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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1996 Commission File No. 0-23396
Skyline Multimedia
Entertainment, Inc.
(Name of Small Business Issuer in Its Charter)
New York 11-3182335
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
350 Fifth Avenue, New York, New York 10118
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(Address of principal executive offices) (Zip Code)
(212) 564-2224
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(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(h) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
Units consisting of Common Stock, Class A Warrants and Class B Warrants
Common Stock, $.001 Par Value
Redeemable Class A Warrants
Redeemable Class B Warrants
Check whether the Issuer: (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 |_|
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
|X|
The Company's revenues for its most recent fiscal year were $5,978,000.
The aggregate market value of the voting stock held by non-affiliates of the
Company was $5,700,000 as of September 24, 1996 based on the average bid and
asked prices of such stock as of that date.
There were 2,455,000 shares of Common Stock, $.001 par value, outstanding as of
September 24, 1996. Additionally, there were 1,090,909 shares of Series A
convertible participating preferred stock, $.001 par value, outstanding as of
September 24, 1996.
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DOCUMENTS INCORPORATED BY REFERENCE
1. Proxy Statement for the annual meeting of shareholders to be filed with
the Securities and Exchange Commission within 120 days following the Company's
fiscal year ended June 30, 1996. Certain information to be included therein is
incorporated by reference into Part III hereof.
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PART I
Item 1. DESCRIPTION OF BUSINESS.
General
Skyline Multimedia Entertainment, Inc. (the "Company") is a holding company
incorporated under the laws of the State of New York on November 2, 1993, which
owns all of the outstanding stock of its operating subsidiaries, New York
Skyline, Inc. ("Skyline"), Skyline Virtual Reality, Inc. ("SVR"), Skyline
Chicago, Inc. ("SCI") and Skyline Magic, Inc. ("SMI"). The Company is engaged in
the development and operation of state-of-the-art simulator attractions and
high-technology and family entertainment at established tourist sites and other
popular locations primarily in the United States. The Company's operating
strategy is to capture a large portion of the existing tourist traffic at these
sites and to expand its operations throughout the world. All references to the
"Company" contained herein include Skyline, SVR, SCI and SMI, except where
specifically noted.
On December 22, 1994, the Company commenced operations of its first
attraction, New York Skyride, which is located in the Empire State Building in
New York City. New York Skyride is an exhilarating simulated "aerial tour" of
New York City in a futuristic "spacecopter". New York Skyride features two 40
passenger state-of-the-art flight simulators and related computer-controlled
film projection technologies to provide visitors with a complete "New York"
experience, including an extensive pre-show area featuring interactive
multimedia exhibits depicting the various tourist sites and attractions in and
around the New York Metropolitan area, and culminating in a seven and a half
minute aerial "adventure" in and around New York City. Passengers will not only
experience the sensations of an actual aerial flight, but will also experience
visual images projected on screens within the simulator that envelop the viewer
with a variety of sights and sounds. New York Skyride is intended to provide
visitors with a sensation of taking a "once in a lifetime" aerial flight around
New York City. The Company believes that New York Skyride is identified with the
focal point of the tourism industry in New York City and one of the world's most
famous "must-see" attractions.
During April 1996, through SVR, the Company signed a ten-year renewable
lease for approximately 13,000 square feet of space in the Business Improvement
District Entertainment Zone located at Times Square (Broadway and 42nd Street)
in New York City to develop "XS New York", a state-of-the-art entertainment
center featuring the latest in virtual reality, simulation and related
technologies. XS New York is anticipated to open by December 1996 and will
feature highly themed "environments" exhibiting futuristic graphics, lighting,
audio and visual displays and special effects. Visitors will experience a
professionally created facility that will include unique "Virtual Environments",
each highlighting innovative technologies that will offer an exhilarating
sensory and tactile encounter. In addition, the Company expects to include a
"Cybercafe" which will feature food, refreshments, souvenirs and high speed
computer terminals providing access to the World Wide Web and Internet.
In September 1996, the Company entered into a 15 year lease with the
operators of the Woodfield Mall located outside of Chicago in Schaumberg,
Illinois. The Woodfield Mall is one
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of the largest and most heavily visited malls in the United States, boasting
annual attendance in excess of 18 million. The Company, through SCI, intends to
develop an entertainment venue at this location similar to that of XS New York.
The Company is in the process of finalizing negotiations to create a 50/50
joint venture to produce and operate a "Broadway-style" magic show. The show,
called "Magic on Broadway", is currently being previewed at the Lambs Theatre in
the Broadway district in New York City. The show is expected to run initially
for seven months with options to extend and features the talents of magician
Joseph Gabriel.
The Company intends to use the expertise and experience which it gained
from the operation of New York Skyride to develop these and similar attractions
at other locations in the United States and abroad. However, there can be no
assurance that the Company will be successful in developing these attractions or
other attractions at additional locations.
The Company's revenues are generated primarily from ticket sales, with
additional revenues generated from the sale of food, beverages and souvenir
merchandise. The Company has entered into corporate sponsorship and advertising
arrangements with major international corporations which provide additional
revenue and marketing exposure.
The Company's principal executive office is located at the Empire State
Building, 350 Fifth Avenue, New York, New York 10118 and its telephone number is
(212) 564-2224.
The New York Skyride Experience
New York Skyride is an adventure that is directly related to the New York
City tourist experience. The Company believes that New York Skyride enhances a
visit to the Empire State Building and to New York City by providing an
exciting, bird's-eye view of the landmarks and sites that cannot be seen from
any other vantage point.
Upon entering New York Skyride, visitors, who will be treated as
first-class passengers about to depart on a futuristic helicopter flight aboard
the "Zalman 2100 Spacecopter", will proceed into the Pre-Show Heliport area
(approximately 7,500 sq. ft.) where they are introduced to multimedia displays
depicting major New York City tourist attractions as well as informational and
entertaining film clips. These displays have been designed and installed by
certain of the Company's sponsors.
The Pre-Show area has interactive multimedia exhibits which provide the
background of certain tourist attractions in the New York City area. These
exhibits provide the visitor with useful knowledge about New York City and its
many popular tourist sites and a feeling of participation in the New York
Skyride experience.
Following a preflight briefing about "spacecopter" travel, passengers will
enter into one of the two "Zalman 2100 Spacecopters", which are 40 passenger
computer-controlled flight simulators. At the front of each simulator is a large
18' x 18' screen upon which a fast-paced film is displayed. The simulator also
contains an advanced 8-channel digital sound system, with
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4 dual amplifiers, 400 watts per channel each (or 3,200 watts of total sound),
to provide passengers with an enhanced audio/visual experience.
Once the passengers are seated in the spacecopter, they begin a seven and a
half minute simulated flight that treats them to an array of New York City
scenes. Spectacular adventures await the passengers throughout their excursion.
For example, the spacecopter crashes into FAO Schwarz, the world's largest toy
store, passes directly under the Brooklyn Bridge, "dives" into a tunnel, crashes
into the East River, has a run-in with a New York City traffic cop, among other
exciting adventures. The spacecopter also visits many of New York City's other
tourist attractions, including Fifth Avenue, the World Trade Center Towers,
Central Park, Times Square and the Statue of Liberty. Since New York Skyride is
intended to be a family-oriented attraction, the film is designed to appeal to
the broadest audience and not purely the most adventurous thrill-seekers. The
film makes the Empire State Building the focal point of the attraction, with a
liftoff and landing taking place from atop the Empire State Building.
Once the spacecopter flight has been completed, passengers exit the
simulators and proceed to the exit lobby which contains a beverage, food and
souvenir concession area. All passengers are able to purchase souvenirs of their
visit to New York Skyride, i.e. a hat, large button or other suitable memento
with the Empire State Building or New York Skyride logo on it.
The XS New York Experience
The Company's latest project under development will include an interactive
virtual reality entertainment center, "XS New York", which is located in the
heart of Times Square in New York City and is expected to commence operations by
December 1996. XS New York will present the latest in state-of-the-art
entertainment technology, featuring cutting-edge virtual reality hardware and
software. Upon entering XS New York, guests will immediately become immersed in
heavily themed "environments" that display futuristic graphics, lighting, audio
and video treatments. Presented in a first class, professional format, guests
will be lead through an expertly designed layout that introduces them to
interactive show action equipment and special effects areas into virtual
"worlds" that offer each guest an opportunity to experience the latest in
virtual reality and related technologies.
Each virtual world will feature a unique type of virtual reality hardware
and software display. Some will offer competition between players while others
will provide exploratory experiences. Tickets will be purchased from a centrally
located ticket area which will also serve as the launching point for most guest
experiences. One of the virtual worlds will include a "Cybercafe" which will
offer light food and refreshments and computer terminals which will be linked to
the World Wide Web and Internet.
Other themed environments will feature attractions such as the newly
created Mag-Ball(TM) competition arena, which will allow guests to participate
in the very popular Mag-Ball(TM) game, and the internationally recognized
Virtuality 2000 series interactive entertainment equipment. Some environments
will include a 3-dimensional action and visual presentation allowing guests to
view their own activity, the activity of competitors and the attractions' vital
statistics on giant overhead monitors and projection screens. Simultaneously,
guests waiting to participate in a
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particular virtual world and those seated in the Cybercafe will also be able to
view the fast-paced action and sound effects of certain themed environments.
Some environments will include interactive virtual reality equipment that can be
programmed to function as stand alone units or in conjunction with other players
at locations around the world. The Company intends to stage monthly competitions
between other "XS" locations culminating in a "Virtual Olympics" once each year.
The XS Chicago Experience
In September 1996, the Company entered into a lease for approximately
21,000 square feet of space in the Woodfield Mall outside of Chicago, Illinois.
The Company, through SCI, plans to develop a state-of-the-art interactive
virtual reality entertainment center, XS Chicago, similar to the XS New York
project currently under development. The XS Chicago location will be situated
near the Rainforest Cafe, a successful themed restaurant, and other retail
establishments that attract tourists and regional area residents. The Company
will have to obtain additional financing in connection with the development of
XS Chicago and is currently in the process of identifying potential sources,
although there can be no assurance that such financing will be available on
acceptable terms, or at all. See "Management Discussion and Analysis of
Financial Condition and Results of Operations."
Simulator and Virtual Reality Technologies
The Company's motion simulator attractions utilize state-of-the-art,
computer-controlled aircraft flight simulators. Simex, Inc. (formerly
Interactive Simulation, Inc.), a Canadian company experienced in simulation
technology, provided the sophisticated computer hardware and software that
coordinates the movements of the simulator platform with the images projected on
the screen. The range of motion for the simulators is along six axes (that is,
the simulators can create up and down motions, right and left motions, angled
motions to simulate turning or banking while climbing or descending at varying
degrees and a spin motion, or some combination of the above). The movable
platforms on which the simulators rest and which move in synchronization with
the film were developed by Moog, Inc., a large defense contractor experienced in
the adaptation of flight simulator technology to the entertainment market.
A key component of the simulator technology is the "show control system",
which is a PC-based computer program that coordinates and manages the motion and
gyration of the simulator with the film and audio elements of the program. For
example, when the film image shows the spacecopter banking to the right, there
must be a precise, coordinated movement of the simulator in that direction to
both convince the passengers senses that they are flying in a spacecopter and
prevent passenger disorientation. The speed of the film through the projection
system is faster than normal film, television or video footage, which enhances
the passengers perception of motion and movement. The film is in
state-of-the-art super 35mm format projected at 30 frames per second rather than
standard 24 frames per second, which provides a sharper, more intense image. The
projection equipment is a fully automated system that eliminates the need for a
projector operator. The film was developed in conjunction with Chromavision
Corp., a production studio with extensive experience in fast-paced concept
films.
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XS New York and, in the future, XS Chicago will feature a wide assortment
of the latest in entertainment and virtual reality hardware and software
technologies. The state-of-the-art interactive virtual reality technologies
which will be showcased at XS New York and, in the future, XS Chicago include: a
dogfight simulation experience created by Ride and Show Engineering, which
allows direct competition with other participants and provides each participant
the opportunity to engage their opponent, navigate through a canyon at high
speed and fly completely inverted; the "Mag-Ball" experience developed by
Greystone Technology, a southern California defense contractor, which provides
an interactive competition that can be linked with players at other venues
across the country; Virtual Reality game experiences, including Total Recoil,
manufactured by Virtuality Ltd., a British company and the current world leader
in the design, fabrication and production of Virtual Reality entertainment
systems, a simulated skeet shoot contest that provides all the sensations of
firing a shot gun in a completely safe environment, and many other 3-dimensional
software packages, including Alpine Racer - a simulated slalom ski race, Daytona
Speedway - a simulated car racing experience and Full Swing Golf - a simulated
golf experience featuring the most famous golf courses in the world; and a
virtual PC-based game and sports "battle ground" where players compete on-line
and in person, for scholarships and prizes, on a three-tiered pyramid stage,
which will combine the excitement of a Hollywood game show and the intensity of
a PC action game, in the latest unique spectator event. XS New York will also
feature a contemporary Cybercafe which will serve food and beverages while
providing access to the World Wide Web and Internet from table-based PC computer
stations.
XS New York and, in the future, XS Chicago will also include a uniquely
themed retail area that will provide New York related (or in the case of XS
Chicago, Chicago related) merchandise as well as specialty souvenirs. Since
attractions at XS New York and XS Chicago will require the use of magnetic debit
cards, a comprehensive data base will be created indicating customer
demographics and preferences, which information the Company will use for future
software development, special event promotions and merchandise selection.
The Magic on Broadway Experience
The Company is in the process of finalizing negotiations relating to the
participation, through SMI, in a 50/50 Joint Venture which will produce and
manage a "Broadway-style" show featuring the talents of Joseph Gabriel, an
internationally renowned magician. The show, "Magic on Broadway", is currently
being previewed at the Lambs Theatre in New York City and is expected to run
initially for seven months. The joint venture will have the option to extend the
engagement and will receive revenues from ticket and merchandise sales and
administrative fees. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
The Empire State Building Location
New York Skyride is located on the second and third floors of the Empire
State Building, in a 21,800 square foot site that wraps around the south and
west sides of the building with an entrance situated adjacent to the main lobby
escalator that takes all visitors to the waiting area for the Observatory
elevators. Signs and video monitor displays in the Empire State Building's
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lobby and in the Observatory ticket purchase area make visitors to the Empire
State Building aware of New York Skyride. Most importantly, visitors who
purchase tickets to the Observatory are offered the choice of purchasing a
combined Observatory/New York Skyride ticket at a reduced price from separate
purchases of tickets to both attractions. The cost of a ticket to New York
Skyride is $9.00, and the cost of a combined ticket with the Observatory is
$11.50 (the cost of a ticket to the Observatory is $4.50). Children's rates,
group rates and senior discounts are also offered along with other promotional
discounts.
The Empire State Building is a focal point for the tourism industry in New
York City. The Observatory, which opened in 1933 and is located on both the
102nd and the 86th floors, has achieved worldwide recognition and publicity, and
is a primary destination for a large percentage of New York City's tourist
traffic. Paid attendance figures provided by management of the Empire State
Building for the last five years for the Observatory are summarized below.
EMPIRE STATE BUILDING OBSERVATORY
ADMISSION TICKET SALES (000'S)
YEAR 1991 1992 1993 1994 1995
---- ---- ---- ---- ----
TOTAL ATTENDANCE 2,295 2,391 2,650 2,915 3,350
Except for 1991, which was the year of the Gulf War, the Observatory
attendance has experienced steady growth.
The Company believes that combined ticket sales at the Observatory's ticket
facilities together with the Company's marketing and promotional campaigns will
enable New York Skyride to attract approximately 25-30% of all visitors to the
Observatory; however, there can be no assurance that these levels will be
achieved. For the year ended June 30, 1996, the Company's capture rate of
Observatory visitorship averaged approximately 23%, up from approximately 20%
for the year ended June 30, 1995. The Company expects that with additional
marketing and promotional activities to further public awareness of New York
Skyride, both inside and outside the Empire State Building, the Company's
capture rate should increase to anticipated levels.
The Times Square Location
The Company has leased approximately 13,000 square feet of space at
1457-1463 Broadway (at 42nd Street), New York, New York in the Business
Improvement District Entertainment Zone located in Times Square in New York
City. This space will be utilized for the Company's latest attraction "XS New
York", a state-of-the-art interactive virtual reality entertainment center.
Ideally situated in the heart of Times Square, XS New York is part of the
exciting revitalization of Times Square along with such other notable names as
Disney's New Amsterdam Theater, Madame Tussaud's Wax Museum and AMC's 26-Plex
Movie Theater, and is located directly across from the World Famous Disney
Store. The Times Square area is visited by approximately 20 to 30 million
tourists annually, employs 250,000 people and
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accommodates 1.5 million commuters every day. This incredible density of people
with significant disposable income continues to grow each year and is expected
to grow at a more significant rate as a result of the revitalization efforts
mentioned above. In addition, Times Square in New York City is the most popular
place in the world on New Year's Eve, particularly so as the millennium
approaches.
The Woodfield Mall Location
The Company leased approximately 21,000 square feet of space in the
Woodfield Mall located outside of Chicago, in Schaumberg, Illinois. The
Woodfield Mall is the fourth largest shopping mall in the United States with
over 2 million square feet of retail space and annual visitorship in excess of
18 million. The Company's premises are located near "The Rainforest Cafe" and
other retail establishments which attract large numbers of visitors to the mall.
Advertising and Promotional Plans
The Company intends to capitalize on the strength of its existing locations
with a multifaceted marketing, public relations and advertising program that
will heighten awareness about New York Skyride (including the fact that it is
the first such motion simulator attraction in New York City) and XS New York
among the more than 25 million persons, including tourists and residents from
the surrounding New York area, who visit New York City every year. Advertising
and promotional activities include a careful mix of paid advertising and
promotional and public relations activities.
In connection with New York Skyride, efforts to attract attendees from the
Observatory are focused within the Empire State Building itself. The management
of the Observatory has agreed to sell combined Observatory and New York Skyride
discounted admission tickets and to identify other opportunities for shared
promotional programs and other joint marketing activities. Pursuant to the terms
of the license agreement with the Observatory, any discount as a result of
combined ticket sales are deducted from the admission price of a New York
Skyride ticket. The non-discounted price of a New York Skyride ticket is $9.00
for adults and $7.00 for children under the age of 12 years.
Promoting New York Skyride and XS New York to tourist boards (such as The
New York Convention & Visitor's Bureau), travel agents, managers of group
activities and visitors to New York City represents a primary focus of the
Company's marketing efforts for these attractions. Since tourists and visitors
are a primary target, special volume discounts are offered to groups such as
conventions and trade associations, as well as through travel agent packages.
School groups are also a significant market for New York Skyride and XS New
York, and special programs are being implemented to target these audiences,
especially during the slower tourist periods in the fall and winter months.
The Company will continue to market and promote its activities through
traditional print advertising in publications that go to New York City tourists
and others, as well as broaden its advertising and promotional programs to the
general public through local radio and newspaper advertising. The Company is in
the process of developing its marketing plans for its XS Chicago
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attraction to be located in the Woodfield Mall and expects to employ similar
advertising and promotional programs throughout the Chicago Metropolitan area
and other surrounding regions.
Corporate Sponsors
Management expects to continue to supplement revenue from ticket sales to
its attractions by soliciting corporate sponsorships from a number of key
consumer product companies. It is expected that these sponsorships will generate
additional revenue for the Company through joint marketing and promotional
programs with these leading consumer product companies. To date, the Company has
entered into three major sponsorship agreements in connection with New York
Skyride, one involving JVC Company of America, a major electronics manufacturer,
one with Pepsi-Cola Bottling Company of New York, Inc., a major soft drink
manufacturer, and one with Fuji Photo Film U.S.A., a major distributor of
photographic and magnetic imaging merchandise. The agreements range in their
terms from three to five years and provide for annual fees, capital improvements
and cross promotions for the Company. The Company believes that such
arrangements will result in greater market awareness and acceptance through the
association of New York Skyride with such corporate sponsors and their products.
Corporate sponsorships in connection with XS New York are being developed and
the Company expects such sponsorships to be a significant source of revenue and
provide significant marketing exposure.
Leases and License Agreements
The Company, through Skyline, entered into both a lease (the "Lease") and
an exclusive license agreement (the "License Agreement") with the Empire State
Building Company, the operator of the Empire State Building in New York City, on
February 26, 1993. The Lease of the premises located at the Empire State
Building is for a term of 20 years and contains rent escalation provisions as
described under "Description of Property" below and certain other provisions
relating to additional rent, taxes, utilities, prohibition against assignment
and cross-default provisions in the event of a default under the License
Agreement. The Company has negotiated a modification to the Lease extending the
term of the Lease to coincide with a new lease for an additional 35,000 square
feet of space adjacent to the New York Skyride location. The modification would
extend the termination date of the Lease from May 1, 2013 through and including
June 30, 2016. The term of the License Agreement has also been extended to
coincide with the new lease for additional space.
The License Agreement provides for the joint sale of tickets to the
Observatory and New York Skyride provided payments by the Company are made
monthly at an annual rate of $150,000 from April 1, 1995 through March 31, 1998;
$175,000 from April 1, 1998 through March 31, 2002; $200,000 from April 1, 2002
through March 31, 2006; $225,000 from April 1, 2006 through April 30, 2013, and
$186,000 from May 1, 2013 through June 30, 2016. The License Agreement also
provides for the reimbursement by the Company of certain costs and expenses
relating to the joint ticket sales and contains cross-default provisions in the
event of a default under the Lease.
During April 1996, the Company signed a 20 year renewable lease for an
additional 35,000 square feet of space within the Empire State Building adjacent
to the New York Skyride facility. The lease term commences September 1, 1996 and
provides for rental payments by the
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Company at an annual rate of $529,000 through July 31, 1997; $565,000 from
August 1, 1997 through July 31, 1998; $600,000 from August 1, 1998 through July
31, 1999; $619,000 from August 1, 1999 through July 31, 2000; $741,000 from
August 1, 2000 through July 31, 2004; $811,000 from August 1, 2004 through July
31, 2007; $882,000 from August 1, 2007 through July 31, 2010; $953,000 from
August 1, 2010 through July 31, 2013; and $1,023,000 from August 1, 2013 through
July 31, 2016. This lease contains rent escalation provisions as described under
"Description of Property" below and certain other provisions relating to
additional rent, taxes, utilities, and prohibitions against assignment. Included
in the lease is a rent credit of $1,363,000 to be applied in equal monthly
installments against the base rent over the first 60 months of the lease.
Additionally during April 1996, the Company signed a ten year renewable
lease for approximately 13,000 square feet of space in the Business Improvement
District Entertainment Zone located in Times Square in New York City. The rent
commencement date is February 1, 1997 and provides for annual rental payments
aggregating $560,345 during the first five years of the lease and $644,000
during the last five years of the lease. The Company is developing a new
state-of-the-art entertainment center at the site, XS New York, featuring the
latest in virtual reality, simulation and related technologies, which is
anticipated to open by December 1996. The lease contains a cancellation clause
exercisable at any time in the event the landlord commences construction of
office buildings on the site at some future date. Should the landlord exercise
the cancellation clause, the Company would be required to vacate the space
within six months after notice, but would be entitled to reimbursement of a
portion of its out-of-pocket construction costs, not to exceed $125 per square
foot.
During September 1996 the Company entered into a fifteen year lease with
Woodfield Associates for approximately 21,000 square feet of space in the
Woodfield Mall located outside of Chicago in Schaumberg, Illinois. The lease
term commences on the later of (i) September 1, 1997 or (ii) 180 days following
the date the leased premises are made available to the Company. The lease
provides for monthly payments at an annual rate of $420,000 from the
commencement of the lease continuing through the fifth lease year, $630,000
beginning with the sixth lease year through the tenth lease year, and $839,000
beginning with the eleventh lease year through the balance of the lease term. In
addition, the lease provides for annual percentage rent equal to 10% of gross
sales which exceed $5,597,000 through year five, $8,395,000 through year ten,
and $11,194,000 thereafter. Included in the lease is a rent credit of $944,325
to be applied in equal monthly installments against the base rent over the first
60 months of the lease. Additional charges under the lease for common area
maintenance charges aggregate $15 per square foot beginning with the first year
of the Lease and are subject to annual percentage increases based on increases
in tax assessments and other costs and expenses. As a condition to the execution
of the lease, the Company was required to provide a $200,000 irrevocable letter
of credit as security for the performance of the Company's obligations under the
lease.
Patents and Trademarks
The Company does not hold any patents relating to New York Skyride or XS
New York and their related technologies. Accordingly, the Company's concept is
not proprietary and is subject to duplication and competition from entities with
greater resources and strengths than the Company. The success of the Company's
business relies heavily on the strength of its location
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and lease terms. The Company has obtained a registered trademark for the name
"New York Skyride" and has a trademark application in process for "XS New York".
Competition
New York Skyride and XS New York compete with all other New York City
tourist attractions and cultural events such as museums, Broadway shows and
other landmarks. These attractions are quite different "experiences" from that
of a trip aboard the Zalman 2100 Spacecopter (which the Company believes is the
first attraction of its type in New York City) or an experience encompassing the
latest in virtual reality and simulator technologies, but they present intense
competition for attendance and visitor dollars. These other attractions are
generally more established, and are owned and operated by entities that have
greater financial resources and managerial expertise than the Company.
Additionally, a major entertainment complex is being developed at Times Square
which will include entertainment attractions from companies such as Disney,
American Cinema, Madame Tussaud and other large entertainment companies.
Additionally, in September 1996, a simulator attraction opened in Times Square,
and a virtual reality high-tech game center is being developed at the old Studio
54 location on 54th Street between Broadway and Eighth Avenues. Further, the
Company is aware that a simulator attraction is currently being developed at the
World Trade Center Towers and a non-New York related simulator is expected to
open in October 1996 on the lower level of the Empire State Building. The
Company believes that the simulator attraction being developed in the Empire
State Building will not have a material impact on the Company or the operations
of New York Skyride since such attraction is not a uniquely "New York"
experience, is expected to have much less capacity than New York Skyride and
will be unable to sell tickets jointly with the Observatory. There can be no
assurance that other virtual reality and simulator attractions will not commence
operations in the New York area at some future point in time.
Insofar as motion simulation technologies, including show control systems
(and related projection and audio technologies), are subject to improvements and
enhancements, it is possible that competitive attractions will be able to offer
a more technologically advanced "experience" to a customer than the experience
offered by New York Skyride. Also, the Company believes that a number of
attractions, which includes the simulator attraction which opened in Times
Square, utilizing so-called "virtual reality" imaging technologies, or large
film format technologies with enhanced 3-dimensional projection technologies,
are likely to open in the New York area within the near future. These
attractions do not depend on motion simulators for their special effects, and
they are also likely to be developed and operated by companies that have
significantly greater financial, managerial and promotional experience and
resources than the Company. While these attractions may not offer a directly
competitive "product" to New York Skyride (i.e., an aerial adventure in New York
City) or XS New York, their presence will certainly create significant
competition for the Company to attract visitors to New York Skyride and XS New
York. The Company will compete with these entities primarily on the basis of
location, uniqueness of product, marketing and price.
To the extent the Company develops similar attractions at landmark
locations in other cities, it is likely to face intense competition from
established cultural and historical attractions owned and operated by entities
with significantly greater resources than the Company. The
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<PAGE>
Company is also likely to face intense competition for the right to operate at
other landmark locations.
Employees
As of September 24 1996, the Company employed seven management persons
(other than the Company's President) on a full-time basis. The Company also
employs approximately 85 non-management personnel who typically work one of
three shifts during an approximate 95 hour workweek.
Item 2. DESCRIPTION OF PROPERTY.
The Company's executive offices are located at the Empire State Building at
350 Fifth Avenue, New York, New York. These offices consist of 4,400 square feet
leased at an annual base rental of $101,000, beginning September 1, 1994,
escalating to $110,000 over the five year term of the lease.
On February 26, 1993, the Company entered into an agreement with the
operator of the Empire State Building for the lease of approximately 17,800
square feet of space on the second floor of the Empire State Building for a term
of 20 years. This space is being fully utilized for the Company's New York
Skyride attraction. Annual base rent through March 31, 1998 is $338,371; from
April 1, 1998 through March 31, 2002 is $391,798; from April 1, 2002 through
March 31, 2006 is $445,225; from April 1, 2006 through March 31, 2009 is
$498,642; from April 1, 2009 through April 30, 2013 is $534,270; from May 1,
2013 through June 30, 2016 is $441,663. However, the Company negotiated a
modification of the lease term to coincide with its lease for additional space
as described below. The modification extends the original lease term from May 1,
2013 through and including June 30, 2016. Such annual rent is payable monthly
and subject to additional amounts for taxes and utilities. The Company was not
required to pay the first 21 months rent which is being amortized over the term
of the Lease.
The Company also leases an additional 4,000 square feet of space located
above the primary leased premises. The Company uses such additional space to
accommodate a larger screen (18' X 18') on which to show the New York Skyride
film. The term of this lease coincides with the term of the Lease and License
Agreement, as modified, at an annual base rental for such additional space of
$76,000 escalating to $120,000 over the term of the lease.
During April 1996, the Company signed a 20 year renewable lease for an
additional 35,000 square feet of space adjacent to and above the current
location of New York Skyride. The lease term commences September 1, 1996 and the
annual base rent over the term of the lease will begin at $529,000 and escalate
over the term of the lease to $1,023,000. Included in the lease terms is a rent
credit of $1,363,000 to be applied in equal installments against the base rent
over the first 60 months of the lease. In conjunction with the signing of this
new lease, the terms of both the Lease and License Agreement signed February 26,
1993 were amended to coincide with the new lease. The Company is considering how
to best utilize the additional space in the Empire State Building, including a
mixed use location based entertainment center which would likely require a
partner with significantly greater financial resources than the
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<PAGE>
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Additionally during April 1996 the Company entered into a ten year
renewable lease with the owners of 1457-1463 Broadway, New York, New York for
approximately 13,000 square feet of space. The Company will occupy the ground
floor and mezzanine level and is currently developing an interactive virtual
reality entertainment center. See "The XS New York Experience". The rent
commencement date is February 1, 1997 and annual rental payments aggregate
$560,345 for each of the first five years and $644,000 for each of the last 5
years of the lease. Such annual rent is payable monthly and subject to
additional amounts for taxes.
During September 1996 the Company entered into a fifteen year lease with
Woodfield Associates for approximately 21,000 square feet of space in the
Woodfield Mall located outside of Chicago in Schaumberg, Illinois. The lease
term commences on the later of (i) September 1, 1997 or (ii) 180 days following
the date of the leased premises are made available to the Company. The lease
provides for monthly payments at an annual rate of $420,000 from the
commencement of the lease continuing through the fifth lease year, $630,000
beginning with the sixth lease year through the tenth lease year, and $839,000
beginning with the eleventh lease year through the balance of the lease term. In
addition, the lease provides for a percentage rent equal to 10% of Gross sales
which exceed $5,597,000 through year five, $8,395,000 through year ten, and
$11,194,000 thereafter. Included in the lease is a rent credit of $944,325 to be
applied in equal monthly installments against the base rent over the first 60
months of the lease. Additional charges under the lease for common area
maintenance charges aggregate $15 per square foot beginning with the first year
of the Lease and are subject to annual percentage increases based on increases
in tax assessments and other costs and expenses. As a condition to the execution
of the lease, the Company was required to provide a $200,000 irrevocable letter
of credit as security for the performance of the Company's obligations under the
lease.
The Company believes that its facilities are adequate for its current and
expected future levels of operations.
Item 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
Not Applicable.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
PRICE RANGE OF COMMON EQUITY
Prior to February 14, 1994, the date of the Company's initial public
offering, there was no public market for the Units, Common Stock, Class A
Warrants or Class B Warrants (as defined below). Each of these classes of
securities are currently quoted on the Nasdaq Small-Cap Market under the symbols
"SKYLU," "SKYL," "SKYLW" and "SKYLZ," respectively. The following table sets
forth the high and low sales prices for the Units, Common Stock, Class A
Warrants and Class B Warrants for the fiscal periods indicated as reported by
Nasdaq. The quotations shown represent inter-dealer prices without adjustment
for retail mark-ups, mark-downs or commissions, and may not necessarily reflect
actual transactions.
UNITS Fiscal 1996 Fiscal 1995
- ----- ----------- -----------
High Low High Low
---- --- ---- ---
1st Quarter.................. 6 1/8 4 1/4 6 1/4 5
2nd Quarter.................. 6 7/8 4 1/2 6 5/16 5
3rd Quarter.................. 6 1/2 4 6 3/32 4 15/32
4th Quarter.................. 5 3/4 3 3/4 5 5/16 4 1/4
COMMON STOCK
- ------------
High Low High Low
---- --- ---- ---
1st Quarter.................. 4 1/2 2 3/4 4 5/16 3 15/32
2nd Quarter.................. 4 2 3/4 4 5/16 3 15/32
3rd Quarter.................. 4 7/8 3 4 5/16 3 5/32
4th Quarter.................. 4 1/8 2 1/2 4 5/32 3 5/16
CLASS A WARRANTS
- ----------------
High Low High Low
---- --- ---- ---
1st Quarter.................. 1 1/8 3/4 1 5/32 5/16
2nd Quarter.................. 2 1/8 1 1/8 1 5/32 9/16
3rd Quarter.................. 1 3/4 3/4 1 1/32 5/16
4th Quarter.................. 1 1/8 5/8 1 13/32
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<PAGE>
CLASS B WARRANTS
- ----------------
High Low High Low
---- --- ---- ---
1st Quarter.................. 1/2 1/4 No No
Trades Trades
2nd Quarter.................. 9/16 3/8 13/32 5/32
3rd Quarter.................. 7/8 9/16 1/4 7/32
4th Quarter.................. 5/8 3/8 5/16 5/32
The per share closing sales price of the Common Stock as reported by Nasdaq
on September 24, 1996 (the date of the last reported sale) was 3-5/8. As of
September 24, 1996, the Company had in excess of 400 beneficial shareholders and
ten shareholders of record.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operational Overview
From its inception until December 22, 1994, the Company's primary
activities consisted of developmental activities, including the preparation of
plans relating to the design of New York Skyride; negotiation of a lease and a
license agreement with the operators of the Empire State Building (the location
for New York Skyride); working with engineers, architects, contractors,
designers, and other parties in connection with the construction and operation
of New York Skyride; developing software and video films in connection with New
York Skyride; developing marketing strategies; initiating marketing and
corporate sponsorship activities by identifying and contacting potential
strategic alliances; selecting a management team; and obtaining financing.
On December 22, 1994, the Company commenced operations of New York Skyride
and began generating revenue from ticket sales to the attraction and the sale of
merchandise at its souvenir/concession area. New York Skyride was opened on a
preview basis until February 21, 1995, the date of its official Grand Opening.
During the period beginning with commencement of operations of New York
Skyride and ending June 30, 1995, the New York Skyride facility was visited by
in excess of 250,000 customers. This period encompassed both the Company's
preview opening and the slower six months of the year. The quarter ended
September 30, which includes the summer months, represents the busiest quarter,
whereas the quarter ended March 31 is the slowest quarter of the year. During
the year ended June 30, 1996, the facility was visited by approximately 700,000
customers. Revenues generated during the year ended June 30, 1996 and June 30,
1995 aggregated $5,978,000 and $2,190,000, respectively, consisting of
$4,609,000 and $1,635,000, respectively, from ticket sales, $1,049,000 and
$354,000, respectively, from the sale of food and merchandise at its
souvenir/concession area, and $320,000 and $201,000, respectively, from
sponsorship income. During the year ended June 30, 1996, the Company earned net
income of $1,046,000. The net loss from operations of $2,225,000 for the year
ended June 30, 1995, is
15
<PAGE>
a reflection of the New York Skyride facility not commencing full scale
operations until February 21, 1995, and the significant amount of start-up
expenditures incurred during the development and initial operations of the
facility. Additionally, most of the Company's overhead expenses are relatively
constant, whereas revenue is seasonal in nature with a significant portion of
revenue being generated during the summer months and Holiday seasons. Thus, the
period during which the Company was open for operations included a proportionate
share of overhead expenses and a disproportionate amount of revenue.
The Company completed an initial public offering of its securities in
February 1994 and received net proceeds of approximately $6,200,000 therefrom.
The Company utilized such net proceeds for the development and completion of New
York Skyride, including approximately $2,000,000 for renovation of the site at
the Empire State Building, $2,026,000 for design and construction of the
simulators and related technologies contained therein and $1,027,000 for
production of the film. The total cost of these three items, $5,053,000, was
$1,853,000 over original amounts budgeted. Additionally, the Company utilized
approximately $300,000 to complete the interactive video and computer pre-show
area for New York Skyride, approximately $150,000 for the construction of the
food and souvenir concession stand, approximately $300,000 for architectural,
construction and design consultants, and approximately $250,000 in miscellaneous
costs. The Company exceeded its original budget estimates due in part to the
delay in opening and certain enhancements implemented that were not originally
anticipated.
At June 30, 1996 the Company had working capital of approximately
$1,623,000, and an accumulated deficit of approximately $(2,162,000), compared
to a working capital deficiency of $(1,800,000) and an accumulated deficit of
$(3,200,000) at June 30, 1995.
During the fiscal year ended June 30, 1995, the Company was required to
make significant payments to contractors, engineers, architects, consultants and
other professionals upon acceptance for delivery and commencement of operation
of the simulators.
During fiscal 1996, in order for the Company to be able to pay its
creditors, engage in a significant marketing and promotional campaign and
provide capital for future growth and expansion, management raised additional
proceeds from the sale of equity capital and through a loan from a financial
institution as described below.
Liquidity and Capital Resources
The Company received a loan in the amount of $100,000 in October 1993 from
D. H. Blair Investment Banking Corp. ("Blair"), the underwriter of the Company's
initial public offering of its securities. The proceeds of this loan were used
to make certain required payments under the Lease and payment of certain
consulting and professional fees. This loan was repaid in full plus accrued
interest at 10% per annum out of the proceeds of the bridge loan (the "Bridge
Loan") consummated in December 1993 in the aggregate amount of $760,000. The
Bridge Loan consisted of $760,000 in aggregate principal amount promissory notes
(the "Notes") with interest at 10% per annum and was repaid out of the proceeds
of the Company's initial public offering. Additionally, an aggregate of 456,000
Class A Warrants (as defined below) were issued in connection with the Bridge
Loan. Blair acted as placement agent in connection with the Bridge Loan and
received a cash commission of 10% and a non-accountable expense
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<PAGE>
allowance of 3% of the aggregate principal amount of the Notes ($98,000). The
net proceeds of approximately $660,000 received in connection with the Bridge
Loan were used to repay the October 1993 $100,000 loan from Blair and for
certain required deposits and payments in connection with the development of New
York Skyride.
In February 1994, the Company consummated an initial public offering of
1,495,000 Units (the "Units") (including exercise of the over-allotment option
in April 1994), each Unit consisting of one share of Common Stock, $.001 par
value (the "Common Stock"), one Redeemable Class A Warrant (the "Class A
Warrants") and one Redeemable Class B Warrant (the "Class B Warrants"). Each
Class A Warrant entitles the holder thereof to purchase, at any time until
February 14, 1999, one share of Common Stock and one Class B Warrant at an
exercise price of $6.65, subject to adjustment in certain circumstances. Each
Class B Warrant entitles the holder thereof to purchase, at any time until
February 14, 1999, one share of Common Stock at an exercise price of $8.75 per
share, subject to adjustment in certain circumstances. The Company received
aggregate net proceeds of approximately $6,200,000 in connection with this
offering, which proceeds were used as described above. The Class A Warrants and
Class B Warrants are subject to redemption under certain conditions. As a result
of the sale by the Company of the Preferred Stock (as described below), the
number of shares into which the Class A Warrants are exercisable and the
exercise price of each Class A Warrant has been adjusted to 1.106 shares of
Common Stock and $6.01 per share, respectively, and the number of shares into
which the Class B Warrants are exercisable and the exercise price of each Class
B Warrant has been adjusted to 1.106 shares of Common Stock and $7.91 per share,
respectively.
Further, 670,000 shares of the Company's issued and outstanding Class A
Common Stock (which is identical to the Common Stock in all respects, except
that each share of Class A Common Stock is entitled to five votes per share and
is currently held by the Company's President) are subject to forfeiture,
pursuant to an escrow arrangement entered into between the Company's President
and Blair, in the event certain pretax earnings targets or per share market
price targets are not met. In the event any of the shares are released from
escrow, the release will be treated, for financial reporting purposes, as
compensation expense to the Company. The Company, however, will not be allowed a
deduction for such charges for income tax purposes. Accordingly, the Company
will recognize, during the period in which the earnings or market price targets
are met, what could be a substantial charge to earnings, which would increase
the Company's loss or reduce or eliminate earnings. The amount of this charge
will be equal to the difference between the aggregate market price of such
shares on the date of release from escrow and the original value assigned to
such shares. The amount of compensation expense recognized by the Company will
not affect the Company's total shareholders' equity.
During November 1994, the Company obtained a loan from an institutional
lender aggregating $1,000,000 (to be repaid in 48 monthly installments) with
interest at 12 1/2% compounded monthly. Pursuant to the loan agreement, the
lender was granted a first security interest in the Company's simulator and
projection equipment. The loan originally required a certificate of deposit of
$250,000 provided by the Company which was released during May 1995. Up to
$500,000 of this loan is personally guaranteed by the Company's president.
17
<PAGE>
In order to pay the Company's creditors, provide capital for future growth
and expansion and allow for an extensive promotional and marketing campaign, the
Company consummated a private placement with an institutional investor on July
7, 1995 whereby 1,090,909 shares of Series A Convertible Participating Preferred
Stock (the "Preferred Stock") were sold for gross proceeds of $2.75 per share
aggregating $3,000,000. The Preferred Stock is convertible into common stock of
the Company at any time on a share-for-share basis. The holders of the Preferred
Stock are entitled to an aggregate of up to 24.9% of the outstanding voting
power of the Company on all matters which come before the shareholders.
Additionally, so long as 272,727 shares of Preferred Stock remain outstanding,
the holders thereof will have the ability to obtain up to 50.1% of the
outstanding voting power of the Company and elect a majority of the Board of
Directors in the event the holders of the Preferred Stock determine in good
faith that such action is reasonably necessary for the protection of their
investment. Since the institutional investor is a Small Business Investment
Company subject to the regulatory oversight of the Small Business Administration
("SBA"), the exercise of this control provision cannot be made arbitrarily and
is subject to SBA review. The Preferred Stock is subject to a Registration
Rights Agreement granting both demand and piggyback registration rights. In
order to consummate the above investment, the president of the Company agreed to
personally guarantee the Company's obligations under the Preferred Stock
purchase agreement, his shares of stock subject to limitations on transfer or
disposition, provide the institutional investor with an irrevocable proxy and
adjust the earnings targets required to release the 670,000 Class A Common Stock
subject to escrow upwards as a result of the Preferred Stock issuance.
Accordingly, in order to ensure that the sale of Preferred Stock would be
consummated, the Board of Directors approved the issuance of an option to
purchase 1,250,000 shares of Common Stock, exercisable at $3.75 per share (the
market price on the date of grant) only in the event that the targets for the
release of the shares subject to escrow are not achieved, and which are subject
to different earnings and equity targets which are more in line with the intent
of the original escrow provisions. The Company will recognize a charge to
earnings during the period in which such options are exercised, equal to the
difference between the aggregate market price of such shares on the date such
options are exercised and the exercise price paid therefor.
The Company used a portion of the net proceeds from the Preferred Stock
sale to repay certain indebtedness incurred in connection with the New York
Skyride project and used the balance of the proceeds for working capital, which
will include expansion of the Company's business through developing attractions
at new locations, including the XS New York project.
As of June 30, 1996, the Company had working capital of approximately
$1,623,000 compared to a working capital deficiency of $(1,800,000) at June 30,
1995 which was due primarily to the New York Skyride project being in excess of
original amounts budgeted by $1,853,000. Since inception approximately
$6,050,000 was spent on capital expenditures relating to New York Skyride and
$230,000 was spent on capital expenditures and leasing costs relating to the XS
New York Times Square project. Losses accumulated to $(2,162,000), of which in
excess of $(2,000,000) occurred prior to the facility's Grand Opening.
The Company is currently involved in a dispute with a subcontractor
regarding amounts billed for work allegedly performed in connection with the New
York Skyride project. The Company believes that it has adequately reserved for
such contingency and does not believe that the resolution of the dispute will
have a material impact on the Company's financial position.
18
<PAGE>
Such contingency represents leasehold improvements which, when amortized over
the remaining term of the Company's lease, will not have a material effect on
the Company's results from operations.
As a result of the Company's development of its Times Square site, certain
contractual agreements have been consummated and deposits and advance payments
made. Such payments include approximately $324,000 of concept and design
consultant fees, approximately $156,000 of architectural fees and approximately
$250,000 of construction costs. The Company estimates the capital expenditures
required to develop the XS New York Times Square facility to be approximately
$5,300,000, which includes both the construction of the facility and related
costs and the acquisition or leasing of the necessary equipment.
In order to develop the Company's Times Square facility, available cash and
cash flow from operations are not currently anticipated to be sufficient to fund
such project. In order to continue to develop the XS New York project, the XS
Chicago project, and achieve the Company's expansion and long term goals, the
Company will need to obtain additional financing to fund its projects. The
Company has identified several sources of additional financing, primarily debt
financing, however, there can be no assurance that such financing will be
available on terms acceptable to the Company, or at all, or that there will not
be construction and other delays affecting completion of such projects. Also,
there can be no assurance that demands placed on the Company's financial
resources by multiple projects, or any one project in particular, will not
affect the Company's ability to successfully complete or finance one or more
such projects, which would adversely affect the Company's expansion and planned
growth strategy. In this regard, the Company has deferred development plans for
the additional space at the Empire State Building site until such time as the XS
New York project is completed and further assessments are made with respect to
the cost and funding of the XS Chicago project. Accordingly, there can be no
assurance that the additional space at the Empire State Building will be
successfully developed without a strategic partner, or at all.
Additionally, the Company's Magic on Broadway joint venture project
requires an initial capital investment of approximately $250,000. The Company
intends to fund this project through cash flows from operations. The Company
will be entitled to receive 50% of the profits, if any, and an administrative
fee from the joint venture. Revenues of the joint venture will consist primarily
of ticket and merchandise sales. Magic on Broadway will initially run for seven
months and may be extended on a weekly basis.
The Company's long term goal is to develop simulator and other location
based entertainment attractions in other major cities in the United States, and
possibly in other countries. There are, however, only a limited number of
locations in a small number of cities that are suitable for such attractions,
and there can be no assurance at all that the Company could obtain a lease at
any such locations or develop a successful attraction at such locations. Also,
development of additional attractions will require the Company to obtain
financing for such ventures, and there can be no assurance that such financing
will be available, or available on terms and conditions that are acceptable to
the Company. Additionally, it is possible that the Company would find it
necessary to have one or more local partners involved in any additional
attractions it might attempt to develop, further limiting the revenues that the
Company could
19
<PAGE>
generate from development of simulator or entertainment attractions at other
locations. The Company continually explores expansion opportunities both in the
United States and abroad.
From time to time, the Company may be involved in negotiations for
additional sites or other entertainment-based projects, however, current
negotiations, if any, are too preliminary to warrant disclosure at this time.
The Company will keep investors informed as other projects mature.
Inflation
The Company believes that the impact of inflation on its operations since
its inception has not been material.
Seasonality
The Company's business is somewhat seasonal in nature, based in part, on
higher volumes of tourists in the New York City Metropolitan area during the
spring and summer months and during the December holiday season. The Company
will direct a portion of its marketing and promotional efforts on attracting a
larger percentage of the Observatory traffic and increasing volume to New York
Skyride and attracting visitors to XS New York, particularly during non-peak
seasons.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this item is set forth at the end of this report.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
NONE
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Information concerning the directors and officers of the Company is
contained in the Company's definitive Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A no later than 120
days after the close of the fiscal year ended June 30, 1996. such information is
hereby incorporated herein by reference.
20
<PAGE>
Item 10. EXECUTIVE COMPENSATION.
Information concerning Executive Compensation is contained in the Company's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A no later than 120 days after the close of
the fiscal year ended June 30, 1996. Such information is hereby incorporated
herein by reference.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information concerning the security ownership of certain beneficial owners
and management is contained in the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A no
later than 120 days after the close of the fiscal year ended June 30, 1996. Such
information is hereby incorporated herein by reference.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information concerning certain relationships and related transactions is
contained in the Company's Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A no later than 120 days after the
close of the fiscal year ended June 30, 1996. Such information is hereby
incorporated herein by reference.
Item 13. EXHIBITS, LIST, AND REPORTS ON FORM 8-K.
(a) Exhibits are listed on the Index to Exhibits on page 23 of this report.
The Exhibits required by Item 601 of Regulation S-B are listed on such Index in
response to this Item and are incorporated herein by reference.
Financial Statements required by Regulation S-X are listed in
response to this Item and are set forth at the end of this report and are
incorporated herein by reference.
(b) Reports on Form 8-K:
The registrant has not filed any reports on Form 8-K during the last
quarter of the period covered by this report.
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
Date: September 25, 1996 By: /s/Zalman Silber
-----------------------------------
Zalman Silber, President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: September 25, 1996 By: /s/Jay Coleman
-----------------------------------
Jay Coleman, Chairman of the
Board of Directors
Date: September 25, 1996 By: /s/Zalman Silber
-----------------------------------
Zalman Silber, President, Chief
Executive Officer and Director
Date: September 25, 1996 By: /s/Steven Schwartz
-----------------------------------
Steven Schwartz, Vice President
-Finance, Principal Financial
and Accounting Officer, Secretary
and Treasurer
Date: September 25, 1996 By: /s/David Shamilzadeh
-----------------------------------
David Shamilzadeh, Director
Date: September 25, 1996 By: /s/Neil S. Belloff
-----------------------------------
Neil S. Belloff, Director
Date: September 25, 1996 By: /s/Ronald D. Celmer
-----------------------------------
Ronald D. Celmer, Director
Date: September 25, 1996 By: /s/John F. Barry, III
-----------------------------------
John F. Barry, III, Director
22
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
JUNE 30, 1996 AND JUNE 30, 1995
<PAGE>
[Richard A. Eisner & Company (Letterhead)]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Skyline Multimedia Entertainment, Inc.
We have audited the accompanying consolidated balance sheet
of Skyline Multimedia Entertainment, Inc. and subsidiaries as at
June 30, 1996, and the related consolidated statements of
operations, changes in stockholders' equity accounts and cash
flows for each of the years in the two-year period then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
enumerated above present fairly, in all material respects, the
financial position of Skyline Multimedia Entertainment, Inc. and
subsidiaries at June 30, 1996, and the results of their
operations and their cash flows for each of the years in the two-
year period then ended in conformity with generally accepted
accounting principles.
New York, New York
August 14, 1996
With respect to Notes H[1] and K
September 19, 1996
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 1996
A S S E T S
<TABLE>
<S> <C>
Current assets:
Cash (Note C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,198,000
Inventory (Note B[2]). . . . . . . . . . . . . . . . . . . . . . . . . 130,000
Prepaid expenses and other current assets. . . . . . . . . . . . . . . 168,000
-----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 2,496,000
Property, equipment and leasehold improvements - net
(Notes B[3], D[1] and E) . . . . . . . . . . . . . . . . . . . . . . . 5,597,000
Security deposits (Note G[3]) . . . . . . . . . . . . . . . . . . . . . . 372,000
Net deferred tax asset (net of valuation allowance of $670,000)
(Note F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,000
Deferred project and leasing costs (Note D[2]). . . . . . . . . . . . . . 230,000
-----------
T O T A L . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,035,000
===========
L I A B I L I T I E S
Current liabilities:
Note payable - current portion (Note E). . . . . . . . . . . . . . . . $ 250,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 372,000
Accrued expenses and other current liabilities . . . . . . . . . . . . 190,000
Deferred sponsorship income. . . . . . . . . . . . . . . . . . . . . . 61,000
-----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 873,000
Note payable - long-term portion (Note E) . . . . . . . . . . . . . . . . 365,000
Deferred rent payable (Note B[4]) . . . . . . . . . . . . . . . . . . . . 713,000
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 1,951,000
===========
Commitments and contingencies (Notes D[2], G, H and K)
STOCKHOLDERS' EQUITY
(Note I)
Preferred stock, par value $.001 per share, 5,000,000 shares
authorized, 1,090,909 shares of Series A convertible participating
preferred stock issued and outstanding (liquidating value $2.75
per share) (Note I[2]). . . . . . . . . . . . . . . . . . . . . . . . 1,000
Common stock - $.001 par value; authorized 19,000,000 shares;
one vote per share; issued and outstanding 1,495,000 shares. . . . . . 2,000
Class A common stock - $.001 par value; authorized 1,000,000 shares;
five votes per share; issued and outstanding 960,000 shares;
670,000 shares in escrow . . . . . . . . . . . . . . . . . . . . . . . 1,000
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . 9,242,000
Accumulated (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . (2,162,000)
-----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . 7,084,000
T O T A L . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,035,000
===========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
-2-
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1996 1995
---- ----
<S> <C> <C>
Revenues (Note A):
Ticket sales . . . . . . . . . . . . . . . $ 4,609,000 $ 1,635,000
Concession sales . . . . . . . . . . . . . 1,049,000 354,000
Sponsorship income (Note H[3]) . . . . . . 320,000 201,000
----------- -----------
T o t a l . . . . . . . . . . . . . 5,978,000 2,190,000
----------- -----------
Operating expenses:
Cost of merchandise sold . . . . . . . . . 410,000 168,000
Selling, general and administrative. . . . 4,345,000 3,860,000
Depreciation and amortization. . . . . . . 502,000 237,000
----------- -----------
T o t a l . . . . . . . . . . . . . 5,257,000 4,265,000
----------- -----------
Income (loss) from operations . . . . . . . . 721,000 (2,075,000)
Interest income . . . . . . . . . . . . . . . 120,000 19,000
Interest expense. . . . . . . . . . . . . . . (100,000) (120,000)
----------- -----------
Income (loss) before provision for income
taxes. . . . . . . . . . . . . . . . . . . 741,000 (2,176,000)
Income tax expense (benefit) (Note F) . . . . (305,000) 49,000
----------- -----------
NET INCOME (LOSS) . . . . . . . . . . . . . . $ 1,046,000 $(2,225,000)
=========== ===========
Net income (loss) per share of common stock
(Note B[1]). . . . . . . . . . . . . . . . $.37 $(1.25)
==== =======
Weighted average number of shares of common
stock outstanding (excludes 670,000 escrow
shares). . . . . . . . . . . . . . . . . . 2,858,000 1,785,000
========= =========
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
- 3 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ACCOUNTS
<TABLE>
<CAPTION>
Class A Series A
Common Stock Common Stock Preferred Stock Additional
------------ ------------ --------------- Paid-In Accumulated
Shares Amount Shares Amount Shares Amount Capital (Deficit)
------ ------ ------ ------ ------ ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1,
1994. . . . . . . . 1,495,000 $2,000 960,000 $1,000 $6,405,000 $ (983,000)
Issuance of Class A
warrant in
connection with
equipment financing 5,000
Net (loss) for the
year ended June 30,
1995. . . . . . . . (2,225,000)
--------- ------ ------- ------ ---------- -----------
Balance at June 30,
1995. . . . . . . . 1,495,000 2,000 960,000 1,000 6,410,000 (3,208,000)
Net proceeds from
sale of stock . . . 1,090,909 $1,000 2,832,000
Net income for the
year ended June 30,
1996. . . . . . . . 1,046,000
--------- ------ ------- ------ --------- ------ ---------- -----------
BALANCE AT JUNE 30,
1996. . . . . . . . 1,495,000 $2,000 960,000 $1,000 1,090,909 $1,000 $9,242,000 $(2,162,000)
--------- ------ ------- ------ --------- ------ ---------- -----------
--------- ------ ------- ------ --------- ------ ---------- -----------
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
- 4 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1996 1995
--------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . $1,046,000 $(2,225,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . 502,000 237,000
Deferred income taxes . . . . . . . . . . . . . . . (340,000)
Advances to officer granted as compensation . . . . 47,000
Warrants issued in connection with financings . . . 5,000
Changes in operating assets and liabilities:
(Decrease) increase in accounts payable . . . . . (633,000) 879,000
(Decrease) increase in accrued liabilities. . . . (57,000) 868,000
(Increase) in inventory . . . . . . . . . . . . . (130,000)
(Increase) in prepaid expenses and other current
assets. . . . . . . . . . . . . . . . . . . . . (163,000) (5,000)
Increase in deferred sponsorship income . . . . . 19,000 42,000
---------- -----------
Net cash provided by (used in) operating
activities. . . . . . . . . . . . . . . . . . 374,000 (282,000)
---------- -----------
Cash flows from investing activities:
Purchase of fixed assets. . . . . . . . . . . . . . . . (283,000) (3,571,000)
(Increase) in security deposits . . . . . . . . . . . . (229,000) (20,000)
(Increase) in deferred project and leasing costs. . . . (230,000)
---------- -----------
Net cash (used in) investing activities. . . . (742,000) (3,591,000)
---------- -----------
Cash flows from financing activities:
Proceeds from sale of preferred stock . . . . . . . . . 2,895,000
Deferred private placement costs. . . . . . . . . . . . (62,000)
Repayment of bank loan. . . . . . . . . . . . . . . . . (20,000)
Advances from officer . . . . . . . . . . . . . . . . . 76,000
Repayments to officer . . . . . . . . . . . . . . . . . (76,000)
Proceeds from notes payable . . . . . . . . . . . . . . 1,255,000
Repayment of notes payable. . . . . . . . . . . . . . . (473,000) (167,000)
---------- -----------
Net cash provided by financing activities . . . 2,422,000 1,006,000
---------- -----------
NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . 2,054,000 (2,867,000)
Cash at beginning of period. . . . . . . . . . . . . . . . 144,000 3,011,000
---------- -----------
CASH AT END OF PERIOD. . . . . . . . . . . . . . . . . . . $2,198,000 $ 144,000
---------- -----------
---------- -----------
Supplemental disclosures of cash flow information:
Cash paid for interest during the period. . . . . . . . $ 101,000 $ 92,000
Equipment acquired under a capital lease agreement. . . 23,000
Cash paid for taxes during the period . . . . . . . . . 65,000
</TABLE>
The accompanying notes to financial statements
are an integral part hereof.
- 5 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company:
Skyline Multimedia Entertainment, Inc. ("SME") is a holding
company engaged in the development and operation of state-of-the-art
entertainment attractions, and together with its subsidiaries,
New York Skyline, Inc. ("NYSI") and Skyline Virtual Reality, Inc.
("SVR") are referred to as the "Company". Its first site, which is
located in the Empire State Building in New York City, is owned and
operated by NYSI which commenced operations of its "New York Skyride"
facility on December 22, 1994. The second site, which is located in
Times Square in New York City, is owned and is to be operated by SVR.
It is expected that operations of its interactive virtual reality
entertainment center will commence by December 1996.
The Company's business is somewhat seasonal in nature, based in
part, on higher volumes of tourists during the spring and summer
months and holiday seasons.
(NOTE B) - Summary of Significant Accounting Policies:
[1] Net income/loss per share:
Net income/loss per share is based on the weighted average
number of shares outstanding during the period, excluding shares held
in escrow. The weighted average number of common shares was
calculated by including the convertible participating preferred stock
as common stock equivalents, warrants and options outstanding are not
considered as their effect would be anti-dilutive (Note I[1]).
[2] Inventory:
Inventory consists of clothing, souvenirs and food sold in
the Company's gift shop and is valued at the lower of cost (first-in,
first-out) or market.
[3] Property, equipment and leasehold improvements:
Property and equipment, including assets under capital
leases are recorded at cost and are depreciated on the straight-line
method over the estimated useful lives of the assets from three to
twelve years. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or the
estimated useful life of the asset.
[4] Rent expense:
The Company, for financial accounting purposes, spreads
scheduled rent increases and rent holidays over the term of the lease
using the straight-line method.
(continued)
- 6 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE B) - Summary of Significant Accounting Policies: (continued)
[5] Management estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
[6] Recently issued accounting standards:
The Company has not elected to adopt, early, the provisions
of two recently issued accounting standards regarding impairments of
long-lived assets ("FAS 121") and stock based compensation
("FAS 123"). FAS 121 requires entities to review long-lived assets
and certain identifiable intangibles to be held and used, for
impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. FAS 123 permits
accounting for stock-based compensation pursuant to a fair value based
method. If the method is not adopted, FAS 123 requires disclosure of
pro forma net income and pro forma earnings per share on a fair value
basis. The Company has not determined the potential impact, if any,
of the adoption of these standards on its financial position or
results of operations.
(NOTE C) - Concentration of Credit Risk:
The Company maintains all of its cash with highly capitalized
credit-worthy financial institutions. Such balances often exceed the
FDIC limit and are not insured.
(NOTE D) - Property, Equipment and Leasehold Improvements:
[1] Property, equipment and leasehold improvements is summarized
as follows:
Office equipment and fixtures. . . . . $ 579,000
Simulation equipment . . . . . . . . . 2,158,000
Simulation film. . . . . . . . . . . . 1,050,000
Leasehold improvements . . . . . . . . 2,549,000
----------
6,336,000
Less accumulated depreciation and
amortization. . . . . . . . . . . . (739,000)
-----------
B a l a n c e. . . . . . . . $5,597,000
===========
(continued)
- 7 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE D) - Property, Equipment and Leasehold Improvements:
(continued)
[2] The Company has incurred project and leasing costs
associated with the development of its Times Square site. As of
June 30, 1996, project and leasing costs of approximately $230,000
were incurred, which include construction, architectural, commissions
and other professional fees necessary to begin development. It is
expected that additional costs aggregating approximately $5,000,000
will be incurred to complete the project.
The Company expects to commence operations of the Times
Square site by December 1996. Upon commencement of operations, such
costs will be categorized and assigned estimated useful lives which
will be used in calculating the appropriate amortization and
depreciation expense.
(NOTE E) - Notes Payable:
At June 30, 1996, the Company has a note outstanding, payable to
an equipment finance company, payable in equal monthly installments
through October 1998, bearing interest at 12 1/2% per annum:
Aggregate payments. . . . . . . . . . $718,000
Less interest . . . . . . . . . . . . 103,000
--------
Present value of net minimum
obligation . . . . . . . . . . . . 615,000
Less current portion. . . . . . . . . 250,000
--------
Long-term portion at June 30,
1996 . . . . . . . . . . . . . . . $365,000
========
The note is collateralized by interests in the Company's
simulator and projection equipment and $500,000 is personally
guaranteed by the Company's president.
(continued)
- 8 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Income Taxes:
[1] Income tax expense (benefit) is comprised of the following:
Year Ended
June 30,
--------------------
1996 1995
---- ----
Current:
Federal. . . . . . . . . . $ - 0 - $ - 0 -
State and local. . . . . . 35,000 49,000
Deferred:
Federal. . . . . . . . . . (211,000) - 0 -
State and local. . . . . . (129,000) - 0 -
--------- -------
Income tax expense
(benefit) . . . . $(305,000) $49,000
========= =======
[2] A reconciliation between the Company's effective income tax
rate and the U.S. Federal income tax rate is as follows:
Year Ended
June 30,
--------------
1996 1995
---- ----
Statutory rate. . . . . . . . 34.0 % (34.0)%
State and local income
(capital) tax, net of
federal tax benefit. . . . (8.4) 2.3
Nondeductible expenses. . . . 2.8
(Reduction of) provision for
valuation allowance for
federal deferred tax
assets . . . . . . . . . . (69.6) 34.0
------ -----
Effective income tax rate
(benefit). . . . . . . . . (41.2)% 2.3 %
======= ======
(continued)
- 9 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Income Taxes: (continued)
[3] The principal components of deferred tax assets, liabilities
and the valuation allowance are as follows:
June 30,
------------------------
1996 1995
---- ----
Deferred tax assets:
Capitalization of start-up
costs. . . . . . . . . . . $ 610,000 $ 893,000
Net operating loss
carryforwards. . . . . . . 730,000 550,000
---------- ----------
1,340,000 1,443,000
Valuation allowance . . . . . (670,000) (1,443,000)
---------- ----------
670,000 - 0 -
Deferred tax liabilities:
Depreciation differences . . 330,000 - 0 -
---------- -----------
Net deferred tax asset. . . . . $ 340,000 $ - 0 -
========== ===========
(NOTE G) - Commitments and Contingencies:
[1] The Company leases office premises and space for its
entertainment attractions from the Empire State Building Company
pursuant to operating leases expiring at various dates through 2016.
Certain of the leases contain renewal options. The leases provide for
free rent or rent credits for various periods; rental expense is
recognized on a straight-line basis over the life of the leases.
[2] During the year ended June 30, 1996 the Company entered into
a ten-year renewable lease with One Times Square Center Partners, L.P.
for space to house its interactive virtual reality entertainment
center. The lease terms provide for five months of rent credits
during the construction period and three months of rent credits during
the first year. The Company expects to start recording rent expense
in December 1996, the expected start of operations. The lease terms
also provide for two five-year renewal options. In addition, the
lease contains a cancellation clause in the event that the landlord
commences construction of office buildings on the site during the
lease term. Should the landlord exercise the cancellation clause, the
Company would be required to vacate the space within six months after
written notice, but would be entitled to reimbursement of a portion of
its out-of-pocket construction costs, not to exceed $125 per square
foot. Rental expense will be recognized by the Company on a straight-
line basis over the initial ten-year term of the lease.
(continued)
- 10 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Commitments and Contingencies: (continued)
[3] Minimum annual rental payments required for all leases are
as follows:
Year Ending
June 30,
-----------
1997 . . . . . . . . . . $ 948,000
1998 . . . . . . . . . . 1,352,000
1999 . . . . . . . . . . 1,474,000
2000 . . . . . . . . . . 1,422,000
2001 . . . . . . . . . . 1,519,000
Thereafter . . . . . . . 23,373,000
-----------
T o t a l. . . $30,088,000
===========
The terms of the leases include escalation clauses for
increases in real estate taxes and certain cost of living adjustments.
Security deposits pursuant to all the leases total $789,000
of which $313,000 was paid at June 30, 1996. Rent expense for the
years ended June 30, 1996 and June 30, 1995 was approximately $805,000
and $563,000, respectively [see Note B[4]].
[4] The Company has a licensing agreement with the Empire State
Building Observatory (the "Observatory") expiring on June 30, 2016, to
have tickets to its entertainment attraction and facility sold by the
licensor's employees at the counter where licensor's tickets to the
observatory are sold. Under the terms of the licensing agreement the
following future payments are required:
Year Ending
June 30,
-----------
1997. . . . . . . . . . . $ 150,000
1998. . . . . . . . . . . 156,250
1999. . . . . . . . . . . 175,000
2000. . . . . . . . . . . 175,000
2001. . . . . . . . . . . 175,000
Thereafter. . . . . . . . 3,115,000
----------
T o t a l . . . $3,946,250
==========
(continued)
- 11 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Commitments and Contingencies: (continued)
[5] The Company at June 30, 1996 is in dispute with a
subcontractor regarding amounts billed for work performed on the
Empire State Building attraction. The Company believes that it has
recorded an adequate liability in connection therewith and does not
believe that the resolution of the dispute will have a material impact
on the Company's financial position. Such contingency represents
leasehold improvements which, when amortized over the remaining term
of the Company's lease, will not have a material effect on the
Company's results from operations.
[6] The Company, has an agreement with an investment banker
which provides for a finder's fee, as defined, in connection with any
business transaction entered into by the Company with a party
introduced by the investment banker. The agreement expires in
February 1999.
(NOTE H) - Employment and Other Agreements:
[1] As at June 30, 1996 the Company renegotiated a one-year
employment agreement with its president beginning July 1, 1996. The
agreement provides for an annual salary of $250,000. Pursuant to such
agreement the president is entitled to an annual bonus of 10% of
earnings before interest, taxes, depreciation and amortization.
During July 1996, the Company advanced approximately
$301,000 to its president, pursuant to a demand note at an interest
rate of 8% which was repaid in September 1996.
[2] As at June 30, 1996 the Company has contracts with two other
executives providing for salaries aggregating approximately $190,000,
subject to annual increases after twelve months. Additionally,
pursuant to one of the agreements, the executive vice president is
entitled to certain incentives in the event that future locations are
established or joint ventures are entered into as a result of his
efforts.
[3] During the fiscal year ended June 30, 1995 the Company
entered into two sponsorship agreements, one with a major
international electronics manufacturer appointing it the presenting
sponsor of its New York skyride and one with a major soft drink
manufacturer. During the year ended June 30, 1996 the Company entered
into a sponsorship agreement with a distributor of photographic and
magnetic imaging. The terms of the agreements range from three to
five years, and provide for annual fees, capital improvements and
cross promotions for the Company. Sponsorship revenue under these
(continued)
- 12 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE H) - Employment and Other Agreements: (continued)
[3] (continued)
agreements aggregate approximately $1,300,000 over the terms. The
Company received from sponsors capital improvements and monetary fees
aggregating approximately $339,000 in the year ended June 30, 1996 and
$243,000 in the year ended June 30, 1995, of which $61,000 was
deferred as of June 30, 1996.
(NOTE I) - Stockholders' Equity:
[1] In connection with the Company's public offering of
securities in 1994, the underwriter required that an aggregate of
670,000 shares of the Company's Class A common stock be placed into
escrow. Some or all of such escrow shares may be released commencing
with the year ending June 30, 1996 up to the year ended June 30, 1998
if the Company meets certain minimum earnings thresholds, as defined,
or if certain minimum per share market prices of its common stock are
attained. For the year ended June 30, 1996 none of such escrow shares
were released. As shares are released from escrow they will be
accounted for as reissued for services rendered and the fair value of
such shares will be charged to operations as compensation expense.
The Company, however, would not be allowed a deduction for such
charges for income tax purposes.
[2] On July 7, 1995, the Company consummated a stock purchase
agreement with the Prospect Street NYC Discovery Fund, L.P. (the
"Fund"), pursuant to which the Company sold 1,090,909 shares of
Series A convertible participating preferred stock, par value $.001
per share, for $3,000,000. Net proceeds from such investment,
aggregated approximately $2,833,000. The preferred stock issued is
convertible into common stock of the Company at any time on a share-
for-share basis. The preferred shares are subject to both demand and
piggyback registration rights. The preferred stock has a liquidation
preference equal to $2.75 per share, but does not pay any dividends
unless declared by the Board of Directors. The preferred stockholders
are entitled to an aggregate of up to 24.9% of the outstanding voting
power of the Company which, can increase to 50.1% of the voting power,
if in their sole discretion, it becomes reasonably necessary for the
protection of their investment.
(continued)
- 13 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Stockholders' Equity: (continued)
[3] The Company has outstanding warrants for the purchase of its
common stock as follows:
Warrants Issued in Number of Exercise
Connection With Class Shares Price Expiration Date
------------------- ----- --------- -------- ---------------
Equipment financing. A 14,931 (a)(b) February 14, 1999
Bridge loan. . . . . A 504,336 (a)(b) February 14, 1999
Public offering. . . A 1,653,470 (a)(b) February 14, 1999
Public offering. . . B 1,653,470 (b) February 14, 1999
Officer. . . . . . . B 331,800 (b) February 14, 1999
(a) A Class A warrant is exchangeable for one share of common stock
and one Class B warrant, at an exercise price of $6.01.
(b) A Class B warrant is exchangeable for one share of common stock
at an exercise price of $7.91.
The above warrants may be redeemed by the Company at a price
of $.05 per warrant assuming certain minimum per share market prices
of its common stock, as defined, are met.
[4] The Company has a stock option plan ("Plan A") which, as
amended, provides for the issuance of incentive stock options or
nonqualified options to key employees and officers to be determined by
the Compensation Committee of the Board of Directors. The aggregate
number of shares which may be issued under Plan A is 2,500,000.
Incentive stock options under Plan A may not be granted at less than
the fair market value of the underlying shares at date of grant (110%
of fair market value for a 10% or greater stockholder). Incentive
stock options granted under Plan A will be exercisable for a period
not to exceed ten years.
A summary of stock option activity related to Plan A is as
follows:
Option
Number of Price
Shares Per Share
--------- ---------
Outstanding - July 1, 1994. 45,000 $5.00
Options cancelled . . . . . (45,000) $5.00
Granted . . . . . . . . . . 1,537,500 (a) $3.50 - $4.50
---------
Outstanding - June 30,
1995 . . . . . . . . . . 1,537,500 $3.50 - $4.50
Granted . . . . . . . . . . 15,000 $3.50 - $4.00
---------
Outstanding - June 30, 1996 1,552,500 $3.50 - $4.50
=========
(continued)
- 14 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Stockholders' Equity: (continued)
[4] (continued)
At June 30, 1996, 293,750 of the Plan A options were
exercisable.
(a) Includes an option to purchase 1,250,000 shares of
common stock issued to the Company's president (see Note I[7]).
[5] The Company has a stock option plan for nonemployee
directors ("Plan B"). The aggregate number of shares which may be
issued under Plan B, as amended, is 500,000.
A summary of stock option activity related to Plan B is as
follows:
Option
Number of Price
Shares Per Share
--------- ---------
Outstanding - July 1, 1994. 30,000 $5.00
Granted . . . . . . . . . . 160,000 $3.50 - $4.00
-------
Outstanding - June 30, 1995 190,000 $3.50 - $5.00
Cancelled . . . . . . . . . (10,000) $5.00
Granted . . . . . . . . . . 25,000 $3.75
-------
Outstanding - June 30, 1996 205,000 $3.50 - $5.00
=======
At June 30, 1996 all the Plan B options were exercisable.
[6] In connection with its initial public offering, the Company
granted the underwriter an option, as adjusted, to purchase up to
143,082 units at $6.36 per unit exercisable over a three-year period
commencing February 1997.
[7] As a result of the investment by Prospect Street NYC
Discovery Fund during July 1995, the president of the Company
personally guaranteed the representations and obligations of the
Company under the preferred stock purchase agreement for a one-year
period (which expired in July 1996), became subject to limitations on
the transfer or disposition of Company stock held by him and had the
earnings targets required to release the 670,000 shares of Class A
common stock held in escrow adjusted for the additional shares issued.
Accordingly, in order to ensure that the investment would be
consummated and as an inducement for the president to enter into the
guarantee agreement, the Board of Directors approved the issuance on
June 29, 1995 of options to purchase 1,250,000 shares of common stock
exercisable at $3.75 per share which expire on June 28, 2005. These
options are exercisable only in the event that the targets for the
release of the escrow shares are not achieved, and are subject to
(continued)
- 15 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Stockholders' Equity: (continued)
[7] (continued)
certain adjusted earnings and equity targets, as defined. If the
options become noncontingent, the fair value of the underlying shares
on that date less the option price will be charged to operations as
compensation expense.
[8] At June 30, 1996 the Company has reserved shares of common
stock for issuance upon exercise of warrants, options and conversion
of preferred stock as follows:
Class "A" warrants. . . . . . . . . . 4,345,474
Class "B" warrants. . . . . . . . . . 1,985,270
Plan "A" options. . . . . . . . . . . 1,552,500
Plan "B" options. . . . . . . . . . . 205,000
Underwriter options . . . . . . . . . 572,328
Preferred stock . . . . . . . . . . . 1,090,909
---------
9,751,481
=========
(NOTE J) - Related Party Transactions:
[1] During fiscal year 1995 the Company entered into a two-year
employment contract with an individual related to the president of the
Company to manage the souvenir/concession area of the attraction. The
agreement provides for annual compensation of $55,000 and a 20% bonus
(not to exceed $50,000) of after-tax profits of the souvenir/
concession area in excess of $150,000. For the year ended June 30,
1995, no bonus was payable under the terms of the agreement.
Subsequent to June 30, 1996 such individual received a bonus for that
year of $15,000 which included amounts due pursuant to the above
agreement.
[2] The Company has an agreement with a marketing consulting
firm, whose principal is the Chairman of the Board of Directors of the
Company, to act as the Company's sales agent in soliciting and
negotiating sponsorships and commercial endorsements. Sponsorship
commissions and consulting fees paid to said firm for the years ended
June 30, 1996 and June 30, 1995 aggregated $55,000 and $80,000,
respectively.
[3] The Company incurred legal fees to a law firm, one of whose
employees is a director of the Company. Such fees related primarily
to general corporate services. Legal fees for the year ended June 30,
1996 and June 30, 1995 aggregated $36,000 and $73,000, respectively.
(continued)
- 16 -
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE J) - Related Party Transactions: (continued)
[4] During the year ended June 30, 1995, the Company paid legal
fees to a law firm, one of whose principals was a director of the
Company until February 1995. Such fees related primarily to general
corporate services, which totalled $40,000.
(NOTE K) - Subsequent Events:
On September 5, 1996, the Company entered into a 15 year lease
for space to house its interactive virtual reality entertainment
center in the Chicago area. Total rental payments pursuant to the
lease aggregate approximately $13,200,000. Additional rent may be
charged as a percentage of the gross sales (as defined). As a
condition to the execution of the lease, the Company provided a
$200,000 irrevocable letter of credit as security.
- 17 -
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
3.1 Certificate of Incorporation of the Company. (1)
3.2 By-laws of the Company. (1)
3.3 Certificate of Amendment of Certificate of
Incorporation relating to the issuance of the
Preferred Stock. (2)
4.1 See Exhibits 3.1 and 3.2
10.1 The Company's 1994 Stock Incentive Plan (as
Amended and Restated)
10.2 The Company's Stock Option Plan for Non-
Employee Directors (as Amended and Restated)
10.3 Employment Agreement dated October 1, 1993
between the Company and Zalman Silber. (1)
10.4 Lease Agreement dated February 26, 1993 between
the Company and Empire State Building Company.
(1)
10.5 License Agreement dated February 26, 1993
between the Company and the Empire State
Building Company. (1)
10.6 Purchase Agreement dated February 14, 1994
between the Company and Interactive Simulation,
Inc. (3)
10.7 Film Production Agreement dated April 7, 1994
between the Company and Empire Productions,Inc.,
and Chromavision Corp. (3)
10.8 Lease Agreement dated April 14, 1994 between the
Company and the Empire State Building Company
relating to the Company's executive offices. (3)
10.9 Lease Agreement dated February 8, 1994 between
the Company and the Empire State Building
Company relating to additional space. (3)
23
<PAGE>
Exhibit
Number Description
- ------- -----------
10.10 Construction contract dated July 5, 1994 between
the Company and Signature Construction Group Inc.
(4)
10.11 Loan and security agreement dated November 16,
1994 between the Company and PhoenixCor, Inc.
(5)
10.12 Employment Agreement dated August 15, 1994
between the Company and Steven Schwartz. (5)
10.13 Sponsorship Agreement dated February 21, 1995
between the Company and Dentsu USA, Inc. on
behalf of JVC Company of America. (6)
10.14 Stock Purchase Agreement, dated as of July 7, 1995,
between the Company and Prospect Street Fund. (2)
10.15 Registration Rights Agreement dated as of July 7,
1995 between the Company and Prospect Street
Fund relating to the Common Stock issuable upon
conversion of the Preferred Stock. (2)
10.16 Guarantee of Zalman Silber dated as of July 7, 1995
relating to the guarantee of the Company's
obligations under the Stock Purchase Agreement. (2)
10.17 Stockholders' Agreement dated as of July 7, 1995
between Zalman Silber and Prospect Street Fund.
(2)
10.18 Amendment to Employment Agreement dated June
29, 1995 between the Company and Zalman Silber.
(7)
10.19 Agreement dated March 16, 1995 by and between
Skyline, PhoenixCor, Inc. and Zalman Silber
relating to the release of certain security deposits;
and the Rider dated March 16, 1995 to the
Individual Guaranty of Zalman Silber. (7)
24
<PAGE>
Exhibit
Number Description
- ------- -----------
10.20 Lease amendment dated March 1996 between the
Company and the Empire State Building relating to
additional space. (8)
10.21 Amendment dated March 1996, to the Company's
original lease and license agreement with the Empire
State Building Company. (8)
10.22 Lease agreement dated March 1996 between the
Company and One Times Square Center Partners,
L.P., for space located at 1457-1463 Broadway,
New York, N.Y. (8)
10.23 Lease agreement dated September 5, 1996 between
the Company and Woodfield Associates, for space
located at the Woodfield Mall in Schaumberg,
Illinois.
21 Subsidiaries of the Company.
27.1 Financial Data Schedule
- -------------------------------
(1) Previously filed as an exhibit to Registration Statement on Form SB-2
(Commission File No. 33-73276) declared effective on February 14, 1994.
(2) Previously filed as an exhibit to the Company's current report on Form 8-K
filed on July 21, 1995.
(3) Previously filed as an exhibit to the Company's annual report on Form
10-KSB for the fiscal year ended June 30, 1994.
(4) Previously filed as an exhibit to the Company's quarterly report on Form
10-QSB for the quarter ended September 30, 1994.
(5) Previously filed as an exhibit to the Company's quarterly report on Form
10-QSB for the quarter ended December 31, 1994.
(6) Previously filed as an exhibit to the Company's quarterly report on Form
10-QSB for the quarter ended March 31, 1995.
(7) Previously filed as an exhibit to the Company's annual report on Form
10-KSB for the fiscal year ended June 30 ,1995.
(8) Previously filed as an exhibit to the Company's quarterly report on Form
10-QSB for the quarter ended March 31, 1996.
25
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
1994 STOCK INCENTIVE PLAN
(As Amended and Restated)
SECTION 1. Purpose
The purpose of the Skyline Multimedia Entertainment, Inc. 1994 Stock
Incentive Plan (the "Plan") is to enable Skyline Multimedia Entertainment, Inc.
(the "Company") and its subsidiaries (as defined below) to provide a select
group of employees the opportunity to acquire a proprietary interest in the
Company and to benefit from the appreciation in the value of its common shares
and thereby to enhance the ability of the Company to attract and retain
employees of exceptional ability who, by their participation in the Plan, will
have a greater incentive to contribute to the Company's long-term success and
growth. For purposes of the Plan, a "subsidiary" means any subsidiary
corporation as defined in Section 424(f) of the Internal Revenue Code of 1986,
as amended, (the "Code").
SECTION 2. Types of Awards
2.1 Awards under the Plan may be in the form of (i) incentive stock options
or non-qualified stock options ("Stock Options"); (ii) Stock Appreciation
Rights; (iii) Restricted Stock; (iv) Performance Shares; (v) Loans; and/or (vi)
Tax Offset Payments.
2.2 An eligible employee may be granted one or more types of awards, which
may be independent or granted in tandem. If
1
<PAGE>
two awards are granted in tandem the employee may exercise (or otherwise receive
the benefit of) one award only to the extent he or she relinquishes the tandem
award.
SECTION 3. Administration
3.1 The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Board") or such other committee of directors
as the Board shall designate (the "Committee"), which shall consist of not less
than two disinterested persons (as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Act") or any successor rule) who shall
serve at the pleasure of the Board, and both or all of whom shall be deemed
"outside directors" within the contemplation of Section 162(m)(4)(C)(i) of the
Code. The President of the Company shall also be a member of the Committee,
ex-officio, whether or not he is otherwise eligible to be a member of the
Committee. The Committee shall be appointed annually by the Board, which may at
any time and from time to time remove any members of the Committee, with or
without cause, appoint additional members to the Committee and fill vacancies,
however caused, in the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made by
a majority of its members present at a meeting duly called and held except that
the Committee may delegate to any one of its members the authority of the
Committee with respect to the grant of Options to persons who shall not be
officers and/or directors of the
2
<PAGE>
Company and who are not, and in the judgment of the Committee may not be
reasonably expected to become, a "covered employee" within the meaning of
Section 162(m)(3) of the Code. Any decision or determination of the Committee
reduced to writing and signed by all of the members of the Committee (or by the
member of the Committee to whom authority has been delegated) shall be fully as
effective as if it had been made at a meeting duly called and held.
3.2 The Committee shall have the authority to grant awards to eligible
employees under the Plan; to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall deem advisable; to
interpret the terms and provisions of the Plan and any award granted under the
Plan; and to otherwise supervise the administration of the Plan. In particular,
and without limiting its authority and powers, the Committee shall have the
authority:
(a) to determine whether and to what extent any award or combination
of awards will be granted hereunder, including whether any awards will be
granted in tandem with each other;
(b) to select the employees to whom awards will be granted;
(c) to determine the number of shares of the common stock of the
Company (the "Stock") to be covered by each award granted hereunder;
(d) to determine the terms and conditions of any award granted
hereunder, including, but not limited to, any
3
<PAGE>
vesting or other restrictions based on performance and such other factors as the
Committee may determine, and to determine whether the terms and conditions of
the award are satisfied;
(e) to determine the treatment of awards upon an employee's
retirement, disability, death, termination for cause or other termination of
employment;
(f) to determine pursuant to a formula or otherwise the fair market
value of the Stock on a given date; provided, however, that if the Committee
fails to make such a determination, fair market value shall, in the event the
Stock is traded on a national exchange, mean the closing sale price of the Stock
on a given date;
(g) to determine whether the amount of any dividends declared with
respect to the number of shares covered by an award (i) will be paid to the
employee currently or (ii) will be deferred and deemed to be reinvested or (iii)
will otherwise be credited to the employee, or that the employee has no rights
with respect to such dividends;
(h) to determine whether to what extent, and under what circumstances
Stock and other amounts payable with respect to an award will be deferred either
automatically or at the election of an employee, including providing for and
determining the amount (if any) of deemed earnings on any deferred amount during
any deferral period;
(i) to provide that the shares of Stock received as a result of an
award shall be subject to a right of
4
<PAGE>
first refusal, pursuant to which the employee shall be required to offer to the
Company any shares that the employee wishes to sell, subject to such terms and
conditions as the Committee may specify;
(j) to amend the terms of any award, prospectively or retroactively;
provided, however, that no amendment shall impair the rights of the award holder
without his or her consent;
(k) to substitute new Stock Options for previously granted Stock
Options, or for options granted under other plans, in each case including
previously granted options having higher option prices; and
(l) to allow an option holder to exercise his or her option prior to
its expiration and pay for the acquired shares with currently owned shares,
while at the same time receiving replacement options, at the then current market
price, for the same remaining term as the option exercised.
3.3 All determinations made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
Plan participants.
3.4 The Committee may from time to time delegate to one or more officers of
the Company any or all of its authority granted hereunder except with respect to
awards granted to persons subject to Section 16 of the Act. The Committee shall
specify the maximum number of shares that the officer or officers to whom such
authority is delegated may award.
5
<PAGE>
SECTION 4. Stock Subject to Plan
4.1 The total number of shares of Stock reserved and available for
distribution under the Plan shall be 2,500,000 (subject to further adjustment as
provided below). Such shares may consist of authorized but unissued shares or
treasury shares. The exercise of a Stock Appreciation Right for cash, the
payment of any other award in cash shall not count against this share limit.
4.2 To the extent an option terminates without having been exercised, or an
award terminates without the employee having received payment of the award, or
shares awarded are forfeited, the shares subject to such award shall again be
available for distribution in connection with future awards under the Plan. At
no time will the number of shares issued under the Plan plus the number of
shares covered by outstanding awards under the Plan exceed the number of shares
authorized under the Plan.
4.3 In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, Stock dividend, Stock split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Stock, a substitution or adjustment, as may be
determined to be appropriate by the Committee in its sole discretion, shall be
made in the aggregate number of shares reserved for issuance under the Plan, the
number of shares subject to outstanding awards and the amounts to be paid by
employees or the Company, as the case may be, with respect to outstanding
awards.
6
<PAGE>
SECTION 5. Eligibility
Officers and other employees and consultants of the Company or a subsidiary
are eligible to be granted awards under the Plan. A director of the Company or a
subsidiary who is not also an employee of the Company or a subsidiary will not
be eligible to be granted awards under the Plan. The participants under the Plan
shall be selected from time to time by the Committee, in its sole discretion,
from among those eligible employees.
SECTION 6. Stock Options
6.1 The Stock Options awarded under the Plan may be of two types: (i)
Incentive Stock Options within the meaning of Section 422 of the Code or any
successor provision thereto; and (ii) Non-Qualified Stock Options. To the extent
that any Stock Option does not qualify as an Incentive Stock Option, it shall
constitute a Non-Qualified Stock Option.
6.2 Subject to the following provisions, Stock Options awarded under the
Plan shall be in such form and shall have such terms and conditions as the
Committee may determine:
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and
7
<PAGE>
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time in whole or in part.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased, accompanied by
payment of the purchase price. Payment of the purchase price shall be made in
such manner as the Committee may provide in the award, which may include cash
(including cash equivalents), delivery of shares of Stock already owned by the
optionee or subject to awards hereunder, through the delivery of irrevocable
instructions to a broker to deliver promptly to the Company an amount equal to
the purchase price, or by any other manner permitted by law and determined by
the Committee, or any combination of the foregoing. The Committee may provide
that all or part of the shares received upon the exercise of a Stock Option
which are paid for using Restricted Stock or Performance Shares shall be
restricted or deferred in accordance with the original terms of the award in
question. The Committee shall determine acceptable methods for providing notice
of exercise for tendering shares of Stock and for delivery of irrevocable
instructions to a broker and may impose such limitations and prohibitions on the
use of Stock or irrevocable instructions to a broker to exercise as it deems
appropriate.
8
<PAGE>
(e) No Shareholder Rights. An optionee shall have neither rights to
dividends or other rights of a shareholder with respect to shares subject to a
Stock Option until the optionee has given written notice of exercise and has
paid for such shares.
(f) Surrender Rights. The Committee may provide that options may be
surrendered for cash upon any terms and conditions set by the Committee.
(g) Non-transferability. No Stock Option shall be transferable by the
optionee other than by will or by the laws of descent and distribution. During
the optionee's lifetime, all Stock Options shall be exercisable only by the
optionee.
(h) Termination of Employment. If an optionee's employment with the
Company or a subsidiary terminates by reason of death, disability, retirement,
voluntary or involuntary termination or otherwise, the Stock Option shall be
exercisable to the extent determined by the Committee. The Committee may provide
that, notwithstanding the option term fixed pursuant to Section 6.2(b), a Stock
Option which is outstanding on the date of an optionee's death shall remain
outstanding for an additional period after the date of such death.
6.3 (a) Notwithstanding the provisions of Section 6.2, no Incentive Stock
Option shall (i) have an option price which is less than 100% of the fair market
value of the Stock on the date of the award of the Stock Option, (ii) be
exercisable more than ten years after the date such Incentive Stock Option is
awarded or (iii) be awarded more than ten years after the effective date of
9
<PAGE>
the Plan. No Incentive Stock Option shall be granted to an employee who, at the
time the option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its
subsidiary, unless the option price, at the time of the award, is at least 110%
of the fair market value of the stock subject to the option and such option is
not exercisable after the expiration of five years from the date of the award.
6.3 (b) The initial per share option price of any option which is a
non-incentive stock option shall not be less than 85% of the fair market value
of a share of the Common Stock on the date of the grant; provided, however,
that, in the case of a non-incentive stock option granted to a person who is, or
in the judgment of the Committee may reasonably be expected to become, a
"covered employee" within the meaning of Section 162(m)(3) of the Code, the
initial per share option price shall not be less than the fair market value of a
share of the Common Stock on the date of grant.
6.4 (a) The aggregate fair market value of the shares of the Common Stock
for which any Participant may be granted incentive stock options which are
exercisable for the first time in any calendar year (whether under the terms of
the Plan or any other stock option plan of the Company) shall not exceed
$100,000.
(b) No Participant shall, during any fiscal year of the Company, be granted
Options to purchase more than 1,500,000 shares of the Common Stock.
10
<PAGE>
SECTION 7. Stock Appreciation Rights
7.1 A Stock Appreciation Right shall entitle the holder thereof to receive
payment of an amount, in cash, shares of Stock or a combination thereof, as
determined by the Committee, equal in value to the excess of the fair market
value of the shares as to which the award is granted on the date of exercise
over an amount specified by the Committee. Any such award shall be in such form
and shall have such terms and conditions as the Committee may determine.
7.2 The Committee may provide that a Stock Appreciation Right may be
exercised only within the 60-day period following occurrence of a Change of
Control (as defined in Section 15.2). The Committee may also provide that in the
event of a Change of Control the amount to be paid upon the exercise of a Stock
Appreciation Right shall be based on the Change of Control Price (as defined in
Section 15.3).
SECTION 8. Restricted Stock
Subject to the following provisions, all awards of Restricted Stock shall
be in such form and shall have such terms and conditions as the Committee may
determine:
(a) The Restricted Stock award shall specify the number of shares of
Restricted Stock to be awarded, the price, if any, to be paid by the recipient
of the Restricted Stock and the date or dates on which, or the conditions upon
the satisfaction of which, the Restricted Stock will vest. The vesting of
Restricted
11
<PAGE>
Stock may be conditioned upon the completion of a specified period of service
with the Company or a subsidiary, upon the attainment of specified performance
goals or upon such other criteria as the Committee may determine.
(b) Stock certificates representing the Restricted Stock awarded to an
employee shall be registered in the employee's name, but the Committee may
direct that such certificates shall be held by the Company on behalf of the
employee. Except as may be permitted by the Committee, no share of Restricted
Stock may be sold, transferred, assigned, pledged or otherwise encumbered by the
employee until such share has vested in accordance with the terms of the
Restricted Stock award. At the time Restricted Stock vests, a certificate for
such vested shares shall be delivered to the employee (or his or her designated
beneficiary in the event of death), free of all restrictions.
(c) The Committee may provide that the employee shall have the right to
vote or receive dividends on Restricted Stock. The Committee may provide that
Stock received as a dividend on, or in connection with a stock split of
Restricted Stock, shall be subject to the same restrictions as the Restricted
Stock.
(d) Except as may be provided by the Committee, in the event of an
employee's termination of employment before all of his or her Restricted Stock
has vested, or in the event any conditions to the vesting of Restricted Stock
have not been satisfied prior to any deadline for the satisfaction of such
conditions set forth in the award, the shares of Restricted Stock
12
<PAGE>
which have not vested shall be forfeited, and the Committee may provide that (i)
any purchase price paid by the employee shall be returned to the employee or
(ii) a cash payment equal to the Restricted Stock's fair market value on the
date of forfeiture, if lower, shall be paid to the employee.
(e) The Committee may waive, in whole or in part, any or all of the
conditions to receipt of, or restrictions with respect to, any or all of the
employee's Restricted Stock.
13
<PAGE>
SECTION 9. Performance Share Awards
Subject to the following provisions, all awards of Performance Shares shall
be in such form and shall have such terms and conditions as the Committee may
determined:
(a) The Performance Shares award shall specify the number of Performance
Shares to be awarded to any employee and the duration of the period (the
"Performance Period") after which, and the terms pursuant to which, the
Performance Shares will be issued to the employee. The Committee may condition
the award of Performance Shares, or receipt of Stock or cash at the end of the
Performance Period, upon the attainment of specified performance goals or such
other criteria as the Committee may determine.
(b) Except as may be permitted by the Committee, Performance Share awards
may not be sold, assigned, transferred, pledged or otherwise encumbered during
the Performance Period.
(c) At the expiration of the Performance Period, the employee (or his or
her designated beneficiary in the event of death) shall receive (i) certificates
for the number of shares of Stock equal to the number of shares covered by the
Performance Share award, (ii) cash equal to the fair market value of such Stock
or (iii) a combination of shares and cash, as the Committee may determine.
(d) Except as may be provided by the Committee, in the event of an
employee's termination of employment before the end of the Performance Period,
his or her Performance Share award shall be forfeited.
14
<PAGE>
(e) The Committee may waive, in whole or in part, any or all of the
conditions to receipt of, or restrictions with respect to, Stock or cash under a
Performance Share award.
SECTION 10. Loans
The Committee may provide that the Company shall make, or arrange for, a
loan or loans to an employee with respect to the exercise of any Stock Option
awarded under the Plan, with respect to the payment of the purchase price, if
any, of any Restricted Stock awarded hereunder, or with respect to any taxes
arising from an award hereunder; provided, however, that the Company shall not
loan to an employee more than the excess of the purchase or exercise price of an
award (together with the amount of any taxes arising from such award) over the
par value of any shares of Stock awarded. The Committee shall have full
authority to decide whether a loan will be made hereunder and to determine the
amount, term and provisions of any such loan, including the interest rate to be
charged, whether the loan will be with or without recourse against the borrower,
any security for the loan, the terms on which the loan is to be repaid and the
conditions, if any, under which the loan may be forgiven.
SECTION 11. Tax Offset Payments
The Committee may provide for a Tax Offset Payment by the Company to the
employee in an amount specified by the Committee, which shall not exceed the
amount necessary to pay the
15
<PAGE>
federal, state, local and other taxes payable with respect to any award and
receipt of the Tax Offset Payment, assuming the employee is taxed at the maximum
tax rate applicable to such income. The Tax Offset Payment may be paid in cash,
Stock or a combination thereof, as determined by the Committee.
SECTION 12. Election to Defer Awards
The Committee may permit an employee to elect to defer receipt of an award
for a specified period or until a specified event, upon such terms as are
determined by the Committee.
SECTION 13. Tax Withholding
13.1 Each employee shall, no later than the date as of which the value of
an award first becomes includible in the employee's gross income for applicable
tax purposes, pay to the Company, or make arrangements satisfactory to the
Committee regarding payment of, any federal, state, local or other taxes of any
kind required by law to be withheld with respect to the award. The obligations
of the Company under the Plan shall be conditional on such payment or
arrangements, and the Company (and, where applicable, any subsidiary), shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the employee.
13.2 To the extent permitted by the Committee, and subject to such terms
and conditions as the Committee may provide,
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<PAGE>
an employee may irrevocably elect to have the withholding tax obligation, or any
additional tax obligation with respect to any awards hereunder, satisfied by (i)
having the Company withhold shares of Stock otherwise deliverable to the
employee with respect to the award or (ii) delivering to the Company, shares of
unrestricted Stock.
SECTION 14. Amendments and Termination
The Board may discontinue the Plan at any time and may amend it from time
to time. No amendment or discontinuation of the Plan shall adversely affect any
award previously granted without the employee's written consent. Amendments may
be made without shareholder approval except as required to satisfy Rule 16b-3
under the Act (or any successor rule) or other regulatory requirements.
SECTION 15. Change of Control
15.1 In the event of a Change of Control, unless otherwise determined by
the Committee at the time of grant or by amendment (with the holder's consent)
of such grant:
(a) all outstanding Stock Options and all outstanding Stock
Appreciation Rights awarded under the Plan shall become fully exercisable and
vested;
(b) the restrictions and deferral limitations applicable to any
outstanding Restricted Stock and Deferred Stock
17
<PAGE>
awards under the Plan shall lapse and such shares and awards shall
be deemed fully vested; and
(c) to the extent the cash payment of any award is based on the fair
market value of Stock, such fair market value shall be the Change of Control
Price.
15.2 A "Change of Control" shall be deemed to occur on:
(a) The date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Act, other than the Company and its subsidiaries as
determined immediately prior to that date, in a transaction or series of
transactions has become the beneficial owner, directly or indirectly (with
beneficial ownership determined as provided in Rule 13d-3, or any successor
rule, under such Act) of 20% or more of the outstanding securities of the
Company having the right under ordinary circumstances to vote at an election of
the Board;
(b) the date on which one-third or more of the members of the Board
shall consist of persons other than Current Directors (for these purposes, a
"Current Director" shall mean any member of the Board as of the effective date
of the Plan and any successor of a Current Director whose nomination or election
has been approved by a majority of the Current Directors then on the Board); or
(c) the date of approval by the shareholders of the Company of an
agreement providing for (A) the merger or consolidation of the Company with
another corporation where the
18
<PAGE>
shareholders of the Company, immediately prior to the merger or consolidation,
would not beneficially own, immediately after the merger or consolidation,
shares entitling such shareholders to 50% or more of all votes (without
consideration of the rights of any class of stock to elect directors by a
separate class vote) to which all shareholders of the corporation issuing cash
or securities in the merger or consolidation would be entitled in the election
of directors or where the members of the Board, immediately prior to the merger
or consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the corporation issuing cash
or securities in the merger or consolidation or (B) the sale or other
disposition of all or substantially all the assets of the Company.
15.3 "Change of Control Price" means the highest price per share paid for
the Company's Stock in any transaction reported on any national stock exchange
or in the over-the-counter market, or paid or offered in any transaction related
to a Change of Control at any time during the 90-day period ending with the
Change of Control. Notwithstanding the foregoing sentence, in the case of Stock
Appreciation Rights granted in tandem with Incentive Stock Options, the Change
of Control Price shall be the highest price paid on the date on which the Stock
Appreciation Right is exercised.
19
<PAGE>
SECTION 16. General Provisions
16.1 Each award under the Plan shall be subject to the requirement that, if
at any time the Committee shall determine that (i) the listing, registration or
qualification of the Stock subject to the award or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body or (iii) an agreement by the
recipient of an award with respect to the disposition of Stock, is necessary or
desirable (in connection with any requirement or interpretation of any federal
or state securities law, rule or regulation) as a condition of, or in connection
with, the granting of such award or the issuance, purchase or delivery of Stock
thereunder, such award shall not be granted or exercised, in whole or in part,
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
16.2 Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements. Neither the adoption of the Plan
nor any award hereunder shall confer upon any employee of the Company, or of a
subsidiary, any right to continued employment.
16.3 Determinations by the Committee under the Plan relating to the form,
amount and terms and conditions of awards need not be uniform, and may be made
selectively among persons who receive or are eligible to receive awards under
the Plan, whether or not such persons are similarly situated.
20
<PAGE>
16.4 No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination or interpretation taken or made
with respect to the Plan, and all members of the Board or the Committee and all
officers or employees of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
SECTION 17. Effective Date of Plan
The Plan became effective upon approval by the Company's shareholders on
February 10, 1994. The Plan was amended and restated effective as of November
22, 1995.
21
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(As Amended and Restated)
1. PURPOSE.
Skyline Multimedia Entertainment, Inc. (the "Company") hereby
establishes a Stock Option Plan for Non-Employee Directors, which is intended to
provide incentive to non-employee directors of the Company, to encourage such
Participants to acquire a proprietary interest in the Company and to continue
their association with the Company. Options granted hereunder are intended to be
either (a) "incentive stock options" (which term, when used herein, shall have
the meaning ascribed thereto by the provisions of Section 422(b) of the Code) or
(b) options which are not incentive stock options ("non-incentive stock
options") or (c) a combination thereof, as determined by the Committee at the
time of the grant thereof.
2. DEFINITIONS.
(a) "Annual Meeting" shall mean the Company's annual meeting of
shareholders, or any postponement or adjournment thereof.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean the Committee appointed by
1
<PAGE>
the Board as set forth in Section 4 hereof.
(e) "Common Stock" shall mean the Common Stock, $.001 par value, of
the Company.
(f) "Company" shall mean Skyline Multimedia Entertainment, Inc., a New
York corporation.
(g) "Disability" shall mean the condition, as determined by the Board
or the Committee, of a Participant who is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to last for a continuous period of not less
than twelve (12) months. The Board or Committee's determination of Disability or
the absence thereof shall be conclusive and binding on all interested parties.
(h) "Exercise Price" shall mean the price per share of Common Stock at
which an Option may be exercised.
(i) "Fair Market Value" shall mean the value of one (1) share of
Common Stock, determined as follows:
(1) If the Common Stock is not listed or admitted to trading on a
stock exchange, the last sale price of the Common Stock in the
over-the-counter market on the date of valuation, or,
(2) If the Common Stock is then listed or admitted to trading on
any stock exchange, the closing sale price on the date of valuation on
the principal stock exchange on which the Common Stock is then listed
or admitted to trading.
2
<PAGE>
If no closing sale price is quoted on such day, or if no sale
takes place on such day on such principal exchange, as the case may
be, then the closing sale price on the over-the-counter market or the
closing sale price of the Common Stock on such exchange on the next
preceding day on which a sale occurred or closing sale price was
reported, as the case may be, shall be the Fair Market Value. During
such times as there is not a market price available, the Fair Market
Value shall be determined by the Board or the Committee in good faith,
which determination shall be conclusive and binding on all interested
parties.
(j) "Option" shall mean any stock option granted pursuant to the Plan.
(k) "Option Agreement" shall mean the written agreement entered into
between the Company and the Optionee with respect to which an Option or Options
are granted under the Plan.
(l) "Optionee" shall mean a Participant who has received an Option.
(m) "Participant" shall mean a member of the Board who is not also an
employee (within the meaning of Code Section 3401 and the regulations
thereunder) of the Company.
(n) "Plan" shall mean this Stock Option Plan for Non- Employee
Directors.
(o) "Purchase Price" shall mean the Exercise Price times the number of
whole shares of Common Stock with respect to which an
3
<PAGE>
Option is exercised.
3. ADOPTION AND EFFECTIVE DATE OF PLAN.
The Plan became effective upon the approval of the shareholders of the
Company on February 10, 1994, and shall terminate ten (10) years after such
effective date. The Plan was subsequently amended and restated on November 22,
1995.
4. ADMINISTRATION.
The Plan shall be administered by the Board or by a committee of two
(2) or more persons appointed by the Board, such committee, or the Board, if it
administers the Plan, being hereinafter the "Committee". The Committee shall be
responsible for carrying out the terms of the Plan with respect to all Plan
administration matters. Acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by all of the members of the
Committee, shall be the valid acts of the Committee.
The administration, interpretation or application of the Plan by the
Committee shall be final, conclusive and binding upon all Participants. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
thereunder.
The Committee shall consist of two or more members of the Board both
or all of whom shall be "disinterested persons" within the meaning of Rule
16b-3(c)(i) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and both or all of whom shall be "outside directors"
within the contemplation
4
<PAGE>
of Section 162(m)(4)(C)(i) of the Code. The President of the Company shall also
be a member of the Committee, ex-officio, whether or not he is otherwise
eligible to be a member of the Committee. The Committee shall be appointed
annually by the Board, which may at any time and from time to time remove any
members of the Committee, with or without cause, appoint additional members to
the Committee and fill vacancies, however caused, in the Committee. A majority
of the members of the Committee shall constitute a quorum. All determinations of
the Committee shall be made by a majority of its members present at a meeting
duly called and held except that the Committee may delegate to any one of its
members the authority of the Committee with respect to the grant of Options to
persons who shall not be officers and/or directors of the Company and who are
not, and in the judgment of the Committee may not be reasonably expected to
become, a "covered employee" within the meaning of Section 162(m)(3) of the
Code. Any decision or determination of the Committee reduced to writing and
signed by all of the members of the Committee (or by the member of the Committee
to whom authority has been delegated) shall be fully as effective as if it had
been made at a meeting duly called and held.
5. ELIGIBILITY.
The persons who shall be eligible to receive Options under the Plan
shall be all non-employee directors of the Company.
6. STOCK.
The stock subject to Options granted under the Plan shall be shares of
the Company's authorized but unissued or reacquired
5
<PAGE>
Common Stock. The aggregate number of shares which may be issued under Options
exercised under the Plan shall not exceed 500,000 shares. The number of shares
subject to options outstanding under the Plan at any time may not exceed the
number of shares remaining available for issuance under the Plan. In the event
that any outstanding Option under the Plan for any reason expires or is
terminated, the shares allocable to the unexercised portion of such Option may
again be subjected to an Option under the Plan. The limitations established by
this Section 6 shall be subject to adjustment upon the occurrence of the events
specified and in the manner provided in Section 9 hereof.
7. PARTICIPANTS; TIMING AND SIZE OF OPTION GRANTS.
Immediately upon election or re-election and qualification as a
non-employee director of the Company at any time following adoption of the Plan
by the Board of Directors and approval of the shareholders, each new Participant
who has not theretofore served as a director of the Company shall be granted an
Option under the Plan covering 5,000 shares of Common Stock. All such Option
grants are subject to the limitation set forth in Section 6 hereof. Options
shall vest and become exercisable immediately upon the grant thereof.
8. TERMS AND CONDITIONS OF OPTIONS.
Any Option granted pursuant to the Plan shall be evidenced by an
Option Agreement in such form as the Committee shall from time to time
determine, which Option Agreement shall comply with and be subject to the
following terms and conditions:
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<PAGE>
(a) Optionee's Agreement. Each Optionee shall agree to remain a
director of and to render to the Company his services for the remainder of the
term for which he was elected, but such agreement shall not impose upon the
Company any obligation to retain the Optionee as a director for any period.
(b) Number of Shares. Each Option shall state the number of shares to
which it pertains and shall provide for the adjustment thereof in accordance
with the provisions of Section 9 hereof. No Participant shall, during any fiscal
year of the Company, be granted Options to purchase more than 250,000 shares of
the Common Stock.
(c) Exercise Price. Each Option shall state the Exercise Price, which
price shall be 100% of the Fair Market Value on the date of grant of the Option,
provided, however, that, in the case of a Participant who owns more than 10% of
the total combined voting power of the Common Stock at the time an Option which
is an incentive stock option is granted to him, the initial per share option
price shall not be less than 110% of the fair market value of a share of the
Common Stock on the date of grant. The aggregate fair market value of the shares
of the Common Stock for which any Participant may be granted incentive stock
options which are exercisable for the first time in any calendar year (whether
under the terms of the Plan or any other stock option plan of the Company) shall
not exceed $100,000.
(d) Medium and Time of Payment. The Purchase Price shall be payable in
full upon the exercise of the Option. The
7
<PAGE>
Purchase Price may be paid (i) in cash or by certified check or by bank draft;
(ii) subject to any legal restrictions and obligations regarding the purchase of
shares for promissory notes or evidences of indebtedness, by delivery of
Optionee's promissory note in a form satisfactory to the Company and (at the
election of the Company) secured by a Pledge Agreement of the shares purchased
or other security; or (iii) by the surrender of shares of the Common Stock in
good form for transfer, owned by the person exercising the Option and having an
aggregate Fair Market Value on the date of exercise equal to the Purchase Price,
or in any combination of the foregoing, so long as the total thereof equals the
Purchase Price. No share of Common Stock shall be issued upon the exercise of an
Option until full payment therefor has been made.
To the extent the Purchase Price is paid by delivery of shares of
Common Stock which the Participant held for at least six months prior to the
date of exercise of the Options, the Board shall have the authority to grant an
Option for the same number of shares delivered as payment of the Purchase Price,
exercisable at the then current Fair Market Value of the Common Stock.
(e) Tax withholding. The Company shall have the power to withhold, or
require an Optionee to remit to the Company, an amount sufficient to satisfy
Federal, State, and local withholding tax requirements on the exercise of any
Options under the Plan. To the extent permissible under applicable tax,
securities, and other laws, the Board may, in its sole discretion, permit an
Optionee to satisfy an obligation to pay any tax to any governmental entity in
8
<PAGE>
respect of exercise, up to an amount determined on the basis of the highest
marginal tax rate applicable to such Optionee, in whole or in part, by (i)
directing the Company to apply shares of Common Stock to which the Option
relates or (ii) delivering to the Company shares of Common Stock owned by the
Optionee.
(f) Term and Exercise of Options. Each Option Agreement shall state
the time or times when the Option so evidenced becomes exercisable. Options
shall vest and become exercisable immediately upon the grant thereof. All
Options under this Plan expire not later than the tenth (10th) anniversary of
the date of grant.
(g) Termination of Status as Director. In the event that an Optionee
shall cease to be a director of the Company for any reason, including death or
Disability, such Optionee or his heirs and personal representatives, as the case
may be, shall have the right to exercise his Options at any time within ninety
(90) days after such termination, provided, however, that if an event has
occurred giving rise to the Repurchase right set forth in Section 10 hereof,
such right to exercise options shall expire at the later of the end of such
90-day period or the end of the 180- day period set forth in Section 10.
(h) Non-transferability of Options. During the lifetime of an
Optionee, his Options shall be exercisable only by the Optionee and shall not be
assignable or transferable, except pursuant to a qualified domestic relations
order, as defined in the Code or the Employee Retirement Income Security Act, or
the rules thereunder. In the event of the Optionee's death, no Option shall
9
<PAGE>
be transferable by the Optionee otherwise than by will or by the
laws of descent and distribution.
(i) Rights as a Shareholder. An Optionee or a transferee of an
Optionee shall have no rights as a shareholder with respect to any shares
covered by his Option until the date of the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 9.
(j) Registration Rights. An Option may provide for the right of an
Optionee to require the Company to register the shares issuable on exercise of
an Option and the right to include such shares in other registrations of the
Company.
(k) Other Provisions. An Option Agreement authorized under the Plan
shall contain such other provisions not inconsistent with the terms of the Plan.
9. CHANGES IN CAPITAL STRUCTURE.
In the event that the outstanding shares of Common Stock are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of merger,
consolidation or reorganization in which the Company is the surviving
corporation or of a recapitalization, stock split, combination of shares,
reclassification, reincorporation, stock dividend (in excess of 2%), or other
change in the capital structure of the Company,
10
<PAGE>
appropriate adjustments shall be made by the Board of Directors in the aggregate
number and kind of shares subject to the Plan and to the grant of Options
hereunder, and the number and kind of shares and the price per share subject to
outstanding Options in order to preserve, but not to increase, the benefits to
persons then holding Options under the Plan.
In the event that the Company at any time proposes to (i) merge into,
consolidate with or to enter into any other reorganization (including the sale
of substantially all of its assets) in which the Company is not the surviving
corporation, or (ii) enter into a merger or other reorganization as a result of
which the outstanding shares of Common Stock will be changed into or exchanged
for shares of the capital stock or other securities of another corporation or
for cash or other property, then the Plan and all unexercised Options granted
hereunder shall terminate, unless provision is made in writing in connection
with such transaction for the continuance of the Plan and for the assumption of
Options theretofore granted, or the substitution for such Options of new options
covering the shares of a successor with appropriate adjustments as to number and
kind of shares and prices, in which event the Plan and the Options thereto or
granted or the new options substituted therefor, shall continue in the manner
and under the terms so provided. If such provision is not made in such
transaction for the continuance of the Plan and the assumption of Options
theretofore granted or the substitution for such Options of new options covering
the shares of a successor corporation, then
11
<PAGE>
the Board of Directors or the Committee shall cause written notice of the
proposed transaction to be given to all Optionees not less than thirty (30) days
prior to the anticipated effective date of the proposed transaction, and, prior
to the effective date of the proposed transaction, each Optionee shall have the
right to exercise all Options held by him in respect of any or all shares then
subject thereto.
The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassification,
reorganizations or changes of its capital or business structure or to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
10. PERMISSIVE RESALE TO COMPANY.
(a) In the event,
(i) any "person" or "group" of "persons" (as the terms "person"
and "group" are used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 and the rules thereunder)
(A) makes a tender offer or exchange offer or enters into a
merger or other acquisition agreement (collectively, the "Offer")
to acquire the beneficial ownership, directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the then outstanding securities of the
Company, and
12
<PAGE>
(B) such "person" or "group" of "persons" does not
substantially concurrently offer to purchase each of the then
outstanding Options evidenced hereby in connection with such
Offer for a price at least equal to the Repurchase Price (as
defined below), or
(ii) a majority of the Board of Directors of the Company shall be
comprised of persons who were not elected to such office as part of
the "Company Nominated Slate" of directors (i.e., the slate of
nominees proposed by the Board of Directors in office immediately
prior to the election or other change in directors),
then Optionee shall have the right to require the Company to repurchase (the
"Repurchase") the then outstanding Options at the Repurchase Price for a period
ending one hundred eighty (180) days following the date on which (i) such
"person" or "group" actually acquires any securities of the Company pursuant to
such Offer; or (ii) a majority of the Board of Directors of the Company shall be
comprised of persons who were not elected as part of the "Company Nominated
Slate" of directors. On the occurrence of the events described in Section
10(a)(i) hereof, the Repurchase Price shall be equal to the difference between
(i) the Acquisition Price (as defined below) and (ii) the Exercise Price. The
Acquisition Price shall be equal to the sum of all (i) money and (ii) the fair
market value of any property actually paid or transferred for a share of the
Common Stock of the Company by such "person" or "group"
13
<PAGE>
pursuant to such Offer. On the occurrence of the events described in Section
10(a) (ii) hereof, the Repurchase Price shall be equal to the difference between
(i) the highest "Fair Market Value" (as defined in Section 2(i)) during the ten
(10) trading days prior to such event and (ii) the Exercise Price. The
Repurchase Price shall be paid in cash.
(b) The Repurchase pursuant to Section 10(a) shall be effected by
delivery of a notice (the "Repurchase Notice") to the Company within the one
hundred eighty (180) day period described above setting forth Optionee's name,
Optionee's intention to exercise his repurchase rights, the number of Options
held by Optionee, the Repurchase Price, and the date (which shall not be less
than four (4) business days from the date of the delivery of the Repurchase
Notice) on which the Repurchase is to occur. On the date set for the Repurchase,
the Company shall immediately pay Optionee, in cash or by certified or bank
check made payable to the order of Optionee, an amount equal to the Repurchase
Price multiplied by the number of Options surrendered for Repurchase.
11. SECURITIES LAW REQUIREMENTS.
Notwithstanding any other provisions of the Plan or agreements made
pursuant thereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock upon the exercise of any
Option prior to fulfillment of all of the following conditions:
(a) Securities Exchange. The listing or approval for listing upon
notice of issuance, of such shares on any securities
14
<PAGE>
exchange as may at the time be the market for the Common Stock;
(b) Qualification. Any registration or other qualification of such
shares under any State or Federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Board or the
Committee shall, in its absolute discretion upon the advice of counsel, deem
necessary or advisable; and
(c) Consents. The obtaining of any other consent, approval or permit
from any state or federal governmental agency which the Board or the Committee
shall, in its absolute discretion upon the advice of counsel, determine to be
necessary or advisable.
12. AMENDMENTS TO THE PLAN.
The Board may, insofar as permitted by law, from time to time, with
respect to any shares of Common Stock at the time not subject to Options,
suspend or discontinue the Plan or revise or amend it in any respect whatsoever,
provided, however, that the Board may condition any such revision or amendment
on approval of the shareholders, if the Board determines that such approval is
necessary or desirable for any reason, including, without limitation, to comply
with any laws, rules or regulations pertaining to the Plan, and provided further
that the Plan provisions relating to the amount and timing of Options awarded
hereunder, and the Exercise Price thereof, shall not be amended more than once
every six (6) months, other than to comport with changes in the Code or the
Employee Retirement Income Security Act, or the rules thereunder or to otherwise
comply with law.
15
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13. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
pursuant to the exercise of Options will be used for general corporate purposes.
16
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------------------------------
APPROVED
==============================
/s/DGL
------------------------------
LEGAL
/s/[Illegible]
------------------------------
LEASING AGENT
/s/[Illegible]
/s/ Jack [Illegible last name] ------------------------------
VICE PRESIDENT OF LEASING
LEASE ------------------------------
FINAL
------------------------------
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
TENANT
"SKYRIDE"
- --------------------------------------------------------------------------------
TRADE NAME
N/A
- --------------------------------------------------------------------------------
GUARANTOR
WOODFIELD MALL
A Regional Retail Development
VILLAGE OF SCHAUMBURG
COUNTY OF COOK
STATE OF ILLINOIS
PROVISIONS ADDED TO THIS LEASE APPEAR ON
THE DATA SHEET AND ON THE ATTACHED RIDER
AND, EXCEPT IN INSTANCES OF ADDITIONAL
SENTENCES OR PARAGRAPHS BEING ADDED AT
THE END OF A SECTION OR PARAGRAPH, ARE
INDICATED IN THE TEXT BY AN
UNDERSCORING OF THE LINE NUMBER IN THE
RIGHT-HAND MARGIN OF THE LINE BEING
CHANGED. ADDITIONAL LANGUAGE IS INSERTED
EITHER IN PLACE OF DELETED LANGUAGE OR
AFTER AN UNDERSCORED WORD, EXCEPT AS
OTHERWISE NOTED ABOVE.
<PAGE>
TABLE OF CONTENTS
PAGE
DATA SHEET................................................................ Dl
EXECUTION/ACKNOWLEDGMENT.................................................. El
ADDENDUM ................................................................. Al
ARTICLE I. GRANT AND TERM
SECTION 1.01. LEASED PREMISES....................................... S1
SECTION 1.02. COMMENCEMENT AND ENDING DAY OF TERM .................. S1
SECTION 1.03. OPENING............................................... S2
ARTICLE II. RENT
SECTION 2.01. MINIMUM RENT.......................................... S2
SECTION 2.02. PERCENTAGE RENT....................................... S2
SECTION 2.03. GROSS SALES........................................... S2
SECTION 2.04. RENT ADJUSTMENT....................................... S3
SECTION 2.05. TENANT'S TAX OBLIGATION............................... S3
SECTION 2.06. PAYMENTS.............................................. S4
ARTICLE III. RECORDS AND BOOKS OF ACCOUNT
SECTION 3.01. TENANT'S RECORDS...................................... S5
SECTION 3.02. REPORTS BY TENANT..................................... S5
ARTICLE IV. AUDIT
SECTION 4.01. RIGHT TO EXAMINE BOOKS................................ S5
SECTION 4.02. AUDIT................................................. S5
ARTICLE V. CONSTRUCTION OF LEASED PREMISES
SECTION 5.01. CONSTRUCTION OF LEASED PREMISES ...................... S6
SECTION 5.02. AVAILABILITY AND POSSESSION OF
PREMISES FOR TENANT'S WORK............................ S7
SECTION 5.03. LANDLORD'S AND TENANT'S OPTIONAL
RIGHT OF CANCELLATION................................. S7
SECTION 5.04. ULTIMATE COMMENCEMENT DATE............................ S7
ARTICLE VI. ALTERATIONS, CHANGES AND ADDITIONS
SECTION 6.01. INSTALLATION BY TENANT................................ S8
SECTION 6.02. REMOVAL BY TENANT..................................... S8
SECTION 6.03. CHANGES AND ADDITIONS................................. S8
ARTICLE VII. CONDUCT OF BUSINESS BY TENANT
SECTION 7.01. USE OF PREMISES....................................... S8
SECTION 7.02. OPERATION OF BUSINESS................................. S8
SECTION 7.03. RADIUS............................................... S10
SECTION 7.04. STORAGE, OFFICE SPACE................................ S10
SECTION 7.05. CARE OF PREMISES..................................... S10
ARTICLE VIII. COMMON AREAS
SECTION 8.01. OPERATION AND MAINTENANCE OF COMMON AREAS............ S10
SECTION 8.02. USE OF COMMON AREAS.................................. S10
SECTION 8.03. TENANT'S PRO RATA SHARE OF EXPENSES.................. S11
ARTICLE IX. SIGNS
SECTION 9.01. SIGNS................................................ S12
ARTICLE X. MAINTENANCE
SECTION 10.01. LANDLORD'S OBLIGATIONS FOR MAINTENANCE.............. S12
SECTION 10.02. TENANT'S OBLIGATIONS FOR MAINTENANCE................ S12
ARTICLE XI. INSURANCE AND INDEMNITY
SECTION 11.01. TENANT'S INSURANCE.................................. S14
SECTION 11.02. LANDLORD'S INSURANCE................................ S15
SECTION 11.03. COVENANT TO HOLD HARMLESS........................... S15
ARTICLE XII. UTILITY CHARGES
SECTION 12.01. UTILITY CHARGES..................................... S16
ARTICLE XIII. ESTOPPEL STATEMENT, ATTORNMENT AND SUBORDINATION
SECTION 13.01. ESTOPPEL STATEMENT.................................. S17
SECTION 13.02. ATTORNMENT.......................................... S18
SECTION 13.03. SUBORDINATION....................................... S18
SECTION 13.04. REMEDIES............................................ S18
ARTICLE XIV. ASSIGNMENT AND SUBLETTING
SECTION 14.01. NO ASSIGNMENT OR SUBLETTING......................... S18
ARTICLE XV. WASTE
SECTION 15.01. WASTE OR NUISANCE................................... S19
(i) Standard Contents/03/14/95
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE XVI. TRADE NAME, PROMOTIONAL CHARGE
SECTION 16.01. TRADE NAME......................................... S19
SECTION 16.02. SOLICITATION OF BUSINESS........................... S19
SECTION 16.03. PROMOTIONAL CHARGE................................. S19
ARTICLE XVII. DESTRUCTION OF LEASED PREMISES
SECTION 17.01. RECONSTRUCTION OF DAMAGED PREMISES................. S20
SECTION 17.02. WAIVER OF SUBROGATION.............................. S21
ARTICLE XVIII. EMINENT DOMAIN
SECTION 18.01. TOTAL CONDEMNATION OF LEASED PREMISES.............. S21
SECTION 18.02. PARTIAL CONDEMNATION............................... S21
SECTION 18.03. LANDLORD'S AND TENANT'S DAMAGES.................... S22
ARTICLE XIX. DEFAULT
SECTION 19.01. RIGHT TO RE-ENTER.................................. S22
SECTION 19.02. RIGHT TO RELET..................................... S23
SECTION 19.03. EXPENSES........................................... S23
SECTION 19.04. WAIVER OF COUNTERCLAIMS AND TRIAL BY JURY.......... S23
ARTICLE XX. BANKRUPTCY OR INSOLVENCY
SECTION 20.01. TENANT'S INTEREST NOT TRANSFERABLE................. S24
SECTION 20.02. TERMINATION........................................ S24
SECTION 20.03. TENANT'S OBLIGATION TO AVOID CREDITORS'
PROCEEDINGS........................................ S24
SECTION 20.04. RIGHTS AND OBLIGATIONS UNDER THE BANKRUPTCY
CODE............................................... S24
ARTICLE XXI. ACCESS BY LANDLORD
SECTION 21.01. RIGHT OF ENTRY..................................... S25
ARTICLE XXII. TENANT'S PROPERTY
SECTION 22.01. TAXES ON TENANT'S PROPERTY......................... S25
SECTION 22.02. LOSS AND DAMAGE.................................... S25
SECTION 22.03. NOTICE BY TENANT................................... S25
ARTICLE XXIII. HOLDING OVER
SECTION 23.01. HOLDING OVER....................................... S26
SECTION 23.02. SUCCESSORS......................................... S26
ARTICLE XXIV. RULES AND REGULATIONS
SECTION 24.01. RULES AND REGULATIONS.............................. S26
ARTICLE XXV. QUIET ENJOYMENT
SECTION 25.01. LANDLORD'S COVENANT................................ S26
SECTION 25.02. TENANT'S COVENANT.................................. S26
ARTICLE XXVI. SECURITY PROVISION
SECTION 26.01. SECURITY........................................... S26
ARTICLE XXVII. MISCELLANEOUS
SECTION 27.01. WAIVER; ELECTION OF REMEDIES....................... S27
SECTION 27.02. ENTIRE AGREEMENT................................... S27
SECTION 27.03. INTERPRETATION AND USE OF PRONOUNS................. S27
SECTION 27.04. DELAYS............................................. S28
SECTION 27.05. NOTICES............................................ S28
SECTION 27.06. CAPTIONS AND SECTION NUMBERS....................... S28
SECTION 27.07. BROKER'S COMMISSION................................ S28
SECTION 27.08. RECORDING.......................................... S28
SECTION 27.09. FURNISHING OF FINANCIAL STATEMENTS................. S28
SECTION 27.10. LANDLORD'S USE OF COMMON AREAS..................... S28
SECTION 27.11. TRANSFER OF LANDLORD'S INTEREST.................... S28
SECTION 27.12. FLOOR AREA......................................... S29
SECTION 27.13. INTEREST ON PAST DUE OBLIGATIONS................... S29
SECTION 27.14. LIABILITY OF LANDLORD.............................. S29
SECTION 27.15. ACCORD AND SATISFACTION............................ S29
SECTION 27.16. EXECUTION OF LEASE; NO OPTION...................... S30
SECTION 27.17. GOVERNING LAW...................................... S30
SECTION 27.18. SPECIFIC PERFORMANCE OF LANDLORD'S RIGHTS.......... S30
SECTION 27.19. CERTAIN RULES OF CONSTRUCTION...................... S30
SECTION 27.20. INDEX.............................................. S30
SECTION 27.21. SURVIVAL; NONDISCLOSURE; FREE ACT.................. S30
EXHIBIT A SITE PLAN; LEASED PREMISES; LEGAL DESCRIPTION (if included)
EXHIBIT B CONSTRUCTION
EXHIBIT 8-1 UTILITIES
EXHIBIT 8-2 (additional construction information and procedures, if any)
EXHIBIT C CENTRAL-AIR/CONDENSER-WATER SYSTEM (if any)
OTHER EXHIBITS (if any)
RIDER
(ii) Standard Contents/03/14/95
<PAGE>
WOODFIELD MALL
A Regional Retail Development
VILLAGE OF SCHAUMBURG, ILLINOIS
THIS LEASE made as of this 5 day of September, 1996, by and between CHICAGO
TITLE AND TRUST COMPANY, a corporation of Illinois; as Trustee under Trust No.
46746, and not personally, (Landlord), and SKYLINE MULTIMEDIA ENTERTAINMENT,
INC., the address of which is Empire State Building, 350 Fifth Avenue, Suite
612, New York, New York 10118 (Tenant). All of the provisions of the Lease,
including the Data Sheet, the standard provisions commencing with Article I and
continuing through Article XXVII of the Lease (hereinafter at times referred to
as the "text of the Lease" or the "Standard Form"), the Addendum, all exhibits,
and riders, if any, are incorporated in full in this preamble and in the Lease
as if fully set forth at this point. In the event of a conflict between the
provisions of the Data Sheet and the remainder of the Lease or exhibits, the
provisions of the Data Sheet shall control.
DATA SHEET
The following references furnish data to be incorporated in the specified
Sections of the Lease and shall be construed to incorporate all of the terms of
the entire Section as stated in the said Lease:
(1) Section 1.01: Leased Premises: Store Number 144, situated on the lower
level of Building "G," having an irregular shape and consisting of approximately
eight thousand six hundred eighty-five (8,685) square feet and Store Number 325,
situated on the upper level of Building "G," having an irregular shape and
consisting of approximately twelve thousand three hundred (12,300) square feet
for a total of twenty thousand nine hundred eighty five (20,985) square feet.
(2) Section 1.02: Commencement Date of Term: The later of (i) September 1,
1997, or (ii) the date one hundred eighty (180) days following the date the
leased premises are made available to Tenant with the leased premises vacant and
free and clear of the possessory rights of prior or current occupants.
Length of Term: Fifteen (15) lease years
(3) Section 2.01 and Section 2.02: Name and Address for Rent Payments:
Payments from Tenant shall be made payable to Woodfield Associates, and shall be
sent to:
Woodfield Associates
Drawer 67-554
Detroit, Michigan 48267
Section 27.05: Notice Address for Landlord:
Woodfield Associates
200 East Long Lake Road
P.O. Box 200
Bloomfield Hills, MI 48303-0200
(4) Section 2.01: Minimum Rent:
(i) From the commencement of the term of this Lease and continuing through
the fifth (5th) lease year of the term hereof, the sum of Four Hundred Nineteen
Thousand Seven Hundred and 00/100 Dollars ($419,700.00) annually, which sum
shall be payable by Tenant in equal consecutive monthly installments of Thirty
Four Thousand Nine Hundred Eighty and 00/100 Dollars ($34,980.00) each;
(ii) Beginning with the sixth (6th) lease year of the term hereof and
continuing through tenth (10th) lease year of the lease term, the sum of Six
Hundred Twenty Nine Thousand Five Hundred Fifty and 00/100 Dollars ($629,530.00)
annually, which sum shall be payable by Tenant in equal consecutive monthly
installments of Fifty Two Thousand Four Hundred Sixty Two and 50/100 Dollars
($52,462.50) each.
(iii) Beginning with the eleventh (11th) lease year of the term hereof and
continuing throughout the balance of the lease term, the sum of Eight Hundred
Thirty Nine Thousand Four Hundred and 00/100 Dollars ($839,400.00) annually,
which sum shall be payable by Tenant in equal consecutive monthly installments
of Sixty Nine Thousand Nine Hundred Fifty and 00/100 Dollars ($69,950.00) each.
D1 Skyride/Woodfield/61796
<PAGE>
(5) Section 2.02(a): Percentage Rent:
(i) From the commencement of the term of this Lease and continuing through
the fifth (5th) lease year of the term hereof, a sum equal to ten percent (10%)
(the 'percentage rent factor') of all 'Gross Sales' resulting from business
conducted in, on or from the leased premises during each lease year in excess of
Five Million Five Hundred Ninety-Seven Thousand and 00/l00ths Dollars
($5,597,000.00) ('Minimum Gross Sales');
(ii) Beginning with the sixth (6th) lease year of the term hereof and
continuing through the tenth (10th) lease term, a sum equal to ten percent (10%)
(the 'percentage rent factor') of all 'Gross Sales' resulting from business
conducted in, on or from the leased premises during each lease year in excess of
Eight Million Three Hundred Ninety-Five Thousand Five Hundred and 00/l00ths
($8,395,500.00) ('Minimum Gross Sales').
(iii) Beginning with the eleventh (11th) lease year of the term hereof and
continuing throughout the balance of the lease term, a sum equal to ten percent
(10%) (the 'percentage rent factor') of all 'Gross Sales' resulting from
business conducted in, on or from the leased premises during each lease year in
excess of Eleven Million One Hundred Ninety-Four Thousand and 00/l00ths Dollars
($11,194,000.00) ('Minimum Gross Sales').
(6) Section 5.01(b): Design of Leased Premises: The store design to be used
by Tenant in the preparation of Working Drawings and Specifications for Tenant's
Work in the leased premises shall be similar in concept to the store design
reflected in the Skyride store operated by Tenant at 42nd Street, New York, New
York, and Tenant's architect shall provide certification to Landlord, with the
submission of such Working Drawings and Specifications, that this store design
requirement has been satisfied. Such submission shall also include the
certification of Tenant's architect that the Working Drawings and Specifications
comply with the Space Layout Drawings provided by Landlord, all criteria and
specifications set forth in Exhibits B and B-1 and any further construction
exhibits attached to this Lease, and all applicable code requirements. Landlord
shall not withhold its approval of the store design indicated in the Working
Drawings and Specifications to the extent the design is similar in concept to
the 42nd Street location if Tenant and Tenant's architect shall comply with the
foregoing requirements.
(7) Section 5.01(c): Tenant Reimbursement to Landlord: Not Applicable.
(8) Section 7.01: Permitted Use: The operation of a high-quality
entertainment facility that will include related retail sales and the operation
of computer equipment commonly found in high-quality "cyber cafes" and "family
entertainment centers." The cafes on the premises will serve only such items as
are customarily featured on a light-fare restaurant menu. The technology
presented will be intended for broad appeal to families with young children as
well as adults, and may include simulation/motion-based systems, virtual-reality
equipment, interactive-video attractions, live entertainment and
audio-animatronic characters and special effects. No coin or token operated
machines or games will be allowed in the facility. Landlord reserves the right
of approval on any and all attractions within the space provided Landlord shall
not unreasonably withhold its approval of the types of attractions specifically
listed above.
(9) Section 7.03: Radius: Ten (10) miles.
(10) Section 16.01: Trade Name: "SKYRIDE"
(11) Section 16.03: Original Annual and Initial Promotional Charge: Not
Applicable. The initial and ongoing charges under Paragraphs (a) and (b) of
Section 16.03 shall not apply to Tenant.
(12) Section 26.01: Security Deposit: Fifty Two Thousand Four Hundred
Sixty-Two and 50/l00ths Dollars ($52,462.50).
Additional Security: Not Applicable.
(13) Guarantor(s): Not Applicable.
Address(es): Not Applicable.
(14) Rider: The Rider attached and made a part of this Lease is the
"Standard Skyride Rider" containing the pre-negotiated revisions to the Standard
Form and Exhibit B, which revisions are accepted by Landlord and Tenant by their
execution of this Lease.
D2 Skyride/Woodfield/71196
<PAGE>
SPECIAL PROVISIONS:
Section 1.02: A portion of the leased premises is presently leased to a tenant
whose lease term has not expired. The commencement of the term hereof is subject
to Landlord entering into a termination of lease agreement with such tenant
under which such tenant in fact vacates the leased premises.
In the event that Landlord shall voluntarily, during the term of this Lease
(excluding the last two (2) years of the term hereof), lease space in the
Shopping Center to a tenant whose primary use shall be the operation of
motion-based simulators or virtual-reality attractions or interactive video
technology excluding a tenant whose primary business is the sale or rental of
software and hardware (hereinafter "Competing Business"), and the Gross Sales
from the leased premises during the 6-month period commencing with the opening
of such Competing Business (such 6-month period being hereinafter referred to as
the "Test Period") shall decrease by more than ten percent (10%) (as compared to
the Gross Sales from the leased premises during the same 6-month period in the
year immediately preceding the opening of the Competing Business), then, upon
notice from Tenant to Landlord that such decrease in Gross Sales has occurred
(which notice shall be accompanied by certified reports of Gross Sales for each
of the relevant 6-month periods), subject to verification by Landlord of such
decrease, fifty percent (50%) of each monthly payment of minimum rent required
to be paid under Section 2.01 hereof shall thereafter be abated. However, the
foregoing abatement of minimum rent shall be contingent upon all of the
following factors: (i) such abatement shall not apply from and after the date
that the Competing Business shall cease operating in the Shopping Center; (ii)
Tenant shall at all times continuously operate its business in the leased
premises in accordance with the provisions of Section 7.01 and 7.02 hereof and
Tenant shall not otherwise be in default under this Lease; (iii) if Tenant shall
not be operating its business during the Test Period pursuant to a permitted
closing under this Lease (i.e., in connection with a fire or other casualty
under Section 17.01, or a condemnation under Article XVIII), then the Gross
Sales for the Test Period shall be increased by the amount of Gross Sales from
the leased premises for the days of the next subsequent 6-month period (during
which Tenant shall be open for business) which shall correspond to the same
calendar days of permitted and actual cessation of operations in the leased
premises during the Test Period; (iv) if the square footage of the leased
premises shall be reduced, for whatever reason, during the Test Period, then the
Gross Sales to be evaluated for the Test Period (as adjusted pursuant to subpart
(iii) above) shall be increased by the percentage of such reduction in square
footage; (v) the Competing Business shall not be owned or operated by Tenant or
by any licensee, franchisee, assignee, sublessee or affiliate of Tenant, or by
any entity related in any other manner to Tenant or to any licensee, franchisee,
assignee, sublessee or affiliate of Tenant; and (vi) the Competing Business
shall not arise as a result of any change of any permitted use in the Shopping
Center by order or other action of the applicable United States Bankruptcy
Court. Tenant agrees to indemnify Landlord, its officers, directors, partners,
employees and agents, from and against any and all third-party claims, actions,
suits, losses, damages, liability, costs and expense, including, without
limitation, attorneys fees, court costs and disbursements, that arise from or
out of the foregoing provisions of this paragraph and which relate to any claim
that such provisions constitute unfair competition, restraint of trade or unfair
trade practice.
Provided Tenant opens for business to the public on or before the lease
term commencement date (subject to extension to the extent Tenant is delayed in
opening due to events beyond Tenant's control) and for so long as Tenant shall
not at any time during such period be in default under any of the terms,
covenants or conditions of said Lease beyond any applicable notice, grace or
cure period set forth in this Lease, minimum rent in the amount of $15,738.75
per month shall be abated for the first month of the term, and for each month
thereafter, until the total amount abated under this paragraph shall equal
$944,325.00, at which time full payments of minimum rent shall commence.
Landlord and Tenant agree that no portion of the minimum rent paid by Tenant
after the expiration of any period during which such rent was abated shall be
allocated by Landlord or Tenant to such abatement period, nor is such rent
intended by the parties to be allocable to any abatement period.
Section 2.04: The provisions of Section 2.04 shall not apply to Tenant.
Section 2.05: The charge payable by Tenant under this Section shall be $6.00 per
square foot of the leased premises per annum during the first lease year of the
lease term, payable in equal consecutive monthly installments without any
set-off, deduction or counterclaim. Such charge for each lease year after the
first lease year shall be increased by the percentage of increase in the taxes,
assessments, costs and expenses included under Section 2.05 during the
immediately preceding lease year, as applied to the charge payable by Tenant for
such preceding lease year.
Section 8.03: The charges payable by Tenant under this Section shall be $9.00
per square foot of the leased premises per annum during the first lease year of
the lease term payable in equal monthly installments without set-off, deduction
or counterclaim. Such charge for each lease year after the first lease year
shall be increased or decreased by the percentage of increase in the costs and
expenses included under Section 8.03 during the immediately preceding lease
year, as applied to the charge payable by Tenant for such preceding lease year,
provided however, that the charge payable by Tenant under this Section 8.03
shall not be decreased below $9.00 per square foot of floor area in the leased
premises.
Section 16.03(e): This Section of the Addendum shall not apply to this Lease.
Section 26.02: Tenant shall provide to Landlord prior to the date of Landlord's
execution of this Lease, as security for the performance of Tenant's obligations
under this Lease, in addition to any Guaranty attached hereto, an irrevocable
Letter of Credit from a commercial bank of substantial financial standing (the
"Issuer") in the amount of Two Hundred Thousand and 00/100 DOLLARS ($200,000)
from which Landlord may draw in the event of any
D3 Skyride/Woodfield/8996
<PAGE>
default by Tenant under the terms of this Lease. Such Letter of Credit must
be in writing, signed by the Issuer, made payable to the order of Landlord,
and must provide that, effective upon the date of issuance of the Letter of
Credit, the Issuer shall, upon written notice signed on behalf of Landlord
that Tenant has defaulted under the terms of this Lease, immediately remit
whatever amounts are specified in said notice, up to and including the full
face amount of the Letter of Credit. Such Letter of Credit shall, by its
terms, be fully effective during a one (1) year period following the date
of issuance. Tenant shall arrange for such Letter of Credit to be renewed,
or replaced by an equivalent Letter of Credit, to provide continuing
identical security to Landlord during each subsequent one (1) year period
and during any remaining period under the Lease term and during any holdover
period or other extension of the term of the Lease. Each such renewal or
replacement of the Letter of Credit shall be for the full face amount of Two
Hundred Thousand Dollars ($200,000) regardless of previous draws against
any prior Letter of Credit. No later than sixty (60) days prior to the
termination date of each Letter of Credit, or renewal term thereof, Tenant
shall provide written notice (and supporting documentary evidence signed by
the Issuer) to Landlord that the then effective Letter of Credit has been so
renewed or so replaced for the succeeding time period. The failure of Tenant
to timely renew the Letter of Credit or to maintain the Letter of Credit as
herein specified or the Issuer's refusal or failure to permit Landlord to draw
against the Letter of Credit shall be a default under the terms of this Lease
beyond any applicable grace or cure period.
In addition to all other remedies available to Landlord in the event of
default by Tenant under the terms of this Lease, Landlord shall have the
specific remedy of immediately drawing against the Letter of Credit in any
amount up to and including the full face amount of such Letter of Credit in the
event of any breach by Tenant of any of the covenants or provisions of this
Lease, including, without limitation, a breach consisting of any of the
following: (1) any deviation from Tenant's permitted use without prior written
approval of Landlord, (2) the failure of Tenant to complete construction of and
to open its store for business to the public on or before the commencement date
specified in Section 1.02 of the Lease, (3) any failure to pay any rental or
other charges owing to Landlord on or before the due date specified in the
Lease, and (4) any deviation from Tenant's hours of operation as specified in
Section 7.02 of this Lease without the prior written approval of Landlord.
It is specifically agreed and understood that, in the event that Landlord
has not received from Tenant a Letter of Credit, in form and substance
acceptable to Landlord, and in accordance with the provisions of this Section,
within ten (10) days of the date of Landlord's execution of this Lease, then
this Lease shall be, at the sole option of Landlord, null and void and of no
further force and effect."
Notwithstanding anything contained in this Section 26.02, if Tenant shall
not be in default hereunder, during the then preceding one (1) year period,
provided the amount of the Letter of Credit required to be provided under this
Section shall not be reduced below Two Hundred Thousand and 00/100ths Dollars
($200,000.00).
Exhibit B. Section II.B.: The $20.00 per lineal foot charge shall not apply to
Tenant.
Exhibit B. Section II.C.: The $45.00 per lineal foot charge shall not apply to
Tenant.
Exhibit B. Section III.D.2.a.: Neither the $45.00 per lineal foot charge nor the
$66.00 per lineal foot charge shall apply to Tenant.
Exhibit B. Section IV.F.: Subject to Tenant's compliance with governmental laws,
ordinances and regulations and subject to Landlord's receipt of approvals from
the operators of stores within the Department Store Sites, Tenant shall be
permitted to install a sign on the exterior of the building containing the
leased premises, and a monument sign near Woodfield Road, which signs shall
conform to the criteria set forth on a "Exterior Sign Exhibit" prepared by
Tenant and approved by Landlord; upon approval of the Exterior Sign Exhibit
Landlord agrees to make a positive presentation to the operators of the
Department Store Sites on these issues.
Exhibit B. Section V.B.3.: The fee for Coordination and Administrative Services
shall not apply to this Lease.
Exhibit B. Section VI.B.5.: Such remodeling and refurbishing shall be limited to
resurfacing (both interior and exterior) and updating, including, but not
limited to, replacement of all floor coverings and wall coverings, and
replacement of older equipment with the then most recent technology; provided,
however, that no structural changes or redesign of major components (other than
resurfacing items and replacement of equipment, as stated) shall be required.
[End of text of Data Sheet]
D4 Skyride/Woodfield/81296
<PAGE>
EXECUTION/ACKNOWLEDGMENT
In confirmation of their agreement to enter into this Lease (including the
Preamble, Data Sheet, Addendum, Standard Form, all exhibits, and the Rider (if
any) attached hereto), and intending to be bound hereby, Landlord and Tenant
have signed and sealed this Lease as of the day and year first above written on
page Dl of this Lease.
In the Presence of: CHICAGO TITLE AND TRUST COMPANY,
a corporation of Illinois, as Trustee
under Trust No.46746, and not personally,
/s/ Evelyn F. Mills By: /s/ [Illegible]
- -------------------------------- --------------------------------------
Its: Authorized Agent
________________________________ LANDLORD
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
________________________________ By: /s/Mark Messersmith
--------------------------------------
Print Name: MARK MESSERSMITH
Its: Executive Vice President
--------------------------------------
Print Title:__________________________
________________________________ And: ______________________________________
Print Name: __________________________
Its: ______________________________________
Print Title:__________________________
TENANT
Tenant's Federal Tax Identification Number:
___________________________________________
Tenant's corporate seal: __________________
It is expressly understood and agreed by and between the parties hereto,
anything herein to the contrary notwithstanding, that each and all of the
warranties, indemnities, representations, covenants, undertakings and agreements
herein made on the part of the Trustee while in form purporting to the
warranties, indemnities, representations, covenants, undertakings and agreements
of said Trustee are nevertheless each and every one of them, made and intended
not as personal warranties, indemnities, representations, covenants,
undertakings and agreements by the Trustee or for the purpose or with the
intention of binding said Trustee personally but are made and intended for the
purpose of binding only that portion of the trust property specifically
described herein, and this instrument is executed and delivered by said Trustee
not in its own right, but solely in the exercise of the powers conferred upon it
as such Trustee and that no personal liability or personal responsibility is
assumed by nor shall at any time be asserted or enforceable against the Chicago
Title and Trust Company or any of the beneficiaries under said Trust Agreement,
on account of this instrument or on account of any warranty, indemnity,
representation, covenant, undertaking or agreement of the said Trustee in this
instrument contained, either expressed or implied, all such personal liability,
if any, being expressly waived and released.
E1 Skyride/Woodfield/3/12/96
<PAGE>
ACKNOWLEDGMENT OF LANDLORD
STATE OF Mi )
) ss.
COUNTY OF Oakland )
On this 5th day of September, 1996 before me personally appeared the above
named Agent of the Chicago Title and Trust Company, Trustee, personally known to
me to be the same person whose name is subscribed to the foregoing Lease as such
Agent, and acknowledged before me that he signed and delivered the said Lease as
his own free and voluntary act and as the free and voluntary act of said Company
for the uses and purposes therein set forth; and the said Agent then and there
acknowledged that said Agent, as custodian of the corporate seal of said
Company, caused the corporate seal of said Company to be affixed to said Lease
as said Agent's own free and voluntary act and as the free and voluntary act of
said Company for the uses and purposes therein set forth.
/s/ Evelyn F. Mills
-------------------------------------------
Notary Public, __________ County __________
My Commission expires:
EVELYN F. MILLS
Notary Public, Oakland County, MI
My commission Expires Nov. 23, 1998
ACKNOWLEDGMENT OF CORPORATE TENANT
STATE OF New York )
) ss.
COUNTY OF New York )
On this 31 day of July, 1996, before me personally appeared Mark
Messersmith and _________ to me personally known, who, being by me duly sworn,
did each for himself say that he is, respectively, the Executive Vice President
and ________________ of SKYLINE MULTIMEDIA ENTERTAINMENT, INC. the corporation
named in and which executed the within instrument, corporate seal, and that said
instrument was signed on behalf of said corporation by authority of its board of
directors; and said Mark Messersmith, Executive Vice President, acknowledged
before me said instrument to be the free act and deed of said corporation.
/s/ Bernard A. Shafran
-------------------------------------------
Notary Public, County,
My Commission expires:
BERNARD A. SHAFRAN
Notary Public, State of New York
No. 41-4665361
Qualified in Queens county
Commission Expires Oct. 31, 1996
E2 Skyride/Woodfield/3/12/96
<PAGE>
ADDENDUM -- WOODFIELD MALL
All of the provisions set forth in this Addendum are in addition to, and
not in substitution for, the provisions of the Standard Form, except to the
extent specifically otherwise stated.
Section 1.01(a). LEASED PREMISES: The regional retail development is commonly
known as "Woodfield Mall," located in the Village of Schaumburg, Cook County,
Illinois.
Section 12.01. UTILITY CHARGES: In substitution for the text of paragraphs (a)
through (g) of Section 12.01, the following provisions shall apply:
Tenant shall be solely responsible for and shall promptly pay all charges
for water, gas, heat, electricity, sewer and any other utility used upon or
furnished to the leased premises. Tenant shall contract directly with and shall
be solely responsible to the public utility companies for the installation of
service and the payment of all charges for Tenant's usage of such utility
services. Landlord shall have the right, at its sole option, to supply
electricity to the leased premises in which event the minimum rent reserved
under this Lease will be increased for the period that Landlord so supplies such
electricity to include the increase in the fair and reasonable rental value of
the leased premises due to the supplying of such electricity in accordance with
the numbered paragraphs set forth below. If Landlord shall elect to supply any
of the foregoing other utilities used upon or furnished to the leased premises,
Tenant agrees to purchase and pay for same as additional rent, within ten (10)
days of the presentation by Landlord to Tenant of bills therefor, at the rates
which would be applicable to Tenant as a direct customer of the public utility
company, as such rates are filed by the utility company serving the area with
the proper regulating authority and in effect from time to time covering such
services. Landlord shall also have the right to periodically estimate the
monthly amount required to be paid by Tenant to Landlord with respect to any or
all of such services provided by Landlord and such estimated monthly amount or
amounts shall be paid by Tenant on the first day of each calendar month, in
advance, at the place and in the manner specified for payments of minimum rent
hereunder. Landlord shall have the right to change such estimated amount or
amounts at any time and from time to time, by notice to Tenant. If the total of
the estimated monthly payments made by Tenant shall be less for any lease year
or calendar year than the actual amount due from Tenant pursuant to the
provisions of this Section, Tenant shall pay to Landlord the difference between
the amount paid by Tenant and the actual amount due within ten (10) days after
submission to Tenant of Landlord's statement and invoice therefor; and if the
total of the estimated payments made by Tenant for any such year shall exceed
the actual amount due from Tenant, the excess amount paid shall be credited
against the next payment due from Tenant to Landlord under this Section. The
obligation of Tenant to pay for such utilities shall commence as of the date on
which possession of the premises is delivered to Tenant, without regard to any
free rent period or formal commencement date of this Lease.
Prior to the commencement of the term of this Lease,
(1) Landlord shall analyze Tenant's Working Drawings and Specifications
covering its construction of the leased premises and shall determine Tenant's
annual electric (kilowatt) requirements at the leased premises. Such
determination shall be based upon (i) Tenant's electric requirements for the
projected number of hours per year during which the leased premises will be open
for business (i.e., the number of hours established for the Shopping Center by
the Landlord), and during which Tenant's employees will be present at the leased
premises (for inventory, clean-up, meetings, etc.); and (ii) Tenant's electric
requirements during the remaining hours in the year. Based upon such
information, Landlord will calculate the annual amount which Tenant would be
charged by the local electric public utility company for furnishing such
electrical energy, and Tenant agrees that the minimum rent reserved under the
Lease will be increased by such amount.
(2) Landlord reserves the right to further increase the minimum rent to
reflect any increase in the annual amount which Tenant would be charged by the
local electric utility company or in the event of any change in the construction
of the leased premises or if Tenant operates its premises in excess of the
number of hours as projected above.
(3) At any time after the execution of the Lease, either Landlord or Tenant
may request an appraisal by an independent electrical engineer, mutually
acceptable to Landlord and Tenant, who is qualified to determine whether the
adjustment in the minimum rent as computed by Landlord is below or in excess of
the amount which Tenant would be charged
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<PAGE>
by the local electric utility company for furnishing such electrical energy.
If Landlord and Tenant cannot agree promptly upon an independent
electrical engineer, then the matter shall be submitted for arbitration before
the American Arbitration Association.
(4) The appraisal or arbitration, as the case may be, shall be binding on
both parties and shall set forth the amount, if any, by which the adjustment of
the minimum rent reflecting the increased value of the leased premises resulting
from Landlord supplying electrical energy is below or in excess of the annual
amount which Tenant would be charged by the local electric utility company for
furnishing such electrical energy. The minimum rent shall thereupon be adjusted
by the amount of such deficiency or excess, such adjustment to become effective
as of the first day of the month following the month in which demand for the
appraisal was made.
(5) The cost of such appraisal or arbitration shall be shared equally
between Landlord and Tenant; provided, that if either party requests an
appraisal prior to one year after the effective date of the last preceding
appraisal or arbitration, the entire cost of such appraisal or arbitration shall
be paid for by the party requesting such appraisal. In each case, upon
completion of an appraisal and, if necessary, arbitration pursuant to this
agreement, the parties agree that the minimum rent shall reflect such adjustment
or adjustments.
Section 26.01. SECURITY: For purposes of this Section 26.01, references to
"Landlord" shall be deemed to be references to Woodfield Associates for payment,
retention and application of said security deposit.
Section 27.14. LIABILITY OF LANDLORD: The parties hereto agree that wherever in
this Lease the term "Woodfield Associates" or "beneficiary" of the Trust (or
trust) is used, it shall be deemed to mean Woodfield Associates, its successors
and assigns, or any other entity designated in writing by Landlord.
Exhibit B. Additional Construction Exhibit (if any): To the extent that any
construction exhibit beyond Fxhibits B and B-1 shall be attached to the Lease,
and any such exhibit shall refer to electrical criteria, such electrical
criteria shall be field verified by Tenant prior to preparation of any plans for
Tenant's Work and prior to the undertaking of any work with respect to the
leased premises. Tenant shall be solely responsible for such verification.
[End of text of Addendum]
-A2- 03/07/95
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STANDARD FORM
ARTICLE I. GRANT AND TERM
SECTION 1.01. LEASED PREMISES. (a) Landlord, in consideration of the rent
to be paid and the covenants to be performed by Tenant, does hereby demise and
lease unto Tenant, and Tenant hereby rents and hires from Landlord, those
certain premises in the regional retail development shown on Exhibit A, subject
to covenants, restrictions and easements of record, the terms and provisions of
certain reciprocal easement and/or operating agreements now or hereinafter
entered into by Landlord with the owners or lessees of the Department Store
Sites, and the terms and provisions of the underlying lease, if any. It is
agreed that the term "regional retail development" as used herein shall mean and
refer to the Department Store Sites and the Shopping Center, including the
buildings located or to be located thereon, all as shown on the site plan which
is set forth in Exhibit A attached hereto and made a part hereof, and that the
term "Shopping Center" shall, except as otherwise specifically provided herein,
mean and refer to the hatched and the shaded portions of such site plan which
portions from time to time open directly on the enclosed Mall and which may vary
at each level of the regional retail development, together with the enclosed
Mall (whether or not shaded or hatched). The approximate location of the
premises leased to Tenant hereunder is shown in Exhibit A. The legal description
of the regional retail development or of the Shopping Center is set forth in
Exhibit A or referenced in the Addendum attached hereto and made a part hereof.
The leased premises (herein referred to as the "leased premises" or "premises")
are described as set forth in the Data Sheet attached hereto. As used in this
Lease, the term "State" shall mean the state in which the Shopping Center is
located.
(b) The exterior walls and the roof of the leased premises and the area
beneath said premises are not demised hereunder, and the use thereof, together
with the right to locate, both vertically and horizontally, install, maintain,
use, repair and replace pipes, utility lines, ducts, conduits, flues,
refrigerant lines, drains, sprinkler mains and valves, access panels, wires and
structural elements leading through the leased premises serving other parts of
the regional retail development, is hereby reserved unto Landlord. Landlord
reserves an easement in, over and through the area occupied by the storefront of
the leased premises, and an easement above Tenant's finished ceiling to the
roof, or to the bottom of the floor deck above the leased premises, for general
access purposes and in connection with the exercise of Landlord's other rights
under this Lease.
(c) The attached site plan of the regional retail development, Exhibit A,
includes premises identified thereon as Department Store Sites, including the
buildings located or to be located thereon, which sites are collectively
hereinafter referred to as the "Department Store Sites" and/or "Department
Stores," unless otherwise specifically set forth. It is agreed that, wherever
the term "Shopping Center" is used herein, it shall be deemed to exclude the
Department Store Sites (even if such Sites shall be within the hatched and/or
shaded area shown on the site plan), except as otherwise specifically stated
herein. In addition, said site plan includes other portions of the Shopping
Center which Landlord may from time to time sell or lease for the purpose of
construction and/or use by one or more department stores (as defined in Section
27.12 hereof), which portion(s) may thereupon, at Landlord's option, be referred
to and treated as "Department Store Site(s)" and/or "Department Stores" upon
occupancy thereof by a department store, and which, at Landlord's option, may be
excluded from the Shopping Center. In the event Landlord elects to enlarge the
regional retail development, any additional area may be included by Landlord in
the definition of the Shopping Center for purposes of this Lease. Landlord shall
also have the general right from time to time to include within and/or to
exclude from the defined Shopping Center any existing or future areas, and the
floor area of the Shopping Center shall be accordingly adjusted.
SECTION 1.02. COMMENCEMENT AND ENDING DAY OF TERM. The term of this Lease
shall commence upon (a) the commencement date set forth in the Data Sheet, or
(b) the date on which Tenant opens its store in the leased premises for business
to the public, whichever of said dates is the first to occur, and shall end on
the final day of the last lease year of the term or other specified date as set
forth in the Data Sheet, unless sooner terminated as hereinafter provided. For
the purpose of this Lease, the first "lease year" shall be a period commencing
on the day the term of this Lease commences and ending on January 31 next
following; after the first lease year, the term "lease year" shall mean a fiscal
year of twelve (12) consecutive calendar months commencing on February 1 of each
calendar year, except that the final lease year of the term shall be a period of
less than twelve (12) consecutive calendar months in the event that an
expiration date other than January 31 is set forth in the Data Sheet.
<PAGE>
SECTION 1.03. OPENING. Tenant covenants and agrees to complete its
construction within the leased premises in accordance with the provisions of
this Lease and to open its store for business to the public not later than the
date established for commencement of the term of this Lease pursuant to Section
1.02 hereof.
ARTICLE II. RENT
SECTION 2.01. MINIMUM RENT. (a) The minimum rent during the term of this
Lease shall be the amount set forth in the Data Sheet attached hereto as
adjusted pursuant to Section 2.04 or other provisions of this Lease, which sum
shall be payable by Tenant in equal consecutive monthly installments in the sum
set forth in the Data Sheet attached hereto, on or before the first day of each
month, in advance, payable as set forth, and at the address set forth, in the
Data Sheet attached hereto under "Name and Address for Rent Payments," or such
other place as the Landlord may designate in writing, such payments to be
without any prior demand therefor and without any deductions or setoff
whatsoever.
(b) Should the term of this Lease commence on a day other than the first
day of a calendar month, then the rent for such month shall be prorated on a
daily basis based upon a thirty (30) day calendar month. Should any lease year
contain less than twelve (12) calendar months, said annual rent shall be
prorated.
SECTION 2.02. PERCENTAGE RENT. (a) In addition to the payment of the
minimum rent, as hereinbefore provided, Tenant shall pay to Landlord for each
lease year of the term hereof, as percentage rent, an amount equal to the
percentage rent factor (see Data Sheet) multiplied by all Gross Sales resulting
from business conducted in, on or from the leased premises during such lease
year in excess of the amount of Gross Sales set forth in the Data Sheet
(hereinafter referred to as "Minimum Gross Sales"). Subsequent to the date upon
which Tenant is initially obligated to open for business in the leased premises,
in addition to any and all other remedies afforded to Landlord under this Lease
by reason of default, "Minimum Gross Sales" shall be reduced by 1/360th for each
day or portion thereof that Tenant does not operate its business pursuant to
Section 7.02 hereof. If percentage rent hereunder shall be calculated on the
basis of a split percentage arrangement, as defined in subsection (b) below,
then the reduction required by the preceding sentence shall be applied to the
minimum rent which would otherwise be deductible in the calculation of
percentage rent with respect to all Gross Sales of Tenant (provided that such
reduction shall be made solely for the purpose of the percentage rent
calculation). The percentage rent shall be payable as set forth, and at the
address set forth, in the Data Sheet attached hereto under "Name and Address for
Rent Payments," or such other place as the Landlord may designate in writing,
such payments to be without any prior demand therefor and without any deductions
or setoff whatsoever.
SEE ATTACHED RIDER FOR INSERTS
(b) Such percentage rent shall be paid in installments computed on all
Gross Sales during each period of the term hereof in excess of of annual Minimum
Gross Sales. Such periods during each lease year shall be measured as follows:
February through July, August through January. Such installments shall be
payable within thirty (30) days after the expiration of each month period of
each lease year. In the event that the total of the installments of percentage
rent for any lease year does not equal the percentage rent computed on the total
amount of Gross Sales for such lease year, in accordance with the formula set
forth in the Data Sheet, then Tenant, at the time it submits the annual
statement of Gross Sales required under Section 3.02, shall pay Landlord any
deficiency, or Landlord shall credit any overpayment to the next installment of
percentage rent due from Tenant, as the case may be. In no event, however, shall
the aggregate of minimum rent and percentage rent to be paid by Tenant and
retained by Landlord for any lease year be less than the minimum rent specified
herein. If the commencement date of the lease term is other than February 1,
then the percentage rent covering the first lease year hereunder shall be paid
in the following manner: for the period during which the lease term commences,
the percentage rent shall be equal to the product of the percentage rent factor
and the amount of Gross Sales in excess of a prorated fraction of annual Minimum
Gross Sales (with such prorated fraction to be calculated by taking the number
of days remaining in such period as of the date the leased premises are
initially opened for business to the general public, dividing by 360 and
multiplying the resulting quotient by the stated annual Minimum Gross Sales
figure); for the balance of the first lease year, the percentage rent shall be
equal to the product of the percentage rent factor and the amount of Gross Sales
in excess of annual Minimum Gross Sales during each subsequent period. If the
expiration date of the lease term is other than January 31, then the percentage
rent covering the final lease year hereunder shall be calculated in a like
manner, with proration to occur in the period during which the lease term
expires. In the event that Tenant shall be obligated to pay percentage rent
calculated on different percentages for more than one category of merchandise
and/or services (a "split percentage" arrangement), then the percentage rent
payable by Tenant hereunder shall be calculated for each period (and for any
fractional period occurring at the beginning or end of the term) based upon the
stated percentages being applied to the respective categories of Gross Sales for
such period, with the minimum rent paid by Tenant for any such period being
deducted from the combined total in order to arrive at the percentage rent owing
by Tenant for such period. Such amounts shall be payable within thirty (30) days
after the expiration of the applicable period.
SEE ATTACHED RIDER FOR INSERTS
SECTION 2.03. GROSS SALES. The term "Gross Sales" as used herein shall be
construed to include the entire amount of the actual sales price, whether for
cash or otherwise, of all sales of merchandise or services and all other
receipts whatsoever of all business conducted in or from the leased premises by
Tenant, or by all concessionaires (as defined in Section 3.02 hereof) or
otherwise, including, without limitation, mail, catalogue or telephone orders
received or filled at the leased premises, all deposits not refunded to
purchasers, and orders taken, although said orders may be filled elsewhere. A
"sale" shall be deemed to have been consummated for the purposes of this Lease,
and the entire amount of the sales price shall be included in Gross Sales, at
such time that (i) the transaction is initially reflected in the
July 11 1996
Standard Form/03/14/95
S2
<PAGE>
books or records of Tenant or a concessionaire (if a concessionaire makes the
sale), or (ii) Tenant or such concessionaire receives all or any portion of the
sales price, or (iii) the applicable goods or services are delivered to the
customer, whichever first occurs, irrespective of whether payment is made in
installments, the sale is for cash or for credit, or otherwise, or all or any
portion of the sales price has actually been paid at the time of inclusion in
Gross Sales or at any other time. No deduction shall be allowed for direct or
indirect discounts, rebates, or other reductions on sales to employees or
others, unless generally offered to the public on a uniform basis. In addition,
no deduction shall be allowed for uncollected or uncollectible credit accounts,
or for trade-ins or other credits on sales to employees or others. The term
"Gross Sales" shall not include, however, any sums collected and paid out by
Tenant for any sales or excise tax imposed by and accounted for by Tenant to any
duly constituted governmental authority, nor shall it include the exchange of
merchandise between the stores of Tenant, if any, where such exchange of goods
or merchandise is made solely for the convenient operation of the business of
Tenant and not for the purpose of consummating a sale which has theretofore been
made in or from the leased premises and/or for the purpose of depriving Landlord
of the benefit of a sale which otherwise would be made in or from the leased
premises, nor shall the term include the amount of returns to shippers or
manufacturers, nor proceeds from the sale of trade fixtures. There shall be
deductible from Gross Sales the amount of any cash or credit refund made upon
any sale in or from the leased premises, previously included in "Gross Sales"
hereunder, not to exceed the sum so previously included, where the merchandise
sold is thereafter returned by the purchaser and accepted by Tenant. The term
"merchandise" as used in this Lease shall include food and beverages if Tenant
is permitted to sell such items in Section 7.01 hereof.
SECTION 2.04. RENT ADJUSTMENT. (a) Notwithstanding any provisions to the
contrary contained in this Lease, Tenant shall pay to Landlord as minimum rent
for the second lease year of the term of this Lease, and for each subsequent
lease year of said term, but subject to further increase pursuant to this
Section 2.04 and other provisions of this Lease, the greater of the amounts
calculated according to the formulas set forth in Paragraphs (i) and (ii) below.
(i) Minimum rent for the lease year in question shall be increased by the
net percentage of change between the Base Index and the Index published for the
first calendar month of such lease year (as such terms are defined below).
(ii) Minimum rent for the lease year in question shall be increased by the
amount of percentage rent payable for the immediately preceding lease year
pursuant to Section 2.02 hereof.
(b) For purposes of the foregoing calculations, the term "Base Index" shall
be the Index (as defined in Section 27.20), for the month during which the term
of this Lease commences (or, if the Index is not published for such month, then
the Index published for the month closest, but prior, to the lease commencement
date). Following any increase in minimum rent pursuant to Paragraph (a) above,
the "Base Index" for future calculations shall be redefined as the Index
published for the first calendar month of the lease year for which the minimum
rent has last been increased pursuant to said Paragraph (a). The Index for the
first calendar month of any given lease year, if the Index is not published for
such month, shall be the Index published for the month closest, but prior, to
the first calendar month of such lease year. For the purposes of this Section,
the percentage rent payable by Tenant for any lease year consisting of less than
twelve (12) full calendar months shall be calculated by dividing the percentage
rent payable by Tenant for such lease year pursuant to Section 2.02 hereof by
the actual number of days in such lease year, and by multiplying the resulting
quotient by 360. Landlord shall notify Tenant of the increased minimum rent for
each lease year following the determination of same by Landlord, and Tenant
shall pay such increased minimum rent for the applicable lease year in the
manner set forth in Section 2.01 hereof. In the event that the increase in
minimum rent results from the calculation set forth above in subsection (a)(ii),
then the Minimum Gross Sales otherwise applicable for such period shall be
increased by a percentage equal to the percentage increase in minimum rent made
by reason of the percentage rent payable in the preceding lease year. If
percentage rent under this Lease shall be calculated on the basis of a split
percentage arrangement, as defined in Section 2.02(b) hereof, then, in the
event of an increase in minimum rent resulting from the calculation set forth
above in subsection (a)(i), only the minimum rent (not including such increase)
which would otherwise be deducted shall be deductible from the percentage rent
calculated with respect to all Gross Sales of Tenant. The minimum rent for any
period as stated in Section 2.01 hereof, if different than that stated for the
immediately preceding period, shall be adjusted by multiplying such different
minimum rent ("Changed Rent") by the cumulative percentage increase in minimum
rent pursuant to this Section from the commencement of the term of this Lease
through and including the first lease year during which such Changed Rent would
have become effective, with the resulting product to be added to such Changed
Rent to yield the effective minimum rent for such period, subject to further
adjustment as provided in this Section or elsewhere in this Lease.
(c) Upon the opening of any department store within the regional retail
development during the term of this Lease (if such department store was not open
for business to the general public as of the commencement date of this Lease),
the minimum rent and Minimum Gross Sales then in effect shall be immediately and
automatically increased by fifteen percent (15%), subject to further increases
pursuant to this paragraph, this Section and other provisions of this Lease.
SECTION 2.05. TENANT'S TAX OBLIGATION. Tenant shall pay to Landlord its
proportionate share of all taxes and assessments which may be levied or assessed
by any lawful authority during the term of this Lease, or with respect to each
fiscal tax year falling in whole or in part during the term of this Lease,
against the land, buildings and improvements comprising the Shopping Center, and
of all other taxes which Landlord becomes obligated to pay with respect to the
regional retail development, irrespective of whether such taxes are assessed
against real or personal property. The portion of such taxes and assessments
allocated to the common areas of the Shopping Center, and the portion of such
taxes allocated to the "net-building area" (gross building area less the sum of
gross leasable floor area
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<PAGE>
and common areas) of the Shopping Center, shall be deducted from the total of
such taxes and assessments and charged to Tenant in accordance with the
provisions contained in Section 8.03 of this Lease. Tenant's proportionate share
of the remaining taxes and assessments (i.e., those not charged under Section
8.03) shall be equal to the product obtained by multiplying such taxes and
assessments by a fraction, the numerator of which shall be the number of square
feet of floor area in the leased premises and the denominator of which shall be
the total number of square feet of gross leased and occupied floor area in the
Shopping Center. In the event that any present or future enactment of the State
or any political subdivision thereof or any governmental authority having
jurisdiction thereover either: (a) imposes a direct or indirect tax and/or
assessment of any kind or nature upon, against or with respect to the rents
payable by tenants or occupants in the regional retail development to Landlord
derived from the regional retail development or with respect to the Landlord's
(or the individuals' or entities' which constitute the partners of the
partnership which is the Landlord, or which is the beneficiary of the Trust of
which Landlord is Trustee, as applicable) ownership of the land and buildings
comprising the regional retail development, either in addition to or by way of
substitution for all or any part of the taxes and assessments levied or assessed
against such land and such buildings, including, without limitation, any net
profits tax or any comparable tax imposed on any portion of Landlord's revenues
from the regional retail development; and/or (b) imposes a direct or indirect
tax or surcharge of any kind or nature, upon, against or with respect to the
parking areas or the number of parking spaces in the regional retail
development, then in either or both of such events, Tenant shall be obligated to
pay its proportionate share thereof as provided herein. For purposes of this
Section, the term "regional retail development" shall be deemed to include the
land upon which any parking facilities, temporary or permanent off-site utility
systems and any wooded area, lake, shoreline thereof or island park serving the
regional retail development are located with all improvements situated thereon.
To the extent that real estate taxes and assessments are the obligation of
Tenant pursuant to Section 8.03 hereof, the same shall not be includable in
Tenant's proportionate share pursuant to this Section.
Tenant's proportionate share of all of the aforesaid taxes and assessments
levied or assessed for or during the term hereof, as determined by Landlord,
shall be paid in monthly installments on or before the first day of each
calendar month, in advance, in an amount estimated by Landlord; provided that
Landlord shall have the right to initially determine monthly estimates and to
revise the estimates from time to time, and shall have the right to apply such
monthly installments to tax bills according to the formula being utilized by
Landlord from time to time. Upon receipt of all tax bills and assessment bills
attributable to any calendar or fiscal year during the term hereof, Landlord
shall furnish Tenant with a written statement of the actual amount of Tenant's
proportionate share of the taxes and assessments for such year. In the event no
tax bill is available, Landlord will compute the amount of such tax. If the
total amount paid by Tenant under this Section for any calendar or fiscal year
during the term of this Lease shall be less than the actual amount due from
Tenant for such year, as shown on such statement, Tenant shall pay to Landlord
the difference between the amount paid by Tenant and the actual amount due, such
deficiency to be paid within ten (10) days after demand therefor by Landlord;
and if the total amount paid by Tenant hereunder for any such calendar or fiscal
year shall exceed such actual amount due from Tenant for such year, such excess
shall be credited against the next installment of taxes and assessments due from
Tenant to Landlord hereunder. All amounts due hereunder shall be payable to
Landlord at the place where the minimum rent is payable. In the event Landlord
contests any taxes levied or assessed during the term hereof upon, against or
with respect to the Shopping Center or any portion thereof or interest therein,
or in the event of Landlord's negotiation with respect to assessed valuation for
the Shopping Center, Tenant shall pay its proportionate share of Landlord's
costs, expenses and attorneys' fees in connection therewith calculated on the
same basis as set forth above in this Section. For the calendar or fiscal years
in which this Lease commences and terminates, the provisions of this Section
shall apply, and Tenant's liability for its proportionate share of any taxes and
assessments for such years shall be subject to a pro rata adjustment based on
the number of days of said calendar or fiscal years during which the term of
this Lease is in effect. A copy of a tax bill or assessment bill submitted by
Landlord to Tenant shall at all times be sufficient evidence of the amount of
taxes and/or assessments assessed or levied against the property to which such
bill relates. Prior to or at the commencement of the term of this Lease and from
time to time thereafter throughout the term hereof, Landlord shall notify Tenant
in writing of Landlord's estimate of Tenant's monthly installments due
hereunder.
SECTION 2.06. PAYMENTS. Rent shall be defined in this Lease as (i) minimum
rent, (ii) percentage rent and (iii) all other charges of whatever nature
required to be paid by Tenant under this Lease, including the Exhibits hereto.
The rent charges described in item (iii) of the preceding sentence shall, unless
otherwise specified, be due and payable ten (10) days after demand, without any
deductions or setoff whatsoever, in the manner and at the place where minimum
rent is payable and Tenant's failure to pay rent shall carry with it the
consequences set forth under Article XIX hereof. Landlord's rights and remedies
pursuant to this Section shall be in addition to any and all other rights and
remedies provided under this Lease or at law. Notwithstanding anything to the
contrary contained in this Lease, Landlord's demand for any and all rent may be
sent to Tenant by regular mail. Rent is specifically agreed by Tenant to be a
minimum reasonable use and occupancy charge for the leased premises. In the
event any sums required hereunder to be paid are not received on or before the
tenth (10th) day after the same are due, then, for each and every such payment,
Tenant shall immediately pay, as additional rent, a service charge of five
percent (5%) of the outstanding amount due, which service charge again shall be
imposed for each month that such amount shall remain unpaid. In the event of
Tenant's failure to pay the foregoing service charge, Landlord may deduct said
charge from the deposit set forth in Section 26.01 hereof. The provisions of
this Section shall not be construed to extend the date for payment of any sums
required to be paid by Tenant under this Lease or to relieve Tenant of its
obligation to pay all such sums at the time or times herein stipulated, and
neither the demand for, nor collection by Landlord of, late payment service
charges pursuant to this Section shall be construed as a cure of any default in
payment by Tenant. It is agreed that the said service charge is a fair and
reasonable charge under the circumstances and shall not be construed as interest
on a debt payment. In the event any charge imposed hereunder or under any other
section of this Lease is either stated to be or construed as interest, then no
such interest charge shall be calculated at a rate which is higher than the
maximum rate which is allowed under the usury laws of the State, which maximum
rate of interest shall be substituted for the rate in excess thereof, if any,
computed pursuant to this Lease.
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<PAGE>
ARTICLE III. RECORDS AND BOOKS OF ACCOUNT
SECTION 3.01. TENANT'S RECORDS. Tenant shall prepare and keep full,
complete and proper books and source documents, in accordance with generally
accepted accounting principles, of the Gross Sales, whether for cash, credit or
otherwise, of each separate department at any time operated in the leased
premises and of the operations of each subtenant, concessionaire, licensee
and/or assignee, and shall require and cause all such parties to prepare and
keep books, source documents, records and accounts sufficient to substantiate
those kept by Tenant. The books and source documents to be kept by Tenant shall
include, without limitation, true copies of all Federal, State and local tax
returns and reports, records of inventories and receipts of merchandise, daily
receipts from all sales and other pertinent original sales records and records
of any other transactions conducted in or from the leased premises by Tenant and
any other persons conducting business in or from the leased premises. Pertinent
original sales records shall include, without limitation: (i) cash register
tapes, including tapes from temporary registers, (ii) serially pre-numbered
sales slips, (iii) the original records of all mail and telephone orders at and
to the leased premises, (iv) settlement report sheets of transactions with
subtenants, concessionaires, licensees and assignees, (v) original records
indicating that merchandise returned by customers was purchased at the leased
premises by such customers, (vi) memorandum receipts or other records of
merchandise taken out on approval, (vii) detailed original records of any
exclusions or deductions from Gross Sales, (viii) sales tax records, and (ix)
such other sales records, if any, which would normally be examined by an
independent accountant pursuant to accepted auditing standards in performing an
audit of Tenant's sales. Tenant shall record at the time of each sale or other
transaction, in the presence of the customer, all receipts from such sale or
other transaction, whether for cash, credit or otherwise, in a cash register or
cash registers having a cumulative total which shall be sealed in a manner
approved by Landlord and which shall possess such other features as shall be
required by Landlord. All of the foregoing books, source documents and records
shall be retained for a period of at least four (4) years after the expiration
of each lease year.
SECTION 3.02. REPORTS BY TENANT. Tenant shall furnish to Landlord within
thirty (30) days after the expiration of each quarter-annual period of each
lease year a complete statement ("quarterly report"), certified by Tenant, of
the amount of Gross Sales, as defined in Article II, Section 2.03 of this Lease,
made in, on or from the leased premises during said period. Failure of Tenant to
timely submit quarterly reports as aforesaid shall entitle Landlord to estimate
Gross Sales based upon available data (with a reconciliation upon receipt of the
annual report), and Tenant shall be obligated to pay percentage rent, as set
forth in Section 2.02, on such estimated Gross Sales. Tenant also agrees that it
will furnish to Landlord within thirty (30) days after the expiration of each
full lease year a complete statement, certified by an independent certified
public accountant, showing in all reasonable detail the amount of such Gross
Sales made by Tenant from the leased premises during the preceding lease year.
Tenant shall in all events furnish to Landlord within five (5) days after the
end of each month of the term of this Lease a written statement of Gross Sales
covering the preceding month, the statement to be in such form and style and
contain such details and breakdown as the Landlord may reasonably require.
Tenant shall require and cause all its concessionaires, if any, to furnish
statements at the times and in the form and content specified in this Section,
relating to their operations within the leased premises. All reports of Gross
Sales submitted or caused to be submitted by Tenant to Landlord shall be
conclusive and binding upon Tenant unless such reports are corrected within two
(2) years after the date of issuance. The term "concessionaire" as used in this
Lease shall mean and include any and all concessionaires, licensees,
franchisees, department operators, subtenants, permittees or others directly or
indirectly operating or conducting a business in or from the leased premises.
ARTICLE IV. AUDIT
SECTION 4.01. RIGHT TO EXAMINE BOOKS. Notwithstanding the acceptance by
Landlord of payments of percentage rent, Landlord shall have the right to all
rents and other charges actually due hereunder, and the right to examine, make
extracts from and copy, at the leased premises or (at the option of Landlord) at
the corporate headquarters office of Tenant in the United States, Tenant's and
all concessionaires' books, source documents, accounts, records and sales tax
reports filed with applicable government agencies in order to verify the amount
of Gross Sales in and from the leased premises. Tenant shall make all such
documents and records available at the leased premises (or at Tenant's corporate
headquarters, if elected by Landlord) upon days' prior written notice from
Landlord.
SEE ATTACHED RIDER FOR INSERTS
SECTION 4.02. AUDIT. At its option, Landlord may at any time, upon days'
prior written notice to Tenant, arrange for an auditor selected by Landlord to
conduct a complete audit (including a physical inventory) of the entire records
and operations of Tenant and/or any concessionaire concerning business
transacted upon or includable in Gross Sales from the leased premises during the
period covered by any statement issued by Tenant or a concessionaire as above
set forth in Article III. Tenant shall make available to Landlord's auditor at
the leased premises (or at Tenant's corporate headquarters, if elected by
Landlord) within days following Landlord's notice requiring such audit, all
of the books, source documents, accounts and records referred to in Section
3.01 of this Lease and any other materials which such auditor deems necessary or
desirable for the purpose of making such audit. Tenant shall promptly pay to
Landlord the amount of any deficiency in percentage rent payments disclosed by
any such audit. If such audit shall disclose that Tenant's statement of Gross
Sales is at variance to the extent of one percent (1%) or more, Landlord may
bill to Tenant the amount of any deficiency and the cost of such audit, which
shall be paid by Tenant within ten (10) days after Tenant's receipt of
Landlord's invoice; in the event Tenant fails to pay such discrepancy and costs,
Landlord may terminate this Lease as set forth below and/or shall have such
other rights and remedies as may be provided herein or at law arising by virtue
of Tenant's failure to pay rent. If such audit shall disclose that Tenant's
statement of Gross Sales is at variance to the extent of three percent (3%) or
more, then Landlord, in addition to the foregoing remedy and other
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remedies available to Landlord, shall have the option, upon at least ten (10)
days' notice to Tenant, to declare this Lease terminated and the term ended, in
which event this Lease shall cease and terminate on the date specified in such
notice with the same force and effect as though the date set forth in such
notice were the date originally set forth herein and fixed for the expiration of
the term, and Tenant shall vacate and surrender the leased premises but shall
remain liable for all obligations arising during the balance of the original
stated term as provided in this Lease. In addition to the foregoing, and in
addition to all other remedies available to Landlord, in the event Landlord or
Landlord's auditor shall schedule a date for an audit of Tenant's records in
accordance with this Section, and Tenant shall fail to be available or shall
otherwise fail to comply with the requirements for such audit, Tenant shall pay
all costs and expenses associated with the scheduled audit.
SEE ATTACHED RIDER FOR INSERTS
In addition to all other remedies available to Landlord, in the event that
any such audit shall disclose that Tenant's records and other documents as
referred to in Articles III and IV hereof and such other materials provided by
Tenant to Landlord's auditor are inadequate, in the opinion of Landlord's
auditor, to accurately disclose Tenant's Gross Sales, then Landlord shall be
entitled to collect as additional rent from Tenant an amount equal to fifteen
percent (15%) of the highest Effective Rent (minimum rent plus percentage rent)
payable by Tenant in any of the three (3) preceding lease years. Landlord's
exercise of the foregoing remedy shall in no way limit or otherwise affect
Landlord's ability to exercise other remedies available to it, nor shall
Tenant's obligations pursuant to the terms, covenants and conditions of this
Lease (including, without limitation, Tenant's obligation with respect to
reporting Gross Sales and payment of percentage rent) be in any manner reduced
or diminished by the exercise of such remedy. In the event that Tenant shall,
following the exercise of such remedy, provide to Landlord all records and
documentation as required to be provided pursuant to the terms of this Lease so
as to permit Landlord's auditor to accurately establish Tenant's Gross Sales for
the period in question, then Tenant shall be permitted a credit with respect to
any amount of additional rent collected by Landlord from Tenant pursuant to this
paragraph, with such credit to be applied first against the installment of
percentage rent due from Tenant for the period in question, with any remaining
credit to be applied against the next installment of percentage rent payable by
Tenant. Neither the provisions of this Section 4.02 nor any other provisions in
this Lease shall restrict Landlord's rights to discovery in any litigation or
arbitration proceeding.
SEE ATTACHED RIDER FOR INSERTS
ARTICLE V. CONSTRUCTION OF LEASED PREMISES
SECTION 5.01. CONSTRUCTION OF LEASED PREMISES. (a) The leased premises
shall be constructed substantially as set forth in Exhibit B, which is attached
hereto and made a part hereof. Each of the parties hereto does hereby agree to
perform the obligations imposed upon such party in said Exhibit B at the times
and in the manner therein provided. All references in the text of the Lease to
Exhibit B shall include Exhibit B-1. Minor changes from any plans or
specifications covering Landlord's Work which may be, or which may have been,
necessary or appropriate during construction of the Shopping Center or leased
premises shall not affect or change this Lease or invalidate same. If this Lease
is executed after the opening of the regional retail development or if the
leased premises are in an expansion wing of the regional retail development
which opened prior to the date of this Lease, the parties hereto acknowledge
that the work to be performed by Landlord pursuant to Exhibit B has been fully
performed (except to the extent specifically otherwise set forth in Exhibit B).
(b) Tenant agrees, prior to the commencement of the term of this Lease, at
Tenant's sole cost and expense, to provide all work of whatsoever nature in
accordance with its obligations set forth in Exhibit B as "Tenant's Work."
Tenant agrees to furnish to Landlord the Working Drawings and Specifications
(and Demolition Drawings, as applicable) with respect to the leased premises
prepared in the manner and within the time periods required in Exhibit B. If
such Working Drawings and Specifications (and Demolition Drawings, as
applicable) are not furnished by Tenant to Landlord within the required time
periods in form to permit approval by Landlord, then Landlord may at its option
at any time while Tenant is in default of this provision, in addition to any and
all other remedies provided in this Lease, by notice to Tenant, declare this
Lease null and void and of no further force or effect, in which event this Lease
shall terminate, but Tenant shall remain liable for all obligations arising
during the original stated term as provided in this Lease. In addition, if
Landlord determines that Landlord and Tenant are unable to agree upon Working
Drawings and Specifications (and Demolition Drawings, as applicable), Landlord
shall have the option, upon notice to Tenant, to declare this Lease null and
void and of no further force or effect, in which event this Lease shall
terminate on the date specified in such notice, in the same manner as provided
in the preceding sentence. No deviation from the final set of plans and
specifications, once approved by the Landlord, shall be made by Tenant without
Landlord's prior written consent. Approval of the plans and specifications by
Landlord shall not constitute the assumption of any responsibility by Landlord
or Landlord's architect for their accuracy, efficacy or sufficiency, and Tenant
shall be solely responsible for such items. Unless Landlord otherwise directs in
writing, Tenant shall not open the leased premises for business until all
construction has been completed pursuant to the provisions of Exhibit B. Until
such time as Tenant's final Working Drawings and Specifications (and Demolition
Drawings, as applicable) have been approved in writing by Landlord, the right of
Tenant to enter upon the leased premises shall be solely for the purpose of
inspection, measurement and obtaining information necessary to prepare
architectural drawings and construct its premises. Tenant shall not be deemed to
have taken possession of the leased premises until, and Landlord shall be deemed
to have delivered and Tenant shall be deemed to have taken such possession when,
Tenant actually commences construction of its leasehold improvements following
Landlord's approval of Tenant's final Working Drawings and Specifications (and
Demolition Drawings, as applicable). Until Tenant is so deemed to have taken
possession, in the event of a default by Tenant under this Article V, Landlord,
upon notice to Tenant, shall have the right to declare this Lease null and void
and of no further force or effect and thereafter may demise and lease the
premises described in Section 1.01 free from any rights of Tenant. Tenant shall
not
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open its store for business until Tenant's storefront sign is installed, the
store is fully fixtured, lighted, stocked with merchandise in place and staffed,
and Tenant is prepared to engage in the sale of goods and/or services to the
public pursuant to Article VII. Under no circumstances shall Tenant remove the
storefront barricade, unless Landlord shall specifically otherwise direct in
writing. Landlord shall remove the storefront barricade (or Tenant shall remove
the same if so directed in writing by Landlord) when Tenant is so prepared to
open for business as determined by Landlord, and Tenant shall reimburse Landlord
for all costs and expenses in connection with such removal (or Tenant shall pay
for all such costs and expenses directly (including transportation of the
barricade to storage in the regional retail development), if Tenant shall be
directed by Landlord to perform such removal). If all or any part of the leased
premises shall have been previously occupied, Tenant acknowledges that the
Tenant's Work described in Exhibit B has been initially performed by a tenant
previously occupying the leased premises and that Tenant accepts the leased
premises in an "as is" condition without representation by the Landlord or any
person, firm or corporation on behalf of Landlord as to the condition thereof.
Tenant shall submit Working Drawings and Specifications and Demolition Drawings
showing the work to be performed by Tenant to completely remodel and refurbish
the leased premises and, subject to Landlord's approval, will cause such work to
be performed prior to the commencement of the term of this Lease. All such
additional work and permitted alterations, repairs and improvements shall be in
accordance with the provisions of Exhibit B.
(c) Upon execution of this Lease, Tenant shall pay to Landlord, as a
reimbursement to Landlord for costs and expenses with respect to the leased
premises, the sum set forth in the Data Sheet as "Tenant Reimbursement to
Landlord." The payment of such sum by Tenant shall not in any manner reduce or
limit the obligation of Tenant for payment of other charges under this Lease,
including, without limitation, the charges set forth in the Exhibits attached
hereto.
SECTION 5.02. AVAILABILITY AND POSSESSION OF PREMISES FOR TENANT'S WORK.
(a) The leased premises shall be considered available to Tenant when Landlord
furnishes Tenant with a written notice to such effect (the "Notice of
Availability"). Upon receipt of such Notice of Availability, Tenant shall have
only limited access to the premises for purposes of inspection and measurement
verification. The Notice of Availability shall not constitute delivery of the
premises, and Landlord (or a current occupant of the premises) will retain
possession of the premises until delivery of possession is made to Tenant as
provided below. Landlord may furnish the Notice of Availability at any time
subsequent to Landlord's obtaining possession of the premises. If the leased
premises are presently occupied by another tenant, Landlord will not make the
premises available to Tenant until a date after Landlord regains possession of
the leased premises from the tenant presently occupying the same.
(b) Landlord covenants to deliver possession of the leased premises to
Tenant upon written approval by Landlord of Tenant's Working Drawings, but only
if said approval is subsequent to or simultaneous with a furnishing to Tenant of
a Notice of Availability. Upon receiving actual possession, Tenant shall have
access to the leased premises for all purposes set forth under this Lease.
(c) Upon delivery of possession, Tenant accepts the premises and
acknowledges that the premises are in the condition required by this Lease,
subject to all field conditions existing at the time of delivery of possession.
Failure of Landlord to deliver possession of the leased premises in the manner
and condition as provided for in this Lease will not give rise to any claim for
damages by Tenant against Landlord, or against Landlord's contractor, or permit
Tenant to rescind or terminate this Lease.
SECTION 5.03. LANDLORD'S AND TENANT'S OPTIONAL RIGHT OF CANCELLATION. If
for any reason the leased premises are not ready for Tenant's Work on the date
eighteen (18) months following the date of this Lease, then, for a period of
thirty (30) days thereafter, Tenant shall have the option, and for a period of
forty-five (45) days following such eighteen (18) month period, Landlord shall
have the option, of cancelling and terminating this Lease by not more than sixty
(60) days' written notice, one to the other, and, in the event that either party
shall exercise such option, this Lease shall terminate with neither party being
liable to the other in damages or otherwise, and any money deposited pursuant to
Section 26.01 hereof shall be returned to Tenant. In the event that neither
Tenant nor Landlord gives such written notice of cancellation, then said options
shall be null and void and of no further force or effect, and this Lease shall
be considered as continuing in full force and effect. In addition, if another
tenant is presently in possession of the leased premises, and Landlord shall not
have delivered possession of the leased premises to Tenant by the lease
commencement date (as specifically identified in the Data Sheet), then Landlord
shall have the right to thereafter terminate this Lease at any time prior to
delivery of possession to Tenant by written notice to Tenant, with like result
as set forth in the first sentence of this paragraph. If as of the date of this
Lease the leased premises are (i) in a regional retail development, or in an
expansion wing of a regional retail development, which development or wing, as
applicable, has not initially opened for business to the public, or (ii)
presently occupied by another entity, then the foregoing eighteen (18) month
period under this Section 5.03 (and the four (4) year period set forth in
Section 5.04) shall be modified to commence as of (i) the currently projected
date of such initial opening, or (ii) the currently projected date of Landlord's
repossession of the leased premises from such present entity, as applicable.
SEE ATTACHED RIDER FOR INSERTS
SECTION 5.04. ULTIMATE COMMENCEMENT DATE. Notwithstanding anything to the
contrary contained herein, if for any reason whatsoever (including without
limitation, excusable delay) the term of this Lease shall not have commenced
prior to such date as shall be four (4) years from the date of this Lease
(subject to extension as set forth in Section 5.03), then this Lease shall be
automatically terminated without further act of either party hereto, and the
parties hereto shall be released from all obligations hereunder.
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ARTICLE VI. ALTERATIONS, CHANGES AND ADDITIONS
SECTION 6.01. INSTALLATION BY TENANT. Tenant shall not make or cause to be
made any alterations, additions or improvements to the leased premises (for
example, but without limiting the generality of the foregoing, Tenant shall not
install or cause to be installed any signs, floor covering, interior or exterior
lighting, plumbing fixtures, shades, canopies or awnings, electronic detection
devices, antennas, mechanical, electrical or sprinkler systems, or make any
changes to the storefront) without the prior written approval of Landlord in
each instance. Tenant shall present to Landlord plans and specifications for
such work at the time approval is sought, in accordance with criteria and
procedures as provided in Exhibit B.
SEE ATTACHED RIDER FOR INSERTS
SECTION 6.02. REMOVAL BY TENANT. All alterations, decorations, additions,
trade fixtures and improvements made by Tenant shall be deemed to have attached
to the leasehold and to have become the property of Landlord upon such
attachment. Upon expiration or earlier termination of the term of this Lease,
Tenant shall not remove any of such alterations, decorations, additions, trade
fixtures or improvements. Landlord may, however, designate by written notice to
Tenant those trade fixtures which shall be removed by Tenant at the expiration
or earlier termination of the Lease, and Tenant shall promptly remove the same
and repair any damage to the leased premises caused by such removal. Landlord
shall have the right to padlock or otherwise secure the leased premises upon the
expiration or earlier termination of the term of the Lease. Landlord shall also
have the right, at any time during the term of this Lease, and upon expiration
or earlier termination of the term of this Lease, to immediately enter the
leased premises in order to remove any items which shall be determined by
Landlord to be a violation of existing health, safety, security or other similar
codes or regulations affecting or applicable to the leased premises or the
regional retail development. Landlord shall attempt to provide prior
notification to Tenant of such removal, subject to the then existing
circumstances.
SEE ATTACHED RIDER FOR INSERTS
SECTION 6.03. CHANGES AND ADDITIONS. Landlord, for itself and for the
underlying lessor, if any, hereby reserves the right at any time, and from time
to time, to make alterations to, and to build additional stories on the building
in which the leased premises are located, and to construct other buildings and
improvements in the regional retail development, including any modifications of
the common areas in connection therewith, to enlarge or reduce the Shopping
Center or the regional retail development, to add decks or elevated parking
facilities, and to sell or lease any part of the land comprising the regional
retail development, as shown on the site plan attached hereto as Exhibit A, for
the construction thereon of a building(s) to be occupied by a Department
Store(s) which may or may not be part of the regional retail development.
Landlord also reserves for itself and for the underlying lessor, if any, the
right at any time, and from time to time, to change, modify, or abolish any
temporary off-site utility or any storm sewer or retention pond system (if
applicable) serving the regional retail development. The purpose of Exhibit A is
to show the approximate location of the leased premises within the Shopping
Center and Landlord reserves for itself and for the underlying lessor, if any,
the right at any time to relocate, enlarge, or reconfigure the various
buildings, parking areas and other common areas on said site plan. Tenant hereby
consents to the exercise by Landlord of the rights set forth in this Section
6.03 and agrees that the exercise of such rights by Landlord or by the
underlying lessor, if any, shall not diminish Tenant's obligations under this
Lease.
SEE ATTACHED RIDER FOR INSERTS
ARTICLE VII. CONDUCT OF BUSINESS BY TENANT
SECTION 7.01. USE OF PREMISES. Tenant shall continuously use and occupy the
entire leased premises during the term of this Lease, which use and occupancy
shall be solely for the purpose of conducting the business specifically set
forth in the Data Sheet and for no other purpose or purposes. It is agreed that
the use specified in the Data Sheet has been, and is, a material inducement to
Landlord in entering into this Lease with Tenant, and that Landlord would not
enter into this Lease without this inducement. If any governmental license or
permit shall be required for the proper and lawful conduct of Tenant's business
or other activity carried on in the leased premises or if a failure to procure
such a license or permit might or would in any way affect Landlord or the
Shopping Center, then Tenant, at Tenant's expense, shall duly procure and
thereafter maintain such license or permit and submit the same for inspection by
Landlord. Tenant, at Tenant's expense, shall, at all times, comply with the
requirements of each such license or permit.
SECTION 7.02. OPERATION OF BUSINESS. Tenant shall be open for business and
operate continuously, during all days and hours established by Landlord, in all
of the leased premises during the entire term of this Lease, and shall conduct
its business at all times in a first class and reputable manner, maintaining at
all times a full staff of employees and a full and complete stock of
merchandise. Failure by Tenant so to be open for business and to operate shall
entitle Landlord, in addition to other remedies provided in this Lease, to
mandatory injunctive relief, and shall give Landlord the right to erect a
storefront barricade in front of the leased premises at Tenant's expense, which
barricade shall not be removed except upon Landlord's prior written consent and
with Tenant paying the cost of such removal. The erection of such a barricade by
Landlord shall not be construed as a re-entry by Landlord into the leased
premises or as an acceptance by Landlord of any surrender of possession of the
leased premises by Tenant. In the event the maximum hours during which the
Shopping Center (or any separate part thereof) is legally permitted to be open
to the public are regulated by any lawful authority, then Landlord shall be the
sole judge of which days and hours shall be Shopping Center business days and
hours (and the days and hours applicable to any such separate part). Tenant
shall install and maintain at all times a display of merchandise in the display
windows, if any, of the leased premises and shall keep the same well lighted
during such hours as Landlord shall designate. Tenant, at Tenant's expense,
shall promptly comply with all present and future laws, ordinances, orders,
rules, regulations and requirements of all governmental authorities having
jurisdiction, affecting or applicable to the leased premises or the cleanliness,
safety, occupancy and use of the same,
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whether or not any such law, ordinance, order, rule, regulation or requirement
is substantial, or foreseen or unforeseen, or ordinary or extraordinary, or
shall necessitate structural changes or improvements or interfere with the use
and enjoyment of the leased premises. Tenant shall not do or permit anything to
be done in or about the leased premises, or bring anything therein, which will
in any way conflict with any such law, ordinance, order, rule, regulation or
requirement affecting the occupancy or use of the leased premises or the
regional retail development which is or may hereafter be enacted or promulgated
by governmental authorities, or in any way obstruct or interfere with the rights
of others, nor shall Tenant use or allow the premises to be used for any
improper, immoral or objectionable purposes as determined by Landlord. Tenant
shall not cause or permit the use, generation, storage or disposal in or about
the leased premises or the regional retail development of any substances,
materials or wastes subject to regulation under any federal or state or local
laws from time to time in effect concerning hazardous, toxic or radioactive
materials unless Tenant shall have received Landlord's prior written consent,
which Landlord may withhold or at any time revoke in its sole discretion. Tenant
shall comply with all federal, state and local laws in effect from time to time
prohibiting discrimination or segregation by reason of race, color, creed, age,
religion, sex or national origin. No auction, liquidation, going out of
business, fire or bankruptcy sales may be conducted or advertised by sign or
otherwise in the leased premises. Tenant shall display and sell only
first-quality, current-season merchandise and Tenant's sales practices shall be
in accord with standards and practices generally acceptable in enclosed
first-class, full-retail-price regional shopping centers. Tenant shall be
obligated to permit returns of merchandise and shall allow such returns,
except in connection with special sales and close outs. Tenant shall not offer
any goods or services which Landlord determines, in its sole discretion, to be
inconsistent with the image of a first-class, family-oriented regional retail
development, nor shall Tenant display or sell any goods containing portrayals
which Landlord determines, in its sole discretion, to be lewd, graphically
violent or pornographic. Tenant agrees that it will conduct its business in good
faith, and will not do any act tending to injure the reputation of the Shopping
Center (or any part thereof) as determined by Landlord. Tenant shall not sell or
display any paraphernalia used in the preparation or consumption of controlled
substances. In the event Landlord has approved Tenant's remaining open for
business after normal Shopping Center hours (and/or any hours applicable to that
part of the Shopping Center containing the leased premises), then such approval
shall be conditioned upon Tenant's paying for all additional costs incurred by
Landlord as a result thereof. Tenant shall not permit noise or odors in the
leased premises which are objected to by Landlord and, upon written notice from
Landlord, Tenant shall immediately cease and desist from causing such noise or
odor, and failing of which Landlord may deem the same a material breach of this
Lease. Tenant shall not permit the operation of any coin operated or vending
machines or pay telephones on the leased premises, other than in the areas
reserved solely for the use of Tenant's employees. Tenant shall not sell or
display any merchandise within five feet (5') of the storefront leaseline or
opening unless such sale or display shall be expressly approved on the Store
Design Drawings or otherwise approved by Landlord, in writing, except that
Tenant shall be permitted to display merchandise in the display windows, if
any. Tenant shall not use the areas adjacent to the leased premises for
business purposes. Tenant shall not store anything in service or exit
corridors. Tenant agrees that all receiving and delivery of goods and
merchandise, and all removal of merchandise, supplies, equipment, trash and
garbage, and all storage of trash and garbage, shall be made only by way of or
in the areas provided therefor by Landlord. Tenant shall not use or permit the
use of any portion of the leased premises as sleeping quarters, lodging rooms,
or for any unlawful purposes. Tenant shall not install any radio or television
or other similar device exterior to the leased premises and shall not erect any
aerial on the roof or exterior walls of any building within the regional retail
development. Landlord may direct the use of all pest extermination contractors
at the sole cost and expense of Tenant and at such intervals as Landlord may
require. Failure of Tenant to employ the pest extermination contractor
designated by Landlord shall entitle Landlord to employ such contractor
with respect to Tenant's premises and Tenant shall reimburse Landlord for
the cost thereof. Landlord shall have the option to provide pest
extermination services for the Shopping Center or the regional retail
development or any part thereof, in which event Tenant shall pay to Landlord
Tenant's proportionate share of the cost of such service, with such
proportionate share to be calculated in the manner provided in Section 8.03 of
this Lease. In the event that Tenant is permitted pursuant to this Lease to
engage in the sale of food and beverages from the leased premises, then Tenant
shall: (i) offer such food and beverages only pursuant to a menu approved by
Landlord, which shall not be changed without Landlord's prior written consent
(which consent Landlord may grant or withhold in its sole and absolute
discretion), (ii) serve its customers in containers or dishes and with utensils
to be approved by Landlord, subject to change by Landlord from time to time,
(iii) be solely responsible for prompt disposal within the premises of all
trash, garbage and debris, and (iv) inspect and maintain all grease traps, pans
and hood ventilators in good order, condition and repair, and shall contract for
same if and as required by Landlord. The covenants of Tenant regarding
hazardous, toxic or radioactive materials, as set forth in this Lease, shall
survive the expiration or earlier termination of the term of this Lease. Without
limiting any of the foregoing provisions, Tenant also shall be required to
maintain, at all times, a minimum staff of two (2) employees for operation of
the leased premises, and Tenant shall not permit the leased premises to be left
unattended at any time. In the event that the leased premises, at any time,
shall not be staffed by at least two (2) employees, or shall be left unattended,
then, in addition to all other remedies available to Landlord, Landlord shall
have the right to terminate this Lease upon ten (10) days' prior written notice
to Tenant, in which event this Lease shall terminate on the date specified in
such notice, but Tenant shall remain liable for all obligations arising during
the original stated term as provided in this Lease. If Landlord shall exercise
such termination right, Tenant shall have the right to vitiate such termination
by written agreement (entered into within such ten (10) day period) to increase
the minimum rent set forth in Section 2.01 hereof (as increased pursuant to
other provisions of this Lease) to three (3) times the amount otherwise
required. In the event of such vitiation, such increased rent shall become
effective immediately and shall continue in effect for the remaining term of the
Lease (subject to further increase pursuant hereto and pursuant to the other
provisions of this Lease), and Tenant shall continue to be obligated to operate
with a minimum staff of two (2) employees and shall not permit the leased
premises to be left unattended.
SEE ATTACHED RIDER FOR INSERTS
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SECTION 7.03. RADIUS. During the term of this Lease, in the event Tenant,
its parent corporation or subsidiary corporation, or its franchisor or
franchisee, or its licensor or licensee, or any person, firm, corporation or
other entity who or which controls or is controlled by Tenant, or by any person,
firm, corporation or other entity which directly or indirectly controls or is
controlled by Tenant, shall, directly or indirectly, either individually or as a
partner or stockholder or otherwise, own, operate or become financially
interested in any business similar to or in competition with the business of
Tenant described in Section 7.01 within a radius of ten (10) miles from the
leased premises, then the Gross Sales (as defined in this Lease) of any such
business or businesses within said radius shall be included in the Gross Sales
made from the leased premises and the percentage rent hereunder shall be
computed upon the aggregate of the Gross Sales made from the leased premises and
by any such other business or businesses then conducted within said radius and
Tenant shall report and maintain records of such sales in the manner provided in
Article III hereof. This Section 7.03 shall not apply to any such business or
businesses open and being operated by Tenant within said radius as of the date
of this Lease as long as such business or businesses shall continue to be
operated in the same location(s) existing as of said date. If Tenant fails to
make payments required pursuant to this Section 7.03, Landlord or Landlord's
authorized representative or agent shall have the right at all reasonable times
during the term hereof and for a period of at least four (4) years after the
expiration of the term of this Lease, to inspect, audit, copy and/or make
extracts of the books, source documents, records and accounts pertaining to such
other business or businesses conducted within said radius, in accordance with
the provisions of Article IV hereof, for the purpose of determining or verifying
the additional rents due to Landlord pursuant to this Section. Moreover, in the
event Tenant fails to supply to Landlord sales records with respect to any such
similar or competing business, Landlord shall have the right to estimate the
sales for such businesses based upon Tenant's Gross Sales in the leased
premises, and the additional percentage rent generated from the inclusion of
such estimated sales and Tenant's Gross Sales shall be deemed additional rent to
be paid by Tenant in accordance with the provisions of Section 2.02 and 2.06 of
this Lease.
SECTION 7.04. STORAGE, OFFICE SPACE. Tenant shall warehouse, store and/or
stock in the leased premises only such goods, wares and merchandise as Tenant
intends to offer for sale at retail at, in, from or upon the leased premises.
This shall not preclude occasional emergency transfers of merchandise from the
other stores of Tenant, if any, not located in the Shopping Center. Tenant shall
use for office, clerical or other non-selling purposes only such space in the
leased premises as is from time to time reasonably required for Tenant's
business in the leased premises.
SECTION 7.05. CARE OF PREMISES. Tenant, at Tenant's expense, shall at all
times keep the leased premises (including the service areas adjacent to the
premises, display windows and signs) orderly, neat, safe, clean and free from
rubbish and dirt, and vermin, and shall store all trash, garbage and other solid
waste within the leased premises. Tenant shall not burn any trash or garbage at
any time in or about the regional retail development. Landlord may direct the
use by Tenant at Tenant's expense of all solid waste disposal contractors at
such intervals as Landlord may require. If Landlord shall provide or contract
for any services or facilities for solid waste pickup or sewer cleaning, then
Tenant shall be obligated to use the same and shall pay a proportionate share of
the expense thereof within ten (10) days after being billed therefor. If
Landlord does not provide such services, Tenant shall arrange for the regular
pickup of all solid waste at Tenant's expense.
ARTICLE VIII. COMMON AREAS
SECTION 8.01. OPERATION AND MAINTENANCE OF COMMON AREAS. Landlord agrees to
cause to be operated and maintained during the term of this Lease all common
areas within the Shopping Center. The manner in which such areas and facilities
shall be operated and maintained, and the expenditures therefor, shall be at the
sole discretion of Landlord and the use of such areas and facilities shall be
subject to such regulations as Landlord shall make from time to time.
SECTION 8.02. USE OF COMMON AREAS. The term "common area," as used in this
Lease, shall mean (i) the following areas within the regional retail
development: parking areas and facilities as determined by Landlord
(collectively "parking facilities"), roadways, pedestrian sidewalks and
walkways, pedestrian plazas, pedestrian passage areas, driveways, public
transportation loading and unloading facilities, truckways, loading docks,
delivery areas, landscaped areas, community rooms, office facilities, the
enclosed Mall, berms, elevators and escalators and stairs and ramps and vertical
transportation facilities not contained within any leased premises, public
restrooms and comfort stations, service areas, service and fire and exit
corridors, passageways, retention ponds (if applicable), and other areas,
amenities, facilities and improvements provided by Landlord, (ii) those areas
within the regional retail development and areas adjacent to the regional retail
development which from time to time may be provided by the owners of such areas
for the convenience and use of Landlord, the tenants of the Shopping Center, the
owners and occupants of the Department Store Sites, and their respective
concessionaires, agents, employees, customers, invitees and all other licensees
and others entitled to the use thereof and (iii) any other facilities or areas,
whether within or outside the regional retail development, as may be designated
by Landlord from time to time. The use and occupancy by Tenant of the leased
premises shall include the use of the common areas in common with Landlord and
with all others for whose convenience and use the common areas have been or may
hereafter be provided by Landlord or by the owners of common areas not within
the Shopping Center, subject, however, to rules and regulations for the use
thereof as prescribed from time to time by Landlord or the owner of such common
area, including, without limitation, the right of Landlord to determine the
hours and mode of operation of the elevators, escalators and vertical
transportation facilities serving the Shopping Center, and including the right
of Landlord or such owner to impose parking charges, whether by meter or
otherwise, with respect to any parking facilities. In no event, however, shall
Tenant, its agents or employees, use the common areas for the display or sale of
merchandise. Without limiting the generality of the foregoing, Landlord may
include in common areas
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those portions of the Shopping Center presently or hereafter sold or leased to
Department Stores, until the building thereon has been opened for business, at
which time there shall be withdrawn from the common areas those areas not
provided by the owner thereof for common use. Tenant and its employees and
agents shall park their cars and other vehicles only in areas specifically
designated from time to time by Landlord for that purpose, and shall not in any
case park their vehicles in any private or non-public portions of the parking
facilities. Tenant covenants that it will enforce the parking by its employees
and agents in such designated areas and in only public areas. Automobile license
numbers of employees' and agents' vehicles shall be furnished by Tenant to
Landlord upon Landlord's request. In the event any vehicle is parked by Tenant
or by an employee or agent of Tenant in a private or non-public parking area or
in any portion of the parking facilities other than the area of such parking
facilities as shall be designated by Landlord, Tenant shall be obligated to pay
Landlord the sum of One Hundred Dollars ($100) per day for each such vehicle in
order to partially compensate Landlord for the loss of percentage rent arising
from the business lost to Tenant and to other tenants in the Shopping Center due
to the lack of available parking space in the said parking facilities, and
Landlord shall have the right to cause the vehicle to be towed to a location
designated by Landlord and Tenant shall be obligated to reimburse Landlord for
all towing charges. Similarly, Landlord shall have the right to cause any
vehicle to be towed if the parking charges, if any, or the per diem charge or
reimbursement due to Landlord hereunder, with respect to such vehicle have not
been paid; with any such vehicle to be towed to a location designated by
Landlord and with Tenant being obligated to pay all parking charges, fines and
towing charges imposed by Landlord with respect to such vehicles. Tenant further
agrees to hold harmless Landlord and defend Landlord, its agents and employees
against any and all claims of the employee, agent and/or owner of the vehicle
towed. Landlord shall have the further option of prohibiting Tenant and its
employees and agents from parking their cars or other vehicles in the parking
facilities, and the violation of such prohibition shall be subject to the same
provisions as set forth above. Landlord may at any time close temporarily any
common area to make repairs or changes, to prevent the acquisition of public
rights in such area, to discourage non-customer parking, to use areas for
attendant or valet parking, and may do such other acts in and to the common
areas as in its judgment may be desirable to improve the convenience thereof.
Tenant shall not provide, nor shall Tenant authorize any person or entity to
provide, valet or attendant parking for Tenant's customers or others; Landlord
shall have the exclusive right, but shall not be obligated, to provide valet or
attendant parking at the regional retail development.
SECTION 8.03. TENANT'S PRO RATA SHARE OF EXPENSES. (a) Tenant agrees to pay
to Landlord in the manner hereinafter provided, but not more often than once
each calendar month, Tenant's proportionate share of: (1) all costs and expenses
of every kind and nature paid or incurred by Landlord in operating, equipping,
policing and protecting, lighting, heating, air conditioning, providing
sanitation and sewer and other services, providing a music and public address
system, insuring (including self-insurance and the payment of deductible amounts
under insurance policies), repairing, replacing and maintaining (i) the common
areas and (ii) all buildings and roofs within the Shopping Center and (iii) all
other areas, facilities and buildings, including project offices, parking
facilities, vertical transportation facilities, retention ponds (if applicable),
and any and all facilities and improvements connecting the regional retail
development to off-site buildings or areas, which are used in connection with
the maintenance and/or operation of, and whether located within or outside of,
the regional retail development (hereinafter collectively referred to as
"project areas"); such costs and expenses shall include, but shall not be
limited to, the full cost of: illumination and maintenance of regional retail
development signs, whether located on or off the regional retail development;
holiday and seasonal lighting, decorations and displays; refuse disposal, water,
gas, sewage, electricity and other utilities (without limitation), including any
and all usage, service, hook-up, connection, availability and/or standby fees or
charges pertaining to same, and including all costs associated with the
provision, maintenance and operation of any central telephone service for the
regional retail development; the operation, maintenance, repair and replacement
of all or any part of the parking facilities; snow removal; maintenance,
operation, repair and replacement of any and all roads (temporary or otherwise)
servicing the regional retail development, including, without limitation, any
landscaping or other work related to such roads; maintenance and operation of
any temporary or permanent utility, including a sewage disposal system, within
or without the regional retail development, built, operated and/or maintained
for the specific purpose of servicing the regional retail development, together
with hook up or connection fees and service charges; compliance with laws,
rules, regulations and orders of governmental authorities; maintenance for
wooded areas, retention ponds, lakes and shoreline areas (if applicable);
cleaning, lighting, striping and landscaping; curbs, gutters, sidewalks,
drainage and irrigation ditches, conduits, pipes and canals located on or
adjacent to the regional retail development; premiums and all other costs with
respect to liability, casualty, and property insurance, and compliance with
insurance requirements; personal property taxes; licensing fees and taxes; audit
fees and expenses; supplies; the cost and expense of supplying music to the
regional retail development; all costs and expenses of enforcing the rules and
regulations established by Landlord for the Shopping Center and handling of
claims or other matters arising from the operation of the regional retail
development; real estate taxes and assessments and substitutions and
replacements thereof levied or assessed by municipal, county, state, federal or
other taxing or assessing authority upon, against or with respect to the common
areas, the project areas and/or the land thereunder and the land on which the
Shopping Center buildings are located, and all property (including any land upon
which may be located any temporary or permanent utility, including a sewage
disposal system, within or without the regional retail development built,
operated and/or maintained for the purpose of servicing the regional retail
development) provided by Landlord which may at any time comprise or serve the
Shopping Center, whether located on or off the site of the Shopping Center,
irrespective of whether the same is taxed or assessed as real or personal
property; cost, lease payment or depreciation of any equipment, improvements or
facilities used in the operation or maintenance of the common areas or project
areas, including, without limitation, any imputed interest as may be applicable
to costs paid or incurred by Landlord the full amount of which is not included
under this Section 8.03 in the year so paid or incurred, and including any
interest or other expense associated with any loans obtained by Landlord with
respect to any cost or expense included or includable hereunder, including any
portion of the long-term debt on the Shopping Center which has been incurred for
such purposes; total compensation and benefits (including premiums for workers'
compensation or any
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other insurance or other retirement or employee benefits, and including all
costs incurred in providing such benefits) paid to or on behalf of employees
involved in the performance of the work specified in this Section 8.03 or
employees otherwise providing services to tenants or customers of the Shopping
Center; and (2) an amount equal to fifteen percent (15%) of the total of all of
the foregoing costs and expenses for the regional retail development. The
proportionate share to be paid by Tenant shall be that portion of the foregoing
costs and expenses which the number of square feet of floor area in the leased
premises bears to the total number of square feet of gross leased and occupied
floor area of all buildings in the Shopping Center abutting on the enclosed
Mall. The gross leased and occupied floor area in effect for the whole of any
lease year shall be the average of the gross leased and occupied floor area in
effect on the first day of each calendar month in such lease year.
(b) Tenant's proportionate share of such costs and expenses for each lease
year shall be paid in monthly installments on the first day of each calendar
month, in advance, in an amount estimated by Landlord from time to time.
Subsequent to the end of each calendar or fiscal lease year (at Landlord's
option), Landlord shall furnish Tenant with a statement of the actual amount of
Tenant's proportionate share of such cost and expenses for such period. If the
total amount paid by Tenant under this Section for any such year shall be less
than the actual amount due from Tenant for such year as shown on such statement,
Tenant shall pay to Landlord the difference between the amount paid by Tenant
and the actual amount due, such deficiency to be paid within ten (10) days after
the furnishing of each such statement, and if the total amount paid by Tenant
hereunder for any such year shall exceed such actual amount due from Tenant for
such year, such excess shall be credited against the next installment due from
Tenant to Landlord under this Section. Landlord may estimate the annual budget
and charge the estimated share to the Tenant on a monthly basis subject to
revision by Landlord of the budget from time to time and final annual adjustment
based upon actual expenses. Neither the provisions of this Section, nor any of
the other requirements or restrictions imposed upon Tenant under this Lease,
shall excuse Tenant from its obligation to comply with laws and ordinances and
other governmental requirements as set forth in Section 7.02 hereof.
ARTICLE IX. SIGNS
SECTION 9.01. SIGNS. Tenant shall affix a sign to the exterior surface of
the storefront of the leased premises fronting on the enclosed Mall and shall
maintain said sign in good condition and repair during the entire term of this
Lease. Said sign shall conform to the criteria for signs contained in Exhibit B,
and the size, content, design and location thereof shall be subject to the prior
written approval of Landlord. Except as hereinabove mentioned, Tenant shall not
place or cause to be placed, erected or maintained on any exterior door, wall,
window or the roof of the leased premises, or on the glass of any window or door
of the leased premises, or on any sidewalk or other location outside the leased
premises, or within any display window space in the leased premises, or within
five (5) feet of the front of the storefront leaseline or opening, whether or
not there is a display window space in the leased premises, or within any
entrance to the leased premises, or otherwise visible from the Mall, any sign
(flashing, moving, hanging, handwritten, or otherwise), decal, placard,
decoration, flashing, moving or hanging lights, lettering, or any other
advertising matter of any kind or description. Moreover, Tenant is prohibited
from utilizing any displays which are not part of the fixture plan approved in
writing by Landlord for the leased premises. If Tenant places or causes to be
placed or maintained any of the foregoing, the same may be removed by Landlord
or Landlord's representative without notice and without such removal
constituting a breach of this Lease or entitling Tenant to claim damages on
account thereof. No symbol, design, name, mark or insignia adopted by Landlord
for the Shopping Center shall be used without the prior written consent of
Landlord. No illuminated sign located in the interior of the leased premises and
which is visible from the outside thereof shall be permitted without the prior
written approval of Landlord. All signs located in the interior of the leased
premises shall be in good taste and professionally printed so as not to detract
from the general appearance of the leased premises and the Shopping Center.
SEE ATTACHED RIDER FOR INSERTS
ARTICLE X. MAINTENANCE
SECTION 10.01. LANDLORD'S OBLIGATIONS FOR MAINTENANCE. Landlord shall keep
and maintain the exterior surfaces of the exterior walls of the building in
which the leased premises are located (exclusive of doors, door frames, door
checks, other entrances, windows and window frames which are not part of common
areas, and storefronts) in good repair, except that Landlord shall not be called
upon to make any such repairs occasioned by the act or negligence of Tenant, its
agents, employees, invitees, licensees or contractors. Landlord shall not be
called upon to make any other improvements or repairs of any kind upon the
leased premises and appurtenances, except as may be required under Articles XVII
and XVIII hereof, and nothing contained in this Section 10.01 shall limit
Landlord's right to reimbursement from Tenant for maintenance, repair costs and
replacement costs conferred elsewhere in this Lease.
SECTION 10.02. TENANT'S OBLIGATIONS FOR MAINTENANCE. (a) Except as provided
in Section 10.01 of this Lease, Tenant, at Tenant's expense, shall keep and
maintain in first-class appearance, in a condition at least equal to that which
existed when Tenant initially opened the leased premises for business, and in
good order, condition and repair as determined by Landlord (including
replacement of parts and equipment, if necessary) the leased premises and every
part thereof and any and all appurtenances thereto wherever located, including,
but without limitation, the interior surfaces of the exterior walls, the
exterior and interior portion of all doors, door frames, door checks, other
entrances, windows, window frames, plate glass, storefronts, all plumbing and
sewage facilities within the leased premises, including free flow up to the main
sewer line, fixtures, ventilation, heating and air conditioning and electrical
systems (whether or not located in the leased premises), sprinkler systems,
walls, floors and ceilings, and all other
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repairs, replacements, renewals and restorations, interior and exterior,
ordinary and extraordinary, foreseen and unforeseen, and all other work
performed by or on behalf of Tenant pursuant to the exhibits attached hereto or
Articles V or VI hereof or otherwise in accordance with the provisions of this
Lease. Tenant shall remodel the leased premises as required in Exhibit B.
(b) Tenant shall keep and maintain the leased premises in a clean, sanitary
and safe condition in accordance with the laws of the State and in accordance
with all directions, rules and regulations of the health officer, fire marshall,
building inspector, or other proper officials of the governmental agencies
having jurisdiction, and Tenant shall comply with all requirements of law,
ordinances and otherwise, affecting the leased premises, all at the sole cost
and expense of Tenant. At the time of the expiration or sooner termination of
the tenancy created herein, Tenant shall surrender the leased premises in good
order, condition and repair.
(c) Tenant shall keep the leased premises and all other parts of the
regional retail development free from any and all liens arising out of any work
performed, materials furnished or obligations incurred by or for Tenant, and
agrees to bond against or discharge any such lien (including, without
limitation, any construction, mechanic's or materialman's lien) within days
after written request therefor by Landlord. Tenant shall give Landlord at least
fifteen (15) days' notice prior to commencing or causing to be commenced any
work on the leased premises (whether prior or subsequent to the commencement of
the lease term), so that Landlord shall have reasonable opportunity to file and
post notices of non-responsibility for Tenant's work. In addition, prior to
commencing or causing to be commenced any work on the leased premises, Tenant
shall file a Notice of Commencement (or other similar instrument limiting lien
rights related to Tenant's Work) as provided by applicable statutory provisions
and shall deliver a copy of such Notice of Commencement (or similar instrument)
to Landlord. Tenant shall reimburse Landlord for any and all costs and expenses
which may be incurred by Landlord by reason of the filing of any such liens
and/or the removal of same, such reimbursement to be made within ten (10) days
after written notice from Landlord to Tenant setting forth the amount of such
costs and expenses.
SEE ATTACHED RIDER FOR INSERTS
(d) Tenant, at its own expense, shall install and maintain fire
extinguishers, other fire protection devices as may be required from time to
time by any agency having jurisdiction thereof. Should Landlord's insurance
carrier require that Tenant's fire protection system be modified, Tenant shall
make such modification at its sole expense within thirty (30) days after notice
in writing by Landlord. Failure of Tenant to do so shall entitle Landlord to
enter the leased premises and make such modification at the expense of Tenant.
Tenant shall pay all charges billed by Landlord within ten (10) days after
invoice. Tenant shall also be liable for any additional insurance premiums
assessed to Landlord relating to the leased premises.
(e) (1) Tenant agrees to operate its heating and its ventilating and air
conditioning system(s) serving the leased premises during regular Shopping
Center business hours so as to maintain comfort conditions. Temperatures in the
leased premises shall be compatible with temperatures in the enclosed Mall.
Tenant's installation of its heating and ventilating and air conditioning system
shall be as set forth in Exhibit B, attached hereto and made a part hereof.
Tenant shall be fully obligated for its maintenance and repair. Tenant shall not
drain heat or ventilation or air conditioning from the enclosed Mall into the
leased premises and Tenant shall at all times maintain adequate temperatures
within the leased premises to prevent any such drainage; likewise, Tenant shall
not discharge air from the leased premises into the enclosed Mall or other
interior areas. Landlord shall not be obligated to Tenant for any damages or
cost or expense resulting, directly or indirectly, from any failure or
malfunction of any air conditioning supply system or condenser water system
serving the Shopping Center or any component parts of any such system.
(2) To the extent the leased premises shall be serviced by a central
air conditioning or condenser water system, Tenant's obligation for connecting
to, and all charges for, the central system, as well as Tenant's installation,
operation and maintenance of its heating and ventilating and air conditioning
portion of the system shall be as set forth in Exhibit B (and any separate
exhibit relating to such central system) attached hereto and made a part hereof.
Landlord shall not be obligated to Tenant for any damages or cost or expense
resulting, directly or indirectly, from any failure or malfunction of the
central air conditioning supply system (or central condenser water system, as
applicable) or any component parts thereof. Tenants approved by Landlord for the
installation of a separate heating, ventilating and air conditioning system,
serving the leased premises, shall construct the same in accordance with
Landlord's criteria. If Tenant shall install such a system, Tenant shall be
fully obligated for its maintenance and repair.
(f) Tenant expressly waives all rights to make repairs at the expense of
Landlord as provided for in any statute or law in effect during the term of this
Lease.
(g) In the event that Tenant fails, refuses or neglects to commence and
complete repairs promptly and adequately, to remove any lien, to pay any cost or
expense, to reimburse Landlord, or otherwise to perform any act or fulfill any
obligation required of Tenant pursuant to this Section 10.02, Landlord may, but
shall not be required to, make or complete any such repairs, remove such lien
(without inquiring into the validity thereof), pay such cost or perform such act
or the like without prior notice to, but at the sole cost and expense of,
Tenant, and Tenant shall reimburse Landlord for all costs and expenses of
Landlord thereby incurred within ten (10) days after receipt by Tenant from
Landlord of a statement setting forth the amount of such costs and expenses. The
failure by Tenant so to make repairs, to remove any lien, to pay any such cost
or expense, or to so reimburse Landlord (in the case of reimbursement, within
such ten-day period) shall constitute a default by Tenant under this Lease and
shall carry with it the same consequences
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as failure to pay any installment of rent. Landlord's rights and remedies
pursuant to this subsection (g) shall be in addition to any and all other rights
and remedies provided under this Lease or at law.
ARTICLE XI. INSURANCE AND INDEMNITY
SECTION 11.01. TENANT'S INSURANCE. (a) Tenant, at its sole cost and
expense, shall, at all times, commencing with the date upon which the leased
premises shall be made available for Tenant's Work, procure, pay for and keep in
full force and effect: (i) a commercial general liability policy (ISO form or
equivalent), including insurance against assumed or contractual liability under
this Lease with respect to the leased premises and the operations of Tenant and
any subtenants of Tenant in, on or about the leased premises in which the limits
with respect to personal liability and property damage shall be not less than
Two Million Dollars ($2,000,000) per occurrence; (ii) all risk property
insurance, including theft and, if applicable, boiler and machinery coverage,
written at replacement cost value in an adequate amount to avoid coinsurance and
a replacement cost endorsement insuring Tenant's merchandise, trade fixtures,
furnishings, equipment and all items of personal property of Tenant and
including property of Tenant's customers located on or in the leased premises;
(iii) workers' compensation coverage as required by law; (iv) with respect to
alterations, improvements and the like required or permitted to be made by
Tenant hereunder, contingent liability and builder's risk insurance, in amounts
satisfactory to Landlord; (v) product liability coverage, including, without
limitation (if this Lease covers leased premises in which food and/or beverages
are sold and/or consumed), liquor liability coverage (if applicable to Tenant's
business) and coverage for liability arising out of the consumption of food
and/or alcoholic beverages on or obtained at the leased premises, of not less
than Two Million Dollars ($2,000,000) per occurrence for personal injury and
death and property damage; (vi) the insurance required under Exhibit B; and
(vii) such insurance as may from time to time be required by city, county, state
or federal laws, codes, regulations or authorities, together with such other
insurance as is reasonably necessary or appropriate under the circumstances. The
minimum limits of coverage as set forth in this paragraph may from time to time,
at Landlord's option, be increased by not more than ten percent (10%) per annum,
on a cumulative basis, with such increase to occur not more often than once
during each lease year during the term hereof. The deductibles under any of such
insurance policies to be carried by Tenant shall not exceed Five Thousand
Dollars ($5,000).
(b) All policies of insurance required to be carried by Tenant pursuant to
this Section 11.01 shall be written by responsible insurance companies
authorized to do business in the State and acceptable to Landlord. Any such
insurance required of Tenant hereunder may be furnished by Tenant under any
blanket policy carried by it or under a separate policy therefor; provided,
however, that: (1) any such blanket policy carried with respect to the insurance
required under subparagraphs (i), (iv), (v), (vi) and (vii) of Section 11.01(a)
shall contain a "per location" endorsement assuring that any aggregate limit
under such blanket policy shall apply separately to the leased premises and that
the insurer thereunder shall provide written notice to Landlord if the available
portion of such aggregate is reduced to less than the minimum amounts required
under Section 11.01(a) by either payment of claims or the establishment of
reserves for claims (whereupon Tenant shall be obligated to take immediate steps
to increase the amount of its insurance coverage in order to satisfy the minimum
requirements set forth above), and (2) any such blanket policy carried with
respect to the property insurance required under subparagraph (ii) of Section
11.01(a) shall contain an "agreed value" endorsement with respect to all of the
items of property identified in such subparagraph. A copy of each paid-up policy
evidencing such insurance (appropriately authenticated by the insurer) or a
certificate of the insurer, certifying that such policy has been issued,
providing the coverage required by this Section and containing provisions
specified herein, shall be delivered to Landlord prior to the commencement of
the term of this Lease and, upon renewals, not less than thirty (30) days prior
to the expiration of such coverage. Landlord may, at any time, and from time to
time, inspect and/or copy any and all insurance policies required to be procured
by Tenant hereunder.
(c) Each policy evidencing insurance required to be carried by Tenant
pursuant to this Section 11.01 shall provide coverage on an occurrence basis
(and not on a "claims-made" basis) and shall contain the following provisions
and/or clauses: (i) a cross-liability clause; (ii) a provision that such policy
and the coverage evidenced thereby shall be primary and non-contributing with
respect to any policies carried by Landlord, and that any coverage carried by
Landlord shall be excess insurance; (iii) a provision including Landlord, the
beneficial ownership entity of the Shopping Center (if any), the managing agent
of the Shopping Center and any other parties in interest designated by Landlord
or such beneficial ownership entity (if any), as additional insureds (except
with respect to workers' compensation insurance); (iv) a waiver by the insurer
of any right of subrogation against Landlord, the underlying lessor, if any, and
their respective agents, employees and representatives which arises or might
arise by reason of any payment under such policy or by reason of any act or
omission of Landlord, its agents, employees or representatives; (v) a
severability clause; (vi) a provision that the insurer will not cancel,
materially change or fail to renew the coverage provided by such policy without
first giving Landlord and the underlying lessor, if any, thirty (30) days' prior
written notice; and (vii) a provision (to the extent available) that no act or
omission of Landlord shall affect or limit the obligation of the insurer to pay
the amount of any loss sustained.
(d) In the event that Tenant fails to procure, maintain and/or pay for, at
the times and for the durations specified in this Section 1l.0l, any insurance
required by this Section, or fails to carry insurance required by law or
governmental regulation, Landlord may (but without obligation to do so) at any
time or from time to time, and without notice, procure such insurance and pay
the premiums therefor, in which event Tenant shall repay to Landlord all sums so
paid by Landlord together with interest thereon as provided elsewhere herein and
any costs or expenses incurred by Landlord in connection therewith, within ten
(10) days following Landlord's written demand to Tenant for such payment.
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(e) Tenant shall not carry any stock of goods or do anything in or about
the leased premises which will in any way tend to increase the insurance rates
on the Shopping Center, the regional retail development, the leased premises
and/or the building of which they are a part and/or the contents thereof. If
Tenant installs any electrical equipment that overloads the lines in the leased
premises, Tenant shall at its own expense make whatever changes are necessary to
comply with the requirements of the insurance underwriters and governmental
authorities having jurisdiction.
SECTION 11.02. LANDLORD'S INSURANCE. (a) Landlord agrees, during the term
hereof, to provide, to the extent the same is available from Landlord's
insurance carrier, in amounts and coverages determined by Landlord, with or
without deductibles, insurance coverage against such risks as are from time to
time included in a standard extended coverage endorsement, insuring the
improvements to the leased premises provided by Tenant pursuant to this Lease
(exclusive of Tenant's merchandise, trade fixtures, furnishings, equipment,
plate glass, signs and personal property of Tenant). Landlord may also carry at
its option special extended coverage endorsements and other special insurance
coverage (including, without limitation, earthquake coverage). Tenant shall
submit to Landlord an itemized statement setting forth the cost of such
improvements promptly after completion thereof and Tenant shall provide to
Landlord, within thirty (30) days after the end of each lease year of the term
hereof, a written appraisal of the then current replacement value of the
leasehold improvements to the leased premises, which appraisal shall be
certified by an independent insurance appraiser. In the event Tenant fails to
provide such itemized statement or any such appraisal, Landlord shall have the
right to estimate the value of said improvements, which estimate shall be
binding upon Tenant. Tenant agrees to pay Landlord for the total cost of so
insuring such improvements, including, without limitation, the payment of all
applicable deductible amounts, such payments (other than deductible amounts) to
be made in equal monthly installments on the first day of each calendar month,
in advance, in an amount estimated by Landlord; provided, however, that Landlord
may elect to bill Tenant for such costs on a basis less frequent than monthly.
Deductible amounts shall be paid by Tenant upon notice from Landlord. Subsequent
to the receipt by Landlord of an invoice for such insurance premium, Landlord
shall furnish Tenant with a written statement setting forth such cost. If the
total amount paid by Tenant under this Section for any calendar, lease or fiscal
year (at Landlord's option) shall be less than the actual amount due from Tenant
for such year as shown on such statement, Tenant shall pay to Landlord the
difference between the amount paid by Tenant and the actual amount due, such
deficiency to be paid within thirty (30) days after the furnishing of each such
statement, and if the total amount paid by Tenant hereunder for any such
calendar year shall exceed such actual amount due from Tenant for such calendar
year, such excess shall be credited against the next installment due from Tenant
to Landlord under this Section 11.02.
(b) Landlord agrees, during the term hereof, to carry rent interruption
insurance, which insurance may be carried in amounts equal to Tenant's total
minimum rent obligation for twelve (12) full months (or such other period as
Landlord may elect) under this Lease plus the total of the estimated costs to
Tenant of taxes, assessments, insurance premiums and common area maintenance
costs for such twelve (12) month period (or such other period as Landlord may
elect). Tenant agrees from time to time, to reimburse Landlord for the total
cost of such insurance, such reimbursement to be made within ten (10) days after
receipt of a written statement from Landlord setting forth such cost.
(c) Any insurance required of Landlord hereunder may be furnished by or for
Landlord under any blanket policy carried by or for Landlord or under a separate
policy therefor. The cost of the foregoing insurance under this Section 11.02 is
a part of the cost of the property insurance which may be included in the costs
and expenses set forth in Section 8.03 hereof. To the extent that the foregoing
insurance costs shall be so included under Section 8.03 and Tenant shall pay its
proportionate share of costs and expenses pursuant to said Section 8.03, such
insurance costs shall not be separately charged to Tenant under this Section
11.02.
SECTION 11.03. COVENANT TO HOLD HARMLESS. Tenant covenants to indemnify
Landlord, the underlying lessor, if any, and their respective officers,
directors, stockholders, beneficiaries, partners, representatives, agents and
employees, and save them harmless (except for loss or damage resulting solely
from the negligence of Landlord and not required to be insured against by Tenant
pursuant to this Article XI) from and against any and all claims, actions,
damages, liability, cost and expense, including attorneys' fees, in connection
with all losses, including loss of life, personal injury and/or damage to
property, arising from or out of any occurrence in, upon or at the leased
premises or the occupancy or use by Tenant of the leased premises or any part
thereof, or arising from or out of Tenant's failure to comply with any provision
of this Lease or occasioned wholly or in part by any act or omission of Tenant,
its concessionaires, agents, contractors, suppliers, employees, servants,
customers or licensees. For the purpose of this Section 11.03, the leased
premises shall include the service areas adjoining the same and the loading
platform area allocated to the use of Tenant and the parking facilities
servicing the Shopping Center. In case Landlord or any other party so
indemnified shall, without fault, be made a party to any litigation commenced by
or against Tenant, or if Landlord or any such party shall, in its sole
discretion, determine that it must intervene in such litigation to protect its
interest hereunder, including, without limitation, the incurring of costs,
expenses, and attorneys' fees in connection with relief of Tenant ordered
pursuant to the Bankruptcy Code (11 USC ss. 101 et. seq.), then Tenant shall
protect and hold them harmless by attorneys satisfactory to Landlord and shall
pay all costs, expenses and reasonable attorneys' fees incurred or paid by such
party in connection with such litigation. Landlord shall have the right to
engage its own attorneys in connection with any of the provisions of this
Section 11.03 or any other provision of this Lease, including, without
limitation, any defense of Landlord or intervention by Landlord, notwithstanding
any contrary provisions or court decisions of the State. The foregoing
provisions of this Section shall survive the expiration or earlier termination
of the term of this Lease.
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ARTICLE XII. UTILITY CHARGES
SECTION 12.01. UTILITY CHARGES. (a) Tenant shall be solely responsible for
and shall promptly pay all necessary fees, deposits and charges, including use
and/or connection fees, hook-up fees, standby fees, and/or penalties for
discontinued or interrupted service, and the like, for water, gas, heat,
electricity, centrally conditioned cold air supply, sewer and sanitation, solid
waste disposal and any other service or utility used in or upon or furnished to
the leased premises, irrespective of whether Landlord has paid for these
services in advance, or otherwise. Landlord, at its sole option, may elect to
furnish any or all of the above services on a "rent inclusion basis" without
separate charge therefor to Tenant, by metering or otherwise, such charge to be
included in the minimum rent payable hereunder, in which event the minimum rent
specified in Section 2.01 shall be increased to reflect the value of such
service(s) as provided in paragraph (h) below. Alternatively, Landlord, at its
sole option, may provide for any or all of such services on a separate-charge
basis, and in such event Tenant shall purchase such service(s) from Landlord,
and within ten (10) days after Landlord bills Tenant for any such service Tenant
shall pay Landlord such rates, charges and fees, upon terms and conditions as
Landlord may establish; provided that, if the rates, charges or fees for any
such service are regulated by a public agency, the rates, charges and/or fees to
Tenant shall be computed using the maximum rate schedules which would be
applicable if Tenant were at the time a direct customer of the applicable public
utility corporation. If the cost of any such service for any month has not been
made known to Landlord at the time of billing, Landlord shall have the right to
estimate the amount thereof, and to base its billing to Tenant upon said
estimated amount, and Landlord may adjust such billing when the actual amount is
made known to Landlord. Landlord shall also have the right to periodically
estimate the monthly amount required to be paid by Tenant to Landlord with
respect to any or all of such services provided by Landlord and such estimated
monthly amount or amounts shall be paid by Tenant on the first day of each
calendar month, in advance, at the place and in the manner specified for
payments of minimum rent hereunder. Landlord shall have the right to change such
estimated amount or amounts at any time and from time to time, by notice to
Tenant. If the total of the estimated monthly payments made by Tenant for any
lease year or calendar year shall be less than the actual amount due from Tenant
pursuant to the provisions of this Section, Tenant shall pay to Landlord the
difference between the amount paid by Tenant and the actual amount due within
ten (10) days after submission to Tenant of Landlord's statement and invoice
therefor; and if the total of the estimated payments made by Tenant for any such
year shall exceed the actual amount due from Tenant, the excess amount paid
shall be credited against the next payment due from Tenant to Landlord under
this Section. Landlord, at its sole option, may require Tenant to install
separate, appropriate meters for measuring Tenant's consumption of water,
electricity or the like, and may require Tenant to remove any or all such meters
upon Landlord's discontinuing the service in question to Tenant. The failure by
Tenant to pay when due any amount payable to Landlord under this Section 12.01
shall carry with it the same consequences as failure to pay any installment of
rent when due. Notwithstanding the foregoing, if a separate exhibit describing
applicable rates for a utility service is attached to this Lease, Tenant shall
pay for such service pursuant to such exhibit.
(b) In the event Landlord furnishes electricity on a rent inclusion basis as
provided above, at such time as Tenant's lighting and electrical equipment has
been completely installed, Landlord may, at Landlord's sole option (and to the
extent permitted by applicable regulations), cause a survey of Tenant's usage of
electricity to be made by an independent electrical consultant selected by
Landlord. The consultant shall render a report to Landlord and Tenant showing
the estimated amount of electricity which Tenant will consume, the value
thereof, and the minimum rent reserved hereunder shall thereupon be increased to
reflect such value. Tenant shall promptly pay to Landlord the difference between
the minimum rent hereunder and the increased minimum rent as so determined for
all months of the term of this Lease which have therefore elapsed, and each
monthly installment of rent thereafter paid by Tenant shall be based upon such
increased rent. Subject to applicable utility regulations, each party to this
Lease shall thereafter have the right whenever such party believes there has
been a material increase or decrease in Tenant's regular usage of electric
current (that is, a change therein other than on a temporary basis) to request,
by notice to the other party, a redetermination of the fair rent value of the
electric service then furnished by Landlord. When any such request occurs, the
redetermination shall be made as promptly as possible by an independent
electrical consultant selected by Landlord, and, based upon its report, the
minimum rent theretofore required to be paid hereunder shall thereafter be
adjusted to reflect such new fair rent value. Any change or adjustment in such
report shall be binding on both Landlord and Tenant. It is agreed that the cost
of conducting the redetermination shall be borne solely by the party requesting
same. Tenant agrees, on request of Landlord, to execute and deliver from time to
time a supplement to this Lease, setting forth the new minimum rent, as then
determined as above provided. After the making of the initial survey referred to
above, Tenant shall not without prior written notice to Landlord make any
alterations in or additions to the electrical equipment and/or appliances in the
leased premises. Tenant shall promptly execute a separate utility letter or
utility agreement if requested by Landlord or by the applicable utility company.
(c) Any furnishing by Landlord of electric current to the leased premises shall
be limited to the extent of the capacity of Landlord's existing feeders,
switches, risers, wiring installations and other electrical system serving the
leased premises (the "electric distribution system"). Tenant agrees that
Tenant's use of electrical current will at no time exceed the capacity of the
electric distribution system, and that Tenant will not make any alteration or
addition to the electric distribution system without Landlord's prior written
consent in each instance.
(d) In the event that, at any time during the term of this Lease, Tenant desires
to connect or install any additional electric fixtures, equipment or appliances
to the electric distribution system and such fixtures, equipment or appliances
require additional electric current which, in combination with Tenant's existing
electrical requirements exceeds the capacity of the electric distribution
system, then, provided that Landlord shall have consented in writing to such
connections or installations, Landlord, upon the written request of Tenant and
at the sole cost and expense of Tenant, will
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install any additional riser or risers (and all other equipment necessary and
proper in connection therewith) to supply Tenant's electric requirements, but
only if such riser or risers (and such other equipment) are necessary to supply
Tenant with the electric current required by it and will not cause permanent
damage or injury to the leased premises or the regional retail development of
which the leased premises form a part or cause or create a dangerous or
hazardous condition or entail excessive or unreasonable alterations, repairs,
expense or interference with or disturbance of other tenants or occupants of the
regional retail development. Notwithstanding any provisions contained in this
Section 12.01, Landlord shall not be obligated to provide any new utility
services or increased utility capacities to the leased premises to the extent
that the leased premises shall have been previously occupied by another tenant,
and, if the leased premises have not been previously occupied, Landlord shall
not be obligated to provide any utility services or utility capacities other
than as specifically set forth in Exhibit B. Tenant shall promptly advise
Landlord of any increase in Tenant's connected load to the electric distribution
system. Any additional utility services or any increase in utility capacities
beyond that in existence if the leased premises shall have been previously
occupied (or beyond the specifications set forth in Exhibit B if the leased
premises have not been previously occupied) shall be subject to the prior
written approval of Landlord, and such additional services or capacities shall
be provided at the sole cost and expense of Tenant.
(e) Tenant agrees further to provide and install, at Tenant's sole cost and
expense, all lamps, tubes, bulbs, starters, ballasts, transformers and the like
items used or required in the leased premises.
(f) At any time during the term hereof, Landlord may, upon the thirty (30) days'
prior written notice to Tenant, discontinue furnishing electric current (or such
other utility being furnished by Landlord) to the leased premises without
thereby affecting this Lease in any manner or otherwise incurring any liability
to Tenant, except that the minimum rent reserved herein shall be reduced by the
amount then being paid by Tenant on account of Landlord's service of electricity
(or such other utility) to the leased premises, determined as provided above (as
the same may have been adjusted from time to time pursuant to other provisions
of this Article), and Landlord shall no longer be obligated to furnish electric
current (or such other utility) to the leased premises. If Landlord shall give
Tenant notice of intention to cease furnishing electric current (or other
utility) to the leased premises, Tenant may contract for and receive such
electric current (or such other utility) directly from the public utility
corporation then serving the Shopping Center, and if Tenant does so, Landlord
shall permit Tenant, at Tenant's sole cost, to use Landlord's risers, wiring and
electric installations (or other utility conduits, as applicable) then serving
the leased premises for such purpose to the extent that the same are available,
suitable and may be safely so used consistent with concurrent and anticipated
future use by Landlord and other tenants.
SEE ATTACHED RIDER FOR INSERTS
(g) If at any time after the date hereof, the electrical energy rates (or other
utility rates) as filed by the public utility corporation then serving the
Shopping Center shall be reduced or increased, or any tax shall be imposed
thereon (or subsequently increased or decreased), then the minimum rent reserved
herein shall be equitably adjusted as of the first day of the month next
following the effective date of such rate change to reflect the resulting
reduction or increase in the value of Landlord's service of providing Tenant
with electric current (or other utility service) on a rent inclusion basis, but
in no event shall the minimum rent be reduced below the amount stated in Article
II hereof.
(h) Notwithstanding any other provisions of this Lease, the value of, or (as
applicable) the rate for, each utility furnished by Landlord, which utility
shall be subject to regulation by a public agency, shall be computed for the
purposes of this Lease in accordance with the maximum rate schedules which would
be applicable if Tenant were at the time a direct customer of the applicable
public utility company serving the Shopping Center (subject to any separate rate
schedules for utility services as may be included in the exhibits to this
Lease). The value of, or (as applicable) the rate for, any nonregulated utility
service provided by Landlord shall be computed at the prevailing rates which
would be paid by Tenant for direct comparable service from contractors in the
local area, except to the extent that specific rates are otherwise set forth in
this Lease. The public utility corporation referred to in this Section 12.0l
shall be the utility company named in Exhibit C attached hereto (if any), or the
successor to such company or such other company designated by Landlord.
(i) Landlord shall not be liable to Tenant for any loss, damage or expense which
Tenant may sustain if the quality or character of utilities used upon or
furnished to the leased premises are no longer available or suitable for
Tenant's requirements, or if said utilities are interrupted as a result of
actions by the public utility companies or any other cause and no such change,
interruption, or cessation of service shall constitute an eviction of Tenant.
(j) Any obligation of Landlord to furnish light, heat, conditioned air, or power
or any utility service shall be conditioned upon the availability of adequate
energy sources. Landlord shall have the right to reduce heat, lighting, air
conditioning or other utility services within the regional retail development,
including without limitation, the leased premises and the common areas, as
required by any mandatory or voluntary fuel or energy saving allocation, or any
similar statute, regulation, order or program without such action diminishing
Tenant's obligations hereunder.
ARTICLE XIII. ESTOPPEL STATEMENT, ATTORNMENT AND SUBORDINATION
SECTION 13.01. ESTOPPEL STATEMENT. Tenant shall, without charge, at any
time and from time to time, within days after receipt by Tenant of written
request therefor from Landlord or from any mortgagee under any mortgage or any
beneficiary under any deed of trust on the real property on which the building
containing the leased premises is located or of which the leased premises are a
part, deliver, in recordable form, a duly executed and acknowledged certificate
or statement to the party requesting said certificate or statement or to any
other person, firm
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or corporation designated by Landlord, certifying: (a) that this Lease is
unmodified and in full force and effect, or, if there has been any modification,
that the same is in full force and effect as modified, and stating any such
modification; (b) the date of commencement of the term of this Lease; (c) that
rent is paid currently without any off-set or defense thereto; (d) the dates to
which the rent and other charges payable hereunder by Tenant have been paid, and
the amount of rent and other charges, if any, paid in advance; (e) whether or
not there is then existing any claim of Landlord's default hereunder and, if so,
specifying the nature thereof; and (f) any other matters relating to the status
of such Lease as shall be requested by Landlord or any such mortgagee or
beneficiary from time to time; provided that, in fact, such facts are accurate
and ascertainable. Any such certificate or statement by Tenant may, at the
election of the requesting party, include Tenant's undertaking not to pay rents
or other charges for more than a specified period in advance of the due dates
therefor set forth herein.
SEE ATTACHED RIDER FOR INSERTS
SECTION 13.02. ATTORNMENT. In the event any proceedings are brought for the
foreclosure of, or in the event of the conveyance by deed in lieu of foreclosure
of, or in the event of exercise of the power of sale under, any mortgage and/or
deed of trust made by Landlord covering the leased premises, or in the event
Landlord sells, conveys or otherwise transfers its interest in the Shopping
Center or any portion thereof containing the leased premises, this Lease shall
remain in full force and effect and Tenant hereby attorns to, and covenants and
agrees to execute an instrument in writing reasonably satisfactory to the new
owner whereby Tenant attorns to such successor in interest and recognizes such
successor as the Landlord under this Lease. Payment by or performance of this
Lease by any person, firm or corporation claiming an interest in this Lease or
the leased premises by, through or under Tenant without Landlord's consent in
writing shall not constitute an attornment or create any interest in this Lease
or the leased premises.
SECTION 13.03. SUBORDINATION. Tenant agrees that this Lease shall, at the
request of Landlord, be subordinate to any underlying lease and to any mortgages
or deeds of trust that are now, or may hereafter be, placed upon the leased
premises and to any and all advances to be made thereunder, and to the interest
thereon, and all renewals, replacements and extensions thereof, provided that
the lessor under any such underlying lease or the mortgagees or beneficiaries
named in said mortgages or trust deeds shall agree to recognize the interest of
Tenant under this Lease in the event of foreclosure, if Tenant is not then in
default. Tenant also agrees that any underlying lessor or mortgagee or
beneficiary may elect to have this Lease constitute a prior lien to its
underlying lease or mortgage or deed of trust, and in the event of such election
and upon notification by such underlying lessor or such mortgagee or beneficiary
to Tenant to that effect, this Lease shall be deemed prior in lien to such
underlying lease or mortgage or deed of trust, whether this Lease is dated prior
to or subsequent to the date of said underlying lease or mortgage or deed of
trust. Tenant agrees that upon the request of Landlord, or any mortgagee or
beneficiary, Tenant shall execute whatever instruments may be required by
Landlord or by any mortgagee or beneficiary to carry out the intent of this
Section.
SEE ATTACHED RIDER FOR INSERTS
SECTION 13.04. REMEDIES. Failure of Tenant to execute any statements or
instruments necessary or desirable to effectuate the foregoing provisions of
this Article, within days after written request so to do by Landlord, shall
constitute a breach of this Lease. In the event of such failure, Tenant hereby
irrevocably appoints Landlord as attorney-in-fact for Tenant with full power and
authority to execute and deliver in the name of Tenant any such statements or
instruments, which appointment shall be in addition to any other rights or
remedies available to Landlord. In addition, for each day beyond the referenced
day period that Tenant shall fail to execute said statements or instruments,
Tenant shall pay to Landlord Five Hundred and 00/l00ths Dollars ($500.00) in
order to partially compensate Landlord for the administrative costs and other
damages arising from Tenant's failure. Such per diem amount shall be immediately
due and payable as additional rent under this Lease.
SEE ATTACHED RIDER FOR INSERTS
ARTICLE XIV. ASSIGNMENT AND SUBLETTING
SECTION 14.01. NO ASSIGNMENT OR SUBLETTING. Notwithstanding any provision
herein to the contrary or reference herein to concessionaires or subtenants or
otherwise, Tenant agrees not to assign or in any manner transfer this Lease or
any estate or interest therein, and not to lease or sublet the leased premises
or any part or parts thereof or any right or privilege appurtenant thereto, and
not to allow anyone to conduct business at, upon or from the leased premises
(whether as concessionaire, franchisee, licensee, permittee, subtenant,
department operator or otherwise), or to come in, by, through or under it, in
all cases either by voluntary or involuntary act of Tenant or by operation of
law or otherwise. Without limiting any of the other provisions contained in this
Section 14.01, the restrictions of this Section shall apply to any merger,
consolidation or other reorganization of Tenant or of Tenant's Guarantor or of
any corporate entity which directly or indirectly controls Tenant, and any such
merger, consolidation or other reorganization shall be deemed to be an
assignment of this Lease within the meaning of this Section 14.01. The sale,
issuance or transfer of any voting capital stock of Tenant or Tenant's Guarantor
or any voting capital stock of any corporate entity which directly or indirectly
controls Tenant (if any one of such entities, Tenant or Tenant's Guarantor or
any such controlling corporate entity, is a corporation the stock of which is
not traded on the New York Stock Exchange or the American Stock Exchange), or
any interests in any noncorporate entity which directly or indirectly controls
Tenant or Tenant's Guarantor which results in a change in the direct or indirect
voting control (or a change in the identity of any person, persons, entity or
entities with the power to vote or control at least fifty percent (50%) of the
voting shares of any class of stock) of Tenant, or Tenant's Guarantor, or any
corporate or noncorporate entity which directly or indirectly controls Tenant or
Tenant's Guarantor shall be deemed to be an assignment of this Lease within the
meaning of this Section 14.01. If Tenant is a partnership, trust or an
unincorporated association, then the sale, issuance or transfer of a controlling
interest therein, or the transfer of a majority interest in or a change in the
voting control of any partnership, trust, unincorporated association, or
corporation which directly or indirectly controls Tenant, or the transfer of any
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portion of any general partnership or managing interest in Tenant or in any such
entity, or any change or conversion of Tenant or of any such entity to a limited
liability company, a limited liability partnership, or any other entity which
possesses the characteristics of limited liability, shall be deemed to be a
prohibited assignment of this Lease within the meaning of this Section 14.01.
Any such prohibited act by Tenant or Tenant's Guarantor (or any attempt at
same), either voluntarily or involuntarily or by operation of law or otherwise,
shall, at Landlord's option, terminate this Lease without relieving Tenant of
any of its obligations hereunder for the balance of the stated term, and any
such act shall be null and void. The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof, or the termination thereof by
Landlord pursuant to any provision contained herein, shall not work a merger
and shall, at the option of Landlord, terminate all or any existing franchises,
concessions, licenses, permits, subleases, subtenancies, departmental operating
arrangements or the like, or may, at the option of Landlord, operate as an
assignment to Landlord of the same. Nothing contained elsewhere in this Lease
shall authorize Tenant to enter into any franchise, concession, license,
permit, subtenancy, departmental operating arrangement or the like, except
pursuant to the provisions of this Section. Landlord has entered into this
Lease with Tenant in order to obtain for the benefit of the entire regional
retail development the unique attraction of Tenant's trade name set forth in
Section 16.01 and the unique merchandising mix and product line associated with
Tenant's business as described in Section 7.01, and Landlord has specifically
relied on the identity and special skill of the Tenant in its ability to
conduct the specific business identified in Section 7.01, and the foregoing
prohibition on assignment or subletting or the like is expressly agreed to by
Tenant as an inducement to Landlord to lease to Tenant. Tenant hereby
acknowledges that the foregoing provisions of this Section 14.01 constitute a
freely negotiated restraint on alienation.
Without limiting any of the foregoing provisions, neither Tenant nor
any other person having an interest in the possession, use, occupancy or
utilization of the leased premises shall enter into any lease, sublease,
license, concession or other agreement for use, occupancy or utilization of
space in the leased premises which provides for rent or other payment for such
use, occupancy or utilization based in whole or in part on the net income or
profits derived by any person from the property leased, used, occupied or
utilized (other than an amount based on a fixed percentage or percentages of
receipts or sales), and any such purported lease, sublease, license, concession
or other agreement shall be absolutely void and ineffective as a conveyance of
any right or interest in the possession, use, occupancy or utilization of any
part of the leased premises.
SEE ATTACHED RIDER FOR INSERTS
ARTICLE XV. WASTE
SECTION 15.01. WASTE OR NUISANCE. Tenant shall not commit or suffer to be
committed any waste upon the leased premises and shall not place a load upon any
floor of the leased premises which exceeds the floor load per square foot which
such floor was designed to carry. Tenant shall not commit or suffer to be
committed any nuisance or other act or thing which may disturb the quiet
enjoyment of any other occupant or tenant of the regional retail development.
Tenant agrees that business machines and mechanical equipment used by Tenant
which cause vibration or noise that may be transmitted to the building or
buildings comprising the regional retail development or to the leased premises,
to such a degree as to be reasonably objectionable to Landlord or to any
occupant, shall be placed and maintained by Tenant at its expense in settings of
cork, rubber or spring-type vibration isolators sufficient to eliminate such
vibrations or noise. Tenant shall take such action as Landlord reasonably deems
necessary to prevent or terminate any such nuisance or waste arising out of
Tenant's business, including, without limitation, any nuisance created by
employees, agents, contractors, invitees or licensees of Tenant.
ARTICLE XVI. TRADE NAME, PROMOTIONAL CHARGE
SECTION 16.01. TRADE NAME. Tenant agrees (a) to operate its business in the
leased premises under the name specifically set forth in the attached Data
Sheet; (b) not to change the advertised name or character of the business
operated in the leased premises; and (c) to refer to the Shopping Center by the
name set forth in Section 1.01 for the regional retail development in
designating the location of the leased premises in all advertising and in all
other references to the location of the leased premises. Landlord shall have the
right to include Tenant's trade name in any public relations, promotional or
advertising materials or information. By its execution of this Lease, Tenant
authorizes Landlord to utilize Tenant's trade name in the foregoing manner.
SEE ATTACHED RIDER FOR INSERTS
SECTION 16.02. SOLICITATION OF BUSINESS. Tenant and Tenant's employees
and/or agents shall not solicit business in the parking areas or other common
areas, or any part of the regional retail development other than in the leased
premises, nor shall Tenant distribute any handbills or other advertising matter
in the parking area, other common areas, or any part of the regional retail
development other than in the leased premises. Tenant shall not give samples or
approach customers outside the leased premises for purposes of soliciting sales.
Moreover, and generally, Tenant shall not give away any promotional items which
could create a nuisance or require Landlord to incur additional common area
expenses.
SECTION 16.03. PROMOTIONAL CHARGE. (a) Landlord shall provide or cause to
be provided a program of advertising or promotional events which, in Landlord's
sole judgment, will serve to promote the regional retail development. Landlord
shall be compensated, out of promotional charges collected by Landlord during
each year for promotional services provided, in an amount equal to twenty-five
percent (25%) of the promotional charges so collected, on a non-cumulative
basis. Landlord shall not be obligated to expend more than is actually
collected. Any promotional
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services and personnel so provided shall be under the exclusive control and
supervision of Landlord, who shall have the sole authority to employ and
discharge personnel and to establish a budget. Tenant agrees to pay to Landlord,
as Tenant's share of the cost of said advertising and promotional program, an
annual promotional charge which originally shall equal the amount as shown in
the Data Sheet for this Lease, which annual promotional charge shall, at
Landlord's option, be payable by Tenant in equal monthly installments at the
time and in the manner set forth for rent payments in this Lease. However, such
annual promotional charge payable by Tenant will be adjusted commencing January
1st immediately succeeding the commencement date of the term of this Lease and
annually thereafter, by a percentage equal to the percentage increase from the
base period of the Index (as defined in Section 27.20) to the respective January
1st or the closest month thereto that the Index is published (but in no event
shall Tenant pay less than the original promotional charge as specified above).
The term "base period" shall refer to the month of adjustment in such annual
promotional charge closest to and prior to the date of commencement of the term
of this Lease (i.e., the most recent month prior to the commencement date during
which such promotional charge has been adjusted), or the date of the opening of
the Shopping Center, whichever of such dates shall be the later to occur. In
addition to this cost of living adjustment, such annual promotional charge may
be increased from time to time by Landlord to the extent required by increases
in the costs of promotional, public relations or advertising services provided
pursuant to this Section (including, without limitation, changes in costs
arising from variations in the type, nature or extent of such services). Tenant
also agrees to pay to Landlord, within ten (10) days after demand therefor, an
initial promotional charge in the amount set forth in the Data Sheet in addition
to the foregoing promotional charges. The various promotional charges set forth
in this Section 16.03 and in the Data Sheet shall be increased as of the
commencement date of the Lease to reflect the then current charges per square
foot for Shopping Center tenants.
(b) Landlord reserves the right at any time to cease providing promotional
services and to cause a Merchants' Association to be formed. Upon the formation
of the Association, Landlord will turn over to the Association any funds in its
possession, collected from tenants as promotional charges, not spent or required
to discharge indebtedness, and less Landlord's compensation due under Section
16.03(a). Thereupon, Landlord shall be relieved of any and all liability to
Tenant in connection with such advertising and promotional services. Upon
formation of the Association, Tenant shall become a member thereof and will
maintain membership in good standing and will abide by the regulations and
cooperate in the activities of such Association throughout the term of this
Lease and any extensions or renewals thereof. The purpose of the Merchants'
Association shall be to encourage its members to deal fairly and courteously
with their customers, to follow ethical business practices, and to assist the
business of its members by sales promotions and centerwide advertising. If
Landlord shall elect to provide promotional services and personnel to formulate
and effect an advertising, promotional and public relations program for the
Shopping Center, Landlord shall be reimbursed by the Merchants' Association for
Landlord's cost of providing such promotional services and personnel, in an
amount equal to twenty-five percent (25%) of the annual dues payable to the
Merchants' Association. Any promotional services and personnel so provided shall
be under the exclusive control and supervision of Landlord, who shall have the
sole authority to employ and discharge such personnel. The provisions of this
Section 16.03 shall be deemed to be covenants for the benefit of Landlord and
said Association as and when formed, and may be enforced by either of them as
binding obligations of Tenant. Tenant's obligation for payment of dues to the
Association shall be the same sum per month as Tenant was obligated to pay for
promotional service prior to the formation of the Association, subject, however,
to annual adjustments approved by the Board of Directors of the Association
increasing said dues to the extent required by increases in the costs of
promotional, public relations and advertising services (including, without
limitation, changes in costs arising from variations in the type, nature or
extent of such services). In addition, the cost of living adjustment referred to
in Section 16.03(a) above with respect to Tenant's monthly payment to Landlord
for promotion services shall also apply in the same manner to the Merchants'
Association dues. In the event that such a Merchants' Association shall be in
operation as of the date of this Lease, the parties hereby acknowledge the
present application of this Section l6.03(b).
(c) Landlord reserves the right, at any time, to dissolve any Merchants'
Association which may exist and to provide, or cause to be provided, a program
of advertising and promotional events which, in Landlord's sole judgment, will
serve to promote the regional retail development. In the event any such program
is so established, it shall be governed by the provisions of Section 16.03(a)
hereof, and Tenant's obligations shall be as set forth therein.
(d) All recurring payments, charges, dues and assessments (other than the
initial assessment) payable under this Section 16.03 shall be due in monthly
installments on the first day of each month during the term of this Lease, and
all such items, and the initial assessment, shall be paid without deduction or
offset. Failure by Tenant to pay all amounts when due shall carry with it the
same consequences under Article XIX hereof as Tenant's failure to pay rent.
ARTICLE XVII. DESTRUCTION OF LEASED PREMISES
SECTION 17.01. RECONSTRUCTION OF DAMAGED PREMISES. In the event the leased
premises shall be partially or totally destroyed by fire or other casualty
insured under the insurance carried by Landlord pursuant to Section 11.02 of
this Lease so as to become partially or totally untenantable, then the damage to
the leased premises shall be promptly repaired (unless Landlord shall elect not
to rebuild as hereinafter provided), and the minimum rent and (to the extent
covered by the insurance carried by Landlord under Section 11.02(b)) other
charges payable by Tenant to Landlord (to the extent that such charges are based
upon the square foot area of the leased premises) shall be abated in proportion
to the floor area of the leased premises rendered untenantable, and the Minimum
Gross Sales above which percentage rent is computed and payable shall likewise
be proportionately reduced. Payment of full rent and all other charges so abated
shall commence and Tenant shall be obligated to reopen for business on the
thirtieth (3Oth) day
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following the date that Landlord advises Tenant that the premises are
tenantable, unless Tenant opens at an earlier time in the damaged area or
remains open in such area following destruction or damage, in which event there
shall be no abatement or any such abatement shall terminate as of the date of
Tenant's earlier reopening. If Landlord shall elect to cause Tenant to make the
necessary repairs to the leased premises, as provided below, payment of full
rent and all other charges so abated shall commence and Tenant shall be
obligated to reopen for business on the sixtieth (60th) day following the date
that Landlord advises Tenant of Landlord's election for Tenant to perform such
work. Landlord shall be obligated to cause such repairs to be made unless
Landlord, at its sole option, elects to cause Tenant to make such repairs, in
which event Tenant shall promptly complete the same and Landlord will make
available to Tenant for the sole purpose of reconstruction of Tenant's
improvements such portion of any insurance proceeds received by Landlord from
its insurance carrier, under a policy carried pursuant to Section 11.02 of this
Lease, allocated to the leased premises by Landlord. In the event of any such
reconstruction by Tenant, an architect duly registered in the State shall be
selected by Landlord and shall direct the payment of such insurance proceeds.
Such insurance proceeds shall be payable to Tenant only upon receipt by Landlord
of certificates of said architect stating that the payments specified therein
are properly payable for the purpose of reimbursing Tenant for expenditures
actually made by Tenant in connection with such work. At the election of
Landlord or Landlord's mortgagee, direct payments may be made to material
suppliers and laborers upon written certification by said architect that such
payments are due and payable. Any such insurance proceeds in excess of Tenant's
actual expenditures in restoring the damage or destruction shall belong to
Landlord. In making repairs, restoration or reconstruction, Tenant, at its
expense, shall comply with all laws, ordinances, and governmental rules or
regulations, and shall perform all work or cause such work to be performed with
due diligence and in a first-class manner. All permits required in connection
with said repairs, restoration and reconstruction shall be obtained by Tenant at
Tenant's sole cost and expense. Any amount expended by Tenant in excess of such
insurance proceeds received by Landlord and made available to Tenant shall be
the sole obligation of Tenant. In the event of reconstruction or repair by
Landlord, any amount expended by Landlord in repairing the leased premises in
excess of the proceeds of insurance received by Landlord pursuant to Section
11.02 of this Lease allocated to the leased premises shall be repayable by
Tenant to Landlord within ten (10) days after receipt by Tenant from Landlord of
a statement setting forth the amount of such excess. The party required
hereunder to repair the damage to the leased premises shall reconstruct such
leased premises in accordance with the working drawings originally approved by
Landlord or with (at Landlord's sole election) new drawings prepared by Tenant
and acceptable to Landlord and Tenant. In no event shall Landlord be required to
repair or replace Tenant's merchandise, trade fixtures, furnishings or
equipment. If (i) more than thirty-five percent (35%) of the floor area of the
building in which the leased premises are located or of the Shopping Center
shall be damaged or destroyed by fire or other casualty, or (ii) during the last
three (3) years of the term hereof more than twenty-five percent (25%) of the
floor area of the leased premises or of the building in which the leased
premises are located or of the Shopping Center shall be damaged or destroyed by
fire or other casualty, or (iii) all or any part of the Shopping Center or said
building or the leased premises are damaged or destroyed at any time by the
occurrence of any risk not insured under the insurance carried by Landlord
pursuant to Sections 8.03 or 11.02(a), then Landlord, at its sole option, may
terminate this Lease by giving written notice to Tenant of Landlord's election
so to terminate, such notice to be given within ninety (90) days after the
occurrence of such damage or destruction. If Landlord repairs or rebuilds, or
requires Tenant to repair or rebuild the leased premises as herein provided,
Tenant, at Tenant's sole cost, shall repair or replace Tenant's merchandise,
trade fixtures, furnishings and equipment in a manner and to at least a
condition equal to that prior to the damage or destruction thereof.
SECTION 17.02. WAIVER OF SUBROGATION. Each party hereto does hereby waive,
remise, release and discharge the other party hereto and any officer, director,
shareholder, beneficiary, partner, agent, employee or representative of such
other party, of and from any liability whatsoever hereafter arising from loss,
damage or injury caused by fire or other casualty for which insurance containing
a waiver of subrogation is carried by the injured party at the time of such
loss, damage or injury to the extent of any recovery by the injured party under
such insurance.
ARTICLE XVIII. EMINENT DOMAIN
SECTION 18.01. TOTAL CONDEMNATION OF LEASED PREMISES. If the whole of the
leased premises shall be taken by any public authority under the power of
eminent domain or sold to public authority under threat or in lieu of such a
taking, then the term of this Lease shall cease as of the day possession shall
be taken by such public authority, and the rent shall be paid up to that day
with a proportionate refund by Landlord of such rent and other charges as may
have been paid in advance for a period subsequent to the date of the taking.
SECTION 18.02. PARTIAL CONDEMNATION. (a)(i) If less than the whole but more
than twenty percent (20%) of the leased premises or more than fifty percent
(50%) of the common areas shall be so taken under eminent domain, or sold to
public authority under threat or in lieu of such a taking, Tenant shall have the
right either to terminate this Lease and declare the same null and void as of
the day possession is taken by public authority, or, subject to Landlord's right
of termination as set forth in Section l8.02(b) of this Article, to continue in
the possession of the remainder of the leased premises, upon notifying Landlord
in writing within ten (10) days after such taking of Tenant's intention. In the
event Tenant elects to remain in possession, all of the terms herein provided
shall continue in effect, except that, as of the day possession of such
percentage of the leased premises is taken by public authority, the minimum
rent and other charges payable by Tenant to Landlord (to the extent that such
charges are based upon the square foot area of the leased premises) shall be
reduced in proportion to the floor area of the leased premises taken and the
Minimum Gross Sales above which percentage rent is computed and payable shall
likewise be proportionately reduced; thereafter, Landlord shall, at its own cost
and expense, make all necessary repairs or alterations to the basic building, so
as to
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constitute the remaining leased premises a complete architectural unit, and
Tenant, at Tenant's sole cost, shall similarly act with respect to Tenant's
improvements, trade fixtures, furnishings and equipment.
(ii) If twenty percent (20%) or less of the leased premises shall be so
taken, the lease term shall cease only on the part so taken, as of the day
possession shall be taken by such public authority, and Tenant shall pay rent
and other charges up to that day, with appropriate credit by Landlord (toward
the next installment of such rent or charges due from Tenant) of such rent or
charges as may have been paid in advance for a period subsequent to the date of
the taking; thereafter, the minimum rent and other charges payable to Landlord
(to the extent that such charges are based upon the square foot area of the
leased premises) shall be reduced in proportion to the amount of the leased
premises taken and the Minimum Gross Sales above which percentage rent is
computed and payable shall likewise be proportionately reduced. Landlord shall,
at its expense, make all necessary repairs or alterations to the basic building,
so as to constitute the remaining leased premises a complete architectural unit,
and Tenant, at Tenant's sole cost, shall similarly act with respect to Tenant's
improvements, trade fixtures, furnishings and equipment.
(b) If more than fifty percent (50%) of the building in which the leased
premises are located, or more than fifty percent (50%) of the leased premises,
or more than fifty percent (50%) of the Shopping Center or of the common areas,
shall be taken under power of eminent domain, or sold to public authority under
the threat or in lieu of such a taking, Landlord may, by written notice to
Tenant delivered on or before the tenth (10th) day following the date of
surrendering possession to the public authority, terminate this Lease as of the
day possession is taken by public authority. The rent and other charges shall be
paid up to the day possession is taken by public authority, with an appropriate
refund by Landlord of such rent as may have been paid in advance for a period
subsequent to that date.
SECTION 18.03. LANDLORD'S AND TENANT'S DAMAGES. All damages awarded for
such taking under the power of eminent domain or sale under threat or in lieu of
such a taking, whether for the whole or a part of the leased premises, shall
belong to and be the property of Landlord, irrespective of whether such damages
shall be awarded as compensation for diminution in value to the leasehold or to
the fee of the leased premises, and Tenant shall have no claim against either
Landlord or the condemning authority with respect thereto; provided, however,
that Landlord shall not be entitled to any award specifically designated as
compensation for, depreciation to, and cost of removal of, Tenant's stock and
trade fixtures.
ARTICLE XIX. DEFAULT
SECTION 19.01. RIGHT TO RE-ENTER. (a) In the event of (1) any failure of
Tenant to pay any rent or other charges due hereunder when due, or (2) if Tenant
shall fail to move into the premises and to commence the conduct of its business
the date specified in Section 1.02 hereof, or fail to perform any obligation
hereunder prior to such commencement date, or fail to continuously operate its
business pursuant to Section 7.02 for the purpose specified in Section 7.01
hereof, or fail to operate under the name specified in Section 16.01 hereof, or
if Tenant shall abandon said premises, or permit this Lease to be taken under
any writ of execution, or if there shall be any default by Tenant (or by any
person or entity which, directly or indirectly, controls, is controlled by, or
is under common control with Tenant) under any other lease with Landlord (or
with any person or entity which is affiliated with Landlord or which, directly
or indirectly, controls, is controlled by, or is under common control with
Landlord, or which is managed by the managing agent utilized by Landlord for the
Shopping Center) which shall not be remedied within the applicable grace period,
if any, provided therefor under such other lease, or if there shall be any
default by Tenant or any entity affiliated with Tenant with respect to any
financing instrument or arrangement, if any, relating to any items used in, or
the operation of business upon, the leased premises, or (3) any failure to
perform any other of the terms, conditions or covenants of this Lease to be
observed or performed by Tenant for more than thirty (30) days after written
notice of such default shall have been mailed to Tenant; then Landlord, besides
other rights or remedies it may have, shall have the right to declare this Lease
terminated and the term ended (in which event, this Lease and the term hereof
shall expire, cease and terminate with the same force and effect as though the
date set forth in any required notice were the date originally set forth herein
and fixed for the expiration of the term and Tenant shall vacate and surrender
the premises but shall remain liable for all obligations arising during the
balance of the original stated term as hereafter provided as if this Lease had
remained in full force and effect) and Landlord shall have the right to bring a
special proceeding to recover possession from Tenant holding over and/or
Landlord may, in any of such events, without notice, re-enter the leased
premises either by force or otherwise, and dispossess, by summary proceedings or
otherwise, Tenant and the legal representative of Tenant or other occupant of
the leased premises and remove their effects and hold the premises as if this
Lease had not been made, and Tenant hereby waives the service of notice of
intention to re-enter or to institute legal proceedings to that end.
SEE ATTACHED RIDER FOR INSERTS
(b) In addition to the remedies set forth herein for such failure by
Tenant, Landlord shall have the further remedy of erecting a barricade at the
storefront of the leased premises at such time as possession of the leased
premises is deemed vested in Landlord, which barricade may be erected, at
Tenant's expense, and without notice to Tenant or resort to legal process, and
without Landlord in any manner becoming liable for any loss or damage which may
be occasioned thereby. Notwithstanding the foregoing provisions of this Section,
in the event Tenant shall fail to perform or shall default in the performance of
term, covenant or condition of this Lease on two (2) or more separate occasions
during any twelve-month period, then, even though such failures or defaults may
have been cured by Tenant, any further failure or default by Tenant during
shall be deemed a default without the ability for cure by Tenant. During
the continuance of any failure of performance or any default by Tenant in the
performance of any term, covenant or condition of this Lease, Tenant shall not
be entitled to exercise any rights or options, or to receive any funds or
proceeds being held under or pursuant to this Lease, notwithstanding any
contrary provisions contained herein. In the
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event of re-entry by Landlord, Landlord may remove all persons and property from
the leased premises and such property may be stored in a public warehouse or
elsewhere at the cost of, and for the account of Tenant, without notice or
resort to legal process and without Landlord being deemed guilty of trespass, or
becoming liable for any loss or damage which may be occasioned thereby. In
addition, and to the extent permitted by law, in the event of re-entry by
Landlord, Landlord may, but shall not be required to, padlock or otherwise
secure the entrances to the leased premises without prior notice or resort to
legal process and without being deemed guilty of trespass or becoming liable for
any loss or damage; all costs and expenses incurred by Landlord in securing the
entrances to the leased premises shall be borne by Tenant and shall be payable
to Landlord on ten (10) days' written notice; and any such padlocking or
securing of the premises shall not constitute or be deemed as an election on
Landlord's part to terminate this Lease unless a written notice of such
intention shall be given to Tenant or unless the termination of this Lease is
decreed by a court of competent jurisdiction. In the event Tenant shall not
remove its property from the leased premises within ten (10) days after Tenant
has vacated the premises, then such property shall be deemed abandoned by Tenant
and Landlord may dispose of the same without liability to Tenant. At any time
that Tenant has failed to pay rent or other charges within ten (10) days after
the same shall be due, thereafter Landlord shall not be obligated to accept any
payment from Tenant unless such payment is made in certified funds. To the
extent that this Lease specifically provides for any abatement of rent otherwise
payable by Tenant under this Lease, or any payment by Landlord to Tenant, such
abatement shall not be effective, nor shall such payment be required to be made,
if Tenant shall have failed to observe or perform any of Tenant's obligations
hereunder or if Tenant shall otherwise be in default hereunder, and Tenant shall
be obligated to immediately repay to Landlord the amount of any rent previously
abated or the amount of any payment previously made by Landlord to Tenant
hereunder, notwithstanding anything contained in this Lease to the contrary.
SEE ATTACHED RIDER FOR INSERTS
SECTION 19.02. RIGHT TO RELET. Should Landlord elect to re-enter, as herein
provided, or should it take possession pursuant to legal proceedings or pursuant
to any notice provided for by law, it may either terminate this Lease or it may
from time to time, without terminating this Lease, make such alterations and
repairs as may be necessary in order to relet the premises, and relet said
premises or any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rent and upon such other
terms and conditions as Landlord in its sole discretion may deem advisable. Upon
each such reletting all rents and other sums received by Landlord from such
reletting shall be applied, first, to the payment of any indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the payment of any costs
and expenses of such reletting, including reasonable brokerage fees and
attorneys' fees and the costs of any alterations and repairs; third, to the
payment of rent and other charges due and unpaid hereunder; and the residue, if
any, shall be held by Landlord and applied in payment of future rent as the same
may become due and payable hereunder. If such rents and other sums received from
such reletting during any month be less than that to be paid during that month
by Tenant hereunder, Tenant shall pay such deficiency to Landlord; if such rents
and the sums shall be more, Tenant shall have no right to, and shall receive no
credit for, the excess. Such deficiency shall be calculated and paid monthly. No
re-entry or taking possession of the leased premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention is given to Tenant or unless the termination thereof is
decreed by a court of competent jurisdiction. Notwithstanding any such reletting
without termination, Landlord may at any time elect to terminate this Lease for
such previous breach. Should Landlord at any time terminate this Lease for any
breach, in addition to any other remedies it may have, it may recover from
Tenant all damages it may incur by reason of such breach, including the cost of
recovering the leased premises, reasonable attorneys' fees, and including the
worth at the time of such termination of the excess, if any, of the amount of
rent and charges equivalent to rent reserved in this Lease for the remainder of
the stated term over the then reasonable rental value of the leased premises for
the remainder of the stated term, all of which amounts shall be immediately due
and payable from Tenant to Landlord. In determining the rent which would be
payable under this Lease by Tenant subsequent to default, the percentage rent
for each year of the unexpired portion of the term shall be equal to the average
percentage rent payable by Tenant from the commencement of the term to the time
of default, or during the preceding three (3) full lease years, whichever period
is shorter. The failure or refusal of Landlord to relet the premises shall not
affect Tenant's liability. The terms "entry" and "re-entry" are not limited to
their technical meanings. Nothing contained in this Lease shall be construed to
limit or prejudice the right of Landlord to prove for and obtain as damages by
reason of the termination of this Lease or re-entry of the leased premises for
the default of Tenant under this Lease an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
shall be greater than any of the sums referred to in this Section 19.02.
SECTION 19.03. EXPENSES. In case suit shall be brought for recovery of
possession of the leased premises, for the recovery of rent or any other amount
due under the provisions of this Lease, or because of the breach of any other
covenant herein contained and a breach shall be established, shall pay to
all expenses incurred therefor, including reasonable attorneys' fees.
In addition, in the event Landlord shall incur expenses, including reasonable
attorneys' fees, as a result of Tenant's failure to perform or comply with any
term, covenant or condition set forth in this Lease, Tenant shall pay to
Landlord all such expenses. Any amounts payable by Tenant to Landlord pursuant
to this Section 19.03 or Section 11.03 of this Lease may be included in any
subsequent monthly rent bill to Tenant, and the failure of Tenant to promptly
pay same shall entitle Landlord to all remedies for failure to pay rent as
available under this Lease or at law or in equity.
SEE ATTACHED RIDER FOR INSERTS
SECTION 19.04. WAIVER OF COUNTERCLAIMS AND TRIAL BY JURY. Landlord and
Tenant waive their right to trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other (except
for personal injury or property damage) on any matters whatsoever arising out of
or in any way connected with this Lease, the relationship of Landlord and
Tenant, Tenant's use of or occupancy of said premises, and any
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emergency statutory or any other statutory remedy. Tenant shall not interpose
any counterclaim or counterclaims or claims for set-off, recoupment or deduction
of rent in a summary proceeding for nonpayment of rent or other action or
summary proceeding based on termination, holdover or other default in which
Landlord seeks repossession of the leased premises from Tenant.
SEE ATTACHED RIDER FOR INSERTS
ARTICLE XX. BANKRUPTCY OR INSOLVENCY
SECTION 20.01. TENANT'S INTEREST NOT TRANSFERABLE. Neither Tenant's
interest in this Lease, nor any estate hereby created in Tenant nor any interest
herein or therein, shall pass to any trustee, except as may specifically be
provided pursuant to the Bankruptcy Code (11 USC Section 101 et. seq.), or to
any receiver or assignee for the benefit of creditors or otherwise by operation
of law.
SECTION 20.02. TERMINATION. In the event the interest or estate created in
Tenant hereby shall be taken in execution or by other process of law, or if
Tenant or Tenant's Guarantor, if any, or Tenant's executors, administrators, or
assigns, if any, shall be adjudicated insolvent or bankrupt pursuant to the
provisions of any state law or an order for the relief of such entity shall be
entered pursuant to the Bankruptcy Code, or if a receiver or trustee of the
property of Tenant or Tenant's Guarantor, if any, shall be appointed by reason
of the insolvency or inability of Tenant or Tenant's Guarantor, if any, to pay
its debts, or if any assignment shall be made of the property of Tenant or
Tenant's Guarantor, if any, for the benefit of creditors, then and in any such
events, this Lease and all rights of Tenant hereunder shall automatically cease
and terminate with the same force and effect as though the date of such event
were the date originally established herein and fixed for the expiration of the
term, and Tenant shall vacate and surrender the leased premises but shall remain
liable as herein provided. Notwithstanding the foregoing provisions of this
Section, in the event that such termination shall result solely from the
bankruptcy or insolvency of, or such other described event relating to, Tenant's
Guarantor, Landlord shall have the option to reinstate all of the provisions of
this Lease (including, without limitation, the obligation of Tenant to
continuously operate pursuant to Article VII hereof) upon written notice to
Tenant.
SECTION 20.03. TENANT'S OBLIGATION TO AVOID CREDITORS' PROCEEDINGS. Tenant
or Tenant's Guarantor, if any, shall not cause or give cause for the appointment
of a trustee or receiver of the assets of Tenant or Tenant's Guarantor, if any,
and shall not make any assignment for the benefit of creditors, or become or be
adjudicated insolvent. The allowance of any petition under any insolvency law
except under the Bankruptcy Code or the appointment of a trustee or receiver of
Tenant or Tenant's Guarantor, if any, or of the assets of either of them, shall
be conclusive evidence that Tenant caused, or gave cause, therefor, unless such
allowance of the petition, or the appointment of a trustee or receiver, is
vacated within thirty (30) days after such allowance or appointment. Any act
described in this Section 20.03 shall be deemed a material breach of Tenant's
obligations hereunder, and this Lease shall thereupon automatically terminate in
the same manner and with the same force and effect as set forth in Section 20.02
hereof. Landlord does, in addition, reserve any and all other remedies provided
in this Lease or in law. Notwithstanding the foregoing provisions of this
Section, in the event that such termination shall result solely from the
bankruptcy or insolvency of, or such other described event relating to, Tenant's
Guarantor, Landlord shall have the option to reinstate all of the provisions of
this Lease (including, without limitation, the obligation of Tenant to
continuously operate pursuant to Article VII hereof) upon written notice to
Tenant.
SECTION 20.04. RIGHTS AND OBLIGATIONS UNDER THE BANKRUPTCY CODE. (a) Upon
the filing of a petition by or against Tenant under the Bankruptcy Code, Tenant,
as debtor and as debtor in possession, and any trustee who may be appointed
agree as follows: (i) to perform each and every obligation of Tenant under this
Lease including, but not limited to, the manner of "operation" as provided in
Section 7.02 of this Lease until such time as this Lease is either rejected or
assumed by order of the United States Bankruptcy Court; (ii) to pay monthly in
advance on the first day of each month, as reasonable compensation for use and
occupancy of the leased premises, an amount equal to all minimum rent and other
charges otherwise due pursuant to this Lease and to pay percentage rent monthly
at the percentage set forth in this Lease for the lease year in which such month
falls on all sales during such month in excess of one twelfth (1/12th) of the
Minimum Gross Sales for such lease year, with payment of all such percentage
rent to be made by the tenth (10th) day of the succeeding month; (iii) to reject
or assume this Lease within sixty (60) days of the appointment of such trustee
under Chapter 7 of the Bankruptcy Code or within sixty (60) days (or such
shorter term as Landlord, in its sole discretion, may deem reasonable, so long
as notice of such period is given) of the filing of a petition under any other
Chapter; provided that no extension of either of the foregoing periods by or on
behalf of Tenant shall be permitted; (iv) to give Landlord at least forty-five
(45) days' prior written notice of any proceeding relating to any assumption of
this Lease; (v) to give at least thirty (30) days' prior written notice of any
abandonment of the leased premises, with any such abandonment to be deemed a
rejection of this Lease and an abandonment of any property not previously
removed from the leased premises; (vi) to do all other things of benefit to
Landlord otherwise required under the Bankruptcy Code; (vii) to be deemed to
have rejected this Lease in the event of the failure to comply with any of the
above; and (viii) to have consented to the entry of an order by an appropriate
United States Bankruptcy Court providing all of the above, waiving notice and
hearing of the entry of same.
(b) No default of this Lease by Tenant, either prior to or subsequent to
the filing of such a petition, shall be deemed to have been waived unless
expressly done so in writing by Landlord.
(c) It is understood and agreed that this is a Lease of real property in a
shopping center and that, therefore, Section 365(b)(3) of the Bankruptcy Code is
applicable to any proposed assumption of this Lease in a bankruptcy case.
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(d) Included within and in addition to any other conditions or obligations
imposed upon Tenant or its successor in the event of assumption and/or
assignment are the following: (i) the cure of any monetary defaults and the
reimbursement of pecuniary loss immediately upon entry of a court order
providing for assumption and/or assignment; (ii) the deposit of an additional
sum equal to three (3) months' rent to be held pursuant to the terms of Section
26.01 of this Lease (notwithstanding any alteration or modification of the terms
of said Section); (iii) the use of the leased premises as set forth in Section
7.01 of this Lease and the quality, quantity and/or lines of merchandise of any
goods or services required to be offered for sale are unchanged; (iv) the
payment of any sums which may then be due or which may thereafter become due
pursuant to the provisions of Section 2.04 of this Lease; (v) the debtor, debtor
in possession, trustee, or assignee of such entity demonstrates in writing that
it has sufficient background including, but not limited to, substantial
retailing experience in shopping centers of comparable size and financial
ability to operate a retail establishment out of the leased premises in the
manner contemplated in this Lease, and meets all other reasonable criteria of
Landlord as did Tenant upon execution of this Lease; (vi) the prior written
consent of any mortgagee to which this Lease has been assigned as collateral
security; and (vii) the premises, at all times, remains a single store and no
physical changes of any kind may be made to the premises unless in compliance
with the applicable provisions of this Lease.
(e) Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall, upon demand, execute and
deliver to Landlord an instrument confirming such assumption.
ARTICLE XXI. ACCESS BY LANDLORD
SECTION 21.01. RIGHT OF ENTRY. Landlord or Landlord's agents shall have the
right to enter the leased premises at all reasonable times to examine the same
and to show them to prospective purchasers or mortgagees. Landlord or Landlord's
agents shall have the further right to enter the leased premises to make such
repairs, alterations, improvements or additions as Landlord may deem necessary
or desirable, irrespective of whether the work shall be for the leased premises
or for other premises or facilities, and Landlord shall be allowed to take all
material into and upon the leased premises that may be required therefor without
the same constituting an eviction of Tenant in whole or in part, and the rent
and other charges reserved shall in no wise abate while said repairs,
alterations, improvements, or additions are being made, by reason of loss or
interruption of business of Tenant, or otherwise. Landlord may, at any time,
exhibit the leased premises to prospective tenants. If an excavation shall be
made upon land adjacent to the leased premises, or shall be authorized to be
made, Tenant shall afford to the person causing or authorized to cause such
excavation, license to enter upon the leased premises for the purpose of doing
such work as said person shall deem necessary to preserve the wall or the
building of which leased premises form a part from injury or damage and to
support the same by proper foundations without any claim for damages or
indemnity against Landlord, or diminution or abatement of rent.
SEE ATTACHED RIDER FOR INSERTS
ARTICLE XXII. TENANT'S PROPERTY
SECTION 22.01. TAXES ON TENANT'S PROPERTY. Tenant shall be responsible for,
and shall pay, prior to delinquency, any and all taxes, assessments, levies,
fees and other governmental charges of every kind or nature (for all purposes
under this Lease, collectively called "taxes") levied or assessed by municipal,
county, state, federal or other taxing or assessing authority upon, against or
with respect to (i) the leased premises or any leasehold interest, (ii) all
furniture, fixtures, equipment and any personal property of any kind owned by
Tenant or any previous tenant and occupant, and placed, installed or located in,
within, upon or about the leased premises, (iii) all alterations, additions or
improvements of whatsoever kind or nature, if any, made to the leased premises,
by Tenant or any previous tenant or occupant, and (iv) rents or other charges
payable by Tenant to Landlord, irrespective of whether any of the terms
described in clauses (i) through (iv) above are assessed against real or
personal property, and irrespective of whether any of such items are assessed to
or against Landlord or Tenant. If at any time during the term of this Lease any
of such taxes are not levied and assessed separately and directly to Tenant (for
example, if the same are levied or assessed to Landlord, or upon or against the
building containing the leased premises and/or the land underlying said
building), Tenant shall pay to Landlord Tenant's share thereof as determined by
Landlord.
SECTION 22.02. LOSS AND DAMAGE. Landlord shall not be responsible or liable
to Tenant for any loss or damage that may be occasioned by or through the acts
or omissions of persons occupying adjoining premises or any part of the premises
adjacent to or connected with the premises hereby leased or any part of the
building of which the leased premises are a part, or any other area in the
regional retail development, or for any loss or damage resulting to Tenant or
its property from bursting, stoppage or leaking of water, gas, sewer or steam
pipes, or (without limiting the foregoing) for any damages or loss of property
within the leased premises from any cause whatsoever.
SECTION 22.03. NOTICE BY TENANT. Tenant shall give immediate notice to
Landlord in case of any damage to or destruction of all or any part of, or
accidents in, the leased premises or of defects therein or in alterations,
decorations, additions or improvements, including, without limitation, any
fixtures or equipment.
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ARTICLE XXIII. HOLDING OVER
SECTION 23.01. HOLDING OVER. Any holding over after the expiration of the
term hereof with the consent of the Landlord, shall be construed to be a tenancy
from month to month at a monthly minimum rent of not less than one-sixth (1/6)
the annual minimum rent effective for the final lease year or partial lease year
preceding expiration of the term (subject to further adjustment pursuant to the
various provisions of this Lease, including, without limitation, Section 2.04),
together with an amount estimated by Landlord for the monthly additional charges
payable pursuant to this Lease, and shall otherwise be on the same terms and
conditions (including, without limitation, payment of percentage rent) as herein
specified so far as applicable, subject to any changes in any of the foregoing
terms or conditions as may be submitted by Landlord to Tenant. Any holding over
without Landlord's consent shall entitle Landlord to re-enter the leased
premises as provided in Section 19.01 of this Lease.
SECTION 23.02. SUCCESSORS. All rights and liabilities herein given to, or
imposed upon, the respective parties hereto shall extend to and bind the several
respective heirs, executors, administrators, successors, and assigns of the said
parties; and if there shall be more than one person or entity comprising Tenant,
they shall all be bound jointly and severally by the terms, covenants and
agreements herein. No rights, however, shall inure to the benefit of any
assignee of Tenant.
ARTICLE XXIV. RULES AND REGULATIONS
SECTION 24.01. RULES AND REGULATIONS. Tenant agrees to comply with and
observe all rules and regulations established by Landlord from time to time,
provided the same shall apply uniformly to all tenants of the Shopping Center.
Tenant's failure to keep and observe said rules and regulations shall constitute
a breach of the terms of this Lease in the same manner as if the rules and
regulations were contained herein as covenants. In the case of any conflict
between said rules and regulations and this Lease, this Lease shall be
controlling.
SEE ATTACHED RIDER FOR INSERTS
ARTICLE XXV. QUIET ENJOYMENT
SECTION 25.01. LANDLORD'S COVENANT. Upon payment by Tenant of the rents
herein provided, and upon the observance and performance of all covenants, terms
and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the leased premises for the term hereby
demised without hindrance or interruption by Landlord or any other person or
persons lawfully or equitably claiming by, through or under Landlord, subject,
nevertheless, to the terms and conditions of this Lease and any mortgage, deed
of trust or underlying lease to which this Lease is subordinate.
SECTION 25.02. TENANT'S COVENANT. Tenant hereby acknowledges and agrees
that Landlord has specifically relied upon the identity, skill, product line,
and trade name of Tenant in entering into this Lease with Tenant. Tenant
recognizes that its use of the leased premises in accordance with the use clause
set forth in the Data Sheet and its compliance with the particular provisions of
Article VII hereof, regarding the conduct and continuous operation of Tenant's
business in the leased premises throughout the term of this Lease, forms a
material inducement to Landlord, and Tenant specifically covenants that it will
strictly adhere to these provisions. Any ambiguities in Article VII or in the
use clause set forth in the Data Sheet shall be construed against Tenant and in
favor of Landlord. Tenant further acknowledges and agrees that any indebtedness
from Tenant to Landlord existing as of the date of this Lease shall be deemed
additional rent hereunder, and Tenant's commitment and obligation to pay all
such indebtedness as additional rent under this Lease has formed an additional
necessary consideration to Landlord in entering into this Lease and in hereby
granting Tenant the right to use the leased premises as set forth herein.
ARTICLE XXVI. SECURITY PROVISION
SECTION 26.01. SECURITY. The amount set forth in the Data Sheet as a
security deposit is payable by Tenant, upon the execution of this Lease by
Tenant, in the manner and at the place where minimum rent is payable. Landlord
is to retain said amount as security for the faithful performance of all
covenants, conditions and agreements of this Lease. Such amount is occasionally
referred to herein as the "security." Landlord may, at its option, apply the
security to remedy defaults in the payment of any rent or other charge
hereunder, to repair damages to the leased premises caused by Tenant, or to
clean the leased premises upon the expiration or termination of this Lease; in
no event however, shall Landlord be obligated so to apply the security.
Landlord's right to bring a special proceeding to recover or otherwise to obtain
possession of the leased premises before or after Landlord's declaration of the
termination of this Lease for nonpayment of rent or for any other reason shall
not in any event be affected by reason of the fact that Landlord holds such
security. Such security, if not applied toward the payment of rent in arrears or
toward the payment of damages suffered by Landlord by reason of Tenant's breach
of the covenants, conditions and agreements of this Lease, is to be returned to
Tenant without interest, except as provided by law, when this Lease is
terminated according to its terms, but in no event is such security to be
returned until Tenant has vacated the leased premises and delivered possession
thereof to Landlord. In the event that Landlord repossesses itself of the leased
premises, whether by special proceeding or re-entry or otherwise, because of
Tenant's default or failure to carry out the covenants, conditions and
agreements of this Lease, Landlord may apply such security upon all damages
suffered to the date of said repossession
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and may retain the security to apply upon such damages as may be suffered or
shall accrue thereafter by reason of Tenant's default or breach. In the event
any bankruptcy, insolvency, reorganization or other creditor-debtor proceedings
shall be instituted by or against Tenant, or its successors or assigns, or any
guarantor of Tenant hereunder, such security shall be deemed to be applied first
to the payment of any rents and/or other charges due Landlord for all periods
prior to the institution of such proceedings, and the balance, if any, of such
security may be retained by Landlord in partial liquidation of Landlord's
damages. Landlord shall not be obligated to keep such security as a separate
fund but may commingle the security with its own funds. In the event Landlord
applies the security in whole or in part, Tenant shall, upon demand by Landlord,
deposit sufficient funds to maintain the security in the initial amount. Failure
of Tenant to deposit such additional security shall entitle Landlord to avail
itself of the remedies provided in this Lease for nonpayment of rent by Tenant.
The acceptance by Landlord of the security deposit submitted by Tenant shall not
render this Lease effective unless and until Landlord shall have executed and
actually delivered to Tenant a fully-executed copy of this Lease.
ARTICLE XXVII. MISCELLANEOUS
SECTION 27.01. WAIVER; ELECTION OF REMEDIES. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. In particular, but without limitation, if Tenant assigns or transfer its
interest in this Lease contrary to the terms of this Lease, any acceptance by
Landlord of such assignee's or transferee's payment shall not be deemed to be a
waiver of the restrictions set forth in Section 14.01 hereof. In the event that
Tenant shall be at any time in default of both monetary and nonmonetary terms,
covenants or conditions of this Lease, any acceptance by Landlord of any payment
rendered by Tenant shall not have the effect of curing Tenant's nonmonetary
defaults and shall not have the effect of curing any monetary default other than
the particular amount owing for which such payment is specifically accepted by
Landlord. Following notice of termination or any other remedy exercised by
Landlord with respect to any monetary default of Tenant, such default shall not
be deemed cured by the payment of rent owing by Tenant for the current period
only, and Landlord may apply such payments to current rent only without any
effect upon Tenant's existing indebtedness and continuing monetary default,
notwithstanding any contrary instructions by or on behalf of Tenant, which
instructions shall be null and void and of no effect. In addition, after the
service of notice or the commencement of a suit, or after final judgment for the
possession of the leased premises, Landlord may receive and collect rent due
from Tenant, and the payment of rent by Tenant shall not waive or affect said
notice or suit or judgment. One or more waivers of any covenant or condition by
Landlord shall not be construed as a waiver of a subsequent breach of the same
covenant or condition, and the consent or approval by Landlord to or of any act
by Tenant requiring Landlord's consent or approval shall not be deemed to render
unnecessary Landlord's consent or approval to or of any subsequent similar act
by Tenant. The failure of Landlord to insist upon a strict performance of any
term, condition or covenant contained in this Lease shall not be deemed a waiver
of any rights or remedies that Landlord may have and shall not be deemed a
waiver of any subsequent breach or default in the terms, conditions or covenants
herein contained, and any such failure shall not be construed as creating a
custom of Landlord's accepting other than strict performance or as modifying in
any way the terms, covenants or conditions of this Lease. No breach by Tenant of
a covenant or condition of this Lease shall be deemed to have been waived by
Landlord unless such waiver is in writing signed by Landlord. No act or thing
done by Landlord or Landlord's agents shall be deemed an acceptance of surrender
of the leased premises and no agreement to accept such surrender shall be valid
unless in writing signed by Landlord. In addition to any and all other remedies
available to Landlord, Landlord may obtain an injunction to restrain any breach
or threatened breach of any term, covenant or condition of this Lease. The
rights and remedies of Landlord under this Lease or under any specific section,
subsection or clause hereof shall be cumulative and in addition to any and all
other rights and remedies which Landlord has or may have elsewhere under this
Lease or at law or equity, whether or not such section, subsection or clause
expressly so states. Nothing contained in this Lease shall be construed to
confer upon any person or entity other than Landlord or Tenant any rights,
benefits or causes of action, except to the extent specifically otherwise
provided in this Lease and except to the extent provided for the benefit of any
mortgagee, deed-of-trust beneficiary, ground lessor or trustee for the Shopping
Center.
SECTION 27.02. ENTIRE AGREEMENT. The Addendum, and all exhibits, and
riders, if any, attached hereto form a part of this Lease and shall be given
full force and effect, as fully as if set forth at length herein. This Lease and
said Addendum, exhibits, and riders, if any, so attached hereto and forming a
part hereof, set forth all the covenants, promises, agreements, conditions and
understandings between Landlord and Tenant concerning the leased premises, and
there are no covenants, promises, agreements, conditions or understandings,
either oral or written, between them other than as are herein set forth. Tenant
has not relied upon any representation of Landlord or its agents, other than any
items contained in this Lease, as an inducement to enter into this Lease. No
alteration, amendment, change or addition to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed by each party.
SECTION 27.03. INTERPRETATION AND USE OF PRONOUNS. Nothing contained herein
shall be deemed or construed by the parties hereto, nor by any third party, as
creating the relationship of principal and agent or of partnership or of joint
venture between the parties hereto, it being understood and agreed that neither
the method of computation of rent, nor any other provision contained herein, nor
any acts of the parties herein shall be deemed to create any relationship
between the parties hereto other than the relationship of Landlord and Tenant.
Whenever herein the singular number is used the same shall include the plural,
and the masculine gender shall include the feminine and neuter genders.
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SECTION 27.04. DELAYS. In the event that either party hereto shall be
delayed in the performance of its initial construction or maintenance and/or
repair obligations by reason of strikes, lockouts, labor troubles, inability to
procure materials or shall at any time be so delayed by reason of failure of
power, restrictive governmental laws or reasons of a similar nature not the
fault of the party delayed in performing work or doing acts required under the
terms of this Lease, then performance of such act shall be excused for the
period of the delay and the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay. Nothing contained
in this Section shall excuse Tenant from the continuous operation of its
business in the leased premises in accordance with the provisions of Sections
7.01 and 7.02 hereof. The provisions of this Section 27.04 shall not operate to
delay the commencement of the term of this Lease or to excuse Tenant from
payment of minimum rent, percentage rent or any other payments required by the
terms of this Lease; provided, however, that the obligation of Tenant to open
for business pursuant to Section 1.03 hereof may be delayed pursuant to the
provisions of this Section 27.04. Further, Landlord's reduction of heat, light,
air conditioning, or any other services whatsoever to the Shopping Center
because of any similar or dissimilar event constituting a cause for excusable
delay hereunder shall not relieve Tenant from its obligations under Article VII
of this Lease.
SECTION 27.05. NOTICES. Unless specifically stated to the contrary in this
Lease, any notice, demand, request or other instrument which may be or is
required to be given by Tenant under this Lease or by law shall be sent by
United States certified mail, return receipt requested, postage prepaid, and
shall be deemed to have been given as of the third day following receipt of same
by Landlord; or, if required to be given by Landlord under this Lease or by law,
such notice, demand, request or other instrument may be sent by certified mail,
by regular mail, by overnight courier (using Federal Express, United Parcel
Service, or a similar reputable courier service), by personal delivery or by
other comparably reliable means, and shall be deemed to have been given upon the
date of mailing or the date of other submission to Tenant, whichever of such
dates shall be the first to occur; and shall be addressed (a) if to Landlord, at
the address set forth for Landlord on Page D1 of this Lease or at such other
address as Landlord may designate by written notice, Attention Lease
Administration, together with copies thereof to such other parties designated by
Landlord, and (b) if to Tenant, at the leased premises or the address set forth
for Tenant on Page D1 of this Lease, or such other address as Tenant shall
designate by written notice. All notices given from Landlord to Tenant,
including, without limitation, notices of default and/or termination of Tenant's
interests under this Lease, may be given by Landlord's attorney acting as agent
on behalf of Landlord.
SECTION 27.06. CAPTIONS AND SECTION NUMBERS. The captions, section numbers,
article numbers, and index appearing in this Lease are inserted only as a matter
of convenience and in no way define, limit, construe, or describe the scope or
intent of such sections or articles of this Lease, nor in any way affect this
Lease.
SECTION 27.07. BROKER'S COMMISSION. Each party represents and warrants to
the other party that the warrantor has dealt with no brokers and that there are
no claims for brokerage commissions or finder's fees, nor will there be any such
claim, arising from any act or omission of the warrantor in connection with this
Lease, and the warrantor agrees to indemnify the other party and hold it
harmless from all liabilities arising from any such claim, including, without
limitation, the cost of attorneys' fees in connection therewith. Such agreement
shall survive the termination of this Lease.
SECTION 27.08. RECORDING. Tenant shall not record this Lease or any
memorandum, affidavit or other notice of this Lease.
SEE ATTACHED RIDER FOR INSERTS
SECTION 27.09. FURNISHING OF FINANCIAL STATEMENTS. Upon
Landlord's written request, Tenant shall promptly furnish Landlord, from time
to time, with financial statements (including, without limitation, operating
statements including an annual profit and loss statement for the individual
store unit covered by this Lease) reflecting Tenant's current financial
condition, and written evidence of then current ownership of managing and
controlling interests in Tenant and in any entities which directly or
indirectly control or manage Tenant (which written evidence shall include,
without limitation, the names of all existing managers, shareholders and
partners, as applicable, of record and their respective management/ownership
interests as of the date of such writing), which financial statements and
written evidence shall be certified as being true and correct by the chief
financial officer or partner and by the chief executive officer or partner of
Tenant.
SEE ATTACHED RIDER FOR INSERTS
SECTION 27.10. LANDLORD'S USE OF COMMON AREAS. Landlord reserves the right,
from time to time, to utilize portions of the common areas for carnival type
shows, rides and entertainment, outdoor shows, displays, automobile and other
product shows, the leasing of permanent and temporary kiosks, or such other uses
which in Landlord's judgment tend to attract the public. Further, Landlord
reserves the right to utilize the lighting standards and other areas in the
parking facilities for advertising purposes. Any revenues derived by Landlord
from the use of the common areas, whether from usage fees or otherwise, shall
not be applied as a deduction against any cost or expense required to be paid by
Tenant under this Lease.
SEE ATTACHED RIDER FOR INSERTS
SECTION 27.11. TRANSFER OF LANDLORD'S INTEREST. In the event of any
transfer or transfers of Landlord's interest in the premises, including a
so-called sale-leaseback, the transferor shall be automatically relieved of any
and all obligations on the part of Landlord accruing from and after the date of
such transfer, provided that (a) the interest of the transferor, as Landlord, in
any funds then in the hands of Landlord in which Tenant has an interest shall be
turned over, subject to such interest, to the then transferee; and (b) notice of
such sale, transfer or lease shall be
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delivered to Tenant as required by law. Upon the termination of any such lease
in a sale-leaseback transaction prior to termination of this Lease, the former
lessee thereunder shall become and remain liable as Landlord hereunder until a
further transfer. No holder of a mortgage or deed of trust, or underlying lessor
on an underlying lease, to which this Lease is or may be subordinate, and no
lessor under a so-called sale-leaseback shall be responsible in connection with
the security deposited hereunder, unless such mortgagee, holder of such deed of
trust, underlying lessor or lessor shall have actually received the security
deposited hereunder.
SECTION 27.12. FLOOR AREA. (a) The term "floor area" as used in this Lease
means, with respect to any leasable area in the Shopping Center or in the
regional retail development, the aggregate number of square feet of floor space
of all floor levels therein, including any mezzanine space (to the extent
reflected as floor area in the applicable leases), measured from (i) the outside
faces of all perimeter walls thereof other than any party wall separating such
premises from other leasable premises, (ii) the center line of any such party
wall, (iii) the outside face of any interior wall, and (iv) the building and/or
leaseline adjacent to any entrance to such premises. In the event Landlord
determines that the square foot area of the leased premises is at variance with
the square foot area stated in this Lease, Landlord may, at its option, adjust
the floor area of the leased premises and make proportional adjustments in
minimum rent, percentage rent, and promotional/Merchants' Association charges,
and other charges to Tenant under this Lease.
(b) For the purpose of this Lease, in determining the gross leasable floor
area or the gross leased and occupied floor area of the Shopping Center, there
shall be excluded therefrom, at the sole option of Landlord, the leasable area
of 20,000 square feet or more occupied by a single entity (which, for purposes
of this Lease, shall be defined as a department store), the floor area of any
premises leased for the operation of a post-office type or packaging or delivery
facility or other public/consumer-service or governmental facility, the floor
area of any space without direct customer access from the enclosed Mall, and the
total floor area utilized by Landlord for the operation of a skating rink or
other recreational area, child care center, community room, library, project
offices, and related rooms, common areas and project areas, which shall be
deemed amenities to the Shopping Center. The term "gross leased and occupied
floor area" shall include only such areas as are leased and occupied by tenants
subsequent to the dates of commencement of the terms of their respective leases.
Areas shall not be considered occupied to the extent that Landlord shall not be
receiving full proportionate share contributions for the same. No deduction or
exclusion from floor area shall be made by reason of columns, ducts, stairs,
elevators, escalators, shafts, or other interior construction or equipment.
SECTION 27.13. INTEREST ON PAST DUE OBLIGATIONS. Any amount due from Tenant
to Landlord hereunder which is not paid when due (including, without limitation,
amounts due as reimbursement to Landlord for costs incurred by Landlord in
performing obligations of Tenant hereunder upon Tenant's failure to so perform)
shall bear interest at the highest rate then allowed under the usury laws of the
State from the date due until paid, unless otherwise specifically provided
herein, but the payment of such interest shall not excuse or cure any default by
Tenant under this Lease.
SECTION 27.14. LIABILITY OF LANDLORD. If Landlord shall fail to perform any
covenant, term or condition of this Lease upon Landlord's part to be performed,
and if as a consequence of such default Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the proceeds of
sale received upon execution of such judgment and levied thereon against the
right, title and interest of Landlord in the Shopping Center and out of net
income from such property received by Landlord, or out of the consideration
received by Landlord from the sale or other disposition of all or any part of
Landlord's right, title and interest in the Shopping Center, subject,
nevertheless, to the rights of Landlord's mortgagee, and neither Landlord, nor
the individuals or entities which constitute the partners of the partnership
which is Landlord, nor the individuals or entities which constitute the partners
of the partnership which is the beneficiary of the Trust of which Landlord is
Trustee (if applicable), shall be liable for any deficiency. If Landlord is
identified in this Lease as a Trustee, Tenant hereby recognizes that Landlord is
executing this Lease as Trustee under an express trust, and it is expressly
understood and agreed by and between the parties hereto, anything herein to the
contrary notwithstanding, that each and all of the representations, covenants,
undertakings and agreements herein made on the part of the Landlord while in
form purporting (except as herein otherwise expressed) to be the
representations, covenants, undertakings, and agreements of the Landlord are
nevertheless each and every one of them, made and intended not as personal
representations, covenants, undertakings and agreements by the Landlord or for
the purpose or with the intention of binding said Landlord personally but are
made and intended for the purpose of binding only that portion of the trust
property specifically leased hereunder, and this Lease is executed and delivered
by said Landlord not in its own right, but solely in the exercise of the powers
conferred upon it as such Trustee; that no duty shall rest upon Landlord to
sequester the trust estate or the rents, issues and profits arising therefrom,
or the proceeds arising from any sale or other disposition thereof; and that no
personal liability or personal responsibility is assumed by nor shall at any
time be asserted or enforceable against Trustee, or any successor trustee or any
of the beneficiaries under said trust, on account of this Lease or on account of
any representation, covenant, undertaking or agreement of the said Landlord in
this Lease contained, either expressed or implied, all such personal liability,
if any, being expressly waived and released by the Tenant herein and by all
persons claiming by, through or under said Tenant.
SECTION 27.15. ACCORD AND SATISFACTION. Payment by Tenant or receipt by
Landlord of a lesser amount than the rent or other charges herein stipulated may
be, at Landlord's sole option, deemed to be on account of the earliest due
stipulated rent or other charges, or deemed to be on account of rent owing for
the current period only, notwithstanding any instructions by or on behalf of
Tenant to the contrary, which instructions shall be null and void, and no
endorsement or statement on any check or any letter accompanying any check
payment as rent or other charges shall be deemed an accord and satisfaction, and
Landlord shall accept such check or payment without prejudice to Landlord's
S29
<PAGE>
right to recover the balance of such rent or other charges or pursue any other
remedy in this Lease or in law or in equity against Tenant.
SECTION 27.16. EXECUTION OF LEASE; NO OPTION. The submission of this Lease
to Tenant shall be for examination purposes only, and does not and shall not
constitute a reservation of or option for Tenant to lease, or otherwise create
any interest of Tenant in the leased premises or any other premises situated in
the Shopping Center. Execution of this Lease by Tenant shall be irrevocable. The
return to Landlord of Tenant-executed copies of this Lease shall not be binding
upon Landlord, notwithstanding any preparation or anticipatory reliance or
expenditures by Tenant or any time interval, until Landlord has in fact executed
and actually delivered a fully-executed copy of this Lease to Tenant.
SECTION 27.17. GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State. If any provision of this Lease or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease shall not be affected
thereby and each remaining provision of the Lease shall be valid and enforceable
to the full extent permitted by the law. Tenant appoints the following persons
at the following locations as agent to receive service of process, writs,
notices, summonses, or other legal documents in any suit, action or proceeding
which Landlord may commence against Tenant: (a) the person in charge at the
leased premises, or (b) any officer, partner or other principal of Tenant, or
any person in charge, at the Tenant's address as set forth on Page D1 of this
Lease. Where permitted by law or local court rule, Tenant consents to service of
such process by United States mail, in the manner specified in the applicable
law or court rule.
SECTION 27.18. SPECIFIC PERFORMANCE OF LANDLORD'S RIGHTS. shall
have the right to obtain specific performance of any and all of the covenants
or obligations of under this Lease, and nothing contained in this
Lease shall be construed as or shall have the effect of abridging such right.
SEE ATTACHED RIDER FOR INSERTS
SECTION 27.19. CERTAIN RULES OF CONSTRUCTION. Time is of the essence in
this Lease. Notwithstanding the fact that certain references elsewhere in this
Lease to acts required to be performed by Tenant hereunder omit to state that
such acts shall be performed at Tenant's sole cost and expense, unless the
context clearly implies to the contrary, each and every act to be performed or
obligations to be fulfilled by Tenant pursuant to this Lease shall be performed
or fulfilled at Tenant's sole cost and expense. Any breach or default by Tenant
of its obligations under this Lease shall be deemed material. Tenant shall be
fully responsible and liable for the observance and compliance by
concessionaires with all the terms and conditions of this Lease, which terms and
conditions shall be applicable to concessionaires as fully as if such
concessionaires were the Tenant hereunder; any failure by a concessionaire fully
to observe and comply with the terms and conditions of this Lease shall
constitute a default hereunder by Tenant. Nothing contained in the preceding
sentence shall constitute a consent by Landlord to any concession, subletting or
other arrangement proscribed by Section 14.01. All provisions of this Lease have
been freely negotiated by and between the parties.
SEE ATTACHED RIDER FOR INSERTS
SECTION 27.20. INDEX. The term "Index" as used in this Lease shall be the
"Consumer Price Index for All Urban Consumers (1982-84 = 100), U.S. City
Average, All Items," as published by the Bureau of Labor Statistics of the
United States Department of Labor. If the Index is not published by the Bureau
of Labor Statistics or another governmental agency at any time during the term
of this Lease, or if the Index is otherwise re-named, discontinued or
superseded, then the calculations based on the Index shall be made using the
most closely comparable statistics on the purchasing power of the consumer
dollar as published by a responsible financial authority and selected by
Landlord.
SECTION 27.21. SURVIVAL; NONDISCLOSURE; FREE ACT. The obligations of Tenant
for payment of rent and charges under this Lease shall survive the expiration or
earlier termination of the term of this Lease. By its execution of this Lease,
Tenant acknowledges and agrees that it has read this Lease, understands the
contents hereof, and is signing this Lease as its own free act and deed, and as
the free act and deed of the representatives signing on Tenant's behalf, without
any persuasion or coercion by any person or entity, and with full advice of
counsel.
-------------------------------------------------------------------
[End of Standard Form; signature and acknowledgment pages for the Lease appear
after the Data Sheet on the pages immediately preceding the Addendum.]
S30
<PAGE>
[Site plan of shopping center]
Exhibit A, page 1 of 6
<PAGE>
[Upper level key plan]
Exhibit A, page 2 of 6
<PAGE>
[Bldg. G upper level floor plan]
Exhibit A, page 3 of 6
<PAGE>
[Lower level key plan]
Exhibit A, page 4 of 6
<PAGE>
[Bldg. G. lower level floor plan]
Exhibit A, page 5 of 6
<PAGE>
LEGAL DESCRIPTION OF SHOPPING CENTER
Parcel 1:
That part of Lot 2A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in
Woodfield, and that part of Lot 2 in Woodfield, taken as a Tract, said Woodfield
being a Subdivision of part of the Northwest Quarter, Northeast Quarter and
Southeast Quarter of Section 13, Township 41 North, Range 10, East of the Third
Principal Meridian, bounded and described as follows:
Commencing at the most Northerly corner of Lot 2A aforesaid, thence South
43(degrees) 40' 00" East, along the Northeasterly line of said Lot 2A, 25.67
feet to the point of beginning; thence South 43(degrees) 40' 00" East along said
Northeasterly line of Lot 2A, 308.33 feet; thence South 46(degrees) 20' 00"
West, 30.00 feet; thence South 43(degrees) 40' 00" East, 86.75 feet; thence
North 46(degrees) 20' 00" East, 192.42 feet; thence South 43(degrees) 40' 00"
East, 1.42 feet; thence North 46(degrees) 20' 00" East, 25.17 feet; thence North
43(degrees) 40' 00" West, 6.75 feet; thence North 88(degrees) 40' 00" West, 8.25
feet; thence North 43(degrees) 40' 00" West, 2.33 feet; thence North 01(degree)
20' 00" East, 4.95 feet; thence North 01(degree) 20' 00" East, 2.33 feet; thence
North 43(degrees) 40' 00" West, 53.92 feet; thence North 46(degrees) 20' 00"
East, 52.67 feet; thence North 43(degrees) 40' 00" West, 272.00 feet; thence
South 46(degrees) ?0' 00" West, 50.67 feet; thence North 43(degrees) 40' 00"
West, 41.50 feet; thence South 46(degrees) 20' 00" West, 20.25 feet; thence
North 43(degrees) 40' 00" West, 2.33 feet; thence North 88(degrees) 40' 00"
West, 7.78 feet; thence South 46(degrees) ?0' 00" West, 56.46 feet; thence North
88(degrees) 40' 00" West, 6.36 feet; thence South 46(degrees) 20' 00" West,
11.75 feet; thence South 01(degree) 20' 00" West, 11.55 feet; thence South
46(degrees) 20' 00" West, 30.08 feet; thence North 88(degrees) 40' 00" West
11.55 feet; thence South 46(degrees) 20' 00" West 11.75 feet; thence South
01(degrees) 20' 00" West, ?.36 feet; thence South 46(degrees) 20' 00" West,
28.46 feet to the point of beginning, in Cook County, Illinois.
Also
Parcel 2:
Lot 10 and Lot 2 in Woodfield, a Subdivision of part of the Northwest Quarter
and the Northeast Quarter and the Southeast Quarter of Section 13, Township 41
North, Range 10, East of the Third Principal Meridian, in Cook County, Illinois,
except that part of Lot 2 lying Northerly of the following described line:
Beginning at a point on the East line of said Lot 2, said point being 8.897 feet
Southerly of (as measured a long the East line of said Lot 2) the Northeasterly
corner of said Lot 2; thence Westerly along a straight line having a bearing of
South 88(degrees) 17' 05" West a distance of 171.83 feet to a point on the West
line of said Lot 2, said point being 7.119 feet Southerly of (as measured along
the West line of said Lot 2) the Northwesterly corner of said Lot 2, said area
containing approximately 1,005 square feet, and except Lot A in the
Resubdivision of parts of Lots 2, 5, 6 and 7 in Woodfield, being a Subdivision
of part of the Northwest Quarter, Northeast Quarter and Southeast Quarter of
Section 13, Township 41 North, Range 10, East of the Third Principal Meridian,
(except that part bounded and described as follows: commencing at the most
Northerly corner of said Lot 2A; thence South 43(degrees) 40' 00" East, along
the Northeasterly line of said Lot 2A, 334.00 feet to the point of beginning,
thence South 46(degrees) 20' 00" West 30.00 feet; thence South 43(degrees) 40'
00" East, 5.00 feet; thence North 46 20' 00", East, 30.00 feet; thence North
43(degrees) 40' 00" West, 5.00 feet to the point of beginning) in Cook County,
Illinois, and in addition thereto Lot 5A in the resubdivision of parts of Lots
2, 5, 6 and 7 in Woodfield, being a Subdivision of part of the Northwest
Quarter, Northeast Quarter and Southeast Quarter of Section 13, Township 41
North, Range 10, East of the Third Principal Meridian, Cook County, Illinois,
excepting therefrom the following:
That part of Lot 2A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in
Woodfield, and that part of Lot 2 in Woodfield, taken as a Tract, said Woodfield
being a Subdivision of part of the Northwest Quarter, Northeast Quarter and
Southeast Quarter of Section 13, Township 41 North, Range 10, East of the Third
Principal Meridian, bounded and described as follows:
Commencing at the most Northerly corner of Lot 2A aforesaid, thence South
43(degrees) 40' 00" East, along the Northeasterly line of said Lot 2A, 25.67
feet to the point of beginning; thence South 43(degrees) 40' 00" East along said
Northeasterly line of Lot 2A, 308.33 feet; thence South 46(degrees) 20' 00"
West, 30.00 feet; thence South 43(degrees) 40' 00" East, 86.75 feet; thence
North 46(degrees) 20' 00" East, 192.42 feet; thence South 43(degrees) 40' 00"
East, 1.42 feet; thence North 46(degrees) 20' 00" East, 25.17 feet; thence North
43(degrees) 40' 00" West, 6.75 feet; thence North 88(degrees) 40' 00" West, 8.25
feet; thence North 43(degrees) 40' 00" West, 2.33 feet; thence North 01(degrees)
20' ?0" East, 4.95 feet; thence North 01(degrees) 20' 00" East, 2.33 feet;
thence North 43(degrees) 40' 00" West, 53.92 feet; thence North 46(degrees) 20'
00" East, 52.67 feet; thence North 43(degrees) 40' 00" West, 272.00 feet; thence
South 46(degrees) ?0' 00" West, 50.67 feet; thence North 43(degrees) 40' 00"
West, 41.50 feet; thence South 46(degrees) 20' 00" West, 20.25 feet; thence
North 43(degrees) 40' 00" West, 2.33 feet; thence North 88(degrees) 40' 00"
West, 7.78 feet; thence South 46(degrees) 20' 00" West, 56.46 feet; thence North
88(degrees) 40' 00" West, 6.36 feet; thence South 46(degrees) 20' 00" West, 1.75
feet; thence South 01(degrees) 20' 00" West, 11.55 feet; thence South
46(degrees) 20' 00" West, 30.08 feet; thence North 88(degrees) 40' 00" West,
11.55 feet; thence South 46(degrees) 20' 00" West, 11.75 feet; thence South
01(degrees) 20' 00" West, 6.36 feet; thence South 46(degrees) 20' 00" West,
28.46 feet, to the point of beginning, in Cook County, Illinois.
Exhibit A, page 6 of 6
<PAGE>
EXHIBIT B
CONSTRUCTION
This Exhibit B shall be deemed to include Exhibit B-1 and any additional
construction exhibits as may be attached to this Lease. Such additional exhibits
may have the effect of providing further specifications or criteria or may serve
to amplify or adjust certain of the provisions contained in this Exhibit B.
SECTION I. EXISTING IMPROVEMENTS
The reuse by Tenant of existing improvements, if any, within the leased premises
shall be as dictated by practicality and Landlord's existing design criteria and
shall be subject to Landlord's written approval.
SECTION II. LANDLORD'S WORK
A. A complex of building shells and common area improvements of exterior and
interior design and materials as determined by Landlord substantially as
shown in Exhibit A.
B. If any partitions are required to separate the leased premises from
adjacent spaces, Landlord shall install metal stud framing only, after
Tenant has performed any demolition necessary to accommodate installation
of said framing. Such stud framing shall extend from the floor slab of the
leased premises to the underside of the floor or roof structure. Tenant
shall reimburse Landlord as Tenant's share of the cost of such work, $20.00
per lineal foot of said stud framing. Tenant shall install gypsum board on
Tenant's side of stud framing to underside of structure as required for a
one-hour fire resistant separation.
C. In the event that the leased premises are located in a retail development,
or in an expansion wing of a retail development, which development or
expansion wing shall not yet have opened for business to the public, and
Tenant shall be able to complete its construction within the leased
premises prior to such opening, Landlord shall not provide a temporary
barricade at the storefront lease line, except to the extent that Landlord
shall determine that such barricade is necessary or desirable. If the
leased premises are not located in such a development or in such an
expansion wing, or if Tenant shall be unable to complete the construction
of the leased premises and to open for business at the time that such
development or expansion wing, as applicable, first opens for business to
the public, Landlord shall provide, for Tenant's use during construction
and demolition, a temporary barricade at the storefront lease line. Tenant
shall reimburse Landlord $45.00 per lineal foot of storefront lease line
for any such temporary barricade provided by Landlord. Landlord shall
remove the storefront barricade upon completion of Tenant's Work and when
Tenant is prepared to open for business as determined by Landlord. Landlord
shall have the option, by written notice to Tenant, to require Tenant to
remove the storefront barricade and to store the same at a location
specified by Landlord within the regional retail development. In the event
of such removal by Tenant, Tenant shall be responsible for any damage
caused to the barricade by such removal and storage. In either case, Tenant
shall immediately repair any damage caused to the leased premises by the
removal of the barricade.
D. If the entire leased premises shall not have been previously occupied by
another tenant or occupant, the provision of utility connections by
Landlord shall be as set forth under Section II of Exhibit B-1. If the
entire leased premises shall have been previously occupied, and the
following utilities or utility stubs are not contained within the premises,
Landlord shall cause said utilities to be extended to within the leased
premises at a point which is closest to Landlord's pickup point. Such
utilities shall include: sanitary, domestic cold water, plumbing vent
(where applicable), fire protection, and air conditioning supply duct stub
(where applicable). Refer to Exhibit B-1 (and/or to other construction
exhibits, if any, attached to this Lease) for additional information on
certain utilities.
SECTION III. TENANT'S WORK
Tenant at its sole cost and expense shall perform all work required to complete
the leased premises to a finished condition ready for the conduct of business
therein. Tenant's Work shall conform to criteria, procedures, and schedules as
set forth in Sections IV, V, and VI respectively, of this Exhibit, and shall
include, but not be limited to, the following:
A. Field Conditions: Prior to the preparation of its working drawings and the
commencement of its construction. Tenant shall survey the site to inspect,
verify and coordinate all existing conditions within the leased premises.
Such survey shall include the location of existing mall utilities which are
to remain, placement of wall stud framing defining the leased premises, and
identification of various improvements made by previous occupant(s), if
any, which are to remain, be relocated or removed and the determination of
the extent of demolition or repair to be performed by Tenant. Tenant shall
advise Landlord immediately of any discrepancies with respect to Landlord's
Space Layout drawings.
The results of such survey shall be incorporated into Tenant's working
drawings and specifications. Tenant shall verify conditions pertaining to
the leased premises from time to time after commencement of construction of
its leased premises. Any adjustments to the work arising from field
conditions not apparent on drawings and other building documents shall
receive the prior written approval of Landlord.
Exhibit B. page 1 of 11
<PAGE>
Immediately following the installation by Landlord of wall stud framing
defining the leased premises. Tenant shall verify the accuracy of said
installation and shall immediately advise Landlord of any discrepancies.
Failure to so notify Landlord shall be deemed as acceptance by Tenant of
said installation and layout.
Tenant shall coordinate its work with the work of others or with existing
conditions occurring above or below the leased premises and shall make
changes from time to time as required to accommodate such work or
conditions.
B. Working Drawings and Specifications: Working Drawings and Specifications as
set forth in Section V of this Exhibit.
C. Demolition
1. All demolition required to facilitate Tenant's construction shall be
performed by Tenant at Tenant's expense, and shall be as approved by
Landlord on Tenant's demolition plans, prior to commencing such work.
a. Floors: Tenant shall repair or replace any part of the existing
concrete slab which may have been removed by Landlord or Tenant
to allow for extension of underground utilities. Backfill and
compaction shall be provided by Tenant.
b. Interior Finishes: Tenant shall demolish any existing
improvements made by previous occupant(s) within the leased
premises which Tenant has indicated on the survey referred to in
Section 111(A) above are not to remain. Such work shall include
but not be limited to: storefront and storefront enclosure,
abandoned party walls, interior partitions and finishes, floor
coverings, ceilings and miscellaneous improvements. Removal of
demolition debris shall be performed by Tenant. In no event shall
removal of debris take place through the malls during the hours
in which the Shopping Center is open for business.
c. Mechanical and Electrical Equipment: Tenant shall remove all
mechanical and electrical systems existing on the leased premises
which are no longer functional or designated to be reused. Such
work shall include but not be limited to: roof top and interior
HVAC equipment and supports, duct work, wire and conduits,
electrical distribution equipment, plumbing fixtures, sprinkler
lines, telephone equipment and any specialty equipment as may
exist in the leased premises.
2. Repairs:
Tenant shall make all repairs to the premises necessitated by the
removal of the improvements made by previous occupant(s). Such work
shall include but not be limited to: concrete slab, roof, structural
members, mechanical and electrical equipment, telephone equipment,
party walls and interior finishes.
D. Architectural and Finishing Work
1. Storefront work.
2. Partitions.
a. To the extent that new corridor-partitions are required, Landlord
will erect stud framing and one (1) layer of 5/8" firecode gypsum
wallboard on the corridor side of one-hour fire resistant
partitions separating the leased premises from adjacent
service/exit corridors. Such stud framing shall extend from the
floor slab of the leased premises to the underside of the floor
or roof structure. Tenant shall reimburse Landlord as Tenant's
share of the cost of such work $45.00 per lineal foot of said
stud framing, and gypsum wallboard. Tenant shall install one (1)
layer of 5/8" firecode gypsum wallboard on Tenant's side of stud
framing to underside of structure as required for a one-hour fire
resistant separation.
Note: Service/exit corridors where a two-hour fire resistant
partitions separating the leased premises from the adjacent
service/exit corridor is required, Landlord will erect stud
framing and two (2) layers of 5/8" firecode gypsum wallboard on
the corridor side of two-hour fire resistant partitions
separating the leased premises from adjacent service/exit
corridors. Tenant shall reimburse Landlord as Tenant's share of
the cost of such work $66.00 per lineal foot of said stud framing
and gypsum wallboard. Tenant shall install two (2) layers of 5/8"
firecode gypsum wallboard on Tenant's side of stud framing to
underside of structure as required for a two-hour fire resistant
separation.
3. All required interior partitioning, fire separations and doors,
service exit door, ceiling work, floor coverings, commercial grade
finish hardware, and painting and finishing work.
4. Covering and finishing of columns to achieve a one-hour fire resistant
rating.
5. Toilet facilities.
6. Sign(s) and sign panel backgrounds.
Exhibit B. page 2 of 11
<PAGE>
7. Floors:
a. In upper level Tenant spaces with a depressed structural concrete
floor, concrete topping to achieve a finished floor elevation at
the same elevation as the mall.
b. Repairs as may be required to accommodate extension of
underground utilities.
c. All slabs on grade. Tenant shall provide sand fill and/or remove
excess as required and compact same to 95% modified proctor and
install a vapor barrier (minimum .004 mill visqueen) and a
concrete minimum strength of 3,000 pounds with 6 x 6 No. 10 woven
wire mesh (minimum thickness 4") in accordance with Standard
Project Details, finished as required to receive floor finishes.
d. Finished floor elevation at all store entrances shall be at the
same elevation as adjacent areas. All carpet areas are to be
depressed.
E. Structural
1. Any alterations and/or additions and reinforcements to Landlord's
structure required to accommodate Tenant's Work, all of which must be
designed by a certified structural engineer at Tenant's expense.
Performance of such work is subject to prior written approval of
Landlord.
F. Mechanical
1. All plumbing, heating, ventilating, and air conditioning systems
within or directly related to Tenant's leased premises, proceeding
from the points of connection to utilities as listed in Exhibit B-1,
or modifications to existing mechanical systems, all in accordance
with Landlord's design criteria.
G. Electrical
1. All electrical and telephone systems within or directly related to the
leased premises proceeding from points of connection to utilities as
listed in Exhibit B-1 (or in other construction exhibits, if any,
attached to this Lease), or modifications to existing systems, all in
accordance with Landlord's design criteria.
H. Fire Protection
1. A complete, hydraulically calculated fire protection sprinkler system,
proceeding from the point of connection to Landlord's system or
modifications or removal of existing fire protection sprinkler system
and existing fire retardant materials in accordance with Landlord's
design criteria. All such work shall be performed, at Tenant's sole
cost and expense, by a qualified sprinkler contractor acceptable to
Landlord. Landlord's approval of the foregoing shall not constitute
the assumption of any responsibility by Landlord for the accuracy or
sufficiency thereof, and Tenant shall be solely responsible therefor.
Tenant shall be responsible for the cost of the complete removal of
all existing fire-retardant materials and all demolition associated
with this removal. All work will be done in strict compliance with all
local. state, and federal codes and requirements. All demolition and
removal work will be performed by contractors under contract with the
Landlord.
All of the work performed pursuant to this Section III shall, for the purpose of
the Lease to which this Exhibit is attached and made a part, be deemed to be
improvements made to the leased premises by Tenant.
SECTION IV. CRITERIA - TENANT'S WORK.
The requirements, criteria and/or outline specifications as set forth herein
represent minimum standards for the preparation of working drawings,
construction and finish of the leased premises by Tenant:
A. Standard Project Details and Construction Information
1. Standard Project Details and Construction Information, issued by
Landlord, as they pertain to Tenant's Work, shall govern with respect
to such work. Such details shall be reviewed by Tenant and
incorporated as required in Tenant's Working Drawings and
Specifications for the leased premises.
B. Design Loads
1. Structural loading imposed by any of Tenant's Work on a temporary or
permanent basis shall not exceed the following allowable live loads:
a. Stores located on supported slabs (levels other than on-grade):
75 lbs. per square foot.
b. Common areas, mall courts, and galleries: 75 lbs. per square
foot.
c. On-grade slabs: 125 lbs. per square foot.
d. Roof: 20 lbs. per square foot.
Exhibit B, page 3 of 11
<PAGE>
C. Architectural, Structural
1. Storefront work:
a. The configuration of the storefront line, as established by
Landlord, shall be considered the leaseline, beyond which no
element of the storefront may extend.
b. All storefront components, including head tracks for sliding
doors, grille roller supports, guides and supports for side
rolling grilles, etc., shall be structurally fastened and braced
to the building structure. All aluminum storefront components
which remain visible during business hours, such as sliding doors
and other glazing sections, rolling grilles or ornamental metal
shall have an anodized finish.
c. Electronic surveillance or other shoplifting detection devices
and security systems shall be incorporated and integrated within
Tenant's storefront. Free-standing "boxes" or "columns" or other
exposed equipment or decals shall be prohibited.
2. Ceilings:
Non-combustible ceilings on a concealed metal suspension system shall
be used throughout all Tenant's public areas. An exposed metal
suspension system may be permitted only if the system consists of 2' x
2' tee grid with regressed lay-in acoustical tile in horizontal planes
only; vertical or sloped use of exposed tees is prohibited. Taped,
painted and/or plaster sprayed gypsum board ceilings shall be used in
conjunction with all storefront soffits. The use of exposed wood or
other combustible material above ceilings or in any other attic spaces
is prohibited.
3. Walls:
5/8" Firecode (UL listed) gypsum board shall be used on all party
walls where a one-hour fire resistant separation is required. All
interior partitions shall have gypsum board finish on all sides. A
one-hour fire resistant rating is required for all steel columns.
4. Floors:
a. Carpeting and/or other quality floors, such as glazed or unglazed
tiles or hardwood flooring shall be used in Tenant's public
areas. The reuse of flooring materials not in compliance with the
foregoing is prohibited.
b. Toilet rooms and kitchens shall have waterproofed floors and door
thresholds.
5. Service Exit Door:
One hinged 3'-0" x 7'-0" x 1-3/4" prime coated, one-hour fire
labeled, hollow metal service exit door, frame, and commercial
grade hardware unless otherwise required by code. The service door
shall be installed in a vestibule, by Tenant at its expense, if
required by code.
6. Rubbish Storage:
a. Food and beverage service Tenants shall provide rubbish and solid
waste storage room(s) within leased premises.
b. Floor area to be waterproofed with membrane approved in writing
by Landlord.
7. General:
a. Landlord shall have the right to locate, both vertically and
horizontally, utility lines, air ducts, flues, refrigerant
lines, drains, sprinkler mains and valves, and such other
facilities, including access panels for same, within the leased
premises, as deemed necessary by engineering design and/or code
requirements. Landlord's right to locate facilities within the
leased premises shall include the facilities required by other
tenants. Landlord shall also have the right to locate mechanical
and other equipment on the roof over the leased premises.
b. Notwithstanding anything to the contrary contained in this Lease
or in any of the exhibits attached thereto, all flashing,
counter-flashing, roof penetrations, and roofing repairs shall
conform to the project roofing specifications. Roof repairs or
penetrations required by removal or relocation of existing
equipment or installation of new equipment (cutting of roof and
deck material and/or repair of same) shall be performed by
Landlord's roofing contractor at Tenant's expense.
Tenant shall enter into a direct contract with Landlord's roofing
contractor.
Exhibit B, page 4 of 11
<PAGE>
D. Mechanical
1. Plumbing:
a. Plumbing fixtures and accessories shall be of commercial quality
and shall be of water conserving type.
b. Tenant shall provide a water meter (calibrated in gallons) in an
easily accessible location (or, at Landlord's direction, Tenant
will install a remote reader device).
c. Floor drains shall be provided in toilet rooms and kitchens
and/or food service areas.
d. Tenant shall be obligated to pay to Landlord, at the time Tenant
obtains its construction permit, any capital facility connection
charge imposed by the governmental unit having jurisdiction,
together with all other costs and expenses incurred or to be
incurred by Landlord with respect to Tenant's construction of and
connection to water and wastewater facilities, and with respect
to particular plumbing fixtures, in accordance with all
applicable ordinances in effect from time to time.
Refer to Exhibit B-1 for additional criteria.
2. Heating, Ventilating and Air Conditioning:
a. If Tenant elects to utilize existing HVAC system, said system
shall be completely upgraded and repaired to like new condition
at Tenant's sole cost and expense.
b. If Tenant elects to install a new HVAC system or a supplement to
an existing system, said systems, shall be installed in complete
compliance with criteria presently established for the Shopping
Center.
Refer to Exhibit B-1 for additional criteria.
3. Fire Protection:
Hydraulically calculated fire protection sprinkler system, fire hose
cabinets, fire extinguishers and other equipment within the leased
premises in accordance with Landlord's insurance underwriters' Fire
Rating Inspection Bureau, and Code requirements. Since the entire fire
protection system for the project is required to be an inter-related,
centrally controlled installation, Tenant shall cause to be designed
and installed, by a qualified sprinkler contractor acceptable to
Landlord, said system within the leased premises in accordance with
Landlord's requirements and shall submit shop drawings, specifications
and hydraulic calculations for the sprinkler system to the Landlord's
Insurance Underwriters' Fire Rating Inspection Bureau for approval.
Landlord's approval of the foregoing shall not constitute the
assumption of any responsibility by Landlord for the accuracy of
sufficiency thereof, and Tenant shall be solely responsible therefor.
Said work shall be accomplished without interrupting fire service to
remainder of Shopping Center during occupied hours.
E. Electrical
1. Tenant, at its expense, shall furnish and install and/or modify the
existing to provide a complete electrical service proceeding from the
Landlord's point of connection as defined in Exhibit B-1 to a point
within the leased premises. This work shall include, but not be
limited to, furnishing and installing a fusible disconnect switch at
Landlord's/utility company's distribution equipment and conduit and
conductors of sufficient capacity for Tenant's requirements. All
conductors shall be insulated copper wire type THW or THWN.
2. All fluorescent or incandescent lighting fixtures in Tenant's public
areas, other than track type and decorative fixtures, shall be
recessed. Fluorescent fixtures shall have low brightness, parabolic
lenses or diffusers and be no larger than 2' 0" x 2' 0" in size. Bare
lamp fluorescent or incandescent fixtures may not be used except in
concealed areas and/or stock rooms. Connections to all devices in
Tenant's public areas shall be concealed.
3. Emergency lighting shall be provided by Tenant per code to illuminate
stock and/or sales areas and rear exitway during power outage, which
lighting shall be battery-operated, twin-head light pack(s) and/or
fluorescent fixtures. In public areas battery assembly for emergency
lights shall be concealed.
4. Circuits serving signs shall be controlled by a time switch.
5. Audio systems installed by Tenant shall be designed such that sound
shall be contained within the leased premises. No speaker or sound
emitting device shall be installed or employed within twenty feet
(20') of Tenant's storefront lease line and shall be directed toward
the interior of the space.
Refer to Exhibit B-1 for additional criteria.
Exhibit B, page 5 of 11
<PAGE>
F. Tenant's Permanent Sign
1. General:
Tenant shall submit quadruplicate copies of its sign drawings and
specifications, including samples of materials and colors, for
Landlord's approval, prior to fabrication of Tenant's sign. Such
drawings shall show location of sign on storefront elevation drawing
and shall clearly indicate color, materials, attachment devices,
dimensions and construction details.
2. Criteria:
the storefront of the leased premises facing malls and/or courts shall
be identified by a sign. Tenant's sign shall be subject to the
following requirements and limitations:
a. The average height of sign letters or components shall not exceed
twelve inches (12").
b. No part of the sign letters shall hang free of the background.
c. Sign shall not project beyond the leaseline of the leased
premises more than two inches (2") if less than eight feet (8')
above finished floor line, or more than six inches (6") if above
eight feet (8').
d. Signs shall be limited to the store name only as set forth in
Section 16.01 of this Lease; reference to merchandise or activity
is prohibited.
e. Sign letters or components shall not have exposed neon or other
lamps. All light source shall be concealed by translucent
material. Surface brightness of translucent material shall be
consistent in all letters and components of the sign. All edges
and the backs shall be fully encased in metal.
f. The storefront sign shall not employ the name of the Shopping
Center as part of Tenant's store identification.
g. The outer limits of sign letters, components or insignia shall
fall within a rectangle, the two short sides of which must be at
least twenty-four inches (24") from the side leaselines of the
leased premises, the top side of which must be at least twelve
inches (12") from the soffit of the mall fascia element.
h. All electrical sign components must bear U.L. label. Such U.L.
label must be inconspicuously placed.
SEE ATTACHED RIDER FOR INSERTS
3. The following types of signs or sign components are prohibited:
a. Signs employing moving or flashing lights or any audible or
moving components.
b. Signs employing exposed raceways, ballast boxes or transformers.
c. Signs exhibiting manufacturer's name, stamps or decals.
d. Signs employing painted and/or non-illuminated letters.
e. Signs employing luminous-vacuum formed plastic letters.
f. Signs of box or cabinet type, employing transparent, translucent
or luminous plastic background panels.
g. Shadow-box type signs.
h. Signs employing unedged or uncapped plastic letters with no
returns.
i. Any exposed fastenings whatsoever.
j. Cloth, paper, plastic or cardboard signs, stickers, decals, or
painted signs of any kind, hung around, on or behind storefront
glass or within storefront space.
k. Back-illuminated signs.
l. Free-standing signs.
4. The service door of the leased premises shall be identified with a
plastic sign, uniform to all Tenants, in accordance with Center
Management criteria.
SECTION V. PROCEDURE, SCHEDULES AND OBLIGATIONS FOR THE COMPLETION OF PLANS AND
SPECIFICATIONS BY TENANT.
All prints, drawing information and other material to be furnished by Tenant to
Landlord for approval as required in this Exhibit shall be addressed to Landlord
at 200 East Long Lake Road, P.O. Box 200, Bloomfield Hills, Michigan 48303-0200.
Approvals of such documents shall be deemed invalid unless given by Landlord in
writing. Any approval given by Landlord with respect to Tenant's Work or any
subsequent alterations by Tenant shall be effective only for a period of one
hundred twenty (120) days following Landlord's notice to Tenant of such
approval. If Tenant shall not have commenced construction with respect to such
work or alterations within such one hundred twenty (120) day period (or shall
not be diligently pursuing such work or alterations to completion), Tenant shall
be required to resubmit the applicable plans and specifications to Landlord for
re-approval prior to commencement or continuation of such work or alterations.
All notices, drawing information and other material furnished by Landlord to
Tenant under this Exhibit or pursuant to Sections 5.01 or 5.02 of the Lease may
be effectively submitted to Tenant by mailing the same to Tenant at the address
set forth on the Data Sheet on page 1 of the Lease or to Tenant's architect if
Tenant has provided Landlord with such an address, notwithstanding any contrary
or additional requirement contained in any other section of the Lease.
Exhibit B, page 6 of 11
<PAGE>
A. Space Layout Drawings
1. Following the execution of this Lease, Landlord shall furnish Tenant
with one (1) set of prints of Space Layout Drawings giving technical
and design information for the leased premises; provided that Landlord
shall not be responsible for the accuracy, efficacy or sufficiency of
said Space Layout Drawings and Tenant shall be solely responsible for
all technical and other examinations of the leased premises and shall
be exclusively responsible with respect to verification of actual
field conditions and actual field measurements and a full review of
all technical and engineering requirements with respect to the leased
premises and Tenant's construction thereon.
B. Working Drawings and Specifications
1. Within thirty (30) days from either of the following dates, whichever
shall be the later to occur (a) receipt by tenant of Space Layout
Drawings or (b) execution of this Lease by the parties hereto, Tenant
shall engage an Architect registered in the state in which the
Shopping Center is located for the purpose of preparing Working
Drawings and Specifications for the leased premises. Working Drawings
and Specifications shall be prepared in strict compliance with the
Construction Criteria and requirements as set forth in Section IV of
this Exhibit and shall adhere to the design as indicated in Section
5.01(b) of the Data Sheet of the Lease to which this exhibit is
attached.
2. All Working Drawings and Specifications prepared by Tenant's Architect
shall be submitted by Tenant, in the form of one (1) set of
reproducible prints (i.e., sepias) and one (1) set of prints, along
with a Letter of Certification by Tenant's Architect that such
drawings and specifications comply with Section 5.01(b) of the Data
Sheet and Landlord's Construction Criteria. Any required revisions to
such Working Drawings and Specifications shall be prepared and
resubmitted by Tenant to Landlord within days of receipt of notice
from Landlord.
SEE ATTACHED RIDER FOR INSERTS
3. Tenant shall pay all fees of its Architect, and shall pay to Landlord
for Coordination and Administrative Services a fee based on the floor
area of the leased premises in accordance with the following schedule:
Floor Area of Lease Premises Applicable Amount in $
---------------------------- ----------------------
1 to 500 sq. ft. 900.00
501 to 750 sq. ft. 975.00
751 to 1,500 sq. ft. 1,150.00
1,501 to 3,500 sq. ft. 1,700.00
3,501 to 6,000 sq. ft. 2,150.00
6,001 to 10,000 sq. ft. 2,750.00
10,001 sq. ft. and over 3,300.00 + 30 cents/sq. ft. in
excess of 10,000 sq. ft.
Tenant's payment of the foregoing fee shall be payment to Landlord in
connection with Landlord's review of the various plans and
specifications submitted by Tenant and in connection with Landlord's
facilitation and coordination of Tenant's actual construction in the
leased premises; however, Landlord shall not be in any way responsible
or liable with respect to the accuracy, sufficiency, or feasibility of
Tenant's plans, and Tenant shall be totally responsible for same.
C. Completion Schedule:
1. The following information regarding Tenant's completion schedule
shall be completed by Tenant and delivered to Landlord upon
Tenant's execution of this Lease:
a. Working Drawings and Specifications submittal date ( days
after receipt of fully-executed Lease)
b. Submission of Working Drawings and Specifications to the
local building department for building permit concurrent
with submittal to Landlord (allow four (4) weeks for
approval)
c. Construction start date
d. Merchandise date
e. Store opening date
f. Commencement date
Notification may be sent by Landlord to Tenant, at Landlord's
option, for completion of any of the preceding dates not listed
on the Completion Schedule submitted by Tenant. Any such
notification shall be returned completed to Landlord no later
than twenty-one (21) days following Tenant's receipt thereof.
SEE ATTACHED RIDER FOR INSERTS
Exhibit B, page 7 of 11
<PAGE>
SECTION VI. PROCEDURE, SCHEDULES AND OBLIGATIONS FOR THE CONSTRUCTION OF THE
LEASED PREMISES BY TENANT.
A. Commencement of Construction
1. Tenant shall commence demolition and/or construction of its leased
premises not later than fourteen (14) days from the date of approval
by Landlord's Architect of the Working Drawings and Specifications
referred to in Section V, C, 1 above, and shall carry such
construction to completion with all due diligence. The failure of
Tenant to comply with procedures and schedules set forth in this
Exhibit, or to commence or complete the construction of the leased
premises prior to the date of commencement of the term of the Lease to
which this Exhibit is attached and made a part shall have no effect
whatsoever upon the commencement of said term, which shall in any
event commence at the time provided for in Section 1.02 of said Lease.
B. General Requirements
1. Tenant shall submit to Landlord via Certified or Registered Mail, at
least five (5) days prior to the commencement of construction, the
following information:
a. The names and addresses of the General, Mechanical and Electrical
Contractors Tenant intends to engage in the construction of its
leased premises.
b. The date on which Tenant's construction work will commence,
together with the estimated date of completion of Tenant's
construction work and fixturing work, and date of Tenant's
projected opening for business in the leased premises.
c. Evidence of insurance as called for hereinbelow.
d. Itemized statement of estimated construction costs, including
architectural, engineering and contractor's fees.
e. Tenant's Contractors' Performance and/or Labor and Material
bonds, if so required by Landlord, or any other bond to be
furnished by Tenant as may be required by Landlord to insure the
faithful performance of the work in accordance with the Drawings
and Specifications approved by Landlord.
2. Tenant shall engage the services of such bondable, licensed
contractors who will work in harmony with Landlord's contractors and
the contractors employed by the other tenants so that there shall be
no labor disputes which would interfere with the operation,
construction and completion of the Shopping Center or with any work
being carried out therein.
3. Construction shall comply in all respects with applicable Federal,
State, County and/or City statutes, ordinances, regulations, laws and
codes. All required building and other permits in connection with the
construction and completion of the leased premises shall be obtained
and paid for by Tenant. Landlord's review of Tenant's Working Drawings
and Specifications shall be for the purpose of ascertaining compliance
with the requirements of this Lease and Landlord's requirements, and
shall in no event extend to any confirmation or authorization, express
or implied, that Tenant's Working Drawings and Specifications have
been prepared in accordance with the requirements of applicable laws,
codes, ordinances and regulations, including, without limitation, the
Americans with Disabilities Act, and Tenant shall be solely
responsible with respect to all necessary compliance with such laws,
codes, ordinances and regulations.
Tenant shall provide temporary heat if required.
Tenant shall provide temporary electrical if required.
Tenant shall apply and pay for all utility services.
Tenant shall cause its Contractor to provide warranties for not less
than one year against defects in workmanship, materials and equipment.
4. Tenant's Work shall be subject to the inspection of Landlord, its
consultants, and its supervisory personnel.
5. Upon the expiration of one half (1/2) of the lease term, Tenant shall,
within thirty (30) days after direction from Landlord, submit Working
Drawings and Specifications as set forth in Section V of this Exhibit
showing the work to be performed by Tenant to completely remodel and
refurbish the leased premises. Tenant will cause such work to be
performed not later than ninety (90) days following the date of
Landlord's direction in accordance with Working Drawings and
Specifications approved by Landlord specifying the remodeling work to
be done by Tenant.
All such work shall be subject to and shall be carried out in
accordance with the provisions of this Lease, including, without
limitation, the provisions of Section 5.01(b) governing construction
of the leased premises and the remedies of Landlord in the event of
noncompliance by Tenant, including, but not limited to, termination of
this Lease as therein set forth. Without limiting the foregoing, in
the event that Tenant shall fail to perform such remodeling work, or
if Tenant shall fail to operate the leased premises as required in
Exhibit B, page 8 of 11
<PAGE>
the Lease or shall fail to surrender possession of the leased premises
to Landlord as required in the Lease or under law, Landlord shall have
the right to erect, at Tenant's expense, a storefront barricade in
front of the leased premises, which barricade shall not be removed
except upon Landlord's prior written consent and with Tenant paying
the cost of such removal.
C. Landlord's Right to Perform Work
1. Landlord shall have the right to perform, on behalf of and for the
account of Tenant, subject to reimbursement of the cost thereof by
Tenant, any and all of Tenant's Work which Landlord determines in its
sole discretion should be performed immediately and on an emergency
basis for the best interest of the project, including without
limitation, work which pertains to structural components, mechanical,
sprinkler and general utility systems, roofing and removal of unduly
accumulated construction material and debris.
D. Temporary Facilities During Construction
1. Tenant shall pay for all temporary utility facilities, and the removal
of debris, as necessary and required in connection with the demolition
and/or construction of the leased premises. Storage of Tenant's
Contractors, construction material, tools, equipment and debris shall
be confined to the leased premises and in areas which may be
designated for such purposes by Landlord. In no event shall any
material or debris be stored in the mall or in service or exit
corridors.
2. During construction, Landlord may provide temporary electrical service
in an area designated by Landlord. Tenant shall request, in writing,
permission to connect temporary lines to the power source for service
to its premises. The cost to Tenant for this service will be $450.00
per month or twenty-five cents (25 cents) per square foot of leased
area per month, whichever is greater. Payment is to be remitted to
Landlord by the first of each month after service is initiated. In the
event that the leased premises presently contain a metered electrical
service, Tenant shall utilize the existing service and reimburse
Landlord on the metered basis.
3. During initial construction, Tenant fixturing and merchandise
stocking, Landlord may require Tenant to utilize trash removal service
from designated truck courts. Tenant is responsible for breaking down
boxes and placing trash in containers in the designated truck court
areas.
The cost to Tenant for this service will be on a monthly basis and
payment is to be remitted by the first of each month after service is
initiated on the following basis:
Floor Area of Leased Premises Monthly Charge in $
----------------------------- -------------------
30,001 sq. ft. to 50,000 sq. ft. 460.00
20,001 sq. ft. to 30,000 sq. ft. 410.00
15,001 sq. ft. to 20,000 sq. ft. 360.00
10,001 sq. ft. to 15,000 sq. ft. 320.00
5,001 sq. ft. to 10,000 sq. ft. 280.00
2,001 sq. ft. to 5,000 sq. ft. 240.00
2,000 sq. ft or less 200.00
At any time, as determined by Landlord, Landlord may discontinue trash
removal service and Tenant shall assume responsibility therefor. All
such work shall be performed by contractors approved by Landlord.
E. Construction Completion
1. A Letter of Certification by Tenant's Architect stating that the store
has been satisfactorily completed in compliance with the Landlord
Approved Working Drawings. Any deficiencies should be outlined and
sent to Tenant's contractor for correction within thirty (30) days.
F. Landlord's Letter of Acceptance
1. Upon the completion of Tenant's construction and fixturing work, and
upon written request to Landlord from Tenant, Landlord shall issue a
Landlord's Letter of Acceptance of said premises. The issuing of such
a Letter shall be contingent upon Tenant satisfying all of the
following conditions (which conditions shall, in any event, be
satisfied by Tenant as a obligation hereunder):
a. The satisfactory completion by Tenant of the work to be performed
by Tenant under Section III of this Exhibit including correction
of deficiencies and inconsistencies with approved Working
Drawings and Specifications.
b. Furnishing by Tenant to Landlord of all waivers of liens and
sworn statements from all persons performing labor and/or
supplying materials in connection with such work showing that all
of said persons have been compensated in full.
Exhibit B, page 9 of 11
<PAGE>
c. Submittal by Tenant to Landlord of a detailed breakdown of
Tenant's final and total construction costs.
d. Submittal by Tenant to Landlord of warranties for not less than
one (1) year against defects in workmanship, materials and
equipment, if so required by Landlord.
e. Full payment by Tenant of all sums due Landlord for items of work
performed by Landlord on behalf of Tenant, as outlined in this
Exhibit.
f. The issuance of a Certificate of Occupancy by the Building and
Safety Department of the local unit of government.
2. Upon written request from Tenant, Landlord shall also inspect that
portion of Tenant's Work which shall have been completed up to the
date of such request, and upon satisfaction of all of the foregoing
conditions set forth in paragraph 1 above (other than issuance of a
Certificate of Occupancy) with respect to the portion of Tenant's Work
so completed, Landlord shall issue a Landlord's Letter of Acceptance
with respect to such completed work. No payments, if any, required to
be made by Landlord to Tenant shall be made unless and until Tenant
shall have obtained a current Letter of Acceptance with respect to all
of Tenant's Work completed as of the date of such required payment.
G. Payments by Tenant
1. Tenant shall pay Landlord all sums due Landlord for items of work
performed or expenses incurred by Landlord on behalf of Tenant within
ten (10) days after receipt by Tenant of a statement therefor from
Landlord. Such items of work and expenses incurred include, but are
not necessarily limited to, the following:
a. All items called for as Tenant's cost obligations in this
Exhibit.
b. In the event that the leased premises are located in a retail
development, or in an expansion wing of a retail development,
which development or expansion wing shall not yet have opened for
business to the public at the time of the commencement by Tenant
of its construction hereunder, Tenant shall be obligated to pay
to Landlord Tenant's pro rata share of costs and expenses
incurred by Landlord in arranging for a final cleaning of and
debris removal from the common areas and vacant premises in
preparation for the grand opening of the retail development or of
such expansion wing. Tenant's pro rata share shall be computed on
the basis that the square footage of the leased premises bears to
the square footage of gross leased and occupied area in the
Shopping Center (or in the expansion wing of the Shopping Center,
as applicable) as of the earlier of: the date of the opening of
the Shopping Center (or the expansion wing, as applicable), or
the date that Tenant is notified of its pro rata share of such
costs and expenses.
2. In the event Tenant fails to open its store for business to the
general public the commencement date of the term of the Lease, or
fails to complete the remodeling required under Section 5.01 of the
Lease within ninety (90) days following such commencement date (to the
extent that this Lease represents a renewal lease for the same
premises as are presently occupied by Tenant), then in addition to all
other fees and charges hereunder, Tenant shall pay a fee to Landlord
in accordance with the following schedule for additional coordination,
administration, and other services, which fee shall be paid for each
full calendar month after the commencement date, or after the
expiration of such ninety (90) day period, as applicable (with periods
of less than one month to be prorated), that Tenant shall have failed
to open its store for business, or shall have failed to complete its
required remodeling as set forth above, as applicable. The payment of
the foregoing fee shall not excuse Tenant from default for failure to
open, or failure to remodel, as applicable, shall not preclude the
exercise of default remedies by Landlord, and shall not render
Landlord liable in any manner for or in connection with Tenant's
construction.
SEE ATTACHED RIDER FOR INSERTS
Floor Area of Leased Premises Applicable Amount in $
----------------------------- ----------------------
1 to 500 sq. ft. 2,500.00
501 to 750 sq. ft. 3,000.00
751 to 1,500 sq. ft. 4,000.00
1,501 to 3,500 sq. ft. 5,500.00
3,501 to 6,000 sq. ft. 7,000.00
6,001 to 10,000 sq. ft. 8,000.00
10,001 sq. ft. and over 9,500.00 + 75c/per sq. ft.
in excess of 10,000 sq. ft.
H. Insurance
1. Tenant shall secure, pay for and maintain, or cause its Contractor(s)
to secure, pay for and maintain during construction and fixturing work
within the leased premises, all of the insurance policies required
herein, in the amounts as set forth below, and such insurance as may
from time to time be required from city, county, state or federal
laws, codes, regulations or authorities, together with such other
insurance as is reasonably necessary or appropriate under the
circumstances. Tenant shall not permit its Contractor(s) to commence
any work until all required insurance has been obtained and
certificates of such insurance have been
Exhibit B, page 10 of 11
<PAGE>
delivered to Landlord.
2. Tenant's General Contractor's and Subcontractors' Required Minimum
Coverages and Limits of Liability.
a. Worker's Compensation, as required by state law, and including
Employer's Liability Insurance with a limit of not less than
$2,000,000, and any insurance required by any Employee Benefit
Acts or other statutes applicable where the work is to be
performed as will protect the Contractor and Subcontractors from
any and all liability under the aforementioned acts.
b. Commercial General Liability Insurance (including Contractor's
Protective Liability) in an amount not less than $2,000,000 for
any one occurrence whether involving personal injury liability
(or death resulting therefrom) or property damage liability or a
combination thereof with an aggregate limit of $2,000,000. Such
insurance shall provide for explosion, collapse and underground
coverage.
Such insurance shall insure Tenant's General Contractor against
any and all claims for personal injury, including death resulting
therefrom and damage to or destruction of property of any kind
whatsoever and to whomsoever belonging and arising from his
operations under the Contract and whether such operations are
performed by Tenant's General Contractor, Subcontractors, or any
of their Subcontractors, or by any one directly or indirectly
employed by any of them.
c. Comprehensive Automobile Liability Insurance, including the
ownership, maintenance, and operation of any automotive
equipment, owned, hired, and non-owned, in the following amounts:
(1) Bodily injury, per occurrence for personal
injury and/or death ...................... $2,000,000
(2) Property Damage Liability ................ $2,000,000
Such insurance shall insure the General Contractor and/or
Subcontractors against any and all claims for personal injury,
including death resulting therefrom and damage to the property of
others caused by accident and arising from its operations under the
Contract and whether such operations are performed by the General
Contractor, Subcontractors, or by anyone directly or indirectly
employed by any of them.
3. Tenant's Protective Liability Insurance.
Tenant shall provide Owner's Protective Liability Insurance as will
insure Tenant against any and all liability to third parties for
damages because of personal injury liability (or death resulting
therefrom) and property damage liability of others or a combination
thereof which may arise from work in connection with the leased
premises, and any other liability for damages which Tenant's General
Contractor and/or Subcontractors are required to insure against under
any provisions herein. Said insurance shall be provided in minimum
amounts as follows:
a. Bodily injury, per occurrence for personal
injury and/or death ............................. $2,000,000
b. Property Damage Liability ....................... $2,000,000
4. Tenant's Builder's Risk Insurance -- Completed Value Builder's Risk
Material Damage Insurance.
Coverage:
Tenant shall provide an "All Physical Loss" Builder's Risk insurance
policy on the work to be performed for Tenant in the leased premises
as it relates to the building within which the leased premises is
located. The policy shall include Tenant, its Contractor and
Subcontractors, Landlord, and the partners and agents of Landlord, as
insureds as their interests may appear. The amount of insurance to be
provided shall be 100% of the replacement cost.
5. All such insurance policies required under this Exhibit, except as
noted above, shall include Landlord, its Managing Agent, its
Architect, its General Contractor, and the partners and agents of
Landlord, and the partners of such partners, and any other parties in
interest designated by Landlord, as additional insureds; except
Worker's Compensation Insurance, which shall contain an endorsement
waiving all rights of subrogation against Landlord, its Managing
Agent, its Architect, General Contractor, partners and agents, and the
partners of such partners, and any other parties in interest
designated by Landlord.
Certificates of Insurance shall provide that no reduction in the
amounts or limits of liability or cancellation of such insurance
coverage shall be undertaken without prior thirty (30) day written
notice to Landlord.
The insurance required under this Exhibit shall be in addition to any and
all insurance required to be procured by Tenant pursuant to Section 11.01
of the Lease to which this Exhibit is attached.
[End of text of Standard Construction Exhibit]
Exhibit B, page 11 of 11
<PAGE>
WOODFIELD
EXHIBIT B-l
UTILITIES
(Attached to and forming a part of Exhibit B;
Section references correspond to the Section numbers set forth in Exhibit B.)
SECTION II: LANDLORD'S WORK.
A. Building Utilities and Services
1. Points of connection, for Tenant's use, to the following utilities in
location and sizes determined by Landlord.
a. Sanitary sewer stub.
b. Plumbing vent stub.
c. Domestic cold water stub.
d. Fire protection sprinkler system main.
e. Central gas utility company metering manifolds.
f. Central electric utility company distribution centers.
g. Central telephone company distribution boards.
h. Duct shafts containing fresh air, relief air and toilet exhaust
ducts to serve first level tenants stubbed in central locations
and terminating to the atmosphere.
SECTION IV: CRITERIA - TENANT'S WORK.
The requirements, criteria, and/or outline specifications as set forth herein
represent minimum standards for the design, construction, and finish of the
mechanical and electrical systems installed by Tenant.
A. Mechanical
1. Plumbing:
a. Plumbing fixtures and accessories shall be of commercial quality
and shall be of a water-conserving type.
b. Water heaters shall be electric, except Food and Beverage Service
Tenants where gas units may be permitted if gas is available.
c. Floor drains shall be provided in toilet rooms, kitchens, and/or
food service areas.
d. Food and Beverage Service Tenants shall further provide:
(i) Cast-iron grease traps located within the leased premises.
(ii) Gas service and branch line extension from the gas meter
center to and within the leased premises.
e. Every space shall have at least one (1) toilet room. All spaces
3,000 square feet or larger must provide public accessible toilet
rooms (male and female). Said toilet rooms must comply with the
state of Illinois plumbing code.
2. Heating, Ventilating, and Air Conditioning:
a. Tenant shall install an all-electric heating and air-conditioning
system.
(i) Each Tenant shall provide its own individual system (i.e.,
heating, ventilation and air-conditioning equipment and
controls, ducts, insulation, water supply, venting and
drainage, fresh air supply and return, exhaust and make-up
air, dehumidification and humidification equipment, water
saving equipment and all structural, plumbing and electrical
work related thereto).
(ii) All equipment shall be contained within Tenant's premises
except rooftop air-cooled condensing units, make-up air
units, and hood exhausters. Such equipment located on the
roof shall only be located in areas designated by the
Landlord to specified heights, and in accordance with
Landlord's standard details for roof-mounted equipment. All
refrigerant piping shall be installed in ceiling space and
extended through roof adjacent to the equipment. Suction
lines shall be insulated.
(iii) Tenant's air handling units shall be floor-supported in
Tenant's space independent of Landlord's structural system.
b. Toilet rooms shall be exhausted per code. All roof mounted units
for second level Tenants shall be of aluminum construction.
Exhibit B-1, page 1 of 2
<PAGE>
c. Ductwork: Fabricated of galvanized sheet metal per American
Society of Heating, Refrigerating and Air-Conditioning Engineers'
standards, as outlined for "Low Pressure Ducts" in the latest
edition of their "Guide and Data Book".
d. There shall be a provision to bring in 100% fresh air for cooling
purposes anytime the outside temperature is below 60(degrees)F.
Such provision shall be operated by automatic temperature
controls.
e. All first level outside air, relief air, exhaust air and other
ductwork requiring outdoor intake or venting except process
requirements shall be extended by Tenant to the common tenant
service shafts. All outside air, relief air and general exhaust
(Toilet Room, Storage Room, etc.) ductwork shall connect with
backdraft dampers to sheet metal housings provided at the base of
the common shafts.
f. All process exhausts, hood exhausts, equipment vents, and other
contaminated exhausts permitted by Landlord shall discharge
vertically to the atmosphere, and be located a minimum of 20 feet
horizontally from any fresh air intakes, properly dispersing
odors or fumes away from same.
g. All supply and fresh-air ductwork shall be insulated, and all
ductwork on all levels shall be installed in concealed space
above ceilings. Space between ceiling and structure shall not be
used as a return air plenum.
h. All air supplied to Tenant's area by its equipment shall not
migrate to the public mall or adjacent spaces.
i. Standards of design and construction shall be in accordance with
latest ASHRAE and SMACNA Guides.
j. Tenant shall provide all process requirements, hood exhausts,
make-up air supply, equipment vents and other contaminated
exhausts. When permitted by Landlord they shall extend in
ductwork through the roof. This ductwork shall be located in
special shafts, built by Tenant, at locations and of construction
designated by Landlord.
k. Ductwork which passes through service corridor and demising walls
shall have U.L. approved fire dampers located in ductwork at
wall. Provide approved access doors for such dampers.
l. Tenant roof equipment shall be located in areas designated by
Landlord to specified heights and in accordance with Landlord's
standard details for equipment on the roof.
(i) Should weight or location of equipment by Tenant require
supports, screens, cat walks or roof hatch and ladder, they
shall be provided by Tenant in accordance with standard
details. Landlord shall determine when and where the above
shall be required.
(ii) All above equipment shall be finish painted in accordance
with Landlord's paint schedule and specifications.
(iii) Tenant's roof equipment shall he clearly identified with
Tenant's name.
B. Electrical
1. Power available for the leased premises shall consist of the following
voltages:
a. For tenants located in buildings "D, E, F, G, J and K":
(i) Tenant spaces of 6,000 square feet and smaller will be
provided with 120/208 volt, 3 phase, 4 wire.
(ii) Tenant spaces in excess of 6,000 square feet will be
provided with 277/480 volt, 3 phase 4 wire.
b. For tenants located in buildings "L and N":
(i) All tenants will be provided with 277/480 volt, 3 phase, 4
wire.
2. Installation or modification of the existing system shall conform to
the following:
a. Power for Tenant's heating, ventilating and air conditioning
equipment (single and/or three phase), including electric duct
heaters, unit heaters, strip heaters, etc. will be taken from 480
volt, 3 phase, 3-wire rain tight distribution panelboards located
on the roof. Landlord will furnish and install a plug-in fusible
switch (min. 60 amp) at Tenant's expense. Tenant shall furnish
and install fuses, all wiring and conduit from rooftop
panelboards, transformers, starters, relays, switches,
connections, etc., required for Tenant's equipment.
b. Dry type transformer (if required) shall be used for all 120/208
volt requirements.
c. Panelboards shall be designed for 20% minimum spare ampacity
(based on connected load) and 20% spare breaker space.
d. All electrical wiring systems shall be in conduit. The use of
"Bx" or "Romex" is not permitted.
Exhibit B-1, page 2 of 2
<PAGE>
STANDARD SKYRIDE RIDER
- --------------------------------------------------------------------------------
Section 1.02: At the end of the Section, insert "In the event Landlord elects to
cause, and will actually be causing, an expansion or contraction of the Shopping
Center or the regional retail development which shall directly affect all or any
portion of the leased premises, then Landlord upon two hundred ten (210) days
prior notice in writing to Tenant may terminate this Lease. During the two
hundred ten (210) day period Landlord shall offer to Tenant such alternative
location of approximately the same square footage as may be available in the
Shopping Center from time to time. In the event the parties agree on a specific
location, then this Lease shall be amended by substituting the new location for
the present location and minimum rent, the percentage rent breakpoint, and
Merchant's Association or promotional charges shall be proportionately adjusted.
Tenant shall cause all construction in the new premises to be completed and open
for business within one hundred eighty (180) days following delivery of the new
premises to Tenant. Rent and other charges shall be abated during any period
from Tenant's closing in the original premises to the date Tenant is obligated
to reopen in the new premises. In the event of relocation, and provided Tenant
shall not be in default hereunder beyond any applicable notice, grace or cure
period set forth in this Lease, Landlord shall reimburse to Tenant the
reasonable costs paid by Tenant in constructing Tenant's leasehold improvements
in the new premises plus the reasonable costs paid by Tenant in moving Tenant's
trade fixtures and personal property from the original premises to the new
premises. The reimbursement to Tenant by Landlord for constructing Tenant's
leasehold improvements in the new premises shall take place in monthly
installments within fifteen (15) days following Tenant's completion of portions
of such work. Moreover in the event of relocation, the lease term shall be
extended for the period equal to the date of Tenant's closing in the original
premises to the date Tenant is obligated to reopen in the new premises, plus, at
Landlord's sole option, a period (of Landlord's choosing) to expire no later
than the date fifteen (15) lease years following Tenant's re-opening for
business in the new premises. In the event Landlord and Tenant are unable to
agree on an alternative location, this Lease shall terminate at the end of the
said two hundred ten (210) day period. In the event of such termination, within
thirty (30) days following the date that Tenant shall have vacated the premises,
Landlord shall pay to the Tenant a sum equal to the then unamortized cost to
Tenant of Tenant's leasehold improvements, such amortization to be on the
straight line basis over the full term of the Lease and Landlord shall also pay
to Tenant a sum equal to eighteen (18) months' of Tenant's net profits from the
leased premises (at the rate of net profits achieved by Tenant from the leased
premises during the twelve [12] month period preceding termination of this
Lease). Net profits shall be Tenant's profits less all costs and expenses
associated with the operating of the leased premises including without
limitation, any administration, overhead and employee expenses allocated to the
leased premises. Tenant shall furnish to Landlord such backup information as
Landlord may reasonably require. Tenant shall deliver possession of the leased
premises to Landlord on or before the termination and/or relocation, date in the
condition required in this Lease and subject to all charges which are due and
owing or which shall be accrued up to such date (which charges shall be paid to
Landlord within thirty (30) days of such date), Tenant shall be released from
any and all further obligations pursuant to this Lease accruing or arising from
and after the date of termination with respect to the vacated premises, however,
in the event of relocation, Tenant shall remain liable for such obligations and
charges accruing under this Lease after the date of such relocation."
Section 2.02(a): On page S2, line 22, after the word "date", insert "sixty (60)
days following the date"
Section 2.02(b): Wherever the term "quarter-annual" previously appeared, insert
"semi-annual".
Wherever the term "one-quarter (1/4)" previously appeared,
insert "one-half (1/2)".
On page S2, line 37, in place of the deleted "three (3)",
insert "six (6)".
Section 4.01: On page S5, line 52, in place of the deleted language, insert "ten
(10)".
Section 4.02: On page S5, lines 54 and 59, in place of the deleted language,
insert "ten (10)".
On page S5, line 55, after the word "Landlord", insert
"which auditor shall be an independent certified public accountant and shall be
employing generally accepted auditing standards,".
On page S6, line 9, after the word "audit.", insert
"Landlord shall use reasonable efforts to schedule an audit at a time and on a
date which is mutually convenient for Landlord and Tenant.
Landlord shall not examine or audit Tenant's Gross Sales
records under this Article IV more often than once per lease year unless any
audit shall disclose a variance between actual Gross Sales and reported Gross
Sales of two percent (2%) or more in which event Landlord may thereafter audit
without any limitation on frequency."
-1-
<PAGE>
On page S6, line 13, after the word "auditor", insert "which
auditor shall be an independent certified public accountant and shall be
employing generally accepted auditing standards,".
Section 5.03: On page S7, line 45, after the word "the", insert "entire".
Section 6.01: At the end of the Section, insert "Notwithstanding the foregoing,
Tenant shall be permitted to make minor, nonstructural alterations to the
interior of the leased premises not to exceed One Hundred Thousand and 00/l00ths
Dollars ($100,000.00) during any twelve (12) month period, provided that such
alterations shall not change the original design of the leased premises as
originally approved by Landlord, and further provided, Tenant shall not be
permitted to make any alterations whatsoever to the storefront, signage or
configuration or size of the sales area without Landlord's prior written
approval. Tenant shall give Landlord fifteen (15) days' written notice prior to
undertaking any alterations which Tenant is permitted to make pursuant to this
paragraph."
Section 6.02: On page S8, line 14, after the word "improvements.", delete the
period and insert "provided Tenant may remove the following types of trade
fixtures upon expiration of the lease term if Tenant shall not be in default and
repairs any damage caused by installation or removal of same: Tenant's elevator
equipment, and such trade fixtures and equipment as are unique to Tenant's
business."
At the end of the Section, insert "Following Tenant's
request, Landlord shall agree to subordinate its interest in and lien on
Tenant's merchandise and trade fixtures (excluding leasehold improvements and
fixtures) to the lien of Tenant's lender or equipment lessor, which
subordination shall be pursuant to an agreement in form and content prepared and
approved by Landlord; Tenant shall pay to Landlord a fee of Seven Hundred Fifty
and 00/l00ths Dollars ($750.00) for preparation of any such agreement."
Section 6.03: At the end of the Section, insert "In exercising its rights under
this Section 6.03, Landlord shall use reasonable efforts to minimize resulting
interference with access to or visibility of the leased premises from the
enclosed mall area. If, while exercising its rights under this Section, Landlord
prevents Tenant from operating its business in the leased premises and Tenant
actually closes for three (3) or more consecutive days due to no fault of
Tenant, then commencing with expiration of such three (3) day period and
continuing until Landlord's activities have ceased to the point where Tenant is
able to reopen, minimum rent and other charges payable by Tenant to Landlord
hereunder shall be abated as Tenant's sole remedy."
Section 7.02: On page S9, line 17, after the word "refunds", insert "for cash
purchases".
On page S9, line 27, after the word "are", insert
"reasonably".
On page S9, line 27, after the word "Landlord", insert "or
which travels into the premises of other tenants within the Shopping Center,".
On page S9, line 30, after the word "employees.", delete the
period and insert "provided up to ten (10) soda or snack dispensing vending
machines shall be permitted by Landlord within the leased premises."
Section 9.01: On page S12, lines 33 and 34, after the word "premises", insert
"which is visible from the exterior of the leased premises,".
Section 10.02(c): On page S13, line 16, in place of the deleted language, insert
"thirty (30)".
Section 12.01(f): At the end of the subsection, insert "Subject to Landlord's
compliance with governmental laws, ordinances and regulations, and subject to
events beyond Landlord's reasonable control, Landlord shall not unreasonably
discontinue the supplying of any utility service unless an alternative source of
such service shall be available to Tenant."
Section 13.01: On page S17, line 65, in place of the deleted language, insert
"twenty (20)".
Section 13.03: On page S18, line 33, after the word "Section.", delete the
period and insert "provided such instruments are not inconsistent with the
express terms of this Lease.
Section 13.04: On page S18, lines 36 and 40, in place of the deleted language,
insert "twenty (20)".
Section 14.01: At the end of the Section, insert "Notwithstanding the foregoing,
the issuance or trading of stock on a U.S. Government regulated and recognized
exchange or on the NASDAQ over the counter market shall not be deemed to result
in a prohibited assignment hereunder.
-2-
<PAGE>
Notwithstanding the provisions of this Section 14.01 to the
contrary, Landlord shall not withhold its consent to an assignment of this Lease
by Tenant (by merger, consolidation or otherwise) to another entity
simultaneously acquiring a controlling interest in Tenant's stock or all or
substantially all of Tenant's assets, including, without limitation, the entire
chain of stores conducted under the trade name herein set forth, provided that:
(1) the assignee shall simultaneously be acquiring control of the entire chain
of stores conducted under the trade name herein set forth, (2) Tenant shall not
at the time of such assignment be in default under any of the terms, covenants
and conditions of this Lease, (3) such assignee shall, as of the date
immediately after the effective date of the assignment, have a net worth (based
on assets contained within the United States) equal to or greater than the
combined net worth of Tenant and Tenant's Guarantor (if any) as of the date of
Tenant's execution of this Lease or as of the date immediately preceding the
effective date of such transfer, whichever of such net worth amounts shall be
the greater, (4) such assignee shall agree in writing to perform all of the
unperformed terms, covenants and conditions of this Lease (whether accruing
prior to, on, or after the effective date of the assignment), (5) Tenant and
Tenant's Guarantor (if any) shall agree in writing to at all times remain
primarily obligated for the performance of the terms, covenants and conditions
of this Lease, (6) the assignee shall deposit with Landlord a sum equal to two
(2) months' minimum rent (at the then current rate) which Landlord may apply
against any monetary obligations of Tenant which are unpaid or outstanding as of
the effective date of the assignment (any portion of such sum which has not been
so applied within fourteen (14) months following the effective date of the
assignment shall be promptly returned to the assignee), (7) such assignee shall
have demonstrated experience in the operation of first class facilities of the
type described in Section 7.01 of the Data Sheet (or shall have retained
management personnel with such experience) and (8) no later than thirty (30)
days prior to the effective date of the assignment, Tenant shall have supplied
Landlord with all back-up information reasonably required by Landlord to
establish that all of the foregoing conditions have been satisfied."
Section 16.01: At the end of the Section, insert "Notwithstanding the foregoing,
Landlord shall not unreasonably withhold its approval of Tenant's changing its
trade name to the name to which all of the other Skyride stores are changed;
Tenant shall pay to Landlord the actual cost of changing directory signage in
the Shopping Center resulting from the change in trade name."
Section 19.01(a): On page S22, line 35, in place of the deleted language, insert
"by the date thirty (30) days following".
On page S22, line 35, after the word "fail", insert "during
the days or hours required".
On page S22, line 36, after the word "business", insert
"(following fifteen [15] days' prior written notice by Landlord to Tenant of
such failure and opportunity for Tenant to cure during such fifteen [15] day
period)".
Section 19.01(b): On page S22, line 63, in place of the deleted language, insert
"the same".
On page S22, line 65, after the word "Tenant", insert "of
the same kind".
On page S22, line 65, in place of the deleted language,
insert "such twelve (12) month period".
Section 19.03: On page S23, line 57, in place of the second deletion, insert
"the nonprevailing party".
On page S23, line 58, in place of the deleted language,
insert "the other party" .
Section 19.04: On page S24, line 1, after the word "any", insert
"noncompulsory".
Section 21.01: On page S25, line 24, after the word "times", insert "upon prior
oral notice to the individual apparently then in charge at the leased
premises,".
On page S25, line 25, after the word "right", insert "upon
three (3) days' prior written notice to Tenant (except in the event of an
emergency in which event no notice shall be required)".
On page S25, line 30, after the word "time", insert "upon
prior oral notice to the individual then in charge at the leased premises,".
At the end of the Section, insert "In exercising its rights
under this Section, Landlord shall use reasonable efforts to minimize any
resulting interference with the operation of Tenant's business.
-3-
<PAGE>
In the event Landlord shall enter the leased premises under
non-emergency situations in order to perform alterations, improvements,
additions or repairs to other portions of the Shopping Center (including the
leased premises), and the same are not necessitated by Tenant's act, neglect or
breach of this Lease, and as a result thereof Tenant cannot, in the exercise of
reasonable business judgment, operate its business and in fact closes the entire
premises to the public, and if such closing continues for a period of three (3)
business days or more, Landlord agrees that minimum rent and other charges
payable by Tenant to Landlord hereunder shall be abated as Tenant's sole remedy
commencing with expiration of such three (3) business day period and continuing
until such time as the condition giving rise to the Tenant closing has been
corrected at which time Tenant shall resume the payments."
Section 24.01: On page S26, line 24, after the word "Center.", delete the period
and insert "and shall be applied uniformily in similar situations and shall not
be inconsistent with the express terms of this Lease."
Section 27.08: At the end of the Section, insert "Provided Tenant shall not be
in default hereunder, then Landlord agrees to execute, and Tenant may record, a
memorandum of this Lease which sets forth the names of the parties, length of
term and a description of the leased premises, only, provided however, Tenant
agrees: (i) to execute an amendment of such memorandum of lease for Landlord's
recording should Landlord transfer all or any portion of its interest in the
regional retail development, or should Landlord change the description of the
leased premises, Shopping Center or regional retail development, and (ii) Tenant
shall immediately and properly prepare, execute and record a discharge of such
memorandum upon expiration or sooner termination of this Lease. If Tenant fails
to execute an amendment of such memorandum within ten (10) days following
Landlord's written request, or if Tenant fails to properly record such a
discharge within ten (10) days following expiration or sooner termination of
this Lease, Tenant appoints Landlord as Tenant's attorney in fact for purposes
of preparing, executing and recording such documents."
Section 27.09: On page S28, line 47, after the word "request,", insert "but no
more often than once during any twelve (12) month period,".
Section 27.10: At the end of the Section, insert "In exercising its rights under
this Section, Landlord shall use reasonable efforts to minimize any resulting
interference with the operation of Tenant's business."
Section 27.18: On page S30, line 22, in place of the deleted language, insert
"Each party".
On page S30, line 23, in place of the deleted language,
insert "the other".
Section 27.19: On page S30, line 26, after the word "Lease.", delete the period
and insert "(with respect to the obligations of both parties)."
Exhibit B.: On page 6, line 13, in place of the deleted language, insert
"Subject to the terms of the Data Sheet of the Lease, only".
On page 6, line 13, after the word "sign.", insert "Subject
to the terms of the Data Sheet of the Lease,".
On page 7, line 25, in place of the deleted language, insert
"twenty (20)".
On page 7, line 54, in place of the deleted language, insert
"sixty (60)".
On page 10, line 37, in place of the deleted language,
insert "by the date thirty (30) days following".
[End of text of the Rider; signature and acknowledgment pages appear at end of
Data Sheet on the pages immediately preceding the Addendum.]
-4-
<PAGE>
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
SUBSIDIARIES
NAME STATE OWNERSHIP DATE OF INCORPORATION
---- ----- --------- ---------------------
New York Skyline, Inc. New York 100% 11/2/93
Skyline Virtual Reality, Inc. Delaware 100% 8/21/95
Skyline Chicago, Inc. Delaware 100% 8/13/96
Skyline Magic, Inc. Delaware 100% 8/19/96
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,198,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 130,000
<CURRENT-ASSETS> 2,496,000
<PP&E> 6,336,000
<DEPRECIATION> 739,000
<TOTAL-ASSETS> 9,035,000
<CURRENT-LIABILITIES> 873,000
<BONDS> 0
0
1,000
<COMMON> 3,000
<OTHER-SE> 7,080,000
<TOTAL-LIABILITY-AND-EQUITY> 9,035,000
<SALES> 5,658,000
<TOTAL-REVENUES> 5,978,000
<CGS> 410,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 502,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,000
<INCOME-PRETAX> 741,000
<INCOME-TAX> (305,000)
<INCOME-CONTINUING> 1,046,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,046,000
<EPS-PRIMARY> .37
<EPS-DILUTED> 0.000
</TABLE>
