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, 1999
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)
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Delaware 95-3024222
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
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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, $0.01 par value
Series E Preferred Stock, $0.01 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, 1999 were
$34,371,230.
The aggregate market value of the voting stock on July 12, 1999 (consisting
of Common Stock, par value $0.01 per share) held by non-affiliates was
approximately $1,737,375 based upon the closing price for such Common Stock on
said date ($1.06), as reported by a market maker. On such date, there were
5,554,530 shares of Registrant's Common Stock outstanding.
1
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Play Co. Toys & Entertainment Corp. (the "Company"), a Delaware
corporation, was founded in 1974, at which time it operated one store under the
name Play Co. Toys in Escondido, California. At present, the Company and its two
wholly-owned subsidiaries - Toys International, Inc. ("Toys") and Play Co. Toys
Canyon Country, Inc. ("Canyon," which operates the Company's "flagship model"
store opened in October 1996 in Santa Clarita) - operate an aggregate of
twenty-six stores throughout Southern California (in the Los Angeles, Orange,
San Diego, Riverside, and San Bernardino Counties) and in (i) Tempe, Arizona,
(ii) Las Vegas, Nevada, (iii) Dallas, Texas, (iv) Auburn Hills, Michigan, and
(v) Chicago, Illinois. The Company intends to expand its operations
geographically and in accordance therewith has executed leases to open ten
additional stores by the end of calendar year 2000. These stores shall be
located in California (San Francisco, San Ysidro, and Mission Viejo), Nevada
(Las Vegas), Texas (Houston), North Carolina (Charlotte), and Tennessee
(Nashville), and Illinois (Schaumberg). The Company and its subsidiaries are
hereinafter referred to in the aggregate as the "Company" except as otherwise
required for clarity.
Approximately 75% of the Company's stores offer educational, new electronic
interactive, and specialty and collectible toys and items for sale and are
strategically located in highly trafficked, upscale malls. The remaining 25%
sell traditional toys and games and are located in strip shopping centers. Given
the favorable results obtained from a two year market test of the sale of
children's swimwear in its stores, the Company recently expanded its product mix
and now offers a limited number of children's swimwear and accessories for sale
in many of its stores.
Since 1997, the Company has embraced and implemented a new store design and
layout, remodeled most of its older stores, closed non-profitable stores, and
expanded its geographic market from exclusively Southern California to the
mid-western United States. Since 1996, the Company has opened eight stores which
are considered by management to be high-end retail toy and educational,
electronic interactive stores. These outlets, and those the Company expects to
open in the future, offer items comparable in quality and choice to those
offered by FAO Schwarz, Warner Brothers, and Disney Stores and are expected to
attract clientele similar to those attracted by such stores.
In April 1999, the Company debuted the first of two dedicated electronic
commerce websites. This site, www.ToysWhyPayRetail.com, represents a new trade
name for the Company and allows consumers to purchase, at near wholesale prices,
overstocks, special buys, and overruns on mostly name-brand toys purchased by
the Company out of season. The Company plans to offer approximately 1000 items
for sale on the website.
The second electronic commerce website, www.Playco.com, is currently being
developed to a state-of-the-art standard in conjunction with an Internet
consulting firm. This second site, which will offer collectible and imported
specialty merchandise such as die-cast cars, dolls, plush toys, trains, and
collectible action figures, is expected to open in the fall of 1999. In
conjunction with the website launch, the Company plans to place computer kiosks
in its retail locations in order to permit customers to place orders on the
website for goods otherwise not sold in such stores.
Because the Company's new and newly remodeled stores 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, such stores have shown and are expected to continue to show higher gross
profits than the Company's older stores (which focused primarily on the sale of
traditional toys).
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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 then 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 Toys' three store locations: two of such locations
operate under the tradename "Toys International," and the third operates 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. Both promissory notes were repaid in full under
agreed terms. 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 through April 1997, during which time he advised the Company
regarding Toys' then operations, vendors, policies, employees, etc.
Ownership of the Company
At fiscal year end March 31, 1999, approximately 45.2% of the outstanding
shares of the Company's common stock, par value $0.01 (the "Common Stock"), were
owned by United Textiles & Toys Corp. ("UTTC"), the Company's parent
corporation. UTTC is a Delaware corporation and public company which was
organized in March 1991 and commenced operations in October 1991. It formerly
designed, manufactured, and marketed a variety of lower priced women's dresses,
gowns, and separates (blouses, camisoles, jackets, skirts, and pants) for
special occasions and formal events. In April 1998, UTTC ceased all operating
activities; it now operates solely as a holding company. The president and a
director of UTTC is Mr. Ilan Arbel who is also the president, chief executive
officer, and a director of Multimedia Concepts International, Inc. ("MMCI"), the
parent company of UTTC. MMCI owns approximately 78.5% of UTTC common stock and
is, in turn, owned approximately 62.2% by U.S. Stores Corp., a company of which
Mr. Arbel is the president and a director. U.S. Stores Corp. is owned 100% by
American Telecom PLC ("ATPLC"), a British public corporation, which is owned
approximately 80% by Europe American Capital Foundation ("EACF"), a Swiss
foundation, which is the parent corporation also of Frampton Industries, Ltd.
("Frampton") and ABC Fund, Ltd. ("ABC"), entities affiliated with the Company
under common control.
The following chart depicts the Company's ownership structure:
Europe American Capital Foundation
Frampton Industries, Ltd. (100%) American Telecom PLC (80%) ABC Fund, Ltd.(100%)
(100%)
U.S. Stores Corp.
(62.2%)
Multimedia Concepts International, Inc.
(78.5%)
United Textiles & Toys Corp.
(45.2%)
Play Co. Toys & Entertainment Corp.
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The Company has two operating subsidiaries, Toys and Canyon, each of which
is wholly-owned. Toys operates fourteen stores, and Canyon operates one store.
See "Item 2. Description of Property."
Product Lines
The Company's older stores, which are located in strip shopping centers,
sell children's and adult toys, games, bicycles and other wheel goods, sporting
goods, puzzles, Nintendo and Sony electronic game systems (and cartridges
therefor), cassettes, and books. These stores offer in excess of 15,000 items
for sale, most of which are major brand name toys and hobby products.
The Company's new (post 1996) and remodeled stores, while also offering the
aforesaid products for sale, stock a mix of educational toys, specialty stuffed
animals such as Steiff and North America Bears, Small World toys, LBG trains,
CD-ROMs, computer software games, and Learning Curve and Ty products. The
Company's Tutti Animali store, located in the Crystal Court Mall in Costa Mesa,
California, primarily sells stuffed animals.
The Company periodically reviews each individual store's sales history and
prospects on an individual basis to decide on the appropriate product mix to
stock thereat. During calendar years 1997 and 1998, the Company market tested
the sale in its stores of a limited number of pieces of children's swimwear
manufactured by Breaking Waves, Inc. ("BWI"), an affiliate. The Company's
chairman is also the president of Shopnet.com, Inc. ("Shopnet"), BWI's parent.
Those market tests proved successful. As a result, in November 1998, the Company
entered into a sales agreement with BWI pursuant to which BWI agreed to sell to
the Company on a wholesale basis, and the Company agreed to purchase from BWI,
during each season during which swimwear is purchased, an agreed upon number of
pieces of merchandise for its retail locations. The Company further agreed to
provide advertising, promotional materials, and ads of the merchandise in all of
its brochures, advertisements, catalogs, and all other promotional materials,
merchandising programs, and sales promotion methods, in all mediums utilized by
same. The Company's swimwear sales comprise a small portion (less than 1%) of
its total sales.
Suppliers and Manufacturers
The Company purchases a significant portion of its products from
approximately five manufacturers and ships them to its stores from its warehouse
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's
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.
Merchandising Strategy
Store Design
The Company believes it important to offer an environment that is less
intimidating and more "user friendly" than the environments provided by some of
the larger toy retailers whose businesses compete with the Company. In view of
this belief, the Company actively embraces a policy of affording its customers
courtesy, respect, and ease of convenience. The Company provides trained store
clerks to assist customers with all of their shopping needs and stocks its
merchandise at eye level for its patrons' convenience.
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In 1996, management determined that current and prospective consumers,
whose needs and desires are influenced by prevailing musical, fashion,
recreational, and entertainment trends, require variety and demand in addition
to traditional products; namely, they desire the most fashionable products. In
an effort to meet the rapidly changing needs of its consumers, the Company
designed new outlets which provide a combination of (i) new educational,
electronic interactive, specialty, hobby, and collectible toys and goods and
(ii) traditional toys and games. In addition, it sought out, has opened, and
continues to open outlets located in highly trafficked malls, rather than in the
strip shopping centers where it originally opened its stores. In addition, 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 current and imminent industry demands.
On June 17, 1999, the Company opened its 26th store in the Venetian Hotel
in Las Vegas, Nevada. During fiscal year 1999, the Company opened six new
stores. By the end of calendar year 2000, the Company intends to open ten
additional stores.
Product and Trend Analysis
The Company continually assesses trends and demands in the industry,
refines its store formats and/or product lines as needed, and analyzes and
evaluates markets for future store openings, merchandise lines, and marketing
strategies. The Company operates its stores under the names "Play Co. Toys,"
"Toys International," "Toy Co.," and "Tutti Animali" depending upon the product
mix and location.
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 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 continues to emphasize
specialty and educational toys in its stores.
Termination of Military Base Sales
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 year 1998 (2% of sales) and fiscal year 1997 (3% of sales),
the Company ceased such sales as of July 1998. Wholesale sales to military bases
were approximately 1% of sales in fiscal year 1999.
Seasonality
Since inception, the Company's business has been highly seasonal, with the
majority of its sales and profits being generated in the fourth calendar quarter
of the year, particularly during the November and December holiday season.
Competition
The toy 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, Kay Bee Toy Stores, K-Mart, and Wal Mart. Most of
the Company's larger competitors are located in free-standing stores rather than
in malls. Kay Bee stores, however, are located in malls, though their product
line is different than the Company's. The Company also competes with on-line toy
retailers, such as eToys Inc. The toy 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
competes as to price, personnel, service, speed of delivery, and breadth of
product line.
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As a result of the continually changing nature of children's consumer
preferences and tastes, the success of the Company is dependent on its ability
to change and adapt to new trends and to supply the merchandise then in demand.
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 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 competes have more extensive
research and development, marketing, and customer support capabilities and
greater financial, technological, and other resources than those of the Company.
There can be no assurance that the Company will be successful or that it will be
able to distinguish itself from such larger, better 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.
Warehousing, Shipping and Inventory Systems
The Company's stores are serviced from one distribution facility which is
approximately 37,000 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. Through this
system, the Company analyzes product sales 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 increased in the fourth calendar quarter,
during the holiday season, during which period some stores are restocked on a
daily basis. The Company ships to its stores in California by its own leased
vehicles. The Company ships to stores located outside of California via truck
load or less than truck load independent trucking companies.
Trademarks
In 1976, 1994, and 1998, the Company received federal registrations for the
trademarks "Play Co. Toys," "TKO" and "Toy Co." respectively. Play Co. Toys and
Toy Co. are trademarks utilized by the Company in connection with its certain of
its stores. "TKO" was used for certain items the Company previously
manufactured. The Company also utilizes the tradenames "Toys International" and
"Tutti Animali."
Employees
At June 30, 1999, the Company had three executive officers, approximately
151 full time employees, and approximately 332 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 vice president of
retail operations and vice president of merchandising who in turn report
directly to the Company's executive officers.
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Financing through FINOVA Capital Corporation
On January 21, 1998, the Company entered into a $7.1 million secured,
revolving Loan and Security Agreement (the "FINOVA Agreement") with FINOVA
Capital Corporation ("FINOVA"). The credit line offered under the FINOVA
Agreement replaced the $7 million credit line the Company previously had with
Congress Financial Corporation (Western) (the "Congress Financing"). Neither
FINOVA nor Congress is affiliated with the Company. The Company repaid the
Congress loan on February 3, 1998.
The FINOVA credit line is secured by substantially all of the Company's
assets and expires on August 3, 2000. The FINOVA Agreement is also guaranteed by
UTTC. It accrues interest at a rate of floating prime plus one and one-half
percent. Effective July 30, 1998, the Company and FINOVA amended the FINOVA
Agreement to increase the maximum level of borrowings under the agreement from
$7.1 million to $7.6 million. Effective September 24, 1998, the Company and
FINOVA entered into a second amendment to the FINOVA Agreement to increase the
maximum level of borrowings thereunder from $7.6 million to $8.6 million through
December 31, 1998. As of January 1, 1999, the maximum level of borrowings
returned to the $7.6 million level. In December 1998, the FINOVA Agreement was
amended a third time to reflect FINOVA's taking of a subordinate position with
respect to its lien on only such equipment as has been leased by the Company
from Phoenix Leasing, Inc.
In November 1998, pursuant to an agreement with ZD Group, L.L.C. ("ZD") - a
related New York limited liability company, the beneficiary of which is a member
of the family of the Company's Chairman - ZD issued a $700,000 irrevocable
standby letter of credit ("L/C") in favor of FINOVA. FINOVA then lent a matching
$700,000 to the Company in the form of a term loan, pursuant to a fourth
amendment to the FINOVA Agreement entered into on February 11, 1999. The term
loan from FINOVA expires on August 3, 2000 and bears interest at prime plus one
percent. In March 1999, the Company and FINOVA entered into a Fifth Amendment to
Loan and Security Agreement which stretches the agreed upon (in the FINOVA
Agreement) decrease in advance rate against the Company's cost value of its
inventory over a five month period.
Under the FINOVA Agreement, the Company is able to borrow against the cost
value of eligible inventory. Since February 1999, pursuant to the Agreement, the
Company's allowed borrowing has increased by $100,000 to $2.5 million against a
combination of $3 million in standby letters of credit in favor of FINOVA and
restricted cash provided by a subordinated loan. $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 MMCI (an
affiliate of the Company by virtue of its 78.5% ownership of UTTC, the Company's
parent), and the other $500,000 was provided by the Company.
During fiscal year 1999, the Company breached two negative covenants in the
FINOVA Agreement by exceeding maximum levels of capital expenditures and
unsecured and lease financing. FINOVA waived such defaults.
The Company believes that it will require a significant increase in its
line of credit as a result of its 50% revenue growth over the past fiscal year
and has approached FINOVA about increasing the line of credit. There can be no
assurance that FINOVA (i) will be amenable to such a credit line increase or
(ii) will provide such an increase under terms that the Company deems
reasonable.
Trade Financing
The Company relies on credit terms from its suppliers and manufacturers to
purchase nearly all of its inventory. Credit arrangements vary for reasons both
within and outside the control of the Company. See "-- Suppliers and
Manufacturers."
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Fixture Financing
During fiscal year 1999, the Company entered into approximately twelve
financing agreements for the leasing of fixtures for its remodeled and new
stores. These agreements were entered into with various entities, none of which
is affiliated with the Company, and bear terms of between three and five years.
The agreements are payable monthly and provide fixture financing in the
approximate aggregate amount of $849,000. All such financings are secured by the
Company's store fixtures and equipment. The Company is currently negotiating
additional financing of this type.
Former Financing through Congress Financial Corporation (Western)
In February 1996, pursuant to the terms of the Congress Financing, Europe
American Capital Corporation ("EACC"), an affiliate of the Company, delivered a
$2 million L/C to Congress. The Congress Financing was also guaranteed by UTTC,
the majority shareholder of the Company. As compensation for the issuance of the
L/C, the Company granted to EACC options, subject to shareholder approval, (i)
to purchase up to an aggregate of 1,250,000 shares of Common Stock at a purchase
price of 25% of the closing bid price for the Common Stock on the last business
day prior to exercise, for a period of six months from issuance (this option
expired unexercised); and (ii) to purchase up to an aggregate of 20 million
shares of the Company's Series E Preferred Stock (the "Series E Stock"). From
April 1996 to June 1997, EACC exercised its options and purchased an aggregate
of 3,562,070 shares of the Company's Series E Stock for $3,562,070. An aggregate
of 361,500 of such shares were converted into Common Stock. In March 1997, EACC
issued an additional $1 million L/C to Congress in order for the Company to
obtain additional financing from Congress. This L/C enabled the Company to
receive additional advances of up to $1 million from Congress. EACC did not
receive any compensation for the issuance of this L/C. With the closing of the
Company's December 1997 offering of Series E Stock, EACC's option to purchase
shares of Series E Stock (granted in accordance with the Congress Financing)
terminated. The proceeds of the funds received from EACC's investment enabled
the Company (i) to acquire the assets of Toys (a three store chain) in January
1997, (ii) to finance the openings of the Santa Clarita, Arizona Mills, Redondo
Beach, Ontario Mills, and Clairemont Mesa stores, (iii) to redesign four store
locations, and (iv) to support the Company's operations during the Company's
business turnaround.
Recent Developments
In May 1999, the Company sold 750,000 shares of Series F Preferred Stock,
par value $0.01 per share (the "Series F Stock"), at a purchase price of $1.00
per share, in a private placement. The Company received $657,500 in net proceeds
from the sale.
In March 1999, the Company borrowed an aggregate of $400,000 from Full Moon
Development, Inc., a corporation not affiliated with the Company, pursuant to
two promissory notes, each in the amount of $200,000. The Company has repaid the
first note, and the second note is due on July 30, 1999.
In February 1999, the Company entered into a one year agreement with
Typhoon Capital Consultants, LLC ("Typhoon") pursuant to which Typhoon is to
provide financial consulting services and other consulting services encompassing
assistance in the production of a summary business plan and corporate profile,
the creation of an advisory committee to assist the Company in assessing certain
proposed actions, and the marketing of the Company's websites. In exchange for
Typhoon's services, the agreement provides for the grant of an option to
purchase an aggregate of 150,000 shares of Common Stock, exercisable at $1.75
per share until their expiration on August 30, 2001.
<PAGE>
In November 1998, the Company borrowed $250,000 from Amir Overseas Capital
Corp. ("Amir"), a corporation not affiliated with the Company, under a
promissory note which bore interest at 12%. The note was repaid in January 1999.
In September 1998, the Company borrowed $1,000,000 from Amir, under a promissory
note which bore interest at 12%. This note was repaid in December 1998.
In July 1998, the Company entered into a Lead Generation/Corporate
Relations Agreement with Corporate Relations Group, Inc. ("CRG"), a Florida
corporation not affiliated with the Company, pursuant to which CRG is to provide
investor and public relations services to the Company for a period of five
years. Under the terms of the Agreement, the Company paid $100,000 to CRG upon
execution of the agreement, and a Company shareholder remitted 50,000 shares of
the Company's Series E Stock as a reimbursement for expenses. In addition, in
exchange for CRG's services, the agreement provided for the grant to CRG and
four of its principals options to purchase an aggregate 450,000 shares of Common
Stock at an exercise price of $0.78125 per share and an aggregate 700,000 shares
of Series E Stock at an exercise price of $2.25 per share. In connection with
these options, the Company recorded approximately $35,000 in compensation
($10,000 for the Series E Stock options and $25,000 for the Common Stock
options) based on an option pricing model which considered the volatility of the
securities' stock prices, and the short life of the options, 2/3 of which are
exercisable for a two month period and the remaining 1/3 of which are
exercisable for an eight month period.
In May 1998, the Company commenced an offering of Units, each Unit
comprising one share of Series F Stock and one Series F Preferred Stock Purchase
Warrant (the "Series F Warrants"), at a purchase price of $3.00 per Unit,
through Morgan Grant Capital Group, Inc. as placement agent. The Company
terminated the offering in June 1998, and no funds were raised thereby.
In July 1997, the Company effected a 1 for 3 reverse split of its Common
Stock. To date, not all shareholders have exchanged their pre-reverse split
shares for post-reverse split shares; therefore, the number of shares
outstanding as of the date set forth herein is subject to change, nominally, as
such shareholders submit their shares for exchange.
ITEM 2. DESCRIPTION OF PROPERTY
Until recently, the Company's stores were serviced from two adjacent
distribution facilities (one 37,000 square feet in size, the other 18,000 square
feet in size) encompassing an aggregate of approximately 55,000 square feet, at
550 Rancheros Drive, San Marcos, California. As of April 15, 1997, however, the
Company returned approximately 15,400 feet of the 18,000 square foot warehouse
space to the landlord. The Company now leases (i) 40,000 square feet of combined
office and warehouse space (approximately 3,000 square feet is office space, and
the remaining 37,000 square feet is warehouse space) and (ii) approximately
2,600 square feet of separate space which houses defective merchandise until
same is either returned to the manufacturers or the Company is authorized by the
manufacturers to destroy the goods. The former space is leased at an approximate
annual cost of $247,000, from a partnership of which one of the partners is
Richard Brady, the president and a director of the Company. The lease expires in
April 2000, and the Company believes that it is on terms no more or less
favorable than terms it might otherwise have negotiated with an unaffiliated
party. The latter space is leased at an approximate annual cost of $31,572, from
Dunlop/Townley Holdings. The lease expires in March 2000. From October 1998
through April 1999, the Company leased an additional 4,200 square feet of
warehouse space for $2,300 per month. This space was leased to store overflow
inventory from the Company's primary warehouse.
The following table sets forth the leased properties on which the Company's
(and its subsidiaries') currently operating stores (aggregating 26) are located:
<PAGE>
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SIZE IN SQUARE FEET
LEASE BASE RENT
STORE LOCATION EXPIRATION ANNUAL COST
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Play Co. Toys 12,000 July 2006 $108,000.00
Santa Clarita
19232 Soledad Canyon Rd
Santa Clarita, CA 91351
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Play Co. Toys 7,800 January 2001 $84,840.00
Santa Margarita
27690-B Santa Margarita
Mission Viejo, CA 92691
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(table continued from previous page)
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STORE LOCATION SIZE IN SQUARE FEET LEASE BASE RENT
EXPIRATION ANNUAL COST
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Play Co. Toys 8,250 December 1999 $87,549.72
Chula Vista
1193 Broadway
Chula Vista, CA 91911
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Play Co. Toys 10,030 June 2000 $127,880.64
El Cajon
327 N. Magnolia
El Cajon, CA 92020
- -------------------------------------------------------------------------------------------------------------------------------
Play Co. Toys 11,323 November 1999 $95,040.48
Simi Valley
1117 E. Los Angeles, Suite C
Simi Valley, CA 93065
- -------------------------------------------------------------------------------------------------------------------------------
Play Co. Toys 10,000 September 2005 $110,753.88
Encinitas
280 N. El Camino Real
Encinitas, CA 92024
- -------------------------------------------------------------------------------------------------------------------------------
Play Co. Toys 9,800 December 2004 $117,330.72
Pasadena
885 S. Arroyo Parkway
Pasadena, CA 91105
- -------------------------------------------------------------------------------------------------------------------------------
Play Co. Toys 13,125 January 2001 $96,360.00
Orange
1349 E. Katella
Orange, CA 92513
- -------------------------------------------------------------------------------------------------------------------------------
Play Co. Toys 10,478 Month to Month $95,941.80
Redlands
837 Tri-City
Redlands, CA 92373
- -------------------------------------------------------------------------------------------------------------------------------
Play Co. Toys 10,156 August 2002 $88,053.00
Clairemont
4615-A Clairemont Drive
San Diego, CA 92117
- -------------------------------------------------------------------------------------------------------------------------------
Play Co. Toys 11,597 March 2004 $91,020.00
Rancho Cucamonga
9950 W. Foothill Blvd, Suite U
Rancho Cucamonga, CA 91730
- -------------------------------------------------------------------------------------------------------------------------------
Play Co. Toys 10,000 October 2004 $64,926.60
Corona
1210 W. Sixth Street
Corona, CA 91720
===============================================================================================================================
</TABLE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
===============================================================================================================================
STORE LOCATION SIZE IN SQUARE FEET LEASE BASE RENT
EXPIRATION ANNUAL COST
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Play Co. Toys 9,400 December 2003 $178,980.00
Woodland Hills
19804 Ventura Blvd., #366
Woodland Hills, CA 91364
- -------------------------------------------------------------------------------------------------------------------------------
Toys International 5,183 January 2004 $159,900.00
South Coast Plaza, Ste. 1020
3333 Bristol Street, Suite 1030
Costa Mesa, CA 92626
- -------------------------------------------------------------------------------------------------------------------------------
Toys International 3,869 January 2001 $145,920.00
Century City
10250 Santa Monica Blvd
Los Angeles, CA 90067
- -------------------------------------------------------------------------------------------------------------------------------
Tutti Animali 1,220 January 2000 5% of Sales
Crystal Court
3333 Bear Street
Cost Mesa, CA 92626
- -------------------------------------------------------------------------------------------------------------------------------
Toys International 3,620 August 2007 $83,260.08
Galleria at South Bay
1815 Hawthorne Blvd., #366
Redondo Beach, CA 90278
- -------------------------------------------------------------------------------------------------------------------------------
Toy Co. 5,642 January 2003 $112,840.00
Ontario Mills
One Mills Circle, #302
Ontario, CA 91764
- -------------------------------------------------------------------------------------------------------------------------------
Toy Co. 7,103 October 2002 $163,369.00
Arizona Mills
5000 Arizona Mills Circle, #689
Tempe, AZ 85282
- -------------------------------------------------------------------------------------------------------------------------------
Toy Co. 7,002 May 2008 $175,483.32
Fashion Outlet of Las Vegas
32100-320 Las Vegas Blvd. So.
Primm, NV 89019
- -------------------------------------------------------------------------------------------------------------------------------
Toy Co. 9,369 May 2003 $175,483.32
Grapevine Mills
3000 Grapevine Mills Pkwy, Ste. 312
Grapevine, TX 76051
- -------------------------------------------------------------------------------------------------------------------------------
Toys International 5,339 December 2008 $133,475.04
Thousand Oaks
208 W. Hillcrest Drive
Thousand Oaks, CA 91360
===============================================================================================================================
<PAGE>
(table continued from previous page)
===============================================================================================================================
STORE LOCATION SIZE IN SQUARE FEET LEASE BASE RENT
EXPIRATION ANNUAL COST
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Toys International 10,000 May 2008 $195,000.00
Great Lakes Crossing
4236 Baldwin Rd., #551
Auburn Hills, MI 48326
- -------------------------------------------------------------------------------------------------------------------------------
Toy Co. 12,496 July 2003 $168,696.00
Gurnee Mills Mall
06170 W. Grand Ave., Sp. #559
Gurnee, IL 60031
- -------------------------------------------------------------------------------------------------------------------------------
Toys International 9,400 March 2008 $221,424.00
The Block
20 City Dr. West, Ste. 203
Orange, CA 92868
- -------------------------------------------------------------------------------------------------------------------------------
Toys International 7,002 June 2004 $450,000.00
The Venetian Resort & Casino
3311 Las Vegas Blvd. South, Ste.1212
Las Vegas, NV 89109
===============================================================================================================================
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
In October 1997, in the Superior Court of the State of California, County
of San Bernardino, Foothill Marketplace commenced suit against the Company 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, in the approximate amount of
$300,000. This action is in the discovery phase and a trial is currently
scheduled for September 1999.
Neither the Company's officers, directors, affiliates, nor owners of record
or beneficially of more than five percent of any class of the Company's Common
Stock is a party to any material proceeding adverse to the Company or has a
material interest in any such proceeding adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 5, 1999, the Company held its annual meeting during which it
proposed (i) to elect four directors to the board and (ii) to amend the
Company's Certificate of Incorporation to authorize an increase in the number of
authorized shares of the Company's (a) Common Stock from fifty-one million
shares currently authorized to one hundred sixty million shares and (b) Series E
Stock from ten million shares currently authorized to twenty-five million
shares. Both proposals were adopted, and the following were elected directors of
the board for a term of one year: Richard Brady, James B. Frakes, Harold
Rashbaum, and Moses Mika. Mr. Mika is the father of Ilan Arbel (the president of
UTTC).
<PAGE>
The votes cast or withheld for the election of the directors are set forth
as follows:
<TABLE>
<CAPTION>
Nominees Votes For Votes Withheld
<S> <C> <C>
Harold Rashbaum 4,777,694 12,742
Richard Brady 4,783,236 7,200
James Frakes 4,781,808 8,628
Moses Mika 4,777,727 12,709
</TABLE>
The votes cast for, against, or withheld for the proposal to increase the
capital stock of the Company are set forth as follows:
<TABLE>
<CAPTION>
Votes Cast For Votes Cast Against Abstentions
<S> <C> <C> <C>
4,769,629 20,806 0
</TABLE>
<PAGE>
PART II
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 ("Nasdaq"). The following table sets forth
representative high and low bid quotes as reported by the OTC Bulletin Board,
whereon the Company's securities are quoted, during the periods stated below.
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.
<TABLE>
<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> <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 .67 1.25 1 4.75 .5 1.75
04/01/98 - 06/30/98 .58 1.75 .87 3.5 .5 1.25
07/01/98 - 09/30/98 .75 1.56 .31 3.5 .12 1.12
10/01/98 - 12/31/98 .56 1.22 .20 .67 .01 .37
1999
01/01/99 - 03/31/99 .75 2.56 .20 1.72 .03 .25
04/01/99 - 06/16/99 1.06 1.84 .50 3.37 .10 .58
</TABLE>
- ---------------------
<PAGE>
(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 Stock and Series E 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 with the close of
business on September 23, 1997. It began trading on the OTC Bulletin Board in
October 1997.
As of July 12, 1999, there were approximately 408 holders of record of the
Company's Common Stock, although the Company believes that there are
approximately 650 additional beneficial owners of shares of Common Stock held in
street name. As of July 12, 1999, the number of outstanding shares of the
Company's Common Stock was 5,554,530 (This number is subject to change,
nominally, as the pre-July 1997 reverse split shares which have not been
exchanged as yet are offered for such exchange by the Company's shareholders.)
Effective with the close of business on September 23, 1997, the Company's
Common Stock was delisted from trading on Nasdaq. The Company appealed an
earlier Nasdaq determination and presented its argument in August 1997 at an
oral hearing before the Nasdaq Qualifications Panel (the "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 L/C as security for the Congress credit
line. The Company appealed this matter to the Nasdaq Listing and Hearing Review
Committee (the "Review Committee") which, on October 29, 1997, remanded the
Panel's determination for reconsideration by a new Nasdaq analyst and a new
Panel, this remand due in part to the Company's allegations of bias.
In December 1997, the Company presented written evidence to the new Panel
which, in a determination dated January 20, 1998, affirmed the delisting. The
Company appealed said determination to the Review Committee. In a determination
dated May 21, 1998, the Review Committee affirmed the delisting citing as its
basis therefor, inter alia, as follows: ". . . given the Company's history of
losses, we do not have confidence in the Company's ability to maintain
compliance [with the capital and surplus requirement] for the long term." In
addition, the Review Committee determined that "substantial dilution to the
public shareholders by stock issuance . . . and by the conversion of preferred
stock issued . . . at prices substantially below the market price" supported the
Review Committee's argument of purported affiliate self-dealing. In further
support of its determination, the Review Committee cited the Company's failure
to provide information requested with respect to entities which were not
affiliated with the Company. (In response to the Review Committee's request for
such information, the Company informed same that it did not believe it
appropriate to make representations regarding the transactions or the
composition of any entities with which it was not affiliated and recommended
that the Review Committee redirect such inquiries directly to such entities.)
The Company sought all administrative remedies available from Nasdaq and
believes that Nasdaq erred in its determination. Given the extreme cost
associated with appealing Nasdaq's decision to the Securities and Exchange
Commission, however, the Company decided not to file such an appeal.
Recent Sales of Unregistered Securities
Except where otherwise indicated, the sales of securities of the Company
described below were exempt from registration under the Securities Act of 1933,
as amended (the "Act"), in reliance upon the exemption afforded by ss.4(2) of
the Act for transactions not involving a public offering. All certificates
evidencing such sales bear an appropriate restrictive legend.
<PAGE>
Series F Preferred Stock Private Placement
In May 1999, pursuant toss.506 of Regulation D, the Company sold 750,000
shares of Series F Stock, at a purchase price of $1.00 per share, through Robb
Peck McCooey Clearing Corporation as placement agent. The Company received
$750,000 for the sale, less expenses, and the placement agent's 10% commission
and 1% nonaccountable expense allowance. Each share of Series F Stock is
convertible, at the holder's option, into two fully paid and non-assessable
shares of Common Stock, at any time commencing on the date the registration
statement registering the Series F Stock and Common Stock underlying same is
declared effective by the Securities and Exchange Commission.
Common Stock Issuance
In May 1999, the Company issued 45,333 shares of Common Stock to Brian
Hunter, a real estate consultant, as compensation for services rendered in
negotiating certain commercial leases on behalf of the Company. This transaction
was valued by the Company at approximately $56,000 based on the closing stock
price on May 17, 1999 and a 10% discount related to the unregistered nature of
the Common Stock.
<PAGE>
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,
1996 1997 1998 1999
Balance Sheet Data:
<S> <C> <C> <C> <C>
Working capital (deficiency) $192,401 $(1,570,486) $4,452,481 $5,832,145
Total assets 9,213,104 9,378,618 14,139,887 21,150,392
Total current liabilities 6,673,570 8,148,657 4,581,831 7,558,647
Long term obligations 726,007 226,925 7,055,549 8,527,116
Redeemable preferred stock 87,680 --- --- ---
Stockholders' equity 1,725,847 1,003,036 2,502,507 5,064,629
Common stock dividends --- --- --- ---
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31,
1996 1997 1998 1999
Operating Data:
<S> <C> <C> <C> <C>
Net sales $21,230,853 $19,624,276 $22,568,527 $34,371,230
Gross profit 6,097,958 5,955,172 8,878,928 14,780,446
Gross margin 28.7% 30.3% 39.3% 43.0%
Total operating expenses 9,105,515 8,789,570 10,119,430 13,672,377
Net income (loss) before taxes (3,542,715) (3,584,881) (2,054,470) 143,018
Net income (loss) (3,542,715) (3,584,881) (2,054,470) 140,868
Net income (loss) applicable to common shares
(3,542,715) (6,474,496) (3,528,276) (1,566,857)
Income (loss) per common share(1) (2.77) (1.29) (0.86) (.34)
Weighted average shares outstanding(1) 1,287,843 2,791,876 4,098,971 4,590,642
</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 has two wholly owned operating subsidiaries: Toys
International, Inc. ("Toys") and Play Co. Toys Canyon Country, Inc. ("Canyon").
Toys currently operates fourteen stores, and Canyon operates one store. The
Company plans to combine these two subsidiaries and to assign to Toys five Play
Co. Toys stores that either have been or will be reformatted to the Toys
concept.
For the year ended March 31, 1999 as compared to the year ended March 31, 1998
The Company generated net sales of $34,371,230 in the year ended March 31,
1999 (also referred to as fiscal year 1999). This represented an increase of
$11,802,703, or 52.3%, over net sales of $22,568,527 in the year ended March 31,
1998 (also referred to as fiscal year 1998). Approximately $7.6 million of this
sales growth came from new stores, and the remaining $4 million came from a
21.3% increase in same store sales. Sales from the Company's wholesale
operations were insignificant in both fiscal years.
The Company ended fiscal year 1999 with 25 retail locations in six states,
compared to 19 retail locations in two states at the end of fiscal year 1998.
During fiscal year 1999, the Company opened six new stores.
The Company posted a gross profit of $14,780,446 in the year ended March
31, 1999. This represented an increase of $5,901,518, or 66.5%, over the gross
profit of $8,878,928 in the year ended March 31, 1998. 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 39.3% in fiscal year 1998 to 43% in fiscal year
1999. This 3.7% 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,
1998, and 1999.
Operating expenses (total operating expenses less litigation related
expenses and depreciation and amortization) in the year ended March 31, 1999
were $12,658,376. This represented a $3,793,769, or 42.8%, increase over the
Company's operating expenses of $8,864,607 in the year ended March 31, 1998. The
primary reasons for the operating expense increase were a growth in rent expense
of approximately $673,000 and in payroll and related expenses of $1,770,000. The
increases in rent and salary expenses were largely due to the opening of the six
new stores in fiscal year 1999. As a percentage of sales, operating expenses
decreased by 2.5% to 36.8% of net sales for fiscal year 1999 from 39.3% in
fiscal year 1998.
The Company incurred $27,659 of litigation related expenses in fiscal year
1999 compared to $583,541 of litigation related expenses in fiscal year 1998.
The expenses in fiscal year 1998 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
and the $27,659 of litigation related expenses in fiscal year 1999 are largely
related to that matter.
<PAGE>
Depreciation and amortization expense in the year ended March 31, 1999 was
$986,342. This represented a $315,060, or 46.9%, increase over the Company's
depreciation and amortization expense of $671,282 in the year ended March 31,
1998. Depreciation and amortization are non-cash charges. The primary reason for
the depreciation and amortization expense increase was the depreciation related
to the fixed assets purchased for the six new stores opened during fiscal year
1999.
Total operating expenses (the sum of operating expenses, litigation related
expenses, and depreciation and amortization expense) in the year ended March 31,
1999 were $13,672,377. This represented a $3,552,947, or 35.1%, increase over
the Company's total operating expenses of $10,119,430 in the year ended March
31, 1998. The reasons for this increase are noted in the three preceding
paragraphs.
The Company recorded operating income of $1,108,069 in fiscal year 1999
compared to an operating loss of $(1,240,502) in fiscal year 1998. This
represented an improvement of $2,348,571. This improvement was a result of the
$5,901,518 increase in gross profit being partially offset by the $3,552,949
increase in total operating expenses.
Total interest expense amounted to $965,051 in the year ended March 31,
1999. This represented a $151,083, or 18.6%, increase over the Company's
interest expense of $813,968 in fiscal year 1998. The primary reason for the
increased level of interest expense was a higher level of borrowings in fiscal
year 1999 than in fiscal year 1998.
In fiscal year 1999, the Company recorded income tax expense of $2,150,
representing various state income taxes. The Company's net operating loss
carryforward sheltered the Company from federal income taxes in fiscal year
1999.
In fiscal year 1998, 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, 1999 and 1998 and resulted in a net zero dollar provision for deferred
income taxes for each of the years ended March 31, 1999 and 1998.
As a result of the above-mentioned factors, the Company recorded a net
income of $140,868 for the fiscal year ended 1999 compared to a net loss of
$(2,054,470) for the fiscal year ended March 31, 1998.
In fiscal year 1999, the net income of $140,868 was reduced by non-cash
dividends of $1,707,725 in order to determine the net income applicable to
common shares. The non-cash dividends represent amortization of the discount
recorded upon issuance of Series E Stock with a beneficial conversion feature.
No dividends in the form of securities or other assets were actually paid out. A
non-cash dividend of $1,473,806 was recorded for fiscal year 1998. As a result,
the net loss applicable to common shares was $(1,566,857), or $(.34) per share,
for the year ended March 31, 1999 and $(3,528,276), or $(.86) per share, for the
year ended March 31, 1998.
Liquidity and Capital Resources
At March 31, 1999, the Company had a working capital position of $5,832,145
compared working capital of $4,452,481 at March 31, 1998. The primary factors in
the $1,379,664 increase in working capital were a $1,162,268 growth in the
Company's net investment in inventories (increase in inventories less increase
in accounts payable), which was financed through a $2,369,468 increase under the
Company's financing agreement, a long-term liability.
<PAGE>
While the Company generated an operating profit during fiscal year
ended March 31, 1999, the Company generated operating losses for the prior
fiscal years and has historically financed those losses and its working capital
requirements through loans and sales of the Company's equity securities. 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, 1999, the Company used $1,231,117 of cash in
its operations compared to $2,288,736 used in operations in the year ended March
31, 1998. The primary reason for the $1,057,619 reduction in the use of cash in
operations was the Company's net income of $140,868 compared to the prior year's
loss of $2,054,470. Beyond the $2,195,338 improvement of net income, the Company
recorded an incremental amount of $312,177 of non-cash depreciation and
amortization and amortization of debt issuance costs that are added back to the
Company's operating cash flow.
The Company used cash in its operating activities in fiscal year 1999
because of a $1,162,268 growth in the Company's net investment in inventories
(increase in inventories less increase in accounts payable). The Company has
invested in its inventory position to supply its growing number of stores and
its increased level of sales.
The Company used $2,799,819 of cash in its investing activities during
fiscal year 1999 compared to $3,273,273 in fiscal year 1998. All but $100,000 of
the cash used in investing activities represented purchases of property and
equipment. These purchases primarily related to the six new stores the Company
opened in fiscal year 1999. The $2,799,819 represents capital expenditures net
of landlord tenant improvement contributions and of capital lease financing.
In fiscal year 1998, $2,250,000 of the investing activities related to the
purchase of restricted certificates of deposit. Of that amount, $2,000,000 was
used to collateralize a letter of credit ("L/C") in the same amount in favor of
FINOVA Capital Corp. ("FINOVA" - see below), the Company's 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 Company generated $3,507,917 from its financing activities in the year
ended March 31, 1999 compared to the generation of $6,033,273 from financing
activities in the year ended March 31, 1998. The largest contribution to the
Company's financing activities in the 1999 fiscal year was from net borrowings
under the Company's financing agreement. 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 in proceeds from
notes payable.
As a result of the above factors, the Company had a net decrease in cash of
$523,019 in fiscal year 1999 compared to a net increase in cash of $471,264 in
fiscal year 1998.
During fiscal 1999, the Company opened six new stores in high traffic
shopping malls for a total cost (excluding inventory) of approximately $3.4
million. The stores are located in Primm (near Las Vegas), Nevada; Gurnee (near
Chicago), Illinois; Auburn Hills (near Detroit), Michigan; Grapevine (near
Dallas), Texas; Thousand Oaks and Orange (both near Los Angeles), California.
The Company had planned to finance the costs of opening those new stores
through a combination of capital lease financing, use of the Company's working
capital, and the sale of additional equity. The Company received approximately
$850,000 in lease financing during fiscal year 1999 and approximately $240,000
in the April through June 1999 period. The Company continues to seek additional
capital lease financing.
<PAGE>
The following transactions entered into over the second half of fiscal year
1999 were equity and debt transactions structured to help the Company with the
cost of the capital expenditures associated with opening the six new stores.
On November 24, 1998, Breaking Waves, Inc. ("BWI"), a wholly-owned
subsidiary of Shopnet.com, Inc. ("Shopnet," formerly known as Hollywood
Productions, Inc.), an affiliate, purchased 1.4 million unregistered shares of
the Company's Common Stock in a private transaction. The president of Shopnet
and BWI is also the chairman of the Company. Shopnet is a publicly traded
company. The shares purchased by BWI represent approximately 25.4% of the total
Common Stock issued and outstanding after the transaction.
The consideration for the Common Stock was $665,000, which represented a
price of $0.475 per share. The price represented an approximate 33% discount
from the then current market price of $.718 reflecting a discount for the
illiquidity of the shares, which do not carry any registration rights. $300,000
of the consideration was in cash and the remaining $365,000 was in product from
BWI, primarily girl's swimsuits. The $365,000 value of the swimsuit inventory
was determined by the Company based on its analysis of the net realizable value
of the inventory received. The Company had previously carried swimsuits from BWI
in its stores on a trial basis.
In November 1998, the Company entered into agreements with ZD Group, L.L.C.
("ZD"), a related party, and Frampton, an affiliate under common control, to
secure additional financing. ZD is a New York trust, the beneficiary of which is
a member of the family of the Company's chairman. Frampton is a British Virgin
Islands company.
Pursuant to the ZD agreement, ZD issued a $700,000 irrevocable standby L/C
in favor of FINOVA. FINOVA then lent a matching $700,000 to the Company in the
form of a term loan. The term loan expires on August 3, 2000 and bears interest
at prime plus one percent. As consideration for its issuance of the L/C, ZD will
receive a one-third profit percentage after application of corporate overhead
beginning April 1, 1999 from three of the Company's stores (Woodfield Mall in
Schaumburg, Illinois scheduled to open in late summer 1999; Auburn Hills,
Michigan; and Gurnee, Illinois).
Under the Frampton agreement, Frampton lent $500,000 and Europe American
Capital Foundation, another affiliate under common control, lent $150,000 in the
form of a convertible, subordinated debenture due December 31, 1999. The
debentures each bear a 5% interest rate and will be convertible into the
Company's Series E Stock at the lenders' option. The conversion price initially
was $0.10 per share. That price was discounted 50% from the then current market
price (November 10, 1998) reflecting a discount for the illiquidity of the
shares, which do not carry any registration rights. Subsequently, in May 1999,
the lenders agreed to amend the conversion price to $0.20 per share, which
equaled the full market price on the date of the original business transaction.
At March 31, 1999, the Company had a line of credit with FINOVA in
connection with a Loan and Security Agreement ("FINOVA Agreement"). The FINOVA
Agreement originally provided 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, 1999 was 7.75%). The FINOVA Agreement matures on August 3,
2000 and can be renewed for one additional year at the lender's option.
In addition to the $700,000 term loan secured by the ZD letter of credit,
the FINOVA Agreement was amended during the 1999 fiscal year to increase the
maximum amount of borrowings available under the line of credit. The maximum
level of borrowings was first increased by $500,000, and later by an additional
$1 million only through December 31, 1998. As of March 31, 1999, the overall
FINOVA Agreement allowed for a maximum level of borrowings of $8.3 million,
including the $700,000 term loan backed by the ZD letter of credit. The Company
had approximately $100,000 available under the FINOVA Agreement at March 31,
1999.
<PAGE>
The FINOVA Agreement is guaranteed by United Textiles & Toys Corp. ("UTTC")
and is secured by substantially all the assets of the Company and $3,700,000 in
letters of credit. Of the $3,700,000 in letters of credit, $2,000,000 is
collateralized by amounts held in a restricted certificate of deposit.
Multimedia Concepts International, Inc., an affiliate under common control, has
provided a $1,000,000 L/C and ZD provided a $700,000 L/C as noted above.
During fiscal year 1999, the Company breached two negative covenants in the
FINOVA Agreement by exceeding maximum levels of capital expenditures and
unsecured and lease financing. FINOVA subsequently waived those defaults.
The Company believes that it will require a significant increase in its
line of credit as a result of its 50% revenue growth over the past fiscal year
and has approached FINOVA about increasing the line of credit. There can be no
assurance that FINOVA (a) will be amenable to such a credit line increase or (b)
will only provide such an increase under terms that Company management finds
reasonable.
In March 1999, the Company borrowed an aggregate of $400,000 from Full Moon
Development, Inc., a corporation not affiliated with the Company, pursuant to
two promissory notes, each in the amount of $200,000. The Company has repaid the
first note, and the second note is due on July 30, 1999.
In the fourth quarter of the year ended March 31, 1999, the Company
borrowed $100,000 from Shopnet under an unsecured note, with interest at 9%. Of
this amount, $25,000 has been repaid to date. The original maturity date has
been verbally extended to an unspecified date. In each of April and May 1999,
the Company borrowed an additional $100,000 under unsecured notes, with interest
at 9%, maturity on August 31, 1999 and September 30, 1999, respectively.
Planned new store openings remain a significant capital commitment of the
Company. The Company has entered into leases to open ten new stores by the end
of calendar year 2000. The Company expects that the costs of building those new
stores net of landlord tenant improvement contributions and of inventory
requirements will be approximately $2.8 million. The Company plans to finance
the costs of opening those new stores through a combination of capital lease
financing, use of the Company's working capital, and the sale of additional
equity.
The first of those stores opened in June in the Venetian Resort and Casino
in Las Vegas, Nevada. The costs of opening that store (excluding inventory) were
approximately $825,000. This store was projected to be the most capital
intensive of all the stores scheduled to be opened this fiscal year.
Electronic commerce represents another area that may result in significant
capital expenditures for the Company in fiscal 2000. In April 1999, The Company
debuted the first of two dedicated electronic commerce websites. This site,
www.ToysWhyPayRetail.com, represents a new trade name for the Company and allows
consumers to purchase, at near wholesale prices, overstocks, special buys, and
overruns on mostly name-brand toys purchased by the Company out of season. The
Company plans to offer approximately 1000 items for sale on the website.
<PAGE>
The second electronic commerce website, www.Playco.com, is currently being
developed to a state-of-the-art standard in conjunction with an Internet
consulting firm. This second site, which will offer collectible and imported
specialty merchandise such as die-cast cars, dolls, plush toys, trains, and
collectible action figures, is expected to open in the fall of 1999. In
conjunction with the website launch, the Company plans to place computer kiosks
in several of its retail locations in order to permit customers to place orders
on the website for goods otherwise not sold in such store.
<PAGE>
In May 1999, pursuant toss.506 of Regulation D, the Company sold 750,000
shares of Series F Preferred Stock, par value $0.01 per share ("Series F
Stock"), at a purchase price of $1.00 per share, through Robb Peck McCooey
Clearing Corporation as placement agent. The Company received $657,500 in net
proceeds from the sale. Each share of Series F Stock is convertible, at the
holder's option, into two fully paid and non-assessable shares of Common Stock,
at any time commencing on the date the registration statement registering the
Series F Stock and Common Stock underlying same is declared effective by the
Securities and Exchange Commission.
The Company has received letters of intent from two investment banking
firms to raise additional equity through the public sale of a minority interest
in the Company's Toys subsidiary. The Company is pursuing those opportunities
and continuing to seek additional lease financing. There can be no assurance
that the Company will be able to obtain sufficient financing to successfully
open the planned new stores. Additionally, as noted above, the Company has
incurred significant capital expenditures over the past twelve months. To date,
the Company has deployed its working capital to cover a significant portion of
these capital expenditures. As a result, the Company is also seeking additional
working capital from the above-mentioned equity offerings. Should the Company be
unable to raise sufficient working capital, it may be unable to purchase product
directly from factories at advantageous pricing, thereby resulting in a negative
impact on gross margins and results of operations.
Year 2000
In 1998, the Company developed a plan to upgrade its existing management
information system ("MIS") and computer hardware and to become year 2000
compliant. The Company has completed the hardware upgrade and has installed a
year 2000 compliant upgrade to its accounting software. The Company expects to
finish the year 2000 compliance work in the September quarter of 1999.
To finance the cost of the new hardware in the computer upgrade project,
the Company entered into a lease in the amount of $82,472 bearing an interest
rate of 10.8%. The total cost of the hardware and software purchased for the
project was approximately $100,000.
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. Management has reviewed its
significant vendors' (i.e., Mattel, Inc. and Hasbro, Inc.) and financing arm's
(FINOVA) recent SEC filings vis-a-vis year 2000 risks and uncertainties and, on
the basis thereof, is confident that the steps the Company has taken to become
year 2000 compliant are sufficient. In continuation of this review, the Company
shall continue to monitor or otherwise obtain confirmation from the aforesaid
entities - and such other entities as management deems appropriate - as to their
respective degrees of preparedness. To date, nothing has come to the attention
of the Company that would lead it to believe that its significant vendors and/or
service providers will not be year 2000 ready.
Year 2000 readiness is a priority of the Company. The Company believes that
it is taking such reasonable and prudent steps as are necessary to mitigate the
risks associated with potential year 2000 difficulties. The effect, if any, of
year 2000 problems on the Company's results of operations if the Company's or
its customers, vendors, or service providers are not fully compliant cannot be
estimated with any degree of certainty. It is nonetheless possible that year
2000 problems could have a material adverse effect in that holiday 1999
purchases may be stunted due to consumer uncertainty and that the overall
business environment may be disrupted in the Company's fourth fiscal quarter.
<PAGE>
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 1999. Same can be attributed to the expansion of its collectible die cast
cars, specialty yo-yo's, Rokenbok and Learning Curve toys, 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 1999, 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 future financial performance will depend upon continued
demand for toys and 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. The Company also competes both through its electronic commerce
operations and through its stores against Internet oriented toy retailers such
as eToys, Inc. 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.
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.
Net Operating Loss Carryforwards
At March 31, 1999, the Company has net operating loss ("NOL") carryforwards
of approximately $9,400,000 for federal purposes and approximately $5,000,000
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 is subject to provisions of the
Internal Revenue Code ss.382 which limits use of NOL 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 purchase of a majority interest in the
Company by American Toys, Inc. 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, 1997 through
1999 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 result
of the May 1999 private offering of Series F Stock.
ITEM 7. FINANCIAL STATEMENTS
See attached Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Company's independent auditor since February 20, 1997 has been Haskell
& White LLP.
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Officers and Directors
The following table sets forth the names, ages, and titles of all directors
and officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Harold Rashbaum 72 Chairman of the Board
Richard Brady 47 Chief Executive Officer, President, and Director
James Frakes 42 Chief Financial Officer, Secretary, and Director
Moses Mika 78 Director
</TABLE>
All directors are elected at an annual meeting of the Company's
shareholders and hold office for a period of one year or until the next annual
meeting of stockholders or until their successors are duly elected and
qualified. Vacancies on the board of directors may be filled by the remaining
directors. Officers are appointed 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 that Mr. Rashbaum is the
father-in-law of Ilan Arbel, Mr. Mika's son.
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.
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. Mr. Brady has been the president of Toys since January 1997 and a
director thereof since May 1998.
Harold Rashbaum has been the chairman of the board of directors since
September 10, 1996. Mr. Rashbaum was a management consultant to the Company from
July 1995 to September 10, 1996. In May 1998, he was elected as a director of
Toys. Mr. Rashbaum has been the president, chief executive officer, and a
director of Shopnet since January 1997. From May 1996 to January 1997, Mr.
Rashbaum served as secretary and treasurer of Shopnet. Since May 1999, he has
also been the president and a director of Hollywood Productions, Inc.
("Hollywood," a wholly-owned subsidiary of Shopnet) and since September 1996, he
has been the president, secretary, and sole director of BWI (also a wholly-owned
subsidiary of Shopnet). Since February 1996, Mr. Rashbaum has been the president
and a director of H.B.R. Consultant Sales Corp. ("HBR"), of which his wife is
the sole shareholder. 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.
<PAGE>
James Frakes was appointed chief financial officer and secretary of the
Company in July 1997. In August 1997, he was elected as a director of the
Company. In January 1998, Mr. Frakes was appointed secretary and chief financial
officer of Toys. He was elected as a director thereof in May 1998. In January
1998, Mr. Frakes was elected as a director of Shopnet. 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.
Moses Mika was appointed as a director of the Company in March 1998 and was
elected a director of Toys in May 1998. Mr. Mika has been retired since 1989.
Significant Employees of the Company
Howard Labow has been the vice president of advertising of the Company (a
non-executive officer position) since June 1998. He has been employed by the
Company since 1977.
Donna Hogan has been the vice president of merchandising of the Company (a
non-executive officer position) since June 1998. She has been employed by the
Company since 1983.
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.
No person ("a Reporting Person") who during the fiscal year ended March 31,
1999 was a director, officer, or beneficial owner of more than ten percent of
the Company's Common Stock or Series E Stock [which are the only classes of
equity securities of the Company registered under ss.12 of the Securities
Exchange Act of 1934], failed to file on a timely basis reports required by
ss.16 of the Act during the most recent fiscal year except as follows: (i)
Richard Brady failed to file a Form 4, (ii) Moses Mika failed to file Forms 3
and 5, (iii) Harold Rashbaum failed to file a Form 4, (iv) EACC failed to file
Forms 3, 4, and 5, and (v) EACF failed to file Forms 3 and 5. The foregoing is
based solely upon a review by the Company of (i) Forms 3 and 4 during the most
recent fiscal year as furnished to the Company under Rule 16a-3(e) under the
Act, (ii) Forms 5 and amendments thereto furnished to the Company with respect
to its most recent fiscal year, and (iii) any representation received by the
Company from any reporting person that no Form 5 is required, except as
described herein.
<PAGE>
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, 1999, 1998, and 1997 to each of
the named executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
($)
Other Annual Restricted Securities
Year Salary Bonus Compen- Stock Underlying All
($) ($)(1) sation Award Options/ LTIP Other
SARs Payouts ($) Compen
($) -sation(#)
Name and Principal
Position
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard Brady .... 1999 124,500 -- 8,579 -- -- -- --
President, CEO,
and Director
1998 120,000 -- 8,579 25,000(3) -- -- --
1997 108,000 -- 6,179 -- -- -- --
</TABLE>
----------------------
(1) No bonuses were paid during the periods herein stated.
(2) Includes an automobile allowance of $7,200 for each of 1999 and 1998
and $4,800 for 1997, and the payment of life insurance premiums of $1,379 for
each of 1999, 1998 , and 1997.
(3) Mr. Brady received 25,000 shares of Series E Stock as a bonus in March
1998: these shares vested equally over a 12 month period commencing in April
1998 and were returned to the Company by Mr. Brady in April 1999.
During fiscal 1999, Harold Rashbaum, the Company's chairman of the board,
received an aggregate of $33,000 in compensation from the Company in
consideration of the consulting services he provided therefor. In March 1998,
the Company issued 25,000 shares of Series E Stock, subject to a vesting
schedule, to each of Mr. Brady and Mr. Rashbaum: these shares were returned to
the Company by Messrs. Brady and Rashbaum in early April 1999. Mr. Rashbaum
devotes a significant portion of his time to the Company. Among other things, he
reviews potential store sites, assists in strategic planning, reviews all cash
outflows, and otherwise works closely with management in further developing and
implementing the Company's ongoing business strategy.
<PAGE>
1994 Stock Option Plan
In 1994, the Company adopted a Stock Option Plan (the "SOP"). The board
believes that SOP is desirable to attract and retain executives and other key
employees of outstanding ability. Under the SOP, options to purchase an
aggregate of not more than 50,000 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 granted to James
Frakes, chief financial officer and secretary, pursuant to his hire, an option
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 adjust 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 SOP and is
generally empowered to interpret the SOP, 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 SOP, 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 SOP 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 SOP 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 SOP,
provided, however, that certain material modifications affecting the SOP must be
approved by the shareholders, and any change in the SOP that may adversely
affect an Optionee's rights under an option previously granted under the SOP
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 "401(k) ESOP Plan") which covers
substantially all employees of the Company. The 401(k) 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 401(k) ESOP Plan allows
contributions only by the Company: these can be made annually at the discretion
of the Company's board of directors. The 401(k) 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 Plan through payroll deductions. The
Company does not intend to match contributions to the 401(k). Contributions to
the 401(k) 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. On January 26, 1995, Messrs. Brady and Tom Davidson
(a founder of the Company and the Company's former president) and the Company's
then parent company contributed an aggregate of 15,333 shares of the Company's
Common Stock to the 401(k) ESOP Plan. In August 1998, pursuant to the ESOP
portion of the plan, the Company issued 5,673 shares of Common Stock to certain
former employees.
<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 July 12, 1999, 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:
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Common Stock
of Beneficial Owner Beneficially Owned1 Beneficially Owned 2,3
- ------------------------------------------------------------------------------------------------------------------------------------
Harold Rashbaum 4
<S> <C> <C>
c/o Play Co. Toys & Entertainment Corp. -- --
550 Rancheros Drive
San Marcos, CA 92069
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Brady
c/o Play Co. Toys & Entertainment Corp. 25,587 *
550 Rancheros Drive
San Marcos, CA 92069
- ------------------------------------------------------------------------------------------------------------------------------------
James B. Frakes 5
c/o Play Co. Toys & Entertainment Corp. 20,000 --
550 Rancheros Drive
San Marcos, CA 92069
- ------------------------------------------------------------------------------------------------------------------------------------
Moses Mika
c/o Play Co. Toys & Entertainment Corp. -- --
550 Rancheros Drive
San Marcos, CA 92069
- ------------------------------------------------------------------------------------------------------------------------------------
United Textiles & Toys Corp. 6
1410 Broadway, Suite 1602 2,489,910 45.2%
New York, NY 10018
- ------------------------------------------------------------------------------------------------------------------------------------
Breaking Waves, Inc. 4
112 West 34th Street 1,400,000 25.4%
New York, New York 10120
- ------------------------------------------------------------------------------------------------------------------------------------
Multimedia Concepts International, Inc.7
1410 Broadway, Suite 1602 -- --
New York, NY 10018
- ------------------------------------------------------------------------------------------------------------------------------------
ABC Fund, Ltd.8
Riva Caccia -- --
Lugano, Switzerland CH-900
- ------------------------------------------------------------------------------------------------------------------------------------
Europe American Capital Foundation ("EACF")9
Via Cantonale -- --
Lugano, Switzerland CH-900
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-- --
Volcano Trading Limited10
Via Cantonale
Lugano, Switzerland CH-900
- ------------------------------------------------------------------------------------------------------------------------------------
Officers and Directors as a Group 35,587 *
(4 persons)4,5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 35,303,418 shares of Common Stock issuable upon the
conversion (any time two years from issuance) of 5,883,903 shares of Series E
Stock outstanding.
(4) Mr. Rashbaum, the Company's chairman of the board, is also the
president and the sole director of BWI which is a wholly-owned subsidiary of
Shopnet. Mr. Rashbaum is also the president and a director of Shopnet.
(5) Represents those shares underlying an option which have vested and/or
which shall vest within 60 days. The final 10,000 shares underlying such option
shall vest on July 1, 2000.
(6) Does not include 1,950,000 shares of Common Stock issuable upon the
conversion (any time two years from issuance) of 325,000 shares of Series E
Stock. The president of UTTC, a publicly traded company which is the Company's
controlling shareholder, is Ilan Arbel who is also the president, chief
executive officer, and a director of MMCI, a publicly traded company which is
the parent company of UTTC (owning approximately 78.5% of same). MMCI is owned
approximately 62.2% by U.S. Stores Corp., a company of which Mr. Arbel is the
president and a director. U.S. Stores Corp. is owned 100% by ATPLC, a British
corporation. By virtue of its ownership of UTTC, MMCI may be deemed a beneficial
holder of the Company's Common Stock held by UTTC.
(7) Does not include 4,818,420 shares of Common Stock issuable upon the
conversion (any time two years from issuance) of 803,070 shares of Series E
Stock.
(8) Does not include 9,199,998 shares of Common Stock issuable upon the
conversion (any time two years from issuance) of 1,533,333 shares of Series E
Stock.
(9) Does not include 11,535,000 shares of Common Stock issuable upon the
conversion (any time two years from issuance) of 1,922,500 shares of Series E
Stock.
<PAGE>
(10) Does not include 1,968,000 shares of Common Stock issuable upon
conversion of 328,000 shares of Series E Stock underlying Series E Warrants.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Shopnet.com, Inc.
In the fourth quarter of the year ended March 31, 1999, the Company
borrowed $100,000 from Shopnet under an unsecured note, with interest at 9%. Of
this amount, $50,000 has been repaid to date. The original maturity date has
been extended to an unspecified date. In each of April and May 1999, the Company
borrowed an additional $100,000 under unsecured notes, with interest at 9% and
maturity on August 31, 1999 and September 30, 1999, respectively.
Breaking Waves, Inc.
On November 24, 1998, pursuant to a sales agreement entered into by and
between the Company and BWI, BWI purchased 1.4 million unregistered shares of
the Company's Common Stock in a private transaction. The shares purchased by BWI
represent approximately 25.4% of the total Common Stock issued and outstanding
after the transaction. The consideration for the stock was $665,000, which
represents a price of $0.475 per share. The price represents an approximate 33%
discount from the then current market price of $0.718 reflecting a discount for
the illiquidity of the shares, which do not carry any registration rights.
$300,000 of the consideration was in cash and the remaining $365,000 was in
product from BWI, primarily girl's swimsuits. The $365,000 value of the swimsuit
inventory was determined by the Company based on its analysis of the net
realizable value of the inventory received. The Company had previously carried
swimsuits from BWI in its stores on a trial basis.
Pursuant to the sales agreement (which has a term of one year and
automatically extends for one year terms unless terminated by either of the
parties), the Company agreed to purchase a minimum of 250 pieces of merchandise
for each of its retail locations and to provide advertising promotional
materials and ads of the merchandise in all of its brochures, advertisements,
catalogs, and all other promotional materials, merchandising programs, and sales
promotion methods.
On July 15, 1998, the Company borrowed $300,000 from BWI and issued an
unsecured promissory note (at 9% interest per annum) to same in exchange
therefor. The note called for five monthly installments of principal and
interest commencing August 15, 1998 and ending December 30, 1998 and has been
repaid in full.
On March 1, 1998, the Company borrowed $250,000 from BWI and issued an
unsecured promissory note (at 15% interest per annum) to same in exchange
therefor. The note called for ten monthly installments of principal and interest
commencing on March 31, 1998 and ending on December 31, 1998 and has been repaid
in full.
ZD Group, L.L.C.
In November 1998, the Company entered into an agreement with ZD to secure
additional financing. ZD is a New York limited liability company, the
beneficiary of which is a member of the family of the Company's chairman.
Pursuant to the ZD agreement, ZD issued a $700,000 irrevocable standby L/C in
favor of FINOVA, the Company's working capital lender (which is not an affiliate
of the Company). FINOVA then lent a matching $700,000 to the Company in the form
of a term loan, pursuant to a Fourth Amendment to Loan and Security Agreement
executed on February 11, 1999 by and between the Company and FINOVA. The term
loan from FINOVA expires on August 3, 2000 and bears interest at prime plus one
percent. As consideration for its issuance of the L/C, ZD will receive a profit
percentage after application of corporate overhead from three of the Company's
stores.
<PAGE>
Frampton Industries, Ltd.
In January 1999, the Company and Frampton Industries, Ltd. ("Frampton"), an
affiliated British Virgin Islands company, under common control, executed a
letter agreement pursuant to which Frampton has agreed to act as the exclusive
placement agent and financial advisor for the Company in connection with a
contemplated proposed offering of convertible debentures. The agreement is for a
term of six months (with a potential two month extension at Frampton's option)
and provides that Frampton shall be provided an investment banking fee of 8% of
the face amount of each debenture funded.
In November 1998, the Company entered into an agreement with Frampton to
secure additional financing. Pursuant to the agreement, Frampton loaned $500,000
in the form of a convertible, subordinated debenture due December 31, 1999. The
debenture bears a 5% interest rate and initially was convertible into Series E
Stock at a price of $0.10 per share at Frampton's option. This price represents
a 50% discount from the then current (November 10, 1998) market price reflecting
a discount for the illiquidity of the shares, which do not carry any
registration rights. In May 1999, Frampton agreed to amend the conversion price
to $0.20 per share, which represents the full market price on the date of the
original business transaction.
Europe American Capital Foundation
In November 1998, the Company entered into an agreement with EACF, an
entity which beneficially controls the Company, to secure additional financing.
Pursuant to the agreement, EACF loaned $150,000 in the form of a convertible,
subordinated debenture due December 31, 1999. The debenture bears a 5% interest
rate and initially was convertible into Series E Stock at a price of $0.10 per
share at EACF's option. This price represents a 50% discount from the then
current (November 10, 1998) market price reflecting a discount for the
illiquidity of the shares, which do not carry any registration rights. In May
1999, EACF agreed to amend the conversion price to $0.20 per share, which
represents the full market price on the date of the original business
transaction.
United Textiles & Toys Corp.
The Company's parent, UTTC, has guaranteed the Company's loan from FINOVA.
The president of UTTC, Ilan Arbel, in a letter dated May 15, 1998, has
represented, generally, his intent and ability to provide working capital to the
Company, should same be necessary, through September 30, 1999.
On July 27, 1998, the Company sold 100,000 shares of Series E Stock to
UTTC, the Company's principal shareholder, for $100,000. In determining the
purchase price paid by UTTC, the trading price of the Company's Series E Stock -
along with the applicable discounts for illiquidity, lack of marketability, and
lack of registration rights - were considered. The trading price of
approximately $2.00 per share was discounted by 50% for the above reasons.
ABC Fund, Ltd.
In June 1998, the Company and ABC, a Belize corporation and an affiliate of
the Company under common control, the holder of a 5% convertible secured
subordinated debenture - dated January 21, 1998 and due August 15, 2000 (the
"Debenture") - offered to amend the terms of the Debenture to enable the
conversion of the principal amount and accrued interest thereon, into shares of
Series E Stock, at a conversion price of $1.00 per share. Management agreed to
convert the Debenture since the conversion of the debt into equity would result
in a strengthened equity position which management believed would provide
confidence to the Company's working capital lender, FINOVA, and trade creditors.
<PAGE>
Further, converting the debt to equity eliminated on-going interest expense
requirements as well as the cash flow required to repay the Debenture.
Simultaneously with its offer to amend the Debenture, ABC elected to convert
same as of June 30, 1998, whereby, $1.5 million in principal amount and $33,333
in accrued interest were converted into 1,533,333 shares of Series E Stock. ABC
did not receive any registration rights regarding the shares. Simultaneously,
ABC terminated the Subordinated Security Agreement between the parties and the
Intercreditor and Subordination Agreement, dated January 21, 1998, by and
between ABC and FINOVA. ABC, or its assigns, retained a right included in the
Debenture, to purchase up to an aggregate of 25% of the outstanding shares of
common stock of Toys. The purchase price per share shall equal the net book
value per share of Toys' common stock as of the date of exercise using generally
accepted accounting principals. The calculation of the number of shares subject
to this right and the purchase price per share shall be as of the date that the
Company receives notification that the right is being exercised. This right
shall extend until August 15, 2000 and shall automatically extend thereafter
until August 15, 2003 unless earlier terminated by ABC or its assignee.
Officers and Directors
The Company leases 40,000 square feet of combined office and warehouse
space (approximately 3,000 square feet is office space, and the remaining 37,000
square feet is warehouse space), at an approximate annual cost of $247,000, from
a partnership of which one of the partners is Richard Brady, the president and a
director of the Company. The lease expires in April 2000, and the Company
believes that it is on terms no more or less favorable than terms it might
otherwise have negotiated with an unaffiliated party.
In early April 1999, each of Messrs. Brady and Rashbaum returned his 25,000
shares of Series E Stock which were issued to same by the Company in March 1998
as bonuses in recognition of their efforts to further the Company's turnaround
toward profitability.
During fiscal 1999, the Company remitted an aggregate of $33,000 to Mr.
Rashbaum in consideration of the consulting services he provided therefor. Mr.
Rashbaum received $2,500 per month for the first nine months of the fiscal year,
and commencing January 1, 1999, his consulting fee increased to $3,500 per
month. Mr. Rashbaum devotes a significant portion of his time to the Company.
Among other things, he reviews potential store sites, assists in strategic
planning, reviews all cash outflows, and otherwise works closely with management
in further developing and implementing the Company's ongoing business strategy.
Pursuant to the Company's SOP, in July 1997, the Company granted to James
Frakes (chief financial officer and secretary), pursuant to his hire, an option
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 July 1998, 1999, and
2000. On June 17, 1998, the board elected to adjust the exercise price of the
option to $1.15, representing 110% of the closing price of the Common Stock on
said date. No portion of the option has been exercised.
Multimedia Concepts International, Inc.
In January 1998, in accordance with certain financing provided by FINOVA,
the Company received $3.0 million in standby L/Cs. Of same, $2 million was
established by the Company and was secured by a $2 million 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. The remaining $1 million was provided by
MMCI, an affiliate of the Company by virtue of its 78.5% ownership of UTTC, the
Company's parent.
<PAGE>
Europe American Capital Corporation
From April 1996 to June 1997, EACC, an entity of which Ilan Arbel and/or
his relatives is/are officer(s) and/or director(s), 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 (i) to acquire the assets of Toys (a
three store chain) in January 1997, (ii) to finance the openings of the Santa
Clarita, Arizona Mills, Redondo Beach, Ontario Mills, and Clairemont Mesa
stores, (iii) to redesign four store locations, and (iv) to support the
Company's operations during the Company's business turnaround.
Toys International Inc. Consulting Agreement
In January 1997, the Company entered into a consulting agreement with Gayle
Hoepner, a selling stockholder and former chief executive officer of Toys. Mr.
Hoepner was not an affiliate of the Company. 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. Pursuant to the consulting agreement, Mr. Hoepner,
among other things, (i) advised the Company on specialty toys purchasing, (ii)
introduced management to his contacts in the specialty toy industry and
accompanied management to the Nurnberg, Germany toy show, and (iii) advised
management on potential store sites. The Company believes that this agreement
was on terms no less favorable than terms it might otherwise have negotiated
with any other unrelated third party.
American Toys, Inc. Spin-Off
On January 30, 1996, pursuant to the requirements of the Company's loan
agreement with Congress, American Toys, Inc. (the Company's former parent)
converted all $1.4 million of debt owed by the Company into equity. Congress is
not affiliated with the Company. 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 385,676 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.
<PAGE>
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>
Table of Contents F-1
Report of Independent Certified Public Accountants F-2
Balance Sheets F-3
Statements of Operations and Comprehensive Net Income (Loss) F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-9
</TABLE>
(b) During its last fiscal 1999 quarter, the Company filed no Forms 8-K.
(c) All exhibits, except (i) those designated with an asterisk (*) which
are filed herewith or (ii) those designated with a double asterisk (**) which
shall be filed by amendment hereto, 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) with the
Company's Registration Statement on Form SB-2, Registration No. 333-32051; or
(iii) as indicated 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.
<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.
3.2(b)* Amendment to Certificate of Incorporation of the Company, filed May 9, 1996
3.2(c)* Amendment to Certificate of Incorporation of the Company, filed August 13, 1996
3.2(d)* Amendment to Certificate of Incorporation of the Company, filed March 24, 1997
3.2(e)* Amendment to Certificate of Incorporation of the Company, filed May 29, 1998
3.2(f)* Amendment to Certificate of Incorporation of the Company, filed May 12, 1999
3.2(g)* Amendment to Certificate of Incorporation of the Company, filed May 25, 1999
3.3 By-Laws of the Company. See (i) above.
4.1 Specimen Common Stock Certificate See (i) above).
4.2 Specimen Series E Redeemable Purchase 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.
10.26 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.
10.34 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.
<PAGE>
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.
10.75 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, 1996 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/A-1 for the period ended September 30, 1995 filed with the Commission).
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 10.87 of the Company's
10-QSB/A-1 for the period ended September 30, 1997).
10.88 Lease Agreement for Store - Redondo Beach (incorporated by reference herein to exhibit 10.88 of the Company's
10-QSB/A-1 for the period ended September 30, 1997).
10.89 Lease Agreement for Store - Arizona Mills (incorporated by reference herein to exhibit 10.89 of the Company's
10-QSB/A-1 for the period ended September 30, 1997).
10.90 FINOVA Loan and Security Agreement (incorporated by reference herein to exhibit 10.90 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 10.91 of the Company's
10-QSB for the period ended Dec. 31, 1997).
10.92 Lease Agreement for Store - City Mills (incorporated by reference herein to exhibit 10.92 of the Company's
10-KSB for the fiscal year ended March 31, 1998).
10.93 Lease Agreement for Store - Fashion Outlet of Las Vegas (incorporated by reference herein to exhibit 10.93 of
the Company's 10-KSB for the fiscal year ended March 31, 1998).
10.93(a)* Fixture Financing Agreements
10.93(b) Letter from Ilan Arbel, dated May 15, 1998, re: funding of Company's operations (incorporated by reference
herein to exhibit 10.93(b) of the Company's 10-KSB/A-2 for the fiscal year ended March 31, 1998).
10.94 Lease Agreement for Store-Concord Mills (Play Co. Toys) (incorporated by reference herein to exhibit 10.94 of
the Company's 10-QSB for the period ended June 30, 1998).
10.95 Lease Agreement for Store-Katy Mills (Play Co. Toys) (incorporated by reference herein to exhibit 10.95 of
the Company's 10-QSB for the period ended June 30, 1998).
10.96 Lease Agreement for Store-Concord Mills (Toy Co.) (incorporated by reference herein to exhibit 10.96 of the
Company's 10-QSB for the period ended June 30, 1998).
10.97 Lease Agreement for Store-Katy Mills (Toy Co.) (incorporated by reference herein to exhibit 10.97 of the
Company's 10-QSB for the period ended June 30, 1998).
10.98 Lease Agreement for Store-Ontario Mills (Toy Co.) (incorporated by reference herein to exhibit 10.98 of the
Company's 10-QSB for the period ended June 30, 1998).
10.99 Amendment No. 1 to Finova Loan Agreement (incorporated by reference herein to exhibit 10.99 of the Company's
10-QSB for the period ended June 30, 1998).
10.100 Amendment No. 1 to Lease Agreement for Store-Rancho Cucamonga (Play Co. Toys) (incorporated by reference
herein to exhibit 10.100 of the Company's 10-QSB for the period ended June 30, 1998).
10.101 Company & Corporate Relations Group, Inc. Lead Generation/Corporate
Relations Agreement, dated July 22, 1998 (incorporated by reference herein to
exhibit 10.101 of the Company's 10-QSB for the period ended June 30, 1998).
10.103 Promissory Note with Amir Overseas Capital Corp. (dated September 18,
1998) (incorporated by reference herein to exhibit 10.103 of the Company's
10-QSB for the period ended September 30, 1998).
10.104 Promissory Note with Amir Overseas Capital Corp. (dated November 9, 1998) (incorporated by reference herein to
exhibit 10.104 of the Company's 10-QSB for the period ended September 30, 1998).
10.105 Lease Agreement for Store - Dallas (incorporated by reference herein to exhibit 10.105 of the Company's 10-QSB
/A-1 for the period ended September 30, 1998).
10.106 Lease Agreement for Store - Thousand Oaks (incorporated by reference herein to exhibit 10.106 of the Company's
10-QSB/A-1 for the period ended September 30, 1998).
10.107 Lease Agreement for Store - Detroit (incorporated by reference herein to exhibit 10.107 of the Company's 10-QSB
/A-1 for the period ended September 30, 1998).
10.108 Lease Agreement for Store - Chicago (incorporated by reference herein to exhibit 10.108 of the Company's
10-QSB/A-1 for the period ended September 30, 1998).
10.109 Lease Agreement for Store - Orange County (incorporated by reference herein to exhibit 10.109 of the Company's
10-QSB/A-1 for the period ended September 30, 1998).
10.110 Phoenix Leasing Incorporated Loan and Security Agreement and Ancillary Documents (October 1998) (incorporated
by reference herein to exhibit 10.109 of the Company's 10-QSB/A-1 for the period ended September 30, 1998).
10.111 Agreement by and between the Company and ZD Group, L.L.C., dated November 11, 1998 (incorporated by reference
herein to exhibit 10.111 of the Company's 10-QSB for the period ended December 31, 1998).
10.112 Intercreditor and Subordination Agreement by and between ZD Group, L.L.C. and FINOVA Capital Corporation, dated
February 11, 1999 (incorporated by reference herein to exhibit 10.112 of the Company's 10-QSB for the period
ended December 31, 1998).
10.113 5% Convertible Secured Subordinated Debenture in favor of Frampton Industries, Ltd., dated November 11, 1998
(incorporated by reference herein to exhibit 10.113 of the Company's 10-QSB for the period ended December 31,
1998).
10.114 Subordinated Security Agreement by and between the Company and Frampton Industries, Ltd., dated November 11,
1998 (incorporated by reference herein to exhibit 10.114 of the Company's 10-QSB for the period ended December
31, 1998).
10.115 Intercreditor and Subordination Agreement by and between Frampton Industries, Ltd. and FINOVA Capital
Corporation, dated February 11, 1999 (incorporated by reference herein to exhibit 10.115 of the Company's 10-
QSB for the period ended December 31, 1998).
10.115(a) Third Amendment to Loan and Security Agreement by and between the Company and FINOVA Capital Corporation,
dated December 1998 (incorporated by reference herein to exhibit 10.115(a) of the Company's 10-QSB/A-1 for the
period ended December 31, 1998).
10.116 Fourth (initially filed as "Third") Amendment to Loan and Security Agreement by and between the Company and
FINOVA Capital Corporation, dated February 11, 1999 (later renamed "Fourth" Amendment) (incorporated by
reference herein to exhibit 10.116 of the Company's 10-QSB for the period ended December 31, 1998).
10.117 Letter of Intent by and between the Company and Frampton Industries, Inc., dated January 4, 1999 (incorporated
by reference herein to exhibit 10.117 of the Company's 10-QSB for the period ended December 31, 1998).
<PAGE>
10.118 Fifth Amendment to Loan and Security Agreement by and between the Company and FINOVA Capital Corporation, dated
March 1999 (incorporated by reference herein to exhibit 10.118 of the Company's 10-QSB/A-1 for the period ended
December 31, 1998).
10.119 Typhoon Capital Consultants, LLC agreement dated February 1, 1999 (incorporated by reference herein to exhibit
10.118 of the Company's 10-QSB/A-1 for the period ended December 31, 1998).
10.120* 5% Convertible Secured Subordinated Debenture in favor of Europe American Capital Foundation, dated November 11
, 1998.
10.121* Amendment to Lease Agreement - Tutti Animali.
10.122* Lease Agreement for Store - Aladdin.
10.123* Lease Agreement for Store - Pier 39.
10.124* Lease Agreement for Store - Opry Mills.
10.125* Lease Agreement for Store - Mission Viejo.
10.126* Fixture Financing Agreement with Premier Capital Corp., dated October 15, 1998.
10.127* Lease Agreement for Store - Venetian.
10.128* Lease Agreement for Store - Woodfield Mall.
10.129* Amendment to Lease Agreement - Rancho Cucamonga.
10.130* Promissory Notes - Full Moon Development, Inc.
21.01* Subsidiaries.
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 13th day of July 1999.
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 7/13/99
Harold Rashbaum Board of Directors Date
/s/ Richard Brady Chief Executive Officer, 7/13/99
Richard Brady President, and Director Date
/s/ James Frakes Chief Financial Officer, 7/13/99
James Frakes Secretary, and Director Date
/s/ Moses Mika Director 7/13/99
Moses Mika Date
</TABLE>
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Table of Contents
March 31, 1999 and 1998
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance Sheets F-3
Statements of Operations and Comprehensive Net Income (Loss) F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-9
</TABLE>
F-1
<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, 1999 and 1998 and the related statements of operations and comprehensive net
income (loss), stockholders' equity, and cash flows for each of the two years in
the period ended March 31, 1999. 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, 1999 and 1998, and the results of its
operations and its cash flows for each of the two years in the period ended
March 31, 1999 in conformity with generally accepted accounting principles.
HASKELL & WHITE LLP
Newport Beach, California
June 24, 1999
F-2
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
<TABLE>
<CAPTION>
Balance Sheets
ASSETS (Note 4)
March 31,
1999 1998
Current
<S> <C> <C>
Cash ............................................. $ 125,967 $ 648,986
Restricted certificates of deposit (Notes 2 and 4) 350,000 250,000
Accounts receivable .............................. 98,276 78,594
Merchandise inventories .......................... 11,506,284 7,872,804
Other current assets ............................. 1,310,263 183,928
----------- -----------
Total current assets ................ 13,390,790 9,034,312
Property and equipment, net of accumulated
depreciation and amortization of $4,058,603 and
$3,414,235, respectively (Note 3) ................ 5,348,175 2,782,386
Restricted certificate of deposit (Notes 2 and 4) ..... 2,000,000 2,000,000
Deposits and other assets (Note 4) .................... 411,427 323,189
----------- -----------
$21,150,392 $14,139,887
=========== ===========
</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
Restated
1999 (Note 11)
Current
<S> <C> <C>
Accounts payable $ 5,611,442 $ 3,505,230
Accrued expenses and other liabilities 595,008 726,601
Current portion of capital lease obligations (Note 5) 227,197 -
Current portion of notes payable (Note 6) 1,125,000 350,000
--------------- ----------------
Total current liabilities 7,558,647 4,581,831
Borrowings under financing agreement (Note 4) 7,814,666 5,445,198
Capital lease obligations, net of current portion (Note 5) 585,681 -
Notes payable, net of current portion (Note 6) - 1,500,000
Deferred rent liability (Note 9) 126,769 110,351
--------------- ----------------
Total liabilities 16,085,763 11,637,380
--------------- ----------------
Commitments and contingencies (Notes 2, 4, 5, 6, 7, 9, 10 and 13)
Stockholders' equity (Note 11)
Series E convertible preferred stock, $1 par value,
10,000,000 shares authorized; 5,833,903 and 4,200,570
shares outstanding, respectively, full liquidation value
of $5,833,903 and $4,200,570, net of unamortized discount
of $1,842,252 and $1,916,644 for beneficial conversion feature (Note 11) 5,682,101 3,974,376
Series F convertible preferred stock, $.01 par value,
5,500,000 shares authorized, none outstanding - -
Common stock, $.01 par value, 51,000,000 shares authorized;
5,503,519 and 4,103,519 shares outstanding, respectively 55,035 41,035
Additional paid-in capital 15,335,172 12,927,918
Accumulated deficit (16,007,679) (14,440,822)
--------------- ----------------
Total stockholders' equity 5,064,629 2,502,507
--------------- ----------------
$ 21,150,392 $ 14,139,887
=============== ================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
<TABLE>
<CAPTION>
Statements of Operations and Comprehensive Net Income (Loss)
Years Ended March 31,
1998
Restated
1999 (Note 11)
<S> <C> <C>
Net sales ............................................... $ 34,371,230 $ 22,568,527
Cost of sales ........................................... 19,590,784 13,689,599
------------ ------------
Gross profit .......................... 14,780,446 8,878,928
------------ ------------
Operating expenses
Operating expenses (Notes 9 and 10) ................ 12,658,376 8,864,607
Litigation related expenses (Note 7) ............... 27,659 583,541
Depreciation and amortization ...................... 986,342 671,282
------------ ------------
Total operating expenses .............. 13,672,377 10,119,430
------------ ------------
Operating income (loss) ................................. 1,108,069 (1,240,502)
------------ ------------
Interest expense (Note 4)
Interest and finance charges ....................... 796,202 525,323
Amortization of debt issuance costs ................ 168,849 288,645
------------ ------------
Total interest expense ................ 965,051 813,968
------------ ------------
Net income (loss) before income taxes ................... 143,018 (2,054,470)
Provision for income taxes (Note 8) ..................... 2,150 --
------------ ------------
Net income (loss) ....................................... 140,868 (2,054,470)
Other items of comprehensive income (loss) .............. -- --
------------ ------------
Comprehensive net income (loss) ......................... $ 140,868 $ (2,054,470)
============ ============
Calculation of basic and diluted income (loss) per share:
Net income (loss) .................................. $ 140,868 $ (2,054,470)
Effects of non-cash dividends on convertible
preferred stock (Note 11) ....................... (1,707,725) (1,473,806)
------------ ------------
Net income (loss) applicable to common shares ........... $ (1,566,857) $ (3,528,276)
============ ============
Basic and diluted income (loss) per common share
and share equivalents .............................. $ (.34) $ (.86)
============ ============
Weighted average number of common shares and
share equivalents outstanding ...................... 4,590,642 4,098,971
============ ============
</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' Equity
Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Preferred Stock Additional Total
Series E Common Stock Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1997........2,500,570 $ 2,500,570 4,083,519 $ 40,835 $9,374,177 $(10,912,546) $ 1,003,036
Issuance of Common
Stock for cash ...... -- -- 20,000 200 300 -- 500
Issuance of Series E
Preferred Stock for cash .... 950,000 -- -- -- 1,200,000 -- 1,200,000
Issuance of Series E warrants
for cash ................... -- -- -- -- 50,000 -- 50,000
Issuance of Series E Preferred
Stock and warrants for cash,
net of offering expenses . 750,000 -- -- -- 2,303,441 -- 2,303,441
Non-cash dividend to amortize
discount on Series E
(Note 11) ..... -- 1,473,806 -- -- -- (1,473,806) --
Net loss for the year ....... -- -- -- -- -- (2,054,470) (2,054,470)
--------- ------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1998 ......4,200,570 3,974,376 4,103,519 41,035 12,927,918 (14,440,822) 2,502,507
Conversion of debt and accrued
interest to Series E
Preferred Stock1,533,333 -- -- -- 1,533,333 -- 1,533,333
Issuance of Series E
Preferred Stock for cash ... 100,000 -- -- -- 100,000 -- 100,000
Issuance of Series E Preferred
Stock and options to
consultants ............. -- -- -- -- 78,750 -- 78,750
Issuance of Common Stock
for cash and inventories -- -- 1,400,000 14,000 651,000 -- 665,000
Non-cash dividend to amortize
discount on Series E (Note 11) -- 1,707,725 -- -- -- (1,707,725) --
Issuance of stock options
to consultants -- -- -- -- 44,000 -- 44,000
Miscellaneous adjustments .... -- -- -- -- 171 -- 171
Net income for the year ...... -- -- -- -- -- 140,868 140,868
-------- ------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1999 ......5,833,903 $ 5,682,101 5,503,519 $ 55,035 $15,335,172 $(16,007,679) $ 5,064,629
========= ============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-
<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,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) .................................... $ 140,868 $(2,054,470)
Adjustments to reconcile net income (loss) to net cash
used for operating activities:
Depreciation and amortization .................... 983,459 671,282
Loss on abandonment of assets .................... -- 45,255
Amortization of debt issuance costs .............. 109,977 196,849
Deferred rent .................................... 16,418 (16,574)
Amortization of stock options .................... 122,921 --
Increase (decrease) from changes in:
Accounts receivable .............................. (19,682) (18,388)
Merchandise inventories .......................... (3,268,480) (1,779,874)
Other current assets ............................. (1,236,312) 63,385
Deposits and other assets ........................ (88,238) (195,241)
Accounts payable ................................. 2,106,212 381,379
Accrued expenses and other liabilities ........... (98,260) 417,661
----------- -----------
Cash used for operating activities ...... (1,231,117) (2,288,736)
----------- -----------
Cash flows from investing activities:
Purchase of restricted certificates of deposit ....... (100,000) (2,250,000)
Purchases of property and equipment .................. (2,699,819) (1,023,273)
----------- -----------
Cash used for investing activities ...... (2,799,819) (3,273,273)
----------- -----------
</TABLE>
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Statements of Cash Flows (Note 12) (continued)
<TABLE>
<CAPTION>
Years Ended March 31,
1999 1998
Cash flows from financing activities:
<S> <C> <C>
Change in bank overdraft ......................... $ -- $ (135,325)
Borrowings under financing agreements, net ....... 43,239,568 33,560,443
Repayments under financing agreements ............ (40,870,100) (32,554,120)
Proceeds from notes payable ...................... 2,700,000 1,750,000
Repayment of notes payable ....................... (1,925,000) (141,666)
Repayments under capital leases .................. (36,551) --
Proceeds from issuance of common stock ........... 14,000 500
Proceeds from issuance of preferred stock ........ 386,000 3,390,450
Proceeds from issuance of preferred stock warrants -- 162,991
------------ ------------
Cash provided by financing activities 3,507,917 6,033,273
------------ ------------
Net (decrease) increase in cash ....................... (523,019) 471,264
Cash, beginning of year ............................... 648,986 177,722
------------ ------------
Cash, end of year ..................................... $ 125,967 $ 648,986
============ ============
</TABLE>
<PAGE>
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 twenty-five (25)
retail stores located within southern California, Arizona, Illinois, Michigan,
Nevada, and Texas at March 31, 1999, as compared to nineteen (19) stores located
in California and Arizona as of 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. ("UTTC"). As of March 31, 1999, UTTC owns approximately 45.2% 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.
Nature of Relationships with Affiliates
As described in the footnotes following, the Company obtains a portion of
the financing from and engages in transactions with affiliated entities, many of
which are under common control. These entities and the nature of the affiliates
are as follows:
Affiliates Under Common Control
Name of Entity and Nature of Affiliation
United Textiles & Toys Corp. ("UTTC"): A company that held a majority of
the Company's common stock through November 1998 and 45.2% since the Breaking
Waves, Inc. investment in Common Stock (see below and Note 11). UTTC effectively
controls the Company. The president of UTTC is Ilan Arbel.
Multimedia Concepts International, Inc. ("MMCI"): Majority stockholder in
UTTC. The president and director of MMCI is Ilan Arbel.
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
1. Summary of Accounting Policies (continued)
Nature of Relationships with Affiliates (continued)
Name of Entity and Nature of Affiliation
Europe American Capital Foundation ("EACF"): Foundation of which Ilan Arbel
and/or his relatives is/are officer(s) and/or director(s). EACF is the sole
stockholder/beneficiary of Frampton Industries, Ltd. and ABC Fund, Ltd., and the
majority stockholder of American Telecom, PLC.
Europe American Capital Corporation ("EACC"): Entity of which Ilan Arbel
and/or his relatives is/are officer(s) and/or director(s).
Frampton Industries, Ltd. ("Frampton"): Entity which is wholly owned by
EACF.
American Telecom PLC: Entity 80% owned by EACF.
ABC Fund, Ltd. ("ABC"): Entity which is wholly owned by EACF.
U.S. Stores Corp. ("USSC"): A private company whose president is Ilan
Arbel, who is also a director. Parent company of MMCI.
Other Affiliates Name of Entity and Nature of Affiliation
ZD Group L.L.C. ("ZD"): ZD is a New York Trust, the beneficiary of which is
a member of the family of the Company's Chairman.
European Ventures Corp. ("EVC"): Parent company of Shopnet.com. Ilan Arbel
is the president.
Shopnet.com ("Shopnet"): The Chairman of Play Co. is the president and a
director of Shopnet.
F-10
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
1. Summary of Accounting Policies (continued)
Nature of Relationships with Affiliates (continued)
Name of Entity and Nature of Affiliation
Breaking Waves, Inc. ("BWI"): This entity is a wholly owned subsidiary of
Shopnet, and also owns 25% of Play Co's Common Stock (Note 11). The president of
BWI is also the Chairman of the Board of the Company and a relative of Ilan
Arbel.
The following chart graphically depicts the Company's ownership structure
at March 31, 1999 for those entities under common control:
Europe American Capital Foundation
100% 100%
Frampton Industries, Ltd. ABC Fund, Ltd.
80%
American Telecom PLC
62.2%
U.S. Stores Corp.
100%
Multimedia Concepts International, Inc.
78.5%
United Textiles & Toys Corp.
45.2%
Play Co. Toys & Entertainment Corp.
F-11
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
1. Summary of Accounting Policies (continued)
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 three banks. Accounts at each bank
are insured by the Federal Deposit Insurance Corporation up to $100,000 in
aggregate. Uninsured balances are approximately $2,603,308 and $2,698,986 at
March 31, 1999 and 1998, 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.
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
balances of any abandoned leasehold improvements are expensed.
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. The Company adopted the
provisions of this statement as of March 31, 1999 without impact given its
historical treatment of store opening costs.
F-12
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
Summary of Accounting Policies (continued)
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.
Non-cash dividends recorded to amortize the discount on Series E Preferred
Stock totaled $1,707,725 and $1,473,806 for the years ended March 31, 1999 and
1998 (Note 11).
For the year ended March 31, 1999, there is no difference between basic and
diluted loss per common share as the effects of stock options or warrants and
conversion of preferred stock are anit-dilutive given the net loss applicable to
common shares for each year.
F-13
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
Summary of Accounting Policies (continued)
Net Loss Per Share (continued)
As of March 31, 1999 and 1998, potentially dilutive securities outstanding
which were not included in the calculation of basic and diluted net loss per
common share consist of the following:
<TABLE>
<CAPTION>
Potential Common Shares
March 31,
1999 1998
--------------- ----------
Common shares issuable upon:
Conversion of Series E Preferred Stock;
5,833,903 and 4,200,570 shares outstanding,
respectively, each convertible into six shares
<S> <C> <C>
of Common Stock, subject to holding periods. 35,003,418 25,203,420
Exercise of 2,000,000 outstanding warrants to
purchase 2,000,000 shares of convertible Series
E Preferred Stock, each share of Series E then
convertible into six shares of Common Stock,
subject to holding periods. 12,000,000 12,000,000
Conversion of debentures (Note 6) into 3,250,000
shares of Series E Preferred Stock, each share
of Series E then convertible into six shares of
Common Stock, subject to holding periods. 19,500,000 -
Exercise of employee stock options 30,000 30,000
--------------- ----------------
66,533,418 37,233,420
=============== ================
</TABLE>
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.
F-14
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
1. Summary of Accounting Policies (continued)
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.
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. For the purposes of
evaluating potential impairment, the Company's assets are grouped by physical
location, namely the corporate office/warehouse, and individual retail
locations. 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. Since adopting SFAS 121 in April 1997, the Company gives
consideration to events or changes in circumstances for each of its locations
and has not identified circumstances other than the closure of retail locations
(see Note 7) which resulted in the write-off of unamortized balances of tenant
improvements for the year ended March 31, 1998. The expense related to the write
off of such assets was immaterial.
F-15
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
1. Summary of Accounting Policies (continued)
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, which is effective for fiscal years
beginning after December 15, 1997, was adopted by the Company during the fiscal
year ending March 31, 1999 without impact to the financial statements for either
of the years ended March 31, 1999 or 1998.
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. Management reviewed the
provision of this statement during the year ended March 31, 1999. While the
Company has expanded into several states during the year, management believes
the Company's operations to be limited to one reporting segment being a retailer
of educational, specialty, collectible, and traditional toys. All of the
Company's sales have been domestic, and there are no foreign operations.
F-16
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
2. Restricted Certificates of Deposit
At March 31, 1999 and 1998, the Company has three 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 financing under the
FINOVA Capital Corporation agreement ("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 ("FINOVA" ). The second, in the amount of $250,000,
is collateral for a facility for letters of credit. The third, in the amount of
$100,000, is to cover an increase on the previously mentioned letter of credit
facility.
3. Property and Equipment
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
March 31,
1999 1998
<S> <C> <C>
Furniture, fixtures and equipment $ 5,968,292 $ 4,222,586
Leasehold improvements 2,763,711 1,551,760
Signs 501,798 317,363
Vehicles 104,912 104,912
Construction in progress 68,065 -
--------------- ----------------
9,406,778 6,196,621
Accumulated depreciation and amortization (4,058,603) (3,414,235)
-------------- ----------------
$ 5,348,175 $ 2,782,386
=============== ================
</TABLE>
The following is a summary of property and equipment held under capital
leases (Note 5) at March 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Furniture and fixtures $ 849,429
Less accumulated depreciation (112,584)
$ 736,845
</TABLE>
F-17
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
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 (Note
1), provided a $2,000,000 letter of credit for collateral. As compensation to
EACC, the Company granted EACC options ("EACC Options" - Note 11), to acquire
shares of Common Stock and Preferred Stock, the aggregate value of which was
$458,000. 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 for the year
ended March 31, 1998.
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 $4,866,324 under the FINOVA
Financing, 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, as amended currently, provides for maximum borrowings
up to $8,300,000 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, 1999 and 1998 was 7.75% and 8.5%,
respectively). The agreement matures on August 3, 2000 and can be renewed for
one additional year at the lender's option.
F-18
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
Financing Agreement (continued)
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 was $133,876 and $253,858, as
of March 31, 1999 and 1998, respectively, and is included in "Deposits and other
assets" in the balance sheets. Additional costs were incurred and capitalized
during the year relating to amendments to the agreement that increased the
borrowing capacity.
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, 1999
and 1998, the Company was in compliance with this financial covenant.
The FINOVA Financing also includes various other covenants, two of which
the Company violated during the year by exceeding the specified maximum levels
of capital expenditures and debt financing. The Company has received a waiver of
these defaults.
The FINOVA Financing is guaranteed by UTTC 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 MMCI, an affiliate of the Company (Note 1).
At March 31, 1999, the Company also has $700,000 included in its
borrowings from FINOVA under a term loan due concurrently with the overall
FINOVA Financing, with interest at prime plus one percent, secured by a letter
of credit (Note 9).
F-19
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
5. Capital Lease Obligations
During the year ending March 31, 1999, the Company entered into several
leases with financing companies that have been classified as capital lease
obligations. The amounts financed ranged from $49,901 to $232,098, with varying
monthly installment payments from $849 to $5,313, at interest rates varying from
12.6% to 19.6%. The leases, which have maturity dates ranging from October 15,
2001 to March 1, 2004, require minimum payments as follows:
<TABLE>
<CAPTION>
Year ending
March 31,
<S> <C> <C>
2000 $ 249,423
2001 249,423
2002 234,658
2003 213,986
2004 152,672
----------------
Total minimum lease payments 1,100,162
Less amount representing interest (287,284)
Present value of minimum lease payments 812,878
Less current portion (227,197)
Long-term portion $ 585,681
================
</TABLE>
6. Notes Payable
<TABLE>
<CAPTION>
March 31,
1999 1998
Note payable to ABC, an affiliate (Note 1), bearing interest at 5% per annum.
Converted with accrued interest of $33,333, into 1,533,333 shares of Series
<S> <C> <C> <C>
E Preferred Stock (Note 11). $ - $ 1,500,000
Note payable to BWI, an affiliate (Note 1), bearing interest at 15% per annum,
paid in ten monthly installments of $25,000 plus accrued interest through
maturity on December 31, 1998. Note was subordinate to the FINOVA Financing
<S> <C> <C>
(Note 4). - 250,000
6. Notes Payable (continued)
</TABLE>
<TABLE>
<CAPTION>
March 31,
1999 1998
Note payable to stockholder of Toys International non-interest bearing,
guaranteed by UTTC, an affiliate (Note 1), paid in quarterly installments
<S> <C> <C> <C> <C>
of $25,000 through its maturity on January 16, 1999. - 100,000
Note payable to Shopnet, an affiliate (Note 1), bearing interest at 9% per
annum, payable in monthly installments of $25,000 with an original maturity
of June 15, 1999. Note has been verbally extended to an unspecified date. 75,000 -
Note payable to Full Moon Development, Inc., an unaffiliated entity, bearing
interest at 12%, payable in monthly installments of $50,000 through maturity
on July 30, 1999. 200,000 -
Note payable to Full Moon Development, Inc., an unaffiliated entity,
bearing interest at 12%, payable in monthly installments of $66,667, except for
the final installment which is due at maturity on June 30, 1999, twenty days
after previous payment. 200,000 -
Convertible debenture to Frampton, an affiliate (Note 1), bearing interest at
5% per annum, with interest only payments due monthly beginning March 1, 1999,
convertible to Series E Preferred Stock, due at maturity on December 31, 1999. 500,000 -
Convertible debenture to EACF, an affiliate (Note 1), bearing interest at 5%
per annum, with interest only payments due monthly beginning March 1, 1999,
convertible to Series E Preferred Stock, due at maturity on December 31, 1999. 150,000 -
Total notes payable 1,125,000 1,850,000
Less current portion (1,125,000) (350,000)
--------------- ----------------
Long-term portion $ - $ 1,500,000
</TABLE>
6. Notes Payable (continued)
The above notes may carry interest rates that differ from prevailing
interest rates. The Company has not provided for imputed interest on rate
discounts or premiums as the effects are immaterial to the financial statements.
The above convertible debentures to Frampton and EACF are both convertible
into Series E Preferred Stock. The debenture holder has the right at any time
prior to the maturity date to convert all or part of the outstanding principal
plus any accrued interest. The conversion price is $.20 per share, i.e. for
every $100,000 converted, the holder would receive 500,000 shares. Each share of
Series E Preferred Stock is convertible into six shares of Common Stock (Note
11).
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, of which
$57,820 remains outstanding on one settlement.
The statement of operations for the year ended March 31, 1999 and 1998
includes $27,659 and $583,541 of "litigation related expenses" which comprise
the settlement costs on the aforementioned leases, and legal fees associated
with the negotiations.
The Company currently has one remaining landlord/tenant matter which has
yet to be resolved. As of March 31, 1999, the Company has accrued a liability
related to this matter, which is an estimate by management based on its
analysis. The Company's management expects this matter to be resolved without
further material effects on the financial statements.
F-20
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
8. Income Taxes
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1999 1998
Current:
<S> <C> <C>
Federal .............................. $ -- $ --
State ................................ 2,150 --
Total current .................. 2,150 --
Deferred:
Federal .............................. 40,424 750,224
State ................................ 45,726 156,280
Total deferred ................. 86,150 906,504
Valuation allowance ............ (86,150) (906,504)
Total provision for income taxes $ 2,150 $ --
</TABLE>
F-21
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
8. Income Taxes (continued)
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,
1999 1998
<S> <C> <C>
Inventories $ (329,264) $ (227,696)
AMT tax credits (23,260) (23,260)
Accrued expenses 72,760 (19,779)
--------------- ----------------
Current portion of net deferred income
tax (assets) liabilities (279,764) (270,735)
--------------- ----------------
Depreciation and amortization (211,108) (28,388)
Loss on disposal of assets 127,043 25,926
Net operating loss carryforwards (3,471,124) (3,652,294)
Deferred rent liability (50,099) (43,891)
Income taxes 794 508
Amortization of stock options (200,520) (202,049)
--------------- ----------------
Long-term portion of net deferred
income tax (assets) liabilities (3,805,014) (3,900,188)
--------------- ----------------
Total net deferred income tax (assets) liabilities (4,084,778) (4,170,923)
Valuation allowance 4,084,778 4,170,923
Net deferred income taxes $ - $ -
</TABLE>
At March 31, 1999 and 1998, 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.
F-22
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
8. Income Taxes (continued)
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,
1999 1998
<S> <C> <C>
Federal statutory income tax (benefit) rate 34.0% (34.0)%
Permanent adjustments 4.4 -
State income taxes, net of federal benefit 1.5 0.1
Change in valuation allowance (38.4) 33.9
--------- --------------
Effective income tax rate 1.5% -%
</TABLE>
At March 31, 1999, the Company has net operating loss (NOL) carryforwards
of approximately $9,400,000 for federal purposes and approximately $5,000,000
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 ss.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
acquisition of a majority interest in the Company 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, 1997 through 1999, 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 the May 1999 private
offering of Series F Preferred Stock (Note 13).
F-23
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
9. Commitments and Contingencies
Operating Leases
The Company leases its retail store properties under noncancelable
operating lease agreements which expire through June 2009 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, 1999 and 1998, the Company incurred rental
expense under all operating leases of $4,104,073 and $3,112,822, respectively.
Contingent rent expense was insignificant during the years ended March 31, 1999
and 1998.
At March 31, 1999, the aggregate future minimum lease payments due under
these noncancelable leases, including approximately $448,000 for the remaining
term of the lease for the closed Rialto, California retail location (Note 7)
through November 2003, are as follows:
<TABLE>
<CAPTION>
Related
Party
Office/
Year Ending Warehouse Retail
March 31, (Note 10) Locations Total
---------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
2000 $ 247,289 $ 5,148,190 $ 5,395,479
2001 20,624 4,952,250 4,972,874
2002 - 4,536,291 4,536,291
2003 - 4,374,766 4,374,766
2004 - 3,472,774 3,472,774
Thereafter - 7,447,655 7,447,655
--------------- --------------- ----------------
Total minimum lease payments $ 267,91 $ 29,931,926 $ 30,199,839
============= =============== ===================
</TABLE>
F-24
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
9. Commitments and Contingencies (continued)
Operating Leases (continued)
As of the date of this report the Company has executed leases for the
opening of ten (10) additional stores in California, Nevada, North Carolina,
Texas, Illinois, and Tennessee. The stores are expected to open on various dates
in August 1999 through November 2000, and have varying expiration dates through
2010. The new leases will require expected minimum rental payments aggregating
approximately $27,434,000 over the life of the leases. Accordingly, existing
minimum lease commitments as of March 31, 1999, plus those expected minimum
commitments for the proposed retail locations would aggregate minimum lease
commitments of approximately $57,634,000.
Delisting of Securities
Until September 24, 1997, the Company's Common Stock was quoted on the
NASDAQ SmallCap Stock Market.
Since September 24, 1997, the Company's Common Stock, as well as its Series
E Preferred Stock and Series E Preferred 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
For the years ended March 31, 1999 and 1998, approximately forty-one (41%)
and thirty-one percent (31%) of the Company's inventory purchases were 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.
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.
F-25
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
9. Commitments and Contingencies (continued)
401(k) Employee Stock Ownership Plan (continued)
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 Common Stock. Through March 31,
1999, 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) portion of the Plan.
Financing Agreement
In November 1998, the Company entered into an agreement with ZD, a related
party (Note 1), to secure additional financing. Pursuant to this agreement, ZD
issued a $700,000 irrevocable standby letter of credit ("L/C") in favor of
FINOVA, the Company's working capital lender. FINOVA then lent a matching
$700,000 to the Company in the form of a term loan (Note 4). The term loan
expires on August 3, 2000 and bears interest at prime plus one percent.
As consideration for its issuance of the L/C, ZD will receive payments
representing one-third (33%) of the net profits from three stores, Great Lakes
Crossing, Gurnee Mills, and Woodfield Mall (scheduled to open late summer 1999).
The net profit of each store will include an appropriate allocation of corporate
overhead. The expense related to the net profits interest due to ZD will be
accrued beginning April 1, 1999, the effective date of the agreement. The
duration of the agreement with ZD is equal to the current lease term of each of
the stores, including any renewals, but in any event not beyond the Company's
fiscal year ending March 31, 2013. The store leases currently expire, including
options for renewal, at various dates through June 2009. The Company will
categorize this expense as (effective) interest since these costs represent
compensation to secure additional financing.
Additionally, as long as the agreement is in effect, ZD will have the right
to nominate and appoint one-third of the Company's Board of Directors.
F-26
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
9. Commitments and Contingencies (continued)
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
shares of Common Stock as may be granted from time to time by the Company's
Board of Directors. Pursuant to the hire of the Company's current Chief
Financial Officer and Secretary, the Company granted an option to purchase
30,000 shares of Common Stock at an exercise price of $3.25 per share was
authorized, vesting at the rate of 10,000 shares per annum in each of July 1998,
1999 and 2000. In June 1998, the Board of Directors adjusted the exercise price
of the option to $1.15 per share. As of March 31, 1999, no portion of the option
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.
Year 2000
In 1998, the Company developed a plan to upgrade its existing management
information system ("MIS") and computer hardware and to become year 2000
compliant. The Company has completed the hardware upgrade and has installed a
year 2000 compliant upgrade to its accounting software. The Company expects to
finish the year 2000 compliance work by the end of September 1999.
To finance the cost of the new hardware in the computer upgrade project,
the Company entered into a lease in the amount of $82,472, bearing an interest
rate of 10.8%. The total cost of the hardware and software purchased for the
project was approximately $100,000. This lease is included with the capital
lease obligations described in Note 5.
F-27
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
9. Commitments and Contingencies (continued)
Year 2000 (continued)
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. Management has reviewed its
significant vendors' and financial institution's recent SEC filings vis-a-vis
year 2000 risks and uncertainties and, on the basis thereof, is confident that
the steps the Company has taken to become year 2000 compliant are sufficient. In
continuation of this review, the Company shall continue to monitor or otherwise
obtain confirmation from the aforesaid entities - and such other entities as
management deems appropriate - as to their respective degrees of preparedness.
To date, nothing has come to the attention of the Company that would lead it to
believe that its significant vendors and/or service providers will not be year
2000 ready.
Year 2000 readiness is a priority of the Company. The Company believes that
it is taking such reasonable and prudent steps as are necessary to mitigate the
risks associated with potential year 2000 difficulties. However, the effect, if
any, of year 2000 problems on the Company's results of operations if the
Company's or its customers, vendors, or service providers are not fully
compliant cannot be estimated with any degree of certainty.
10. Related Party Transactions
Office and Warehouse Lease
The Company leases an office/warehouse building from Davidson, Welker, &
Brady, a partnership of which one of the partners, Richard Brady, is the
Company's Chief Executive Officer and Director. The original lease was executed
in October 1986. The lease term was for a 10-year period, with increases in the
monthly rent tied to the CPI, adjusted every three years. The lease was amended
in 1993 to extend the term through April 2000 (Note 9), with an option to extend
for a period of five years under the same terms and conditions of the lease.
Rent expense under this lease totaled $247,289 for each of the years ended March
31, 1999 and 1998.
F-28
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
10. Related Party Transactions (continued)
Consulting Fees
The Company made payments aggregating $33,000 and $25,000 to the Chairman
of the Board of Directors for various consulting services during the years ended
March 31, 1999 and 1998, respectively.
Commitment of Financing
The individual, beneficial majority stockholder of UTTC, 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
The following summarizes the Company's capital structure as of March 31,
1999, as amended in April 1998, and the subsequent change thereto approved at
the annual meeting of its shareholders on May 5, 1999 and effected May 12, 1999:
<TABLE>
<CAPTION>
March 31, May 12,
1999 1999
Common Stock
<S> <C> <C>
Authorized shares of $.01 par value
common stock 51,000,000 160,000,000
Preferred Stock
Authorized 15,500,000 shares of preferred stock designated as:
$1.00 par convertible Series E 10,000,000 25,000,000
$.01 par convertible Series F 5,500,000 5,500,000
</TABLE>
F-29
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
11. Equity Transactions (continued)
Capital Structure (continued)
Each share of Series E Preferred Stock ("Series E Stock") is convertible
into six shares of Common Stock at the option of the holder commencing two years
from the date of issuance for a period of five years. The Series E Stock has a
liquidation preference of $1.00 per share. Prior to June 30, 1997, the Series E
Stock was convertible into 20 shares of Common Stock upon issuance.
Each share of Series F Preferred Stock ("Series F Stock") is convertible
into two shares of Common Stock at the option of the holder commencing at any
time following the date the registration statement is declared effective.
Holders of Series F Stock are also entitled to, when and as declared by the
Board of Directors, cumulative dividends at $.08 per share. Dividends are fully
cumulative and accrue (whether or not declared), without interest, from the date
such dividends are payable. The Series F Stock will be automatically converted
in the event of the earlier of two years or the Company's Common Stock having a
closing price of at least $5.00 per share for a consecutive thirty-day period.
The Series F Stock has a liquidation preference of $0.50 per share, subject only
to the Series E Stock preference.
Issuance of Common Stock
In November 1998, the Company issued 1,400,000 shares of Common Stock to
Breaking Waves, Inc., an affiliate (Note 1), in consideration for cash and
inventory. The Company received $300,000 in cash and inventory valued at
$365,000 based upon the Company's analysis of the net realizable value of the
inventory received.
F-30
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
11. Equity Transactions (continued)
EACC Options
In connection with the Congress Financing (Note 4), and the previous bank
line of credit agreement, EACC provided a $2,000,000 letter of credit for
collateral. As compensation to EACC, the Company granted EACC options ("EACC
Options") to acquire shares of 350,000 Common Stock, the value of such options
estimated at $224,000 by the Company; and options to acquire (i) up to an
additional 1,250,000 shares of Common Stock at a purchase price of 25% of the
closing bid price for the Company's Common Stock on the last business day prior
to exercise for a period of six months commencing February 1996, the value of
such options was considered to be insignificant, and (ii) an option to purchase
up to an aggregate 20,000,000 shares of the Series E Stock at a purchase price
of $1.00 per share during the period from May 9, 1996 through January 30, 1998,
the value of such options was estimated to be $234,000 by the Company. The
aggregate value of the options, $458,000, was treated as debt issuance costs
(Note 4). All of the options to acquire shares of Common Stock expired
unexercised.
During the year ended March 31, 1997, the Company issued an aggregate
2,862,070 shares of Series E Stock for aggregate consideration of $2,862,070
upon exercise of a portion of the EACC Options on various dates. Of these
shares, EACC transferred 334,000 shares to UTTC. Subsequently, during the year
ended March 31, 1997, UTTC and EACC each converted 334,000 and 27,500 of Series
E Stock, respectively, into Common Stock at the 20 to 1 conversion rate, with no
holding requirement, provided for in the definition of the Series E Stock at the
time (7,230,000 shares of Common Stock before the retroactive effect of July
1997, one for three reverse split), or 2,410,000 post-reverse split shares of
Common Stock.
In June 1997, the Company issued 700,000 shares of Series E Stock to EACC
which had previously advanced $700,000 in funds subsequent to March 31, 1997
against the EACC Option to acquire shares of Series E Stock. The remainder of
the EACC Options were then terminated in December 1997, upon consummation of the
Company's public offering of Series E Stock.
F-31
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
11. Equity Transactions (continued)
Issuance of Series E Stock
In an agreement dated June 30, 1997, the Company agreed to issue 250,000
shares of Series E Stock for $500,000 and 500,000 warrants to purchase shares of
Series E 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. The shares
of Series E Stock and warrants were registered and sold by the holder in
connection with the Company's public offering of Series E Stock, discussed
below.
On December 29, 1997, the Company completed a public offering of 750,000
shares of Series E 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.
On June 30, 1998, ABC offered to amend the terms of a $1.5 million
debenture (Note 6) to enable the conversion of the principal and accrued
interest into shares of Series E Stock at a conversion price of $1.00 per share.
The conversion price reflects a 33% discount to the trading price of the Series
E Stock and was determined on the basis of the trading price, the illiquidity of
the restricted Series E Stock and the absence of registration rights. The
debenture originally provided for the conversion, at the option of ABC, of the
debenture into shares of common stock of either (i) a subsidiary which the
Company intended to form for the purpose of acquiring certain stores operated by
the Company, or (ii) any other subsidiary which might acquire a portion of the
assets and business of the Company. This option to convert was exercisable at
the net book value of the subsidiary's shares with a limitation on such share
ownership being 25% of the total outstanding shares of said subsidiary. ABC did,
however, retain the right to acquire up to 25% of the common stock of the
subsidiary to be formed at book value at the time of the exercise, if any.
F-32
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
11. Equity Transactions (continued)
Issuance of Options
In February 1999, the Company entered into a Consulting Agreement (the
"Agreement") with Typhoon Capital Consultants, LLC ("Typhoon") pursuant to which
Typhoon is to provide financial and other consulting services. In exchange for
Typhoon's services, the Agreement provides for the grant of an option to
purchase 150,000 shares of the Company's Common Stock with an exercise price of
$1.75 per share, in the following increments: an initial increment of 50,000
options followed by five monthly increments of 20,000 options. The options will
expire on August 30, 2001. Each increment is valued by the Company using an
option valuation model. The initial values are capitalized and will be amortized
through the term of the Agreement. The initial increment of 50,000 options was
valued at $44,000, of which approximately $6,300 was expensed through March 31,
1999.
In July of 1998, the Company entered into a five-year consulting agreement
with Corporate Relations Group ("CRG") to provide corporate relations services.
As compensation for their services, CRG received $100,000 in cash upon execution
of the agreement and received 50,000 shares of Series E Stock. The Company did
not issue the shares of Series E Stock, however, such were provided to CRG by a
shareholder. In addition, in exchange for CRG's services, the agreement provided
for the grant of options to CRG and four of its principals. The options are for
an aggregate 450,000 shares of Common Stock exercisable at $.78 per share, and
an aggregate 700,000 shares of the Series E Stock exercisable at $2.25. The
options are exercisable incrementally in batches of one-third. The first
one-third is exercisable 60 days commencing with the date the securities are
registered and declared effective. The next one-third is exercisable for 60 days
commencing 60 days after the registration is declared effective. The remaining
one-third is exercisable for a period of 240 days, commencing 120 days after the
registration is declared effective.
The Company has recorded an aggregate value for this transaction of
$178,750, including the $100,000 cash payment, $43,750 for the Series E Stock
based on a closing market price on August 27, 1998 of $0.875 per share, and
$35,000 for the two sets of options ($10,000 for the Series E Stock options and
$25,000 for the Common Stock options). The option values were based upon an
option pricing model that considered the volatility of the securities' prices,
and the short life of the options. This transaction has been capitalized by the
Company, and is being pro-ratably expensed over the term of the agreement.
F-33
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
11. Equity Transactions (continued)
Series E Stock Bonus
In March 1998, the Company's Board of Directors granted to its Chairman of
the Board and to its President, 25,000 shares each of its Series E Stock in
recognition of their efforts to further the Company's turnaround towards
profitability. The shares vested 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 a closing market price of $1.86
per share which was subjected to a 50% marketability discount given the
restrictive nature and vesting requirement of the securities as well as the
relatively low trading volume. In early April 1999, the Company's Chairman of
the Board and its President returned the shares of Series E Stock to the
Company, which then reversed the compensation expense previously recorded during
the year. As a result, these shares have been excluded from the balance sheet
and statement of stockholders' equity.
Series E Stock Dividends Resulting from Beneficial Conversion Feature
For the years ended March 31, 1999 and 1998, the Company recorded non-cash
dividends of $1,707,725 and $1,473,806 in applying the provisions of Topic No.
D-60 of the Emerging Issues Task Force as described below.
In April 1999, the Company filed with the Securities and Exchange
Commission restated financial statements for the year ended March 31, 1998 to
conform with Topic No. D-60 of the Emerging Issues Task Force. Topic D-60
communicated the views of the staff of the Securities and Exchange Commission
that the portion of the proceeds upon issuance of the convertible stock
allocable to the beneficial conversion feature should be recorded as additional
paid-in capital and recognized as a dividend over the minimum period in which
the preferred shareholders can realize the conversion.
The Company's Series E Stock, of which shares were issued in varying
amounts on various dates as described above, includes a beneficial conversion
feature in that each share of Series E Stock is convertible into six shares of
the Company's Common Stock at the option of the holder commencing two years from
the date of issuance. Shares of Series E Stock issued through June 30, 1997,
were originally convertible into twenty shares of Common Stock, at the option of
the holder, with no holding period requirement.
F-34
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
11. Equity Transactions (continued)
Series E Stock Dividends Resulting from Beneficial Conversion Feature
(continued)
The beneficial conversion feature is measured at the date of issuance of
the Company's Series E Stock as the difference between the conversion price and
the market value of the Common Stock into which the Series E Stock is
convertible, limited to the proceeds received from the issuance of the Series E
Stock. Based on the calculations prescribed by Topic No. D-60, all proceeds
initially received by the Company from the issuance of Series E Stock have been
initially recorded as additional paid in capital as 100% of the proceeds is
allocable to the beneficial conversion feature. Over the required holding
period, if any, a non-cash dividend is recorded reducing the retained earnings
(or increasing the accumulated deficit) and increasing the balance recorded as
Series E Stock in the balance sheet. Thus, there is no net effect on the total
stockholders' equity of the Company. Since shares of Series E Stock issued prior
to June 30, 1997, were originally convertible upon issuance, 100% of the
non-cash dividend was recorded upon issuance of the Series E Stock. Non-cash
dividends associated with shares of Series E Stock issued after June 30, 1997,
are being recorded over the required two-year holding period of the security.
However, the Company has also restated its net loss per common share as
presented in the statement of operations for the year ended March 31, 1998, as
the dividend attributable to the beneficial conversion feature of the Series E
Stock reduces the amount of net income (or increases the amount of net loss)
applicable to the common shares.
In applying the provisions of Topic No. D-60, the Company has recorded
non-cash dividends of $1,473,806 for the year ended March 31, 1998. This amount
represents $0, $1,200,000, $0, and $273,806 for each of the three-month periods
ended June 30, 1997, September 30, 1997, December 31, 1997, and March 31, 1998.
For the year ended March 31, 1999, these non-cash dividends aggregated
$1,707,725. These non-cash dividends were recorded as $273,806 in the
three-month period ended June 30, 1998 and $477,973 in each of the three-month
periods ended September 30, 1998, December 31, 1998, and March 31, 1999.
F-35
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
11. Equity Transactions (continued)
Series E Stock Dividends Resulting from Beneficial Conversion Feature
(continued)
As a result of the application of Topic No. D-60, the Company has
reclassified the initial proceeds of issuance of Series E Stock to additional
paid-in capital and the resulting non-cash dividends which affect the
accumulated deficit and the amount recorded as Series E Stock. The impact on the
financial statements for the year ended March 31, 1998 is summarized as follows:
<TABLE>
<CAPTION>
March 31, 1998
As Reported As Restated
<S> <C> <C>
Series E Stock $ 5,891,020 $ 3,974,376
Common Stock 41,035 41,035
Additional paid-in capital 6,675,398 12,927,918
Accumulated deficit (10,104,946) (14,440,822)
--------------- ----------------
Total stockholders' equity $ 2,502,507 $ 2,502,507
- =============== ================
Net loss for the year ended $ (2,054,470) $ (2,054,470)
Effects of non-cash dividends - (1,473,806)
=============== ================
Net loss applicable to common shares $ (2,054,470) $ (3,528,276)
=============== ================
Basic and diluted loss per common share and share equivalent $ (.50) $ (.86)
============= ===============
12. Supplemental Cash Flow Information
Cash paid for income taxes and interest was as follows:
Years Ended March 31,
1999 1998
Interest paid $ 809,601 $ 511,924
============ ================
Income taxes $ 850 $ 800
======== ============
</TABLE>
F-36
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
12. Supplemental Cash Flow Information (continued)
Non-cash investing and financing activities consisted of the following:
The Company acquired leasehold improvements and equipment during the year
ended March 31, 1999, by entering into capital lease obligations for $849,429
(Notes 3 and 5).
Convertible debt and accrued interest outstanding of $1,533,333 was
converted into 1,533,333 shares of Series E Stock during the year ended March
31, 1999 (Note 11).
Common Sock was issued in exchange for cash and inventory during the year
ended March 31, 1999. The inventory acquired had a value of $365,000 (Note 11).
For the years ended March 31, 1999 and 1998 non-cash dividends of
$1,707,725 and $1,473,806, respectively, were recorded to amortize the discount
recorded on Series E Sock resulting from the beneficial conversion features
(Note 11).
13. Subsequent Events
Unsecured Promissory Notes
On April 22, 1999, the Company entered into an unsecured promissory note
with Shopnet, an affiliate, (Note 1) for $100,000 at an interest rate of 9% per
annum. The principal payments and accrued interest are due monthly beginning May
31, 1999, with a maturity date of August 31, 1999.
On May 17, 1999, the Company entered into an unsecured promissory note with
Shopnet, an affiliate (Note 1) for $100,000 at an interest rate of 9% per annum.
The principal payments and accrued interest are due monthly beginning June 30,
1999, with a maturity date of September 30, 1999.
F-37
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
Subsequent Events (continued)
Private Placement of Series F Stock
On May 18, 1999, the Board of Directors of the Company unanimously adopted
a Corporate Resolution to enter into a Securities Purchase Agreement (the
Private Placement) with several investors. The Private Placement was for 750,000
shares of the Company's Series F Preferred Stock ("Series F Stock"), par value
of $.01 per share, for gross proceeds of $750,000. The Company was also
authorized to amend its articles of incorporation to change the terms and
privileges of the Series F Stock. The Series F Stock is convertible into two
shares of Common Stock at any time following the effective date of the
registration statement registering the Series F Stock and underlying shares of
Common Stock for resale.
The Corporate Resolution also authorized the Company to file a Registration
Statement with the Securities and Exchange Commission for the securities under
Private Placement.
As part of the Private Placement, the Company granted an option to the
Placement Agent and its assignees to purchase an aggregate 350,000 shares of
Common Stock, with an exercise price of $3.00 per share for a period of four
years from the date of closing of the Private Placement. Additionally, as
commission, the Placement Agent received a 10% fee, or $75,000, and a 1% fee, or
$7,500, to cover administrative expenses. The Private Placement closed on May
27, 1999, providing net cash proceeds of $667,500 to the Company before legal
and other administrative expenses.
On the May 27, 1999 closing date of the Private Placement, the Company's
Common Stock had a closing price of $1.69. As such, the Series F Stock has a
beneficial conversion feature which will result in accounting treatment to
reflect non-cash dividends in future periods in a manner similar to the Series E
Stock transactions described in Note 11.
F-38
<PAGE>
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A Subsidiary of United Textiles & Toys Corp.)
Notes To Financial Statements
Years Ended March 31, 1999 and 1998
Subsequent Events (continued)
Common Stock Compensation of Consultant
In May 1999, the Company issued 45,333 shares of Common Stock to a
consultant as compensation for site selections and negotiation of retail
location leases. These services are being provided for new Company stores
opening in fiscal 2000. This Company has valued the shares based on the May 17,
1999 closing price of $1.375 per share, less a 10% discount for marketability
restrictions for an aggregate value of approximately $56,000.
F-39
Exhibit 3.2(b)
Amendment to Certificate of Incorporation of the Company, filed May 9, 1996
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PLAY CO. TOYS
Under Section 242 of the Delaware Corporation Law:
The undersigned, for the purpose of amending the Certificate of
Incorporation of Play Co. Toys, does hereby certify and set forth:
ARTICLE FIRST
The name of the Corporation is PLAY CO. TOYS
ARTICLE SECOND
The Certificate of Incorporation was filed by the Department of State
on June 15, 1994.
ARTICLE THIRD
The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to authorize (i) a change in the
name of the Corporation from Play Co. Toys to Play Co. Toys & Entertainment
Corp., (ii) one share of a Series D Preferred Stock, (iii) 1,000,000 shares of a
Series E Preferred Stock, and (iv) an increase in the authorized number of
shares of Common Stock from 10,000,000 to 30,000,000 shares, as follows:
The Certificate of Incorporation of this Corporation is amended by
changing Articles I and IV so that, as amended, said Articles shall read as
follows:
THIRD
The name of the Corporation is Play Co. Toys & Entertainment Corp.
FOURTH
A. Authorized Capital Stock. The total number of shares of all classes
of capital stock which this Corporation shall have authority to issue is
THIRTY-ONE MILLION FOUR HUNDRED SIXTY-NINE THOUSAND FOUR HUNDRED FORTY-FIVE
(31,469,445) shares consisting of THIRTY MILLION (30,000,000) shares of Common
Stock, par value $.01 per share (hereinafter, the "Common Stock") and ONE
MILLION FOUR HUNDRED SIXTY-NINE THOUSAND FOUR HUNDRED FORTY-FIVE (1,469,445)
shares of preferred stock, par value $.01 per share (hereinafter, the "Preferred
Stock"), of which 469,444 shares have been designated the "Series B Preferred
Stock," the relative rights, preferences, and limitations of which are as set
forth in sub-paragraph (B) of this Article Fourth, one share has been designated
"Series D Preferred Stock," the relative rights, preferences, and limitations of
which are as set forth in sub-paragraph (C) of this Article Fourth and 1,000,000
shares have been designated "Series E Preferred Stock, " the relative rights,
preferences, and limitations of which are as set forth in sub-paragraph (D) of
this Article Fourth .
B. Series B Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $.01 per share, shall be the "Series B Preferred Stock."
<PAGE>
(ii) Rank. The Series B Preferred Stock shall, with respect to rights on
liquidation, winding up, and dissolution, rank (a) junior to any other series of
the Preferred Stock established by the Board of Directors and, if approved by
the affirmative vote of the holders of the outstanding shares of the Series B
Preferred Stock, the terms of which shall specifically provide that such series
shall rank prior to the Series B Preferred Stock (any such other securities are
referred to herein collectively as the "Senior Securities"), (b) on a parity
with any other series of the Series Preferred Stock established by the Board of
Directors, the terms of which shall specifically provide that such series shall
rank on a parity with the Series B Preferred Stock (the Series B Preferred Stock
and any such other securities are referred to herein collectively as the "Parity
Securities"), and (c) prior to any other equity securities of the Corporation,
including the Series D Preferred Stock and Series E Preferred Stock and Series E
Preferred Stock and the Common Stock (all of such equity securities of the
Corporation to which the Series B Preferred Stock ranks prior, including the
Common Stock, are referred to herein collectively as the "Junior Securities").
(iii) Dividends
(a) Accrual of Dividends. The holders of the then outstanding shares of
Series B Preferred Stock shall be entitled to receive, out of any funds legally
available therefor, cumulative dividends at the annual rate of $0.60 per share
payable in cash as provided in Section (iii)(b) below. Such dividends shall
accrue on each share from its issue date, and shall accrue, whether or not
earned or declared. Such dividends shall be cumulative so that if such dividends
in respect of any dividend period, at the rate specified above, shall not have
been paid or declared and a sum sufficient for the payment thereof set apart,
the deficiency shall first be fully paid before any dividend or other
distribution shall be paid on or declared and set apart for the Common Stock.
The data on which the Corporation initially issues any shares of the Series B
Preferred Stock shall be deemed its "issue date" regardless of the number of
times such share is transferred on the stock records of the Corporation or the
number of certificates which may be issued to evidence such share.
(b) (1) Dividends on the shares of the Series B Preferred Stock shall be
payable in cash annually on each February 1 or such other date determined by the
Board of Directors of the Corporation (each such date being hereafter referred
to as a "Series B Dividend Payment Data") commencing on February 1, 1995. If the
Board of Directors selects a date other than February 1, the Corporation shall
deliver by regular mail notice to each record holder of the Series B Preferred
Stock, and (2) Dividends shall be payable to each holder of record of the Series
B Preferred Stock, the record date being either (A) the January 31 immediately
preceding the Series B Dividend Payment Date, or (B) the date determined by the
Board of Directors of the Corporation. If the Board of Directors determines the
record date, the Corporation shall deliver by regular mail notice to each record
holder to the Series B Preferred Stock.
(c) Other Dividends. So long as any shares of the Series B Preferred Stock
are outstanding, no dividend or other distribution shall be paid or declared and
set apart for payment on the shares of Common Stock or any other class or series
of capital stock of the Corporation without the written consent of the holders
of a majority of the outstanding shares of the Series B Preferred Stock.
(iv) Put.
(a) Notice. On each February 1, 1995 and 1996, each of the holders of the
Series B Preferred Stock may, at his option, require the Corporation to redeem
one-half of the shares of Series B Preferred Stock originally issued to him, for
a per share price equal to the sum of $1.00 plus all accrued but unpaid
dividends on each share of the Series B Preferred Stock (the "Redemption
Price"), upon the terms set forth below. A holder who desires to consummate such
<PAGE>
redemption shall give written notice (the "Put Notice") to the Corporation.
Within five (5) days after receipt of a Put Notice, the Corporation shall
deliver notice (the "Company Notice") to the other holders of the Series B
Preferred Stock, which shall state that a holder of the Series B Preferred Stock
has delivered a Put Notice. If any holder of the Series B Preferred Stock
delivers a Put Notice within ten (10) days after delivery of the Company Notice,
the Put Notice shall be deemed timely delivered; however, the Corporation shall
not be required to deliver another Company Notice. If a holder does not exercise
his rights hereunder, the number of shares which he was entitled to sell to the
Corporation shall carry over to the next date on which he has a put right (for
example, if he does not exercise his put right on February 1, 1995, he shall be
entitled to sell all of the shares originally issued to him on February 1,
1996).
(b) Payment. On the thirtieth day after delivery of the Company Notice
pursuant to Section 2(a) above, the Corporation shall pay the Redemption Price
to the holder of the Series B Preferred Stock in cash or by bank cashier's check
provided that the holder of the Series B Preferred tock surrenders to the
Corporation the certificate(s) representing such shares duly endorsed for
transfer. For purposes of calculating the Redemption Price, dividends shall be
deemed to cease accruing on the day before payment of the Redemption Price.
(c) Limitation on Redemption. If the funds of the Corporation legally
available for redemption of shares of the Series B Preferred Stock are
insufficient to redeem the total number of such shares to be redeemed, those
funds which are legally available will be used to redeem the maximum possible
number of such shares, and if at the time of payment to one holder, the
Corporation has received a Put Notice from another holder, then the funds
available for redemption shall be applied ratably among such holders. The shares
of the Series B Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of the Series B Preferred Stock, such funds will
immediately be used to redeem the balance of the shares set forth in the
Redemption Notice which were not redeemed.
(v) Redemption.
(a) Notice. The Corporation may redeem all of the issued and outstanding
shares of the Series B Preferred Stock for a per share price equal to the
Redemption Price, upon the terms set forth below. If the Corporation desires to
redeem the Series B Preferred Stock, it shall deliver notice (the "Redemption
Notice") by regular mail to each holder of record of the Series B Preferred
Stock at the address of each holder as it appears on the books of the
Corporation. Dividends shall cease accruing on the date of the Redemption
Notice.
(b) Delivery of Certificates and Payment. On or before the tenth day after
the date of the Redemption Notice (the "Period"), each holder of the Series B
Preferred Stock shall deliver to the secretary of the Corporation at its
principal office his certificate(s) for the Series B Preferred Stock, duly
endorsed in blank (or accompanied by proper instruments of transfer). Upon such
surrender, the holder thereof shall be entitled to receive payment of the
Redemption Price for each share of the Series B Preferred Stock so surrendered.
The Corporation shall make such payment within five days after the later of (i)
the date on which the holder delivered such certificates or (ii) the last day of
the Period.
(vi) Preference on Liquidation.
(a) Payment on Preferred Stock. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, the
holder of each share of the Series B Preferred Stock then outstanding shall be
entitled to be paid, out of the assets of the Corporation available for
distribution to its shareholders, whether from capital, surplus, or earnings,
before any payment shall be made in respect of the Common Stock, an amount equal
to the Redemption Price. If upon liquidation, dissolution, or winding up of the
Corporation, the assets of the Corporation available for distribution to its
shareholders shall be insufficient to pay the holders of the Preferred Stock the
full amounts to which they shall be entitled, the holders of the Preferred Stock
shall share ratably in any distribution of assets.
(b) Merger and Consolidation. The merger or consolidation of the
Corporation with another corporation in which the Corporation is not the
surviving corporation or the sale of all or substantially all of the assets of
the Corporation shall be deemed to be a liquidation, dissolution, or winding up
of the Corporation as those terms are used in this Article IV.
(c) Payment on Common Stock. Upon completion of the distributions required
by Section 4(a) above, the holders of the Common Stock shall be entitled to
receive ratably any remaining assets and funds of the Corporation available for
distribution in connection with any such liquidation, dissolution, or winding up
of the Corporation.
(d) Determination of Value. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation which will involve
the distribution of assets other than cash, the Board of Directors shall
determine in good faith the value of the assets to be distributed to the holders
of shares of the Series B Preferred Stock and the holders of shares of Common
Stock.
(vi) Voting Rights.
(a) The holders of the Series B Preferred Stock shall not have any voting
rights.
C. Series D Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series D Preferred Stock."
(ii) Rank. The Series D Preferred Stock shall rank junior to the Series B
Preferred Stock and the Series E Preferred Stock.
(iii) Dividends.
(a) The holder of the share of Series D 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 the annual rate
of 7%. The dividend is payable within 90 days of each year anniversary thereof
(the "Series D Dividend Payment Date"), in preference to dividends on the Junior
Securities. Such dividend shall be paid to the holder of record at the close of
business on the date ten business days prior to the Series D Dividend Payment
Dates, which dividend may be paid in cash or kind, at the discretion of the
Corporation. Each of such dividends shall be fully cumulative and shall accrue
(whether or not declared), without interest, from the date such dividends are
payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
which have accrued (whether or not declared) on any Senior Securities, no
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the share of the Series D Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment, or setting apart for payment, all accrued and unpaid dividends on all
<PAGE>
outstanding shares of Senior Securities shall have been or will be declared and
paid or set apart for payment, without interest. No dividends shall be declared
or paid or set apart for payment on any Parity or Junior securities for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series D Preferred Stock for all dividend payment
periods terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the share
of the Series D Preferred Stock and any other Parity Securities, all dividends
declared upon the share of the Series D Preferred Stock and any other Parity
Securities shall be declared pro rata so that the amount of dividends declared
on the share of Series D Preferred Stock and such other Parity Securities shall
in all cases bear to each other the same ratio that accrued dividends per share
on the Series D Preferred Stock and such other Parity securities bear to each
other. No interest or sum of money in lieu of interest shall be payable in
respect of any dividend payment or payments on the Series D Preferred Stock or
any other Parity Securities which may be in arrears.
(c) The holder of the share of the Series D Preferred Stock shall be
entitled to receive the dividends provided for in paragraph (iii)(a) hereof in
preference to and in priority over any dividends upon any of the Junior
Securities.
(d) Subject to the foregoing provisions of this Section (iii), the Board of
Directors may declare, and the Corporation may pay or set apart for payment,
dividends and other distributions on any of the Junior Securities and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights, or options exercisable for or convertible into any of the Junior
Securities, and the holder of the share of the Series D Preferred Stock shall
not be entitled to share therein.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holder of the share of
Series D Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1,400,000 for the share outstanding, before any payment
shall be made or any assets distributed to the holders of any of the Junior
Securities, provided, however, that the holder of the outstanding share of the
Series D Preferred Stock shall not be entitled to receive such liquidation
payment until the liquidation payments on all outstanding shares of Senior
Securities, if any, shall have been paid in full. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holder of the outstanding share of the Series D Preferred Stock or any
other Parity Securities, then the holders of all such shares shall share ratably
in such distribution of assets in accordance with the amount which would be
payable on such distribution if the amounts to which the holder of the
outstanding share of Series D Preferred Stock and the holders of outstanding
shares of such other Parity Securities are entitled were paid in full.
(b) For the purpose of this Article IV, neither the voluntary sale,
conveyance, lease, exchange, or transfer (for cash, shares of stock, securities,
or their consideration) of all or substantially all the property or assets of
the Corporation or the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution, or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
lease, exchange, or transfer shall be in connection with a dissolution or
winding up of the business of the Corporation.
(v) Redemption. The share of Series D Preferred Stock is not redeemable by
the Corporation.
<PAGE>
(vi) Conversion. The share of Series D Preferred Stock is not convertible
into any securities of the Corporation.
(vii) Voting Rights.
(a) The holder of the Series D Preferred Stock shall have the right to vote
at all meetings of the stockholders of the Corporation, or consent in writing in
lieu of voting, or otherwise, solely for the election of the Corporation's Board
of Directors.
(b) At such times as the shares of Series D Preferred Stock is outstanding,
the Board of Directors shall be comprised of such odd number of Directors as
shall be fixed by the Board of Directors or as stated in the Corporation's
Certificate of Incorporation, provided however, that such number of Directors
shall not be less than three (3).
(c) The holder of the share of Series D Preferred Stock, voting as a
separate class, shall have the sole right to vote for or consent in writing in
lieu of voting, and elect two-thirds (2/3) of the Directors of the Corporation,
who shall be known as the Preferred Directors, and to remove any Preferred
Directors with or without cause at any time and to fill all vacancies of
Preferred Directors.
D. Series E Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series E Preferred Stock."
(ii) Rank. The Series E Preferred Stock shall rank junior to the Series B
Preferred Stock and senior to the Series D Preferred Stock.
(iii) Dividends.
(a) The holders of the shares of the Series E 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
$1.00 per share. The dividend is payable within 90 days of each year anniversary
thereof (the "Series E Dividend Payment Date"), in preference to dividends on
the Junior Securities. Such dividend shall be paid to the holder of record at
the close of business on the date ten business days prior to the Series E
Dividend Payment Dates, which dividend may be paid in cash or kind, at the
discretion of the Corporation. Each of such dividends shall be fully cumulative
and shall accrue (whether or not declared), without interest, from the date such
dividends are payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
which have accrued (whether or not declared) on any Senior Securities, no
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the shares of the Series E Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment, or setting apart for payment, all accrued and unpaid dividends on all
outstanding shares of Senior Securities shall have been or are declared and paid
or set apart for payment, without interest. No dividends shall be declared or
paid or set apart for payment on any Parity or Junior securities for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series E Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the shares
of the Series E Preferred Stock and any other Parity Securities, all dividends
declared upon shares of the Series E Preferred Stock and any other Parity
<PAGE>
Securities shall be declared pro rata so that the amount of dividends declared
per share on the Series E Preferred Stock and such other Parity Securities shall
in all cases bear to each other the same ratio that accrued dividends per share
on the Series E Preferred Stock and such other Parity Securities bear to each
other. No interest or sum of money in lieu of interest shall be payable in
respect of any dividend payment or payments on the Series E Preferred Stock or
any other Parity Securities which may be in arrears.
(c) Holders of the shares of the Series E Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (iii)(a) hereof in preference
to and in priority over any dividends upon the Series D Preferred Stock and any
other Junior Securities.
(d) Subject to the foregoing provisions of this Section (iii), the Board of
Directors may declare, and the Corporation may pay or set apart for payment,
dividends and other distributions on any of the Junior Securities and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights, or options exercisable for or convertible into any of the Junior
Securities, and the holders of the shares of the Series E Preferred Stock shall
not be entitled to share therein.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holders of shares of Series
E Preferred Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1.00 per share for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holder of the outstanding shares
of the Series E Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, if any, shall have been paid in full. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holders of the outstanding shares of the Series E Preferred Stock or any
other Parity Securities, then the holders of all such shares shall share ratably
in such distribution of assets in accordance with the amount which would be
payable on such distribution if the amounts to which the holders of the
outstanding shares of Series E Preferred Stock and the holders of outstanding
shares of such other Parity Securities are entitled were paid in full.
(b) For the purposes of this Article IV, neither the voluntary sale,
conveyance, lease, exchange, or transfer (for cash, shares of stock, securities,
or their consideration) of all or substantially all the property or assets of
the Corporation or the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution, or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
lease, exchange, or transfer shall be in connection with a dissolution or
winding up of the business of the Corporation.
(v) Redemption. The shares of Series E Preferred Stock are not redeemable
by the Corporation.
(vi) Conversion.
(a) Subject to and upon compliance with the provisions of this Section
(vi), the holder of a share of Series E Preferred Stock shall have the right, at
such holder's option, at any time, commencing two years from issuance,
terminating five years from issuance, to convert such share into twenty fully
paid and non-assessable shares of Common Stock of the Corporation.
(b) The holders of shares of the Series E Preferred Stock at the close of
<PAGE>
business on a Series E Dividend Payment Date shall be entitled to receive the
dividend payable on such shares on the corresponding Series E Dividend Date
notwithstanding the conversion thereof or the Corporation's default in payment
of the dividend due on such Series E Dividend Payment Date (except that holders
of shares called for redemption on a redemption date between such record date
and the Series E Dividend Payment Date shall not be entitled to receive such
dividend on such dividend payment date). However, shares of Series E Preferred
Stock surrendered for conversion during the period between the close of business
on any Series E Dividend Payment Date and the opening of business on the
corresponding Series E Dividend Payment Date (except shares called for
redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the dividend payable on such shares on such Series
E Dividend Payment Date. A holder of shares of Series E Preferred Stock on a
Series E Dividend Payment Date who (or whose transferee) surrenders any of such
shares for conversion into shares of Common Stock on a Series E Dividend Payment
Date will receive the dividend payable by the Corporation on such shares of
Series E Preferred Stock on such date, and the converting holder need not
include payment in the amount of such dividend upon surrender of shares of
Series E Preferred Stock for conversion. Except as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion.
(c) (i) In order to exercise the conversion privilege, the holders of each
share of Series E Preferred Stock to be converted shall surrender the
certificate representing such share at the office of the transfer agent for the
Series E Preferred Stock, appointed for such purpose by the Corporation, with
the Notice of Election to Convert on the back of said certificate completed and
signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series E Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender of the certificate for
shares of Series E Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate(s) for the number of full shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of this Section
(iv).
(iii) Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for shares
of Series E Preferred Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the person(s) in whose name(s) any
certificate(s) for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder(s) of record of the shares represented
thereby at such time on such date, unless the stock transfer books of the
Corporation shall be closed on that date, in which event such person(s) shall be
deemed to have become such holder(s) of record at the close of business on the
next succeeding day on which such stock transfer books are open, and such notice
is received by the Corporation. All shares of Common Stock delivered upon
conversion of the Series E Preferred Stock will, upon delivery, be duly and
validly issued and fully paid and non-assessable, free of all liens and charges
and not subject to any preemptive rights.
(d) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common stock held in
its treasury, or both, for the purposes of effecting conversions of the Series E
Preferred Stock, the full number of shares of Common Stock deliverable upon the
<PAGE>
conversion of all outstanding shares of Series E Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Series E Preferred Stock shall be computed as if at the time of computation
of all such outstanding shares were held by a single holder.
(vii) Voting Rights. The holders of the Series E Preferred Stock shall have
no voting rights.
E. Common Stock.
(i) Dividends. Subject to the dividend and liquidation rights of the Series
E Preferred stock, the holders of Common Stock shall be entitled to share
equally all dividends declared and paid by the Corporation.
(ii) Voting. The holders of record of Common Stock shall have one vote, on
all matters upon which stockholders of the Corporation may vote, for each share
of Common Stock held by them.
(iii) Dissolution, Liquidation, Etc. In the event of the dissolution,
liquidation, or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation and
after the payment to the holders of the Preferred Stock as provided for in this
Certificate of Incorporation, the remaining assets of the Corporation shall be
distributed to the holders of Common Stock.
ARTICLE FOURTH
The amendments to the Articles of Incorporation set forth above was adopted
on the 3rd day of May 1996, at a meeting of the Corporation's shareholders.
ARTICLE FIFTH
The amendments were approved by the shareholders. The number of votes cast
for the amendments by the shareholders was sufficient for approval.
IN WITNESS WHEREOF, the undersigned President of this Corporation has
executed this Certificate of Amendment on this 3rd day of May 1996.
PLAY CO. TOYS
Richard Brady, President
Exhibit 3.2(c)
Amendment to Certificate of Incorporation of the Company, filed August 13, 1996
CERTIFICATE OF AMENDMENT
<PAGE>
OF
CERTIFICATE OF INCORPORATION
OF
PLAY CO. TOYS & ENTERTAINMENT CORP.
Under Section 242 of the Delaware Corporation Law:
The undersigned, for the purpose of amending the Certificate of
Incorporation of Play Co. Toys & Entertainment Corp., does hereby certify and
set forth:
FIRST:
The name of the Corporation is PLAY CO. TOYS & ENTERTAINMENT CORP.
SECOND:
The Certificate of Incorporation was filed by the Department of State
on June 15, 1994.
THIRD:
The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to (i) amend the rights and
preferences of the Series D Preferred Stock to include a conversion provision,
whereby the share of Series D Preferred Stock shall be convertible into
1,157,028 shares of the Corporation's Common Stock, (ii) amend the designation
of the Series E Preferred Stock to designate two separate classes, of which
1,900,000 shares shall be designated the "Series E Class I Preferred Stock" and
100,000 shall be designated as the "Series E Class II Preferred Stock," and
(iii) increase the number of authorized shares of Common Stock from 30,000,000
to 40,000,000. The Certificate of Incorporation of this Corporation is amended
by changing "Article Fourth" so that, as amended, said Article shall read as
follows:
FOURTH
A. Authorized Capital Stock. The total number of shares of all classes of
capital stock which this Corporation shall have authority to issue is FORTY-TWO
MILLION (42,000,000) shares consisting of FORTY MILLION (40,000,000) shares of
Common Stock, par value $.01 per share (hereinafter, the "Common Stock") and TWO
MILLION ONE (2,000,001) shares of preferred stock, par value $.01 per share
(hereinafter, the "Preferred Stock"), of which one share has been designated
"Series D Preferred Stock," the relative rights, preferences, and limitations of
which are as set forth in sub-paragraph (B) of this Article Fourth and 2,000,000
shares have been designated "Series E Preferred Stock," to be issued in classes,
of which 1,900,000 shall be designated as the "Series E Class I Preferred Stock"
and 100,000 shares as the Series E Class II Preferred Stock," the relative
rights, preferences, and limitations of which are as set forth in sub-paragraph
(C) of this Article Fourth.
B. Series D Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series D Preferred Stock."
(ii) Rank. The Series D Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up, and dissolution, rank (a) junior
to the Series E Preferred Stock and any other series of Preferred Stock
established by the Board of Directors and, if required by Section (vii),
approved by the affirmative vote of the holder of the share of the Series D
Preferred Stock, the terms of which shall specifically provide that such series
<PAGE>
shall rank prior to the Series D Preferred Stock (any other securities are
referred to herein collectively as the "Senior Securities"), (b) on a parity
with any other series of the Series Preferred Stock established by the Board of
Directors, the terms of which shall specifically provide that such series shall
rank on a parity with the Series D Preferred Stock (the Series D Preferred Stock
and any such other securities are referred to herein collectively a the "Parity
Securities"), and (c) prior to any other equity securities of the Corporation,
including the Common Stock of the Corporation (all of such equity securities of
the Corporation to which the Series D ranks prior, including the Common Stock,
are referred to herein collectively as the "Junior Securities.")
(iii) Dividends.
(a) The holder of the share of Series D 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 the annual rate
of 7%. The dividend is payable within 90 days of each year anniversary thereof
(the "Series D Dividend Payment Date"), in preference to dividends on the Junior
Securities. Such dividend shall be paid to the holder of record at the close of
business on the date ten business days prior to the Series D Dividend Payment
Dates, which dividend may be paid in cash or kind, at the discretion of the
Corporation. Each of such dividends shall be fully cumulative and shall accrue
(whether or not declared), without interest, from the date such dividends are
payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
which have accrued (whether or not declared) on any Senior Securities, no
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the share of the Series D Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment, or setting apart for payment, all accrued and unpaid dividends on all
outstanding shares of Senior Securities shall have been or will be declared and
paid or set apart for payment, without interest. No dividends shall be declared
or paid or set apart for payment on any Parity or Junior securities for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series D Preferred Stock for all dividend payment
periods terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the share
of the Series D Preferred Stock and any other Parity Securities, all dividends
declared upon the share of the Series D Preferred Stock and any other Parity
Securities shall be declared pro rata so that the amount of dividends declared
on the share of Series D Preferred Stock and such other Parity Securities shall
in all cases bear to each other the same ratio that accrued dividends per share
on the Series D Preferred Stock and such other Parity Securities bear to each
other. No interest or sum of money in lieu of interest shall be payable in
respect of any dividend payment or payments on the Series D Preferred Stock or
any other Parity Securities which may be in arrears.
(c) The holder of the share of the Series D Preferred Stock shall be
entitled to receive the dividends provided for in paragraph (iii)(a) hereof in
preference to and in priority over any dividends upon any of the Junior
Securities.
(d) Subject to the foregoing provisions of this Section (iii), the Board of
Directors may declare, and the Corporation may pay or set apart for payment,
dividends and other distributions on any of the Junior Securities and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights, or options exercisable for or convertible into any of the Junior
Securities, and the holder of the share of the Series D Preferred Stock shall
not be entitled to share therein.
<PAGE>
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holder of the share of
Series D Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1,400,000 for the share outstanding, before any payment
shall be made or any assets distributed to the holders of any of the Junior
Securities, provided, however, that the holder of the outstanding share of the
Series D Preferred Stock shall not be entitled to receive such liquidation
payment until the liquidation payments on all outstanding shares of Senior
Securities, if any, shall have been paid in full. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holder of the outstanding share of the Series D Preferred Stock or any
other Parity Securities, then the holders of all such shares shall share ratably
in such distribution of assets in accordance with the amount which would be
payable on such distribution if the amounts to which the holder of the
outstanding share of Series D Preferred Stock and the holders of outstanding
shares of such other Parity Securities are entitled were paid in full.
(b) For the purpose of this Article Fourth, neither the voluntary sale,
conveyance, lease, exchange, or transfer (for cash, shares of stock, securities,
or their consideration) of all or substantially all the property or assets of
the Corporation or the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution, or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
lease, exchange, or transfer shall be in connection with a dissolution or
winding up of the business of the Corporation.
(v) Redemption. The share of Series D Preferred Stock is not redeemable by
the Corporation.
Conversion.
(a) Subject to and upon compliance with the provisions of this Section
(vi), the holder of the share of Series D Preferred Stock shall have the right,
at such holder's option, at any time, to convert such share into 1,157,028
shares of the Corporation's Common Stock. The shares issued pursuant to the
conversion shall be fully paid and non-assessable shares of Common Stock of the
Corporation.
(b) (i) In order to exercise the conversion privilege, the holder of the
share of Series D Preferred Stock shall surrender the certificate representing
such share at the office of the transfer agent for the Series D Preferred Stock,
appointed for such purpose by the Corporation, with the Notice of Election to
Convert on the back of said certificate completed and signed. Unless the shares
of Common Stock issuable on conversion are to be issued in the same name in
which such share of Series D Preferred Stock is registered, the share
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder or such
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax.
(ii) As promptly as practicable after the surrender of the certificate for
the share of Series D Preferred Stock as aforesaid, the shall issue and shall
deliver at such office to such holder, or on his written order, a certificate(s)
for the number of full shares of Common Stock issuable upon the conversion of
such share in accordance with the provisions of this Section (vi).
(iii) The conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificate for the
share of Series D Preferred Stock shall have been surrendered and such notice
<PAGE>
received by the Corporation as aforesaid, and the person(s) in whose name(s) any
certificate(s) for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder(s) of record of the shares represented
thereby at such time on such date, unless the stock transfer books of the
Corporation shall be closed on that date, in which event such person(s) shall be
deemed to have become such holder(s) of record at the close of business on the
next succeeding day on which such stock transfer books are open, and such notice
is received by the Corporation. All shares of Common Stock delivered upon
conversion of the Series D Preferred Stock will, upon delivery, be duly and
validly issued and fully paid and non-assessable, free of all liens and charges
and not subject to any preemptive rights.
(c) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common stock held in
its treasury, or both, for the purposes of effecting the conversion of the
Series D Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of the outstanding share of Series D Preferred Stock not
theretofore converted. For purposes of this subsection (c), the number of shares
of Common Stock which shall be deliverable upon the conversion of the
outstanding share of Series D Preferred Stock shall be 1,157,028 .
(vii) Voting Rights.
(a) The holder of the Series D Preferred Stock shall have the right to vote
at all meetings of the stockholders of the Corporation, or consent in writing in
lieu of voting, or otherwise, solely for the election of the Corporation's Board
of Directors.
(b) At such times as the shares of Series D Preferred Stock is outstanding,
the Board of Directors shall be comprised of such odd number of Directors as
shall be fixed by the Board of Directors or as stated in the Corporation's
Certificate of Incorporation, provided however, that such number of Directors
shall not be less than three (3).
(c) The holder of the share of Series D Preferred Stock, voting as a
separate class, shall have the sole right to vote for or consent in writing in
lieu of voting, and elect two-thirds (2/3) of the Directors of the Corporation,
who shall be known as the Preferred Directors, and to remove any Preferred
Directors with or without cause at any time and to fill all vacancies of
Preferred Directors.
(d) So long as any shares of the Series D Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series D Preferred
Stock, voting as a class, vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series D Preferred Stock, (ii) increase or decrease the par value
of the Series D Preferred Stock, or (iii) alter the preferences, powers, or
rights of the Series D Preferred Stock so as to affect them adversely.
C. Series E Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series E Preferred Stock" which shall be
issued in classes, the "Series E Class I Preferred Stock (the "Series E Class
I") and the "Series E Class II Preferred Stock (the "Series E Class II"). The
number of shares of Series E Preferred Stock authorized hereby shall be an
aggregate of 2,000,000 shares, 1,900,000 of which are designated as Series E
Class I and 100,000 of which are designated as Series E Class II.
(ii) Rank. The Series E Preferred Stock shall, with respect to dividend
<PAGE>
rights and rights on liquidation, winding up, and dissolution, rank (a) junior
to any other Senior Securities established by the Board of Directors and, if
required by Section vii, approved by the affirmative vote of the holders of a
majority of the shares of the Series E Preferred Stock, the terms of which shall
specifically provide that such series shall rank prior to the Series E Preferred
Stock, (b) on a parity with any other Parity Securities established by the Board
of Directors, the terms of which shall specifically provide that such series
shall rank on a parity with the Series E Preferred Stock, and (c) prior to the
Series D Preferred Stock and any other Junior Securities of the Corporation.
(iii) Dividends.
(a) The holders of the shares of the Series E 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
$1.00 per share. The dividend is payable within 90 days of each year anniversary
thereof (the "Series E Dividend Payment Date"), in preference to dividends on
the Junior Securities. Such dividend shall be paid to the holder of record at
the close of business on the date ten business days prior to the Series E
Dividend Payment Dates, which dividend may be paid in cash or kind, at the
discretion of the Corporation. Each of such dividends shall be fully cumulative
and shall accrue (whether or not declared), without interest, from the date such
dividends are payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
which have accrued (whether or not declared) on any Senior Securities, no
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the shares of the Series E Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment, or setting apart for payment, all accrued and unpaid dividends on all
outstanding shares of Senior Securities shall have been or are declared and paid
or set apart for payment, without interest. No dividends shall be declared or
paid or set apart for payment on any Parity or Junior securities for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series E Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the shares
of the Series E Preferred Stock and any other Parity Securities, all dividends
declared upon shares of the Series E Preferred Stock and any other Parity
Securities shall be declared pro rata so that the amount of dividends declared
per share on the Series E Preferred Stock and such other Parity Securities shall
in all cases bear to each other the same ratio that accrued dividends per share
on the Series E Preferred Stock and such other Parity Securities bear to each
other. No interest or sum of money in lieu of interest shall be payable in
respect of any dividend payment or payments on the Series E Preferred Stock or
any other Parity Securities which may be in arrears.
(c) Holders of the shares of the Series E Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (iii)(a) hereof in preference
to and in priority over any dividends upon the Series D Preferred Stock and any
other Junior Securities.
(d) Subject to the foregoing provisions of this Section (iii), the Board of
Directors may declare, and the Corporation may pay or set apart for payment,
dividends and other distributions on any of the Junior Securities and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights, or options exercisable for or convertible into any of the Junior
Securities, and the holders of the shares of the Series E Preferred Stock shall
not be entitled to share therein.
(iv) Liquidation Preference.
<PAGE>
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holders of shares of Series
E Preferred Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1.00 per share for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holder of the outstanding shares
of the Series E Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, if any, shall have been paid in full. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holders of the outstanding shares of the Series E Preferred Stock or any
other Parity Securities, then the holders of all such shares shall share ratably
in such distribution of assets in accordance with the amount which would be
payable on such distribution if the amounts to which the holders of the
outstanding shares of Series E Preferred Stock and the holders of outstanding
shares of such other Parity Securities are entitled were paid in full.
(b) For the purposes of this Article Fourth, neither the voluntary sale,
conveyance, lease, exchange, or transfer (for cash, shares of stock, securities,
or their consideration) of all or substantially all the property or assets of
the Corporation or the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution, or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
lease, exchange, or transfer shall be in connection with a dissolution or
winding up of the business of the Corporation.
(v) Redemption. The shares of Series E Preferred Stock are not redeemable
by the Corporation.
(vi) Conversion.
(a) Subject to and upon compliance with the provisions of this Section
(vi), the holder of a share of Series E Preferred Stock designated as Class I
Series E Preferred Stock shall have the right, at such holder's option,
terminating five years from issuance, to convert such share into twenty full
paid and non-assessable shares of Common Stock of the Corporation. A holder of a
share of Series E Class I shall have the right, at such holder's option to
convert such share immediately upon issuance. A holder of the Series E Class II
shall have the right to convert such share, at such holder's option, at any time
commencing two years from issuance.
(b) The holders of shares of the Series E Preferred Stock at the close of
business on a Series E Dividend Payment Date shall be entitled to receive the
dividend payable on such shares on the corresponding Series E Dividend Date
notwithstanding the conversion thereof or the Corporation's default in payment
of the dividend due on such Series E Dividend Payment Date (except that holders
of shares called for redemption on a redemption date between such record date
and the Series E Dividend Payment Date shall not be entitled to receive such
dividend on such dividend payment date). However, shares of Series E Preferred
Stock surrendered for conversion during the period between the close of business
on any Series E Dividend Payment Date and the opening of business on the
corresponding Series E Dividend Payment Date (except shares called for
redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the dividend payable on such shares on such Series
E Dividend Payment Date. A holder of shares of Series E Preferred Stock on a
Series E Dividend Payment Date who (or whose transferee) surrenders any of such
shares for conversion into shares of Common Stock on a Series E Dividend Payment
Date will receive the dividend payable by the Corporation on such shares of
Series E Preferred Stock on such date, and the converting holder need not
include payment in the amount of such dividend upon surrender of shares of
<PAGE>
Series E Preferred Stock for conversion. Except as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion.
(c) (i) In order to exercise the conversion privilege, the holders of each
share of Series E Preferred Stock to be converted shall surrender the
certificate representing such share at the office of the transfer agent for the
Series E Preferred Stock, appointed for such purpose by the Corporation, with
the Notice of Election to Convert on the back of said certificate completed and
signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series E Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender of the certificate for
shares of Series E Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate(s) for the number of full shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of this Section
(iv).
(iii) Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for shares
of Series E Preferred Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the person(s) in whose name(s) any
certificate(s) for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder(s) of record of the shares represented
thereby at such time on such date, unless the stock transfer books of the
Corporation shall be closed on that date, in which event such person(s) shall be
deemed to have become such holder(s) of record at the close of business on the
next succeeding day on which such stock transfer books are open, and such notice
is received by the Corporation. All shares of Common Stock delivered upon
conversion of the Series E Preferred Stock will, upon delivery, be duly and
validly issued and fully paid and non-assessable, free of all liens and charges
and not subject to any preemptive rights.
(d) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common stock held in
its treasury, or both, for the purposes of effecting conversions of the Series E
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series E Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Series E Preferred Stock shall be computed as if at the time of computation
of all such outstanding shares were held by a single holder.
(vii) Voting Rights. The holders of record of shares of the Series E
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section (vii)(a) or as otherwise provided by law.
(a) So long as any shares of the Series E Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series E Preferred
Stock, voting as a class, vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series E Preferred Stock, (ii) increase or decrease the par value
of the Series E Preferred Stock or (iii) alter the preferences, powers or rights
of the Series E Preferred Stock so as to affect them adversely.
<PAGE>
(b) In exercising the voting rights set forth in this Section (vii), each
share of Series E Preferred Stock shall have one vote per share.
D. Common Stock.
(i) Dividends. Subject to the dividend and liquidation rights of the Series
D Preferred Stock and the Series E Preferred Stock, the holders of Common Stock
shall be entitled to share equally all dividends declared and paid by the
Corporation.
(ii) Voting. The holders of record of Common Stock shall have one vote, on
all matters upon which stockholders of the Corporation may vote, for each share
of Common Stock held by them.
(iii) Dissolution, Liquidation, Etc. In the event of the dissolution,
liquidation, or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation and
after the payment to the holders of the Preferred Stock as provided for in this
Certificate of Incorporation, the remaining assets of the Corporation shall be
distributed to the holders of Common Stock.
FIFTH:
The amendments to the Certificate of Incorporation set forth above were
adopted by written consent of the Corporation's majority shareholder on the 20th
day of June 1996.
IN WITNESS WHEREOF, the undersigned President of this Corporation has
executed this Certificate of Amendment on this 8th day of August 1996.
PLAY CO. TOYS & ENTERTAINMENT CORP.
Richard Brady, President
Angela Burnett, Secretary
Exhibit 3.2(d)
Amendment to Certificate of Incorporation of the Company, filed March 24, 1997
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PLAY CO. TOYS & ENTERTAINMENT CORP.
Under Section 242 of the Delaware Corporation Law:
The undersigned, for the purpose of amending the Certificate of
Incorporation of Play Co. Toys & Entertainment Corp., does hereby certify and
set forth:
<PAGE>
FIRST:
The name of the Corporation is
PLAY CO. TOYS & ENTERTAINMENT CORP.
SECOND:
The Certificate of Incorporation was filed by the Department of State on
June 15, 1994.
THIRD:
The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to (i) increase the authorized
shares of the Series E Preferred Stock to 4,000,000, (ii) increase the number of
authorized shares of Series E Class I Preferred Stock from 1,900,000 to
3,900,000 shares and (iii) to eliminate the designation of the Series D
Preferred Stock. The Certificate of Incorporation of this Corporation is amended
by changing "Article FOURTH", so that, as amended, said Article shall read as
follows:
FOURTH:
A. Authorized Capital Stock. The total number of shares of all classes of
capital stock which this Corporation shall have authority to issue is FORTY-FOUR
MILLION (44,000,000) share consisting of FORTY MILLION (40,000,000) shares of
Common Stock, par value $.01 per share (hereinafter, the "Common Stock"), and
FOUR MILLION (4,000,000) shares of Preferred Stock, par value $.01 per share
(hereinafter, the "Preferred Stock"), of which 4,000,000 shares have been
designated, "Series E Preferred Stock", to be issued in classes, of which
3,900,000 shall be designated as the "Series E Class I Preferred Stock" and
100,000 shares as the "Series E Class II Preferred Stock", the relative rights,
preferences and limitations of which are as set forth in sub-paragraph (B) of
this Article FOURTH.
B. Series E Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $.01 per share, shall be the "Series E Preferred Stock", which shall be
issued in classes, the "Series E Class I Preferred Stock" (the "Series E Class
I") and the "Series E Class II Preferred Stock" (the "Series E Class II"). The
number of shares of Series E Preferred Stock authorized hereby shall be an
aggregate of 4,000,000 shares, 3,900,000 designated as Series E Class I and
100,000 designated as Series E Class II.
(ii) Rank. The Series E Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding up and dissolution, rank (a) junior to
any other Senior Securities established by the Board of Directors and, if
required by Section vii, approved by the affirmative vote of the holders of a
majority of the shares of the Series E Preferred Stock, the terms of which shall
specifically provide that such series shall rank prior to the Series E Preferred
Stock, (b) on a parity with any other Parity Securities established by the Board
of Directors, the terms of which shall specifically provide that such series
shall rank on a parity with the Series E Preferred Stock, and (c) prior to any
other Junior Securities of the Corporation.
(iii) Dividends.
(a) The holders of the shares of the Series E Preferred Stock shall be
entitled to receive, when and as declares by the Board of Directors, out of
funds legally available for the payment of dividends, cumulative dividends at
<PAGE>
$1.00 per share. The dividend is payable within 90 days of each year anniversary
thereof (the "Series E Dividend Payment Date"), in preference to dividends on
the Junior Securities. Such dividend shall be paid to the holder of record at
the close of business on the date ten business days prior to the Series E
Dividend Payment Dates, which dividend may be paid in cash or kind, at the
discretion of the Corporation. Each of such dividends shall be fully cumulative
and shall accrue (whether or not declared), without interest, from the date such
dividends are payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
which have accrued (whether or not declared) on any Senior Securities, no
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the shares of the Series E Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment or setting apart for payment, all accrued and unpaid dividends on all
outstanding shares of Senior Securities shall have been or are declared and paid
or set apart for payment, without interest. No dividends shall be declared or
paid or set apart for payment on any Parity or Junior securities for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series E Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the shares
of the Series E Preferred Stock and any other Parity Securities shall be
declared pro rata so that the amount of dividends declared per share on the
Series E Preferred Stock and such other Parity Securities shall in all cases
bear to each other the same ratio that accrued dividends per share on the Series
E Preferred Stock and such other Parity securities bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series E Preferred Stock or any other
Parity Securities which may be in arrears.
(c) Holders of the shares of the Series E Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (iii)(a) hereof in preference
to and in priority over any dividends upon the Series D Preferred Stock and any
other Junior Securities.
(d) Subject to the foregoing provisions of this Section (iii) the Board of
Directors may declare, and the Corporation may pay or set apart for payment,
dividends and other distributions on any of the Junior Securities, and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights or options exercisable for or convertible into any of the Junior
Securities, and the holders of shares of the Series E Preferred Stock shall not
be entitled to share therein
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation, the holders of shares of Series
E Preferred Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1.00 per share for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holder of the outstanding shares
of the Series E Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, if any, shall have been paid in full. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holders of the outstanding shares of the Series E Preferred Stock or any
other Parity Securities, then the holders of all such shares shall share ratably
in such distribution of assets in accordance with the amount which would be
payable on such distribution if the amounts to which the holders of the
<PAGE>
outstanding shares of Series E Preferred Stock and the holders of outstanding
shares of such other Parity Securities are entitled were paid in full.
(b) For the purposes of this Article FOURTH, neither the voluntary sale,
conveyance, lease, exchange or transfer (for cash, shares of stock, securities
or their consideration) of all or substantially all the property or assets of
the Corporation or the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
lease, exchange or transfer shall be in connection with a dissolution or winding
up of the business of the Corporation.
(v) Redemption. The shares of Series E Preferred Stock is not redeemable by
the Corporation.
(vi) Conversion.
(a) Subject to and upon compliance with the provisions of this Section
(vi), the holder of a share of Series E Preferred Stock designated shall have
the right, at such holder's option, terminating five years from issuance, to
convert such share into 20 fully paid and non-assessable shares of Common Stock
of the Corporation. A holder of a share of Series E Class I shall have the
right, at such holder's option to convert such share immediately upon issuance.
A holder of the Series E Class II shall have the right to convert such share, at
such holder's option, at any time commencing two years from issuance.
(b) The holders of shares of the Series E Preferred Stock at the close of
business on a Series E Dividend Payment Date shall be entitled to receive the
dividend payable on such shares on the corresponding Series E Dividend Date
withholding the conversion thereof or the Corporation's default in payment of
the dividend due on such Series E Dividend Payment Date (except that holders of
shares called for redemption on a redemption date between such record date and
the Series E Dividend Payment Date shall not be entitled to receive such
dividend on such dividend payment date). However, shares of Series E Preferred
Stock surrendered for conversion during the period between the close of business
on any Series E Dividend Payment Date and the opening of business on the
corresponding Series E Dividend Payment Date (except shares called for
redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the dividend payable on such shares on such Series
E Dividend Payment Date. A holder of shares of Series E Preferred Stock on a
Series E Dividend Payment Date who (or whose transferee) surrenders any of such
shares for conversion into shares of Common Stock on a Series E Dividend Payment
Date will receive the dividend payable by the Corporation on such shares of
Series E Preferred Stock on such date, and the converting holder need not
include payment in the amount of such dividend upon surrender of shares of
Series E Preferred Stock for conversion. Exchange as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion.
(c)(i) In order to exercise the conversion privilege, the holders of each
share of Series E Preferred Stock to be converted shall surrender the
certificate representing such share at the office of the transfer agent for the
Series E Preferred Stock, appointed for such purpose by the Corporation, with
the Notice of Election to Convert on the back of said certificate completed and
signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series E Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
<PAGE>
(ii) As promptly as practicable after the surrender of the certificates for
shares of Series E Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions of
this Section (iv).
(iii) Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for shares
of Series E Preferred Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date,
unless the stock transfer books of the Corporation shall be closed on that date,
in which event such person or persons shall be deemed to have become such holder
or holders of record at the close of business on the next succeeding day on
which such stock transfer books are open, and such notice received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
E Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(d) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting conversions of the Series E
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series E Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Series E Preferred Stock shall be computed as if at the time of computation
of all such outstanding share were held by a single holder.
(vii) Voting Rights. The holders of record of shares of the Series E
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section (vii)(a) or as otherwise provided by law.
(a) So long as any shares of the Series D Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series D Preferred
Stock, voting as a class, to vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series D Preferred Stock, (ii) increase or decrease the par value
of the Series D Preferred Stock or (iii) alter the preferences, powers or rights
of the Series D Preferred Stock so as to affect them adversely.
(b) In exercising the voting rights set forth in this Section vii, each
share of Class A Preferred Stock shall have one vote per share.
C. Common Stock.
(i) Dividends. Subject to the dividend and liquidation rights of the Series
D Preferred Stock and the Series E Preferred Stock, the holders of Common Stock
shall be entitled to share equally all dividends declared and paid by the
Corporation.
(ii) Voting. The holders of record of Common Stock shall have one vote, on
all matters upon which stockholders of the Corporation may vote, for each share
of the Common Stock held by them.
(iii) Dissolution, Liquidation, Etc. In the event of the dissolution,
<PAGE>
liquidation or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation and
after the payment to the holders of the Preferred Stock as provided for in this
Certificate of Incorporation, the remaining assets of the Corporation shall be
distributed to the holders of Common Stock.
FIFTH:
The amendment to the Articles of Incorporation of the Corporation set forth
above was adopted by written consent of the Corporation's majority shareholder
on the 20th day of June, 1996.
IN WITNESS WHEROF, the undersigned President of this Corporation has
executed this Certificate of Amendment on this 20th day of February, 1997.
PLAY CO. TOYS & ENTERTAINMENT CORP.
- --------------------
Richard Brady, President
- --------------------
Angela Burnett, Secretary
Exhibit 3.2(e)
Amendment to Certificate of Incorporation of the Company, filed May 29, 1998
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PLAY CO. TOYS & ENTERTAINMENT CORP.
Under Section 242 of the Delaware Corporation Law:
The Undersigned, for the purpose of amending the Certificate of
Incorporation of Play Co. Toys & Entertainment Corp., does hereby certify and
set forth:
FIRST:
The name of the Corporation is
PLAY CO. TOYS & ENTERTAINMENT CORP.
SECOND:
The Certificate of Incorporation was filed by the Department of State
on June 15, 1994.
THIRD:
The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is (i) to increase the authorized
number of shares of Preferred Stock from 10,000,000 to 15,500,000 shares,
5,500,000 of which shares shall be designated Series F Preferred Stock; and (ii)
to increase the number of authorized shares of Common Stock from 40,000,000 to
51,000,000. The Certificate of Incorporation of this Corporation is amended by
<PAGE>
changing "Article FOURTH," so that, as amended, said Article shall read as
follows:
"FOURTH:
A. Authorized Capital Stock. The total number of shares of all classes
of capital stock which this Corporation shall have authority to issue is SIXTY
SIX MILLION FIVE HUNDRED THOUSAND (66,500,000) shares consisting of FIFTY ONE
MILLION (51,000,000) shares of Common Stock, par value $0.01 per share (the
"Common Stock"), and FIFTEEN MILLION FIVE HUNDRED THOUSAND (15,500,000) shares
of Preferred Stock, par value $0.01 per share (the "Preferred Stock") of which
TEN MILLION (10,000,000) shares are designated "Series E Preferred Stock," and
FIVE MILLION FIVE HUNDRED THOUSAND (5,500,000) shares are designated "Series F
Preferred Stock," the relative rights, preferences, and limitations of which are
as set forth in subparagraph of this Article FOURTH.
B. Series E Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series E Preferred Stock." The number of
shares of Series E Preferred Stock authorized hereby shall be 10,000,000 shares.
(ii) Rank. The Series E Preferred Stock shall, with respect to rights on
liquidation, winding up, and dissolution, rank (a) junior to any other Senior
Securities established by the Board of Directors and, if required by Section
(vii), approved by the affirmative vote of the holders of a majority of the
shares of the Series E Preferred Stock, the terms of which shall specifically
provide that such series shall rank prior to the Series E Preferred Stock; (b)
on a parity with any other Parity Securities established by the Board of
Directors, the terms of which shall specifically provide that such series shall
rank on a parity with the Series E Preferred Stock; and (c) prior to any other
Junior Securities of the Corporation.
(iii) Dividends.
The Series E Preferred Stock shall not have any right to dividends. (iv)
Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holders of the shares of
Series E Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1.00 per share for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holders of the outstanding shares
of the Series E Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, if any, shall have been paid in full. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holders of the outstanding shares of the Series E Preferred Stock or any
other Parity Securities, then the holders of all such shares shall share ratably
in such distribution of assets in accordance with the amount which would be
payable on such distribution if the amounts to which the holders of the
outstanding shares of Series E Preferred Stock and the holders of outstanding
shares of such other Parity Securities are entitled were paid in full.
(b) For the purposes of this Article FOURTH, neither the voluntary sale,
conveyance, lease, exchange, nor transfer (for cash, shares of stock,
securities, or their consideration) of all or substantially all of the property
or assets of the Corporation or the consolidation or merger of the Corporation
with one or more other corporations shall be deemed to be a liquidation,
dissolution, or winding up, voluntary or involuntary, unless such voluntary
<PAGE>
sale, conveyance, lease, exchange, or transfer shall be in connection with a
dissolution or winding up of the business of the Corporation.
(v) Redemption. The shares of Series E Preferred Stock are not redeemable
by the Corporation.
(vi) Conversion.
(a) Subject to, and upon compliance with, the provisions of this Section
(vi), the holder of a share of Series E Preferred Stock designated shall have
the right, at such holder's option, terminating five years from issuance, to
convert such share into 6 fully paid and non-assessable shares of Common Stock
of the Corporation. A holder of the Series E Preferred Stock shall have the
right to convert such share, at such holder's option, at any time commencing two
years from issuance.
(b) (1) In order to exercise the conversion privilege, the holders of each
share of Series E Preferred Stock to be converted shall surrender the
certificates representing such shares at the office of the transfer agent for
the Series E Preferred Stock, appointed for such purpose by the Corporation,
with the Notice of Election to Convert on the back of said certificate completed
and signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series E Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
(2) As promptly as practicable after the surrender of the certificates for
shares of Series E Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions of
this Section (iv).
(3) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series E Preferred Stock shall have been surrendered and such notice shall have
been received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open and such notice is received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
E Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(c) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting conversions of the Series E
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series E Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Series E Preferred Stock shall be computed as if at the time of computation
all such outstanding shares were held by a single holder.
<PAGE>
(vii) Voting Rights. The holders of record of shares of the Series E
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section (vii)(a) or as otherwise provided by law.
(a) So long as any shares of the Series E Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series E Preferred
Stock, voting as a class, vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series E Preferred Stock; (ii) increase or decrease the par value
of the Series E Preferred Stock; or (iii) alter the preferences, powers, or
rights of the Series E Preferred Stock so as to affect them adversely.
(b) In exercising the voting rights set forth in this Section (vii), each
share of Series E Preferred Stock shall have one vote per share.
C. Series F Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series F Preferred Stock." The number of
shares of Series F Preferred Stock authorized hereby shall be 5,500,000 shares.
(ii) Rank. The Series F Preferred Stock shall, with respect to rights on
liquidation, winding up, and dissolution, rank (a) junior to any other Senior
Securities established by the Board of Directors, including the Series E
Preferred Stock, and, if required by Section (vii), approved by the affirmative
vote of the holders of a majority of the shares of the Series F Preferred Stock,
the terms of which shall specifically provide that such series shall rank prior
to the Series F Preferred Stock; (b) on a parity with any other Parity
Securities established by the Board of Directors, the terms of which shall
specifically provide that such series shall rank on a parity with the Series F
Preferred Stock; and (c) prior to any other Junior Securities of the
Corporation.
(iii) Dividends.
(a) 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. The dividend is payable quarterly, subsequent to the initial
payment date declared by the Board of Directors (the "Series F Dividend Payment
Dates"), in preference to dividends on the Junior Securities. Such dividend
shall be paid to the holder of record by the close of business on the date
thirty business days after the Series F Dividend Payment Dates, which dividend
may be paid in cash or kind, at the discretion of the Corporation. Each of such
dividends shall be fully cumulative and shall accrue (whether or not declared),
without interest, from the date such dividends are payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
which have accrued (whether or not declared) on any Senior Securities, no
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the shares of the Series F Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment, or setting apart for payment, all accrued and unpaid dividends on all
outstanding shares of Senior Securities shall have been or are declared and paid
or set apart for payment, without interest. No dividends shall be declared or
paid or set apart for payment on any Parity or Junior securities for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series F Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the shares
<PAGE>
of the Series F Preferred Stock and any other Parity Securities, the Corporation
distribute the dividend pro rata so that the amount of dividends declared per
share on the Series F Preferred Stock and such other Parity Securities shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Series F Preferred Stock and such other Parity securities bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series F Preferred Stock or
any other Parity Securities which may be in arrears.
(c) Holders of the shares of the Series F Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (iii)(a) hereof in preference
to and in priority over any dividends of other Parity Securities and any other
Junior Securities.
(d) Subject to the foregoing provisions of this Section (iii) the Board of
Directors may declare, and the Corporation may pay or set apart for payment
dividends and other distributions on any of the Junior Securities and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights, or options exercisable for or convertible into any of the Junior
Securities, and the holders of shares of the Series F Preferred Stock shall not
be entitled to share therein.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holders of the shares of
Series F Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $3.00 per share for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holders of the outstanding shares
of the Series F Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, including the Series E Preferred Stock, shall have been paid
in full. If the assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the holders of the outstanding shares of the
Series F Preferred Stock or any other Parity Securities, then the holders of all
such shares shall share ratably in such distribution of assets in accordance
with the amount which would be payable on such distribution if the amounts to
which the holders of the outstanding shares of Series F Preferred Stock and the
holders of outstanding shares of such other Parity Securities were paid in full.
(b) For the purposes of this Article FOURTH, neither the voluntary sale,
conveyance, lease, exchange, nor transfer (for cash, shares of stock,
securities, or their consideration) of all or substantially all of the property
or assets of the Corporation or the consolidation or merger of the Corporation
with one or more other corporations shall be deemed to be a liquidation,
dissolution, or winding up, voluntary or involuntary, unless such voluntary
sale, conveyance, lease, exchange, or transfer shall be in connection with a
dissolution or winding up of the business of the Corporation.
(v) Redemption.
(a) Notice. The Corporation may, at any time commencing one years from
issuance, redeem all of the issued and outstanding shares of the Series F
Preferred Stock for a per share price of $3.00 (the "Redemption Price"), plus
accrued but unpaid dividends, upon the terms set forth below. If the Corporation
desires to redeem the Series F Preferred Stock, it shall deliver notice (the
"Redemption Notice") by regular mail to each holder of record of the Series F
Preferred Stock at the address of each holder as it appears on the books of the
Corporation. Dividends shall cease accruing on the date of the Redemption
Notice.
<PAGE>
(b) Delivery of Certificates and Payment. On or before the tenth day after
the date of the Redemption Notice (the "Period"), each holder of the Series F
Preferred Stock shall deliver to the secretary of the Corporation at its
principal office his certificate for the Series F Preferred Stock, duly endorsed
in blank (or accompanied by proper instruments of transfer). Upon such surrender
the holder thereof shall be entitled to receive payment of the Redemption Price
for each share of the Series F Preferred Stock so surrendered. The Corporation
shall make such payment within five days after the later of (i) the date on
which the holder delivered such certificates or (ii) the last day of the Period.
(vi) Conversion.
(a) Subject to, and upon compliance with, the provisions of this Section
(vi), the holder of a share of Series F Preferred Stock designated shall have
the right, at such holder's option, to convert such share into two fully paid
and non-assessable shares of Common Stock of the Corporation, at any time
commencing six months from issuance.
(b) (1) In order to exercise the conversion privilege, the holders of each
share of Series F Preferred Stock to be converted shall surrender the
certificates representing such shares at the office of the transfer agent for
the Series F Preferred Stock, appointed for such purpose by the Corporation,
with the Notice of Election to Convert on the back of said certificate completed
and signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series F Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
(2) As promptly as practicable after the surrender of the certificates for
shares of Series F Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions of
this Section (vi).
(3) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series F Preferred Stock shall have been surrendered and such notice shall have
been received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open and such notice is received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
F Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(c) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting conversions of the Series F
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series F Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
<PAGE>
of Series F Preferred Stock shall be computed as if at the time of computation
all such outstanding shares were held by a single holder.
(vii) Voting Rights. The holders of record of shares of the Series F
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section (vii)(a) or as otherwise provided by law.
(a) So long as any shares of the Series F Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series F Preferred
Stock, voting as a class, vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series F Preferred Stock; (ii) increase or decrease the par value
of the Series F Preferred Stock; or (iii) alter the preferences, powers, or
rights of the Series F Preferred Stock so as to affect them adversely.
(b) In exercising the voting rights set forth in this Section (vii), each
share of Series F Preferred Stock shall have one vote per share.
D. Common Stock
(i) Dividends. Subject to the liquidation rights of the Preferred Stock,
the holders of Common Stock shall be entitled to share equally all dividends
declared and paid by the Corporation.
(ii) Voting. The holders of record of Common Stock shall have one vote, on
all matters upon which stockholders of the Corporation may vote, for each share
of the Common Stock held by them.
(iii) Dissolution, Liquidation, Etc. In the event of the dissolution,
liquidation, or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation and
after the payment to the holders of the Preferred Stock as provided for in this
Certificate of Incorporation, the remaining assets of the Corporation shall be
distributed to the holders of the Common Stock.
FIFTH: The amendment to the Articles of Incorporation of the Corporation
set forth above was adopted by written consent of the Corporation's majority
shareholder on the 5th day of April, 1998.
IN WITNESS WHEROF, the undersigned President of this Corporation has
executed this Certificate of Amendment on this 28th day of May, 1998.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By:
Richard Brady, President
By:
James Frakes, Secretary
Exhibit 3.2(f)
Amendment to Certificate of Incorporation of the Company, filed May 12, 1999
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PLAY CO. TOYS & ENTERTAINMENT CORP.
Under Section 242 of the Delaware Corporation Law:
The undersigned, for the purpose of amending the Certificate of
Incorporation of Play Co. Toys & Entertainment Corp. (the "Corporation"), does
hereby certify and set forth:
FIRST:
The name of the Corporation is
PLAY CO. TOYS & ENTERTAINMENT CORP.
SECOND:
The Certificate of Incorporation was filed by the Department of State on
June 15, 1994.
THIRD:
The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is (i) to increase the number of
authorized shares of Common Stock, par value $0.01 per share, from 51,000,000 to
160,000,000 and (ii) to increase the authorized number of shares of Series E
Preferred Stock, par value $0.01 per share, from 10,000,000 to 25,000,000.
Accordingly, the Certificate of Incorporation of this Corporation is amended by
changing "Article FOURTH," so that, as amended, said Article shall read as
follows:
FOURTH:
A. Authorized Capital Stock. The total number of shares of all classes of
capital stock which this Corporation shall have authority to issue is
(190,500,000) shares consisting of ONE HUNDRED SIXTY MILLION (160,000,000)
shares of Common Stock, par value $0.01 per share (the "Common Stock"), and
THIRTY MILLION FIVE HUNDRED THOUSAND (30,500,000) shares of Preferred Stock, par
value $0.01 per share (the "Preferred Stock") of which TWENTY-FIVE MILLION
(25,000,000) shares are designated "Series E Preferred Stock" and FIVE MILLION
FIVE HUNDRED THOUSAND (5,500,000) shares are designated "Series F Preferred
Stock," the relative rights, preferences, and limitations of which are as set
forth in subparagraph of this Article FOURTH.
B. Series E Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series E Preferred Stock." The number of
shares of Series E Preferred Stock authorized hereby shall be 25,000,000 shares.
(ii) Rank. The Series E Preferred Stock shall, with respect to rights on
liquidation, winding up, and dissolution, rank (a) junior to any other Senior
Securities established by the Board of Directors and, if required by Section
(vii), approved by the affirmative vote of the holders of a majority of the
shares of the Series E Preferred Stock, the terms of which shall specifically
<PAGE>
provide that such series shall rank prior to the Series E Preferred Stock; (b)
on a parity with any other Parity Securities established by the Board of
Directors, the terms of which shall specifically provide that such series shall
rank on a parity with the Series E Preferred Stock; and (c) prior to any other
Junior Securities of the Corporation.
(iii) Dividends. The Series E Preferred Stock shall not have any right to
dividends.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holders of the shares of
Series E Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1.00 per share for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holders of the outstanding shares
of the Series E Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, if any, shall have been paid in full. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holders of the outstanding shares of the Series E Preferred Stock or any
other Parity Securities, then the holders of all such shares shall share ratably
in such distribution of assets in accordance with the amount which would be
payable on such distribution if the amounts to which the holders of the
outstanding shares of Series E Preferred Stock and the holders of outstanding
shares of such other Parity Securities are entitled were paid in full.
(b) For the purposes of this Article FOURTH, neither the voluntary sale,
conveyance, lease, exchange, nor transfer (for cash, shares of stock,
securities, or their consideration) of all or substantially all of the property
or assets of the Corporation or the consolidation or merger of the Corporation
with one or more other corporations shall be deemed to be a liquidation,
dissolution, or winding up, voluntary or involuntary, unless such voluntary
sale, conveyance, lease, exchange, or transfer shall be in connection with a
dissolution or winding up of the business of the Corporation.
(v) Redemption. The shares of Series E Preferred Stock are not redeemable
by the Corporation.
(vi) Conversion.
(a) Subject to, and upon compliance with, the provisions of this Section
(vi), the holder of a share of Series E Preferred Stock designated shall have
the right, at such holder's option, at any time commencing two years from
issuance and terminating five years from issuance, to convert such share into 6
fully paid and non-assessable shares of Common Stock of the Corporation.
(b) (1) In order to exercise the conversion privilege, the holders of each
share of Series E Preferred Stock to be converted shall surrender the
certificates representing such shares at the office of the transfer agent for
the Series E Preferred Stock, appointed for such purpose by the Corporation,
with the Notice of Election to Convert on the back of said certificate completed
and signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series E Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
(2) As promptly as practicable after the surrender of the certificates for
<PAGE>
shares of Series E Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions of
this Section (iv).
(3) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series E Preferred Stock shall have been surrendered and such notice shall have
been received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open and such notice is received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
E Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(c) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting conversions of the Series E
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series E Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Series E Preferred Stock shall be computed as if at the time of computation
all such outstanding shares were held by a single holder.
(vii) Voting Rights. The holders of record of shares of the Series E
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section (vii)(a) or as otherwise provided by law.
(a) So long as any shares of the Series E Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series E Preferred
Stock, voting as a class, vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series E Preferred Stock; (ii) increase or decrease the par value
of the Series E Preferred Stock; or (iii) alter the preferences, powers, or
rights of the Series E Preferred Stock so as to affect them adversely.
(b) In exercising the voting rights set forth in this Section (vii), each
share of Series E Preferred Stock shall have one vote per share.
C. Series F Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series F Preferred Stock." The number of
shares of Series F Preferred Stock authorized hereby shall be 5,500,000 shares.
(ii) Rank. The Series F Preferred Stock shall, with respect to rights on
liquidation, winding up, and dissolution, rank (a) junior to any other Senior
Securities established by the Board of Directors, including the Series E
Preferred Stock, and, if required by Section (vii), approved by the affirmative
vote of the holders of a majority of the shares of the Series F Preferred Stock,
the terms of which shall specifically provide that such series shall rank prior
to the Series F Preferred Stock; (b) on a parity with any other Parity
<PAGE>
Securities established by the Board of Directors, the terms of which shall
specifically provide that such series shall rank on a parity with the Series F
Preferred Stock; and (c) prior to any other Junior Securities of the
Corporation.
(iii) Dividends.
(a) 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. The dividend is payable quarterly, subsequent to the initial
payment date declared by the Board of Directors (the "Series F Dividend Payment
Dates"), in preference to dividends on the Junior Securities. Such dividend
shall be paid to the holder of record by the close of business on the date
thirty business days after the Series F Dividend Payment Dates, which dividend
may be paid in cash or kind, at the discretion of the Corporation. Each of such
dividends shall be fully cumulative and shall accrue (whether or not declared),
without interest, from the date such dividends are payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
which have accrued (whether or not declared) on any Senior Securities, no
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the shares of the Series F Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment, or setting apart for payment, all accrued and unpaid dividends on all
outstanding shares of Senior Securities shall have been or are declared and paid
or set apart for payment, without interest. No dividends shall be declared or
paid or set apart for payment on any Parity or Junior securities for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series F Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the shares
of the Series F Preferred Stock and any other Parity Securities, the Corporation
distribute the dividend pro rata so that the amount of dividends declared per
share on the Series F Preferred Stock and such other Parity Securities shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Series F Preferred Stock and such other Parity securities bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series F Preferred Stock or
any other Parity Securities which may be in arrears.
(c) Holders of the shares of the Series F Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (iii)(a) hereof in preference
to and in priority over any dividends of other Parity Securities and any other
Junior Securities.
(d) Subject to the foregoing provisions of this Section (iii) the Board of
Directors may declare, and the Corporation may pay or set apart for payment
dividends and other distributions on any of the Junior Securities and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights, or options exercisable for or convertible into any of the Junior
Securities, and the holders of shares of the Series F Preferred Stock shall not
be entitled to share therein.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holders of the shares of
Series F Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $3.00 per share for each share outstanding, before any
<PAGE>
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holders of the outstanding shares
of the Series F Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, including the Series E Preferred Stock, shall have been paid
in full. If the assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the holders of the outstanding shares of the
Series F Preferred Stock or any other Parity Securities, then the holders of all
such shares shall share ratably in such distribution of assets in accordance
with the amount which would be payable on such distribution if the amounts to
which the holders of the outstanding shares of Series F Preferred Stock and the
holders of outstanding shares of such other Parity Securities were paid in full.
(b) For the purposes of this Article FOURTH, neither the voluntary sale,
conveyance, lease, exchange, nor transfer (for cash, shares of stock,
securities, or their consideration) of all or substantially all of the property
or assets of the Corporation or the consolidation or merger of the Corporation
with one or more other corporations shall be deemed to be a liquidation,
dissolution, or winding up, voluntary or involuntary, unless such voluntary
sale, conveyance, lease, exchange, or transfer shall be in connection with a
dissolution or winding up of the business of the Corporation.
(v) Redemption.
(a) Notice. The Corporation may, at any time commencing one years from
issuance, redeem all of the issued and outstanding shares of the Series F
Preferred Stock for a per share price of $3.00 (the "Redemption Price"), plus
accrued but unpaid dividends, upon the terms set forth below. If the Corporation
desires to redeem the Series F Preferred Stock, it shall deliver notice (the
"Redemption Notice") by regular mail to each holder of record of the Series F
Preferred Stock at the address of each holder as it appears on the books of the
Corporation. Dividends shall cease accruing on the date of the Redemption
Notice.
(b) Delivery of Certificates and Payment. On or before the tenth day after
the date of the Redemption Notice (the "Period"), each holder of the Series F
Preferred Stock shall deliver to the secretary of the Corporation at its
principal office his certificate for the Series F Preferred Stock, duly endorsed
in blank (or accompanied by proper instruments of transfer). Upon such surrender
the holder thereof shall be entitled to receive payment of the Redemption Price
for each share of the Series F Preferred Stock so surrendered. The Corporation
shall make such payment within five days after the later of (i) the date on
which the holder delivered such certificates or (ii) the last day of the Period.
(vi) Conversion.
(a) Subject to, and upon compliance with, the provisions of this Section
(vi), the holder of a share of Series F Preferred Stock designated shall have
the right, at such holder's option, to convert such share into two fully paid
and non-assessable shares of Common Stock of the Corporation, at any time
commencing six months from issuance.
(b) (1) In order to exercise the conversion privilege, the holders of each
share of Series F Preferred Stock to be converted shall surrender the
certificates representing such shares at the office of the transfer agent for
the Series F Preferred Stock, appointed for such purpose by the Corporation,
with the Notice of Election to Convert on the back of said certificate completed
and signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series F Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
<PAGE>
to pay any transfer or similar tax.
(2) As promptly as practicable after the surrender of the certificates for
shares of Series F Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions of
this Section (vi).
(3) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series F Preferred Stock shall have been surrendered and such notice shall have
been received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open and such notice is received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
F Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(c) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting conversions of the Series F
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series F Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Series F Preferred Stock shall be computed as if at the time of computation
all such outstanding shares were held by a single holder.
(vii) Voting Rights. The holders of record of shares of the Series F
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section (vii)(a) or as otherwise provided by law.
(a) So long as any shares of the Series F Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series F Preferred
Stock, voting as a class, vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series F Preferred Stock; (ii) increase or decrease the par value
of the Series F Preferred Stock; or (iii) alter the preferences, powers, or
rights of the Series F Preferred Stock so as to affect them adversely.
(b) In exercising the voting rights set forth in this Section (vii), each
share of Series F Preferred Stock shall have one vote per share.
D. Common Stock
(i) Dividends. Subject to the liquidation rights of the Preferred Stock,
the holders of Common Stock shall be entitled to share equally all dividends
declared and paid by the Corporation.
(ii) Voting. The holders of record of Common Stock shall have one vote, on
all matters upon which stockholders of the Corporation may vote, for each share
of the Common Stock held by them.
<PAGE>
(iii) Dissolution, Liquidation, Etc. In the event of the dissolution,
liquidation, or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation and
after the payment to the holders of the Preferred Stock as provided for in this
Certificate of Incorporation, the remaining assets of the Corporation shall be
distributed to the holders of the Common Stock.
FIFTH: The amendment to the Articles of Incorporation of the Corporation
set forth above was adopted by majority consent of the Corporation's
shareholders at the Corporation's annual meeting held on May 5, 1999.
IN WITNESS WHEREOF, the undersigned President of this Corporation has
executed this Certificate of Amendment on this 5th day of May, 1999.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By:
Richard Brady, President
By:
James Frakes, Secretary
Exhibit 3.2(g)
Amendment to Certificate of Incorporation of the Company, filed May 25, 1999
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PLAY CO. TOYS & ENTERTAINMENT CORP.
The undersigned, for the purpose of amending the Certificate of
Incorporation of Play Co. Toys & Entertainment Corp., do hereby certify and set
forth:
FIRST: The name of the Corporation is: of Play Co. Toys & Entertainment
Corp.
SECOND: The Certificate of Incorporation was filed by the Department of
State on the 15th day of June, 1994.
THIRD: The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to amend the provisions of "Article
Fourth, Subarticle (C)" to amend certain rights and preferences of the Series F
Preferred Stock so that, as amended, said Subarticle shall read as follows:
"C. Series F Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series F Preferred Stock." The number of
shares of Series F Preferred Stock authorized hereby shall be 5,500,000 shares.
(ii) Rank. The Series F Preferred Stock shall, with respect to rights on
liquidation, winding up, and dissolution, rank (a) junior to any other Senior
Securities established by the Board of Directors, including the Series E
Preferred Stock, and, if required by Section (vii), approved by the affirmative
vote of the holders of a majority of the shares of the Series F Preferred Stock,
the terms of which shall specifically provide that such series shall rank prior
to the Series F Preferred Stock; (b) on a parity with any other Parity
Securities established by the Board of Directors, the terms of which shall
specifically provide that such series shall rank on a parity with the Series F
Preferred Stock; and (c) prior to any other Junior Securities of the
Corporation.
(iii) Dividends.
(a) 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
$0.08 per share. Cumulative dividends are payable upon the earlier of redemption
or conversion of the shares (the "Series F Dividend Payment Dates"), in
preference to dividends on the Junior Securities. Such dividend shall be paid to
the holder of record by the close of business on the date thirty business days
after the Series F Dividend Payment Dates, which dividend may be paid in cash or
in kind, in shares of Series F Preferred Stock, at the discretion of the
Corporation. If paid in kind, the number of shares issuable shall be rounded to
the nearest share, there being no obligation of the Company to make any cash
payments. Each of such dividends shall be fully cumulative and shall accrue
(whether or not declared), without interest, from the date such dividends are
payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
which have accrued (whether or not declared) on any Senior Securities, no
<PAGE>
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the shares of the Series F Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment, or setting apart for payment, all accrued and unpaid dividends on all
outstanding shares of Senior Securities shall have been or are declared and paid
or set apart for payment, without interest. No dividends shall be declared or
paid or set apart for payment on any Parity or Junior securities for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series F Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the shares
of the Series F Preferred Stock and any other Parity Securities, the Corporation
distribute the dividend pro rata so that the amount of dividends declared per
share on the Series F Preferred Stock and such other Parity Securities shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Series F Preferred Stock and such other Parity securities bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series F Preferred Stock or
any other Parity Securities which may be in arrears.
(c) Holders of the shares of the Series F Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (iii)(a) hereof in preference
to and in priority over any dividends of other Parity Securities and any other
Junior Securities.
(d) Subject to the foregoing provisions of this Section (iii) the Board of
Directors may declare, and the Corporation may pay or set apart for payment
dividends and other distributions on any of the Junior Securities and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights, or options exercisable for or convertible into any of the Junior
Securities, and the holders of shares of the Series F Preferred Stock shall not
be entitled to share therein.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holders of the shares of
Series F Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $0.50 per share for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holders of the outstanding shares
of the Series F Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, including the Series E Preferred Stock, shall have been paid
in full. If the assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the holders of the outstanding shares of the
Series F Preferred Stock or any other Parity Securities, then the holders of all
such shares shall share ratably in such distribution of assets in accordance
with the amount which would be payable on such distribution if the amounts to
which the holders of the outstanding shares of Series F Preferred Stock and the
holders of outstanding shares of such other Parity Securities were paid in full.
(b) For the purposes of this Article FOURTH, neither the voluntary sale,
conveyance, lease, exchange, nor transfer (for cash, shares of stock,
securities, or their consideration) of all or substantially all of the property
or assets of the Corporation or the consolidation or merger of the Corporation
with one or more other corporations shall be deemed to be a liquidation,
dissolution, or winding up, voluntary or involuntary, unless such voluntary
sale, conveyance, lease, exchange, or transfer shall be in connection with a
dissolution or winding up of the business of the Corporation.
<PAGE>
(v) Redemption. The shares of Series B Preferred Stock are not redeemable
by the Corporation.
(vi) Conversion.
(a) Subject to, and upon compliance with, the provisions of this Section
(vi), the holder of a share of Series F Preferred Stock so designated shall have
the right, at such holder's option, to convert such share into two fully paid
and non-assessable shares of Common Stock of the Corporation, at any time
commencing on the date the registration statement registering the Series F
Preferred Stock and Common Stock underlying same is declared effective by the
Securities and Exchange Commission.
(b) (1) In order to exercise the conversion privilege, the holders of each
share of Series F Preferred Stock to be converted shall surrender the
certificates representing such shares at the office of the transfer agent for
the Series F Preferred Stock, appointed for such purpose by the Corporation,
with the Notice of Election to Convert on the back of said certificate completed
and signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series F Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
(2) As promptly as practicable after the surrender of the certificates for
shares of Series F Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions of
this Section (vi).
(3) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series F Preferred Stock shall have been surrendered and such notice shall have
been received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open and such notice is received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
F Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(c) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting conversions of the Series F
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series F Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Series F Preferred Stock shall be computed as if at the time of computation
all such outstanding shares were held by a single holder.
(d) Upon the occurrence of an Event of Conversion (as defined below), each
share of Series F Preferred Stock then outstanding shall, by virtue of, and
<PAGE>
simultaneously with, the occurrence of the Event of Conversion and without any
action on the part of the holder thereof, be automatically converted into two
validly issued, fully paid, and nonassessable Common Shares. The term "Event of
Conversion" shall mean the earlier of two years from issuance of the Series F
Preferred Stock or the occurrence of the closing price per share for the
Corporation's common stock having been at least $5.00 for a consecutive 30 day
period.
(vii) Voting Rights. The holders of record of shares of the Series F
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section (vii)(a) or as otherwise provided by law.
(a) So long as any shares of the Series F Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series F Preferred
Stock, voting as a class, vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series F Preferred Stock; (ii) increase or decrease the par value
of the Series F Preferred Stock; or (iii) alter the preferences, powers, or
rights of the Series F Preferred Stock so as to affect them adversely.
(b) In exercising the voting rights set forth in this Section (vii), each
share of Series F Preferred Stock shall have one vote per share.
FIFTH: The amendment to the Articles of Incorporation of the Corporation
set forth above was adopted by unanimous consent of the Corporation's board of
directors dated as of May 18, 1999.
IN WITNESS WHEREOF, the undersigned President and Secretary of this
Corporation have executed this Certificate of Amendment on this 18th day of May,
1999.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By:
Richard Brady, President
By:
James Frakes, Secretary
Exhibit 10.93(a)
Fixture Financing Leases
<PAGE>
LEASE AGREEMENT
TO OUR VALUED CUSTOMER: This Lease has been written in "Plain English" When
we use the words you and your in this Lease, we mean you, our Customer, which is
the Lessee indicated below When we use the words We, US, and our in this Lease,
we mean the Lessor,
Pacifica Capital
<TABLE>
<CAPTION>
<S> <C> <C>
CUSTOMER Play Co. Toys & Entertainment Corp. Approval
Information 550 Rancheros Drive, San Marcos, CA 92069
Lease
The Block in Orange - 20 City Blvd. West, #203, Oramge, CA 92868
SUPPLIER Lozier Corporation
INFORMATION Street Address/City/State/Zip Supplier Phone
P.O. Box 3577, OTaha, NE 68103 800-228-9882
EQUIPMENT Quantity Make/Model Serial Number
DESCRIPTION Store Fixtures
See Exhibit A Attached Hereto And Made A Part Hereof
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
END OF LEASE (Check one applicable box. If no box is checked, the fair market value will apply.)
PURCHASE
OPTION Fair Market Value Purchase Option x Fixed Price Purchase Option of $1.00
Fixed Price Purchase Option % of the total Cash Price
</TABLE>
TERM AND Lease Term (months) Lease Payment
LEASE PAYMENT 60 $963.61
SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
You agree to pay at the time you sign this Lease
A) Total Advance Lease Payment (Mos) = $ 1 ,927. 22
B) Salesluse Tax on Advance Lease Payment = $ inc.
LEASE PAYMENT C) One-time Documentaurso Fee = $ 500.00
0) Total of A + B + C = $ 2,427.22
If more than one Lease Payment is required in advance. the additional
amount will be applied at the end of the original or any renewal term.
</TABLE>
INSURANCE You are required to provide and maintain insurance related
& TAXES to the Equipment, and to pay any property, use another
taxes refitted to this Lease or the Equipment (See Sections
4 and 6 on the back of this Lease) If you are tax-exempt,
you agree to furnish us with satisfactory evidence
of your exemption
TERMS AND CONDITIONS BY SIGNING THIS LEASE: (I) YOU ACKNOWLEDGE THAT YOU
HAVE READ AND UNDERSTAND THE TERMS AND CONDITIONS ON THE FRONT AND BACK OF THIS
LEASE, (II) YOU AGREE THAT THIS LEASE IS A NET LEASE THAT YOU CANNOT TERMINATE
OR CANCEL, YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL PAYMENTS DUE UNDER
THIS LEASE, AND YOU CANNOT WITHHOLD, SET OFF OR REDUCE SUCH PAYMENTS FOR ANY
REASON, (III) YOU WILL USE THE EQUIPMENT ONLY FOR BUSINESS PURPOSES, (IV) YOU
WARRANT THAT THE PERSON SIGNING THIS LEASE FOR YOU HAS THE AUTHORITY TO DO SO
AND TO GRANT THE POWER OF ATTORNEY SET FORTH IN SECTION 7 OF THIS LEASE, (V) YOU
CONFIRM THAT YOU DECIDED TO ENTER INTO THIS LEASE RAThER THAN PURCHASE THE
EQUIPMENT FOR THE TOTAL CASH PRICE, AND (VI) YOU AGREE THAT THIS LEASE WILL BE
GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND YOU CONSENT TO THE
JURISDICTION OF ANY COURT LOCATED WITHIN MASSACHUSETTS. YOU AND WE EXPRESSLY
WAIVE ANY RIGHTS TO A TRIAL BY JURY.
<TABLE>
<CAPTION>
<S> <C>
Pacifica Capital Play Co. Toys &
Entertainment Corp.
Bette Kerhoulas, Pres. of Gen. Ptr. James Frakes, Chief Financial Officer
</TABLE>
THIS PERSONAL GUARANTY CREATES SPECIFIC LEGAL OBUGATIONS When we use the
we, us, and our in this personal Guarantee. we mean the lessor named above
<PAGE>
In consideration of Our entering into the lease agreement identified above
("Lease"). you unconditionaly and irrevocably guarantee to us, our successors
and assigns the prompt payment and performance of all obligations of the
Customer identified above ("Leasee") under the Lease. You agree that this is a
guaranty of payment and not of collection and that we can proceed directly
against you without first proceeding against the Lessee or against the equipment
covered by the Lease. You waive all defenses and notices including those of
protest, presentment and demand. You agree that we can renew, extend or
otherwise modify the terms of the Lease and you will be bound by such changes.
If the Lessee defaults under the Lease. you will immediately perform all
obligations of the Lessee under the Lease, including, but not limited to, paying
all amounts due under the Lease. You will pay to us all expenses, including
attorneys' fees) incurred by us in enforcing our rights against you the Lessee
This is a continuing guaranty that will not he discharged or affected by your
death and will bind your heirs and personal representatives. You waive any
rights to seek repayment from the Leasee in the event you must pay us if more
than one personal guarantor has signed this Personal Guaranty, each of you agree
that your liability is joint and several. You authorize us any of our affiliates
to obtain credit bureau reports regarding your personal credit and make other
creat inquiries that we determine are necessary.
THIS PERSONAL GUARANTY IS GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS YOU CONSENT TO THE JURISDICTION OF ANY COURT LOCATED WITHIN
MASSACHUSETTS YOU EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY.
<TABLE>
<CAPTION>
<S> <C>
Personal Guarantor (no title) Personal Guarantor (no title)
Print Name Print Name
Home Street Address/City/State/Zip Home Street Address/City/State/Zip
</TABLE>
<PAGE>
EXHIBIT "A"
12 PLT UPRITE,54H,06 BASE
12 PLT UPRITE,60H,06 BASE
10 PLT UPRITE,66H,06 BASE
24 PLT UPRITE,72H,06 BASE
30 PLT UPRITE,84H,06 BASE
60 PLT UPRITE,96H,06 BASE
9 PLT S STYLE DECK,36WX160
2 PLT S STYLE DECK,36WX19D
24 PLT S STYLE DECK,36WX22D
9 PLT S STYLE DECK,48WX13D
74 PLT S STYLE DECK,48WX16D
10 PLT S STYLE DECK,48WX19D
64 PLT S STYLE DECK,48WX22D
30 PLT S STYLE SHELF,36WX13D
60 PLT S STYLE SHELF,36WX15D
40 PLT S STYLE SHELF,36WX17D
40 PLT S STYLE SHELF,36WX19D
6 PLT S STYLE SHELF,36WX22D
50 PLT S STYLE SHELF,48WX13D
270 PLT S STYLE SHELF,48WX15D
140 PLT S STYLE SHELF,48WX17D
120 PLT S STYLE SHELF,48WX19D
30 PLT S STYLE SHELF,48WX22D
6 PLT BACK,36WX30H,36H UPRITE OR 30H UPPERM PEG
6 PLT BACK,36WX48H,54H UPRITE OR 48H UPPER, PEG
6 PLT BACK,36WX60H,66H UPRITE OR 60H UPPER,PEG
6 PLT BACK,36WX66H,72H UPRITE OR 66H UPPBR,PEG
30 PLT BACK,48WX30H,36H UPRITE OR 30H UPPER,PEG
30 PLT BACK,48WX48H,5411 UPRITE OR 48H UPPER,PEG
2 PLT BACKM48WX6OH,66H UPRITE OR 60H UPPER,PEG
20 PLT BACK,48WX6611,72H UPRITE OR 66H UPPER,PEG
16 N/A CENTER RAIL,48W
16 PLT PLICER RAIL,48W
100 PLT TOP RAIL,48W
This Exhibit "A" is affached to and a part of Lease No. ___________and
constitutes a true and accurate description of the equipment.
LESSEE Play Co. Toys & Entertainment Corp.
By James Frakes Title: Chief Financial Officer
LESSOR: Pacifica Capital
By: Bette Kerhoulas Title: Pres. of Gen. Ptr. Date: 3/24/99
page 1 of 3
<PAGE>
EXHIBIT "A"
4 N/A CENTER RAIL,36W
4 PLT SPLICER RAIL,36W
20 PLT TOP RAIL,36W
150 PLT SLOTWALL CENTER RAIL,48W
24 PLT SLOTWALL CENTER RAIL, 36W
36 GLV SLOTWALL BACK SPACER CLIP
30 PLT SLOTWALL SPLICER RAIL,48W
6 PLT SLOTWALL SPLICER RAIL,36W
100 PLT BOTTOM RAIL,48W,HEAVY DUTY
22 PLT BOTTOM IUJL,36W,HEAVY DUTY
110 PTD BASE BRKT,22D,06 BASE
24 PTD BASE BRKT,19D,06 BASE
100 PTD BASE BRKT,16D,06 BASE
12 PTD BASE BRKT,13D,06 BASE
21 CHR BASE ENDTRIM,22D,06 BASE,PAIWLH/RTI
12 CHR BASE ENDTRIM, 1 9D,06 BASE,PAIR-LH/RH
20 CHR BASE ENDTRIM,16D,06 BASE,PAIR-LH/RH
3 CHR BASE ENDTRIM,13D,06 BASE,PAIRLH/Rll
34 CHR CLOSED FRONT,36W,06 BASE
34 CHR CLOSED BASE FRONT,48W,06 BASE
2 PLT END MDSE PANEL,36WX60H,06 BASE,PTDSLOTWL
3 PLT END MDSE PANEL,48WX66H,06 BASE,PTDSLOTWL
5 PLT END MDSE PANEL,48WX72H, 06 BASE,PTDSLOTWL
6 PLT END MDSE PANEL,36WX84H,06 BASE,PTDSLOTWL
8 109 END DECK,35WX16D,06 BASE
8 109 END DECK,47WX19D,06 BASE
7 IGR WIDESPAN UPRITE FRAME,24DX96H
38 IGR WIDESPAN BEAM,96L,STD DUTY
38 IGR WIDESPAN SHELF SUPPORT,24D,STD DUTY
4 804 WIDESPAN PARTBD SHELF,96WX24D,STD DUTY
15 ZNC WIDES PAN SHELF,96WX24D, WIREGRID
2 SAT DOORKIT,36WX5 lH,GLASS,W/LOCK
9 SAT DOORKIT,48WX40H,GLASS,W/LOCK
16 SAT DOORKIT,48WX5 lH,GLASS,W/LOCK
This Exhibit "A" is aflached to and a part of Lease No. and constitutes a
true accurate description of the equipment.
LESSEE:Play Co Toys & Entertainment Corp.
By:
James Frakes Title: Chief Financial
Officer
LESSOR: Pacifica Capital
By: Bette Kerhoulas Pres. of Gen. Ptr. Date: 3/24/99
page 2 of 3
<PAGE>
3 SAT DOORKIT,48W,87H,TEMP GLASS,W/LOCK
2 PLT DOORKIT ENDTRIM,22DX87H
4 PLT DORKIT ENDTRIM,19DX87H
8 PLT DOORKIT ENDTRIM,22DX51H
4 PLT DOORKIT ENDTRIM,I9DX51H
8 PLT DOORKIT ENDTRIM,16DX4OH
4 CLRBCP GLASS SHELF ASSEMBLY
4 CLRBCP GLASS SHELF ASSEMBLY
8 CLRBCP GLASS SHELF ASSEM
8 CLRBCP GLASS SHELF ASSEM
8 CLRBCP GLASS SHELF ASSEM
12 CLRBCP GLASS SHELF ASSEM
12 CLRJ3CP GLASS SHELF ASSEM
36 CLRBCP GLASS SHELF ASSEM
40 CLRBCP GLASS SHELF ASSEM
40 CLRBCP GLASS SHELF ASSEM
100 GLV CANOPY BRKT,FOR LAM CANOPY
25 WHT CANOPY LITE BRKT,FOR UNDER SHELF APPL
20 GLV BASE BRACKET ANCHOR LATE,PACK OF 10
20 PLT UPRITE TOP CAP,PACK OF TEN
6 PLT8RG 4 WAY DISPLAY,24DX54H,W/DECK,SLOTWL/MTK
48 PLT DL STYLE SHELF,24WX1OD
48 PLT DL STYLE SHELF,24WX07D
148 N/A SHELF ALIGNMENT/WALLSECTION BASE PIN
3 GLV LEVELING LEG WRENCH
1 N/A MATERIAL SAFETY DATA SHEET/FORM #1461 7B
1 N/A INST.INST, BASIC SHELVING - ADD ON
2 PLT S STYLE SHELF, 36WC13D
2 PLT S STYLE SHELF,48WX13D
2 PLT S STYLE SHELF 48WX15D
16 PLT SLOTWALL SPLICER RAIL,48W
This Exhibit "A" is attached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
James Frakes Title: Chief Financial Officer Date
LESSOR: Pacifica Capital
By: Pres. of Gen. Ptr. Date: 3/24/99
Bette Kerhoulas
page 3 of 3
<PAGE>
DELIVERY & ACCEPTANCE
DELIVERY AND
ACCEPTANCE CERTIFICATE
By signing below, you, the Lessee, agree:
A) That all equipment described in the lease identified below ( Equipment")
has been delivered, inspected, installed and is unconditionally and irrevocably
accepted by you as satisfactory for all purposes of the lease and
B) That we, the Lessor named on the front of the lease identified below are
authorized to purchase the Equipment and start billing you under the lease
Lessee Name
Play Co. Toys & Entertainment Corp.
Authorized Signature
James Frakes
Title Date
Chief Financial Officer 3/24/99
<PAGE>
ASSIGNMENT OF INVOICE
KNOW ALL MEN BY THESE PRESENTS: THAT REFERENCE IS HEREBY MADE TO that
ce~ain equipment Lease dated 3/3/99 by and between ______________ ------ Play
Co. Toys & Entertainment Corn. (Lessee), and Pacifica Capital (Lessor), and in
which Playco Toys (Assignor, for purposes of this Assignment of Invoice only)
has a certain interest, that pursuant thereto,
Lessee and Lessor mutually agreed that the subject leased personal property
would be ordered by Lessor and purchased from the equipment vendor(s) with said
vendor directly invoicing Lessor. In that vendor(s) erroneously invoiced
Assignor, said invoice has not been paid by Assignor nor Lessee but rather has
been forwarded to Lessor. It was not the intention of Assignor or Lessee to
acquire any rights, title or interest in the subject equipment.
Assignor hereby assigns and conveys to Pacifica Capital (Lessor) all of its
right, title and interest that it may have in and under that certain Vendor
Invoice No. 156652-OOO~OO dated 11/02/98 , from Lozier Corporation (\,endor),
attached hereto and in the equipment identified therein (Equipment). Assignor
represents and warrants that Assignor has the right to assign said Invoice, and
that acceptance of such assignment and payment of the purchase price shall vest
full right, title and interest in the Equipment in Pacifica Capital (Lessor)
free from any claims and encumbrances
IN WITNESS WHEREOF, Assignor has hereunto executed this document this
__________ day of 1999
Assignor: Play Co. Toys & Entertainment Corp.
By: James Frakes
Title: Chief Financial Officer
<PAGE>
CORPORATE RESOLUTION TO LEASE
RESOLVED, that this corporation, Play Co. Toys & Entertainment Corp. lease
from Pacifica Capital hereinafter referred to as Lessor, such items of personal
property, and upon such terms and conditions as the officers hereinafter
authorized, in their discretion, may deem necessary or advisable now or in the
future.
RESOLVED FURTHER, that the following authorized officers of this
corporation
Chief Financial Officer James Frakes
Title Name Signature
be and they hereby are authorized, directed and empowered in the name of
this corporation, to do or cause to be done all such further acts and things as
they shall deem necessary, advisable, convenient, or proper in connection with
the execution and delivery of any such lease or leases and in connection with or
incidental to the carrying of the same into effect, including without limitation
on the scope of the foregoing, the execution, acknowledgment, and delivery of
any and all instruments and documents which may be reasonably required by Lessor
under or in connection with any such lease
RESOLVED FURTHER. that Lessor is authorized to act upon this resolution
until written notice of its revocation is delivered to Lessor, and that the
authority hereby granted shall apply with equal force and effect to the
successors in the office of the officers herein named, and further that said
officers have deemed said leases and agreements to be in the best interests of
this corporation, and the execution of such lease agreements by said officers
shall be conclusive evidence of their approval thereof.
I, Richard Brady President of Play Co. Toys & Entertainment Corp., a
corporation, incorporated under the laws in the State of Del aware do hereby
certify that the foregoing is a full, true and correct copy of resolutions of
the Board of Directors of the said corporation, adopted at a meeting, which was
duly and regularly called and held in all respects as required b law, and the
by-laws of the said corporation, at the office thereof on the /3rd day of /
~arch ,igV__99, at which meeting a quomm was present and in favor of said
resolution. I further certify that said resolutions are still in full force and
effect and have not been amended or revoked and that the specimen signatures
appearing herein are the signatures of the officers authorized to sign for this
corporation by the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as~such President and
affixed the corporate seal of the said corporation, this 3rd day of March, 1999
SEAL
Richard Brady
President of Play Co. Toys & Entertainment Corp.
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
LEASE AGREEMENT
TO OUR VALUED CUSTOMER: This Lease has been written in "Plain English" When
we use the words you and your in this Lease, we mean you, our Customer, which is
the Lessee indicated below When we use the words We, US, and our in this Lease,
we mean the Lessor,
Pacifica Capital
<TABLE>
<CAPTION>
<S> <C> <C>
CUSTOMER Play Co. Toys & Entertainment Corp. Approval
Information 550 Rancheros Drive, San Marcos, CA 92069
Lease
6170 West Grand Ave., #559, Gurnee, IL 60031 760-471-4504
SUPPLIER Lozier Corporation
INFORMATION Street Address/City/State/Zip Supplier Phone
P.O. Box 3577, Omaha, NE 68103 800-228-9882
EQUIPMENT Quantity Make/Model Serial Number
DESCRIPTION Store Fixtures
See Exhibit A Attached Hereto And Made A Part Hereof
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
END OF LEASE (Check one applicable box. If no box is checked, the fair market value will apply.)
PURCHASE
OPTION x Fair Market Value Purchase Option Fixed Price Purchase Option of $1.00
not to exceed 5%
Fixed Price Purchase Option % of the total Cash Price
</TABLE>
TERM AND Lease Term (months) Lease Payment
LEASE PAYMENT 60 $849.00
SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
You agree to pay at the time you sign this Lease
A) Total Advance Lease Payment (Mos) = $ 1,698.00
B) Salesluse Tax on Advance Lease Payment = $ inc.
LEASE PAYMENT C) One-time Documentaurso Fee = $ 0.00
D) Total of A + B + C = $ 1,698.00
If more than one Lease Payment is required in advance. the additional
amount will be applied at the end of the original or any renewal term.
</TABLE>
INSURANCE You are required to provide and maintain insurance related
& TAXES to the Equipment, and to pay any property, use another
taxes refitted to this Lease or the Equipment (See Sections
4 and 6 on the back of this Lease) If you are tax-exempt,
you agree to furnish us with satisfactory evidence
of your exemption
TERMS AND CONDITIONS BY SIGNING THIS LEASE: (I) YOU ACKNOWLEDGE THAT YOU
HAVE READ AND UNDERSTAND THE TERMS AND CONDITIONS ON THE FRONT AND BACK OF THIS
LEASE, (II) YOU AGREE THAT THIS LEASE IS A NET LEASE THAT YOU CANNOT TERMINATE
OR CANCEL, YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL PAYMENTS DUE UNDER
THIS LEASE, AND YOU CANNOT WITHHOLD, SET OFF OR REDUCE SUCH PAYMENTS FOR ANY
REASON, (III) YOU WILL USE THE EQUIPMENT ONLY FOR BUSINESS PURPOSES, (IV) YOU
WARRANT THAT THE PERSON SIGNING THIS LEASE FOR YOU HAS THE AUTHORITY TO DO SO
AND TO GRANT THE POWER OF ATTORNEY SET FORTH IN SECTION 7 OF THIS LEASE, (V) YOU
CONFIRM THAT YOU DECIDED TO ENTER INTO THIS LEASE RAThER THAN PURCHASE THE
EQUIPMENT FOR THE TOTAL CASH PRICE, AND (VI) YOU AGREE THAT THIS LEASE WILL BE
GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND YOU CONSENT TO THE
JURISDICTION OF ANY COURT LOCATED WITHIN MASSACHUSETTS. YOU AND WE EXPRESSLY
WAIVE ANY RIGHTS TO A TRIAL BY JURY.
<TABLE>
<CAPTION>
<S> <C>
Pacifica Capital Play Co. Toys &
Entertainment Corp.
Bette Kerhoulas, Pres. of Gen. Ptr. James Frakes, Chief Financial Officer
</TABLE>
THIS PERSONAL GUARANTY CREATES SPECIFIC LEGAL OBUGATIONS When we use the
we, us, and our in this personal Guarantee. we mean the lessor named above
<PAGE>
In consideration of Our entering into the lease agreement identified above
("Lease"). you unconditionaly and irrevocably guarantee to us, our successors
and assigns the prompt payment and performance of all obligations of the
Customer identified above ("Leasee") under the Lease. You agree that this is a
guaranty of payment and not of collection and that we can proceed directly
against you without first proceeding against the Lessee or against the equipment
covered by the Lease. You waive all defenses and notices including those of
protest, presentment and demand. You agree that we can renew, extend or
otherwise modify the terms of the Lease and you will be bound by such changes.
If the Lessee defaults under the Lease. you will immediately perform all
obligations of the Lessee under the Lease, including, but not limited to, paying
all amounts due under the Lease. You will pay to us all expenses, including
attorneys' fees) incurred by us in enforcing our rights against you the Lessee
This is a continuing guaranty that will not he discharged or affected by your
death and will bind your heirs and personal representatives. You waive any
rights to seek repayment from the Leasee in the event you must pay us if more
than one personal guarantor has signed this Personal Guaranty, each of you agree
that your liability is joint and several. You authorize us any of our affiliates
to obtain credit bureau reports regarding your personal credit and make other
creat inquiries that we determine are necessary.
THIS PERSONAL GUARANTY IS GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS YOU CONSENT TO THE JURISDICTION OF ANY COURT LOCATED WITHIN
MASSACHUSETTS YOU EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY.
<TABLE>
<CAPTION>
<S> <C>
Personal Guarantor (no title) Personal Guarantor (no title)
Print Name Print Name
Home Street Address/City/State/Zip Home Street Address/City/State/Zip
</TABLE>
EXHIBIT "A"
12 PLT UPRITE 60H OG BASE
10 PLT UPRITE 66H 06 BASE
24 PLT UPRITE 72H 06 BASE
60 PLT UPRITE 85H 06 BASE
24 STYLE DECK 36Wx16D
3 PLT STYLE DECK 3GWxl 9D
6 PLT STYLE DECK 36Wx22D
9 PLT STYLE DECK 48Wx13~
145 PLT STYLE DECK 48Wx16D
15 PLI STYLE DECK 48Wx1 9D~
44 PLT S STYLE DECK 48Wx22D
60 PLT S STYLE SHELF 36Wx15D
10 PLI S STYLE SHELF 36Wx17D
20 PLT S STYLE SHELF 36Wx19D
6 PLT S STYLE SHELF 36Wx22D
20 PLT S STYLE SHELF 48Wx1OD
120 PLT S STYLE SHELF 48Wx13D
600 PLT S STYLE SHELF 48Wx15D
100 PLT S STYLE SHELF 48Wx17D
120 PLT S STYLE SHELF 48Wx19D
44 PLT S STYLE SHELF 48Wx22D
8 PLT BACK 36Wx30H 36H UPRITE DR 30H UPPER PEG
8 PLT BACK 36Wx48H 54H UPRITE DR 48H UPPER PEG
60 PLT BACK 48Wx30H 36H UPRITE DR 30H UPPER PEG
60 PLT BACK 48Wx48H 54H UPRITE DR 48H UPPER PEG
16 PLT BACK 48Wx54H 60H UPRITE DR 54H UPPER PEG
24 N/A CENTER RAIL 48W
24 PLT SPLICER RAIL 48W
130 PLTTOPRAIL48W
4 N/A CENTER RAIL 36W
4 PLT SPLICER RAIL 36W
This Exhibit 'A" is attached to and a part of Lease No. ____________and
constitutes a true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Chief Financial Officer 3/3/99
LESSOR: Pacifica Capital
By: Bette Kerhoulas Pres. of Gen. Ptr. Date: 3/24/99
page 1 of 3
<PAGE>
EXHIBIT "A"
24 PLT TOP RAIL36W
180 PLT SLOTWALL CENTER RAIL 48W
34 PLT SLOTWALL CENTER RAIL 36W
40 GLV SLOTWALL BACK SPACER CLIP
34 PLT SLOTWALL SPLICER RAIL 48W
130 PLT BOTTOM RAIL 48W HEAVY DUTY
24 PLT BOTTOM RAIL 36W HEAVY DUTY
60 PTD BASE BRKT22DO6 BASE
40 PTD BASE BRKT 19006 BASE
210 PTD BASE BRKT 160 06 BASE
12 PTD BASE BRKT 13006 BASE
12 CHR BASE ENOTRIM 22D 06 PAIR - LH/RH BASE
16 CHR BASE ENOTRIM 190 06 PAIR - LH/RH BASE
40 CHR BASE ENOTRIM 160 06 PAIR - LH/RH BASE
3 CHR BASE ENDTRIM 18D 06 PAIR - LH/RH BASE
34 CHR CLOSED BASE FRONT 36V~ 06 BASE
220 CHR CLOSED BASE FRONT 48W 06 BASE
2 PLT END MOSE PANEL 06 BASE PTD SLOTWALL 36Wx60H
4 PLT END MOSE PANEL 06 BASE PTD SLOTWALL 36Wx66H
9 PLT END MOSE PANEL 06 BASE PTD SLOTWALL 36Wx72H
12 PLT END MOSE PANEL 36Wx84H 06 BASE PTD SLOTWALL
27 1C9 END DECK 35Wx16D 06 BASE
8 IGR WIDESPAN UPRITE FRAME 24Dx96H
10 IGR WIDESPAN UPRITE FRAME 18Dx96H
24 IGR WIDESPAN BEAM 96L STO DUTY
18 IGR WIDESPAN BEAM 72L STD DUTY
12 IGR WIDESPAN BEAM 48L STO DUTY
50 IGR WIDESPAN SHELF SUPPORT 24D STO DUTY
50 IGR WIDESPAN SHELF SUPPORT 180 STO DUTY
1 804 WIDESPAN PARTBD SHELF 96Wx24D STO DUTY
3 S04 WIDESPAN PARTBD SHELF 72W~4D STO DUTY
1 S04 WIDESPAN PARTBD SHELF 48Wx18D STO DUTY
This Exhibit "A" is attached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co Toys & Entertainment
Corp.
By: James Frakes Title: Chief Financial Officer 3/3/99
LESSOR:Pacifica Capital
By: Bette Kerhoulas Title: Pres. of Gen. Ptr Date: 3/24/99
page 2 of 3
<PAGE>
EXHIBIT "A"
2 WIDESPAN SHELF 96W~4D WIREGRID
9 SAT DOORKIT 48Wx40H GLASS WITH LOCK
15 SAT DOORKIT 48Wx51 H GLASS WITH LOCK
6 SAT DOORKIT 48Wx87H TEMP GLASS WITH LOCK
52 CLRBCP GLASS SHELF ASSEM
40 CLRBCP GLASS SHELF ASSEM
40 CLRBCP GLASS SHELF ASSEM
100 GLV CANOPY BRKT FOR LAM CANOPY
100 WHT CANOPY LITE BRKT FOR UNDER SHELF APPL
2 IGR WIDESPAN BEAM 60L STD DUTY
5 S04 WIDESPAN PARTBD SHELF 96Wx1 8D STD DUTY
1 804 WIDESPAN PARTBD SHELF 48Wx24D STD DUTY
24 PLT S STYLE DECK 36Wx16D
36 PLT S STYLE DECK 48Wx16D
58 PTD BASE BRKT 16D 06 BASE
3 PLT END MDSE PANEL 36Wx72H 06 BASE PTDSLOTWL MTK
4 PLT END MDSE PANEL 36Wx84H 06 BASE PTD$LOTWL MTK
7 109 END DECK 35Wx16D 06 BASE
4 SAT DOORKIT 48Wx87H TEMP GLASS WITH LOCK
6 ZNC WIDESPAN SHELF 96Wx24D WIREGRID
118 N/A SHELF ALIGNMENT/WALLSECTION BASE PIN
3 GLV LEVELING LEG WRENCH
2 PLT S STYLE SHELF 36Wx17D
2 SAT DOORKIT 48x87H TEMP GLASS WITH LOCK
This Exhibit "A" is attached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co Toys & Entertainment
Corp.
By: James Frakes Title: Chief Financial Officer 3/3/99
LESSOR:Pacifica Capital
By: Bette Kerhoulas Title: Pres. of Gen. Ptr Date: 3/24/99
page 3 of 3
<PAGE>
DELIVERY & ACCEPTANCE
DELIVERY AND
ACCEPTANCE CERTIFICATE
By signing below, you, the Lessee, agree:
A) That all equipment described in the lease identified below ( Equipment")
has been delivered, inspected, installed and is unconditionally and irrevocably
accepted by you as satisfactory for all purposes of the lease and
B) That we, the Lessor named on the front of the lease identified below are
authorized to purchase the Equipment and start billing you under the lease
Lessee Name
Play Co. Toys & Entertainment Corp.
Authorized Signature
James Frakes
Title Date
Chief Financial Officer 3/24/99
<PAGE>
ASSIGNMENT OF INVOICE
KNOW ALL MEN BY THESE PRESENTS: THAT REFERENCE IS HEREBY MADE TO that
certain equipment Lease dated 3/3/99 by and between ______________ Play Co. Tovs
& Entertainment Corp. (Lessee), and Pacifica Capital (Lessor), and in which
Playco Toys (Assignor, for purposes of this Assignment of Invoice only) has a
certain interest, that pursuant thereto,
Lessee and Lessor mutually agreed that the subject leased personal property
would be ordered by Lessor and purchased from the equipment vendor(s) with said
vendor directly invoicing Lessor. In that vendor(s) erroneously invoiced
Assignor, said invoice has not been paid by Assignor nor Lessee but rather has
been forwarded to Lessor. It was not the intention of Assignor or Lessee to
acquire any rights, title or interest in the subject equipment.
Assignor hereby assigns and conveys to Pacifica Capital (Lessor) all of its
right, title and interest that it may have in and under that certain Vendor
Invoice No. 153483-000-00 dated 11/4/98 from Lozier Corporation (Vendor),
attached hereto and in the equipment identified therein (Equipment). Assignor
represents and warrants that Assignor has the right to assign said Invoice, and
that acceptance of such assignment and payment of the purchase price shall vest
full right, title and interest in the Equipment in Pacifica Capital (Lessor)
free from any claims and encumbrances.
IN WITNESS WHEREOF, Assignor has hereunto executed this document this ~<\
day of March 1999
Assignor: Play Co. Toys & Entertainment Corp.
By: James Frakes
Title: Chief Financial Officer
<PAGE>
CORPORATE RESOLUTION TO LEASE
RESOLVED, that this corporation, Play Co. Toys & Entertainment Corp. lease
from Pacifica Capital hereinafter referred to as Lessor, such items of personal
property, and upon such terms and conditions as the officers hereinafter
authonzed. in their discretion, may deem necessary or advisable now or in the
future.
RESOLVED FURTHER, that the following authorized officers of this
corporation
Chief Financial Officer James Frakes
Title Name Signature
be and they hereby are authorized, directed and empowered in the name of
this corporation. to do or cause to be done all such further acts and things as
they shall deem necessary, advisable, convenient, or proper in connection with
the execution and delivery of any such lease or leases and in connection with or
incidental to the carrying of the same into effect, including without limitation
on the scope of the foregoing, the execution, acknowledgment, and delivery of
any and all instruments and documents which may be reasonably required by Lessor
under or in connection with any such lease.
RESOLVED FURTHER, that Lessor is authorized to act upon this resolution
until written notice of its revocation is delivered to Lessor, and that the
authority hereby granted shall apply with equal force and effect to the
successors in the office of the officers herein named, and further that said
officers have deemed said leases and agreements to be in the best interests of
this corporation, and the execution of such lease agreements by said officers
shall be conclusive evidence of their approval thereof.
I, Richard Brady President of Play Co. Toys & Entertainment Corp., a
corporation, incorporated under the laws in the State of Del aware do hereby
certify that the foregoing is a full, tme and correct copy of resolutions of the
Board of Directors of the said corporation, adopted at a meeting, which was duly
and regularly called and held in all respects as required by law, and the
by-laws of the said corporation, at the office thereof on the ~ 3rd day of /
March ,i 9)(__99, at which meeting a quomm was present and in favor of said
resolution. I further certify that said resolutions are still in full force and
effect and have not been amended or revoked and that the specimen signatures
appearing herein are the signatures of the officers authorized to sign for this
corporation by the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as such President and
affixed the corporate seal of the said corporation, this X 3rd day of 1 March ,
1999
SEAL
Richard Brady
President of Play Co. Toys & Entertainment Corp.
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
END OF LEASE PURCHASE OPTION
Pacifica Capital, the Lessor named in an Equipment Lease dated March 3 .19
99' number ______________ ("Lease") hereby grants to the Lessee named in the
Lease and identified below (the "Lessee"), the right of first refusal to
purchase the equipment leased thereby, as a whole and not in part, on an "AS IS,
WHERE IS," BASIS, WITHOUT REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER,
EXPRESS OR IMPLIED, at the end of the original or any renewal term of such
Lease, for an amount equal to:
Check One
A. X End of Lease Fair Market Value; Not to exceed 5%
B. [] 10% Stated End of Lease Fair Market Value $
C. [] $1.00;
D. [] 10% Option;
E. [] Other$
-
PLUS ANY APPLICABLE TAX, (Collectively "Purchase Option Price").
Lessee understands and agrees that no salesperson or agent of the Supplier of
the equipment is authorized to alter or sign this agreement. This option is not
binding upon Lessor unless signed by an authorized employee of Lessor.
This option being predicated upon the ability of the Lessee to maintain his
account with Lessor in good order and make prompt and timely payments, this
option shall expire and become null and void if the Lessee is in default for a
period of thirty (30) days or longer. As an additional condition of this option,
Lessee shall pay to Lessor, by the last day of the term of the Lease, all other
amounts due from Lessee to Lessor under the Lease, including but not limited to
property taxes, insurance, late fees, interest, or other charges which from time
to time may be assessed under the Lease. This option may be exercised by Lessee
only upon not less than thirty (30) days nor more than sixty (60) days prior
written notice to Lessor, and accompanied by the Purchase Option Price.
LEASSEE Play Co. Toys & Entertainment Corp.
By: James Frakes
Title: Chief Financial Officer
Date:3/3/99
LESSOR: Pacifica Capital
By: Bette Kerhoulas
Title: Pres. of Gen. Ptr.
Date: 3/24/99
<PAGE>
Play Co. Toys & Entertainment Corp.
550 Rancheros Drive San Marcos, CA 92069
To: Contact Name
Insurance Company
Address
City/State/Zip
Phone Number
INSURANCE CERTIFICATE REQUEST
We have entered into a lease with Pacifica Capital. Please see Exhibit "A"
attached to this request for the complete description of the equipment that we
are leasing. The equipment value is $37,409.01.
This equipment is located at: 6170 West Grand Ave., #559, Gurnee, IL 60031
Please see that we have immediate insurance coverage and issue insurance
certificates with the following endorsements.
1. Loss Payee & Additional Insured Endorsement:
SFC Capital Group Corporation
1390 Willow Pass Road Suite 850
Concord, CA 94520
2. Additional Insured Endorsement:
Pacifica Capital
4 Venture Suite #260
Irvine, CA 92618
[X] PHYSICAL DAMAGE: Insurance Coverage is to be provided for fire, theft,
extended coverage, vandalism and malicious mischief for the full value of the
equipment.
[X] LIABILITY: Coverage should be written with minimum limits of $500,000 /
$500,000 for Bodily Injury and $100,000 Property Damage or Combined Single
Limits of $500,000 ($1,000,000 Combined for Heavy Machinery and Vehicles).
By: James Frakes
Title: Chief Financial Officer
Date:3/3/99
Please Fax All Insurance Certificates To (949) 727-3722
Questions? Call Karen (949) 727-3711 ext. 245
<PAGE>
LEASE AGREEMENT
TO OUR VALUED CUSTOMER: This Lease has been written in "Plain English" When
we use the words you and your in this Lease, we mean you, our Customer, which is
the Lessee indicated below When we use the words We, US, and our in this Lease,
we mean the Lessor,
Pacifica Capital
<TABLE>
<CAPTION>
<S> <C> <C>
CUSTOMER Play Co. Toys & Entertainment Corp. Approval
Information 550 Rancheros Drive, San Marcos, CA 92069
Lease
Various - See Exhibit "A"
SUPPLIER Various - See Exhibit "A"
INFORMATION Supplier Phone
EQUIPMENT Quantity Make/Model Serial Number
DESCRIPTION
See Exhibit A Attached Hereto And Made A Part Hereof
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
END OF LEASE (Check one applicable box. If no box is checked, the fair market value will apply.)
PURCHASE
OPTION Fair Market Value Purchase Option [x] Fixed Price Purchase Option of $1.00
Fixed Price Purchase Option % of the total Cash Price
</TABLE>
TERM AND Lease Term (months) Lease Payment
LEASE PAYMENT 60 $1,389.91
SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
You agree to pay at the time you sign this Lease
A) Total Advance Lease Payment (Mos) = $ 2,779.82
B) Salesluse Tax on Advance Lease Payment = $ inc.
LEASE PAYMENT C) One-time Documentaurso Fee = $ 500.00
D) Total of A + B + C = $ 3,279.82
If more than one Lease Payment is required in advance. the additional
amount will be applied at the end of the original or any renewal term.
</TABLE>
INSURANCE You are required to provide and maintain insurance related
& TAXES to the Equipment, and to pay any property, use another
taxes refitted to this Lease or the Equipment (See Sections
4 and 6 on the back of this Lease) If you are tax-exempt,
you agree to furnish us with satisfactory evidence
of your exemption
TERMS AND CONDITIONS BY SIGNING THIS LEASE: (I) YOU ACKNOWLEDGE THAT YOU
HAVE READ AND UNDERSTAND THE TERMS AND CONDITIONS ON THE FRONT AND BACK OF THIS
LEASE, (II) YOU AGREE THAT THIS LEASE IS A NET LEASE THAT YOU CANNOT TERMINATE
OR CANCEL, YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL PAYMENTS DUE UNDER
THIS LEASE, AND YOU CANNOT WITHHOLD, SET OFF OR REDUCE SUCH PAYMENTS FOR ANY
REASON, (III) YOU WILL USE THE EQUIPMENT ONLY FOR BUSINESS PURPOSES, (IV) YOU
WARRANT THAT THE PERSON SIGNING THIS LEASE FOR YOU HAS THE AUTHORITY TO DO SO
AND TO GRANT THE POWER OF ATTORNEY SET FORTH IN SECTION 7 OF THIS LEASE, (V) YOU
CONFIRM THAT YOU DECIDED TO ENTER INTO THIS LEASE RAThER THAN PURCHASE THE
EQUIPMENT FOR THE TOTAL CASH PRICE, AND (VI) YOU AGREE THAT THIS LEASE WILL BE
GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND YOU CONSENT TO THE
JURISDICTION OF ANY COURT LOCATED WITHIN MASSACHUSETTS. YOU AND WE EXPRESSLY
WAIVE ANY RIGHTS TO A TRIAL BY JURY.
<TABLE>
<CAPTION>
<S> <C>
Pacifica Capital Play Co. Toys &
Entertainment Corp.
Bette Kerhoulas, Pres. of Gen. Ptr. James Frakes, Chief Financial Officer
</TABLE>
THIS PERSONAL GUARANTY CREATES SPECIFIC LEGAL OBUGATIONS When we use the
we, us, and our in this personal Guarantee. we mean the lessor named above
<PAGE>
Inventory Addendum to Lease Aqreement No:
Between Pacifica Finance Company, as Lessor
And Play Co. Toys & Entertainment Corp., as Lessee
Dated _________ 1999
LOCATION: Play Co. Toys & Entertainment Corp. (Lessee) Agrees to amend
Paragraph 3 of the Lease Agreement. In lieu of records showing the location of
each piece of leased equ~pment. Lessee will report this location to Lessor upon
request by Lessor. Failure to do so shall constitute a breach of the lease,
which default shall be governed by the terms and conditions specified in
Paragraph 3 of the Lease Agreement. Agreed to this day of 1999
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
<PAGE>
EXHIBIT "A"
Equipment Location: Portion of payment: $1,025.39
550 Rancheros Drive
San Marcos, CA 92069
Equipment Cost: $6,470.00
Tax 7.75%: 501.43
Total: $6,971.43
Vendor:
Vision Point of Sale, Inc.
2470 Brickvale Drive
Elk Grove Village IL 60007
3 NCR Master POS Terminal with the following
21/21 Receipt Printer
Keyboard
Standard Cash Drawer & Till
3.5" Flex Drive
CCC/PCI F/Modem I/F
5 NCR Electronic Cash Register:
Satellite Terminal with:
21/21 Receipt Printer
Keyboard
Standard Cash Drawer wiTill
7 NCR 2123 POS Printer
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 1 of 11
<PAGE>
EXHIBIT "A"
Equipment Location:
550 Rancheros Drive
San Marcos, CA 92069
Equipment Cost: $2,500.00
Tax 7.75%: 193.75
Shipping: 825.00
Total: $3,518.75
Vendor:
Teldata Voice & Data Communications
9085 Aero Drive
San Diego CA 92123
1 SALES CD
MTXSDV
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 2 of 11
<PAGE>
EXHIBIT "A"
Equipment Location:
550 Rancheros Drive
San Marcos, CA 92069
Equipment Cost: $12,628.20
Tax 7.75%: 978.69
Total: $13,606.89
Vendor:
Connex System Integration
410 5. Santa Fe Rd., Suite 101
Vista CA 92084
1 HP LC3 P11 350 192MB RAM 2X 9.1 GB Hard Drive Sony
SDT-9000 tape backup wiSony backup software
25 License for Exchange Server (software)
25 License NT Server (software)
1 Proxy Server
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 3 of ll
<PAGE>
EXHIBIT "A"
Equipment Location:
550 Rancheros Drive
San Marcos, CA 92069
Equipment Cost: $4,330.96
Tax 7.75%: 335.65
Total: $4,666.61
Vendor:
Data Pro
735 Elliott Street
Longmont CO 80501
5 Epson Stylus 740 printer
Serial #'5 A6R1 380874, A6R1 387421, A6R1 350911,
A6R1 818129, A6R1 352039
5 Parallel Printer Cables 10'
5 USR Sportster 56K internal modem
1 lomega ZIP drive
1 ATI Expert 98 video card
1 ASDS P5AB AT Motherboard
1 AMD K6-2 333 CPU
1 64 Meg PC10O DIMM memory
1 CPU haetsinks with fan
1 Toshiba 6302B 32X IDE CDROM
1 Fujitsu 3.2G Harddisk
2 IDE cables
1 TEAC 32X CDROM
1 Fujitsu 3.2G Harddisk
2 Phoneplugs
2 Bookshelf
1 CS-i 14 Master View CPU Switch
4 3 in 1 Mon/KB/Mouse cables
1 3COM 3CCFE575BT 10/1 LAN PCMCIA card
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 4 of 11
<PAGE>
EXHIBIT "A"
Continued:
Data Pro
735 Elliott Street
Longmont CO 80501
1 Logitech Track ball
3 Sylvania 17" Monitor
1 Floppy Drive
1 FIC VA-503 AT Motherboard
1 AMD K6-2 266 CPU
1 Heatsink with fan
I 64 Meg PC1OO DIMM memory
1 USR Sportster 56K internal modem
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 5 of 11
<PAGE>
EXHIBIT "A"
Equipment Location:
550 Rancheros Drive
San Marcos, CA 92069
Equipment Cost: $4,617.00
Tax 7.75%: 357.82
Total: $4,974.82
Vendor:
Mega Comm Technologies, Inc.
9109 Chesapeake Drive
San Diego CA 92123
5 WINDOWS NT WORKSTATION 4.0
10 MCAFEE VIRUS SCAN CLASSIC FOR 95/98/NT
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 6 of 11
<PAGE>
EXHIBIT "A"
Equipment Location:
550 Rancheros Drive
San Marcos, CA 92069
Equipment Cost: $7,342.09
Tax 7.75%: 567.52
Total: $7,909.61
Vendor:
COMPUSA
P.O. Box 200670
Dallas, TX 75320-0670
2 BELK AUTO S/B RVESBL IEEE
1 REAL 56+10/100 PC-CRD
1 BELK CBL MACIMG2 8MM 10' P
1 ESPO STYLUS COLOR 650
15 BELK CBL 1OBT CATS 14' GRN
5 BELK CBL DB 25 MM STR 15' G
5 BROT PTOUCH 310 LBLPRTR
1 TOSH BATT PACK LION 4000
2 3COM 10/100 PCMCIA 16BIT
1 CANO BJC-80
1 CANOPORT KIT NK-300
6 BELK CUCABAG IEEE PARCBL6
2 READ CUSA CLEANING WIPES
4 BELK CBL DB25 MM STR 15' G
1 BELK 4P05 MAC SWITCHBOX
1 VIEW 191N 25MM PS790
6 LASERJET 6LSE
1 VIEW 191N PS790
2 SONY 17.25 200E5 MONITOR
1 HP LASERJET hOOSE
3 HP LASERJET 6LSE
1 BELK AUTOS/B RVESBL IEEE
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 7 of ll
<PAGE>
EXHIBIT "A"
Equipment Location:
27690-B Santa Margarita Parkway
Mission Viejo, CA 92691
Equipment Cost: $1,551.08
Tax 7.75%: 120.21
Shipping: 592.50
Total: $2,263.79
Portion of payment: $55.74
Vendor:
Toshiba
9740 Irvine Blvd.
Irvine, CA 92618
Phone System which includes:
1 DK14-KSU-4 DKT PORTS 2-CD
1 STRATA-DK1 4-DOCUMNTPAK-VB
1 1 CO 2 DKT INTF 5K14/DK8
4 10 KEY DIGITAL HANDSFREE
I 10 KEY DIGITAL DISPLAY
5 DK1 4/40/424-DIG ITELOUG-VC
1 PERIPHERALS
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 8 of 11
<PAGE>
EXHIBIT "A"
Equipment Location:
The Block in Orange
20 City Blvd. West #203
Orange, CA 92868
Equipment Cost: $3,042.43
Tax 7.75%: 235.82
Shipping: 915.00
Total: $4,193.25
Portion of payment: $103.24
Vendor:
Toshiba
9740 Irvine Blvd.
Irvine, CA 92618
Phone System which includes:
1 DK14-KSU-4 DKT PORTS 2-CD
1 STRATA-DK1 4-DOCUMNTPAK-VB
1 1 CO 2 DKT INTF SK14IDK8
1 SID TEL INTF DK14/DK8
1 DTMF RCVR 3 CKT DK14/DK8
5 10 KEY DIGITAL HANDSFREE
1 10 KEY DIGITAL DISPLAY
6 DKI 4/40/424-DIGITELOUG-VC
1 PERIPHERALS
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 9 of ll
<PAGE>
EXHIBIT "A"
Equipment Location:
208 W. Hillcrest Drive
Thousand Oaks, CA 91360
Equipment Cost: $3,042.43
Tax 8.25%: 251.00
Shipping: 915.00
Total: $4,208.43
Portion of payment: $103.61
Vendor:
Toshiba
9740 Irvine Blvd.
Irvine, CA 92618
Phone System which includes:
1 DK14-KSU-4 DKT PORTS 2-CD
1 STRATA-DK14-DOCUMNTPAK-VB
1 1 CO 2 DKT INTF 5K14/DK8
1 STD TEL INTF DK14/DK8
1 DTMF RCVR 3 CKT DK14/DK8
5 10 KEY DIGITAL HANDSFREE
1 10 KEY DIGITAL DISPLAY
6 DK1 4/40/424-DIGITELOUG-VC
1 PERIPHERALS
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page lO of 11
<PAGE>
EXHIBIT "A"
Equipment Location:
Great Lakes Crossing Mall
3999 Joslyn Rd., #551
Auburn Hills, MI 48326
Equipment Cost: $3.042.3
Tax 6.00%: 182.55
Shipping: 915.00
Total: $4,139.98
Portion of
payment: $101.93
Vendor:
Toshiba
9740 Irvine Blvd.
Irvine, CA 92618
Phone System which includes:
1 DK14-KSU-4 DKT PORTS 2-CD
1 STRATA-DKI 4-DOCUMNTPAK-VB
1 1 CO 2 DKT INTF 5K14/DK8
1 STD TEL INTF DK14/DK8
1 DTMF RCVR 3 CKT DK14/DK8
5 10 KEY DIGITAL HANDSFREE
1 10 KEY DIGITAL DISPLAY
6 DK1 4/40/424-DIGITELOUG-VC
1 PERIPHERALS
This Exhibit "A" is affached to and a part of Lease No. and constitutes a
true and accurate description of the equipment.
LESSEE: Play Co. Toys & Entertainment Corp.
By: James Frakes Title: CFO Date: 4/2/99
LESSOR: Pacifica Finance Company
By: Title: Date:
Page 11 of 11
<PAGE>
DELIVERY & ACCEPTANCE
DELIVERY AND
ACCEPTANCE CERTIFICATE
By signing below, you, the Lessee, agree:
A) That all equipment described in the lease identified below ( Equipment")
has been delivered, inspected, installed and is unconditionally and irrevocably
accepted by you as satisfactory for all purposes of the lease and
B) That we, the Lessor named on the front of the lease identified below are
authorized to purchase the Equipment and start billing you under the lease
Lessee Name
Play Co. Toys & Entertainment Corp.
Authorized Signature
James Frakes
Title Date
Chief Financial Officer 3/24/99
<PAGE>
CORPORATE RESOLUTION TO LEASE
RESOLVED, that this corporation, Play Co. Toys & Entertainment Corn. lease from
Pacifica Finance Company hereinafter referred to as Lessor, such items of
personal property, and upon such terms and conditions as the officers
hereinafter authorized, in their discretion, may deem necessary or advisable now
or in the future.
RESOLVED FURTHER, that the following authorized officers of this corporation
CFO James Frakes
Title Name Signature
be and they hereby are authorized, directed and empowered in the name of this
corporation, to do or cause to be done all such further acts and things as they
shall deem necessary, advisable, convenient, or proper in connection with the
execution and delivery of any such lease or leases and in connection with or
incidental to the carrying of the same into effect, including without limitation
on the scope of the foregoing, the execution, acknowledgment, and delivery of
any and all instruments and documents which may be reasonably required by Lessor
under or in connection with any such lease.
RESOLVED FURTHER, that Lessor is authorized to act upon this resolution until
written notice of its revocation is delivered to Lessor, and that the authority
hereby granted shall apply with equal force and effect to the successors in the
office of the officers herein named, and further that said officers have deemed
said leases and agreements to be in the best interests of this corporation, and
the execution of such lease agreements by said officers shall be conclusive
evidence of their approval thereof.
I, Richard Brady President of Play Co. Toys & Entertainment Corp., a
corporniion, incorporated under the laws in the State of Delaware do hereby
certify that the foregoing is a full, true and correct copy of resolutions of
the Board of Directors of the said corporation, adopted at a meeting. which was
duly and regularly called and held in all respects as required by law, and the
by-laws of the said corporation, at the office thereof on the I~ 3 day of ~A~(//
,1 9X9'; ,at which meeting a quorum was present and in favor of said resolution.
I further certify that said resolutions are still in full force and effect and
have not been amended or revoked and that the specimen signatures appearing
herein are the signatures of the officers authorized to sign for this
corporation by the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as such President and affixed
the corporate seal of the said corporation, this 2nd day of April, 1999
SEAL
Richard Brady
President of Play Co. Toys & Entertainment Corp.
<PAGE>
DISCLAIMER OF OWNERSHIP
The Undersigned (the t'Lessee") proposes to be the Lessee of certain
equipment from Pacifica Finance Com~any (the "Lessor") pursuant to an Equipment
Lease between Lessor and Lessee bearing Lease No._____________signed by the
Lessee on ______________ 1999 (the "Lease"). The equipment covered by the Lease
is hereinafter referred to as the "Equipment."
The Equipment will be purchased by Lessor from Vision Point of Sale, Inc.
(the "Vendor"). Vendor has given credit to Lessee for deposit received and/or a
trade in of existing equipment. Upon Lessor's receipt of all necessary
documentation and satisfaction of all conditions to Lessor entering into the
Lease, Lessor shall pay the Vendor in full less the trade in value.
Lessee hereby consents to the Vendor transferring the entire ownership in
the Equipment to Lessor and effective on the actual transfer of the Equipment to
Lessor, disciaims any ownership interest or rights in the Equipment except those
the Lessee has by virtue of being the Lessee under the Lease.
LESSEE. Play Co Toys & Entertainment Corp.
BY:James Frakes
TITLE: CF0
DATE: 4/2/99
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
Play Co. Toys & Entertainment Corp.
550 Rancheros Drive
San Marcos, CA 92069
To: Contact Name
Insurance Company
Address
City/State/Zip
Phone Number Fax
INSURANCE CERTIFICATE REQUEST
We have entered into a lease with Pacifica Finance Company. Please see
Exhibit "A" attached to this request for the complete description of the
equipment that we are leasing. The equipment value is $56~453.55.
This equipment is located at: 550 Rancheros Drive , San Marcos, CA 92069
Please see that we have immediate insurance coverage and issue following
endorsements.
1. Loss Payee & Additional Insured Endorsement:
AT&T Capital Leasing Services, Inc.
4420 rosewood Drive
Pleasanton, CA 94588
2. Additional Insured Endorsement:
pacifica Finance Company
4 Venture Suite #260
Irvine, CA 92618
PHYSICAL DAMAGE: Insurance Coverage is to be provided for fire, theft,
extended coverage, vandalism and malicious mischief for the full value of the
equipment.
LIABILITY: Coverage should be written with minimum limits of $500,000 /
$500,000 for Bodily Injury and $100,000 Property Damage or Combined Single
Limits of $500,000 ($1,000,000 Combined for Heavy Machinery and Vehicles).
By: James Frakes
Title: CFO
Date:
Please Fax All Insurance Certificates To
(949) 727-3722 Questions? Call Karen (949) 727-3711 ext. 245
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
LESSOR LEASE NUMBER
Pacifica Capital
4 Venture Suite #260
Irvine, CA 92618
- ------------------------------------------------------------------------------------------------------------------------------------
FULL LEGAL NAME AND ADDRESS OF LESSEE SUPPLIER OF EQUIPMENT (COMPLETE ADDRESS)
1
Vanous Vendors
See Exhibit "A'9 Attached
Play Co. Toys & Entertainment Corp.
550 Rancheros Drive
San Marcos, CA 9296~TLY AND SEVERALLY RESPONSIBLE
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY DESCRIPTION, MODEL #, CATALOG #, SERIAL# OR'OTHER ID#
- ------------------------------------------------------------------------------------------------------------------------------------
See Exhibit A Attached hereto and Made A Part Hereof
- ------------------------------------------------------------------------------------------------------------------------------------
EOUIPMENT
LOCATION IF STREET ADDRESS 10251 Santa Monica Blvd.
DIFFERENT COUNTY____________________ STATE ZIP____________________
CITY Los Angeles Los Angeles CA 90067
- ------------------------------------------------------------------------------------------------------------------------------------
AMOUNT OF EACH PAYMENT MONTHLY XX TERM OF LEASE NO. OF PAYMENTS SECURITY
(PLUS SALES TAX. IF APPLICABLE) OTHEPUSPECIFY 0 (NO OF MONTHS) DEPOSIT
$1,987.53 60 60 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS OF LEASE
1 LEASE Lessee hereby leases from Leesor, and Lessor teases to Lessee. the
personal propeny dercebed above. together with any replacement parts. additions,
repairs or acceroones now or hereahei incorporated in or affixed to it
(hereinafter referred to as the 'Equipment")
2 ACCEPTANCE OF EOUIPMENT Lessee agrees to inspect the Equipment and to
execute an Acknowledgement and Acceptance of Equipment by Lessee notne, as
provided by Lessor, aher the Equipment has been deliverect ano aner Lessee is
satistiert that the Equipment is satisfactory in every respect Lessee herehy
authonzes Lessor to insert in this Lease senal numbers or other identifying data
with respect to the Equipment
3 DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES. THERE ARE NO
WARRANTIES BY OR ON BEHALF OF LESSOR Lessee acknowledges and aqrees by his
signature below as follows
(a) LESSOR MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE
CONDITION OF THE EOUIPMENT ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR
ANY PARTICULAR PuRPOSE ITS DESIGN ITS CAPACITY, ITS CUALITY, OR WITH RESPECT TO
ANY CHARACTERISTICS OF THE EOUIPMENT
(b) Lessee has fully inspecred the Equipment which it haS requested Lessor
to acquire and lease to Lessee and the Equipment is in good condition and to
Lessee's complete satisfaction
(c) Lessee leases the EqCipment Cs is' and with all faults,
(d) Lessee Specifically acknowledges that the Equipment is leased to Lessee
solely to Commercial or business parboses and not for personal lawly, hoUSehold,
or agrCuitu.al purposes,
(e) If the Equipment is not properly installed does Cot operate CS
represented or warranied by the supplier or manufacturer or is unsatisfactory
for any reason, regardless of cause or consequence. Lessee S only remedy it any
Shall be against thy supplier or manafacturer of the Equipment and not against
Lessor
(f) Provided Lessee is not in delaull under this Lesne Lessor assigns to
Lessee any warranties made by the supplier or the manulCoturer of the Equipment
INITIALS
(g) LESSEE SHALL HAVE NO REMEDY FOR CONSEGUENTIAL OR INCIDENTAL DAMAGES
AGAINST LESSOR and
(h) NO DEFECT DAMAGE OR UNFITNESS OF THE EGUIRMENT FOR ANY PURPOSE SHALL
RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY OTrrER
OBLIGATION UNDER THIS LEASE The parties have soecificaily neoutiated and adrend
to the torenoino barsoraph
4 STATUTORY FINANCE LEASE Lessee agrees and acknowledges that it is the
intent of both parties to this Lease that it qualify as a Statutory finance
lease under Artide 2A of the Uniform Commercial Code Lessee acknowledges and
agrees that Lessee has selected both (1) the Equipment, and (2) the Supplier
from whom Lessor is to purchase the Equipment Lessee acknowledges that Lessor
has not participated in any way in Lessee's selection of the Equipment or of the
supplier and Lessor has not selected manufactured, or supplied ihe Equipment
LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING THE
LESSOR'S PURCHASE OF THE EOUIPMENT FROM THE SUPPLIER CHOSEN BY LESSEE AND THAT
LESSEE SHOULD CONTACT THE SUPPLIER OF THE EOUIPMENT FOR A DESCRIPTION OF ANY
SUCH RIGHTS
5 ASSIGNMENT BY LESSEE PROHIBITED WITHOUT LESSOR'S PRIOR WRITTEN CONSENT.
LESSEE SHALL NOT ASSIGN THIS LEASE OR SUBLEASE THE EOUIPMENT OR ANY INTEREST
THEREIN, OR PLEDGE OP TRANSFER THIS LEASE, OR OTHERWISE DISPOSE OF THE EOUIPMENT
COVERED HEREBY
6 COMMENCEMENT, RENTAL PAYMENTS, INTERIM RENTALS This Lease shall commence
upon the written acceptance hereof by Lessor and shall end upon full performance
and observance by Lessee of each and every term, conctition and covenant set
forth in this Lease, any Schedules hereto and any extenvons hereof Rental
payments Shall be in the amounts and frequency as set forth or, me tace of this
Lease or any Schedules hereto In addition to regular rentals, Lessee shalt pay
to Lessor intesm rent for the use of the Equipment phor to the due date of the
first payment Inteem reef shaf be in an amount equal to 1/30th of the monthly
rental, multiplied by the number ot ovys elapsing between the date on which the
Equipment is accepted by Lessee and the commencement hate of this Lease,
together wtth the nomber of days elapsing between commencement of the Lease and
the due date of the first payment The payment of intenm renl xhaIl be due and
payable upon Lessee's receipt of invoice from Lessor Ilne rental penoof under
the Lease shall terminate following the last dap of the terms stated On the face
hereof or in any Schectuve hereto unless such Lease or Schedule has been
extended or otbenese modified Lessotor shaft have no obligation to Lessee under
this Lease if the Equipment, for whatever reason, ix not delivered to Lessee
vethin ninety (90) days after Lessee egna this Lease Lessor shall have no
obligahon to Leaxee Uroder this Lease if Lessee fails tO execute and deliver to
Lessor an Acknowledgement and Acceptance of Equipment by Lessee acknoafedging
its acceptance of the Equipment within thirty (30) days after it is delivered to
Lessee, with respect to this Lease or any Schedule hereto
THIS LEASE IS NOT CANCELABLE OR TERMINABLE BY LESSEE
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS WHICH ARE A PART OF
THIS LEASE
LESSEE UNDERSTANDS AND ACKNOWLEDGES THAT NO BROKER OR SUPPLIER, NOR ANY
SALESMAN. BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, IS AN AGENT OF LE~SOR NO
BROKER OR SUPPLIER NOR ANY SALESMAN, BPOKEO, OR AGENT OF ANY BROKER OR SUPPLIER,
IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDiTiON OF THIS LEASE, AND NO
REPRESENTATION AS TO THE EOUIPMENT OR ANY OTHER MATTER BY THE BROKER OR
SUPPLIER. NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, SHALL IN
ANY WAY AFFECT LESSEE'S DUTY TO PAY THE RENTALS AND TO PERFORM LESSEE'S
OBLIGATIONS SET 'ORTH IN ThIS LEASE
7 CHOICE OF LAW This Lease shall not be eflective until signed by Lessor at
as pnncipal office listed above This Lease Shall be considered to have been made
in the State of Lesso~s perelpat place of ousineas listed anove and shall be
interpreted in accordance with the laws and regutations of the State of Lessors
poncipal place of buChess Lessee agrees to Iunsdiclion in the State of Lessors
principal place of business listed above in any action suit or proceeding
regarding this Leas~ and concedes that it, and each of them transacted business
in the State of Lessors pencipal place or business lisled above by entenng intO
this Lease In the event of any legal action veth regard to this lease 9(the equ
pmenf covered hereby. Lessee agrees that venue may be laid in the County of
Lessors principal place of business
<TABLE>
<CAPTION>
<S> <C>
LESSEE LESSOR
Play Co. Toys Entertainment Corp.
James B. Frakes CFO/Corporate Secretary Harold Noriega, President of General Partner
</TABLE>
<PAGE>
ADDENDUM A
ADDENDUM A TO LEASE AGREEMENT NUMBER #
This Addendum is incorporated into and made a part of the above-noted Lease
Agreement and all supporting documents (IILcaseYv) by and between Pacifica
Capital, as Lessor and Play Co. Toys & Entertainment Corp., as Lessee dated May
15 1998 capitalized terms used but not defined herein shall have the same
meaning given to them in the Lease.
The provision of the aforementioned Lease notwithstanding Lessor and Lessee
mutually agree to amend the above referenced lease as follows:
The Lease payment shall be in the sum of$l,880.81.
All other terms, provisions and conditions of the lease remain in full
force and effect.
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be duly
executed as of this 19th day of May 1998.
Acknowledged and Agreed by Lessee:
LESSEE: Play Co. Toys & Entertainment Corp.
James B. Frakes, CFO/Corporate Secretary
<PAGE>
ADDENDUM A
ADDENDUM A TO LEASE AGREEMENT NUMBER #
This Addendum is incorporated into and made a part of the above-noted Lease
Agreement and all supporting documents (11Lease") by and between Pacifica
Capital, as Lessor and Play Co. Toys & Entertainment Corp., as Lessee dated Mav
15, 19~pitalized terms used but not defined herein shall have the same meaning
given to them in the Lease.
The provision of the aforementioned Lease notwithstanding Lessor and Lessee
mutually agree to amend the above referenced lease as follows:
Paragraph 21F modified to read as follows: Lessee defaults on any other
agreement it has with lessor EXECUTED SUBSEQUENT TO THE DATE HEREOF; or
Paragraph 22 Remedies modified to read as follows: If Lessee is in default,
Lessor, WITH 10 DAYS WRITTEN NOTICE AND THE RIGHT TO CURE, shall have the right
to exercise any one or more of the following remedies, concurrently or
separately, and without any election of remedies being deemed to have been made.
All other terms, provisions and conditions of the lease remain in full
force and effect.
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be duly
executed as of this 19th day of May 1998.
Acknowledged and Agreed by Lessee:
LESSEE: Play Co. Toys & Entertainment Corp.
James B. Frakes, CFO/Corporate Secretary
<PAGE>
ADDENDUM A
EXHIBIT "A" PAGE 1 OF 6
LEASE NO.
QUANTITY EQUIPMENT DESCRIPTION --
Vendor #1 Play Co. Toys & Ente rtai nmen t Corp
(Spacewall) 550 Rancheros Dr.
San Marcos, CA 92069
14 96" T X3' W
36 96"TX4' W
2 60"TX3'W
11 60" T X 4' W
Vendor #2 Play Co. Toys & Entertainment Corp.
(Tustin Wood Works, 550 Rancheros Dr.
Incorporated) San Marcos, CA 92069
1 NEW CASH WRAP FOR CENTURY CITY
INCLUDING 2 ROUND IMPULSE UNITS
AND 2 ANGLED PARTS OF CASH WRAP
Vendor #3 Play Co. Toys & Entertainment Corp.
(Signage Solution) 550 Rancheros Dr.
San Marcos, CA 92069
1 One Set of 11" Reverse Halo Letters
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be duly
executed as of this 19th day of May 1998.
Acknowledged and Agreed by Lessee:
LESSEE: Play Co. Toys & Entertainment Corp.
James B. Frakes, CFO/Corporate Secretary
<PAGE>
ADDENDUM A
EXHIBIT "A"
LEASE NO.
OUANTITY EOUIPMENT DESCRIPTION
Vendor #4 Play Co. Toys & Entertainment Corp.
(Wallach 's) 550 Rancheros Dr.
San Marcos, CA 92069
362 Sq. Yd. Royal Blue High Grade Carpet
1.00 Sq. Yd. Carpet: add to original contract for
Designweave 4Ooz. to match Bentley Kings
Road Color Sapphire
Vendor #5 Play Co. Toys & Entertainment Corp.
(G.S.I.) 550 Rancheros Dr.
San Marcos, CA 92069
8 36" X 8" 1/4" CLEAR GLASS POLISH ALL
8 36" X 10" "SAME"
12 36" X 12" "SAME"
4 36" X 16" "SAME"
4 36" X 18" "SAME"
22 48" X 12" "SAME"
22 48" X 16" "SAME"
22 48" X 18" "SAME"
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be duly
executed as of this 19th day of May 1998.
Acknowledged and Agreed by Lessee:
LESSEE: Play Co. Toys & Entertainment Corp.
James B. Frakes, CFO/Corporate Secretary
<PAGE>
ADDENDUM A
EXHIBIT "A"
LEASE NO.
OUANTITY EOUIPMENT DESCRIPTION
Vendor #6 Mici Installation
24585 Kings View
Laguna Niguel, CA 92677
1 Installation of all store fixtures, glass case, all CDC fixtures, &
canopies and 28 glass door kits. All hardware for anchoring plus box
comers. Anchor all wall units accoording to plan.
Vendor #7 TruSsworks
325 South Maple Avenue, #28
So. San Franciso, CA 94080
650-742-0709
1 2' Radius 90' section
2 4' Radius 45' section
2 2' Radius 90' section, Horizontal
I 6' 7 1/2" sq. straight truss
1 7' 8-3/4" Sq. straight truss
2 7' 0" Sq. straight truss
1 2' 1-3/8" sq. straight truss
I 8-1/2" straight truss
2 1' 11-3/8" straight truss
1 5' 0" straight flat truss
1 5' 9-1/2" straight flat truss
2 3 7-1/2" sq. straight truss
10 12' 0" suspension cable, wi shackle
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be duly
executed as of this 19th day of May 1998.
Acknowledged and Agreed by Lessee:
LESSEE: Play Co. Toys & Entertainment Corp.
James B. Frakes, CFO/Corporate Secretary
<PAGE>
ADDENDUM A
EXHIBIT "A"
LEASE NO. _________
OUANTITY EOUIPMENT DESCRIPTION
Vendor #8 Tustin Wood Works, Incorporated
2660 Walnut Ave., Unit F
Tustin, CA 92780
714-731-2803
<TABLE>
<CAPTION>
<S> <C>
2 ROUNDED SEAT AREA
1 BOOKCASE FOR CENTURY CITY
34 FACIA PIECES
1 SQUARE STEP DISPLAY
1 HOBBY CASH WRAP
7 RECTANGULAR DISPLAY CASES WITH
MIRROR BACKS 0N3
2 ANGLED DISPLAY CASES WITH FLOURECENT LIGHTS AT SIDES AND A
FLOURECENT AT TOP
2 DISPLAY CASES 25 1/2" WIDE & 36" WIDE WITH SPOT LIGHTS &
FLOURECENT AT TOP
1 WEDGE CABINET FOR CENTURY CITY
61" HIGH WHITE
3 LAMINATED SHELVES WHITE FOR CENTURY CITY
1 ANGLED CABINET 72" HIGH WHITE & RED FOR CENTIRY CITY
2 3" x 72" FILLER PCS LAMINATED ON 4 SIDES WITH WHITE LAMINATE
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be duly
executed as of this 19th day of May 1998.
Acknowledged and Agreed by Lessee:
LESSEE: Play Co. Toys & Entertainment Corp.
James B. Frakes, CFO/Corporate Secretary
<PAGE>
ADDENDUM A
EXHIBIT "A"
LEASE NO.
QUANTITY
Vendor #9
Lozier Corporation
P.O. Box 3577
Omaha, NE
402-457-8000
50 PLT BACK, 48WX66H,72H UPRITE OR 66H UPPER, PEG
14 PLT, BACK,48WX54H,60H UPRITE OR 54H UPPER, PEG
12 PLT S STYLE SHELF,48X22D
8 PLT S STYLE DECK, 36W X 16D
6 PLT S STYLE SHELF, 36W X 16D
8 PLT S STYLE SHELF, 36WX22D
36 PLT S STYLE SHELF, 48WX22D
45 PLT SLOTWALL CENTER RAIL,48W
15 PLT SLOTWALL CENTER RAIL, 36W SLV
10 SLOTWALL BACK SPACER CLIP
45 PLT BOTTOM RAIL, 48W, HEAVY DUTY
15 PLT BOTTOM RAIL, 36W, HEAVY DUTY
13 CHR BASE ENDTRIM, 16D, 06 BASE, PAIR-LH/RH
8 SAT DOORKIT,36WX4OH,GLASS,W/LOCK
4 SAT DOORKIT,36WX50H,GLASS,W/LOCK
10 SAT DOORKIT,48WX50H,GLASS,W/LOCK
6 SAT DOOR KIT,48WX87H,TEMP GLASS,W/LOCK
4 PLT MULTI-PURPOSE BRKTS, 16D,FLAT,PAIR-LH/RH
3 I09 END DECK, 35WX16D,06 BASE
3 PLT END HOSE PANEL,36WX68H,05, BASE,PTDSLOTWL
6 BASE BPACKET ANCHOR PLATE, PACK CF 10
18 CANOPY LITE BRKT,FOR UNDER SHELF APPL
</TABLE>
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be duly
executed as of this 19th day of May 1998.
Acknowledged and Agreed by Lessee:
LESSEE: Play Co. Toys & Entertainment Corp.
James B. Frakes, CFO/Corporate Secretary
<PAGE>
EXHIBIT "A"
LEASE NO.
QUANTITY EQUIPMENT DESCRIPTION
Vendor #9
4 GLASS SHELF BRKT, 08D
4 GLASS SHELF BRKT, lOD
17 GLASS SHELF BRKT,12D
13 GLASS SHELF BRKT,16D
13 GLASS SHELF SHELF, 18D
36 BCP GLASS SHELF SUPPORT CHANNEL,36W
66 BCP GLASS SHELF SUPPORT CHANNEL, 48W
72 GLV CANOPY BRKT, FOR LAM CANOPY
4 PLT S STYLE SHELF, 36WX22D
6 PLT S STYLE SHELF,36WX19D
12 PLT S STYLE SHELF,36WX17D
8 PLT S STYLE SHELF,36WX15 D
2 PLT S STYLE SHELF, 36WX13D
2 PLT S STYLE SHELF,36WX10D
6 3CP GLASS SHELF BRKT, 12D
6 3CP GLASS SHELF BRKT, 16D
6 3CP GLASS SHELF BRKET, 13D
2 PLT S STYLE SHELF,36WX1OD
2 PLT S STYLE SHELF, 36WX13D
2 PLT S STYLE SHELF, 36WX16D
2 PLT S STYLE SHELF,36WX19D
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be duly
executed as of this 19th day of May 1998.
Acknowledged and Agreed by Lessee:
LESSEE: Play Co. Toys & Entertainment Corp.
James B. Frakes, CFO/Corporate Secretary
<PAGE>
LESSOR. LEASE NUMBER
Pacifica Capital
4 Venture Suite #260
Irvine, CA 92618
LESSEE
DATE OF LEASE
May 15, 1998
Play Co. Toys & Entertainment Corp.
550 Rancheros Drive
San Marcos, CA 92069
ACKNOWLEDGEMENT AND ACCEPTANCE
OF EQUIPMENT BY LESSEE
See Exhibit "A" Attached Hereto and Made A Part Hereof
Lessee hereby acknowledges that the Equipment described above has been
received in good condition and repair, has been properly installed, tested, and
inspected, and is operating satisfactorily in all respects for all of Lessee's
intended uses and purposes. Lessee hereby accepts unconditionally and
irrevocably the Equipment.
By signature below, Lessee specifically authorizes and requests Lessor to
make payment to the supplier of the Equipment. Lessee agrees that said Equipment
has not been delivered, installed, or accepted on a trial basis.
WITH THE DELIVERY OF THIS DOCUMENT TO LESSOR, LESSEE ACKNOWLEDGES AND
AGREES THAT LESSEE'S OBLIGATIONS TO LESSOR BECOME ABSOLUTE AND IRREVOCABLE AND
LESSEE SHALL BE FOREVER ESTOPPED FROM DENYING THE TRUTHFULNESS OF THE
REPRESENTATIONS MADE IN THIS DOCUMENT
DATE OF ACCEPTANCE
May 21, 1998
LESSEE Play Co. Toys & Entertainment Corp.
James Frakes CFO/Corporate Secretary
IMPORTANT THIS DOCUMENT HAS LEGAL AND FINANCiAL CONSEQUENCES TO YOU DO NOT
SIGN THIS DOCUMENT UNTiL YOU HAVE ACTUALLY RECEIVED ALL OF THE EQUIPMENT AND ARE
COMPLETELY SAT~SiFIED WITH IT
I HEREBY AUTHORiZE________________ ______________
TO ORALLY VERIFY MY/OUR ACCEPTANCE OF ThE ABOVE
REFERENCED EQUIPMENT IN MY ABSENCE.
<PAGE>
BILL OF SALE
For and in consideration of the sum ofThirty One Thousand
TWO/Hu~)rI~SEiYhtY Eight &14/lOO ~ and other valuable consideration, the receipt
and svfficiency of which are hereby acknowledged, Play Co. Toys & Entertainment
Corp. (hereiii rererred to as "Seller") does hereby sell, grant, transfer and
deliver all its rights, title and interest in and to the equipment described
below (the "Equipment"):
SEE EXHIBIT "A'~ ATTACHED HERETO AND MADE A PART HEREOF
unto Pacifica Capital ( herein referred to as "Purchaser"), to have and to
hold said Equipment forever. The Equipment is sold "AS, WHERE IS," and the
foregoing description of the Equipment is for the sole purpose of identifying it
and is not part of the basis of the bargain. All cost incidental to the transfer
and/or delivery of the Equipment, including but nor limited to any applicable
sales or use tax, and/or any applicable registration fees shall be borne solely
by the Purchaser.
THE CONVEYANCE OF THE EQUIPMENT MADE HEREBY IS WITHOUT RECOURSE TO THE
SELLER, AND WITHOUT ANY WARRANTIES OF SELLER, WHETHER WRITTEN, ORAL OR IMPLIED,
excepting only that Seller represents that the Equipment is free of encumbrances
created by Seller. SELLER SHALL NOT, BY VIRTUE OF HAVING SOLD THE EQUIPMENT, BE
DEEMED TO HAVE MADE ANY REPRESENTATION OF WARkANTY AS TO THE MERCHANTABILITY,
FITNESS, DESIGN OR CONDITION OF, OR AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP IN THE EQUIPMENT.
Play Co. Toys & Entertainment Corp.
By James B. Frakes
Title
<PAGE>
ASSIGNMENT OF INVOICE
KNOW ALL MEN BY THESE PRESENTS: THAT REFERENCE IS HEREBY MADE TO that
certain equipment Lease dated 5/15/98 by and between Play Co. Toys &
Entertainment Corp. (Lessee), and Pacifica Capital (Lessor), and in which Toys
International (Assignor, for purposes of this Assignment of Invoice only) has a
certain interest, that pursuant thereto,
Lessee and Lessor mutually agreed that the subject leased person~ property
would be ordered by Lessor and purchased from the equipment vendor(s) with said
vendor directly invoicing Lessor. In that vendor(s) erroneously invoiced
Assignor, said invoice has not been paid by Assignor nor Lessee but rather has
been forwarded to Lessor. It was not the intention of Assignor or Lessee to
acquire any rights, title or interest in the subject equipment
Assignor hereby assigns and conveys to Pacifica Capital
(Lessor) all of its right, title and interest that it may have in and under
that certain Vendor ***SEE BEL0W*** Invoice No. ____________dated
________________ from Lozier Corporation ____________(Vendor), attached hereto
and in the equipment identified therein (Equipment)
Assignor represents and warrants that Assignor has the right to assign said
Invoice, and that acceptance of such assignment and payment of the purchase
price shall vest full right, title and interest in the Equipment in Pacifica
Capital (Lessor) free from any chims and encumbrances.
IN WITNESS WHEREOF, Assignor has hereunto executed this document this day
of 1998
**** Invoice~#105103-000-00 dated 4/6/98
Invoice #983989-000-00 dated 3/24/98
Invoice #105103-002-00 dated 4/7/98
Assignor: Play Co. Toys & Entertainment Corp.
By: __________
James B. Frakes
Title: CFO/Corporate Secretary
<PAGE>
ASSIGNMENT OF INVOICE
KNOW ALL MEN BY THESE PRESENTS: THAT REFERENCE IS HEREBY MADE TO that
certain equipment Lease dated 5/15/98 , by and between Play Co. Toys &
Entertainment Corp. (Lessee), and Pacifica Capital (Lessor), and in which P1ayco
Toys (Assignor, for purposes of this Assignment of Invoice only) has a certain
interest, that pursuant thereto,
Lessee and Lessor mutually agreed that the subject ~eased person~ property
would be ordered by Lessor and purchased from the equipment vendor(s) with said
vendor directly invoicing Lessor. In that vendor(s) erroneously invoiced
Assignor, said invoice has not been paid by Assignor nor Lessee but rather has
been forwarded to Lessor. It was not the intention of Assignor or Lessee to
acquire any rights, title or interest in the subject equipment.
Assignor hereby assigns and conveys to Pacifica Capital (Lessor) all of its
right, title and interest that it may have in and under that certain Vendor
Invoice No. 2452 & 2485 dated 3/27/98 & 4/22/98, from Tustin Wood Works,
Incorporatec(Vendor), attached hereto and in the equipment identified therein
(Equipment). Assignor represents and warrants that Assignor has the right to
assign said Invoice, and that acceptance of such assignment and payment of the
purchase price shall vest full right, title and interest in the Equipment in
Pacifica Capital (Lessor) free from any claims and encumbrances.
IN WITNESS WHEREOF, Assignor has hereunto executed this document this 15th
day of May 1998
Assignor: Play Co. Toys & Entertainment Corp.
By: _________
James B. Frakes
Title: CFO/Corporate Secretary
<PAGE>
ASSIGNMENT OF INVOICE
KNOW ALL MEN BY THESE PRESENTS: THAT REFERENCE IS HEREBY MADE TO
thatcertainequipmentLeasedated 5/15/98 byandbetween Play Co. Toys &
Entertainment Corp. (Lessee), and Pacifica Capital (Lessor), and in which P1 av
Co Toys (Assignor, for purposes of this Assignment of Invoice only) has a
certain interest, that pursuant thereto,
Lessee and Lessor mutually agreed that the subject leased personal property
would be ordered by Lessor and purchased from the equipment vendor(s) with said
vendor directly invoicing Lessor. In that vendor(s) erroneously invoiced
Assignor, said invoice has not been paid by Assignor nor Lessee but rather has
been forwarded to Lessor. It was not the intention of Assignor or Lessee to
acquire any rights, title or interest in the subject equipment.
Assignor hereby assigns and conveys to Pacifica Capital (Lessor) all of its
right, title and interest that it may have in and under that certain Vendor
Invoice No. none dated Mav 2, 1998 from Mici Installation ____________ (Vendor),
attached hereto and in the equipment identified therein (Equipment). Assignor
represents and warrants that Assignor has the right to assign said Invoice, and
that acceprance of such assignment and payment of the purchase price shall vest
full right, title and interest in the Equipment in Pacifica Capital (Lessor)
free from any claims and encumbrances.
IN WITNESS WHEREOF, Assignor has hereunto executed this document this 15th
day of May, 1998
Assignor: Play Co. Toys & Entertainment Corp.
By: James Frakes
Title: CFO/Corporate Secretary
<PAGE>
ASSIGNMENT OF INVOICE
KNOW ALL MEN BY THESE PRESENTS: THAT REFERENCE IS HEREBY MADE TO
thatcertainequipmentLeasedated 5/15/98 ,byandbetween Play Co. Tovs &
Entertainment Corp. (Lessee), and Pacifica Capital (Lessor)1 and in which P1ayco
Toys (Assignor, for purposes of this Assignment of Invoice only) has a certain
interest, that pursuant thereto,
Lessee and Lessor mutually agreed that the subject leased personal property
would be ordered by Lessor and purchased from the equipment vendor(s) with said
vendor directly invoicing Lessor. In that vendor(s) erroneously invoiced
Assignor, said invoice has not been paid by Assignor nor Lessee but rather has
been forwarded to Lessor It was not the intention of Assignor or Lessee to
acquire any rights, title or interest in the subject equipment.
Assignor hereby assigns and conveys to Pacifica Capital (Lessor) all of its
right, title and interest that it may have in and under ~at certain Vendor
InvoiceNo. M198()285 dated 3/27/98 from Trussworks (BGB Incorporated ~Vendor),
attached hereto and in the equipment identified therein (Equipment). Assignor
represents and warrants that Assignor has the right to assign said Invoice, and
that acceptance of such assignment and payment of the purchase price shall vest
full right, title and interest in the Equipment in Pacifica Ca~ital (Lessor)
free from any claims and encumbrances.
IN WITNESS WHEREOF, Assignor has hereunto execu~d this document this 15th
day of May 1998
Assignor: Play Co. Toys & Entertainment Corp.
By: James Frakes
Title: CFO/Corporate_Secretary
<PAGE>
BILL OF SALE
For and in consideration ofthe sum ofThirtv One Thousand ~ Eight &14/lOO
and other valuable consideration, the receipt and svfficiency of which are
hereby acknowledged, Play Co. Toys & Entertainment Corp. (hereui rererred to as
"Seller") does hereby sell, grant, transfer and deliver all its rights, title
and interesi in and to the equipment described b~ow (the "Equipment"):
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF
unto Pacifica Capital ( herein referred to as "Purchaser"), to have and to hold
said Equipment forever. The Equipment is sold "AS, WHERE IS," and the foregoing
description of the Equipment is for the sole purpose of identifying it and is
not part of the basis of the bargain. All cost incidental to the transfer and/or
delivery of the Equipment, including but nor limited to any applicable sales or
use tax, and/or any applicable registration fees shall be borne solely by the
Purchaser.
THE CONVEYANCE OF THE EQUIPMENT MADE HEREBY IS WITHOUT RECOURSE TO THE
SELLER, AND WITHOUT ANY WARRANTIES OF SELLER, WHETHER WRITTEN, ORAL OR IMPLIED,
excepting only that Seller represents that the Equipment is free of encumbrances
created by Seller. SELLER SHALL NOT, BY VIRTUE OF HAVING SOLD THE EQUIPMENT, BE
DEEMED TO HAVE MADE ANY REPRESENTATION OF WARRANTY AS TO THE MERCHANTABILITY,
FITNESS, DESIGN OR COND~ON OF, OR AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP IN THE EQUIPMENT. Dated this l5th day of May 1998.
Play Co. Toys & Entertainnient Corp.
By James B. Frakes
Title: CFO/Corporate Secretary
Exhibit 10.120
Debenture - EACF
NEITHER THIS DEBENTURE NOR THE UNDERLYING COMMON SHARES HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER
THIS DEBENTURE, OR ANY SHARES ISSUED PURSUANT TO ITS CONVERSION PROVISION,
UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING SUCH DEBENTURE OR SHARES
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, OR (ii)
IT FIRST RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF
DIRECTORS OR ITS AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE
PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933
AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, INCLUDING, BUT NOT LIMITED TO,
REGULATION S, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT OF 1933.
PLAY CO. TOYS & ENTERTAINMENT CORP.
a Delaware Corporation
RESTATED
5% CONVERTIBLE SUBORDINATED
DEBENTURE DUE DECEMBER 31, 1999
Section 1. Terms: PLAY CO. TOYS & ENTERTAINMENT CORP., a Delaware
corporation ("Corporation") for value received, hereby promises to pay to EUROPE
AMERICAN CAPITAL FOUNDATION, a Liechtenstein Trust ("Holder"), or subject to
Section 6 herein the Holder's assigns, the principal sum of ONE HUNDRED FIFTY
THOUSAND and 00/100 ($150,000.00) DOLLARS on December 31, 1999, and on the 1st
day of March 1999 and every month thereafter, to pay all accrued but as yet
unpaid interest on such outstanding principal, accrued as of the end of the
preceding month, until this Debenture has been paid in full or converted
pursuant to Section 6 hereto. Interest on the outstanding principal amount shall
accrue at the rate of five (5%) percent per annum from the Funding Date.
Section 2. Payments: Payments of interest shall be made in lawful money of
the United States of America to Holder at the address provided by the Holder, as
appears on this instrument below or at such other addresses as sent by Holder to
the Corporation by certified United States mail at least ten (10) days before
said payment date.
Section 3. Default: The occurrence of one or more of the following events
shall constitute an event of default:
3.1. Continued nonpayment of the interest due on this Debenture for more
than thirty (30) days beyond the payment date when due.
3.2. The nonpayment of the principal of this Debenture when the same shall
have become due and payable.
3.3. The entry of a decree or order by a court having jurisdiction in the
premises adjudging the Corporation a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment, or
composition of or in respect of the Corporation under the Federal Bankruptcy Act
or any other applicable federal or state law, or appointing a receiver,
liquidator, assignee, or trustee of the Corporation, or any substantial part of
its property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
sixty (60) consecutive days.
3.4. The institution by the Corporation of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
<PAGE>
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under the Federal Bankruptcy Act or
any other applicable federal or state law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator, assignee, or
trustee of the Corporation, or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Corporation in furtherance of any such
action.
3.5. Default in the obligation of the Corporation to any lender for
borrowed money, other than this Debenture, which shall continue for a period of
three (3) days after the expiration of any "cure period", which default is acted
upon by such lender.
Section 4. Acceleration: At the option of the Holder, and without demand or
notice, all principal and any unpaid interest shall become immediately due and
payable upon a default as set forth in Section 3 above, subject to the
provisions of Section 4 hereof.
Section 5. Subordination:
5.1. The rights of the Holder under the terms of this Debenture shall be
subordinated to:
5.1.1. Any sums due or to become due to Finova Capital Corporation its
successors or assigns pursuant to a certain Loan and Security Agreement executed
on January 21, 1998 as well as any other secured debt including sums due to
Frampton Industries, Inc. The Holder of this Debenture agrees to enter into any
reasonable Intercreditor Agreement proposed by senior lenders.
5.1.2. Modifications, renewals, extensions, and refundings of any such
indebtedness, liabilities or obligations; unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such indebtedness, liabilities or obligations or such modification,
renewal, extension or refunding thereof are not superior in right of payment to
this Debenture.
5.2. The rights of the Holder, under the terms of this Debenture shall be
superior to any obligation due any holder of the common shares of the
Corporation arising solely out of the fact that such person is an owner of the
common shares of the Corporation and the claims of unsecured creditors except as
specifically provided for above.
Section 6. Conversion Privilege and Call Provision:
6.1. The Holder is hereby granted the right to purchase up to such number
of shares of Series E Preferred Stock ("Series E Shares") as the amount of this
Debenture multiplied by .20 shall equal. The option is exercisable at any time
prior to December 31, 1999 at an exercise price set forth above, i.e., 20 cents
per share. The Holder may convert all or part of the principal and accrued but
unpaid interest at the conversion date. In order to convert, the Holder must
surrender this Debenture to the Corporation at the Corporation's principal
office and the Corporation shall, as promptly as practicable after the
surrender, deliver to the Holder a certificate or certificates representing the
number of fully paid and nonassessable Series E Shares of the Corporation into
which this Debenture may be converted and if appropriate issue a check in good
funds to the Holder for any sum which may remain due under this Debenture and
has not been used to buy Series E Shares as hereinabove set forth.
<PAGE>
6.2. No payment or adjustment shall be made upon any conversion with
respect to any interest accrued on any debenture surrendered for conversion
prior to an interest payment date or to any dividend on the common stock
delivered upon conversion.
6.3. Registration Rights: The Holder hereof shall have a right to demand
the registration for resale of the Series E Shares underlying this Debenture
commencing six (6) months after the issuance of this Debenture or the
conversion, whichever occurs later, whereby the Corporation shall prepare and
file a Registration Statement with the Securities and Exchange Commission on an
appropriate form, and use its best efforts to have same declared effective as
well as comply with State securities laws and the requirements of any market
wherein the Corporation's securities are then being traded. In addition, the
Holder shall be notified in the event the Corporation files a Registration
Statement at any time after the conversion whereby the Corporation will give
notice of its intent to file such Registration Statement to the Holder and will,
upon the request of the Holder, include and register in such Registration
Statement all shares of Series E Stock issued pursuant to the conversion of this
Debenture.
Section 7. Early Demand for Payment:
7.1. Provided that this Debenture has not been converted pursuant to
Section 6 hereof, on or after the termination of the Finova Capital Corporation
Loan and Security Agreement, and the payment in full of all obligations due
Finova, its successors or assigns, the Holder of this Debenture may notify the
Corporation of such Holder's desire to be paid all outstanding principal and
interest. The Corporation shall pay such Holder all such principal and interest
within ten (10) days of such demand notice. The outstanding balance shall
continue to bear interest at the rate of eighteen (18%) percent per annum until
paid commencing ten (10) days after such demand notice (the "Default Rate").
7.2. Upon delivery of such notice by the Holder to the Corporation,
Holder's right to convert pursuant to Section 6 hereof shall cease. Upon receipt
of the final payment hereon, the Holder shall immediately deliver this Debenture
to the Corporation marked "paid-in-full."
Section 8. ADDITIONAL RIGHTS
8.1. In the event of conversion, the Holder, together with all other
holders of Series E Shares shall have the right to elect one-third (1/3) of the
Board of Directors of the Corporation.
Section 9. Effect of Mergers, etc. on Conversion Privilege: In case of any
capital reorganization, or of any reclassification of the Series E Shares of the
Corporation or in case of the consolidation or merger of the Corporation with or
into any other corporation or of the sale, lease or other disposition of the
properties and assets of the Corporation as, or substantially as, an entirety to
any other corporation, there shall be no adjustment of the conversion ratio
hereof but the Debenture shall, after such capital reorganization,
reclassification of Series E Shares, consolidation, merger or sale, lease, or
other disposition, be convertible into the kind and amount of shares or other
securities or property (including cash) to which the holder of the number of
Series E Shares deliverable (immediately prior to the time of such capital
reorganization, reclassification of Series E Shares, consolidation, merger,
sale, lease or other disposition) upon conversion of the Debenture would have
been entitled upon such capital reorganization, reclassification of Series E
Shares, consolidation, merger, sale, lease or other disposition.
Section 10. Corporation to Reserve Common Shares: The Corporation covenants
that it will at all times reserve and keep available, free from preemptive
<PAGE>
rights, out of the aggregate of its authorized but unissued Series E Shares, or
its issued Series E Shares held in its treasury, or both, for the purpose of
effecting conversion of the Debentures, the full number of Series E Shares of
then deliverable upon the conversion of the Debentures not theretofore
converted; and if at any time the number of authorized but unissued Series E
Shares shall not be sufficient to effect the conversion of all Debentures, the
Corporation will take such corporate action as may in the opinion of its counsel
be necessary to increase its authorized but unissued Series E Shares to such
number of shares as shall be sufficient for that purpose.
Section 11. Laws: The Laws of the State of Delaware shall apply in
construing this Debenture.
Section 12. Fractional Shares: Fractional Shares or script representing
Fractional Shares may be issued upon the exercise of this Debenture.
Section 13. Assignment, Exchange, or Loss of Debenture:
13.1. Subject to the restrictions appearing at the start of this Debenture,
upon presentation and surrender of this Debenture to the Corporation at its
principal office or at the office of its stock transfer agent, if any, with the
assignment form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Corporation shall, without charge, execute and deliver a new
debenture in the name of the assignee named in such instrument of assignment and
this Debenture shall promptly be cancelled.
13.2. This Debenture is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Corporation at its
principal office, or at the office of its stock transfer agent, if any, for
other debentures of different denominations entitling the Holder to purchase, in
the aggregate, the same number of Shares purchasable hereunder.
13.3. Upon receipt by the Corporation of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Debenture, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and (in
the case of mutilation) upon surrender and cancellation of this Debenture, the
Corporation will execute and deliver a new debenture, which shall constitute an
additional contractual obligation on the part of the Corporation, whether or not
this Debenture is lost, stolen, destroyed or mutilated shall be at any time
enforceable by anyone.
Section 14. Rights of the Holder: The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Corporation, either at law or
equity. The rights of the Holder are limited to those expressed in this
Debenture and are not enforceable against the Corporation except to the extent
set forth herein. The Holder shall, however, possess the same right to inspect
the books and records of the Corporation, including financial records, as is
provided by Delaware law to a shareholder of the Corporation.
Section 15. OMITTED INTENTIONALLY
Section 16. OMITTED INTENTIONALLY
Section 17. OMITTED INTENTIONALLY
Section 18. Restrictions on Amendments to Articles of Incorporation: The
Corporation hereby agrees that for so long as this Debenture is issued and
outstanding, and the Holder has not made an early demand for payment pursuant to
Section 7 hereof, and the Holder has not exercised the Holder's conversion
privilege to Section 6 hereof, that the Corporation will not cause its Articles
of Incorporation to be amended or restated without the express written consent
of the Holder hereof.
<PAGE>
Section 19. Restrictions on Transfer: This Debenture has not been
registered under the Securities Act of 1933. This Debenture, or any right
hereunder, may not be enforced against the Corporation by any Holder, except the
original Holder herein, (i) unless there is an effective registration covering
such note or underlying right under the Securities Act of 1933 and applicable
state securities laws, (ii) unless the Corporation receives an opinion of an
attorney, licensed to practice within the United States, that the transfer of
the Debenture, or any underlying right, complies with the requirements of the
Securities Act of 1933 and any relevant state securities law, or (iii) unless
the transfer is made pursuant to Rule 144 under the Securities Act of 1933 or
Regulation S of the S.E.C., as amended from time to time.
Section 20. Any place the word "Corporation" is used in this Debenture it
shall refer to PLAY CO. TOYS & ENTERTAINMENT CORP. and any subsidiary or
affiliated corporation formed by it to acquire a portion of the assets and
business of PLAY CO. TOYS & ENTERTAINMENT CORP. to operate as an independent
chain of retail stores under the name "Toys International" or such other name as
may be chosen from time to time by the Corporation.
Section 21. Notices: Any notices permitted or required under this Agreement
shall be deemed given upon the date of personal delivery or forty-eight (48)
hours after deposit in the United States mail, postage fully prepaid, return
receipt requested, addressed:
to the Corporation at:
550 Rancheros Drive
San Marcos, CA 92069
to the Holder at:
P.O. Box 120
Zurich, Switzerland 8034
With Copies to:
Todtman, Nachamie, Spizz & Johns, P.C.
425 Park Avenue
New York, New York 10022
Attention: Barton Nachamie, Esq.
or at any other address as any party may, from time to time, designate by notice
given in compliance with this Section.
Section 22. Pronouns: Any masculine personal pronoun shall be considered to
mean the corresponding feminine or neuter personal pronoun, as the context
requires.
Section 23. Titles and Captions: All section titles or captions contained
in this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
Section 24. Computation of Time: In computing any period of time pursuant
to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday or legal holiday, in which
event the period shall run until the end of the next day thereafter which is not
a Saturday, Sunday or legal holiday.
Section 25. Presumption: This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
<PAGE>
Section 26. Further Action: The parties hereby shall execute and deliver
all documents, provide all information and take or forbear from all such action
as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 27. Parties in Interest: Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
Section 28. Attorney Fees: If suit or action is instituted in connection
with any controversy arising out of this Debenture, or in the enforcement of any
rights hereunder, the prevailing party shall be entitled to recover, in addition
to costs, such sums as the Court may adjudge as reasonable attorney fees,
including attorney fees of any appeal.
Section 29. The Corporation acknowledges and agrees to use the funds
provided to it by Holder for the sole purpose of acquiring Inventory and for
working capital purposes.
IN WITNESS WHEREOF, PLAY CO. TOYS & ENTERTAINMENT CORP., has executed this
Debenture to be effective as of the 11th day of November, 1998, except as to the
Restatement of Section 6 which was executed this ____ day of May, 1999..
PLAY CO. TOYS & ENTERTAINMENT CORP.
A Delaware Corporation
By_______________________________________________
AGREED TO:
EUROPE AMERICAN CAPITAL FOUNDATION
By:___________________________________________
Exhibit 10.121
SECOND AMENDMENT TO LEASE
(Tutti Animali)
THIS SECOND AMENDMENT TO LEASE (the "Amendment") is made and entered into
as of the 27th day of January, 1999, by and between SOUTH COAST PLAZA, a
California general partnership ("Landlord"), and PLAY CO. TOYS & ENTERTAINMENT
CORP., a Delaware corporation ("Tenant"), with respect to the following:
RECITALS
Landlord is the successor to the landlord's interest and Tenant is the last
assignee of the tenant's interest pursuant to that certain lease dated July 31,
1986 between South Coast Plaza Expansion, a California limited partnership, as
the original Landlord, and Toys International (the "Original Lease"), as amended
by that certain First Amendment to Lease dated as of January 16, 1997 (the
"First Amendment," and together with the Original Lease, the "Lease"). The Lease
covers certain premises commonly known as Suite 130 (the "Premises") located in
the western portion of South Coast Plaza Retail Center in the City of Costa
Mesa, County of Orange, State of California (the "Center").
B. Pursuant to the First Amendment, the Lease currently expires on January
<PAGE>
31, 1999 (the "Current Expiration Date"). Landlord and Tenant desire to extend
the Current Expiration Date and, for that purpose, enter into this Amendment.
AGREEMENT
IN CONSIDERATION OF the foregoing recitals and the mutual covenants
contained herein, Landlord and Tenant agrees as follows:
Current Expiration Date. The date "January 31, 1999" appearing in the First
Amendment is hereby amended to read "January 31, 2000."
Renovation and Remodeling. Landlord and Tenant acknowledge that Landlord
proposes to renovate and remodel or cause to be renovated and remodeled portions
of the Center. Such work (the "Renovation") shall or may include relocation of
certain tenant Enclosed Mall storefronts, renovation of the ceiling in the
Enclosed Mall, replacing certain staircases with escalators and elevators,
modifications to the exterior fascia of the Enclosed Mall building, construction
of a pedestrian bridge with a landing on the third floor of the Center across
Bear Street to the east of the Center, modifications to the parking structure
for the Center, renovation and retenanting of the building at the south end of
the Center formerly operated as a Robinson's-May store and renovation of the
building at the north end of the Center currently operated as a Macy's
department store. Landlord contemplates that such Renovation will be conducted
during calendar years 1999 and 2000. In connection with the Renovation, Landlord
and Tenant agree as follows: (a) There are no guaranties, promises,
representations or warranties by Landlord as to the scope of the Renovation or
the precise time period over which the same shall be conducted. Tenant
acknowledges that the plans for the Renovation are subject to change at any time
and from time to time and that the scheduling of the Renovation or any
components thereof is also subject to change from time to time with or without
notice to Tenant. Landlord will, upon written request by Tenant, advise Tenant
of Landlord's then best estimate of the scope and timing of the Renovation. Any
such estimate provided by Landlord is merely an estimate and should not be
regarded as a promise, guaranty, warranty or representation by Landlord. (b)
Conduct of the Renovation or various components thereof may result in noise,
dust, odors and inconvenience to Tenant and its employees, customers, vendors
and service personnel. Landlord shall take reasonable steps to minimize such
inconvenience and other deleterious effects. Tenant acknowledges that Landlord
cannot eliminate all such inconvenience and such deleterious effects and agrees
that neither the Renovation nor any of the possible effects thereof identified
in this subsection shall entitle Tenant to any abatement of rent, to any other
financial accommodation by Landlord or to terminate the Lease, as hereby
amended.
No Brokers. Each of Landlord and Tenant represents and warrants to the
other that it has retained or employed no broker, finder or agent in connection
with this Amendment and the transaction provided for herein, and that there is
no broker, finder or agent entitled to a fee or commission in connection with
this Amendment and the transaction provided for herein through the warranting
party. Each of Landlord and Tenant agrees to indemnify, defend and hold the
other harmless from and against all claims to a fee or commission made by any
broker, finder or agent claiming through or under the indemnifying party.
Payment shall not be a condition precedent to recovery upon the foregoing
indemnification provision. The foregoing indemnification provision shall include
a covenant by each indemnifying party to defend the indemnified party against
all claims for which indemnification is available pursuant to this paragraph
with legal counsel selected by the liability insurance carrier for the
indemnifying party or otherwise reasonably satisfactory to the indemnified
party.
Counterparts. This Amendment may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
<PAGE>
together shall constitute a single instrument. It shall not be necessary for
both parties to execute the same counterpart(s) of this Amendment for this
Amendment to become effective.
Defined Terms. All terms used in this Amendment with initial capital
letters and not defined herein shall have the meanings given to such terms in
the Lease.
Lease in Effect. Landlord and Tenant acknowledge and agree that the Lease,
as hereby amended, remains in full force and effect in accordance with its
terms.
Effectiveness. This Amendment shall be effective as of the date first set
forth above, notwithstanding any later execution and delivery by Landlord and/or
Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Second Amendment
to Lease to be effective as of the date provided in paragraph 6 above.
PLAY CO. TOYS & ENTERTAINMENT CORP., a Delaware corporation
By
Title:
"Tenant"
SOUTH COAST PLAZA, a California general partnership
By: C. J. Segerstrom & Sons, a California general partnership,
Managing General Partner
By
Manager
By
Manager
"Landlord"
Exhibit 10.122
Lease Agreement - Aladdin
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
("Execution Date").
ARTICLE 1
FUNDAMENTAL LEASE PROVISIONS
1.1 Landlord: ALADDIN BAZAAR, LLC,
a Delaware limited liability company
1.2 Tenant: TOYS INTERNATIONAL,
a California corporation
1.3 Tenant's Trade Name: TOYS INTERNATIONAL (Section 9.1)
1.4 Premises:
That certain retail space currently identified as "Space No.
1-H-(Sectiont2.1)hopping Center known as "Desert Passage at Aladdin," located in
the County of Clark, State of Nevada, containing 5,898 square feet of Floor Area
(subject to Section 2.7) with a frontage of approximately 48.5 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:
Ninety (90) days prior to the initial opening o(Sectiono2.3)g Center.
1.7 Expiration Date:
The last day of the one hundred twentieth (120th) full
ca(Sectiono3.1)following 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 ninety
(90) days following Substantial Completion or (iii) March 1, 2000; or (b) the
date Tenant first opens for business in the Premises.
1.9 Minimum Annual Rent:
Eighty-Five and No/100 Dollars ($85.00) per ann(Sectionq4.2) foot of Floor
Area of the Premises, beginning with the Rent Commencement Date and continuing
for the next two (2) full years of the Lease Term plus any partial calendar
month at the beginning of the Lease Term; then, Ninety-Five and No/100 Dollars
($95.00) per annum per square foot of Floor Area of the Premises for the next
three (3) full years; then, One Hundred and No/100 Dollars ($100.00) per annum
<PAGE>
per square foot of Floor Area of the Premises for the remainder of the Lease
Term.
1.10 Percentage Rent:
Seven percent (7%) of Gross Sales in excess of t(Sectionp4.3).
1.11 Marketing Assessment:
Four and No/100 Dollars ($4.00) per annum per s(Sectiono8.2) Floor Area of
the Premises.
1.12 Addresses for Notices:
(Article 23)
To Landlord:
ALADDIN BAZAAR, LLC
c/o TrizecHahn Development
4350 La Jolla Village Drive, Suite 700
San Diego, CA 92122-1233
Attn: Legal Department
and to: Landlord's manager at the Shopping Center.
and: Any notice of default required to be sent to Fleet National Bank in
accordance with Exhibit G to the Lease.
Fleet National Bank
75 State Street
Mail Stop MA BO F11C
Boston, MA 02109-1810
Attn: Margaret A. Mulcahy (or her successor)
To Tenant:
TOYS INTERNATIONAL
550 Rancheros Drive
San Marcos, CA 92069
Attn: President
1.13 Permitted Use: Primarily for the retail sale of upscale, brand name
toys and, at T(Sectiono9.1)n (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, children's
apparel (provided that the display of such children's apparel shall not exceed
ten percent (10%) of the retail sales Floor Area of the Premises), and such
other items as are typically displayed in toy stores located within first-class
regional shopping centers. It is expressly agreed and understood by Tenant that
the Premises must at all times be merchandised in a unique, world class manner,
including, without limitation, a variety of themed boutiques (such as, by way of
example only, a "Barbie Boutique") as well as other unique theming consistent
with the quality of the theming of the Shopping Center. Tenant shall use the
Premises for no other use or purpose. The Permitted Use is expressly subject to
Section 9.4.
1.14 Security Deposit:
<PAGE>
None. (Article 26)
1.15 Exhibit C Charge:
None. (Section 4.10)
1.16 Initial Assessment:
Four and No/100 Dollars ($4.00) per square foot of Floor
A(Sectionh8.4)emises.
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.
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, (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 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 on or before January 1, 2001, for any reason (including without
limitation abandonment of the construction of the Shopping Center) then either
Landlord or Tenant, in either party's sole and absolute discretion, shall have
the option at any time thereafter (until possession is so delivered) to notify
the other party of its 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 or to reconfigure
existing leasable spaces) 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
<PAGE>
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 3,898 square feet or more than
7,898 square feet in size and having a mall frontage of 28.5 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 in proximity 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 Rent and all Additional Rent that 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 the
Floor Area of the Premises;
(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) in the
aggregate;
(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
<PAGE>
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 from time to time
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 this 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 recurrent 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.
2.7 Right to Measure Floor Area of Premises. Within thirty (30) days
following Substantial Completion, Tenant, at its sole cost and expense, or
Landlord, at its sole cost and expense, may elect to 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. If the parties do not
exercise their right to measure the Floor Area as provided herein, both Landlord
and Tenant hereby acknowledge and agree that each party shall automatically be
deemed to have absolutely and unconditionally (i) waived such right, (ii)
accepted the Floor Area calculation as set forth in Section 1.4, and (iii)
released and waived any rights the parties may have against one another in the
event the Floor Area calculation set forth in Section 1.4 is different from the
actual Floor Area.
<PAGE>
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. 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 90-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 75-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 each year of the Lease Term, in advance,
on the first day of each calendar month, without setoff, deduction, prior notice
<PAGE>
or demand.
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-five percent
(75%) of the total leasable Floor Area in the Shopping Center. Until such time
as the aforementioned contingency has been met, Tenant shall pay to Landlord the
lesser of (i) the monthly Minimum Annual Rent otherwise payable or (ii) the
amount equal to seven percent (7%) 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-five percent (75%) of
the total leasable Floor Area 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 seven percent (7%) 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 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
<PAGE>
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
<PAGE>
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.
(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 business ("Competing Business") not so operated or owned on
the Execution Date within a radius of five (5) miles from the location of the
Shopping Center (excluding a store in the shopping center commonly known as the
"Venetian"), Tenant's right to terminate pursuant to Section 4.3(d) of this
Lease shall be null and void.
(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 Three Million and No/100 Dollars ($3,000,000.00)
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. Notwithstanding anything to the contrary contained herein, Tenant's
right to terminate this Lease pursuant to this Section 4.3(d) shall be null and
void in the event a Competing Business exists as provided in Section 4.3(c) of
this Lease.
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
<PAGE>
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 this 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 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
<PAGE>
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 Priority of Payments. Notwithstanding anything to the contrary
contained in this Lease, all payments made by Tenant and received by Landlord
may, in Landlord's sole and absolute discretion, be applied to any outstanding
arrearages owed by Tenant to Landlord, irrespective of any payment
characterization Tenant may designate for any such payment.
4.9 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.
4.10 Exhibit C Charge. Intentionally Omitted.
ARTICLE 5
PREMISES TAX AND INSURANCE EXPENSES
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 covering 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
<PAGE>
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.
ARTICLE 6
UTILITIES AND AIR CONDITIONING
6.1 Utilities. The Utilities that Landlord shall make available to the
Premises or to a central distribution point outside 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.
Tenant shall use the Utilities, if any, provided, or contracted for, 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. Further,
Landlord shall have the right at any time and from time to time during the Lease
Term to contract for Utility services from alternative service providers in
which event Tenant shall use such Utilities 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.
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 the costs of any and all Utilities furnished by Landlord to
the Premises or otherwise for the benefit of Tenant (including, without
limitation, maintenance, repair, installation, and service costs associated
therewith), 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, or the Utility provider 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 public 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. 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.
<PAGE>
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. Tenant shall pay the Air Conditioning Charge
as provided in Section 4.4.
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 non-exclusive portions 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.
ARTICLE 7
COMMON AREA
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, any 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
<PAGE>
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; Common Area theming (including, without
limitation, live and simulated entertainment) and all maintenance, repair and/or
operational expenses associated therewith; 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; 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,
<PAGE>
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 that are part of the Shopping Center
(i.e., excluding any Casino property having frontage on the Interior Mall)
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.
(c) Limitation on Tenant's Share of Common Area Expenses. Notwithstanding
the foregoing to the contrary, in no event shall Tenant's share of Common Area
Expenses for the calendar year 2000 ("Base Year") exceed an amount equal to
Twenty Dollars ($20) per square foot of Floor Area of the Premises. After the
Base Year, increases in Tenant's share of Common Area Expenses (excluding Common
Area taxes, insurance and utility expenses) in any calendar year shall not
exceed an amount equal to six percent (6%) per annum on a cumulative basis of
the Tenant's share of such Common Area Expenses for the Base Year (in the event
the Base Year is a partial calendar year, Tenant's share of Common Area Expenses
for the Base Year shall be annualized for the purpose of the foregoing
calculation). By way of example but not limitation, Tenant's share of such
Common Area Expenses for the fourth (4th) full calendar year of the Lease Term
shall not exceed an amount derived by the following formula: {[(BA x 1.06) x
1.06] x 1.06}, where "BA" equals Tenant's share of such Common Area Expenses for
the Base Year (annualized in the event the Base Year is a partial 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
<PAGE>
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; provided, 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. 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.
Tenant acknowledges and agrees that 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 Landlord will not be
restricted in any manner by this Lease in the placement and/or design of any
such facilities; provided, 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 further acknowledges that the Interior Mall may, in Landlord's sole
and absolute discretion, remain open to the public twenty-four (24) hours per
day, on each and every day of the year.
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.
ARTICLE 8
MARKETING
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[s]). Landlord shall
control and administer the Marketing Fund, if established, with advice from an
advisory group comprised of representatives of various Shopping Center tenants.
<PAGE>
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.
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 adjusted annually in accordance with the CPI Adjustment Procedures;
provided, however, in no event shall the Marketing Assessment increase in any
year by more than five percent (5%) over the Marketing Assessment for the
previous year. The Base Month shall be the month of October immediately
preceding the Rent Commencement Date; the Month of Adjustment shall be the month
of October during each year of the Lease Term thereafter. The adjustment shall
be effective as of the first day of January following the Month of Adjustment.
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
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.
ARTICLE 9
USE
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.
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
<PAGE>
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, Gaming
Devices, or other gaming machines, or conduct any Gaming Activities (although
Tenant shall be allowed to display and demonstrate to customers and/or allow
customers to operate items which Tenant has for sale), 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
<PAGE>
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
any Mortgagee (including, without limitation, any 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, or licensees, 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
<PAGE>
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 Landlord'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 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
<PAGE>
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 Tenant in the event the Tenant's use of the Premises will be
affected by such licenses/agreements.
9.5 Gaming Provisions.
(a) Acknowledgment Regarding Gaming. Tenant hereby expressly acknowledges
and agrees 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 the Casino(s) and/or its gaming nominee has the sole and exclusive
right pursuant to the REA to conduct Gaming Activities. Tenant shall not be
permitted to conduct Gaming Activities or to utilize Gaming Devices in the
Premises.
(c) Tenant's Obligations. Tenant and Tenant's Agents shall promptly apply
for and obtain any and all Gaming Licenses required by any Gaming Authority upon
notice from the Gaming Authority or Landlord. "Tenant's Agents" is defined as
any of Tenant's employees, stockholders, members, directors, managers, officers,
general partners, agents or representatives. In the event (i) Tenant or any of
Tenant's Agents fails to make such application, or fails to obtain the requisite
Gaming License, or to otherwise satisfy the requirements of the Gaming
Authorities, or (ii) any Gaming Licenses of the Casino(s) are, or are threatened
to be, denied, curtailed, suspended, or revoked by any Gaming Authority due to
the activities or relationships of Tenant or Tenant's Agents, Landlord may
immediately terminate this Lease.
Tenant agrees to provide any documentation and/or other evidence requested
by any Gaming Authority as may be appropriate in order for such Gaming Authority
to determine whether or not Tenant is in compliance with this Section 9.5. A
violation of this Section 9.5 shall be a non-curable default pursuant to the
provisions of Section 16.1(d) of this Lease.
9.6 Competing Tenant. In the event that at any time during the Lease Term,
Landlord enters into a lease with a tenant in the Shopping Center whose Primary
Use (as defined herein) is the retail sale of children's toys (hereinafter
"Competing Tenant"), and such Competing Tenant is open and operating in the
Shopping Center, 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
Cure 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 and Percentage Rent payable pursuant to
Article 1 shall be decreased by fifty percent (50%). The aforementioned
reduction shall in no event be deemed to modify, reduce, or abate Tenant's
obligation to pay all other Additional Rent under the Lease.
In addition, both Landlord and Tenant shall have the right to terminate
this Lease upon notice to the other party given at any time after a Competing
Tenant has been open for a period of one (1) year following the expiration of
the Cure Period and so long as such Competing Tenant continues to operate its
business. In the event Landlord exercises such right to terminate, Tenant shall
<PAGE>
have the right to nullify Landlord's termination notice by (i) notifying
Landlord, within ten (10) days following Landlord's notice of termination, of
its intention to waive the fifty percent (50%) reduction in Minimum Annual Rent
and Percentage Rent, and (ii) immediately commencing the payment of the full
amount of such rental payable pursuant to the terms of this Lease (absent the
terms of this Section 9.6). In the event of the termination of this Lease by
Landlord as provided herein, Landlord shall pay Tenant, within thirty (30) days
after the effective date of termination, an amount equal to the unamortized
portion of the cost incurred by Tenant in connection with Tenant's Work,
amortized on a straight-line basis from the Rent Commencement Date through and
including the original Expiration Date.
In the event the Competing Tenant ceases operating in the Shopping Center,
then Minimum Annual Rent and Percentage Rent shall revert to the amount
specified in Article 1.
The term "Primary Use" as used in this Section 9.6 means more than
twenty-five percent [25%] of the sales Floor Area of the entire premises,
including aisle space, is used for the display of such merchandise.
Notwithstanding the foregoing to the contrary: is agreed and understood
that the following shall be excluded from the definition of a Competing Tenant:
(i) one (1) tenant whose Primary Use is the sale of children's toys and whose
premises contain less than 2,000 square feet of Floor Area; and (ii) any tenant
whose Primary Use is the sale of educational or similar specialty toys (such as,
by way of example only, the stores doing business under the trade name of Store
of Knowledge, Learningsmith, or Discovery Store); and (iii) one (1) tenant whose
Primary Use is the sale of a specific type or category of children's toy (such
as, by way of example, "Build-A-Bear") and whose premises does not exceed 4,000
square feet of Floor Area; and (iv) any tenant whose principal use of its
premises and primary concept is the sale of apparel or gifts with the incidental
sale of children's toys provided no more than thirty-five percent [35%] of the
sales Floor Area of any such tenant's entire premises, including aisle space, is
used for the display of such children's toys; and (v) any kiosk or cart tenant
(provided, however, in no event shall a kiosk or cart selling children's toys be
located in the area directly in front of the Premises). 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.
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 (other
than an Occupancy Transaction as to which Landlord's consent was not required);
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.
<PAGE>
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 and which hours may, in
Landlord's sole and absolute discretion, be unique and extended to provide for
optimum sales generation. 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 Midnight, 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 Tenant's
Plans to Landlord 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 in this Lease and as an
inducement for the Tenant to enter into this lease prior to the receipt by
Tenant of the Tenant Package, Landlord agrees to the following: (i) Tenant shall
not be required to perform any work not specifically provided for in the Lease;
(ii)Tenant shall not be required to pay Landlord for any service, work, etc. or
other fee unless specifically provided for in the Lease; (iii) in the event of a
conflict between the Tenant Package and a requirement specifically provided for
in the Lease, the Lease shall prevail; and (iv) in the event of a conflict
between the Landlord approved plans and the Tenant Package, the approved plans
shall prevail except to the extent such discrepancy would result in a violation
of building code or other local building department requirement.
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 the Shopping Center 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
<PAGE>
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
<PAGE>
reasonable attorney fees and bond premiums).
(d) Notice of Non-responsibility. Landlord or it'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 may deem to be proper for
the protection of Landlord'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 or portion thereof 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
<PAGE>
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.
<PAGE>
(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 with a commercially reasonable deductible. 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. 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.,
<PAGE>
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 such litigation 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.
<PAGE>
(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 9.5 [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
<PAGE>
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
<PAGE>
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,
clearance, 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) Failing or refusing to comply with Section 9.5; 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 a
written notice specifying the nature of the default and demanding that Tenant
fully cure each such default within the time period specified in the
correspondingly lettered subparagraphs below:
(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, clearance, 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
<PAGE>
(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
<PAGE>
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;
(e) The unamortized cost of the Construction Allowance, if any, paid by
Landlord to Tenant in accordance with the provisions of Exhibit C-Addendum, if a
part of this Lease, and/or any rent credit given to Tenant, with a straight-line
amortization schedule and an amortization period equal to the Lease Term; and
(f) 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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
Concurrently with Tenant's execution of this Lease, Tenant shall execute
and deliver to Landlord the Notice of Assignment of Lease attached hereto as
<PAGE>
Exhibit G.
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.
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. 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. 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, any 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,
any Ground Lessor), execute an attornment agreement confirming the same, in form
and substance reasonably acceptable to Landlord or Landlord's successor. Such
agreement shall provide, among other things, that said successor shall not be
bound by (a) any prepayment of more than one (1) month's Rent (except Security
Deposit but only to the extent received by said successor) or (b) any material
amendment of this Lease made after the later of the Execution Date, or the date
that such successor's lien or interest first arose, unless said successor shall
have consented to such amendment. 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 or Mortgagee, Tenant shall execute and deliver to Landlord or
Mortgagee, if applicable, 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, any 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
<PAGE>
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
<PAGE>
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, the occupancy and/or on-going operation of Major Tenants).
25.3 Shopping Center Configuration. Tenant acknowledges that Exhibit A is
for the purposes of convenience only and that, subject to Section 7.5, 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.
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
<PAGE>
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, and (c) computer or
other reporting system failures resulting from the conversion to the year 2000
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
<PAGE>
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
<PAGE>
("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 Development (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.
ALADDIN BAZAAR, LLC,
a Delaware limited liability company
By: TH Bazaar Centers Inc.,
a Delaware corporation,
as managing member
By:
Name:
Title:
By:
Name:
Title:
LANDLORD
<PAGE>
TOYS INTERNATIONAL,
a California corporation
By:
Name:
Title:
By:
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.
"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. In no
event shall the CPI Adjustment Procedures result in a decrease of any sum of
money. 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.
<PAGE>
"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. In addition "Common Area" shall include areas
outside the boundaries of the Shopping Center that are included in the term
"Common Area" as defined in the REA.
"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.
"Effective Date" means the earlier of (i) the Execution Date or (ii) the
Commencement Date.
"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.
<PAGE>
"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 Charge" means the charge 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
(including without limitation the operation of Gaming Devices) 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 Board,
and/or any other state or local agency or authority regulating the business of
gambling and/or liquor licenses.
"Gaming Devices" means slot machines or other gaming devices, cashless
wagering systems and associated equipment (as those terms are defined in Nevada
Revised Statues Chapter 463), or any other equipment or supplies utilized to
perform Gaming Activities.
"Gaming Licenses" means any licenses, permits, authorizations, approvals,
registrations, waivers and/or findings of suitability issued by any Gaming
Authority.
"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. Gross Sales shall include, 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 (i) 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, or (ii) sums
<PAGE>
and credits received in the settlement of Claims for loss of or damage to
merchandise; or (iii) sales of fixtures, equipment or property which are not
stock in trade. 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. Gift Certificates shall be included in Gross Sales upon the redemption
of same at the Premises. Each sale upon installments or credit shall be treated
as a sale for the full sale price at the time of sale.
"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 refund, credit or the amount of discounts made thereon; 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; and transfers of merchandise between Tenant's
stores. 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), if any, 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
<PAGE>
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, code, rule, requirement, order, court decision or
procedural requirement of any Governmental Authority, and/or (ii) the rules and
regulations of the applicable governmental insurance authority or any similar
body, and/or (iii) the requirements of the REA. 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)
<PAGE>
to an extent of more than twenty-five percent (25%) of the full replacement cost
of the Premises, 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, (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, and (iii) any premises (or the occupants thereof) located in
buildings that are not a part of the primary Shopping Center structure (e.g.,
pad locations or peripheral property), the Restaurant Tenants, and (v) premises,
if any, used for the purpose of performing marriage ceremonies.
"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.
"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, beneficiary (or trustee acting on behalf of
the beneficiary), or assignee of any Mortgage, or any lessor under the 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 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.
<PAGE>
"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 Landlord, the owner or owners of the
Casino(s), and/or the owner or owners of the real property comprising all or a
portion of the Shopping Center and/or the Casino(s), 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.
"Restaurant Tenants" means those tenants whose primary use of their
premises in the Shopping Center is the operation of a restaurant (exclusive of
tenants located within the Food Court).
"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 (e.g., sprinkler and Air Conditioning
System) 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 Agents" is defined in Section 9.5(c).
"Tenant's Work" is defined in Exhibit C and the Tenant Package.
"Tenant's Plans" means calculations, specifications, designs, and drawings
<PAGE>
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 treatment and removal, treatment
and delivery of water, (including chilled or hot 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
PROVISIONS RELATING TO THE DESIGN AND CONSTRUCTION OF TENANT'S STORE
I. General Requirements
A. Tenant Package. Landlord will provide Tenant with the Tenant Package (as
defined in Exhibit B) which outlines specific requirements to be adhered to for
the purpose of the initial construction of the Premises.
B. Tenant's Plans.
1. Prior to Tenant preparing Tenant's Plans, Tenant, Tenant's architect and
engineer(s) shall thoroughly familiarize themselves with all local building
codes, this Exhibit C and the Tenant Package, as well as verify by physical
inspection, the accuracy and completeness of the existing site conditions.
Tenant's Plans and construction shall be prepared and performed with full
knowledge of and in compliance with the Tenant Package (including, without
limitation, the use of required lien waiver forms provided therein), this
Exhibit C and Legal Requirements including, but not limited to all energy
conservation, Hazardous Materials Laws, and handicap access requirements.
Tenant's Plans shall be prepared and/or stamped by architect(s) and engineer(s)
fully qualified and licensed in the state of Nevada.
2. Within ninety (90) days after receipt of the Tenant Package, Tenant
shall submit to Landlord, for Landlord's preliminary review, fully detailed and
dimensioned 1/2" scale preliminary design drawings for Tenant's Premises. This
preliminary submittal shall include the following: (a) three (3) sets of prints
<PAGE>
and one (1) sepia showing storefront elevations, floorplan, reflected ceiling
plan, fixture plans, and sections through the storefront and storefront signage,
(b) one (1) material sample and color board, and (c) if requested by Landlord,
one (1) completely colored rendering of Tenant's storefront design and/or
photographs of Tenant's existing prototype.
3. Within twenty-five (25) days after Landlord's approval of Tenant's
preliminary plans, Tenant agrees to submit to Landlord, for Landlord's final
review, six (6) sets of prints and one (1) sepia of fully detailed and
dimensioned 1/4" scale final construction drawings for Tenant's Premises, which
shall include the following : (a) architectural drawings including plan views of
the storefront, floor areas, and reflected ceiling; elevations of the storefront
and interiors; sections through the storefront, 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, panel schedules, riser diagrams, load
calculations, and all calculations and forms required by applicable Legal
Requirements, (c) all mechanical drawings, including but not limited to heating,
ventilating, and air conditioning design calculations, an equipment schedule and
specifications, the design for the air distribution duct work system, smoke
exhaust system, exhaust fan(s), plumbing fixtures and piping specifications, and
(d) structural drawings indicating any Tenant design elements, alterations,
additions and/or reinforcements to Landlord's structure required to accommodate
Tenant's Work, and all calculations and completed forms required by Legal
Requirements.
C. Approval of Tenant's Plans.
1. Tenant's Plans and the design and quality of Tenant's Work shall be
subject to the approval of Landlord.
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 approval of Tenant's Plans shall not create any
responsibility or liability on the part of Landlord for their completeness,
sufficiency, design, workability 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. Any additional expenses incurred by Landlord for
the review of any changes to the approved Tenant's Plans shall be at Tenant's
expense and reimbursed by Tenant upon Tenant's receipt of an invoice from
Landlord.
D. Requirements for Tenant's Improvements.
1. Tenant's Work and all other Improvements shall be constructed under the
supervision of an on-site superintendent at all times, and in accordance with
the approved Tenant's Plans, this Exhibit C and the Tenant Package.
2. At Tenant's sole cost, 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.
<PAGE>
3. Tenant, at its sole cost and expense, shall be responsible for obtaining
all necessary permits including, but not limited to, 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.
4. Tenant shall not be permitted to open for business until the Premises
fully and strictly comply with Legal Requirements and the approved Tenant's
Plans.
5. Prior to Tenant opening for business, Tenant shall provide Landlord with
a copy of the Certificate of Occupancy.
6. Tenant shall complete all Landlord punchlist items to Landlord's
commercially reasonable satisfaction within thirty (30) days following receipt
of Landlord's punchlist.
7. Within sixty (60) days, after completion of Tenant's Work, Tenant shall
deliver to Landlord: (i) a copy of the final signed-off building inspection
card, permit or report with respect thereto, (ii) original forms of all lien
waivers from all parties supplying labor and/or materials for Tenant's Work
which are notarized and unconditional using only the appropriate forms set forth
in the Tenant Package, and a copy of Tenant's recorded valid Notice of
Completion, and (iii) a certification from the architect of record that the work
is substantially complete and the Premises have been constructed in accordance
with the approved Tenant's Plans and this Exhibit C.
8. All work shall be performed and completed strictly in accordance with
Legal Requirements in a good and workmanlike manner, and shall be diligently
prosecuted to completion.
9. 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 located on site.
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 a
one time charge equal to $.60 per square foot of Floor Area of the Premises to
Landlord for the non-exclusive use of such receptacles. This charge shall be
reimbursed by Tenant upon Tenant's receipt of an invoice from Landlord.
II. 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 II and any other Improvements
or work necessary to construct and complete construction of Tenant's store. All
costs of Tenant's Work shall be paid for by Tenant regardless of whether or not
Tenant actually performed the work. In the event Landlord performs work at
Tenant's expense as provided in this Exhibit C, Tenant shall reimburse Landlord
for the cost thereof immediately upon Landlord's request therefor; provided,
however, that any such costs shall be competitive with the costs of commensurate
contractors serving the same trade area.
B. Performance of Work by Landlord. The cost incurred by Landlord in
performing any work or modification on behalf of Tenant above and beyond that
described under Section V of this Exhibit C, "Description of Landlord's Work",
or which is required as a result of Tenant's Work and/or other Improvements,
shall be reimbursed by Tenant upon Tenant's receipt of an invoice from Landlord;
provided, however, that any such costs shall be competitive with the costs of
commensurate contractors serving the same trade area.
<PAGE>
C. Storefront.
1. Tenant will be required to complete the storefront, infill unfinished
storefront openings such as display windows, entry areas, and any other
unfinished openings (as set forth in the Tenant Package), and install the
storefront signage.
2. Landlord will construct a portion of Tenant's storefront and the scope
of such work is set forth on Exhibit I attached hereto. As consideration for
such work, Tenant shall pay Landlord the "Storefront Charge" (as defined herein)
upon Tenant's receipt of an invoice therefor. The Storefront Charge shall be an
amount equal to Fifty Thousand Dollars ($50,000.00).
D. Ceilings. Tenant shall furnish and install all ceilings.
E. Partitions.
1. Tenant shall furnish and install all partitions within the Premises as
required by Legal Requirements and as shown in Tenant's approved Plans.
2. Tenant shall plaster or drywall and firetape the interior side of all
Interior Demising Partitions and Perimeter Demising Partitions over their entire
area, except for necessary openings as designated by Legal Requirements or the
Tenant Package.
F. Floor. Tenant shall furnish and install all floor coverings within the
Premises.
G. Rear Exit/Service Door(s). Landlord, at Tenant's expense, shall furnish
and install rear exit/service door(s), frames and hardware as required by Legal
Requirements, which cost shall be reimbursed by Tenant upon Tenant's receipt of
an invoice from Landlord provided, however, that any such costs shall be
competitive with the costs of commensurate contractors serving the same trade
area and shall not exceed $1,100 per door.
H. Plumbing.
1. Tenant shall furnish and install all plumbing fixtures and rough-in
plumbing. Tenant's plumbing contractor shall provide approved receptors and
piping for air conditioning condensate drains and water heater overflow as
specified in the Tenant Package.
2. Grease traps will be required for all food preparation areas having pot
sinks or any grease-producing appliances that discharge into the waste system.
3. Tenant shall not be permitted to use natural gas in the Premises.
I. Sprinklers. At Tenant's expense (which cost shall be reimbursed by
Tenant upon Tenant's receipt of an invoice from Landlord), Landlord's contractor
shall make such additions, modifications, or relocations to the sprinkler system
installed by Landlord required by the design and/or construction of Tenant's
Improvements, or to bring the same into compliance with the requirements of
Landlord's insurance underwriters and Legal Requirements; provided, however,
that any such costs shall be competitive with the costs of commensurate
contractors serving the same trade area.
J. Air Conditioning/Heating.
1. All air conditioning and heating work required by Tenant shall be at
Tenant's sole cost and expense. All such air conditioning and heating work shall
be designed and installed by Tenant (except as provided in Item 2. of this
<PAGE>
Section J). This work shall include, without limitation, additional air
conditioning, if any, connection to supply and return lines, duct work, any
associated distribution devices, and any controls or circuitry required. Tenant
shall provide heating to the Premises in accordance with, and if required
pursuant to, the Tenant Package. Notwithstanding anything to the contrary
contained in this Lease and Exhibits, if Tenant's business produces odor, fume
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
System designed to resolve the problems caused by such operations. The Air
Conditioning System serving the Premises shall be designed to cool air
automatically. Tenant, at a minimum, shall maintain conditions inside the
Premises as follows: 75(degree) Fahrenheit dry bulb and 50% relative humidity
with outside conditions of 108(degree) Fahrenheit dry bulb and 71(degree)
Fahrenheit wet bulb.
2. Landlord, at Tenant's expense, shall furnish and install an air terminal
box connected to Landlord's main supply line and provide Tenant with a
thermostat, which costs shall be reimbursed by Tenant upon Tenant's receipt of
an invoice from Landlord; provided, however, that any such costs shall be
competitive with the costs of commensurate contractors serving the same trade
area and shall not exceed $5,000.
K. Electrical. Tenant shall install all electrical and telephone work
required within the Premises, including, without limitation, the following:
1. Feeders and other work from the central distribution point, light
fixtures, transformers, electrical panels, electrical fuses, a main service
disconnect switch at Tenant's distribution point, distribution within the
Premises and additional conduit(s) from the central distribution point, as
required.
2. Temporary power for Tenant's construction.
3. It shall be Tenant's sole obligation, at its expense, to diligently
arrange for electrical and telephone service and installation of an electrical
meter by the electrical provider, to be designated by Landlord, in sufficient
time to establish such service prior to the date Tenant initially opens for
business.
4. Landlord shall furnish and install the following, at Landlord's main
distribution point, and the cost of such work shall be reimbursed by Tenant upon
Tenant's receipt of an invoice from Landlord: (i) a main electrical switch and
(ii) electrical fuses provided, however, that any such costs shall be
competitive with the costs of commensurate contractors serving the same trade
area and shall not exceed $7,600.00.
L. Miscellaneous. At Tenant's expense, Tenant shall provide and/or furnish
and install the following (except as otherwise expressly provided herein):
1. Life safety systems, as may be required by Legal Requirements, shall be
installed by Landlord at Tenant's expense (provided, however, that any such
costs shall be competitive with the costs of commensurate contractors serving
the same trade area).
2. Elevators, dumbwaiters, chutes, conveyors, duct shafts, pneumatic tubes
and their shafts, doors, and other components, including electrical hook-up and
service, if any, from the electrical panel to said equipment.
3. After Tenant's initial opening for business, Tenant shall be required to
install sound insulation of the walls and ceilings, and/or such other sound
insulation measures as required by Landlord in its commercially reasonable
discretion, in the event Tenant's business operations create sounds or noises
<PAGE>
that disturb Landlord, other tenants, patrons of other tenants, or the occupant
of any space in the Shopping Center.
III. DESIGN CRITERIA.
A. Structural.
Tenant must receive Landlord's prior written approval, which approval may
be given or withheld in Landlord's sole and absolute discretion, for any
alteration(s), addition(s), reinforcement(s), or penetration(s) which shall
affect any space (including, but not limited to, any portion of the Casino)
located adjacent to, above, or beneath Tenant's Premises. All work shall be
performed by Tenant, at Tenant's expense (or at Landlord's option, by Landlord,
at Tenant's expense). Any commercially reasonable costs associated with
Landlord's review and approval of Tenant's proposed alteration(s), addition(s),
reinforcement(s), or penetration(s) as provided herein shall be reimbursed by
Tenant upon Tenant's receipt of an invoice from Landlord.
B. Roof.
1. There shall be no installation of radio , television and/or satellite
dishes and/or antennas. Further, any other roof-top equipment shall be subject
to the prior written approval of Landlord 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 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 and/or said Governmental Authorities shall be designed and installed by
Landlord, at Tenant's expense, or at Landlord's option, designed and installed
by Tenant, at Tenant's expense; provided, however, that any such costs shall be
competitive with the costs of commensurate contractors serving the same trade
area.
2. All flashing, counter-flashing, roof penetrations 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 roofing contractor; provided,
however, that any such costs shall be competitive with the costs of commensurate
contractors serving the same trade area.
C. Storefront.
1. Tenant shall strictly comply with the storefront theming and
construction criteria that pertain to Tenant's Premises as set forth in the
Tenant Package.
2. No storefront, part thereof, or swinging door shall project beyond the
Premises or into any Common Area, except as may be otherwise set forth in the
Tenant Package. Tenant shall comply with the door types as specified in the
Tenant Package.
3. All storefront work, including entry doors, shall be supported at its
head sections by a welded structural steel framework that shall be securely
attached, suspended and braced to the existing building structure.
4. 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 Work.
5. All storefront materials shall be durable materials that express and
<PAGE>
maintain the theming for the area of the Shopping Center in which the Premises
is located. Such materials are outlined in the Tenant Package and must be
submitted to Landlord, for Landlord's approval, prior to application.
6. All storefront construction and materials shall be resistant to wear,
fading, discoloration, and decay.
D. Floors. Tenant shall furnish and install hard durable flooring materials
within the sales Floor Area of the Premises such as marble, slate, stone,
natural hardwood, mosaic tile or similar materials approved by Landlord.
Tenant's storefront entry area shall have hard durable flooring material
identical in quality, color and pattern to the mall flooring material, or, at
Landlord's option, such other durable materials as may be approved by Landlord.
E. Ceiling.
1. Ceilings shall be drywall or plaster construction within the sales Floor
Area of the Premises. Other ceiling material finishes may be used subject to
written approval by Landlord. Acoustical T-bar ceiling with standard 24" x 48"
modules will only be permitted in storage and nonpublic areas.
2. Tenant shall strictly comply with specifications of the maximum ceiling
height of the Premises set forth in the Tenant Package; it is understood that
such maximum ceiling heights will vary for different areas of the Shopping
Center but will be no less than twelve feet (12'). Higher ceilings may be
allowed upon written approval from Landlord . Any relocation of or modification
to structure, piping, conduit and/or duct work necessitated by Tenant's
installation of a ceiling in excess of the height limitation shall be at
Tenant's expense. Any access panels and/or catwalks above the ceilings required
to serve Tenant's Work shall be installed at Tenant's expense.
F. Electrical. All lighting fixtures in Tenant's public areas, other than
decorative fixtures, shall be recessed. 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.
G. Signs. All signs shall be designed strictly in accordance with the
Tenant Package. Tenant acknowledges that the sign criteria have been established
for the 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.
IV. Tenant's Use of a Contractor.
A. Contractor Selection. Tenant must use only union labor contractor(s) and
subcontractor(s) for the construction of Tenant's Work and Improvements Tenant
further agrees that it will require any general contractor and any
subcontractors it retains for the construction of Tenant's Work and Improvements
to execute the Letter of Assent as described herein. The "Letter of Assent" is
an agreement required by the local union and a copy of the Letter of Assent is
contained in the Tenant Package. Such contractor shall be bondable and shall
meet all licensing and insurance requirements established by Landlord and
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 of
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":
<PAGE>
1. Prior to commencement of Tenant's Improvements, Tenant's contractor
shall provide Landlord with a construction schedule indicating the 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 and 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 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 Legal Requirements and
all reasonable and equitable rules and regulations established by Landlord in
the performance of Tenant's Improvements .
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 Six and
No/100 Dollars ($6) 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 satisfactory to Landlord, and shall be
in such form as Landlord shall approve in its sole and absolute 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 Improvements. The performance bond shall be in an amount equal to one
hundred percent (100%) of 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 satisfactory to Landlord, and shall be in such form as Landlord
shall approve in its sole and absolute discretion.
V. Description Of Landlord's Work.
<PAGE>
A. General. "Landlord's Work" shall be limited to the performance of the
improvements described in this Section V.
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 code 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 1 (one). Exterior walls shall be masonry, metal
stud, and plaster or such other material or materials as Landlord shall select.
C. Partitions. Landlord will provide Interior Demising Partitions and
Perimeter Demising Partitions. At Landlord's option, the demising partitions
shall be of unfinished (i) masonry, or (ii) concrete, or (iii) metal or wood
studs sixteen inches (16") on center, to the underside of the structure above.
Where such partitions fall on structural column lines, at structural braces or
structural expansion joints, projections may occur. Where desirable in
Landlord's opinion, a vertical neutral strip will be located at the storefront
area between stores.
D. Floor. Concrete floor slabs within the interior of the Premises shall
have a smooth finish. Such floor shall be on a single plane without depressions
or raised areas, but may, at Landlord's option, be sloped. Notwithstanding the
foregoing to the contrary, it is agreed and understood that the floor slab in
some premises shall have changes in elevation.
E. Plumbing. Water service and sewer laterals shall be sized by Landlord
and brought to a point above or directly beneath the Premises, as specified in
the Tenant Package.
F. Sprinklers. An automatic sprinkler system as described in the Tenant
Package shall be installed in accordance with Landlord's standard grid pattern
and height that shall include one (1) sprinkler head per one hundred (100)
square feet of Floor Area of the Premises.
G. Electrical. Pursuant to Landlord's criteria, Landlord shall provide the
following: (i) facilities for the delivery of 277/480 volt power to a central
distribution point, (ii) an electrical meter socket at the distribution point
and (iii) an empty conduit(s) from the central distribution point to the
Premises for electrical and telephone lines. Tenant's facilities shall be sized
and located by Landlord, as specified in the Tenant Package.
H. Air Conditioning. Landlord shall design and install an Air Conditioning
System to serve the Premises with chilled air or water or other refrigerant, at
Landlord's sole discretion. The Air Conditioning System may consist of
equipment, meters, and facilities that serve the Premises either exclusively or
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. The Tenant Package shall detail the type, design, and
specifications of the Air Conditioning System provided by Landlord. In the event
Tenant requires in excess of 3.85 watts per square foot of Floor Area and if
such additional capacity is available, Landlord may, in its sole and absolute
discretion, provide the additional capacity to Tenant and Tenant shall reimburse
Landlord for the cost thereof upon Tenant's receipt of an invoice from Landlord.
<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.
Tenant's employees shall not be permitted to enter those areas of the
Casino(s) which are designated "Employees Only."
Tenant shall not permit its employees to perform their employment tasks in
any portion of the Casino(s) without the express written approval of an
authorized agent on behalf of the owner of the Casino. Further, any such
employees shall be bonded in such amount as may be reasonably required by such
Casino owner.
<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 $ per square
foot of Floor Area of the Premises was 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
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
<PAGE>
EXHIBIT G
Notice-of-Assignment of Lease
_________________, 199__
TOYS INTERNATIONAL, a California corporation
550 Rancheros Drive
San Marcos, CA 92069
Re: Lease Dated: __________________________________
Mortgagee: Fleet National Bank
Address of Mortgagee: 75 State Street
Mail Stop MA BO F11C
Boston, MA 02109-1810
Attn: Margaret A. Mulcahy (or her successor)
Mortgage Dated: __________________________________
Dear Sir/Madam:
The undersigned has assigned by a mortgage or deed of trust (the
"Mortgage") dated as shown above to the Mortgagee identified above, as
administrative agent for the "Lenders" under a Building Loan Agreement of even
date with the Mortgage, all the undersigned's estate, right, title and interest
in, to and under the Lease between you and the undersigned dated as set forth
above, as said Lease may have been heretofore modified or amended (the "Lease"),
together with all right, title and interest of the undersigned as lessor
thereunder, including, without limitation, the right upon the occurrence of an
Event of Default (as defined in the Mortgage) to collect and receive all
earnings, revenues, rents, issues, profits and income of the property subject to
the Mortgage.
Said assignment does not impair or diminish any of our obligations to you
under the provisions of the Lease, nor are any such obligations imposed upon
Mortgagee, its successors or assigns.
Pursuant to said assignment you are hereby notified that in the event of a
demand on you by Mortgagee or its successors and assign (provided Mortgagee
shall have notified you of the identity of Mortgagee's successor or assignee)
for the payment to it of the rents due under the Lease, you may, and are hereby
authorized and directed to, pay said rent to Mortgagee (or such successor or
assignee) and we hereby agree that the receipt by you of such a demand shall be
conclusive evidence of Mortgagee's (or such successor's or assignee's) right to
the receipt thereof and that the payment of the rents by you to Mortgagee (or
such successor or assignee) pursuant to such demand shall constitute performance
in full of your obligation under the Lease for the payment of rent to the
undersigned.
Kindly indicate your receipt of this letter and your agreement to the
effect set forth below by signing the enclosed copy thereof and mailing it to
Mortgagee at its address identified above to the attention of its Real Estate
Finance Office.
ALADDIN BAZAAR, LLC,
a Delaware limited liability company
By: TH Bazaar Centers Inc.,
a Delaware corporation,
as managing member
By:
Name:
Title:
By:
Name:
Title:
LANDLORD
<PAGE>
The undersigned acknowledges receipt of the original of this letter and
agrees for the benefit of Mortgagee that it shall notify Mortgagee of any
default on the part of the landlord under the Lease which would entitle the
undersigned to cancel the Lease or to abate the rent payable thereunder, and
further agrees that, notwithstanding any provision of the Lease, no notice of
cancellation thereof, nor of any abatement, shall be effective unless Mortgagee
has received the notice aforesaid and has failed within 30 days of the date
thereof to cure, or if the default cannot be cured within 30 days has failed to
commence and diligently prosecute the cure, of landlord's default which gave
rise to the right to cancel or abate.
TOYS INTERNATIONAL,
a California corporation
By:
Name:
(Type or Print Name)
Title:
By:
Name:
(Type or Print Name)
Title:
TENANT
<PAGE>
EXHIBIT H
GUARANTY OF LEASE
WHEREAS, a certain Lease, more fully described below, has been or will be
executed:
a. Name of Shopping Center: DESERT PASSAGE AT ALADDIN
b. Landlord: ALADDIN BAZAAR, LLC,
a Delaware limited liability company
c. Tenant: TOYS INTERNATIONAL,
a California corporation
d. Premises Address: Space No. 1-H-095
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)
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)
Exhibit 10.123
Lease Agreement - Pier 39
PIER 39 LIMITED PARTNERSHIP LEASE
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
1. Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Shopping Center Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
3. Premises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
5. Term Commencement: Opening for Business . . . . . . . . . . . . . . . . . .2
5.1 Term. (2)
5.2 Landlord's Ability to Deliver Premises. (2)
5.3 Tenant's Opening. (2)
5.4 No Extension or Renewal of Lease or Tenancy. (2)
5.5 Early Termination (2)
6. Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
6.1 Minimum Monthly Rent. (3)
6.2 Cost of Living Adjustment. (3)
6.3 Commencement of Rent. (3)
6.4 Percentage Rent. (3)
6.5 Definition of Gross Sales. (4)
6.6 Statement of Gross Sales. (4)
6.7 Records/Audit. (4)
6.8 Additional Rent. (5)
6.9 Late Payment. (5)
6.10 Place of Payment. (6)
7. Security Deposit. . . . . . . . . . . . . . . . . .INTENTIONALLY OMITTED . .6
8. Use and Operation of Premises. . . . . . . . . . . . . . . . . . . . . . . .6
8.1 Authorized Use. (6)
8.2 Continuous Operation. (6)
8.3 Limitation on Non-Sales Uses. (6)
8.4 Vending Machines. (6)
8.5 Distress Sales. (6)
8.6 Lawful Use, Nuisance, Waste, Interference. (6)
8.7 Clean-up. (6)
8.8 Displays, Solicitation. (7)
8.9 Deliveries. (7)
8.10 Operating Standards. (7)
9. Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
9.1 Utilities Furnished by Utility Companies. (7)
9.2 Utilities Furnished by Landlord. (7)
10. Indemnity, Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . .7
10.1 Indemnity. (7)
10.2 Waiver of Subrogation. (7)
<PAGE>
11. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11.1 Comprehensive, General and Automobile Liability Insurance. (8)
11.2 Workers' Compensation and Employers' Liability. (8)
11.3 Plate Glass. (8)
11.4 Boiler and Equipment. (8)
11.5 Fire and Extended Coverage of Tenant's Improvements and Property. (8)
11.6 Fire and Extended Coverage of Center. (8)
11.7 Effective Date, Policy Forms and Provisions. (8)
11.8 Landlord's Right to Maintain Insurance and Allocate Costs. (9)
11.9 Insurance During Course of Construction. (9)
11.10 Adjustments to Coverage's and Amounts. (9)
12. Tenant's Right to Make Alterations. . . . . . . . . . . . . . . . . . . . .9
13. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13.1 Real Property. (10)
13.2 Personal Property. (10)
13.3 Payment of Real Property Taxes. (10)
13.4 Definition of Taxes. (11)
13.5 Prepaid Tax Deposit. (11)
14. Common Areas. . . . .. . . . . . . . . . . .. . . . . . . . . . . .. . . . 11
14.1 Definitions. (11)
14.2 Landlord's Duties. (11)
14.3 Management. (12)
14.4 Nonexclusive Rights. (12)
14.5 Payment by Tenant. (12)
14.6 Maximum Annual Increase (12)
15. Repairs, Surrender of Premises. . . . . . . . . . . . . . . . . . . . . . .13
15.1 Landlord's Obligations. (13)
15.2 Tenant's Obligations. (13)
15.3 Surrender. (13)
15.4 Landlord's Rights. (13)
15.5 Improvements. (13)
16. Fixtures and Personal Property. . . . . . . . . . . . . . . . . . . . . . .14
17. Assignment; Subletting, .. . . . . . . . . . . .. . . . . . . . . . . .. . 14
18. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
18.1 Taking. (15)
18.2 Termination. (15)
18.3 Award. (15)
19. Advertising and Signs. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
19.1 Signs. (15)
19.2 Advertising. (15)
20. Mechanic's Liens.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
20.1 Tenant's Duties. (15)
20.2 Contest and Discharge of Liens. (16)
<PAGE>
21. Destruction, Reconstruction.. . . . . . . . . . . . . . . . . . . . . . . .16
21.1 Destruction. (16)
21.2 Destruction of Building or Center. (16)
21.3 Restoration and Abatement of Rent. (16)
21.4 Restoration of Leasehold Improvements and Fixtures. (16)
21.5 Deposits of Insurance Proceeds. (17)
21.6 Termination. (17)
22. Subordination; Attornment.. . . . . . . . . . . . . . . . . . . . . . . . .17
22.1 Subordination. (17)
22.2 Attornment. (17)
23. Bankruptcy and Insolvency.. . . . . . . . . . . . . . . . . . . . . . . . .17
23.1 Termination. (17)
23.2 Effect. (18)
23.3 Guarantor of Lease. (18)
24. Default and Remedies. . . . . . . . . . . . . . . . . . . .. . . . . . . . 18
24.1 Defaults. (18)
24.2 Remedies. (18)
24.3 No Termination. (18)
24.4 Termination. (18)
24.5 Personal Property, Fixtures. (19)
24.6 Remedies Not Limited. (19)
24.7 No Setoff. (19)
24.8 Waiver of Rights of Redemption. (19)
24.9 Waiver of Trial by Jury. (19)
24.10 Default by Landlord. (19)
25. Marketing Fund. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 20
26. Sale of Premises by Landlord. . . . . . . . . . . . . . . . . . . . . . . .20
27. Master Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
29. Rules and Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
30. Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
31. Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
32. Radius Clause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
33. Changes To Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
34. Design Criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
35. Sign Criteria . . . . . . . . . . . . . . . . . . . . . . 21
36. General Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
36.1 Offset Statement. (21)
36.2 Waiver. (22)
36.3 Force Majeure. (22)
36.4 Modification. (22)
36.5 Governing Law. (22)
36.6 Disclaimer. (22)
36.7 Severability. (22)
36.8 Entire Agreement. (22)
36.9 Time. (22)
36.10 Joint and Several. (22)
36.11 Captions; Terms. (23)
36.12 Successors. (23)
36.13 Notices. (23)
36.14 No Merger. (23)
36.15 Offer. (23)
36.16 Authority. (23)
<PAGE>
37. Sponsorship Program . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
38. Hazardous Material. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
39. Other Toy Tenants . . . . . . . . . . .. . . . . . . . . . . . . . .. . . .24
40. Co-Tenancy . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . 25
EXHIBIT "A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT "B" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
EXHIBIT "C" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Division 1 Landlord's Work . . . . . . . . . . . . . . . . . . . . . . 28
Division 2 Tenant's Work . . . . . . . . . . 28
Division 3 Plans and Specifications. . . . . . . . . . . . . . . . . . 29
Division 4 Construction . . . . . . . . . . . . . . . . . . . . . . . .29
ADDENDUM TO EXHIBIT "C" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
EXHIBIT "D" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT "E" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
EXHIBIT "F" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
EXHIBIT "G" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
<PAGE>
PIER 39 LIMITED PARTNERSHIP LEASE
1. Parties
This Lease is dated and effective on November 1, 1998, between PIER 39
LIMITED PARTNERSHIP, a California Limited Partnership ("Landlord") and Toys
International, a California corporation ("Tenant").
2. Shopping Center Plan
The general plan of PIER 39 CENTER, the integrated retail shopping center
which Landlord constructed in the City and County of San Francisco (hereinafter
called the "Shopping Center" or "Center") is shown on Exhibit "A" attached
hereto and made a part hereof. Except as otherwise restricted by this Lease,
Tenant acknowledges that the Landlord may change, eliminate or add any
improvements to any portion of the Shopping Center.
3. Premises
Landlord hereby leases and demises to Tenant, and Tenant hereby leases and
takes from Landlord the commercial space K-105 (hereinafter called "the
premises"), consisting of approximately 5500 square feet, with a location, size
and shape substantially as shown on Exhibit "B" attached hereto and made a part
hereof, and all improvements thereon, together with the right of all necessary
ingress and egress and the nonexclusive use of Common Areas, as hereinafter
described and defined. Landlord reserves the right to install, maintain, use and
replace ducts, wires, conduits and pipes leading through the premises in
locations which will not materially interfere with Tenant's use of the premises.
The exact boundaries of the premises shall be as constructed and shall extend to
the unfinished interior surface of all perimeter walls, except glazing, which
shall be included within the premises, the unfinished surface of all floors, and
the underside of the structural concrete slab or other structural element
forming the ceiling of the premises. Within sixty (60) days following the
Commencement Date, Landlord shall deliver to Tenant a certificate stating
Landlord's determination of the actual number of square feet of floor area in
the premises, and the parties agree that in the event of a dispute as to the
number of square feet of floor area in the premises, the decision of an
independent architect mutually selected by the parties shall be final, binding
and conclusive. In the event the square feet of floor area in the premises is
not 5,500, then this Lease shall be amended to reflect the actual number of
square feet of floor area in the premises, and appropriate adjustment shall be
to rental and other charges based upon the square feet of floor area in the
premises..
4. Construction
The premises have been constructed generally in accordance with the
provisions of Exhibit "C", attached hereto and made a part hereof, and the
allocation between Landlord's work and Tenant's work is set forth therein.
Tenant shall, at its sole cost and expense, obtain and maintain all
permits, authorizations and approvals from all governmental and
quasi-governmental authorities necessary to construct and operate Tenant's
business on the premises.
Tenant shall, at its sole cost and expense, diligently prosecute to
completion all work necessary to fully construct its business within the
premises in compliance with all laws, ordinances, rules, regulations, permits,
authorizations and approvals from all governmental and quasi-governmental
authorities. Tenant shall indemnify, defend and hold Landlord harmless from any
<PAGE>
and all damages, liabilities, claims, demands, costs and expenses (including
attorneys, accountants and investigation fees and costs) arising from or in
connection with Tenant's failure to fully comply with the provisions of this
Section 4. Promptly after receipt of written request from Tenant, Landlord shall
execute and deliver to Tenant or Tenant's designee an instrument, on a form
reasonably acceptable to Landlord and Landlord's lender(s), pursuant to which
Landlord waives and relinquishes, in favor of any lender or lessor of Tenant,
any lien or security interest which Landlord may have with respect to Tenant's
trade fixtures, machinery, equipment, furnishings, furniture, merchandise,
inventory and personal property now or hereafter placed in the premises by
Tenant.
Tenant shall be solely responsible and liable for the full and complete
design and construction necessary for the operation of its business in the
premises, and all requirements of all permits, approvals and authorizations.
Tenant shall submit to Landlord all plans and specifications for the proposed
construction and such plans and specifications shall be subject to the prior
written approval of Landlord, which approval shall not be unreasonably withheld.
All construction work shall be made under the supervision of a competent
architect or competent licensed structural engineer in accordance with the plans
and specifications which Landlord has approved in writing. All such construction
work shall be contracted for and paid for by Tenant or other persons without
cost to Landlord, and shall be completed free of liens and in a good and
workmanlike manner, all in accordance with such reasonable rules and regulations
as Landlord may establish from time to time for remodeling and construction work
done by tenants in the Center.
Tenant's Architect/Engineer shall provide on-site construction inspection
throughout the course of construction to insure conformity with all aspects of
plans, specifications, building codes and general construction practices. Upon
substantial completion of Tenant's construction, Tenant shall cause Tenant's
Architect/Engineer to prepare and deliver to Landlord a Notice of Completion and
an Architect's Certificate of Acceptance of said premises.
Tenant shall promptly correct all work reasonably rejected by the
Landlord's Construction Representative as defective or as failing to conform to
the plans and specifications approved by Landlord in writing, whether observed
before or after substantial completion and whether or not fabricated, installed
or completed. Tenant shall bear all costs of correcting such rejected work
including compensation of the Landlord's Construction Representative for
services made necessary thereby.
It is hereby agreed that Tenant shall take all appropriate action necessary
to insure that the premises, and every part thereof, are maintained in a manner
consistent with Landlord's design criteria and Landlord's maintenance standards
throughout the Term of this Lease. The nature and extent of such maintenance
work shall be approved in writing by Landlord prior to commencement of the work,
and shall be at the sole cost and expense of Tenant and pursuant to all
applicable provisions of this Lease.
Landlord does not, and has not, made any representations or warranties
regarding the physical condition of the premises, the nature or extent of the
improvements located therein, or the fitness for Tenant's particular use
thereof. Tenant has made its own investigation of the premises, and every part
thereof, and is taking possession of the premises based upon such investigation
only. By taking possession of the premises, Tenant acknowledges that the same,
and every part thereof, is fit for its intended purpose.
5. Term Commencement: Opening for Business
5.1 Term. The term of this Lease ("Term") shall be for ten (10) years
commencing on the earlier of (a) the date upon which Tenant initially opens for
<PAGE>
business in the premises, or (b) May 1, 1999 ("Commencement Date"), and expiring
on April 30, 2009, unless earlier terminated pursuant to the provisions of this
Lease or as provided by law. Notwithstanding the foregoing, the Commencement
Date shall be postponed one (1) day for each day that Landlord does not deliver
possession of the premises beyond February 1, 1999.
5.2 Landlord's Ability to Deliver Premises. The Lease shall not be rendered
void or voidable by Landlord's inability to deliver the premises; nor shall such
inability to deliver the premises render Landlord liable to Tenant for any loss
or damage whatsoever suffered by Tenant thereby. No extension of the Lease shall
result from a delay in delivering the premises. Notwithstanding anything to the
contrary contained in this Lease, in the event Landlord has not delivered
possession of the premises to Tenant by written notice to Tenant given on or
before February 1, 1999, then Tenant shall have the right to terminate this
Lease effective upon written notice to Landlord, which notice may be given after
February 1, 1999 and any time prior to such delivery of possession.
5.3 Tenant's Opening. Tenant shall open the premises for business no later
than the Commencement Date. Within thirty (30) days after Tenant opens for
business and receipt of Landlord's request, Tenant will execute and deliver to
Landlord a certificate substantially in the form attached hereto, marked Exhibit
"D" and made a part hereof, indicating thereon any exceptions thereto which may
exist at that time. Failure of the Tenant to execute and deliver such
certificate shall constitute an acceptance of the premises and acknowledgment by
Tenant that the statements included in Exhibit "D" are true and correct, without
exception.
5.4 No Extension or Renewal of Lease or Tenancy. Landlord has no obligation
of any kind -- legal, equitable or otherwise -- to grant to Tenant an extension
or renewal of this Lease or to enter into a new or other lease with Tenant, and
Landlord shall have no liability to Tenant, its agents, employees or
representatives, and each of them, for Landlord's failure or refusal to consent
to or grant an extension of renewal of this Lease and/or to enter into a new or
other lease with Tenant.
5.5 Early Termination. Landlord and Tenant shall each have a one-time
option to terminate this Lease in the event that Tenant shall fail to achieve
gross sales (as defined below) in and from the premises, as reported to
Landlord, of One Million Five Hundred Twelve Thousand Five Hundred Dollars
($1,512,500.00) during the period of May 1, 2001 through April 30, 2002
(the"Test Period"); neither Landlord nor Tenant may terminate this Lease if
Tenant's gross sales equal or exceed said sum during said period. Either party
may exercise its option to terminate this Lease upon written notice to the other
party given not later than June 30, 2002, and stating the effective date of
termination, which shall not be less than sixty (60) days nor more than ninety
(90) days after such notice is given. In the event this Lease is terminated
pursuant to the foregoing, the Term shall end upon such effective date of
termination as if the same were the expiration date originally provided in this
Lease. In the event that at any time or times during the Test Period Tenant is
prevented from operating its business at the premises due to matters set forth
in Section 36.3 of this Lease, then for purposes of this Section 5.5 only,
Tenant's gross sales for such time or times during the Test Period shall be
deemed to be equal to Tenant's gross sales for the identical period(s) during
the most recent year as to which Tenant was not so prevented from operating its
business at the premises.
Except as otherwise expressly provided in this Lease, Tenant shall have no
other right to terminate this Lease except the specific right to terminate
provided herein.
6. Rent
<PAGE>
6.1 Minimum Monthly Rent. Tenant shall pay to Landlord in advance on the
first day of each calendar month of the Lease Term without set off or deduction
minimum monthly rent as follows:
(i) For the first (1st) through thirty-sixth (36th) full calendar months of
the Term, the sum of Nine Thousand Six Hundred Twenty Five Dollars ($9,625.00)
per month.
(ii) For the thirty-seventh (37th) through seventy-second (72nd) months of
the Term, the sum of Eleven Thousand Dollars ($11,000.00) per month.
(iii) For the seventy-third (73rd) through ninety-sixth (96th) months of
the Term, the sum of Eleven Thousand Four Hundred Fifty Eight Dollars
($11,458.00) per month.
(iv) For the ninety-seventh (97th) through the one hundredth-twentieth
(120th) months of the Term, the sum of Twelve Thousand Three Hundred Seventy
Five Dollars ($12,375.00) per month.
Rent for any fractional month shall be prorated and paid on the first day
rent accrues during said month.
Notwithstanding anything to the contrary contained in this Lease, Tenant
shall not be required to pay minimum monthly rent with respect to the first six
(6) months of the Term; provided, however, that Tenant shall be required to make
all other payments specified in the Lease during said period, including, without
limitation, percentage rent, common area maintenance charges, real estate taxes
and promotional fund contributions.
6.2 Cost of Living Adjustment. INTENTIONALLY OMITTED.
6.3 Commencement of Rent. Except as otherwise provided in Section 6.1,
minimum monthly rent shall commence on the Commencement Date. ("Rent Start
Date")
6.4 Percentage Rent. Tenant shall also pay to Landlord percentage rent
equal to six percent (6%) of Tenant's gross sales (as the term "gross sales" is
defined in Paragraph 6.5 of the Lease) in excess of the Annual Breakpoint (as
defined below) made from or upon the premises during each Lease Year (as defined
below). The Annual Breakpoint shall be $1,776,923 annually for years one (1)
through (3) of the Term, $2,030,769 annually for years four (4) through six (6)
of the Term, $2,115,385 annually for years seven (7) and eight (8) of the Term,
and $2,284,615 annually for years nine (9) and ten (10) of the Term. Percentage
rent shall be computed each calendar month. Commencing with the calendar month
in each Lease Year in which Tenant's gross sales exceeds the Annual Breakpoint,
on or before the tenth (10th) day of the calendar month immediately following
the close of each calendar month, Tenant shall pay to Landlord an amount equal
to six percent (6%) of the excess over the Annual Breakpoint of the amount of
all gross sales during the Lease Year through and including those made during
the calendar month for which the installment of percentage rent is being
calculated, as reduced by the amount, if any, of installments of percent rent
previously paid by Tenant for the Lease Year.
Within ninety (90) days after the end of each Lease Year Landlord shall
determine the amount of percentage rent based on the gross sales of Tenant
during the Lease Year, and the sums paid to Landlord as minimum monthly rent and
percentage rent. If Tenant has paid to Landlord an amount of percentage rent
greater than the percentage rent it is in fact obligated to pay for the Lease
Year as determined in this Paragraph, Tenant shall be entitled to an immediate
refund of said sum so determined. If Tenant has paid to Landlord an amount of
percentage rent less than Tenant is required to pay, Tenant shall immediately
pay the difference to Landlord.
<PAGE>
A "Lease Year" is a calendar year, except that the first Lease Year shall
commence on the date the Term commences and the last Lease Year shall end on the
date the Term expires or terminates.
For the purpose of computing the percentage rent for any fractional Lease
Year, percentage rent shall be equal to the product of (A) six percent (6%)
multiplied by the excess, if any, of (i) the amount of Tenant's gross sales
during the period of 365 days beginning on the Rent Start Date or during the
period of 365 days ending at the end of the Term, as the case may be, over (ii)
the Annual Breakpoint in effect during the fractional Lease Year, multiplied by
(B) a fraction, the numerator of which shall be the number of days contained in
such fractional Lease Year and the denominator of which shall be 365.
6.5 Definition of Gross Sales. As used herein, the term "gross sales" means
the entire amount of the actual sales price, whether wholly or partly for cash
or credit, of all merchandise and services sold and all other receipts by sale,
barter or otherwise of all business conducted in, on or from the premises,
including, without limiting the foregoing, all deposits not returned to
purchasers, all sales to employees or agents of Tenant, all orders taken in or
from the premises although said orders may be received by telephone or mail or
through the Internet or other electronic media, or filled elsewhere, or procured
from the premises by house to house or other canvassing, all sales by vending
machines on the premises, and sales by any sublessee, licensee or concessionaire
in or from the premises, all without credit to Tenant for cash discounts or
uncollected or uncollectible credit accounts. There shall be excluded or, if
previously included, deducted from "gross sales" the following:
(a) Any refund or credit given on merchandise sold in or from the premises
and returned by a customer for cash or credit, or the amount of any refund or
credit given in lieu of accepting the return of such merchandise;
(b) Goods returned to sources or transferred to another store or warehouse
owned by or affiliated with Tenant;
(c) Sums and credits received by Tenant in the settlement of claims for
loss of or damage to merchandise;
(d) Receipts from public telephones and stamp machines;
(e) Sales taxes, so-called luxury taxes, consumers' excise taxes, gross
receipt taxes and other similar taxes now or hereafter imposed upon the sale of
merchandise or services, but only if collected separately from the selling price
of merchandise or services and collected from customers;
(f) Sales of fixtures, equipment or property which are not stock in trade;
(g) Sales to employees of Tenant for their own use and not for resale, to
the extent such sales do not exceed in the aggregate three percent (3%) of gross
sales for the Lease Year;
(h) The amount of any discount given on promotional items, with only the
amount actually charged by Tenant to be included in gross sales;
(i) Bulk sales of goods or merchandise not in the ordinary course of
Tenant's business for the purpose of resale;
(j) Uncollected or uncollectible credit accounts, bounced checks and other
bad debts;
(k) Gift certificates, or like vouchers, until such time as the same shall
have been converted into a sale by redemption;
<PAGE>
(l) Receipts from vending machines installed solely for the use of Tenant's
employees; and
(m) Receipts from so-called "layaway" sales except and as to the extent
actually received by Tenant.
All sales originating at the premises shall be considered as made and
completed therein, although bookkeeping and payment of the account, filling of
the order, or delivery of the merchandise may be made in or from a place other
than the premises.
6.6 Statement of Gross Sales. Tenant agrees to furnish Landlord a statement
of gross sales of Tenant for each calendar month within ten (10) days after the
close of such month, and an annual statement of gross sales for each calendar
year within thirty (30) days after the close of such calendar year. Such
statements shall be signed and certified correct by Tenant. The receipt by
Landlord of any statement or any payment of percentage rent shall not bind it as
to the correctness of the statement or payment.
6.7 Records/Audit.
(a) Tenant shall establish and comply with an adequate system of recording
sales and bank deposits in accordance with generally accepted accounting
standards for internal controls. Tenant shall record all sales of every kind on
computer equipment, a cash register with locked continuous tape or other
method(s) reasonably satisfactory to Landlord.
(b) INTENTIONALLY OMITTED
(c) All records which refer or pertain to the premises including, but not
limited to, all cash register tape; non consolidated sales tax returns; bank
books, records, and statements, and invoices, vouchers and bills shall be made
available at a reasonable time and place (it being agreed that Tenant's
corporate headquarters is a reasonable place if it is located in California) for
the inspection of Landlord, its accountants and attorneys within fifteen (15)
days of written notice from Landlord. Tenant shall keep safe and intact all of
the aforesaid records for a period of three (3) years after the date of the
submission to Landlord of the annual statement of gross sales to which said
records pertain.
(d) At any time within three (3) years after the receipt of any statement
of gross sales, Landlord shall be entitled to an audit of such gross sales
either by Landlord and/or by representatives of Landlord. If it shall be
determined by such audit that there has been improper reporting of gross sales
which results in a failure to pay the proper amount of rent, then such
deficiency shall become immediately due and payable, with interest at the rate
set forth in 6.9, from the date when said payment should have been made. If such
audit shall disclose an understatement of more than three percent (3%) of gross
sales, Tenant shall promptly pay to Landlord the cost of said audit in addition
to the deficiency of percentage rent, which deficiency shall be payable in any
event. The furnishing by Tenant of any fraudulent understatement of more than
five percent (5%) shall constitute an immediate and noncureable breach of this
Lease, and shall give Landlord the right to terminate this Lease upon 15 days
written notice to Tenant within 90 days after Landlord's discovery of such
breach. If any such audit discloses that actual gross sales by Tenant were less
than those reported, and, as a result thereof, Tenant paid more percentage rent
than was due hereunder, Landlord shall promptly refund to Tenant the amount of
the excess percentage rent payment, less the cost to Landlord of the audit.
(e) If, during an audit conducted by Landlord, Tenant's accounting records
are determined (in Landlord's sole judgment) to be unauditable and/or do not
<PAGE>
comply with Sections 6.7(a), (b) and/or (c) of the Lease, then Tenant shall pay
to Landlord all reasonable costs and expenses which may be incurred by Landlord
in conducting such audit. Tenant acknowledges that Tenant's failure to maintain
its books of account as required by Section 6.7 of the Lease or in an otherwise
auditable condition will cause Landlord certain damages as a result of
Landlord's inability to ascertain through audit or otherwise Tenant's gross
sales. The exact amount of said damages are extremely difficult or impracticable
to fix. Such damages will include, but not be limited to, the loss of percentage
rent and promotional fund contributions. Therefore, in addition to the payment
of all costs and expenses of the audit, Tenant shall pay to Landlord upon demand
the sum of One Hundred Dollars ($100.00) for each day that Tenant failed to
properly maintain its books of account as provided herein. Landlord and Tenant
agree that this sum represents a reasonable estimate of such damages and is fair
compensation to Landlord for its loss caused by Tenant's failure to maintain its
books of account.
The provisions of this Section 6.7 shall survive the expiration or earlier
termination of this Lease.
6.8 Additional Rent. Tenant shall pay within fifteen (15) days following
demand therefor as additional rent all sums of money designated as additional
rent and all other sums of money or charges required to be paid by Tenant under
this Lease, whether or not the same be designated "additional rent".
6.9 Late payment. If Tenant shall fail to pay, when the same is due and
payable, any minimum or percentage rent, additional rent, or any other amounts
or charges to be paid by Tenant, such unpaid amounts shall bear interest from
the date due to the date of payment at the maximum lawful rate which Landlord
may charge, or if there be no such maximum, at a rate equal to five percent (5%)
in excess of the rate charged by the Federal Reserve Bank of San Francisco to
its member banks on overnight credits (commonly known as the Federal Funds
Rate).
If Tenant shall fail to pay any installment of percentage rent or
promotional fund charges when due, or any installment of minimum rent or any
other amounts or charges due hereunder within five (5) days of the date due, a
late charge equal to ten percent (10%) of such rent or other amount due, shall
be immediately due and payable to Landlord by Tenant. The Tenant agrees that the
damage sustained by Landlord by reason of Tenant's failure to make timely
payment would be impractical and extremely difficult to determine and the
foregoing late charges represent a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment by Tenant.
6.10 Place of Payment. All rent and other payments shall be paid by Tenant
to Landlord at its management office in the Shopping Center, or at such other
place as may from time to time be designated by Landlord in writing.
INTENTIONALLY OMITTED
8. Use and Operation of Premises
8.1 Authorized Use. Tenant shall use and occupy the premises for the
purposes and under the trade name as set forth in Exhibit "E". Tenant shall not
use or permit the premises to be used for any other purpose or purposes or under
any other trade name whatsoever without the prior written consent of Landlord.
8.2 Continuous Operation. Subject to the provisions of paragraph 36.3,
Tenant shall, continuously and uninterruptedly after its initial opening for
business, conduct and carry on Tenant's business in the premises and keep the
premises open for business seven (7) days per week, from 10:30 a.m. to 8:30 p.m.
<PAGE>
(or longer at Tenant's option). Tenant will be subject to a mandatory injunction
to compel the specific performance of the provisions of this paragraph. Landlord
reserves the right to alter the minimum hours at it's sole reasonable
discretion, provided at least 30 days notice in writing is given to Tenant.
Notwithstanding the foregoing, Tenant may be closed on Thanksgiving Day and
Christmas Day.
8.3 Limitation on Non-Sales Uses. Tenant agrees to warehouse, store and/or
stock on the premises only such goods, wares and merchandise as Tenant intends
to offer for sale at retail from the premises within a reasonable time after
receipt thereof, shall use for office, clerical or other nonselling purposes
only such space as is from time to time reasonably required for Tenant's
business therein, and shall not perform therein any such functions for any other
store of Tenant or any affiliate thereof.
8.4 Vending machines. Except in non-sales areas of the premises, Tenant
shall not, without the prior written consent of Landlord, sell merchandise from,
use or allow in or upon the premises, any vending machines or coin-operated
music, amusement, or gaming machines.
8.5 Distress Sales. Tenant shall not use or permit the premises, or any
part thereof, to be used for the conducting of a second-hand store, auction, or
distress, fire, bankruptcy or going-out-of-business sale.
8.6 Lawful Use, Nuisance, Waste, Interference. During the Term of this
Lease, Tenant shall not use or permit the premises to be used for any use or
purpose in violation of the laws, ordinances, regulations or requirements of the
United States of America, State of California, City and County of San Francisco,
or any other lawful authority. Tenant shall keep the premises, and every part
thereof, in a clean and wholesome condition, free of any objectionable noises,
odors or nuisances, and will comply fully with all health and police
regulations. Tenant shall not commit, permit or suffer waste to be committed on
or to occur to the premises. Tenant further agrees not to use or permit the
premises to be used in any which will interfere with the peace, quiet enjoyment
or business of any other tenant, operator or customer in the Center. Tenant
shall not commit any acts on the premises, nor use the premises in any manner,
that will cause the cancellation of any fire, liability, or other insurance
policy insuring the premises or the improvements on the premises. Tenant shall,
at Tenant's sole cost and expense, comply with all requirements of Landlord's
insurance carriers that are necessary for the continued maintenance at
reasonable rates of fire and liability insurance policies on the premises and
the Center, and otherwise consistent with the terms of this Lease. Tenant shall,
at Tenant's sole cost and expense, comply with all laws, rules, orders of all
federal, state and municipal governments or agencies, including, but not limited
to, the Americans with Disabilities Act, now in effect or which may hereafter
come into effect, whether or not they reflect a change in policy from that now
existing, relating in any manner to the premises and the occupation and use by
Tenant of the premises. Tenant shall not do anything on the premises that will
cause damage to the premises. The premises shall not be overloaded. No
machinery, equipment, apparatus, or other appliance shall be used or operated in
or on the premises that will in any manner injure, vibrate or shake the
premises.
8.7 Clean-up. Tenant shall be responsible for cleaning up all debris,
refuse, and trash generated by Tenant's operation, whether within the premises
or adjacent thereto and within fifteen (15) feet from the front entrance of the
premises.
8.8 Displays, Solicitation. Tenant shall not display or sell merchandise or
allow carts, portable signs, showcases or any other objects to be stored or to
remain outside the defined exterior wall, roof, and permanent doorways of the
premises. Tenant will not solicit in any manner in any of the Common Areas of
the Center or the parking garage for the Center operated by Landlord.
<PAGE>
8.9 Deliveries. Tenant shall complete, or cause to be completed, all
deliveries, loading, unloading and service to the premises prior to 11:30 a.m.
of each day. Tenant shall prevent delivery trucks or other vehicles servicing
the premises from parking or standing in front or at rear of the premises from
11:30 a.m. to 11:30 p.m. of each day. Landlord reserves the right to regulate
further the activities of Tenant in regard to deliveries and servicing of the
premises, and Tenant agrees to abide by such further non-discriminatory
regulations of Landlord.
8.10 Operating Standards. Tenant shall, throughout the Term of this Lease,
manage and operate its business in the premises according to sound commercial
practices in accordance with the highest standards of quality and presentation
and consistent with the overall objective of presenting PIER 39 as the finest
attraction of its kind in the City and County of San Francisco.
9. Utilities
9.1 Utilities Furnished by Utility Companies. Tenant, from the date of the
delivery of the premises and thereafter to expiration or termination of this
Lease, shall pay before delinquency for all water, gas, heat, electricity,
power, sewage, telephone, and all other service supplied by utility companies to
and consumed in or on the premises.
9.2 Utilities Furnished by Landlord. In the event one or more of said
utilities is not separately metered and is furnished by Landlord, Tenant shall
pay as additional rent, within ten (10) days after receipt of Landlord's invoice
therefor, a charge, as reasonably determined by Landlord's engineer based on
Tenant's premises and Tenant's use, to reimburse Landlord for utilities
furnished by Landlord to the premises. Such charge shall not exceed that of the
local utility company if its services were furnished directly to Tenant.
Landlord shall not be liable whatsoever, in damages or otherwise, for any
failure or interruption of any utility service being furnished the premises, and
no failure or interruption shall affect Tenant's obligations under or entitle
Tenant to terminate this Lease.
In the event electric power is wholly unavailable to the premises such that
Tenant is unable to transact any business therefrom ("Electrical Disruption")
for five (5) consecutive days, commencing on the sixth (6th) day of such
Electrical Disruption the minimum monthly rental shall be abated proportionately
for each day thereafter that the Electric Disruption continues.
10. Indemnity; Waiver of Subrogation
10.1 Indemnity. Tenant covenants with Landlord (defined for purposes of
this paragraph as also including the San Francisco Port Commission and the City
and County of San Francisco and, during the course of construction, Landlord's
Construction Manager and General Contractor) that Landlord shall not be liable
for any damage or liability of any kind or for any injury to or death of persons
or damage to property of Tenant or any other person, from any cause whatsoever,
by reason of the construction of Tenant's work, or any other construction
undertaken by Tenant, or the use, occupancy or enjoyment of or presence on the
premises of Tenant, or any person holding under Tenant or otherwise present on
the premises. Tenant will indemnify, defend and save harmless Landlord from all
liability whatsoever, including attorneys, accountants and investigation fees
and costs, on account of any such real or claimed damage or injury arising out
of the use of the premises, its facilities, or as otherwise set forth above.
Tenant shall not, however, be liable for damage or injury occasioned by the sole
negligence of Landlord, its employees, agents and representatives.
10.2 Waiver of Subrogation. Notwithstanding anything to the contrary
<PAGE>
contained in this Lease, Landlord (defined for purposes of this paragraph as
including, during the course of construction, Landlord's Construction Manager
and General Contractor) and Tenant hereby waive any rights each may have against
the other and Tenant waives any rights it may have against the San Francisco
Port Commission and the City and County of San Francisco on account of any loss
or damage occasioned to Landlord or Tenant, as the case may be, their respective
property, the premises, or its contents or to other portions of the Shopping
Center, arising from any risk generally covered by property insurance carried or
required to be carried by either party; and the parties each, on behalf of their
respective insurance companies insuring the property of either Landlord or
Tenant against any such loss, waive any right of subrogation that each may have
against the other; Tenant, on behalf of its insurance companies insuring the
premises, its contents, Tenant's other property or other portions of the
Shopping Center, waives any right of subrogation which such insurer or insurers
may have against the San Francisco Port Commission and the City and County of
San Francisco.
The provisions of this Section 10 shall survive the expiration or earlier
termination of this Lease.
11. Insurance
11.1 Commercial, General and Automobile Liability Insurance. Tenant shall
carry and maintain at its sole cost and expense commercial general and
automobile liability insurance against any and all damages and liability
resulting from, arising out of, or relating to the premises, the operations
thereof, the products sold or produced therein, and the operation of any owned,
non-owned and hired vehicles against claims for bodily injury, personal injury
and property damage in an amount not less than One Million Dollars ($1,000,000)
per occurrence. Such policy or policies shall further be endorsed if any
applicable exposure exists at the request of the Landlord for the following
hazards: Blanket Contractual Liability, Liquor Liability or Dramshop Insurance,
Broad Form Property Damage, Owned and/or Non-Owned Water Craft Liability,
Deletion of XCU Hazards.
11.2 Workers' Compensation and Employers' Liability. Tenant shall carry and
maintain at its own cost and expense Workers' Compensation and Employers'
Liability insurance covering employees for California Workers' Compensation
benefits, including Employer's Liability with limits of at least Five Hundred
Thousand Dollars ($500,000) for each accident. Where such coverage is reasonably
commercially available such policy or policies shall be endorsed to provide the
benefits of the Federal United States Longshoremen and Harbor Workers Act, if
applicable.
11.3 Plate Glass. Tenant shall be responsible for the maintenance of the
plate glass on the premises, but shall have the option to insure or self-insure
the risk of damage.
11.4 Boiler and Equipment. If not otherwise covered by Tenant's other
policies, Tenant shall carry and maintain in full force and effect boiler and
machinery insurance on all boilers and other pressure vessels and systems (if
such exist), whether fired of unfired, serving the premises in an amount not
less than One Hundred Thousand Dollars ($100,000.00).
11.5 Fire and Extended Coverage of Tenant's Improvements and Property.
Tenant shall carry and maintain insurance providing protection against any peril
included within the classification "fire and extended coverage," together with
insurance against sprinkler damage, vandalism and malicious mischief, covering
Tenant's leasehold improvements (including Tenant's work in Exhibit "C") and any
alterations thereto, trade fixtures, equipment, merchandise, and other personal
property in an amount equal to one hundred percent (100%) of their full
replacement cost. Said policy shall contain a standard replacement cost
<PAGE>
endorsement providing for no deduction for depreciation.
11.6 Fire and Extended Coverage of Center. Landlord shall carry and
maintain, at Tenant's pro rata expense, insurance providing protection against
any peril included within the classification "fire and extended coverage"
together with insurance against sprinkler damage, vandalism and malicious
mischief and such other insurance as Landlord deems appropriate with respect to
the buildings and improvements (including the underlying deck and pier areas) of
which the premises are a part, exclusive of Tenant's leasehold improvements and
trade fixtures, in an amount equal to at least ninety percent (90%) of full
replacement cost. Said policy shall contain a standard replacement cost
endorsement providing for no deduction for depreciation.
From and after the Commencement Date, Tenant shall pay as additional rent
its pro rata share of the premiums for such insurance within ten (10) days after
receipt of Landlord's invoice therefor. Tenant's pro rata share will equal that
amount of insurance premiums which when compared to the total amount of
insurance premiums, as determined by Landlord's insurance carrier to be
allocable to the building and improvements (including the underlying deck and
pier area) of which the premises are a part, is directly proportional to the
floor area of Tenant's premises as compared to the useable total floor area of
the building and improvements of which Tenant's premises are a part.
11.7 Effective Date, Policy Forms and Provisions. The policies of insurance
referred to in paragraphs 11.1 through 11.5 shall be carried and maintained from
and after the date of delivery of the premises to Tenant to expiration of the
Lease Term.
All such policies of insurance shall be issued by insurance companies with
a general policy holders rating of not less than A and a financial rating of X
as rated in the most current available Best's Insurance Reports and qualified to
do business in the State of California.
All such policies shall be issued in the names of and for the mutual and
joint benefit and protection of Tenant, Landlord, Pier 39 Limited Partnership,
San Francisco Port Commission, City and County of San Francisco, and lender(s)
designated from time to time by Landlord (with respect to all policies except
liability policies).
Executed copies of such policies of insurance or certificates thereof shall
be delivered to Landlord within ten (10) days after delivery of possession of
the premises to Tenant, and thereafter with respect to renewals or new policies
at least thirty (30) days prior to the effective date thereof. All such policies
shall contain a provision that the insurance company will give Landlord and each
other additional insured at least thirty (30) days written notice prior to any
cancellation, lapse, change in coverage, scope or amount, or any other amendment
of the insurance policy.
All such public liability, property damage, and other casualty policies
shall be written as primary policies with respect to the interest of Landlord
and all other additional insureds and shall provide that any insurance carried
by Landlord or such other additional insureds is excess and not contributing
insurance with respect to the insurance required hereunder. The public
liability, property damage or other casualty policies shall contain "cross
liability" or "severability of interest" provisions.
Notwithstanding anything to the contrary contained within this Section 11,
Tenant's obligations to carry the insurance provided for herein may be brought
within the coverage of a so-called umbrella, excess liability or blanket policy
or policies of insurance carried and maintained by the Tenant; provided,
however, that Landlord and the other aforementioned additional insureds shall be
named as loss payees or additional insureds thereunder as their interests may
<PAGE>
appear, that the coverage afforded Landlord and them will not be reduced or
diminished by reason of the use of such blanket policy of insurance, and that
the requirements set forth herein are otherwise satisfied. Tenant agrees to
permit the Landlord at all reasonable times to inspect the policies of insurance
of the Tenant covering risks upon the premises, if any, for which policies or
copies thereof are not required to be delivered to Landlord.
The procurement and maintenance by Tenant of the policies required to be
obtained and maintained by Tenant under this Section 11 shall not relieve or
satisfy Tenant's obligations under paragraph 10.1.
11.8 Landlord's Right to Maintain Insurance and Allocate Costs. In the
event Tenant is in default under this Section 11, Landlord shall have the right,
at its option, to maintain all or some of the insurance required by this Section
11 to be maintained by Tenant. In such case Tenant shall pay to Landlord as
additional rent within ten (10) days after receipt of a statement therefor, that
portion of the premiums of such insurance allocable to Tenant as reasonably
determined by Landlord.
11.9 Insurance During Course of Construction. Tenant shall cause its
contractors to maintain insurance in accordance with Exhibit C, with respect to
any construction work undertaken by Tenant.
11.10 Adjustments to Coverage's and Amounts. Landlord shall evaluate and
review the types of coverage, the coverage's and amounts of the insurance
required pursuant to this Section 11 on a periodic basis, and shall take into
account all relevant factors, including, without limitation, the then prevailing
practices among first-class shopping centers and entertainment facilities as
well as trends in the risk management, current insurance industry and tort
litigation and law, inflation, etc. The coverage' and amounts of such insurance
shall then be adjusted in accordance with such review and evaluation (but in no
event shall such coverage's or amounts be adjusted downward). Notwithstanding
the foregoing, Tenant shall procure and maintain insurance in the amounts and
covering the risks as may be determined by Landlord's lender(s) from time to
time.
12. Tenant's Right to Make Alterations
Landlord agrees that Tenant, at Tenant's sole cost and expense and after
giving Landlord seven (7) days prior written notice of its intention to do so,
from time to time may make alterations, additions, and changes in and to the
interior of the premises (except those of a structural nature) as it may find
necessary or convenient for its purposes, provided that no alterations,
additions or changes costing in excess of Seventy-Five Thousand Dollars
($75,000.00) may be made in any successive twelve (12) month period without the
prior written approval of Landlord, and provided further that no alterations,
additions or changes shall be made to any store front, the exterior walls or
roof of the premises, nor shall Tenant erect any mezzanine or increase the size
of same if one be initially constructed, without the prior written consent of
Landlord which consent shall not be unreasonably withheld.
All alterations, additions or changes which require the approval of
Landlord shall be under the supervision of a competent architect or competent
licensed structural engineer and made in accordance with plans and
specifications with respect thereto, approved in writing by Landlord prior to
commencement of work, and as otherwise provided in Section 4 of this Lease. All
alterations, additions, and changes must be performed in a good and workmanlike
manner and diligently prosecuted to completion.
13. Taxes
13.1 Real Property. Tenant shall pay its pro rata share of the real
<PAGE>
property and possessory interest taxes and assessments levied against the
building and improvements (including the underlying deck and pier area) of which
the premises are a part, including all permit, inspection and license fees, and
other public charges of whatever nature that are assessed against the premises
or arise because of the occupancy, use, or possession of the premises
(including, but not limited to, taxes on, or which shall be measured by, any
rents or rental income, and taxes on personal property, whether of Landlord or
Tenant). Tenants pro rata share will equal that portion of said taxes which when
compared to the total of said taxes will be directly proportional to the floor
area (as defined in paragraph 14.1) of Tenant's premises as compared to the
gross leased and occupied floor area of the building and improvements of which
Tenant's premises are a part.
If the building of which the premises are a part together with the
underlying deck and pier area is itself not separately assessed, the amount of
taxes and assessments allocable to the building shall be determined as follows:
(a) There shall be allocated to that building a portion of the total taxes
and assessments assessed on total underlying deck and pier area in the Center
(excluding UnderWater World), other than that included in the Common Area,
proportionate to the deck surface area occupied by that building as compared to
the total deck surface area occupied by all buildings other than those included
in the Common Area (and UnderWater World); and
(b) There shall be allocated to that building a portion of the total taxes
and assessments on all buildings with which that building is included, directly
in proportion to the value placed on that building by the assessor as compared
to the total value placed by the assessor on all buildings included in the one
assessment of the group of buildings (excluding UnderWater World).
13.2 Personal Property. Tenant shall pay prior to delinquency all taxes
levied against personal property, trade fixtures and other property placed by
Tenant in or about the premises. If any of such personal property of Tenant
shall be assessed against Landlord or Landlord's real or personal property,
Tenant shall pay to Landlord the taxes attributable to Tenant within fifteen
(15) days after receiving a statement thereof from Landlord.
13.3 Payment of Real Property Taxes. Tenants shall pay its pro rata share
of the real property and possessory interest taxes and assessments determined
pursuant to paragraph 13.1. Tenant shall pay to Landlord as additional rent on
the first day of the calendar month during the term hereof an amount estimated
by Landlord to be 1/12 of Tenant's pro rata share of such real property and
possessory interest taxes and assessments. Landlord may adjust the amount of
such monthly payment at any time when in Landlord's judgment such adjustment is
necessary to discharge fully Tenant's pro rata share of such taxes and
assessments as and when the same become due. If at any time within thirty (30)
days prior to the due date of any of such real property or possessory interest
taxes and assessments the amount then on deposit therefor shall be insufficient
for the payment of such obligations in full, Tenant shall within thirty (30)
days after demand deposit the amount of the deficiency with Landlord. All of
said amounts collected hereunder by Landlord shall be held not in trust and not
as agent of Tenant and shall not bear interest, and shall be applied to the
payment of the obligation for which the amounts were deposited. If the amounts
deposited are in excess of the actual obligation for which they were deposited,
Landlord may refund any such excess, or, at its option, may hold the same and
reduce proportionately the required monthly deposits for the ensuing year.
Tenant shall be obligated to pay all real property and possessory interest taxes
and assessments from the Commencement Date to expiration of the Lease Term,
prorated for any partial tax year on a daily basis so that Tenant shall pay all
taxes attributable to the portion of any tax year occurring within the period of
Tenant's obligations. With respect to any assessments which may be levied
against or upon the premises and the Shopping Center, or which under the laws
<PAGE>
then in force may be evidenced by improvement or other bonds, or may be paid in
annual installments, only the amount of such annual installment (with
appropriate proration for any partial year) shall be included within the
computation of Tenant's pro rata share of real property taxes for any particular
year. Landlord shall furnish Tenant with copies of all applicable bills
pertaining to real property taxes within thirty (30) days of Tenant's written
request therefor.
13.4 Definition of Taxes. The term " real property taxes" shall mean and
include all taxes, permit, inspection and license fees, assessments, possessory
interest taxes, taxes on rent and/or other charges or on account of rent and/or
other charges payable to Landlord hereunder, taxes or levies wholly or partly in
lieu of the foregoing, and all other governmental or public charges, general and
special, ordinary and extraordinary, of any kind and nature whatsoever,
including, but not limited to, assessments for public improvements or benefits
which shall during the Term hereof be laid, assessed, levied, imposed upon or
become due and payable, with the exception of income, inheritance, and estate
taxes imposed upon Landlord; and shall include all costs, expenses and
attorneys' fees incurred by Landlord in contesting or negotiating with public
authorities (Landlord having the sole authority to conduct such a contest or
enter into such negotiations) as to any of the same. In no event shall Tenant be
required to pay (a) any portion of Landlord's general income, franchise,
inheritance, estate or gift taxes, (b) any business license tax or fee imposed
upon Landlord which is generally applicable to all real estate related and
non-real estate related business owners or operators in the city, county or
state in which the Premises is located, nor (c) any assessments levied in order
to finance in whole or in part the development or construction of any portion of
the Shopping Center.
13.5 Prepaid Tax Deposit. Tenant has deposited with Landlord upon execution
of this Lease the sum of Nineteen Thousand Nine Hundred and Ten Dollars
($19,910.00) as a prepaid tax deposit. Said deposit represents Landlord's best
estimate of Tenant's tax liability for the then current year (said taxes being
required to be paid in advance). Said deposit shall not be assigned, transferred
or encumbered by Tenant and any attempt to do so by Tenant shall not be binding
upon Landlord. This deposit is in addition to the monthly payments provided in
Section 13.3 of the Lease. Landlord shall apply said deposit in full to Tenant's
then current tax liability. No trust relationship is created herein between
Landlord or Tenant with respect to said deposit. Landlord shall not be required
to keep the deposit separate from its general accounts. Tenant shall not be
entitled to any interest on the sum deposited. Said deposit, or so much as has
not been used to discharge Tenant's obligations hereunder, shall be returned to
Tenant at the expiration of the Lease Term.
14. Common Areas
14.1 Definitions. The term "Common Areas" means all areas and facilities
outside the premises and within the exterior boundaries of the Shopping Center
and the park areas that are provided and designated by Landlord from time to
time for the general use and convenience of Tenant and of other tenants of the
Shopping Center and their representatives, invitees and public invitees. Common
Areas include, without limiting the foregoing, pedestrian walkways, patios,
landscaped areas and parks, sidewalks, service corridors, recreational
facilities, rest-rooms, stairways, decorative walls, elevators, plazas, malls,
throughways, roadways, and vehicles for moving customers.
The term "Common Area expenses" means the total of all items of cost and
expense related to owning, maintaining, managing and operating the Common Areas,
maintained, managed and operated by Landlord. This includes, without limiting
the generality of the foregoing, all such maintenance, repair and construction
work as shall be required to preserve, maintain and restore utility of the
Common Areas, reasonable supervision and management fees, all real estate and
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personal property taxes and assessments levied on land and improvements, and
equipment and other personal property; all costs of policing and security
protection for the Common Areas, resurfacing, repainting and remarking,
cleaning, sweeping and other janitorial services; purchase, construction and
maintenance of refuse receptacles and other equipment; repair, maintenance,
servicing and replacement of sprinkler system; planting and relandscaping;
directional signs and other markers; lighting and all costs of utilities
utilized in connection therewith; reasonable depreciation allowance on Common
Area improvements, machinery, and equipment used in connection with the Common
Areas; rentals of equipment, premiums on public liability, property damage and
other insurance, costs of compliance with any statutes, ordinances and
regulations, including costs of any required changes in installations for supply
of utilities, or sanitary facilities, or other public facilities; and other
costs necessary in Landlord's judgment for the maintenance and operation of the
Common Area. Notwithstanding anything to the contrary contained in this Lease,
Tenant shall not be required to pay its pro rata share of any costs which (i)
are incurred as a result of the sole negligence or intentional misconduct of
Landlord, (ii) are reimbursed to Landlord from insurance proceeds or warranties
or another person or entity responsible therefor, (iii) are directly and solely
caused by defects in the original construction of the Shopping Center, (iv) are
in connection with the construction or installation of new capital items (other
than any new capital improvements made after the original construction and
installation of the Shopping Center which (a) are required under any law,
statute, ordinance, rule or restriction not applicable to or required at the
time of such original construction or installation, or (b) are an undertaking
for the protection of the health and safety of occupants and customers of the
Shopping Center or are made for the purpose of reducing other Common Area
expenses); however, the costs and expenses of the maintenance, repair and
replacement of capital items shall be included; and (v) are in excess of the
depreciated portion of capital expenditures attributable to Tenant's Term
hereunder.
The term "floor area" wherever used in this Lease means and includes all
areas for the exclusive use and occupancy by a tenant of Landlord, measured from
the exterior walls (and from the extensions thereof, in the case of openings)
and from the center of the interior dividing partitions, separating two (2)
leased premises, including mezzanines, warehousing or storage areas, clerical or
office areas and employee areas. The term "leased and occupied floor area"
wherever used in this Lease means the total of all leased and occupied tenant
floor area (excluding UnderWater World.)
14.2 Landlord's Duties. Landlord shall cause the Common Areas to be kept in
a neat, clean and orderly condition as Landlord deems necessary for the proper
operation of the Center.
14.3 Management. Landlord shall at all times have the right and privilege
of determining the nature and extent of the Common Area and in making such
changes therein and thereto from time to time which in its opinion are deemed to
be desirable, and for the best interest of all persons using said Common Areas,
including the location and relocation of driveways, entrances, exits, the
direction and flow of traffic, installation of prohibited areas, landscaped
areas, and all other facilities thereof. Notwithstanding anything to the
contrary contained in this Lease, in no event may any changes which Landlord
makes to the Shopping Center, or any portion thereof, have a material and
adverse effect upon access to and/or visibility of the Premises.
Landlord shall also have the right to establish, change, alter, and enforce
against Tenant and other users of said Common Areas reasonable rules and
regulations as it may deem necessary or advisable for the proper and efficient
operation and maintenance of said Common Areas, including, without limitation,
establishing the hours during which the Common Areas shall be open for use.
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Landlord shall at all times during the Term of this Lease have the sole and
exclusive control of the Common Areas, may at any time exclude and restrain any
person from use and occupancy thereof, excepting, however, bona fide customers,
patrons, and suppliers of Tenant and other tenants of Landlord who make use of
said areas in accordance with the rules and regulations established by Landlord.
It is understood and agreed that Landlord or some other person or entity
may be engaged to manage the Common Areas and shall be paid a reasonable
management fee for this service.
14.4 Nonexclusive Rights. The rights of Tenant hereunder in and to the
Common Areas shall at all times be subject to the rights of Landlord and other
tenants of Landlord to use the same in common with the Tenant, and it shall be
the duty of Tenant to keep said areas free and clear of any obstruction created
or permitted by Tenant or resulting from Tenant's operation and to permit the
use of said Common Areas only for normal ingress and egress by customers,
patrons and suppliers to and from Tenant and other tenants of Landlord.
14.5 Payment by Tenant. All expenses in connection with the Common Areas
shall be charged and prorated to Tenant in the following manner:
(1) Tenant shall pay Landlord on the first day of each calendar month
during the term of this Lease an amount estimated by Landlord to be Tenant's pro
rata share of such Common Area expenses. Landlord may adjust the estimated
monthly charge at any time and from time to time on the basis of Landlord's
experience and reasonably anticipated costs.
(2) Within one hundred twenty (120) days following the end of each calendar
year, Landlord shall furnish Tenant a statement covering the calendar year just
expired, certified as correct by a certified public accountant or an authorized
representative of Landlord, showing the total cost, the amount of Tenant's pro
rata share of such Common Area expenses for such calendar year and the payments
made by Tenant with respect to such period as set forth in subparagraph (a)
above. If Tenant's pro rata share of such Common Area expenses exceeds Tenant's
payments so made, Tenant shall pay Landlord the deficiency within thirty (30)
days after receipt of such statement. If said payments exceeds Tenant's pro rata
share of such Common Area expenses, Tenant shall be entitled to offset the
excess against payments next thereafter to become due Landlord as set forth in
said subparagraph (a), or entitled to a refund at the end of the Term.
(3) Tenant's pro rata share of the total Common Area expenses for the
previous calendar year will equal that portion of such expenses which when
compared to the total of such expenses is directly proportional to the floor
area of Tenant's premises as compared to the gross leased and occupied floor
area of buildings in the Shopping Center (excluding UnderWater World). In
addition, Tenant shall pay a sum to Landlord for the accounting, bookkeeping,
and collection of said expenses in an amount equal to ten percent (10%) of
Tenant's pro rata share of said expenses.
(4) Tenant shall be obligated for its pro rata share of the total Common
Area expenses from the Commencement Date through expiration of the Lease term,
prorated on a daily basis so that Tenant shall pay its pro rata share of Common
Area expenses attributable to the period of Tenant's obligation.
14.6 Maximum Annual Increase. Notwithstanding anything to the contrary
contained in this Lease, Tenant's pro rata share of common area expenses shall
not increase by more than six percent (6%) annually.
15. Repairs, Surrender of Premises
15.1 Landlord's Obligations. Subject to the provisions of Section 21, and
except for damage caused by any negligent or intentional act or omission of
<PAGE>
Tenant, Tenant's agents, employees, or invitees, Landlord, at Landlord's
expense, shall keep in good order, condition and repair the roof, structural
parts of the premises, and structural floor, foundations, exterior walls, and
pipes and conduits outside the premises for the furnishing to the building of
various utilities (except to the extent the same are the obligation of the
appropriate utility company). Landlord shall not, however, be obligated to
maintain windows, window sash, casement or frames, door and door frames, signs,
locks, closing devices, the interior surface of exterior walls, or store fronts.
Landlord shall have no obligation to make repairs under this paragraph 15.1
until a reasonable time after receipt of written notice of the need of such
repairs. Tenant expressly waives to the extent allowed by law the benefits of
any statute now or hereafter in effect which would otherwise allow Tenant the
right to make repairs at Landlord's expense or to terminate this Lease because
of Landlord's failure to keep the premises in good order, condition and repair.
15.2 Tenant's Obligations. Subject to the provisions of paragraph 15.1 and
section 21, Tenant, at Tenant's sole cost and expense, shall keep in good order,
condition and repair the premises and every part thereof, including, without
limiting the generality of the foregoing, plumbing, heating, ventilation,
electrical and lighting facilities and equipment within the premises, fixtures,
interior walls, ceilings, partitions, windows, window sash, casement and frames,
doors and door frames, plate glass, signs, locks and closing devices, and store
fronts; any damage resulting from any breach of any covenant of this Lease,
negligent act, intentional act, or omission by Tenant, Tenant's agents,
employees or invites; and any items of repair, maintenance and improvement or
reconstruction which are at any time required with respect to the premises by
any laws, ordinances, or rules or regulations of any public authority or of the
National Fire Protection Association, or any similar body, whether foreseen or
unforeseen. In addition, Tenant shall undertake reasonable periodic painting as
reasonably determined by Landlord to the interior of the premises, the color, if
different, to be subject to Landlord's prior written consent. Tenant shall
maintain the premises, the improvements located therein, and every part thereof,
in first-class condition and repair and up to the standards established by
Landlord from time to time. Notwithstanding the foregoing, except to the extent
covered by Tenant's waiver pursuant to paragraph 10.2, Tenant shall not (and
Landlord shall) be obligated to make repairs of damage caused by Landlord's sole
negligence or intentional misconduct, or that of Landlord's agents, employees or
representatives.
15.3 Surrender. On the last day of the Term hereof, or any sooner
termination, Tenant shall surrender the premises to Landlord broom clean and in
good condition, ordinary wear and tear and casualty damage excepted as corrected
by normal maintenance and repair. Tenant shall repair any damage to the premises
occasioned by its use thereof, or by the removal of Tenant's trade fixtures,
furnishings and equipment pursuant to section 16, which repairs shall include
the patching and filling of holes and repair of structural damage. Landlord may
require Tenant to remove its sign and all or any portion of its trade fixtures.
15.4 Landlord's Rights. If Tenant fails to perform Tenant's obligations
under paragraph 15.2, Landlord may, at its option, enter upon the premises,
after ten (10) days prior written notice to Tenant, and put the same in good
order, condition and repair, and the cost thereof shall become due and payable
as additional rent to Landlord on the date of Tenant's next rent installment,
plus interest at the rate set forth in Section 6.9 from the date incurred by
Landlord and paid by Tenant. Tenant shall permit Landlord and/or Landlord's
agents, representatives or employees to enter the premises at all reasonable
times to inspect the premises to determine whether Tenant is complying with the
terms of this Lease, to perform any repair or other work in and about the
premises, and to do other lawful acts that may be necessary to protect
Landlord's interest in the premises under this Lease or to perform Landlord's
duties under this Lease, all without liability to Tenant for any interference
with Tenant's use or occupancy of the premises, and shall be without abatement
<PAGE>
of rent or other charges under this Lease. Notwithstanding the foregoing, in the
event that due to any entry by Landlord into the premises, the premises are
totally unavailable for the conduct of Tenant's business therein for five (5)
consecutive business days, commencing on the sixth (6th) day of such
unavailability the minimum monthly rent shall be abated proportionately for each
day thereafter until the premises become available to Tenant for the conduct of
its business therefrom.
15.5 Improvements. Subject to the provisions of paragraph 15.3 of this
Lease, any alterations and improvements located on or in the premises, or any
part thereof, shall immediately upon the expiration or termination of this Lease
become Landlord's property, be considered part of the premises, and not to be
removed at or prior to the end of the Lease Term without Landlord's prior
written consent, unless Landlord requests Tenant to remove all or any portion of
the same.
16. Fixtures and Personal Property
Subject to the provisions of paragraph 15.5, any trade fixtures, signs and
other personal property of Tenant not permanently affixed to the premises shall
remain the property of Tenant and Landlord agrees that Tenant shall have the
right, provided Tenant is not in default under the terms of this Lease, to
remove, at any time, and from time to time, any and all of its trade fixtures,
signs and other personal property which it may have stored or installed in the
premises, provided that (except upon the expiration or earlier termination of
this Lease) Tenant replaces said property with new property of the same or
similar character so as to assure that Tenant's business within the premises
will continue in operation and produce the maximum gross sales. Tenant, at its
expense, shall immediately repair any damage occasioned to the premises by
reason of the removal of any such trade fixtures, signs and other personal
property as provided in paragraph 15.3. All improvements to the premises by
Tenant except trade fixtures and signs, shall become the property of Landlord
upon expiration or earlier termination of this Lease.
The term "trade fixtures" wherever used in this Lease specifically excludes
paneling, windows, non decorative light fixtures, floor covering and partitions,
which shall be considered leasehold improvements.
17. Assignment; Subletting
Tenant shall not voluntarily or by operation of law transfer, assign,
sublet, enter into a license or concession agreement, or encumber all or any
part of this Lease or Tenant's interest in and to the Lease or premises without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld. Any attempt at transfer, assignment, subletting, license or concession
agreement, or encumbrance without Landlord's written consent, shall be void and
confer no rights upon any third person, and shall, at the option of Landlord,
constitute a default under this Lease. No consent to any transfer, assignment,
subletting, license or concession agreement, or encumbrance shall be deemed to
be a consent to any subsequent transfer, assignment, subletting, license or
concession agreement, or encumbrance of this Lease.
Notwithstanding any transfer, assignment or subletting to which Landlord
has consented, Tenant shall not be relieved of any of its liability or
obligations hereunder.
Tenant agrees to reimburse Landlord's reasonable expenses (including
attorney's and accountants's fees and expenses) for the processing and
documentation of any such requested transfer, assignment, subletting, license or
concession agreement, change in ownership (except as exempted below) or mortgage
of this Lease or Tenant's interest in and or to the premises.
<PAGE>
If the Tenant hereunder is a corporation which is not deemed a publicly
held corporation, or is an unincorporated association or partnership, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association or partnership in the aggregate in excess of 50% shall
be deemed an assignment within the meaning and provisions of this paragraph 17,
provided, however, this paragraph shall not apply to a transfer of any stock or
interest if at the time of the transfer the Tenant entity is operating at least
fifteen (15) retail stores..
Notwithstanding anything to the contrary contained in this Lease, Tenant
shall have the right, without Landlord's consent, but only after giving Landlord
at least fifteen (15) days prior written notice, to assign this Lease to any of
the following: (i) to any corporation or other entity resulting from a merger,
consolidation or reorganization involving Tenant, so long as Tenant or entities
controlled by or under common control with Tenant control at least fifty percent
(50%) of the merged, consolidated or reorganized entity or Landlord is
reasonably assured that the transaction will not materially adversely affect the
quality of operation of Tenant's store in the premises; (ii) to the parent of
Tenant or to a corporation or other entity in which at least fifty percent (50%)
of the stock or other ownership interests are owned or controlled, directly or
indirectly, by Tenant or Tenant's parent; or (iii) to a person or entity
acquiring substantially all of Tenant's assets, in each case provided and on
condition that:
(1) Tenant shall not be in default under this Lease beyond the expiration
of any applicable cure or grace period;
(2) In the case of a merger, consolidation or reorganization, the resulting
entity shall thereafter have all or substantially all of the assets held by
Tenant prior to such merger or consolidation and all or substantially all of the
assets of Tenant's toy stores; or in the case of an assignment to a subsidiary,
the subsidiary shall thereafter continue to be owned or controlled, directly or
indirectly, by Tenant;
(3) The assignee shall have a net worth not less than Five Million Dollars
($5,000,000.00);
(4) Tenant shall give Landlord prior written notice and a true and correct
copy of any such assignment;
(5) The assignee shall expressly assume in writing the obligations of
Tenant under this Lease;
(6) Tenant shall not be released from its obligations and liabilities
provided for under this Lease by virtue of such assignment; and
(7) The premises shall continue to be operated only under the trade name
and only for the use specified in this Lease.
18. Condemnation
18.1 Taking. If the whole or any part of the premises or Common Areas are
taken for public or quasi-public use by the exercise or the threat of the right
of eminent domain, or similar laws, governmental easements, servitudes, or
similar rights, with or without litigation, or by judgment or agreement
(including voluntary sale), then as to the portion of the premises or Common
Areas taken, this Lease shall terminate as of the date the title vests in the
condemning authority. If the portion of the premises remaining after such taking
can be occupied and used by Tenant for the purposes described in this Lease,
then Landlord shall have the option for a period of thirty (30) days after said
taking either to terminate this Lease or to elect to continue this Lease in full
force and effect, in which event Landlord, at its sole expense, shall promptly
<PAGE>
restore the premises as economically and otherwise practicable to the conditions
existing immediately prior to such taking, and Tenant shall do likewise, at
Tenant's sole expense, with respect to Tenant's leasehold improvements described
in Exhibit "C" and any alterations thereto, all exterior signs, trade fixtures,
equipment, display cases, furniture, furnishings and other installations of
Tenant. During the period said repairs are being effected, the minimum monthly
rent, real property taxes and Common Area expenses payable by Tenant for said
period shall be reduced equitably to the degree the repair work interferes with
the normal business conducted on the premises. However, the obligation of Tenant
to pay percentage rent, additional rent (other than real property taxes and
Common Area expenses), and other charges shall remain in full force and effect.
18.2 Termination. If the portion of the premises remaining after such
taking cannot be occupied and used by Tenant for the purposes described in this
Lease, or Landlord exercises its option to terminate this Lease in accordance
with paragraph 18.1 above, then this Lease shall terminate as of the date title
vests in the condemning authority. In the event the Lease is terminated, the
parties shall be released from all obligations under this Lease except such
obligations as are accrued and unpaid up to the date of termination.
18.3 Award. Landlord shall receive all proceeds (including, without
limitation, proceeds for the value of Tenant's leasehold) awarded, compensated,
or paid, except that Tenant shall have the right to receive the proceeds for its
trade fixtures and personal property.
19. Advertising and Signs.
19.1 Signs. Tenant shall affix a sign to the exterior wall of the premises.
The size, content, design and location thereof shall be subject to the prior
written approval of Landlord, which approval shall not be unreasonably withheld.
Tenant shall not affix or maintain upon the glass pane and supports of the
show window (and within six (6) inches of any window), doors or exterior walls
of the premises, any signs, advertising placards, names, insignia, trade marks,
descriptive material or any other such like item or items without the prior
written approval of Landlord, which approval shall not be unreasonably withheld.
Tenant shall not affix any sign to the roof of the premises. Landlord has the
right to remove all unauthorized signs at Tenant's expense. All costs of signs
shall be the responsibility of the Tenant.
19.2 Advertising. Tenant shall use no advertising medium which creates
aural or visual effects outside Tenant's premises, including, without
limitation, flashing lights, search lights, loud speakers, phonographs, radios
or television. Tenant shall not display, paint, place or cause to be displayed,
painted or placed any handbills, bumper stickers or other advertising devices on
any vehicle parked in the parking garage, whether belonging to Tenant, or to
Tenant's agents, or to any other person; nor shall Tenant distribute or cause to
be distributed in the Center any handbills or other advertising devices. There
shall be no advertising or display on the premises except relating to the
products and services offered on the premises.
20. Mechanic's Liens.
20.1 Tenant's Duties. Tenant shall give seven (7) days prior written notice
to Landlord before contracting for any work or repairs to the premises that
might subject the property to any lien, to enable Landlord to post notices of
nonresponsibility. Tenant shall pay and discharge when due any and all claims
upon which any lien against the premises could be based for any labor, services,
materials, or equipment furnished to or for Tenant in, upon or about the
premises. Tenant shall indemnify, defend and hold Landlord free and harmless
from any such lien or claim of lien, liability, damages, costs, and attorneys'
fees relating thereto. Tenant shall give Landlord prompt notice of any claim of
<PAGE>
lien filed against the premises or any action affecting title to the premises.
20.2 Contest and Discharge of Liens. Tenant shall have the right to contest
the validity or amount of any claim of lien, but in such event, Tenant shall
within fifteen (15) days after receiving notice of such claim of lien, record in
the office of the San Francisco County Recorder a corporate surety bond pursuant
to California Civil Code Section 3143, in a sum equal to one and one-half (1.5)
times the amount of the claim naming Landlord as principal. Upon the final
determination of the validity of any such lien, Tenant shall satisfy and
discharge such lien within three (3) days thereafter. In the event Landlord has
elected at its option to pay any sums on behalf of Tenant as a result of
Tenant's failure to perform the obligations contained herein, Tenant shall pay
the amount thereof as additional rent to Landlord within ten (10) days after
demand.
21. Destruction, Reconstruction.
21.1 Destruction. In the event the premises are totally or partially
destroyed by fire or any other peril, whether or not covered by insurance, and
the restoration can be completed in Landlord's reasonable judgment within a time
period such that after completion there is at least a term of ten (10) months
until expiration of the Lease Term herein, the Landlord shall have the option to
elect, by giving written notice to Tenant within thirty (30) days of such
destruction, either to perform reconstruction of Landlord's work in Exhibit "C"
at its sole expense, in which case this Lease shall remain in full force and
effect, or to terminate this Lease. In the event restoration cannot be completed
in Landlord's reasonable judgment within a time period such that after
completion there is at least ten (10) months until expiration of the Lease term,
the Lease shall be automatically terminated. Tenant waives the provisions of
Section 1932 (2) and Section 1933 (4) of the California Civil Code.
Notwithstanding anything to the contrary contained in this Lease, and
subject to the provisions of the Master Lease, in the event that the premises
are damaged during the last two (2) years of the Term to an extent of at least
fifty percent (50%) of the full replacement cost thereof, Tenant may terminate
this Lease by giving written notice to Landlord within sixty (60) days after
such damage occurs. In the event of any fire or other casualty damage occurring
to the premises which is not repaired or restored within one year after its
occurrence or which is incapable of being repaired or restored within such
period, then Tenant may terminate this Lease by notice to Landlord stating a
termination date at least sixty (60) days after the notice, given within thirty
(30) days following the end of such one year period or, if the casualty is so
incapable of being restored, within sixty (60) days following the casualty. If
Tenant gives such notice, the Term of this Lease shall end and terminate upon
the effective date of termination specified in such notice in the same manner as
if the same were the expiration date originally provided in this Lease.
21.2 Destruction of Building or Center. If the building in which the
premises are located is totally or partially destroyed or if any other building
comprising a part of the Center is partially or totally destroyed to the extent
that:
(a) The then cost of the reconstruction of the building in which the
premises are located is greater than twenty percent (20%) of the then cost of
replacing said whole building, or
(b) The then cost of repairs for the damages to one or more buildings
comprising a part of the Center is greater than twenty percent (20%) of the then
cost of replacing all the buildings comprising the Center, then the Landlord
shall have the option for sixty (60) days after the date of such destruction to
terminate this Lease by written notice.
<PAGE>
21.3 Restoration and Abatement of Rent. Subject to the provisions of
paragraph 21.4, Landlord shall cause all work necessary to effect all
restoration undertaken pursuant to paragraph 21.1 to be commenced promptly and
prosecuted diligently to completion. During restoration the minimum monthly rent
payable by Tenant shall be reduced to the degree the restoration work interferes
with the normal business conducted on the premises. 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
in the event Tenant does continue operation of its business, the obligation of
Tenant hereunder to pay percentage rent, additional rent, and all other charges
shall remain in full force and effect. Tenant shall not be entitled to any
compensation or damages from Landlord for loss of the use of the whole or any
part of the premises, Tenant's personal property or any inconvenience or
annoyance occasioned by such damage, repair, reconstruction or restoration.
21.4 Restoration of Leasehold Improvements and Fixtures. If restoration of
the premises is effected by Landlord, Tenant, at its sole cost and expense,
shall restore and repair promptly all leasehold improvements, trade fixtures,
equipment and other property of Tenant located on the premises that were damaged
or destroyed, so as to restore all property of Tenant located on the premises to
a condition substantially equal to that which existed immediately prior to said
damage and destruction. Tenant shall commence said restoration work promptly and
prosecute it diligently to completion. Tenant shall be responsible for the work
described in this paragraph to the extent not covered by insurance proceeds.
21.5 Deposits of Insurance Proceeds. Subject to the rights of the holder of
any first mortgage or deed of trust encumbering the premises and adjoining
property, all proceeds of insurance which pursuant to the terms of the Lease are
to be used for the purpose of repairs, reconstruction and restoration shall be
deposited in a trust account in a bank to be selected by Landlord to be
disbursed upon Landlord's written instructions for the purposes of accomplishing
the necessary repairs and reconstruction, with such controls on disbursement as
may be required by any Lender or by the insurance carrier.
21.6 Termination. Upon any termination of the Lease under the provisions of
this section, the parties shall be released thereby without further obligations
to the other party as of the date of the destruction, except for items which
have accrued and are then unpaid. In the event of termination, all proceeds from
fire and extended insurance,, with required endorsements, including insurance on
the items specified as Tenant's work in Exhibit "C" and Tenant's leasehold
improvements and alterations thereto, but excluding proceeds for trade fixtures,
merchandise, signs and other personal property of Tenant, shall be disbursed and
paid to Landlord. In exercising its termination rights provided in this Section
21, other than a right to terminate arising solely by reason of a substantial or
total destruction of the premises during the last two (2) years of the term,
Landlord shall not terminate this Lease unless Landlord also terminates the
leases of all other tenants similarly affected by the casualty
22. Subordination; Attornment.
22.1 Subordination. This Lease shall be subordinate to any ground lease,
mortgage, deed of trust, or any other hypothecation for security now or later
placed upon the premises and to any advances made on the security of it or
Landlord's interest in it, and to all renewals, modifications, consolidations,
replacements, and extensions of it. Upon the written request of any first
mortgagee or beneficiary of any first deed of trust made by Landlord, Tenant
shall execute and deliver a writing in the form required by such first mortgagee
or beneficiary (without cost and within ten (10) days following such written
request) subordinate its rights hereunder to the lien of any mortgage or deed of
trust, now or hereafter encumbering the land and building of which the premises
are a part, and to all advances made or hereafter to be made upon the security
thereof.
<PAGE>
22.2 Attornment. In the event of foreclosure, the exercise of the power of
sale under any mortgage or deed of trust made by Landlord encumbering the
premises, or a deed in lieu of foreclosure, Tenant shall attorn to the purchaser
upon any such foreclosure or sale or the grantee as the Landlord under this
Lease. In the event of termination of the Master Lease, this Lease shall
continue in effect, and Tenant agrees to attorn to the landlord under the Master
Lease or its successor.
Subject to the observance and performance by Tenant of all terms, covenants
and conditions of the Lease on the part of Tenant to be observed and performed,
Landlord's successor by reason of termination of the Master Lease, purchase at
the foreclosure or trustee's sale or deed in lieu of foreclosure (hereinafter
referred to as "Successor Landlord") shall recognize the leasehold estate of
Tenant under all of the terms, covenants and conditions of the Lease for the
remaining balance of the Term with the same force and effect as if Successor
Landlord were the Landlord under the Lease; provided, however, that Successor
Landlord shall not be (a) liable for any act or omission of Landlord, (b)
obligated to cure any defaults of Landlord under the Lease which occurred prior
to the time that Successor Landlord succeeded to the interest of Landlord under
the Lease, (c) subject to any offsets or defenses which Tenant may be entitled
to assert against Landlord, (d) bound by any payment of rent or additional rent
by Tenant to Landlord for more than one (1) month in advance, (e) bound by any
amendment or modification of the Lease made without the written consent of the
mortgagee or beneficiary of any deed of trust made by Landlord encumbering the
premises, or (f) liable or responsible for or with respect to the retention,
application and/or return to Tenant of any security deposit paid to Landlord,
whether or not still held by Landlord, unless and until Successor Landlord has
actually received for its own account as Landlord the full amount of such
security deposit.
23. Bankruptcy and Insolvency.
23.1 Termination. This Lease, at the option of Landlord, shall terminate on
the happening of any of the following events: (a) the filing or institution by
Tenant of any proceeding under the Bankruptcy Act and any amendment thereto, or
any other federal or state act now or hereafter relating to the subject of
bankruptcy, insolvency, arrangement, reorganization, or other form of debtor
relief; (b) the institution or filing of any involuntary proceeding against
Tenant under any of the aforementioned laws unless such proceeding is dismissed
within sixty (60) days thereafter; (c) an adjudication of bankruptcy or a
finding or judgment of insolvency of Tenant; (d) an assignment for the benefit
of creditors by Tenant; (e) the levy of a writ of execution on the business of
Tenant or the assets of Tenant located on the premises which is not discharged
within ten (10) days after the date of said levy; or (f) the appointment of a
receiver to take possession of any property of Tenant at the premises.
23.2 Effect. The occurrence of any of the events listed in paragraph 23.1
shall be deemed to be a material breach and default of this Lease, entitling
Landlord to exercise the remedies set forth in paragraph 24.2 below. In the
event of the occurrence of any of the events listed in paragraph 23.1, then this
Lease or any interest in the premises shall not become an asset in any of such
proceedings.
23.3 Guarantor of Lease. The provisions of this section 23 shall also apply
to any guarantor of this Lease, giving Landlord the same remedies and right to
terminate this Lease, as if the stated events had occurred to Tenant.
24. Default and Remedies.
24.1 Defaults. The occurrence of any of the following shall constitute a
material breach and default of this Lease by Tenant:
<PAGE>
(a) Any failure by Tenant to pay when due any of the rent, additional rent
or other charges payable by Tenant hereunder where such failure continues for
ten (10) days after notice the same is due.
(b) A failure by Tenant to observe and perform any other provision of this
Lease to be observed or performed by Tenant when such failure continues for more
than a reasonable time (in no event to exceed thirty (30) days after written
notice thereof from Landlord); if more than thirty (30) days shall be required
because of the nature of the default, if Tenant shall fail to commence the cure
within thirty (30) days and fails to diligently prosecute the cure to
completion.
(c) The abandonment or the vacation of the premises.
24.2 Remedies. In the event of any default of Tenant under paragraphs 23.1
or 24.1, then in addition to any and all other remedies available to Landlord at
law and equity, Landlord shall have the right:
(a) To declare the Lease terminated and to reenter the premises and take
possession thereof and remove all persons therefrom, and Tenant shall have no
further claim thereon or thereunder; or
(b) Without declaring this Lease terminated to reenter the premises and
occupy, relet or sublet the whole or any part thereof for and on account of
Tenant and to collect said rent and other sums that may thereafter come due and
payable.
(c) Without declaring this Lease terminated to collect rents and other
sums, as they become due hereunder.
(d) To reenter the premises pursuant to subparagraph (b) above and
thereafter elect to terminate this Lease and all of the rights of the Tenant in
or to the premises.
24.3 No Termination. In the event Landlord has reentered the premises under
the provisions of subparagraph 24.2(b) or obtained possession of the premises by
service of a notice pursuant to California Code of Civil Procedure Section 1161
or abandonment by Tenant, Landlord shall not be deemed to have terminated this
Lease, unless Landlord shall have so notified Tenant in writing.
24.4 Termination. In the event Landlord elects to terminate this Lease
under the provisions of subparagraphs 24.2(a) or (d) above, Landlord may recover
from Tenant as damages:
(a) The worth at the time of award of any unpaid rent which had been earned
at the time of such termination; plus
(b) The worth at the time of award of 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 Tenant proves could have been reasonably avoided;
plus
(c) The worth at the time of award of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of such
rental loss for the same period that Tenant proves could be reasonably avoided;
plus
(d) Any other amount necessary to compensate Landlord for all the detriment
approximately 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, but not limited to, any costs or expenses incurred by
<PAGE>
Landlord in maintaining or preserving the premises after such default, preparing
the premises for reletting to a new tenant, any repairs or alterations to the
premises for such reletting, leasing commissions, and any other costs necessary
or appropriate to relet the premises.
(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 applicable California
law.
As used in subparagraphs (a) and (b) above, the "worth at the time of
award" is computed by allowing interest at the rate of ten percent (10%) per
annum. As used in subparagraph (c) above, 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%).
For all purposes of this Section 24, the term "rent" shall be deemed to be
all sums however denominated required to be paid by Tenant pursuant to the terms
of this Lease.
Percentage rent shall be computed on the basis of the average monthly
amount thereof accruing during the immediately preceding twelve (12) month
period, except that if it becomes necessary to compute such rent before such a
twelve (12) month period has occurred, it shall be on the basis of the average
monthly amount accruing during the such shorter period.
24.5 Personal Property, Fixtures. INTENTIONALLY OMITTED.
24.6 Remedies Not Limited. The remedies given to Landlord in this section
shall be in addition and supplemental to all other rights or remedies which the
Landlord may have under the laws then in force, and all such remedies may be
exercised alternatively, cumulatively, concurrently and/or consecutively.
24.7 No Setoff. The covenants to pay rent and other amounts hereunder are
independent covenants and Tenant shall have no right to hold back, offset or
fail to pay any such amounts for the alleged default of Landlord or any other
reason whatsoever, except as otherwise expressly provided herein.
24.8 Waiver of Rights of Redemption. To the extent permitted by applicable
law, Tenant 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 due to Tenant's default hereunder or
otherwise.
24.9 Mutual Waiver of Trail by Jury. LANDLORD AND TENANT HEREBY WAIVE TRIAL
BY JURY in any action or proceeding by either of them against the other arising
out of or in connection with the Lease, the relationship of Landlord and Tenant
created thereby, Tenant's use or occupancy of the premises, or any claim of
injury or damage occurring in or about the Center or the premises.
24.10 Default by Landlord. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord within thirty (30) days after
receipt of written notice of default (or if 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). If Landlord is thus in
default, then Tenant, subject to the provisions of paragraphs 22.2 and 36.3 and
Section 26, and except as otherwise provided in this Lease, shall be entitled to
recover from Landlord any and all damages sustained by Tenant as a result of
Landlord's (ii) any money judgment resulting from any default or other claim
arising under this Lease shall be satisfied only out of Landlord's interest in
the Center, (iii) no other real, personal or mixed property of Landlord,
wherever located, shall be subject to levy (or pre-judgment attachment) on any
such judgment obtained against Landlord, (iv) if Landlord's interest in the
<PAGE>
Center is insufficient to satisfy such judgment, Tenant will not institute any
further action, suit, claim or demand, in law or equity, against Landlord for or
on the account of such deficiency, and (v) such neglect or failure shall not
constitute consent by Landlord for Tenant to perform or observe such terms,
covenants or conditions at Landlord's expense. Tenant hereby waives, to the
extend permitted under law, any right to satisfy said money judgment against
Landlord except from Landlord's interest in the Center. The term "Landlord" for
purposes of this subsection only shall mean any and all persons and/or entities,
if any, which hold an ownership or beneficial interest in or comprise Landlord.
25. Marketing Fund.
Tenant shall pay to Pier 39 Marketing Fund, in care of Landlord, on or
before the tenth (10th) day following each calendar month during the Lease Term,
an amount equal to One Thousand Dollars ($1,000.00). Monies received by the
Marketing Fund shall be expended to cover expenses of all marketing activities
for the benefit of the Shopping Center and to cover reasonable administration
expenses for the administration of the Fund.
26. Sale of Premises by Landlord.
In the event of any sale or exchange of the premises by the Landlord and
assignment by Landlord of this Lease, Landlord shall be and is hereby entirely
freed and relieved of all liability under any and all of its covenants and
obligations in or derived from this Lease arising out of any act, occurrence, or
omission relating to the premises or this Lease occurring after the consummation
of such sale or exchange and assignment.
27. Master Lease.
Landlord is the lessee under that certain lease ("Master Lease") dated
August 3, 1977, as amended, with the San Francisco Port Commission as Lessor.
The premises leased herein are included in the premises leased by Landlord under
the Master Lease, and Tenant is subject to and shall comply with all provisions
of the Master Lease as the same may be hereafter amended or modified including,
without limitation, the nondiscrimination provisions thereof.
28. Guarantee
All obligations of Tenant, hereunder shall be guaranteed in the form and by
the guarantor as set forth in Exhibit "F", attached hereto and made a part
hereof.
29. Rules and Regulations.
The rules and regulations attached to this Lease as Exhibit "G" are
incorporated herein and made a part hereof, reserving to Landlord the right to
amend or supplement said rules and regulations from time to time so long as they
operate without unreasonable discrimination as to all tenants. Violation of any
rule or regulation is breach of this Lease.
30. Holding Over.
Unless given written notice by Landlord at least thirty (30) days prior to
expiration of the Term of this Lease, Tenant may, upon giving at least thirty
(30) days written notice to Landlord, hold possession of the premises after the
expiration of the Term of this Lease, and such holding-over shall be deemed to
be a month-to-month tenancy terminable upon thirty (30) days notice from either
party to the other, at commencing to accrue upon notice from Landlord to Tenant,
double minimum monthly rent, and otherwise subject to all terms and provisions
of this Lease, including without limitation, any and all terms and provisions
relating to percentage and additional rent. Tenant shall indemnify, defend and
<PAGE>
hold Landlord harmless from any and all claims and damages, including attorneys,
accountants and investigation fees and costs, resulting from Tenant's failure to
surrender the premises upon the expiration of the Term of this Lease or
termination by Landlord of Tenant's tenancy. Any holding-over without Landlord's
written consent shall entitled Landlord to re-enter the premises as provided in
Section 24 of the Lease.
31. Attorneys' Fees
If any action is brought for a declaration of rights under or to enforce
the provisions of this Lease, the prevailing party shall be entitled to
reasonable attorney's fees and costs as fixed by the Court.
32. Radius Clause. INTENTIONALLY OMITTED.
33. Changes To Center.
Except as otherwise restricted herein, Landlord hereby reserves the
absolute right at any time and from time to time (a) to make changes or
revisions in the site plans as shown on Exhibits "A" and "B"; including
additions to, subtractions from, or rearrangements of the building(s) and Common
Areas indicated on Exhibits "A" and "B"; and (b) to construct additional or
other buildings or improvements to the Common Areas in the Center and to make
alterations thereof or additions thereto and to build additional stores on or in
any such buildings and to build adjoining same.
34. Design Criteria.
All improvements to ceilings, walls, lighting, floors, display systems,
storage, and equipment by Tenant are subject to Landlord's written approval in
advance, which approval shall not be unreasonably withheld.
Tenant shall furnish Landlord space layout drawings giving technical and
design information relative to the demised premises.
35. Sign Criteria
It is intended that the signing of the stores at Center be imaginative and
varied in manner. Landlord's written approval of Tenant's sign drawings and
specifications is required which approval shall not be unreasonably withheld.
The furnishing and installation of sign(s) and the cost incurred shall be the
sole responsibility of the Tenant. Each tenant will be required to identify its
premises by a sign. Sign criteria are as follows:
(a) Materials: carved wood, stained glass, applied letters (no plastic)
painted on wood or glass.
(b) Colors: with Landlord's written approval.
(c) Lighting: incandescent, front lighted.
(d) Size: Shop size 400 square feet and under - sign size 6 square feet;
shops size 400-600 square feet - sign size 8 square feet; shop size 600-800
square feet - sign size 10 square feet; shop size 800-1100 square feet -sign
size 12 square feet.
36. General Provisions.
36.1 Offset Statement. Within fifteen (15) days after written request
therefor by Landlord, Tenant agrees to deliver in recordable form a certificate
in the form of Exhibit "D" addressed to Landlord or any person designated by
Landlord stating:
<PAGE>
(a) This Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and that this Lease, as so modified, is
in full force and effect);
(b) The date to which the rent and any other charges are paid in advance;
and
(c) To Tenant's best knowledge, there are no defenses or offsets to the
Lease or any amounts owing thereunder, or specifying the defenses or offsets, if
any, which are claimed.
Any such statement may be conclusively relied upon by Landlord and any
lender or prospective purchaser of the premises. Tenant's failure to deliver
such statement within fifteen (15) days of written request can be conclusively
relied upon by Landlord and any lender or prospective purchaser to the effect
that the Lease is unmodified and in full force and effect, that only the current
month's rents and charges have been paid in advance, and that there are no
defenses or offsets to the Lease or amounts owed thereunder.
Landlord agrees to execute and deliver to Tenant a similar certificate from
time to time within thirty (30) days of Tenant's written request therefor,
subject to Landlord's lender(s) written consent as to form and substance.
36.2 Waiver. No covenant, term, condition, or breach of this Lease shall be
deemed waived except as expressly stated in a writing executed by the waiving
party. A waiver by either party of any breach of the other party shall not be
deemed to be a waiver of any preceding or succeeding breach. Acceptance of all
or any portion of rent at any time by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant, other than the failure to pay the
particular rent so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such rent. Either party's consent
to or approval of any act by the other party requiring consent or approval shall
not be deemed to waive or render unnecessary consent to or approval of any
subsequent similar act.
36.3 Force Majeure. Any prevention, delay or stoppage due to strikes,
lock-outs, labor disputes, acts of God, inability to obtain labor or materials
or reasonable substitutes therefore, governmental restrictions or regulations,
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, shall excuse the performance by such party for a period
equal to any such prevention, delay or stoppage of it. The provisions of this
paragraph shall not excuse Tenant from prompt payment of rent or additional rent
and other charges to be paid by Tenant pursuant to this Lease; provided,
however, the Commencement Date of this Lease is subject to the force majeure
provisions herein.
36.4 Modification. Tenant agrees this Lease shall be modified at the
request of Landlord in any manner requested by a first mortgagee providing
construction or permanent financing to Landlord with respect to the Center,
provided that no such modification shall substantially decrease the rights or
increase the obligations of Tenant hereunder, and in all events no such
modification shall change the amount of rent or additional rent to be paid by
Tenant.
36.5 Governing Law. This Lease shall be governed and interpreted solely by
the laws of the State of California.
36.6 Disclaimer. Nothing contained herein shall be deemed to create any
relationship between the parties other than that of Landlord and Tenant. It is
<PAGE>
expressly stipulated that the parties are not partners, joint venturers, or
agents of one another.
36.7 Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
36.8 Entire Agreement. This Lease contains all of the agreements, and
supersedes all prior agreements between the parties hereto with respect to the
subject matter hereof, and none shall be used to interpret or construe this
Lease. This Lease may be modified (including any extension or renewal of the
Term of this Lease) only by an agreement in writing signed by each of the
parties.
36.9 Time. Time is of the essence in this Lease and each and every
provision thereof.
36.10 Joint and Several. All the terms, covenants and conditions contained
in this Lease to be performed by Tenant, if Tenant shall consist of more than
one person or organization, shall be deemed to be joint and several.
36.11 Captions; Terms. The captions of sections and paragraphs of this
Lease are for convenience only and shall not be considered in resolving any
questions of interpretation or construction of any section or paragraph of this
Lease. Each number, singular or plural, as used in this Lease shall include all
numbers and each gender shall be deemed to include all genders.
36.12 Successors. Except as otherwise set forth in Section 17 and paragraph
22.2 above, and as otherwise expressly provided elsewhere in this Lease, each
and all of the terms, covenants and conditions of this Lease shall be binding
upon and inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors in the interest and assigns.
36.13 Notices. Any notice, request, demand, consent, approval, or other
communication required or permitted under this Lease must be in writing and
shall be deemed to have been given (a) when personally delivered or sent by
facsimile with receipt acknowledged, (b) one business day following prepaid
deposit with any nationally recognized overnight carrier which routinely issues
receipts, or (c) three business days following deposit in any depository
regularly maintained by the United States Postal Service, postage prepaid,
certified mail, return receipt requested, in any case addressed to the party to
whom it is intended at its address:
Tenant: Toys International, a California corporation
550 Rancheros Drive
San Marcos, CA 92069
Attention: President
Telephone: 619/471-4505
FAX: 619/471-9624
Landlord: PIER 39 LIMITED PARTNERSHIP
P.O. BOX 193730
SAN FRANCISCO, CALIFORNIA 94119
Telephone: 415/705-5500
FAX: 415/981-8808
Either party may change its address for purposes of any such communication
by giving ten (10) days prior written notice of such change to the other party
in the manner set forth herein.
<PAGE>
Tenant hereby appoints as its agent to receive the service of all
dispossessory or distraint proceedings and notices thereunder the person in
charge of or occupying the premises at the time, and, if no person shall be in
charge of or occupying the same, then such service may be made by attaching the
same on the main entrance of the premises.
36.14 No Merger. The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation thereof, or a termination by Landlord, shall not work a
merger, and shall, at the option of Landlord, terminate all or any existing
subtenancies or may, at the option of Landlord, operate as an assignment to
Landlord of any or all of such subtenancies.
36.15 Offer. Preparation of this Lease by Landlord or Landlord's agent and
submission of the same to Tenant shall not be deemed an offer to lease. This
Lease shall become binding upon Landlord and Tenant only when fully executed by
Landlord and Tenant.
36.16 Quiet Enjoyment. Landlord, subject to the provisions hereafter set
out, agrees that Tenant shall have quiet possession of the premises throughout
the term, provided Tenant is not in default in performance of any of the
covenants or conditions of this Lease. Tenant expressly acknowledges and agrees
that Tenant's right to quiet possession of the premises shall not preclude
Landlord's right to make changes and additions to the Center and to do work in
the premises on the terms and conditions set forth in this Lease. Landlord shall
be fully released from its obligation under this Paragraph and any obligations
or warranties imposed by law for quiet possession of Tenant upon a sale or other
transfer of Landlord's interest in the premises or any part thereof; provided
that the transferee fully assumes Landlord's obligations to Tenant under this
Lease.
37. Sponsorship Program.
Tenant understands and acknowledges that Landlord runs a very successful
and effective Sponsorship Program at the Center, and that such Program benefits
all of the tenants at PIER 39. Accordingly, Tenant agrees that it will,
throughout the Term of this Lease, fully cooperate with and fully participate in
Landlord's Sponsorship Program at PIER 39.
38. Hazardous Material.
Tenant shall not bring upon or generate toxic or hazardous substances
within the premises, and should Tenant so act, then Tenant shall, at its sole
cost and expense, comply with all Federal, State or local laws from time to time
in effect ("Hazardous Materials Laws") concerning the management, use,
generation, storage, transportation, presence, discharge or disposal of
hazardous, toxic, radioactive or carcinogenic materials, substances or waste
("Hazardous Materials"). Tenant shall cause any and all Hazardous Materials
brought onto or used, generated, stored or discharged in the premises to be
removed from the premises and transported for disposal in accordance with
applicable Hazardous Materials Laws. Landlord shall have the right to enter the
premises from time to time upon reasonable notice to conduct tests, inspections
and surveys concerning Hazardous Materials and to monitor Tenant's compliance
with its obligations concerning Hazardous Materials and Hazardous Materials
Laws. Tenant shall also supply Landlord, as promptly as possible, and in any
event within thirty (30) days after Tenant receives or sends same, copies of all
claims, reports, complaints, notices, warnings or asserted violations relating
in any way to the premises or Tenant's use thereof and concerning Hazardous
Materials or Hazardous Materials Laws. Tenant shall not negotiate or enter into
any settlement agreement, consent decree or other compromise in respect to
Hazardous Materials or Hazardous Materials Laws affecting the premises except
after giving Landlord prior written notice and a full and fair opportunity to
<PAGE>
appear, intervene or otherwise assert and protect Landlord's rights and
interests.
Tenant shall indemnify, defend and hold Landlord, the City and County of
San Francisco and the San Francisco Port Commission, and each of them, harmless
from any claims, causes of action, liabilities, costs or expenses (including all
reasonable attorneys' fees and costs) arising from or in connection with
personal injury or death or property damage or clean-up costs caused or alleged
to have been caused by the presence of Hazardous Materials brought upon or
generated by Tenant within the premises, including, without limitation, any
personal injury, death or property damage caused or alleged to have been caused
by the release of Hazardous Materials or other toxic substances into the air as
a result of such contamination, whether such claims, causes of action or
liabilities are first asserted during the Term hereof or thereafter, and
including, without limitation, claims made against Landlord with respect to
personal injury, death or property damage sustained by third parties caused or
alleged to have been caused by the presence or release of Hazardous Materials or
other toxic substances.
Nothing contained in this Section shall be construed to prevent Tenant from
using and disposing of cleaning supplies and other similar supplies customarily
used in the operation of a business similar to Tenant's, even though such
supplies may contain Hazardous Materials, provided the same is done in
accordance with all applicable laws and the provisions of this Lease.
39. Other Toy Tenants.
Throughout the Term of this Lease, Landlord agrees that it will not enter
into a lease with any person or entity which intends to use a portion of the
Center for the predominant and primary purpose of offering children's toys for
sale at retail; provided, however, that said restrictions shall not apply to
premises of 1,500 square feet or less, and, provided, further, that said
restrictions shall not apply to any stores open for business at the Center as of
the date of this Lease.
40. Co-Tenancy.
Currently there is a Carousel and a Performance Stage located within 100
feet of the front of the premises. Landlord agrees that during the period of
February 1, 1999 through January 31, 2002, the Carousel and Stage, or other
similar uses (for example, a Ferris Wheel) shall remain within 100 feet of the
front of the premises, subject to removal or inoperation for repair,
refurbishment and/or replacement, provided Landlord uses reasonable efforts to
accomplish such repair, refurbishment and/or replacement in a reasonably
diligent manner.
IN WITNESS WHEREOF, the Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
LANDLORD
PIER 39 LIMITED PARTNERSHIP
a California Limited Partnership
By: PIER 39 GP, LLC, a Delaware
Limited Liability Company, as
the General Partner
By: PIER 39 GP, INC., a Delaware
Corporation, as
Managing Member
By
Its:
By
Its:
TENANT
Toys International, a California corporation
By
Its:
By
Its:
<PAGE>
EXHIBIT "A"
EXHIBIT "B"
EXHIBIT "C"
Description of Work To Be Performed By
Landlord and Tenant On Demised Premises
Exhibit "C"
Landlord has erected a "semi-turnkey" shell for Tenant as described below.
Division 1
Landlord's Work
1. Structure. Wood framed with wood siding, doors, windows and complete
roofing system in accordance with applicable codes and in keeping with "turn of
the century" architectural concept.
2. Floors. Cement or plywood subfloor (Landlord's option).
3. Walls. Wood frame or metal stud exposed or covered with gypsum board,
taped and sanded (Landlord's option).
4. Ceiling. Exposed floor or roof structure components.
5. Electric Service. Conduit only from Landlord's distribution switchboard
to an approved junction box within the demised premises.
6. Telephone Service. An empty conduit shall be installed for use of the
telephone company to a point within the demised premises.
7. Other Utilities. To be provided by Tenant or by Landlord at Tenant's
expense.
8. Fire Protection System. Sprinkler system, fire hose cabinets and other
equipment in accordance with Landlord's insurance underwriters and Code
requirements. (Modification by Tenant at Tenant's expense.)
Division 2
Tenant's Work
Tenant, at its sole cost and expense, shall perform all work, other than
that to be performed by Landlord as set forth in Division 1 of this exhibit,
required to complete the demised premises to a finished condition ready for the
conduct of business therein. (Please see Addendum)
1. Architectural and Finish Work. All interior partitioning, ceiling work,
floor coverings and painting and finishing work.
2. Electrical. All conduit, wiring, lighting fixtures, lamps and any other
electrical equipment required by the Tenant.
3. Mechanical. Heating and ventilating systems as required. Tenant shall
employ a roofing contractor acceptable to Landlord to provide any roof
penetrations.
4. Sign. Size, design and location to be approved by Landlord.
Division 3
<PAGE>
Plans and Specifications
1. Design Drawings. Tenant shall submit forthwith to Landlord's Architect
for approval two sets of design drawings showing intended finishing of the
demised premises. Said drawings must be approved in writing prior to Tenant's
commencement of work.
Division 4
Construction
1. Contractors. All contractors engaged by Tenant shall be bondable,
licensed contractors, possessing good labor relations, capable of performing
quality workmanship and working in harmony with Landlord's General Contractor
and other contractors on the job and Landlord's Construction Representative. All
work shall be coordinated with the general project work.
2. Insurance. (Please see Addendum)
(a) Landlord shall procure and maintain fire and extended coverage and all
risk insurance, including earthquake and flood, upon the buildings and
improvements (including the underlying deck and pier areas) of which Tenant's
premises are a part, exclusive of Tenant's leasehold improvements described as
Tenant's work in this Exhibit "C", Tenant's furnishings, fixtures and equipment,
and any improvements made by Tenant not described in this "Exhibit "C" as
Tenant's work. Coverage for any peril included within the classification "fire
and extended coverage" shall be equal to one hundred percent 100%) of the full
replacement value, with coverage for loss or damage from other perils in n
amount to be determined by Landlord.
Tenant shall reimburse Landlord for its pro rata share of the premiums for
the insurance provided for herein attributable to the period from and after
delivery of the premises to Tenant. The premium cost of such insurance will be
allocated among all tenants, and Tenant's pro rata share, computed as set forth
in paragraph 11.6 of the Lease, shall be payable by Tenant to Landlord a
additional rent, within ten (10) days of presentation of a statement therefor.
(b) Tenant shall secure, pay for and maintain, or cause its contractors to
secure, pay for and maintain during construction and fixturing work within
Tenant's demised premises, all of the insurance policies as required by
Landlord. Tenant shall not permit its contractors to commence any work until all
the required insurance has been obtained and certificates of such insurance have
been delivered to Landlord.
3. Tenant Obligations. Tenant shall prepare all its plans and perform all
its work to comply with the governing statutes, ordinances, regulations, codes
and insurance rating boards; take out all necessary permits and obtain
Certificates of Occupancy for the work performed by it, all subject to
Landlord's written approval. Landlord's approval of Tenant's plan does not
relieve Tenant of its obligation to complete the development in accordance with
the terms of the Lease, nor does it relieve Tenant of the necessity of complying
with the laws, rules, regulations, and requirements of local governing
authorities. Certificates of Occupancy or copies thereof are mandatory and shall
be filed with Landlord before Tenant opens for business.
4. Storefront Glass. All storefront glass must be safety plate or tempered.
5. Sprinklers. All modifications to the existing Tenant sprinkler grid to
fit new Tenant's sprinkler requirements be by Tenant's Sprinkler Contractor at
Tenant's sole expense.
Tenant's Contractor shall notify Landlord's local authority prior to each
<PAGE>
shutting down or filling of Tenant's sprinkler system.
6. Modification Costs. All engineering, architectural and construction
costs for modifications to Landlord's structure and appurtenances are Tenant's
responsibility.
7. Work Condition. All such work shall be performed in first-class
workmanlike manner and shall be in a good and usable condition at the date of
completion thereof. Tenant shall require any person performing any such work to
guarantee the same to be free from any and all defects in workmanship and
materials for one (1) year from the date of completion thereof.
8. On-site Inspection. Tenant's Architect/Engineer will provide on-site
construction inspection throughout the course of construction to insure
conformity with all aspects of plans, specifications, building codes and general
construction practices. Upon substantial completion of Tenant's construction,
Tenant shall cause Tenant's Architect/Engineer to prepare and deliver to
Landlord a Notice of Completion and an Architect's Certificate of Acceptance of
said premises.
9. Rejected Work. Tenant shall promptly correct all work reasonably
rejected by the Landlord's Architect/Construction Representative as defective or
as failing to conform to the working drawings and specifications approved by
Landlord, whether observed before or after substantial completion and whether or
not fabricated, installed or completed. Tenant shall bear all costs of
correcting such rejected work including compensation for the Landlord's
Architect's/Construction Representative's additional services made necessary
thereby.
PLEASE SEE ADDENDUM TO THIS EXHIBIT "C"
ADDENDUM TO
EXHIBIT "C"
1. It is understood that Tenant will be remodeling an existing space.
Reliable "as built" drawings do not exist for such space. Tenant's drawings, as
provided in Division 3, Plans and Specifications, shall show all existing
conditions, including, but not limited to, existing floor plan, ceilings and
floor elevations, shear walls, bracing, columns, heating, ventilation,
electrical, plumbing, and communication wiring. If any of these conditions are
to remain in the premises and/or to be affected by the work to be performed by
Tenant, then complete plans, sections and details shall be included in Tenant's
drawings and specifications. Any conditions that are discovered during the
course of Tenant's work, and not indicated on Tenant's drawings and
specifications, shall not be disturbed until inspected and approved for
relocation and/or modification by Landlord's representative.
2. Tenant takes and accepts the premises in its "as-is" condition. Tenant
has made its own investigation of the conditions in the premises, and has relied
solely upon its own investigation and judgment concerning the conditions in the
premises. Landlord has not made, and does not make, any representation or
warranty concerning the physical condition of the premises, the condition,
nature and/or extent of the improvements located inside or outside of the
premises, or the fitness of use of the premises; Tenant acknowledges that it has
not relied upon any such representations or warranties in entering into this
Lease.
3. It is hereby agreed that Tenant shall remodel the premises, interior or
and exterior, including but not limited to, the storefront, show windows,
signage, electrical system, interior fixturing, displays, cash wrap and
finishes. Tenant shall employ an architect and/or designer licensed in the State
<PAGE>
of California, to design and coordinate all aspects of said remodel in a manner
consistent with Landlord's design criteria. The nature and extent of said
remodeling shall be approved by Landlord in writing prior to commencement of
work. Said work shall be completed within 90 days and all work shall be
performed at Tenant's sole cost and expense and pursuant to all applicable
provisions of the Lease.
4. It is hereby agreed that Tenant shall conform to the Landlord's
construction requirements as outlined in the PIER 39 construction package.
Remodeling required by this Lease shall be completed to Landlord's satisfaction
prior to the dates or time periods outlined herein.
5. It is hereby agreed that Tenant shall take all appropriate action
necessary to insure that the premises, and every part thereof, including but not
limited to the interior fixturing, store front elements, signage, awnings and
finishes are maintained in a manner consistent with PIER 39 design criteria and
PIER 39 maintenance standards throughout the term of this lease. The nature and
extent of said maintenance work shall be approved in writing prior to
commencement of work and shall be at the sole cost and expense of the Tenant and
pursuant to all applicable provisions of the Lease.
Notwithstanding anything to the contrary contained in the construction
package or design criteria (collectively "Criteria") of this Lease, (i) Tenant
shall not be required to pay Landlord for any item of work, installation or
service, or any other sum whatsoever, that is not provided for in this Lease,
(ii) Tenant's obligation to use Landlord or a particular contractor for the
performance of any part of Tenant's work (excluding the provisions of paragraph
15.4) is conditioned upon Landlord or such contractor charging a competitive fee
for its work or service and being available when needed by Tenant, (iii) in the
event of any conflict between this Lease and the Criteria, this Lease shall
control, (iv) in the event of any conflict between the Criteria and Tenant's
Landlord approved design drawings, the approved design drawings shall control,
and (v) Landlord will not disapprove a proposed contractor or subcontractor of
Tenant unless Landlord has had a negative experience with such contractor or
subcontractor.
Notwithstanding anything to the contrary contained in this Lease, Tenant
shall have the right without Landlord's consent to re-use any and all
improvements, fixtures and equipment existing in the premises as of the date of
this Lease to the extent same are working, in good repair and have adequate
capacity and life. Landlord agrees that no such improvements, fixtures and/or
equipment shall be removed from the premises prior to delivery of possession to
Tenant, except to the extent removed by the previous tenant of the premises (or
portion thereof).
<PAGE>
EXHIBIT "D"
STATEMENT OF TENANT RE: LEASE
DATED: , 19______
RE: K-105
FOR PREMISES AT PIER 39 CENTER
SAN FRANCISCO, CALIFORNIA
To Landlord and Lenders:
The undersigned, as tenant under that certain lease dated
_________________, 199___ made and entered into between PIER 39 LIMITED
PARTNERSHIP, as Landlord, and the undersigned, as Tenant, hereby ratifies said
Lease and certifies that the undersigned has entered into occupancy of the
premises described in said Lease, that the minimum monthly rent is as follows:
(i) For the first (1st) through thirty-sixth (36th) months of the term, the sum
of Nine Thousand Six Hundred Twenty Five Dollars ($9,625.00) per month, (ii) For
the thirty-seventh (37th) through seventy-second (72nd) months of the term, the
sum of Eleven Thousand Dollars ($11,000.00) per month, (iii) For the
seventy-third (73rd) through ninety-sixth (96th) months of the term, the sum of
Eleven Thousand Four Hundred Fifty Eight Dollars ($11,458.00) per month, (iv)
For the ninety-seventh (97th) through the one hundredth-twentieth (120th) months
of the term, the sum of Twelve Thousand Three Hundred Seventy Five Dollars
($12,375.00) per month and was payable starting April 1, 1999; that said Lease
is in full force and effect and has not been assigned, modified, supplemented or
amended in any way; that the same represents the entire agreement between the
parties as to said Lease; that the term of said Lease expires on January 31,
2009, that all conditions under said Lease to be performed by the Landlord have
been satisfied and on this date there are no existing defenses or offsets which
the undersigned has against the enforcement of said Lease by the Landlord; that
no rent has been paid in advance and the sum of N/A ($ N/A ) has been deposited
with Landlord as security (no minimum rent is due until October 1, 1999); and
that the minimum monthly rent for October 1 , 19 99 has been paid.
Tenant further certifies that all of "Landlord's Work" as required by said
Lease and Exhibit "C" thereto has been completed in a good and workmanlike
manner and to the satisfaction of Tenant.
This certification is made by the undersigned with the intent and knowledge
that a Lender or Lenders and the Landlord will be relying hereon in advancing
loan funds to the Landlord under said Lease to be secured by a mortgage or deed
of trust upon the subject premises and adjoining property.
Very truly yours,
Toys International, a California corporation
By ____________________________________________
Its:
By ____________________________________________
Its:
<PAGE>
EXHIBIT "E"
USE OF PREMISES AND TRADE NAME
Tenant shall use and occupy the premises under the following name:
Toys International, or other tradename used in substantially all of
Tenant's other toy stores, subject to Landlord's prior written consent, which
consent shall not be unreasonably withheld.
Tenant shall use and occupy the premises for the following purposes and for
no other purposes:
Retail sale of toys, better quality collectibles, hobbies, arts and crafts,
children's books, dolls, model kits, 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, and such other items as are typically displayed in toy stores located
within first-class regional shopping centers.
<PAGE>
EXHIBIT "F"
GUARANTEE
Play Co. Toys and Entertainment Corp., a Delaware corporation, "GUARANTOR",
as a material inducement to and in consideration of PIER 39 LIMITED PARTNERSHIP,
"LANDLORD", entering into a written lease, "LEASE" with Toys International,
"TENANT", dated the same date as this Guarantee, "GUARANTEE", pursuant to which
LEASE LANDLORD leased to TENANT and TENANT leased from LANDLORD, premises
described in Exhibit "B" to LEASE, unconditionally guarantees the full
performance of each and every term, condition and covenant of the LEASE to be
performed by TENANT, including the payment of all rent and other charges to
accrue thereunder.
GUARANTOR further agrees as follows:
1. This GUARANTEE shall continue in favor of LANDLORD notwithstanding
forbearance under or extension, modification or alteration of LEASE entered into
by and between the parties thereto, or their successors or assigns, or the
impairment or suspension of LANDLORD'S rights or remedies against TENANT, the
release or modification of security, or assignment of LEASE by TENANT with or
without the consent of LANDLORD.
2. LANDLORD may, without notice, assign GUARANTEE in whole or in part.
3. The liability of GUARANTOR hereunder is primary and independent of that
of TENANT with respect to any right of action which accrues to LANDLORD under
the LEASE, and LANDLORD may, at its option, proceed against GUARANTOR without
having exercised any or all of its rights or remedies against TENANT, commenced
any action or obtained any judgment against TENANT, or exercised any other
remedy in LANDLORD'S power. GUARANTOR waives presentment, demand for
performance, notice of nonperformance, protest, notice of protest, notice of
dishonor, and notice of acceptance of this GUARANTEE.
4. Until all TENANT'S obligations to LANDLORD under LEASE have been
discharged in full, GUARANTOR shall have no right to subrogation against TENANT
and waives any right to enforce any remedies that LANDLORD now has, or later may
have, against TENANT.
5. Notice to TENANT shall constitute notice to GUARANTOR.
6. GUARANTOR shall pay a reasonable attorney's fee and all other costs and
expenses which may be incurred by LANDLORD in the enforcement of GUARANTEE.
7. No failure on the part of LANDLORD to pursue any remedy hereunder or
under LEASE shall constitute a waiver on LANDLORD'S part of the right to pursue
said remedy on the basis of the same or subsequent breach.
8. The terms and provisions of GUARANTEE shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties herein
named.
9. GUARANTEE shall be enforceable by LANDLORD in accordance with the laws
of the State of California and shall be construed in accordance therewith.
10. The obligations of GUARANTOR hereunder (if there are more than one) are
joint and several. The use of the singular herein shall include the plural.
DATED: , 19 .
GUARANTOR
Play Co. Toys and Entertainment Corp. a
Delaware corporation
By ___________________________________
Its:
By ___________________________________
Its:
<PAGE>
EXHIBIT "G"
RULES AND REGULATIONS
1. Tenant will be responsible for removing all garbage from its premises to
a location designated by the Landlord adjacent to the perimeter roadway.
Violation of this will result in a $100.00 charge per violation.
2. INTENTIONALLY OMITTED.
3. All Tenants will require their employees not to use the parking garage.
Under no circumstances should validation stamps ever be given to any employee.
4. All deliveries must take place between the hours after 2:30 a.m. to
11:30 a.m. All removals, the carrying in or out of safes, freight, furniture or
bulky matter of any description must take place during these hours. All vendors,
suppliers and other trucks must be off the perimeter roadway by 11:30 a.m.
Violation of this 11:30 a.m. rule will result in a $50.00 charge per violation
to the Tenant. This charge should be passed to the party who violates the 11:30
a.m. time limit.
The Landlord reserves the right to inspect all freight to be brought into
the Center and to exclude from the Center all freight which violates any of
these rules and regulations or terms of the Lease.
5. The sidewalks, entrances, passages, courts, elevators, perimeter
roadway, vestibules, stairways, corridors or halls shall not be obstructed or
encumbered by any Tenant or used for any purpose other than ingress or egress to
and from the demised premises
6. No awnings, curtains, blinds, shades, aerials, antennae or any other
projections shall be attached to the outside walls or roof of any building in
the Center without the prior written consent of Landlord.
7. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Center shall not be covered or obstructed by any Tenant, nor shall any bottles,
parcels, or other articles be placed on the window sills.
8. No Tenant shall cause or permit any unusual or objectionable odors to be
produced upon or permeated from the demised premises nor shall Tenant vent any
fumes or odors into the interior of the premises of another Tenant.
9. No Tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb, or interfere with the occupants of this or neighboring
buildings or premises or those having business with them whether by the use of
any musical instrument, amplified sound, un-musical noise, whistling, singing,
or in any other way. No Tenant shall throw anything out of the doors, windows or
skylights, down the passageways, or off the balconies.
No Tenant shall do anything or permit anything to be done on or from Tenant
s premises which will disturb the quiet enjoyment of any other Tenant or its
premises.
10. No Tenant, nor any of Tenant's servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the demised premises any
flammable, combustible or explosive fluid, chemical or substance.
11. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord s opinion, tends to impair the reputation of the Center or
its desirability as a Center through retail sales and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.
12. The premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose.
13. Canvassing, soliciting and peddling in the Center is prohibited and
each Tenant shall cooperate to prevent the same.
14. There shall not be used in any space, or in the public halls of any
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
15. Tenant agrees to accept BankAmericard, Master Charge, and Visa credit
cards at all times during the Term of this Lease.
16. Tenant will cooperate by appropriate decoration of the demised premises
in promotional and public relations activities of the Center for holidays such
as Christmas, Easter, Valentine's Day and Halloween.
17. Tenant will also cooperate in any other promotional programs designed
by Landlord from time to time.
18. Tenant will at all times maintain membership in the San Francisco
Convention and Visitor's Bureau.
19. Tenant recognizes that it will be the policy of the Center and its
Tenant's to cooperate with the activities of the San Francisco Chamber of
Commerce and other specified organizations which will contribute to the success
of the Center.
20. Tenant recognizes that it will be the policy of the Center to the
extent not in violation of any laws, to give reasonable preference in employment
to residents of the City and County of San Francisco.
21. Tenant will cooperate in all procedures and programs calculated to
discourage shoplifting in the Center.
22. Landlord shall not be responsible to Tenant hereunder for the
non-observance or violation of any of these rules and regulations by any other
Tenants. Landlord shall have the right, but not the obligation, to take action
against any Tenant for violation of any of the rules and regulations.
23. Tenant agrees that a late opening or an early closing will result in a
$100.00 charge to the Tenant per violation. The imposition of this charge shall
not preclude Landlord from pursuing any or all other remedies available to it..
24. Tenant will be required to illuminate the interior of its premises from
8:30 p.m. (or closing time) to 11:00 p.m.
25. For any check returned to the Landlord from the bank, the Tenant will
be charged a penalty of $15.00.
26. Tenant will be required to attend at least one merchandising seminar
once a year.
27. Tenant agrees, if Landlord so desires, to retain a professional display
person to dress the Tenant's windows.
28. Tenant agrees to encourage its employees, agents, vendors, contractors,
etc. to cooperate in environmental protection and/or conservation programs that
Landlord promotes to maintain or improve the quality of the local environment.
Exhibit 10.124
Lease Agreement - Opry Mills
LEASE
TOYS INTERNATIONAL, INC., a California corporation
-----------------------------------
Tenant
TOY CO.
------------------------------------
Trade Name
N/A
------------------------------------
Guarantor
Opry Mills
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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................................................................9
Section 2.4. Security Deposit. [Intentionally Deleted] 9
Section 2.5. Late Charge.......................................................................9
ARTICLE III......................................................................................................10
PREPARATION OF LEASED PREMISES..........................................................................10
Section 3.1. Landlord's Work..................................................................10
Section 3.2. Delivery of Possession...........................................................10
Section 3.3. Tenant's Work....................................................................10
Section 3.4. Alterations by Tenant............................................................12
Section 3.5. Removal by Tenant................................................................12
ARTICLE IV.......................................................................................................13
CONDUCT OF BUSINESS.....................................................................................13
Section 4.1. Use and Trade Name...............................................................13
Section 4.2. Operation of Business............................................................13
Section 4.3. Sign.............................................................................13
Section 4.4. Tenant's Warranties..............................................................14
Section 4.5. Storage and Office Space.........................................................14
Section 4.6. Care of Premises.................................................................15
Section 4.7. Notice by Tenant.................................................................15
Section 4.8. Radius...........................................................................15
ARTICLE V........................................................................................................15
COMMON AREA.............................................................................................15
Section 5.1. Use of Common Area...............................................................15
Section 5.2. Common Area Maintenance Expenses.................................................16
ARTICLE VI.......................................................................................................17
REPAIRS AND MAINTENANCE.................................................................................17
Section 6.1. Repairs and Maintenance by Landlord..............................................17
Section 6.2. Repairs and Maintenance by Tenant................................................18
ARTICLE VII......................................................................................................19
TAXES ...............................................................................................19
Section 7.1. Tax Liability....................................................................19
Section 7.2. Method of Payment................................................................19
ARTICLE VIII.....................................................................................................20
INSURANCE, INDEMNITY AND LIABILITY......................................................................20
Section 8.1. Landlord's Insurance Obligations.................................................20
Section 8.2. Tenant's Insurance Obligations...................................................20
SECTION 8.3. MUTUAL COVENANT..................................................................21
SECTION 8.4. COVENANT TO HOLD HARMLESS........................................................22
<PAGE>
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
ARTICLE X........................................................................................................24
CONDEMNATION............................................................................................24
Section 10.1. Eminent Domain..................................................................24
Section 10.2. Rent Apportionment..............................................................24
Section 10.3. Temporary Taking................................................................24
ARTICLE XI.......................................................................................................25
ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE............................................................25
Section 11.1. No Assignment, Subletting or Encumbering of Lease 25
Section 11.2. Assignment or Sublet............................................................26
Section 11.3. Transfer of Landlord's Interest.................................................27
ARTICLE XII......................................................................................................27
SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE 27
Section 12.1. Subordination...................................................................27
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..................................................................29
Section 13.4. Network.........................................................................29
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......................................................................32
Section 14.4. Additional Remedies and Waivers.................................................32
Section 14.5. Landlord's Cure of Default......................................................33
Section 14.6. Security Interest [Intentionally Deleted] 33
ARTICLE XV.......................................................................................................33
RIGHT OF ACCESS.........................................................................................33
ARTICLE XVI......................................................................................................33
DELAYS ...............................................................................................33
ARTICLE XVII.....................................................................................................34
END OF TERM.............................................................................................34
Section 17.1. Return of Leased Premises.......................................................34
Section 17.2. Holding Over....................................................................34
ARTICLE XVIII....................................................................................................34
COVENANT OF QUIET ENJOYMENT.............................................................................34
ARTICLE XIX......................................................................................................35
UTILITIES...............................................................................................35
Section 19.1. Utilities.......................................................................35
Section 19.2. Electricity, Telephone and Gas..................................................35
Section 19.3. Trash and Garbage Removal.......................................................35
Section 19.4. Water and Sewer.................................................................35
<PAGE>
Section 19.5. Grease Interceptors.............................................................35
ARTICLE XX.......................................................................................................36
MISCELLANEOUS...........................................................................................36
Section 20.1. Entire Agreement...............................................................36
Section 20.2. Notices........................................................................36
Section 20.3. Governing Law..................................................................36
Section 20.4. Successors.....................................................................36
Section 20.5. Liability of Landlord..........................................................37
Section 20.6. Brokers........................................................................37
Section 20.7. Transfer by Landlord...........................................................37
Section 20.8. No Partnership.................................................................37
Section 20.9. Waiver of Counterclaims........................................................37
Section 20.10. Waiver of Jury Trial...........................................................37
Section 20.11. Severability...................................................................37
Section 20.12. No Waiver......................................................................37
Section 20.13. Consumer Price Index...........................................................37
Section 20.14. Interest.......................................................................38
Section 20.15. Excavation.....................................................................38
Section 20.16. Rules and Regulations..........................................................38
Section 20.17. Financial Statements...........................................................38
Section 20.18. General Rules of Construction..................................................38
Section 20.19. Recording......................................................................38
Section 20.20. Effective Date.................................................................38
Section 20.21. Headings.......................................................................39
Section 20.22. Managing Agent.................................................................39
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 H Agreement of Subordination, Non-Disturbance and Attornment
Exhibit H-1 Pre-Construction Tenant Estoppel Certificate
</TABLE>
<PAGE>
THIS LEASE dated as of this ____ day of ________________, 19___ (the
"Lease") by and between OPRY 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, provided, however, the square footage and
the frontage shall remain the same. 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 January following the 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: 321, consisting of approximately 10,625 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) the Grand Opening, (ii) the date following the
expiration of a sixty (60) 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: Nine (9) years, plus any additional necessary to extend the
Term to the January 31st following the expiration of nine (9) full years.
<PAGE>
Option Period: N/A.
(3) Section 2.1: Minimum Rent:
Original Term:
From the Commencement Date and continuing through the fifth (5th) year of
the Original Term, the sum of $265,625.00 annually ($25.00 psf), payable in
equal consecutive monthly installments of $22,135.42 each;
Beginning with the sixth (6th) year and continuing through the expiration
of the Original Term, the sum of $318,750.000 annually ($30.00 psf), payable in
equal consecutive monthly installments of $26,562.50 each.
(4) Section 2.2: Percentage Rent:
Percentage Factor: 6%
Sales Break Point for the Original Term:
From the Commencement Date through the fifth (5th) year of the Original
Term: $3,794,642.86;
Beginning with the sixth (6th) year and continuing through the expiration
of the Original Term: $4,553,571.43.
(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 sale, at discount, of toys and toy related merchandise, including
children's apparel (not to exceed ten percent [10%] of sales area of the Leased
Premises).
Trade Name: Toy Co.
(7) Section 13.2: Fund Contribution: $1.75 psf of floor area in the Leased
Premises
Grand Opening Fee (Initial Contribution): $1.75 psf of floor area in the
Leased Premises (8) Guarantor: N/A
Address:
(9) Grand Opening Date: To be determined
(10) Temporary Charges: $1.00 psf of floor area in the Leased Premises
(11) Construction Chargebacks: $ N/A
(12) Construction Allowance: $10.00 psf of floor area in the Leased
Premises
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,
<PAGE>
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 Opry Mills 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 Tennessee. 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.
(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
<PAGE>
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, people counters, 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
<PAGE>
under this Lease.
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 Million Two Hundred Fifty
Thousand and 00/100ths Dollars ($2,250,000.00) 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
<PAGE>
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
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 sixty (60) 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.
ARTICLE II
RENT AND DEPOSIT
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,
<PAGE>
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,
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
<PAGE>
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.
(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 on the
succeeding December 31st.
(d) The parties hereto understand and agree that the Percentage Factor
specified in subparagraph (a) above for the purpose of computing Percentage Rent
has been determined based on Tenant's representation that it will sell
substantially all merchandise from the Leased Premises at discount prices,
namely prices that are at least twenty percent (20%) less than the prices
charged by the majority of other retailers in the metropolitan area in which the
Shopping Center is located who sell the same or substantially similar
merchandise at full retail markup. Tenant hereby acknowledges that Tenant has
represented to Landlord that it will operate its business in the Leased Premises
as one of the following: (i) a factory direct outlet; or (ii) a discounter; or
(iii) an off-price operation, selling all its merchandise at discount prices (as
herein defined), and that such representation was a material inducement for
Landlord to enter into this Lease with Tenant on the rental terms herein
contained, which rental provisions are predicated on the typically lower profit
margins of such businesses, as compared to those selling at full retail markup.
Within forty-five (45) days after the end of each Lease Year (together with the
annual Gross Sales statement) Tenant shall provide reasonable information that
Tenant has sold substantially all its merchandise at discount prices on a
continuous basis. Landlord may, at its option, at any time and from time to
time, obtain an independent study and review of the prices charged by Tenant and
the prices charged by the majority of retailers in the metropolitan area in
which the Shopping Center is located who sell the same or substantially similar
merchandise as that sold in the Leased Premises (herein "Study"). If a Study
reveals that Tenant is failing or failed to sell its merchandise at discount
prices on a continuous basis, Tenant shall pay Landlord's cost and expense
incurred for such Study.
<PAGE>
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.
ARTICLE III
PREPARATION OF LEASED PREMISES
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
<PAGE>
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
<PAGE>
Sheet shall be extended by one (1) day for each day of additional delay by
Landlord.
Provided Tenant is not in default hereof, Landlord hereby agrees to
contribute towards the cost of Tenant's Work a Construction Allowance of Ten and
00/100ths Dollars ($10.00) per square foot of floor area of the Leased Premises.
The aforesaid Construction Allowance shall be paid thirty (30) days after the
date Tenant opens for business in the Leased Premises, 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 one-tenth (1/10th) 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
<PAGE>
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.
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
<PAGE>
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.
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 but in no event more than one (1) hour after the close of
business. 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
<PAGE>
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 one (1) sign affixed
to the front of the Leased Premises, subject to the prior written approval of
Landlord as to design and location and conforming to all applicable legal and
insurance requirements. Tenant's sign shall conform to the specifications and
requirements contained in Exhibit E attached hereto. Tenant shall keep its
approved storefront sign 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 but in no event more than one (1) hour after the close of business.
Tenant shall pay for all costs in connection with such sign 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 such sign, then Landlord shall have the right to do so,
provided, however, that if the sign has received Landlord's prior written
approval and is consistent with the specifications and requirements of Exhibit
E, Landlord shall replace said sign as soon as practicable. Except as mentioned
above, Tenant shall not place or cause to be placed, erected or 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 enclosed mall, 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
handlettered) 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
<PAGE>
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 to maintain at all times, whether or not
Tenant is open for business, temperatures in the Leased Premises which will not
drain heat or ventilation or air conditioning from the enclosed mall or other
interior areas into the Leased Premises and shall not discharge heat,
ventilation or air conditioning from the Leased Premises into the enclosed mall
or other interior areas; and (k) be authorized to do business in the State,
evidence of which must be delivered to Landlord on or before the earlier of (I)
the Commencement Date or (II) the date that Tenant opens for business in the
Leased Premises.
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
<PAGE>
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
fifteen (15) miles for outlet stores only and five (5) miles for full price
stores, 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 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
<PAGE>
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),
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
<PAGE>
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, 2000 shall not exceed Ten and 00/100ths Dollars ($10.00) per square foot of
floor area of the Leased Premises per Lease Year, 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.
ARTICLE VI
REPAIRS AND MAINTENANCE
Section 6.1. Repairs and Maintenance by Landlord. Landlord agrees to keep
<PAGE>
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 installed by
Tenant or exclusively serving 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 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 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
<PAGE>
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.
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,
<PAGE>
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.
(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
<PAGE>
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
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
<PAGE>
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.
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
<PAGE>
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.
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
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 first-class manner. All permits required in connection with said repairs,
restoration and reconstruction shall be obtained by Tenant at Tenant's sole cost
and expense. Any amount expended by Tenant in excess of any insurance proceeds
received by Tenant shall be the sole obligation of Tenant. 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
<PAGE>
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.
ARTICLE X
CONDEMNATION
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.
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
<PAGE>
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.
ARTICLE XI
ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE
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
all of the unperformed terms, covenants and conditions of this Lease, (3) Tenant
shall at all times remain primarily obligated for the performance of the terms,
covenants and conditions of this Lease and (4) the number of stores being
transferred must consist of at least three (3) stores.
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.
<PAGE>
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.
(d) Except for a permitted assignment or subletting as specified in Section
<PAGE>
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.
ARTICLE XII
SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE
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
<PAGE>
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.
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.
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
<PAGE>
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.
ARTICLE XIII
ADVERTISING AND PROMOTION
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 the annual Fund Contribution. 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
<PAGE>
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.
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.
Any production by Landlord of advertising messages for Tenant and any 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 video
taped advertising message of the business conducted, or to be conducted, in the
Leased Premises (herein "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.
ARTICLE XIV
DEFAULT AND REMEDIES
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
<PAGE>
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
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 in 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, and The Block at Orange, 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) Perform, on behalf and at the expense of Tenant, any obligation of
Tenant under this Lease which Tenant has failed to perform and of which Landlord
shall have given at least three (3) days' notice (except in the case of
emergency, in which event no such notice shall be required), the cost of which
performance by Landlord, together with interest therein at the interest rate (as
specified in Section 20.14 hereof) from the date of such expenditure, shall be
deemed additional rent and shall be payable by Tenant to Landlord upon demand.
(b) Without further notice, re-enter and repossess the Leased Premises, by
summary proceedings or otherwise, and remove Tenant and all other persons and
property from the Leased Premises, and store such property in a public warehouse
or elsewhere at the cost of and for the account of Tenant without resort to
legal process and without Landlord being deemed guilty of trespass or conversion
or becoming liable for any loss or damage occasioned thereby. In connection
herewith, Landlord shall have, in addition to any other remedies, any and all
self-help remedies, including but not limited to a forcible entry into the
Leased Premises or a "lock-out" accomplished by changing the locks on the Leased
Premises. No re-entry of the Leased Premises shall be construed as an election
by Landlord to accept Tenant's surrender of the Leased Premises or to terminate
this Lease unless a written notice of such intention is given by Landlord to
Tenant.
(c) Declare the entire balance of the Rent, and all other amounts to be
paid by Tenant hereunder for the remainder of the Term to be due and payable
immediately, and collect such balance in any manner not inconsistent with
applicable law. The amount of additional rent and Percentage Rent payable with
respect to each Lease Year remaining in the Term after such default (including
the Lease Year during which such default occurred) shall be conclusively
<PAGE>
presumed to be equal to the average additional rent and Percentage Rent payable
with respect to each completed Lease Year preceding such default; provided,
however, that if such default occurs before the expiration of two (2) Lease
Years, then the amount of additional rent and Percentage Rent payable with
respect to each Lease Year remaining in the Term after such default (including
the Lease Year or partial Lease Year during which such default occurred) shall
be conclusively presumed to be equal to twelve (12) times the average monthly
additional rent and Percentage Rent payable prior to such default.
(d) Terminate this Lease by giving written notice of such termination to
Tenant, which termination shall be effective as of the date of such notice or
any later date therefor specified by Landlord in such notice (provided, that
without limiting the generality of the foregoing provisions, Landlord shall not
be deemed to have accepted any abandonment or surrender by Tenant of any or all
of the Leased Premises or Tenant's leasehold estate under this Lease unless
Landlord has so advised Tenant expressly and in writing, regardless of whether
Landlord has re-entered or relet any or all of the Leased Premises or exercised
any or all of Landlord's other rights under this Lease or applicable law).
(e) In Landlord's own name or otherwise, relet any or all of the Leased
Premises with or without any additional premises, for any or all of the
remainder of the Term (or, if this Lease has then been terminated, for any or
all of the period which would, but for such termination, have constituted the
remainder of the Term) or for a period exceeding such remainder, on such terms
and subject to such conditions as are acceptable to Landlord (including, by way
of example rather than of limitation, the alteration of any or all of the Leased
Premises in any manner which, in Landlord's judgment, is necessary or desirable
in connection with such reletting, and the allowance of one or more concessions
or "free-rent" or reduced-rent periods), and collect and receive the rents
thereof. Tenant shall pay to Landlord, at the times and in the manner specified
by the provisions of this Lease (unless Landlord has elected to accelerate Rent
as provided above in subparagraph(d), in which event Tenant shall be obligated
to pay such accelerated amount as provided in such subparagraph), (i) the
installments of the Minimum Rent, additional rent and Percentage Rent accruing
during such remainder (or, if this Lease has then been terminated, damages
equalling the respective amounts of such installments (determined as provided in
subparagraph 14.2(c) which would have accrued during such remainder, had this
Lease not been terminated)), plus (ii) the cost to Landlord of any such
reletting (including, by way of example rather of limitation, any attorneys's
fees, leasing or brokerage commissions, repair or improvement expenses and the
expense of any other actions taken in connection with such reletting) less any
monies received by Landlord with respect to such remainder from such reletting
of any or all of the Leased Premises.
(f) Recover from Tenant, an amount equal to (i) all items of accrued and
unpaid Rent, including, without limitation, the then unamortized amount of the
Construction Allowance; (ii) all reasonable expenses (including, by way of
example rather than of limitation, all repossession costs, management expenses,
operating expenses, legal expenses and attorney's fees) incurred by Landlord in
curing or seeking to cure any default or in exercising or seeking to exercise
any of Landlord's rights and remedies under the provisions of this Lease or at
law or in equity on account of any default, plus (iii) interest on all such
expenses, at the rate provided in Section 20.14, all of which expenses and
interest shall be payable by Tenant immediately on demand therefor by Landlord.
(g) Without terminating this Lease, maintain Tenant's right to possession,
in which case this Lease shall continue in effect whether or not Tenant shall
have vacated 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 Rent as it becomes due hereunder.
(h) Any damage or loss of Rent sustained by Landlord may be recovered by
<PAGE>
Landlord, at Landlord's option, at the time of the reletting or termination, in
a single action or in separate actions, from time to time, as said loss of Rent
or damages shall accrue, or in a single proceeding deferred by Landlord or with
jurisdiction reserved by the court, until the expiration of the Term of this
Lease (in which event Tenant hereby agrees that, at Landlord's option, the cause
of action shall not be deemed to have accrued until the date of expiration of
said Term).
(i) Nothing contained herein shall prevent the enforcement of any claim
Landlord may have against Tenant for anticipatory breach of this Lease. In the
event of any anticipatory breach by Tenant of any of the covenants or provisions
hereof or in the event of Tenant's default, Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity as if
re-entry, summary proceedings and other remedies were not provided for herein.
Mention in this Lease of any particular remedy shall not preclude Landlord from
any other remedy under this Lease or, at law or in equity. Tenant hereby
expressly waives for itself and all persons claiming by or through Tenant, any
and all rights to redeem, reinstate or restore, or obtain relief from forfeiture
of this Lease granted by or under any present or future law in the event of
Tenant being evicted or dispossessed for any cause, or in the event of Landlord
obtaining possession of the Leased Premises by reason of the violation by Tenant
of any of the covenants and conditions of this Lease.
(j) In case suit shall be brought for recovery of the Leased Premises, for
the recovery of Rent or any other amount due under the provisions of this Lease,
or because of the breach of any other covenant herein contained on the part of
Tenant to be kept and performed, and a breach shall be established, Tenant shall
pay to Landlord all costs and expenses incurred therefor, including Landlord's
attorney's reasonable fees and expenses.
(k) Nothing herein contained shall limit or prejudice Landlord's right to
prove and obtain as damages, by reason of any default by Tenant, an amount equal
to the maximum allowed by statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved. No expiration
or termination of this Lease, abandonment, re-entry by Landlord or vacancy,
shall relieve Tenant of any of its liabilities and obligations under this Lease
(whether or not any or all of the Leased Premises are relet), and Tenant shall
remain liable to Landlord for all damages resulting from any default by Tenant,
including any damage resulting from the breach by Tenant of any of its
obligations to pay Minimum Rent, Percentage Rent, additional rent and any other
sums which Tenant is obligated to pay hereunder.
(l) The rights and remedies of Landlord under this Lease shall be deemed to
be cumulative, and no one of such rights or remedies shall be exclusive at law
or in equity of the other rights and remedies of Landlord on account of a
default by Tenant, and the exercise of any one such right or remedy by Landlord
shall not impair Landlord's standing, right or power to exercise any other right
or remedy.
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
<PAGE>
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. Notwithstanding any other
provision contained in this Lease to the contrary, all rights and remedies of
Landlord set forth herein (including but not limited to Landlord's rights
respecting lockout, re-entry, self-help, repossession, security interests and
lien rights and foreclosure) shall be in addition to (and not in substitution
of) any and all other rights and remedies now or hereafter provided by law,
including but not limited to rights and remedies provided by the statutes,
rules, regulations, laws and judicial decisions of the State, and all such
rights and remedies shall be cumulative; and none of such rights and remedies so
provided by law shall be conditioned or limited by any conditions or limitations
on the remedies granted to Landlord under the terms of this Lease, nor upon any
notice and/or passage of time that may be required hereunder in order for an
event or condition to constitute a default or an event of default as that term
is defined in this Lease.
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.
Section 14.6. Security Interest [Intentionally Deleted].
ARTICLE XV
RIGHT OF ACCESS
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
<PAGE>
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.
ARTICLE XVI
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.
Section 17.2. Holding Over. If Tenant shall hold possession of the Leased
<PAGE>
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. Landlord, either directly or through an agent
or designee, may elect to supply any of the utilities used upon or furnished to
the Leased Premises. If Landlord, either directly or through its designee, shall
elect to supply any of the utilities used upon or furnished to the Leased
Premises, Tenant agrees to pay as additional rent a per square foot charge based
on Tenant's estimated usage, as reflected on a monthly invoice to be provided by
Landlord or its designee; 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 and its designee 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 or its designee of light, cooling
and/or heat or power shall be conditioned upon the availability of adequate
energy sources. Landlord or its designee 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, either directly or through
an agent or designee, elects to furnish such service to the tenants in the
Shopping Center, Tenant agrees to use only the service provided by Landlord or
its designee 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 or its designee 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,
<PAGE>
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:
(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
<PAGE>
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.
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,
<PAGE>
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.
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.
<PAGE>
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 of 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 MillsServices Corp., a Delaware corporation, 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, inquires or other communications to the Managing Agent, 1300 Wilson
Boulevard, Suite 400, Arlington, Virginia 22209.
[signature block on following page]
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have signed this Lease as of the
day and year first above written.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
WITNESS: LANDLORD:
By: ____________________ OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership
By: ____________________
By: Opry Mills, L.L.C., a Delaware limited liability company
Its: General Partner
WITNESS/ATTEST: By: The Mills Limited Partnership, a Delaware limited partnership
Its: Manager
By: The Mills Corporation, a Delaware corporation
Its: General Partner
By: ____________________
By: ____________________ By: _________________________
Judith Berson
Executive Vice President
TENANT:
By: ____________________
By: ____________________ TOYS INTERNATIONAL, INC., a California corporation
By: __________________
Name:____________________
Its: ____________________
By: __________________
Name:____________________
Its: ____________________
Tenant's Corporate Seal:
</TABLE>
<PAGE>
ACKNOWLEDGMENT 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 OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited
partnership.
- -----------------------------------
Notary Public
My Commission expires:_____________
[Notarial Seal]
ACKNOWLEDGMENT OF CORPORATE TENANT
STATE OF )
) ss.
CITY/COUNTY OF )
On ____________________, 19____, before me _____________________, a
Notary Public in and for said state aforesaid, personally appeared
_________________________ and _____________________, as ___________________ and
____________________ 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>
ADDENDUM ATTACHED TO AND MADE A PART OF LEASE DATED ___________, 199__, BY
AND BETWEEN OPRY MILLS LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP, AS
"LANDLORD," AND TOYS INTERNATIONAL, INC., A CALIFORNIA CORPORATION, AS "TENANT."
- -
The Lease is hereby modified and supplemented as set forth herein. Any
conflict between a term, condition or provision contained in this Addendum with
any term, condition or provision contained in the printed Lease shall be
resolved in favor of this Addendum.
Section 12.1: At the end of Section 12.1, insert:
"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 or such other reasonable form of subordination agreement within
twenty (20) days of a request from Landlord's lender to do so."
Add as a new Section 20.23:
"Section 20.23. Lease Contingencies. This Lease is contingent and
conditioned upon (a) acquisition of the Retail Development property by the
Landlord; it being understood that as of the date of this Lease, Landlord has
only a contractual right to said property and (b) 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 (both of said conditions (a) and (b) being herein collectively
referred to as the "Lease Contingencies"). In the event the foregoing Lease
Contingencies have not been satisfied on or before June 30, 2000, 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 Contingencies 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."
Add as a new Section 20.24:
"Section 20.24. Ground Lease. Notwithstanding anything else contained in
this Lease, Tenant acknowledges that Landlord's interest in the land upon which
the Shopping Center is to be or has been constructed will be that of a ground
lessee under a ground lease to be entered into between Landlord and the owner(s)
of such land (the "Ground Lease"). Tenant agrees that (i) this Lease is and
shall be subordinate to the Ground Lease, as the same may from time to time be
modified, extended, restated or replaced, (ii) upon any termination of the
Ground Lease, Tenant shall attorn to the ground lessor and recognize said ground
lessor as its lessor under this Lease, and (iii) said ground lessor shall be
named as an additional insured under Tenant's liability insurance described in
Section 8.2 above (provided Tenant has been furnished with the name of such
ground lessor). Landlord represents and warrants that the Ground Lease will
contain (and any restatement or replacement thereof will contain) provisions
pursuant to which the ground lessor irrevocably agrees to recognize this Lease
and Tenant's interest hereunder in the event of any termination of the Ground
Lease (unless such termination is caused by a casualty or condemnation that also
results in a termination of this Lease), so long as Tenant is not then in
default under this Lease beyond any applicable cure period; provided that, upon
such recognition, the ground lessor shall not (i) have any obligation to Tenant
with respect to any portion of the term of this Lease extending beyond the
scheduled expiration date of the Ground Lease (which shall be no earlier than
October 31, 2048); (ii) be liable for the acts or defaults of any prior landlord
(including Landlord); (iii) have any liability to complete any initial
construction of the Leased Premises or to fund any allowance granted by any
prior landlord (including Landlord) with respect thereto; (iv) be bound by any
payments of rent made by Tenant more than thirty (30) days in advance; or (v) be
liable for the return of any security deposit not actually received by the
ground lessor."
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this
Addendum as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
WITNESS: LANDLORD:
OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership
By: Opry 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
Its: Executive Vice President
By: ____________________
By: ____________________
TENANT:
TOYS INTERNATIONAL, INC., a California corporation
WITNESS/ATTEST: By:
Name:
Its:
By: ____________________
By: ____________________ By:
Name:
Its:
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
Addendum and acknowledged before me that she was duly authorized and did execute
same on behalf of OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited
partnership.
- -----------------------------------
Notary Public, Commonwealth of Virginia
My Commission expires:_____________
ACKNOWLEDGEMENT OF CORPORATE TENANT
STATE OF )
) ss.
CITY/COUNTY OF )
On ______________________, 19_____, before me _______________________, a
Notary Public in and for the state aforesaid, personally appeared
____________________ and ________________, as ______________________ and
_____________________ 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 whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person 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 H
AGREEMENT OF SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT
THIS AGREEMENT is made this day of ________, 199_, by and among OPRY MILLS
LIMITED PARTNERSHIP, a Delaware limited partnership having an office c/o The
Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209
("Lessor"), TOYS INTERNATIONAL, INC., a California corporation, having an office
at 550 Rancheros Drive, San Marcos, California 92069 ("Lessee"), and
_____________, having offices at __________________, its successors and assigns
or an affiliate ("Lender"), for itself and as 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 the Opry Mills shopping center
in Nashville, Tennessee as more fully described on Exhibit A attached hereto and
made a part hereof (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 has or will become the owner of an indebtedness secured by,
among other things, a [Deed of Trust] [Mortgage], dated as of _______________,
made by Lessor, as [trustor] [mortgagor], for the benefit of Lender, as
[beneficiary] [mortgagee] (the ["Deed of Trust"]["Mortgage"]), which [Deed of
Trust] [Mortgage] was recorded in the public records of the County of _________
in the State of ____________ on _______________ as Instrument Number
___________, 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] [Mortgage] 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,
<PAGE>
provided (i) Lender commences such remedy within thirty (30) 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] [Mortgage] 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 shall 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 as
to 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 reduces 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
<PAGE>
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 to or
create any responsibility or liability upon Lender for the control, care,
management or repair of the Property or for any waste committed on the Property
by any party whatsoever or 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 of 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 interest 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 overnight courier 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.
13. If any bankruptcy proceedings shall hereafter commence with respect to
Lessor, and if the Lease is rejected by the trustee in bankruptcy pursuant to
Section 365 of the United States Bankruptcy Code, Lessee agrees with Lender (i)
not to treat such lease as terminated or if the Lease is terminated by the
Trustee, to execute a new lease with Lender or its designee on the same terms as
the Lease, and (ii) to remain in possession of the Premises.
14. Lessee agrees to execute and deliver from time to time, upon the
request of Lender a certificate regarding the status of the Lease in the form
set forth in Schedule A hereto and made a part hereof. ----------
EXECUTED as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
LESSOR: OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership
By: Opry Mills, L.L.C., a Delaware limited liability company
Its: General Partner
By: The Mills Limited Partnership, a Delaware limited partnership
Its: Manager
<PAGE>
By: The Mills Corporation, a Delaware corporation
Its: General Partner
------------------------------------
By: Judith Berson
Its: Executive Vice President
LENDER: _________________________,
By:_________________________________
LESSEE: TOYS INTERNATIONAL, INC., a California corporation
By:
Name:
Title: ________________________
By:
Name:
Title: ________________________
</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
Agreement of Subordination, Non-Disturbance and Attornment and acknowledged
before me that she was duly authorized and did execute same on behalf of OPRY
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
_______________________ and ___________________, as ____________________ and
___________________ 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]
ACKNOWLEDGEMENT OF LENDER
STATE OF _________________ )
) ss.
CITY/COUNTY OF __________ )
On this ____ day of ____________________, 19____, before me, _________,
notary public, personally appeared ______________, the __________ of
________________, 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.
Notary Public
My Commission expires:_____________
<PAGE>
EXHIBIT H-1
PRE-CONSTRUCTION TENANT ESTOPPEL CERTIFICATE
TO: ________________________, its successors and assigns or an affiliate
(referred to herein as "Lender"), for itself and as agent for one or more
co-lenders:
1. The undersigned is the Lessee under that certain Lease together with all
amendments, modifications and supplements thereto, as more fully described on
Schedule A attached hereto, and made a part hereof (collectively, the "Lease")
by and between OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership,
as Lessor and __________________________________, a ____________________
corporation, as Lessee, covering those certain premises described therein and
located at Opry Mills, Nashville, ---------- ----- Tennessee ("Premises").
2. Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Lease.
3. Except for any amendments, modifications and supplements described in
Schedule A the Lease has not been modified, changed, altered or amended in any
respect and is the only Lease or agreement between the Lessee and Lessor or its
agents affecting the Premises.
4. Lessee has made no agreements with Lessor or its agents or employees
concerning free rent, partial rent, rebate of rental payments or any other type
of rental concession (except as set forth in the Lease).
5. No rent has been prepaid for more than one (1) month.
6. The Lease is in full force and effect and Lessee has no right to
terminate the Lease (other than by reason of default by Lessor). As of the date
hereof, Lessee is entitled to no credit, no free rent and no offset or deduction
in rent, except as set forth in the Lease.
7. The Lessee and Lessor are not in default under the Lease and, to the
best of Lessee's knowledge, there is no event which with notice or passage of
time would constitute a default by Lessee or Lessor under the Lease.
8. Lessor has and is under no obligation to Lessee with respect to payment
of the cost of tenant improvement work to the Premises, except as specifically
set forth in the Lease.
9. The Lease does not contain and the Lessee does not have any outstanding
options or rights of first refusal to purchase the Premises or any part thereof
or the real property of which the Premises are a part.
10. No actions, whether voluntary of otherwise, are pending against the
Lessee under the bankruptcy laws of the United States or any state thereof.
11. Any notices sent to Lender or its affiliates shall be sent certified
mail, return receipt requested and addressed to ___________________ at its
offices ________________________.
This certification is made knowing that Lender relies upon the truth of
this certification in making certain fundings.
Dated as of this _______day of ______________________, 199_.
TOYS INTERNATIONAL, INC., a California corporation
By:_____________________________________________
Its:_____________________________________________
Exhibit 10.125
Lease Agreement - Mission Viejo
COMPLETE WITH TENANT CHANGES TO EXECUTED LEASE
2/17/99
LEASE
BY AND BETWEEN
MISSION VIEJO ASSOCIATES LP,
a California limited partnership
AND
TOYS INTERNATIONAL
a California corporation
<PAGE>
Mission Viejo Mall LEASE
THIS LEASE made this _________ day of ________________________________,
19______, by and between MISSION VIEJO ASSOCIATES LP, , a California limited
partnership ("Landlord"), and TOYS INTERNATIONAL, a California corporation
("Tenant");
WITNESSETH THAT, in consideration of the rents, covenants and agreements
hereinafter set forth, such parties enter into the following agreement:
ARTICLE I
BASIC LEASE INFORMATION AND DEFINITIONS
Section 1.1. Basic Lease Information.
This Article I is an integral part of this Lease and all of the terms
hereof are incorporated into this Lease in all respects. In addition to the
other provisions which are elsewhere defined in this Lease, the following,
whenever used in this Lease, shall have the meanings set forth in this Section:
Center: Mission Viejo Mall, situated in the City of Mission Viejo, County
of Orange, State of California.
Premises: Room 030. Landlord shall have the right to change the room
designation upon written notice to Tenant.
Store Floor Area: Approximately 5,959 square feet.
Lease Term: Commencing on the Commencement Date and continuing until the
last day of January next following the end of the tenth (10th) Lease Year.
Commencement Date: The earlier of (i) the date the Tenant opens for
business, or (ii) the Required Completion Date
Required Completion Date: The later of (i) September 1, 1999, (ii) the
grand re-opening of the Center including the opening of Nordstrom, or (iii)
ninety (90) days after the last to occur of (a) Tenant's receipt of Landlord's
written approval of Tenant's Plans, provided Tenant has submitted the same for
Landlord's review within fifteen (15) days of execution of this Lease, (b)
receipt of a fully executed copy of this Lease, (c) receipt of necessary
government permits and approvals required in order for Tenant to commence its
work in the Premises, provided such permits are promptly applied for and
diligently pursued by Tenant, and (d) the date Landlord has delivered possession
of the Premises to Tenant by notice to Tenant.
Minimum Annual Rent: A Minimum Annual Rent of One Hundred Fifty-Four
Thousand Nine Hundred Thirty-Four Dollars ($154,934.00) per annum (approximately
$26.00 per square foot of Store Floor Area), payable in equal monthly
installments, in advance upon the first day of each and every month commencing
upon the Commencement Date and continuing thereafter through and including the
last month of the second (2nd) Lease Year of the Lease Term; and
A Minimum Annual Rent of Two Hundred Two Thousand Six Hundred Six Dollars
($202,606.00) per annum (approximately $34.00 per square foot of Store Floor
Area), payable in equal monthly installments, in advance upon the first day of
each and every month commencing upon the third (3rd) Lease Year of the Lease
Term and continuing thereafter through and including the last month of the fifth
(5th) Lease Year of the Lease Term; and
A Minimum Annual Rent of Two Hundred Thirty-Eight Thousand Three Hundred
Sixty Dollars ($238,360.00) per annum (approximately $40.00 per square foot of
<PAGE>
Store Floor Area), payable in equal monthly installments, in advance upon the
first day of each and every month commencing upon the sixth (6th) Lease Year of
the Lease Term and continuing thereafter through and including the last month of
the Lease Term.
Percentage Rent Rate: Six percent (6%).
Sales Breakpoint:$2,000,000.00 per annum from the Commencement Date through
and including the expiration of the second (2nd) Lease Year; and $2,800,000.00
per annum for the Lease Years third (3rd) through fifth (5th)Lease Years; and
$3,400,000.00 per annum for each Lease Year during the remainder of the Lease
Term (prorated for any Partial Lease Year).
Taxes: Calculated as set forth in Section 4.5.
Common Area Maintenance: Calculated as set forth in Section 6.2.
Trade Name: TOYS INTERNATIONAL.
Permitted Use: The Premises shall be occupied and used by Tenant solely for
the purpose of conducting therein the business of the retail sale of toys,
better quality collectibles, hobbies, arts and crafts, children's books, dolls,
model kits, child-oriented games, child-oriented video and audio cassettes,
child-oriented computer software, sporting goods and such other items as are
typically displayed in toy stores located within first class regional shopping
centers and Tenant shall not use or permit or suffer the use of the Premises for
any other business or purpose.
Insurance Charge: Thirty cents (30(cent)) per square foot of Store Floor
Area per annum, subject to adjustment as set forth herein (Section 11.1).
Promotional Fund Fixed Contribution: the greater of $1,000.00 or $1.00 per
square foot of Store Floor Area per annum, subject to adjustment as set forth
herein (Section 14.1).
Media Fund Charge: the greater of $1,000.00 or $1.00 per square foot of
Store Floor Area per annum, subject to adjustment as set forth herein (Section
14.3).
Notice Address:
Landlord MISSION VIEJO ASSOCIATES LP,
c/o M.S. Management Associates Inc.
National City Center
115 W. Washington
Indianapolis, Indiana 46204
Tenant TOYS INTERNATIONAL 550 Rancheros Drive
San Marcos, California 92069 Attention: President
Section 1.2. Definitions.
(a) "Center" shall mean, as the same may be changed from time to time, the
land and buildings and other improvements from time to time constituting an
integrated shopping center which Landlord and others have constructed or caused
to be constructed.
(b) "Landlord's Tract" shall mean that portion (or portions) of the land in
the Center and the buildings and other improvements thereon which at any time in
question Landlord owns or which Landlord leases as tenant under a sale leaseback
or under a ground lease or sublease, it being understood that Landlord may not
own or control portions of the Center. Subject to Article V, Landlord reserves
<PAGE>
unto itself the unlimited right to modify the configuration of Landlord's Tract
at any time for the purpose of incorporating additional Major Tenants and other
buildings within the Center.
ARTICLE II
LEASED PREMISES AND TERM
Section 2.1. Leased Premises.
Landlord hereby leases to Tenant and Tenant hereby rents from Landlord the
Premises as crosshatched on Exhibit "A". The Store Floor Area shall be measured
to the center line of all party or adjacent tenant walls, to the exterior faces
of all other walls and to the building line where there is no wall. The parties
agree that Landlord's determination of the Store Floor Area shall be final,
binding and conclusive. Either party shall have the right to re-measure Store
Floor Area and effectuate the adjustment of Minimum Monthly Rent provided for in
Section 4.1.
Section 2.2. Roof and Walls.
Landlord shall have the exclusive right to use all or any part of the
exterior of the side and rear walls of the Premises and the roof for any
purpose, including but not limited to erecting signs or other structures on or
over all or any part of the same, erecting scaffolds and other aids to the
construction and installation of the same, and installing, maintaining, using,
repairing and replacing pipes, ducts, conduits and wires leading through, to or
from the non-sales areas of the Premises and serving other parts of the Center
in locations which do not materially interfere with Tenant's use of the
Premises. Tenant shall have no right whatsoever in the exterior of exterior
walls of the Premises or the roof or any portion of the Center outside the
Premises, except as provided in Exhibit "B" hereof.
Section 2.3. Lease Term.
The term of this Lease (hereinafter called "Lease Term") shall commence
upon the Commencement Date and shall thereafter end on the last day of January
next following the number of Lease Years set forth in Article I unless sooner
terminated as herein provided.
Notwithstanding anything to the contrary contained in this Lease, in the
event Landlord has not delivered possession of the Premises to Tenant, with
Landlord's Work completed, on or before August 1, 1999, the expiration of the
ninety (90) day period referred to in Section 1.1(f) shall be postponed to June
1, 2000.
Section 2.4. Lease Year Defined.
"Lease Year," as used herein, means a period of twelve (12) consecutive
months during the Lease Term, the first full Lease Year commencing on the
Commencement Date and continuing through the twelfth (12th) full calendar month
occurring on or after the Commencement Date. "Partial Lease Year" means that
portion of the Lease Term prior to the first full Lease Year or following the
last full Lease Year.
Notwithstanding the foregoing, in the event the Commencement Date occurs
during the period from and including December 2, 1999 through and including
December 24, 1999, then the first Lease Year shall commence on the Commencement
Date and end on November 30, 2000.
Section 2.5. Relocation of Premises. INTENTIONALLY DELETED.
<PAGE>
Section 2.6. Modifications to the Center.
Notwithstanding anything in this Lease contained, Landlord reserves the
right to change or modify and add to or subtract from the size and dimensions of
the Center or any part thereof, the number, location and dimensions of buildings
and stores, the size and configuration of the parking areas, entrances, exits
and parking aisle alignments, dimensions of hallways, malls and corridors, the
number of floors in any building, the location, size and number of tenants'
spaces and kiosks which may be erected in or fronting on any mall or otherwise,
the identity, type and location of other stores and tenants, and the size,
shape, location and arrangement of Common Areas (hereinafter defined), and to
design and decorate any portion of the Center as it desires, but the general
character of the Center and the approximate location of the Premises in relation
to the Major Tenants (as defined in Section 4.2 herein) shall not be
substantially changed.
Notwithstanding anything to the contrary contained in this Lease, in no
event may any changes which Landlord makes to the Center, or any portion
thereof, have any materially adverse effect upon access to and/or visibility of
the Premises. Landlord shall not install any kiosk, cart, information board or
other obstruction to visibility or access in the area of the enclosed mall
concourse directly in front of the Premises and bounded by an imaginary
elongation of the side lines of the Premises across the mall concourse.
If at any time (a) Landlord is required by any laws, ordinances, rules or
regulations of any governmental agency having jurisdiction over the Center to
provide additional parking in Landlord's Tract, or (b) Landlord proposes to
increase the total rentable floor area within the Center which would require
additional parking in the Center, Landlord may elect to provide such additional
parking by constructing deck or elevated or subterranean parking facilities,
hereinafter referred to as "Deck Parking". In the event Landlord so elects,
Tenant shall pay its proportionate share of the capital expense of providing
such Deck Parking. Tenant's proportionate share shall be determined by (a)
multiplying the total capital expense of providing such Deck Parking by a
fraction, the numerator of which is the Store Floor Area of the Premises and the
denominator of which is the total rentable floor area in Landlord's Tract,
either existing, or proposed by Landlord, as the case may be, at the time of
providing such Deck Parking; and (b) multiplying the figure derived pursuant to
the foregoing subsection (a) by a fraction, the numerator of which is the number
of full calendar months remaining in the term of the Lease, and the denominator
of which shall be the greater of (i) the number of months required to amortize
the permanent financing obtained by Landlord to finance the capital expense of
providing such Deck Parking, or (ii) fifteen (15) years. Tenant shall pay its
proportionate share of the capital expense of providing such Deck Parking in
equal monthly installments commencing upon the date the Deck Parking is open for
public use and continuing thereafter on the first day of every calendar month
during the remaining term hereof, plus interest thereon at the rate of nine
percent (9%) per annum.
ARTICLE III
TENANT'S WORK
Section 3.1.1. Landlord's Work.
Landlord shall at its expense construct the Premises in substantial
accordance with plans and specifications prepared or to be prepared by
Landlord's architect, incorporating in such construction all work described in
Exhibit "B" hereto as being required by Landlord (hereinafter called
("Landlord's Work").
Section 3.1. Tenant's Work.
<PAGE>
All work not provided herein to be done by Landlord shall be performed by
Tenant (hereinafter called "Tenant's Work") including but not limited to all
work designated as Tenant's Work in Exhibit "B," and Tenant shall do and perform
at its expense all Tenant's Work diligently and promptly and in accordance with
the following provisions. Tenant agrees to accept the Premises in its present
"as is" condition Notwithstanding anything to the contrary contained in this
Lease, Tenant shall have the right without Landlord's consent to re-use any and
all improvements, fixtures and equipment existing in the Premises as of the date
of this Lease to the extent same are working, in good repair and have adequate
capacity and life. Landlord agrees that no such improvements, fixtures and/or
equipment shall be removed from the Premises prior to delivery of possession to
Tenant, except to the extent removed by the previous tenant of the Premises (or
portion thereof) pursuant to its lease. In the event that prior to or during the
construction of Tenant's Work any Hazardous Material is found in the Premises,
Landlord shall, at is sole cost, remove same, such removal to be in accordance
with applicable laws and regulations, and the ninety (90) day period referred to
in the definition of "Commencement Required Completion Date" shall be extended
by the number of days Tenant is delayed by virtue of such work by Landlord.
Further alterations of this room will be at the Tenant's sole expense and deemed
to be Tenant's Work, including, but not limited to, all work designated as
Tenant's Work in Exhibit "B", and Tenant shall do and perform all Tenant's Work
diligently and promptly and in accordance with the following provisions.
Section 3.2. Tenant's Obligations Before Commencement Date.
As soon as reasonably possible hereafter, Landlord shall deliver to Tenant
a drawing of the Premises and a copy of the Tenant Information Handbook and the
same shall become a part hereof by this reference as Exhibit "B-1" (hereinafter
referred to as "Handbook"). On or before the later of (i) June 1, 1999 or (ii)
Within forty five (45) days after Tenant receives a fully executed original the
date of this Lease or the date of receipt of a drawing of the Premises and
Tenant's Handbook, whichever is later, Tenant will submit to Landlord one (1)
reproducible set (sepia) and 3 copies of plans and specifications, prepared by a
registered architect or engineer, of all Tenant's Work to be done within the
Premises (hereinafter called "Tenant's Plans"), prepared in conformity with
Exhibit "B" and the Handbook. Within thirty (30) days after receipt of Tenant's
Plans, Landlord shall notify Tenant of any failures of Tenant's Plans to conform
to Exhibit "B," the Handbook or otherwise to meet with Landlord's approval.
Tenant shall within fifteen (15) days after receipt of any such notice cause
Tenant's Plans to be revised to the extent necessary to conform to Exhibit "B"
or the Handbook obtain Landlord's approval and resubmitted for Landlord's
approval. When Landlord has approved the original or revised Tenant's Plans,
Landlord shall initial and return one (1) set of approved Tenant's Plans to
Tenant and the same shall become a part hereof by this reference as Exhibit
"B-2." Approval of plans and specifications by Landlord shall not constitute the
assumption of any responsibility by Landlord for their accuracy or sufficiency
or conformity with applicable laws (including but not limited to the Americans
with Disabilities Act of 1990 and the Williams-Steiger Occupational Safety and
Health Act), and Tenant shall be solely responsible for such plans and
specifications. Tenant shall not commence any of Tenant's Work until Landlord
has approved Exhibit "B-2," unless prior Landlord approval has been obtained in
writing.
Notwithstanding anything to the contrary contained in the Handbook, (i)
Tenant shall not be required to make any plan submissions earlier than as
required pursuant to the terms and provisions of this Lease, (ii) Tenant shall
not be required to post, or to cause its contractor to post, a payment or
performance bond or other bond of any kind, (iii) Landlord shall not have a
right of approval with respect to the identity of Tenant's contractor(s), (iv)
except for Landlord's right to approve plans and specifications for Tenant's
Work, Landlord shall not have the right to design Tenant's store or any portion
thereof, (v) Tenant shall not be required to pay Landlord for any item of work,
<PAGE>
installation or service, or any other sum whatsoever, that is not specifically
and expressly provided for (including the amount thereof) in the terms and
provisions of this Lease, (vi) Tenant shall not be required to include within
Tenant's Work any work not specifically required to be performed pursuant to
this Lease, (vii) there shall be no restriction on Tenant's use or placement of
fixtures, signs, advertisements, notices or decals except as specifically set
forth in this Lease, (viii) Tenant's obligation to use Landlord or a particular
contractor for the performance of any part of Tenant's Work is conditioned upon
Landlord or such contractor charging a competitive fee for its work or service
and being available to perform work or provide materials to Tenant when needed
by Tenant, (ix) Tenant's obligation to incorporate design suggestions and
comments of Landlord or its tenant coordinator is limited to those suggestions
and comments which are requried in order for the plans and specifications to
conform to the Handbook and this Lease, (x) Tenant shall not be obligated to use
union labor unless failure to do so is likely to cause labor unrest or a work
stoppage with respect to the Center, (xi) in the event of any conflict between
this Lease and the Handbook, this Lease shall control, and (xii) in the event of
any conflict between the Handbook and the approved Tenant's Plans, the approved
Tenant's Plans shall control.
Landlord shall notify Tenant not less than fifteen (15) days in advance of
the time when Tenant can commence Tenant's Work; and Tenant shall commence such
work not later than the date specified in such notice (although Landlord may not
have completed Landlord's Work on such date and may be in the Premises
concurrently with Tenant), complete the same in strict accordance with Exhibits
"B" and "B-2," install all store and trade fixtures, equipment, stock in trade,
merchandise and inventory, and open for business therein not later than the
Commencement Required Completion Date. Tenant hereby releases Landlord and its
contractors from any claim whatsoever for damages against Landlord or its
contractors for any delay in the date on which the Premises shall be ready for
delivery to Tenant. In the event possession of the Premises is not delivered to
Tenant within eighteen (18) months two (2) years of the date of this Lease, then
this Lease automatically shall become null and void and neither party shall have
any liability or obligation to the other hereunder.
Section 3.3. Failure of Tenant to Perform. INTENTIONALLY DELETED.
Section 3.4. Condition of Premises.
Except as provided in Section 3.1, Tenant's taking possession of the
Premises shall be conclusive evidence of Tenant's acceptance thereof in good
order and satisfactory condition. Tenant shall acknowledge taking possession of
the Premises in writing. Except as provided in Section 3.1, Tenant agrees that
Landlord has made no representations as to conformance with applicable laws
respecting the condition of the Premises or the presence or absence of Hazardous
Materials (hereinafter defined) in, at, under or abutting the Premises or the
environment. Tenant also agrees that no representations respecting the condition
of the Premises, no warranties or guarantees, expressed or implied, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, with respect to workmanship or any defects in material, and
no promise to decorate, alter, repair or improve the Premises either before or
after the execution hereof, have been made by Landlord or its agents to Tenant
unless the same are contained herein.
In the event that, on the date of delivery of possession of the Premises to
Tenant, the configuration of the Premises is not in substantial conformity with
that shown on the scaled drawings on which Tenant based Tenant's Plans or the
placement of columns, equipment or utility facilities in the Premises is
different than originally shown on the scaled drawings, and, in either case, the
degree of variation from the scaled drawings reasonably requires Tenant to
revise Tenant's Plans, then (i) Landlord shall reimburse to Tenant any
additional architectural and engineering costs incurred by Tenant to prepare
<PAGE>
such revised Tenant's Plans, and (ii) the ninety (90) day period referred to in
Section 1.1(f) shall be extended by the amount of time required (a) to prepare
such revised Tenant's Plans and resubmit the same to Landlord for approval, (b)
for Tenant to obtain Landlord's approval of new Tenant's Plans, and (c) for
Tenant to obtain a new building permit, if required.
Section 3.5. Certification.
Within sixty (60) days after the date Tenant opens for business in the
Premises, Tenant shall deliver to Landlord the following: (a) Tenant's affidavit
stating that the work to be performed by Tenant pursuant to the terms of this
Lease has been completed in strict compliance with Exhibit "B" and Tenant's
Plans, as approved by Landlord, and that no security interest under the Uniform
Commercial Code or chattel mortgages are outstanding or have been filed, it
being intended that any such affidavit may be relied upon by Landlord and that
any deliberate misstatement by Tenant shall constitute an event of default
hereunder; (b) an affidavit of any general contractor performing Tenant's Work
stating that all subcontractors, laborers and material men who have performed
work on or furnished materials to the Premises (whose names and addresses shall
be recited in the affidavit) pursuant to contracts each involving more than
$10,000.00 have been paid in full and that all liens therefor that have or might
be filed have been discharged of record or waived; (c) a complete release and
waiver of lien with respect to the Premises from any general contractor and all
subcontractors who have performed work on or furnished material to the Premises
pursuant to contracts each involving more than $10,000.00, or in lieu thereof,
an attorney's certification that the lien period for the work performed on
Tenant's behalf in the Premises has expired and that no liens in connection
therewith have been filed; (d) Tenant's written acceptance of the Premises
stating that Landlord has completed all of Landlord's Work, if any, required to
be performed by Landlord pursuant to the terms of this Lease and that Tenant
reserves no claims, offsets or backcharges, or stating those claimed; (e) any
monies owing to Landlord for the cost of any work done for or on behalf of
Tenant, as set forth in Exhibit "B" annexed hereto or otherwise; and (f) all
certificates and approvals with respect to the work performed by Tenant or on
Tenant's behalf that may be required by any governmental authorities as a
condition for the issuance of an occupancy certificate for the Premises together
with a copy of any occupancy certificate issued by the proper governmental
authority for the Premises.
ARTICLE IV
RENT
Section 4.1. Minimum and Percentage Rent.
Tenant covenants and agrees to pay to Landlord, without notice or demand,
at Landlord's Address for notice the Minimum Rent set forth in Article I, in
advance upon the first day of each and every month of the Lease Term. If actual
Store Floor Area is modified in accordance with Section 2.l, the Minimum Annual
Rent (Break Points are not related to Minimum Rent or Store Floor Area) and the
Sales Breakpoint shall be deemed automatically increased or decreased based upon
the Store Floor Area as thus determined, and any overpayments or underpayments
of Minimum Monthly Rent (Break Points are not related to Minimum Rent or Store
Floor Area) and Percentage Rent to Landlord shall be adjusted accordingly. The
failure of Tenant to object to any statement, invoice, or billing presented by
Landlord, within thirty (30) days after receipt of such statement, invoice, or
billing based on Store Floor Area, shall constitute Tenant's acquiescence to the
actual Store Floor Area as so determined by Landlord.
In addition to the payment of Minimum Rent, Tenant covenants and agrees to
pay to Landlord, without notice or demand, at Landlord's Address for notice, an
amount, if any, equal to the Percentage Rent Rate applied against that portion
<PAGE>
of Tenant's Adjusted Gross Sales during each Lease Year or Partial Lease Year in
excess of the Sales Breakpoint for such period (hereinafter referred to as
"Percentage Rent"). In the event of a Partial Lease Year, the Sales Breakpoint
shall be determined by multiplying the Sales Breakpoint for the full Lease Year,
by a fraction, the numerator of which shall be the number of days contained in
such Partial Lease Year and the denominator of which shall be 365 days. If
Minimum Rent for any Lease Year or Partial Lease Year is reduced or abated for
any reason, the Sales Breakpoint shall be reduced in direct proportion to the
reduction or abatement of Minimum Rent for the period of time that such
reduction or abatement of Minimum Rent is in effect. If the Sales Breakpoint
changes during a Lease Year, the Sales Breakpoint for that Lease Year shall be
appropriately adjusted.
Notwithstanding anything to the contrary contained in this Lease, for
purposes of calculating Percentage Rent for the Partial Lease Year at the end of
the Lease Term, Tenant's Gross Sales during the Partial Lease Year shall be
deemed to be the total Gross Sales for the final twelve (12) month period of the
Lease Term multiplied by a fraction the numerator of which is the number of
calendar days in the Partial Lease Year and the denominator of which is 365.
Section 4.2. Miscellaneous Rent Provisions.
If Tenant shall fail to pay any installment of Minimum Rent, Percentage
Rent or any item of Additional Rent within five (5) days after the date the same
became due and payable, then Tenant shall pay to Landlord a late payment service
charge ("Late Charge") covering administrative and overhead expenses equal to
the greater of (a) $250.00 or (b) 5(cent) per each dollar so overdue. Provision
herein for payment of the Late Charge shall not be construed to extend the date
for payment of any sums to be paid by Tenant hereunder or to relieve Tenant of
its obligation to pay all such sums at the times herein stipulated. If the
Commencement Date is other than the first day of a month, Tenant shall pay on
the Commencement Date a prorated partial Minimum Monthly Rent for the period
prior to the first day of the next calendar month, and thereafter Minimum
Monthly Rent payments shall be made not later than the first day of each
calendar month. Landlord has designed the Center to contain Four (4) Major
Tenants. For purposes of this Lease, a "Major Tenant" is herein defined as a
single tenant occupying at least 60,000 40,000 contiguous square feet of floor
area, and a variety or specialty store is herein defined as a single tenant
occupying a single store space containing at least 15,000 contiguous square feet
of floor area. If additional Major Tenants are added to the Center or an
existing Major Tenant is replaced by a Major Tenant of higher quality, the
Minimum Annual Rent and Minimum Monthly Rent herein provided for shall
automatically be increased ten percent (10%) at the time each additional or
higher quality Major Tenant opens for business. In addition to the foregoing, If
Landlord shall, at any time during the term of this Lease, renovate or expand
the Center, the cost of which exceeds Ten Million Dollars ($10,000,000.00), the
Minimum Rent herein provided for shall automatically be increased ten percent
(10%) upon the first day of the month following the completion of such
renovation or expansion.
Section 4.3. Percentage Rent.
Tenant shall (i) not later than the fifteenth (15th) fifth (5th) day after
the close of each calendar month, deliver to Landlord at the Center office a
written statement certified under oath by Tenant or an officer of Tenant,
showing Gross Sales and Adjusted Gross Sales made in such calendar month; and
(ii) not later than sixty (60) thirty (30) days after the end of each Lease Year
or Partial Lease Year, deliver to Landlord at the Center office a statement of
Gross Sales and Adjusted Gross Sales for such Lease Year or Partial Lease Year
the correctness of which is certified to by Tenant or an officer of Tenant. If
Tenant fails to prepare and deliver any statement of Gross Sales and Adjusted
Gross Sales required hereunder, within the time or times specified above, then
<PAGE>
Landlord shall have the right, in addition to the other rights and remedies set
forth in this Lease, (a) to collect from Tenant a sum which shall be $250.00
which shall be deemed liquidated damages for administrative and overhead
expenses resulting from such failure, and (b) to estimate Tenant's Adjusted
Gross Sales for any non-reported period and bill Tenant's Percentage Rent
accordingly. Landlord shall reserves the right, at Landlord's option, to adjust
Percentage Rent billings when actual Adjusted Gross Sales reports are received.
Percentage Rent shall become due and payable in each Lease Year on the
twentieth (20th) fifteenth (15th) day of the month immediately following the
month during which Adjusted Gross Sales exceed the Sales Breakpoint for such
Lease Year, and thereafter shall be paid monthly on all additional Adjusted
Gross Sales made during the remainder of such Lease Year, such payments to be
made concurrently with the submission by Tenant to Landlord of the written
statement of monthly Adjusted Gross Sales as provided for herein.
Tenant will preserve for at least three (3) years at Tenant's notice
address all original books and records disclosing information pertaining to
Gross Sales and Adjusted Gross Sales and such other information respecting Gross
Sales and Adjusted Gross Sales as Landlord reasonably requires, including, but
not limited to, cash register tapes, sales slips, sales checks, non-consolidated
gross income and sales tax returns, bank deposit records, sales journals and
other supporting data including itemized records of permitted exclusions.
Landlord and its agents shall have the right during business hours to examine
and audit such books and records preserved by Tenant. If such examination or
audit discloses a liability for Percentage Rent three percent (3%) or more in
excess of the Percentage Rent paid by Tenant for any period Lease Year and at
least $500.00 of Percentage Rent is owed as the result of such audit, or if
Tenant's Gross Sales and Adjusted Gross Sales cannot be verified due to the
insufficiency or inadequacy of Tenant's records, Tenant shall promptly pay
Landlord the reasonable cost of said audit. Tenant shall, in any event, pay to
Landlord the amount of any deficiency in rents which is disclosed by such audit.
If such examination or audit discloses an overpayment of Percentage Rent, then
the excess, less the cost of such examination or audit, shall be credited to
Tenant's account. Tenant's obligation to preserve all original books and records
shall survive the expiration of the Lease Term or the earlier termination of
this Lease. Landlord agrees to maintain confidentiality with respect to all
information obtained as to Tenant's Adjusted Gross Sales and Gross Sales.
If Tenant shall fail to attain Adjusted Gross Sales in an amount equal to
$2,000,000.00 during the third (3rd), fourth (4th) or fifth (5th) Lease Years of
the Lease Term, or if Tenant shall fail to attain Adjusted Gross Sales
sufficient to incur Percentage Rent in an amount equal to at least twenty five
percent (25%) of the Minimum Annual Rent payable pursuant to Section 1.1(g) of
this Lease in any Lease Year after the fifth (5th) Lease Year of the Lease Term,
then Landlord may elect to terminate this Lease by written notice to Tenant
given within six (6) months after the end of the applicable Lease Year, and this
Lease shall terminate and be null and void ninety (90) days after delivery of
such notice. Tenant may render such notice of termination inoperative if Tenant
shall, within thirty (30) days after receipt of such notice, agree in writing to
increase the Minimum Annual Rent payable for each Lease Year thereafter
(including the Lease Year in which such notice of termination was received) by
an amount equal to twenty-five percent (25%) of the Minimum Annual Rent payable
for the Lease Year immediately preceding such notice of termination. Landlord's
failure to exercise such right of termination at the end of any Lease Year shall
not be deemed a waiver of Landlord's right to terminate the Lease at the end of
any subsequent Lease Year.
If Adjusted Gross Sales do not exceed One Million Six Hundred Thirty-eight
Thousand Seven Hundred Twenty-five and 00/100 Dollars ($1,638,725.00) during the
third (3rd) Lease Year of the Term, then Landlord or Tenant may elect to
terminate this Lease by notice to the other given not more than sixty (60) days
<PAGE>
following the expiration of the third (3rd) Lease Year and this Lease shall
terminate and be null and void ninety (90) days after delivery of such notice,
and, upon such termination, both parties hereto shall be relieved from further
obligations hereunder. If Tenant exercises the right of termination, Tenant
shall pay back the unamortized portion of improvements Landlord's Contribution
based upon a ten (10) year straight line amortization schedule, computed from
the Commencement Date and as of the effective date of termination. In the event
that at any time or times during the third (3rd) Lease Year Tenant is prevented
from operating its business at the Premises due to matters set forth in Section
24.5 of this Lease, then for purposes of this paragraph only, Tenant's Adjusted
Gross Sales for such time or times during the third (3rd) Lease Year shall be
deemed to be equal to Tenant's Adjusted Gross Sales for the identical period(s)
during the most recent year as to which Tenant was not so prevented from
operating its business at the Premises..
Section 4.4. Gross Sales and Adjusted Gross Sales Defined.
As used herein, Gross Sales means the sale prices of all goods, wares and
merchandise sold and the charges for all services performed by Tenant or any
other person or entity in, at, or from the Premises for cash, credit or
otherwise, without reserve or deduction for uncollected amounts, including but
not limited to sales and services (i) where the orders originate in, at or from
the Premises, regardless from whence delivery or performance is made, (ii)
pursuant to mail, telephone, telegraph or otherwise received or filled at the
Premises, (iii) resulting from transactions originating in, at or from the
Premises, and (iv) deposits not refunded to customers. Excluded from Gross Sales
in order to determine Adjusted Gross Sales shall be: (i) exchanges of
merchandise between Tenant's stores made only for the convenient operation of
Tenant's business and not to consummate a sale made in, at or from the Premises,
(ii) returns to manufacturers, (iii) refunds to customers (but only to the
extent included in Gross Sales), (iv) sales of fixtures, machinery and equipment
after use in Tenant's business in the Premises, (v) sales to employees at a
discount, (vi) bad debts and/or bad checks on sales made at the Premises written
off during the normal course of business provided that if such bad debts and/or
bad checks are subsequently collected, they shall be included in Gross Sales for
the Lease Year during which they are collected, (vii) sums and credits received
in the settlement of claims for loss of or damage to merchandise, (viii) sales
of product to jobbers, liquidators or the like, (ix) gift certificates, or like
vouchers, until such time as the same shall have been converted into a sale by
redemption, (x) alteration workroom charges and delivery charges, (xi) sales
from vending machines installed solely for the use of Tenant's employees, (xii)
receipts from so-called "layaway" sales except as and to the extent actually
received by Tenant, (xiii) interest, service or sales carrying charges or other
charges, however denominated, paid by customers for extension of credit on
sales, (xiv) discounts and allowances made on merchandise returned or traded in
by customers, (xv) fees, discounts and charges paid by Tenant with respect to
check guarantees and/or to the issuers of credit cards on account of the use of
credit cards by customers of the Premises, and (xvi) sales, excise or similar
tax imposed by governmental authority and collected from customers and paid out
by Tenant. No other taxes shall be deducted from Gross Sales.
Section 4.5. Taxes.
A. Definition. Landlord shall pay or cause to be paid, upon the discretion
of Landlord but before delinquent, all Taxes (as hereinafter defined) levied,
assessed, imposed, become due and payable, or liens arising in connection with
the use, occupancy or possession of or become due and payable out of or for, the
Center or any part thereof during the Lease Term. As used in this Section 4.5
the term "Taxes" shall mean and include all property taxes, both real and
personal, public and governmental charges and assessments, and all other taxes
which Landlord is obligated to pay with respect to the development of the
Center, including all extraordinary or special assessments or assessments
<PAGE>
against any of Landlord's personal property now or hereafter located in the
Center, all reasonable costs and expenses including, but not limited to
consulting, appraisal and attorneys' fees incurred by Landlord in researching,
reviewing, evaluating, contesting, appealing or negotiating with public
authorities (Landlord having the sole authority to conduct such a contest or
enter into such negotiations) as to any of the same and all sewer, water and
other utility taxes and impositions, but shall not include taxes on Tenant's
machinery, equipment, inventory or other personal property or assets of Tenant,
Tenant agreeing to pay all taxes upon or attributable to such excluded property
without apportionment.
Taxes shall not include interest and penalties due on delinquent Taxes, but
shall include interest on Taxes withheld by virtue of Landlord making partial
payment under protest in the event such partial payment is permitted in
connection with a tax appeal proceeding.
B. Tenant's Share. Tenant shall pay to Landlord, as additional rent, its
proportionate share of all calendar year or fiscal year Taxes, such
proportionate share to be prorated for periods at the beginning and end of the
Lease Term which do not constitute full calendar months or years. Tenant's
proportionate share of any such Taxes shall be that portion of such taxes which
bears the same ratio to the total Taxes as the Store Floor Area bears to the
average rentable floor area rented or occupied in the Center (hereinafter called
"Rented Floor Area") during the calendar year or fiscal year in which such Taxes
constitute a lien upon the Center. The floor area of (i) a Major Tenant, and
(ii) any tenant in a free standing premises, and (iii) Common Areas, as
hereinafter defined, shall not be included in the Rented Floor Area, and any
contributions to Taxes received by Landlord from such tenants (less any tax
payments recaptured against any other rents or payments due Landlord) shall be
deducted from Taxes prior to the calculating of Tenant's proportionate share.
Landlord reserves the right and option to cause one or more of the separate tax
lots to be established for components, which may consist of one or more tax
parcels, as determined by Landlord, of Landlord's Tract, in which case Tenant's
proportionate share will be computed on the basis of the component or components
as determined within the sole discretion of Landlord, in which the Premises is
located.
The ratio described in the preceding paragraph shall not be utilized if the
"Rented Floor Area" is less than eighty five percent (85%) of the rentable floor
area in the Center. If the "Rented Floor Area" is less than eighty five percent
(85%), the pro rata share of Tenant shall be determined by the ratio the Store
Floor Area bears to eighty five percent (85%) of the rentable floor area in the
Center.
C. Payment by Tenant. Tenant's proportionate share of Taxes shall be paid
in monthly installments commencing with the Commencement Date, in amounts
initially reasonably estimated by Landlord, one (1) such installment being due
on the first day of each full or partial month during the Lease Term. Upon
notice from Landlord, such monthly installments shall increase or decrease from
time to time to reflect the then current estimate of the amount of any Taxes
due. When the actual amount of any such Taxes is determined by Landlord,
Landlord will notify Tenant of such actual amount and the manner of calculating
Tenant's proportionate share (in a format to be determined by Landlord) and of
any excess or deficiency in the amount theretofore paid by Tenant as its share
of such Taxes. Any such excess will be credited to Tenant's account or refunded
to Tenant if no further payments are due Landlord pursuant to this Lease. Tenant
will pay the amount of any deficiency to Landlord within thirty (30) ten (10)
days following Landlord's notice thereof. Tenant acknowledges and stipulates
that Landlord has made no representations or agreement of any kind as to the
total dollar amount of such Taxes, actual or estimated, or Tenant's dollar share
thereof. With respect to any assessments which may be levied against or upon the
Premises and the Center, or which under the laws then in force may be evidenced
<PAGE>
by improvement or other bonds, or may be paid in annual installments, only the
amount of such annual installment (with appropriate proration for any partial
year) shall be included within the computation of Tenant's pro rata share of
Taxes for any particular year. In no event shall Tenant be required to pay (a)
any portion of Landlord's general income, franchise, inheritance, estate or gift
taxes, (b) any business license tax or fee imposed upon Landlord which is
generally applicable to all real estate related and non-real estate related
business owners or operators in the city, county or state in which the Premises
is located, nor (c) any assessments levied in order to finance in whole or in
part the development or construction of any portion of the Center. Landlord
shall furnish Tenant with copies of all applicable bills pertaining to Taxes
upon Tenant's written request.
D. Other Taxes. Tenant's proportionate share of any governmental tax or
charge (other than income tax) levied, assessed, or imposed on account of the
payment by Tenant or receipt by Landlord, or based in whole or in part upon, the
rents in this Lease reserved or upon the Center or the value thereof shall be
paid by Tenant including any new direct or indirect tax or surcharge against the
Center, the parking areas, or the number of parking spaces in the Center or any
new direct or indirect tax or surcharge in addition to or by way of substitution
for any existing tax or assessment which Landlord becomes obligated to pay with
respect to the Center.
E. Larger Parcel. If the land under the Center is a part of a larger parcel
of land for assessment purposes (the "Larger Parcel"), the taxes and assessments
allocable to the land in the Center for the purpose of determining Taxes under
this Section shall be deemed a fractional portion of the taxes and assessments
levied against the Larger Parcel, the numerator of which is the acreage in the
Center and the denominator of which is the acreage in the Larger Parcel.
Section 4.6. Additional Rent.
All amounts required or provided to be paid by Tenant under this Lease
other than Minimum Annual Rent and Percentage Rent shall be deemed additional
rent and Minimum Annual Rent, Percentage Rent and additional rent shall in all
events be deemed rent.
Section 4.7. Sprinkler System. INTENTIONALLY DELETED
Section 4.8. Landlord's Expenses.
If Landlord pays any monies or incurs any expense to correct a breach of
this Lease by Tenant or to do anything in this Lease required to be done by
Tenant, or incurs any expense (including, but not limited to, attorneys' fees
and court costs), as a result of Tenant's failure to perform any of Tenant's
obligations under this Lease, all amounts so paid or incurred shall, on notice
to Tenant, be considered additional rent payable by Tenant with the first
Minimum Monthly Rent installment thereafter becoming due and payable, and may be
collected as by law provided in the case of rent.
ARTICLE V
PARKING AND COMMON AREAS AND FACILITIES
Section 5.1. Common Areas.
All parking areas, access roads and facilities furnished, made available or
maintained by Landlord in or near the Center, including employee parking areas,
truck ways, driveways, loading docks and areas, delivery areas, multi-story
parking facilities (if any), package pickup stations, elevators, escalators,
pedestrian sidewalks, malls, including the Enclosed Mall and Food Court, if any,
courts and ramps, landscaped areas, retaining walls, stairways, bus stops,
<PAGE>
first-aid and comfort stations, lighting facilities, sanitary systems, utility
lines, water filtration and treatment facilities and other areas and
improvements provided by Landlord for the general use in common of tenants and
their customers and Major Tenants in the Center (all herein called "Common
Areas") shall at all times be subject to the exclusive control and management of
Landlord, and Landlord shall have the right, from time to time, to establish,
modify and enforce reasonable rules and regulations with respect to all Common
Areas. Tenant agrees to comply with all rules and regulations set forth in
Section 8.9 and all reasonable amendments thereto.
Landlord shall have the right from time to time to: change or modify and
add to or subtract from the sizes, locations, shapes and arrangements of parking
areas, entrances, exits, parking aisle alignments and other Common Areas,
provided, however, that the size of parking areas on Landlord's Tract shall not
be substantially reduced; restrict parking by Tenant's employees to designated
areas; construct surface, sub-surface or elevated parking areas and facilities;
establish and from time to time change the level or grade of parking surfaces;
enforce parking charges (by meters or otherwise) with appropriate provisions for
ticket validating; add to or subtract from the buildings in the Center; and do
and perform such other acts in and to said Common Areas as Landlord in its sole
discretion, reasonably applied, deems advisable for the use thereof by tenants
and their customers.
Section 5.2. Use of Common Areas.
Tenant and its business invitees, employees and customers shall have the
nonexclusive right, in common with Landlord and all others to whom Landlord has
granted or may hereafter grant rights, to use the Common Areas subject to such
reasonable regulations as Landlord may from time to time impose and the rights
of Landlord set forth above. If a car of Tenant, a concessionaire, employee or
agent of Tenant is parked outside any area designated by Landlord for employee
parking, Tenant authorizes Landlord to cause such car to be towed from the
Center and Tenant shall reimburse Landlord for the cost thereof upon demand, and
otherwise indemnify and hold Landlord harmless with respect thereto. Tenant
shall abide by all rules and regulations and cause its concessionaires,
officers, employees, agents, customers and invitees to abide thereby. Landlord
may at any time close temporarily any Common Areas to make repairs or changes,
prevent the acquisition of public rights therein, discourage noncustomer
parking, or for other reasonable purposes. Tenant shall furnish Landlord license
numbers and descriptions of cars used by Tenant and its concessionaires,
officers and employees. Tenant shall not interfere with Landlord's or other
tenants' rights to use any part of the Common Areas.
ARTICLE VI
COST AND MAINTENANCE OF COMMON AREAS
Section 6.1. Expense of Operating and Maintaining the Common Facilities.
Landlord will operate, manage, maintain and repair or cause to be operated,
managed, maintained or repaired, the Common Areas of the Center, to the extent
the same is not done by any Major Tenant. "Landlord's Common Area Costs" shall
mean all costs of operating, managing, and maintaining the Common Areas in a
manner deemed by Landlord appropriate for the best interests of tenants and
other occupants in the Center. Included among the costs and expenses which
constitute Landlord's Common Area Costs, but not limited thereto, shall be, at
the option of Landlord, all costs and expenses of protecting, operating, and
managing the Center; repairing; repaving; lighting, including bulbs, poles and
fixtures; cleaning; painting; striping; insuring (including but not limited to
fire and extended coverage insurance on Common Areas, insurance protecting
Landlord against liability for personal injury, death and property damage and
workers' compensation insurance, insurance against defamation and claims of
<PAGE>
false arrest occurring in and about the Center); obtaining and operating public
transportation or shuttle bus systems, including off-site parking costs, as used
in connection with bringing customers to the Center whether or not required by
any environmental or other laws, rules, regulations, guidelines, or orders;
installing and operating music program services and loudspeaker systems; the
cost of personnel, including, without limitation, security, janitorial, and
maintenance personnel, mall manager and assistant mall manager, operations
director, secretaries and mall management bookkeepers (including, without
limitation, the payroll taxes and employee benefits of such personnel); removing
of snow, ice and debris; police protection, security and security patrol; fire
protection; regulating traffic; inspecting, repairing and maintaining of
machinery and equipment used in the operation of the Common Areas, including
heating, ventilating and air conditioning machinery and equipment; purchase
price or depreciation of the cost of machinery and equipment, if purchased, or
the rental fees for machinery and equipment, if leased, providing heating,
ventilating and air conditioning to the interior Common Area; cost and expense
of inspecting, maintaining, repairing and replacing storm and sanitary drainage
systems, including disposal plants and lift stations, sprinkler and other fire
protection systems, electrical, gas, water, telephone and irrigation systems,
parking lot surfaces, sidewalks, curbs, guardrails, bumpers, fences, screens,
seasonal decor, flagpoles, bicycle racks, Center identification signs,
directional signs, traffic signals, and other traffic markers and signs; cost
and expense of maintaining, repairing and replacing the Enclosed Mall and the
exterior of the buildings in the Center, including, but not limited to floors,
floor coverings, canopies, roofs, skylights, benches, fountains, fire exits,
doors and hardware, windows, glass and glazing, escalators, elevators, walls,
stairs and signs; cost and expense of installing, maintaining and repairing
burglar or fire alarm systems in the Center, including any utility systems in
connection with any of the foregoing systems; cost and expense of landscaping
and shrubbery; expenses of utilities; and administrative and overhead costs
equal to fifteen percent (15%) of all of the foregoing and all other of
Landlord's Common Area Costs. Landlord shall have the right to amortize any
portion of the foregoing costs and expenses over a period of years as determined
by Landlord. Any of the foregoing costs and expenses which Landlord has elected
to amortize over a period of years, whether paid or incurred prior to or
subsequent to the execution of this Lease shall be included in Common Area Costs
until such costs and expenses (together with interest thereon at the rate of the
Prime Rate as established by Citibank, N.A. plus two percent [2%] in effect as
of the date Landlord incurs such costs and expenses) have been fully amortized.
Notwithstanding the foregoing provisions, Landlord's Common Area Costs shall not
include: (a) depreciation (other than depreciation as above specified); (b)
costs of repairing and replacing to the extent that proceeds of insurance or
condemnation awards are received therefor; and (c) costs of a capital nature to
the extent they improve the Common Areas to beyond their original condition or
utility as they may be put from time to time by Landlord.
Section 6.2. Tenant to Bear Pro Rata Share of Expenses.
Tenant will pay Landlord, in addition to all other amounts in this Lease
provided, such portion of Landlord's Common Area Costs for each calendar year
during the Lease Term which bears the same ratio to the total of Landlord's
Common Area Costs as the Store Floor Area bears to the Rented Floor Area (as
defined in Section 4.5). The floor area of (i) a Major Tenant or variety or
specialty store, (ii) any tenant in a freestanding premises, (iii) any tenant
with no frontage on the Enclosed Mall or located on a mezzanine level, and (iv)
Common Areas, shall not be included in Rented Floor Area, and any contributions
to Landlord's Common Area costs received from such tenants (less any Common Area
payments recaptured against other rents or payments due Landlord) shall be
deducted from Landlord's Common Area Costs prior to the calculation of Tenant's
proportionate share.
The ratio described in the preceding paragraph shall not be utilized if the
<PAGE>
"Rented Floor Area" is less than eighty five percent (85%) of the rentable floor
area in the Center. If the "Rented Floor Area" is less than eighty five percent
(85%), the pro rata share of Tenant shall be determined by the ratio the Store
Floor Area bears to eighty five percent (85%) of the rentable floor area in the
Center.
Notwithstanding anything contained in this Lease Article XIII to the
contrary, (i) in no event shall Tenant's proportionate share of Common Area
Costs exceed the sum of Nine and 40/100 Dollars ($9.40) per calendar year for
each square foot of Store Floor Area during the partial and first full calendar
year of the Term appropriately pro rated for the first twelve months of the Term
and a prorata sum for any partial calendar year during which the Commencement
Date occurs, Notwithstanding the foregoing provision, and (ii) in no event shall
the increase in Tenant's proportionate share of Landlord's Common Area Costs for
the second full calendar year following the Commencement Date and any subsequent
calendar year exceed six percent (6%) of Tenant's proportionate share of the
Landlord's Common Area Costs for the preceding calendar year.
Tenant's share of Landlord's Common Area Costs shall be paid in monthly
installments in amounts estimated from time to time by Landlord, one (1) such
installment being due on the first day of each month of each calendar year.
After the end of each calendar year the total Landlord's Common Area Costs for
such year (and at the end of the Lease Term, the total Landlord's Common Area
Costs for the period since the end of the immediately next preceding calendar
year) shall be determined by Landlord and Tenant's share paid for such period
shall immediately, upon such determination, be adjusted by credit of any excess
or payment of any deficiency. At Landlord's option, the year-end billing may
include a certification of Landlord's Common Area Costs by an independent
Certified Public Accounting firm designated by Landlord, and such certification
shall be deemed binding and conclusive as to the actual amount of Landlord's
Common Area Costs. The fee for such certification of Landlord's Common Area
Costs shall be included in Landlord's Common Area Costs. Tenant shall not have
the right to examine, inspect, or audit Landlord's records pertaining to
Landlord's Common Area Costs. Tenant acknowledges and stipulates that Landlord
has made no representation or agreement of any kind as to the total dollar
amount of such Common Area Costs, actual or estimated, or Tenant's dollar share
thereof.
ARTICLE VII
UTILITIES AND SERVICES
Section 7.1. Utilities.
Tenant shall not install any equipment which can exceed the capacity of any
utility facilities and if any equipment installed by Tenant requires additional
utility facilities, the same shall be installed at Tenant's expense in
compliance with all code requirements and plans and specifications which must be
approved in writing by Landlord. Tenant shall be solely responsible for and
promptly pay all charges for use or consumption of sewer, gas, electricity,
water and all other utility services. Landlord may make electrical service
available to the Premises, and so long as Landlord continues to provide such
electrical service Tenant agrees to purchase the same from Landlord and pay
Landlord for the electrical service (based upon Landlord's reasonable
determination from time to time of Tenant's consumption of electricity), as
additional rent, on the first day of each month in advance (and prorated for
partial months), commencing on the Commencement Date at the same cost as would
be charged to Tenant from time to time by the utility company which otherwise
would furnish such services to the Premises if it provided such services and
metered the same directly to the Premises, but in no event at a cost which is
less than the cost Landlord must pay in providing such electrical service.
Landlord may supply water or other utilities to the Premises, and so long as
<PAGE>
Landlord continues to provide water or such other utilities Tenant shall pay
Landlord for same at the same cost as would be charged to Tenant by the utility
company which otherwise would furnish such service to the Premises if it
provided such service and metered the same directly to the Premises, but in no
event at a cost which is less than the cost Landlord must pay in providing such
service, and in no event less than the minimum monthly charge which would have
been charged by the utility company in providing such service. Subject to the
applicable rules and regulations of the State where the Center is located Public
Service Commission, Landlord may provide a shared tenant telephone service to
the Premises and so long as Landlord continues to provide such telephone service
Tenant agrees to purchase the same from Landlord and pay Landlord for the
telephone service at the same cost as would be charged to Tenant by the utility
company which otherwise would furnish such service to the Premises if it
provided such service directly to the Premises, but in no event at a cost which
is less than the cost Landlord must pay in providing such telephone service.
Landlord shall have the right to designate an alternate third party utility
company or provider to provide any such utility service to the Premises and/or
the Center.
Tenant shall operate its heating and air conditioning so that the
temperature in the Premises will be the same as that in the adjoining mall, and
set Tenant's thermostat at the same temperature as that thermostat in the mall
which is nearest the Premises. Tenant shall be responsible for the installation,
maintenance, repair and replacement of air conditioning, heating and ventilation
systems within and specifically for the Premises, including all components such
as air handling units, air distribution systems, motors, controls, grilles,
thermostats, filters and all other components. Tenant shall contract for, in its
own name, and shall pay for a qualified service contractor to periodically
inspect, adjust, clean and repair such systems, including changing filters on a
quarterly basis. Tenant shall promptly furnish a copy of each inspection and
service report to the Center manager. Tenant shall operate ventilation so that
the relative air pressure in the Premises will be the same as or less than that
in the adjoining mall as required by the Landlord. If Tenant's use of the
Premises results in special exhaust requirements, Tenant shall have the exhaust
fans interlocked with the make-up air units. If Tenant's use of the Premises
requires a grease trap, Tenant shall contract for, in its own name, and shall
pay for a qualified service contractor to inspect, clean and repair such grease
trap at such intervals as may be required by Tenant's use, but in no event less
frequently than once a month. Tenant shall promptly furnish a copy of the
inspection and service report to the Center manager. In the event such grease
trap services Tenant and other tenants in the Center, Landlord may elect to
perform such inspection, cleaning and repairing, and tenant shall pay to
Landlord its proportionate share of the cost thereof based upon the number of
tenants serviced by such grease trap. Tenant's proportionate share of such cost
shall be due and payable within ten (10) days after billings therefor are
rendered to Tenant.
In the event Tenant requires the use of telecommunication services,
including, but not limited to, credit card verification and/or other data
transmission, then Tenant shall contract for such services with one of the
service providers available at the Center.
Section 7.2. Enforcement and Termination.
In the event of any default by Tenant, Landlord reserves the right, in
addition to all other rights and remedies available to Landlord, to cut off and
discontinue, without notice or liability to Tenant, any utilities or services
provided in accordance with the provisions of this Article VII. Landlord shall
not be liable to Tenant in damages or otherwise if any utilities or services,
whether or not furnished by Landlord hereunder, are interrupted or terminated
because of repairs, installation or improvements, or any cause beyond Landlord's
reasonable control, nor shall any such termination relieve Tenant of any of its
<PAGE>
obligations under this Lease. Notwithstanding anything to the contrary contained
in this Lease, in the event of any interruption in any utility service due to
any cause within Landlord's reasonable control, which interruption renders the
Premises wholly or partially untenantable for the reasonable operation of
Tenant's business therein, all rent and other charges under this Lease shall
abate during such period of untenantability in proportion to the degree to which
Tenant's use of the Premises is impaired. At Tenant's option, Tenant may, at
Tenant's expense, install submeters on the Premises to monitor the consumption
of utilities. Tenant shall operate the Premises in such a way as shall not waste
fuel, energy or natural resources. Tenant shall cooperate with Landlord's
reasonable directives to reduce energy consumption, including installation of
new energy efficient equipment or the modification or replacement of existing
equipment, as the case may be. If any governmental authority shall order
mandatory energy conservation or if Landlord elects voluntarily to cooperate in
energy conservation at the request of any governmental authority, including,
without limitation, a reduction in operating hours or lighting usage, then
Tenant shall comply with such requirements. Landlord may cease to furnish any
one or more of said utilities or services to Tenant without liability for the
same, and no discontinuance of any utilities or services shall constitute a
constructive eviction.
ARTICLE VIII
CONDUCT OF BUSINESS BY TENANT
Section 8.1. Use of Premises.
The Premises shall be occupied and used by Tenant solely for the Permitted
Use set forth in Article I. Tenant expressly understands and acknowledges that
its Permitted Use is nonexclusive, and that other tenants may sell items
identical or similar to those sold by Tenant. Tenant hereby warrants that it has
the full and unfettered right to use the Trade Name, set forth in Article I, for
the entire Lease Term and that such use will not in any way infringe on the
rights of others. The Permitted Use is a material consideration to Tenant
entering into this Lease so as to permit Landlord to maintain an appropriate
tenant mix, or balance, both to the quality and quantity of sales, within the
Center in order to achieve the maximum gross sales for all tenants and to assure
the continued operation of a full service regional shopping center development.
Section 8.2. Prompt Occupancy and Use.
Tenant will occupy the Premises upon the Commencement Date and thereafter
continuously operate and conduct in one hundred percent (100%) of the Premises
during each hour of the entire Lease Term when Tenant is required under this
Lease to be open for business the business permitted under Section 8.1 hereof,
with an adequate full staff and adequate full stock of merchandise, using only
such minor portions of the Premises for storage and office purposes as are
reasonably required. The parties agree that: Landlord has relied upon Tenant's
occupancy and operation in accordance with the foregoing provisions; because of
the difficulty or impossibility of determining Landlord's damages which would
result from Tenant's violation of such provisions, including but not limited to
damages from loss of Percentage Rent from Tenant and percentage rent from other
tenants, and diminished saleability, mortgageability and economic value,
Landlord shall be entitled to liquidated damages if it elects to pursue such
remedy; therefore for any day that Tenant does not fully comply with the
provisions of this Section 8.2 the Minimum Annual Rent, prorated on a daily
basis, shall be increased by twenty-five percent (25%), such increased sum
representing the damages which the parties agree Landlord will suffer by
Tenant's noncompliance. In addition to all other remedies, Landlord shall have
the right to obtain specific performance by Tenant upon Tenant's failure to
comply with the provisions of this Section 8.2.
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Section 8.3. Conduct of Business.
Such business shall be conducted under the Trade Name set forth in Article
I unless another name is previously approved in writing by the Landlord, which
approval shall not be unreasonably withheld, delayed or conditioned; in such
manner as shall assure the reasonable transaction of a maximum volume of
profitable business in and at the Premises. Tenant's store shall be and remain
open from 10:00 A.M. until 9:30 P.M. each day of the week except Sunday, on
Sunday from 12:00 P.M. until 6:00 P.M., and in addition, during all days, nights
and hours (including Sundays as permitted by law) that any two (2) Major Tenants
in the Center (as referred to in Section 4.2 above) is and tenants occupying
seventy percent (70%) of the rentable floor area of the Center, excluding Major
Tenants, are open for business, and such other days, nights and hours as
Landlord shall approve in writing. Notwithstanding anything to the contrary
contained in this Lease, Tenant may be closed up to two (2) days in any calendar
year for the purposes of taking inventory and Tenant shall not be required to be
open for business on Christmas Day, Easter, Thanksgiving Day and New Year's Day.
Section 8.4. Operation by Tenant.
Tenant covenants and agrees that it will: not place or maintain any
merchandise, vending machines or other articles in any vestibule or entry of the
Premises or outside the Premises; store garbage, trash, rubbish and other refuse
in rat-proof and insect-proof containers inside the Premises, and remove the
same frequently and regularly and, if directed by Landlord, by such means and
methods and at such times and intervals as are reasonably designated by
Landlord, all at Tenant's costs including a pre-stocking charge for the removal
of trash prior to the Commencement Date, and, upon Landlord's request, provide a
Waste Profile Sheet or equivalent information concerning contents of trash; not
permit any sound system audible or objectionable advertising medium visible
outside the Premises; keep all mechanical equipment free of vibration and noise
and in good working order and condition; not commit or permit waste or a
nuisance upon the Premises; not permit or cause odors to emanate or be dispelled
from the Premises; not solicit business in the Common Areas nor distribute
advertising matter to, in or upon any Common Area; not permit the loading or
unloading or the parking or standing of delivery vehicles outside any area
designated therefor, nor permit any use of vehicles which will interfere with
the use of any Common Areas; subject to Section 9.1, comply with all laws,
recommendations, ordinances, rules and regulations of governmental, public,
private and other authorities and agencies, including those with authority over
insurance rates, with respect to the use or occupancy of the Premises, and
including but not limited to the Americans with Disabilities Act of 1990 and the
Williams-Steiger Occupational Safety and Health Act; light the show windows of
the Premises and all signs each night of the year for not less than one (1) hour
after the Premises is permitted to be closed; not permit any noxious, toxic or
corrosive fuel or gas, dust, dirt or fly ash on the Premises; not place a load
on any floor in the Shopping Center which exceeds the floor load per square foot
which such floor was designed to carry; store in the Premises only merchandise
which Tenant intends to sell at, in or from the Premises, within a reasonable
time after receipt thereof.
Landlord may make additional services, including but not limited to, music
systems, pest control, trash removal, and/or trash compactor, cleaning,
maintenance, and security, available to the Premises and, in such event, to the
extent Tenant desires such services, Tenant shall utilize such services, at
Tenant's expense which shall be reasonable and competitive.
Section 8.5. Emissions and Hazardous Materials.
A. Emissions. Tenant shall not, without the prior written consent of
Landlord:
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(i) make, or permit to be made, any use of the Premises or any portion
thereof which emits, or permits the emission of an unreasonable amount of dust,
sweepings, dirt, cinders, fumes or odors into the atmosphere, the ground or any
body of water, whether natural or artificial (including rivers, streams, lakes,
ponds, dams, canals, or flood control channels), or which emits, or permits the
emission of dust, sweepings, dirt, cinders, fumes or odors into the atmosphere,
the ground or any body of water, whether natural or artificial (including
rivers, streams, lakes, ponds, dams, canals, or flood control channels) which is
in violation of any federal, state or local law, ordinance, order, rule,
regulation, code or any other governmental restriction or requirement;
(ii) permit any vehicle on the Premises to emit exhaust which is in
violation of any federal, state or local law, ordinance, order, rule,
regulation, code or any other governmental restriction or requirement;
(iii) create, or permit to be created, any sound pressure level which will
interfere with the quiet enjoyment of any real property adjacent to the
Premises, or which will create a nuisance or violate any federal, state or local
law, ordinance, order, rule, regulation, code or any other governmental
restriction or requirement;
(iv) transmit, receive, or permit to be transmitted or received any
electromagnetic, microwave or other radiation which is harmful or hazardous to
any person or property in, on or about the Premises, or anywhere else, or which
interferes with the operation of any electrical, electronic, telephonic or other
equipment wherever located, whether on the Premises or anywhere else;
(v) create, or permit to be created, any ground vibration that is
discernible outside the Premises; or
(vi) produce or permit to be produced any intense glare, light or heat
except within an enclosed or screened area and then only in such manner that the
glare, light or heat shall not be discernible outside the Premises.
B. Hazardous Material
Tenant shall not, without the prior written consent of Landlord, knowingly
cause or permit knowingly or unknowingly, any Hazardous Material (hereinafter
defined) to be brought or remain upon, kept, used, discharged , leaked, or
emitted in or about, or treated at the Premises. As used in this Lease,
"Hazardous Material(s)" shall mean any hazardous, toxic or radioactive
substance, material, matter or waste which is or becomes regulated by any
federal, state or local law, ordinance, order, rule, regulation, code or any
other governmental restriction or requirement, and shall include asbestos,
petroleum products and the terms "Hazardous Substance" and "Hazardous Waste" as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), as amended, 42 U.S.C. ss. 9601 et seq., the Resource
Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C. ss. 6901 et seq.
To obtain Landlord's consent, Tenant shall have an "Environmental Audit"
prepared by a Qualified Engineer or Environmental Professional for Landlord's
review to be relied upon by Landlord and for Landlord's use. Such Environmental
Audit shall list: (1) the name(s) of each Hazardous Material and a Material
Safety Data Sheet (MSDS) as required by the Occupational Safety and Health Act;
(2) the volume proposed to be used, stored and/or treated at the Premises
(monthly); (3) the purpose of such Hazardous Material; (4) the proposed
on-premises storage location(s); (5) the type and description of such storage
area(s); (6) the location of sanitary and storm drains; (7) the name(s) of the
proposed off-premises disposal entity; and (8) an emergency preparedness plan in
the event of a release. Additionally, the Environmental Audit shall include
copies of all required federal, state, and local permits concerning or related
to the proposed use, storage, or treatment of Hazardous Materials at the
<PAGE>
Premises. Tenant shall submit a new Environmental Audit whenever it proposes to
use, store, or treat a new Hazardous Material at the Premises or when the volume
of existing Hazardous Materials to be used, stored, or treated at the Premises
expands by ten percent (10%) during any thirty (30) day period. If Landlord in
its reasonable judgment finds the Environmental Audit acceptable, then Landlord
shall deliver to Tenant Landlord's written consent. Notwithstanding such
consent, Landlord may revoke its consent upon: (1) Tenant's failure to remain in
full compliance with applicable environmental permits and/or any other
requirements under any federal, state, or local law, ordinance, order, rule,
regulation, code or any other governmental restriction or requirement (including
but not limited to CERCLA and/or RCRA), related to environmental safety, human
health, or employee safety; (2) the Tenant's business operations pose or
potentially pose a human health risk to other tenants; or (3) the Tenant expands
its use, storage, or treatment of Hazardous Materials in a manner inconsistent
with the safe operation of a shopping center. Should Landlord consent in writing
to Tenant bringing, using, storing or treating any Hazardous Material in or upon
the Premises, Tenant shall strictly obey and adhere to any and all federal,
state or local laws, ordinances, orders, rules, regulations, codes or any other
governmental restrictions or requirements (including but not limited to CERCLA
and/or RCRA), which in any way regulates, governs or impacts Tenant's
possession, use, storage, treatment or disposal of said Hazardous Material. In
addition, Tenant represents and warrants to Landlord that (1) Tenant shall apply
for and remain in compliance with applicable RCRA and state permits; (2) Tenant
shall report to applicable governmental authorities any release of reportable
quantities of a hazardous substance(s) as mandated by Section 103(a) of CERCLA;
(3) Tenant, within five (5) days of receipt, shall send to Landlord a copy of
any notice, order, inspection report, or other document issued by any
governmental authorities relevant to the Tenant's compliance status with
environmental or health and safety laws; and, (4) Tenant shall remove from the
Premises all Hazardous Materials introduced by Tenant, Tenant's contractors or
agents at the termination of this Lease.
In addition to, and in no way limiting, Tenant's duties and obligations as
set forth in Section 11.6 of this Lease, should Tenant breach any of its duties
and obligations as set forth in this Section 8.5 of this Lease, or if the
presence of any Hazardous Material introduced by Tenant, Tenant's contractors or
agents on the Premises results in contamination of the Premises, the Center, any
land other than the Center, the atmosphere, or any water or waterway (including
groundwater), or if contamination of the Premises or of the Center by any
Hazardous Material otherwise occurs for which Tenant is otherwise legally liable
to Landlord for damages resulting therefrom, Tenant shall indemnify, save
harmless and, at Landlord's option and with attorneys approved in writing by
Landlord, defend Landlord, and its contractors, agents, employees, partners,
officers, directors, and mortgagees, if any, from any and all claims, demands,
damages, expenses, fees, costs, fines, penalties, suits, proceedings, actions,
causes of action, and losses of any and every kind and nature (including,
without limitation, diminution in value of the Premises or the Center, damages
for the loss or restriction on use of the rentable or usable space or of any
amenity of the Premises or the Center, damages arising from any adverse impact
on marketing space in the Center, and sums paid in settlement of claims and for
attorney's fees, consultant fees and expert fees, which may arise during or
after the Lease Term or any extension thereof as a result of such
contamination). This includes, without limitation, costs and expenses, incurred
in connection with any investigation of site conditions or any cleanup,
remedial, removal or restoration work required by any federal, state or local
governmental agency or political subdivision because the presence of Hazardous
Material introduced by Tenant, Tenant's contractors or agents on or about the
Premises or the Center, or because of the presence of Hazardous Material
anywhere else which came or otherwise emanated from Tenant or the Premises.
Without limiting the foregoing, if the presence of any Hazardous Material on or
about the Premises or the Center caused or permitted by Tenant results in any
contamination of the Premises or the Center, Tenant shall, at its sole expense,
<PAGE>
promptly take all actions and expense as are necessary to return the Premises
and/or the Center to the condition existing prior to the introduction of any
such Hazardous Material to the Premises or the Center; provided, however, that
Landlord's approval of such actions shall first be obtained in writing.
Section 8.6. Painting, Decorating, Displays, Alterations.
Tenant will not paint, decorate or change the architectural treatment of
any part of the exterior of the Premises nor any part of the interior of the
Premises visible from the exterior nor make any structural alterations,
additions or changes in the Premises without Landlord's written approval
thereto, which shall not be unreasonably withheld, delayed or conditioned, and
will promptly remove any such paint, decoration, alteration, addition or changes
applied or installed without Landlord's approval when required and restore the
Premises to an acceptable condition or take such other action with respect
thereto as Landlord directs. Promptly after receipt of written request from
Tenant, Landlord shall execute and deliver to Tenant or Tenant's designee an
instrument, on the form submitted by Tenant's lender or lessor, pursuant to
which Landlord waives and relinquishes, in favor of any lender or lessor of
Tenant, any lien for rent and/or security interest which Landlord may have with
respect to Tenant's fixtures, machinery, equipment, furnishing, furniture,
merchandise, inventory and all other personal property now or hereafter placed
in or upon the Premises by Tenant.
Tenant will install and maintain at all times, subject to the other
provisions of this Section 8.6, merchandise displays in any show windows on the
Premises; the arrangement, style, color and general appearance thereof and of
displays in the interior of the Premises which are visible from the exterior,
including, but not limited to, window displays, advertising matter, signs,
merchandise and store fixtures, shall be maintained in keeping with the
character and standards of the Center.
Section 8.7. Other Operations.
If during the Lease Term Tenant directly or indirectly operates, manages or
has any interest whatsoever in any other store or business operated for a
purpose or business similar to or in competition with all or part of the
business permitted under Section 1.1 hereof and using the same or a
substantially identical trade name within three (3) highway miles of any
boundary line of the Center, it will injure Landlord's ability and right to
receive Percentage Rent (such ability and right being a major consideration for
this Lease and the construction of the Center). Accordingly, if Tenant operates,
manages or has such interest in any such store or business within such area,
100% of all sales made from any such other store or business shall be included
in the computation of Gross Sales and Adjusted Gross Sales for the purpose of
determining Percentage Rent under this Lease as though said Gross Sales and
Adjusted Gross Sales had actually been made at, in or from the Premises.
Landlord shall have all rights of inspection of books and records with respect
to such stores or businesses as it has with respect to the Premises; and Tenant
shall furnish to Landlord such reports with respect to Gross Sales and Adjusted
Gross Sales from such other store or business as it is herein required to
furnish with respect to the Premises.
Section 8.8. Sales and Dignified Use.
Tenant shall continuously and without interruption, throughout the Lease
Term in good faith, actively use, occupy and operate the entire Premises, with
fixtures and decor, an inventory of goods and merchandise and a staff of sales
personnel adequate, sufficient and appropriate to operate the Premises as a
"first-class", "high-quality", "fashionable" store or business (as opposed to a
"general", "promotional" or "self-service" store or business) as those standards
of operation may be interpreted from time to time during the Lease Term. The
<PAGE>
foregoing description is intended only as a description of the general quality
of the merchandise or services Tenant may sell and the general quality of
customer service, merchandising, fixturing and decor Tenant must maintain in the
operation of the Premises. The foregoing description is not intended by Landlord
and will not be enforced to affect the retail selling price of Tenant's
merchandise or services. Tenant shall operate its business at the Premises in a
respectable, reputable, tasteful, competent and dignified manner in order to
enhance the image of the Center as a whole and its reputation as a dignified and
desirable place to shop. and to achieve the maximum volume of sales so that
Landlord will receive the maximum amount of Percentage Rent from Tenant or
percentage rent from other tenants and occupants of the Center. No public or
private auction or any fire, "going out of business," bankruptcy or similar
sales or auctions shall be conducted in or from the Premises and the Premises
shall not be used in a disreputable or immoral manner or in violation of
national, state or local laws.
Section 8.9. Rules and Regulations.
Tenant shall comply with the following rules and regulations and any
reasonable, nondiscriminatory amendments thereto as developed by Center
management: (i) Tenant shall advise and cause its vendors to deliver all
merchandise before noon on Mondays through Fridays, not at other times; (ii) all
deliveries are to be made to designated service or receiving areas and Tenant
shall request delivery trucks to approach their service or receiving areas by
designated service routes and drives; (iii) tractor trailers which must be
unhooked or parked must use steel plates under dolly wheels to prevent damage to
the asphalt paving surface. In addition, wheel blocking must be available for
use. Tractor trailers are to be removed from the loading areas after unloading.
No parking or storing of such trailers will be permitted in the Center; (iv)
except for small parcel packages, no deliveries will be permitted through the
malls unless Tenant does not have a rear service door. In such event, prior
arrangements must be made with the Mall Manager for delivery. Merchandise being
received shall immediately be moved into Tenant's Premises and not be left in
the service or receiving areas; (v) Tenant is responsible for storage and
removal of its trash, refuse and garbage. Tenant shall not dispose of the
following items in sinks or commodes: plastic products (plastic bags, straws,
boxes); sanitary napkins; tea bags; cooking fats, cooking oils; any meat scraps
or cutting residue; petroleum products (gasoline, naptha, kerosene, lubricating
oils); paint products (thinner, brushes); or any other item which the same are
not designed to receive. All Store Floor Area of Tenant, including vestibules,
entrances and returns, doors, fixtures, windows and plate glass, shall be
maintained in a safe, neat and clean condition; (vi) other than as permitted
under the provisions of the Lease, Tenant shall not permit or suffer any
advertising medium to be placed on mall walls, on Tenant's mall or exterior
windows, on standards in the mall, on the sidewalks or on the parking lot areas
or light poles. No permission, expressed or implied, is granted to exhibit or
display any banner, pennant, sign, and trade or seasonal decoration of any size,
style or material within the Center, outside the Premises; (vii) Tenant shall
not permit or suffer the use of any objectionable advertising medium which can
be heard or experienced outside of the Premises, including, without limiting the
generality of the foregoing, flashing lights, searchlights, loud speakers,
phonographs, radios or television. No radio, television, or other communication
antenna equipment or device is to be mounted, attached, or secured to any part
of the roof, exterior surface, or anywhere outside the Premises, unless Landlord
has previously given its written consent; (viii) Tenant shall not permit or
suffer merchandise of any kind at any time to be placed, exhibited or displayed
outside its Premises, nor shall Tenant use the exterior sidewalks or exterior
walkways of its Premises to display, store or place any merchandise. No sale of
merchandise by tent sale, truck load sale or the like, shall be permitted on the
parking lot or other common areas; (ix) Tenant shall not permit or suffer any
portion of the Premises to be used for lodging purposes, nor conduct or permit
any unusual firing, explosion or other damaging or dangerous hazard within the
<PAGE>
Premises or the Common Area; (x) Tenant shall not permit or suffer any portion
of the Premises to be used for any warehouse operation, or any assembling,
manufacturing, distilling, refining, smelting, industrial, agricultural,
drilling or mining operation, adult bookstore or cinema, peepshow, entertainment
or sale of products of an obscene or pornographic nature or predominately sexual
nature; (xi) Tenant shall not, in or on any part of the Common Area: (a) vend,
peddle or solicit orders for sale or distribution of any merchandise, device,
service, periodical, book, pamphlet or other matter whatsoever; (b) exhibit any
sign, placard, banner, notice or other written material, except for activities
as approved in writing by Landlord; (c) distribute any circular, booklet,
handbill, placard or other material, except for activities as approved in
writing by Landlord; (d) solicit membership in any organization, group or
association or contribution for any purpose; (e) create a public or private
nuisance; (f) use any Common Areas (including the Enclosed Mall) for any purpose
when none of the other retail establishments within the Center is open for
business or employment, except for activities as approved in writing by
Landlord; (g) throw, discard or deposit any paper, glass or extraneous matter of
any kind except in designated receptacles, or create litter or hazards of any
kind; (h) deface, damage or demolish any sign, light standard or fixture,
landscaping materials or other improvement within the Center, or the property of
customers, business invitees or employees situated within the Center.
ARTICLE IX
MAINTENANCE OF LEASED PREMISES
Section 9.1. Maintenance by Landlord.
Landlord shall keep or cause to be kept the foundations, roof, exterior
walls and other structural portions of the walls of the Premises in compliance
with all applicable laws and governmental rules, ordinances, regulations and
requirements, and in good order, repair and condition except for damage thereto
due to the acts or omissions of Tenant, its agents or employees. or invitees.
The foregoing provision shall not prejudice Landlord's right to include the cost
of maintaining the roof over the Premises within the provisions of Article VI of
this Lease. Landlord shall commence required repairs as soon as reasonably
practicable after receiving written notice from Tenant thereof. This Section 9.1
shall not apply in case of damage or destruction by fire or other casualty or
condemnation or eminent domain, in which events the obligations of Landlord and
Tenant shall be controlled by Article XVI and XVII. Except as provided in this
Section 9.1 Lease Landlord shall not be obligated to make repairs, replacements
or improvements of any kind upon the Premises, or to any equipment, merchandise,
stock in trade, facilities or fixtures therein, all of which shall be Tenant's
responsibility, but Tenant shall give Landlord prompt written notice of any
accident, casualty, damage or other similar occurrence in or to the Premises or
the Common Areas of which Tenant has knowledge.
Section 9.2. Maintenance by Tenant.
Subject to Section 9.1, Tenant shall at all times, at Tenant's sole cost
and expense, keep the Premises (including all entrances and vestibules) and all
partitions, window and window frames and mouldings, glass, store fronts, doors,
door openers, fixtures, equipment and appurtenances thereof (including lighting,
heating, electrical, plumbing, ventilating and air conditioning fixtures and
systems and other mechanical equipment and appurtenances) and all parts of the
Premises, and parts of Tenant's Work not on the Premises, not required herein to
be maintained by Landlord, in good order, condition and repair and clean,
orderly, sanitary and safe, damage by unavoidable casualty excepted, (including
but not limited to doing such things as are necessary to cause the Premises to
comply with applicable laws, ordinances, rules, regulations and orders of
governmental and public bodies and agencies, such as but not limited to the
Americans with Disabilities Act of 1990 and the Williams-Steiger Occupational
<PAGE>
Safety and Health Act). If replacement of equipment, fixtures and appurtenances
thereto is necessary, Tenant shall replace the same with new or completely
reconditioned equipment, fixtures and appurtenances, and repair all damages done
in or by such replacement. If Tenant fails to perform its obligations hereunder,
Landlord without notice may, but shall not be obligated to, perform Tenant's
obligations or perform work resulting from Tenant's acts, actions or omissions
and add the cost of the same to the next installment of Minimum Monthly Rent due
hereunder.
Section 9.3. Surrender of Premises.
At the expiration of the Lease Term, Tenant shall surrender the Premises in
good the same condition as they were required to be in on the Required
Completion Date, reasonable wear and tear and damage by unavoidable casualty
excepted, and deliver all keys for, and all combinations on locks, safes and
vaults in, the Premises to Landlord at Landlord's notice address as specified in
Section 1.1 or, at Landlord's option, to the office of the Center's general
manager.
ARTICLE X
ALTERATIONS AND TENANT'S LIENS
Section 10.1. Remodeling. INTENTIONALLY DELETED.
Section 10.2. Removal and Restoration by Tenant.
All alterations, changes and additions and all improvements, including
leasehold improvements, made by Tenant whether part of Tenant's Work or not,
shall immediately upon installation attach to the fee and become Landlord's
property and shall not be removed unless replaced by like property. If Tenant
fails to remove any shelving, decorations, equipment, trade fixtures or personal
property from the Premises prior to the end of the Lease Term, they shall become
Landlord's property and Tenant shall repair or pay for the repair of any damage
done to the Premises resulting from removing same but not for painting or
redecorating the Premises.
Section 10.3. Tenant's Liens.
A. Tenant shall not suffer any mechanics' or materialmen's lien to be filed
against the Premises or the Center by reason of work, labor, services or
materials performed or furnished to Tenant or anyone holding any part of the
Premises under Tenant. If any such lien shall at any time be filed as aforesaid,
Tenant may contest the same in good faith, but, notwithstanding such contest,
Tenant shall, within fifteen (15) days after the filing thereof, cause such lien
to be released of record by payment, bond, order of a court of competent
jurisdiction, or otherwise. In the event of Tenant's failure to release of
record any such lien within the aforesaid period, Landlord may remove said lien
by paying the full amount thereof or by bonding or in any other manner Landlord
deems appropriate, without investigating the validity thereof, and irrespective
of the fact that Tenant may contest the propriety or the amount thereof, and
Tenant, upon demand, shall pay Landlord the amount so paid out by Landlord in
connection with the discharge of said lien, together with interest thereon at
the rate of twelve percent (12%) per annum and reasonable expenses incurred in
connection therewith, including reasonable attorneys' fees, which amounts are
due and payable to Landlord as additional rent on the first day of the next
following month. Landlord shall have the right to deduct the expenses incurred
by Landlord pursuant to this Section 10.3 from Landlord's contribution towards
Tenant's Work, if any. Nothing contained in this Lease shall be construed as a
consent on the part of Landlord to subject Landlord's estate in the Premises to
any lien or liability under the lien laws of the State where the Center is
located. Tenant's obligation to observe and perform any of the provisions of
<PAGE>
this Section 10.3 shall survive the expiration of the Lease Term or the earlier
termination of this Lease.
B. Tenant shall not create or suffer to be created a security interest or
other lien against any improvements, additions or other construction made by
Tenant in or to the Premises or against any equipment or fixtures installed by
Tenant therein (other than Tenant's property), and should any security interest
be created in breach of the foregoing, Landlord shall be entitled to discharge
the same by exercising the rights and remedies afforded it under paragraph A of
this Section.
ARTICLE XI
INSURANCE
Section 11.1. By Landlord.
Landlord shall carry commercial general liability insurance (either through
the purchase of insurance or a self-insurance plan) on those portions of the
Common Areas included in Landlord's Tract providing coverage of not less than
$5,000,000.00 against liability for bodily injury including death and personal
injury for any one (1) occurrence and $1,000,000.00 property damage insurance,
or combined single limit insurance in the amount of $5,000,000.00.
Landlord shall also carry insurance for fire, extended coverage, vandalism,
malicious mischief and other endorsements deemed advisable by Landlord, insuring
all improvements on Landlord's Tract, including the Premises and all leasehold
improvements thereon and appurtenances thereto (excluding Tenant's merchandise,
trade fixtures, furnishings, equipment, personal property and excluding plate
glass) for the full insurable value thereof, with such deductibles as Landlord
deems advisable, such insurance coverage to include improvements provided by
Tenant as set forth in Exhibit "B" and "B-2" as Tenant's Work (excluding wall
covering, floor covering, carpeting and drapes) and Landlord's Work as defined
in Exhibit "B"; Tenant agrees to pay Landlord, as additional rent, the Insurance
Charge set forth in Article I, payable in equal installments on the first day of
every calendar month during the Lease Term, prorated for partial months and
partial Lease Years, as Tenant's share of the cost of the premiums for such
insurance described above in this sentence. At the end of the first Partial
Lease Year and each Lease Year thereafter, the amount thus to be paid by Tenant
shall be adjusted from time to time as required (but shall never be less than
the above amount) in direct ratio to the increase or decrease in the cost of the
premiums paid by Landlord for such insurance coverage. Notwithstanding the
foregoing provision, in no event shall the increase in Tenant's Insurance Charge
for the second full calendar year following the Commencement Date and any
subsequent calendar year exceed six percent (6%) of Tenant's Insurance Charge
for the preceding calendar year.
Section 11.2. By Tenant.
Tenant agrees to carry commercial general liability insurance on the
Premises during the Lease Term, covering the Tenant and naming the Landlord,
Simon DeBartolo Group, Inc., and the property management company as additional
insureds with terms and companies reasonably satisfactory to Landlord, on an
Occurrence form with a limit of not less than $1,000,000.00 for any one (1)
occurrence, together with primary, Umbrella or Excess insurance in an amount of
not less than $2,000,000.00. Tenant's insurance will include contractual
liability coverage recognizing this Lease, products and completed operations
liability and providing that Landlord and Tenant shall be given a minimum of
thirty (30) days written notice by the insurance company prior to cancellation,
termination or change in such insurance. Tenant also agrees to carry insurance
against fire and such other risks as are from time to time required by Landlord,
including, but not limited to, a standard "All-Risk" (i.e. "Special Form"),
<PAGE>
which may be a blanket policy, policy of property insurance protecting against
all risk of physical loss or damage, including without limitation, sprinkler
leakage coverage and plate glass insurance or self-insurance covering all plate
glass in the Premises (including store fronts), in amounts not less than 80% of
the actual replacement cost, covering all of Tenant's merchandise, trade
fixtures, furnishing, wall covering, floor covering, carpeting, drapes,
equipment and all items of personal property of Tenant located on or within the
Premises. Upon the Commencement Date and annually thereafter, Tenant shall
provide Landlord with certificates or, at Landlord's request, copies of the
policies, evidencing that such insurance is in full force and effect and stating
the terms thereof, including all endorsements. The minimum limits of the
commercial general liability policy of insurance shall in no way limit or
diminish Tenant's liability under Section 11.6 hereof and shall be subject to
increase, not to exceed a maximum limit of $3,000,000.00 combined single limit,
at any time, and from time to time, after the commencement of the fifth (5th)
year of the Lease Term if Landlord in the exercise of its reasonable judgment
shall deem same necessary for adequate protection. Within thirty (30) days after
demand therefor by Landlord, Tenant shall furnish Landlord with evidence that it
has complied with such demand. Prior to the Commencement Date, Tenant's
insurance coverage shall be governed by the provisions of Exhibit "B".
Notwithstanding the above mentioned commercial general liability insurance
policy limit for Tenant, if Tenant after obtaining Landlord's prior written
consent, does or intends to bring, possess, use, store, treat or dispose any
Hazardous Material (herein defined) in or upon the Premises or Center, Landlord
shall have the right, as a condition to such consent, to require Tenant to
purchase additional public liability insurance with coverage of no less than
Five Million and 00/100 Dollars ($5,000,000.00) and to purchase environmental
impairment liability insurance with coverage of no less than Five Million and
00/100 Dollars ($5,000,000.00) with a deductible of no greater than Fifty
Thousand and 00/100 Dollars ($50,000.00) to insure that anything contaminated
with or by the Hazardous Material be removed from the Premises and/or the
Center, and that the Premises and/or the Center be restored to a clean, neat,
attractive, healthy, sanitary and non-contaminated condition.
Section 11.3. Mutual Waiver of Subrogation Rights.
Notwithstanding anything to the contrary contained in this Lease, Landlord
and Tenant and all parties claiming, by, through or under them mutually release
and discharge each other from all claims and liabilities arising from or caused
by any casualty or hazard covered or required hereunder to be covered in whole
or in part by insurance on the Premises or Center in connection with property on
or activities conducted on the Premises or Center, and waive any right of
subrogation which might otherwise exist in or accrue to any person on account
thereof and further agree to evidence such waiver by endorsement to the required
insurance policies, provided that such release shall not operate in any case
where the insurance industry in general takes the position that such waiver
would effect is to invalidate or increase the cost of such insurance coverage
(provided that in the case of increased cost, the other party shall have the
right, within thirty (30) days following written notice, to pay such increased
cost or, in Tenant's case, Tenant's pro rata share of such increased cost
thereby keeping such release and waiver in full force and effect).
Section 11.4. Waiver.
Notwithstanding anything to the contrary contained in this Lease, except to
the extent caused by the negligence, willful act or breach of this Lease by
Landlord, or its agents, employees or contractors, Landlord, its agents and
employees, shall not be liable for, and Tenant waives all claims for, loss or
damage, including but not limited to consequential damages, to person, property
or otherwise, sustained by Tenant or any person claiming through Tenant
resulting from any accident, casualty or occurrence in or upon any part of the
<PAGE>
Center including, but not limited to, claims for damage resulting from: (a) any
equipment or appurtenances becoming out of repair; (b) Landlord's failure to
keep any part of the Center in repair; (c) injury done or caused by wind, water,
or other natural element; (d) any defect in or failure of plumbing, heating or
air conditioning equipment, electric wiring or installation thereof, gas, water,
and steam pipes, stairs, porches, railings or walks; (e) broken glass; (f) the
backing up of any sewer pipe or downspout; (g) the bursting, leaking or running
of any tank, tub, washstand, water closet, waste pipe, drain or any other pipe
or tank in, upon or about the Premises; (h) the escape of steam or hot water;
(i) water, snow or ice upon the Premises; (j) the falling of any fixture,
plaster or stucco; (k) damage to or loss by theft or otherwise of property of
Tenant or others; (l) acts or omissions of persons in the Premises, other
tenants in the Center, occupants of nearby properties, or any other persons; and
(m) any act or omission of owners of adjacent or contiguous property, or of
Landlord, its agents or employees. All property of Tenant kept in the Premises
shall be so kept at Tenant's risk only and Tenant shall save Landlord harmless
from claims arising out of damage to the same, including subrogation claims by
Tenant's insurance carrier.
Section 11.5. Insurance - Tenant's Operation.
Tenant will not do or suffer to be done anything which will contravene
Landlord's insurance policies or prevent Landlord from procuring such policies
in amounts and companies selected by Landlord. If anything done, omitted to be
done or suffered to be done by Tenant in, upon or about the Premises shall cause
the rates of any insurance effected or carried by Landlord on the Premises or
other property to be increased beyond the regular rate from time to time
applicable to the Premises for use for the purpose permitted under this Lease,
or such other property for the use or uses made thereof, Tenant will pay the
amount of such increase promptly upon Landlord's demand and Landlord shall have
the right to correct any such condition at Tenant's expense. In the event that
this Lease so permits and Tenant engages in the preparation of food or packaged
foods or engages in the use, sale or storage of inflammable or combustible
material, Tenant shall install chemical extinguishing devices (such as ansul)
approved by Underwriters Laboratories and Factory Mutual and the installation
thereof must be approved by the appropriate local authority. Tenant shall keep
such devices under service as required by such organizations. If gas is used in
the Premises, Tenant shall install gas cut-off devices (manual and automatic).
Section 11.6. Indemnification.
Notwithstanding anything to the contrary contained in this Lease, except to
the extent caused by the negligence, willful act or breach of this Lease by
Landlord, or its agents, employees or contractors, Tenant shall save harmless,
indemnify, and at Landlord's option, defend Landlord, its agents and employees,
and mortgagee, if any, from and against any and all liability, liens, claims,
demands, damages, expenses, fees, costs, fines, penalties, suits, proceedings,
actions and causes of action of any and every kind and nature arising or growing
out of or in any way connected with Tenant's use, occupancy, management or
control of the Premises or Tenant's operations, conduct or activities in the
Center.
ARTICLE XII
OFFSET STATEMENT, ATTORNMENT, SUBORDINATION
Section 12.1. Offset Statement.
Within thirty (30) ten (10) days after Landlord's written request Tenant
shall deliver, executed in recordable form a declaration to any person
designated by Landlord (a) ratifying this Lease; (b) stating the commencement
and termination dates; and (c) certifying (i) that this Lease is in full force
<PAGE>
and effect and has not been assigned, modified, supplemented or amended (except
by such writings as shall be stated), (ii) that all conditions under this Lease
to be performed by Landlord have been satisfied (stating exceptions, if any),
(iii) that no defenses or offsets against the enforcement of this Lease by
Landlord exist (or stating those claimed): (iv) as to advance rent, if any, paid
by Tenant, (v) the date to which rent has been paid, (vi) as to the amount of
security deposited with Landlord, and (vii) such other information as Landlord
reasonably requires. Persons receiving such statements shall be entitled to rely
upon them. Landlord shall execute and deliver similar statements to Tenant
within thirty (30) days after Tenant's request therefor from time to time.
Section 12.2. Attornment.
Tenant shall, in the event of a sale or assignment of Landlord's interest
in the Premises or the building in which the Premises is located or this Lease
or Landlord's Tract, or if the Premises or such building comes into the hands of
a mortgagee, ground lessor or any other person whether because of a mortgage
foreclosure, exercise of a power of sale under a mortgage, termination of the
ground lease, or otherwise, attorn to the purchaser or such mortgagee or other
person and recognize the same as Landlord hereunder. Tenant shall execute, at
Landlord's request, any attornment agreement reasonably required by any
mortgagee, ground lessor or other such person to be executed, containing such
provisions as such mortgagee, ground lessor or other person reasonably requires.
Section 12.3. Subordination.
A. Mortgage. This Lease shall be secondary, junior and inferior at all
times to the lien of any mortgage and to the lien of any deed of trust or other
method of financing or refinancing (hereinafter collectively referred to as
"mortgage") now or hereafter existing against all or a part of Landlord's Tract,
and to all renewals, modifications, replacements, consolidations and extensions
thereof, and Tenant shall execute and deliver all documents reasonably requested
by any mortgagee or security holder to effect such subordination. If Tenant
fails to execute and deliver any such document requested by a mortgagee or
security holder to effect such subordination, Landlord is hereby authorized to
execute such documents and take such other steps as are necessary to effect such
subordination on behalf of Tenant as Tenant's duly authorized irrevocable agent
and attorney-in-fact.
B. Construction, Operation and Reciprocal Easement Agreements. This Lease
is subject and subordinate to one (1) or more construction, operation,
reciprocal easement or similar agreements (hereinafter referred to as "Operating
Agreements") entered into or hereafter to be entered into between Landlord and
other owners or lessees of real estate (including but not limited to owners and
operators of department stores) within or near the Center (which Operating
Agreements have been or will be recorded in the official records of the County
wherein the Center is located) and to any and all easements and easement
agreements which may be or have been entered into with or granted to any persons
heretofore or hereafter, whether such persons are located within or upon the
Center or not, and Tenant shall execute such instruments as Landlord reasonably
requests to evidence such subordination.
Section 12.4. Failure to Execute Instruments.
Tenant's failure to execute instruments or certificates provided for in
this Article XII within twenty (20) fifteen (15) days after the mailing by
Landlord of a written request by Landlord, when such failure continues for an
additional 10 days after a second request by Landlord, shall be a default under
this Lease.
ARTICLE XIII
<PAGE>
ASSIGNMENT, SUBLETTING AND CONCESSIONS
Section 13.1. Consent Required.
Tenant shall not sell, assign, mortgage, pledge or in any manner transfer
this Lease or any interest therein, nor sublet all or any part of the Premises,
nor license concessions nor lease departments therein, without Landlord's prior
written consent in each instance, which consent shall not be unreasonably
withheld, delayed or conditioned. Consent by Landlord to any assignment or
subletting shall not waive the necessity for consent to any subsequent
assignment or subletting. This prohibition shall include a prohibition against
any subletting or assignment by operation of law. If this Lease is assigned or
the Premises or any part sublet or occupied by anybody other than Tenant,
Landlord may collect rent from the assignee, subtenant or occupant and apply the
same to the rent herein reserved, but no such assignment, subletting, occupancy
or collection of rent shall be deemed a waiver of any restrictive covenant
contained in this Section 13.1 or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of Tenant from the performance by Tenant of any
covenants on the part of Tenant herein contained. Any assignment (a) as to which
Landlord has consented; or (b) which is required by reason of a final
nonappealable order of a court of competent jurisdiction; or (c) which is made
by reason of and in accordance with the provisions of any law or statute,
including, without limitation, the laws governing bankruptcy, insolvency or
receivership shall be subject to all terms and conditions of this Lease, and
shall not be effective or deemed valid unless, at the time of such assignment:
1. Each assignee or (as to its subleased space) sublessee shall agree, in a
written agreement satisfactory to Landlord, to assume and abide by all of the
terms and provisions of this Lease, including those which govern the permitted
uses of the Premises as described in Article VIII herein; and
2. Each assignee or sublessee has submitted a current financial statement,
audited by a certified public accountant, showing a net worth and working
capital in amounts reasonably determined by Landlord to be sufficient to assure
the future performance by such assignee or sublessee of Tenant's obligations
hereunder; and
3. Each assignee or sublessee has submitted, in writing, evidence
reasonably satisfactory to Landlord of substantial retailing experience in
shopping centers of comparable size to the Center and in the sale of merchandise
and services permitted under Article VIII of this Lease; and
4. The business reputation of each assignee or sublessee shall meet or
exceed generally acceptable commercial standards; and
5. The use of the Premises by each assignee or sublessee shall not violate,
or create any potential violation of applicable laws, codes or ordinances, nor
violate any other agreements affecting the Premises, Landlord or other tenants
in the Center, so long as such other agreements do not impair Tenant's ability
to use the Premises in accordance with Section 1.1(m).
6. Tenant shall pay Landlord an Assignment Fee as reimbursement to Landlord
for administrative and legal expenses incurred by Landlord in connection with
any assignment or subletting. The Assignment Fee initially will be One Thousand
and 00/100 Dollars ($1,000.00) and shall increase by One Hundred and 00/100
Dollars ($100.00) at the end of each full Lease Year of the Lease Term.
In the event of any assignment or subletting as provided above, there shall
be paid to Landlord, in addition to the Minimum Annual Rent and other charges
due Landlord pursuant to this Lease, such additional consideration as shall be
attributable to the right of use and occupancy of the Premises, whenever the
same is receivable by Tenant, together with, as additional rent, the greater of
<PAGE>
(i) the excess, if any, of the rent and other charges payable by the assignee or
sublessee over the Minimum Annual Rent and other charges payable under the Lease
to Landlord by Tenant pursuant to this Lease, or (ii) the highest Percentage
Rent payable under the Lease by Tenant during the three (3) Lease Years
immediately preceding such assignment or subletting. Such additional rent shall
be paid to Landlord concurrently with the payments of Minimum Annual Rent
required under this Lease, and Tenant shall remain primarily liable for such
payments. Notwithstanding any assignment or subletting, Tenant shall remain
fully liable on this Lease and for the performance of all terms, covenants and
provisions of this Lease.
Neither Tenant nor any other person having an interest in the possession,
use, occupancy or utilization of the Premises shall enter into any lease,
sublease, license, concession, assignment or other agreement for use, occupancy
or utilization for space in the Premises which provides for rental or other
payment for such use, occupancy, or utilization based in whole or in part on the
net income or profits derived by any person from the part leased, used, occupied
or utilized (other than an amount based on a fixed percentage or percentages of
receipts or sales), and that any such proposed lease, sublease, license,
concession, assignment or other agreement shall be absolutely void and
ineffective as a conveyance of any right or interest in the possession, use,
occupancy or utilization of any part of the Premises.
Notwithstanding anything to the contrary contained in this Lease, without
Landlord's consent and without increase in rent and/or payment to Landlord,
Tenant shall have the right to assign this Lease and/or sublet the Premises to
any person, corporation or entity which is (i) Tenant's parent corporation, (ii)
a wholly-owned subsidiary of Tenant or of Tenant's parent corporation, (iii) a
corporation or entity of which a controlling interest is owned by Tenant or
Tenant's parent corporation, (iv) the surviving entity in the event of any
merger or consolidation involving Tenant; and/or (v) the buyer in one
transaction of all or substantially all of Tenant's assets.
In the event of a proposed assignment or sublease which requires Landlord's
consent hereunder, Landlord shall not unreasonably withhold its consent, with
respect to a proposed change of use and/or trade name in connection therewith.
Section 13.2. Change in Ownership. INTENTIONALLY DELETED.
ARTICLE XIV
PROMOTIONAL FUND AND ADVERTISING
Section 14.1. Provisions Relating to Promotional Fund.
Landlord may, at its option, create and maintain an advertising and
promotional fund (hereinafter referred to as the "Fund"), the primary purpose of
which is to provide sums necessary for professional advertising and promotional
services which benefit the tenants in the Center. In the event the Landlord does
create and maintain the Fund, Tenant agrees to contribute to such Fund,
beginning upon the later to occur of (a) the Commencement Date, or (b) the date
the Fund is created, the Promotional Fund Fixed Contribution set forth in
Article I, payable in equal monthly installments, in advance, on the first day
of each and every month (pro rated for partial months). Landlord shall
contribute an amount equal to one-fourth (1/4) of the monies collected from all
tenants in the Center during each calendar year, which sum may be paid in whole
or in part by Landlord, at its option, by providing the services of a Marketing
Director or other person or persons under Landlord's exclusive control to help
organize and implement advertising and promotional programs using assets from
the Fund. Any overpayment or underpayment of such amount by Landlord shall be
adjusted annually. The Promotional Fund Fixed Contribution shall be increased
annually commencing with the creation of the Fund based upon the lesser of (i)
<PAGE>
five percent (5%) or (ii) the increase of the Consumer Price Index (as
hereinafter defined) during the preceding twelve (12) month period. In addition
to its other obligations contained herein, Tenant agrees that it shall
participate and cooperate in all special sales and promotions sponsored by the
Fund. The failure of any other tenant or any Major Tenant to contribute to the
Fund shall not affect Tenant's obligations hereunder.
The term "Consumer Price Index" as used in this Lease shall mean "United
States City Average All Items for All Urban Consumers (CPI-U, 1982-84=100)"
published by the Bureau of Labor Statistics of the U.S. Department of Labor. If
the publication of the Consumer Price Index of the U.S. Bureau of Labor
Statistics is discontinued, comparable statistics on the purchasing power of the
consumer dollar published by a responsible financial periodical selected by
Landlord shall be used for making such computations.
Section 14.2. Advertising. INTENTIONALLY DELETED.
Section 14.3. Media Fund.
Landlord may, at its option, create and maintain a Media Fund, the
exclusive purpose of which shall be to pay all costs and expenses associated
with the purchase of electronic, print or outdoor advertising for the promotion
of the Center. In the event Landlord does create and maintain the Media Fund,
Tenant agrees to contribute to such Fund, beginning upon the later to occur of
(a) the Commencement Date or (b) the date the Media Fund is created, the Media
Fund Charge set forth in Article I, payable in equal monthly installments, in
advance, on the first day of each and every month (pro rated for partial
months).
The Media Fund Charge shall be adjusted annually annually by a percentage
equal to the lesser of (i) five percent (5%) or (ii) the percentage increase or
decrease in the electronic, print and outdoor advertising rates of the media
used for advertising and promotions in the preceding calendar year in the media
market in which the Center is located, provided, however that said charge shall
not be less than as originally set forth herein. Following the close of each
calendar year, Landlord shall furnish Tenant a statement for the preceding
calendar year showing the amounts expended by Landlord for media advertising.
Tenant hereby authorizes Landlord to use Tenant's trade name and a brief
description of Tenant's business in connection with any media advertising
purchased pursuant to this Section.
ARTICLE XV
SECURITY DEPOSIT
Section 15.1. Amount of Deposit. INTENTIONALLY DELETED
ARTICLE XVI
DAMAGE AND DESTRUCTION
Section 16.1. Damage and Destruction.
If the Premises are hereafter damaged or destroyed or rendered partially
untenantable for their permitted use by fire or other casualty insured under the
coverage which Landlord is obligated to carry pursuant to Section 11.1 hereof,
Landlord shall promptly repair the same to substantially the condition which
they were in immediately prior to the happening of such casualty (excluding
stock in trade, fixtures, furniture, furnishings, carpeting, floor covering,
wall covering, drapes and equipment), and from the date of such casualty until
the earlier of (i) 60 days after Landlord has re-delivered the Premises to
Tenant in the same condition as it was in on the initial delivery to Tenant or
<PAGE>
(ii) the date Tenant reopens in the Premises, Premises are so repaired and
restored, only the Minimum Monthly Rent and Additional Rent payments payable
hereunder shall abate in such proportion as the part of said Premises thus
destroyed or rendered untenantable bears to the total Premises; PROVIDED,
HOWEVER, that Landlord be entitled to terminate this Lease shall not be
obligated to repair and restore if such casualty is not covered by the insurance
which Landlord is obligated to carry pursuant to Section 11.1 hereof and if
Landlord does not elect to terminate this Lease within sixty (60) days after the
occurance, Landlord shall be obligated to restore and rent shall abate in the
manner provided above for insured events or is caused directly or indirectly by
the negligence of Tenant, its agents, and employees and in either of such
events, no portion of the Minimum Monthly Rent and other payments payable
hereunder shall abate, and PROVIDED, FURTHER, that Landlord shall be entitled to
terminate this Lease if Landlord would otherwise be not be obligated to expend
for any repair or restoration an amount in excess of the insurance proceeds
received by Landlord therefor, and provided, further, that if the Premises be
damaged, destroyed or rendered untenantable for their accustomed uses by fire or
other casualty to the extent of more than fifty percent (50%) of the cost to
replace the Premises during the last three (3) years of the Lease Term, then
Landlord or Tenant shall have the right to terminate this Lease effective as of
the date of such casualty by giving to the other party Tenant, within sixty (60)
days after the happening of such casualty, written notice of such termination.
If such notice be given, this Lease shall terminate and Landlord shall promptly
repay to Tenant any rent theretofore paid in advance which was not earned at the
date of such casualty. Any time that Landlord repairs or restores the Premises
after damage or destruction, then Tenant shall promptly repair or replace its
stock in trade, fixtures, furnishings, furniture, carpeting, wall covering,
floor covering, drapes, equipment and Premises to substantially the same
condition as they were in immediately prior to the casualty, and if Tenant has
closed its business, Tenant shall promptly reopen for business upon the
completion of such repairs.
Notwithstanding anything to the contrary set forth herein, in the event all
or any portion of the Center shall be damaged or destroyed by fire or other
cause (notwithstanding that the Premises may be unaffected thereby), to the
extent the cost of restoration thereof would exceed thirty percent (30%) of the
amount it would have cost to replace the Center in its entirety at the time such
damage or destruction occurred, then Landlord provided that Landlord terminates
the leases of all other similarly situated tenants of the Center may terminate
this Lease by giving Tenant thirty (30) days prior notice of Landlord's election
to do so, which notice shall be given, if at all, within ninety (90) days
following the date of such occurrence. In the event of the termination of this
Lease as aforesaid, this Lease shall cease thirty (30) days after such notice is
given, and the rent and other charges hereunder shall be adjusted as of that
date.
Notwithstanding anything to the contrary contained in this Lease, in the
event the Center, or any portion thereof, is damaged or destroyed and as a
result thereof Tenant is denied reasonable access to the Premises and/or the
Common Areas, and is therefore unable to operate its business in the Premises
and in fact ceases such operation, then, all rent shall abate from the date of
the casualty until Tenant is again reasonably able to operate its business in
the Premises.
Notwithstanding anything to the contrary contained in this Lease, Landlord
shall not be entitled to terminate this Lease pursuant to this Article XVI if
Landlord commences reconstruction of the Premises within twenty-four (24) months
following the date of the casualty.
ARTICLE XVII
<PAGE>
EMINENT DOMAIN
Section 17.1. Condemnation.
If any portion of the Premises or fifteen percent (15%) or more of the
Center shall be acquired or condemned by right of eminent domain or transferred
by agreement in lieu of condemnation for any public or quasi public use or
purpose, or if an Operating Agreement is terminated as a result of such an
acquisition or condemnation, then Landlord at its election may terminate this
Lease by giving notice to Tenant of its election, and in such event rentals
shall be apportioned and adjusted as of the date of termination. If the Lease
shall not be terminated as aforesaid, then it shall continue in full force and
effect, and Landlord shall within a reasonable time after possession is
physically taken (subject to delays due to shortage of labor, materials or
equipment, labor difficulties, breakdown of equipment, government restrictions,
fires, other casualties or other causes beyond the reasonable control of
Landlord) repair or rebuild what remains of the Premises for Tenant's occupancy;
and a just proportion of the Minimum Annual Rent shall be abated, according to
the nature and extent of the injury to the Premises until such repairs and
rebuilding are completed, and thereafter for the balance of the Lease Term.
Section 17.2. Damages.
Landlord reserves, and Tenant assigns to Landlord, all rights to damages on
account of any taking or condemnation or any act of any public or quasi public
authority for which damages are payable. Tenant shall execute such instruments
of assignment as Landlord requires, join with Landlord in any action for the
recovery of damages, if requested by Landlord, and turn over to Landlord any
damages recovered in any proceeding. If Tenant fails to execute instruments
required by Landlord, or undertake such other steps as requested, Landlord shall
be deemed the duly authorized irrevocable agent and attorney-in-fact of Tenant
to execute such instruments and undertake such steps on behalf of Tenant.
However, Landlord does not reserve any damages payable for trade fixtures
installed by Tenant at its own cost which are not part of the realty.
ARTICLE XVIII
DEFAULT BY TENANT
Section 18.1. Right to Re-Enter.
The following shall be considered for all purposes to be defaults under and
breaches of this Lease: (a) any failure of Tenant to pay any rent or other
amount when due hereunder for more than ten (10) days after written notice of
such failure; (b) any failure by Tenant to perform or observe any other of the
terms, provisions, conditions and covenants of this Lease for more than thirty
(30) ten (10) days after written notice of such failure (or such additional time
as is reasonably required to correct such default); (c) a determination by
Landlord that Tenant has willfully submitted any false Gross Sales or Adjusted
Gross Sales report required to be furnished hereunder and Tenant subsequently
fails to submit a correct Gross Sales or Adjusted Gross Sales statement within
thirty (30) fifteen (15) days after receipt of written notice from Landlord; (d)
anything done by Tenant, for more than two (2) business days (excluding
holidays) after Tenant's receipt of written notice, at Tenant's notice address,
upon or in connection with the Premises or the construction of any part thereof
which directly or indirectly interferes in any way with, or results in a work
stoppage in connection with, construction of any part of the Center or any other
tenant's space; (e) the bankruptcy or insolvency of Tenant or the filing by or
against Tenant of a petition in bankruptcy or for reorganization or arrangement
or for the appointment of a receiver or trustee of all or a portion of Tenant's
property, or Tenant's assignment for the benefit of creditors; (f) if Tenant
abandons or vacates or does not do business in the Premises or (g) this Lease or
<PAGE>
Tenant's interest herein or in the Premises or any improvements thereon or any
property of Tenant on or at the Premises are executed upon or attached; or (h)
the Premises come into the hands of any person other than expressly permitted
under this Lease, or (i) any claim or lien is asserted or recorded against the
interest of Landlord in the Premises or Center, or any portion thereof, on the
account of, or extending from any improvement or work done by or at the
instance, or for the benefit of Tenant at Tenant's request, or any person
claiming by, through or under Tenant or from any improvement or work the cost of
which is the responsibility of Tenant, and the same is not released, dismissed
or discharged within thirty (30) days after receipt of written demand from
Landlord. In any such event, and without grace period, demand or notice (the
same being hereby waived by Tenant), Landlord, in addition to all other rights
or remedies it may have, shall have the right thereupon or at any time
thereafter to terminate this Lease by giving notice to Tenant stating the date
upon which such termination shall be effective, and shall have the right, either
before or after any such termination, to re-enter and take possession of the
Premises, remove all persons and property from the Premises, store such property
at Tenant's expense, and sell such property if necessary to satisfy any
deficiency in payments by Tenant as required hereunder, all without notice or
resort to legal process and without being deemed guilty of trespass or becoming
liable for any loss or damage occasioned thereby. Nothing herein shall be
construed to require Landlord to give any notice before exercising any of its
rights and remedies provided for in Section 3.3 of this Lease. Notwithstanding
anything to the contrary herein contained, if Tenant commits any default
hereunder for or precedent to which or with respect to which notice is herein
required, and commits such defaults within twelve (12) months thereafter, no
notice shall thereafter be required to be given by Landlord as to or precedent
to any such subsequent default during such twelve (12) month period (as Tenant
hereby waiving the same) before exercising any or all remedies available to
Landlord.
Section 18.2. Right to Relet.
If Landlord re-enters the Premises as above provided, or if it takes
possession pursuant to legal proceedings or otherwise, it may either terminate
this Lease, but Tenant shall remain liable for all obligations arising during
the balance of the original stated term as hereafter provided as if this Lease
had remained in full force and effect, or it may, from time to time, without
terminating this Lease, make such alterations and repairs as it deems advisable
to relet the Premises, and relet the Premises or any part thereof for such term
or terms (which may extend beyond the Lease Term) and at such rentals and upon
such other terms and conditions as Landlord in its sole discretion deems
advisable; upon each such reletting all rentals received by Landlord therefrom
shall be applied, first, to any indebtedness other than rent due hereunder from
Tenant to Landlord; second, to pay any costs and expenses of reletting,
including brokers and attorneys' fees and costs of alterations and repairs;
third, to rent due hereunder, and the residue, if any, shall be held by Landlord
and applied in payment of future rent as it becomes due hereunder.
If rentals received from such reletting during any month are less than that
to be paid during that month by Tenant hereunder, Tenant shall immediately pay
any such deficiency to Landlord. No re-entry or taking possession of the
Premises by Landlord shall be construed as an election to terminate this Lease
unless a written notice of such termination is given by Landlord.
Notwithstanding any such reletting without termination, Landlord may at any
time thereafter terminate this Lease for any prior breach or default. If
Landlord terminates this Lease for any breach, or otherwise takes any action on
account of Tenant's breach or default hereunder, in addition to any other
remedies it may have, it may recover from Tenant all damages incurred by reason
of such breach or default, including the cost of recovering the Premises,
brokerage fees and expenses of placing the Premises in rentable condition,
<PAGE>
attorneys' fees, and an amount equal to the difference between the Minimum Rent
and all items of additional rents reserved hereunder for the period which
otherwise would have constituted the balance of the Lease Term and the then
present rental value of the Premises for such period, both discounted in
accordance with accepted financial practice to the then present worth, at the
average rate established and announced for United States Treasury Bills, with a
maturity of thirteen (13) weeks at the four (4) weekly auctions held immediately
prior to the date of such termination [the four (4) week average bill rate], all
of which shall immediately be due and payable by Tenant to Landlord. In
determining the rental value of the Premises, the rental realized by any
reletting, if such reletting be accomplished by Landlord within a reasonable
time after the termination of this Lease, shall be deemed prima facie to be the
rental value, but if Landlord shall not undertake to relet or having undertaken
to relet, has not accomplished reletting, then it will be conclusively presumed
that the Minimum Rent and all items of additional rent reserved under this Lease
represent the rental value of the Premises for the purposes herein (in which
event Landlord may recover from Tenant, the full total of all Minimum Rent and
all items of additional rent due hereunder, discounted to present value as
hereinbefore provided). Landlord shall, however, account to Tenant for the
Minimum Rent and additional rents received from persons using or occupying the
Premises during the period representing that which would have constituted the
balance of the Lease Term, but only at the end of said period, and only if
Tenant shall have paid to Landlord its damages as provided herein, and only to
the extent of sums recovered from Tenant as Landlord's damages, Tenant waiving
any claim to any surplus. Nothing herein contained, however, shall limit or
prejudice the right of Landlord to prove and obtain as damages by reason of such
termination, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved.
Tenant's obligation to reimburse Landlord for attorneys' fees as referred
to in this Lease shall include all reasonable legal costs, fees and expenses
arising out of (i) Tenant's default in the performance or observance of any of
the terms, covenants, conditions or obligations contained in this Lease and
Landlord places the enforcement of all or any part of this Lease, the collection
of any rent due or to become due or the recovery of possession of the Premises
in the hands of an attorney or (ii) Landlord's incurring any fees or out of
pocket costs in any litigation, negotiation or transaction in which Tenant
causes Landlord to be involved or concerned, in either event regardless of
whether or not suit is actually filed.
In the event of any breach or threatened breach by Tenant of any of the
terms and provisions of this Lease, Landlord shall have the right to injunctive
relief as if no other remedies were provided for herein for such breach.
Any rights and remedies reserved by, or granted to, Landlord under this
Lease, at law or in equity, are distinct, separate and cumulative, and the
exercise of any one of them shall not be deemed to preclude, waive or prejudice
Landlord's right to exercise any or all others.
Tenant expressly waives any right to assert a defense based on merger and
agrees that neither the commencement of any action or proceeding, nor the
settlement thereof, nor the entry of judgment therein, shall bar Landlord from
bringing any subsequent actions or proceedings from time to time.
Wherever in this Lease Landlord has reserved or is granted the right of
"reentry" into the Premises, the use of such word is not intended, nor shall it
be construed, to be limited to its technical legal meaning.
Tenant waives and releases any claim arising out of or related to the
payment of percentage rent by any successor tenant in the Premises, to whom
Landlord may relet the Premises. , but nothing contained herein shall obligate
<PAGE>
Landlord to relet if Tenant shall default hereunder.
Except as otherwise specifically required by this Lease, Tenant waives any
and all statutory and legal notice requirements.
Any action, suit or proceeding relating to, arising out of or in connection
with the terms, conditions and covenants of this Lease shall may be brought by
Landlord against Tenant in the Circuit or Superior Court of Orange Marion
County, California. Indiana Tenant hereby waives any objection to jurisdiction
or venue in any proceeding before said Court. Nothing contained herein shall
affect the right of Landlord to bring any action, suit or proceeding against
Tenant in the courts of any other jurisdictions.
Section 18.3. Counterclaim.
If Landlord commences any proceedings for non-payment of rent (Minimum
Annual Rent, Percentage Rent or additional rent), Tenant will not interpose any
permissive or noncompulsory or mandatory counterclaim. required by the
applicable procedural rules of the Court. The covenants to pay rent and other
amounts hereunder are independent covenants and Tenant shall have no right to
hold back, offset or fail to pay any such amounts for default by Landlord or any
other reason whatsoever.
Section 18.4. Waiver of Rights of Redemption.
To the extent permitted by law, Landlord and Tenant 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 due to Tenant's default hereunder or otherwise.
Section 18.5. Waiver of Trial by Jury.
To the extent permitted by applicable law, Tenant hereby waives trial by
jury in any action, proceeding or counterclaim brought by either party against
the other on any matter whatsoever arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant created hereby, Tenant's use
or occupancy of the Premises or any claim or injury or damage.
Section 18.6. Bankruptcy.
A. Assumption of Lease. In the event Tenant shall become a Debtor under
Chapter 7 of the Bankruptcy Code ("Code") or a petition for reorganization or
adjustment of debts is filed concerning Tenant under Chapters 11 or 13 of the
Code, or a proceeding is filed under Chapter 7 and is transferred to Chapters 11
or 13, the Trustee or Tenant, as Debtor and as Debtor-In-Possession, may not
elect to assume this Lease unless, at the time of such assumption, the Trustee
or Tenant has:
1. Cured or provided Landlord "Adequate Assurance" (as defined below) that:
(a) Within ten (10) days from the date of such assumption the Trustee or
Tenant will cure all monetary defaults under this Lease and compensate Landlord
for any actual pecuniary loss resulting from any existing default, including
without limitation, Landlord's reasonable costs, expenses, accrued interest as
set forth in Section 4.2 of the Lease, and attorneys' fees incurred as a result
of the default;
(b) Within thirty (30) days from the date of such assumption the Trustee or
Tenant will cure all non-monetary defaults under this Lease; and
(c) The assumption will be subject to all of the provisions of this Lease.
<PAGE>
2. For purposes of this Section 18.6, Landlord and Tenant acknowledge that,
in the context of a bankruptcy proceeding of Tenant, at a minimum "Adequate
Assurance" shall mean:
(a) The Trustee or Tenant has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations and
administrative expenses to assure Landlord that the Trustee or Tenant will have
sufficient funds to fulfill the obligations of Tenant under this Lease, and to
keep the Premises stocked with merchandise and properly staffed with sufficient
employees to conduct a fully-operational, actively promoted business in the
Premises; and
(b) The Bankruptcy Court shall have entered an Order segregating sufficient
cash payable to Landlord and/or the Trustee or Tenant shall have granted a valid
and perfected first lien and security interest and/or mortgage in property of
Trustee or Tenant acceptable as to value and kind to Landlord, to secure to
Landlord the obligation of the Trustee or Tenant to cure the monetary and/or
non-monetary defaults under this Lease within the time periods set forth above;
and
(c) The Trustee or Tenant at the very least shall deposit a sum equal to
one (1) month's rent to be held by Landlord (without any allowance for interest
thereon) to secure Tenant's future performance under the Lease.
B. Assignment of Lease. If the Trustee or Tenant has assumed the Lease
pursuant to the provisions of this Section 18.6 for the purpose of assigning
Tenant's interest hereunder to any other person or entity, such interest may be
assigned only after the Trustee, Tenant or the proposed assignee have complied
with all of the terms, covenants and conditions of Section 13.1 herein,
including, without limitation, those with respect to additional rent and the use
of the Premises only as permitted in Article VIII herein; Landlord and Tenant
acknowledging that such terms, covenants and conditions are commercially
reasonable in the context of a bankruptcy proceeding of Tenant. Any person or
entity to which this Lease is assigned pursuant to the provisions of the Code
shall be deemed without further act or deed to have assumed all of the
obligations arising under this Lease on and after the date of such assignment.
Any such assignee shall upon request execute and deliver to Landlord an
instrument confirming such assignment.
C. Adequate Protection. Upon the filing of a petition by or against Tenant
under the Code, Tenant, as Debtor and as Debtor-in-Possession, and any Trustee
who may be appointed agree to adequately protect Landlord as follows:
(1) To perform each and every obligation of Tenant under this Lease until
such time as this Lease is either rejected or assumed by Order of the Bankruptcy
Court; and
(2) To pay all monetary obligations required under this Lease, including
without limitation, prorated from the date of filing until the date of rejection
or assumption of the Lease or the payment of Minimum Monthly Rent, and such
other additional rent charges payable hereunder which is considered reasonable
compensation for the use and occupancy of the Premises; and
(3) Provide Landlord a minimum thirty (30) days prior written notice,
unless a shorter period is agreed to in writing by the parties, of any
proceeding relating to any assumption of this Lease or any intent to abandon the
Premises, which abandonment shall be deemed a rejection of this Lease; and
(4) To perform to the benefit of Landlord otherwise required under the
Code.
<PAGE>
The failure of Tenant to comply with the above shall result in an automatic
rejection of this Lease.
D. Accumulative Rights. The rights, remedies and liabilities of Landlord
and Tenant set forth in this Section 18.6 shall be in addition to those which
may now or hereafter be accorded, or imposed upon, Landlord and Tenant by the
Code. -------------------
ARTICLE XIX
DEFAULT BY LANDLORD
Section 19.1. Default Defined, Notice.
Landlord shall in no event be charged with default in any of its
obligations hereunder unless and until Landlord shall have failed to perform
such obligations within thirty (30) days (or such additional time as is
reasonably required to correct any such default) after written notice to
Landlord by Tenant, specifically describing such failure.
Section 19.2. Notice to First Mortgagee.
If the holder of the first mortgage covering the Premises shall have given
written notice to Tenant of the address to which notices to such holder are to
be sent, Tenant shall give such holder written notice simultaneously with any
notice given to Landlord of any default of Landlord, and if Landlord fails to
cure any default asserted in said notice within the time provided above, Tenant
shall notify such holder in writing of the failure to cure, and said holder
shall have the right but not the obligation, within thirty (30) days after
receipt of such second notice, to cure such default before Tenant may take any
action by reason of such default.
ARTICLE XX
TENANT'S PROPERTY
Section 20.1. Taxes on Leasehold.
Tenant shall be responsible for and shall pay before delinquent all
municipal, county, federal or state taxes coming due during or after the Lease
Term against Tenant's interest in this Lease or against personal property of any
kind owned or placed in, upon or about the Premises by Tenant.
Section 20.2. Assets of Tenant. INTENTIONALLY DELETED.
ARTICLE XXI
ACCESS BY LANDLORD
Section 21.1. Right of Entry.
Landlord, its agents and employees shall have the right to enter the
Premises from time to time at reasonable times to examine the same, show them to
prospective purchasers and other persons, and upon reasonable prior notice to
Tenant, make such repairs, alterations, improvements or additions as Landlord
deems desirable. Except as herein provided, rent shall not abate while any such
repairs, alterations, improvements, or additions are being made. During the last
six (6) months of the Lease Term, Landlord may exhibit the Premises to
prospective tenants. and maintain upon the Premises notices deemed advisable by
Landlord. In addition, during any apparent emergency, Landlord or its agents may
enter the Premises forcibly without liability therefor and without in any manner
affecting Tenant's obligations under this Lease. Nothing herein contained,
<PAGE>
however, shall be deemed to impose upon Landlord any obligation, responsibility
or liability whatsoever, for any care, maintenance or repair except as otherwise
herein expressly provided. During any entry into the Premises Landlord shall use
its best efforts to minimize interference with Tenant's business operations.
Notwithstanding anything to the contrary contained in this Lease, in the event
that due to any entry by or on behalf of Landlord into the Premises, the
Premises are rendered wholly or partially untenantable, then during the period
of such untenantablity all rent and charges shall abate in proportion to the
degree to which Tenant's use of the Premises is impaired.
ARTICLE XXII
HOLDING OVER, SUCCESSORS
Section 22.1. Holding Over.
If Tenant holds over or occupies the Premises beyond the Lease Term (it
being agreed there shall be no such holding over or occupancy without Landlord's
written consent), no tenancy or interest in the Premises shall result therefrom
but such holding over shall be subject to immediate eviction and removal, and
effective upon notice from Landlord to Tenant, Tenant shall pay Landlord for
each day of such holding over a sum equal to the greater of (a) one hundred
fifty percent (150%) twice the Minimum Monthly Rent prorated for the number of
days of such holding over, or (b) Minimum Annual Rent plus Percentage Rent
prorated for the number of days of such holding over, plus, whichever of (a) or
(b) is applicable, a prorata portion of all other amounts which Tenant would
have been required to pay hereunder had this Lease been in effect.
Section 22.2. Successors.
All rights and liabilities herein given to or imposed upon the respective
parties hereto shall bind and inure to the several respective heirs, successors,
administrators, executors and assigns of the parties and if Tenant is more than
one (1) person, they shall be bound jointly and severally by this Lease except
that no rights shall inure to the benefit of any assignee or subtenant of Tenant
unless the assignment or sublease was approved by Landlord in writing as
provided in Section 13.1 hereof. Landlord, at any time and from time to time,
may make an assignment of its interest in this Lease and, in the event of such
assignment, Landlord and its successors and assigns (other than the assignee of
Landlord's interest in this Lease) shall be released from any and all liability
thereafter accruing hereunder.
ARTICLE XXIII
QUIET ENJOYMENT
Section 23.1. Landlord's Covenant.
If Tenant pays the rents and other amounts herein provided, observes and
performs all the covenants, terms and conditions hereof, Tenant shall peaceably
and quietly hold and enjoy the Premises for the Lease Term without interruption
by Landlord or any person or persons claiming by, through or under Landlord,
subject, nevertheless, to the terms and conditions of this Lease.
ARTICLE XXIV
MISCELLANEOUS
Section 24.1. Waiver.
No waiver by Landlord or Tenant of any breach of any term, covenant or
condition hereof shall be deemed a waiver of the same or any subsequent breach
<PAGE>
of the same or any other term, covenant or condition. The acceptance of rent by
Landlord shall not be deemed a waiver of any earlier breach by Tenant of any
term, covenant or condition hereof, regardless of Landlord's knowledge of such
breach when such rent is accepted. No covenant, term or condition of this Lease
shall be deemed waived by Landlord or Tenant unless waived in writing.
Section 24.2. Accord and Satisfaction.
Landlord is entitled to accept, receive and cash or deposit any payment
made by Tenant for any reason or purpose or in any amount whatsoever, and apply
the same at Landlord's option to any obligation of Tenant and the same shall not
constitute payment of any amount owed except that to which Landlord has applied
the same. No endorsement or statement on any check or letter of Tenant shall be
deemed an accord and satisfaction or otherwise recognized for any purpose
whatsoever. The acceptance of any such check or payment shall be without
prejudice to Landlord's right to recover any and all amounts owed by Tenant
hereunder and Landlord's right to pursue any other available remedy.
Section 24.3. Entire Agreement.
There are no representations, covenants, warranties, promises, agreements,
conditions or undertakings, oral or written, between Landlord and Tenant other
than herein set forth. Except as herein otherwise provided, no subsequent
alteration, amendment, change or addition to this Lease shall be binding upon
Landlord or Tenant unless in writing and signed by them. Tenant acknowledges
that it has independently investigated the potential for the success of its
operations in the Center and has not relied upon any inducements or
representations on the part of Landlord or Landlord's representatives, other
than those contained in the Lease. Tenant also acknowledges and agrees that, to
the extent any projections, materials or discussions have related to Tenant's
projected or likely sales volume, customer traffic or profitability, Tenant
understands that any and all such projections, materials and discussions are
based solely upon Landlord's experiences at other properties or upon
standardized marketing studies, and that such projections, materials and
discussions shall not be construed as a promise or guarantee that Tenant will
realize the same or similar results.
Section 24.4. No Partnership.
Landlord does not, in any way or for any purpose, become a partner,
employer, principal, master, agent or joint venturer of or with Tenant.
Section 24.5. Force Majeure.
If either party hereto shall be delayed or hindered in or prevented from
the performance of any act required hereunder by reason of strikes, lockouts,
labor troubles, inability to procure material, failure of power, restrictive
governmental laws or regulations, riots, insurrection, war, environmental
remediation work whether ordered by any governmental body or voluntarily
initiated or other reason of a like nature not the fault of the party delayed in
performing work or doing acts required under this Lease, the period for the
performance of any such act shall be extended for a period equivalent to the
period of such delay. Notwithstanding the foregoing, from and after the
Commencement Date the provisions of this Section 24.5 shall at no time operate
to excuse Tenant from the obligation to open for business on the Commencement
Date, except in the event of an industry wide strike, nor any obligations for
payment of Minimum Annual Rent, Percentage Rent, additional rent or any other
payments required by the terms of this Lease when the same are due, and all such
amounts shall be paid when due. In the event Tenant encounters any of the
foregoing prior to the Commencement Date, the Commencement Date shall be
postponed by a period equal to the length of any such prevention, delay or
stoppage, but in to no event shall the Commencement Date be postponed to a date
<PAGE>
later than the date Tenant initially opens the Premises for business to the
public.
Section 24.6. Submission of Lease.
Submission of this Lease to Tenant does not constitute an offer to lease;
this Lease shall become effective only upon execution and delivery thereof by
Landlord and Tenant. Upon execution of this Lease by Tenant, Landlord is granted
an irrevocable option for fifteen (15) sixty (60) days to execute this Lease
within said period and thereafter return a fully executed copy to Tenant. The
effective date of this Lease shall be the date filled in on Page 1 hereof by
Landlord, which shall be the date of execution by the last of the parties to
execute the Lease.
Section 24.7. Notices.
All notices and other communications ("Notice") to be given hereunder by
either party shall be written and sent by registered or certified mail, return
receipt requested, postage pre-paid or by an express mail delivery service,
addressed to the party intended to be notified at the address set forth in
Article I. Either party may, at any time, or from time to time, notify the other
in writing of a substitute address for that above set forth, and thereafter
notices shall be directed to such substitute address. Notice given as aforesaid
shall be sufficient service thereof and shall be deemed given as of the date
received or the date on which delivery is first refused, as evidenced by the
return receipt of the registered or certified mail or the express mail delivery
receipt, as the case may be. A duplicate copy of all notices from Tenant shall
be sent to any mortgagee as provided for in Section 19.2.
Section 24.8. Captions and Section Numbers.
This Lease shall be construed without reference to titles of Articles and
Sections, which are inserted only for convenience of reference.
Section 24.9. Number and Gender.
The use herein of a singular term shall include the plural and use of the
masculine, feminine or neuter genders shall include all others.
Section 24.10. Objection to Statements. INTENTIONALLY DELETED.
Section 24.11. Representation by Tenant.
If Tenant is or will be a corporation, the persons executing this Lease on
behalf of Tenant hereby covenants and warrants that Tenant is a duly qualified
corporation authorized to do business in the state where the Center is located,
that all franchise and corporate taxes have been paid to date and all future
forms, reports, fees and other documents necessary to comply with applicable
laws will be filed when due, and the person signing this Lease on behalf of the
corporation is an officer of Tenant, and is duly authorized to sign and execute
this Lease.
Tenant hereby represents and warrants that (a) there are no proceedings
pending or so far as Tenant knows threatened before any court or administrative
agency that would materially adversely affect the financial condition of Tenant,
the ability of Tenant to enter into this Lease or the validity or enforceability
of this Lease; (b) there is no provision of any existing mortgage, indenture,
contract or agreement binding on Tenant which would conflict with or in any way
prevent the execution, delivery or performance of the terms of this Lease; (c)
the financial statement of Tenant provided to Landlord in connection with this
Lease are complete and correct and fairly present the financial condition of
Tenant as of the date and for the period referred to therein and have been
<PAGE>
prepared in accordance with generally accepted accounting principles
consistently applied; and (d) there has been no material adverse change in the
financial condition of Tenant since the date of such financial statement and to
the knowledge of Tenant, no such material adverse changes are pending or
threatened. Tenant acknowledges that Landlord is executing this Lease in
reliance upon the foregoing representation and warranty and that such
representation and warranty is a material element of the consideration inducing
Landlord to enter into and execute this Lease.
Section 24.12. Joint and Several Liability.
If Tenant is a partnership or other business organization the members of
which are subject to personal liability, the liability of each such member shall
be deemed to be joint and several.
Section 24.13. Limitation of Liability.
Anything to the contrary herein notwithstanding, no general or limited
partner of the Landlord, or any general or limited partner of any partner of the
Landlord, or any shareholder of any corporate partner of any partner of the
Landlord, or any other holder of any equity interest in the Landlord, or in any
entity comprising the Landlord or its partners, shall be personally liable with
respect to any of the terms, covenants, conditions and provisions of this Lease,
or the performance of Landlord's obligations under this Lease, nor shall
Landlord or any of said constituent parties have any liability to Tenant for any
consequential damages such as, but not limited to, lost profits. The liability
of Landlord for Landlord's obligations under this Lease shall be limited to
Landlord's interest in the Center, and Tenant shall look solely to the interest
of Landlord, its successors and assigns, in the Center, for the satisfaction of
each and every remedy of Tenant against Landlord. Tenant shall not look to any
of Landlord's other assets seeking either to enforce Landlord's obligations
under this Lease, or to satisfy any money or deficiency judgment for Landlord's
failure to perform such obligations, such exculpation of personal liability is
and shall be absolute and without any exception whatsoever.
The term "Landlord" shall mean only the owner at the time in question of
the present Landlord's interest in the Center. In the event of a sale or
transfer of the Center (by operation of law or otherwise) or in the event of the
making of a lease of all or substantially all of the Center, or in the event of
a sale or transfer (by operation of law or otherwise) of the leasehold estate
under any such lease, the grantor, transferor or lessor, as the case may be,
shall be and hereby is (to the extent of the interest or portion of the Center
or leasehold estate sold, transferred or leased) automatically and entirely
released and discharged, from and after the date of such sale, transfer or
leasing of all liability with respect of the performance of any of the terms of
this Lease on the part of Landlord thereafter to be performed; provided that the
purchaser, transferee or lessee (collectively, "Transferee") shall be deemed to
have assumed and agreed to perform, subject to the limitations of this Section
(and without further agreement between the other parties hereto, or among such
parties and the Transferee) and only during and in respect of the Transferee's
period of ownership of the Landlord's interest under this Lease, all of the
terms of this Lease on the part of Landlord to be performed during such period
of ownership, it being intended that Landlord's obligations hereunder shall, as
limited by this Section, be binding on Landlord, its successors and assigns only
during and in respect of their respective, successive periods of ownership.
Section 24.14. Broker's Commission.
Except for Tenant's agreement with BDH Associates, each party represents
and warrants that it has caused or incurred no claims for brokerage commissions
or finder's fees in connection with the execution of this Lease, and each party
shall indemnify and hold the other harmless against and from all liabilities
<PAGE>
arising from any such claims caused or incurred by it (including without
limitation, the cost of attorneys' fees in connection therewith).
Section 24.15. Partial Invalidity.
If any provision of this Lease or the application thereof to any person or
circumstance shall to any extent be invalid or unenforceable, the remainder of
this Lease, or the application of such 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 enforceable
to the fullest extent permitted by law. ; provided, however, if Tenant's
obligation to pay Percentage Rent or Tenant's obligation to continuously operate
its business in the Premises is deemed invalid or unenforceable as determined by
Landlord based upon the then applicable statutes or case law, then Landlord may,
at any time thereafter, terminate this Lease by giving Tenant notice of its
election, and this Lease shall terminate and become null and void thirty (30)
days after said notice.
Section 24.16. Recording.
The parties agree not to place this Lease of record but each party shall,
at the request of the other, execute and acknowledge so that the same may be
recorded a Short Form Lease or Memorandum of Lease, indicating the Lease Term,
but omitting rent and other terms, and an Agreement specifying the date of
commencement and termination of the Lease Term; provided, however, that the
failure to record said Short Form Lease, Memorandum of Lease or Agreement shall
not affect or impair the validity and effectiveness of this Lease. The party
requesting the instrument Tenant shall pay all costs, taxes, fees and other
expenses in connection with or prerequisite to recording.
Section 24.17. Applicable Law.
This Lease shall be construed under the laws of the state where the Center
is located.
Section 24.18. Mortgagee's Approval. INTENTIONALLY DELETED.
Section 24.19. Unrelated Business Taxable Income.
A. If at any time and from time to time during the term of this Lease,
Landlord is advised by its counsel or counsel to a tax exempt partner of the
managing partner of Landlord that any provision of this Lease, including without
limitation the provisions relating to the payment of rent and additional rent,
or the absence of any provision might give rise to unrelated business taxable
income within the meaning of sections 512 of the Internal Revenue Code of 1986,
as amended, or the regulations issued thereunder, or may jeopardize the
tax-exempt status of any partner in Landlord or any partner in a partnership
that is a partner in Landlord, or may prevent any such partner from obtaining
such tax-exempt status, then this Lease shall may be unilaterally amended by
Landlord in such manner as shall meet the requirements reasonably specified by
counsel for Landlord and Tenant agrees that it will execute all documents or
instruments reasonably necessary to effect such amendments, provided that no
such amendment shall increase Tenant's obligations nor decrease Tenant's rights,
nor result on an estimated or actual basis in Tenant having to pay in the
aggregate more on account of its occupancy of the Premises than it would be
required to pay under the terms of this Lease, or having to receive fewer
services or services of lesser quality than it is presently entitled to receive
under this Lease.
B. Any services which Landlord is required to furnish pursuant to the
provisions of this Lease may, at Landlord's option, be furnished from time to
time, in whole or in part, by employees of Landlord or the managing agent of the
<PAGE>
Project or its employees or by one or more third persons hired by Landlord or
the managing agent of the Project. Tenant agrees that upon Landlord's written
request it will enter into direct agreements with the managing agent of the
Project or other parties designated by Landlord for the furnishing of any such
services required to be furnished by Landlord herein, in form and content
approved by Landlord, provided, however, that no such contract shall result on
an estimated or actual basis in Tenant having to pay in the aggregate more money
on account of its occupancy of the Premises under the terms of this Lease, or
having to receive fewer services or services of a lesser quality than it is
presently entitled to receive under this Lease.
Section 24.20. Parties To Have No Liability If Shopping Center Not Open.
INTENTIONALLY DELETED.
Section 24.21. Landlord's Contribution Toward Tenant's Work.
Within thirty (30) days after the date When Tenant has completed all of
Tenant's Work in strict accordance with Exhibit "B" and "B-2" by the Required
Completion Date and furnishes evidence reasonably satisfactory to Landlord of
such completion and that all of Tenant's Work has been paid for in full and no
liens have attached or may attach as the result thereof, provided that Tenant
shall not be required to provide lien waivers or other proof as to contractors
or materialmen having contracts involving $10,000.00 or less each, and no
default in, breach of, or failure to perform, this Lease exists after notice and
expiration of the applicable cure period, and Tenant has paid or reimbursed
Landlord all amounts owed to Landlord pursuant to this Lease and has opened its
store for business and accepted the Premises in writing in a form reasonably
prescribed by Landlord or its mortgagee, and has executed such other instruments
and documents as are required by Landlord's mortgagee to be executed, Landlord
shall pay to Tenant as Landlord's Contribution, if any, for Tenant's Work the
sum equal to the lesser of (i) $148,975.00, determined as provided for in
Section 2.1 hereof, or (ii) the actual cost of Tenant's Work (excluding trade
fixtures, furniture and furnishings or other personal property), and no more,
subject to Landlord's right to deduct any Minimum Rent, Percentage Rent,
additional rent, expenditures by Landlord pursuant to Section 10.3 of the Lease,
or other amounts owed by Tenant to Landlord pursuant to the terms of this Lease
as of the date of payment. Landlord's Contribution shall be used only for
alterations, improvements, fixtures and equipment that become part of or
attached or affixed to the Premises, but excluding trade fixtures, furniture and
furnishings or other personal property. If any portion of Landlord's
Contribution is not paid by Landlord to Tenant when due, such sum shall bear
interest at the rate of ten percent (10%) per annum from the date due until
paid.
Section 24.22 Addendum.
Notwithstanding anything contained in this Lease to the contrary, Landlord
shall not lease space to any other tenant in Landlord's Tract for the primary
purpose of operating a toy store ("Additional Toy Store"), except for a maximum
of two (2) Additional Toy Stores each with space of 2,000 square feet or less.
In the event Landlord violates this covenant, then Tenant shall pay to Landlord,
in lieu of Minimum Annual Rent and Percentage Rent, six percent (6%) of monthly
Adjusted Gross Sales effective upon the date such Additional Toy Store opens for
business and such reduction shall continue until such time as such Additional
Toy Store ceases operating its business in Landlord's Tract. The provisions of
this Section 24.22 shall only be effective so long as Tenant continues, subject
to Section 24.5, to remain open and is operating its business in accordance with
the Permitted Use terms, conditions and covenants of this Lease and is not
otherwise in default of the terms, conditions and covenants of this Lease after
expiration of any applicable notice and cure period. For purposes of this
Section, a store shall be deemed to be used for the primary purpose of operating
a toy store if more than fifty percent (50%) or more of the store floor area is
<PAGE>
devoted to the sale of toys.
Section 24.23 Addendum.
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 attorneys fees and all costs and
disbursements incurred therein by the prevailing party, including, without
limitation, any such fees, costs and disbursements incurred on any appeal from
such action or proceeding. Subject to the provisions of local law, the
prevailing party shall recover all such fees, costs or disbursements as costs
taxable by the court or arbiter in the action or proceeding itself without the
necessity for a cross-action by the prevailing party.
Section 24.24. Special Construction Provision; Waiver of Construction
Chargebacks.
Notwithstanding anything herein in this Lease, any exhibits attached hereto
or any other documents incorporated herein, Tenant shall not be required to pay
or reimburse Landlord for any work performed by Landlord at Tenant's expense
(commonly referred to as "Construction Chargebacks") and Landlord hereby waives
all Construction Chargebacks therefor.
IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this Lease
as of the day and year first above written.
(LANDLORD)
MISSION VIEJO ASSOCIATES, L.P., a California limited partnership
By: SIMON PROPERTY GROUP, L.P., a Delaware limited partnership, General Partner
By: SIMON PROPERTY GROUP, INC., a Delaware corporation, Managing General Partner
By:
David Simon, Chief Executive Officer
(TENANT)
If Corporation TOYS INTERNATIONAL
a California corporation
By:
Attest
<PAGE>
DESCRIPTION OF TENANT'S WORK
I. TENANT'S WORK - The following work required to complete and place the
Premises in finished condition ready to open for business is to be performed by
the Tenant at the Tenant's own expense and shall be in addition to any work
described in the Tenant Information Handbook. Tenant's Work includes, but is not
limited to, the following: --------
A. GENERAL PROVISIONS: All work done by Tenant shall be governed in all
respects by, and be subject to the following:
1. Payment and Performance Bonds. Landlord shall have the right to require
Tenant to furnish payment and performance bonds or other security in form
satisfactory to Landlord for the prompt and faithful performance of Tenant's
Work, assuring completion of Tenant's Work and conditioned that Landlord will be
held harmless from payment of any claim either by way of damages or liens on
account of bills for labor or material in connection with Tenant's Work.
2. Tenant's Work Standards. All Tenant's Work shall conform to applicable
statutes, ordinances, regulations, codes, all requirements of Factory Mutual,
all rating bureaus, and the Tenant Information Handbook which contains the basic
architectural, electrical and mechanical information necessary for the
preparation of Tenant's Plans, and which by this reference is incorporated into
and made a part of this Lease. Tenant shall obtain and convey to Landlord all
approvals, tests and inspections with respect to electrical, HVAC, plumbing and
telephone work, all as may be required by any agency or utility company.
Landlord reserves the right to require changes in Tenant's Work when necessary
by reason of the aforementioned standards.
3. Landlord Approvals. No approval by Landlord or Tenant shall be deemed
valid unless in writing and signed. by Landlord.
4. Space Verification. Tenant shall be obligated to have its architect,
store planner, engineer or contractor conduct an on-site verification of all
dimensions and field conditions prior to proceeding with Tenant's Work.
5. Insurance Requirements. Prior to commencement of Tenant's Work and until
completion thereof, or commencement of the Lease Term, whichever is the last to
occur, Tenant shall effect and maintain Builder's Risk Insurance covering
Landlord, Landlord's general contractor, Tenant, Tenant's contractors and
Tenant's subcontractors, as their interest may appear against loss or damage by
fire, vandalism and malicious mischief and such other risks as are customarily
covered by a standard "All Risk" policy of insurance protecting against all risk
of physical loss or damage to all Tenant's Work in place and all materials
stored at the site of Tenant's Work, and all materials, equipment, supplies and
temporary structures of all kinds incidental to Tenant's Work, and equipment,
all while forming a part of or contained in such improvements or temporary
structures, or while on the Premises or within the Landlord's Tract, all to the
actual replacement cost thereof at all times on a completed value basis. In
addition, Tenant agrees to indemnify and hold Landlord harmless against any and
all claims for injury to persons or damage to property by reason of the use of
the Premises for the performance of Tenant's Work, and claims, fines, and
penalties arising out of any failure of Tenant or its agents, contractors and
employees to comply with any law, ordinance, code requirement, regulations or
other requirement applicable to Tenant's Work and Tenant agrees to require all
contractors and subcontractors engaged in the performance of Tenant's Work to
effect and maintain and deliver to Tenant and Landlord, certificates evidencing
the existence of, and covering Landlord, Tenant and Tenant's contractors, prior
to commencement of Tenant's Work and until completion thereof, the following
insurance coverages:
a. Workmen's Compensation and Occupational Disease insurance in accordance
<PAGE>
with laws of the State in which the property is located and Employer's Insurance
to the limit of $100,000.00.
b. Commercial General Liability Insurance affording protection for bodily
injury, death, personal injury and property damage, and including coverage for
contractual liability, independent contractors, completed operations and
products liability with limits of not less than $3,000,000.00 combined single
limit per occurrence.
c. Comprehensive Automobile Liability Insurance, including coverage for
"non-owned" automobiles, for property damage, bodily injury, including death
resulting therefrom with limits of not less than $1,000,000.00 for any one
occurrence combined single limit.
d. Owners and contractors protective liability coverage for an amount not
less than $1,000,000.00.
6. Damage Deposit. Prior to commencement of construction in the Premises,
Tenant or its agent shall deliver a $1,000.00 damage deposit in the form of a
cashier's check made payable to Landlord. Landlord shall have the right to use
all or any part of said damage deposit as reimbursement for any damage caused by
Tenant or its contractors to any mall finishes. Any balance shall be refunded.
7. Temporary Services. Any temporary services required by Tenant during its
construction period, including, but not limited to, HVAC, plumbing, electrical
service and dumpster service for trash removal shall be secured by Tenant or
Tenant's agent at a specified cost per square foot of the Premises.
8. Impact Fees. Tenant shall pay impact fees assessed by applicable
governmental authorities having jurisdiction or reimburse Landlord for impact
fees paid on the Tenant's behalf.
9. Construction Rules. Tenant will abide by and cause its contractors,
subcontractors, agents and employees to abide by the reasonable rules and
regulations published by Landlord from time to time, including, but not limited
to, those pertaining to parking, toilet facilities, safety conduct, delivery of
materials and supplies, employee egress to the Center, trash storage or
collection or removal, and cooperation with Landlord's architect, general
contractor and subcontractors or other agents.
10. Reasonable Easement. Landlord specifically reserves the rights (and
Tenant shall permit Landlord or its employees, agents or contractors reasonable
access to the Premises for the purpose of exercising such rights), to install,
maintain, repair and replace in the ceiling space and/or under the concrete slab
in the Premises, all such electrical, plumbing, HVAC and other system components
that may be required to service the Common Areas or other tenants in the Center.
Adequate access panels or doors shall be incorporated into Tenant Work for
inspection, service and replacement of both Landlord and Tenant equipment.
B. STORE DESIGN AND CONSTRUCTION. This shall include, without limitation,
design and consulting fees, storefront and signing, interior partitions, all
interior finishes, visual merchandising and fixturing, furnishings and
equipment, lighting, plumbing, HVAC, mechanical and electrical systems
interface, all as described herein and in the Tenant Information Handbook. In
connection with Tenant's Work, Tenant shall file all drawings, plans and
specifications, pay all fees and obtain all permits and applications from
applicable governmental authorities having jurisdiction.
1. Roof. Tenant shall provide any required supports, blocking, temporary
flashing, counterflashing or other work necessary to complete installation of
Tenant's equipment on Landlord's roof. Cant strips and weatherproofing shall be
done only by contractor designated by Landlord. Tenant will be required to
<PAGE>
supplement existing construction to achieve assembly ratings, thermal values or
additional criteria as required by Tenant's Work.
2. Floor Slab. Where required, lower level tenants shall provide 3000 PSI
concrete slab with welded wire mesh reinforcing.
3. Walls and Doors. Tenant shall furnish and install 5/8" fire-rated gypsum
board, taped, floated, airtight against the deck above on the interior of all
common partitions in the Premises. Where required by Landlord, Tenant shall
provide transfer air openings to match the rating of the partition. All other
interior partitions in the Premises shall be constructed of non-combustible
materials in accordance with applicable code requirements. Where required,
Tenant shall provide and install an exit door with hardware between the Premises
and the Common Area or to the service courts. Tenant will be responsible for
repair, maintenance and replacement of the exit doors from the time Tenant's
contractor commences Tenant's Work in the Premises. If panic hardware is
required, it shall be provided by Tenant.
4. Ceiling. All interior finishes beyond the exposed structural systems
will be made by Tenant. Ceilings may be required by the Landlord to maintain
assembly ratings and building system functions.
5. Utilities and Services. Tenant is responsible for all connections to the
following utilities to make a complete, approved and operating system:
a. HVAC System. Tenant will utilize Landlord-specified VAV box(es) and
temperature controls to complete HVAC system including toilet, process, kitchen
and thermal exhaust systems.
b. Plumbing. Tenant will complete waste, grease waste, water and vent
systems utilizing Landlord-supplied utilities.
c. Fire Protection. Modifications to automatic fire sprinkler system will
be performed by contractor designated by Landlord. This work may include, but
not be limited to, the cost of relocating, re-sizing, adding sprinkler mains or
heads, draining the system and fire watch during system down-time.
d. Natural Gas. If available, gas will be used only for food service
process loads. Tenant shall make all necessary arrangements for service to the
Premises and complete the installation.
e. Electrical. Tenant shall furnish and pull required wiring in empty
conduit provided by Landlord to a specified electrical room. Tenant shall
install all electrical improvements within the Premises. Tenant shall employ
contractor designated by Landlord to complete all connections to Landlord
switchgear and for fuse installation. Tenant shall furnish the required fuse.
Tenant shall provide necessary components and devices so that HVAC systems may
be interlocked with Landlord's energy management system.
f. Communication Services. Tenant shall make all necessary arrangements
with available vendor(s) for communication services to the Premises. Special
applications will require Landlord's written approval prior to proceeding with
the work.
g. Life Safety Systems. Tenant shall provide all required life safety
system components necessary to comply with code and complete Landlord's
monitoring and alarm systems. Installations shall be performed by contractor
designated by Landlord.
6. Special Equipment. Tenant shall provide, as required, alarm systems or
other protective devices, public address system, conveyors, time clocks,
delivery door buzzers, fire extinguishers, dry chemical fire protection systems
<PAGE>
or any other equipment peculiar to Tenant's business needs.
7. Signing. Tenant will not erect any signs except in conformity with the
following:
a. The size of all Tenant's signs shall be limited. The scale and concept
of the enclosed mall requires the use of signs which are not larger than
necessary to be legible from within the mall. Thus except for department store
signs, Tenant's signs shall be located within the limits of its storefront and
shall not project more than six inches beyond the storefront and shall conform
to the following proportionate height criteria:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
30-foot storefront 18" capitals 12" body
30 to 60-foot storefront 24" capitals 18" body
60-foot and over storefront 30" capitals 24" body
</TABLE>
b. In addition to complying with the above criteria, signs in the enclosed
malls shall be limited in length to 70% of Tenant's frontage on the mall and
shall in no case exceed a length of thirty feet.
c. Painted or printed signs on the exterior surface of any building shall
be prohibited, except for those tenants who have exterior storefronts. In this
case, small-scale signs relative to store name and stating store hours may be
professionally lettered on the glass of the storefront subject to Landlord's
written approval.
d. Public safety decals on glass in minimum sizes to comply with applicable
Code, subject to the approval of Landlord, may be used as required by building
codes or other governmental regulations.
e. Paper signs, stickers, banners or flags are prohibited.
f. Except as otherwise approved in writing by Landlord, only one storefront
identification sign for Tenant will be permitted with the enclosed mall areas,
except that corner tenants may have two such signs.
g. Tenant shall not install any roof-top signs or pylon signs. No signs
will be permitted at the rear of any building.
C. CLOSE-OUT REQUIREMENTS. Tenant's Work shall be deemed completed at such
time as Tenant, at its sole expense and without cost to Landlord, shall provide:
1. Proof of Payment. Furnish evidence satisfactory to Landlord that all of
Tenant's Work has been completed and paid for in full, provided that Tenant
shall not be required to provide lien waivers or other proof as to contractors
or materialmen having contracts involving $10,000.00 or less each, (and that
such work has been accepted by Landlord), including the costs for Tenant's Work
that may have been done by Landlord and the costs for any other work done by
Landlord which Landlord may be entitled to payment in accordance with the
provisions of this Exhibit "B", the Tenant Information Handbook, or elsewhere in
the Lease, that any and all liens therefor that have been or might be filed have
been discharged of record or waived, and that no security interests relating
thereto are outstanding.
2. Tenant's Affidavit. Furnish an affidavit from Tenant listing all
contractors and any material suppliers in the employ of said Tenant who have
provided goods or services for the completion of Tenant's Work in the Premises.
<PAGE>
3. Tenant Contractor's Affidavit. Furnish an affidavit from Tenant's
general contractor listing all parties who have furnished materials or labor or
services to that contractor for completion of Tenant's Work in the Premises.
4. Certificate of Occupancy. Furnish all certificates and other approvals
with respect to Tenant's Work that may be required from any governmental
authority and any board of fire underwriter's or similar body for the use and
occupancy of the Premises.
5. Record Drawings. Furnish Landlord with one set of reproducible record
drawings of the Premises showing any changes made during construction.
6. Estoppel Certificate. Furnish a Tenant-executed estoppel certificate as
may be required by Landlord or Landlord's mortgagee.
<PAGE>
GUARANTY
FOR VALUE RECEIVED, and in consideration of the execution of a certain
Lease of even date herewith and concurrently herewith covering certain premises
in the Mission Viejo Mall Shopping Center, the creation of the tenancy under
said Lease and the extension of credit by Mission Viejo Associates, L.P., a
California limited partnership (Landlord) to Play Co. Toys International &
Entertainment Corp., a California Delaware corporation (Tenant), and for the
purpose of inducing Landlord to enter into such Lease, the undersigned, jointly
and severally, do hereby absolutely and unconditionally guarantee to Landlord,
its successors and assigns, the full and prompt payment when due, of all rents,
charges and additional sums coming due under said Lease, together with the
performance of all covenants and agreements of the Tenant therein contained and
together with the full and prompt payment of all damages that may arise or be
incurred by Landlord in consequence of Tenant's failure to perform such
covenants and agreements (all such obligations hereinafter collectively referred
to as "Liabilities"), and the undersigned further agree to pay all expenses,
including attorneys' fees and legal expenses, paid or incurred by Landlord in
endeavoring to collect or enforce the Liabilities or any part thereof and in
enforcing this guaranty, such payment and performance to be made or performed by
the undersigned forthwith upon a default by Tenant.
In the event of the death, incompetency, dissolution, bankruptcy or
insolvency of Tenant, or the inability of Tenant to pay debts as they mature, or
an assignment by Tenant for the benefit of creditors, or the institution of any
bankruptcy or other proceedings by or against Tenant alleging that Tenant is
insolvent or unable to pay debts as they mature, or Tenant's default under this
Lease, and if such event shall occur at a time when any of the Liabilities may
not then be due and payable, the undersigned agree to pay to Landlord upon
demand, the full amount which would be payable hereunder by the undersigned if
all Liabilities were then due and payable.
This Guaranty shall be an absolute and unconditional guaranty and shall
remain in full force and effect as to the undersigned during the demised term of
said Lease, and any renewal or extension thereof, and thereafter so long as any
Liabilities remain due and payable even though the demised term or any renewal
or extension thereof shall have expired. An Assignment of said Lease or any
subletting thereunder shall not release or relieve the undersigned from their
liability hereunder.
Landlord may, from time to time, without notice to the undersigned: (a)
retain or obtain a security interest in any property to secure any of the
Liabilities or any obligation hereunder, (b) retain or obtain the primary or
<PAGE>
secondary liability or any party or parties, in addition to the undersigned,
with respect to any of the Liabilities, (c) extend or renew for any period
(whether or not longer than the original period), alter or exchange said Lease
or any of the Liabilities, (d) release, waive or compromise any liability of any
of the undersigned hereunder or any liability of any other party or parties
primarily or secondarily liable on any of the Liabilities, (e) release or impair
any security interest or lien, if any, in all or any property securing any of
the Liabilities or any obligation hereunder and permit any substitution or
exchange for any such property, and (f) resort to the undersigned for payment of
any of the Liabilities, whether or not Landlord shall have resorted to any
property securing any of the Liabilities or any obligation hereunder or shall
have proceeded against any other of the undersigned or against Tenant or any
other party primarily or secondarily liable on any of the Liabilities. No such
action or failure to act by Landlord shall affect the undersigned's liability
hereunder in any manner whatsoever. Any amount received by Landlord from
whatsoever source and applied by it toward the payment of the Liabilities shall
be applied in such order of application as Landlord may from time to time elect.
The undersigned hereby expressly waive: (a) notice of the acceptance of
this Guaranty, (b) notice of the existence, creation, amount, modification,
amendment, alteration or extension of the Lease or all or any of the
Liabilities, whether or not such notice is required to be given to Tenant under
the terms of the Lease, (c) presentment, demand, notice of dishonor, protest,
and all other notices whatsoever, (d) any benefit of valuation, appraisement,
homestead or other exemption law, now or hereafter in effect in any jurisdiction
in which enforcement of this Guaranty is sought, and (e) all diligence in
collection, perfection or protection of or realization upon the Liabilities or
any thereof, any obligation hereunder, or any security for any of the foregoing.
No delay on the part of Landlord in the exercise of any right or remedy
shall operate as a waiver thereof, and no final or partial exercise by Landlord
of any right or remedy shall preclude other or further exercises thereof or the
exercises of any other right or remedy.
The validity of this Guaranty and the obligations of the undersigned
hereunder shall not be terminated, affected or impaired by reason of any action
which Landlord may take or fail to take against Tenant or by reason of any
waiver of, or failure to enforce, any of the rights or remedies reserved to
Landlord in said Lease, or otherwise, or by reason of the bankruptcy or
insolvency of Tenant and whether or not the term of said Lease shall terminate
by reason of said bankruptcy or insolvency.
This Guaranty shall be binding upon the undersigned, and upon the heirs,
legal representatives, successors and assigns of the undersigned and shall be
governed by the laws of the State of California. Indiana.
If this Guaranty is executed by a corporation, association, partnership
(general or limited), joint venture, syndicate, trust or any other type of
organization other than individuals, the individual signatories hereto
undersigned represents and warrants that they, the individual signatories
hereto, and each of them, are duly authorized to execute this Guaranty for and
on behalf of such organization and that such organization is the sole owner of
all ownership interest in the Tenant.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument, or
caused this instrument to be executed by its officers, duly authorized in the
premises, on this _______ day of _______________, 19_____.
<TABLE>
<CAPTION>
<S> <C>
Attest Play Co. Toys & Entertainment Corp.
______________________________________ By:__________________________________
------------------------------------
550 Rancheros Drive
-------------------------------------
San Marcos California 92069
</TABLE>
Exhibit 10.126
Premier Capital Corp.
LEASE AGREEMENT ("Lease")
APPROVAL NO. 45649
LESSEE LEASE NO. CUSTOMER NO. 55967
COMPANY NAME:
Play Co. Toys & Entertainment Corp.
ADDRESS:
550 Rancheros Drive SUPPLIER
San Marcos CA 92069 See Attached Addendum
CONTACT NAME:
Jim Frakes
PHONE:
760-471-4505
EQUIPMENT LOCATION (IF DIFFERENT FROM ABOVE) STREET ADDRESS:
(same)
CHECK DATE: _____ X CORPORATION PARTNERSHIP PROPRIETORSHIP LIMITED
LIABILITY COMPANY E Q U I P M E N T D E S C R I P T I O N X SEE ATTACHED
ADDENDUM
QUANTITY: MAKE/MODEL: SERIAL NUMBER:
S C H E D U L E O F M O N T H L Y L E A S E
P A Y M E N T S
LEASE TERM NUMBER OF AMOUNT OF TOTAL EQUAL TO 2 MONTH(S): $6,363.90
- -- ---------
(Months) PAYMENTS PAYMENT PLUS ADVANCE USE TAX ON ADVANCE: $ incl
- ----------
APPLICABLE LEASE ONE-TIME DOCUMENTATION FEE $ 100.00
- ----------
36 36 AT $2,953.09 TAXES PAYMENT TOTAL INITIAL PAYMENT $6,463.90
ADDITIONAL PROVISIONS END OF LEASE PURCHASE OPTION
_________________________ End of lease purchase option shall be 10% of the Total
Lease Base
_________________________ or Fair Market Value (whichever is greater) or unless
another purchase option has been checked.
X $1.00 Purchase Option Other _______________
T E R M S A N D C O N D I T I O N S (c o n t i n u e d o n p a g e 2)
AGREEMENT. Lessee agrees that: (a) Lessee has read and understands the
terms and conditions on page 1 and page 2 of this Lease; (b) this Lease cannot
be canceled and Lessee has an unconditional obligation to make all payments due
under this Lease without reduction, withholding or off-set; (c) the person
signing this Lease has the authority to do so and to grant the power of attorney
set forth in paragraph 10 of this Lease; (d) this Lease is a commercial
transaction and not a consumer transaction; (e) Lessee has reviewed and approved
the supply contract covering the purchase of the Equipment from the supplier;
and (f) this Lease will be governed by the laws of the Commonwealth of
Massachusetts and Lessee consents to the jurisdiction of any court located
within the Commonwealth. Lessor and Lessee both waive any rights to a trial by
jury.
LEASE. Lessor agrees to lease to Lessee and Lessee agrees to lease from
<PAGE>
Lessor the Equipment described above and in any addendum to this Lease. Lessor
may charge Lessee a documentation fee to cover lease documentation and
investigative costs. The Lease will commence on the date when the Equipment is
received by Lessee.
DELIVERY AND ACCEPTANCE OF EQUIPMENT. Upon delivery of the Equipment to the
location identified above. Lessee will inspect the Equipment and the Equipment
will be deemed irrevocably accepted by Lessee upon the earlier of: a) five (5)
days after delivery of the Equipment; or b) delivery to Lessor of a signed
Delivery and Acceptance Receipt. ONCE LESSEE SIGNS THIS LEASE AND LESSOR ACCEPTS
IT, THIS LEASE WILL BE NONCANCELLABLE FOR THE FULL LEASE TERM.
LEASEPAYMENTS. Lessee agrees to pay to Lessor the monthly Lease payments
and for the number of months as shown above. Any advance Lease payments will be
used for the first Lease payment and any balance will be used for the last Lease
payment(s). Unless otherwise indicated above, the first Lease payment is due on
or before the Equipment is delivered to Lessee. Remaining Lease payments will be
due on the day of each subsequent month (or such other time period specified
above) designated by Lessor. Lessee authorizes Lessor to adjust the Lease
Payment by not more than 10% if the actual Total Lease Base differs from the
estimated Total Lease Base. The Total Lease Base is the amount Lessor has paid
in connection with the purchase , delivery and installation of the Equipment,
including any trade-up or buyout amounts. If any part of a payment is more than
five (5) days late, Lessee shall pay a late charge of up to 10% of the payment,
all or a portion of which is late (or such lesser rate as is the maximum rate
allowable under applicable law).
DISCLAIMER OF WARRANTIES. Lessor is leasing the Equipment to Lessee
"AS-IS." LESSEE ACKNOWLEDGES THAT LESSOR DOES NOT REPRESENT THE MANUFACTURER OR
THE SUPPLIER. LESSEE HAS SELECTED THE EQUIPMENT AND SUPPLIER BASED UPON ITS OWN
JUDGEMENT. LESSOR MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE. LESSEE
AGREES THAT ANY CLAIMS RELATIVE TO THE EQUIPMENT SHALL BE MADE SOLELY AGAINST
THE MANUFACTURER OR SUPPLIER, AND IN NO
EVENT SHALL LESSOR BE LIABLE FOR DAMAGES ARISING DIRECTLY OR INDIRECTLY
FROM THE EQUIPMENT, WHETHER CONSEQUENTIAL, DIRECT, SPECIAL, OR INDIRECT. LESSOR
TRANSFERS TO LESSEE ANY WARRANTIES BY THE MANUFACTURER OR SUPPLIER REGARDING THE
EQUIPMENT. Lessee hereby agrees that either _____________ or its wholly owned
subsidiary __________________ is to be the Lessor under this Lease as identified
by the check mark next to its name. This lease is not Binding until accepted by
Lessor.
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<CAPTION>
<S> <C>
LESSOR: X ___________________________. LESSEE: Play Co. Toys & Entertainment Corp.
-----------------------------------
By: ___________________________________________ Signature: ______________________________
Title: _________________ Date Accepted: ___________ Title: _______________ Date Accepted: ___________
</TABLE>
LOCATION AND USE OF EQUIPMENT. Lessee agrees not to change the location of
the Equipment without the written consent of Lessor. Lessee will keep the
Equipment in compliance with manufacturer's requirements and in good condition
except for ordinary wear and tear. The Equipment will not have any alterations,
additions or replacements to it, without Lessor's prior written consent. At the
end of the Lease term (or any other renewal term), or if the Lease is terminated
for any reason, Lessee, at its expense, will return the Equipment to any place
designated by Lessor, freight prepaid, in the same condition it was delivered
except for ordinary wear and tear. Lessee, at its own expense, will insure the
Equipment for its full replacement value during shipping and name the Lessor as
<PAGE>
a "Loss Payee." Lessor may charge Lessee an inspection service fee for assessing
the condition of returned Equipment.
TAXES AND FEES. Lessee shall pay all taxes, fees and charges relative to
this Lease or the Equipment during the term of the Lease. Lessor will file all
personal property, use or other tax returns (unless Lessor notifies Lessee
otherwise) and Lessee agrees to pay Lessor a fee for making such filings. Lessor
does not have to contest any taxes, fines or penalties. Lessee will pay
estimated property taxes with each Lease payment or periodically as invoiced by
Lessor.
1 INSURANCE; RISK OF LOSS. Lessee, at its own expense, shall keep insurance
against all risks of loss, theft, damage, or destruction of the Equipment for
the full replacement value thereof. Lessee shall furnish Lessor with a
certificate of insurance which shall: (a) name Lessor as "Loss Payee," and (b)
not be canceled except upon thirty (30) days written notice to Lessor. If Lessee
fails to provide Lessor evidence of insurance, then Lessor may at its option
obtain insurance covering Lessor's interest in the Equipment, from an insurer of
Lessor's choice (which may be an affiliate). If Lessor purchases such insurance,
Lessee will cooperate with Lessor's insurance agent with respect to the
placement of insurance and the processing of claims. Lessee also acknowledges
that Lessor is not required to procure or maintain any insurance, and that
Lessor will not be liable to Lessee if such insurance coverage is discontinued.
Lessee agrees to pay to Lessor the Lessor's costs for such insurance and a fee
for Lessor's administration of such insurance. Lessee shall bear all risks of
loss, theft, damages or destruction of the Equipment ("Loss") from any cause
whatsoever and any such Loss shall not relieve Lessee from any obligation under
the Lease including to make Lease payments. Lessee also at its expense shall
maintain public liability and third party property insurance naming Lessor as an
additional insured, in such form, amount and with companies acceptable to
Lessor. Lessee shall upon request from Lessor provide a certificate or other
evidence of such insurance.
1 TITLE; PERSONAL PROPERTY. The Equipment is and at all times shall remain
the sole property of the Lessor. No right, title or interest in the Equipment
shall pass to Lessee other than the right to maintain possession and use of the
Equipment for the full Lease term, conditioned upon Lessee's compliance with the
terms and conditions of the Lease. However, if this Lease is determined to be a
lease intended for security, Lessee grants Lessor a purchase money security
interest in the Equipment. Lessee agrees to keep the Equipment free and clear of
all liens, claims and encumbrances. Lessor may inspect the Equipment at any
reasonable time.
1 UCC FILINGS. Lessee authorizes Lessor to file a copy of this Lease as a
financing statement and appoints Lessor or Lessor's Designee as Lessee's
attorney-in-fact to execute and file, on Lessee's behalf, financing statements
covering this Equipment or, if requested, Lessee will deliver to Lessor signed
financing statements.
1 STATUTORY FINANCE LEASE. IT IS THE INTENT OF THE PARTIES THAT THIS LEASE
QUALIFY AS A STATUTORY FINANCE LEASE UNDER ARTICLE 2A OF THE UNIFORM COMMERCIAL
CODE. LESSEE HAS SELECTED BOTH (A) THE EQUIPMENT AND (B) THE SUPPLIER FROM
WHICHLESSOR IS TO PURCHASE THE EQUIPMENT. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, LESSEE WAIVES ALL RIGHTS AND REMEDIES CONFERED UPON A LESSEE BY ARTICLE 2A.
LESSEE MAY HAVE RIGHTS UNDER THE SUPPLY CONTRACT EVIDENCING THE LESSOR'S
PURCHASE OF THE EQUIPMENT AND LESSEE SHOULD CONTACT THE SUPPLIER FOR A
DESCRIPTION OF ANY SUCH RIGHTS.
1 DEFAULT. Lessee shall be in default if: (a) Lessee fails to make any
Lease payment within five (5) days after the date the payment is due; (b) Lessee
fails to perform any other of its obligations under this Lease or in any other
agreement with Lessor and this failure continues for 10 days after Lessor sends
<PAGE>
Lessee notice of it; (c) any guarantor of the Lease dies or does not perform
guarantor's obligations under the guaranty; or (d) Lessee or any guarantor files
a petition in bankruptcy or seeks similar relief.
1 REMEDIES. If a default occurs, Lessor may do one or more of the
following: (a) cancel this Lease and all other leases that Lessor has entered
into with Lessee; (b) require Lessee to immediately pay Lessor, as compensation
for loss of Lessor's bargain and not as a penalty, a sum equal to (1) the
present value of all unpaid lease payments for the remainder of the Lease term
plus the present value of the anticipated residual interest in the Equipment,
each discounted at 5% per year, compounded monthly, plus (2) all other amounts
due or that become due under the Lease; (c) require Lessee to deliver the
Equipment to Lessor; (d) take peaceful possession of the Equipment with or
without court order; and (e) exercise any other right or remedy available at law
or in equity. Each right and remedy shall be cumulative and may be exercised
singly or in combination. If Lessor takes possession of the Equipment, Lessor
may sell or otherwise dispose of the Equipment with or without notice, at a
public or private sale, and Lessor will apply the net proceeds (after Lessor has
deducted all costs related to the sale or disposition of the Equipment) to the
amounts that Lessee owes Lessor. Lessee will remain responsible for any amounts
still owed to Lessor.
1 ASSIGNMENT. Lessee shall not assign, sublet, lend, transfer, or pledge
the Lease or the Equipment without Lessor's prior written approval. Lessor may
assign, transfer, pledge or sell Lessor's interest in the Lease and/or the
Equipment. Upon notification of such assignment, Lessee shall remit Lease
payments directly to such assignee. Assignee will have the same rights Lessor
has under this Lease but not Lessor's obligations. Lessee agrees that any
assignee will not be subject to any claims, defenses or set-offs Lessee may have
against Lessor or any third party.
1 PURCHASE OPTION. Upon expiration of the Lease term, provided Lessee is
not in default, Lessee shall have the option to purchase the Equipment under the
terms set forth on page 1 of the Lease. As applicable, Lessor will use its
reasonable judgement to determine the Equipment's in use and in place fair
market value. If Lessee disagrees with Lessor's determination, such fair market
value shall be determined by a mutually acceptable independent appraiser. All
fees and expenses of the appraiser shall be paid by the Lessee. Upon payment of
the Purchase Option price, plus applicable taxes, Lessor shall transfer its
interest in the Equipment to Lessee "AS IS" "WHERE IS". Lessor may charge Lessee
a fee for costs and expenses relating to the release of its interest in the
Equipment.
1 RETURN OF EQUIPMENT; AUTOMATIC RENEWAL. Excluding the Lessee exercising
the option to purchase the Equipment, if Lessee fails to return the Equipment
within 10 days of the expiration of the Lease term, this Lease will
automatically renew for an additional 12 month term and thereafter renew for
successive 1 month terms until Lessee returns the Equipment at the end of the
renewal term. Lessee shall pay the monthly Lease payments during such renewal
term(s).
1 LESSEE'S EXPENSES. If costs are incurred to protect Lessor's interest due
to nonperformance of any of the Lessee's obligations under this Lease, Lessee
shall pay Lessor's costs and expenses. This may include reasonable attorney's
fees, incurred by Lessor in exercising its rights hereunder.
1 AUTHORIZATION. Lessee authorizes Lessor to obtain credit reports from
time to time and make other credit inquiries at Lessor's sole discretion. Upon
Lessee's request, Lessor will inform Lessee whether Lessor had requested a
personal credit bureau report and the name and address of the credit reporting
agency that furnished the report.
<PAGE>
1 INDEMNITY. Lessee shall indemnify Lessor against, and hold Lessor
harmless from, any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorney" fees, arising out of,
connected with, or resulting from the Lease or the Equipment without limitation.
1 NON-WAIVER. Lessor's failure to require performance by Lessee of any
provisions of the Lease shall not be a waiver thereof.
1 SEVERABILITY. This Lease contains the entire agreement between the
parties regarding the lease of the Equipment; however, if any provision of the
Lease be declared invalid, the remaining provisions shall remain in force and in
effect.
1 MODIFICATION. Lessee hereby authorizes Lessor to fill in dates and to
indicate the name of the Lessor as well as make minor corrections in the Lease,
but otherwise, the Lease shall not be changed except by written agreement
executed by the parties.
1 INTENT. It is the express intent of the parties not to violate any
applicable usury laws or to exceed the maximum amount of time-price differential
or interest (as applicable) permitted to be charged or collected under
applicable law, and any such excess payment will be applied to Lease payments in
inverse order of maturity and any remaining excess shall be returned to the
Lessee.
1 FAX ACKNOWLEDGEMENT AND CERTIFICATION. By signing below, Lessee
acknowledges that the Lease is being transmitted by fax and Lessee agrees that a
fax copy of the signed Lease may be used by Lessor in any action to enforce
Lessor's rights under the Lease. Lessee also certifies that each of the
provisions contained on page 1 and page 2 of the Lease (and, if applicable,
contained in any related addendum) is clear and legible and Lessee understands
that Lessor is relying on this acknowledgement and certification in entering
into the Lease.
Lessee sign here:
Title Date
Exhibit 10.127
Lease Agreement - Venetian
GRAND CANAL SHOPS
Clark County, Nevada
LANDLORD
Grand Canal Shops Mall Construction, LLC,
a Delaware limited liability company
TENANT
Toys International,
a California corporation
Space No.
1212
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
<S> <C>
INTRODUCTORY PROVISIONS 1
Section 1.0 - Basic Lease Provisions ....................................... 1
(a) Shopping Center ............................................... 1
(b) Space Number .................................................. 1
(c) Approximate Premises GLA ...................................... 1
(d) Term of Lease ................................................. 1
(e) Scheduled Opening Date ........................................ 1
(f) Rent Commencement Date ........................................ 1
(g) Fixed Minimum Rent ............................................ 2
(h) Percentage Rent ............................................... 2
(i) Payment of Percentage Rent ................................... 2
(j) Sales Reports ................................................. 2
(k) One Time Grand Opening Assessment ............................. 2
(l) Annual Marketing Fund Charge .................................. 3
(m) Intentionally Omitted ......................................... 3
(n) Tenant Insurance .............................................. 3
(o) CAM Costs ..................................................... 3
(p) Taxes ......................................................... 3
(q) Intentionally Omitted ......................................... 3
(r) Utility Services and Charges .................................. 3
(s) Tenant's Trade Name ........................................... 3
(t) Permitted Use ................................................. 3
(u) Intentionally Omitted ......................................... 3
(v) Legal Notice Address .......................................... 3
(w) Security Deposit .............................................. 4
(x) Guarantor ..................................................... 4
(y) Additional Provisions .................................................. 4
Section 1.1 - Defined Terms ................................................ 5
ARTICLE II
EXHIBITS ............................................................... 6
Section 2.1 - Exhibits ................................................. 6
ARTICLE III
PREMISES ............................................................... 6
Section 3.1 - Premises ................................................. 6
Section 3.2 - Gross Leasable Area of the Premises ...................... 7
Section 3.3 - Revisions to Premises GLA ................................ 7
Section 3.4 - Landlord's Reservation ................................... 7
Section 3.5 - Relocation ............................................... 7
Section 3.6 - Remodeling ............................................... 8
ARTICLE IV
COMMON AREAS ........................................................... 9
Section 4.1 - Use ...................................................... 9
Section 4.2 - Management and Operation of Common Areas ................. 9
ARTICLE V
CHANGES AND ADDITIONS TO
SHOPPING CENTER SITE PLAN AND LEASING PLAN ............................. 9
Section 5.1 - Site Plan ................................................ 9
Section 5.2 - Changes to Shopping Center Site Plan ..................... 9
ARTICLE VI
<PAGE>
IMPROVEMENTS ........................................................... 10
Section 6.1 - Landlord's Responsibilities .............................. 10
Section 6.2 - Tenant's Responsibilities ................................ 11
Section 6.3 - Tenant's Trade Fixtures .................................. 11
Section 6.4 - Construction Lien ........................................ 12
Section 6.5 - Labor Cooperation ........................................ 12
ARTICLE VII
PLANS .................................................................. 12
Section 7.1 - Submission of Plans ...................................... 12
ARTICLE VIII
USE .................................................................... 13
Section 8.1 - Use ...................................................... 13
Section 8.2 - Tenant's Covenant to Operate ............................. 13
Section 8.3 - Prohibitions on Use ...................................... 13
Section 8.4 - Manner of Operation of Business .......................... 14
Section 8.5 - Privileged License ....................................... 14
Section 8.6 - Vendor Agreements ........................................ 15
ARTICLE IX
TERM ................................................................... 15
Section 9.1 - Term ..................................................... 15
Section 9.2 - Commencement Date Agreement .............................. 15
Section 9.3 - Holding Over ............................................. 15
Section 9.4 - Expiration of the Term of the Lease ...................... 15
Section 9.5 - Renewal of Term .......................................... 16
ARTICLE X
RENT COMMENCEMENT DATE ................................................. 16
Section 10.1 - Rent Commencement Date .................................. 16
Section 10.2 - Failure of Delivery of Premises to Tenant ............... 16
Section 10.3 - Tenant's Failure to be Open by the Rent Commencement Date 16
ARTICLE XI
RENT ................................................................... 17
Section 11.1 - Fixed Minimum Rent ...................................... 17
Section 11.2 - Percentage Rent ......................................... 17
Section 11.3 - Gross Revenue ........................................... 18
Section 11.4 - Exclusion from Gross Revenue ............................ 18
Section 11.5 - Reporting ............................................... 19
Section 11.6 - Books and Records ....................................... 20
ARTICLE XII
ADDITIONAL CHARGES ..................................................... 21
Section 12.1 - Status of Charges ....................................... 21
Section 12.2 - Common Area Maintenance Costs ........................... 21
Section 12.3 - Real Estate Taxes ....................................... 23
Section 12.4 - Marketing Fund .......................................... 25
Section 12.5 - Security Deposit ........................................ 25
Section 12.6 - Grand Opening Marketing Assessment ...................... 26
ARTICLE XIII
PREMISES UTILITY SERVICES .............................................. 26
Section 13.0 - Status of Charges ....................................... 26
Section 13.1 - Utilities ............................................... 26
Section 13.2 - Premises Heating, Ventilating and Air-conditioning System 26
Section 13.3 - Discontinuance of Service ............................... 26
Section 13.4 - Interruption of Service ................................. 27
ARTICLE XIV
SIGNS .................................................................. 27
<PAGE>
Section 14.1 - Tenant's Obligation ..................................... 27
Section 14.2 - Interior Signs and Advertising .......................... 27
ARTICLE XV
REPAIRS AND ALTERATIONS ................................................ 27
Section 15.1 - Repairs by Landlord ..................................... 27
Section 15.2 - Repairs by Tenant ....................................... 28
Section 15.3 - Alterations and Remodeling .............................. 28
Section 15.4 - Renovation .............................................. 29
Section 15.5 - Refurbishment ........................................... 29
ARTICLE XVI
LIENS .............................................................. 29
Section 16.1 - Indemnification by Tenant ........................... 29
Section 16.2 - Tenant's Right of Contest ........................... 29
ARTICLE XVII
INDEMNITY AND INSURANCE ............................................ 29
Section 17.1 - Mutual Indemnification .............................. 29
Section 17.2 - Tenant's Insurance .................................. 30
Section 17.3 - Landlord's Insurance ................................ 32
Section 17.4 - Waiver of Subrogation ............................... 33
Section 17.5 - Landlord Not Responsible for Acts of Others ......... 33
ARTICLE XVIII
GENERAL RULES AND REGULATIONS ...................................... 33
Section 18.1 - Uniformity .......................................... 33
Section 18.2 - Rubbish ............................................. 33
Section 18.3 - Lighting ............................................ 33
Section 18.4 - Merchandise Display, Loading and Unloading .......... 33
Section 18.5 - Obstruction of Passageways .......................... 34
Section 18.6 - Employee Parking .................................... 34
Section 18.7 - Interference With Other Tenants ..................... 34
Section 18.8 - Security ............................................ 34
Section 18.9 - Employee Areas ...................................... 34
Section 18.10 - Tenant Conduct ..................................... 34
Section 18.11 - Gaming ............................................. 34
Section 18.12 - Prohibited Advertising ............................. 35
Section 18.13 - Resort References .................................. 35
Section 18.14 - Prohibited Uses .................................... 35
Section 18.15 - Employee Drug Testing .............................. 35
ARTICLE XIX
SUBORDINATION AND ATTORNMENT BY TENANT ............................. 35
Section 19.1 - Subordination of Lease .............................. 35
Section 19.2 - Attornment by Tenant ................................ 36
ARTICLE XX
RIGHTS OF LANDLORD ................................................. 36
Section 20.1 - Landlord's Right to Repair .......................... 36
Section 20.2 - Landlord's Right to Affix Sign ...................... 36
Section 20.3 - Landlord's Right to Make Payments on Behalf of Tenant 36
ARTICLE XXI
ASSIGNMENT AND SUBLETTING .......................................... 36
Section 21.1 - Landlord's Consent Required ......................... 36
Section 21.2 - Insolvency Proceedings .............................. 37
Section 21.3 - Return of Premises by Tenant ........................ 37
Section 21.4 - Transfer of Ownership ............................... 37
Section 21.5 - Acceptance of Rent by Landlord ...................... 38
Section 21.6 - No Release of Tenant's Liability .................... 38
Section 21.7 - Legal Fees .......................................... 38
<PAGE>
ARTICLE XXII
DAMAGE OR DESTRUCTION .............................................. 38
Section 22.1 - Landlord's Obligation to Repair and Reconstruct ..... 38
Section 22.2 - Option to Terminate ................................. 39
Section 22.3 - Demolition of Landlord's Building ................... 39
Section 22.4 - Damage to Shopping Center ........................... 39
ARTICLE XXIII CONDEMNATION ................................................. 40
Section 23.1 - Effect of Taking .................................... 40
Section 23.2 - Compensation and Awards ............................. 40
Section 23.3 - Condemnation or Breach of Lease ..................... 40
ARTICLE XXIV
DEFAULT ............................................................ 40
Section 24.1 - Events of Default ................................... 40
Section 24.2 - Remedies and Damages ................................ 41
Section 24.3 - Repeated Default .................................... 42
Section 24.4 - Waiver of Rights of Redemption ...................... 42
Section 24.5 - Removal of Tenant ................................... 42
Section 24.6 - Default by Landlord ................................. 43
ARTICLE XXV
COMPETITION ........................................... 43
Section 25.1 - Restriction on Tenant .................. 43
Section 25.2 - Imposition of Damages .................. 43
ARTICLE XXVI
NOTICES ............................................... 44
Section 26.1 - Notices to Tenant and Landlord ......... 44
Section 26.2 - Notices to Mortgagee ................... 44
ARTICLE XXVII
MISCELLANEOUS ......................................... 44
Section 27.1 - Accord and Satisfaction ................ 44
Section 27.2 - Complete Agreement ..................... 44
Section 27.3 - Governing Law .......................... 45
Section 27.4 - Compliance with Governmental Authorities 45
Section 27.5 - Brokerage .............................. 45
Section 27.6 - Effective Date of Lease ................ 45
Section 27.7 - Estoppel Certificates .................. 45
Section 27.8 - Force Majeure .......................... 46
Section 27.9 -Partial Invalidity ...................... 46
Section 27.10 - Memorandum of Lease ................... 46
Section 27.11 - Quiet Enjoyment ....................... 46
Section 27.12 - Rent Demand ........................... 46
Section 27.13 - Section Headings ...................... 46
Section 27.14 - Successors and Assigns ................ 46
Section 27.15 - Waiver ................................ 46
Section 27.16 - Exculpation ........................... 47
Section 27.17 - Transfer of Landlord's Interest ....... 47
Section 27.18 - Time of the Essence ................... 47
Section 27.19 - Remedies Cumulative ................... 47
Section 27.20 - Joint Liability ....................... 47
Section 27.21 - Drafting .............................. 47
Section 27.22 - Perpetuities .......................... 47
ARTICLE XXVIII DISPUTE RESOLUTION 48
GUARANTY 50
</TABLE>
<PAGE>
L E A S E
THIS LEASE is entered into as of this 22nd day of July, 1998, by and
between Grand Canal Shops Mall Construction, LLC, a Delaware limited liability
company, hereinafter called "Landlord", and Toys International, a California
corporation, hereinafter called "Tenant".
ARTICLE I INTRODUCTORY PROVISIONS
Section 1.0 - Basic Lease Provisions .
The following Basic Lease Provisions are an integral part of this Lease,
are referred to in other sections hereof (including, without limitation, the
sections identified below) and are presented in this Section 1.0 for the
convenience of the parties. They are not intended to constitute an exhaustive
list of all charges which may become due and payable under this Lease.
(a) Shopping Center : (Article I, Section 1.1(h)) ` Grand Canal Shops
(b) Space Number : (Article III, Section 3.1) 1212
(c) Approximate Premises GLA : (Article III, Section 3.3)
7,002 square feet total
5,002 square feet first level
2,000 square feet second level
(d) Term of Lease: (Article IX, Section 9.1)
(i) Five (5) Lease Years (as hereinafter defined) commencing on the Rent
Commencement Date (as hereinafter defined) and expiring on the Term Expiration
Date (as hereinafter defined).
(ii) Renewal Term: One (1) option of five (5) Lease Years.
(e) Scheduled Opening Date : (Article X, Section 10.1) April 21, 1999, or
such other date as Landlord may reasonably determine as the opening date for the
Resort (which shall not be earlier than April 1, 1999), provided Landlord
notifies Tenant in writing at least thirty (30) days prior to such alternative
Scheduled Opening Date.
(f) Rent Commencement Date: (Article X, Section 10.1) The later of (i) the
date one hundred ten (110) days after Landlord delivers possession of the
Premises to Tenant with the work to be performed by Landlord under Section
6.1(a) completed other than details of construction which do not materially
interfere with the performance of the work to be performed by Tenant under
Section 6.2, (ii) the Scheduled Opening Date, or (iii) the grand opening of the
Shopping Center; provided, however, that in no event shall the Rent Commencement
Date be later than the date Tenant opens for business.
(g) Fixed Minimum Rent: (Article XI, Section 11.1) During Lease Years 1-3
of the initial Term of this Lease, the Fixed Minimum Rent shall be Four Hundred
Fifty Thousand Dollars ($450,000) per annum (Seventy-Nine and 97/100 Dollars
($79.97) per square foot of the first level Premises GLA per annum plus
Twenty-Five Dollars ($25.00) per square foot of the second level Premises GLA
per annum), payable in equal monthly installments of Thirty-Seven Thousand Five
Hundred Dollars ($37,500). During Lease Years 4-7 of the Term of this Lease, the
Fixed Minimum Rent shall be Four Hundred Ninety Thousand Dollars ($490,000) per
annum (Eighty-Seven and 08/100 Dollars ($87.08) per square foot of the first
level Premises GLA per annum plus Twenty-Seven and 22/100 Dollars ($27.22) per
<PAGE>
square foot of the second level Premises GLA per annum), payable in monthly
installments of Forty Thousand Eight Hundred Thirty-Three Dollars ($40,833).
During Lease Years 8-10 of the Term of this Lease, the Fixed Minimum Rent shall
be Five Hundred Fifty Thousand Dollars ($550,000) per annum (Ninety-Seven and
74/100 Dollars ($97.74) per square foot of the first level Premises GLA per
annum plus Thirty and 56/100 Dollars ($30.56) per square foot of the second
level Premises GLA per annum), payable in monthly installments of Forty-Five
Thousand Eight Hundred Thirty-Three Dollars ($45,833).
(h) Percentage Rent : (Article XI, Section 11.2) Eight percent (8%) of
Gross Revenue in excess of (a) Four Million Dollars ($4,000,000) each calendar
year during Lease Years 1 through 5, and (b) Four Million Five Hundred Thousand
Dollars ($4,500,000) each calendar year during Lease Years 6 through 10 (such
Percentage Rent breakpoints shall be prorated for any partial calendar year
during the Term of this Lease); provided, however, that at any time any
Competing Store, as hereinafter defined, is open for business within the
Restricted Area, as hereinafter defined, the preceding dollar amounts shall be
reduced by an amount equal to the product of Three Hundred Thousand Dollars
($300,000) multiplied by the number of Competing Stores then open for business
in any portion of the Restricted Area other than the Resort (such reductions
shall be prorated with respect to Lease Years during which a Competing Store
opens or closes within the Restricted Area, e.g., if a Competing Store first
opens for business, or closes, exactly halfway into a Lease Year, the reduction
for such Lease Year would be One Hundred Fifty Thousand Dollars ($150,000).
(i) Payment of Percentage Rent: (Article XI, Section 11.2) By the fifteenth
(15th) day of each month for the previous month.
(j) Sales Reports : (Article XI, Section 11.5) Monthly on or before the
fifteenth (15th) day of each month of each Lease Year. Annually on or before
forty-five (45) days following the close of each calendar year. (k) One Time
Grand Opening Assessment : (Article XII, Section 12.6) Three Dollars ($3.00) per
square foot of first level Premises GLA.
(l) Annual Marketing Fund Charge :(Article XII, Section 12.4) Three Dollars
($3.00) per square foot of first level Premises GLA per year.
(m) Intentionally Omitted .
(n) Tenant Insurance : (Article XVII, Section 17.2)
(i) Liability: $2,000,000 combined single limit per occurrence basis for
property damage and personal and bodily injury or death.
(ii) Boiler: $100,000, if applicable.
(iii) Environmental Impairment Liability: $1,000,000 for bodily injury or
property damage.
(iv) All-Risk Coverage: Full replacement cost.
(o) CAM Costs : (Article XII, Section 12.2) Proportionate Share; payable
monthly on estimated bill.
(p) Taxes : (Article XII, Section 12.3) Proportionate Share; payable
monthly on estimated bill.
(q) Intentionally Omitted .
(r) Utility Services and Charges: (Article XIII, Section 13.1) Payable by
Tenant as billed per metered or estimated and adjusted billing. Charges paid
<PAGE>
directly to Landlord may include a service charge not to exceed Twenty-Five
Dollars ($25) per month.
(s) Tenant's Trade Name : (Article VIII, Section 8.1) Toys International.
(t) Permitted Use : (Article VIII, Section 8.1) The retail sale of 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, child-oriented games,
child-oriented video and audio cassettes, compact discs, laser discs and other
technological innovations thereof, child-oriented computer software, sporting
goods, stuffed animals, other juvenile and child-related goods, and such other
items as are typically displayed in toy stores located within first-class
shopping centers.
(u) Intentionally Omitted.
(v) Legal Notice Address : (Article XXVI, Section 26.1)
Tenant: 550 Rancheros Drive
San Marcos, California 92069
Attn: President
Landlord: 3355 Las Vegas Boulevard South
Las Vegas, Nevada 89102
(notices) Attn: Rob Goldstein, Senior V.P.
Forest City Management, Inc.
Commercial Division
P.O. Box ____________
(payments and copies of notices)Cleveland, Ohio 44101
(w) Security Deposit : (Article XII, Section 12.5) None.
(x) Guarantor :
(i) Name: Play Co. Toys & Entertainment Corp.
(ii) Address: 550 Rancheros Drive San Marcos, California 92069 Attn:
President
(y) Additional Provisions (these provisions shall apply notwithstanding
anything in this Lease to the contrary):
(i) Tenant may open up to two (2) Competing Stores within the Restricted
Area provided each such Competing Store is less than six thousand (6,000) square
feet in size.
(ii) Landlord shall not permit any permanent or temporary tenant or
occupant in the first phase of the Resort (i.e., the phase of the Resort opening
on the Scheduled Opening Date) other than Tenant to have sales of toys in excess
of ten percent (10%) of the sales area or product line at the premises of such
tenant or occupant. If Landlord defaults under this provision, Tenant's remedies
shall include, but not be limited to, reducing Tenant's Fixed Minimum Rent and
Percentage Rent by Fifty Percent (50%) for the duration of such default. If such
default in not cured within one (1) year of Landlord's receipt of notice
thereof, Tenant may at any time prior to the curing of such default terminate
this Lease by notice to Landlord and Landlord shall thereupon pay to Tenant the
unamortized (based on straight line amortization as of the effective date of
termination over a ten (10) year period commencing with the Rent Commencement
Date) costs of Tenant's permanent leasehold improvements at the Premises.
<PAGE>
(iii) If Landlord constructs the second phase of the Resort prior to the
termination of this Lease, then Landlord shall negotiate in good faith with
Tenant for the operation by Tenant of a Competing Store in one of the proposed
retail sites in such second phase on substantially the same terms and conditions
(other than the economic terms and conditions) as are contained in this Lease
for the Premises, provided that at the time Landlord notifies Tenant that
Landlord is ready to commence such negotiations, (1) there is no uncured Event
of Default, and (2) Tenant's Gross Revenues during the immediately preceding
twelve (12) month period were equal to or greater than (A) Four Million Dollars
($4,000,000) if Landlord's notice is given during the first or second Lease Year
(provided that if Landlord's notice is given prior to the end of the first
twelve (12) months of the Term of this Lease, then the foregoing dollar amount
shall be reduced to the product of Four Million Dollars ($4,000,000) multiplied
by a fraction, the numerator of which is the number of days between the Rent
Commencement Date and such notice, and the denominator of which is three hundred
sixty-five (365)), or (B) Five Million Dollars ($5,000,000) if Landlord's notice
is given after the second Lease Year. Prior to such negotiations, Landlord shall
provide to Tenant a site plan of such second phase which shall designate the
proposed retail site for Tenant. If within sixty (60) days of Tenant's receipt
of such site plan Landlord and Tenant have not entered into a lease with respect
to the proposed retail site for Tenant, then, except as otherwise provided in
this Section 1.0(y)(iii), Landlord may enter into a lease with respect to such
site with any other person or entity. Should Landlord and Tenant not agree upon
the terms of the lease to be negotiated pursuant to this Section 1.0(y)(iii),
and Landlord later offers the space which is the subject of such negotiation to
other prospective tenants on terms that as a whole are more favorable than those
offered to Tenant, then Landlord shall first offer to rent such space to Tenant
on such more favorable terms. Tenant shall have twenty (20) days after receipt
of Landlord's notice of re-offer (which shall specify the terms of such proposed
lease) to accept such offer.
Section 1.1 - Defined Terms .
Wherever used in this Lease, the following terms shall be construed to mean
as follows:
(a) "COMMON AREAS" shall mean the Enclosed Mall and its amenities
(including entertainment features, such as the canal and gondolas), plaza areas,
surface parking areas, parking decks, structures or garages, if any, driveways,
aisles, sidewalks, loading docks, passageways, landscaping, courts, stairs,
ramps, elevators, escalators, moving walkways, meeting rooms, public restrooms
and other common service areas, provided for by Landlord for the common or joint
use and benefit of the tenants and occupants of the Shopping Center, their
employees, agents, servants, customers and other invitees.
(b) "CPI-U" shall mean the U.S. Department of Labor, Bureau of Labor
Statistics, Consumers Price Index for all Urban Consumers, All Cities Average,
Subgroup "all items" (1982-84=100). If during the Term of this Lease the U.S.
Department of Labor, Bureau of Labor Statistics, ceases to publish a CPI-U, such
other index or standard as will most nearly accomplish the aim and purpose of
said CPI-U and the use thereof by the parties hereto, shall be selected by
Landlord in its reasonable discretion.
(c) "ENCLOSED MALL" shall mean that portion or portions of the climate
controlled enclosed sections of the Shopping Center which are used in common,
among other things, for pedestrian traffic.
(d) "LEASE YEAR" shall mean each twelve (12) month period during the Lease
Term, including any extension thereof under Section 9.5, commencing with the
Rent Commencement Date; provided, however, that if the Rent Commencement Date is
not the first day of a month, then the first Lease Year shall commence on the
<PAGE>
Rent Commencement Date and end on the last day of the twelfth full calendar
month thereafter and the second and each succeeding Lease Year shall commence on
the first day of the next calendar month.
(e) "PREMISES" shall mean the specific demised store space leased to Tenant
by Landlord now existing or to be constructed in the Shopping Center. The
Premises are cross-hatched on Exhibit "B", attached hereto for the sole purpose
of more specifically locating the Premises.
(f) "RENTS" shall mean Fixed Minimum Rent, Percentage Rent and Additional
Charges (as defined in Article XII) unless otherwise specifically noted.
(g) "RESORT" shall mean that hotel, casino, retail, restaurant and parking
complex known as the Venetian Casino Resort of which the Shopping Center is a
part. Notwithstanding the foregoing, Landlord expressly reserves the right, in
the exercise of its sole discretion, to change the name of the Resort at any
time during the Term of this Lease.
(h) "SHOPPING CENTER" shall mean those buildings and common areas
comprising the retail shopping center development known as "The Grand Canal
Shops" owned and/or ground leased by Landlord and located in Clark County,
Nevada, all as shown on Exhibit "A" attached hereto and made a part hereof.
Notwithstanding the foregoing, Landlord expressly reserves the right, in the
exercise of its sole discretion, to change the name of the Shopping Center at
any time during the Term of this Lease.
(i) "TENANT'S PROPORTIONATE SHARE", shall mean a fraction, the numerator of
which is the "Premises GLA", as hereinafter defined (but excluding second level
space), and the denominator of which is the total number of square feet of
actually occupied gross leasable area (excluding second level space) on the main
level of the Shopping Center ("Occupied Center GLA") (except that the Occupied
Center GLA may not be less than ninety percent (90%) of aggregate Shopping
Center GLA (excluding second ------------------- level space)).
ARTICLE II EXHIBITS
Section 2.1 - Exhibits . The following exhibits are attached hereto or
otherwise incorporated herein by reference, and made a part of this Lease;
EXHIBIT "A" Site Plan of the Shopping Center - Attached
EXHIBIT "B" Premises - Attached
EXHIBIT "C" Chargebacks - Attached
EXHIBIT "GCS1.0" Tenant Handbook containing the scope of Landlord and
Tenant work and sign and design criteria - Not attached but incorporated herein
by reference.
ARTICLE III PREMISES
Section 3.1 - Premises . In consideration of the payment of all Rents and
the performance of the covenants as hereinafter set forth, Landlord demises unto
Tenant, and Tenant leases from Landlord, subject to all matters of record, for
the Term and upon the terms and conditions set forth in this Lease, the Premises
which is situated in the County of Clark and State of Nevada and being the unit
set forth in Section 1.0(b).
Section 3.2 - Gross Leasable Area of the Premises . The gross leasable area
of the Premises or the "Premises GLA" shall be computed based on the "lease
lines" for the Premises, defined as follows: The lease line for common demising
<PAGE>
walls between adjoining tenants shall be the center line of the common demising
wall. Along the storefront the lease line shall be the "designated line" ("DL")
separating the Premises from the Common Area, regardless of where Tenant's
storefront is actually built unless Tenant's storefront extends or "pops out"
past such DL in which event the storefront exterior shall be Tenant's lease
line. On non-common demising walls such as between the Premises and service
corridors, mechanical rooms, or the building exterior, the lease line shall be
the outside face of the demising wall. Any recesses required to accommodate the
door swing of the exit door for the Premises shall be considered part of the
Premises. No deductions shall be made for columns or bracing within the Premises
or along the demising walls but deductions shall be made for the areas occupied
by major vertical duct shafts.
Section 3.3 - Revisions to Premises GLA . The square footage set forth in
Section 1.0(c) has been determined pursuant to the provisions of Section 3.2 by
reference to either "CAD" or scaled architectural drawings of the Premises.
Landlord and Tenant acknowledge that irrespective of whether or not the Premises
shall have been constructed as of the date of this Lease, in the event that
Landlord's final as-built field or CAD measurements of the Premises after
Tenant's leasehold improvements have been constructed should disclose a
different square footage than the Premises GLA set forth in Section 1.0(c)
("Final Revised Premises GLA"), then Landlord agrees to notify Tenant in writing
of the Final Revised Premises GLA. Within thirty (30) days after the later of
(a) its receipt of such notice, or (b) Landlord's delivery of possession of the
Premises to Tenant, Tenant shall have the right to have its own measurement made
of the Premises and, in the event that there is a difference between Tenant's
measurement and Landlord's measurement (which shall be deemed to be the square
footage set forth in Section 1.0(c) unless Landlord notifies Tenant otherwise),
Tenant will so notify Landlord and the parties will consult in an effort to
resolve such difference. If the parties have not resolved such difference within
twenty (20) days after Tenant's notice to Landlord thereof, then each party
shall appoint an architect, both of whom shall appoint a third architect who
shall determine the Final Revised Premises GLA and whose determination thereof
shall be final and binding on the parties. The cost of such third architect
shall be borne equally by Landlord and Tenant. If Landlord notifies Tenant of
the Final Revised Premises GLA and Tenant either chooses not to have its own
measurement made or has its own measurement made and there is no difference from
Landlord's measurement, then Landlord's original notice to Tenant of the Final
Revised Premises GLA shall be deemed sufficient to amend the Premises GLA set
forth in Section 1.0(c), such amendment being deemed self-operative without the
necessity of further formal mutual acknowledgment or documentation between
Landlord and Tenant. When so finally determined, the Final Revised Premises GLA
(excluding second level space) shall be used as the numerator in computing
Tenant's Proportionate Share of Additional Charges and the Final Revised
Premises GLA shall be used in all computations of Fixed Minimum Rent since such
has been determined on a square foot (as opposed to a fixed rate) basis. If the
Fixed Minimum Rent should be so revised, Landlord will provide Tenant with
notice of such rent revision.
Section 3.4 - Landlord's Reservation . Landlord reserves to itself the roof
and exterior walls of the building containing the Premises and all space above
the ceiling within the Premises, to accommodate the Shopping Center's
structural, mechanical and electrical conduit piping, ducting or venting
requirements. Landlord and its agents further reserve the right on behalf of
themselves or an authorized utility company to run utility lines, pipes,
conduits or ductwork when necessary or desirable through the air space above
Tenant's ceiling, columns or within walls of the Premises and to maintain,
repair, alter, replace or remove the same in locations which will not materially
interfere with Tenant's use of the Premises.
Section 3.5 - Relocation.
<PAGE>
(a) If at any time from time to time during the Term Landlord adds
additional buildings to the Shopping Center, expands any of the buildings
currently contained in the Shopping Center, or renovates or reconfigures any
part of the Shopping Center (other than minor reconfigurations involving only
the addition, removal or moving of demising walls in the Shopping Center), and
such addition, expansion, renovation or reconfiguration includes the Premises or
a portion thereof, then Landlord shall have a right to relocate the Premises
within the Shopping Center provided that the premises to which the Premises is
relocated shall contain approximately the same square footage as the original
Premises (of which not more than two thousand (2,000) square feet shall be on
the second level) and shall be exposed to reasonably equivalent pedestrian
traffic; provided, however, that Landlord shall not be entitled to so relocate
the Premises more than once every five (5) Lease Years. Landlord shall notify
Tenant of such relocation not less than sixty (60) days prior to the date
thereof. Landlord shall reconstruct on the relocated Premises improvements
substantially similar to those constructed at the original Premises. Landlord
shall pay the reasonable cost of moving and reinstalling Tenant's equipment,
fixtures, trade fixtures and personalty into the relocated Premises. As of the
latter of the date specified in Landlord's notice to Tenant or ten (10) days
after Landlord has notified Tenant that it has completed the improvements to be
constructed by Landlord on the relocated Premises, Tenant shall surrender the
original Premises, shall move to the new Premises, and the relocated Premises
shall be deemed the Premises hereunder as fully as if said relocated Premises
were originally described herein as the Premises. Tenant agrees that promptly,
on demand, it shall execute an amendment to Exhibit "B" designating the location
of the relocated Premises.
(b) Notwithstanding anything to the contrary in subsection (a) above, if
the relocated Premises is not reasonably acceptable to Tenant and Landlord
cannot or does not remedy Tenant's written concerns, then Tenant may terminate
this Lease and neither party shall have any further obligation hereunder (except
with respect to matters that arose before such termination). In connection with
such termination, Landlord shall pay to Tenant the unamortized (based on
straight line amortization as of the effective date of termination over a ten
(10) year period commencing with the Rent Commencement Date) costs of Tenant's
permanent leasehold improvements at the Premises.
Section 3.6 - Remodeling . If at any time from time to time during the Term
Landlord remodels all or any portion of the Shopping Center, and such remodeling
includes the Premises or a portion thereof, then Landlord shall have the right
to change the dimensions or reduce the size of the Premises; provided, however,
that if a reduction in size of the Premises would reduce the Premises to less
than ninety percent (90%) of its original size and if as a result thereof the
remaining portion of the Premises is not suitable for the purpose for which
Tenant has leased the Premises, Tenant may terminate this Lease by written
notice to Landlord given within thirty (30) days after Landlord notifies Tenant
of Landlord's intention to remodel; provided further, however, that such
termination shall not be effective if within thirty (30) days of Tenant's notice
thereof, Landlord notifies Tenant of its election to relocate Tenant pursuant to
Section 3.5 hereof. In the event of any remodeling pursuant to this Section 3.6,
Landlord shall repair any damage to the Premises caused thereby and, in the
event of any reduction in the area of the Premises, Fixed Minimum Rent shall be
appropriately (based on the manner the same is calculated under Section 1.0(g))
reduced. In connection with any such remodeling, Landlord may require Tenant to
cease conducting business from the Premises for a period not in excess of thirty
(30) days. Rent shall be abated during any such period that Landlord requires
Tenant to cease conducting business.
ARTICLE IV COMMON AREAS
Section 4.1 - Use .
<PAGE>
(a) Landlord grants to Tenant and its agents, employees and customers, a
non-exclusive license, subject to the reasonable uniform rules and regulations
promulgated by Landlord, to use the Common Areas in common with other tenants
and occupants of the Shopping Center, their agents, employees and customers
during the Term, subject to the exclusive control and management thereof at all
times by Landlord and subject further to the rights of Landlord as set forth in
Section 4.2 herein.
(b) Landlord reserves to itself the right to construct, lease and/or
license kiosks, carts, and sales areas on any portion of the Common Areas
provided the same do not materially impair access to or visibility of the
Premises from the Common Areas adjacent to the Premises.
(c) Tenant shall not use the Common Areas for any other purpose than herein
designated.
Section 4.2 - Management and Operation of Common Areas . Landlord will use
reasonable efforts to operate and maintain or will cause to be operated and
maintained, the Common Areas in a first-class manner and in the best interest of
the Shopping Center. Landlord will have the right (1) to establish, modify and
enforce reasonable and uniform rules and regulations with respect to the Common
Areas for the general benefit of Landlord and all tenants of the Shopping
Center; (2) to enter into, modify and terminate easements and other agreements
pertaining to the use and maintenance of the parking areas and fees for use of
such parking areas and other Common Areas; (3) to provide for employee parking
(which parking may be located off the Resort property) and formulate reasonable
and uniform rules and regulations for the same; (4) without abatement of rent or
other charges, to close such portions of said parking areas or other common
areas to such extent as may, in the reasonable opinion of Landlord, be necessary
to prevent a dedication thereof or the accrual of any right to any person or to
the public therein or for any other reason in the best interest of Landlord and
all tenants; (5) without abatement of rent or other charges, to close
temporarily any or all portions of the Common Areas for repairs or refurbishing;
(6) to discourage non-customer parking; (7) to move, remove, relocate and/or
replace seats, trees, planters and other amenities commonly found in first-class
shopping centers provided the same do not materially impair access to or
visibility of the Premises from the Common Areas adjacent to the Premises; and
(8) to do such other acts in and to said areas and improvements as in the
exercise of good business management, and the maintenance of a first-class
shopping center, as Landlord, in the exercise of its reasonable business
judgment, shall deem to be advisable.
ARTICLE V CHANGES AND ADDITIONS TOSHOPPING CENTER SITE PLAN AND LEASING PLAN
Section 5.1 - Site Plan . The site plans attached hereto as Exhibits "A"
and "B", respectively, are for the sole purpose of showing the approximate
shape, design, proposed locations of buildings, tenant spaces and common areas
located within the Shopping Center.
Section 5.2 - Changes to Shopping Center Site Plan . Landlord reserves the
right at any time and from time to time (a) to make or permit changes or
revisions in the site plan for the Shopping Center including additions to,
subtractions from, rearrangements of, alterations of, modifications of or
supplements to the building areas, walkways, parking areas, driveways or other
Common Areas, (b) to construct other buildings or improvements in the Shopping
Center and to make alterations thereof or additions thereto and to build
additional stories on any such building or buildings and to build adjoining
same, and (c) to make or permit changes or revisions in the Shopping Center,
including additions thereto, and to convey portions of the Shopping Center to
others for the purpose of constructing thereon other buildings or improvements,
including additions thereto and alterations thereof; provided, however, that no
such changes, rearrangements or other construction shall permanently reduce the
<PAGE>
number of parking spaces provided by Landlord below the number of parking spaces
required by law or materially impair access to or visibility of the Premises
from the Common Areas adjacent to the Premises.
ARTICLE VI IMPROVEMENTS
Section 6.1 - Landlord's Responsibilities .
(a) Landlord, at its own cost and expense, shall construct in accordance
with Exhibit "GCS1.0" that portion of the Premises required in Exhibit "GCS1.0"
to be constructed by Landlord at its sole cost and expense. Landlord shall
complete such work, other than details of construction which do not materially
interfere with the performance of the work to be performed by Tenant under
Section 6.2, prior to delivering possession of the Premises to Tenant.
(b) Landlord warrants that its work shall be delivered free and clear of
liens, encumbrances and violations or conditions which may constitute violations
of any laws, ordinances, or regulations relating to the use, occupancy and
construction of the Premises and the building containing the same.
(c) Landlord, at Tenant's sole cost and expense, shall construct in
accordance with Exhibit "GCS1.0" that portion of the Premises required in
Exhibit "C" to be constructed by Landlord at Tenant's sole cost and expense
("Chargebacks"); provided, however, that in no event shall Tenant be responsible
to pay more than Five Thousand Dollars ($5,000) in Chargebacks . Landlord may,
at its sole option, bill Tenant for the Chargebacks prior to the Rent
Commencement Date, and Tenant shall pay Landlord the Chargebacks no later than
thirty (30) days following receipt of Landlord's billing.
(d) By the earlier to occur of one hundred ten (110) days after Tenant
takes possession of the Premises or the date on which Tenant opens for business,
Tenant shall inform Landlord, in writing, of any items that were required to be
performed by Landlord which are incomplete or inadequate; otherwise Tenant shall
be deemed to have acknowledged that all work required to be performed in
connection with the Premises and any and all obligations to be performed by
Landlord on or before the opening of the Premises have been fully performed
(other than latent defects in such work that Tenant does not discover within
such period, for which Landlord shall be responsible for repairing and
correcting upon receipt of notice thereof from Tenant at any time during the
first Lease Year).
(e) If, on the date Landlord delivers possession of the Premises to Tenant,
the configuration of the Premises is not in substantial conformity with that
shown on the scaled drawings on which Tenant based its Landlord approved final
plans and specifications for Tenant's work, or the placement of columns,
equipment or utility facilities on the Premises required to be constructed or
installed by Landlord under this Section 6.1 is different than shown on such
scaled drawings, and, in either case, the degree of variation from such scaled
drawings reasonably requires Tenant to revise such plans and specifications,
then (i) Landlord shall reimburse Tenant for any additional architectural and
engineering costs incurred by Tenant to prepare such revised plans and
specifications, and (ii) the one hundred ten (110) day period referred to in
Section 1.0(f) shall be extended by the amount of time reasonably required (1)
to prepare such revised plans and specifications and resubmit the same to
Landlord for approval, (2) for Tenant to obtain Landlord's approval of such
revised plans and specifications, and (3) for Tenant to obtain new building
permits for Tenant's work, if required.
Section 6.2 - Tenant's Responsibilities . Tenant shall at its own expense
and in accordance with Exhibit "GCS1.0":
(a) Secure all permits and licenses necessary for the construction of any
<PAGE>
of its installations and the prosecution of its work, and Tenant shall comply
with all laws and regulations relating to the conduct of said work.
(b) Construct the remainder of the Premises and installations therein and
construct the balance of the leasehold improvements necessary to enable Tenant
to occupy the Premises as shown in Tenant's plans and specifications as approved
by Landlord or Landlord's architect, all in a good and workmanlike manner and in
compliance with all insurance requirements and with all applicable permits,
authorizations, building regulations, zoning laws and all other government
rules, regulations, ordinances, statutes and laws, now or hereafter in effect
pertaining to the Premises or Tenant's use thereof. Notwithstanding any other
provision hereof, any installation to be made or work to be performed by Tenant
on or for the Premises prior to opening the Premises for business shall be first
approved in writing by Landlord prior to commencement of any work by Tenant.
Landlord's approval of any plans for Tenant's work shall, however, create no
responsibility or liability on the part of Landlord for their completeness,
design sufficiency or compliance with all Requirements, as hereinafter described
in Section 27.4.
(c) Obtain on behalf of itself, or any of its contractors or
subcontractors, all insurance protection required by Landlord in Exhibit
"GCS1.0".
(d) Install equipment and appliances in said construction and all trade
fixtures installed shall be new and first quality items.
(e) In the event Landlord performs any work at the request or on behalf of
Tenant which is Tenant's responsibility hereunder, Landlord shall bill Tenant
for the costs thereof and Tenant shall pay such costs to Landlord no later than
twenty (20) days following receipt of Landlord's billing.
(f) Landlord may require Tenant, at Tenant's sole cost and expense, to
furnish a bond or other security satisfactory to Landlord to assure diligent and
faithful performance of all work to be performed by Tenant.
The foregoing shall be completed by and Tenant shall open for business no
later than the Rent Commencement Date.
Section 6.3 - Tenant's Trade Fixtures. All trade fixtures, signs and
apparatus (as distinguished from leasehold improvements) owned by Tenant and
installed in the Premises ("Tenant Personal Property") shall remain the property
of Tenant and shall be removable at any time, including upon the expiration or
sooner termination of this Lease; provided Tenant shall not at such time be in
default of any terms or covenants of this Lease; and provided further that
Tenant shall promptly repair any damage to the Premises caused by the removal of
any Tenant Personal Property. If Tenant is in default, Landlord shall have the
benefit of any applicable lien on Tenant Personal Property located in or on the
Premises as may be permitted under the laws of the State of Nevada, and in the
event such lien is asserted by Landlord in accordance with applicable law,
Tenant shall not remove or permit the removal of such Tenant Personal Property
until the lien has been removed and all defaults have been cured. Any Tenant
Personal Property not removed from the Premises by Tenant upon the expiration or
sooner termination of this Lease may be construed by Landlord as abandoned by
Tenant. Alternatively, Landlord may order Tenant to remove such Tenant Personal
Property or have it removed at Tenant's expense. Tenant shall have the right,
without Landlord's consent, to finance any Tenant Personal Property and to grant
security interests therein to secure such financing. Upon request, Landlord
shall subordinate any Landlord's lien on any Tenant Personal Property under this
Section 6.3 to any such security interest, and Landlord agrees, upon request, to
confirm such subordination in writing in a commercially reasonable form
requested by Tenant and/or Tenant's lender, within fifteen (15) days after
Landlord's receipt of such form.
<PAGE>
Section 6.4 - Construction Lien . Nothing contained in this Lease shall be
deemed or construed in any way as constituting the consent or request of
Landlord, express or implied by inference or otherwise, to any contractor,
sub-contractor, laborer or materialman for the specific performance of any labor
or the furnishing of any materials or equipment for any specific improvement,
alteration to or repair of the Premises or any part thereof, nor as giving
Tenant any right, power or authority to contract for or permit the rendering of
any services or the furnishing of any materials on behalf of Landlord that would
give rise to the filing of any lien against the Premises, Shopping Center or the
Resort.
Section 6.5 - Labor Cooperation . Tenant shall perform or cause Tenant's
contractors to perform all work in the making and/or installation of any
repairs, alterations or improvements in a manner so as to avoid any labor
dispute that causes or is likely to cause stoppage or impairment of work or
delivery services or any other services in the Shopping Center. In the event
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, but not limited to (i) removing all disputants from the job site
until such time as the labor dispute no longer exists, (ii) seeking an
injunction in the event of a breach of contract between Tenant and any of
Tenant's contractors, and (iii) filing appropriate unfair labor practice charges
in the event of a union jurisdictional dispute. Landlord may require Tenant to
use recognized union labor in the construction of Tenant's improvements at the
Premises.
ARTICLE VII PLANS
Section 7.1 - Submission of Plans .
<PAGE>
(a) Tenant shall prepare, at its sole cost and expense, and in full
compliance with the provisions of Exhibit "GCS1.0", complete plans and
specifications for all of Tenant's work, including store front design, and shall
submit such plans and specifications to Landlord or Landlord's designated
representative for approval prior to commencement of any work. No material
changes to said plans shall be made after such approval by Landlord without
Landlord's prior written consent. Landlord's approval of any plans for Tenant's
work shall create no responsibility or liability on the part of Landlord for
their completeness, design sufficiency or compliance with all Requirements.
(b) Tenant shall be required to submit its plans and specifications to
Landlord in a timely manner so that Tenant's construction in the Premises shall
be completed on or before the Rent Commencement Date. In the event Tenant's
plans are not submitted in a timely fashion as required above, due to reasons
within Tenant's or its architect's control, Landlord reserves the right, in
addition to any other rights it may have hereunder, to require Tenant to
commence the payment of Rents as of the Rent Commencement Date notwithstanding
the fact that Tenant may not be open for business on such date.
ARTICLE VIII USE
Section 8.1 - Use . Tenant agrees to: (i) operate its business in the
Premises under the trade name specified in Section 1.0(s) (or such other
tradename approved in writing by Landlord, which approval shall not be
unreasonably withheld, delayed or conditioned) and (ii) use the Premises solely
for the permitted use specified in Section 1.0(t) and for no other business or
purpose. Tenant further agrees not to conduct catalog sales in or from the
Premises, except merchandise Tenant is permitted to sell "over-the-counter"
consistent with its permitted use. Tenant recognizes that the specific limited
use prescribed herein is a material consideration to Landlord so that the
Shopping Center will maintain an appropriate tenant mix so as to produce the
maximum Gross Revenue possible for all tenants and that the continued operation
of a first-class shopping center development will be assured. Notwithstanding
the foregoing, Tenant's specific limited use hereunder shall not be construed to
imply that Tenant has an exclusive right to conduct the use permitted by Section
1.0(t). Landlord, in its sole discretion, may permit other tenants or occupants
of the Shopping Center to operate the same or similar use. If Tenant's business
in the Premises is to be conducted pursuant to a franchise agreement, the
existence and continuation of such franchise agreement is a material
consideration to Landlord in entering into this Lease and if such franchise
agreement is terminated, Landlord shall be entitled to treat such event as an
event of default and elect any of the remedies provided in Article XXIV.
Section 8.2 - Tenant's Covenant to Operate . Tenant agrees to complete
Tenant's work and open the Premises for business to the public adequately
fixtured, stocked and staffed on the Rent Commencement Date, and, thereafter
throughout the Term of this Lease, to continuously operate in one hundred
percent (100%) of the space within the Premises the business prescribed in
Section 1.0(t), Mondays through Sundays during such hours as may be reasonably
determined by Landlord for the operation of the Shopping Center. Tenant agrees
it will not open earlier or close later than such hours without Landlord's prior
consent. Notwithstanding anything to the contrary contained herein, Tenant shall
be permitted to close the Premises for up to two (2) days per Lease Year for the
purpose of taking inventory, provided such days are approved in advance and in
writing by Landlord, which approval Landlord shall not unreasonably withhold. In
no event shall Tenant be permitted to close the Premises on any day that banks
in Nevada are required or permitted, under the state or federal law, to be
closed for business ("Holiday"), or within three (3) days of any Holiday.
Section 8.3 - Prohibitions on Use .
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(a) Tenant shall not use or permit or suffer the Premises, or any part
thereof, to be used by anyone else or for any other business or purpose than
that specifically defined and permitted by this Article and further provided
that Tenant shall not divert any portion of the Premises GLA for any other use
other than the use described above.
(b) Tenant shall not permit the Premises to be used in violation of any
laws or local ordinances or any way which in the reasonable judgment of Landlord
will injure the reputation of, be a nuisance, annoyance, or do damage to the
other tenants of the Shopping Center or Landlord, including without limitation,
the sale of patently offensive material and merchandise and the use of audio
devices, flashing lights, machinery and equipment creating noise or odors, or
the committing of acts, which will disturb, impair or interfere with the use and
enjoyment by the other tenants of their respective premises within the Shopping
Center.
(c) Tenant agrees not to use or allow the Premises to be used for any
auction, fire, bankruptcy or "going out of business" sales therein unless
ordered by a court of competent jurisdiction after reasonable notice to Landlord
and an opportunity by Landlord to be heard.
Section 8.4 - Manner of Operation of Business .
(a) Tenant agrees that the above business is to be conducted in a reputable
manner, in keeping with good practices as established in the trade. Tenant shall
keep upon the Premises an adequate staff of employees and an adequate stock of
merchandise during business hours throughout the Term of this Lease so as to
insure a maximum profitable volume of business in and from the Premises.
(b) Subject to Section 15.1 of this Lease, Tenant agrees to assume full
responsibility and at its own cost to keep and maintain the Premises neat,
clean, in proper repair and decor, and free from waste and offensive odors, and
in an orderly and sanitary condition, free of vermin, rodents, bugs and other
pests.
(c) Landlord and its agents shall have the right, but not the duty, to
inspect the Premises at any time to determine whether Tenant is complying with
the terms of this Section 8.4. If Tenant is not in compliance with this Section
8.4, Landlord shall have the right to immediately enter upon the Premises to
remedy said noncompliance at Tenant's expense. Landlord shall use reasonable
efforts to minimize interference with Tenant's business, but shall not be liable
for any interference caused thereby. Section 8.5 - Privileged License . Tenant
acknowledges that Landlord and affiliates of Landlord are businesses that are or
may be subject to and exist because of privileged licenses issued by
governmental authorities relating to casino gaming ("Gaming Authorities"). If a
corporation, Tenant shall disclose the names of all officers and directors of
Tenant, and unless a publicly traded corporation on a national stock exchange,
Tenant shall disclose to Landlord all ownership interests in Tenant and all
lenders or sources of financing. If requested to do so by Landlord, Tenant shall
obtain any license, qualification, clearance or the like which shall be
requested or required of Tenant by Landlord, Gaming Authorities or any
regulatory authority having jurisdiction over Landlord or any affiliate of
Landlord. If Tenant fails to satisfy such requirement or if Landlord or any
affiliate of Landlord is directed to cease business with Tenant by any such
authority, or if Landlord shall in good faith determine, in Landlord's sole and
exclusive judgment, that Tenant, or any of its officers, directors, employees,
agents, designees or representatives, or partner, owner, member, or shareholder,
or any lender or financial participant (a) is or might be engaged in, or is
about to be engaged in, any activity or activities, or (b) was or is involved in
any relationship, either of which could or does jeopardize Landlord's business,
reputation or such licenses, or those of its affiliates, or if any such license
is threatened to be, or is, denied, curtailed, suspended or revoked, then Tenant
<PAGE>
shall immediately (i) terminate any relationship with the individual or entity
which is the source of the problem, or (ii) cease the activity creating the
problem to Landlord's satisfaction. In the event Tenant does not comply with
item (i) or (ii) above, then Landlord (x) may require Tenant to specifically
perform such obligation (the parties recognizing that damages or other remedies
would be inadequate under the circumstances) or (y) may terminate this Lease
without liability to either party; provided, however, if any matter described
herein is reasonably susceptible to cure, Tenant shall have a reasonable time
within which to effect such cure (but in no event longer than the time available
to fully comply with any requirement imposed by law, rule, regulation or the
Gaming Authorities) and Landlord shall not have the right to terminate this
Lease during such cure period.
Section 8.6 - Vendor Agreements . Tenant acknowledges that Landlord has entered
into or may in the future enter into agreements with vendors or service
providers (hereinafter "Common Vendors") to provide services to the Resort and
its tenants for the purposes of achieving uniformity of services, favorable
pricing and/or limiting the number of service providers working in or making
deliveries to the Resort. Tenant agrees to contract with such Common Vendors for
services and to abide by the terms of Landlord's agreements with such Common
Vendors; provided that amounts which are to be paid to such Common Vendors, and
the quality of product and level of service to be provided by such Common
Vendors, shall at all times be competitive in the Las Vegas marketplace.
ARTICLE IX TERM
Section 9.1 - Term . The Term of this Lease shall commence on the Rent
Commencement Date (see Sections 1.0(f) and 10.1) and the Term, unless the Lease
should be terminated earlier, shall expire at midnight on the "Term Expiration
Date" which shall be at the end of the number of Lease Years stated in Section
1.0(d).
Section 9.2 - Commencement Date Agreement . At any time following full
execution of this Lease, Landlord and Tenant may, upon the request of either
party, execute a supplemental agreement setting forth the commencement and
termination dates of the Term of this Lease.
Section 9.3 - Holding Over . If, at the expiration of the Term of this
Lease, Tenant continues to occupy the Premises with or without Landlord's
consent, its tenancy shall become month-to-month terminable by either party on
thirty (30) days prior written notice. Tenant shall be subject to all the
conditions of this Lease excepting the Term thereof and Tenant's obligation to
pay hold-over rent equal to one hundred fifty percent (150%) of the monthly
Fixed Minimum Rent payable by Tenant immediately prior to expiration of the
Term, and Tenant shall be further subject to any changes to this Lease which
Landlord has given Tenant, in writing, during any thirty (30) day period for the
following thirty (30) day period. Notwithstanding anything contained herein to
the contrary, nothing contained in this subparagraph shall be deemed or
construed to give Tenant the right to hold over. Tenant shall not be permitted
to hold over if Landlord gives Tenant notice before the expiration of the Term
of this Lease that Tenant may not hold over.
Section 9.4 - Expiration of the Term of the Lease .
(a) This Lease shall expire at the end of the Term thereof without the
necessity of any notice from either Landlord or Tenant to terminate the same,
and subject to Section 9.3 hereof, Tenant hereby waives notice to vacate or quit
the Premises and agrees that Landlord shall be entitled to the benefit of all
provisions under this Lease respecting the summary recovery of possession of the
Premises from Tenant holding over to the same extent as if statutory notice had
been given. However, if Tenant should vacate prior to the expiration of the Term
of the Lease, Tenant will nevertheless be liable for all Rents due and owing up
<PAGE>
to the expiration of the Term.
(b) For a period of six (6) months prior to the expiration of the Term,
upon reasonable prior notice to Tenant, Landlord shall have the right and may
show the Premises and all parts thereof to prospective tenants during normal
business hours.
(c) Tenant shall deliver and surrender to Landlord possession of the
Premises upon the expiration or earlier termination of this Lease, in as good
condition and repair as the same shall be at the commencement of said term
except ordinary wear and tear and casualty loss.
(d) Tenant shall have no right to quit the Premises, cease to operate its
business, cancel or terminate this Lease except as such right is expressly
granted to Tenant herein.
Section 9.5 - Renewal of Term . Tenant is hereby granted an option to
extend the Term of this Lease, hereinafter referred to as the "Original Lease",
for the additional consecutive periods set forth in Section 1.0(d)(ii), if any,
provided that Tenant shall notify Landlord, in writing, no less than nine (9)
months prior to the commencement of any such renewal term of Tenant's intention
to exercise such Option, and provided further that Tenant at the time of notice
of renewal, as well as the commencement date of the renewal term, there is no
uncured Event of Default. The terms and conditions of the renewal term shall be
the same as the terms and conditions of the Original Lease, excepting for the
following modifications:
(a) Tenant shall have no further right of renewal after the expiration of
the last renewal term.
(b) The Fixed Minimum Rent as payable during the renewal periods, shall be
calculated in accordance with Section 1.0(g).
(c) The Percentage Rent as payable during the renewal periods, shall be
calculated in accordance with Section 1.0(h).
ARTICLE X RENT COMMENCEMENT DATE
Section 10.1 - Rent Commencement Date .
(a) As used in this Lease, the term "Rent Commencement Date" shall mean the
later of the dates specified in Section 1.0(f); provided, however, that in no
event shall the Rent Commencement Date be later than the date Tenant opens for
business. ----------------------
(b) Should the Rent Commencement Date occur on a day other than the first
day of a calendar month, Tenant shall be liable for Fixed Minimum Rent and
Additional Charges due for said previous partial month on a prorated basis based
upon a thirty (30) day month.
Section 10.2 - Failure of Delivery of Premises to Tenant . If Landlord
shall fail to deliver possession of the Premises to Tenant by December 31, 1999
for any cause within Landlord's reasonable control, Tenant shall have the right
to terminate this Lease upon written notice to Landlord given at any time on or
before January 31, 2000 (provided Landlord has not theretofore delivered
possession of the Premises to Tenant), and neither party shall have any further
obligation hereunder (except with respect to matters that arose before such
termination).
Section 10.3 - Tenant's Failure to be Open by the Rent Commencement Date .
Notwithstanding any rights or remedies of Landlord set forth in Article XXIV, in
the event Tenant has not opened by the Rent Commencement Date except for reasons
<PAGE>
outside Tenant's control, Landlord shall have the right to require Tenant to pay
to Landlord as liquidated damages and not as a penalty, the sum of One Hundred
Dollars ($100.00) for each day beyond the Rent Commencement Date that Tenant is
late in opening the Premises for business, which payment is intended to
compensate Landlord for actual and substantial losses that Landlord may suffer.
Nothing contained in this Section 10.3 shall be construed to waive any rights
and remedies Landlord may have against Tenant, nor affect Tenant's obligation to
commence payment of Fixed Minimum Rent and Additional Charges on the Rent
Commencement Date. Landlord may offset any amounts payable by Tenant hereunder
against any amounts Landlord may owe Tenant.
ARTICLE XI RENT
Section 11.1 - Fixed Minimum Rent .
(a) Tenant hereby covenants and agrees to pay to Landlord's authorized
agent, without deduction or set-off and without demand, at the address set forth
in Section 1.0(v) above or such other place as Landlord may, from time to time,
designate in writing, as Fixed Minimum Rent for the Premises, the amount(s) set
forth in Section 1.0(g), said amount(s) to be due and payable in monthly
installments, in advance, on the Rent Commencement Date and on the first day of
each and every calendar month thereafter. Tenant agrees at no time to pay the
monthly Fixed Minimum Rent more than one (1) month in advance of its due date.
(b) Notwithstanding anything in this Lease to the contrary, in the event
Tenant fails to pay any Rents or any other sum due and owing Landlord within
five (5) days following the due date of said Rents, then Tenant shall pay a late
charge of the greater of (i) ten percent (10%) of the amount due and (ii) two
percent (2%) per month of the monthly charges due from the due date of any
installment of any Rents.
(c) Should any governmental taxing authority acting under any present or
future law, ordinance, or regulation, levy, assess, or impose a tax, excise
and/or assessment (other than an income or franchise tax upon Landlord's net
income) upon Landlord with respect to Rents payable by Tenant to Landlord,
either by way of substitution for or in addition to any existing tax on land and
buildings or otherwise, Tenant shall be responsible for and shall pay such tax,
excise and/or assessment, or shall reimburse Landlord for the amount thereof, as
the case may be.
(d) Notwithstanding any other provision hereof, Tenant shall not be
required to pay Fixed Minimum Rent for any period of sixty (60) consecutive days
or more that less than seventy percent (70%) of the gross leasable area
(excluding second level space) on the main level of the Shopping Center is
occupied, open for business and continuously operating.
Section 11.2 - Percentage Rent .
(a) Amount. In addition to Tenant's Fixed Minimum Rent, Tenant covenants
and agrees to pay to Landlord, without deduction or set-off, Percentage Rent for
each calendar year during the term hereof in the amount(s) set forth in Section
1.0(h), during each month of such calendar year during or after which the
Percentage Rent breakpoints set forth in Section 1.0(h) have been reached.
(b) Payment.
(i) The Percentage Rent due for each calendar month shall be payable by no
later than the fifteenth (15th) day of the immediately following calendar month.
Said payments of Percentage Rent shall be made concurrently with the submission
of Tenant's written statement of monthly Gross Revenue to Landlord as
hereinafter provided.
<PAGE>
(ii) Upon submission of Tenant's certified statement of Gross Revenue at
the close of each calendar year, as provided in Section 11.5 herein, adjustments
of amounts due for Percentage Rent shall be made to the respective parties.
Overpayments of Percentage Rent shall be credited against the next installment
of Percentage Rent due (or, if at the end of the Term, Landlord shall pay such
amount to Tenant within thirty (30) days after Tenant has delivered its
certified statement of Gross Revenues to Landlord). Underpayments of Percentage
Rent shall be paid to Landlord within thirty (30) days after Tenant has
delivered its certified statement of Gross Revenues to Landlord.
(iii) Notwithstanding the provision for the payment of Percentage Rent,
Landlord shall not, in any event, be deemed to be a partner or associate of
Tenant in the conduct of its business. The relationship of the parties hereto
shall, at all times, be solely that of Landlord and Tenant.
Section 11.3 - Gross Revenue . The term "Gross Revenue" wherever used
herein shall be defined to mean the total amount of all sales of merchandise
and/or services and all other receipts of all business conducted in, at, or from
any part of the Premises, whether the same be for cash, barter, credit, check,
charge account, gift, and merchandise certificates purchased, or other
disposition of value regardless of collection, in the event of sale upon credit
or charge account, and whether made by Tenant, sub-tenants, concessionaires,
licensees, or assignees of Tenant. The value of each sale shall be the actual
total sales price charged the customer, and shall be reported in full in the
month that the transaction occurs irrespective of when, or if, payment is
received. Gross Revenue includes orders or sales which originate in, at, or from
the Premises, whether delivery or performance is made from the Premises or from
another place, and orders and sales of goods and services delivered and
performed from the Premises as a result of orders taken elsewhere; orders or
sales mailed, telephoned, or telegraphed, which are received at or filled from
the Premises; all sales and revenue accruing by means of mechanical,
self-operated, or automatic vending devices on the Premises. There shall be no
deduction or exclusion from Gross Revenue except as specifically permitted
hereafter. Any deposit not refunded shall be included in Gross Revenue.
Section 11.4 - Exclusion from Gross Revenue . Notwithstanding the
foregoing, Gross Revenue shall not include:
(a) Merchandise returned in the amount of cash refunded, credit given, or
discounts and allowance granted or exchanges made, provided that the sale price
of such items was originally included in Gross Revenue.
(b) The amount of any sales, use or gross receipts tax, or excise tax,
imposed by any governmental authority directly on sales and collected from the
customers, providing the amount of such tax is separately recorded.
(c) The exchange of merchandise between stores of Tenant, when such
exchanges are made solely for the operation of Tenant's business and not for the
purpose of consummating a sale which has been made at, in or from the Premises.
(d) Merchandise returned for credit to shippers, jobbers, wholesalers or
manufacturers.
(e) Revenue from sale of trade fixtures after use in the Premises and sums
or credits received in settlement of claims for loss of or damage to
merchandise.
(f) Revenue from vending machines for Tenant's employee use only.
(g) Shipping, delivery and mailing charges.
(h) Interest, service or sales carrying charges, or other charges, however
<PAGE>
denominated, paid by customers for the extension of credit on sales.
(i) Sales to employees at a discount, not to exceed two percent (2%) of
Gross Revenues in any single calendar year.
(j) Charges, fees and discounts paid by Tenant to credit card issuers on
account of the use of credit cards by Tenant's customers in the Premises.
Section 11.5 - Reporting .
(a) Tenant shall submit to Landlord, on or before the fifteenth (15th) day
of each month of each Lease Year, commencing in the second month of the first
Lease Year, a written statement signed by Tenant showing Tenant's Gross Revenue,
as herein defined, for the preceding calendar month.
(b) On or before forty-five (45) days following the close of each calendar
year (or the expiration of the Term), Tenant shall furnish to Landlord a
statement certified by either, at Tenant's option, an officer of Tenant or a
certified public accountant employed by Tenant, if any, of the Gross Revenue
made by Tenant from the Premises during the preceding calendar year (or portion
thereof).
(c) For the purpose of ascertaining the amount of reportable sales and
revenue, Tenant agrees to record each and every sale at the time of the
transaction on either a cash register having a sealed, continuous, cash register
tape with cumulative totals, which numbers, records, and duplicates each
transaction entered into the register, (in any event such cash register must
have a non-resettable grand total) or on serially prenumbered sales slips or on
a computer system that produces and maintains comparable records. In the event
Tenant chooses to record each sale by using a cash register, Tenant agrees that
the continuous, cash register tape will be sealed or locked in such a manner
that it is not accessible to the person operating the cash register. If Tenant
chooses to record each sale on individual sales slips, Tenant agrees that said
sales slips (including those canceled, voided, or not used) will be retained in
numerical sequence for the period set forth in Section 11.6 herein. If Tenant
chooses to record each sale on a computer system, Tenant agrees that such
computer system will be set up so that such records cannot be changed by the
person operating the computer system.
(d) If Tenant shall fail to prepare and deliver any statement of Gross
Revenue in a timely manner as required herein, and such failure continues for
thirty (30) days after Landlord notifies Tenant thereof, Landlord may do any or
all of the following: (i) elect to treat Tenant's failure to report as a default
of this Lease; (ii) elect to make an audit of all books and records of Tenant
which in any way pertain to or show Gross Revenue and to prepare the statement
or statements which Tenant has failed to prepare and deliver; or (iii) impose a
late/non-reporting fee of One Hundred Dollars ($100.00) for each such failure by
Tenant. The statement or statements so prepared shall be conclusive on Tenant,
and Tenant shall pay on demand all expenses of such audit and of the preparation
of any such statements and all sums as may be shown by such audit to be due as
Percentage Rent.
(e) All such statements and reports shall be kept in confidence by Landlord
except in connection with a sale, mortgage, administrative or judicial
proceedings.
(f) Landlord may, in its sole and absolute discretion, provide a program
for the purpose of collecting daily sales information directly from Tenant via
Tenant's designated representatives at the Premises. The program may be in the
form of automated, computerized telecommunication. The costs and expenses in
connection with the operation of the program will be paid for either by Landlord
or by proceeds from the Marketing Fund. The information collected may be
utilized by Landlord for evaluating and responding to market trends and such
<PAGE>
other matters as Landlord finds appropriate.
Section 11.6 - Books and Records .
(a) Tenant agrees to keep on the Premises, or at its principal office,
accurate books and records (as more specifically identified below) of all
business conducted at the Premises in accordance with generally accepted
accounting practices consistently applied, and said records shall be open and
available for examination at the Premises at all reasonable times to Landlord,
or Landlord's representatives (up to twice per Lease Year), upon reasonable
notice to Tenant, for the purpose of ascertaining or verifying the Gross
Revenue. All records shall be retained by Tenant for examination by Landlord for
a period of at least two (2) years following the end of the calendar year for
which said records apply.
(b) Tenant further agrees that for the purposes hereinbefore recited,
Tenant shall prepare, preserve and maintain for each calendar year, the
following documents, books, accounts and records:
(1) Daily cash register summary tapes (normally referred to as "Z Tapes")
and sealed, continuous, cash register tapes or prenumbered sales slips or
comparable computer records, maintained as recited herein;
(2) A single, separate bank account into which all receipts of business and
other revenue from operations on or from the Premises are deposited;
(3) All bank statements detailing transactions in or through any business
bank account;
(4) Daily or weekly sales recapitulations;
(5) A sales journal;
(6) A general ledger or a summary record of all cash receipts and
disbursements from operations on or from the Premises;
(7) Copies of all sales or use tax returns filed with any governmental
authority which reflect in any manner sales, income or revenue generated in or
from the Premises; and
(8) Such other records or accounts as Landlord may reasonably require in
order to ascertain, document, or substantiate reportable Gross Revenue as
defined herein.
(c) If upon inspection or examination of Tenant's available books and
records of account, Landlord determines that Tenant has failed to maintain,
preserve, or retain the above-recited documents, books, and records of account
in the manner detailed herein, Landlord shall give Tenant sixty (60) days to
cure said deficiencies. Further, if Tenant is found to be deficient in
maintaining any of the above-recited documents, books or records of account,
Tenant shall reimburse Landlord for reasonable expenses incurred by Landlord in
determining said deficiencies, including, but not limited to, any audit or
examination fees incurred by Landlord.
If after receiving the aforesaid notice, and upon expiration of the sixty
(60) day time period specified herein, Tenant fails to cure the noted
deficiencies, Landlord may, at its option, either grant Tenant additional time
to cure the deficiencies, hold Tenant in default of the Lease, or at Tenant's
expense, and for its benefit, retain a good and reputable independent accounting
or bookkeeping firm to prepare and maintain the above-recited documents, books
and records of accounts. If Landlord elects the latter option, Tenant agrees and
covenants that the representative or representatives of said accounting or
<PAGE>
bookkeeping firm will have full right of entry and access to the Premises and
existing financial records, and full cooperation by Tenant, for the purpose of
establishing and maintaining the documents, records and books of account recited
hereinabove. Any expenses incurred by Landlord in furtherance of its rights
hereunder will be considered additional rent for the Premises due and payable by
Tenant with the next due installment of Rents.
(d) In the event an examination of the records of Tenant to verify said
Gross Revenue shall disclose a deficiency in excess of three percent (3%) of the
Gross Revenue reported for any calendar year where Percentage Rent is due
Landlord, (1) Tenant agrees to pay to Landlord the reasonable costs and expenses
of such audit, and (2) any additional Percentage Rent found due and owing as a
result of said audit shall be immediately paid by Tenant to Landlord upon
demand. If an examination by Landlord or its representative discloses that
Tenant has overreported Gross Revenue and that, as a result of said
overreporting, Tenant has overpaid Percentage Rent, Landlord shall give Tenant
credit against the next due installment of Rents due and owing by Tenant for the
overpaid Percentage Rent (or, if at the end of the Term, Landlord shall pay such
amount to Tenant within thirty (30) days after Tenant has delivered its
certified statement of Gross Revenues to Landlord).
ARTICLE XII ADDITIONAL CHARGES
Section 12.1 - Status of Charges . As part of the Rents provided for by
this Lease, Tenant agrees to pay to Landlord, as hereinafter provided, the
"Additional Charges" as described in this Article and Article XIII for the
purposes as hereinafter set forth. Such Additional Charges shall be subject to
all provisions of this Lease and shall be deemed included as part of Rents due
and owing hereunder.
Section 12.2 - Common Area Maintenance Costs .
(a) The term "Common Area Maintenance ('CAM') Cost" means the total of all
items of cost related to maintaining, managing, operating, policing, securing,
repairing, replacing, enhancing, insuring and protecting the Common Area,
including but not limited to: all cost of maintaining, painting and upgrading
facilities, fixtures and improvements, including but not limited to, parking
decks or structures, cleaning, removal of trash, dirt and debris, snow and ice
removal, sweeping and janitorial services; all such maintenance and construction
work as shall be required to preserve and maintain the utility and appearance of
the Common Area; lighting of outdoor areas, mall and service corridors;
maintenance, repair and replacement of roof/roofs, and sprinkler systems; cost
of plantings, landscaping and mall amenities, interior and exterior landscaping
and supplies incidental thereto to include all seasonal and similar decorations
plus the cost of all utilities utilized in connection therewith; costs of
maintenance and repair of the system which heats, ventilates and air conditions
the Enclosed Mall and Landlord's energy costs incurred in connection therewith;
directional signs, shopping center signs, bumpers and other markers;
installation, maintenance and repair of any security systems, fire protection
systems, lighting and utility systems, and storm drainage systems; installation,
maintenance, repair and replacement of disposal plants, lift stations, and
retention ponds or basins; costs and expenses of payroll, payroll taxes and
employee benefits of all management personnel, including without limitation
managers, security and maintenance people, secretaries and bookkeepers; costs
and expenses of operating, maintaining, repairing and replacing machinery and
equipment used in the operation and maintenance of the Common Areas, and the
personal property taxes and other charges incurred in connection with such
machinery and equipment; management fees, costs and expenses of purchasing and
maintaining in full force insurance (including, without limitation, liability
insurance for personal injury, death and property damage, rent insurance,
insurance against fire, extended coverage, theft or other casualties, all risk,
difference in conditions, sprinkler, malicious mischief, vandalism, earthquake,
<PAGE>
flood, worker's compensation insurance covering personnel, fidelity bonds for
personnel, insurance against liability for defamation and claims of false arrest
occurring on or about the Common Areas, and plate glass insurance), costs and
expenses enforcing any operating agreements pertaining to the Common Areas or
any portions thereof, and any easement agreement, or reservation or any
arbitration or judicial actions undertaken with respect to the same; costs and
expense of policing/security, including uniforms, equipment and all supplies;
all costs relating to separate employee parking areas, including but not limited
to the cost of any shuttle services Landlord may provide and the cost of
transportation services, depreciation of equipment and equipment buildings used
in operating, maintaining and replacing the Common Areas and/or rent paid for
the leasing of any such equipment or buildings; cost and expense for the rental
of music program service and loudspeaker systems including furnishing
electricity; services furnished by Landlord for nonexclusive use of all tenants
on a non-profit basis including parcel pick up and delivery services and shuttle
bus service; the cost of pest extermination; the cost of improvements not part
of initial Shopping Center construction except as otherwise provided below in
this Section 12.2(a); and an administration cost in an amount not more than
fifteen percent (15%) of the total cost and expense of all the foregoing.
Notwithstanding anything to the contrary in the definition of "CAM Costs",
CAM Costs shall not include: (i) the cost of any repairs made by Landlord
because of the total or partial destruction of the Shopping Center from casualty
or condemnation, (ii) the costs of capital improvements except for those (A)
made to reduce CAM Costs (amortized at an annual rate reasonably calculated to
equal the amount of CAM Costs to be saved in each calendar year throughout the
Lease Term (as determined by Landlord at the time Landlord elected to proceed
with the capital improvements to reduce the CAM Costs)), together with interest
at Landlord's reasonable estimate of its actual cost of funds, or (B) made to
comply with laws, statutes or insurance requirements not in force at the time of
the initial construction of the Shopping Center, or undertaken for the
protection of the health and safety of occupants and customers of the Shopping
Center (which shall be amortized, including interest on the unamortized cost at
Landlord's actual cost of funds, over its useful life as reasonably determined
by Landlord), (iii) the cost of removing Hazardous Materials from the Shopping
Center, or (iv) costs for which Landlord is reimbursed by insurance proceeds or
warranties.
(b) Tenant's Proportionate Share of the CAM Costs shall be paid by Tenant
to Landlord in equal monthly installments, in advance, on the first day of each
calendar month during the Term of this Lease in an amount equal to one-twelfth
(1/12) of Tenant's Proportionate Share of the CAM Costs as reasonably estimated
by Landlord for the fiscal year. The amount due for any partial fiscal year
shall be prorated accordingly.
(c) Within ninety (90) days after the end of Landlord's fiscal year
(January 1 - December 31), Landlord shall furnish Tenant with a written
statement in reasonable detail of the actual CAM Costs and the amount and manner
of calculation of Tenant's Proportionate Share thereof for the preceding fiscal
year. Landlord reserves the right, however, to change its fiscal year at any
time during the Term of this Lease upon reasonable prior notice to Tenant. If
Tenant's Proportionate Share of the actual CAM Costs exceed the aggregate of
Tenant's monthly payments, Tenant shall pay to Landlord any deficiency due
within fifteen (15) days after receipt of said statement by Landlord. If
Tenant's monthly payments have exceeded Tenant's Proportionate Share of the
actual CAM Costs, any surplus paid by Tenant shall be credited against the next
ensuing installment of Rents until such surplus is exhausted, unless such
surplus has occurred during Tenant's last year prior to expiration of the Lease,
in which event Landlord shall refund such excess to Tenant within thirty (30)
days after determination of such surplus has been made. Failure of Landlord to
provide the statement called for hereunder within the time prescribed shall not
relieve Tenant of its obligations hereunder.
<PAGE>
The obligations of Landlord and Tenant to make the foregoing adjustment
shall survive the expiration or earlier termination of this Lease.
(d) Landlord shall keep at its principal offices, accurate books and
records of the CAM Costs in accordance with generally accepted accounting
practices consistently applied, and said records shall be open and available for
examination at all reasonable times to Tenant, or Tenant representatives, upon
reasonable notice to Landlord and not more than once per calendar year, for the
purpose of ascertaining or verifying the CAM Cost. The results of any such audit
shall be kept confidential by Tenant except that the same may be disclosed (i)
to Tenant's professional advisors and consultants, (ii) to the extent required
by law, or (iii) in connection with any judicial, administrative or other
dispute resolution proceeding to enforce any right of Tenant hereunder . All
records shall be retained by Landlord for examination by Tenant for a period of
at least two (2) years following the end of the fiscal year for which the
records apply.
(e) In the event an examination of the records of Landlord to verify CAM
Cost shall disclose that actual CAM Costs were more than three percent (3%) less
than the CAM Costs reported for any calendar year, Landlord agrees to pay to
Tenant the reasonable costs and expenses of such audit. Any overpayment of CAM
Cost shall be reimbursed to Tenant by Landlord and any underpayment shall be
paid to Landlord by Tenant within thirty (30) days after the results of the
audit.
Section 12.3 - Real Estate Taxes .
(a) (i) The term "real estate taxes" shall mean all taxes, assessments,
charges, levies, fees and other governmental charges, general and special,
ordinary and extraordinary, of any kind and nature whatsoever, including, but
not limited to, assessments for off-site public improvements for the benefit of
the Shopping Center, which shall be laid, assessed, levied, or imposed upon the
Shopping Center or any part thereof and which are payable at any time during the
term hereof, and all gross receipts taxes, rent taxes, and occupancy taxes, and
shall include all of Landlord's reasonable administrative costs and any and all
reasonable costs, including reasonable attorney fees, incurred by Landlord in
contesting or negotiating the taxes with any governmental authority, excepting
only franchise, estate, inheritance, succession, capital levy, transfer, net
income and excess profits taxes imposed upon Landlord.
(ii) The Rents to be paid under this Lease shall be paid to Landlord
absolutely and without deduction for taxes of any nature whatsoever. Landlord
and Tenant recognize and acknowledge that there may be changes in the current
real property tax system and that there may be imposed new forms of taxes,
assessments, charges, levies or fees, or there may be an increase in certain
existing taxes, assessments, charges, levies or fees placed on, or levied in
connection with the ownership, leasing, occupancy or operation of the Shopping
Center or the Premises. All such new or increased taxes, assessments, charges
levies or fees which are imposed or increased as a result of or arising out of
any changes in the structure of the real property tax system or any limitations
on the real property taxes which can be assessed on real property including, but
not limited to, any and all taxes, assessments, charges, levies and fees
assessed or imposed due to the existence of this Lease (including any surcharge
on the income directly derived by Landlord therefrom) or for the purpose of
funding special assessment districts of the type funded by real property taxes,
shall also be included within the meaning of "real estate taxes." With respect
to any general or special assessment which may be levied against or upon the
Premises or the Shopping Center and which under the laws then in force may be
evidenced by improvement or other bonds, or may be paid in periodic
installments, there shall be included within the meaning of "real estate taxes"
with respect to any tax fiscal year only the amount currently payable on such
<PAGE>
bond for such tax fiscal year, or the periodic installment for such tax fiscal
year.
(iii) Tenant shall be responsible for payment of any type of tax, excise or
assessment, (regardless of label or whether in the form of a rental tax, gross
receipts tax, sales tax, occupation tax, use assessments, privilege tax,
franchise tax, or otherwise, except any tax, excise or assessment which in
substance is a net income or franchise tax that is based solely on Landlord's
net income), which is levied, assessed or imposed at any time by any
governmental authority upon or against the Premises, the use or occupancy of the
Premises, the Rents payable by Tenant to Landlord, or otherwise with respect to
the Landlord-Tenant relationship hereunder. Tenant shall pay the full amount of
such tax, excise or assessment directly to the appropriate governmental
authority, unless the applicable law expressly imposes solely on Landlord the
duty to pay or collect such tax, excise or assessment, in which case Tenant
shall pay the full amount of such tax, excise or assessment as part of the Rents
due and payable under this lease to Landlord within twenty (20) days following
receipt of Landlord's billing therefor. Notwithstanding that the applicable law
may impose on Landlord the duty to pay or collect such tax, excise or
assessment, it is understood and agreed that Tenant shall nevertheless be
obligated to pay such tax, excise or assessment and Landlord shall be
indemnified against and saved harmless from the same by Tenant. In the event (i)
Tenant fails to timely pay such tax, excise or assessment and Landlord pays the
same, or (ii) Landlord elects in its sole discretion to pay the same in advance,
Tenant shall promptly reimburse Landlord for the amount thereof as part of the
Rents due and payable under this Lease. The provisions of this paragraph shall
also apply to any such tax, excise or assessment which may at any time replace
or supplement any tax, excise or assessment described herein.
(b) The Premises, its leasehold improvements and the underlying realty will
not be separately assessed for tax purposes but instead will be assessed as part
of a larger parcel or parcels of land and improvements comprising the Shopping
Center. Accordingly, Tenant agrees to pay its Proportionate Share of said real
estate taxes. Tenant's Proportionate Share of real estate taxes shall be paid by
Tenant to Landlord in equal monthly installments on the first day of each
calendar month during the Term of this Lease, in an amount equal to one-twelfth
(1/12) of Tenant's Proportionate Share of said real estate taxes as reasonably
estimated by Landlord for the tax year. The amount due for any partial fiscal
year shall be prorated accordingly.
(c) Within ninety (90) days after Landlord's payment of the final
installment of real estate taxes for each tax year, Landlord shall furnish
Tenant with a written statement in reasonable detail showing the actual amount
of the real estate taxes applicable to the Shopping Center and the actual amount
and manner of calculation of Tenant's Proportionate Share thereof ("Actual
Taxes"). If Tenant's Proportionate Share of the Actual Taxes exceed the
aggregate of Tenant's monthly payments, Tenant shall pay to Landlord any
deficiency due Landlord within thirty (30) days after receipt of said statement
by Tenant. If Tenant's aggregate monthly payments exceed Tenant's Proportionate
Share of the Actual Taxes, any surplus paid by Tenant shall be credited against
the next ensuing monthly installment of Rent until such surplus is exhausted,
unless such surplus has occurred during Tenant's last year prior to expiration
of the Lease in which event Landlord shall refund such excess to Tenant within
thirty (30) days after determination of such surplus has been made. Failure of
Landlord to provide the statement called for hereunder within the time
prescribed shall not relieve Tenant of its obligations hereunder. Landlord shall
make available for inspection by Tenant upon reasonable notice from Tenant
copies of all bills relating to Actual Taxes.
The obligations of Landlord and Tenant to make the foregoing adjustment
shall survive the expiration or earlier termination of this Lease.
<PAGE>
Section 12.4 - Marketing Fund .
(a) During the term hereof, Landlord shall maintain a marketing fund
("Marketing Fund") which shall be used by Landlord to pay all costs and expenses
associated with the formulation and carrying out of an ongoing program for the
promotion of the Shopping Center, which program may include, without limitation,
special events, shows, displays, signs, marquees, decor, seasonal events,
advertising for the Shopping Center, promotional literature to be distributed
within and outside the Shopping Center and other activities within the Shopping
Center designed to attract customers.
(b) In addition, Landlord may use the Marketing Fund to defray the costs of
administration of the Marketing Fund, including, without limitation, the salary
of a marketing director and related administrative personnel, rent and
insurance.
(c) Tenant shall make a contribution to the Marketing Fund in the amount
set forth in Section 1.0(l), hereinafter referred to as "Tenant's Marketing Fund
Contribution". Tenant's Marketing Fund Contribution shall be paid by Tenant in
equal monthly installments, in advance, without deduction or set-off, on the
first day of each calendar month. The amount due for all partial calendar years
shall be prorated accordingly. ------------------------------------
(d) At the end of each calendar year or part thereof, Tenant's Marketing
Fund Contribution shall be adjusted annually by a percentage equal to the
percentage increase in the CPI-U measured for the twelve (12) month period from
the CPI-U published nearest to the Rent Commencement Date to the CPI-U published
on the next succeeding anniversary thereof and thereafter for each twelve (12)
month period between each succeeding anniversary thereof.
Section 12.5 - Security Deposit . Concurrently with its execution and
submission of this Lease, Tenant shall deposit with Landlord and thereafter
during the Term of the Lease shall maintain on deposit with Landlord, without
interest, the sum set forth in Section 1.0(w) as security deposit for the full,
prompt and faithful performance by Tenant of all of its obligations hereunder.
It is also agreed between the parties herein as follows:
(a) That such deposit or any portion thereof may be applied to the curing
of any default that may exist, without prejudice to any other remedy or remedies
which Landlord may have on account thereof, and upon such application Tenant
shall pay Landlord on demand the amount so applied which shall be added to the
security deposit so the same will be restored to its original amount;
(b) That should the Premises be transferred by Landlord, the security
deposit or any balance thereof may be turned over to Landlord's successor or
transferee, and Tenant agrees to look solely to such successor or transferee for
such application or return;
(c) That Landlord or its successors shall not be obligated to hold the
security deposit as a separate funds, but may commingle it with other funds; and
(d) That if Tenant shall faithfully perform all of the covenants and
agreements in this Lease contained on the part of Tenant to be performed, the
security deposit, or any then remaining balance thereof, shall be returned to
Tenant, without interest, within thirty (30) days after the expiration of the
term of the Lease.
Section 12.6 - Grand Opening Marketing Assessment . In addition to the
charges set forth in this Lease, Tenant shall pay to Landlord upon being billed,
as an assessment for the initial opening of the Shopping Center, the amount set
forth in Section 1.0(k). This sum shall be used for the purpose of defraying the
<PAGE>
promotional expense in connection with the initial opening of the Shopping
Center and shall be paid by Tenant whether or not Tenant participates in or is
open for business for the initial opening of the Shopping Center. Any portion of
such assessment not actually expended in connection with such initial opening
shall be retained in the Marketing Fund for subsequent expenditures. Landlord
shall not bill Tenant for such assessment prior to the date sixty (60) days
before the Scheduled Opening Date.
ARTICLE XIII PREMISES UTILITY SERVICES
Section 13.0 - Status of Charges . As part of the Rents provided for by
this Lease Tenant agrees to pay to Landlord, as hereinafter provided, the
utility service charges which shall be deemed to be included as part of the
Additional Charges described in Article XII.
Section 13.1 - Utilities . Landlord will provide at a point available to
the Premises the facilities necessary to enable Tenant to obtain for the
Premises water, electricity, telephone and sanitary sewer service, such
facilities being more specifically described in Exhibit "GCS1.0". Tenant shall
be solely responsible for payment or reimbursement to Landlord of all utilities
and services provided to the Premises, including, without limitation, gas, heat,
water electricity, other power, air conditioning, telephone service, flora
maintenance and preservation, oven and stove exhaust cleaning and air filter
replacement services, premises cleaning service, interior window washing
services, garbage disposal, pest control and sewerage services. Landlord may
include a service charge of up to Twenty-Five Dollars ($25) per month in the
cost of utilities billed directly by Landlord. Tenant shall also be responsible
for and pay all connection or service fees in connection with such utilities and
services. All costs of providing meters or submeters shall be paid by Tenant. If
applicable, Tenant shall pay all utility charges directly to the billing utility
company by no later than the due date specified in any bill. Landlord may
provide heating, chilled water and chilled air from a central plant to the
Premises, in which case Tenant shall pay to Landlord (or the operator of the
central plant, if applicable) Tenant's share of the cost of such services as
reasonably determined by Landlord. Such share shall be paid to Landlord (or
plant operator) by the first day of each and every month as additional rent.
Section 13.2 - Premises Heating, Ventilating and Air-conditioning System .
Tenant is to provide its own equipment and facilities for heating, ventilating
and air-conditioning the Premises ("Premises HVAC System") described in Exhibit
"GCS1.0", and shall operate and maintain the same during the Term of this Lease
and such equipment shall belong to Landlord at the expiration or earlier
termination of this Lease.
Section 13.3 - Discontinuance of Service . Landlord reserves the right with
thirty (30) days prior written notice to Tenant to cut off and discontinue
water, electricity, air conditioning, heating, ventilating, and any or all other
service without liability to Tenant, whenever and during any period after such
thirty (30) day period in which bills for the same remain unpaid by Tenant. Any
such action by Landlord shall not be construed by Tenant or any other party
interpreting this Lease as an eviction or disturbance of possession of Tenant or
an election by Landlord to terminate this Lease on account of such nonpayment.
If such service is discontinued or disconnected by Landlord pursuant to this
Section 13.3, any reconnection of such service shall be at Tenant's sole cost
and expense.
Section 13.4 - Interruption of Service . Landlord shall not be liable to
Tenant in damages or otherwise if any one or more of said utility services or
obligations hereunder is interrupted or terminated because of necessary repairs,
installations, construction and expansion, non-payment of utility charges due
from Tenant, or by reason of governmental regulation, statute, ordinance,
restriction or decree, or any other cause beyond Landlord's reasonable control.
<PAGE>
No such interruption or termination of utility service shall relieve Tenant from
any of its obligations under this Lease. If any one or more of such utility
services or obligations hereunder is interrupted or terminated due to any cause
within Landlord's reasonable control, and such interruption or termination
prevents Tenant from operating Tenant's business in the Premises for five (5)
consecutive days, then the payment of Rent by Tenant shall be abated for each
day after the five (5) day period during which said interruption or termination
prevents Tenant from operating Tenant's business in the Premises.
ARTICLE XIV SIGNS
Section 14.1 - Tenant's Obligation . Tenant shall only erect such signs
that have been approved by Landlord in accordance with Exhibit "GCS1.0" and
requirements of all governmental authorities, and said signs shall be maintained
in good condition by Tenant. Tenant shall obtain all permits and licenses for
its sign(s). Tenant shall not exhibit or affix any other type of sign, decal,
advertisement, notice or other writing, awning, antenna or other projection to
the roof or the outside walls or windows of the Premises or the building of
which the Premises are a part, without Landlord's approval. No movable displays
or sales fixtures will be allowed in the Design Control Area (as defined in
Exhibit "GCS1.0") except behind the display windows or store closure.
Section 14.2 - Interior Signs and Advertising . Tenant further agrees that
no advertising material of any kind except temporary price tags related to
merchandise on display shall be placed within four (4) feet of any customer door
or lease line of the Premises or on the surface of any display window or
customer door. All window display advertising material and signs shall be in
keeping in character and standards with the improvements within the Shopping
Center as reasonably determined by Landlord and as more specifically described
in Exhibit "GCS1.0," and Landlord reserves the right to require Tenant to
correct any nonconformity. Any such display and signs shall only be related to
merchandising of goods from the Premises.
ARTICLE XV REPAIRS AND ALTERATIONS
Section 15.1 - Repairs by Landlord .
(a) Landlord shall keep the roof, structural portions, the exterior of the
Premises, parking facilities and other Common Areas, in good and tenantable
condition and repair during the Term of this Lease, subject to Section 12.2,
provided, however, if the need for such repair is attributable to or results
from the negligence or misconduct of Tenant or its agents and is not covered by
Section 17.4, or is Tenant's responsibility, then in such case Tenant does
hereby agree to and shall reimburse Landlord for all costs and expenses incurred
by Landlord with respect to such repairs.
(b) As used in this Article the expression "structural portions and
exteriors of the Premises" shall not be deemed to include store front or store
fronts, plate glass, window cases or window frames, doors or door frames or
alterations required to comply with any governmental regulations or
requirements, including, but not limited to, the Americans with Disabilities Act
("ADA"). It is expressly understood and agreed that Landlord shall be under no
obligation to make any repairs, alterations, --- replacements or improvements to
and upon the Premises resulting from compliance with the ADA or the mechanical
equipment exclusively serving the Premises at any time.
(c) Landlord shall not in any way be liable to Tenant for failure to make
repairs as herein specifically required of Landlord unless Tenant has previously
notified Landlord in writing of the need for such repairs or Landlord has
otherwise obtained knowledge thereof and Landlord has failed to commence said
repairs within a reasonable period of time following receipt of Tenant's written
notification or such knowledge, and has not diligently pursued said repairs to
<PAGE>
completion.
Section 15.2 - Repairs by Tenant .
(a) It shall be Tenant's sole responsibility, at its own expense, to keep
and maintain its storefront and the interior of the Premises in good condition
and repair; provided, however, if the need for such repair is attributable to or
results from the negligence or misconduct of Landlord or its agents and is not
covered by Section 17.4, then in such case Landlord does hereby agree to and
shall reimburse Tenant for all costs and expenses incurred by Tenant with
respect to such repairs. All repairs to the Premises or any installation,
equipment or facilities therein or thereabout, other than those repairs required
to be made by Landlord pursuant to Section 15.1, shall be made by Tenant. Said
repairs shall include but not be limited to all necessary painting and
decorating, the maintenance, repair and replacement of the electrical, plumbing
and sewer systems, under the floor and elsewhere which exclusively serve the
Premises, storefronts, window and other glass, entrance and service doors and
window frames, and any other mechanical or operational installations exclusively
serving the Premises. All such repairs and replacements shall be in quality and
class equal to the original work or item and shall be subject to Landlord's
prior reasonable approval.
(b) Tenant shall replace, at the expense of Tenant, any and all plate and
other glass damaged or broken from any cause whatsoever in and about the
Premises.
(c) Landlord agrees that Tenant shall have the benefit of all warranties
that Landlord obtained in performing the work required to be performed by
Landlord under Section 6.1 to the extent in force with respect to portions of
the Premises Tenant is obligated to repair and maintain hereunder.
Section 15.3 - Alterations and Remodeling .
(a) Tenant, at its own expense, shall have the right, during the Term of
this Lease, to make such interior alterations, changes and improvements to the
Premises as Tenant may deem necessary for its use and business, provided,
however, that any remodeling of the interior in excess of Twenty-Five Thousand
Dollars ($25,000) and any material or structural alterations to the Premises or
changes in the electrical, heating, ventilating and air conditioning systems
thereof shall not be made without Landlord's prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed. In addition,
prior to the commencement of such work, Tenant, if required by Landlord, shall
secure, at Tenant's expense, performance, labor and materials bonds satisfactory
to Landlord for the full cost of such work. Landlord's approval of Tenant's
alterations shall create no responsibility or liability on the part of Landlord
for their completeness, design sufficiency or compliance with all Requirements.
All such alterations, changes and improvements, except trade fixtures, shall
become the property of Landlord upon installation and shall remain upon and be
surrendered with the Premises upon expiration or earlier termination of this
Lease. If any alteration costs in excess of Two Hundred Thousand Dollars
($200,000), Tenant shall deliver "as-built" plans to Landlord upon completion.
(b) Tenant further agrees not to make any alterations, additions or changes
to any storefront or exterior sign, the exterior walls or roof of the Premises,
nor shall Tenant erect any second level or increase the size of same if one is
initially constructed unless and until the prior written consent of Landlord
shall first have been obtained. In no event shall Tenant make or cause to be
made any penetration through the roof or the floor slab of the Premises without
the prior written consent of Landlord.
Section 15.4 - Renovation . In the event that Landlord develops after five
(5) years from the date of this Lease, a comprehensive renovation plan for the
<PAGE>
Shopping Center which may include structural changes to conform to revised
design criteria or to new additions to the Shopping Center, Tenant agrees, at
Landlord's sole cost, to redesign and reconstruct its store front and signs to
conform to Landlord's revised design criteria. Landlord shall provide Tenant
with revised design criteria and Tenant shall commence its renovation within
ninety (90) days of receipt of said criteria and shall thereafter diligently
pursue its completion.
Section 15.5 - Refurbishment . Without limiting Section 15.2 or Section
15.3, Tenant agrees that it will cosmetically refurbish the Premises at least by
the end of the sixth (6th) Lease Year if Tenant exercises its option to extend
the Term of this Lease under Section 9.5, according to plans which are approved
by Landlord in writing in advance.
ARTICLE XVI LIENS
Section 16.1 - Indemnification by Tenant . Tenant shall allow no liens to
be filed against the Premises, the Shopping Center or the Resort as a result of
work performed by, at the request or on behalf of Tenant. Tenant shall indemnify
and save harmless Landlord against all loss, liability, costs, attorney's fees,
damages or interest charges as a result of any mechanic's lien or any other lien
caused to be filed against the Shopping Center, the Premises, the Resort or
Tenant's leasehold estate therein as a result of acts or omissions of Tenant or
its agents, contractors and employees, and Tenant shall, within thirty (30) days
of the filing of any such lien and written notice given to Tenant, remove, pay
or cancel said lien or secure the payment of any such lien or liens by bond or
other security acceptable to Landlord.
Section 16.2 - Tenant's Right of Contest . Tenant shall have the right at
all times and at its own expense to contest and defend on behalf of Tenant or
Landlord any action involving the collection, validity or removal of such lien
or liens, upon giving adequate security to Landlord for payment of such lien.
ARTICLE XVII INDEMNITY AND INSURANCE
Section 17.1 - Mutual Indemnification .
(a) Tenant shall defend, indemnify and save Landlord harmless from legal
action, damages, loss, liability and any other expense (including reasonable
attorney fees) in connection with loss of life, bodily or personal injury or
property damage arising from or out of all acts, failures, omissions or
negligence of Tenant, its agents, employees or contractors which occur in the
Premises, Common Areas or other parts of the Shopping Center, unless such legal
action, damages, loss, liability or other expense (including reasonable attorney
fees) results from any sole act, omission or neglect of Landlord, its respective
agents, contractors, employees or persons claiming through it.
(b) Landlord shall indemnify and save Tenant harmless from legal action,
damages, loss, liability and any other expense (including reasonable attorney
fees) in connection with loss of life, bodily or personal injury or property
damage, arising from or out of all acts, failures, omissions or negligence of
Landlord, its agents, employees or contractors which occur in the Premises,
Common Areas or other parts of the Shopping Center, unless such legal action,
damages, loss, liability or other expense (including reasonable attorney fees)
results from any sole act, omission or neglect of Tenant, its respective agents,
contractors, employees or persons claiming through it.
Section 17.2 - Tenant's Insurance . Tenant covenants and agrees that from
and after the date of delivery of the Premises from Landlord to Tenant, and
during the Term of this Lease, Tenant will carry and maintain, at its sole cost
and expense, the following types of insurance, naming as insureds or loss
payees, as appropriate, Tenant, Landlord, Landlord's lenders and other parties
<PAGE>
with an insurable interest as designated by Landlord, in the amount specified
and in the form hereinafter provided for with insurance companies authorized to
do business in the state in which the Premises is located and rated A-/VIII or
better in the most current edition of Best's Insurance Report. All policies
shall be written as primary policies and not contributing with or in excess of
the coverage, if any, which Landlord may carry.
(a) Commercial General Liability Insurance. Tenant shall keep in full force
and effect commercial general liability insurance, which shall include broad
form property damage liability coverage, extended bodily injury coverage,
advertising injury liability coverage, contractual liability coverage and
independent contractors coverage, in the amount set forth in Section 1.0(n),
adjusted annually for inflation (but only if the CPI-U has increased five
percent (5%) or more since the last such adjustment), written on a combined
single limit per occurrence basis for property damage, personal injury and
bodily injury or death of one or more persons.
(b) Boiler and Machinery Insurance. If applicable, Tenant shall maintain in
full force and effect at all times during the Term of the Lease a policy(s) of
boiler and machinery breakdown insurance covering all of its boilers, fired or
unfired pressure vessels, heating, ventilating and air-conditioning units or any
other mechanical equipment which may malfunction or cause damage to property or
injury to persons that may be caused by or results from any equipment existing
from time to time at the Premises, which equipment is used exclusively by
Tenant, and if said coverage is not included within the policy(s) providing
coverage for Tenant's alterations, improvements and betterments, pursuant to
Section 17.2(e), then said insurance shall be by separate policy in the amount
set forth in Section 1.0(n).
(c) Environmental Impairment Liability Insurance. Subject to the
limitations imposed by Section 18.14, if Tenant uses, stores, handles, processes
or disposes of "Hazardous Materials" (as hereinafter defined) in the ordinary
course of its business, then Tenant shall maintain in full force and effect
throughout the Term of this Lease, Environmental Impairment Liability Insurance
with limits of not less than the amount set forth in Section 1.0(n), providing
coverage for bodily injury, property damage or injury or damage of actual,
alleged or threatened emission, discharge, dispersal, seepage, release or escape
of Hazardous Materials, including any loss, cost or expense incurred as a result
of any cleanup of Hazardous Materials or in the investigation, settlement or
defense of any claim, suit, or proceedings against Landlord or its management
company arising from Tenant's use, storage, handling, processing or disposal of
Hazardous Materials.
As used herein, the term "Hazardous Material" means those substances,
chemicals and mixtures as may be defined as "hazardous substances," "hazardous
materials", "toxic substances," "imminently hazardous chemical substance or
mixture," "pesticide," "heavy metal," "hazardous air pollutant," "toxic
pollutant," "toxic waste," "pollutant," "regulated substance," "asbestos,"
"asbestos containing material," "solid waste" "hazardous waste," "medical
waste," or "radioactive waste" in any of the following acts, as now or hereafter
amended: the Toxic Substances Control Act, 15 U.S.C. Sec. 2601 et seq., the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. Sec. 9601 et seq, the Resource Conservation and Recovery Act of 1976,
42 U.S.C. Sec. 5901 et seq., the Federal Hazardous Substances Act, 15 U.S.C.
Sec. 1261 et seq., the Federal Water Pollution Control Act, 33 U.S.C. Sec. 1251
et seq., the Clean Air Act, 42 U.S.C. Sec. 7401, et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Sec. 136 et seq., the
Emergency Planning and Community Right to Know Act of 1986, 42 U.S.C. Sec. 11001
et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. Sec. 651 et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Sec. 1801 et seq.,
the statutes of the State of Nevada found currently at ch. 444, 445, 459, 477,
590, 618 or in the Uniform Fire Code, 1991 edition and the rules, orders and
<PAGE>
regulations now in effect or promulgated and effective hereafter pursuant to
each respective law listed above as well as such other substances, materials and
wastes which are regulated under applicable local, state or federal law, or
which are classified as hazardous or toxic under federal, state or local laws or
regulations.
(d) Liquor Liability Insurance. If Tenant distributes, sells, serves or
furnishes alcoholic beverages in the ordinary course of its business, then
Tenant shall maintain and keep in full force and effect throughout the Term of
this Lease, Liquor Liability Insurance in an amount not less than $1,000,000
written on a combined single limit per occurrence basis.
(e) Personal Property, Alterations, Improvements and Betterments. Tenant
shall at all times during the Term hereof maintain in full force and effect a
policy(s) of all risk insurance including coverage for flood, earthquake,
sprinkler damage, vandalism and malicious mischief, covering all of Tenant's
personal property, including alterations, improvements and betterments to the
Premises now existing or to be added, to the extent of their full replacement
costs as updated from time to time during the Term of this Lease. Landlord shall
be a named loss payee under each such policy.
The proceeds of Tenant's policy(s) to the extent of the cost of any damage
or loss to the Premises, shall be used for the repair and replacement of the
property damaged or destroyed. In the event of Tenant's failure to commence,
within forty-five (45) days of availability of insurance proceeds and the
Premises reconstructed to the extent required to be reconstructed by Landlord
under Article XXII, and to diligently proceed to reconstruct or repair its
portion of the damaged or destroyed Premises to its former condition prior to
said casualty, then Landlord shall have the right to make all necessary repairs
and if the insurance proceeds described above are not sufficient to cover the
repairs, Tenant shall be liable for all additional costs in excess of such
available insurance proceeds. However, it is expressly understood and agreed
that Landlord shall be under no obligation to insure, reinstall, repair or
replace any such alterations, additions, improvements or betterments. This
paragraph is only applicable if the Lease is not terminated pursuant to Article
XXII hereof.
(f) Additional Hazards. Tenant agrees that it will not keep, use, sell or
offer for sale in or upon the Premises any article which may be prohibited by
the standard form of all risk insurance coverage. Tenant agrees to pay any
increase in premium for All Risk Coverage resulting from the keeping, use, sale
or offering for sale of such prohibited articles that may be charged during the
Term of this Lease for the amount of any insurance which may be carried by
Landlord on the Premises. Said ------------------ additional premiums shall be
payable by Tenant to Landlord upon ten (10) days written notice to Tenant.
(g) Blanket Policies. Tenant may maintain any of its required insurance
coverages under excess liability, umbrella or blanket policies of insurance
covering said Premises and any other premises of Tenant, or companies affiliated
with Tenant, provided that the coverage afforded will not be reduced or
diminished by reason of the use of such blanket policy.
(h) Worker's Compensation. Tenant shall, at all times during the Term,
maintain and pay all sums to the State Industrial Insurance System in order to
be in compliance with their worker's compensation requirements or maintain
adequate worker's compensation insurance in the event of that Tenant is
permitted to be self-insured, together with Employer's Liability (Nevada Stop
Gap) in an amount not less than One Million Dollars ($1,000,000.00) for each
injury, accident or illness. If self-insured, Tenant shall submit at least
fourteen (14) days prior to the Rent Commencement Date and annually during the
Term thereafter a certificate of compliance to Landlord confirming that Tenant
has fulfilled its self-insurance requirements.
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(i) Business Interruption. Tenant shall, at all times during the Term,
procure and maintain in full force and effect a policy of business interruption
insurance in an amount not less than one hundred percent (100%) of the annual
business interruption value and an extended period of indemnity clause for an
additional three (3) months.
(j) Other Policies. Tenant shall maintain such other or additional
insurance (as to risks covered, policy amounts, policy provisions or otherwise)
as Landlord may reasonably request provided that such insurance and such amounts
are then commonly insured against with respect to similar properties in Clark
County, Nevada.
(k) Policy(s) and/or Certificates of Insurance. The above mentioned
policy(s) or certificate(s) of insurance are to be provided by Tenant to
Landlord prior to occupancy and at least annually thereafter or as requested by
Landlord. The coverage evidenced by the policy(s) or certificate(s) of insurance
will be with insurance company(s) reasonably acceptable to Landlord and will be
for a period of not less than one (1) year, and will provide that Landlord be
given written notice thirty (30) days prior to the expiration, material adverse
alteration, cancellation, non-renewal or replacement of the existing policy(s),
with the further understanding that should Tenant fail to furnish said notice or
policies as is provided in this Lease, and at the times herein provided,
Landlord may obtain such insurance and the premiums on such insurance shall be
deemed to be an Additional Charge to be paid by Tenant to Landlord upon demand.
(l) Notice of Loss. Tenant shall notify Landlord forthwith in the event of
any damage to persons or property occurring on the Premises from fire, any other
casualty, or serious injury. Section 17.3 - Landlord's Insurance . Landlord
covenants and agrees that from and after the date of delivery of the Premises
from Landlord to Tenant, and during the Term of this Lease, Landlord will carry
and maintain, with regard to the Shopping Center, the following types of
insurance, in the amounts specified and in the form hereinafter provided:
(a) Commercial General Liability Insurance. Landlord shall keep and
maintain in full force and effect commercial general liability insurance in an
amount not less than $2,000,000, adjusted annually for inflation, written on a
combined single limit per occurrence basis for property damage and personal and
bodily injury or death of one or more persons.
(b) Property Damage Insurance. Landlord shall, at all times, keep and
maintain in full force and effect all risk policy(s) of insurance, including
coverage for sprinkler damage, vandalism and malicious mischief, covering the
roof, structural portions and perimeter walls of the Shopping Center and
equipment (excluding Tenant's fixtures, merchandise, personal property, wall
coverings, alterations, improvements, betterments and any other item included in
Tenant's insurance) in an amount not less than full replacement cost (exclusive
of the cost of excavations, foundations and footings) updated from time to time
during the Term of this Lease or the amount of such insurance which Landlord's
mortgage lender may require Landlord to maintain, whichever is the greater.
(c) Blanket Policies. Landlord may maintain any of its required insurance
under blanket policies of insurance covering the Premises and any other premises
of Landlord or companies affiliated with Landlord, provided that the coverage
afforded will not be reduced or diminished by reason of the use of such blanket
policy of insurance.
All insurance maintained by Landlord pursuant to this Section 17.3 shall be
a part of the CAM Cost.
Section 17.4 - Waiver of Subrogation . Notwithstanding anything to the
<PAGE>
contrary contained elsewhere in this Lease, neither Landlord nor Tenant shall be
liable to the other party or to any insurance company insuring the other party
by way of subrogated rights or otherwise, for any loss or damage caused by fire
or any other hazard or peril covered by fire and extended coverage or all risk
insurance, to the extent such loss or damage is covered by insurance (or where
insurance was required by this Lease) to any building structure or other
tangible property, or any resulting loss of income, even though such loss or
damage may have been occasioned by the negligence of such party, its agents or
employees.
Section 17.5 - Landlord Not Responsible for Acts of Others . Landlord shall
not be responsible or liable to Tenant, or those claiming by, through or under
Tenant, for any loss or damage to their person or property resulting from the
acts or omissions of persons occupying space adjoining or adjacent to the
Premises or connected to the Premises or any other part of the Shopping Center
caused by but not limited to events such as breaking or falling of electrical
cables and wires, the breaking, bursting, stoppage or leaking of water, gas,
sewer or steam pipes.
ARTICLE XVIII GENERAL RULES AND REGULATIONS
Section 18.1 - Uniformity . Landlord reserves the right, at any time and
from time to time for the general welfare of the Shopping Center, the avoidance
of nuisance and the maintenance of a good reputation, safety, order and
cleanliness in the Premises and at the Shopping Center, to impose reasonable
rules and regulations of generally uniform application governing the conduct of
tenants and the use of the Common Areas in the Shopping Center. Upon receipt of
notice thereof, Tenant agrees to comply with such rules and regulations imposed
by Landlord as if they had existed and been attached hereto at the time of
execution of this Lease.
Section 18.2 - Rubbish . Tenant agrees to maintain the Premises, at its
expense, free and clear of all rubbish, garbage or trash in the containers
permitted and/or required by Landlord. Tenant, at its own expense, shall dispose
of all said rubbish as reasonably directed by Landlord. In the event Tenant
requires the services of a trash compactor, it agrees to arrange for and
coordinate said services through Landlord's mall manager. If Tenant is required
to use the Shopping Center's trash compactor service, the charge for such
service shall be competitive with the prevailing market rate for such services.
Section 18.3 - Lighting . Tenant agrees to keep the windows of the Premises
properly displayed and the Premises signs and external lights, where
specifically permitted, properly illuminated during the hours as reasonably
established by the rules and regulations of Landlord for the Shopping Center.
Section 18.4 - Merchandise Display, Loading and Unloading . Tenant agrees
not to display merchandise outside the Premises, and to load, unload or deliver
goods and merchandise only at such times and in such areas and through such
entrances as shall be reasonably designated by Landlord.
Section 18.5 - Obstruction of Passageways . Tenant agrees not to obstruct
the passageways, driveways, approachways, walks, roadways, exits and entries in,
to, from and through the Common Areas and all other parts of the Shopping Center
used in common with other tenants.
Section 18.6 - Employee Parking . Tenant and its employees shall park their
cars only in such areas designated for the purpose by Landlord. Tenant shall
furnish Landlord with state automobile license numbers assigned to cars used by
Tenant's employees within five (5) days after taking possession of the Premises
and shall thereafter notify Landlord of any changes within five (5) days after
such changes occur. If Tenant or its employees shall fail to park their cars in
the designated parking areas, then, without limiting any other remedy which
<PAGE>
Landlord may pursue in the event of Tenant's default, Landlord, after giving
notice to Tenant, shall have the right to charge Tenant, as an Additional
Charge, the sum of Thirty Dollars ($30.00) per day per car parked in violation
of the provisions of this Section 18.6.
Landlord may, in its sole discretion, arrange for off-site parking and a
shuttle service to the Shopping Center. The cost for such service shall be
included in the CAM Cost.
Section 18.7 - Interference With Other Tenants . Tenant shall not do,
permit or suffer anything to be done, or kept upon the Property that will
obstruct or interfere with the rights of other tenants, Landlord or the patrons
and customers of any of them, or which will or would be likely to cause a
nuisance to any of them or their patrons or customers by reason of unreasonable
noise, odor, vibration, or otherwise, nor will Tenant commit or suffer any act
which would result in the diminishment of the good will of the Resort, Landlord
or Tenant or in any way reflect the Resort, Landlord or Tenant in a negative
manner within the business and consumer community.
Section 18.8 - Security . Tenant acknowledges that Landlord's security
department and security officers are not responsible for providing security
services in the Premises and that all such responsibility is the obligation of
Tenant. In no event shall Landlord be liable to Tenant or any third-party for
the security department's failure to respond to a request for aid or assistance
by Tenant.
Section 18.9 - Employee Areas . Tenant shall not cause or permit its
employees or agents to enter upon those areas of the Resort which are designated
"Employees Only".
Section 18.10 - Tenant Conduct . Tenant acknowledges that Landlord and its
affiliates have a reputation for offering high-quality entertainment and/or
services to the public, and that it and its affiliates are subject to regulation
and licensing, and desire to maintain their reputation and receive positive
publicity. Tenant therefore agrees that throughout the Term of this Lease, it
and its officers, directors, shareholders, employees and agents will not conduct
themselves in a manner which is contrary to the best interests of Landlord, nor
in any manner that adversely affects or is detrimental to Landlord or its
affiliates, and will not directly or indirectly make any oral, written or
recorded private or public statement or comment that is disparaging, critical,
defamatory or otherwise not in the best interests of Landlord. Landlord shall
use its good faith business judgment in determining whether Tenant's conduct or
that of its officers, directors or management adversely affects Landlord or its
affiliates.
Section 18.11 - Gaming . No slot machine, video gaming device or other
gambling game shall be permitted on the Premises.
Section 18.12 - Prohibited Advertising . Landlord shall have the right to
prohibit any advertising, promotion or display by Tenant which, in Landlord's
reasonable opinion, impairs or would tend to impair the reputation of Landlord,
the Shopping Center or the Resort or its desirability as a location as a resort,
hotel, casino, restaurant, retail or other commercial space, and upon written
notice from Landlord Tenant shall immediately refrain from and discontinue such
advertising. Upon written request of Landlord, Tenant shall provide Landlord a
tangible specimen of advertising material relating to the Premises prior to
publishing or otherwise displaying such advertisements in any manner, whether
through print media, electronic media, over or through the Internet or through
any other means now known or hereafter developed.
Section 18.13 - Resort References . Tenant, at its sole expense, agrees to
refer to the Shopping Center and the Resort only by such name as permitted by
<PAGE>
Landlord in designating the location of the Premises in all newspaper or other
advertising, stationery, other printed materials and all other references to
location. Tenant agrees Landlord may include a reference to Tenant's tradename
listing Tenant as one of the tenants of the Shopping Center in advertising and
marketing of the Shopping Center and Resort.
Section 18.14 - Prohibited Uses . Tenant shall not, without prior written
consent of Landlord, sell, or suffer to be kept, used or sold in, upon or about
the Premises any gasoline, distillate or other petroleum products or any other
substance or material of an explosive, inflammable or radiological nature, in
such quantities as may be prohibited by any such insurance policy or any
Hazardous Material or any other substance that may endanger any part of the
Resort or its occupants, business patrons or invitees. Notwithstanding anything
to the contrary in the foregoing, Tenant shall not use, store, transport,
manufacture, process, treat, discharge or release any Hazardous Material from
in, on or about the Premises in violation of the Environmental Laws.
Section 18.15 - Employee Drug Testing . Tenant shall require pre-employment
drug testing of all employees at the Premises (other than persons employed by
Tenant as of the date hereof) at Tenant's sole cost and expense.
ARTICLE XIX SUBORDINATION AND ATTORNMENT BY TENANT
Section 19.1 - Subordination of Lease . This Lease and the estate of Tenant
hereunder shall be subject and subordinate to any ground lease, deed of trust,
mortgage lien or charge or any reciprocal easement agreement or other operating
agreement which now encumber or which at any time hereafter may encumber the
Premises (such ground lease, deed of trust, mortgage lien or charge, or any
reciprocal easement agreement or other operating agreement and any replacement,
renewal, modification, consolidation or extension thereof being hereinafter
referred to as an "Encumbrance"). Any Encumbrance shall be prior and paramount
to this Lease and to the right of Tenant hereunder and all persons claiming
through and under Tenant, or otherwise, in the Premises. Tenant's acknowledgment
and agreement of subordination provided for in this Section 19.1 shall be
self-operative and no further instrument of subordination shall be required.
However, Tenant, on Tenant's behalf, and on behalf of all persons claiming
through and under Tenant, covenants and agrees that, from time to time at the
request of Landlord or the holder of any Encumbrance, Tenant will execute and
deliver any necessary or proper instruments or certificates reasonably necessary
to acknowledge or confirm the priority of the Encumbrance over this Lease and
the subordination of this Lease thereto or to evidence Tenant's consent to any
Encumbrance. Notwithstanding the foregoing, any holder of an Encumbrance may
elect to the extent possible that this Lease shall have priority over such
Encumbrance and, upon notification of such election by the holder of such
Encumbrance, this Lease shall be deemed to have priority over such Encumbrance,
whether this Lease is dated prior to or subsequent to the date of such
Encumbrance. Notwithstanding the foregoing, the subordination of this Lease to
any Encumbrance under this Section 19.1 shall only be effective if the holder of
such Encumbrance (a "Superior Mortgagee") executes and delivers to Tenant a
non-disturbance agreement, the form of which shall be a commercially reasonable
form. Tenant shall execute and deliver to any Superior Mortgagee any such
commercially reasonable non-disturbance agreement requested by such Superior
Mortgagee within ten (10) days of such Superior Mortgagee's request therefor.
Section 19.2 - Attornment by Tenant . Tenant agrees that if the holder of
any Encumbrance or any person claiming under said Encumbrance shall succeed to
the interest of Landlord in this Lease, Tenant shall recognize and attorn to
said holder as Landlord under the terms of this Lease. Tenant agrees that it
will, upon the request of Landlord, execute, acknowledge and deliver any and all
instruments necessary or desirable to give effect or notice of such attornment
and failure of Tenant to execute any such document or instrument on demand shall
constitute a default by Tenant under the terms of this Lease.
<PAGE>
ARTICLE XX RIGHTS OF LANDLORD
Section 20.1 - Landlord's Right to Repair . Landlord, or its authorized
agents, after reasonable prior written notice to Tenant, may go upon and inspect
the Premises or any portion of the Shopping Center and, if Tenant has failed to
commence and diligently pursue to completion any repairs required to be made by
Tenant hereunder within ten (10) days following receipt of written notice from
Landlord, may make such repairs. Said work performed shall be chargeable to
Tenant and shall be due and payable within ten (10) days following receipt of
Landlord's billing.
Section 20.2 - Landlord's Right to Affix Sign . Landlord has a right to
install or place upon, or affix to the roof and exterior walls of the Premises
equipment, non-competitive signs, displays, antennas and any other object or
structure of any kind, provided the same shall not materially impair the
structural integrity of the building or interfere with Tenant's occupancy.
Section 20.3 - Landlord's Right to Make Payments on Behalf of Tenant .
Landlord has a right to make payments on behalf of Tenant where Tenant defaults
in its payments or obligations under the terms of this Lease. Said payments by
Landlord shall be considered as an Additional Charge and be due and payable
within ten (10) days following receipt of Landlord's billing.
ARTICLE XXI ASSIGNMENT AND SUBLETTING
Section 21.1 - Landlord's Consent Required .
(a) Landlord has entered into this Lease with Tenant in order to obtain the
benefit for the Shopping Center of the unique attraction of the trade name set
forth in Article I and of the unique merchandising mix and product line
associated with the business operated by Tenant under such trade name. In
entering into this Lease, Landlord has specifically relied on the identity and
special skill of Tenant in its ability to conduct the business identified in
Article I. Accordingly Tenant shall not mortgage, pledge, encumber, franchise,
assign or in any manner transfer this Lease, voluntarily or involuntarily, by
operation of law or otherwise, nor sublet all or any part of the Premises for
the conduct of any business by any third person or business entity, or for any
purpose other than is herein authorized without Landlord's prior written consent
which shall not be unreasonably withheld, conditioned or delayed by Landlord.
Notwithstanding the foregoing provisions, Tenant shall have the right to assign
this Lease, without Landlord's consent and without increase in rent and/or
payment to Landlord, to the surviving entity in the event of any merger or
consolidation involving Tenant or to the buyer in one transaction of all or
substantially all of Tenant's assets.
(b) Any consent by Landlord to any assignment or subletting, or other
operation by a concessionaire, or licensee, shall not constitute a waiver of the
necessity for such consent under any subsequent assignment or subletting or
operation by a concessionaire or licensee.
(c) Reference anywhere else in this Lease to an assignee or subtenant shall
not be considered as a consent by Landlord to such assignment or subletting nor
as a waiver against the same except as specifically permitted in this Section
21.1.
Section 21.2 - Insolvency Proceedings . In the event an assignment of the
Premises is caused by operation of law due to Tenant's voluntary or involuntary
insolvency proceedings under the Bankruptcy Reform Act of 1978 as amended, said
assignment shall be subject to any and all conditions contained in Section 365
of said Act or any other section pertaining to the termination, assumption,
assignment and rejection of executory contracts for leases.
<PAGE>
Section 21.3 - Return of Premises by Tenant . Prior to or simultaneously
with any request by Tenant for consent as required in this Article XXI to assign
this Lease or sublet the whole or substantially the whole of the Premises,
Tenant shall, by written notice and without charge of any kind, offer the return
of the Premises to Landlord herein. Landlord, within thirty (30) days of receipt
of said written notice, shall have the option to accept the Premises without
further liability upon Tenant as to the terms of this Lease or reject said offer
and permit Tenant to assign or sublet the Premises subject to the conditions of
this Article XXI; provided, however, that if Landlord elects to accept the
premises, then Tenant shall have thirty (30) days from Landlord's notice to
Tenant of such election to rescind such offer and continue to lease the Premises
on the terms and conditions set forth herein.
Section 21.4 - Transfer of Ownership .
(a) In the event that Tenant is a "closely-held" entity (meaning a
corporation which is not listed on a national security exchange as defined in
the Securities Exchange Act of 1934 and as amended, a partnership, a limited
liability company, or any other type of business entity that is not a
corporation), a change in the "control" of Tenant ("control" meaning the
ownership or control of more than fifty percent (50%) of the voting or ownership
interests of Tenant or, if Tenant is a partnership, the general partner of
Tenant) without Landlord's prior written consent shall constitute an attempted
assignment in violation of this Lease and shall at Landlord's election: (x) be
deemed to be a default under this Lease; (y) be deemed to be an offer of return
of the Premises to Landlord pursuant to Section 21.3; or (z) be deemed to be
null and void and of no effect.
(b) Notwithstanding the foregoing provisions, Tenant shall have the right
to assign or otherwise transfer this Lease or sublease the entire Premises (but
not part of the Premises), to its parent or to a wholly owned subsidiary or to
an entity which is wholly owned by the same entity which wholly owns Tenant, or
to an entity controlled by Tenant or by the persons and entities that control
Tenant, provided, however, that (i) Tenant shall also remain primarily liable
for all obligations under this Lease, (ii) the transferee shall, prior to the
effective date of the transfer, deliver to Landlord, instruments evidencing such
transfer and its agreement to assume and be bound by all the terms, conditions
and covenants of this Lease to be performed by Tenant, all in form acceptable to
Landlord, (iii) Tenant shall not be in default under this Lease and (iv)
Tenant's right to make such transfer is expressly conditioned on, and shall
remain in effect only as long as the transferee maintains its relationship as
parent or wholly owned subsidiary of Tenant or wholly owned subsidiary of
Tenant's parent. Any transfer of other ownership interests of such parent or
subsidiary transferee shall be deemed a change in the control of Tenant and
governed by the provisions of Section 21.4(a) unless such parent or subsidiary
transferee is not a closely-held entity.
Section 21.5 - Acceptance of Rent by Landlord . If this Lease be assigned,
or if the Premises, or any part thereof, be subleased or occupied by anybody
other than Tenant with or without Landlord's consent, Landlord may collect from
assignee, subtenant or occupant, any Rent or other charges payable by Tenant
under this Lease and apply the amount collected to the Rents herein reserved,
but such collection by Landlord shall not be deemed a waiver of the provisions
of this Lease, nor an acceptance of this assignee, subtenant or occupant, as a
tenant of the Premises.
Section 21.6 - No Release of Tenant's Liability . No assignment or
subletting or any other transfer by Tenant, either with or without Landlord's
consent, required or otherwise, during the Term of this Lease shall release
Tenant from any liability under the terms of this Lease nor shall Tenant be
relieved of the obligation of performing any of the terms, covenants and
<PAGE>
conditions of this Lease.
Section 21.7 - Legal Fees . In each instance where Landlord's consent to an
assignment or subletting is requested by Tenant, Tenant acknowledges and agrees
that Landlord shall not be deemed to be acting unreasonably if Landlord, as one
of its conditions to the granting of such consent, should require Tenant to pay
the reasonable attorney's fees incurred by Landlord, its outside counsel, if
any, or counsel for Landlord's lender if such lender's consent should be
required, in the preparing, reviewing, negotiating and/or processing of
documentation in connection with the requested assignment or subletting
irrespective of whether or not consent is given to such assignment or
subletting.
ARTICLE XXII DAMAGE OR DESTRUCTION
Section 22.1 - Landlord's Obligation to Repair and Reconstruct .
(a) Subject to Section 22.2, if the Premises shall be partially damaged by
fire or other casualty but are not thereby rendered untenantable in any manner,
Landlord shall cause the Premises to be repaired, subject to Subsection (c)
herein, and the Fixed Minimum Rent and Additional Charges shall not be abated.
If by reason of such occurrence the Premises shall be rendered untenantable only
in part, Landlord shall cause the Premises to be repaired, subject to Subsection
(c) herein and to Section 22.2, and the Fixed Minimum Rent and Additional
Charges shall be abated proportionately as to the portion of the Premises
rendered untenantable until the earlier to occur of one hundred ten (110) days
after Landlord's restoration work has been substantially completed or the date
the Premises so repaired has reopened for business.
(b) Subject to Section 22.2, if the Premises shall be rendered wholly
untenantable by reason of such occurrence, Landlord shall cause the Premises to
be repaired, subject to Subsection (c) herein, and the Fixed Minimum Rent and
Additional Charges shall be abated until the earlier to occur of one hundred ten
(110) days after Landlord's restoration work has been substantially completed or
the date the Premises so repaired has reopened for business.
(c) If Landlord is required or elects to repair or reconstruct the Premises
under the provisions of this Article XXII, its obligation shall be limited to
that work with respect to the Premises which was Landlord's obligation to
perform for Tenant at the commencement date of this Lease. Tenant, at Tenant's
expense, shall promptly perform all repairs and restoration not required to be
done by Landlord and shall promptly refixture and reconstruct the Premises and
recommence business in all parts thereof.
(d) Tenant shall not be entitled to any compensation or damages, other than
stated herein, from Landlord for the loss of the use of the whole or any part of
the Premises or damage to Tenant's personal property or any inconvenience or
annoyance occasioned by such damage, repair, reconstruction or restoration.
Section 22.2 - Option to Terminate . If (1) the Premises are rendered
wholly untenantable or damaged as a result of any cause which is not covered by
Landlord's actual insurance or Landlord's required insurance under Section
17.3(b); (2) the Premises are damaged or destroyed to the extent of twenty-five
percent (25%) or more of the cost of replacement during the last two (2) Lease
Years of the Term; (3) the Premises are damaged or destroyed in whole or in part
during the last Lease Year of the Term; or (4) the Shopping Center or Resort is
damaged to the extent of ten percent (10%) or more of the cost of replacement,
then in any of such events, Landlord may elect to terminate this Lease by giving
to Tenant notice of such election within ninety (90) days after the occurrence
of such event and, in the case of clause (2) or clause (3), Tenant may elect to
terminate this Lease by giving to Landlord notice of such election within thirty
(30) days after the occurrence of such event. If such notice is given, this
<PAGE>
Lease shall terminate as of the date of such notice, and Fixed Minimum Rent and
Additional Charges shall be equitably abated until and adjusted as of the date
of such termination. Notwithstanding the foregoing provisions, Landlord shall
not terminate this Lease solely pursuant to clause (4) of this Section 22.2
unless Landlord terminates the leases of all other similarly situated tenants in
the Shopping Center. Notwithstanding the foregoing provisions, if Landlord
terminates this Lease solely pursuant to clause (2) or clause (3) in this
Section 22.2, and if at the time Tenant received notice of such termination
Tenant's option to extend the Term of this Lease under Section 9.5 may still be
validly exercised, then Tenant may nullify Landlord's termination notice, and
require Landlord to repair the Premises in accordance with Section 22.1, by
exercising such option by giving Landlord written notice of such exercise within
thirty (30) days after Tenant's receipt of Landlord's notice of termination.
Tenant hereby waives any statutory rights of termination which may arise
out of partial or total destruction of the Premises which Landlord is obligated
to restore.
Section 22.3 - Demolition of Landlord's Building . If the Shopping Center
is so substantially damaged that it is reasonably necessary, in Landlord's
judgment, to demolish a portion of the said Shopping Center, including the
Premises, for the purpose of reconstruction, Landlord may demolish the Premises,
in which event Tenant's Fixed Minimum Rent and Additional Charges shall be
abated until the earlier to occur of one hundred ten (110) days after Landlord's
restoration work has been substantially completed or the date the Premises so
restored has reopened for business.
Section 22.4 - Damage to Shopping Center . If the Shopping Center, or any
portion thereof, is damaged or destroyed and as a result thereof Tenant is
denied reasonable access to the Premises and/or the Common Areas and as a result
is unable to operate its business in the Premises and in fact ceases such
operation, then, whether or not the Premises was damaged or destroyed, all Rent
shall abate from the date of the casualty until Tenant regains such access.
ARTICLE XXIII CONDEMNATION
Section 23.1 - Effect of Taking .
(a) In the event that the whole or any part of the Premises shall be taken
for public or quasi-public use or condemnation under eminent domain, this Lease
shall terminate as to the part so taken on the date possession is yielded to the
condemning authority.
(b) In the event that any portion of the Resort, Shopping Center or Common
Areas is taken and such taking substantially impairs access to or the usefulness
of the Premises for the purposes hereinbefore granted to Tenant, either party
may terminate the Lease by written notice within thirty (30) days prior to the
actual physical taking.
(c) For the purposes of this Article, a voluntary sale, conveyance or deed
in lieu of condemnation, but under threat of condemnation, shall be deemed an
appropriation or taking under the power of eminent domain. (d) If this Lease has
not been terminated as above provided following any of such actual takings, then
Landlord shall, at its expense, make all necessary repairs or alterations to the
basic building and exterior work so as to constitute the remaining Premises a
complete architectural unit and a proportionate allowance shall be made in the
Fixed Minimum Rent and Additional Charges based on the proportion of the
Premises remaining as compared to the original Premises.
Section 23.2 - Compensation and Awards . All compensation awarded for any
taking of the fee and the leasehold, or any part thereof, shall belong to and be
<PAGE>
the property of Landlord. Tenant hereby assigns to Landlord all right, title and
interest of Tenant in and to any award made for leasehold damages and/or
diminution in the value of Tenant's leasehold estate. Tenant shall have the
right to claim such compensation as may be separately awarded or allocated by
reason of the cost or loss to which Tenant might be put in removing Tenant's
merchandise, fixtures, leasehold improvements and equipment. Compensation as
used in this Section 23.2 shall mean any award given to Landlord for such taking
in excess of, and free and clear of, all prior claims of the holders of any
mortgages or other security interests.
Section 23.3 - Condemnation or Breach of Lease . Any such appropriation or
condemnation proceedings shall not operate as or be deemed an eviction of Tenant
or a breach of Landlord's covenant of quiet enjoyment.
Tenant hereby waives any statutory rights of termination which may arise by
reason of any partial taking of the Premises under the power of eminent domain.
ARTICLE XXIV DEFAULT
Section 24.1 - Events of Default . Each of the following shall be
considered an "Event of Default" and shall give rise to and entitle Landlord to
the remedies provided for in Section 24.2, as well as any and all other
remedies, whether at law or in equity, provided for or otherwise available to
Landlord or as otherwise provided for in this Lease:
(a) Tenant shall default in the payment of any Rents or charges, or in the
payment of any other sums of money required to be paid by Tenant to Landlord
under this Lease, or as reimbursement to Landlord for sums paid by Landlord on
behalf of Tenant in the performance of the covenants of this Lease, and said
default is not cured within ten (10) days after receipt of written notice
thereof from Landlord.
(b) Tenant shall default in the performance of any other covenants, terms,
conditions, provisions, rules and regulations of this Lease excepting those
items listed in the above section (a) and such default is not cured within
thirty (30) days after written notice thereof given by Landlord, excepting such
defaults that cannot be cured completely within such thirty (30) day period
providing Tenant, within said thirty (30) day period, has promptly commenced to
proceed with diligence and in good faith to remedy such default.
(c) There is commenced any case in bankruptcy against the original named
Tenant, any assignee or subtenant of the original named Tenant, any then
occupant of the Premises or any guarantor of all or any of Tenant's obligations
hereunder (collectively "Key Persons") or an order for relief is entered with
respect to any Key Person or there is appointed a receiver or trustee to take
possession of any of the assets at the Premises of any Key Person or the
Premises or any Key Person applies for or consents to such appointment, or there
is a general assignment by any Key Person for the benefit of creditors, or any
action is taken by or against any Key Person under any state or federal
insolvency or bankruptcy act, or any similar law now or hereafter in effect or
any property at the Premises of any Key Person is taken or seized under levy of
execution or attachment, or any Key Person admits in writing its inability to
pay its debts as they mature; provided, however, that if there is commenced any
involuntary case in bankruptcy against a Key Person, such commencement shall not
constitute an Event of Default if the same is dismissed within sixty (60) days
of such commencement.
(d) The sale of Tenant's interest in the Premises under attachment,
execution or similar legal process.
(e) Tenant should vacate or abandon the Premises or shall fail to operate
its business on the days and hours required, or fails to continuously occupy and
<PAGE>
conduct Tenant's business in the Premises.
All cure periods provided in this Lease shall run concurrently with any
periods provided by law.
Section 24.2 - Remedies and Damages .
(a) If any Event of Default occurs, Landlord may, at its option and in
addition to any and all other rights or remedies provided Landlord in this Lease
or at law or equity, immediately, or at any time thereafter, and without demand
or notice (except as provided herein):
(i) without waiving the Event of Default, apply all or part of the security
deposit, if any, to cure the Event of Default and Tenant shall on demand restore
the security deposit to its original amount;
(ii) without waiving such Event of Default, apply thereto any overpayment
of Rents to curing the Event of Default in lieu of refunding or crediting the
same to Tenant;
(iii) if the Event of Default pertains to work or other obligations (other
than the payment of Rents) to be performed by Tenant, without waiving such Event
of Default, enter upon the Premises and perform such work or other obligation,
or cause such work or other obligation to be performed, for the account of
Tenant; and Tenant shall on demand pay to Landlord the cost of performing such
work or other obligation plus fifteen percent (15%) thereof as administrative
costs;
(iv) declare the term of this Lease ended and re-enter the Premises and
take possession thereof, terminate all of the rights of Tenant in and to the
Premises and accelerate all rents and other charges owing during the remaining
portion of the Lease Term.
(b) Notwithstanding any termination of this Lease or termination of
Tenant's rights to possession, whether by summary proceedings or otherwise,
Tenant shall pay and be liable for (on the days originally fixed herein for the
payment thereof) the several installments of Rent as if this Lease had not been
terminated and as if Landlord had not entered and whether the Premises are relet
or remain vacant in whole or in part, but in the event the Premises is relet by
Landlord, Tenant shall be entitled to a credit in the net sum of Rents received
by Landlord in reletting after deduction of all expenses incurred in reletting
the Premises, and in collecting such Rents.
(c) In the event of a reletting, Landlord may apply the rent therefrom
first to the payment of Landlord's reasonable expenses including but not limited
to attorney's fees incurred, expense of reletting, repairs, brokerage fees,
subdividing, renovation or alteration of the Premises and then to the payment of
Rent and all other sums due from Tenant hereunder, and Tenant shall remain
liable for any deficiency.
(d) In computing damages or rental due under this Lease, the value of the
Percentage Rent for any period subsequent to the termination of this Lease, or
the termination of Tenant's right of possession, shall be included and shall be
an amount per year equal to one-third of the total Percentage Rent chargeable to
Tenant for the last three (3) full Lease Years immediately preceding such
termination, and if less than three (3) full Lease Years shall have elapsed,
such value shall be an amount per year equal to the average yearly Percentage
Rent theretofore payable by Tenant.
(e) Landlord shall use commercially reasonable efforts to mitigate its
damages resulting from any Event of Default.
<PAGE>
Section 24.3 - Repeated Default .
(a) Notwithstanding anything to the contrary set forth in this Lease, if
(i) Tenant shall be in default in the timely payment of any Rents due Landlord
from Tenant or the payment of any other money due Landlord from Tenant under the
terms of this Lease, or in the timely reporting of Gross Revenue as required by
Section 11.5 of this Lease, (ii) any such default shall be repeated three (3)
times in any period of twelve (12) consecutive months, and (iii) Landlord shall
have notified Tenant of each such default, then, notwithstanding that such
default shall have been cured within the period after notice, as provided in
this Lease, any further similar default within said twelve (12) month period
shall be deemed to be a "Repeated Event of Default."
(b) In the event of a Repeated Event of Default, Landlord, without giving
Tenant any notice and without affording Tenant an opportunity to cure the
default may terminate this Lease forthwith without notice to Tenant.
Section 24.4 - Waiver of Rights of Redemption . Tenant hereby expressly
waives any and all rights of redemption granted by or under any present or
future laws in the event of Tenant being evicted or dispossessed for any cause,
or in the event of Landlord obtaining possession of the Premises by reason of
the violation, by Tenant, of any of the covenants or conditions of this Lease,
or otherwise.
Section 24.5 - Removal of Tenant . Pursuant to the rights of re-entry
provided above, Landlord may remove all persons from the Premises and may, but
shall not be obligated to, remove all property therefrom, and may, but shall not
be obligated to, enforce any rights Landlord may have against said property or
store the same in any public or private warehouse or elsewhere at the cost and
for the account of Tenant or the owner or owners thereof. Tenant agrees to hold
Landlord free and harmless from any liability whatsoever for the removal and
storage of any such property, whether of Tenant or any third party whomsoever.
Anything contained herein to the contrary notwithstanding, Landlord shall not be
deemed to have terminated this Lease or the liability of Tenant to pay any Rent
or other sum of money thereafter to accrue hereunder, or Tenant's liability for
damages under any of the provisions hereof, by any such reentry, or by any
action in unlawful detainer or otherwise to obtain possession of the Premises,
unless Landlord shall have specifically, with reference to this Section 24.5,
notified Tenant in writing that it has so elected to terminate this Lease.
Tenant covenants and agrees that the service by Landlord of any notice pursuant
to the unlawful detainer statutes of the State of Nevada 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 service of such
notice to Tenant) be deemed to be a termination of this Lease, or the
termination of any liability of Tenant hereunder to Landlord.
Section 24.6 - Default by Landlord . In the event Landlord fails or refuses
to perform any of the provisions, covenants or conditions of this Lease on
Landlord's part to be kept or performed, Tenant, prior to exercising any right
or remedy Tenant may have against Landlord on account of such default, shall
give written notice to Landlord and, if Tenant has been notified of the name and
notice address of such Lender, Landlord's lender of such default, specifying in
said notice the default with which Landlord is charged and Landlord shall not be
deemed in default if the same is cured within thirty (30) days of receipt of
said notice. Notwithstanding any other provision hereof, Tenant agrees that if
the default complained of in the notice provided for by this Section 24.6 is of
such a nature that the same can be rectified or cured by Landlord, but cannot
with reasonable diligence be rectified or cured within said thirty (30) day
period, then such default shall be deemed to be rectified or cured if Landlord
within said thirty (30) day period (or Landlord's lender in a longer reasonable
time) shall commence the rectification and curing thereof and shall continue
thereafter with all due diligence to cause such rectification and curing to
<PAGE>
proceed.
ARTICLE XXV COMPETITION
Section 25.1 - Restriction on Tenant . Tenant agrees that for as long as
this Lease shall remain in effect, Tenant, and if Tenant is not a natural
person, its members, partners, officers, directors, shareholders (or similar
entities) or any affiliates, shall not directly or indirectly operate, manage,
or have any interest in any business (unless such business is already in
operation on the date of this Lease) which is similar or in competition with the
use set forth in Section 1.0(t) ("Competing Store"), within the area of Clark
County, Nevada commonly referred to as "The Las Vegas Strip" and more
specifically described as Las Vegas Boulevard north from Tropicana Avenue to
Spring Mountain Road, east from Las Vegas Boulevard to Koval Lane and west from
Las Vegas Boulevard to Industrial Road ("Restricted Area"). The operation by
Tenant of a Competing Store within the Resort shall not constitute a violation
of this Section 25.1 or result in any decrease in the Percentage Rent
breakpoints set forth in Section 1.0(h).
Section 25.2 - Imposition of Damages . In the event that Tenant shall
violate this covenant, Landlord may, at its option, without limiting Landlord's
remedies, effective as of the date such Competing Store opens for business
within the Restricted Area, pursue any and/or all of the following remedies in
its sole and absolute discretion: (i) include seventy-five percent (75%) of the
Gross Revenues of the Competing Store(s) in the Gross Revenues generated from
the Premises for the purpose of computing Percentage Rent due hereunder; or (ii)
increase Tenant's Fixed Minimum Rent to the average of the annual "effective"
(aggregate of Fixed Minimum Rent and Percentage Rent) rent paid by Tenant to
Landlord during the immediately preceding two (2) Lease Years; or (iii) increase
Tenant's Fixed Minimum Rent then in effect as well as any future increases in
Fixed Minimum Rent by fifty percent (50%).
ARTICLE XXVI NOTICES
Section 26.1 - Notices to Tenant and Landlord . Any and all notices and
demands by or from Landlord to Tenant, or by or from Tenant to Landlord,
required or desired to be given hereunder shall be in writing and shall be
validly given or made if served either personally or if deposited in the United
States mail, certified or registered, postage prepaid, return receipt requested,
or if delivered by a nationally recognized next day delivery courier service. If
such notice or demand be served by registered or certified mail or by courier
service in the manner provided, service shall be conclusively deemed given the
first business day delivery is attempted or upon receipt, whichever is sooner.
Notices shall be addressed in accordance with Section 1.0(v) above. Either party
may change its address for the purpose of receiving notices or demands as herein
provided by a written notice given in the manner aforesaid to the other party
hereto, which notice of change of address shall not become effective, however,
until the actual receipt thereof by the other party.
Section 26.2 - Notices to Mortgagee . Provided Tenant has been notified of
the name and notice address thereof, Tenant shall give Landlord's mortgagee
("Mortgagee") written notice of any alleged default which could give rise to
Tenant's termination of the Lease or expenditure of money on behalf of Landlord.
Such Mortgagee shall also be given an appropriate time to cure such default
including the opportunity to obtain possession of Landlord's interest, if
necessary, to cure the default. Landlord shall notify Tenant in writing of any
change in the Mortgagee (and its notice address) for the Shopping Center.
ARTICLE XXVII MISCELLANEOUS
Section 27.1 - Accord and Satisfaction . No payment by Tenant or receipt by
<PAGE>
Landlord of a lesser amount than any payment of Rents herein stipulated shall be
deemed to be other than on account of the earliest stipulated Rents, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment of Rents be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such Rents or pursue any other remedy provided for in this Lease
or available at law or in equity.
Section 27.2 - Complete Agreement . The parties hereto acknowledge that all
of the terms and covenants contained herein were reviewed by both parties and/or
their counsel hereto and all negotiations, consideration, representations,
inducements and understandings between the parties are incorporated herein, and
may be modified or altered only by agreement, in writing, between the parties.
This Lease contains the entire agreement between the parties hereto, and no
agent, representative, employee or officer of Landlord has or had authority to
make or has made any statement, agreement or representation, either oral or
written, in connection herewith, modifying, adding or changing the terms and
conditions herein set forth. No present or past dealings or custom between the
parties shall be permitted to contradict or modify the terms hereof. No
modification of this Lease shall be binding unless such modification shall be in
writing and signed by the parties hereto. Unless otherwise expressly set forth
in writing herein, Tenant acknowledges that there are no agreements, promises,
representations, warranties or covenants by Landlord or its agents or employees
as to the following types of matters, including, without limitation: (i)
exclusive rights to sell goods and/or services; (ii) limitations on or
restrictions against competing businesses in the Shopping Center; (iii) the
future opening of other stores or businesses; (iv) expected per square foot or
total sales from the Premises; (v) type or quality of existing or prospective
tenants located or to be located in the Shopping Center; (vi) work to be
performed by Landlord in improving Tenant's Premises; (vii) contribution by
Landlord towards Tenant's leasehold improvement costs; (viii) that Tenant's
annual Proportionate Share of CAM Costs or real estate taxes will not exceed a
certain amount per square foot of Premises GLA during the Term hereof; or (ix)
promotion and/or advertising of Tenant's business and/or products or services.
Section 27.3 - Governing Law . The laws of the State of Nevada shall govern
the validity, construction, performance and effect of this Lease. Any legal
suit, action or proceeding against Landlord or Tenant arising out of or relating
to this Lease shall be instituted in any federal or state court in Clark County,
Nevada, and each party waives any objection which it may now or hereafter have
to the laying of venue of any such suit, action or proceeding, and each party
hereby irrevocably submits to the jurisdiction of any such court in any suit,
action or proceeding.
Section 27.4 - Compliance with Governmental Authorities . Tenant, at its
own expense, shall comply with all laws, rules, orders, ordinances, directions,
regulations and requirements of federal, state, county and municipal authorities
now in force or which hereafter may be in force ("Requirements"), which shall
impose any duty upon Landlord or Tenant with respect to the initial improvement,
use, occupation or alteration of the Premises by Tenant, including, but not
limited to, Requirements of the ADA which may be applicable thereto; provided,
however, that Tenant shall not be required to make any alteration required by
any Requirement to any portion of the Premises that Landlord is required to
maintain under Section 15.1 unless such alteration is required due to Tenant's
particular use of the Premises. Tenant agrees to indemnify and save Landlord
harmless from and against any penalty, damage or charge imposed for any
violation by Tenant, its assignees, subtenants, licensees, agents and employees
of any said Requirements.
Section 27.5 - Brokerage . Tenant and Landlord each warrants to the other
that it has had no dealings with any broker or agent in connection with the
Lease, except BDH Associates, whose commission shall be paid by Tenant, and
<PAGE>
Blatteis Realty Company, Inc., whose commission shall be paid by Landlord.
Tenant and Landlord covenant and agree to pay, hold harmless and indemnify the
other from and against any and all costs, expenses or liability for any
compensation, commissions and charges claimed by any broker or agent alleging to
have dealt with the indemnifying party with respect to this Lease or the
negotiation hereof (including, without limitation, the cost of legal fees in
connection therewith).
Section 27.6 - Effective Date of Lease . Submission of this Lease by
Landlord for examination or execution by Tenant does not constitute a
reservation of nor option for Lease, and this instrument shall not become
effective as a lease or otherwise until execution by and delivery to both
Landlord and Tenant. This Lease shall only become effective and binding upon the
parties in establishing the relationship of Landlord and Tenant as of the date
first written above, but not earlier than the date Landlord
- ----------------------- executes this Lease.
Section 27.7 - Estoppel Certificates . Tenant agrees at any time, upon not
less than fifteen (15) days prior written request by Landlord, to execute,
acknowledge and deliver to Landlord a written statement certifying that this
Lease is unmodified and in full force and effect (or, if there has been
modifications, that the same is in full force as modified and stating the
modifications), the dates to which the Rents have been paid in pursuant to this
Lease and such other certification concerning the Lease as may be reasonably
required by Landlord or Landlord's mortgagee. Tenant further agrees that such
statement may be relied upon by any mortgagee or prospective purchaser of the
fee or assignee of any mortgage on the fee of the Premises.
Section 27.8 - Force Majeure . Landlord and/or Tenant shall be excused for
the period of delay in the performance of any of their respective obligations
hereunder, except their respective obligation to pay any sums of money due under
the terms of this Lease, and shall not be considered in default, when prevented
from so performing by cause or causes beyond Landlord's or Tenant's control,
including, but not limited to, all labor disputes, civil commotion, war, fire or
other casualty, governmental regulations, statutes, ordinances, restrictions or
decrees, or through acts of God.
Section 27.9 -Partial Invalidity . If any term, covenant or condition of
this Lease, or any application thereof, should be held by a court of competent
jurisdiction to be invalid, void or unenforceable, all terms, covenants and
conditions of this Lease, and all applications thereof, not held invalid, void
or unenforceable, shall continue in full force and effect and shall in no way be
affected, impaired or invalidated thereby.
Section 27.10 - Memorandum of Lease . This Lease shall not be recorded, but
either party may record a memorandum of lease describing the Premises herein
demised, giving the Term of this Lease, and referring to this Lease. The party
requesting that the Memorandum of Lease be recorded shall prepare and pay all
costs of preparation and recording of the Memorandum of Lease and the other
party agrees to execute at any and all times such instruments as may be
reasonably required for such recording. Tenant shall execute such documents as
Landlord may require, in recordable form, upon the expiration or earlier
termination of the Term of this Lease in order to remove the memorandum of lease
from record.
Section 27.11 - Quiet Enjoyment . Subject to the terms and conditions of
this Lease and to any Encumbrances to which this Lease is subordinate pursuant
to Section 19.1, Landlord hereby covenants and agrees that if Tenant shall
perform all of the covenants and agreements herein stipulated to be performed on
Tenant's part, Tenant shall at all times during the continuance hereof have the
peaceful and quiet enjoyment and possession of the Premises without any manner
of hindrance from Landlord or any person or persons lawfully claiming the
<PAGE>
Premises, save and except in the event of the taking of the Premises by public
or quasi-public authority as hereinbefore provided.
Section 27.12 - Rent Demand . Every demand for Rents due wherever and
whenever made shall have the same effect as if made at the time it falls due and
at the place of payment, and after the service of any notice or commencement of
any suit, or final judgment therein, Landlord may receive and collect any Rents
due, and such collection or receipt shall not operate as a waiver of nor affect
such notice, suit or judgment.
Section 27.13 - Section Headings . The section headings and title headings
contained herein are for convenience only and do not define, limit, construe or
amplify the contents of such Sections.
Section 27.14 - Successors and Assigns . The conditions, covenants and
agreements contained in this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.
Section 27.15 - Waiver .
(a) Landlord and Tenant shall have the right at all times to enforce the
covenants, conditions and legal rights or remedies of this Lease in strict
accordance with the terms thereof, notwithstanding any conduct or custom on the
part of Landlord or Tenant in refraining from so doing at any time or times. No
failure by Landlord or Tenant to insist upon the strict performance of any term
or condition of this Lease or to exercise any right or remedy available, legal
or equitable, for a breach thereof, and no acceptance of full or partial Rents
during the continuance of any such breach shall constitute a waiver of any such
breach or any such term, condition or right.
(b) No term or condition of this Lease required to be performed by Landlord
or Tenant, and no breach thereof, shall be waived, altered or modified except by
a written instrument executed by the other party.
(c) A waiver by Landlord in respect to any tenant of the Shopping Center in
which the Premises are located shall not constitute a waiver in favor of any
other tenant, nor shall the waiver of the breach of any condition be claimed if
pleaded to excuse a future breach of the same condition or covenant or any other
condition, covenant, provision, rule and regulation of this Lease.
Section 27.16 - Exculpation . If Landlord shall fail to perform any
covenant, term or condition of this Lease upon Landlord's part to be performed
and, 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 the execution of such judgment and levy thereon against the
right, title and interest of Landlord in the Shopping Center and out of rents or
other income from the Shopping Center 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. Neither
Landlord nor any of the partners, beneficiaries, officers, directors, venturers,
shareholders or affiliated entities of Landlord shall be personally liable for
any deficiency.
Section 27.17 - Transfer of Landlord's Interest . Landlord shall be liable
under this Lease only while owner of the Premises. If Landlord should sell or
otherwise transfer Landlord's interest in the Premises, then such
purchaser/transferee shall be responsible for all of the covenants and
undertakings thereafter accruing of Landlord. Tenant agrees that Landlord shall,
after such sale or transfer of Landlord's interest, have no liability to Tenant
<PAGE>
under this Lease or any modification or amendment thereof, or extensions or
renewals thereof, except for such liabilities which might have accrued prior to
the date of such sale or transfer of Landlord's interest to such
purchaser/transferee.
Section 27.18 - Time of the Essence . Time is of the essence of this Lease
and all of the terms, covenants and conditions hereof.
Section 27.19 - Remedies Cumulative . The various rights, options,
elections and remedies contained in this Lease shall be cumulative and no one of
them shall be construed as exclusive of any other, or of any right, priority or
remedy allowed or provided for by law and not expressly waived in this Lease.
Section 27.20 - Joint Liability . In the event Tenant now or hereafter
shall consist of more than one person, firm or corporation, then and in such
event, all such persons, firms or corporations shall be jointly and severally
liable as Tenant hereunder.
Section 27.21 - Drafting . This Lease shall not be construed either for or
against Landlord or Tenant, but shall be interpreted in accordance with the
general tenor of its language.
Section 27.22 - Perpetuities . If for any reason the Rent Commencement Date
has not occurred within three (3) years of the date hereof, this Lease shall
thereupon terminate and be of no further force or effect (except with respect to
matters that arose before such termination).
ARTICLE XXVIII DISPUTE RESOLUTION
If any controversy or claim between the parties, other than Landlord's
claim of unlawful detainer or a proceeding for summary eviction for failure to
pay Fixed Minimum Rent, arises out of this Lease, and the parties are unable to
agree by direct negotiations, the parties shall promptly mediate any such
disagreement or dispute under the Commercial Mediation Rules of the American
Arbitration Association. If the parties are unable to resolve such disagreement
or dispute through mediation, then such disagreement or dispute (excluding an
action by Landlord in unlawful detainer or summary proceeding, as provided
above) shall be submitted to binding arbitration under the Commercial
Arbitration Rules of the American Arbitration Association.
The arbitrators shall be appointed under the Commercial Arbitration Rules
of the American Arbitration Association. As soon as the panel has been convened,
a hearing date shall be set within twenty-one (21) days thereafter. Written
submittals shall be presented and exchanged by both parties ten (10) days before
the hearing date, including reports prepared by experts upon whom either party
intends to rely. At such time the parties will also exchange copies of all
documentary evidence upon which they will rely at the arbitration hearing and a
list of the witnesses whom they intend to call to testify at the hearing. Each
party shall also make its respective experts available for deposition by the
other party prior to the hearing date. The hearings shall be concluded no later
than five (5) days after the initial hearing date. The arbitrators shall make
their award within ten (10) business days after the conclusion of the hearing.
In the event of a three-member panel, the decision in which two (2) of the
members of the arbitration panel concur shall be the award of the arbitrators.
Except as otherwise specified herein, there shall be no discovery or
dispositive motion practice (such as motions for summary judgment or to dismiss
or the like) except as may be permitted by the arbitrators, who shall authorize
only such discovery as is shown to be absolutely necessary to insure a fair
hearing and no such discovery or motions permitted by the arbitrators shall in
any way conflict with the time limits contained herein. The arbitrators shall
not be bound by the rules of evidence or civil procedure, but rather may
<PAGE>
consider such writings and oral presentations as reasonable businessmen would
use in the conduct of their day-to-day affairs, and may require the parties to
submit some or all of their presentation as the arbitrators may deem
appropriate. It is the intention of the parties to limit live testimony and
cross-examination to the extent absolutely necessary to insure a fair hearing to
the parties on the significant matters submitted to arbitration. The parties
have included the foregoing provisions limiting the scope and extent of the
arbitration with the intention of providing for prompt, economic and fair
resolution of any dispute submitted to arbitration.
The arbitrators shall have the discretion to award the costs of
arbitration, arbitrators' fees and the respective attorneys' fees of each party
between the parties as they see fit.
Judgment upon the award entered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
Notwithstanding the parties' agreement to mediate or arbitrate their
disputes as provided herein, any party may seek emergency relief in a court of
law without waiving the right to arbitrate.
The arbitrators shall make their award in accordance with applicable
law and based on the evidence presented by the parties, and at the request of
either party at the start of the arbitration, shall include in their award
findings of fact and conclusions of law supporting the award.
Nothing contained herein is intended to, nor shall, limit Landlord's right
to pursue any action in unlawful detainer in the case of an Event of Default by
Tenant.
IN WITNESS WHEREOF, the parties hereto have executed these presents, the
day and year first written above. Grand Canal Shops Mall Construction, LLC, a
Delaware limitedToysbInternational, a California corporation
By: Venetian Casino Resort, LLC, a Nevada limited liability company, its member
By: ___________
By: Las Vegas Sands, Inc., a Nevada corporation, its member
Name:_______________
By: _______________________
Name: _______________________ Its: _______________
Its: _______________________
<PAGE>
GUARANTY
GUARANTY OF LEASE dated July 22, 1998, by and between Grand Canal Shops
Mall Construction, LLC, a Delaware limited liability company, as Landlord, and
Toys International, a California corporation, as Tenant.
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, the
undersigned Guarantor hereby unconditionally and irrevocably guarantees the full
and faithful performance by Tenant of all the terms, covenants and conditions of
the above-referenced Lease. This Guaranty shall remain in full force and effect
regardless of any amendment, modification, extension, compromise or release of
any term, covenant or condition of the Lease or of any party thereto, as the
case maybe. The undersigned agrees to indemnify Landlord against any and all
liability, loss, costs, charges, penalties, obligations, expenses, attorneys'
fees, litigation, judgments, damages, claims and demands of any kind whatsoever
in connection with, arising out of or by reason of the assertion by Tenant of
any defense to its obligations under the Lease or the assertion by Guarantor of
any defense to its obligations hereunder. Guarantor waives any right or claim or
rights to cause a marshaling of Tenant's assets or to proceed against Guarantor
or Tenant or any security for the Lease or this Guaranty in any particular order
and Guarantor agrees that any payments or performance required to be made
hereunder shall become due upon demand in accordance with the terms hereof
immediately upon the happening of a default under the Lease, whether or not
Guarantor has been given notice of such default, and Guarantor hereby expressly
waives and relinquishes all rights and remedies accorded by applicable law to
guarantors, including, but not limited to, notice of demand, notice of default,
any failure to pursue Tenant or its property, any defense arising out of the
absence, impairment or loss of any right of reimbursement or subrogation and any
defense arising by reason of any defense of Tenant or by reason of the cessation
of the liability of Tenant or any defense by reason of the assertion by Landlord
against Tenant of any of the rights or remedies reserved to Landlord pursuant to
the provisions of the Lease, or by reason of summary or other proceedings
against Tenant.
No delay on Landlord's part in exercising any right, power or privilege
under this Guaranty or any other document executed in connection herewith shall
operate as a waiver of any such privilege, power or right.
Guarantor agrees that any judgment rendered against Tenant for monies or
performance due Landlord shall in every and all respects bind and be conclusive
against Guarantor to the same extent as if Guarantor had appeared in any such
proceedings and judgment therein had been rendered against Guarantor.
Guarantor subordinates to Tenant's obligations to Landlord all indebtedness
of Tenant to Guarantor, whether now existing or hereafter contracted, whether
direct or indirect, contingent or determined. With respect to any such
indebtedness of Tenant to Guarantor, Guarantor further agrees to make no claim
therefor until any and all obligations of Tenant to Landlord shall have been
discharged in full and Guarantor further covenants and agrees not to assign all
or any part of such indebtedness while this Guaranty remains in effect.
The terms, covenants and conditions contained in this Guaranty shall inure
to the benefit of the successors and assigns of Landlord.
If any term, covenant or condition of this Guaranty, or any application
thereof, should be held by a court of competent jurisdiction to be invalid, void
or unenforceable, all terms, covenants and conditions of this Guaranty, and all
applications thereof not held invalid, void or unenforceable shall continue in
full force and effect and shall in no way be affected, impaired or invalidated
thereby. In this Guaranty, whenever the context so requires, the masculine
gender includes the feminine and/or neuter, and the singular number includes the
<PAGE>
plural.
This Guaranty shall be construed in accordance with its intent and without
regard to any presumption or other rule requiring construction against the party
causing the same to be drafted. The laws of the State of Nevada shall govern the
validity, construction, performance and effect of this Guaranty.
Should Guarantor consist of more than one person or entity, then, in such
event, all such persons and entities shall be jointly and severally liable as
Guarantor hereunder. In any action brought by Landlord to enforce any of its
rights under or arising from this Guaranty, Landlord shall be entitled to
receive its costs and legal expenses including reasonable attorneys' fees,
whether such action is prosecuted to judgment or not. If Landlord shall engage
the services of any attorney for the purpose of collecting any rental due from
Tenant, having first given Tenant five (5) days' notice of its intention so to
do, Tenant shall pay the reasonable fees of such attorney for his services
regardless of the fact that no legal proceeding or action may have been filed or
commenced. Dated this 22nd day of July, 1998.
GUARANTOR: PLAY CO. TOYS & ENTERTAINMENT CORP.,
a Delaware corporation
By:
Name:
Its:
<PAGE>
EXHIBIT "A"
Site Plan
See Attached
EXHIBIT "B"
Premises
See Attached
EXHIBIT "C"
Chargebacks
See Attached
EXHIBIT "GCS1.0"
Tenant Handbook
(Not attached)
Exhibit 10.128
Lease Agreement - Woodfield Mall
<PAGE>
LEASE
TOYS INTERNATIONAL, INC.
TENANT
"TOYS INTERNATIONAL"
TRADE NAME
PLAYCO TOYS & ENTERTAINMENT CORP
GUARANTOR
WOODFIELD MALL
A Regional Retail Development
VILLAGE OF SCHAUMBURG
COUNTY OF COOK
STATE OF ILLINOIS
PROVISIONS ADDED TO THIS LEASE APPEAR ON THE DATA SHEET AND ON THE ATTACHED
RIDER AND, EXCEPT IN INSTANCES OF ADDITIONAL SENTENCES OR PARAGRAPHS BEING ADDED
AT THE END OF A SECTION OR PARAGRAPH. ARE INDICATED IN THE TEXT BY AN
UNDERSCORING OF THE LINE NUMBER IN THE RIGHTHAND MARGIN OF THE LINE BEING
CHANGED ADDITIONAL LANGUAGE IS INSERTED EITHER IN PLACE OF DELETED LANGUAGE OR
AFTER AN UNDERSCORED WORD, EXCEPT AS OTHERWISE NOTED ABOVE
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
DATA SHEET Dl
EXECUTION/ACKNOWLEDGMENT El
ADDENDUM Al
ARTICLE I. GRANT AND TERM
SECTION 1.01. LEASED PREMISES Sl
SECTION 1.02. COMMENCEMENT AND ENDING DAY OF TERM Sl
SECTION 1.03. OPENING . S2
ARTICLE II. RENT
SECTION 2.01. MINIMUM RENT S2
SECTION 2.02. PERCENTAGE RENT S2
SECTION 2.03. GROSS SALES S2
SECTION 2.04. RENT ADJUSTMENT S3
SECTION 2.05. TENANT'S TAX OBLIGATION S3
SECTION 2.06. PAYMENTS S4
ARTICLE III. RECORDS AND BOOKS OF ACCOUNT
SECTION 3.01. TENANT'S RECORDS S5
SECTION 3.02. REPORTS BY TENANT S5
ARTICLE IV. AUDIT
SECTION 4.01. RIGHT TO EXAMINE BOOKS S5
SECTION 4.02. AUDIT S5
ARTICLE V. CONSTRUCTION OF LEASED PREMISES
SECTION 5.01. CONSTRUCTION OF LEASED PREMISES S6
SECTION 5.02. AVAILABILITY AND POSSESSION OF PREMISES FOR TENANT'S WORK . S7
SECTION 5.03. LANDLORD'S AND TENANT'S OPTIONAL RIGHT OF CANCELLATION S7
SECTION 5.04. ULTIMATE COMMENCEMENT DATE S7
ARTICLE VI. ALTERATIONS, CHANGES AND ADDITIONS
SECTION 6.01. INSTALLATION BY TENANT S8
SECTION 6.02. REMOVAL BY TENANT S8
SECTION 6.03. CHANGES AND ADDITIONS S8
ARTICLE VII. CONDUCT OF BUSINESS BY TENANT
SECTION 7.01. USE OF PREMISES S8
SECTION 7.02. OPERATION OF BUSINESS S8
SECTION 7.03. RADIUS Sl0
SECTION 7.04. STORAGE, OFFICE SPACE Sl0
SECTION 7.05. CARE OF PREMISES S10
ARTICLE VIII. COMMON AREAS
SECTION 8.01. OPERATION AND MAINTENANCE OF COMMON AREAS S10
SECTION 8.02. USE OF COMMON AREAS S10
SECTION 8.03. TENANT'S PRO RATA SHARE OF EXPENSES S11
ARTICLE IX. SIGNS
SECTION 9.01. SIGNS S12
ARTICLE X. MAINTENANCE
<PAGE>
SECTION 10.01. LANDLORD'S OBLIGATIONS FOR MAINTENANCE S12
SECTION 10.02. TENANT'S OBLIGATIONS FOR MAINTENANCE S12
ARTICLE XI INSURANCE AND INDEMNITY
SECTION 11.01. TENANT'S INSURANCE S14
SECTION 11.02. LANDLORD'S INSURANCE S15
SECTION 11.03. COVENANT TO HOLD HARMLESS S15
ARTICLE XII. UTILITY CHARGES
SECTION 12.01. UTILITY CHARGES S16
ARTICLE XIII. ESTOPPEL STATEMENT, ATTORNMENT AND SUBORDINATION
SECTION 13.01. ESTOPPEL STATEMENT S17
SECTION 13.02. ATTORNMENT S18
SECTION 13.03. SUBORDINATION S18
SECTION 13.04. REMEDIES S18
ARTICLE XIV. ASSIGNMENT AND SUBLETTING
SECTION 14.01. NO ASSIGNMENT OR SUBLETTING S18
ARTICLE XV. WASTE
SECTION 15.01. WASTE OR NUISANCE S19
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE XVI. TRADE NAME, PROMOTIONAL CHARGE
SECTION 16.01. TRADE NAME S19
SECTION 16.02. SOLICITATION OF BUSINESS S19
SECTION 16.03. PROMOTIONAL CHARGE S19
ARTICLE XVII. DESTRUCTION OF LEASED PREMISES
SECTION 17.01. RECONSTRUCTION OF DAMAGED PREMISES S20
SECTION 17.02. WAIVER OF SUBROGATION S21
ARTICLE XVIII. EMINENT DOMAIN
SECTION 18.01. TOTAL CONDEMNATION OF LEASED PREMISES S21
SECTION 18.02. PARTIAL CONDEMNATION S21
SECTION 18.03. LANDLORD'S AND TENANT'S DAMAGES S22
ARTICLE XIX. DEFAULT
SECTION 19.01.RIGHT TO RE-ENTER S22
SECTION 19.02.RIGHT TO RELET S23
SECTION 19.03.EXPENSES S23
SECTION 19.04.WAIVER OF COUNTERCLAIMS AND TRIAL BY JURY S23
ARTICLE XX. BANKRUPTCY OR INSOLVENCY
SECTION 20.01. TENANT'S INTEREST NOT TRANSFERABLE S24
SECTION 20.02. TERMINATION S24
SECTION 20.03. TENANT'S OBLIGATION TO AVOID CREDITORS' PROCEEDINGS S24
SECTION 20.04. RIGHTS AND OBLIGATIONS UNDER THE BANKRUPTCY CODE S24
ARTICLE XXI. ACCESS BY LANDLORD
SECTION 21.01. RIGHT OF ENTRY S25
ARTICLE XXII. TENANT'S PROPERTY
SECTION 22.01. TAXES ON TENANT'S PROPERTY S25
SECTION 22.02. LOSS AND DAMAGE S25
SECTION 22.03. NOTICE BY TENANT S25
ARTICLE XXIII. HOLDING OVER
SECTION 23.01. HOLDING OVER S26
SECTION 23.02. SUCCESSORS S26
ARTICLE XXIV. RULES AND REGULATIONS
SECTION 24.01. RULES AND REGULATIONS S26
ARTICLE XXV. QUIET ENJOYMENT
SECTION 25.01. LANDLORD'S COVENANT S26
SECTION 25.02. TENANT'S COVENANT S26
ARTICLE XXVI. SECURITY PROVISION
SECTION 26.01. SECURITY S26
ARTICLE XXVII. MISCELLANEOUS
SECTION 27.01. WAIVER: ELECTION OF REMEDIES S27
SECTION 27.02. ENTIRE AGREEMENT S27
SECTION 27.03. INTERPRETATION AND USE OF PRONOUNS S27
SECTION 27.04. DELAYS S28
SECTION 27.05. NOTICES S28
SECTION 27.06. CAPTIONS AND SECTION NUMBERS S28
<PAGE>
SECTION 27.07. BROKER'S COMMISSION S28
SECTION 27.08. RECORDING S28
SECTION 27.09. FURNISHING OF FINANCIAL STATEMENTS S28
SECTION 27.10. LANDLORD'S USE OF COMMON AREAS S28
SECTION 27.11. TRANSFER OF LANDLORD'S INTEREST S28
SECTION 27.12. FLOOR AREA S29
SECTION 27.13. INTEREST ON PAST DUE OBLIGATIONS S29
SECTION 27.14. LIABILITY OF LANDLORD S29
SECTION 27.15. ACCORD AND SATISFACTION S29
SECTION 27.16. EXECUTION OF LEASE; NO OPTION S30
SECTION 27.17. GOVERNING LAW S30
SECTION 27.18. SPECIFIC PERFORMANCE OF LANDLORD'S RIGHTS S30
SECTION 27.19. CERTAIN RULES OF CONSTRUCTION S30
SECTION 27.20. INDEX S30
SECTION 27.21. SURVIVAL; NONDISCLOSURE; FREE ACT S30
</TABLE>
EXHIBIT A SITE PLAN; LEASED PREMISES; LEGAL DESCRIPTION (if included)
EXHIBIT B CONSTRUCTION
EXHIBIT B-l UTILITIES
EXHIBIT B-2 (additional construction information and procedures, if any) EXHIBIT
C CENTRALAIR/CONDENSER-WATER SYSTEM (if any) OTHER EXHIBITS (if any) RIDER
<PAGE>
WOODFIELD MALL
A Regional Retail Development
VILLAGE OF SCHAUMBURG, ILLINOIS
THIS LEASE made as of this 22nd day of January, 1999, by and between CHICAGO
TITLE AND TRUST COMPANY, a corporation of Illinois, as Trustee under Trust No.
46746, and not personally, (Landlord), and TOYS INTERNATIONAL, the address of
which is 550 Rancheros Drive, San Marcos, CA 92069 (Tenant) All of the
provisions of the Lease, including the Data Sheet, the standard provisions
commencing with Article I and continuing through Article XXVII of the Lease
(11ereinafter at times referred to as the "text of the Lease" or the "Standard
Form"), the Addendum, all exhibits, and riders, if any, are incorporated in full
in this preamble as if fully set forth at this point
DATA SHEET
The following references furnish data to be incorporated in the specified
Sections of the Lease and shall be construed to incorporate all of the terms of
the entire Section as stated in the said Lease
(1) Section 1.01: Leased Premises: Store Number 113, situated on the lower
level of Building "F," having an irregular shape and consisting of approximately
eleven thousand eight hundred five (11,805) square feet and having a frontage of
at least sixty feet (60').
(2) Section 1.02: Commencement Date of Term: The later of: (i) June 1, 1999,
or (ii) the date one hundred twenty (120) days following the date that the
leased premises are available to Tenant
Length of Term: Ten (10) lease years
(3) Section 2.01 and Section 2.02: Name and Address for Rent Payments:
Payments from Tenant shall be made payable to Woodfield Associates, arid shall
be sent to:
Woodfield Associates
Department 55401
P.O. Box 67000
Detroit, Michigan 48267-0554
Section 27.05: Notice Address for Landlord:
Woodfield Associates
200 East Long Lake Road
P.O. Box 200
Bloomfield Hills, MI 48303-0200
(4) Section 2.01: Minimum Rent: Four Hundred Seventy-Two Thousand Two
Hundred and 00/100ths Dollars ($472,200.00) per arinum, payable in equal
consecutive monthly installments of Thirty-Nine Thousand Three Hundred Fifty and
00/lOoths Dollars ($39,350.00).
(5) Section 2.02(a): Percentage Rent: Six percent (6%) (the "percentage rent
factor") of Gross Sales made during each lease year of the term hereof in excess
of Seven Million Eight Hundred Seventy Thousand and 00/lOOths Dollars
($7,870,000.00) ("Minimum Gross Sales").
(6) Section 5.01(1)): Design of Leased Premises The store design to be used
by Tenant in the preparation of
<PAGE>
Working Drawings and Specifications for Tenant's Work in the leased premises
shall be substantially the same as the store design reflected in the design for
the Toys International store for The Block, Orange County, California. and
Tenant's architect shall provide certification to Landlord, with the submission
of such Working Drawings and Specifications, that this store design requirement
has been satisfied. The Working Drawings and Specifications for Tenant's Work in
the leased premises shall be completed and submitted to Landlord no later than
sixty (60) days following the later of: (a) receipt by Tenant of Space Layout
Drawings or (b) full execution of this Lease Such submission shall also include
the certification of Tenant's architect that the Working Drawings and
Specifications comply with the Space Layout Drawings provided by Landlord, all
criteria and specifications set forth in Exhibits B and B- 1 and any further
construction exhibits attached to this Lease, and all applicable code
requirements. Landlord shall not withhold its approval of the store design
indicated in the Working Drawings and Specifications if Tenant and Tenant's
architect shall comply with the foregoing requirements.
(7) Section 5.01(c): Tenant Reimbursement to Landlord: Not applicable.
(8) Section 7.01: Permitted Use: For the retail sale of toys and. at
Tenant's option. better quality collectibles, hobbies, arts & crafts, children's
books, dolls, model kits, child oriented games, child oriented video and audio
cassettes, children's compact discs and laser discs and other technological
innovations of said media children's computer software, children's sporting
goods, wheel goods, stuffed animals, and other such child-related entertainment
goods. Store will feature a children's library with books sold by the store; a
children's play area with toys sold in the store, a children's theatre with
theatre seating and benches, theatre will show children's videos and feature
films, and, at Tenant's option, a children's computer center featuring software
sold in the store. Tenant will sell children cllothing not to exceed ten percent
(10%) of floor area.
(9) Section 7.03: Radius: Ten (10) miles.
(10)Section 16.01: Trade Name: "Toys International"
(11)Section 16.03: Original Annual Promotional Charge: Eighteen Thousand
Seven Hundred Sixty -Nine and 00/100ths Dollars ($18,769.00). Original annual
promotional charge to be paid in monthly installments of One Thousand Five
Hundred Sixty-Four and 08/100ths Dollars ($1,564,08).
(12)Section 26.01: Security Deposit: Not applicable. Additional Security:
Not applicable.
(13)Guarantor(s): Playco Toys & Entertainment Corp.
Address(es): 550 Rancheros Drive
San Marcos, CA 92069
(14)Rider: Toys International Standard Rider
SPECIAL PROVISIONS:
In the event of an express conflict between the provisions of this Lease,
any such conflict shall be resolved with the following priority to determine
which portion of the Lease controls: (i) the Special Provisions of the Data
Sheet ii) the other provisions of the Data Sheet; (iii) the Addendum; (iv) the
Rider; (v) Exhibit B-2D (if applicable), Exhibit B-I. and Exhibit C; (vi) the
body of the Lease, Exhibit A, and Exhibit B.
Addendum. Section 12.01: On page A-i, line 32 and 45, in place of the
deletions, insert "thirty (30)"
On page A-i, line 48, after the word "Section.", delete the period and
insert " or refunded if at or after the end of the lease term."
Addendum. Section 16.03(e): The references in this Section to "four (4)"
shall be
<PAGE>
changed to "one (1)".
On page A-2, line 44, after the word "period,", insert "and Such failure
continues for twenty (20) days after Landlord notifies Tenant thereof,"
On page A-2, line 45, in place of the deletion, insert "thirty (30)"
Section 1.02: Provided Tenant shall not at any time during such initial four (4)
month period be in default under any of the terms, covenants or conditions of
said Lease beyond any applicable cure period, minimum rent for the initial four
(4) months of the lease term shall be abated. Landlord and Tenant agree that no
portion of the minimum rent paid by Tenant after the expiration of any period
during which such rent was abated shall be allocated by Landlord or Tenant to
such abatement period, nor is such rent intended by the parties to be allocable
to any abatement period. In the event that this Lease is terminated prior to
expiration of the stated lease term as the result of a default by Tenant, Tenant
shall immediately repay to Landlord an amount equal to the then unamortized
portion of the minimum rent abatement which amortization shall be on the
straight-line basis over the full stated lease term, plus interest on such
unamortized portion at a rate equal to three (3) percentage points above the
prime rate then charged by a plurality of FDIC member banks headquartered in the
State, which interest shall accrue from the date of the minimum rent abatement
through the date of termination of the Lease. The cost of Tenant's leasehold
improvements pursuant to Section 1.02 hereof shall be less the aggregate amount
of such abatement
The leased premises are presently leased to a tenant whose lease term has
not expired. The commencement of the term hereof is subject to Landlord entering
into a termination of lease agreement with such tenant under which such tenant
in fact vacates the leased premises This paragraph shall not give Landlord any
additional termination rights beyond those stated in Section 5.03.
<PAGE>
*for the fifth lease year as
Further, in the event Tenant does not achieve 'Gross Sales' (as hereinafter
defined) of at least Three Million Five Hundred Thousand and 00/lOOths Dollars
($3,500,000.00) during the fifth (5th) lease year of the term hereof, then
Tenant provided it shall not be in default beyond any applicable cure period,
shall, for a period of sixty (60) days, arid Landlord shall, for a period of
ninety (90) days, after the last date that Tenant is obligated to furnish to
Landlord its annual written report of Gross Sales required pursuant to Section
3.02 hereof. have the option, upon sixty (60) days prior written notice to the
other party, of terminating this Lease. In the event that neither party
exercises the foregoing options to terminate this Lease within the required time
period, then each such option shall, upon expiration of the applicable period,
become null and void and be of no further force or effect. In the event Tenant
fails to submit a certified report of Gross Sales within the time permitted
pursuant to Section 3.02 of the said Lease, then 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 shall be the basis for Landlord exercising its termination right
arid Tenant shall not be permitted to reinstate the 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. The Gross
Sales to be evaluated under this paragraph shall include only regular retail
sales to individual customers and shall not include any wholesale, commercial,
bulk, corporate, intra-company or warehouse transfers or sales of merchandise or
services. Tenant shall only be permitted to exercise its option to terminate
this Lease for failure to achieve certain Gross Sales during a particular time
period if, subject to force majeure, Tenant shall have operated its business in
accordance with the requirements of Section 7.02 during the entire time period
in question; provided, however, that, unless Tenant's failure to operate in
accordance with Section 7.02 is due to a voluntary decision on Tenant's part to
totally cease the operation of its business in which event no notice shall be
required, Tenant shall not be deemed to have failed to so operate unless
Landlord shall have notified Tenant as to the default upon which Landlord is
claiming that Tenant is not so operating, and Tenant shall have failed to cure
or correct such default within twenty (20) days after receipt or refusal of such
notice. At Landlord's sole option, the above stated Gross Sales figure shall be
reduced by l/360th for each day during the above stated time period that Tenant
was required to operate its business in the leased premises but shall not have
operated its business in the leased premises. In the event that at any time or
times during the fifth (5th) lease year Tenant is prevented from operating due
to matters or causes beyond Tenant's control, then for purposes of this
paragraph only, Tenant's Gross Sales for the time period Tenant is not operating
as the result of said matters or causes shall be considered equal to Tenant's
Gross Sales for the identical time period during the most recent lease year as
to which Tenant was not prevented from operating its business in the leased
premises.
Further, in the event the commencement date of the Lease does not occur
until after August 1, 1999, then the length of the term of this Lease shall be
eleven (11) lease years
Section 2.04: The provisions of Section 2.04 shall not apply to Tenant.
Section 5.03: The references in this Section to "eighteen (18)" shall be
changed to "six (6)" and the six (6) month period shall be deemed to have an
expiration date of July 1, 1999.
Section 16.03(a): The initial promotional charge shall not apply to Tenant.
Further, the cumulative percentage increase in the annual promotional
charge under this Section shall not exceed five percent (5%) per annum
compounded annually.
Section 19.01(a): The Cross Default provisions of this Subsection shall not
apply to this Lease.
Exhibit B. Section II.B.: The $20.00 per lineal foot charge shall not apply
to Tenant.
<PAGE>
Exhibit B. Section II.C.: The $45.00 per lineal foot charge shall not apply
to Tenant.
Exhibit B. Section m.D.2.a.: Neither the $45.00 per lineal foot charge nor
the $66.00 per lineal foot charge shall apply to Tenant. Exhibit B. Section
IV.D.1.d.: The capital facility connection charges and other charges imposed by
this Subsection shall not apply to Tenant.
Exhibit B. Section V.B.3.: The fee for Coordination and Administrative
Services shall not apply to this Lease.
Exhibit B. Section VI.B.5.: Such remodeling and refurbishing shall be
limited to resurfacing only if necessary (both interior and exterior),
including, but not limited to, replacement of all floor coverings and wall
coverings (if visibly worn), and provided further that no structural changes or
redesign of components (other than resurfacing items as stated) shall be
required.
Exhibit B. Section VI.D.2: The electrical service charge in this Section
shall not apply to Tenant.
Exhibit B. Section VI.D.3.: The trash removal charge in this Section shall
not apply to Tenant.
Exhibit B-1. Section II.A.1.: On page 1, line 13, after the word
"connection", insert "at the rear of the leased premises"
[End of text of Data Sheet]
<PAGE>
EXECUTION/ACKNOWLEDGMENT
In confirmation of their agreement to enter into this Lease (including the
Preamble, Data Sheet, Addendum, Standard Form, all exhibits, and the Rider (if
any) attached hereto), and intending to be bound hereby, Landlord and Tenant
have signed and sealed this Lease as of the day and year first above written on
page Dl of this Lease.
In the Presence of:
CHICAGO TITLE AND TRUST COMPANY, a corporation of
Illinois, as Trustee under Trust No 46746 and not
personally,
By:
Its Authorized
Agent
LANDLORD
TOYS INTERNATIONAL, INC.
Its:
Its:
Print Title:
Print Name:
Print Title &~ C
TENANT
Tenant's Federal Tax Identification Number:
33-0810354
Tenant's corporate seal
It is expressly understood and agreed by and between the parties hereto,
anything herein to the contrary notwithstanding, that each and all of the
warranties, indemnities, representations. covenants, undertakings and agreements
herein made on the part of the Trustee while in form purporting to be
warranties, indemnities, representations, covenants, undertakings and agreements
of said Trustee are nevertheless each and every one of them, made and intended
not as personal warranties, indemnities, representations, covenants,
undertakings and agreements by the Trustee or for the purpose or with the
intention of binding said Trustee personally but are made and intended
<PAGE>
for the purpose of binding only that portion of the trust property specifically
described herein, and this instrument is executed and delivered by said Trustee
not in its own right, but solely in the exercise of the powers conferred upon it
as such Trustee and that no personal liability or personal responsibility is
assumed by nor shall at any time be asserted or enforceable against the Chicago
Title and Trust Company or any of the beneficiaries under said Trust Agreement,
on account of this instrument or on account of any warranty, indemnity,
representation, covenant, undertaking or agreement of the said Trustee in this
instrument contained, either expressed or implied, all such personal liability,
if any, being expressly waived and released.
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ACKNOWLEDGMENT OF LANDLORD
STATE OF MICHIGAN )
)ss.
COUNTY OF OAKLAND )
On this 22nd day of January, l999 before me personally appeared the above
named Agent of the Chicago Title and Trust Company, Trustee, personally known to
me to be the same person whose name is subscribed to the foregoing Lease as such
Agent, and acknowledged before me that he signed and delivered the said Lease as
his own free and voluntary act and as the free and voluntary act of said Company
for the uses and purposes therein set forth; and the said Agent then and there
acknowledged that said Agent, as custodian of the corporate seal of said
Company, caused the corporate seal of said Company to be affixed to said Lease
as said Agent's own free and voluntary act and as the free and voluntary act of
said Company for the uses and purposes therein set forth.
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
[UNREADABLE]
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ADDENDUM -- WOODFIELD MALL
All of the provisions set forth in this Addendum are in addition to, and not in
substitution for, the provisions of the Standard Form, except to the extent
specifically otherwise stated.
Section 1.01(a). LEASED PREMISES: The regional retail development is
commonly known as "Woodfield Mall," located in the Village of Schaumburg, Cook
County, Illinois.
Section 7.02. OPERATION OF BUSINESS: To the extent that Tenant shall accept
payment by credit card for goods or services offered from the leased premises,
Tenant shall be obligated to comply with the "point-of-purchase" display
requirements of its merchant agreement with the credit card company designated
in writing by Landlord from time to time. If Landlord has not designated a
particular credit card company, then the provisions of this paragraph shall not
apply. Likewise, if Tenant does not have a merchant agreement with the credit
card company designated by Landlord, the provisions of this paragraph shall not
apply.
Section 12.01 UTILITY CHARGES: In substitution for the text of paragraphs
(a) through (g) of Section 12.01, the following provisions shall apply:
Tenant shall be solely responsible for and shall promptly pay all charges
for water, gas, heat, electricity, sewer and any other utility used upon or
furnished to the leased premises. Tenant shall contract directly with and shall
be solely responsible to the public utility companies for the installation of
service and the payment of all charges for Tenant's usage of such utility
services. Landlord shall have the right, at its sole option, to supply
electricity to the leased premises in which event the minimum rent reserved
under this Lease will be increased for the period that Landlord so supplies such
electricity to include the increase in the fair and reasonable rental value of
the leased premises due to the supplying of such electricity in accordance with
the numbered paragraphs set forth below. If Landlord shall elect to supply any
of 'the foregoing other utilities used upon or furnished to the leased premises,
Tenant agrees to purchase and pay for same as additional rent, within ~ days of
the presentation by Landlord to Tenant of bills therefor, at the rates which
would be applicable to Tenant as a direct customer of the public utility
company, as such rates are filed by the utility company serving the area with
the proper regulating authority and in effect from time to time covering such
services. Landlord shall also have the right to periodically estimate the
monthly amount required to be paid by Tenant to Landlord with respect to any or
all of such services provided by Landlord and such estimated monthly amount or
amounts shall be paid by Tenant on the first day of each calendar month, in
advance, at the place and in the manner specified for payments of minimum rent
hereunder. Landlord shall have the right to change such estimated amount or
amounts at any time and from time to time. by notice to Tenant. If the total of
the estimated monthly payments made by Tenant shall be less for any lease year
or calendar year than the actual amount due from Tenant pursuant to the
provisions of this Section, Tenant shall pay to Landlord the difference between
the amount paid by Tenant and the actual amount due within ~~(4~) days after
submission to Tenant of Landlord's statement and invoice therefor; and if the
total of the estimated payments made by Tenant for any such year shall exceed
the actual amount due from Tenant, the excess amount paid shall be credited
against the next payment due from Tenant to Landlord under this Section. The
obligation of Tenant to pay for such utilities shall commence as of the date on
which possession of the premises is delivered to Tenant, without regard to any
free rent period or formal commencement date of this Lease.
Prior to the commencement of the term of this Lease,
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(1) Landlord shall analyze Tenant's Working Drawings and Specifications
covering its construction of the leased premises and shall determine Tenant's
annual electric (kilowatt) requirements at the leased premises. Such
determination shall be based upon (i) Tenant's electric requirements for the
projected number of hours per year during which the leased premises will be open
for business (i.e., the number of hours established for the Shopping Center by
the Landlord), and during which Tenant's employees will be present at the leased
premises (for inventory, clean-up, meetings, etc.): and (ii) Tenant's electric
requirements during the remaining hours in the year. Based upon such
information, Landlord will calculate the annual amount which Tenant would be
charged by the local electric public utility company for furnishing such
electrical energy, and Tenant agrees that the minimum rent reserved under the
Lease will be increased by such amount.
(2) Landlord reserves the right to further increase the minimum rent to
reflect any increase in the annual amount which Tenant would be charged by the
local electric utility company or in the event of any change in the construction
of the leased premises or if Tenant operates its premises in excess of the
number of hours as projected above.
(3) At any time after the execution of the Lease, either Landlord or Tenant
may request an appraisal by an independent electrical engineer, mutually
acceptable to Landlord and Tenant, who is qualified to determine whether the
adjustment in the minimum rent as computed by Landlord is below or in excess of
the amount which Tenant would be charged by the local electric utility company
for furnishing such electrical energy. If Landlord and Tenant cannot agree
promptly upon an independent electrical engineer, then the matter shall be
submitted for arbitration before the American Arbitration Association.
(4) The appraisal or arbitration, as the case may be, shall be binding on
both parties and shall set forth the amount, if any, by which the adjustment of
the minimum rent reflecting the increased value of the leased premises resulting
from Landlord supplying electrical energy is below or in excess of the annual
amount which Tenant would be charged by the local electric utility company for
furnishing such electrical energy. The minimum rent shall thereupon be adjusted
by the amount of such deficiency or excess, such adjustment to become effective
as of the first day of the month following the month in which demand for the
appraisal was made.
(5) The cost of such appraisal or arbitration shall be shared equally
between Landlord and Tenant; provided, that if either party requests an
appraisal prior to one year after the effective date of the last preceding
appraisal or arbitration, the entire cost of such appraisal or arbitration shall
be paid for by the party requesting such appraisal. In each case, upon
completion of an appraisal and, if necessary. arbitration pursuant to this
agreement, the parties agree that the minimum rent shall reflect such adjustment
or adjustments.
Section 16.03. PROMOTIONAL CHARGE: (e) In any event, and notwithstanding
the formation of a promotion fund or Merchants' Association, Tenant agrees to
participate in at least four (4) Shopping Center promotions in each lease year.
Tenant shall reimburse to Landlord all costs of including Tenant in each
promotion. Such promotions may consist of tabloids, circulars, catalogs, special
Shopping Center newspaper inserts or sections. direct mailings, electronic media
including radio and television, standard newspaper advertisements and/or any
other promotions sponsored by Landlord. The media type, format and content of
any such promotions, as well as the timing of any such promotions, shall be in
Landlord's sole discretion. If Landlord establishes more than four (4) Shopping
Center promotions in each lease year, Tenant shall be permitted to determine in
which four (4) promotions it shall participate. Tenant shall be required to
submit a proposed advertisement within thirty (30) days after Landlord's notice
of the type of promotion being sponsored and the requirements for individual
advertisements in connection with such promotion. In the event that Tenant fails
to submit a proposed advertisement in accordance with such advertising
requirements within the thirty (30) day period, Tenant shall be in default
hereunder. All amounts payable by Tenant hereunder shall be payable within ~
days after written notice by Landlord.
Section 26.01. SECURITY: For purposes of this Section 26.01, references to
Landlord shall be deemed to be references to Woodfield Associates for payment,
retention and application of said security deposit.
Section 27.14. LIABILITY OF LANDLORD: The parties hereto agree that
wherever in this Lease the term "Woodfield Associates" or "beneficiary" of the
Trust (or trust) S used, it shall be deemed to mean Woodfield Associates, its
successors and assigns, or any other entity designated in writing by Landlord.
Exhibit B, Additional Construction Exhibit (if any): To the extent that any
construction exhibit beyond Exhibits B and B-1 shall be attached to the Lease,
and any such exhibit shall refer to electrical criteria, such
<PAGE>
electrical criteria shall be field verified by Tenant prior to preparation of
any plans for Tenant's Work and prior to the undertaking of any work with
respect to the leased premises. Tenant shall be solely responsible for such
verification.
[End of text of Addendum]
<PAGE>
STANDARD FORM
ARTICLE I. GRANT AND TERM
SECTION 1.01. LEASED PREMISES. (a) Landlord, in consideration of the rent
to be paid and the covenants to be performed by Tenant, does hereby demise and
lease unto Tenant, and Tenant hereby rents and hires from Landlord, those
certain premises in the regional retail development shown on Exhibit A, subject
to covenants, restrictions and easements of record, the terms and provisions of
certain reciprocal easement and/or operating agreements now or hereinafter
entered into by Landlord with the owners or lessees of the Department Store
Sites, and the terms and provisions of the underlying lease, if any. It is
agreed that the term "regional retail development' as used herein shall mean and
refer to the Department Stores and the Shopping Center, including the buildings
located or to be located thereon, all as shown on the site plan which is set
forth in Exhibit A attached hereto and made a part hereof, and that the term
"Shopping Center" shall, except as otherwise specifically provided herein, mean
and refer to the hatched and the shaded portions of such site plan which
portions from time to time open directly on the enclosed Mall and which may vary
at each level of the regional retail development, together with the enclosed
Mall (whether or not shaded or hatched). The approximate location of the
premises leased to Tenant hereunder is shown in Exhibit A. The legal description
of the regional retail development or of the Shopping Center is set forth in
Exhibit A or referenced in the Addendum attached hereto and made a part hereof.
The leased premises (herein referred to as the "leased premises" or "premises")
are described as set forth in the Data Sheet attached hereto. As used in this
Lease, the term "State" shall mean the state in which the Shopping Center is
located.
(b) The exterior walls and the roof of the leased premises and the area
beneath said premises are not demised hereunder, and the use thereof, together
with the right to locate, both vertically and horizontally, install, maintain,
use, repair and replace pipes, utility lines, ducts, conduits, flues,
refrigerant lines, drains, sprinkler mains and valves, access panels, wires and
structural elements leading through the leased premises serving other parts of
the regional retail development, is hereby reserved unto Landlord. Landlord
reserves an easement in, over and through the area occupied by the storefront of
the leased premises and an easement above Tenant's finished ceiling to the roof,
or to the bottom of the floor deck above the leased premises, for general access
purposes and in connection with the exercise of Landlord's other rights under
this Lease.
(c) The attached site plan of the regional retail development, Exhibit A,
includes premises identified thereon as Department Store Sites, including the
buildings located or to be located thereon, which sites are collectively
hereinafter referred to as the "Department Store Sites" and/or "Department
Stores," unless otherwise specifically set forth. It is agreed that, wherever
the term "Shopping Center" is used herein, it shall be deemed to exclude the
Department Store Sites (even if such Sites shall be within the hatched and/or
shaded area shown on the site plan), except as otherwise specifically stated
herein. In addition, said site plan includes other portions of the Shopping
Center which Landlord may from time to time sell or lease for the purpose of
construction and/or use by one or more department stores (as defined in Section
27.12 hereof), which portion(s) may thereupon, at Landlord's option, be referred
to and treated as "Department Store Site(s)" and/or "Department Stores" upon
occupancy thereof by a department store, and which, at Landlord's option, may be
excluded from the Shopping Center. In the event Landlord elects to enlarge the
regional retail development, any additional area may be included by Landlord in
the definition of the Shopping Center for purposes of this Lease. Landlord shall
also have the general right from time to time to include within and/or to
exclude from the defined Shopping Center any existing or future areas, and the
floor area of the Shopping Center shall be accordingly adjusted.
SECTION 1.02. COMMENCEMENT AND ENDING DAY OF TERM. The term of this Lease
shall commence upon (a) the commencement date set forth in the Data Sheet, or ~)
the date on which Tenant opens its store in the leased premises for business to
the public, whichever of said dates is the first to occur, and shall end on the
final day of the last lease year of the term or other specified date as set
forth in the Data Sheet, unless sooner terminated as hereinafter provided. For
the purpose of this Lease, the first "lease year" shall be a period commencing
on the day the term of this Lease commences and ending on January 31 next
following; after the first lease year, the term "lease year" shall mean a fiscal
year of twelve (12) consecutive calendar months commencing on February 1 of each
calendar year, except that the final lease year of the term shall be a period of
less than twelve (12) consecutive calendar months in the event that an
expiration date other than January 31 is set forth in the Data Sheet.
<PAGE>
SECTION 1.03. OPENING. Tenant covenants and agrees to complete its
construction within the leased premises in accordance with the pro"isions of
this Lease and to open its store for business to the public not later than the
date established for commencement of the term of this Lease pursuant to Section
1.02 hereof.
ARTICLE II. RENT
SECTION 2.01. MINIMUM RENT. (a) The minimum rent during the term of this
Lease shall be the amount Set forth in the Data Sheet attached hereto as
adjusted pursuant to Section 2.04 or other provisions of this Lease, which sum
shall be payable by Tenant in equal consecutive monthly installments in the sum
set forth in the Data Sheet attached hereto, on or before the first day of each
month, in advance, payable as set forth, and at the address set forth, in the
Data Sheet attached hereto under "Name and Address for Rent Payments," or such
other place as the Landlord may designate in writing, such payments to be
without any prior demand therefor and without any deductions or setoff
whatsoever.
(b) Should the term of this Lease commence on a day other than the first
day of a calendar month, then the rent for such month shall be prorated on a
daily basis based upon a thirty (30) day calendar month. Should any lease year
contain less than twelve (12) calendar months, said annual rent shall be
prorated.
SECTION 2.02. PERCENTAGE RENT. (a) In addition to the payment of the
minimum rent, as hereinbefore provided, Tenant shall pay to Landlord for each
lease year of the term hereof, as percentage rent, an amount equal to the
percentage rent factor (see Data Sheet) multiplied by all Gross Sales resulting
from business conducted in, on or from the leased premises during such lease
year in excess of the amount of Gross Sales set forth in the Data Sheet
hereinafter referred to as "Minimum Gross Sales"). Subsequent to the date upon
which Tenant is initially obligated to open for business in the leased premises,
in addition to any and all other remedies afforded to Landlord under this Lease
by reason of default, "Minimum Gross Sales" shall be reduced by 11360th for each
day or portion thereof that Tenant does not operate its business pursuant to
Section 7.02 hereof. If percentage rent hereunder shall be calculated on the
basis of a split percentage arrangement, as defined in subsection (1,) below,
then the reduction required by the preceding sentence shall be applied to the
minimum rent which would otherwise be deductible in the calculation of
percentage rent with respect to all Gross Sales of Tenant provided that such
reduction shall be made solely for the purpose of the percentage rent
calculation). The percentage rent shall be payable as set forth, and at the
address set forth, in the Data Sheet attached hereto under "Name and Address for
Rent Payments," or such other place as the Landlord may designate in writing,
such payments to be without any prior demand therefor and without any deductions
or setoff whatsoever.
(b) Such percentage rent shall be paid in quarter-annual installments
computed on all Gross Sales during each quarter-annual period of the term hereof
in excess of one quarter (114) of annual Minimum Gross Sales. Such
quarter-annual periods during each lease year shall be measured as follows:
February through April, May through July, August through October, and November
through January. Such quarter-annual installments shall be payable within thirty
(30) days after the expiration of each three (3) month period of each lease
year. In the event that the total of the quarter-annual installments of
percentage rent for any lease year does not equal the percentage rent computed
on the total amount of Gross Sales for such lease year, in accordance with the
formula set forth in the Data Sheet, then Tenant, at the time it submits the
annual statement of Gross Sales required under Section 3.02, shall pay Landlord
any deficiency, or Landlord shall credit any overpayment to the next installment
of percentage rent due from Tenant, as the case may be. In no event, however,
shall the aggregate of minimum rent and percentage rent to be paid by Tenant and
retained by Landlord for any lease year be less than the minimum rent specified
herein. If the commencement date of the lease term is other than February 1,
then the percentage rent covering the first lease year hereunder shall be paid
in the following manner: for the quarter-annual period during which the lease
term commences, the percentage rent shall be equal to the product of the
percentage rent factor and the amount of Gross Sales in excess of a prorated
fraction of annual Minimum Gross Sales (with such prorated fraction to be
calculated by taking the number of days remaining in such quarter annual period
as of the date the leased premises are initially opened for business to the
general public, dividing by 360, and multiplying the resulting quotient by the
stated annual Minimum Gross Sales figure); for the balance of the first 'ease
year, the percentage rent shall be equal to the product of the percentage rent
factor and the amount of Gross Sales in excess of one-quarter (1/4) of annual
Minimum Gross Sales during each subsequent quarter-annual period. If the
expiration date of the lease term is other than January 31, then the percentage
rent covering the final lease year hereunder shall be calculated in a like
manner, with proration to occur in the quarter-annual period during which the
lease term expires In the event that Tenant shall be obligated to pay percentage
rent calculated on different percentages for more than one category of
merchandise and/or services (a "split percentage" arrangement), then the
percentage rent payable by Tenant hereunder shall be calculated for each
quarter-annual period (and for any fractional period occurring at the beginning
or end of the term) based upon the stated percentages being applied to the
respective categories of Gross Sales for such period, with the minimum rent paid
by Tenant for any such period being deducted from the combined total in order to
arrive at the percentage rent owing by Tenant for such period. Such amounts
shall be payable within thirty (30) days after the expiration of the applicable
period.
SECTION 2.03. GROSS SALES. The term "Gross Sales" as used herein shall be
construed to include the entire amount of the actual sales price, whether for
cash or otherwise, of all sales of merchandise or services and all other
receipts whatsoever of all business conducted in or from the leased premises by
Tenant, or by all
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concessionaires (as defined in Section 3.02 hereof) or otherwise,
including, without limitation, mail, catalogue or telephone orders received or
filled at the leased premises, all deposits not refunded to purchasers, and
orders taken, although said orders may be filled elsewhere. A "sale" shall be
deemed to have been consummated for the purposes of this Lease, and the entire
amount of the sales price shall be included in Gross Sales, at such time that
(i) the transaction is initially reflected in the books or records of Tenant or
a concessionaire (if a concessionaire makes the sale), or (ii) Tenant or such
concessionaire receives all or any portion of the sales price, or (iii) the
applicable goods or services are delivered to the customer, whichever first
occurs, irrespective of whether payment is made in installments, the sale is for
cash or for credit, or otherwise, or all or any portion of the sales price has
actually been paid at the time of inclusion in Gross Sales or at any other time.
No deduction shall be allowed for direct or indirect discounts, rebates, or
other reductions on sales to employees or others, unless generally offered to
the public on a uniform basis. In addition, no deduction shall be allowed for
uncollected or uncollectible credit accounts, or for trade-ins or other credits
on sales to employees or others. The term "Gross Sales" shall not include,
however, any sums collected and paid out by Tenant for any sales or excise tax
imposed by and accounted for by Tenant to any duly constituted governmental
authority, nor shall it include the exchange of merchandise between the stores
of Tenant, if any, where such exchange of goods or merchandise is made solely
for the convenient operation of the business of Tenant and not for the purpose
of consummating a sale which has theretofore been made in or from the leased
premises and/or for the purpose of depriving Landlord of the benefit of a sale
which otherwise would be made in or from the leased premises, nor shall the term
include the amount of returns to shippers or manufacturers, nor proceeds from
the sale of trade fixtures. There shall be deductible from Gross Sales the
amount of any cash or credit refund made upon any sale in or from the leased
premises, previously included in "Gross Sales" hereunder, not to exceed the sum
so previously included, where the merchandise sold is thereafter returned by the
purchaser and accepted by Tenant. The term "merchandise" as used in this Lease
shall include food and beverages if Tenant is permitted to sell such items in
Section 7.01 hereof.
SECTION 2.04. RENT ADJUSTMENT. (a) Notwithstanding any provisions to the
contrary contained in this Lease, Tenant shall pay to Landlord as minimum rent
for the second lease year of the term of this Lease, and for each subsequent
lease year of said term, but subject to further increase pursuant to this
Section 2.04 and other provisions of this Lease, the greater of the amounts
calculated according to the formulas set forth in Paragraphs (i) and (ii) below.
(i) Minimum rent for the lease year in question shall be increased by the
net percentage of change between the Base Index and the Index published for the
first calendar month of such lease year (as such terms are defined below).
(ii) Minimum rent for the lease year in question shall be increased by the
amount of percentage rent payable for the immediately preceding lease year
pursuant to Section 2.02 hereof.
(b) For purposes of the foregoing calculations, the term "Base Index" shall
be the Index (as defined in Section 27.20), for the month during which the term
of this Lease commences (or, if the Index is not published for such month, then
the Index published for the month closest, but prior, to the lease commencement
date) Following any increase in minimum rent pursuant to Paragraph (a) above,
the "Base Index" for future calculations shall be redefined is the Index
published for the first calendar month of the lease year for which the minimum
rent has last been increased pursuant to said Paragraph (a). The Index for the
first calendar month of any given lease year, if the Index iv. not published for
such month, shall be the Index published for the month closest, but prior, to
the first calendar month of such lease year. For the purposes of this Section,
the percentage rent payable by Tenant for any lease year consisting of less than
twelve (12) full calendar months shall be calculated by dividing the percentage
rent payable by Tenant for such lease year pursuant to Section 2.02 hereof by
the actual number of days in such lease year, and by multiplying the resulting
quotient by 360. Landlord shall notify Tenant of the increased minimum rent for
each lease year following the determination of same by Landlord, and Tenant
shall pay such increased minimum rent for the applicable lease year in the
manner set forth in Section 2.01 hereof. In the event that the increase in
minimum rent results from the calculation set forth above in subsection (a)(ii),
then the Minimum Gross Sales otherwise applicable for such period shall be
increased by a percentage equal to the percentage increase in minimum rent made
by reason of the percentage rent payable in the preceding lease year. If
percentage rent under this Lease shall be calculated on the basis of a split
percentage arrangement, as defined in Section 2.02(1,) hereof, then, in the
event of an increase in minimum rent resulting from the calculation set forth
above in subsection (a)(i), only the minimum rent (not including such increase)
which would otherwise be deducted shall be deductible from the percentage rent
calculated with respect to all Gross Sales of Tenant. The minimum rent for any
period as stated in Section 2.01 hereof, if different than that stated for the
immediately preceding period, shall be adjusted by multiplying such different
minimum rent ("Changed Rent") by the cumulative percentage increase in minimum
rent pursuant to this Section from the commencement of the term of this Lease
through and including the first lease year during which such Changed Rent would
have become effective, with the resulting product to be added to such Changed
Rent to yield the effective minimum rent for such period, subject to further
adjustment as provided in this Section or elsewhere in this Lease.
(c) Upon the opening of any department store within the regional retail
development during the term of this Lease (if such department store was not open
for business to the general public as of the commencement date of this Lease),
the minimum rent and Minimum Gross Sales then in effect shall be immediately and
automatically increased by fifteen percent (15%), subject to further increases
pursuant to this paragraph, this Section and other provisions of this Lease.
SECTION 2.05. TENANT'S TAX OBLIGATION. Tenant shall pay to Landlord its
proportionate share of all taxes and assessments which may be levied or assessed
by any lawful authority during the term of this Lease, or with
<PAGE>
respect to each fiscal tax year falling in whole or in part during the term
of this Lease, against the land, buildings and improvements comprising the
Shopping Center, and of all other taxes which Landlord becomes obligated to pay
with respect to the regional retail development, irrespective of whether such
taxes are assessed against real or personal property. The portion of such taxes
and assessments allocated to the common areas of the Shopping Center, and the
portion of such taxes allocated to the "net-building area (Gross building area
less the sum of gross leasable floor area and common areas) of the Shopping
Center, shall be deducted from the total of such taxes and assessments and
charged to Tenant in accordance with the provisions contained in Section 8.03 of
this Lease. Tenant's proportionate share of the remaining taxes and assessments
(i.e.. those not charged under Section 8.03) shall be equal to the product
obtained by multiplying such taxes and assessments by a fraction, the numerator
of which shall be the number of square feet of floor area in the leased premises
and the denominator of which shall be the total number of square feet of gross
leased and occupied floor area in the Shopping Center. In the event that any
present or future enactment of the State or any political subdivision thereof or
any governmental authority having jurisdiction thereover either: (a) imposes a
direct or indirect tax and/or assessment of any kind or nature upon, against or
with respect to the rents payable by tenants or occupants in the regional retail
development to Landlord derived from the regional retail development or with
respect to the Landlord's (or the individuals' or entities' which constitute the
partners of the partnership which is the Landlord, or which is the beneficiary
of the Trust of which Landlord is Trustee, as applicable) ownership of the land
and buildings comprising the regional retail development, either in addition to
or by way of substitution for all or any part of the taxes and assessments
levied or assessed against such land and such buildings, including, without
limitation, any net profits tax or any comparable tax imposed on any portion of
Landlord's revenues from the regional retail development; and/or (1,) imposes a
direct or indirect tax or surcharge of any kind or nature, upon, against or with
respect to the parking areas or the number of parking spaces in the regional
retail development, then in either or both of such events, Tenant shall be
obligated to pay its proportionate share thereof as provided herein. For
purposes of this Section, the term "regional retail development" shall be deemed
to include the land upon which any parking facilities, temporary or permanent
off-site utility systems and any wooded area, lake, shoreline thereof or island
park serving the regional retail development are located with all improvements
situated thereon. To the extent that real estate taxes and assessments are the
obligation of Tenant pursuant to Section 8.03 hereof, the same shall not be
includable in Tenant's proportionate share pursuant to this Section.
Tenant's proportionate share of all of the aforesaid taxes and assessments
levied or assessed for or during the term hereof, as determined by Landlord,
shall be paid in monthly installments on or before the first day of each
calendar month, in advance, in an amount estimated by Landlord; provided that
Landlord shall have the right to initially determine monthly estimates and to
revise the estimates from time to time, and shall have the right to apply such
monthly installments to tax bills according to the formula being utilized by
Landlord from time to time. Upon receipt of all tax bills and assessment bills
attributable to any calendar or fiscal year during the term hereof, Landlord
shall furnish Tenant with a written statement of the actual amount of Tenant's
proportionate share of the taxes and assessments for such ear. In the event no
tax bill is available, Landlord will compute the amount of such tax. If the
total amount paid by Tenant under this Section for any calendar or fiscal year
during the term of this Lease shall be less than the actual amount due from
Tenant for such year, as shown on such statement, Tenant shall pay to Landlord
the difference between the amount paid by Tenant and the actual amount due, such
deficiency to be paid within ten (10) days after demand therefor by Landlord,
and if the total amount paid by Tenant hereunder for any such calendar or fiscal
year shall exceed such actual amount due from Tenant for such year, such excess
shall be credited against the next of taxes and assessments ~ue from Tenant to
Landlord hereunder. All amounts due hereunder shall be payable to Landlord at
the place where the minimum rent is payable. In the event Landlord contests any
taxes levied or assessed during the term hereof upon, against or with respect to
the Shopping Center or any portion thereof or interest therein, or in the event
of Landlord's negotiation with respect to assessed valuation for the Shopping
Center, Tenant shall pay its proportionate share of Landlord's costs, expenses
and attorneys' fees in connection therewith calculated on the same basis as set
forth above in this Section. For the calendar or fiscal years in which this
Lease commences and terminates, the provisions of this Section shall apply, and
Tenant's liability for its proportionate share of any taxes and assessments for
such years shall be subject to a pro rata adjustment based on the number of days
of said calendar or fiscal years during which the term of this Lease is in
effect A copy of a tax bill or assessment bill submitted by Landlord to Tenant
shall at all times be sufficient evidence of the amount of taxes and/or
assessments assessed or levied against the property to which such bill relates.
Prior to or at the commencement of the term of this Lease and from time to time
thereafter throughout the term hereof, Landlord shall notify Tenant in writing
of Landlord's estimate of Tenant's monthly installments due hereunder.
SECTION 2.06. PAYMENTS. Rent shall be defined in this Lease as (i) minimum
rent, (ii) percentage rent and (iii) all other charges of whatever nature
required to be paid by Tenant under this Lease, including the Exhibits hereto.
The rent charges described in item (iii) of the preceding sentence shall, unless
otherwise specified, be due and payable ten (10) days after demand, without any
deductions or setoff whatsoever, in the manner and at the place where minimum
rent is payable and Tenant's failure to pay rent shall carry with it the
consequences set forth under Article \'IX hereof. Landlord's rights and remedies
pursuant to this Section shall be in addition to any and all other rights and
remedies provided under this Lease or at law. Notwithstanding anything to the
contrary contained in this Lease, Landlord's
<PAGE>
demand for any and all rent may be sent to Tenant by regular mail. Rent is
specifically agreed by Tenant to be a minimum reasonable use and occupancy
charge for the leased premises. In the event any sums required hereunder to be
paid are not received on or before the tenth (10th) day after the same are due,
then, for each and every such payment, Tenant shall immediately pay, as
additional rent, a service charge of five percent (5%) of the outstanding amount
due. In the event of Tenant's failure to pay the foregoing service charge,
Landlord may deduct said charge from the deposit set forth in Section 26.01
hereof. The provisions of this Section shall not be construed to extend the date
for payment of any sums required to be paid by Tenant under this Lease or to
relieve Tenant of its obligation to pay all such sums at the time or times
herein stipulated, and neither the demand for, nor collection by Landlord of,
late payment service charges pursuant to this Section shall be construed as a
cure of any default in payment by Tenant. It is agreed that the said service
charge is a fair and reasonable charge under the circumstances and shall not be
construed as interest on a debt payment. In the event any charge imposed
hereunder or under any other section of this Lease is either stated to be or
construed as interest, then no such interest charge shall be calculated at a
rate which is higher than the maximum rate which is allowed under the usury laws
of the State, which maximum rate of interest shall be substituted for the rate
in excess thereof, if any, computed pursuant to this Lease.
<PAGE>
ARTICLE III. RECORDS AND BOOKS OF ACCOUNT
SECTION 3.01. TENANT'S RECORDS. Tenant shall prepare and keep full,
complete and proper books and source documents, in accordance with generally
accepted accounting principles, of the Gross Sales, whether for cash, credit or
otherwise, of each separate department at any time operated in the leased
premises and of the operations of each subtenant, concessionaire, licensee
and/or assignee, and shall require and cause all such parties to prepare and
keep books, source documents, records and accounts sufficient to substantiate
those kept by Tenant. The books and source documents to be kept by Tenant shall
include, without limitation, true copies of all State and local tax returns and
reports, records of inventories and receipts of merchandise, daily receipts from
all sales and other pertinent original sales records and records of any other
transactions conducted in or from the leased premises by Tenant and any other
persons conducting business in or from the leased premises. Pertinent original
sales records shall include without limitation: (i) cash register tapes,
including tapes from temporary registers, (ii) serially pre-numbered ~ (iii) the
original records of all mail and telephone orders at and to the leased premises,
(iv) settlement report sheets of transactions with subtenants, concessionaires,
licensees and assignees, (v) original records indicating that merchandise
returned by customers was purchased at the leased premises by such customers,
(vi) memorandum receipts or other records of merchandise taken out on approval,
(vii) detailed original records of any exclusions or deductions from Gross
Sales, (viii) sales tax records, and (ix) such other sales records, if any,
which would normally be examined by an independent accountant pursuant to
accepted auditing standards in performing an audit of Tenant's sales. Tenant
shall record at the time of each sale or other transaction, in the presence of
the customer, all receipts from such sale or other transaction, whether for
cash, credit or otherwise, in a cash register Landlord and which shall possess
such other features as shall be required by Landlord. All of the foregoing
books, source documents and records shall be retained for a period of at least
f.~(A) years after the expiration of each lease year.
SECTION 3.02. REPORTS BY TENANT. Tenant shall furnish to Landlord within
thirty (30) days after the expiration of each quarter-annual period of each
lease year a complete statement ("quarterly report"), certified by Tenant, of
the amount of Gross Sales, as defined in Article II, Section 2.03 of this Lease,
made in, on or from the leased premises during said period. Failure of Tenant to
timely submit quarterly reports as aforesaid shall entitle Landlord to estimate
Gross Sales based upon available data (with a reconciliation upon receipt of the
annual report), and Tenant shall be obligated to pay percentage rent, as set
forth in Section 2.02, on such estimated Gross Sales. Tenant also agrees that it
will furnish to Landlord within thirty (30) days after the expiration of each
full lease year a complete statement, certified by ~. showing in all reasonable
detail the amount of such Gross Sales made by Tenant from the leased premises
during the preceding lease year. Tenant shall in all events furnish to Landlord
within fi~\1/4~) days after the end of each month of the term of this Lease a
written statement of Gross Sales covering the preceding month, the statement to
be in such form and style and contain such details and breakdown as the Landlord
may reasonably require. Tenant shall require and cause all its concessionaires,
if any, to furnish statements at the times and in the form and content specified
in this Section, relating to their operations within the leased premises. All
reports of Gross Sales submitted or caused to be submitted by Tenant to Landlord
shall be conclusive and binding upon Tenant unless such reports are corrected
within two (2) years after the date of issuance. The term "concessionaire" as
used in this Lease shall mean and include any and all concessionaires,
licensees, franchisees, department operators, subtenants, permittees or others
directly or indirectly operating or conducting a business in or from the leased
premises.
ARTICLE IV. AUDIT
SECTION 4.01. RIGHT TO EXAMINE BOOKS. Notwithstanding the acceptance by
Landlord of payments of percentage rent, Landlord shall have the right to all
rents and other charges actually due hereunder, and the right to examine, make
extracts from and copy, at the leased premises or (at the option of~~~) at the
corporate headquarters office of Tenant in the United States, Tenant's and all
concessionaires' books, source documents, accounts, records and sales tax
reports filed with applicable government agencies in order to verify the amount
of Gross Sales in and from the leased premises. Tenant shall make all such
documents and records available at the leased premises (or at Tenant's corporate
headquarters, if elected by T~,,A1~j) upon ti'r~~(1) days' prior written notice
from Landlord.
SECTION 4.02. AUDIT. At its option, Landlord may at any time, upon A.~~\';)
days' prior written notice to Tenant, arrange for an auditor selected by
Landlord to conduct a complete audit (including a physical inventory) of the
entire records and operations of Tenant and/or any concessionaire concerning
business transacted upon or includable in Gross Sales from the leased premises
during the period covered by any statement issued by Tenant or a concessionaire
as above set forth in Article III. Tenant shall make available to Landlord's
auditor at the leased premises (or at Tenant's corporate headquarters, if
elected by ~ within ~ days following Landlord's notice requiring such audit, all
of the books, source documents, accounts and records referred to in Section 3.01
of this Lease and any other materials which such auditor deems necessary or
desirable for the purpose of making such audit. Tenant shall promptly pay to
Landlord the amount of any deficiency in percentage rent payments disclosed by
any such audit. If such audit shall disclose that Tenant's statement of Gross
Sales is ~ to the extent of "~p~-ti..~,'1~) or more, Landlord may bill to Tenant
the amount of any deficiency and the cost of such audit, which shall be paid by
Tenant within ten (10) days after Tenant's receipt of Landlord's invoice; in the
event Tenant fails to pay such discrepancy and costs, Landlord may terminate
this Lease as set forth below and/or shall have such other rights and remedies
as may be provided herein or at law arising by virtue of Tenant's failure to pay
rent. If such audit shall disclose that Tenant's statement of Gross Sales is ~
to the extent of or more then Landlord. 4n addition to the foregoing remedy and
other
<PAGE>
remedies available to Landlord, shall have the option, upon at least ten (10)
days' notice to Tenant, to declare this Lease terminated and the term ended, in
which event this Lease shall cease and terminate on the date specified in such
notice with the same force and effect as though the date set forth in such
notice were the date originally set forth herein and fixed for the expiration of
the term, and Tenant shall vacate and surrender the leased premises but shall
remain liable for all obligations arising during the balance of the original
stated term as provided in this Lease. In addition to the foregoing, and in
addition to all other remedies available to Landlord, in the event Landlord or
Landlord's auditor shall schedule a date for an audit of Tenant's records in
accordance with this Section, and Tenant shall fail to be available or shall
otherwise fail to comply with the requirements for such audit, Tenant shall pay
all costs and expenses associated
In addition to all other remedies available to Landlord, in the event that
any such audit shall disclose that Tenant's records and other documents as
referred to in Articles III and IV hereof and such other materials provided by
Tenant to Landlord's auditor are inadequate, in the opinion ~ Landlord's auditor
to accurately disclose Tenant's Gross Sales, then Landlord shall be entitled to
collect as additional rent from Tenant an amount equal to fifteen percent (15%)
of the highest Effective Rent (minimum rent plus percentage rent) payable by
Tenant in any of the three (3) preceding lease years. Landlord's exercise of the
foregoing remedy shall in no way limit or otherwise affect Landlord's ability to
exercise other remedies available to it, nor shall Tenant's obligations pursuant
to the terms, covenants and conditions of this Lease (including, without
limitation, Tenant's obligation with respect to reporting Gross Sales and
payment of percentage rent) be in any manner reduced or diminished by the
exercise of such remedy. In the event that Tenant shall, following the exercise
of such remedy, provide to Landlord all records and documentation as required to
be provided pursuant to the terms of this Lease so as to permit Landlord's
auditor to accurately establish Tenant's Gross Sales for the period in question,
then Tenant shall be permitted a credit with respect to any amount of additional
rent collected by Landlord from Tenant pursuant to this paragraph, with such
credit to be applied first against the installment of percentage rent due from
Tenant for the period in question, with any remaining credit to be applied
against the next installment of percentage rent payable by Tenant. Neither the
provisions of this Section 4.02 nor any other provisions in this Lease shall
restrict Landlord's rights to discovery in any litigation or arbitration
proceeding.
ARTICLE V. CONSTRUCTION OF LEASED PREMISES
SECTION 5.01. CONSTRUCTION OF LEASED PREMISES. (a) The leased premises
shall be constructed substantially as set forth in Exhibit B, which is attached
hereto and made a part hereof. Each of the parties hereto does hereby agree to
perform the obligations imposed upon such panty in said Exhibit B at the times
and in the manner therein provided. All references in the text of the Lease to
Exhibit B shall include Exhibit B-I. Minor changes from any plans or
specifications covering Landlord's Work which may be, or which may have been,
necessary or appropriate during construction of the Shopping Center or leased
premises shall not affect or change this Lease or invalidate same. If this Lease
is executed after the opening of the regional retail development or if the
leased premises are in an expansion wing of the regional retail development
which opened prior to the date of this Lease, the parties hereto acknowledge
that the work to be performed by Landlord pursuant to Exhibit B has been fully
performed (except to the extent specifically otherwise set forth in Exhibit B).
(b) Tenant agrees, prior to the commencement of the term of this Lease, at
Tenant's sole cost and expense, to provide all work of whatsoever nature in
accordance with its obligations set forth in Exhibit B as "Tenant's Work."
Tenant agrees to furnish to Landlord the Working Drawings and Specifications
(and Demolition Drawings, as applicable) with respect to the leased premises
prepared in the manner and within the time periods required in Exhibit B. If
such Working Drawings and Specifications (and Demolition Drawings, as
applicable) are not furnished by Tenant to Landlord within the required time
periods in form to permit approval by Landlord, then Landlord may at its option
at any time while Tenant is in default of this provision, in addition to any and
all other remedies provided in this Lease, by notice to Tenant declare this
Lease null and void and of no further force or effect, in which event this Lease
shall terminate, but Tenant shall remain liable for all obligations arising
during the original stated term as provided in this Lease. In addition, if
Landlord determines that Landlord and Tenant are unable to agree upon Working
Drawings and Specifications (and Demolition Drawings, as applicable), Landlord
shall have the option, upon notice to Tenant, to declare this Lease null and
void and of no further force or effect, in which event this Lease shall
terminate on the date specified in such notice, in the same manner as provided
in the preceding sentence. No deviation from the final set of plans and
specifications, once approved by the Landlord, shall be made by Tenant without
Landlord's prior written consent. Approval of the plans and specifications by
Landlord shall not constitute the assumption of any responsibility by Landlord
or Landlord's architect for their accuracy, efficacy or sufficiency, and Tenant
shall be solely responsible for such items. Tenant shall not open the leased
premises for business until all construction has been completed pursuant
<PAGE>
to the provisions of Exhibit B. Until such time as Tenant's final Working
Drawings and Specifications (and Demolition Drawings, as applicable) have been
approved in writing by Landlord, the right of Tenant to enter upon the leased
premises shall be solely for the purpose of inspection, measurement and
obtaining information necessary to prepare architectural drawings and construct
its premises. Tenant shall not be deemed to have taken possession of the leased
premises until, and Landlord shall be deemed to have delivered and Tenant shall
be deemed to have taken such possession when, Tenant actually commences
construction of its leasehold improvements following Landlord's approval of
Tenant's final Working Drawings and Specifications (and Demolition Drawings, as
applicable). Until Tenant is so deemed to have taken possession, in the event of
a default by Tenant under this Article V, Landlord, upon notice to Tenant shall
have the right to declare this Lease null and void and of no further force or
effect and, thereafter may demise and lease the premises described in Section
1.01 free from any rights of Tenant. Tenant shall not open its store for
business until Tenant's storefront sign is installed, the store is fully
fixtured, lighted, stocked with merchandise in place and staffed, and Tenant is
prepared to engage in the sale of goods and/or services to the public pursuant
to Article VJI. Under no circumstances shall Tenant remove the storefront
barricade, unless Landlord shall specifically otherwise direct in writing.
Landlord shall remove the storefront barricade (or Tenant shall remove the same
if so directed in writing by Landlord) when Tenant is so prepared to open for
business as determined by Landlord, and Tenant shall reimburse Landlord for all
costs and expenses in connection with such removal (or Tenant shall pay for all
such costs and expenses directly (including transportation of the barricade to
storage in the regional retail development), if Tenant shall be directed by
Landlord to perform such removal). If all or any part of the leased premises
shall have been previously occupied, Tenant acknowledges that the Tenant's Work
described in Exhibit B has been initially performed by a tenant previously
occupying the leased premises and that Tenant accepts the leased premises in an
"as is" condition without representation by the Landlord or any person, firm or
corporation on behalf of Landlord as to the condition thereof. Tenant shall
submit Working Drawings and Specifications and Demolition Drawings showing the
work to be performed by Tenant to completely remodel and refurbish the leased
premises and, subject to Landlord's approval, will cause such work to be
performed prior to the commencement of the term of this Lease. All such
additional work and permitted alterations, repairs and improvements shall be in
accordance with the provisions of Exhibit B.
(c) Upon execution of this Lease, Tenant shall pay to Landlord, as a
reimbursement to Landlord for costs and expenses with respect to the leased
premises, the sum set forth in the Data Sheet as "Tenant Reimbursement to
Landlord." The payment of such sum by Tenant shall not in any manner reduce or
limit the obligation of Tenant for payment of other charges under this Lease,
including, without limitation, the charges set forth in the Exhibits attached
hereto.
SECTION 5.02. AVAILABILITY AND POSSESSION OF PREMISES FOR TENANT'S WORK.
(a) The leased premises shall be considered available to Tenant when Landlord
furnishes Tenant with a written notice to such effect (the "Notice of
Availability"). Upon receipt of such Notice of Availability, Tenant shall have
only limited access to the premises for purposes of inspection and measurement
verification. The Notice of Availability shall not constitute delivery of the
premises, and Landlord (or a current occupant of the premises) will retain
possession of the premises until delivery of possession is made to Tenant as
provided below. Landlord may furnish the Notice of Availability at any time
subsequent to Landlord's obtaining possession of the premises. If the leased
premises are presently occupied by another tenant, Landlord will not make the
premises available to Tenant until a date after Landlord regains possession of
the leased premises from the tenant presently occupying the same.
(b) Landlord covenants to deliver possession of the leased premises to
Tenant upon written approval by Landlord of Tenant's Working Drawings, but only
if said approval is subsequent to or simultaneous with a furnishing to Tenant of
a Notice of Availability. Upon receiving actual possession, Tenant shall have
access to the leased premises for all purposes set forth under this Lease.
(c) Upon delivery of possession, Tenant accepts the premises and
acknowledges that the premises are in the condition required by this Lease,
subject to all field conditions existing at the time of delivery of possession.
Failure of Landlord to deliver possession of the leased premises in the manner
and condition as provided for in this Lease will not give rise to any claim for
damages by Tenant against Landlord, or against Landlord's contractor, or permit
Tenant to rescind or terminate this Lease.
SECTION 5.03. LANDLORD'S AND TENANT'S OPTIONAL RIGHT OF CANCELLATION. If
for any reason the leased premises are not ready for Tenant's Work on the date
eighteen (18) months following the date of this Lease, then, for a period of
thirty (30) days thereafter, Tenant shall have the option, and for a period of
forty-five (45) days following such eighteen (18) month period, Landlord shall
have the option, of canceling and terminating this Lease by not more than sixty
(60) days' written notice, one to the other, and, in the event that either party
shall exercise such option, this Lease shall terminate with neither party being
liable to the other in damages or otherwise, and any money deposited pursuant to
Section 26.01 hereof shall be returned to Tenant. In the event that neither
Tenant nor Landlord gives such written notice of cancellation, then said options
shall be null and void and of no further force or effect, and this Lease shall
be considered as continuing in full force and effect. In addition, if another
tenant is presently in possession of the leased premises, and Landlord shall not
have delivered possession of the leased premises to Tenant by the lease
commencement date (as specifically identified in the Data Sheet), then Landlord
shall have the right to thereafter terminate this Lease at any time prior to
delivery of possession to Tenant by written notice to Tenant, with like result
as set forth in the first sentence of this paragraph. If as of the date of this
Lease the leased premises are (i) in a regional retail development, or in an
expansion wing of a regional retail development, which development or wing, as
applicable, has not initially opened for business to the public, or (ii)
presently occupied by another entity, then the foregoing eighteen (18) month
period under this Section 5.03 (and the four (4) year period set forth in
Section 5.04) shall be modified to commence as of (i) the currently projected
date of such initial opening, or (ii) the currently projected date of Landlord's
repossession of the leased premises from such present entity, as
<PAGE>
applicable.
SECTION 5.04. ULTIMATE COMMENCEMENT DATE. Notwithstanding anything to the
contrary contained herein, if for any reason whatsoever (including without
limitation, excusable delay) the term of this Lease shall not have commenced
prior to such date as shall be four (4) years from the date of this Lease
(subject to extension as set forth in Section 5.03), then this Lease shall be
automatically terminated without further act of either party hereto, and the
parties hereto shall be released from all obligations hereunder.
ARTICLE VI. ALTERATIONS, CHANGES AND ADDITIONS
SECTION 6.01. INSTAL~ON BY TENANT. Tenant shall not make or cause to be
made any alterations, additions or improvements to the leased premises (for
example, but without limiting the generality of the foregoing, Tenant shall not
install or cause to be installed any signs, floor covering, interior or exterior
lighting, plumbing fixtures, shades, canopies or awnings, electronic detection
devices, antennas, mechanical, electrical or sprinkler systems, or make any
changes to the storefront) without the prior written approval of Landlord in
each instance. Tenant shall present to Landlord plans and specifications for
such work at the time approval is sought, in accordance with criteria and
procedures as provided in Exhibit B.
SECTION 6.02. REMOVAL BY TENANT. All alterations, additions, trade fixtures
and improvements made by Tenant shall be deemed to have attached to the
leasehold and to have become the property of Landlord upon such attachment. Upon
expiration or earlier termination of the term of this Lease, Tenant shall not
remove any of such alterations, additions, trade fixtures or improvements.
Landlord may, however, designate by written notice to Tenant those trade
fixtures which shall be removed by Tenant at the expiration or earlier
termination of the Lease, and Tenant shall promptly remove the same and repair
any damage to the leased premises caused by such removal. Landlord shall have
the right to padlock or otherwise secure the leased premises upon the expiration
or earlier termination of the term of the Lease. Landlord shall also have the
right, at any time during the term of this Lease, and upon expiration or earlier
termination of the term of this Lease, to immediately enter the leased premises
in order to remove any items which shall be determined by Landlord to be a
violation of existing health, safety, security or other similar codes or
regulations affecting or applicable to the leased premises or the regional
retail development. Landlord shall attempt to provide prior notification to
Tenant of such removal, subject to the then existing circumstances.
SECTION 6.03. CHANGES AND ADDITIONS. Landlord, for itself and for the
underlying lessor, if any, hereby reserves the right at any time, and from time
to time, to make alterations to, and to build additional Stories on the building
in which the leased premises are located, and to construct other buildings and
improvements in the regional retail development, including any modifications of
the common areas in connection therewith, to enlarge or reduce the Shopping
Center or the regional retail development, to add decks or elevated parking
facilities, and to sell or lease any part of the land comprising the regional
retail development, as shown on the site plan attached hereto as Exhibit A, for
the construction thereon of a building(s) to be occupied by a Department
Store(s) which may or may not be part of the regional retail development.
Landlord also reserves for itself and for the underlying lessor, if any, the
right at any time, and from time to time, to change, modify, or abolish any
temporary off-site utility or any storm sewer or retention pond system (if
applicable) serving the regional retail development. The purpose of Exhibit A is
to show the approximate location of the leased premises within the Shopping
Center and Landlord reserves for itself and for the underlying lessor, ,,,f any,
the right at any time to relocate, enlarge, or reconfigure the various
buildings, parking areas and other common areas on said site plan. Tenant hereby
consents to the exercise by Landlord of the rights set forth in this Section
6.03 and agrees that the exercise of such rights by Landlord or by the
underlying lessor, if any, shall not diminish Tenant's obligations under this
Lease.
ARTICLE VII. CONDUCT OF BUSINESS BY TENANT
SECTION 7.01. USE OF PREMISES. Tenant shall continuously use and occupy the
entire leased premises during the term of this Lease, which use and occupancy
shall be solely for the purpose of conducting the business specifically set
forth in the Data Sheet and for no other purpose or purposes. It is agreed that
the use specified in the Data Sheet has been, and is, a material inducement to
Landlord in entering into this Lease with Tenant, and that Landlord would not
enter into this Lease without this inducement. If any governmental license or
permit shall be required for the proper and lawful conduct of Tenant's business
or other activity carried on in the leased premises or if a failure to procure
such a license or permit might or would in any way affect Landlord or the
Shopping Center, then Tenant, at Tenant's expense, shall duly procure and
thereafter maintain such license or permit and submit the same for inspection by
Landlord. Tenant, at Tenant's expense, shall, at all times, comply with the
requirements of each such license or permit.
SECTION 7.02. OPERATION OF BUSINESS. Tenant shall be open for business and
operate continuously, during all days and hours established by Landlord, in all
of the leased premises during the entire term of this Lease, and shall conduct
its business at all times in a first class and reputable manner, maintaining at
all times -LII staff of employees and LIl .] -- ~1~T stock of merchandise.
Failure by Tenant so to be open for business and to operate shall entitle
Landlord, in addition to other remedies provided in this Lease, to mandatory
injunctive relief, and~~ give Landlord the right to erect a storefront barricade
in front of the leased premises at Tenant's expense, which barricade shall not
be removed except upon Landlord's prior written consent and with Tenant paying
the cost of such removal. The erection of such a barricade by Landlord shall not
be construed as a re-entry by Landlord into the leased premises or as an
acceptance by Landlord of any surrender of possession of the leased premises by
Tenant. In the event the maximum hours during which the Shopping Center (or any
separate part thereof) is legally permitted
<PAGE>
to be open to the public are regulated by any lawful authority, then
Landlord shall be the sole judge of which days and hours shall be Shopping
Center business days and hours (and the days and hours applicable to any such
separate part). Tenant shall install and maintain at all times a display of
merchandise in the display windows, if any, of the leased premises and shall
keep the same well lighted during such hours as Landlord shall designate.
Tenant, at Tenant's expense, shall promptly comply witli all present and future
laws, ordinances, orders, ru~egul ations and requirements of all governmental
authorities having jurisdiction, affecting or applicable to the leased premises
or the cleanliness, safety, occupancy and use of the same, whether or not any
such law, ordinance, order, rule, regulation or requirement is substantial, or
foreseen or unforeseen, or ordinary or extraordinary, or shall necessitate
structural changes or ~ovements or interfere with the use and enjoyment of the
leased premises. Tenant shall not do or permit to e one in or about the leased
premises, or bring anything therein, which will in any way conflict with any
such law, ordinance, order, rule, regulation or requirement affecting the
occupancy or use of the leased premises or the regional retail development which
is or may hereafter be enacted or promulgated by governmental authorities, or in
any way obstruct or interfere with the rights of others, nor shall Tenant use or
allow the premises to be used for any improper, immoral or objectionable
purposes as determined by Landlord. Tenant shall not cause or permit the use,
generation, storage or disposal in or about the leased premises or the regional
retail development of any substances, materials or wastes subject to regulation
under any federal or state or local laws from time to time in effect concerning
hazardous, toxic or radioactive materials unless Tenant shall have received
Landlord's prior written consent, which Landlord may withhold or at any time
revoke in its sole discretion. Tenant shall comply with all federal, state and
local laws in effect from time to time prohibiting discrimination or segregation
by reason of race, color, creed, age, religion, sex or national origin. No
auction, liquidation, going out of business, fire or bankruptcy sales may be
conducted or advertised by sign or otherwise in the leased premises. Tenant
shall display and sell only first-quality, current-season merchandise and
Tenant's sales practices shall be in accord with standards and practices
generally acceptable in enclosed first-class, full-retail-price regional
shopping centers. Tenant shall be obligated to permit returns of merchandise and
shall allow cash refunds on such returns, except in connection with special
sales and close outs. Tenant shall not offer any goods or services which
Landlord determines, in its sole discretion, to be inconsistent~ the image of a
first-class, family-oriented regional retail development, nor shall Tenant
display or sell any goods containing portrayals which Landlord determines, in
its sole discretion, to be lewd, graphically violent or pornographic. Tenant
agrees that it will conduct its business in good faith, and will not do any act
tending to injure the reputation of the Shopping Center (or any part thereof) as
determined by Landlord. Tenant shall not sell or display any paraphernalia used
in the preparation or consumption of controlled substances. In the event
Landlord has approved Tenant's remaining open for business after normal Shopping
Center hours (and/or any hours applicable to that part of the Shopping Center
containing the leased premises), then such approval shall be conditioned upon
Tenant's paying for all additional costs incurred by Landlord as a result
thereof. Tenant shall not permit noise or odors in the leased premises which are
objected to by Landlord and, upon written notice from Landlord, Tenant shall
immediately cease and desist from causing such noise or odor, and failing of
which Landlord may deem the same a material breach of this Lease. Tenant shall
not permit the operation of any coin operated or vending machines or pay
telephones on the leased premises, other than in the areas reserved solely for
the use of Tenant's employees. Tenant shall not sell or display any merchandise
within r.'~~~\'i') of the storefront leaseline or opening unless such sale or
display shall be expressly approved on the Store Design Drawings or otherwise
approved by Landlord, in writing, except that Tenant shall be permitted to
display merchandise in the display windows, if any. Tenant shall not use the
areas adjacent to the leased premises for business purposes. Tenant shall not
store anything in service or exit corridors. Tenant agrees that all receiving
and ~elivery of goods and merchandise, and all removal of merchandise, supplies,
equipment, trash and garbage, and all storage of trash and garbage, shall be
made only by way of or in the areas provided therefor by Landlord Tenant shall
not use or permit the use of any portion of the leased premises as sleeping
quarters, lodging rooms, or for any unlawful purposes Tenant shall not install
any radio or television or other similar device exterior to the leased premises
and shall not erect any aerial on the roof or exterior walls of any building
within the regional retail development. Landlord may direct the use of all pest
extermination contractors at the sole cost and expense of Tenant and at such
intervals as Lanc;iord may require Failure of Tenant to employ the pest
extermination contractor designated by Landlord shall entitle Landlord to such
contractor with respect to Tenant's premises and Tenant shall reimburse Landlord
for the cost thereof. Landlord shall have the option to provide pest
extermination services for the Shopping Center or the regional retail
development or any part thereof, in which event Tenant shall pay to Landlord
Tenant's proportionate share of the cost of such service, with such
proportionate share to be calculated in the manner provided in Section 8.03 of
this Lease In ~e event that Tenant is permitted pursuant to this Lease to engage
in the sale of food and beverages from the leased premises, then Tenant shall:
(i) offer such food and beverages only pursuant to a menu approved by Landlord,
which shall not be changed without Landlord's prior written consent (which
consent Landlord may grant or withhold in its sole and absolute discretion),
(ii) serve its customers in containers or dishes and with utensils to be
approved by Landlord, subject to change by Landlord from time to time, (iii) be
solely responsible for prompt disposal within the premises of all trash, garbage
and debris, and (iv) inspect and maintain all grease traps, pans and hood
ventilators in good order, condition and repair, and shall contract for same if
and as required by Landlord. The covenants of Tenant regarding hazardous, toxic
or radioactive materials, as set forth in this Lease, shall survive the
expiration or earlier termination of the term of this Lease. Without limiting
any of the foregoing provisions, [DELETED] the leased premisesto be left
unattended at any time. In the event that the leased premises, at any time,
[DELETED] shall be left unattended, then, in addition to all other remedies
available to Landlord, Landlord shall have the right to terminate this Lease
upon ten (10) days' prior written notice to Tenant,
<PAGE>
in which event this Lease shall terminate on the date specified in such
notice, but Tenant shall remain liable for all obligations arising during the
original stated term as provided in this Lease. If Landlord shall exercise such
termination right, Tenant shall have the right to vitiate such termination by
written agreement (entered into within such ten (10) day period) to increase the
minimum rent set forth in Section 2.01 hereof (as increased pursuant to other
provisions of this Lease) to three (3) times the amount otherwise required. In
the event of such vitiation, such increased rent shall become effective
immediately and shall continue in effect for the remaining term of the Lease
(subject to further increase pursuant hereto and pursuant to the other
provisions ofthis Lease), and Tenant [DELETED]
SECTION 7.03. RADIUS. During the term of this Lease, in the event Tenant,
its parent corporation or subsidiary corporation, or its franchisor or
franchisee, or its licensor or licensee, or any person, firm, corporation or
other entity who or which controls or is controlled by Tenant, or by any person,
firm, corporation or other entity which directly or indirectly controls or is
controlled by Tenant, shall, directly or indirectly, either individually or as a
partner or stockholder or otherwise, own, operate or become financially
interested in any business similar to or in competition with the business of
Tenant described in Section 7.01 within a radius often (10) miles from the
leased premises, then the Gross Sales (as defined in this Lease) of any such
business or businesses within said radius shall be included in the Gross Sales
made from the leased premises and the percentage rent hereunder shall be
computed upon the aggregate of the Gross Sales made from the leased premises and
by any such other business or businesses then conducted within said radius and
Tenant shall report and maintain records of such sales in the manner provided in
Article III hereof. This Section 7.03 shall not apply to any such business or
businesses open and being operated by Tenant within said radius as of the date
of this Lease as long as such business or businesses shall continue to be
operated in the same location(s) existing as of said~ If Tenant fails to make
payments required pursuant to this Section 7.03, Landlord or Landlord's
authorized representative or agent shall have the right at all reasonable times
during the term hereof and for a period of at least four (4) years after the
expiration of the term of this Lease, to inspect, audit, copy and/or make
extracts of the books, source documents, records and accounts pertaining to such
other business or businesses conducted within said radius, in accordance with
the provisions of Article IV hereof, for the purpose of determining or verifying
the additional rents due to Landlord pursuant to this Section. Moreover, in the
event Tenant fails to supply to Landlord sales records with respect to any such
sii~iilar or competing business, Landlord shall have the right to estimate the
sales for such businesses based upon Tenant's Gross Sales in the leased
premises, and the additional percentage rent generated from the inclusion of
such estimated sales and Tenant's Gross Sales shall be deemed additional rent to
be paid by Tenant in accordance with the provisions of Section 2.02 and 2.06 of
this Lease.
SECTION 7.04. STORAGE, OFFICE SPACE. Tenant shall such goods, wares and
merchandise as Tenant intends to warehouse, store and/or stock in the leased
premises only offer for sale at retail at, in, from or upon the leased premises.
This shall not preclude occasional emergency transfers of merchandise from the
other stores of Tenant, if any, not located in the Shopping Center. Tenant shall
use for office, clerical or other non-selling purposes only such space in the
leased premises as is from time to time reasonably required for Tenant's
business in the leased premises.
SECTION 7.05. CARE OF PREMISES. Tenant, at Tenant's expense, shall at all
times keep the leased premises (including the service areas adjacent to the
premises, display windows and signs) orderly, neat, safe, clean and free from
rubbish and dirt, and vermin, and shall store all trash, garbage and other solid
waste within the leased premises. Tenant shall not burn any trash or garbage at
any time in or about the regional retail development. Landlord may d.rect the
use by Tenant at Tenant's expense of all solid waste disposal contractors at
such intervals as Landlord may require. Landlord shall provide or contract for
any services or facilities for solid waste pickup or sewer cleaning, then enan
shall be obligated to use the same and shall pay a proportionate share of the
expense thereof within ten (10) days after being billed therefor. If Landlord
does not provide such services, Tenant shall arrange for the regular pickup of
all solid waste at Tenant's expense.
ARTICLE VIII. COMMON AREAS
SECTION 8.01. OPERATION AND MAINTENANCE OF COMMON AREAS. Landlord agrees to
cause to be operated and maintained during the term of this Lease all common
areas within the Shopping Center. The manner in which such areas and facilities
shall be operated and maintained, and the expenditures therefor, shall be at the
sole discretion of Landlord and the use of such areas and facilities shall be
subject to such regulations as Landlord shall make from time to time.
SECTION 8.02. USE OF COMMON AREAS. The term ~common area,' as used in this
Lease, shall mean (i) the following areas within the regional retail
development: parking areas and facilities as determined by Landlord
(collectively "parking facilities"), roadways, pedestrian sidewalks and
walkways, pedestrian plazas, pedestrian passage areas, driveways, public
transportation loading and unloading facilities, truckways, loading docks,
delivery areas, landscaped areas, community rooms, office facilities, the
enclosed Mall, berms, elevators and escalators and stairs and ramps and vertical
transportation facilities not contained within any leased premises, public
restrooms and comfort stations, service areas, service and fire and exit
corridors, passageways, retention ponds (if applicable), and other areas,
amenities, facilities and improvements provided by Landlord, (ii) those areas
within the regional retail development and areas adjacent to the regional retail
development which from time to time may be provided by the owners of such areas
for the convenience and use of Landlord, the tenants of the Shopping Center, the
owners and occupants of the Department Store Sites, and their respective
concessionaires, agents, employees, customers, invitees and all other licensees
and others entitled to the use thereof and (iii) any other facilities or areas,
whether within or outside the regional retail development, as may be designated
by Landlord from time to time. The use and occupancy by Tenant of the leased
premises shall include the use of the common areas in common with Landlord and
with all others for whose convenience and use the common areas have been or may
hereafter be provided by Landlord or by the owners of common areas not within
the Shopping Center, subject, however, to rules and regulations for the use
thereof as prescribed from time to time by Landlord or the owner of such common
area, including, without limitation, the right of Landlord to determine the
hours and mode of operation of the elevators, escalators and vertical
transportation facilities serving the Shopping Center, and including the right
of Landlord or such owner to impose parking charges, whether by meter or
otherwise, with respect to any parking facilities. In no event, however, shall
Tenant, its agents or employees, use the common areas for the display or sale of
merchandise. Without limiting the generality of the foregoing, Landlord may
include in common areas
<PAGE>
those portions of the Shopping Center presently or hereafter sold or leased
to Department Stores, until the building thereon has been opened for business,
at which time there shall be withdrawn from the common areas those areas not
provided by the owner thereof for cornmon use. Tenant and its employees and
agents shall park their cars and other vehicles only in areas specifically
designated from time to time by Landlord for that purpose, and shall not in any
case park their vehicles in any private or non-public portions of the parking
facilities. Tenant covenants that it will enforce the parking by its employees
and agents in such designated~ and in only public areas. Automobile license
numbers of employees' and agents' vehicles shall be furnished by Tenant to
Landlord upon Landlord's request. In the event any vehicle is parked by Tenant
or by an employee or agent of Tenant in a private or non-public parking area or
in any portion of the parking facilities other than the area of such parking
facilities as shall be designated by Landlord, Tenant shall be obligated to pay
Landlord the sum of One Hundred Dollars ($100) per day for each such vehicle in
order to partially compensate Landlord for the loss of percentage rent arising
from the business lost to Tenant and to other tenants in the Shopping Center due
to the lack of available parking space in the said parking facilities, and
Landlord shall have the right to cause the vehicle to be towed to a location
designated by Landlord and Tenant shall be obligated to reimburse Landlord for
all towing charges. Similarly, Landlord shall have the right to cause any
vehicle to be towed if the parking charges, if any, or the per diem charge or
reimbursement due to Landlord hereunder, with respect to such vehicle have not
been paid; with any such vehicle to be towed to a location designated by
Landlord and with Tenant being obligated to pay all parking charges, fines and
towing charges imposed by Landlord with respect to such vehicles. Tenant further
agrees to hold harmless Landlord and defend Landlord, its agents and employees
against any and all claims of the employee, agent and/or owner of the vehicle
towed. Landlord shall have the further option of prohibiting Tenant and its
employees and agents from parking their cars or other vehicles in the parking
facilities, and the violation of such prohibition shall be subject to the same
provisions as set forth above. Landlord may at any time close temporarily any
common area to make repairs or changes, to prevent the acquisition of public
rights in such area, to discourage non-customer parking, to use areas for
attendant or valet parking, and may do such other acts in and to the common
areas as in its judgment may be desirable to improve the convenience thereof.
Tenant shall not provide, nor shall Tenant authorize any person or entity to
provide, valet or attendant parking~~~~ant's customers or others; Landlord shall
have the exclusive right, but shall not be obligated, to provide valet or
attendant parking at the regional retail development F!]R INSEBTS SECTION 8.03.
TENANT'S PRO RATA SHARE OF EXPENSES. agrees to pay to Landlord in the manner
hereinafter provided, but not more often than once each calendar month Tenant's
proportionate sharr, of (1) all costs and expenses of every kind and nature paid
or incurred by Landlord in operating, equipping, policing and protecting,
lighting, heating, air conditioning, providing sanitation and sewer and other
services, providing a music and public address system, insuring ~ sel
f-insurance and the payment of deductible amounts under insurance policies),
repairing, replacing and maintaining (i) the common areas and (ii) all bui~'~gs
and roofs within the Shopping Center and (iii) all other areas, facilities and
buildings, including project offices, parking facilities, vertical
transportation facil;~ies, retention ponds (if applicable), and any and all
facilities and improvements connecting the regional retail development to
off-site buildings or areas, which are used in connection with the maintenance
and/or operation of, and whether located within or outside of, the regional
retail development ~ereinafter collectively referred to as 'project areas"),
such costs and expenses shall include, but shall not be limited to, the full
cost of: illumination and maintenance of regional retail development signs,
whether located on or off the regional retail development; holiday and seasonal
lighting, decorations and displays; refuse disposal, water, gas, sewage,
electricity and other utilities (without limitation), including any and all
usage, service, hook-up, connection, availability and/or standby fees or charges
pertaining to same, and including all costs associated with the provision,
maintenance and operation of any central telephone service for the regional
retail development; the operation, maintenance, repair and replacement of all or
any part of the parking facilities; snow removal, maintenance, operation, repair
and replacement of any and all roads (temporary or otherwise) servicing the
regional retail development, including, without limitation, any landscaping or
other work related to such roads, maintenance and operation of any temporary or
permanent utility, including a sewage disposal system, within or without the
regional retail development, built, operated and/or maintained for the specific
purpose of servicing the regional retail development, together with hook up or
connection fees and service charges; compliance with laws, rules, regulations
and orders of governmental authorities; maintenance for wooded areas, retention
ponds, lakes and shoreline area, (if applicable), cleaning, lighting, striping
and landscaping; curbs, gutters, sidewalks, drainage and irrigation ditches,
conduits, pipes and canals located on or adjacent to the regional retail
development; premiums and all other costs with respect to liability, casualty,
and property insurance, and compliance with insurance requirements; personal
property taxes, licensing fees and taxes; audit fees and expenses; supplies; the
cost and expense of supplying music to the regional retail development; all
costs and expenses of enforcing the rules and regulations established by
Landlord for the Shopping Center and handling of claims or other matters arising
from the operation of the regional retail development; real estate taxes and
assessments and substitutions and replacements thereof levied or assessed by
<PAGE>
municipal, county, state, federal or other taxing or assessing authority
upon, against or with respect to the common areas, the project areas and/or the
land thereunder and the land on which the Shopping Center buildings are located,
and all property (including any land upon which may be located any temporary or
permanent utility, including a sewage disposal system, within or without the
regional retail development built, operated and/or maintained for the purpose of
servicing the regional retail development) provided by Landlord which may at any
time comprise or serve the Shopping Center, whether located on or off the site
of the Shopping Center, irrespective of whether the same is taxed or assessed as
real or personal property; cost, lease payment or depreciation of any equipment,
improvements or facilities used in the operation or maintenance of the common
areas or project areas, including, without limitation, any imputed interest as
may be applicable to costs paid or incurred by Landlord the full amount of which
is not included under this Section 8.03 in the year so paid or incurred, and
including any interest or other expense associated with any loans obtained by
Landlord with respect to any cost or expense included or includable hereunder,
including any portion of the long-term debt on the Shopping Center which has
been incurred for such purposes; total compensation and benefits
(including_premiums for workers' compensation or any
<PAGE>
other insurance or other retirement or employee benefits, and including all
costs incurred in providing such benefits) paid to or on behalf of employees
involved in the performance of the work specified iii this Section 8.03 or
employees otherwise providing services to tenants or customers of the Shopping
Center; and (2) an amount equ~~~fifteen percent (15%) of the total of all of the
foregoing costs and expenses for the regional retail development. The
proportionate share to be paid by Tenant shall be that portion of the foregoing
costs and expenses which the number of square feet of floor area in the leased
premises bears to the total number of square feet of gross leased and occupied
floor area of all buildings in the Shopping Center abutting on the enclosed
Mall. The gross leased and occupied floor area in effect for the whole of any
lease year shall be the average of the gross leased and occupied floor area in
effect on the first day of each calendar month in such lease year.
Tenant's proportionate share of such costs and expenses for each Sr(lt ~
~ltl(pound)B ~t]13 ~~SEBTS lease year shall be paid in monthly installments on
the first day of each calendar month, in advance, in an amount estimated by
Landlord from time to time. Subsequent to the end of each calendar or fiscal
lease year (at Landlord's option), Landlord shall furnish Tenant with a
statement of the actual amount of Tenant's proportionate share of such cost and
expenses for such ~od.If the total amount paid by Tenant under tills Section for
any such year shall be less than the actual amount due fF~~T~nant for such year
as shown on such statement, Tenant shall pay to Landlord the difference between
the amount paid by Tenant and the actual amount due, such deficiency to be paid
within ten (10) days after the furnishing of each such statement, and if the
total amount paid by Tenant hereunder for any such year shall exceed such actual
amount due from Tenant for such year, such excess shall be credited against the
next installment due from Tenant to Landlord under this Section. Land lord may
estimate the annual budget and charge the estimated share to the Tenant on a
monthly basis subject to revision by Landlord of the budget from time to time
and final annual adjustment based upon actual expenses. Neither the provisions
of this Section, nor any of the othe~ requirements or restrictions imposed upon
Tenant under this Lease, shall excuse Tenant from its obligation to comply with
laws and ordinances and other governmental requirements as set forLh in Section
7.02 hereof.
ARTICLE IX. SIGNS
SECTION 9.01. SIGNS. Tenant shall affix a sign to the exterior surface of
the storefront of the leased premises fronting on the enclosed Mall and shall
maintain said sign in good condition and repair during the entire term of this
Lease. Said sign shall conform to the criteria for signs contained in Exhibit B,
and the size, content, design and location thereof shall be subject to the prior
written approval of Landlord. Except as hereinabove mentioned, Tenant shall not
place or cause to be placed, erected or maintained on any exterior door, wall,
window or the roof of the leased premises, or on the glass of any window or door
of the leased premises, or on any sidewalk or other location outside the leased
premises, or within any display window space in the leased premises, or within ~
feet of the front of the storefront ~easeline or opening, whether or not there
is a display window space in the leased premises, or within any entrance to the
leased premises, or otherwise visible from the Mall, any sign (flashing, moving,
hanging, handwritten, or otherwise), decal, placard, decoration, flashing,
moving or hanging lights, lettering, or any other advertising matter of any kind
or description. Moreover, Tenant is prohibited from utilizing any displays which
are not part of the fixture plan approved in writing by Landlord for the leased
premis~ If Tenant places or causes to be placed or maintained any of the
foregoing, the same may be removed by an ord or Landlord's representative
without notice and without such removal constituting a breach of this Lease or
entitling Tenant to claim damages on account thereof. No symbol, design, name,
mark or insignia adopted by Landlord for the Shopping Center shall be used
without the prior written consent of Landlord. No illuminated sign locat~d in
the interior of the leased premises and which is visible from the outside
thereof shall be permitted without the prior written approval of Landlord. All
signs located in the interior of the leased premises shall be in good taste and
professionally printed so as not to detract from the general appearance of the
leased premises and the Shopping~
ARTICLE X. MAINTENANCE
SECTION 10.01. LANDLORD'S OBLIGATIONS FOR MAINTENANCE. Landlord shall keep
and maintain the_exterior surfaces of the exterior walls of the building in
which the leased premises are located (exclusive of doors, door frames, door
checks, other entrances, windows and window frames which are not part of common
areas, and storefronts) in good repair, except that Landlord shall not be called
upon to make any such repairs occasioned by the act or negligence of Tenant, its
agents, employees, invitees, licensees or contractors. Landlord shall not be
called upon to make any other improvements or repairs of any kind upon the
leased premises and appurtenances, except as may be required under Articles XVII
and XVIII hereof, and nothing contained in this Section 10.01 shall limit
Landlord's right to reimbursement from Tenant for maintenance, repair costs and
replacement costs conferred elsew here in ~ Lease. ~r:: f~lATL'h:E~ ~ SECTION
10.02. TENANT'S OBLIGATIONS FOR MAINTENANCE. (a) Except as provided in Section
10.01 of this Lease, Tenant, at Tenant's expense, shall keep and maintain in
first-class appearance, in a condition at least equal to that which existed when
Tenant initially opened the leased premises for business, and in good order,
condition and repair as determined by Landlord (including replacement of parts
and equipment, if necessary) the leased premises and every part thereof and any
and all appurtenances thereto wherever located, including, but without
limitation, the interior surfaces of the exterior walls, the exterior and
interior portion of all doors, door frames, door checks, other entrances,
windows, window frames, plate glass, storefronts, all plumbing and sewage
facilities within the leased premises, including free flow up to the main sewer
line, fixtures, ventilation, heating and air conditioning and electrical systems
(whether or not located in the leased~ses, sprinkler systems, walls, floors and
ceilings, and all other
<PAGE>
repairs, replacements, renewals and restorations, interior and exterior,
ordinary and extraordinary, foreseen and unforeseen, and all other work
performed by or on behalf of Tenant pursuant to the exhibits attached hereto or
Articles V or VI hereof or otherwise in accordance with the provisions of this
Lease. Tenant shall remodel the leased premises as required in Exhibit B.
Tenant shall keep and maintain the leased premises in a clean, (1))
sanitary and safe condition in accordance with the laws of the State and in
accordance with all directions, rules and regulations of the health officer,
fire marshall, building inspector, or other proper officials of the governmental
agencies having jurisdiction, and Tenant shall comply with all requirements of
law, ordinances and otherwise, affecting the leased premises, all at the sole
cost and expense of Tenant. At the time of the expiration or sooner termination
of the tenancy created herein, Tenant shall surrender the ~premises in good
order, condition and expenses.
(c) Tenant shall keep the leased premises and all other parts of the
regional retail development free from any and all liens arising out of any work
performed, materials furnished or obligations incurred by or for Tenant, and
agrees to bond against or discharge any such lien (including, without
limitation, any construction, mechanic's or materialman's lien) within.-'- days
after written request therefor by Landlord. Tenant shall give Landlord at least
fifteen (15) days' notice prior to commencing or causing to be commenced any
work on the leased premises (whether prior or subsequent to the commencement of
the lease term), so that Landlord shall have reasonable opportunity to file and
post notices of non-responsibility for Tenant's work. In addition, prior to
commencing or causing to be commenced any work on the leased premises, Tenant
shall file a Notice of Commencement (or other similar instrument limiting lien
rights related to Tenant's Work) as provided by applicable statutory provisions
and shall deliver a copy of such Notice of Commencement (or similar instrument)
to Landlord. Tenant shall reimburse Landlord for any and all costs and expenses
which may be incurred by Landlord by reason of the filing of any such liens
and/or the removal of same, such reimbursement to be made within ten (10) days
after written notice from Landlord to Tenant setting forth the amount of such
costs and expenses.
(d) Tenant, at its own expense, shall install and maintain fire
extinguishers, other fire protection devices as may be required from time to
time by any agency having jurisdiction thereof. Should Landlord's insurance
carrier require that Tenant's fire protection system be modified, Tenant shall
make such modification at its sole expense within thirty (30) days after notice
in writing ~ Failure of Tenant to do so shall entitle Landlord to enter the
leased premises and make such modification at the expense of Tenant. Tenant
shall pay all charges billed by Landlord within ten (10) days after invoice
Tenant shall also be liable for any additional insurance premiums assessed to
Landlord relating to the
(e) (1) Tenant agrees to operate its heating and its ventilating and air
conditioning system(s) serving the leased premises during regular Shopping
Center business hours so as to maintain comfort conditions. Temperatures in the
leased premises shall be compatible with temperatures in the enclosed Mall.
Tenant's installation of its heating and ventilating and air conditioning system
shall be as set forth in Exhibit B, attached hereto and made a part hereof.
Tenant shall be fully obligated for its maintenance and repair. Tenant shall not
drain heat or ventilation or air conditioning from the enclosed Mall into the
leased premises and Tenant shall at all times maintain adequate temperatures
within the leased premises to prevent any such drainage; likewise, Tenant shall
not discharge air from the leased premises into the enclosed Mall or other
interior areas. Landlord shall not be obligated to Tenant for any damages or
cost or expense resulting, directly or indirectly, from any failure or
malfunction of any air conditioning supply system or condenser water system
serving the Shopping Center or any component parts of any such system.
(2) To the extent the leased premises shall be serviced by a central air
conditioning or condenser water system, Tenant's obligation for connecting to,
and all charges for, the central system, as well as Tenant's installation,
operation and maintenance of its heating and ventilating and air conditioning
portion of the system shall be as set forth in Exhibit B (and any separate
exhibit relating to such central system) attached hereto and made a part hereof.
Landlord shall not be obligated to Tenant for any damages or cost or expense
resulting, directly or indirectly, from any failure or malfunction of the
central air conditioning supply system (or central condenser water system, as
applicable) or any component parts thereof Tenants approved by Landlord for the
installation of a separate heating, ventilating and air conditioning system,
serving the leased premises, shall construct the same in accordance with
Landlord's criteria. If Tenant shall install such a system, Tenant shall be
fully obligated for its maintenance and repair.
(f) Tenant expressly waives all rights to make repairs at the expense of
Landlord as provided for in any statute or law in effect during the term of this
Lease.
(g) In the event that Tenant fails, refuses or neglects to commence and
complete
<PAGE>
repairs promptly and adequately, to remove any lien, to pay any cost or
expense, to reimburse Landlord, or otherwise to perform any act or fulfill any
obligation required of Tenant pursuant to this Section 10.02, Landlord ma but
shall not be required to, make or complete any such repairs, remove such lien
(without inquiring into the vali~thereof), pay such cost or perform such act or
the like without ~- notice to, but at the sole cost and expense of, Tenant, and
Tenant shall reimburse Landlord for all costs and expenses of Landlord thereby
incurred within ten (10) days after receipt by Tenant from Landlord of a
statement setting forth the amount of such costs and expenses. The failure by
Tenant so to make repairs, to remove any lien, to pay any such cost or expense,
or to so reimburse Landlord (in the case of reimbursement, within such ten-day
period) shall constitute a default by Tenant under this Lease and shall carry
with it the same consequences
ARTICLE XI. INSURANCE AND INDEMNITY
SECTION 11.01. TENANT'S INSURANCE (a) [UNREADABLE]
(b) [UNREADABLE]
(c) [UNREADABLE]
(d) [UNREADABLE]
<PAGE>
(e) Tenant shall not carry any stock of goods or do anything in or about
the leased premises which will in any way tend to increase the insuran~e rates
on the Shopping Center, the regional retail ~evelopment, the leased premises
and/or the building of which they are a part and/or the contents thereof. If
Tenant installs any electrical equipment that overloads the lines in the leased
premises, Tenant shall at its own expense make whatever changes are necessary to
comply with the requirements of the insurance underwriters and governmental
authorities having jurisdiction.
SECTION 11.02. LANDLORD'S INSURANCE. (a) Landlord agrees, during the term
hereof, to provide, to the extent the same is available from Landlord's
insurance carrier, in amounts and coverages determined by Landlord, with or
without deductibles, insurance coverage against such risks as are from time to
time included in a standard extended coverage endorsement, insuring the
improvements to the leased premises provided by Tenant pursuant to this Lease
(exclusive of Tenant's merchandise, trade fixtures, furnishings, equipment,
plate glass, signs and personal property of Tenant). Landlord may also carry at
its option special extended coverage endorsements and other special insurance
coverage (including, without limitation, earthquake coverage). Tenant shall
submit to Landlord an itemized statement setting forth the cost of such
improvements promptly after completion thereof and Tenant shall provide to
Landlord, within thirty (30) days after the end of each lease year of the term
hereof, a written appraisal of the then current replacement value of the
leasehold improvements to the leased premises, which appraisal shall be
certified by an independent insurance appraiser. In the event Tenant fails to
provide such itemized statement or any such appraisal, Landlord shall have the
right to estimate the value of said improvements, which estimate shall be
binding upon Tenant Tenant agrees to pay Landlord for the total cost of so
insuring such improvements, including, without limitation, the payment of all
applicable deductible amounts, such payments (other than deductible amounts) to
be made in equal monthly installments on the first day of each calendar month,
in advance, in an amount estimated by Landlord; provided, however, that Landlord
may elect to bill Tenant for such costs on a basis less frequent than monthly.
Deductible amounts shall be paid by Tenant upon notice from Landlord. Subsequent
to the receipt by Landlord of an invoice for such insur.ince premium, Landlord
shall furnish Tenant with a written statement setting forth such cost. If the
total amount paid by Tenant under this Section for any calendar, lease or fiscal
year (at Landlord's option) shall be less than the actual amount due from Tenant
for such year as shown on such statement, Tenant shall pay to Landlord the
difference between the amount paid by Tenant and the actual amount due, such
deficiency to be paid within thirty (30) days after the furnishing of each such
statement, and if the total amount paid by Tenant hereunder for any such
calendar year shall exceed uch actual amount due from Tenant for such calendar
year, such excess shall be credited against the next ~ due from Tenant to
Landlord under this Section 11.02. SEE ATTAT~~E~ ~I!)E~ ~ I~SEBTS (0) Landlord
agrees, during the term hereof, to carry rent interruption insurance, which
insurance may be carried in amounts equal to Tenant's total minimum rent
obligation for twelve (12) full months (or such other period as Landlord may
elect) under this Lease p~us the total of the estimated costs to Tenant of
taxes, assessments, insurance ~remiums and common area maintenance costs for
such twelve (12) month period (or such other period as Landlord may elect)
Tenant agrees from time to time, to reimburse Landlord for the total cost of
such insurance, such reimbursement to be made within ten (10) days after receipt
of a written statement from Landlord setting forth such cost
(c) Any insurance required of Landlord hereunder may be furnished by or for
Landlord under any blanket policy carried by or for Landlord or under a separate
policy therefor. The cost of the foregoing insurance under this Section 11.02 is
a part of the cost of the property insurance which may be included in the costs
and expenses Set forth in Section 8.03 hereof To the extent that the foregoing
insurance costs shall be so included under Section 8.03 and Tenant shall pay its
proportionate share of costs and expenses pursuant to said Section 8.03, such
insurance costs ~hall not be separately charged to Tenant under this Section
11.02. lNS(pound)~
SECTION 11.03. COVENANT TO HOLD HARMLESS. Tenant ~ Landlord, the underlying
lessor, if any, and their respective officers, ~ors, stockholders,
beneficiaries, partners, representatives, agents and employees, and save them
harmless (except for loss or damage resulting solely from the negligence of
Landlord and not required to be insured against by Tenant pursuant to this
Article XI) from and against any anu all claims, actions, damages, liability,
cost and expense, including attorneys' fees, in connection with all losses,
including loss of life, personal injury and/or damage to property, arising from
or out of any occurrence in, upon or at the leased premises or the occupancy or
use by Tenant of the leased premises or any part thereof, or arising from or out
of Tenant's failure to comply with any provision of this Lease or occasioned
wholly or in part by any act or omission of Tenant, its concessionaires, agents,
contractors, suppliers, employees, servants, customers or licensees. For the
purpose of this Section 11.03, the leased premises shall include the service
areas adjoining the same and the loading platform area allocated to ~use of
Tenant~the parking facilities servicing the Shopping Center. In case Landlord or
any other party so indemnified shall, without fault, be made a party to any
litigation commenced by or against Tenant, or if Landlord or any such party
shall, in its sole discretion, determine that it must intervene in such
litigation to protect its interest hereunder, including, without limitation, the
incurring of costs, expenses, and attorneys' fees in connection with relief of
Tenant ordered pursuant to the Bankruptcy Code (11 USC ~ 101 ~ seci.), then
Tenant shall protect and hold them harmless by attorneys satisfactory to
Landlord and shall pay all costs, expenses and reasonable attorneys' fees
incurred or paid by such party in connection with such litigation. Landlord
shall have the right to engage its own attorneys in connection with any of the
provisions of this Section 11.03 or any other provision of this Lease,
including, without limitation, any defense of Landlord or intervention by
Landlord, notwithstanding any contrary provisions or court decisions of the
State The foregoing provisions of this Section shall survive the expiration or
earlier termination Cf the term of this Lease. _________ _____
<PAGE>
SECTION 12.01. UTILITY CHARGES. (a) Tenant shall be solely responsible for
and shall promptly pay all necessary fees, deposits and charges, including use
and/or connection fees, hook-up fees, standby fees, and/or penalties for
discontinued or interrupted service, and the like, for water, gas, heat,
electricity, centrally conditioned cold air supply, sewer and sanitation, solid
waste disposal and any other service or utility used in or upon or furnished to
the leased premises, irrespective of whether Landlord has paid for these
services in advance, or otherwise. Landlord, at its sole option, may elect to
furnish any or all of the above services on a "rent inclusion basis" without
separate charge therefor to Tenant, by metering or otherwise, such charge to be
included in the minimum rent payable hereunder, in which event the minimum rent
specified in Section 2.01 shall be increased to reflect the value of such
service(s) as provided in paragraph (h) below. Alternatively, Landlord, at its
sole option, may provide for any or all of such services on a separate-charge
basis, and in such event Tenant shall purchase such service(s) from Landlord,
and within ten (10) days after Landlord bills Tenant for any such service Tenant
shall pay Landlord such rates, charges and fees, upon terms and conditions as
Landlord may establish; provided that, if the rates, charges or fees for any
such service are regulated by a public agency, the rates, charges and/or fees to
Tenant shall be computed using the maximum rate schedules which would be
applicable if Tenant were at the time a direct customer of the applicable public
utility corporation. If the cost of any such service for any month has not been
made known to Landlord at the time of billing, Landlord shall have the right to
estimate the amount thereof, and to base its billing to Tenant upon said
estimated amount, and Landlord may adjust such billing when the actual amount is
made known to Landlord. Landlord shall also have the right to periodically
estimate the monthly amount required to be paid by Tenant to Landlord with
respect to any or all of such services provided by Landlord and such estimated
monthly amount or amounts shall be paid by Tenant on the first day of ~ch
calendar month, in advance, at the place and in the manner specified for
payments of minimum rent hereunder. Landlord shall have the right to change such
estimated amount or amounts at any time and from time to time, by notice to
Tenant. If the total of the estimated monthly payments made by Tenant for any
lease year or calendar year shall be less than the actual amount due from Tenant
pursuant to the provisions of this Section, Tenant shall pay to Landlord the
difference between the amount paid by Tenant and the actual amount due within
ten (10) days after submission to Tenant of Landlord's statement and invoice
therefor; and if the total of the estimated payments made by Tenant for any such
year shall exceed the actual amount due from Tenant, the excess amount paid
shall be credited against the next payment due from Tenant to Landlord under
this Section. Landlord, at its sole option, may require Tenant to install
separate, appropriate meters for measuring Tenant's consumption of water,
electricity or the like, and may require Tenant to remove any or all such meters
upon Landlord's discontinuing the service in question to Tenant. The failure by
Tenant to pay when due any amount payable to Landlord under this Section 12.01
shall carry with it the same consequences as failure to pay any installment of
rent when due. Notwithstanding the foregoing, if a separate exhibit describing
applicable rates for a utility service is attached to this Lease, Tenant shall
pay for such service pursuant to such exhibit
(b) In the event Landlord furnishes electricity on a rent inclusion basis
as provided above, at such time as Tenant's lighting and electrical equipment
has oeen completely installed, Landlord may, at Landlord's sole option (and to
the extent permitted by applicable regulations), cause a survey of Tenant's
usage of electricity to be made by an independent electrical consultant selected
by Landlord. The consultant shall render a report to Landlord and Tenant showing
the estimated amount of electricity which Tenant will consume, the value
thereof, and the minimum rent reserved hereunder shall thereupon be increased to
reflect such value. Tenant shall promptly pay to Landlord the difference between
the minimum rent hereunder and the increased minimum rent as so determined for
all months of the term of this Lease ,, hich have therefore elapsed, and each
monthly installment of rent thereafter paid by Tenant shall be based upon such
increased rent. Subject to applicable utility regulations, each party to this
Lease shall thereafter have the right whenever such party believes there has
been a material increase or decrease in Tenant's regular usage of electric
current (that is, a change therein other than on a temporary basis) to request,
by notice to the other party, a redetermination of the fair rent value of the
electric service then furnished by Landlord. When any such request occurs, the
redetermination shall be made as promptly as possible by an independent
electrical consultant selected by Landlord, and, based upon its report, the
minimum rent theretofore required to be paid hereunder shall thereafter be
adjusted to reflect such new fair rent value. Any change or adjustment in such
report shall be binding on both Landlord and Tenant. It is agreed that the cost
of conducting the redetermination shall be borne solely by the party requesting
same. Tenant agrees, on request of Landlord, to execute and deliver from time to
time a supplement to this Lease, setting forth the new minimum rent, as then
determined as above provided. After the making of the initial survey referred to
above, Tenant shall not without prior written notice to Landlord make any
alterations in or additions to the electrical equipment and/or appliances in the
leased premises. Tenant shall promptly execute a separate utility letter or
utility agreement if requested by Landlord or by the applicable utility company.
(c) Any furnishing by Landlord of electric current to the leased premises
shall be limited to the extent of the cap~ity of Landlord's existing feeders,
switches, risers, wiring installations and other electrical system serving the
leased premises (the "electric distribution system"). Tenant agrees that
Tenant's use of electrical current will at no time exceed the capacity of the
electric distribution system, and that Tenant will not make any alteration or
addition to the electric distribution system without Landlord's prior written
consent in each instance.
(d) In the event that, at any time during the term of this Lease, Tenant
desires to connect or install any additional electric fixtures, equipment or
appliances to the electric distribution system and such fixtures, equipment or
appliances require additional electric current which, in combination with
Tenant's existing electrical requirements exceeds the capacity of the electric
distribution system, then, provided that Landlord shall have consented in
writing to such connections or installations, Landlord, upon the written request
of Tenant and at the sole cost and expense of Tenant, will
services and personnel so provided shall be under the exclusive control and
supervision of Landlord, who shall have the sole authority to employ and
discharge personnel and to establish a budget. Tenant agrees to pay to Landlord,
as Tenant's share of the cost of said advertising and promotional program, an
annual promotional charge which originally shall equal the amount as shown in
the Data Sheet for this Lease, which annual promotional charge shall, at
Landlord's option, be payable by Tenant in equal monthly installments at the
time and in the manner set forth for rent payments in this Lease However, such
annual promotional charge payable by Tenant will be adjusted commencing January
1st immediately succeeding the commencement date of the term of this Lease and
annually thereafter, by a percentage equal to the percentage increase from the
base period of the Index (as defined in Section 27.20) to the respective January
1st or the closest month thereto that the Index is published (0ut in no event
shall Tenant pay less than the original promotional charge as specified above).
The term "base period" shall refer to the month of adjustment in such annual
promotional charge closest to and prior to the date of commencement of the term
of this Lease (i.e., the most recent month prior to the commencement date during
which such promotional charge has been adjusted), or the date of the opening ot
the Shopping Center, whichever of such dates shall be the later to occur. In
addition to this cost of living adjustment, such annual promotional charge may
be increased from time to time by Landlord to the extent required by increases
in the costs of promotional, public relations or advertising services provided
pursuant to this Section (including, without limitation, changes in costs
arising from variations in the type, nature or extent of such services) Tenant
also agrees to pay to Landlord, within ten (10) days after demand therefor, an
initial promotional charge in the amount set forth in the Data Sheet in addition
to the foregoing promotional charges The various promotional charges set forth
in this Section 16 03 and in the Data Sheet shall be increased as of the
commencement date of the Lease to reflect the then current charges per square
foot for Shopping Center tenants
<PAGE>
(0) Landlord reserves the right at any time to cease providing promotional
services and to cause a Merchants' Association to be formed. Upon the formation
of the Association, Landlord will turn over to the Association any funds in its
possession, collected from tenants as promotional charges, not spent or required
to discharge indebtedness, and less Landlord's compensation due under Section
16.03 (a). Thereupon, Landlord shall be relieved of any and all liability to
Tenant in connection with such advertising and promotional services. Upon
formation of the Association, Tenant shall become a member thereof and will
maintain membership in good standing and will abide by the regulations and
cooperate in the activities of such Association throughout the term of this
Lease and any extensions or renewals thereof. The purpose of the Merchants'
Association shall be to encourage its members to deal fairly and courteously
with their customers, to follow ethical business practices, and to assist the
business of its members by sales promotions and centerwide advertising. If
Landlord shall elect to provide promotional services and personnel to formulate
and effect an advertising, promotional and public relations program for the
Shopping Center, Landlord shall be reimbursed by the Nierchants' Association for
Landlord's cost of providing such promotional services and personnel, in an
amount Lqual to twenty-five percent (25%) of the annual dues payable to the
Merchants' Association Any promotional services and (pound)ersonnel so provided
shall be under the exclusive control and supervision of Landlord, who shall have
the sole authority to employ and discharge such personnel. The provisions of
this Section 16.03 shall be deemed to be covenants for the benefit of Landlord
and said Association as and when formed, and may be enforced by either of them
as binding obligations of Tenant Tenant's obligation for payment of dues to the
Association shall be the same sum per month as Tenant was obligated to pay for
promotional service prior to the formation of the Association, subject, however,
to annual adjustments approved by the Board of Directors of the Association
increasing said dues to the extent required by increases in the costs of
promotional, public relations and advertising services (including, without
limitation, changes in costs arising from variations in the type, nature or
extent of such services). In addition, the cost of living adjustment referred to
in Section 16.03(a) above with respect to Tenant's monthly payment to Landlord
for promotion services shall also apply in the same manner to the Merchants'
Association dues. In the event that such a Merchants' Association shall be in
operation as of the date of this Lease, the parties hereby acknowledge the
present application of this Section 16 03(0) ~ ciati~n (c) Landlord reserves the
right, at any time, to dissolve any ~ to provide, or cause to be provided, a
program of advertising and promotional events which, in Landlord's sole
judgment, will serve to promote the regional retail development In the event any
such program is so established, it shall be governed by the provisions of
Section 16.03(a) hereof, and Tenant's obligations shall be as set forth therein
(d) All recurring payments, charges, dues and assessments (other than the
initial assessment) payable under this Section 1603 shall be due in m(~nthly
installments on the first day of each month during the term of this Lease, and
all such items, and the initial assessment, shall be paid without deduction or
offset. Fa~ure by Tenant to pay all amounts when due shall carry with it the
same consequences under Article XIX hereof as Tenant's failure to pay rent
ARTICLE XVII. DESTRUCTION OF LEASED PREMISES
SECTION 17.01. RECONSTRUCTION OF DA~~GED PREMISES. In the event the leased
premises shall be partially or totally destroyed by fire or other casualty
insured under the insurance carried by Landlord pursuant to Section 11.02 of
this Lease_____________~ ~ then the damage to the leased premises shall be
promptly repaired (unless Landlord shall elect not to rebuild as hereinafter
provided), and the minimum rent and (to the extent covered by the insurance
carried by Landlord under Section 11 02(0)) other charges payable by Tenant to
Landlord (to the extent that such charges are based upon the square foot area of
the leased premises) shall be abated in proportion to the floor area of the
leased premises rendered untenantable, and the Minimum Gross Sales above which
percentage rent is computed and payable shall likewise be proportionately
reduced. Payment of full rent and all other charges so abated shall commence and
Tenant shall be ob1i~ated tp reopen for business on the thirtieth (30th) day
<PAGE>
following the date that Landlord advises Tenant that the premises are
tenantable, unless Tenant opens at an earlier time in the damaged area or
remains open in such area following destiruction or damage, in which event there
shall be no abatement or any such abatement shall terminate as of the date of
Tenant's earlier reopening. If Landlord shall elect to cause Tenant to make the
necessary repairs to the leased premises, as provided below, payment of full
rent and all cther charges so abated shall commence and Tenant shall be
obligated to reopen for bu~iness on the ~ day following the date that Landlord
advises Tenant of Landlord's election for Tenant to perform such work. Landlord
shall be obligated to cause such repairs to be made unless Landlord, at its sole
option, elects to cause Tenant to make such repairs, in which event Tenant shall
promptly complete the same and Landlord will make available to Tenant for the
sole purpose of reconstruction of Tenant's improvements such portion of any
insurance proceeds received by Landlord from its insurance carrier, under a
policy carried pursuant to Section 11.02 of this Lease, allocated to the leased
premis~ by Landlord. In the event of any such reconstruction by Tenant, an
architect duly registered in the State shall be selected by Landlord and shall
direct the payment of such insurance proceeds. Such insurance proceeds shall be
payable to Tenant only upon receipt by Landlord of certificates of said
architect stating that the payments specified therein are properly payable for
the purpose of reimbursing Tenant for expenditures actually made by Tenant in
connection with such work. At the election of Landlord or Landlord's mortgagee,
direct payments may be made to material suppliers and laborers upon written
certification by said architect that such payments are due and payable. Any such
insurance proceeds in excess of Tenant's actual expenditures in restoring the
damage or destruction shall belong to Landlord. In making repairs, restoration
or reconstruction, Tenant, at its expense, shall comply with all laws,
ordinances, and governmental rules or regulations, and shall perform all work or
cause such work to be performed with due diligence and in a first-class manner.
All permits required in connection with said repairs, restoration and
reconstruction shall be obtained by Tenant at Tenant's sole cost and expense.
Any amount expended by Tenant in excess of such insurance proceeds received by
Landlord and made available to Tenant shall be the sole obligation of Tenant. In
the event of reconstruction or~r by Landlord, any amount expended by Landlord in
repairing the leased premises in excess of the proceeds of insurance received by
Landlord pursuant to Section 11.02 of this Lease allocated to the leased
premises shall be repayable by Tenant to Landlord within ten (10) days after
receipt by Tenant from Landlord of a statement setting fortli the amount of 3uch
excess. The party required hereund~ to repair the damage to the leased premises
shall ~construct such leased prerrises in accordance with the working drawings
originally approved by Landlord or with (at Landlord's sole election) new
drawings prepared by Tenant and acceptable to Landlord and Tenant. In no event
shall Landlord be required to repair or replace Tenant's merchandise, trade
fixtures, furnishings or equipment. If (i) more than thirty-five percent (35%)
of the floor area of the building in which the leased premises are ocat or of
the Shopping Center shall be damaged or destroyed by fire or other casualty, or
(ii) during the last three (3) years of the term hereof more than twenty-five
pe~ent (25%) of the floor area of the leased premises or of the building in
which the leased premises are located or of the Shopping Center shall be damaged
or destroyed by fire or other casualty, or (iii) all or any part of the Shopping
Center or said building or the leased premises are damaged or destroyed at any
time by the occurrence of any risk not insured under the insurance carried by
Landlord pursuant to Sections 8 03 or 11.02(a), then Landlord, at its sole
option, may terminate this Lease by giving written notice to Tenant of
Landlord's election so to terminate, such notice to be given within ninety (90)
days after the occurrence of such damage or destruction. If Landlord repairs or
rebuilds, or requires Tenant to repair or rebuild the leased premises as herein
provided, Tenant, at Tenant's sole cost, shall repair or replace Tenant's
merchandise, trade fixtures, furnishings and equipment in a manner and to at
least a condition equal to that prior to the damage or destruction thereof. S[~
AUAJ~hFI) RIIiE~ FOB INSEBIS SE~ON 17.02. WAIVER OF SUBROGATION. ~ party hereto
does hereby waive, remise, release and discharge the other party hereto and any
officer, director, shareholder, beneficiary, partner, agent, employee or
representative of such other party. of and from any liability whatsoever
hereafter arising from loss, damage or injury caused by fire or other casualty
for which insurance containing a waiver of subrogation is carried by the injured
party at the time of such loss, damage or injury to the extent of any recovery
by the injured party under such insurance.
ARTICLE XVIII. EMINENT DOMAIN
SECTION 18.01. TOTAL CONDEMNATION OF LEASED PREMISES. If the whole of the
leased premises shall be taken by any public authority under the power of
eminent domain or sold to public authority under threat or in lieu of such a
taking, then the term of this Lease shall cease as of the day possession shall
be taken by such public authority, and the rent shall be paid up to that day
with a proportionate refund by Landlord of such rent and other charges as may
have been paid in advance for a period subsequent to the date of the taking.
SECTION 18.02. PARTIAL CONDEMNATION. (a)(i) If less than the whole but more
than twenty percent (20%) of the leased premises or more than fifty percent
(50%) of the common areas shall be so taken under eminent domain, or sold to
public authority under threat or in lieu of such a taking, Tenant shall have the
right either to terminate this Lease and declare the same null and void as of
the day possession is taken by public authority, or, subject to Landlord's right
of termination as set forth in Section 18.02(0) of this Article, to continue in
the possession of the remainder of the leased premises, upon notifying Landlord
in writing within ten (10) days after such taking of Tenant's intention. In the
event Tenant elects to remain in possession, all of the terms herein provided
shall continue in effect, except that, as of the day possession of such
percentage of the leased premises is taken by public authority, the minimum rent
and other charges payable by Tenant to Landlord (to the extent that such charges
are based upon the square foot area of the leased premises) shall be reduced in
proportion to the floor area of the leased premises taken and the Minimum Gross
Sales above
<PAGE>
which percentage "ent is computed and payable shall likewise be
proportionately reduced; thereafter, Landlord shall, at its own cost and
expense, make all necessary repairs or alterations to the basic building, so as
to constitute the remaining leased premises a complete architectural unit, and
Tenant, at Tenant's sole cost, shall similarly act with respect to Tenant's
improvements, trade fixtures, furnishings and equipment.
(ii) If twenty percent (20%) or less of the leased premises shall be so
taken, the lease term shall cease only on the part so taken, as of the day
possession shall be taken by such public authority, and Tenant shall pay rent
and other charges up to that day, with appropriate credit by Landlord (toward
the next installment of such rent or charges due from Tenant) of such rent or
charges as may have been paid in advance for a period subsequent to the date of
the taking; thereafter, the minimum rent and other charges payable to Landlord
(to the extent that such charges are based upon the square foot area of the
leased premises) shall be reduced in proportion to the amount of the leased
premises taken and the Minimum Gross Sales above which percentage rent is
computed and payable shall likewise be proportionately reduced. Landlord shall,
at its expense, make all necessary repairs or alterations to the basic building,
so as to constitute the remaining leased premises a complete architectural unit,
and Tenant, at Tenant's sole cost, shall similarly act with respect to Tenant's
improvements, trade fixtures, furnishings and equipment.
(b) If more than fifty percent (50%) of the building in which the leased
premises are located, or more than fifty percent (50%) of the leased premises,
or more than fifty percent (50%) of the Shopping Center or of the common areas,
shall be taken under power of eminent domain, or sold to public authority under
the threat or in lieu of such a taking, Landlord may, by written notice to
Tenant delivered on or before the tenth (lOth) day following the date of
surrendering possession to the public authority, terminate this Lease as of the
day possession is taken by public authority. The rent and other charges shall be
paid up to the day possession is taken by public authority, with an appropriate
refund by Landlord of such rent as may have been paid in advance for a period
subsequent to that date.
SECTION 18.03. LANDLORD'S AND TENANT'S DAI~IAGES. All damages awarded for
such taking under the power of eminent domain or sale under threat or in lieu of
such a taking, whether for the whole or a part of the leased premises, shall
belong to and be the property of Landlord, irrespective of whether such damages
shall be awarded as compensation for diminution in value to the leasehold or to
the fee of the leased premises, and Tenant shall have no claim against either
Landlord or the condeinning authority with respect thereto; provided, however,
that Landlord shall not be entitled to any award specifically designated as
compensation for, depreciation to, and cost of removal of, Tenant's stock and
trade fixtures.
ARTICLE XIX. DEFAULT
SECTION 19.01. RIGHT TO RE-ENTER. (a) In the event of (1) any failure of
Tenant to pay any rent or other charges due hereunder wh~~ due, or (2) if Tenant
shall fail to move into the premises and to commence the conduct ~of its
business on the date specified in Section 1.02 hereof, or fail to~any obligation
hereunder prior to such commencement date, or fail to continuously operate its
business pursuant to Section 7.02 for the purpose specified in Section 7.01
hereof, or fail to operate under the name specified in Section 16.01 hereof, or
if Tenant shall abandon said premises, or permit this Lease to be taken under
any writ of execution, or if there shall be any default by Tenant (or by any
person or entity which, directly or indirectly, controls, is controlled by, or
is under common control with Tenant) under any other lease with Landlord (or
with any person or entity which is affiliated with Landlord or which, directly
or indirectly, controls, is controlled by, or is under common control with
Landlord, or wnich is managed by the managing agent utilized by Landlord for the
Shopping Center) which shall not be remedied within the applicable grace period,
if any, provided therefor under such other lease, [DELETED](3) any failure to
perform any other of the terms, conditions or covenar's of this Lease to be
observed or performed by Tenant for more than thirty (30) days after written
notice of such default shall have been ~ to~ then Landlord, besides other rights
or remedies it may have, shall have the right to declare this Lease terminated
and the term ended (in which event, this Lease and the term hereof shall expire,
cease and terminate with the same force and effect as though the date set forth
in any required notice were the date originally set forth herein and fixed for
the expiration of the term and Tenant shall vacate and surrender the premises
but shall remain liable for all obligations arising during the balance of the
original stated term as hereafter provided as if this Lease had remained in full
force and effect) and Landlord shall have the right to bring a special
proceeding to recover possession from Tenant holding over and/or Landlord may,
in any of such events, without notice, re-enter the leased premises either by
force or otherwise, and dispossess, by summary proceedings or otherwise, Tenant
and the legal representative of Tenant or other occupant of the leased premises
and remove their effects and hold the premises as if this Lease had not been
made, and Tenant hereby waives the service of notice of intention to re-enter or
to institute legal proceedings to that end.
<PAGE>
(b) In addition to the remedies set forth herein for such failure by
Tenaunt, Landlord shall have the further remedy of erecting a barricade at the
storefront of the leased premises at such time as possession of the leased
premises is deemed vested in Landlord, which barricade may be erected, at
Tenant's expense, and with~ notice to Tenant eo resort to legal process, and
without Landlord in any manner becoming liable for an;' loss or damage which may
be occasioned thereby. Notwithstanding the foregoing provisions of this Section,
in the event Tenant shall fail to perform or shall default in the performance of
.~ term, covenant or condition of this Lease on~i'j- or more separate occasions
during any twelve-month period, then, even though such failures or defaults may
have been cured by Tenant, any further failure or default by Tenant during ~
shall be deemed a default without the ability for cure by Tenant. During the
continuance of any failure of performance or any default by Tenant in the
performance of any term, cov( nant or condition of this Lease, Tenant shall not
be entitled to exercise any rights or options, or to receive any funds or
proceeds being held under or pursuant to this Lease, notwithstanding any
contrary provisions contained herein. In the
event of re-entry by Landlord, Landlord may remove all persons and property
from the leased premises and such property may be stored in a public warehouse
or elsewhere at the cost of, and for the account of Tenant, without notice or
resort to legal process and without Landlord being deemed guilty of trespass, or
becoming liable for any loss or damage which may be occasioned thereby. In
addition, and to the extent permitted by law, in the event of re-entry by
Landlord, Landlord may, but shall not be required to, padlock or otherwise
secure the entrances to the leased premises without prior notice or resort to
legal process and without being deemed guilty of trespass or becoming liable for
any loss or damage; all costs and expenses incurred by Landlord in securing the
entrances to the leased premises shall be borne by Tenant and shall be payable
to Landlord on ten (10) days' written notice; and any such padlocking or
securing of the premises shall not constitute or be deemed as an election on
Landlord's part to terminate this Lease unless a written notice of such
intention shall be given to Tenant or jinless the termination of this Lease is
decreed by a court of competent jurisdiction. In the event Tenant shall not
remove its property from the leased premises within ten (10) days after Tenant
has vacated the premises, then such property shall be deemed abandoned by Tenant
and Landlord may dispose of [DELETED] To the extent that this Lease specifically
provides for any abatement of rent otherwise payable by Tenant under this Lease,
or any payment by Landlord to Tenant, such abatement shall not be effective, nor
shall such payment be required to be made.[DELETED]
SECTION 19.02. RIGHT TO RELET. Should Landlord elect to re-enter, as herein
provided, or should it take possession pursuant to legal proceedings or pursuant
to any notice provided for by law, it may either terminate this Lease or it may
from time to time, without terminating this Lease, make such alterations and
repairs as may be necessary in order to relet the premises, and relet said
premises or any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rent and upon such other
terms and conditions as Landlord in its sole discretion may deem advisable. Upon
each such reletting all rents and other sums received by Landlord from such
reletting shall be applied, first, to the payment of any indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the payment of any costs
and expenses of such reletting, including reasonable brokerage fees and
attorneys' fees and the costs of~ alterations and repairs; third, to the payment
of rent and other charges due and unpaid hereunder; and the residue, if any,
shall be held by Landlord and applied in payment of future rent as the same may
become due and payable hereunder. If such rents and other sums received from
such reletting during any month be less than that to be paid during that month
by Tenant hereunder, Tenant shall pay such deficiency to Landlord, if such rents
and the sums shall be more, Tenant shall have no right to, and shall receive no
credit for, the excess. Such defici~ncy shall be calculated and paid monthly. No
re-entry or taking possession of the leased premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention is given to Tenant or unless the termination thereof is
decreed by a court ofcompetentjurisdiction. Notwithstanding any such releitting
without termination, Landlord may at any time elect to terminate this Lease for
such previous breach. Should Landlord at any time terminate this Lease for any
breach, in addition to any other remedies it may have, it may recover from
Tenaut all damages it may incur by reason of such breach, including the cost of
recovering the leased premises, reasonable attorneys' fees, and including the
worth at the time of such termination of the excess, if any, of the amount of
rent and charges equivalent to rent reserved in this Lease for the remainder of
the stated term over the then reasonable rental value of the leased premises for
the remainder of the stated term all of which amounts shall be immediately due
and payable from Tenant to Landlord In determining the rent wh~ould be payable
under this Lease by Tenant subsequent to default, the percentage rent for each
year of the unexpired portion of the term shall be equal to the average
percentage rent payable by Tenant from the commencement of the term to the time
of default, or during the preceding three (3) full lease years, whichever period
is
<PAGE>
shorter. The failure or refusal of Landlord to relet the premises shall not
affect Tenant's liabilitv. The terms '~entry" and "re-entry" are not limited to
their technical meanings. Nothing contained in this Lease shall be construed to
limit or prejudice the right of Landlord to prove for and obtain as damages by
reason of the termination of this Lease or re-entry of the leased premises for
the default of Tenant under this Lease an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
shall be greater than any of the sums referred to in this ~~~inn 19.02
SECTION 19.03. EXPENSES. In case suit shall be brought for recovery of
possession of the leased premises, for the recovery of rent or any other amount
due under the provisions of this Lease, or because of the breach of any other
covenant herein c~.~:~~neo zr tcia ~ fTprz::t ~ and a breach shall be
established, Tnr.ar.tzkzll ~ all expenses incurred therefor, including
reasonable attorneys' fees. In addition, in the event Landlord shall incur
expenses, including reasonable attorneys' fees, as a result of Tenant's failure
to perform or comply with any term, covenant or condition set forth in this
Lease, Tenant shall pay to Landlord all such expenses. Any amounts payable by
Tenant to Landlord pursuant to this Section 19.03 or Section 11.03 of this Lease
may be included in any subsequent monthly rent bill to Tenant, and the failure
of Tenant to promptly pay same shall entitle Landlord to all remedies for
failure to pay rent as available under this Lease or at law or in equity.
SECTION 19.04. WAIVER OF COUNTERCLAIMS AND TRIAL BY 3URY. Landlord and
Tenant waive their right to trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other (except
for personal injury or property damage) on any matters whatsoever arising out of
or in any way connected with this Lease, the relationship of Landlord and
Tenant, Tenant's use of or occupancy of said premises, and any
<PAGE>
emergency statutory or any other statutory remedy. Tenant shall not
interpose any counterclaim or counterclaims or claims for set-off, recoupment or
deduction of rent in a summary proceeding for~ayment of rent or other action or
summary proceeding based on termination, holdover or other default in which
Landlord seeks repossession of the leased premises from Tenant.
ARTICLE XX. BANKRUPTCY OR INSOLVENCY
SECTION 20.01. TENANT'S INTEREST NOT TRANSFERABLE. Neither Tenant's
interest in this Lease, nor any estate hereby created in Tenant nor any interest
herein or therein, shall pass to any trustee, except as may specifically be
provided pursuant to the Bankruptcy Code (11 USC ~ 101 et. seq ), or to any
receiver or assignee for the benefit of creditors or otherwise by operation of
law.
SECTION 20.02. TERMINATION. In the event the interest or estate created in
Tenant hereby shall be taken in execution or by other process of law, or if
Tenant or Tenant's Guarantor, if any, or Tenant's executors, administrators, or
assigns, if any, shall be adjudicated insolvent or bankrupt pursuant to the
provisions of any state law or an order for the relief of such entity shall be
entered pursuant to the Bankruptcy Code, or if a receiver or trustee of the
property of Tenant or Tenant's Guarantor, if any, shall be appointed by reason
of the insolvency or inability of Tenant or Tenant's Guarantor, if any, to pay
its debts, or if any assignment shall be made of the property of Tenant or
Tenant's Guarantor, if any, for the benefit of creditors, then and in any such
events, this Lease and all rights of Tenant hereunder shall automatically cease
and terminate with the same force and effect as though the date of such event
were the date originally established herein and fixed for the expiration of the
term, and Tenant shall vacate and surrender the leased premises but shall remain
liable as herein provided. Notwithstanding the foregoing provisions of this
Section, in the event that such termination shall result solely from the
bankruptcy or insolvency of, or such other described event relating to, Tenant's
Guarantor, Landlord shall have the option to reinstate all of the provisions of
this Lease (including, without limitation, the obligation of Tenant to
continuously operate pursuant to Article VII hereof) upon written notice to
Tenant
SECTION 20.03. TENANT'S OBLIGATION TO AVOID CREDITORS' PROCEEDINGS. Tenant
or Tenant's Guarantor, if any, shall not cause or give cause for the appointment
of a trustee or receiver of the assets of Tenant or Tenant's Guarantor, if any,
and shall not make any assignment for the benefit of creditors, or become or be
adjudicated insolvent. The allowance of any petition under any insolvency law
except under the Bankruptcy Code or the appointment of a trustee or receiver of
Tenant or Tenant's Guarantor, if any, or of the assets of either of them, shall
be conclusive evidence that Tenant caused, or gave cause, therefor, unless such
allowance of the petition, or the appointi'~ent of a trustee or receiver, is
vacated within ti;.~,J\'~~) days after such allowance or appointment. Any act
described in this Section 20 03 shall be deemed a material breach of Tenant's
obligations hereunder, and this Lease shall thereupon ~utomatically terminate in
the same manner and with the same force and effect as set forth in Section 20.02
hereof. Landlord does, in addition, reserve any and all other remedies provided
in this Lease or in law. Notwithstanding the foregoing provisions of this
Section, in the event that such termination shall result solely from the
bankruptcy or insolvency of, or such other described event relating to, Tenant's
Guarantor, Landlord shall have the option to reinstate all of the provisions of
this Lease (including, without limitation, the obligation of Tenant to
continuously operate pursuant to Article VII hereof) upon written notice to
Tenant.
SECTION 20.04. RIGHTS AND OBLIGATIONS UNDER THE BANKRUPTCY CODE. (a) Upon
the filing of a petition by or against Tenant under the Bankruptcy Code, Tenant,
as debtor and as debtor in possession, and any trustee who may be appointed
agree as follows: (i) to perform each and every obligation of Tenant under this
Lease including, but not limited to, the manner of 'operation as provided in
Section 7 02 of this Lease until such time as this Lease is either rejected or
assumed by order of the United States Bankruptcy Court, (ii) to pay monthly in
advance on the first day of each month, as reasonable compensation for use and
occupancy of the leased premises, an amount equal to all minimum rent and other
charges otherwise due pursuant to this Lease and to pay percentage rent monthly
a' the percentage set forth in this Lease for the lease year in which such month
falls on all sales during such month in excess of one twelfth (1/12th) of the
Minimum Gross Sales for such lease year, with payment of all such percentage
rent to be made by the tenth (1 0th) day of the succeeding month; (iii) to
reject or assume this Lease within sixty (60) days of the appointment of such
trustee under Chapter 7 of the Bankruptcy Code or within sixty (60) days (or
such shorter term as Landlord, in its sole discretion, may deem reasonable, so
long as notice of such period is given) of the filing of a petition under any
other Chapter; provided that no extension of either of the foregoing periods by
or on behalf of Tenant shall be permitted; (iv) to give Landlord at least
forty-five (45) days' prior written notice of any proceeding relating to any
assumption of this Lease; (v) to give at least thirty (30) days' prior written
notice of any abandonment of the leased premises, with any such abandonment to
be deemed a rejection of this Lease and an abandonment of any property not
previously removed from the leased premises; (vi) to
<PAGE>
do all other things of benefit to Landlord otherwise required under the
Bankruptcy Code, (vii) to be deemed to have rejected this Lease in the event of
the failure to comply with any of the above; and (viii) to have consented to the
entry of an order by an appropriate United States Bankruptcy Court providing all
of the above, waiving notice and hearing of the entry of same.
~) No default of this Lease by Tenant, either prior to or subsequent to the
filing of such a petition, shall be deemed to have been waived unless expressly
done so in writing by Landlord.
(c) It is understood and agreed that this is a Lease of real property in a
shopping center and that, therefore, Section 365(0)(3) of the Bankruptcy Code is
applicable to any proposed assumption of this Lease in a bankruptcy case
(d) Included within and in addition to any other conditions or obligations
imposed upon Tenant or its successor in the event of assumption and/or
assignment are the following: (i) the cure of any monetary defaults and the
reimbursement of pecuniary loss immediately upon entry of a court order
providing for assumption and/or assignment; (ii) the deposit of an additional
sum equal to three (3) months' rent to be held pursuant to the terms of Section
26.01 of this Lease (notwithstanding any alteration or modification of the terms
of said Section); (iii) the use of the leased premises as set forth in Section
7.01 of this Lease and the quality, quantity and/or lines of merchandise of any
goods or services required to be offered for sale are unchanged; (iv) the
payment of any sums which may then be due or which may thereafter become due
pursuant to the provisions of Section 2.04 of this Lease; (v) the debtor, debtor
in possession, trustee, or assignee of such entity demonstrates in writing that
it has sufficient background including, but not limited to, substantial
retailing experience in shopping centers of comparable size and financial
ability to operate a retail establishment out of the leased premises in the
manner contemplated in this Lease, and meets all other reasonable criteria of
Landlord as did Tenant upon execution of this Lease; (vi) the prior written
consent of any mortgagee to which this Lease has been assigned ~s collateral
security; and (vii) the premises, at all times, remains a single store and no
physical changes of any kind may be made to the premises unless in compliance
with the applicable provisions of this Lease
(e) Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall, upon demand, execute and
deliver to Landlord an instrument confirming such assumption.
ARTICLE XXI. ACCESS BY LANDLORD
SECTION 21.01. RIGHT OF ENTRY. Landlord or Landlord's agents shall have the
right to enter the leased premises at all reasonable times to examine the same
and to show them to prospective purchasers or mortgagees. Landlord or Landlord's
agents shall have the further ri~ht to enter the leased premises to make such
repairs, alterations, improvements or additions as Landlord may deem necessary
or desirable, irrespective of whether the work shall be for the leased premises
or for other premises or facilities, and Landlord shall be allowed to take all
material into and upon the leased premises that may be required therefor without
the same constituting an eviction of Tenant in whole or in part, and the rent
and other charges reserved shall in no wise abate while said repairs,
alterations, improvements, or additions are being made, by reason of loss or
interruption of business of Tenant, or otherwise. Landlord may, at any time,
exhibit the leased premises to prospective tenants. If an excavation shall be
made upon land adjacent to the leased premises, or shall be authorized to be
made, Tenant shall afford to the person causing or authorized to cause such
excavation, license to enter upon the leased premises for the purpose of doing
such work as said person shall deem necessary to preserve the wall or the
building of which leased premises form a part from injury or damage and to
support the same by proper ~oundations without any r'laim for damages or
indemnity against Landlord, or diminution or abatement of rent.
ARTICLE XXII. TENANT'S PROPERTY
SECTION 22.01. TAXES ON TENANT'S PROPERTY. Tenant shall be responsible for,
and shall pay, prior to delinquency, any and all taxes, assessments, levies,
fees and other governmental ch~rges of every kind or nature (for all purposes
under this Lease, collectively called "taxes99) levied or assessed by municipal,
county, state, federal or other taxing or assessing authority upon, against or
with respect to (I) the leased premises or any leasehold interest, (ii) all
furniture, fixtures, equipment and any personal property of any kind owned by
Tenant or any previous tenant and occupant, and placed, installed or located in,
within, upon or about the leased premises, (iii) all alterations, additions or
improvements of whatsoever kind or nature, if any, made to the leased premises,
by Tenant or any previous tena:it or occupant, and (iv) rents or other charges
payable by Tenant to Landlord, irrespective of whether any of the terms
described in clauses (i) through (iv) above are assessed against real or
personal property, and irrespective of whether any of such items are assessed to
or against Landlord or Tenant. If at any time during the term of this Lease any
of such taxes are not levied and assessed separately and directly to Tenant (for
example, if the same are levied or assessed to Landlord, or upon or against the
building containing the leased premises and/or the land underlying said
building), Tenant shall pay to Landlord Tenant's share thereof~ determined by
Landlord.
SECTION 22.02. LOSS AND DAMAGE. Landlord shall not be responsible or liable
to Tenant for any loss or damage that may be occasioned by or through the acts
or omissions of persons occupying adjoining premises or any part of the premises
adjacent to or connected with the premises hereby leased or any part of the
building of which the leased premises are a part, or any other area in the
regional retail development, or for any loss or damage resulting to Tenant or
its property from bursting, stoppage or leaking of water, gas, sewer or steam
pipes, or (without limiting the foregoing) for any damages or loss of property
within the leased premises from any cause whatsoever.
SECTION 22.03. NOTICE BY TENANT. Tenant shall give immediate notice to
Landlord in case of any damage to or destruction of all or any part of, or
accidents in, the leased premises or of defects therein or in alterati ~ns,
decorations, additions or improvements, including, without limitation, any
fixtures or equipment.
SECTION 23.01. HOLDING OVER. Any holding over after the expiration of the
term hereof with the consent of the Landlord, shall be construed to be a tenancy
from
<PAGE>
ARTICLE XXIII. HOLDING OVER
month to month at a monthly minimum rent of not less than~ ~ the annual
minimum rent effective for the final lease year or partial lease year preceding
expiration of the term (subject to further adjustment pursuant to the various
provisions of this Lease, including, without limitation, Section 2.04), together
with an amount estimated by Landlord for the monthly additional charges payable
pursuant to this Lease, and shall otherwise be on the same terms and conditions
(including, without limitation, payment of percentage rent) as herein specified
so far as applicable, subject to any changes in any of the foregoing terms or
conditions as may be submitted by Landlord to Tenant. Any holding over without
Landlord's consent shall entitle Landlord to re-enter the leased premises as
provided in Section 19.01 of this Lease.
SECTION 23.02. SUCCESSORS. All rights and liabilities herein given to, or
imposed upon, the respective parties hereto shall extend to and bind the several
respective heirs, executors, administrators, successors, and assigns of the said
parties; and if there shall be more than one person or entity comprising Tenant,
they shall all be bound jointly and severally by the terms, covenants and
agreements herein. No rights, however, shall inure to the benefit of~ assignee
of
ARTICLE XXI". RULES AND REGULATIONS
SECTION 24.01. RULES AND REGULATIONS. Tenant agrees to comply with and
observe all rules and regulations established by Landlord from time to time,
provided the same shall apply uniformly to all tenants of the Shopping Center.
Tenant~s failure to keep and observe said rules and regulations shall constitute
a breach of the terms of this Lease in the same manner as if the rules and
regulations were contained herein as covenants. In the case of any conflict
between said rules and regulations and this Lease, this Lease shall be
controlling.
ARTICLE XXV. QUIET ENJOYMENT
SECTION 25.01. LANDLORD'S COVENANT. Upon payment by Tenant of the rents
herein provided, and upon the observance and performance of all covenants, terms
and conditions on Tenant~s part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the leased premises for the term hereby
demised without hindrance or interruption by Landlord or any other person or
persons lawfully or equitably claiming by, through or under ,,,Landlord,
subject, nevertheless, to the terms and conditions of this Lease and any
mor~age, deed of trust or underl5'ing lease to which this Lease is subordinate.
SECTION 25.02. TENANT'S COVENANT. Tenant hereby acknowledges and agrees
that Landlord has specifically relied upon the identity, skill, product line,
and trade name of Tenant in entering into this Lease with Tenant. Tenant
recognizes that its use of the leased premises in accordance with the use clause
set forth in the Data SheeL and its compliance with the particular provisions of
Article VII hereof, regarding the conduct and continuous operation of Tenant's
business in the leased premises throughout the term of this Lease, forms a
material inducement to Landlord, and Tenant specifically covenants that it will
strictly adhere to these provisions. Any ambiguities iI '.'II the use clause set
forth in the Data Sheet shall be construed against Tenant ~ t T ~ ~. Tenant
further acknowledges and agrees that any in~ness from Tenant to Landlord
existing as of the date of this Lease shall be deemed additional rent hereunder,
and Tenant's commitment and obligation to pay all such indebtedness as
additional rent under this Lease has formed an additional necessary
consideration to Landlord in entering into this Lease and in hereby ~ranting
Tenant the right to use the leased premises as set forth herein.
ARTICLE XXVI. SECURITY PROVISION
SECTION 26.01. SECUR]TY. The amount set forth in the Data Sheet as a
security deposit is payable by Tenant, upon the execution of this Lease by
Tenant, in the manner and at the place where minimum rent is payable. Landlord
is to retain said amount as ~ecurity for the faithful performance of all
covenants, conditions and agreements of this Lease. Such amount is occasionally
referred to herein as the "security." Landlord may, at its option, apply the
security to remedy defaults in the payment of any rent or other charge
hereunder, to repair damages to the leased premises caused by Tenant, or to
clean the leased premises upon the expiration or termination of this Lease; in
no event however, shall Landlord be obligated so to apply the security.
Landlord's right to bring a special proceeding to recover or otherwise to obtain
possession of the leased premises before or after Landlord's declaration of the
termination of this Lease for nonpayment of rent or for any other reason shall
not in any event be affected by reason of the fact that Landlord holds such
security. Such security, if not applied toward the payment of rent in arrears or
toward the payment of damages suffered by Landlord by reason of Tenant's breach
of the covenants, conditions and agreements of this Lease, is to be returned to
Tenant without interest, except as provided by law, when this Lease is
terminated according to its terms, but in no event is such security to be
returned until Tenant has vacated the leased premises and delivered possession
thereof to Landlord. In the event that Landlord repossesses itself of the leased
premises, whether by special proceeding or re-entry or otherwise, because of
Tenant's default or failure to carry Out the covenants, conditions and
agreements of this Lease, Lan~ord may apply such security upon all damages
suffered to the date of said repossession
<PAGE>
and may retain the security to apply upon such damages as may be suffered
or shall accrue thereaffer by reason of Tenant's default or breach. In the event
any bankruptcy, insolvency, reorganization or other creditor-debtor proceedings
shall be instituted by or against Tenant, or its successors or assigns, or any
guarantor of Tenant hereunder, such security shall be deemed to be applied first
to the payment of any rents and/or other charges due Landlord for all periods
prior to the institution of such proceedings, and the balance, if any, of such
security may be retained by Landlord in partial liquidation of Landlord's
damages. Landlord shall not be obligated to keep such security as a separate
fund but may commingle the security with its own funds. In the event Landlord
applies the security in whole or in part, Tenant siall, upon demand by Landlord,
deposit sufficient funds to maintain the security in the inital amount. Failure
of Tenant to deposit such additional security shall entitle Landlord to avail
itself of the remedies provided in this Lease for nonpayment of rent by Tenant.
The acceptance by Landlord of the security deposit submitted by Tenant shall not
render this Lease effective unless and until Landlord shall have executed and
actually delivered to Tenant a fully-executed copy of this Lease
ARTICLE XXVII. MISCELLANEOUS
SECTION 27.01. WAIVER; ELECTION OF REMEDIES. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. In particular, but without limitation, if Tenant assigns or transfers its
interest in this Lease contrary to the terms of this Lease, any acceptance by
Landlord of such assignee's or transferee's payment shall not be deemed to be a
waiver of the restrictions set forth in Section 14 Ol hereof. In the event that
Tenant shall be at any time in default of both monetary and nonmonetary terms,
covenants or conditions of this Lease, any acceptance by Landlord of any payment
rendered by Tenant shall not have the effect of curing Tenant's nonmonetary
defaults and shall not have the effect of curing any monetary default other than
the particular amount owing for which such payment is specifically accepted by
Landlord. Following notice of termination or any other remedy exercised by
Landlord with respect to any monetary default of Tenant, such default shall not
be deemed cured by the payment of rent owing by Tenant for the current period
only, and Landlord may apply such payments to current rent only without any
effect upon Tenant's existing indebtedness and continuing monetary default,
notwithstanding any contrary instructions by or on behalf of Tenant, which
instructions shall be null and void and ~.: no effect In addition, afte~ the
service of notice or the commencement of a suit, or after final judgment for the
possession of the leased premises, Landlord may receive and collect rent due
from Tenant, and the payment of rent by Tenant shall not waive or affect said
notice or suit or judgment. One or more waivers of any covenant or condition by
Landlord shall not be construed as a waiver of a subsequent breach of the same
covenant or condition, and the consent or approval by Landlord to or of any act
by Tenant requiring Landlord's consent or approval shall not be deemed to render
unnecessary Landlord's consent ~r approval to or of any subsequent similar act
by Tenant. The failure of Landlord to insist upon a strict performance of any
term, condition or covenant contained in this Lease shall not be deemed a waiver
of any rights or remedies that Landlord may have and shall not be deemed a
waiver of any subsequent breach or default in the terms, conditions or covenants
herein contained, and any such failure shall not be construed as creating a
custom of Landlord's accepting other than strict performance or as modifying in
any way the terms, covenants or conditions of this Lease. No breach by Tenant of
a covenant or condition of this Lease shall be deemed to have been waived by
Landlord unless such waiver is in writing signed by Landlord. No act or thing
done by Landlord or Landlord's agents shall be deemed an acceptance of surrender
of the leased premises and no agreement to accept such surrender shall be valid
unless in writing signed by Landlord In addition to any and all other remedies
available to Landlord, Landlord may dbtain an injunction to restrain any breach
or threatened breach of any term, covenant or condition of this Lease The rights
and remedies of Landlord under this Lease or under any specific section,
subsection or clause hereof shall be cumulative and in addition to any and all
other rights and remedies which Landlord has or may have elsewhere under this
Lease or at law or equity, whether or not such section, subsection or clause
expressly so states Nothing contained in this Lease shall be construed to confer
upon any person or entity other than Landlord or Tenant any rights, benefits or
causes of action, except to the extent specifically otherwise provided in this
Lease and except to the extent provided for the benefit of any mortgagee,
deeci-oftrust beneficiary, ground lessor or trustee for the Shopping Center.
SECTION 27.02. ENTIRE AGREEMENT. The Addendum, and all exhibits, and
riders, if any, attached hereto form a part of this Lease and shall be given
full force and effect, as fully as if set forth at length herein This Lease and
said Addendum, exhibits, and riders, if any, so attached hereto and forming a
part hereof, set forth all the covenants, prornises, agreements, conditions and
understandings between Landlord and Tenant concerning the leased premises, and
there are no covenants, promises, agreements, conditions or understandings,
either oral or written, between them other than as are herein set forth. Tenant
has not relied upon any representation of Landlord or its agents, other than any
items contained in this Lease, as an inducement to enter into this Lease No
alteration, amendment, change or addition to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed by each party
SECTION 27.03. INTERPRETATION AND USE OF PRONOUNS. Nothing contained herein
shall be deemed or construed by the parties hereto, nor by any
<PAGE>
third party as creating the relationship of principal and agent or of
partnership or of joint venture between the parties hereto, it being understood
and agreed that neither the method of computation of rent, nor ~ny other
provision contained herein, nor any acts of the parties herein shall be deemed
to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant Whenever herein the singular number is used
the same shall include the plural, and the masculine gender shall include the
feminine and neuter genders
SECTION 27.04. DELAYS. In the event that either panty hereto shall be
delayed in the performance Gf its initial construction or maintenance dfld/or
repair obligations by reason of strikes, loc'..outs, labor troubles, inabihy to
procure materials or shall at any time be so delayed by reason of failure of
power, restrictive governmental laws or reasons of a similar nature not the
fault of the party delayed in performing work or doing acts required under the
terms of this Lease, then performance of such act shall be excused for the
period of the delay and the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay. Nothing contained
in this Section shall excuse Tenant from the continuous operation of its
business in the leased premises in accordance with the provisions of Sections
7.01 and 7.02 hereof. TY- provisions of this Section 27.04 shall not operate to
delay the commencement of the term of this Lease or to excuse Tenant from
payment of minimum rent, percentage rent or any other payments required by the
terms of this Lease; provided, however, that the obligation of Tenant to open
for business pursuant to Section 1.03 hereof may be delayed pursuant to the
provisions of this Section 27.04. Further, Landlord's reduction of heat, light,
air conditioning, or any other services whatsoever to the Shopping Center
because of any similar or dissimilar event constituting a cause for excusable
delay hereunder shall not relieve Tenant from its obligations under Article VII
of this Lease S'(pound)~ [~T~r\\,E~ RI[]E~ F()~ INSE~TS
SECTION 27.05. NOTICES. Unless specifically stated to the contrary in this
Lease, any notice, demand, request or other instrument which may be or is
required to be given by Tenant under this Lease or by law shall be sent by
United States certified mail, return receipt requested, postage prepaid, and
shall be deemed to have been given as of the ~ ~ay . . g receipt of same by
Landlord; or, if required to be given by Landlord under this Lease or by law,
such notice, demand, request or other instrument ~ be Sent by certified mail, ~;
[DELETED] and shall be deemed to have been given upon the date of [DELETED] and
shall b~ addressed (a) if to Landlorj, at the address set forth for Landlord on
Page Dl of this Lease or at such other address as Landlord may designate by
written notice, Attention Lease Administration, together with copies thereof to
such other parties designated by Landlord, and cb) if to Tenant, at "ir 1o~~ud
u-omir~r the address set forth for Tenant on Page Dl of this Lease or such other
address as Tenant shall designate by written notice. All notices [DELETED]
without limitation, notices of default and/or termination of Tenant's interests
under this Lease, may be given ~ attorney a~ting as agent [DELETED]
SECTION 27.06. CAPTIONS AND SECTION NUMBERS. The captions, section numbers,
article numbers, and index appearing in this Lease are inserted only as a matter
of convenience and in no way define, limit, construe, or describe the scope or
intent of such sections or articles of this Lease, nor in any way affect this
Lease.
SECTION 27.07. BROKER'S COMMISSION. Each party represents and warrants to
the other party that the warrantor has dealt with no brokers and that there are
no claims for brokerage commissions or finder's fees, nor will there be any such
claim, arising from any act or omission of the warrantor in connection with this
Lease, and the warrantor agrees to indemnify the other party and hold it
harmless from all liabilities arising from any such claim, including, without
limitation, the cost of attorneys' fees in connection therewith. Such agreement
shall survive the termination of this Lease.
SECTION 27.08. RECORDING. Tenant shall not record this Lease or any
memorandum, affidavit or other notice of this Lease.
SECTION 27.09. FUR~SHING OF FINANCIAL STATEMENTS. Upon Landlord's written
request, Tenant shall promptly furnish Landlord, from time to time, with
financial statements (including, without limitation, operating statements
including an annual profit and loss statement for the individual store unit
covered by this Lease) reflecting Tenant's current financial condition, and
written evidence of then current ownership of managing and controlling interests
in Tenant and in any entities which directly or indirectly control or manage
Tenant (which written evidence shall include, without limitation, the names of
all existing managers, shareholders and partners, as applicable, of record and
their respective management/ownership interests as of the date of such writing),
which financial statements and written evidence shall be certified as being true
and correct by the chief financial officer or partner and by the chief executive
officer or partner of Tenant.
SECTION 27.10. LANDLORD'S USE OF COMMON AREAS. Landlord reserves the right,
from time to time, to utilize portions of the co~on areas for carnival type
shows, rides and entertainment, outdoor shows, displays, automobile and other
prndtict shows, the leasing of permanent and temporary kiosks, or such other
uses which in Landlord's judgment tend to attract the public. Further, Landlord
reserves the right to utilize the lighting standards and other areas in the
parking facilities for advertising purposes. Any revenues derived by Landlord
from the use of the common areas, whether from usage fees or otherwise, shall
not be applied as a deduction against any cost or expense required to be paid by
Tenant under this Lease.
SECTION 27.11. TRANSFER OF LANDLORD'S INTEREST. In the event of any
transfer or transfers of Landlord's interest in the premises, including a
so-called sale-leaseback, the transferor shall be automatically relieved of any
and all obligations on the part of Landlord accruing from and after the date of
such transfer, provided that (a) the interest of the transferor, as Landlord, in
any funds then in the hands of Landlord in which Tenant has an interest shall be
turned over, subject to such interest, to the then transferee; and ~) notice of
such sale, transfer or lease shall be delivered to Tenant as required by law.
Upon the termination of any such lease in a sale-leaseback transaction prior to
termination of this Lease, the former lessee thereunder shall become and remain
liable as Landlord hereunder until a further transfer. No holder of a mortgage
or deed of trust, or underlying lessor on an underlying lease, to which this
Lease is or may be subordinate, and no lessor under a so-called sale-leaseback
shall be responsible in connection with the security deposited hereunder, unless
such mortgagee, holder of such deed of trust, underlying lessor or lessor shall
have actually received the security deposited hereunder.
SECTION 27.12. FLOOR AREA. (a) The term "floor area" as used in this Lease
means, with respect to any leasable area in the Shopping Center or in the
regional retail development, the aggregate number of square feet of floor space
of all floor levels therein, including any mezzanine space (to the extent
reflected as floor area in the applicable leases), measured from (i) the outside
faces of all perimeter walls thereof other than any party wall separating such
premises from other leasable premises, (ii) the center line of any such party
wall, (iii) the outside face of any interior wall, and (iv) the building and/or
leaseline adjacent to any entrance to such premises. In the event Landlord
determines that the square foot area of the leased premises is at variance with
the square foot area stated in this Lease, Landlord may, at its option, adjust
the floor area of the leased premises and make proportional adjustments in
minimum rent, percentage rent, and promotional/Merchants' Association charges,
and other charges to Tenant under this Lease.
<PAGE>
(1)) For the purpose of this Lease, in determining the gross leasable flooY area
or the gross leased and occupied floor area of the Shopping Center, there shall
be excluded therefrom, at the sole option of Landlord, the ~asable area of~
square feet or more occupied by a single entity (which, for purposes of this
Lease, shall be defined as a department store), the floor area of any premises
leased for the operation of a post-office type or packaging or delivery facility
or other public/consumer-service or governmental facility, the floor area of any
space without direct customer access from the enclosed Mall, and the total floor
area utilized by Landlord for the operation of a skating rink or other
recreational area, child care center, community room, library, project offices,
and related rooms, common areas and project areas, which shall be deemed
amenities to the Shopping Center. The term "gross leased and occupied floor area
shall include o~y such areas as are leased and occupied by tenants subsequent to
the dates of commencement of the terms of their respective leases. Areas shall
not be considered occupied to the extent that Landlord shall not be receiving
full proportionate share contributions for the same. No deduction or exclusion
from floor area shall be made by reason of columns, ducts, stairs, elevators,
escalators, shafts, or other interior construction or equipment.
SECTION 27.13. INTEREST ON PAST DUE OBLIGATIONS. Any amount due from Tenant
to Landlord hereunder which is not paid when due (including, without limitation,
amounts due as reimbursement to Landlord for costs incurred by Landlord in
performing obligations of Tenant hereunder upon Tenant's failure to so perform)
shall bear interest at the highest rate then allowed under the usury laws of the
State from the date due until paid, unless otherwise specifically provided
here~n, but the payment of such interest shall not excuse or cure any default by
Tenant under this Lease
SECTION 27.14. LIABILITY OF LANDLORD. If Landlord shall fail to perform any
covenant, terr~ or condition of this Lease upon Landlord's part to be performed,
and if as a consequence of such default Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the proceeds of
sale received upon execution of such judgment and levied thereon against the
right, title and interest of Landlord in the Shopping Center and out of net
income from such property received by Landlord, or out of the consideration
received by Landlord from the sale or other disposition of all or any part of
Landlord's right, title and interest in the Shopping Center, subject,
nevertheless, to the rights of Landlord's mortgagee, and neither Landlord, nor
the individuals or entities which constitute the partners of the partnership
which is Landlord, nor the individuals or entities which constitute the partners
of the partnership which is the beneficiary of the Trust of which Landlord is
Trustee (if applicable), shall be liable for any deficiency. If Landlord is
identified in this Lease as a Trustee, Tenant hereby recognizes that Landlord is
executing this Lease as Trustee under an express trust, and it is expressly
understood and agreed by and between the parties hereto, anything herein to the
contrary notwithstanding, that each and all of the representations, covenants,
undertakings and agreements herein made on the part of the Landlord while in
form purporting (except as herein otherwise expressed) to be the
representations, covenants, undertakings, and agreements of the Landlord are
nevertheless each and every one of them, made and intended not as personal
representations, covenants, undertakings and agreements by the Landlord or for
the purpose or with the intention of binding said Landlord personally but are
made and intended for the purpose of binding only that portion of the trust
property specifically leased hereunder, and this Lease is executed and delivered
by said Landlord not in its own right, but solely in the exercise of the powers
conferred upon it as such Trustee; that no duty shall rest upon Landlord to
sequester the trust estate or the rents, issues and profits arising therefrom,
or the proceeds arising from any sale or other disposition thereof; and that no
personal liability or personal responsibility is assumed by nor shall at any
time be asserted or enforceable against Trustee, or any successor trustee or any
of the beneficiaries under said trust, on account of this Lease or on account of
any representation, covenant, undertaking or agreement of the said Landlord in
this Lease contained, either expressed or implied, all such personal liability,
if any, being expressly waived and released by the Tenant herein and by all
persons claiming by, through or under said Tenant.
SECTION 27.15. ACCORD AND SATISFACTION. Payment by Tenant or receipt by
Landlord of a l~sser amount than the rent or other charges herein stipulated may
be, at Landlord's sole option, deemed to be on account of the earliest due
stipulated rent or other charges, or deemed to be on account of rent owing for
the current period only, notwithstanding any instructions by or on behalf of
Tenant to the contrary, which instructions shall be null and void, and no
endorsement or statement on any check or any letter accompanying any check
payment as rent or other charges shall be deemed an accord and satisfaction, and
Landlord shall accept such check or payment without prejudice to Landlord's
<PAGE>
right to recover the balance of such rent or other charges or pursue any
other remedy in this Lease or in law or in equity against Tenant.
SECTION 27.16. EXECUTION OF LEASE; NO OI'TION. The submission of this Lease
to Tenant shall be for examination purposes only, and does not and shall not
constitute a reservation of or option for Tenant to lease, or otherwise create
any interest of Tenant in the leased premises or any other premises situated in
the Shopping Center Execution of this Lease by Tenant shall be irrevocable. The
return to Landlord of Tenant-executed copies of this Lease shall not be binding
upon Landlord, notwi~ng any preparation or anticipatory reliance or expenditures
by Tenant or any time interval, until Landlord has in fact executed and actually
delivered a fully-executed copy of this Lease to Tenant ~NS(pound)~S SECTION
27.17. GOVERNING LAW. This Lease shall be construed in accordance with the laws
of the State. If any provision of this Lease or the application thereof to any
person or circumstances shall, to any extent, be invalid or unenforceable, the
remainder of this Lease shall not be affected thereby and each remaining
provision of the Lease shall be valid and enforceable to the full extent
permitted by the law Tenant appoints the following persons at the following
locations as agent to receive service of process, writs, notices, summonses, or
other legal documents in any suit, action or proceeding which Landlord may
commence against Tenant. ~ any officer, partner or other principal of Tenant, or
any person in charge, at the Tenant's address as set forth on Page Dl of this
Lease. Where permitted by law or local court rule, Tenant consents to service of
such process by United States mail, in the manner specified in the applicable
law or court rule
SECTION 27.18. SPECII"IC PERFORMNCE OF LANDLORD'S RIGHTS. Landlord shall
have the right to obtain specific performance of any and all of the covenants or
obligations of Tenant under this Lease, and nothing contained in this Lease
shall be construed as or shall have the effect of abridging such right.
SECTION 27.19. CERTMN RULES OF CONSTRUCTION. Time is of the essence in this
Lease. Notwithstanding the fact that certain references elsewhere in this Lease
to acts required to be performed by Tenant hereunder omit to state that such
acts shall be performed at Tenant's sole cost and expense, unless the context
clearly implies to the contrary, each and every act to be performed or
obligations to be fulfilled by Tenant pursuant to this Lease shall be performed
or fulfilled at Tenant's sole cost and expense. Any breach or default by Tenant
of its obligations under this~shall be deemed material. Tenant shall be fully
responsible and liable for the observance and compliance by concessionaires with
all the terms and conditions of this Lease, which terms and conditions shall be
applicable to concessionaires as fully as if such concessionaires were the
Tenant hereunder, any failure by a concessionaire fully to observe and comply
with the terms and conditions of this Lease shall constitute a default hereunder
by Tenant. Nothing (pound)ontained in the preceding sentence shall constitute a
consent by Landlord to any concession, subletting or other arrangement
proscribed by Section 14.01. All provisions of this Lease have been freely
negotiated by and between the parties ~r~; ~ ~l!]E~ ~[)3' ~~S(pound)BTS SECTION
27.20. INDEX. The term "Index' as used in this Lease shall be the "Consumer
Price Index fo~ All Urban Consumers (1982-84 = 100), U.S. City Average, All
Items," as published by the Bureau of Labor Statistics of the United States
Department of Labor. If the Index is not published by the Bureau of Labor
Statistics or another governmental agency at any time during the term of this
Lease, or if the Index is otherwise re-named, discontinued or superseded, then
the calculations based on the Index shall be made using the most closely
comparable statistics on the purchasing power of the consumer dollar as
published by a responsible financial authority and selected by Landlord
SECTION 27.21. SURVIVAL; NONDISCLOSURE; I"REE ACT. The obligations of
Tenant for payment of rent and charges under this Lease shall survive the
expiration or earlier termination of the term of this Lease. Tenant covenants
that neither Tenant nor any attorney or other representative for Tenant shall
disclose the contents of this Lease to any other person ~t. Tenant shall be
fully responsible for the actions of its attorneys and representatives. By its
execution of this Lease, enant acknowledges and agrees that it has read this
Lease, understands the contents hereof, and is signing this Lease as its own
free act and deed, and as the free act and deed of the representatives signing
on Tenant's behalf, without any persuasion or coercion by any person or entity,
and with full advice of counsel
[End of Standard Form; signature and acknowledgment pages for the Lease
appear after the Data Sheet on the pages immediately preceding the Addendum.]
<PAGE>
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Parcel 1:
That part of Lot 2A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in
Woodfield, and that part of Lot 2 in Woodfield, taken as a Tract, said Woodfield
being a Subdivision of part of the Northwest Quarter', Northeast Quarter and
Southeast quarter of Section 13, Township 41 ~or'th, Range 10, East of the Third
Principal Meridian, bounded and described as follows:
Commencing at the most Northerly corner of Lot 2A aforesaid, thence South
430 40' 00,' East, along the Northeasterly line of said Lot 2A, 25.67 feet to
the point of beginning; thence South 430 40' 00,' east along said Northeasterly
line of Lot 2A, 308.33 feet; thence South 460 20' 0011 West, 30.00 feet; thence
South 430 40' 00,' East, 86.75 feet; thence North 46~ 20' 00,' East, 192.42
feet; thence South 430 40' 00,' East, 1.42 feet; thence North 460 20' 00,' East,
25.17 feet; thence North 430 40' 00,' West, 6.75 feet; thence North 880 40' 00,'
West, 8.25 feet; thence North 430 40' 00,' West, 2.33 feet; thence North 010 20'
00,' East, 4.95 feet; thence North 010 20' 00,' East, 2.33 feet; thence North
430 40' 00,' West, 53.92 feet; thence North 460 20' 00" East, 52.67 feet; thence
North 430 40' 00,' West, 272.00 feet; thence South 460 20' 00,' West, 50.67
feet; thence North 430 40' 00,' West, 41.50 feet; thence South 460 20' 00,,
West, 20.25 feet; thence North 430 40' 00.' West, 2.33 feet; thence North 880
40' 00,, West, 7.78 feet; thence South 460 20' 00" West, 56.46 feet; thence
North 880 40' 00,' West, 6.36 feet; thence South 460 20' 00,' West, 11.75 feet;
thence South 010 20' 00,' West, 11.55 feet; thence South 460 20' 00,, West,
30.08 feet; thence North 880 40' 00" West 11.55 feet; thence South 460 20' 00,'
West 11.75 feet; thence South 010 20' 00,' West, 6.36 feet; thence South 460 20'
00" West, 28.46 feet to the-point of beginning, in Cook County, Illinois.
Also
Parcel 2:
Lot 10 and Lot 2 in Woodfield, a Subdivision of part of the Northwest
Quarter and the Northeast Quarter and the Southeast Quarter of Section 13,
Township 41 North, Range 10, East of the Third Principal Meridian, in Cook
County, Illinois, except that part of Lot 2 lying Northerly of the following
described line:
Beginning at a point on the East line of said Lot 2, said point being 8.897
feet Southerly of (as measured a ~ng the East line of said Lot 2) the
Northeasterly corner of said Lot 2; thence Westerly along a straight line having
a bearing of South 880 17' OS" West a distance of 171.83 feet to a point on the
West line of said Lot 2, said point being 7.119 feet Southerly of (as measured
along the West line of said Lot 2) the Northwester~ corner of said Lot 2, said
area containing approximately 1,005 square feet, and except Lot 2A in the
Resubdivision of parts of Lots 2, 5, 6 and 7 in Woodfield, being a Subdivision
of part of the Northwest Quarter, Northeast Quarter and Southeast Quarter of
Section 13, Township 41 North, Range 10, East of the Third Principal Meridian,
(except that part bounded and described as follows: commencing at the most
Northerly corner of said Lot 2A; thence South 430 40' 00,' East, along the
Northeasterly line of said Lot 2A, 334.00 feet to the point of beginning, thence
South 460 20' 00" West 30.00 feet; thence South 430 40' 00,' East, 5.00 feet;
thence North 460 20' 00" East, 30.00 feet; thence North 430 40' 00,' West, 5.00
feet to the point of beginning) in Cook County, Illinois, and in addition
thereto Lot 5A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in Woodfield,
being a Subdivision of part of the Northwest Quarter, Northeast Quarter and
Southeast Quarter of Section 13, Township 41 North, Range 10, East of the Third
Principal Meridian, Cook County, Illinois, excepting therefrom the following:
That part of Lot 2A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in
Woodfield, and that part of Lot 2 in Woodfield, taken as a Tract, said Woodfield
being a Subdivision of part of the Northwest Quarter, Northeast Quarter and
Southeast Quarter of Section 13, Township 41 North, Range 10, East of the Third
Principal Meridian, bounded and described as follows:
Commencing at the most Northerly corner of Lot 2A aforesaid, thence South
430 40' 00,' East, along the Northeasterly line of said Lot 2A, 25.67 feet to
the point of beginning; thence South 430 40' 001, East along said Northeasterly
line of Lot 2A, 308.33 feet; thence South 460 20' 00,' West, 30.00 feet; thence
South 430 40' 00,' East, 86.75 feet; thence North 460 20' 00,' East, 192.42
feet; thence South 430 40' 00" East, 1.42 feet; thence North 460 20' 00" East,
25.17 feet; thence North 430 40' 00,' West, 6.75 feet; thence North 880 40' 00,'
West, 8.25 feet; thence North 430 40' 00,, West, 2.33 feet; thence North 010 20'
00,' East, 4.95 feet; thence North 010 20' 00" East, 2.33 feet; thence North 430
40' 00" West, 53.92 feet; thence North 460 20' DO" East, 52.67 feet; thence
North 430 40' 00" West, 272.00 feet; thence South 460 20' DO" West, 50.67 feet;
thence North 430 40' 00,' West, 41.50 feet; thence South 460 20' DO" West, 20.25
feet; thence North 430 40' 00,' West, 2.33
<PAGE>
feet; thence North 880 40' 00,' West, 7.78 feet; thence South 460 20' 00"
West, 56.46 feet; thence North 880 40' 00,' West, 6.36 feet; thence South 460
20' DO" West, 11.75 feet; thence South 010 20' 00,' West, 11.55 feet; thence
South 460 20' DO" West, 30.08 feet; thence North 880 40' DO" West, 11.55 feet;
thence South 460 20' DO" West, 11.75 feet; thence South 010 20' DO" West, 6.36
feet; thence South 460 20' DO" West, 28.46 feet, to the point of beginning, in
Cook County, Illinois.
<PAGE>
EXHIBIT B CONSTRUCTION
This Exhibit B shall be deemed to include Exhibit B-i and any additional
construction exhibits as may be attached to this Lease. Such additional exhibits
may have the effect of providing further specifications or criteria or may serve
to amplify or adjust certain of the provisions contained in this Exhibit B.
SECTION I. EXISTING IMPROVEMENTS
The reuse by Tenant of existing improvements, if any, within the leased
premises shall be as dictated by practicality and Landlord's existing design
criteria and shall be subject to Landlord's written approval
SECTION II. LANDLORD'S WORK
A. A complex of building shells and common area improvements of exterior
and interior design and materials as determined by Landlord substantially as
shown in Exhibit A.
B If any partitions are required to separate the leased premises from
adjacent spaces, Landlord shall install metal stud framing only, after Tenant
has performed any demolition necessary to accommodate installation of said
framing. Such stud framing shall extend from the floor slab of the leased
premises to the underside of the floor or roof structure Tenant shall reimburse
Landlord as Tenant's share of the cost of such work, $20.00 per lineal foot of
said stud framing. Tenant shall install gypsum board on Tenant's side of stud
framing to underside of structure as required for a one-hour fire resistant
separation.
C In the event that the leased premises are located in a retail
development, or in an expansion wing of a retail development, which development
or expansion wing shall not yet have opened for business to the public, and
Tenant shall be able to complete its construction within the leased premises
prior to such opening, Landlord shall not provide a temporary barricade at the
storefront lease line, except to the extent that Landlord shall determine that
such barricade is necessary or desirable. If the leased premises are not located
in such a development or in such an expansion wing, or if Tenant shall be unable
to complete the construction of the leased premises and to open for business at
the time that such development or expansion wing, as applicable, first opens for
business to the public, Landlord shall provide, for Tenant's use during
construction and demolition, a temporary barricade at the storefront lease line.
Tenant shall reimburse Landlord $45.00 per lineal foot of storefront lease line
for any such temporary barricade provided by Landlord. Landlord shall remove the
storefront barricade upon completion of Tenant's Work and when Tenant is
prepared to open for business as determined by Landlord. Landlord shall have the
option, by written notice to Tenant, to require Tenant to remove the storefront
barricade and to store the same at a location specified by Landlord within the
regional retail development. In the event of such removal by Tenant, Tenant
shall be responsible for any damage caused to the barricade by such removal and
storage. In either case, Tenant shall immediately repair any damage caused to
the leased premises by the removal of the barricade.
D If the entire leased premises shall not have been previously occupied by
another tenant or occupant, the provision of utility connections by Landlord
shall be as set forth under Section II of Exhibit B-i. If the entire leased
premises shall have been previously occupied, and the following utilities or
utility stubs are not contained within the premises, Landlord shall cause said
utilities to be extended to within the leased premises at a point which is
closest to Landlord's pickup point. Such utilities shall include: sanitary,
domestic cold water, plumbing vent (where applicable), fire protection, and air
conditioning supply duct stub (where applicable) Refer to Exhibit B-i (and/or to
other construction exhibits, if any, attached to this Lease) for additional
information on certain utilities
SECTION III. TENANT'S WORK
Tenant at its sole cost and expense shall perform all work required to
complete the leased premises to a finished condition ready for the conduct of
business therein. Tenant's Work shall conform to criteria, procedures, and
schedules as set forth in Sections IV, V, and VI respectively, of this Exhibit,
and shall include, but not be limited to, the following
A Field Conditions: Prior to the preparation of its working drawings and
the commencement of its construction, Tenant shall survey the site to inspect,
verify and coordinate all existing conditions within the leased premises Such
survey shall include the location of existing mall utilities which are to
remain, placement of wall stud framing defining the leased premises, and
identification of various improvements made by previous occupant(s), if any,
which are to remain, be relocated or removed and the determination of the extent
of demolition or repair to be performed by Tenant. Tenant shall advise Landlord
immediately of any discrepancies with respect to Lan~ord's Space Layout
drawings.
The results of such survey shall be incorporated into Tenant's working
drawings and specifications. Tenant shall verify conditions pertaining to the
leased premises from time to time after commencement of construction of its
leased premises. Any adjustments to the work arising from field conditions not
apparent on drawings and other building documents shall receive the prior
written approval of Landlord.
<PAGE>
Immediately following the installation by Landlord of wall stud framing
defining the leased premises, Tenant shall verify the accuracy of said
installation and shall immediately advise Landlord of any discrepancies. Failure
to so notify Landlord shall be deemed as acceptance by Tenant of said
installation and layout.
Tenant shall coordinate its work with the work of others or with existing
conditions occurring above or below the leased premises and shall make changes
from time to time as required to accommodate such work or conditions.
B. Workin~ Drawin~s and ST,ecifications: Working Drawings and
Specifications as set forth in Section V of this Exhibit
C. Demolition
1. All demolition required to facilitate Tenant's construction shall be
performed by Tenant at Tenant's expense, and shall be as approved by Landlord on
Tenant's demolition plans, prior to commencing such work.
a. Floors: Tenant shall repair or replace any part of the existing concrete
slab which may have been removed by Landlord or Tenant to allow for extension of
underground utilities. Backfill and compaction shall be provided by Tenant. b.
Interior Finishes: Tenant shall demolish any existing improvements made by
previous occupant(s) within the leased premises which Tenant has indicated on
the survey referred to in Section III (A) above are not to remain. Such work
shall include but not be limited to: storefront and storefront enclosure,
abandoned party walls, interior partitions and finishes. floor coverings,
ceilings and miscellaneous improvements. Removal of demolition debris shall be
performed by Tenant. In no event shall removal of debris take place through the
malls during the hours in which the Shopping Center is open for business. c.
Mechanical and Electrical Equipment: Tenant shall remove all mechanical and
electrical systems existing on the leased premises which are no longer
functional or designated to be reused. Such work shall include but not be
limited to: roof top and interior HVAC equipment and supports. duct work, wire
and conduits, electrical distribution equipment, plumbing fixtures, sprinkler
lines, telephone equipment and any specialty equipment as may exist in the
leased premises.
2 Repairs
Tenant shall make all repairs to the premises necessitated by the removal
of the improvements made by previous occupant(s). Such work shall include but
not be limited to: concrete slab, roof, structural members, mechanical and
electrical equipment, telephone equipment, party walls and interior finishes
Architectural and Finishing Work
1. Storefront work.
2. Partitions.
a To the extent that new corridor-partitions are required, Landlord will
erect stud framing and one (1) layer of 5/8" firecode gypsum wallboard on the
corridor side of one-hour fire resistant partitions separating the leased
premises from adjacent service/exit corridors. Such stud framing shall extend
from the floor slab of the leased premises to the underside of the floor or roof
structure. Tenant shall reimburse Landlord as Tenant's share of the cost of such
work $45.00 per lineal foot of said stud framing, and gypsum wallboard. Tenant
shall install one (1) layer of 5/8" firecode gypsum wallboard on Tenant's side
of stud framing to underside of structure as required for a one-hour fire
resistant separation.
Note Service/exit corridors where a two-hour fire resistant partitions
separating the leased premises from the adjacent service/exit corridor is
required, Landlord will erect stud framing and two (2) layers of 5/8" firecode
gypsum wallboard on the corridor side of two-hour fire resistant partitions
separating the leased premises from adjacent service/exit corridors. Tenant
shall reimburse Landlord as Tenant's share of the cost of such work $66.00 per
lineal foot of said stud framing and gypsum wallboard. Tenant shall install two
(2) layers of 5/8" firecode gypsum wallboard on Tenant's side of stud framing to
underside of structure as required for a two-hour fire resistant separation.
3. All required interior partitioning, fire separations and doors, service
exit door, ceiling work, floor coverings, commercial grade finish hardware, and
painting and finishing work.
4 Covering and finishing of colurrins to achieve a one-hour fire resistant
rating
5 Toilet facilities.
<PAGE>
C. Architectural Structural
a In upper level Tenant spaces with a depressed structural concrete floor,
concrete topping to achieve a finished floor elevation at the same elevation as
the mall. b. Repairs as may be required to accommodate extension of underground
utilities. c. All slabs on grade. Tenant shall provide sand fill and/or remove
excess as required and compact same to 95% modified proctor and install a vapor
barrier (minimum .004 mill visqueen) and a concrete minimum strength of 3,000
pounds with 6 x 6 No.10 woven wire mesh (minimum thickness 4") in accordance
with Standard Project Details, finished as required to receive floor finishes.
d. Finished floor elevation at all store entrances shall be at the same
elevation as adjacent areas. All carpet areas are to be depressed.
E. Structural
1. Any alterations and/or additions and reinforcements to Landlord's
structure required to accommodate Tenant's Work, all of which must be designed
by a certified structural engineer at Tenant's expense. Performance of such work
is subject to prior written approval of Landlord
F. Mechanical
1 All plumbing, heating, ventilating, and air conditioning systems within
or directly related to Tenant's leased premises, proceeding from the points of
connection to utilities as listed in Exhibit B-i, or modifications to existing
mechanical systems, all in accordance with Landlord's design criteria.
G. Electrical
1 All electrical and telephone systems within or directly related to the
leased premises proceeding from points of connection to utilities as listed in
Exhibit B-i (or in other construction exhibits, if any, attached to this Lease),
or modifications to existing systems, all in accordance with Landlord's design
criteria
H. Fire Protection
1A complete, hydraulically calculated fire protection sprinkler system,
proceeding from the point of connection to Landlord's system or modifications or
removal of existing fire protection sprinkler system and existing fire retardant
materials in accordance with Landlord's design criteria. All such work shall be
performed, at Tenant's sole cost and expense, by a qualified sprinkler
contractor acceptable to Landlord. Landlord's approval of the foregoing shall
not constitute the assumption of any responsibility by Landlord for the accuracy
or sufficiency thereof, and Tenant shall be solely responsible therefor.
Tenant shall be responsible for the cost of the complete removal of all
existing ~ materials and all demolition associated with this removal. All work
will be done in strict compliance with all local, state, and federal codes and
requirements. All demolition and removal work will be performed by contractors
under contract with the Landlord. - ~
All of the work performed pursuant to this Section III shall, for the
purpose of the Lease to which this Exhibit is attached and made a part, be
deemed to be improvements made to the leased premises by Tenant.
SECTION IV. CRITERIA -- TENANT'S WORK.
The requirements, criteria and/or outline specifications as set forth
herein represent minimum standards for the preparation of working drawings,
construction and finish of the leased premises by Tenant
A. Standard Project Details and Construction Information
1 Standard Project Details and Construction Information, issued by
Landlord, as they pertain to Tenant's Work, shall govern with respect to such
work. Such details shall be reviewed by Tenant and incorporated as required in
Tenant's Working Drawings and Specifications for the leased premises.
B. Desi~n Loads
1. Structural loading imposed by any of Tenant's Work on a temporary or
permanent basis shall not exceed the following allowable live loads:
a. Stores located on supported slabs (levels other than on-grade): 75 lbs.
per square foot
b. Common areas, mall courts, and galleries: 75 lbs. per square foot.
c. On-grade slabs: 125 lbs. per square foot.
d. Roof: 20 lbs. per square foot.
Tenant shall enter into a direct contract with Landlord's roofing
contractor.
<PAGE>
C. Architectural Structural
1. Storefront work:
a. The configuration of the storefront line, as established by Landlord,
shall be considered the leaseline, beyond which no element of the storefront may
extend. b. All storefront components, including head tracks for sliding doors,
grille roller supports, guid~ and supports for side rolling grilles, etc., shall
be structurally fastened and braced to the building stru '~ure All aluminum
storefront components which remain visible during business hours, such as
sliding. oors and other glazing sections, rolling grilles or ornamental metal
shall have an anodized finish. c. Electronic surveillance or other shoplifting
detection devices and security systems shall be incorpo ated and integrated
within Tenant's storefront. Free-standing "boxes' or "columns" or other exposed
equipment or decals shall be prohibited.
2. Ceilings:
Non-combustible ceilings on a concealed metal suspension system shall be
used throughout all Tena'it's public areas. An exposed metal suspension system
may be permitted only if the system consists of 2 x 2' tee grid with regressed
lay-in acoustical tile in horizontal planes only; vertical or sloped use of
exposed tees is prohibited. Taped, painted and/or plaster sprayed gypsum board
ceilings shall be used in conjunction with all storefront soffits. The use of
exposed wood or other combustible material above ceilings or in any )ther attic
spaces is prohibited.
3. Walls:
5/8" Firecode ~L listed) gypsum board shall be used on all party walls
where a one-hour fire resistant separation is required. All interior partitions
shall have gypsum board finish on all sides. A one-hoi fire resistant rating is
required for all steel columns.
4 Floors
a Carpeting and/or other quality floors, such as glazed or unglazed tiles
or hardwood flooring sh~. be used in Tenant's public areas. The reuse of
flooring materials not in compliance with the foregoing is prohibited. b Toilet
rooms and kitchens shall have waterproofed floors and door thresholds.
5 Service Exit Door:
One hinged 3'-O" x 7'-O" x 1-3/4" prime coated, one-hour fire labeled,
hollow metal service exit ~oor, frame, and commercial grade hardware unless
otherwise required by code. The service door shall be installed in a vestibule,
by Tenant at its expense, if required by code.
6 Rubbish Storage:
a Food and beverage service Tenants shall provide rubbish and solid waste
storage room(s) within l~ '~ed premises. b Floor area to be waterproofed with
membrane approved in writing by Landlord.
7 General.
a Landlord shall have the right to locate, both vertically and
horizontally, utility lines, air ducts, . refrigerant lines, drains, sprinkler
mains and valves, and such other facilities, including access p a.els for same,
within the leased premises, as deemed necessary by engineering design and/or
~ode requirements. Landlord's right to locate facilities within the leased
premises shall include the faci ties required by other tenants. Landlord shall
also have the right to locate mechanical and other equipment on the roof over
the leased premises.
b. Notwithstanding anything to the contrary contained in this Lease or in
any of the exhibits attached thereto, all flashing, counter-flashing, roof
penetrations, and roofing repairs shall conform tc the project roofing
specifications. Roof repairs or penetrations required by removal or
relocati()~-I of existing equipment or installation of new equipment (cutting of
roof and deck material and/or repair of same) shall be performed by Landlord's
roofing contractor at Tenant's expense.
Tenant shall enter into a direct contract with Landlord's
roofing contractor.
<PAGE>
C. Architectural Structural
D Mechanical
1. Plumbing:
a. Plumbing fixtures and accessories shall be of cornttiercial quality and
shall be of water conserving type.
b. Tenant shall provide a water meter (calibrated in gallons) in an easily
accessible location (or, at Landlord's direction, Tenant will install a remote
reader device).
c. Floor drains shall be provided in toilet rooms and kitchens and/or food
service areas.
d. Tenant shall be obligated to pay to Landlord, at the time Tenant obtains
its construction permit, any capital facility connection charge imposed by the
governmental unit having jurisdiction, together with all other costs and
expenses incurred or to be incurred by Landlord with respect to Tenant's
construction of and connection to water and wastewater facilities, and with
respect to particular plumbing fixtures, in accordance with all applicable
ordinances in effect from time to time.
Refer to Exhibit B-i for additional criteria.
2. Heating, Ventilating and Air Conditioning:
a. If Tenant elects to utilize existing HVAC system, said system shall be
completely upgraded and repaired to like new condition at Tenant's sole cost and
expense
b. If Tenant elects to install a new HVAC system or a supplement to an
existing system, said systems, shall be installed in complete compliance with
criteria presently established for the Shopping Center
Refer to Exhibit B-i for additional criteria.
3. Fire Protection
Hydraulically calculated fire protection sprinkler system, fire hose
cabinets, fire extinguishers and other equipment within the leased premises in
accordance with Landlord's insurance underwriters' Fire Rating Inspection
Bureau, and Code requirements. Since the entire fire protection system for the
project is required to be an inter-related, centrally controlled installation,
Tenant shall cause to be designed and installed, by a qualified sprinkler
contractor acceptable to Landlord, said system within the leased premises in
accordance with Landlord's requirements and shall submit shop drawings,
specifications and hydraulic calculations for the sprinkler system to the
Landlord's Insurance Underwriters' Fire Rating Inspection Bureau for approval
Landlord's approval of the foregoing shall not constitute the assumption of any
responsibility by Landlord for the accuracy of sufficiency thereof, and Tenant
shall be solely responsible therefor. Said work shall be accomplished without
interrupting fire service to remainder of Shopping Center during occupied hours.
E Electrical
1. Tenant, at its expense, shall furnish and install and/or modify the
existing to provide a complete electrical service proceeding from the Landlord's
point of connection as defined in Exhibit B-I to a point within the leased
premises. This work shall include, but not be limited to, furnishing and
installing a fusible disconnect switch at Landlord's/utility company's
distribution equipment and conduit and conductors of sufficient capacity for
Tenant's requirements. All conductors shall be insulated copper wire type THW or
THWN.
2. All fluorescent or incandescent lighting fixtures in Tenant's public
areas, other than track type and decorative fixtures, shall be recessed.
Fluorescent fixtures shall have low brightness, parabolic lenses or diffusers
and be no larger than 2' 0" x 2' 0" in size. Bare lamp fluorescent or
incandescent fixtures may not be used except in concealed areas and/or stock
rooms. Connections to all devices in Tenant's public areas shall be concealed.
3. Emergency lighting shall be provided by Tenant per code to illuminate
stock and/or sales areas and rear exitway during power outage, which lighting
shall be battery-operated, twin-head light pack(s) and/or fluorescent fixtures.
In public areas battery assembly for emergency lights shall be concealed.
4. Circuits serving signs shall be controlled by a time switch.
5 Audio systems installed by Tenant shall be designed such that sound shall
be contained within the leased premises. No speaker or sound emitting device
shall be installed or employed within twenty feet (20') of Tenant's storefront
lease line and shall be directed toward the interior of the space
Tenant shall enter into a direct contract with Landlord's roofing
contractor.
<PAGE>
D Mechanical
A. Snace Layout DrawinGS
1. General:
Tenant shall submit quadruplicate copies of its sign drawings and
specifications, including samples of materials and colors, for Landlord's
approval, prior to fabrication of Tenant's sign. Such drawings shall show
location of sign on storefront elevation drawing and shall clearly indicate
color, materials, attachment devices, dimensions and construction details.
2. Criteria:
Only the storefront of the leased premises facing malls and/or courts shall
be identified by a sign. Tenant's sign shall be subject to the following
requirements and limitations:
a. The average height of sign letters or components shall not exceed twelve
inches (12")
b. No part of the sign letters shall hang free of the background.
c. Sign shall not project beyond the leaseline of the leased premises more
than two inches (2 ~) if less than eight feet (8') above finished floor line, or
more than six inches (6") if above eight feet (8').
d. Signs shall be limited to the store name only as set forth in Section
16.01 of this Lease; reference to merchandise or activity is prohibited.
e. Sign letters or components shall not have exposed neon or other lamps.
All light source shall be concealed by translucent material. Surface brightness
of translucent material shall be consistent in all letters and components of the
sign. All edges and the backs shall be fully encased in metal.
f The storefront sign shall not employ the name of the Shopping Center as
part of Tenant's store identification.
g. The outer limits of sign letters, components or insignia shall fall
within a rectangle, the two short sides of which must be at least twenty-four
inches (24") from the side leaselines of the leased premises, the top side of
which must be at least twelve inches (12") from the soffit of the mall fascia
element.
h. All electrical sign components must bear U.L. label. Such U.L. label
must be inconspicuously placed.
3 The following types of signs or sign components are prohibited:
a Signs
b. Signs
c Signs
d. Signs
e. Signs
f Signs panels. g. Shadow-box type signs.
h. Signs employing unedged or uncapped plastic letters with no returns.
i. Any exposed fastenings whatsoever.
j Cloth, paper, plastic or cardboard signs, stickers, decals, or painted
signs of any kind, hung around, on or behind storefront glass or within
storefront space.
k. Back-illuminated signs.
I. Free-standing signs. employing moving or flashing lights or any audible
or moving components. employing exposed raceways, ballast boxes or transformers.
exhibiting manufacturer's name, stamps or decals. employing painted and/or non-
illuminated letters. employing luminous-vacuum formed plastic letters. of box or
cabinet type, employing transparent, translucent or luminous plastic background
4 The service door of the leased premises shall be identified with a
plastic sign, uniform to all Tenants, in accordance with Center Management
criteria.
SECTION VI. PROCEDURE SCHEDULES AND OBLIGATIONS FOR THF COMPLETION OF PLANS
AND SPECIFICATIONS BY TENANT
All prints, drawing information and other material to be furnished by
Tenant to Landlord for approval as required in this Exhibit shall be addressed
to Landlord at 200 East Long Lake Road, P.O. Box 200, Bloomfield Hills, Michigan
Refer to Exhibit B-I for additional criteria.
<PAGE>
A. Space Layout Drawings
Approvals of such documents shall be deemed invalid unless given by
Landlord in writing. ~ [DELETED] If Tenant shall not have commenced construction
with respect to such work or alterations within such one hundred twenty (120)
day period (or shall not be diligently pursuing such work or alterations to
completion), Tenant ~ to resubmit the applicable plans and specifications to
Landlord for re-approval prior to commencement or continuation of such work or
alterations. All noticeS1 drawing information and other material furnished by
Landlord to Tenant under this Exhibit or pursuant to Sections 5.01 or 5.02 of
the Lease may be effectively submitted to Tenant by mailing the same to Tenant
at the address set forth on the Data Sheet on page 1 of the Lease or to Tenant's
architect if Tenant has provided Landlord with such an address, notwithstanding
any contrary or additional requirement contained in any other section of the
Lease
1.Following the execution of this Lease, Landlord shall furnish Tenant with
one (1) set of prints of Space Layout Drawings giving technical and design
information for the leased premises, provided that Landlord shall not be
responsible for the accuracy, efficacy or sufficiency of said Space Layout
Drawings and Tenant shall be solely responsible for all technical and other
examinations of the leased premises and shall be exclusively responsible with
respect to verification of actual field conditions and actual field measurements
and a full review of all technical and engineering requirements with respect to
the leased premises and Tenant's construction thereon.
B Workin~ Drawints and Snecifications
1.Within thirty (30) days' from either of the following dates, whichever
shall be the later to occur (a) receipt by tenant of Space Layout Drawings or
(b) execution of this Lease by the parties hereto, Tenant shall engage an
Architect registered in the state in which the Shopping Center is located for
the purpose of preparing Working Drawings and Specifications for the leased
premises Working Drawings and Specifications shall be prepared in strict
compliance with the Construction Criteria and requirements as set forth in
Section IV of this Exhibit and shall adhere to the design as indicated in
Section 5.01(b) of the Data Sheet of the Lease to which this exhibit is attached
2 All Working Drawings and Specifications prepared by Tenant's Architect
shall be submitted by Tenant. in the form of one (1) set of reproducible prints
(i.e., sepias) and one (1) set of prints, along with a Letter of Certification
by Tenant's Architect that such drawings and specifications comply with Section
5.01(b) of the Data Sheet and Landlord's Construction Criteria. Any required
revisions to such Working Drawings and Specifications shall be prepared and
resubmitted by Tenant to Landlord within ten (10) days of receipt of notice from
Landlord.
3 Tenant shall pay all fees of its Architect, and shall pay to Landlord for
Coordination and Administrative Services a fee based on the floor area of the
leased premises in accordance with the following schedule
Floor Area of
Lease Premises
1 to 500 sq. ft. 900.00
501 to 750 sq. ft. 975.00
751 to 1,500 sq. 1,150.00
1,501 to 3,500 sq. 1,700.00
3,501 to 6,000 sq. ft. 2,150.00
6,001 to 10,000 sq.ft. 2,750.00
10,001 sq. ft. and over 3,300.00 + $.30/SQ. FT.in excess
OF 10,000 sq. ft.
Tenant's payment of the foregoing fee shall be payment to Landlord in
connection with Landlord's review of the various plans and specifications
submitted by Tenant and in connection with Landlord's facilitation and
coordination of Tenant's actual construction in the leased premises; however,
Landlord shall not be in any way responsible or liable with respect to the
accuracy, sufficiency, or feasibility of Tenant's plans, and Tenant shall be
totally responsible for same
Refer to Exhibit B-I for additional criteria.
<PAGE>
C Comnletion Schedule:
1 The following information regarding Tenant's completion schedule shall be
completed by Tenant and delivered to Landlord upon Tenant's execution of this
Lease:
a Working Drawings and Specifications submittal date (thirty (30) days
after receipt of fully-executed Lease)
b. Submission of Working Drawings and Specifications to the local building
department for building permit concurrent with submittal to Landlord (allow four
(4) weeks for approval)
c Construction start date
d. Merchandise date
e. Store opening date
f. Commencement date
Notification may be sent by Landlord to Tenant, at Landlord's option, for
completion of any of the preceding dates not listed on the Completion Schedule
submitted by Tenant. Any such notification shall be returned completed to
Landlord no later than twenty-one (21) days following Tenant's receipt thereof
<PAGE>
SECTION VI. PROCEDURE. SCHEDULES AND OBLIGATIONS FOR THE CONSTRUCTION OF
THE LEASED PREMISES BY TENANT.
A Commencement of Construction
1 Tenant shall commence demolition and/or construction of its leased
premises and shall carry such construction to completion with all due diligence
The failure of Tenant to comply with procedures and schedules set forth in this
Exhibit, or to commence or complete the construction of the leased premises
prior to the date of commencement of the term of the Lease to which this Exhibit
is attached and made a part shall have no effect whatsoever upon the
commencement of said term, which shall in any event commence at the time
provided for in Section 1.02 of said Lease
B. General Requirements
1. Tenant shall submit to Landlord via Certified or Registered Mail, at
~ast five (5) days prior to the commencement of construction, the following
information:
a. The names and addresses of the General, Mechanical and Electrical
Contractors Tenant intends to engage in the construction of its leased premises.
b. The date on which Tenant's construction work will commence, together
with the estimated date of completion of Tenant's construction work and
fixturing work, and date of Tenant's projected opening for business in the
leased premises.
c. Evidence of insurance as called for hereinbelow.
d. Itemized statement of estimated construction costs, including
architectural, engineering and contractor's fees.
e. [DELETED]
2. Tenant shall engage the services of such bondable, licensed contractors
who will work in harmony with Landlord's contractors and the contractors
employed by the other tenants so that there shall be no labor disputes which
would interfere with the operation, construction and completion of the Shopping
Center or with any work being carried Out therein.
3. Construction shall comply in all respects with applicable Federal,
State, County and/or City statutes, ordinances, regulations, laws and codes. All
required building and other permits in connection with the construction and
completion of the leased premises shall be obtained and paid for by Tenant.
Landlord's review of Tenant's Working Drawings and Specifications shall be for
the purpose of ascertaining compliance with the requirements of this Lease and
Landlord's requirements, and shall in no event extend to any confirmation or
authorization, express or implied, that Tenant's Working Drawings and
Specifications have been prepared in accordance with the requirements of
applicable laws, codes, ordinances and regulations, including, without
limitation, the Americans with Disabilities Act, and Tenant shall be solely
responsible with respect to all necessary compliance with such laws, codes,
ordinances and regulations.
Tenant shall provide temporary heat if required.
Tenant shall provide temporary electrical if required.
Tenant shall apply and pay for all utility services.
Tenant shall cause its Contractor to provide warranties for not less than
one year against defects in workmanship, materials and equipment.
4. Tenant's Work shall be subject to the inspection of Landlord, its
consultants, and its supervisory personnel
5. Upon the expiration of one half (1/2) of the lease term, Tenant shall,
within eh-- days after direction from Landlord, submit Working Drawings and
Specifications as set forth in Section V of this Exhibit showing the work to be
performed by Tenant to completely remodel and refurbish the leased premises
Tenant will cause such work to be performed not later than i-i- days following
the date of Landlord's direction in accordance with Working Drawings and
Specifications approved by Landlord ~ remodeling work to be done by T~nant
All such work shall be subject to and shall be carried out in accordance
with the provisions of this Lease, including, without limitation, the provisions
of Section 5.01(b) governing construction of the leased premises and the
remedies of Landlord in the event of noncompliance by Tenant, including, but not
limited to, termination of this Lease as therein set forth. Without limiting the
<PAGE>
foregoing, in the event that Tenant shall fail to perform such remodeling
work, or if Tenant shall fail to operate the leased premises as required in the
Lease or shall fail to surrender possession of the leased premises to Landlord
as required in the Lease or under law, Landlord shall have the right to erect,
at Tenant's expense, a storefront barricade in front of the leased premises,
which barricade shall not be removed except upon Landlord's prior written
consent and with Tenant paying the cost of such removal.
C. Landlord's Right to Perform Work
1.Landlord shall have the right to perform, on behalf of and for the
account of Tenant, subject to reimbursement of the cost thereof by Tenant, any
and all of Tenant's Work which Landlord determines in its sole discretion should
be performed immediately and on an emergency basis for the best interest of the
project, including without limitation, work which pertains to structural
components, mechanical, sprinkler and general utility systems, roofing and
removal of unduly accumulated construction material and debris
D. Temnorarv Facilities Durin~ Construction
1.Tenant shall pay for all temporary utility facilities, and the removal of
debris, as necessary and required in connection with the demolition and/or
construction of the leased premises. Storage of Tenant's Contractors'
construction material, tools, equipment and debris shall be confined to the
leased premises and in areas which may be designated for such purposes by
Landlord. In no event shall any material or debris be stored in the mall or in
service or exit corridors.
2 During construction, Landlord may provide temporary electrical service in
an area designated by Landlord Tenant shall ~ --.- ~ to connect temporary lines
to the power source for service to its premises. The cost to Tenant for this
service will be $450.00 per month or twenty-five cents (25C) per square foot of
leased area per month, whichever is greater. Payment is to be remitted to
Landlord by the first of each month after service is initiated. In the event
that the leased premises presently contain a metered electrical service, Tenant
shall utilize the existing service and reimburse Landlord on the metered basis.
During initial construction, Tenant fixturing and merchandise stocking, Landlord
may require Tenant to utilize trash removal service from designated truck
courts. Tenant is responsible for breaking down boxes and placing trash in
containers in the designated truck court areas.
The cost to Tenant for this service will be on a monthly basis and payment
is to be remitted by the first of each month after service is initiated on the
following basis:
Floor Area of Leased Premises Monthly Amount in $
30,001 sq. ft. to 460.00
50,000 sq. ft.
20,001 sq. ft. to 410.00
30,000 sq. ft.
15,001 sq. ft. to 360.00
20,000 sq. ft.
10,001 sq. ft. to 320.00
15,000 sq. ft.
5,001 sq. ft. to 10,000 sq. ft. 280.00
2,001 sq. ft. to 5,000 sq. ft. 240.00
2,000 sq. ft or less 200.00
At any time, as determined by Landlord, Landlord may discontinue trash
removal service and Tenant shall assume responsibility therefor. All such work
shall be performed by contractors approved by Landlord.
E Construction Comnletion
1. A Letter of Certification by Tenant's Architect stating that the store
has been satisfactorily completed in compliance with the Landlord Approved
Working Drawings. Any deficiencies should be outlined and sent to Tenant's
contractor for correction within thirty (30) days.
F. Landlord's Letter of Accentance
1Upon the completion of Tenant's construction and fixturing work, and upon
written request to Landlord from Tenant, Landlord shall issue a Landlord's
Letter of Acceptance of said premises. The issuing of such a Letter shall be
contingent upon Tenant satisfying all of the following conditions (which
conditions shall, in any event, be satisfied by Tenant as a obligation
hereunder):
a. The satisfactory completion by Tenant of the work to be performed by
Tenant under Section III of this Exhibit including correction of deficiencies
and inconsistencies with approved Working Drawings and Specifications.
b Furnishing by Tenant to Landlord of all waivers of liens and sworn
statements from all persons performing labor and/or supplying materials in
connection with such work showing that all of said persons have been compensated
in ~l.
C Submittal by Tenant to Landlord of a detailed breakdown of Tenant's final
and total construction costs
d. Submittal by Tenant to Landlord of warranties for not less than one (1)
year against defects in workmanship, materials and equipment, if so required by
Landlord.
e. Full payment by Tenant of all sums due Landlord for items of work
performed by Landlord on behalf of Tenant, as outlined in this Exhibit.
f The issuance of a Certificate of Occupancy by the Building and Safety
Department of the local unit of government.
2. Upon written request from Tenant, Landlord shall also inspect that
portion of Tenant's Work which shall have been completed up to the date of such
request, and upon satisfaction of all of the foregoing conditions set forth in
paragraph 1 above (other than issuance of a Certificate of Occupancy) with
respect to the portion of Tenant's Work so com~eted, Landlord shall issue a
Landlord's Letter of Acceptance with respect to such completed work. No
payments, if any, required to be made by Landlord to Tenant shall be made unless
and until Tenant shall have obtained a current Letter of Acceptance with respect
to all of Tenant's Work completed as of the date of such required payment.
G Payments bv Tenant
1.Tenant shall pay Landlord all sums due Landlord for items of work
performed or expenses incurred by Landlord on behalf of Tenant within ten (10)
days after receipt by Tenant of a statement therefor from Landlord. Such items
of work and expenses incurred include, but are not necessarily limited to, the
following:
a. All items called for as Tenant's cost obligations in this Exhibit.
b. In the event that the leased premises are located in a retail
development, or in an expansion wing of a retail development, which development
or expansion wing shall not yet have opened for business to the public at the
time of the commencement by Tenant of its construction hereunder, Tenant shall
be obligated to pay to Landlord Tenant's pro rata share of costs and expenses
incurred by Landlord in arranging for a final cleaning of and debris removal
from the common areas and vacant premises in preparation for the grand opening
of the retail development or of such expansion wing. Tenant's pro rata share
shall be computed on the basis that the square footage of the leased premises
bears to the square footage of gross leased and occupied area in the Shopping
Center (or in the expansion wing of the Shopping Center, as applicable) as of
the earlier of: the date of the opening of the Shopping Center (or the expansion
wing, as applicable), or the date that Tenant is notified of its pro rata share
of such costs and extenses.
2 in the event Tenant fails to open its store for business to the general
public upon the commencement date of the term of the Lease, or fails to complete
the remodeling required under Section~'~1 of the Lease within ninety (90) days
following such commencement date (to the extent that this Lease represents a
renewal lease for the same premises as are presently occupied by Tenant), then
in addition to all other fees and charges hereunder, Tenant shall pay a fee to
Landlord in accordance with the following schedule for additional coordination,
administration, and other services, which fee shall be paid for each full
calendar month after the commencement date, or after the expiration of such
ninety (90) day period, as applicable (with periods of less than one month to be
prorated), that Tenant shall have failed to open its store for business, or
shall have failed to complete its required
<PAGE>
remodeling as set forth above, as applicable. The payment of the foregoing
fee shall not excuse Tenant from default for failure to open, or failure to
remodel, as applicable, shall not preclude the exercise of default remedies by
Landlord, and shall not render Landlord liable in any manner for or in
connection with Tenant's construction.
Floor Area of Leased Premises Applicable Amount in $
1 to 500 sq. ft. 2,500.00
501 to 750 sq. ft. 3,000.00
751 to 1,500 sq. ft. 4,000.00
1,501 to 3,500 sq. ft. 5,500.00
3,501 to 6,000 sq. ft. 7,000.00
6,001 to 10,000 sq. ft. 8,000.00
10,001 sq. ft. and over 9,500.00 + $.75per sq.ft. in excess
of 10,000 sq ft
H Insurance
1Tenant shall secure, pay for and maintain, or cause its Contractor(s) to
secure, pay for and maintain during construction and fixturing work within the
leased premises, all of the insurance policies required herein, in the amounts
as set forth below, and such insurance as may from time to time be required from
city, county, state or federal laws, codes, regulations or authorities, together
with such other insurance as is reasonably necessary or appropriate under the
circumstances. Tenant shall not permit its Contractor(s) to commence any work
until all required insurance has been obtained and certificates of such
insurance have been
<PAGE>
delivered to Landlord
2. Tenant's General Contractor's and Subcontractors' Required Minimum
Coverages and Limits of Liability.
a. Worker's Compensation, as required by state law, and including
Employer's Liability Insurance with a limit of not less than $2,000,000, and any
insurance required by any Em~oyee Benefit Acts or other statutes applicable
where the work is to be performed as will protect the Contractor and
Subcontractors from any and all liability under the aforementioned acts. b.
Comtnercial General Liability Insurance (including Contractor's Protective
Liability) in an amount not less than $2,000,000 for any one occurrence whether
involving personal injury liability (or death resulting therefrom) or property
damage liability or a combination thereof with an aggregate limit of $2,000,000.
Such insurance shall provide for explosion, collapse and underground coverage.
Such insurarice shall insure Tenant's General Contractor against any and
all claims for personal injury, including death resulting therefrom and damage
to or destruction of property of any kind whatsoever and to whomsoever belonging
and arising from his operations under the Contract and whether such operations
are performed by Tenant's General Contractor, Subcontractors, or any of their
Subcontractors, or by any one directly or indirectly employed by any ~ them.
C. Comprehensive Automobile Liability Insurance, including the ownership,
maintenance, and operation of any automotive equipment, owned, hired, and
non-owned, in the following amounts:
(1) Bodily injury, per occurrence for personal
injury and/or death $2,000,000
(2) Property Damage Liability $2,000,000
Such insurance shall insure the General Contractor and/or Subcontractors
against any and all claims for personal injury, including death resulting
therefrom and damage to the property of others caused by accident and arising
from its operations under the Contract and whether such operations are performed
by the General Contractor, Subcontractors, or by anyone directly or indirectly
employed by any of them
3 Tenant's Protective Liability Insurance.
Tenant shall provide Owner's Protective Liability Insurance as will insure
Tenant against any and all liability to third parties for damages because of
personal injury liability (or death resulting therefrom) and property damage
liability of others or a combination thereof which may arise from work in
connection with the leased premises, and any other liability for damages which
Tenant's General Contractor and/or Subcontractors are required to insure against
under any provisions herein. Said insurance shall be provided in minimum amounts
as follows:
a. Bodily injury, per occurrence for personal injury
and/or death $2,000,000
b. Property Damage Liability $2,000,000
4 Tenant's Builder's Risk Insurance -- Completed Value Builder's Risk
Material Damage Insurance.
Coverage:
Tenant shall provide an "All Physical Loss" Builder's Risk insurance policy
on the work to be performed for Tenant in the leased premises as it relates to
the building within which the leased premises is located. The policy shall
include Tenant, its Contractor and Subcontractors, Landlord, and the partners
and agents of Landlord, as insureds as their interests may appear. The amount of
insurance to be provided shall be 100% of the replacement cost.
5. All such insurance policies required under this Exhibit, except as noted
above, shall include Landlord, its Managing Agent,
<PAGE>
its Architect, its General Contractor, and the partners and agents of
Landlord, and the partners of such partners, and any other parties in interest
designated by Landlord, as additional insureds; except Worker's Compensation
Insurance, which shall contain an endorsement waiving all rights of subrogation
against Landlord, its Managing Agent, its Architect, General Contractor,
partners and agents, and the partners of such partners, and any other parties in
interest designated by Landlord.
Certificates of Insurance shall provide that no reduction in the amounts or
limits of liability or cancellation of such insurance coverage shall be
undertaken without prior thirty (30) day written notice to Landlord.
The insurance required under this Exhibit shall be in addition to any and
all insurance required to be procured by Tenant pursuant to Section 11.01 of the
Lease to which this Exhibit is attached.
d. All electrical wiring systems shall be in conduit. The use of "Bx" or
"Romex" is not permitted.
<PAGE>
WOODFIELD
EXHIBIT B-1
UTILITIES
(Attached to and forming a part of Exhibit B;
Section references correspond to the Section numbers set forth in
Exhibit B.)
SECTION II: LANDLORD'S WORK.
A. Buildin~ Utilities and Services
1. Points of connection for Tenant's use, to the following utilities in
location and sizes determined by Landlord.
a. Sanitary sewer stub.
b. Plumbing vent stub.
c. Domestic cold water stub.
d. Fire protection sprinkler system main.
e. Central gas utility company metering manifolds.
f. Central electric utility company distribution centers.
g. Central telephone company distribution boards.
h. Duct shafts containing fresh air, relief air and toilet exhaust ducts to
serve first level tenants stubbed in central locations and terminating to the
atmosphere.
SECTION IV: CRITERIA - TENANT'S WORK.
The requirements, criteria, and/or outline specifications as set forth
herein represent minimum standards for the design, construction, and finish of
the mechanical and electrical systems installed by Tenant.
A. Mechanical
1. Plumbing:
a. Plumbing fixtures and accessories shall be of commercial quality and
shall be of a water-conserving type. b. Water heaters shall be electric, except
Food and Beverage Service Tenants where gas units may be permitted if gas is
available. c Floor drains shall be provided in toilet rooms, kitchens, and/or
food service areas. d. Food and Beverage Service Tenants shall further provide:
(i) Cast-iron grease traps located within the leased premises.
(ii) Gas service and branch line extension from the gas meter center to and
within the leased premises.
e. Every space shall have at least one (I) toilet room. All spaces 3,000
square feet or larger must provide public accessible toilet rooms (male and
female). Said toilet rooms must comply with the state of Illinois plumbing code.
2 Heating, Ventilating, and Air Conditioning:
a Tenant shall install an all-electric heating and air-conditioning system.
<PAGE>
(i) Each Tenant shall provide its own individual system (i.e., heating,
ventilation and air-conditioning equipment and controls, ducts, insulation,
water supply, venting and drainage, fresh air supply and return, exhaust and
make-up air, dehumidification and humidification equipment, water saving
equipment and all structural, plumbing and electrical work related thereto).
(ii) All equipment shall be contained within Tenant's premises except
rooftop air~ooled condensing units, make-up air units, and hood exhausters. Such
equipment located on the roof shall only be located in areas designated by the
Landlord to specified heights, and in accordance with Landlord's standard
details for roof-mounted equipment. All refrigerant piping shall be installed in
ceiling space and extended through roof adjacent to the equipment. Suction lines
shall be insulated.
(iii) Tenant's air handling units shall be floor-supported in Tenant's
space independent of Landlord's structural system.
b. Toilet rooms shall be exhausted per code. All roof mounted units for
second level Tenants shall be of aluminum construction.
C. Ductwork: Fabricated of galvanized sheet metal per American Society of
Heating, Refrigerating and Air-Conditioning Engineers' standards, as outlined
for "Low Pressure Ducts't in the latest edition of their "Guide and Data Book~'.
d. There shall be a provision to bring in 100~ fresh air for cooling
purposes anytime the outside temperature is below 600F. Such provision shall be
operated by automatic temperature controls
e. All first level outside air, relief air, exhaust air and other ductwork
requiring outdoor intake or venting except process requirements shall be
extended by Tenant to the common tenant service shafts. All outside air, relief
air and general exhaust ~oilet Room, Storage Room, etc.) ductwork shall connect
with backdraft dampers to sheet metal housings, provided at the base of the
common shafts.
f. All process exhausts, hood exhausts, equipment vents, and other
contaminated exhausts permitted by Landlord shall discharge vertically to the
atmosphere, and be located a minimum of 20 feet horizontally from any fresh air
intakes, properly dispersing odors or fumes away from same.
g. All supply and fresh-air ductwork shall be insulated, and all ductwork
on all levels shall be installed in concealed space above ceilings. Space
between ceiling and structure shall not be used as a return air plenum.
h. All air supplied to Tenant's area by its equipment shall not migrate to
the public mall or adjacent spaces.
i. Standards of design and construction shall be in accordance with latest
ASHRAE and SMACNA Guides.
j.Tenant shall provide all process requirements, hood exhausts, make-up air
supply, equipment vents and other contaminated exhausts. When permitted by
Landlord they shall extend in ductwork through the roof. This ductwork shall be
located in special shafts, built by Tenant, at locations and of construction
designated by Landlord.
<PAGE>
k.Ductwork which passes through service corridor and demising walls shall
have U.L. approved fire dampers located in ductwork at wall. Provide approved
access doors for such dampers.
l. Tenant roof equipment shall be located in areas designated by Landlord
to specified heights and in accordance with Landlord's standard details for
equipment on the roof.
(i) Should weight or location of equipment by Tenant require supports,
screens, cat walks or roof hatch and ladder, they shall be provided by Tenant in
accordance with standard details. Landlord shall determine when and where the
above shall be required.
(ii) All abo"e equipment shall be finish painted in accordance with
Landlord's paint schedule and specifications.
(iii) Tenant's roof equipment shall be clearly identified with Tenant's
name.
B. Electrical
1. Power available for the leased premises shall consist of the following
voltages:
a.For tenants located in buildings "D, F, F, G, 3 and K":
(i) Tenant spaces of 6,000 square feet and smaller will be provided with
120/208 volt, 3 phase, 4 wire. (ii) Tenant spaces in excess of 6,000 square feet
will be provided with 2771480 volt, 3 phase 4 wire.
b.For tenants located in buildings "L and N":
(i) All tenants will be provided with 277/480 volt, 3 phase, 4 wire.
2. Installation or modification of the existing system shall conform to the
following:
a. Power for Tenant's heating, ventilating and air conditioning equipment
(single and/or three phase), including electric duct heaters, unit heaters,
strip heaters, etc. will be taken from 480 volt, 3 phase, 3-wire rain tight
distribution panelboards located on the roof. Landlord will furnish and install
a plug-in fusible switch (mm. 60 amp) at Tenant's expense. Tenant shall furnish
and install fuses, all wiring and conduit from rooftop panelboards,
transformers, starters, relays, switches, connections, etc., required for
Tenant's equipment.
b.Dry type transformer (if required) shall be used for all 1201208 volt
requirements
c.Panelboards shall be designed for 20% minimum spare ampacity (0ased on
connected load) and 20% spare breaker space.
<PAGE>
STANDARD TOYS INTERNATIONAL RIDER
Section 1.01(a): On page 51, line 11, after the word any", insert "Landlord
represents that such covenants, restrictions and easements of record and the
terms and provisions of any such reciprocal easement and/or operating agreements
shall not materially interfere with Tenant's use of the leased premises
generally pursuant to Section 7.01 hereof."
Section 1.01(1))On page Si, line 27, after the word "Landlord.", insert
"Landlord shall use reasonable efforts to locate such facilities below the
floor, above Tenant's finished ceiling and/or ~thin or abuning dividing walls."
Section 1.02: At the end of the Section, insert "In the event Landlord
elects to add a departinent store or cause an expansion or contraction of the
Shopping Center or the regional retail development which directly affects all or
any portion of the leased premises, then Landlord upon one hundred eighty (180)
days prior notice in writing to Tenant may termmate this Lease. During the one
hundred eighty (180) day period Landlord shall offer to Tenant such alternative
location of approximately the same square footage and frontage as may be
available in the Shopping Center from time to tirne. Landlord shall not exercise
its rights under this paragraph on more than one (1) occasion during the term of
this Lease Tenant shall not be obligated to relocate or to have this Lease
terminate during the period between November 15 and the next following January
31 pursuant to this Section 1.02. In the event the parties agree on a specific
location, then this Lease shall be amended by substituting the new location for
the present location and minimum rent, the percentage rent break:point, and
Merchant's Association or promotional charges shall be
<PAGE>
proportionately adjusted. Tenant shall cause all construction in the new
premises to be completed and open for business within ninety (90) days following
delivery of the new premises to Tenant. In the event of relocation during the
first eight (8) leas~ years of the lease term, thirty (30) days following
Tenant's opening in the new premises and submission to Landlord of waivers of
lien covering Tenant's Work therein, Landlord shall reimburse to Tenant the
reasonable costs paid by Tenant in constructing Tenant's Work in the new
premises, plus incidental relocation expenses, such incidental relocation
expenses, not to exceed Ten Thousand Dollars ($10,000.00). Rent and other
charges shall be abated during any period from Tenant's closing in the original
premises to the date Tenant is obligated to reopen in the new premises. In the
event Landlord and Tenant are unable to agree on an alternative location, this
Lease shall terminate at the end of the said one hundred eighty (180) day period
In the event of such temlitiation or in the event of relocation after the first
eight (8) lease years of the lease term, within thirty (30) days following the
date that Tenant shall have vacated the premises, Landlord shall pay to the
Tenant a sum equal to the then unamortized cost of Tenant's leasehold
improvements, such amortization to be on the straight line basis over the ftill
term of the Lease. Tenant shall furnish to Landlord such backup information as
(iii) Bulk sales of distressed merchandise to jobbers, liquidators or the
like not t Landlord may reasonably require. Tenant shall deliver possession of
the leased prernises to Landlord on or before the termination and/or relocation
date in the condition required in this Lease and subject to all charges which
are due and owing or which shall be accrued up to such date (which charges shall
be paid to Landlord within thirty (30) days of such date). Tenant shall be
released from any and all flirther obligations pursuant to this Lease accruing
or arising from and after the date of termination with respect to the vacated
premises, however, in the event of relocation, Tenant shall remain liable for
such obligations and charges accruing under this Lease after the date of such
relocation."
Section 2.02(1))On page S2, line 41, after the word "be", delete the period
and insert "(or refunded to Tenant if Landlord is holding any overpayment
following expiration of the lease term)
At the end of the Section, insert "Notwithstanding the foregoing, if the
commencement date of the lease term is other than February 1, then the
percentage rental covering the first lease year shall be paid as follows: no
percentage rental shall be paid to Landlord during the first lease year; rather
Tenant's Gross Sales in excess of Minimum Gross Sales shall be determined for
the first twelve (12) calendar months following the commencement date of the
lease term, and percentage rental shall be paid on such excess prorated as to
the number of days of a full calendar year which are included in said first
lease year. Such percentage rental shall be payable on or before the last day of
the thirteenth (13th) month next following the commencement date of the lease
term."
Section 2.03: At the end of the Section, insert 'Notwithstanding anything
to the contrary contained in this Lease to the contrary, the following shall be
excluded from the definition of Gross Sales
(i) Sales to employees at discount to the extent same shall not exceed two
and one-half percent (2-1/2%) of Gross Sales per annum,
(ii) Sums and credits received in the settlement of claims for loss of or
damage to merchandise;
(iii) Bulk sales of distressed merchandise to jobbers, liquidators or the
like not t
<PAGE>
(iv) Gift certificates, or like vouchers, until such time as the same been
converted into a sale by redemption;
(v) At cost alteration workroom charges and at cost delivery charges.
(vi) Receipts from public telephones, stamp machines, public toilet locks,
~nd vending machines permitted by Landlord and installed solely for the use of
Tenant's employees,
(vii) Receipts from so-called "layaway" sales to the extent payments
thereon have not been received by Tenant; and
(viii) Interest, service or sales carrying charges or other charges,
howe~er denominated, paid by customers for extension of credit on sales
(provided credit card company charges shall not be excluded from Gross Sales)."
Section 2.05: On page 54, line 22, after the sentence ending with the word
"Section", insert If such taxes and assessments include assessments which are
being paid by Landlord in installments, then only the installments paid by
Landlord during a lease year shall be included in taxes and assessments for such
lease year.
On page 54, line 30, after the word "year", insert "(including the
percentage figure used for determining same)".
On page 54, line 36, in place of the deleted language, insert "installments
On page 54, line 37, after the word "hereunder", delete the period and
insert "(or refunded to Tenant if Landlord is holding any excess following
expiration of the lease term)."
On page 54, line 47, after the sentence ending with the word "relates",
insert "Upon Tenant's request, but no more often than once during each lease
year, Landlord shall supply Tenant with a copy of the tax bill pertaining to the
then current or prior (as requested by Tenant) fiscal period of the taxing
authority."
At the end of the Section, insert "Notwithstanding the foregoing, Tenant's
obligation hereunder shall not include the payment of any income tax of general
applicability to be paid by' Landlord, excepting that Tenant shall be obligated
for such tax to the extent such tax is assessed in lieu of or in substitution
for existing ad valorem taxes on real property which are hereafter modified,
abolished or repealed in whole or in part."
Section 2.06: On page S4, line 57, after the word "rent", insert
"(excluding notices of default)".
Section 3.01:
by Tenant". reasonably acceptable to". On page S5, line 8, after the word
"local", insert "sales"
On page 55, line 11, after the word "include,", insert "to the extent
maintained
On page S5, line 20, in place of the deleted language, insert "other device
(iii) Bulk sales of distressed merchandise to jobbers, liquidators or the
like not
<PAGE>
in the ordinary course of Tenant's business;
On page S5, line 21, after the word "be", insert "reasonably"
On page S5, line 22, in place of the deleted language. insert "three (3)"
Section 3.02: On page S5, line 32, in place of the deleted language, insert
"Tenant's chiet financial or other executive officer".
On page S5, line 34, in place of the deleted language, insert "ten (10)"
On page S5, line 36, after the word "require.". insert "If Landlord makes
an oral request to Tenant's corporate headquarters by telephone for Tenant's
monthly Gross Sales figure sooner than ten (10) days following the end of the
month in question, and at the time of Landlord's request Tenant has such figure
available, then Tenant agrees to immediately and orally inform Landlord of the
Gross Sales figure in question.
At the end of the Section, insert "Landlord shall use reasonable efforts to
keep Tenant's Gross Sales information confidential provided Tenant agrees that
same may be disclosed to Landlord's agents, its partners, the partners of such
partners, Landlord mortgagees or prospective mortgagees or to any purchaser or
prospective purchaser of all or any portion of Landlord's interest in the
regional retail development."
Section 4.01. On page S5. line 48. in place of the deleted language, insert
"Tenant"
On page S5, line 52, in place of the first deletion, insert "Tenant"
On page S5, line 52, in place of the second deletion, insert "ten (10)"
Section4.02 On page 55, lines 54 and 59, in place of the deleted "three
(3)", insert "ten (10)" On page S5, line 59, in place of the first deletion,
insert "Tenant"
" u n d e r st a t e d ".
( 2 % ) ".
( 4 % ) "
O n p a g e S 5, lines 63 and 68, in place of the deleted "at variance",
insert
On page S5, line 63, in place of the deleted percentage, insert "two
percent
On page S5, line 68, in place of the deleted percentage, insert "four
percent On page 55, line 68, after the word "more", insert "on three (3) or more
occasioris during the lease term".
On page S6, line 5, after the word "in", insert "Section 19.02 of".
On page 56, line 13, after the word "auditor", insert "which auditor shall
be an independent certified public accountant".
Section 5.01(1)):On page 56, line 48, after the word "by", insert "thirty
(30) days' written"
On page S6, lines 49, after the word "Tenant,", insert "and an opportunity
for Tenant to cure during such thirty (30) day period,".
On page S6, line 50, after the word "in", insert "Section 19.02 of".
On page S6, line 52, after the word "upon", insert "fifteen (15) days'
written"
On page 56, line 52, after the word "Tenant,", insert "and an opportunity
for Tenant to cure during such fifteen (15) day
<PAGE>
period,".
On page 56, line 67, after the word "upon", insert "fifteen (15) days'
written
On page S6, line 67, after the word "Tenant", insert "and an opportunity
for Tenant to cure during such fifteen (15) day period".
On page S7, line 1, in place of the deleted word, insert "adequately".
At the end of the Section, insert "If Landlord shall fail to respond to
Tenant s plans and specifications within fifteen (15) days following receipt
thereof, then the comniencement date set forth in the Data Sheet shall be
extended one (1) day for each day beyond such fifteen (15) day period that
Landlord fails to respond."
Section 5.02(a): At the end of the Subsection, insert "In no event shall
Landlord provide Tenant with a Notice of Availability under this Lease until
after Tenant has received a fully executed Lease from Landlord and until
Landlord's Work has been substantially completed."
Section 5.02(c): On page S7, line 39, after the word "possession.", delete
the period and insert "except for defects in Landlord's Work of which Tenant
notifies Landlord in writing within thirty (30) days from date of possession and
(if the leased premises have not previously been occupied) latent defects in
Landlord's Work of which Tenant notifies Landlord in writing within six (6)
months from the date of taking possession (which defects Landlord shall promptly
undertake to correct)".
<PAGE>
Section 6.01 At the end of the Section, insert "Notwithstanding the
foregoing, Tenant shall be permitted to make minor, nonstructural alterations to
the interior of the leased premises not to exceed Fifty Thousand and 00/l00ths
Dollars ($50,000.00) during any twelve (12) month period, provided that such
alterations shall not change the original design of the leased premises as
originally approved by Landlord, and further provided, Tenant shall not be
permitted to make any alterations whatsoever to the storefront, signage or
configuration or size of the sales area without Landlord's prior written
approval Tenant shall give Landlord fifteen (15) days' written notice prior to
undertaking any alterations which Tenant is permitted to make pursuant to this
paragraph."
Section 6.02. On page S8, line 14, after the word "iniprovements.", delete
the period and insert provided Tenant may remove trade fixtures installed by
Tenant upon expiration of the lease term if Tenant shall not be in default and
repairs any damage caused by installation or removal of same
Section 6.03: At the end of the Section, insert "In exercising its rights
under this Section. Landlord shall use reasonable efforts to minimize any
interference with access to or visibility of the leased premises from the
enclosed mall area.
Section 7.02: On page S8, line 56, in place of the deleted language, insert
"an adequate"
On page 58, line 57, in place of the deleted language, insert "an adequate"
On page S8, line 57, after the word "merchandise", delete the period and
insert "provided Tenant shall only be obligated to open and operate during those
days and hours during which at least seventy percent (70%) of the other Shopping
Center tenants (excluding banks, theatres and food operators) are similarly
obligated and in no event shall Tenant be obligated to open and operate on
Christmas Day or Thanksgiving Day."
On page 58, line 58, after the word "shall", insert "following four (4)
hours' notice to Tenant (which notice may be given by telecopier)".
On page 58, line 67, after the word "designate", delete the period and
insert "but no earlier than an hour prior to required opening or later than an
hour following permitted closing."
On page 59, line 2, after the word "improvements", insert "(excluding
structural changes or improvements which Landlord is responsible for pursuant to
Section 10 01)".
On page S9, line 11, after the word "discretion", delete the period and
insert provided, however, that Tenant may use and store such substances in the
leased premises as are normally and customarily used by retail commercial
establisliments (i.e., ink, ink removers and cleansers) if such use and storage
is in compliance with all laws and governmental regulations regarding the same."
On page 59, line 18, after the word "outs", delete the period and insert
"or where the merchandise has been returned more than thirty (30) days after
purchase or has been worn or is damaged."
On page S9, line 31, in place of the deleted language, insert "three feet
(3')".
On page 59, line 41, after the sentence ending with the word "require",
insert "The rates charged by such contractors shall be competitive with those
charged by other pest extermination contractors doing business in the vicinity
of the Shopping Center."
Section 7.03: On page SlO, line 12, after the word "date.", delete the
period and insert o' nor shall this Section apply to stores which are both (i)
operated under a trade name which is not the same or similar to that permitted
hereunder and (ii) are not selling merchandise under any of the same label(s) as
sold at the leased premises.
Section 7.05: On page SIO, line 34, after the sentence ending with the word
"require", insert "The rates charged by such contractors shall be
competitive with those charged by other solid waste disposal contractors
doing business in the vicinity of the Shopping Center."
<PAGE>
Section 8.02: On page SIO, line 49, after the word "development", insert
"if not for the exclusive use of a single occupant of the regional retail
development"
On page SlO, line 59, after the word "areas", insert "serving the Shopping
Center"
On page S1l, line 6, after the word "areas", insert "provided a reasonable
[UNREADABLE]
On page 513, line 11, after the word "repair" delete the period and insert
reasonable wear and tear and damage by casualty excepted
Section 10.02(c):On page 513, line 16, in place of the deleted number,
insert "twenty (20)"
Section10.02(d):On page 513, line 30, after the word "Landlord", delete the
period and insert provided such changes are required by Landlord's insurance
carrier as a result of Tenant's particular manner of use of the leased
premises."
Section10.02(2):On page 513, line 61, after the word "may,'t, insert "upon
five (5) days notice to Tenant (except in the event of an emergency in which
event no notice shall be required)".
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
On page S13, line 63, in place of the deleted language, insert "further".
Section 11.01(a): On page 514, line 12, after the word "risk", insert "(i
e.," special form")"
On page 514, line 18, after the word "amounts", insert "reasonably".
On page S~, line 27, after the word "hereof", delete the period and insert
", up to a maximum amount of Three Million Dollars ($3,000,000)."
On page S14, line 27, in place of the deleted language, insert "(x) Ten
Thousand and 00/lOOths Dollars ($10,000.00) if Tenant shall have a net worth of
less than Five Million Dollars ($5,000,000) and (y) a coinmercially reasonable
amount which satisfies the written requirements of Landlord's mortgagee, so long
as such requirements are consistent with industry standards, if Tenant shall
have a net worth of over Five Million Dollars ($5,000,000)."
Section 11.01(1)):On page 514, line 31, after the word "and", insert
"reasonably".
On page 514, line 32, after the word "blanket", insert ", umbrella or
excess liability".
Section 11.01(c): On page 514, line 54, after the number "(iv)", insert
"with respect to the insurance required under subpart (ii) of Section
11.01(a),".
Section 11.02(a): On page 515, line 29, in place of the deleted language,
insert "installments"
On page SiS, line 30, after the "11.02.", delete the period and insert ",
or promptly refunded to Teriant if Landlord is holding any excess following
expiration of the lease term."
Section 11.02(c): On page 515, line 44, after "11.02.", insert "Upon
Tenant's request, but no more often than once per lease year, Landlord shall
advise Tenant of the coverages and deductible amounts then in effect for the
insurance carried under subsections (a) and (1,) of this Section."
Section 11.03: On page 515, line 46, after the word "HARMLESS.", insert
"After the initial entry by Tenant (or its agents, employees, contractors or
representatives) into the leased premises,
On page S15, line 54, after the word "customers", insert "(to the extent
the acts or omissions of the customer took place within the leased premises)".
On page S15, line 56, after the word "the", insert "exclusive".
On page SiS, line 56, after the word "and", insert "(while being used by
Tenant)".
At the end of the Section. insert "Landlord covenants to indemnify Tenant.
and save it harmless (except for loss or damage resulting from the negligence of
Tenant, its agents, employees or contractors) from and against any and all
claims, actions, damages, liability and expense, including attorneys' fees, in
connection with loss of life, personal injury and/or damage to property arising
from or out of any occurrence (other than any occurrence caused by Tenant, its
agents, employees or contractors or arising in connection with Tenant's business
operations) in the common areas of the Shopping Center
Section 12.01~): On page S17, line 41, after the word "maximum", insert (i
e, without regard to discounts such as volume consumption or energy conservation
discounts)".
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
Section 13.04 (30)" On page S18, line 41, in place of the deleted amount,
insert "Fifty and O() Ii)()ih~ Dollars ($50 00)
Section 14.01: On page S18, line 61, after the word "Exchange", and within
the parenthetic~l insert "or a NASDAQ member stock exchange"
At the end of the Section, insert the following new paragraphs
"Notwithstanding the provisions of this Section 14 Ol to the contrary,
Landlord shall not witlihold its consent to an assignment of this Lease by
Tenant (by merger, consolidation or otherwise) (A) to another entity to which
Tenant (and Tenant's Guarantor [if an~) shall simultaneously he transferring at
least twenty-five (25) stores or (B) in connection with a transfer of a
controlling interest in Tenant's stock where Tenant (which shall, for the
purposes of the application of the provisions of this paragraph be deemed to be
the 'assignee' in connection with any such transfer of a controlling interest in
its stock) shall continue to own at least twenty-five (25) stores, provided that
in either of such events (A) or (B): (1) Tenant shall not at the time of such
assignment be in default under any of the terms, covenants and conditions of
this Lease, (2) such assignee shall, as of the date immediately prior to the
effective date of the assignment, have a net worth (1)ased on assets contained
within the United States) equal to or greater than the combined net worth of
Tenant and Tenant's Guarantor (if any) as of the date of Tenant's execution of
this Lease or as of the date immediately preceding the effective date of such
transfer. whichever of such net worth amounts shall be the greater, but in no
event less than Ten Million Dollars ($10,000,000), (3) such assignee shall agree
in writing to perform all of the unperformed terms. covenants and condinons
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
of this Lease (whether accruing prior to, on, or after the effective date of the
assignment), (4) Tenant and Tenant's Guarantor (if any) shall at all times
remain primarily obligated for the performance of the terms, covenants and
conditions of this Lease, (5) the assignee shall deposit with Landlord a sum
equal to four (4) months' minimum rent (at the then current rate) which Landlord
may apply against any monetary obligations of Tenant which are not satisfied as
of the effective date of the assignment (any portion of such sum which has not
been so applied within fourteen (14) months following the effective date of the
assignment shall be promptly returned to the assignee), (6) such assignee shall
have demonstrated experience in the operation of stores similar to the type
operated by Tenant in the leased premises and shall prior to the effective date
of the assignment be operating at least twenty~five (25) such stores or
representatives of Tenant's then management team remain involved for at least
two (2) years, and (7) no later than thirty (30) days prior to the effective
date of the assignment, Tenant shall have supplied Landlord with all back-up
information reasonably required by Landlord to establish that all of the
foregoing conditions have been satisfied. Notwithstanding the foregoing, in the
event the above conditions for assignment are satisfied, if Landlord's managing
agent shall be The Taubman Company or any of its affiliates or if any of
Landlord's current partners (or entities controlled by such partners) shall own
an interest in Landlord at the time of such assignment, then Landlord shall
nonetheless have the option of terminating this Lease provided Landlord shall
release Tenant from all obligations and liabilities accruing after the effective
date of termination if Tenant shall have timely vacated and delivered the leased
premises to Landlord in the condition required herein; provided Landlord shall
not have such
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
right to terminate this Lease if Tenant, in the event of an assignment pursuant
to clause (A) above, shall simultaneously be transferring (to the same assignee
as Tenant shall be transferring this Lease) all of its stores (including, in any
event, at least thirty-five [3~ stores) or, in the event of an assignment
pursuant to clause (B) above, Tenant shall continue to own all of the stores
owned by Tenant immediately preceding such assignment (including, in any event,
at least thirty-five [35] stores). Such option to terminate may be exercised by
Landlord during the period ninety (90) days following Landlord's receipi of
Tenant's notice of the proposed assignment and receipt of all back-up
information requested b~ Landlord in connection therewith. Any such termination
shall be effective upon not less than ninety (9()) days notice from Landlord.
Further, notwithstanding the foregoing, an assignment of this Lease to
Tenant' ~ parent corporation or to a wholly owned subsidiary corporation of
Tenant or of Tenant's parent corporation shall be permitted provided the
foregoing conditions (1), (3) and (4) shall be satisfied
Further, notwithstanding the foregoing, so long as the stock of Tenant's
parent corporation is traded on the New York Stock Exchange or on the Atnerican
Stock Exchange or a NASDAQ member stock exchange, then a merger, consolidation
or other reorganization of Tenant's parent corporation, or the sale, issuance or
transfer of any voting capital stock of Tenant's parent corporation, shall not
result in a prohibited assignment hereunder."
Section 16.01: On page S19, line 52, after the sentence ending with the
word "premises", insert "Notwithstanding the foregoing, Landlord shall not
unreasonably withhold its approval of Tenant's changing its trade name to the
name to which all of the other
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
Toys International stores are changed,
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
Tenant shall pay to Landlord the actual cost of changing directory signage
in the Shopping Center resulting from the change in trade name."
Section 16.03(1)): On page S20, line 28, after the word "thereof.", insert
"Tenant's obligations under this subsection 16.03(1,) as a member of the
Merchant's Association shall be in lieu of (and not in addition to) Tenant's
obligations under subsection 16.03(a). In no event shall Tenant's moneta~
obligations under this subsection exceed the amounts referenced in the last
three (3) sentences of this subsection."
Section 17.01: On page S20, line 63, after the word '~rent", insert "and
charges payable under Section 16.03 of this Lease".
On page 521, line 5, in place of the deleted language, insert "ninetieth
(90th)"
On page S21, line 11, after the sentence ending with the word "Landlord",
insert "In no event shall Tenant be obligated to undertake work equivalent to
Landlord's Work in the leased premises
On page S21, line 22, after the word "repair", insert "of improvements
(excluding items of Landlord's Work)".
On page S21, line 29, after the word "equipment.", insert "In the event the
leased premises are repaired pursuant to the provisions of this Section 17.01,
Landlord shall make all necessary repairs to items of Landlord's Work in the
leased premises which were damaged or destroyed
At the end of the Section, insert "Landlord shall not terminate this Lease
pursuant to the provisions of subparts (i) or (iii) above unless it also
terminates the leases of at least fifty percent (50%) of the other tenants
occupying Tenant's floor in Tenant's building Notwithstanding anything contained
in this Lease to the contrary, if more than twenty-five percent (25 %) of the
floor area of the leased premises is destroyed by casualty not insured against
by Landlord pursuant to Sections 8 03 or 11.02, and Landlord elects not to
terminate this Lease pursuant to the provisions of this Section, yet requires
Tenant to repair such damage, then within thirty (30) days following notice of
such situation, Tenant may terminate this Lease upon thirty (30) days notice to
Landlord. Landlord agrees to notify Tenant as to Landlord's election of whether
to rebuild or terminate within ninety (90) days after the occurrence. If during
the last two (2) years of the term hereof more than twenty-five percent (25%) of
the leased premises shall be damaged or destroyed by fire or other casualty,
then Tenant may elect to terminate this Lease by giving written notice to
Landlord of its election to so terminate, such notice to be given within ninety
(90) days after the occurrence of such damage or destruction."
Section 17.02: On page S21, line 42, in place of the deleted language,
insert "Notwithstanding anything contained in this Lease to the contrary, each".
At the end of the Section, insert "The insurance carried by Landlord
pursuant to Section 11.02 (or Section 8.03 if the last two (2) sentences of
subsection 11 02(c) apply) shall contain a waiver by the insurer of any right of
subrogation against Tenant. With respect to damage to the Shopping Center
buildings and improvements caused by Tenant, Tenant's liability to Landlord
shall be computed as if Landlord shall have been insuring the Shopping Center
buildings and improvements at full replacement cost (and shall have recovered
full replacement cost less deductibles) with deductibles no higher than the
greater of (x) those generally in effect at other enclosed first class regional
shopping centers in the State or (y) commercially reasonable amounts."
Section 19.01. On page S22, line 34, in place of the deleted language,
insert ~within ten (10) days following notice that same are".
On page S22, line 35, after the word "perform". insert "~eyond any
applicable cure period)".
On page S22, line 38, after the word "default", insert "('Cross Default')"
On page S22, line 47, in place of the deleted language, insert "delivered"
On page S22, line 47, after the word "Tenant". insert "(which thirty (30)
day period shall be extended for an additional reasonable period if same can not
be cured within thirty (30) days but Tenant shall have promptly commenced the
cure and shall be diligently pursuing the cure to completion)".
foregoing, the Cross Default provisions of subpart 19.01(a)(2) above shall
not apply to defaults under other leases unless the default under the other
lease(s) was (i) monetary in nature, or (ii) due to a failure to construct, open
or continuously operate; or (iii) due to a violation of the assignment
restrictions, or (iv) due to a violation of the permitted use provisions.'.
On page S22, line 60, in place of the first deletion, insert "one (1)
day's"
On page 522, line 60, in place of the second deletion, insert "but without"
On page 522, line 63, in place of the first deletion, insert "the same".
On page 522, line 63, in place of the deleted number, insert "three (3)"
On page S22, line 65, after the word "default", insert "of the same kind".
On page 522, line 65, in place of the deleted language, insert "such twelve
(12) month period".
On page S23, line 18, after the word "shall", insert "then"
Section 19.02' On page S23, line 30, after the word "any", insert
"necessary"
On page 523, line 43, after the word "term", insert "(discounted to present
value based upon an interest rate of six percent [6%] per annum)".
On page S23, line 48, after the sentence ending with the word "liability",
insert "Landlord agrees to attempt to mitigate by using good faith efforts to
relet the leased premises, but in no event shall Landlord be obligated to lease
the leased premises in any manner which is not in keeping with the caliber and
quality of the Shopping Center and the tenant-mix therein (as determmed by
Landlord) or to give preference to leasing the leased premises over other
available space in the Shopping Center
Section 19.03: On page S23, line 57, in place of the second deletion,
insert "the prevailing party shall recover from the other party".
Section 19.04: On page S24, line 1, after the word "any", insert
"non-compulsory"
Section 20.03: On page 524, line 33, in place of the deleted language,
insert "sixty (60)".
Section 21.01: On page S25, line 25, after the word "right", insert ", upon
three (3) days written notice to Tenant (except in the event of an emergency in
which event no notice shall be required)"
At the end of the Section, insert "In exercising its rights under this
Section, Landlord shall use reasonable efforts to minimize any interference with
the operation of Tenant's business. In the event Landlord shall enter the leased
premises under non-emergency situations in order to perform alterations,
improvements, additions or repairs to other portions of the Shopping Center, and
the same are not necessitated by Tenant's act, neglect or breach of this Lease,
and as a result thereof Tenant cannot operate its business and in fact closes
the entire premises to the public, and if such closing continues for a period of
seventy4wo (72) hours or more, Landlord agrees that from and after the
expiration of such seventy-two (72) hour period, minimum rent shall be abated
until such time as the condition giving rise to the Tenant closing has been
corrected at which time Tenant shall resume the payments."
Section 22.01: On page S25, line 52, after the word "as", insert
"reasonably"
Section 23.01: On page S26, line 4, in place of the deleted language,
insert "one-ninth (1/9th)"
Section 23.02: On page S26, line 16, after the word "any", insert
"unpermitted".
Section 25.02: On page S26, line 44, after the word "shall", insert "not".
On page S26, line 44, in place of the deleted language, insert "or against
Landlord as a matter of law."
Section 26.01: At the end of the Section, insert "Landlord acknowledges
that there is no security deposit due upon the inception of the term of this
Lease and that the security deposit provisions of this Lease apply solely in
connection with Article XX of this Lease."
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
Section 27.04' On page S28, line 8, in place of the deleted language.
insert "To the ~xtent Tenant has access to the leased premises through the
Shopping Center, the"
On page S28, line 14, after the word "Lease", insert ", except to the
extent the leased premises are rendered untenantable".
Section 27.05: On page S28, line 19, after the word "receipt", insert ", or
refusal of receipt"
On page S28, line 20, in place of the first deletion, insert "shall". On
page S28, line 20, in place of the second deletion, insert "return receipt
requested, postage prepaid".
On page S28, line 22. in place of the second deletion. insert "receipt or
refusal of receipt by".
On page S28, line 26, after the word "Lease", insert "Attention President"
On page S28, line 28, in place of the deleted language, insert "an"
At the end of the Section, insert "Notwithstanding anything contained
above, Landlord and Tenant may send notice with a reliable air courier service,
marked and prepaid for overnight delivery, and such notice shall be deemed given
one (1) day following deposit with such air courier."
Section 27.09: At the end of the Section, insert "So long as Tenant is a
publicly traded company, Tenant shall be deemed in compliance with the
provisions of this Section upon the furnishing to Landlord of a copy of its
published annual and quarterly reports."
Section 27.10: At the end of the Section, insert "In exercising its rights
under this Section, Landlord shall use reasonable efforts to minimize any
interference with the operation of Tenant's business."
Section 27.12(a): At the end of the Subsection, insert "Within thirty (30)
days following delivery of possession, Tenant's architect shall be permitted to
confirm Landlord's measurement of the floor area of the leased premises; in the
event of a disagreement between Landlord's architect and Tenant's architect,
both architects shall choose a third (3rd) independent architect whose
measurement shall be final and binding. Followin any such determination, the
floor area of the leased premises shall be adjusted to conform to the actual
floor area, but there shall be no adjustment in minimum rent or percentage rent
Section 27.12~): On page S29, line 20, in place of the deleted number,
insert "25,000"
On page S29, line 20, after the word "more", insert "of contiguous (i e ,
not totally separated by demising walls) floor area".
Section 27.16: On page S30, line 7, after the word "irrevocable", delete
the period and insert "for a period of thirty (30) days; thereafter Tenant may
revoke its execution prior to Landlord's execution upon five (5) days notice to
Landlord."
Section 27.19: On page S30, line 31, after the word "Lease", insert "beyond
any applicable grace or cure period expressly set forth herein".
Section 27.21: On page S30, line 49, after the word "entity.", delete the
period and insert "provided Tenant may disclose the contents of this Lease (i)
to comply with any governmental orders, laws, rules or regulations applicable to
it or its principals, (ii) to professionals assisting Tenant to so comply and
(iii) to any potential investors in, lenders to or purchasers of Tenant's
business; provided however Tenant warrants to Landlord that all of the
individuals who, and entities which, are recipients of such information shall
comply with the confidentiality provisions of this Section
Exhibit "B":
Section III.H.1. On page 3, line 37, after the word "Landlord ", insert
"Notwithstanding anything contained to the contrary in this Lease or the
exhibits hereto, if within fifteen (15) days after Landlord gives Tenant
Landlord's Notice of Availability (as prc'\ ided in Section 5 02) and prior to
Tenant's conimencement of any construction in the leased premises, (x) Tenant
gives Landlord written notice of any asbestos containing materials (ACM) in the
leased premises which notice shall specify in detail the location, nature and
quantity of the ACM in the leased premises, and (y) the ACM shall have been
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
installed by Landlord, and (z) the applicable governmental authorities
require the removal or encapsulation of the ACM in connection with the
performance of Tenant's Work, then Landlord shall give Tenant written notice
("Landlord's ACM Notice") specifying whether or not Landlord elects to cause the
removal or encapsulation of the ACM. If Landlord elects to remove or encapsulate
such ACM then the commencement date set forth in the Data Sheet shall be
extended for the period from Landlord's ACM Notice through completion of removal
or encapsulation. If Landlord does not elect to cause the removal or
encapsulation of such ACM as required by the applicable governmental authorities
in connection with the performance of Tenant's Work then Tenant shall have the
option to terminate this Lease, by and upon written notice delivered to Landlord
within five (5) days after Tenant's receipt of Landlord's ACM Notice; provided
however, that Landlord may vitiate such termination by agreeing to so remove or
encapsulate such ACM by notice sent to Tenant no later than ten (10) days
followmg Landlord's receipt of Tenant's notice of termination. Tenant
acknowledges and agrees that termination of this Lease as provided above shall
be Tenant's sole and exclusive remedy with respect to the presence of any ACM in
the leased premises and agrees not to bring or assert any claim whatsoever
against Landlord on account of the presence or condition of any ACM in the
leased premises. If Landlord elect to remove or encapsulate such ACM, Landlord
shall not be responsible for any ACM installed by Landlord which is not
identified by Tenant in Tenant's notice to Landlord and in no event shall the
existence of any ACM be deemed to be a defect (latent or otherwise) in
Landlord's Work, it being understood that, except as otherwise herein set forth,
Tenant accepts the leased premises in an "as is" condition without
representation by Landlord, or any person or entity on behalf of Landlord, as to
the condition thereof Tenant shall disclose the existence of any ACM only to
Landlord, its agents and representatives and shall otherwise keep confidential
any information obtained regarding ACM in the leased premises.
On page 3 of 11, line 41, in place of the deleted language, insert
"asbestos containing".
On page 3 of 11, line 43, after the word "All", insert "such"
Section Iv.C.: On page 4 of 11, line 51, after the "a.", insert "Subject to
the provisions of Section 1.01(0) ofthe Rider to the Lease,".
Section V: On page 6 of 11, line 62, after the comma after the
parenthetical ending with the word "completion", insert "Landlord shall have the
right to require".
On page 6 of 11, line 64, after the word "notices", insert "(other than
notices of default or notices of failure of performance)".
Section v'.A.1: On page 8 of 11, line 7, in place of the deleted language,
insert "in time to open by the required operling date set forth in the Lease".
Section Vl.B.5: On page 8 of 11, line 58, in place of the deleted language,
insert "sixty (60)"
On page 8 of 11, line 58, after the word "after", insert "written".
On page 8 of 11, line 61, in place of the deleted language, insert "one
hundred twenty (120)"
On page 8 of 11, line 61, after the word "Landlord's", insert "written"
On page 8 of 11, line 63, after the word "Tenant", insert "; provided
however, if such one hundred twenty (120) day period would expire between
October 14th and the next February 15th, its expiration shall be extended to the
next June 15th"
Section v'.D.2: On page 9 of 11, line 23, in place of the deleted language,
insert "give Landlord prior written notice of Tenant's readiness".
Section v'.D.3: On page 9 of 11, line 49, after the word "contractors",
insert "reasonably"
Section v'.G.1.b.: On page 10 of 11, line 35, after the word "expenses.",
insert "The charge to Tenant under this subparagraph G. 1 .b. shall not exceed
Three Hundred and OOIlOOths Dollars ($300.00)."
Section v'.F.1: On page 10 of 11, line 37, after the word "the", insert
"date thirty (30) days following the".
[End of text of the Rider; signature and acknowledgment pages appear at end
of Data Sheet on the pages immediately preceding the Addendum.]
foregoing, the Cross Default provisions of subpart 19.01(a)(2) above shall
not apply to defaults under other leases unless the default under the other
lease(s) was (i) monetary in nature, or (ii) due to a failure to construct, open
or continuously operate; or (iii) due to a violation of the assignment
restrictions, or (iv) due to a violation of the permitted use provisions.'.
On page S22, line 60, in place of the first deletion, insert "one (1)
day's"
On page 522, line 60, in place of the second deletion, insert "but without"
On page 522, line 63, in place of the first deletion, insert "the same".
On page 522, line 63, in place of the deleted number, insert "three (3)"
On page S22, line 65, after the word "default", insert "of the same kind".
On page 522, line 65, in place of the deleted language, insert "such twelve
(12) month period".
On page S23, line 18, after the word "shall", insert "then"
Section 19.02' On page S23, line 30, after the word "any", insert
"necessary"
On page 523, line 43, after the word "term", insert "(discounted to present
value based upon an interest rate of six percent [6%] per annum)".
On page S23, line 48, after the sentence ending with the word "liability",
insert "Landlord agrees to attempt to mitigate by using good faith efforts to
relet the leased premises, but in no event shall Landlord be obligated to lease
the leased premises in any manner which is not in keeping with the caliber and
quality of the Shopping Center and the tenant-mix therein (as determmed by
Landlord) or to give preference to leasing the leased premises over other
available space in the Shopping Center
Section 19.03: On page S23, line 57, in place of the second deletion,
insert "the prevailing party shall recover from the other party".
Section 19.04: On page S24, line 1, after the word "any", insert
"non-compulsory"
Section 20.03: On page 524, line 33, in place of the deleted language,
insert "sixty (60)".
Section 21.01: On page S25, line 25, after the word "right", insert ", upon
three (3) days written notice to Tenant (except in the event of an emergency in
which event no notice shall be required)"
At the end of the Section, insert "In exercising its rights under this
Section, Landlord shall use reasonable efforts to minimize any interference with
the operation of Tenant's business. In the event Landlord shall enter the leased
premises under non-emergency situations in order to perform alterations,
improvements, additions or repairs to other portions of the Shopping Center, and
the same are not necessitated by Tenant's act, neglect or breach of this Lease,
and as a result thereof Tenant cannot operate its business and in fact closes
the entire premises to the public, and if such closing continues for a period of
seventy4wo (72) hours or more, Landlord agrees that from and after the
expiration of such seventy-two (72) hour period, minimum rent shall be abated
until such time as the condition giving rise to the Tenant closing has been
corrected at which time Tenant shall resume the payments."
Section 22.01: On page S25, line 52, after the word "as", insert
"reasonably"
Section 23.01: On page S26, line 4, in place of the deleted language,
insert "one-ninth (1/9th)"
Section 23.02: On page S26, line 16, after the word "any", insert
"unpermitted".
Section 25.02: On page S26, line 44, after the word "shall", insert "not".
On page S26, line 44, in place of the deleted language, insert "or against
Landlord as a matter of law."
Section 26.01: At the end of the Section, insert "Landlord acknowledges
that there is no security deposit due upon the inception of the term of this
Lease and that the security deposit provisions of this Lease apply solely in
connection with Article XX of this Lease."
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
Section 27.04' On page S28, line 8, in place of the deleted language.
insert "To the ~xtent Tenant has access to the leased premises through the
Shopping Center, the"
On page S28, line 14, after the word "Lease", insert ", except to the
extent the leased premises are rendered untenantable".
Section 27.05: On page S28, line 19, after the word "receipt", insert ", or
refusal of receipt"
On page S28, line 20, in place of the first deletion, insert "shall". On
page S28, line 20, in place of the second deletion, insert "return receipt
requested, postage prepaid".
On page S28, line 22. in place of the second deletion. insert "receipt or
refusal of receipt by".
On page S28, line 26, after the word "Lease", insert "Attention President"
On page S28, line 28, in place of the deleted language, insert "an"
At the end of the Section, insert "Notwithstanding anything contained
above, Landlord and Tenant may send notice with a reliable air courier service,
marked and prepaid for overnight delivery, and such notice shall be deemed given
one (1) day following deposit with such air courier."
Section 27.09: At the end of the Section, insert "So long as Tenant is a
publicly traded company, Tenant shall be deemed in compliance with the
provisions of this Section upon the furnishing to Landlord of a copy of its
published annual and quarterly reports."
Section 27.10: At the end of the Section, insert "In exercising its rights
under this Section, Landlord shall use reasonable efforts to minimize any
interference with the operation of Tenant's business."
Section 27.12(a): At the end of the Subsection, insert "Within thirty (30)
days following delivery of possession, Tenant's architect shall be permitted to
confirm Landlord's measurement of the floor area of the leased premises; in the
event of a disagreement between Landlord's architect and Tenant's architect,
both architects shall choose a third (3rd) independent architect whose
measurement shall be final and binding. Followin any such determination, the
floor area of the leased premises shall be adjusted to conform to the actual
floor area, but there shall be no adjustment in minimum rent or percentage rent
Section 27.12~): On page S29, line 20, in place of the deleted number,
insert "25,000"
On page S29, line 20, after the word "more", insert "of contiguous (i e ,
not totally separated by demising walls) floor area".
Section 27.16: On page S30, line 7, after the word "irrevocable", delete
the period and insert "for a period of thirty (30) days; thereafter Tenant may
revoke its execution prior to Landlord's execution upon five (5) days notice to
Landlord."
Section 27.19: On page S30, line 31, after the word "Lease", insert "beyond
any applicable grace or cure period expressly set forth herein".
Section 27.21: On page S30, line 49, after the word "entity.", delete the
period and insert "provided Tenant may disclose the contents of this Lease (i)
to comply with any governmental orders, laws, rules or regulations applicable to
it or its principals, (ii) to professionals assisting Tenant to so comply and
(iii) to any potential investors in, lenders to or purchasers of Tenant's
business; provided however Tenant warrants to Landlord that all of the
individuals who, and entities which, are recipients of such information shall
comply with the confidentiality provisions of this Section
Exhibit "B~~:
Section III.H.1. On page 3, line 37, after the word "Landlord ", insert
"Notwithstanding anything contained to the contrary in this Lease or the
exhibits hereto, if within fifteen (15) days after Landlord gives Tenant
Landlord's Notice of Availability (as prc'\ ided in Section 5 02) and prior to
Tenant's conimencement of any construction in the leased premises, (x) Tenant
gives Landlord written notice of any asbestos containing materials (ACM) in the
leased premises which notice shall specify in detail the location, nature and
quantity of the ACM in the leased premises, and (y) the ACM shall have been
Section 13.01:On page S17, line 65, in place of the deleted number, insert
"thirty (30)"
<PAGE>
installed by Landlord, and (z) the applicable governmental authorities
require the removal or encapsulation of the ACM in connection with the
performance of Tenant's Work, then Landlord shall give Tenant written notice
("Landlord's ACM Notice") specifying whether or not Landlord elects to cause the
removal or encapsulation of the ACM. If Landlord elects to remove or encapsulate
such ACM then the commencement date set forth in the Data Sheet shall be
extended for the period from Landlord's ACM Notice through completion of removal
or encapsulation. If Landlord does not elect to cause the removal or
encapsulation of such ACM as required by the applicable governmental authorities
in connection with the performance of Tenant's Work then Tenant shall have the
option to terminate this Lease, by and upon written notice delivered to Landlord
within five (5) days after Tenant's receipt of Landlord's ACM Notice; provided
however, that Landlord may vitiate such termination by agreeing to so remove or
encapsulate such ACM by notice sent to Tenant no later than ten (10) days
followmg Landlord's receipt of Tenant's notice of termination. Tenant
acknowledges and agrees that termination of this Lease as provided above shall
be Tenant's sole and exclusive remedy with respect to the presence of any ACM in
the leased premises and agrees not to bring or assert any claim whatsoever
against Landlord on account of the presence or condition of any ACM in the
leased premises. If Landlord elect to remove or encapsulate such ACM, Landlord
shall not be responsible for any ACM installed by Landlord which is not
identified by Tenant in Tenant's notice to Landlord and in no event shall the
existence of any ACM be deemed to be a defect (latent or otherwise) in
Landlord's Work, it being understood that, except as otherwise herein set forth,
Tenant accepts the leased premises in an "as is" condition without
representation by Landlord, or any person or entity on behalf of Landlord, as to
the condition thereof Tenant shall disclose the existence of any ACM only to
Landlord, its agents and representatives and shall otherwise keep confidential
any information obtained regarding ACM in the leased premises.
On page 3 of 11, line 41, in place of the deleted language, insert
"asbestos containing".
On page 3 of 11, line 43, after the word "All", insert "such"
Section Iv.C.: On page 4 of 11, line 51, after the "a.", insert "Subject to
the provisions of Section 1.01(0) ofthe Rider to the Lease,".
Section V: On page 6 of 11, line 62, after the comma after the
parenthetical ending with the word "completion", insert "Landlord shall have the
right to require".
On page 6 of 11, line 64, after the word "notices", insert "(other than
notices of default or notices of failure of performance)".
Section v'.A.1: On page 8 of 11, line 7, in place of the deleted language,
insert "in time to open by the required operling date set forth in the Lease".
Section Vl.B.5: On page 8 of 11, line 58, in place of the deleted language,
insert "sixty (60)"
On page 8 of 11, line 58, after the word "after", insert "written".
On page 8 of 11, line 61, in place of the deleted language, insert "one
hundred twenty (120)"
On page 8 of 11, line 61, after the word "Landlord's", insert "written"
On page 8 of 11, line 63, after the word "Tenant", insert "; provided
however, if such one hundred twenty (120) day period would expire between
October 14th and the next February 15th, its expiration shall be extended to the
next June 15th"
Section v'.D.2: On page 9 of 11, line 23, in place of the deleted language,
insert "give Landlord prior written notice of Tenant's readiness".
Section v'.D.3: On page 9 of 11, line 49, after the word "contractors",
insert "reasonably"
Section v'.G.1.b.: On page 10 of 11, line 35, after the word "expenses.",
insert "The charge to Tenant under this subparagraph G. 1 .b. shall not exceed
Three Hundred and OOIlOOths Dollars ($300.00)."
Section v'.F.1: On page 10 of 11, line 37, after the word "the", insert
"date thirty (30) days following the".
[End of text of the Rider; signature and acknowledgment pages appear at end
of Data Sheet on the pages immediately preceding the Addendum.]
Exhibit 10.129
Lease Agreement - Rancho Cucamonga
<PAGE>
ORIGINAL
STANDARD INDUSTRIALICOMMERCIAL MULTI-TENANT LEASE--MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1 Basic Provisions ("Basic Provisions"').
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
February 20.19 99 ,is made by and between SHOOK PROPERTIES, INC . A CALIFORNIA
CORPORATION ("Lessor") and PLAY CO. TOYS AND ENTERTAINMENT, INC., A DELAWARE
CORPORATION ("Lessee"),
(collectively, the "Parties," or individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 9950 W. Foothill Blvd. , Suite U
,located in the City of RANCHO CUCAMONGA County of SAN BERNARDINO , State of CA
, with zip code91730 , as outlined on Exhibit A attached
hereto ("Premises"). The "Building" is that certain building containing the
Premises and generally described as (describe briefly the nature of the
Building):
APPROXIMATELY 11.597 SOU'RRE FEET OF RETAIL SPACE LOCATED IN SUITE U AT
RANCHO CUCAMONGA VILLAGE. A SINGLE STORY RETAIL CENTER CONSISTING OF
APPROXIMATELY 43.500 SOUARE FEET OF SPACE
In addition to Lessee's rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively referred to as
the "Industrial Center." (Also see Paragraph 2.)
1.2(b) Parking: THIRTY (30) unreserved vehicle parking spaces ("Unreserved
Parking Spaces"); and -0-reserved vehicle parking spaces ("Reserved Parking
Spaces") (Also see Paragraph 2.6.)
1.3 Term: 5 years and-0- months ("Original Term") commencing APRIL 1. 1999
("Commencement Date") and ending MARCH 31. 2004 ("Expiration Date"). (Also
see Paragraph 3.)
1.4 Early Possession: NOT APPLICABLE ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $7.585.00 + CAM per month ("Base Rent"). payable on the 1ST
day of each month commencing APRIL 1. 1999 . (Also see Paragraph 4.) [x] If this
box is checked, this Lease provides for the Base Rent to be adjusted per
Addendum ONE , attached hereto.
1.6(a) Base Rent Paid Upon Execution: $7' 585. 00+CAM as Base Rent for the
period APRIL 1 1999 TO APRIL 30. 1999
1.6(b) Lessee's Share of Common Area Operating Expenses: 27.41% percent (
27.410 %) ("Lessee's Share") as determined by
[x] prorata square footage of the Premises as compared to the total square
footage of the Building or [] other criteria as described in Addendum ________
2
<PAGE>
1.7 Security Deposit: $ NONE ("Security Deposit") (Also see Paragraph 5.)
1.8 Permitted Use: RETAIL SALES OF TOYS
("Permitted Use"). (Also see Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph 8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to
by the Parties (check applicable boxes):
[x] NONE represents Lessor exclusively ("Lessor's Broker");
[x] NONE represents Lessee exclusively ("Lessee's Broker"); or
[x] NONE represents both Lessor and Lessee ("Dual Agency"). (Also see
Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of $ -0- )
for brokerage services rendered by said Broker(s) in connection with this
transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are lobe
guaranteed by NOT APPLICABLE
("Guarantor"). (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs A through H , all of which constitute a part of this
Lease. A through H, and Exhibits
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems. fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be In good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
3
<PAGE>
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. if the Premises do not comply with said warranties, Lessor
shall, except as ottrerwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense. as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that lie
Permitted Use :.n Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning.
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 Lessee as Prior Owner/occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
noncompliance of~e Premises with said warranties. Initials: ______________
<PAGE>
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehides no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permilted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition 'to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be Immediately payable upon demand by Lessor.
4
<PAGE>
(c) Lessor shall at the Coinmencement Date of this Lease, provide the
parking facilities required by Applicable Law.
2.7 Common Areas -' Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 Common Areas -~ Lessee's Rights. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. in the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.9 Common Areas Rules and Regulations. Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the rtght, from time to time, to establish, modify, amend
and enforce reasonable Rules and Regulations with respect thereto in accordance
with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.
2.10 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Industrial
Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deem to be appropriate.
5
<PAGE>
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in Paragraph
1.4 and if Lessee totally or partially occupies the Premises after the Early
Possession Date but prior to the Commencement Date, the obligation to pay Base
Rent shall be abated for the period of such early occupancy. All other terms of
this Lease, however, (including but not limited to the obligations to pay
Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Dale of the Original
Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver possession
of the Premises to Lessee by the Early Possession Date, if one is specified in
Paragraph 1.4, or if no Early Possession Date is specified, by the Commencement
Date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease, or the obligations of Lessee
hereunder, or extend the term hereof, but in such case, Lessee shall not, except
as otherwise provided herein, be obligated to pay rent or perform any other
obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (80) day period, cancel this Lease, in which event the
Parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, ~at Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which U'e Lessee wo~~ ha~e oo~erw'se e~~o~ert vn~e~ '~e 'eP. m~ ~t'sol,
b~ m"nu~ an~ day~ oP. de~ay cause~ by the acts, changes or omissIons of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as the
same may be adjusted from time to lime, to Lessor in lawful money of the United
States, without offset or deduction, on or before the day on which it is due
under the terms of this Lease. Base Rent and all other rent and charges for any
period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "Common Area Operating Expenses" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and operation
of the Industrial Center, including, but not limited to, the following:
6
<PAGE>
(I) The operation, repair and maintenance, in neat, clean, good
order and condition, of the following:
(aa) The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electridly and telephone to service
the Common Areas.
(iii) Trash disposal, property management and security services
and the costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of Common
Areas.
(v) Real Property Taxes (as defined in Paragraph 10.2) to be paid
by Lessor for the Building and the Common Areas under Paragraph 10 hereof.
(vi) The cost of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss concerning the
Building or the Common Areas.
(viii) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere In this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed
<PAGE>
Lessee's Share as indicated on said statement, Lessee shall be credited the
amount of such over-payment against Lessee's Share of Common Area Operating
Expenses next becoming '~ue. If Lessee's payments under this Paragraph 4.2(d)
during said preceding year were less than Lessee's Share as indicated on said
statement, Lessee shall pay to Lessor the amount of the deficiency within len
(10) days after delivery by Lessor to Lessee of said statement.
5 Security Deposit. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.7 as security for
Lessee's faithful performance of Lessee's obligations under this Lease. If
Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor may
use, apply or retain all or any portion of said Security Deposit for the payment
of any amount due Lessor or to reimburse or compensate Lessor for any liability,
cost, expense, loss or damage (including attorneys' fees) which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. Any time the Base Reot
increases during the term of this Lease, Lessee shall, upon written request from
Lessor, deposit additional monies with Lessor as an addition to the Security
Deposit so that the, total amount of the Security Deposit shall at all times
bear the same proportion to the then current Base Rent as the initial Security
Deposit bears to the initial Base Rent set forth in Paragraph 1.5. Lessor shall
not be required to keep all or any part of the Security Deposit separate from
its general accounts. Lessor shall, at the expiration or earlier termination of
the term hereof and after Lessee has vacated the Premises, return to Lessee (or,
at Lessor's option, to the last assignee, if any, of Lessee's interest herein),
that portion of the Security Deposit not used or applied by Lessor. Unless
otherwise expressly agreed in writing by Lessor, no part of the Security Deposit
shall be considered to be held in trust, to bear interest or other increment for
its use, or to be prepayment for any monies 10 be paid by Lessee under this
Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted Use
set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates waste or a nuisance,
or that disturbs owners andJor occupants of, or causes damage to the Premises or
neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its consent
to any written request by Lessee, Lessee's assignees or subtenants, and by
prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lessor's reasonable objections to
the change in use.
7
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6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance" as used
in this Lease shall mean any product, substance, chemical, material or waste
whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity In or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "Reportable Use" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but upon notice to Lessor and in compliance
with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises or neighboring properties to any meaiiingful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to any Reportable Use of
any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in Its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Lessor's option, removal on or before Lease expiration
or earlier termination) of reasonably necessary protective modifications to the
Premtses (such as concrete encasements) and/o an additional Security Deposit
under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill.
release, discharge of, or exposure to, such ilazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnity, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or Involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
8
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environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations vn~e1 '~s ~eas~ ~ 'esp~ct'0
\\az~d'o'u~ S'o~sta~tes, ~n'e~ ~pec'1'ca~ ~o agTeed by ~e~~or 'n ~(~ng a' '~e
Yime ol ~ agreemen~.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (I) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. Maintenance, RepaIrs, Utility Instaliations, Trade Fixtures and Alterations
7.1 Lessee's ObligatIons.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
9
<PAGE>
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and maintain a
contract, with copies to Lessor, in customary form and substance for and with a
contractor specializing and experienced in the inspection, maintenance and
service of the heating, air conditioning and ventilation system for the
Premises. However, Lessor reserves the right, upon notice to Lessee, to procure
and maintain the contract for the heating, air conditioning and ventilating
systems, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand,
for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this Paragraph
7.1, Lessor may enter upon the Premises after ten (10) days' prior written
notice to Lessee (except in the case of an emergency, in which case no notice
shall be required), perform such obligations on Lessee's behalf, and put the
Premises in good order, condition and repair, in accordance with Paragraph 13.2
below. 7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction), and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
extefior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection syttems and equipment, fire hydrants, parking lots,
<PAGE>
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Con'~non Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter In effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Building, Industrial Center or
Common Areas in good order, condition and repair.
7.3 Utility InstallatIons, Trade Fixtures, Alterations,
(a) Definitions; Consent Required. The term "Utility installations" is
used in this Lease to refer to all air lines, power panels, electrical
distributi6n, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
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Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
(b) Consent. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with detailed plans. All consents given by Lessor,
whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall
be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) Lien Protection, Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal and to
cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
11
<PAGE>
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may require that
any or all Lessee-Owned Alterations or Utility Installations be removed by the
expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) SurrenderiRestoration, Lessee shall surrender the Premises by the end
of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or groundwater contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
8. insurance; Indemnity,
8.1 Payment of Premiums. The cost of premiums for the insurance policies
maintained by Lessor under this Paragraph 8 shall be a Common Area Operating
Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods commencing
prior to, or extending beyond, the term of this Lease shall be prorated to
coincide with the corresponding Commencement Date or Expiration Date.
8.2 Liability insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during the
term of this Lease a Commercial General Liability policy of insurance protecting
Lessee, Lessor and any Lender(s) whose names have been provided to Lessee in
writing (as additional insureds) against claims for bodily injury, personal
injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
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8.3 Property insurance.Building, improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and to any Lender(s), insuring against loss or damage to the
Premises. Such insurance shall be for full replacement cost, as the same shall
exist from time to time, or the amount required by any Lender(s), but in no
event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installalions, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Building required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered loss, but not including plate glass insurance. Said
policy or policies shall also contain an agreed valuation provision in lieu of
any co-insurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the dty nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during the
term of this Lease a policy or policies in the name of Lessor, with loss payable
to Lessor and any Lender(s), insuring the loss of the full rental and other
charges payable by all lessees of the Building to Lessor for one year (including
all Real Property Taxes, insurance costs, all Common Area Operating Expenses and
any scheduled rental increases). Said insurance may provide that in the event
the Lease is terminated by reason of an insured loss, the period of indemnity
for such coverage shall be extended beyond the date of the completion of repairs
or replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any co-insurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income, Real
Property Taxes, insurance premium costs and other expenses, if any, otherwise
payable, for the next 12-month period. Common Area Operating Expenses shall
include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the premiums
for the property insurance of the Building and for the Common Areas or other
buildings in the Industrial Center if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
(d) Lessee's improvements. Since Lessor is the Insuring Party, Lessor shall
not be required to insure Lessee-Owned Alterations and Utility Installations
unless the item in question has become the property of Lessor under the terms of
this Lease.
8.4 Lessee's Property insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed
$1,000.00 per occurrence. The proceeds from any such insurance shall be used by
Lessee for the replacement of personal property and the restoration of Trade
Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request
from Lessor, Lessee shall provide Lessor with written evidence that such
insurance is In force.
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8.5 insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the ~state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender, as set forth
in the most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee ~ be delivered to Lessor, within seven
(7) days after the earlier of the Ea~iy Possession Date or the Commencement
Date, certified copies of, or certificates evidencing the existence and amounts
of, the insurance required under Paragraph 8.2(a) and 8.4. No such policy shall
be cancelable or subject to modification except after thirty (30) days' prior
written notice to Lessor. Lessee shall at least thirty (30) days prior 10 the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss or damage to their property arising out of or incident to the
perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. in case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee, upon notice from Lessor, shall defend
the same at Lessee's expense by counsel reasonably satisfactory to Lessor and
Lessor shall cooperate with Lessee in such defense. Lessor need not have first
paid any such claim in order to be so Indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
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9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the tl~en Replacement Cost (as defined in sub-paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or discovery
of a condition involving the presence of, or a contamination by, a Hazardous
Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.
9.2 Premises Partial Damage insured Loss. If Premises Partial Damage that
is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect. In the event, however, that there is a shortage of
insurance proceeds and such shortage is due to the fact that, by reason of the
unique nature of the improvements in the Premises, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage In insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, Lessor shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within such ten (10) day period,
and if Lessor does not so elect to restore and repair, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or destruction.
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Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than this Paragraph 9 2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3 Partial Damage -' Uninsured Loss. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor, may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. in the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's
option, terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (I) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense, repair such damage as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option and provide such funds or assurance during such period,
then this Lease shall terminate as of the date set forth in the first sentence
of this Paragraph 9.5.
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9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (I) Premises Partial Damage or (ii) Hazardous Substance
Condition for which Lessee is not legally responsible, the Base Rent, Common
Area Operating Expenses and other charges, if any, payable by Lessee hereunder
for the period during which such damage or condition, its repair, remediation or
restoration continues, shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired, but not in excess of proceeds from
insurance required to be carried under Paragraph 8.3(b). Except for abatement of
Base Rent, Common Area Operating Expenses and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises under
the provisions of this Paragraph 9 and shall not commence, in a substantial and
meaningful way, the repair or restoration of the Premises within ninety (90)
days after such obligation shall accrue, Lessee may, at any time prior to the
commencement of such repair or restoration, give written notice to Lessor and to
any Lenders of which Lessee has actual notice of Lessee's election to terminate
this Lease on a date not less than sixty (60) days following the giving of such
notice. If Lessee gives such notice to Lessor and such Lenders and such repair
or restoration is not commenced within thirty (30) days after receipt of such
notice, this Lease shall terminate as of the date specified in said notice. If
Lessor or a Lender commences the repair or restoration of the Premises within
thirty (30) days after the receipt of such notice, this Lease shall continue in
full force and effect. "Commence" as
used In this Paragraph 9.6 shall mean either the unconditional authorization of
the preparation of the required plans, or the beginning of the actual work on
the Premises, whichever occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and ~ffect, but subject
to Lessor's rights under
Paragraph 6.2(c) and Paragraph 13), Lessor may, at Lessor's option, either (i)
investigate and remediate such hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) limes the then monthly Base
Rent or $100,000.00 whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the date of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the excess costs
of (a) investigation and remediation of such Hazardous Substance Condition to
the extent required by Applicable Requirements, over (b) an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with the funds required of Lessee or satisfactory
assurance thereof within thirty (30) days following said commitment by Lessee.
In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such investigation and remediation as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the time
period specified above, this Lease shall terminate as of the date specified in
Lessor's notice of termination.
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9.8 Termination Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, Lessor shall return to Lessee any advance payment made by
Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is
not then required to be, used by Lessor under the terms of this Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined
in Paragraph 10.2, applicable to the Industrial Center, and except as otherwise
provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 Real Property Tax Definition. As used herein, the term "Real Property
Taxes" shall include any form of real estate tax or assessment, general.
special, ordinary or extraordinary. and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "Real Property Taxes" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, Imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change In the ownership of the Industrial
Center or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included In the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.
10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be condusive.
io;5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. when
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possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
if any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
ii. Utilities. Lessee shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas and deaning of the Premises, together with any taxes thereon. If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth In
Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty.five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said trarisaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease without
Lessor's specific prior written consent shall, at Lessor's option, be a Default
curable after notice per Paragraph 13.1, or a non-curable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth In Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
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thereof. Further, in the event of such Breach and rental adjustment, (I) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depredation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not (I) be effective without the express written assumption by such assignee or
subiessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, nor (iii) alter the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) in the event of any Default or Breach of Lessee's obligation under this
Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone else
responsible for the performance of the Lessee's obligations under this Lease,
including any sublessee, without first exhausting Lessor's remedies against any
other person or entity responsible therefor to Lessor, or any security held by
Lessor.
(e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000.00 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or Inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c) shall
give Lessor the right (but not the obligation) to require that the Security
Deposit be increased by an amount equal to six (6) times the then monthly Base
Rent, and Lessor may make the actual receipt by Lessor of the Security Deposit
Increase a condition to Lessor's consent to such transaction.
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(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
12.3 Additional Tenns and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest
in all rentals and income arising from any sublease of all or a portion of the
Premises heretofore or hereafter made by Lessee, and Lessor may collect such
rent and income and apply same toward Lessee's obligations under this Lease;
provided, however, that until a Breach (as defined in Paragraph 13.1) shall
occur in the performance of Lessee's obligations under this Lease, Lessee may,
except as otherwise provided in this Lease, receive, collect and enjoy the rents
accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such subtessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further assign
or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
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13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy same, or
the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure by
Lessee to make any payment of Base Rent, Lessee's Share of Common Area Operating
Expenses, or any other monetary payment required to be made by Lessee hereunder
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure by
Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c) above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by Lessee
of any general arrangement or assignment for the benefit of creditors; (ii)
Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
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(f) The discovery by Lessor that any financial statement of Lessee or of
any Guarantor, given to Lessor by Lessee or any Guarantor, was materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anti~patory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may, at its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee to Lessor upon invoice therefor. If any check given to
Lessor by Lessee shalt not be honored by the bank upon which it is drawn,
Lessor, at its own option, may require all future payments to be made under this
Lease by Lessee be made only by cashier's check. In the event of a Breach of
this Lease by Lessee (as defined In Paragraph 13.1), with or without further
notice or demand, and wittibut limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease and the term hereof shall terminate and Lessee
shall immediately surrender possession of the Premises to Lessor. in such event
Lessor shall be entitled to recover from Lessee: (I) the worth at the time of
the award of the unpaid rent which had been earned at the time of termination;
(ii) the worth at the time of award of 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 that the Lessee proves could have been reasonably
avoided; (iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the amount of
such rental toss that the Lessee proves could be reasonably avoided; and (iv)
any other amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, including but not limited to the cost of recovering possession of the
Premises, expenses of retetting, including necessary renovation and alteration
of the Premises, reasonable altorneys' fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco or the Federal Reserve Bank District in which the Premises
are located at the time of award plus one percent (1%). Efforts by Lessor to
mitigate damages caused by Lessee's Default or Breach of this Lease shall not
waive Lessor's right to recover damages under this Paragraph 13.2. If
termination of this Lease is obtained through the provisional remedy of unlawful
detaine right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under Subparagraph 13.1(b), (c) or (d) was not previously given,
a notice to pay rent or quit, or to perform or quit, as the case may be, given
to Lessee under any statute authorizing the forfeiture of leases for unlawful
detainer shall also constitute the applicable notice for grace period purposes
required under sub-paragraph 13.1(b), (c) or (d). In such case, the applicable
grace period under the unlawful detainer statute shall run concurrently after
the one such statutory notice, and the failure of Lessee to cure the Default
within the greater of the two (2) such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.
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(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination of
Lessee's right to possession shall not relieve Lessee from liability under any
indemnity provisions of this Lease as to matters occurring or accruing during
the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture in Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, alt of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shalt automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
13.4 Late Charges. Lessee hereby,acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which wilt be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shalt be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The Parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor wilt incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shalt, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shalt not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shalt in no event be less than thirty (30) days after receipt by Lessor,
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and by any Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance. then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
i4. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shalt have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. if Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shalt be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. Brokers' Fees.
15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.
15.2 Additional Terms. Unless Lessor and Broker(s) have otherwise agreed in
writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined in
Paragraph 39.1) granted under this Lease or any Option subsequently granted, or
(b) if Lessee acquires any rights to the Premises or other premises in which
Lessor has an interest, or (c) if Lessee remains in possession of the Premises
with the consent of Lessor after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property In which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Broker(s) a fee in accordance with the schedule of said Broker(s) in effect
at the time of the execution of this Lease.
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15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 Representations and Warranties. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and that no broker or other person, firm
or entity other than said named Broker(s) is entitled to any commission or
finder's fee in connection with said transaction. Lessee and Lessor do each
hereby agree to indemnify, protect, defend and hold the other harmless from and
against liability for compensation or charges which may be claimed by any such
unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying Party, including any costs, expenses, and/or
attorneys' fees reasonably incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shalt within ten
(10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or sell
the Premises or the Building, or any part thereof, Lessee and all Guarantors
shall deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably required
by such lender or purchaser, including but not limited to Lessee's financial
statements for the past three (3) years. All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shalt be used
only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In the
event of a transfer of Lessor's title or interest in the Premises or in this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit)
any unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants In this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. SeverabIlity. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
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20. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that it
has made, and is relying solely upon, its own investigation as to the nature,
quality, character and finano~al responsibility of the other Party to this Lease
and as to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written notice to the other
specify a different address for notice purposes, except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for the purpose of mailing or delivering notices to Lessee. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be de~d ~
<PAGE>
twenty-four (24) hours after delivery of the same to the United States Postal
Service or courier. If any notice is transmitted by facsimile transmission or
similar means, the same shall be deemed served or delivered upon telephone or
facsimile confirmation of receipt of the transmission thereof, provided a copy
is also delivered via delivery or mail. If notice is received on a Saturday or a
Sunday or a legal holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed 10 render
unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor on account of monies or damages due Lesso~, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RecordIng. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Bas,e Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed
or pertormed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the state in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attomment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, ~Security Device~'), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event or Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
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30.2 Aftomment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreemenr') from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30,4 Self-Executing. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attomment and/or non-disturbance agreement
as is provided for herein.
31. Attorneys' Fees. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) in any such proceeding, action, or appeal thereon, shall
be entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "PrevaIling Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection there~th, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the root) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to
<PAGE>
install advertising signs on the Building, including the roof, which do not
unreasonably interfere with the conduct of Lessee's business; Lessor shall be
entitled to all revenues from such advertising signs.
35. Termination; Merger. Unless specifically stated otherwise rn' writing
by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otlierwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting, or the presence or use of a
hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this Lease, including but not limited to the obligation to provide
the Tenancy Statement and information required in Paragraph 16.
37.2 Additional Obligations of Guarantor. It shall constitute a Default of
the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
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38. Quiet Possession. Upon payment by Lessee of tile rent for the Premises
and the performance of all of the covenants, conditions and provisions on
Lessee's part to be observed and performed under this Lease; Lessee shall have
quiet possession of the Premises for the entire term hereof subject to all of
the provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option" has the following
meaning: (a) the right to extend the term of this Lease or to renew this Lease
or to extend or renew any lease that Lessee has on other property of Lessor; (b)
the right of first refusal to lease the Premises or the right of first offer to
lease the Premises or the right of first refusal to lease other property of
Lessor or the right of first offer to lease other property of Lessor, (c) the
right to purchase the Premises, or the right of first refusal to purchase the
Premises, or the right of first offer to purchase the Premises, or the right to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor; or the right of first offer to purchase other property
of Lessor.
39.2 Options Personal to Original 'Lessee. Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or Involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later option cannot be exercised unless the prior
Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option. notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease: (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee). or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
29
<PAGE>
40. Rules and Regulations. Lessee agrees that it will abide by, and keep
and observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protesr' and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
44. Authority. If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT. AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR AUORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND
STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS
TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
LOCATED SHOULD BE CONSULTED.
The Parties hereto have executed this Lease at the place and on the dates
specified above to their respective signatures.
<TABLE>
<CAPTION>
<S> <C>
Executed at: SAN CLEMENTE. CA Executed at San Marcos
on: on:
BY LESSOR: BY LESSEE:
SHOOK PROPERTIES, INC., A CALIFORNIA CORPORATION PLAY CO. TOYS AND ENTERTAINMENT, INC., A DELAWARE
By
Name Printed KEITH SHOOK. PRESIDENT
Title
By
Name Printed KEITH SHOOK. SECRETARY
Title
Address 1060-A CALLE NEGOCIO SAN CLEMENTE
Telephone: 949-498-2041
Facsimile: 949-498-3766
BROKER: Executed at:
on:
</TABLE>
NOTICE:
These forms are often modified to meet Changing requirements of law and
industry needs. Please Write or Call US to make sure that you are utilizing the
most Current form. We can be reached at the American Industrial Real Estate
Association, 700 South Flower, Suite 600, Los Angeles, CA 90017. (213) 687-8777
Fax (213) 687-8616
(C) 1993 by American Industrial Real Estate Association. All rights
reserved. No part of these words may be reproduced in any form without
permission in writing.
<PAGE>
ADDENDUM ONE TO THAT
MULTI TENANT-MODIFIED NET LEASE
This Addendum is hereby attached to Lease dated Febuu~iry 20, 1999 by and
between SHOOK PROPERTIES, INC., as Lessor, alid PLAY CO. TOYS AND ENTERTAINMENT,
CORP. a Delaware corporatioli as Lessee, shall be for the ptirpose of describing
certain terms and conditions made a part of said Lease.
49. Lessor has the right to ask lbr and receive current financial
statelnents within thirty (30) (lays of reqtlesting same flom Lessee.
50. Except as permitted by Lessor, all vehicles must be parked in the
designated parking areas. Large trucks will be permitted upon the
prelnises for purposes of loading and unloading only. No vehicles shall
be stored in any state of disrepair nor shall any vehicle be repaired
in any portioll of the common areas. Lessee shall not store or cause to
be stored any vehicle, parts, pieces, systems, equipment, new or used
upon the common area. Further, no acculilulation of debris or parts in
non-designated exterior storage areas shall be permitted for either
telliporary or extended periods of time.
51. AMERICANS WITH DISABILITIES ACT DISCLOSURE
The United States Congress has recently enacted the Americans with
Disabilities Act. Among other things this act is intended to make many
business establishments equally accessible to persons with a variety of
disabilities, and modifications to real property may be required. State
and local laws also may mandate changes. Mandated changes may be
required now or in the future. Lessees should consult attorneys and
qualified design professionals of their choice for information
regarding these matters. Without limiting the generality of the
foregoing, Lessee acknowledges that they shall comply with all
governmental rules, regulations, or requirements regarding laws within
the rentable space they currently occupy regard mg the Americans with
Disabilities Act.
52. BASE RENT
Notwithstanding anything in the Lease to the contrary, the monthly
lease Rental schedule for the leased premises shall be as follows:
April 1, 1999 to March 31, 2000 $7,585.00 per month + CAM
April 1, 2000 to March 31, 2001 $7,813.00 per month + CAM
April 1, 2001 to March 31, 2002 $8,047.00 per month + CAM
April 1, 2002 to March 31, 2003 $8,288.00 per month + CAM
April 1, 2003 to March 31, 2004 $8,537.00 per month + CAM
In addition to base rent, Tenant is fully responsible for monthly payment
of Additional Rent/Common Area Maintenance "CAM" Expenses; estimated at $0.29
per square foot, $3,363.00 month for 1999.
53. PERCENTAGE RENT
(a) In addition to the Minimum Rent to be paid by Tenant (luring the
initial lease term, Tenant shall pay to Landlord a percentage of rent
in the amount of three percent (3%) percent of Net Sales
over $1,400,000 during lease term
<PAGE>
53. PERCENTAGE RENT
(b) In addition to the montl~ly payments of Fixed Rental as provided for in
this lease, Lessee agrees to pay the Lessor the following additional rental
payments' based upon net retail sales:
During the term of this lease an additional amount for each
calendaryear equivalent to four percent (4 %) of the net retail
sa'les made in, upon or from the demised premises during each
calendar year, or portion thereof.
Any sums which may become payable pursuant to t'te foregoing provision
shall be paid on or before the first day of February ~f each year based
on net retail sales for the preceding calendar yeare
In colnputing additional rental payments, any initial or final
accounting period of less than one full calendar year shall b~ ~rora
ted.
Lessee will furnish to the Lessor, within thirty (30) days after the
termination of the calendar year, a statement, verified by one of its
officers, specifying the annual net retail sales made by Lessee upon
the demised premises during the preceding calendar year.
Lessor shall have tl~e right each year to examine and audit Lessee's
records of sales made upon or from the demised' premises, but only for
the purpose of ascertaining the amount of net retail sales made upon
or from the demised premises during the preceding calendar year. Said
audit or examination s1~all not be made more often than once in each
year, and shall be made on behalf of Lessor by a certified public
accountant to be selected by Lessor; and if Lessor wishes to audit
Lessee's records as aforesaid, Lessor shall notify Lessee in writing
15 days prior and proceed with such audit within ninety (90) days
after receipt from Lessee of the statement specifying the amount of
the net retail sales for the calendar year in question. Should Lessor
fail to exercise tI~e right to audit the records of Lessee within two
(2) years after receipt of the statement as hereinbefore provided,
then and in that event Lessor shall have no further right to audit or
inspect the records of Lessee for said calendar year,. and the said
statement shall be fiiial and binding upon the Lessor. Any such audit
or examination by the Lessor shall be at Lessor's expense, unless such
audit discloses that Lessee has underreported sales by two percent
(2%) or more.
The term "Net retail sales" as used in this lease, shall be
interpreted to mean the aggregate of all moneys received by Lessee
from sales/leasing, rental or service of goods, wares, merchandise and
service to the public made upon the demised premises, after deduction
of all refunds and allowances made to customers by Lessee in
connection with merchandise sold by or returned to Lessee, but shall
not include the amount of any sales tax, license or occupational tax,
or any other tax measured by the sales or receipts from sales made by
the Lessee.
The term "gross sale" shall not include sales made by Lessee at its
established employee, government or charitable discount prices nor
sales made from vending Iflachines lnRtalled for the exclusive use of
employees.
The return or '~ransfer of merchandise from one store to another or to
any of Lessee's warehouses shall not be construed as retail sales, nor
shall any sum be paid to Lessor on such merchandise returned or
transferred.
This agreement shall not be construed as giving Lessor any partnership
or other interests in Lessee's business.
The Lessor agrees not to divulge to any person or persons, firm or
corporation, the amount of retail sales made by, Lessee from said
leased premises, excepting any prospective purchaser or encumbrancer
of the premises.
With respect to sales made in, upon or from the lease,d premises by a
sublessee, licensee, concessionaire or assignee of' Lessee, the
obligations of Lessee hereunder relating to the fur~ishing of annual
statements of gross sales shall be deemed fulfilled by furnishing such
statements prepared by the sublessee, licensee, concessionaire or
assignee of Lessee. The obligation relating to the keeping of books
and records shall be fulfilled by requiring the aublessee, licenseee,
concessionaire or assignee to agree to keep such books and records.
<PAGE>
PLAY CO. TOYS
ADDENDUM TO LEASE
Page 3 of 5
54. TENANT'S RIGHT TO CANCEL
Three years from the completion date of tenant improvements
(Completion Date to be confirmed with a Confirmation of Completion of
Tenant Improvement document), Lessee shall have the right at any time
to cancel the lease agreement by providing Lessor with 30 day written
notice.
Additionally, should Lessee cancel the Lease prior to the expiration
date of the initial lease agreement, Lessee must pay Lessor a
cancellation fee of $50,000,and reimburse Landlord for a proration of
tenant in) provement costs due to canceling the lease prior to the
initial lease expiration date.
55. TENANT IMPROVEMENTS
a. Lessor, at Lessors own cost and expense, shall provide Tenant with a
$95,000.00 tenant improvement allowance. Lessor shall provide the funds
to Lessee upon Lessee providing Lessor with plans and perni its
approved by the City of Rancho Cucamonga and approved by I~essor.
Lessee must use the improvement allowance to install improvements in
the leascd premises.
b. Upon actual completion of Lessee's improvements, Lessee agrees to file
for record in the office of the County Recorder where the Shopping
Center is situated a Notice of Completion, as permitted by law.
C. Upon actual completion of [~essee's improvements, Lessee agrees to sign
a "Confirmation of Completion of I~enant Improvements" document
provided by Lessor.
d. Lessee's contractor shall perform said work in a manner and at times
which do not interfere with other tenant's in the Center.
e. Lessee's contractor shall be responsible for the repair, replacement or
cleanup of any damage done by him to the premises. Lessee's contractor
must carry worker's compensation insurauce and provide Lessor with
evidence of a General Contractor's license and required insurance and
permits.
56. LATE ChARGES
Base and Additional Rent are due on the first (1 St) day of each month.
If rent is not received by the fifth (5th) clay of each month, Landlord
shall charge Tenant a late fee of 6% of outstanding balance each month.
Acceptance of rent by Lessor does not waive Lessor's right to
enforce any breach of lease by Lessee. Lessee shall pay Lessor $25.00
for any check returned N.S.F. ~on Sufficient Funds). in the event that
any check fiom Lessee to Lessor is returned due to Non-Sufficient
Funds, Lessee shall pay all subsequent monthly rental installments to
Lessor in the form of a Cashier's Check.
<PAGE>
Play Co. Toys
Addendum to Lease
Page 4 of 5
57. PARKING
Lessee shall insure that is agents and employees utilize the rear
parking facility only. Lessee shall not be allowed to have its agents
nor employees park in the front parking which is designated for
customers Rancho Cucamonga Village. Should Lessee, its agents and/or
employees utilize the parking spaces, Lessor shall have the option to
enforce fines, penalties and parking fees to Lessee, its agents and
employees.
58.
AUTIIORITV
If Lessee is a corporation, each individual executing this Agreement on
behalf of the Lessee corporation represents and warrants that he or she
is duly authorized to sign and deliver this Agreement on behalf of said
corporation, in accordance with a duly adopted resolution of the Board
of Directors of said corporation, or in accordance with the bylaws of
said corporation, and that this Agreement is binding upon said
corporation in accordance with its terms.
If Lessee is a division or subsidiary of a corporation, each individual
executing this Addendum on behalf of the division or subsidiary
represents and warrants that he or she is duly authorized to execute
and deliver this Addendum on behalf of the division or subsidiary, in
accordance with a duly adopted resolution of the Board of Directors of
the parent corporation, that this Addendum is binding upon the parent
corporation (as well as the division or subsidiary) in accordance with
its terms, and that said division or subsidiary shall, within thirty
(30) days after request by Owner, deliver to Owner a certified copy of
a resolution of the Board of Directors of the parent corporation
authorizing or ratifying the execution of this Addendum.
If Lessee is a partnership, each individual executing this Addendum on
behalf of said partnership represents and warrants that he or she is
duly authorized to sign and deliver this Addend tim on behalf of said
partnership and that this Addendum is binding upon said partnership in
accordance with its terms.
59. MISCELLANEOUS
(a) Except as otherwise set forth herein, all of the
terms and conditions of said lease shall remain in full force
and elTect, and shall remain fully applicable to the premises,
throughout the duration of the extended term of said lease.
Said lease, a extended and amended herein, constitutes the
entire agreement between the parties hereto, and no further
modification of said lease shall be binding unless evidenced by
an agreement in writing signed by Lessor and Lessee.
(b) The captions and paragraph numbers appearing in
this Addendum are inserted only a s a matter of convenience and
in no way define, limit, construe, affect or describe the scope
or intent of the provisions in this Addendum.
<PAGE>
Play Co. Toys
Addendum to Lease
Page 5 of 5
60. SECURITY DEPOSIT
Lessee's Security Deposit, if ally, shall be refulided pursuant to the
terms of Section 1950.7 of the California Civil Code withiii thirty
(30) (lays after Lessee has vacated the prelnises.
61. Any reference herein to "Lessor" and "Lessee" shall be interchangeable
with "Landlord" and "Tenant" respectively.
IN WITNESS WI]EREOF, I~essor and Lessee have executed this Addendum as
of the day and year first above written.
Except as amended hereby, said Lease shall remain in full force and effect, and
is hereby ratified and confirmed.
IN WITNESS WUEREOF, the parties have duly executed this Addendum to
Lease as first written on the date above.
"LESSOR" "LESSEE"
SHOOK PROPERTIES, INC., a PLAY CO. TOYS AND
California corporation ENTERTAINMENT, INC., a
Delaware corporation
Keith Shook, President (Date) James Frakes CEO
Keith Shook, Secretary (Date) Richard Brady
<PAGE>
HAZARDOUS MATERIALS
This Exhibit is attached to and constitutes a part of that certain Lease of
even date herewith ("Lease") between Lessor and Lessee. If there is any
inconsistency between the provisions of this Exhibit and the other provisions of
this Lease, the provisions of this Exhibit shall control.
1. Terms. Unless otherwise provided herein, the capitalized terms in the
Exhibit shall have the same meaning as are given such terms in this Lease.
2. Hazardous Materials. Lessor and Lessee agree as follows with respect to
the existence or use of "Hazardous Material" (as defined below) on the Premises:
(a) Prohibition of Storage. Lessee shall (I) not cause or permit any
Hazardous Material to be brought upon, kept or used in or about the
Premises by Lessee, its agents, employees, contractors and invitees,
other than those expressly permitted by Lessor and identified below. If
Lessee breaches the obligation stated in the preceding sentence, or if
the presence of Hazardous Materials on the Premises caused or permitted
by Lessee (including Hazardous Materials specifically permitted and
identified below) result in contamination of the Premises, or if
contamination of the Premises by Hazardous Material otherwise occurs
for which Lessee is legally liable to Lessor for damage resulting
therefrom, then Lessee shall indemnify, defend and hold Lessor, its
agents and contractors harmless from any and all claims, judgments,
damages, penalties, fines, costs, liabilities, or losses (including
without limitation diminution in value of the Premises or any portion
of the property surrounding the Premises (the "Adjacent Property"),
damages for the loss or restriction on use of renewable or usable space
or of any amenity of the Premises, damages arising from any adverse
impact marketing of space in the Premises or the Adjacent Property, and
sums paid in settlement of claims, attorneys' fees, consultant fees and
expert fees( which arise during or after the Lease Term as a result of
such contamination. The indemnification of Lessor by Lessee includes,
without limitation, costs incurred in connection with any investigation
of site conditions or any cleanup, remedial, removal, or restoration
work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present in the soil
or ground water on or under the Premises. Without limiting the
foregoing, if the presence of any Hazardous Material on the Premises
caused or permitted by Lessee results in any contamination of the
Premises, Lessee shall promptly take all actions at its sole expense as
are necessa the condition existing prior to the introduction of any
such Hazardous Material to the Premises, provided that Lessor's
approval of such action shall first be obtained, which approval shall
not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term effect on the Premises
or the Adjacent Property.
(b) Termination of Lease. Notwithstanding the provisions of Paragraph
(a) above, if (I) any anticipated use of the Premises by Lessee or any
proposed assignee or sublease or Lessee involves generation, storage,
use, treatment or disposal of Hazardous Material, (ii) Lessee or the
proposed assignee or subleasee has been required by any prior landlord,
lender or governmental authority to take remedial action in connection
with Hazardous Material contaminating a property if the contamination
resulted from such party's action or use of the property in question,
or (iii) Lessee or the proposed assignee or subleasee is subject to an
enforcement order issued by any governmental authority in connection
with the use, disposal or storage of a Hazardous Material, Lessor shall
have the right to terminate the Lease in Lessor's sole and absolute
discretion (with respect to any such matter involving a proposed
assignee or sublessee).
EXHIBIT "C"
PAGE 1 OF 2
<PAGE>
TENANT IMPROVEMENTS
Lessor shall provide Tenant with a $95,000.00 tenant improvement allowance as
defined in Paragraph 55 of Lease Agreement.
EXHIBIT "B"
<PAGE>
Hazardous Materials
Page Two
(c) Definition of "Hazardous Material". As used herein, the term "Hazardous
Material" means any hazardous or toxic substance, governmental authority, the
State of California or the United States Government. The term "Hazardous
Material" includes, without limitation, any material or substance which is (I)
defined as a "hazardous waste", "extremely hazardous waste" or restricted
hazardous waste" under Section 25140, of the California Health and Safety Code,
Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a
"hazardous substance" under Section 25316 of the California Health and Safety
Code, Division 20, Chapter 6.8 (Carpenter-Presly-Tanner Hazardous Substance
Account Act), (iii)defi ned as "hazardous materials", "hazardous substance" or
"hazardous waste" under Section 25501 of the California Health and Safety Code,
Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and
Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the
California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage
of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) listed under
Article 9 and defined as hazardous or extremely hazardous pursuant to Article 11
of Title 22 of the California Administrative Code, Division 4, Chapter 20,
(viii) designated as a "hazardous substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ix) defined as a
"hazardous waste" pursuant to Section 1004 of the Federal Resource Conversation
and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section --- 6903),
or (x) defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq. (42 ------ U.S.C. Section 9601).
Specific Items That May Be Stored. The following Hazardous Materials may be
kept or used in or about the Premises:
(i)
(ii)
(iii)
EXHIBIT "C"
PAGE 2 OF 2
<PAGE>
RANCHO CUCAMONGA VILLAGE
Sign Criteria
Page2of2
14. Sign contractor shall repair any damage caused by his work. Damage to
structure that is not repaired by the sign contractor shall become the
Tenant's responsibility to correct.
15 Tenant shall be fully responsible for the operations of his sign
contractors1 and shall indemnify, defend and hold the parties harmless
from damages or liabilities on account hereon.
C. INSURANCE
1. Sign Company shall carry workman's compensation and public liability
insurance against all damage suffered or done to any and all persons
and/or property while engaged in the construction or erection of signs
in the amount of $1,000,000 per occurrence.
D. COMMERCIAL SIGNS
Sign Type A - Internally illuminated Channel Letters. To be
placed on building front over entrance as specified on Exhibit 4'0"
maximum letter height typical. Sign size will be determined by the
equation of one (1) square foot of signage per lineal foot of
leasehold frontage1 not to exceed eighty percent (80%) of said
frontage, maximum. Letterstyle and symbol logos are open to Tenant,
subject to Landlord's approval. Plex letter face color (Rohm & Haas
Co.) open to Tenant, subject to Landlord's approval. Refer to Exhibit
for further specifications regarding Sign Type B.
Sign Type B. Tenant will be required to place, as specified on
exhibits, at rear service door, a 14" x 14" black Formica plaque with
suite number and business name. White vinyl die out letters and
numerals typical. Typical letter style: Helvetica Medium.
Sign Type C: Tenant shall be allowed to place 4" white vinyl
letters above its entry door which contains Tenant's business name.
Tenant must submit a drawing of proposed located and lettering to
Landlord for written approval.
E. SIGNS AND AUCTIONS
Tenant shall not place or permit to be placed any sign upon the exterior or in
the windows of the demised premises without Landlord's prior written consent,
nor shall Tenant change the color or exterior appearance of the demised premises
without Landlord's prior written consent. Tenant shall at its sole cost and
expense prepare sign construction drawings, in accordance with said criteria
drawings, which shall be submitted to Landlord for Landlord's written approval.
Tenant agrees to install signs for the demised premises which shall conform with
the approved sign drawings attached hereto as an Exhibit, within thirty (30)
days after the commencement of the term of this Lease.
Tenant shall not without Landlord's prior written consent display or sell
merchandise outside the defined exterior walls and permanent doorways of the
demised premises. Tenant shall not conduct or permit to be conducted any sale by
auction in, upon or from the demised premises, whether said auction be
voluntary, involuntary, pursuant to any assignment for the payment of creditors,
or pursuant to any bankruptcy or other solvency proceeding.
Page 2 of 2
EXHIBIT "D"
<PAGE>
SAMPLE - TENANT ESTOPPEL CERTIFICATE
Landlord: SHOOK PROPERTIES, INC.
Tenant:
Premises: RANCHO CUCAMONGA VILLAGE
9950 W. FOOTHILL BLVD., SUITE
RANCHO CUCAMONGA, CA
Area: SQUARE FEET
Lease Dated:
The undersigned Tenant of the above-referenced lease (the
________________________________ as purchaser of the Real Property under the
Lease (the "Premises") is a part, as follows:
"Lease") hereby certifies to of which
the premises demised
1. That the term of the Lease commenced on _____________________ and the
Tenant is in full and complete possession of the premises under the Lease, such
possession having been delivered by the original landlord and having been
accepted by the Tenant.
2. That the Lease calls for monthly rent installments of $ to date.
3. That no advance rental or other payment has been made in connection with
the Lease, there is no "free rent" or other concession under the remaining term
of the Lease.
4. That a security deposit in the amount of $ _________ is being held by
Landlord, which amounts is not subject to any off-set or reduction, or to any
increase for interest or other credit due to Tenant.
5. That all obligations and conditions under said Lease to be performed to
date by Landlord or Tenant have been satisfied, free of defenses and off set's
including all construction work in the Premises.
6. That the Lease is a valid Lease and is in full force and effect, and
represents the entire agreement between the parties; that there is no existing
default on the part of the Landlord or the Tenant in any of the terms and
conditions thereof and no event has occurred which, with the passing of time or
giving of notice or both, would constitute an event of default; and that said
Lease has (initial one): () () not been amended, modified, supplemented,
extended, renewed, or assigned. been amended, modified, supplemented, extended,
renewed or assigned as follows by the following described agreements:
7. That the Lease provided for a primary term of _________________________
years/months; commencing _______________ and expiring on the_______ day of
,19-il and that (please initial)
) neither the Lease nor any of the documents listed above in Paragraph 6
(if any) contain an option for any additional term or terms.
8. That Landlord has not rebated, reduced or waived any amounts due from
Tenant under the lease, either orally or in writing, nor has Landlord provided
financing for, made loans or advances to, or invested in the business of Tenant.
9. That, to Tenant's actual knowledge, there is no apparent or likely
contamination of the Real Property of the Premises by Hazardous Materials, and
Tenant does not use, nor has Tenant disposed of, Hazardous Materials in
violation of Environmental Laws on the Real Property or the premises.
10. That there are no actions, voluntary or involuntary, pending against
the Tenant under the bankruptcy laws of the United States or any state thereof.
11. That this certification is made knowing the is relying upon the
representations herein made.
Estoppel to be acknowledged by Tenant - Tenant's signature not required on
Exhibit to Lease.
EXHIBIT "E"
<PAGE>
RANCHO CUCAMONGA VILLAGE
RULES AND REGULATIONS
The rules and regulations set forth herein below are a part of that certain
Lease which these rules and regulations are an Exhibit and into which Lease
these rules and regulations are hereby incorporated by this reference:
1. The sidewalk, entrances, truck doors and Common Areas shall not be
obstructed by any of the Lessees or used by them for any purpose other than
ingress and egress to and from their respective Lease Premises. Lessee will not
place or allow to be placed in these areas any waste paper, dust, garbage,
refuse or anything whatever that would tend to make them unclean or untidy, or
hinder ingress and egress to their Lessees.
2. No one shall use the Leased Premises for sleeping apartments or
residential purposes, or for the storage of personal effects or articles other
than those required for business purposes.
3. Lessor reserves the right to refuse access to any persons wherein
Lessor, in good faith judges to be a threat to the safety, reputation, or
property of the Project and its occupants.
4. Lessee shall not make or permit any noise or odors that annoy or
interfere with other Lessees or persons having business within the Project
including, but not limited to the operation of any musical sound producing
installment or device inside or outside the leased premises without prior
written consent of Lessor.
5. Lessee shall give Lessor prompt notice of any accident to or any defect
in the plumbing, climate control, mechanical or electrical apparatus or any
other part of the Leased Premises or the Project.
6. Lessee shall not keep animals or birds within the Project, and shall not
bring bicycles, motorcycles or other vehicles into areas not designated as
authorized for same.
7. Lessee shall not store, park or maintain motor vehicles in the Common
Area Parking for purposes of conducting a business primarily and directly
involving said motor vehicles, including without limitation, selling, leasing,
washing, repairing, detailing, storage, maintenance and/or painting of said
motor vehicles.
8. Lessee shall not store, park or maintain motor vehicles in the Common
Area Parking for purposes of conducting a business primarily and directly
involving said motor vehicles, including without limitation, selling, leasing,
washing, repairing, detailing, storage, maintenance and/or painting of said
motor vehicles.
9. purpose. Lessee shall not make, suffer or permit litter except in
appropriate receptacles for that
10. Lessee shall not alter any lock or install new or additional locks or
bolts without Landlord's prior written consent.
11. Lessee shall be responsible for the inappropriate use of any toilet
rooms, pluming or other utilities. No foreign substances of any kind are to be
inserted therein.
12. Lessee shall not deface the walls, partitions or other surfaces of the
Premises of the Project. Lessee shall not mark, paint, drill into or in any way
deface the walls, ceilings, partitions, floor or other part 0 of the Leased
Premises and the Project except with the prior written consent of Lessor.
13. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
EXHIBIT "F"
PAGE 1 OF 2
<PAGE>
RANCHO CUCAMONGA VILLAGE
Rules and Regulations
Page Two
14. Lessee shall be entitled to park in common with other Lessees or Lessor
only in that portion of the parking area. Lessee agrees not to overburden the
parking facilities and agrees to cooperate with Lessor and other Lessees in the
use of the parking facilities. Lessor reserves the right in its absolute
discretion to determine whether parking facilities are becoming crowded, and in
such event to allocate parking spaces among Lessee and other Lessees and at
Lessor's elections to locate and, from time to time, relocate such space.
15. No Lessee, employee or invitee shall go upon the roof of the Building,
with Landlord's written prior consent.
16. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
17. Lessor reserves the right to waive any one of these rules and
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
18. Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
19. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.
20. Users of the parking area will obey all posted signs and park only in
the areas designated for vehicle parking.
21. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party suing the parking area.
22. ~essee s~fl~)be responsi~e~r seeing That a~ oti~s emp)oyees, agents,
and invi~ees comply with the applicable parking rules, regulations, laws and
agreements.
23. Lessor reserves the right to modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem necessary
for the proper operation of the parking area. Lessee agrees to abide by these
and such rules and regulations.
EXHIBIT "F"
Page 2 of 2
<PAGE>
EXHIBIT "G"
Exhibit "G" is intentionally omitted from Lease
EXHIBIT "G"
Exhibit "G" is intentionally omitted from Lease
Exhibit 10.130
Promissory Notes - Full Moon Development, Inc.
PROMISSORY NOTE
$200,000.00 March 22, 1999
FOR VALUE RECEIVED, PLAY CO. TOYS & ENTERTAINMENT CORP., a Delaware
corporation, having an address of 550 Rancheros Drive, San Marcos, California
92069 ("Maker"), promises to pay to the order of FULL MOON DEVELOPMENT, INC.,
having an address Via Cantonale 116, Lugano, Switzerland CH690 and c/o Todtman,
Nachamie, Spizz & Johns, P.C., 425 Park Avenue, New York, New York 10022
("Holder"), or at such other place as may be designated in writing by any other
holder hereof, the sum of Two Hundred Thousand and 00/100 ($200,000.00) Dollars
("Sum"), and interest thereon at the rate of twelve (12%) percent per annum. The
Sum shall be paid, together with accrued interest, in four (4) installments of
Fifty Thousand and 00/100 ($50,000.00) Dollars each on April 30, 1999, May 30,
1999, June 30, 1999 and July 30, 1999.
Notwithstanding anything contained in this Promissory Note to the contrary,
any payments due and owing to the Holder under and pursuant to the terms and
conditions of this Promissory Note shall be paid in accordance with directions
given in writing to the Maker by the Holder not less than three (3) business
days prior to the date when such payment(s) are due, if and only in the event
that the Holder desires a payment to be made to a person, firm or entity other
than the Holder.
The Holder shall not by any act, delay, omission, or failure to act be
deemed to have waived any right, power, privilege or remedy hereunder, and no
waiver whatsoever shall be valid unless in writing and signed by the Holder, and
then only to the extent therein set forth; nor shall any single or partial
exercise of any right, power, privilege or remedy hereunder preclude any further
exercise thereof, or the exercise of any further right, power, privilege or
remedy. The rights and remedies herein provided are cumulative and not exclusive
of any rights or remedies provided by law and may be exercised singly or
concurrently. A waiver by the Holder of any right or remedy under the terms of
this Promissory Note, on any one occasion, shall not be construed as a bar to
any right or remedy which the Holder would otherwise have had on any future
occasion.
The entire outstanding balance of the principal amount and all accrued but
unpaid interest and late charges, if any, shall be become due and payable at the
option of Holder or any other holder hereof immediately upon the happening of
any of the following events ("Event of Default"): a. a default in payment of any
amount due pursuant to this Promissory Note continuing beyond three (3) days
after written notice of such default is given by the Holder to the Maker; or
b. the filing of a petition in voluntary or involuntary bankruptcy by or
against Maker or any guarantor of this Promissory Note, the general assignment
for the benefit of creditors of Maker or any guarantor of this Promissory Note,
or the appointment of a receiver or trustee of any assets of Maker or any
guarantor of this Promissory Note; or
A late charge on any payments of principal and/or interest made more than
five (5) days after the due date thereof shall be paid at the rate of two (2.0%)
percent per month or portion thereof that said payment remains unpaid.
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest permitted to be charged to Maker hereof under
<PAGE>
applicable law, but if, notwithstanding, interest in excess of such maximum
legal rate shall be paid hereunder, the excess shall be retained by Payee or any
other holder of this Promissory Note as cash collateral for the payment of the
outstanding principal amount and may be applied to pay same.
Maker hereby waives presentment for payment, demand, of non-payment and
dishonor, protest, of protest and any other that may be required under the law
in connection with enforcement of this Promissory Note.
Maker shall pay any and all expenses, including but not limited to
reasonable attorneys' fees, incurred by Payee or any other holder hereof in
seeking payment of amounts due pursuant to this Promissory Note, and Maker
hereby waives trial by jury in any litigation arising out of or in connection
with this Promissory Note.
This Promissory Note is non-negotiable. This Promissory Note may not be
modified or the face hereof canceled except in a writing, signed by Maker and by
Holder or any other holder of this Promissory Note. This Promissory Note shall
be interpreted and enforced in accordance with the laws of the State of Delaware
without regard to any principles of conflicts of law. The parties hereto hereby
consent to the jurisdiction of the Courts of the State of Delaware and of the
United States District Court for the District of Delaware in connection with any
and all actions commenced with respect to this Promissory Note and further
consent that any notice, process or notice of motion or other application to
either of said courts or judges thereof may be served in or out of the State or
District of Delaware by certified or registered mail return receipt requested,
or by personal service, provided a reasonable time for appearance is allowed, or
in such other manner as may be permitted by either of said courts.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By____________________________________
<PAGE>
PROMISSORY NOTE
$200,000.00 March 25, 1999
FOR VALUE RECEIVED, PLAY CO. TOYS & ENTERTAINMENT CORP., a Delaware
corporation, having an address of 550 Rancheros Drive, San Marcos, California
92069 ("Maker"), promises to pay to the order of FULL MOON DEVELOPMENT, INC.,
having an address Via Cantonale 116, Lugano, Switzerland CH690 and c/o Todtman,
Nachamie, Spizz & Johns, P.C., 425 Park Avenue, New York, New York 10022
("Holder"), or at such other place as may be designated in writing by any other
holder hereof, the sum of Two Hundred Thousand and 00/100 ($200,000.00) Dollars
("Sum"), and interest thereon at the rate of twelve (12%) percent per annum. The
Sum shall be paid, together with accrued interest, in three (3) installments of
Sixty-Six Thousand Six Hundred Sixty-Six and 67/100 ($66,666.67) Dollars each on
May 10, 1999, June 10, 1999 and June 30, 1999.
Notwithstanding anything contained in this Promissory Note to the contrary,
any payments due and owing to the Holder under and pursuant to the terms and
conditions of this Promissory Note shall be paid in accordance with directions
given in writing to the Maker by the Holder not less than three (3) business
days prior to the date when such payment(s) are due, if and only in the event
that the Holder desires a payment to be made to a person, firm or entity other
than the Holder.
The Holder shall not by any act, delay, omission, or failure to act be
deemed to have waived any right, power, privilege or remedy hereunder, and no
waiver whatsoever shall be valid unless in writing and signed by the Holder, and
<PAGE>
then only to the extent therein set forth; nor shall any single or partial
exercise of any right, power, privilege or remedy hereunder preclude any further
exercise thereof, or the exercise of any further right, power, privilege or
remedy. The rights and remedies herein provided are cumulative and not exclusive
of any rights or remedies provided by law and may be exercised singly or
concurrently. A waiver by the Holder of any right or remedy under the terms of
this Promissory Note, on any one occasion, shall not be construed as a bar to
any right or remedy which the Holder would otherwise have had on any future
occasion.
The entire outstanding balance of the principal amount and all accrued but
unpaid interest and late charges, if any, shall be become due and payable at the
option of Holder or any other holder hereof immediately upon the happening of
any of the following events ("Event of Default"): a. a default in payment of any
amount due pursuant to this Promissory Note continuing beyond three (3) days
after written notice of such default is given by the Holder to the Maker; or
b. the filing of a petition in voluntary or involuntary bankruptcy by or
against Maker or any guarantor of this Promissory Note, the general assignment
for the benefit of creditors of Maker or any guarantor of this Promissory Note,
or the appointment of a receiver or trustee of any assets of Maker or any
guarantor of this Promissory Note; or
A late charge on any payments of principal and/or interest made more than
five (5) days after the due date thereof shall be paid at the rate of two (2.0%)
percent per month or portion thereof that said payment remains unpaid.
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest permitted to be charged to Maker hereof under
applicable law, but if, notwithstanding, interest in excess of such maximum
legal rate shall be paid hereunder, the excess shall be retained by Payee or any
other holder of this Promissory Note as cash collateral for the payment of the
outstanding principal amount and may be applied to pay same.
Maker hereby waives presentment for payment, demand, of non-payment and
dishonor, protest, of protest and any other that may be required under the law
in connection with enforcement of this Promissory Note.
Maker shall pay any and all expenses, including but not limited to
reasonable attorneys' fees, incurred by Payee or any other holder hereof in
seeking payment of amounts due pursuant to this Promissory Note, and Maker
hereby waives trial by jury in any litigation arising out of or in connection
with this Promissory Note.
In the event Maker obtains new financing from any financial institution,
leasing company, bank or the like, the balance due on this Note shall accelerate
and become due on the closing and funding of such financing.
This Promissory Note is non-negotiable. This Promissory Note may not be
modified or the face hereof canceled except in a writing, signed by Maker and by
Holder or any other holder of this Promissory Note. This Promissory Note shall
be interpreted and enforced in accordance with the laws of the State of Delaware
without regard to any principles of conflicts of law. The parties hereto hereby
consent to the jurisdiction of the Courts of the State of Delaware and of the
United States District Court for the District of Delaware in connection with any
and all actions commenced with respect to this Promissory Note and further
consent that any notice, process or notice of motion or other application to
either of said courts or judges thereof may be served in or out of the State or
District of Delaware by certified or registered mail return receipt requested,
or by personal service, provided a reasonable time for appearance is allowed, or
in such other manner as may be permitted by either of said courts.
PLAY CO. TOYS & ENTERTAINMENT CORP. By____________________________________
Exhibit 10.131
Securities Purchase Agreement
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between PLAY CO. TOYS & ENTERTAINMENT CORP.,
a Delaware corporation, with headquarters located at 550 Rancheros Drive, San
Marcos, California 92069 (the "Company"), and each entity named on a signature
page hereto (each, a "Buyer," collectively, the "Buyers"), each agreement with a
Buyer being deemed a separate and independent agreement between the Company and
such Buyer, except that each Buyer acknowledges and consents to the rights
granted to each other Buyer under such agreement and the Transaction Agreements,
as defined below.
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer acknowledges that it is an "accredited investor" as such
term is defined under Rule 501 of Regulation D as promulgated under the 1933
Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, 750,000 shares of the Company's Series F
Preferred Stock, par value $.01 per share (the "Series F Stock"), at a purchase
price of $1.00 per share, with the rights and preferences described herein and
as provided for in the Amendment to the Company's Certificate of Incorporation
as annexed hereto; and
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. The Buyers agree to purchase from the Company 750,000 shares
of the Series F Stock at a purchase price of $1.00 per share for total proceeds
of $750,000 (the "Purchase Price"). Unless all 750,000 shares are purchased and
paid for by the Buyers, no shares shall be sold.
b. Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:
(i) "Converted Shares" or "Shares" means the shares of Common Stock
issuable upon conversion of the Series F Stock, including shares issued as
dividends thereon.
(ii) "Securities" means the Series F Stock and the shares of Common Stock
underlying the Series F Stock, including the shares issuable as dividends
thereon.
(iii) "Closing Date" means the date of the closing of the purchase and sale
of the Series F Stock, as provided herein, but which date shall not be later
<PAGE>
then 3 days from the date of this Agreement.
(iv) "Effective Date" means the effective date of the Registration
Statement registering the resale of the Securities.
(v) "Certificates" means one or more certificates representing the 750,000
shares of Series F Stock being purchased hereunder by the Buyers, each
certificate duly executed on behalf of the Company and issued in the name of
each Buyer.
(vi) "Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership, or trust.
(vii) "Affiliate" means, with respect to a specific Person referred to in
the relevant provision, another Person who or which controls or is controlled by
or is under common control with such specified Person.
(viii) "Transaction Agreements" means this Agreement and the Certificate of
Amendment of the Certificate of Incorporation.
c. Form of Payment; Delivery of Certificates.
(i) The Buyers shall pay the Purchase Price for the Series F Stock by
delivering immediately available good funds in United States Dollars to the
escrow agent (the "Escrow Agent") identified in the Joint Escrow Instructions
attached hereto as Annex II (the "Joint Escrow Instructions") on or before the
Closing Date.
(ii) On or before the Closing , the Company shall deliver the Certificates
to the Escrow Agent.
(iii) By signing this Agreement, each Buyer and the Company, subject to
acceptance by the Escrow Agent, agree to all of the terms and conditions of, and
become a party to, the Joint Escrow Instructions, all of the provisions of which
are incorporated herein by reference as if set forth in full herein.
d. Method of Payment. Unless otherwise agreed to by the Escrow Agent,
payment into escrow of the Purchase Price shall be made by wire transfer of
funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, Esqs.
Attorney Trust Account (the "Escrow Account")
Account No.: [To be provided by Krieger & Prager]
Re: Play Co. Toys Transaction
Time is of the essence with respect to such payment, and failure by the
Buyers to fund the Escrow Account shall allow the Company to cancel this
Agreement.
e. Escrow Property. The Purchase Price and the Certificates delivered to
the Escrow Agent as contemplated by Sections 1(c) and (d) hereof are referred to
as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION. Each Buyer represents and warrants to, and covenants
and agrees with, the Company as follows:
<PAGE>
a. Without limiting the Buyer's right to sell the Common Stock pursuant to
the Registration Statement, the Buyer is purchasing the Series F Stock and will
be acquiring the Securities for its own account for investment only and not with
a view towards the public sale or distribution thereof and not with a view to or
for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, and (iii) able, by reason of the
business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
c. All subsequent offers and sales of the Series F Stock and the Shares by
the Buyer shall be made pursuant to registration of the Shares under the 1933
Act or pursuant to an exemption from registration. Buyer acknowledges that a
standard restrictive legend shall be affixed to the Certificates.
d. The Buyer understands that the shares of Series F Stock are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments, and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Series F Stock.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances, and operations of the Company and
materials relating to the offer and sale of the Series F Stock and the offer of
the Shares which have been requested by the Buyer. The Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company and
have received complete and satisfactory answers to any such inquiries. In
addition, Buyer has reviewed in detail the Company's reports and other
information documents as filed with the Securities and Exchange Commission
within the last year and has had an opportunity to discuss same with the
Company. In addition, the Buyer has had an opportunity to obtain information
regarding the industry in which the Company operates and has had an opportunity
to evaluate the Company's potential success in such industry.
f. The Buyer is a resident of the state as listed below and is a United
States citizen or if a corporation, limited partnership, partnership, limited
liability company, or other entity, than the Buyer is a resident of the state of
such company's formation or principal place of business, as listed below and is
a citizen of the United States.
g. The Buyer understands that its investment in the Securities involves a
high degree of risk and that there can be no assurance that a liquid market will
develop or that if it does, it will be maintained for any period of time.
h. The Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities. The Buyer's overall commitment
to investments that are not readily marketable is not, and his acquisition of
the Securities will not cause such overall commitment to become,
disproportionate to his or her net worth.
i. This Agreement has been duly and validly authorized, executed, and
<PAGE>
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally.
j. Except as specifically set forth herein, no representation or warranty
is made by the Company to induce the Buyer to make this investment, and any
representation or warranty not made herein is specifically disclaimed.
k. The Buyer is not purchasing the Series F Stock as a result of or
subsequent to any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio, any seminar or meeting, or any solicitation of a
subscription by a person not previously known to the Buyer in connection with
investments in securities generally.
l. The Buyer agrees to indemnify and hold harmless the Company and its
officers, directors, and affiliates and each other person, if any, who controls
the Company, within the meaning of Section 15 of the 1933 Act, against any and
all loss, liability, claim, damage, and all expenses reasonably incurred in
investigating, preparing, or defending against any litigation commenced or
threatened or any claim whatsoever arising out of or based upon any false
representation or warranty, breach, or failure by the Buyer to comply with any
covenant or agreement made by the Buyer herein or in any other document
furnished by the Buyer to any of the foregoing in connection with this
transaction.
In the event of a registration of any of the Securities under the 1933 Act
pursuant to the terms of this Agreement, Buyer will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the 1933 Act, each officer of the Company who signs the Registration Statement
(as defined below), each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the 1933 Act, against
all losses, claims, damages, or liabilities, joint or several, to which the
Company or such officer, director, underwriter, or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement under which such Shares were registered
for resale under the 1933 Act pursuant to the terms of this Agreement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and will reimburse the
Company and each such officer, director, underwriter, and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage, or liability arises
out of or is based upon an untrue statement or omission made in reliance upon
and in conformity with information pertaining to such seller, furnished in
writing to the Company by such seller specifically for use in such Registration
Statement or prospectus and provided, further, that the liability of each seller
hereunder shall be limited to the proceeds received by such seller from the sale
of Shares covered by such Registration Statement.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to the
Buyer:
a. Concerning the Series F Stock and the Shares. The Series F Stock has
been duly authorized and, when issued, will be duly and validly issued, fully
paid, and non-assessable. There are no preemptive rights of any stockholder of
<PAGE>
the Company, as such, to acquire the Series F Stock or the Shares, and the
Company has not sold and will not sell Series F Stock without the prior consent
of Buyers until 90 days after the Effective Date.
b. Reporting Company Status. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction where the
nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations,
or condition (financial or otherwise) or results of operation of the Company and
its subsidiaries taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is quoted on the
OTC Bulletin Board. The Company has received no notice, either oral or written,
with respect to the continued eligibility of the Common Stock for such listing,
and the Company has maintained all requirements for the continuation of such
listing.
c. Authorized Shares. As of the date hereof, the authorized capital stock
of the Company consists of: (i) 160,000,000 shares of Common Stock, $.01 par
value per share, of which 5,509,197 are issued and outstanding and (ii)
25,000,000 shares of Series E Preferred Stock of which 5,883,903 shares are
issued and outstanding and (iii) 5,500,000 shares of Series F Preferred Stock of
which no shares are issued and outstanding. All issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has sufficient authorized and unissued shares of
Common Stock as may be necessary to effect the issuance of the Shares. The
Shares have been duly authorized and, when issued upon conversion of, or as
dividends on, the Series F Stock in accordance with its terms, will be duly and
validly issued, fully paid, and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder.
d. Securities Purchase Agreement and Series F Stock. This Agreement and the
transactions contemplated thereby, have been duly and validly authorized by the
Company. This Agreement has been duly executed and delivered by the Company, and
this Agreement is, and the Series F Stock, when executed and delivered by the
Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this Agreement by the
Company, the issuance of the Securities, and the consummation by the Company of
the other transactions contemplated by this Agreement and the Series F Stock do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under (i) the articles of
incorporation or by-laws of the Company, each as currently in effect, (ii) any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound, including any listing agreement for the Common Stock except as herein
set forth, or (iii) to its knowledge, any existing applicable law, rule, or
regulation or any applicable decree, judgment, or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company, which would have a
material affect on the Company's properties or assets.
f. Approvals. No authorization, approval, or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
<PAGE>
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. Since January 1, 1998, none of the Company's SEC Documents,
as amended, contained, at the time they were filed, any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements made therein in light of the
circumstances under which they were made, not misleading. The Company has since
April 1, 1998 timely filed all requisite forms, reports, and exhibits thereto
with the SEC.
h. Absence of Litigation. Except as set forth in the Company's SEC
documents, there is no action, suit, proceeding, inquiry, or investigation
before or by any court or public board or body pending or, to the knowledge of
the Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling, or finding would have a material adverse effect on the
properties, business or financial condition, or results of operation of the
Company and its subsidiaries taken as a whole or the transactions contemplated
by any of the Transaction Agreements or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under any of the Transaction Agreements.
k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the business,
operations or condition (financial or otherwise), or results of operations of
the Company and its subsidiaries taken as a whole.
l. No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the Company's SEC documents or those
incurred in the ordinary course of the Company's business since March 31, 1998
m. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant, or condition
contained in any material indenture, mortgage, deed of trust, or other material
instrument or agreement to which it is a party or by which it or its property is
bound.
n. Dilution. The Company's executive officers and directors have studied
and fully understand the nature of the shares of Series F Stock being sold
hereby and recognize that they have a dilutive effect. The board of directors of
the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the
Series F Stock is binding upon the Company and enforceable regardless of the
dilution such issuance will have on the ownership interests of other
shareholders of the Company.
o. No Integrated Offering. The Company has not made any offers or sales of
any security or solicited any offers to buy any security under circumstances
that would eliminate the availability of the exemption from registration under
Rule 506 of Regulation D in connection with the offer and sale of the Securities
contemplated hereby.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Series F
Stock has not been, and is not being, registered under the provisions of the
1933 Act, and, except as provided in the registration rights granted herein, the
<PAGE>
Shares have not been and are not being registered under the 1933 Act and may not
be transferred unless (A) subsequently registered thereunder or (B) the Buyer
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope, and substance to the Company's counsel, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; (2) any sale of the Securities
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and. further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller or the person through whom the sale is made may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the registration
rights specified herein) under the 1933 Act or to comply with the terms and
conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the Series F
Stock and, until such time as the Common Stock has been registered under the
1933 Act as contemplated by the registration rights specified herein and sold in
accordance with an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
Registration Rights.
(i) Within 60 days following the Closing Date (the "Filing Date"), the
Company will file a registration statement on Form SB-2, or such other form as
is available if Form SB-2 is unavailable, with the SEC to register for resale
under the 1933 Act all of the shares of Common Stock underlying the Series F
Stock being subscribed for by the Buyers, the 350,000 shares of Common Stock
underlying certain Warrants being issued to the Placement Agent, and no other
Securities.
(ii) In the event the Registration Statement is not filed by the Filing
Date or declared effective within 150 days after the Filing Date, the Company
shall pay the undersigned an amount equal to 1% of the stated value of $1 per
share for each share of Series F Stock held by the Buyer for the initial month
and 2% per month for each month thereafter that the Registration Statement is
not effective. The payment required hereunder will be paid to the undersigned in
cash. No payment shall be required under this paragraph if the sole cause of the
delay in filing the Registration Statement is the Buyer's failure to comply with
its obligations under subparagraph (c)(iii)(b) hereof.
(iii) Registration Procedures.
(a) All expenses incurred by the Company in connection with the
registration under subsection (i) above including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of the
Company's counsel and independent public accountants for the Company, fees and
expenses (including counsel fees) incurred in connection with complying with
state securities or "blue sky" laws, fees of the National Association of
Securities Dealers, Inc., and fees of transfer agents and registrars shall be
borne by the Company. In connection with the registration under subsection (i)
<PAGE>
above, the Company shall (1) use all reasonable efforts to cause the
Registration Statement to promptly become effective and to remain effective for
a period not to exceed ninety days after exercise of the warrants; (2) use all
reasonable efforts to register and qualify the shares covered by the
Registration Statement under such applicable state securities laws as the
undersigned shall request to enable the public sale or other disposition in such
jurisdictions of such shares; and (3) take such other actions as are reasonable
to comply with the requirements of the 1933 Act and the 1934 Act, and the
regulations thereunder.
(b) In connection with each registration hereunder, the sellers of Shares
will furnish to the Company, in writing, such information with respect to
themselves and the proposed distribution by them and execute such documents
regarding the sale of the Shares as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws. In
addition, the Company shall permit the Buyers the right to review the "Selling
Securityholders" front cover and "Plan of Distribution" sections of the
Registration Statement prior to filing it for approval. The Buyers must approve
these sections prior to the Company filing the Registration Statement with the
SEC. No penalty as described in subparagraph (c)(ii) above shall be applied
where the delay in filing is due to the Buyer's failure to give its reasonable
consent in a timely manner.
(iv) Availability of Rule 144. The Company covenants that it will use all
reasonable efforts to file the reports required to be filed by the Company under
the 1933 Act and the 1934 Act so as to enable the undersigned to sell the Shares
pursuant to Rule 144 under the 1933 Act. In connection with any sale by any
holder of any Shares pursuant to Rule 144 under the 1933 Act, the Company shall
cooperate with the undersigned to facilitate the timely preparation and delivery
after such sale of Share certificates not bearing any restrictive legend
required by the 1933 Act.
(v) Indemnification. In the event of a registration of any of the Shares
under the 1933 Act pursuant to this Agreement, the Company will indemnify and
hold harmless each Buyer, and the directors, officers, partners, members,
employees, and agents of each such seller, each underwriter of such Shares
thereunder, and each other person, if any, who controls such sellers or
underwriters within the meaning of the 1933 Act, against any losses, claims,
damages, or liabilities, joint or several, to which such sellers, underwriters,
or controlling persons may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) (a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Shares was registered under the 1933 Act pursuant to Sections 4
or 5, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, (b) arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (c) arise
out of any violation or alleged violation by the Company of any rule or
regulation promulgated under the 1933 Act or any applicable states securities
law in connection with any such registration and will reimburse each such
seller, each such underwriter, and each such controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action, provided, however,
that the Company will not be liable to any seller in any such case if and to the
extent that any such loss, claim, damage, or liability arises out of or is based
upon an untrue statement or omission so made in conformity with information
furnished by any such seller in writing specifically for use in such
Registration Statement or prospectus or any amendment or supplement thereof.
d. Filings. The Company undertakes and agrees to make all necessary filings
in connection with the sale of the Securities to the Buyer under any United
<PAGE>
States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market and to provide a copy thereof to the Buyer
promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to Sections 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
obtain and to continue the listing and trading of its Common Stock on the OTC
Bulletin Board and will comply in all material respects with the Company's
reporting, filing, and other obligations under the by-laws or rules of the
National Association of Securities Dealers, Inc. ("NASD").
f. Use of Proceeds. The Company will use the proceeds from the sale of the
Series F Stock (excluding amounts paid by the Company for legal fees, finder's
fees, and escrow fees in connection with the sale of the Series F Stock) for
internal general working capital purposes, and, unless specifically consented to
in advance in each instance by the Buyer, the Company shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership enterprise, or other person or for the repayment of any
outstanding loan by the Company to any other party.
g. Available Shares. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield one hundred percent (100%) of the number of shares of Common
Stock issuable at conversion as may be required to satisfy the conversion rights
of the Buyer pursuant to the terms and conditions of the Series F Stock which
have been not yet been converted (including the shares of Common Stock which may
issued as dividends on such Series F Stock).
h. Indemnification. The Company agrees to indemnify and hold harmless the
Buyer, the officers, directors and affiliates of the Buyer, and each other
person, if any, who controls the Buyer, within the meaning of Section 15 of the
1933 Act, against any and all loss, liability, claim, damage, and all expenses
reasonably incurred in investigating, preparing, or defending against any
litigation commenced or threatened or any claim whatsoever arising out of or
based upon any false representation or warranty or breach or failure by the
Company to comply with any covenant or agreement made by the Company herein or
in any other document furnished by the Company to any of the foregoing in
connection with this transaction.
i. Certain Agreements. (i) The Company covenants and agrees that it will
not, without the prior written consent of the Buyer, enter into any subsequent
or further offer or sale of Common Stock or securities convertible into Common
Stock (collectively, "New Common Stock") with any third party pursuant to a
transaction which in any manner permits the registration of the New Common Stock
on any date before the 90th day after the Effective Date of the Registration
Statement registering the Securities herein for resale.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the Purchase Price for
the Series F Stock in accordance with Section 1(c) hereof, the Company will
irrevocably instruct its transfer agent to issue Common Stock from time to time
upon conversion of the Series F Stock in such amounts as specified from time to
time by the Company to the transfer agent, bearing the restrictive legend
specified in Section 4(b) of this Agreement prior to registration of the Shares
under the 1933 Act, registered in the name of the Buyer or its nominee and in
such denominations to be specified by the Buyer in connection with each
conversion of the Series F Stock. The Company warrants that, with respect to the
<PAGE>
Buyer's Securities, no instruction other than such instructions referred to in
this Section 5 and stop transfer instructions to give effect to Section 4(a)
hereof prior to registration and sale of the Shares under the 1933 Act will be
given by the Company to the transfer agent and that the Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and applicable law. Nothing in this Section
shall affect in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. If the Buyer provides
the Company with an opinion of counsel, reasonably satisfactory to the Company,
that registration of a resale by the Buyer of any of the Securities in
accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act, the Company shall (except as provided in clause (2) of
Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Converted Shares, promptly instruct the Company's transfer agent
to issue one or more certificates for Common Stock without legend in such name
and in such denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right to convert
the Series F Stock by delivering an executed and completed Notice of Conversion
to the Company with the original Series F Stock certificate.
(ii) The term "Conversion Date" means, with respect to any conversion
elected by the holder of the Series F Stock, the date that the Company received
the documents referenced in (b)(i) above. In order to determine the date, the
Buyer shall deliver the request via recognized express or overnight courier, to
avoid delays, the Conversion Date being the date delivery is made. The
Conversion Date for any mandatory conversion provided in the Certificate of
Amendment of Certificate of Incorporation shall be the date such mandatory
conversion is effective, without the requirement for a Notice of Conversion to
be issued by the Buyer. The Conversion Date shall be no later than two years
from the issuance of the Series F Stock, at which time, if not converted
earlier, the Series F Stock shall automatically convert into the Shares.
(iii) The Company will transmit the certificates representing the Converted
Shares issuable upon conversion of any Series F Stock (together, unless
otherwise instructed by the Buyer, with Series F Stock not being so converted)
to the Buyer at the address specified in the Notice of Conversion (which may be
the Buyer's address for notices as contemplated by Section 11 hereof or a
different address) via recognized express or overnight courier, by electronic
transfer or otherwise, within five (5) business days, or such date as is
practicable (such fifth business day the "Delivery Date") after the Conversion
Date.
c. The Company understands that a delay in the issuance of the Shares upon
the Buyer's request for conversion of the Series F Stock could result in
economic loss to the Buyer. The Company agrees to provide the Shares issuable
upon conversion of any shares of Series F Stock within 10 days after the
Conversion Date. If the Company fails to issue the Shares, then the Buyer shall
have the right to 1% per week, or any part thereof, until received, as a penalty
for the potential loss to Buyer.
d. The Company will authorize its transfer agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative. The Company will
provide the Buyer with a copy of the authorization so given to the transfer
agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first NYSE trading
day after each of the conditions contemplated by Sections 7 and 8 hereof shall
have been either satisfied or waived by the party in whose favor such conditions
<PAGE>
run.
b. The closing of the purchase and issuance of Series F Stock shall occur
on the Closing Date at the offices of the Escrow Agent and shall take place no
later than 3:00 P.M., New York time, on such day or such other time as is
mutually agreed upon by the Company and the Buyer.
c. Notwithstanding anything to the contrary contained herein, the Escrow
Agent will be authorized to release the Escrow Funds to the Company and to
others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The Buyer understands
that the Company's obligation to sell the Series F Stock to the Buyer pursuant
to this Agreement on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement by the Buyer;
b. Delivery by the Buyers to the Escrow Agent of good funds as payment in
full of an amount equal to the Purchase Price for the Series F Stock in
accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and warranties
of the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. The Company
understands that the Buyer's obligation to purchase the Series F Stock on the
Closing Date is conditioned upon:
a. The execution and delivery of this Agreement by the Company;
b. Filing by the Company of the Certificate of Amendment of the Certificate
of Incorporation;
c. Delivery by the Company to the Escrow Agent of the relevant Certificates
in accordance with this Agreement;
d. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement. each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
e. On such Closing Date, the Buyer shall have received an opinion of
counsel for the Company, dated such Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, substantially to the effect set forth in
Annex III attached hereto;
f. There shall not be in effect any law, rule, or regulation prohibiting or
restricting the transactions contemplated hereby or requiring any consent or
approval which shall not have been obtained; and
g. From and after the date hereof to and including such Closing Date, the
trading of the Common Stock shall not have been suspended by the SEC or the
NASD.
<PAGE>
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of
or protection of any of its rights under any of the Transaction Agreements.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
g. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
h. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
10. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or
(c) the third business day after mailing by international express courier,
with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at
the following addresses (or at such other addresses as such party may designate
by ten (10) days' advance written notice similarly given to each of the other
<PAGE>
parties hereto):
COMPANY: PLAY CO. TOYS & ENTERTAINMENT CORP.
550 Rancheros Drive
San Marcos, CA 92046
Attn: James Frakes, CFO
Telephone No.: (760) 471-4505
Telecopier No.: (760) 471-9624
with a copy to:
Millennium Ventures Law Group
113 Crosby Court
San Ramon, CA 94598
Attn: Marie Elena Cocchiaro, Esq.
Telephone No.: (925) 934-9531
Telecopier No.: (925) 934-1119
BUYER: At the address set forth on the signature page of this Agreement.
with a copy to:
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Attn: Samuel Krieger, Esq.
Telephone No.: (212) 689-3322
Telecopier No. (212) 213-2077
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
Attn: Samuel Krieger, Esq.
New York, New York 10016
Telephone No.: (212) 689-3322
Telecopier No. (212) 213-2077
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the payment
of the Purchase Price, and shall inure to the benefit of the Buyer and the
Company and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NO. OF SHARES OF SERIES F STOCK 130,000
PURCHASE PRICE OF SERIES F STOCK: $130,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 26th day of May 1999.
BUYER: DAVID STEFANSKY
David Stefansky, an individual Social Security Number
Subscriber's Telecopier No.
Address of Subscriber
Place of Citizenship
As of the date set forth below, the undersigned hereby accepts this
Agreement and represents that the foregoing statements are true and correct and
that it has caused this Securities Purchase Agreement to be duly executed on its
behalf.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: James Frakes
Title: Chief Financial Officer and Secretary
Date: May 26,1999
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NO. OF SHARES OF SERIES F STOCK 50,000
PURCHASE PRICE OF SERIES F STOCK: $50,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 26th day of May 1999.
BUYER: ARON STEFANSKY
Aron Stefansky, an individual Social Security Number
Subscriber's Telecopier No.
Address of Subscriber
Place of Citizenship
As of the date set forth below, the undersigned hereby accepts this
Agreement and represents that the foregoing statements are true and correct and
that it has caused this Securities Purchase Agreement to be duly executed on its
behalf.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: James Frakes
Title: Chief Financial Officer and Secretary
Date: May 26,1999
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NO. OF SHARES OF SERIES F STOCK 155,000
PURCHASE PRICE OF SERIES F STOCK: $155,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 26th day of May 1999.
BUYER: SOLOMON LIBENTHAL
Solomon Libenthal, an individual Social Security Number
Subscriber's Telecopier No.
Address of Subscriber
Place of Citizenship
As of the date set forth below, the undersigned hereby accepts this
Agreement and represents that the foregoing statements are true and correct and
that it has caused this Securities Purchase Agreement to be duly executed on its
behalf.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: James Frakes
Title: Chief Financial Officer and Secretary
Date: May 26,1999
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NO. OF SHARES OF SERIES F STOCK 15,000
PURCHASE PRICE OF SERIES F STOCK: $15,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 26th day of May 1999.
BUYER: SAMUEL KRIEGER
Samuel Krieger, an individual Social Security Number
Subscriber's Telecopier No.
Address of Subscriber
Place of Citizenship
As of the date set forth below, the undersigned hereby accepts this
Agreement and represents that the foregoing statements are true and correct and
that it has caused this Securities Purchase Agreement to be duly executed on its
behalf.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: James Frakes
Title: Chief Financial Officer and Secretary
Date: May 26,1999
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NO. OF SHARES OF SERIES F STOCK 100,000
PURCHASE PRICE OF SERIES F STOCK: $100,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 26th day of May 1999.
BUYER: BIRDIE CAPITAL CORP.
(Signature of Authorized Person)
By: Employer Identification Number
Title:
Subscriber's Telecopier No.
Address of Subscriber
Jurisdiction of Incorporation or Organization
As of the date set forth below, the undersigned hereby accepts this
Agreement and represents that the foregoing statements are true and correct and
that it has caused this Securities Purchase Agreement to be duly executed on its
behalf.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: James Frakes
Title: Chief Financial Officer and Secretary
Date: May 26,1999
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NO. OF SHARES OF SERIES F STOCK 100,000
PURCHASE PRICE OF SERIES F STOCK: $100,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 26th day of May 1999.
BUYER: HARBOURCREEK INVESTMENTS, LTD.
(Signature of Authorized Person)
By: Employer Identification Number
Title:
Subscriber's Telecopier No.
Address of Subscriber
Jurisdiction of Incorporation or Organization
As of the date set forth below, the undersigned hereby accepts this
Agreement and represents that the foregoing statements are true and correct and
that it has caused this Securities Purchase Agreement to be duly executed on its
behalf.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: James Frakes
Title: Chief Financial Officer and Secretary
Date: May 26,1999
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NO. OF SHARES OF SERIES F STOCK 200,000
PURCHASE PRICE OF SERIES F STOCK: $200,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 26th day of May 1999.
BUYER: VELENTIA PROPERTIES, INC.
(Signature of Authorized Person)
By: Employer Identification Number
Title:
Subscriber's Telecopier No.
Address of Subscriber
Jurisdiction of Incorporation or Organization
As of the date set forth below, the undersigned hereby accepts this
Agreement and represents that the foregoing statements are true and correct and
that it has caused this Securities Purchase Agreement to be duly executed on its
behalf.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: James Frakes
Title: Chief Financial Officer and Secretary
Date: May 26,1999
<PAGE>
ANNEX I
TO
SECURITIES PURCHASE AGREEMENT
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PLAY CO. TOYS & ENTERTAINMENT CORP.
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
Mail Filing Receipt to:
Millennium Ventures Law Group
113 Crosby Court, Suite 2
Walnut Creek, California 94598
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PLAY CO. TOYS & ENTERTAINMENT CORP.
The undersigned, for the purpose of amending the Certificate of
Incorporation of Play Co. Toys & Entertainment Corp., do hereby certify and set
forth:
FIRST: The name of the Corporation is: of Play Co. Toys & Entertainment
Corp.
SECOND: The Certificate of Incorporation was filed by the Department of
State on the 15th day of June, 1994.
THIRD: The amendment to the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to amend the provisions of "Article
Fourth, Subarticle (C)" to amend certain rights and preferences of the Series F
Preferred Stock so that, as amended, said Subarticle shall read as follows:
"C. Series F Preferred Stock.
(i) Designation. The designation of this series of Preferred Stock, par
value $0.01 per share, shall be the "Series F Preferred Stock." The number of
shares of Series F Preferred Stock authorized hereby shall be 5,500,000 shares.
(ii) Rank. The Series F Preferred Stock shall, with respect to rights on
liquidation, winding up, and dissolution, rank (a) junior to any other Senior
Securities established by the Board of Directors, including the Series E
Preferred Stock, and, if required by Section (vii), approved by the affirmative
vote of the holders of a majority of the shares of the Series F Preferred Stock,
the terms of which shall specifically provide that such series shall rank prior
to the Series F Preferred Stock; (b) on a parity with any other Parity
Securities established by the Board of Directors, the terms of which shall
specifically provide that such series shall rank on a parity with the Series F
Preferred Stock; and (c) prior to any other Junior Securities of the
Corporation.
(iii) Dividends.
(a) 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
$0.08 per share. Cumulative dividends are payable upon the earlier of redemption
or conversion of the shares (the "Series F Dividend Payment Dates"), in
preference to dividends on the Junior Securities. Such dividend shall be paid to
the holder of record by the close of business on the date thirty business days
after the Series F Dividend Payment Dates, which dividend may be paid in cash or
in kind, in shares of Series F Preferred Stock, at the discretion of the
Corporation. If paid in kind, the number of shares issuable shall be rounded to
the nearest share, there being no obligation of the Company to make any cash
payments. Each of such dividends shall be fully cumulative and shall accrue
(whether or not declared), without interest, from the date such dividends are
payable as herein provided.
(b) If at any time the Corporation shall have failed to pay full dividends
<PAGE>
which have accrued (whether or not declared) on any Senior Securities, no
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation on the shares of the Series F Preferred Stock or any
other Parity Securities unless, prior to or concurrently with such declaration,
payment, or setting apart for payment, all accrued and unpaid dividends on all
outstanding shares of Senior Securities shall have been or are declared and paid
or set apart for payment, without interest. No dividends shall be declared or
paid or set apart for payment on any Parity or Junior securities for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series F Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of such full cumulative
dividends. If any dividends are not paid in full, as aforesaid, upon the shares
of the Series F Preferred Stock and any other Parity Securities, the Corporation
distribute the dividend pro rata so that the amount of dividends declared per
share on the Series F Preferred Stock and such other Parity Securities shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Series F Preferred Stock and such other Parity securities bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series F Preferred Stock or
any other Parity Securities which may be in arrears.
(c) Holders of the shares of the Series F Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (iii)(a) hereof in preference
to and in priority over any dividends of other Parity Securities and any other
Junior Securities.
(d) Subject to the foregoing provisions of this Section (iii) the Board of
Directors may declare, and the Corporation may pay or set apart for payment
dividends and other distributions on any of the Junior Securities and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights, or options exercisable for or convertible into any of the Junior
Securities, and the holders of shares of the Series F Preferred Stock shall not
be entitled to share therein.
(iv) Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Corporation, the holders of the shares of
Series F Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $0.50 per share for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Securities, provided, however, that the holders of the outstanding shares
of the Series F Preferred Stock shall not be entitled to receive such
liquidation payment until the liquidation payments on all outstanding shares of
Senior Securities, including the Series E Preferred Stock, shall have been paid
in full. If the assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the holders of the outstanding shares of the
Series F Preferred Stock or any other Parity Securities, then the holders of all
such shares shall share ratably in such distribution of assets in accordance
with the amount which would be payable on such distribution if the amounts to
which the holders of the outstanding shares of Series F Preferred Stock and the
holders of outstanding shares of such other Parity Securities were paid in full.
(b) For the purposes of this Article FOURTH, neither the voluntary sale,
conveyance, lease, exchange, nor transfer (for cash, shares of stock,
securities, or their consideration) of all or substantially all of the property
or assets of the Corporation or the consolidation or merger of the Corporation
with one or more other corporations shall be deemed to be a liquidation,
dissolution, or winding up, voluntary or involuntary, unless such voluntary
sale, conveyance, lease, exchange, or transfer shall be in connection with a
<PAGE>
dissolution or winding up of the business of the Corporation.
(v) Redemption. The shares of Series B Preferred Stock are not redeemable
by the Corporation.
(vi) Conversion.
(a) Subject to, and upon compliance with, the provisions of this Section
(vi), the holder of a share of Series F Preferred Stock so designated shall have
the right, at such holder's option, to convert such share into two fully paid
and non-assessable shares of Common Stock of the Corporation, at any time
commencing on the date the registration statement registering the Series F
Preferred Stock and Common Stock underlying same is declared effective by the
Securities and Exchange Commission.
(b) (1) In order to exercise the conversion privilege, the holders of each
share of Series F Preferred Stock to be converted shall surrender the
certificates representing such shares at the office of the transfer agent for
the Series F Preferred Stock, appointed for such purpose by the Corporation,
with the Notice of Election to Convert on the back of said certificate completed
and signed. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name in which such share of Series F Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.
(2) As promptly as practicable after the surrender of the certificates for
shares of Series F Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions of
this Section (vi).
(3) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series F Preferred Stock shall have been surrendered and such notice shall have
been received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open and such notice is received by the
Corporation. All shares of Common Stock delivered upon conversion of the Series
F Preferred Stock will upon delivery be duly and validly issued and fully paid
and non-assessable, free of all liens and charges and not subject to any
preemptive rights.
(c) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purposes of effecting conversions of the Series F
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series F Preferred Stock not theretofore
converted. For purposes of this subsection (d), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Series F Preferred Stock shall be computed as if at the time of computation
all such outstanding shares were held by a single holder.
(d) Upon the occurrence of an Event of Conversion (as defined below), each
<PAGE>
share of Series F Preferred Stock then outstanding shall, by virtue of, and
simultaneously with, the occurrence of the Event of Conversion and without any
action on the part of the holder thereof, be automatically converted into two
validly issued, fully paid, and nonassessable Common Shares. The term "Event of
Conversion" shall mean the earlier of two years from issuance of the Series F
Preferred Stock or the occurrence of the closing price per share for the
Corporation's common stock having been at least $5.00 for a consecutive 30 day
period.
(vii) Voting Rights. The holders of record of shares of the Series F
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this Section (vii)(a) or as otherwise provided by law.
(a) So long as any shares of the Series F Preferred Stock are outstanding,
the Corporation will not, without the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of the Series F Preferred
Stock, voting as a class, vote to amend the Corporation's Certificate of
Incorporation to (i) increase or decrease the aggregate number of authorized
shares of the Series F Preferred Stock; (ii) increase or decrease the par value
of the Series F Preferred Stock; or (iii) alter the preferences, powers, or
rights of the Series F Preferred Stock so as to affect them adversely.
(b) In exercising the voting rights set forth in this Section (vii), each
share of Series F Preferred Stock shall have one vote per share.
FIFTH: The amendment to the Articles of Incorporation of the Corporation
set forth above was adopted by unanimous consent of the Corporation's board of
directors dated as of May 18, 1999.
IN WITNESS WHEREOF, the undersigned President and Secretary of this
Corporation have executed this Certificate of Amendment on this 18th day of May,
1999.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By:
Richard Brady, President
By:
James Frakes, Secretary
<PAGE>
ANNEX II
TO
SECURITIES PURCHASE AGREEMENT
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the
Securities Purchase Agreement to
Which These Joint Escrow
Instructions Are Attached
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Attention: Samuel M. Krieger, Esq.
Dear Mr. Krieger:
As escrow agent for both Play Co. Toys & Entertainment Corp., a Delaware
corporation (the "Company"), and the one or more Buyers (each, a "Buyer") of
Series F Convertible Preferred Stock (the "Series F Stock") of the Company, who
is/are named in the Securities Purchase Agreement (the "Agreement") between the
Company and the Buyers to which a copy of these Joint Escrow Instructions is
attached as Annex II, you (hereafter, the "Escrow Agent") are hereby authorized
and directed to hold the documents and funds together with any interest thereon
(the "Escrow Funds") delivered to the Escrow Agent pursuant to the terms of the
Agreement in accordance with the following instructions. All capitalized terms
used herein and not otherwise defined herein shall have the respective meanings
provided in the Agreement.
1. The Escrow Agent shall, as promptly as feasible, notify the Company of
receipt of the Purchase Price for the Series F Stock from or on behalf of the
Buyer, including $155,000 which is payable by check to the Company, and notify
the Buyer (or such agent as the Buyer may designate in writing) of receipt of
the relevant Certificates. As promptly as feasible upon receipt of notice
(whether oral or in written form) from the Company and the Buyer that the
respective conditions precedent to the purchase and sale have been satisfied
(which notice shall not be unreasonably withheld), the Escrow Agent shall, after
reduction by the amounts referred to in the next succeeding sentence of this
paragraph, release the relevant Escrow Funds to or upon the order of the Company
and shall release the relevant Certificates to the Buyers, except that the
Escrow Agent shall release the Certificate to the Buyer who paid the Purchase
Price via check only after notification by the Company that the funds
represented thereby have cleared the bank. After receipt of such notice, an
amount equal to (i) ten percent (10%) of the Purchase Price of the Series F
Stock as the aggregate cash fees and non-accountable expense allowance and
350,000 options to purchase common stock at an exercise price of $3.00 per share
for four years due to Robb Peck McCooey (the "Placement Agent") shall be
released to or upon the order of the Placement Agent, (ii) one percent (1%) of
the Purchase Price of the Series F Stock in legal and escrow fees to the Escrow
Agent (the "Escrow Agent Fees") shall be released to or upon the order of the
Escrow Agent, and (iii) Ten Thousand ($10,000) Dollars in legal fees shall be
released to Millennium Ventures Law Group, counsel for the Company, via wire
transmission pursuant to instructions under separate cover. If the relevant
Certificates are not deposited with the Escrow Agent (or the Escrow Agent's
designee) within ten (10) days after receipt by the Company of notice of receipt
by the Escrow Agent of the Purchase Price funds from the Buyer for the relevant
Series F Stock, the Escrow Agent shall notify the Buyer, and the Buyer shall be
entitled to cancel the purchase and demand repayment of the funds. If the
<PAGE>
Purchase Price funds are not deposited with the Escrow Agent in accordance with
the Agreement, the Escrow Agent shall notify the Company, and the Company shall
be entitled to cancel the Agreement and demand return of such Certificates.
If the Company or the Buyer notifies the Escrow Agent on or before the
Closing Date that the conditions precedent to the obligations of the Company or
the Buyer, as the case may be, under the Agreement with respect to the purchase
and sale of Series F Stock to be effected were not satisfied or waived, then the
Escrow Agent shall return the Escrow Funds to the Buyer, without interest or
deduction and shall return the Certificates to the Company. Prior to return of
any Escrow Funds to the Buyer, the Buyer shall furnish such tax reporting or
other information as shall be appropriate for the Escrow Agent to comply with
applicable United States laws. The Escrow Agent shall deposit all Escrow Funds
received hereunder in the Escrow Agent's attorney trust account at The Bank of
New York, located at 350 Fifth Avenue, New York, New York, except for $155,000
which shall be paid by delivery to the Company of a check on the account of Mr.
Solomon Libenthal, made payable to the Company.
2. The Escrow Agent's duties hereunder may not be altered, amended,
modified, or revoked, except by a writing signed by the Company, the Buyer, and
the Escrow Agent.
3. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, and any act done or omitted by the Escrow Agent pursuant
to the advice of the Escrow Agent's attorneys-at-law shall be conclusive
evidence of such good faith.
4. The Escrow Agent is hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments, or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment, or decree, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person, firm, or corporation by reason of such decree
being subsequently reversed, modified, annulled, set aside, vacated, or found to
have been entered without jurisdiction. In the event that the Escrow Agent shall
be uncertain as to its duties or rights hereunder or shall receive instructions
with respect to the Escrowed Certificates or the Escrow Funds which, in its sole
determination, are in conflict either with other instructions received by it or
with any provision of this Agreement, the Escrow Agent, at its sole option, may
deposit the Escrow Funds and Certificates (and any other amounts that thereafter
become part of the Escrow Funds) with the registry of a court of competent
jurisdiction in a proceeding to which all parties in interest are joined. Upon
the deposit by the Escrow Agent of the Escrow Funds with the registry of any
court, the Escrow Agent shall be relieved of all further obligations and
released from all liability hereunder.
5. The Escrow Agent shall not be liable in any respect on account of the
identity, authorities, or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
6. The Escrow Agent has acted as legal counsel for the Buyer and the
Placement Agent and may continue to act as legal counsel for such parties, from
time to time, notwithstanding its duties as the Escrow Agent hereunder. The
Company consents to the Escrow Agent acting in such capacity as legal counsel
for the Buyer and waives any claim that such representation represents a
<PAGE>
conflict of interest on the part of the Escrow Agent. The Company understands
that the Buyer and the Escrow Agent are relying explicitly on the foregoing
provision in entering into these Joint Escrow Instructions.
7. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Buyer. In the event of any such resignation, the Buyer and the Company shall
appoint a successor Escrow Agent.
8. If the Escrow Agent reasonably requires other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
9. The Company and the Buyer agree jointly and severally to indemnify and
hold harmless the Escrow Agent from any and all claims, liabilities, costs, or
expenses in any way arising from or relating to the duties or performance of the
Escrow Agent hereunder other than any such claim, liability, cost, or expense to
the extent the same shall (a) have been tax obligations in connection with the
Escrow Agent's fee hereunder, or (b) have been determined by the final,
unappealable judgment of a court of competent jurisdiction to have resulted from
the gross negligence or willful misconduct of the Escrow Agent, or (c) be a
liability, or arise from a liability, to either the Company or the Buyer.
11. Any notice required or permitted hereunder shall be given in the manner
provided in the Section headed "NOTICES" in the Agreement, the terms of which
are incorporated herein by reference.
12. By signing these Joint Escrow Instructions, the Escrow Agent becomes a
party hereto only for the purpose of these Joint Escrow Instructions; the Escrow
Agent does not become a party to the Agreement. The Company and the Buyer have
become parties hereto by their execution and delivery of the Agreement, as
provided therein.
13. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns and shall
be governed by the laws of the State of New York without giving effect to
principles governing the conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be legal and binding on all
parties hereto.
14. The rights and obligations of any party hereto are not assignable
without the written consent of the other parties hereto. These Joint Escrow
Instructions constitute the entire agreement amongst the parties with respect to
the subject matter hereof.
15. The Company agrees that the Placement Agent is a third party
beneficiary of the provisions of clause (i) in Section 1 hereof and that such
clause cannot be amended or revoked without the prior written consent of the
Placement Agent.
ACCEPTED BY:
ESCROW AGENT:
KRIEGER & PRAGER
By:
Date:
PLACEMENT AGENT:
ROBB PECK MCCOOEY
By:
Date:
THE COMPANY
PLAY CO. TOYS & ENTERTAINMENT CORP.
By:
Date:
<PAGE>
ANNEX III
TO
SECURITIES PURCHASE AGREEMENT
MILLENNIUM VENTURES LAW GROUP
Attorneys at Law
113 Crosby Court, Suite 2
Walnut Creek, California 94598
(925) 934-9531 (phone)
(925) 934-1119 (fax)
May 27, 1999
Purchasers of Play Co. Toys & Entertainment Corp. Series F Preferred Stock
c/o Krieger & Prager
319 Fifth Avenue
New York, New York 10016
Re: Play Co. Toys & Entertainment Corp.
Ladies and Gentlemen:
We have acted as counsel to Play Co. Toys & Entertainment Corp., a
corporation incorporated under the laws of the State of Delaware (the
"Company"), in connection with the proposed issuance and sale of 750,000 shares
of the Company's Series F Preferred Stock (the "Securities") pursuant to the
Securities Purchase Agreement, dated May 26, 1999 (the "Purchase Agreement")
between the Company and the annexed listed of purchasers (the "Buyers"),
including all Exhibits and Appendices annexed thereto - and all Agreements and
instruments executed and delivered as contemplated thereby (collectively, the
"Agreements").
In accordance with paragraph 8(e) of the Purchase Agreement, and upon the
instructions of your office, this opinion is delivered to you and is intended
for your use only and, as such, may be relied upon by you only, solely with
regard to the issuance of your opinion as referenced herein.
In rendering these opinions we have also reviewed the Resolution of the
Board of Directors of the Company relating to the Agreements and the Company's
Officers' Certificate as to the accuracy of certain representations all dated on
or about May 26, 1999.
In rendering the opinions herein, we have assumed and have relied upon (i)
the genuineness of all signatures on the Agreements reviewed by us; (ii) the
conformity to the originals of all such Agreements submitted to us as copies;
(iii) with respect to the Agreements, that said Buyers have the requisite power
and authority to enter into and perform all obligations under same; (iv) that
the Agreements accurately describe and contain the mutual understanding of the
parties; (v) that there are no oral or written statements or agreements that
modify, amend, or vary or purport to modify, amend, or vary any of the terms of
the Agreements; and (vi) that the Agreements are construed in accordance with
the laws of the State of California.
Furthermore, we have assumed the assumptions set forth in ss.4 of the Legal
Opinion Accord (the "Accord") of the ABA Section of Business Law (1991).
Based upon the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion as follows:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and is duly
<PAGE>
qualified to do business in the State of California.
2. The authorized capital stock of the Company consists of (i) 160,000,000
shares of Common Stock, par value $0.01 per share (the "Common Stock"); (ii)
25,000,000 shares of Series E Preferred Stock, par value $0.01 per share; and
(iii) 5,500,000 shares of Series F Preferred Stock, par value $0.01 per share.
3. The Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Company has been a reporting company under the Exchange Act for a period of at
least twelve months preceding the date hereof.
4. When duly countersigned by the Company's transfer agent and registrar
and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities and any Common Stock to be issued upon the conversion thereof, as
described in the Agreements represented thereby, will be duly authorized and
validly issued, fully paid and nonassessable.
5. The Company has the requisite corporate power and authority to enter
into the Agreements and to sell and deliver the Securities and the Common Stock
to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by the Company; to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by the Company or the consummation of the transactions
contemplated thereby. Each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or other laws
affecting creditors' rights generally and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed.
6. To our knowledge, after due inquiry, the execution, delivery, and
performance of the Agreements by the Company and the performance of its
obligations thereunder do not and will not constitute a breach or violation of
any of the terms and provisions of or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of Incorporation
or By-Laws, each as currently in effect, (ii) any indenture, mortgage, deed of
trust, agreement, or other instrument to which the Company is a party or by
which it or any of its property is bound, (iii) any applicable statute or
regulation, or (iv) any judgment, decree, or order of any court or governmental
body having jurisdiction over the Company or any of its property.
The opinions set forth above are subject to the following qualifications
and limitations:
(a) The enforceability of the Agreements and the rights or remedies set
forth therein are subject to or limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or other similar laws relating to or
affecting the rights of creditors generally;
(b) The enforceability of the Agreements is subject to specific enforcement
of particular provisions of the Agreements and general principles of equity;
(c) The enforceability of the Agreements is further subject to the
qualification that certain waivers, procedures, remedies, and other provisions
of the Agreements may be unenforceable under or may be limited by the law.
provided however, that the foregoing does not substantially prevent the
practical realization of the benefits intended by the Agreements; and
<PAGE>
(d) Millennium Ventures Law Group expresses no opinion as to compliance
with any laws, rules, or regulations relating to antifraud matters, securities
or the sale or issuance thereof, or antitrust or anti-competitive matters. This
opinion is expressed only with respect to the laws of the State of Delaware
General Corporation Law. Millennium Ventures Law Group expresses no opinion to
the extent that the law of any jurisdiction other than that identified above is
applicable to the subject matter hereof.
The opinions expressed in this letter are based upon the law in effect on
the date hereof, and we assume no obligation to revise or supplement this
opinion should such law be changed by legislative action, judicial decision, or
otherwise.
This opinion is being furnished to you solely for your benefit and only
with respect to the transaction recited herein. Accordingly, it may not be
relied upon by, quoted in any manner to, or delivered to any person or entity
without, in each instance, our prior written consent.
The opinions expressed above are subject to the effects of laws which may
limit the recovery of damages to the extent a court finds them to constitute a
penalty or be unreasonable under the circumstances. Furthermore, the opinions
expressed above are subject to the qualifications that certain remedies,
waivers, and other provisions contained in the Agreements may not be
enforceable.
The opinions set forth herein are limited to those expressly stated, and no
other legal opinion or opinions should be implied.
This opinion is given as of the date hereinabove stated and imposes no
obligation upon Millennium Ventures Law Group to update the opinion. Millennium
Ventures Law Group specifically disclaims any undertaking or obligation to
advise the addressee or its counsel or any other person of any facts or
circumstances that may hereafter be brought to its attention or any change in
any laws that may hereafter occur which may alter or affect the opinions
expressed herein.
Very truly yours,
Millennium Ventures Law Group
By: Marie Elena Cocchiaro
Exhibit 21.01
SUBSIDIARIES
Play Co. Toys & Entertainment Corp. is the parent of two wholly-owned
subsidiaries:
1. Toys International, Inc., a California corporation which operates 13
stores under the following names: Toys International, Toy Co., or Tutti Animali,
and
2. Play Co. Toys & Canyon Country, Inc., a California corporation which
operates 1 store under the name Play Co. Toys
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.01
FINANCIAL DATA SCHEDULE
This schedule contains summary information extracted from the Balance Sheet,
Statement of Operations, Statement of Cash flows and Notes thereto incorporated
in Part I, Item 7, of this Form 10-KSB and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> mar-31-1999
<PERIOD-END> jun-30-1998
<CASH> 125,967
<SECURITIES> 0
<RECEIVABLES> 98,276
<ALLOWANCES> 0
<INVENTORY> 11,506,284
<CURRENT-ASSETS> 13,390,790
<PP&E> 9,406,778
<DEPRECIATION> (4,058,603)
<TOTAL-ASSETS> 21,150,392
<CURRENT-LIABILITIES> 7,558,647
<BONDS> 0
0
5,682,101
<COMMON> 0
<OTHER-SE> (617,472)
<TOTAL-LIABILITY-AND-EQUITY> 21,150,392
<SALES> 34,371,230
<TOTAL-REVENUES> 34,371,230
<CGS> 19,590,784
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,672,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 965,051
<INCOME-PRETAX> 143,018
<INCOME-TAX> 143,018
<INCOME-CONTINUING> 143,018
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,868
<EPS-BASIC> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
