises,
Premises shall be deemed to be abandoned, at the option of the Lessor
except such property as may be [ILLEGIBLE] to Lessor
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32. SECURITY DEPOSIT: Lessee has deposited with Lessor the sum of Twenty
one thousand eight hundred fifty Dollars ($21,850.00)(the "Deposit"),
The Deposit shall be held by Lessor as security for the faithful
performance by Lessee of all of the provisions of this Lease to be
performed or observed by Lessee. In the event Lessee fails to perform or
observe any of the provisions of this Lease to be performed or observed
by it, then, at the option of Lessor, Lessor may (but shall not be
obligated to) apply the Deposits or so much thereof as may be necessary
to remedy any default in the payment of rent or to repair damages to the
Premises caused by Lessee, and Lessee shall forthwith upon demand
restore the Deposit to the sum so specified. Any remaining portion of
the Deposit shall be returned to Lessee upon expiration of this lease.
33. LATE CHARGE AND INTEREST: (a) Lessee hereby acknowledges that late
payment by Lessee to Lessor of rent and other sums due hereunder will
cause Lessor to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and
late charges which may be imposed on Lessor by the terms of any mortgage
or trust deed covering the Building. Accordingly, if any installment of
rent or any other sum due from Lessee shall not be received by Lessor
when due, Lessee shall pay to Lessor a late charge lump sum equal to 6%
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur
by reason of late payment by Lessee. Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee's default with
respect to such overdue amount, nor prevent Lessor from exercising any
of the other rights and remedies granted hereunder.
(b) Any amount due to Lessor, if not paid when due, shall bear interest
from the date due until paid at the rate of 10% per annum or, if a
higher rate is legally permissible, at the highest rate legally
permitted, provided that interest shall not be payable on late charges
incurred by Lessee nor on any amounts upon which late charges are paid
by Lessee to the extent such interest would cause the total interest to
be in excess of that legally permitted. Payment of interest shall not
excuse or cure any default hereunder by Lessee.
34. WAIVER: The waiver by Lessor of any agreement, condition or provision
herein obtained shall not be deemed to be a waiver of any subsequent
breach of the same or any other agreement, condition or provisions
herein contained, nor shall any custom or practice which may evolve
between the parties in the administration of the terms hereof be
construed to waive or to lessen the right of Lessor to insist upon the
performance by Lessee in strict accordance with said terms. The
subsequent acceptance of rental hereunder by Lessor shall not be deemed
to be a waiver of any preceding breach by Lessee of any agreement,
condition or provision of this Lease, other than the failure of Lessee
to pay the particular rental so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of acceptance of such
rental.
35. NOTICES: All notices and demands which may or are required to be given
by either party to the other hereunder shall be in writing and shall be
deemed to have been fully given when deposited in the United States
mail, certified or registered, postage prepaid, and addressed as
follows: to Lessee at 700 Airport Boulevard, Burlingame, CA 94010, or to
such either place as Lessee may from time to time designate in a notice
to Lessor; to Lessor at 1000 S. Claremont Street, Suite 201, San Mateo,
CA 94402, or to such other place as Lessor may from time to time
designate in a notice to Lessee; or, in the case of Lessee, delivered to
Lessee at the Premises. Lessee hereby appoints as its agent to receive
the service of all dispossessory or distraint proceedings and notices
thereunder the person in charge of or occupying the Premises at the
time, and, if no person shall be in charge of or occupying the same,
then such service may be made by attaching the same on the main entrance
of the Premises.
36. BROKERAGE COMMISSION: Lessor and Lessee warrant that they have no
contract or dealings regarding this Lease through any licensed real
estate broker other than Cushman & Wakefield whose commission shall be
paid by Lessor, or any other person who can claim a right to commission
or finder's fee as a procuring cause of this Lease. In the event that
any other broker or finder perfects a claim for commission or finder's
fee in connection with this Lease, the party through whom the broker or
finder makes its claim shall indemnify, hold harmless and defend the
other party from said claim and all costs and expenses, including
reasonable attorneys' fees, incurred by the other party in defending
against the same.
37. COMPLETE AGREEMENT: There are no oral agreements between Lessor and
Lessee affecting this Lease, and this Lease supercedes and cancels any
and all previous negotiations, arrangements, brochures, agreements and
understandings, if any, between Lessor and Lessee or displayed by Lessor
to Lessee with respect to the subject matter of this Lease or the
Building. There are no representations between Lessor and Lessee other
than those contained in this Lease.
38. CORPORATE AUTHORITY: If Lessee signs as a corporation, each of the
persons executing this Lease on behalf of Lessee does hereby covenant
and warrant that Lessee is a duly authorized and existing corporation,
that Lessee has and is qualified to do business in California, that the
corporation has full sight and authority to enter into this Lease, and
that each of the persons signing on behalf of the corporation were
authorized to do so.
39. MISCELLANEOUS: The words "Lessor" and "Lessee" as used herein shall
include the plural as well as the singular. If there be more than one
Lessee, the obligations hereunder imposed upon Lessee shall be joint and
several. Time is of the essence of this Lease and each and all of its
provisions. Submission of this instrument for examination or signature
by Lessee does not constitute a reservation of or option for lease, and
it is not effective as a lease or otherwise until execution and delivery
by both Lessor and Lessee. The exhibit(s) and addendum, if any, attached
to this Lease are by this reference made a part hereof. The agreements,
conditions and provisions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, executors,
administrators, successors and assigns of the parties hereto. If any
provisions of this Lease shall be determined to be illegal or
unenforceable, such determination shall not affect any other provision
of this Lease and all such other provisions shall remain in full force
and effect. This Lease shall be governed by and construed pursuant to
the laws of the State of California.
40. LESSEE SIGNS: Lessee shall erect no signs on the exterior of the
Building or in any of the common areas without the prior written consent
of Lessor.
41. EXHIBITS:
Exhibit Schedule Addendum to Lease
Exhibit A Description of the Property = Floorplans
Exhibit C Form of Estoppel Certificate
42. OTHER PROVISIONS:
None except as provided in the Addendum.
43. RULES AND REGULATIONS: 1. The sidewalks, halls, passages, exits,
entrances, elevators, escalators, if any, and stairways of the Building
shall not be obstructed by any of the Lessees or used by them for any
purpose other than for ingress to and egress from their prospective
premises. The halls, passages, exits, entrances, elevators, escalators
and stairways are not for the general public, and Lessor shall in all
cases retain the right to control and prevent access thereto of all
persons whose presence in the judgement of Lessor would be prejudicial
to the safety, character, reputation and interests of the Building and
its Lessees, provided that nothing therein contained shall be construed
to prevent such access to persons with whom any Lessee normally deals in
the ordinary course of its business, unless such persons are engaged in
illegal activities. No Lessee and no employee or invitee of any Lessee
shall go upon the roof of the building.
2. Except as authorized by a Lease, no sign, placard, picture, name,
advertisement or notice visible from the exterior of any Lessee's
premises shall be inscribed, painted, affixed or otherwise displayed by
any Lessee on any part of the Building without the prior written consent
of Lessor. Lessor will adopt and make available to Lessee general
guidelines relating to signs inside the Building on the office floors.
Lessee agrees to conform to such guidelines, but may request approval of
Lessor for qualifications, which approval will not be unreasonably
withheld. All approved signs or lettering on doors shall be printed,
painted, affixed or inscribed at the expense of the lessee by a person
approved by Lessor, which approval will not be unreasonably withheld.
Material visible from outside the Building will not be permitted.
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3. The premises shall not be used for the storage of merchandise held for sale
to the general public or for lodging. No cooking shall be done or permitted by
any Lessee on the premises, except that use by the Lessee of Underwriter's
Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar
beverages shall be permitted, provided that such use is in accordance with all
applicable federal, state and city laws, codes, ordinances, rules and
regulations.
4. No Lessee shall employ any person or persons other than the janitor of
Lessor for the purpose of cleaning the premises, unless otherwise agreed to by
Lessor in writing. Except with the written consent of Lessor, no person or
persons other than those approved by Lessor shall be permitted to enter the
Building for the purpose of cleaning the same. No Lessee shall cause any
unnecessary labor by reason of such Lessee's carelessness or indifference in the
preservation of good order and cleanliness, janitor service will not be
furnished on nights when rooms are occupied after 9:00 P.M. unless, by agreement
in writing, service is extended to a later hour for specifically designated
rooms.
5. Lessor will furnish each Lessee free of charge with two keys to the
premises. Lessor shall require payment of $10 for each additional key provided
to Lessee. No Lessee shall have any keys made. No Lessee shall alter and lock
or install a new or additional lock or any bolt on any door of its premises
without the prior written consent of Lessor. Lessee shall in each case furnish
Lessor with a key for any such lock. Each Lessee, upon the termination of its
tenancy, shall deliver to Lessor all keys to doors in the Building which shall
have been furnished to Lessee.
6. Lessee shall have the right to prescribe the weight, size and position of
all equipment, materials, furniture or other property brought into the
Building. Heavy objects shall, if considered necessary to Lessor, stand on wood
strips of such thickness as is necessary to properly distribute the weight.
Lessor will not be responsible for tear of or damage to any such property from
any cause, and all damage done in the Building by moving or maintaining such
property shall be repaired at the expense of Lessee. The persons employed to
move such property in or out of the building must be acceptable to Lessor.
7. No Lessee shall use or keep in the premises or the Building any kerosene,
gasoline or inflammable or combustible fluid or material other than limited
quantities thereof reasonably necessary for the operation or maintenance of
office equipment, or without Lessor's prior written approval, use any method of
heating or air conditioning other than that supplied by Lessor. No Lessor shall
use or keep or permit to be used or kept any foul or noxious gas or substance in
the premises, or permit or suffer the premises to be occupied or used in a
manner offensive or objectionable to Lessor or other occupants of the Building
by reason of noise, odors or vibrations; or interfere in any way with other
Lessors or those having business therein.
8. The directory of the Building will be provided for the display of the name
and location of Lessees and a reasonable number of the principal officers and
employees of Lessees, and Lessor reserves the right to exclude any other names
therefrom. Any additional name which Lessee shall desire to place upon said
bulletin board must first be approved by Lessor, and, if so approved, charge
will be made therefor.
9. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, hangings or decorations shall be attached to, hung or placed in, or
used in connection with any window of the Building without the prior written
consent of Lessor. In any event, with the prior written consent of Lessor, such
items shall be installed on the office side of Lessor's standard window covering
and shall in no way be visible from the exterior of the Building.
10. No Lessee shall obtain for use in the premises, ice, drinking water, food,
beverage, towel or other similar services, except at such reasonable hours and
under such reasonable regulations as may be fixed by Lessor.
11. Each Lessee shall see that the doors of its premises are closed and locked
and that all water faucets, water apparatus and utilities are shut off before
Lessee or Lessee's employees leave the premises, so as to prevent waste or
damage, and for any default or carelessness. In this regard Lessee shall make
good all injuries sustained by other tenants or occupants of the Building or
Lessor. On multiple-terrace floors, all Lessees shall keep the doors to the
Building corridors closed at all times except for ingress and egress.
12. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed, no
foreign substance of any kind whatsoever shall be thrown therein and the
expense of any breakage, stoppage or damage resulting from the violation of
this rule shall be borne by the Lessee who, or whose employees or invitees,
shall have caused it.
13. Except with the prior written consent of Lessor, no Lessee shall sell, or
permit the sale at retail, of newspapers, magazines, periodicals, theatre
tickets or any value number or exchanges to the general public for or on the
premises, nor shall any Lessee carry on or permit or allow any employees or
other person to carry on, the business of stenography, typewriting, or any
similar business in or from the premises for the service or accommodation of
occupants of any other portion of the Building, nor shall the premises of any
Lessee be used for manufacturing of any kind of any business or activity other
than that specifically provided for in such Lessee's lease.
14. No Lessee shall install any radio or television antenna, loudspeaker, or
other device on the roof of exterior walls of the Building.
15. There shall not be used in any space, or in the public halls of the
Building, either by any Lessee or others, any hand trucks except those equipped
with rubber tires and side guards or such other material handling equipment as
Lessor may approve. No other vehicles of any kind shall be brought by any Lessee
into the Building or kept in or about its premises.
16. Each Lessee shall store all its trash and garbage within its premises. No
material shall be placed in the trash boxes or receptacles if such material is
of such nature that it may not be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage in the City of Burlingame
without being in violation of any law or ordinance governing such disposal. All
garbage and refuse disposal shall be made only through instruments provided for
such purposes and at such times as Lessor shall allow.
17. Canvassing, peddling, soliciting, and distribution of handbills or any
other written materials in the Building are prohibited, and each Lessee shall
cooperate to prevent the same.
18. The requirements of the Lessees will be attended to only upon application
by telephone or in person at the office of the Building. Employees of Lessor
shall not perform any work or do anything outside of their regular duties unless
under special instructions from Lessor.
19. Lessor may waive any one or more of these Rules and Regulations for the
benefit of any particular Lessee or Lessees, but no such waiver by Lessor shall
be considered as a waiver of such Rules and Regulations in favor of any other
Lessee or Lessees, nor prevent Lessor from thereafter enforcing any such Rules
and Regulations against any or all of the Lessees of the Building.
20. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, convenants,
agreements and conditions of any lease of premises in the Building.
21. Lessor reserved the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building, and for the preservation of good order
therein.
22. Proper protection of carpeting is required such as plastic carpet
protectors under wheeled chairs.
IN WITNESS WHEREOF, the parties have executed this Lease dated the day and year
first above written.
<TABLE>
<CAPTION>
LESSEE: The Gymboree Corporation LESSOR: Seabreeze I Venture RAISER PROPERTY
a Delaware Corporation MANAGEMENT
COMPANY
OFFICE LEASE
<S> <C> <C>
By /s/ JOSEPH T. PRUSKO By /s/ PHILLIP H. RAISER
--------------------------------- ---------------------------- ---------------------------------
VP, Treasurer General Partner
--------------------------------- ----------------------------
</TABLE>
Page 6
<PAGE> 7
ADDENDUM TO LEASE
THE GYMBOREE CORPORATION
1. PREMISES:
Suite 120 - 1,090 Rentable Square Feet
Suite 130 - 5,900 Rentable Square Feet
TOTAL PREMISES: 6,900 RENTABLE SQUARE FEET
2. BASE RENT SCHEDULE:
The Base Rent shall commence on April 16, 1998 and payable each month
thereafter on the first of each month according to the following schedule:
<TABLE>
<S> <C>
April 16-30, 1998 $ 9,530.00 Total
May, 1998 - February, 1999: $19,060.00 per month
March, 1999 - February, 2000: $19,754.00 per month
March, 2000 - February, 2001: $20,453.00 per month
March, 2001 - February, 2002: $21,152.00 per month
March, 2002 - March, 2003: $21,850.00 per month
</TABLE>
3. TENANT IMPROVEMENT ALLOWANCE:
Lessor shall provide an allowance of $34,950.00 to be used for Tenant
Improvements within the Premises. Such payment shall be made to Lessee upon
completion of improvements and upon providing Lessor of adequate lien releases
for such work. Lessee shall have the right to perform the initial improvements
to the Premises subject to a mutually agreed upon floorplan, plans and
specifications approved by Lessor. Lessor reserves the right to approve the
contractor to be used, approve all finishes and shall have the right to
supervise such work. Approval of contractor, finishes and approval of work shall
not be unreasonably withheld. Lessee shall be responsible for all City approvals
and permits and any related fees. Contractor shall have acceptable insurance
coverage and supply Lessor with Certificates of Insurance and shall hold Lessor
harmless.
4. FIRST RIGHT FOR ADDITIONAL SPACE:
Lessor shall not lease the adjacent Suite 100 (4,520 rentable square feet) to a
tenant other than the current Lessee (Kumon) until the premises has first been
offered to Lessee. Once Lessor knows that the premises will be available, Lessor
will notify Lessee in writing of the terms on which Lessor is willing to lease
Suite 100. Lessee shall have five
<PAGE> 8
ADDENDUM TO LEASE - PAGE TWO
(5) business days to either accept the full terms offered by Lessor or give up
their rights under this paragraph. The Base Rent for such expansion shall be at
the rates being offered in the building for comparable space. This option shall
not apply should Lessee be in default of the Lease or if the premises has been
assigned or subleased.
5. LESSEE'S SHARE OF INCREASED COSTS:
Lessee's share of increases in all operating expenses, including real estate
taxes and capital improvements, shall not exceed 7% per year over the previous
year. When calculating increases to Lessee, the building area must be adjusted
to reflect at least 95% occupancy.
6. ADA/TITLE 24 BUILDING UPGRADES:
Any ADA or Title 24 work which is required in the common areas of the building
as a result of permits required for Lessee's initial improvements are the
responsibility of Lessor. It is agreed that the common area upgrades currently
planned by Lessor shall apply towards any work required as a result of Lessee's
building permit.
7. OPTION TO EXTEND LEASE TERM:
Lessee shall have one (1) option to extend the term of this Lease for a period
of five (5) additional years. Lessee must give Lessor at least six (6) months
prior written notice of their desire to exercise such option. The Base Rent
during the extended term shall be at the then market rents for comparable space
in the building. This option shall not apply should Lessee be in default of the
Lease or if the premises has been assigned or subleased.
8. OTHER:
a) The Lessee reserves the right to install telephone/data cabling
between 111 Anza & 700 Airport Blvd. at existing underground conduit.
Lessee to pay for cabling.
b) The Lessee reserves the right to provide baby changing tables at the
toilet rooms on Floor 1. Lessee to pay for tables.
c) Lessor to make every reasonable effort to make available an enclosed
garage space for (2) golf carts. If this is not possible, space
adjacent to stairs (next to trash area) to be reserved for Gymboree
golf carts. Lessee to pay for power & chain link fencing for golf
carts.
d) At Lessee's request, Lessor to work with Lessee for reasonable
installation of security system. Lessee to pay for cost of system.
System to be similar to 700 Airport Blvd.
<PAGE> 9
EXHIBIT A
SUITE 130
APPROX. 5,900 RENTABLE SQ. FT.
THE GYMBOREE CORPORATION
[FLOOR PLAN]
<PAGE> 10
EXHIBIT A-1
SUITE 120
APPROXIMATELY 1,090 RENTABLE SQ. FT.
THE GYMBOREE CORPORATION
[FLOOR PLAN]
<PAGE> 11
EXHIBIT C
TENANT'S-ESTOPPEL
CERTIFICATE
Re: Lease Dated
Amendments
Landlord:
Tenant:
Premises:
Gentlemen:
We understand that you have committed to make a loan to
on the security of the property known as Plaza of which the
Premises are a part, and that as a condition to the making of such loan you have
required this certificate by the undersigned (the "Tenant").
The Tenant hereby confirms the following:
1. That (i) the Tenant is the tenant under the Lease; (ii) the Lease
constitutes the entire agreement between the parties with respect to the
leasing of the Promises, and there are no understandings, contracts,
agreements, or commitments of any kind between the Landlord and the Tenant
in respect of the Lease or the Promises except as expressly provided in the
Lease; (iii) the Lease is in full force and effect and has not been
modified, changed, altered, supplemented or amended in any respect, except
under the instruments described above; and (iv) the Lease is the only lease
between the parties affecting the Premises.
2. That (i) the Tenant has accepted possession and is in occupancy of the
Premises demised pursuant to the Lease; and (ii) the original or base term
commenced on the _________ day of _____________, 198_, and will expire on
the ________ day of _____________________, 19__.
3. That except as expressly provided in the Lease, the Tenant (i) does not
have any right to renew or extend the term of the Lease; (ii) does not have
any option or preferential right to purchase all
<PAGE> 12
Page Two
or any part of the Premises or all or any part of the land and building of
which the Premises are a part; and (iii) does not have any right, title or
interest with respect to the Premises other than as tenant under the Lease:
4. That the improvements and space required to be furnished according to
the Lease have been completed in all respects to the satisfaction of the
Tenant and have been accepted by the Tenant.
5. That the Landlord has fulfilled all of its duties of an inducement
nature and that all conditions under the Lease to be performed by the
Landlord have been satisfied*
6. That (i) there is no known existing default on the part of the Landlord
under the Lease; (ii) to the best of the Tenant's knowledge there are at
present no facts or conditions which with notice or lapse of time or both
would become such a default; and (iii) As of the date hereof, the Tenant
has no defense, offset, lien, credit or claim of offset, credit or
deduction, against the enforcement of the Lease by the Landlord or the
rents or other charges accrued or accruing thereunder, nor has the rent
thereunder been prepaid for a period in excess of one month.
7. That the Tenant has no notice of a prior sale, transfer, assignment,
hypothecation or pledge by the Landlord of the Lease or of the rentals
accruing thereunder.
8. That (i) the annual fixed rent under the Lease is $___________ payable
in advance in equal monthly installments of $_________________; (ii) that
the last date to which such rent and other sums due from the Tenant under
said Lease have bean paid is ________________, (iii) the fixed rent
commenced to accrue on the _______ day of _______________, 198__, and was
payable from that date; (iv) the full rent is now accruing under the Lease;
and (v) the final payment of fixed rent during the original or base term of
the Lease will be due on the ______ day of ______________, 19__ .
9. That exceptions to the statements made herein (if any) are attached as
Exhibit A to this Certificate.
Executed this ________ day of _________________, 198 .
----------------------------
Tenant
By
----------------------------
Title
--------------------------
<PAGE> 1
Exhibit 10.16
AMENDMENT NO. 1 TO
AMENDED AND RESTATED LINE OF CREDIT AGREEMENT
This Amendment No. 1 (the "Amendment") dated as of July 17, 1997, is
among Bank of America National Trust and Savings Association (the "Bank"), The
Gymboree Corporation ("TGC"), Gymboree Manufacturing, Inc. ("GMI"), Gymboree,
Inc. ("GI"), and Gymboree Industries Limited. ("GIL") (TGC, GMI, GI, and GIL are
hereinafter referred to collectively as the "Borrowers" and individually as a
"Borrower").
RECITALS
A. The Bank, TGC, and GMI entered into a certain Amended and
Restated Line of Credit Agreement dated as of October 27, 1995 (the
"Agreement").
B. TGC has a wholly-owned Canadian subsidiary, GI. TGC also has a
wholly-owned Irish subsidiary, Gymboree Industries Holdings Limited, which, in
turn, has a wholly-owned Irish subsidiary, GIL.
C. TGC and GMI have requested the Bank to add GI and GIL as
Borrowers under the Agreement, and the Bank is willing to grant that request
subject to certain of the addition terms and conditions set forth in this
Amendment.
D. The Bank and the Borrowers desire to amend the Agreement in
order to memorialize the terms and conditions under which GI and GIL are added
as Borrowers under the Agreement.
E. The Bank and the Borrowers also desire to amend the Agreement in
order to increase the Commitment, extend the availability period, and amend
certain covenants.
AGREEMENTS
1. Definitions. Capitalized terms used but not defined in this
Amendment shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 In Paragraph 1.1(a), the amount "$100,000,000" is
substituted for the amount $75,000,000."
2.2 The following proviso is added to Paragraph 1.1(c), and it
reads in its entirety as follows:
<PAGE> 2
It is provided, however, that:
(i) the outstanding amounts of any letters of credit issued for the
account of GI, including amounts drawn on such letters of credit and not
yet reimbursed, may not exceed Ten Million Dollars ($10,000,000) (the "GI
L/C Limit");
(ii) the outstanding amount of any letters of credit issued for the
account of GIL, including amounts drawn on such letters of credit and not
yet reimbursed, may not exceed Ten Million Dollars ($10,000,000) (the "GIL
L/C Limit");
(iii) the outstanding amount of any standby letters of credit,
including amounts drawn on such letters of credit and not yet reimbursed,
may not exceed Five Hundred Thousand Dollars ($500,000); and
(iv) the outstanding amounts of any letters of credit issued for the
accounts of TGC or GMI, including amounts drawn on such letters of credit
and not yet reimbursed, may not at any time exceed the Commitment, minus
the sum of the GI L/C Limit and the GIL L/C Limit.
(In calculating the amounts described above, the Bank will use Equivalent
Amounts for letters of credit denominated in Canadian Dollars or Irish
Punts. "Equivalent Amount" means the equivalent in U.S. Dollars of another
currency calculated at the spot rate for the purchase of such other
currency with U.S. Dollars quoted by Bank's Foreign Exchange Trading Center
in San Francisco, California, at approximately 8:00 a.m. San Francisco time
two (2) banking days (as determined by Bank with respect to such currency)
prior to the relevant date.)
2.3 In Paragraph 1.2, the date "May 31, 1999" is substituted for
the date "May 31, 1998."
2.4 The first paragraph of Paragraph 1.3 is amended to read in
its entirety as follows:
1.3 Letters of Credit. This line of credit may be used for
financing:
(i) commercial letters of credit with a maximum maturity of
180 days but not to extend more than 180 days beyond the Expiration
Date. Each commercial letter of credit will require drafts payable at
sight or up to the earlier of 180 days after sight or 180 days after
the Expiration Date.
2
<PAGE> 3
(ii) standby letters of credit with a maximum maturity not
to extend beyond the Expiration Date. The standby letters of credit may
include a provision providing that the maturity date will be
automatically extended each year for an additional year unless the Bank
gives written notice to the contrary.
Each commercial letter of credit issued for the account of GI may be
denominated in U.S. Dollars or Canadian Dollars. Each commercial letter of
credit issued for the account of GIL may be denominated in U.S. Dollars or
Irish Punts. All other letters of credit issued pursuant to this Agreement
will be denominated in U.S. Dollars.
The letters of credit outstanding from the Bank for the account of any one
or more of the Borrowers that are not already outstanding under this
Agreement shall, as of the date of that certain Amendment No. 1 to Amended
and Restated Line of Credit Agreement among the Bank and the Borrowers, be
deemed to be outstanding under this Agreement, and shall be subject to all
the terms and conditions stated in this Agreement.
2.5 Paragraph 1.3(c) is amended to read in its entirety as follows:
(c) to sign the Bank's form Application and Agreement for Commercial
Letter of Credit or Application and Agreement in its entirety as follows:
2.6 A new Paragraph 3.9 is added to the Agreement, and it reads in
its entirety as follows:
3.9 Taxes. If any payments to the Bank under this Agreement are
made from outside the United States, the Borrowers will not deduct any
foreign taxes from any payments they make to the Bank. If any such taxes
are imposed on any payments made by the Borrowers (including payments under
this paragraph), the Borrowers will pay the taxes and will also pay to the
Bank, at the time interest is paid, any additional amount which the Bank
specifies as necessary to preserve the after-tax yield to Bank would have
received if such taxes have not been imposed. The Borrowers will confirm
that they have paid the taxes by giving the Bank official tax receipts (or
notarized copies) within 30 days after the due date.
2.7 In Paragraphs 5.1 and 5.4, the word "jurisdiction" is
substituted for the word "state."
3
<PAGE> 4
2.8 The final sentence of the definition of "Subsidiary" in Paragraph
5.1 is amended to read in its entirety as follows:
The term "Subsidiary" shall include GMI, GI, or GIL in the event that GMI,
GI, or GIL is no longer a "Borrower" under this Agreement.
2.9 Paragraph 6.1 is amended to read in its entirety as follows:
6.1 Use of Line of Credit. To request commercial or standby
letters of credit only for use in the usual course of business and to
request standby letters of credit only for the account of TGC.
2.10 In the lead-in of Paragraph 6.2, the second parenthetical phrase
is amended to read in its entirety as follows:
(other than guarantees by TGC of the obligations of Gymboree U.K. Ltd.
under store or distributor center leases and guarantees by TGC of the
obligations of any one or more of the other Subsidiaries under store or
distributor center leases)
2.11 In Paragraph 6.4, the word "or" immediately before clause (c) is
deleted, the amount "Sixty-Five Million Dollars ($65,000,000)" is substituted
for the amount "Thirty-Five Million Dollars ($35,000,000)" in clause (c), and
the word "or" immediately followed by the following clause (d) is added:
(d) Fifty Million Dollars ($50,000,000) in the Borrowers' fiscal
year ending January 31, 1999, and in each fiscal year thereafter
2.12 In Paragraph 6.5, the second and final sentence is amended to
read in its entirety as follows:
It is provided, however, that the Borrowers and the Subsidiaries may
take any of the actions otherwise prohibited by this paragraph so long
as they do not spend in the aggregate more than Thirty Million Dollars
($30,000,000) between February 1, 1997, and the Expiration Date in
connection with any such actions.
2.13 The last sentence of Paragraph 7.1 (a) is amended to read in its
entirety as follows:
The statements shall be prepared on a consolidated basis and shall
contain no material adverse difference from TGC's annual TGC-prepared
financial statements, which latter statements TGC agrees to prepare
on a
4
<PAGE> 5
consolidating basis and provide to the Bank also within 120 days of TGC's
fiscal year end. TGC further agrees that its annual TGC-prepared financial
statements will include, without limitation, a balance sheet and an income
statement.
2.14 The following new subparagraph (g) is added to Paragraph 7.1:
(g) Within the periods provided in (b) above, a compliance
certificate of TGC signed by an authorized financial officer of TGC setting
forth (i) the information and computations (in sufficient detail) to
establish that TGC is in compliance with all financial covenants at the end
of the period covered by the financial statements then being furnished and
(ii) whether there existed as of the date of such financial statements and
whether there exists as of the date of the certificate, any default under
this Agreement and, if any such default exists, specifying the nature
thereof and the action the Borrowers are taking and propose to take with
respect thereto.
2.15 The first sentence of Paragraph 7.2 is amended to read in its
entirety as follows:
To maintain on a consolidated basis tangible net worth equal to at least
the amounts indicated each period specified below:
<TABLE>
<CAPTION>
Period Amounts
------ -------
<S> <C>
From May 1, 1997 $100,000,000
through January 30, 1998
From January 31, 1998 $100,000,000 plus 50%
through January 30, 1999 of net income after income taxes
(without subtracting losses)
earned in the fiscal year ending
January 31, 1998
On January 31, 1999 $100,000,000 plus 50% of net income
after income taxes (without
subtracting losses) earned in the
fiscal year January 31, 1998 plus
50% of net income after income
taxes (without subtracting losses)
earned in the
</TABLE>
5
<PAGE> 6
fiscal year ending
January 31, 1999
2.16 In Paragraph 7.4, the amounts "Fifteen Million Dollars
($15,000,000)" and "Thirty-Five Million Dollars ($35,000,000)" are
substituted for the amounts "Twenty Million Dollars ($20,000,000)" and
"Forty Million Dollars ($40,000,000)," respectively.
2.17 In Paragraph 9.8, the phrase "the other Borrowers" is
substituted for the phrase "the other Borrower" in each case in which the
latter phrase appears.
3. GI's and GIL's Acknowledgement. GI and GIL hereby acknowledge
that by executing this Amendment and thereby becoming Borrowers under the
Agreement, GI and GIL promise and agree to perform or to be subject to, as
applicable, each and every covenant, agreement, term, and obligation of the
Agreement including, without limitation, those which pertain to the joint and
several liability of each Borrower to the Bank for the payment of all
obligations under the Agreement and under any instrument or agreement
required under the Agreement.
4. Representations and Warranties. When the Borrowers sign this
Amendment, the Borrowers represent and warrant to the Bank that: (a) there is
no event which is, or with notice or lapse of time or both would be, a default
under the Agreement, (b) the representations and warranties in the Agreement
are true as of the date of this Amendment as if made on the date of this
Amendment, (c) this Amendment is within each Borrower's powers, has been duly
authorized, and does not conflict with any of either Borrower's organizational
papers, and (d) this Amendment does not conflict with any law, agreement, or
obligation by which either Borrower is bound.
5. Condition Precedent. This Amendment will be effective when the
Bank receives, in form and content acceptable to the Bank, evidence that the
execution, delivery, and performance by GI and GIL of this Agreement and any
instrument or agreement required under this Agreement have been duly authorized.
6. 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. Further, nothing in this Amendment shall release TGC or GMI from any of
its obligations under the Agreement.
6
<PAGE> 7
This Amendment is executed as of the date stated at the beginning of
this Amendment.
Bank of America National Trust
and Savings Association
By
---------------------------------
Title
------------------------------
By
---------------------------------
Title
------------------------------
The Gymboree Corporation
By /s/ JAMES P. CURLEY
---------------------------------
James P. Curley
Title Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
Gymboree Manufacturing, Inc.
By /s/ JAMES P. CURLEY
---------------------------------
James P. Curley
Title Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
Gymboree, Inc.
By /s/ JAMES P. CURLEY
---------------------------------
James P. Curley
Title Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
Gymboree Industries Limited
By /s/ JAMES P. CURLEY
---------------------------------
James P. Curley
Title Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
7
<PAGE> 1
Exhibit 10.17
AMENDMENT NO. 2 TO
AMENDED AND RESTATED LINE OF CREDIT AGREEMENT
This Amendment No. 2 (the "Amendment") dated as of August 11, 1997,
is among Bank of America National Trust and Savings Association (the "Bank"),
The Gymboree Corporation ("TGC"), Gymboree Manufacturing, Inc. ("GMI"),
Gymboree, Inc. ("GI"), Gymboree Industries Limited ("GIL"), and Gymboree U.K.,
Ltd. ("GUKL"). (TGC, GMI, GI, GIL, and GUKL are hereinafter referred to
collectively as the "Borrowers" and individually as a "Borrowers").
RECITALS
A. The Bank, TGC, and GMI entered into a certain Amended and
Restated Line of Credit Agreement dated as of October 27, 1995, as previously
amended (the "Agreement"). GI and GIL were added as Borrowers pursuant to
Amendment No. 1 to Amended and Restated Line of Credit Agreement dated as of
July 17, 1997.
B. TGC has a wholly-owned English subsidiary, GUKL.
C. TGC, GMI, GI, and GIL have requested the Bank to add GUKL as a
Borrower under the Agreement for the limited purpose of making available to
GUKL the new foreign exchange facility added to the Agreement by this
Amendment. The Bank is willing to grant that request subject to certain of the
additional terms and conditions set forth in this Amendment.
D. The Bank and the Borrowers desire to amend the Agreement in
order to memorialize the terms and conditions under which GUKL is added as
a Borrower under the Agreement.
E. The Bank and the Borrowers also desire to amend the Agreement
in order to add a foreign exchange facility to the Agreement and to adjust
certain within-line limitations applicable to standby letters of credit issued
under the Agreement in conjunction with making standby letters of credit
available to GIL.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this
Amendment shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 Clause (iii) of the proviso at the end of Paragraph 1.1(c)
is amended to read in its entirety as follows:
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<PAGE> 2
(iii) the outstanding amount of any standby letters of credit,
including amounts drawn on such letters credit and not yet reimbursed, may
not exceed One Million Dollars ($1,000,000); provided further that the
outstanding amount of any such letters of credit, including amounts drawn
on such letters of credit and not yet reimbursed, issued for the accounts
of TGC or GIL, respectively, may not exceed Five Hundred Thousand Dollars
($500,000).
2.2 A new Paragraph 1.4 is added to the Agreement, and it reads in
its entirety as follows:
1.4 Foreign Exchange Facility.
(a) During the availability period, the Bank at its discretion
may enter into spot and forward foreign exchange contracts with any one
more of the Borrowers. The foreign exchange contract limit will be Ten
Million U.S. Dollars (U.S. $10,000,000), and the settlement limit will be
five Million U.S. Dollars (U.S. $5,000,000). The "foreign exchange contract
limit" is the maximum limit on the net difference between the total foreign
exchange contracts outstanding less the total foreign exchange contracts
for which the borrowers have already compensated the Bank. The "settlement
limit" is the maximum limit on the gross total amount of all sale and
purchase contracts on which delivery is to be effected and settlement
allowed on any one banking day.
(b) The Bank shall not be obligated to permit the Borrowers to
enter into any foreign exchange contracts which would exceed the settlement
limit. However, if the Bank decides, in its discretion, to waive the
settlement limit for foreign exchange contracts which will settle on any
particular banking day, the Bank shall not be required to make any U.S.
Dollar or foreign currency settlement payment to the Borrowers until the
Bank receives evidence satisfactory to it that the Borrowers have paid the
Bank all of the Borrowers' U.S. Dollar and foreign currency settlement
payments. The Bank shall not be liable for interest or other damages caused
by any such failure to pay or deliver or any such delay in payment or
delivery.
(c) The Borrowers will pay the Bank on demand the Bank's then
standard foreign exchange contract fees for each contract.
(d) Foreign exchange contracts will be in form and substance
satisfactory to the Bank.
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<PAGE> 3
(e) No foreign exchange contracts will mature later than 180
days after the Expiration Date, and in addition no foreign exchange
contract shall have a tenor longer than 180 days.
(f) The Borrowers understand the risks of, and are financially
able to bear any losses resulting from, entering into foreign exchange
contracts. The Bank shall not be liable for any loss suffered by the
Borrowers as a result of the Borrowers' foreign exchange trading. The
Borrowers will enter into each foreign exchange contract in reliance
only upon the Borrowers' own judgment. The Borrowers acknowledge that
in entering into foreign exchange contracts with the Borrowers, the
Bank is not acting as a fiduciary. The Borrowers understand that
neither the Bank nor any Borrower has any obligation to enter into any
particular foreign exchange contract with the other.
(g) The Borrowers hereby request the Bank to rely upon and
execute the Borrowers' telephonic instructions regarding foreign
exchange contracts, and the Borrowers agree that the Bank shall incur
no liability for its acts or omissions which result from interruption
of communications, misunderstood communications or instructions from
unauthorized persons, unless caused by the wilful misconduct of the
Bank or its officers or employees. The Borrowers agree to protect the
Bank and hold it harmless from any and all loss, damage, claim,
expense (including the reasonable fees of outside counsel and the
allocated costs of staff counsel) or inconvenience, however arising,
which the Bank suffers or incurs or might suffer or incur, based on or
arising out of said acts or omissions.
(h) The Borrowers agree to promptly review all confirmations
sent to the Borrowers by the Bank. The Borrowers understand that these
confirmations are not legal contracts but only evidence of the valid
and binding oral contract which the Borrowers have already entered
into with the Bank. The Borrowers agree to promptly execute and return
to the Bank confirmations which accurately reflect the terms of a
foreign exchange contract, and immediately contact the Bank if the
Borrowers believe a confirmation is not accurate. In the event of a
conflict, inconsistency or ambiguity between the provisions of this
Agreement and the provisions of confirmation, the provisions of this
Agreement will prevail.
(i) The Borrowers agree that the Bank may electronically record
all telephonic conversations with the Borrowers relating to foreign
exchange contracts
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<PAGE> 4
and that such tape recordings may be submitted in evidence to any court or
in any other proceedings relating to such contracts. The Borrowers agree
that in the event of a conflict, inconsistency or ambiguity between the
terms of a foreign exchange contract as reflected in a tape recording and
the terms stated on a confirmation, the terms reflected in the tape
recording shall control.
(j) The Borrowers hereby authorize the Bank to debit the
Borrowers' accounts with the Bank for payments due from the Borrowers to
the Bank with respect to any foreign exchange contract.
(k) In addition to any other rights or remedies which the Bank
may have under this Agreement or otherwise, upon the occurrence of an event
of default under this Agreement, or if the Borrowers' aggregate realized or
unrealized mark-to-market losses on foreign exchange contracts exceed One
Million Dollars $1,000,000 (the "Revaluation Limit"), the Bank may:
(1) Suspend performance of its obligations to the
Borrowers under any foreign exchange contract;
(2) Declare all foreign exchange contracts, interest and
any other amounts which are payable by the Borrowers to the Bank
immediately due and payable; and
(3) Without notice to the Borrowers, close out any or all
foreign exchange contracts or positions of the Borrowers with the
Bank.
The Bank shall not be under any obligation to exercise any such rights or
remedies or to exercise them at a time or in a manner beneficial to the
Borrowers. The Borrowers shall be liable for any amounts owing to the Bank
after exercise of any such rights and remedies.
(l) The Borrowers agree to enter into a Foreign Exchange Master
Agreement with the Bank (as amended, modified or renewed, the "FEMA") by no
later than September 23, 1997. All foreign exchange transactions entered into
between each Borrower and the Bank shall be subject to the provisions of this
Agreement and the FEMA. In the event of any conflict or inconsistency between
the provisions of this Agreement and the provisions of the FEMA, the provisions
of the FEMA shall control. The occurrence of an Event of Default under the FEMA
shall also constitute a default under this Agreement.
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<PAGE> 5
2.3 The final sentence of the definition of "Subsidiary" in
Paragraph 5.1 is amended to read in its entirety as follows:
The term "Subsidiary" shall include GMI, GI, GIL, or GUKL in the
event that GMI, GI, GIL, or GUKL is no longer a "Borrower" under
this Agreement.
2.4 Paragraph 6.1 is amended to read in its entirety as
follows:
6.1 Use of Line of Credit. To request commercial or
standby letters of credit only for use in the usual course of
business and to request standby letters of credit only for the
accounts of TGC or GIL.
2.5 In the lead-in of Paragraph 6.2, "GUKL" is substituted
for "Gymboree U.K. Ltd." in the second parenthetical phrase.
3. GUKL's Acknowledgment. GUKL hereby acknowledges that by
executing this Amendment and thereby becoming a Borrower under the Agreement
for the limited purpose of entering into spot and forward foreign exchange
contracts with the Bank, GUKL promises and agrees to perform or to be subject
to, as applicable, each and every covenant, agreement, term, and obligation of
the Agreement including, without limitation, those which pertain to the joint
and several liability of each Borrower to the Bank for the payment of all
obligations under the Agreement and under any instrument or agreement required
under the Agreement.
4. Representations and Warranties. When the Borrowers sign
this Amendment, the Borrowers represent and warrant to the Bank that: (a)
there is no event which is, or with notice or lapse of time or both would be, a
default under the Agreement, (b) the representations and warranties in the
Agreement are true as of the date of this Amendment as if made on the date of
this Amendment, (c) this Amendment is within each Borrower's powers, has been
duly authorized, and does not conflict with any of either Borrower's
organizational papers, and (d) this Amendment does not conflict with any law,
agreement, or obligation by which either Borrower is bound.
5. Condition Precedent. This Amendment will be effective when
the Bank receives, in form and content acceptance to the Bank, evidence that
the execution, delivery, and performance by GUKL of this Amendment and any
instrument or agreement required under the Agreement, as amended by this
Amendment, have been duly authorized.
6. 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. Further, nothing in this
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<PAGE> 6
Amendment shall release TGC, GMI, GI, or GIL from any of its obligations under
the Agreement.
This Amendment is executed as of the date stated at the beginning of
this Amendment.
Bank of America National Trust
and Savings Association
By
---------------------------------
Title
------------------------------
By
---------------------------------
Title
------------------------------
The Gymboree Corporation
By /s/ JAMES P. CURLEY
---------------------------------
James P. Curley
Title Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
Gymboree Manufacturing, Inc.
By /s/ JAMES P. CURLEY
---------------------------------
James P. Curley
Title Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
Gymboree, Inc.
By /s/ JAMES P. CURLEY
---------------------------------
James P. Curley
Title Senior Vice President,
Chief Financial Officer,
Chief Accounting Officer
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
6
<PAGE> 1
EXHIBIT 10.18
AMENDMENT NO. 3 TO
AMENDED AND RESTATED LINE OF CREDIT AGREEMENT AND WAIVER
This Amendment No. 3 and Waiver (the "Amendment and Waiver") dated as
of January 9, 1998, is among Bank of America National Trust and Savings
Association (the "Bank"), The Gymboree Corporation ("TGC"), Gymboree
Manufacturing, Inc. ("GMI"), Gymboree, Inc. ("GI"), Gymboree Industries Limited
("GIL"), Gymboree U.K., Ltd. ("GUKL"), and Gymboree U.K. Leasing Limited
("GUKLL"). (TGC, GMI, GI, GIL, GUKL, and GUKLL are hereinafter referred to
collectively as the "Borrowers" and individually as a "Borrower").
RECITALS
A. The Bank, TGC, and GMI entered into a certain Amended and
Restated Line of Credit Agreement dated as of October 27, 1995, as previously
amended (the "Agreement"). GI and GIL were added as Borrowers pursuant to
Amendment No. 1 to Amended and Restated Line of Credit Agreement dated as of
July 17, 1997. Pursuant to Amendment No. 2 to Amended and Restated Line of
Credit Agreement dated as of August 11, 1997 ("Amendment No. 2"), GUKL was
added as a Borrower for the limited purpose of making available to GUKL the new
foreign exchange facility added to the Agreement by Amendment No. 2.
B. In addition to GUKL, TGC has another wholly-owned English
Subsidiary GUKLL.
C. TGC, GMI, GI, GIL, and GUKL have requested the Bank (a) to add
GUKLL as a Borrower under the Agreement for the limited purpose of making
standby letters of credit available to GUKLL and (b) to begin making standby
letters available to GUKL. The Bank is willing to grant these requests subject
to certain of the additional terms and conditions set forth in this Amendment
and Waiver.
D. The Bank and the Borrowers desire to amend the Agreement in
order to memorialize the terms and conditions under which GUKLL is added as a
Borrower under the Agreement.
E. The Bank and the Borrowers also desire to amend the Agreement
in order to adjust certain within-line limitations applicable to standby
letters of credit issued under the Agreement in conjunction with making standby
letters of credit available to both GUKL and GUKLL and in order to add certain
terms and conditions to the Agreement.
F. Finally, certain events of default have occurred under the
Agreement, and, in addition, the Bank has waived on a one-time basis a
restriction applicable to commercial letters of credit in order to issue
certain letters of credit for the account of GMI. The Borrowers have requested
the Bank to waive those events of default and to confirm its one-time waiver.
The
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<PAGE> 2
Bank is willing to comply with that request, and in conjunction therewith, the
Bank and the Borrowers have agreed to further amend the Agreement, subject to
the terms and conditions of this Amendment and Waiver.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this
Amendment and Waiver shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 The proviso at the end of Paragraph 1.1(c) is amended to
read in its entirety as follows:
It is provided, however, that:
(i) the outstanding amounts of any commercial letters of
credit issued for the account of GI, including amounts drawn on
such letters of credit and not yet reimbursed, may not exceed
Ten Million Dollars ($10,000,000) (the "GI L/C Limit");
(ii) the outstanding amount of any commercial letters of
credit issued for the account of GIL, including amounts drawn on
such letters of credit and not yet reimbursed, may not exceed
Ten Million Dollars ($10,000,000) (the "GIL Commercial L/C
Limit");
(iii) the outstanding amount of any standby letters of
credit, including amounts drawn on such letters of credit and not
yet reimbursed, may not exceed Eleven Million Dollars
($11,000,000); provided further that the outstanding amount of
any such letters of credit, including amounts drawn on such
letters of credit and not yet reimbursed, issued (A) for the
accounts of TGC or GIL, respectively, may not exceed Five
Hundred Thousand Dollars ($500,000) for either TGC or GIL (with
respect to GIL, the "GIL Standby L/C Limit") and (B) for the
accounts of GUKL or GUKLL, respectively, may not in the
aggregate exceed Ten Million Dollars ($10,000,000) (the
"GUKL/GUKLL L/C Limit").
(iv) the outstanding amounts of any letters of credit
issued for the accounts of TGC or GMI, including amounts drawn
on such letters of credit and not yet reimbursed, may not at any
time exceed the Commitment minus the sum of the GI L/C Limit
plus the GIL Commercial L/C Limit plus the
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<PAGE> 3
GIL Standby L/C Limit plus the GUKL/GUKLL L/C
Limit.
(In calculating the amounts described above, the Bank will use
Equivalent Amounts for letters of credit denominated in Canadian
Dollars, Irish Punts, or English Pounds Sterling. "Equivalent
Amount" means the equivalent in U.S. Dollars of another currency
calculated at the spot rate for the purchase of such other
currency with U.S. Dollars quoted by the Bank's Foreign Exchange
Trading Center in San Francisco, California, at approximately
8:00 a.m. San Francisco time two (2) banking days (as determined
by Bank with respect to such currency) prior to the relevant
date.)
2.2 The first seven sentences of Paragraph 1.3 are amended to
read in their entirety as follows:
1.3 Letters of Credit. This line of credit may be used for
financing:
(i) commercial letters of credit with a maximum maturity
of 180 days but not to extend more than 180 days beyond the
Expiration Date. Each commercial letter of credit will require
drafts payable at sight or up to the earlier of 180 days after
sight or 180 days after the Expiration Date.
(ii) standby letters of credit with a maximum maturity not
to extend more than 5 years beyond the Expiration Date in the
case of letters of credit issued for the account of either GUKL
or GUKLL and not to extend beyond the Expiration Date in all
other cases.
Each commercial letter of credit issued for the account of GI may be
denominated in U.S. Dollars or Canadian Dollars. Each commercial
letter of credit issued for the account of GIL may be denominated in
U.S. Dollars or Irish Punts. Each standby letter of credit issued for
the account of either GUKL or GUKLL may be denominated in U.S.
Dollars or English Pounds Sterling. All other letters of credit
issued pursuant to this Agreement will be denominated in U.S. Dollars.
2.3 A new Paragraph 1.5 is added to the Agreement, and it reads
in its entirety as follows:
1.5 Termination of Line Credit. if this line of credit
terminates as a result of the Borrowers' request to cancel it, the
Bank's decision to cancel it because on or more Borrowers are in
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<PAGE> 4
GIL Standby L/C Limit plus the GUKL/GUKLL L/C Limit.
(In calculating the amounts described above, the Bank will use
Equivalent Amounts for letters of credit denominated in Canadian
Dollars, Irish Punts, or English Pounds Sterling. "Equivalent Amount"
means the equivalent in U.S. Dollars of another currency calculated at
the spot rate for the purchase of such other currency with U.S.
Dollars quoted by the Bank's Foreign Exchange Trading Center in San
Francisco, California, at approximately 8:00 a.m. San Francisco time
two (2) banking days (as determined by Bank with respect to such
currency) prior to the relevant date.)
2.2 The first seven sentences of Paragraph 1.3 are amended to read in
their entirety as follows:
1.3 Letters of Credit. This line of credit may be used for
financing;
(i) commercial letters of credit with a maximum maturity of 180
days but not to extend more than 180 days beyond the Expiration Date.
Each commercial letter of credit will require drafts payable at sight
or up to the earlier of 180 days after sight or 180 days after the
Expiration Date.
(ii) standby letters of credit with a maximum maturity not to
extend more than 5 years beyond the Expiration Date in the case of
letters of credit issued for the account of either GUKL or GUKLL and
not to extend beyond the Expiration Date in all other cases.
Each commercial letter of credit issued for the account of GI may be
denominated in U.S. Dollars or Canadian Dollars. Each commercial letter of
credit issued for the account of GIL may be denominated in U.S. Dollars or
Irish Punts. Each standby letter of credit issued for the account of either
GUKL or GUKLL may be denominated in U.S. Dollars or English Pounds
Sterling. All other letters of credit issued pursuant to this Agreement
will be denominated in U.S. Dollars.
2.3 A new Paragraph 1.5 is added to the Agreement, and it reads in
its entirety as follows:
1.5 Termination of Line of Credit. If this line of credit
terminates as a result of the Borrowers' request to cancel it, the Bank's
decision to cancel it because one or more Borrowers are in
3
<PAGE> 5
default, the Bank's decision not to renew it, or the Borrowers'
decision not to accept the Bank's offer to renew it upon such terms
and conditions as the Bank may offer, or for any other reason, the
Borrowers must by no later than 15 days before the effective date of
such termination:
(a) deposit with the Bank, as cash security for the
Borrowers' reimbursement obligations with respect to all
outstanding letters of credit issued pursuant to this Agreement,
an amount equal to the total outstanding amount of all such
letters of credit, including amounts drawn on any such letters of
credit and not yet reimbursed, and sign such documents as the
Bank requires to obtain and perfect its security interest in such
cash security; and
(b) with respect to each letter of credit, if any, for
which the Borrowers have not provided cash security in accordance
with subparagraph (a) above, obtain a standby letter of credit
issued in favor of the Bank, as beneficiary, by an issuer
acceptable to the Bank and in form, amount, and substance
acceptable to the Bank for the purpose of supporting the
Borrowers' reimbursement obligations with respect to the
corresponding letter of credit outstanding under this Agreement.
If any letters of credit are requested by an Borrower and issued by
the Bank during the 15 days before the effective date of such
termination, the Borrowers must, with respect to any such letter of
credit issued during such period, take the actions described in either
subparagraph (a) or subparagraph (b) above prior to the issuance of
such letter of credit.
2.4 The final sentence of the definition of "Subsidiary" in
Paragraph 5.1 is amended to read in its entirety as follows:
The term "Subsidiary" shall include GMI, GI, GIL, GUKL, or GUKLL
in the event that GMI, GI, GIL, GUKL, or GUKLL is no longer a
"Borrower" under this Agreement.
2.5 A new Paragraph 5.15 is added to the Agreement, and it reads
in its entirety as follows:
5.15 Year 2000 Compliance. Each Borrower and each
Subsidiary has conducted a review and assessment of its computer
applications and made inquiry of its key suppliers, vendors, and
customers with respect to the "year 2000 problem" (that is, the
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<PAGE> 6
risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) and, based on that
review and inquiry, no Borrower and no Subsidiary believes the year
2000 problem will result in a material adverse change in its business
condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
2.6 Paragraph 6.1 is amended to read in its entirety as
follows:
6.1 Use of Line of Credit. To request commercial or
standby letters of credit only for the use in the usual course of
business and to request standby letters of credit only for the
accounts of TGC, GIL, GUKL, or GUKLL.
2.7 In the lead-in of Paragraph 6.2, the second
parenthetical phrase is amended to read in its entirety as follows:
(other than guarantees by TGC of the obligations of GUKL under store
or distributor center leases, guarantees by TGC of the obligations
of any one or more of the other Subsidiaries under store or
distributor center leases, and the guaranty of Gymboree Industries
Holdings Limited required under this Agreement)
2.8 Paragraph 6.5 is deleted.
2.9 Paragraph 9.2 is amended to read in its entirety as
follows:
9.2 Governing Law, Jurisdiction, and Service of Process.
(a) This Agreement is governed by and construed
according to the laws of the State of California, United
States of America.
(b) Any legal action or proceeding with respect to
this Agreement may be brought in the state or federal
courts located in the State of California, and by execution
and delivery of this Agreement, the Borrowers consent, for
themselves and in respect of their property, to the
jurisdiction of those courts. The Borrowers irrevocably
waive any objection, including any objection to the laying
of venue or based on the grounds of forum non conveniens,
which they may now or hereafter have to the bringing of any
action or proceeding in such jurisdiction in respect of this
Agreement or any document related
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<PAGE> 7
hereto. The Borrowers waive personal service of any summons,
complaint, or other process, which may be made by any other means
permitted by California law.
(c) Final judgment (a certified or exemplified copy of
which shall be conclusive evidence of the fact and of the amount of
any indebtedness of the Borrowers in any action or proceeding with
respect to this Agreement) shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment. Nothing herein shall
affect the rights of the Bank to commence any action or proceeding in
the courts of Canada (or any province thereof), Great Britain,
Ireland or the courts of any other state or country where the
Borrowers or any of their property may be found.
(d) The Borrowers acknowledge and agree that the locals
for any arbitration pursuant to Paragraph 9.4 of this Agreement shall
be within the State of California.
(e) GI, GIL, GUKL, and GUKLL irrevocably appoint TGC and
GMI as their process agents to receive, for them and on their behalf,
service of process in any legal action or proceeding with respect to
this Agreement. If TGC's or GMI's chief executive office is no longer
located in the State of California, GI, GIL, GUKL, and GUKLL also
appoint the Secretary of State of the State of California as their
process agent to receive, for them and on their behalf, service of
process in any legal action or proceeding with respect to this
Agreement. If for any reason GI's, GIL's, GUKL's, and GUKLL's process
agents are unable to act as such, GI, GIL, GUKL, and GUKLL shall
promptly notify the Bank and within thirty (30) days appoint a
substitute process agent or agents acceptable to the Bank. Nothing in
this Agreement will affect the right of the Bank to serve process in
any manner permitted by law.
3. Defaults and Waiver.
3.1 For purposes of this Amendment and Waiver, the "Existing
Defaults" shall mean:
(a) the default existing under Paragraph 1.4(1) of the
Agreement from September 24, 1997, until December 1, 1997, as a
result of the Borrowers' failure to enter into the FEMA until
December 1, 1997, instead of by September 23, 1997, as required by
Paragraph 1.4(1); and
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<PAGE> 8
(b) the default existing under Paragraph 6.5 of the
Agreement as of November 21, 1997, and thereafter as a result of the
Borrowers' and the Subsidiaries' expenditures for the repurchase of
shares exceeding, without the Bank's prior consent, the maximum
aggregate amount permitted by Paragraph 6.5
3.2 Subject to and upon the terms and conditions hereof, the Bank
hereby waives the Existing Defaults.
3.3 Subject to the terms and conditions hereof, the Bank confirms
that on December 1, 1997, it waived Paragraph 1.3(i) of the Agreement for
the sole and express purpose of complying with the Borrowers' request to
issue 3 commercial letters of credit for the account of GMI, each such
letter of credit with a maximum maturity of 209 days instead of the maximum
maturity of 180 days required by Paragraph 1.3(i).
3.4 Nothing contained herein shall be deemed a waiver of (or
otherwise affect the Bank's ability to enforce) any other event of default
or any other term, condition, or covenant of the Agreement, including
without limitation (i) any event of default as may now or hereafter exist
and arise from or otherwise be related to the Existing Defaults (including
without limitation any cross-default arising under the Agreement by virtue
of any matters resulting from the Existing Defaults) or to the requirements
set forth in Paragraph 1.3(i) of the Agreement, and (ii) any event of
default arising at any time after the date of this Amendment and Waiver and
which is the same as any of the Existing Defaults or is a breach of any of
the requirements set forth in Paragraph 1.3(i) of the Agreement.
4. GUKLL's Acknowledgement. GUKLL hereby acknowledges that by
executing this Amendment and Waiver and thereby becoming a Borrower under the
Agreement for the limited purpose of the obtaining standby letters of credit
issued for its account by the Bank, GUKLL promises and agrees to perform or to
be subject to, as applicable, each and every covenant, agreement, term, and
obligation of the Agreement including, without limitation, those which pertain
to the joint and several liability of each Borrower to the Bank for the
payment of all obligations under the Agreement and under any instrument or
agreement required under the Agreement.
5. Representations and Warranties. When the Borrowers sign this
Amendment and Waiver, the Borrowers represent and warrant to the Bank that: (a)
there is no event which is, or with notice or lapse of time or both would be,
a default under the Agreement, except those events, if any, that have been
disclosed in writing to the Bank or waived in writing by the Bank, (b) the
representations and warranties in the
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Agreement are true as of the date of this Agreement and Waiver as if made on
the date of this Amendment and Waiver, (c) this Amendment and Waiver is within
each Borrower's powers, has been duly authorized, and does not conflict with
any Borrower's organizational papers, (d) this Amendment and Waiver does not
conflict with any law, agreement, or obligation by which any Borrower is bound,
and (e) the Borrower are entering into this Amendment and Waiver on the basis
of their own investigation and for their own reasons, without reliance upon the
Bank or any other entity or individual.
6. Conditions Precedent. This Amendment and Waiver will be
effective when the Bank receives, in form and content acceptable to the Bank,
evidence that the execution, delivery, and performance by GUKL and GUKLL of
this Amendment and Waiver and any instrument or agreement required under the
Agreement, as amended by this Amendment and Waiver, have been duly authorized.
7. Conditions Subsequent. This Amendment and Waiver will remain
effective only if the Bank receives, in form and content acceptable to the
Bank, by no later than February 28, 1998:
(a) Guaranty signed by Gymboree Industries Holdings Limited ("GIHL")
(b) Evidence that the execution, delivery and performance by GIHL of
the above-required Guaranty have been duly authorized, together with a
written opinion from GIHL's legal counsel covering such matters as the
Bank may require. The legal counsel and the forms of the opinion must be
acceptable to the Bank.
8. Reservation of Rights. The Borrowers acknowledge and agree that
neither the Bank's forbearance in exercising its rights and remedies in
connection with the Existing Defaults, nor the execution and delivery by the
Bank of this Amendment and Waiver, shall be deemed (a) to create a course of
dealing or otherwise obligate the Bank to forbear or execute similar waivers
under the same or similar circumstances in the future, or (b) to waive,
relinquish or impair any right of the Bank to receive any indemnity or similar
payment from any person or entity as a result of any matter arising from or
relating to the Existing Defaults.
9. Effect of Amendment and Waiver. Except as provided in this
Amendment and Waiver, all of the terms and conditions of the Agreement shall
remain in full force and effect. Further, nothing in this Amendment and Waiver
shall release TGC, GMI, GI, GIL, or GUKL from any of its obligations under the
Agreement.
8
<PAGE> 10
This Amendment and Waiver is executed as of the date stated at the
beginning of this Amendment.
Bank of America National Trust
and Savings Association
By
---------------------------------
Title
------------------------------
By
---------------------------------
Title
------------------------------
The Gymboree Corporation
By /s/ GARY WHITE
---------------------------------
Title President and CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
Gymboree Manufacturing, Inc.
By /s/ GARY WHITE
---------------------------------
Title President and CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title Vice President, Treasurer
------------------------------
9
<PAGE> 11
Gymboree, Inc.
By /s/ GARY WHITE
---------------------------------
Title President and CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree Industries Limited
By /s/ GARY WHITE
---------------------------------
Title President and CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree U.K., Ltd.
By /s/ GARY WHITE
---------------------------------
Title President and CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree U.K. Leasing Limited
By /s/ GARY WHITE
---------------------------------
Title President and CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
10
<PAGE> 1
EXHIBIT 10.19
AMENDMENT NO. 4 TO
AMENDED AND RESTATED LINE OF CREDIT AGREEMENT
This Amendment No. 4 (the "Amendment") dated as of January 30, 1998,
is among Bank of America National Trust and Savings Association (the "Bank"),
The Gymboree Corporation ("TGC"), Gymboree Manufacturing, Inc. ("GMI"),
Gymboree, Inc. ("GI"), Gymboree Industries Limited ("GIL"), Gymboree U.K., Ltd.
("GUKL"), and Gymboree U.K. Leasing Limited ("GUKLL"). (TGC, GMI, GI, GIL,
GUKL, and GUKLL are hereinafter referred to collectively as the "Borrowers" and
individually as a "Borrower").
RECITALS
A. The Bank, TGC, and GMI entered into a certain Amended and
Restated Line of Credit Agreement dated as of October 27, 1995, as previously
amended (the "Agreement"). GI and GIL were added as Borrowers pursuant to
Amendment No. 1 to Amended and Restated Line of Credit Agreement dated as of
July 17, 1997. Pursuant to Amendment No. 2 to Amended and Restated Line of
Credit Agreement dated as of August 11, 1997 ("Amendment No. 2"), GUKL was added
as a Borrower for the limited purpose of making available to GUKL the new
foreign exchange facility added to the Agreement by Amendment No. 2. Pursuant to
Amendment No. 3 to Amended and Restated Line of Credit Agreement and Waiver
dated as of January 9, 1998 ("Amendment No. 3 and Waiver"), GUKLL was added as a
Borrower for the limited purpose of making standby letters of credit available
to GUKLL. Standby letters of credit were also made available to GUKL pursuant to
Amendment No. 3 and Waiver.
B. The Bank and the Borrowers now desire to amend the Agreement in
order to amend TGC's liquidity covenant for and only for TGC's fiscal year
ending as of January 31, 1998.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this
Amendment shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 The first sentence of Paragraph 7.4 is amended to read in
its entirety as follows:
To maintain unencumbered liquid assets equal to at least Fifteen
Million Dollars ($15,000,000) as of the end of the first, second, and
third fiscal quarter of each fiscal year, Twenty Million Dollars
($20,000,000) as of the end of the fiscal year ending January 31,
1
<PAGE> 2
1998, and Thirty-Five Million Dollars ($35,000,000) as of the end of
each fiscal year thereafter.
3. Representations and Warranties. When the Borrowers sign this
Amendment, the Borrowers represent and warrant to the Bank that: (a) there is
no event which is, or with notice or lapse of time or both would be, a default
under the Agreement, except those events, if any, that have been disclosed in
writing to the Bank or waived in writing by the Bank, (b) the representations
and warranties in the Agreement are true as of the date of this Amendment as if
made on the date of this Amendment, (c) this Amendment is within each
Borrower's powers, has been duly authorized, and does not conflict with any
Borrower's organizational papers, (d) this Amendment does not conflict with
any law, agreement, or obligation by which any Borrower is bound, and (e) the
Borrowers are entering into this Amendment on the basis of their own
investigation and for their own reasons, without reliance upon the Bank or any
other entity or individual.
4. 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 stated at the beginning of
this Amendment.
Bank of America National Trust
and Savings Association
By
---------------------------------
Title
------------------------------
By
---------------------------------
Title
------------------------------
The Gymboree Corporation
By /s/ GARY WHITE
---------------------------------
Title CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Joseph T. Prusko
Title VP, Treasurer
------------------------------
2
<PAGE> 3
Gymboree Manufacturing, Inc.
By /s/ GARY WHITE
---------------------------------
Title CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree, Inc.
By /s/ GARY WHITE
---------------------------------
Title CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree Industries Limited
By /s/ GARY WHITE
---------------------------------
Title CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree U.K., Ltd.
By /s/ GARY WHITE
---------------------------------
Title CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree U.K. Leasing Limited
By /s/ GARY WHITE
---------------------------------
Title CEO
------------------------------
By /s/ JOSEPH T. PRUSKO
---------------------------------
Title Vice President, Treasurer
------------------------------
3
<PAGE> 1
EXHIBIT 10.20
AMENDMENT NO. 5 TO
AMENDED AND RESTATED LINE OF CREDIT AGREEMENT
This Amendment No. 5 (the "Amendment") dated as of March 9, 1998, is among
Bank of America National Trust and Savings Association (the "Bank"), The
Gymboree Corporation ("TGC"), Gymboree Manufacturing, Inc. ("GMI"), Gymboree,
Inc. ("GI"), Gymboree Industries Limited ("GIL"), Gymboree, U.K., Limited
("GUKL"), and Gymboree U.K. Leasing Limited ("GUKLL"). (TGC, GMI, GI, GIL,
GUKL, and GUKLL are hereinafter referred to collectively as the "Borrowers" and
individually as a "Borrower").
RECITALS
A. The Bank, TGC, and GMI entered into a certain Amended and Restated
Line of Credit Agreement dated as of October 27, 1995, as previously amended
(the "Agreement"). GI and GIL were added as Borrowers pursuant to Amendment No.
1 to Amended and Restated Line of Credit Agreement dated as of July 17, 1997.
Pursuant to Amendment No. 2 to Amended and Restated Line of Credit Agreement
dated as of August 11, 1997 ("Amendment No. 2"), GUKL was added as a Borrower
for the limited purpose of making available to GUKL the new foreign exchange
facility added to the Agreement by Amendment No. 2. Pursuant to Amendment No. 3
to Amended and Restated Line of Credit Agreement and Waiver dated as of January
9, 1998 ("Amendment No. 3 and Waiver"), GUKLL was added as a Borrower for the
limited purpose of making standby letters of credit available to GUKLL. Standby
letters of credit were also made available to GUKL pursuant to Amendment No. 3
and Waiver. Pursuant to Amendment No. 4 to Amended and Restated Line of Credit
Agreement dated as of January 30, 1998, TGC's liquidity covenant was amended
for and only for TGC's fiscal year ending as of January 31, 1998.
B. The Bank and the Borrowers now desire to amend the Agreement in order
to make cash advances available to TGC, to amend TGC's tangible net worth
covenant, to further amend TGC's liquidity covenant, and to require certain
additional guaranties.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this Amendment
shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 Paragraph 1.1(b) is amended to read in its entirety as follows:
1
<PAGE> 2
(b) This is a revolving line of credit providing for cash
advances and letters of credit. During the availability period, the
Borrowers may repay principal amounts of cash advances and reborrow them.
The aggregate principal balance of cash advances outstanding at any one
time may not exceed Fifteen Million Dollars ($15,000,000) (the "Advance
Limit").
2.2 The first sentence of Paragraph 1.1(c) is amended to read in its
entirety as follows:
The Borrowers agree not to permit the outstanding amounts of any letters of
credit, including amounts drawn on letters of credit and not yet
reimbursed, plus the Advance Limit to exceed the Commitment.
2.3 In clause (iv) of Paragraph 1.1(c), the phrase "plus the Advance
Limit" is inserted between the phrase "plus the GUKL/GUKLL L/C Limit" and the
period at the end of clause (iv).
2.4. New Paragraphs 1.6, 1.7, 1.8, and 1.9 are added to the
Agreement, and they read in their entirety as follows:
1.6 Interest Rate.
(a) Unless the Borrowers elect an optional interest rate as
described below, the interest rate is the Bank's Reference Rate minus 0.5
percentage point.
(b) The Reference Rate is the rate of interest publicly
announced from time to time by the Bank in San Francisco, California, as
its Reference Rate. The Reference Rate is set by the Bank based on various
factors, including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing
some loans. The Bank may price loans to its customers at, above, or below
the Reference Rate. Any change in the Reference Rate shall take effect at
the opening of business on the day specified in the public announcement of
a change in the Bank's Reference Rate.
1.7 Repayment Terms.
(a) The Borrowers will pay interest on April 1, 1998, and then
monthly thereafter until payment in full of any principal outstanding under
this line of credit.
(b) The Borrowers will repay in full all principal and any
unpaid interest or other charges outstanding under this line of credit no later
than
2
<PAGE> 3
the Expiration Date. Any interest period for an optional interest rate (as
described below) shall expire no later than the Expiration Date.
1.8 Optional Interest Rates.
(a) Instead of the interest rate based on the Bank's Reference
Rate, the Borrowers may elect the optional interest rate specified below
during interest periods agreed to by the Bank and the Borrowers. The
optional interest rate shall be subject to the terms and conditions
described later in this Agreement. Any principal amount bearing interest at
an optional rate under this Agreement is referred to as a "Portion." The
optional interest rate that is available is the LIBOR Rate plus 0.5
percentage point.
(b) Each optional interest rate is a rate per year. Interest
will be paid on the last day of each interest period, and, if the interest
period is longer than one month, then on the first day of each month during
the interest period. At the end of any interest period, the interest rate
will revert to the rate based on the Reference Rate, unless the Borrowers
have designated another optional interest rate for the Portion. No Portion
will be converted to a different interest rate during the applicable
interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of optional interest
rates of interest periods commencing after the default occurs.
1.9 LIBOR Rate. The election of LIBOR Rates shall be subject to
the following terms and requirements:
(a) The interest period during which the LIBOR Rate will be in
effect will be one, two, three, four, five, six, seven, eight, nine, ten,
eleven, or twelve months. The first day of the interest period must be a
day other than a Saturday or a Sunday on which the Bank is open for
business in California, New York and London and dealing in offshore dollars
(a "LIBOR Banking Day"). The last day of the interest period and the actual
number of days during the interest period will be determined by the Bank
using the practices of the London inter-bank market.
(b) Each LIBOR Rate Portion will be for an amount not less than
the following:
(i) for interest periods of four months or longer, Five
Hundred Thousand Dollars ($500,000).
3
<PAGE> 4
(ii) for interest periods of one, two or three months, One
Million Dollars ($1,000,000).
(c) The "LIBOR Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of the
first day of the interest period.
LIBOR Rate = London Inter-Bank Offered Rate
------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means the average per
annum interest rate at which U.S. dollar deposits would be offered
for the applicable interest period by major banks in the London
inter-bank market, as shown on the Telerate Page 3750 (or such other
page as may replace it) at approximately 11:00 a.m. London time two
(2) London Banking Days before the commencement of the interest
period. If such rate does not appear on the Telerate Page 3750 (or
such other page that may replace it), the rate for that interest
period will be determined by such alternate method as reasonably
selected by Bank. A "London Banking Day" is a day on which the Bank's
London Branch is open for business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum
reserve percentages for determining the determining the reserves to be
maintained by member banks of the Federal Reserve System for
Eurocurrency Liabilities, as defined in Federal Reserve Board
Regulation D, rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include, but not
be limited to, marginal, emergency, supplemental, special, and other
reserve percentages.
(d) The Borrowers shall irrevocably request a LIBOR Rate
Portion no later than 12:00 noon San Francisco time on the LIBOR Banking
Day preceding the day on which the London Inter-Bank Offered Rate will be
set, as specified above. For example, if there are no intervening holidays
or weekend days in any of the relevant locations, the request must be made
at least three days before the LIBOR Rate takes effect.
(e) The Borrowers may not elect a LIBOR Rate with respect to
any principal amount which is
4
<PAGE> 5
scheduled to be repaid before the last day of the applicable interest
period.
(f) Each prepayment of a LIBOR Rate Portion, whether
voluntary, by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid and a
prepayment fee as described below. A "prepayment" is a payment of an
amount on a date earlier than the scheduled payment date for such
amount as required by this Agreement. The prepayment fee shall be
equal to the amount (if any) by which:
(i) the additional interest which would have been
payable during the interest period on the amount prepaid had it
not been prepaid, exceeds
(ii) the interest which would have been recoverable by
the Bank by placing the amount prepaid on deposit in the domestic
certificate of deposit market, the eurodollar deposit market, or
other appropriate money market selected by the Bank, for a period
starting on the date on which it was prepaid and ending on the
last day of the interest period for such Portion (or the
scheduled payment date for the amount prepaid, if earlier).
(g) The Bank will have no obligation to accept an election
for a LIBOR Rate Portion if any of the following described events has
occurred and is continuing:
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of a LIBOR Rate Portion are
not available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the
cost of a LIBOR Rate Portion.
2.5 Article 2 is amended to read in its entirety as follows:
2. PERIODIC FEE.
The Borrowers agree to pay a fee equal to 1/16% per annum of
the Advance Limit, payable in arrears. This fee is due on May 2, 1998,
and on the last day of each following fiscal quarter until the
expiration of the availability period.
5
<PAGE> 6
2.6 In Paragraph 3.3(a), the phrase "telephone or telefax
instructions for repayments or for the issuance of letters of credit" is
replaced by the phrase "telephone or telefax instructions for advances or
repayments or for the designation of optional interest rates and telefax
requests for the issuance of letters of credit."
2.7 In Paragraph 3.3(b), the phrase "Repayments will be
withdrawn from TGC's account number 14729-01406" is replaced by the phrase
"Advances will be deposited in and repayments will be withdrawn from TGC's
account number 14729-01406."
2.8 In Paragraph 3.4(a), the phrase "interest and any fees" is
replaced by the phrase "interest and principal payments and any fees."
2.9 Paragraph 6.1 is amended to read in its entirety as follows:
6.1 Use of Proceeds. To request (a) cash advances only for
use by TGC in order to fund TGC's short-term working capital needs,
(b) commercial or standby letters of credit only for use in the usual
course of business, (c) commercial letters of credit only for the
accounts of TGC, GMI, GI, or GIL, and (d) standby letters of credit
only for the accounts of TGC, GIL, GUKL, or GUKLL.
2.10 In the lead-in of Paragraph 6.2, the second parenthetical
phrase is amended to read in its entirety as follows:
(other than guaranties by TGC of the obligations of GUKL under store
or distributor center leases, guaranties by TGC of the obligations of
any one or more of the other Subsidiaries under store or distributor
center leases, and guaranties required under this Agreement, including
guaranties required under any amendments to this Agreement)
2.11 In Paragraph 7.2, the first sentence is amended to read in
its entirety as follows:
To maintain on a consolidated basis tangible net worth equal to at
least One Hundred Twenty-Five Million Dollars ($125,000,000) through
the day before the last day of TGC's 1998 fiscal year, and, as of
TGC's 1998 fiscal year end and thereafter, to maintain tangible net
worth equal to the sum of (a) One Hundred Twenty-Five Million Dollars
($125,000,000) plus (b) the sum of 50% of net income after income
taxes (without subtracting losses) earned in each fiscal year
commencing with TGC's 1998 fiscal year.
6
<PAGE> 7
2.12 In Paragraph 7.2, the definition of tangible net worth
is amended by deleting the word "subsidiaries" and the comma
immediately following that word.
2.13 In Paragraph 7.4, the lead-in of the definition of
liquid assets is amended to read in its entirety as follows:
"Liquid assets" means the following assets of TGC calculated
on a consolidated basis:
3. Representations and Warranties. When the Borrowers sign
this Amendment, the Borrowers represent and warrant to the Bank that: (a)
there is no event which is, or with notice or lapse of time or both would be, a
default under the Agreement, except those events, if any, that have been
disclosed in writing to the Bank or waived in writing by the Bank, (b) the
representations and warranties in the Agreement are true as of the date of this
Amendment as if made on the date of this Amendment, (c) this Amendment is
within each Borrower's powers, has been duly authorized, and does not conflict
with any Borrower's organizational papers, (d) this Amendment does not conflict
with any law, agreement, or obligation by which any Borrower is bound, and (e)
the Borrowers are entering into this Amendment on the basis of their own
investigation and for their own reasons, without reliance upon the Bank or any
other entity or individual.
4. Conditions Subsequent. This Amendment will remain
effective only if the Bank receives, in form and content acceptable to the
Bank, by no later than June 15, 1998:
(a) Guaranties signed by Gym-mark, Inc., Gymboree Retail
Stores, Inc., The Gymboree Stores, Inc., Gymboree Logistics
Partnership, Gymboree Play Program, Inc., Gymboree Operations, Inc.,
Gymboree Japan K.K., Gymboree of Ireland, Ltd., Gymboree Ireland
Leasing Limited, and Gymboree Hong Kong Ltd., respectively.
(b) Evidence that the execution, delivery, and performance
by the above-named guarantors of the above-required guaranties have
been duly authorized and, whenever required by the Bank in its sole
discretion, a written opinion from any such guarantor's legal counsel
covering such matters as the Bank may require. The legal counsel and
the forms of opinion must be acceptable to the Bank.
Further, the Bank and the Borrowers acknowledge and agree that failure to
satisfy the above conditions subsequent by June 15, 1998, shall constitute an
event of default under the Agreement.
5. GIHL's Guaranty. By its execution of this Amendment, the
Bank confirms its unilateral decision to extend to March 31, 1998, the deadline
for its receipt of the guaranty.
7
<PAGE> 8
to be signed by GIHL and the related ancillary documents required under Section
7 of Amendment No. 3 and Waiver.
6. 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 stated at the beginning of
this Amendment.
Bank of America National Trust
and Savings Association
By /s/ ILLEGIBLE
---------------------------------
Title Vice President
------------------------------
By
---------------------------------
Title
------------------------------
The Gymboree Corporation
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
Gymboree Manufacturing, Inc.
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
8
<PAGE> 9
Gymboree, Inc.
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
Gymboree Industries Limited
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
Gymboree U.K., Limited
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
Gymboree U.K. Leasing Limited
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
By /s/ ILLEGIBLE
---------------------------------
Title President and CEO
------------------------------
9
<PAGE> 1
EXHIBIT 10.21
AMENDMENT NO. 6 TO
AMENDED AND RESTATED LINE OF CREDIT AGREEMENT
This Amendment No. 6 (the "Amendment") dated as of March 9, 1998,
is among Bank of America National Trust and Savings Association (the "Bank"),
The Gymboree Corporation ("TGC"), Gymboree Manufacturing, Inc. ("GMI"),
Gymboree, Inc. ("GI"), Gymboree Industries Limited ("GIL"), Gymboree U.K.,
Limited ("GUKL"), Gymboree U.K. Leasing Limited ("GUKLL"), Gymboree Ireland
Leasing Limited ("GILL"), Gymboree of Ireland, Limited ("GOIL"), Gymboree
Industries Holdings Limited ("GIHL"), Gymboree Hong Kong Limited ("GHKL"), and
Gymboree Japan K.K ("GJKK"). (TGC, GMI, GI, GIL, GUKL, GUKLL, GILL, GOIL, GIHL,
GHKL, and GJKK are hereinafter referred to collectively as the "Borrowers" and
individually as a "Borrower").
RECITALS
A. The Bank, TGC, and GMI entered into a certain Amended and
Restated Line of Credit Agreement dated as of October 27, 1995, as previously
amended (the "Agreement").
Pursuant to Amendment No. 1 to Amended and Restated Line of Credit Agreement
dated as of July 17, 1997, GI and GIL were added as Borrowers.
Pursuant to Amendment No. 2 to Amended and Restated Line of Credit Agreement
dated as of August 11, 1997 ("Amendment No. 2"), GUKL was added as a Borrower
for the limited purpose of making available to GUKL the new foreign exchange
facility added to the Agreement by Amendment No. 2.
Pursuant to Amendment No. 3 to Amended and Restated Line of Credit Agreement
and Waiver dated as of January 9, 1998 ("Amendment No. 3 and Waiver"), GUKLL
was added as a Borrower for the limited purpose of making standby letters of
credit available to GUKLL. Standby letters of credit were also made available
to GUKL pursuant to Amendment No. 3 and Waiver.
Pursuant to Amendment No. 4 to Amended and Restated Line of Credit Agreement
dated as of January 30, 1993, TGC's liquidity covenant was amended for and only
for TGC's fiscal year ending as of January 31, 1998.
Pursuant to Amendment No. 5 to Amended and Restated Line of Credit Agreement
dated as of March 9, 1998, cash advances for use by TGC were made available
under the Agreement, TGC's tangible net worth covenant was amended, TGC's
liquidity covenant was further amended, and a requirement for certain
additional guaranties was added to the Agreement.
B. TGC has three wholly-owned Irish subsidiaries, GILL, GOIL, and
GIHL, and a wholly-owned Japanese subsidiary,
1
<PAGE> 2
GJKK, GIHL, in turn, has a wholly-owned Chinese subsidiary, GHKL, in addition
to GIHL's wholly-owned Irish subsidiary, GIL.
C. TGC, GMI, GI, GIL, GUKL, and GUKLL have requested the Bank to
add GILL, GOIL, GIHL, GHKL, and GJKK as Borrowers under the Agreement for the
limited purpose of making available to GILL, GOIL, GIHL, GHKL, and GJKK the
foreign exchange facility added to the Agreement by Amendment No. 2. They have
also requested the Bank to make the foreign exchange facility available to the
existing Borrower, GUKLL. The Bank is willing to grant these requests subject
to the additional terms and conditions set forth in this Amendment.
D. The Bank and the Borrowers desire to amend the Agreement in
order to memorialize the terms and conditions under which GILL, GOIL, GIHL,
GHKL, and GJKK are added as Borrowers under the Agreement.
E. The Bank and the Borrowers also desire to amend the Agreement in
order to adjust the contract limit, the settlement limit, and the revaluation
limit applicable to the foreign exchange facility.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this
Amendment shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 The second sentence of Paragraph 1.4 (a) is amended to read
in its entirety as follows:
The foreign exchange contract limit will be Fifty Million U.S.
Dollars ($50,000,000), and the settlement limit will be Fifty Million
U.S. Dollars ($50,000,000).
2.2 In Paragraph 1.4 (k), the amount "Seven Million Five Hundred
Thousand Dollars ($7,500,000)" is substituted for the amount "One Million
Dollars ($1,000,000)" as the Revaluation Limit.
2.3 The final sentence of the definition of "Subsidiary" in
Paragraph 5.1 is amended to read in its entirety as follows:
The term "Subsidiary" shall include GMI, GI, GIL, GUKL, GUKLL,
GILL, GOIL, GIHL, GHKL, or GJKK in the event that GMI, GI, GIL,
GUKL, GUKLL, GILL, GOIL, GIHL, GHKL, or GJKK is no longer a
"Borrower" under this Agreement.
2
<PAGE> 3
2.4 Paragraph 9.2(e) is amended to read in its entirety as
follows:
(e) GI, GIL, GUKL, GUKLL, GILL, GOIL, GIHL, GHKL, and
GJKK irrevocably appoint TGC and GMI as their process agents
to receive, for them and on their behalf, service of process
in any legal action or proceeding with respect to this
Agreement. If TGC's or GMI's chief executive office is no
longer located in the State of California, GI, GIL, GUKL,
GUKLL, GILL, GOIL, GIHL, GHKL, and GJKK also appoint the
Secretary of State of the State of California as their
process agent to receive, for them and on their behalf,
service of process in any legal action or proceeding with
respect to this Agreement. If for any reason GI's, GIL's,
GUKL's, GUKLL's, GILL's, GOIL's, GIHL's, and GHKL's, and
GJKK's process agents are unable to act as such GI, GIL,
GUKL, GUKLL, GILL, GOIL, GIHL, GHKL, and GJKK shall promptly
notify the Bank and within thirty (30) days appoint a
substitute process agent or agents acceptable to the Bank.
Nothing in this Agreement will affect the right of the Bank
to serve process in any manner permitted by law.
3. GILL's, GOIL's, GIHL's, GHKL's, and GJKK's Acknowledgment.
GILL, GOIL, GIHL, GHKL, and GJKK hereby acknowledge that by executing this
Amendment and thereby becoming Borrowers under the Agreement for the limited
purpose of entering into spot and forward foreign exchange contracts with the
Bank, GILL, GOIL, GIHL, and GJKK promise and agree to perform or to be subject
to, as applicable, each and every covenant, agreement, term, and obligation of
the Agreement including without limitation, those which pertain to the joint
and several liability of each Borrower to the Bank for the payment of all
obligations under the Agreement and under any instrument or agreement required
under the Agreement.
4. Representations and Warranties. When the Borrowers sign this
Amendment, the Borrowers represent and Warrant to the Bank that: (a) there is no
event which is, or with notice or lapse of time or both would be, a default
under the Agreement, except those events, if any, that have been disclosed in
writing to the Bank or waived in writing by the Bank, (b) the representations
and warranties in the Agreement are true as of the date of this Amendment as if
made on the date of this Amendment, (c) this Amendment is within each Borrowers'
powers, has been duly authorized, and does not conflict with any Borrower's
organizational papers, (d) this Amendment does not conflict with any law,
agreement, or obligation by which any Borrower is bound, and (e) the Borrowers
are entering into this Amendment on the basis of their own investigation and for
their
3
<PAGE> 4
own reasons, without reliance upon the Bank or any other entity or individual.
5. Conditions Precedent. This Amendment will be effective when the Bank
receives, in form and content acceptable to the Bank, evidence that the
execution, delivery, and performance by GILL, GOIL, GIHL, GHKL, GJKK and GUKLL
of this Amendment and any instrument or agreement required under the Agreement,
as amended by this Amendment, have been duly authorized.
6. Condition Subsequent and Additional Acknowledgments. This Amendment
will remain effective only if the Bank receives, in form and content acceptable
to the Bank, by no later than June 15, 1998, a fully signed Foreign Exchange
Master Agreement entered into by GILL, GOIL, GIHL, GHKL, GJKK, GUKLL, and the
Bank (as amended, modified or renewed, the "1998 FEMA"). Each such Borrower
acknowledges and agrees that all foreign exchange transactions entered into
between such Borrower and the Bank shall be subject to the provisions of the
Agreement and the 1998 FEMA. In the event of any conflict or inconsistency
between the provisions of the Agreement and the provisions of the 1998 FEMA, the
provisions of the 1998 FEMA shall control. The occurrence of an Event of Default
under the FEMA shall also constitute a event of default under the Agreement.
Further, the Bank and the Borrowers acknowledge and agree that failure to
satisfy the above condition subsequent by June 15, 1998, shall constitute an
event of default under the Agreement.
7. 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.
Further, nothing in this Amendment shall release TGC, GMI, GI, GIL, GJKL, or
GUKLL from any of its obligations under the Agreement.
This Amendment is executed as of the date stated at the beginning of this
Amendment.
Bank of America National Trust
and Savings Association
By /s/ [ILLEGIBLE]
---------------------------------
Title
------------------------------
By
---------------------------------
Title
------------------------------
4
<PAGE> 5
The Gymboree Corporation
By /s/ GARY WHITE
---------------------------------
Title President and CEO
------------------------------
By /s/ CHARLENE S. GOLD
---------------------------------
Title Assistant Secretary
------------------------------
Gymboree Manufacturing, Inc.
By /s/ GARY WHITE
---------------------------------
Title President and CEO
------------------------------
By /s/ CHARLENE S. GOLD
---------------------------------
Title Assistant Secretary
------------------------------
Gymboree, Inc.
By /s/ GARY WHITE
---------------------------------
Title President and CEO/Director
------------------------------
By /s/ CHARLENE S. GOLD
---------------------------------
Title Assistant Secretary
------------------------------
Gymboree Industries Limited
By /s/ GARY WHITE
---------------------------------
Title President and CEO/Director
------------------------------
By /s/ CHARLENE S. GOLD
---------------------------------
Title Director
------------------------------
5
<PAGE> 6
The Gymboree U.K. Limited
By /s/ GARY WHITE
----------------------------------
Title Director/President and CEO
-------------------------------
By /s/ CHARLENE S. GOLD
----------------------------------
Title Assistant Secretary
-------------------------------
Gymboree U.K. Leasing Limited
By /s/ GARY WHITE
----------------------------------
Title Director/President and CEO
-------------------------------
By /s/ CHARLENE S. GOLD
----------------------------------
Title Assistant Secretary
-------------------------------
Gymboree Ireland Leasing Limited
By /s/ GARY WHITE
----------------------------------
Title Director/President and CEO
-------------------------------
By /s/ CHARLENE S. GOLD
----------------------------------
Title Director/Assistant Secretary
-------------------------------
Gymboree of Ireland, Limited
By /s/ GARY WHITE
----------------------------------
Title Director/President and CEO
-------------------------------
By /s/ CHARLENE S. GOLD
----------------------------------
Title Director/Assistant Secretary
-------------------------------
6
<PAGE> 7
Gymboree Industries Holdings Limited
By /s/ GARY WHITE
----------------------------------
Title Director/President and CEO
-------------------------------
By /s/ CHARLENE S. GOLD
----------------------------------
Title Director/Asst. Sec.
-------------------------------
Gymboree Hong Kong Limited
By /s/ GARY WHITE
----------------------------------
Title Director/President and CEO
-------------------------------
By /s/ CHARLENE S. GOLD
----------------------------------
Title Director/Asst. Sec.
-------------------------------
Gymboree Japan K.K.
By /s/ GARY WHITE
----------------------------------
Title Director/President and CEO
-------------------------------
By /s/ CHARLENE S. GOLD
----------------------------------
Title Director/Asst. Sec.
-------------------------------
7
<PAGE> 1
ACQUISITION AND DEVELOPMENT AGREEMENT
This Acquisition and Development Agreement (the "Agreement) is entered
into on this ___ day of November, 1996 by and between THE GYMBOREE CORPORATION,
a Delaware corporation (hereinafter "TGC"), and CARL D. PANATTONI and WICKLAND
PROPERTIES) a California corporation (hereinafter individually and collectively,
"Developer").
RECITALS
WHEREAS:
A. Developer is the owner of a certain tract of land in Dixon, California
as generally outlined on the attached Exhibit A (the "Tract"); and
B. Developer intends to develop the Tract into a business park to be
called the Dixon Commerce Center (the "Business Park") for lease or
sale for purposes of industrial, warehouse, distribution, research and
development, and similar uses; and
C. TGC wishes to locate the Project in the Business Park on certain terms
and conditions.
NOW THEREFORE, in consideration of the mutual promises and covenants as
incorporated herein, the parties do agree as follows:
1. DEFINITIONS
"Agreement." This Acquisition and Development Agreement.
"Closing" or "Close of Escrow." Recordation of the Deed.
"Closing Date." That date upon which Closing occurs, in no event
to occur earlier than five (5) business days after completion of all of the
conditions of this Agreement.
"Code." The Internal Revenue Code of 1986 as amended.
"Construction Contract." The Agreement between TGC (as the
"Owner") and Developer (as the "Design/Builder") in a form to be mutually agreed
upon by the parties hereto within thirty (30) days after execution of this
Agreement and attached hereto as Exhibit E and made a part hereof by reference.
"Contingency Period." The period of time commencing on the date of
execution hereof (the "Execution Date") and ending at 5:00 p.m. PDT on the
fifteenth (15th) business day after the Execution Date.
"Deed." The Grant Deed conveying title to the Property as provided
Section 3.5(a).
"Deposit." An amount equal to Twenty Thousand and no/100 Dollars
($20,000).
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<PAGE> 2
"Developer Offsite Improvements." Infrastructure improvements to
be constructed by Developer in connection with the development of the Business
Park consisting of storm drainage to the property line of the Property in
accordance with plans and specifications reasonably approved by TGC, sufficient
for the City of Dixon to issue a certificate of occupancy upon completion of the
building and exterior areas on the Property, without the necessity for
completion of any further Offsite Improvements. In no event shall the Developer
Offsite Improvements include either the Preliminary Offsite Improvements or the
Secondary Offsite Improvements as defined herein.
"Disapproved Exceptions." The exceptions to title described in the
Preliminary Report to which TGC objects by written notice to Developer within
the Review Period.
"East Street. That certain street running from Vaughn Road along
the eastern boundary of the Property as shown on Exhibit C attached hereto. This
is a definition for identification purposes only in this Agreement and does not
imply that the name of the street shall be other than as may be mutually
agreeable to Developer and TGC.
"Environmental Laws." (See "Hazardous Materials" below.)
"Escrow." That certain escrow to be opened with the Escrow Holder
in respect of this Agreement and the Closing thereof
Escrow Holder. Chicago Title Company, 388 Market Street, 13th
Floor, San Francisco, California 94111; telephone (415) 788-0871, fax (415)
956-2175.
"Force Majeure." As used in this Agreement, the term "Force
Majeure" means delay resulting from causes beyond a party's reasonable control
(excluding financial reasons) such as strikes, walkouts or other labor disputes,
acts of God, inability to obtain labor, materials or merchandise, governmental
restrictions, regulations or controls, judicial orders, war, riot or civil
commotion, fire or casualty. The party obligated to perform shall give prompt
notice to the other as soon as reasonably possible after the onset of such delay
stating the cause and an estimate of the duration thereof.
"Hazardous Materials." Any wastes, materials or substances
(whether in the form of liquids, solids or gases, and whether or not air-borne),
which are or are deemed to be pollutants or contaminants, or which are or are
deemed to be hazardous, toxic, ignitable, reactive, corrosive, dangerous,
harmful or injurious, or which present a risk, to public health or to the
environment, or which are or may become regulated by or under the authority of
any applicable local, state or federal laws, judgments, ordinances, orders,
rules, regulations, codes or other governmental restrictions, guidelines or
requirements, any amendments or successor(s) thereto, replacements thereof or
publications promulgated pursuant thereto (collectively "Environmental Laws").
"Land Entitlement Permit(s)." Any and all permits or approvals
required by any governmental authority precedent to TGC's ability to legally
construct the Project upon the Property including, without limitation, zoning,
general plan designation, design or architectural review and approval, zoning
variance, planned unit development approval, environmental
-2-
<PAGE> 3
impact report, building permit, subdivision map, sewer permit, water permit, or
any permit required by any governmental agency or authority in order to
construct the Project as designed by TGC.
"Monetary Exceptions." Exceptions to fee simple absolute title to
the Property which are removable by the payment of a liquidated sum of money.
"Nonmonetary Exceptions." Exceptions to fee simple absolute title
to the Property which are not removable by the payment of a liquidated sum of
money.
"Offsite Improvements." The Developer Offsite Improvements,
Preliminary Offsite Improvements and Secondary Offsite Improvements shall be
known collectively herein as the "Offsite Improvements".
"Preliminary Offsite Improvements." All common infrastructure
"improvements constructed or to be constructed in connection with the
development of the Business Park including construction, installation, paving
and lighting of Vaughn Road (and including the Vaughn Road Project, as defined
in Section 5.3(a) hereof), and provision of gas, sewer, electricity, telephone
and water to the property line of the Property (including provision of sewer and
water on East Street in general conformance with those drawings furnished by
Developer attached hereto and incorporated herein as Exhibit J), all in
accordance with plans and specifications reasonably approved by TGC within
fifteen (15) business days after receipt thereof, all sufficient for the City of
Dixon to issue a certificate of occupancy upon completion of the building and
exterior areas on the Property, without the necessity for completion of any
further Offsite Improvements. In no event shall the Preliminary Offsite
Improvements include either the Developer Offsite Improvements or the Secondary
Offsite Improvements as defined herein.
"Preliminary Report." A report of the status of title issued by
Escrow Holder's title insurance divisions describing the state of title to the
Property.
"Project." TGC's distribution facility to be constructed and
located on the Property.
"Project Plans." Plans and specifications for construction of the
Project on the Property prepared under the direction of TGC in accordance with
the guideline specifications attached hereto as Exhibit D, and the Construction
Contract.
"Property." All that certain real property described in Exhibit B
and delineated in Exhibit C attached hereto and made a part hereof by reference,
along with all mineral rights, easements, hereditaments and appurtenances
pertaining thereto.
"Purchase Price." An amount equal to Seven Hundred Ninety-Three
Thousand Five Hundred and no/100 Dollars ($793,500).
"Restrictions." That certain declaration of restrictions, or
covenants, conditions and restrictions which will encumber the Tract and which
shall govern the use, design,
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<PAGE> 4
maintenance, architecture, construction and other related features of the
appearance and operation of the Business Park.
"Review Period." A period ending on the last to occur of fifteen
(15) business days from and after (i) the date TGC receives the Preliminary
Report together with copies of all instruments giving rise to the exceptions
contained therein, or (ii) the date TGC receives notice from the Developer that
the tentative subdivision map for the Business Park has been approved by the
City of Dixon.
"Secondary Offsite Improvements." Construction, installation,
paving, lighting and hydrants in the streets of the Business Park (other than as
set forth above under the Preliminary Offsite Improvements) including, without
limitation, East Street, all in accordance with plans and specifications
reasonably approved by TGC within fifteen (15) business days of receipt thereof.
In no event shall the Secondary Offsite Improvements include either the
Developer Offsite Improvements or the Preliminary Offsite Improvements as
defined herein.
"Situs State." The State of California.
2. PROPERTY
Subject to all of the terms, conditions and provisions of this
Agreement, and for the consideration herein set forth, Developer hereby agrees
to convey and TGC hereby agrees to accept conveyance of the Property.
3. ESCROW
3.1. Opening of Escrow. Within two (2) business days after the
execution of this Agreement by both parties, 2 signed copy of this Agreement
shall be deposited by TGC with the Escrow Holder in order to open the Escrow.
References herein to the opening of Escrow shall mean the date that a copy of
this Agreement is deposited with Escrow Holder. By such deposit, Escrow Holder
is hereby authorized and instructed to act in accordance with the provisions of
this Agreement, which Agreement together with Escrow Holder's standard general
provisions, shall constitute Escrow Holder's escrow instructions. Developer and
TGC shall each deposit such other instruments and funds as are necessary to
close the Escrow and complete the conveyance of the Property in accordance with
the terms hereof.
3.2, The Closing Date, The Escrow is scheduled to close at the offices
of the Escrow Holder after satisfaction of all conditions set forth in this
Agreement unless extended by the mutual written agreement of both parties. Time
is specifically a matter of essence with respect to the Closing Date, which may
not be extended except by mutual consent of the parties. If Escrow shall fail to
close because of failure of TGC to comply with the obligations required to be
performed by TGC hereunder, the costs incurred through the Escrow to the date
the Escrow is terminated, including the cost of the Preliminary Report, shall be
paid by TGC. If the Escrow shall fail to close because of failure of Developer
to comply with the obligations required to be performed by Developer hereunder,
such costs, without limitation of TGC's remedies, shall be paid by Developer. If
the Escrow should fail to close for any other reason, the cost of terminating
the Escrow shall be divided between the parties.
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<PAGE> 5
3.3. Execution of Additional Instructions. The obligations of each
party which are herein agreed to be undertaken by each party in the Escrow
shall be and are hereby made agreements of such party in and under this
Agreement independent of the Escrow. If any requirements relating to the duties
or obligations of Escrow Holder hereunder are not acceptable to Escrow Holder,
or if Escrow Holder requires additional instructions, the parties agree to make
such deletions, substitutions and additions to these escrow instructions
relating to such duties or obligations of Escrow Holder or clarification of
these instructions as counsel for Developer and for TGC shall mutually approve,
and which do not substantially change this Agreement or its intent. Developer
and TGC agree to perform, observe and fulfill the requirements of this Agreement
notwithstanding said deletions, substitutions or additions to said escrow
instructions.
3.4. Closing Costs. Subject to the provisions of Section 3.2 above, the
expenses of the Escrow shall be paid by Developer including: (i) an amount equal
to the premium for a CLTA Standard Coverage Policy (1990), (ii) any documentary
transfer tax on the Deed, and (iii) all sales and excise taxes. TGC shall pay
(1) recording charges, (2) Escrow fees and (3) the balance of the premium for
the Title Policy which is not paid for by Developer pursuant to clause (i) of
this Section 3.4. All other costs and charges of the Escrow for the sale shall
be prorated between TGC and the Developer in accordance with the customary
practices of Solano County, California.
3.5. Documents to be Delivered by Developer. At the Closing Developer
shall deposit into Escrow, for delivery to TGC at the Close of Escrow, the
following documents:
(a) The Deed fully executed, in recordable form, sufficient to
convey marketable and insurable fee simple title to the Property as previously
approved by TGC, in form reasonably satisfactory to TGC.
(b) An assignment to TGC of all land use entitlements, permits and
licenses held by Developer relating to the Property or required from
governmental authority as a condition to operation or occupation of the Property
or any part thereof, together with the originals or true copies thereof.
(c) Such funds necessary to comply with Developer's obligations
hereunder regarding prorations.
(d) The affidavit or the qualifying statement described in Section
8.4(a).
(e) The certificate specified in Section 10.1(a)(xii).
(f) The title policy specified in Section 7.2.
(g) A true copy of the recorded Restrictions.
(h) The recorded Option specified in Article 6.
All assignments and other documents hereinabove described shall be in
form reasonably satisfactory to TGC's counsel.
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<PAGE> 6
4. PURCHASE PRICE AND DEPOSIT
4.1. Purchase Price. The Purchase Price shall be paid in cash on the
Closing Date.
4.2. Assumption of Bonds. At the Closing TGC shall assume any special
assessment bonds encumbering the Property in respect of off-site improvements
performed for the benefit of the Business Park, which bonds are amortized over
not less than fifteen years when assessed and for which the installment payments
are includable with the real property tax bill (the "Bonds").
4.3. Deposit.
(a) Upon opening of Escrow, TGC shall deliver the Deposit to the
Escrow Holder. The Deposit shall be placed in an interest bearing account at the
direction of TGC. All interest earned on such account shall belong to and be
remitted to TGC.
(b) Seller agrees that on or before December 31, 1996, the Escrow
Holder is directed and authorized to take instruction solely from Buyer
regarding the release of the Deposit, and Seller does hereby so instruct the
Escrow Holder. Upon Close of Escrow, the Escrow Holder shall release the Deposit
to Buyer so long as adequate replacement funds are available in Escrow, or apply
the Deposit to the Purchase Price, at the option of Buyer.
5. DEVELOPER OBLIGATIONS
5.1. Construction Pricing.
(a) In the event that a Construction Contract is entered into
between TGC and Developer, Developer shall prepare cost estimates and bids for
the construction of the Project in accordance with the Project Plans. Within
fifteen (15) days following submittal of the final version thereof to Developer,
Developer shall submit the completed Construction Contract for the Project, the
cost of which shall not exceed Seven Million Eight Hundred Thirty-Three Thousand
Seven Hundred Twenty-Four Dollars ($7,833,724) based upon the Proposal. Such
Construction Contract shall specify that the Project shall be completed no later
than December 1, 1997; and that TGC shall have access to the Project for
installation of equipment, supplies and other improvements no later than
September 1, 1997. The contract price maximum referenced above shall be
exclusive of governmental fees and costs of the Offsite Improvements, but shall
include all development services to be provided by Developer, most particularly
including, without limitation, all services required to process approval of the
Project through all governmental agencies from whom Land Entitlement Permits may
be required, including the City of Dixon, the County of Solano and relevant
state agencies.
(b) TGC Construction Option. TGC shall have no obligation to enter
into the Construction Contract with Developer.
5.2. Closing and Prorations.
(a) All expenses of the Property shall be prorated and apportioned
as of 12:01 a.m. on the Closing Date, in order that Developer bear all expenses
with respect to the
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<PAGE> 7
Property through and including midnight of the day preceding the Closing Date.
Any expense amount which cannot be ascertained with certainty as of the Closing
Date shall be prorated on the basis of the parties' reasonable estimates of such
amount and shall be the subject of a final proration 30 days after the Closing
Date or as soon thereafter as the precise amounts can be ascertained. A
statement setting forth such agreed prorations shall be delivered to Escrow
Holder. Escrow Holder shall not be required to calculate any prorations.
(b) Expenses to be prorated shall include taxes, water rates and
sewer rents, if any, gas, electricity and other utility charges, any unfixed
meter charges, if any (apportioned on the basis of the last meter reading), and
other expenses customarily prorated. If possible, in lieu of prorating,
utilities and other expenses shall be contracted for in the name of TGC as of
the Closing Date.
5.3. Offsite Improvements.
(a) The Developer Offsite Improvements shall be completed by
Developer by no later than June 1, 1997. Preliminary Offsite Improvements shall
be completed by no later than December 31, 1996; provided, however, that if
Force Majeure prevents completion of the widening and resurfacing of Vaughn Road
(the "Vaughn Road Project") by December 1, 1996, the time allowed hereunder for
completion of the Vaughn Road Project shall be extended for a period equivalent
to the period of such delay caused by the Force Majeure events. All Secondary
Offsite Improvements which are required by the City of Dixon or other applicable
governmental agency to be completed by Developer shall be completed by no later
than June 1, 1997. Plans and specifications for the Offsite Improvements shall
be provided to TGC by no later than ten days following date of execution hereof
and TGC shall have ten (10) business days thereafter in which to either grant
its approval or deny approval by providing written specification of the reasons
therefor. The parties acknowledge that TGC is materially relying upon Developer
to complete its obligations as set forth herein so that the Project can be
completed in a manner which will allow TGC to obtain working occupancy of the
Project for use as a distribution facility by December 1, 1997. In the event the
Offsite Improvements required to be completed by Developer are not completed by
the respective dates set forth herein, the parties acknowledge that TGC will
suffer damage arising from TGC's need to commence and complete the Project in
the manner described in this Section 5.3(a), Developer shall be responsible for
such consequential damages, in addition to and cumulative with any other
remedies available to TGC or at law, or in equity, or under the provisions of
this Agreement.
(b) Upon completion of the Offsite Improvements as set forth
above, TGC shall pay to Developer the sum of $150,000 cash as its contribution
to the costs thereof. For purposes hereof, the term "completion" shall mean that
the City of Dixon and the State of California shall have approved all of the
Offsite Improvements and shall require no further work of construction or
installation be performed with respect thereto.
(c) The plans and specifications for the Secondary Offsite
Improvements to East Street shall:
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<PAGE> 8
(i) include either a loop road or road terminating in a legal cul
de sac or other satisfactory means for providing adequate access for fire
protection purposes; and
(ii) to the extent the Secondary Offsite Improvements are not to
be completed by the City of Dixon or any subdivision thereof, be completed by
June 1, 1997, including storm drain, the storm drainage retention pond to be
located in the Business Park and to which the Property shall be connected by
Developer, and all other improvements to be completed by Developer as set forth
in the plans and specifications.
5.4. Restrictions. Developer has prepared and delivered to TGC a set of
Restrictions for recordation as an encumbrance upon all parcels of property in
the Business Park. Within fifteen (15) business days following date of execution
hereof, TGC shall provide to Developer TGC's comments and suggested revisions
thereto. The parties shall thereafter negotiate in good faith to develop a set
of Restrictions reasonably agreeable to both parties reflecting the development
of a first class Business Park in the Northern California industrial market and
further reflecting the high standards required by TGC. The Restrictions shall
"include a requirement that Vaughn Road be permanently landscaped for its entire
length; and that East Street be permanently landscaped on both sides of the
street for its entire length upon which the Property fronts upon development
thereof, which landscaping shall be subject to common maintenance.
5.5. Payment of Adjustments to Proration. Either party owing the other
party a sum of money based on adjustments made to prorations after the Closing
Date shall promptly pay that sum to the other party, together with interest
thereon at the rate of the lesser of (i) the maximum interest rate permitted by
law in the Situs State and (ii) thirteen and one-half percent (13.5%) per annum,
to the date of payment if payment is not made within 10 days after mutual
agreement of the amount due.
5.6. Plans and Specifications. In the event a Construction Contract is
entered into between TGC and Developer as provided in Section 8.9 hereof,
Developer shall undertake the preparation of the Project Plans upon execution
thereof, such Project Plans to be developed based upon the schematics provided
by TGC as described in that certain proposal dated July 22, 1996 from Developer
to TGC, a copy of which is attached hereto and incorporate herein as Exhibit H
(the "Proposal"). Developer shall consult and cooperate with TGC in the
development of the design and in the preparation of cost estimates for the
construction of the Project in accordance with the Project Plans. Each party
shall act diligently and with expedition.
5.7. No Construction Contract. In the event that no Construction
Contract is entered into between TGC and Developer on or before the date
specified in Section 8.9, Developer shall have no obligation to undertake
preparation of the Project Plans as set forth in Section 5.6.
6. OPTION LAND
On the Closing Date, Developer shall grant to TGC the option to acquire
the land abutting the Property as delineated in Exhibit F (the "Option Land"),
in the form of the option
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<PAGE> 9
attached hereto as Exhibit G (the "Option") and made a part hereof by reference.
On the Closing Date, the Option shall be recorded in the official records of
Solano County.
7. TITLE CONDITION OF THE PROPERTY
7.1. Preliminary Report. As soon as reasonably possible after the
opening of Escrow, Escrow Holder shall deliver to TGC a Preliminary Report
together with copies of all instruments giving rise to the exceptions contained
in the Preliminary Report. TGC shall have the right to object to any exceptions
contained in the Preliminary Report within the Review Period. Should TGC fail to
make any objections by notice to Developer within the Review Period, the
Preliminary Report shall be deemed approved. In the event TGC objects to any
exceptions contained in the-Preliminary Report, Developer shall have until the
Closing Date to attempt, using its best efforts, to clear all Disapproved
Exceptions which efforts shall include, if necessary, the posting of bonds to
clear recorded liens. Upon receipt of notice of TGC's Disapproved Exceptions,
Developer shall: (i) clear all Monetary Exceptions at Closing, and (ii) have
until the Closing Date to attempt, using its best efforts, to clear all
Nonmonetary Exceptions or advise TGC that, based upon Developer's good faith
judgment with respect to the removability of such Nonmonetary Exceptions,
Developer is unwilling or unable to remove such items. Developer shall obtain
and deliver to Escrow Holder a demand for payment from any lien holder of record
whose lien is to be discharged at the Close of Escrow, and after approval of
such demand by Developer, Escrow Holder shall pay such demand at the Close of
Escrow. In the event Developer cannot remove from title any Disapproved
Exception by the Close of Escrow, TGC shall have the right to elect one of the
following alternatives:
(a) to waive such Disapproved Exceptions and close the Escrow, or
(b) terminate this Agreement.
7.2. Title Insurance. At the Close of Escrow and as a condition
thereto, the title insurer shall issue a firm commitment to provide an ALTA
Owners Extended Form (B-1970) Policy of Title Insurance to TGC containing such
endorsements as TGC's counsel may reasonably require, with liability in the
amount of the Purchase Price (the "Title Policy"), to be issued on commencement
of Construction of the Project, showing title to the Property vested in TGC,
subject only to the exceptions approved by TGC pursuant to Section 8.1 above and
to the non-delinquent real property taxes and special assessments referred to in
Section 5.2 above. Indemnification of the Title Insurer by Developer or any
other party, in order to induce the Title Insurer to insure any otherwise
Disapproved Exception, or to obtain any endorsement required by TGC, shall not
be allowed except with the prior written consent of TGC after full disclosure to
TGC of the nature and substance of the indemnity in the matter to be indemnified
against.
8. CONDITIONS TO TGC's OBLIGATION
8.1. Contingency Period.
(a) As a condition to TGC's obligation to purchase hereunder, TGC
shall be entitled to examine the Property, documents, and other information
specified in Section 8.2,
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along with such other economic, governmental, development and marketing
feasibility, and physical studies and analyses as TGC may require, which
examination, analyses and studies shall be completed within the Contingency
Period. Developer shall cooperate with TGC and will assist in obtaining and
providing information requested by TGC.
(b) Developer shall provide, to the extent available to Developer,
such information, documents, data, and access no later than five (5) days from
date of execution hereof and failure to do so shall extend the Contingency
Period by one (1) day for each day of delay. The conditions of this Article 8
are for the benefit of TGC, any or all of which may be waived by TGC in writing,
at TGC's sole option.
8.2. Access and Information.
(a) Developer shall provide to TGC the following with respect to
the Property:
(i) Access to the Property by TGC, its agents or
representatives to inspect the physical condition of every portion thereof,
including, without limitation, soils reports, geology, archaeology, hazardous
waste, asbestos, endangered species, availability, capacity and costs of
utilities.
(ii) Any other information pertaining to the Property
reasonably requested by TGC to the extent such information is available to
Developer.
(b) TGC agrees to indemnify and hold Developer harmless against
any and all liability, loss, cost, damage or expense (including reasonable
attorneys' fees and costs) which Developer may sustain or incur by reason of the
negligence or intentional act of TGC, its agents or representatives in
conducting inspections of the Property pursuant to Paragraph (a)(i) of this
Section 8.2.
8.3. Intentionally Omitted.
8.4. Notice. If TGC approves all of the above, which TGC may do or
refuse to do in its sole subjective judgment, it shall so notify Developer prior
to the expiration of the Contingency Period. If TGC does not notify Developer
that it has approved the above items, this Agreement shall become null and void
and the Deposit shall be returned to Buyer forthwith, upon the expiration of the
Contingency Period, and there shall be no further obligation on the part of
either party.
8.5. Foreign Person.
(a) As a condition to the closing of this transaction, Developer
shall deliver to TGC on the Closing Date (or such earlier date as may be
required pursuant to regulations promulgated by the Secretary of the Treasury
under Section 1445 of the Code an affidavit of Developer, or an authorized
officer of Developer, sworn under penalty of perjury setting forth Developer's
United States tax identification number and stating that Developer is not a
foreign person, and is an United States Person as defined in the Code.
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(b) It is understood and agreed that in lieu of furnishing such
nonforeign affidavit Developer may furnish to TGC a qualifying statement issued
by the United States Treasury, at such time and in such manner and subject to
such terms and conditions as may proscribed by regulations and promulgated under
Code Section 1445. Such qualifying statement shall be in form and content
satisfactory to TGC's counsel and shall provide adequate assurance that
Developer has met its obligations with respect to the taxation of foreign
persons and entities under the Code.
(c) If by the Closing Date Developer shall not have furnished to
TGC either the affidavit specified in paragraph (a) or the qualifying statement
described in paragraph (b) hereof with respect to this transaction, or such
Statement is false, TGC may at its option either: (i) adjourn the Closing until
such time as Developer has complied with the conditions set forth herein, and
such adjournment shall not place TGC in default of its obligations hereunder;
or, alternatively, (ii) TGC may withhold from the Purchase Price payable to
Developer at Close of Escrow and remit to the Internal Revenue Service, a sum
equal to ten percent (10%) of the gross selling price of the Property in
accordance with the withholding obligations imposed upon TGC pursuant to Code
Section 1445. Such withholding shall not place TGC in default under this
Agreement, and Developer shall not be entitled to claim that such withholding
shall excuse Developer's performance under the Agreement.
8.6. Waiver. In the event of a breach by Developer of any of its
covenants, representations, warranties or other agreements set forth in this
Agreement, TGC may elect (i) nevertheless to proceed with the purchase of the
Property, reserving all of its other rights and remedies available to it under
this Agreement or otherwise at law or in equity including, without limitation,
the right to collect damages for such breach from Developer and the right to
indemnification as provided in Article 12, or (ii) to terminate this Agreement
by written notice to Developer delivered prior to Closing, and upon such
termination TGC shall be relieved of all further obligations hereunder.
8.7. Approval of Board of Directors. This Agreement is subject to
approval of the Board of Directors of TGC on or before the expiration of the
Contingency Period.
8.8. Closing Deliveries. Developer shall have timely met all of its
requirements for delivery of closing materials as provided in Section 3.5.
8.9. Intentionally Omitted.
8.10. Performance Conditions.
(a) The Closing shall not occur earlier than five (5) business
days after the last to occur of the following:
(i) Receipt by TGC of written notice from the City of Dixon
that the City of Dixon Planning Commission has approved the plans and
specifications for the Business Park and the Project.
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(ii) The Preliminary Offsite Improvements have been
completed, except that completion of the Vaughn Road Project shall not be
required as a condition of Closing under this Section 8.10(a).
(iii) Receipt by TGC of written assurance from the City of
Dixon (the "Letter of Assurance") substantially in the form attached hereto as
Exhibit I stating that: (A) the City of Dixon Building Department will issue
building permit for construction of the Project which is not conditioned upon
completion of the Offsite Improvements; and (B) a certificate of occupancy (or a
temporary certificate of occupancy, as the case may be) will be issued by the
City of Dixon upon completion of the Project in accordance with the terms of the
building permit, notwithstanding lack of completion of East Street or lack of
completion of the storm drainage retention pond to be located in the Business
Park and to which the Developer shall connect the Property.
(iv) Conveyance to Developer of that certain irrigation
parcel marked by crosshatch on Exhibit F attached hereto, which comprises a
portion of the Option Land, including, without limitation, removal of that
certain easement shown on Exhibit F as 20' Access and Water Line Easement to SID
and City of Dixon BK 1990 - Inst. No. 900078258.
(v) The Developer has provided the City of Dixon with a bond
sufficient to ensure completion of East Street as set forth in the subdivision
map approved by the City of Dixon of which the Property is a part.
(vi) Modification of that certain easement shown on Exhibit C
as 20' PSE per 36 PM 14 to (1) modify the north-south length of such easement so
that such easement extends from Vaughn Road south for a distance of two hundred
(200) feet (the "200 Foot Length") and (2) widen the east-west width of such
easement to forty (40) feet along the entire 200 Foot Length.
(vii) At TGC's option, the parties shall have executed a
letter of intent for the Construction Contract pursuant to which Developer shall
agree to design and build the Project in accordance with the terms thereof;
provided, however, that in the event the parties hereto have not executed and/or
acknowledged and accepted a letter of intent setting forth the terms of the
Construction Contract on or before December 16, 1996, any such letter of intent
and/or Construction Contract shall be deemed to be null and void and TGC shall
have the right, at its option, to terminate this Agreement by written notice to
Developer on or before December 31, 1996. In the event TGC elects to terminate
this Agreement as provided in this Section 8.10(a)(vii), this Agreement shall
become null and void upon receipt by Seller of notice from TGC of same, the
Deposit shall be returned to TGC forthwith, and there shall be no further
obligation on the part of either party.
(viii) The parties shall have developed and executed the
Restrictions as provided in Section 5.4 hereof.
(b) Developer shall not be deemed to have breached this Agreement
in the event one or more of the conditions of Section 8.10(a) cannot be
fulfilled for reasons other than the act or omission of Developer.
Notwithstanding the preceding sentence, if the Closing has
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not occurred by March 1, 1997, TGC, at its option may terminate this Agreement
by written notice to Developer.
9. MISCELLANEOUS DATA TO BE PROVIDED BY DEVELOPER
9.1. Survey. Developer shall obtain, at its cost and expense, a survey
of the Property, showing the boundaries thereof, the location of all
improvements thereon and the location of all recorded easements which affect the
Property in form and substance sufficient to enable the title insurer to issue
an ALTA policy as described in Section 7.2 hereof. Developer shall provide TGC
with a copy of the survey and shall deliver a copy to the title insurer to
permit it to issue its required title insurance.
9.2. Assignment of Warranties. At the Closing Developer will assign to
TGC all warranties which it may have from vendors, contractors or servicing
agents with respect to the physical condition of the Property.
10. WARRANTIES AND REPRESENTATIONS
10.1. Warranties and Representations by Developer.
(a) Developer hereby makes the following additional
representations, covenants and warranties and acknowledges that the execution of
this Agreement by TGC has been made and the acquisition by TGC of the Property
will have been made in material reliance by TGC on such covenants,
representations and warranties.
(i) Litigation. To the best knowledge and belief of
Developer, there is presently no claim, litigation, proceeding or governmental
investigation pending or threatened against or relating to the Property or the
transactions contemplated hereby. Developer shall give TGC immediate notice of
any such claim, litigation proceeding or investigation which becomes known to
it prior to the Closing Date.
(ii) Compliance with Laws. No notice of violation of any
applicable zoning regulation or ordinance or other law, order, ordinance,
permit, rule, regulation or requirement, or any covenants, conditions or
restrictions affecting or relating to the use, operation or occupancy of the
Property has been given to Developer by any governmental agency having
jurisdiction or by any other person entitled to enforce the same; to the best
knowledge and belief of Developer, the Property conforms to all applicable
ordinances and other laws, order, ordinances, permits, rules, regulations and
requirements, and to all covenants, conditions and restrictions affecting or
relating to the use, operation or occupancy of the Property.
(iii) Environmental.
(A) To the best knowledge and belief of Developer, as of
the date of this Agreement and the date of Close of Escrow, Developer and the
Property are not and will not be in violation of any federal, state or local
law, ordinance or regulation relating to industrial hygiene, soil, water, or
environmental conditions on, under or about the Property including, but not
limited to, the Environmental Laws.
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(B) To the best knowledge and belief of Developer,
during the period that Developer has owned the Property there has been no use,
presence, disposal, storage, generation, release, or threatened release (as
those terms are used in the Environmental Laws, and hereinafter collectively
referred to as "Use") of Hazardous Materials on, from or under the Property,
except as previously disclosed by Developer to TGC in writing.
(C) Developer has no knowledge of any Use of Hazardous
Materials, on, from or under the Property which may have occurred prior to
Developer taking title to the Property, except as previously disclosed by
Developer to TGC in writing.
(D) During the period that Developer has owned the
Property, there has been no enforcement action or litigation brought or
threatened against Developer or the Property, nor any settlements reached by or
with any party or parties alleging the Use of any Hazardous Materials on, from
or under the Property, except as previously disclosed by Developer to TGC in
writing.
(iv) Foreign Person. Developer is not a foreign person and is
a "United States Person" as such term is defined in Section 1445 of the Internal
Revenue Code of 1986 as amended.
(v) Permits. Developer has obtained all licenses, permits,
easements and rights of way required from all governmental authorities having
jurisdiction over the Property or from private parties for the use of the
Property and to insure vehicular and pedestrian ingress and egress to the
Property.
(vi) Public Improvements. To the best knowledge and belief of
Developer, there are presently no intended public improvements which will result
in any charge being levied or assessed against the Property or in the creation
of any lien upon the Property. Developer shall promptly notify TGC of any
changes affecting this representation, of which it becomes aware prior to the
Closing Date.
(vii) Condemnation. To the best knowledge and belief of
Developer, there is presently no pending or contemplated condemnation of the
Property or any part thereof. Developer shall promptly notify TGC of any changes
affecting this representation of which it becomes aware prior to the Closing
Date.
(viii) Utilities. All utilities necessary to service the
Property will be available to the Property at the Closing Date, or upon
completion of the Offsite Improvements, without the consent of any other person,
firm or corporation and without expense (other than normal and usual security
deposits or bonds) to TGC.
(ix) Access. There are no facts or conditions which will
result in the termination of the present access from the Property to any utility
services or to existing highways and roads.
(x) Default. The closing of the various transactions
contemplated by this Agreement will not constitute or result in any default or
event that with a notice or lapse of time, or both, would be a default, breach
or violation of any lease, mortgage, deed of trust,
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<PAGE> 15
covenant or other agreement, instrument or arrangement by which Developer or the
Property are bound, or any event which would permit any party to accelerate the
maturity of any indebtedness or other obligation. No consent or joinder by any
Partner of Developer is required for this Agreement or the performance of
Developer's obligations hereunder.
(xi) Defects. To the best knowledge and belief of Developer,
at the Closing Date, there will be no defects or conditions of the Property or
the soil which will impair the use of such Property, nor are there presently,
nor will there be in the future, any encroachments onto the Property.
(xii) Subsequent Changes in Conditions. If Developer becomes
aware of any fact or circumstances which would change a representation or
warranty, then Developer will immediately give notice of such changed fact or
circumstance to TGC, but shall not relieve Developer of its liabilities or
obligations with respect thereto (except as described in Subsection (b)).
Developer shall issue a certificate at the Closing Date stating that all of the
representations and warranties contained in this Section are true and correct as
of said date, except as to facts, if any, concerning which TGC was notified.
(xiii) Authority of Developer. Wickland Properties is a
corporation duly organized and validly existing and in good standing under the
laws of the State of California. Developer has the authority to own and convey
the Property, this Agreement and all documents executed by Developer which are
to be delivered to TGC at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by Developer and do not and at the time of
Closing will not violate any provisions of any agreement or judicial order to
which Developer is a party or to which Developer or the Property is subject.
(xiv) Property Tax Assessment. Notwithstanding any other
provision of this Agreement to the contrary, if TGC shall become liable after
the Closing for payment of any property taxes assessed against the Property for
any period of time prior to the Closing Date, Developer shall immediately pay to
TGC on demand an amount equal to such tax assessment in accordance with Section
5.6.
(b) Status At and After Closing. All representations and warranties
contained in Subsection (a) of this Section or made in writing by Developer in
connection with the transaction herein provided for shall be true and correct on
the date hereof, and on the Closing Date except to the extent TGC has been
notified to the contrary after the date hereof and prior to Closing Date, and
liability for misrepresentation or breach of warranty or covenant shall survive
the execution and delivery of this Agreement and the Closing; provided, however,
that Developer shall not be deemed to have breached this Agreement in the event
such representation or warranty is subsequently not true or correct due solely
to the act or omission of an entity or person other than Developer and Developer
has so notified TGC. It is agreed that TGC's damages resulting from
misrepresentation or breach of warranty or covenant by Developer shall include
all loss, damage, liability or expense, including court costs and reasonable
attorney's fees, reasonably incurred or sustained by TGC in connection
therewith.
(c) TGC's Rights. Upon notification of any fact which would change
any of the representations or warranties contained herein or would otherwise
constitute a breach
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thereof, TGC shall have the option of (i) waiving the breach of warranty or
change, reserving all of its rights and remedies in respect thereof available at
law, or in equity, or under the terms hereof, (ii) agreeing with Developer to
adjust the terms hereof to compensate TGC for such change, or (iii) to terminate
this Agreement. If such fact is different because of a misrepresentation of
Developer, then the options of the preceding sentence shall be in addition to
any other remedy available to TGC at law or in equity.
As used in this Agreement, the words "To the best knowledge and belief
of Developer" includes the knowledge of any general partner of Developer and of
any agent of any general partner of Developer after due inquiry.
10.2. TGC Warranties.
(a) This Agreement and all documents executed by TGC which are to
be delivered to TGC at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by TGC and do not and at the time of Closing
will not violate any provisions of any agreement or judicial order to which TGC
is a party or to which TGC is subject.
(b) The representations and warranties contained in Section 10.2
or made in writing by TGC in connection with the transaction which is the
subject of this Agreement shall be true and correct on the date hereof, and on
the Closing Date except to the extent Developer has been notified to the
contrary after the date hereof and prior to Closing Date, and liability for
misrepresentation or breach of warranty or covenant shall survive the execution
and delivery of this Agreement and the Closing; provided, however, that TGC
shall not be deemed to have breached this Agreement in the event such
representation or warranty is subsequently not true or correct due solely to the
act or omission of an entity or person other than TGC. It is agreed that
Developer's damages resulting from misrepresentation or breach of Warranty or
covenant by TGC shall include all loss, damage, liability or expense, including
court costs and reasonable attorney's fees, reasonably incurred or sustained by
Developer in connection therewith.
10.3. Representations of Authority. Each signatory party hereby
represents to the other that this Agreement has been duly executed by duly
authorized officers or general partners of such party and constitutes a valid,
binding and enforceable obligation of such party.
11. CONDEMNATION
11.1. Condemnation. In the event that, prior to the Close of Escrow, a
governmental entity shall commence any action of eminent domain to take any
portion of the Property, TGC shall have the option either to (i) elect not to
acquire the Property, in which case this Agreement shall be terminated, or (ii)
complete the acquisition of the Property, in which case TGC shall be entitled to
the proceeds of such taking.
12. INDEMNITY
12.1. Developer. Developer hereby agrees to indemnify and hold TGC
harmless from and against any and all loss, claims, damages, penalties,
liabilities, costs, or allegations of any of the foregoing, including all out of
pocket litigation costs and the actual fees and expenses of counsel,
investigation and appeal which may arise in connection with any
misrepresentation
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<PAGE> 17
made by or on behalf of Developer in connection with any certificate or other
instrument furnished or to be furnished by Developer or at its request
hereunder, any breach of Developer's warranties and representations, the failure
of Developer to fulfill any of its covenants or agreement under this Agreement,
or for any cause arising with respect to the Property prior to the Closing Date,
including but not limited to all foreseeable consequential damages. The term
"TGC" as contained herein shall include TGC, its directors, officers, employees,
partners, joint venturers and agents, and any successors to TGC's interest in
the chain of title to the Property, its directors, officers, employees,
partners, joint venturers and agents.
12.2. TGC. TGC hereby agrees to indemnify and hold Developer harmless
from and against any and all loss, claims, damages, penalties, liabilities,
costs, or allegations of any of the foregoing, including all out-of pocket
litigation costs and the actual fees and expenses of counsel, investigation and
appeal which may arise on or after the Closing Date in connection with any cause
arising with respect to the Property other than the causes discussed in Section
12.1 above, including but not limited to all foreseeable consequential damages.
13. MISCELLANEOUS
13.1. Attorneys' Fees. In the event of any action between TGC and
Developer seeking enforcement of any of the terms and conditions of this
Agreement, or in connection with the Property, the prevailing parry in such
action shall be awarded, in addition to damage, injunctive or other relief, its
reasonable costs and expenses, including but not limited to taxable costs and
reasonable attorneys' fees.
13.2. Notices. All notices under this Agreement shall be deemed
delivered upon personal delivery to TGC or Developer, as the case may be, or
five (5) business days after deposit in the United States mail, registered or
certified, postage fully prepaid and addressed to the respective parties,
effective, in the case of mailing, as at the date deposited in the mail, or on
receipt if by reputable courier service which provides written evidence of
delivery, to the addresses stated in the first paragraph of this Agreement, or
such other address as the parties may from time to time designate in writing. A
copy of notices to Developer shall be sent to:
Panattoni Johnson & Loorz
9812 Old Winery Place, Suite 4
Sacramento, CA. 95827
Facsimile no. (916) 362-0161
Attention: Mr. Rod Johnson
Notices to TGC shall be sent to:
The Gymboree Corporation
700 Airport Blvd. Suite 200
Burlingame, CA. 94010-1912
Attention: Alan Katz, Director of
Corporate Real Estate and Facilities
Facsimile no. (415) 696-7550
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<PAGE> 18
A copy of any notice to TGC shall be sent to:
Martin I. Zankel, Esq.
Bartko, Zankel, Tarrant & Miller
900 Front Street, Suite 300
San Francisco, CA 94111
Facsimile No. (415) 956-1152
As a matter of convenience, however, communications between TGC and Developer
shall, to the extent feasible, be conducted orally, by telephone or in person,
between counsel or other authorized agents of the parties, with such
communications to be confirmed and made effective in writing as set forth above.
13.3. Entire Agreement. This Agreement and the items incorporated
herein contain all of the agreements of the parties hereto with respect to the
matters contained herein and no prior agreement or understanding pertaining to
any such matter shall be effective for any purpose. No provisions of this
Agreement may be amended or modified in any manner whatsoever except by an
agreement in writing signed by duly authorized officers or general partners of
each of the parties hereto, except that any modifications which relate to the
adjustment of tine limitations (except the Closing Date) or the form of
documents may be made by legal counsel to the parties.
13.4. Successors. The terms, covenants and conditions of this Agreement
shall be binding upon and shall inure to the benefit of the heirs, executors,
administrators and assigns of the respective parties hereto.
13.5. Assignment. Developer may not assign its rights hereunder without
the prior written consent of TGC. TGC may assign its rights hereunder so long as
it covenants to remain responsible for the full performance hereof through Close
of Escrow.
13.6. Choice of Laws. This Agreement shall be governed by the laws of
the State of California and any question arising hereunder shall be construed or
determined according to such law.
13.7. Headings. Headings at the beginning of each numbered section of
this Agreement are solely for the convenience of the parties and are not a part
of this Agreement.
13.8. Survival, Developer's obligations pursuant to the Agreement, and
with particular reference, but not limited in any way to the indemnity set forth
in Section 14 shall survive the Close of Escrow. Developer expressly agrees that
the representations and warranties and the indemnity stated herein are not
personal to TGC and, so long as Developer is given written notice thereof by TGC
or a subsequent party in interest, the benefits hereunder may be assigned to
subsequent parties in interest to the chain of title to the Property, which
subsequent parties in interest may proceed directly against Developer to recover
pursuant to this Section.
13.9. Counterparts. This Agreement may be signed by the parties in
different counterparts and the signature pages combined to create a document
binding on all parties.
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13.10. Brokers and Finders. In the event of a claim for broker's fee,
finder's fee, commission or other similar compensation in connection herewith
other than as set forth above, TGC, if such claim is based upon any agreement
alleged to have been made by TGC, hereby agrees to indemnify and hold Developer
harmless against any and all liability, loss, cost, damage or expense (including
reasonable attorneys' fees and costs) which Developer may sustain or incur by
reason of such claim, and Developer, if such claim is based upon any agreement
alleged to have been made by Developer, hereby agrees to indemnify and hold TGC
harmless against any and all liability, loss, cost, damage or expense (including
reasonable attorneys' fees and costs) which TGC may sustain or incur by reason
of such claim. The provisions of this Section shall survive the Closing.
13.11. No Offer. The submittal or execution of this Agreement, or a
draft thereof, by either party shall not constitute an offer, nor shall either
party be bound to any of the terms hereof until both parties have executed this
document and an original signature copy of such executed document has been
received by each party.
14. EXHIBITS
The following Exhibits are attached hereto and made a part hereof by
reference:
Exhibit A - Legal Description of Tract
Exhibit B - Legal Description of Property
Exhibit C - Plat of Property
Exhibit D - Guideline Specifications for the Project
Exhibit E - The Construction Contract
Exhibit F - Option Land
Exhibit G - Option
Exhibit H - The Proposal
Exhibit I - Letter of Assurance
Exhibit J - East Street Drawings
IN WITNESS WHEREOF, TGC and Developer have executed this Agreement as
of the date first above written.
TGC: DEVELOPER:
THE GYMBOREE CORPORATION
/s/ Carl D. Panattoni
----------------------------------
By: [SIG] Carl D. Panattoni
----------------------------------
By:
---------------------------------- WICKLAND PROPERTIES
By: [SIG]
-------------------------------
By:
-------------------------------
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EXHIBIT A
Legal Description of Tract
(To be attached upon receipt by Buyer of the Preliminary Report.)
<PAGE> 21
EXHIBIT B
Legal Description of Property
(To be attached upon receipt by Buyer of the Preliminary Report.)
<PAGE> 22
[PARCEL MAP]
<PAGE> 1
STANDARD FORM OF AGREEMENT BETWEEN OWNER AND
CONTRACTOR WHERE THE BASIS OF PAYMENT IS A STIPULATED SUM
AIA DOCUMENT A101 - ELECTRONIC FORMAT
________________________________________________________________________________
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY
IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.
The 1987 Edition of AIA Document A201, General Conditions of the Contract for
Construction, is adopted in this document by reference. Do not use with other
general conditions unless this document is modified. This document has been
approved and endorsed by The Associated General Contractors of America.
Copyright 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1962, 1967, 1974, 1977,
copyright 1987 The American Institute of Architects, 1735 New York Avenue, N.W.,
Washington, D.C., 20006-5292. Reproduction of the material herein or
substantial quotation of its provisions without written permission of the AIA
violates the copyright laws of the United States and will be subject to legal
prosecution.
________________________________________________________________________________
AGREEMENT
made as of the 5th day of May in the year of Nineteen Hundred and Ninety-Seven
BETWEEN the Owner:
(Name and address)
The Gymboree Corp.
700 Airport Boulevard, Suite 200
Burlingame, CA 94010-1912
and the Contractor:
(Name and address)
DPR Construction, Inc.
1451 River Park Drive, Suite 210
Sacramento, CA 95815
The Project is:
(Name and location)
The Gymboree Corp./Dixon Distribution Center
2299 Kids Way
Dixon, CA 95620
DPR Job No.: 02-97005-00
The Architect is:
(Name and address)
DES Architects & Engineers
399 Bradford Street
Redwood City, CA 94063
The Owner and Contractor agree as set forth below.
________________________________________________________________________________
Page #1
<PAGE> 2
ARTICLE 1
THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions). Drawings, Specifications,
addenda issued prior to execution of this Agreement, other documents listed in
this Agreement and Modifications issued after execution of this Agreement;
these form the Contract, and are as fully a part of the Contract as if attached
to this Agreement or repeated herein. The Contract represents the entire and
integrated agreement between the parties hereto and supersedes prior
negotiations, representations or agreements, either written or oral. An
enumeration of the Contract Documents, other than Modifications, appears in
Article 9.
ARTICLE 2
THE WORK OF THIS CONTRACT
The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract
Documents to be the responsibility of others, as follows:
2.1 The Owner acknowledges that the services to be provided by the Contractor
under this agreement shall not constitute the Contractor an Architect or
Engineer nor impose on the Contractor any obligation to assume or perform on
behalf of the Owner the professional responsibilities, duties, services and
activities for which the Owner has contracted with the Architect; nor shall the
Owner impose on the Contractor any liability with respect thereto.
2.2 The Contractor shall not be responsible or liable in connection with the
design of the Work nor for the failure of the Architect to provide the required
designs. The Contractor, in performing his duties, does not relieve the
Architect from any responsibilities for services contained in the Agreement
between the Owner and Architect; nor shall the Contractor incur any liability
for non performance of such services by the Architect.
2.3 The Contractor shall notify the Owner and Architect promptly, in writing,
if he becomes aware that necessary designs are lacking and shall not proceed
with such part of the work until so directed by Owner.
ARTICLE 3
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The Work to be performed under this Contract shall be commenced upon
receipt of confirmation of Owner's financing, a valid building permit and
within five (5) days of a written notice to proceed and shall be substantially
completed within two hundred eight (208) calendar days from commencement. Such
contract time shall be extended pursuant to the provisions of A1A-A201 General
Conditions Article 8.3. (May 5, 1997 through November 28, 1997.)
(Insert the date of commencement, if it differs from the date of this Agreement,
or, if applicable, state that the date will be fixed in a notice to proceed.)
3.2 If the Substantial Completion Date of the Work is delayed for any cause
beyond Contractor's control, including, but not limited to, any act, neglect,
delay or default of the Owner, Owner's Lender, Architect or by any employee or
representative of either of them, or by any separate contractor employed by the
Owner, or the Building Department or other governmental authority, or by
changes or additions to the Work, or by injunction, or by government control or
regulations, or by any delay caused by common carrier on land or water, or by
shortages or labor or materials, or both, or by damage or delay which may arise
through or by fire, explosion, lightning, earthquake, cyclone, inclement
weather (including, without limitation) rain, flood, insurrection or war, or by
the
(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirement for earlier Substantial Completion of
certain portions of the Work, if not stated elsewhere in the Contract
Documents.)
(Insert provisions, if any, for liquidated damages relating to failure to
complete on time)
Page #2
<PAGE> 3
abandonment of the Work by strikes, boycotts or by lockouts engaged thereon
through no fault of the Contractor, or any other causes beyond Contractor's
control then the Contractor shall not be held responsible or accountable for
such delay and the Owner shall issue a Change Order to this Contract extending
the Substantial Completion Date by such amount of time as Contractor reasonably
estimates in writing to the Owner the Substantial Completion Date has been
delayed. In the event the delay is due to a change or addition to the Work
originated by the State of California, the State agrees to be held liable of
the resultant increase in cost, which Owner shall pass on the Contract.
3.3 In the event the Contractor does not achieve Substantial Completion within
the Contract Time including approved extensions, the Contractor shall pay the
Owner, as liquidated, damages and not as penalty, the sum of seven hundred
fifty dollars ($750.00) per day for the first thirty (30) calendar days and two
thousand dollars ($2,000.00) for each day thereafter for which the actual time
performance exceeds the authorized Contract Time.
3.4 Included in the Construction Time and Contract Sum are three (3) work days
which are anticipated to be lost due to inclement weather. The Contractor will
advise the Owner monthly as to the status of the delays claimed to be lost due
to inclement weather. At such time as the accumulated number of the lost days
exceeds the allotment of days, that difference shall constitute a time
extension and the Owner shall issue a Change Order to this Contract extending
the Contract Time the required number of days and adjusting the Contract Sum
(including the Contractor's Fee) by an amount the Contractor reasonably
estimates the delay has cost.
ARTICLE 4
CONTRACT SUM
4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Seven Million Two Hundred
Sixty-Six Thousand Seven Hundred Eighty=Eight Dollars ($7,266,788.00), subject
to additions and deductions as provided in the Contract Documents.
4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner:
(State the numbers or other identification of accepted alternates. If decisions
on other alternates are to be made by the Owner subsequent to the execution of
this Agreement, attach a schedule of such other alternates showing the amount
for each and the date until which that amount is valid.)
<TABLE>
<S> <C>
A. Original bid of April 11, 1997 including all clarifications and exclusions $7,244,099
B. Add to reach .040 shrinkage for the slab and tilt-up concrete material 37,457
C. Add to increase to R-30 batt insulation at the office area ceiling 3,500
D. Add to increase Built-Up Roofing System to a 20 year bond 11,000
E. Add to use Viracon VT5-20 in lieu of Eclipse Reflective glass 6,000
F. Deduct to use oriented strand board in lieu of plywood 40,000
G. Add to use Kelley specified dock levelors 4,732
----------
Total Authorization $7,266,788
==========
</TABLE>
4.3 For additive changes, the fee will be increased by the costs of the change,
pursuant to the provisions of Section 7 of the General Conditions and the
following:
a) Any Value Engineering has no fee associated with it, 100% credit to Gymboree.
b) The first $250,000 of Change Orders at 2.5% our base fee.
c) the next $100,000 at 10% of DPR work and 5% on subcontractors.
d) All remaining Change Orders at 10% and 10% as stated in the Contract.
4.4 For deductive changes, there is no change in fee.
ARTICLE 5
PROGRESS PAYMENTS
5.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner
shall make progress payments on account of the Contract Sum to the Contractor
as provided below and elsewhere in the Contract Documents.
Insert B: 5.1 The Architect shall promptly review the pre-approved Application
for Payment and will, within four (4) days of receipt thereof, sign the
Application for Payment and forward it to the Owner or Lender. Consideration
may also be given by the
Page #3
<PAGE> 4
Owner or Architect for withholding previously approved amounts as provided in
Article 9.5 of the General Conditions. The amount approved in the Application
for Payment shall be payable by Owner on or before the 20th day of the month
following the month covered by the Application for Payment.
Insert C: 5.1.1 Payment shall be wired to:
Insert D: Wells Fargo Bank
Insert E: 400 Hamilton
Insert F: Palo Alto, CA 94301
Insert G: Contact: Larry Hyde (650) 855-7696
Insert H: For the account of:
Insert I: DPR Construction, Inc.
Insert J: Account No. 4191-048735
Insert K: Routing No. 121000248
Insert L.: Have the bank notify Michele Leiva at (650) 592-4800
Insert M: Job Name: The Gymboree Corp./Dixon Distribution Center
Insert N: Job No. 02-97005-00
5.2 NOT APPLICABLE
5.2 The Contractor shall, during the last week of each month, meet with the
Architect and Owner (and/or other parties designated in writing by the Owner)
to review and approve an itemized draft indicating the total estimated value of
the work completed through the end of the current calendar month including the
value of all material and equipment suitably stored at the jobsite or other
approved location. Such draft will set forth the individual percentages of
completion of each part of the work including a pro-rata share of the
Contractor's Fee and applicable retention. The approved draft will then be
formalized into an Application for Payment, and will be submitted to the Owner
for processing.
5.3 Provided an Application for Payment is received by the Architect not
later than the last day of a month, the Owner shall make payment to the
Contractor not later than the tenth (10) day of the following month. If an
Application for Payment is received by the Architect after the application date
fixed above, payment shall be made by the Owner not later than ten (10)
calendar days after the Architect receives the Application for Payment.
5.4 NOT APPLICABLE
5.5 Applications for Payment shall indicate the percentage of completion of
each portion of the Work as of the end of the period covered by the Application
for Payment.
5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
5.6.1 Take that portion of the Contract Sum properly allocable to completed
Work as determined by multiplying the percentage completion of each portion of
the Work by the share of the total Contract Sum allocated to that portion of
the Work in the Schedule of Values, less retainage of ten percent (10%).
Pending final determination of the cost to the Owner of changes in the Work,
amounts not in dispute may be included as provided in Subparagraph 7.3.7 of the
General Conditions even though the Contract Sum has not yet been adjusted by
Change Order;
5.6.2 Add that portion of the Contract Sum properly allocable to materials
and equipment delivered and suitably stored at the site for subsequent
incorporation in the completed construction (or, if approved in advance by the
Owner, suitably stored off the site at a location agreed upon in writing), less
retainage of ten percent (10%);
Page #4
<PAGE> 5
5.6.3 Subtract the aggregate of previous payments made by the Owner; and
5.6.4 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
5.7 The progress payment amount determined in accordance with Paragraph
5.6 shall be further modified under the following circumstances:
5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to
increase the total payments to One Hundred percent (100%) of the Contract Sum,
less such amounts as the Architect shall determine for incomplete Work and
unsettled claims; and thirty-five (35) days after Substantial Completion, any
unpaid balance plus the remaining retention will be paid to the Contractor.
Should minor items remain to be completed, the Contractor and the Owner or
Architect shall list such items and the Contractor's written acceptance of such
list shall constitute his unconditional promise to complete said items within a
reasonable time thereafter. The Owner may retain a sum equal to one hundred
fifty percent (150%) of the estimated cost of completing any unfinished items,
provided that such items are listed separately and the estimated cost of
completing any unfinished item is likewise listed separately. Thereafter, Owner
shall pay to the Contractor monthly, the amount retained for incomplete items
as each of said items is completed.
5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in
accordance with Subparagraph 9.10.3 of the General Conditions.
5.8 Reduction or limitation of retainage, if any, shall be as follows:
(If it is intended, prior to Substantial Completion of the entire Work, to
reduce or limit the retainage resulting from the percentages inserted in
Subparagraphs 5.6.1 and 5.6.2 above, and this is not explained elsewhere in the
Contract Documents, insert here provisions for such reduction or limitation.)
None.
ARTICLE 6
FINAL PAYMENT
Final payment, constituting the entire unpaid balance of the Contract Sum,
shall be made by the Owner to the Contractor when (1) the Contract has been
fully performed by the Contractor except for the Contractor's responsibility to
correct nonconforming Work as provided in Subparagraph 12.2.2 of the General
Conditions and to satisfy other requirements, if any, which necessarily survive
final payment; and (2) a final Certificate for Payment has been issued by the
Architect; such final payment shall be made by the Owner not more than 30 days
after the issuance of the Architect's final Certificate for Payment, or as
follows:
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 Where reference is made in this Agreement to a provision of the
General Conditions or another Contract Document, the reference refers to that
provision as amended or supplemented by other provisions of the Contract
Documents.
7.2 Payments due and unpaid under the Contract shall bear interest from
the date payment is due at the rate stated below, or in the absence thereof, at
the legal rate prevailing from time to time at the place where the Project is
located.
(insert rate of interest agreed upon, if any.)
7.2.1 In the event that any payments are not made by the Owner to the
Contractor when due in accordance with this Contract, said payments shall bear
interest from the date the payment was due until paid at the rate of five
percent (5%) per annum over the prime rate of the Wells Fargo Bank of San
Francisco prevailing the 25th day of the month preceding the date that payment
was due. The fact that the Contractor is charging interest in accordance with
this provision, shall not constitute waiver by Contractor of any other rights
or remedies provided for herein by reason of Owner's default in making such
payments, including specifically, but not limited to, Contractor's rights to
terminate this Contract for nonpayment.
(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Contractor's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)
Page #5
<PAGE> 6
7.3 Other provisions:
7.3.1 Attorney's Fees. If either party becomes involved in litigation or
arbitration arising out of this Contract or the performance thereof, the court
or arbitration panel in such litigation or arbitration or in a separate suit
shall award attorney's fees to the prevailing party. Unless judgment goes by
default, the attorney's fees award shall not be computed in accordance with any
court schedule, but shall be such as to fully reimburse all attorney's fees
actually incurred in good faith, regardless of the size of the judgment, it
being the intention of the parties to fully compensate for all attorney's fees
incurred in good faith.
7.3.2 Destruction of the Work by Fire, Elements, Etc.
(a) In the event of the Work herein be wholly or partially damaged or
destroyed by war, fire, storm, lightning, flood, earthquake, settlement or
defective soils, expansion or contraction, cracking or deflection, tidal wave,
surface or subsurface water, mob violence, vandalism or other casualty before
the final completion of said Work, the Contractor, upon written instruction
from the owner, shall proceed to replace and/or repair said Work in accordance
with the plans. In this event, the provisions of this Contract shall remain in
full force and effect, except that the Contract Sum stated in Article 4 shall
be increased by total cost of removing and/or replacing all damaged and/or
destroyed work, the time for completion shall be extended and the Contractor's
Fee shall be increased.
(b) In the event of substantial damage or destruction to the Work by
any cause, the Owner may, upon giving written notice to the Contractor, elect
to terminate this Contract. In such case, the Owner shall pay the Contractor
for all costs of the Work and all obligations incurred by Contractor in
connection with the Work, and the Contractor's Fee earned upon such costs and
obligations.
(c) Owner will obtain, prior to the commencement of the Work, Flood,
Earthquake, Fire and Extended Coverage Insurance, including "All Risk"
insurance and such other additional insurance as so desired, to insure those
casualties enumerated in Paragraph (a) upon the Work and upon all materials
intended to become a part of the Work, whether on-site, temporarily and
suitably stored elsewhere, or in transit. The Owner shall be responsible for
any and all costs not covered by said insurance. A copy of each policy shall be
submitted to the Contractor. The Contractor and all subcontractors shall be
named as "Additional Insureds" and each policy shall include a Waiver of
Subrogation and Permission to Occupy Endorsement, and the policy shall be
satisfactory to the Contractor.
7.3.3 Damage and Indemnity. Notwithstanding any of the provisions in the
Contract to the contrary, Contractor shall in no event have any responsibility,
nor be liable to Owner, for damages or delays resulting from the prior presence
of pollutants, gaseous emissions, asbestos, hazardous or toxic substances,
whether subsurface or otherwise, and/or from soil subsidence, unless solely
caused by the gross negligence or willful misconduct of Contractor, and Owner
will fully hold harmless and indemnify Contractor from and against any and all
claims or actions resulting from the prior presence of any such pollutants,
gaseous emissions, asbestos, hazardous and/or toxic substances, whether
subsurface or otherwise, and/or from soil subsidence.
Except as set forth elsewhere in this Contract, Contractor makes no warranty,
express or implied, including any implied warranties of merchantability or
fitness for a particular purpose.
7.3.4 License. Contractors are required by law to be licensed and regulated
by the Contractor's State License Board. Any questions concerning the
Contractor may be referred to the Registrar of the Board whose address is: P.O.
Box 26000, Sacramento, CA 95826.
7.3.5 Service of Notices. All notices or other communications required or
permitted hereunder shall be in writing, and shall be sent certified mail,
postage prepaid, return receipt requested, or telegraphed, delivered or sent by
telex, telecopy or cable and shall be deemed received upon the earlier of (i)
if personally delivered, the date of delivery to the address of the person to
receive such notice, (ii) if mailed, four (4) business days after the date of
posting by the United States Post Office, (iii) if given by telegraph or cable,
when delivered to the telegraph company with charges prepaid; or (iv) if given
by telex or telecopy, when sent. Any notice, request, demand, direction or
other communication sent by cable, telex or telecopy must be confirmed within
forty-eight (48) hours by letter mailed or delivered in accordance with the
foregoing.
7.3.6 Any written notice hereunder directed to Contractor may be served on
its project manager by the means stated in 7.3.5.
7.3.7 Any written notices hereunder directed to Owner or Architect may be
served on the Architect's or Owner's representatives by the means stated in
7.3.5 at:
Contractor:
DPR Construction, Inc.
Page #6
<PAGE> 7
Attn: Eric R. Lamb
555 Twin Dolphin Drive, 2nd Floor
Redwood City, CA 94065
Owner:
The Gymboree Corporation
Attn: Art Chinn
700 Airport Boulevard, Suite 200
Burlingame, CA 94010-1912
Architect:
DES Architects & Engineers
Attn: Kevin Norman
399 Bradford Street
Redwood City, CA 94063
7.3.8 Assignment. It is agreed that neither this Contract nor the obligations or
benefits hereunder shall be assigned by Contractor without the written
consent of Owner, nor by Owner with the written consent of Contractor.
ARTICLE 8
TERMINATION OR SUSPENSION
8.1 The Contract may be terminated by the Owner or the Contractor as provided
in Article 14 of the General Conditions.
8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.
ARTICLE 9
ENUMERATION OF CONTRACT DOCUMENTS
9.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:
9.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A101, 1987 Edition.
9.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201, 1987 Edition.
9.1.3 The Supplementary and other Conditions of the Contract are those contained
in the Project Manual dated, and are as follows:
DOCUMENTS TITLE PAGES
Exhibit C - List of Contract Documents
- --------------------------------------
9.1.4 The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and are as follows:
(Either list the Specifications here or refer to an exhibit attached to this
Agreement.)
DOCUMENT TITLE PAGES
Exhibit C - List of Contract Documents
- --------------------------------------
9.1.5 The Drawings are as follows, and are dated unless a different date is
shown below:
(Either list the Drawings here or refer to an exhibit attached to this
Agreement)
NUMBER DATE PAGES
Exhibit C - List of Contract Documents
- --------------------------------------
9.1.6 The addenda, if any, are as follows:
NUMBER DATE PAGES
Exhibit C - List of Contract Documents
- --------------------------------------
Page #7
<PAGE> 8
Portions of addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.
9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows:
(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid. Instructions to Builders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to be
part of the Contract Documents.)
Exhibit A - Insurance Requirements
Exhibit B - List of Standard Wage Rates
Exhibit C - List of Contract Documents
Exhibit D - Project Schedule
Exhibit E - Contract Price Breakdown
AIA A201 - General Conditions of the Contract for Construction
Addendum to AIA Document A201 General Conditions
This Agreement is entered into as of the day and year first written above and
is executed in at least three original copies of which one is to be delivered
to the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the owner.
OWNER CONTRACTOR
/s/ ALAN KATZ /s/ ERIC R. LAMB
- ------------------------------ ------------------------------
Alan Katz, Director of Corporate Eric R. Lamb, Executive Vice President
Real Estate and Facilities (Printed name and title)
(Printed name and title)
Page #8
<PAGE> 9
EXHIBIT "A"
INSURANCE REQUIREMENTS
STANDARD FORM OF AGREEMENT
BETWEEN OWNER AND CONTRACTOR
(1987 EDITION OF AIA DOCUMENT A101)
THE GYMBOREE CORPORATION and DPR CONSTRUCTION, INC.
1. Contractor shall maintain in effect at all times during the performance
of the work under the contract not less than the following coverage and
limits of insurance which shall be maintained under forms of policies
satisfactory to the Owner.
1.1 Worker's Compensation and Employer's Liability Insurance. Workers
Compensation insurance shall be provided as required by any applicable
law or regulation. Employer's Liability insurance shall be provided in
amounts not less than:
$ 1,000,000 each accident for bodily injury by accident
$ 1,000,000 policy limit for bodily injury by disease
$ 1,000,000 each employee for bodily injury by disease
If there is an exposure of injury to Contractor's employees under the
U.S. Longshoreman and Harbor Workers' Compensation Act, the Jones Act
or under laws, regulations or statutes applicable to maritime
employees, coverage shall be included for such injuries or claims.
1.2 General Liability Insurance. Contractor shall carry Commercial General
Liability insurance covering operations by or on behalf of Contractor,
providing insurance for bodily injury liability and property damage
liability for the limits of liability indicated below and including
coverage for:
(1) premises and operations:
(2) products and completed operations;
(3) contractual liability insuring the obligations
assumed by Contractor in this Agreement;
(4) broad form property damage (including completed
operations);
(5) explosion, collapse and underground hazards; and
(6) personal injury liability.
Except with respect to bodily injury and property damage included
within the products and completed operation hazards, the aggregate
limit, where applicable, shall apply separately to Contractor's work
under this Agreement.
1.2.2 The Contractor shall provide an Occurrence form Commercial General
Liability policy, the limits of liability shall be not less than:
$2,000,000 general aggregate
$2,000,000 aggregate for products-completed operations
$2,000,000 for personal injury liability
$2,000,000 each occurrence (combined single limit for bodily
injury and property damage)
Page 1
<PAGE> 10
1.3 Automobile Liability Insurance. Contractor shall carry automobile
liability insurance, including coverage for all owned, hired and
non-owned automobiles. The limits of liability shall be not less than
$1,000,000 combined single limit each accident for bodily injury and
property damage.
2.0 Certificates of insurance, as evidence of the insurance required by
this Agreement, shall be furnished by the Contractor before any work is
commenced. The certificates of insurance shall provide that there will
be no cancellation or reduction of coverage without thirty (30) days
prior written notice to the Contractor.
3.0 The Bodily Injury and Property Damage Liability Policies shall include
a provision or endorsement naming the Owner as an additional insured as
respects liabilities arising out of Contractor's performance of the
work under this Contract, and providing that such insurance is primary
insurance as respects the interests of the Owner and that any other
insurance maintained by the Owner is excess and not contributing
insurance.
4.0 Aircraft Insurance. If the Contractor or his Subcontractors use any
owned, leased, chartered or hired aircraft of any type (including
helicopters) in the performance of this contract, they shall maintain
aircraft liability Insurance in an amount of not less than $10,000,000
per occurrence including Passenger Liability. Evidence of Coverage in
the form of a Certificate of Insurance shall be provided prior to the
start of work.
5.0 Insurance Requirements for Contractor. The Contractor shall insure that
all tiers of their Subcontractors shall procure and maintain insurance
in like form including the Additional Insured requirements set forth in
Paragraph 2.0.
6.0 Professional Liability Exposures. The Owner acknowledges that the
Contractor will not provide Professional Errors and Omissions Insurance
as the Contractor in his role of Contractor is not acting as an
Architect. Professional Liability Insurance in forms and amounts
acceptable to the Owner shall be carried if the Contractor is to
provide design services to the project. Evidence of coverage in the
form of a Certificate of Insurance shall be provided to the Owner prior
to the start of work.
7.0 If the Owner has not provided acceptable evidence of property insurance
coverage required herein at the start of work, then the Contractor may
obtain such coverage and the cost therefore shall become a cost
reimbursable item. If adequate coverage is later obtained by the Owner,
the Contractor shall terminate any property insurance coverage so
obtained.
Page 2
<PAGE> 11
EXHIBIT "B"
LIST OF STANDARD WAGE RATES
STANDARD FORM OF AGREEMENT
BETWEEN OWNER AND CONTRACTOR
(1987 EDITION OF AIA DOCUMENT A-101)
THE GYMBOREE CORPORATION and DPR CONSTRUCTION, INC.
THE GYMBOREE CORP./DIXON DISTRIBUTION CENTER
2299 KIDS WAY
DIXON, CA 95620
DPR JOB NO. 02-97005-00
<TABLE>
<CAPTION>
Overtime Double Time
Classification Rates Rates Rates
- -------------- ----- ----- -----
<S> <C> <C> <C>
Principal 120.00
Project Executive 95.00
Senior Estimator 70.00
Estimator 65.00
MEP Estimator/Coordinator 65.00
Project Manager 70.00
Project Engineer 40.00
Field Office Coordinator 32.00
Project Accountant 35.00
Superintendent 65.00
Carpenter Foreman 51.20 69.45 87.70
Carpenter 46.00 62.85 79.70
Labor Foreman 42.38 56.62 70.86
Laborer 38.05 51.35 64.65
</TABLE>
Said rates establish the hourly amount the Contractor will bill and the Owner
will pay for the work to be performed by the Contractor's own forces for this
project.
<PAGE> 12
GYMBOREE DISTRIBUTION CENTER
EXHIBIT "C"
LIST OF CONTRACT DOCUMENTS
DPR JOB NO. 02-97005-00
DATED MAY 22,1997
Drawings prepared by DES Architects and Morton & Pitalo, Inc. listed as follows:
<TABLE>
<CAPTION>
Drawing No. Dated Drawing No. Dated Drawing No. Dated
- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C>
A0.1.1 3/12/97 S1.5 4/1/97 E2.4 3/12/97
A0.1.2 3/12/97 S1.6 4/1/97 E2.5 3/12/97
A1.1.1 3/12/97 S1.7 4/1/97 E3.1 3/12/97
A2.1.1 3/12/97 S1.8 4/1/97 E3.2 3/12/97
A2.1.2 3/12/97 S2.1 4/1/97 E3.3 3/12/97
A2.1.3 3/12/97 S3.1 4/1/97 E3.4 3/12/97
A2.1.4 3/12/97 S3.2 4/1/97 E3.5 3/12/97
A2.2.1 3/12/97 S4.1 4/1/97 E4.1 3/12/97
A2.2.2 3/12/97 S4.2 4/1/97 E4.2 3/12/97
A2.3.1 3/12/97 S4.3 4/1/97 L1.1 3/12/97
A2.3.2 3/12/97 S5.1 4/1/97 L1.2 3/12/97
A3.1.1 3/12/97 S6.1 4/1/97 L2.1 3/12/97
A3.1.2 3/12/97 S6.2 4/1/97 L3.1 3/12/97
A3.2.1 3/12/97 S6.3 4/1/97 L4.1 3/12/97
A5.1.1 3/12/97 S6.4 4/1/97 L4.2 3/12/97
A5.1.2 3/12/97 S6.5 4/1/97 L8.1 3/12/97
A6.1.1 3/12/97 M1.1 3/12/97 L8.2 3/12/97
A6.1.2 3/12/97 M2.1 3/12/97
A8.1.1 3/12/97 M2.2 3/12/97
A8.1.2 3/12/97 M3.1 3/12/97 Addendum #1 dated April 1, 1997
A8.1.3 3/12/97 M3.2 3/12/97 Addendum #2 dated April 4, 1997
A9.1.1 3/12/97 M4.1 3/12/97 Addendum #3 dated April 8, 1997
A9.1.2 3/12/97 M5.1 3/12/97 Addendum #4 dated April 10, 1997
A9.1.3 3/12/97 M6.1 3/12/97
A10.1.1 3/12/97 MT24.1 3/12/97 Specifications dated 3/12/97
A10.1.2 3/12/97 MT24.2 3/12/97
C1 2/97 P1.1 3/12/97
C3.1 3/12/97 P2.1 3/12/97
C4.1 3/12/97 P2.2 3/12/97
C5.1 3/12/97 P3.1 3/12/97
C8.1 3/12/97 E0.1 3/12/97
C8.2 3/12/97 E0.2 3/12/97
S0.1 4/1/97 E0.3 3/12/97
S1.1 4/1/97 E1.1 3/12/97
S1.2 4/1/97 E2.1 3/12/97
S1.3 4/1/97 E2.2 3/12/97
S1.4 4/1/97 E2.3 3/12/97
</TABLE>
<PAGE> 13
EXHIBIT D -- BID SCHEDULE
GYMBOREE DISTRIBUTION CENTER
Proposed Construction Schedule
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ID Name Duration Start/End Dates Level
- ----- --------------------------------- -------- -------------------- ------------------
<S> <C> <C> <C> <C>
1 Bid Project 0w 4/1/97 Milestone
2 Preconstruction 15w 97 to 7-14-97 Summary
3 Award Contract 2w /97 to 4/14/97 Critical
4 Submittals/Steel and Long Lea 13w 4/15/97 to 7/14/97 Critical
5 DPR Mobilize 1w 4/15/97 to 4/21/97 Critical
6 Site Construction 26w 4/22/97 to 10/20/97 Summary
7 Import and Rough Grading 2w 4/22/97 to 5/5/97 Critical
8 Underground Utilities/Finish Gr 3w 5/6/97 to 5/26/97 Noncritical
9 Curb and Gutter 2w 5/27/97 to 6/9/97 Noncritical
10 Baserock 1w 6/10/97 to 6/16/97 Noncritical
11 Paving 1w 6/17/97 to 6/23/97 Noncritical
12 Landscaping and Site Concrete 3w 9/23/97 to 10/31/97 Noncritical
13 Site Clean 1w 10/14/97 to 10/20/97 Noncritical
14 Building Construction 28w 4/29/97 Summary
15 Fine Grade Pad 1w 4/29/97 to 5/5/97 Critical
16 Foundations 3w 5/6/97 to 5/26/97 Critical
17 Underslab Plumbing 2w 5/13/97 to 5/26/97 Critical
18 Slab on Grade 4w 5/20/97 to 6/16/97 Critical
19 Tilt Up Panels 8w 6/3/97 to 7/28/97 Critical
20 Structural Steel 2w 7/15/97 to 7/28/97 Critical
21 Roof/Roof Structure 4w 7/29/97 to 8/25/97 Critical
22 Exterior Finishes 8w 7/29/97 to 9/22/97 Critical
23 Fire Sprinklers/Lighting 4w 8/12/97 to 9/8/97 Critical
</TABLE>
- --------------------------------------------------------------------------------
Date: 6/6/97
DPR CONSTRUCTION, INC.
<PAGE> 14
EXHIBIT D -- BID SCHEDULE
GYMBOREE DISTRIBUTION CENTER
Proposed Construction Schedule
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ID Name Duration Start/End Dates Level
- ----- --------------------------------- -------- -------------------- ------------------
<S> <C> <C> <C> <C>
24 Tenant Imprivements 10w 8/19/97 to 10/27/97 Critical
25 Set Roof Top Mechanical Units 1w 8/26/97 to 9/1/97 Noncritical
26 Roof Screen 2w 8/26/97 to 9/8/97 Noncritical
27 Dock Levelers 1w 8/26/97 to 9/1/97 Critical
28 Rolling Doors 2w 8/26/97 to 9/8/97 Critical
29 Owner Fixturization/Systems S 10w 9/2/97 to 1 Critical
30 Substantial Completion 0w Milestone
</TABLE>
- --------------------------------------------------------------------------------
Date: 6/6/97
DPR CONSTRUCTION, INC.
<PAGE> 15
May 5, 1997
EXHIBIT "E"
CONTRACT PRICE BREAKDOWN
FOR
THE GYMBOREE CORP.
THE GYMBOREE CORP.
700 Airport Boulevard, Suite 200
Burlingame, CA 94010-1912
DPR Job No. 02-97005-00
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
A. Original bid of April 11, 1997 including all clarifications and exclusions $7,244,099
B. Add to reach .040 shrinkage for the slab and tilt-up concrete material 37,457
C. Add to increase to R-30 batt insulation at the office area ceiling 3,500
D. Add to increase Built-Up Roofing System to a 20 year bond 11,000
E. Add to use Viracon VT5-20 in lieu of Eclipse Reflective glass 6,000
P. Deduct to use oriented strand board in lieu of plywood (40,000)
G. Add to use Kelley specified dock levelors 4,732
----------
Total Authorization $7,266,788
</TABLE>
END OF EXHIBIT "E"
1
<PAGE> 16
GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
AIA DOCUMENT A201 - ELECTRONIC FORMAT
- --------------------------------------------------------------------------------
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.
This document has been approved and endorsed by the Associated General
Contractors of America.
Copyright 1911, 1915, 1918, 1925, 1927, 1951, 1958, 1961, 1963, 1967, 1970,
1976, 1987 by The American Institute of Architects, 1735 New York Avenue N.W.,
Washington D.C. 20006-5292. Reproduction of the material herein or substantial
quotation of its provisions without written permission of the AIA violates the
copyright laws of the United States and will be subject to legal prosecutions.
- --------------------------------------------------------------------------------
TABLE OF ARTICLES
1. GENERAL PROVISIONS 8. TIME
2. OWNER 9. PAYMENTS AND COMPLETION
3. CONTRACTOR 10. PROTECTION OF PERSONS AND
PROPERTY
4. ADMINISTRATION OF THE CONTRACT
5. SUBCONTRACTORS 11. INSURANCE AND BONDS
6. CONSTRUCTION BY OWNER OR BY 12. UNCOVERING AND CORRECTION OF
SEPARATE CONTRACTORS WORK
7. CHANGES IN THE WORK 13. MISCELLANEOUS PROVISIONS
14. TERMINATION OR SUSPENSION OF
THE CONTRACT
Page #1
<PAGE> 17
INDEX
<TABLE>
<S> <C>
ACCEPTANCE OF NONCONFORMING WORK 9.6.6, 9.9.3 12.3
Acceptance of Work 9.6.6, 9.8.2, 9.9.3, 9.10.1, 9.10.3
ACCESS TO WORK 3.16, 6.2.1, 12.1
Accident Prevention 4.2.3, 10
Acts and Omissions 3.2.1, 3.2.2, 3.3.2, 3.12.8, 3.18, 4.2.3,
4.3.2, 4.3.9, 8.3.1, 10.1.4, 10.2.5, 13.4.2, 13.7, 14.1
Addenda 1.1.1, 3.11
Additional Costs, Claims for 4.3.6, 4.3.7, 4.3.9, 6.1.1, 10.3
Additional Inspections and Testing 4.2.6, 9.8.2, 12.2.1, 13.5
Additional Time, Claims for 4.3.6, 4.3.8, 4.3.9, 8.3.2
ADMINISTRATION OF THE CONTRACT 3.3.3, 4, 9.4, 9.5
Advertisement or Invitation to Bid 1.1.1
Aesthetic Effect 4.2.13, 4.5.1
ALLOWANCES 3.8
All-risk Insurance 11.3.1.1
APPLICATIONS FOR PAYMENT 4.2.5, 7.3.7, 9.2, 9.3, 9.4, 9.5.1
9.6.3, 9.8.3, 9.10.1, 9.10.3, 9.10.4, 11.1.3, 14.2.4
Approvals 2.4, 3.3.3., 3.5., 3.10.2, 3.12.4 through 3.12.8,
3.18.3, 4.2.7, 9.3.2, 11.3.1.4, 13.4.2, 13.5
ARBITRATION 4.1.4, 4.3.2, 4.3.4, 4.4.4, 4.5, 8.3.1,
10.1.2, 11.3.9, 11.3.10
ARCHITECT 4.1
Architect, Definition of 4.1.1
Architect, Extent of Authority 2.4, 3.12.6, 4.2, 4.3.2, 4.3.6, 4.4,
5.2, 6.3, 7.1.2, 7.2.1, 7.3.6, 7.4, 9.2, 9.3.1, 9.4, 9.5,
9.6.3, 9.8.2, 9.8.3, 9.10.1, 9.10.3, 12.1,
12.2.1, 13.5.1, 13.5.2, 14.2.2, 14.2.4
Architect, Limitations of Authority and Responsibility 3.3.3,
3.12.8, 3.12.11, 4.1.2, 4.2.1, 4.2.2, 4.2.3, 4.2.6,
4.2.7, 4.2.10, 4.2.12, 4.2.13, 4.3.2, 5.2.1, 7.4, 9.4.2, 9.6.4, 9.6.6
Architect's Additional Services and Expenses 2.4, 9.8.2, 11.3.1.1,
12.2.1, 12.2.4, 13.5.2, 13.5.3, 14.2.4
ARCHITECT'S ADMINISTRATION OF THE CONTRACT 4.2, 4.3.6,
4.3.7, 4.4, 9.4, 9.5
Architect's Approvals 2.4, 3.5.1, 3.10.2, 3.12.6,
3.12.8, 3.18.3, 4.2.7
Architect's Authority to Reject Work 3.5.1, 4.2.6, 12.1.2, 12.2.1
Architect's Copyright 1.3
Architect's Decisions 4.2.6, 4.2.7, 4.2.11, 4.2.12, 4.2.13, 4.3.2,
4.3.6, 4.4.1, 4.4.4, 4.5, 6.3, 7.3.6, 7.3.8, 8.1.3, 8.3.1, 9.2,
9.4, 9.5.1, 9.8.2, 9.9.1, 10.1.2, 13.5.2, 14.2.2, 14.2.4
Architect's Inspections 4.2.2, 4.2.9, 4.3.6, 9.4.2, 9.8.2,
9.9.2, 9.10.1, 13.5
Architect's Instructions 4.2.6, 4.2.7, 4.2.8, 4.3.7,
7.4.1, 12.1, 13.5.2
Architect's Interpretations 4.2.11, 4.2.12, 4.3.7
Architect's On-Site Observations 4.2.2, 4.2.5, 4.3.6, 9.4.2,
9.5.1, 9.10.1, 13.5
Architect's Project Representative 4.2.10
Architect's Relationship with Contractor 1.1.2, 3.2.1, 3.2.2,
3.3.3, 3.5.1, 3.7.3, 3.11, 3.12.8, 3.12.11, 3.16, 3.18, 4.2.3,
4.2.4, 4.2.6, 4.2.12, 5.2, 6.2.2, 7.3.4,
9.8.2, 11.3.7, 12.1, 13.5
Architect's Relationship with Subcontractors 1.1.2, 4.2.3, 4.2.4,
4.2.6, 9.6.3, 9.6.4, 11.3.7
Architect's Representations 9.4.2, 9.5.1, 9.10.1
Architect's Site Visits 4.2.2, 4.2.5, 4.2.9, 4.3.6, 9.4.2,
9.5.1, 9.8.2, 9.9.2, 9.10.1, 13.5
Asbestos 10.1
Attorneys' Fees 3.18.1, 9.10.2, 10.1.4
Award of Separate Contracts 6.1.1
AWARD OF SUBCONTRACTS AND OTHER CONTRACTS
FOR PORTIONS OF THE WORK 5.2
BASIC DEFINITIONS 1.1
Bidding Requirements 1.1.1, 1.1.7, 5.2.1, 11.4.1
BOILER AND MACHINERY INSURANCE 11.3.2
Bonds, Lien 9.10.2
Bonds, Performance and Payment 7.3.6.4, 9.10.3, 11.3.9, 11.4
Building Permit 3.7.1
CAPITALIZATION 1.4
Certificate of Substantial Completion 9.8.2
Certificate for Payment 4.2.5, 4.2.9, 9.3.3, 9.4, 9.5, 9.6.1
9.6.6, 9.7.1, 9.8.3, 9.10.1, 9.10.3, 13.7, 14.1.1.3, 14.2.4
Certificates of Inspection, Testing or Approval 3.12.11, 13.5.4
Certificates of Insurance 9.3.2, 9.10.2, 11.1.3
CHANGE ORDERS 1.1.1, 2.4.1, 3.8.2.4, 3.11, 4.2.8, 4.3.3, 5.2.3,
7.1, 7.2, 7.3.2, 8.3.1, 9.3.1.1, 9.10.3, 11.3.1.2,
11.3.4, 11.3.9, 12.1.2
Change Orders, Definition of 7.2.1
CHANGES 7.1
CHANGES IN THE WORK 3.11, 4.2.8, 7, 8.3.1, 9.3.1.1, 10.1.3
Claim, DEFINITION of 4.3.1
CLAIMS AND DISPUTES 4.3, 4.4, 4.5, 6.2.5, 8.3.2, 9.3.1.2,
9.3.3, 9.10.4, 10.1.4
CLAIMS AND TIMELY ASSERTION OF CLAIMS 4.5.6
CLAIMS FOR ADDITIONAL COST 4.3.6, 4.3.7, 4.3.9, 6.1.1, 10.3
CLAIMS FOR ADDITIONAL TIME 4.3.6, 4.3.8, 4.3.9, 8.3.2
CLAIMS FOR CONCEALED OR UNKNOWN CONDITIONS 4.3.6
Claims for Damages 3.18, 4.3.9, 6.1.1, 6.2.5, 8.3.2,
9.5.1.2, 10.1.4
Claims Subject to Arbitration 4.3.2, 4.4.4, 4.5.1
CLEANING UP 3.15, 6.3
COMMENCEMENT OF STATUTORY LIMITATION PERIOD 13.7
Commencement of the Work, Conditions Relating to 2.1.2, 2.2.1,
3.2.1, 3.2.2, 3.7.1, 3.10.1, 3.12.6, 4.3.7, 5.2.1, 6.2.2,
8.1.2, 8.2.2, 9.2, 11.1.3, 11.3.6, 11.4.1
Commencement of the Work, Definition of 8.1.2
Communications Facilitating Contract Administration 3.9.1, 4.2.4, 5.2.1
Completion, Conditions Relating to 3.11, 3.15, 4.2.2, 4.2.9,
4.3.2, 9.4.2, 9.8, 9.9.1, 9.10, 11.3.5, 12.2.2, 13.7.1
COMPLETION, PAYMENTS AND 9
Completion, Substantial 4.2.9, 4.3.5.2, 8.1.1, 8.1.3, 8.2.3, 9.8,
9.9.1, 12.2.2, 13.7
Compliance with Laws 1.3, 3.6, 3.7, 3.13, 4.1.1, 10.2.2,
11.1, 11.3, 13.1, 13.5.1, 13.5.2, 13.6, 14.1.1, 14.2.1.3
Concealed or Unknown Conditions 4.3.6
Conditions of the Contract 1.1.1, 1.1.7, 6.1.1
Consent, Written 1.3.1, 3.12.8, 3.14.2, 4.1.2, 4.3.4, 4.5.5, 9.3.2,
9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 10.1.3, 11.3.1,
11.3.1.4, 11.3.11, 13.2, 13.4.2
CONSTRUCTION BY OWNER OR BY
SEPARATE CONTRACTORS 1.1.4, 6
Construction Change Directive, Definition of 7.3.1
</TABLE>
Page 2
<PAGE> 18
Construction Change Directives 1.1.1, 4.2.8, 7.1, 7.3, 9.3.1.1
Construction Schedules, Contractor's 3.10,6.1.3
CONTINGENT ASSIGNMENT OF SUBCONTRACTS 5.4
Continuing Contract Performance 4.3.4
Contract, Definitions of 1.1.2
CONTRACT, TERMINATION OR SUSPENSION OF THE 4.3.7, 5.4.1.1, 14
Contract Administration 3.3.3, 4, 9.4, 9.5
Contract Award and Execution, Conditions Relating to 3.7.1, 3.10, 5.2,
9.2, 11.1.3, 11.3.6, 11.4.1
CONTRACT DOCUMENTS, THE 1.1, 1.2, 7
Contract Documents, Copies Furnished and Use of 1.3, 2.2.5, 5.3
Contract Documents, Definition of 1.1.1
Contract Performance During Arbitration 4.3.4, 4.5.3
CONTRACT SUM 3.8, 4.3.6, 4.3.7, 4.4.4, 5.2.3, 6.1.3,
7.2, 7.3, 9.1, 9.7, 11.3.1, 12.2.4, 12.3, 14.2.4
CONTRACT SUM, Definition of 9.1
Contract Time 4.3.6, 4.3.8, 4.4.4, 7.2.1.3, 7.3, 8.2.1,
8.3.1, 9.7, 12.1.1
Contract Time, Definition of 8.1.1
CONTRACTOR 3
Contractor, Definition of 3.1, 6.1.2
Contractor's Bid 1.1.1
CONTRACTOR'S CONSTRUCTION SCHEDULES 3.10, 6.1.3
Contractor's Employees 3.3.2, 3.4.2, 3.8.1, 3.9, 3.18, 4.2.3,
4.2.6, 8.1.2, 10.2, 10.3, 11.1.1, 14.2.1.1
CONTRACTOR'S LIABILITY INSURANCE 11.1
Contractor's Relationship with Separate Contractors
and Owner's Forces 2.2.6, 3.12.5, 3.14.2, 4.2.4, 6, 12.2.5
Contractor's Relationship with Subcontractors 1.2.4, 3.3.2,
3.18.1, 3.18.2, 5.2, 5.3, 5.4, 9.6.2, 11.3.7, 11.3.8, 14.2.1.2
Contractor's Relationship with the Architect 1.1.2, 3.2.1, 3.2.2,
3.3.3, 3.5.1, 3.7.3, 3.11, 3.12.8, 3.16, 3.18, 4.2.3, 4.2.4, 4.2.6,
4.2.12, 5.2, 6.2.2, 7.3.4, 9.8.2, 11.3.7, 12.1, 13.5
Contractor's Representations 1.2.2, 3.5.1, 3.12.7, 6.2.2, 8.2.1, 9.3.3
Contractor's Responsibility for Those Performing the Work 3.3.2,
3.18, 4.2.3, 10
Contractor's Review of Contract Documents 1.2.2, 3.2, 3.7.3
Contractor's Right to Stop the Work 9.7
Contractor's Right to Terminate the Contract 14.1
Contractor's Submittals 3.10, 3.11, 3.12, 4.2.7, 5.2.1, 5.2.3,
7.3.6, 9.2, 9.3.1, 9.8.2, 9.9.1, 9.10.2, 9.10.3,
10.1.2, 11.4.2, 11.4.3
Contractor's Superintendent 3.9, 10.2.6
Contractor's Supervision and Construction Procedures 1.2.4, 3.3,
3.4, 4.2.3, 8.2.2, 8.2.3, 10
Contractual Liability Insurance 11.1.1.7, 11.2.1
Coordination and Correlation 1.2.2, 1.2.4, 3.3.1, 3.10, 3.12.7,
6.1.3, 6.2.1
Copies Furnished of Drawings and Specifications 1.3, 2.2.5, 3.11
Correction of Work 2.3, 2.4, 4.2.1, 9.8.2, 9.9.1,
12.1.2, 12.2, 13.7.1.3
Cost, Definition of 7.3.6, 14.3.5
Costs 2.4, 3.2.1, 3.7.4, 3.8.2, 3.15.2, 4.3.6, 4.3.7, 4.3.8.1,
5.2.3, 6.1.1, 6.2.3, 6.3, 7.3.3.3, 7.3.6, 7.3.7, 9.7, 9.8.2, 9.10.2,
11.3.1.2, 11.3.1.3, 11.3.4, 11.3.9, 12.1, 12.2.1, 12.2.4,
12.2.5, 13.5, 14
CUTTING AND PATCHING 3.14, 6.2.6
Damage to Construction of Owner or Separate Contractors 3.14.2,
6.2.4, 9.5.1.5, 10.2.1.2, 10.2.5, 10.3, 11.1, 11.3, 12.2.5
Damage to the Work 3.14.2, 9.9.1, 10.2.1.2, 10.2.5, 10.3, 11.3
Damages, Claims for 3.18, 4.3.9, 6.1.1, 6.2.5,
8.3.2, 9.5.1.2, 10.1.4
Damages for Delay 6.1.1, 8.3.3, 9.5.1.6, 9.7
Date of Commencement of the Work, Definition of 8.1.2
Date of Substantial Completion, Definition of 8.1.3
Day, Definition of 8.1.4
Decisions of the Architect 4.2.6, 4.2.7, 4.2.11,
4.2.12, 4.2.13, 4.3.2, 4.3.6, 4.4.1, 4.4.4, 4.5, 6.3,
7.3.6, 7.3.8, 8.1.3, 8.3.1, 9.2, 9.4, 9.5.1, 9.8.2,
9.9.1, 10.1.2, 13.5.2, 14.2.2, 14.2.4
DECISIONS TO WITHHOLD CERTIFICATION 9.5, 9.7, 14.1.1.3
Defective or Nonconforming Work, Acceptance,
Rejection and Correction of 2.3, 2.4, 3.5.1, 4.2.1,
4.2.6, 4.3.5, 9.5.2, 9.8.2, 9.9.1, 10.2.5, 12, 13.7.1.3
Defective Work, Definition of 3.5.1
Definitions 1.1, 2.1.1, 3.1, 3.5.1, 3.12.1, 3.12.2, 3.12.3,
4.1.1, 4.3.1, 5.1, 6.1.2, 7.2.1, 7.3.1, 7.3.6, 8.1, 9.1, 9.8.1
DELAYS AND EXTENSIONS OF TIME 4.3.1, 4.3.8.1, 4.3.8.2,
6.1.1, 6.2.3, 7.2.1, 7.3.1, 7.3.4, 7.3.5, 7.3.8,
7.3.9, 8.1.1, 8.3, 10.3.1, 14.1.1.4
Disputes 4.1.4, 4.3, 4.4, 4.5, 6.2.5, 6.3, 7.3.8, 9.3.1.2
Documents and Samples at the Site 3.11
Drawings, Definition of 1.1.5
Drawings and Specifications, Use and Ownership of 1.1.1, 1.3,
2.2.5, 3.11, 5.3
Duty to Review Contract Documents and Field Conditions 3.2
Effective Date of insurance 8.2.2, 11.1.2
Emergencies 4.3.7, 10.3
Employees, Contractor's 3.3.2, 3.4.2, 3.8.1, 3.9, 3.18.1,
3.18.2, 4.2.3, 4.2.6, 8.1.2, 10.2, 10.3, 11.1.1, 14.2.1.1
Equipment, Labor, Materials and 1.1.3, 1.1.6, 3.4, 3.5.1,
3.8.2, 3.12.3, 3.12.7, 3.12.11, 3.13, 3.15.1, 4.2.7,
6.2.1, 7.3.6, 9.3.2, 9.3.3, 11.3, 12.2.4, 14
Execution and Progress of the Work 1.1.3, 1.2.3, 3.2, 3.4.1,
3.5.1, 4.2.2, 4.2.3, 4.3.4, 4.3.8, 6.2.2, 7.1.3,
7.3.9, 8.2, 8.3, 9.5, 9.9.1, 10.2, 14.2, 14.3
EXECUTION, CORRELATION AND INTENT of the
Contract Documents 1.2, 3.7.1
Extensions of Time 4.3.1, 4.3.8, 7.2.1.3, 8.3, 10.3.1
Failure of Payment by Contractor 9.5.1.3, 14.2.1.2
Failure of Payment by Owner 4.3.7, 9.7, 14.1.3
Faulty Work (See Defective or Nonconforming work)
FINAL COMPLETION AND FINAL PAYMENT 4.2.1, 4.2.9, 4.3.2,
4.3.5, 9.10, 11.1.2, 11.1.3, 11.3.5, 12.3.1, 13.7
Financial Arrangements, Owner's 2.2.1
Fire and Extended Coverage Insurance 11.3
GENERAL PROVISIONS 1
GOVERNING LAW 1.3.1
Guarantees (See Warranty and Warranties)
Hazardous Materials 10.1, 10.2.4
Identification of Contract Documents 1.2.1
Identification of Subcontractors and Suppliers 5.2.1
Indemnification 3.17, 3.18, 9.10.2, 10.1.4, 11.3.1.2, 11.3.7
Information and Services Required of the Owner 2.1.2, 2.2,
4.3.4, 6.1.3, 6.1.4, 6.2.6, 9.3.2, 9.6.1, 9.6.4, 9.8.3, 9.9.2,
9.10.3, 10.1.4, 11.2, 11.3, 13.5.1, 13.5.2
INJURY OR DAMAGES TO PERSON OR PROPERTY 4.3.9
Inspections 3.3.3, 3.3.4, 3.7.1, 4.2.2,
Page 3
<PAGE> 19
4.2.6, 4.2.9, 4.3.6, 9.4.2, 9.8.2, 9.9.2, 9.10.1, 13.5
Instructions to Bidders 1.1.1
Instructions to the Contractor 3.8.1, 4.2.8, 5.2.1, 7, 12.1, 13.5.2
Insurance 4.3.9, 6.1.1, 7.3.6.4, 9.3.2, 9.8.2, 9.9.1, 9.10.2, 11
INSURANCE, BOILER AND MACHINERY 11.3.2
INSURANCE, CONTRACTOR'S LIABILITY 11.1
Insurance, Effective Date of 8.2.2, 11.1.2
INSURANCE, LOSS OF USE 11.3.3
INSURANCE, OWNER'S LIABILITY 11.2
INSURANCE, PROPERTY 10.2.5, 11.3
Insurance, Stored Materials 9.3.2, 11.3.1.4
INSURANCE AND BONDS 11
Insurance Companies, Consent to Partial Occupancy 9.9.1, 11.3.11
Insurance Companies, Settlement with 11.3.10
Intent of the Contract Documents 1.2.3, 3.12.4, 4.2.6, 4.2.7, 4.2.12,
4.2.13, 7.4
INTEREST 13.6
Interpretation 1.2.5, 1.4, 1.5, 4.1.1, 4.3.1, 5.1, 6.1.2, 8.1.4
Interpretations, Written 4.2.11, 4.2.12, 4.3.7
Joinder and Consolidation of Claims Required 4.5.6
JUDGMENT ON FINAL AWARD 4.5.1, 4.5.4.1, 4.5.7
LABOR AND MATERIALS, equipment 1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2,
3.12.2, 3.12.3, 3.12.7, 3.12.11, 3.13.3, 3.15.1,
4.2.7, 6.2.1, 7.3.6, 9.3.2, 9.3.3, 12.2.4, 14
Labor Disputes 8.3.1
Laws and Regulations 1.3, 3.6, 3.7, 3.13, 4.1.1, 4.5.5,
4.5.7, 9.9.1, 10.2.2, 11.1, 11.3, 13.1, 13.4, 13.5.1, 13.5.2, 13.6
Liens 2.1.2, 4.3.2, 4.3.5.1, 8.2.2, 9.3.3, 9.10.2
LIMITATIONS ON CONSOLIDATION OR JOINDER 4.5.5
Limitations, Statutes of 4.5.4.2, 12.2.6, 13.7
Limitations of Authority 3.3.1, 4.1.2, 4.2.1,
4.2.3, 4.2.7, 4.2.10, 5.2.2, 5.2.4, 7.4, 11.3.10
Limitations of Liability 2.3, 3.2.1, 3.5.1, 3.7.3, 3.12.8, 3.12.11,
3.17, 3.18, 4.2.6, 4.2.7, 4.2.12, 6.2.2, 9.4.2, 9.6.4, 9.10.4,
10.1.4, 10.2.5, 11.1.2, 11.2.1, 11.3.7, 13.4.2, 13.5.2
Limitations of Time, General 2.2.1, 2.2.4, 3.2.1, 3.7.3,
3.8.2, 3.10, 3.12.5, 3.15.1, 4.2.1, 4.2.7, 4.2.11, 4.3.2,
4.3.3, 4.3.4, 4.3.6, 4.3.9, 4.5.4.2, 5.2.1, 5.2.3, 6.2.4, 7.3.4, 7.4,
8.2, 9.5, 9.6.2, 9.8, 9.9, 9.10, 11.1.3, 11.3.1, 11.3.2, 11.3.5,
11.3.6, 12.2.1, 12.2.2, 13.5, 13.7
Limitations of Time, Specific 2.1.2, 2.2.1, 2.4, 3.10, 3.11,
3.15.1, 4.2.1, 4.2.11, 4.3, 4.4, 4.5, 5.3, 5.4, 7.3.5, 7.3.9,
8.2, 9.2, 9.3.1, 9.3.3, 9.4.1, 9.6.1, 9.7, 9.8.2, 9.10.2, 11.1.3,
11.3.6, 11.3.10, 11.3.11, 12.2.2, 12.2.4, 12.2.6, 13.7, 14
LOSS OF USE INSURANCE 11.3.3
Material Suppliers 1.3.1, 3.12.1, 4.2.4, 4.2.6, 5.2.1,
9.3.1, 9.3.1.2, 9.3.3, 9.4.2, 9.6.5, 9.10.4
Materials, Hazardous 10.1, 10.2.4
Materials, Labor, Equipment and 1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2,
3.12.2, 3.12.3, 3.12.7, 3.12.11, 3.13, 3.15.1, 4.2.7, 6.2.1,
7.3.6, 9.3.2, 9.3.3, 12.2.4, 14
Means, Methods, Techniques, Sequences and
Procedures of Construction 3.3.1, 4.2.3, 4.2.7, 9.4.2
MINOR CHANGES IN THE WORK 1.1.1, 4.2.8, 4.3.7, 7.1, 7.4
MISCELLANEOUS PROVISIONS 13
Modifications, Definition of 1.1.1
Modifications to the Contract 1.1.1, 1.1.2, 3.7.3, 3.11,
4.2.1, 5.2.3, 7, 8.3.1, 9.7
Mutual Responsibility 6.2
NONCONFORMING WORK, ACCEPTANCE OF 12.3
NONCONFORMING WORK, REJECTION AND CORRECTION OF 2.3.1,
4.3.5, 9.5.2, 9.8.2, 12, 13.7.1.3
Notice 2.3, 2.4, 3.2.1, 3.2.2, 3.7.3, 3.7.4, 3.9, 3.12.8,
3.12.9, 3.17, 4.3, 4.4.4, 4.5, 5.2.1, 5.3, 5.4.1.1, 8.2.2, 9.4.1,
9.5.1, 9.6.1, 9.7, 9.10, 10.1.2, 10.2.6, 11.1.3, 11.3, 12.2.2,
12.2.4, 13.3, 13.5.1, 13.5.2, 14
NOTICE, WRITTEN 2.3, 2.4, 3.9, 3.12.8, 3.12.9, 4.3,
4.4.4, 4.5, 5.2.1, 5.3, 5.4.1.1, 8.2.2, 9.4.1, 9.5.1, 9.7, 9.10,
10.1.2, 10.2.6, 11.1.3, 11.3, 12.2.2, 12.2.4, 13.3, 13.5.2, 14
Notice of Testing and Inspections 13.5.1, 13.5.2
Notice to Proceed 8.2.2
NOTICES, PERMITS, FEES AND 2.2.3, 3.7, 3.13, 7.3.6.4, 10.2.2
Observations, Architect's On-Site 4.2.2, 4.2.5
4.3.6, 9.4.2, 9.5.1, 9.10.1, 13.5
Observations, Contractor's 1.2.2, 3.2.2
Occupancy 9.6.6, 9.8.1, 9.9, 11.3.11
On-Site Inspections by the Architect 4.2.2, 4.2.9, 4.3.6,
9.4.2, 9.8.2, 9.9.2, 9.10.1
On-Site Observations by the Architect 4.2.2, 4.2.5, 4.3.6,
9.4.2, 9.5.1, 9.10.1, 13.5
Orders, Written 2.3, 3.9, 4.3.7, 7, 8.2.2, 11.3.9, 12.1,
12.2, 13.5.2, 14.3.1
OWNER 2
Owner, DEFINITION of 2.1
OWNER, INFORMATION AND SERVICES REQUIRED OF THE 2.1.2,
2.2, 4.3.4, 6, 9, 10.1.4, 11.2, 11.3, 13.5.1, 14.1.1.5, 14.1.3
Owner's Authority 3.8.1, 4.1.3, 4.2.9, 5.2.1, 5.2.4, 5.4.1,
7.3.1, 8.2.2, 9.3.1, 9.3.2, 11.4.1, 12.2.4, 13.5.2, 14.2, 14.3.1
Owner's Financial Capability 2.2.1, 14.1.1.5
OWNER'S LIABILITY INSURANCE 11.2
Owner's Loss of Use Insurance 11.3.3
Owner's Relationship with Subcontractors 1.1.2, 5.2.1, 5.4.1, 9.6.4
Owner's Right to Carry Out the Work 2.4, 12.2.4, 14.2.2.2
OWNER'S RIGHT TO CLEAN UP 6.3
OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD
SEPARATE CONTRACTS 6.1
OWNER'S RIGHT TO STOP THE WORK 2.3, 4.3.7
Owner's Right to Suspend the Work 14.3
Owner's Right to Terminate the Contract 14.2
OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS,
AND OTHER DOCUMENTS 1.1.1, 1.3, 2.2.5, 5.3
PARTIAL OCCUPANCY OR USE 9.6.6, 9.9, 11.3.11
PATCHING, CUTTING AND 3.14, 6.2.6
PATENTS, ROYALTIES AND 3.17
PAYMENT, APPLICATIONS FOR 4.2.5, 9.2, 9.3, 9.4,
9.5.1, 9.8.3, 9.10.1, 9.10.3, 9.10.4, 14.2.4
PAYMENT, CERTIFICATES FOR 4.2.5, 4.2.9, 9.3.3, 9.4, 9.5,
9.6.1, 9.6.6, 9.7.1, 9.8.3, 9.10.1, 9.10.3, 13.7, 14.1.1.3, 14.2.4
PAYMENT, FAILURE OF 4.3.7, 9.5.1.3, 9.7,
9.10.2, 14.1.1.3, 14.2.1.2
Payment, Final 14.2.1, 4.2.9, 4.3.2, 4.3.5, 9.10, 11.1.2,
11.1.3, 11.3.5, 12.3.1
PAYMENT BOND, PERFORMANCE BOND AND 7.3.6.4, 9.10.3,
11.3.9, 11.4
Payments, Progress 4.3.4, 9.3, 9.6, 9.8.3, 9.10.3, 13.6, 14.2.3
PAYMENTS AND COMPLETION 9, 14
Payments to Subcontractors 5.4.2, 9.5.1.3,
9.6.2, 9.6.3, 9.6.4, 11.3.8, 14.2.1.2
PCB 10.1
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<PAGE> 20
Performance Bond and Payment Bond 7.3.6.4
9.10.3, 11.3.9, 11.4
PERMITS, FEES AND NOTICES 2.2.3, 3.7, 3.13, 7.3.6.4, 10.2.2
PERSONS AND PROPERTY, PROTECTION OF 10
Polychlorinated Bipheny 10.1
Product Data, Definition of 3.12.2
PRODUCT DATA AND SAMPLES, SHOP DRAWINGS 3.11, 3.12, 4.2.7
PROGRESS AND COMPLETION 4.2.2, 4.3.4, 8.2
PROGRESS PAYMENTS 4.3.4, 9.3,
9.6, 9.8.3, 9.10.3, 13.6, 14.2.3
PROJECT, Definition of the 1.1.4
PROJECT MANUAL, Definition of the 1.1.7
Project Manuals 2.2.5
Project Representatives 4.2.10
PROPERTY INSURANCE 10.2.5, 11.3
PROTECTION OF PERSONS AND PROPERTY 10
Regulations and Laws 1.3, 3.6, 3.7, 3.13, 4.1.1, 4.5.5
4.5.7, 10.2.2, 11.1, 11.3, 13.1, 13.4, 13.5.1, 13.5.2, 13.6, 14
Rejection of Work 3.5.1, 4.2.6, 12.2
Releases of Waivers and Liens 9.10.2
Representations 1.2.2, 3.5.1, 3.12.7, 6.2.2, 8.2.1, 9.3.3,
9.4.2, 9.5.1, 9.8.2, 9.10.1
Representatives 2.1.1, 3.1.1, 3.9, 4.1.1,
4.2.1, 4.2.10, 5.1.1, 5.1.2, 13.2.1
RESOLUTION OF CLAIMS AND DISPUTES 4.4, 4.5
Responsibility for Those Performing the Work 3.3.2, 4.2.3, 6.1.3, 6.2, 10
Retainage 9.3.1, 9.6.2, 9.8.3, 9.9.1, 9.10.2, 9.10.3
REVIEW OF CONTROL DOCUMENTS AND FIELD
CONDITIONS BY CONTRACTOR 1.2.2, 3.2, 3.7.3, 3.12.7
Review of Contractor's Submittals by Owner and Architect 3.10.1,
3.10.2, 3.11, 3.12,
4.2.7, 4.2.9, 5.2.1, 5.2.1, 5.2.3, 9.2, 9.8.2
Review of Shop Drawings, Product Data and Samples
by Contractor 3.12.5
RIGHTS AND REMEDIES 1.1.2, 2.3, 2.4, 3.5.1, 3.15.2,
4.2.6, 4.3.6, 4.5, 5.3, 6.1, 6.3, 7.3.1, 8.3.1, 9.5.1, 9.7, 10.2.5,
10.3, 12.2.2, 12.2.4, 13.4, 14
ROYALTIES AND PATENTS 3.17
RULES AND NOTICES FOR ARBITRATION 4.5.2
SAFETY OF PERSONS AND PROPERTY 10.2
SAFETY PRECAUTIONS AND PROGRAMS 4.2.3, 4.2.7, 10.1
Samples, Definition of 3.12.3
SAMPLES, SHOP DRAWINGS, PRODUCT DATA AND 3.11, 3.12, 4.2.7
SAMPLES AT THE SITE, DOCUMENTS AND 3.11
SCHEDULE OF VALUES 9.2, 9.3.1
Schedules, Construction 3.10
Separate Contracts and Contractors 1.1.4, 3.14.2, 4.2.4,
4.5.5, 6, 11.3.7, 12.1.2, 12.2.5
Shop Drawings, Definition of 3.12.1
SHOP DRAWINGS, PRODUCT DATA AND SAMPLES 3.11, 3.12, 4.2.7
SITE, USE OF 3.13, 6.1.1, 6.2.1
Site Inspections 1.2.2, 3.3.4, 4.2.2, 4.2.9,
4.3.6, 9.8.2, 9.10.1, 13.5
Site Visits, Architect's 4.2.2, 4.2.5, 4.2.9, 4.3.6,
9.4.2, 9.5.1, 9.8.2, 9.9.2, 9.10.1, 13.5
Special Inspections and Testing 4.2.6, 12.2.1, 13.5
SPECIFICATIONS, Definition of the 1.1.6
SPECIFICATIONS, THE 1.1.1, 1.1.6, 1.1.7, 1.2.4, 1.3, 3.11
Statute of Limitations 4.5.4.2, 12.2.6, 13.7
Stopping the Work 2.3, 4.3.7, 9.7, 10.1.2, 10.3, 14.1
Stored Materials 6.2.1, 9.3.2, 10.2.1.2, 11.3.1.4, 12.2.4
Subcontractor, Definition of 5.1.1
SUBCONTRACTORS 5
Subcontractors, Work by 1.2.4, 3.3.2, 3.12.1, 4.2.3, 5.3, 5.4
SUBCONTRACTUAL RELATIONS 5.3, 5.4, 9.3.1.2, 9.6.2
9.6.3, 9.6.4, 10.2.1, 11.3.7, 11.3.8, 14.1.1, 14.2.1.2, 14.3.2
Submittals 1.3, 3.2.3, 3.10, 3.11, 3.12, 4.2.7, 5.2.1, 5.2.3,
7.3.6, 9.2, 9.3.1, 9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 11.1.3
SUBROGATION, WAIVERS OF 6.1.1, 11.3.5, 11.3.7
SUBSTANTIAL COMPLETION 4.2.9, 4.3.5.2, 8.1.1, 8.1.3,
8.2.3, 9.8, 9.9.1, 12.2.1, 12.2.2, 13.7
Substantial Completion, Definition of 9.8.1
Substitution of Subcontractors 5.2.3, 5.2.4
Substitution of the Architect 4.1.3
Substitutions of Materials 3.5.1
Sub-subcontractor, Definition of 5.1.2
Subsurface Conditions 4.3.6
SUCCESSORS AND ASSIGNS 13.2
SUPERINTENDENT 3.9, 10.2.6
SUPERVISION AND CONSTRUCTION PROCEDURES 1.2.4, 3.3, 3.4,
4.2.3, 4.3.4, 6.1.3, 6.2.4, 7.1.3, 7.3.4, 8.2, 8.3.1, 10, 12, 14
Surety 4.4.1, 4.4.4, 5.4.1.2, 9.10.2, 9.10.3, 14.2.2
Surety, Consent of 9.9.1, 9.10.2, 9.10.3
Surveys 2.2.2, 3.18.3
SUSPENSION BY THE OWNER FOR CONVENIENCE 14.3
Suspension of the Work 4.3.7, 5.4.2, 14.1.1.4, 14.3
Suspension or Termination of the Contract 4.3.7, 5.4.1.1, 14
TAXES 3.6, 7.3.6.4
TERMINATION BY THE CONTRACTOR 14.1
TERMINATION BY THE OWNER FOR CAUSE 5.4.1.1, 14.2
Termination of the Architect 4.1.3
Termination of the Contractor 14.2.2
TERMINATION OR SUSPENSION OF THE CONTRACT 14
TESTS AND INSPECTIONS 3.3.3, 4.2.6, 4.2.9, 9.4.2, 12.2.1 13.5
TIME 8
TIME, DELAYS AND EXTENSION OF 4.3.8, 7.2.1, 8.3
Time Limits, Specific 2.1.2, 2.2.1, 2.4, 3.10, 3.11, 3.15.1,
4.2.1, 4.2.11, 4.3, 4.4, 4.5, 5.3, 5.4, 7.3.5, 7.3.9, 8.2, 9.2, 9.3.1,
9.3.3, 9.4.1, 9.6.1, 9.7, 9.8.2, 9.10.2, 11.1.3, 11.3.6, 11.3.10,
11.3.11, 12.2.2, 12.2.4, 12.2.6, 13.7, 14
TIME LIMITS ON CLAIMS 4.3.2, 4.3.3., 4.3.6, 4.3.9, 4.4, 4.5
Title to Work 9.3.2, 9.3.3
UNCOVERING AND CORRECTION OF WORK 12
UNCOVERING OF WORK 12.1
Unforseen Conditions 4.3.6, 8.3.1, 10.1
Unit Prices 7.1.4, 7.3.3.2
Use of Documents 1.1.1, 1.3, 2.2.5, 3.12.7, 5.3
USE OF SITE 3.13, 6.1.1, 6.2.1
VALUES, SCHEDULE OF 9.2, 9.3.1
WAIVER OF CLAIMS: FINAL PAYMENT 4.3.5, 4.5.1, 9.10.3
Waiver of Claims by the Architect 13.4.2
Waiver of Claims by the Contractor 9.10.4, 11.3.7, 13.4.2
Waiver of Claims by the Owner 4.3.5, 4.5.1, 9.9.3,
9.10.3, 11.3.3, 11.3.5, 11.3,7, 13.4.2
Waiver of Liens 9.10.2
Waivers of Subrogation 6.1.1, 11.3.5, 11.3.7
WARRANTY and Warranties 3.5, 4.2.9,
4.3.5.3, 9.3.3, 9.8.2, 9.9.1, 12.2.2, 13.7.1.3
Weather Delays 4.3.8.2
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WHEN ARBITRATION MAY BE DEMANDED 4.5.4
Work, Definition of 1.1.3
Written Consent 1.3.1, 3.12.8, 3.14.2, 4.1.2, 4.3.4,
4.5.5, 9.3.2, 9.8.2, 9.9.1, 9.10.2, 9.10.3, 10.1.2, 10.1.3
11.3.1, 11.3.1.4, 11.3.11, 13.2, 13.4.2
Written Interpretations 4.2.11, 4.2.12, 4.3.7
WRITTEN NOTICE 2.3, 2.4, 3.9, 3.12.8, 3.12.9, 4.3, 4.4.4,
4.5, 5.2.1, 5.4.1.1, 8.2.2, 9.4.1, 9.5.1, 9.7, 9.10, 10.1.2,
10.2.6, 11.1.3, 11.3, 12.2.2, 12.2.4, 13.3, 13.5.2, 14
Written Orders 2.3, 3.9, 4.3.7,
7, 8.2.2, 11.3.9, 12.1, 12.2, 13.5.2, 14.3.1
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<PAGE> 22
GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
ARTICLE I
GENERAL PROVISIONS
1.1 BASIC DEFINITIONS
1.1.1 THE CONTRACT DOCUMENTS
The Contract Documents consist of the Agreement between Owner and Contractor
(hereinafter the Agreement), Conditions of the Contract (General, Supplementary
and other Conditions), Drawings, Specifications, addenda issued prior to
execution of the Contract, other documents listed in the Agreement and
Modifications issued after execution of the Contract. A Modification is (1) a
written amendment to the Contract signed by both parties, (2) a Change Order,
(3) a Construction Change Directive or (4) a written order for a minor change in
the Work issued by the Architect. Unless specifically enumerated in the
Agreement, the Contract Documents do not include other documents such as bidding
requirements (advertisement or invitation to bid, Instructions to Bidders,
sample forms, the Contractor's bid or portions of addenda relating to bidding
requirements).
1.1.2 THE CONTRACT
The Contract Documents form the Contract for Construction. The Contract
represents the entire and integrated agreement between the parties hereto and
supersedes prior negotiations, representations or agreements, either written or
oral. The Contract may be amended or modified only by a Modification. The
Contract Documents shall not be construed to create a contractual relationship
of any kind (1) between the Architect and Contractor, (2) between the Owner and
a Subcontractor or Sub-subcontractor or (3) between any persons or entities
other than the Owner and Contractor. The" Architect shall, however, be entitled
to performance and enforcement of obligations under the Contract intended to
facilitate performance of the Architect's duties.
1.1.3 THE WORK
The term "Work" means the construction and services required by the Contract
Documents, and includes all other labor, materials, equipment and services
provided or to be provided by the Contractor to fulfill the Contractor's
obligations. The Work may constitute the whole or a part of the Project.
1.1.4 THE PROJECT
The Project is the total construction of which the Work performed under the
Contract Documents may be the whole or a part and which may include construction
by the Owner or by separate contractors.
1.1.5 THE DRAWINGS
The Drawings are the graphic and pictorial portions of the Contract Documents,
wherever located and whenever issued, showing the design, location and
dimensions of the Work, generally including plans, elevations, sections,
details, schedules and diagrams.
1.1.6 THE SPECIFICATIONS
The Specifications are that portion of the Contract Documents consisting of the
written requirements for materials, equipment, construction systems, standards
and workmanship for the Work, and performance of related services.
1.1.7 THE PROJECT MANUAL
The Project Manual is the volume usually assembled for the Work which may
include the bidding requirements, sample forms, Conditions of the Contract and
Specifications.
1.2 EXECUTION, CORRELATION AND INTENT
1.2.1 The Contract Documents shall be signed by the Owner and Contractor as
provided in the Agreement. If either the Owner or Contractor or both do not sign
all the Contract Documents, the Architect shall identify such unsigned Documents
upon request.
1.2.2 Execution of the Contract by the Contractor is a representation that
the Contractor has visited the site, become familiar with local conditions under
which the Work is to be performed and correlated personal observations with
requirements of the Contract Documents.
1.2.3 The intent of the Contract Documents is to include all items necessary
for the proper execution and completion of the Work by the Contractor. The
Contract Documents are complementary, and what is required by one shall be as
binding as if required by all; performance by the Contractor shall be required
only to the extent consistent with the Contract Documents and reasonably
inferable from them as being necessary to produce the intended results.
1.2.4 Organization of the Specifications into divisions, sections and
articles, and arrangement of Drawings shall not
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control the Contractor in dividing the Work among Subcontractors or in
establishing the extent of Work to be performed by any trade.
1.2.5 Unless otherwise stated in the Contract Documents, words which have
well-known technical or construction industry meanings are used in the Contract
Documents in accordance with such recognized meanings.
1.3 OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND OTHER
DOCUMENTS
1.3.1 The Drawings, Specifications and other documents prepared by the
Architect are instruments of the Architect's service through which the Work to
be executed by the Contractor is described. The Contractor may retain one
contract record set. Neither the Contractor nor any Subcontractor,
Sub-subcontractor or material or equipment supplier shall own or claim a
copyright in the Drawings, Specifications and other documents prepared by the
Architect, and unless otherwise indicated the Architect shall be deemed the
author of them and will retain all common law, statutory and other reserved
rights, in addition to the copyright. All copies of them, except the
Contractor's record set, shall be returned or suitably accounted for to the
Architect, on request, upon completion of the Work. The Drawings, Specifications
and other documents prepared by the Architect, and copies thereof furnished to
the Contractor, are for use solely with respect to this Project. They are not to
be used by the Contractor or any Subcontractor, Sub-subcontractor or material or
equipment supplier on other projects or for additions to this Project outside
the scope of the Work without the specific written consent of the Owner and
Architect. The Contractor, Subcontractors, Sub-subcontractors and material or
equipment suppliers are granted a limited license to use and reproduce
applicable portions of the Drawings, Specifications and other documents prepared
by the Architect appropriate to and for use in the execution of their Work under
the Contract Documents. All copies made under this license shall bear the
statutory copyright notice, if any, shown on the Drawings, Specifications and
other documents prepared by the Architect. Submittal or distribution to meet
official regulatory requirements or for other purposes in connection with this
Project is not to be construed as publication in derogation of the Architect's
copyright or other reserved rights.
1.4 CAPITALIZATION
1.4.1 Terms capitalized in these General Conditions include those which are
(1) specifically defined, (2) the titles of numbered articles and identified
references to Paragraphs, Subparagraphs and Clauses in the document or (3) the
titles of other documents published by the American Institute of Architects.
1.5 INTERPRETATION
1.5.1 In the interest of brevity the Contract Documents frequently omit
modifying words such as "all" and "any" and articles such as "the" and "an," but
the fact that a modifier or an article is absent from one statement and appears
in another is not intended to affect the interpretation of either statement.
ARTICLE 2
OWNER
2.1 DEFINITION
2.1.1 The Owner is the person or entity identified as such in the Agreement
and is referred to throughout the Contract Documents as if singular in number.
The term "Owner" means the Owner or the Owner's authorized representative.
2.1.2 The Owner upon reasonable written request shall furnish to the
Contractor in writing information which is necessary and relevant for the
Contractor to evaluate, give notice of or enforce mechanic's lien rights. Such
information shall include a correct statement of the record legal title to the
property on which the Project is located, usually referred to as the site, and
the Owner's interest therein at the time of execution of the Agreement and,
within five days after any change, information of such change in title, recorded
or unrecorded.
2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER
2.2.1 NOT APPLICABLE
2.2.2 The Owner shall furnish surveys describing physical characteristics,
legal limitations and utility locations for the site of the Project, and a legal
description of the site.
2.2.3 Except for pennies and fees which are the responsibility of the
Contractor under the Contract Documents, the Owner shall secure and pay for
necessary
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approvals, easements, assessments and charges required for construction, use or
occupancy of permanent structures or for permanent changes in existing
facilities.
2.2.4 Information or services under the Owner's control shall be furnished by
the Owner with reasonable promptness to avoid delay in orderly progress of the
Work.
2.2.5 Unless otherwise provided in the Contract Documents, the Contractor
will be furnished, free of charge, such copies of Drawings and Project Manuals
as are reasonably necessary for execution of the Work.
2.2.6 The foregoing are in addition to other duties and responsibilities of
the Owner enumerated herein and especially those in respect to Article 6
(Construction by Owner or by Separate Contractors), Article 9 (Payments and
Completion) and Article II (Insurance and Bonds).
2.3 OWNER'S RIGHT TO STOP THE WORK
2.3.1 If the Contractor fails to correct Work which is not in accordance
with the requirements of the Contract Documents as required by Paragraph 12.2 or
fails to carry out Work in accordance with the Contract Documents, the Owner, by
written order signed personally or by an agent specifically so empowered by the
Owner in writing, may order the Contractor to stop the Work, or any portion
thereof, until the cause for such order has been eliminated; however, the right
of the Owner to stop the Work shall not give rise to a duty on the part of the
Owner to exercise this right for the benefit of the Contractor or any other
person or entity, except to the extent required by Subparagraph 6.1.3.
2.4 OWNER'S RIGHT TO CARRY OUT THE WORK
2.4.1 NOT APPLICABLE
ARTICLE 3
CONTRACTOR
3.1 DEFINITION
3.1.1 The Contractor is the person or entity identified as such in the
Agreement and is referred to throughout the Contract Documents as if singular in
number. The term "Contractor" means the Contractor or the Contractor's
authorized representative.
3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR
3.2.1 The Contractor shall review the Contract Documents and shall report to
the Architect errors, inconsistencies or omissions discovered.
3.2.2 The Contractor shall take field measurements and verify field
conditions and shall carefully compare such field measurements and conditions
and other information known to the Contractor with the Contract Documents before
commencing activities. Errors, inconsistencies or omissions discovered shall be
reported to the Architect at once.
3.2.3 The Contractor shall perform the Work in accordance with the Contract
Documents and submittals approved pursuant to Paragraph 3.12.
3.3 SUPERVISION AND CONSTRUCTION PROCEDURES
3.3.1 The Contractor shall supervise and direct the Work, using the
Contractor's best skill and attention. The Contractor
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shall be solely responsible for and have control over construction means,
methods, techniques, sequences and procedures and for coordinating all portions
of the Work under the Contract, unless Contract Documents give other specific
instructions concerning these matters.
3.3.2 The Contractor shall be responsible to the Owner for acts and omissions
of the Contractor's employees, Subcontractors and their agents and employees,
and other persons performing portions of the Work under a contract with the
Contractor.
3.3.3 The Contractor shall not be relieved of obligations to performing the
Work in accordance with the Contract Documents either by activities or duties of
the Architect in the Architect's administration of the Contract, or by tests,
inspections or approvals required or performed by persons other than the
Contractor.
3.3.4 The Contractor shall be responsible for inspection of portions of Work
already performed under this Contract to determine that such portions are in
proper condition to receive subsequent Work.
3.4 LABOR AND MATERIALS
3.4.1 Unless otherwise provided in the Contract Documents, the Contractor
shall provide and pay for labor, materials, equipment, tools, construction
equipment and machinery, water, heat, utilities, transportation, and other
facilities and services necessary for proper execution and completion of the
Work, whether temporary or permanent and whether or not incorporated or to be
incorporated in the Work.
3.4.2 The Contractor shall enforce strict discipline and good order among the
Contractor's employees and other persons carrying out the Contract. The
Contractor shall not permit employment of unfit persons or persons not skilled
in tasks assigned to them.
3.5 WARRANTY
3.5.1 The Contractor warrants to the Owner that materials and equipment
furnished under the Contract will be new unless otherwise required or permitted
by the Contract Documents, that the Work will be free from defects not inherent
in the quality required or permitted, and that the Work will conform with the
requirements of the Contract Documents. Work not conforming to these
requirements, including substitutions not properly approved, may be considered
non-conforming. The Contractor's warranty excludes remedy for damage or defect
caused by abuse, modifications not executed by the Contractor, improper or
insufficient maintenance, improper operation, or normal wear and tear under
normal usage. If required by the Architect, the Contractor shall furnish
satisfactory evidence as to the kind and quality of materials and equipment.
Other than the above, Contractor make no other warranty, representation or
guarantee whether express or implied, and such are expressly disclaimed.
3.6 TAXES
3.6.1 The Contractor shall pay sales, consumer, use and similar taxes for the
Work or portions thereof provided by the Contractor which are legally enacted
when bids are received or negotiations concluded, whether or not yet effective
or merely scheduled to go into effect.
3.7 PERMITS, FEES AND NOTICES
3.7.1 Unless otherwise provided in the Contract Documents, the Contractor
shall secure and pay for the building permit and other permits and governmental
fees, licenses and inspections necessary for proper execution and completion of
the Work.
3.7.2 The Contractor shall comply with and give notices required by laws,
ordinances, rules, regulations and lawful orders of public authorities bearing
on performance of the Work.
3.7.3 NOT APPLICABLE
3.7.4 If the Contractor performs Work knowing it to be contrary to laws,
statutes, ordinances, building codes, and rules and regulations, the Contractor
shall be responsible for such Work and for all attributable costs and resulting
damages incurred by Owner or Architect.
3.8 ALLOWANCES
3.8.1 The Contractor shall include in the Contract Sum all allowances stated
in the Contract Documents. Items covered by allowances shall be supplied for
such amounts and by such
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persons or entities as the Owner may direct, but the Contractor shall not be
required to employ persons or entities against which the Contractor makes
reasonable objection.
3.8.2 Unless otherwise provided in the Contract Documents:
.1 materials and equipment under an allowance shall be selected
promptly by the Owner to avoid delay in the Work;
.2 allowances shall cover the cost to the Contractor of materials
and equipment delivered at the site and all required taxes,
less applicable trade discounts;
.3 Contractor's costs for unloading and handling at the site,
labor, installation costs, overhead, profit and other expenses
contemplated for stated allowance amounts shall be included in
the Contract Sum and not in the allowances;
.4 whenever costs are more than or less than allowances, the
Contract Sum shall be adjusted accordingly by Change Order.
The amount of the Change Order shall reflect (1) the
difference between actual costs and the allowances under
Clause 3.8.2.2 and (2) changes in Contractor's costs under
Clause 3.8.2.3.
3.9 SUPERINTENDENT
3.9.1 The Contractor shall employ a competent superintendent and necessary
assistants who shall be in attendance at the Project site during performance of
the Work. The superintendent shall represent the Contractor, and communications
given to the superintendent shall be as binding as if given to the Contractor.
Important communications shall be confirmed in writing. Other communications
shall be similarly confirmed on written request in each case.
3.10 CONTRACTOR'S CONSTRUCTION SCHEDULES
3.10.1 The Contractor, promptly after being awarded the Contract, shall
prepare and submit for the Owner's and Architect's information a Contractor's
construction schedule for the Work. The schedule shall not exceed time limits
current under the Contract Documents, shall be revised at appropriate intervals
as required by the conditions of the Work and Project, shall be related to the
entire Project to the extent required by the Contract Documents, and shall
provide for expeditious and practicable execution of the Work.
3.10.2 The Contractor shall prepare and keep current, for the Architect's
approval, a schedule of submittals which is coordinated with the Contractor's
construction schedule and allows the Architect reasonable time to review
submittals.
3.10.3 The Contractor shall conform to the most recent schedules.
3.11 DOCUMENTS AND SAMPLES AT THE SITE
3.11.1 The Contractor shall maintain at the site for the Owner one record copy
of the Drawings, Specifications, addenda, Change Orders and other Modifications,
in good order and marked currently to record changes and selections made during
constructions, and in addition approved Shop Drawings, Product Data, Samples and
similar required submittals. These shall be available to the Architect and shall
be delivered to the Architect for submittal to the Owner upon completion of the
Work.
3.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES
3.12.1 Shop Drawings are drawings, diagrams, schedules and other data
specially prepared for the Work by the Contractor or a Subcontractor,
Sub-subcontractor, manufacturer, supplier or distributor to illustrate some
portion of the Work.
3.12.2 Product Data are illustrations, standard schedules, performance charts,
instructions, brochures, diagrams and other information furnished by the
Contractor to illustrate materials or equipment for some portion of the Work.
3.12.3 Samples are physical examples which illustrate materials, equipment or
workmanship and establish standards by which the Work will be judged.
3.12.4 Shop Drawings, Product Data, Samples and similar submittals are not
Contract Documents. The purpose of their submittal is to demonstrate for those
portions of the Work for which submittals are required the way the Contractor
proposes to conform to the information given and the design concept expressed in
the Contract Documents. Review by the Architect is subject to the limitations of
Subparagraph 4.2.7.
3.12.5 The Contractor shall review, approve and submit to the Architect Shop
Drawings, Product Data, Samples and similar submittals required by the Contract
Documents with reasonable promptness and in such sequence as to cause no delay
in the Work or in the activities of the Owner or of separate contractors.
Submittals made by the Contractor
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which are not required by the Contract Documents may be returned without action.
If Shop Drawings, Product Data Samples and similar submittals presented to the
Architect by the Contractor contain deviations from requirements of the Contract
Documents, the Contractor shall, in writing, designate such deviations as such
at the time of submittal.
3.12.6 The Contractor shall perform no portion of the Work requiring submittal
and review of Shop Drawings, Product Data, Samples or similar submittals until
the respective submittal has been approved by the Architect. Such Work shall be
in accordance with approved submittals.
3.12.7 By approving and submitting Shop Drawings, Product Data, Samples and
similar submittals, the Contractor represents that the Contractor has determined
and verified materials, field measurements and field construction criteria
related thereto, or will do so, and has checked and coordinated the information
contained within such submittals with the requirements of the Work and of the
Contract Documents.
3.12.8 The Contractor shall not be relieved of responsibility for deviations
from requirements of the Contract Documents by the Architect's approval of Shop
Drawings, Product Data, Samples or similar submittals unless the Contractor has
specifically informed the Architect in writing of such deviation at the time of
submittal and the Architect has given written approval to the specific
deviation. The Contractor shall not be relieved of responsibility for errors or
omissions in Shop Drawings, Product Data, Samples or similar submittals by the
Architect's approval thereof.
3.12.9 The Contractor shall direct specific attention, in writing or on
resubmitted Shop Drawings, Product Data, Samples or similar submittals, to
revisions other than those requested by the Architect on previous submittals.
3.12.10 Informational submittals upon which the Architect is not expected to
take responsive action may be so identified in the Contract Documents.
3.12.11 When professional certification of performance criteria of materials,
systems or equipment is required by the Contract Documents, the Architect shall
be entitled to rely upon the accuracy and completeness of such calculations and
certifications.
3.13 USE OF SITE
3.13.1 The Contractor shall confine operations at the site to areas permitted
by law, ordinances, permits and the Contract Documents and applicable covenants,
conditions and restrictions, shall not unreasonably encumber the site with
materials or equipment and shall not interfere with the use of the roads
adjoining the site or any parcel of real property other than the parcel
containing the site.
3.14 CUTTING AND PATCHING
3.14.1 The Contractor shall be responsible for cutting, fitting or patching
required to complete the Work or to make its parts fit together properly.
3.14.2 The Contractor shall not damage or endanger a portion of the Work or
fully or partially completed construction of the Owner or separate contractors
by cutting, patching or otherwise altering such construction, or by excavation.
The Contractor shall not cut or otherwise alter such construction by the Owner
or a separate contractor except with written consent of the Owner and of such
separate contractor; such consent shall not be unreasonably withheld. The
Contractor shall not unreasonably withhold from the Owner or a separate
contractor the Contractor's consent to cutting or otherwise altering the Work.
3.15 CLEANING UP
3.15.1 The Contractor shall keep the premises and surrounding area free from
accumulation of waste materials or rubbish caused by operations under the
Contract. At completion of the Work the Contractor shall remove from and about
the Project waste materials, rubbish, the Contractor's tools, construction
equipment, machinery and surplus materials.
3.15.2 If the Contractor fails to clean up as provided in the Contract
Documents, the Owner may do so and the cost thereof shall be charged to the
Contractor.
3.16 ACCESS TO WORK
3.16.1 The Contractor shall provide the Owner and Architect access to the Work
in preparation and progress wherever located.
3.17 ROYALTIES AND PATENTS
3.17.1 The Contractor shall pay all royalties and license fees. The Contractor
shall defend suits or claims for infringement of patent rights and shall hold
the Owner and Architect harmless from loss on account thereof, but shall not be
responsible for such defense or loss when a particular design, process or
product of a particular manufacturer or manufacturers is required by the
Contract Documents.
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However, if the Contractor has reason to believe that the required design,
process or product is an infringement of a patent, the Contractor shall be
responsible for such loss unless such information is promptly furnished to the
Architect.
3.18 INDEMNIFICATION
3.18.1 To the fullest extent permitted by law, the Contractor shall indemnify
and hold harmless the Owner, Architect, Architect's consultants, and agents and
employees of any of them from and against claims, damages, losses and expenses,
including but not limited to attorneys' fees, arising out of or resulting from
performance of the Work, provided that such claim, damage, loss or expense is
attributable to bodily injury, sickness, disease or death, or to injury to or
destruction of tangible property (other than the Work itself) including loss of
use resulting therefrom, but only to the extent caused in whole or in part by
acts or omissions of the Contractor, a Subcontractor, anyone directly or
indirectly employed by them, or anyone for whose acts they may be liable,
regardless of whether or not such claim, damage, loss or expense is caused in
part by a party indemnified hereunder. Such obligation shall not be construed to
negate, abridge, or reduce other rights or obligations of indemnity which would
otherwise exist as to a party or person described in this Paragraph 3.18.
3.18.2 In claims against any person or entity indemnified under this Paragraph
3.18 by an employee of the Contractor, a Subcontractor, anyone directly or
indirectly employed by them or anyone for whose acts they may be liable, the
indemnification obligation under this Paragraph 3.18 shall not be limited by a
limitation on amount or type of damages, compensation or benefits payable by or
for the Contractor or a Subcontractor under workers' or workmen's compensation
acts, disability benefit acts or other employee benefit acts.
3.18.3 The obligations of the Contractor under this Paragraph 3.18 shall not
extend to the liability of the Architect, the Architect's consultants, and
agents and employees of any of them arising out of (1) the preparation or
approval of maps, drawings, opinions, reports, surveys, Change Orders, designs
or specifications, or (2) the giving of or the failure to give directions or
instructions by the Architect, the Architect's consultants, and agents and
employees of any of them provided such giving or failure to give is the primary
cause of the injury or damage.
ARTICLE 4
ADMINISTRATION OF THE CONTRACT
4.1 ARCHITECT
4.1.1 The Architect is the person lawfully licensed to practice architecture
or an entity lawfully practicing architecture identified as such in the
Agreement and is referred to throughout the Contract Documents as if singular in
number. The term "Architect" means the Architect or the Architect's authorized
representative.
4.1.2 Duties, responsibilities and limitations of authority of the Architect
as set forth in the Contract Documents shall not be restricted, modified or
extended without written consent of the Owner, Contractor and Architect. Consent
shall not be unreasonably withheld.
4.1.3 In case of termination of employment of the Architect, the Owner shall
appoint an architect against whom the Contractor makes no reasonable objection
and whose status under the Contract Documents shall be that of the former
architect.
4.1.4 Disputes arising under Subparagraphs 4.1.2 and 4.1.3 shall be subject
to arbitration.
4.2 ARCHITECT'S ADMINISTRATION OF THE CONTRACT
4.2.1 The Architect will provide administration of the Contract as described
in the Contract Documents, and will be the Owner's representative (1) during
construction, (2) until final payment is due and (3) with the Owner's
concurrence, from time to time during the correction period described in
Paragraph 12.2. The Architect will advise and consult with the Owner. The
Architect will have authority to act on behalf of the Owner only to the extent
provided in the Contract Documents, unless otherwise modified by written
instrument in accordance with other provisions of the Contract.
4.2.2 Architect's obligations for inspections and check of the quality or
quantity of the Work shall be set forth in an agreement between owner
and Architect.
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4.2.3 The Architect will not have control over or charge of and will not be
responsible for construction means, methods, techniques, sequences or
procedures, or for safety precautions and programs in connection with the Work,
since these are solely the Contractor's responsibility as provided in Paragraph
3.3. The Architect will not be responsible for the Contractor's failure to carry
out the Work in accordance with the Contract Documents. The Architect will not
have control over or charge of and will not be responsible for acts or omissions
of the Contractor, Subcontractors, or their agents or employees, or of any other
persons performing portions of the Work.
4.2.4 COMMUNICATIONS FACILITATING CONTRACT ADMINISTRATION. Except as
otherwise provided in the Contract Documents or when direct communications have
been specialty authorized, the Owner and Contractor shall endeavor to
communicate through the Architect. Communications by and with the Architect's
consultants shall be through the Architect. Communications by and with
Subcontractors and material suppliers shall be through the Contractor.
Communications by and with separate contractors shall be through the Owner.
4.2.5 Based on the Architect's observations and evaluations of the
Contractor's Applications for Payment, the Architect will review and certify the
amounts due the Contractor and will issue Certificates for Payment in such
amounts.
4.2.6 The Architect will have authority to reject Work which does not conform
to the Contract Documents. Whenever the Architect considers it necessary or
advisable for implementation of the intent of the Contract Documents, the
Architect will have authority to require additional inspection or testing of the
Work in accordance with Subparagraphs 13.5.2 and 13.5.3, whether or not such
Work is fabricated, installed or completed. However, neither this authority of
the Architect nor a decision made in good faith either to exercise or not to
exercise such authority shall give rise to a duty or responsibility of the
Architect to the Contractor, Subcontractors, material and equipment suppliers,
their agents or employees, or other persons performing portions of the Work.
4.2.7 The Architect will review and approve or take other appropriate action
upon the Contractor's submittals such as Shop Drawings, Product Data and
Samples, but only for the limited purpose of checking for conformance with
information given and the design concept expressed in the Contract Documents.
The Architect's action will be taken with such reasonable promptness as to cause
no delay in the Work or in the activities of the Owner, Contractor or separate
contractors, while allowing sufficient time in the Architect's professional
judgment to permit adequate review. Review of such submittals is not conducted
for the purpose of determining the accuracy and completeness of other details
such as dimensions and quantities, or for substantiating instructions for
installation or performance of equipment or systems, all of which remain the
responsibility of the Contractor as required by the Contract Documents. The
Architect's review of the Contractor's submittals shall not relieve the
Contractor of the obligations under Paragraphs 3.3, 3.5 and 3.12. The
Architect's review shall not constitute approval of safety precautions or,
unless otherwise specifically stated by the Architect, of any construction
means, methods, techniques, sequences or procedures. The Architect's approval of
a specific item shall not indicate approval of an assembly of which the item is
a component.
4.2.8 The Architect will prepare Change Orders and Construction Change
Directives, and may authorize minor changes in the Work as provided in Paragraph
7.4.
4.2.9 The Architect will conduct inspections to determine the date or dates
of Substantial Completion and the date of final completion, will receive and
forward to the Owner for the Owner's review and records written warranties and
related documents required by the Contract and assembled by the Contractor, and
will issue a final Certificate for Payment upon compliance with the requirements
of the Contract Documents.
4.2.10 If the Owner and Architect agree, the Architect will provide one or
more project representatives to assist in carrying out the Architect's
responsibilities at the site. The duties, responsibilities and limitations of
authority of such project representatives shall be as set forth in an exhibit
to be incorporated in the Contract Documents.
4.2.11 The Architect will interpret and decide matters concerning performance
under and requirements of the Contract Documents on written request of either
the Owner or Contractor. The Architect's response to such requests will be made
with reasonable promptness and within any time limits agreed upon. If no
agreement is made concerning the time within which interpretations required of
the Architect shall be furnished in compliance with this Paragraph 4.2, then
delay shall not be recognized on account of failure by the Architect to furnish
such interpretations until 15 days after written request is made for them.
4.2.12 Interpretations and decisions of the Architect will be consistent with
the intent of and reasonably inferable from the Contract Documents and will be
in writing or in the form of drawings. When making such interpretations and
decisions,
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the Architect will endeavor to secure faithful performance by both Owner and
Contractor, will not show partiality to either and will not be liable for
results of interpretations or decisions so rendered in good faith.
4.2.13 The Architect's decisions on matters relating to aesthetic effect will
be final if consistent with the intent expressed in the Contract Documents and
approved by the Owner.
4.3 CLAIMS AND DISPUTES
4.3.1 DEFINITION. A Claim is a demand or assertion by one of the parties
seeking, as a matter of right, adjustment or interpretation of Contract terms,
payment of money, extension of time or other relief with respect to the terms of
the Contract. The term "Claim" also includes other disputes and matters in
question between the Owner and Contractor arising out of or relating to the
Contract. Claims must be made by written notice. The responsibility to
substantiate Claims shall rest with the party making the Claim.
4.3.2 DECISION OF ARCHITECT. Claims, including those alleging an error or
omission by the Architect, shall be referred initially to the Architect for
action as provided in Paragraph 4.4. A decision by the Architect, as provided in
Subparagraph 4.4.4, shall be required as a condition precedent to arbitration or
litigation of a Claim between the Contractor and Owner as to all such matters
arising prior to the date final payment is due, regardless of (1) whether such
matters relate to execution and progress of the Work or (2) the extent to which
the Work has been completed. The decision by the Architect in response to a
Claim shall not be a condition precedent to arbitration or litigation in the
event (1) the position of Architect is vacant, (2) the Architect has not
received evidence or has failed to render a decision within agreed time limits,
(3) the Architect has failed to take action required under Subparagraph 4.4.4
within 15 days after the Claim is made, (4) 30 days have passed after the Claim
has been referred to the Architect or (5) the Claim relates to a mechanic's
lien.
4.3.3 TIME LIMITS ON CLAIMS. Claims by either party must be made within 21
days after occurrence of the event giving rise to such Claim or within 21 days
after the claimant first recognizes the condition giving rise to the Claim,
whichever is later. Claims must be made by written notice. An additional Claim
made after the initial Claim has been implemented by Change Order will not be
considered unless submitted in a timely manner.
4.3.4 CONTINUING CONTRACT PERFORMANCE. Pending final resolution of a Claim
including arbitration, unless otherwise agreed in writing the Contractor shall
proceed diligently with performance of the Contract and the Owner shall continue
to make payments in accordance with the Contract Documents to the extent that
such payments are undisputed by the Owner.
4.3.5 WAIVER OF CLAIMS: FINAL PAYMENT. The making of final payment shall
constitute a waiver of Claims by the Owner except those arising from:
.1 liens, Claims, security interests or encumbrances arising out
of the Contract and unsettled;
.2 failure of the Work to comply with the requirements of the
Contract Documents; or
.3 terms of special warranties required by the Contract
Documents.
4.3.6 CLAIMS FOR CONCEALED OR UNKNOWN CONDITIONS. If conditions are
encountered at the site which are (1) subsurface or otherwise concealed physical
conditions which differ materially from those indicated in the Contract
Documents or (2) unknown physical conditions of an unusual nature, which differ
materially from those ordinarily found to exist and generally recognized as
inherent in construction activities of the character provided for in the
Contract Documents, then notice by the observing party shall be given to the
other party promptly before conditions are disturbed and in no event later than
5 days after first observance of the conditions. Contractor shall include in any
such written notice a claim, if any, for equitable adjustment of the Contract
Sum or Contract Time due to such unknown conditions. Any claim for equitable
adjustment of the Contract Sum and/or the Contract Time which is not included in
such notice shall be deemed to have been waived by the Contractor.
4.3.7 CLAIMS FOR ADDITIONAL COST. If the Contractor
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wishes to make Claim for an increase in the Contract Sum, written notice as
provided herein shall be given before proceeding to execute the Work. Prior
notice is not required for Claims relating to an emergency endangering life or
property arising under Paragraph 10.3. If the Contractor believes additional
cost is involved for reasons including but not limited to (1) a written
interpretation from the Architect, (2) an order by the Owner to stop the Work
where the Contractor was not at fault, (3) a written order for a minor change in
the Work issued by the Architect, (4) failure of payment by the Owner, (5)
termination of the Contract by the Owner, (6) Owner's suspension or (7) other
reasonable grounds, Claim shall be filed in accordance with the procedure
established herein.
4.3.8 CLAIMS FOR ADDITIONAL TIME
4.3.8.1 If the Contractor wishes to make Claim for all increase in the Contract
Time, written notice as provided herein shall be given. The Contractor's Claim
shall include an estimate of cost and of probable effect of delay on progress of
the Work. In the case of a continuing delay only one Claim is necessary.
4.3.8.2 If adverse weather conditions are the basis for a Claim for additional
time, such Claim shall be documented by data substantiating that weather
conditions were abnormal for the period of time, and that weather
conditions had an adverse effect on the scheduled construction.
INSERT A: 4.3.8.3 Should a delay become apparent before the Work or any portion
thereof is started, Contractor shall immediately notify the Owner in writing of
such delay, the approximate duration of such delay and the effect on the
Contract Time as estimated by the Contractor.
4.3.9 INJURY OR DAMAGE TO PERSON OR PROPERTY. If either party to the Contract
suffers injury or damage to person or property because of an act or omission of
the other party, of any of the other party's employees or agents, or of others
for whose acts such party is legally liable, written notice of such injury or
damage, whether or not insured, shall be given to the other party within a
reasonable time not exceeding 21 days after first observance. The notice shall
provide sufficient detail to enable the other party to investigate the matter.
If a Claim for additional cost or time related to this Claim is to be asserted,
it shall be filed as provided in Subparagraphs 4.3.7 or 4.3.8.
4.4 RESOLUTION OF CLAIMS AND DISPUTES
4.4.1 The Architect will review Claims and take one or more of the following
actions within ten days of receipt of a Claim: (1) request additional supporting
data from the claimant, (2) submit a schedule to the parties indicating when the
Architect expects to take action, (3) reject the Claim in whole or in part,
stating reasons for rejection, (4) recommend approval of the Claim by the other
party or (5) suggest a compromise. The Architect may also, but is not obligated
to, notify the surety, if any, of the nature and amount of the Claim.
4.4.2 If a Claim has been resolved, the Architect will prepare or obtain
appropriate documentation.
4.4.3 If a Claim has not been resolved, the party making the Claim shall,
within ten days after the Architect's preliminary response, take one or more of
the following actions: (1) submit additional supporting data requested by the
Architect, (2) modify the initial Claim or (3) notify the Architect that the
initial Claim stands.
4.4.4 If a Claim has not been resolved after consideration of the foregoing
and of further evidence presented by the parties or requested by the Architect,
the Architect will notify the parties in writing that the Architect's decision
will be made within seven days, which decision shall be final and binding on the
parties but subject to arbitration. Upon expiration of such time period, the
Architect will render to the parties the Architect's written decision relative
to the Claim, including any change in the Contract Sum or Contract Time or both.
If there is a surety and there appears to be a possibility of a Contractor's
default, the Architect may, but is not obligated to, notify the surety and
request the surety's assistance in resolving the controversy.
Insert B. 4.4.5 If a dispute arises out of or relating to this Contract or the
breach thereof, and if said dispute cannot be settled through direct
discussions, the parties agree to first endeavor in good faith to settle the
dispute in an amicable manner within 45 days of submission to mediation under
the Construction Industry Mediation Rules of the American Arbitration
Association before having recourse to judicial forum.
Insert C: The mediation shall be initiated by the written request of either
party and shall be commended within 15 days of receipt of such notice.
Insert D: The parties agree that if such mediation fails, the dispute will be
settled by the courts of the State of California.
4.5 ARBITRATION
4.5.1 CONTROVERSIES AND CLAIMS SUBJECT TO ARBITRATION. Any controversy or
Claim arising out of or related to the Contract, or the breach thereof, shall
be settled
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by arbitration in accordance with the Construction Industry Arbitration Rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrator or arbitrators may be entered in any court having jurisdiction
thereof, except controversies or Claims relating to aesthetic effect and except
those waived as provided for in Subparagraph 4.3.5. Such controversies or Claims
upon which the Architect has given notice and rendered a decision as provided in
Subparagraph 4.4.4 shall be subject to arbitration upon written demand of either
party. Arbitration may be commenced when 30 days have passed after a Claim has
been referred to the Architect as provided in Paragraph 4.3 and no decision has
been rendered.
4.5.2 RULES AND NOTICES FOR ARBITRATION. Claims between the Owner and
Contractor not resolved under Paragraph 4.4 shall, if subject to arbitration
under Subparagraph 4.5. 1, be decided by arbitration in accordance with the
Construction Industry Arbitration Rules of the American Arbitration Association
currently in effect, unless the parties mutually agree otherwise. Notice of
demand for arbitration shall be filed in writing with the other party to the
Agreement between the Owner and Contractor and with the American Arbitration
Association, and a copy shall be filed with the Architect.
4.5.3 CONTACT PERFORMANCE DURING ARBITRATION. During arbitration proceedings,
the Owner and Contractor shall comply with Subparagraph 4.3.4.
4.5.4 WHEN ARBITRATION MAY BE DEMANDED. Demand for arbitration of any Claim
may not be made until the earlier of (1) the date on which the Architect has
rendered a final written decision on the Claim, (2) the tenth day after the
parties have presented evidence to the Architect or have been given reasonable
opportunity to do so, if the Architect has not rendered a final written decision
by that date, or (3) any of the five events described in Subparagraph 4.3.2.
4.5.4.1 When a written decision of the Architect states that (1) the decision
is final but subject to arbitration and (2) a demand for arbitration of a Claim
covered by such decision must be made within 30 days after the date on which the
party making the demand receives the final written decision, then failure to
demand arbitration within said 30 days' period shall result in the Architect's
decision becoming final and binding upon the Owner and Contractor. If the
Architect renders a decision after arbitration proceedings have been initiated,
such decision may be entered as evidence, but shall not supersede arbitration
proceedings unless the decision is acceptable to all parties concerned.
4.5.4.2 A demand for arbitration shall be made within the time limits specified
in Subparagraphs 4.5.1 and 4.5.4 and Clause 4.5.4.1 as applicable. and in other
cases within a reasonable time after the Claim has arisen, and in no event shall
it be made after the date when institution of legal or equitable proceedings
based on such Claim would be barred by the applicable statute of limitations as
determined pursuant to Paragraph 13.7.
4.5.5 LIMITATION ON CONSOLIDATION OR JOINDER.
4.5.6 CLAIMS AND TIMELY ASSERTION OF CLAIMS. A party who files a notice of
demand for arbitration must assert in the demand ail Claims then known to that
party on which arbitration is permitted to be demanded. When a party fails to
include a Claim through oversight, inadvertence or excusable neglect, or when a
Claim has matured or been acquired subsequently, the arbitrator or arbitrators
may permit amendment.
4.5.7 JUDGMENT ON FINAL AWARD. The award rendered by the arbitrator or
arbitrators shall be final, and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof.
ARTICLE 5
SUBCONTRACTORS
5.1 DEFINITIONS
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5.1.1 A Subcontractor is a person or entity who has a direct contract with
the Contractor to perform a portion of the Work at the site. The term
"subcontractor" is referred to throughout the Contract Documents as if singular
in number and means a Subcontractor or an authorized representative of the
Subcontractor. The term "subcontractor" does not include a separate contractor
or subcontractors of a separate contractor.
5.1.2 A Sub-subcontractor is a person or entity who has a direct or indirect
contract with a Subcontractor to perform a portion of the Work at the site. The
term "sub-subcontractor" is referred to throughout the Contract Documents as if
singular in number and means a Sub-subcontractor or an authorized representative
of the Sub-subcontractor.
5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK
5.2.1 Unless otherwise stated in the Contract Documents or the bidding
requirements, the Contractor, as soon as practicable after award of the
Contract, shall furnish in writing to the Owner through the Architect the names
of persons or entities (including those who are to furnish materials or
equipment fabricated to a special design) proposed for each principal portion of
the Work. The Architect will promptly reply to the Contractor in writing stating
whether or not the Owner or the Architect, after due investigation, has
reasonable objection to any such proposed person or entity. Failure of the Owner
or Architect to reply promptly shall constitute notice of no reasonable
objection.
5.2.2 The Contractor shall not contract with a proposed person or entity to
whom the Owner or Architect has made reasonable and timely objection. The
Contractor shall not be required to contract with anyone to whom the Contractor
has made reasonable objection.
5.2.3 If the Owner or Architect has reasonable objection to a person or
entity proposed by the Contractor, the Contractor shall propose another to whom
the Owner or Architect has no reasonable objection. The Contract Sum shall be
increased or decreased by the difference in cost occasioned by such change and
an appropriate Change Order shall be issued. However, no increase in the
Contract Sum shall be allowed for such change unless the Contractor has acted
responsively in submitting names as required.
5.2.4 The Contractor shall not change a Subcontractor, person or entity
previously selected if the Owner or Architect makes reasonable objection to such
change.
5.3 SUBCONTRACTUAL RELATIONS
5.3.1 By appropriate agreement, written where legally required for validity,
the Contractor shall require each Subcontractor, to the extent of the Work to be
performed by the Subcontractor, to be bound to the Contractor by terms of the
Contract Documents, and to assume toward the Contractor all the obligations and
responsibilities which the Contractor, by these Documents, assumes toward the
Owner. Each subcontract agreement shall preserve and protect the rights of the
Owner under the Contract Documents with respect to the Work to be performed by
the Subcontractor so that subcontracting thereof will not prejudice such rights.
Where appropriate, the Contractor shall require each Subcontractor to enter into
similar agreements with Sub-subcontractors. The Contractor shall make available
to each proposed Subcontractor, copies of the Contract Documents to which the
Subcontractor will be bound. Subcontractors shall similarly make copies of
applicable portions of such documents available to their respective proposed
Sub-subcontractors.
5.4 CONTINGENT ASSIGNMENT OF SUBCONTRACTS
5.4.1 NOT APPLICABLE
.1 NOT APPLICABLE
.2 NOT APPLICABLE
5.4.2 NOT APPLICABLE
ARTICLE 6
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CONSTRUCTION BY OWNER OR BY SEPARATE
CONTRACTORS
6.1 OWNERS RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS
6.1.1 The Owner reserves the right to perform construction or operations
related to the Project with the Owner's own forces, and to award separate
contracts in connection with other portions of the Project or other construction
or operations on the site under Conditions of the Contract identical or
substantially similar to these including those portions related to insurance and
waiver of subrogation.
If the Contractor claims that delay or additional cost is involved
because of such action by the Owner, the Contractor shall make such Claim as
provided elsewhere in the Contract Documents.
6.1.2 When separate contracts are awarded for different portions of the
Project or other construction or operations on the site, the term "Contractor"
in the Contract Documents in each case shall mean the Contractor who executes
each separate Owner-Contractor Agreement.
6.1.3 The Owner shall provide for coordination of the activities of the
Owner's own forces and of each separate contractor with the Work of the
Contractor, who shall cooperate with them. The Contractor shall participate with
other separate contractors and the Owner in reviewing their construction
schedules when directed to do so. The Contractor shall make any revisions to the
construction schedule and Contract Sum deemed necessary after a joint review and
mutual agreement.
6.1.4 Unless otherwise provided in the Contract Documents, when the Owner
performs construction or operations related to the Project with the Owner's own
forces, the Owner shall be deemed to be subject to the same obligations and to
have the same rights which apply to the Contractor under the Conditions of the
Contract, including, without excluding others, those stated in Article 3, this
Article 6 and Articles 10, 11 and 12.
6.2 MUTUAL RESPONSIBILITY
6.2.1 The Contractor shall afford the Owner and separate contractors
reasonable opportunity for introduction and storage of their materials and
equipment and performance of their activities and shall connect and coordinate
the Contractor's construction and operations with theirs as required by the
Contract Documents.
6.2.2 If part of the Contractor's Work depends for proper execution or
results upon construction or operations by the Owner or a separate contractor,
the Contractor shall, immediately upon recognizing such dependence, inform the
Owner of that dependence and, prior to proceeding with that portion of the Work,
the Contractor shall promptly report to the Architect and Owner discrepancies or
defects discovered in such other construction that would render it unsuitable
for such proper execution and results. Failure of the Contractor so to report
shall constitute an acknowledgment that the Owner's or separate contractors'
construction or operations will not affect Contractor's Work. Failure of the
Contractor to report any apparent discrepancies or defects in such other
construction shall constitute an acknowledgment that the Owner's or separate
contractors' completed or partially completed construction is fit and proper to
receive the Contractor's Work, except as to defects not then reasonably
discoverable.
6.2.3 Costs caused by delays or by improperly timed activities or
nonconforming construction shall be borne by the party responsible therefor.
6.2.4 The Contractor shall, at its sole cost, promptly remedy damage
wrongfully caused by the Contractor to completed or partially completed
construction or to property of the Owner or separate contractors as provided in
Subparagraph 10.2.5.
6.2.6 Claims and other disputes and matters in question between the
Contractor and a separate contractor shall be subject to the provisions of
Paragraph 4.3 provided the separate contractor has reciprocal obligations.
6.2.6 The Owner and each separate contractor shall have the same
responsibilities for cutting and patching as are described for the Contractor in
Paragraph 3.14.
6.3 OWNER'S RIGHT TO CLEAN UP
6.3.1 If a dispute arises among the Contractor, separate contractors and the
Owner as to the responsibility under their respective contracts for maintaining
the premises and surrounding area free from waste materials and rubbish as
described in Paragraph 3.15, the Owner may clean up and allocate the cost among
those responsible as the Architect determines to be just.
ARTICLE 7
CHANGES IN THE WORK
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7.1 CHANGES
7.1.1 Changes in the Work may be accomplished after execution of the
Contract, and without invalidating the Contract, by Change Order, Construction
Change Directive or order for a minor change in the Work, subject to the
limitations stated in this Article 7 and elsewhere in the Contract Documents.
7.1.2 A Change Order shall be based upon agreement among the Owner,
Contractor and Architect; a Construction Change Directive requires agreement by
the Owner and Architect and may or may not be agreed to by the Contractor; an
order for a minor change in the Work may be issued by the Architect alone.
7.1.3 Changes in the Work shall be performed under applicable provisions of
the Contract Documents, and the Contractor shall proceed promptly, unless
otherwise provided in the Change Order, Construction Change Directive or order
for a minor change in the Work.
7.1.4 If unit prices are stated in the Contract Documents or subsequently
agreed upon, and if quantities originally contemplated are so changed in a
proposed Change Order or Construction Change Directive that application of such
unit prices to quantities of Work proposed will cause substantial inequity to
the Owner or Contractor, the applicable unit prices shall be equitably adjusted.
7.2 CHANGE ORDERS
7.2.1 A Change Order is a written instrument prepared by the Architect and
signed by the Owner, Contractor and Architect, stating their agreement upon all
of the following:
.1 a change in the Work;
.2 the amount of the adjustment in the Contract Sum, if any; and
.3 the extent of the adjustment in the Contract Time, if any.
7.2.2 Methods used in determining adjustments to the Contract Sum may include
those listed in Subparagraph 7.3.3.
7.3 CONSTRUCTION CHANGE DIRECTIVES
7.3.1 A Construction Change Directive is a written order prepared by the
Architect and signed by the Owner and Architect, directing a change in the Work
and stating a proposed basis for adjustment, if any, in the Contract Sum, or
Contract Time, or both. The Owner may by Construction Change Directive, without
invalidating the Contract, order changes in the Work within the general scope of
the Contract consisting of additions, deletions or other revisions, the Contract
Sum and Contract Time being adjusted accordingly.
7.3.2 A Construction Change Directive shall be used in the absence of total
agreement on the terms of a Change Order.
7.3.3 If the Construction Change Directive provides for an adjustment to the
Contract Sum, the adjustment shall be based on one of the following methods:
.1 mutual acceptance of a lump sum properly itemized and
supported by sufficient substantiating data to permit
evaluation;
.2 unit prices stated in the Contract Documents or subsequently
agreed upon;
.3 cost to be determined in a manner agreed upon by the parties
and a mutually acceptable fixed or percentage fee; or
.4 as provided in Subparagraph 7.3.6.
7.3.4 Upon receipt of a Construction Change Directive, the Contractor shall
promptly proceed with the change in the Work involved and advise the Architect
of the Contractor's agreement or disagreement with the method, if any, provided
in the Construction Change Directive for determining the proposed adjustment in
the Contract Sum or Contract Time.
7.3.5 A Construction Change Directive signed by the Contractor indicates the
agreement of the Contractor therewith, including adjustment in Contract Sum and
Contract Time or the method for determining them. Such agreement shall be
effective immediately and shall be recorded as a Change Order.
7.3.6 If the Contractor does not respond promptly or disagrees with the
method for adjustment in the Contract Sum, the method and the adjustment shall
be determined by the Architect on the basis of reasonable expenditures and
savings of those performing the Work attributable to the change, including, in
case of an increase in the Contract Sum, a reasonable allowance for overhead and
profit. In such case, and also under Clause 7.3.3.3, the Contractor shall keep
and present, in such form as the Architect may prescribe, an itemized accounting
together with appropriate supporting data. Unless otherwise provided in the
Contract Documents,
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costs for the purposes of this Subparagraph 7.3.6 shall be limited to the
following
.1 costs of labor, including social security, old age and
unemployment insurance, fringe benefits required by agreement
or custom, and workers' or workmen's compensation insurance;
.2 costs of materials, supplies and equipment, including cost of
transportation, whether incorporated or consumed;
.3 rental costs of machinery and equipment, exclusive of hand
tools, whether rented from the Contractor or others;
.4 costs of premiums for all bonds arid insurance, permit fees,
and sales, use or similar taxes related to the Work; and
.5 additional costs of supervision and field office personnel
directly attributable to the change.
7.3.7 NOT APPLICABLE
7.3.8 If the Owner and Contractor do not agree with the adjustment in
Contract Time or the method for determining it, the adjustment or the method
shall be referred to the Architect for determination.
7.3.9 When the Owner and Contractor agree with the determination made by the
Architect concerning the adjustments in the Contract Sum and Contract Time, or
otherwise reach agreement upon the adjustments, such agreement shall be
effective immediately and shall be recorded by preparation and execution of an
appropriate Change Order.
7.4 MINOR CHANGES IN THE WORK
7.4.1 The Owner, after review by the Architect will have authority to order
minor changes in the Work not involving adjustment in the Contract Sum or
extension of the Contract Time and not inconsistent with the intent of the
Contract Documents. Such changes shall be effected by written order and shall be
binding on the Owner and Contractor. The Contractor shall carry out such written
orders promptly.
ARTICLE 8
TIME
8.1 DEFINITIONS
8.1.1 Unless otherwise provided, Contract Time is the period of time,
including authorized adjustments, allotted in the Contract Documents for
Substantial Completion of the Work.
8.1.2 "The date of commencement of the Work is the date established in the
Agreement. The date shall not be postponed by the failure to act of the
Contractor or of persons or entities for whom the Contractor is responsible.
8.1.3 The date of Substantial Completion is the date as established in
Paragraph 9.8. also per A101 Paragraph 3.1 Insert A.
8.1.4 The term "day" as used in the Contract Documents shall mean calendar
day unless otherwise specifically defined.
8.2 PROGRESS AND COMPLETION
8.2.1 Time limits stated in the Contract Documents are of the essence of the
Contract. By executing the Agreement the Contractor confirms that the Contract
Time is a reasonable period for performing the Work.
8.2.2 The Contractor shall not knowingly, except by agreement or instruction
of the Owner in writing, prematurely commence operations on the site or
elsewhere prior to the effective date of insurance required by Article 11 to be
furnished by the Contractor. The date of commencement of the Work shall not be
changed by the effective date of such insurance. Unless the date of commencement
is established by a notice to proceed given by the Owner, the Contractor shall
notify the Owner in writing not less than five days or other agreed period
before commencing the Work to permit the timely filing of mortgages, mechanic's
liens and other security interests.
8.2.3 The Contractor shall proceed expeditiously with adequate forces and
shall achieve Substantial Completion within the Contract Time.
8.3 DELAYS AND EXTENSIONS OF TIME
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8.3.1 NOT APPLICABLE
8.3.2 Claims relating to time shall be made in accordance with applicable
provisions of Paragraph 4.3.
8.3.3 This Paragraph 8.3 does not preclude recovery of damages for delay by
either party under other provisions of the Contract Documents.
ARTICLE 9
PAYMENTS AND COMPLETION
9.1 CONTRACT SUM
9.1.1 The Contract Sum is stated in the Agreement and, including authorized
adjustments, is the total amount payable by the Owner to the Contractor for
performance of the Work under the Contract Documents.
9.2 SCHEDULE OF VALUES
9.2.1 Before the first Application for Payment, the Contractor shall submit
to the Architect a schedule of values allocated to various portions of the Work,
prepared in such form and supported by such data to substantiate its accuracy as
the Architect may require. This schedule, unless objected to by the Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.
9.3 APPLICATIONS FOR PAYMENT
9.3.1 At least ten days before the date established for each progress
payment, the Contractor shall submit to the Architect an itemized Application
for Payment for operations completed in accordance with the schedule of values.
Such application shall be notarized, if required, and supported by such data
substantiating the Contractor's right to payment as the Owner or Architect may
require.
9.3.1.1 Such applications may include requests for payment on account of
changes in the Work which have been properly authorized by Construction Change
Directives on which the agreement of Owner and Contractor has been reached as to
adjustment in the Contract Sum.
9.3.1.2 NOT APPLICABLE
9.3.2 Unless otherwise provided in the Contract Documents, payments shall be
made on account of materials and equipment delivered and suitably stored at the
site for subsequent incorporation in the Work. If approved in advance by the
Owner, payment may similarly be made for materials and equipment suitably stored
off the site at a location agreed upon in writing. Payment for materials and
equipment stored on or off the site shall be conditioned upon compliance by the
Contractor with procedures satisfactory to the Owner to establish the Owner's
title to such materials and equipment or otherwise protect the Owner's interest,
and shall include applicable insurance, storage, and transportation to the site
for such materials and equipment stored off the site.
9.3.3 The Contractor warrants that title to all Work covered by an
Application for Payment will pass to the Owner no later than the time of
payment. The Contractor further warrants that upon submittal of an Application
for Payment all Work for which Certificates for Payment have been previously
issued and payments received from the Owner shall, to the best of the
Contractor's knowledge, information and belief, be free and clear of liens,
claims, security interests or encumbrances favor of the Contractor,
Subcontractors, material suppliers, or other persons or entities making a claim
by reason of having provided labor, materials and equipment relating to the
Work.
9.4 CERTIFICATES FOR PAYMENT
9.4.1 The Architect will, within seven days after receipt of the Contractor's
Application for Payment, either issue to the Owner a Certificate for Payment,
with a copy to the Contractor, for such amount as the Architect determines is
properly due, or notify the Contractor and Owner in writing of the Architect's
reasons for withholding certification in whole or in part as provided in
Subparagraph 9.5.1.
9.4.2 The issuance of a Certificate for Payment will constitute a
representation by the Architect to the Owner, based on the Architect's
observations at the site and the data comprising the application for Payment,
that the Work has
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progressed to the point indicated and that, to the best of the Architect's
knowledge, information and belief, quality of the Work is in accordance with the
Contract Documents. The foregoing representations are subject to an evaluation
of the Work for conformance with the Contract Documents upon Substantial
Completion, to results of subsequent tests and inspections, to minor deviations
from the Contract Documents correctable prior to completion and to specific
qualifications expressed by the Architect. The issuance of a Certificate for
Payment will further constitute a representation that the Contractor is entitled
to payment in the amount certified. However, the issuance of a Certificate for
Payment will not be a representation that the Architect has (1) made exhaustive
or continuous on-site inspections to check the quality or quantity of the Work,
(2) reviewed construction means, methods, techniques, sequences or procedures,
(3) reviewed copies of requisitions received from Subcontractors and material
suppliers and other data requested by the Owner to substantiate the Contractor's
right to payment or (4) made examination to ascertain how or for what purpose
the Contractor has used money previously paid on account of the Contract Sum.
9.5 DECISIONS TO WITHHOLD CERTIFICATION
9.5.1 The Architect may decide not to certify payment and may withhold a
Certificate for Payment in whole or in part, to the extent reasonably necessary
to protect the Owner, if in the Architect's opinion the representations to the
Owner required by Subparagraph 9.4.2 cannot be made. If the Architect is unable
to certify payment in the amount of the Application, the Architect will notify
the Contractor and Owner as provided in Subparagraph 9.4.1. If the Contractor
and Architect cannot agree on a revised amount, the Architect will promptly
issue a Certificate for Payment for the amount for which the Architect is able
to make such representations to the Owner. The Architect may also decide not to
certify to such extent as may be necessary in the Architect's opinion to protect
the Owner from loss because of:
.1 defective Work not remedied;
.2 third party claims filed;
.3 failure of the Contractor to make payments to Subcontractors
or for labor, materials or equipment;
.4 reasonable evidence that the Work cannot be completed for the
unpaid balance of the Contract Sum;
.5 damage to the Owner or another contractor;
.6 NOT APPLICABLE
.7 persistent failure to carry out the Work in accordance with
the Contract Documents
9.5.2 When the above reasons for withholding certification are removed,
certification will be made for amounts previously withheld.
9.6 PROGRESS PAYMENTS
9.6.1 After the Architect has issued a Certificate for Payment, the Owner
shall make payment in the manner and within the time provided in the Contract
Documents, and shall so notify the Architect.
9.6.2 NOT APPLICABLE
9.6. 3 NOT APPLICABLE
9.6.4 Neither the Owner nor Architect shall have an obligation to pay or to
see to the payment of money to a Subcontractor except as may otherwise be
required by law.
9.6.5 NOT APPLICABLE
9.6.6 A Certificate for Payment, a progress payment, or
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partial or entire use or occupancy of the Project by the Owner shall not
constitute acceptance of Work not in accordance with the Contract Documents.
9.7 FAILURE OF PAYMENT
9.7.1 If the Architect does not issue a Certificate for Payment, through no
fault of the Contractor, within seven days after receipt of the Contractor's
Application for Payment, or if the Owner does not pay the Contractor within
seven days after the date established in the Contract Documents the amount
certified by the Architect or awarded by arbitration, then the Contractor may,
upon seven additional days' written notice to the Owner and Architect, stop the
Work until payment of the amount owing has been received. The Contract Time
shall be extended appropriately and the Contract Sum shall be increased by the
amount of the Contractor's reasonable costs of shut-down, delay and start-up,
and interest as provided in paragraph 13.6.1, which shall be accomplished as
provided in Article 7.
9.8 SUBSTANTIAL COMPLETION
9.8.1 Substantial Completion is the stage in the progress of the Work when the
Work or designated portion thereof is sufficiently complete in accordance with
the Contract Documents so the Owner can occupy or utilize the Work for its
intended use.
9.8.2 When the Contractor considers that the Work, or a portion thereof which
the Owner agrees to accept separately, is substantially complete, the Contractor
shall prepare and submit to the Architect a list of items to be completed or
corrected. The Contractor shall proceed promptly to complete and correct items
on the list. Failure to include an item on such list does not alter the
responsibility of the Contractor to complete all Work in accordance with the
Contract Documents. Upon receipt of the Contractor's list, the Architect will
make an inspection to determine whether the Work or designated portion thereof
is substantially complete. If the Architect's inspection discloses any item,
whether or not included on the Contractor's list, which is not in accordance
with the requirements of the Contract Documents, the Contractor shall, ,
complete or correct such item, upon notification by the Architect. When the Work
or designated portion thereof is substantially complete, the Architect will
prepare a Certificate of Substantial Completion which shall establish the date
of Substantial Completion, shall establish responsibilities of the Owner and
Contractor for security, maintenance, heat, utilities, damage to the Work and
insurance, and shall fix the time within which the Contractor shall finish all
items on the list accompanying the Certificate. Warranties required by the
Contract Documents shall commence on the date of Substantial Completion of the
Work or designated portion thereof unless otherwise provided in the Certificate
of Substantial Completion. The Certificate of Substantial Completion shall be
submitted to the Owner and Contractor for their written acceptance of
responsibilities assigned to them in such Certificate.
9.8.3 Upon Substantial Completion of the Work or designated portion thereof and
upon application by the Contractor and certification by the Architect, and
acceptance by the owner, Owner shall make payment, reflecting adjustment in
retainage, as provided in the Contract Documents.
9.9 PARTIAL OCCUPANCY OR USE
9.9.1 The Owner may occupy or use any completed or partially completed portion
of the Work at any stage when such portion is designated by separate agreement
with the Contractor, provided such occupancy or use is consented to by the
insurer as required under Subparagraph 11.3.11 and authorized by public
authorities having jurisdiction over the Work. Such partial occupancy or use may
commence whether or not the portion is substantially complete, provided the
Owner and Contractor have accepted in writing the responsibilities assigned to
each of them for payments, retainage if any, security, maintenance, heat,
utilities, damage to the Work and insurance, and have agreed in writing
concerning the period for correction of the Work and commencement of warranties
required by the Contract Documents. When the Contractor considers a portion
substantially complete, the Contractor shall prepare and submit a list to the
Architect as provided under Subparagraph 9.8.2. Consent of the Contractor to
partial occupancy or use shall not be unreasonably withheld. The stage of the
progress of the Work shall be determined by written agreement between the Owner
and Contractor or, if no agreement is reached, by decision of the Architect. For
any partial occupancy or use, the Owner shall reduce retainage proportional to
the Contractor at the time of partial occupancy or use.
9.9.2 Immediately prior to such partial occupancy or use, the Owner, Contractor
and Architect shall jointly inspect the area to be occupied or portion of the
Work to be used in order to determine and record the condition of the Work.
9.9.3 Unless otherwise agreed upon, partial occupancy or use of a portion or
portions of the Work shall not constitute acceptance of Work not complying with
the requirements of
<PAGE> 40
the Contract Documents.
9.10 FINAL COMPLETION AND FINAL PAYMENT
9.10.1 Upon receipt of written notice that the Work is ready for final
inspection and acceptance and upon receipt of a final Application for Payment,
the Architect will promptly make such inspection and, when the Architect finds
the Work acceptable under the Contract Documents and the Contract fully
performed, the Architect will promptly issue a final Certificate for Payment
stating that to the best of the Architect's knowledge, information and belief,
and on the basis of the Architect's observations and inspections, the Work has
been completed in accordance with terms and conditions of the Contract Documents
and that the entire balance found to be due the Contractor and noted in said
final Certificate is due and payable. The Architect's final Certificate for
Payment will constitute a further representation that conditions listed in
Subparagraph 9.10.2 as precedent to the Contractor's being entitled to final
payment have been fulfilled.
9.10.2 Neither final payment nor any remaining retained percentage shall become
due until the Contractor submits to the Architect (1) an affidavit that
payrolls, bills for materials and equipment, and other indebtedness connected
with the Work for which the Owner or the Owner's property might be responsible
or encumbered (less amounts withheld by Owner) have been paid or otherwise
satisfied, (2) a certificate evidencing that insurance required by the Contract
Documents to remain in force after final payment is currently in effect and will
not be cancelled or allowed to expire until at least 30 days' prior written
notice has been given to the Owner, (3) a written statement that the Contractor
knows of no substantial reason that the insurance will not be renewable to cover
the period required by the Contract Documents, (4) consent of surety, if any, to
final payment.
9.10.3 If, after Substantial Completion of the Work, final completion thereof is
materially delayed through no fault of the Contractor or by, issuance of Change
Orders affecting shall, upon application by the Contractor and certification by
the Architect, and without terminating the Contract, make payment of the balance
due for that portion of the Work fully completed and accepted. If the remaining
balance for Work not fully completed or corrected is less than retainage
stipulated in the Contract Documents, and if bonds have been furnished, the
written consent of surety to payment of the balance due for that portion of the
Work fully completed and accepted shall be submitted by the Contractor to the
Architect prior to certification of such payment, Such payment shall be made
under terms and conditions governing final payment, except that it shall not
constitute a waiver of claims.
9.10.4 Acceptance of final payment by the Contractor, a Subcontractor or
material supplier shall constitute a waiver of claims by that payee except those
previously made in writing and identified by that payee as unsettled at the time
of final Application for Payment. Such waivers shall be in addition to the
waiver described in Subparagraph 4.3.7 and 4.3.8.
ARTICLE 10
PROTECTION OF PERSONS AND PROPERTY
10.1 SAFETY PRECAUTIONS AND PROGRAMS
10.1.1 The Contractor shall be responsible for initiating, maintaining and
supervising all safety precautions and programs in connection with the
performance of the Contract.
10.1.2 Each time the phrase "asbestos or polychlorinated biphenyl (PCB)" is
used, change this phrase to read "a hazardous material in any form including
but not limited to, asbestos, asbestos products, polychlorinated biphenyl (PCB)
or other toxic substances". In the event the Contractor encounters on the site
material reasonably believed to be asbestos or polychlorinated biphenyl (PCB)
which has not been rendered harmless, the Contractor shall immediately stop Work
in the area affected and report the condition to the Owner and Architect in
writing. The Work in the affected area shall not thereafter be resumed except by
written agreement of the Owner and Contractor if in fact the material is
asbestos or polychlorinated biphenyl (PCB) and has not been rendered harmless.
The Work in the affected area shall be resumed in the absence of asbestos or
polychlorinated biphenyl (PCB), or when it has been rendered harmless, by
written agreement of the Owner and Contractor, or in accordance with final
determination by the Architect on which arbitration has not been demanded, or by
arbitration under Article 4.;
<PAGE> 41
10.1.3 The Contractor shall not be required pursuant to Article 7 to perform
without consent any Work relating to asbestos or polychlorinated biphenyl (PCB).
10.1.4 To the fullest extent permitted by law, the Owner shall indemnify and
hold harmless the Contractor, Architect, Architect' s consultants and agents and
employees of any of them from and against claims, damages, losses and expenses,
including but not limited to attorneys' fees, arising out of or resulting from
performance of the Work in the affected area if in fact the material is asbestos
or polychlorinated biphenyl (PCB) and has not been rendered harmless, provided
that such claim, damage, loss or expense is attributable to bodily injury,
sickness, disease or death, or to injury to or destruction of tangible property
(other than the Work itself) including loss of use resulting therefrom; caused
in whole or in part by negligent acts or omissions of the Owner, anyone directly
or indirectly employed by the Owner or anyone for whose acts the Owner may be
liable, regardless of whether or not such claim, damage, loss or expense is
caused in part by a party indemnified hereunder, Such obligation shall not be
construed to negate, abridge, or reduce other rights or obligations of indemnity
which would otherwise exist as to a party or person described in this
Subparagraph 10.1.4.
10.2 SAFETY OF PERSONS AND PROPERTY
10.2.1 The Contractor shall take reasonable precautions for safety of, and shall
provide reasonable protection to prevent damage, injury or loss to:
.1 employees on the Work and other persons who may be affected thereby;
.2 the Work and materials and equipment to be incorporated therein,
whether in storage on or off the site, under care, custody or control
of the Contractor or the Contractor's Subcontractors or
Sub-subcontractors; and
.3 other property at the site or adjacent thereto, such as trees, shrubs,
lawns, walks, pavements, roadways, structures and utilities not
designated for removal, relocation or replacement in the course of
construction.
10.2.2 The Contractor shall give notices and comply with applicable laws,
ordinances, rules, regulations and lawful orders of public authorities bearing
on safety of persons or property or their protection from damage, injury or
loss.
10.2.3 The Contractor shall erect and maintain, as required by existing
conditions and performance of the contract, reasonable safeguards for safety and
protection, including posting danger signs and other warnings against hazards,
promulgating safety regulations and notifying owners and users of adjacent sites
and utilities.
10.2.4 When use or storage of explosives or other hazardous materials or
equipment or unusual methods are necessary for execution of the Work, the
Contractor shall exercise utmost care and carry on such activities under
supervision of properly qualified personnel.
10.2.5 The Contractor shall promptly remedy damage and loss caused in whole or
in part by the Contractor, a Subcontractor, a Sub-subcontractor, or anyone
directly or indirectly employed by any of them, or by anyone for whose acts they
may be liable and for which the Contractor is responsible
10.2.6 The Contractor shall designate a responsible member of the Contractor's
organization at the site whose duty shall be the prevention of accidents. This
person shall be the Contractor's superintendent unless otherwise designated by
the Contractor in writing to the Owner and Architect.
10.2.7 The Contractor shall not load or permit any part of the Instruction or
site to be loaded so as to endanger its safety.
10.3 EMERGENCIES
1O.3.1 In an emergency affecting safety of persons or property, the Contractor
shall act, at the Contractor's discretion, to prevent threatened damage, injury
or loss. Additional compensation or extension of time claimed by the Contractor
on account of an emergency shall be determined as provided in Paragraph 4.3 and
Article 7.
ARTICLE 11
INSURANCE AND BONDS
11.1 CONTRACTOR'S LIABILITY INSURANCE
11.1.1 The Contractor shall purchase from and maintain in
<PAGE> 42
a company or companies lawfully authorized to do business in the jurisdiction in
which the Project is located such insurance as will protect the Contractor from
claims set forth below which may arise out of or result from the Contractor's
operations under the Contract and for which the Contractor may be legally
liable, whether such operations be by the Contractor or by a Subcontractor or by
anyone directly or indirectly employed by any of them, or by anyone for whose
acts any of them may be liable:
.1 claims under workers' or workmen's compensation, disability benefit and
other similar employee benefit acts which are applicable to the Work to
be performed;
.2 claims for damages because of bodily injury, occupational sickness or
disease, or death of the Contractor's employees,
.3 claims for damages because of bodily injury, sickness or disease, or
death of any person other than the Contractor's employees,
.4 claims for damages insured by usual personal injury liability coverage
which are sustained (1) by a person as a result of an offense directly
or indirectly related to employment of such person by the Contractor,
or (2) by another person;
.5 claims for damages, other than to the Work itself, because of injury to
or destruction of tangible property,
.6 claims for damages because of bodily injury, death of a person or
property damage arising out of ownership, maintenance or use of a motor
vehicle; and
.7 claims involving contractual liability insurance applicable to the
Contractor's obligations under Paragraph 3.18.
11.1.2 The insurance required by Subparagraph 11.1.1 shall be written for not
less than limits of liability specified in the Contract Documents or required by
law, whichever coverage is greater. Coverage's, whether written on an occurrence
or claims-made basis, shall be maintained without interruption from date of
commencement of the Work until date of final payment and termination of any
coverage required to be maintained after final payment.
11.1.3 Certificates of Insurance acceptable to the Owner shall be filed with the
Owner prior to commencement of the Work. These Certificates and the insurance
policies required by this Paragraph 11.1 shall contain a provision that
coverages afforded under the policies will not be cancelled or allowed to expire
until at least 30 days' prior written notice has been given to the Owner. If any
of the foregoing insurance coverages are required to remain in force after final
payment and are reasonably available, all additional certificate evidencing
continuation of such coverage shall be submitted with the final Application for
Payment as required by Subparagraph 9.10.2. Information concerning reduction of
coverage shall be furnished by the Contractor with reasonable promptness in
accordance with the Contractor's information and belief. In addition to
Certificates of Insurance, Contractor shall supply a written endorsement to
Contractor's General Liability insurance policy that names the Owner as an
Additional Insured, The endorsement shall provide that Contractor's Liability
Insurance policies shall be primary, and that any liability insurance of Owner
shall be secondary and non-contributory.
11.2 OWNER'S LIABILITY INSURANCE
11.2.1 NOT APPLICABLE
11.3 PROPERTY INSURANCE
11.3.1 NOT APPLICABLE
11.3.1.1 Property insurance shall be on an all-risk policy form and shall insure
against the perils of fire and extended coverage and physical loss or damage
including, without duplication of coverage, theft, vandalism, malicious
mischief,
<PAGE> 43
collapse, false-work, and flood, temporary buildings and debris removal
including demolition occasioned by enforcement of any applicable legal
requirements, and shall cover reasonable compensation for Architect's services
and expenses required as a result of such insured loss. Coverage for other
perils shall not be required unless otherwise provided in the Contract
Documents.
11.3.1.2 If the Owner does not intend to purchase such property insurance
required by the Contract and with all of the coverages in the amount described
above, the Owner shall so inform the Contractor in writing prior to commencement
of the Work. The Contractor may then effect insurance which will protect the
interests of the Contractor, Subcontractors and Sub-subcontractors in the Work,
and by appropriate Change Order the cost thereof shall be charged to the Owner.
If the Contractor is damaged by the failure or neglect of the Owner to purchase
or maintain insurance as described above, without so notifying the Contractor,
then the Owner shall bear all reasonable costs properly attributable thereto.
11.3.1.3 NOT APPLICABLE
11.3.1.4 Unless otherwise provided in the Contract Documents, this property
insurance shall cover portions of the Work stored off the site after written
approval of the owner at the value established in the approval, and also
portions of the Work in transit.
11.3.2 BOILER AND MACHINERY INSURANCE. The Owner shall purchase and maintain
boiler and machinery insurance required by the Contract Documents or by law,
which shall specifically cover such insured objects during installation and
until final acceptance by the Owner; this insurance shall include interests of
the Owner, Contractor, Subcontractors and Sub-subcontractors in the Work, and
the Owner and Contractor shall be named insureds.
11.3.3 LOSS OF USE INSURANCE. The Owner, at the Owner's option, may purchase and
maintain such insurance as will insure the Owner against loss of use of the
Owner's property due to fire or other hazards, however caused. The Owner waives
all rights of action against the Contractor for loss of use of the Owner's
property, including consequential losses due to fire or other hazards however
caused.
11.3.4 If the Contractor requests in writing that insurance for risks other than
those described herein or for other special hazards be included in the property
insurance policy, the Owner shall, if possible, include such insurance, and the
cost there of shall be charged to the Contractor by appropriate Change Order.
11.3.5 If during the Project construction period the Owner insures properties,
real or personal or both, adjoining or adjacent to the site by property
insurance under policies separate from those insuring the Project, or if after
final payment property insurance is to be provided on the completed Project
through a policy or policies other than those insuring the Project during the
construction period, the Owner shall waive all rights in accordance with the
terms of Subparagraph 11.3.7 for damages caused by fire or other perils covered
by this separate property insurance. All separate policies shall provide this
waiver of subrogation by endorsement or otherwise.
11.3.6 Before an exposure to loss may occur, the Owner shall file with the
Contractor a copy of each policy that includes insurance coverages required by
this Paragraph 11.3. Each policy shall contain all generally applicable
conditions, definitions, exclusions and endorsements related to this Project.
Each policy shall contain a provision that the policy will not be cancelled or
allowed to expire until at least 30 days' prior written notice has been given to
the Contractor.
INSERT E: 11.3.6.1 If the Owner has not provided acceptable evidence of
property insurance coverage required herein at the start of work, then the
Contractor may obtain such coverage and the cost therefore shall become a cost
reimbursable item. If adequate coverage is later obtained by the Owner, then the
Contractor shall terminate any property insurance coverage so obtained.
11.3.7 WAIVERS OF SUBROGATION. The Owner and Contractor waive all rights against
(1) each other and any of their subcontractors, sub-subcontractors, agents and
employees, each of the other, and (2) the Architect, Architect's consultants,
separate contractors described in Article 6, if any, and any of their
subcontractors, sub-subcontractors, agents and employees, for damages caused by
fire or other perils to the extent covered by property insurance obtained
pursuant to this Paragraph 11.3 or other property insurance applicable to the
Work, except such rights as they have to proceeds of such insurance held by
<PAGE> 44
the Owner as fiduciary. The Owner or Contractor, as appropriate, shall require
of the Architect, Architect's consultants, separate contractors described in
Article 6, if any, and the subcontractors, sub-subcontractors, agents and
employees of any of them, by appropriate agreements, written where legally
required for validity, similar waivers each in favor of other parties enumerated
herein, The policies shall provide such waivers of subrogation by endorsement or
otherwise. A waiver of subrogation shall be effective as to a person or entity
even though that person or entity would otherwise have a duty of indemnifica-
tion. contractual or otherwise, did not pay the insurance premium directly or
indirectly, and whether or not the person or entity had an insurable interest in
the property damaged.
11.3.8 A loss insured under Owner's property insurance shall be adjusted by the
Owner as fiduciary and made payable to the Owner as fiduciary for the insureds,
as their interests may appear, subject to requirements of any applicable
mortgagee clause and of Subparagraph 11.3.10. The Contractor shall pay
Subcontractors their just shares of insurance proceeds received by the
Contractor, and by appropriate agreements, written where legally required for
validity, shall require Subcontractors to make payments to their
Sub-subcontractors in similar manner.
11.3.9 If required in writing by a party in interest, the Owner as fiduciary
shall, upon occurrence of an insured loss, give bond for proper performance of
the Owner's duties. The cost of required bonds shall be charged against proceeds
received as fiduciary. The Owner shall deposit in a separate account proceeds so
received, which the Owner shall distribute in accordance with such agreement as
the parties in interest may reach, or in accordance with an arbitration award in
which case the procedure shall be as provided in Paragraph 4.5, If after such
loss no other special agreement is made, replacement of damaged property shall
be covered by appropriate Change Order.
11.3.10 The Owner as fiduciary shall have power to adjust and settle a loss with
insurers unless one of the parties in interest shall object in writing within
five days after occurrence of loss to the Owner's exercise of this power; if
such objection be made, arbitrators shall be chosen as provided in Paragraph
4.5. The Owner as fiduciary shall, in that case, make settlement with insurers
in accordance with directions of such arbitrators. If distribution of insurance
proceeds by arbitration is required, the arbitrators will direct such
distribution.
11.3.11 Partial occupancy or use in accordance with Paragraph 9.9 shall not
commence until the insurance company or companies providing property insurance
have consented to such partial occupancy or use by endorsement or otherwise. The
Owner and the Contractor shall take reasonable steps to obtain consent of the
insurance company or companies and shall, without mutual written consent, take
no action with respect to partial occupancy or use that would cause
cancellation, lapse or reduction of insurance.
11.4 PERFORMANCE BOND AND PAYMENT BOND
11.4.1 The Owner shall have the right to require the Contractor to furnish
bonds covering faithful performance of the Contract and payment of obligations
arising thereunder as stipulated in bidding requirements or specifically
required in the Contract Documents on the date of execution of the Contract.
11.4.2 NOT APPLICABLE
ARTICLE 12
UNCOVERING AND CORRECTION OF WORK
12.1 UNCOVERING OF WORK
12.1.1 If a portion of the Work is covered contrary to the Architect's request
or to requirements specifically expressed in the Contract Documents, it must, if
required in writing by the Architect, be uncovered for the Architect's
observation and be replaced at the Contractor's expense without change in the
Contract Time.
12.1.2 If a portion of the Work has been covered which the Architect has not
specifically requested to observe prior to its being covered, the Architect may
request to see such Work and it shall be uncovered by the Contractor. If such
Work is in accordance with the Contract Documents, costs of uncovering and
replacement shall, by appropriate Change Order, be charged to the Owner, If such
Work is not in accordance with the Contract Documents, the Contractor shall pay
such costs unless the condition was caused by the Owner or a separate contractor
in which event the Owner shall be responsible for payment of such costs.
12.2 CORRECTION OF WORK
12.2.1 The Contractor shall promptly correct Work rejected by the Architect or
failing to conform to the requirements of the Contract Documents, whether
observed before or after Substantial Completion and whether or not fabricated,
installed or completed. The Contractor shall bear all costs of
<PAGE> 45
correcting such rejected Work, including without limitation, additional testing
and inspections costs and compensation for the Architect's services and expenses
made necessary thereby and all costs and damages incurred by Owner.
12.2.2 If, within one year after the date of Substantial Completion of the Work.
or designated portion thereof, or after the date for commencement of warranties
established under Subparagraph 9.9.1, or by terms of an applicable special
warranty required by the Contract Documents, any of the Work is found to be not
in accordance with the requirements of the Contract Documents, the Contractor
shall correct it promptly after receipt of written notice from the Owner to do
so unless the Owner has previously given the Contractor a written acceptance of
such condition. This period of one year shall be extended with respect to
portions of Work first performed after Substantial Completion by the period of
time between Substantial Completion and the actual performance of the Work. This
obligation under this Subparagraph 12.2.2 shall survive acceptance of the Work
under the Contract. The Owner shall give such notice promptly after discovery of
the condition.
12.2.3 The Contractor shall remove from the site portions of the Work which are
not in accordance with the requirements of the Contract Documents and are
neither corrected by the Contractor nor accepted by the Owner.
12.2.4 If the Contractor fails to correct nonconforming Work within a reasonable
time, the Owner may correct it in accordance with Paragraph 2.4. If the
Contractor does not proceed with correction of such nonconforming, Work within a
reasonable time fixed by written notice from the Architect, the Owner may remove
it and store the salvable materials or equipment at the Contractor's expense. If
the Contractor does not pay costs of such removal and storage within ten days
after written notice, the Owner may upon ten additional days' written notice
sell such materials and equipment at auction or at private sale and shall
account for the proceeds thereof, after deducting costs and damages that should
have been borne by the Contractor. If such proceeds of sale do not cover costs
which the Contractor should have borne, the Contract Sum shall be reduced by the
deficiency. If payments then or thereafter due the Contractor are not sufficient
to cover such amount. the Contractor shall pay the difference to the Owner.
12.2.5 The Contractor shall bear the cost of correcting destroyed or damaged
construction, whether completed or partially completed, of the Owner or separate
contractors caused by the Contractor's correction or removal of Work which is
not in accordance with the requirements of the Contract Documents.
12.2.6 Nothing contained in this Paragraph 12.2 shall be construed to establish
a period of limitation with respect to other obligations which the Contractor
might have under the Contract Documents. Establishment of the time period of one
year as described in Subparagraph 12.2.2 relates only to the specific obligation
of the Contractor to correct the Work, and has no relationship to the time
within which the obligation to comply with the Contract Documents may be sought
to be enforced, nor to the time within which proceedings may be commenced to
establish the Contractor's liability with respect to the Contractor's
obligations other than specifically to correct the Work.
12.3 ACCEPTANCE OF NONCONFORMING WORK
12.3.1 If the Owner prefers to accept Work which is not in accordance with the
requirements of the Contract Documents, the Owner may do so instead of requiring
its removal and correction, in which case the Contract Sum will he reduced as
appropriate and equitable. Such adjustment shall be effected whether or not
final payment has been made.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 GOVERNING LAW
13.1.1 The Contract shall be governed by the law of the place where the Project
is located.
13.2 SUCCESSORS AND ASSIGNS
13.2.1 The Owner and Contractor respectively bind themselves, their partners,
successors, assigns and legal representatives to the other party hereto and to
partners, successors, assigns and legal representatives of such other party in
respect to covenants, agreements and obligations contained in the Contract
Documents. Neither party to the Contract shall assign the Contract as a whole
without written consent of the other. If either party attempts to make such an
assignment without such consent, that party shall nevertheless remain legally
responsible for all obligations under the Contract.
13.3 WRITTEN NOTICE
13.3.1 Written notice shall be deemed to have been duly served if delivered in
person to the individual or a member of the firm or entity or to an officer of
the corporation for which
<PAGE> 46
it was intended, or if delivered at or sent by registered or certified mail to
the last business address known to the party giving notice.
13.4 RIGHTS AND REMEDIES
13.4.1 Duties and obligations imposed by the Contract Documents and rights and
remedies available thereunder shall be in addition to and not a limitation of
duties, obligations, rights and remedies otherwise imposed or available by law.
13.4.2 No action or failure to act by the Owner, Architect or Contractor shall
constitute a waiver of a right or duty afforded them under the Contract, nor
shall such action or failure to act constitute approval of or acquiescence in a
breach thereunder, except as may be specifically agreed in writing.
13.5 TESTS AND INSPECTIONS
13.5.1 Tests, inspections and approvals of portions of the Work required by the
Contract Documents or by laws, ordinances, rules, regulations or orders of
public authorities having jurisdiction shall be made at an appropriate time.
Unless otherwise provided, the Contractor shall make arrangements for such
tests, inspections and approvals with an entity acceptable to the Owner, or with
the appropriate public authority, and shall bear all related costs of tests,
inspections and approvals as provided for in the Contract Documents. The
Contractor shall give the Architect timely notice of when and where tests and
inspections are to be made so the Architect may observe such procedures. The
Owner shall bear costs of tests, inspections or approvals which do not become
requirements until after bids are received or negotiations concluded.
13.5.2 If the Architect, Owner or public authorities having jurisdiction
determine that portions of the Work require additional testing, inspection or
approval not included under Subparagraph 13.5.1, the Architect will, upon
written authorization from the Owner, instruct the Contractor to make
arrangements for such additional testing, inspection or approval by an entity
acceptable to the Owner, and the Contractor shall give timely notice to the
Architect of when and where tests and inspections are to be made so the
Architect may observe such procedures.
13.5.3 If such procedures for testing, inspection or approval under Subpara-
graphs 131.5.1 and 13.5.2 reveal failure of the portions of the Work to comply
with requirements established by the Contract Documents, the Contractor shall
bear all costs made necessary by such failure including those of repeated
procedures and compensation for the Architect's services and expenses.
13.5.4 Required certificates of testing inspection or approval shall, unless
otherwise required by the Contract Documents, be secured by the Contractor and
promptly delivered to the Architect.
13.5.5 If the Architect is to observe tests, inspections or approvals required
by the Contract Documents, the Architect will do so promptly and, where
practicable, at the normal place of testing.
13.5.6 Tests or inspections conducted pursuant to the Contract Documents shall
be made promptly to avoid unreasonable delay in the Work.
13.6 INTEREST
13.6.1 Payments due and unpaid under the Contract Documents shall bear
interest from the date payment is due at such rate as the parties may agree upon
in writing or, in the absence thereof, at the prime rate prevailing from time to
time at the place where the Project is located.
13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD
13.7.1 As between the Owner and Contractor;
.1 BEFORE SUBSTANTIAL COMPLETION. As to acts or failures to act occurring
prior to the relevant date of Substantial Completion, any applicable
statute of limitations shall commence to run and any alleged cause of
action shall be deemed to have accrued in any and all events not later
than such date of Substantial Completion;
.2 BETWEEN SUBSTANTIAL COMPLETION AND FINAL CERTIFICATE FOR PAYMENT. As to
acts or failures to act occurring subsequent to the relevant date of
Substantial Completion and prior to issuance of the final Certificate
for Payment, any applicable statute of limitations shall commence to
run and any alleged cause of action shall be deemed to have accrued in
any and all events not later than the date of issuance of the final
Certificate for Payment; and
.3 AFTER FINAL CERTIFICATE FOR PAYMENT. As to acts or failures to act
occurring after the relevant date of issuance of the final Certificate
for Payment, any applicable statute of limitations shall commence to
run and any alleged cause of action shall be deemed
<PAGE> 47
to have accrued in any and all events not later than the date of any act
or failure to act by the Contractor pursuant to any warranty provided
under Paragraph 3.5, the date of any correction of the Work or failure
to correct the Work by the Contractor under Paragraph 12.2, or the date
of actual commission of any other act or failure to perform any duty or
obligation by the Contractor or Owner, whichever occurs last.
ARTICLE 14
TERMINATION OR SUSPENSION OF THE
CONTRACT
14.1 TERMINATION BY THE CONTRACTOR
14.1.1 The Contractor may terminate the Contract if the Work is stopped for a
period of 30 days through no act or fault of the Contractor or a Subcontractor,
Sub-subcontractor or their agents or employees or any other persons performing
portions of the Work under contract with the Contractor, for any of the
following reasons:
.1 issuance of an order of a court or other public authority having
jurisdiction;
.2 an act of government, such as a declaration of national emergency,
making material unavailable;
.3 because the Architect has not issued a Certificate for Payment and has
not notified the Contractor of the reason for withholding certification
as provided in Subparagraph 9.4.1, or because the Owner has not made
payment on a Certificate for Payment within the time stated in the
Contract Documents;
.4 if suspensions, delays or interruptions by the Owner as described in
Paragraph 14.3 constitute in the aggregate more than 100 percent of the
total number of days scheduled for completion, or 60 days in any
365-day period, whichever is less; or
.5 NOT APPLICABLE
14.1.2 If one of the above reasons exists, the Contractor may, upon seven
additional days' written notice to the Owner and Architect, terminate the
Contract and recover from the Owner payment for Work completed prior to
termination and for proven loss with respect to materials, equipment, tools and
construction equipment and machinery and overhead and profit at a maximum amount
of ten percent (10%) of the payment made for completed Work.
14.1.3 If the Work is stopped for a period of 60 days through no act or fault of
the Contractor or a Subcontractor or their agents or employees or any other
persons performing portions of the Work under contract with the Contractor
because the Owner has persistently failed to fulfill the Owner's obligations
under the Contract Documents with respect to matters important to the progress
of the Work, the Contractor may, upon seven additional days' written notice to
the Owner and the Architect, terminate the Contract and recover from the Owner
as provided in Subparagraph 14.1.2.
14.2 TERMINATION BY THE OWNER FOR CAUSE
14.2.1 NOT APPLICABLE
.1 NOT APPLICABLE
.2 NOT APPLICABLE
.3 NOT APPLICABLE
.4 NOT APPLICABLE
14.2.2 NOT APPLICABLE
.1 NOT APPLICABLE
.2 NOT APPLICABLE
.3 NOT APPLICABLE
<PAGE> 48
14.2.3 NOT APPLICABLE
14.2.4 NOT APPLICABLE
14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE
14.3.1 The Owner may, without cause, order the Contractor in writing to suspend,
delay or interrupt the Work in whole or in part for such period of time as the
Owner may determine.
14.3.2 An adjustment shall be made for increases in the cost of performance of
the Contract, including profit on the increased cost of performance, caused by
suspension, delay or interruption. No adjustment shall be made to the extent:
.1 that performance is, was or would have been so suspended, delayed or
interrupted by another cause for which the Contractor is responsible;
or
.2 that an equitable adjustment is made or denied under another provision
of this Contract.
14.3.3 Adjustments made in the cost of performance shall have a mutually agreed
fixed or percentage fee.
<PAGE> 49
June 6, 1997
ADDENDUM
THIS ADDENDUM AMENDS AND SUPPLEMENTS THE GENERAL CONDITIONS OF THE CONTRACT FOR
CONSTRUCTION (AIA DOCUMENT A201) ("GENERAL CONDITIONS") WHICH CONSTITUTES A PART
OF THE CONTRACT FOR CONSTRUCTION BETWEEN THE GYMBOREE CORPORATION AND
DPR CONSTRUCTION, INC.
1. Subparagraph 2.4.1 is hereby deleted in its entirety and replaced by the
following:
2.4.1 If the contractor defaults or neglects to carry out work in
accordance with the Contract Documents and fails within a seven
(7)-day period after receipt of written notice from the Owner to
commence and pursue correction of such default or neglect with
diligence and promptness, the Owner may, without prejudice to
other remedies the Owner may have, correct such deficiencies. In
such case an appropriate Construction Change Directive shall be
issued deducting from payments then or thereafter due the
Contractor the cost of correcting such deficiencies, including
compensation for the Architect's additional services and
expenses made necessary by such default, neglect or failure. If
payments then or thereafter due the Contractor are not
sufficient to cover such amounts, the Contractor shall pay the
difference to the Owner.
2. Subparagraph 3.2.1 shall be amended by deleting the second and third
sentences thereof and replacing them with the following:
The Contractor shall not be liable to the Owner or Architect for damage
resulting from errors, inconsistencies or omissions in the Contract
Documents unless: (i) the Contractor recognized such error,
inconsistency or omission and knowingly failed to report it to the
Architect; or (ii) the Contractor is responsible for the occurrence of
the error, inconsistency or omission. If the Contractor performs any
construction activity which it knows involves a recognized error,
inconsistency or omission in the Contract Documents or includes in the
construction any Work based upon any error, inconsistency or omission in
the Contract Documents for which it is responsible, the Contractor shall
be responsible for all costs for correction of such Work and for all
damages incurred by Owner or Architect due to such Work.
3. Subparagraph 4.5.2 shall be amended by adding the following thereto:
The Arbitrator shall resolve the controversy in accordance with
applicable law and the terms and conditions of the Contract Documents.
The Arbitrator shall allow the parties reasonable opportunities for
per-hearing document exchange and other pre-hearing discovery of
evidence as determined by the Arbitrator in his or her discretion. In
addition, subparagraph 1283.05 Of the California Code of Civil Procedure
shall apply to such Arbitration, and said code subparagraph is hereby
incorporated by reference. The cost of the Arbitration shall be shared
equally between the parties provided, however, that such costs along
with all other costs and expenses, including attorneys fees, shall be
subject to award in full or in part by the Arbitrator, in the
Arbitrator's discretion, to the prevailing party.
4. Subparagraph 7.3.7 shall be deleted in its entirety and replaced by the
following:
7.3.7 Subject to the provisions of the Contract Documents regarding
the Application for Payment, pending final determination of cost
to the Owner, amounts not in dispute may be included in
Applications for Payment. The amount of credit to be allowed by
the Contractor to the Owner for a deletion or change which
results in a net decrease in the Contract Sum will be the actual
net cost
1
<PAGE> 50
(excluding the corresponding decrease in the Contractor's
overhead and profit). When both additions and credits covering
related Work or substitutions are involved in a change, the
allowance for overhead and profit shall be figured on the basis
of the net increase or decrease, as the case may be, with
respect to that change. Notwithstanding, no sum shall be added
as a result of a bonafide dispute between Owner and Contractor.
5. The following shall be added as Subparagraph 7.3.10:
7.3.10 Notwithstanding any other provision of the Contract Documents,
no change in the Work, whether by way of alteration or addition
to the Work, shall be the basis of an addition to the Contract
Sum or a change or in the Contract Time unless and until such
alteration or addition has been authorized by a Change Order in
strict compliance with the requirements of the Contract
Documents. This requirement is of the essence of the Contract
Documents. Accordingly, no course of conduct or dealings between
the parties, nor express or implied acceptance of alterations or
additions to the Work, and no claim that the Owner has been
unjustly enriched by any alteration or addition to the Work,
whether or not there is in fact any such unjust enrichment,
shall be the basis for any claim to an increase in the Contract
Sum or change in the Contract Time.
6. The following shall be added as new Subparagraph 7.5:
7.5.1 Notwithstanding any other provision of the Contract Documents,
no increase in the Contract Sum shall include an allowance of
more than ten percent (10%) for Contractor's overhead and
profit, or more than ten percent (1O%) for overhead and profit
of any subcontractor or sub-subcontractor. Refer to Paragraph
5.2.2 of AIA A111 Contract.
7. Subparagraph 8.3.1 shall be deleted in its entirety and replaced by the
following:
8.3.1 If the Contractor is delayed at any time in the progress of the
Work, Contractor shall immediately notify Owner in writing of
such delay as provided in Subparagraph 13.3.1. If such delay
is: (i) not due to any act or omission of Contractor; and (ii)
due to (a) the negligent or intentional act of Owner or its
employees or contractors, or (b) labor disputes, fire, unusual
delay in deliveries, adverse weather conditions not reasonably
anticipated, unavoidable casualties or other causes beyond the
Contractor's reasonable control (except for Changes permitted
pursuant to Article 7 hereof), or (c) delay authorized in
writing by the Owner pending Arbitration, which authorization
shall be at the Owner's sole and absolute discretion, or (d)
other causes which the Owner and Contractor mutually agree, in
their sole and absolute discretion, may justify delay, then the
Contract Time shall be reasonably extended by Change Order. Any
claim for extension of the Contract Time shall be delivered to
the Owner with the written notice required above and the
Contractor shall immediately take all steps reasonably possible
to lessen the adverse impact of such delay.
8. Subparagraph 9.3.1 shall be amended by adding the following thereto:
Notwithstanding the above, the Owner shall have the right, in its sole
discretion, to verify the representations contained in the application
for payment by independent source satisfactory to Owner. In the event
Owner chooses to verify such representations, Owner shall have five (5)
days in addition to the time specified in Subparagraph 9.4.1 in which to
conduct such independent verification.
8. The following shall be added as Subparagraph 9.3.1.3:
9.3.1.3 Until Substantial Completion, the Owner shall pay ninety percent
(90%) of the amount due the Contractor on account of progress
payments. Upon Substantial Completion, the previous retainage
shall be reduced to five percent (5%) of the amount previously
paid to the Contractor on
2
<PAGE> 51
account of progress payments and the Owner shall pay ninety-five
percent (95%) of the amount due the Contractor on account of all
remaining progress payments.
9. Subparagraph 9.8.2 shall be amended by the addition of the following:
Notwithstanding the above, the Owner shall have the right, in its sole
discretion, to verify that there has been Substantial Completion,
including any corrections or completions of Work for which Owner may
withhold the retainage as provided above, by independent source
satisfactory to Owner. In the event Owner chooses to verify substantial
completion. Owner has ten (10) days in which to conduct such independent
verification following Owner's receipt from the Architect of a proposed
Certificate of Substantial Completion.
10. Subparagraph 9.10.2 shall be amended by deleting that portion of the
first sentence of that Subparagraph commencing with the number (5)
through the end of that subparagraph, and replacing that language with
the following:
(5), evidence satisfactory to Owner establishing payment or satisfaction
of all obligations incurred in connection with the Work which could
result in a lien, claim, security interest or other encumbrance of the
Owner's Property, including, without limitation, releases and waivers of
all liens, claims, security interests or encumbrances arising out of the
Contract or the Work; evidence that full payment has been made to all
union fringe benefits and into all union trust funds and any and all
taxes and insurance arising due to the Work; evidence that there have
been no liens recorded or stop notices filed against the Project which
have not been discharged (by bonding or otherwise) and Contractor's
affidavit that there are no threats of any claims or lawsuits against
the Owner for alleged failure of Contractor to make any payment or to
fulfill any indemnities provided for in the Contract. Notwithstanding
the foregoing, Owner's obligation to make final payment to Contractor
shall be conditioned upon the following: (i) that Contractor has not
failed to fulfill any indemnity requirement provided for in this
Contract; (ii) dismissal of the Owner as a party from any lawsuit which
may exist to foreclose any mechanics' lien against the Owner's property;
(iii) acceptance of the Work by Owner's construction lender; (iv)
delivery by the Contractor to the Architect and the Owner of as-built
drawings, a complete list of subcontractors and principal vendors
(including addresses and telephone number), a complete set of all
operation and maintenance manuals and manufacturer's literature of
equipment and materials used in the Work; and (v) any and all other
items required pursuant to the Contract Documents.
11. The following shall be added as Subparagraph 9.11:
9.11 LIQUIDATED DAMAGES
9.11.1 The Contractor and the Contractor's surety, if any, shall be
liable for and shall pay the Owner the sums hereinafter
stipulated as liquidated damages for each calendar day of delay
until the Work is substantially completed: Seven Hundred Fifty
Dollars ($750.00) per day for the first thirty (30) days and Two
Thousand Dollars ($2,000.00) for each day thereafter.
9.11.2 Notwithstanding any other provision of the Contract Documents,
Contractor agrees to complete not later than September 15, 1997
that portion of the Work is the warehouse area of the building
to be constructed as part of the Project necessary to provide
Owner's conveyor contractor with the ability to access the area
of that warehouse in which a conveyor system is to be installed,
and adjacent areas necessary for completion of the conveyor
contractor's work, and to permit installation of that conveyor
system without interference or complication by Contractor's Work
(the "Minimum Conveyor Area Work"). Should the Minimum Conveyor
Area Work not be completed by September 15, 1997, the Contractor
and the Contractor's surety, if any, shall be liable for and
shall pay the Owner the sums hereinafter stipulated as
liquidated damages for each calendar day of delay after such
dated until the Minimum Conveyor Area Work is completed:
3
<PAGE> 52
Seven Hundred Fifty Dollars ($750.00) per day for the first
thirty (30) calendar days and Two Thousand Dollars ($2,000.00)
for each day thereafter.
12. The following shall be added as new Subparagraph 11.1.4:
11.1.4 Contractor shall require that all subcontractors of every tier
supply Certificates of Insurance evidencing liability insurance
that complies with the requirements of Subparagraph 11.1.1
with limits according to a schedule of subcontractor's liability
insurance to be submitted by Contractor and approved by Owner.
Subcontractors of every tier shall also supply copies of
endorsements to their insurance policies naming Owner as an
additional insured as respects to the operations of
subcontractor, and providing that the insurance of subcontractor
is primary and the insurance of Owner is secondary and
non-contributory.
13. Subparagraphs 11.2.1 and 11.3.1 are deleted in their entirety and
replaced by the following:
11.2.1 The Owner will purchase, effect and maintain property insurance
for all of the Work to be performed under this Contract. The
policy of insurance shall be a Builder's Risk type on a
replacement cost basis, "All-Risk" form, and copies of the
policy form to be used will be made available to the Contractor
at its request. The policy shall be equal to the full insurable
value of the Work. The coverage of the insurance shall not
extend to tools and equipment of the Contractor, subcontractors
or any tier or property owned by employees of any of them;
vehicles of any kind; trees, shrubs, drawings or specifications.
11.3.1 No other type of insurance than that set forth in Subparagraph
11.2.1 shall be required to be furnished by Owner. The
furnishing of insurance by the Owner shall in no way relieve,
nor be construed to relieved, the Contractor or subcontractors
of any tier of any responsibility of obligation whatsoever
otherwise imposed by this Contract.
14. Subparagraph 12.2.3 shall be amended by the addition of the following:
In addition, the Contractor shall be responsible, at its sole cost and
expense, for the removal of any materials or substances which may be
considered to be hazardous materials and/or hazardous substances under
applicable law which are on the Project site as a result of the acts or
omissions of Contractor, it subcontractors, materialmen or any other
party for which Contractor is responsible or for whose acts Contractor
may be liable.
15. Subparagraph 13.5.1 shall be amended by deleting the last sentence
thereof and replacing it with the following:
Except for tests, inspections or approvals which are made necessary by
the act or omission of Contractor, the Owner shall bear costs of test,
inspections or approvals which do not become requirements until after
negotiation of the terms of the Contract are concluded between Owner and
Contractor.
16. Subparagraph 13.5.2 shall be amended by deleting the last sentence
thereof and replacing it with the following:
Except where such additional testing, inspection or approval is required
due to the act or omission of Contractor or Architect, the Owner shall
bear the cost thereof, except as provided in Subparagraph 13.5.3. All
costs of such additional testing, inspection or approval required due to
the act or omission or Contractor or Architect shall be paid by the
party responsible therefor.
17. Subparagraph 14.2.1 shall be deleted in its entirety and replaced by the
following:
4
<PAGE> 53
The Owner, at its option, may terminate this Contract in whole or from
time to time in part at any time by written notice thereof to
Contractor. Upon any such termination, Contractor agrees to waive any
claims for damages, including loss of anticipated profits, on account
thereof, and as the sole right and remedy of Contractor in the event of
such termination, Owner shall pay Contractor in accordance with
Subparagraph 14.2.1.2, below. The provisions of the Contract which by
their nature survive final acceptance of the Work shall remain in full
force and effect after such termination to the extent therein provided.
.1 Upon receipt of any such notice of termination, Contractor
shall, unless the notice directs otherwise, immediately
discontinue the Work on that date and to the extent specified in
the notice; place no further orders or subcontracts for
materials, equipment, services or facilities, except as may be
necessary for completion of such portion of the Work as is not
discontinued; promptly make every reasonable effort to procure
cancellation upon terms satisfactory to Owner of all orders and
subcontracts to the extent they relate to the performance of the
discontinued portion of the Work; and shall thereafter do only
such Work as may be necessary to preserve and protect Work
already in progress and to protect materials, plant and
equipment on the Project site or in transit thereto.
.2 Upon termination, Contractor shall be entitled to be paid the
full cost of all Work properly done by Contractor to the date of
termination not previously paid. If at the date of such
termination, Contractor has properly prepared or fabricated off
the site any goods for subsequent incorporation in the Work, and
if Contractor delivers such goods to the site or to such other
place AS the Owner shall reasonably direct, the Contractor shall
be paid for such goods or materials.
.3 Upon termination of the Contract, the obligations of the
Contract shall continue as to portions of the Work already
performed and as to bonafide obligations assumed by Contractor
prior to the date of termination.
18. Subparagraph 14.2.3 shall be deleted in its entirety and replaced by the
following:
14.2.3 Upon termination of the Contact by Owner under the terms of this
Subparagraph 14.2, a Contractor shall not be entitled to receive
further payment until the Work which is not discontinued is
completed.
19. Subparagraph 14.2.4 shall be deleted in its entirety and replaced by the
following:
14.2.4 If the unpaid balance of the Contract Sum exceeds the cost to
Owner of finishing the Work and all damages Owner may incur due
to any breach of the Contract by Contractor causing the
termination, including compensation for the Architect's services
and expenses made necessary thereby, such excess shall be paid
to the Contractor. If such costs and damages exceed the unpaid
balance, the Contractor shall pay the difference to the Owner
forthwith.
End of Addendum
5
<PAGE> 1
EXHIBIT 11.1
The Gymboree Corporation
Computation of Net Income Per Share
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------
January 31, February 2, February 4,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
NET INCOME $35,170 $31,788 $26,381
Weighted average number of shares of
Common Stock outstanding during the period:
Common Stock 24,302 25,111 24,862
------- ------- -------
24,302 25,111 24,862
======= ======= =======
BASIC NET INCOME PER SHARE $ 1.45 $ 1.27 $ 1.06
======= ======= =======
Weighted average number of shares
outstanding during the period:
Common Stock 24,302 25,111 24,862
Add incremental shares from assumed
exercise of stock options and warrants 698 559 495
------- ------- -------
Weighted average common and common
equivalent shares outstanding during
the period 25,000 25,670 25,357
======= ======= =======
DILUTED NET INCOME PER SHARE $ 1.41 $ 1.24 $ 1.04
======= ======= =======
</TABLE>
21
<PAGE> 1
THE GYMBOREE CORPORATION
SELECTED FINANCIAL AND OPERATING DATA
The following selected financial data have been derived from the consolidated
financial statements of the Company. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's consolidated financial statements
and notes thereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands, except operating data
and per share amounts) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Net sales $ 373,440 $ 303,111 $ 259,381 $ 188,424 $ 129,582
Cost of goods sold, including
buying and occupancy expenses (207,630) (164,052) (149,428) (100,651) (69,462)
----------- ----------- ----------- ----------- -----------
Gross profit 165,810 139,059 109,953 87,773 60,120
Selling, general and administrative expenses (112,443) (91,540) (69,845) (53,095) (38,312)
Play programs income, net 517 74 316 554 1,237
----------- ----------- ----------- ----------- -----------
Operating income 53,884 47,593 40,424 35,232 23,045
Foreign exchange losses (837) 0 0 0 0
Interest income 2,778 3,678 2,823 1,760 867
----------- ----------- ----------- ----------- -----------
Income before income taxes 55,825 51,271 43,247 36,992 23,912
Income taxes (20,655) (19,483) (16,866) (14,797) (9,806)
----------- ----------- ----------- ----------- -----------
Net income $ 35,170 $ 31,788 $ 26,381 $ 22,195 $ 14,106
=========== =========== =========== =========== ===========
Basic income per share $ 1.45 $ 1.27 $ 1.06 $ 0.91 $ 0.61
=========== =========== =========== =========== ===========
Diluted income per share $ 1.41 $ 1.24 $ 1.04 $ 0.88 $ 0.57
=========== =========== =========== =========== ===========
Basic weighted average shares outstanding 24,302 25,111 24,862 24,279 22,969
Diluted weighted average shares outstanding 25,000 25,670 25,357 25,265 24,858
OPERATING DATA:
Number of stores at end of period 435 354 279 209 152
Net sales per average gross square foot $ 621 $ 670 $ 827 $ 882 $ 851
Net sales per average store $ 947,000 $ 948,000 $ 1,063,000 $ 1,050,000 $ 982,000
Comparable store net sales increase/(decrease)(2) 2% (6%) 3% 12% 11%
BALANCE SHEET DATA:
Working capital $ 71,590 $ 105,190 $ 89,417 $ 73,937 $ 49,907
Total assets 229,200 216,909 160,009 126,083 87,607
Stockholders' equity $ 157,710 $ 161,933 $ 123,934 $ 92,629 $ 63,305
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1997 and 1996 included 52 weeks, 1995 included 53 weeks, and 1994 and 1993
included 52 weeks.
(2) A store becomes comparable after it is opened for 14 full months.
Comparable store net sales in 1997 through 1993 were calculated on a 52
week basis.
This annual report contains forward-looking statements reflecting the Company's
current expectations and there can be no assurance that the Company's actual
future performance will meet such expectations. Factors that could cause future
performance to vary from current expectations include, but are not limited to,
the factors discussed later under the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section.
10
<PAGE> 2
THE GYMBOREE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Gymboree Corporation was founded in 1976 as a provider of interactive
parent-child play programs and began to franchise this business in 1979. In
1986, the Company opened its first retail store featuring children's apparel and
accessories. Through the end of fiscal 1997, the Company had grown to 435
stores, including 418 stores in 48 states in the United States, 11 stores in
Canada and 6 stores in Europe.
The Company's net sales for the 52 weeks ended January 31, 1998 increased
to $373.4 million from $303.1 million in the 52 weeks ended February 2, 1997 and
$259.4 million in the 53 weeks ended February 4, 1996. Net income increased to
$35.2 million in 1997 from $31.8 million in 1996 and $26.4 million in 1995.
These increases in net sales and net income were due principally to the
Company's store expansion. Comparable store net sales, all based on a 52 week
period, increased 2% for 1997, decreased 6% for 1996 and increased 3% for 1995.
The Company expects that future increases in net sales and net income will be
increasingly dependent on the opening and profitability of new domestic and
international stores.
In fiscal 1997, the Company changed its fiscal year end to be the Saturday
closest to January 31. As a result, fiscal 1997, which included 52 weeks, ended
on Saturday, January 31, 1998. In previous years, the Company's fiscal year
ended on the Sunday closest to January 31 of each year. 1996, which included 52
weeks, ended February 2, 1997, while 1995, which included 53 weeks, ended
February 4, 1996. This change did not have a significant effect on the
consolidated financial statements of the Company.
1997 COMPARED TO 1996
NET SALES
Net sales increased 23% to $373.4 million for 1997, compared to $303.1 million
for 1996. Sales for the 82 stores opened in 1997 contributed $40.9 million of
the increase in net sales. Stores opened or expanded prior to 1997 but not
qualifying as comparable stores, including the 16 stores expanded in 1997,
contributed $24.2 million of the increase in net sales. Increases in comparable
store net sales for 1997 contributed $5.2 million of the increase in net sales.
Comparable store net sales increased 2% over 1996.
The increase in comparable store net sales was primarily due to the Company
operating with higher store inventory levels throughout 1997 and somewhat higher
levels of markdowns compared to 1996.
GROSS PROFIT
Gross profit increased 19% to $165.8 million in 1997 from $139.1 million in
1996. As a percentage of net sales, gross profit decreased to 44.4% in 1997 from
45.9% in 1996. The decrease in gross profit as a percentage of net sales was
attributable to increases in average markdowns per store in 1997 compared to
1996.
The Company is planning higher average per store inventory levels in 1998
as compared to 1997. While the increase in average per store inventory levels is
expected to have a favorable impact on comparable store sales, this may result
in downward pressure on gross profit as a percent of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("S,G&A"), which principally
consist of non-occupancy store expenses, corporate overhead and distribution
expenses, remained relatively flat as a percentage of net sales at 30.1% in 1997
compared to 30.2% in 1996. S,G & A, as a percentage of net sales has remained
flat during fiscal 1997 as compared to 1996 due primarily to increases in
comparable store sales and the discontinuation of the Company's catalog business
at the end of 1996 largely offset by S,G&A associated with its international
store expansions.
The Company expects S,G&A to increase in 1998, in absolute dollars and as a
percentage of sales, as a result of continued international expansion, the 2nd
retail concept and increased marketing programs.
PLAY PROGRAMS INCOME
Play Programs income increased 599% to $517 thousand in 1997, from $74 thousand
in 1996, due primarily to new franchise sales, enrollment growth in both
franchised and corporate owned centers and increased play product sales.
FOREIGN EXCHANGE LOSSES
Foreign exchange losses increased $837 thousand in 1997 as compared to 1996.
Total losses from foreign exchange transactions during 1997 were 0.2% of sales.
This increase was primarily attributed to losses incurred from currency
fluctuations in intercompany transactions between the Company's U.S. operations
and its foreign subsidiaries.
INTEREST INCOME
Interest income decreased to $2.8 million in 1997, from $3.7 million in 1996,
due to lower average cash and investment balances resulting from two stock
repurchases during 1997. This trend of declining interest income is expected to
continue in the future.
INCOME TAXES
The Company's effective tax rate for 1997 was 37% compared to 38% in 1996 due to
implementation of tax planning strategies. See Note 6 of Notes to Consolidated
Financial Statements.
1996 COMPARED TO 1995
NET SALES
Net sales increased 17% to $303.1 million for 1996, compared to $259.4 million
for 1995. Sales for the 75 stores opened in 1996 contributed $35.3 million of
the increase in net sales. Stores opened prior to 1996 but not qualifying as
comparable stores, including the 19 stores expanded in 1996, contributed $20.9
million of the increase in net sales. These were offset, in part, by a decrease
in comparable store net sales for 1996 of $12.5 million. Comparable store net
sales for 1996 decreased 6% over the same period in 1995.
The decrease in comparable store net sales was primarily due to the Company
operating with significantly lower average store inventory levels and lower
levels of markdowns compared to 1995.
11
<PAGE> 3
THE GYMBOREE CORPORATION
GROSS PROFIT
Gross profit increased 26% to $139.1 million in 1996 from $110.0 million in
1995. As a percentage of net sales, gross profit increased to 45.9% in 1996 from
42.4% in 1995. The increase in gross profit was attributable to the trend of
lower per store inventory levels which contributed to a reduction in average
markdowns per store in 1996 compared to 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased as a percentage of net
sales to 30.2% in 1996 compared to 26.9% in 1995. The increase in S,G&A, as a
percentage of net sales, was largely due to a decline in comparable store sales,
the funding of a new catalog business and international store expansion.
PLAY PROGRAMS INCOME
Play Programs income decreased 77% to $74 thousand in 1996, from $316 thousand
in 1995, due to a reduction in sales of new franchises.
INTEREST INCOME
Interest income increased to $3.7 million in 1996, from $2.8 million in 1995,
due to higher average cash and investment balances as compared to the prior
year.
INCOME TAXES
The Company's effective tax rate for 1996 was 38% compared to 39% in 1995 due to
implementation of tax planning strategies.
LIQUIDITY AND CAPITAL RESOURCES
During 1997, 1996 and 1995, the Company satisfied its cash requirements through
cash flow from operations. Primary uses of cash have been to purchase
outstanding common stock in 1997, finance the construction of new stores,
purchase merchandise inventories and to purchase land and construct a new
300,000 square foot distribution center in Dixon, California.
The combined balances of cash, cash equivalents and investments were $36.5
million and $90.4 million at the end of 1997 and 1996, respectively. Working
capital as of January 31, 1998 was $71.6 million compared to $105.2 million at
February 2, 1997. The decrease in working capital was primarily due to lower
cash, cash equivalents and investments balances offset in part by larger
merchandise inventories. The Company's investments are largely made in short to
medium-term investment grade securities. See Note 2 of Notes of Consolidated
Financial Statements.
During 1997, the Company generated $37.8 million of cash from operations,
$63.5 million from the sale of investments and $8.8 million from the exercise of
stock options. Uses of cash consisted primarily of $49.7 million for the
repurchase of the Company's common stock and $49.0 million for capital
expenditures, related largely to the opening of 82 new stores, the new Dixon
Distribution Center, the expansion of 16 existing stores and the roll-out of an
all new in-store POS system for all stores. During 1996, the Company generated
$49.1 million of cash from operations and $4.8 million from the exercise of
stock options. In 1996, the Company used cash of $37.1 million primarily to open
75 new stores and expand 19 existing stores and develop and enhance management
information systems.
The Company has no long-term debt and did not require any cash borrowings
in either 1997 or 1996. The Company's only outside financing requirement was for
documentary letters of credit used mainly to fund its foreign sourcing of
merchandise inventories. As of January 31, 1998, the Company had one bank line
of credit that allowed up to $100 million in unsecured letters of credit and up
to $10 million in foreign exchange contracts, of which $61.5 million was
available pursuant to such lines.
In March 1998, this line of credit agreement was amended. The amended $100
million facility allows up to $74 million in unsecured commercial letters of
credit, $11 million in standby letters of credit, and $15 million in borrowings.
In addition, under this same facility, the Company may engage in up to $50
million in foreign exchange contracts.
The Company estimates that capital expenditures during 1998 will be between
$50 and $55 million, which will primarily be used to open approximately 100 to
130 new domestic and international stores and to expand approximately 30 to 40
existing stores.
The Company anticipates that cash generated from operations, together with
its existing cash resources and funds available from its current letters of
credit and line of credit facilities, will be sufficient to satisfy its cash
needs through at least fiscal 1998.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to experience
seasonal fluctuations in its retail sales and net income. Historically, a
disproportionate amount of the Company's retail sales and a majority of its net
income have been realized during the months of November and December. In
anticipation of increased sales activity during these months, the Company hires
a significant number of temporary employees to bolster its permanent store
staff. In addition, the company has experienced periods of increased sales
activity in early spring and early fall. If, for any reason, the Company's sales
were below seasonal norms during November and December, or during the early
spring or early fall, the Company's annual operating results could be materially
and adversely affected. Historically, retail sales and net income have been
weakest during the second fiscal quarter, and the Company expects this trend to
continue. the Company's quarterly results of operations may also fluctuate
significantly as a result of a variety of factors, including the timing of new
store openings, the costs and increased overhead associated with the opening and
future operation of new stores and the new sales contributed by new stores,
advertising and marketing expenditures, merchandise mix and timing and level of
markdowns.
FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
The discussion in this annual report contains certain forward-looking
statements, including statements regarding future net sales and net income,
future inventory levels, future comparable store net sales, future S,G&A
expenses, future interest income, planned capital expenditures, planned store
expansions, international expansion and future cash needs. Such forward-looking
statements in particular, and the Company's business and operating results in
12
<PAGE> 4
THE GYMBOREE CORPORATION
general, involve risks and uncertainties. Actual results may differ
significantly from the results discussed in the forward-looking statements.
Future operating results will depend upon many factors, including general
economic conditions, levels of competition, growth in the childrens' apparel
market, financing and working capital needs, the availability of suitable new
store locations, the ability to develop new merchandise and the ability to hire
and train qualified sale associates, the ability of the Company to successfully
identify and respond to emerging children's fashion trends and effectively
monitor and control costs. There can be no assurance that the Company will be
able to effectively realize its plans for future growth. While the Company also
expects that its increased inventory levels will have a favorable effect on
comparable store sales, there can be no assurance that the Company will
experience increases in comparable store sales.
The Company's sales and profitability depend upon the continued demand by
its customers for its apparel and accessories. The Company believes that its
future success will depend in large part upon its ability to anticipate, gauge
and respond in a timely manner to changing consumer demands and fashion trends
and upon the appeal of the Company's products. There can be no assurance that
the demand of the Company's apparel or accessories will not decline or that the
Company will be able to anticipate, gauge and respond to changes in fashion
trends. If demand for the Company's apparel and accessories were to decline or
if the Company were to misjudge fashion trends, the Company's business,
financial condition and results of operations could be materially and adversely
affected.
During 1997, the Company expanded its operations in Europe and Canada. As a
result, the Company's business is subject to the risks generally associated with
doing business abroad, such as foreign governmental regulations, foreign
consumer preferences, currency fluctuations, political unrest, disruptions or
delays in shipments and changes in economic conditions in countries in which the
Company's operates its stores. These factors, among others, could influence the
Company's ability to sell its products in these international markets. If any
such factors were to render the conduct of business in a particular country
undesirable or impractical, there could be a material and adverse effect on the
Company's results of operations and financial condition.
The matters discussed in this report with respect to opening a 2nd retail
concept are also forward looking statements that involve risk and uncertainties,
including no prior operating history, no prior history of market acceptance,
potentially higher expenses without corresponding revenue increases, impact to
earnings, ability to obtain new store sites, ability to obtain adequate sources
of merchandise, competition from other retailers and uncertainties generally
associated with apparel retailing. In addition, the Company has recently hired
several highly experienced executives to support the production, merchandising
and promotion of the products of this 2nd retail concept. The Company's limited
experience with marketing apparel to this demographic could materially and
adversely affect its ability to introduce this 2nd retail concept successfully
or to develop this concept's product line.
The Company's future profitability is critically dependent on its ability
to achieve and manage potential future growth effectively. There can be no
assurance that the Company will be successful in increasing net sales in the
future or that the rate of period-to-period net sales growth, if any, will not
decline. If the Company's operations were to continue to grow, of which there
can be no assurance, there could be increasing strain on other resources, and
the Company may experience serious operating difficulties, including
difficulties in hiring, training, managing an increasing number of employees,
difficulties in obtaining sufficient fabric and sourcing capacity to produce its
products, problems in upgrading its management information systems and delays in
product distribution shipments. There can be no assurance that the Company will
be able to manage future growth effectively. Any failure to manage growth
effectively could have a material adverse effect on the Company's results of
operations and financial condition.
The success of this expansion will depend upon a number of factors,
including the ability to provide an adequate supply of inventory and the ability
to hire and train qualified employees (hereinafter "team members"), of which
there can be no assurance.
The Company is assessing the impact of the acceptance of the Euro in the
Economic and Monetary Union in Europe commencing in January 1999 and developing
a strategy for a smooth transition to the Euro in its European stores.
Many existing computer systems and applications, and other control devices,
use only two digits to identify a year in the date field, without considering
the impact of the upcoming change in the millennium. As a result, such systems
and applications could fail or create erroneous results unless corrected so that
they can process data related to the year 2000. The Company relies on its
systems, applications and devices in operating and monitoring all major aspects
of its business, including financial systems (such as general ledger, accounts
payable and payroll modules), customer services, infrastructure, embedded
computer chips, networks and telecommunications equipment. The Company also
relies, directly and indirectly, on external systems of business enterprises
such as suppliers, creditors, financial organizations, and of governmental
entities, both domestic and international, for accurate exchange of data. The
Company's current estimate is that the costs associated with the year 2000
issue, and the consequences of incomplete or untimely resolution of the year
2000 issue, will not have a material adverse effect on the result of operations
or financial position of the Company in any given year. However, despite the
Company's efforts to address the year 2000 impact on its internal systems, the
Company has not fully identified such impact or whether it can resolve it
without disruption of its business and without incurring significant expense. In
addition, even if the internal systems of the Company are not materially
affected by the year 2000 issue, the Company could be effected through
disruption in the operation of the enterprises with which the Company interacts.
13
<PAGE> 5
THE GYMBOREE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
January 31, February 2,
(In thousands, except share data) 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 17,870 $ 8,027
Investments 18,642 82,360
Accounts receivable 5,184 4,336
Merchandise inventories 75,293 48,979
Prepaid expenses and other 4,467 1,893
---------- ----------
Total current assets 121,456 145,595
---------- ----------
Property and Equipment:
Land 810
Construction in progress -- building 9,595
Leasehold improvements 58,082 44,231
Furniture, fixtures, and equipment 66,819 45,820
---------- ----------
135,306 90,051
Less accumulated depreciation and amortization (30,934) (19,465)
---------- ----------
104,372 70,586
Lease Rights and Other Assets 3,372 728
---------- ----------
Total Assets $ 229,200 $ 216,909
========== ==========
- ---------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 26,046 $ 21,949
Accrued liabilities 15,781 11,825
Income taxes payable 8,039 6,631
---------- ----------
Total current liabilities 49,866 40,405
---------- ----------
Deferred Rent and Other Liabilities 21,624 14,571
Stockholders' Equity:
Common stock, including excess paid-in capital ($.001 par value:
100,000,000 shares authorized; 24,015,096 and 25,324,060 shares
outstanding at January 31, 1998 and February 2, 1997, respectively) 23,109 62,694
Restricted stock deferred compensation (337) (753)
Retained earnings 134,938 99,992
---------- ----------
Total stockholders' equity 157,710 161,933
---------- ----------
Total Liabilities and Stockholders' Equity $ 229,200 $ 216,909
========== ==========
- ---------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
14
<PAGE> 6
THE GYMBOREE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
As a Percentage of Net Sales
Year Ended: for the Year Ended
-------------------------------------- ---------------------------------------
JANUARY 31, February 2, February 4, January 31, February 2, February 4,
1998 1997 1996 1998 1997 1996
(In thousands, except per share data) (52 WEEKS) (52 weeks) (53 weeks) (52 weeks) (52 weeks) (53 weeks)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 373,440 $ 303,111 $ 259,381 100.0% 100.0% 100.0%
Cost of goods sold, including buying
and occupancy expenses (207,630) (164,052) (149,428) (55.6) (54.1) (57.6)
--------- --------- --------- --------- --------- ---------
Gross profit 165,810 139,059 109,953 44.4 45.9 42.4
Selling, general and administrative expenses (112,443) (91,540) (69,845) (30.1) (30.2) (26.9)
Play program income, net 517 74 316 0.1 0.0 0.1
--------- --------- --------- --------- --------- ---------
Operating income 53,884 47,593 40,424 14.4 15.7 15.6
Foreign exchange losses (837) 0 0 (0.2) 0 0
Interest income 2,778 3,678 2,823 0.7 1.2 1.1
--------- --------- --------- --------- --------- ---------
Income before income taxes 55,825 51,271 43,247 14.9 16.9 16.7
Income taxes (20,655) (19,483) (16,866) (5.5) (6.4) (6.5)
--------- --------- --------- --------- --------- ---------
Net income $ 35,170 $ 31,788 $ 26,381 9.4% 10.5% 10.2%
========= ========= ========= ========= ========= =========
Income per share:
Basic $ 1.45 $ 1.27 $ 1.06
Diluted $ 1.41 $ 1.24 $ 1.04
Weighted average shares outstanding:
Basic 24,302 25,111 24,862
Diluted 25,000 25,670 25,357
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
15
<PAGE> 7
THE GYMBOREE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Year Ended:
---------------------------------------------
January 31, February 2, February 4,
1998 1997 1996
(In thousands) (52 weeks) (52 weeks) (53 weeks)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35,170 $ 31,788 $ 26,381
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,549 8,899 5,367
Non-cash compensation expenses 416 386 394
Loss on disposal of property and equipment 1,510 980 712
Provision for deferred income taxes 2,136 1,200 647
Tax benefit from exercise of stock options 1,217 1,167 1,217
Change in assets and liabilities:
Accounts receivable (848) (1,468) (727)
Merchandise inventories (26,346) (11,327) (3,555)
Prepaid expenses and other assets (1,176) (1,338) (374)
Accounts payable 4,097 12,292 (1,983)
Accrued liabilities 1,554 1,089 (176)
Income taxes payable 1,408 387 1,695
Deferred rent and other liabilities 5,067 5,085 3,085
-------- -------- --------
Net cash provided by operating activities 37,754 49,140 32,683
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (48,964) (37,059) (25,500)
Proceeds from sales of assets 117
Sales (purchases) of investments 63,526 (17,649) (11,905)
Acquisition of lease rights (1,788)
-------- -------- --------
Net cash provided by (used in) investing activities 12,891 (54,708) (37,405)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 8,844 4,840 2,449
Repurchase of common stock (49,646)
-------- -------- --------
Net cash provided by (used in) financing activities (40,802) 4,840 2,449
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 9,843 (728) (2,273)
CASH AND CASH EQUIVALENTS:
Beginning of year 8,027 8,755 11,028
-------- -------- --------
End of year $ 17,870 $ 8,027 $ 8,755
======== ======== ========
OTHER CASH FLOW INFORMATION:
Cash paid during the year for income taxes $ 16,298 $ 16,822 $ 13,605
- -------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
16
<PAGE> 8
THE GYMBOREE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock and Restricted
Excess Paid-in Capital Stock
--------------------------- Deferred Retained
(In thousands, except share data) Shares Amount Compensation Earnings Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 29, 1995 24,585,202 $53,021 $(1,533) $ 41,141 $ 92,629
Issuance of common stock
under stock option plans 407,074 2,449 2,449
Tax benefit from exercise
of stock options 1,217 1,217
Unrealized gain on
investments 864 864
Amortization of
restricted stock 394 394
Net income 26,381 26,381
---------- ------- ------- --------- ---------
BALANCE AT
FEBRUARY 4, 1996 24,992,276 56,687 (1,139) 68,386 123,934
Issuance of common stock
under stock option plans 331,784 4,840 4,840
Tax benefit from exercise
of stock options 1,167 1,167
Unrealized loss on
investments (182) (182)
Amortization of
restricted stock 386 386
Net income 31,788 31,788
---------- ------- ------- --------- ---------
BALANCE AT
FEBRUARY 2, 1997 25,324,060 62,694 (753) 99,992 161,933
Issuance of common stock
under stock option plans 613,036 8,844 8,844
Stock repurchase (1,922,000) (49,646) (49,646)
Tax benefit from exercise
of stock options 1,217 1,217
Unrealized loss on investments
and cumulative translation adjustments (224) (224)
Amortization of
restricted stock 416 416
Net income 35,170 35,170
---------- ------- ------- --------- ---------
BALANCE AT
JANUARY 31, 1998 24,015,096 $23,109 $ (337) $ 134,938 $ 157,710
========== ======= ======= ========= =========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
17
<PAGE> 9
THE GYMBOREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include The Gymboree Corporation and its
wholly-owned subsidiaries (the "Company"). All significant intercompany balances
and transactions have been eliminated.
NATURE OF THE BUSINESS
The Company is a leading specialty retailer of high quality apparel and
accessories for children ages newborn to seven years. As of January 31, 1998,
February 2, 1997, and February 4, 1996, the Company had 435, 354 and 279 retail
stores, respectively. The Company also offers directed parent-child
developmental play programs at approximately 390 franchised locations and 12
Company-operated locations.
FISCAL YEAR
In fiscal 1997, the Company changed its fiscal period end date to be the
Saturday closest to January 31. As a result, fiscal 1997, which included 52
weeks, ended on Saturday, January 31, 1998. In previous years, the Company's
year ended on the Sunday closest to January 31 of each year. Fiscal 1996, which
included 52 weeks, ended February 2, 1997, while fiscal 1995, which included 53
weeks, ended on February 4, 1996. This change did not have a significant effect
on the consolidated financial statements of the Company.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid investment instruments with a maturity
of three months or less, at date of purchase.
INVESTMENTS
The Company's investments, consisting primarily of municipal bonds, are
classified as available-for-sale and are recorded at fair market value. Fair
market value is based upon quoted market prices on the last day of the year.
Unrealized gains and losses are included in retained earnings.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts receivable and
accounts payable approximates their estimated fair value.
MERCHANDISE INVENTORIES
Merchandise inventories are recorded under the retail method of accounting and
are stated at the lower of cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, which range
from approximately three to ten years. Leasehold improvements are amortized over
the lesser of the lease term which range from 10 to 25 years, or the estimated
useful lives of the improvements.
Internally developed and purchased computer software is recorded at cost
and is amortized using the straight-line method based on an estimated useful
life of five years.
INCOME TAXES
The Company computes income taxes using the asset and liability method. Deferred
income taxes are provided for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities.
LEASE RIGHTS
Lease rights are recorded at cost and are amortized over 10 years or the life of
the lease, whichever is less.
DEFERRED RENT
Many of the Company's operating leases contain predetermined fixed increases of
the minimum rental rate during the initial lease term. For these leases, the
Company recognizes the related rental expense on a straight-line basis and
records the difference between the amount charged to expense and the rent paid
as deferred rent.
FOREIGN CURRENCIES
Assets and liabilities of foreign subsidiaries are translated to U.S. dollars at
the exchange rates effective on the balance sheet date. Translation adjustments
resulting from this process are recorded in stockholders' equity. Revenues,
costs of sales, expenses and other income are translated at average rates of
exchange prevailing during the year. Gains and losses on foreign currency
transactions are included in net income.
STORE PREOPENING COSTS
Store preopening costs are expensed as incurred.
PLAY PROGRAMS REVENUE RECOGNITION
Initial franchise fees for all sites sold in a territory are recognized as
revenue when the franchisee has paid the initial franchise fee, has received
government approval in the case of international franchises, and has completed
the training program. At that time, the Company has provided substantially all
of the initial services required by the franchise agreement.
USE OF ESTIMATES
The preparation of the 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 amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to team members using the intrinsic
value method in accordance with Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees."
RECLASSIFICATIONS
Certain amounts for prior years have been reclassified to conform to the 1997
presentation.
18
<PAGE> 10
THE GYMBOREE CORPORATION
INCOME PER SHARE
In the fourth quarter of 1997, the Company adopted the Statement of the
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
requires dual presentation of basic and diluted income per share. Basic income
per share is computed as net income divided by the weighted average number of
common shares outstanding for the period. Diluted income per share reflects the
potential dilution that could occur from common shares issuable through stock
options and restricted stock and is computed by dividing net income by the
weighted average number of common shares outstanding for the period plus the
dilutive effect of outstanding stock options and restricted stock. All prior
periods have been restated to conform with the new statement.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued SFAS No. 130, "Reporting
Comprehensive Income," and No. 131, "Disclosures about Segments of an Enterprise
and Related Information." SFAS No. 130 requires the presentation, by major
components and as a single total, the change in the Company's net assets during
a period from non-owner sources. SFAS No. 131 establishes annual and interim
reporting standards for operating segments of an enterprise and related
disclosures about its products, services, geographic areas and major customers.
SFAS No. 130 and No. 131 are effective for the Company's fiscal years ending
after January 31, 1998. Adoption of these standards will not impact the
Company's consolidated financial position, results of operations or cash flows,
and any effect will be limited to the form and content of its disclosures.
2. INVESTMENTS
As of January 31, 1998 and February 2, 1997, all of the Company's investment
securities were classified as available-for-sale. The Company's investments
consist of the following (in thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
January 31, 1998 February 2, 1997
---------------------------------------- ---------------------------------------
Gross Gross
Unrealized Fair Unrealized Fair
Amortized Holding Market Amortized Holding Market
Cost Gain (Loss) Value Cost Gain Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Municipal obligations $ 7,771 $ 27 $ 7,798 $ 47,597 $ 169 $ 47,766
U.S. Treasury bills/Agency obligations 4,097 (1) 4,096 20,847 2 20,849
Corporate notes/bonds 3,071 2 3,073 0 0 0
Money market securities 323 0 323 0 0 0
Commercial paper 3,352 0 3,352 8,755 19 8,774
Asset backed securities 0 0 0 2,618 5 2,623
Collateralized mortgage obligations 0 0 0 2,323 25 2,348
-------- ---------- -------- -------- ---------- --------
Totals $ 18,614 $ 28 $ 18,642 $ 82,140 $ 220 $ 82,360
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table shows the amortized cost and approximate fair market value
of investment securities by contractual maturity at January 31, 1998 (in
thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amortized Fair Market
Cost Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Within one year $ 14,809 $ 14,819
After one but within five years 3,805 3,823
-------- --------
Totals $ 18,614 $ 18,642
- --------------------------------------------------------------------------------
</TABLE>
3. LEASES
The Company leases its store locations, corporate headquarters, distribution
centers and certain fixtures and equipment under operating leases. The leases
expire at various dates through the year 2023. Store leases typically provide
for payment by the Company of operating expenses, real estate taxes and
additional rent based on a percentage of sales if a specified sales target is
exceeded.
Future minimum lease payments under operating leases at January 31, 1998
are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In thousands) Operating Leases
- --------------------------------------------------------------------------------
<S> <C>
Year:
1998 $ 26,603
1999 26,321
2000 26,047
2001 25,771
2002 24,667
Later years 86,647
--------
Total minimum lease commitments $216,056
- --------------------------------------------------------------------------------
</TABLE>
Rent expense for all operating leases was $36.9 million, $29.1 million and
$23.1 million, in 1997, 1996 and 1995 respectively, which includes percentage
rent expense and other lease required expenses of $12.7 million, $10.9 million
and $9.7 million for 1997, 1996 and 1995, respectively.
19
<PAGE> 11
THE GYMBOREE CORPORATION
4. LINES OF CREDIT
As of January 31, 1998, the Company had a bank line of credit that allows up to
$100 million of long-term, unsecured letters of credit, and up to $50 million in
foreign exchange contracts. As of January 31, 1998, $61.5 million was available.
On March 9, 1998, the Company amended its line of credit agreement with
Bank of America NT & SA. The amended $100 million facility allows for up to $74
million in unsecured commercial letters of credit, $11 million in standby
letters of credit and a revolving line of credit in the aggregate principal
amount of $15 million (the "Advance Limit"). The Interest rate will be based on
the Bank of America's Reference Rate minus 0.5%, or LIBOR (London Interbank
Offered Rate) plus 0.5%. A fee is charged equal to 1/16% per annum of the
Advance Limit, payable in arrears.
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following :
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
January 31, February 2,
(in thousand) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Employee compensation $ 6,293 $ 5,290
Sales taxes 881 1,582
Percentage rent 1,057 561
Store credits and gift certificates 3,223 2,150
Deferred taxes 2,402
Store operating expenses and other 1,925 2,242
------- -------
Total $15,781 $11,825
- --------------------------------------------------------------------------------
</TABLE>
Other accrued liabilities relate primarily to store operating expenses.
6. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(in thousand) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $14,996 $15,100 $13,406
State 3,523 3,183 2,813
------- ------- -------
Total current 18,519 18,283 16,219
------- ------- -------
Deferred:
Federal 1,796 960 438
State 340 240 209
------- ------- -------
Total deferred 2,136 1,200 647
------- ------- -------
Total provision $20,655 $19,483 $16,866
- --------------------------------------------------------------------------------
</TABLE>
A reconciliation of the statutory federal income tax rate with the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal rate 35% 35% 35%
State income taxes, net of federal
income tax benefit 4 4 5
Tax exempt interest (1) (1) (1)
Other (1) -- --
---- ---- ----
Effective tax rate 37% 38% 39%
- --------------------------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. Temporary differences and carryforwards which
give rise to deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
January 31, February 2,
(in thousand) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Uniform capitalization costs $ 1,399 $ 735
Accrued reserves 672 650
State taxes 481 388
Deferred rent 1,654 1,353
Other 58 210
------- -------
4,264 3,336
------- -------
Deferred tax liabilities:
Prepaid expenses (510) (389)
Fixed asset basis differences (5,717) (2,774)
------- -------
(6,227) (3,163)
------- -------
Net deferred tax assets (liabilities) $(1,963) $ 173
- --------------------------------------------------------------------------------
</TABLE>
7. STOCK PLANS
STOCK OPTION PLANS
The Company's 1983 Incentive Stock Option Plan (the "1983 Plan") and 1993 Stock
Option Plan (the "1993 Plan") provide for grants to team members of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code and
for grants of non-statutory stock options and stock purchase rights to team
members, consultants and non-employee directors of the Company. The Company has
reserved a total of 3,600,000 shares of common stock for issuance under the 1983
Plan and 4,025,000 shares of common stock for issuance under the 1993 Plan.
Options granted pursuant to the plans have been granted at exercise prices equal
to the fair market value of the Company's common stock on the date of grant. The
options have a term of either five or ten years and generally vest over a four
year period. No further options may be granted under the 1983 Plan. There were
743,589 and 1,587,668 shares available for the grant of options under the 1993
Plan at January 31, 1998 and February 2, 1997, respectively.
20
<PAGE> 12
THE GYMBOREE CORPORATION
The following summarizes all stock option transactions for the three years
ended January 31, 1998 (shares in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Weighted Average
Outstanding Price Per Share
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 29, 1995 1,847 $12.26
Options granted 529 24.87
Options exercised (382) 5.28
Options canceled (226) 17.44
- -------------------------------------------------------- ------
Balance, February 4, 1996 1,768 17.50
Options granted 704 24.37
Options exercised (294) 14.48
Options canceled (252) 23.92
- -------------------------------------------------------- ------
Balance, February 2, 1997 1,926 19.51
Options granted 1,299 24.55
Options exercised (577) 13.67
Options canceled (323) 24.42
- -------------------------------------------------------- ------
Balance, January 31, 1998 2,325 $22.11
- --------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding
at January 31, 1998 (shares in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Options Outstanding
Options Exercisable (Vested)
- --------------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Number Average
Exercisable Number Life Exercise of Options Exercise
Prices of Options (in years) Price at 1/31/98 Price
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.17 to 10.00 272 4.4 $ 5.53 252 $ 5.98
14.94 to 20.81 267 6.6 19.62 202 19.92
21.25 to 23.50 362 7.5 23.17 178 23.06
23.85 to 26.50 1,116 9.2 24.64 156 24.37
26.75 to 28.50 181 7.4 26.90 109 26.84
28.63 to 36.63 127 7.6 30.76 67 30.74
----- ------ --- ------
$ 0.17 to 36.63 2,325 $22.11 964 $19.11
- --------------------------------------------------------------------------------------
</TABLE>
1993 EMPLOYEE STOCK PURCHASE PLAN
The Company has reserved a total of 600,000 shares of common stock for issuance
under the 1993 Employee Stock Purchase Plan (the "Purchase Plan"). The price at
which stock is purchased under the Purchase Plan is equal to 85% of the fair
market value of the common stock on the first day of the applicable offering
period or the last day of the applicable purchase period, whichever is lower.
Unless terminated earlier, the Purchase Plan will terminate in 2013. There were
35,797 and 37,840 shares issued under the Purchase Plan in fiscal 1997 and 1996,
respectively.
RESTRICTED STOCK
In 1994, the Company granted 100,000 shares of its common stock to its former
President and Chief Executive Officer at an aggregate purchase price of $50.00.
The aggregate fair market value of the shares, as measured by the stock price on
the vesting commencement date was $1,937,500. The shares, which were issued
pursuant to the 1993 Plan, are subject to a repurchase option that lapses over a
period of 60 months. The difference between the purchase price and the aggregate
fair market value of the shares will be amortized as compensation expense over
the five year vesting period. Accordingly, the Company recognized compensation
expense of $415,926 in 1997, $386,000 in 1996, and $394,000 in 1995.
ADDITIONAL STOCK PLAN INFORMATION
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its three stock-based compensation plans, described above. Accordingly, no
compensation expense has been recognized for its stock option plans and its
employee stock purchase plan. Compensation expense has been charged against
income for its restricted stock plan. Had compensation expense for the Company's
stock option plans and the Purchase Plan been determined based on the fair value
at the grant dates for awards under these plans, consistent with the method of
SFAS No.123, "Accounting for Stock-Based Compensation," the Company's net income
and income per share would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Year Ended
--------------------------------------------
January 31, February 2, February 4,
(in thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income As reported $35,170 $31,788 $26,381
Pro forma 32,210 29,317 25,430
Basic income
per share As reported $ 1.45 $ 1.27 $ 1.06
Pro forma 1.33 1.17 1.02
Diluted income
per share As reported $ 1.41 $ 1.24 $ 1.04
Pro forma 1.29 1.14 1.00
- ---------------------------------------------------------------------------------
</TABLE>
The weighted average fair value of options granted during 1997, 1996 and
1995 were $10.29, $8.67 and $8.75, respectively. The fair value of each option
grant is estimated on the date of the grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended
-------------------------------------------
January 31, February 2, February 4,
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected Dividend Rate 0.0% 0.0% 0.0%
Expected volatility 54.4% 55.0% 55.0%
Risk-free interest rate 6.0% 6.0% 6.0%
Expected lives (yrs.) 3.0 3.0 2.9
- --------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 13
THE GYMBOREE CORPORATION
8. 401(K) PLAN
The Company maintains a voluntary defined contribution 401(k) profit sharing
plan (the "Plan") covering all team members who have met certain service and
eligibility requirements. Team members may elect to contribute up to 20% of
their compensation to the Plan, not to exceed the dollar limit set by law. The
Company matches $0.50 to the Plan for each $1.00 contributed by a team member,
up to a maximum Company contribution of $500 per team member per year. The
Company's matching contributions to the Plan were $176,000, $133,000, and
$102,000 in 1997, 1996, and 1995, respectively.
9. STOCKHOLDER RIGHTS PLAN
In March 1997, the Company adopted a Stockholder Rights Plan (the "Plan"). The
Plan entails a dividend of one right for each outstanding share of the Company's
common stock. The rights are represented by and traded with the Company's common
stock. There are no separate certificates or market for the rights.
The rights do not become exercisable or trade separately from the common
stock unless 17.5% or more of the common stock of the Company has been acquired,
or after a tender or exchange offer is made for 17.5% or greater ownership of
the Company's common stock. Should the rights become exercisable, each right
will entitle the holder thereof to buy 1/1,000th of a share of the Company's
Series A Preferred Stock at an exercise price of $125. Each 1/1,000th of a share
of the new Series A Preferred Stock will essentially be the economic equivalent
of one share of common stock.
Under certain circumstances, the rights "flip-in" and become rights to buy
the Company's common stock at a 50% discount. Under certain other circumstances,
the rights "flip-over" and become rights to buy an acquirer's common stock at a
50% discount.
The rights may be redeemed by the Company for $0.01 per right at any time
on or prior to the fifth day (or a later date as determined by the Board of
Directors) following the first public announcement by the Company of the
acquisition of beneficial ownership of 17.5% of the Company's common stock.
10. STOCK REPURCHASE
During fiscal 1997, common stock repurchase programs were authorized by the
Board of Directors whereby the Company could buy back up to $60 million of its
common stock. As of January 31, 1998, 1,922,000 shares have been repurchased by
the Company for an aggregate amount of $49,646,000.
11. QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
The quarterly financial information presented below reflects all adjustments
which, in the opinion of the Company's management, are of a normal and recurring
nature necessary to present fairly the results of operations for the periods
presented.
<TABLE>
<CAPTION>
1997 Quarter Ended
-----------------------------------------------
(In thousands, except per share May 3, Aug. 2, Nov. 1, Jan. 31,
amounts and store data) 1997 1997 1997 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 85,240 $ 71,684 $101,120 $115,396
Gross profit 38,946 30,452 45,859 50,553
Operating income 12,640 6,544 16,893 17,804
Net income 8,599 4,578 10,865 11,128
Basic income per share $ 0.34 $ 0.19 $ 0.44 $ 0.46
Diluted income per share $ 0.34 $ 0.19 $ 0.44 $ 0.46
Stores at end of period 380 401 427 435
</TABLE>
<TABLE>
<CAPTION>
1996 Quarter Ended
-----------------------------------------------
May 5, Aug. 4, Nov. 3, Feb. 2,
1996 1996 1996 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 69,103 $ 57,898 $ 84,685 $ 91,425
Gross profit 33,656 25,148 40,255 40,000
Operating income 12,969 5,949 13,690 14,985
Net income 8,593 4,285 8,995 9,915
Basic income per share $ 0.34 $ 0.17 $ 0.36 $ 0.39
Diluted income per share $ 0.34 $ 0.17 $ 0.35 $ 0.39
Stores at end of period 305 326 348 354
- ------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 14
THE GYMBOREE CORPORATION
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
The Gymboree Corporation:
We have audited the accompanying consolidated balance sheets of The Gymboree
Corporation and subsidiaries (the "Company") as of January 31, 1998 and February
2, 1997, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three fiscal years in the period ended January
31, 1998. 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 The Gymboree Corporation and
subsidiaries as of January 31, 1998 and February 2, 1997, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 31, 1998 in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
- -----------------------------
San Francisco, California
March 9, 1998
23
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Gymboree Manufacturing, Inc., a California corporation.
Gym-mark, Inc., a California corporation.
Gymboree Retail Stores, Inc., a California corporation.
Gymboree Logistics Partnership, a California partnership (wholly owned by
Gym-mark, Inc. and Gymboree Retail Stores, Inc.).
Gymboree Play Program, Inc., a California corporation.
Gymboree Operations, Inc., a California corporation.
Gymboree, Inc., a Canadian and Delaware corporation.
Gymboree Japan K.K., a Japan corporation.
Gymboree Industries Holdings Ltd., a Republic of Ireland and Delaware
corporation.
Gymboree Hong Kong Ltd., a Hong Kong corporation, wholly owned by Gymboree
Industries Holdings Ltd.
Gymboree Industries Ltd., a Republic of Ireland corporation, wholly owned by
Gymboree Industries Holdings Ltd.
Gymboree Ireland Leasing Ltd., a Republic of Ireland corporation.
Gymboree of Ireland, Ltd., a Republic of Ireland corporation.
Gymboree U.K. Leasing Ltd., a United Kingdom and Delaware corporation.
Gymboree U.K. Ltd., a United Kingdom corporation.
21
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-60310, 33-90452 and 33-94594 of The Gymboree Corporation on all Forms S-8 of
our report dated March 9, 1998, incorporated by reference in this Annual Report
on Form 10-K of The Gymboree Corporation for the fiscal year ended January 31,
1998.
Deloitte & Touche LLP
April 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GYMBOREE
CORPORATION'S ANNUAL REPORT FOR THE YEAR ENDED JANUARY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-03-1997
<PERIOD-END> JAN-31-1998
<CASH> 17,870
<SECURITIES> 18,642
<RECEIVABLES> 5,184
<ALLOWANCES> 0
<INVENTORY> 75,293
<CURRENT-ASSETS> 121,456
<PP&E> 135,306
<DEPRECIATION> (30,934)
<TOTAL-ASSETS> 229,200
<CURRENT-LIABILITIES> 49,866
<BONDS> 0
0
0
<COMMON> 23,109
<OTHER-SE> 134,601
<TOTAL-LIABILITY-AND-EQUITY> 229,200
<SALES> 373,440
<TOTAL-REVENUES> 373,957
<CGS> (207,630)
<TOTAL-COSTS> (112,443)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 55,825
<INCOME-TAX> (20,655)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,170
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.41
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GYMBOREE
CORPORATION'S QUARTERLY REPORTS ON FORMS 10-Q FOR THE QUARTERS ENDED MAY 3,
1997, AUGUST 2, 1997, AND NOVEMBER 1, 1997 EXCEPT FOR THE EARNINGS PER SHARE
DATA WHICH HAS BEEN RESTATED IN ACCORDANCE WITH THE STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE" AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-31-1998 JAN-31-1998 JAN-31-1998
<PERIOD-START> FEB-03-1997 MAY-04-1997 AUG-03-1997
<PERIOD-END> MAY-03-1997 AUG-02-1997 NOV-01-1997
<CASH> 7,725 4,776 8,413
<SECURITIES> 73,458 46,011 37,848
<RECEIVABLES> 4,654 4,988 6,005
<ALLOWANCES> 0 0 0
<INVENTORY> 36,568 56,840 68,641
<CURRENT-ASSETS> 123,958 114,214 123,732
<PP&E> 101,164 114,444 126,624
<DEPRECIATION> (21,748) (24,391) (27,649)
<TOTAL-ASSETS> 204,532 205,563 225,687
<CURRENT-LIABILITIES> 27,790 35,816 41,164
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 52,762 39,928 42,491
<OTHER-SE> 107,972 112,440 123,614
<TOTAL-LIABILITY-AND-EQUITY> 204,532 205,563 225,687
<SALES> 85,240 71,684 101,120
<TOTAL-REVENUES> 85,240 71,787 101,283
<CGS> (46,294) (41,232) (55,261)
<TOTAL-COSTS> (26,306) (24,011) (29,129)
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 13,650 7,266 17,246
<INCOME-TAX> (5,051) (2,688) (6,381)
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 8,599 4,578 10,865
<EPS-PRIMARY> 0.34 0.19 0.44
<EPS-DILUTED> 0.34 0.19 0.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GYMBOREE
CORPORATION'S ANNUAL REPORT FOR THE YEAR ENDED FEBRUARY 2, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-02-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-02-1997
<CASH> 8,027
<SECURITIES> 82,360
<RECEIVABLES> 4,336
<ALLOWANCES> 0
<INVENTORY> 48,979
<CURRENT-ASSETS> 145,595
<PP&E> 90,051
<DEPRECIATION> (19,465)
<TOTAL-ASSETS> 216,909
<CURRENT-LIABILITIES> 40,405
<BONDS> 0
0
0
<COMMON> 62,694
<OTHER-SE> 99,239
<TOTAL-LIABILITY-AND-EQUITY> 216,909
<SALES> 303,111
<TOTAL-REVENUES> 303,185
<CGS> (164,052)
<TOTAL-COSTS> (91,540)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 51,271
<INCOME-TAX> (19,483)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,788
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GYMBOREE
CORPORATION'S QUARERLY REPORTS ON FORMS 10-Q FOR THE QUARTERS ENDED MAY 5, 1996,
AUGUST 4, 1996, AND NOVEMBER 3, 1996 EXCEPT FOR THE EARNINGS PER SHARE DATA
WHICH HAS BEEN RESTATED IN ACCORDANCE WITH THE STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 128, "EARNINGS PER SHARE" AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> FEB-02-1997 FEB-02-1997 FEB-02-1997
<PERIOD-START> FEB-04-1996 MAY-06-1996 AUG-05-1996
<PERIOD-END> MAY-05-1996 AUG-04-1996 NOV-03-1996
<CASH> 11,476 5,940 6,960
<SECURITIES> 74,983 72,941 72,546
<RECEIVABLES> 4,319 4,825 4,937
<ALLOWANCES> 0 0 0
<INVENTORY> 29,091 45,065 51,725
<CURRENT-ASSETS> 122,211 132,512 138,086
<PP&E> 62,800 70,397 78,584
<DEPRECIATION> (13,554) (15,532) (17,259)
<TOTAL-ASSETS> 171,974 187,603 199,746
<CURRENT-LIABILITIES> 28,045 34,026 34,433
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 57,355 60,929 61,874
<OTHER-SE> 75,264 79,932 89,165
<TOTAL-LIABILITY-AND-EQUITY> 132,619 140,862 151,039
<SALES> 69,103 57,898 84,685
<TOTAL-REVENUES> 69,231 57,787 84,685
<CGS> (35,447) (32,750) (44,432)
<TOTAL-COSTS> (20,687) (19,199) (26,565)
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 13,859 6,911 14,507
<INCOME-TAX> (5,266) (2,626) (5,512)
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 8,593 4,285 8,995
<EPS-PRIMARY> 0.34 0.17 0.35
<EPS-DILUTED> 0.34 0.17 0.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GYMBOREE
CORPORATION'S ANNUAL REPORT FOR THE YEAR ENDED FEBRUARY 4, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-04-1996
<PERIOD-START> JAN-30-1995
<PERIOD-END> FEB-04-1996
<CASH> 8,755
<SECURITIES> 64,893
<RECEIVABLES> 2,868
<ALLOWANCES> 0
<INVENTORY> 37,652
<CURRENT-ASSETS> 116,054
<PP&E> 55,493
<DEPRECIATION> (12,085)
<TOTAL-ASSETS> 160,009
<CURRENT-LIABILITIES> 26,637
<BONDS> 0
0
0
<COMMON> 56,687
<OTHER-SE> 67,247
<TOTAL-LIABILITY-AND-EQUITY> 160,009
<SALES> 259,381
<TOTAL-REVENUES> 259,697
<CGS> (149,428)
<TOTAL-COSTS> (69,845)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 43,247
<INCOME-TAX> (16,866)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,381
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
