SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number O-25030
PLAY CO. TOYS & ENTERTAINMENT CORP.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 95-3024222
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
550 Rancheros Drive, San Marcos, California 92069
(Address of Principal Executive Offices)
(760) 471-4505
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class Name of each exchange on which registered
NONE
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock, $.01 par value
Series E Preferred Stock, $.01 par value
Series E Preferred Stock Purchase Warrants
(Title of Class)
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 past 12
months (or for such shorter period that 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 no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ X].
The Registrant's revenues for its fiscal year ended March 31, 1998 were
$22,568,527.
The aggregate market value of the voting stock on March 31, 1998
(consisting of Common Stock, par value $.01 per share) held by non-affiliates
was approximately $1,241,018, based upon the closing price for such Common Stock
on said date ($.75), as reported by a market maker. On such date, there were
4,103,519 shares of Registrant's Common Stock outstanding.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
History
Play Co. Toys & Entertainment Corp. (the "Company") was founded in
1974, at which time it operated one store under the name Play Co. Toys in
Escondido, California. The Company now operates 19 stores: 18 are located
throughout Southern California in the Los Angeles, Orange, San Diego, Riverside,
and San Bernardino Counties, and one is located in Tempe, Arizona. The Company
has executed leases to build and open six additional stores during calendar
1998. The Company expects that by the end of calendar 1998 it shall have 25
stores, 18 of which (the "New Stores") shall follow the Company's new concept
and seven of which (the "Original Stores") shall follow its old format.
In 1996, the Company redefined its corporate goals and philosophy,
changing its focus from the sale of traditional toys in stores located in strip
shopping centers to the sale of educational, new electronic interactive, and
specialty and collectible toys and items in high traffic malls. In light of its
new focus, the Company has redesigned four of its Original Stores to the
Company's new format, opened five new locations, and acquired three stores in
its acquisition of Toys International, Inc. (" Toys"). Two of the five New
Stores operate under the tradename Toy Co. In conformance with its new goals,
the Company's New Stores shall be smaller (5,000 to 10,000 square feet in size)
and shall operate exclusively in high traffic malls rather than in strip
shopping centers.
The Company's New Stores have and are expected to continue to produce
higher gross profits since they focus on the sale of educational and electronic
interactive games and toys, specialty products, and collector's toys, which
generally carry higher gross margins than traditional toys.
Acquisition of Toys International
In January 1997, the Company acquired substantially all of the assets
of Toys. The acquisition, in principal, included the assignment to the Company
of the three store leases held by Toys and Toys' entire inventory. As part of
the purchase agreement, the Company obtained the rights to the Toys
International and Tutti Animali operating name trademarks and also assumed the
existing leases at its three store locations: two of such locations operate
under the tradename Toys International, and the third operate under the Tutti
Animali tradename. The total purchase price was $1,024,184 which consisted
mainly of inventory and certain prepaid expenses and deposits. The purchase
price was tendered in the form of a $759,184 cash payment remitted in January
1997 and the execution of two promissory notes, aggregating $265,000, payable
over a two year period. In order to ensure a smooth transition in operations,
the former president of Toys, Mr. Gayle Hoepner, continued his relationship as a
consultant to the Company for a period of ninety days.
Series E Preferred Offering
On December 29, 1997, through West America Securities Corp. as agent,
the Company completed a public offering of its Series E Preferred Stock and
Redeemable Series E Stock Purchase Warrants. The offering raised $3,150,000 in
gross proceeds from which the Company realized net proceeds of $2,303,441 after
discounts, commissions, and expenses of the offering. The proceeds were
apportioned as follows: (i) $500,000 was placed in a restricted certificate of
deposit to secure a stand-by letter of credit in favor of FINOVA Capital
Corporation ("FINOVA"), the Company's working capital lender (see "--
Financing"); (ii) approximately $140,000 has been expended for the relocation
and enlargement of the Company's Toys store located in the Century City shopping
center (the Company expects to expend an additional $100,000 to complete the
renovation)' (iii) $250,000 was placed in a restricted short-term certificate of
deposit as collateral for a facility to issue letters of credit; (iv)
approximately $1,050,000 was used to pay down the FINOVA credit line to reduce
interest expenses; and (v) approximately $440,000 was used to reduce trade
accounts payable or to opportunistically purchase inventory from vendors on
advantageous terms.
<PAGE>
Series F Preferred Offering
In May 1998, the Company commenced an offering of Units, each Unit
comprising one share of the Company's Series F Preferred Stock, par value $.01
per share (the "Series F Stock"), and one Series F Preferred Stock Purchase
Warrant (the "Warrants"), at a purchase price of $3.00 per Unit, through Morgan
Grant Capital Group, Inc., as placement agent. The Company is seeking to raise
an aggregate of $4,500,000 which requires the sale of a minimum of 250,000 Units
to close the offering. Each Warrant is exercisable for a period of five years,
commencing one year from issuance, at $4.00 per share. Each share of Series F
Stock shall carry a $0.36 annual dividend, payable quarterly, and the holder has
the right, commencing six months after issuance, to convert each share into two
fully paid and non-assessable shares of Common Stock. As of the date of this
report, the offering has not been consummated.
Merchandising Strategy; Refocusing of Corporate Direction
Traditionally, the Company's merchandising strategy was to offer an
alternative, less intimidating environment than that provided by the larger toy
retailers who are in competition with the Company. In particular, the Company
stocks all of its items at eye level (not vertically, as other stores often do),
provides clerks to assist customers, and implements a policy of treating its
customers with courtesy and respect. The Company's merchandise is stacked from
the ground to the eye level of an adult, no more than six feet high. The Company
has augmented its product lines in its New Stores and will continue to provide
these quality services to patrons of all its stores.
Beginning in 1996, management of the Company realized the inherent
value in, and thus the demand for, a retail outlet which provides a combination
of (i) educational, new electronic interactive, and specialty and collectible
toys and items; and (ii) traditional toys. In addition, the Company determined
that it should place its stores in high traffic malls, rather than in strip
shopping centers where most of its Original Stores have operated. To achieve its
goals, the Company developed a new store design and marketing format which
provides an interactive setting together with a retail operation. This format
and design has formed the foundation for the Company's future direction and
growth plans, thereby allowing the Company to meet what it believes are the
industry's current and future demands. The Company has thus far remodeled four
Original Stores to fit its New Store design, opened five New Stores, and
acquired three New Stores (Toys stores). By the end of calendar year 1998, the
Company intends to open six additional New Stores, the leases for which were
executed in the first calendar quarter of 1998, and thereby operate a total of
twenty-five stores. In calendar 1999, the Company expects to open an additional
six stores, bringing its total to 31. The Company shall continue to operate its
Original Stores until their leases expire, except with respect to certain stores
for which it is negotiating lease extensions, which stores it may redesign to
fit the New Store concept. The Company periodically reviews each individual
store's sales history and prospects on an individual basis to decide on the
appropriate product mix. As part of its business plan, the Company shall
continue to assess current and future trends and demands in the industry, refine
its new format, and analyze and evaluate markets for future store openings,
product lines, and marketing strategies. The Company shall continue to operate
its stores under the names it currently utilizes - Play Co. Toys, Toys
International, Toy Co., and Tutti Animali - and shall continue to open stores
with such names contingent upon the product mix and location of the store.
To a certain extent, mostly with respect to its Original Stores, the
Company offers a broad in-stock selection of products at prices generally
competitive within the industry. While the Company does not stock the depth or
breadth of selection of toys for its Original Stores as some of its larger
competitors do, the Company does strive to stock all basic categories of toys
and all television advertised items. The Company also offers a special order
program for many items; this program is free to its customers. In June 1994, the
Company began to sell toy and hobby items on a wholesale basis to military bases
located in Southern California. In accordance with its new corporate focus, and
given that wholesale sales to military bases were minimal in fiscal 1998
(approximating $444,000, or 2% of sales), whereas they totaled approximately
<PAGE>
$619,000, or 3% of sales for the year ended March 31, 1997, the Company has
decided to cease such sales as of July 1998.
Product Lines
The Original Stores sell children's and adult toys, games, bicycles,
and other wheel goods, sporting goods, puzzles, Nintendo and Sony electronic
game systems and cartridges for such game systems, cassettes, and books. They
offer over 15,000 items for sale, most of which are major brand name toys and
hobby products.
The New Stores also carry some of the items found in the Original
Stores; however, they focus on selling educational toys, Steiff and North
America Bears, Small World toys, LBG trains, CD-ROMs, electronic software games,
Learning Curve and Ty products. The Company's Tutti Animali store, located in
the Crystal Court Mall in Costa Mesa, California, is a unique store which sells
only stuffed animals.
Warehousing, Shipping and Inventory Systems
Until recently, the Company's stores were serviced from two adjacent
distribution facilities (one 43,000 square feet in size, the other 5,200 square
feet in size) encompassing an aggregate of approximately 48,200 square feet.
Inventory and shipment of products continues to be monitored by a computerized
point-of-sale system. The point-of-sale system is a sophisticated scanning,
inventory control, purchasing, and warehouse system which allows each store
manager to monitor sales activity and inventory at each store and enables the
Company's Officers to obtain reports on all stores. It monitors sales at all
store locations and automatically notifies the warehouse and shipping department
each time stock of a particular item is low or out, depending upon the item and
the instructions programmed into it. Though this system, management continuously
analyzes the sales of its product lines and adjusts product mix in order to
maximize return and effectively manage its retail space. The Company's stores
generally are restocked on a weekly basis, although certain stores and certain
items may be restocked at more frequent intervals. In addition, restocking of
products is generally increased during the fourth quarter, during the holiday
season. During the holiday season some stores and some items are restocked on a
daily basis.
All shipments to stores in California are made by vehicles owned or
leased by the Company.
Suppliers and Manufacturers
The Company purchases all of its products from manufacturers and
wholesalers and ships them to its stores from its distribution center. There are
no written contracts and/or agreements with any individual manufacturer or
supplier; rather, all orders are on a purchase order basis only. The Company
relies on credit terms from suppliers and manufacturers to purchase nearly all
of its inventory. Credit terms vary from company to company and are based upon
many factors, including the ordering company' financial condition, account
history, type of product and the time of year the order is placed. Such credit
arrangements vary for reasons both within and outside the control of the
Company. In past years the Company's credit lines decreased due to the Company's
then poor financial condition. Recently, the Company has seen a significant
increase in its credit lines based on its improved financial condition and its
ability to remain current with its accounts payable.
<PAGE>
Seasonality
Since inception, the Company's business has been highly seasonal, with
the majority of its sales and profits being generated in the fourth quarter of
the calendar year, particularly during the November and December holiday season.
However, during fiscal 1998 and during the first quarter of fiscal 1999, the
Company has seen a significant increase in sales during the remaining three
quarters, giving a lesser effect to the fourth quarter holiday season, although
the Company does expect that the holiday season shall continue to represent a
significant (30-40%) portion of the Company's annual sales. This adjustment in
revenues is due to the Company's new store design and refocused product lines.
Trademarks
In 1976 and 1994, the Company received federal registrations for the
trademarks "Play Co. Toys" and "TKO." Play Co. Toys is a trademark utilized by
the Company in connection with its marketing and sales; TKO is used for certain
items the Company previously manufactured. In addition, the Company has applied
for the federal registration of the name "Toy Co." as a tradename of the
Company: this application is pending. Two of the Company's New Stores, those
located in Arizona Mills and Ontario Mills, operate under this name. In
accordance with its acquisition of Toys, the Company acquired the rights to the
tradenames "Toys International" and "Tutti Animali."
Financing
On January 21, 1998, the Company entered into a $7.1 million secured,
revolving Loan and Security Agreement (the "FINOVA Agreement") with FINOVA. The
credit line offered under the FINOVA Agreement replaced the $7 million credit
line the Company had with Congress Financial Corporation (Western) ("Congress").
The Company paid off the Congress loan on February 3, 1998. The Company believes
that its credit availability against the cost value of its inventory under the
FINOVA Agreement will be comparable to its availability under the Congress loan.
The FINOVA credit line is secured by substantially all the Company's assets and
expires on August 3, 2000. It accrues interest at a rate of floating prime plus
one and one-half percent.
Under the FINOVA Agreement, the Company is able to borrow against the cost
value of eligible inventory and is able to borrow up to $2.4 million against a
combination of $3 million in standby letters of credit in favor of FINOVA and
restricted cash provided by a subordinated loan compared to a $2 million advance
against $3 million in standby letters of credit under the Congress Arrangement.
$1.5 million of the $3 million in additional borrowing support from the standby
letters of credit was provided by an institutional investor in the form of a
subordinated loan; $1.0 million was provided in the form of a standby letter of
credit issued by Multimedia Concepts International, Inc., an affiliate of the
Company; the other $500,000 was provided by the Company.
The Company relies on credit terms from its suppliers and manufacturers to
purchase nearly all of its inventory. While its accounts payable to vendors is
current as of March 31, 1998, there can be no assurance that the Company will be
able to keep such payable current in the future. Credit arrangements vary for
reasons both within and outside the control of the Company. See "-- Suppliers
and Manufacturers."
The Company has entered into one fixture financing agreement, with Pacifica
Capital, for the leasing of fixtures for its remodeled store in the Century City
Shopping Center located in west Los Angeles. The agreement is for a term of five
years and provides fixture financing in the approximate amount of $84,000. The
financing is secured by the store fixtures. The Company is negotiating two
additional fixture financing arrangements which it hopes to consummate by August
1998. There can be no assurance, however, that either such financing will be
consummated.
<PAGE>
Competition
The toy and hobby products market is highly competitive. Though the
Company's New Stores offer a combination of traditional, educational, new
electronic interactive, specialty, and collectible toys and items, the Company
remains in direct competition with local, regional, and national toy retailers
and department stores, including Toys R Us (considered to be the dominant toy
retailer in the United States), Kay Bee Toy Stores, K-Mart, and Wal Mart. Most
of the Company's larger competitors are located in free-standing stores, not
malls. Kay Bee stores however, are located in malls, though their product line
is different than the Company's. In addition, the toy and hobby products market
is particularly characterized by large retailers and discount stores with
intensive advertising and marketing campaigns and with deeply discounted pricing
of such products. The Company faces competition from hobby vendors that market
through direct sales forces and from distributors that rely on mail order and
telemarketing. The Company competes as to price, personnel, service, speed of
delivery, and breadth of product line. Many of the Company's competitors have
greater financial and marketing resources than those of the Company.
As a result of the continual changing nature of children's consumer
preferences and tastes, the success of the Company is dependent on its ability
to change and adapt to such changing tastes and preferences. Children's
entertainment products are often characterized by fads of limited life cycles.
Combining the traditional and educational toy segments of the market into one
retail location is believed to be a unique concept that should prove to
differentiate the Company's stores from those of any of its larger or similar
size competitors. Management has been unable to locate any other retailer
currently using this combined marketing concept. The Company will compete for
the educational toy customer with other specialty stores such as Disney Stores,
Warner Bros. Stores, Learning Smith, Lake Shore, Zainy Brainy, and Noodle
Kidoodle.
Most of the companies with which the Company compete have more
extensive research and development, marketing and customer support capabilities
and greater financial, technological and other resources than that of the
Company. There can be no assurance that the Company will be successful or that
it can distinguish itself from such larger, more well known entities. In
addition, the Company does not believe there are any significant barriers to
entry to discourage new companies from entering into this industry.
Employees
As of March 31, 1998, the Company has three executive officers,
approximately 65 full time employees, and approximately 259 part time employees.
None of the employees of the Company is represented by a union, and the Company
considers employee relations to be good. Each store employs a store manager, an
assistant manager, and between fifteen to twenty-five full-time and part-time
employees. Each of the Company's store managers reports to the Company's
Director of Operations and Director of Merchandising who in turn report directly
to the Company's Executive Officers.
ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains approximately 3,500 square feet of executive
office space and until recently, the Company's stores were serviced from two
adjacent distribution facilities (one 43,000 square feet in size, the other
18,000 square feet in size), encompassing an aggregate of approximately 61,000
square feet, at 550 Rancheros Drive, San Marcos, California. As of April 15,
1997, however, the Company returned 12,800 feet of the 18,000 square foot
warehouse space to the landlord. The combined 51,700 square foot office and
warehouse space are leased at an approximate annual cost of $281,000, the lease
expiring on April 30, 2000. The office and warehouse are leased from a company
owned in part by Richard Brady, the President and a Director of the Company. The
Company believes that the lease is on terms no more or less favorable than terms
it might otherwise have negotiated with an unaffiliated party. In addition, the
Company currently leases 18 stores in southern California and one store in
Arizona. During the last calendar quarter of 1997, the Company opened a
temporary short-term seasonal store (in Crystal Court in Costa Mesa, California)
<PAGE>
and three new stores in high traffic shopping malls: one in South Bay Galleria
in Redondo Beach, California; one in Ontario Mills in Ontario, California; and
one in Arizona Mills in Tempe, Arizona (the Company's first store outside of
southern California). The Company has executed six leases to open additional
locations within the 1998 calendar year.
The Company has recently completed the enlargement of one of its 19
stores, the Toys store located in Los Angeles, California. The lease for this
store expired in January 1998 and was extended, at a new location within the
same mall, through and until March 31, 2001. Three of the Company's other stores
are operating under leases that either also have expired or will expire in 1998,
the fate of such stores to depend upon lease negotiations with the landlords of
same.
ITEM 3. LEGAL PROCEEDINGS
In June 1997, in the Superior Court of the State of California, Los Angeles
County, Shook Development Corp. commenced suit against the Company for breach of
contract pertaining to premises leased by the Company from South San Dimas, a
California Limited Partnership. In addition, in the Superior Court of the State
of California, Orange County, Prudential Insurance Company of America commenced
suit against the Company for breach of contract pertaining to premises leased by
the Company. In May 1997, in the Superior Court of the State of California, Los
Angeles County, PNS Stores, Inc. commenced suit against the Company and its
former guarantor for breach of contract pertaining to premises leased by the
Company. These actions settled for an aggregate of $469,600 during fiscal year
1998.
In October 1997, in the Superior Court of the State of California,
County of San Bernardino, Foothill Marketplace commenced suit against the
Company and its former guarantor for breach of contract pertaining to premises
leased by the Company in Rialto, California. The lease for the premises has a
term from February 1987 through November 2003. The Company vacated the premises
in August 1997. Under California State law and the provisions of the lease,
plaintiff has a duty to mitigate its damages. Plaintiff seeks damages, of a
continuing nature, for unpaid rent, proximate damages, costs, and attorneys'
fees. This action is in the discovery phase.
No Director, Officer, or affiliate of the Company, nor any associate of
same, is a party to, or has a material interest in, any proceeding adverse to
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 28, 1998, the Company held its annual meeting during which
it proposed to elect four Directors to the Board. The proposal was adopted, and
the following were elected Directors of the Board for a term of one year:
Richard Brady, James Frakes, Harold Rashbaum, and Sheikhar Boodram.
The votes cast or withheld for the election of the Directors are set
forth as follows:
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Nominees Votes For Votes Withheld
<S> <C> <C>
Harold Rashbaum 2,781,477 2,539
Richard Brady 2,782,623 1,393
James Frakes 2,782,241 1,775
Sheikhar Boodram 2,781,477 2,539
</TABLE>
On March 16, 1998, Mr. Boodram resigned as Director. On March 18, 1998, in
order to fill the vacancy left by Mr. Boodram, the Board of Directors appointed
Moses Mika as a Director.
<PAGE>
An Information Statement was mailed on May 8, 1998 to the Company's
stockholders of record on April 15, 1998 in connection with the proposed action
to be taken by the Company pursuant to the written consent of the Company's
majority stockholder. The Company received authorization to effect an increase
in the total number of shares of all classes of capital stock which the Company
has authority to issue from forty million (40,000,000) shares to sixty-six
million five hundred thousand (66,500,000) shares, consisting of (i) an increase
in the number of authorized shares of common stock, par value $.01 (the "Common
Stock"), from forty million (40,000,000) shares to fifty-one million
(51,000,000) shares of Common Stock; (ii) ten million (10,000,000) shares of the
Series E Preferred Stock as previously authorized; and (iii) the authorization
of 5,500,000 shares of a new class of preferred stock, par value $.01 per share,
designated the "Series F Preferred Stock." The increase in the authorized
capital stock was undertaken to enable the Company to commence its Series F
private offering. The action was taken by amendment to the Company's Certificate
of Incorporation filed on May 29, 1998. See "-- Series F Preferred Offering."
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Until September 24, 1997, the Company's common stock was quoted on the
Nasdaq SmallCap Stock Market. The following table sets forth representative high
and low closing bid quotes as reported by a market maker during the periods
stated below. The Company's Securities are quoted on the OTC Bulletin Board. Bid
quotations reflect prices between dealers, do not include resale mark-ups,
mark-downs, or other fees or commissions, and do not necessarily represent
actual transactions.
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<CAPTION>
Calendar Series E (2) Series E (2)
Period Stock(1 Common) Warrants (1) Preferred Stock Warrants
------ --------------- ---------------- --------
Low High Low High Low High Low High
1996
<S> <C> <C> <C> <C> <C> <C>
01/01/96 - 03/31/96 7/8 2 3/8 1/8 1/4
04/01/96 - 06/30/96 1 1/8 3 1/8 1/4
07/01/96 - 09/30/96 3/4 21/2
10/01/96 - 12/31/96 1 1/8 1 3/8
1997
01/01/97 - 03/31/97 1 11/4 1 11/4
04/01/97 - 06/30/97 1 1 1/8
07/01/97 - 09/23/97(3) 1 1 1/8
10/14/97 - 12/31/97 2 3
1998
01/01/98 - 03/31/98 .68 2 1 4.75 .5 1.75
04/01/98 - 06/19/98 1.37 1.75 .87 3.5 .5 1.25
- ---------------------
</TABLE>
(1) The Common Stock and Warrants issued in the Company's initial public
offering in November 1994 started to trade separately on February 6, 1995. The
Warrants expired in February 1997.
(2) The Company consummated an offering of its Series E Preferred Stock and
Series E Preferred Stock Purchase Warrants in December 1997. These securities
commenced trading on the OTC Bulletin Board on January 5, 1998.
(3) The Company's Common Stock was delisted from Nasdaq effective September
24, 1998. It began trading on the OTC Bulletin Board
<PAGE>
As of June 24, 1998, there were 344 holders of record of the Company's
Common Stock, although the Company believes that there are approximately 636
additional beneficial owners of shares of Common Stock held in street name. As
of June 24, 1998, the number of outstanding shares of the Company's Common Stock
was 4,103,519. (This number is subject to change, nominally, as the 7,521,563
pre-reverse split shares which have not been exchanged as yet are offered for
such exchange by the Company's shareholders.)
On September 24, 1997, the Company's Common Stock was delisted from
trading on the Nasdaq Stock Market. The Company appealed an earlier Nasdaq
determination and presented its argument at an oral hearing before the Nasdaq
Listings Qualifications Panel. On September 23, 1997, the Company received a
decision from the panel that based its decision to delist on its belief that the
Company did not meet the stockholders' equity maintenance requirement of
$1,000,000 and based on transactions it deemed " detrimental to the investing
public and the public interest" concerning transactions undertaken in February
1996 with respect to options issued to an investor which provided a $2,000,000
Letter of Credit as security for the Congress credit line. See
"Business-Financing and Supplier Credit." The Company's management believes that
Nasdaq has erred in its determination and has sought all administrative remedies
available from the Nasdaq Stock Market. The Company has decided not to appeal
Nasdaq's decision to the Securities and Exchange Commission.
<PAGE>
PART II
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table summarizes certain selected financial data and is
qualified in its entirety by the more detailed financial statements contained
elsewhere in this document.
<TABLE>
<CAPTION>
Year Ended March 31,
1995 1996 1997 1998
----
Balance Sheet Data:
<S> <C> <C> <C> <C>
Working capital (deficiency) $1,805,396 $46,589 $(1,570,486) $4,452,481
Total assets 11,119,692 9,213,104 9,378,618 14,139,887
Total current liabilities 7,298,136 6,673,570 8,148,657 4,581,831
Long term obligations 140,218 726,007 226,925 7,055,549
Redeemable preferred stock
242,275 87,680 --- ---
Stockholders' equity 3,439,063 1,725,847 1,003,036 2,502,507
Common stock dividends --- --- --- ---
</TABLE>
Year Ended March 31,
<TABLE>
<CAPTION>
1995 1996 1997 1998
----
Operating Data:
<S> <C> <C> <C> <C>
Net sales $25,374,722 $21,230,853 $19,624,276 $22,568,527
Cost of sales 16,704,757 15,132,895 13,669,104 13,689,599
Operating expenses 9,292,632 9,105,515 8,789,570 10,119,430
Net loss 875,788 3,542,715 3,584,881 2,054,470
Loss per common share(1) (0.87) (2.77) (1.29) (0.50)
Average shares outstanding(1) 1,011,284 1,287,843 2,791,876 4,098,971
</TABLE>
(1) Adjusted for effects of 1 for 3 reverse split of Common Stock in July
1997.
<PAGE>
Results of Operations
Statements contained in this report which are not historical facts may be
considered forward looking information with respect to plans, projections, or
future performance of the Company as defined under the Private Securities
Litigation Reform Act of 1995. These forward looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected.
The Company's operations are substantially controlled by United Textiles &
Toys Corp. ("UTTC") , the Company's parent. UTTC currently owns approximately
59.3% of the issued and outstanding shares of the Company's Common Stock.
For the year ended March 31, 1998 compared to the year ended March 31, 1997
The Company generated net sales of $22,568,527 in the year ended March 31,
1998 (also referred to as fiscal year 1998). This represented an increase of
$2,944,251, or 15%, over net sales of $19,624,276 in the year ended March 31,
1997 (also referred to as fiscal year 1997). Approximately $2.46 million of this
sales growth came from new stores (including the three Toys International, Inc.-
"Toys" - stores acquired in January 1997) and the remaining $480,000 came from a
3.7% increase in same store sales. Sales from the Company's wholesale operations
were insignificant in both fiscal years.
The Company ended fiscal year 1998 with 19 retail locations, compared to 21
retail locations at the end of fiscal year 1997. During fiscal year 1998, the
Company opened four new stores and closed six stores (the lease for one of which
stores expired).
The Company posted a gross profit of $8,878,928 in the year ended March 31,
1998. This represented an increase of $2,923,756, or 49.1%, over the gross
profit of $5,955,172 in the year ended March 31, 1997. The gross profit increase
was due to the above noted growth in net sales and to an improvement in the
Company's gross margin from 30.3% in fiscal year 1997 to 39.3% in fiscal year
1998. This 9.0% gross margin improvement was the result of a change in the
Company's merchandising mix to augment its historical product base of lower
margin traditional toys with educational and specialty toys which generally
produce better margins than traditional toys. This change in merchandising mix
has been the centerpiece of the Company's business plan for fiscal years 1997
and 1998.
Operating expenses in the year ended March 31, 1998 were $8,864,607. This
represented a $482,052, or 5.8%, increase over the Company's operating expenses
of $8,382,555 in the year ended March 31, 1997. The primary reasons for the
operating expense increase were a growth in rent expense of approximately
$411,000 and in payroll and related expense of $367,000. Those expense increases
were partially offset by a reduction of advertising expense of $574,000.
The Company incurred $583,541 of litigation related expenses in fiscal year
1998. The expenses were associated with the closure of five store locations and
related subsequent litigation. This expense includes settlement amounts relating
to four of the five closed locations and the related legal fees and costs. The
Company remains in litigation regarding the fifth closed store.
Depreciation and amortization expense in the year ended March 31, 1998 was
$671,282. This represented a $264,267, or 64.9%, increase over the Company's
depreciation and amortization expense of $407,015 in the year ended March 31,
1997. Depreciation and amortization are non-cash charges. The primary reason for
the depreciation and amortization expense increase was the depreciation on the
fixed assets purchased for the four new stores opened during fiscal year 1998.
Total operating expenses (the sum of operating expenses, litigation related
expenses and depreciation and amortization expense) in the year ended March 31,
1998 were $10,119,430. This represented a $1,329,860, or 15.1%, increase over
the Company's total operating expenses of $8,789,570 in the year ended March 31,
1997. The reasons for this increase are noted in the three preceding paragraphs.
<PAGE>
The Company's operating loss improved from $2,834,398 in fiscal year 1997
to $1,240,502 in fiscal year 1998. This represented an improvement of
$1,593,896, or 56.2%. This improvement was a result of the $2,923,756 increase
in gross profit being partially offset by the $1,329,860 increase in total
operating expenses.
Total interest expense totaled $813,968 in the year ended March 31, 1998.
This represented a $63,485, or 8.5%, increase in total interest expense. The
primary reason for the increased level of interest expense was a higher level of
borrowings in fiscal year 1998 than in fiscal year 1997.
During each of the years ended March 31, 1998 and 1997, the Company
recorded net income tax provisions consisting only of the current portion of the
minimum income taxes required by various jurisdictions including the States of
California and Delaware; such amounts were immaterial and are included in
operating expenses. Changes in deferred taxes were offset dollar for dollar by
adjustments to the Company's valuation allowance which has reduced its net
deferred tax assets to zero as of March 31, 1998 and 1997 and resulted in a net
zero dollar provision for deferred income taxes for each of the years ended
March 31, 1998 and 1997.
As a result of the above mentioned factors, the Company recorded a net loss
of $2,054,470 for the fiscal year ended March 31, 1998 and a net loss of
$3,584,881 recorded in the fiscal year ended March 31, 1997. In fiscal year
1997, the net loss applicable to common shares differed from the net loss by
$27,545, as a result of preferred stock dividends accrued in that year. The net
loss per common share for the 1998 fiscal year was $0.50 compared to a net loss
per common share in the 1997 fiscal year of $1.29. The loss per common share
decreased both as a result of the decreased net loss and due to the increase in
the weighted average number of shares outstanding from 2,791,876 in fiscal year
1997 to 4,098,971 in fiscal year 1998.
Liquidity and Capital Resources
At March 31, 1998, the Company had a working capital position of $4,452,481
compared to a working capital deficit of $1,570,486 at March 31, 1997. This
change in the Company's working capital was largely due to the classification of
the borrowings under the Company's new financing agreement as a long term
liability at March 31, 1998 compared to the borrowings under its previous
financing agreement that were classified as a short term liability at March 31,
1997.
The Company has generated operating losses for the past several years and
has historically financed those losses and its working capital requirements
through financing transactions, most recently from a public offering of the
Company's Series E Preferred Stock consummated in December 1997. There can be no
assurance that the Company will be able to generate sufficient revenues or have
sufficient controls over expenses and other charges to achieve profitability.
For the year ended March 31, 1998, the Company used $2,288,736 of cash in
its operations compared to $2,275,962 used in operations in the year ended March
31, 1996. A $1,779,874 increase in merchandise inventories was the primary
reason that cash used in operations actually grew by $12,774 while the net loss
decreased by $1,530,411. The Company believes that this inventory growth
occurred due to improved support from its trade vendors in fiscal year 1998
compared to fiscal year 1997.
The Company used $3,273,273 in its investing activities during fiscal year
1998 compared to $1,024,127 in fiscal year 1997. In fiscal year 1998, $2,250,000
of the investing activities related to the purchase of restricted certificates
of deposit. $2 million of that amount was used to collateralize a letter of
credit in the same amount in favor of FINOVA Capital Corp. ("FINOVA" - see
below), its working capital lender. The other $250,000 is collateral for a
facility for letters of credit. The remaining $1,023,273 of investing activities
related to purchases of property and equipment, largely at four new stores that
the Company opened. The $1,024,127 in investing activities in fiscal 1997
related to the acquisition of Toys, a Southern California-based, three store
chain of specialty toy stores located in high traffic shopping malls.
The Company generated $6,033,273 from its financing activities in the year
ended March 31, 1998 compared to the generation of $3,285,410 from financing
activities in the year ended March 31, 1997. The largest contributions to the
Company's financing activities in the 1998 fiscal year were the receipt of
$3,390,450 of net proceeds from the sale of preferred stock through a
combination of public and private offerings and $1,750,000. Proceeds from
preferred stock sales was the single largest contributor to the Company's
financing activities in fiscal 1997 as well.
<PAGE>
As a result of the above factors, the Company had a net increase in cash of
$471,264 in fiscal year 1998 compared to a net decrease in cash of $14,679 in
fiscal year 1997.
During fiscal 1998, the Company opened three new stores in high traffic
shopping malls and one new store in a large strip mall in San Diego, California.
In addition, it reformatted one existing store in the San Diego area. The three
new high traffic shopping mall stores are located in the South Bay Galleria in
Redondo Beach, California; in Ontario Mills in Ontario, California; and in
Arizona Mills in Tempe, Arizona. The Arizona Mills location is the Company's
first store located outside of Southern California.
On December 29, 1997, the Company completed a public offering of Series E
Preferred Stock and Redeemable Series E Purchase Warrants. The offering was
managed by West America Securities Corp and generated $3,150,000 in gross
proceeds. The net proceeds of the offering were $2,303,441 after discounts and
commissions, legal expenses, Blue Sky fees, accounting fees, printing expenses,
other investment banking fees, and other miscellaneous costs and expenses.
At March 31, 1998, the Company had an inventory financing line of
credit with FINOVA in connection with a Loan and Security Agreement ("FINOVA
Agreement"). On February 3, 1998, the Company borrowed $4,866,324 under the
FINOVA Agreement, the proceeds of which were used primarily to repay the then
outstanding borrowings under the financing arrangement with Congress Financial
Corporation, its previous working capital lender, and to pay fees related to the
FINOVA Agreement. The FINOVA Agreement provides for maximum borrowings up to
$7,100,000 based on a percentage of the cost value of eligible inventory, as
defined. Outstanding borrowings bear interest at 1.5% above the prime rate, as
defined (the prime rate at March 31, 1998 was 8.5%). The FINOVA Agreement
matures on July 21, 2000 and can be renewed for one additional year at the
lender's option.
The FINOVA Agreement is guaranteed by UTTC and is secured by substantially
all the assets of the Company and $3,000,000 in letters of credit. Of the
$3,000,000 in letters of credit, $2,000,000 is collateralized by amounts held in
a restricted certificate of deposit. The remaining $1,000,000 letter of credit
has been provided by Multimedia Concepts International, Inc., an affiliate.
In April 1998, the Company relocated its store in the Century City Shopping
Center in west Los Angeles to a new, larger location within that same high
traffic shopping center. This store was one of the three stores acquired in the
purchase of Toys in January 1997. The relocation involved the renovation of the
new store space at an overall aggregate cost of approximately $251,000.
The Company plans to open six new stores in high traffic malls by the end
of calendar 1998. The Company plans to open these new stores in Nevada, Texas,
Illinois, Michigan, and Southern California. The Company has entered into leases
for six of these locations. The costs involved in opening the six new stores
will require a significant capital expenditure, estimated to be approximately
$1.5 million to $2.4 million.
In order to raise additional capital to help finance this planned store
expansion, in May 1998, the Company began a private placement sale of units (the
"Private Placement") through Morgan Grant Capital Group, Inc. as placement
agent. The Private Placement carries a minimum amount of $750,000 and a maximum
of $4,500,000. Each unit consists of one share of the Company's Series F
Preferred Stock, par value $.01 per share, and one Series F Preferred Stock
Purchase Warrant at a purchase price of $3.00 per Unit.
In addition to the equity that the Company plans to raise in the
Private Placement, other potential sources of capital to help finance the store
expansion include a combination of landlord tenant improvement contributions,
borrowings on its credit line, and borrowings under capital leases. Any
remaining expenditure will be paid out of the Company's working capital. There
can be no assurance that the Company will be able to complete the Private
<PAGE>
Placement or obtain sufficient landlord or lease financing to support the
projected new store opening costs.
Year 2000
An additional area that represents a near term commitment of capital
resources is the Company's management information system. The Company has
investigated its existing management information system and has determined that
it does not provide sufficient scope to support the planned level of expanded
operations and, furthermore, is not year 2000 compliant. The Company is
exploring the cost of upgrading its current system or purchasing a new system to
meet the projected demands of the business and to become year 2000 compliant.
Based on information learned to date, the Company estimates that the cost of
upgrading its current system will be on the order of $190,000 to $300,000. The
Company does not have any estimates yet as to the cost of replacing its current
system.
Beyond the above noted internal year 2000 system issue, the Company has no
current knowledge of any outside third party year 2000 issues that would result
in a material negative impact on its operations. Should the Company become aware
of any such situation, contingency plans will be developed.
Trends Affecting Liquidity, Capital Resources and Operations
As a result of its planned merchandise mix change to emphasize specialty
and educational toys, the Company enjoyed significant sales and gross profits in
fiscal 1998. Same can be attributed to the expansion of its collectible die cast
cars, specialty yo-yo's, and the continued strength of Beanie Babies(R)and other
plush and educational toys. While the Company believes these particular toys
will remain popular with its customer base for the remainder of calendar year
1998, there can be no assurance that these particular specialty toys will
continue to contribute strongly to the Company's sales and gross profits.
However, the history of the toy industry indicates that there is generally at
least one highly popular toy every year.
The Company's sales efforts are focused primarily on a defined geographic
segment consisting of the Southern California area and the Southwestern United
States. The Company's future financial performance will depend upon continued
demand for toys and hobby items and on general economic conditions within that
geographic market area, the Company's ability to choose locations for new
stores, the Company's ability to purchase product at favorable prices and on
favorable terms, and the effects of increased competition and changes in
consumer preferences.
The toy and hobby retail industry faces a number of potentially adverse
business conditions including price and gross margin pressures and market
consolidation. The Company competes with a variety of mass merchandisers,
superstores and other toy retailers, including Toys R Us and Kay Bee Toy Stores.
Competitors that emphasize specialty and educational toys include Disney Stores,
Warner Bros. Stores, Learning Smith, Lake Shore, Zainy Brainy, and Noodle
Kidoodle. There can be no assurance that the Company's business strategy will
enable it to compete effectively in the toy industry.
Seasonality
The Company's operations are highly seasonal with approximately 30-40% of
its net sales falling within the Company's third quarter, which coincides with
the Christmas selling season. The Company intends to open new stores throughout
the year, but generally before the Christmas selling season, which will make the
Company's third quarter sales an even greater percentage of the total year's
sales.
<PAGE>
Impact of Inflation
The impact of inflation on the Company's results of operations has not been
significant. The Company attempts to pass on increased costs by increasing
product prices over time.
ITEM 7. FINANCIAL STATEMENTS
See attached Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On February 20, 1997, the Company engaged Haskell & White, Certified
Public Accountants, as its new independent accountants to audit the Company's
financial statements for the year ending March 31, 1997, replacing BDO Seidman,
LLP as auditors of the Company. Prior to engaging Haskell & White, such
accounting firm was not consulted on any matters relative to the application of
accounting principles on specified transactions or in any matter that was the
subject of a disagreement between the Company and its former accountants. During
the past year, Haskell & White has provided services of a general financial
consulting nature to the Company and has performed agreed upon procedures in the
due diligence process related to the January 1997 acquisition of substantially
all the assets of Toys.
In December 1996, Haskell & White was engaged by U.S. Wireless
Corporation, (formerly known as American Toys, Inc.), the Company's former
parent company, to re-audit the financial statement of American Toys, Inc. for
the year ended March 31, 1996. In so doing, Haskell & White re-audited the
financial statements of the Company for the year ended March 31, 1996 and,
therefore, provided an audit report for the comparative financial statements for
the years ended March 31, 1997 and 1996.
The change in accountants was not due to any discrepancies or disagreements
between the Company and BDO Seidman, LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
The former accountants' reports on the Company's financial statements for the
years ended March 31, 1995 and 1996 did not contain any adverse opinions or
disclaimers of opinion; nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Officers and Directors
The Directors of the Company are elected annually by the shareholders,
and the Officers are appointed annually by the Board of Directors. Vacancies on
the Board of Directors may be filled by the remaining Directors. Each Director
and Officer will hold office until the next annual meeting of shareholders or
until his successor is elected and qualified. The Executive Officers and
Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Harold Rashbaum 70 Chairman of the Board
Richard Brady 46 Chief Executive Officer, President,
and Director
James Frakes 41 Chief Financial Officer, Secretary,
and Director
John Hites 41 Vice President of Retail Operations
Moses Mika 78 Director
</TABLE>
<PAGE>
All Directors hold office until the next annual meeting of stockholders or
until their successors are duly elected and qualified. Officers are elected
annually by, and serve at the discretion of, the Board of Directors. There are
no family relationships between or among any Officers or Directors of the
Company, except Mr. Rashbaum is the father-in-law of Mr. Mika's son. Each
Director is elected at an annual meeting of the Company's shareholders and
serves for a period of one year or until a successor is duly elected.
As permitted under the Delaware General Corporation Law, the Company's
Certificate of Incorporation eliminates the personal liability of the Directors
to the Company or any of its shareholders for damages caused by breaches of said
Directors' fiduciary duties. As a result of such provision, stockholders may be
unable to recover damages against Directors for actions which constitute
negligence or gross negligence or are in violation of their fiduciary duties.
This provision in the Company's Certificate of Incorporation may reduce the
likelihood of derivative, and other types of shareholder, litigation against
Directors.
Harold Rashbaum was appointed Chairman of the Board of Directors on
September 10, 1996. Mr. Rashbaum was a crisis management consultant to the
Company from July 1995 to September 10, 1996. He has been the President, Chief
Executive Officer, and a Director of Hollywood Productions, Inc. ("Hollywood")
since January 1997. From May 1996 to January 1997, Mr. Rashbaum served as
Secretary and Treasurer of Hollywood. He has been the President of Breaking
Waves, Inc., a subsidiary of Hollywood, since September 1996. Since February
1996, Mr. Rashbaum has also been the President and a Director of H.B.R.
Consultant Sales Corp. ("HBR"), of which his wife is the sole stockholder. Prior
thereto from February 1992 to June 1995, Mr. Rashbaum was a consultant to 47th
Street Photo, Inc., an electronics retailer. Mr. Rashbaum held this position at
the request of the bankruptcy court during the time 47th Street Photo, Inc. was
in Chapter 11. From January 1991 to February 1992, Mr. Rashbaum was a consultant
for National Wholesale Liquidators, Inc., a major retailer of household goods
and housewares.
Richard Brady is a co-founder of the Company and has acted as the
Company's Chief Executive Officer and President since December 1995. Mr. Brady
was the Executive Vice President, Secretary, and a Director from the Company's
inception in 1974 until December 1996. He was re-elected Director of the Company
in January 1998.
James Frakes was elected Chief Financial Officer and Secretary of the
Company in July 1997. Since August 1997, he has been a Director of the Company.
In January 1998, Mr. Frakes was elected Director of Hollywood. Prior thereto,
from June 1990 to March 1997, Mr. Frakes was Chief Financial Officer of Urethane
Technologies, Inc. ("UTI") and two of its subsidiaries, Polymer Development
Laboratories, Inc. ("PDL") and BMC Acquisition, Inc. These were specialty
chemical companies, which focused on the polyurethane segment of the plastics
industry. Mr. Frakes was also Vice President and a Director of UTI during this
period. In March 1997, three unsecured creditors of PDL filed a petition for the
involuntary bankruptcy of PDL. This matter is pending before the United States
Bankruptcy Court, Central District of California. From 1985 to 1990, Mr. Frakes
was a manager for Berkeley International Capital Corporation, an investment
banking firm specializing in later stage venture capital and leveraged buyout
transactions. In 1980, Mr. Frakes obtained a Masters in Business Administration
from University of Southern California. He obtained his Bachelor of Arts degree
in history from Stanford University, from which he graduated with honors in
1978.
John Hites was appointed Vice President of Retail Operations of the Company
in April 1998. From 1991 through March 1998, Mr. Hites operated a sole
proprietorship known as Vintage Sports Company which engaged in the retail sale
of sporting goods. From November 1995 to September 1997, Mr. Hites operated
Vintage Game and Hobby, a related business which engaged in the retail sale of
games, toys, and crafts. Since 1974, Mr. Hites has been actively involved in the
retail sale of specialty toys and items. From 1976 through 1982, Mr. Hites was
employed by Toys International, Inc. Mr. Hites attended California Polytechnic
University, Pomona, California, from 1974 through 1976 where he focussed his
studies on business administration.
<PAGE>
Moses Mika was appointed Director of the Company in March 1998. Mr. Mika
has been retired since 1989.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Officers, Directors, and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities
to file reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission ("SEC"). Officers, Directors, and greater
than ten percent beneficial owners also are required by rules promulgated by the
SEC to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon requests for information of the Company's Officers, Directors,
and greater than 10% shareholders, during fiscal 1997, the Company has been
informed that all Officers, Directors, or greater than 10% shareholders have
stated that they have filed such reports as are required pursuant to Section
16(a) during the 1996 fiscal year, except that Mr. Brady and Mr. Rashbaum failed
to file Form 4's timely upon receipt of shares of Series E Preferred Stock and
Mr.
Frakes failed to file a Form 3 upon becoming an officer of the Company or upon
his receipt of stock options. All required filings have since been made. The
Company has no basis to believe that any required filing by any of the above
indicated individuals has not been made.
ITEM 10. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
or paid by the Company during the years ended March 31, 1998, 1997, and 1996 to
each of the named Executive Officers of the Company.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
(a) (b) (c) (d) (e) (f)
Name and Principal Options/ Other Annual
Position Year Salary($) Bonus($)(1) SARs(shs) Compensation($)
- -------------------- ---- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard Brady 1998 120,000 - 25,000 (2) 8,579 (3)
Chief Executive Officer, 1997 108,000 - -- 6,179(3)
President, and Director 1996 117,230 - -- 7,979(3)
- ----------------------
</TABLE>
(1) No bonuses were paid during the periods herein stated.
(2) Mr. Brady received 25,000 shares of the Series E Preferred Stock as a
bonus in March 1998, which shares vest equally over a 12 month period commencing
in April 1998.
(3) Includes an automobile allowance of $7,200 for 1998, $4,800 for 1997,
and $6,600 for 1996 and the payment of life insurance premiums of $1,379 for
each of 1998, 1997, and 1996.
Commencing January 1998, Harold Rashbaum, the Company's Chairman of the
Board has received a $2,500 monthly consulting fee. Mr. Rashbaum works closely
with management in developing the Company's ongoing business strategy.
<PAGE>
1994 Stock Option Plan
In 1994, the Company adopted the Company's 1994 Stock Option Plan (the
"Plan"). The Board believes that the Plan is desirable to attract and retain
executives and other key employees of outstanding ability. Under the Plan,
options to purchase an aggregate of not more than 50,000 (reflects 1 for 3
reverse split) shares of Common Stock may be granted from time to time to key
employees, Officers, Directors, advisors, and independent consultants to the
Company and its subsidiaries. The Company has granted to James Frakes, Chief
Financial Officer and Secretary, pursuant to his hire, options to purchase
30,000 shares of Common Stock at an exercise price of $3.25 per share, vesting
at the rate of 10,000 shares per annum in each of July 1998, 1999, and 2000. On
June 17, 1998 the Board elected to reset the exercise price of the option to
$1.15, representing approximately 110% of the closing price of the Common Stock
on said date.
The Board of Directors is charged with administration of the Plan and
is generally empowered to interpret the Plan, prescribe rules and regulations
relating thereto, determine the terms of the option agreements, amend them with
the consent of the Optionee, determine the employees to whom options are to be
granted, and determine the number of shares subject to each option and the
exercise price thereof. The per share exercise price for incentive stock options
("ISOs") will not be less than 100% of the fair market value of a share of the
Common Stock on the date the option is granted (110% of fair market value on the
date of grant of an ISO if the Optionee owns more than 10% of the Common Stock
of the Company).
Options will be exercisable for a term (not less than one year)
determined by the Board. Options may be exercised only while the original
grantee has a relationship with the Company or at the sole discretion of the
Board, within ninety days after the original grantee's termination. In the event
of termination due to retirement, the Optionee, with the consent of the Board,
shall have the right to exercise his option at any time during the thirty-six
month period following such retirement. Options may be exercised up to
thirty-six months after the death or total and permanent disability of an
Optionee. In the event of certain basic changes in the Company, including a
change in control of the Company as defined in the Plan, in the discretion of
the Board, each option may become fully and immediately exercisable. ISOs are
not transferable other than by will or by the laws of descent and distribution.
Options may be exercised during the holder's lifetime only by the holder or his
guardian or legal representative. Options granted pursuant to the Plan may be
designated as ISOs with the attendant tax benefits provided therefor pursuant to
Sections 421 and 422A of the Internal Revenue Code of 1986. Accordingly, the
Plan provides that the aggregate fair market value (determined at the time an
ISO is granted) of the Common Stock subject to ISOs exercisable for the first
time by an employee during any calendar year (under all plans of the Company and
its subsidiaries) may not exceed $100,000. The Board may modify, suspend, or
terminate the Plan, provided, however, that certain material modifications
affecting the Plan must be approved by the shareholders, and any change in the
Plan that may adversely affect an Optionee's rights under an option previously
granted under the Plan requires the consent of the Optionee.
1994 401(k) Employee Stock Option Plan ("ESOP")
In May 1994, the Company adopted corporate resolutions approving a
401(k) Employee Stock Ownership Plan (the "ESOP Plan") which covers
substantially all employees of the Company. The ESOP Plan was filed on July 14,
1995 with the Internal Revenue Service and includes provisions for both employee
stock ownership and a 401(k) Plan. The ESOP Plan allows contributions only by
the Company: these can be made annually at the discretion of the Company's Board
of Directors. The ESOP Plan has been designed to invest primarily in the
Company's stock. The employees of the Company will contribute to the 401(k)
portion of the ESOP Plan through payroll deductions. The Company does not intend
to match contributions to the 401(k). Contributions to the ESOP Plan may result
in an expense, resulting in a reduction in earnings, and may dilute the
ownership interests of persons who currently own securities of the Company.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's outstanding Common Stock as of June 24, 1998, by (i)
each beneficial owner of 5% or more of the Company's Common Stock; (ii) each of
the Company's Executive Officers, Directors and key employees; and (iii) all
Executive Officers, Directors, and key employees as a group:
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Common Stock
Of Beneficial Owner Beneficially Owned (1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harold Rashbaum (4)(5)
c/o Play Co. Toys & Entertainment Corp. -- --
550 Rancheros Drive
San Marcos, CA
- ---------------------------------------------------------------------------------------------------------------------------
Richard Brady(4)(5)
c/o Play Co. Toys & Entertainment Corp. 25,587 *
550 Rancheros Drive
San Marcos, CA
- ---------------------------------------------------------------------------------------------------------------------------
Moses Mika
c/o Play Co. Toys & Entertainment Corp. -- --
550 Rancheros Drive
San Marcos, CA
- ---------------------------------------------------------------------------------------------------------------------------
United Textiles &
Toys Corporation 2,486,247(5)(6) 59.1
448 West 16th Street
New York, NY 10011
- ---------------------------------------------------------------------------------------------------------------------------
Multimedia Concepts International, Inc.
448 West 16th Street --(5)(7) --(7)
New York, NY 10011
- ---------------------------------------------------------------------------------------------------------------------------
Europe American
Capital Foundation --(5)(8) --(8)
Box 47
Tortola, BVI
- ---------------------------------------------------------------------------------------------------------------------------
Vermongenstreuhand GMBH
Kiser Street, #14 --(5)(9) --(9)
Bregenz Austria
- ---------------------------------------------------------------------------------------------------------------------------
Volcano Trading
Limited --(5)(10) --(10)
Via Cantonale, #16
Lugano Switzerland
- ---------------------------------------------------------------------------------------------------------------------------
Officers and Directors as a group
(5 persons)(3)(5) 25,587 *
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
* Less than 1%
(1) Unless otherwise noted, all of the shares shown are held by individuals
or entities possessing sole voting and investment power with respect to such
shares. Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual or entity to acquire them within 60 days, whether by the
exercise of options or warrants, are deemed outstanding in determining the
number of shares beneficially owned by such person or entity.
(2) The "Percent of Common Stock Beneficially Owned" is calculated by
dividing the "Number of Shares Beneficially Owned" by the sum of (i) the total
outstanding shares of Common Stock of the Company, and (ii) the number of shares
of Common Stock that such person or entity has the right to acquire within 60
days, whether by exercise of options or warrants. The "Percent of Common Stock
Beneficially Owned" does not reflect shares beneficially owned by virtue of the
right of any person, other than the person named and affiliates of said person,
to acquire them within 60 days, whether by exercise of options or warrants.
(3) Does not include 25,503,420 shares of Common Stock issuable upon the
conversion (any time two years from issuance) of 4,200,570 shares of Series E
Stock outstanding and 50,000 shares of Series E Stock issuable on exercise of
options granted to Richard Brady and Harold Rashbaum. Does not include the sale
of any shares of Series F Preferred Stock or the conversion thereof into shares
of Common Stock. See "Business - Series F Preferred Offering."
(4) Does not include 150,000 shares of Common Stock issuable upon the
conversion (any time two years from issuance) of 25,000 shares of Series E Stock
issued as a bonus in April 1998.
(5) Subject to a two-year lock up on transfer commencing December 1997, in
accordance with lock up agreements executed in connection with the Company's
Series E Preferred Stock offering.
(6) Does not include 1,350,000 shares of Common Stock issuable upon the
conversion of 225,000 shares of the Series E Preferred Stock. Includes 578,742
shares issued in connection with the distribution of the Company's shares by
American Toys in August 1996.
(7) Does not include 4,818,420 shares of Common Stock issuable upon the
conversion of 803,070 shares of the Series E Preferred Stock.
(8) Does not include 7,035,000 shares of Common Stock issuable upon the
conversion of 1,172,500 shares of the Series E Preferred Stock.
(9) Does not include 4,500,000 shares of Common Stock issuable upon the
conversion of 750,000 shares of the Series E Preferred Stock.
(10) Does not include (i) 1,500,000 shares of Common Stock issuable upon
the conversion of 250,000 shares of the Series E Preferred Stock; or (ii)
2,088,000 shares of Common Stock issuable upon conversion of the Series E Stock
underlying 348,000 Series E Stock Purchase Warrants.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1998, the Company issued 25,000 shares of Series E Stock,
subject to one year vesting schedules, to each of Richard Brady, President of
the Company, and Harold Rashbaum, Chairman of the Board of the Company, as
bonuses in recognition of their efforts to further the Company's turnaround
toward profitability.
In January 1998, in accordance with the FINOVA financing, the Company
received $3.0 million in standby letters of credit: $2.0 Million of which was
established by the Company and secured by a $2.0 certificate of deposit which
was acquired with $1.5 million in proceeds from a subordinated debt arrangement
and $500,000 from the proceeds of the Company's December 1997 public offering of
Series E Stock; and $1.0 million of which was provided by Multimedia Concepts
International, Inc., an affiliate of the Company.
<PAGE>
From April 1996 to June 1997, Europe America Capital Corporation
("EACC"), an affiliate, exercised its options and purchased an aggregate of
3,562,070 shares of the Series E Stock for $3,562,070. An aggregate of 361,500
shares were converted to Common Stock which, inclusive of the 250,000 shares of
Series E Stock issued in June 1997, constituted an aggregate of 3,450,570 shares
of Series E Stock outstanding prior to the Series E Stock public offering in
December 1997. The proceeds of the funds received from this investment enabled
the Company to acquire the assets of Toys (a three store chain); to finance the
openings of the Santa Clarita, Arizona Mills, Redondo Beach, Ontario Mills, and
Clairemont stores; to redesign five store locations; and to support the
Company's operations during the Company's business turnaround.
The Company leases a combined 51,700 square feet of office and
warehouse space at an approximate annual cost of $247,000, the lease expiring in
April 2000. The office and warehouse are leased from a partnership of which one
of the partners is Richard Brady, the President and a Director of the Company.
The Company believes that the lease is on terms no more or less favorable than
terms it might otherwise have negotiated with an unaffiliated party.
On January 30, 1996, pursuant to the requirements of the Company's Loan
Agreement with Congress, American Toys, Inc. converted all $1,400,000 of debt
owed by the Company into equity. In exchange for the debt, American Toys, Inc.
agreed to receive from the Company one share of Series D Preferred Stock with
the right to elect 2/3 of the Company's Board of Directors upon stockholder
approval. In August 1996, the one share of Series D Preferred Stock was
converted into 1,157,028 shares of the Company's Common Stock based on the
initial amount of the debt divided by the average price of the shares for a 90
day period prior to the conversion. This was performed in order for American
Toys, Inc. to spin such shares off to its stockholders and divest its interest
in the Company.
See "Executive Compensation" for a description of the Company's
compensation of its Officers and Directors.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following financial statements of the Company are included as Part
II,
Item 8:
<TABLE>
<CAPTION>
<S> <C>
Index to Financial Statements F-1
Report of Independent Certified Public Accountants F-2
Balance Sheets F-3
Statements of Operations F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-9
</TABLE>
(b) During the last quarter, the Company filed one Form 8-K. In March 1998,
the Company filed a Form 8-K apprising of Mr. Sheikhar Boodram's resignation as
a Director of the Company.
(c) All exhibits, except those designated with an asterisk (*), which are
filed herewith, have previously been filed with the Commission either (i) in
connection with the Company's Registration Statement on Form SB-2, dated
November 2, 1994, under file No. 33-81940-NY; (ii) to the Company's Registration
Statement on Form SB-2, Registration No. 333-32051; or (iii) by the reference
herein and pursuant to 17 C.F.R. ss.230.411, are incorporated by reference
herein. Exhibits previously filed but not as part of the SB-2 Registration
Statement are incorporated herein by reference to the appropriate document.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1.1 Form of Underwriting Agreement. See (ii) above.
3.1 Certificate of Incorporation of the Company dated June 15, 1995. See (i) above.
3.2 Amendment to Certificate of Incorporation of the Company, filed July 2, 1997. See (ii) above).
3.2(a) Amendment to Certificate of Incorporation of the Company, filed August 11, 1997. See (ii) above.
3.3 By-Laws of the Company. See (i) above.
4.1 Specimen Common Stock Certificate See (i) above).
4.2 Specimen Warrant Certificate. See (ii) above
4.3* Specimen Series E Preferred Stock Certificate. See (ii) above
4.4 ESOP Plan See (i) above).
4.5* Form of Warrant Agreement between the Company, the Underwriter and Continental Stock Transfer & Trust Company.
See (ii) above.
10.22 Lease Agreement for Store - Escondido. See (i) above.
10.23 Lease Agreement for Store - Convoy. See (i) above.
10.26 Lease Agreement for Store - Chula Vista. See (i) above.
10.27 Lease Agreement for Store - El Cajon. See (i) above.
10.29 Lease Agreement for Store - Simi Valley. See (i) above.
10.30 Lease Agreement for Store - Encinitas. See (i) above.
10.31 Lease Agreement for Store - San Dimas. See (i) above.
10.33 Lease Agreement for Store - Rialto. See (i) above.
10.34 Lease Agreement for Store - Redlands. See (i) above.
10.35 Lease Agreement for Store - Rancho Cucamonga. See (i) above.
10.36 Lease Agreement for Store - Woodland Hills. See (i) above.
10.37 Lease Agreement for Warehouse - Executive Offices. See (i) above.
10.38 Lease Agreement for Store - Pasadena. See (i) above.
10.38(a) Lease Agreement for Store - Whittier. See (i) above.
10.41 The Company Incentive Stock Option. Plan See (i) above.
10.44 Lease Agreement for Store - Corona Plaza. See (i) above.
10.50 Extension of Warehouse Lease. See (i) above.
10.65 Direct delivery Purchase Agreement between the Company and Camp Pendleton See (i) above.
10.66 Direct delivery Purchase Agreement between the Company and MCRD, San Diego See (i) above.
10.75 Asset Purchase Agreement for the purchase of Toys International - (incorporated by reference herein to exhibit
10.75 of the Company's 10-QSB for the period ended December 31, 1995 filed with the Commission).
10.76 Lease Agreement for Store - Riverside International (incorporated by reference herein to exhibit 10.76 of the
Company's 10-KSB for the year ended March 31, 1997, filed with the Commission).
10.77 Lease Agreement for Store - Santa Clarita International (incorporated by reference herein to exhibit 10.77 of
the Company's 10-KSB for the year ended March 31, 1997, filed with the Commission).
10.78 Lease Agreement for Store - South Coast Plaza International (incorporated by reference herein to exhibit 10.78
of the Company's 10-KSB for the year ended March 31,1997, filed with the Commission).
10.79 Lease Agreement for Store - Century City International (incorporated by reference herein to exhibit 10.79 of
the Company's 10-KSB for the year ended March 31, 1997, filed with the Commission).
10.80 Lease Agreement for Store - Crystal Court International (incorporated by reference herein to exhibit 10.80 of
the Company's 10-KSB for the year ended March 31, 1997, filed with the Commission).
10.81 Lease Agreement for Store - Orange County (incorporated by reference herein to exhibit (i) of the Company's 10
-QSB/A1 for the period ended September 30, 1995 filed with the Commission).
10.82 Loan and Security Agreement with by and between Congress Financial Corporation (Western) as Lender and Play Co.
Toys as Borrower dated February 1, 1996 (incorporated by reference herein to exhibit (i) of the Company's 10-
QSB for the period ended December 31, 1995).
10.82(a) Amendment No. 4 to Loan and Security Agreement with Congress. See (ii) above.
10.83 Stock Purchase Option Agreement with Europe America Capital Corporation for Series E Preferred Stock
(incorporated by reference herein to exhibit (ii) of the Company's 10-QSB for the period ended December 31,
1995).
10.84 Stock Purchase Option Agreement with Europe America Capital Corporation for Common Stock (incorporated by
reference herein to exhibit (iii) of the Company's 10-QSB for the period ended December 31, 1995).
10.85 Lease Agreement for Store - Mission Viejo (incorporated by reference herein to exhibit (iv) of the Company's
10-QSB for the period ended December 31, 1995).
10.86 Subscription Agreement between the Company and Volcano Trading Limited dated June 30, 1997. (incorporated by
reference herein to exhibit 10.86 to the Company's Registration Statement on Form SB-2, Registration No.
333-32051.
10.87 Lease Agreement for Store - Clairemont (incorporated by reference herein to exhibit (iv) of the Company's 10-
QSB for the period ended September 30, 1997).
10.88 Lease Agreement for Store - Redondo Beach (incorporated by reference herein to exhibit (iv) of the Company's
10-QSB for the period ended September 30, 1997).
10.89 Lease Agreement for Store - Arizona Mills (incorporated by reference herein to exhibit (iv) of the Company's
10-QSB for the period ended September 30, 1997).
10.90 FINOVA Loan and Security Agreement (incorporated by reference herein to exhibit (iv) of the Company's 10-QSB
for the period ended December 31, 1997)
10.91 Schedule to Loan and Security Agreement (incorporated by reference herein to exhibit (iv) of the Company's 10-
QSB for the period ended Dec. 31, 1997).
10.92* Lease Agreement for Store - City Mills
10.93* Lease Agreement for Store - Las Vegas
16.01 Letter from BDO Seidman, LLP (incorporated by reference herein to Form 8-K dated February 20, 1997).
27.01* Financial Data Schedule.
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 26th day of June, 1998.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: /s/Richard Brady___________
Richard Brady, Chief Executive
Officer and President
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.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Harold Rashbaum Chairman of the 6/26/98
Harold Rashbaum Board of Directors Date
/s/ Richard Brady Chief Executive Officer 6/26/98
Richard Brady President, and Director Date
/s/ James Frakes Chief Financial Officer, 6/26/98
JamesFrakes Secretary, and Director Date
/s/ Moses Mika Director 6/26/98
Moses Mika Date
</TABLE>
<PAGE>
TABLE OF CONTENTS
March 31, 1998 and 1997
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Certified Public Accountants F-2
Financial Statements:
Balance Sheets F-3
Statements of Operations F-5
Statements of Stockholders' (Deficit) Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-9
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Play Co. Toys & Entertainment Corp.
We have audited the accompanying balance sheets of Play Co. Toys &
Entertainment Corp. (a subsidiary of United Textiles & Toys Corp.) as of March
31, 1998 and 1997 and the related statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended March 31,
1998 and 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Play Co. Toys &
Entertainment Corp. at March 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the two years in the period ended
March 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
HASKELL & WHITE LLP
Certified Public Accountants
Newport Beach, California
May 15, 1998
F-2
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
<TABLE>
<CAPTION>
Balance Sheets
ASSETS (Note 4)
March 31,
1998 1997
Current
<S> <C> <C>
Cash ............................................ $ 648,986 $ 177,722
Restricted certificate of deposit (Notes 2 and 4) 250,000 --
Accounts receivable ............................. 78,594 60,206
Merchandise inventories ......................... 7,872,804 6,092,930
Other current assets ............................ 183,928 247,313
----------- -----------
Total current assets ............... 9,034,312 6,578,171
Property and equipment, net of accumulated
depreciation and amortization of $3,414,235
and $2,828,913, respectively (Note 3) ........... 2,782,386 2,475,650
Restricted certificate of deposit (Notes 2 and 4) .... 2,000,000 --
Deposits and other assets (Note 4) ................... 323,189 324,797
----------- -----------
$14,139,887 $ 9,378,618
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,
1998 1997
Current
<S> <C> <C>
Bank overdraft $ - $ 135,325
Borrowings under financing agreement (Note 4) - 4,438,875
Accounts payable 3,505,230 3,123,851
Accrued expenses and other liabilities 726,601 308,940
Current portion of notes payable (Note 6) 350,000 141,666
--------------- ----------------
Total current liabilities 4,581,831 8,148,657
Borrowings under financing agreement (Note 4) 5,445,198 -
Notes payable, net of current portion (Note 6) 1,500,000 100,000
Deferred rent liability (Note 9) 110,351 126,925
--------------- ----------------
Total liabilities 11,637,380 8,375,582
--------------- ----------------
Commitments and contingencies (Notes 2, 4, 7, 9, 10 and 13)
Stockholders' (deficit) equity (Notes 11 and 13)
Series E preferred stock, $1 par value, 10,000,000 shares authorized;
4,200,570 and 2,500,570 shares outstanding, respectively, full liquidation
value of $4,200,570 and $2,500,570 5,891,020 2,500,570
Common stock, $.01 par value, 40,000,000 shares authorized; 4,103,519
and 4,083,519 shares outstanding, respectively 41,035 40,835
Additional paid-in capital 6,675,398 6,512,107
Accumulated deficit (10,104,946) (8,050,476)
--------------- ----------------
Total stockholders' equity 2,502,507 1,003,036
--------------- ----------------
$ 14,139,887 $ 9,378,618
=============== ================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Statements of Operations
<TABLE>
<CAPTION>
Years Ended March 31,
1998 1997
<S> <C> <C>
Net sales .................................. $ 22,568,527 $ 19,624,276
Cost of sales .............................. 13,689,599 13,669,104
------------ ------------
Gross profit ............. 8,878,928 5,955,172
------------ ------------
Operating expenses
Operating expenses (Notes 9 and 10) ... 8,864,607 8,382,555
Litigation related expenses (Note 7) .. 583,541 --
Depreciation and amortization ......... 671,282 407,015
------------ ------------
Total operating expenses . 10,119,430 8,789,570
------------ ------------
Operating loss ............................. (1,240,502) (2,834,398)
------------ ------------
Interest expense (Note 4)
Interest and finance charges .......... 525,323 443,872
Amortization of debt issuance costs ... 288,645 306,611
------------ ------------
Total interest expense ... 813,968 750,483
------------ ------------
Net loss ................................... $ (2,054,470) $ (3,584,881)
============ ============
Net loss applicable to common shares ....... $ (2,054,470) $ (3,612,426)
============ ============
Basic and diluted loss per common share and
share equivalents ..................... $ (.50) $ (1.29)
============ ============
Weighted average number of common shares and
share equivalents outstanding ......... 4,098,971 2,791,876
============ ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Statements of Stockholders' (Deficit) Equity
Years Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
Additional Redeemable Preferred Stock
Common Stock Paid-in Series B Series D
........................................Shares Amount Capital Shares Amount Shares
------------- ----------- ------------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1996 1,287,843 $ 12,878 $ 4,779,520 81,579 $ 87,680
Redemption of preferred stock - - - (81,579) (81,579)
Payment of accrued dividends - - - - (6,101)
Conversion of due to affiliate and
related accrued interest to Series
E preferred stock - - - - -
Issuance of Series E preferred
stock for cash - - - - -
Conversion of Series E preferred
stock to common 2,410,000 24,100 337,400 - -
Conversion of Series D preferred
stock to common 385,676 3,857 1,395,187 - -
Net loss for the year - - - - -
----------- ----------- ------------ ------------- -------------
Balance, March 31, 1997 4,083,519 40,835 6,512,107 - -
Issuance of common stock for cash 20,000 200 300 - -
Issuance of Series E preferred stock
for cash - - - - -
Issuance of Series E warrants for cash - - 50,000 - -
Issuance of Series E preferred
stock and warrants for cash,
net of offering expenses - - 112,991 - -
Net loss for the year - - - - -
----------- ----------- ------------ ------------- -------------
Balance, March 31, 1998 4,103,519 $ 41,035 $ 6,675,398 - $ -
=========== ========= ============ === ====
</TABLE>
Statements of Stockholders' (Deficit) Equity
Years Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
Preferred Stock
Series E Class I Accumulated
........................................Shares Amount Deficit
<S> <C> <C> <C>
Balance, April 1, 1996 - $ - $ (4,465,595)
Redemption of preferred stock - - -
Payment of accrued dividends - - -
Conversion of due to affiliate and
related accrued interest to Series
E preferred stock 528,070 528,070 -
Issuance of Series E preferred
stock for cash 2,334,000 2,334,000 -
Conversion of Series E preferred
stock to common (361,500) (361,500) -
Conversion of Series D preferred
stock to common - - -
Net loss for the year - - (3,584,881)
----------- ----------- ------------
Balance, March 31, 1997 2,500,570 2,500,570 (8,050,476)
Issuance of common stock for cash - - -
Issuance of Series E preferred stock
for cash 950,000 1,200,000 -
Issuance of Series E warrants for cash _ _ -
Issuance of Series E preferred
stock and warrants for cash,
net of offering expenses 750,000 2,190,450 -
Net loss for the year - - (2,054,470)
----------- ----------- ------------
Balance, March 31, 1998 4,200,570 $ 5,891,020 $ (10,104,946)
=========== ========= ============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Statements of Cash Flows (Note 12)
<TABLE>
<CAPTION>
Years Ended March 31,
1998 1997
Cash flows from operating activities:
<S> <C> <C>
Net loss ...................................... $(2,054,470) $(3,584,881)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization ............. 671,282 407,015
Loss on abandonment of assets ............. 45,255 --
Amortization of debt issuance costs ....... 196,849 214,743
Deferred rent ............................. (16,574) (71,012)
Increase (decrease) from changes in:
Accounts receivable ....................... (18,388) (24,933)
Merchandise inventories ................... (1,779,874) 431,154
Other current assets ...................... 63,385 (13,912)
Deposits and other assets ................. (195,241) 94,867
Accounts payable .......................... 381,379 245,668
Accrued expenses and other liabilities .... 417,661 25,329
----------- -----------
Cash used for operating activities (2,288,736) (2,275,962)
----------- -----------
Cash flows from investing activities:
Purchase of restricted certificates of deposit (2,250,000) --
Purchases of property and equipment ........... (1,023,273) (1,024,127)
----------- -----------
Cash used for investing activities (3,273,273) (1,024,127)
----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Statements of Cash Flows (Note 12)
<TABLE>
<CAPTION>
Years Ended March 31,
1998 1997
Cash flows from financing activities:
<S> <C> <C>
Change in bank overdraft ......................... $ (135,325) $ 26,574
Borrowings under financing agreements ............ 33,560,443 22,404,385
Repayments under financing agreements ............ (32,554,120) (21,368,535)
Proceeds from notes payable ...................... 1,750,000 --
Repayment of notes payable ....................... (141,666) (23,334)
Proceeds from issuance of common stock ........... 500 --
Proceeds from issuance of preferred stock ........ 3,390,450 2,334,000
Proceeds from issuance of preferred stock warrants 162,991 --
Redemption of preferred stock .................... -- (81,579)
Payment of dividends on preferred stock .......... -- (6,101)
------------ ------------
Cash provided by financing activities 6,033,273 3,285,410
------------ ------------
Net increase (decrease) in cash ....................... 471,264 (14,679)
Cash, beginning of year ............................... 177,722 192,401
------------ ------------
Cash, end of year ..................................... $ 648,986 $ 177,722
============ ============
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
1. Summary of Accounting Policies
Business Organization and Revenue Recognition
Play Co. Toys & Entertainment Corp. (the "Company") is a Delaware
corporation that owns and operates retail stores which sell educational,
specialty, collectible, and traditional toys. The Company had nineteen (19)
retail stores located within southern California and Arizona at March 31, 1998.
The Company's retail stores, which are located in high-traffic malls and strip
centers, operate under the names "Play Co. Toys," "Toys International," and "Toy
Co."
In August 1996, the Company became a subsidiary of United Textiles & Toys
Corp. ("United Textiles"), formerly known as Mister Jay Fashions International
(Note 11). As of March 31, 1998 United Textiles owns approximately 57% of the
outstanding shares of the Company's common stock.
Revenues are recognized at the point of sale for retail locations and at
the shipping date for wholesale operations. Wholesale operations represent a
minor portion of the Company's operations.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost (first-in,
first-out method - "FIFO") or market.
Concentration of Credit Risk
The Company maintains cash balances at two banks. Accounts at each bank are
insured by the Federal Deposit Insurance Corporation up to $100,000 in
aggregate. Uninsured balances are approximately $2,698,986 and zero at March 31,
1998 and 1997, respectively.
Property and Equipment
Property and equipment is recorded at cost. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives (3 -
15 years) of the related assets. Leasehold improvements are amortized over the
lesser of the related lease terms or the estimated useful lives of the
improvements. Maintenance and repairs are charged to operations as incurred.
F-9
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
1. Summary of Accounting Policies (continued)
Store Opening and Closing Costs
Costs incurred to open a new retail location such as advertising, training
expenses and salaries of newly hired employees are generally expensed as
incurred and improvements to leased facilities are capitalized. Upon permanently
closing a retail location, the costs to relocate fixtures, terminate employees
and other related costs are expensed as incurred. In addition, the unamortized
balance of any abandoned leasehold improvements are expensed.
Income Taxes
The Company uses the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Deferred income taxes are recognized based on the
differences between financial statement and income tax bases of assets and
liabilities using enacted rates in effect for the year in which the differences
are expected to reverse. Valuation allowances are established, when necessary,
to reduce the deferred tax assets to the amount expected to be realized. The
provision for income taxes represents the tax payable for the period and the
change during the period in deferred tax assets and liabilities, including the
effect of change in the valuation allowance, if any.
Net Loss Per Share
During the three-month period ended December 31, 1997, the Company adopted
the provisions of SFAS No. 128, Earnings Per Share, which requires the
disclosure of "basic" and "diluted" earnings (loss) per share. Basic earnings
(loss) per share is computed by dividing net income (loss), after reduction for
preferred stock dividends and the accretion of any redeemable preferred stock,
by the weighted average number of common shares outstanding during each period.
Diluted earnings (loss) per share is similar to basic earnings (loss) per share
except that the weighted average number of common shares outstanding is
increased to reflect the dilutive effect of potential common shares, such as
those issuable upon the exercise of stock or warrants and the conversion of
preferred stock, as if they had been issued.
F-10
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
1. Summary of Accounting Policies (continued)
Net Loss Per Share (continued)
Dividends accrued and accretion recorded on the former Series B preferred
stock aggregated $27,545 for the year ended March 31, 1997. No such transactions
occurred during the year ended March 31, 1998.
The financial statements for the year ended March 31, 1997 have been
restated to reflect the effects of adopting SFAS No. 128. However, for both of
the years ended March 31, 1998 and 1997, there is no difference between basic
and diluted loss per common share as the effects of the exercise of stock
options or warrants and conversion of preferred stock are anti-dilutive given
the net loss recorded for both years.
Common share and per share amounts have been retroactively adjusted for the
one-for-three reverse stock split which was effective in July 1997.
Statements of Cash Flows
For purpose of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, consisting of
accounts receivable, accounts payable, and borrowings, approximates their fair
value.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, revenues
and expenses, and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual amounts could differ from those estimates.
F-11
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
1. Summary of Accounting Policies (continued)
Impairment of Long-Lived Assets
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of, requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
The Company adopted SFAS 121 effective April 1, 1997. There was no
impact of such adoption on the Company's financial condition and
results of operations.
Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation,
established financial accounting and reporting standards for
stock-based employee compensation plans and certain other transactions
involving the issuance of stock. The Company adopted the disclosure
requirements of SFAS 123 for stock-based employee compensation
effective April 1, 1996. However, the Company continues to use the
intrinsic value method for recording compensation expenses as
prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees. The fair value method prescribed by SFAS No. 123 is used to
record stock-based compensation to non-employees.
Effect of New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. This statement establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains
and losses) in an entity's financial statements. This statement
requires an entity to classify items of other comprehensive income by
their nature in a financial statement and display the accumulated
balance of other comprehensive income separately from retained earnings
and additional pai in-capital in the equity section of a statement of
financial position. This pronouncement is effective for fiscal years
beginning after December 15, 1997 and the Company expects to adopt the
provision statement in the fiscal year ending March 31, 1999.
Management does not expect this statement to significantly impact the
Company's financial statements.
F-12
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
1. Summary of Accounting Policies (continued)
Effect of New Accounting Pronouncements (continued)
In June 1997, the FASB issued SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information. This statement requires public enterprises
to report financial and descriptive information about its reportable operating
segments and establishes standards for related disclosures about product and
services, geographic areas, and major customers. This pronouncement is effective
for fiscal years beginning after December 15, 1997 and the Company expects to
adopt the provisions of this statement in the fiscal year 1999. Management does
not expect this statement to significantly impact the Company's financial
statements.
In April 1998, the AICPA's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities.
The SOP, which is effective for fiscal years beginning after December 15, 1998
with earlier application encouraged, requires entities to expense start-up and
organization costs for establishing new operations. Management does not expect
this statement to significantly impact the Company's financial statements.
Reclassification of Prior Year Amounts
To enhance comparability, certain reclassifications have been made to the
1997 financial statements, where appropriate, to conform with the financial
statement presentation used in 1998.
2. Restricted Certificates of Deposit
At March 31, 1998, the Company has two certificates of deposit which are
restricted as to their nature. The first, in the amount of $2,000,000 represents
collateral against a letter of credit securing the FINOVA Financing (Note 4),
and is classified as a non-current asset since the funds in the certificate of
deposit will remain restricted until the letter of credit expires or is released
by FINOVA Capital Corporation. The second, in the amount of $250,000, is
collateral for a facility for letters of credit.
F-13
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
3. Property and Equipment
Property and equipment consisted of the following:
March 31,
1998 1997
Furniture, fixtures and
equipment $4,222,586 $3,699,371
Leasehold improvements . 1,551,760 1,220,246
Signs .................. 317,363 280,034
Vehicles ............... 104,912 104,912
---------- ----------
6,196,621 5,304,563
----------
Accumulated depreciation
and amortization (3,414,235) (2,828,913)
----------- ----------------
$ 2,782,386 $ 2,475,650
============== ================
4. Financing Agreements
On February 7, 1996, the Company borrowed, under an agreement with Congress
Financial Corporation (Western) (the "Congress Financing"), approximately
$2,243,000, the proceeds of which were used to repay the then outstanding
borrowings under a bank line of credit agreement. The Congress Financing
provided for maximum borrowings up to $7,000,000 based upon a percentage of the
cost value of eligible inventory, as defined. Outstanding borrowings bore
interest at 1.5% above the prime rate, as defined.
In connection with the Congress Financing, and the previous bank line of
credit agreement, European American Capital Corp. ("EACC"), an affiliate,
provided a $2,000,000 letter of credit for collateral. As compensation to EACC,
the Company granted EACC options to acquire shares of common stock, the value of
such options estimated at $224,000 by the Company; and options to acquire
additional shares of common stock and shares of Series E preferred stock, the
value of these options estimated at $234,000 by the Company. The aggregate
$458,000 was initially included in other assets, as debt issuance costs, and
additional paid-in capital. The option values were amortized into interest
expense through the February 1, 1998 maturity of the Congress Financing,
resulting in aggregate interest charges of $196,849 and $214,743 for the years
ended March 31, 1998 and 1997, respectively. No options to acquire shares of
common stock were exercised before the termination of the exercise period.
F-14
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
4. Financing Agreement (continued)
The exercise of options to acquire shares of Series E preferred stock
by EACC, before the options terminated in December 1997 upon consummation of the
Company's Series E preferred stock offering (Note 11).
In March 1997, the Congress Financing was amended to provide for, among
other things, increased borrowing ratios and an additional $1,000,000 letter of
credit as collateral from EACC. Thereafter, the Congress Financing was
collateralized by an aggregate $3,000,000 in letters of credit through its
maturity on February 1, 1998.
On February 3, 1998, the Company borrowed, under an agreement with FINOVA
Capital Corporation (the "FINOVA Financing"), $4,866,324, the proceeds of which
were used primarily to repay the then outstanding borrowings under the Congress
Financing, and to pay fees related to the FINOVA Financing. The FINOVA Financing
provides for maximum borrowings up to $7,100,000 based on a percentage of the
cost value of eligible inventory, as defined. Outstanding borrowings bear
interest at 1.5% above prime rate, as defined (the prime rate at March 31, 1998
was 8.5%). The agreement matures on July 21, 2000 and can be renewed for one
additional year at the lender's option.
Total fees related to the FINOVA Financing aggregated approximately
$272,000 and are being amortized over the 30-month term of the agreement. The
unamortized portion of these debt issuance costs, $253,858, is included in
"deposits and other assets" at March 31, 1998.
The FINOVA Financing includes a financial covenant requiring the Company to
maintain, at all times, net worth, as defined, of $750,000. At March 31, 1998,
the Company was in compliance with this financial covenant.
The FINOVA Financing is guaranteed by United Textiles and is secured by
substantially all of the assets of the Company and $3,000,000 in letters of
credit. Of the $3,000,000 in letters of credit, $2,000,000 is collateralized by
amounts held in a restricted certificate of deposit (Note 2). The remaining
$1,000,000 letter of credit, has been provided by Multimedia Concepts
International, Inc., an affiliate of the Company.
F-15
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
5. Asset Purchase Agreement
On January 16, 1997 the board of directors of the Company approved the
purchase of the assets and assumption of certain existing liabilities of Toys
International. Toys International is a high-end retailer of toys which operated
three mall locations in Southern California. As part of the purchase agreement,
the Company obtained the rights to the Toys International and Tutti Animali
operating name trademarks and also assumed the existing leases at the three
locations. The total purchase price was $1,024,184 which consisted mainly of
inventory and certain prepaid expenses and deposits. The purchase price was paid
in the form of a cash payment of $759,184 in January 1997 and the execution of
two promissory notes aggregating $265,000 (Note 6).
6. Notes Payable
<TABLE>
<CAPTION>
March 31,
1998 1997
<S> <C> <C>
Note payable to ABC Fund Ltd., an affiliate, bearing interest at 5% per
annum, principal due on August 15, 2000, accrued interest due on May 10
1998, and quarterly until debt paid in full or converted (Note 9).
Note is subordinate to the FINOVA Financing (Note 13). $1,500,000 -
Note payable to Breaking Waves, Inc., an affiliate, bearing interest at
15% per annum, payable in ten monthly installments of $25,000 plus
accrued interest through maturity on December 31, 1998. Note is
subordinate to the FINOVA Financing (Note 4). 250,000 -
Note payable to stockholder of Toys International non-interest bearing,
guaranteed by United Textiles, payable in quarterly installments of
$25,000 through maturity, on January 16, 1999. Note is subordinate to
the FINOVA Financing (Note 4). 100,000 200,000
</TABLE>
F-16
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
6. Notes Payable (continued)
<TABLE>
<CAPTION>
March 31,
1998 1997
<S> <C> <C>
Note payable to stockholder of Toys International, non-interest
bearing, guaranteed by United Textiles, payable in five installments
ranging from $11,667 to $15,000 through maturity, on June 16, 1997. - 41,666
Total notes payable 1,850,000 241,666
Less current portion (350,000) (141,666)
--------------- ----------------
Long-term portion $ 1,500,000 $ 100,000
=============== ================
</TABLE>
Future obligations under these notes payable as of March 31, 1998 are as
follows:
Year
March 31 Amount
1999 $ 350,000
1,500,000
$ 1,850,000
7. Closure of Retail Stores - Litigation
During the year ended March 31, 1998, the Company closed, and ultimately
vacated, five retail locations prior to the end of their lease terms. As a
result, four of the five landlords filed lawsuits against the Company to collect
unpaid rent as well as rental obligations remaining under the terms of the
respective leases.
Subsequent to the filing of actions by the landlords and through May 1998,
the Company, with assistance of outside counsel, reached settlement agreements
with the various landlords. These settlements aggregated $469,600.
The statement of operations for the year ended March 31, 1998 includes
$583,541 of "litigation related expenses" which comprise the settlement costs on
the aforementioned leases, legal fees associated with the negotiations and
monthly rentals for the locations since vacating the premises.
The Company currently has one remaining landlord/tenant matter which has
yet to be resolved. The Company's management expects this matter to be resolved
without further material effects on the financial statements.
<PAGE>
8. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
significant items comprising the Company's net deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
March 31,
1998 1997
<S> <C> <C>
Inventories $ (227,696) $ (183,192)
AMT tax credits (23,260) (23,260)
Accrued expenses (19,779) (15,119)
--------------- ----------------
Current portion of net deferred income
tax (assets) liabilities (270,735) (221,571)
--------------- ----------------
Depreciation and amortization (28,388) 150,857
Loss on disposal of assets 25,926 -
Net operating loss carryforwards (3,652,294) (3,142,710)
Deferred rent liability (43,891) (50,945)
Income taxes 508 -
Amortization of stock options (202,049) -
--------------- ----------------
Long-term portion of net deferred
income tax (assets) liabilities (3,900,188) (3,042,798)
--------------- ----------------
Total net deferred income tax (assets) liabilities (4,170,923) (3,264,369)
Valuation allowance 4,170,923 3,264,369
--------------- ----------------
Net deferred income taxes $ - $ -
=============== ================
</TABLE>
At March 31, 1998 and 1997, a 100% valuation allowance has been
provided on the net deferred income tax assets since the Company can not
determine that it is "more likely than not" to be realized.
The reconciliation of income taxes computed at the federal statutory
tax rate to income taxes at the effective income tax rate in the statements of
operations is as follows:
<TABLE>
<CAPTION>
March 31,
1998 1997
<S> <C> <C>
Federal statutory income tax (benefit) rate (34.0)% (34.0)%
State income taxes, net of federal benefit 0.1 0.1
Change in valuation allowance 33.9 33.9
----------- --------------
Effective income tax rate -% -%
</TABLE>
<PAGE>
At March 31, 1998, the Company has net operating loss (NOL) carryforwards
of approximately $9,800,000 for federal purposes and approximately $5,300,000
for state purposes. The federal NOLs are available to offset future taxable
income and expire at various dates through March 31, 2013 while the state NOLs
are available and expire at various dates through March 31, 2003.
A portion of the NOLs described above are subject to provisions of the
Internal Revenue Code 382 which limits use of net operating loss carryforwards
when changes of ownership of more than 50% occur during a three year testing
period. During the years ended March 31, 1994 and 1995, the Company's ownership
changed by more than 50% as a result of the May 1993 of a majority interest in
the Company by American Toys and the Company's November 1994 completion of an
initial public offering of its common stock. Further changes in common and
preferred stock ownership during each of the years ended March 31, 1998 and
1997, as described in Note 11, have also potentially limited the use of NOLs.
The effect of such limitations has yet to be determined. NOLs could be further
limited upon the exercise of outstanding stock options and stock purchase
warrants or as a result of a planned private offering of preferred stock (Note
13).
F-17
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
9. Commitments and Contingencies
Operating Leases
The Company leases its retail store properties under noncancelable
operating lease agreements which expire through October 2007 and require various
minimum annual rentals. Several of the leases provide for renewal options to
extend the leases for additional five or ten-year periods. Certain store leases
also require the payment of property taxes, normal maintenance and insurance on
the properties and additional rents based on percentages of sales in excess of
various specified retail sales levels.
During the years ended March 31, 1998 and 1997, the Company incurred rental
expense under all operating leases of $3,112,822 and $2,681,728, respectively.
Contingent rent expense was insignificant during the years ended March 31, 1998
and 1997.
During the year ended March 31, 1997, the Company sub-leased portions of
its warehouse building and a portion of one of its retail locations under
noncancelable operating leases. Sub-lease income during the year ended March 31,
1997 was $93,822 (Note 10).
At March 31, 1998 the aggregate future minimum lease payments due under
these noncancelable leases are as follows:
<TABLE>
<CAPTION>
Year Ending Amount
March 31, Leases
<S> <C>
1999 $ 2,541,123
2000 2,583,314
2001 2,103,669
2002 1,788,302
2003 1,665,152
Thereafter 3,919,531
Total minimum lease payments $ 14,601,091
===============
</TABLE>
F-18
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
9. Commitments and Contingencies (continued)
Termination of Warehouse Lease
In April 1997, the Company negotiated a settlement with a landlord for an
excess warehouse facility, whereby the Company was released from the lease
obligation for a settlement of $60,000. This early lease termination will result
in annual savings of approximately $235,000 based on the original scheduled
lease term through April 2000.
Convertible Debt Agreement
As discussed in Note 6, the Company has a $1.5 million note payable to ABC
Fund, an affiliate. Prior to the August 15, 2000 maturity date, the note is
convertible into the common stock of a subsidiary of the Company. ABC Fund may,
at its option, convert all or a portion of the note and accrued unpaid interest
thereon into up to 25% of the common stock of the subsidiary at an exercise
price equal to the net book value of the subsidiary's shares.
Delisting of Securities
On September 24, 1997, the Company's common stock was delisted from trading
on the NASDAQ Stock Market ("NASDAQ") as the Company did not meet the
stockholders' equity maintenance requirement of $1,000,000 at the time and based
on certain transactions undertaken in February 1996 which NASDAQ deemed
"detrimental to the investing public and public interest" with respect to
options issued to an investor which provided a letter of credit as security for
the Congress Financing.
Since September 24, 1997, the Company's common stock, as well as its Series
E preferred stock and Series E stock purchase warrants sold in a public offering
completed in December 1997, have been quoted on the over-the-counter on the OTC
bulletin board.
Dependence on Suppliers
Approximately thirty-one percent (31%) of the Company's inventory purchases
are made directly from five (5) manufacturers. The Company typically purchases
products from its suppliers on credit arrangements provided by the
manufacturers. The termination of a credit line or the loss of a major supplier
or the deterioration of the Company's relationship with a major supplier could
have a material adverse effect on the Company's business.
9. Commitments and Contingencies (continued)
401(k) Employee Stock Ownership Plan
In August 1994, the Company adopted a 401(k) Employee Stock Ownership Plan
(the "Plan") which covers substantially all employees of the Company. The Plan
includes provisions for both an Employee Stock Ownership Plan ("ESOP") and a
401(k) Plan.
The ESOP allows only contributions by the Company which can be made
annually at the discretion of the Company's Board of Directors. The ESOP is
designed to invest primarily in the Company's stock. As of March 31, 1998, there
had been no transactions with regards to the ESOP.
The 401(k) portion of the Plan is contributed to by the employees of the
Company through payroll deductions. The Company makes no matching contributions
to the 401(k).
1994 Stock Option Plan
In June 1994, the Company adopted the 1994 Stock Option Plan (the "Plan")
which provides for options to purchase an aggregate of not more than 50,000
post-reverse split shares of common stock as may be granted from time to time by
the Company's Board of Directors. Pursuant to the hiring of the Company's
current Chief Financial Officer and Secretary, an option to purchase 30,000
shares of Common Stock at an exercise price of $1.15 per share was authorized,
vesting at the rate of 10,000 shares per annum in each of the twelve month
periods ending July 1998, 1999 and 2000. As of March 31, 1998, no options to
purchase common stock had been exercised.
Seasonality
The Company's business is highly seasonal with a large portion of its
revenues and profits being derived during the months of November and December.
Accordingly, in order for the Company to operate, it must obtain substantial
short-term borrowings from lenders and the Company's suppliers during the first
three-quarters of each fiscal year to purchase inventory and for operating
expenditures. Historically, the Company has been able to obtain such credit
arrangements and substantially repay the amounts borrowed from suppliers and
reduce outstanding borrowings from its lender during the fourth quarter of its
fiscal year.
F-19
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
9. Commitments and Contingencies (continued)
Year 2000
An area that represents a near-term commitment of capital resources is the
Company's management information system. The Company has investigated its
existing management information system and has determined that it does not
provide sufficient scope to support the planned level of expanded operations
and, furthermore, is not Year 2000 compliant. The Company is currently exploring
the cost of upgrading its current system or purchasing a new system to meet the
projected demands of the business and to become Year 2000 compliant. Based on
information learned to date, the Company estimates that the cost of upgrading
its current system would be on the order of $190,000 to $300,000. Management has
not been able to estimate a replacement cost at March 31, 1998.
10. Related Party Transactions
Office and Warehouse Lease
The Company leases an office and warehouse building from a partnership of
which one of the partners is a Company officer, stockholder and director. Rent
expense under this lease for the years ended March 31, 1998 and 1997 totaled
$247,289 and $227,546, respectively. The lease expires in April 2000.
Sub-lease
During the year ended March 31, 1997, sub-lease rental income included
$54,422 from an entity in which stockholders and employees of the Company have
an ownership interest. Sub-lease income was insignificant for the year ended
March 31, 1998.
Consulting Agreement
In January 1997, the Company entered into a consulting agreement with the
stockholder of Toys International as part of the purchase agreement with Toys
International. The term of the agreement commenced on January 16, 1997, expired
on April 16, 1997 and called for three monthly payments of $10,000 each. As a
result, the expenses related to the agreement totaled $23,334 and $6,666 for the
years ended March 31, 1998 and 1997, respectively.
F-20
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
10. Related Party Transactions (continued)
Consulting Fees
The Company made payments aggregating $25,000 and $7,000 to the Chairman of
the Board of Directors for various consulting services during the years ended
March 31, 1998 and 1997, respectively.
Commitment of Financing
The individual, beneficial majority stockholder of United Textiles, in a
letter dated May 15, 1998, has represented his intent and ability to provide
additional working capital to the Company, should such be necessary, through
September 1999.
11. Equity Transactions
Capital Structure
At March 31, 1998, the Company's capital structure consisted of 40,000,000
authorized shares of $.01 par value common stock and 10,000,000 authorized
shares of $1.00 par Series E preferred stock. Each share of series E preferred
stock is convertible into six shares of common stock at the option of the holder
after holding the shares of Series E preferred stock for two years from the date
of issuance. This capital structure became effective August 11, 1997 upon the
amendment of the Company's certificate of incorporation in anticipation of the
public offering of Series E preferred stock discussed below.
Issuance of Series E Preferred Stock
In April 1996, EACC exercised its option and acquired 528,070 shares of
Series E preferred stock. In connection therewith, the amount due to EACC,
aggregating $528,070 at March 31, 1996 was extinguished.
In June 1996, October 1996 and January 1997, EACC exercised its option and
acquired 334,000, 800,000 and 1,200,000 shares of Series E preferred stock,
respectively. All options were exercised at $1.00 per share resulting in an
aggregate cash consideration of $334,000, $800,000 and $1,200,000, respectively.
The 334,000 shares of Series E preferred stock issued to EACC in June 1996 were
subsequently transferred to United Textiles.
In an agreement dated June 30, 1997, the Company agreed to issue 250,000
shares of Series E preferred stock for $500,000 and 500,000 warrants to purchase
Series E preferred stock for an additional $50,000 in a private sale. The
$550,000 was collected on August 12, 1997 and the shares and warrants were
issued.
In June 1997, the Company issued 700,000 shares of Series E preferred stock
to EACC which had advanced funds subsequent to March 31, 1997 against its option
to acquire share of Series E preferred stock.
On December 29, 1997, the Company completed a public offering of 750,000
shares of Series E preferred stock and 1,500,000 redeemable Series E stock
purchase warrants. The gross proceeds from the offering were $3,150,000 and the
net proceeds to the Company totaled $2,303,441 after deduction of offering
expenses including such items as underwriter discounts and commissions, legal,
accounting, printing and filing fees.
Other Preferred Stock Transactions
In April 1996, the Company redeemed all remaining outstanding shares of
Series B preferred stock, aggregating 81,579, at the redemption price of $81,579
and paid dividends on the Series B preferred stock aggregating $6,101.
On August 8, 1996 the Company amended its certificate of incorporation upon
approval by the board of directors to allow the Series D preferred stock to be
convertible into 385,676 shares of the Company's common stock. On August 11,
1996, American Toys converted its one share of Series D preferred stock into
385,676 shares of the Company's common stock. At this time, American Toys owned
1,235,319 shares of the common stock of the Company which were spun-off to the
stockholders of American Toys, including United Textiles. As a result, United
Textiles became the majority stockholder of the Company.
In August 1996, the 334,000 shares of Series E preferred stock held by
United Textiles were converted into 2,226,667 shares of the Company's common
stock. In addition, in February 1997, EACC converted 27,500 shares of the Series
E preferred stock into 183,333 shares of the Company's common stock.
F-21
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
11. Equity Transactions (continued)
Stock Option Grants
In March 1998, the Company's Board of Directors granted to its Chairman of
the Board and to its President rendered, 25,000 shares each of its Series E
Preferred Stock, par value $.01 per share in recognition of their efforts to
further the Company's turnaround towards profitability. The shares shall vest on
a monthly basis over a one-year period commencing April 1, 1998, being fully
vested April 1999. On the date of grant management determined the compensation
value of this stock grant to be approximately $47,000 in the aggregate, based on
the closing market price as adjusted for the restrictive nature and vesting
requirement of the securities.
12. Supplemental Cash Flow Information
Cash paid for income taxes and interest was as follows:
Years Ended March 31,
1998 1997
Interest paid $511,924 $443,875
======== ========
Income taxes $ 800 $ 800
======== ========
For the year ended March 31, 1997, non-cash financing activities
include the extinguishment of balance due to affiliate aggregating
$528,070 in exchange for 528,070 shares of Series E preferred stock,
the conversion on 1 share of Series D preferred stock for 385,676
post-reverse split shares of common stock and the conversion of 361,500
shares of Series E preferred stock for 2,410,000 post-reverse split
shares of common stock. In addition, the Company incurred $265,000 in
notes payable to the stockholder of Toys International as a result of
the asset purchase which consisted mainly of inventory.
F-22
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
13. Subsequent Events
Change in Capital Structure
In anticipation of a private placement of securities, as discussed
below, the Company's Board of Directors, in April 1998, authorized an
amendment to the Company's capital structure which would (i) increase
the total authorized common shares from 40,000,000 to 51,000,000; (ii)
increase the total authorized shares of preferred stock from 10,000,000
to 15,500,000; and (iii) designate the 5,500,000 increase in shares of
authorized preferred stock as "Series F Preferred Stock," par value
$.01 per share. Such amendment was approved by written consent of a
majority of the shareholders.
The holders of the shares of the Series F Preferred Stock shall
be entitled to receive, when and as declared by the Board of
Directors, out of funds legally available for the payment of
dividends, cumulative dividends at $0.09 per share per quarter or
$.036 per annum. The dividend is to be payable quarterly. Dividends
shall be fully cumulative and shall accrue (whether or not declared),
without interest, from the date such dividends are payable. The Series
F Stock shall have liquidation preference of $3.00 per share, subject
only to the Series E Stock preference.
The Series F Preferred Stock shall possess no voting rights,
except as provided by law with respect to altering the rights and
preferences thereof. The Series F Stock shall have the right, at the
option of each individual holder, at any time, commencing six months
after issuance, to convert each share to two fully paid and
non-assessable shares of Common Stock. Upon conversion of the Series F
Stock into Common Stock, the ownership interests of persons who own
Common Stock at the time of conversion shall be diluted.
The Company may, at any time commencing one year from issuance,
redeem all of the issued and outstanding shares of the Series F Stock
for a per share price of $3.00, plus accrued but unpaid dividends,
upon notice to each holder of record of the Series F Stock.
Each warrant is exercisable into one share of Series F Stock
commencing one year from issuance at $4.00 for a period of five years.
Unexercised warrants will automatically expire at the end of such
five-year period. Although the Company has no current intention of
reducing the exercise price or extending the exercise period of the
warrants, it is possible that either or both of such changes may be
effected by resolution of the Board of Directors in the future.
F-23
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes to Financial Statements
Years Ended March 31, 1998 and 1997
13. Subsequent Events (continued)
The Series F warrants are redeemable by the Company at any time, commencing
one year from issuance, upon 30 days' prior notice, at a redemption price of
$.05 each.
Private Placement of Series F Preferred Stock
In April 1998, the Company's Board of Directors approved a resolution to
seek additional equity capital of a minimum of $750,000 to a maximum of
$4,500,000 from a private placement sale of units. Each unit is to consist of
one share of Series F preferred stock par value $.01 per share and one Series E
preferred stock purchase warrant at a purchase price of $3.00 per unit.
Expansion Plans
The Company's Board of Directors has authorized management to locate
suitable expansion sites and enter into leases for new retail locations in the
states of: Nevada, Texas, Illinois, Michigan and additional sites in California.
Capital Lease Facility
The Company borrowed approximately $85,000 to finance equipment and
fixtures for the remodel of one of its retail locations through a finance
company. Borrowings under the agreement are to be paid monthly, including
interest, over sixty months.
F-24
<PAGE>
Exhibit 10.92
City Mills Lease
<PAGE>
LEASE
TOYS INTERNATIONAL, INC., a California corporation
-----------------------------------
Tenant
TOYS INTERNATIONAL
------------------------------------
Trade Name
N/A
------------------------------------
Guarantor
City Mills at Orange
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I.........................................................................................................4
GRANT AND TERM...........................................................................................4
Section 1.1 Leased Premises....................................................................4
Section 1.2 Term...............................................................................5
Section 1.3 Opening............................................................................6
Section 1.4 Late Opening.......................................................................6
ARTICLE II........................................................................................................7
RENT AND DEPOSIT.........................................................................................7
Section 2.1. Minimum Rent......................................................................7
Section 2.2. Percentage Rent...................................................................7
Section 2.3. Payments By Tenant................................................................8
Section 2.4. Security Deposit. [Intentionally Deleted] 9
Section 2.5. Late Charge.......................................................................9
ARTICLE III.......................................................................................................9
PREPARATION OF LEASED PREMISES...........................................................................9
Section 3.1. Landlord's Work...................................................................9
Section 3.2. Delivery of Possession............................................................9
Section 3.3. Tenant's Work....................................................................10
Section 3.4. Alterations by Tenant............................................................11
Section 3.5. Removal by Tenant................................................................12
ARTICLE IV.......................................................................................................12
CONDUCT OF BUSINESS.....................................................................................12
Section 4.1. Use and Trade Name...............................................................12
Section 4.2. Operation of Business............................................................12
Section 4.3. Sign.............................................................................13
Section 4.4. Tenant's Warranties..............................................................13
Section 4.5. Storage and Office Space.........................................................14
Section 4.6. Care of Premises.................................................................14
Section 4.7. Notice by Tenant.................................................................14
Section 4.8. Radius...........................................................................14
ARTICLE V........................................................................................................15
COMMON AREA.............................................................................................15
Section 5.1. Use of Common Area...............................................................15
Section 5.2. Common Area Maintenance Expenses.................................................15
ARTICLE VI.......................................................................................................17
REPAIRS AND MAINTENANCE.................................................................................17
Section 6.1. Repairs and Maintenance by Landlord..............................................17
Section 6.2. Repairs and Maintenance by Tenant................................................17
ARTICLE VII......................................................................................................18
TAXES ...............................................................................................18
Section 7.1. Tax Liability....................................................................18
Section 7.2. Method of Payment................................................................19
Section 7.3. Sales Tax Reports................................................................19
ARTICLE VIII.....................................................................................................19
INSURANCE, INDEMNITY AND LIABILITY......................................................................19
Section 8.1. Landlord's Insurance Obligations.................................................19
Section 8.2. Tenant's Insurance Obligations...................................................20
Section 8.3. Mutual Covenant..................................................................21
Section 8.4. Covenant to Hold Harmless........................................................21
Section 8.5. Loss and Damage..................................................................22
ARTICLE IX.......................................................................................................22
DESTRUCTION OF LEASED PREMISES..........................................................................22
Section 9.1. Continuance of Lease.............................................................22
Section 9.2. Reconstruction...................................................................23
<PAGE>
ARTICLE X........................................................................................................23
CONDEMNATION............................................................................................23
Section 10.1. Eminent Domain..................................................................23
Section 10.2. Rent Apportionment..............................................................24
Section 10.3. Temporary Taking................................................................24
ARTICLE XI.......................................................................................................24
ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE............................................................24
Section 11.1. No Assignment, Subletting or Encumbering of Lease 24
Section 11.2. Assignment or Sublet............................................................26
Section 11.3. Transfer of Landlord's Interest.................................................26
ARTICLE XII......................................................................................................26
SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE 26
Section 12.1. Subordination...................................................................26
Section 12.2. Attornment......................................................................27
Section 12.3. Financing.......................................................................27
Section 12.4. Estoppel Certificate............................................................27
Section 12.5. Remedies........................................................................28
ARTICLE XIII.....................................................................................................28
ADVERTISING AND PROMOTION...............................................................................28
Section 13.1. Promotion Fund..................................................................28
Section 13.2. Promotion Fund Contribution.....................................................28
Section 13.3. Advertisements..................................................................28
Section 13.4. Network.........................................................................28
ARTICLE XIV......................................................................................................29
DEFAULT AND REMEDIES....................................................................................29
Section 14.1. Elements of Default.............................................................29
Section 14.2. Landlord's Remedies.............................................................30
Section 14.3. Bankruptcy......................................................................31
Section 14.4. Additional Remedies and Waivers.................................................31
Section 14.5. Landlord's Cure of Default......................................................31
ARTICLE XV.......................................................................................................31
RIGHT OF ACCESS.........................................................................................31
ARTICLE XVI......................................................................................................32
DELAYS ...............................................................................................32
ARTICLE XVII.....................................................................................................32
END OF TERM.............................................................................................32
Section 17.1. Return of Leased Premises.......................................................32
Section 17.2. Holding Over....................................................................32
ARTICLE XVIII....................................................................................................33
COVENANT OF QUIET ENJOYMENT.............................................................................33
ARTICLE XIX......................................................................................................33
UTILITIES...............................................................................................33
Section 19.1. Utilities.......................................................................33
Section 19.2. Electricity, Telephone and Gas..................................................33
Section 19.3. Trash and Garbage Removal.......................................................34
Section 19.4. Water and Sewer.................................................................34
Section 19.5. Grease Interceptors.............................................................34
ARTICLE XX.......................................................................................................34
MISCELLANEOUS...........................................................................................34
Section 20.1. Entire Agreement...............................................................34
Section 20.2. Notices........................................................................34
Section 20.3. Governing Law..................................................................35
Section 20.4. Successors.....................................................................35
Section 20.5. Liability of Landlord..........................................................35
Section 20.6. Brokers........................................................................35
Section 20.7. Transfer by Landlord...........................................................35
<PAGE>
Section 20.8. No Partnership.................................................................35
Section 20.9. Waiver of Counterclaims........................................................35
Section 20.10. Waiver of Jury Trial...........................................................35
Section 20.11. Severability...................................................................36
Section 20.12. No Waiver......................................................................36
Section 20.13. Consumer Price Index...........................................................36
Section 20.14. Interest.......................................................................36
Section 20.15. Excavation.....................................................................36
Section 20.16. Rules and Regulations..........................................................36
Section 20.17. Financial Statements...........................................................36
Section 20.18. General Rules of Construction..................................................36
Section 20.19. Recording......................................................................37
Section 20.20. Effective Date.................................................................37
Section 20.21. Headings.......................................................................37
Section 20.22. Managing Agent.................................................................37
Section 20.23. Non-Discrimination.............................................................37
Section 20.24. Lease Contingency..............................................................37
EXHIBITS:
Exhibit A Site Plan
Exhibit B Measurement of Leased Premises
Exhibit C Landlord's Work
Exhibit D Tenant's Work
Exhibit E Sign Criteria
Exhibit F Commencement and Expiration Date Declaration
Exhibit G Waiver of Sales Tax Confidentiality
Exhibit H Subordination, Non-Disturbance and Attornment Agreement
</TABLE>
<PAGE>
A Retail Development
THIS LEASE dated as of this ____ day of ________________, 19___ (the
"Lease") by and between ORANGE CITY MILLS LIMITED PARTNERSHIP, a Delaware
limited partnership, the address of which is c/o The Mills Corporation, 1300
Wilson Boulevard, Suite 400, Arlington, Virginia 22209 (hereinafter referred to
as "Landlord") and TOYS INTERNATIONAL, INC., a California corporation, the
address of which is 550 Rancheros Drive, San Marcos, California 92069
(hereinafter referred to as "Tenant").
R E C I T A L
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord, the Leased Premises, for the Term commencing on the Commencement Date,
subject to the terms, covenants, conditions and provisions of this Lease.
Landlord shall have the right, at any time prior to the Delivery of Possession
Date of the Leased Premises, by written notice to Tenant, to relocate the Leased
Premises in either direction (from side to side from the outside boundary of the
Leased Premises) by not more than forty (40) feet, and upon any such relocation,
the size and description of the Leased Premises shall be appropriately modified
to reflect any resulting proportional adjustment in the Rent based upon the
change in size of the Leased Premises. If the Commencement Date is not the first
day of a month, Minimum Rent for the month in which the Commencement Date occurs
shall be prorated to the end of the month and paid as the second monthly
installment of Minimum Rent on the first day of the next month and, after the
expiration of the number of years in the Term, the Term shall expire on the last
day of the same month in which the Commencement Date of the Term occurred, it
being the intention of the parties that the Term expire on the last day of a
month. Neither this Lease nor the obligations of Tenant hereunder shall be
affected by a postponement and Landlord shall not be subject to any liability
for failure to make possession of the Leased Premises available on the
Commencement Date. When the Commencement Date has been determined, Landlord and
Tenant shall execute, acknowledge and deliver a written statement in recordable
form specifying the Commencement and Expiration Dates of the Term and, if there
shall have been any changes in the floor area of the Leased Premises, such
statement shall reflect such change or changes. Said statement upon execution
and delivery shall be deemed to be a part of this Lease.
DATA SHEET
The following references furnish data to be incorporated in the
specified Sections of this Lease and shall be construed to incorporate all of
the terms of the entire Section as stated in this Lease:
(1) Section 1.1: Description of Leased Premises:
Store number: 207, consisting of approximately 9,400 square feet of
floor area as shown on Exhibits A and B attached hereto and made a part hereof.
(2) Section 1.2: Term:
Commencement Date:
The earlier of (i) Grand Opening, (ii) the date following the
expiration of a seventy-five (75) day fixturing period ("Fixturing Period")
following the Delivery of Possession Date (as defined in Section 3.2), or (iii)
the date the Leased Premises is open for business to the public.
Original Term: Ten (10) years, plus that additional period necessary to
extend the expiration date to the January 31st immediately following the
expiration of ten (10) years..
<PAGE>
(3) Section 2.1: Minimum Rent:
From the Commencement Date and continuing through the third (3rd) year
of the Original Term, the sum of $225,600.00 annually ($24.00 psf), payable in
equal consecutive monthly installments of $18,800.00 each;
Beginning with the fourth (4th) year and continuing through the fifth
(5th) year of the Original Term, the sum of $235,000.00 annually ($25.00 psf),
payable in equal consecutive monthly installments of $19,583.33 each;
Beginning with the sixth (6th) year and continuing through the
expiration of the Original Term, the sum of $291,400.00 annually ($31.00 psf),
payable in equal consecutive monthly installments of $24,283.33 each.
(4) Section 2.2: Percentage Rent:
Percentage Factor: 6%
Sales Break Point for the Original Term:
From the Commencement Date through the third (3rd) year of the Original
Term: $3,760,000.00.
Beginning with the fourth (4th) year and continuing through fifth (5th)
year of the Original Term: $3,916,666.67.
Beginning with the sixth (6th) year and continuing through the expiration
of the Original Term: $4,856,666.67.
(5) Section 2.4: Security Deposit: N/A
(6) Section 4.1: Permitted Use:
Tenant shall use the Leased Premises for the use set forth below and for no
other purpose:
For the retail sale of toys and toy related merchandise. In no event shall
Tenant's primary use be (i) stuffing or making stuffed bears or (ii) the sale of
plush animals.
Trade Name: Toys International
(7) Section 13.2: Fund Contribution: $1.00 per square foot of floor area
of the Leased Premises.
Grand Opening Fee (Initial Contribution): $7,500.00
(8) Guarantor: N/A
(9) Grand Opening Date: November, 1998
(10) Temporary Charges: Actual charges for temporary services described in
Exhibit D not to exceed $1.00 per square foot of floor area of the
Leased Premises.
(11) Construction Chargebacks: N/A
(12) Tenant Allowance: $250,000.00
<PAGE>
ARTICLE I
GRANT AND TERM
Section 1.1 Leased Premises. (a) Landlord, in consideration of the Rent (as
defined in Section 2.3) to be paid and the covenants to be performed by Tenant,
does hereby lease and demise to Tenant, and Tenant hereby rents and hires from
Landlord for the Term herein set forth, the Leased Premises which are described
as set forth in the Data Sheet attached hereto, in the retail development
designated as City Mills At Orange or by such other name as Landlord may from
time to time hereafter designate (hereinafter "Retail Development"). The term
"State" as used herein shall mean the State or Commonwealth of California. For
all purposes in this Lease, a "Major Tenant" is any occupant of 20,000 square
feet or more of floor area in the Retail Development and a "Major Tenant Space"
is any space in the Retail Development containing 20,000 square feet or more. It
is agreed that, wherever the term "Shopping Center" is used herein, it shall
mean the Retail Development excluding the Major Tenant Spaces, except as
otherwise specifically stated herein. Exhibit A sets forth the general layout of
the Retail Development. Landlord does not warrant or represent that the Retail
Development or the Leased Premises will be constructed exactly as shown thereon
or that it will be completed by a specific date. Notwithstanding anything
contained in this Lease to the contrary, Landlord shall have the right, at any
time and from time to time, without notice to or consent of Tenant, and without
in any manner diminishing Tenant's obligations under this Lease, to make
alterations or additions to, and build additional stories on the building in
which the Leased Premises are located and to build adjoining the same, to
construct other buildings and improvements of any type in the Retail Development
or the common areas, or any part thereof, including the right to locate and/or
erect thereon permanent or temporary kiosks and structures, to enlarge the
Retail Development, and to make alterations therein or additions thereto, to
build additional stories on any building or buildings within the Retail
Development, and to build adjoining thereto, to construct decks or elevated
parking facilities and free standing buildings within the parking lot areas of
the Retail Development, and to change the size, location, elevation and nature
of any of the stores in the Retail Development or the common areas, or any part
thereof. In the event Landlord elects to enlarge the Retail Development, or any
part thereof, any additional area may be included by Landlord in the definition
of the Retail Development 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. The premises leased to Tenant are
herein referred to as the "Leased Premises". The approximate location of the
Leased Premises is cross-hatched on the lease plan of the Retail Development
attached hereto and made a part hereof as Exhibit A. This Lease of the Leased
Premises is subject to all applicable building restrictions, planning and zoning
ordinances, governmental rules and regulations, existing underlying leases, and
all other encumbrances, covenants, restrictions, easements and agreements
affecting the Retail Development and the terms and provisions of certain master
declaration, reciprocal easement and operating agreements now or hereafter
entered into by Landlord.
Subject to the provisions of Section 5.1, Tenant shall enjoy a
non-exclusive easement, right and privilege for Tenant and its customers,
employees and invitees and the customers, employees and invitees of any
assignee, sublessee, concessionaire or licensee of Tenant, to use the common
areas of the Shopping Center, with Landlord and the other tenants and occupants
of floor area within the Shopping Center and their respective customers,
employees and invitees. Furthermore, Landlord agrees that any additions,
alterations or modifications to the Shopping Center by Landlord shall not
adversely affect access to, or visibility of the Leased Premises and, except as
otherwise provided for herein, Tenant shall retain substantially the same
relative position with respect to Major Tenants of the Shopping Center as of the
Commencement Date.
<PAGE>
(b) After the Delivery of Possession Date (as defined in Section 3.2),
Landlord reserves the right to relocate Tenant. Landlord shall provide Tenant
with not less than thirty (30) days written notice of such relocation (the
"Relocation Period") during which Landlord shall offer to Tenant such
alternative location(s) (with approximately the same floor area) as may be
available. 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 the square footage, Minimum Rent and Sales Break Point shall be
proportionately adjusted based upon the change in the size of the Leased
Premises. Landlord shall, at Landlord's cost and expense, complete the leasehold
improvements to the new location in accordance with the working drawings
originally approved by Landlord with respect to Tenant's Work in the original
Leased Premises and Tenant shall relocate to the new location and, within
fifteen (15) days after delivery of the new location to Tenant, open for
business in the new location ("Relocation Date"). In the event Landlord and
Tenant are unable to agree on an alternative location, this Lease shall
terminate at the end of the said thirty (30) day period ("Termination Date"). In
the event of such termination, Landlord shall pay to Tenant, within thirty (30)
days following the Termination Date, a sum equal to the then unamortized cost of
Tenant's leasehold improvements which have been paid for by Tenant, such
amortization to be on a straight line basis over the Original Term, provided
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 Date and/or the Relocation Date in "as is"
condition excepting the provisions of Sections 3.5 and 17.1. Tenant shall pay
all charges which are due and owing or which shall accrue up to such Termination
Date or Relocation Date (which charges shall be paid to Landlord within thirty
(30) days of such Termination Date or Relocation Date) and Tenant shall be
released from any and all further obligations pursuant to this Lease accruing
after such Termination Date or Relocation Date with respect to the vacated
Leased Premises, except as otherwise provided in Articles V and VII; however, in
the event of relocation, Tenant shall remain liable for all obligations accruing
under this Lease after the Relocation Date.
(c) The square footage of the Leased Premises (sometimes herein
referred to as the gross leasable floor area or GLA) shall be measured as
defined in Exhibit B. The actual square footage in the Leased Premises shall be
determined by Landlord's architect. The certificate of Landlord's architect as
to actual square footage shall be binding upon both parties hereto, and such
determined square footage shall be used in all calculations based on square
footage throughout this Lease. If the floor area determined in accordance with
the preceding sentence varies from the square foot floor area originally set
forth in the Data Sheet, the Minimum Rent set forth in Section 2.1 hereof shall
be adjusted by multiplying the Minimum Rent by a fraction, the numerator of
which is the square foot floor area determined by Landlord's architect and the
denominator of which is the square foot floor area originally set forth in the
Data Sheet, and Tenant shall be obligated to pay such Minimum Rent, as adjusted,
from the Commencement Date, subject to further adjustments as provided in this
Lease. Each monthly installment provided for in Section 2.1 shall be recomputed
and shall be that dollar amount which results from dividing the adjusted Minimum
Rent by twelve (12). Any and all references in this Lease to Minimum Rent (or
the monthly installments thereof) shall be deemed to be references to the
Minimum Rent as computed by application of this Section 1.1, subject, however,
to the adjustments set forth elsewhere in this Lease. For purposes 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
project areas and offices, common areas and/or areas under Landlord's control
(e.g., electrical/utility rooms, etc.). The exterior walls, roof, storefront and
the area beneath the Leased Premises are not demised hereunder, and the use
thereof, together with the right to install, maintain, use, repair and replace
pipes, ducts, conduits, wires, tunnels, sewers and structural elements leading
through the Leased Premises in locations which will not materially interfere
with Tenant's use thereof and serving other parts of the Retail Development are
hereby reserved to Landlord. Landlord reserves an easement above Tenant's
finished ceiling or light line to the roof for general access purposes and in
connection with the exercise of Landlord's other rights under this Lease.
<PAGE>
Section 1.2 Term. The Term of this Lease shall be for a period
commencing on the Commencement Date, and expiring at 11:59 p.m. local time on
the final day of the month in which the Original Term or the Option Period, if
exercised, expires or other specified date as set forth in the Data Sheet,
unless sooner terminated in accordance with the provisions hereof (the
"Expiration Date"). Unless otherwise specified in this Lease, the use of the
word "Term" shall be deemed to include both the Original Term and the Option
Period, if exercised. The term "full year" and "year" as used in this Lease
shall mean consecutive periods of twelve (12) months each following the
Commencement Date. For all purposes of this Lease, the term "Lease Year" shall
have the following meaning: the first Lease Year shall be a period beginning
with the Commencement Date and ending on the 31st day of December next following
the Commencement Date, and after the first Lease Year, the term Lease Year shall
mean a fiscal period of twelve (12) consecutive calendar months commencing on
January 1 of each calendar year, except that the last Lease Year shall terminate
on the Expiration Date or sooner termination of this Lease. Lease Years
containing 365 days or more shall be referred to as "full Lease Years." If the
Leased Premises are not delivered to Tenant on or before the expiration of
thirty-six (36) months after the date of Landlord's execution of this Lease then
either party may cancel and terminate this Lease upon sixty (60) days prior
written notice to the other, in which event neither party shall have any further
obligation or liability to the other; provided, however, that if Landlord has
commenced construction of the Shopping Center, then Tenant shall not be
permitted to terminate in the foregoing manner. Following the Commencement Date
of this Lease, Landlord may submit to Tenant a Commencement and Expiration Date
Declaration in the form attached hereto as Exhibit F, specifying the information
called for in said form, and Tenant shall execute such Declaration within thirty
(30) days following submission for purposes of certifying such information;
provided, however, that the Declaration shall not be rendered ineffective by
Tenant's failure to execute same.
Notwithstanding the foregoing, in the event Tenant does not achieve
Gross Sales (as hereinafter defined) of at least Two Hundred Thirty and
00/100ths Dollars ($230.00) per square foot during the third (3rd) full Lease
Year of the Term hereof, then Landlord and Tenant, for a period of sixty (60)
days following the end of the third (3rd) full Lease Year, each shall have the
option, upon one hundred eighty (180) days prior written notice to the other
party, of terminating this Lease ("Termination Option") provided, however, that
Tenant shall not be entitled to terminate this Lease if Tenant shall have been,
or is, in default of this Lease. In the event Tenant fails to submit a certified
report of annual Gross Sales within the time period required pursuant to Section
2.2 of this Lease, then Landlord shall use such information as Landlord shall
have available to permit Landlord to make a determination as to the amount of
Gross Sales achieved by Tenant during the period covered by Landlord's option to
terminate and such information shall be the basis for Landlord exercising its
Termination Option and Tenant shall not be permitted to reinstate this Lease
after termination for any reason or cause whatsoever, including, but not limited
to, the submittal by Tenant of a subsequent sales report either certified or
uncertified. In the event that neither party exercises its Termination Option
within the required time period, then each such Termination Option shall, upon
expiration of the applicable period, become null and void and be of no further
force or effect. In the event either party exercises the foregoing Termination
Option within the required time period, this Lease shall terminate upon
expiration of the one hundred eighty (180) day period subject, however, to the
payment by Tenant to Landlord of all sums then due and owing or having accrued
to Landlord. In the event that Tenant exercises the Termination Option provided
for herein, Tenant shall pay to Landlord the unamortized portion of the
Construction Allowance (as hereinafter defined).
Section 1.3 Opening. Tenant covenants and agrees to complete its
construction within the Leased Premises in accordance with the provisions of
this Lease, to satisfy the requirements for issuance of a certificate of
acceptance pursuant to Exhibit D attached hereto and made a part hereof, and to
open its store for business to the public not later than the Commencement Date.
Notwithstanding the foregoing, Landlord hereby notifies Tenant that the
anticipated date of the grand opening of the Shopping Center (the "Grand
Opening") is the date set forth on the Data Sheet, and Tenant shall be obligated
<PAGE>
to open its store for business to the public on such date or such other date as
Landlord may establish from time to time for the Grand Opening upon written
notice to Tenant. Tenant shall not be permitted to open for business to the
public prior to the Grand Opening without the prior written consent of Landlord
which consent shall be at Landlord's sole discretion.
Section 1.4 Late Opening. Except for delays, as described in Article
XVI and provided that Tenant has been given the seventy-five (75) day Fixturing
Period, in the event Tenant shall fail to open its store for business to the
public upon the Commencement Date, then in order to compensate Landlord for its
loss, Tenant shall pay to Landlord as additional rent (as defined in Section
2.3) over and above the Minimum Rent and all other charges to be paid by Tenant
to Landlord pursuant to this Lease, a sum in an amount equal to One Hundred and
00/100ths Dollars ($100.00) per day for the Commencement Date and each day after
the Commencement Date that Tenant shall have failed to open its store for
business. This remedy shall be in addition to any and all other remedies
provided for in this Lease in the event of such failure to open. Such additional
late opening rent shall be deemed to be in lieu of any Percentage Rent that
might have been earned during the period of Tenant's failure to open.
Section 2.1. Minimum Rent. During the entire Term of this Lease, Tenant
shall pay annual minimum rental ("Minimum Rent") for the Leased Premises from
the Commencement Date of this Lease in the amount set forth in the Data Sheet
attached hereto, 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. The Minimum Rent and each of
the monthly installments called for hereunder shall be payable to Landlord,
without demand, deduction, set-off or counter-claim. The first installment of
Minimum Rent shall be paid by Tenant within ten (10) days of Tenant's receipt of
Landlord's notice of the Delivery of Possession Date. If the Commencement Date
occurs on other than the first day of a month, the second installment of Minimum
Rent shall be prorated at a daily rate on the basis of a thirty (30) day month.
Section 2.2. Percentage Rent. (a) During and for each Lease Year,
Tenant shall pay annual percentage rent ("Percentage Rent") equal to the
Percentage 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 applicable Sales Break Point set forth in the Data Sheet.
In any Lease Year where there is more than one applicable Sales Break Point, for
purposes of computing annual Percentage Rent the following calculation shall be
used: each Sales Break Point which was effective during any such Lease Year
shall be multiplied by a fraction, the numerator of which is the number of days
in the Lease Year that such Sales Break Point was effective and the denominator
of which is the actual number of days in such Lease Year (herein the "Adjusted
Break Point") and the sum of the Adjusted Break Points shall be the Sales Break
Point for such Lease Year. "Gross Sales" is defined to mean the total amount of
the actual sales price, whether for cash or otherwise, of all sales of
merchandise or services arising out of or payable on account of (and all other
receipts or amounts receivable whatsoever with respect to) all the business
conducted in, on, or from the Leased Premises by or on account of Tenant or any
sublessee, assignee or concessionaire of Tenant for cash or otherwise, including
all orders for merchandise taken from or filled at or from the Leased Premises,
including all deposits not refunded to customers. A "sale" shall be deemed to
have been consummated for purposes of this Lease, and the entire amount of the
sale price shall be included in Gross Sales, at such time as (i) the transaction
is initially reflected in the books or records of Tenant, or any sublessee,
assignee or concessionaire of Tenant, or (ii) Tenant or such other entity
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 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. Tenant shall record
at the time of each sale or 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. There shall be no deduction
allowed for direct or indirect discounts, rebates, or other reductions on sales,
<PAGE>
unless generally offered to the public on a uniform basis. Tenant may deduct
from Gross Sales discount sales to employees, bad debts when written off the
books of Tenant and charges paid to credit card companies provided, however,
that in the aggregate such deductions do not exceed three percent (3%) of Gross
Sales in any Lease Year. Tenant may also exclude from Gross Sales any transfer
of goods between Tenant's other stores and returns to shippers or manufacturers.
The term "Gross Sales" shall exclude, however, proceeds from any sales tax,
gross receipts tax or similar tax, by whatever name called which are separately
stated and in addition to the purchase price, bona fide transfers of merchandise
from the Leased Premises to any other stores or warehouses of Tenant, refunds
given to customers for merchandise purchased at the Leased Premises and returned
or exchanged, and sales of Tenant's fixtures and equipment not in the ordinary
course of Tenant's business. The term "merchandise" as used in this Lease shall
include food and beverages if Tenant is permitted to sell such items pursuant to
Section 4.1 hereof.
(b) Tenant shall keep at the Leased Premises or at Tenant's executive
offices within the continental United States a full and accurate set of books
and records adequately showing the amount of Gross Sales in each Lease Year. The
books and records to be kept by Tenant shall include, without limitation, (i)
cash register tapes, including tapes from temporary registers; (ii) serially
pre-numbered sales slips; (iii) detailed original records of any exclusions or
deductions from Gross Sales; (iv) sales tax records; and (v) such other 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. Such
books and records shall be kept in accordance with generally accepted accounting
principles and practices and shall be retained by Tenant for a period of not
less than two (2) years following the end of the Lease Year to which they have
reference. When and as Landlord may reasonably require, Tenant shall also
furnish to Landlord any and all statements, information, and copies of sales and
income tax reports and returns which separately show financial data for the
Leased Premises, and inventory records and other data evidencing Gross Sales.
Within ten (10) days following the end of each calendar month of the Term hereof
Tenant shall submit to Landlord an unaudited statement of Gross Sales for such
calendar month. All Gross Sales statements to be supplied by Tenant to Landlord
shall be in such form and with such detail as Landlord shall deem necessary or
desirable. Within ten (10) days following the end of the month in which Tenant's
Gross Sales for the Lease Year to date exceed the Sales Break Point, and each
month thereafter, Tenant shall pay to Landlord Percentage Rent and shall submit
to Landlord a statement certified by Tenant setting forth the Gross Sales for
each such period. Within forty-five (45) days after the close of each Lease
Year, Tenant shall furnish to Landlord a statement certified by an authorized
representative or financial officer of Tenant setting forth the amount of Gross
Sales during such Lease Year and showing the amount of Percentage Rent required
to be paid by Tenant for such Lease Year. The full amount of the Percentage Rent
due shall be paid to Landlord no later than sixty (60) days after the end of
each Lease Year and any excess Percentage Rent paid shall be credited against
Tenant's next due Percentage Rent payment, except for the final Lease Year of
the Term for which any excess shall be refunded to Tenant. Landlord and/or
Landlord's auditor shall have the right, at any time after ten (10) business
days notice, to inspect and/or audit the records of Tenant relating to Gross
Sales. If the Gross Sales exceed those reported, Tenant shall immediately pay
any deficiency in Percentage Rent owing to Landlord. If Gross Sales vary from
those reported by three percent (3%) or more, Tenant shall pay Landlord's cost
of inspection and audit. If Gross Sales vary from those reported by (i) five
percent (5%) or more in any one (1) Lease Year, or (ii) three percent (3%) or
more for any two (2) Lease Years out of any five (5) Lease Years, then Landlord
shall have the right, at its sole option, to terminate this Lease, with Tenant
remaining liable for sums due and owing under this Lease for the balance of the
Term. Tenant agrees that in the event Tenant shall fail to timely submit a Gross
Sales statement as required by this Section 2.2(b), Tenant shall pay on demand a
late fee of Fifty and 00/100ths Dollars ($50.00) per late statement, as
additional rent.
<PAGE>
(c) In the event that Tenant shall fail to operate its business in the
Leased Premises in the manner and on each day as required pursuant to Article IV
hereof, then, for the purpose of computing the Percentage Rent for such Lease
Year affected by Tenant's failure to operate, the Sales Break Point for such
Lease Year shall be adjusted by multiplying the Sales Break Point otherwise
applicable for such Lease Year by a fraction, the numerator of which shall be
the actual number of days in such short Lease Year or the actual number of days
in such Lease Year during which Tenant was open for business and operating in
accordance with Article IV, and the denominator of which shall be "360".
In the event that the first Lease Year is less than six (6) months in
length, then the Percentage Rent covering such Lease Year shall be paid on Gross
Sales in excess of the Sales Break Point computed on a pro rated basis for the
period beginning on the Commencement Date of the Term and ending twelve (12)
calendar months thereafter.
Section 2.3. Payments By Tenant. Throughout the Term of this Lease,
Tenant shall pay to Landlord, without demands, deductions, set-offs or
counterclaims, the Rent, which is hereby defined as the sum of the Minimum Rent,
Percentage Rent and all additional rent, when and as the same shall be due and
payable hereunder. Unless otherwise stated, all sums of money or charges of any
kind or nature, in addition to Minimum Rent and Percentage Rent, payable by
Tenant to Landlord pursuant to this Lease or the Exhibits attached hereto are
defined as "additional rent" and are due thirty (30) days after the rendering of
an invoice therefor, without any deductions, set-offs or counterclaims, and
failure to pay such sums of money or charges shall carry the same consequences
as Tenant's failure to pay Rent. All payments and charges required to be made by
Tenant to Landlord hereunder shall be payable in United States funds, at the
address indicated on page 1 of this Lease, unless otherwise specified by written
notice from Landlord to Tenant. No payment by Tenant or receipt by Landlord of a
lesser amount than the correct Rent shall be deemed to be other than a payment
on account and no endorsement or statement on any check or other communication
accompanying a check for payment of any amounts payable hereunder shall be
deemed an accord and satisfaction, and Landlord may accept such check in payment
without prejudice to Landlord's right to recover the balance of any sums owed by
Tenant hereunder or to pursue any other remedy available in this Lease, or under
law, against Tenant.
Section 2.4. Security Deposit. [Intentionally Deleted]
Section 2.5. Late Charge. In the event any Rent or sums required
hereunder to be paid are not received on or before the tenth (10th) calendar day
after the same are due, then, for each and every late payment, Tenant shall
immediately pay, as additional rent, a late charge equal to the greater of (a)
Fifty and 00/100ths Dollars ($50.00), (b) Ten and 00/100ths Dollars ($10.00) per
day for each day after the date due that such payment has not been received by
Landlord or (c) four percent (4%) per month of the total receivable balance of
Tenant outstanding. In the event of Tenant's failure to pay the foregoing late
charge, Landlord may deduct said charge from the Security Deposit set forth in
Section 2.4 hereof. The provisions herein for late charges shall not be
construed to extend the date for payment of any sums required to be paid by
Tenant hereunder or to relieve Tenant of its obligation to pay all such sums at
the time or times herein stipulated. Notwithstanding the imposition of such late
charges pursuant to this Section 2.5, Tenant shall be in default under this
Lease if any or all payments required to be made by Tenant are not made on or
before the time due and as stipulated in Article XIV, and neither the demand
for, nor collection by, Landlord of such late charges shall be construed as a
cure of such default on the part of Tenant. It is agreed that the said late
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.
<PAGE>
Section 3.1. Landlord's Work. Landlord shall construct the building
wherein the Leased Premises are to be located and perform the work described in
Exhibit C attached hereto and made a part hereof ("Landlord's Work") at
Landlord's cost and expense, except as otherwise provided in Exhibit C. All
work, in addition to the work described in Exhibit C, done by Landlord at
Tenant's request shall be paid for by Tenant within thirty (30) days after the
presentation to Tenant of a bill for such work. Acceptance of possession by
Tenant shall be conclusive evidence that Landlord's Work has been fully
performed in the manner required. Any items of Landlord's Work which are not
completed as of delivery of possession shall be identified by Tenant on a punch
list to be submitted to Landlord within thirty (30) days after the date of
possession and Landlord shall thereafter complete the same. Any items of
Landlord's Work which are not timely identified on such a punch list shall be
deemed completed.
Section 3.2. Delivery of Possession. (a) Landlord, or Landlord's
supervising architect, shall give Tenant at least ten (10) days' prior written
notice of the date on which Landlord's Work will be substantially completed in
accordance with Exhibit C and the Leased Premises will be available for the
performance of Tenant's Work (as defined in Section 3.3) to the extent that
Tenant shall be able to perform its work in the Leased Premises without
substantial interference resulting from the conduct of Landlord's Work
("Delivery of Possession Date") provided, however, that in the event the
Shopping Center shall have initially opened for business prior to the
Commencement Date of this Lease, then the foregoing notice requirement shall
automatically be deemed to be reduced to a five (5) day notice requirement.
Tenant covenants and agrees to take physical possession of the Leased Premises
on the Delivery of Possession Date provided that Landlord's Work is
"substantially complete." The Delivery of Possession Date shall be subsequently
confirmed by Landlord, or Landlord's supervising architect, by written notice to
Tenant. Failure of Landlord to deliver possession of the Leased Premises within
the time and in the condition provided for in this Lease will not give rise to
any claim for damages by Tenant against Landlord or permit Tenant to rescind or
terminate this Lease.
(b) Tenant may, provided Tenant shall not interfere with the conduct of
Landlord's Work, and subject to Landlord's reasonable rules and regulations,
enter the Leased Premises during normal working hours during the course of
Landlord's Work for the purpose of inspecting the Leased Premises and making
measurements. At such time prior to the Delivery of Possession Date that
Landlord's Work has progressed sufficiently to permit Tenant to perform its work
without interfering with Landlord's Work, Landlord may, but shall not be
required to, notify Tenant of the same, and Tenant may then enter the Leased
Premises in order to begin to install its store fixtures and perform such other
work as may be required under the provisions of this Lease in order to ready the
store for opening. Throughout the period of Tenant's Work, Tenant shall schedule
its work so as not to interfere with any work being performed by Landlord or by
any other tenant in the Shopping Center.
Section 3.3. Tenant's Work. (a) Tenant agrees, prior to the
commencement of the Term of this Lease, at Tenant's sole cost and expense, to
diligently perform all work of whatever nature in accordance with Tenant's
obligations set forth in Exhibit D ("Tenant's Work") and all other related work
necessary to prepare for the opening to the public of Tenant's store in the
Leased Premises in accordance with the provisions of this Lease. Tenant agrees
to furnish to Landlord the Store Design Drawings and Working Drawings and
Specifications with respect to the Leased Premises prepared in the manner and
within the time periods required in Exhibit D. If such Store Design Drawings or
Working Drawings and Specifications are not furnished by Tenant to Landlord
within the required time period(s) in form to permit approval by Landlord, then
the Fixturing Period (as described in the Data Sheet) shall be reduced by one
(1) day for each day of delay by Tenant in submitting said Store Design Drawings
or Working Drawings and Specifications. Landlord shall exercise reasonable
efforts to respond to such Store Design Drawings or Working Drawings and
Specifications submitted by Tenant pursuant to this Lease within seven (7)
business days following Landlord's receipt from Tenant. In the event of
Landlord's failure to respond within such seven (7) business day period, the
Fixturing Period as described in the Data Sheet shall be extended by one (1) day
for each day of additional delay by Landlord.
<PAGE>
Provided Tenant is not in default hereof, Landlord hereby agrees to
contribute towards the cost of Tenant's Work a Construction Allowance of Two
Hundred Fifty Thousand and 00/100ths Dollars ($250,000.00). The aforesaid
Construction Allowance shall be paid thirty (30) days after the Commencement
Date as specified in Section 1.2 hereof, provided Tenant shall have received a
Certificate of Acceptance pursuant to Exhibit D hereof and the applicable lien
waivers from all contractors and subcontractors. In the event that this Lease is
terminated prior to the expiration of the Term hereof, Tenant shall repay said
Construction Allowance to Landlord in cash upon termination; provided, however,
that Tenant's liability for said Construction Allowance shall be reduced at the
rate of Thirty-seven Thousand Five Hundred and 00/100ths Dollars ($37,500.00)
each anniversary of the Commencement Date occurring during the Term hereof.
No material deviations from the final Store Design Drawings or Working Drawings
and Specifications, once approved by Landlord, shall be permitted unless
necessary to comply with applicable governmental requirements. Landlord's
approval of Tenant's Store Design Drawings and Working Drawing and
Specifications shall not constitute the assumption of such items. Tenant's Work
shall include the installation of fixtures and equipment and the stocking of the
Leased Premises with suitable merchandise. Tenant covenants that all such
fixtures and equipment visible to customers shall be new and otherwise
acceptable to Landlord in appearance. In addition to conforming to the
requirements specified in Exhibit D, all work performed by Tenant shall comply
with such rules and regulations as Landlord and its representatives may make,
provided that such rules and regulations are uniformly applied to all similarly
situated Shopping Center tenants under construction. 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 D. It
is further understood and agreed that: (i) Landlord shall have no responsibility
or liability whatsoever for any loss of, or damage to, any fixtures, equipment,
merchandise, or other property belonging to Tenant, installed or left in the
Leased Premises except to the extent resulting from the negligence or
intentional acts of Landlord, its agents or employees; and (ii) Tenant's entry
upon and occupancy of the Leased Premises prior to the Commencement Date shall
be governed by and subject to all the provisions, covenants and conditions of
this Lease. Tenant shall obtain at its sole cost and immediately thereafter
furnish to Landlord all certificates and approvals with respect to work done and
installations made by Tenant that may be required for the issuance of a
certificate of occupancy for the Leased Premises, so that such certificate of
occupancy shall be issued and the Leased Premises shall be ready for the opening
of Tenant's business on the Commencement Date. Upon the issuance of the
certificate of occupancy, a copy thereof shall be immediately delivered to
Landlord. Promptly upon the completion of its work, Tenant, at Tenant's cost,
shall repair, clean and restore all portions of the Shopping Center affected by
Tenant's Work to their prior condition.
(b) The interest of Landlord in the Leased Premises and the Retail
Development shall not be subject to liens for improvements made by or on behalf
of Tenant. Nothing contained in this Lease shall be construed as a consent on
the part of Landlord to subject Landlord's estate in the Leased Premises or the
Retail Development to any lien or liability under applicable law. In the event
that any mechanic's, materialman's or other lien or any notices of claim,
including without limitation, stop notices (herein "lien") is filed against the
Leased Premises or Retail Development as a result of any work, labor, services
or materials performed or furnished, or alleged to have been performed or
furnished to or for Tenant or to or for anyone holding the Leased Premises
through or under Tenant, Tenant, at its expense, shall cause the lien to be
discharged or fully bonded to the satisfaction of Landlord within thirty (30)
days after notice of the filing thereof. If Tenant fails to discharge or bond
against said mechanic's, materialman's or other lien, Landlord may, in addition
to any other remedies Landlord may have, but without obligation to do so, bond
against or pay the lien without inquiring into the validity or merits of such
lien and all sums so advanced, including reasonable attorney fees incurred by
Landlord in defending against such lien, procuring the bond or in the discharge
of such lien, shall be paid by Tenant on demand as additional rent. It shall be
Tenant's continuing obligation to keep and maintain the Leased Premises and all
other parts of the Retail Development free from any and all liens arising out of
any work performed, materials furnished or obligations incurred by or for Tenant
in connection with the Leased Premises. In addition, Tenant shall replace any
bonds posted by Landlord pursuant hereto with a suitable bond of equivalent
amount within twenty (20) days after Landlord's demand therefor.
<PAGE>
Tenant, subject to Landlord's consent not to be unreasonably withheld,
conditioned or delayed, may grant a security interest, encumber or pledge its
equipment, personal property, inventory and movable trade fixtures located on or
about the Leased Premises, with respect to financing which benefits this store
location. In no event, however, shall Tenant be permitted to mortgage,
hypothecate, encumber or pledge the leasehold interest in the Leased Premises.
(c) Upon the expiration of each five (5) year period of the Term of
this Lease, Tenant shall, within thirty (30) days after direction from Landlord,
submit drawings and specifications showing the work to be performed by Tenant to
completely refurbish the interior portions of Leased Premises. Tenant shall not
be required, pursuant to this Section 3.3(c), to reconstruct the Leased
Premises. The work required of Tenant hereunder shall specifically include work
with respect to the following items: wall covering, floor covering, ceiling,
storefront sign and surfaces visible to customers. Tenant will cause such work
to be performed not later than ninety (90) days following the date of Landlord's
direction in accordance with drawings and specifications approved by Landlord
specifying the refurbishing work to be done by Tenant. All such work shall be
carried out in accordance with the provisions of this Lease, including the
provisions of this Section 3.3 governing construction of the Leased Premises.
Section 3.4. Alterations by Tenant. Tenant shall not make or cause to
be made any alterations, repairs, additions or improvements in or to the Leased
Premises (for example, but without limiting the generality of the foregoing,
Tenant shall not install or cause to be installed any exterior signs or interior
signs visible from the exterior except as permitted by Section 4.3 hereof, floor
covering, interior or exterior lighting, plumbing fixtures, shades, canopies or
awnings or make any changes to the storefront, mechanical, electrical or
sprinkler systems) without the prior written consent thereto by Landlord. Tenant
shall submit to Landlord plans and specifications for such work at the time
consent is sought, in accordance with the criteria and procedures as provided in
Exhibit D. In the event Landlord grants such consent, such alterations, repairs,
additions or improvements shall be performed in good and workmanlike manner and
in accordance with all applicable legal and insurance requirements and all
drawings or specifications approved by Landlord, and in accordance with the
provisions of this Lease, including the provisions of Section 3.3 governing
construction of the Leased Premises. Any work performed by Tenant shall be
subject to Landlord's inspection and approval after completion to determine
whether the same complies with the requirements of this Lease. Prior to the
commencement of any such work by Tenant, Tenant shall obtain the insurance
required in Section 8.2. Tenant agrees that Landlord shall have the right, at no
expense to Landlord, to require Tenant to furnish Landlord with payment and
performance bonds guaranteeing the completion of any repairs, alterations,
additions or improvements (structural or otherwise) required or permitted to be
performed by Tenant under any provision of this Lease.
Tenant may from time to time make non-structural alterations to the
Leased Premises without Landlord's prior written approval, the aggregate total
cost of which shall not exceed Ten Thousand and 00/100ths Dollars ($10,000.00)
in any Lease Year; provided, however, that Tenant shall not be permitted to
alter the sign or the storefront without the prior written consent of Landlord,
and provided further that any such non-structural alterations shall not change
the overall appearance of the Leased Premises as originally approved by
Landlord.
Section 3.5. Removal by Tenant. All repairs, alterations, decorations,
additions and improvements made by Tenant shall be deemed to be attached to the
leasehold and to have become the property of Landlord upon such attachment, and,
upon the Expiration Date or sooner termination of this Lease, Tenant shall not
remove any of such alterations, decorations, additions and improvements;
provided that trade fixtures installed by Tenant may be removed if all Rent due
herein are paid in full and Tenant is not otherwise in default hereunder;
provided further, however, that Landlord may designate by written notice to
Tenant those alterations, decorations, additions and improvements which shall be
removed by Tenant at the Expiration Date or sooner termination of this Lease and
Tenant shall, at Tenant's cost, promptly remove the same and repair any damage
to the Leased Premises caused by such removal.
<PAGE>
ARTICLE IV
CONDUCT OF BUSINESS
Section 4.1. Use and Trade Name. Tenant shall continuously use and
occupy the Leased Premises during the Term solely for the purpose of conducting
the business specifically set forth in the Data Sheet and for no other purpose
or purposes. Throughout the Term hereof, Tenant shall (a) operate its business
in the Leased Premises under the Trade Name specifically set forth in the Data
Sheet and under no other so long as such name shall not be held to be in
violation of any applicable law, (b) not change the advertised name or character
of the business operated in the Leased Premises, (c) refer to the Shopping
Center by name in designating the location of the Leased Premises in all
newspaper and other advertising within the Shopping Center market area and in
all other references to the location of the Leased Premises, and (d) during the
period from the Delivery of Possession Date through sixty (60) days following
the Commencement Date, include in all Tenant's newspaper advertising within the
Shopping Center market area the designation that Tenant is opening for business
in the Shopping Center. If any governmental license(s) or permit(s) 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, adversely affect Landlord or the
Shopping Center, then Tenant, at Tenant's expense, shall duly procure and
thereafter maintain such license(s) or permit(s) and submit the same for
inspection by Landlord. Tenant, at Tenant's expense, shall at all times, comply
with the requirements of such license(s) or permit(s). Except as provided in
Section 1.3, Tenant shall open its store in the Leased Premises for business to
the public on the Commencement Date, and shall thereafter diligently conduct its
regular business operations in the Leased Premises as required by the terms of
this Lease.
Section 4.2. Operation of Business. Tenant shall open for business in
the Leased Premises and remain open during the entire Term and continuously
operate its business in the entire area of the Leased Premises during the entire
Term. Tenant shall conduct its business at all times in a high class and
reputable manner, maintaining at all times a full staff of employees and a
complete stock of merchandise. 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 Leased Premises well lighted during all hours that the
Shopping Center is open to the public and during such other hours as may be
reasonably designated by Landlord. In no event shall Tenant conduct or advertise
any auction, fire sale, going out of business sale, or bankruptcy sale in or
about the Leased Premises without Landlord's prior written consent in each
instance, which consent may be withheld by Landlord in its sole and absolute
discretion. Tenant shall conduct its business in the Leased Premises in a lawful
manner and in good faith during all days and hours specified by Landlord from
time to time. Tenant shall not use or allow the Leased Premises to be used for
any improper, immoral or objectionable purposes, as determined by Landlord, and
Tenant shall not do any act tending to injure the reputation of the Shopping
Center as determined by Landlord.
Section 4.3. Sign. Tenant shall install and maintain two (2) signs
affixed to the front of the Leased Premises in accordance with the Tenant
Handbook, subject to the prior written approval of Landlord as to design and
location and conforming to all applicable legal and insurance requirements.
Tenant's signs shall conform to the specifications and requirements contained in
Exhibit E attached hereto. Tenant shall keep its approved storefront signs
lighted during all hours that the Shopping Center is open to the public and
during such other hours as may be reasonably designated by Landlord. Tenant
shall pay for all costs in connection with such signs and shall be responsible
for the cost of proper installation and removal thereof and any damage caused to
the Leased Premises thereby. In the event Landlord deems it necessary to remove
either or both of such signs, then Landlord shall have the right to do so,
provided, however, that if the sign or signs have received Landlord's prior
written approval and are consistent with the specifications and requirements of
Exhibit E, Landlord shall replace said signs as soon as practicable. Except as
mentioned above, Tenant shall not place or cause to be placed, erected or
<PAGE>
maintained on any exterior door, wall or window of the Leased Premises, or the
glass of any window or door of the Leased Premises, or on any sidewalk or within
any display window space in the Leased Premises, or within five (5) feet of the
front of the storefront lease line or opening, or within any entrance to the
Leased Premises or otherwise visible from the common areas, any sign (flashing,
moving, hanging, handwritten or otherwise), decal, placard, flashing, moving or
hanging lights, lettering or any other advertising matter of any kind or
description. No symbol, design, name, mark or insignia adopted by Landlord for
the Retail Development shall be used without the prior written approval of
Landlord. Any interior signs must be in good taste and prepared professionally
(not hand-lettered) so as not to detract from the appearance of the Leased
Premises or the Shopping Center. Any sign or display visible from the exterior
of the Leased Premises which does not meet the above criteria may be removed at
any time by Landlord without Landlord incurring any liability therefor, and
without such removal constituting a breach of this Lease or entitling Tenant to
claim damages on account thereof.
Section 4.4. Tenant's Warranties. Tenant warrants, represents,
covenants and agrees that, in the operation of its business within the Leased
Premises, Tenant shall: (a) pay before delinquency any and all taxes,
assessments and public charges levied, assessed or imposed upon Tenant's
business, or upon Tenant's fixtures, furnishings or equipment in the Leased
Premises, or upon any leasehold interest or personal property of any kind, owned
by or placed in or about the Leased Premises by Tenant or by anyone claiming by,
through or under Tenant, including, without limitation, any transfer taxes, and
pay when and as due all license fees, permit fees and charges of a similar
nature required for the conduct by Tenant or any subtenant or concessionaire of
any business or undertaking authorized hereunder to be conducted in or from the
Leased Premises; (b) observe all reasonable requirements promulgated by Landlord
at any time and from time to time relating to delivery vehicles, the delivery of
merchandise, and the storage and removal of trash and garbage; (c) not use any
space outside the Leased Premises for sale, storage or any other undertaking;
(d) not use the plumbing facilities in the Leased Premises for any purpose other
than that for which they were constructed, nor dispose of any foreign substances
therein; (e) not use any advertising medium or sound devices inside or adjacent
to the Leased Premises which produce or transmit sounds which are audible beyond
the interior of the Leased Premises; (f) not permit any odor to emanate from the
Leased Premises which is objected to by Landlord or by any tenant or occupant of
the Retail Development (and, upon written notice from Landlord, Tenant shall
immediately cease and desist from causing such odor, and Landlord may deem the
failure by Tenant to do so, a material breach of this Lease); (g) keep the
Leased Premises and any platform, loading dock or service area used by Tenant in
a neat, clean, safe and sanitary condition; (h) promptly comply with all present
and future laws, ordinances, orders, rules, regulations and requirements of all
governmental authorities having jurisdiction, and observe and comply with all
covenants and restrictions of record and all notices from Landlord's mortgagee,
affecting or applicable to the Retail Development or affecting or applicable to
the Leased Premises or the cleanliness, safety, occupancy and use of the same,
whether or not any such law, ordinance, order, rule, regulation, covenant,
restriction, or other requirement is substantial, or foreseen or unforeseen, or
ordinary or extraordinary, or shall necessitate structural changes or
improvements, shall interfere with the use or enjoyment of the Leased Premises,
or shall be directed to or imposed upon Tenant or Landlord, and Tenant shall
hold Landlord harmless from any and all cost or expense on account thereof (as
used in this Lease, the term "legal requirements" shall include the requirements
set forth in this subparagraph); (i) not use the parking areas or sidewalks,
common areas or any space on or about the Retail Development (outside the Leased
Premises) for display, sale, handbilling, advertising, solicitation, or any
other similar undertaking; (j) maintain and operate the heating, ventilating and
air conditioning system and equipment servicing the Leased Premises so as to
adequately heat and cool the same; and (k) be authorized to do business in the
State.
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Section 4.5. Storage and Office Space. Tenant shall store or stock in the
Leased Premises only such goods, wares and merchandise as Tenant intends to
offer for sale at, in, from, or upon the Leased Premises. This shall not
preclude occasional emergency transfers of merchandise to 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 therein, and
Tenant shall not perform any office or clerical function in the Leased Premises
for any store located elsewhere.
Section 4.6. Care of Premises. Tenant shall keep the Leased Premises
(including the exterior and interior portions of all windows, doors and all
other glass and signs) orderly, neat, safe and clean and free from rubbish or
dirt at all times and shall store all trash and garbage only in the areas
reasonably designated by Landlord for such storage and accumulation. Tenant
shall not move any safe, heavy machinery, heavy equipment, or fixtures into or
out of the Leased Premises without Landlord's prior written consent. Tenant
agrees that it will not place a load on any floor exceeding the floor load per
square foot which such floor was designed to carry, and will not install,
operate or maintain in the Leased Premises any heavy equipment except in such
manner as to achieve a proper distribution of weight.
Section 4.7. Notice by Tenant. Tenant shall give immediate notice to
Landlord in case of fire or accidents in the Leased Premises, or in the building
of which the Leased Premises are a part of, or of defects therein or in any
fixtures or equipment.
Section 4.8. Radius. Tenant acknowledges that the Retail Development
draws it customers from a large geographic area, relying in part on regional and
international tourism, and that the success of the Retail Development and income
of the Landlord therefrom are dependent upon maximum customer traffic within the
Retail Development . In addition, Tenant acknowledges that Landlord is relying
on the generation of Percentage Rent from Tenant's Gross Sales at the Leased
Premises. During the Term, in the event Tenant, or any person, firm or
corporation who or which controls or is controlled by Tenant (an "Affiliate")
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 Article IV
("competing business"), which business is conducted within the Area (as said
term is herein defined), then the Gross Sales (as said term is defined in this
Lease) of any such competing business within said Area shall be included in
Tenant's Gross Sales made from the Leased Premises and the Percentage Rent
hereunder shall be computed upon the aggregate of Tenant's Gross Sales made from
the Leased Premises and made from each such competing business then conducted
within said Area. Tenant shall be obligated to provide Landlord with full and
complete Gross Sales information and reports with respect to any competing
business within the Area in accordance with the requirements of Article II of
this Lease and Tenant shall be obligated to include the applicable portion of
the Gross Sales of such competing business with the Gross Sales of the Leased
Premises and to pay Percentage Rent thereon in accordance with the terms of this
Lease. The "Area" shall be defined as the area falling within a radius of ten
(10) miles measured from the outside boundary of the Retail Development. This
Section 4.8 shall not apply to any competing business which is open and is being
operated by Tenant within said Area on the Effective Date.
ARTICLE V
COMMON AREA
Section 5.1. Use of Common Area. Landlord agrees to cause to be
operated, managed and maintained during the Term all of the common areas of the
Shopping Center. The term "common areas", as used in this Lease, shall mean the
parking areas, pedestrian sidewalks and bridges, truckways, loading docks,
delivery areas, park areas, pedestrian malls and courts, elevators and
escalators, if any, and stairs not contained in leased areas, public restrooms
and comfort stations, if any, service areas, fire, service and exit corridors,
passageways, landscaped areas, berms and all other areas or improvements which
may be provided for the convenience and use of the occupants and tenants of the
Retail Development and their respective agents, employees, customers, invitees,
and the licensees and invitees of Landlord. The use and occupancy by Tenant of
the Leased Premises shall include the non-exclusive use, in common with all
<PAGE>
others to whom Landlord has or may hereafter grant rights to use the same
(including, but not limited to, the owners, tenants and occupants of the
Shopping Center), of the common areas and of such other facilities as may be
designated by Landlord from time to time; subject, however, to rules and
regulations for the use thereof which will be uniformly applicable to all
Shopping Center tenants as prescribed from time to time by Landlord. In
particular, Tenant and its employees shall park their cars only in the areas
specifically designated from time to time by Landlord for that purpose. Tenant
covenants that it will enforce the parking by its employees in such designated
areas. Automobile license numbers of employees' cars shall be furnished by
Tenant to Landlord within five (5) days after Landlord's request. In the event
any vehicle is parked by an employee of Tenant in a non-employee parking area,
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. Tenant further agrees to hold harmless Landlord and defend
Landlord, its agents and employees against any and all claims of the employee
and/or owner of the vehicle towed. Landlord may at any time close temporarily
any common area to make repairs or changes, to prevent the acquisition of public
rights in such areas and to discourage non-customer use, provided the same shall
not materially adversely affect access to or visibility of the Leased Premises.
In addition, Landlord may modify, from time to time, the traffic flow pattern
and layout of parking spaces and the entrances-exits to adjoining public streets
or walkways, utilize portions of the common areas for entertainment, displays
and charitable activities and may do such other acts in and to the common areas
as in its judgment may be desirable to improve the convenience or attraction
thereof.
Landlord agrees to maintain all common areas of the Shopping Center in good
order, condition and repair and in a safe, clean, sightly and sanitary condition
in accordance with good and accepted shopping center practices. The maintenance
obligations of Landlord shall include, without limitation, the re-striping of
parking areas when required, repairing of common areas and adequate lighting of
all exterior common areas during all hours of darkness during which Tenant shall
be open for business and for one (1) hour thereafter.
Section 5.2. Common Area Maintenance Expenses. (a) Tenant agrees to pay
to Landlord each Lease Year, in the manner hereinafter provided, Tenant's
proportionate share of all costs and expenses (the "Common Area Maintenance
Expenses") of every kind and nature paid or incurred by Landlord, or for which
Landlord is obligated, during each Lease Year, for operating, equipping,
policing and protecting, heating, air conditioning, providing sanitation and
sewer and other services, lighting, insuring, repairing, replacing and
maintaining (i) the common areas, and (ii) all buildings and roofs within the
Retail Development, and (iii) all other areas, facilities and buildings used in
connection with the maintenance and/or operation of, and whether located within
or outside of, the Retail Development, including without limitation, all roads
and driveways serving the Retail Development which are maintained or repaired by
Landlord or at Landlord's expense. The Common Area Maintenance Expenses shall
include, but are not limited to, costs and expenses of: water, gas, sewage,
electricity, refuse disposal, air conditioning, heating and other utilities
(without limitation), including all usage, service, hook-up, connection,
availability and/or standby fees or charges pertaining to same, and the utility
costs; illumination and maintenance of signs, whether located on or off the
Retail Development property; salaries of all management personnel; maintenance,
repair and replacement of directories, electronic or otherwise, cleaning,
lighting, snow removal and landscaping; security control and fire protection;
uniforms for maintenance, administrative and security personnel for the Retail
Development; management fees; maintenance for wooded areas, retention ponds,
wetlands, rivers and riverbank areas; premiums for insurance to the extent
maintained by Landlord, for liability, casualty and property damage, including,
without limitation, insurance against vandalism, plate glass breakage, fire and
extended coverage insurance and such other coverage as determined by Landlord,
and liability for defamation and claims of false arrest occurring in and about
such areas; personal property taxes; maintaining and replacing the equipment, if
any, supplying music to such areas; the reasonable depreciation of equipment
used in the operation and maintenance of such areas; total compensation and
benefits (including premiums for workers' compensation and other insurance) paid
to or on behalf of persons involved in the performance or
administration/technical support of the work specified in this Section 5.2;
repair, maintenance and cleaning of such areas; operation, repair, maintenance
and reasonable depreciation of all temporary and permanent utility systems for
the Retail Development, including, without limitation, heating, ventilating and
air conditioning systems (HVAC systems), gas system(s), plumbing system(s),
<PAGE>
electrical equipment and irrigational pumping system(s); operation, repair,
maintenance and reasonable depreciation of emergency water and sprinkler main
system(s) and security alarm system(s); operation maintenance, repair and
replacement of mechanical equipment including any automatic door openers,
elevators, escalators, lighting fixtures (including replacement of poles, tubes
and bulbs) and all other items of equipment used in connection with such areas;
paper supplies in restrooms located in or about such areas, cleaning, lighting,
striping and landscaping, curbs, gutters, sidewalks, drainage and irrigation
ditches, conduits, pipes and canals serving the Retail Development; and there
shall also be added to the foregoing costs and expenses an amount equal to
fifteen percent (15%) of the total of all of the ongoing costs and expenses as
Landlord's administrative fee. As stated throughout this Lease, whenever Tenant
is obligated to pay its "proportionate share" of a cost, expense or Taxes (as
hereinafter defined) such share shall be based on gross leased and occupied
floor area in the Shopping Center, and Tenant's proportionate share shall be
that fraction, the numerator of which is the total square footage of floor area
in the Leased Premises, and the denominator of which is the total square footage
of gross leased and occupied floor area (including the Leased Premises) in the
Shopping Center. As used throughout this Lease, 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.
Notwithstanding anything to the contrary contained herein, Tenant's
share of Common Area Maintenance Expenses from the Commencement Date through
December 31, 1999 shall not exceed seven and 50/100ths Dollars ($7.50) per
square foot of floor area of the Leased Premises proportionately reduced for a
partial Lease Year.
Prior to the proration of such Common Area Maintenance Expenses to Tenant,
there shall be deducted from the total of such Common Area Maintenance Expenses
any amounts specifically contributed by the Major Tenants toward such Common
Area Maintenance Expenses. It is further agreed that in no event shall Tenant be
obligated for the capital costs of initially constructing the Retail Development
or the capital costs of subsequent expansion construction for the Retail
Development (i.e., adding new Major Tenants to the development or expanding the
Shopping Center or the common areas).
(b) Tenant's proportionate share of such Common Area Maintenance
Expenses for each Lease Year shall be paid in advance, in equal monthly
installments, in the same manner and at the same time as the monthly
installments of Minimum Rent are payable hereunder without deduction, offset or
diminution of any kind, based on an amount estimated in advance from time to
time by Landlord to be Tenant's obligation under this Section 5.2.
Notwithstanding the above, in the event Landlord at any time determines that the
amount of Common Area Maintenance Expenses actually being paid or incurred by
Landlord exceeds the estimate upon which Tenant's proportionate share of Common
Area Maintenance Expenses was computed, then Tenant, following a request from
Landlord, shall commence to pay with the next monthly installment of Minimum
Rent due an amount sufficient to result in Tenant's paying its full
proportionate share of Common Area Maintenance Expenses as computed on the basis
of Landlord's revised estimate of Common Area Maintenance Expenses. Subsequent
to the end of each Lease Year, Landlord shall furnish Tenant with a statement of
the actual amount of Tenant's proportionate share of such Common Area
Maintenance Expenses for such period which statement shall be in reasonable
detail, provided, however, Landlord shall be permitted to describe areas of
expenditure by category and shall not be obligated to enumerate each specific
expenditure. If the total amount paid by Tenant under this Section 5.2 for any
Lease Year shall be less than the actual amount due from Tenant for such Lease
Year as shown on such statement, Tenant shall pay 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 Lease Year shall
exceed the actual amount due from Tenant for such Lease Year, such excess shall
be credited against the next installment due from Tenant to Landlord under this
Section 5.2.
<PAGE>
ARTICLE VI
REPAIRS AND MAINTENANCE
Section 6.1. Repairs and Maintenance by Landlord. Landlord agrees to
keep in good order, condition and repair the roof (including keeping the roof
watertight), foundations, exterior (including exterior painting and finish), all
structural portions of the Leased Premises (and of the building in which the
Leased Premises are located) and all plumbing and utility lines not exclusively
serving and not located within the Leased Premises. Should any repairs,
modifications or alterations be required by reason of applicable law, the same
shall be made by Landlord at Landlord's cost and expense unless the need for
such repairs, modifications or alterations shall result from Tenant's failure to
perform its obligations under this Lease or from Tenant's use of the Leased
Premises for other than general merchandising purposes. In addition, for the
first twelve (12) months only following the Delivery of Possession Date,
Landlord shall, upon written notice from Tenant of the necessity therefor,
correct any defects in Landlord's Work within the Leased Premises. All costs and
expenses incurred by Landlord under this Section 6.1 shall be included in Common
Area Maintenance Expenses, other than costs and expenses for Landlord's
correction of defects in Landlord's Work.
Section 6.2. Repairs and Maintenance by Tenant. (a) Except for the
repairs and maintenance that Landlord is specifically obligated to make or
perform pursuant to Section 6.1 above, throughout the entire Term of this Lease,
Tenant, at its expense, shall promptly make all repairs and replacements and
perform maintenance in and to the Leased Premises and all equipment and fixtures
therein or appurtenant thereto, that are necessary or desirable in order to keep
the Leased Premises in good order, condition and repair and in safe, dry and
tenantable condition. Without limiting the generality of the foregoing, Tenant,
at its expense, shall maintain and promptly make any and all necessary repairs
to or replacements of: (i) that portion of any pipes, lines, ducts, wires or
conduits (whether contained within or outside the Leased Premises) which are
installed by Tenant or that exclusively serve the Leased Premises; (ii) the
glass windows, plate glass doors, and all fixtures or appurtenances composed of
glass that are located in or about the Leased Premises; (iii) Tenant's signs;
(iv) the floors and floor coverings, doors and door frames, windows and window
frames, walls, storefront including security gates, grilles or enclosures, locks
and closing devices, partitions and ceilings in the Leased Premises; (v)
heating, ventilating, air conditioning, electrical and plumbing system(s)
equipment and fixtures (whether contained within or outside the Leased Premises)
which are installed by Tenant or which exclusively serve the Leased Premises;
and (vi) the Leased Premises or any part of the Shopping Center when repairs
thereto are necessitated by any act or omission (negligent or otherwise) of
Tenant or any of Tenant's agents, employees or invitees, or by the failure of
Tenant to perform any of its obligations under this Lease. Notwithstanding the
foregoing, Landlord shall be responsible for repairs and maintenance
necessitated by the negligence or intentional acts of Landlord, its agents or
employees. Notwithstanding any contrary provision of this Article VI, Tenant, at
its expense, shall make any and all repairs to the Leased Premises as may be
necessitated by any break-in, forcible entry or other trespass into or upon the
Leased Premises, regardless of whether or not such entry and damage is caused by
the negligence or fault of Tenant or occurs during or after business hours.
Tenant, at its expense, shall change all air conditioning filters at least five
(5) times per year and shall have the air conditioning system professionally
inspected and generally serviced at least twice per year.
(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,
building inspector, the National Fire Protection association and any other
officials of the governmental agencies having jurisdiction, at the sole cost and
expense of Tenant, and Tenant shall comply with all requirements of laws,
ordinances, rules, regulations and orders of any lawful authority having
<PAGE>
jurisdiction affecting the Leased Premises or Tenant's use thereof. Tenant, at
its expense, shall install and maintain fire extinguishers and other fire
protection devices as may be required by reason of the conduct of Tenant's
business, from time to time by any agency having jurisdiction or the
underwriters insuring the building in which the Leased Premises are located. If
any bureau, department or official of the Federal or State government requires
or recommends the installation of any changes, modifications or alterations in
the sprinkler system or additional sprinkler heads or other equipment
(hereinafter in this subsection (b) collectively "changes") by reason of
Tenant's business, or the location of partitions, trade fixtures, or other
contents of the Leased Premises, or for any other reason, or if any such changes
become necessary to prevent the imposition of a penalty or charge against the
full allowance for a sprinkler system in the fire insurance rates set by any
fire insurance company, Tenant, at Tenant's expense, shall promptly make such
changes as required.
(c) 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 Tenant's electrical system without
Landlord's prior written consent. If Tenant installs any electrical equipment
that overloads the electrical lines in the Leased Premises or the Retail
Development, Tenant shall, at Tenant's sole cost and expense, be required to
make whatever changes to such electrical equipment and in the electric wiring in
the Leased Premises (but only after obtaining Landlord's written approval) as
may be necessary in order to remedy such overloading and be in compliance with
all insurance and legal requirements. All changes required to be made hereby
shall result in the continued conformance with the provisions of Exhibit D and
this Lease.
(d) If Tenant refuses or neglects to properly maintain the Leased
Premises, or to commence or to complete repairs promptly and adequately, or if
Landlord finds it necessary to make any repairs or replacements otherwise
required to be made by Tenant, then Landlord may, after notice to Tenant, in
addition to all other remedies, but without obligation to do so, enter the
Leased Premises and proceed forthwith to have such maintenance, repairs or
replacements made and Tenant shall pay to Landlord, on demand, the cost and
expenses therefor plus a charge of fifteen percent (15%) of such costs and
expenses.
ARTICLE VII
TAXES
Section 7.1. Tax Liability. Tenant agrees to pay to Landlord Tenant's
proportionate share of all taxes and assessments and service payments in lieu of
taxes of every nature and kind which may be levied or assessed by, or payable
to, any lawful authority during or with respect to each fiscal tax year falling
in whole or in part during the Term of this Lease against any or all or any part
of the land, buildings and improvements comprising the Retail Development and
any other taxes which Landlord becomes obligated to pay with respect to the
Retail Development, whether or not the same are assessed as real or personal
property or are payable in advance or in arrears (the "Taxes"). If due to a
future change in the method of taxation, any tax, excise or assessment shall be
levied or assessed against Landlord, directly or indirectly, in lieu of, in
substitution for or as a supplement to any present Taxes or future (real estate
or personal property) tax, in whole or in part, including any new tax, excise or
assessment upon rentals payable to Landlord by occupants of the Retail
Development or upon gross receipts or other income of Landlord derived by
Landlord from or upon the interest in the Retail Development of Landlord (or any
individuals or entities comprising Landlord), such tax, excise or assessment
shall constitute a tax respecting which Tenant is obligated to pay its
proportionate share to Landlord as provided herein. If any Taxes or assessed
valuation(s) are contested by Landlord, then Tenant's proportionate share of
Taxes shall also include Tenant's proportionate share of the cost and expense of
consultation services incurred in evaluating and contesting such Taxes or
assessed valuation(s).
<PAGE>
The term "Taxes" shall also include any form of assessment, special
assessment, license fee, license tax, business license fee, business license
tax, commercial rental tax, levy, charge, tax or similar imposition, imposed by
any authority having the direct power to tax, including without limitation any
city, county, State or Federal government, or any school, agricultural,
lighting, drainage or other improvement or special assessment district or any
other agency or other public body, whether or not consented to or joined in by
Landlord and whether or not retroactive, payable by Landlord thereof as against
the land and improvements comprising, or any legal or equitable interest of the
Landlord in, the Retail Development.
Section 7.2. Method of Payment. Tenant's proportionate share of Taxes
shall be paid, in advance, in monthly installments on or before the first day of
each calendar month, in the same manner and at the same time as the monthly
installments of Minimum Rent are payable hereunder without deduction, offset or
diminution of any kind, based on an amount estimated by Landlord. Following
receipt of all bills for Taxes 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 Taxes for such year. If
any bill for any such Taxes is not available, Landlord will estimate the amount
of such tax. If the total amount paid by Tenant hereunder 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 thirty (30) 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 due from
Tenant to Landlord hereunder. For the calendar or fiscal years in which this
Lease commences and terminates, Tenant's liability for its proportionate share
of any Taxes 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 any such bill for Taxes shall at all times be
sufficient evidence of the amount of Taxes 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. Tenant's obligations under this Article VII
shall survive the Expiration Date or sooner termination of this Lease.
Section 7.3. Sales Tax Reports. Landlord is obligated, under the
Disposition and Development Agreement between Landlord and the Orange
Redevelopment Agency relating to the Retail Development, to furnish the Orange
Redevelopment Agency sales tax reports for all tenants of the Retail
Development. Therefore, in order to provide Landlord with the sales tax
information from the State of California Board of Equalization ("Board")
pertaining to Tenant's sales at the Leased Premises, Tenant agrees to provide
Landlord with certified copies of all annual sales tax returns filed with the
Board for Tenant's retail operations at the Leased Premises during the Term of
this Lease. In addition thereto, Tenant shall provide Landlord with a power of
attorney letter addressed to, and in a form satisfactory to, the Board
authorizing the Board to release to Landlord all sales tax information for
Tenant's retail operations at the Leased Premises during the Term of this Lease.
Such letter shall be in the form attached hereto and made a part hereof as
Exhibit G, or such other or additional forms as required from time to time by
the Board in order to release such information to Landlord. Landlord agrees to
maintain the confidentiality of any proprietary information received by Landlord
pursuant to this Section 7.3.
<PAGE>
ARTICLE VIII
INSURANCE, INDEMNITY AND LIABILITY
Section 8.1. Landlord's Insurance Obligations. Landlord agrees to
obtain and maintain during the Term hereof, to the extent the same is available,
fire and extended coverage insurance, in amounts and coverages and with such
special endorsements as Landlord shall determine from time to time, insuring the
building in which the Leased Premises are located and 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 shall also carry rental interruption
insurance in amounts at least equal to Tenant's total rental obligation for
twelve (12) full months under this Lease including the total of the estimated
costs to Tenant of Taxes and Common Area Maintenance Expenses (including
insurance) for such twelve (12) month period. Tenant shall reimburse Landlord
for its proportionate share of the insurance costs incurred by Landlord under
this Section 8.1 as part of Tenant's Common Area Maintenance Expenses as
provided in Section 5.2 hereof.
Section 8.2. Tenant's Insurance Obligations. (a) Provided Tenant is the
Tenant named on the Recital Page and a wholly-owned subsidiary of the Guarantor,
if any, and Tenant's and Guarantor's, if any, combined net worths are or
Tenant's net worth is at least equal to Ten Million and 00/100ths Dollars
($10,000,000.00), Tenant shall have the right to self-insure for any loss or
damage of the type covered by standard fire and extended coverage insurance with
respect to personal property located on or within the Leased Premises including
alterations and improvements made by Tenant to the extent the same are not
covered by Landlord's fire and extended coverage insurance. Tenant and Guarantor
shall at their sole expenses, without regard to fault on the part of any person,
make and perform any repairs or restorations which are required as a result of a
casualty which would be covered by insurance of the type described in this
Section 8.2(a). Tenant, at Tenant's sole cost and expense, shall obtain and
maintain in effect commencing with the Delivery of Possession Date and
continuing throughout the Term of this Lease, insurance policies providing for
the following coverage: (i) all risk property insurance against fire, theft,
vandalism, malicious mischief, sprinkler leakage and such additional perils as
now are or hereafter may be included in a standard extended coverage endorsement
from time to time in general use in the State, insuring Tenant's merchandise,
trade fixtures, furnishings, equipment and all items of personal property of
Tenant and of anyone claiming by, through or under Tenant located on or in the
Leased Premises, and the amount of such insurance will be set forth in an
"agreed value endorsement" to the policy of such insurance, not less than one
hundred percent (100%) of the full replacement value thereof without deduction
for depreciation, and with a deductible amount of not more than Fifty Thousand
and 00/100ths Dollars ($50,000.00), provided, however, any and all proceeds of
such insurance, so long as this Lease shall remain in effect, shall be used only
to repair or replace or pay for the items so insured; (ii) a commercial general
liability policy, including insurance protecting against any and all claims for
injury to persons or property occurring in or about the Leased Premises and
protecting against assumed or contractual liability under this Lease with
respect to the Leased Premises and the operations of Tenant and any subtenant of
Tenant in, on or about the Leased Premises, with such policy to be in the
minimum amount of Three Million and 00/100ths Dollars ($3,000,000) single limit
coverage; (iii) products liability insurance for merchandise offered for sale or
lease from the Leased Premises, including (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 and 00/100ths Dollars ($2,000,000)
per occurrence for personal injury and death and property damage; (iv) workers'
compensation coverage as required by law; (v) with respect to alterations,
improvements and the like required or permitted to be made by Tenant hereunder,
contingent liability and builders risk insurance in amounts satisfactory to
Landlord; and (vi) the insurance required under Exhibit D.
<PAGE>
(b) All insurance policies herein to be procured by Tenant shall: (i)
be issued by insurance companies reasonably satisfactory to Landlord and
authorized to do business in the State; (ii) be written as primary policy
coverage and non-contributing with respect to any coverage which Landlord may
carry and that any coverage carried by Landlord shall be excess insurance; (iii)
insure and name Landlord, Landlord's managing agent, any mortgagee of the
Shopping Center and any parties in interest designated by Landlord as additional
insured, as their respective interests may appear (except with respect to
workers' compensation insurance); and (iv) contain any express waiver of any
right of subrogation by the insurance company against Landlord, Landlord's
managing agent 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.
Neither the issuance of any insurance policy required hereunder, nor the minimum
limits specified herein with respect to Tenant's insurance coverage, shall be
deemed to limit or restrict in any way Tenant's liability arising under or out
of this Lease. With respect to each and every one of the insurance policies
herein required to be procured by Tenant, on or before the Commencement Date and
at least thirty (30) days before any such insurance policy shall expire, Tenant
shall deliver to Landlord upon Landlord's written request a duplicate original
or certified copy of each such policy or a certificate of the insurer,
certifying that such policy has been issued, providing the coverage required by
this Section 8.2 and containing provisions specified herein, together with
evidence of payment of all applicable premiums. Any insurance required to be
carried hereunder may be carried under a blanket policy covering the Leased
Premises and other locations of Tenant. Each and every insurance policy required
to be carried hereunder by or on behalf of Tenant shall provide (and any
certificate evidencing the existence of each such insurance policy shall
certify) that, unless Landlord shall first have been given thirty (30) days'
prior written notice thereof, the insurer will not cancel, materially change or
fail to renew the coverage provided by such insurance policy. The term
"insurance policy" as used herein shall be deemed to include any extensions or
renewals of such insurance policy. In the event that Tenant shall fail to
promptly furnish any insurance coverage hereunder required to be procured by
Tenant, Landlord, at its sole option, shall have the right after ten (10) days
prior written notice to Tenant to obtain the same and pay the premium therefor
for a period not exceeding one (1) year in each instance, and the premium so
paid by Landlord shall be immediately due and payable by Tenant to Landlord as
additional rent.
(c) Tenant shall not do or permit to be done any act or thing upon the
Leased Premises that will invalidate or be in conflict with fire insurance
policies covering the building containing the Leased Premises or any part
thereof, including all common areas, or fixtures and property therein, or any
other insurance policies or coverage referred to above in this Article VIII; and
Tenant shall promptly comply with all rules, orders, regulations, or
requirements relating to such insurance policies, and shall not do, or permit
anything to be done, in or upon the Leased Premises, or bring or keep anything
therein, which shall increase the rate of fire insurance on the building in
which the Leased Premises are located or on any property, including all common
areas, located therein, or increase the rate or rates of any other insurance
referred to hereinabove. If any act or omission of Tenant, its agents, employees
or contractors shall result in any increase in the premium rates applicable to
any such insurance policies carried by Landlord, or other increased costs to
Landlord in connection therewith, then Tenant shall reimburse Landlord on demand
as additional rent for the amount of any such increased rates or costs. In
particular, if Tenant uses the Leased Premises for the preparation of food,
Tenant shall reimburse Landlord on demand, for any part of the premium for
insurance coverage under Section 8.1 hereof required to be paid on account of
such use of the Leased Premises.
Section 8.3. Mutual Covenant. Notwithstanding any provision of this
Lease to the contrary, Landlord and Tenant each hereby releases the other, its
officers, directors, employees, and agents from any and all liability or
responsibility for any 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 regardless of the extent of any
<PAGE>
recovery by the injured party under such insurance. Both parties agree to carry
casualty insurance containing such waiver of subrogation.
Additionally, during any time when Tenant is self-insuring its
insurance obligations hereunder, Tenant hereby releases the Landlord, its
officers, directors, employees and agents from any and all liability or
responsibility for any loss, damage or injury caused by fire or other casualty,
even if such loss, damage or casualty is caused in whole or in part by Landlord
or by any party for whom Landlord may be responsible.
Section 8.4. Covenant to Hold Harmless. Except with respect to the
negligence or willful misconduct of Landlord, its agents or employees (unless
covered or required to be covered by Tenant's insurance), Tenant hereby
indemnifies and agrees to hold harmless Landlord, its officers, directors,
partners, employees and agents and any mortgagee or master lessor of the
Shopping Center, from and against any and all claims, actions, damages,
liabilities, costs and expenses, including attorneys' fees, that (i) arise from
or are in connection with the possession, use, occupancy, management, repair,
maintenance or control of the Leased Premises, or any portion thereof, or (ii)
arise from or are in connection with any act or omission of Tenant or Tenant's
agents, employees, contractors, licensees or invitees, or (iii) result from any
default, breach, violation or nonperformance of this Lease or any provision
hereof by Tenant, or (iv) result from injury to person or property or loss of
life sustained in or about the Leased Premises. Tenant shall, at its own cost
and expense, defend any and all actions, suits and proceedings which may be
brought against Landlord or any mortgagee or master lessor of the Shopping
Center with respect to the foregoing. Tenant shall pay, satisfy and discharge
any and all judgments, orders and decrees which may be received against Landlord
or any such mortgagee or master lessor in connection with the foregoing. In the
event 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, intervene in such litigation to
protect its interest hereunder, then Tenant shall protect and hold them harmless
and shall pay all costs, expenses and attorneys' fees incurred or paid by such
party(ies) in connection with such litigation. Landlord hereby indemnifies and
agrees to save harmless Tenant, its officers, directors, partners, employees and
agents from and against any and all claims, actions, damages, liabilities, costs
and expenses, including attorneys' fees, in connection with loss of life,
personal injury and/or damage to property arising from or out of any occurrence
in the common areas of the Shopping Center unless caused by the negligence or
willful misconduct of Tenant, its agents, contractors, employees, officers,
directors, partners, subtenants or concessionaires.
Section 8.5. Loss and Damage. All Tenant's property of every kind and
description which may at any time be in the Leased Premises shall be kept at
Tenant's sole risk, and Landlord shall not be liable except to the extent
resulting from the negligence or intentional acts of Landlord, its agents or
employees to Tenant, its agents, employees or customers, for any damage, loss,
compensation, accident, or claims whatsoever resulting to Tenant or its property
from the necessity of repairing any portion of the Shopping Center; any
interruption in the use of the Leased Premises; the use or operation (by
Landlord, Tenant, or any other person or persons whatsoever) of any elevators,
heating, cooling, electrical or plumbing equipment or apparatus; the termination
of this Lease by reason of the destruction of the Leased Premises; any fire,
robbery, theft, or any other casualty; any leakage in any part or portion of the
Leased Premises or the Shopping Center; any water, wind, rain or snow that may
leak into, or flow from part of the Leased Premises or the Shopping Center; any
acts or omissions of any occupant of any space adjacent to or adjoining all or
any part of the Leased Premises or any part of the building of which the Leased
Premises are a part; any explosion, casualty, utility failure or malfunction, or
falling plaster; the bursting, stoppage or leakage of any pipes, sewer pipes,
drains, conduits, appliance or plumbing works; or any other cause whatsoever.
<PAGE>
ARTICLE IX
DESTRUCTION OF LEASED PREMISES
Section 9.1. Continuance of Lease. In the event of any damage to the
Leased Premises by fire or other casualty, this Lease shall not be terminated or
otherwise affected; except that, (a) if more than twenty-five percent (25%) of
the square footage of the Leased Premises shall be damaged by any such fire or
other casualty during the last three (3) years of the Term of this Lease (not
including any Option Periods) or during any renewal or extension of the Term
hereof and the cost of repair or restoration exceeds Ten Thousand and 00/100ths
Dollars ($10,000.00) as estimated by Landlord, or (b) if Landlord is unable to
rebuild any portion of the building in which the Leased Premises are located or
of the Shopping Center due to any inability to obtain any required governmental
approval in connection therewith, or (c) if 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
(d) if all or any part of the building in which the Leased Premises are located
or if the Shopping Center or the Leased Premises shall be damaged or destroyed
at any time by the occurrence of any risk not insured under the insurance
required to be carried under Article VIII hereof, then Landlord shall have the
option to terminate this Lease within ninety (90) days following the occurrence
of such fire or other casualty by giving written notice to Tenant during such
period. In the event Landlord exercises any of the foregoing options to
terminate, this Lease shall immediately terminate upon Landlord's written notice
to Tenant and (i) the entire proceeds of the insurance provided for in Section
8.1 hereof shall be paid by the insurance company or companies directly to
Landlord and shall belong to, and be the sole property of Landlord, (ii) the
portion of the proceeds of the insurance provided for in Section 8.2 which is
allocable to equipment, fixtures and other items, which, by the terms of this
Lease, rightfully belong to Landlord upon the termination of this Lease by
whatever cause, shall be paid by the insurance company or companies directly to
Landlord, and shall belong to, and be the sole property of, Landlord, and (iii)
Landlord and Tenant shall be relieved from any and all further liability or
obligation accruing under this Lease from and after the date of such
termination. Tenant hereby waives any and all rights which it may have to
terminate this Lease by reason of damage to the Leased Premises by fire or other
casualty pursuant to any presently existing or hereafter enacted statute or
pursuant to any other law.
The provisions of this Lease constitute an express agreement between
Landlord and Tenant with respect to any and all damage to, or destruction of,
all or any part of the Leased Premises or any other portion of the Shopping
Center, and Landlord and Tenant agree that Sections 1932 and 1933(4) of the
California Civil Code shall have no application to this Lease or any damage or
destruction to all or any part of the Leased Premises or any other portion of
the Shopping Center.
Section 9.2. Reconstruction. If the Leased Premises are damaged by fire
or other casualty and this Lease is not terminated in accordance with Section
9.1 hereof, then all fire and extended coverage insurance proceeds from policies
carried pursuant to Section 8.1 hereof, however recovered, shall be held in
escrow and made available for payment of the cost of repairing, replacing and
rebuilding the Leased Premises, the damage to the Leased Premises shall be
promptly repaired, and the Minimum Rent and other charges payable by Tenant to
Landlord shall be abated in proportion to the floor area of the Leased Premises
rendered untenantable, and the Sales Break Point shall likewise be
proportionately reduced. Payment of Minimum Rent and all other charges so abated
shall commence and Tenant shall be obligated to reopen for business sixty (60)
days following the date that Landlord advises Tenant that the Leased Premises
are tenantable and Landlord has substantially completed Landlord's
Reconstruction Work, 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
<PAGE>
of Tenant's earlier reopening. Landlord shall be obligated to commence
Landlord's Reconstruction Work and shall diligently pursue the completion of
Landlord's Reconstruction Work and shall cause the same to be completed as soon
thereafter as possible under the attendant circumstances, but in any event all
such Landlord's Reconstruction Work shall be completed and the Leased Premises
reopened for business within one hundred eighty (180) days following such fire
or casualty. After Landlord has completed Landlord's Reconstruction Work, Tenant
shall commence such Tenant's Reconstruction Work, at its expense. Tenant 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 firs 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 any insurance proceeds
received by Tenant shall be the sole obligation of Tenant. "Landlord's
Reconstruction Work" shall be all work required to reconstruct the Leased
Premises in accordance with the working drawings originally approved by Landlord
pursuant to Exhibit C and Exhibit D, 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 Landlord repairs or rebuilds, 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 ("Tenant's
Reconstruction Work"). Except as may be specifically set forth in this Article
IX, Landlord shall not be liable or obligated to Tenant to any extent whatsoever
by reason of any fire or other casualty damage to the Leased Premises, or any
damages suffered by Tenant by reason thereof, or the deprivation of Tenant's
possession of all or any part of the Leased Premises.
In the event Landlord has not commenced restoration or rebuilding of
the Leased Premises within ninety (90) days of the date of such fire or casualty
loss, or diligently proceeded to complete such restoration or rebuilding so that
the Leased Premises are restored/rebuilt to its former condition prior to such
fire or casualty loss within one hundred eighty (180) days of the date of such
fire or casualty loss, Tenant will have the right, in either case, to terminate
this Lease by providing Landlord notice of such election and Tenant will vacate
and surrender the Leased Premises pursuant to Section 17.1.
Section 10.1. Eminent Domain. If fifty percent (50%) or more of the
floor area of the Leased Premises shall be taken or condemned by any
governmental authority (including, for purposes of this Article X, any purchase
by such governmental authority in lieu of a taking), then either party may elect
to terminate this Lease by giving notice to the other party not more than ninety
(90) days after the date on which such title shall vest in the authority. If the
parking facilities are reduced below the minimum parking requirements imposed by
the applicable authorities, Landlord may elect to terminate this Lease by giving
Tenant notice within one hundred eighty (180) days after such taking. In
addition, if any Major Tenant shall terminate its lease with Landlord, pursuant
to a taking of its store, Landlord may terminate this Lease by written notice to
Tenant within ninety (90) days after notice to Landlord that such Major Tenant
is terminating its lease. In the case of any taking or condemnation, whether or
not the Term of this Lease shall cease and terminate, the entire award shall be
the property of Landlord; provided, however, Tenant shall be entitled to any
award as may be made for trade fixtures and other equipment (not including any
Tenant's Work required or permitted under this Lease) which under the terms of
this Lease would not have become the property of Landlord; further provided,
that any such award to Tenant shall not be in diminution of any award otherwise
to be made to Landlord in the absence of such award to Tenant.
<PAGE>
The provisions of this Lease constitute an express agreement between
Landlord and Tenant with respect to any condemnation or taking of all or any
portion of the Leased Premises or any other portion of the Shopping Center, and
Landlord and Tenant agree that Section 1265.130 of the California Code of Civil
Procedure shall have no application to this Lease or any taking or condemnation
of all or any portion of the Leased Premises or any other portion of the
Shopping Center.
Section 10.2. Rent Apportionment. In the event of any taking or
condemnation, the then current Minimum Rent, Sales Break Point and the square
foot floor area in the Leased Premises as determined pursuant to Section 1.1
shall be apportioned as of the date when possession of the Leased Premises is
required to be delivered to the condemning authority or termination of this
Lease, as the case may be, and, if the Term of this Lease shall not have ceased
and have been terminated as of said date, Tenant shall be entitled to a pro rata
reduction in the Minimum Rent payable and Sales Break Point hereunder, or, if
Tenant has prepaid Minimum Rent, Tenant shall be entitled to a pro rata credit
for the Minimum Rent paid hereunder, based on the proportion which the floor
area taken from the Leased Premises bears to the entire floor area of the Leased
Premises immediately prior to such taking.
Section 10.3. Temporary Taking. Notwithstanding anything to the
contrary in this Article X, the requisitioning of the Leased Premises or any
part hereof by military or other public authority for purposes arising out of a
temporary emergency or other temporary situation or circumstances shall
constitute a taking of the Leased Premises by eminent domain when the use or
occupancy by the requisitioning authority is expressly provided to continue, or
shall in fact have continued, for a period of one hundred eighty (180) days or
more, and if this Lease is not thereafter terminated under the foregoing
provisions of this Article X, then for the duration of any period of use and
occupancy of the Leased Premises by the requisitioning authority, all the terms
and provisions of this Lease and obligations of Tenant hereunder shall remain in
full force and effect, except that the Minimum Rent and Sales Break Point shall
be reduced in the same proportion that the floor area of the Leased Premises so
requisitioned bears to the total floor area of the Leased Premises, and Landlord
shall be entitled to whatever compensation may be payable from the
requisitioning authority for the use and occupation of the Leased Premises for
the period involved.
Section 11.1. No Assignment, Subletting or Encumbering of Lease. (a)
Except as otherwise provided in this Article XI and notwithstanding any
references to assignees, subtenants, concessionaires or other similar entities
in this Lease, Tenant shall not (i) assign or otherwise transfer, or mortgage or
otherwise encumber, this Lease, in whole or in part, or any of its rights
hereunder, (ii) sublet the Leased Premises or any part thereof, or permit the
use of the Leased Premises or any part thereof by any persons other than Tenant
or its agents. Any such attempted or purported transfer, assignment, mortgaging
or encumbering of this Lease or any of Tenant's interest hereunder and any
attempted or purported subletting or grant of a right to use or occupy all or a
portion of the Leased Premises in violation of the foregoing sentence, whether
voluntary or involuntary or by operation of law or otherwise, shall be null and
void and shall not confer any rights upon any purported transferee, assignee,
mortgagee, or occupant, and shall, at Landlord's option, terminate this Lease
without relieving Tenant of any of its obligations hereunder for the balance of
the stated Term. Nothing contained elsewhere in this Lease shall authorize
Tenant to enter into any franchise, concession, license, permit, subtenancy,
departmental operation arrangements or the like, except pursuant to the
provisions of this Article XI.
Notwithstanding the provisions of this Article XI to the contrary,
Landlord's consent shall not be unreasonably withheld or delayed to an
assignment of this Lease or a sublease for all or any portion of the Leased
Premises (by merger, consolidation or otherwise) to another entity (the
"Transferee") to which Tenant shall simultaneously be transferring all or
substantially all of its stock or all or substantially all of its assets,
provided that: (1) Tenant shall not at the time of such transfer be in default
under any of the terms, covenants and conditions of this Lease beyond any
applicable grace period, (2) such Transferee shall agree in writing to perform
<PAGE>
all of the unperformed terms, covenants and conditions of this Lease and (3)
Tenant shall at all times remain primarily obligated for the performance of the
terms, covenants and conditions of this Lease.
Notwithstanding anything to the contrary set forth in this Article XI
and without application of any prior provisions of this Article XI, Tenant shall
have the right, without Landlord's consent but with prior written notice to
Landlord, to assign this Lease or sublet the Leased Premises to its parent
corporation or any of its wholly-owned subsidiaries, or any affiliate or
subsidiary of Tenant's parent corporation provided that Tenant shall at all
times remain primarily obligated for the performance of the terms, covenants and
conditions of this Lease.
In addition, Tenant may, without violating the provisions of this
Article XI, sell or offer for sale its voting stock to the public in accordance
with the qualifications or registration requirements of the state where Tenant
is incorporated and the Securities Act of 1933, as amended.
(b) If Tenant is a corporation, the sale, issuance or transfer of any
voting capital stock of Tenant or of any corporate entity which directly or
indirectly controls Tenant (unless Tenant is a corporation whose stock is
publicly traded which shall result in a change in the voting control of Tenant
or the corporate entity which controls Tenant shall be deemed to be a prohibited
assignment of this Lease within the meaning of this Article XI. If Tenant is a
partnership or an unincorporated association, then the sale, issuance or
transfer of a majority interest therein, or the transfer of a majority interest
in or a change in the voting control of any partnership or unincorporated
association or corporation which directly or indirectly controls Tenant, or the
transfer of any portion or all of any general partnership or managing
partnership interest, shall be deemed to be a prohibited assignment of this
Lease within the meaning of this Article XI. The consent by Landlord to any
assignment, transfer, or subletting to any party shall not be construed as a
waiver or release of Tenant under the terms of any covenant or obligation under
this Lease or as a waiver or release of the non-assignability covenants in their
future application, nor shall the collection or acceptance of Rent from any such
assignee, transferee, subtenant or occupant constitute a waiver or release of
Tenant of any covenant or obligation contained in this Lease.
(i) Notwithstanding anything herein contained to the contrary, a
sale or transfer of any voting capital stock of Tenant when caused by
death (e.g., testamentary transfer) or for estate planning purposes
(e.g. inter vivos trust) will not be deemed a prohibited assignment of
this Lease.
(ii) The provisions of this Section 11.1 (b) shall not be deemed
to prohibit transfer of limited partnership interests among existing
limited or general partners; however, if either general partner ceases
to remain a general partner of Tenant such occurrence shall be deemed
a prohibited assignment of this Lease under the meaning of this
Article XI.
(c) Without conferring any rights upon Tenant not otherwise provided in
this Article XI, should Tenant desire to enter into an assignment, sublease or
transfer of this Lease or Tenant's rights hereunder, Tenant shall request in
writing Landlord's consent to the assignment at least thirty (30) days before
the proposed effective date of the assignment, providing the following: (i) the
full particulars of the proposed assignment, sublease or transfer of this Lease
or Tenant's rights hereunder, including its nature, effective date, terms and
conditions, and copies of any offers, draft agreements, subleases, letters of
commitment or intent and other documents pertaining to the proposed assignment;
(ii) a description of the identity, net worth and previous business experience
of the proposed transferee, including, without limitation, copies of the
proposed transferee's latest income, balance sheet and changes in financial
position statements (with accompanying notes and disclosures of all material
changes thereto) in audited form, if available, and certified as accurate by the
proposed transferee; and (iii) any further information relevant to the proposed
assignment which Landlord shall request after receipt of Tenant's request for
consent. Tenant shall, concurrently with any request for Landlord's consent, pay
to Landlord a fee in the sum of One Thousand and 00/100ths Dollars ($1,000.00)
for Landlord's review and processing of such request and Landlord shall not be
obligated to review such request prior to Landlord's receipt of such fee. All
requests for assignment, sublease or transfer shall be forwarded to Landlord at
the address provided above and to the on-site mall management office.
<PAGE>
(d) Except for a permitted assignment or subletting as specified in
Section 11.1(a) and (b) and without conferring any rights upon Tenant not
otherwise provided in this Article XI, in the event of an assignment or transfer
of Tenant's interest in this Lease, or a sublease of all or a portion of the
Leased Premises, to a third party, any monthly rent or other payment accruing to
Tenant as the result of any such assignment, transfer, or sublease, including
any lump sum or periodic payment in any manner relating to such assignment,
transfer or sublease, which is in excess of the Rent then payable by Tenant
under this Lease shall be paid one-half (1/2) of such excess by Tenant to
Landlord monthly as additional rent. Landlord may require a certificate from
Tenant specifying the full amount of any such payment of whatsoever nature.
Notwithstanding any assignment, subletting or transfer of this Lease or Tenant's
rights hereunder, Tenant shall remain fully liable on this Lease and for the
performance of all terms, covenants and provisions of this Lease.
(e) All reasonable costs and expenses, including attorney's fees (which
shall include the cost of any time expended by Landlord's attorneys including
in-house counsel) incurred by Landlord in connection with any proposed or
purported assignment, transfer or sublease shall be borne by Tenant and shall be
payable to Landlord as additional rent. It is understood and agreed that the
restrictions set forth in this Article XI are of primary importance in enabling
Landlord to control the mix of tenants in the Shopping Center.
Section 11.2. Assignment or Sublet. If this Lease is transferred or
assigned, in whole or in part, as aforesaid, or if the Leased Premises or any
part thereof be sublet or occupied by any person or entity other than Tenant,
whether as a result of any act or omission by Tenant, or operation of law, or
otherwise, then Landlord, whether before or after default by Tenant, may, in
addition to, and not in diminution of or substitution for, any other rights and
remedies under this Lease or pursuant to law to which Landlord may be entitled
as a result thereof, collect rent from the transferee, assignee, subtenant or
occupant and apply the net amount collected to the Rent herein reserved, but no
such transfer, assignment, subletting, occupancy or collection shall be deemed a
waiver of the covenants contained herein or the acceptance of the transferee,
assignee, subtenant, or occupant as Tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant set forth in
this Lease.
Section 11.3. Transfer of Landlord's Interest. In the event of any
transfer of Landlord's interest in the Leased Premises, including a sale or
lease, 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 delivered to Tenant as required by law.
Section 12.1. Subordination. Tenant agrees that this Lease shall, at
the request of Landlord, be subordinate 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 mortgagees or
beneficiaries named in said mortgages or deeds of trust shall agree to recognize
the interests of Tenant under this Lease in the event of foreclosure, if Tenant
is not then in default. Tenant also agrees that any mortgagee or beneficiary may
elect to have this Lease constitute a prior lien to its mortgage or deed of
trust, and in the event of such election and upon notification by such mortgagee
or beneficiary to Tenant to that effect, this Lease shall be deemed prior in
lien to such mortgage or deed of trust, whether this Lease is dated prior to or
subsequent to the date of said mortgage or deed of trust. Tenant agrees that
upon the request of Landlord, or any mortgagee or beneficiary, Tenant shall
execute whatever reasonable instruments may be required to carry out the intent
of this Section 12.1 and Section 12.2.
<PAGE>
In accordance with the provisions of this Section 12.1, Tenant agrees
to execute the Agreement of Subordination, Non-Disturbance and Attornment and
Pre-Construction Tenant Estoppel Certificate attached hereto as Exhibit H and
Exhibit H-1 at the time it executes this Lease.
Section 12.2. 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 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 12.3. Financing. In the event any construction lender, land
lessor, or the permanent lender for the Shopping Center requires, as a condition
to financing, modifications to this Lease, then, provided such modifications do
not materially alter the approved working plans and do not increase the Rent to
be paid hereunder, Landlord shall submit to Tenant a written amendment with such
required modifications and if Tenant fails to execute and return the same within
thirty (30) days after the amendment has been submitted, Landlord shall be
entitled to its remedies as specified in Section 12.5.
Nothing herein shall require Tenant to execute an amendment or
amendments to accomplish changes which would change (i) the Minimum Rent,
additional rent or Percentage Rent payable by Tenant; (ii) the permitted use;
(iii) the size, dimensions or location of the Leased Premises; (iv) the length
of the Term; (v) Landlord's construction obligations; or (vi) the conditions
precedent as to Tenant's initial opening requirements, or which would place a
lien on Tenant's assets.
Section 12.4. Estoppel Certificate. Tenant shall, without charge
therefor, at any time and from time to time, within thirty (30) days after
request therefor by Landlord, execute, acknowledge and deliver to Landlord a
written estoppel certificate, in reasonable form, certifying to Landlord, any
mortgagee, or any purchaser of the Shopping Center or any other person
designated by Landlord, as of the date of such estoppel certificate: (i) that
Tenant is in possession of the Leased Premises and has unconditionally accepted
the same; (ii) that this Lease is unmodified and in full force and effect (or if
there has been modification, that the same is in full force and effect as
modified and setting forth such modifications); (iii) whether or not there are
then existing any set-offs or defenses against the enforcement of any right or
remedy of Landlord, or any duty or obligation of Tenant, hereunder (and, if so,
specifying the same in detail); (iv) that Rent is paid currently without any
offset or defense thereto, (v) the dates, if any, to which any Rent has been
paid in advance; (vi) whether or not there is then existing any claim of
Landlord's default under this Lease and if so, specifying the same in detail;
(vii) that Tenant has no knowledge of any event having occurred that authorized
the termination of this Lease by Tenant (or if Tenant has such knowledge,
specifying the same in detail); and (viii) any other matters relating to the
status of this Lease that Landlord or its mortgagee may request be confirmed,
provided that such facts are accurate and ascertainable.
<PAGE>
Landlord shall, within thirty (30) days after written request from
Tenant, no more often than once in any Lease Year and provided Tenant is not
then in default hereunder, deliver to Tenant or such persons as Tenant may
designate, a statement in writing certifying to the extent true that: (i) Tenant
is in possession of the Leased Premises; (ii) this Lease is in full force and
effect (as later modified, if such be the case); (iii) the Rent due hereunder is
current; and (iv) that to the best of Landlord's knowledge, information and
belief, Tenant is not in default hereunder.
Section 12.5. Remedies. Any failure by Tenant to execute any
certificate, statement or instrument in accordance with the foregoing provisions
of this Article XII or any financing statement in accordance with the provisions
of Section 14.2(a), within the time period provided or if no time period is
specified, then within thirty (30) days after written request, shall constitute
an irrevocable power of attorney appointing and designating Landlord or its
successors or assigns as attorney-in-fact for Tenant, to execute and deliver any
such certificate, statement, instrument or financing statement.
Section 13.1. Promotion Fund. Landlord shall establish an advertising and
promotion fund (the "Fund"). The object of the Fund shall be to advertise the
Retail Development in the local metropolitan statistical area and to provide a
program of events, all of which shall, in Landlord's judgment, serve to enhance
and promote the Retail Development and its occupants. Such program of events may
include the promotion of coach traffic to the Retail Development and the
development of a mall video network within the Retail Development offering a
program of information, entertainment and advertisements. The Fund shall be
administered by Landlord and the costs and expenses of such administration shall
be charged to the Fund. Landlord shall expend all amounts paid to the Fund by
the tenants in the Retail Development for the purposes herein set forth.
Section 13.2. Promotion Fund Contribution. Tenant's annual contribution
to the Fund shall be the Fund Contribution (reduced proportionately for a
partial Lease Year) as defined in the Data Sheet. Upon Grand Opening, Tenant
shall also pay Tenant's one-time initial contribution or Grand Opening Fee which
is equal to Seven Thousand Five Hundred and 00/100ths Dollars ($7,500.00). The
Fund Contribution payable by Tenant for each Lease Year shall be increased
commencing with the second Lease Year of the Term of this Lease, and each Lease
Year thereafter, by a percentage equal to the percentage increase from the "base
period" of the Consumer Price Index ("Index") to the "current period" of the
Index of the Lease Year for which the adjustment is being made; provided,
however, if the first Lease Year is less than six (6) months, the first
adjustment to the Fund Contribution shall be after the first full Lease Year.
Except as herein expressly provided, the term "base period" shall initially
refer to the Index published for the month of October immediately preceding the
Commencement Date. Following the initial increase in the Fund Contribution
hereunder, the term "base period" shall refer to the Index published for the
month of October immediately preceding the Lease Year for which the Fund
Contribution was last adjusted hereunder. The "current period" of the Index
shall refer to the Index published for the month of October immediately
preceding the Lease Year for which an adjustment is being made. In the event the
Index shall not be published for any of the above-described months, then the
Index published for the month closest, but prior, to the described month shall
be used in its place. The annual Fund Contribution shall be payable by Tenant to
Landlord, or as Landlord may direct, in twelve (12) equal monthly installments,
commencing on the Commencement Date, at the same time and in the same manner as
the monthly installments of Minimum Rent are payable.
Section 13.3. Advertisements. Not more than once each Lease Year, Landlord
may require Tenant at Tenant's cost to either (i) place a one-quarter (1/4) page
tabloid advertisement, or (ii) contribute funds to cover the cost and expense of
an advertisement prepared by Landlord in an advertising mailer, newspaper insert
or other media ad coordinated by Landlord. In the event that Tenant fails to
submit its proposed advertisement within thirty (30) days after Landlord's
request, then ---- Landlord shall have the right to include Tenant in the
advertising promotion and to charge Tenant for the advertisement. Such charge
shall be payable by Tenant within ten (10) days after written notice by
Landlord.
<PAGE>
Section 13.4. Network. Landlord may cause to be developed a mall video
network within the Retail Development (the "Network"). The object of the Network
shall be to provide a program of information, entertainment and advertisements,
which shall, in Landlord's judgment, serve to enhance or promote the Retail
Development and its occupants. The Network shall have the right to sell
available time and access on the Network for advertisements or other uses. The
Network shall be under the sole and exclusive direction of Landlord and shall be
administered by Landlord. The costs and expenses paid or incurred by Landlord
for administering, operating, equipping, staffing, protecting, insuring,
repairing, replacing and maintaining the Network shall be charged to the Fund.
During the first year of the operation of the Network and provided Tenant is not
in default of payment of its Fund Contribution, Landlord agrees to produce, or
cause to be produced a video taped advertising message of the business
conducted, or to be conducted, in the Leased Premises (herein "Tenant Video") in
accordance with the terms of this Section 13.4. The Tenant Video shall (i)
identify Tenant's type of business in the Leased Premises, Tenant's trade name
and the address/location of the Leased Premises within the Retail Development;
(ii) be approximately fifteen (15) seconds in duration; (iii) be produced on one
occasion only following the initial opening of the Leased Premises for business;
(iv) be produced in the Leased Premises, Landlord's studio or both; (v) utilize
one format from a select group of advertising message formats as mutually
selected by Landlord and Tenant; and (vi) not contain any lewd, obscene or
offensive content or material. The Tenant Video will be shown on the Network a
reasonable number of times, not to exceed one hundred (100), during a two (2)
week period in the first year of operation. Landlord shall use reasonable
efforts to air Tenant Videos at varying times and days during such two (2) week
period. Any further production by Landlord of advertising messages for Tenant
and any further air time on or access to the Network is subject to availability,
as determined solely by Landlord, and shall be at the then applicable rates and
fees set by Landlord. Landlord shall have the right to reject, remove or
discontinue showing any Tenant Video or advertising message on the Network the
content of which is, in the opinion of Landlord, unethical, misleading, in bad
taste, or shall tend to injure the reputation of the Retail Development or its
occupants, or shall be deemed to be detrimental to the Retail Development or is
in violation of any applicable rule, law or existing agreement with occupant(s)
of the Retail Development. Tenant acknowledges that Tenant shall be solely
responsible for the content of its Tenant Video and except with respect to the
gross negligence of Landlord and the Network, Tenant agrees to save harmless
Landlord, its officers, directors, partners, employees and agents from and
against any and all claims, actions, damages, liability, cost or expense,
including attorneys' fees that arise from or with respect to the content of such
advertising message, including without limitation any claims for infringement of
the intellectual property rights of others or actions for unfair competition.
Landlord reserves the right at any time to dissolve the Network and cease
providing its promotional services as well as Tenant Videos and in lieu thereof,
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 Retail
Development and its occupants.
Section 14.1. Elements of Default. If any one or more of the following
events occur, said event or events shall hereby be classified as a "default":
(a) (i) the failure of Tenant to take possession of the Leased Premises at the
Delivery of Possession Date, or (ii) the failure of Tenant to open its doors for
business on the date specified in Section 1.3 hereof, or (iii) if Tenant vacates
or abandons the Leased Premises and permits the same to remain unoccupied and
unattended, or (iv) if Tenant fails to maintain normal inventory levels and
employee staff for the conduct of its normal business activities in the Leased
Premises, or (v) the failure of Tenant to continuously operate its business in
compliance with Section 4.2 for the purposes specified in Section 4.1, or (vi)
in the event of the sale or removal of a substantial portion of Tenant's
property located in the Leased Premises in a manner which is outside the
ordinary course of Tenant's business; (b) the failure of Tenant to pay any Rent
or other charges required to be paid by Tenant when same shall become due and
payable hereunder and such failure continues for ten (10) days after written
notice; (c) the failure of Tenant to perform or observe any term or condition of
this Lease and such failure shall continue for thirty (30) days after written
<PAGE>
notice; (d) ; (e) if any writ of execution, levy, attachment or other legal
process of law shall occur upon Tenant's assets, merchandise, fixtures, or
Tenant's estate or interest in the Leased Premises; (f) Tenant shall be
liquidated or dissolved or shall begin proceedings toward such liquidation or
dissolution, or shall in any manner permit the divestiture of all, or any
substantial part of Tenant's assets. In the event of
(i) a default which results in a total monetary outstanding balance on excess
of $20,000.00 or (ii) a default pursuant to Section 14.1 (a) (iii) of this
Lease, which shall not be remedied within the applicable grace period, if any,
by Tenant under this Lease or by the tenant in any of the "other leases" (as
hereinafter defined), then Landlord may, upon ten (10) days prior notice in
writing to Tenant, declare such default to be a default of this Lease (unless
the default is cured within the ten day period after notice) and, at Landlord's
option, a default of any of the "other leases," as the case may be. Landlord and
Tenant acknowledge that Tenant or the parent, subsidiary or affiliate of Tenant
(by virtue of common ownership or control, direct or indirect) has presently, or
may in the future, enter into lease agreements with Landlord (or with any person
or entity which is affiliated with Landlord, or which directly or indirectly
controls or 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)
for the shopping centers commonly referred to as Ontario Mills, Potomac Mills,
Franklin Mills, Gurnee Mills, Sawgrass Mills, Grapevine Mills, Arizona Mills,
Katy Mills and Concord Mills (such leases to be referred to as "other leases").
Nothing contained herein shall be deemed a limitation of the rights of Landlord
as set forth in this Lease or any of the "other leases."
Section 14.2. Landlord's Remedies. In the event of any such default or
breach by Tenant, Landlord may at any time thereafter, with or without further
notice or demand and without limiting Landlord in the exercise of any right or
remedy which Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Leased Premises by
any lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Leased Premises to Landlord. In such
event Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including, but not limited to, the cost
of recovering possession of the Leased Premises; expenses of reletting,
including necessary renovation an alteration of the Leased Premises; reasonable
attorneys' fees; any real estate commission actually paid; and the worth at the
time of award determined by the court having jurisdiction thereof of (i) the
unpaid rent (as defined below) which had been earned at the time of termination;
(ii) the amount by which the unpaid rent, which would have been earned after
termination until the time of award, exceeds the amount of such rental loss for
the same period which the Tenant proves could have been reasonably avoided; and
(iii) the amount by which the unpaid rent, for the balance of the Term after the
time of such award, exceeds the amount of such rental loss for the same period
that Tenant proves could be reasonably avoided. The worth at the time of award
of the sums referred to in clauses (i) and (ii) above, shall be computed by
allowing interest from the due date at the rate provided in Section 20.14. The
worth at the time of award of the amount referred to in clause (iii) above,
shall be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
Landlord's rights hereunder shall be deemed subject to the rights granted to
Tenant pursuant to Section 1951 et seq. and each applicable subsection thereof
of the California Civil Code.
(b) Maintain Tenant's right to possession, in which case this Lease shall
continue in effect whether or not Tenant shall have abandoned the Leased
Premises. In such event, Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder, pursuant to Section 1951.4 of the California Civil
Code or any similar, successor or related provision of law.
(c) Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decisions of the State of California. Any notice delivered
by Landlord to Tenant under this Lease shall be in lieu of, and in addition to,
any notice required under Section 1161 of the California Code of Civil Procedure
or any similar successor law with respect to the subject default.
<PAGE>
(d) The term "rent" as used in this Section 14.2 shall mean Minimum Rent
and all other additional rent payable pursuant to any other section of this
Lease, including Section 2.3 of this Lese. All such sums other than Minimum
Rent, shall be computed on the basis of the average monthly amount thereof
accruing during the immediately preceding twelve (12) month period prior to
default, except that if it becomes necessary to compute such rent before such
twelve (12) month period has occurred, then the bases of the average monthly
amount accruing during such shorter period shall be used.
Section 14.3. Bankruptcy. (a) 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 or receiver or assignee for the benefit of creditors or
otherwise by operation of law, except as may specifically be provided pursuant
to the Bankruptcy Code (11 USCss.101 et seq.), as the same may be amended from
time to time. -- ---
(b) It is understood and agreed that this Lease is a lease of real
property in a shopping center as such lease is described in Section 365 of the
Bankruptcy Code, as the same may be amended from time to time. 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 with respect
to the assets of or estate in bankruptcy of Tenant, agree to pay monthly in
advance on the first day of each month, as reasonable compensation for the use
and occupancy of the Leased Premises, an amount equal to all Minimum Rent,
additional rent and other charges otherwise due pursuant to this Lease, and to
pay Percentage Rent monthly, at the percentage factor set forth in this Lease
for the Lease Year in which such month falls, on all of the Gross Sales during
such month in excess of one-twelfth (1/12th) of the Sales Break Point for such
Lease Year; payment of all such Percentage Rent to be made by the tenth (10th)
day of the succeeding month. Included within and in addition to any other
conditions or obligations imposed upon Tenant or its successor in the event of
the assumption and/or assignment of this Lease are the following: (i) the cure
of any monetary defaults and reimbursement of pecuniary loss within not more
than thirty (30) days of assumption and/or assignment; (ii) the deposit of an
additional sum equal to not less than three (3) months' Minimum Rent and
additional rent to be held pursuant to the terms of Section 2.4 of this Lease,
which sum shall be determined by Landlord, in its sole discretion, to be a
necessary deposit to secure the future performance under this Lease by Tenant or
its assignee; (iii) the use of the Leased Premises as set forth in Section 4.1
of this Lease and the quality, quantity and/or lines of merchandise, goods or
services required to be offered for sale are unchanged; and (iv) the prior
written consent of any mortgagee to which this Lease has been assigned as
collateral security.
Section 14.4. Additional Remedies and Waivers. The rights and remedies of
Landlord set forth herein shall be in addition to any other right and remedy now
or hereinafter provided by law, including but not limited to the statutes,
rules, regulations, laws and judicial decisions of the State, and all such
rights and remedies shall be cumulative. No action or inaction by Landlord shall
constitute a waiver of a default or termination and no waiver of default or
termination shall be effective unless it is in writing, signed by Landlord.
Section 14.5. Landlord's Cure of Default. If Tenant shall be in default
hereunder, Landlord shall have the option, but not the obligation, upon three
(3) days written notice to Tenant (except in the event of an emergency, in which
event no notice shall be required), to cure the act or failure constituting said
default for the account of and at the expense of Tenant. Landlord's cure or
attempt to cure any act or failure constituting the default by Tenant shall not
result in a waiver or release of Tenant. Tenant agrees to pay the costs incurred
by Landlord pursuant to this Section 14.5 plus interest, in accordance with
Section 20.14 hereof, on all sums expended by Landlord pursuant to this Section
14.5 from the date of such expenditure plus a charge of fifteen percent (15%) of
such costs, to Landlord upon demand, as additional rent.
<PAGE>
Landlord may, at any reasonable time or times, upon prior notice to
Tenant (except in the event of an emergency, or if Tenant is in default under
this Lease, in which event no notice shall be required), before and after the
Commencement Date, enter upon the Leased Premises, any portion thereof and any
appurtenance thereto (with men and materials, if required) for the purpose of:
(a) inspecting the same; (b) making such repairs, replacements or alterations
which Landlord may be required to perform as herein provided or which it may
deem desirable for the Leased Premises; and (c) showing the Leased Premises to
prospective purchasers, lenders or lessees. Landlord hereby expressly reserves
the right, exercisable at any time and from time to time, to erect, use,
maintain and repair pipes, conduits, plumbing, vents, ducts and wires in, to,
under and through the Leased Premises as and to the extent that Landlord may now
or hereafter deem to be necessary or appropriate for the proper operation and
maintenance of the Shopping Center. Any redecorating or repair necessitated by
reason of location of same within the Leased Premises shall be the
responsibility of Landlord. Landlord agrees to hold Tenant harmless from any
damage or injury to person or property to the extent resulting from Landlord
exercising its rights under this Article XV.
In the exercise of its rights under this Article XV, Landlord shall use
reasonable efforts to avoid material interference with the operation of Tenant's
business within the Leased Premises. Landlord agrees that except in the event of
an emergency, and provided Tenant shall make an employee of Tenant available to
accompany Landlord following Landlord's notice to Tenant of the necessity
therefor, Landlord shall not enter the Leased Premises during the Term of this
Lease without an employee of Tenant accompanying Landlord's representative.
Tenant hereby waives and releases any right it may have under Sections
1941 and 1942 of the California Civil Code or under any similar law, statute,
ordinance or common law now or hereafter in effect.
DELAYS
If Landlord or Tenant is delayed or prevented from performing any of
their respective obligations during the Term of this Lease because of strikes,
lockouts, labor troubles, inability to procure materials, failure of power,
governmental restrictions or delays in issuing permits (provided that the delays
do not result from Tenant's actions or failure to act) or reasons of a like
nature not the fault of the party delayed in performing such obligation, then
the period of such delays shall be deemed added to the time herein provided for
the performance of any such obligation and the defaulting party shall not be
liable for losses or damages caused by such delays; provided, however, that,
subsequent to the Commencement Date, this Article XVI shall not apply to the
payment of any sums of money required to be paid by Tenant hereunder or any
obligation of Landlord or Tenant that can be satisfied by the payment of money,
and shall not excuse Tenant from its obligation to continuously operate its
business within the Leased Premises in accordance with the provisions of
Sections 4.1 and 4.2 hereof.
ARTICLE XVII
END OF TERM
Section 17.1. Return of Leased Premises. Upon the Expiration Date or
earlier termination of this Lease, Tenant shall quit and surrender to Landlord
the Leased Premises, broom-clean, in good order and condition, ordinary wear and
tear excepted, and shall surrender to Landlord all keys to or for the Leased
Premises and inform Landlord of all combinations of locks, safes and vaults, if
any, in the Leased Premises. Subject to the provisions of Section 3.5 hereof,
Tenant, at its expense, shall promptly remove all personal property of Tenant,
repair all damage to the Leased Premises caused by such removal and restore the
Leased Premises to the condition which existed prior to the installation of the
property so removed. Any personal property of Tenant not removed within ten (10)
days following the Expiration Date or earlier termination of this Lease shall be
deemed to have been abandoned by Tenant and to have become the property of
Landlord, and may be retained or disposed of by Landlord, as Landlord shall
desire. Tenant's obligation to observe or perform the covenants set forth in
this Section 17.1 shall survive the Expiration Date or earlier termination of
this Lease.
<PAGE>
Section 17.2. Holding Over. If Tenant shall hold possession of the
Leased Premises after the Expiration Date or earlier termination of this Lease
at Landlord's option (a) Tenant shall be deemed to be occupying the Leased
Premises as a tenant from month-to-month, at double the Minimum Rent and other
charges in effect during the last Lease Year immediately preceding such holdover
and otherwise subject to all of the terms and conditions of this Lease, or (b)
Landlord may exercise any other remedies it has under this Lease or at law or in
equity including an action for wrongfully holding over.
Notwithstanding the foregoing, if Tenant is negotiating in good faith
with Landlord to renew or extend the Term of this Lease for the Leased Premises
(or a relocation within the Shopping Center), then Tenant may occupy the Leased
Premises on a month-to-month tenancy at one-twelfth (1/12th) of the annual
Minimum Rent for the last year of the Term of the Lease.
ARTICLE XVIII
COVENANT OF QUIET ENJOYMENT
Landlord covenants that if and so long as Tenant pays the Rent and all
other charges provided for herein, and performs all of its obligations provided
for herein, Tenant shall at all times during the Term hereof peaceably have,
hold and enjoy the Leased Premises, without any interruption or disturbance from
Landlord, or anyone lawfully or equitably claiming through or under Landlord,
subject to the terms hereof and any mortgage or deed of trust to which this
Lease shall be subordinate.
ARTICLE XIX
UTILITIES
Section 19.1. Utilities. Tenant agrees to connect to and use the utilities
(including electricity, water, gas, cooling and/or heating system, telephone and
any other utility) supplied to the Leased Premises in accordance with the
criteria set forth in the Exhibits attached to this Lease, Landlord's schedule
of mechanical and electrical design criteria, Landlord's rules and regulations,
and the rules and regulations of the utility companies supplying the service.
Tenant shall be solely responsible for and promptly pay all costs and charges,
including installation thereof where applicable, for all water, gas, cooling,
heat, electricity, sewer and other utilities provided or used in or at the
Leased Premises, commencing with the Delivery of Possession Date and continuing
throughout the Term of this Lease. If Landlord shall elect to supply any of the
utilities used upon or furnished to the Leased Premises, Tenant agrees to pay
Tenant's share of Landlord's hard and soft costs associated with the
installation, operation, maintenance and repair of such utility systems, based
on Tenant's estimated usage and its pro rata share of such hard and soft costs
as reflected on a monthly invoice to be provided by Landlord; provided, however,
in no event shall Tenant's total charges for utilities provided by Landlord
exceed what Tenant would be charged by the local utility company if it were
billed directly by such utility as a direct retail customer. Landlord shall not
be liable to Tenant for any loss, damage or expense which Tenant may sustain if
the utilities, or 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 the supply of any such utility ceases or is interrupted as a
result of any cause and no such change, interruption or cessation of service
shall constitute an eviction of Tenant. Any furnishing by Landlord of light,
cooling and/or heat or power shall be conditioned upon the availability of
adequate energy sources. Landlord shall have the right to reduce heat, lighting
and air conditioning within the Shopping Center, 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.
<PAGE>
Section 19.2. Electricity, Telephone and Gas. All telephone, electric and
gas (with gas being available only to food service tenants) utility required by
Tenant for the Leased Premises shall (if available) be obtained by Tenant in
accordance with Exhibit D and shall be installed by the appropriate company or
utility. All charges for such utility service (including the installation
thereof) shall be paid by Tenant directly to the company or utility providing
any such service, as and when they --------- become due and payable.
Section 19.3. Trash and Garbage Removal. Tenant shall be solely
responsible for trash and garbage removal from the Leased Premises including the
placing of all trash and garbage in containers provided by Landlord or
Landlord's contractor for such purpose. In the event Landlord elects to furnish
such service to the tenants in the Shopping Center, Tenant agrees to use only
the service provided by Landlord and to pay for such service (including both the
cost of leasing containers and the cost of removal) monthly, as additional rent,
in accordance with the uniform schedule of charges to be established by
Landlord. In no event shall Tenant be obligated to pay Landlord more for such
trash and garbage removal service than the prevailing competitive rates of
reputable independent trash removal contractors for service similar to that
provided by Landlord.
Section 19.4. Water and Sewer. The cost of water and sanitary sewer for
usage in the Shopping Center shall be included in Common Area Maintenance
Expenses, except for food service tenants which may be billed directly by
Landlord or by the supplier of water and sanitary service and any other tenants
which are billed directly by Landlord or such supplier. Landlord reserves the
right to install a water meter in the Leased Premises at any time or from time
to time to measure Tenant's consumption of water therein and bill Tenant
directly for the cost of such consumption. Tenant shall pay, as additional rent,
the amount of each bill within fifteen (15) days after such bill is rendered.
Section 19.5. Grease Interceptors. Landlord, in its commercially reasonable
judgment, will arrange for regular periodic service and cleaning of all grease
interceptors at Tenant's expense. Cost of service and cleaning of grease
interceptors will be allocated among grease interceptors serving food court(s)
and grease interceptors serving individual tenants in proportion to grease trap
size. Tenants served by individual grease traps will pay their pro rata share of
the cost for their grease trap. The share of grease trap service and cleaning
cost apportioned to food court grease traps will be paid by food court tenants
as part of the food court common facilities expenses.
ARTICLE XX
MISCELLANEOUS
Section 20.1. Entire Agreement. This Lease together with the Exhibits,
attached hereto and incorporated herein contains the entire agreement between
the parties hereto and there are no promises, agreements, conditions,
undertakings, or warranties, or representations, oral or written, express or
implied, between them other than as herein set forth. No change or modification
of this Lease or of any of the provisions hereof shall be valid or effective
unless the same is in writing and signed by the parties hereto. No alleged or
contended waiver of any of the provisions of this Lease shall be valid or
effective unless in writing signed by the party against whom it is sought to be
enforced.
Section 20.2. Notices. No notice or other communication given under this
Lease shall be effective unless the same is in writing and is delivered in
person or mailed by registered or certified mail, return receipt requested,
first class, postage prepaid, or delivered by Federal Express or a comparably
reliable national air courier service (i.e. one which delivers service in at
least 48 states) provided that any such courier service provides written
evidence of delivery. Any such notice or communication shall be addressed:
<PAGE>
(a) If to Landlord, at 1300 Wilson Boulevard, Suite 400, Arlington,
Virginia 22209, Attention: General Counsel, or to such other address as Landlord
shall designate by giving notice thereof to Tenant, with a copy for
informational purposes only to the Mall Manager of the Retail Development.
(b) If to Tenant, at the address set forth for Tenant on page 1 of this
Lease or at the Leased Premises, or such other address as Tenant shall designate
by giving notice thereof to Landlord.
The date of service of any notice or other communication given by mail
shall be the date on which such notice is deposited in the U.S. mails. The date
of service of any notice given by courier service (as described above) shall be
one (1) day after deposit with such courier service.
Section 20.3. Governing Law. It is the intent of the parties hereto that
all questions with respect to the construction of this Lease and the rights and
the liabilities of the parties hereto shall be determined in accordance with the
laws of the jurisdiction in which the Leased Premises is located and that all
disputes arising hereunder shall be heard and decided in the local jurisdiction
where the Leased Premises is located.
Section 20.4. 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 Tenant, or more than one
person or entity acting collectively as Tenant, they shall all be bound jointly
and severally by the terms, covenants and agreements herein. Any restriction on
or requirement imposed upon Tenant hereunder shall be deemed to extend to
Tenant's Guarantor, Tenant's sublessees, Tenant's assignees and Tenant's
invitees, and it shall be Tenant's obligation to cause the foregoing persons to
comply with such restrictions or requirements. No rights, however, shall inure
to the benefit of any assignee or other transferee of Tenant, and no rights or
benefits shall be conferred upon any such assignee or transferee by reason of
this Section 20.4, unless such rights or benefits shall be expressly otherwise
set forth in this Lease.
Section 20.5. Liability of Landlord. Neither Landlord, Landlord's
beneficiaries, any persons or entities comprising Landlord, nor any successor in
interest to Landlord (or to such persons or entities) shall have any personal
liability for any failure by Landlord to perform any term, covenant or condition
of this Lease. 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 rents or other income
from such property receivable 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 any of the co-partners
comprising the partnership which is Landlord herein shall be liable for any
deficiency. The foregoing limitation of liability shall be noted in any judgment
secured against Landlord and in the judgment index.
Section 20.6. Brokers. Tenant warrants and represents that there was no
broker or agent instrumental in consummating this Lease. Tenant agrees to
indemnify and hold Landlord harmless against any claims for brokerage or other
commissions arising by reason of a breach by Tenant of this representation and
warranty.
Section 20.7. Transfer by Landlord. Landlord hereunder shall have the right
to freely assign this Lease without notice to or the consent of Tenant.
Section 20.8. No Partnership. Notwithstanding the fact that a portion of
the Rent reserved hereunder may be a percentage of Tenant's Gross Sales, and
notwithstanding anything else to the contrary, Landlord shall not be deemed to
be a partner of Tenant or a joint venturer with Tenant.
<PAGE>
Section 20.9. Waiver of Counterclaims. Tenant shall not impose any
counterclaim or counterclaims in a summary proceeding or other action based on
termination or holdover, it being the intent of the parties hereto that Tenant
be strictly limited in such instance to bringing a separate action in the court
of appropriate jurisdiction. The foregoing waiver is a material inducement to
Landlord making, executing and delivering this Lease and Tenant's waiver of its
right to counterclaim in any summary proceeding or other action based on
termination or holdover is done so knowingly, intelligently and voluntarily.
Section 20.10. Waiver of Jury Trial. Landlord and Tenant hereby waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on, or in respect of, any matter whatsoever
arising out of or in any way connected with this Lease, the relationship of
Landlord and Tenant hereunder, Tenant's use or occupancy of the Leased Premises
and/or any claim of injury or damage.
Section 20.11. Severability. 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, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
Section 20.12. No Waiver. No failure by Landlord to insist upon the strict
performance of any term, covenant, agreement, provision, condition or limitation
of this Lease to be kept, observed or performed by Tenant, and no failure by
Landlord to exercise any right or remedy available upon a breach of any such
term, covenant, agreement, provision, condition or limitation of this Lease,
shall constitute a waiver of any such breach or of any such term, covenant,
agreement, provision, condition or limitation.
Section 20.13. Consumer Price Index. As used herein, "Consumer Price Index"
or "Index" shall mean the Consumer Price Index for All Urban Consumers (1982-84
= 100), U.S. City Average, All Items, published by the United States Department
of Labor, Bureau of Labor Statistics (or such comparable index as may be
utilized in substitution for or as the successor to the stated Index). If such
Index is not published by the Bureau of Labor Statistics or by another similar
governmental agency at any time during the Term of this Lease, then the most
closely comparable statistics on the purchasing power of the consumer dollar as
published by a responsible financial authority and selected by Landlord shall be
utilized in lieu of such Index.
Section 20.14. Interest. Any amount due from Tenant to Landlord herein
which is not paid when due shall bear interest at a rate per annum equal to the
Federal Reserve Bank discount rate as published in the Wall Street Journal on
the 25th day of the month preceding the date upon which the obligation is
incurred (or the next business day thereafter if the 25th is not a weekday) plus
five percent (5%) unless otherwise specifically provided herein, but the payment
of such interest shall not excuse or cure any default by Tenant under this
Lease. In no event shall any interest calculated hereunder be 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 Section 20.14.
Section 20.15. Excavation. 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 the Leased
Premises form a part from injury or damage and to support the same by proper
foundation, without any claim for damages or indemnity from Landlord, or
diminution or abatement of Rent.
<PAGE>
Section 20.16. Rules and Regulations. Tenant agrees to comply with and
observe all reasonable rules and regulations established by Landlord for the
Shopping Center from time to time. Tenant's failure to keep and observe such
rules and regulations shall constitute a default pursuant to the terms of this
Lease in the manner as if the same were contained herein as covenants, which
shall carry with it the same consequences under Article XIV hereof as Tenant's
failure to pay rent.
Section 20.17. Financial Statements. Upon Landlord's written request
from time to time, but not more than once per Lease Year, Tenant shall, within
ten (10) days after Landlord's request therefor, furnish Landlord financial
statements outlining Tenant's then current financial condition and shall furnish
financial statements outlining the current financial condition of any Guarantor
of this Lease. Landlord shall maintain all financial information provided in a
confidential manner; provided, however, that Landlord may disclose such
financial statements to Landlord's mortgagees or prospective mortgagees or
purchasers.
Section 20.18. General Rules of Construction. (a) This Lease may be
executed in several counterparts and the counterparts shall constitute one and
the same instrument. (b) Landlord may act under this Lease by its attorney or
agent. (c) Wherever a requirement is imposed on Tenant hereunder, Tenant shall
be required to perform such requirement at its sole cost and expense unless it
is specifically otherwise provided herein. (d) (i) Wherever appropriate herein,
the singular includes the plural and the plural includes the singular; (ii)
whenever the word "including" is used herein, it shall be deemed to mean
"including, but not limited to"; and (iii) the words "re-enter" and "re-entry"
as used herein shall not be restricted to their technical legal meaning. (e)
Anything in this Lease to the contrary notwithstanding: (i) any provision hereof
which permits or requires a party to take any particular action shall be deemed
to permit or require, as the case may be, such party to cause such action to be
taken; and (ii) any provision hereof which requires any party not to take any
particular action shall be deemed to require such party to prevent such action
to be taken by any person or by operation of law. (f) Whenever costs or expenses
are required to be assessed to or paid by Tenant, such costs and expenses shall
be reasonable.
Section 20.19. Recording. Neither this Lease nor any memorandum hereof may
be recorded without the express written consent of Landlord.
Section 20.20. Effective Date. For all purposes hereof, the "Effective
Date" of this Lease shall be the date upon which this Lease shall have been
executed by both parties and physically delivered by Landlord to Tenant or its
attorney. Prior to the Effective Date, neither this Lease nor anything hereunder
contained shall be legally binding on either Landlord or Tenant, and the
submission of this Lease by Landlord to Tenant prior to such Effective Date for
examination or consideration by Tenant or discussion between Landlord and Tenant
shall not constitute a reservation of or option for the Leased Premises or
create any legal obligation or liability whatsoever on Landlord.
Section 20.21. Headings. 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 20.22. Managing Agent. Landlord has advised Tenant that it has
appointed Management Associates Limited Partnership, a Delaware limited
partnership as managing agent of the Retail Development (said managing agent and
any successor or substitute managing agent is hereinafter referred to as
"Managing Agent"). Tenant shall, until otherwise notified by Landlord, make all
payments of Rent required to be made pursuant to this Lease to the Managing
Agent payable to Landlord and direct all notices, inquiries or other
communications to the Managing Agent, 1300 Wilson Boulevard, Suite 400,
Arlington, Virginia 22209.
<PAGE>
Section 20.23. Non-Discrimination. Tenant herein covenants by and for
itself, its successors and assigns, and all persons claiming under or through
them, and this Lease is made and accepted upon and subject to the following
conditions: That there be no discrimination against or segregation of any person
or group of persons, on account of race, color, religion, creed, national
original, ancestry, handicap, age, marital status, or sex in the leasing,
subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein
leased, nor shall Tenant, for itself, or for any person claiming under or
through it, establish or permit any such practice or practices of discrimination
or segregation with reference to the selection, location, number, use or
occupancy of tenants, lessees, sublessees, subtenants, or vendees in the land
herein leased.
Section 20.24. Lease Contingency. This Lease is contingent and
conditioned upon the securing by Landlord of financing for the Retail
Development on terms and conditions, and at a rate of interest and in a loan
amount, satisfactory to Landlord in its sole and absolute discretion (herein
referred to as the "Lease Contingency"). In the event the foregoing Lease
Contingency has not been satisfied on or before December 31, 1999, then Landlord
shall thereafter have the right to terminate and cancel this Lease upon thirty
(30) days prior written notice to Tenant. If the Lease Contingency shall be
satisfied prior to the expiration of the aforesaid thirty (30) day notice
period, then the notice to terminate and cancel shall be voided and this Lease
shall remain in full force and effect. In the event of termination of this Lease
as herein provided, this Lease shall cease and come to an end, Landlord shall
reimburse Tenant for any advance Rent paid, and there shall thereupon be no
further liability or obligations upon either party under or with respect to this
Lease. Each party will, at the other's request, execute an instrument in
recordable form containing a release and surrender of all right, title and
interest in and to this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have signed this Lease as of
the day and year first above written.
WITNESS: LANDLORD:
ORANGE CITY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership
By: Orange City Mills, L.L.C., a Delaware limited liability company
Its: General Partner
By: The Mills Limited Partnership, a Delaware limited partnership
Its: Manager
By: The Mills Corporation, a Delaware corporation
Its: General Partner
By: _________________________
Judith Berson
Executive Vice President
By: ____________________
By: ____________________ TENANT:
<TABLE>
<CAPTION>
<S> <C>
TOYS INTERNATIONAL, INC., a California corporation
By: __________________
WITNESS/ATTEST: Name:____________________
Its: ____________________
:
By: __________________
By: ____________________ Name:____________________
Its: ____________________
By: ____________________
Tenant's Corporate Seal:
By: ____________________
By: ____________________
</TABLE>
<PAGE>
ACKNOWLEDGEMENT OF LANDLORD
COMMONWEALTH OF VIRGINIA )
) ss.
COUNTY OF ARLINGTON )
On this ____ day of ____________________, 19____, before me personally
appeared Judith Berson, to me known to be the person who executed the foregoing
Lease and acknowledged before me that she was duly authorized and did execute
same on behalf of ORANGE CITY MILLS LIMITED PARTNERSHIP, a Delaware limited
partnership.
-----------------------------------
Notary Public
My Commission expires:_____________
ACKNOWLEDGEMENT OF CORPORATE TENANT
STATE OF )
) ss.
CITY/COUNTY OF )
On ____________________, 19____, before me _____________________, a
Notary Public in and for said state aforesaid, personally appeared
__________________________as _______________________and
________________________, as _______________________ of TOYS INTERNATIONAL,
INC., a California corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
-----------------------------------
Notary Public, ____________ County,
My Commission expires:_____________
[Notarial Seal]
<PAGE>
EXHIBIT F
COMMENCEMENT AND EXPIRATION DATE DECLARATION
LANDLORD:
TENANT:
LEASE DATE:
STORE NUMBER:
Landlord and Tenant acknowledge and agree that the Commencement Date of the
above referenced Lease is and the Expiration Date of the Lease is .
- ----------------------------------------------------
- --------------------------------------------------------
LANDLORD: TENANT:
By: By:
Its: Its:
Date: Date:
<PAGE>
EXHIBIT G
WAIVER OF SALES TAX CONFIDENTIALITY
Date: _________________
I authorize the Comptroller of Public Accounts to release sales tax
information pertaining to the taxpayer indicated below to Orange City Mills
Limited Partnership, c/o The Mills Corporation, 1300 Wilson Boulevard, Suite
400, Arlington, Virginia 22209. I understand that this waiver applies only at
our retail store located in City Mills at Orange in Orange, California.
Please print or type the following information as shown below on your
California Sales and Use Tax Permit:
- ------------------------------------------------------------------------------
Name of Taxpayer Listed on California Sales Tax Permit
- ------------------------------------------------------------------------------
Name Under Which Taxpayer is Doing Business (d/b/a or Outlet Name)
- ------------------------------------------------------------------------------
Taxpayer Mailing Address
- -------------------------------------------------------------------------------
Physical Location of Business Permitted for Sales Tax in Orange, California
- ------------------------------------------------------------------------------
California Taxpayer ID Number Tax Outlet Number
(As Shown on California Sales Tax Permit)
--------------------------------
Authorized Signature
--------------------------------
Print Name of Authorized Signature
--------------------------------
Position of Authorized Signature
--------------------------------
Phone Number of Authorized Signature
<PAGE>
EXHIBIT H
AGREEMENT OF SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT
THIS AGREEMENT is made this ________day of _______________________, 19___, by
and among ORANGE CITY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership
having an office c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400,
Arlington, VA 22209 ("Lessor"), TOYS INTERNATIONAL, INC., a California
corporation, having an office at 550 Rancheros Drive, San Marcos, California
92069 ("Lessee") and BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK AKTIENGESELLSCHAFT,
acting by and through its New York branch, having offices at Financial Square,
32 Old Slip, 33rd Floor, New York, NY 10005, it successors and assigns or an
affiliate ("Lender"), for itself and as agent ("Agent") for, and as co-lender
with one or more co-lenders.
W I T N E S S E T H :
WHEREAS, Lender is providing financing for CITY MILLS shopping center
in Orange, California (the "Property"):
WHEREAS, under a certain lease (the "Lease") Lessor did lease, let, and
demise a portion of the Property (such portion of the Property is hereinafter
called the "Premises") to Lessee:
WHEREAS, Lender had or will become the owner of an indebtedness secured
by, among other things, a deed of trust, made by Lessor, as trustor, for the
benefit of Lender, as beneficiary (the "Deed of Trust"), and an assignment of
Lessor's interest in the Lease for the benefit of Lender ("Assignment of
Leases"):
NOW, THEREFORE, in consideration of the covenants, terms, conditions
and agreements herein contained, and in consideration of other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
1. The Lease and all rights and liens created thereby shall be subject and
subordinate in all respects to the Deed of Trust and the lien created thereby,
to any advancements made thereunder, and to any increases, extensions,
modifications or renewals thereof.
2. So long as Lessee is not in default under the Lease beyond any
applicable grace or cure period, Lender hereby covenants to Lessee that in the
event it obtains title to the Premises, either by foreclosure or by deed in lieu
of foreclosure, and thereafter obtains the right of possession of the Premises,
that the Lease will continue in full force and effect, and Lender shall
recognize the Lease and Lessee's rights thereunder.
3. Lessee agrees that from and after the date hereof in the event of any
act or omission by Lessor under the Lease which would give Lessee the right,
either immediately or after the lapse of a period of time, to terminate the
Lease, or to claim a partial or total eviction, Lessee will not exercise any
such right (a) until it has given written notice of such act or omission to
Lender by certified mail, return receipt requested, and (b) until and unless
Lender fails to remedy such act or omission within thirty (30) days for any act
or omission which can be cured by the payment of money, or in the case of any
other act or omission, as long as necessary to remedy such act or omission,
provided (i) Lender commences such remedy with thirty days, and (ii) Lender
pursues completion of such remedy with due diligence following such giving of
notice and following the time when Lender shall have become entitled under the
Deed of Trust to remedy the same. It is specifically agreed that Lessee shall
not, as to Lender, be entitled to require cure of any such default which is
personal to Lessor, and therefore not susceptible of cure by Lender, and that no
such uncured default shall entitle Lessee to exercise any rights under the Lease
with respect to Lender.
4. That in the event the interests of Lessor under the Lease shall be
transferred to Lender or any nominee, designee, assignee of Lender or any
purchaser at foreclosure sale (Lender or such other party referred to as a
"Lender Party") by reason of foreclosure, deed in lieu of foreclosure, or
similar transaction. Lessee hereby covenants and agrees to make, for the benefit
and reliance of Lender, full and complete attornment to the Lender Party as
substitute lessor upon the same terms, covenants and conditions as provided in
the Lease, except to the extent otherwise set forth herein.
5. The provisions of this Agreement be real covenants running with the
Property, and shall be binding upon and inure to the benefit of the respective
parties hereto and their respective heirs, executors, administrators,
beneficiaries, successors and assigns, including without limitation any Lender
Party.
6. Notwithstanding anything contained herein to the contrary, or anything
to the contrary in the Lease, Lender and any Lender Party shall not be:
(a) Liable for any act or omission of Lessor, including without limitation,
any delay in opening the Project or the Premises for occupancy and any failure
to complete the construction of the Premises or the Project or any improvements
therein;
(b) Subject to any offsets, claims or defenses which Lessee might have
against Lessor;
(c) Required or obligated to credit Lessee with any rent for any period
beyond the then current rental period which Lessee might have paid Lessor;
(d) Bound by any amendments or modifications or voluntary termination of
the Lease made without Lender's prior written consent, other than exercise of
rights, options or elections contained in the Lease; or
(e) Bound to or liable for refund of any security deposit except to the
extent actually received by Lender or a Lender Party.
7. Lessee shall not, without the express written consent of Agent:
(a) Cancel, terminate or surrender the Lease, except as provided therein or
in any modification or amendment specified herein or hereafter consented to by
Lender;
(b) After the date hereof, enter into any agreement with Lessor or its
successors or assigns, which grants any concession with respect to the Lease or
which materially compromises, discounts or otherwise reduced the rent called for
thereunder; or
(c) After the date hereof, prepay rent more than one (1) month in advance.
8. Lessor and Lessee hereby jointly and severally agree for the benefit and
reliance of Lender, that neither this Agreement, nor any assignment of the Lease
for collateral purposes, nor anything to the contrary in the aforesaid Lease or
in any modifications or amendments thereto shall, prior to Lender's acquisition
of Lessor's interest in and possession of the Property (and thereafter, only to
the extent of the Property and not personally), operate to give rise or create
any responsibility or liability upon Lender for the control, care, management or
repair of the Property by any party whatsoever so for any dangerous or defective
condition of the Property; or impose responsibility for the carrying out by
Lender of any of the covenants, terms and conditions of the Lease or any
modification or amendment whether or not hereafter consented to by Lender, or
for any negligence in the management, upkeep, repair or control of said Property
resulting in loss, injury or death to any lessee, licensee, invitee, guest,
employee, agent or stranger. Notwithstanding anything to the contrary in the
Lease, Lender, its successors and assigns (and any Lender Party, as
appropriate), shall be responsible for performance of only those covenants and
obligations of the Lease accruing after Lender's its successors' and assigns'
(or Lender Party's, as appropriate), acquisition of Lessor's interests in and
possession of the Property.
9. Lessee covenants and agrees to make rental payments according to the
terms of such Assignment of Leases upon written demand by Lender in the event of
any default (as described therein). Lessor consents to payments being so made.
10. Lessee agrees that this Agreement satisfies any condition or
requirement in the Lease relating to the granting of a non-disturbance
agreement.
11. Any notices hereunder shall be effective upon mailing by certified
mail, return receipt requested, or delivery by Federal Express addressed to the
recipient at its address set forth in the preambles hereof or as to each party,
to such other address as the party may designate by a notice given in accordance
with the requirements contained herein.
12. This Agreement contains the entire agreement between the parties
hereto. This instrument may be executed in multiple counterparts, all of which
shall be deemed originals and with the same effect as if all parties hereto had
signed the same document. Signature and acknowledgment pages may be detached
from the counterparts and attached to a single copy of this document to
physically form one document.
EXECUTED as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
LESSOR: ORANGE CITY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership
By: Orange City Mills, L.L.C., a Delaware limited liability company
Its: General Partner
By: The Mills Limited Partnership, a Delaware limited partnership
Its: Manager
By: The Mills Corporation, a Delaware corporation
Its: General Partner
By: _________________________
Judith Berson
Executive Vice President
LENDER: BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK AKTIENGESELLSCHAFT,
for itself and as Agent
By: _______________________________
Name: _______________________________
Title: _______________________________
By: _______________________________
Name: _______________________________
Title: _______________________________
LESSEE: TOYS INTERNATIONAL, INC., a California corporation
By: _________________________
Its: _________________________
Tenant's Corporate Seal:
</TABLE>
ACKNOWLEDGEMENT OF LESSOR
COMMONWEALTH OF VIRGINIA )
) ss.
COUNTY OF ARLINGTON )
On this ____ day of ____________________, 19____, before me personally
appeared Judith Berson, to me known to be the person who executed the foregoing
Exhibit H and acknowledged before me that she was duly authorized and did
execute same on behalf of ORANGE CITY MILLS LIMITED PARTNERSHIP, a Delaware
limited partnership.
-----------------------------------
Notary Public
My Commission expires:_____________
ACKNOWLEDGEMENT OF LENDER
STATE OF )
-----------------------------------------------
) ss.
COUNTY OF )
On this ____ day of ____________________, 19____, before me, _________,
notary public, personally appeared _____________ and ______________, proved to
me on the basis of satisfactory evidence to be the persons whose names are
subscribed to the within instrument and acknowledged to me that they executed
the same in their authorized capacities and that by their signatures on the
instrument the entity upon behalf of which the persons acted, executed the
instrument.
WITNESS my hand and
official seal.
-----------------------------------
Notary Public
My Commission expires:_____________
[Notarial Seal]
ACKNOWLEDGEMENT OF LESSEE
STATE OF )
) ss.
CITY/COUNTY OF )
On ____________________, 19____, before me _____________________, a
Notary Public in and for said state aforesaid, personally appeared
_______________________________, as _______________________ of TOYS
INTERNATIONAL, INC., a California corporation, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
-----------------------------------
Notary Public, ____________ County,
My Commission expires:_____________
[Notarial Seal]
<PAGE>
================================================================================
SPECIALTY TENANT LEASE EXHIBIT
================================================================================
EXHIBIT C
LANDLORD'S WORK - ROUGH SHELL
Preface
Work to be performed by Landlord in constructing the Leased Premises shall
be limited to those items expressly set forth below as Landlord's Work in this
Exhibit C ("Landlord's Work") and Tenant shall pay Landlord's charge for such
work as described herein. All other items of work, including the purchase and
installation of all materials and equipment necessary for Tenant's use of the
Leased Premises, shall be provided by Tenant at Tenant's sole expense, and shall
include but shall not be limited to those items set forth in Exhibit D
("Tenant's Work").
The building in which the Leased Premises are a part shall be designed by
the architect and engineer retained by the Landlord to design and oversee
construction of the Retail Development (herein sometimes referred to as "The
Project"). Construction shall meet the requirements for a fully sprinkled
building in accordance with the fire protection and building code program of the
local jurisdictional authority as well as the Development Agreement and Master
Declaration governing The Project, if applicable.
Landlord shall provide Tenant with a Tenant Handbook (Tenant Design
Criteria) hereinafter referred to as "Tenant Handbook".
Except as otherwise provided below, Landlord shall initially construct the
following:
A. BUILDING SHELL WORK WITHIN AND AROUND THE LEASED PREMISES
1. Shell. Landlord shall construct the building shell (building structure,
insulated roof and exterior walls) in which the Leased Premises are to be
located. It is expressly agreed and understood that the Leased Premises shall
constitute a portion of an open air mall building.
2. Exterior Appurtenances. Public entrance features, canopies and screen
walls at the exterior of the building structure shall be provided by the
Landlord in locations and of the design and in materials deemed appropriate by
Landlord.
3. Outside Walls. If the Leased Premises abuts an exterior wall, such wall
shall be unfinished on the interior metal stud with insulation only. Tenant
shall install drywall on the interior side of the wall from the finished floor
to the metal roof at Tenant's expense. The exterior side of the wall shall be
finished by the Landlord.
4. Demising Partitions. Demising partitions are not load bearing and Tenant
may not hang fixtures from them. Should Tenant require structure and/or backing
to accommodate the loading of Tenant's wall hung fixtures, said request shall be
in writing to Landlord for approval. Additional structure and backing shall be
furnished and installed by Tenant at Tenant's expense. Tenant shall install
drywall, (taped and floated) and paint on demising partitions between leased
premises up to the roof deck.
5. Demising Strip. Where the Landlord desires, a vertical demising strip
may be located at the storefront line between stores. The centerline and/or
backside of said strip may or may not precisely coincide with the lease line
defining the Leased Premises.
6. Exterior Service /Exit Door. Where the Leased Premises abuts an outside
wall, Landlord shall install one (1) 3'0 x 7'-0" (nominal) x 1 3/4" hollow metal
door and frame with (11/2pair butts and temporary lockset) as required by Code
or Landlord's insurance carrier. The outside face of door will be finished by
Landlord to match adjacent construction and may not be modified by Tenant. The
location of such door ( if any) will be indicated on the Lease Outline Drawing.
Tenant store name and space number will be applied on or adjacent to the door by
Landlord per Landlord's Architect's specification's in accordance with Exhibit
D.
7. Interior Service/Exit Door. Where the Leased Premises abuts an interior
service/exit corridor, Landlord shall install one (1) 3'-0" x 7'-0" (nominal) x
1 3/4" hollow metal door and frame (with 11/2pair butts and temporary lockset) ,
as required by code or Landlord's insurance carrier. The hollow metal door and
frame will be finished painted on the corridor side with a color selected by
Landlord. Tenant's store name and space number will be applied on or adjacent to
the door by Landlord, per Landlord's Architect's specification in accordance
with Exhibit D.
8. Floor Slab. Landlord shall furnish a 4" thick slab on grade with smooth
trowelled concrete surface. The floor elevation will be above the finished floor
elevation in the mall areas adjacent to the Leased Premises.
9. Storefronts and Bulkheads. Landlord shall design and construct all
tenant storefronts and bulkheads. The configuration of the storefront lease
line, as established by Landlord, shall be the line beyond which no element of
the storefront may extend and may not necessarily follow the line of
construction. The storefront furnished by the Landlord shall be framed aluminum
storefront system with one entry. The entry shall be a pair of 3'-0" x 7'-0"
(nominal) medium stile doors and hardware. A temporary lockset may be installed
by the Landlord. The final lockset and keying shall be by Tenant.
B. FINISH WORK OUTSIDE OF THE LEASED PREMISES
1. Exterior Areas. Landlord shall provide parking areas, access roads,
delivery areas, drainage systems, walks, ramps (if required), lighting ,
landscaping and planting, striping, signage and other facilities and
improvements as determined by the Landlord in the exterior common area.
2. Common Areas. Landlord shall provide courts and entry-ways, lighted
delivery areas, service and exit corridors, ramps (if required), public
restrooms, meter and valve rooms or areas, and all other areas, facilities and
buildings used in the maintenance and operations of The Project as determined by
the Landlord.
C. BUILDING UTILITY SYSTEMS SERVING THE LEASED PREMISES
1. VAC System. Landlord will provide a roof-top air conditioning unit
("RTU"). The Landlord will install a roof opening, curb and RTU. Landlord shall
provide a connection point within the Leased Premises for Tenant's sanitary
vent.
2. Electrical System. Landlord shall bring primary electrical service to
the Retail Development. An empty conduit only, shall be extended by the Landlord
from an electrical room to a point within the Leased Premises as indicated on
the Lease Outline Drawing. Electrical service furnished by Landlord shall
consist of 277/480 volt, 3 phase, four wire service of size and capacity values
as described in the Tenant Handbook. Tenant to complete electrical system in
accordance with Exhibit D and the Tenant Handbook.
3. Plumbing System. Landlord shall provide a valved and capped domestic
cold water line, and a sanitary sewer line at the rear of Leased Premises, as
indicated on the Lease Outlines Drawing. Tenant shall connect to Landlord's
plumbing system and extend services within the Leased Premises according to
Tenant's approved plans and in accordance with requirements of Exhibit D and the
Tenant Handbook.
4. Sprinkler Systems. Landlord shall install a wet sprinkler fire
protection system within the Leased Premises. The system shall include, but not
be limited to, risers, bulk mains, cross mains, branch lines, and upturned
sprinkler heads at the underside of the ceiling. Within the Leased Premises, the
sprinkler system provided by the Landlord shall have one (1) sprinkler head per
100 square feet of Leased Premises. The quantity of heads provided by the
Landlord shall be the minimum required by Code or local governing authorities.
Mains and cross mains shall be designed to accept additional heads up to a
maximum coverage of one (1) head per 80 square feet of Leased Premises. Landlord
shall design the sprinkler system to code in accordance with the Landlord's
white box drawings for the Leased Premises.
5. Telephone System. Landlord shall provide either an open cable tray or
empty conduit from a telephone junction board to a point within or adjacent to
the Leased Premises as indicated on the White Box drawings.
6. Gas Distribution. Landlord shall negotiate with the local utility
company providing gas service to bring gas service to a service/metering point
in the Retail Development. Any available gas service, including the quantity
thereof, will depend upon the availability of gas provided to Landlord's
building by the Utility Company. Gas service is available to Restaurant and Cafe
Tenants for cooking purposes only and for a built-in gas furnace in the Tenant's
VAC Unit. Tenant's requiring gas shall arrange with the local utility providing
gas service for the service connection at the servicing/metering point provided
in the Retail Development. The Landlord reserves the right to allocate gas
service within The Project if the utility company providing the service limits
the quantities of gas supplied to The Project.
D. GENERAL PROVISIONS
1. Minor changes in any plans or specifications covering the Landlord's
scope of work which may be necessary during the design or construction of The
Project or the Leased Premises shall not in any way invalidate the terms of the
Lease or this Exhibit C, nor shall it require that the Landlord provide any work
not described herein.
2. Landlord shall have the right to specify or change the location, either
before or after the construction of all utility lines, condenser water lines,
condensate drain lines, drains, sprinkler mains and valves, and such other
facilities within the Leased Premises as are necessary by engineering design
and/or Code Requirements. These items as described above shall be located so as
not to materially interfere with the Tenant's use of the Leased Premises.
Landlord shall have the right to relocate and specify the location of mechanical
and other equipment on the roof over the Leased Premises.
3.
4. Landlord shall have the right to perform, at Tenant's Expense, any of
the Tenant's Work which the Landlord determines in its sole discretion to be
performed (a) immediately and/or on an emergency basis for the best interest of
The Project, (b) to the extent required for Landlord Compliance with all
applicable building codes, or, (c) to the extent necessary to obtain any
Certificate of Occupancy required by the Landlord or any other tenant in The
Project.
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SPECIALTY TENANT LEASE EXHIBIT
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EXHIBIT D
TENANT'S WORK - ROUGH SHELL
Preface
This Exhibit "D" is intended to describe the obligation of the Tenant in the
design and construction of the Leased Premises. Landlord's Work will be limited
to the work described in Exhibit C. Landlord's Work for Tenant in this Exhibit D
will be accomplished by Landlord at Tenant's expense. The work of Tenant
described in Exhibit D is intended to complete the Leased Premises in accordance
with Tenant's drawings as approved in writing by Landlord to a finished
condition ready for the conduct of business therein ("Tenant's Work"). All
finished installations will be deemed incomplete until approved by Landlord.
Tenant's Work shall conform to the procedures, schedules and reimbursement
requirements set forth in Sections 2 and 3 of this Exhibit. Exhibit D shall
govern over any inconsistencies with Exhibit C.
Landlord and Tenant have a common interest in opening the Leased Premises on the
Commencement Date. To this end, Landlord will coordinate its work with Tenant's
Work insofar as the schedule for such Commencement Date and prudent construction
practice will allow and will assign one or more tenant coordinators to function
as liaison between Tenant and Landlord. Further to this end, Tenant and Tenant's
contractors agree to abide by Landlord's Construction Rules and Regulations
which may be issued from time to time. In order to ensure that the Tenant's
store interior and signage design are orderly and aesthetically coordinated with
Landlord's building, and to ensure that Landlord's storefront and signage
requirements are understood by Tenant, its designers, engineers, contractors,
and other representatives, Landlord has drafted and Tenant shall follow the
architectural and signage criteria established in the Tenant Handbook (Tenant
Design Criteria) hereinafter referred to as "Tenant Handbook". In order to
ensure that the Tenant's VAC, (venting, airconditioning) systems are compatible
and coordinated with the Landlord's building, and to ensure that the Landlord's
VAC, plumbing and electrical requirements are understood by Tenant, its
designers, engineers, contractors, and other representatives, Landlord has
drafted and Tenant shall follow the mechanical and electrical criteria
established in the Tenant Handbook.
All Tenant construction shall be in accordance with the requirements of all
applicable codes, ordinances, rules and regulations of all authorities having
jurisdiction over the work including all requirements of the Landlord's
insurance carrier.
Construction shall conform to the requirements for a fully sprinklered
building in accordance with the fire protection and building code program of the
local jurisdictional authority as well as the Development Agreement and the
Master Declaration governing "The Project" if applicable. Tenant shall secure
all necessary permits including, but not limited to, occupancy and health
department permits from the jurisdictional authorities in sufficient time to
allow Tenant to open the Leased Premises on the Commencement Date. Tenant shall
furnish to Landlord upon receipt, copies of all building permit applications,
statements, amendments and the like, and all permits, inspection reports,
certificates, and other documents as required by authorities having jurisdiction
of The Project.
Tenant, at its sole cost and expense, shall perform all work other than work to
be performed by Landlord as set forth in Exhibit C, required to complete the
Leased Premises to a finished condition ready for the conduct of business
therein.
All of Tenant's Work within the Leased Premises performed pursuant to this
Section l shall, for the purpose of this Lease to which this Exhibit is
attached, shall be deemed to be improvements made to the Leased Premises by
Tenant at Tenant's expense.
SECTION 1 - TENANT CONSTRUCTION WORK WITHIN THE PREMISES
A. GENERAL CRITERIA
The criteria and outline specifications set forth herein represent
minimum standards for the design, construction, and finish of the Leased
Premises by Tenant.
1. Jurisdictions and Codes. The project is being developed in and under the
jurisdictions of the State, County, and the City in which The Project is
located. All design and construction work shall comply with all applicable
statutes, ordinances, regulations, laws and codes and the requirements
pertaining to service and utilities furnished by utility companies, all
applicable state, county, and local statutes and ordinances, and OSHA
regulations. All design construction shall meet the requirements stated in the
guidelines for the American Disabilities Act (ADA).
2. Permits and Approval. Prior to the commencement of construction, all
building and other permits shall be obtained and posted in a prominent place
within the Leased Premises. Landlord's written approval shall be obtained by
Tenant prior to the undertaking of any construction work which deviates from
Tenant's approved Store Working Drawings and Specifications, or which modifies
whatsoever Landlord's building shell or utilities, or any work not explicitly
shown on said Store Working Drawings and Specifications. 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.
3. Floor Loads. The slab on-grade has been designed to carry a total load
(dead and live) of 125 pounds per square foot. Any loading imposed by any of
Tenant's Work, either on a temporary or permanent basis, shall not exceed 125
lbs./SF ("Allowable Load").
4. Standard Project Details. Standard Project Details, as issued by
Landlord's Architect from time and time and as they pertain to Tenant's Work,
shall govern with respect to Tenant's Work. Such details shall be incorporated
into the Tenant's Store Working Drawings and Specifications for the Leased
Premises.
5. Materials. Only new, first-class materials shall be used in the
construction of the Leased Premises. Used, first-class materials for interior
architectural facades and fixtures may be used provided such materials are noted
on the Tenant's plans and approved by Landlord through field inspection.
6. Field Conditions. From time to time, the Tenant is obligated to verify
conditions pertaining to the Leased Premises prior to and after commencement of
construction of its Leased Premises. Tenant shall coordinate its work with the
work of Landlord, other tenants, and with existing conditions above, below and
adjacent to the Leased Premises. Tenant shall make changes as required to
accommodate such work or conditions.
7. Tenant Handbook. Landlord shall provide Tenant with the Tenant Handbook
and Tenant shall comply with all design criteria, procedures for drawings,
specifications, and construction, and other rules, regulations and provisions
therein. To the extent, if at all, that the Tenant Handbook may conflict with
the provisions of this Exhibit D, the provisions of the Tenant Handbook shall
govern.
B. ARCHITECTURAL FINISHES
1. Floors. Tenant's finish floor covering materials must be selected and
adapted in thickness to correspond in elevation exactly with the level of the
finished surface material of the mall common area. Quality floor materials, such
as carpeting, glazed or unglazed tile, wood parquet or marble, shall be used in
the sales area of the Leased Premises. However carpet is not allowed within the
first 5'-0" of the Leased Premises. All flooring finish materials are subject to
Landlord's approval
2. Storefront. Tenant's storefront shall be designed and constructed by
Landlord as provided in Exhibit C and as described in the Tenant Handbook.
3. Interior Partitions. All interior partitions by Tenant within the Leased
Premises shall be metal stud with 5/8" gypsum board construction, and shall be
taped, floated, sanded, and painted. Any combustible materials applied to
partitions shall meet all flame spread and smoke generation requirements of
jurisdictional authorities and receive a U.L. labeled fire retardant coating if
required by code. Any Tenant penetrations of rated partitions shall be
specifically approved in writing by Landlord and governing authorities as a
portion of the permitting process.
4. Demising Partitions. Demising partitions are not load bearing and Tenant
may not hang fixtures from them. Should Tenant require structure and/or backing
to accommodate the loading of Tenant's wall hung fixtures, said request shall be
in writing to Landlord for approval. Additional structure and backing shall be
furnished and installed by Tenant at Tenant's expense. Tenant shall install
drywall, taped, floated, sanded and painted on demising partitions between
Tenant spaces up to at least 12' - 0" above concrete. Drywall may be placed on
demising partition above 12'-0" without Landlord's specific approval.
A demising cap, supplied by the Landlord will be installed on
the storefront glass at the location of the demising partition or at any
location along the storefront that the landlord deems necessary.
5. Exterior Walls. Tenant shall install all finishes on the inside face
of exterior walls up to deck within Leased Premises.
6. Service and Exit Corridor Partitions. Any Tenant penetrations of
rated partitions, and relocations and/or additions to Landlord furnished exit
doors, shall be specifically approved in writing by Landlord and governing
authorities as a portion of the permitting process. Any framing, cutting,
patching of the corridor wall surfaces including the building of vestibules to
provide for the non-impingement of the door into the corridor traffic way, and
other work related construction shall be coordinated and consistent with
Landlord's Work (including but not limited to the provision of 4'-0" high 1/4"
masonite board and metal cornerguards). On walls dividing the Leased Premises
from service and exit corridors, or other rated enclosures, the Tenant shall
provide on the Tenant's side, sufficient layers of drywall to complete the
necessary rating. All materials used in corridor construction shall be fire
rated. Any Tenant penetrations of rated partitions shall be specifically
approved in writing by Landlord and governing authorities as a portion of the
permitting process.
7. Additional Interior Service/Exit Corridor Doors. If Tenant desires
additional service access to the Leased Premises other than what is provided by
Landlord in Exhibit C, then Tenant shall such submit a request to the Landlord
in writing. Upon receiving written approval by the Landlord, the tenant shall
provide and install an interior hollow metal door, labeled as required, with a
hollow metal frames, and all hardware, in accordance with governing codes. Any
framing, cutting, and patching of the corridor wall surfaces including the
building of vestibules to provide for the non-impingement of the door into the
corridor traffic way, the other work related thereto shall be the responsibility
of the Tenant. Hollow metal door and frame are to be finish painted on the
corridor side with a color selected by Landlord. Tenant's store name will be
applied on or adjacent to the door by Landlord, at Tenant's expense, per
Landlord's Architect's specifications.
8. Door Relocation. The relocation of any exterior Tenant door shall be
performed by Landlord at Tenant's sole expense and must be coordinated with the
structure of Landlord's building.
9. Door Hardware. Tenant shall furnish and install all door locks and exit
devices on all interior service doors, exterior doors, exit corridor doors, and
storefront, using hardware recommended by Landlord in the Tenant Handbook.
10. Ceiling. All work related to ceiling and ceiling treatments, if any,
shall be the responsibility of Tenant. Tenant's ceiling shall be limited to a
ceiling height not less than 6" above the height of the storefront, nor higher
than the maximum heights indicated in the Tenant Handbook.
All ceilings and ceiling treatments shall be on non-combustible material
approve by Landlord and shall maintain the degree of openness required by the
jurisdictional authority and/or described in the Tenant Handbook. All structural
loads shall be specifically approved to Landlord's structural engineer for the
location and method of support.
If Tenant's interior partitions and ceiling configuration cause the
requirement of additional sprinkler heads, such additional heads shall be
installed by Landlord's designated contractor at Tenant's expense (unless
otherwise agreed upon by Landlord in writing) both as required by jurisdictional
authority and landlord's insurance carrier.
11. Interior Finishes. All finished interior surfaces must be materials
approved by Landlord for appearance. All Tenant fixtures, furniture, carpeting
(including underlayment), upholstery materials, drapery and other furnishing
must comply with flammability of materials and smoke generation requirements for
furniture and furnishings of local jurisdictional authorities. All wood shall be
fire retardant in accordance with code requirements. All wood in contact with
the floor shall be termite retardant.
12. Finish Hardware. Commercial grade finish hardware, labeled where
required, shall be used throughout. If Tenant adds additional door(s) other than
what is provided in Exhibit C then commercial grade finish hardware, labeled
where required, shall be used. All doors shall have at least one and one-half
(1-1/2) pair butts, wall or floor stops, kick plates, lock sets and push-pull
plates as required. All exit doors shall have hardware as required by Code.
13. Toilet Rooms. Tenant shall construct restroom facilities, fixtures,
toilet partitions, and building specialty items such as toilet room mirrors,
dispensers, paper holders and amenities to fully meet the ADA Guidelines and
local codes.
14. Mezzanines. Mezzanines will not be permitted.
15. Layout and Painting of Exposed Mechanical and Electrical Systems. All
Tenant installed duct work, conduits, pipes and any other mechanical or
electrical equipment exposed to public view from outside the Leased Premises,
shall be laid out and installed in a neat and orderly configuration. Tenant
shall paint the above tenant improvements with a color and finish to match
Landlord's finish if such improvements can be seen from the mall common area.
16. Soundproofing. Tenant shall take all precautions to ensure sound is not
transmitted to adjacent tenant spaces or the mall common area.
C. STRUCTURAL
1. Modifications. Any alterations, additions, and/or reinforcements to the
structure of Landlord's building required to accommodate Tenant's Work, must be
designed by a registered structural engineer at Tenant's expense. Tenant shall
leave the structure of Landlord's building as strong or stronger than original
design and with finishes unimpaired. Tenant's architect shall calculate or have
calculated the structural loads caused by Tenant's improvements and submit those
calculations for written approval by Landlord and Landlord's Architect prior to
Tenant's construction.
2. Loading. All loads individually hung from the structure shall be
specifically approved by Landlord's structural engineer for location and method
of support.
D. VENTING AND AIR CONDITIONING
1. VAC System. A complete air conditioning system to suit Tenant's
requirements shall be designed, furnished, installed and maintained by Tenant in
accordance with the requirements of the Tenant Handbook. Tenant's portion of the
VAC system shall include roof-top air conditioning units(s) ("RTU"), ducts,
insulation, fire dampers, outlets, grilles and controls to maintain temperatures
per Tenant Handbook. All Tenant ductwork shall be internally insulated and
Tenant shall make all connections to Landlord installed systems in a manner
fully satisfactory to Landlord. Landlord shall install roof-top curb at Tenant's
expense.
2. Toilet Exhaust System. Tenant installed toilet facilities within the
Leased Premises shall include a complete toilet exhaust system according to Code
and the requirements of the Tenant Handbook.
3. Smoke Venting. If the authority having jurisdiction requires individual
smoke venting from the Leased Premises, Tenant, at Tenant's expense, shall
provide the complete required smoke system, discharging vertically through a
roof vent at sufficient velocity to carry the discharge away from any intakes on
the roof. Roof vents will be installed by Landlord's designated contractor at
Tenant's expense and in accordance with the Tenant Handbook.
4. Exhaust/Negative Pressure. All exhaust and make up air systems shall be
by Tenant in accordance with Exhibit D and the Tenant Handbook. As determined by
Landlord, all Tenants producing odors within their premises shall be required to
install full height partitions and provide supplemental exhaust to the exterior
of the building to keep the premises at a negative pressure relative to
Mainstreet and all adjacent areas
E. ELECTRICAL
1. System. Tenant shall design, furnish, install and maintain a complete
electrical distribution system, including but not limited to conductors to
electrical room connected to load side of Landlord's check meter. Tenant shall
provide the transformer, distribution panels, circuits, conductors, fixtures and
devices, within the Leased Premises in accordance with the requirements of the
Tenant Handbook. No appurtenances, including but not limited to light fixtures,
antennas, signs, etc., will be affixed to the exterior walls or roof of
Landlord's Building without Landlord's express written permission. Electrical
design shall meet standards set forth in Tenant Handbook and identified by Code.
2. Electrical Construction.
a. Material - All electrical materials shall meet National Electrical Code
Standard, unless a better grade is required by local Code. All materials shall
be new and shall bear evidence of approval by Underwriter's Laboratory (UL). ALL
CONDUCTORS SHALL BE COPPER. ALUMINUM CONDUCTORS WILL NOT BE ALLOWED.
b. Lighting Fixtures - Tenant is required to provide light fixtures within
the first 5' of store per the quantity, layout & fixture types designated in the
Tenant Handbook. Recessed fixtures installed in furred spaces shall be connected
by means of flexible conduit and approved fixture wire, connected to a branch
circuit outlet box which is independent of the fixture.
c. Fluorescent Fixtures - All fixtures shall be provided and installed by
Tenant with switch legs and local switches rated 20 amps at 277 volts. All
fluorescent fixtures shall have internal protection devices. Fluorescent
ballasts shall be high power factor type with individual non-resetting overload
protection. Ballast harmonics may not exceed that Total Harmonic Current
Distortion allowable by the electric utility. All lamps subject to public view
shall have warm white deluxe or better color rendition. Cool white may be used .
d. Electric Meter - Landlord will provide electricity from a check meter
and redistribute to tenants.
e. Panel Boards - Panel boards shall be furnished and installed by Tenant.
120/208 volt panels and 277/480 volt panels shall both be equipped with single
or multiple pole bolted thermal magnetic breakers.
f. Short Circuit Ratings - Tenant's electrical distribution system shall be
designed to withstand and safely interrupt an available short circuit current
indicated in the Tenant Handbook.
g. Transformer - All necessary transformers shall be furnished and
installed by Tenant. All ceiling hung transformers shall be approved by
Landlord's Structural Engineer for location and method of support.
h. Nameplates - The following equipment shall be identified with engraved
Bakelite nameplates: distribution panels, motor starters, lighting panels and
push-button stations.
F. PLUMBING
1. System. Tenant shall connect to Landlord's plumbing system as described
in Exhibit C and the Tenant Handbook. Tenant shall provide a complete plumbing
system within the Leased Premises, including but not limited to, fixtures and
toilet accessories as required by Code. Tenant shall provide accessible clean
outs in toilet areas. Plumbing work must be installed according to all
appropriate Codes and requirements of the Tenant Handbook. Landlord's approval
of Tenant's plans is not a statement that the plans are in compliance with Code
or other local requirements. Tenant shall be required to provide vent
connections and a toilet room exhaust connection, if necessary, through the roof
as required by Code and the Tenant Handbook. All such penetrations shall be by
Landlord's designated contractor at Tenant's sole expense.
2. Water Heaters. Electric water heaters shall be automatic and a maximum
capacity of 2 k.w. All units shall be UL approved and conform to the
requirements of the local Energy Code. Water heaters must have
temperature/pressure relief valves with discharge piping according to Code.
3. Water Meters. Tenant shall furnish and install water meters at Tenant's
expense in accordance with the Tenant Handbook.
4. Condensate Drains. Tenant shall extend and connect condensate drain
line(s) from RTU(s) in accordance with the Tenant Handbook.
5. Connection. If Tenant's restroom location, on Tenant's Construction
Documents does not coincide with Landlord's utility location, Tenant, at
Tenant's expense, shall move utility lines to coincide with Tenant's
Construction Documents with Landlord's prior approval. All cutting and placing
of concrete is by Tenant.
G. FIRE PROTECTION SYSTEM
All revisions to the fire protection system required by Tenant's layout
shall be performed by Landlord's designated sprinkler contractor at Tenant's
sole expense (unless otherwise agreed upon by Landlord in writing). The
sprinkler contractor shall design system revisions in accordance with Tenant's
Construction Documents. Such designs may involve additional heads, relocated
heads, heads in refrigeration boxes, toilet rooms, kitchen exhaust ducts, and/or
at Tenant's request, heads located to conform with Tenant's ceiling pattern and
layout. All design and construction shall be governed by Code and the
requirements of Landlord's insurance carrier.
Tenants are required by local code to provide fire extinguishers, at least
one to be installed within 25 feet of the Tenant's entry off the mall common
area.
H. TELEPHONE
Tenant shall arrange directly with the local Telephone Company for
telephone service. The local Telephone Company will bring telephone service to a
point inside the Leased Premises via a raceway provided by Landlord and as
described in Exhibit C. Tenant shall furnish, install and maintain telephone
wiring and equipment within the Leased Premises to suit Tenant's requirements at
Tenant's expense.
I. SIGNAGE
1. Tenant Store Signs- Each Tenant is required to have two (2) storefront
signs. All signs shall be designed, constructed and located in accordance with
Landlord's Sign Criteria, Exhibit E, the Tenant Handbook, and as approved by
Landlord. All signage shall meet criteria set forth by local jurisdictional
authorities and code.
2. Suite Number and Tenant Trade Name. Landlord shall furnish and install a
suite number and Tenant trade name of Landlord's design at all exterior Tenant
doors and interior service/exit corridor doors. Landlord shall also install
suite number on the Tenant's storefront
J. FIXTURES AND FURNISHINGS
Tenant shall furnish and install in the Leased Premises all fixtures,
furnishings, equipment, shelving, trade fixtures, leasehold improvements,
interior decorations, graphics, signs, mirrors, cornices, covers and decorative
light fixtures, portable fire extinguishers as required by Code and the Tenant
Handbook, and other special effects, all as approved by Landlord.
All Tenant improvements, other than ceilings, and lighting fixtures, shall be
floor-mounted unless written approval is obtained from Landlord.
K. MISCELLANEOUS REQUIREMENTS
1. Tenant's Contractor. Work undertaken by Tenant at Tenant's expense (a) shall
not be awarded to Landlord's contractor without Landlord's written consent and
(b) may only be awarded to a reputable and bondable contractor or contractors
licensed to do business in the State, County and City in which The Project is
located. Tenant's general contractor shall give Landlord a $2,000 security
deposit before commencement of construction. The security deposit will be held
against any breakage caused by Tenant's contractor and shall be refunded when
Landlord's construction punchlist is completed.
Tenant's contractor shall adhere to Landlord's policy of a drug and
alcohol free workplace.
2. Equipment Screening. Tenants requiring mechanical or electrical
equipment, antennas, and the like shall not be placed on the roof or the
exterior of the building without the prior express written approval of Landlord.
All such equipment, if allowed, shall be screened from the view of the public
from any point within the project site. All screening materials, construction
details, and construction techniques shall be approved by Landlord in writing,
prior to any such work by Tenant. --------------------
3. Clean-Up. Tenant shall cause its contractors to maintain the Leased
Premises in a clean and orderly condition during construction. All unusable
shipping containers, packaging, and other debris shall be broken down and
contained within the Leased Premises until removed by Tenant's contractor to
containers provided by Landlord outside Landlord's Building. --------
Flammable waste must be confined to covered metal containers until removed
by Tenant. All usable construction material, equipment, fixtures, merchandise,
etc. must always be contained within the Leased Premises. Common Areas, courts,
arcades, public corridors, service/exit corridors and the exterior of Landlord's
Building shall be kept clean at all times. If Tenant fails to clean up, Tenant
hereby authorizes Landlord to clean up for Tenant at Tenant's expense.
4. Full Payment. Tenant shall satisfy Landlord that adequate arrangements
have been made to ensure that all Tenant's contractors shall be paid in full for
work ordered by Tenant. Tenant is advised to familiarize itself with the
mechanic's lien laws in the State in which The Project is located and shall hold
the Landlord harmless for any liens filed against the property of the Landlord
for the work of the Tenant. ------------
5. Character of Employees. Tenant will not employ any unfit person or
anyone not skilled in the work he is performing, or any workman that is
incompatible with the balance of the work force or who will cause, or whose
presence will cause, labor disputes or work stoppages. In the event any
employee(s) of Tenant or Tenant's contractor(s) causes a labor dispute or work
stoppage, Tenant expressly agrees to have such employee(s) immediately removed
from the Project upon Landlord's request, and that Tenant's failure to do so
shall constitute an event of Default under the Tenant's Lease of which this
Exhibit is a part.
SECTION 2: PROCEDURE AND SCHEDULES FOR THE COMPLETION OF TENANT'S PLANS AND
SPECIFICATIONS
Unless otherwise notified by Landlord, all prints, specifications, and
other material to be furnished by Tenant as herein required shall be sent to:
Tenant Coordinator (Address to be furnished when available).
Tenant shall engage an architect ("Tenant's Architect") registered in the
State and licensed to do business in the County and the City in which The
Project is located to prepare the Working Drawings and Specifications to be
submitted for Landlord's approval. The fees for Tenant's Architect shall be paid
by the Tenant.
On each occasion that Tenant shall fail to submit or resubmit drawings,
specifications or any amendments thereto within the time periods provided for in
this Exhibit D, and such failure continues for five (5) days following notice
from Landlord that such drawings, specifications or amendments thereto are
overdue, Tenant shall pay to Landlord a fee in accordance with the following
schedule for additional coordination and other services. The payment of this fee
shall not excuse Tenant from default for failure to submit or resubmit drawings
or specifications and shall not preclude the exercise of default or other
remedies by Landlord.
Floor Area of Leased Premises Applicable Amount
1,500 or less sq. ft. $ 250.00
1,501 - 5,000 sq. ft. $ 500.00
5,001 or more sq. ft. $ 1,000.00
A. LEASE OUTLINE DRAWINGS
Following execution of the Lease of which this Exhibit is a part, Landlord shall
furnish Tenant with two (2) prints of the Lease Outline Drawing (LOD) giving
technical and design information relative to the Leased Premises along with
other drawings that may be helpful to Tenant in the design of its store.
B. STORE DESIGN DRAWINGS
1. Within thirty (30) days of whichever of the following shall be the later to
occur: (a) receipt of Lease Outline Drawing from Landlord or (b) the execution
of the Lease; the Tenant shall submit to Landlord one (1) set of sepia
reproducible prints and three (3) sets of blueline prints of Store Design
Drawings, showing the intended design, character, and finishes of the Leased
Premises. The Store Design Drawings shall comply with the design criteria of The
Project as described in this Exhibit D and in the Tenant Handbook and shall set
forth the requirements of Tenant within the Leased Premises. Said Drawings shall
include, but not be limited to the following:
a. Architectural design of the space, including an elevation of Landlord's
storefront showing Tenant's signage, floor plans, elevations, sections, and
renderings indicating material and color selections and finishes, and layout
including location of fixtures both permanent and movable. Provide the weights
of all items to be suspended above from the structure.
b. Mechanical System: Basic equipment to be used and its location, duct
distribution system, diffuser locations, and any louvers or vents to be provided
for Tenant by Landlord at Tenant's expense. Provide projected mechanical loads
on forms provided by Landlord in the Tenant Handbook.
c. Electrical System: Reflected ceiling plans indicating type of lighting
fixtures, and floor plans showing outlets and other electrical equipment
contemplated with location of panel and switchboard. Provide projected
electrical loads on forms provided by Landlord in the Tenant Handbook.
d. Plumbing System: Floor plans showing the location, layout, and type of
fixtures to be furnished, including riser diagrams.
e. Fire Protection System: Location of any specialty heads Tenant's
architect may require.
f. Tenant shall identify in writing all intended exceptions to the design
criteria contained in the Tenant Handbook and/or this Exhibit D, prior ro
preparation of preliminary drawings.
2. After receipt of Store Design Drawings, Landlord shall timely return to
Tenant one (1) set of Store Design Drawings with modifications and/or approval.
If, upon receipt of approved Store Design Drawings bearing Landlord's comments,
Tenant wishes to take exception thereto, Tenant may do so in writing within
seven (7) days from date of receipt of said drawings, by registered or certified
mail, return receipt requested, first class, postage prepaid, or delivered by
Federal Express or a comparably reliable national air courier service (i.e. one
which delivers service in at least 48 states) provided that any such courier
service provides written evidence of delivery, addressed to Landlord, at the
above address, and the notice address in the Lease. Unless such action is taken,
it will be deemed that all comments made by Landlord on Store Design Drawings
are acceptable to and adopted by Tenant.
3. If Store Design Drawings are returned to Tenant with comments, but not
bearing approval of Landlord, said Store Design Drawings shall immediately be
revised by Tenant and resubmitted to Landlord for approval within seven (7) days
of their receipt by Tenant.
C. CONSTRUCTION DOCUMENTS AND SPECIFICATIONS
1. Store Working Drawings and Specifications shall be prepared in strict
compliance with the design criteria and requirements as set forth in this
Exhibit D and the Tenant Handbook and shall adhere to the Store Design Drawings
as approved by Landlord. Store Working Drawings to minimum scales as called for
below, and Specifications shall include, but not be limited to, the following:
<TABLE>
<CAPTION>
<S> <C>
a. Key plan showing location of the Leased Premises relative to the entire mall.
b. Floor plan at a minimum scale of 1/4" = 1'0".
c. Overall sections at 1/4" = 1'0".
d. Reflected ceiling plan at a minimum scale of 1/4" - 1'0".
e. Plans, elevations, and section of storefront (if to be constructed by Tenant) at 1/2" = 1'-0",
with finish materials board including manufacturers, model numbers, color numbers, and all other identifying
information. Details of storefront at 1-1/2" = 1'0".
f. Interior elevations at 1/4" = 1'0".
g. Full sections of types of partitions used at 1/2" = 1'0".
h. Details of special conditions encountered at 1-1/2" = 1'-0".
i. Door schedule with jamb details at 1-1/2" = 1'0".
j. Finish and color schedules with sample material boards.
k. Plumbing, ventilating, and cooling plans, at 1/4" - 1'0".
l. Mechanical details at 1-1/2" = 1'0".
m. Electrical plans at 1/4" = 1'0".
n. Electrical details, fixture schedules, and one-line electrical riser diagram.
o. Mechanical and electrical load tabulations on forms provided by Landlord in the Tenant Handbook.
p. Structural load tabulations.
q. Specifications covering all of Tenant's Work, including, but not
limited to, architectural, electrical, plumbing, ventilating, and air
conditioning. r. Layout of fixture location, both permanent and
movable. s. Any and all other plans and specifications as may be
required by the local fire and building authorities or other governing
bodies.
</TABLE>
2. All Construction Documents and Specifications prepared by Tenant's
Architect shall be submitted by Tenant, in the form of one (1) set of
reproducible sepia prints, specifications and three (3) sets of blueline prints
to Landlord for approval within 21 days from receipt by Tenant of Landlord's
written approval of Store Design Drawings.
3. As soon as practicable after receipt of Construction Documents and
Specifications, Landlord shall return to Tenant one (1) set of prints of
Construction Documents and Specifications with its suggested modifications
and/or approval. If, upon receipt of approved Construction Documents and
Specifications bearing Landlord's comments, Tenant wishes to take exception
thereto, Tenant may do so in writing, by certified or registered mail, return
receipt requested, first class, postage prepaid, or delivered by Federal Express
or a comparably reliable national air courier service (i.e. one which delivers
service in at least 48 states) provided that any such courier service provides
written evidence of delivery, addressed to Landlord at the above address and at
the notice address in the Lease, within seven (7) days from the date of receipt
of Construction Documents and Specifications. Unless such action is taken, it
will be deemed that all comments made by Landlord on Construction Documents and
Specifications are acceptable to and adopted by Tenant.
4. If Construction Documents and Specifications are returned to Tenant with
comments, but not bearing approval of Landlord, said Store Working Drawings and
Specifications shall immediately be revised by Tenant and resubmitted to
Landlord for approval within seven (7) days of their receipt by Tenant.
5. Construction Documents and Specifications prepared by Tenant's Architect
shall be submitted by Tenant in the form of one (1) set of mylar reproducible
prints and specifications and three (3) sets of blueline prints. "For
Construction" shall be marked clearly on each copy in red. Such drawings and
specifications shall reflect correction of all Landlord's comments to the Store
Working Drawings and specifications returned by Landlord.
6. Store Working Drawings shall be submitted to the local Authorities
having jurisdiction for building permit after such drawings have been approved
by Landlord in the submittal process as outlined above.
7. Landlord and Landlord's architect shall, from time to time, be entitled
to monitor Tenant's Work and shall have the right to require all work which does
not comply with Tenant's approved Store Working Drawings and Specifications to
be corrected within thirty (30) days of notification to Tenant.
SECTION 3: PROCEDURE AND SCHEDULES FOR THE CONSTRUCTION OF THE LEASED
PREMISES BY TENANT
A. COMMENCEMENT OF CONSTRUCTION
Tenant shall start construction of the Leased Premises not later than twenty
(20) days from either of the following dates, whichever shall be the later to
occur: (1) the date of receipt by Tenant of written notice from Landlord that
Landlord has substantially completed the work to be performed by Landlord under
Exhibit C, (other than such work which cannot be performed by Landlord until
Tenant makes the Leased Premises ready for the performance thereof) and that the
Leased Premises are ready for Tenant's Work; or (2) the date on which Landlord
approves the Tenant's Store Working Drawings and Specifications for the Leased
Premises. Tenant shall carry such construction to completion with all due
diligence.
B. GENERAL REQUIREMENTS
1. Tenant shall submit to Landlord, via certified or registered mail,
return receipt requested, first class, postage prepaid, or delivered by Federal
Express or a comparably reliable national air courier service (i.e. one which
delivers service in at least 48 states) provided that any such courier service
provides written evidence of delivery, at least five (5) days prior to the
commencement of construction the following information:
a. Copy of building and all other permits needed to perform Tenant's
Work within the Leased Premises.
b. The names and addresses of the general, mechanical, plumbing and
electrical contractors Tenant intends to engage in the construction of the
Leased Premises.
c. The actual commencement of construction date and the estimated date
of completion of construction work, fixturing work, and date of projected
opening.
d.
e. Itemized statement of estimated construction costs including
architectural, engineering, and contracting fees.
f. Evidence of insurance with a company or companies authorized to
transact business in which The Project is located as required below.
g. Tenant's General Contractor's $2,000.00 Security Deposit.
2. Tenant shall secure, pay for, maintain, and cause its contractors and
subcontractors to secure, pay for, and maintain, during the continuance of
construction and fixturing work within the Leased Premises, all of the insurance
policies required in the amounts as set forth herein, together with such
insurance as may from time to time be required by City, County, State or Federal
laws, Codes, regulations or authorities. Tenant's Work may not commence, nor may
Tenant permit its contractors and subcontractors to commence any work, until all
required insurance has been obtained and certificates of such insurance have
been delivered to Landlord. Insurance policies shall name the Landlord,
Landlord's Architect and General Contractor for the project as additional
insureds. Certificates of Insurance coverage shall provide that no change or
cancellation of such insurance coverage shall be undertaken without thirty (30)
days written notice to Landlord. Landlord shall have the right to require
Tenant, and Tenant shall have the duty, to stop work in the Leased Premises
immediately if any of the coverage required herein lapses during the course of
the work, in which event Tenant's Work may not be resumed until the required
insurance is obtained and satisfactory evidence of same is provided to the
Landlord.
a. Tenant's General Contractor's Required Minimum Coverages and Limits of
Liability.
(1) Worker's Compensation Insurance, as required by State law, and
Employer's Liability Insurance with a limit of not less than $1,000,000 (or more
if required by the law of the State) and any insurance required by any Employee
Benefit Act or similar statute applicable where the work is to be performed as
will protect the contractor and subcontractors from any and all liability under
the aforementioned act(s) or similar statute.
(2) Comprehensive General Liability Insurance (including Contractor's
Protective Liability) in an amount not less than $5,000,000 per occurrence
whether involving personal injury liability (or death resulting therefrom) or
property damage liability or a combination thereof (combined single limit
coverage) with a minimum aggregate limit of $5,000,000. Such insurance shall
include explosion, collapse and underground (X,C and U) coverage and contractual
liability coverage for personal injury, death and damage to the property of
other arising from construction at the Leased Premises, whether performed by
Tenant's contractors, subcontractors, or sub-subcontractors, or by anyone
directly or indirectly employed by any of them.
(3) Comprehensive Automotive Liability Insurance, for the ownership,
maintenance, or operation of any automotive equipment, whether owned, leased or
otherwise held, including employer's non-ownership and hired car liability
endorsements, in an amount not less than $5,000,000 per occurrence and
$5,000,000 aggregate, combined single limit bodily injury and property damage
liability.
Such insurance policies shall insure the Tenant's general contractor and
all subcontractors against any and all claims for bodily injury, including death
resulting therefrom and damage to the property of others arising from its
operations at the Leased Premises or in connection with construction of the
Leased Premises, whether performed by the Tenant's general contractor,
subcontractors, or sub-subcontractors, or by anyone directly or indirectly
employed by any of them.
b. Tenant's Insurance Requirements
(1) Tenant shall obtain Owner's Protective Liability Insurance
as will insure Tenant against any and all liability for damage from bodily
injury, including death resulting therefrom, or property damage 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.
Landlord and Landlord's Architect and General Contractor shall be named as
additional insureds. Said insurance shall be provided in minimum amounts of
$5,000,000 aggregate, combined single limit bodily injury and property damage
liability.
(2) Tenant's Work Insurance: Tenant shall insure 100% of the
value of the work in the Leased Premises as it relates to the building
within which the Leased Premises is located, with an "all risk" perils
property insurance policy or a completed value "all risk" perils
Builder's Risk policy, naming the interest of the Landlord and the
Tenant's general contractor and all subcontractors, as their
respective interests may appear, within a radius of one hundred feet
(100') of the Leased Premises.
3. All contractors engaged by Tenant shall be licensed contractors in the
State in which The Project is located possessing good labor relations, capable
of performing quality workmanship and working in harmony with Landlord's General
Contractor and other contractors on the job. All work shall be coordinated with
the general project work.
4. Tenant's contractors and construction shall comply in all respects with
applicable federal, state and local 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 the Tenant.
5. Tenant shall complete all work within the Leased Premises as
expeditiously as possible, but in no event later than in time to open for
business on the Commencement Date. Should Tenant fail to complete its work
within this schedule, Landlord may, at Landlord's option, install a temporary
storefront or barricade at the Leased Premises at Tenant's expense. The costs
and expenses for a temporary storefront and other work performed by Landlord,
which was made necessary due to the Tenant's failure to complete its work in
time for the Commencement Date, shall be payable to Landlord by Tenant.
6. Landlord shall have the right to perform, on behalf of and for the
account of Tenant any of Tenant's Work which Landlord deems necessary to be done
on an emergency basis or which pertains to structural components, the general
utility systems for The Project, roof and exterior wall penetrations, or the
erection of temporary barricades and temporary signs, during construction for
the period following the Opening of The Project for business. Landlord will
provide such work at Tenant's expense.
7. Tenant's Work shall be subject to the inspection and approval of
Landlord and Landlord's Architect.
8. Tenant shall pay or reimburse Landlord for all costs incurred by
Landlord (including deposits) for all utility meters for the Leased Premises.
9. Upon the completion of Tenant's Work, all facilities shall be in full
use without defects.
10. All work performed by Tenant shall be performed so as to cause no
interference with other tenants and the construction and operation of The
Project. Tenant will take all precautionary steps to protect its facilities and
the facilities of others affected by Tenant's Work and properly police same.
Construction equipment and materials are to be located within the Leased
Premises and truck traffic is to be routed in and from the site, all as directed
by Landlord and so as not burden the construction and operation of The Project.
11. Upon and from the completion of Tenant's Work in the Leased Premises
and acceptance by Landlord's Architect, a minimum one-year warranty of all work,
materials, and equipment shall be provided to Landlord by Tenant.
12. Landlord shall have the right to stop Tenant's Work whenever necessary
to obtain compliance with applicable building and safety codes or the approved
Store Construction Documents and Specifications.
13. Tenant and its contractors shall comply with the guidelines for Tenant
Work procedures and temporary construction facilities set forth in the Tenant
Handbook, and Landlord's Construction Rules and Regulations which may be issued
from time to time.
14. Landlord shall have the right to order any Tenant or Tenant's
contractor who willfully violates any of the above requirements to cease work,
and to remove himself and his equipment and employees from The Project.
C. TEMPORARY SERVICES AND FACILITIES DURING CONSTRUCTION
1. Utility costs or charges for any service to the Leased Premises shall be
the responsibility of Tenant from the date Tenant commences work or is obligated
to commence work, whichever is earlier.
2. If necessary, Tenant will provide temporary heat for the Leased Premises
during construction. No open burners are permitted and only electricity may be
used for temporary heat.
3. Temporary Electrical Services. If electrical service is not available in
the Leased Premises during construction, Landlord shall provide electrical
service in an area designated by the Landlord. Tenant shall request, in writing,
permission to connect temporary lines to the power source for service to the
Leased Premises. Tenant shall reimburse Landlord for the Temporary Electric
Services.
4. Temporary Trash Removal. During initial construction, fixturing and
stocking, Landlord shall provide trash removal service from the service areas.
It shall be Tenant's responsibility to break boxes down and place trash daily in
the containers provided. Trash accumulation will not be permitted overnight in
the Leased Premises, mall or service/exit corridors. Tenant shall not allow
trash to accumulate within the Leased Premises nor shall Tenant place any trash
in the service/exit corridor or mall areas adjacent to the Leased Premises.
Tenant shall reimburse Landlord for the Temporary Trash Removal.
The period shall start with the date the Tenant starts construction in the
Leased Premises and ends with the date the Tenant opens for business.
In addition, Tenant shall pay any costs incurred by Landlord in removing
trash from areas in and around the Leased Premises. Landlord's decision as to
which Tenant is responsible for trash left outside the Leased Premises will be
reasonable and equitable, and Landlord's decision will be final.
5. Plans Review/Tenant Coordination. Landlord or its architect and/or
engineer shall review Tenant's plans and specifications for compliance with the
provisions of this Exhibit D and the Tenant Handbook. In addition, Landlord
shall assign a Tenant Coordinator(s) to work with Tenant and Tenant's Architect,
Engineer and contractor for the design and construction of the Leased Premises.
Tenant shall reimburse Landlord for such plan review and tenant coordination.
6. Temporary Storefront. If Tenant is not open for business in the Leased
Premises and Landlord's Retail Development is open, or if, in Landlord's sole
judgment, Landlord determines that a temporary storefront is necessary so as not
to disrupt the construction, opening or operation of any portion of The Project,
then Landlord shall install, at Tenant's expense, for Tenant's use during
construction a full height temporary barricade on the storefront lease line.
Tenant shall reimburse Landlord for the temporary storefront. Upon completion of
Tenant's construction and fixturing in the Leased Premises, Tenant shall remove,
disassemble and dispose of such temporary storefront.
7. Coming Soon Sign. If during Tenant's initial construction, fixturing and
merchandise stocking, The Project is open (or shall open) for business, Landlord
will provide and install, following the earlier to occur of (a) erection of the
initial construction barricade, or (b) completion of the storefront for the
Leased Premises, a "coming soon" sign on the front (barricade or storefront, as
the case may be) of the Leased Premises. Tenant shall reimburse Landlord for
providing such sign.
8. Suite Number and Tenant Trade Name. Landlord shall furnish and install
suite number and Tenant trade name sign adjacent to Tenant's exterior and/or
interior rear exit door(s) in accordance with Landlord's standard. Landlord
shall also install suite number on Mall storefront. Tenant shall reimburse
Landlord for this service.
9. The charges for Temporary Services and Facilities as described in this
subsection C shall be:
Size of Leased Premises Landlord's Charge
9,400 sf The actual cost for the temporary services
shall not exceed $1.00 psf
10. The charges for all work performed or to be performed by Landlord for
or on behalf of Tenant shall be due and payable within thirty (30) days after
billing by Landlord. Landlord may decline at Landlord's sole judgment to proceed
with work at Tenant's expense until Landlord's receipt of payment thereof.
D. COST PLUS ADMINISTRATION FEE WORK BY LANDLORD IN PREMISES AT TENANT
EXPENSE
The following work in the Leased Premises shall only be performed by
Landlord in Landlord's building. The Tenant shall contract with the Landlord to
furnish the following work items if required by Tenant's store design at
Landlord's actual cost plus fifteen percent (15%) for administration, and the
cost of any such item of work shall be payable to Landlord in full within thirty
(30) days after receipt of invoice therefore.
1. Openings in rated demising partitions and exterior wall, provided such
opening/penetrations have been approved in advance by Landlord in writing.
2. Roof Openings. With Landlord's prior written permission, roof openings
for any purpose shall include supporting structures, curbs, roof patching and
flashing. Tenant shall be responsible for installation of ducts, pipes,
equipment and counter flashing. Landlord reserves the right to refuse to permit
the furnishing of any openings which exceed the capability of the structural
system or which in Landlord's opinion would have an appearance detrimental to
Landlord's Building.
3. Plumbing Service. With Landlord's written permission, additional
sanitary sewer or relocation of sanitary sewer.
4. Electric Service. With Landlord's written permission, additional
electric service or relocation of electrical service.
5. Storefront. With Landlord's prior written permission, changes to
Landlord furnished interior and exterior storefront including but not limited to
additional doors and relocation of doors.
6. Landlord's Labor (including overtime, demurrage and waiting time) and
equipment used in any work Landlord performs for Tenant.
7. Architectural and/or Engineering fees incurred Landlord as a result of
Tenant requesting any services in excess of the standard review services
described in Section C.5.
8. Building Department Expeditor Fees incurred by Landlord in expediting
Tenant Building Permit, Controlled Inspection and other requirements for
temporary and permanent Certificates of Occupancy on the building and the Leased
Premises.
9. Building Permits, Microfilming and Documentation Fees paid by Landlord
on behalf of the Tenant in expediting the approval of Building Permits and other
approvals of Agencies having jurisdiction.
E. CERTIFICATE OF ACCEPTANCE
Upon the completion of Tenant's construction and fixturing work within the
Leased Premises, Tenant shall so notify Landlord in writing. Landlord, upon
receipt of such notice from Tenant, shall issue a Certificate of Acceptance of
said premises provided, however, that the issuing of such a Certificate shall be
contingent upon all of the following:
1. The satisfactory completion by Tenant of the work to be performed by
Tenant under this Exhibit D, in accordance with good workmanship and the
approved Store Working Drawings and Specifications therefore.
2. Receipt by Landlord from Landlord's Architect of a premises acceptance
letter. This letter can be issued only upon Tenant's correction of the
deficiencies noted by Landlord or Landlord's Architect upon any inspection of
the Leased Premises.
3. Tenant shall have furnished Landlord with waivers of liens and sworn
statements, or satisfactory substitutes for same, in such form as may be
required by Landlord, from all contractors, subcontractors and other persons
performing labor and/or supplying materials in connection with such work showing
that all of said persons have been compensated in full.
4.
5. Submission by Tenant to Landlord of the warranties for the benefit of
Landlord on the workmanship, materials, and equipment incorporated into the
Leased Premises as required in Section 3.B.11 of this Exhibit.
<PAGE>
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SPECIALTY TENANT LEASE EXHIBIT
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EXHIBIT E
SIGN CRITERIA
1. Tenant is required to identify the Leased Premises by signage on the
storefront. The general criteria for the design of Tenant' signage ("sign
criteria") is set forth below. More specific sign criteria for The Project as a
whole and certain tenants in certain designated locations such as in food courts
and mall courts is set forth in the Tenant Handbook, (Tenant Design Criteria)
hereinafter referred to as "Tenant Handbook".
2. Costs incurred in design, construction and installation, as well as
maintenance shall be the responsibility of Tenant. The Tenant must obtain
permits to erect and connect the sign from local community officials before the
sign is installed.
3. It is intended that the signage be developed in an imaginative and
varied manner so as to enhance the architectural treatment of the facade in
general and be harmonious with the overall architecture and thematic
consideration of The Project in particular. Although current signage practices
of the Tenant shall be considered, they will not govern the signs to be
installed.
4. Approval of signs shall be solely the right of the Landlord, and Tenant
must submit all design for signage to the Landlord for approval in the form of
working drawings before manufacturing or further assembly begins. Submission
shall be to Landlord, in the form of shop drawings with all pertinent details
necessary for construction and installation included. Submission shall be a
minimum of ninety (90) days before proposed installation date, and tenant is
expected to have sign manufactured and ready for installation within forty-five
(45) days of approval by Landlord or Landlord's agent before installation, at
project site. Landlord reserves the right to reject signs not conforming to
approved drawings regardless of stage of completion or installation.
5. Each tenant is required to have two (2) storefront signs. The Tenant's
storefront sign shall occupy an area of the storefront facade designated in the
Tenant Handbook and/or the Lease Outline Drawing, and/or by the Project
Architect. The area shall total no more than eight (8) square feet for each
sign. The design of the storefront is to be considered by Tenant in the
development of signage. In general, signs will be installed in the designated
sign area above the entry door. Variation of this criteria shall be subject to
Landlord's prior written approval, which shall be solely at the discretion of
Landlord. No sign shall be installed closer than three feet (3'-0") from the end
of the Leased Premises storefront on both sides.
6. Signage shall be limited to the name of the store. Additional elements
will be considered as long as they enlarge, expand, or otherwise clarify the
name of the store.
7. Signs which are comprised of unaltered sans serif typefaces are, in
general, unacceptable, as are signs or type faces which are difficult to read.
8. The use of corporate identifications or logos will be considered, but
prior use or identification with a particular sign or logo will not govern
Landlord's approval for Tenant use. Tenant agrees that Landlord's rejection of
particular logo or sign shall not constitute a violation of Lease by Landlord.
In the case of conflict between the sign criteria and other provisions of the
Lease, Tenant agrees that the sign criteria and Landlord's discretion shall
prevail. Tenant shall not hold Landlord liable for damage or injury as a result
of the sign criteria or the implementation of the sign criteria by agreement of
both parties.
9. A variety of fabrication materials shall be considered, however
construction shall be guaranteed for outdoor use for a period of at least five
(5) years against peeling, cracking, crazing, blistering, or any other
degradation of surface or materials. Tenant shall obtain, from manufacturer of
the sign, a five (5) year warranty covering the condition of finished surfaces,
construction and operation of sign.
10. All electrical signs shall carry approval of Underwriters Laboratories
(U.L.) on all component parts and on the complete display. Maximum brightness of
lit signs shall be fifty(50) foot Lamberts measured one foot (1') from the
source of light. No blinking, moving or flashing lights shall be allowed.
Surface lighting may be reduced in order to accentuate lit signage. There will
be no special advantage in terms of visibility of internally lit over externally
lit signs.
11. No exposed raceways, ballast boxes or electrical transformers will be
permitted except as required to be exposed by local building codes.
12. Landlord shall not be responsible for signs improperly installed or
manufactured, and those signs not meeting code requirements shall, at Tenant's
expense, be removed and built to code specifications before reinstallation.
Signs meeting Landlord's sign criteria, but not meeting local code requirements,
shall be the responsibility of Tenant, and Tenant agrees not to hold Landlord
liable for costs due to conflict between these sign criteria and code, should
such conflict exist under present code or due to future changes in code.
13. Notwithstanding anything herein contained to the contrary, Tenant shall
have the right to replace any existing sign(s) of said Tenant as long as such
replacement meets the sign criteria listed within this document, the Tenant
Handbook, and is accompanied by Landlord's prior written approval prior to
installation.
14. No other signs of any type or purpose, permanent or temporary, shall be
permitted to be displayed upon the facade, windows or within the dimension
prescribed in Section 4.03 of the Lease, behind an unobstructed window unless
and until such sign has been submitted to Landlord and has received Landlord's
prior written approval. Landlord shall be the sole judge of what constitutes an
unobstructed window. Removal of signage of any type installed without Landlord
approval shall be mandatory before said sign shall be considered by Landlord for
installation.
15. Landlord shall not be required to approve signage for any reason other
than conformance with the sign criteria in this Exhibit E and the Tenant
Handbook. Scheduled opening dates and other time constraints shall not be reason
to approve signage which Landlord otherwise would consider unsuitable for
manufacture or installation. Tenant agrees not to hold Landlord liable for any
damage caused to Tenant due to signage or lack of signage as a result of
Landlord's insistence upon conformance with the sign criteria or the Landlord's
withholding of approval of submitted signage.
16. In the event that Tenant is unable to supply satisfactory signage
design by the fixturing period of Tenant's store, Landlord shall have the option
of providing such design. In such a case, Tenant agrees to pay prior to store
opening all expenses involved in the design, manufacture, and installation of
said signage plus 15% cost of administration, and Tenant agrees to waive rights
to reject said signage and agrees not to oppose installation of said signage.
17. Signage indicated on drawings and mechanicals submitted for reasons
other than signage evaluation (as described in this Exhibit E and the Tenant
Handbook) shall not constitute a signage submittal. No approval of such drawings
and mechanicals shall constitute approval of signage.
18. Food Court Tenants shall be permitted to install one menu board within
the Leased Premises subject to Landlord's prior design review and written
approval. Refer to the Tenant Handbook for type, size and location allowed.
19. Procedure for Submittal and Approval of Sign Drawings:
a. Approval of store design drawings or working drawings and
specifications for Tenant's Leased Premises does not constitute
approval of any sign work. Approval of signs shall be solely the right
of Landlord, and Tenant must submit all candidates for signage to the
Landlord for approval in the form of sign designer's working drawings
and/or manufacturer's shop drawings before manufacturing or assembly
begins. Drawings by Tenant, its architect or anyone not qualified to
produce signage drawings are not acceptable. At the same time as
Tenant's initial submission of store working drawings and
specifications to Landlord, Tenant shall submit one (1) set of
reproducible prints and specifications and three (3) sets of blue
prints, along with samples of all material and colors, for all its
proposed sign work. The drawings shall clearly show location of sign
on storefront elevation drawing, size and stroke dimensions, graphics,
color, construction, and attachment details. Full information
regarding electrical load requirements and brightness in footcandles
shall also be included. Landlord reserves the right to reject signs
not conforming to approved drawings regardless of state of completion
or installation.
b. As soon as practical after receipt of the sign drawings,
Landlord shall return to Tenant one (1) set of such sign drawings with
the suggested modifications and/or approval. If, upon receipt of
approved sign drawings bearing Landlord's comments, Tenant wishes to
take exception thereto, Tenant may do so in writing, by certified or
registered mail addressed to Landlord within seven (7) days from the
date of Tenant's receipt of such sign drawings. Unless such action is
taken, it will be deemed that all comments made by Landlord on the
sign drawings are acceptable to and approved by Tenant.
c. If sign drawings and specifications are returned to Tenant
with comments, but not bearing approval of Landlord; said drawings and
specifications shall be revised immediately by Tenant and resubmitted
to Landlord for approval within seven (7) days of their receipt by
Tenant.
<PAGE>
EXHIBIT H-1
PRE-CONSTRUCTION TENANT ESTOPPEL CERTIFICATE
EXHIBIT 10.93
Las Vegas Lease
<PAGE>
SHOPPING CENTER LEASE
In consideration of the rents and covenants hereinafter set forth, Landlord
leases to Tenant, and Tenant leases from Landlord, the Premises upon the terms
and conditions of this Shopping Center Lease ("Lease") entered into and dated
May 15, 1998 ("Execution Date").
ARTICLE 1
FUNDAMENTAL LEASE PROVISIONS
1.1 Landlord: FASHION OUTLET OF LAS VEGAS ASSOCIATES,
a Nevada general partnership
1.2 Tenant: TOYS INTERNATIONAL,
a California corporation
1.3 Tenant's Trade Name: TOY CO. (Section 9.1)
1.4 Premises:
That certain retail space currently identified as
"Space No. 1-(Sectionn2.1) Shopping Center known as "Fashion
Outlet of Las Vegas," located in the unincorporated area
known as "Primm," in the County of Clark, State of Nevada,
containing approximately 6,567 square feet of Floor Area
with a frontage of approximately 52.42 feet. The Premises
are shown in that approximate location crosshatched on
Exhibit A.
1.5 Lease Term: Approximately ten (10) years. (Section 3.1)
1.6 Target Delivery Date:
Seventy-Five (75) days prior to the initial
open of Shopping Center.(Sectionh2.3)
1.7 Expiration Date:
The last day of the One Hundred Twentieth (120th) full
calendar(Sectiono3.1)ing the Rent Commencement Date (if the
Rent Commencement Date falls on the first (1st) day of a
calendar month, then the calendar month in which the Rent
Commencement Date occurs shall be deemed to be the first
full calendar month for the determination of the Expiration
Date).
1.8 Rent Commencement Date:
The earlier to occur of (a) that date which is
t(Section 4.1)ccur of (i) the initial opening of the
Shopping Center or (ii) that date which is Sixty (60) days
after the date Tenant receives a fully-executed original
copy of this lease from Landlord, provided Landlord receives
the Tenant executed Lease on or before May 13, 1998., or (b)
the date Tenant first opens for business in the Premises.
1.9 Minimum Annual Rent: Sixteen and 50/100 Dollars ($16.50) per annum
p(Sectione4.2)t of Floor Area of the Premises, beginning with the Rent
Commencement Date and continuing for the first two (2) full years of the Lease
Term plus any partial calendar month at the beginning of the Lease Term; then,
Nineteen and No/100 Dollars ($19.00) per annum per square foot of Floor Area of
the Premises for the next four (4) full years; then, Twenty-One and 50/100
Dollars ($21.50) per annum per square foot of Floor Area of the Premises for the
remainder of the Lease Term.
1.10 Percentage Rent:
Five percent (5%) of Gross Sales in excess of the
Breakpoint (Section 4.3)
1.11 Marketing Assessment:
Two and No/100 Dollars ($2.00) per annum per
square Floor Area of the Premises.(Section 8.2)
1.12 Addresses for Notices: (Article 23)
To Landlord: FASHION OUTLET OF LAS VEGAS ASSOCIATES
c/o TrizecHahn Centers
4350 La Jolla Village Drive, Suite 400
San Diego, CA 92122-1233
Attn: Legal Department
and to: Landlord's manager at the Shopping Center.
and to Ground Lessor for compliance with Section 11.3(d) only:
PRIMM 650 LIMITED PARTNERSHIP
c/o Hale, Lane, Peek, Dennison, Howard, Anderson and
Pearl
100 West Liberty Street, Tenth Floor
Post Office Box 3237
Reno, Nevada 89505
Attn: R. Craig Howard
To Tenant: TOYS INTERNATIONAL
550 Rancheros Drive
San Marcos, CA 92069
Attn: President
1.13 Permitted Use: The operation of a Manufacturer's Outlet for the retail sale
of b(Sectiona9.1) toys and, at Tenant's option (but only to the extent
incidental to the primary operation of a toy store), better quality
collectibles, hobbies, arts and crafts, children's books, dolls, model kits
(provided that the display of such model kits shall not exceed twenty-five
percent (25%) of the retail sales Floor Area of the Premises), child-oriented
games, child-oriented video and audio cassettes, child-oriented compact and
laser discs, and other technological innovations thereof, child-oriented
computer software, sporting goods, wheel goods, stuffed animals, other juvenile
and child-related goods, and such other items as are typically displayed in
better quality toy stores. Tenant shall use the Premises for no other use or
purpose. The Permitted Use is expressly subject to Section 9.5.
1.14 Security Deposit:
Twenty-Seven Thousand Eighty-Eight and 86/100 Dollars
($27,(Article 26)
1.15 Exhibit C Rent: Intentionally Omitted. (Section 4.9)
1.16 Initial Assessment:
Two and No/100 Dollars ($2.00) per square foot of Floor
Are(Section 8.4)ises.
The provisions of this Article 1 summarize certain terms of this Lease
which are more fully described in the balance of this Lease. In the event of a
conflict between the provisions of Article 1 and the balance of this Lease, the
latter shall control. Capitalized terms used in this Lease shall have the
meanings set forth or cross-referenced in Exhibit B or otherwise defined in the
body of this Lease.
ARTICLE 2
PREMISES
2.1 Condition. Landlord shall deliver to Tenant and Tenant shall accept
from Landlord, possession of the Premises upon Substantial Completion.
Landlord's certification of Substantial Completion shall be conclusive and
binding upon Landlord and Tenant, provided, however, that Tenant may within
thirty (30) days after Substantial Completion deliver to Landlord a list of any
claimed defects in Landlord's Work, and Landlord shall thereafter proceed to
cure any such defects. Further, Landlord shall warrant the Premises against
latent defects for a period of one (1) year following Substantial Completion.
Within thirty (30) days following Substantial Completion, Tenant, at its sole
cost and expense, or Landlord, at its sole cost and expense, may cause the Floor
Area of the Premises to be measured by a licensed architect. In the event such
calculation reflects a deviation of more than one percent (1%) from the Floor
Area set forth in Section 1.4, and the other party approves the calculation,
this Lease shall be amended to reflect the recalculated Floor Area and to
proportionately adjust Minimum Annual Rent.
2.2 Title of Premises. Tenant acknowledges that Tenant's leasehold interest
in the Premises is subject to (a) covenants, conditions, restrictions,
easements, Mortgages, and other matters of record, (b) the REA and the Ground
Lease, (c) the effect of all Legal Requirements, including any local zoning
laws; and (d) general and special taxes not delinquent. Landlord warrants that
none of the matters contained in the REA, the Ground Lease and/or the Mortgage
shall adversely affect the Permitted Use.
2.3 Delay in Delivery; Project Abandonment. If Landlord cannot deliver
possession of the Premises to Tenant on the Target Delivery Date for any reason,
Landlord shall not be subject to any liability therefor. Such failure of
delivery shall not affect the validity of this Lease or the obligations of
Tenant hereunder (except as expressly provided for in this Lease), or extend the
Expiration Date. If Landlord is unable to deliver possession of the Premises to
Tenant within forty-eight (48) months after the Target Delivery Date for any
reason (including without limitation abandonment of the construction of the
Shopping Center) then Landlord, in its sole and absolute discretion, shall have
the option at any time thereafter to notify Tenant of Landlord's intent to
terminate this Lease in which event this Lease shall terminate and both Landlord
and Tenant shall be released from any liability or obligation under this Lease.
2.4 Relocation or Termination. If in connection with Landlord's expansion,
reduction, removal, renovation or construction of new or existing improvements
after the initial opening of the Shopping Center (but excluding reconfiguration
required solely to accommodate other Shopping Center tenants) Landlord
reasonably determines that it is necessary that Tenant vacate the Premises or
that the Premises be altered, Landlord may require that Tenant surrender
possession of the Premises, provided Landlord, in its sole and absolute
discretion, either (a) amends this Lease to lease Tenant other comparable
premises within the Shopping Center on the same terms and conditions as those
contained in this Lease for the balance of the remaining Lease Term, or (b)
terminates this Lease and pays Tenant an amount equal to the then unamortized
net cost to Tenant of its Improvements, calculated using a straight-line
amortization schedule and an amortization period equal to the Lease Term. The
relocation of the Premises in accordance with (a) herein or the payment of the
consideration in accordance with (b) herein shall be Tenant's sole remedy in the
event Tenant is required to surrender possession of the Premises as provided in
this Section. It is expressly agreed and understood that Landlord shall first
offer to lease Tenant other comparable premises within the Shopping Center if
available, in Landlord's sole, yet reasonable discretion. The foregoing
provisions of this Section 2.4 shall be subject to the following:
(a) Comparable premises shall be deemed to mean premises which are
substantially the same in size (not less than 4,500 square feet or more than
7,500 square feet in size and having a mall frontage of 32 feet or more) and
similar in location with respect to vertical transportation within the Shopping
Center; provided, however, in no event shall Landlord be obligated to offer to
Tenant any location which Landlord is prevented from leasing to Tenant pursuant
to covenants of Landlord respecting radius, location, use, or exclusivity
contained in any other lease, financing agreement (including the Mortgage), or
other agreement affecting the Shopping Center. If more than one (1) comparable
premises is available in the Shopping Center as determined by Landlord's sole,
yet reasonable judgement, Landlord shall offer Tenant the comparable premises
that is closest to the Premises. Landlord shall pay the cost and expense of
finishing the new premises to the extent of the quality and condition of the
decor (including all Improvements but excluding Personal Property) which existed
in the Premises immediately prior to relocation;
(b) Landlord shall give Tenant at least ninety (90) days notice of
Landlord's intention to relocate the Tenant;
(c) Landlord shall not have the right to relocate the Tenant more than one
(1) time during the Lease Term and in no event shall relocation occur from
August 1st through October 31st;
(d) The physical relocation of Tenant's Personal Property from the Premises
to the new premises shall be accomplished by Landlord at Landlord's cost and
expense;
(e) Landlord shall exercise due diligence in the relocation of the Tenant
and Minimum Annual Rental and Additional Rent shall abate during any period that
the business conducted upon the Premises must be closed as a result of such
relocation, which closure shall not exceed seven (7) days;
(f) If the new premises differ in size from the Premises as it existed
before the relocation, Minimum Annual Rental shall be adjusted to a sum computed
by multiplying the Minimum Annual Rental by a fraction, the numerator of which
shall be the total number of square feet in the new premises and the denominator
of which shall be the total number of square feet in the Premises before
relocation. In addition, all Additional Rent which is calculated based on Floor
Area shall be calculated on the basis of the Floor Area of the new premises;
(g) The parties shall immediately execute an amendment to this Lease
documenting the relocation of the Tenant and the reduction or increase in
Minimum Annual Rental;
(h) All incidental costs incurred by Tenant as a result of the relocation
including without limitation, costs incurred in change of address on stationery,
business cards, directories, advertising, and other such items, shall be paid by
Landlord, in a sum not to exceed Seven Hundred Fifty Dollars ($750);
(i) If Tenant (in its sole and absolute discretion) and Landlord are
unable to agree upon comparable premises for the purposes of relocation pursuant
to this Section 2.4 within thirty (30) days of Landlord's notice to Tenant of
its intent to relocate Tenant, then this Lease shall terminate and Landlord
shall compensate Tenant for its reasonable damages. For purposes of this Section
2.4, reasonable damages shall be defined as the unamortized net cost to Tenant
of its Improvements with a straight-line amortization period equal to the Lease
Term.
2.5 Reserved Easement. Landlord shall have the right during the Lease Term
to install, relocate, maintain, and operate conduits, facilities, and structures
comprising the Air Conditioning System and permitting the conveyance of
Utilities in and through the space above the ceiling (or ceiling line if there
is no ceiling) in the Premises. If Landlord desires to relocate any such
conduits, facilities or structures, Tenant shall have the right to approve such
relocation, which approval shall not be unreasonably withheld so long as such
items remain above the ceiling or ceiling line. Landlord further reserves the
right to use up to one percent (1%) of the Floor Area of the Premises as
Landlord may designate at any time to accommodate items serving other tenants or
resulting from the remodeling or expansion of the Shopping Center, including
without limitation columns, shafts, ducts, and pipes, provided such portion is
located adjacent to a wall other than the storefront and such items are either
not visible from the Premises sales area or are reasonably concealed in a manner
which does not materially detract from the appearance of Tenant's store.
2.6 Right to Enter. Landlord and/or its authorized representatives shall
have the right to enter the Premises at all reasonable times for the purpose of
showing the Premises to prospective purchasers or lenders. Tenant additionally
shall permit Landlord, or its authorized representatives, to enter the Premises
at all times during usual business hours upon reasonable notice (except in the
case of an emergency, in which case Landlord may enter as reasonably necessary)
to inspect the Premises, to perform its duties under the Lease, and to perform
any work therein (a) that may be necessary to comply with Legal Requirements,
(b) that Landlord may deem necessary to prevent waste or deterioration of the
Premises or Shopping Center, and (c) that Landlord may deem necessary in
connection with the expansion, reduction, remodeling or renovation of any
portion of the Shopping Center. Landlord agrees that it shall use reasonable
efforts to perform any work it is required or permitted to perform under this
Section 2.6 in such manner and at such times as to not unreasonably or
materially disturb Tenant's business operations, except in the case of an
emergency. In the event work is performed by Landlord in accordance with this
Section 2.6, except to the extent such work was caused by Tenant's failure to
perform its obligations under this Lease, and said work renders the Premises
untenantable for a period of at least three (3) consecutive days, thereafter
Minimum Annual Rent and Additional Rent (except Percentage Rent) shall be abated
proportionately with the degree in which Tenant's use of the Premises is
impaired and such abatement shall continue during the period in which Tenant is
unable to operate its business in the Premises as a result of such work.
ARTICLE 3
LEASE TERM
3.1 Duration. This Lease shall become fully effective and binding as of the
Effective Date. The "Lease Term" means that period commencing on the
Commencement Date and continuing through the Expiration Date, unless sooner
terminated as provided in this Lease or by law.
3.2 Surrender of the Premises. At the Expiration Date or earlier
termination of this Lease, Tenant shall remove all Personal Property from the
Premises and surrender possession of the Premises to Landlord in broom clean
condition and good state of repair, except ordinary wear and tear, damage or
destruction covered by Article 18, and any repair Landlord is obligated to
perform pursuant to this Lease.
3.3 Failure to Surrender Possession and Liquidated Damages. Landlord and
Tenant acknowledge and agree that any failure of Tenant to surrender possession
of the Premises on the Expiration Date or earlier termination of this Lease
shall result in substantial damages to Landlord, and that those damages are and
will be impossible or impracticable to measure. Accordingly, if Tenant does not
surrender possession of the Premises to Landlord as set forth herein, Tenant
shall be deemed a hold over tenant at sufferance. During the period of any such
hold over tenancy, Tenant shall pay to Landlord, as liquidated damages, for each
day that Tenant holds over in the Premises, an amount equal to two (2) times the
portion of the Minimum Annual Rent payable during the last month of the Lease
Term, plus an amount equal to the Additional Rent (including Percentage Rent)
which was payable by Tenant in the last full calendar year prior to the
Expiration Date or earlier termination of this Lease, prorated on the basis of a
365-day year; provided, however, that Tenant's obligation to pay such liquidated
damages shall not commence until the tenth (10th) day following Landlord's
notice to Tenant stating Landlord's intent to enforce the provisions of this
Section 3.3 and until the commencement of such liquidated damages, Tenant shall
pay the Minimum Annual Rent and Additional Rent as payable by Tenant in the last
full calendar year prior to the Expiration Date or earlier termination of this
Lease. No provision of this Lease shall be deemed to permit Tenant to retain
possession of the Premises after the Expiration Date or earlier termination of
this Lease without Landlord's prior written consent. Except as otherwise
specifically stated in this Lease, all of the terms and conditions of this Lease
shall remain in effect following any extension, renewal or hold over of the
original Lease Term.
ARTICLE 4
RENT
4.1 Rent Commencement Date. Tenant's obligation to pay Minimum Annual Rent
and Additional Rent shall commence upon the Rent Commencement Date.
Notwithstanding anything to the contrary contained herein, (i) in the event the
completion by Landlord of any punch list items pursuant to Section 2.1
materially interferes with Tenant's ability to perform Tenant's Work, the 60-day
period described in Section 1.8 shall be extended by one day for each full day
in which Tenant is so delayed and/or (ii) in the event that on the date of
delivery of the Premises to Tenant, the condition of the Premises is not in
substantial conformity with the Tenant Package provided by Landlord for Tenant's
use in the preparation of its plans and as a result the plans for Tenant's Work
must be revised, the 60-day period described in Section 1.8 shall be extended to
allow a commercially reasonable period of time (with Tenant acting diligently
and in good faith) for Tenant to prepare revised plans, obtain Landlord's
approval, and obtain a new building permit, if required.
4.2 Minimum Annual Rent. Tenant shall pay Minimum Annual Rent in twelve
(12) equal monthly installments during the Lease Term, in advance, on the first
day of each calendar month, without setoff, deduction, prior notice or demand.
Notwithstanding anything to the contrary contained herein, if the initial
opening of the Shopping Center has not occurred on or before September 1, 1998,
it is agreed that after Tenant initially opens for business within the Premises
and provided Tenant continuously remains open for business then the Minimum
Annual Rent and Percentage Rent set forth in Article 1 shall be abated through
December 31, 1998. During the time Minimum Annual Rent and Percentage Rent is
abated, Tenant shall pay to Landlord the amount equal to five percent (5%) of
Tenant's Gross Sales monthly in arrears on or before the twentieth (20th) day of
each month, and further provided that during the period the Minimum Annual Rent
and Percentage Rent is abated, Tenant shall pay all other charges called for in
the manner provided for in this Lease. The provisions of this Section 4.2 shall
in no event change or modify the Rent Commencement Date. However, in the event
Tenant fails to open for business within the time limits set forth in Article 1,
Tenant shall pay, in addition to the amounts required in Section 11.1, the
Minimum Annual Rent and Percentage Rent set forth in Article 1 for every day
Tenant is not open regardless of the provisions of this paragraph.
Notwithstanding anything to the contrary contained herein, it is agreed
that commencing on the thirtieth (30th) day following the date Tenant has opened
for business and so long as Tenant continuously remains open for business, the
Minimum Annual Rent set forth in Article 1 shall be abated until such time (the
foregoing period is referred to as the "Initial Abatement Period") as there are
initially open for business tenants occupying at least seventy percent (70%) of
the total Floor Area available for Mall Tenants in the Shopping Center. Until
such time as the aforementioned contingencies have been met, Tenant shall pay to
Landlord the lesser of (i) the monthly Minimum Annual Rent otherwise payable or
(ii) the amount equal to five percent (5%) of Tenant's Gross Sales monthly in
arrears on or before the twentieth (20th) day of each month, and further
provided that during said prior period Tenant shall pay all other charges called
for in the manner provided for in this Lease except Minimum Annual Rent. The
foregoing abatement shall in no event change or modify the Rent Commencement
Date.
Then, after the conditions for the Initial Abatement Period have been
satisfied and so long as Tenant continuously remains open for business, the
Minimum Annual Rent set forth in Article 1 shall be abated during any period
("On-Going Abatement Period") in which less than seventy percent (70%) of the
total Floor Area available for Mall Tenants in the Shopping Center is open for
business in the Shopping Center. During any such On-Going Abatement Period,
Tenant shall pay to Landlord the lesser of (i) the monthly Minimum Annual Rent
otherwise payable or (ii) the amount equal to five percent (5%) of Tenant's
Gross Sales monthly in arrears on or before the twentieth (20th) day of each
month, and further provided that during the On-Going Abatement Period Tenant
shall pay all other charges called for in the manner provided for in this Lease
except Minimum Annual Rent. In the event any On-Going Abatement Period continues
for a period of 365 consecutive days during which time Tenant's Gross Sales have
decreased by at least thirty percent (30%) as compared to Tenant's Gross Sales
for the immediately preceding 365 day period, then, Tenant shall have the right
to terminate this Lease upon notice to Landlord which must be exercised, if at
all, within thirty (30) days following the end of said 365 consecutive day
period. Upon such termination, both Landlord and Tenant shall be released from
any further liability under this Lease.
In the event the Initial Abatement Period or the On-Going Abatement Period
continue for more than 365 consecutive days, then Landlord shall have the right
to terminate this Lease upon thirty (30) days written notice to Tenant,
provided, Tenant shall have the right to nullify Landlord's termination notice
by notifying Landlord of its intention to pay the Minimum Annual Rent in
accordance with Article 1, and Article 4, Section 4.2 of this Lease (followed by
actual compliance therewith). Upon such termination, both Landlord and Tenant
shall be released from any further liability under this Lease.
4.3 Percentage Rent.
(a) In General. Tenant shall pay Percentage Rent for each partial or full
calendar year of the Lease Term calculated based on Gross Sales for such period.
Said payments of Percentage Rent shall commence with the calendar month in which
Tenant's Gross Sales first exceed the Breakpoint for such full or partial
calendar year. Said payments shall equal that amount which is the product of the
Percentage Rent figure (specified in Article 1) multiplied by the amount of
Gross Sales in excess of the Breakpoint. Said payments shall be payable
concurrently with Tenant's submittal of the monthly statements of Gross Sales in
accordance with the provisions of Section 4.3(b). Anything to the contrary
notwithstanding, in the event Minimum Annual Rent is abated in accordance with
any provisions of this Lease (other than Section 4.2 and Section 9.6), the
Breakpoint shall be adjusted accordingly.
The total Percentage Rent due and payable for a calendar year shall be
computed based on Tenant's annual statement of Gross Sales for that year and if
Tenant paid an amount greater than the actual Percentage Rent payable, the
amount of such overpayment shall be credited against Tenant's next required
payment of Additional Rent or, at the end of this Lease Term, receive a refund
thereof from Landlord, except to the extent Tenant is in monetary default under
the terms of this Lease and no other amounts are owed to Landlord; if Tenant
paid an amount less than the required Percentage Rent, then Tenant shall pay
such difference to Landlord together with Tenant's annual statement of Gross
Sales for said calendar year.
Notwithstanding anything to the contrary contained in this Section 4.3, for
the purpose of computing Percentage Rent due for a partial calendar year
occurring at the beginning of the Lease Term, Gross Sales made during that
partial year shall be added to the Gross Sales made during the first full
calendar year after the Rent Commencement Date and said payments of Percentage
Rent shall commence with the calendar month in which Tenant's Gross Sales first
exceed the Breakpoint for this entire period
(b) Reporting of Gross Sales. Tenant agrees to furnish to Landlord a
statement of Gross Sales within twenty (20) days after the close of each
calendar month, and an annual statement, including a monthly breakdown of Gross
Sales, within forty-five (45) days after the close of each calendar year during
the Lease Term and any partial calendar year at the beginning or end of the
Lease Term; provided, however, that Tenant shall cause its store manager to
orally transmit to Landlord monthly Gross Sales within ten (10) days after the
close of each calendar month and annual Gross Sales within thirty (30) days
after the close of each calendar year. It is agreed, however, that should Tenant
fail twice during the Lease Term to submit its written report of monthly and/or
annual Gross Sales within the time periods as provided for herein, then Tenant
shall, for the remainder of the Lease Term, be required to submit its written
monthly statements of Gross Sales within ten (10) days after the close of each
calendar month and to submit its written annual statements of Gross Sales within
thirty (30) days after the close of each calendar year. Such statements shall
itemize all elements of Gross Sales and Gross Sales Adjustments, and shall be
certified as true and correct by a Responsible Officer of Tenant. The receipt by
Landlord of any statement or any payment of Percentage Rent for any period shall
not bind Landlord as to the correctness of such statement or payment. Upon
request, Tenant agrees to furnish to Landlord a copy of Tenant's state and local
sales and use tax returns, if required in the state where the Shopping Center is
located, but only to the extent such returns are limited to the business
conducted upon the Premises. Tenant shall record at the time of sale, in the
presence of the customer, all receipts from sales or other transactions using a
cash register or computer system that cumulatively numbers and records all
receipts. Tenant and its subtenants, licensees, and concessionaires, shall keep
(i) full and accurate books of account and records in accordance with generally
accepted accounting principles consistently applied, including without
limitation, a sales journal, general ledger, and all bank account statements
showing deposits of Gross Sales revenue, (ii) all cash register detail tapes
with regard to all transactions of Gross Sales, and (iii) detailed original
records of all Gross Sales Adjustments. Such books, receipts, and records shall
be kept by Tenant for a period of three (3) years after the close of each
calendar year and during such 3-year period shall be available for inspection
and audit by Landlord and its representatives at the Premises or Tenant's
principal place of business at all times during regular business hours upon no
less than twenty (20) days prior notice. It is agreed, however, that Landlord's
right to inspect or audit shall be limited to once every calendar year, provided
(i) that in the event any audit reveals an understatement of annual Gross Sales
of more than two percent (2%), said limit shall thereafter be inapplicable, and
(ii) that in the event any audit shall result in a dispute between Landlord and
Tenant, and such dispute may be resolved by another audit, Landlord shall be
entitled to a second audit. Any corrections or adjustments to Gross Sales
previously reported by Tenant which will result in a refund to Tenant must be
reported to Landlord within the three (3) year period following the end of the
calendar year in which such Gross Sales were made. If it shall be determined as
a result of an audit that there has been a deficiency in the payment of
Percentage Rent, then such deficiency shall become immediately due and payable
with interest at the Interest Rate from the date when said payment was due or if
such audit determines that there has been an overpayment of Percentage Rent the
amount of such overpayment shall be credited against Tenant's next required
payments of Additional Rent. In addition, if Tenant understates annual Gross
Sales by more than three percent (3%) and if Landlord is entitled to any
additional Percentage Rent as a result, or if an audit shows that Tenant has
failed to maintain the books of account and records as required or fails to
appear for and/or cooperate with Landlord's audit representative and, as a
result, Landlord is unable to verify the accuracy of Tenant's statement, then
Tenant shall pay to Landlord all reasonable costs and expenses incurred by
Landlord in conducting such audit and collecting any underpayment. Any
information gained from such audits, statements or inspection shall be
confidential and shall not be disclosed other than to carry out the purpose
hereof; provided, however, Landlord shall be permitted to divulge the contents
of any such statements in connection with any contemplated sales, transfers,
assignments, encumbrances or financing arrangements of Landlord's interest in
the Premises or in connection with any administrative or judicial proceedings in
which Landlord is involved where Landlord may be required to divulge such
information. It is expressly agreed and understood that in no event shall any
provision of this Lease be deemed to prohibit or otherwise restrict Landlord
from divulging information concerning Gross Sales to Ground Lessor as necessary
in order to comply with the terms of the Ground Lease.
(c) New Locations. If during the Lease Term, Tenant, or any director or
officer of Tenant, or any parent, subsidiary or other affiliate of Tenant,
directly or indirectly, operates or owns under Tenant's Trade Name or otherwise
any similar type of Manufacturer's Outlet or other so-called "factory outlet"
business (exclusive of any such business so operated or owned pursuant to a
lease that was executed prior to June 1, 1996) within a radius of fifty (50)
miles measured from the hotel/casino located on Las Vegas Boulevard in Las
Vegas, Nevada, and known as "New York, New York," Landlord shall, and continuing
while Tenant is operating said other business, include the Gross Sales of such
other business in the Gross Sales made from the Premises for the purpose of
computing the Percentage Rent due hereunder. Tenant will provide Landlord with a
statement of Tenant's Gross Sales, in accordance with the provisions of Section
4.3(b) for each such business location operated by Tenant within said radius.
(d) Mutual Right to Terminate Based on Gross Sales. Landlord or Tenant
shall have a one (1) time right to terminate this Lease by written notice to the
other party, which notice must be given, if at all, during the first ninety (90)
days following the thirty-sixth (36th) full calendar month of the Lease Term.
Such termination shall be effective on the ninetieth (90th) day after such
notice is given. This right to terminate shall be null and void in the event
Tenant's Gross Sales exceed One Million Six Hundred Fifty Thousand and No/100
Dollars ($1,650,000.00) during any one of the first three (3) years (year being
defined as twelve [12] consecutive full calendar months) of the Lease Term and,
further, Tenant's right to terminate shall be null and void in the event Tenant
is in default of this Lease, beyond any applicable cure period, as of the date
of the termination notice.
4.4 Additional Rent. Tenant shall pay all Additional Rent without setoff,
deduction, prior notice or demand in the amounts and in the manner set forth in
this Lease.
Tenant's payments of Additional Rent pursuant to Articles 5, 6, and 7
shall be payable in the following manner:
(a) Estimate. Commencing with the Rent Commencement Date and continuing
throughout the balance of the Lease Term, Tenant shall pay Landlord, on the
first day of each calendar month, those amounts Landlord estimates to be
Tenant's share of the aforementioned Additional Rent. Landlord may adjust such
monthly estimates at the end of any calendar quarter on the basis of Landlord's
experience and reasonably anticipated costs.
(b) Reconciliation. Following the end of each calendar year or property tax
installment period, as applicable, Landlord shall furnish Tenant separate
statements for the Additional Rent payable by Tenant pursuant to Articles 5, 6,
and 7. Such statements shall cover the billing period showing the total of the
applicable Additional Rent expenses, Tenant's share of such expenses for such
billing period, and the total prior amounts payable by Tenant with respect to
such period in accordance with subsection (a) of this Section. Upon written
request, Landlord will provide Tenant with the method of calculation of Tenant's
share. If Tenant's share of the Additional Rent expenses exceeds the total of
Tenant's payments with respect thereto, Tenant shall pay Landlord the deficiency
within thirty (30) days after receipt of such statement. If said payments exceed
Tenant's share of the specified Additional Rent expenses, such excess shall be
offset against the payments next due Landlord for the same Additional Rent
expense with a refund of any excess remaining at the expiration or earlier
termination of the Lease Term except to the extent Tenant is in monetary default
under the Lease. If it shall be determined as a result of an audit that there
has been an overpayment in the payment of Additional Rent due to Landlord's
miscalculation of the year end reconciliation, then such overpayment shall be
credited to Tenant's next payment of Additional Rent with a refund of any excess
remaining at the expiration or earlier termination of the Lease Term except to
the extent Tenant is in monetary default under this Lease.
(c) Tenant's Right to Audit. Provided Tenant is not in default under any
provision of this Lease after notice and expiration of the applicable cure
period, if any, provided for in Article 16, within twelve (12) months after the
receipt by Tenant of the annual statement with respect to any item of Additional
Rent for a calendar year, or tax year, if applicable with respect to taxes,
Tenant may, upon no less than thirty (30) days' prior written notice to
Landlord, audit Landlord's books pertaining to such Additional Rent payable by
Tenant pursuant to Articles 5, 6, and 7 for such calendar year or tax year, as
the case may be. Tenant's audit shall be performed by a certified public
accountant who is retained strictly on a non-contingency basis. The audit shall
be conducted at the office designated by Landlord and shall be during usual
business hours. Tenant's right to audit shall be restricted to one (1) per
calendar year and shall be at the sole cost and expense of Tenant. In no event
shall Tenant's right to audit relieve Tenant of its obligation to pay all
amounts due as provided in this Lease. Tenant shall deliver a copy of the
results of such audit to Landlord within fifteen (15) days of its receipt by
Tenant. Any information gained from such audit shall be confidential and shall
not be disclosed by Tenant, its agents and/or employees except to Tenant's
attorneys, accountants, and consultants or in connection with any contemplated
assignments or in connection with any administrative or judicial proceedings in
which Tenant may be required to divulge such information.
(d) Payment Directly to Third Party. Landlord, in its sole and absolute
discretion, shall have the option to require that the Tenant pay the reasonable
costs of certain services directly to the provider of such services. In such
event, such costs shall not be payable to Landlord as provided in the applicable
provision of this Lease unless Tenant fails to pay any such amount when due. If
Tenant fails to pay any such amount when due and such failure continues for ten
(10) days after Tenant s receipt of notice thereof from Landlord, Landlord shall
have the right, but not the obligation, to pay such amount on behalf of Tenant
and Tenant shall, upon demand, pay such amount to Landlord plus Landlord's
Administrative Fee.
4.5 Proration of Rent for Partial Month. Rent payable by Tenant for any
partial calendar month at the beginning or end of the Lease Term which is
calculated on the basis of a full calendar year shall be computed on a daily
basis to reflect the actual number of days in said partial month at an amount
equal to one-three hundred sixty-fifth (1/365th) of such annual Rent for each
day of said partial month.
4.6 Landlord's Right to Offset. If any sums are payable by Landlord
pursuant to any provision of this Lease, Landlord shall have the right to first
offset from such sum any amounts that are currently payable by Tenant to
Landlord pursuant to any provision contained in this Lease.
4.7 Failure to Pay Rent When Due. If Tenant fails to pay any amount of
Minimum Annual Rent or Additional Rent within five (5) days of when due, such
unpaid amount shall bear interest at the Interest Rate from the date such sum
was due. In addition, Tenant acknowledges that the late payment by Tenant of any
installment of Minimum Annual Rent or Additional Rent within five (5) days of
when due will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amount of which costs are extremely
difficult or impracticable to determine. Therefore, if any such installment is
not received by Landlord from Tenant within five (5) days of when due, Tenant
shall immediately pay to Landlord a late charge of Four Hundred Dollars ($400).
Landlord and Tenant agree that such late charge represents a reasonable estimate
of such costs and expenses and is fair compensation to Landlord for its loss
caused by Tenant's late payment.
4.8 Address for Payments. Tenant shall pay all rent and other payments due
Landlord at Landlord's management office in the Shopping Center, or at such
place as Landlord may from time to time designate in writing.
Tenant agrees to pay to Landlord (a) the amount of all taxes, similar
assessments, and special assessments levied for any reason on, or attributable
to, the Premises and/or the realty underlying the Premises (whether separately
or as part of a larger parcel as provided in this Article) and reasonable costs
associated with challenging such taxes and assessments and (b) the cost to
Landlord of the insurance required to be maintained by Landlord on the Premises
under Section 13.3. In no event shall Tenant be required to pay: (a) any portion
of Landlord's general income, franchise, inheritance, estate or gift taxes, or
(b) any assessment levied for the purpose of financing Landlord's cost to
develop or construct any portion of the Shopping Center.
With respect to any assessment which may be levied against or upon the
Premises and the Shopping Center, or which under the laws then in force may be
evidenced by improvement bonds or other bonds, and which may be paid in annual
installments, only the amount of such annual installment (with appropriate
proration for any partial calendar year of the Lease Term) shall be included
within the computation of Tenant's pro rata share of taxes and assessments for
any particular year.
Upon Tenant's written request therefor, Landlord will provide Tenant
with copies of applicable tax bills for the immediately preceding tax period or
other information upon which Landlord has relied for its determinations
hereunder.
For the purpose of this Article, the term "larger parcel" is such
portion of the Shopping Center containing the Premises and other realty and/or
improvements for which taxes and assessments are levied, but excluding any
portion whose taxes are included in the Common Area Expenses. In the event the
Premises and the realty underlying the Premises are not separately assessed for
computation of taxes and assessments or are separately assessed and billed as
part of a larger parcel then, in either event, taxes and assessments on the
Premises and the realty underlying the Premises shall be that proportion of the
taxes and assessments on such larger parcel which the Floor Area of the Premises
bears to the Floor Area of all the areas available for exclusive use and
occupancy by tenants of such larger parcel, whether or not actually occupied and
open for business, provided that an equitable adjustment shall be made for
buildings which are partially completed on the date such taxes and assessments
are levied.
In the event the cost to Landlord of the insurance covering the
Premises is not separately charged to Landlord, Tenant's share of insurance as
set forth herein shall be the proportion of the total insurance expenses
(excluding any insurance which is included in Common Area Expenses) which the
Floor Area of the Premises bears to the Floor Area of all the areas available
for exclusive use and occupancy by tenants of the Shopping Center, whether or
not actually occupied and open for business, exclusive of Floor Area which is
separately insured.
Tenant shall pay before delinquency all taxes (including sales and use
taxes), assessments, license fees, and public charges levied, assessed or
imposed upon its business operation as well as upon its merchandise,
Improvements, and Personal Property. In the event such items of Tenant's
property are assessed with property of Landlord, Landlord shall allocate such
assessment, on the basis of assessed value or such other reasonable allocation,
between Landlord and Tenant so that Tenant shall pay only its equitable portion.
6.1 Utilities. The Utilities that Landlord shall make available to the
Premises are as set forth in Landlord's Work. Landlord shall have no obligation
whatsoever to make any other Utilities available for the benefit of Tenant.
6.2 Utilities Charge. Tenant shall pay the Utilities Charge in accordance
with Section 4.4.
6.3 Calculation of Utilities Charge. The "Utilities Charge" shall be
Tenant's payment of any and all Utilities furnished by Landlord to the Premises
or otherwise for the benefit of Tenant, with the exception of the cost of any
Utilities that are included in Common Area Expenses. Tenant shall install at its
sole expense any separate meter required by Landlord or Tenant for any
Utilities. If any Utilities are not separately metered to the Premises and are
instead provided in common with others, then Landlord shall reasonably determine
Tenant's share of the Utilities so provided (not to exceed the rates of the
local utility company if such service had been provided directly to Tenant), and
such determination shall be used in the calculation of the Utilities Charge;
provided, however, that Tenant shall be permitted to install a submeter to
monitor Tenant's usage. Tenant shall use the Utilities provided by Landlord to
the Premises throughout the Lease Term, and shall not contract separately for
the same without the prior written consent of Landlord which Landlord may grant
or withhold in its sole and absolute discretion. It is expressly agreed and
understood that water and waste water utilities shall be obtained through a
private utility provider. If Landlord does not provide all of the Utilities,
Tenant agrees, at its own expense, to pay to the appropriate utility company the
cost of any such Utilities.
6.4 Air Conditioning. Landlord shall provide the Air Conditioning System in
accordance with Exhibit C, Description of Landlord's Work.
6.5 Air Conditioning Charge. Since the Air Conditioning System is a
centralized system serving the Premises on a nonexclusive basis, Tenant shall
pay the Air Conditioning Charge as provided in Section 4.4. If at any time
during the Lease Term, an Air Conditioning System which exclusively serves the
Premises is installed, Tenant shall have no separate Air Conditioning Charge,
but Tenant shall pay all costs of Utilities used to operate the Air Conditioning
System as part of the Utilities Charge.
6.6 Calculation of Air Conditioning Charge. The "Air Conditioning Charge"
shall be Tenant's share of the total expense associated with the operation and
maintenance of the Air Conditioning System (including Amortization of Capital
Items) for any given calendar year and the Administrative Fee with respect to
all such expenses. Initially, such share shall be equal to the proportion that
Tenant's Engineered Value bears to the total of the Engineered Values of all
tenants utilizing the Air Conditioning System during each calendar month of the
calendar year and averaged for that calendar year. Within thirty (30) days after
Tenant opens the Premises for business, Tenant shall submit to Landlord a
certified air balance report stating the amount of CFM actually being used by
Tenant in the Premises. If Tenant fails to submit such certified air balance
report to Landlord within said thirty (30) day period, Landlord may obtain such
a certified air balance report at Tenant's expense, which air balance report as
completed by Landlord shall be binding and conclusive. If the Air Conditioning
System supplies chilled water or other fluid refrigerant to the Premises,
Landlord shall measure the GPM actually being used by Tenant in the Premises on
the basis of the air balance report. Either party may, at any time, install
meters to verify the amount of CFM/GPM used by Tenant. After receipt and
verification of the air balance report and/or the metered CFM or GPM readings,
Landlord shall use such actual CFM or GPM in the foregoing formula, in lieu of
Tenant's Engineered Value.
6.7 Tenant's Engineered Value. Tenant shall not at any time cause an
increase in the Engineered Value without the prior written approval of Landlord.
Upon Landlord's request, Tenant shall submit to Landlord the current
calculations requested under Exhibit F.
7.1 Tenant's License to Use. Landlord grants to Tenant and its employees,
agents, customers, and invitees a non-exclusive license to use the Common Area
during the Lease Term, subject to the rights of Landlord, the other tenants of
Landlord, Ground Lessor, the parties to the REA, the other owners of the
Shopping Center and such parties' employees, agents, customers, and invitees to
use the same in common with Tenant.
7.2 Operation and Maintenance of Common Area. Landlord shall keep the
Common Area in a neat, clean, and orderly condition, and shall repair, maintain
or replace all equipment and facilities thereof as Landlord shall deem
necessary. Landlord may cause any or all of the services concerning the Common
Area to be provided by an independent contractor(s) or by an affiliate(s) of
Landlord. If Landlord does not maintain all of the Common Areas of the Shopping
Center because one or more of the Major Tenants or the parties to the REA
maintains a portion thereof, then, for so long as such condition exists,
Landlord's responsibility hereunder shall extend to only those portions of the
Common Area not maintained by Major Tenants or parties to the REA and the Common
Area expenses described in this Article shall refer only to the portions
maintained by Landlord.
7.3 Common Area Expenses.
(a) In General. "Common Area Expenses" shall mean all expenses in
connection with the use, ownership (i.e., property taxes), operation, and
maintenance of the Common Area, including without limitation, all general
maintenance and repairs deemed necessary by Landlord or as may be required by
Governmental Authority; work performed by Landlord in accordance with Section
12.2; resurfacing, restriping, and repair of all parking areas; painting;
cleaning; trash removal; snow and ice removal; sweeping and janitorial services;
seasonal decor; signs; fire protection systems; the cost of Utilities including,
without limitation, costs or fees paid to a private utility provider; personnel
to implement any of the foregoing services including, if Landlord deems
necessary, the cost of security officers and security systems; all taxes,
similar assessments, and special assessments levied for any reason on the Common
Area and the realty underlying the Common Area and all reasonable costs
associated with challenging such taxes and assessments; all personal property
taxes levied for any reason on any personalty of the Common Area; the cost to
Landlord of the insurance covering the Shopping Center; the Amortization of
Capital Items; all on-site costs and personnel expenses of Landlord incurred in
managing the Shopping Center; all maintenance, repair and/or operational
expenses reimbursable by Landlord to Ground Lessor and/or the parties to the REA
for areas that are utilized in common by Landlord and Ground Lessor and/or the
parties to the REA; maintenance and/or repair of privately owned roads providing
access to and located adjacent to the Shopping Center; all costs associated with
shuttle or other transportation services designed to transport Shopping Center
customers and/or employees to and from the Shopping Center; and the
Administrative Fee with respect to all such expenses. Common Area Expenses shall
be reduced (prior to the calculation of Tenant's share) by the contributions
required to be made by the Major Tenants thereto, and shall not include any
costs in connection with the original construction and installation of the
Common Area. Further, Interior Mall Expenses shall be reduced (prior to the
calculation of Tenant's share) by the Licensees Contribution. There shall be no
duplication to Tenant of the costs for insurance and taxes as provided in
Article 5 and this Section.
Notwithstanding anything to the contrary contained in this Lease,
Tenant shall not be required to pay its share of any costs which (i) have been
reimbursed to Landlord from insurance proceeds or warranties or eminent domain
award (and to the extent Tenant does pay for any such costs which are
subsequently reimbursed to Landlord, Tenant shall be entitled to a refund), (ii)
are incurred in connection with the expansion or renovation of the Shopping
Center except to the extent such expenses are deferred maintenance expenses or
otherwise appropriate operation and/or maintenance expenses; (iii) are
associated with the removal and/or abatement of Hazardous Materials from
portions of the Shopping Center other than the Premises; or (iv) are incurred by
Landlord pursuant to Section 8.5 of this Lease. Further, Tenant shall not be
required to pay both depreciation and the replacement cost for the same item.
In no event shall Tenant's share of expenses in any calendar year in
connection with any work associated with an Insured Casualty or an Uninsured
Casualty exceed an amount equal to fifteen percent (15%) of Tenant's total share
of Common Area Expenses for such year; provided, however, that commercially
reasonable deductibles, co-insurance, and/or self-insurance funds shall not be
subject to the foregoing limitation so long as the potential exposure to the
Landlord as a result of such deductibles, co-insurance, and/or self insurance
does not exceed an amount equal to 25% of the total replacement cost of the
Shopping Center).
(b) Calculation. Tenant shall pay its share of Common Area Expenses in the
manner provided in Section 4.4. Tenant's share of Common Area Expenses shall be
calculated as follows:
(i) Tenant's share of Common Area Expenses for the previous
calendar year shall be the proportion of all such expenses, exclusive of
Interior Mall Expenses and Food Court Expenses, that the Floor Area of the
Premises bears to the total Floor Area of all premises in the Shopping Center
that are leased and open as of the commencement of each calendar year or, at
Landlord's sole and absolute discretion, each calendar quarter and averaged for
that calendar year, exclusive of the Major Tenants' Floor Area and Licensees'
Floor Area; (provided, however, that during the Lease Term, in no event will
Tenant's share of such Common Area Expenses be calculated on the basis of less
than eighty percent (80%) occupancy of the Floor Area of the Shopping Center,
exclusive of the Major Tenants' Floor Area and Licensees' Floor Area);
(ii) If the storefront of the Premises is located on the
Interior Mall, Tenant's share of Interior Mall Expenses for the previous
calendar year shall be the proportion of all Interior Mall Expenses that the
Floor Area of the Premises bears to the Floor Area of all premises having
storefronts on the Interior Mall that are leased and open as of the commencement
of each calendar year or, at Landlord's sole and absolute discretion, each
calendar quarter and averaged for that calendar year, exclusive of the Major
Tenants' Floor Area and Licensees' Floor Area (provided, however, that during
the Lease Term, in no event will Tenant's share of such Interior Mall Expenses
be calculated on the basis of less than eighty percent (80%) occupancy of the
Floor Area of premises having store fronts on the Interior Mall, exclusive of
the Major Tenants' Floor Area and Licensees' Floor Area); and
(iii) If the Premises is located within the Food Court of the
Shopping Center and the use of the Premises involves the sale of food, Tenant's
share of Food Court Expenses for the previous calendar year shall be the
proportion of all Food Court Expenses that the Floor Area of the Premises bears
to the Floor Area of all food use tenants within the Food Court that are leased
and open as of the commencement of each calendar year or, at Landlord's sole and
absolute discretion, each calendar quarter and averaged for that calendar year.
7.4 Extended Hours Services. If Tenant desires to operate its business in
the Premises beyond the normal Shopping Center hours of operation, Tenant shall
request Landlord's permission to do so, which request shall be subject to
Landlord's approval, and thereafter shall notify Landlord of any changes in the
times or dates of the extended hours of operation. Landlord will provide those
extended hours services that it deems necessary and Tenant shall reimburse
Landlord for Tenant's equitable share of the increased costs incurred by
Landlord for such extended hours services, including without limitation
lighting, security, Utilities, and Landlord's Administrative Fee with respect to
all such expenses. Tenant shall pay such increased costs as part of Additional
Rent in accordance with Section 4.4.
7.5 Control of Common Area. Landlord shall at all times have the right to
determine the nature and extent of the Common Area, whether the same be surface,
underground or multiple-deck, and to make such changes thereto as it shall
elect, including without limitation the location and relocation of driveways,
entrances, exits, and automobile parking spaces, the direction and flow of
traffic, and the installation of prohibited areas, landscaped areas and Utility
Installations. Landlord shall at all times have the sole and exclusive control
of the Common Area, including, without limitation, the right to lease space
within the Common Area to tenants for the sale of merchandise and/or services
and the right to permit advertising displays, educational displays and
entertainment in the Common Area, including kiosks, carts, and other temporary
or permanent stands. Landlord's control and operation of the Common Area shall
at all times be subject to Landlord's obligation to comply with all Legal
Requirements. Landlord shall also have the right at any time and from time to
time to exclude and restrain any person from the use or occupancy of the Common
Area. It shall be the duty of Tenant to keep all of the Common Area free and
clear of any obstructions created or permitted by Tenant or resulting from
Tenant's operation. However, no permanent facility which materially and
adversely affects the access to or visibility of the Premises shall be located
within ten feet (10') directly in front of Tenant's Premises as limited by an
imaginary ten foot (10') extension of Tenant's Interior Demising Partitions
without Tenant's prior consent.
Tenant acknowledges and agrees that the Landlord intends to design the
Common Area and specifically, the Interior Mall area, in such a manner that will
result in a wide variety of both permanent and temporary facilities and design
elements (collectively referred to herein as "facilities") located throughout
the Common Area. Tenant further acknowledges and agrees that the Landlord will
not be restricted in any manner by this Lease in the placement and/or design of
any such facilities. However, no permanent facility which materially and
adversely affects the access to or visibility of the Premises shall be located
within ten feet (10') directly in front of Tenant's Premises as limited by an
imaginary ten foot (10') extension of Tenant's Interior Demising Partitions
without Tenant's prior consent.
7.6 Security Officers. Tenant acknowledges that if Landlord provides
security officers for the Common Area, Landlord does not represent, guarantee or
assume responsibility that Tenant will be secure from any Claims relating to
such security officers. Landlord shall have no obligation to hire, maintain or
provide such services, which may be withdrawn or changed at any time with or
without notice to Tenant or any other person and without liability to Landlord.
7.7 Rules and Regulations. In addition to any rules and regulations of
record governing the Shopping Center, Tenant shall abide by the rules and
regulations set forth in Exhibit D. Landlord shall have the right to establish
additional reasonable and equitable rules and regulations, and to adopt
reasonable and equitable amendments to the same from time to time for the proper
and efficient operation and/or maintenance of the Common Area or any portion
thereof, as Landlord determines in its discretion.
7.8 Validated Parking. Landlord shall have the right to adopt a
nondiscriminatory, uniform policy, charge and/or validation system for the
parking facilities in the Common Area.
8.1 Marketing. Tenant shall, at Landlord's option, either participate in a
marketing fund ("Marketing Fund") or a merchants' association ("Merchants'
Association") which shall be organized to market the Shopping Center (and may
include, without limitation, joint marketing with the Casino). Landlord shall
control and administer the Marketing Fund, if established, with advice from an
advisory group comprised of representatives of various Shopping Center tenants.
The activities of the Marketing Fund or the Merchants' Association, as the case
may be, shall be financed by an annual budget based on an appropriate fiscal
year. The annual budget shall be the sum of the annual marketing assessments of
all tenants at the Shopping Center plus the contributions of Landlord as
provided in this Article.
8.2 Tenant's Marketing Assessment. Tenant shall pay the Marketing
Assessment to Landlord if Landlord has established the Marketing Fund, or as
dues to the Merchants' Association if Landlord has not established the Marketing
Fund. Tenant shall pay the Marketing Assessment in equal monthly installments,
payable in advance commencing on the Rent Commencement Date and thereafter on
the first day of each calendar month of each year. Tenant's Marketing Assessment
shall be increased annually by an amount equal to five percent (5%) over the
Marketing Assessment for the previous year.
8.3 Landlord's Contribution. Landlord shall contribute on a noncumulative
basis an amount equal to twelve and one-half percent (12.5%) of the total
contributions by all tenants of the Shopping Center to the Marketing Fund;
provided, however, in no event shall Landlord be required to contribute more
than Twenty-Five Thousand Dollars ($25,000) in any fiscal year. At Landlord's
option, Landlord may elect to contribute part or all of the marketing and
graphic arts services required by the Marketing Fund or the Merchants'
Association in lieu of making its contribution in cash. In any event, Landlord
shall maintain the sole and absolute authority to employ and discharge any
member of its marketing and graphic arts staffs providing said services.
8.4 Initial Assessment. Tenant shall pay the Initial Assessment to Landlord
on or before the Rent Commencement Date. The Initial Assessment shall be used by
Landlord for promoting the initial opening of the Shopping Center and shall be
payable by Tenant whether or not Tenant participates in or is open for business
at the initial opening of the Shopping Center.
8.5 Daily Sales. Landlord may, in its sole and absolute discretion, provide
a program for the purpose of collecting daily sales information directly from
the Tenant via Tenant's designated representative at the Premises and Tenant
agrees to participate in any such program. The daily sales information would
include gross daily receipts collected at the Premises. The program shall be in
the form of automated, computerized telecommunication. The costs and expenses in
connection with the operation of the program would be paid for either by the
Landlord or by proceeds from the Marketing Fund. The information collected may
be utilized by Landlord for the purpose of evaluating and responding to market
trends and determining merchandising category rankings.
9.1 Permitted Use. Tenant shall operate the Premises only under Tenant's
Trade Name and shall only use the Premises for the Permitted Use, and for no
other use or purpose. Landlord shall not unreasonably withhold its consent to a
change in Tenant's Trade Name in connection with an approved Occupancy
Transaction. Tenant shall at all times operate a Manufacturer's Outlet store and
shall display two (2) prices (i.e., the actual, full retail price [exclusive of
sales prices] thereof as offered in Tenan s (or Tenant's affiliates') full price
retail stores and the discounted retail price) on all merchandise ; provided,
however, that the foregoing requirement to display two prices shall be waived so
long as Tenant does not adhere to such practice in all of the stores operated by
Tenant. Further, in the event the Permitted Use permits the sale of merchandise
that is not manufactured by Tenant, Tenant must either purchase any such
merchandise directly from the manufacturer, a manufacturer authorized
distributor or a manufacturer authorized wholesaler, or obtain the express
written authority, license, and/or other approval to sell such merchandise from
the manufacturer provided Tenant's failure to comply with this sentence shall
not be deemed a violation of the Lease unless the manufacturer, another tenant
which sells such merchandise in the Shopping Center, or any other interested
party objects or Tenant's failure to comply breaches any covenant of Landlord or
Tenant respecting use or exclusivity in any other lease, financing agreement, or
other agreement relating to the Shopping Center.
9.2 Duties and Prohibited Conduct. Tenant shall at all times comply with
all Legal Requirements. At Tenant's sole expense, Tenant shall procure,
maintain, and make available for Landlord's inspection any governmental license
or permit required for the proper and lawful conduct of Tenant's business.
Tenant shall not use the Premises, or permit or fail to prevent the Premises to
be used, (a) for any purpose or in any manner that violates any Legal
Requirement and/or the requirements of the insurance underwriter(s) for the
Shopping Center, (b) for the sale or display of pornography, nudity, graphic
violence, drug paraphernalia, or any goods and/or services that, in the sole and
absolute discretion of Landlord, are inconsistent with the image of a community
or family-oriented shopping center, (c) as a massage parlor, adult bookstore or
second-hand store, (d) to conduct an auction, distress, fire, bankruptcy or
going-out-of business sale or similar sales, (e) to sell merchandise from
vending machines (except vending machines installed and made available solely
for use by Tenant's employees), (f) to operate any video, pinball or other
gaming machines, although Tenant shall be allowed to display and demonstrate to
customers and/or allow customers to operate items which Tenant has for sale, or
conduct any Gaming Activities unless expressly permitted by this Lease, or (g)
to keep live animals of any kind unless otherwise permitted by this Lease.
Tenant shall not place, affix or maintain any signs, advertising placards,
names, insignia, trademarks, descriptive material or any other similar item or
items outside, on or within twenty-four inches (24") of the Lease Line, the
storefront, the glass panes and supports of the show windows, or any window,
door, roof or the exterior side of any Perimeter Demising Partition of the
Premises, except such signs as Landlord shall approve in writing in accordance
with Exhibit C. Tenant shall use the sales Floor Area within six feet (6') of
the storefront Lease Line, if at all, for the promotional display of merchandise
only; stacking or stocking merchandise within said area or in the window area is
expressly prohibited. Tenant shall not cause or permit any waste to occur in the
Premises and shall not overload the floor, or any mechanical, electrical,
plumbing or Utility systems serving the Premises. Tenant shall keep the
Premises, and every part thereof, in a clean and wholesome condition, free from
any objectionable noises, loud music, odors or nuisances. If the Permitted Use
includes the sale of and/or preparation of food, Tenant shall at all times
maintain a health department rating of "A" (or such other highest health
department or similar rating as is available).
9.3 Hazardous Materials.
(a) In General. Tenant shall not use, generate, manufacture, produce,
store, transport, treat, dispose or permit the escape or release on, under,
about or from the Premises, or any part thereof, of any Hazardous Materials. If
Tenant's Permitted Use requires the use and/or storage of any Hazardous
Materials on, under or about the Premises, Tenant shall provide written notice
to Landlord, prior to final execution of this Lease, of the identity of such
materials and Tenant's proposed plan for the use, storage, and disposal thereof;
such use, storage, and disposal shall be subject to Landlord's approval, in
Landlord's sole and absolute discretion. If Landlord approves such proposed use,
storage, and disposal of specific Hazardous Materials, Tenant may use and store
upon the Premises only such specifically approved materials and shall comply
with any conditions to such approval as Landlord may impose in its sole and
absolute discretion. Landlord's permission hereunder may be withdrawn or
modified at any time in Landlord's sole and absolute discretion. Tenant shall
fully and promptly comply with all Hazardous Materials Laws at all times during
the Lease Term, and at the expiration or earlier termination of the Lease Term,
Tenant shall remove and dispose of all Hazardous Materials affecting the
Premises and the Shopping Center resulting from the use or occupancy thereof by
Tenant or its agents, employees, suppliers, contractors, subtenants, successors,
and assigns regardless of whether such removal is required by any Hazardous
Materials Law. Notwithstanding the foregoing, Landlord consents to Tenant's
above-ground use, storage, and off-site disposal of products containing small
quantities of Hazardous Materials, which products are of a type customarily used
in operations specifically mentioned as a Permitted Use, provided that Tenant
shall handle, use, store, and dispose of such Hazardous Materials in a safe and
lawful manner and shall not allow Hazardous Materials to contaminate the
Premises or the Shopping Center.
(b) Indemnity. Tenant shall indemnify, protect, defend, and hold Landlord
(and its partners, joint venturers, shareholders, affiliates, and property
managers, and their respective officers, directors, employees, and agents) and
Landlord's Mortgagee (including, without limitation, Ground Lessor) harmless
from and against any and all Claims arising out of, in connection with, or
directly or indirectly arising out of the use, generation, manufacture,
production, storage, treatment, release, disposal or transportation of Hazardous
Materials by Tenant, or any successor, assignee or sublessee of Tenant, or their
respective agents, contractors, employees, licensees, or invitees, on, under,
about or from the Premises or the Shopping Center, including, but not limited
to, all foreseeable and unforeseeable costs, expenses, and liabilities related
to any testing, repair, cleanup, removal costs, detoxification or
decontamination and the preparation and implementation of any closure, remedial
action, site assessment costs or other required plans in connection therewith
deemed required, necessary or advisable by Landlord or any Governmental
Authority, and any foreseeable or unforeseeable consequential damages. Any
defense of Landlord pursuant to the foregoing indemnity shall be by counsel
reasonably acceptable to Landlord. Neither the consent by Landlord to the use,
generation, storage, release, disposal or transportation of Hazardous Materials,
nor Tenant's strict compliance with all Hazardous Materials Laws, shall excuse
Tenant from Tenant's indemnification obligations hereunder. The foregoing
indemnity shall be in addition to and not a limitation of the other
indemnification provisions of this Lease. Tenant's obligations hereunder shall
survive the termination or expiration of this Lease.
(c) Reporting. Tenant shall notify Landlord in writing, promptly after any
of the following: (i) Tenant has knowledge, or has reasonable cause to believe,
that any Hazardous Materials have been released, discharged or located on, under
or about the Premises or, to the extent caused by Tenant, the Shopping Center,
whether or not the same is in quantities that would otherwise be reportable to a
public agency, (ii) Tenant receives any warning, notice of inspection, notice of
violation or alleged violation, or Tenant receives notice or knowledge of any
proceeding, investigation, order or enforcement action, under any Hazardous
Materials Law concerning the Premises or, to the extent caused by Tenant, the
Shopping Center, or (iii) Tenant becomes aware of any Claims made or threatened
by any third party concerning the Premises or, to the extent caused by Tenant,
the Shopping Center respecting Hazardous Materials.
(d) Confirmation of Tenant's Knowledge. Upon request from Landlord or
Landlord's Mortgagee at any time, Tenant shall promptly execute all affidavits,
representations, and any other similar documents as Landlord or Landlord's
Mortgagee may request concerning Tenant's best knowledge and belief regarding
the presence or absence, or the use, generation, storage, disposal or
transportation of Hazardous Materials, under, about or from the Premises or, to
the extent caused by Tenant, the Shopping Center.
(e) Asbestos. If any asbestos containing materials exist in the Premises
that were introduced into the Premises by Tenant, its affiliates, agents,
contractors, employees, assignors, predecessors, successors or Transferees at
any time, Tenant shall remove all such asbestos containing materials prior to
(i) the expiration or earlier termination of this Lease and/or (ii) making
Improvements to the Premises and, in either event, regardless of whether such
removal is required by any Hazardous Materials Law.
(f) Landlord's Right to Terminate. If the Premises or any part of the
Shopping Center becomes or is discovered to be contaminated with any Hazardous
Materials, and if any handling of any nature is undertaken in connection
therewith (either at Landlord's own initiative or pursuant to the requirements
of any Government Authority), and if Tenant is not responsible for any handling
or indemnification in connection therewith under this Lease or otherwise, then
Landlord shall have the right to terminate this Lease upon thirty (30) days'
notice to Tenant in the event the estimated cost of any such handling exceeds an
amount equal Two Hundred Fifty Thousand Dollars ($250,000) and such cost is not
covered by insurance, provided, however, that Landlord's notice shall include
the estimated cost of such handling. Tenant shall have the option to pay the
cost of such handling in excess of $250,000 which option must be exercised, if
at all, within twenty (20) days following Tenant's receipt of Landlor s notice
by written notice to Landlord and by depositing an amount equal to the estimated
cost of such handling in excess of $250,000 in a third party escrow account in
which event Landlord's notice to terminate will be null and void provided Tenant
pays for the entire cost of such handling in excess of $250,000 in a timely and
reasonable manner. In no event shall Landlord terminate this Lease unless
Landlord terminates the leases of all other tenants similarly affected by such
circumstances.
(g) Initial Inspection. Tenant may, within fifteen (15) days after Tenant
takes possession of the Premises with Landlord's consent, provided this Lease is
fully executed and Tenant has not commenced any work in the Premises, perform an
inspection of the Premises by a recognized, certified environmental consultant
for the purpose of determining whether any Hazardous Materials exist in the
Premises.
In the event such inspection determines that Hazardous Materials do exist
and further that they require specific handling in accordance with applicable
Hazardous Materials Laws and provided said Hazardous Materials are not present
by reason of Tenant's Work (as defined in Exhibit C and to the extent made or
caused to be made by Tenant or an affiliate of Tenant), then Tenant shall have
the right to, within ten (10) days of such determination, notify Landlord of the
results of the inspection, in which event Landlord, at its sole cost and
expense, shall perform the necessary reasonable steps to handle such Hazardous
Materials (hereinafter referred to as "Remedial Work"). Notwithstanding the
foregoing to the contrary, if Landlord determines that the cost of such Remedial
Work, in Landlord's reasonable opinion, is excessive, or that such Remedial Work
would unreasonably interfere with the operation of the Shopping Center or other
businesses in the Shopping Center, Landlord may terminate this Lease and all
liability hereunder shall cease.
In the event any such Remedial Work delays the commencement of Tenant's
work in the Premises, the date certain referred to in Section 1.8, in connection
with the definition of the Rent Commencement Date shall be delayed by the
corresponding number of days that it takes to complete the Remedial Work,
calculated from the date Landlord receives Tenant's notice of the results of the
inspection and continuing until the Remedial Work is completed. Tenant shall not
be entitled to any further compensation or damages from Landlord arising
directly or indirectly from the Remedial Work including but not limited to loss
of use of the whole or any part of the Premises, the building of which the
Premises are a part, Tenant's Personal Property, or any inconvenience or
annoyance reasonably occasioned by the existence of Hazardous Materials and the
subsequent Remedial Work.
In no event does Tenant's right to inspect extend beyond the fifteen
(15) day period set forth above and, in the event Tenant waives its right to
inspection of the Premises, the right to inspect shall be of no force or effect;
upon the expiration of said fifteen (15) day period or upon Tenant's waiver of
its right to inspection, the handling or removal of Hazardous Materials shall be
governed in accordance with the provisions of Article 12 of this Lease.
9.4 Gaming Provisions.
(a) Acknowledgment Regarding Gaming. Tenant hereby expressly acknowledges
and agrees that the Shopping Center may include Gaming Activities in the Common
Area and/or certain tenant premises and that the Shopping Center is a part of a
complex that includes Gaming Activities.
(b) Exclusive Gaming Rights. Tenant hereby expressly acknowledges and
agrees that Ground Lessor and/or its gaming nominee has the sole and exclusive
right pursuant to the Ground Lease to conduct Gaming Activities within
designated portions of the Common Area and/or to contract with tenants of the
Shopping Center for the placement of gaming devices within any tenant's space
provided that the lease for such space permits the same.
(c) Tenant's Obligations. Tenant hereby represents and covenants that in no
event shall the use and/or occupancy of the Premises by, or any activities
and/or relationships of, Tenant or its assignees or subtenants or their
respective agents, employees, contractors, or licensees result in a Denial (as
defined herein) or otherwise jeopardize any license for Gaming Activities in the
Shopping Center and/or the Casino. A "Denial" shall exist if Tenant or any
Associated Person (as defined herein) is denied a license or is found unsuitable
as a licensee by any Gaming Authority, or Tenant or any Associated Person is
required by any Gaming Authority to apply for a gaming license and does not
apply within any required time limit, as the same may be extended by such Gaming
Authority, or withdraws any application before the Gaming Authority for a gaming
license other than upon a determination by the applicable Gaming Authority that
such license is not required. An "Associated Person" is any person (i) that is
directly or indirectly owned by Tenant, (ii) is an officer, director or agent of
Tenant or of a partner in Tenant, or (iii) has the legal power to exercise a
significant influence over Tenant or a partner in Tenant.
Tenant agrees to provide any documentation and/or other evidence requested
by Landlord as may be appropriate in order for Landlord to determine whether or
not Tenant is in compliance with this Section 9.4(c). A violation of this
Section 9.4(c) shall be a non-curable default pursuant to the provisions of
Section 16.1(d) of this Lease.
9.5 Compliance with Exclusive License Agreements. Tenant hereby expressly
acknowledges and agrees that Landlord intends to enter into various license
agreements or other similar agreements in connection with the Shopping Center
whereby Landlord will grant exclusive licenses to third parties for the use of
certain products or brand names that will be required to be sold in the Shopping
Center (by way of example, but not by way of limitation, a license may require
that specific brand name soda beverages will be the exclusive soda beverages for
the Shopping Center). Tenant further expressly agrees and acknowledges that
Tenant's use of the Premises shall at all times be subject to any such
licenses/agreements regardless of whether or not such licenses/agreements were
entered into as of the Effective Date; provided, however, in no event shall any
such licenses/agreements limit the merchandise that Tenant is permitted to sell
as provided in Section 1.13. To the extent Landlord enters into any such
licenses/agreements, Landlord will provide at least thirty (30) days prior
written notice to the Tenant in the event Tenant's use of the Premises will be
affected by such licenses/agreements.
9.6 Competing Tenant. In the event that at any time during the Lease Term,
(i) Landlord enters into a lease with a tenant in the Shopping Center whose
primary use is the retail sale of toys (i.e. more than fifty percent [50%] of
the sales Floor Area of the premises, including aisle space, is used for the
display of toys) (hereinafter "Competing Tenant"), and such Competing Tenant is
open and operating in the Shopping Center; and (ii) Tenant's Gross Sales (as
defined in Exhibit B) decrease during the Competing Period (defined as the six
[6] consecutive full calendar month period immediately following the opening of
the Competing Tenant) over the Reference Period (defined as the same consecutive
full calendar six [6] month period in the year preceding said Competing Period)
(by way of example, if a Competing Tenant opened in the Shopping Center on
December 1, 1998, then the Competing Period would be December 1, 1998, through
May 30, 1999, and the Reference Period would be December 1, 1997 through May 30,
1998), based on certified statements of Gross Sales provided by Tenant for the
Competing Period and the Reference Period, which Landlord may verify the
accuracy hereof, then Tenant shall give Landlord written notice of such
Competing Tenant and Landlord shall have sixty (60) days to remedy the situation
("Cure Period"). In the event Landlord has not remedied the situation within the
Cure Period, then commencing with the first (1st) full calendar month after the
Competing Period and continuing until the earlier of (i) such time as the
Competing Tenant ceases operating at the Shopping Center or (ii) the remainder
of the Lease Term, Tenant's Minimum Annual Rent shall be decreased by a
percentage of the Minimum Annual Rent, as stated in Article 1, equal to the
percentage by which Tenant's Gross Sales have decreased during the Competing
Period as compared to the Reference Period. By way of example, in the event
Tenant's Gross Sales have decreased by thirty percent (30%) during the Competing
Period, Tenant's Minimum Annual Rent shall be reduced by thirty percent (30%)
and Tenant shall pay as Minimum Annual Rent the amount which is seventy percent
(70%) of the amount referenced in Article 1 as Minimum Annual Rent. This
reduction of Minimum Annual Rent shall be deemed to be Tenant's sole and
exclusive remedy, and said reduction shall in no event be deemed to modify,
reduce, or abate Tenant's obligation to pay all other Additional Rent, including
Percentage Rent, under the Lease. For the purpose of computing Percentage Rent
due during the period that Minimum Annual Rent is reduced, it shall be deemed
that all reduced Minimum Annual Rent was in fact paid to Landlord.
In the event the Competing Tenant ceases operating in the Shopping Center,
or ceases to fit the description provided herein, or in the event Tenant's Gross
Sales during any consecutive six (6) month period increase to at least one
hundred twenty percent (120%) of the amount of Tenant's Gross Sales during the
Reference Period, then Minimum Annual Rent shall revert to the amount specified
in Article 1.
It is agreed and understood that the following shall be excluded from the
definition of a Competing Tenant: Major Tenants and tenants whose premises
contain less than 2,000 square feet of Sales Floor Area. In no event shall the
provisions of this Section 9.6 be deemed to restrict Landlord from leasing the
space in the Shopping Center as provided in Section 9.6 to any Competing Tenant.
Nothing herein shall be deemed to affect Tenant's obligation to keep its
business in the Premises in continuous operation (pursuant to the terms of this
Lease) and to pay Additional Rent as set forth in this Lease during any period a
Competing Tenant is operating in the Shopping Center.
It is further agreed and understood that after two (2) years following this
reduction in Minimum Annual Rent, Landlord shall have the right to terminate
this Lease upon written notice to Tenant, provided that, within ten (10) days of
its receipt of Landlord's notice, Tenant shall have the right to nullify
Landlord's termination notice by notifying Landlord of its intention to pay the
Minimum Annual Rent in accordance with Article 1, and Article 4, 4.2 of this
Lease (followed by actual compliance therewith).
The provisions of this Section 9.6 shall be automatically null and void
if (i) Tenant is in default under this Lease (which default remains uncured
beyond the applicable time periods set forth in Article 16, Section 16.2); (ii)
Tenant enters into an Occupancy Transaction pursuant to Article 15 of this
Lease; or (iii) Tenant's Premises ceases to be used primarily for the permitted
use which is stated in Article 1, Section 1.13 of this Lease.
ARTICLE 10
TENANT'S OPERATING COVENANTS
10.1 Operating Covenants. Tenant shall, continuously and uninterruptedly
from and after its initial opening for business, (a) operate and conduct within
the entire Premises the business that it is permitted to operate and conduct
under the provisions hereof, except while the Premises are untenantable by
reason of fire or other casualty, (b) maintain within the Premises an adequate
stock of merchandise together with sufficient personnel and Personal Property to
service and supply the usual and ordinary requirements of its customers, and (c)
keep the Premises in a neat, clean, and orderly condition.
10.2 Operating Days and Hours. It is in the interests of both Tenant and
Landlord to have regulated hours of business for all of the Shopping Center.
Commencing with the opening for business by Tenant in the Premises and for the
remainder of the Lease Term, Tenant shall be open for business daily and shall
continuously remain open for business with its window displays, exterior signs,
and exterior advertising displays adequately illuminated during all hours on all
days on which Landlord, in its sole and absolute discretion, determines to open
the Shopping Center for business to the public. If the Shopping Center contains
Common Area which is enclosed for the purpose of providing climatic control,
Landlord shall not be obligated to open the enclosed area so that Tenant may
conduct business except on those days and hours when tenants in the Shopping
Center occupying at least fifty percent (50%) of the Floor Area thereof shall
have given reasonable advance notice to Landlord that they desire to be open for
business during such time.
Notwithstanding anything to the contrary contained in this Lease, in no
event shall Tenant be required to open for business on any day earlier than
10:00 a.m. or later than 10:00 p.m., or on Christmas Day or Thanksgiving Day,
unless at least fifty percent (50%) of the other Shopping Center Tenants are
open during such period(s).
Tenant shall be permitted to be closed two (2) days per calendar year (on a
non-cumulative basis) for the purpose of taking inventory. Tenant shall provide
written notice to the Shopping Center General Manager at least ten (10) days
prior to the date of closing and shall display appropriate signage advising its
customers of such closure. In no event shall Tenant be permitted to close for
inventory during the period in any calendar year commencing November 1st and
ending December 31st.
ARTICLE 11
IMPROVEMENTS
11.1 Initial Construction of the Premises. Tenant shall submit to Landlord
plans and specifications for the construction of Tenant's storefront and store
interior in accordance with Exhibit C and the Tenant Package. Tenant shall
commence and diligently proceed with construction so as to complete the work
contemplated thereby and open for business in the Premises on or before the Rent
Commencement Date. All Personal Property must be new when installed in, or
attached to, the Premises.
Notwithstanding anything to the contrary contained herein, Tenant agrees
that this Lease is being entered into on the reliance that Tenant's storefront
and store interior design shall be acceptable to Landlord, and Tenant's Plans
shall fully and strictly comply with the Tenant Package and Landlord's design
concept for Fashion Outlet of Las Vegas as well as being of equal or greater
quality as the design of a first-class toy store operation. If it is determined,
in Landlord's sole judgment, that Tenant's Plans, the design and quality of all
work and installations by Tenant in the Premises are not in conformance with
Landlord's criteria or such other first-class toy store operation, Landlord
shall have the right to require Tenant to conform at Tenant's sole cost and
expense or Landlord may terminate this Lease.
Tenant acknowledges that the financial success of the Shopping Center
depends, in part, on Tenant's opening the Premises for business
contemporaneously with the Rent Commencement Date and that Landlord's damages
arising from Tenant's failure to do so are extremely difficult and impracticable
to fix. Therefore, subject to Section 25.7, should Tenant fail to open the
Premises for business upon the Rent Commencement Date, Tenant shall pay to
Landlord, upon receipt of invoice, the sum of Four Hundred Dollars ($400) per
day for each day Tenant delays its opening after and including the Rent
Commencement Date, which sum Tenant agrees is fair compensation to Landlord for
said damages. Tenant shall not open the Premises for business prior to the
initial opening of the Shopping Center without the prior consent of Landlord.
11.2 Improvements. After the initial construction of the Premises by
Tenant, at Tenant's own expense and in accordance with Exhibit C, after giving
Landlord written notice of its intentions to do so, Tenant may, from time to
time, make such Improvements to the Premises as Tenant may find necessary or
convenient for its purposes so long as the value of the Premises is not thereby
materially diminished and subject to Landlord's approval as provided in this
Section. Tenant shall not make any of the following Improvements without
Landlord's prior written consent in each instance: Improvements costing more
than Ten Thousand Dollars ($10,000) in the aggregate per occurrence;
Improvements to the mechanical or electrical systems, to the exterior walls or
roof of the Premises, or to any storefront or area of the Premises within three
feet (3') of the storefront; the addition of any mezzanine or Improvements that
increase the size of any existing mezzanine; and any penetration into or through
the roof, ceiling or floor of the Premises. With the exception of the plans in
connection with the Tenant's initial construction and opening of the Premises,
Tenant shall reimburse Landlord for all reasonable costs and expenses
(including, without limitation, any reasonable architect or engineer fees)
incurred by Landlord in approving or disapproving Tenant's plans for
Improvements. Tenant shall certify to Landlord Tenant's actual cost of
constructing its Improvements within thirty (30) days after completing the same.
11.3 Mechanics' Liens.
(a) General. Tenant shall pay or cause to be paid all costs of labor,
services, and materials supplied in the prosecution of any work done in the
Premises on behalf of Tenant, and Tenant shall keep the Premises free and clear
of all mechanics' liens and other liens arising out of any work done for Tenant
or persons claiming under Tenant. Tenant shall promptly notify Landlord of any
Claim or lien filed against the Premises or the commencement of any action
affecting the title thereto.
(b) Contest of Lien. If Tenant desires to contest the claim of any
mechanics' lien, Tenant shall (i) either post a release bond issued by a
responsible corporate surety as prescribed by law, or furnish Landlord with
adequate security for the amount of the claim plus estimated costs and interest,
and (ii) promptly pay or cause to be paid any and all sums awarded to the
claimant on its suit.
(c) Landlord's Right to Cure. If Tenant fails to provide security for or
satisfaction of any mechanics' lien, then Landlord, in addition to any other
rights or remedies it may have, may (but shall not be obligated to) discharge
said lien by (i) paying the claimant an amount sufficient to settle and
discharge the claim, (ii) posting a release bond, or (iii) taking such action as
Landlord shall deem appropriate, and Tenant shall pay to Landlord on demand all
costs incurred by Landlord in settling and discharging such lien (including
reasonable attorney fees and bond premiums).
(d) Notice of Non-responsibility. Landlord, Ground Lessor, or either
party's representatives shall have the right to go upon and inspect the Premises
at all reasonable times, and shall have the right to post and keep posted
thereon during the performance by Tenant of any work described in this Article
11 notices of non-responsibility or such other notices that Landlord and/or
Ground Lessor may deem to be proper for the protection of Landlord's and/or
Ground Lessor's interest in the Premises. Tenant shall give Landlord and Ground
Lessor at least ten (10) days advance written notice of its intention to
commence any work that might result in a lien described in this Article.
11.4 Title to Improvements. All Improvements shall become the property of
Landlord upon expiration or earlier termination of this Lease. Landlord's
reversionary interest in the Improvements shall at all times be prior and
superior to any interest of any lender of Tenant, or of any other entity
claiming any purchase money lien or other interest in the Improvements.
ARTICLE 12
REPAIRS; MAINTENANCE
12.1 Tenant's Obligations. Tenant agrees at all times from and after the
Commencement Date, at its own cost and expense, to repair, maintain in good and
tenantable condition and replace, as necessary, the Premises and every part
thereof (except portions of the Premises specifically required to be maintained
by Landlord pursuant to this Lease), including without limitation all equipment
and Utility Installations exclusively serving the Premises; any Air Conditioning
System exclusively serving the Premises; exterior and interior glass; signs;
locks and closing devices, window sashes, casements and frames; doors and door
frames; floor coverings; any grease traps, grease lines, and/or piping; the
storefront; and all items of repair, maintenance, alteration, improvement or
reconstruction as may be required by any Legal Requirement or the insurance
underwriter(s) for the Shopping Center. In no event shall Tenant be required to
make repairs necessitated by the negligence or willful acts of Landlord or
anyone claiming under Landlord, because of the failure of Landlord to perform or
observe any term or condition of this Lease, or because of Improvements made by
Landlord except to the extent otherwise covered by the insurance Tenant is
required to carry under this Lease. All replacements made by Tenant shall be of
like size, kind, and quality to the items replaced as they existed when
originally installed and shall be subject to Landlord's prior approval. Tenant
shall have the benefit of any warranty(ies) in connection with Landlord's Work
to the extent any such warranty covers portions of the Premises Tenant is
obligated to repair and maintain hereunder.
12.2 Landlord's Obligations. Landlord shall repair, maintain in good and
tenantable condition (and in compliance with Legal Requirements and requirements
of the insurance underwriter(s) for the Shopping Center) and replace, as
necessary, the roof, exterior walls, and structural parts of the Premises
(including the structural floor), and all Utility Installations serving the
Premises on a nonexclusive basis (except where the appropriate utility company
performs such duties) or that form a centralized Air Conditioning System serving
the Premises on a nonexclusive basis. In no event shall Landlord be required to
make repairs necessitated by the negligence or willful acts of Tenant or anyone
claiming under Tenant, because of the failure of Tenant to perform or observe
any term or condition of this Lease, or because of Improvements made by Tenant
except to the extent otherwise covered by the insurance Landlord is required to
carry under this Lease. Landlord shall be under no obligation to repair, replace
or maintain the Premises or the mechanical equipment exclusively serving the
Premises at any time, except as this Lease expressly provides. Notwithstanding
anything to the contrary contained in this Lease, Landlord shall not in any way
be liable to Tenant for failure to make repairs as herein specifically required
of it unless Tenant has previously notified Landlord of the need for such
repairs and Landlord has failed to commence and complete said repairs within a
reasonable period following receipt of Tenant's notification. As used in this
Article 12, "exterior walls" shall exclude storefronts, plate glass, window
cases or window frames, doors or door frames, security grilles or similar
enclosures. The definition of Common Area Expenses includes all work performed
by Landlord in accordance with this Section except as otherwise expressly
provided for in this Lease.
12.3 Performance of Work by Landlord. If Tenant refuses or neglects to
repair, replace, or maintain the Premises, or any part thereof, in a manner
reasonably satisfactory to Landlord, Landlord shall have the right but not the
obligation, upon giving Tenant reasonable notice of its election to do so, to
enter the Premises and make such repairs or perform such maintenance or
replacements on behalf of and for the account of Tenant. Nothing herein
contained shall imply any duty of Landlord to do any work that, under any
provision of this Lease, Tenant is required to do, nor shall Landlord's
performance of any repairs on behalf of Tenant constitute a waiver of Tenant's
default in failing to do the same. No exercise by Landlord of any rights herein
reserved shall entitle Tenant to any compensation, damages or abatement of Rent
from Landlord for any injury or inconvenience occasioned thereby. If Landlord
performs any maintenance or other obligations that Tenant is required to perform
under the terms of this Lease, Tenant shall upon demand pay to Landlord the
costs and expenses incurred by Landlord in doing the same (or shall deposit with
Landlord the anticipated amounts thereof), plus Landlord's Administrative Fee.
12.4 Service Contracts. Tenant shall contract with a qualified air
conditioning service company designated by Landlord (provided that the rates
charged by such service company are competitive in the trade area for
commensurate contractors) for the inspection and maintenance at least once every
calendar year and the repair and replacement, as necessary, of the distribution
portion of the Air Conditioning System serving the Premises. If at any time
during the Lease Term, an Air Conditioning System which exclusively serves the
Premises is installed, Tenant shall contract with a qualified air conditioning
service company approved by Landlord for the monthly maintenance and the repair
and replacement, as necessary, of the Air Conditioning System. Tenant shall
contract with a qualified service company for the cleaning and maintenance of
any grease traps and/or grease lines which are Tenant's responsibility to
maintain. Tenant shall provide Landlord with a copy of any contract required
under this Section within ten (10) days after the Commencement Date, together
with a copy of any subsequent contracts within ten (10) days after their
execution.
ARTICLE 13
INSURANCE OBLIGATIONS
13.1 Tenant's Insurance Obligations. At all times from and after the
Commencement Date, Tenant shall procure and maintain, at its sole cost and
expense, the following policies of insurance:
(a) Liability. Commercial general liability insurance with broad form
contractual liability coverage and with coverage limits of not less than Two
Million Dollars ($2,000,000) combined single limit, per occurrence, specifically
including liquor liability insurance covering consumption of alcoholic beverages
by customers of Tenant, if the sale of alcoholic beverages is permitted in the
Premises. Such policy shall insure Tenant's performance of the indemnity
provisions of this Lease, but the amount of such insurance shall not limit
Tenant's liability nor relieve Tenant of any obligation hereunder.
(b) Workers' Compensation. Workers' compensation insurance in the amount
required by the state in which the Shopping Center is located for the benefit of
Tenant's employees.
(c) Plate Glass. Insurance covering the full replacement cost of all plate
glass on the Premises; Tenant may self-insure such risk.
(d) Equipment. Boiler and machinery insurance on the Air Conditioning
System (or any part thereof) exclusively serving the Premises.
(e) Tenant's Personal Property and Improvements. Property insurance
covering any peril generally included in the classification "all risks"
(excluding earthquake and flood) in the area in which the Shopping Center is
located covering all (i) merchandise, (ii) Improvements, and (iii) Personal
Property owned or leased by Tenant (or for which Tenant is legally liable) and
located in the Shopping Center, in an amount not less than ninety percent (90%)
of their full replacement cost. Any policy proceeds shall be used for the repair
or replacement of the property damaged or destroyed, unless this Lease is
terminated under the provisions of Article 18.
13.2 Policy Requirements; Right to Adjust Requirements. All policies of
insurance provided for herein shall be issued by insurance companies that have a
general policyholder's rating of not less than "A" and a financial rating
equivalent to a policyholder's surplus of at least One Hundred Million Dollars
($100,000,000), as rated in the most current available "Best's" Insurance
Reports, and that have been admitted or qualified to do business in the state
where the Shopping Center is located by the insurance commission or other
highest board, body or official responsible for overseeing the insurance
business in such state. Tenant's general liability policy as required in Section
13.1(a) shall contain cross-liability endorsements. All policies of insurance
provided for herein (with the exception of workers' compensation insurance)
shall name Landlord, Landlord's property manager, all Mortgagees and such other
individuals or entities as Landlord may from time to time designate, as
"additional insureds." Certificates of all insurance required of Tenant
hereunder expressly providing for the waiver of subrogation as required in
Section 13.4 shall be delivered to Landlord at least ten (10) days prior to the
Commencement Date. Tenant shall provide to Landlord, at least thirty (30) days
prior to expiration, certificates of insurance to evidence any renewal or
additional insurance procured by Tenant. All certificates of insurance delivered
to Landlord shall contain an agreement by the company issuing said policy to
give Landlord twenty (20) days' advance written notice of any cancellation,
lapse, reduction or other adverse change respecting such insurance. All
commercial general liability insurance, property damage or other casualty
policies shall be written as primary policies, not contributory with or
secondary to coverage that Landlord may carry.
Notwithstanding anything to the contrary contained herein, Tenant shall
be permitted to have Tenant's primary commercial general liability insurance
policy written in a lesser amount than specified in Section 13.1(a) (in no event
less than fifty percent [50%] of the required coverage) provided Tenant carries
and maintains an "excess liability" and/or "umbrella policy" to cover the
balance of the required coverage and provided that all the requirements set
forth herein are otherwise satisfied. Further, Tenant shall be permitted to have
any required insurance covered as part of a blanket policy with a so called
"agreed amount endorsement" for the business conducted upon the Premises
providing the insurance coverage required under this Lease.
13.3 Landlord's Insurance Obligation. At all times from and after the
Commencement Date, Landlord shall maintain in effect insurance providing
protection for the following liabilities and/or risks: (a) commercial general
liability insurance for bodily injury and property damage arising from
Landlord's ownership and/or operation of the Shopping Center with coverage
limits at least equal to those Tenant is required to maintain as provided
herein, and (b) any peril included in the classification All Risks in the
geographic area in which the Shopping Center is located, including earthquake
coverage and/or any other coverage Landlord deems reasonably necessary (e.g.,
so-called "Difference in Conditions" coverage), covering the Shopping Center,
exclusive of any item that Tenant is required to insure or any item, building or
improvement that another party is required to insure, in an amount that is the
greater of eighty percent (80%) of its full replacement cost (exclusive of the
cost of excavations, foundations, and footings), or such greater amount as any
Mortgagee may require Landlord to maintain.
13.4 Mutual Waivers of Rights. Notwithstanding anything to the contrary
contained in this Lease, Landlord (for itself and its insurer), waives any
rights, including rights of subrogation, and Tenant (for itself and its
insurer), waives any rights, including rights of subrogation, each may have
against the other, and Tenant (for itself and its insurer) waives any rights,
including rights of subrogation, it may have against any of the parties to the
REA, for compensation of any loss or damage occasioned to Landlord or Tenant
arising from any risk generally covered by the All Risks insurance required to
be carried by Landlord and Tenant. The foregoing waivers shall be operative only
so long as available in the state where the Shopping Center is located. The
foregoing waivers shall be effective whether or not the parties maintain the
insurance required to be carried pursuant to this Lease.
ARTICLE 14
INDEMNITY
From and after the Commencement Date, Tenant shall indemnify, protect,
defend, and hold Landlord (and its partners, joint venturers, shareholders,
Mortgagee, affiliates, and property managers, and their respective officers,
directors, employees, and agents) harmless from and against any and all Claims
arising out of or in connection with loss of life, personal injury, property
damage or otherwise arising from (a) the use, occupation, improvement or
maintenance of the Premises or the Shopping Center or any work or activity in or
about the Premises or Shopping Center by Tenant or its assignees or subtenants
or their respective agents, employees, contractors, or licensees, (b) any
activity, condition or occurrence in or about the Premises, (c) the filing or
potential filing of any mechanic's or materialmen's lien against the Premises or
the Shopping Center in connection with any work done or caused to be done by
Tenant, (d) any breach or failure to perform any obligation imposed on Tenant
under this Lease, or (e) any act or omission of Tenant or its assignees or
subtenants or their respective agents, contractors, employees, or licensees.
Upon notice from Landlord, Tenant shall, at Tenant's sole expense and by counsel
reasonably satisfactory to Landlord, defend any action or proceeding brought
against Landlord by reason of any such Claim. If Landlord (or its partners,
joint venturers, shareholders, Mortgagee, affiliates, and property managers, or
their respective officers, directors, employees, and agents), without fault on
its part, is made a party to any litigation commenced by or against Tenant, then
Tenant shall indemnify, protect, defend, and hold each of such persons harmless
from and against any and all Claims arising out of incurred or paid by any such
person in connection with such litigation. The obligations of this Article shall
survive the expiration or earlier termination of this Lease. In no event shall
Tenant's obligations pursuant to this Article 14 extend to Claims arising out of
the sole negligence or willful misconduct of Landlord, or its agents, employees
or contractors (acting on behalf of Landlord).
ARTICLE 15
OCCUPANCY TRANSACTIONS
15.1 Restrictions.
(a) No Encumbrances. Tenant shall not make, consent to, or suffer any
Encumbrance without the prior written consent of Landlord, which Landlord may
grant or withhold in its sole and absolute discretion.
(b) Other Occupancy Transactions. Tenant shall not enter into or consent to
any Occupancy Transaction other than an Encumbrance without first obtaining
Landlord's written consent, which Landlord shall not withhold unreasonably.
Landlord may withhold its consent on any reasonable ground, including without
limitation any of the following situations: (i) the Transferee's contemplated
use of the Premises following the proposed Occupancy Transaction is not
identical to the Permitted Use, (ii) in Landlord's reasonable business judgment,
the Transferee lacks sufficient business reputation or experience to operate a
business of the type and quality permitted under this Lease, (iii) the present
net worth and working capital of the Transferee are less than that of Tenant, or
Tenant and Tenant's Guarantor, as the case may be, at the Effective Date or at
the time of the request, whichever is higher, (iv) the proposed Occupancy
Transaction would breach any covenant of Landlord or Tenant respecting radius
restriction, location, use or exclusivity in any other lease, financing
agreement, or other agreement relating to the Shopping Center (including, but
not limited to, Section 9.4 [i.e., the Gaming Provisions]), or (v) the proposed
Occupancy Transaction provides for rentals thereunder based on the net income or
profits derived by the Transferee from the Premises.
15.2 Condition Precedent. Tenant shall not have the right or power to enter
into an Occupancy Transaction if Tenant shall be in default beyond any
applicable notice and cure period pursuant to Article 16 under any provision of
this Lease.
15.3 Procedures. Should Tenant desire to enter into an Occupancy
Transaction which requires Landlord's consent, Tenant shall request Landlord's
consent to such transaction in writing at least forty-five (45) days before the
effective date of any such transaction. Such request shall include the
following:
(a) A detailed description of the proposed transaction, including its
nature, effective date, the purchase price, payment terms, allocation among
leasehold interest, Personal Property, Improvements, goodwill, inventory, and
other items;
(b) Copies of any offers, agreements, subleases, assignments, letters of
commitment or intent, and other documents or correspondence pertaining to the
proposed transaction;
(c) A description of the identity, financial condition, and previous
business experience of Tenant and Transferee, including, without limitation,
copies of latest income statement, balance sheet, and statement of cash flows
(with accompanying notes and disclosures of all material changes thereto) in
audited form, if available, and certified as accurate by Tenant or Transferee
respectively, together with a statement authorizing Landlord or its designated
representative(s) to investigate Tenant's and Transferee's business experience,
credit, and financial responsibility; and
(d) A statement by Tenant and Transferee agreeing that it is their
intention to complete the transaction if Landlord consents thereto.
15.4 Response by Landlord; Documentation. Within thirty (30) days after
receipt of Tenant's request for consent and all items required under Section
15.3, Landlord shall (a) consent to the proposed Occupancy Transaction, (b)
exercise its rights under Section 15.6, or (c) refuse to consent to the
Occupancy Transaction. Any consent by Landlord to any Occupancy Transaction
shall be evidenced by an instrument prepared by Landlord and executed by Tenant
and Transferee. As a condition to the completion of any assignment or transfer
of Tenant's interest in this Lease, Transferee shall agree in writing to assume
and perform all of the terms, covenants, and conditions of this Lease that are
obligations of Tenant. Tenant shall remain fully liable to perform its duties
under this Lease following the Occupancy Transaction. Tenant shall, on demand of
Landlord, reimburse Landlord for all Landlord's reasonable costs, including
attorney fees, incurred in obtaining advice and preparing documentation for each
requested Occupancy Transaction not to exceed One Thousand Dollars ($1,000.00)
per occurrence.
15.5 Consideration to Landlord. Except for those Occupancy Transactions
permitted pursuant to the provisions of Section 15.8 without Landlord's prior
consent, if Tenant enters into an Occupancy Transaction, the Minimum Annual Rent
then payable and any scheduled increases thereto shall be increased on the
effective date of such transaction to the highest of: (a) the total Minimum
Annual Rent payable by the Transferee to Tenant; (b) an amount equal to the
total of the Minimum Annual Rent plus Percentage Rent required to be paid by
Tenant pursuant to this Lease during the calendar year immediately preceding
such transaction; or (c) the Minimum Annual Rent payable in the first full year
of the Lease Term, increased in accordance with the CPI Adjustment Procedures
using the Rent Commencement Date as the Base Month and the effective date of
such transaction as the Month of Adjustment. In no event shall the Minimum
Annual Rent, as adjusted, be less than the Minimum Annual Rent in effect prior
to the effective date of the Occupancy Transaction.
15.6 Landlord's Right of First Refusal. If Tenant requests consent to an
Occupancy Transaction in accordance with this Article, Landlord shall have the
right to purchase the leasehold interest of Tenant in this Lease and the
Premises (referred to in this Section as "Tenant's interest"), to the exclusion
of the prospective Transferee, at the purchase price and terms offered by the
prospective Transferee. Such right shall be exercisable by Landlord by giving
Tenant notice of its election to purchase as provided in Section 15.4. Upon such
election, the proposed Transferee shall have no right to purchase Tenant's
interest, Landlord and Tenant shall execute an agreement setting forth the terms
and conditions of the purchase, and the proposed Occupancy Transaction shall be
deemed to have been disapproved. No failure of Landlord to elect to exercise its
rights hereunder shall be construed as consent to the proposed Occupancy
Transaction or a waiver of such rights with respect to any future proposed
Occupancy Transaction.
15.7 Nullity. Any Occupancy Transaction purportedly consummated in
violation of the provisions of this Article shall be null and void and of no
force or effect.
15.8 Permitted Occupancy Transactions. Notwithstanding anything to the
contrary contained in this Article 15, so long as the Tenant (i) is the tenant
entity named in Section 1.2 of this Lease and (ii) is not in default as provided
in Section 15.2, Tenant shall have the right, without the prior written consent
of Landlord, to enter into an Occupancy Transaction, other than an Encumbrance,
with a person or entity which: [a] is Tenant's parent organization; or [b] is a
wholly-owned subsidiary of Tenant; or [c] is a corporation of which Tenant or
Tenant's parent organization owns in excess of fifty percent (50%) of the
outstanding capital stock; or [d] as a result of a consolidation or merger with
Tenant and/or Tenant's parent corporation shall own all the capital stock of
Tenant or Tenant's parent corporation; or [e] purchases all or substantially all
of Tenant's assets provided such acquisition includes at least ten (10) stores
operating under the Trade Name (or a trade name similar to the Trade Name)
permitted under this Lease; or [f] acquires stock constituting effective control
of Tenant provided that at the time of such acquisition Tenant operates at least
ten (10) stores under the Trade Name (or a trade name similar to the Trade Name)
permitted under this Lease. Any Occupancy Transaction pursuant to [a], [b], [c],
[d], [e], or [f] above shall be subject to the following conditions: (1) Tenant
shall remain fully liable during the unexpired Lease Term; (2) any such
Occupancy Transaction shall be subject to all of the terms, covenants and
conditions of this Lease and any such Transferee shall expressly assume for the
benefit of Landlord the obligations of Tenant under this Lease by a document
prepared by Landlord; (3) the resulting entity pursuant to [d], [e], and [f]
above shall have a net worth equal to or greater than Four Million Dollars
($4,000,000.00); (4) Tenant shall give Landlord notice of such Occupancy
Transaction at least twenty (20) days prior to its effective date (which notice
shall include all documentation necessary to verify the conditions contained in
this paragraph); and (5) Tenant shall reimburse Landlord for Landlord's
reasonable documentation fees incurred in conjunction with the processing and
preparation of documentation for any such Occupancy Transaction, not to exceed
One Thousand Dollars ($1,000.00) per occurrence.
ARTICLE 16
DEFAULTS BY TENANT; LANDLORD REMEDIES
16.1 Events of Default. The occurrence of any of the following shall
constitute a default by Tenant and a breach of this Lease.
(a) Failing or refusing to pay any amount of Minimum Annual Rent or
Additional Rent when due in accordance with the provisions of this Lease;
(b) Failing or refusing to occupy and operate the Premises in accordance
with Sections 10.1 and 10.2 or conducting a going-out-of-business, liquidation
or similar sale;
(c) Failing or refusing to perform fully and promptly any covenant or
condition of this Lease, other than those specified in subparagraphs (a) and (b)
above or (d) below; or
(d) Maintaining, committing, or permitting on the Premises waste or a
nuisance in any twelve (12) consecutive month period in which Tenant has
previously received one (1) or more notices of such violation; use of the
Premises for an unlawful purpose; entering into an Occupancy Transaction
contrary to the provisions of Article 15; failing to remain open for business as
required by Section 10.2, on any occasion during a given year of the Lease Term
in which Tenant has received three (3) or more notices of violations of said
Section; and in the event the Permitted Use involves the sale and/or preparation
of food, Tenant's failure to maintain a health department rating of "A" (or such
other highest health department or similar rating as is available) for the
second (2nd) time in any twelve (12) month period.
16.2 Notices. Following the occurrence of any of the defaults specified in
subparagraphs (a), (b) and (c) of Section 16.1, Landlord shall give Tenant, and
any subtenant, a written notice specifying the nature of the default and
demanding that Tenant, and any subtenant, either fully cure each such default
within the time period specified in the correspondingly lettered subparagraphs
below or quit the Premises and surrender the same to Landlord:
(a) For nonpayment of Minimum Annual Rent or Additional Rent, the first two
(2) such notices in each calendar year will be ten (10) day notices, thereafter
during such year five (5) days;
(b) For breach of Sections 10.1 or 10.2 or for conducting a
going-out-of-business, liquidation or similar sale, three (3) business ( i.e.,
Monday through Friday) days;
(c) With regard to those defaults specified in subparagraph (c) of Section
16.1, a reasonable period not to exceed thirty (30) days; provided, however,
that if such default cannot be cured within said time period, Tenant shall be
deemed to have cured such default if Tenant so notifies Landlord in writing,
commences cure of the default within said time period, thereafter diligently and
in good faith continues with said cure and actually completes said cure (and
upon request from Landlord, Tenant shall provide Landlord with written notice as
to the progress of Tenant's cure); and
(d) With regard to those defaults specified in subparagraph (d) of Section
16.1, Landlord shall give Tenant, and any subtenant, a written notice specifying
the nature of the default and the provisions of this Lease breached and Landlord
shall have the right to demand in said notice that Tenant quit the Premises
within five (5) days.
To the extent permitted by applicable state law, the time periods provided
in this Section for cure of Tenant's defaults under this Lease or for surrender
of the Premises shall be in lieu of, and not in addition to, any similar time
periods prescribed by applicable state law as a condition precedent to the
commencement of legal action against Tenant for possession of the Premises;
provided, however, to the extent the foregoing is not permitted by applicable
law, any notice under this Section shall run concurrently with, and not in
addition to, any similar time periods prescribed by applicable law. Any notice
given pursuant to this Section is in lieu of any written notice required by
statute or law and Tenant waives (to the fullest extent permitted by law) the
giving of any notice other than that provided for in this Section.
16.3 Landlord's Rights and Remedies. Should Tenant fail to cure within the
time periods specified in Section 16.2 any default specified in subparagraph
(a), (b) or (c) of Section 16.1, or fail to quit the Premises in accordance with
subparagraph (d) of Section 16.2 with respect to any default specified in
subparagraph (d) of Section 16.1, Landlord may exercise any of the following
rights without further notice or demand of any kind to Tenant or any other
person, except as required by applicable state law:
(a) The right of Landlord to terminate this Lease and Tenant's right to
possession of the Premises and to reenter the Premises, take possession thereof
and remove all persons therefrom, following which Tenant shall have no further
claim thereon or hereunder;
(b) The right of Landlord, without terminating this Lease and Tenant's
right to possession of the Premises, to reenter the Premises and occupy the
whole or any part thereof for and on account of Tenant and to collect any unpaid
Rent which has become payable, or which may thereafter become payable; or
(c) The right of Landlord, even though it may have reentered the Premises,
in accordance with subparagraph (b) of this Section, to elect thereafter to
terminate this Lease and Tenant's right to possession of the Premises.
Should Landlord have reentered the Premises under the provisions of
subparagraph (b) of this Section, Landlord shall not be deemed to have
terminated this Lease or have accepted a surrender thereof by any such reentry,
unless Landlord shall have notified Tenant in writing that it has so elected to
terminate this Lease and Tenant's right to possession. Tenant further covenants
that the service by Landlord of any notice pursuant to the unlawful detainer or
eviction statutes of the state where the Shopping Center is located and the
surrender of possession pursuant to such notice shall not (unless Landlord
elects to the contrary at the time of, or at any time subsequent to, the serving
of such notice and such election is evidenced by a written notice to Tenant) be
deemed to be a termination of this Lease. In the event of any reentry or taking
possession of the Premises as aforesaid, Landlord shall have the right, but not
the obligation, to remove therefrom all or any part of the merchandise,
Improvements or Personal Property located therein and to place the same in
storage at a public warehouse at the expense and risk of Tenant. The rights and
remedies given to Landlord in this Section shall be additional and supplemental
to all other rights or remedies which Landlord may have under laws in force when
the default occurs.
Landlord agrees that in the event Tenant defaults under this Lease and
thereafter vacates the Premises, Landlord shall use its reasonable efforts to
re-lease the Premises and mitigate monetary damages arising out of Tenant's
default or breach of this Lease. Nothing herein, however, shall prohibit
Landlord from leasing any other vacant premises before leasing the Premises
hereunder, or from using its business judgment respecting the leasing of the
Premises hereunder.
16.4 Landlord's Damages. Should Landlord terminate this Lease and Tenant's
right to possession of the Premises, pursuant to the provisions of subparagraphs
(a) or (c) of Section 16.3, Landlord may recover from Tenant as damages, all of
the following:
(a) The worth at the time of award of any unpaid Rent that had been earned
at the time of such termination;
(b) The worth at the time of award of the amount by which the unpaid Rent
that would have been earned after termination until the time of award exceeds
the amount of such Rent loss Tenant proves could have been reasonably avoided;
(c) The worth at the time of award of the amount by which the unpaid Rent
for the balance of the Lease Term after the time of award exceeds the amount of
such Rent loss that Tenant proves could be reasonably avoided;
(d) Any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, including, without limitation, any costs or expense incurred by
Landlord in (i) retaking possession of the Premises, including reasonable
attorney fees therefor, (ii) maintaining or preserving the Premises after such
default, (iii) preparing the Premises for reletting to a new tenant, including
repairs or demolitions to the Premises for such reletting, (iv) leasing
commissions, and (v) any other costs necessary or appropriate to relet the
Premises; and
(e) At Landlord's election, such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by the laws of the state
where the Shopping Center is located.
As used in subparagraphs (a) and (b) of this Section, the "worth at the
time of award" is computed by allowing interest at the Interest Rate. As used in
subparagraph (c) of this Section, the "worth at the time of award" is computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).
All Additional Rent shall, for the purposes of calculating any amount
due under the provisions of subparagraph (c) of this Section, be computed on the
basis of the average monthly amount thereof accruing during the immediately
preceding thirty-six (36) month period, except that, if it becomes necessary to
compute such Additional Rent before such a thirty-six (36) month period has
occurred, then such Additional Rent shall be computed on the basis of the
average monthly amount thereof accruing during such shorter period.
16.5 Personal Property. In the event of Tenant's default, continuing during
the length of said default, Landlord shall have the right to take the exclusive
possession of any of Tenant's merchandise and/or Personal Property remaining on
the Premises and to use the same free of rent or charge until all defaults have
been cured or, at its option, to require Tenant to remove same forthwith. In the
event of any reentry or taking possession of the Premises as provided in this
Article, Landlord shall have the right, but not the obligation, to remove
therefrom all or any part of the merchandise or Personal Property located
therein and to place the same in storage at a public warehouse at the expense
and risk of Tenant.
Notwithstanding anything to the contrary contained herein, upon Tenant's
written request therefor, provided such request is in connection with the
remodel, alteration or merchandising of the Premises and provided Tenant is not
in default under this Lease (beyond the applicable notice and cure period as
provided in Article 16), Landlord shall subordinate its rights, on a form
prepared by Landlord, in such Personal Property of Tenant to the rights of any
fixture or equipment seller, lender or lessor (hereinafter "Lender") of Tenant,
but only so long as Tenant is indebted to such Lender, provided such Lender
agrees to (i) allow Landlord thirty (30) days to cure Tenant's default under the
agreement between Tenant and Lender, (ii) provide Landlord with no less than
five (5) days' written notice in the event of entry for repossession and shall
have said Personal Property removed within five (5) days from the date of entry
for repossession, (iii) remove the Personal Property promptly upon notification
from Landlord in the event of default by Tenant under this Lease, (iv) be
accompanied by a representative of center management during any such entry, and
only during reasonable business hours, (v) repair all damage occasioned by any
such repossession at Lender's sole expense, (vi) defend, indemnify and hold
Landlord harmless from any claims made as a result of the removal of the
Personal Property by Lender, (vii) dispose of or sell the property at some place
other than the Shopping Center, and (viii) advise Landlord in writing within
twenty (20) days after the expiration or earlier termination of the agreement
between Lender and Tenant as to said Personal Property. In no event shall
Landlord be under any obligation to assist in the repossession of such Personal
Property. Tenant further agrees to reimburse Landlord, in advance, for
Landlord's reasonable costs incurred in preparing the documentation referred to
herein (not to exceed $500 per occurrence)
16.6 Waiver of Rights of Redemption. Tenant expressly waives any and all
rights of redemption granted by or under any present or future laws if Tenant is
evicted or dispossessed for any cause, or if Landlord obtains possession of the
Premises by reason of the violation by Tenant of any of the terms, covenants,
and conditions of this Lease or otherwise.
ARTICLE 17
DEFAULTS BY LANDLORD; TENANT'S REMEDIES
17.1 Default by Landlord. If Landlord fails to perform or observe any of
the terms, covenants or conditions contained in this Lease on its part to be
performed or observed within thirty (30) days after written notice of default
from Tenant or, when more than thirty (30) days shall be required because of the
nature of the default, if Landlord shall fail to proceed diligently to cure such
default after written notice thereof from Tenant, said failure shall constitute
a default by Landlord under this Lease.
17.2 Notice to Mortgagees. If the Premises or any part thereof, or any
interest of Landlord in this Lease or the Rent due hereunder, are at any time
subject to any Mortgage (including but not limited to any Ground Lease) and if
Tenant is given notice of the name and address of the Mortgagee, then Tenant
shall give written notice of any Landlord's default to such Mortgagee,
specifying the default in reasonable detail. If Landlord fails to cure such
default within the applicable cure period, Tenant shall give written notice of
such failure to such Mortgagee affording such Mortgagee the same opportunity to
cure as provided Landlord in Section 17.1. If such Mortgagee does perform on
behalf of Landlord, such default shall be deemed cured.
17.3 Limitations on Remedies Against Landlord. In the event Tenant makes
any Claim or asserts any cause of action against Landlord as a result of
Landlord's default: (a) Tenant's sole and exclusive remedy shall be against the
current rents, issues, profits, and other income Landlord receives from its
operation of the Shopping Center, net of all current operating expenses,
liabilities, reserves, and debt service associated with said operation ("Net
Income" for purposes of this Section only), (b) no other real, personal or mixed
property of Landlord, wherever located, shall be subject to levy on any judgment
obtained against Landlord, (c) if such Net Income is insufficient to satisfy any
judgment, Tenant will not institute any further action, suit, Claim or demand,
in law or in equity, against Landlord for or on the account of such deficiency,
and (d) Landlord's default shall not constitute consent by Landlord for Tenant
to perform or observe such terms, covenants or conditions at Landlord's expense.
The limitations set forth in this Section shall be applicable to, and
enforceable by, Landlord and/or by any partner, trustee, officer, employee,
agent or property manager of Landlord.
17.4 Landlord's Exemption From Liability. Landlord shall not be liable for
injury to Tenant's business or loss of income therefrom or for damage that may
be sustained by the person, merchandise or Personal Property of Tenant, its
employees, invitees, customers, agents or contractors or any other person in or
about the Premises, caused by or resulting from fire, steam, electricity, gas,
water or rain, which may leak or flow from or into any part of the Premises, or
from the breakage, leakage, obstruction or other defects of the Utility
Installations, Air Conditioning System or other components of the Premises or
Shopping Center, or as a result of the exercise by Landlord of its rights under
this Lease, except to the extent that such damage or loss is caused by
Landlord's sole, active negligence or willful misconduct. Landlord makes no
representations or warranties whatsoever with respect to any Air Conditioning
System or Utility Installations existing as of the date hereof or in the future
except as expressly provided in Section 2.1; provided, however, in no event is
the foregoing intended to diminish Landlord's obligation to perform Landlord's
Work subject to the specifications provided in Exhibit C. Landlord shall not be
liable in damages or otherwise for any discontinuance, failure or interruption
of service to the Premises of Utilities or the Air Conditioning System and
Tenant shall have no right to terminate this Lease or withhold rent because of
the same except as otherwise expressly provided for in this Section 17.4.
Landlord shall not be liable for any damages arising from any use, act or
failure to act of any other tenant or occupant, if any, of the Shopping Center.
Notwithstanding anything to the contrary contained in this Lease, if as a
result of Landlord's or Landlord's agent's negligence, any utility or Air
Conditioning System being furnished to Tenant is interrupted for more than
seventy-two (72) consecutive hours, then commencing with the first full business
day thereafter, there shall be an equitable abatement of Minimum Annual Rent and
Additional Rent (except Percentage Rent) reflecting the extent Tenant's ability
to conduct business in the Premises is impaired, continuing until such time as
the utility service to the Premises is restored. Such abatement shall not affect
any obligation of Tenant under this Lease to pay Percentage Rental.
ARTICLE 18 RECONSTRUCTION
18.1 Insured Casualty. Upon the occurrence of an Insured Casualty to the
Premises Landlord shall commence Reconstruction of Landlord's Work within ninety
(90) days after such occurrence (provided neither party has terminated as
provided in this Section) and prosecute the same diligently to completion, and
Tenant shall commence Reconstruction of Tenant's Work promptly upon completion
of Landlord's Work and shall diligently prosecute the same to completion. In the
event of a Major Destruction of the Premises as a result of an Insured Casualty
during the last two (2) years of the Lease Term, Landlord and Tenant shall each
have the option to terminate this Lease on written notice to the other of
exercise thereof within thirty (30) days after such occurrence.
18.2 Uninsured Casualty. Upon the occurrence of an Uninsured Casualty to
the Premises, Landlord shall have the election, and shall within ninety (90)
days following the date of such damage give Tenant written notice of Landlord's
election, either to commence Reconstruction of the Premises and prosecute the
same diligently to completion, in which event this Lease shall continue in full
force and effect, or not to perform such Reconstruction, in which event this
Lease shall cease and terminate not later than sixty (60) days after Landlord's
notice of its election to terminate. In the event of a Major Destruction of the
Premises as a result of an Uninsured Casualty during the last two (2) years of
the Lease Term, Tenant shall have the option to terminate this Lease on written
notice to Landlord of exercise thereof within thirty (30) days after such
occurrence.
18.3 Construction Provisions. Reconstruction shall substantially conform to
the provisions of Exhibit C and shall cover Landlord's Work and Tenant's Work.
Landlord shall reconstruct the Premises only to the extent of Landlord's Work;
Tenant, at its sole cost and expense, shall reconstruct Tenant's Work and shall
replace its merchandise, Improvements and Personal Property.
18.4 Release of Liability. In the event of termination under any of the
provisions of this Article, both Landlord and Tenant shall be released from any
liability or obligation under this Lease, except as otherwise provided for in
this Lease, arising after the date of termination. In the event of termination,
all proceeds from Tenant's insurance covering Tenant's Improvements, but
excluding proceeds for Tenant's merchandise, the unamortized net cost to Tenant
of its Improvements with a straight-line amortization schedule and an
amortization period equal to the Lease Term, and Personal Property, shall be
disbursed and paid to Landlord. In no event shall Tenant be entitled to share in
Landlord's insurance proceeds or to take any action which would result in a
reduction of Landlord's insurance proceeds.
18.5 Abatement of Rent. In the event of an Insured Casualty or an Uninsured
Casualty to the Premises, the recurrent Rent (except Percentage Rent) payable by
Tenant shall be abated proportionately with the degree to which Tenant's use of
the Premises is impaired, commencing from the date of destruction and continuing
during the period of Reconstruction or until the effective date of termination,
as the case may be. Tenant shall continue the operation of its business on the
Premises during any such period to the extent reasonably practicable from the
standpoint of prudent business management, and the obligation of Tenant to pay
Percentage Rent and non-recurrent Additional Rent shall remain in full force and
effect. Tenant shall not be entitled to any compensation or damages from
Landlord for loss of use of the whole or any part of the Premises, Tenant's
Personal Property, or any inconvenience or annoyance occasioned by such damage,
Reconstruction or replacement.
18.6 Major Destruction. Notwithstanding any of the foregoing provisions of
this Article, should there be a Major Destruction of the Shopping Center at any
time after the Effective Date, Landlord shall have the right to terminate this
Lease on written notice to Tenant within ninety (90) days after such
destruction. In no event shall Landlord terminate this Lease unless it
terminates the leases of all Shopping Center tenants similarly affected by the
casualty.
18.7 Waiver of Inconsistent Statutes. Landlord and Tenant hereby waive any
statutory rights of termination which may arise by reason of any partial or
total destruction of the Premises.
ARTICLE 19 EMINENT DOMAIN
19.1 Total Taking. If the entire Premises shall be appropriated or taken
under the power of eminent domain by any public or quasi-public authority or
under threat of and in lieu of condemnation (hereinafter, "taken" or "taking"),
this Lease shall terminate as of the date of such taking, and Landlord and
Tenant shall have no further liability or obligation, except as otherwise
provided for in this Lease, arising under this Lease after such date.
19.2 Partial Taking; Right to Terminate. If more than twenty-five percent
(25%) of the Floor Area of the Premises is taken, or if by reason of any taking,
regardless of the amount so taken, the remainder of the Premises is not one
undivided space or is rendered unusable for the Permitted Use, either Landlord
or Tenant shall have the right to terminate this Lease as of the date Tenant is
required to vacate the portion of the Premises taken, upon giving notice of such
election within thirty (30) days after receipt by Tenant from Landlord of
written notice that said Premises have been or will be so taken. In addition, if
(a) such a significant portion of the Shopping Center or Common Area is taken
that, in Landlord's reasonable opinion, substantial restoration is required on
the remaining portion, or (b) Landlord exercises its right to terminate its
participation in the REA because of the taking of portions of the Casino(s) or
the Shopping Center other than the Premises, the Landlord shall have the right
to terminate this Lease upon thirty (30) days' written notice to Tenant. In the
event of such termination, both Landlord and Tenant shall be released from any
liability or obligation under this Lease, except as otherwise provided for in
this Lease, arising after the date of termination. Landlord and Tenant shall,
immediately after learning of any taking, give notice thereof to each other.
19.3 Restoration. If this Lease does not terminate pursuant to Sections
19.1 or 19.2 above, then Tenant shall continue to occupy that portion of the
Premises not taken and the parties shall proceed as follows: (a) at Landlord's
cost and expense and as soon as reasonably possible, Landlord shall restore the
Premises remaining to a complete unit of like quality and character as existed
prior to such appropriation or taking, and (b) the Minimum Annual Rent provided
for in Article 1 shall be reduced on an equitable basis, taking into account the
relative values of the portion taken as compared to the portion remaining.
Tenant waives any statutory rights of termination that may arise because of any
partial taking of the Premises.
19.4 Award. Landlord shall be entitled to the entire condemnation award for
any taking of the Premises, the Shopping Center or any part thereof. Tenant's
right to receive any amounts separately awarded to Tenant directly from the
condemning authority for the taking of its merchandise, Personal Property,
relocation expenses and/or interests in other than the real property taken
and/or the leasehold interest shall not be affected in any manner by the
provisions of this Section, provided Tenant's award does not reduce or affect
Landlord's award.
ARTICLE 20
SUBORDINATION; ATTORNMENT; ESTOPPEL
20.1 Subordination to Mortgage. This Lease and all of Tenants' rights
hereunder are and shall be subject and subordinate to the first Mortgage and any
secondary Mortgage approved by the first Mortgagee. The foregoing shall be self
operative without the execution of additional documentation, however, within
twenty (20) days after the receipt of a request from Landlord or any Mortgagee,
Tenant shall confirm such subordination by executing a recordable subordination
agreement in form and content reasonably satisfactory to Landlord and Landlord's
Mortgagee. Tenant acknowledges that any Mortgagee has the right to subordinate
at any time its Mortgage to this Lease and the leasehold estate, without
Tenant's consent. Tenant shall, within twenty (20) days after written request
therefor, execute and deliver such documents as are reasonably requested by the
Mortgagee to confirm such subordination.
Notwithstanding anything to the contrary contained herein, upon request
from Tenant, Landlord shall request from any party seeking such superior
position (with the exception of the existing Mortgagee) a non-disturbance
agreement and attornment agreement to the effect that so long as Tenant pays the
rentals due under this Lease and otherwise complies with the terms hereof,
Tenant's occupancy hereunder shall not be disturbed. In no event shall Tenant's
obligation to subordinate its rights hereunder be conditioned on the receipt of
such agreement. Tenant shall be responsible for payment of any costs incurred in
connection with obtaining the documentation requested hereunder.
Concurrently with Tenant's execution of this Lease, Tenant shall
execute the Subordination, Non-Disturbance and Attornment Agreement
("Subordination Agreement") attached hereto as Exhibit G. The Subordination
Agreement shall be submitted to the Lender (as defined in Exhibit G) for review
and execution by the Lender, at Lender's sole and absolute discretion. In no
event shall the enforceability of this Lease be conditioned upon the execution
by Lender of the Subordination Agreement. 20.2 Subordination to REA. Subject to
Section 2.2, this Lease and all of Tenant's rights hereunder are and shall be
subject and subordinate to the REA and any amendments or modifications thereof.
If the REA is not of record as of the date hereof, then this Lease shall
automatically become subordinate to the REA upon recordation of the REA, and
within twenty (20) days after the receipt of a request from Landlord or any
Mortgagee, Tenant shall confirm such subordination by executing a recordable
subordination agreement in form and content reasonably satisfactory to Landlord.
20.3 Subordination to Ground Lease. Subject to Section 2.2, this Lease and
all of Tenant's rights hereunder are and shall be subject and subordinate to the
Ground Lease and any amendments or modifications thereof. If a Memorandum of
Ground Lease is not of record as of the date hereof, then this Lease shall
automatically become subordinate to the Ground Lease upon recordation of a
Memorandum of Ground Lease, and within twenty (20) days after the receipt of a
request from Landlord or any Mortgagee, Tenant shall confirm such subordination
by executing a recordable subordination agreement in form and content reasonably
satisfactory to Landlord.
20.4 Attornment. If Landlord sells, transfers, or conveys its interest in
the Premises or this Lease, or if the same is foreclosed judicially or
nonjudicially, or otherwise acquired, by a Mortgagee (including, without
limitation, Ground Lessor), upon the request and at the sole and absolute
election of Landlord's successor, Tenant shall attorn to said successor,
provided said successor accepts the Premises subject to this Lease. Tenant
shall, upon request of Landlord or any Mortgagee (including, without limitation,
Ground Lessor), execute an attornment agreement confirming the same, in form and
substance reasonably acceptable to Landlord or Landlord's successor. This
Section 20.4 shall in no way be deemed a waiver by Tenant of any Claims for any
predecessor's failure or bad faith refusal to provide any Security Deposit to
its successor or to notify its successor of any amendment prior to the date that
such successor's lien or interest first arose.
20.5 Estoppel Certificate. Within twenty (20) days after request from
Landlord, Tenant shall execute and deliver to Landlord an Estoppel Certificate
with appropriate facts concerning the status of this Lease and Tenant's
occupancy completed by Landlord, and with any exceptions thereto noted in
writing by Tenant. Tenant's failure to execute and deliver the Estoppel
Certificate within said twenty-day period shall be deemed to make conclusive and
binding upon Tenant in favor of Landlord, Ground Lessor, and any potential
Mortgagee or transferee the statements contained in such Estoppel Certificate
without exception.
Landlord shall upon request from Tenant (in connection with a proposed
Occupancy Transaction under Article 15), but not more than twice per any
calendar year, execute a statement certifying that (i) this Lease represents the
entire agreement between Landlord and Tenant, and is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
dates to which rental and other charges are paid in advance, if any, (ii)
certifying the commencement and termination dates of the Lease Term, and (iii)
acknowledging that there are not, to Landlord's knowledge, any uncured defaults
on the part of Tenant hereunder or specifying such defaults if any are claimed.
ARTICLE 21
QUIET ENJOYMENT
Landlord agrees that Tenant, upon paying the rent and performing the terms,
covenants, and conditions of this Lease, may quietly have, hold, and enjoy the
Premises from and after Landlord's delivery of the Premises to Tenant and until
the end of the Lease Term, subject, however, to those matters to which this
Lease is or shall become subordinate.
ARTICLE 22
CONSENTS
Wherever in this Lease consent, approval or permission (collectively
referred to in this Article as "consent") is required, such consent shall be
given in writing and shall not be unreasonably withheld or delayed, unless
otherwise expressly provided. Landlord shall not be deemed to have withheld its
consent unreasonably where Landlord's right to give its consent is conditioned
on Landlord obtaining the consent of any other person, entity, agency or
Governmental Authority and such other person, entity, agency or Governmental
Authority does withhold its consent. If Landlord fails to give any consent that
a court later holds Landlord was required to give under the terms of this Lease,
Tenant shall be entitled solely to specific performance and such other remedies
as may be specifically reserved to Tenant under this Lease, but in no event
shall Landlord be responsible for monetary damages (including incidental and
consequential damages) for such failure to give consent unless said consent is
withheld maliciously or in bad faith. The failure by Landlord to respond to any
request for consent shall in no event be deemed either approval or refusal by
Landlord.
ARTICLE 23
NOTICES
Wherever in this Lease it shall be required or permitted that any notice,
request, report, communication or demand (collectively, "notice") be given,
served or transmitted by either party to this Lease to or on the other, such
notice shall be in writing and shall be personally delivered or forwarded by
certified mail, return receipt requested, or by nationally recognized courier
service providing written confirmation of delivery, to the addresses of the
parties specified in Section 1.12. Notice shall be deemed to have been given or
served on the delivery date indicated by the United States Postal Service or
courier service on the return receipt or on the date such delivery is refused or
marked "undeliverable," unless Landlord or Tenant, as the case may be, is served
personally, in which event the date of personal delivery shall be deemed the
effective date of notice. Either party may change its address by providing
written notice as specified herein; provided, however, that all addresses
provided must be the actual street address of a residence or business
establishment. The foregoing method of service shall be exclusive, and Landlord
and Tenant waive, to the fullest extent permitted under law, the right to any
other method of service required by any statute or law now or hereafter in
force. Whenever multiple notices are sent or multiple methods of transmitting
any notice are utilized, any time period that commences upon the giving or
deemed giving of such notice shall commence upon the earliest date such delivery
is effectuated, and such time shall not be extended by operation of law or
otherwise because of any later delivery of the same notice.
ARTICLE 24
ATTORNEY FEES
If either Landlord or Tenant institutes any action or proceeding
against the other relating to the provisions of this Lease or any default
hereunder, the nonprevailing party in such action or proceeding shall reimburse
the prevailing party for the reasonable expenses of attorney fees and all costs
and disbursements incurred therein by the prevailing party, including, without
limitation, any such fees, costs or disbursements incurred on any appeal from
such action or proceeding. The prevailing party shall recover all such fees,
costs or disbursements as costs taxable by the court in the action or proceeding
itself without the necessity for a cross-action by the prevailing party. In
addition to the foregoing award of attorneys' fees, costs and disbursements to
the prevailing party, the prevailing party shall be entitled to its attorneys'
fees, costs and disbursements in any post judgment proceedings to collect or
enforce the judgment. This provision is separate and several and shall survive
the termination of this Lease.
ARTICLE 25 GENERAL PROVISIONS
25.1 Binding Effect. The parties hereto agree that all the provisions of
this Lease are to be construed as covenants and agreements and, except as
otherwise specified, that said provisions shall bind and inure to the benefit of
the parties hereto and their respective heirs, legal representatives,
successors, and assigns.
25.2 Right to Lease. Landlord shall have the absolute right to lease or
permit the use or occupancy of space in the Shopping Center as Landlord shall
determine in its sole and absolute judgment. Tenant does not rely on the fact,
nor does Landlord represent, that there shall be any specific occupants or
minimum occupancy level of space in the Shopping Center at any time (including,
without limitation, Major Tenants).
25.3 Shopping Center Configuration. Subject to Section 7.5, Tenant
acknowledges that Exhibit A is for the purposes of convenience only and that
Landlord reserves the right at any time during initial construction or
thereafter to expand, reduce, remove, demolish, change, renovate or construct
any existing or new improvements at the Shopping Center, including, without
limitation, the Amusement Facility and/or the Enclosed Mall Gaming Areas.
25.4 Claims by Brokers. Tenant warrants that all negotiations with respect
to this Lease (including, without limitation, preliminary consideration of the
Premises, relevant economics and final Lease provisions) were accomplished
without the aid, intervention or employment of any broker or finder, of any kind
(with the exception of BDH Associates). Tenant shall indemnify, protect, defend,
and hold Landlord (and its partners, joint venturers, affiliates, shareholders,
and property managers, and their respective officers, directors, employees, and
agents) harmless from and against any and all Claims arising out of or in
connection with any Claims made by any person claiming to be a broker or finder
representing Tenant with regard to this Lease including, without limitation,
Claims for commissions and all costs of enforcing this indemnity against Tenant.
25.5 Exhibits. All exhibits attached hereto are incorporated herein and
made a part of this Lease by reference as if fully set forth herein.
25.6 Entire Agreement; Amendments to Lease. There are no oral or written
agreements or representations between the parties hereto affecting this Lease
not contained herein. This Lease supersedes and cancels any and all previous
negotiations, arrangements, representations, brochures, displays, projections,
estimates, agreements, and understandings, if any, made by, to, or between
Landlord and Tenant and their respective agents and employees with respect to
the subject matter thereof, and none shall be used to interpret, construe,
supplement or contradict this Lease. This Lease, and all amendments thereto,
shall be considered to be the only agreement between the parties hereto and
their representatives and agents. To be effective and binding on Landlord and
Tenant, any amendment to the provisions of this Lease must be in writing and
executed by both parties in the same manner as this Lease itself. Any amendment
to this Lease shall be prepared by Landlord. Tenant shall reimburse Landlord on
demand for Landlord's reasonable costs, including attorney fees, incurred in the
preparation and handling of any amendment to this Lease requested by Tenant.
25.7 Force Majeure. The occurrence of any of the following events shall
excuse such obligations of Landlord or Tenant as are thereby rendered impossible
or reasonably impracticable for so long as such obligation remains impossible or
reasonably impracticable to perform: strikes, lockouts, labor disputes, acts of
God, inability to obtain labor, materials or reasonable substitutes therefor,
governmental restrictions, regulations or controls, judicial orders, enemy or
hostile governmental action, civil commotion, fire or other casualty, and other
causes beyond the reasonable control of the party obligated to perform.
Notwithstanding the foregoing (a) the occurrence of such events shall not excuse
Tenant's obligations to pay Rent or excuse such obligations as this Lease may
otherwise impose on the party to obey, remedy or avoid such event, provided,
however, that delays in opening for business resulting from reasons set forth
herein shall abate Tenant's obligation to initially open for business and
commence payment of Rent for a period equal to the length of such delay and (b),
should the work performed by Tenant or Tenant's contractor result in a strike,
lockout and/or labor dispute, such strike, lockout and/or labor dispute shall
not excuse Tenant's performance or obligation to pay Rent.
25.8 Venue. The laws of the state where the Shopping Center is located
shall govern the validity, performance, and enforcement of this Lease. Landlord
and Tenant consent to personal jurisdiction and venue in the state and judicial
district in which the Shopping Center is located.
25.9 Labor Disputes. Tenant shall construct, or cause Tenant's contractor
to construct, all Improvements in such a manner as to avoid any labor dispute
that causes or is likely to cause stoppage or impairment of work, deliveries or
any other services in the Shopping Center. If there shall be any such stoppage
or impairment as the result of any such labor dispute or potential labor
dispute, Tenant shall immediately undertake such action as may be necessary to
eliminate such dispute or potential dispute, including, without limitation, (a)
removing all disputants from the job site until such time as the labor dispute
no longer exists, (b) seeking a temporary restraining order and other injunctive
relief with regard to illegal union activities or a breach of contract between
Tenant and Tenant's contractor, and (c) filing appropriate unfair labor practice
charges.
25.10 Bankruptcy. Federal bankruptcy code shall govern with respect to this
Lease and in no event shall any provision of this Lease be deemed to be a waiver
by either party of its rights under such code.
25.11 No Presumption. Although the provisions of this Lease were drafted
primarily by Landlord, the parties hereto agree that such fact shall not create
any presumption, construction or implication favoring the position of either
Landlord or Tenant. The parties agree that any deletion of language from this
Lease prior to its execution by Landlord and Tenant shall not be construed to
have any particular meaning or to raise any presumption, construction or
implication, including, without limitation, any implication that the parties
intended thereby to state the opposite of the deleted language. The captions of
the Articles and Sections of this Lease are for convenience only, are not
operative parts of this Lease and do not in any way limit or amplify the terms
and provisions of this Lease.
25.12 No Waiver. The waiver by Landlord or Tenant of any breach of any
term, covenant or condition contained in this Lease shall not be deemed a waiver
of such term, covenant or condition of any subsequent breach thereof, or of any
other term, covenant or condition contained in this Lease. The consent to or
approval by Landlord or Tenant of any act by the other party requiring such
consent or approval shall not be deemed to waive or render unnecessary
Landlord's or Tenant's consent to or approval of any subsequent similar act by
the other party. Landlord's subsequent acceptance of partial Rent or performance
by Tenant shall not be deemed to be an accord and satisfaction or a waiver of
any preceding breach by Tenant of any term, covenant or condition of this Lease
or of any right of Landlord to a forfeiture of this Lease by reason of such
breach, regardless of Landlord's knowledge of such preceding breach at the time
of Landlord's acceptance. No term, covenant or condition of this Lease shall be
deemed to have been waived by Landlord or Tenant unless such waiver is in
writing and executed by such party.
25.13 Nondiscrimination. Landlord and Tenant covenant for themselves, their
heirs, executors, administrators, successors, and assigns and all persons
claiming under or through them, that there shall be no discrimination against or
segregation of any person or group of persons on account of race, color,
religion, creed, sex, marital status, sexual orientation, national origin,
ancestry, age, physical handicap or medical condition, in the leasing,
subleasing, transferring, use, occupancy, tenure or enjoyment of the Premises
herein leased, and Tenant and any person claiming under or through Tenant shall
not establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or occupancy
of tenants, subtenants, licensees, vendees or customers in the Premises.
25.14 Parties. If two (2) or more persons or corporations execute this
Lease as Tenant, the word "Tenant" as used in this Lease shall refer to all such
persons or corporations, and the liability of such persons or corporations for
compliance with and performance of all the terms, covenants, and conditions of
this Lease shall be joint and several. The masculine pronoun used herein shall
include the feminine or the neuter, as the case may be, and the use of the
singular shall include the plural.
25.15 Real Estate Investment Trust. During the Lease Term or any extension
thereof, should a real estate investment trust become Landlord hereunder, all
provisions of this Lease shall remain in full force and effect except as
modified by this Section. If Landlord in good faith determines that its status
as a real estate investment trust under the provisions of the Internal Revenue
Code of 1986, as heretofore or hereafter amended, will be jeopardized because of
any provision of this Lease, Landlord may request reasonable amendments to this
Lease, and Tenant will not unreasonably withhold, delay or defer its consent
thereto, provided that such amendments do not (a) increase the monetary
obligations, decrease the rights, or materially increase any other obligations,
of Tenant pursuant to this Lease or (b) in any other manner adversely affect
Tenant's interest in the Premises.
25.16 Relationship of the Parties. Nothing contained in this Lease shall be
deemed or construed as creating a partnership, joint venture, principal-agent,
or employer-employee relationship between Landlord and any other person or
entity (including, without limitation, Tenant) or as causing Landlord to be
responsible in any way for the debts or obligations of such other person or
entity.
25.17 Sale or Mortgage by Landlord. If Landlord, at any time, sells,
conveys, transfers or otherwise divests itself or is divested of its interest
("transfer") in the Premises, other than a transfer for security purposes only,
Landlord shall be relieved of all obligations and liabilities accruing hereunder
after the effective date of said transfer, provided that any Security Deposit or
other funds of Tenant then being held by Landlord are delivered to Landlord's
successor. The obligations to be performed by Landlord hereunder shall be
binding on Landlord's successors and assigns only during their respective
periods of ownership.
25.18 Severability. If any provision of this Lease shall be determined to
be void by any court of competent jurisdiction, then such determination shall
not affect any other provision of this Lease, and all such other provisions
shall remain in full force and effect. It is the intention of the parties hereto
that, if any provision of this Lease is capable of two constructions, one of
which would render the provision void and the other of which would render the
provision valid, then the provision shall have the meaning that renders it
valid.
25.19 Time of Essence. Time is of the essence in the performance of all
covenants and conditions of this Lease.
25.20 Waiver of Trial by Jury. Landlord and Tenant hereby waive any and all
rights to a trial by jury in any action, proceeding or counterclaim (including
any claim for injury or damage and any emergency and other statutory remedy in
respect thereof) brought by either against the other on any matter arising out
of or in any way connected with this Lease, the relationship of Landlord and
Tenant, and/or Tenant's use or occupancy of the Premises.
25.21 Warranty of Authority. Tenant represents, covenants, and warrants to
Landlord as of the Effective Date that the signatories signing on behalf of
Tenant have the requisite authority to bind Tenant. Further, if the Tenant is a
corporation, Tenant represents, covenants, and warrants to Landlord that: (a) as
of the Effective Date, Tenant is a duly constituted corporation in good standing
and qualified to do business in the state where the Shopping Center is located,
(b) Tenant has paid all applicable franchise and corporate taxes, and (c) Tenant
will file when due all forms, reports, fees, and other documents necessary to
comply with applicable laws.
25.22 Tenant's Financial Statements. On a quarterly basis, Tenant shall
submit copies of Tenant's Form 10-QB quarterly report to Landlord, in care of
the Chief Financial Officer of TrizecHahn Centers (or any other individual
Landlord notifies Tenant of in writing at a later date), at the address
specified in Section 1.12 within sixty (60) days of filing said report with the
Securities and Exchange Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. Failing or refusing to comply with this Section
25.22 within ten (10) days of Landlord's written request, shall constitute a
default by Tenant and a breach of this Lease.
ARTICLE 26
SECURITY DEPOSIT
26.1 Payment. On or before the Effective Date, Tenant shall pay Landlord
the Security Deposit as security for the faithful performance by Tenant of all
of its obligations under this Lease. Landlord shall not be required to hold the
Security Deposit and, if Landlord does hold the Security Deposit, Landlord shall
not be liable for interest, except as required herein and shall not be required
to hold the Security Deposit in a segregated account except as may be required
by applicable law or any Mortgagee. Anything to the contrary notwithstanding
contained in Article 26, upon receipt from Tenant of the sum of Twenty-Seven
Thousand Eighty-Eight and 86/100 Dollars ($27,088.86), Landlord shall deposit
such sum in an interest bearing account with a federally insured bank or savings
and loan association. Landlord shall hold the account as a Security Deposit
under the terms and conditions set forth in Article 26. All interest or earnings
accruing on Tenant's Security Deposit from said account shall be paid to Tenant
at the end of each year of the Lease Term, within thirty (30) days of Tenant's
written request therefor, provided Tenant is not, and has not been, in default
under the terms of the Lease during the preceding year.
26.2 Application. If any of the rentals herein reserved or any other sum
payable by Tenant to Landlord shall be overdue and unpaid or paid by Landlord on
behalf of Tenant, or if Tenant shall fail to perform any of its obligations
under this Lease, then Landlord may, at its option and without prejudice to any
other remedy which Landlord may have on account thereof, appropriate and apply
all or a portion of the Security Deposit to compensate Landlord for Minimum
Annual Rent, Additional Rent, loss or damage sustained by Landlord, and Tenant
shall forthwith restore said Security Deposit to the original sum deposited.
Should Tenant comply with all of said obligations and promptly pay all the
rentals when due and all other sums payable by Tenant to Landlord, the Security
Deposit shall be refunded in full to Tenant at the expiration or earlier
termination of the Lease Term, subject to the provisions of Section 26.3.
26.3 Return of Security Deposit. Provided Tenant (i) initially opens for
business within sixty (60) days of the time limits set forth in Section 11.1;
(ii) is not currently in default, which default remains uncured for the time
period set forth in Section 16.2, nor has been in default of any of the terms or
provisions of this Lease during the Lease Term beyond the time period to cure as
set forth in Section 16.2; (iii) is the tenant entity specified in Article 1, or
any permitted Transferee pursuant to Article 15, Section 15.8 of this Lease; and
(iv) has a net worth and working capital equal to or greater than Tenant's net
worth and working capital as of the Effective Date, then at the end of the
thirty-sixth (36th) full month of the Lease Term and upon Tenant's written
request, Landlord shall apply the Security Deposit to Tenant's Minimum Annual
Rent beginning with the Minimum Annual Rent due on the first (1st) day of the
calendar month following Landlord's receipt of Tenant's written request and
continuing each subsequent month until the entire Security Deposit has been
exhausted and further provided that during the months the Security Deposit is
applied to Minimum Annual Rent, Tenant shall pay all other charges called for in
the manner provided for in this Lease. In the event Tenant is or has been in
default beyond the time period to cure as set forth in Section 16.2, does not
comply with the conditions set forth in this Lease, or if Tenant's net worth and
working capital is not equal to or greater than Tenant's net worth and working
capital as of the Effective Date, the Security Deposit shall be retained by
Landlord until the expiration or earlier termination of this Lease.
FASHION OUTLET OF LAS VEGAS ASSOCIATES,
a Nevada general partnership
By: TrizecHahn Factory Shops Inc.,
a Delaware corporation,
as managing general partner
By: TrizecHahn Centers Management Inc.,
a California corporation,
as its attorney-in-fact
By:
Name:
Title:
By:
Name:
Title:
LANDLORD
TOYS INTERNATIONAL,
a California corporation
By:
Name:
(Type or Print Name)
Title:
By:
Name:
(Type or Print Name)
Title:
TENANT
<PAGE>
EXHIBIT B
DEFINED TERMS
Unless otherwise indicated, all references to Articles and Sections shall
be deemed to refer to Articles and Sections of this Lease.
"Additional Rent" means all sums of money required to be paid by Tenant
under this Lease with the exception of Minimum Annual Rent.
"Administrative Fee" means an amount equal to fifteen percent (15%) of the
amount of expenses or other amounts with respect to which the Administrative Fee
is payable as set forth in particular Articles and Sections of this Lease.
"Air Conditioning Charge" is defined in Section 6.6.
"Air Conditioning System" means the air conditioning system serving the
Premises either exclusively or in common with other tenants of the Shopping
Center, including all pipes, ducts, machinery, fans, coolers, chillers,
condensers, and other equipment used in connection therewith.
"Amortization of Capital Items" shall mean the amortization of any capital
item costing Twenty-Five Thousand Dollars ($25,000) or more with a useful life
(as determined in accordance with generally accepted accounting principles) in
excess of five (5) years. Amortization shall be, in lieu of the full cost of
such item, over said useful life and shall include an interest factor based on
the Interest Rate.
"Amusement Facility" means any amusement facility (by way of example, a
roller coaster or thrill ride) that may, at Landlord's sole and absolute
discretion, be operated in the Shopping Center.
"Associated Person" is defined in Section 9.4(c).
"Breakpoint" for any specific period means the amount obtained by dividing
the Minimum Annual Rent payable during such period by the percentage set forth
in Section 1.10 for the calculation of Percentage Rent.
"CFM" means cubic feet of air per minute.
"CPI Adjustment Procedures" shall mean the method by which adjustments
shall be made to a sum of money Tenant must pay Landlord ("Base Amount") in
accordance with percentage increases, if any, in the Department of Labor, Bureau
of Labor Statistics, Consumer Price Index for All Urban Consumers, U.S. City
Average, Subgroup "All Items" (1982-84 = 100), referred to herein as the
"Index." The procedure for making such adjustments shall be to increase the Base
Amount by a percentage equal to the percentage increase, if any, in the Index
for the Month of Adjustment as compared to the Index for the Base Month. The
terms "Month of Adjustment" and "Base Month," as used herein, are defined in the
applicable Articles of this Lease. If at any time there is no Index, Landlord
shall substitute any official index published by the Bureau of Labor Statistics
or by such successor or similar governmental agency as may then be in existence
and shall be most nearly equivalent thereto.
"Casino(s)" means the hotel/casino operation(s) located adjacent to the
Shopping Center.
"Change of Control" means the transfer by sale, assignment, death,
incompetency, mortgage, deed of trust, trust, operation of law, or otherwise of
any shares, voting rights or ownership interests which will result in a change
in the identity of the person or persons exercising, or who may exercise,
effective control of Tenant, unless such change results from the trading of
shares listed on a recognized public stock exchange. If Tenant is a private
corporation whose stock becomes publicly held, the transfers of such stock from
private to public ownership shall not be deemed a Change of Control.
Notwithstanding the foregoing to the contrary, any transfer of stock in Tenant's
corporation between present stockholders, to family members of present
stockholders, or for bona fide estate planning purposes shall not be deemed a
Change of Control so long as the Tenant entity does not change as a result of
such transfer.
"Claims" means any claim, demand, investigation, proceeding, action, suit,
judgment, award, fine, lien, loss, damage, expense, charge or cost of any kind
or character and liability (including reasonable attorney fees and court costs).
"Commencement Date" means the earlier to occur of (i) the date Landlord
tenders possession of the Premises to Tenant or Tenant's agent or (ii) the date
Tenant or Tenant's agent occupies the Premises for any purpose.
"Common Area" means all improved and unimproved areas within the boundaries
of the Shopping Center (including additional land acquired by Landlord) which
are made available from time to time for the general use, convenience, and
benefit of Landlord, other persons entitled to occupy any portion of the
Shopping Center and/or their customers, patrons, employees, and invitees,
including, without limitation, all automobile parking areas and structures,
floors, ceilings, roofs, skylights, windows, driveways, open or enclosed malls,
food court seating areas, sidewalks, curbs, and landscaped areas, and such
public transportation facilities and landscaped areas as are contiguous with and
benefit the Shopping Center. "Common Area Expenses" is defined in Section 7.3.
"Construction Allowance" means that amount, if any, payable by Landlord in
accordance with Exhibit C-Addendum.
"Denial" is defined in Section 9.4(c).
"Effective Date" means the earlier of (i) the Execution Date or (ii) the
Commencement Date.
"Enclosed Mall Gaming Areas" means areas located within the Common Area
designated by Landlord for gaming.
"Encumbrance" means any conditional, contingent or deferred assignment,
sublease or conveyance voluntarily made by Tenant of some or all of Tenant's
interest, rights or duties in this Lease or the Premises, including Tenant's
right to use, occupy or possess the Premises, in whole or in part, including,
without limitation, any mortgage, deed of trust, pledge, hypothecation, lien,
franchise, license, concession or other security arrangement.
"Engineered Value" means the total CFM, or the total GPM, which Tenant has
calculated under Exhibit F as necessary for supply to the Premises, or which
have been calculated as necessary for supply to other leasable premises in the
Shopping Center.
"Estoppel Certificate" means a document stipulation substantially in the
form of Exhibit E.
"Execution Date" means that date set forth in the first paragraph of this
Lease upon which this Lease is fully executed by Landlord and Tenant.
"Exhibit C Rent" means the rental payable by Tenant for Landlord's Work and
is more specifically set forth in Section 1.15.
"Expiration Date" means that date set forth in Section 1.7.
"Floor Area" means the square footage of the Premises described in Article
1 (or, where applicable, of other premises located in a building or buildings of
the Shopping Center) without deduction for the width of or space occupied by air
conditioning units that exclusively serve and are located within the Premises
and/or by columns, sprinkler risers, roof drains, structural braces, expansion
joints and/or shear walls, measured from the exterior surface of building walls
(and extensions thereof, in the case of openings), from the exterior surface of
Perimeter Demising Partitions, from the center line of Interior Demising
Partitions or vertical neutral strips and from any Lease Line, all of which form
the perimeter of the Premises.
"Food Court" means that area, if any, of the Shopping Center for which
specific Common Area is designated by Landlord, in its sole and absolute
discretion, for the purpose of providing facilities to accommodate the
consumption of food and beverages by customers of food use tenants in the
Shopping Center.
"Food Court Expenses" means Common Area Expenses which are attributable
solely to the operation and use of the Food Court.
"GPM" means gallons of water or fluid per minute.
"Gaming Activities" means any use, operation, business or other activity
which requires a license or a determination of suitability, approval or permit
from any Gaming Authority.
"Gaming Authority" means the Nevada Gaming Commission, and/or the Nevada
State Gaming Control Board, and/or the Clark County Liquor and Gaming License
Board, and/or any other agency or authority of the State of Nevada regulating
the business of gambling.
"Governmental Authority" means any federal, state, county, city or local
governmental board, body or agency having jurisdiction over the Premises or the
Shopping Center or any part thereof.
"Gross Sales" means the proceeds of all sales and/or other revenue derived
or made from the Premises adjusted to exclude or deduct, as applicable, Gross
Sales Adjustments and including, without limitation, merchandise, goods and/or
services sold, leased, licensed or otherwise transferred in or from the Premises
by Tenant, its subtenants, licensees, and concessionaires, whether for cash or
on credit and whether made by store personnel or by approved vending or gaming
machines. Gross Sales shall not include any government imposed taxes upon the
sale of merchandise or services which are collected separately from the selling
price and paid directly to the taxing authority. All sales and/or revenue
originating at the Premises shall be considered Gross Sales, even though
bookkeeping and payment of the account may be transferred to another place for
collection and even though actual filling and/or delivery of the merchandise may
be made from a place other than the Premises. Each sale upon installments or
credit shall be treated as a sale for the full sale price at the time of sale.
Gift Certificates shall be included in Gross Sales upon the redemption of same
at the Premises.
"Gross Sales Adjustments" means the following items but same shall be
deducted (as opposed to excluded) from Gross Sales only to the extent previously
reported as Gross Sales: interest, service or sales carrying charges collected
separately from the selling price and paid by customers to Tenant for extension
of credit; the selling price of all merchandise returned by customers and
accepted for full credit or the amount of discounts made thereon; sums and
credits received in the settlement of Claims for loss or damage to merchandise;
the price allowed on merchandise traded in by customers for credit or the amount
of credit for discounts and allowances made in lieu of acceptance thereof;
alteration workroom charges and delivery charges at Tenant's cost and collected
separately from the selling price; receipts from vending machines installed
solely for Tenant's employees; transfers of merchandise between Tenant's stores,
and sales of fixtures, equipment or property which are not stock in trade. In
addition, the following may be included as a Gross Sales Adjustment (but shall
be deducted (as opposed to excluded) from Gross Sales only to the extent
previously reported as Gross Sales); provided that (i) through (iii) below shall
not exceed a total of two percent (2%) of Tenant's Gross Sales in any single
calendar year:
(i) Bad checks and/or debts, provided that if subsequently collected, said
checks and/or debts shall be included within Gross Sales in the calendar year in
which subsequently collected;
(ii) The discount permitted on sales to employees actually employed at the
Premises; and
(iii) Fees paid by Tenant to credit card companies and/or banking
institutions in accordance with credit card purchase plans.
"Ground Lease" means the agreement(s) whereby Landlord holds a leasehold
interest in the land (or any part thereof) on which the Shopping Center is
located.
"Ground Lessor" means the lessor under the Ground Lease.
"Hazardous Materials" means any chemical, compound, material, substance or
other matter that: (a) is defined as a hazardous substance, hazardous material
or waste, or toxic substance under any Hazardous Materials Law, (b) is
regulated, controlled or governed by any Hazardous Materials Law or other Legal
Requirement, (c) is petroleum or a petroleum product, or (d) is asbestos,
formaldehyde, radioactive material, drug, bacteria, virus, or other injurious or
potentially injurious material (by itself or in combination with other
materials).
"Hazardous Materials Laws" means any and all federal, state or local laws,
ordinances, rules, decrees, orders, regulations or court decisions relating to
hazardous substances, hazardous materials, hazardous waste, toxic substances,
environmental conditions on, under or about the Premises or the Shopping Center,
or soil and ground water conditions, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act, the California Hazardous Waste Control Act, the
Carpenter-Presley-Tanner Hazardous Substances Account Act, the Porter-Cologne
Water Quality Control Act, Nevada Revised Statues ("NRS") Ch. 459, NRS Sections
618.750-618.850 inclusive, NRS Section 477.045, any other Legal Requirement
concerning hazardous or toxic substances, and any amendments to the foregoing.
"Improvements" means all permanent and nonstructural fixtures,
installations, alterations, replacements, additions, changes and/or improvements
to the Premises.
"Initial Assessment" means the sum payable by Tenant as set forth in
Section 1.16 and provided for in Section 8.4.
"Insured Casualty" means damage or destruction the repair of which is
covered to the extent of at least fifty percent (50%) of the replacement cost
thereof (with deductibles, self-insurance and co-insurance being deemed to be
"covered") by insurance proceeds received by or made available to Landlord
pursuant to any insurance policy actually carried or required to be carried by
Landlord under the terms of this Lease.
"Interest Rate" means the lesser of (i) the maximum lawful rate permitted
by usury or similar law in the State in which the Shopping Center is located to
be charged by Landlord to Tenant, or (ii) two percent (2%) above the annualized
rate of interest publicly announced from time to time by Bank of America NT&SA
in San Francisco, California, as its "prime rate" or "reference rate," and such
interest shall be computed on the basis of monthly compounding with actual days
elapsed compared to a 360-day year.
"Interior Demising Partitions" means partitions separating the Premises
from adjacent space occupied or intended to be occupied by another tenant.
"Interior Mall" means that portion of the Common Area, if any, which is
located in the interior facing portion of the Shopping Center.
"Interior Mall Expenses" shall mean Common Area Expenses which are
attributable solely to the operation and use of the Interior Mall.
"Landlord" is defined in Article 1.
"Landlord's Work" is defined in Exhibit C.
"Lease Line" means any imaginary or defined line which separates the
Premises from all areas of the Shopping Center other than the premises of
adjacent tenants and which is shown in the Tenant Package.
"Lease Term" is defined in Section 3.1.
"Legal Requirement" means, to the extent applicable, (i) any law, statute,
ordinance, regulation, rule, requirement, order, court decision or procedural
requirement of any Governmental Authority, (ii) the rules and regulations of the
applicable governmental insurance authority or any similar body, (iii) the
requirements of the REA and/or the Ground Lease (including, but not limited to,
water conservation measures required thereunder), and (iv) the reasonable
requirements of any Mortgagee. References herein to "law" or "lawful" include
Legal Requirements or the full and strict compliance with Legal Requirements, as
applicable.
"Licensees" means occupants of Floor Area pursuant to occupancy agreements
with terms of less than one (1) year.
"Licensees' Contribution" means the contribution that Landlord has agreed
to make in an amount equal to five percent (5%) of the license fee income
received by Landlord from Licensees during a calendar year.
"Licensees' Floor Area" means the Floor Area occupied by Licensees.
"Major Destruction" means destruction (whether or not an Insured Casualty)
to an extent of more than twenty-five percent (25%) of the full replacement cost
of the Premises, the Casino, or Shopping Center, as the case may be, as of the
date of destruction, or destruction to the Shopping Center that results in the
termination of the leases of tenants therein representing more than twenty-five
percent (25%) of the Floor Area thereof.
"Major Tenants" means collectively (i) any premises (or the occupants
thereof) at the Shopping Center used primarily for events, meetings, and
operations conducted on a nonprofit basis for the benefit of the community, and
(ii) premises (or the occupants thereof) that contain at least ten thousand
(10,000) square feet of contiguous (i.e., not separated by Interior Demising
Partitions) Floor Area.
"Major Tenants' Floor Area" means the Floor Area of the Major Tenants.
"Mall Tenants" means those tenants occupying premises in the Shopping
Center that front onto the Interior Mall.
"Manufacturer's Outlet" means a retail store selling brand name merchandise
manufactured by, or exclusively for, Tenant and/or sold in Tenant's full price
retail stores, and discounted by an average of twenty-five percent (25%) from
the actual, full retail price (exclusive of sales prices) thereof as offered in
Tenant's (or Tenant's affiliates') full price retail stores.
"Marketing Assessment" means the sum payable by Tenant as set forth in
Section 1.11 and provided for in Article 8.
"Marketing Fund" is defined in Section 8.1.
"Merchants' Association" is defined in Section 8.1.
"Minimum Annual Rent" means the rental payable by Tenant for the use and
occupancy of the Premises and is more specifically set forth in Section 1.9.
"Mortgage" means any mortgage, deed of trust, assignment, security
agreement, conditional sale contract or other encumbrance or hypothecation of
any of Landlord's interest in the real and personal property comprising the
Shopping Center (including all subsequent amendments, modifications, and
advances thereto), including an assignment or encumbrance of Landlord's interest
in this Lease and the rents and profits derived therefrom. "Mortgage" shall also
include the Ground Lease or similar instrument whereby Landlord holds a
leasehold interest in the Shopping Center or any part thereof.
"Mortgagee" means the holder/trustee, beneficiary or assignee of any
Mortgage, or any lessor under any ground lease or similar instrument.
"Occupancy Transaction" means any Transfer, Encumbrance, Change of Control,
or other arrangement whereby the identity of the person or persons using,
occupying or possessing the Premises changes or may change, whether such change
be of an immediate, deferred, conditional, exclusive, nonexclusive, permanent or
temporary nature.
"Percentage Rent" means the rental payable by Tenant as set forth in
Section 1.10 and pursuant to Section 4.3.
"Perimeter Demising Partitions" means partitions separating the Premises
from the Common Area.
"Permitted Contractor" is defined in Exhibit C, Section V.A.
"Permitted Use" means the permitted use of the Premises as set forth in
Section 1.13.
"Personal Property" means trade fixtures, furniture, furnishings, signs,
and other personal property not permanently affixed to the Premises.
"Phase I" means the Shopping Center as shown on Exhibit A.
"Phase II" means the subsequent expansion, if any, of the Shopping Center
after the construction of Phase I.
"Premises" means the commercial space described in Section 1.4 from the top
of the floor to the underside of the structure above and exclusive of such
conduits, facilities, and structures as may be located in the Premises for the
use and benefit of Landlord and/or other tenants.
"REA" means that certain document entitled "Construction, Operation and
Reciprocal Easement Agreement" (or such other similar title) respecting the
certain rights and obligations of the Landlord, the owner or owners of the
Casino, and/or the owner or owners of the real property comprising all or a
portion of the Shopping Center or the Shopping Center and the Casino property,
which has been or will be recorded against such real property and as amended,
supplemented and/or restated from time to time.
"Reconstruction" means demolition, stabilization, repair, reconstruction,
and restoration of the Premises, Building or Shopping Center, as the case may
be, resulting from an Insured Casualty or Uninsured Casualty.
"Rent" means all amounts of Minimum Annual Rent and Additional Rent
required to be paid by Tenant under this Lease.
"Rent Commencement Date" means that date determined as set forth in Section
1.8.
"Responsible Officer" of Tenant shall mean all individuals doing business
as Tenant, an individual general partner if Tenant is a partnership, a
responsible officer of Tenant if Tenant is a corporation, or a responsible
officer of any corporate general partner of Tenant if Tenant is a partnership
with one or more corporate partners.
"Security Deposit" means the amount, if any, specifically set forth in
Section 1.14.
"Shopping Center" means that commercial property named in Section 1.4 of
this Lease, as the same may from time to time be expanded, reduced, altered,
reconstructed or otherwise changed.
"Substantial Completion" means the date Landlord notifies Tenant that
Landlord's Work has been completed to the point where Tenant may commence
construction of Tenant's Work, it being understood that Landlord will not
complete all items of Landlord's Work until Tenant has completed portions of
Tenant's Work to the point where Landlord may reenter the Premises and complete
Landlord's Work.
"Target Delivery Date" means that date set forth in Section 1.6.
"Tenant Package" means (i) the tenant design manual/package and (ii)
technical handbook setting forth specific criteria for Tenant's Work, as either
may be amended from time to time. The Tenant Package shall provide for
architectural, construction, mechanical, and Utilities standards, specifications
and criteria established by Landlord, from time to time, for the Shopping
Center, including, without limitation, standards, specifications, and criteria
for storefronts, interior improvements, and signs.
"Tenant's Work" is defined in Exhibit C and the Tenant Package.
"Tenant's Plans" means calculations, specifications, designs, and drawings
which pertain to Tenant's Work and/or other Improvements and which are described
in Exhibit C, Description of Tenant's Work.
"Trade Name" means the name set forth in Section 1.3.
"Transfer" means any voluntary, unconditional, and present (i) assignment
of some or all of Tenant's interest, rights, and duties in this Lease and the
Premises, including Tenant's right to use, occupy, and possess the Premises, or
(ii) sublease of Tenant's right to use, occupy, and possess the Premises, in
whole or in part.
"Transferee" means the proposed assignee, sublessee, mortgagee,
beneficiary, pledgee or other recipient of Tenant's interest, rights or duties
in this Lease or the Premises in an Occupancy Transaction.
"Uninsured Casualty" means damage or destruction that is not an Insured
Casualty.
"Utilities" means the services of sewage removal and treatment, treatment
and delivery of water, electricity, natural gas (if permitted by Landlord),
telephone service and other services such as satellite data transmission, cable
systems, and security systems.
"Utilities Charge" is defined in Section 6.3.
"Utility Installations" means any and all systems, machinery, facilities,
installations, supply lines, transformers, pipes, conduits, ducts, penetrations,
components, appurtenances, and equipment used in or in connection with the
Shopping Center for the generation or supply of Utilities.
<PAGE>
EXHIBIT C
FASHION OUTLET OF LAS VEGAS
PRIMM, NEVADA
PROVISIONS RELATING TO THE DESIGN AND CONSTRUCTION OF TENANT'S STORE
I. DESCRIPTION OF LANDLORD'S WORK.
A. General. "Landlord's Work" shall be limited to the performance of the
improvements described in this Section I.
B. Structure. Landlord's architect shall design the building in which the
Premises are located. Said building shall be constructed and sprinklered in
accordance with the building codes in effect in the jurisdiction where the
Shopping Center is located as of the time of the initial construction of the
Shopping Center. Construction of the building in which the Premises are located
shall not be less than Type I. Exterior walls shall be masonry, metal studs and
plaster or such other material or materials as Landlord's architect shall
select.
C. Vanilla Shell. Landlord shall perform the following "Vanilla Shell"
work:
1. Partitions. Landlord shall provide partitions separating the restroom
(pursuant to Paragraph 4 below) from the remainder of the Premises, as well as
Interior Demising Partitions and Perimeter Demising Partitions, as applicable.
All such demising partitions shall be unfinished masonry, concrete, or metal
studs, at Landlord's option, twenty four inches (24") on center and to the
underside of the structure above, or to a height of fourteen feet six inches
(14'-6"), and shall include 5/8" type x gypboard, taped, textured and ready for
paint. Where such partitions fall on structural column lines, braces or
expansion joints, projections may occur. A vertical neutral strip will be
located at the storefront area, between stores. A bulkhead will be located above
the Premises storefront at a minimum height of twelve feet (12'-O") and a
maximum height of fourteen feet (14'-O") above finished floor. The neutral strip
and bulkhead shall be finished within the interior of the Premises by 5/8" type
x gypboard, taped, textured and ready for paint, and the finish facing the
enclosed mall shall be in keeping with the mall decor.
2. Floor. Concrete floor slabs within the interior of the Premises and in
any entranceways shall have a smooth finish. Such floor shall be on a single
plane without depressions or raised areas.
3. Ceiling. Landlord shall leave the ceiling area exposed to the structure
above. At Landlord's option, thermal insulation, fire proofing, electrical
conduits, air conditioning ducts, plumbing pipes, fire sprinkler piping, etc.
will be exposed on the underside of the building structure.
4. Restroom. Landlord shall construct one (1) restroom in the Premises,
except for premises located within a Food Court (if any) in which case a public
restroom will be located within two hundred feet (200') of any such premises.
The restroom to be located in the Premises shall be constructed to meet the
current handicap requirements and shall include the following:
a. Flooring shall be sheet vinyl with coved base.
b. Walls shall be 5/8" gypboard, taped, textured and painted.
c. Ceiling shall be 5/8" gypboard, taped, textured and painted.
d. Door, one (1) 2'-6" x 7"-O" solid core wood, installed in a
prefabricated metal frame, bath type lockset and a door closure. e. Plumbing,
one (1) water closet (tank type), one (1) lavatory sink (wall mounted). f.
Electrical, one (1) light fixture with utility outlet (wall mounted above the
lavatory sink) and switched adjacent to door.
g. Mirror, one (1) 18" x 24" (wall mounted) above lavatory sink.
h. Ventilation, one (1) vent connected to a common vent system.
i. Handicap grab bars as required by code.
j. One (1) toilet paper holder.
k. One (1) two and one-half (2 1/2) gallon electric water heater, floor
mounted under lavatory sink.
5. Electrical. Landlord shall install electrical service as necessary for
lighting, air conditioning and ventilation. Light fixtures will be hung from the
structure above. 20 amp electrical utility outlets shall be installed within the
demising partitions at twenty feet (20') on center, starting five feet (5')
behind the front Lease Line. One (1) 20 amp. power supply in a "j -box" at the
back of the bulkhead above the storefront for Tenant's sign. One (1) smoke
detector shall be installed within the front portion of the Premises and
connected to Landlord's smoke detection system.
6. Air Conditioning/Smoke Control. Landlord shall design and install an Air
Conditioning System to serve the Premises with chilled air. The Air Conditioning
System shall consist of equipment, meters, and facilities that serve the
Premises in common with other premises in the Shopping Center, as a centralized
system. The Air Conditioning System shall be designed to cool air automatically
and to handle a maximum of 3.85 watts per square foot of Floor Area attributable
to combined loads and to maintain conditions inside the Premises as follows: 75
degrees Fahrenheit dry bulb and 50 percent relative humidity with outside
conditions of 108 degrees Fahrenheit dry bulb and 73 degrees Fahrenheit wet
bulb. The location, type and manufacturer of the Air Conditioning System
equipment shall be at Landlord's discretion.
To the extent required by building codes, Landlord shall design and install
a Smoke Control System meeting all current codes.
Should Tenant's interior design or use require modifications, alterations
or additions to these systems, Landlord or, at Landlord's option, Tenant shall
make such modifications, alterations or additions at Tenant's sole cost and
expense.
7. Storefront. Landlord shall design and construct the storefront of the
Premises, including windows and entry doors, around a design theme established
for the area of the mall in which the Premises is located.
8. Sprinklers. An automatic fire sprinkler system shall be designed and
installed by Landlord in accordance with Landlord's standard grid pattern, and
at a height of fourteen feet (14') above finished floor, and shall include one
(1) sprinkler head per one hundred thirty (130) square feet of Floor Area of the
Premises.
9. Communications. Landlord shall install one (1) empty conduit from a
central distribution point to the Premises for Tenant's use in pulling its
wiring for telephone and other communications.
C. Miscellaneous. The exterior trim and other surfaces of the mall
buildings normally requiring painting shall be painted. Sidewalks adjacent to
the Shopping Center shall be constructed of concrete or such other suitable
material as Landlord shall select.
II. GENERAL REQUIREMENTS
A. Tenant Package. Tenant acknowledges receipt of the Tenant Package for
the purpose of the initial construction of the Premises and/or revising,
modifying, and/or altering the Vanilla Shell work as furnished by Landlord.
B. Tenant's Plans.
1. Prior to preparing Tenant's Plans, Tenant's architect and engineer(s)
shall thoroughly familiarize themselves with, and verify by physical inspection
(to the extent possible based on the then existing condition and construction of
the Premises by Landlord), the accuracy of the Premises, the Tenant Package,
this Exhibit C, all local building codes and all existing job conditions.
Tenant's Plans and construction shall be prepared and performed with full
knowledge of and in compliance with the Tenant Package, this Exhibit C and all
Legal Requirements, including without limitation all energy conservation,
Hazardous Materials Laws, and handicap access requirements. Tenant's Plans shall
be prepared or, if permitted by law, sealed by architect(s) and engineer(s)
fully qualified and licensed in the state in which the Shopping Center is
located.
2. Tenant has submitted to Landlord fully detailed and dimensioned 1/2" =
1' scale preliminary storefront signage drawings. This preliminary submittal
included the following: (a) three (3) sets of prints and one (1) sepia that show
storefront elevations and signage, and sections through the storefront and
storefront signage, and (b) one (1) material sample and color board.
3. No later than May 15, 1998 Tenant agrees to submit to Landlord six (6)
sets of prints and one (1) sepia of fully detailed and dimensioned 1/4" = 1'
scale architectural and structural construction drawings, which included the
following: (a) plan views of the storefront, floor areas, and reflected ceiling;
elevations of the interiors, sections through partitions and along the
longitudinal axis, door, finish, and color schedules, and final design drawings
for storefront signs in accordance with the Tenant Package, (b) electrical
drawings including circuitry plans, revised panel schedules, riser diagrams,
load calculations, and all calculations and forms required by applicable Legal
Requirements, and (c) mechanical drawings, including revisions to air
conditioning including design calculations, equipment schedule, and completed
forms required by applicable Legal Requirements.
C. Approval of Tenant's Plans.
1. Tenant's Plans, and the design and quality of all work and installations
undertaken by Tenant in the Premises, shall be subject to the approval of
Landlord and Landlord's architect and engineers.
2. If said plans are not approved because they do not conform to the Tenant
Package, Landlord will state the reasons for nonconformance and Tenant will be
given twenty (20) days to resubmit another set of plans taking into account
Landlord's suggested changes. If these subsequent drawings are not approved,
within ninety (90) days after full execution and delivery of this Lease by both
parties, Landlord shall have no further obligation to approve said plans and
Landlord shall have the right to terminate this Lease.
3. Landlord's architect's approval of Tenant's Plans shall not create any
responsibility or liability on the part of Landlord for their completeness,
sufficiency, design or compliance with Legal Requirements, and shall not relieve
Tenant of any of Tenant's responsibility or liability hereunder.
4. Any changes to the approved Tenant's Plans requested by Tenant shall be
subject to Landlord's approval and shall be reviewed by Landlord's architect.
Tenant shall pay any additional expenses incurred in connection with such
processing, including any additional fees of Landlord's architect, which costs
shall be deposited by Tenant at the option of Landlord prior to the commencement
of such processing.
D. Requirements for Tenant's Improvements.
1. Tenant's Work and all other Improvements shall be made under the
supervision of a competent architect or licensed structural engineer and made in
accordance with the approved Tenant's Plans. At Tenant's sole cost and expense,
Landlord shall have the right, but not the obligation, to perform any work that
Tenant shall have failed to construct in accordance with the approved Tenant's
Plans, after ten (10) days' notice from Landlord. Tenant, at its sole cost and
expense, shall be responsible for obtaining all necessary permits including
building and health department permits for the performance of such work and for
the payment of any impact, capacity, usage, and/or similar fee in connection
with such work. Upon completion of such work, Tenant shall have recorded in the
office of the County Recorder where the Shopping Center is located a Notice of
Completion, as required or permitted by law, and Tenant shall deliver to
Landlord, within ten (10) days after completion of said work, a copy of the
final signed-off building inspection card, permit or report with respect
thereto, copies of all mechanics' lien releases or other lien releases on
account of Tenant's Work, notarized and unconditional, in such form as Landlord
shall have approved, and the Certificate of Occupancy. All work shall be
performed and completed strictly in accordance with all Legal Requirements in a
good and workmanlike manner, and shall be diligently prosecuted to completion.
The Premises shall at all times be a complete unit, except during the period of
work, and Tenant shall perform all such work so as not to obstruct access to the
premises of any other tenant in the Shopping Center as well as Landlord's
contractors or subcontractors.
2. Tenant shall not open for business in the Premises until the Premises
fully and strictly comply with the approved Tenant's Plans and all Legal
Requirements, in the reasonable judgment of Landlord or Landlord's architect.
3. During the performance of Tenant's Work, Tenant shall be responsible for
the removal from the Shopping Center on a daily basis of all trash, construction
debris and surplus construction materials, or at Landlord's option, the
placement on a daily basis of such trash, debris and/or materials in Landlord
designated receptacles. All boxes and packaging must be broken down by Tenant
prior to such placement.
In the event Landlord opts, in its sole and absolute discretion, to provide
trash receptacles for Tenant's use during Tenant's construction, Landlord shall
cause such receptacles to be emptied and trash removed, and Tenant shall pay an
amount equal to $.20 per square foot of Floor Area of the Premises to Landlord
for the non-exclusive use of such receptacles.
III. Description Of Tenant's Work
A. General. "Tenant's Work" shall mean the purchase and/or installation of
all of the Improvements described in this Section III and any other Improvements
or work necessary to complete construction of Tenant's store. In addition,
Tenant's Work is inclusive of Tenant's fixturization in preparing for the
opening of the Premises for business. All costs of Tenant's Work shall be paid
for by the Tenant regardless of whether or not Tenant actually performed the
work.
B. Ceilings. All interior finishes beyond the Landlord furnished Vanilla
Shell will be installed by Tenant at its sole cost and expense. In no event
shall Tenant's Work be suspended from Landlord's non-structural construction.
C. Partitions.
1 . Where required by Landlord, Tenant shall provide transfer air openings
of equal rating as partition construction.
2. With respect to partitions installed by Tenant, Tenant shall install
type x 5/8" gypboard to the underside of the structure above or to Tenant's
ceiling, if Tenant installs a ceiling. Tenant shall paint all partitions
(including those furnished by Landlord).
3. All partitions constructed by Tenant shall be constructed of
non-combustible materials. Tenant is responsible for all bracing, studs and
blocking as required to support wall mounted fixtures and equipment. All of
Tenant's partition construction work shall be completed so as to satisfy
applicable code and fire rating requirements.
4. Tenant is responsible for repair, maintenance and replacement of exit
doors as necessary after the construction of Tenant's Work is commenced in the
Premises.
5. Tenant is responsible for furnishing and installing all doors and frames
including hardware within the Premises in compliance with code, except for
Landlord furnished doors.
D. Floor. Tenant shall install floor covering within the Premises, except
for the one (1) restroom supplied by Landlord, if applicable, as part of the
Vanilla Shell.
E. Plumbing.
1. Tenant shall install all plumbing required by the approved Tenant's
Plans with the exception of restroom plumbing installed by Landlord as part of
the Vanilla Shell.
2. Grease traps, if required, shall be located within the Premises. Grease
traps shall be required for all food preparation areas having a pot sink or any
grease-producing appliances that discharge into waste system.
F. Fire Sprinklers. At Tenant's expense, Landlord's contractor (or, at
Landlord's option, Tenant's contractor) shall make such additions,
modifications, or reallocations to the sprinkler system installed by Landlord,
required by the design or construction of Tenant's improvements to bring the
same into compliance with the requirements of Landlord's insurance underwriters
and Legal Requirements. The costs of any work performed by Landlord's
contractor, at Tenant's expense, shall be competitive with commensurate
contractors serving the same trade area.
G. Air Conditioning/Ventilation.
1. Should Tenant's improvements require additional air conditioning or
ventilation, Tenant shall install, at Tenant's sole cost and expense, an
additional variable air volume box (if required) and a ducted distribution and
return system, including thermostat, or fans and duct work for ventilation,
meeting the requirements established by the calculations of the approved
Tenant's Plans. Landlord, at Tenant's sole cost and expense, shall provide
additional air supply to meet these requirements.
2. Notwithstanding anything to the contrary contained in this Lease and
Exhibits, if Tenant's business produces odor, fumes and/or grease or involves
food preparation, at Landlord's option, Tenant shall at its sole cost and
expense, design and install an independent Air Conditioning and Ventilation
System designed to mitigate the problems caused by such operations. Any such Air
Conditioning an Ventilation System shall be designed to cool air automatically
to maintain conditions inside the Premises as follows: 75 degrees Fahrenheit dry
bulb and 50 percent relative humidity with the outside conditions of 108 degrees
Fahrenheit dry bulb and 73 degrees Fahrenheit wet bulb.
H. Electrical.
1. Should the approved Tenant's Plans require additional electrical work
beyond the electrical furnished by Landlord as part of the Vanilla Shell, said
work shall be performed by Tenant at Tenant's sole cost and expense.
2. Tenant, at its sole cost and expense, shall arrange for electrical and
telephone service and installation of an electrical meter through the local
utility company in sufficient time to establish service prior to the date of
fixturizing and initially open for business.
I. Performance of Tenant Work by Landlord.
The reasonable cost incurred by Landlord in performing any work or
modification on behalf of Tenant or which is required as a result of Tenant's
Work and/or other improvements, shall be paid for by Tenant immediately upon
Tenant's receipt of an invoice.
J. Miscellaneous.
1. Internal communications, alarm, fire protection, or smoke detection
systems, installed by Tenant, beyond that furnished by Landlord as part of the
Vanilla Shell, as may be required by any Governmental Authority shall be at
Tenant's sole cost and expense.
2. Elevators, dumbwaiters, chutes, conveyors, duct shafts, pneumatic tubes
and shafts, doors and other components, including electrical hook-up and
service, if any, from the Tenant's electrical panel to said equipment, shall be
at Tenant's sole cost and expense.
3. Tenant's sign (s), show window display platforms, window backs, interior
finish in show windows, store fixtures, and furnishings shall be at Tenant's
sole cost and expense.
4. Double-studded walls and sound insulation of the walls and ceilings, and
such other sound insulation measures as required by Landlord in its reasonable
discretion when, in the reasonable judgment of Landlord, Tenant's business
operations create sounds or noises that may disturb Landlord, other tenants,
patrons of other tenants, or the occupant of any space in the Shopping Center.
IV. DESIGN CRITERIA.
A. Structural. Any alterations, additions or reinforcements to Landlord's
structure required to accommodate Tenant's Improvements shall be performed only
with Landlord's architect's and engineer's prior written approval, at Tenant's
expense. Tenant shall pay, upon receipt of invoice and without setoff or
deduction, any costs associated with Landlord's consultants' review and approval
of Tenant's proposed alterations, additions and/or reinforcements to Landlord's
structure.
B. Roof.
1. There shall be no installation of radio or television antennas. Any
roof-top equipment shall be subject to the prior written approval of Landlord,
Landlord's architect and all appropriate Governmental Authorities. All roof
penetrations (which shall include, without limitation, equipment platforms,
curbs, and multiple pipe enclosures) and equipment locations required by Tenant
and approved by Landlord, Landlord's architect, and said Governmental
Authorities shall be at Tenant's expense and subject to the conditions of said
approval. At Landlord's option, all such work shall be engineered and installed
by Landlord's contractor in accordance with standard project details as provided
by Landlord's architect. Any roof screens or screening devices required by
Landlord, Landlord's architect, and/or said Governmental Authorities shall be
designed by Landlord's architect or roofing engineer and at Landlord's option
installed by Landlord's contractor at Tenant's expense. The costs of any work
performed by Landlord's contractor, at Tenant's expense, shall be competitive
with commensurate contractors serving the same trade area.
2. All flashing, counter-flashing, and roofing repairs shall conform to the
project roofing specifications. All such work shall be paid for by Tenant but
shall be performed by Landlord's contractor. The costs of any work performed by
Landlord's contractor, at Tenant's expense, shall be competitive with
commensurate contractors serving the same trade area.
C. Storefronts.
1. Tenant shall install signage and storefront finish materials with colors
and architectural embellishments complementary to Landlord's themed storefront
design for the area of the Shopping Center in which the Premises is located.
2. No storefront, part thereof, or swinging door shall project beyond the
Premises Lease Line or into the Common Area, except as may be otherwise set
forth in the Tenant Package.
3. All storefront work, including sliding door tracks and housing boxes for
grilles, shall be floor mounted and supported at its head section by a welded
structural steel framework that shall be securely attached, suspended and braced
to the existing building structure. Storefronts that project past the mall facia
(bulkhead) shall be engineered and designed to be supported independently of the
mall facia (bulkhead). Tenant shall pay the cost incurred by Landlord in
repairing any damage done to Landlord's Work by the installation, construction,
attachment or support of any part of Tenant's revised storefront.
4. Other than windows, all storefront finish material shall be durable
materials approved by Landlord's architect. Plaster, drywall, plastic laminate,
and similar materials will not be permitted.
5. All storefront construction and finish materials shall be weatherproof
(if required in the Tenant Package) and resistant to wear, fading,
discoloration, and decay. Any and all storefront construction and finish
materials that in the sole but commercially reasonable judgment of Landlord are
faded, discolored, worn or in disrepair shall be immediately, at Tenant's
expense, be refinished, repaired or replaced by Tenant to Landlord's reasonable
satisfaction.
D. Floors. Tenant shall install and maintain carpeting and/or other quality
flooring materials, such as concrete stain and wax, slate, stone, marble, hard
wood, or terrazzo in Tenant's public areas. Vinyl composition tile, or
indoor/outdoor carpeting shall not be used in Tenant's public areas. Tenant's
storefront entry area and Display Zone (the term "Display Zone" means the front
six feet (6') of the Premises as measured from the Lease Line) shall have hard
durable flooring materials only, or such other durable materials as may be
approved by Landlord's architect.
E. Ceilings.
1. Ceilings will be left exposed to the structure above, provided that all
areas and equipment, duct work, etc. must be painted out in colors that are
complimentary to the interior of the Premises. Tenant's storefront entry area
and Display Zone must be non-combustible.
2. If, subject to Landlord's approval, Tenant does install a ceiling in the
Premises, Tenant shall strictly comply with specifications of the maximum
ceiling height of the Premises set forth in the Tenant Package ( it is
understood that Tenant will not be required by Landlord to install a ceiling).
Higher ceilings may be allowed upon written approval by Landlord and/or
Landlord's architect. Any relocation of or modification to structure, piping,
conduits, fire sprinkler system = and/or duct work necessitated by Tenant's
installation of ceilings in excess of the height limitation shall be at Tenant's
expense. Access panels and/or catwalks above ceilings required to serve Tenant's
sign equipment and/or Landlord's equipment shall be installed at Tenant's
expense.
F. Electrical. All fluorescent or incandescent lighting fixtures in
Tenant's public areas, other than decorative fixtures, shall be recessed, if
ceilings are installed. Fluorescent fixtures shall have parabolic lenses or
diffusers. No acrylic lenses shall be permitted in public areas. Bare lamp
fluorescent or incandescent fixtures may be used only in concealed areas and/or
stock rooms. The Premises storefront entry and Display Zone shall have
incandescent lighting fixtures only and such fixtures shall be decorative,
recessed, or track systems unless otherwise approved by Landlord's architect.
G. Signs. All storefront signs shall be designed strictly in accordance
with the Tenant Package. Tenant acknowledges that the sign criteria have been
established for mutual benefit of all tenants in the Shopping Center. Any
nonconforming or unapproved signs shall be removed or brought into conformance
at the expense of Tenant.
V. TENANT'S USE OF A CONTRACTOR.
A. Contractor Selection. Tenant may select any contractor for the
construction of Tenant's Improvements provided such contractor is bondable and
meets all licensing and insurance requirements established by Landlord in the
Tenant Package and all Governmental Authorities. Tenant shall provide Landlord
with a copy of the contract with its contractor prior to commencement of any
Improvements, and Landlord shall have the right to disapprove such contractor or
the contract on reasonable grounds. Tenant's contractor shall do or cause to be
done all Tenant's Work except where this Exhibit C or this Lease provides for
Landlord's contractor to do the same.
B. Special Conditions. Tenant shall incorporate into the contract with its
contractor the following items as "Special Conditions":
1. Prior to commencement of Tenant's Improvements, Tenant's contractor
shall provide Landlord with a construction schedule indicating the start and
completion dates of all phases of Tenant's Improvements.
2. Tenant's contractor shall diligently perform said work in a manner and
at times that do not impede or delay Landlord in the completion of the Premises
or any other portion of the Shopping Center. Any delays in the completion of the
Premises caused by Tenant's contractor shall not relieve Tenant of any
obligation under this Lease.
3. Tenant's contractor shall be responsible for the repair, replacement or
clean-up of any damage caused by Tenant's contractor to any other contractor's
work in any area of the Shopping Center.
4. Tenant's contractor shall provide written notice to Landlord's Tenant
Coordinator or Landlord's Shopping Center manager of any work to be done on
weekends or other than normal job hours, and Tenant agrees to pay all costs
associated therewith.
5. Tenant and Tenant's contractor shall comply with all Legal Requirements
and all rules and regulations established by Landlord in the performance of
Tenant's Work.
6. Prior to commencement of construction, Tenant shall submit to Landlord
evidence of insurance for its contractor in accordance with the requirements set
forth in this Lease.
7. Within thirty (30) days of the scheduled grand opening of the Shopping
Center, Landlord shall determine whether a barricade will be necessary to
segregate the Premises from the remainder of the Shopping Center; provided,
however, a barricade will only be required if Tenant is not scheduled or does
not appear to be able (based on the status of Tenant's construction and as
determined in Landlord's commercially reasonable judgement) to open the Premises
for business on the initial grand opening date of the Shopping Center. At
Landlord's option, Landlord may erect said barricade or direct Tenant to erect
said barricade using the same material and with the same appearance as used by
Landlord in the closure of the other tenants' premises. In the event Landlord
erects the barricade, Tenant shall pay to Landlord an amount equal to Three and
No/100 Dollars ($3) per square foot of the area required to be covered (i.e.,
the lineal width times the lineal height of the opening).
8. Tenant's contractor or subcontractors shall not post signs on any part
of the Shopping Center or the Premises.
9. Prior to the commencement of Tenant's Improvements, Tenant shall provide
Landlord with a "labor and materials payment bond" in an amount equal to one
hundred percent (100%) of the aggregate price of all contracts for such work,
conditioned on Tenant's payment in full of all claims of mechanics' lien
claimants for such labor, services and/or materials supplied in the prosecution
of such work. Said payment bond shall name Landlord as a primary obligee, shall
be given by a sufficient surety that is reasonably satisfactory to Landlord, and
shall be in such form as Landlord shall approve in its reasonable discretion. In
addition, Tenant shall obtain, or cause its contractor to obtain, a "performance
bond" covering the faithful performance of the contract for the construction of
Tenant's Work. The performance bond shall be in an amount equal to the full
amount of the contract price, conditioned on the contractor's faithful
performance of the contract. Said performance bond shall name Landlord and
Tenant as co-obligees, shall be given by a sufficient surety that is reasonably
satisfactory to Landlord, and shall be in such form as Landlord shall approve in
its reasonable discretion.
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
Tenant will deposit its trash only in the Shopping Center trash receptacles
and shall participate in and comply with any reasonable procedures established
by Landlord or any procedures established by (or in compliance with) a
Governmental Authority for the collection, sorting, separation, and recycling of
waste products, garbage, refuse, and trash.
Tenant shall use reasonable efforts to complete, or cause to be completed,
all deliveries, loading, unloading, and services to the Premises prior to 10:00
a.m. of each day. Tenant shall attempt to prevent any delivery trucks or other
vehicles servicing the Premises from parking or standing in front of, or at the
rear of, the Premises from 10:00 a.m. to 9:00 p.m. of each day.
Tenant shall not display, paint or place, or cause to be displayed, painted
or placed, any handbills, bumper stickers or other advertising devices on any
vehicle parked in the parking area of the Shopping Center, whether belonging to
Tenant, or to Tenant's agent, or to any other person, nor shall Tenant
distribute, or cause to be distributed, in the Shopping Center, any handbills or
other advertising devices.
Employees of Tenant shall not park their automobiles in those automobile
parking areas of the Common Area which Landlord may from time to time designate
for use by patrons of the Shopping Center.
Tenant and its employees shall park their cars only in those parking areas
designated by Landlord for employee parking. Tenant shall furnish Landlord with
the automobile license numbers of Tenant and Tenant's employees within fifteen
(15) days after taking possession of the Premises and shall thereafter notify
Landlord of any changes thereto within five (5) days after such change occurs.
If Tenant or its employees fail to park their cars in the designated parking
areas, Landlord may charge Tenant Ten Dollars ($10.00) per car per day for each
day or partial day that any car is parked in any area other than those
designated; provided, however, Landlord agrees to give Tenant written notice of
the first violation of this provision for each vehicle. Tenant shall have two
(2) days thereafter within which to correct the violation; if said violation is
not corrected within said two-day period, then the aforesaid fine shall be
levied and Tenant shall pay the same within ten (10) days of Landlord's request
therefor. After notice of such first violation, no prior notice of any
subsequent violation by the same vehicle shall be required.
Tenant shall not display or sell merchandise, or place carts, portable
signs, devices or any other objects in the Common Area and Tenant shall not
solicit or distribute materials in any manner in the Common Area.
Tenant shall utilize no medium which can be heard or experienced outside of
the Premises.
Tenant shall not erect an aerial or antenna on the roof or exterior walls
of the Premises.
<PAGE>
EXHIBIT E
TENANT'S ESTOPPEL CERTIFICATE
Date: , 19
Address:
To whom it may concern:
The undersigned, as Tenant, has entered into that certain Lease, dated 19 ,
with , as Landlord, for the leasing of certain Premises at the Shopping Center
commonly known as .
Tenant understands that you have offered or committed to enter into a
transaction with Landlord with respect to an interest in Landlord and/or this
Lease and/or the Premises and/or the realty underlying the Premises and/or a
portion of or interest in the realty or improvements in the Shopping Center
owned or hereafter acquired by Landlord. You have requested this Certificate
from Tenant as a condition precedent to consummation of one of the following
transactions: sale, purchase, exchange, transfer, assignment, lease, conveyance,
encumbrance, pledge, mortgage or hypothecation.
In accordance with the terms of the Lease, Tenant ratifies the Lease and
certifies that:
(1) The undersigned has accepted the Premises and entered into occupancy
(i.e. accepted possession) of the Premises described in said Lease on , 19 ;
(2) The undersigned is presently open and conducting business with the
public in the Premises;
(3) The current Minimum Annual Rent in the annual amount of $ and Exhibit C
Rent in the annual amount of $ were payable from , 19 ;
(4) Said Lease is in full force and effect and has not been assigned,
modified, supplemented or amended in any way (except by agreement[s] dated ),
and, to Tenant's knowledge, neither party thereto is in default thereunder;
(5) The Lease represents the entire agreement between the parties as to the
terms, covenants and conditions respecting the leasing of the Premises;;
(6) The Lease Term expires on , 19 ; --------------------------- -----
(7) All conditions under said Lease to be performed by Landlord have been
satisfied, including, without limitation, all co-tenancy requirements thereunder
except: ;
(8) All required contributions by Landlord to Tenant on account of Tenant's
improvements have been received;
(9) On this date there are no existing defenses, offsets, counterclaims or
deductions against rental that the undersigned has against the enforcement of
said Lease by Landlord except: ;
(10) No rental has been paid more than one (1) month in advance and no
security (other than a security deposit in the amount of $ ) has been deposited
with Landlord; and
(11) The Minimum Annual Rent through , 19 , has been paid.
(12) The operation and use of the Premises does not involve the generation,
treatment, transportation, storage, disposal or release of Hazardous Material(s)
or solid waste into the environment and that the Premises are being operated in
accordance with all applicable environmental laws, zoning ordinances and
building codes.
Very truly yours,
(Tenant)
By:
Title:
<PAGE>
EXHIBIT F
MECHANICAL/ELECTRICAL SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
1. Tenant Name Space No.
2. Tenant Drawing Nos. Mechanical Electrical
3. Floor Area (Sq. Ft.)
4. Electrical Load Breakdown
a. Lighting Watts
---------------
b. Sign(s) Watts
---------------
c. Appliances Watts
---------------
d. Receptacles Watts
---------------
e. Equipment Watts
---------------
f. Electric Water Heater Watts
---------------
g. Electric Heater Watts
---------------
h. Miscellaneous Watts
---------------
5. Total Connected Electrical Load Watts: Watts/Sq.Ft. of Floor
6. Tenant Calculated Design Heating Load BTUH
--
7. Tenant Calculated Design Cooling Load BTUH
--
8. Tenant Calculated Design Air Supply CFM (per Tenant plans)
--
9. Landlord Allotted Air Supply CFM
---------------
10. Additional Air Supply Required CFM
11. Variable Volume Air Terminal Units
a. Air CFM Max
b. Inlet/Outlet Sizes
12. Chilled Water Air Handler Units
a. Max GPM
13. Toilet Exhaust CFM
14. Special Exhaust/Make-up System(s) Data
(Use, CFM, HP, Method of Operation, Etc.)
15. Air Conditioning Unit Data (if Tenant is installing its own system.)
a. Make b. Model # c. CFM
</TABLE>
<PAGE>
EXHIBIT G
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
TENANT ENTITY: TOYS INTERNATIONAL
TENANT NAME (dba): TOY CO.
SPACE NO: 1-A-320
THIS AGREEMENT is made as of the day of , 19 , by and among PNC BANK,
NATIONAL ASSOCIATION, a banking association, having an office at One PNC Plaza,
19th Floor, P1-POPP-19-2, Pittsburgh, PA 15222-2702 (the "Lender"), FASHION
OUTLET OF LAS VEGAS ASSOCIATES, a Nevada general partnership, having an office
at 4350 La Jolla Village Drive, Suite 400, San Diego, CA 92122-1233 (the
"Landlord"), and TOYS INTERNATIONAL, a California corporation, having an office
at 550 Rancheros Drive, San Marcos, CA 92069 (the "Tenant").
WITNESSETH:
WHEREAS, Lender has made or intends to make a loan or loans (the "Loan")
to or for the benefit of Landlord secured, inter alia, by a mortgage or deed of
trust granted by Landlord to Lender (such mortgage or deed of trust and all
amendments, renewals, modifications, replacements, increases, supplements,
consolidations and extensions thereof being hereinafter collectively referred to
as the "Mortgage") upon certain real property described in Exhibit A hereto
(said real property, together with all improvements now or hereinafter located
thereon, hereinafter called the "Property"); and
WHEREAS, Landlord and Tenant have entered into that certain lease
agreement, dated as of _______________________, 19 ___ (the "Lease"), with
respect to certain premises (the "Premises") which are part of the Property; and
WHEREAS, pursuant to the Mortgage and documents related thereto, Landlord
has assigned or is to assign, inter alia, all of its right, title and interest
in the Lease and the rents payable thereunder to Lender as security for the
performance of its obligations made in connection with the Loan.
NOW, THEREFORE, intending to be legally bound hereby, in consideration of
the mutual promises and covenants of the parties hereto, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do mutually covenant and agree as follows:
1. The Lease, including any option to purchase, right of first refusal or
the like, is and shall at all times hereafter be subject and subordinate in all
respects to the Mortgage and, unless the holders thereof shall otherwise elect,
to all future mortgages, deeds of trust and security instruments of the type
referred to in paragraph 13 hereof. Such subordination shall be effective as
though the Lease shall have been executed after the execution of the Mortgage
and such other mortgages, deeds of trust and security instruments and the due
and proper recordation thereof in all appropriate offices and indexes.
2. If Landlord shall default in any of Landlord's obligations under the
Lease beyond any cure period, then Tenant shall give prompt written notice
thereof to Lender. Tenant shall take no action as a result of such default and
shall continue to perform all terms of the Lease as though such default shall
not have occurred, until the applicable grace period provided to Lender in this
paragraph 2 shall have expired. Lender shall have the right to cure any default
by Landlord under the Lease until the later of (a) thirty (30) days after the
expiration of any grace period available to Landlord under the Lease, or (b)
sixty (60) days after Lender shall have received written notice from Tenant of
such default, provided that, if such default is not capable of being cured by
Lender within such period, Lender shall have such additional period of time as
may be required within which to cure such default so long as Lender diligently
proceeds with efforts to cure such default. Lender shall have the right, but not
the obligation, to remedy or cure such default, and in no event shall this
Agreement be construed as expanding the rights or remedies of Tenant upon the
occurrence of a default under the Lease.
3. So long as Tenant is not in default in the payment of rent, additional
rent or other sums or changes now or hereafter payable under the Lease
(collectively, the "Rent") or in the performance of any of the terms, covenants
or conditions of the Lease, Tenant, subject to the other provisions of this
Agreement, shall not, by reason of foreclosure of the Mortgage, acceptance of a
deed in lieu of foreclosure or the exercise of any remedy provided in the
Mortgage, be disturbed in Tenant's occupancy of the Premises during the term of
the Lease or any extension thereof set forth in the Lease.
4. If Lender, prior to its acquisition of Landlord's title to the Property,
shall at any time exercise a right to receive the Rent, Lender shall not thereby
become obligated to Tenant for the performance of any of the terms, covenants,
conditions or agreements of Landlord under the Lease. Landlord and Tenant agree
with Lender that Tenant shall pay the Rent directly to Lender upon Tenant's
receipt of written notice from Lender of the exercise of such rights and
Landlord hereby irrevocably authorizes and directs Tenant to make all such
payments to Lender.
5. Tenant shall attorn to and recognize as Tenant's landlord any purchaser
at a foreclosure or judicial sale relating to the Mortgage or debt secured
thereby or any transferee by deed or assignment in lieu thereof (any such party,
and its successors and assigns, hereinafter called a "Successor Landlord").
Without further evidence of such attornment and recognition, Tenant shall be
bound by and comply with all the terms, provisions, covenants and obligations
contained in the Lease on its part to be performed. Notwithstanding anything to
the contrary contained in this Agreement or any other instrument (including,
without limitation, the Lease), neither Lender nor any Successor Landlord shall
have any obligation whatsoever to complete any improvements or any work or
restoration otherwise to be performed under the Lease or to reimburse or
otherwise credit Tenant or any other party for any costs thereof, provided that,
if a Successor Landlord or its successor or assign shall elect not to complete
or restore the shopping center on the Property, as contemplated by the Lease,
then Tenant shall have the right to terminate the Lease as its sole remedy
against the Successor Landlord and its successors and assigns.
6. Notwithstanding any provision of the Lease to the contrary, no notice of
default by Tenant to Landlord under the Lease shall be deemed effectively given
to Landlord unless and until Tenant shall also have given the same such notice
(including all documents accompanying or required to accompany the same) to
Lender in accordance with paragraph 12 below.
7. In addition to, and not in lieu of all the provisions of this Agreement,
neither Lender nor any Successor Landlord nor any of their respective successors
or assigns shall in any way or to any extent:
(a) be liable for, nor shall Tenant have any right to terminate the Lease
or to exercise any other right or remedy against Lender or any Successor
Landlord by reason of, any act or omission of any prior landlord (including
Landlord) in contravention of any provision of the Lease;
(b) be subject to any offsets, claims or defenses which Tenant might have
against any prior landlord (including Landlord);
(c) be bound by any Rent which Tenant might have paid for more than thirty
(30) days in advance to any prior landlord (including Landlord); and
(d) be in any way responsible for any deposit or security which was or
shall have been delivered to any prior landlord (including Landlord) but which
was not or shall not have been subsequently delivered to Lender or such other
person or entity, as the case may be.
In any such event, Tenant shall nonetheless continue to observe and perform
all terms, covenants and provisions of the Lease on its part to be performed.
8. In the event of a default under the Lease by any Successor Landlord or
by any of its successors or assigns, Tenant shall have no recourse to any assets
of such Successor Landlord or of its successors or assigns, other than its
interest in the Property.
9. Tenant, in order to induce Lender to enter into this Agreement, hereby
affirms that:
(a) Exhibit B is a full, true and complete copy of the Lease, including all
amendments and addenda thereto, and Tenant has no other rights with respect to
the Premises or the Property or any portion thereof;
(b) The Lease is in full force and effect and has not been modified or
amended (except as may be herein set forth), and no option, if any, to extend
the term of the Lease or to expand or contract the area of the Premises has been
exercised;
(c) Tenant has not assigned its interest in the Lease or sublet any of the
Premises;
(d) Intentionally omitted.
(e) To the best of Tenant's knowledge and belief, Landlord is not in
default under any of Landlord's obligations under the Lease;
(f) Tenant has no right of offset or defense against any Rent or other
obligation under the Lease;
(g) The Lease was duly authorized by Tenant and constitutes the valid and
binding obligation of Tenant enforceable in accordance with its provisions;
(h) Tenant has not prepaid any Rent under the Lease other than for the
current month.
10. Tenant agrees to execute such other documents as Lender may deem
reasonably necessary to subordinate the Lease to the lien of the Mortgage and to
confirm the other matters contained herein. Tenant further agrees with Lender
that Tenant will not voluntarily subordinate the Lease to any lien or
encumbrance without Lender's written consent.
11. Unless the terms of this Agreement shall require actual delivery, all
notices, demands or requests, and responses thereto, required or permitted to be
given pursuant to this Agreement shall be in writing and shall be sent by
certified or registered mail, postage prepaid, return receipt requested or
recognized overnight delivery service, and addressed to the party at the address
set forth above or at such other place as such party or successor or assign may
from time to time designate in a notice to the other parties. Rejection or other
refusal to accept or inability to deliver because of changed address of which no
notice has been given shall constitute receipt of the notice, demand or request
sent.
12. This Agreement shall be binding upon and inure to the parties and their
respective heirs, successors and assigns. Landlord and Tenant acknowledge and
agree that, at the election of any subsequent mortgagee, beneficiary of a deed
of trust or holder of other security instrument with respect to the Property or
any part thereof the proceeds of whose loan are used in whole or in part to
refinance the Loan, this Agreement shall also inure to the benefit of such
mortgagee, beneficiary or holder. In such event, all references herein to Lender
shall also refer to such mortgagee, beneficiary or holder, and all references to
the Mortgage shall also refer to such mortgage, deed of trust or security
instrument. Landlord and Tenant agree to execute such documents as any such
mortgagee, beneficiary or holder may reasonably request to confirm the
provisions of this Agreement.
13. This Agreement may not be changed, amended or modified in any manner
other than by an agreement in writing specifically referring to this Agreement
and executed by the parties hereto.
14. This Agreement may be executed in counterparts. If any provision of
this Agreement shall be invalid or unenforceable, the validity and
enforceability of the remaining provisions of this Agreement shall not be
affected thereby.
15. This Agreement shall be of no further force or effect upon the
expiration or earlier termination of the Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TOYS INTERNATIONAL, a California corporation
By:
Name:
(Type or Print Name)
Title:
By:
Name:
(Type or Print Name)
Title:
TENANT
FASHION OUTLET OF LAS VEGAS ASSOCIATES,
a Nevada general partnership
By: TrizecHahn Factory Shops Inc.,
a Delaware corporation,
as managing general partner
By: TrizecHahn Centers Management Inc.,
a California corporation,
as its attorney-in-fact
By:
Name:
Title:
By:
Name:
Title:
LANDLORD
PNC BANK, NATIONAL ASSOCIATION
_______________________ By:
Typed Name:
Typed Title:
LENDER
State of
County of )
On , before me (here insert name and title of the officer), personally
appeared , personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
State of )ss.
County of )
On , before me (here insert name and title of the officer), personally
appeared , personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
STATE OF
COUNTY OF
On this day of ________________, 19 ____, before me, a notary public,
personally appeared , who acknowledged himself to be the of , a , and that he,
as such officer, being authorized to do so, executed the foregoing instrument
for the purposes therein contained by signing the name of such entity by himself
as such officer. ---------------------------------------------
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My commission expires:
<PAGE>
EXHIBIT H
GUARANTY OF LEASE
WHEREAS, a certain Lease, more fully described below, has been or will be
executed:
<TABLE>
<CAPTION>
<S> <C>
a. Name of Shopping Center: FASHION OUTLET AT LAS VEGAS
b. Landlord: FASHION OUTLET AT LAS VEGAS,
a Nevada general partnership
c. Tenant: TOYS INTERNATIONAL,
a California corporation
d. Premises Address: Space No. 1-A-320
</TABLE>
WHEREAS, the Landlord under said Lease requires as a condition to its
execution of said Lease that the undersigned (herein referred to as "Guarantor")
guarantee the full performance of the obligations of Tenant under said Lease.
WHEREAS, the undersigned is desirous that Landlord enter into said
Lease with Tenant.
NOW, THEREFORE, in consideration of the execution of said Lease by
Landlord, Guarantor hereby unconditionally guarantees the complete and timely
performance of each and all of the terms, covenants and conditions of said Lease
to be kept and performed by said Tenant, including the payment of all rentals
and other charges to accrue thereunder. Guarantor further agrees as follows:
1. That this Guaranty shall continue in favor of Landlord notwithstanding
any extension, modification, or alteration of said Lease entered into by and
between the parties thereto, or their successors or assigns, notwithstanding any
assignment of said Lease, with or without the consent of Landlord, and no
extension, modification, alteration or assignment of the above-referred to Lease
shall in any manner release or discharge Guarantor and it does hereby consent
thereto;
2. This Guaranty will continue unchanged by any bankruptcy, reorganization
or insolvency of Tenant or any successor or assignee thereof or by any
disaffirmance or abandonment by a trustee to Tenant;
3. Landlord may, without notice, assign this Guaranty in whole or in part
and no assignment or transfer of the Lease shall operate to extinguish or
diminish the liability of Guarantor hereunder;
4. The liability of Guarantor under this Guaranty shall be primary and, in
any right of action which shall accrue to Landlord under the Lease, Landlord
may, at its option, proceed against the undersigned without having commenced any
action or obtained any judgment against Tenant;
5. Guarantor shall pay Landlord's reasonable attorney fees and all costs
and other expenses incurred in any negotiations, action or proceeding commenced
to enforce this Guaranty;
6. Guarantor hereby waives notice of any demand by Landlord as well as of
any notice of Tenant's default in the payment of rent or any other amounts
contained or reserved in the Lease;
7. Guarantor hereby consents to personal jurisdiction and venue in the
state and judicial district in which the Shopping Center is located; and
8. The person or persons executing this Guaranty of Lease on behalf of
Guarantor represent, covenant, and warrant to Landlord as of the Effective Date
that the signatories signing on behalf of Guarantor have the requisite authority
to bind Guarantor. Further, if the Guarantor is a corporation, Guarantor
represents, covenants, and warrants to Landlord that: (a) as of the Effective
Date, Guarantor is a duly constituted corporation in good standing and qualified
to do business in the state where the Shopping Center is located, (b) Guarantor
has paid all applicable franchise and corporate taxes, and (c) Guarantor will
file when due all forms, reports, fees, and other documents necessary to comply
with applicable laws.
The use of the singular herein shall include the plural. The obligation of
two (2) or more parties shall be joint and several. The terms and provisions of
this Guaranty shall be binding upon and inure to the benefit of the respective
heirs, legal representatives, successors and assigns of the parties herein
named.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty of Lease to be
executed as of the Effective Date of the above-mentioned Lease.
PLAY CO. TOYS & ENTERTAINMENT CORP.,
a Delaware corporation
By:
Name:
(Type or Print Name)
Title:
By:
Name:
(Type or Print Name)
Title:
GUARANTOR
ADDRESS: 550 Rancheros Drive
San Marcos, CA 92069
(PLEASE NOTARIZE DOCUMENT BY COMPLETING THE ATTACHED ACKNOWLEDGMENT)
<PAGE>
ACKNOWLEDGMENT
State of )ss.
County of )
On , before me (here insert name and title of the officer), personally
appeared , personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
State of )ss.
County of )
On , before me (here insert name and title of the officer), personally
appeared , personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
