<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 27, 1997
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________________ to _______________
Commission file number 0-14756
THE COSMETIC CENTER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1266697
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8839 GREENWOOD PLACE, SAVAGE, MARYLAND 20763
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 301-497-6800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
As of August 11, 1997, 10,015,101 shares of Class C Common Stock, par value
$.01 per share, and no shares of Class A Common Stock, par value $.01 per
share, or Class B Common Stock, par value $.01 per share, were outstanding.
<PAGE>
THE COSMETIC CENTER, INC.
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 27, DECEMBER 31,
ASSETS 1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................... $ 2,706 $ 3,479
Accounts receivable, net............................................ 1,331 -
Inventories......................................................... 83,964 31,713
Deferred tax assets................................................. 2,879 -
Prepaid expenses and other.......................................... 1,397 773
------------- -------------
Total current assets........................................... 92,277 35,965
Property and equipment, net.............................................. 13,430 7,616
Other assets............................................................. 1,069 589
Intangible assets related to businesses aquired, net..................... 5,917 1,451
------------- -------------
Total assets................................................... $ 112,693 $ 45,621
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 16,778 $ 2,242
Accrued expenses and other.......................................... 11,030 2,385
------------- -------------
Total current liabilities...................................... 27,808 4,627
Note payable - parent..................................................... 13,255 -
Due to parent............................................................. - 12,315
Long-term debt............................................................ 33,000 -
Other long-term liabilities............................................... 7,303 -
Stockholders' equity:
Common stock, $1.00 par value; 1,000 shares
authorized; 1 share issued and outstanding......................... - -
Class A common stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding....................... - -
Class B common stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding....................... - -
Class C common stock, $.01 par value; 40,000,000 shares
authorized; 10,015,101 shares issued and outstanding............... 100 -
Additional paid in capital.......................................... 39,068 28,536
Retained earnings (deficit)......................................... (7,841) 143
------------- -------------
Total stockholders' equity..................................... 31,327 28,679
------------- -------------
Total liabilities and stockholders' equity..................... $ 112,693 $ 45,621
============= =============
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
2
<PAGE>
THE COSMETIC CENTER, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ -----------------------------
JUNE 27, JUNE 30, JUNE 27, JUNE 30,
1997 1996 1997 1996
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales................................................... $ 36,473 $ 16,267 $ 49,332 $ 28,974
-------------- ------------- ------------- -------------
Cost of sales including buying, occupancy and distribution.. 24,955 10,499 33,658 19,326
Selling, general and administrative expenses................ 11,704 6,384 18,402 13,217
Business consolidation costs................................ 4,000 - 4,000 -
-------------- ------------- ------------- -------------
Operating expenses.......................................... 40,659 16,883 56,060 32,543
-------------- ------------- ------------- -------------
Loss from operations........................................ (4,186) (616) (6,728) (3,569)
Interest expense............................................ (898) (244) (1,172) (391)
Other expense, net.......................................... (64) - (64) -
-------------- ------------- ------------- -------------
Loss before income taxes.................................... (5,148) (860) (7,964) (3,960)
Provision for income taxes.................................. 5 15 20 30
-------------- ------------- ------------- -------------
Net loss.................................................... $ (5,153) $ (875) $ (7,984) $ (3,990)
============== ============= ============= =============
Net loss per common share................................... $ (0.54) $ (0.10) $ (0.89) $ (0.47)
============== ============= ============= =============
Weighted average shares outstanding......................... 9,542,558 8,479,335 9,010,946 8,479,335
============== ============= ============= =============
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
3
<PAGE>
THE COSMETIC CENTER, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
JUNE 27, JUNE 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
------------- -------------
<S> <C> <C>
Net loss.................................................................... $ (7,984) $ (3,990)
Adjustments to reconcile net loss to
net cash provided by (used for) operating activities:
Depreciation and amortization........................................... 1,706 1,006
Change in assets and liabilities, net of aquired assets and liabilities:
Increase in accounts receivable, net................................ (204) -
Decrease (increase) in inventories.................................. 69 (5,637)
Decrease in prepaid expenses and other current assets............... 754 79
Decrease in other assets............................................ 851 -
Increase (decrease) in accounts payable............................. 3,198 (332)
Increase (decrease) in accrued expenses and other................... 2,541 (897)
Decrease in other long-term liabilities............................. (447) -
------------- -------------
Net cash provided by (used for) operating activities........................ 484 (9,771)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (1,162) (2,013)
Acquisition of business, net of cash acquired............................... (19,883) -
------------- -------------
Net cash used for investing activities...................................... (21,045) (2,013)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under long-term debt......................................... 18,848 -
Increase in due to parent................................................... 940 10,605
------------- -------------
Net cash provided by financing activities................................... 19,788 10,605
------------- -------------
Net decrease in cash and cash equivalents................................... (773) (1,179)
Cash and cash equivalents at beginning of period............................ 3,479 3,421
------------- -------------
Cash and cash equivalents at end of period.................................. $ 2,706 $ 2,242
============= =============
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest............................................................. $ 315 -
Income taxes, net of refunds......................................... 12 -
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
4
<PAGE>
THE COSMETIC CENTER, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Cosmetic Center, Inc. (the "Company") is an approximately 85% owned
subsidiary of Revlon Consumer Products Corporation ("RCPC" and together
with its subsidiaries, "Products Corporation"), which is a direct wholly
owned subsidiary of Revlon, Inc.
On April 25, 1997, Prestige Fragrance & Cosmetics, Inc. ("PFC"), then a
wholly owned subsidiary of RCPC, merged with and into The Cosmetic Center,
Inc. (prior to the merger, "CCI"), with the Company being the surviving
corporation (the "Merger"). The Merger has been accounted for as a reverse
acquisition using the purchase method of accounting, and PFC is considered
to be the acquiring entity and CCI is considered to be the acquired entity
for accounting purposes, even though the Company is the surviving legal
entity. The historical financial statements of the Company for the period
prior to the Merger include the results of operations of PFC only and for
the period subsequent to the Merger include the results of operations of
both entities. As a result of the Merger, the Company changed its fiscal
year to a 52- or 53-week year ending on or about December 31. See Note 3.
The accompanying Condensed Financial Statements are unaudited. In
management's opinion, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation have been made.
In the Unaudited Condensed Financial Statements, the Company has made a
number of estimates and assumptions relating to the assets and liabilities,
the disclosure of contingent assets and liabilities and the reporting of
revenues and expenses to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ
from those estimates.
The results of operations and financial position, including working
capital, for interim periods are not necessarily indicative of results to
be expected for a full year, due, in part, to seasonal fluctuations, which
are normal for the Company's business.
Merchandise Inventories
The Company's inventories, consisting primarily of cosmetics, fragrances,
beauty aids, and related items, are valued at the lower of cost or market.
Cost is determined using the weighted average cost method.
Rental Expenses
Certain store leases provide for minimum rentals plus additional rentals
computed as a percentage of net sales in excess of amounts specified in the
applicable lease as minimum rentals. The Company accrues percentage rent
expense during interim periods based on actual net sales in excess of the
prorated annual amounts specified in the related lease.
5
<PAGE>
THE COSMETIC CENTER, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(2) NET LOSS PER SHARE
Net loss per common share, for the periods ended June 27, 1997, is
computed by dividing net loss by the weighted average number of common and,
when dilutive, common equivalent shares outstanding. Weighted average shares
outstanding is computed assuming that the 8,479,335 shares of Class C
Common Stock that RCPC received in exchange for its one share of PFC stock
were outstanding and owned by RCPC for all periods prior to the Merger.
Immediately after the Merger, the number of shares outstanding were
10,015,101. Stock options are the only common share equivalents. There is
no material difference between primary and fully diluted loss per share.
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share,"
which establishes a new standard for computing and presenting earnings per
share. SFAS No. 128 will be effective for interim and annual financial
statements issued after December 15, 1997. The Company believes that the
adoption of SFAS No. 128 will not have a material impact on the Company's
reported earnings per share.
(3) THE MERGER
On April 25, 1997, pursuant to the Agreement and Plan of Merger among
CCI, RCPC and PFC dated as of November 27, 1996 and amended as of February
20, 1997 and March 20, 1997 (the "Merger Agreement"), the Company
consummated the previously announced merger of PFC with and into CCI, with
the Company surviving the Merger. Pursuant to the Merger, RCPC received
8,479,335 shares of the Company's newly issued Class C Common Stock, par
value $.01 per share (the "Class C Common Stock"), the only class of the
Company's stock outstanding after the Merger, in exchange for its one share
of PFC stock outstanding prior to the Merger. As a result of the Merger,
CCI's stockholders were entitled to receive, for each share of Class A
Common Stock or Class B Common Stock they held, one share of newly issued
Class C Common Stock or, at each stockholder's election and subject to the
limitation discussed below, $7.63 in cash (the "Cash Election"). Holders of
options to purchase CCI's Class A Common Stock or Class B Common Stock with
an exercise price of less than $7.63 were entitled to receive for each such
option they held an equivalent option to purchase Class C Common Stock or,
at each such optionholder's election and subject to the limitation
discussed below, cash equal to the difference between $7.63 and the
exercise price per share of such options. The right of stockholders and
optionholders to receive cash was limited to an aggregate of 2,829,065
shares and options for shares. Holders of 3,688,440 shares of Class A
Common Stock and Class B Common Stock in the aggregate and 86,500 options
exercised their Cash Election so that after proration 2,764,116 shares of
Class A Common Stock and Class B Common Stock in the aggregate were
accepted for Cash Election. The number of shares of Class C Common Stock
owned by RCPC after the Merger constitutes approximately 85% of the
outstanding Class C Common Stock after giving effect to the Cash Election.
The Merger is being accounted for as a reverse acquisition using the
purchase method of accounting with RCPC effectively acquiring approximately
85% of CCI for a deemed purchase price of approximately $27.9 million. This
amount was allocated to the assets of CCI acquired and liabilities of CCI
assumed, to the extent of RCPC's ownership interest, based upon their
preliminary estimated fair values. A total of $4.5 million, representing
the excess of acquisition cost over fair value of CCI's net tangible
assets, has been allocated to goodwill and is being amortized over
40 years. The deemed purchase price has been allocated to CCI's assets
and liabilities as follows:
Inventory $ 52.3
Property and equipment, net 6.3
Goodwill 4.5
Accounts payable and accrued liabilities (24.3)
Long-term debt (14.2)
Other, net 3.2
-------------
Purchase price $ 27.9
=============
6
<PAGE>
THE COSMETIC CENTER, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Pro Forma Results of Operations
The Company's results of operations have incorporated CCI's results of
operations commencing upon the effective date of the Merger. The summary
pro forma information below combines the actual results of each of CCI and
PFC for the period from January 1, 1997 to the effective date of the Merger
and the actual results of the Company from the effective date of the Merger
to June 27, 1997, and, for the period from January 1, 1997 to the effective
date of the Merger, reflects the increased amortization of goodwill,
increased interest expense and certain income tax adjustments related to
the Merger and the Cash Election that would have been incurred had the
Merger and the Cash Election occurred on January 1, 1997. The summary pro
forma information (in millions, except per share amount) is not necessarily
indicative of the results of operations of the Company had the Merger and
the Cash Election occurred at January 1, 1997, nor is it necessarily
indicative of future results.
SIX MONTHS ENDED
JUNE 27, 1997
-----------------
Sales $ 85.0
Operating loss (8.8)
Net loss $ (11.4)
=================
Net loss per common share $ (1.14)
=================
(4) LONG - TERM DEBT
In connection with the Merger, on April 25, 1997, the Company entered
into a loan and security agreement (the "New Facility") and paid the then
outstanding balance of the $14.0 million on the previous credit facility of
CCI (the "Former Facility") with borrowings under the New Facility. On
April 28, 1997, the Company used approximately $21.2 million of borrowings
under the New Facility to fund the Cash Election associated with the
Merger. The New Facility, which expires on April 30, 1999, provides up to
$70 million of revolving credit tied to a borrowing base of 65% of eligible
inventory, as defined in the New Facility. Borrowings under the New
Facility are collateralized by the Company's accounts receivable and
inventory (and proceeds therefrom). Under the New Facility, the Company may
borrow at its option at LIBOR plus 2.25% or at the bank's prime rate plus
0.5%. The Company also pays a commitment fee equal to one-quarter of one
percent per annum. Interest is payable on a monthly basis except for
interest on LIBOR rate loans with a maturity of less than three months,
which is payable at the end of the LIBOR rate loan period and interest on
LIBOR rate loans with a maturity of more than three months which is payable
every three months. If the Company terminates the New Facility, the Company
is obligated to pay a prepayment penalty of $700,000 if the termination
occurs before the first anniversary date of the New Facility and $175,000
if the termination occurs after the first anniversary date. The New
Facility contains various restrictive covenants and requires the Company to
maintain a minimum tangible net worth and a minimum interest coverage
ratio.
(5) BUSINESS CONSOLIDATION
As a result of the Merger, the Company incurred business consolidation
costs of approximately $4.0 million in connection with the consolidation of
certain warehouse, distribution and headquarters operations of PFC into the
Company. As of June 27, 1997 the balance of the business consolidation
liability was approximately $2.8 million, which consisted of $2.0 million
in accrued expenses and $0.8 million in other long-term liabilities.
7
<PAGE>
THE COSMETIC CENTER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BASIS OF PRESENTATION
As described in Note 1 to the Unaudited Condensed Financial Statements,
the Merger has been accounted for as a reverse acquisition, pursuant to
which PFC is considered to be the acquiring entity and CCI is considered to
be the acquired entity for accounting purposes, even though the Company is
the surviving legal entity. As such, the financial statements of the
Company include PFC in all periods presented and CCI from the date of the
Merger on April 25, 1997. The following discussion and analysis should be
read in conjunction with the Unaudited Condensed Financial Statements and
notes thereto included herein.
GENERAL
At June 27, 1997, the Company operated 197 outlet stores and 68 retail
stores in 43 states. The outlet stores offer a wide range of first quality,
first quality excess, returned and refurbished, and discontinued brand name
cosmetics, fragrances and personal care products at discounted prices. The
outlet stores are generally located in outlet malls and operate under the
names "Prestige Fragrance & Cosmetics," "Colours & Scents," "Visage" and
"The Cosmetic Warehouse," with seven stores operated principally for
employees of Products Corporation. The retail stores are generally located
in strip malls under the name "The Cosmetic Center(Register Mark)" located
in the greater metropolitan market areas of Washington, D.C.; Richmond,
Virginia; Baltimore, Maryland; Chicago, Illinois; Charlotte/Raleigh/Durham,
North Carolina; and Philadelphia, Pennsylvania and sell approximately 25,000
brand name prestige and mass-merchandised cosmetic products. The Company
also operates full service salons, offering hair cutting, coloring and
styling and manicure services in 63 of these retail stores.
RESULTS OF OPERATIONS
Net sales for the three months ended June 27, 1997 were $36.5 million,
an increase of $20.2 million, or 124%, from the $16.3 million in net sales
for the three months ended June 30, 1996. Net sales for the six months
ended June 27, 1997 were $49.3 million, an increase of $20.3 million, or
70.0%, from the $29.0 million in net sales for the six months ended June
30, 1996. The increases in net sales are primarily attributable to the
acquisition of CCI, which contributed approximately $21.4 million in net
sales from the date of the Merger on April 25, 1997, and were partially
offset by a decline in PFC comparable store sales due primarily to
disruptions caused by distribution warehouse consolidation, a shorter
reporting period as a result of the change in fiscal year, temporarily
reduced promotional activity and soft fragrance sales. The Company operated
265 stores at June 27, 1997 and 183 stores at June 30, 1996. Excluding the
CCI stores acquired in the Merger, PFC comparable store sales for the six
months ended June 27, 1997 declined to $26.0 million from $28.2 million for
the six months ended June 30, 1996 for the reasons stated above.
Cost of sales, including buying, occupancy and distribution expenses
("COS"), was $25.0 million (68.4% of net sales) for the three months ended
June 27, 1997 compared to $10.5 million (64.5% of net sales) for the three
months ended June 30, 1996 and $33.7 million (68.2% of net sales) for the
six months ended June 27, 1997 compared to $19.3 million (66.7% of net
sales) for the six months ended June 30, 1996. COS as a percentage of net
sales for the three months and six months ended June 27, 1997 increased
primarily as a result of higher COS in the CCI stores included from the
date of the Merger associated with their product mix partially offset by
improved margins in the PFC stores primarily as a result of lower fragrance
sales.
Selling, general and administrative ("SG&A") expenses were $11.7 million
(32.0% of net sales) for the three months ended June 27, 1997 compared to
$6.4 million (39.2% of net sales) for the three months ended June 30, 1996
and $18.4 million (37.3% of net sales) for the six months ended June 27,
1997 compared to $13.2 million (45.6% of net sales) for the six months
ended June 30, 1996. SG&A expenses as a percentage of net sales
decreased in the three months and six months ended June 27, 1997, primarily
due to the benefit of certain synergies achieved as a result of the
consolidation of the CCI and PFC operations.
8
<PAGE>
THE COSMETIC CENTER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company incurred business consolidation costs of $4.0 million in
connection with the consolidation of certain warehouse, distribution and
headquarters operations of PFC into the Company.
Interest expense was $0.9 million for the three months ended June 27,
1997 compared to $0.2 million for the three months ended June 30, 1996 and
$1.2 million for the six months ended June 27, 1997 compared to $0.4
million for the six months ended June 30, 1996. The increase in interest
expense for the 1997 periods is primarily attributable to higher
outstanding borrowings as a result of the Cash Election and the repayment
of the Former Facility.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used for) operating activities was $0.5 million
for the six months ended June 27, 1997 and ($9.8) million for the six
months ended June 30, 1996. The increase in cash provided by operations
resulted primarily from lower inventory levels and improved working capital
management. Net cash used for investing activities was $21.0 million for
the six months ended June 27, 1997 and $2.0 million for the six months
ended June 30, 1996. The increase in cash used for investing activities was
primarily due to the Cash Election in connection with the Merger, partially
offset by reduced capital expenditures as a result of lower store opening
activities during the 1997 period as compared to the 1996 period. Net cash
provided by financing activities was $19.8 million for the six months ended
June 27, 1997 and $10.6 million for the six months ended June 30, 1996. The
increase in cash provided by financing activities in the 1997 period
resulted primarily from borrowings under the New Facility to fund the Cash
Election and the repayment of the Former Facility.
On April 25, 1997, pursuant to the Merger Agreement, the Company
consummated the merger of PFC, then a wholly owned subsidiary of RCPC, with
and into CCI, with the Company surviving the Merger. See Note 3 to the
Company's Unaudited Condensed Financial Statements.
The Company expects that its future cash needs will result primarily
from the cash required in connection with the payment of costs and expenses
associated with the Merger, costs to integrate the operations of CCI and
PFC, costs to expand the operations of the Company following the Merger,
including capital expenditures, and debt service on the New Facility. The
Company estimates that capital expenditures for the remainder of 1997 will
be approximately $3 million. The Company believes that funds available from
the New Facility and internally generated funds will provide sufficient
cash to meet the Company's cash needs for the next year.
Pursuant to a Tax Sharing Agreement, each of the subsidiaries of RCPC,
including, from the effective date of the Merger, the Company, has agreed
to pay to RCPC an amount equal to its liability for federal, state and
local income taxes (including estimated taxes), if any. Since the payments
to be made by subsidiaries of RCPC, including, from the effective date of
the Merger, the Company, to RCPC under the Tax Sharing Agreement will be
determined by the amount of taxes that such subsidiaries would otherwise
have to pay if they were to file separate federal, state or local income
tax returns, the Tax Sharing Agreement will benefit RCPC to the extent RCPC
can offset the taxable income generated by such subsidiaries, including,
from the effective date of the Merger, the Company, against losses and tax
credits generated by RCPC and its other subsidiaries. The Company
anticipates that, as a result of anticipated operating losses, no
significant federal tax payments or payments in lieu of taxes pursuant to
the Tax Sharing Agreement will be made by the Company for 1997.
FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-Q for the quarter ended June 27, 1997
as well as other public documents of the Company contains forward looking
statements which involve risks and uncertainties. The Company's actual
results may differ materially from those discussed in such forward looking
statements. Such statements include, without limitation, statements
regarding the amount of costs and expenses associated with the Merger,
costs to integrate the operations of the Company and PFC, costs to expand
the operations of the Company, the amount of required capital expenditures,
the Company's ability to develop relationships with the manufacturers of
professional
9
<PAGE>
THE COSMETIC CENTER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
hair care products, expectations as to the Company's cash flows from
operations and the pro forma financial information and assumptions
contained in Note 3. Readers are urged to consider statements which use the
terms "believes," "no reason to believe," "expects," "plans," "intends,"
"estimates," "anticipated," "or "anticipates" to be uncertain and forward
looking. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties
and assumptions. In addition to factors that may be described in the
Company's Commission filings, including this filing, the following factors,
among others, could cause the Company's actual results to differ materially
from those expressed in any forward looking statements made by the Company:
the inability to generate sufficient cash flows from operations to fund new
store openings, unanticipated costs and expenses associated with the
Merger, unanticipated costs or difficulties or delays in integrating the
operations of CCI and PFC and expanding the operations of the Company,
unanticipated capital expenditures, including costs associated with store
openings and closings, actions by competitors that may have greater capital
resources than the Company, including combinations within the retail
industry and successful new retail store concepts, the lack of viability of
the Company's salon business, the unavailability of product or the loss of
suppliers, including secondary source suppliers, the inability to secure
sufficient professional hair care products, general business and economic
conditions, and other factors described from time to time in the Company's
reports filed with the SEC.
EFFECT OF NEW ACCOUNTING STANDARD
In March 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which establishes new standards for computing
and presenting earnings per share. SFAS No. 128 will be effective for
interim and annual financial statements issued after December 15, 1997. The
Company believes that the adoption of SFAS No. 128 will not have a material
impact on the Company's reported earnings per share.
10
<PAGE>
THE COSMETIC CENTER, INC.
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 27, DECEMBER 31,
ASSETS 1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................... 2,706 3,479
Accounts receivable, net............................................ 1,331 -
Inventories......................................................... 83,964 31,713
Deferred tax assets................................................. 2,879 -
Prepaid expenses and other.......................................... 1,397 773
------------- -------------
Total current assets........................................... 92,277 35,965
Property and equipment, net.............................................. 13,430 7,616
Other assets............................................................. 1,069 589
Intangible assets related to businesses aquired, net..................... 5,917 1,451
------------- -------------
Total assets................................................... $ 112,693 $ 45,621
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 16,778 $ 2,242
Accrued expenses and other.......................................... 11,030 2,385
------------- -------------
Total current liabilities...................................... 27,808 4,627
Note payable - parent..................................................... 13,255 -
Due to parent............................................................. - 12,315
Long-term debt............................................................ 33,000 -
Other long-term liabilities............................................... 7,303 -
Stockholders' equity:
Common stock, $1.00 par value; 1,000 shares
authorized; 1 share issued and outstanding......................... - -
Class A common stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding....................... - -
Class B common stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding....................... - -
Class C common stock, $.01 par value; 40,000,000 shares
authorized; 10,015,101 shares issued and outstanding............... 100 -
Additional paid in capital.......................................... 39,068 28,536
Retained earnings (deficit)......................................... (7,841) 143
------------- -------------
Total stockholders' equity..................................... 31,327 28,679
------------- -------------
Total liabilities and stockholders' equity..................... $ 112,693 $ 45,621
============= =============
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
<PAGE>
THE COSMETIC CENTER, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ -----------------------------
JUNE 27, JUNE 30, JUNE 27, JUNE 30,
1997 1996 1997 1996
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales................................................... $ 36,473 $ 16,267 $ 49,332 $ 28,974
-------------- ------------- ------------- -------------
Cost of sales including buying, occupancy and distribution.. 24,955 10,499 33,658 19,326
Selling, general and administrative expenses................ 11,704 6,384 18,402 13,217
Business consolidation costs................................ 4,000 - 4,000 -
-------------- ------------- ------------- -------------
Operating expenses.......................................... 40,659 16,883 56,060 32,543
-------------- ------------- ------------- -------------
Loss from operations........................................ (4,186) (616) (6,728) (3,569)
Interest expense............................................ (898) (244) (1,172) (391)
Other expense, net.......................................... (64) - (64) -
-------------- ------------- ------------- -------------
Loss before income taxes.................................... (5,148) (860) (7,964) (3,960)
Provision for income taxes.................................. 5 15 20 30
-------------- ------------- ------------- -------------
Net loss.................................................... $ (5,153) $ (875) $ (7,984) $ (3,990)
============== ============= ============= =============
Net loss per common share................................... $ (0.54) $ (0.10) $ (0.89) $ (0.47)
============== ============= ============= =============
Weighted average shares outstanding......................... 9,542,558 8,479,335 9,010,946 8,479,335
============== ============= ============= =============
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
<PAGE>
THE COSMETIC CENTER, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
JUNE 27, JUNE 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
------------- -------------
<S> <C> <C>
Net loss.................................................................... $ (7,984) $ (3,990)
Adjustments to reconcile net loss to
net cash provided by (used for) operating activities:
Depreciation and amortization........................................... 1,706 1,006
Change in assets and liabilities, net of aquired assets and liabilities:
Increase in accounts receivable, net................................ (204) -
Decrease (increase) in inventories.................................. 69 (5,637)
Decrease in prepaid expenses and other current assets............... 754 79
Decrease in other assets............................................ 851 -
Increase (decrease) in accounts payable............................. 3,198 (332)
Increase (decrease) in accrued expenses and other................... 2,541 (897)
Decrease in other long-term liabilities............................. (447) -
------------- -------------
Net cash provided by (used for) operating activities........................ 484 (9,771)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (1,162) (2,013)
Acquisition of business, net of cash acquired............................... (19,883) -
------------- -------------
Net cash used for investing activities...................................... (21,045) (2,013)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under long-term debt......................................... 18,848 -
Increase in due to parent................................................... 940 10,605
------------- -------------
Net cash provided by financing activities................................... 19,788 10,605
------------- -------------
Net decrease in cash and cash equivalents................................... (773) (1,179)
Cash and cash equivalents at beginning of period............................ 3,479 3,421
------------- -------------
Cash and cash equivalents at end of period.................................. $ 2,706 $ 2,242
============= =============
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest............................................................. $ 315 -
Income taxes, net of refunds......................................... 12 -
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
<PAGE>
THE COSMETIC CENTER, INC. AND SUBSIDIARIES
PROFORMA FOOTNOTES
(DOLLARS IN THOUSANDS)
SIX MONTHS
ENDED
JUNE 27, 1997
-----------------
Sales $ 85.0
Operating loss (8.8)
Net loss $ (11.4)
=================
Net loss per common share $ (1.14)
=================
Inventory $ 52.3
Property and equipment, net 6.3
Goodwill 4.5
Accounts payable and accrued liabilities (24.3)
Long-term debt (14.2)
Other, net 3.2
-----------------
Purchase price $ 27.9
=================
<PAGE>
THE COSMETIC CENTER, INC.
PART II
ITEM 2. CHANGES IN SECURITIES
The information required with respect to this Item 2 was included in
Item 2 of the Company's quarterly report on Form 10-Q for the quarterly
period ended March 28, 1997 and, pursuant to Instruction to Part 2 of Form
10-Q, an additional report of the information need not be made.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information required with respect to this Item 4 was included in
Item 4 of the Company's quarterly report on Form 10-Q for the quarterly
period ended March 28, 1997 and, pursuant to Instruction 6 to Item 4 of
Form 10-Q, this item is answered by reference to such information in such
report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT 3 (i) - Restated Certificate of Incorporation of the Company
(filed herewith).
EXHIBIT 4 - Loan and Security Agreement dated as of April 25, 1997 by
and among the Company, BankAmerica Business Credit, Inc., as agent, and
the lenders parties thereto (incorporated herein by reference to
Exhibit 5 to the Schedule 13D filed on behalf of RCPC and Mafco
Holdings Inc. dated May 5, 1997).
EXHIBIT 10 (A) - Employment and Non-Competition Agreement dated as of
April 25, 1997 between the Company and Mark S. Weinstein (filed
herewith).
EXHIBIT 10 (B) - Employment Agreement Amendment dated as of April 25,
1997 between the Company and Ben S. Kovalsky (filed herewith).
EXHIBIT 10 (C) - Supply Agreement between RCPC and the Company dated as
of April 25, 1997 (filed herewith).
EXHIBIT 10 (D) - Services Agreement between RCPC and the Company dated
as of April 25, 1997 (filed herewith).
EXHIBIT 10 (E) - Registration Rights Agreement between RCPC and the
Company dated as of April 25, 1997 (incorporated herein by reference to
Exhibit 3 to the Schedule 13D).
EXHIBIT 10 (F) - Employment Agreement dated as of April 25, 1997
between the Company and I. Howard Diener (filed herewith).
EXHIBIT 10 (G) - Lease Agreement by and between the Company and Parcel
A-40 Associates, LLC dated as of June 1, 1997 (filed herewith).
EXHIBIT 10 (H) - Assignment and Assumption Agreement by and between the
Company as Assignor and GPA Associates, LLC as Assignee dated as of
June 15, 1997 (filed herewith).
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on May 8, 1997 and an amendment
on Form 8-K/A dated May 15, 1997 reporting the Merger of PFC with and into
the Company, the change in the Company's independent accountants and the
change in the Company's fiscal year end.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE COSMETIC CENTER, INC.
(Registrant)
Date: August 12, 1997 By: /s/ I. HOWARD DIENER
-------------------------
I. HOWARD DIENER
President and Chief Executive Officer
Date: August 12, 1997 By: /s/ BRUCE E. STROHL
------------------------
BRUCE E. STROHL
Senior Vice President - Finance and
Chief Financial Officer
<PAGE>
Exhibit 3(i)
RESTATED CERTIFICATE OF INCORPORATION
OF
THE COSMETIC CENTER, INC.
FIRST: The name of the corporation (hereinafter called the
"Corporation") is The Cosmetic Center, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of the Corporation's registered agent at such address is
Corporation Service Company.
THIRD: The Corporation's purpose is to engage in, promote and carry on
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH:
(a) The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is fifty million
(50,000,000) shares of common stock which shall be divided into classes,
of which five million (5,000,000) shares with a par value of one cent
($.01) per share shall be Class A Common Stock ("Class A Common
Shares"), five million (5,000,000) shares with a par value of one cent
($.01) per share shall be Class B Common Stock ("Class B Common Shares")
and forty million (40,000,000) shares with a par value of one cent
($.01) per share shall be Class C Common Stock ("Class C Common
Shares").
(b) The relative rights, preferences and limitations of the Class
A Common Shares and Class B Common Shares are identical in all respects,
except that:
(1) the voting power for the election of directors and all
other purposes is vested exclusively in the holders of Class B Common
Shares ("Class B Stockholders") and, except as otherwise required by law
and as set forth in clause (3) of this paragraph (b), the holders of
Class A Common Shares ("Class A Stockholders") are not to have any
voting power or be entitled to receive notice of meetings of
stockholders. In all matters in which they have the right to vote, the
Class A Stockholders have one vote per share and the Class B
Stockholders have one vote per share;
(2) the aggregate number of authorized Class A Common Shares
may be increased or decreased (but not below the number of outstanding
Class A Common Shares) only by the affirmative vote of Class B
Stockholders holding at least a majority of the then outstanding Class B
Common Shares, voting together as a single class;
<PAGE>
(3) the affirmative vote of Class A Stockholders holding at
least a majority of the then outstanding Class A Common Shares, voting
together as a single class, shall be required to amend this Certificate
of Incorporation if such amendment would alter or change the powers,
preferences or special rights of the Class A Common Shares;
(4) a dividend or distribution in cash or property on Class
A Common Shares may be greater than any dividend or distribution in cash
or property on Class B Common Shares;
(5) a dividend or distribution in shares of the Corporation
on Class A Common Shares may be paid or made only in Class A Common
Shares; and
(6) a dividend or distribution in shares of the Corporation
on Class B Common Shares may be paid or made in Class A Common Shares or
Class B Common Shares.
(c) In the event of a merger, consolidation or combination of the
Corporation with another entity (whether or not the Corporation is the
surviving entity) or in the event of the dissolution of the Corporation,
Class A Stockholders shall be entitled to receive in respect of each
Class A Common Share the same kind, and at the same ratio, of shares,
evidences of indebtedness, other securities, cash, rights or any other
property, or any combination of the foregoing, as Class B Stockholders
shall be entitled to receive in respect of each Class B Common Share.
(d) Each Class A Common Share shall convert automatically into one
Class B Common Share if the number of outstanding Class B Common Shares
is less than 10% of the aggregate number of outstanding Class A Common
Shares and Class B Common Shares. For purposes of this paragraph (d),
Class A Common Shares or Class B Common Shares repurchased by the
Corporation would not be considered to be "outstanding" from and after
the date of repurchase. In the event of any such conversion of the Class
A Common Shares, certificates which formerly represented outstanding
Class A Common Shares thereafter will be deemed to represent a like
number of Class B Common Shares, and all Common Shares then authorized
by the Certificate of Incorporation will be deemed to be Class B Common
Shares.
(e)(1) A Person (as defined below) who after March 13, 1992
acquires and continues to hold, directly or indirectly, in excess of 15%
of the aggregate number of outstanding Class B Common Shares may not
exercise the voting power of that number of the Class B Common Shares so
acquired that are deemed to be excess Class B Common Shares for purposes
of this paragraph (e). An acquisition of Class B Common Shares hereunder
shall be deemed to include any Class B Common Shares that a Person
acquires, directly or indirectly, in one transaction or in a series of
transactions, or with respect to which the Person acts or agrees to act
in concert with any other Person. The number of Class B Common Shares
deemed hereunder to be
2
<PAGE>
excess Class B Common Shares shall be determined on any date by
application of the following formula:
(i) the percentage which the number of Class B Common
Shares acquired since March 13, 1992 and then held by that Person bears
to the aggregate number of outstanding Class B Common Shares;
(ii) minus the percentage which the number of Class A
Common Shares acquired since March 13, 1992 at an equitable price and
then held by that Person bears to the aggregate number of outstanding
Class A Common Shares;
(iii) times the aggregate number of outstanding
Class B Common Shares.
For purposes of this determination, (A) any Class A Common Shares or
Class B Common Shares issued by the Corporation since the last date on
which a Person acquired any Class B Common Shares shall be considered to
be not outstanding and (B) any Class A Common Shares or Class B Common
Shares repurchased by the Corporation since the last date on which a
Person acquired any Class A Common Shares or Class B Common Shares
(whether in treasury or retired) shall be deemed still to be
outstanding. Determination of excess Class B Common Shares shall be made
as of the date that a Person, directly or indirectly, alone or with
others, otherwise would seek to exercise or direct the exercise of
voting power with respect to those Class B Common Shares.
(2) Class A Common Shares shall have been acquired at an
equitable price for purposes of clause (1) of this paragraph (e) only if
they were acquired at a price at least equal to the higher of:
(i) the highest per share price (including any broker
commissions, transfer taxes and soliciting dealers' fees) paid by the
acquiring Person for any Class B Common Shares acquired by that Person
within either 60 days before or 60 days after the Class A Common Shares
were acquired; or
(ii) the highest closing sale price during the 30-day
period immediately before the Class A Common Shares were acquired of a
Class B Common Share on the principal United States national securities
exchange on which the Class B Common Shares are listed, or, if the Class
B Common Shares are not listed on any United States national securities
exchange, the highest closing sales price for a Class B Common Share
during the 30-day period on the National Association of Securities
Dealers, Inc. ("NASD") National Market System, or, if the Class B Common
Shares are not listed on the NASD National Market System, the highest
closing bid quotation for a Class B Common Share during the 30-day
period on the NASD Automated Quotations System or any system in use, or,
if no quotations are available, the fair
3
<PAGE>
market value during the 30-day period of a Class B Common Share as
determined in good faith by the Board of Directors of the Corporation.
If any of the consideration given by the Person for any Class B Common
Shares under subclause (i) of this clause (2) was other than cash, the
value of such non-cash consideration shall be as determined in good
faith by the Board of Directors of the Corporation.
(3) An acquisition of a Class B Common Share shall not
include for the purposes of clause (1) of this paragraph (e) an
acquisition:
(i) made pursuant to a contract existing prior to
March 13, 1992; or
(ii) by bequest or inheritance, by operation of law
upon the death of any individual, or by any other transfer without
valuable consideration, including a gift that is made in good faith and
not for the purpose of circumventing this paragraph (e).
(4) Unless there are affirmative attributes of concerted
action, acting or agreeing to act in concert with any other Person shall
not include for purposes of clause (1) of this paragraph (e) actions
taken or agreed to be taken by Persons acting in their official
capacities as directors or officers of the Corporation or actions by
Persons related by blood or marriage.
(5) Notwithstanding that the voting power of any Class B
Common Share cannot be exercised pursuant to this paragraph (e), that
Class B Common Share shall be included in the determination of the
voting power of the Corporation for any purpose under the Certificate of
Incorporation or the Delaware General Corporation Law, unless otherwise
provided in the by-laws of the Corporation.
(6) For purposes of this paragraph (e), "Person" includes,
without limitation, a corporation (whether nonprofit or for profit), a
partnership, an unincorporated society or association, and two or more
persons having a joint or common interest.
(f) No holder of shares of any class of the Corporation's capital
stock, now or subsequently authorized, shall have any preferential or
preemptive right to subscribe for, purchase or receive any of the
following shares or other securities that may be issued, sold or offered
for sale by the Corporation: (i) any shares of any class of the
Corporation's capital stock, now or subsequently authorized; (ii) any
options or warrants for such shares; (iii) any rights to subscribe to or
purchase such shares; or (iv) any securities convertible into or
exchangeable for such shares. However, in connection with the issuance
or sale of any such shares or other securities, the Board of Directors,
in its sole discretion, may offer shares or other securities, for
purchase or
4
<PAGE>
subscription by the holders of shares of any class of the Corporation's
capital stock, except as may otherwise be provided by this Certificate
of Incorporation as it may be amended from time to time.
(g) Upon the conversion of the outstanding Class A Common Shares
and Class B Common Shares into Class C Common Shares pursuant to the
terms of the merger between the Corporation and Prestige Fragrance &
Cosmetics, Inc., and notwithstanding any other provision of the restated
certificate of incorporation of the Corporation, the Class C Common
Shares shall have all the rights of common stock as provided in the
Delaware General Corporation Law, including the right to vote on the
election of directors and all other matters submitted to a vote of the
holders of the Corporation's common stock. Each Class C Common Share
shall have one vote per share.
FIFTH:
(a) The number of directors of the Corporation shall be fixed from
time to time in the manner specified in the by-laws of the Corporation.
The directors shall be classified, with respect to the time for which
they severally hold office, into three classes, as nearly equal in
number as possible, one class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1993,
another class to be originally elected for a term expiring at the annual
meeting of stockholders to be held in 1994 and another class to be
originally elected for a term expiring at the annual meeting of
stockholders to be held in 1995, with each director in each class to
hold office until his successor is elected and qualified. At each annual
meeting of stockholders of the Corporation, the successors of the class
of directors whose term expires at the meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.
(b) Notwithstanding anything contained in this Certificate of
Incorporation or the by-laws of the Corporation to the contrary, the
affirmative vote of the holders of at least 80% of the combined voting
power of the then outstanding shares of stock of the Corporation then
entitled to vote generally in the election of directors, voting together
as a single class, shall be required to alter, amend, adopt any
provision inconsistent with or repeal this Article FIFTH.
SIXTH: The provisions for the regulation of the Corporation's internal
affairs are to be stated in the Corporation's by-laws as the same may be
amended from time to time. Election of the Corporation's directors are not
required to be made by written ballot unless the Corporation's by-laws
otherwise provide.
SEVENTH: In addition to the rights, powers, privileges and discretionary
authority expressly conferred by statute upon the Corporation's board of
directors, it is hereby authorized and empowered to adopt, amend or repeal the
Corporation's by-laws.
5
<PAGE>
EIGHTH: The Corporation shall indemnify each person who may be
indemnified (the "Indemnities") pursuant to Section 145 of the General
Corporation Law of the State of Delaware (or any successor provision thereto)
to the full extent permitted thereby. In each and every situation where the
Corporation may do so under such section, the Corporation hereby obligates
itself to so indemnify the Indemnitees, and in each case, if any, where the
Corporation must make certain investigations on a case-by-case basis prior to
indemnification, the Corporation shall pursue such investigations diligently,
it being the specific intention of this Article EIGHTH to obligate the
Corporation to indemnify each person whom it may indemnify to the fullest
extent permitted by law at any time and from time to time. To the extent not
prohibited by Section 145 of the General Corporation Law of the State of
Delaware (or any other provision thereof), the Indemnitees shall not be liable
to the Corporation except for their own individual willful misconduct or
actions taken in bad faith.
NINTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
TENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived
any improper personal benefit. If the Delaware General Corporation Law
hereafter is amended to further eliminate or limit the liability of a director
of a corporation, then a director of the Corporation, in addition to the
circumstances in which a director is not personally liable as set forth in the
preceding sentence, shall not be liable to the fullest extent permitted by the
Delaware General Corporation Law as so amended. Any repeal or modification of
the foregoing provisions of this Article TENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
6
<PAGE>
IN WITNESS WHEREOF, The Cosmetic Center, Inc. has caused this Restated
Certificate of Incorporation to be signed by its Vice President and Assistant
Secretary, this 25th day of June, 1997.
/s/ Robert K. Kretzman /s/ Annamarie DellaFave
- ----------------------------------- ---------------------------------
Robert K. Kretzman Annamarie DellaFave
Vice President and Secretary Assistant Secretary
7
<PAGE>
EXHIBIT 10(A)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of April 25, 1997 by and between The Cosmetic Center, Inc., a Delaware
corporation qualified to do business in Maryland with its principal place of
business located at 8839 Greenwood Place, Savage, Maryland 20763 ("EMPLOYER"),
and Mark S. Weinstein, now residing at 8020 Summer Mill Court, Bethesda,
Maryland 20817 ("EMPLOYEE").
RECITALS
1. EMPLOYER is engaged in the specialty retail sale and wholesale
distribution of a wide range of brand name cosmetic, fragrance, skin care and
personal care products.
2. Prior to the date hereof, EMPLOYEE was Chairman and, until July
1995, Chief Executive Officer of EMPLOYER.
3. On the date hereof, Prestige Fragrance & Cosmetics, Inc., a
Delaware corporation engaged in the retail distribution of cosmetics,
fragrances, skin care and personal care products at discounted prices ("PFC"),
was merged into EMPLOYER, with EMPLOYER being the survivor of such merger.
4. From and after the date hereof, EMPLOYER desires to employ and
retain the unique experience, ability and services of EMPLOYEE in the position
of Vice Chairman of the Board of Directors of EMPLOYER and EMPLOYEE desires and
is willing to undertake and continue such employment with EMPLOYER, all upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the recitals, and of the mutual
covenants and agreements herein contained, and of other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
EMPLOYER hereby employs EMPLOYEE, and EMPLOYEE hereby accepts employment with
EMPLOYER, upon the terms and conditions set forth in this Agreement:
1. EMPLOYMENT
EMPLOYER hereby employs EMPLOYEE and EMPLOYEE hereby accepts
employment as Vice Chairman of the Board of EMPLOYER. EMPLOYEE will render such
services to the Corporation as are customarily rendered by the Vice Chairman of
comparable publicly held companies. EMPLOYER agrees that EMPLOYEE shall have no
obligation to provide such services outside of the State of Maryland and its
surrounding states (other than any travel required in the ordinary course of
providing such services).
Notwithstanding anything herein to the contrary, it is specifically
agreed that EMPLOYEE's duties and responsibilities hereunder will be rendered
on a part-time basis and nothing in this employment agreement shall prohibit
EMPLOYEE from engaging, directly or indirectly, in activities with other
companies, ventures, or investments in any capacity whatsoever, provided only
that such activities or any of them do not interfere with EMPLOYEE's
performance of his duties hereunder.
2. TERM OF EMPLOYMENT
The term of EMPLOYEE's employment hereunder shall commence on the date
hereof and continue until the fourth anniversary of the date hereof (the
"Term"). On or before the last day of EMPLOYEE's employment hereunder, EMPLOYEE
shall execute and deliver to EMPLOYER a letter of resignation from all offices
then held by EMPLOYEE with EMPLOYER and with any affiliates effective upon said
last day of employment hereunder. This Section 2 is subject to the provisions
of Section 9 of this Agreement.
3. COMPENSATION OF EMPLOYEE
A. COMPENSATION. During the Term, EMPLOYER hereby agrees to pay to
EMPLOYEE for all services to be rendered by EMPLOYEE in any capacity hereunder
(including, but not limited to, services as a Director and officer of EMPLOYER
and/or of any affiliate, and with respect to any other offices, positions
and/or capacities to which he is elected) an annual salary of Three Hundred
Fifteen Thousand ($315,000) ("Salary") and agrees to pay to EMPLOYEE for the
non-competition covenant pursuant to Section 13 annual payments of One Hundred
Fifty Thousand ($150,000) ("Non-Compete Payments"), in each case, payable
bi-weekly.
B. WITHHOLDING. There shall be deducted from each installment of
EMPLOYEE's Salary and Non-Compete Payments, and from any other payments to or
for the benefit of EMPLOYEE pursuant to this Agreement, all amounts which are
at any
<PAGE>
time and from time to time by applicable federal, state, county or municipal
laws required to be deducted by reason of withholding taxes, Social Security
contributions and other requisite governmental imposed deductions from the
income of employees.
C. REIMBURSEMENT FOR BUSINESS EXPENSES AND OTHER PERQUISITES. EMPLOYER
shall promptly reimburse EMPLOYEE for all reasonable business, travel and
miscellaneous expenses incurred by EMPLOYEE during the Term in the furtherance
of EMPLOYER's business, upon the submission to EMPLOYER of proper vouchers
authenticating such expenditures. In addition, EMPLOYER shall, during the Term,
continue to furnish EMPLOYEE an office and suitable office fixtures, telephone
service and secretarial assistance, all of which shall be appropriate to his
position and status as Vice Chairman of the Board of EMPLOYER.
D. VEHICLE. In order to facilitate EMPLOYEE's performance of his
duties under this Agreement, EMPLOYER hereby agrees to furnish EMPLOYEE with
the vehicle furnished as of the date hereof to EMPLOYEE by EMPLOYER. For so
long as EMPLOYER shall furnish EMPLOYEE with such vehicle pursuant to the
preceding sentence, EMPLOYER shall pay directly all properly documented gas,
oil, repair, maintenance and insurance expenses associated with such vehicle.
Upon the earlier of (i) EMPLOYEE's request prior to the termination of this
Agreement for Good Cause or (ii) termination of this Agreement other than for
Good Cause, EMPLOYER shall transfer (without cost other than the payment by
EMPLOYEE of any withholding or transfer taxes) to EMPLOYEE title to the vehicle
furnished hereunder to EMPLOYEE by EMPLOYER.
4. GROUP INSURANCE BENEFITS
While in the employment of EMPLOYER, EMPLOYEE will be made a party
insured under any policies of group health, life, accident, disability, medical
expense or similar group insurance plans which EMPLOYER may from time to time
make available generally to other employees holding comparable senior
management positions to that of EMPLOYEE and on the same basis as those so
employed. All matters of eligibility for benefits under any plan or plans of
group health, life, accident, disability, medical expense or similar group
insurance plans which EMPLOYER may at any time and from time to time make
available shall be determined in accordance with the provisions of the
insurance policies. Upon termination or expiration of the Term, EMPLOYEE shall
be entitled to continued medical coverage in accordance with the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.
5. MEDICAL REIMBURSEMENT. EMPLOYER has established a medical
reimbursement plan for certain of its key executive officers including
EMPLOYEE. During the Term, EMPLOYER shall maintain such plan and shall pay all
premiums in connection with such medical reimbursement plan.
6. SPLIT DOLLAR AND KEY-MAN INSURANCE. At any time during the Term and
within 30 days after the expiration of the Term, EMPLOYEE shall be entitled to
terminate that certain Split-Dollar Insurance Agreement dated September 22,
1994 between EMPLOYEE and EMPLOYER (the "Split-Dollar Insurance Agreement")
relating to that certain life insurance policy (Pacific Mutual Life Insurance
Policy No. 1A2285224-0) in the face amount of $1,000,000 (the "Split-Dollar
Insurance Policy") in accordance with the terms of the Split-Dollar Insurance
Agreement by payment to the EMPLOYER of an amount equal to the premiums paid by
EMPLOYER through the time of purchase. Until the earlier of the termination of
the Split-Dollar Insurance Agreement as provided in the prior sentence and the
termination of the Term, EMPLOYER shall continue to pay premiums in accordance
with the terms of the Split-Dollar Insurance Agreement. As of, and for 30 days
after, the expiration of the Term, EMPLOYEE shall be entitled to purchase from
EMPLOYER that certain life insurance policy (Mass Mutual Life Insurance Policy
No. 9655632) in the face amount of $1,000,000 (the "Key Man Insurance Policy")
for an amount equal to the premiums paid by EMPLOYER through the time of
purchase. Until the earlier of the purchase of the Key Man Insurance Policy as
provided in the prior sentence and the termination of the Term, EMPLOYER shall
continue in effect the Key Man Insurance Policy. Unless and until purchased by
EMPLOYEE as provided herein, EMPLOYER shall continue being the owner of the Key
Man Policy and the death benefits under the Key Man Insurance Policy shall be
payable to EMPLOYER. Until the earlier of the termination of the Split-Dollar
Insurance Agreement as provided above and the termination of the Term, the
death benefits under the Split-Dollar Insurance Policy shall be payable (i) to
EMPLOYER to the extent of the premiums paid by it and (ii) the balance of the
benefit to the beneficiaries designated by EMPLOYEE in accordance with the
Split-Dollar Insurance Agreement.
7. PROFIT-SHARING AND PENSION PLANS
To the same extent and on the same basis as EMPLOYER makes available
generally to other employees holding comparable senior management positions to
that of EMPLOYEE, EMPLOYEE shall have the right to participate in any profit
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sharing or pension plan established by EMPLOYER under the terms and conditions
therein contained (but not including any stock option or bonus plans).
8. VACATIONS
EMPLOYEE shall be entitled each year during the Term to paid vacation
time of four (4) weeks. Any part of such vacation time that is not used during
any year shall not cumulate and shall be forfeited. Upon termination of
EMPLOYEE's employment hereunder, EMPLOYER shall have no obligation to pay
EMPLOYEE for any unused vacation days.
9. TERMINATION OF EMPLOYMENT
A. DEFINITION OF GOOD CAUSE. For purpose of this Agreement, the term
"Good Cause" shall be construed to mean the following: (i) conviction of a
felony or other crime involving moral turpitude or pursuant to which EMPLOYEE
is imprisoned, in each case, that has a material adverse effect on EMPLOYER's
financial condition, assets or operations, (ii) dishonesty of EMPLOYEE after
the date hereof in a material matter that has a material adverse effect on
EMPLOYER's financial condition, assets or operations or (iii) the material
breach by EMPLOYEE of any of his obligations or agreements contained in Section
13.
B. TERMINATION FOR GOOD CAUSE WITHOUT RIGHT TO CURE. EMPLOYER shall
have the right to immediately cancel and terminate this Agreement and to
immediately discharge EMPLOYEE for Good Cause which falls within the meanings
of Sections 9(A) (i) or (ii).
C. TERMINATION FOR GOOD CAUSE WITH RIGHT TO CURE. Following reasonable
notice and failure to promptly cure, EMPLOYER shall have the right to cancel
and terminate this Agreement and to discharge EMPLOYEE for Good Cause which
falls within the meaning of Section 9(A)(iii); provided, however, that EMPLOYEE
shall not be entitled to cure such a default under Section 9(A)(iii) pursuant
to this Section 9C if EMPLOYEE previously cured a default under the same
subparagraph of Section 9A pursuant to this Section 9C. Any notice provided to
EMPLOYEE under this Section 9C shall be in writing and shall set forth with
reasonable specificity and detail the nature of the default and the specific
curative action which needs to be taken to cure such default if such default is
curable.
D. DISABILITY. The inability of EMPLOYEE to render services to
EMPLOYER as a result of any temporary or permanent Disability (as defined
below) of EMPLOYEE shall not constitute a failure by EMPLOYEE to perform his
obligations under this Agreement and shall not be deemed a breach or default by
EMPLOYEE hereunder. The Salary and Non-Compete Payments to be paid to EMPLOYEE
during the Term shall continue and not be terminated if EMPLOYEE incurs a
temporary or permanent Disability during the Term; provided, however, that such
Salary and Non-Compete Payments shall be reduced by any disability payments
received by EMPLOYEE from any insurance policies paid for by EMPLOYER. For
purposes of this Agreement, "Disability" shall mean a mental or physical
illness or condition rendering EMPLOYEE incapable of performing the duties for
EMPLOYER required of him under this Agreement.
E. DEATH. Upon EMPLOYEE's death, EMPLOYER's obligations under the
Agreement shall remain in full force and effect, except that all Salary and
Non-Compete Payments that EMPLOYEE was entitled to receive hereunder in respect
of the balance of the Term shall be paid to EMPLOYEE's estate or
successor-in-interest, as the case may be.
10. EMPLOYEE'S REMEDY FOR BREACH.
A. CANCELLATION OR TERMINATION. If EMPLOYER cancels and terminates
this Agreement and discharges EMPLOYEE prior to the expiration of the Term as
specified in Section 2 without reason or for any reason other than for Good
Cause, then, as EMPLOYEE's sole and exclusive remedy, EMPLOYER shall pay
EMPLOYEE an amount equal to the balance of his Salary and Non-Compete Payments
for the remainder of the Term as specified in Section 2 and EMPLOYEE shall not
be obligated to mitigate EMPLOYEE's damages. Said amount shall be paid to
EMPLOYEE over the remainder of the Term in installments to be paid on the same
schedule as EMPLOYEE was paid immediately prior to EMPLOYEE's discharge, each
installment to be in the same amount EMPLOYEE would have been paid under this
Agreement if EMPLOYEE had not been discharged; provided, however, that if
EMPLOYER shall fail to pay any such installment when due, then, after notice
and failure to cure within five business days, all remaining installments shall
be accelerated and immediately due and payable in full. EMPLOYER agrees that
this provision represents liquidated damages and not a penalty, and that it
represents a reasonable forecast of EMPLOYEE's anticipated and actual economic
damages. Notwithstanding anything herein to the contrary, no such cancellation
or termination of this Agreement shall adversely affect any of EMPLOYEE's
rights or benefits accrued prior to the date of such cancellation or
termination or that are triggered by such cancellation or termination.
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B. FAILURE TO PAY SALARY AND NON-COMPETE PAYMENTS WHEN DUE. If
EMPLOYER fails to pay any regular Salary and Non-Compete Payments when due as
specified in Section 3, or to pay accelerated amount due if such Salary and
Non-Compete Payments are accelerated as specified in Section 10A, in addition
to such amount which is due to EMPLOYEE, EMPLOYEE shall be entitled to receive
interest on the unpaid balance thereof at the rate of 15% per annum.
C. CHANGE OF CONTROL. If there is a change of control of EMPLOYER (as
defined below), EMPLOYEE may elect to treat such change in control as a
termination by EMPLOYER without Good Cause except that the payment of an amount
equal to the balance of his Salary and Non-Compete Payments for the balance of
the Term shall be paid in a single lump sum payment (rather than installment
payments as provided in Section 10A). Failure to take any action upon a change
of control for a period of time up to 180 days shall not be deemed a waiver of
EMPLOYEE's right to treat such change of control as a termination. A "change in
control" of EMPLOYER for purposes of this Agreement shall be deemed to have
taken place if (A) Revlon Consumer Products Corporation together with its
affiliates no longer has the power to vote, directly or indirectly, whether
through record or beneficial ownership, a voting trust arrangement, or other
contractual arrangement, a majority of the voting power of outstanding shares
of EMPLOYER or (B) all or substantially all of EMPLOYER's assets are sold to
any person other than an affiliate, or (C) EMPLOYER is liquidated or dissolved
or adopts a plan of liquidation or (D) EMPLOYER shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or otherwise commence any
action or proceeding seeking reorganization, arrangement or readjustment of its
debts or for any other relief under the Federal Bankruptcy Code, as amended, or
under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing, or consent to, approve of, or acquiesce in, any such
petition, action or proceeding; (ii) apply for or acquiesce in the appointment
of a receiver, assignee, liquidator, sequestrator, custodian, trustee or
similar officer for it or for all or any part of its Property; (iii) make an
assignment for the benefit of creditors; or (iv) be unable generally to pay its
debts as they become due; or (E) an involuntary petition shall be filed or an
action or proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of EMPLOYER's debts or for any other relief under the Federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or
law, state or federal, now or hereafter existing and such petition, action or
proceeding shall not be dismissed within 60 days from such filing or
commencement. For purposes of this Section 10C, a "person" includes an
individual, corporation, partnership, trust, association, joint venture, pool,
syndicate, unincorporated organization, joint-stock company, or similar
organization or group acting in concert. A person for these purposes shall be
deemed to be a beneficial owner as that term is used in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
D. SURVIVAL OF REMEDIES. This Section 9 shall survive any termination
of this Agreement other than for Good Cause.
11. ARBITRATION.
Any controversy or claim arising out of or in any way relating to this
Agreement, the performance of the parties thereunder, the termination thereof,
or the breach thereof, shall be settled by arbitration in either Montgomery or
Prince George's County, Maryland, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator may be entered in any court of the State of Maryland
having jurisdiction thereof. The parties agree that any controversy or claim
subject to arbitration will be submitted to a single arbitrator selected from
the panels of Arbitrators of the American Arbitration Rules unless some other
method is agreed to by the parties to this Agreement. Additionally, the
discovery provisions of the Federal Rules of Civil Procedure then in effect
shall apply in any such arbitration and the arbitrator is hereby directed to
enforce such Rules. The losing party in any such arbitration shall pay the
prevailing party's legal fees and costs as well as the costs of the
arbitration. The foregoing agreement to arbitrate shall be specifically
enforceable.
12. STOCK OPTIONS.
Upon the termination of EMPLOYEE's employment for any reason, other
than Good Cause, including death or the expiration of this Agreement pursuant
to Section 2, EMPLOYER shall offer to repurchase all unexpired options (whether
vested or not) to purchase securities of EMPLOYER ("Options") from EMPLOYEE or
his estate or other successor-in-interest, as the case may be. The price to be
paid for each such option shall be the excess, if any, of the then Market Price
(as defined below) of EMPLOYER's common stock (or other securities for which
the option is then exercisable) on the date of termination over the option
exercise price. EMPLOYEE (or his estate or other successor-in-interest) shall
have the right to sell all or a portion of such Options to EMPLOYER. EMPLOYER
shall purchase and pay for all such Options within sixty (60) days of the date
of EMPLOYEE's termination.
For the purpose of this Agreement, "Market Price" shall mean the
closing sale price on the date in question of a share of such stock on the
composite tape for the principal United States securities exchange registered
under the Exchange Act on
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which such stock is listed, or, if such stock is not listed on any such
exchange, the closing sale price or bid quotation with respect to a share of
such stock on the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in use, or if no
such quotations are available, or if shares of such stock are not traded on any
United States registered securities exchange or in the over-the-counter market,
the fair market value on the date in question of a share of such stock as
determined by an investment banker selected by a majority of the members of the
Board of Directors of EMPLOYER in good faith.
13. NON-COMPETITION AND CONFIDENTIALITY
A. NON-COMPETITION. In consideration of the knowledge EMPLOYEE has
gained of EMPLOYER's management and overall business operation during his
employment and to prevent unfair competition with EMPLOYER based on this
knowledge, EMPLOYEE agrees that during the Term and for two years thereafter,
he will not, directly or indirectly, for his own benefit, or for or with any
person, firm or corporation whatsoever other than EMPLOYER, own, control,
manage or operate stores similar in respect of products to those operated by
EMPLOYER during such period of employment in Maryland, Virginia, Illinois or
the District of Columbia or within a 50-mile radius of any other city where
EMPLOYER is operating retail stores; provided, however, that nothing herein
shall prohibit or restrict EMPLOYEE from owning up to 1% of the outstanding
capital stock of any publicly traded corporation.
B. CONFIDENTIALITY. EMPLOYEE shall keep confidential any and all
nonpublic information obtained by him during the term of his employment about
EMPLOYER and its affairs, its goods, techniques, processes, procedures,
materials, know-how, labeling, its leases, its relationship to actual and
potential customers, and needs and requirements of any such actual or potential
customers and similar trade information, and he shall make no disclosure
thereof to third persons in a manner that would be injurious to EMPLOYER.
14. NON-ASSIGNABILITY BY EMPLOYEE
EMPLOYEE shall have no right to assign this Agreement or any of its
rights or obligations hereunder to another party or parties.
15. ASSIGNABILITY BY EMPLOYER
EMPLOYER shall have the right to assign this Agreement or any of its
rights or obligations hereunder to any of its affiliates or to any successor to
the business (by merger, consolidation, sale of stock or assets, or otherwise);
provided that no assignment shall release EMPLOYER from its obligations and
liabilities under this Agreement.
16. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland applicable to contracts made and to be
performed therein, without giving effect to the principles of conflicts of law.
17. NON-WAIVER OF BREACH
No failure of either party to exercise any power, right or remedy
given such party hereunder, or to insist upon the strict compliance by the
other party of any obligation, covenant, term, condition, warranty or agreement
hereunder, and no custom or practice at variance with the terms hereof, shall
constitute a waiver of such party's rights to demand exact compliance with the
terms hereof.
18. NUMBER AND GENDER
Where text required, words in the singular shall be deemed to include
the plural and vice-versa, and words of any gender shall be deemed to include
all genders.
19. HEADINGS NOT PART OF AGREEMENT
Any headings preceding the text of the several Sections and
subparagraphs of this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
20. NOTICES
No notice, request, consent, approval, waiver or other communication
which may be or is required or permitted to be given under this Agreement shall
be effective unless the same is in writing and is delivered in person, or sent
by registered or
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certified mail, return receipt requested, first-class postage prepaid, (1) if
to EMPLOYER to The Cosmetic Center, Inc., 8839 Greenwood Place, Savage, Maryland
20763, Attention: President, with a copy to Revlon Consumer Products
Corporation, 625 Madison Avenue, New York, New York 10022, Attention: Vice
President and Corporate Secretary, and (2) if to EMPLOYEE to 8020 Summer Mill
Court, Bethesda, Maryland 20817, or (effective upon receipt) at any other
address that may be given by one party to the other by notice pursuant to this
Section 20. Such notices, if sent by registered or certified mail, return
receipt requested, first-class postage prepaid, shall be deemed to have been
given at the time of mailing.
21. ENTIRE AGREEMENT
This Agreement contains all of the agreements and understandings
between the parties hereto with respect to the employment of EMPLOYEE by
EMPLOYER, and no oral agreements or written correspondence shall be held to
affect the provisions hereof.
22. TERMINATION OF PRIOR AGREEMENTS AND RELEASE. In consideration for
EMPLOYER's execution of this Agreement and for other good and valuable
consideration the receipt and adequacy of which is hereby acknowledged,
EMPLOYEE for himself, his heirs, executors, administrators and assigns, hereby
release and forever discharge EMPLOYER and its predecessors, successors and
assigns, and each of them (collectively, the "Releasees"), from all manner of
actions, causes of action, suits, debts, sums of money, accounts, covenants,
controversies, agreements, promises, damages, judgments, claims and demands
whatsoever, at law, in equity or otherwise, of any nature, whether known or
unknown, EMPLOYEE ever had or may have against each or any of the Releasees
arising out of or in connection with (a) his employment by EMPLOYER or any of
its affiliates prior to the date hereof and (b) any employment agreement,
severance agreement and any other contracts, agreements or commitments prior to
the date hereof regarding salary, bonus, stock options or other compensation
relating to such employment, including, without limitation, that certain
Employment Agreement between EMPLOYEE and EMPLOYER dated February 28, 1991;
provided, however that this release shall not affect and shall not be deemed to
affect EMPLOYEE's rights and the liability of EMPLOYER in respect of claims
EMPLOYEE may have (a) for salary or expense reimbursement in the ordinary
course of business through the date hereof, (b) for indemnification under
EMPLOYER's certificate of incorporation and bylaws and under applicable law,
including the General Corporation Law of Delaware and (c) under EMPLOYER's 1991
Stock Option Plan, the Split-Dollar Insurance Agreement and that certain
Split-Dollar Insurance Benefit Plan relating to deferred compensation dated as
of January 2, 1994 between EMPLOYEE and EMPLOYER. This release is valid whether
any claim or right arises under any federal, state or local statute (including,
without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Age Discrimination in Employment Act of 1967, the Equal Pay
Act, the Americans with Disabilities Act of 1990, the Employee Retirement
Income Security Act of 1974, the Family and Medical Leave Act of 1993, the Fair
Labor Standards Act, and all other statues regulating the terms and conditions
of employment), regulation or ordinance, under the common law or in equity
(including any claims for wrongful discharge or otherwise), or under any
agreement referred to above.
23. PARTIAL INVALIDITY
Should any part of this Agreement for any reason be declared or held
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of any remaining portion, which remaining
portion shall remain in force and effect as if this Agreement had been executed
with the invalid or unenforceable portion thereof eliminated.
24. AMENDMENTS
Neither this Agreement nor any provision hereof may be amended,
modified, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
amendment, modification, change, waiver, discharge or termination is sought.
25. BURDEN AND BENEFIT
This Agreement is binding upon, and inures to the benefit of, the
parties hereto and their respective spouses, heirs, executors, administrators,
personal and legal representatives, successors and assigns.
26. COUNTERPARTS
This Agreement may be executed in one or more counterparts and, in
such event, all such counterparts shall constitute originals and all such
counterparts shall constitute a single agreement.
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27. HOLIDAYS, ETC.
Whenever the last day for the performance of any act required by any
party under this Agreement shall fall upon a Saturday, Sunday or legal holiday
in the State of Maryland, the date for the performance of any such act shall be
extended to the next succeeding business day which is not a Saturday, Sunday or
such legal holiday.
28. NO INFERENCE AGAINST AUTHOR.
No provision of this Agreement shall be interpreted against any party
because such party or its legal representative drafted such provision.
IN WITNESS WHEREOF, EMPLOYER has caused this Agreement to be executed
and sealed on its behalf by its duly authorized officers, and EMPLOYEE has
hereunto set his hand and seal, all done as of the day and year hereinabove
first written.
ATTEST: EMPLOYER:
THE COSMETIC CENTER, INC.
/s/ Bruce E. Stohl /s/ Howard Diener
- ----------------------------- -----------------------------------
Name: Howard Diener
Title: President
WITNESS: EMPLOYEE:
/s/ Bruce E. Stohl /s/ Mark S. Weinstein
- ----------------------------- -----------------------------------
Mark S. Weinstein
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EXHIBIT 10(B)
AMENDMENT
THIS AMENDMENT ("Amendment") is entered into as of April 25, 1997
between The Cosmetic Center, Inc., formerly known as Cosmetic & Fragrance
Concepts, Inc., ("EMPLOYER" or "COMPANY") and Ben S. Kovalsky ("EMPLOYEE" or
"KOVALSKY").
RECITALS:
R-1. The parties entered into an Employment Agreement dated February
28, 1991 ("Employment Agreement").
R-2. On October 1, 1996 the COMPANY entered into a letter of intent
with Revlon Consumer Products Corporation ("Revlon") to merge its wholly owned
subsidiary, Prestige Fragrance & Cosmetic, Inc. ("PFC") into the COMPANY. After
the merger the COMPANY will consist of two groups -- The Cosmetic Center Group
and the PFC Group.
R-3. In order to ensure a smooth transition after the merger, Revlon
has requested that the COMPANY ensure KOVALSKY'S continued employment for at
least six (6) months after the merger.
R-4. In consideration of the COMPANY amending the Employment Agreement
as provided for herein KOVALSKY has agreed to continue his employment for at
least six (6) months after the merger.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby reciprocally acknowledged, the parties agree as
follows:
1. EFFECTIVE DATE. The "Effective Date" of this Amendment shall be the
date PFC is merged into the COMPANY.
2. CONTINUATION OF EMPLOYMENT. Notwithstanding anything in the
Employment Agreement to the contrary, including without limitation, Sections 1,
2 and 10 C, as of the Effective Date KOVALSKY agrees to assume the newly
created position of President and Chief Operating Officer of The Cosmetic
Center Group, in lieu of his present position as President, Chief Executive and
Chief Operating Officer of the COMPANY, and to continue in such position for a
period of at least six (6) months from the Effective Date of this Amendment
("Minimum Employment Period").
3. COMPENSATION OF EMPLOYEE. As of the Effective Date, Paragraphs 3 A
and B of the Employment Agreement shall no longer be applicable and the
following shall apply in lieu thereof:
"EMPLOYER hereby agrees to pay to EMPLOYEE for all services to be
rendered by EMPLOYEE in his capacity as President and Chief Operation Officer
of The Cosmetic Center Group of EMPLOYER an annual base salary ("Base Salary")
of Two Hundred Twenty Five Thousand Dollars ($225,000.00). In addition,
Employee shall be paid an annual amount of One Hundred Thousand Dollars
($100,000.00), which amount shall be paid, less all amounts required by law to
be withheld, in the same number of installments and at the same time, as the
Base Salary in consideration for the non-competition covenant contained in the
Employment Agreement ("the Non-Competition Payments").
4. TERMINATION PAYMENT. Upon the Effective Date, Section 10 of the
Employment Agreement shall be deemed deleted, and in lieu thereof, the
following shall apply:
A. CANCELLATION OR TERMINATION. In the event EMPLOYER cancels and
terminates this Employment Agreement and discharges EMPLOYEE prior to
the expiration of the term of this Employment Agreement as specified
in Section 2 of this Amendment for any reason other than for Good
Cause or EMPLOYEE terminates his employment with EMPLOYER at any time
after the end of the Minimum Employment Period, then EMPLOYER shall
pay to EMPLOYEE a lump-sum payment equal to the remainder of his Base
Salary and Non-Competition Payments that would be due through the end
of the Term (without giving effect to EMPLOYEE'S termination), which
payment shall be made to EMPLOYEE within thirty (30) days of the date
of such termination. For illustrative purposes only, if the Effective
Date occurs on January 31, 1997 and EMPLOYEE either terminates or is
terminated from his employment with EMPLOYER on September 30, 1997,
EMPLOYEE shall be entitled to a lump-sum payment equal to twenty nine
(29) months of remaining Base Salary and Non-Competition Payments
(i.e. $785,416.65). EMPLOYEE shall not be obligated to mitigate
EMPLOYEE'S damages in the event of termination by EMPLOYER. EMPLOYER
agrees that this provision with respect to a termination by EMPLOYER
represents liquidated damages and not a penalty, and that it
represents a reasonable forecast of EMPLOYEE's anticipated and actual
economic damages as well as including reasonable compensation of
$100,000.00 per year to EMPLOYEE in consideration for the Non-Compete
provision contained in the Employment Agreement. EMPLOYER agrees that
this provision with respect to a termination by EMPLOYEE after the
Minimum Employment Period represents reasonable severance in light of
EMPLOYEE'S prior service to
<PAGE>
EMPLOYER as well as including reasonable compensation of $100,000.00
per year to EMPLOYEE in consideration for the Non-Compete provision
contained in the Employment Agreement. In the event EMPLOYER cancels
and terminates this Agreement and discharges EMPLOYEE prior to the
expiration of the term of this Agreement as specified in Section 2 for
Good Cause or EMPLOYEE terminates his employment with EMPLOYER at any
time prior to the end of the Minimum Employment Period, EMPLOYER shall
have no obligation to make any payment or provide any benefits
hereunder for any period subsequent to the date of such termination or
resignation, except as required by law.
B. FAILURE TO PAY SALARY WHEN DUE. In the event EMPLOYER fails to
pay any regular Base Salary and Non-Competition Payments when due as
specified in Section 3 hereof, or to pay accelerated amount due if
such Base Salary and Non-Competition Payments are accelerated as
specified in Section 10A, IN ADDITION TO SUCH AMOUNT WHICH IS DUE TO
EMPLOYEE, EMPLOYEE SHALL BE ENTITLED TO RECEIVE INTEREST ON THE UNPAID
BALANCE THEREOF AT THE RATE OF 15% PER ANNUM.
C. SURVIVAL OF REMEDIES. This Section 10 shall survive any
termination of this Agreement other than for Good Cause.
5. AUTOMOBILE. Upon expiration of the Employment Agreement,
termination by EMPLOYEE after the end of the Minimum Employment Period, or
termination by EMPLOYER at any time during the Term other than for Good Cause,
the COMPANY shall transfer to KOVALSKY title to the COMPANY'S 1993 Lexus 400
which is presently being used by KOVALSKY.
6. CONTINUATION OF BENEFITS. For a period of one year following
expiration of the Employment Agreement, termination by EMPLOYEE after the end
of the Minimum Employment Period, or termination by EMPLOYER at any time during
the Term other than for Good Cause, the COMPANY shall continue to provide
and/or pay the Medical Reimbursement and Insurance Reimbursement in accordance
with Paragraphs 5 and 6 of the Employment Agreement to the same extent as if
KOVALSKY remained employed by the COMPANY. Upon expiration of the Employment
Agreement, termination by EMPLOYEE after the end of the Minimum Employment
Period, or termination by EMPLOYER at any time during the Term other than for
Good Cause, the COMPANY shall pay KOVALKSY the sum of $8,100.00 in
consideration for the Group Insurance Benefits being lost by KOVALSKY as a
result of such termination.
7. STOCK OPTIONS. Upon the Effective Date, Paragraph 12 of the
Employment Agreement shall be deemed deleted, and in lieu thereof, the
following shall apply:
"Upon expiration of the Employment Agreement, termination by EMPLOYEE
after the end of the Minimum Employment Period, termination by EMPLOYER at any
time during the Term other than for Good Cause or EMPLOYEE'S death, EMPLOYER
shall offer to repurchase all unexpired options (whether vested or not) to
purchase securities of the EMPLOYER ("Options") from EMPLOYEE or his estate or
other successor-in-interest, as the case may be. The price to be paid for each
such option shall be the excess, if any, of (A) the greater of (i) the then
Market Price (as defined below) of EMPLOYER's common stock (or other securities
for which the option is then exercisable) on the date of termination or (ii)
$7.63 over (B) the option exercise price. EMPLOYEE (or his estate or other
successor-in-interest) shall have the right to sell all or a portion of such
Options to EMPLOYER. EMPLOYER shall purchase and pay for all such Options
within sixty (60) days of the date of EMPLOYEE's termination.
For the purpose of this Agreement, "Market Price" shall mean the
closing sale price on the date in question of a share of such stock on the
composite tape for the principal United States securities exchange registered
under the Securities Exchange Act of 1934 (the "Exchange Act") on which such
stock is listed, or, if such stock is not listed on any such exchange, the
closing sale price or bid quotation with respect to a share of such stock on
the date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such quotations
are available, or if shares of such stock are not traded on any United States
registered securities exchange or in the over-the-counter market, the fair
market value on the date in question of a share of such stock as determined by
an investment banker selected by a majority of the members of the board of
Directors of EMPLOYER in good faith."
8. DEFERRED COMPENSATION. Upon expiration of the Employment Agreement
or termination, EMPLOYER shall pay to EMPLOYEE, the deferred compensation
liability established by EMPLOYER for EMPLOYEE in accordance with generally
accepted accounting principles less all amounts required by law to be withheld.
In addition, within thirty (30) days of any termination referred to in the
preceding sentence, EMPLOYEE shall have the right to purchase EMPLOYER'S
interest in the Guardian Life Insurance Policy on EMPLOYEE and his wife by
paying to EMPLOYER the amount of premiums paid to date of such policy on the
date of EMPLOYEE'S termination.
2
<PAGE>
9. CONFIRMATION OF TERMS. All of the terms, covenants and conditions
of the Employment Agreement, except as are herein specifically modified and
amended, shall remain in full force and effect and are hereby adopted and
reaffirmed by the parties hereto. In the event of any conflict between the
terms of this Amendment and the Employment Agreement, the terms of this
Amendment shall control.
IN WITNESS WHEREOF, the COMPANY has caused this Amendment to be
executed and sealed on its behalf by its duly authorized officers, and KOVALSKY
has hereunto set his hand and seal, all done as of the day and year hereinabove
first written.
EMPLOYER:
ATTEST: THE COSMETIC CENTER, INC.
/s/ Bruce E. Strohl /s/ Howard Diener (SEAL)
- ------------------------------ ----------------------------------------
I. Howard Diener
President
WITNESS: EMPLOYEE:
/s/ Bruce E. Strohl /s/ Ben S. Kovalsky (SEAL)
- ------------------------------ ----------------------------------------
Ben S. Kovalsky
3
<PAGE>
EXHIBIT 10(C)
===============================================================================
SUPPLY AGREEMENT
BY AND BETWEEN
REVLON CONSUMER PRODUCTS CORPORATION
AND
THE COSMETIC CENTER, INC.
DATED AS OF APRIL 25, 1997
===============================================================================
<PAGE>
SUPPLY AGREEMENT
AGREEMENT (this "Agreement") dated as of April 25, 1997 between
Revlon Consumer Products Corporation, a Delaware corporation ("Revlon"), and
The Cosmetic Center, Inc., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, prior to the date hereof, Revlon supplied to its wholly owned
subsidiary, Prestige Fragrance & Cosmetics Inc., a Delaware corporation
("PFC"), certain cosmetics, fragrances, skin care and personal care products;
WHEREAS, pursuant to that certain Merger Agreement dated as of
November 27, 1996 and amended as of February 20, 1997 and March 20, 1997 (the
"Purchase Agreement"), by and among Revlon, PFC and Buyer, contemporaneously
with the execution and delivery of this Agreement, PFC was merged with and
into Buyer, with Buyer being the survivor of such Merger;
WHEREAS, in connection with the foregoing, Buyer desires to purchase
from Revlon, and Revlon is willing to sell, or cause to be sold, to Buyer for
resale at Buyer's Cosmetic Center retail stores ("Cosmetic Center Stores") and
PFC retail stores ("PFC Stores") certain cosmetics, fragrances, skin care and
personal care products as provided for in this Agreement, for the consideration
and upon and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE 1.
SALE OF PRODUCTS
SECTION 1.01 SALE OF PRODUCTS. Subject to the terms and conditions of
this Agreement, for a period of four (4) years from the date hereof (the
"Supply Term"), Revlon will sell, or will cause to be sold, to Buyer its
requirements of (a) cosmetics, fragrances, skin care and personal care products
manufactured and sold by Revlon ("Revlon Products") that are first quality and
on Revlon's then current order form ("First Quality Products"), (b) Revlon
Products that have been returned to Revlon and which are coded in Revlon's
inventory system as "211" merchandise or have been discontinued or are no
longer on Revlon's then current order form and which are coded in Revlon's
inventory system as "261" merchandise (collectively, "Returned/Discontinued
Products") and (c) First Quality Products that are in excess of Revlon's needs
("Excess Products").
Notwithstanding anything herein to the contrary, Revlon's obligation
to supply Revlon Products pursuant to this Agreement shall be subject in its
entirety to the availability of such Revlon Products and, if and to the extent
that there are limited supplies of Revlon Products, Revlon shall be entitled to
allocate such limited supplies of any such Revlon Products among its customers
(including any subsidiaries or affiliates of Revlon) in its sole and absolute
discretion. Revlon shall have no obligation hereunder to manufacture any Revlon
Products in order to fulfill any orders for Revlon Products submitted by Buyer.
SECTION 1.02 SELLING PRICE OF REVLON PRODUCTS. During the Supply Term,
the purchase price (the "Prices") for the Revlon Products shall be as follows:
(a) the purchase price for First Quality Products shall be Revlon's normal
trade prices; (b) the purchase price for Returned/Discontinued Products shall
be Revlon's fully allocated cost of goods plus 8.1%; and (c) the purchase price
for Excess Products shall be at a price mutually acceptable to Revlon and
Buyer.
SECTION 1.03 SHIPMENT OF REVLON PRODUCTS; BUYER'S TITLE. Revlon shall
ship or cause to be shipped any Revlon Products purchased by Buyer pursuant to
this Agreement FOB Revlon's manufacturing or warehouse facilities (for purposes
of price, payment and risk of loss). Buyer shall take title to Revlon Products
purchased by Buyer pursuant to this Agreement upon shipment as provided in this
Section 1.03, F.O.B. Revlon's manufacturing or warehouse facilities.
SECTION 1.04 REJECTS AND RETURNS; PRODUCT WARRANTIES.
(a) Revlon represents and warrants that the First Quality Products and
Excess Products (i) were manufactured in accordance with all applicable laws,
statutes, ordinances and regulations in effect from time to time, including,
without limitation, any such laws relating to protection of the environment and
(ii) will conform to the specifications therefor and to all applicable
governmental rules and regulations. Except with respect to latent or hidden
defects, the representations and warranties of Revlon contained in this Section
1.04(a) shall not survive any inspection, delivery, acceptance or payment by
Buyer for such Revlon Products. REVLON MAKES NO WARRANTIES OF MERCHANTABILITY
OR OF FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER EXPRESS OR IMPLIED
WARRANTY, EXCEPT AS SET FORTH ABOVE. WITH RESPECT TO ANY RETURNED/DISCONTINUED
PRODUCTS, BUYER TAKES SUCH PRODUCTS "AS IS" AND REVLON MAKES NO WARRANTIES OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER EXPRESS OR
IMPLIED WARRANTY.
<PAGE>
(b) No Revlon Product may be returned to Revlon (or its designee)
unless Revlon has authorized the return in writing, provided, however, that
Revlon will accept returns of First Quality Products and Excess Products that
were defective at the time of shipment if Buyer gives Revlon notice of such
defect within ten (10) days following the date of delivery to Buyer with
respect to any defect apparent on the surface, and within ninety (90) days
after the date of delivery with respect to any latent or hidden defect. Revlon
shall not in any event be responsible for any defect, damage or deficiency that
arises following shipment FOB Revlon's facilities.
SECTION 1.05 RESALE OF REVLON PRODUCTS. Buyer agrees that any Revlon
Products purchased by Buyer pursuant to this Agreement will be sold by Buyer
only in retail stores and that any Returned/Discontinued Products will be sold
only in PFC Stores. Without limiting the generality of the foregoing, Buyer
agrees that it shall not sell any Returned/Discontinued Products in Cosmetic
Center Stores and will not sell any Revlon Products through wholesale channels
of distribution or to any third parties (other than retail customers of its
retail stores). If requested by Revlon, Buyer agrees to provide to Revlon and
its representatives access to its facilities, management and books and records
at reasonable times upon advance notice and in a manner which is not disruptive
to Buyer's operations in order to permit Revlon to monitor compliance with this
Section 1.05.
ARTICLE 2
PROVISIONS OF GENERAL APPLICATION
SECTION 2.01 PAYMENT OF PRICE. Buyer shall pay the Price against
Revlon's detailed invoice and supporting documentation including item, quantity
and shipment dates net 30 days after shipment.
SECTION 2.02 EARLY TERMINATION. (a) Notwithstanding anything herein to
the contrary, if there is a change of control (as defined below) of Buyer at
any time after the date hereof but prior to the end of the Supply Term,
Revlon may terminate this Agreement upon not less than one year's prior written
notice to Buyer; provided, however, that in no event may Revlon terminate this
Agreement prior to the second anniversary of the date hereof. A "change in
control" of Buyer for purposes of this Agreement shall be deemed to have taken
place if (A) Revlon together with its affiliates no longer has the power to
vote, directly or indirectly, whether through record or beneficial ownership, a
voting trust arrangement, or other contractual arrangement, a majority of the
voting power of outstanding shares of Buyer or (B) all or substantially all of
Buyer's assets are sold to any person other than an affiliate. For purposes of
this Section 2.02, a "person" includes an individual, corporation, partnership,
trust, association, joint venture, pool, syndicate, unincorporated
organization, joint-stock company, or similar organization or group acting in
concert. A person for these purposes shall be deemed to be a beneficial owner
as that term is used in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended.
(c) Notwithstanding anything to the contrary, Revlon may terminate
this Agreement (A) upon 30 days' prior written notice if Buyer is in default of
the provisions of Section 1.05, (B) immediately if Buyer is liquidated or
dissolved or adopts a plan of liquidation or (C) immediately if Buyer shall:
(i) file a voluntary petition in bankruptcy or file a voluntary petition or
otherwise commence any action or proceeding seeking reorganization, arrangement
or readjustment of its debts or for any other relief under the Federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or
law, state or federal, now or hereafter existing, or consent to, approve of, or
acquiesce in, any such petition, action or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for it or for all or any part of its
Property; (iii) make an assignment for the benefit of creditors; or (iv) be
unable generally to pay its debts as they become due; or (D) immediately if an
involuntary petition shall be filed or an action or proceeding otherwise
commenced seeking reorganization, arrangement or readjustment of Buyer's debts
or for any other relief under the Federal Bankruptcy Code, as amended, or under
any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing and such petition, action or proceeding shall not be
dismissed within 60 days from such filing or commencement.
SECTION 2.03 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Neither party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the written consent of the other party hereto,
except that Revlon may assign, delegate or otherwise transfer any or all of its
rights or obligations under this Agreement to any of its affiliates or to any
successor to its business (by merger, consolidation, sale of stock or assets,
or otherwise); provided that no assignment shall release Revlon from its
obligations and liabilities under this Agreement.
SECTION 2.04 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, understandings and negotiations,
both written and
2
<PAGE>
oral, between the parties with respect to the subject matter of this Agreement.
No representation, inducement, promise, understanding, condition or warranty
not set forth herein has been made or relied upon by either party hereto. No
agreement or understanding modifying or amending this Agreement shall be
binding upon either party hereto unless in writing and signed by a duly
authorized officer thereof.
SECTION 2.05 THIRD PARTIES. Except as otherwise provided herein, this
Agreement is not intended to and shall not confer upon any other Person other
than the parties hereto and their affiliates, any rights or remedies with
respect to the subject matter hereof.
SECTION 2.06 NOTICES. Any notice or other communication required or
permitted hereunder shall be made in writing and shall be delivered personally,
sent by certified or registered mail (postage prepaid), or sent by facsimile
transmission, and shall be deemed given when so delivered personally, sent by
facsimile transmission, or, if mailed, four days after the date of deposit in
the United States mails. All communications hereunder shall be delivered to the
respective parties at the following addresses (or to such other person or at
such other address for a party as shall be specified by like notice, provided
that notices of a change of address shall be effective only upon receipt
thereof):
(c) If to Revlon, to:
Revlon Consumer Products Corporation
625 Madison Avenue
New York, New York 10022
Attention: Vice President and Corporate Secretary
and by telecopy to: (212) 527-5693
(d) If to Buyer, to:
The Cosmetic Center, Inc.
8839 Greenwood Place
Savage, Maryland 20763
Attention: President
and by telecopy to: (301) 497-6728
SECTION 2.07 GOVERNING LAW. The parties hereto agree that all of the
provisions of this Agreement and any questions concerning its interpretation
and enforcement shall be governed by the laws of the State of New York
applicable to agreements executed in New York to be wholly performed in New
York by residents of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and the year first above written.
REVLON CONSUMER PRODUCTS CORPORATION
By: /s/ Robert K. Kretzman
---------------------------------
Name: Robert K. Kretzman
Title: Vice President
THE COSMETIC CENTER, INC.
By: /s/ Bruce E. Stohl
---------------------------------
Name: Bruce E. Stohl
Title: Senior Vice President - Finance
3
<PAGE>
EXHIBIT 10(D)
================================================================================
SERVICES AGREEMENT
BY AND BETWEEN
THE COSMETIC CENTER, INC.
AND
REVLON CONSUMER PRODUCTS CORPORATION
DATED AS OF APRIL 25, 1997
================================================================================
<PAGE>
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement"), dated as of April 25,
1997, is by and between The Cosmetic Center, Inc. ("Cosmetic Center") and
Revlon Consumer Products Corporation ("Revlon"), each a Delaware corporation.
WHEREAS, Cosmetic Center is a majority owned subsidiary of Revlon; and
WHEREAS, Cosmetic Center desires to utilize certain services of Revlon
and, in addition, Revlon is willing to purchase certain goods and services on
behalf of Cosmetic Center;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. SERVICES
1.1 CONTINUING SERVICES. Revlon agrees to provide to Cosmetic Center,
and Cosmetic Center agrees to purchase from Revlon, the following services
(individually a "Continuing Service" and collectively the "Continuing
Services") as and to the extent requested by Cosmetic Center (each of the
subsections below being referred to herein as a "Service Group"):
(a) Revlon's senior executive management personnel for overall
executive advice and services;
(b) Revlon's treasury staff for financial advice and services,
including assistance with respect to matters such as financing,
raising capital, and daily cash management and investment services;
(c) Revlon's legal staff for general legal advice and services,
including assistance with respect to claims which may be asserted or
become the subject of litigation, the preparation and review of
contracts and disclosure documents required by federal laws and
general consultation with respect to legal and administrative
proceedings and matters;
(d) Revlon's human resources staff for advice and assistance with
personnel matters, including, without limitation, wage and salary
administration, employee relations and administration of pension plans
and other employee benefit plans;
(e) Revlon's controller's staff for accounting, bookkeeping and
auditing advice and services, including, without limitation,
assistance in the preparation and review of financial statements, and
assistance in the preparation and review of disclosure documents
required by federal securities laws;
(f) Revlon's tax staff for general tax advice and services,
including, without limitation, assistance in the preparation of
federal, state, local and foreign tax returns;
(g) Revlon's real estate staff for administration and assistance
in matters relating to real estate, including the administration of
real estate leases;
(h) Revlon's management information staff for administration and
assistance in matters relating to management information and computer
systems;
(i) Revlon's corporate information staff for advice and
assistance in matters relating to public relations and investor
relations and in organizational matters associated with stockholders'
meetings and meetings of the board of directors;
(j) Revlon's risk management staff for advice and assistance with
respect to risk management and insurance matters (including, if
appropriate, arranging for Cosmetic Center's participation in Revlon's
insurance plans and policies);
(k) the services of certain hourly employees of Revlon or its
subsidiaries for the performance of warehousing and distribution
functions at Cosmetic Center's leased distribution facility in
Holmdel, New Jersey; and
(l) Revlon security staff for general security services.
1.2 THIRD PARTY SERVICES. Commencing on the date hereof, and for the
term of this Agreement and as agreed upon by Cosmetic Center and Revlon, Revlon
shall provide to Cosmetic Center services purchased by Revlon from third party
providers (the "Third Party Services") as and to the extent requested by
Cosmetic Center, including, but not limited to, insurance coverage and the
services of attorneys, accountants and other consultants.
1.3 LIMITATION OF SERVICES. Notwithstanding any other provision of
this Agreement: Revlon need not make available any service agreed to be
provided herein to the extent doing so would (i) unreasonably interfere with
the performance of services for Revlon by an employee of Revlon or otherwise
cause an unreasonable burden to Revlon or (ii) unreasonably interfere with the
use of or access to any equipment, office space or facility by Revlon or
otherwise cause an unreasonable burden to Revlon. In addition, Revlon need not
make available any service agreed to be provided herein to the extent that
Revlon discontinues such service within its organization.
<PAGE>
1.4 NO EMPLOYMENT RELATIONSHIP: It is understood and agreed that each
of the Revlon staff members and hourly employees providing a Continuing Service
to Cosmetic Center pursuant to this Agreement shall be employed solely and
exclusively by Revlon. Revlon shall have sole authority over the wages, hours
and working conditions of said Revlon staff members and hourly employees, and
shall exclusively supervise the means and manner of their work. It is further
understood and agreed that in providing Continuing Services hereunder, Revlon
shall be considered an independent contractor of Cosmetic Center, and Cosmetic
Center shall not be a single, joint or any other type of employer of any of the
Revlon staff members or hourly employees. Accordingly, Cosmetic Center shall
not be a party to, and shall not be responsible for any obligations or
liabilities under, any express or implied contract, understanding, policy,
practice, representation, pension or welfare benefit plan or trust or
collective bargaining agreement between or involving Revlon and any of its
staff members or hourly employees or labor organizations who represent Revlon
staff members or hourly employees, except to the extent expressly provided
otherwise hereunder including Sections 2.1 and 2.3 relating to payment for all
continuing services and related amounts. Revlon agrees to be solely responsible
for compliance with all applicable laws and other binding legal commitments
with respect to its staff members and hourly employees and any labor
organizations who represent them, and it indemnifies and holds Cosmetic Center,
its officers, directors and employees from and against any and all losses,
liabilities, claims, damages, costs and expenses (including attorneys' fees and
other expenses of litigation) to which such party may become subject arising
out of Revlon's failure to so comply or out of Revlon's employment of said
staff members and hourly employees, except to the extent expressly provided
otherwise herein including Sections 2.1 and 2.3 relating to payment for all
continuing services and related amounts.
SECTION 2. COST OF SERVICES
2.1 COST OF CONTINUING SERVICES. For the Continuing Services provided
by Revlon to Cosmetic Center hereunder, Cosmetic Center shall pay to Revlon the
actual fully burdened cost incurred by Revlon in providing such services. The
actual cost for providing such services shall be determined by considering the
relevant factors, including, without limitation, the time spent by persons
providing the services, the hourly cost of each such person, including any
fringe benefits, and the cost of materials, equipment and overhead, if any,
related to providing such services. The cost of providing warehousing and
distribution services shall include payroll costs plus any contributions to the
pension and welfare benefit plans in which the employees providing such
services participate.
2.2 COST OF THIRD PARTY SERVICES. For the Third Party Services
provided by Revlon to Cosmetic Center hereunder, Cosmetic Center shall pay to
Revlon that portion of amounts due to third party providers of the Third Party
Services as is allocable to the services purchased for and provided to, or for
the benefit of, Cosmetic Center.
2.3 EXPENSES. In addition to the amounts to be paid by Cosmetic Center
pursuant to Sections 2.1 and 2.2, Cosmetic Center shall reimburse Revlon for
the amount of all reasonable out-of-pocket expenses incurred by Revlon in
providing any services hereunder and not otherwise charged to Cosmetic Center
pursuant to Paragraph 2.1 or 2.2. Notwithstanding anything herein to the
contrary, Cosmetic Center agrees to pay Revlon $340,000 within 10 days
following the date hereof, which payment shall be in lieu of reimbursement
for the actual severance costs or expenses incurred by Revlon in connection
with the termination by Revlon of the hourly employees of Revlon and/or its
subsidiaries referred to in Section 1.1(k).
SECTION 3. EMPLOYEE BENEFIT PLANS
COSMETIC CENTER AGREES TO PAY REVLON ANY AND ALL COSTS ASSOCIATED
WITH OR ATTRIBUTABLE TO THE PARTICIPATION OF EMPLOYEES OF COSMETIC CENTER IN
ANY PENSION, HEALTH, SAVINGS OR EMPLOYEE BENEFIT PLAN OF REVLON.
SECTION 4. LIMITATION OF LIABILITY
In providing services hereunder, Revlon shall have a duty to act, and
cause its agents to act, in a reasonably prudent manner. Neither Revlon, nor
any officer, director, employee or agent of Revlon shall be liable to Cosmetic
Center for any error of judgment or for any loss incurred by Cosmetic Center in
connection with the matters to which this Agreement relates, except a loss
resulting from the willful misconduct, bad faith or gross negligence on the
part of Revlon.
SECTION 5. INDEMNITY
Cosmetic Center shall indemnify and hold harmless Revlon, its
officers, directors and employees from and against any and all losses,
liabilities, claims, damages, costs and expenses (including attorney's fees and
other expenses of litigation) to which such party may become subject arising
out of the provision hereunder by Revlon or any third party of services to
Cosmetic Center, provided that such indemnity shall not protect any such party
against any liability to which such person would be subject by reason of
willful misconduct, bad faith or gross negligence.
<PAGE>
SECTION 6. PAYMENT
Cosmetic Center shall pay Revlon any amount due hereunder, including,
without limitation, any amount billed for services, other assistance, expenses
of outside professional services, costs of contribution and administration
with respect to employee benefit plans, any insurance premiums (including
charges for deductibles, self-insurance retensions, retrospective premium
adjustments and similar self-insurance costs) and other reimbursements, within
10 working days of the presentation to Cosmetic Center of an invoice therefor.
SECTION 7. TERM
7.1 TERM. (a) This Agreement shall be continuously in effect until
terminated in whole or in part as to any specific Service Group or Groups on 90
days' prior written notice by Cosmetic Center and on 180 days' prior written
notice by Revlon of its intention to terminate this Agreement or such specific
Service Group or Groups. Notwithstanding anything herein to the contrary, if
there is a change of control (as defined below) of Cosmetic Center at any time
prior to the end of the Term, Revlon may terminate this Agreement upon not less
than 30 days' prior written notice to Cosmetic Center. A "change in control" of
Cosmetic Center for purposes of this Agreement shall be deemed to have taken
place if (A) Revlon together with its affiliates no longer has the power to
vote, directly or indirectly, whether through record or beneficial ownership, a
voting trust arrangement, or other contractual arrangement, a majority of the
voting power of outstanding shares of Cosmetic Center or (B) all or
substantially all of Cosmetic Center's assets are sold to any person other than
an affiliate. For purposes of this Section 7, a "person" includes an
individual, corporation, partnership, trust, association, joint venture, pool,
syndicate, unincorporated organization, joint-stock company, or similar
organization or group acting in concert. A person for these purposes shall be
deemed to be a beneficial owner as that term is used in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended.
(b) Notwithstanding anything to the contrary, Revlon may terminate
this Agreement (A) immediately if Buyer is liquidated or dissolved or adopts a
plan of liquidation or (B) immediately if Buyer shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or otherwise commence any
action or proceeding seeking reorganization, arrangement or readjustment of its
debts or for any other relief under the Federal Bankruptcy Code, as amended, or
under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing, or consent to, approve of, or acquiesce in, any such
petition, action or proceeding; (ii) apply for or acquiesce in the appointment
of a receiver, assignee, liquidator, sequestrator, custodian, trustee or
similar officer for it or for all or any part of its Property; (iii) make an
assignment for the benefit of creditors; or (iv) be unable generally to pay its
debts as they become due; or (C) immediately if an involuntary petition shall
be filed or an action or proceeding otherwise commenced seeking reorganization,
arrangement or readjustment of Buyer's debts or for any other relief under the
Federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing and such
petition, action or proceeding shall not be dismissed within 60 days from such
filing or commencement.
SECTION 8. MISCELLANEOUS
8.1 NOTICE. Any notice or other communication required or permitted
hereunder shall be made in writing and shall be delivered personally, sent by
certified or registered mail (postage prepaid), or sent by facsimile
transmission, and shall be deemed given when so delivered personally, sent by
facsimile transmission, or, if mailed, four days after the date of deposit in
the United States mails, as follows:
To Cosmetic Center: The Cosmetics Center, Inc.
8839 Greenwood Place
Savage, Maryland 20763
Attention: President
To Revlon: Revlon Consumer Products Corporation
625 Madison Avenue
New York, New York 10022
Attention: Vice President and Secretary
8.2 GOVERNING LAW. The validity, interpretation, enforceability and
performance of this Agreement shall be governed by and construed and enforced
in accordance with the law of the State of New York applicable to agreements
executed in New York to be wholly performed in New York by residents of New
York.
8.3 ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
among the parties and supersedes all prior negotiations, undertakings,
representations and agreements, if any, of the parties hereto with respect to
the matters contained herein.
<PAGE>
8.4 AMENDMENTS AND WAIVERS. This Agreement may not be amended except
upon the written consent of the parties hereto. Either party may waive, by
written instrument, compliance by the other party with any term or provision of
this Agreement that such other party was or is obligated to comply with or
perform, provided, however, that such waiver shall not operate as a waiver of,
or estoppel with respect to, any other or subsequent failure. No failure to
exercise and no delay in exercising any right, remedy or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy or power hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy or power provided herein or by law
or in equity. The waiver by any party of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or condition
itself.
8.5 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Neither party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the written consent of the other party hereto, except that
Revlon may assign, delegate or otherwise transfer any or all of its rights or
obligations under this Agreement to any of its affiliates or to any successor
to its business (by merger, consolidation, sale of stock or assets, or
otherwise); provided that no assignment shall release Revlon from its
obligations and liabilities under this Agreement.
8.6 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other persons,
places and circumstances, shall remain in full force and effect.
8.7 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COSMETIC CENTER, INC.
By:/s/ Bruce E. Strohl
------------------------------------
Title: Senior Vice President - Finance
---------------------------------
REVLON CONSUMER PRODUCTS CORPORATION
By:/s/ Robert K. Kretzman
------------------------------------
Title: Vice President
---------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of April 25, 1997, between THE COSMETIC
CENTER, INC., a Delaware corporation (the "Company"), and HOWARD DIENER (the
"Executive").
The Company wishes to employ the Executive, and the Executive wishes
to accept such employment, on the terms and conditions set forth in this
Agreement.
Accordingly, the Company and the Executive hereby agree as follows:
Employment, Duties and Acceptance.
1.1 Employment, Duties. The Company hereby employs the Executive
for the Term (as defined in Section 2.1), to render exclusive and full-time
services to the Company, as chief executive officer of the Company, or in such
other executive position of an equivalent level consistent with the Executive's
business experience and background as may be assigned by the Board of Directors
of the Company, and to perform such other duties consistent with such position
(including service as a director or officer of any affiliate of the Company, if
elected) as may be assigned by the Board of Directors of the Company. The
Executive's title shall be President and Chief Executive Officer, or such other
titles of at least equivalent level consistent with the Executive's duties from
time to time as may be assigned to the Executive by the Board of Directors.
1.2 Acceptance. The Executive hereby accepts such employment and
agrees to render the services described above. During the Term, the Executive
agrees to serve the Company faithfully and to the best of the Executive's
ability, to devote the Executive's entire business time, energy and skill to
such employment, and to use the Executive's best efforts, skill and ability to
promote the Company's interests.
1.3 Location. The duties to be performed by the Executive
hereunder shall be performed primarily at the office of the Company in
Maryland, subject to reasonable travel requirements consistent with the nature
of the Executive's duties from time to time on behalf of the Company.
2. Term of Employment; Certain Post-Term Benefits.
2.1 The Term. The term of the Executive's employment under this
Agreement (the "Term") shall commence on the date hereof (the "Effective Date")
and shall end on such date as is provided pursuant to Section 2.2.
<PAGE>
2.2 End-of-Term Provisions. At any time on or after the second
anniversary of the Effective Date the Company shall have the right to give
written notice of non-renewal of the Term. In the event the Company gives such
notice of non-renewal, the Term automatically shall be extended so that it ends
twelve months after the last day of the month in which the Company gives such
notice. If the Company shall not theretofore have given such notice, from and
after the third anniversary of the Effective Date unless and until the Company
gives written notice of non-renewal as provided in this Section 2.2, the Term
automatically shall be extended day-by-day; upon the giving of such notice by
the Company, the Term automatically shall be extended so that it ends twelve
months after the last day of the month in which the Company gives such notice.
Non-extension of the Term shall not be deemed to be a breach of this Agreement
by the Company for purposes of Section 4.4.
2.3 Special Curtailment. The Term shall end earlier than the date
provided in Section 2.2, if sooner terminated pursuant to Section 4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all services to be rendered
pursuant to this Agreement, the Company agrees to pay the Executive during the
Term a base salary, payable semi-monthly in arrears, at the annual rate of not
less than $ 350,000 during the Term (the "Base Salary"). All payments of Base
Salary or other compensation hereunder shall be less such deductions or
withholdings as are required by applicable law and regulations. In the event
that the Company, in its sole discretion, from time to time determines to
increase the Base Salary, such increased amount shall, from and after the
effective date of the increase, constitute "Base Salary" for purposes of this
Agreement.
3.2 Bonus. In addition to the amounts to be paid to the Executive
pursuant to Section 3.1, the Executive shall receive an annual bonus with a
target award of 50% and a maximum award of 100% of the Executive's Base Salary
at the rate in effect during the calendar year in which bonus is earned, based
upon achievement of objectives set annually not later than February 28 of such
year (and not later than April 30 for the first year of the Term) by the
Compensation Committee of the Board of Directors of the Company. Any such bonus
shall be payable on or before March 30 of the year following the calendar year
in which bonus is earned and shall not be paid unless the Executive is actively
employed by the Company on the date of payment.
3.3 Stock Options. The Executive shall be recommended to the
Compensation Committee or other committee of the Board administering the
Company's 1997 Stock Plan or any plan that may replace it, as from time to time
in effect, to receive an option on the effective date of the merger of Prestige
Fragrance & Cosmetics, Inc., a
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Delaware corporation with and into the Company to purchase 100,000 shares of
the Company's Class C common stock and an option during each subsequent year
during the Term to purchase 50,000 shares of the Company's Class C common
stock, with (i) the initial such grant of options for 100,000 shares to be on
the effective date of merger for a term of 10 years at an option exercise price
equal to the fair market value on the date of grant and with the option not
becoming exercisable until the third anniversary of the date of grant and then
becoming 100% exercisable for the balance of the term of such option, unless
prior thereto the Executive's employment is terminated by the Company otherwise
than for cause pursuant to Section 4.3, in which event the option shall be
exercisable with respect to 25% if termination occurs during the period from
the first to the second anniversaries of the grant date and with respect to 50%
if termination occurs during the period from the second to the third
anniversaries of the grant date and in either case shall remain so exercisable
for one year from the date of such termination and (ii) each subsequent grant
to vest and otherwise be on terms (other than number of shares covered)
substantially the same as other senior executives of the Company generally.
3.4 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable expenses actually incurred or paid by the
Executive during the Term in the performance of the Executive's services under
this Agreement, subject to and in accordance with the Company's applicable
expense reimbursement and related policies and procedures as in effect from
time to time.
3.5 Vacation. During each year of the Term, the Executive shall be
entitled to a vacation period or periods of four weeks taken in accordance with
the vacation policy of the Company as in effect from time to time.
3.6 Fringe Benefits.
(i) During the Term, the Executive shall be entitled to
participate in those qualified and non-qualified defined benefit, defined
contribution, group insurance, medical, dental, disability and other benefit
plans of the Company as from time to time in effect made available to senior
executives of the Company generally. In addition, during the Term the Executive
shall be entitled to the use of a Company-provided automobile in accordance
with the Company's executive automobile policy and guidelines as from time to
time in effect and to the fringe benefits set forth on Schedule 1.
(ii) During the Term, the Company agrees to make available to the
Executive an additional term life insurance policy with a death benefit of
$1,000,000 from time to time, subject to the insurer's satisfaction with the
results of any required medical examination, to which the Executive hereby
agrees to submit, and shall reimburse the Executive for the premium expense
related thereto and gross the Executive up for the tax
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<PAGE>
payable with respect to such reimbursement. Such coverage shall be provided by
the Company and the Executive may designate the beneficiaries of such policy.
4. Termination.
4.1 Death. If the Executive shall die during the Term, the Term
shall terminate and no further amounts or benefits shall be payable hereunder
except pursuant to life insurance provided under Section 3.6.
4.2 Disability. If during the Term the Executive shall become
physically or mentally disabled, whether totally or partially, such that the
Executive is unable to perform the Executive's services hereunder for (i) a
period of six consecutive months or (ii) shorter periods aggregating six months
during any twelve month period, the Company may at any time after the last day
of the six consecutive months of disability or the day on which the shorter
periods of disability shall have equaled an aggregate of six months, by written
notice to the Executive (but before the Executive has returned to active
service following such disability), terminate the Term and no further amounts
or benefits shall be payable hereunder, except that the Executive shall be
entitled to receive until the first to occur of (x) the Executive ceasing to be
disabled or (y) the Executive's attaining the age of 65, continued coverage for
the Executive under the Company paid group life insurance plan (including
supplemental coverage under Section 3.6) and for the Executive and his spouse
and children, if any, under the Company's group medical plan, to the extent
permitted by such plans and to the extent such benefits continue to be provided
to the Company's senior executives generally.
4.3 Cause. In the event of gross neglect by the Executive of the
Executive's duties hereunder, conviction of the Executive of any felony,
conviction of the Executive of any lesser crime or offense involving the
property of the Company or any of its subsidiaries or affiliates, willful
misconduct by the Executive in connection with the performance of the
Executive's duties hereunder or other material breach by the Executive of this
Agreement, or any other conduct on the part of the Executive which would make
the Executive's continued employment by the Company materially prejudicial to
the best interests of the Company, the Company may at any time by written
notice to the Executive terminate the Term and, upon such termination, the
Executive shall be entitled to receive no further amounts or benefits
hereunder, except as required by law.
4.4 Company Breach; Other Termination. In the event of the breach
of any material provision of this Agreement by the Company or the failure of
the Compensation Committee (or other appropriate Committee of the Company's
Board of Directors) to fully implement the Company's recommendation pursuant to
Section 3.3, the Executive shall be entitled to terminate the Term upon 60
days' prior written notice to the Company. In addition, the Company shall be
entitled to terminate the Term at any time and without prior notice otherwise
than pursuant to the provisions of Section 2.2, 4.2 or 4.3. Upon
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such termination by the Executive, or in the event the Company so terminates
the Term otherwise than pursuant to the provisions of Section 2.2, 4.2 or 4.3,
the Company's sole obligation shall be (at the Executive's election by written
notice within 10 days after such termination) either (i) to make payments in
the amounts prescribed by Section 3.1 (less amounts required by law to be
withheld) and to continue the Executive's participation in the group medical
and dental plans of the Company under COBRA at the active employee contribution
rate then in effect, conditioned upon the Executive's execution of a release
and confidentiality agreement satisfactory to the Company in its sole
discretion, in each case until the third anniversary of the date hereof, or
(ii) to pay severance at the Base Salary in effect as of the date of
termination of the Term for a total of twenty-four months (the "Severance
Period") and to continue the Executive's participation in the group medical and
dental plans of the Company under COBRA at the active employee contribution
rate then in effect for the Severance Period conditioned upon the Executive's
execution of a release and confidentiality agreement satisfactory to the
Company in its sole discretion, in each case provided that any compensation
earned by the Executive from other employment or a consultancy shall reduce the
post-employment payments provided for herein and provided further that the
Executive shall cease to be covered by medical and/or dental plans of the
Company at such time as he becomes covered by like plans of another company.
Notwithstanding the foregoing, if during the period that such post-employment
payments are made to the Executive, the Executive undertakes Permanent
Employment (as hereinafter defined), then in lieu of reduction of such payments
as provided in the preceding sentence, within 10 days after the Company
determines that the Executive has undertaken Permanent Employment the Company
shall pay to the Executive a lump sum equal to the lesser of (i) the then
present value (discounted at the rate of 6% per annum from the date of
termination of the Term to the date of such determination) of 50% of the
balance of the payments or (ii) six months' payments at the Base Salary in
effect as of the date of termination of the Term, in either case less amounts
required by law to be withheld, in satisfaction and discharge of any further
obligation pursuant to this Section. For purposes hereof, "Permanent
Employment" shall mean employment undertaken by the Executive (i) pursuant to
an agreement, offer letter or policy which provides for not less than six
months' severance upon termination of such employment otherwise than for cause,
or (ii) which continues with an employer and/or its affiliates for not less
than three months, or (iii) which the Executive elects, by written notice to
the Company, to treat as Permanent Employment for purposes of this Section.
4.5 Litigation Expenses. If the Company and the Executive become
involved in any action, suit or proceeding relating to the alleged breach of
this Agreement by the Company or the Executive, then if and to the extent that
a final judgment in such action, suit or proceeding is rendered in favor of the
Executive, the Company shall reimburse the Executive for all expenses
(including reasonable attorneys' fees) incurred by the Executive in connection
with such action, suit or proceeding or the portion thereof adjudicated in
favor of the Executive. Such costs shall be paid to the Executive promptly upon
presentation of expense statements or other supporting information evidencing
the incurrence of such expenses.
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<PAGE>
5. Protection of Confidential Information; Non-Competition.
5.1 The Executive acknowledges that the Executive's work for the
Company will bring the Executive into close contact with many confidential
affairs of the Company not readily available to the public, including trade
secrets and confidential marketing, sales, product development and other data
and plans which it would be impracticable for the Company to effectively
protect and preserve in the absence of this Section 5 and the disclosure or
misappropriation of which could materially adversely affect the Company.
Accordingly, the Executive agrees:
5.1.1 Except in the course of performing the Executive's duties
provided for in Section 1.1, not at any time, whether during or after the
Executive's employment with the Company, to divulge to any other entity or
person any confidential information acquired by the Executive concerning the
Company's or its affiliates' financial affairs or business processes or methods
or their research, development or marketing programs or plans, any other of its
or their trade secrets, any information regarding personal matters of any
directors, officers, employees or agents of the Company or its affiliates or
their respective family members, or any information concerning the
circumstances of the Executive's employment and any termination of the
Executive's employment with the Company or any information regarding
discussions related to any of the foregoing. The foregoing prohibitions shall
include, without limitation, directly or indirectly publishing (or causing,
participating in, assisting or providing any statement, opinion or information
in connection with the publication of) any diary, memoir, letter, story,
photograph, interview, article, essay, account or description (whether
fictionalized or not) concerning any of the foregoing, publication being deemed
to include any presentation or reproduction of any written, verbal or visual
material in any communication medium, including any book, magazine, newspaper,
theatrical production or movie, or television or radio programming or
commercial. In the event that the Executive is requested or required to make
disclosure of information subject to this Section 5.1.1 under any court order,
subpoena or other judicial process, the Executive will promptly notify the
Company, take all reasonable steps requested by the Company to defend against
the compulsory disclosure and permit the Company to control with counsel of its
choice any proceeding relating to the compulsory disclosure. The Executive
acknowledges that all information the disclosure of which is prohibited by this
section is of a confidential and proprietary character and of great value to
the Company.
5.1.2 To deliver promptly to the Company on termination of the
Executive's employment by the Company, or at any time the Company may so
request, all memoranda, notes, records, reports, manuals, drawings, blueprints
and other documents (and all copies thereof) relating to the Company's business
and all property associated therewith, which the Executive may then possess or
have under the Executive's control.
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<PAGE>
5.2 The Executive shall in all respects fully comply with the
terms of the attached Employee Agreement as to Confidentiality and
Non-Competition (whether or not the Executive is a signatory thereof) during
the term of this Agreement and for the duration of any payments made under
Sections 2.2 or 4.4 with the same effect as if the same were set forth herein
in full.
5.3 If the Executive commits a breach of any of the provisions of
Sections 5.1 or 5.2 hereof, the Company shall have the following rights and
remedies:
5.3.1 The right and remedy to have the provisions of this
Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages and disgorgement
of profits will not provide an adequate remedy to the Company; and
5.3.2 The right and remedy to require the Executive to account for
and pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (collectively "Benefits") derived or received by
the Executive as the result of any transactions constituting a breach of any of
the provisions of Sections 5.1 or 5.2 hereof, and the Executive hereby agrees
to account for and pay over such Benefits to the Company. In addition, if the
Executive attempts or threatens to commit a breach of any of the provisions of
Sections 5.1 or 5.2, the Executive consents to the Company obtaining a
preliminary and a permanent injunction in any court having equity jurisdiction
against the Executive committing the attempted or threatened breach. Each of
the rights and remedies enumerated above shall be independent of the other, and
shall be severally enforceable, and all of such rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity.
5.4 If any of the covenants contained in Sections 5.1, 5.2 or 5.3,
or any part thereof, hereafter are construed to be invalid or unenforceable,
the same shall not affect the remainder of the covenant or covenants, which
shall be given full effect, without regard to the invalid portions.
5.5 If any of the covenants contained in Sections 5.1 or 5.2, or
any part thereof, are held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision so as to be enforceable to the maximum extent permitted by
applicable law and, in its reduced form, said provision shall then be
enforceable.
5.6 The parties hereto intend to and hereby confer jurisdiction to
enforce the
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covenants contained in Sections 5.1, 5.2 and 5.3 upon the courts of any state
within the geographical scope of such covenants. In the event that the courts
of any one or more of such states shall hold such covenants wholly
unenforceable by reason of the breadth of such covenants or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of
any other states within the geographical scope of such covenants as to breaches
of such covenants in such other respective jurisdictions, the above covenants
as they relate to each state being for this purpose severable into diverse and
independent covenants.
5.7 Any termination of the Term or this Agreement shall have no
effect on the continuing operation of this Section 5.
6. Inventions and Patents.
6.1 The Executive agrees that all processes, technologies and
inventions (collectively, "Inventions"), including new contributions,
improvements, ideas and discoveries, whether patentable or not, conceived,
developed, invented or made by him during the Term shall belong to the Company,
provided that such Inventions grew out of the Executive's work with the Company
or any of its subsidiaries or affiliates, are related in any manner to the
business (commercial or experimental) of the Company or any of its subsidiaries
or affiliates or are conceived or made on the Company's time or with the use of
the Company's facilities or materials. The Executive shall further: (a)
promptly disclose such Inventions to the Company; (b) assign to the Company,
without additional compensation, all patent and other rights to such Inventions
for the United States and foreign countries; (c) sign all papers necessary to
carry out the foregoing; and (d) give testimony in support of the Executive's
inventorship.
6.2 If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Executive within two
years after the termination of the Executive's employment by the Company, it is
to be presumed that the Invention was conceived or made during the Term.
6.3 The Executive agrees that the Executive will not assert any
rights to any Invention as having been made or acquired by the Executive prior
to the date of this Agreement, except for Inventions, if any, disclosed to the
Company in writing prior to the date hereof.
7. Intellectual Property.
Notwithstanding and without limitation of Section 6, the Company shall
be the sole owner of all the products and proceeds of the Executive's services
hereunder, including, but not limited to, all materials, ideas, concepts,
formats, suggestions, developments, arrangements, packages, programs and other
intellectual properties that the Executive may acquire, obtain, develop or
create in connection with or during the Term, free and clear of
8
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any claims by the Executive (or anyone claiming under the Executive) of any
kind or character whatsoever (other than the Executive's right to receive
payments hereunder). The Executive shall, at the request of the Company,
execute such assignments, certificates or other instruments as the Company may
from time to time deem necessary or desirable to evidence, establish, maintain,
perfect, protect, enforce or defend its right, title or interest in or to any
such properties.
8. Indemnification.
The Company will indemnify the Executive, to the maximum extent
permitted by applicable law and the Company's by-laws, against all costs,
charges and expenses incurred or sustained by the Executive in connection with
any action, suit or proceeding to which the Executive may be made a party,
brought by any shareholder of the Company directly or derivatively or by any
third party by reason of any act or omission of the Executive as an officer,
director or employee of the Company or of any subsidiary or affiliate of the
Company.
9. Notices.
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, sent by overnight courier or mailed
first class, postage prepaid, by registered or certified mail (notices mailed
shall be deemed to have been given on the date mailed), as follows (or to such
other address as either party shall designate by notice in writing to the other
in accordance herewith):
If to the Company, to:
The Cosmetic Center, Inc.
8839 Greenwood Place
Savage, Maryland 20763
Attention: Senior Vice President - Finance
with copy to:
Revlon Consumer Products Corporation
625 Madison Avenue
New York, New York 10022
Attention: Vice President and Deputy General Counsel
9
<PAGE>
If to the Executive, to her principal residence as reflected in the
records of the Company.
10. General.
10.1 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made between residents thereof and to be performed entirely in New
York. The parties consent and agree to the exclusive jurisdiction of the
federal and state courts sitting in the State of New York for all purposes.
10.2 The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
10.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
10.4 This Agreement, and the Executive's rights and obligations
hereunder, may not be assigned by the Executive. The Company may assign its
rights, together with its obligations, hereunder (i) to any affiliate or (ii)
to third parties in connection with any sale, transfer or other disposition of
all or substantially all of any business or assets in which the Executive's
services are then substantially involved. In any event the obligations of the
Company hereunder shall be binding on its successors or assigns, whether by
merger, consolidation or acquisition of all or substantially all of such
business or assets.
10.5 This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by
either party of the breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
10.6 This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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11. Subsidiaries and Affiliates.
11.1 As used herein, the term "subsidiary" shall mean any
corporation or other business entity controlled directly or indirectly by the
corporation or other business entity in question, and the term "affiliate"
shall mean and include any corporation or other business entity directly or
indirectly controlling, controlled by or under common control with the
corporation or other business entity in question.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COSMETIC CENTER, INC.
By: /s/ Jerry W. Levin
--------------------------
/s/ Howard Diener
--------------------------
Howard Diener
11
<PAGE>
LEASE AGREEMENT
BY AND BETWEEN
PARCEL A-40 ASSOCIATES, LLC
AND
THE COSMETIC CENTER, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page No.
- ------- --------
SECTION 1. PREMISES..................................................... 1
SECTION 2. LEASEHOLD IMPROVEMENTS - USE................................. 1
SECTION 3. TERM......................................................... 2
SECTION 4. RENT......................................................... 3
4.01 BASE RENT........................................ 3
4.02 ADDITIONAL RENT.................................. 4
4.03 PARTIAL MONTH.................................... 10
4.04 PLACE OF PAYMENT................................. 10
4.05 RENT ABATEMENT................................... 10
SECTION 5. AGREEMENTS AND COVENANTS OF LANDLORD......................... 10
5.01 QUIET ENJOYMENT................................. 11
5.02 ROOF & EXTERIOR STRUCTURE WALLS.................. 11
5.03 COMMON AREAS..................................... 11
5.04 PARKING.......................................... 11
5.05 OPERATING SERVICES............................... 11
5.06 INSURANCE........................................ 12
SECTION 6. AGREEMENTS AND COVENANTS OF TENANT; HAZARDOUS SUBSTANCES;
INDEMNITIES.................................................. 12
6.01 USE OF PREMISES.................................. 12
6.02 USE OF GROUNDS................................... 14
6.03 CLEANING AND MAINTENANCE OF PREMISES ............ 15
6.04 UTILITIES........................................ 16
6.05 HAZARDOUS WASTES................................. 17
6.06 VEHICLE RESTRICTIONS............................. 20
6.07 STORAGE RESTRICTIONS............................. 21
6.08 ALTERATIONS & MODIFICATIONS...................... 21
6.09 RELEASE; INDEMNIFICATION......................... 23
6.10 OPERATION OF MACHINERY; NOISE.................... 25
6.11 SIGNS AND AWNINGS................................ 25
6.12 SURRENDER OF PREMISES............................ 25
6.13 RIGHT TO SHOW PREMISES........................... 26
6.14 INSURANCE........................................ 26
6.15 COOPERATION-EXPANSION............................ 27
SECTION 7. PERFORMANCE OF OBLIGATIONS................................... 28
7.01 EVENTS OF DEFAULT................................ 28
7.02 LANDLORD'S REMEDIES.............................. 29
7.03 WAIVER OF NOTICE TO QUIT AND REDEMPTION.......... 31
7.04 ATTORNEY'S FEES; WAIVER.......................... 31
SECTION 8. CASUALTY; TAKING OR OTHER DESTRUCTION OF PREMISES............ 32
8.01 EMINENT DOMAIN................................... 32
8.02 DAMAGE BY FIRE................................... 32
<PAGE>
SECTION 9. GENERAL PROVISIONS........................................... 33
9.01 HOLDING OVER..................................... 33
9.02 ACCESS TO PREMISES............................... 34
9.03 FORCE MAJEURE.................................... 35
9.04 SECURITY DEPOSIT................................. 35
9.05 ESTOPPEL STATEMENT............................... 35
9.06 SUCCESSORS & ASSIGNS............................. 36
9.07 SUBORDINATION/ATTORNMENT/LENDER RIGHTS........... 36
9.08 TENANT'S FINANCIAL CONDITION..................... 38
9.09 USE OF PAVED AREAS............................... 38
9.10 USE OF TRASH REMOVAL SERVICE..................... 38
9.11 ASSIGNMENT OR SUBLETTING......................... 39
9.12 WAIVER OF TRIAL BY JURY.......................... 40
9.13 NO RECORDATION................................... 40
9.14 CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY....... 40
9.15 EXECUTION OF LEASE............................... 40
9.16 RULES AND REGULATIONS............................ 40
9.17 BROKER........................................... 41
9.18 TOPIC HEADINGS................................... 41
9.19 GOVERNING LAW.................................... 41
9.20 NOTICE........................................... 41
9.21 AMENDMENTS....................................... 42
9.22 TIME IS OF THE ESSENCE........................... 42
9.23. LIABILITY........................................ 42
9.24 RIGHT OF FIRST OFFER............................. 43
9.25 RENEWAL OPTION................................... 44
EXHIBITS
Exhibit A - Description of Property and Premises
Exhibit B - Landlord Work Agreement
Exhibit C - Certificate of Lease Commencement
Exhibit D - Diagram of Parking Areas
Exhibit E - Prohibited Chemicals
Exhibit F - Affected Areas
Exhibit G - Form of Waiver of Landlord's Lien
Exhibit H - Form of Non-Disturbance Agreement
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the
first day of June, 1997, by and between PARCEL A-40 ASSOCIATES, LLC, a Maryland
limited liability company (hereinafter called "Landlord"), and THE COSMETIC
CENTER, INC., a Delaware corporation (hereinafter called "Tenant").
For and in consideration of the rents, covenants and conditions
described below and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereinafter
covenant and agree as follows:
SECTION 1. PREMISES. Landlord does hereby lease and demise
to Tenant, and Tenant does hereby rent and lease from Landlord, for the term or
terms and pursuant to the provisions hereinafter specified, approximately two
hundred five thousand three hundred (205,300) square feet of gross leasable
space (referred to hereinafter as the "Premises"), which is a portion of the
building(s) currently existing and located on Landlord's land at Gateway
Commerce Center (the "Property"), in Columbia, Howard County, Maryland,
together with a right to use, in common with others, the Common Areas
(hereinafter defined), other than those portions of the Common Areas which
have been identified and dedicated for the exclusive use of tenants. The
Premises is outlined in red (with diagonal lines) on Exhibit A attached
hereto, but the Premises does not include any basement that exists within
the boundaries of the Premises outlined in red (with diagonal lines) on
Exhibit A attached hereto. A metes and bounds description of the
Property is attached as part of Exhibit A. The determination of the number of
square feet of gross leasable area in the Premises or improvements on the
Property shall be determined by any method of measurement reasonably determined
by Landlord, provided that notwithstanding anything to the contrary contained
in this Lease, for purposes of determining the Base Rent and any Additional
Rent, the Premises (excluding any Offered Space that might become part of the
Premises pursuant to Section 9.24 below) shall be deemed to contain Two Hundred
Thousand (200,000) square feet of gross leasable area. Neither Landlord nor
Tenant shall be entitled to any adjustment of the Premises, the Base Rent, or
Additional Rent based on the actual square footage of the Premises. Tenant
shall have a right of first offer to expand the Premises as set forth in
Section 9.24 below.
SECTION 2. LEASEHOLD IMPROVEMENTS. Landlord agrees that it shall
improve the Premises by performing the following work ("Landlord's Work"):
(i) installation of a demising wall, pit levelers, doors and other work in
the warehouse portion of the Premises as more particularly described in
Schedule 1 of the Landlord Work Agreement attached hereto as Exhibit B
("Landlord's Warehouse Work"); (ii) construction of certain
additional improvements in the warehouse portion of the Premises as more
particularly described in Schedule 2 of the Landlord Work Agreement
("Landlord's Additional Warehouse Work"); and (iii) construction of twenty-five
thousand (25,000) square feet of office space within the
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Premises in accordance with the Landlord Work Agreement ("Landlord's Office
Work"). Landlord will design and construct Landlord's Warehouse Work at
Landlord's cost and expense. Landlord will design and construct Landlord's
Additional Warehouse Work at Tenant's cost and expense. Landlord will provide
Tenant with an allowance of Five Hundred Sixty-Two Thousand Five Hundred
Dollars ($562,500.00) (the "Allowance") to cover the cost of designing and
constructing Landlord's Office Work. If the cost of designing and constructing
Landlord's Office Work is less than the Allowance, such savings shall be
retained by Landlord. If the cost of designing and constructing Landlord's
Office Work exceeds the Allowance, Tenant shall pay such excess in accordance
with the Landlord Work Agreement as Additional Rent. Landlord's Warehouse Work,
Landlord's Additional Warehouse Work, and Landlord's Office Work each shall be
deemed to be substantially completed on the date that Landlord has
substantially completed such portion of Landlord's Work, subject to completion
of "punch list" items, as determined in accordance with the Landlord Work
Agreement. By taking possession of the Premises, Tenant will be deemed to have
accepted the Premises and Landlord's Work and to have waived all claims of
defect in the Premises, subject to completion of punch list items during the
first thirty (30) days following substantial completion of each of the
warehouse and office portions of the Premises, respectively, and correction of
latent defects during the first one hundred eighty (180) days following
substantial completion of each of the warehouse and office portions of the
Premises, respectively. Prior to taking occupancy of each of the warehouse and
office portions of the Premises, Landlord and Tenant shall jointly inspect the
applicable portion of the Premises and jointly prepare a punch list of items to
be completed. During the first month of Tenant's occupancy of each of the
warehouse and office portions of the Premises, respectively, from time to time
at Tenant's request, Landlord and Tenant shall jointly re-inspect the Premises
and jointly update the applicable punch list. If Landlord and Tenant cannot
agree on the punch list, the Architect shall make such determination. Landlord
shall proceed in a commercially reasonable manner to diligently correct or
complete all punch list items. With respect to latent or hidden defects not
discovered during the first thirty (30) days following substantial completion
of each of the warehouse and office portions of the Premises, respectively,
Tenant may give Landlord written notice during the first one hundred eighty
(180) days following substantial completion of each of the warehouse and office
portions of the Premises, respectively, and Landlord shall proceed in a
commercially reasonable manner to diligently correct such latent or hidden
defects as soon as practicable.
SECTION 3. TERM. The term of this Lease shall begin on the June
1, 1997 ("Commencement Date"). Tenant shall be obligated to accept delivery of
the warehouse portion of the Premises when Landlord's Warehouse Work is
substantially completed, even though Landlord's Additional Warehouse Work
and/or Landlord's Office Work is not then substantially completed. The term of
this Lease shall end on the 31st day of May, 2007 (the "Termination Date"),
unless sooner
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terminated as provided herein or extended as set forth in Section 9.25 below.
Tenant agrees that it shall execute the Certificate of Lease Commencement, in
the form attached hereto as Exhibit C, simultaneously with its execution of
this Lease. Execution and delivery of such certificate shall be without
prejudice to Tenant's rights to require Landlord to correct or complete punch
list items and latent or hidden defects pursuant to Section 2.
SECTION 4. RENT.
4.01 BASE RENT. Tenant agrees to pay to Landlord the
amounts set forth below for each year of the original Lease term (the "Base
Rent"), payable without deduction, set-off or demand:
Lease Year Annual Base Rent
---------- ----------------
1 $1,020,000.00
2 $1,020,000.00
3 $1,080,000.00
4 $1,130,000.00
5 $1,130,000.00
6 $1,130,000.00
7 $1,160,000.00
8 $1,160,000.00
9 $1,170,000.00
10 $1,170,000.00
The foregoing amounts shall be paid in equal monthly installments, in advance,
on the first day of each calendar month during such term, plus Additional Rent
(hereinafter defined), as hereinafter set forth; provided that notwithstanding
the foregoing, Base Rent shall not commence with respect to certain portions of
the Premises until the applicable rent commencement dates set forth in Section
4.05 below. The terms Base Rent and Additional Rent and any other amounts
payable by Tenant to Landlord under this Lease are sometimes hereinafter
referred to collectively as the "Rent". The first Lease Year shall run from the
Commencement Date through the last day of the month during which the first
anniversary of the Commencement Date shall occur. Each Lease Year thereafter
shall be a period of twelve (12) full months, commencing on the first day of
the calendar month following the last calendar month of the first Lease Year,
except that the final Lease Year shall end on May 31.
4.02 ADDITIONAL RENT. Tenant hereby agrees to pay to Landlord,
as additional rent, the following amounts, together with all other
amounts Tenant is obligated to pay hereunder (collectively, the "Additional
Rent") in the manner and at such times as stated below:
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(a) Taxes.
(i) Tenant shall pay Landlord, as Additional Rent, its pro-rata
share of any "Taxes" (as defined below) in excess of "Base Year Taxes" (as
defined below). Tenant's pro-rata share shall be determined by multiplying such
Taxes in excess of Base Year Taxes by a fraction, the numerator of which shall
be the number of gross leasable square feet deemed to be contained within the
exterior boundaries of said Premises, which on the date hereof is two hundred
thousand (200,000) square feet, and the denominator of which shall be the then
existing number of square feet of gross leasable area of improvements on the
Property (excluding mezzanine and basement, if any), which on the date hereof
is seven hundred two thousand (702,000) square feet. Initially, Tenant's pro
rata share of Taxes shall be twenty-eight and forty-nine/one-hundredths percent
(28.49%), subject to adjustment in the event Tenant exercises its right to
expand the Premises pursuant to Section 9.24 or Landlord expands the
improvements on the Property. The amount of Tenant's pro-rata share of Taxes
shall be estimated annually by Landlord on the basis of the July 1 - June 30
tax year utilized by the applicable governmental authorities (the "Tax Year")
and written notice thereof shall be given to Tenant for each Tax Year.
Landlord's estimate shall be based on the assessment of the Property by the
taxing authorities and the tax rate which will be in effect during the Tax
Year, and shall be revised during the Tax Year in the event of any change in
the assessment or the tax rate. Tenant shall pay monthly, as Additional Rent,
at the same time as the monthly installment of Base Rent is due, an amount
equal to one-twelfth (1/12) of Tenant's estimated pro-rata annual share of such
Taxes in excess of Base Year Taxes. Tenant's pro rata share of Taxes shall be
reconciled on an annual basis, and Tenant shall promptly pay to Landlord, or
Landlord shall promptly pay or provide credit to Tenant (against the next
installment of Base Rent and Additional Rent coming due), for the difference
between Tenant's pro-rata share of the actual Taxes in excess of Base Year
Taxes and Tenant's estimated monthly payments theretofore paid with respect to
each Tax Year.
(ii) As used in this Lease, the term "Taxes" shall mean all real
estate, franchise, or excise taxes levied upon the Premises, or upon the use or
occupancy of the Premises, or upon any leasehold improvements in the Premises,
or any business conducted at the Premises, or upon this Lease or the Rent
payable hereunder, whether measured on the basis of gross or net rentals,
square footage, or otherwise; other taxes, levies, and assessments imposed upon
the Premises, and upon any personal property of Landlord used solely in the
operation thereof, or upon Landlord's interest in the Premises or such personal
property; charges, fees, and assessments for transit, housing, police, fire,
development districts, or other governmental services or purported benefits to
the Premises or user payments in lieu of taxes; any and all other taxes,
levies, betterments, assessments, and charges
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arising from the ownership, leasing, operating, use or occupancy of the
Premises, or based upon rentals derived therefrom, which are or shall be
imposed by national, state, municipal, quasi-governmental, or other authorities
having jurisdiction over the Premises; and any other tax, excise, fee, levy,
charge or assessment, however described, that may in the future be levied or
assessed as a substitute for, or in addition to, in whole or in part, any tax,
levy or assessment which would otherwise constitute Taxes, whether or not now
customary or in the contemplation of the parties on the date this Lease is
executed. Taxes shall also include expenses of tax abatement or other
proceedings contesting assessments or levies with respect to Taxes payable for
a Tax Year which occurs, in whole or in part, during the term.
(iii) Taxes shall not include any income taxes, corporate
franchise taxes, personal property taxes (other than taxes on personal property
used solely in the operation of the Property), payroll taxes, inheritance
taxes, estate taxes, gift taxes, and recordation and transfer taxes, and real
estate taxes allocable to limited purpose improvements which do not benefit any
tenant in occupancy of any portion of any building on the Property, such as a
microwave, television or radio antenna (the "Limited Purpose Improvements").
(iv) As used in this Lease, the term "Base Year Taxes" shall mean
the Taxes due and payable for the Tax Year ending June 30, 1998. If Landlord
contests the assessment of its real property during the Base Year, Landlord
must at the same time contest its real property assessment for each of the
remaining years of the three (3) year assessment cycle that includes the Base
Year, and if as a result of such contest Base Year Taxes are reduced, Landlord
also shall contest its real property assessment with respect to each year of
the next succeeding three (3) year assessment cycle.
(v) Should the taxing authorities include in the tax base upon
which such Taxes are levied or assessed the value of any improvements made by
Tenant, or of any machinery, equipment, fixtures, inventory or other personal
property or assets of Tenant, then Tenant shall pay the entire Tax attributable
to such items in addition to the portion of such Taxes payable by Tenant as
aforesaid. A tax bill issued by the taxing authority with jurisdiction over the
Property or true copy thereof submitted by Landlord to Tenant shall be evidence
of the amount of Taxes assessed or levied against any leasehold interest
hereunder or any personal property of any kind owned, installed or used by
Tenant on or at the Premises, and shall be presumed to be correct unless
rebutted by clear and convincing evidence to the contrary. If at any time
during the term of this Lease, a Tax is separately imposed on this Lease or the
Premises, whether measured by the Rent expressly reserved under this Lease (or
any other leases or leasehold interests in the Property) or the size of the
Premises or otherwise, as a substitute for or in addition to Taxes assessed or
imposed on land and buildings, the full amount of such Tax shall be paid
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by Tenant as Additional Rent hereunder. If any Tax levied against the land,
buildings or improvements covered hereby, or the Rent reserved under this
Lease, shall be payable in annual installments, only the amount paid or payable
with respect to any Lease Year or Tax Year shall be included in Taxes for that
Lease Year or Tax Year for the purposes of this Section 4.02(a).
(vi) In the event that any Lease Year does not coincide with the
Tax Year applicable to any Taxes payable hereunder, Tenant's pro rata share of
Taxes shall be determined by multiplying the amount of the Taxes for each Tax
Year occurring during the Lease Year by a fraction, the numerator of which
shall be the number of days during the applicable Tax Year which occur during
the Lease Year and the denominator of which shall be three hundred sixty-five
(365); and adding such products together. In the event any governmental
authority with jurisdiction over the Premises changes its Tax Year, or any
Lease Year is more or less than three hundred sixty-five (365) days, Base Year
Taxes shall be equitably adjusted to reflect the change in the Tax Year or the
actual number of days in the Lease Year.
(vii) Landlord represents and warrants all Taxes on the Property,
except current taxes not delinquent, have been paid in full and that the
Property constitutes one tax parcel for the assessment of real property taxes
and assessments. Landlord shall pay all Taxes on a timely basis, before any
interest or penalties accrue thereon. Taxes shall not include any such interest
or penalties. Tenant shall receive credit for its proportionate share of any
refunds or rebates of Taxes paid to Landlord and attributable to the term of
this Lease or any extension thereof, which right shall survive the expiration
of the term of this Lease. After expiration of the term and the payment of all
Rent due to Landlord, any credit shall be paid by Landlord in cash.
(b) Insurance. Tenant shall pay Landlord, as Additional Rent, its
pro-rata share of any insurance premiums (the "Insurance Premiums") paid by
Landlord on account of the Property (other than property damage insurance for
any Limited Purpose Improvements) pursuant to Section 5.06 in excess of the
Insurance Premiums payable by Landlord for the first Lease Year ("Base Year
Insurance Premiums"). Tenant's pro-rata share shall be determined by
multiplying such Insurance Premiums in excess of Base Year Insurance Premiums
by a fraction, the numerator of which shall be the number of gross leasable
square feet deemed to be contained within the exterior boundaries of the
Premises, which on the date hereof is two hundred thousand (200,000) square
feet, and the denominator of which shall be the then existing number of square
feet of gross leasable area of improvements on the Property (excluding
mezzanine and basement, if any), which on the date hereof is seven hundred two
thousand (702,000) square feet. Initially, Tenant's pro rata share of Insurance
Premiums shall be twenty-eight and forty-nine/one-hundredths percent (28.49%),
subject to adjustment in the event Tenant exercises its right to expand the
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Premises pursuant to Section 9.24 or Landlord expands the building(s) on the
Property. The amount of Tenant's pro-rata share of Insurance Premiums for a
particular calendar year shall be estimated annually by Landlord and written
notice thereof shall be given to Tenant for each calendar year. Landlord's
estimate shall be based on the then current bill for Insurance Premiums, and
shall be revised during the year in the event of any change in the Insurance
Premiums. Tenant shall pay monthly, as Additional Rent, at the same time as the
monthly installment of Base Rent, an amount equal to one-twelfth (1/12th) of
Tenant's estimated pro-rata annual share of such Insurance Premiums in excess
of Base Year Insurance Premiums. Tenant's pro rata share of Insurance Premiums
shall be reconciled on an annual basis, and Tenant shall promptly pay to
Landlord, or Landlord shall promptly pay or provide credit to Tenant (against
the next installment of Base Rent and Additional Rent coming due), for the
difference between Tenant's pro-rata share of actual Insurance Premiums in
excess of Base Year Insurance Premiums and Tenant's estimated monthly payments
theretofore paid with respect to each calendar year during the term. If the
last Lease Year does not coincide with a calendar year, the annual Insurance
Premiums and the Base Year Insurance Premiums for such partial calendar years
shall be multiplied by a fraction, the numerator of which shall be the number
of days in such partial calendar year and the denominator of which shall be
three hundred sixty-five (365).
(c) Operating Expenses.
(i) Tenant shall pay, as Additional Rent, its pro-rata share of
the "Operating Expenses" (as defined below). Tenant's pro-rata share shall be
determined by multiplying the total amount of Operating Expenses incurred by
Landlord in any calendar year by a fraction, the numerator of which shall be
the number of gross leasable square feet of space deemed to be contained within
the exterior boundaries of the Premises, which on the date hereof is two
hundred thousand (200,000) square feet, and the denominator of which shall be
the then existing number of square feet of gross leasable area of improvements
on the Property (excluding mezzanine and basement, if any, and excluding the
square footage attributable to any other tenants at the Property that are
maintaining their own Common Area at their own cost and expense), which on the
date hereof is five hundred eighty-two thousand one hundred fifty (582,150)
square feet. Initially, Tenant's pro rata share of Operating Expenses is
thirty-four and thirty-six/one-hundredths percent (34.36%), subject to
adjustment in the event Tenant exercises its right to expand the Premises
pursuant to Section 9.24 or Landlord expands the improvements on the Property.
The amount of Tenant's pro-rata share of Operating Expenses for a particular
calendar year shall be estimated annually by Landlord and written notice
thereof shall be given to Tenant for each calendar year. Landlord's estimate
shall be based on the evidence then available to Landlord with respect to its
Operating Expenses, and shall be revised during the year as better information
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becomes available. Tenant shall pay monthly, as Additional Rent, at the same
time as the monthly installment of Base Rent is due, an amount equal to
one-twelfth (1/12) of Tenant's estimated pro-rata annual share of such
Operating Expenses. Such estimated amount shall be reconciled on an annual
basis and Tenant shall promptly pay to Landlord, or Landlord shall promptly pay
or provide a credit to Tenant (against the next installment of Base Rent and
Additional Rent coming due), for the difference between Tenant's pro-rata share
of the actual Operating Expenses and Tenant's estimated monthly payments
theretofore paid with respect to each calendar year (or portion thereof) during
the term.
(ii) The term "Operating Expenses" shall mean any and all expenses
incurred by Landlord in connection with the operation, management, maintenance
and repair of the Property, including, without limitation: the cost of
maintaining or repairing all service pipes, electric, gas and water lines, and
sewer mains in the Common Areas; all utility charges incurred in operating the
Common Area; the cost of maintaining, operating, repairing, and repaving the
parking areas; gardening and landscaping; water and sewer charges to the extent
not included in Taxes; lighting; security; sanitary control; removal of ice,
snow, trash, rubbish, garbage and other refuse; cleaning; directional signs,
pavement marking, and parking lot striping; depreciation on machinery,
equipment and furnishings used exclusively at the Property in the operation and
maintenance thereof; the cost of personnel to implement such services, to
direct parking, and to police the Common Areas; management and administrative
fees (in an amount not to exceed four percent (4%) of base rents); legal fees;
accounting fees; and other professional fees.
(iii) Operating Expenses shall not include any of the following:
all costs incurred in maintaining, operating or repairing the roof and the
structural elements of the Property or any Limited Purpose Improvements;
expenses for capital improvements made to the Property (except for capital
expenditures to reduce Operating Expenses); expenses incurred by other tenants
at the Property in maintaining their own Common Area, which are not incurred or
paid by Landlord; interest and amortization of funds borrowed by Landlord,
whether secured or unsecured; depreciation of the Property; advertising
expenses incurred in procuring tenants for the Property; salaries, wages or
other compensation paid to officers or executives of Landlord; income, excess
profits, franchise taxes or other such taxes imposed on or measured by the
income of Landlord from the operation of the Property; Taxes; Insurance
Premiums; painting, redecorating or other work which Landlord performs for any
other tenant or prospective tenant in their respective premises which is not
part of the standard maintenance or repair for the Property which Landlord
performs for all tenants without extra charge; repairs or reconstruction
occasioned by fire, windstorm or other casualty or condemnation; repairs,
improvements, electricity, special cleaning or overtime services to the extent
such services are expressly reimbursed to Landlord by tenants (as opposed to
partial
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reimbursement in the nature of rent escalation provisions), separately charged
to and payable by tenants, or compensable by insurance proceeds; leasing
commissions and expenses of procuring tenants, including lease concessions and
lease take-over obligations; rent payable under any lease to which this Lease
is or becomes subject; supervisory personnel or property manager(s) included in
the management fee; enforcement of leases against tenants, including legal
fees; damages payable to tenants or lenders as a result of Landlord's violation
of the terms of any lease (including a ground or underlying lease) of space in
the buildings, or mortgage to which this Lease is subordinate; and testing for,
and clean up of, Hazardous Substances for which GE is responsible under Section
6.05 below or for which Landlord is reimbursed by another tenant at the
Property or by any other third party.
(d) Late Charge. Tenant shall pay, as Additional Rent, a ten percent
(10%) late charge for each monthly payment of Base Rent and Additional Rent for
Taxes, Insurance Premiums, and Operating Expenses received after the tenth
(10th) day of the month for which such payment is due, and for any other
payment of Additional Rent not received by Landlord within ten (10) days of the
date such payment is due; provided that one time per Lease Year such late
charge shall be waived with respect to a late payment of Base Rent and/or
Additional Rent if Tenant makes the required payment in full within five (5)
days of written notice from Landlord that such payment has not been received.
(e) Survival. The covenant of Landlord and Tenant to make adjustment
for items of Additional Rent, as provided above, shall survive termination or
expiration of this Lease. Any payments which Landlord or Tenant shall be
required to make to the other following termination or expiration of this Lease
shall be made as soon as practicable following determination of such
adjustments.
(f) Inspection of Books and Records. Tenant shall have the right, with
respect to each calendar year, to review relevant books and records of Landlord
with respect to the amount of Taxes, Insurance Premiums, and Operating Expenses
incurred by Landlord during such year. Not later than May 1 of each calendar
year during the term, Landlord shall deliver to Tenant a reconciliation in
reasonable detail, with respect to any Additional Rent charged to Tenant in
connection with Taxes, Insurance Premiums, and Operating Charges. Within ninety
(90) days following Tenant's receipt of such reconciliation, Tenant must give
written notice to Landlord of its desire to exercise its right to review such
books and records. Tenant's notice must identify the firm which will conduct
such review on Tenant's behalf, which must either be a "big six" accounting
firm, or an auditing firm under contract to Tenant and/or its affiliates to
conduct their tenant audits in a particular region or for a particular
affiliate or group of affiliates, or permanent employees of Tenant. The review
shall take place, at Landlord's option, at the Property, at any other office of
Landlord in Maryland or Virginia where such books and records are kept, or at
the
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offices of Landlord's accountant in Maryland or Virginia, at a time mutually
agreeable to Landlord and Tenant, within thirty (30) days of Tenant's notice.
The review shall be conducted by the designated firm or employees, and shall be
limited to the immediately preceding calendar year.
4.03 PARTIAL MONTH. In the event that the Lease Commencement
Date shall fall on a day other than the first day of a calendar
month, a proportionate part of the Rent shall be paid in advance at the rate
above specified for the portion of the month in which the term commenced.
Tenant will also pay, at the expiration or other termination of this Lease, a
proportionate part of said Rent for the part, if any, of a month then expired.
4.04 PLACE OF PAYMENT. All payments of Rent shall be made in
lawful money of the United States to Landlord in care of Penrose
Property Company at 8330 Boone Boulevard, Suite 460, Vienna, Virginia 22182 or
in care of such other persons or entities as Landlord shall designate to Tenant
in writing from time to time.
4.05 RENT ABATEMENT.
(a) Base Rent shall commence with respect to the twenty-five
thousand (25,000) square foot office portion of the Premises (at the rate of
Five Dollars Ten Cents ($5.10) per square foot per annum) on the later of (i)
the date substantial completion of Landlord's Office Work has occurred, or in
the case of Tenant Delay (as defined in the Landlord Work Agreement) the date
substantial completion of Landlord's Office Work is deemed to have occurred, as
determined in accordance with the Landlord Work Agreement, or (ii) June 15,
1997.
(b) Base Rent shall commence with respect to one hundred
twenty-five thousand (125,000) square feet of the warehouse portion of the
Premises (at the rate of Five Dollars Ten Cents ($5.10) per square foot per
annum) on June 15, 1997.
(c) Base Rent shall commence with respect to the remaining fifty
thousand (50,000) square feet of the warehouse portion of the Premises (at the
rate of Five Dollars Ten Cents ($5.10) per square foot per annum) on September
15, 1997.
(d) If by August 15, 1997 substantial completion of Landlord's
Office Work and Landlord's Additional Warehouse Work has not occurred, or in
the case of Tenant Delay is not deemed to have occurred, as determined in
accordance with the Landlord Work Agreement, Base Rent shall be suspended for
the entire Premises until substantial completion of Landlord's Office Work and
Landlord's Additional Warehouse Work has occurred, or in the case of Tenant
Delay, is deemed
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to have occurred, in accordance with the Landlord Work Agreement; provided that
the August 15, 1997 date shall be extended pursuant to Section 9.03 if the
delay in achieving substantial completion of Landlord's Office Work and
Landlord's Additional Warehouse Work is due to force majeure conditions.
SECTION 5. AGREEMENTS AND COVENANTS OF LANDLORD. Landlord hereby
covenants and agrees as follows:
5.01 QUIET ENJOYMENT. Tenant shall have the quiet enjoyment of
the Premises during the term of this Lease provided that no Event
of Default by Tenant shall exist and be continuing. Landlord represents and
warrants to Tenant that Landlord is vested with fee simple title to the
Property and Premises and has full right and lawful authority to lease the
Premises to Tenant. Landlord has provided Tenant with a copy of its title
insurance policy.
5.02 ROOF & STRUCTURAL ELEMENTS. Landlord shall maintain in good
condition and repair the roof (exclusive of skylights and signs) and
structural elements (exclusive of plate glass, windows, window glass,
loading docks, doors, pit levelers and related apparatus, bumpers and dock
seals) of the Premises. Landlord shall not be required to make any repairs
necessitated by reason of any negligent act or omission of, or willful or
intentional misconduct of, or breach of this Lease by, Tenant or its
employees or agents, or anyone claiming under or through Tenant, or caused
by any alteration, addition or improvement made by Tenant or anyone
claiming under Tenant, and if Landlord does make any such repairs,
Tenant shall, within ten (10) days of written demand therefor (which demand
shall include reasonable evidence of the costs incurred by Landlord in
connection with such repairs), pay to Landlord the cost thereof as Additional
Rent.
5.03 COMMON AREAS. Landlord shall maintain, or cause to be
maintained, in good condition and repair all areas which are located outside
the walls of any building located within the Property (the "Common Areas").
Any costs incurred by Landlord in maintaining and repairing the Common Areas
pursuant to the previous sentence shall be included as Operating Expenses
of the Property. Landlord shall not be required to make any repairs
necessitated by reason of any negligent act or omission of, willful or
intentional misconduct of, or breach of this Lease by, Tenant or its employees
or agents, or anyone claiming under or through Tenant, or caused by any
alteration, addition or improvement made by Tenant or anyone claiming under
Tenant, and if Landlord does make any such repairs, Tenant shall, within ten
(10) days of written demand therefor (which demand shall include reasonable
evidence of the costs incurred by Landlord in connection with such repairs),
pay to Landlord the cost thereof, as Additional Rent.
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5.04 PARKING. Landlord shall provide for Tenant's exclusive
use the parking spaces for automobiles, the one hundred twenty foot (120') deep
parking spaces for trucks, and the staging areas for loading and unloading
trucks, all as shown on Exhibit D attached hereto and made a part hereof.
5.05 OPERATING SERVICES. Landlord shall provide the following
operating services to the Property: snow removal, parking lot maintenance,
water and sewer and utilities to Common Areas of the Property to the extent
necessary for the operation of the Property, and any other services that
Landlord, in its sole discretion, deems necessary or appropriate. Any cost
incurred by Landlord in providing such operating services shall be included as
Operating Expenses of the Property.
5.06 INSURANCE. Landlord shall maintain for the Property
a primary, non-contributory, "all-risk" policy of property damage insurance
insuring the Property (including the Premises but excluding Tenant's leasehold
improvements and all personal property located at the Premises) in an amount
equal to the full replacement value thereof, less a reasonable deductible. Such
insurance shall contain an express waiver of any right of subrogation and an
express consent to a waiver of right of recovery against Tenant, its employees
and its agents. Landlord shall also maintain during the term of this Lease
comprehensive general liability insurance, with limits of not less than
$5,000,000.00 combined single limit for personal injury, bodily injury, or
property damage or destruction (including loss of use thereof) for any one
occurrence. The cost incurred by Landlord in providing these insurance
coverages shall be included as Insurance Premiums pursuant to Section 4.02(b)
of this Lease.
SECTION 6. AGREEMENTS AND COVENANTS OF TENANT; HAZARDOUS
SUBSTANCES; INDEMNITIES. Tenant hereby covenants and agrees as follows:
6.01 USE OF PREMISES.
(a) Permitted and Prohibited Uses. Tenant will use and occupy the
Premises solely for purposes of storage and distribution of the products and
inventory manufactured, used or sold by Tenant and its affiliates, including
without limitation, perfumes, fragrances, cosmetics and other health and beauty
aid products, and office uses incidental thereto, but only in accordance with
applicable zoning and other municipal regulations; without the prior written
consent of Landlord, the Premises will not be used for any other purpose.
Notwithstanding the foregoing, Tenant shall not store tires, Hazardous
Substances (as defined in Section 6.05(a) below, except to the limited extent
such Hazardous Substances are permitted by Section 6.05(a)), and other
materials that emit noxious fumes or odors, increase fire hazards, or are
deemed to interfere with, be incompatible with, or inconsistent with the use of
the
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Property by other tenants, in Landlord's reasonable discretion. Tenant shall
not use, or suffer or permit the use or occupancy of, or suffer or permit
anything to be done in or anything to be brought into or kept in or about the
Property, the Premises or any part thereof (i) which would violate any of the
covenants, agreements, terms, provisions and conditions of this Lease or any
other document otherwise applicable to, or binding upon, the Premises; (ii) for
any unlawful purposes or in any unlawful manner; (iii) which, in the reasonable
judgment of Landlord shall in any way (A) impair the appearance or reputation
of the Premises, or (B) permit any nuisance or illegal activity of any kind in
the Property or in the Premises. Tenant shall comply with all present and
future laws, ordinances, regulations and orders of the United States of
America, the State of Maryland, Howard County, and any other public or
quasi-public authority having jurisdiction over the Premises; provided that
during the last twelve (12) months of the term of this Lease, Tenant shall not
be required to make any material Alterations (as defined in Section 6.08(b)
below) to the Premises to bring the Premises into compliance with any laws,
ordinances, regulations or orders not in effect on the Commencement Date of
this Lease, if Tenant vacates the Premises and pays all Rent due for the
remainder of the term, as and when due, regardless of whether Landlord relets
the Premises after Tenant vacates the Premises; and provided further, that
nothing herein shall be deemed to excuse Landlord from its obligations under
Sections 2, 5.02, 5.03, 5.05, 6.01(b), 6.05(b), 6.05(c), 6.06 and 8.02. Tenant
represents and warrants to Landlord that Tenant has entered into this Lease
entirely for a business or commercial purpose.
(b) Licenses and Permits. Upon substantial completion of
Landlord's Work, Landlord will obtain and deliver to Tenant the initial
certificate of occupancy or use and occupancy permit for the Premises.
Thereafter, Tenant will obtain any and all permits, licenses and certificates
required by applicable laws or regulations for the use or occupancy of the
Premises by Tenant and provide copies of same to Landlord within five (5) days
of Landlord's request therefor. It is expressly understood and agreed that if
any future law, ordinance, regulation, or order requires a new certificate of
occupancy for the Premises, Tenant will obtain such certificate at Tenant's own
expense. Notwithstanding the foregoing, if the Premises do not qualify for a
certificate of occupancy or other permit because of structural matters,
environmental contamination not caused by Tenant, or its agents, employees,
contractors, or invitees, or the failure of Landlord's Work to conform to
applicable laws or regulations, Landlord will be responsible for the correction
of such items. If any governmental license, permit, registration or approval
shall be required for the proper and lawful conduct of Tenant's business, and
if the failure to secure such license, permit, registration or approval would
in any way materially and adversely affect Landlord, the Premises or Tenant's
ability to perform any of its obligations under this Lease, Tenant, at Tenant's
expense, shall duly procure and thereafter maintain such license, permit,
registration or approval and, following Landlord's request, submit the same to
inspection by Landlord. Tenant, at Tenant's expense, shall at all times
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comply with the terms and conditions of each such license, permit, registration
or approval; provided that during the last twelve (12) months of the term of
this Lease, Tenant shall not be required to make any material Alterations to
the Premises to bring the Premises into compliance with such license, permit,
registration or approval if Tenant vacates the Premises and pays all Rent due
for the remainder of the term, as and when due, regardless of whether Landlord
relets the Premises after Tenant vacates the Premises. Tenant shall furnish all
data and information to governmental authorities and Landlord as may be
requested by such authorities in accordance with legal, regulatory, licensing
or other applicable governmental requirements as they relate to Tenant's use or
occupancy of the Premises, and shall furnish copies of such data and
information to Landlord, to the extent such data and information relates to the
Property. If Tenant indicates to Landlord, at the time such data and
information is provided to Landlord, that the data and information is
confidential, Landlord shall use commercially reasonable efforts to keep such
information confidential.
(c) Prohibited Materials; Property and Activity. Tenant shall not
bring or permit to be brought or kept in or on the Premises (i) any flammable,
combustible or explosive fluid, material, chemical or substances, except for
cosmetics and other inventory stored at the Premises in the ordinary course of
business, and cleaning products and office supplies used in the ordinary course
of business, or (ii) any diesel forklifts, or (iii) any data processing,
electronic, optical or other equipment or property of a delicate, fragile or
vulnerable nature unless the same are housed, shielded and protected against
harm and damage, whether by cleaning or maintenance personnel, radiations or
emanations from other equipment now or hereafter installed in the Premises, or
otherwise. Nor shall Tenant cause or permit any objectionable odors to emanate
from the Premises.
(d) Requirements of Law - Fines and Penalties. Tenant, at its
sole expense, shall comply with all laws, rules, orders and regulations
including, without limitation, all energy-related requirements, of Federal,
State of Maryland and other authorities and with any direction of any public
officer or officers, pursuant to law, which shall impose any duty upon Landlord
or Tenant with respect to, or arising out of, Tenant's use or occupancy of the
Premises and/or the Property. Tenant shall reimburse and compensate Landlord
for all expenditures made by, or damages or fines sustained or incurred by,
Landlord due to nonperformance or noncompliance with, or breach or failure to
observe, any item, covenant, or condition of this Lease upon Tenant's part to
be kept, observed, performed or complied with. If Tenant receives notice of any
violation of law, ordinance, order or regulation applicable to the Premises
and/or the Property, it shall give prompt notice thereof to Landlord.
Notwithstanding the foregoing, nothing in this Lease shall obligate Tenant to
remediate or remove from the Property any Hazardous Substances introduced onto
the Property by GE, Landlord, or any other person or entity other than Tenant,
its agents, employees, contractors, or invitees.
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(e) Damage to Premises. Tenant shall not suffer or permit the
Premises or any fixtures, equipment or utilities therein or serving the same,
to be overloaded, damaged or defaced. Tenant shall not suffer or permit any
employee, contractor, business invitee or visitor to violate any covenant,
agreement, or obligation of Tenant under this Lease.
6.02 USE OF GROUNDS. Tenant shall use the parking lot for cars
and/or trucks and/or tractor trailers owned or used by Tenant and
its employees, customers, and invitees and otherwise in compliance with Section
9.09 below; Tenant shall not permit such cars, trucks or tractor trailers to be
parked on any portion of the Property other than the areas designated therefor
on Exhibit D. Vehicles which are not being used in Tenant's business on a
regular basis (including personal cars used by Tenant's employees, customers
and invitees, which for purposes hereof shall be considered to be used in
connection with Tenant's business) are not permitted to be parked in the
parking lot. All vehicles owned by Tenant, its employees and agents must be
currently registered and licensed, or be subject to towing without notice by
Landlord, the cost of which shall be Additional Rent if Tenant fails to cause
the removal of such vehicles upon Landlord's request. Tenant will not obstruct
the buildings comprising the Property nor allow the same to be obstructed in
any manner. Tenant shall not place, or cause to be placed, anything on the
exterior of the Premises or the Common Areas (including, but not limited to,
raw materials, merchandise, inventory, trash, fences, storage facilities,
rubbish or vending machines) without the prior written consent of Landlord.
6.03 CLEANING AND MAINTENANCE OF PREMISES.
(a) Exterior. Tenant shall keep the windows, plate glass, doors,
loading docks, loading dock covers, pit levelers and related apparatus,
bumpers, dock seals, and signs (if any) neat, clean and in good order and
repair, at Tenant's expense, and shall not store any material or trash of any
nature whatsoever on the exterior of the Property, nor erect any screen or
fence thereon.
(b) Interior. Tenant shall keep the interior of the Premises in a
neat, clean, and sanitary condition at all times, at Tenant's expense.
(c) Electrical & Mechanical Systems. Landlord represents and
warrants that the electrical and mechanical systems installed in the Premises
or on the exterior of the Premises, including, but not limited to, electrical,
plumbing, heating, ventilating, air-conditioning, lighting, doors, sprinkler
systems, security systems and locks, are in good operating condition as of the
Commencement Date of this Lease. Subject to the foregoing representation and
warranty by Landlord, Tenant
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shall maintain in good working order, repair and appearance, at Tenant's
expense, the electrical and mechanical systems installed in the Premises or on
the exterior of the Premises, including, but not limited to, electrical,
plumbing, heating, ventilating, air conditioning, lighting, doors, sprinkler
systems, security systems and locks. Tenant further agrees to have repairs
performed by a qualified tradesperson using the manufacturer's recommended
parts and materials or the substantial equivalent thereof. Tenant further
agrees to enter into a service contract with a qualified contractor for
maintenance of heating, ventilating and air conditioning systems. Tenant may
request that Landlord waive such service contract requirement, but Landlord
shall grant such waiver only if Tenant implements other procedures with respect
to the maintenance of such systems that are satisfactory to Landlord, in its
sole discretion. If such service contract should not be obtainable, Tenant
agrees to have such systems or equipment inspected periodically, but not less
than twice each Lease Year by a qualified tradesperson. Tenant further agrees,
at the request of Landlord, to forward to Landlord evidence of such service
contract work or semi-annual inspections and necessary repairs. Tenant shall
keep all drain lines clear, and not permit the placement of any materials into
drains which would adversely affect the main sewage lines servicing the
property.
(d) Heat. Tenant shall maintain sufficient heat during the winter
months to insure against freezing of the water pipes, sprinkler systems and
bathrooms.
(e) Machinery & Equipment. Tenant shall regularly, at
commercially reasonable intervals, inspect all portions of the Premises, both
interior and exterior, and all machinery and equipment therein, so as to enable
Tenant to promptly detect the need for repairs to any part thereof; shall make
such repairs as Tenant is herein obligated to make, and shall promptly notify
Landlord in writing of the need for any repairs Landlord is obligated to make
pursuant to the provisions of Section 5.02 above.
(f) Janitorial Services and Trash Removal. Tenant shall provide,
at its sole expense, all janitorial services and trash removal services
required in connection with its use of the Premises.
(g) Vacating Premises. Tenant shall keep the Premises in good
order and condition and at the expiration of the term hereof, or at such other
time as Tenant may vacate the Premises, surrender the same in as good condition
and repair as when received, reasonable wear and tear and damage or destruction
by fire or other casualty excepted.
(h) Damage to Premises. All damage or injury to the Premises or
to any part thereof, or to its fixtures, equipment and appurtenances, whether
requiring
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structural or nonstructural repairs, caused by or resulting from the
negligence, wilful or reckless misconduct, or breach of this Lease by Tenant,
Tenant's agents, servants, employees, contractors, customers, invitees or
licensees, shall be repaired promptly, at Tenant's sole cost and expense, by
Tenant subject to Landlord's direction and supervision (and in accordance with
paragraph 6.08 hereof). If Landlord gives Tenant written notice that Tenant
will be required to make any such repairs and Tenant fails within five (5)
business days of the giving of such notice to proceed with due diligence to
arrange for plans, specifications, cost estimates and/or bids and as soon as
practicable thereafter diligently to pursue and make the required repairs, the
same may be made by Landlord, in which event all expenses incurred by Landlord
therefor shall be paid by Tenant to Landlord within ten (10) days of written
demand therefor (which demand shall include reasonable evidence of the costs
incurred by Landlord in connection with such repairs) as Additional Rent.
6.04 UTILITIES. Tenant shall pay charges for (i) all utilities
consumed or used by Tenant during the term hereof, including but not
limited to electricity, gas, fuel, water and sewer, and (ii) telephone services
used on the Premises, as they become due and payable, and shall transfer all
accounts therefor to Tenant's name (if separately metered) at the outset of the
term of this Lease, and shall keep the Premises free and clear of mechanics'
and materialmen's liens. Utilities which are not separately metered shall be
prorated equitably among Tenant and other tenants in the Property by Landlord
based on the proportionate shares used for allocation of Taxes and Insurance,
equitably adjusted for any excess usage requirements of Tenant or other tenants
or users of the Property.
6.05 HAZARDOUS WASTES.
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(a) Environmental Requirements. Tenant shall refrain from using,
storing or placing upon the Premises, any materials which, under federal, state
or local law, statute, ordinance or regulation, or court or administrative
order or decree, or private agreement (hereinafter called "Environmental
Requirements"), require special handling in collection, storage, treatment or
disposal, including but not limited to, any asbestos, PCBs, those substances
described in Exhibit E attached hereto, petroleum and petroleum products, or
other toxic, hazardous or contaminated substances (hereinafter collectively
called "Hazardous Substances"); provided that Tenant shall be permitted to
store cosmetics and other inventory at the Premises (some of which Landlord
acknowledges might contain Hazardous Substances which shall be stored in strict
compliance with all Environmental Requirements) in the ordinary course of
business and use cleaning products and other office supplies in the ordinary
course of business, provided that Tenant strictly complies with all
Environmental Requirements in connection therewith. Tenant hereby indemnifies,
defends, and saves Landlord harmless from all liabilities and claims arising
from the use, storage or placement of any Hazardous Substances upon the
Premises or elsewhere within the Property (if brought or placed thereon by
Tenant, its agents, employees, contractors or invitees); and Tenant shall (i)
within twenty-one (21) days after written notice thereof, take or cause to be
taken, at its sole expense, such actions as may be necessary to comply with all
Environmental Requirements, and (ii) within twenty-one (21) days after written
demand therefor, pay Landlord, as Additional Rent, any amounts incurred by
Landlord to comply with any Environmental Requirements with respect to the
Premises or with respect to any other portions of the Property as the result of
the placement or storage of Hazardous Substances by Tenant, its agents,
employees, contractors or invitees, or in connection with any judicial or
administrative investigation or proceeding relating thereto, including, without
limitation, reasonable attorneys' fees, fines or other penalty payments. The
indemnification set forth herein shall forever survive the expiration or
earlier termination of this Lease. If Tenant has violated the Environmental
Requirements as determined by any governmental agency, body, or court, or if
Landlord obtains and delivers to Tenant a report prepared by an engineer or
other party engaged in the business of testing and determining the existence of
Hazardous Substances, which report demonstrates that there are Hazardous
Substances used, stored or placed upon the Premises by Tenant, its agents,
employees, contractors or invitees, in violation of this Lease or any
Environmental Requirements, then Landlord shall have the right and option, if
such Hazardous Substances are not removed or brought into compliance with all
Environmental Requirements within twenty-one (21) days after written notice
thereof to Tenant, to remove such Hazardous Substances or bring such Hazardous
Substances into compliance with the Environmental Requirements (provided that
such notice and grace period shall not be required in an emergency), and to
exercise any other rights and remedies available under Section 7.02 of this
Lease. During such twenty-one (21) day period, Tenant shall have the
opportunity to cause such report prepared on Landlord's behalf to be reviewed
by Tenant's own
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environmental consultants, and if the Tenant's consultant disagrees with the
information or conclusions contained in Landlord's report, to cause its
consultant to deliver a report to Landlord stating the reasons for the
disagreement. Landlord and Tenant shall use their best efforts to reconcile the
conflicting reports, but if Landlord or its environmental consultants
reasonably continue to believe that Tenant, or its agents, employees,
contractors, or invitees have violated any Environmental Requirements, then
Landlord shall have all rights and remedies available under this Section
6.05(a) or Section 7.02 of this Lease, subject to Tenant's right to defend.
(b) Access. The parties to this Lease acknowledge that the
Environmental Protection Agency ("EPA") has issued a RCRA Corrective Action
Permit No. MDD046279311 (the "Permit") to General Electric Company ("GE"), a
previous owner of the Property. The Permit requires GE, as the responsible
party, to investigate and, where required, remediate certain Hazardous
Substances that were placed on the Property while GE owned the Property. GE has
covenanted to, and agreed with, Landlord that GE will perform all
investigations, studies and remedial activities necessary to comply with the
Permit and to remediate certain Hazardous Substances placed on the Property in
violation of any Environmental Requirements while GE owned the Property
(collectively, the "Remediation Activities"). GE has also agreed to indemnify
Landlord with respect to Hazardous Substances introduced onto the Property by
GE pursuant to a certain Indemnification Agreement between GE and Landlord
dated April 25, 1996 (the "GE Indemnity"), a copy of which has been delivered
to Tenant subject to the understanding that its terms and provisions be kept
confidential. Landlord covenants that if GE fails to comply with the Permit, or
to complete all Remediation Activities, or to comply with the provisions of the
GE Indemnity, Landlord will take all commercially reasonable action necessary
to require GE to comply with the Permit, to complete all Remediation
Activities, and to comply with the provisions of the GE Indemnity. Landlord
shall indemnify, defend, and hold harmless Tenant from any direct out of pocket
cost or expense (excluding any lost profits or other indirect, special or
consequential damages) incurred by Tenant as a result of GE's failure to comply
with the Permit, to perform all Remediation Activities, and to comply with the
GE Indemnity, to the same extent that Landlord is entitled to be indemnified by
GE pursuant to the GE Indemnity, and subject to the same limitations set forth
in the GE Indemnity. The foregoing indemnity is a personal obligation of the
original Landlord and any purchaser of the Property other than a purchaser as a
result of a foreclosure action or deed in lieu of foreclosure. No party that
becomes the successor Landlord hereunder as a result of a foreclosure action or
deed in lieu of foreclosure shall have any obligation with respect to such
indemnity. However, the personal obligation with respect to such indemnity of
the original Landlord and any purchaser of the Property other than a purchaser
as a result of a foreclosure action or deed in lieu of foreclosure shall
survive any transfer of title. EMG, an environmental consulting firm located in
Baltimore, Maryland, has advised Landlord that there is no human health threat
to Landlord or Tenant as a result of GE's prior activities or the Remediation
Activities covered by the Permit. Neither EPA nor any other governmental
authority has provided Landlord with any notice that there is a human health
threat to Landlord or Tenant as a result of
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GE's prior actions or the Remediation Activities, or that any use of the
Premises should be limited while the Remediation Activities are pending. In
order to permit GE to monitor and complete any Remediation Activities required
by EPA, Landlord has agreed with GE that it will provide access to GE to
certain monitoring wells within the Property and the Premises (each of which is
circular in shape, and has a diameter of less than one foot) shown on the
diagram attached hereto as Exhibit F (the "Affected Areas"). Tenant hereby
grants to GE the right to enter upon the Premises and other portions of the
Property for the purpose of reasonable ingress and egress to and from the
Affected Areas and the performance of any and all Remediation Activities,
subject to the following limitations:
(i) Prior to entry of the Property for any reason, GE has
agreed to so advise Landlord at least fourteen (14) days in advance, which
notice shall include a description of the work or activity to be performed, the
location of the work or activity, and the time of day such work or activity
will be performed (with all reasonable efforts to be made by GE to have such
work or activity performed during non-traditional or "off-peak" working hours
or other hours acceptable to Tenant). For emergencies or other good cause which
would preclude GE from giving such fourteen (14) day prior written notice, GE
shall give notice to Landlord as soon as practical. Landlord agrees to promptly
notify Tenant whenever it receives notice from GE, and promptly to provide
Tenant with copies of any written notice Landlord receives from GE with respect
to GE's entry onto the Premises.
(ii) In conducting its Remediation Activities, GE has agreed
to use all reasonable and diligent efforts to minimize disruption of or
interference with any of Tenant's activities on the Property. Landlord will
take all commercially reasonable action to require GE to comply with such
agreement. If as a result of GE's Remediation Activities Tenant is required to
close its operations at the Premises for more than four (4) hours, Tenant may
bring legal action against GE, and, if GE is thereby in default under the GE
Indemnity, Landlord will take all commercially reasonable action to cooperate
with Tenant in bringing such action, including joining such action as a party,
if necessary. In addition, if as a result of GE's Remediation Activities Tenant
is unable to use five (5) or more of its loading docks, or twenty-five thousand
(25,000) square feet or more of its Premises, for five (5) consecutive business
days or more, a just and proportionate part of the Rent, based on the portion
of the Premises rendered unusable, shall be suspended and abated from such
fifth (5th) business day until such use is restored.
(c) Placement of Fixtures. Tenant agrees that it shall not place
fixtures or equipment or inventory that can not be easily moved (i.e.,
equipment or
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inventory that can not be moved either by hand or by fork lift or other similar
equipment) in any location which would materially restrict GE's access to the
Affected Areas as shown on Exhibit F to perform its activities. To the extent
that GE's performance of its activities requires that equipment and/or
inventory be relocated, GE has agreed, at its cost and expense, to move such
equipment and/or inventory and promptly and diligently restore any disturbed
area to its original condition and relocate such equipment and/or inventory to
its proper location when finished. Landlord will take all commercially
reasonable action to require GE to comply with such agreement. Tenant agrees
that it will not make or permit any alterations, modifications or improvements
to the Premises that would materially impair GE's access to the Affected Areas.
(d) Cooperation and Communication. Tenant agrees to cooperate
with any reasonable request of Landlord or GE to facilitate GE's completion of
the Remediation Activities.
6.06 VEHICLE RESTRICTIONS.
(a) Parking Lot. Tenant shall be liable for damage to asphalt
pavings, walkways, and adjoining areas caused by any spillage or leakage of
gas, oil or any solvent caused by Tenant, or its agents, employees,
contractors, or invitees, or anyone claiming under or through Tenant. Tenant
agrees that parking areas are not to be used for the storage of tractor
trailers, except in areas designated by Landlord in Exhibit D attached hereto.
Tenant will take all reasonably necessary steps to see that the supports for
any trailer that is disconnected and/or parked in areas designated by Landlord
do not cause damage to the asphalt pavement. Tenant is responsible for the cost
of repairing any damage to the paved area of the Property, or the areas
adjacent thereto, including all parking areas, landscaped areas, access drives
and entrance drives where such damage is caused by Tenant, or its employees,
contractors, or invitees, or anyone claiming under or through Tenant, unless
such damage is caused by Landlord's failure to construct (i) the primary truck
pad for longer trucks which is a part of Landlord's Warehouse Work, and which
shall run the length of the dock doors serving the Premises, be eight (8) feet
wide, and begin thirty-three (33) feet from the edge of the docks at the
Premises, or (ii) an optional secondary truck pad for shorter trucks which is
not part of Landlord's Warehouse Work, but which, if constructed, would be
located within thirty-three (33) feet from the edge of the docks at the
Premises. Tenant shall pay Landlord, as Additional Rent, the cost incurred by
Landlord of any such repairs for which Tenant is responsible within ten (10)
days of written demand therefor (which demand shall include reasonable evidence
of the costs incurred by Landlord in connection with such repairs).
(b) Premises. Tenant shall protect the floor of the Premises from
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damage, subject to ordinary wear and tear. Tenant is responsible for the cost
of repairing any damages to the concrete floor of the Premises and shall pay
Landlord, as Additional Rent, the cost of such repairs within five (5) days of
written demand therefor (which demand shall include reasonable evidence of the
costs incurred by Landlord in connection with such repairs).
6.07 STORAGE RESTRICTIONS. Tenant shall not store any materials or
equipment (including, without limitation, vehicles) on the outside of the
building(s) that comprise the Property, without the prior written consent
of Landlord.
6.08 ALTERATIONS & MODIFICATIONS.
(a) Mandatory Alterations. Subject to compliance with the
remaining provisions of this Section 6.08, Tenant shall make, at Tenant's
expense, (i) such alterations, modifications, and improvements to the Premises
as may be required by the building codes or other applicable laws, rules,
ordinances or regulations in effect in the jurisdiction in which the Premises
are located, or by Landlord's insurance carrier to avoid cancellation or
increase in the rate(s) of Landlord's insurance or to secure adequate
additional insurance coverage, and (ii) such alterations, modifications,
additions, installations or improvements to the Premises as may be required for
the safety and health of Tenant's employees, pursuant to the William-Steiger
Occupational Safety and Health Act of 1970 (OSHA) and the equivalent Maryland
statutes (MOSHA), as the same may be amended or implemented from time to time,
unless such alterations, modifications, additions, installations or
improvements described in clause (i) or (ii) hereof are required in order to
obtain the initial certificate of occupancy or use and occupancy permit, or are
required by reason of the Remediation Activities or the introduction of
Hazardous Substances onto the Property by GE, Landlord, or any person or entity
other than Tenant, its agents, employees, contractors, or invitees, or relate
to the roof or structural walls, or are required as a result of any defect in
the Landlord's Work not waived pursuant to Section 2 of the Lease, except to
the extent any change in the roof or structural walls is required solely
because of any special use being made of the Premises by Tenant.
Notwithstanding the foregoing, during the last twelve (12) months of the term
of this Lease, Tenant shall not be required to make any material Alterations to
the Premises to bring the Premises into compliance with any of the legal
requirements described in this Section 6.08(a) not in effect on the
Commencement Date of this Lease, if Tenant vacates the Premises and pays all
Rent due for the remainder of the term as and when due, regardless of whether
Landlord relets the Premises after Tenant vacates the Premises.
(b) Restrictions or Alterations. Tenant will not make or permit
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anyone to make any alterations, decorations (other than decorations reasonably
and customarily made in connection with Tenant's business), additions or
improvements (collectively "Alterations"), structural or otherwise, in or to
the Premises, without the prior written consent of Landlord (which consent
shall not be unreasonably withheld, conditioned, or delayed) and then only
those made by contractors or mechanics approved by Landlord (which approval
shall not be unreasonably withheld, conditioned, or delayed). All of such
approved Alterations done by Tenant shall be at its sole expense and shall at
all times comply with (i) laws, rules, orders and regulations of governmental
authorities having jurisdiction thereof; (ii) orders, Rules and Regulations of
any Board of Fire Underwriters, or any other body hereafter constituted
exercising similar functions, and governing insurance rating bureaus; (iii)
rules and regulations of Landlord promulgated in the ordinary course of
business and consistently applied to all tenants of the Property; and (iv)
plans and specifications prepared by and at the expense of Tenant theretofore
submitted to and approved by Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed. No installations or work shall be undertaken
or begun by Tenant until (A) Landlord has approved written plans and
specifications therefor; (B) Tenant has made provision for either written
waivers of liens from all contractors, laborers and suppliers of materials for
such installations or work, the filing of lien bonds on behalf of such
contractors, laborers and suppliers if the estimated cost of the work will
exceed Two Hundred Fifty Thousand Dollars ($250,000), or other appropriate
protective measures reasonably approved by Landlord; and (C) Tenant shall have
secured all necessary building and other permits. No amendments or additions to
such plans and specifications shall be made without the prior written consent
of Landlord, which consent shall not be unreasonably withheld, conditioned, or
delayed. Landlord shall respond to requests for approval of any plans and
specifications, or modifications thereof, or contractors or mechanics, within
ten (10) business days of its receipt of a written request for approval.
Landlord's failure to respond within ten (10) business days shall be deemed to
be an approval of the request.
(c) Mechanic's Liens. If, notwithstanding the foregoing, any
action to maintain a mechanic's or materialman's lien is filed against the
Premises or any part thereof for work claimed to have been done for, or
materials claimed to have been furnished to, Tenant, such action shall be
contested by Tenant and if such lien is permitted to attach to the Premises or
the Property such lien shall be discharged by Tenant within ten (10) days
thereafter, at Tenant's sole cost and expense, by the payment thereof or by
filing any bond required by law. If Tenant shall fail to so discharge any such
mechanic's or materialman's lien, Landlord may, at its option, discharge the
same and treat the cost thereof as Additional Rent payable within five (5) days
of demand therefor; it being hereby expressly covenanted and agreed that such
discharge by Landlord shall not be deemed to waive or release the default of
Tenant in not discharging the same. It is understood and agreed that in the
event Landlord shall give its written consent to Tenant's making any such
Alterations, such
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written consent shall not be deemed to be an agreement or consent by Landlord
to subject Landlord's interest in the Premises to any mechanic's or
materialman's liens which may be filed in respect of any such Alterations made
by or on behalf of Tenant and not on behalf of Landlord.
(d) Indemnification. Tenant will indemnify, defend, and hold
Landlord harmless from and against any and all expenses, liens, claims or
damages to person or property which arise by reason of the making of any such
Alterations. If any such Alteration is made without the prior written consent
of Landlord, Landlord gives Tenant written notice that Tenant will be required
to correct and remove such unauthorized Alteration, and Tenant fails within
five (5) business days of the giving of such notice to proceed with due
diligence to arrange for plans, specifications, cost estimates and/or bids, and
as soon as practicable thereafter diligently to pursue and complete the
required correction and removal, Landlord may correct or remove the same
(provided that such notice and grace period shall not be required in an
emergency), and any and all expenses incurred by Landlord in the performance of
this work shall be Additional Rent payable by Tenant within five (5) days of
written demand therefor (which demand shall include reasonable evidence of the
costs incurred by Landlord in connection with such correction or removal). All
Alterations in or to the Premises made by either party shall immediately become
the property of Landlord and shall remain upon and be surrendered with the
Premises as a part thereof at the end of the term hereof without disturbance,
molestation or injury; provided, however, Tenant shall have the right to
remove, prior to the expiration of the Term of this Lease, all racking, movable
furniture, movable furnishings, or movable equipment installed in the Premises
at the expense of Tenant which by law are not fixtures or part of the Premises
and which shall be deemed to be the property of Tenant except as set forth in
the next sentence. If such property of Tenant is not removed by Tenant on or
prior to the expiration or termination of this Lease, the same shall become the
property of Landlord and shall be surrendered with the Premises as a part
thereof at the end of the term of this Lease (as may be extended) unless their
removal was required at the time Landlord approved a particular Alteration.
6.09 RELEASE; INDEMNIFICATION.
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(a) No Liability. Landlord shall not be liable to Tenant, its
employees, agents, contractors, business invitees, licensees, customers,
clients, family members, guests, or any other person claiming under or through
Tenant, for any damage, compensation or claim arising from (i) the necessity of
repairing any portion of the Premises, (ii) the interruption in the use of the
Premises, (iii) accident or damage resulting from the use or operation (by
Landlord, Tenant, or any other person or persons whatsoever) of elevators or
heating, air-conditioning, electrical or plumbing equipment or apparatus, (iv)
the termination of this Lease by reason of the destruction of the Premises, (v)
from any fire, robbery, theft, mysterious disappearance and/or any other
casualty, (vi) any personal injury arising from the use, occupancy and
condition of the Premises, (vii) any suspension or curtailment of utility
services or systems, (viii) any failure to provide a security system or
security services, (ix) any defect in the Premises or the Property, (x) any
equipment or appurtenances requiring repair; (xi) the bursting, leaking, or
running of any sprinkler, water or drainage line, tank, wash stand, water
closet, waste pipe, drain or any other pipe or tank in, upon, or about the
Premises; (xii) the backing up of any sewer pipe or roof drain; (v) the escape
of steam or hot water; (xiii) water, snow, or ice being upon or coming through
the roof, skylight, or any other place upon or near the Property, Premises or
otherwise; (xiv) the falling of any fixture, plaster, or skylight; (xv) broken
glass; or (xvi) any act or omission of co-tenants or other occupants of the
Property or of adjoining or contiguous property or buildings, unless any of the
foregoing is caused by the gross negligence or reckless or willful misconduct
of Landlord. In no event shall Landlord or its agents or employees have any
liability to Tenant for lost profits or any consequential damages whatsoever,
or for any damage caused by other occupants of the Premises or any other person
claiming under or through Tenant, or their agents or employees, or for any
damage caused by governmental or quasi-governmental authorities or public
utilities, or their agents or employees. Tenant shall not be entitled to any
abatement or diminution of Rent as a result of any of the foregoing
occurrences, except to the extent Tenant is entitled to an abatement as a
result of a casualty pursuant to Section 8.02 below or as a result of certain
actions of Landlord pursuant to Sections 6.05(b), 6.15 and 9.02 hereof, nor
shall the same release Tenant from its obligations hereunder or constitute an
eviction. Any goods, property or personal effects of Tenant, its employees,
agents, contractors, business invitees, licensees, customers, clients, family
members or guests, stored or placed in or about the Premises shall be at their
risk, and Landlord shall not in any manner be held responsible therefor, unless
caused by the gross negligence or reckless or willful misconduct of Landlord.
Tenant acknowledges that Landlord will not carry insurance on Tenant's
furniture, furnishings, fixtures, equipment and/or improvements in or to the
Premises. It is expressly understood and agreed that Tenant shall look to its
business interruption and property damage insurance policies, and not to
Landlord or its agents or employees, for reimbursement for any damages or
losses incurred as a result of any of the foregoing occurrences, and that said
policies must contain waiver of subrogation clauses. Although the risk of loss
for
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these matters has been allocated to Tenant and its insurance policies, nothing
in this Section 6.09(a) shall be deemed to release Landlord from its
performance obligations under Sections 2, 5.02, 5.03, 5.05, 6.01(b), 6.05(b)
6.05(c) 6.06, and 8.02 of this Lease.
(b) Tenant's Indemnity. Subject to the limitations on the right
of recovery described in Section 6.14(d) below, Tenant hereby agrees to
indemnify, defend, and hold Landlord harmless from and against any cost,
damage, claim, liability or expense (including reasonable attorneys' fees)
incurred by or claimed against Landlord, directly or indirectly, which is
occasioned by or results from (i) any default by Tenant hereunder, (ii) any
act, omission, fault, negligence or misconduct on the part of Tenant, its
agents, employees, contractors, or invitees, or (iii) from Tenant's use and
occupancy of the Premises, except to the extent such cost, damage, claim,
liability or expense is caused by the negligent acts or omissions of Landlord
or its agents, employees, contractors or invitees. Landlord shall give Tenant
written notice when it becomes aware of a claim against Landlord which is
covered by this Section 6.09(b), and shall cooperate with Tenant as may
reasonably be required in connection with any appropriate actions taken by
Tenant to contest a third party claim. Any cost, damage, claim, liability or
expense incurred by Landlord for which Tenant is obligated to pay Landlord
pursuant to this Section 6.09(b) shall be deemed Additional Rent due and
payable within ten (10) days after notice to Tenant that payment is due. Such
notice shall include copies of any bills, invoices, or other evidence of the
amount of any such cost, damage, claim, liability or expense incurred by
Landlord. It is expressly understood and agreed that Tenant's liability under
this Section 6.09(b) extends to the acts and omissions of any subtenant and any
agent, employee, contractor, or invitee, of any subtenant, but not to the acts
or omissions of Landlord, or Landlord's employees, agents or contractors or
other parties for whom Landlord is legally responsible.
(c) Landlord's Indemnity. Subject to the limitations set forth in
Section 6.09(a) and with respect to the right of recovery as set forth in
Section 6.14(d) below, Landlord hereby agrees to indemnify, defend, and hold
Tenant harmless from and against any cost, damage, claim, liability or expense
(including reasonable attorneys' fees) incurred by or claimed against Tenant
which is occasioned by or results from (i) any default by Landlord hereunder,
or (ii) any act, omission, fault, negligence or misconduct on the part of
Landlord or its agents, employees, contractors, or other parties for whom
Landlord is legally responsible, except to the extent caused by the negligent
acts or omissions of Tenant or its agents, employees, contractors or invitees.
Tenant shall give Landlord written notice when it becomes aware of a claim
against Tenant which is covered by this Section 6.09(c), and shall cooperate
with Landlord as may reasonably be required in connection with any appropriate
actions taken by Tenant to contest a third party claim.
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6.10 OPERATION OF MACHINERY; NOISE. Tenant shall not operate any
machinery on the Premises which may cause excessive vibration, noise or
damage to the Premises or the exterior of the Premises and shall not use a
loud speaker or generate sounds which can be heard outside the Premises.
6.11 SIGNS AND AWNINGS. Tenant shall have the right, at its sole
expense, to install a sign on the exterior of its Premises, subject to
Landlord's reasonable approval. Any such sign shall comply with all
ordinances, regulations, and requirements of Howard County, Gateway Commerce
Center, and other applicable authorities. Tenant shall not place any other
exterior signs or awnings upon the Premises or place any signs or posters on
the interiors of any windows or change the color of the exterior painting,
without obtaining Landlord's prior written approval, which approval shall not
be unreasonably withheld, conditioned, or delayed.
6.12 SURRENDER OF PREMISES. Tenant shall quit and surrender the
Premises upon the termination hereof and surrender the Premises to Landlord
at that time, together with any fixtures thereon, broom clean, in good
condition and repair, reasonable wear and tear and damage or destruction by
fire or other casualty excepted, and shall remove from the
Premises at the expiration or other termination of this Lease, all personal
property, goods and personal effects not belonging to Landlord, and repair any
damage caused by such removal, all at Tenant's sole cost and expense. If Tenant
shall fail to perform any of the foregoing obligations, Landlord may, at its
option, (i) retain such property as the exclusive property of Landlord, (ii)
remove and store such property at the expense of Tenant, or (iii) dispose of
such property at a private sale or auction. In the event Landlord elects to
sell such property at a private sale or auction, the proceeds thereof may be
applied by Landlord against any amounts of Rent due hereunder or toward the
expense thus incurred in selling such items, and Tenant agrees to promptly pay
to Landlord the difference (if any) between the cost of conducting such sale
(including attorney's fees) and the proceeds of such sale. Tenant shall
indemnify, defend and hold harmless Landlord against all loss or liability
incurred by Landlord resulting from any delay by Tenant in surrendering the
Premises in accordance with this Section, including, without limitation, any
loss of rent.
6.13 RIGHT TO SHOW PREMISES. Tenant shall permit Landlord access to
the Premises in accordance with Section 9.02 below.
6.14 INSURANCE.
(a) Required Insurance. Tenant shall obtain and pay premiums for,
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and at all times during the term hereof maintain in effect, at Tenant's sole
cost and expense: (i) standard fire and extended coverage insurance, with
flood, malicious mischief and vandalism endorsements covering (A) Tenant's
fixtures, furnishings and equipment installed in or about the Premises, (B) all
partitions, mechanical, electrical, plumbing, floor covering or similar
installations made by Tenant, if any, under the authority and provisions of the
Lease, (C) all alterations, additions, modifications, improvements,
installations and changes to the Premises made by Tenant or for Tenant's
account as permitted hereunder, and (D) all of Tenant's inventory and other
personal property, in an amount equal to the full insurable value of all such
items (i.e., replacement values without regard to depreciation); (ii) public
liability insurance protecting both Landlord and Tenant with limits of at least
Five Million Dollars ($5,000,000) for each occurrence and Five Million Dollars
($5,000,000) in the aggregate and which includes property damage liability
coverage; (iii) business interruption insurance in an amount sufficient to
cover temporary relocation and Rent and other expenses for up to one (1) year;
and (iv) worker's compensation or similar insurance affording statutory
coverage and containing statutory limits. Such coverages may be provided by
blanket policies. Tenant shall name as an additional insured on any liability
policy maintained by Tenant pursuant to this Section 6.14 Landlord and any
other parties in interest from time to time designated in writing by notice
from Landlord to Tenant. Certificates evidencing such policies or other
reasonably satisfactory evidence of such coverage shall be provided to Landlord
within five (5) days of the execution hereof, and annually thereafter. All
insurance policies required by this Section 6.14 shall be written as primary
policy coverage and not contributing with or in excess of any coverage which
Landlord may carry; provide for thirty (30) days prior written notice to
Landlord of any cancellation or other expiration of such policy; and contain an
express waiver of any right of subrogation and an express consent to a waiver
of right of recovery against Landlord, its employees, and its agents.
(b) Insurance Rating. Tenant will not conduct or permit to be
conducted any activity, or place any equipment in or about the Premises, which
will in any way increase the rate of fire insurance or other insurance on the
Property. If any increase in the rate of fire insurance or other insurance is
stated by any insurance company or by the applicable insurance rating bureau to
be due to activity or equipment in or about the Premises, such statement shall
be evidence that the increase in such rate is due to such activity or equipment
and shall be presumed to be correct unless rebutted by clear and convincing
evidence to the contrary. Tenant shall have the right to contest the decision
of the insurance company or insurance rating bureau. Tenant shall pay to
Landlord the amount of any such increase in insurance rates to the extent
attributable to Tenant's activities or equipment at the Premises as Additional
Rent within ten (10) days of written demand therefor.
(c) Premiums. Tenant shall pay as they become due all premiums
for
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the insurance required by this Section 6.14, and shall timely renew or replace
each policy. In the event of Tenant's failure to comply with any of the
foregoing requirements, Landlord shall be entitled, five (5) days after giving
notice to Tenant, to procure such insurance if Tenant shall not have complied
with the foregoing requirements; provided that such five (5) day period shall
be waived if Tenant's insurance has lapsed. Any amounts incurred by Landlord in
procuring such insurance shall be Additional Rent hereunder and shall be repaid
by Tenant within ten (10) days of demand therefor by Landlord.
(d) Waiver of Subrogation and Right of Recovery. Landlord and
Tenant each hereby waive any and all rights of recovery against the other, or
against the officers, employees, agents or representatives, of the other, for
loss of or damage to its property or the property of others under its control,
if such loss or damage is covered by any insurance policy in force (whether or
not described in this Lease) at the time of such loss or damage. Such waiver
shall not apply to loss or damage not covered by any insurance policy in force
by virtue of any deductible permitted by the terms of this Lease, but such
waiver shall apply to loss or damage not covered by any insurance policy
because the maximum limit of such policy has been exceeded. Upon obtaining the
policies of insurance described herein, Landlord and Tenant shall give notice
to the insurance carrier or carriers of the foregoing mutual waiver of
subrogation and cause the policies to contain the waiver of subrogation and
recovery provisions.
6.15 COOPERATION-EXPANSION. Tenant shall cooperate with Landlord in
connection with Landlord's redevelopment activities at the Property so long as
such activities do not unreasonably interfere with Tenant's use and occupancy
of the Premises and its conduct of business at the Premises. Without limiting
the generality of the foregoing, Tenant acknowledges that Landlord may (i)
renovate the remainder of the building of which the Premises are a part, (ii)
renovate the unoccupied office building that is part of the Property, (iii)
expand the building of which the Premises are a part, (iv) construct additional
buildings within the Property, (v) change the configuration of any walkways,
driveways, parking lots and other portions of the Common Areas and/or (vi)
grant easements and dedicate for public use portions of the Property. Tenant
shall cooperate with Landlord in connection with such activities, so long as
such activities do not unreasonably interfere with Tenant's intended use of the
Premises. Landlord shall notify Tenant at least fifteen (15) days in advance in
writing in the event that Landlord intends to take any of the actions described
in this Section 6.15. Landlord shall use all commercially reasonable efforts to
minimize disruption to Tenant's use and occupancy of the Premises and the
conduct of its business at the Premises. If, as a result of any of Landlord's
activities described in this Section 6.15, Tenant is unable to use five (5) or
more of its loading docks, or twenty-five thousand (25,000) square feet or more
of its Premises for five (5) consecutive business days or more, a just and
proportionate part of the Rent,
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based on the portion of the Premises rendered unusable, shall be suspended and
abated from such fifth (5th) business day until such use is restored.
SECTION 7. PERFORMANCE OF OBLIGATIONS.
7.01 EVENTS OF DEFAULT. Each of the following events shall be deemed
to be an "Event of Default":
(i) Tenant shall fail to pay any installment of Base Rent or
Additional Rent (as required by Sections 4.01 or 4.02 hereof) when due, if such
failure continues for a period of five (5) days after Landlord's written notice
thereof to Tenant;
(ii) Tenant shall fail timely to make any other payment required
under this Lease, if such failure continues for a period of five (5) days after
Landlord's written notice thereof to Tenant;
(iii) Tenant shall violate or fail to perform any of the other
terms, conditions, covenants or agreements herein made by Tenant, if such
violation or failure continues for a period of thirty (30) days after
Landlord's written notice thereof to Tenant; provided that if the violation or
failure to perform is not susceptible of being completely cured within such
thirty (30) day period using commercially reasonable efforts, then as long as
Tenant has taken all reasonable steps to cure the violation or failure within
such thirty (30) day period and notified Landlord in writing of its efforts,
and diligently and uninterruptedly continues to pursue the cure of the
violation, the cure period shall be extended for such period as reasonably
shall be required to cure the violation or failure;
(iv) The attachment, execution or other judicial seizure of
substantially all of Tenant's assets or of Tenant's interest in this Lease,
which is not vacated within thirty (30) days of its filing;
(v) Tenant shall seek, consent to, or acquiesce in, any petition
to declare Tenant bankrupt or insolvent, or shall fail to contest and cause the
dismissal of an involuntary petition filed in any bankruptcy, reorganization,
composition, extension or insolvency proceedings, within sixty (60) days of its
filing;
(vi) Tenant shall seek, consent to, or acquiesce in, the
appointment of a trustee, receiver or liquidator of Tenant and all or any part
of Tenant's property, or shall fail to contest or cause the dismissal of any
proceeding for the appointment of such a trustee, receiver or liquidator within
sixty (60) days of its filing; or
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(vii) Tenant makes an assignment of all or substantially all of
its property for the benefit of its creditors.
7.02 LANDLORD'S REMEDIES. Should an Event of Default occur and be
continuing under this Lease, Landlord may pursue any or all of the following
remedies:
(a) Termination of Lease. Landlord may terminate this Lease, by
giving written notice of such termination to Tenant, whereupon this Lease shall
automatically cease and terminate and Tenant shall immediately be obligated to
quit the Premises. If Landlord elects to terminate this Lease, everything
contained in this Lease on the part of Landlord to be done and performed shall
cease without prejudice, subject however, to the right of Landlord to recover
from Tenant all Rent and any other sums accrued up to the time of termination
or recovery of possession by Landlord, whichever is later, and any other
monetary damages or loss sustained by Landlord.
(b) Suit for Possession. Whether or not this Lease has been
terminated, Landlord may proceed to recover possession of the Premises under
and by virtue of the provisions of the laws of the State of Maryland or Howard
County or by such other proceedings, including re-entry and possession, as may
be applicable. Prior to the expiration of the term of this lease (as such term
may be extended pursuant to the terms of this Lease), Landlord shall not
forcibly evict Tenant from the Premises except pursuant to judicial process,
unless Tenant has abandoned the Premises or consented in writing to such
eviction.
(c) Reletting of Premises. Landlord shall have the option to
relet the Premises for such rent and upon such terms as are not unreasonable
under the circumstances and, if the full Rent reserved under this Lease (and
any of the costs, expenses or damages indicated below) shall not be realized by
Landlord, Tenant shall be liable for all damages sustained by Landlord,
including, without limitation, deficiency in Rent, attorneys' fees, brokerage
fees and expenses of placing the Premises in the same rentable condition as
existed on the Lease Commencement Date. Landlord, in putting the Premises in
good order or preparing the same for rerental may, at Landlord's option, make
such alterations, repairs, or replacements in the Premises as Landlord, in its
sole judgment, considers advisable and necessary for the purpose of reletting
the Premises, and the making of such alterations, repairs, or replacements
shall not operate or be construed to release Tenant from liability hereunder as
aforesaid. Landlord shall in no event be liable in any way whatsoever for
failure to relet the Premises, or in the event that the Premises are relet, for
failure to collect the rent under such reletting.
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(d) Monetary Damages. Any damage or loss of Rent sustained by
Landlord may be recovered by Landlord, at Landlord's option, at the time of the
reletting, or in separate actions, from time to time, as said damage shall have
been made more easily ascertainable by successive relettings, or at Landlord's
option in a single proceeding deferred until the Termination Date (in which
event Tenant hereby agrees that the cause of action shall not be deemed to have
accrued until the Termination Date) or in a single proceeding prior to either
the time of reletting or the Termination Date, in which event Tenant agrees to
pay Landlord the difference, if any, between the present value of the Rent
reserved under this Lease on the date of breach and the fair market value of
the Lease on the date of the breach.
(e) Anticipatory Breach; Equitable Remedies. Nothing contained
herein shall prevent the enforcement of any claim Landlord may have against
Tenant for anticipatory breach of the unexpired Term of this Lease. In the
event of a breach or anticipatory breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have the right of injunction, the right of
specific performance, and the right to invoke any remedy allowed at law or in
equity as if re-entry, summary proceedings and other remedies were not provided
for herein; provided that with respect to any anticipatory breach, nothing in
this Section 7.02(e) shall be deemed to be a waiver of any notice or cure
period required or granted by this Lease.
(f) Right of Landlord to Cure Tenant's Default. If an Event of
Default has occurred and is continuing, then Landlord may, but shall not be
required to, make such payment or do such act, and charge the amount of the
expense thereof, if made or done by Landlord, with interest thereon at the rate
per annum of three percent (3%) above the "Prime Rate", from the date paid by
Landlord to the date of payment thereof by Tenant; provided, however, that
nothing herein contained shall be construed or implemented in such a manner as
to allow Landlord to charge or receive interest in excess of the maximum legal
rate then allowed by law. Such payment and interest shall constitute Additional
Rent hereunder due and payable within five (5) days of notice to Tenant that
such amount is due; but the making of such payment or the taking of such action
by Landlord shall not operate to cure such default or to estop Landlord from
the pursuit of any remedy to which Landlord would otherwise be entitled. The
"Prime Rate" shall be the per annum interest rate listed as "the base rate on
corporate loans at large U.S. money center commercial banks" as published under
"Money Rates" in the Wall Street Journal. Such rate shall vary from day to day
as said rate varies according to changes published under "Money Rates" in the
Wall Street Journal. Should the Wall Street Journal stop publishing such "base
rate of interest on corporate loans at large U.S. money center commercial
banks", the rate shall be a comparable rate as reasonably selected by Landlord.
(g) Interest. If Tenant fails to pay any installment of Rent
and/or Additional Rent on or before a late charge is imposed thereon pursuant
to Section
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4.02(d) above, in addition to such late charge, such unpaid installment of Rent
and/or Additional Rent shall bear interest at the rate per annum of three
percent (3%) above the "Prime Rate" from the date such late charge became due
and payable to the date of payment of the unpaid installment by Tenant;
provided, however, that nothing herein contained shall be construed or
implemented in such a manner as to allow Landlord to charge or receive interest
in excess of the maximum legal rate then allowed by law. Such interest shall
constitute Additional Rent hereunder due and payable within five (5) days of
notice to Tenant that such amount is due.
(h) Landlord's Remedies Not Exclusive. The specified remedies to
which Landlord may resort hereunder are cumulative and are not intended to be
exclusive of any remedies or means of redress to which Landlord may at any time
lawfully be entitled, and Landlord may invoke any remedy (including the remedy
of specific performance) allowed at law or in equity as if specific remedies
were not herein provided.
7.03 WAIVER OF NOTICE TO QUIT AND REDEMPTION. At any time an Event of
Default is occurring, and after the expiration of the term of this Lease,
Tenant does hereby waive any and all notices to quit or notice of Landlord's
intention to re-enter the Premises, and waives and surrenders all rights
and privileges which it might have under or by reason of any present or future
law to redeem the Premises or to have a continuance of this Lease for the
term of this Lease after being dispossessed or ejected therefrom by process of
law or under the terms of this Lease orafter the termination of this Lease
as herein provided. Nothing in this Section7.03 shall be deemed to be a
waiver of any notice specifically required by the terms of this Lease.
Notwithstanding anything to the contrary contained in this Article VII,
Landlord agrees that it shall not forcibly evict Tenant from the Premises
except pursuant to judicial process, unless Tenant has abandoned the
Premises or consented in writing to such eviction.
7.04. ATTORNEY'S FEES; WAIVER. In the event that either party brings
a suit to enforce or interpret the provisions of this Lease, the party
against whom judgment is entered shall pay to the prevailing party the
attorneys' fees and costs of litigation incurred by the prevailing party.
If, under the provisions hereof, either party shall institute
proceedings against the other and a compromise or settlement thereof shall be
made, the same shall not constitute a waiver of any other covenant, condition
or agreement herein contained, nor of any of such party's rights hereunder,
except to the extent provided in the compromise or settlement. No waiver by
either party of any breach of any covenant, condition or agreement contained in
this Lease and any rules and regulations promulgated hereunder shall operate as
a waiver of such covenant, condition, agreement, or rule or regulation itself,
or of any subsequent breach thereof. No provision of this Lease shall be deemed
to have been waived by either party unless such waiver is in writing
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and signed by the party against whom enforcement is sought. No payment by
Tenant or receipt by Landlord of a lesser amount than the installments of Rent
herein stipulated shall be deemed to be other than on account of the earliest
stipulated Rent, nor shall any endorsement or statement on any check or letter
accompanying a check for payment of Rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such Rent or to pursue any other remedy
provided in this Lease.
SECTION 8. CASUALTY; TAKING OR OTHER DESTRUCTION OF PREMISES
8.01 EMINENT DOMAIN. If the whole or a substantial part (as
hereinafter defined) of the Premises (or use or occupancy of the Premises)
shall be taken or condemned by any governmental or quasi-governmental
authority for any public or quasi-public use or purpose (including sale under
threat of such a taking), then the terms of this Lease shall cease and
terminate as of the date when title vests in such governmental or
quasi-governmental authority, and the Rent shall be abated on the date when
such title vests in such governmental or quasi-governmental authority. If less
than a substantial part of the Premises is taken or condemned by any
governmental or quasi-governmental authority for any public or quasi-public use
or purpose (including sale under threat of such taking), the Rent shall be
adjusted equitably (on the basis of the rentable area of the Premises before
and after such event) on the date when title vests in such governmental or
quasi-governmental authority and the Lease shall otherwise continue in full
force and effect. Tenant shall have no claim against Landlord (or otherwise)
and hereby agrees to make no claim against the condemning authority for any
portion of the amount that may be awarded as damages as a result of any
governmental or quasigovernmental taking or condemnation (or sale under threat
of such taking or condemnation) or for the value of any unexpired term of the
Lease or for loss of profits or for any other claim or cause of action (other
than moving expenses and claims for Tenant's personal property if and only if
any such award to Tenant shall not reduce the award available to Landlord). For
purposes of this Section 8.01, a substantial part of the Premises shall be
considered to have been taken if more than fifty percent (50%) of the Premises
are unusable by Tenant as a direct result of such taking.
8.02 DAMAGE BY FIRE.
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(a) In the event the Premises or any part thereof is destroyed or
damaged by fire or other casualty so as to render the Premises unfit for use
and occupancy, a just and proportionate part of the Rent, according to the
nature and extent of the injury to said Premises, shall be suspended and abated
until the portion of the Premises so damaged shall have been restored to
substantially the same condition that existed immediately before the damage or
destruction, or until this Lease shall be canceled and terminated as provided
below. Landlord shall determine and notify Tenant in writing, within thirty
(30) days after such damage or destruction, of Landlord's best estimate (based
upon reasonably applied construction criteria) of the date the Premises can be
fully restored. Tenant may challenge Landlord's estimate if it disagrees with
it. If such damage or destruction is not susceptible of being repaired within
six (6) months after the date such damage or destruction occurred, then either
party hereto shall have the right, to be exercised within thirty (30) days
after receipt of such notice, to cancel and terminate this Lease by giving to
the other party a written notice of its desire to so cancel and terminate.
However, if the date by which such restoration can be completed shall be within
six (6) months after the date such damage or destruction occurred, this Lease
shall remain in full force and effect, the just and proportionate share of the
Rent due hereunder shall be suspended and abated as described above, and the
Premises shall be restored by Landlord using commercially reasonable efforts to
complete such restoration promptly. If, at the expiration of such six (6) month
period, however, the restoration of the Premises shall not have been fully
completed, Tenant shall have the right to terminate this Lease by giving
Landlord thirty (30) days written notice thereof; provided that if restoration
is completed within such thirty (30) day period, such termination shall be null
and void.
(b) Notwithstanding anything contained herein to the contrary, in
the event that damage or destruction of all or any portion of the Premises is
not fully covered by the insurance proceeds received by or payable to Landlord,
or if there are insufficient proceeds after any required payments to mortgagees
of the Property, or Landlord does not provide Tenant with reasonable evidence
that it will be permitted by its mortgagees and ground lessors, if any, to use
the insurance proceeds to restore the Premises and that it has available the
funds to cover any shortfall not covered by available insurance proceeds,
either party may, within sixty (60) days of such casualty, terminate this Lease
by written notice to the other, effective as of the date of such casualty;
provided that neither party shall have any right to terminate this Lease
pursuant to this Section 8.02(b) if the estimated cost of the required repair
is Fifty Thousand Dollars ($50,000) or less; and provided further that Landlord
shall not have the right to terminate this Lease pursuant to this Section
8.02(b) if the reason the insurance proceeds are inadequate is Landlord's
failure to obtain the insurance required of it by Section 5.06 above.
SECTION 9. GENERAL PROVISIONS.
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9.01 HOLDING OVER. In the event that Tenant shall not immediately
surrender the Premises on the Termination Date, Tenant shall, by
virtue of the provisions hereof, become a tenant by the month. In such event,
Tenant shall be required to pay a Base Rent equal to One Hundred Fifty Percent
(150%) times the Base Rent required to be paid by Tenant immediately prior to
the Termination Date. The Base Rent, as adjusted, shall be paid on a monthly
basis beginning on the first day of each and every calendar month after the
Termination Date. Such monthly tenancy shall commence with the first day next
after the Termination Date. Except as otherwise provided above with respect to
the payment of Base Rent, Tenant shall, as a monthly tenant, be subject to all
of the terms, conditions, covenants, and agreements of this Lease, including
the obligation to pay Additional Rent on account of Taxes, Insurance and
Operating Expenses. Tenant shall give Landlord at least fifteen (15) days
written notice of any intention to quit the Premises, and Tenant shall be
entitled to fifteen (15) days' written notice to quit the Premises.
Notwithstanding the foregoing provisions of this Section 9.01, in the event
that Tenant shall hold over after the Termination Date, and if Landlord shall
desire to regain possession of the Premises on or after the Termination Date,
then at any time prior to Landlord's acceptance of Rent for a particular month
from Tenant as a monthly tenant hereunder, Landlord, at its option, may
forthwith reenter and take possession of the Premises without process, or by
any legal process in force in the State of Maryland. In the event of any such
holdover to which Landlord objects, Tenant shall be liable to Landlord for any
and all damages incurred as a result of such holdover, and shall, in addition,
pay to Landlord the reasonable value of the Premises, which is hereby agreed to
be One Hundred Fifty Percent (150%) times the Base Rent and Additional Rent
required to be paid by Tenant immediately prior to the Termination Date.
9.02 ACCESS TO PREMISES. Tenant shall (i) upon prior oral notice
(except that no notice shall be required in emergency situations), permit
Landlord and any mortgagee of the Premises or of the interest of Landlord
therein, and their representatives, to have access to, and to enter upon,
the Premises at all reasonable hours for the purposes of inspection
or of making repairs, replacements or improvements in or to the
Premises or equipment (including, without limitation, sanitary, electrical,
heating, air-conditioning or other systems) or of complying with all laws,
orders and requirements of governmental or other authority or of exercising any
right of Landlord under this Lease (including the right during the progress of
any such repairs, replacements or improvements or while performing work and
furnishing materials in connection with compliance with any such laws, orders
or requirements to take upon or through, or to keep and store within, the
Premises all necessary materials, tools and equipment); and (ii) permit
Landlord, at reasonable times, to show the Premises during ordinary business
hours to any existing or prospective mortgagee, ground lessor, purchaser, or
assignee of any mortgagee, of the Premises or of the interest of Landlord
therein, and during the last
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nine (9) months of the term, to any prospective space lessee. In non-emergency
situations, such oral notice shall be given at least one (1) business day prior
to the proposed entry. In emergency situations, even though no notice is
required, Landlord nevertheless shall make a reasonable effort to give Tenant
notice before entering. Tenant shall have the right to have a representative
present during any proposed entry by Landlord, except in emergency situations.
If Tenant shall not be personally present to open and permit an entry into the
Premises at any time when for any reason an entry therein shall be permitted by
the provisions of this Lease, Landlord or Landlord's agents, after taking
reasonable efforts to notify Tenant, may enter the same by a master key, or may
forcibly enter the same, without rendering Landlord or such agents liable
therefor (if during such entry Landlord or Landlord's agents use reasonable
care with respect to Tenant's property), and without in any manner affecting
the obligations and covenants of this Lease. Landlord shall exercise its rights
of access to the Premises permitted under any of the terms and provisions of
this Lease in such manner as to minimize to the extent practicable interference
with Tenant's use and occupancy of the Premises. If, as a result of any of
Landlord's activities described in this Section 9.02, Tenant is unable to use
five (5) or more of its loading docks, or twenty-five thousand (25,000) square
feet or more of its Premises for five (5) consecutive business days or more, a
just and proportionate part of the Rent, based on the portion of the Premises
rendered unusable, shall be suspended and abated from such fifth (5th) business
day until such use is restored. Neither Landlord, nor its agents, servants, or
employees shall be under any duty to inspect the Premises (other than the roof
and the structural elements) during Tenant's occupancy thereof unless and until
Tenant has notified Landlord in writing of the need of repairs for which
Landlord is responsible.
9.03 FORCE MAJEURE. Landlord and Tenant shall be excused from
performing any obligation or undertakings provided for in this Lease for
so long as such performance is prevented or delayed or hindered by act of God,
fire, earthquake, flood, explosion, action of the elements, war, invasion,
insurrection, riot, mob violence, sabotage, inability to procure labor or
general shortage of labor, equipment, facilities, materials or supplies
in the open market, failure of transportation, strike, lockout, action
of labor unions, condemnation, requisition, laws, orders of government or civil
or military authorities, or any other cause, whether similar or dissimilar to
the foregoing, not within the reasonable control of Landlord or Tenant,
whichever is applicable, including, but not limited to, reasonable delays for
adjustment of insurance; provided that any delays for adjustment of insurance
shall not extend any restoration period under Section 8.02(a) above; and
provided further, if the problem is the unavailability of particular equipment,
facilities, materials or supplies and substantially equivalent substitutes or
alternative means of transportation therefor are available, Landlord or Tenant,
whichever is applicable, shall make commercially reasonable efforts to obtain
or use such substitutes.
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9.04 SECURITY DEPOSIT. Tenant shall not be required to make a
security deposit.
9.05 ESTOPPEL STATEMENT.
(a) Upon Landlord's written request, Tenant shall execute,
acknowledge and deliver to Landlord, any of Landlord's lenders, and any
prospective purchaser of the Property, a written statement certifying: (i) that
this Lease has not been amended (or if it has been amended, attaching the
amendment); (ii) that this Lease has not been canceled or terminated; (iii) the
last date of payment of the Base Rent and Additional Rent and the time period
covered by such payment; (iv) that to the best of Tenant's knowledge Landlord
is not in default under this Lease (or, if Landlord is claimed to be in
default, stating why); and (v) such other matters as may be reasonably required
by Landlord, its lenders, or a prospective purchaser, provided such other
matters do not modify the provisions of this Lease. Tenant shall deliver such
statement within fifteen (15) days after Landlord's request. If Tenant does not
deliver such statement to Landlord within such fifteen (15) day period,
Landlord, and any prospective purchaser or lender, may conclusively presume and
rely upon the following facts, to which Landlord may certify as
attorney-in-fact for and on behalf of Tenant: (A) that this Lease has not been
amended (or if it has been amended, attaching the amendment); (B) that this
Lease has not been canceled or terminated except as otherwise represented by
Landlord; (C) that not more than one month of Basic Rent or Additional Rent
have been paid in advance; and (D) that Landlord is not in default under the
Lease. In such event, Tenant shall be estopped from denying the truth of such
facts.
(b) Upon Tenant's written request, Landlord shall execute,
acknowledge and deliver to Tenant, any of Tenant's lenders, and any permitted
assignee of this Lease or Subtenant of the Premises, a written statement
certifying: (i) that this Lease has not been amended (or if it has been
amended, attaching the amendment); (ii) that this Lease has not been canceled
or terminated; (iii) the last date of payment of the Base Rent and Additional
Rent and the time period covered by such payment; (iv) that to the best of
Landlord's knowledge Tenant is not in default under this Lease (or, if Tenant
is claimed to be in default, stating why); and (v) such other matters as may be
reasonably required by Tenant, its lenders, or a permitted assignee or
subtenant; provided such other matters do not modify the provisions of this
Lease. In addition, upon Tenant's written request, Landlord shall execute,
acknowledge and deliver to Tenant or any of Tenant's lenders a waiver of its
Landlord lien substantially in the form attached hereto as Exhibit G. Landlord
shall deliver such statement or waiver within fifteen (15) days after Tenant's
request.
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9.06 SUCCESSORS & ASSIGNS. Subject to the limitations contained
in Sections 6.05(b) and 9.11, the obligations and liabilities herein given
to, or imposed upon, the respective parties hereto shall extend to and bind
the parties hereto and their respective heirs, personal representatives,
successors, sublessees and assigns.
9.07 SUBORDINATION/ATTORNMENT/LENDER RIGHTS.
(a) Subordination. Tenant agrees that this Lease shall be
subordinate to any mortgages or deeds of trust now or subsequently affecting
the fee title of the Property or the Premises and to any and all advances made
or to be made under them, and to all renewals, modifications, consolidations,
replacements or extensions thereof; provided that with respect to any future
mortgage or deed of trust, this Lease shall not be subordinate thereto unless
Tenant receives a Non-Disturbance Agreement from Landlord's lender
substantially in the form attached hereto as Exhibit H, or containing such
other equivalent or substitute terms upon which the parties, acting in good
faith, may agree. Should Landlord or any lender desire confirmation of this
subordination, Tenant, within fifteen (15) days following Landlord's written
request, agrees to execute and deliver, without charge, all documents
evidencing the subordination of this Lease and Tenant's rights, as reasonably
requested by Landlord; provided that with respect to any future mortgage or
deed of trust, Tenant shall not be obligated to execute a subordination
agreement unless it receives the requisite Non-Disturbance Agreement
substantially in the form attached hereto as Exhibit H, or containing such
other equivalent or substitute terms upon which the parties, acting in good
faith, may agree. However, should Landlord or any lender request that this
Lease be made superior, rather than subordinate, to any mortgage or deed of
trust, then Tenant, within fifteen (15) days following Landlord's written
request, agrees to execute and deliver, without any charge, any and all
documents evidencing the superiority of this Lease, as reasonably requested by
Landlord.
(b) Attornment. If Landlord's interest in the Property is
acquired by a beneficiary under a deed of trust, a mortgagee, or a purchaser at
a foreclosure sale, Tenant shall attorn to the transferee of, or successor to,
Landlord's interest in the Property and shall recognize such transferee or
successor as Landlord under this Lease, and such transferee shall be bound to
Tenant under all of the terms of this Lease. Tenant, shall, from and after the
occurrence of the preceding events, have the same remedies that Tenant might
have had against Landlord provided, however, that any such beneficiary,
mortgagee or purchaser shall not be (i) liable to Tenant for damages for any
acts or omissions of Landlord or any prior landlord occurring prior to
obtaining possession, (ii) subject to any offsets, claims or defenses which
Tenant might have against Landlord or any prior landlord which arise by virtue
of acts or omissions occurring prior to the date such beneficiary, mortgagee or
purchaser obtains title, (iii) bound by any rent or additional rent which
Tenant may have paid to
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Landlord or any prior landlord more than one (1) month in advance or by any
deposit or rental security unless funds therefor have been delivered to such
beneficiary, mortgagee or purchaser, (iv) bound by any amendment or
modification made without the prior consent of the holder of the mortgage or
deed of trust that was foreclosed, (v) obligated or liable to Tenant with
respect to the construction and completion of the initial improvements in the
Premises for Tenant's use, enjoyment or occupancy, except that Tenant shall
have the right to terminate this Lease upon five (5) days written notice if
such mortgagee or holder of a deed of trust fails to pay the Allowance
contemplated by the Landlord's Work Agreement, or to complete the improvements
required thereby, or (vi) liable for any damages Tenant may suffer as a result
of any misrepresentation or breach of warranty of Landlord. Tenant waives the
protection of any statute or rule of law which gives or purports to give Tenant
any right to terminate this Lease or surrender possession of the Property upon
the transfer of Landlord's interest. Tenant, within fifteen (15) days following
Landlord's written request, agrees to execute and deliver, without any charge,
any and all documents evidencing such attornment and recognition, as reasonably
requested by Landlord.
(c) Attorney-in-Fact. If Tenant fails to deliver such documents
evidencing Tenant's subordination or attornment, as described in this Section
9.07, within the prescribed fifteen (15) day periods, Tenant hereby makes,
constitutes and irrevocably appoints Landlord, or any transferee or successor
of Landlord, as Tenant's attorney-in-fact to execute and deliver any such
instrument or document.
(d) Notice to Lenders. Tenant agrees that a copy of any notice of
default from Tenant to Landlord shall also be sent to the holder of any
mortgage or deed of trust on the Property, provided Tenant has been given
written notice that the holder of such mortgage or deed of trust has made such
request, and of the holder's name and address. Tenant shall give any such
lender a reasonable time, not to exceed thirty (30) days from the giving of
said notice, to cure or cause to be cured, any such default. If such default
can not be reasonably cured within the time specified herein, then such
additional time as may be necessary shall be allowed, provided the lender has
commenced such cure within such thirty (30) day period and is diligently and
continuously pursuing such cure to completion, in which event this Lease shall
not be terminated while such remedies are being thus diligently pursued.
9.08 TENANT'S FINANCIAL CONDITION. Prior to the execution of this
Lease, Tenant shall deliver to Landlord its most recent financial statements
filed with the United States Securities and Exchange Commission. Tenant
represents and warrants to Landlord that such financial statement of Tenant
is a true and accurate statement as of the date of such statement.
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9.09 USE OF PAVED AREAS. It is expressly understood and agreed that:
(a) The parking lot, access drives, entrance drives, or areas
adjacent thereto, are not to be used to perform vehicle overhaul or repairs
such as, but not limited to, engine transmission, and/or brake replacement,
repair, and/or modification.
(b) The parking lot, access drives, entrance drives, or areas
adjacent thereto, are not to be used for periodic or preventative vehicle
maintenance such as, but not limited to, oil changes, lubrication, coolant
flushes and changes.
(c) Vehicle body work and/or painting is expressly prohibited.
(d) Vehicles will not be blocked up or placed on stands in the
paved areas, or areas adjacent thereto, or jacked for any reason other than
wheel changes in the event of a flat tire or other emergency situation. No
jacked vehicle will be left unattended and shall be jacked only for such period
of time as is necessary to dismount and remount the wheel. No vehicle will be
lowered to the pavement without all wheels and tires in place. In any case, the
pavement will be protected.
9.10 USE OF TRASH REMOVAL SERVICE.
(a) If Landlord elects, as part of the Common Area Operating
Expenses at the Property, to provide an outdoor metal trash container for
disposal of wastebasket trash for the use of all Tenants at the Property,
Tenant agrees to use such trash container in compliance with local ordinances
and restrictions. Tenant further agrees to use commercially reasonable efforts
to keep all trash container lids and hatches which are under its exclusive
control closed when such container is not being filled or emptied, to collapse
boxes, packaging, or other items to their smallest volume before depositing
them in such container, to police spillage immediately, and to maintain truck
access to the trash container. Should Landlord not elect to provide trash
service as part of the Common Area Operating Expenses, Tenant agrees to
maintain its own trash container in the same manner as previously described.
(b) Tenant shall not deposit the following items in or around
such trash container: trash from other locations, building and/or construction
materials, metal, wood, other rigid material larger than 24 inches in any
dimension, liquids, tires, wheels, automotive equipment or appliances, debris
from remodeling, bi-products of manufacturing or assembly processes.
9.11 ASSIGNMENT OR SUBLETTING. Tenant shall not assign, mortgage,
or encumber this Lease nor sublet or suffer or
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permit the Premises or any part thereof to be used by others without the prior
written consent of Landlord in each instance, which consent shall not be
unreasonably withheld, conditioned, or delayed. As long as Tenant hereunder
shall be a corporation, any transfer, sale, pledge, or other disposition
(whether in a single transaction or a related series of transactions) of
fifty-one percent (51%) or more of the aggregate voting power in the
corporation shall be deemed an assignment of this Lease and therefore
prohibited without the express written consent of Landlord, which consent shall
not be unreasonably withheld, conditioned, or delayed; provided that such
transfer, sale, pledge or other disposition of fifty-one percent (51%) or more
of the corporation's aggregate voting power shall not be deemed an assignment
of this Lease if the corporation is a corporation whose stock is publicly
traded and that is required to file quarterly reports with the United States
Securities and Exchange Commission. In the event as the result of a permitted
assignment Tenant hereunder becomes a partnership or limited liability company,
any transfer, sale, assignment, pledge or other disposition of any of the
interests of the general partners of Tenant or of greater than fifty-one
percent (51%) of the interests of Tenant, whether such interests be those of
the general or limited partners or members, shall be deemed an assignment of
this Lease and therefore prohibited without the express written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned, or
delayed. If Tenant submits to Landlord a written request for Landlord's consent
pursuant to this Section 9.11 and Landlord fails to respond thereto within ten
(10) days of its receipt of such request, and Tenant submits to Landlord a
second written request for Landlord's consent to the same transaction which
clearly indicates thereon that it is a second request, if Landlord fails to
respond to such second request within five (5) business days of its receipt,
such failure to respond shall be presumed to constitute the consent of Landlord
to the proposed transaction. Notwithstanding the foregoing, Landlord shall
consent to any bona fide assignment of this Lease or sublease of the Premises
to an "Affiliate" of Tenant. An "Affiliate" of Tenant shall mean a person or
entity that controls Tenant, is controlled by Tenant, or is under common
control with Tenant, as the term control is defined under the Securities
Exchange Act of 1934, as amended. If this Lease is assigned to an Affiliate or
the Premises is subleased to an Affiliate, any transfer, sale, pledge or other
disposition (whether in a single transaction or a related series of
transactions) of fifty-one percent (51%) or more of the aggregate voting power
in the Affiliate shall constitute an assignment unless the Affiliate meets the
publicly traded exemption set forth above. If this Lease is assigned or if the
Premises or any part thereof is sublet or occupied by anyone other than Tenant
without the express written consent of Landlord, Landlord may collect rent from
assignee, sub-tenant or occupant and apply the net amount collected to all Rent
due hereunder, but no assignment, sub-letting, occupancy, or collection shall
be deemed to be a waiver of this covenant or the acceptance of the assignee,
sub-tenant or occupant as Tenant, or a release of Tenant's duties and
obligations hereunder. In the event this Lease is assigned or the Premises, or
any part thereof, is sublet or occupied by anyone other than Tenant or an
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Affiliate, fifty percent (50%) of any Base Rent received by Tenant and/or the
Affiliate in excess of that defined in Section 4 above shall be paid to
Landlord. No assignment shall release Tenant of any obligations or liabilities
under this Lease.
9.12 WAIVER OF TRIAL BY JURY. Landlord and Tenant waive all rights
to a trial by jury in any action, counterclaim, or proceeding based upon, or
related to, the subject matter of this Lease.
9.13 NO RECORDATION. Tenant shall not record this Lease or a
memorandum thereof without obtaining Landlord's prior written consent.
9.14 CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY.
(a) Tenant represents and warrants that the person signing this
Lease on its behalf has full authority to do so and that this Lease binds
Tenant. Upon execution of this Lease, Tenant shall deliver to Landlord a
certified copy of a resolution of Tenant's Board of Directors authorizing the
execution of this Lease or other evidence of such authority reasonably
acceptable to Landlord.
(b) Landlord represents and warrants that Landlord is the owner
of the Property, and that the person signing this Lease on its behalf has full
authority to do so and that this Lease binds Landlord. Upon execution of this
Lease, Landlord shall deliver to Tenant evidence of such authority reasonably
acceptable to Tenant.
9.15 EXECUTION OF LEASE. This Lease may be executed in counterparts,
and, when all counterpart documents are executed, the counterparts shall
constitute a single binding instrument. The delivery of this Lease by Tenant
and Landlord shall not be deemed to be an offer and shall not be binding
upon either party until executed and delivered by both parties.
9.16 RULES AND REGULATIONS. Tenant, its agents, employees,
contractors and invitees shall at all times abide by and observe such
rules and regulations as Landlord reasonably may promulgate from time to
time, with a copy sent to Tenant, for (i) the reputation, safety, care
or appearance of the Premises, and the preservation of good order therein, and
(ii) the operation and maintenance of the Premises or the equipment thereof;
provided that the same shall be in conformity with common practice and usage in
similar buildings and shall not be inconsistent with the provisions of this
Lease. Nothing contained in this Lease shall be construed to impose upon
Landlord any duty or obligation to enforce such rules and regulations, or the
terms, conditions or covenants contained in any other lease, as against any
other tenant, and Landlord shall not be liable to Tenant for violation of
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the same by any other tenant, its employees, agents, contractors, invitees,
licensees, customers, clients, family members or guests; provided that all
rules and regulations shall be consistently applied (or not applied) to all
tenants at the Property.
9.17 BROKER. Landlord and Tenant each represent and warrant
to the other that Preston Partners, Inc. and KLNB, Inc. (collectively the
"Brokers") are the only brokers with which it has dealt in connection with this
Lease or the Premises. Landlord represents and warrants to Tenant that it has
agreed to pay a leasing/brokerage commission to the Brokers pursuant to a
separate agreement. Landlord represents and warrants to Tenant that Landlord
has not dealt with, or agreed to pay any commission or fee to, any broker or
entity relating to Tenant's leasing of the Premises other than the Brokers.
Landlord shall indemnify, defend, and hold Tenant harmless from and against any
loss, cost or expense that results if Landlord's representations in this
Section 9.17 prove to be false or incorrect. Tenant represents and warrants to
Landlord that Tenant has not dealt with, or agreed to pay any commission or fee
to, any broker or entity relating to Tenant's leasing of the Premises other
than the Brokers. Tenant shall indemnify, defend and hold Landlord harmless
from and against any loss, cost or expense that results if Tenant's
representations in this Section 9.17 prove to be false or incorrect.
9.18 TOPIC HEADINGS. The headings, captions, article numbers,
paragraph and section numbers, and index appearing in the Lease are inserted
only as a matter of convenience and reference and in no way define,
limit, construe, or describe the scope or intent of such articles or paragraphs
of this Lease nor in any way affect this Lease.
9.19 GOVERNING LAW. This Lease shall be construed and governed by and
pursuant to the laws of Maryland (excluding its choice of law provisions).
Should any provisions of this Lease and/or its conditions be determined to be
void, illegal or not enforceable, it or they shall be considered severable,
and the Lease and its conditions shall remain in full force and effect and be
binding upon the parties as though the said provision had never been included.
9.20 NOTICE. Except where this Lease specifically provides
for oral notice, any notice or demand required or permitted by law or any
provisions of this Lease shall be given in writing, shall be deemed to be duly
given three (3) days after deposit in the United States mail if sent by
certified or registered mail, return receipt requested, postage prepaid, or
upon delivery if sent by messenger or overnight delivery service, at the
address or addresses listed below or at such other or additional address or
addresses as either party may hereafter designate in writing:
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LANDLORD:
Parcel A-40 Associates, LLC
c/o Penrose Property Company
8330 Boone Boulevard
Suite 460
Vienna, Virginia 22182
with a copy to:
Penguin Group, L.P.
200 West Madison Street
38th Floor
Chicago, Illinois 60606
Attention: John Kevin Poorman, Esquire
TENANT:
The Cosmetic Center, Inc.
625 Madison Avenue
New York, New York 10022
Attention: Vice President, Real Estate
9.21 AMENDMENTS. This Lease, including the Exhibits hereto,
constitutes the entire agreement between the parties pertaining to the
lease of the Premises, and there are no other written or oral agreements
between the parties with respect to the lease of the Premises. No amendment,
modification, or alteration of this Lease shall be effective unless it is in
writing and signed by both parties.
9.22 TIME IS OF THE ESSENCE. Time is of the essence with respect
to the performance and observance of each and every covenant and provision
of this Lease.
9.23. LIABILITY. Tenant shall neither assert nor seek to enforce
any claim for breach of this Lease against any of Landlord's assets other
than Landlord's interest in the Property and in the rents, issues and
profits thereof, including without limitation, insurance proceeds and
condemnation awards, and in any tangible personal property of Landlord used in
connection with, and located at, the Premises, and Tenant agrees to look solely
to such assets for the satisfaction of any liability of Landlord under this
Lease, it being specifically agreed that in no event shall Landlord (or any of
the officers, trustees, directors, partners, beneficiaries, joint
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<PAGE>
venturers, members, stockholders or other principals or representatives,
disclosed or undisclosed) ever be personally liable for any such liability.
This paragraph shall not limit any right that Tenant might otherwise have to
obtain injunctive relief against Landlord or to take any other action which
shall not involve the personal liability of Landlord to respond in monetary
damages from Landlord's assets other than the Landlord's interest in the
Premises. In no event shall Landlord (or any of the officers, trustees,
directors, partners, beneficiaries, joint venturers, members, stockholders or
other principals or representatives, disclosed or undisclosed) ever be liable
for consequential damages.
9.24 RIGHT OF FIRST OFFER.
(a) Provided there is not then an existing Event of Default under
this Lease, Tenant shall have a right of first offer to lease any space in any
building at the Property that becomes available for lease after the initial
leasing of space at the Property and before the Termination Date. Space shall
not be deemed to be available if the tenant then in occupancy extends its lease
or enters into a new lease with Landlord, whether or not such tenant has formal
option rights. This right of first offer may be exercised only if Tenant
intends to occupy the space itself. Notwithstanding the foregoing, Tenant's
right of first offer shall expire at such time as Tenant occupies three hundred
eighty thousand (380,000) square feet or more of the space at the Property.
(b) If any space qualifying for Tenant's right of first offer
becomes available ("Offered Space"), Landlord shall send to Tenant a notice
(the "Offering Notice") regarding the availability of such Offered Space and
specifying (i) the Base Rent and Additional Rent at which Landlord intends to
offer the Offered Space, (ii) the leasehold improvements and any tenant
allowance to be provided by Landlord for the Offered Space, (iii) the term for
which Landlord intends to offer the Offered Space and the date upon which the
Offered Space shall be available for delivery to any party leasing such Offered
Space, and (iv) any other material condition to the leasing of the Offered
Space that varies from the provisions of this Lease. To accept the terms of the
Offering Notice, Tenant must notify Landlord within thirty (30) days following
receipt of the Offering Notice that Tenant has agreed to lease all of the
Offered Space on the foregoing terms.
(c) In the event Tenant elects to exercise its right to lease the
Offered Space, (i) the Offered Space shall be deemed to be a part of the
Premises and Tenant shall commence paying Rent with respect thereto on the date
the Offered Space is delivered to Tenant, which date shall not be earlier than
the date of delivery specified in the Offering Notice, (ii) except as set forth
in the Offering Notice, the Offered Space shall be leased on the same terms and
conditions as contained in this Lease, and (iii) the Offered Space shall be
leased to Tenant in its then existing
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<PAGE>
condition and state of improvement and, except as provided in the Offering
Notice, Landlord shall have no obligation to pay any allowance to Tenant or
make any improvements, repairs or alterations thereof or thereto except as
otherwise specified in the Offering Notice. The Offered Space shall be
delivered to Tenant in good condition and repair, ordinary wear and tear
excepted, and in compliance with all applicable laws, ordinances, rules and
regulations. Landlord and Tenant shall, if requested by either party, execute
and acknowledge an instrument confirming the lease to Tenant of the Offered
Space and the terms and conditions upon which the Offered Space is leased to
Tenant. Notwithstanding the foregoing, if any Event of Default exists on the
first day upon which the Offered Space is to be leased to Tenant, Landlord may
elect, by notice to Tenant within five (5) days following such date, to
terminate Tenant's leasing of the Offered Space, unless the Event of Default
has been cured prior to the giving of such notice.
(d) In the event Tenant does not exercise its right to lease the
Offered Space within the thirty (30) day time period set forth above, Landlord
may proceed to lease such space to the general public, provided that Landlord
shall not lease such space to the general public at an average effective net
rental that is less than ninety percent (90%) of the average effective net
rental proposed in the Offering Notice, or on other terms and conditions which
differ materially from those contained in the Offering Notice, unless Landlord
first reoffers such Offered Space to Tenant in the manner described above on
such changed terms and conditions; provided, however, that with respect to a
reoffer Tenant shall have only ten (10) business days following receipt of the
revised Offering Notice to accept the revised Offering Notice. If Tenant fails
to elect to lease any Offered Space pursuant to an Offering Notice, Landlord
leases the Offered Space to a third party as permitted by this Section, and
thereafter the Offered Space again becomes available, the right of first offer
set forth in this Section 9.24 again shall be applicable to such space.
9.25 RENEWAL OPTION.
(a) Renewal. Provided there is not then an existing Event of
Default under this Lease, Tenant shall have the option to renew the term of
this Lease for one period of five (5) additional years (the "Renewal Term"), to
commence at the expiration of the initial term hereof; provided that Tenant
shall have the right to terminate this Lease at the end of any calendar month
during the Renewal Term by giving Landlord at least twelve (12) months prior
written notice of its exercise of such option. Tenant shall exercise its option
to renew by delivering written notice of such election to Landlord not more
than twelve (12) months and not less than nine (9) months prior to the
expiration of the initial term hereof. The renewal of this Lease shall be upon
the same terms and conditions set forth herein, except (i) the Base Rent during
the Renewal Term shall be calculated based on the prevailing "Market Base
Rental Rate" (as hereinafter defined) at the time the Renewal Term commences,
but
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<PAGE>
in no event less than the Base Rent that Tenant is then paying under the
terms of this Lease, (ii) there shall be a corresponding adjustment of Base
Year Taxes and Base Year Insurance Premiums to the levels incorporated in the
determination of the Market Base Rental Rate, (iii) Tenant shall have no option
to renew this Lease beyond the expiration of the Renewal Term, and (iv) the
leasehold improvements will be provided in their then-existing condition (on an
"as is" basis) at the time the Renewal Term commences. Notwithstanding the
foregoing, Tenant shall have no right to exercise such option to renew, and
Landlord shall have no obligation to renew this Lease, unless (A) this Lease
shall be in full force and effect on the date of the exercise of such renewal
option and the date of the expiration of the initial term, and (B) on the date
of the expiration of the initial term there shall not be an Event of Default
under this Lease. If Tenant shall fail timely to exercise such option to renew
or if Tenant is not permitted to exercise such option to renew, this Lease
shall expire at the expiration of the initial term and Tenant shall have no
further right thereafter to renew this Lease or to thereafter maintain any
interest whatsoever in the Premises.
(b) Market Base Rental Rate. Whenever used in this Lease, the
term "Market Base Rental Rate" shall mean Landlord's reasonable determination,
subject to Section 9.25(c), (i) of the annual net effective rental rate per
square foot (exclusive of expense pass-through additions) of gross leasable
area then being charged in warehouse buildings located in Howard County,
Maryland, and (ii) of the amount of, or formula for determining, Base Year
Taxes and Base Year Insurance Premiums, then prevailing for space comparable to
the Premises. It is agreed that bona fide written offers to or from third
parties unrelated to Landlord to lease comparable space located elsewhere at
the Property (at arm's length) may be used by Landlord as the primary factor in
determining the Market Base Rental Rate.
(c) Resolution of Dispute Over Market Base Rental Rate. At any
time that is not more than eighteen (18) months and not less than twelve (12)
months prior to the expiration of the initial term hereof, Tenant may request
in writing that Landlord provide Tenant, in writing, its estimate of the then
prevailing Market Base Rental Rate and supporting evidence therefor. In the
event Tenant exercises its option to renew in accordance with Section 9.25(a)
above but disagrees with Landlord's determination of the Market Base Rental
Rate, then Tenant's renewal notice shall set forth Tenant's estimate of the
Market Base Rental Rate and its supporting evidence therefor. If, within thirty
(30) days after Tenant exercises its renewal option, Landlord and Tenant have
not agreed upon the Market Base Rental Rate, Tenant shall give Landlord notice
of its desire to arbitrate such rate, which notice shall be accompanied by the
identity of an arbitrator appointed by Tenant. Thereafter, Landlord shall have
fifteen (15) days in which to appoint its arbitrator, and within fifteen (15)
days after the appointment of Landlord's arbitrator the two arbitrators
theretofore appointed shall appoint a third arbitrator. If the two arbitrators
cannot agree on the appointment of a third arbitrator within fifteen (15) days,
then
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<PAGE>
either party shall have the right to apply to the presiding judge of the
Circuit Court of Howard County, Maryland for the selection of the third
arbitrator. After the selection of the third arbitrator, the arbitration board
thus elected shall have thirty (30) days in which to reach a majority agreement
on the Market Base Rental Rate as defined above. If the arbitrators are unable
to reach a majority agreement within such thirty (30) day period, then each of
the arbitrators shall render his or her separate appraisal within such
stipulated time, and the three appraisals shall be averaged in order to
establish such rate; provided, however, that if the low appraisal and/or the
high appraisal are more than ten percent (10%) lower and/or higher than the
middle appraisal, the low appraisal and/or the higher appraisal shall be
disregarded. If only one appraisal is disregarded, the remaining two appraisals
shall be averaged in order to establish such rate. If both the low appraisal
and the high appraisal are disregarded, the middle appraisal shall be the
Market Base Rental Rate. After the Market Base Rental Rate has been
established, the arbitrators shall immediately notify the parties in writing.
Each arbitrator appointed hereunder shall be a member of the American Institute
of Real Estate Appraisers (MAI) with at least five (5) years of full-time
commercial appraisal experience in Howard County, and no such arbitrator shall
have any other existing contractual relationship with either party hereto.
Landlord and Tenant shall pay the fees of their respectively appointed
arbitrators and the fee of the third arbitrator shall be shared equally by
Landlord and Tenant. If on the date the Renewal Term commences the appraisers
have not determined the Market Base Rental Rate pursuant to the provisions of
this Section 9.25, Tenant shall commence making monthly installments of Rent
based on the greater of (i) the Rent payable during the last Lease Year of the
initial term, or (ii) the Market Base Rental Rate set forth in the appraisal
prepared by Tenant's appraiser. If the Market Base Rental Rate is ultimately
determined to be more than Tenant has paid during the Renewal Term, Tenant
shall pay the entire difference to Landlord within ten (10) days of the
determination of the final Market Base Rental Rate, and if the Market Base
Rental Rate is lower than the amounts actually paid by Tenant during the
Renewal Term, Landlord shall refund the entire difference to Tenant in a lump
sum within ten (10) days of the final determination of the Market Based Rental
Rate.
IN WITNESS WHEREOF, the parties hereto have hereunto subscribed their
names and affixed their seals, on the day and year first hereinbefore mentioned
(in
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case either party is a corporation, its name has been hereunto subscribed and
its seal hereunto affixed and attested by its duly authorized officers).
LANDLORD:
---------
PARCEL A-40 ASSOCIATES, LLC
By: Parcel A-40 Management Associates, LLC, its
Manager
By: Penrose Land Consultants, LLC, its
Manager
By: /s/ Mark W. Gregg
----------------------------
Mark W. Gregg,
Authorized Person
and By: Amalgamated Investors, L.P., its Member
By: /s/ J. Kevin Poormen
----------------------------
J. Kevin Poormen,
Vice President
TENANT:
THE COSMETIC CENTER, INC.
By: /s/ Howard Diener
-------------------------------------
Howard Diener
President and Chief Executive Officer
<PAGE>
Exhibit 10(H)
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is made
and entered into this 15th day of June, 1997, from THE COSMETIC CENTER, INC., a
Delaware corporation (the "Assignor"), formerly known as Cosmetic & Fragrance
Concepts, Inc., to GPA ASSOCIATES, LLC, a Maryland limited liability company
("Assignee").
RECITALS
--------
A. Assignor, as tenant, and PROPERTY MARYLAND WAREHOUSE THREE
CORPORATION, a Maryland corporation ("Landlord"), as landlord, entered into
that certain Industrial Lease Agreement dated May 1, 1990, as amended by a
First Amendment to Industrial Lease Agreement dated February 6, 1995 (together
the "Lease"), a copy of which is attached hereto and made a part hereof,
pursuant to which Assignor leased from Landlord certain space located in
Savage, Howard County, Maryland, as more particularly described in the Lease
(the "Premises").
B. Assignor desires to transfer and assign all of its right, title and
interest in the Lease to Assignee and Assignee desires to accept and receive
all of such right, title and interest in and to the Lease.
C. Simultaneously with its execution of this Agreement, Assignor has
entered into a Lease Agreement (the "Parcel A-40 Lease") with Parcel A-40
Associates, LLC ("Parcel A-40"). Parcel A-40 and/or its members own or control
all of the interests in Assignee. The execution and delivery of this Agreement
by Assignee is part of the consideration for Assignor's execution and delivery
of the Parcel A-40 Lease.
AGREEMENT
---------
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending legally to be
bound, agree as follows:
<PAGE>
1. The foregoing Recitals are incorporated by reference herein and
made a part hereof.
2. Assignor represents and warrants to Assignee that (i) a true and
complete copy of the Lease is attached to this Agreement as Exhibit A, (ii) the
Lease constitutes the entire agreement between Assignor and Landlord, (iii)
Assignor is the lawful owner of all of the right, title and interest of the
tenant in and to the Lease, (iv) Assignor has the full power and authority to
execute this Agreement and assign the Lease and upon execution hereof, Assignee
shall have the lawful right to occupy the Premises, (v) the monthly installment
of Basic Annual Rent, Additional Rent with respect to Insurance Costs and Real
Estate Taxes, and Additional Rent with respect to Operating Costs, presently in
effect is Forty-Five Thousand One Hundred Fifty-Eight Dollars and Forty-Two
Cents ($45,158.42), (vi) Assignor has paid to Landlord all rent, additional
rent and other charges due and owing under the Lease through July 31, 1997,
and there are no outstanding invoices for rent, additional rent or other
charges at this time, and (vii) there is no Event of Default by Assignor under
the Lease, nor is there any event or circumstance which would constitute an
Event of Default by Assignor with the giving of notice and/or the passage of
time.
3. (a) Assignor hereby conveys, assigns and transfers to Assignee, its
successors and assigns, effective as of the "Effective Date" (as hereafter
defined), all of the right, title, and interest of Assignor in and to the
Lease. Assignee hereby accepts the conveyance, transfer and assignment of
Assignor's rights under the Lease and assumes and agrees to perform all
obligations of the tenant under the Lease, from and after the Effective Date,
subject to the provisions of paragraphs 4(b) and 4(e) below. The term
"Effective Date" shall mean the later of (i) June 15, 1997 or (ii) the date
rent begins to accrue under the Parcel A-40 Lease.
(b) Assignor covenants and agrees that within fifteen (15) days of
the date Parcel A-40 substantially completes "Land-lord's Office Work", as
defined in the Parcel A-40 Lease, Assignor shall vacate and deliver the
Premises to Assignee, broom clean, in the condition in which the Premises is
required to be when the Premises are delivered to Landlord. Within three (3)
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business days of the date Assignor vacates and delivers the Premises to
Assignee, Assignor and Assignee shall conduct a joint "walk-through" inspection
of the Premises. Assignor shall be responsible, at Assignor's cost and expense,
(i) for the removal of any alteration to, or any restoration of, the Premises
which Assignor is obligated to make as a result of any alteration to the
Premises made by Assignor, and (ii) any other repairs to the Premises required
under the Lease because the condition of the Premises existing on the Effective
Date violates the Assignor's obligations under the Lease with respect to the
condition of the Premises, to the extent that the aggregate cost of any repairs
described in this clause (ii) exceeds Fifteen Thousand Dollars ($15,000.00).
Assignor and Assignee shall use their best efforts to obtain an estoppel
certificate from Landlord that states whether the condition of the Premises is
in accordance with Assignor's obligations under the Lease. In addition, within
three (3) business days of the joint inspection of the Premises, Assignee shall
give Assignor written notice of any condition in the Premises that it has
observed that is in violation of the Assignor's obligations under the Lease.
(c) As soon as practicable following the execution of this
Agreement, Assignor shall give Landlord written notice that it will not extend
the Lease for the five (5) year Extension Term. Assignee shall not take any
action to revoke or contradict such notice.
4. (a) Assignee's liability for the performance of the tenant's
obligations under the Lease accruing from and after the Effective Date shall be
secured by a letter of credit in the amount of One Million Eight Hundred
Sixty-One Thousand One Hundred Sixty-Two Dollars ($1,861,162.00), which shall
be issued by First National Bank of Chicago (the "Bank") to Assignor in
substantially the form attached hereto as Exhibit B and made a part hereof (the
"Letter of Credit"), and which shall have an expiration date which is not
earlier than October 16, 2000. In the event Assignee fails to pay any scheduled
monthly installment of Rent or any other amount owing under the Lease within
four (4) days of written notice from Landlord of such failure (a "Monetary
Default"), or upon the occurrence of any other Event of Default under the
Lease, Assignor shall have the right to draw against the Letter of Credit in
accordance with the terms thereof the amount necessary to cure the Monetary
Default or other Event of
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Default, in which event Assignor shall be obligated to pay the amounts drawn
under the Letter of Credit to Landlord to cure such Monetary Default or other
Event of Default. The Letter of Credit shall require that the following be
delivered to the Bank in connection with any draw against the Letter of Credit:
(i) a sight draft in the amount to be drawn under the Letter of Credit; (ii)
the original Letter of Credit; and (iii) an affidavit executed by an officer of
Assignor on behalf of Assignor that (A) states that there has been a Monetary
Default or other Event of Default under the Lease for which Assignee is
responsible under this Agreement, (B) states the amount that Assignor is
entitled to draw in accordance with this Agreement, (C) states that no
"Suspension Event" (as defined in paragraph 4(b) of this Agreement) has
occurred under the Agreement, and (D) states that a copy of the sight draft and
the affidavit submitted to the Bank has been sent simultaneously to Assignee in
accordance with the provisions of paragraph 8 below. Except as set forth in
paragraph 4(d) below, Assignor shall not be entitled to draw any amounts
pursuant to the Letter of Credit in excess of the amount necessary to cure the
Monetary Default or other Event of Default. The amount necessary to cure a
Monetary Default or other Event of Default shall include the amount of any Rent
or Additional Rent or other sums due to Landlord and the amount Assignor
reasonably estimates it will be required to spend in performing any other
obligations accruing after the Effective Date which Assignee has failed to
perform under the Lease. In the event that a draw made against the Letter of
Credit to cure a Monetary Default or other Event of Default proves to be
insufficient to cure such Monetary Default or other Event of Default, Assignor
may make one or more supplemental draws against the Letter of Credit pursuant
to the terms hereof in order to enable Assignor to use the proceeds of the
Letter of Credit to fully cure such Monetary Default or other Event of Default.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Assignee shall be excused, in whole or in part, from performing the
obligations of tenant accruing under the Lease after the Effective Date, and
Assignor's right to draw against the Letter of Credit shall be suspended or
reduced, at such time as any of the following events has occurred and is
continuing (the "Suspension Events"):
(i) during any period in which there is an Event
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<PAGE>
of Default under the Lease that is the result of a bankruptcy or insolvency of
Assignor, an assignment for the benefit of creditors by Assignor, or an
attachment, execution or judicial seizure of Assignor's assets as described in
paragraphs (C), (D) or (E) of Article 20 of the Lease, Assignee shall be
excused from performing any obligation of tenant under the Lease that accrues
during such period, and Assignor shall be precluded from making any draw
against the Letter of Credit during such period, unless at the time there is
also an Event of Default under the Lease for which Assignee is responsible
pursuant to the terms of this Agreement;
(ii) during any period in which there is an Event of Default
under the Lease that results from, or arises out of, a breach by Assignor of
its obligations under the Lease accruing on or before the Effective Date,
Assignee shall not be obligated to make any payment or perform any obligation
of tenant under the Lease that accrues during such period, and Assignor shall
not have any right to draw against the Letter of Credit during such period,
unless and until Assignor fully cures such breach;
(iii) during any period in which Assignor fails to have vacated
the Premises and delivered possession of the Premises as required by paragraph
3(b) above, Assignee shall not be obligated to make any payment or perform any
obligation of tenant under the Lease that accrues during such period, and
Assignor shall not have any right to draw against the Letter of Credit during
such period, unless and until Assignor fully cures such breach; and
(iv) at any time that Parcel A-40 has any direct or indirect
interest in the Parcel A-40 Lease or the Parcel A-40 property and there is an
uncured Event of Default under the Parcel A-40 Lease, the amount which Assignee
shall be obligated to pay under the Lease, whether for rent or in the
performance of any other obligations of tenant accruing after the Effective
Date, shall be reduced dollar for dollar by the amount of any Rent (including
Additional Rent) which Assignor owes Parcel A-40 under the Parcel A-40 Lease,
and the amount which Parcel A-40 reasonably estimates it will be required to
spend in performing any other obligations which Assignor has failed to perform
under the Parcel A-40 Lease, unless and until Assignor fully cures such breach;
provided that in no event shall such reduction excuse
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<PAGE>
Assignee from making payments to Landlord during such period in an amount equal
to the amount of any rent paid to Assignee by any subtenant or assignee of
Assignee during such period.
(c) The maximum amount drawable under the Letter of Credit shall be
reduced, dollar for dollar, by the amount of rent actually paid by Assignee to
Landlord pursuant to the Lease, provided that at no time shall the amount
available to be drawn under the Letter of Credit be reduced below One Hundred
Thousand Dollars ($100,000.00). Upon the Bank's receipt of reasonably
satisfactory evidence that Assignee has paid such rent to Landlord (including,
without limitation, copies of cancelled checks), the Bank shall have the right
to issue amendments to the Letter of Credit confirming the amount which remains
drawable thereunder. In the event that Assignor is released by Landlord from
any further obligations under the Lease, the Letter of Credit shall be returned
to Assignee and Assignee shall have the right to cause the Letter of Credit to
be cancelled.
(d) If, at the time of any Monetary Default or any other Event of
Default under the Lease, Assignee is bankrupt or insolvent, as described in
paragraph (C) of Article 20 of the Lease, and Assignee has rejected the Lease
in connection with such bankruptcy or insolvency proceedings, the amount which
Assignor shall be entitled to draw under the Letter of Credit shall be the
remaining balance then available to be drawn under the Letter of Credit;
provided that if Assignor is not required to use the full amount drawn under
the Letter of Credit to discharge Assignor's obligations under the Lease, any
remaining balance shall be paid to Assignee promptly upon Assignor's release
from, or satisfaction of, its obligations under the Lease. It is understood and
agreed that if Assignee rejects the Lease in connection with such bankruptcy or
insolvency proceedings, the Assignor's obligations under the Lease could exceed
the Assignee's obligations under the Lease, in which event Assignor shall be
entitled to retain all amounts necessary to discharge Assignor's obligations
under the Lease.
(e) If, during any period in which a Suspension Event is continuing
and Assignor's right to draw against the Letter of Credit is suspended or
reduced, Assignor makes any payment of Rent or Additional Rent or other sums
required of tenant under the Lease or incurs any reasonable expenses in
performing the
-6-
<PAGE>
tenant's obligations under the Lease (collectively the "Suspension Period
Payments"), which but for the application of paragraph 4(b) would have been
Assignee's obligation under this Agreement, then at such time (if any) as
Assignor cures all breaches and as a result the conditions set forth in
paragraph 4(b) have been removed, Assignor shall have the right to give
Assignee written notice specifying (i) that it has cured all breaches and
removed such conditions and (ii) the amount of such Suspension Period Payments,
and Assignee shall reimburse Assignor within five (5) days of its receipt of
such notice for the amount of any Suspension Period Payments. If there is a
dispute between Assignor and Assignee with respect to whether or not a
Suspension Event occurred, and a court of appropriate jurisdiction determines
that no Suspension Event occurred, Assignee shall pay Assignor interest on the
amount of any Suspension Period Payments from time to time outstanding, at the
annual rate equal to two hundred (200) basis points over The Wall Street
Journal corporate prime rate, as published daily in its money rates section, or
its substantial equivalent, such rate to be adjusted as and when the corporate
prime rate changes. If Assignee fails to reimburse Assignor for a Suspension
Period Payment pursuant to this paragraph 4(e), including any interest that may
be due thereon, Assignor shall give Assignee written notice of such failure,
and if Assignee does not make the required payment within five (5) days of such
written notice, such failure shall be deemed a Monetary Default under this
Agreement and Assignor may draw against the Letter of Credit the amount of the
required payment.
5. Assignor hereby indemnifies and agrees to defend and hold Assignee
harmless from and against any loss, cost, damage or expense (including
reasonable attorney's fees) whatsoever resulting from or arising out of any
actual or alleged breach by Assignor of its obligations under the Lease,
accruing during the period ending on the Effective Date.
6. Assignee hereby indemnifies and agrees to defend and hold Assignor
harmless from and against any loss, damage or expense (including reasonable
attorneys' fees) whatsoever resulting from or arising out of any actual or
alleged breach by Assignee of its obligations under the Lease, accruing during
the period subsequent to the Effective Date.
7. The assumption by Assignee of the Lease shall not in
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any way limit or impair the liability of any of the parties to this Agreement
for breach of any representations, warranties, covenants or indemnities
contained in the Lease.
8. Any payments made by Assignor to a lender pursuant to the terms of
a subordination or non-disturbance agreement in connection with the Parcel A-40
Lease shall be deemed to be payments made to Parcel A-40, and Assignor shall
not be deemed to be in default under the Parcel A-40 Lease with respect
thereto.
9. All notices or demands between Assignor and Assignee required or
permitted by law or any provisions of this Agreement shall be given in writing,
shall be sent by messenger or overnight delivery service, at the address or
addresses listed below or at such other or additional address or addresses as
either party may hereafter designate in writing:
ASSIGNOR:
The Cosmetic Center, Inc.
625 Madison Avenue
New York, New York 10022
Attention: Vice President, Real Estate
ASSIGNEE:
GPA Associates, LLC
c/o Penrose Property Company
8330 Boone Boulevard
Suite 460
Vienna, Virginia 22182
with a copy to:
Penguin Group, L.P.
200 West Madison Street
38th Floor
Chicago, Illinois 60606
Attention: John Kevin Poorman, Esquire
10. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Maryland.
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<PAGE>
11. This Agreement is binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators, legal
or personal representatives, successors and assigns.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Assumption Agreement as of the day and year first above written.
ASSIGNOR:
---------
ATTEST: THE COSMETIC CENTER, INC., a
Delaware corporation
/s/ Joanne E. O'Neill By: /s/ Howard Diener
- ---------------------------------- --------------------------------
[Corporate Seal] President and Chief Executive
Officer
ASSIGNEE:
---------
WITNESS: GPA ASSOCIATES, LLC,
a Maryland limited liability
company
By: Parcel A-40 Associates, LLC
-------------------------------
By: Parcel A-40 Management
Associates
-------------------------------
By: Penrose Land Consultant
-------------------------------
By: /s/ Mark W. Gregg
- ---------------------------------- --------------------------------
Authorized Person
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Cosmetic Center, Inc.'s June 27, 1997 financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1997
<PERIOD-END> JUN-27-1997
<CASH> 2,706
<SECURITIES> 0
<RECEIVABLES> 1,341
<ALLOWANCES> 10
<INVENTORY> 83,964
<CURRENT-ASSETS> 92,277
<PP&E> 21,562
<DEPRECIATION> 8,132
<TOTAL-ASSETS> 112,693
<CURRENT-LIABILITIES> 27,808
<BONDS> 46,255
0
0
<COMMON> 100
<OTHER-SE> 31,227
<TOTAL-LIABILITY-AND-EQUITY> 112,693
<SALES> 49,332
<TOTAL-REVENUES> 49,332
<CGS> 33,658
<TOTAL-COSTS> 52,060
<OTHER-EXPENSES> 4,064
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,172
<INCOME-PRETAX> (7,964)
<INCOME-TAX> 20
<INCOME-CONTINUING> (7,984)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,984)
<EPS-PRIMARY> (0.89)
<EPS-DILUTED> (0.89)
</TABLE>
