<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 1, 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 1-13814
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INTIMATE BRANDS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1436998
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Three Limited Parkway, P.O. Box 16000, Columbus, OH 43216
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 415-6900
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock Outstanding at June 7, 1999
-------------------- ---------------------------
$.01 Par Value 37,226,368 Shares
Class B Common Stock Outstanding at June 7, 1999
-------------------- ---------------------------
$.01 Par Value 199,809,084 Shares
<PAGE> 2
INTIMATE BRANDS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
Part I. Financial Information
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen Weeks Ended
May 1, 1999 and May 2, 1998 ............................. 3
Consolidated Balance Sheets
May 1, 1999, January 30, 1999 and May 2, 1998 ........... 4
Consolidated Statements of Cash Flows
Thirteen Weeks Ended
May 1, 1999 and May 2, 1998 ............................. 5
Notes to Consolidated Financial Statements ....................... 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition ........... 12
Part II. Other Information
Item 1. Legal Proceedings ........................................... 20
Item 4. Submission of Matters to a Vote of Security Holders ......... 21
Item 5. Other Information ........................................... 21
Item 6. Exhibits and Reports on Form 8-K ............................ 22
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------
May 1, May 2,
1999 1998
--------- ---------
<S> <C> <C>
Net sales $ 877,821 $ 770,868
Cost of goods sold, and buying and occupancy costs 544,394 498,996
--------- ---------
Gross income 333,427 271,872
General, administrative and store operating expenses (249,233) (200,454)
--------- ---------
Operating income 84,194 71,418
Interest expense (8,864) (7,563)
Other income 1,976 4,372
--------- ---------
Income before income taxes 77,306 68,227
Provision for income taxes 30,900 27,200
--------- ---------
Net income $ 46,406 $ 41,027
========= =========
Net income per basic and diluted share $ .19 $ .16
========= =========
Dividends per share $ .14 $ .14
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
May 1, January 30, May 2,
1999 1999 1998
----------- ----------- -----------
(Unaudited) (Unaudited)
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash and equivalents $ 15,472 $ 387,774 $ 22,850
Accounts receivable 16,819 15,627 18,375
Inventories 524,754 479,896 439,886
Intercompany receivable -- -- 180,821
Other 101,040 93,944 97,151
----------- ----------- -----------
Total current assets 658,085 977,241 759,083
Property and equipment, net 404,890 398,469 388,059
Other assets 70,531 72,367 77,397
----------- ----------- -----------
Total assets $ 1,133,506 $ 1,448,077 $ 1,224,539
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 76,700 $ 93,764 $ 67,053
Current portion of long-term debt 100,000 100,000 --
Accrued expenses 184,518 198,321 175,312
Intercompany payable 159,177 5,860 --
Income taxes 48,673 139,223 40,569
----------- ----------- -----------
Total current liabilities 569,068 537,168 282,934
Long-term debt 250,000 250,000 350,000
Deferred income taxes 3,692 2,251 11,630
Other long-term liabilities 15,236 14,015 12,405
Shareholders' equity:
Common stock 2,527 2,527 2,527
Paid-in capital 670,723 672,391 674,488
Retained earnings (deficit) 158,225 145,396 (108,812)
----------- ----------- -----------
831,475 820,314 568,203
Less: treasury stock, at average cost (535,965) (175,671) (633)
----------- ----------- -----------
Total shareholders' equity 295,510 644,643 567,570
----------- ----------- -----------
Total liabilities and shareholders' equity $ 1,133,506 $ 1,448,077 $ 1,224,539
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
INTIMATE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------
May 1, May 2,
1999 1998
--------- ---------
<S> <C> <C>
Operating activities
Net income $ 46,406 $ 41,027
Impact of other operating activities on cash flows:
Depreciation and amortization 27,159 24,345
Change in assets and liabilities
Inventories (44,858) (22,183)
Accounts payable and accrued expenses (30,867) (76,514)
Income taxes (89,109) (54,926)
Other assets and liabilities (5,589) 25,445
--------- ---------
Net cash used for operating activities (96,858) (62,806)
--------- ---------
Investing activities
Capital expenditures (33,222) (20,448)
--------- ---------
Financing activities
Dividends paid (33,577) (35,374)
Repurchase of common stock (365,212) --
Change in intercompany receivable/payable 153,317 (168,364)
Stock options and other 3,250 1,122
--------- ---------
Net cash used for financing activities (242,222) (202,616)
--------- ---------
Net decrease in cash and equivalents (372,302) (285,870)
Cash and equivalents, beginning of year 387,774 308,720
--------- ---------
Cash and equivalents, end of period $ 15,472 $ 22,850
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
INTIMATE BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
Intimate Brands, Inc. (the Company) includes specialty retail and
catalogue operations, which offer women's intimate and other apparel,
personal care products and accessories. The Company consists of
Victoria's Secret Stores, Victoria's Secret Catalogue, Bath & Body
Works, and Gryphon Development. The Limited, Inc. owns 84.3% of the
outstanding common stock of the Company.
The consolidated financial statements include the accounts of the
Company and all significant subsidiaries which are more than 50 percent
owned and controlled. All significant intercompany balances and
transactions have been eliminated in consolidation.
The consolidated financial statements as of and for the periods ended
May 1, 1999 and May 2, 1998 are unaudited and are presented pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, these consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto contained in the Company's 1998 Annual Report on Form 10-K. In
the opinion of management, the accompanying consolidated financial
statements reflect all adjustments (which are of a normal recurring
nature) necessary to present fairly the financial position and results
of operations and cash flows for the interim periods, but are not
necessarily indicative of the results of operations for a full fiscal
year.
The consolidated financial statements as of and for the periods ended
May 1, 1999 and May 2, 1998 included herein have been reviewed by the
independent public accounting firm of PricewaterhouseCoopers LLP and
the report of such firm follows the notes to consolidated financial
statements.
2. Earnings Per Share
Weighted average common shares outstanding (thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-------------------------
May 1, 1999 May 2, 1998
----------- -----------
<S> <C> <C>
Common shares issued 253,084 252,700
Treasury shares (12,509) (185)
----------- -----------
Basic shares 240,575 252,515
Dilutive effect of stock options and restricted shares 3,952 2,061
----------- -----------
Diluted shares 244,527 254,576
=========== ===========
</TABLE>
There were no options outstanding at quarter-end 1999 and 1998 excluded
from the computation of earnings per share because the options'
exercise price was greater than the average market price of the common
shares during the period.
6
<PAGE> 7
3. Inventories
The fiscal year of the Company and its subsidiaries is comprised of two
principal selling seasons: Spring (the first and second quarters) and
Fall (the third and fourth quarters). Valuation of finished goods
inventories is based principally upon the lower of average cost or
market determined on a first-in, first-out basis utilizing the retail
method. Inventory valuation at the end of the first and third quarters
reflects adjustments for inventory markdowns and shrinkage estimates
for the total selling season.
4. Property and Equipment, net
Property and equipment, net, consisted of (thousands):
<TABLE>
<CAPTION>
May 1, January 30, May 2,
1999 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Property and equipment, at cost $ 846,403 $ 821,061 $ 758,957
Accumulated depreciation and
amortization (441,513) (422,592) (370,898)
--------- --------- ---------
Property and equipment, net $ 404,890 $ 398,469 $ 388,059
========= ========= =========
</TABLE>
5. Income Taxes
The Company is included in The Limited's consolidated federal and
certain state income tax groups for income tax purposes and is
responsible for its proportionate share of income taxes calculated upon
its federal taxable income at a current estimate of the annual
consolidated effective tax rate. Income taxes paid during the thirteen
weeks ended May 1, 1999 and May 2, 1998 approximated $120.0 million and
$80.7 million.
6. Long-term Debt
Long-term debt consists of notes which represent the Company's
proportionate share of certain long-term debt of The Limited. The
interest rates and maturities of the notes parallel those of the
corresponding debt of The Limited. The 7 1/2% debentures are subject to
early redemption beginning in 2003 concurrent with any prepayment of
the corresponding debt by The Limited.
7
<PAGE> 8
Unsecured long-term debt consisted of (thousands):
<TABLE>
<CAPTION>
May 1, January 30, May 2,
1999 1999 1998
-------- -------- --------
<S> <C> <C> <C>
7 1/2% Debentures due March 2023 $100,000 $100,000 $100,000
9 1/8% Notes due February 2001 150,000 150,000 150,000
8 7/8% Notes due August 1999 100,000 100,000 100,000
-------- -------- --------
350,000 350,000 350,000
Less current portion of long-term debt 100,000 100,000 --
-------- -------- --------
$250,000 $250,000 $350,000
======== ======== ========
</TABLE>
Interest paid during the thirteen weeks ended May 1, 1999 and May 2,
1998, including interest on the intercompany cash management account
(see Note 7), approximated $16.4 million and $15.1 million.
7. Intercompany Relationship with the Parent
The Limited provides various services to the Company including, but not
limited to, store design and construction supervision, real estate
management, travel and flight support and merchandise sourcing. To the
extent expenditures are specifically identifiable they are charged to
the Company. All other services-related costs not specifically
attributable to an operating business have been allocated to the
Company based upon various allocation methods. The Company and The
Limited have entered into intercompany agreements which establish the
provision of services in accordance with the terms described above.
The Company participates in The Limited's centralized cash management
system. Under this system cash received from The Company's operations
is transferred to The Limited's centralized cash accounts and cash
disbursements are funded from the centralized cash accounts on a daily
basis. The intercompany cash management account is an interest-earning
asset or interest-bearing liability of the Company. Interest on the
intercompany cash management account is calculated based on the Federal
Reserve AA Composite 30-day rate.
The Company's proprietary credit card processing is performed by
Alliance Data Systems which is approximately 31%-owned by The Limited.
The Company and The Limited are parties to a corporate agreement under
which the Company granted to The Limited a continuing option to
purchase, under certain circumstances, additional shares of Class B
Common Stock or shares of nonvoting capital stock of the Company. The
Corporate Agreement further provides that, upon request of The Limited,
the Company will use its best efforts to effect the registration of any
of the shares of Class B Common Stock and nonvoting capital stock held
by The Limited for sale.
8
<PAGE> 9
8. Segment Information
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company identifies operating
segments based on a businesses' operating characteristics and whether
management reports directly to the Chairman. Reportable segments were
determined based on the similar economic characteristics of the retail
businesses and the similar methods used to distribute products and
combine the store-based operations of Victoria's Secret Stores and Bath
& Body Works. The Catalogue segment consists of the Victoria's Secret
Catalogue operations. Sales outside the United States were immaterial.
Segment information for the thirteen weeks ended May 1, 1999 and May 2,
1998 follows (in thousands):
<TABLE>
<CAPTION>
Reconciling
1999 Retail Catalogue Other (a) Items Total
- ----------------------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 680,871 $ 194,007 $ 2,943 -- $ 877,821
Intersegment sales -- -- $ 77,574 ($ 77,574) (b) --
Operating income (loss) $ 86,191 $ 16,401 ($ 18,398) -- $ 84,194
Total assets $ 832,470 $ 204,900 $ 96,136 -- $ 1,133,506
Reconciling
1998 Retail Catalogue Other (a) Items Total
- ----------------------- ---------- ---------- --------- ---------- -----------
Net sales $ 566,888 $ 199,013 $ 4,967 -- $ 770,868
Intersegment sales -- -- $ 63,207 ($ 63,207) (b) --
Operating income (loss) $ 68,581 $ 18,944 ($ 16,107) -- $ 71,418
Total assets $ 744,578 $ 203,063 $ 276,898 -- $ 1,224,539
</TABLE>
(a) Included in the "other" category are Gryphon and Corporate, neither of
which are significant operating segments. Total assets included an
intercompany receivable of $180,821 in 1998. The Company maintained an
intercompany payable of $159,177 as of May 1, 1999 (see Note 7).
(b) Represents intersegment sales elimination
In addition to its operating segments, management also focuses on
Victoria's Secret as a brand. Sales of the Victoria's Secret brand grew
10% in the first quarter of 1999 and 11% in the first quarter of 1998
and totaled $616.8 million in 1999 and $560.8 million in 1998.
9
<PAGE> 10
9. Special and Nonrecurring Charge
In the fourth quarter of 1997, the Company recognized a $67.6 million
charge in conjunction with closing Cacique, a 118-store lingerie
business, effective January 31, 1998. The amount included noncash
charges of $30 million, comprised principally of write-offs and
liquidations of store assets, which were recognized in 1997. Outlays
for the cash component of the charge amounted to $26.8 million in 1998
and $1.3 million in 1999, leaving a $9.5 million liability at May 1,
1999.
The $9.5 million liability relates principally to future payments for
settlement of store obligations, currently scheduled through 2004. In
determining the provision for lease obligations, the Company considered
the estimated amount necessary for either buying out the lease or
continued rent payments through lease expiration.
10
<PAGE> 11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Audit Committee of
The Board of Directors of
Intimate Brands, Inc.
We have reviewed the condensed consolidated balance sheets of Intimate Brands,
Inc. and Subsidiaries (the "Company") at May 1, 1999 and May 2, 1998, and the
related condensed consolidated statements of income and cash flows for the
thirteen-week periods ended May 1, 1999 and May 2, 1998. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 30, 1999, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated February
17, 1999, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of January 30, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
May 12, 1999
11
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Net sales for the first quarter of 1999 were $877.8 million, an increase of 14%
from $770.9 million for the first quarter of 1998. Gross income increased 23% to
$333.4 million from $271.9 million in 1998 and operating income increased 18% to
$84.2 from $71.4 million in 1998. Earnings per diluted share grew 19% to $.19
per share, compared to $.16 per share in 1998.
Business highlights include the following:
Victoria's Secret Stores' sales increased 17% to $422.8 million in 1999 which
reflected a comparable store sales increase of 13%, while operating profits grew
26%. Sales were driven by three new product launches including `Body by
Victoria,' the most successful launch in brand history. These product launches
were supported by national television advertising.
Bath & Body Works' sales increased 26% to $258.1 million in 1999 with comparable
stores sales increases of 13%. Operating profits grew 24%. Overall, the brand
experienced solid customer response to its new product offerings and
continued strong sales of White Barn Candle Co. home fragrance products.
During the quarter, the Company repurchased $365.2 million of common stock in
connection with the previously announced $500 million share repurchase. These
shares were repurchased on a proportionate basis from both the open market and
The Limited. This stock repurchase was completed in May 1999.
Financial Summary
- -----------------
The following summarized financial data compares the thirteen week period ended
May 1, 1999 to the comparable 1998 period:
<TABLE>
<CAPTION>
Change
From Prior
1999 1998 Year
---- ---- ----------
<S> <C> <C> <C>
NET SALES (MILLIONS):
Victoria's Secret Stores $423 $362 17%
Bath & Body Works 258 205 26%
---- ---- ----
Total retail sales 681 567 20%
Victoria's Secret Catalogue 194 199 (3%)
Other 3 5 N/M
---- ---- ----
Total net sales $878 $771 14%
==== ==== ====
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
% Change
From Prior
COMPARABLE STORE SALES: 1999 1998 Year
------- ------- ---------------
<S> <C> <C> <C>
Victoria's Secret Stores 13% 6%
Bath & Body Works 13% (1%)
------- -------
Total comparable store sales increase 13% 4%
======= =======
STORE DATA:
Retail sales increase attributable to new and
remodeled stores 7% 9%
Retail sales per average selling square foot $ 116 $ 105 10%
Retail sales per average store (thousands) $ 355 $ 327 9%
Average store size at end of quarter (selling square feet) 3,047 3,101 (2%)
Retail selling square feet at end of quarter (thousands) 5,941 5,448 9%
NUMBER OF STORES:
Beginning of year 1,890 1,710
Opened 61 51
Closed (1) (4)
------- -------
End of period 1,950 1,757 11%
======= =======
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 14
<TABLE>
<CAPTION>
Number of Stores Selling Sq. Ft. (thousands)
---------------------------- ----------------------------
May 1, May 2, Change From May 1, May 2, Change From
1999 1998 Prior Year 1999 1998 Prior Year
----- ----- ---------- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Victoria's Secret Stores 849 797 52 3,764 3,580 184
Bath & Body Works 1,101 960 141 2,177 1,868 309
----- ----- ---------- ----- ----- ----------
Total stores and selling
square feet 1,950 1,757 193 5,941 5,448 493
===== ===== ========== ===== ===== ==========
</TABLE>
Net Sales
- ---------
Net sales for the first quarter of 1999 increased by 14% to $877.8 million from
$770.9 million in 1998. The net sales increase was primarily due to a 13%
increase in comparable store sales. The balance of the increase was due to the
net addition of 193 new stores, partially offset by a decrease in catalogue and
other sales.
In the first quarter of 1999, retail sales increased 20% to $680.9 million, led
by Bath & Body Works' sales increase of 26%. Bath & Body Works' sales increase
was primarily attributable to the net addition of 141 new stores and 309,000
selling square feet, as well as a 13% increase in comparable store sales.
Victoria's Secret Stores' sales increased 17% to $422.8 million. The sales
increase was primarily due to a 13% increase in comparable store sales, with the
remaining increase coming from the addition of 52 new stores and 184,000 selling
square feet.
Victoria's Secret Catalogue net sales for the first quarter of 1999 decreased 3%
to $194.0 million from $199.0 million a year ago. The sales decrease was
primarily driven by a decline in sales of Fall clearance merchandise resulting
from fewer clearance catalogues mailed in the first quarter of 1999 versus the
same period in 1998. While gross demand increased 3% and Spring media sales per
page and response rates increased 13% and 30%, net sales of Spring merchandise
were negatively impacted by an increase in backorders.
Gross Income
- ------------
The first quarter of 1999 gross income rate, expressed as a percentage of net
sales, increased to 38.0% from 35.3% for the same period in 1998. The majority
of the rate increase was due to an increase in the merchandise margin rate
(which represents gross income before deduction of buying and occupancy costs).
The remaining increase was driven by a decrease in buying and occupancy costs.
The increase in the merchandise margin rate was primarily attributable to higher
retail markups and reduced markdowns, particularly at Victoria's Secret Stores.
Both the merchandise margin rate and the buying and occupancy rate were
favorably impacted by Bath & Body Works which increased to 29% of total Company
net sales in 1999 from 27% in 1998. Bath & Body Works has historically recorded
higher merchandise margins due to higher retail markups and lower buying and
occupancy costs due to smaller store sizes and higher sales productivity.
14
<PAGE> 15
General, Administrative and Store Operating Expenses
- ----------------------------------------------------
The general, administrative and store operating expense rate, expressed as a
percentage of net sales, increased to 28.4% in the first quarter of 1999 from
26.0% for the same period in 1998. The rate increase was primarily due to an
increase in national advertising investment for the Victoria's Secret brand. In
addition, the increase was driven by a shift in the mix of net sales to Bath &
Body Works, which has higher general, administrative and store operating expense
rates due to significantly smaller stores.
Operating Income
- ----------------
The operating income rate, expressed as a percentage of net sales, increased
slightly to 9.6% in the first quarter of 1999 from 9.3% in 1998. Operating
income increased 18% to $84.2 in 1999. The improvement in operating income was
driven by increases in gross income which more than offset increased general,
administrative and store operating costs.
Interest Expense and Other Income
- ---------------------------------
The Company incurred $8.9 million in interest expense in the first quarter of
1999 compared to $7.6 million for the same period in 1998. Interest expense
primarily resulted from the $350 million of debt. The increase in interest
expense is primarily due to an increase in the Company's intercompany payable as
a result of the share repurchase.
The Company earned $2.0 million in other income compared to $4.4 million for the
same period in 1998. The other income was primarily interest income earned from
excess net cash from operations managed through The Limited's centralized cash
management system (see Note 7 to the Consolidated Financial Statements). The
decrease in other income is primarily due to decreased cash, which was used to
fund the share repurchase.
Special and Nonrecurring Charge
- -------------------------------
In the fourth quarter of 1997, the Company recognized a $67.6 million charge in
conjunction with closing Cacique, a 118-store lingerie business, effective
January 31, 1998. The amount included noncash charges of $30 million, comprised
principally of write-offs and liquidations of store assets, which were
recognized in 1997. Outlays for the cash component of the charge amounted to
$26.8 million in 1998 and $1.3 million in 1999, leaving a $9.5 million liability
at May 1, 1999.
The $9.5 million liability relates principally to future payments for settlement
of store obligations, currently scheduled through 2004. In determining the
provision for lease obligations, the Company considered the estimated amount
necessary for either buying out the lease or continued rent payments through
lease expiration.
15
<PAGE> 16
FINANCIAL CONDITION
The Company's consolidated balance sheet as of May 1, 1999 provides evidence of
financial strength and flexibility. A more detailed discussion of liquidity,
capital resources and capital requirements follows.
Liquidity and Capital Resources
- -------------------------------
Cash provided from operating activities and cash funding from The Limited's
centralized cash management systems provide the resources to support operations,
including projected growth, seasonal requirements and capital expenditures. A
summary of the Company's working capital position and capitalization follows
(thousands):
<TABLE>
<CAPTION>
May 1, January 30, May 2,
1999 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Working capital $ 89,017 $440,073 $476,149
======== ======== ========
Capitalization:
Long-term debt $250,000 $250,000 $350,000
Shareholders' equity 295,510 644,643 567,570
-------- -------- --------
Total capitalization $545,510 $894,643 $917,570
======== ======== ========
</TABLE>
Net cash used in operating activities totaled $96.8 million for the thirteen
weeks ended May 1, 1999 versus $62.8 million for the same period in 1998. The
decrease in cash provided by operations was primarily driven by two factors: 1)
an increase in inventories; and 2) an increase in the amount of income tax
payments.
Investing activities were all for capital expenditures, which are primarily for
new and remodeled stores.
Financing activities included the quarterly cash dividend payment of $0.14 per
share. In addition, financing activities included the repurchase of
approximately 9.0 million shares of the Company's common stock for $365.2
million. The Company has previously announced authorization by its Board of
Directors to repurchase up to $500 million of its common stock on a
proportionate basis from both the open market and The Limited. As of May 1,
1999, the Company had repurchased a total of 11.6 million shares for $460.8
million under this program which was completed in May 1999. The cash dividend
payment and stock repurchase were partially offset by a $153.3 million net
increase in The Limited's intercompany cash management account payable (see Note
7 to the Consolidated Financial Statements).
16
<PAGE> 17
Capital Expenditures
- --------------------
Capital expenditures, primarily for new and remodeled stores, totaled $33.2
million for the thirteen weeks ended May 1, 1999, compared to $20.4 million for
the comparable period of 1998. The Company anticipates spending $150-$170
million in 1999 for capital expenditures, of which $110-$120 million will be for
new stores, the relocation and expansion of existing stores and related
improvements for the retail business.
The Company intends to add approximately 850,000 selling square feet in 1999,
which will represent a 15% increase over year-end 1998. It is anticipated the
increase will result from the addition of approximately 260 net new stores and
the expansion of approximately 45 stores. The Company expects that capital
expenditures will be funded principally by net cash provided by operating
activities.
Information Systems and "Year 2000" Compliance
- ----------------------------------------------
The Year 2000 issue arises primarily from computer programs, commercial systems
and embedded chips that will be unable to properly interpret dates beyond the
year 1999. The Company utilizes a variety of proprietary and third party
computer technologies - both hardware and software - directly in its businesses.
The Company also relies on numerous third parties and their systems' ability to
address the Year 2000 issue. The Company's critical information technology
("IT") functions include point-of-sale equipment, merchandise distribution,
merchandise and non-merchandise procurement, credit card and banking services,
transportation, and business and accounting management systems. The Company is
using both internal and external resources to complete its Year 2000
initiatives.
In order to address the Year 2000 issue, the Company is participating with its
parent, The Limited, which established a program management office to oversee,
monitor and coordinate the company-wide Year 2000 effort. This office has
developed and is implementing a Year 2000 plan. The implementation includes five
stages: (i) awareness, (ii) assessment, (iii) renovation/development, (iv)
validation, and (v) implementation. There are several areas of focus: (1)
renovation of legacy systems throughout the Company; (2) upgrade existing
software packages at two operating businesses; (3) assessment of Year 2000
readiness at key vendors and suppliers; and (4) evaluating facilities and
distribution equipment with embedded computer technology.
The status of each area of focus is as follows:
(1) All five stages of Year 2000 implementation for renovation of legacy systems
are complete for significant IT systems at the Company's businesses.
(2) The upgrade of existing software packages at two of the Company's businesses
has been completed.
17
<PAGE> 18
(3) A vast network of vendors, suppliers and service providers located both
within and outside the United States provide the Company with merchandise
for resale, supplies for operational purposes and services. The Company has
identified key vendors, suppliers and service providers and is making
inquiries to determine their Year 2000 status. The Company has obtained
assurances from a number of its key vendors regarding their Year 2000 status
and expects to complete this process in mid-1999. In addition, the Company
has completed on-site assessments of certain of its key vendors to further
assess such vendors' progress and risks. Also, the Company, along with other
major retail organizations, is participating in a national industry Year
2000 survey of over 80,000 suppliers and vendors.
(4) The Company also utilizes various facilities and distribution equipment with
embedded computer technology, such as conveyors, elevators, security
systems, fire protection systems, and energy management systems. The
Company's assessment of these systems is in process and all stages of its
efforts are expected to be complete in the second quarter of 1999.
The Company believes that the reasonably likely worst-case scenario would
involve short-term disruption of systems affecting its supply and distribution
channels. The Company is developing contingency plans, such as alternative
sourcing, and identifying the necessary actions that it would need to take if
critical systems or service providers were not Year 2000 compliant. The Company
expects to finalize these contingency plans in the second half of 1999.
At the present time, the Company is not aware of any Year 2000 issues that are
expected to affect materially its products, services, competitive position or
financial performance. However, despite the Company's significant efforts to
make its systems, facilities and equipment Year 2000 compliant, the compliance
of third party service providers and vendors (including, for instance,
governmental entities and utility companies) is beyond the Company's control.
Accordingly, the Company can give no assurances that the failure of systems of
other companies on which the Company's systems rely, or the failure of key
suppliers or other third parties to comply with Year 2000 requirements, will not
have a material adverse effect on the Company.
Total expenditures related to remediation, testing, conversion, replacement and
upgrading system applications were $18 million. These expenditures were
completed in 1998. In addition, the Company has incurred internal payroll costs
(not separately identified) relating to the Company's Year 2000 initiatives. Any
additional expenditures are not expected to be material. Total incremental
expenses, primarily depreciation and amortization of new package systems, are
not expected to have a material impact on the Company's financial condition
during 1999 and 2000.
18
<PAGE> 19
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
The Company cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) contained in
this Form 10-Q or made by management of the Company involve risks and
uncertainties and are subject to change based on various important factors, many
of which may be beyond the Company's control. Accordingly, the Company's future
performance and financial results may differ materially from those expressed or
implied in any such forward-looking statements. The foregoing statements as to
costs and dates relating to the Year 2000 effort are forward-looking and are
based on the Company's current best estimates that may be proven incorrect as
additional information becomes available. The Company's Year 2000-related
forward-looking statements are also based on assumptions about many important
factors, including the technical skills of employees and independent
contractors, the representations and preparedness of third parties, the ability
of vendors to deliver merchandise or perform services required by the Company
and the collateral effects of the Year 2000 issues on the Company's business
partners and customers. While the Company believes its assumptions are
reasonable, it cautions that it is impossible to predict factors that could
cause actual costs or timetables to differ materially from the expected results.
In addition to Year 2000 issues, the following factors, among others, in some
cases have affected and in the future could affect the Company's financial
performance and actual results and could cause actual results for 1999 and
beyond to differ materially from those expressed or implied in any
forward-looking statements included in this Form 10-Q or otherwise made by
management: changes in consumer spending patterns, consumer preferences and
overall economic conditions, the impact of competition and pricing, changes in
weather patterns, political stability, currency and exchange risks and changes
in existing or potential duties, tariffs or quotas, postal rate increases and
charges, paper and printing costs, availability of suitable store locations at
appropriate terms, ability to develop new merchandise and ability to hire and
train associates.
Impact of Inflation
- -------------------
The Company's results of operations and financial condition are presented based
on historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of the estimates required, the Company
believes that the effects of inflation, if any, on the results of operations and
financial condition have been minor.
19
<PAGE> 20
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a defendant in a variety of lawsuits arising in the
ordinary course of business.
On November 13, 1997, the United States District Court for the Southern
District of Ohio, Eastern Division, dismissed with prejudice an amended
complaint that had been filed against the Company, The Limited and
certain of The Limited's other subsidiaries by the American Textile
Manufacturers Institute ("ATMI"), a textile industry trade association.
The amended complaint alleged that the defendants violated the federal
False Claims Act by submitting false country of origin declarations to
the U.S. Customs Service. On November 26, 1997, ATMI served a motion to
alter or amend judgment and a motion to disqualify the presiding judge
and to vacate the order of dismissal. The motion to disqualify was
denied on December 22, 1997, but as a matter of his personal
discretion, the presiding judge elected to recuse himself from further
proceedings and this matter was transferred to a judge of the United
States District Court for the Southern District of Ohio, Western
Division. On May 21, 1998, this judge denied all pending motions
seeking to alter, amend or vacate the judgment that had been entered in
favor of the Company. On June 5, 1998, ATMI appealed to the United
States Court of Appeals for the Sixth Circuit, where the matter remains
pending.
On January 13, 1999, two complaints were filed against the Company's
parent, The Limited, and one of its subsidiaries, as well as other
defendants, including many national retailers. Both complaints relate
to labor practices allegedly employed on the island of Saipan,
Commonwealth of the Northern Mariana Islands, by apparel manufacturers
unrelated to The Limited (some of which have sold goods to The Limited)
and seek injunctions, unspecified monetary damages, and other relief.
One complaint, on behalf of a class of unnamed garment workers, filed
in the United States District Court for the Central District of
California, Western Division, alleges violations of federal statutes,
the United States Constitution, and international law. On March 29,
1999, a motion was filed to transfer this action to the United States
District Court located on Saipan, and on April 12, 1999, a motion to
dismiss the complaint for failure to state a claim upon which relief
can be granted was filed. The second complaint, filed by a national
labor union and other organizations in the Superior Court of the State
of California, San Francisco County, alleges unfair business practices
under California law. On March 29, 1999, a motion seeking dismissal of
this complaint was filed.
Although it is not possible to predict with certainty the eventual
outcome of any litigation, in the opinion of management, the foregoing
proceedings are not expected to have a material adverse effect on the
Company's financial position or results of operations.
20
<PAGE> 21
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 18, 1998.
The matters voted upon and the results of the voting were as follows:
Roger D. Blackwell, Grace A. Nichols and Donald B. Shackelford were
elected to the Board of Directors for a term of three years. Of the
32,481,844 Class A shares and 200,409,163 Class B shares (representing
601,227,489 votes) present in person or represented by proxy at the
meeting, the number of votes for and the number of votes as to which
authority to vote in the election was withheld, were as follows with
respect to each of the nominees:
<TABLE>
<CAPTION>
Votes Votes as to Which
For Voting Authority
Name Election Withheld
--------------------- ----------- -----------------
<S> <C> <C>
Roger D. Blackwell 633,444,535 264,798
Grace A. Nichols 633,395,940 313,393
Donald B. Shackelford 633,441,440 267,893
</TABLE>
In addition, directors whose term of office continued after the Annual
Meeting were: Cynthia A. Fields, Kenneth B. Gilman, E. Gordon Gee,
William E. Kirwan, Beth M. Pritchard, Alex Shumate and Leslie H.
Wexner.
Item 5. OTHER INFORMATION
The Company's Certificate of Incorporation includes provisions relating
to potential conflicts of interest that may arise between the Company
and The Limited. Such provisions were adopted in light of the fact that
the Company and The Limited and its subsidiaries are engaged in retail
businesses and may pursue similar opportunities in the ordinary course
of business. Among other things, these provisions generally eliminate
the liability of directors and officers of the Company with respect to
certain matters involving The Limited and its subsidiaries, including
matters that may constitute corporate opportunities of The Limited, its
subsidiaries or the Company. Any person purchasing or acquiring an
interest in shares of capital stock of the Company will be deemed to
have consented to such provisions relating to conflicts of interest and
corporate opportunities, and such consent may restrict such person's
ability to challenge transactions carried out in compliance with such
provisions. Investors should review the Company's Certificate of
Incorporation before making any investment in shares of the Company's
capital stock.
21
<PAGE> 22
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.6. Building Lease Agreement by Distribution Land Corp. and
Victoria's Secret Stores, Inc., dated January 31, 1999.
10.7. Building Lease Agreement by Distribution Land Corp. and
Victoria's Secret Catalogue, Inc., dated January 31, 1999.
10.9. Building Lease Agreement by Distribution Land Corp. and Bath &
Body Works, Inc., dated January 31, 1999.
15. Letter re: Unaudited Interim Financial Information to
Securities and Exchange Commission re: Incorporation of
Independent Accountants' Report.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------
None.
22
<PAGE> 23
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTIMATE BRANDS, INC.
(Registrant)
By /S/ Philip E. Mallott
------------------------
Philip E. Mallott,
Chief Financial Officer*
Date: June 11, 1999
- -------------------------
* Mr. Mallott is the principal financial officer and has been duly authorized to
sign on behalf of the Registrant.
23
<PAGE> 1
EXHIBIT 10.6
------------
LEASE AGREEMENT
---------------
This Lease Agreement (this "Lease") is entered into and made
as of the 31st day of January, 1999, by and between Distribution Land Corp., a
Delaware corporation (hereinafter referred to as "Landlord") and Victoria's
Secret Stores, Inc., a Delaware corporation (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
WHEREAS, Landlord owns a certain office/warehouse distribution
facility containing approximately 1,012,278 square feet of floor space
identified on EXHIBIT A attached hereto and made a part hereof by this reference
(the "Building"); and
WHEREAS, the Building is located upon an approximately 321.1
acre parcel of land located at the intersection of East Broad Street (State
Route 16) and Taylor Road, Reynoldsburg, Ohio, which land is depicted on EXHIBIT
A attached hereto and made a part hereof by this reference (the "Campus"); and
WHEREAS, Landlord wishes to lease to Tenant a portion of the
Building as more particularly described in Section 1.02 below (the "Premises")
and to grant to Tenant the right to utilize certain common areas and facilities
located within the Building and the Campus, all subject to the terms and
conditions of this Lease; and
WHEREAS, Tenant wishes to lease, from Landlord, a portion of
the Building and to utilize those certain common areas and facilities located
within the Building and the Campus.
NOW, THEREFORE, in consideration of the premises described
above and the mutual promises set forth herein, Landlord and Tenant, intending
to be legally bound, hereby agree as follows:
I -- LEASE OF PREMISES
- ----------------------
1.01 - LEASE OF PREMISES. Landlord, in consideration of the
rents and covenants hereinafter set forth, does hereby demise, let and lease to
Tenant, and Tenant does hereby hire, take and lease from Landlord, on the terms
and conditions
<PAGE> 2
hereinafter set forth, the Premises, to have and to hold the same, with all
appurtenances unto Tenant for the Term hereinafter specified.
1.02 - Basic Lease Provisions.
------------------------------
A. Building Address: 8455 East Broad Street
Reynoldsburg, Ohio 43068
B. Building Description: an office/warehouse
distribution facility, containing approximately
223,426 square feet of office space, 773,640 square
feet of distribution space and 15,212 square feet of
Building Common Area (as hereinafter defined)
C. Premises Description: the floors of the Building on
which the Premises are located and the square footage
of the Premises are depicted on the floor plan
attached hereto as Exhibit B and made a part hereof
by this reference.
D. Term: Fifteen (15) years, beginning on January 31,
1999 (the "Commencement Date") and ending on January
30, 2014 (the "Expiration Date")
E. Annual Rent:
(i) Office space and Pro Rata Share of Building
Common Areas - $16.15 per square foot, or
$2,366,863.25
(ii) Distribution space - $4.35 per square foot,
or $2,244,478.20
(iii) Total Annual Rent of $4,611,341.45
(iv) The Annual Rent shall be subject to periodic
adjustments as provided in Section 4.02 of
this Lease
F. Monthly Installments of Rent: $384,278.45
G. Renewal Option(s): three (3) five (5) year Renewal
Option(s) - See Section 4.05 of this Lease for terms
of the Renewal Options
-2-
<PAGE> 3
H. Addresses for Notices and Payments:
Tenant: Victoria's Secret Stores, Inc.
8455 East Broad Street
Reynoldsburg, Ohio 43068
with a copy to:
Victoria's Secret Stores, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Corporate Real Estate Department
Landlord: Distribution Land Corp.
Three Limited Parkway
Columbus, Ohio 43230
with a copy to:
Distribution Land Corp.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Corporate Real Estate Department
I. Use: office/warehouse distribution use related to
distribution for retail sale of men's, women's and
children's apparel, accessories, personal care items
and other products, and for all administrative
activities relating thereto
1.03 - DESCRIPTION OF THE BUILDING, THE PREMISES AND THE
COMMON AREAS.
J. THE BUILDING. The Building is depicted on the attached
Exhibit A. The address and description of the Building are specified in Items A
and B of the Basic Lease Provisions (which are set forth in Section 1.02 of this
Lease).
K. THE PREMISES. The Premises consist of space which: (i) is
located on the floor or floors of the Building designated on the attached
EXHIBIT B, (ii) is located in one or more areas or parts of each such floor, and
(iii) is bound by the proposed or existing demising walls therefor, the
approximate locations of such demising walls and space being marked in color or
cross-hatched and shown on the diagram of the floor plan for each such floor,
such diagram being attached to this Lease as EXHIBIT B and made a part hereof by
this reference. The Premises also include that portion of the Building Common
Areas (as defined in Section 1.03(L) of this Lease) which has been allocated to
Tenant on the basis of the square footage of office space designated for
Tenant's use in items (i), (ii) and (iii) above divided by the total square
footage of office
-3-
<PAGE> 4
space located within the Building ("Pro Rata Share of Building Common Areas").
The approximate number of square feet contained in the area which comprises the
Premises is also specified on EXHIBIT B.
L. COMMON AREAS. The Building is located within, and
constitutes a part of, the Campus. The Campus has been improved with the
Building, additional buildings and structures not subject to this Lease,
security buildings and facilities and roadways, driveways, walkways, parking
areas, loading areas, fences, walls, hedges, plantings, poles, ponds, lakes,
signs, utility improvements, trees, plantings and other landscaping features
(the Campus, excluding the Building, being referred to herein as the "Campus
Common Areas"). The Building contains certain areas or parts which are
designated for use in common by all of the tenants of the Building and their
respective employees, agents, customers, and invitees. Such areas include
entrances, exits and doors, lobbies, hallways, corridors and stairwells,
elevators and restrooms, but excluding certain "special amenities" such as the
cafeteria, mail room and reception area (all of which are referred to herein as
the "Building Common Areas"). The Campus Common Areas and the Building Common
Areas are sometimes referred to herein collectively as the "Common Areas".
II -- COMMON AREAS
- ------------------
2.01 - USE OF BUILDING COMMON AREAS. Subject to Landlord's
right at any time to use the Building Common Areas for its own purposes and the
right of any other tenant to operate the Building Common Areas, Landlord hereby
gives to Tenant and its employees, agents, customers and invitees, the
nonexclusive right to use the Building Common Areas in common with and subject
to the rights given to other tenants of the Building.
2.02 - USE OF CAMPUS COMMON AREAS. Subject to Landlord's right
at any time to use the Campus Common Areas for its own purposes, Landlord hereby
gives to Tenant and its employees, agents, customers and invitees, the
nonexclusive right to use the Campus Common Areas.
2.03 - RULES AND REGULATIONS FOR COMMON AREAS. The Campus
Common Areas and the Building Common Areas shall at all times be subject to the
exclusive management and control of Landlord which shall have the right, from
time to time, to establish, modify and enforce reasonable rules and regulations
with respect to all such Common Areas, and the use of such Campus Common Areas
and the Building Common Areas by Tenant, its subtenants and their respective
employees, agents, customers and invitees shall be subject to such rules and
regulations. Such rules and regulations may include, but shall not be limited
to, restrictions on parking, hours of operation, access routes, hours of access
to the Building and the Campus, rules with respect to the Building and such
other matters as may be deemed appropriate by Landlord from time to time.
-4-
<PAGE> 5
2.04 - CHANGES IN COMMON AREAS. Landlord may do and perform
such acts in and to the Campus Common Areas and the Building Common Areas,
respectively, as it shall determine to be advisable. Landlord hereby reserves
the right to make reconfigurations, alterations, additions, deletions or changes
to the Campus Common Areas and Building Common Areas, respectively, including,
but not limited to, changes in the size and configuration of said Common Areas.
Landlord reserves the right to restrict and limit the use of the Campus Common
Areas and Building Common Areas, respectively, by Tenant, its subtenants and
their respective employees, agents, customers and invitees.
2.05 - MAINTENANCE OF COMMON AREAS. Subject to the provisions
of Section 4.03 hereof, Landlord shall adequately maintain the Campus Common
Areas and Building Common Areas, respectively, in a good and usable condition
throughout the Term of this Lease.
2.06 - COMMON AREA CAPITAL IMPROVEMENTS. Landlord may make
capital improvements to the Campus Common Areas and Building Common Areas,
respectively.
III -- TERM AND POSSESSION
- --------------------------
3.01 - TERM. The Term of this Lease shall be for the period of
years and months specified in Item D of the Basic Lease Provisions; and shall
begin and end on the Commencement Date and Expiration Date, respectively,
specified in Item D of the Basic Lease Provisions, unless the Term of this Lease
is renewed, modified or terminated as provided elsewhere herein.
3.02 - TENANT'S ACCEPTANCE OF THE PREMISES. Tenant hereby
accepts the Premises in an "as is" condition and acknowledges that Landlord has
made no representations or warranties with respect thereto, and that Tenant has
inspected the Premises and found it to be in satisfactory condition.
3.03 - SURRENDER OF THE PREMISES. Upon the expiration or
earlier termination of this Lease, or upon the exercise by Landlord of its right
to re-enter the Premises without terminating this Lease, Tenant shall
immediately surrender the Premises to Landlord, together with all alterations,
improvements and other property as provided elsewhere herein, in broom-clean
condition and in good order, condition and repair, except for ordinary wear and
tear and damage which Tenant is not obligated to repair, failing which Landlord
may restore the Premises to such condition at Tenant's expense. Upon such
expiration or termination, Tenant may, provided Tenant is not in default and
unless prohibited from doing so by other provisions of this Lease, have the
right to remove its personal property and trade fixtures. Tenant shall promptly
repair any damage caused by any such removal, and shall restore the Premises to
the
-5-
<PAGE> 6
condition existing prior to the installation of the items so removed, ordinary
wear and tear and damage which Tenant is not obligated to repair excepted. If
Tenant fails to remove any and all such trade fixtures from the Premises on the
Expiration Date or earlier termination of this Lease, all such trade fixtures
shall become the Property of Landlord, unless Landlord elects to require their
removal, in which case Tenant shall, at its cost, promptly remove the same and
restore the Premises to its prior condition.
3.04 - HOLDING OVER. In the event that Tenant shall not
immediately surrender the Premises on the Expiration Date of the Term hereof,
Tenant shall, by virtue of the provisions hereof, become a tenant by the month
at the monthly rent in effect during the last month of the Term of this Lease,
which monthly tenancy shall commence with the first day next after the
Expiration Date. Tenant, as a monthly tenant, shall be subject to all of the
terms, conditions, covenants and agreements of this Lease. Tenant shall give to
Landlord at least thirty (30) calendar days written notice of any intention to
quit the Premises, and Tenant shall be entitled to thirty (30) calendar days
written notice to quit the Premises, unless Tenant is in default hereunder, in
which event Tenant shall not be entitled to any notice to quit, the usual thirty
(30) calendar days notice to quit being hereby expressly waived. Notwithstanding
the foregoing provisions of this Section 3.04, in the event that Tenant shall
hold over after the expiration of the Term of this Lease, and if Landlord shall
desire to regain possession of the Premises promptly at the expiration of the
Term of this Lease, then, at any time prior to Landlord's acceptance of rent
from Tenant as a monthly tenant hereunder, Landlord, at its option, may
forthwith re-enter and take possession of the Premises without process, or by
any legal process in force.
3.05 - RENEWAL OPTIONS. So long as Tenant is not in default
under the terms of this Lease, Landlord does hereby grant to Tenant the right
and option to extend and renew the fifteen (15) year Term of this Lease (herein
called the "Initial Term") for three (3) additional period(s) of five (5) years
each (herein the "Renewal Term(s)"), beginning on the date immediately following
the Expiration Date of the Initial Term or the preceding Renewal Term, as
appropriate, upon the same terms, conditions, covenants and provisions as are
provided in this Lease (except the Rent, which will be subject to adjustment as
provided in Section 4.02 hereof). Unless in respect of each Renewal Term
Landlord or Tenant notifies the other party, at least one (1) year prior to the
expiration of the Initial Term or Renewal Term then in effect, of its intent not
to extend and renew the Term of this Lease, then the Tenant shall be deemed to
have exercised its Renewal Option in respect of that Renewal Term. If the
Renewal Option is exercised as provided herein, then this Lease shall be amended
to reflect the changes which will result from such extension of the Term of this
Lease, including the modification to all references in the Lease to the "Term"
thereof (as defined in Section 3.01) to include the Renewal Term as well as the
Initial Term.
-6-
<PAGE> 7
IV -- RENT
- ----------
4.01 - RENT.
MONTHLY RENT. Commencing on January 31, 1999, Tenant shall pay
to Landlord, as Rent for the Premises, the annual sum specified in Item E of the
Basic Lease Provisions, payable in equal consecutive monthly installments as
specified in Item F of the Basic Lease Provisions, in advance, on or before the
first day of each and every calendar month during the Term of this Lease;
provided, however, that if the Expiration Date shall be a day other than the
first day of a calendar month, the Rent installment for such last fractional
month shall be prorated on the basis of the number of days during the month this
Lease was in effect in relation to the total number of days in such month.
4.02 - RENT ADJUSTMENT.
A. CPI ADJUSTMENTS DURING THE INITIAL TERM. Commencing on the
first (1st) anniversary of the Commencement Date and continuing on the same date
every year thereafter during the Initial Term, the Rent due and payable to
Landlord shall be adjusted for the next succeeding year. The adjusted Rent for
each year shall be equal to the Rent paid during the immediately preceding
twelve (12) month period (the "lease year") increased by a percentage equal to
the percentage increase in the CPI (as hereinafter defined) computed by
comparing the CPI figure for that month which is two (2) months prior to the
adjustment date (the "adjustment month") with the CPI figure for the month
occurring twelve (12) months prior to the adjustment month (the "base month").
For example, in computing the percentage increase for the lease year commencing
January 31, 2002, the percentage increase in the CPI would be determined by
comparing the CPI figure for November, 2001, the adjustment month, with the CPI
figure for November, 2000, the base month, and similar comparisons would be made
using the CPI figures for adjustment months and base months every year
thereafter. For the purposes hereof, "CPI" shall mean the Consumer Price Index,
published by the Bureau of Labor Statistics of the United States Department of
Labor, in the column for "all items" in the table titled "Consumer Price Index
for all Urban Consumers: U.S. City average, 1982-1984 = 100".
If the CPI at any time herein is no longer published or
issued, Landlord and Tenant shall agree on such other index as is then generally
recognized for determination of purchasing power in the United States.
B. ADJUSTMENTS DURING THE RENEWAL TERM. Commencing on the
first day of each Renewal Term the Rent shall be adjusted to an amount which, in
Landlord's reasonable judgment, is equal to the then current market rental rate
for similar buildings, in similar locations and in the same geographic area.
Provided, however, in no event shall the Rent for the Renewal Term be less than
the Rent which was paid by Tenant during the immediately preceding Term.
Commencing on the first
-7-
<PAGE> 8
anniversary of such date and continuing on the same date every year thereafter
during the Renewal Term, the Rent due and payable to Landlord shall be adjusted
for the next succeeding year. The adjusted Rent for each year shall be equal to
the Rent paid during the immediately preceding 12 month period (the "lease
year") increased by a percentage equal to the percentage increase in the CPI
computed by comparing the CPI figure for that month which is two months prior to
the adjustment date (the "adjustment month") with the CPI figure for the month
occurring 12 months prior to the adjustment month (the "base month"). For
example, in computing the percentage increase for the lease year commencing
January 31, 2002, the percentage increase in the CPI would be determined by
comparing the CPI figure for November, 2001, the adjustment month with the CPI
figure for November, 2000, the base month, and similar comparisons will be made
using the CPI figures for adjustment months and base months every year
thereafter.
C. EXTRAORDINARY CAPITAL EXPENDITURES. If, during the Term of
this Lease, Landlord should agree to make any extraordinary Capital Improvements
to the Premises, such extraordinary Capital Improvements being the result of
either (i) Tenant's request, or (ii) Landlord's determination, in its sole
discretion, that, due to Tenant's activities upon the Premises such improvements
are necessary, then Landlord may either immediately charge Tenant for the costs
of all such Capital Improvements, which costs shall be paid by Tenant within 30
days of Landlord's request therefor, or add to the Rent (to be paid in monthly
installments), an amount equal to the annual depreciation or amortization with
respect to the cost of such equipment or capital improvement, as determined by
Landlord in accordance with generally accepted accounting principles, together
with interest on such cost or the unamortized balance thereof at the rate as may
have to be paid by or accrued on the books of Landlord on the unamortized
balance.
D. EXTRAORDINARY SERVICES. If, during the Term of this Lease,
Landlord provides to Tenant services, including but not limited to repair,
maintenance and janitorial services, (i) in excess of those normally required to
maintain the Building in a manner consistent with similar buildings, in similar
locations in the same geographic areas, and (ii) such extraordinary services are
the result of or made necessary as a result of Tenant's activities within the
Premises, then Landlord shall have the right to calculate the cost of such
extraordinary services and to charge Tenant the cost thereof. All such charges
shall be calculated and charged to Tenant, on a monthly basis, to be paid by
Tenant as Rent hereunder.
4.03 - LATE PAYMENT SERVICE CHARGE; INTEREST. In the event any
installment of Rent, or any other amount which may become due under this Lease
is not paid when due, and such nonpayment continues for a period of ten (10)
days after Landlord gives to Tenant written notice of such nonpayment, then, for
each and every such payment, Tenant shall immediately pay a service charge equal
to five percent (5%) of the amount not timely paid, together with interest on
the amount not timely paid at the rate of eight percent (8%) per annum, from the
due date of such payment until
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paid. The provisions of this Section 4.03 shall not be construed to extend the
date for payment of Rent, or any other amount which may become due under this
Lease, or to relieve Tenant of its obligations to pay all such items at the time
or times herein stipulated, and neither demand for, nor collection by Landlord
of, late payment service charges and interest pursuant to this Section 4.03
shall be construed as a cure of any default in payment by Tenant.
V -- USE OF PREMISES
- --------------------
5.01 - SPECIFIC USE. The Premises shall be occupied and used
exclusively for the purposes specified in Item I of the Basic Lease Provisions
and for purposes incidental thereto, and shall not be used for any other
purposes.
5.02 - COVENANTS REGARDING USE. In connection with its use of
the Premises, Tenant agrees to do the following:
A. Tenant shall use the Premises and conduct its business
therein in a safe, careful, reputable and lawful manner; shall keep any garbage,
trash, rubbish or other refuse in sealed containers within the interior of the
Premises until removed and placed in a dumpster or other authorized container
for the deposit of garbage and refuse, which shall be located in an area
designated by Landlord.
B. Tenant shall not commit, nor allow to be committed, in, on
or about the Premises any act of waste, including any act which might deface,
damage or destroy the Premises or any part thereof; use or permit to be used
within the Premises any hazardous substance, equipment, or other thing which
might cause injury to person or property or increase the danger of fire or other
casualty in, on or about the Premises; or permit any objectionable or offensive
noise or odors to be emitted from the Premises. Notwithstanding the foregoing,
Landlord acknowledges that Tenant will utilize certain distribution equipment
which, but for this sentence, might be deemed to violate this provision and use
of such equipment is expressly permitted.
C. Tenant shall not use the Premises, or allow the Premises to
be used, for any purpose or in any manner other than the permitted uses which
would, in Landlord's opinion, invalidate any policy of insurance now or
hereafter carried on the Premises or the Building or increase the rate of
premiums payable on any such insurance policy. Should Tenant fail to comply with
this covenant, Landlord may, at its option, require Tenant to stop engaging in
such activity or to reimburse Landlord as additional rent for any increase in
premiums charged during the Term of this Lease on the insurance carried by
Landlord on the Premises and the Building and attributable to the use being made
of the Premises by Tenant.
5.03 - ACCESS TO AND INSPECTION OF THE PREMISES. Landlord, its
employees and agents, shall have the right to enter any part of the Premises, at
all reasonable
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times after reasonable notice, for the purpose of examining or inspecting the
same, showing the same to prospective purchasers, mortgagees or tenants, and for
making such repairs, alterations or improvements to the Premises and the
Building as Landlord may deem necessary or desirable. Landlord shall incur no
liability to Tenant for such entry, except with respect to the negligence or
intentional, wrongful acts or omissions of Landlord, its agents, employees and
invitees, nor shall such entry constitute an eviction of Tenant or a termination
of this Lease, or entitle Tenant to any abatement of rent therefor.
5.04 - COMPLIANCE WITH LAWS. Tenant shall comply with all
laws, statutes, ordinances, rules, regulations and orders of any federal, state,
municipal, or other government or agency thereof having jurisdiction over and
relating to the use and occupancy of the Premises, including any such laws,
statutes or regulations requiring modifications or alterations to the Premises.
5.05 - RULES AND REGULATIONS. The Building shall at all times
be subject to the management and control of the Landlord, and Landlord shall
have the right, from time to time, to establish, modify and enforce reasonable
rules and regulations with respect to the Building, and the use of the Building
by Tenant, its subtenants and their respective employees, agents, customers and
invitees shall be subject to such rules and regulations. Such rules and
regulations may include, but shall not be limited to restrictions upon Tenant's
hours of operation, noise levels with the Building, load placement and utility
usage.
VI -- UTILITIES, EQUIPMENT MAINTENANCE AND OTHER SERVICES
- ---------------------------------------------------------
6.01 - ELECTRIC, GAS AND WATER. Landlord, or Limited
Distribution Services, Inc. ("LDS"), acting as Landlord's agent, shall contract
with the appropriate public utilities companies or other providers supplying
electric, gas, water, sanitary sewer and all other utilities and services to the
Premises or to Tenant and shall pay directly all charges for such services from
and after the Commencement Date. Thereafter, Landlord or LDS shall reasonably
allocate these utility or service charges attributable to the Premises or to
Tenant and, on a periodic basis, provide to Tenant a written statement detailing
Tenant's allocation thereof. Tenant shall pay to Landlord or LDS, as
appropriate, within fifteen (15) days of Tenant's receipt of the written
statement therefor, all such utility and service charges.
6.02 - EQUIPMENT MAINTENANCE. LDS shall provide all
maintenance as is required to or deemed advisable for Tenant's distribution
center equipment located within the Premises. Tenant shall pay directly to LDS
all sums charged by LDS in connection with such equipment maintenance.
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6.03 - JANITORIAL AND REFUSE COLLECTION SERVICE. Landlord
shall contract for janitorial and refuse collection services for the Premises
and shall pay for all charges for such services.
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6.04 - DISCONTINUANCES AND INTERRUPTIONS OF UTILITY SERVICES.
Neither Landlord nor LDS shall be liable to Tenant in damages or otherwise (i)
if any utilities shall become unavailable from any public utility company,
public authority, or any other person supplying or distributing such utility, or
(ii) for any interruption in any utility service (including, without limitation,
any heating, ventilation or air conditioning) caused by the making of any
necessary repairs or improvements or by any cause beyond Landlord's and LDS's
reasonable control, and the same shall not constitute a termination of this
Lease or an eviction of Tenant.
6.05 - CAFETERIA, MAIL ROOM AND RECEPTION SERVICES. Included
within the Premises are areas designated for use as the cafeteria and the mail
room. Excluded from the Premises, but comprising part of the Building Common
Areas, is the reception area (the cafeteria, mailroom and reception area being
referred to herein as the "Special Amenities"). Tenant shall maintain, staff and
operate the Special Amenities, including providing security services, for the
benefit of all tenants within the Building. Tenant will also control the Special
Amenities for purposes of decorating and equipping the areas in which each of
the Special Amenities is located. Tenant will charge directly the other tenants
within the Building for the use of the Special Amenities. Neither Landlord nor
LDS shall be liable to Tenant or any other tenant in the Building as a result of
Tenant's operation of the Special Amenities.
VII -- SIGNS
- ------------
7.01 - SIGNS. Tenant shall not inscribe, paint, affix or
display any signs, advertisements or notices on the Premises, the Building, or
the Campus without Landlord's prior written consent, which consent Landlord
shall have no obligation to give and which may be given or withheld in
Landlord's sole discretion.
VIII -- REPAIRS, MAINTENANCE, ALTERATIONS, IMPROVEMENTS
- -------------------------------------------------------
AND FIXTURES
------------
8.01 - REPAIR AND MAINTENANCE OF BUILDING. Landlord shall keep
and maintain the Building (including all doors, whether interior or exterior,
any plate glass in the exterior walls and doors, the roof, exterior and interior
structural walls, and the foundation) and the electrical, plumbing, heating,
ventilation and air conditioning systems serving the Building in good order,
condition and repair, and shall make all necessary repairs to the Building and
the electrical, plumbing, heating, ventilation and air conditioning systems
serving the Building, and will make all replacements from time to time required
thereto.
8.02 - REPAIR AND MAINTENANCE OF PREMISES. Landlord shall
provide cleaning, janitorial, maintenance, repair and restoration services to
the Premises. If a repair is needed to so maintain the Building, then Tenant
shall give to Landlord verbal
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notice, and as soon thereafter as possible confirming written notice, of such
need for repair. Within a reasonable period of time thereafter, Landlord shall
examine the item or matter described in Tenant's notice, and if Landlord should
determine that such item or matter is in need of repair, Landlord shall make
such repair.
8.03 - ALTERATIONS OR IMPROVEMENTS. Tenant shall neither make,
nor permit to be made, any alterations or improvements to the Premises without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld. If Landlord allow Tenant to make any such alterations or
improvements, Tenant shall make the same in accordance with all applicable laws
and building codes, in a good and workmanlike manner and in quality equal to or
better than the original construction of the Building, and shall comply with
such requirements as Landlord considers necessary or desirable, including,
without limitation, requirements as to the manner in which and the times at
which such work shall be done and the contractor or subcontractors to be
selected to perform such work. Tenant shall promptly pay all costs attributable
to such alterations and improvements and shall indemnify Landlord against any
mechanics' liens or other liens or claims filed or asserted as a result thereof
and against any costs or expenses which may be incurred as a result of building
code violations attributable to such work. Tenant shall promptly repair any
damage to the Premises and the Building caused by any such alterations or
improvements. Any alterations or improvements to the Premises, except movable
equipment and trade fixtures, shall become a part of the realty and the property
of Landlord, and shall not be removed by Tenant.
8.04 - TRADE FIXTURES. Any trade fixtures installed in the
Premises by Tenant at its own expense, such as movable partitions, counters,
shelving, and the like, may and, at the request of Landlord, shall be removed on
the Expiration Date or earlier termination of this Lease, provided that Tenant
is not then in default, that Tenant bears the cost of such removal, and further
that Tenant repairs, at its own expense, any and all damage to the Premises and
the Building resulting from such removal. If Tenant fails to remove any and all
such trade fixtures from the Premises on the Expiration Date or earlier
termination of this Lease, all such trade fixtures shall become the property of
Landlord, unless Landlord elects to require their removal, in which case Tenant
shall, at its cost, promptly remove same and restore the Premises to its prior
condition.
IX -- FIRE OR OTHER CASUALTY; CASUALTY INSURANCE
- ------------------------------------------------
9.01 - DAMAGE OR DESTRUCTION BY CASUALTY. If the Building
should be substantially destroyed or damaged (which, as used herein, means
destruction or material damages to at least fifty percent (50%) of the Building)
by fire or other casualty, then either party hereto may, at its option,
terminate this Lease by giving written notice thereof to the other party within
thirty (30) calendar days after the date of such casualty. In such event, all
Rent due under this Lease shall be apportioned to and shall cease as of the date
of such casualty, and Tenant shall be given a reasonable period of time, not
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<PAGE> 14
to exceed forty-five (45) calendar days after receipt of written notice of
termination (or fourteen (14) days after giving notice of termination to
Landlord as appropriate) under this Section 9.01, in which to remove its trade
fixtures and personal property, whereupon both parties shall be released from
all further obligations and liability hereunder (except for any obligations
previously incurred hereunder). If neither party exercises this option, then the
Building shall be reconstructed and restored at Landlord's expense, to
substantially the same condition as it was prior to the casualty; provided,
however, that, if Tenant has made any additional improvements pursuant to
Section 8.03, Tenant shall reimburse Landlord for the cost of reconstructing the
same. In the event of such reconstruction, all Rent due under this Lease shall
be abated from the date of the casualty until such substantial completion of the
reconstruction repairs; and this Lease shall continue in full force and effect
for the balance of the Term. Landlord shall use reasonable diligence in
completing such reconstruction repairs. Notwithstanding the foregoing, if the
Premises are substantially destroyed or damaged (which, as used herein, means
destruction or material damages to at least fifty percent (50%) of the Premises,
as applicable), then Tenant may, at its option, terminate this Lease by giving
written notice thereof to Landlord within thirty (30) calendar days after the
date of such casualty. In such event, all Rent due under this Lease shall be
apportioned to and shall cease as of the date of such casualty, and Tenant shall
be given a reasonable period of time, not to exceed thirty-five (35) calendar
days, in which to remove its trade fixtures and personal property, whereupon
both parties shall be released from all further obligations and liabilities
hereunder (except for any obligations previously incurred hereunder).
9.02 - CASUALTY INSURANCE. Landlord shall obtain and pay for
insurance against fire and other casualty in respect of the Building. Landlord
shall not be responsible for, and shall not be obligated to insure against, any
loss of or damage to any personal property of Tenant or which Tenant may have in
the Premises, or any trade fixtures installed by or paid for by Tenant in the
Premises, or any additional improvements which Tenant may construct in the
Premises, as provided in Section 8.03.
9.03 - WAIVER OF SUBROGATION. Landlord and Tenant each hereby
waive any and all right that they may have to recover from the other damages for
any loss occurring to them by reason of any act or omission of the other, but
only to the extent that the waiving party is actually compensated therefor by
insurance; provided that this waiver shall be effective only with respect to
loss or damage occurring during such time as the waiving party's coverage under
the appropriate policy of insurance is not adversely affected by this waiver.
If, in order to avoid such adverse effect, an endorsement must be added to any
insurance policy required hereunder, Landlord and Tenant shall cause such
endorsement immediately to be added and thereafter maintained throughout the
Term of this Lease.
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<PAGE> 15
X -- GENERAL PUBLIC LIABILITY, INDEMNIFICATION AND INSURANCE
- ------------------------------------------------------------
10.01 - INDEMNIFICATION. Tenant shall indemnify Landlord and
hold it harmless from any and all liability for any loss, damage or injury to
person or property occurring in, on or about the Campus, the Building and the
Premises, regardless of cause, except for that caused by the negligence or
intentional wrongful acts of Landlord and its employees, agents, customers and
invitees; and Tenant hereby releases Landlord from any and all liability for the
same. Landlord shall indemnify Tenant and hold it harmless from any and all
liability for any loss, damage or injury to person or property resulting from
the gross negligence or intentional wrongful acts of Landlord and its employees,
agents, customers and invitees; and Landlord hereby releases Tenant from any and
all liability for the same. The obligation to indemnify hereunder shall include
the duty to defend against any claims asserted by reason of such loss, damage or
injury and to pay any judgments, settlements, costs, fees and expenses,
including attorneys' fees, incurred in connection therewith.
10.02 - TENANT'S INSURANCE. Tenant, shall, at all times during
the Term of this Lease, carry, at its own expense, policies of insurance, with
such coverages, in such amounts, and with such insurers as are reasonably
acceptable to Landlord, covering Tenant's property and fixtures located in the
Premises.
XI -- EMINENT DOMAIN
- --------------------
11.01 - EMINENT DOMAIN. If the whole or any part of the
Building shall be taken for public or quasi-public use by a governmental or
other authority having the power of eminent domain, or shall be conveyed to such
authority in lieu of such taking, and if such taking or conveyance shall cause
the remaining part of the Building to be untenantable and inadequate for use by
Tenant for the purpose for which it was leased, then Tenant may, at its option,
terminate this Lease as of the date Landlord is required to surrender possession
of the Building. In such event, all Rent due under this Lease shall be
apportioned to and shall cease as of the date Landlord is required to surrender
possession of the Building, and Landlord and Tenant shall be released from all
further obligations and liability hereunder (except for any obligations
previously incurred hereunder). If a part of the Building shall be taken or
conveyed, but the remaining part is tenantable and adequate for Tenant's use,
Landlord shall make such repairs, alterations and improvements (exclusive of
repairs, alterations or improvements to tenant improvements, if any, installed
by Tenant pursuant to Section 8.03) as may be necessary to render the part not
taken or conveyed tenantable. If such taking or conveyance includes any part of
the Premises, the Rent shall be reduced in proportion to the part of the
Premises so taken or conveyed. All compensation awarded for such taking or
conveyance shall be the property of Landlord, without any deduction therefrom
for any present or future estate of Tenant, and Tenant hereby assigns to
Landlord all of its right, title and interest in and to any such award. However,
Tenant shall have the right to recover from such authority, but not from
Landlord, such compensation as
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<PAGE> 16
may be awarded to Tenant on account of moving and relocation expenses and
depreciation to and removal of Tenant's trade fixtures and personal property and
alterations or tenant improvements, if any, installed by Tenant pursuant to
Section 8.03.
XII -- LIENS
- ------------
12.01 - LIENS. If, because of any act or omission of Tenant or
anyone claiming by, through or under Tenant, any mechanic's lien or other lien
shall be filed against the Campus, the Building, the Premises or against other
property of Landlord (whether or not such lien is valid or enforceable as such),
Tenant shall, at its own expense, cause the same to be discharged or bonded of
record within a reasonable time, not to exceed thirty (30) calendar days after
the date Tenant becomes aware of the filing thereof, and shall also indemnify
Landlord and hold it harmless from any and all claims, losses, damages,
judgments, settlements, costs and expenses, including attorneys' fees, resulting
therefrom or by reason thereof.
XIII -- ASSIGNMENT AND SUBLETTING
- ---------------------------------
13.01 - ASSIGNMENT AND SUBLETTING. Tenant will not assign,
transfer, mortgage, or otherwise encumber this Lease or sublet or rent (or
permit occupancy or use of) the Premises, or any part thereof, without obtaining
the prior written consent of Landlord, which consent Landlord shall have no
obligation to give and which may be given or withheld in Landlord's sole
discretion.
XIV - TRANSFER BY LANDLORD
- --------------------------
14.01 - ASSIGNMENT OF RIGHTS. Landlord shall have the right to
assign its rights under this Lease at any time during the Term of this Lease,
subject only to the rights of Tenant hereunder; and such assignment shall
operate to release Landlord from liability hereunder for all acts or omissions
occurring after the date of such assignment.
14.02 - SUBORDINATION. Unless a mortgagee shall otherwise
elect, as provided in Section 14.03, this Lease is and shall be subject and
subordinate to the lien of any and all mortgages (which term "mortgages" shall
include both construction and permanent financing and shall include deeds of
trust and similar security instruments) which may now or hereafter encumber or
otherwise affect this Lease, the Building, the Campus, or both, and to all and
any renewals, extensions, modifications, recastings or refinancings thereof. In
confirmation of such subordination, Tenant shall, at the request of Landlord,
promptly execute any requisite or appropriate certificate or other document.
Tenant agrees that in the event that any proceedings are brought for the
foreclosure of any such mortgage, Tenant shall attorn to the purchaser at such
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<PAGE> 17
foreclosure sale, if requested to do so by such purchaser, and to recognize such
purchaser as the landlord under this Lease, provided that such purchaser agrees
not to disturb Tenant's possession and other rights under this Lease so long as
Tenant is not in default hereunder, and Tenant waives the provisions of any
statute or rule of law, now or hereafter in effect, which may give or purport to
give Tenant any right to terminate or otherwise adversely affect this Lease and
the obligations of Tenant hereunder, in the event that any such foreclosure
proceeding is prosecuted or completed.
14.03 - MORTGAGEE'S UNILATERAL SUBORDINATION. If a mortgagee
shall so elect by notice to Tenant or by the recording of a unilateral
declaration of subordination, this Lease and Tenant's rights hereunder shall be
superior and prior in right to the mortgage of which such mortgagee has the
benefit, with the same force and effect as if this Lease had been executed,
delivered and recorded prior to the execution, delivery and recording of such
mortgage, subject, nevertheless, to such conditions as may be set forth in any
such notice of declaration which do not result in Tenant's occupancy under this
Lease being disturbed while Tenant is not in default hereunder.
14.04 - SUBORDINATION TO COVENANTS, CONDITIONS AND
RESTRICTIONS. Tenant agrees that this Lease shall be subordinate and subject to
any covenants, conditions, easements and restrictions ("CCR's") which Landlord,
in its sole discretion, has previously or hereafter grants or adopts with
respect to or imposes upon the Campus, or any portion thereof, as long as such
CCR's do not substantially impair Tenant's use of the Premises for the permitted
uses hereunder. In confirmation of such subordination, Tenant shall, at
Landlord's request, promptly execute any requisite or appropriate certificate or
other document.
14.05 - EXCULPATION. 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
Landlord's interest in the Building and out of rents or other income from the
Building 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
interest in the Building, subject, nevertheless, to the rights of any mortgagee,
and neither Landlord nor any of the shareholders, directors or officers of
Landlord shall be liable for any deficiency.
XV -- DEFAULTS AND REMEDIES
- ---------------------------
15.01 - DEFAULTS BY TENANT. The occurrence of any one or more
of the following events shall be a default and breach of this Lease by Tenant:
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<PAGE> 18
A. Tenant shall fail to pay any monthly installment of Rent
within five (5) calendar days after the same shall be due and payable, or any
other sum(s) within ten (10) calendar days after the same shall be due and
payable, and such nonpayment continues for a period of ten (10) days after
Landlord gives to Tenant written notice of such nonpayment.
B. Tenant shall fail to perform or observe any term,
condition, covenant or obligation required to be performed or observed by it
under this Lease for a period of thirty (30) calendar days or more after notice
thereof from Landlord; provided, however, that if the term, condition, covenant
or obligation to be performed by Tenant is of such nature that the same cannot
reasonably be performed within such thirty (30) day period, such default shall
be deemed to have been cured if Tenant commences such performance within said
thirty (30) day period and thereafter diligently completes the same.
C. A trustee or receiver shall be appointed to take possession
of substantially all of Tenant's assets in or about the Premises or of Tenant's
interest in this Lease (and Tenant does not regain possession within sixty (60)
calendar days after such appointment); Tenant makes an assignment for the
benefit of creditors; or substantially all of Tenant's assets in or about the
Premises or Tenant's interest in this Lease are attached or levied upon under
execution (and Tenant does not discharge the same within sixty (60) calendar
days thereafter).
D. A petition in bankruptcy, insolvency, or for reorganization
or arrangement is filed by or against Tenant pursuant to any federal or state
statute (and, with respect to any such petition filed against it, Tenant fails
to secure a stay or discharge thereof within sixty (60) calendar days after the
filing of the same).
15.02 - REMEDIES OF LANDLORD - Upon the occurrence of any
event of default set forth in Section 15.01, Landlord shall have the following
rights and remedies, in addition to those allowed by law, any one or more of
which may be exercised without further notice to or demand upon Tenant:
E. Landlord may re-enter the Premises and cure any default of
Tenant, in which event Tenant shall reimburse Landlord as additional rent for
any costs and expenses which Landlord may incur to cure such default; and
Landlord shall not be liable to Tenant for any loss or damage which Tenant may
sustain by reason of Landlord's action, regardless of whether caused by
Landlord's negligence or otherwise.
F. Landlord may terminate this Lease as of the date of such
default, in which event: (1) neither Tenant nor any person claiming under or
through Tenant shall thereafter be entitled to possession of the Premises, and
Tenant shall immediately thereafter surrender the Premises to Landlord; (2)
Landlord may re-enter the Premises and dispossess Tenant or any other occupants
of the Premises by force, summary proceedings, ejectment or otherwise, and may
remove their effects, without prejudice to
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<PAGE> 19
any other remedy which Landlord may have for possession or arrearages in rent;
and (3) notwithstanding the termination of this Lease (a) Landlord may recover
from Tenant, as general damages, the maximum amount allowed by law, which, at a
minimum, shall be the present value of the balance of the Rent which would have
been due and payable for the balance of the Term of this Lease, less the present
value of the fair rental value of the Premises for such period (with said
present values being determined using an eight percent (8%) discount rate),
whereupon Tenant shall be obligated to pay the same to Landlord, together with
all costs, losses and damages which Landlord may sustain by reason of such
termination and re-entry, or (b) Landlord may relet all or any part of the
Premises for a term different from that which would otherwise have constituted
the balance of the Term of this Lease, and for rent and on terms and conditions
different from those contained herein, whereupon Tenant shall immediately be
obligated to pay to Landlord, as liquidated damages, the difference between the
Rent provided for herein and that provided for in any lease covering a
subsequent reletting of the Premises, for the period which would otherwise have
constituted the balance of the Term of this Lease, together with all of
Landlord's costs and expenses for preparing the Premises for reletting,
including all repairs, brokers' and attorneys' fees, and all costs, losses and
damages which Landlord may sustain by reason of such termination, re-entry and
reletting, it being expressly understood and agreed that the liabilities and
remedies specified in clauses (a) and (b) hereof shall survive the termination
of this Lease. Notwithstanding the foregoing, Landlord shall use all reasonable
efforts to mitigate its damages.
G. Landlord may sue for injunctive relief or to recover
damages for any loss resulting from the breach.
15.03 - NON-WAIVER OF DEFAULTS. The failure or delay by
Landlord or Tenant to enforce or exercise, at any time, any of the rights or
remedies or other provisions of this Lease shall not be construed to be a waiver
thereof, nor affect the validity of any part of this Lease or the right of
Landlord or Tenant thereafter to enforce each and every such right or remedy or
other provision. No waiver of any default and breach of the Lease shall be held
to be a waiver of any other default and breach. The receipt by Landlord of less
than the full rent due shall not be construed to be other than a payment on
account of rent then due, nor shall any statement on Tenant's check or any
letter accompanying Tenant's check be deemed an accord and satisfaction, and
Landlord may accept such payment without prejudice to Landlord's right to
recover the balance of the rent due or to pursue any other remedies provided in
this Lease. No act or omission by Landlord or its employees or agents during the
Term of this Lease shall be deemed an acceptance or a surrender of the Premises,
and no agreement to accept such a surrender shall be valid unless in writing and
signed by Landlord.
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<PAGE> 20
XVI -- NOTICE AND PLACE OF PAYMENT
- ----------------------------------
16.01 - NOTICE. Any notice or other communication required or
permitted to be given to a party under this Lease shall be in writing, unless
otherwise specified in this Lease, and shall be given by one of the following
methods to such party at the address set forth in Item H of the Basic Lease
Provisions: (1) it may be sent by registered or certified United States mail,
return receipt requested and postage prepaid, or (2) it may be sent by ordinary
United States mail or delivered in person or by courier, telecopier, telex,
telegram, interconnected computers, or any other means for transmitting a
written communication. Any such notice shall be deemed to have been given as
follows: (i) when sent by registered or certified United States mail, as of the
earlier of date of delivery shown on the receipt, or as of the second calendar
day after it was mailed, and (ii) when delivered by any other means, upon
receipt. Either party may change its address for notice by giving written notice
thereof to the other party.
16.02 - PLACE OF PAYMENT. All rent and other payments required
to be made by Tenant to Landlord shall be made by inter-company transfers or
shall be delivered or mailed to Landlord at the address specified in Item H of
the Basic Lease Provisions, or any other address Landlord may specify from time
to time by written notice given to Tenant.
XVII -- HAZARDOUS SUBSTANCES
- ----------------------------
17.01 - HAZARDOUS SUBSTANCES. Tenant shall not cause or permit
any Hazardous Substance (as hereinafter defined) to be used, stored, generated
or disposed of on or in the Premises, the Building or the Campus by Tenant,
Tenant's agents, employees, contractors, invitees or sublessees, without first
obtaining Landlord's written consent. If Hazardous Substances are used, stored,
generated or disposed of on or in the Premises, or if the Premises, the Building
or the Campus becomes contaminated in any manner for which Tenant is legally
liable, Tenant shall indemnify and hold harmless Landlord from any and all
claims, damages, fines, judgments, penalties, costs, liabilities or losses
(including, without limitation, a decrease in value of the Building or the
Campus, damages caused by loss or restriction of rentable or usable space, or
any damages caused by adverse impact on marketing of the space, and any and all
sums paid for settlement of claims, attorneys' fees, consultant and expert fees)
arising during or after the Term of the Lease, and arising as a result of that
contamination by Tenant. This indemnification includes, without limitation, any
and all costs incurred because of any investigation of the site or any cleanup,
removal or restoration mandated by a federal, state or local agency or political
subdivision. Without limitation of the foregoing, if Tenant causes or permits
the presence of any Hazardous Substance on or
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<PAGE> 21
in the Premises, the Building or the Campus and that results in contamination,
Tenant shall promptly, at its sole expense, take any and all necessary actions
to return the Premises, the Building and the Campus to the condition existing
prior to the presence of any such Hazardous Substance on or in the Premises.
Tenant shall first obtain Landlord's approval for any such remedial action. As
used herein, "Hazardous Substance" means any substance that is toxic, ignitable,
reactive or corrosive and that is regulated by any local government, the State
of Ohio, or the United States Government. "Hazardous Substance" includes any and
all materials or substances that are defined as "hazardous waste", "extremely
hazardous waste", or a "hazardous substance" pursuant to state, federal or local
government law. "Hazardous Substance" includes, but is not restricted to,
asbestos, polychlorinated biphenyls, petroleum, petroleum products, and
petroleum wastes.
XVIII -- MISCELLANEOUS GENERAL PROVISIONS
- -----------------------------------------
18.01 - RELOCATION; TERMINATION. Tenant acknowledges and
agrees that Landlord has the right and option to relocate Tenant to different
premises within the Building or to a different building within the Campus or to
a different building on another campus controlled by Landlord. Tenant agrees
that this Lease is, and Tenant's possession rights hereunder are, subject to
said relocation rights. In such event, Tenant agrees to relocate in accordance
with Landlord's plan of relocation and to cooperate fully with Landlord in
completing the relocation. In the event that Tenant should cease to be an entity
which is controlled by The Limited, Inc., then Landlord shall have the right and
option to terminate this Lease by giving Tenant written notice of such
termination at least one hundred eighty (180) days prior to the proposed
Effective Date of the termination. For the purposes of this section, a tenant is
"controlled by" The Limited, Inc. if The Limited, Inc., or one of its
subsidiaries, owns in excess of 50% of the voting shares of such tenant.
18.02 - DEFINITION OF RENT. Any amounts of money to be paid by
Tenant to Landlord pursuant to the provisions of this Lease, whether or not such
payments are denominated "Rent" and whether or not they are to be periodic or
recurring, shall be deemed "Rent" for purposes of this Lease; and any failure to
pay any of the same, as provided in Section 16.01 hereof, shall entitle Landlord
to exercise all of the rights and remedies afforded hereby or by law for the
collection and enforcement of Tenant's obligation to pay Rent. Tenant's
obligation to pay any such Rent, pursuant to the provisions of this Lease, shall
survive the expiration or other termination of this Lease and the surrender of
possession of the Premises after any hold over period.
18.03 - ESTOPPEL CERTIFICATE. Tenant agrees, at any time and
from time to time, upon not less than ten (10) calendar days prior written
notice by Landlord, to execute, acknowledge and deliver to Landlord, as
appropriate, a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect, (or, if there have been modifications, stating
such modifications); (ii) stating the dates to which the rent and any other
charges hereunder have been paid by Tenant;, (iii) stating whether or not, to
the best of Tenant's knowledge, Landlord is in default in the performance of any
covenant, agreement or condition contained in this Lease, and, if so, specifying
each such default of which Tenant may have knowledge; and (iv) stating the
address to
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<PAGE> 22
which notices to Tenant should be sent. Any such statement delivered pursuant
hereto may be relied upon by any owner of the Building or the Campus, any
prospective purchaser of the Building, any mortgagee or prospective mortgagee of
the Building, or any prospective assignee of any such mortgagee.
18.04 - GOVERNING LAW. This Lease shall be construed and
enforced in accordance with the laws of the State of Ohio.
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<PAGE> 23
18.05 - SUCCESSORS AND ASSIGNS. This Lease and the respective
rights and obligations of the parties hereto shall inure to the benefit of and
be binding upon the successors and assigns of the parties hereto, as well as the
parties themselves; provided, however, that Landlord, its successors and
assigns, shall be obligated to perform Landlord's covenants under this Lease
only during and in respect to their successive periods of ownership during the
Term of this Lease.
18.06 - SEVERABILITY OF INVALID PROVISIONS. If any provision
of this Lease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
18.07 - CERTAIN WORDS, GENDER AND HEADINGS. As used in this
Lease, the word "person" shall mean and include, where appropriate, an
individual, corporation, partnership or other entity; the plural shall be
substituted for the singular and the singular for the plural, where appropriate;
and words of any gender shall include any other gender. The topical headings of
the several paragraphs of this Lease are inserted only as a matter of
convenience and reference, and do not affect, define, limit or describe the
scope or intent of this Lease.
18.08 - QUIET ENJOYMENT. So long as Tenant pays the prescribed
rent and performs or observes all of the terms, conditions, covenants and
obligations of this Lease required to be performed or observed by it hereunder,
Tenant shall, at all times during the Term hereof, have the peaceable and quiet
enjoyment, possession, occupancy and use of the Premises, without any
interference from Landlord or any person or persons claiming the Premises, by,
through or under Landlord.
18.09 - COMPLETE AGREEMENT; AMENDMENTS. This Lease, including
all Exhibits, Riders and Addenda, constitutes the entire agreement between the
parties hereto; it supersedes all previous understandings and agreements between
the parties, if any, and no oral or implied representation or understandings
shall vary its terms; and it may not be amended, except by a written instrument
executed by both parties hereto.
18.10 - REASONABLE MODIFICATIONS. Tenant will consent to such
reasonable modifications of this Lease as Landlord may hereafter find it
necessary to make in order to obtain mortgage financing, provided that such
modifications (a) do not change the rental to be paid hereunder or the length of
the Term of the Lease; and (b) do not impose obligations upon Tenant which are
substantially or practically more burdensome to it than the obligations
contained herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this
Lease as of the day and year first above written.
Witnesses as to Landlord: LANDLORD:
DISTRIBUTION LAND CORP., a Delaware
corporation
______________________________ By:_________________________________
Print Name:___________________ George R. Sappenfield
______________________________ Vice President - Real Estate
Print Name:___________________
ATTESTED BY:
______________________________ ____________________________________
Print Name:___________________ C. David Zoba
Vice President and Senior Counsel
______________________________ - Real Estate
Print Name:___________________
Witnesses as to Tenant: TENANT:
VICTORIA'S SECRET STORES, INC., a
Delaware corporation
______________________________ By:_________________________________
Print Name:___________________ George R. Sappenfield
______________________________ Vice President - Real Estate
Print Name:___________________
ATTESTED BY:
______________________________ ____________________________________
Print Name:___________________ C. David Zoba
Vice President and Senior Counsel
______________________________ - Real Estate
Print Name:___________________
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<PAGE> 25
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this _____ day of
____________, 1999, by George R. Sappenfield and C. David Zoba, Vice President -
Real Estate and Vice President and Senior Counsel - Real Estate, respectively,
of Distribution Land Corp., a Delaware corporation, on behalf of the
corporation.
_______________________________
Notary Public
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this _____ day of
_____________, 1999, by George R. Sappenfield and C. David Zoba, Vice President
- - Real Estate and Vice President and Senior Counsel - Real Estate, respectively,
of Victoria's Secret Stores, Inc., a Delaware corporation, on behalf of the
corporation.
_______________________________
Notary Public
This Instrument Prepared By:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
P.O. Box 1008
Columbus, OH 43216-1008
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<PAGE> 1
EXHIBIT 10.7
------------
LEASE AGREEMENT
---------------
This Lease Agreement (this "Lease") is entered into and made
as of the 31st day of January, 1999, by and between Distribution Land Corp., a
Delaware corporation (hereinafter referred to as "Landlord") and Victoria's
Secret Catalogue, Inc., a Delaware corporation (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
WHEREAS, Landlord owns a certain office/warehouse distribution
facility containing approximately 814,954 square feet of floor space identified
on EXHIBIT A attached hereto and made a part hereof by this reference (the
"Building"); and
WHEREAS, the Building is located upon an approximately 60.721
acre parcel of land located at the intersection of Stelzer Road and Loop Road,
Columbus, Ohio, which land is depicted on EXHIBIT A attached hereto and made a
part hereof by this reference (the "Campus"); and
WHEREAS, Landlord wishes to lease to Tenant a portion of the
Building as more particularly described in Section 1.02 below (the "Premises")
and to grant to Tenant the right to utilize certain common areas and facilities
located within the Building and the Campus, all subject to the terms and
conditions of this Lease; and
WHEREAS, Tenant wishes to lease, from Landlord, a portion of
the Building and to utilize those certain common areas and facilities located
within the Building and the Campus.
NOW, THEREFORE, in consideration of the premises described
above and the mutual promises set forth herein, Landlord and Tenant, intending
to be legally bound, hereby agree as follows:
I -- LEASE OF PREMISES
- ----------------------
1.01 - LEASE OF PREMISES. Landlord, in consideration of the
rents and covenants hereinafter set forth, does hereby demise, let and lease to
Tenant, and Tenant does hereby hire, take and lease from Landlord, on the terms
and conditions
<PAGE> 2
hereinafter set forth, the Premises, to have and to hold the same, with all
appurtenances unto Tenant for the Term hereinafter specified.
1.02 - Basic Lease Provisions.
------------------------------
A. Building Address: 3425 Stelzer Road
Columbus, Ohio 43219
B. Building Description: an office/warehouse
distribution facility, containing approximately
118,934 square feet of office space, 686,074 square
feet of distribution space and 9,946 square feet of
Building Common Area (as hereinafter defined)
C. Premises Description: the floors of the Building on
which the Premises are located and the square footage
of the Premises are depicted on the floor plan
attached hereto as Exhibit B and made a part hereof
by this reference.
D. Term: Fifteen (15) years, beginning on January 31,
1999 (the "Commencement Date") and ending on January
30, 2014 (the "Expiration Date")
E. Annual Rent:
(i) Office space and Pro Rata Share of Building
Common Areas - $16.15 per square foot, or
$2,081,412
(ii) Distribution space - $4.35 per square foot,
or $2,984,421.90
(iii) Total Annual Rent of $5,065,833.90
(iv) The Annual Rent shall be subject to periodic
adjustments as provided in Section 4.02 of
this Lease
F. Monthly Installments of Rent: $422,152.83
G. Renewal Option(s): three (3) five (5) year Renewal
Option(s) - See Section 4.05 of this Lease for terms
of the Renewal Options
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<PAGE> 3
H. Addresses for Notices and Payments:
Tenant: Victoria's Secret Catalogue, Inc.
3425 Stelzer Road
Columbus, Ohio 43219
with a copy to:
Victoria's Secret Catalogue, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Corporate Real Estate Department
Landlord: Distribution Land Corp.
Three Limited Parkway
Columbus, Ohio 43230
with a copy to:
Distribution Land Corp.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Corporate Real Estate Department
I. Use: office/warehouse distribution use related to
distribution for retail sale of men's, women's and
children's apparel, accessories, personal care items
and other products, and for all administrative
activities relating thereto
1.03 - Description of the Building, the Premises and the
--------------------------------------------------------
Common Areas.
- -------------
J. THE BUILDING. The Building is depicted on the attached
Exhibit A. The address and description of the Building are specified in Items A
and B of the Basic Lease Provisions (which are set forth in Section 1.02 of this
Lease).
K. THE PREMISES. The Premises consist of space which: (i) is
located on the floor or floors of the Building designated on the attached
EXHIBIT B, (ii) is located in one or more areas or parts of each such floor, and
(iii) is bound by the proposed or existing demising walls therefor, the
approximate locations of such demising walls and space being marked in color or
cross-hatched and shown on the diagram of the floor plan for each such floor,
such diagram being attached to this Lease as EXHIBIT B and made a part hereof by
this reference. The Premises also include that portion of the Building Common
Areas (as defined in Section 1.03(L) of this Lease) which has been allocated to
Tenant on the basis of the square footage of office space designated for
Tenant's use in items (i), (ii) and (iii) above divided by the total square
footage of office
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<PAGE> 4
space located within the Building ("Pro Rata Share of Building Common Areas").
The approximate number of square feet contained in the area which comprises the
Premises is also specified on EXHIBIT B.
L. COMMON AREAS. The Building is located within, and
constitutes a part of, the Campus. The Campus has been improved with the
Building, additional buildings and structures not subject to this Lease,
security buildings and facilities and roadways, driveways, walkways, parking
areas, loading areas, fences, walls, hedges, plantings, poles, ponds, lakes,
signs, utility improvements, trees, plantings and other landscaping features
(the Campus, excluding the Building, being referred to herein as the "Campus
Common Areas"). The Building contains certain areas or parts which are
designated for use in common by all of the tenants of the Building and their
respective employees, agents, customers, and invitees. Such areas include
entrances, exits and doors, lobbies, hallways, corridors and stairwells,
elevators and restrooms, but excluding certain "special amenities" such as the
cafeteria, mail room and reception area (all of which are referred to herein as
the "Building Common Areas"). The Campus Common Areas and the Building Common
Areas are sometimes referred to herein collectively as the "Common Areas".
II -- COMMON AREAS
- ------------------
2.01 - USE OF BUILDING COMMON AREAS. Subject to Landlord's
right at any time to use the Building Common Areas for its own purposes and the
right of any other tenant to operate the Building Common Areas, Landlord hereby
gives to Tenant and its employees, agents, customers and invitees, the
nonexclusive right to use the Building Common Areas in common with and subject
to the rights given to other tenants of the Building.
2.02 - USE OF CAMPUS COMMON AREAS. Subject to Landlord's right
at any time to use the Campus Common Areas for its own purposes, Landlord hereby
gives to Tenant and its employees, agents, customers and invitees, the
nonexclusive right to use the Campus Common Areas.
2.03 - RULES AND REGULATIONS FOR COMMON AREAS. The Campus
Common Areas and the Building Common Areas shall at all times be subject to the
exclusive management and control of Landlord which shall have the right, from
time to time, to establish, modify and enforce reasonable rules and regulations
with respect to all such Common Areas, and the use of such Campus Common Areas
and the Building Common Areas by Tenant, its subtenants and their respective
employees, agents, customers and invitees shall be subject to such rules and
regulations. Such rules and regulations may include, but shall not be limited
to, restrictions on parking, hours of operation, access routes, hours of access
to the Building and the Campus, rules with respect to the Building and such
other matters as may be deemed appropriate by Landlord from time to time.
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<PAGE> 5
2.04 - CHANGES IN COMMON AREAS. Landlord may do and perform
such acts in and to the Campus Common Areas and the Building Common Areas,
respectively, as it shall determine to be advisable. Landlord hereby reserves
the right to make reconfigurations, alterations, additions, deletions or changes
to the Campus Common Areas and Building Common Areas, respectively, including,
but not limited to, changes in the size and configuration of said Common Areas.
Landlord reserves the right to restrict and limit the use of the Campus Common
Areas and Building Common Areas, respectively, by Tenant, its subtenants and
their respective employees, agents, customers and invitees.
2.05 - MAINTENANCE OF COMMON AREAS. Subject to the provisions
of Section 4.03 hereof, Landlord shall adequately maintain the Campus Common
Areas and Building Common Areas, respectively, in a good and usable condition
throughout the Term of this Lease.
2.06 - COMMON AREA CAPITAL IMPROVEMENTS. Landlord may make
capital improvements to the Campus Common Areas and Building Common Areas,
respectively.
III -- TERM AND POSSESSION
- --------------------------
3.01 - TERM. The Term of this Lease shall be for the period of
years and months specified in Item D of the Basic Lease Provisions; and shall
begin and end on the Commencement Date and Expiration Date, respectively,
specified in Item D of the Basic Lease Provisions, unless the Term of this Lease
is renewed, modified or terminated as provided elsewhere herein.
3.02 - TENANT'S ACCEPTANCE OF THE PREMISES. Tenant hereby
accepts the Premises in an "as is" condition and acknowledges that Landlord has
made no representations or warranties with respect thereto, and that Tenant has
inspected the Premises and found it to be in satisfactory condition.
3.03 - SURRENDER OF THE PREMISES. Upon the expiration or
earlier termination of this Lease, or upon the exercise by Landlord of its right
to re-enter the Premises without terminating this Lease, Tenant shall
immediately surrender the Premises to Landlord, together with all alterations,
improvements and other property as provided elsewhere herein, in broom-clean
condition and in good order, condition and repair, except for ordinary wear and
tear and damage which Tenant is not obligated to repair, failing which Landlord
may restore the Premises to such condition at Tenant's expense. Upon such
expiration or termination, Tenant may, provided Tenant is not in default and
unless prohibited from doing so by other provisions of this Lease, have the
right to remove its personal property and trade fixtures. Tenant shall promptly
repair any damage caused by any such removal, and shall restore the Premises to
the
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<PAGE> 6
condition existing prior to the installation of the items so removed, ordinary
wear and tear and damage which Tenant is not obligated to repair excepted. If
Tenant fails to remove any and all such trade fixtures from the Premises on the
Expiration Date or earlier termination of this Lease, all such trade fixtures
shall become the Property of Landlord, unless Landlord elects to require their
removal, in which case Tenant shall, at its cost, promptly remove the same and
restore the Premises to its prior condition.
3.04 - HOLDING OVER. In the event that Tenant shall not
immediately surrender the Premises on the Expiration Date of the Term hereof,
Tenant shall, by virtue of the provisions hereof, become a tenant by the month
at the monthly rent in effect during the last month of the Term of this Lease,
which monthly tenancy shall commence with the first day next after the
Expiration Date. Tenant, as a monthly tenant, shall be subject to all of the
terms, conditions, covenants and agreements of this Lease. Tenant shall give to
Landlord at least thirty (30) calendar days written notice of any intention to
quit the Premises, and Tenant shall be entitled to thirty (30) calendar days
written notice to quit the Premises, unless Tenant is in default hereunder, in
which event Tenant shall not be entitled to any notice to quit, the usual thirty
(30) calendar days notice to quit being hereby expressly waived. Notwithstanding
the foregoing provisions of this Section 3.04, in the event that Tenant shall
hold over after the expiration of the Term of this Lease, and if Landlord shall
desire to regain possession of the Premises promptly at the expiration of the
Term of this Lease, then, at any time prior to Landlord's acceptance of rent
from Tenant as a monthly tenant hereunder, Landlord, at its option, may
forthwith re-enter and take possession of the Premises without process, or by
any legal process in force.
3.05 - RENEWAL OPTIONS. So long as Tenant is not in default
under the terms of this Lease, Landlord does hereby grant to Tenant the right
and option to extend and renew the fifteen (15) year Term of this Lease (herein
called the "Initial Term") for three (3) additional period(s) of five (5) years
each (herein the "Renewal Term(s)"), beginning on the date immediately following
the Expiration Date of the Initial Term or the preceding Renewal Term, as
appropriate, upon the same terms, conditions, covenants and provisions as are
provided in this Lease (except the Rent, which will be subject to adjustment as
provided in Section 4.02 hereof). Unless in respect of each Renewal Term
Landlord or Tenant notifies the other party, at least one (1) year prior to the
expiration of the Initial Term or Renewal Term then in effect, of its intent not
to extend and renew the Term of this Lease, then the Tenant shall be deemed to
have exercised its Renewal Option in respect of that Renewal Term. If the
Renewal Option is exercised as provided herein, then this Lease shall be amended
to reflect the changes which will result from such extension of the Term of this
Lease, including the modification to all references in the Lease to the "Term"
thereof (as defined in Section 3.01) to include the Renewal Term as well as the
Initial Term.
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<PAGE> 7
IV -- RENT
- ----------
4.01 - RENT.
MONTHLY RENT. Commencing on January 31, 1999, Tenant shall pay
to Landlord, as Rent for the Premises, the annual sum specified in Item E of the
Basic Lease Provisions, payable in equal consecutive monthly installments as
specified in Item F of the Basic Lease Provisions, in advance, on or before the
first day of each and every calendar month during the Term of this Lease;
provided, however, that if the Expiration Date shall be a day other than the
first day of a calendar month, the Rent installment for such last fractional
month shall be prorated on the basis of the number of days during the month this
Lease was in effect in relation to the total number of days in such month.
4.02 - RENT ADJUSTMENT.
A. CPI ADJUSTMENTS DURING THE INITIAL TERM. Commencing on the
first (1st) anniversary of the Commencement Date and continuing on the same date
every year thereafter during the Initial Term, the Rent due and payable to
Landlord shall be adjusted for the next succeeding year. The adjusted Rent for
each year shall be equal to the Rent paid during the immediately preceding
twelve (12) month period (the "lease year") increased by a percentage equal to
the percentage increase in the CPI (as hereinafter defined) computed by
comparing the CPI figure for that month which is two (2) months prior to the
adjustment date (the "adjustment month") with the CPI figure for the month
occurring twelve (12) months prior to the adjustment month (the "base month").
For example, in computing the percentage increase for the lease year commencing
January 31, 2002, the percentage increase in the CPI would be determined by
comparing the CPI figure for November, 2001, the adjustment month, with the CPI
figure for November, 2000, the base month, and similar comparisons would be made
using the CPI figures for adjustment months and base months every year
thereafter. For the purposes hereof, "CPI" shall mean the Consumer Price Index,
published by the Bureau of Labor Statistics of the United States Department of
Labor, in the column for "all items" in the table titled "Consumer Price Index
for all Urban Consumers: U.S. City average, 1982-1984 = 100".
If the CPI at any time herein is no longer published or
issued, Landlord and Tenant shall agree on such other index as is then generally
recognized for determination of purchasing power in the United States.
B. ADJUSTMENTS DURING THE RENEWAL TERM. Commencing on the
first day of each Renewal Term the Rent shall be adjusted to an amount which, in
Landlord's reasonable judgment, is equal to the then current market rental rate
for similar buildings, in similar locations and in the same geographic area.
Provided, however, in no event shall the Rent for the Renewal Term be less than
the Rent which was paid by Tenant during the immediately preceding Term.
Commencing on the first
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<PAGE> 8
anniversary of such date and continuing on the same date every year thereafter
during the Renewal Term, the Rent due and payable to Landlord shall be adjusted
for the next succeeding year. The adjusted Rent for each year shall be equal to
the Rent paid during the immediately preceding 12 month period (the "lease
year") increased by a percentage equal to the percentage increase in the CPI
computed by comparing the CPI figure for that month which is two months prior to
the adjustment date (the "adjustment month") with the CPI figure for the month
occurring 12 months prior to the adjustment month (the "base month"). For
example, in computing the percentage increase for the lease year commencing
January 31, 2002, the percentage increase in the CPI would be determined by
comparing the CPI figure for November, 2001, the adjustment month with the CPI
figure for November, 2000, the base month, and similar comparisons will be made
using the CPI figures for adjustment months and base months every year
thereafter.
C. EXTRAORDINARY CAPITAL EXPENDITURES. If, during the Term of
this Lease, Landlord should agree to make any extraordinary Capital Improvements
to the Premises, such extraordinary Capital Improvements being the result of
either (i) Tenant's request, or (ii) Landlord's determination, in its sole
discretion, that, due to Tenant's activities upon the Premises such improvements
are necessary, then Landlord may either immediately charge Tenant for the costs
of all such Capital Improvements, which costs shall be paid by Tenant within 30
days of Landlord's request therefor, or add to the Rent (to be paid in monthly
installments), an amount equal to the annual depreciation or amortization with
respect to the cost of such equipment or capital improvement, as determined by
Landlord in accordance with generally accepted accounting principles, together
with interest on such cost or the unamortized balance thereof at the rate as may
have to be paid by or accrued on the books of Landlord on the unamortized
balance.
D. EXTRAORDINARY SERVICES. If, during the Term of this Lease,
Landlord provides to Tenant services, including but not limited to repair,
maintenance and janitorial services, (i) in excess of those normally required to
maintain the Building in a manner consistent with similar buildings, in similar
locations in the same geographic areas, and (ii) such extraordinary services are
the result of or made necessary as a result of Tenant's activities within the
Premises, then Landlord shall have the right to calculate the cost of such
extraordinary services and to charge Tenant the cost thereof. All such charges
shall be calculated and charged to Tenant, on a monthly basis, to be paid by
Tenant as Rent hereunder.
4.03 - LATE PAYMENT SERVICE CHARGE; INTEREST. In the event any
installment of Rent, or any other amount which may become due under this Lease
is not paid when due, and such nonpayment continues for a period of ten (10)
days after Landlord gives to Tenant written notice of such nonpayment, then, for
each and every such payment, Tenant shall immediately pay a service charge equal
to five percent (5%) of the amount not timely paid, together with interest on
the amount not timely paid at the rate of eight percent (8%) per annum, from the
due date of such payment until
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<PAGE> 9
paid. The provisions of this Section 4.03 shall not be construed to extend the
date for payment of Rent, or any other amount which may become due under this
Lease, or to relieve Tenant of its obligations to pay all such items at the time
or times herein stipulated, and neither demand for, nor collection by Landlord
of, late payment service charges and interest pursuant to this Section 4.03
shall be construed as a cure of any default in payment by Tenant.
V -- USE OF PREMISES
- --------------------
5.01 - SPECIFIC USE. The Premises shall be occupied and used
exclusively for the purposes specified in Item I of the Basic Lease Provisions
and for purposes incidental thereto, and shall not be used for any other
purposes.
5.02 - COVENANTS REGARDING USE. In connection with its use of
the Premises, Tenant agrees to do the following:
A. Tenant shall use the Premises and conduct its business
therein in a safe, careful, reputable and lawful manner; shall keep any garbage,
trash, rubbish or other refuse in sealed containers within the interior of the
Premises until removed and placed in a dumpster or other authorized container
for the deposit of garbage and refuse, which shall be located in an area
designated by Landlord.
B. Tenant shall not commit, nor allow to be committed, in, on
or about the Premises any act of waste, including any act which might deface,
damage or destroy the Premises or any part thereof; use or permit to be used
within the Premises any hazardous substance, equipment, or other thing which
might cause injury to person or property or increase the danger of fire or other
casualty in, on or about the Premises; or permit any objectionable or offensive
noise or odors to be emitted from the Premises. Notwithstanding the foregoing,
Landlord acknowledges that Tenant will utilize certain distribution equipment
which, but for this sentence, might be deemed to violate this provision and use
of such equipment is expressly permitted.
C. Tenant shall not use the Premises, or allow the Premises to
be used, for any purpose or in any manner other than the permitted uses which
would, in Landlord's opinion, invalidate any policy of insurance now or
hereafter carried on the Premises or the Building or increase the rate of
premiums payable on any such insurance policy. Should Tenant fail to comply with
this covenant, Landlord may, at its option, require Tenant to stop engaging in
such activity or to reimburse Landlord as additional rent for any increase in
premiums charged during the Term of this Lease on the insurance carried by
Landlord on the Premises and the Building and attributable to the use being made
of the Premises by Tenant.
5.03 - ACCESS TO AND INSPECTION OF THE PREMISES. Landlord, its
employees and agents, shall have the right to enter any part of the Premises, at
all reasonable
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times after reasonable notice, for the purpose of examining or inspecting the
same, showing the same to prospective purchasers, mortgagees or tenants, and for
making such repairs, alterations or improvements to the Premises and the
Building as Landlord may deem necessary or desirable. Landlord shall incur no
liability to Tenant for such entry, except with respect to the negligence or
intentional, wrongful acts or omissions of Landlord, its agents, employees and
invitees, nor shall such entry constitute an eviction of Tenant or a termination
of this Lease, or entitle Tenant to any abatement of rent therefor.
5.04 - COMPLIANCE WITH LAWS. Tenant shall comply with all
laws, statutes, ordinances, rules, regulations and orders of any federal, state,
municipal, or other government or agency thereof having jurisdiction over and
relating to the use and occupancy of the Premises, including any such laws,
statutes or regulations requiring modifications or alterations to the Premises.
5.05 - RULES AND REGULATIONS. The Building shall at all times
be subject to the management and control of the Landlord, and Landlord shall
have the right, from time to time, to establish, modify and enforce reasonable
rules and regulations with respect to the Building, and the use of the Building
by Tenant, its subtenants and their respective employees, agents, customers and
invitees shall be subject to such rules and regulations. Such rules and
regulations may include, but shall not be limited to restrictions upon Tenant's
hours of operation, noise levels with the Building, load placement and utility
usage.
VI -- UTILITIES, EQUIPMENT MAINTENANCE AND OTHER SERVICES
- ---------------------------------------------------------
6.01 - ELECTRIC, GAS AND WATER. Landlord, or Limited
Distribution Services, Inc. ("LDS"), acting as Landlord's agent, shall contract
with the appropriate public utilities companies or other providers supplying
electric, gas, water, sanitary sewer and all other utilities and services to the
Premises or to Tenant and shall pay directly all charges for such services from
and after the Commencement Date. Thereafter, Landlord or LDS shall reasonably
allocate these utility or service charges attributable to the Premises or to
Tenant and, on a periodic basis, provide to Tenant a written statement detailing
Tenant's allocation thereof. Tenant shall pay to Landlord or LDS, as
appropriate, within fifteen (15) days of Tenant's receipt of the written
statement therefor, all such utility and service charges.
6.02 - EQUIPMENT MAINTENANCE. LDS shall provide all
maintenance as is required to or deemed advisable for Tenant's distribution
center equipment located within the Premises. Tenant shall pay directly to LDS
all sums charged by LDS in connection with such equipment maintenance.
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6.03 - JANITORIAL AND REFUSE COLLECTION SERVICE. Landlord
shall contract for janitorial and refuse collection services for the Premises
and shall pay for all charges for such services.
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6.04 - DISCONTINUANCES AND INTERRUPTIONS OF UTILITY SERVICES.
Neither Landlord nor LDS shall be liable to Tenant in damages or otherwise (i)
if any utilities shall become unavailable from any public utility company,
public authority, or any other person supplying or distributing such utility, or
(ii) for any interruption in any utility service (including, without limitation,
any heating, ventilation or air conditioning) caused by the making of any
necessary repairs or improvements or by any cause beyond Landlord's and LDS's
reasonable control, and the same shall not constitute a termination of this
Lease or an eviction of Tenant.
6.05 - CAFETERIA, MAIL ROOM AND RECEPTION SERVICES. Included
within the Premises are areas designated for use as the cafeteria and the mail
room. Excluded from the Premises, but comprising part of the Building Common
Areas, is the reception area (the cafeteria, mailroom and reception area being
referred to herein as the "Special Amenities"). Tenant shall maintain, staff and
operate the Special Amenities, including providing security services, for the
benefit of all tenants within the Building. Tenant will also control the Special
Amenities for purposes of decorating and equipping the areas in which each of
the Special Amenities is located. Tenant will charge directly the other tenants
within the Building for the use of the Special Amenities. Neither Landlord nor
LDS shall be liable to Tenant or any other tenant in the Building as a result of
Tenant's operation of the Special Amenities.
VII -- SIGNS
- ------------
7.01 - SIGNS. Tenant shall not inscribe, paint, affix or
display any signs, advertisements or notices on the Premises, the Building, or
the Campus without Landlord's prior written consent, which consent Landlord
shall have no obligation to give and which may be given or withheld in
Landlord's sole discretion.
VIII -- REPAIRS, MAINTENANCE, ALTERATIONS, IMPROVEMENTS
- -------------------------------------------------------
AND FIXTURES
------------
8.01 - REPAIR AND MAINTENANCE OF BUILDING. Landlord shall keep
and maintain the Building (including all doors, whether interior or exterior,
any plate glass in the exterior walls and doors, the roof, exterior and interior
structural walls, and the foundation) and the electrical, plumbing, heating,
ventilation and air conditioning systems serving the Building in good order,
condition and repair, and shall make all necessary repairs to the Building and
the electrical, plumbing, heating, ventilation and air conditioning systems
serving the Building, and will make all replacements from time to time required
thereto.
8.02 - REPAIR AND MAINTENANCE OF PREMISES. Landlord shall
provide cleaning, janitorial, maintenance, repair and restoration services to
the Premises. If a repair is needed to so maintain the Building, then Tenant
shall give to Landlord verbal
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notice, and as soon thereafter as possible confirming written notice, of such
need for repair. Within a reasonable period of time thereafter, Landlord shall
examine the item or matter described in Tenant's notice, and if Landlord should
determine that such item or matter is in need of repair, Landlord shall make
such repair.
8.03 - ALTERATIONS OR IMPROVEMENTS. Tenant shall neither make,
nor permit to be made, any alterations or improvements to the Premises without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld. If Landlord allow Tenant to make any such alterations or
improvements, Tenant shall make the same in accordance with all applicable laws
and building codes, in a good and workmanlike manner and in quality equal to or
better than the original construction of the Building, and shall comply with
such requirements as Landlord considers necessary or desirable, including,
without limitation, requirements as to the manner in which and the times at
which such work shall be done and the contractor or subcontractors to be
selected to perform such work. Tenant shall promptly pay all costs attributable
to such alterations and improvements and shall indemnify Landlord against any
mechanics' liens or other liens or claims filed or asserted as a result thereof
and against any costs or expenses which may be incurred as a result of building
code violations attributable to such work. Tenant shall promptly repair any
damage to the Premises and the Building caused by any such alterations or
improvements. Any alterations or improvements to the Premises, except movable
equipment and trade fixtures, shall become a part of the realty and the property
of Landlord, and shall not be removed by Tenant.
8.04 - TRADE FIXTURES. Any trade fixtures installed in the
Premises by Tenant at its own expense, such as movable partitions, counters,
shelving, and the like, may and, at the request of Landlord, shall be removed on
the Expiration Date or earlier termination of this Lease, provided that Tenant
is not then in default, that Tenant bears the cost of such removal, and further
that Tenant repairs, at its own expense, any and all damage to the Premises and
the Building resulting from such removal. If Tenant fails to remove any and all
such trade fixtures from the Premises on the Expiration Date or earlier
termination of this Lease, all such trade fixtures shall become the property of
Landlord, unless Landlord elects to require their removal, in which case Tenant
shall, at its cost, promptly remove same and restore the Premises to its prior
condition.
IX -- FIRE OR OTHER CASUALTY; CASUALTY INSURANCE
- ------------------------------------------------
9.01 - DAMAGE OR DESTRUCTION BY CASUALTY. If the Building
should be substantially destroyed or damaged (which, as used herein, means
destruction or material damages to at least fifty percent (50%) of the Building)
by fire or other casualty, then either party hereto may, at its option,
terminate this Lease by giving written notice thereof to the other party within
thirty (30) calendar days after the date of such casualty. In such event, all
Rent due under this Lease shall be apportioned to and shall cease as of the date
of such casualty, and Tenant shall be given a reasonable period of time, not
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<PAGE> 14
to exceed forty-five (45) calendar days after receipt of written notice of
termination (or fourteen (14) days after giving notice of termination to
Landlord as appropriate) under this Section 9.01, in which to remove its trade
fixtures and personal property, whereupon both parties shall be released from
all further obligations and liability hereunder (except for any obligations
previously incurred hereunder). If neither party exercises this option, then the
Building shall be reconstructed and restored at Landlord's expense, to
substantially the same condition as it was prior to the casualty; provided,
however, that, if Tenant has made any additional improvements pursuant to
Section 8.03, Tenant shall reimburse Landlord for the cost of reconstructing the
same. In the event of such reconstruction, all Rent due under this Lease shall
be abated from the date of the casualty until such substantial completion of the
reconstruction repairs; and this Lease shall continue in full force and effect
for the balance of the Term. Landlord shall use reasonable diligence in
completing such reconstruction repairs. Notwithstanding the foregoing, if the
Premises are substantially destroyed or damaged (which, as used herein, means
destruction or material damages to at least fifty percent (50%) of the Premises,
as applicable), then Tenant may, at its option, terminate this Lease by giving
written notice thereof to Landlord within thirty (30) calendar days after the
date of such casualty. In such event, all Rent due under this Lease shall be
apportioned to and shall cease as of the date of such casualty, and Tenant shall
be given a reasonable period of time, not to exceed thirty-five (35) calendar
days, in which to remove its trade fixtures and personal property, whereupon
both parties shall be released from all further obligations and liabilities
hereunder (except for any obligations previously incurred hereunder).
9.02 - CASUALTY INSURANCE. Landlord shall obtain and pay for
insurance against fire and other casualty in respect of the Building. Landlord
shall not be responsible for, and shall not be obligated to insure against, any
loss of or damage to any personal property of Tenant or which Tenant may have in
the Premises, or any trade fixtures installed by or paid for by Tenant in the
Premises, or any additional improvements which Tenant may construct in the
Premises, as provided in Section 8.03.
9.03 - WAIVER OF SUBROGATION. Landlord and Tenant each hereby
waive any and all right that they may have to recover from the other damages for
any loss occurring to them by reason of any act or omission of the other, but
only to the extent that the waiving party is actually compensated therefor by
insurance; provided that this waiver shall be effective only with respect to
loss or damage occurring during such time as the waiving party's coverage under
the appropriate policy of insurance is not adversely affected by this waiver.
If, in order to avoid such adverse effect, an endorsement must be added to any
insurance policy required hereunder, Landlord and Tenant shall cause such
endorsement immediately to be added and thereafter maintained throughout the
Term of this Lease.
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<PAGE> 15
X -- GENERAL PUBLIC LIABILITY, INDEMNIFICATION AND INSURANCE
- ------------------------------------------------------------
10.01 - INDEMNIFICATION. Tenant shall indemnify Landlord and
hold it harmless from any and all liability for any loss, damage or injury to
person or property occurring in, on or about the Campus, the Building and the
Premises, regardless of cause, except for that caused by the negligence or
intentional wrongful acts of Landlord and its employees, agents, customers and
invitees; and Tenant hereby releases Landlord from any and all liability for the
same. Landlord shall indemnify Tenant and hold it harmless from any and all
liability for any loss, damage or injury to person or property resulting from
the gross negligence or intentional wrongful acts of Landlord and its employees,
agents, customers and invitees; and Landlord hereby releases Tenant from any and
all liability for the same. The obligation to indemnify hereunder shall include
the duty to defend against any claims asserted by reason of such loss, damage or
injury and to pay any judgments, settlements, costs, fees and expenses,
including attorneys' fees, incurred in connection therewith.
10.02 - TENANT'S INSURANCE. Tenant, shall, at all times during
the Term of this Lease, carry, at its own expense, policies of insurance, with
such coverages, in such amounts, and with such insurers as are reasonably
acceptable to Landlord, covering Tenant's property and fixtures located in the
Premises.
XI -- EMINENT DOMAIN
- --------------------
11.01 - EMINENT DOMAIN. If the whole or any part of the
Building shall be taken for public or quasi-public use by a governmental or
other authority having the power of eminent domain, or shall be conveyed to such
authority in lieu of such taking, and if such taking or conveyance shall cause
the remaining part of the Building to be untenantable and inadequate for use by
Tenant for the purpose for which it was leased, then Tenant may, at its option,
terminate this Lease as of the date Landlord is required to surrender possession
of the Building. In such event, all Rent due under this Lease shall be
apportioned to and shall cease as of the date Landlord is required to surrender
possession of the Building, and Landlord and Tenant shall be released from all
further obligations and liability hereunder (except for any obligations
previously incurred hereunder). If a part of the Building shall be taken or
conveyed, but the remaining part is tenantable and adequate for Tenant's use,
Landlord shall make such repairs, alterations and improvements (exclusive of
repairs, alterations or improvements to tenant improvements, if any, installed
by Tenant pursuant to Section 8.03) as may be necessary to render the part not
taken or conveyed tenantable. If such taking or conveyance includes any part of
the Premises, the Rent shall be reduced in proportion to the part of the
Premises so taken or conveyed. All compensation awarded for such taking or
conveyance shall be the property of Landlord, without any deduction therefrom
for any present or future estate of Tenant, and Tenant hereby assigns to
Landlord all of its right, title and interest in and to any such award. However,
Tenant shall have the right to recover from such authority, but not from
Landlord, such compensation as
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may be awarded to Tenant on account of moving and relocation expenses and
depreciation to and removal of Tenant's trade fixtures and personal property and
alterations or tenant improvements, if any, installed by Tenant pursuant to
Section 8.03.
XII -- LIENS
- ------------
12.01 - LIENS. If, because of any act or omission of Tenant or
anyone claiming by, through or under Tenant, any mechanic's lien or other lien
shall be filed against the Campus, the Building, the Premises or against other
property of Landlord (whether or not such lien is valid or enforceable as such),
Tenant shall, at its own expense, cause the same to be discharged or bonded of
record within a reasonable time, not to exceed thirty (30) calendar days after
the date Tenant becomes aware of the filing thereof, and shall also indemnify
Landlord and hold it harmless from any and all claims, losses, damages,
judgments, settlements, costs and expenses, including attorneys' fees, resulting
therefrom or by reason thereof.
XIII -- ASSIGNMENT AND SUBLETTING
- ---------------------------------
13.01 - ASSIGNMENT AND SUBLETTING. Tenant will not assign,
transfer, mortgage, or otherwise encumber this Lease or sublet or rent (or
permit occupancy or use of) the Premises, or any part thereof, without obtaining
the prior written consent of Landlord, which consent Landlord shall have no
obligation to give and which may be given or withheld in Landlord's sole
discretion.
XIV - TRANSFER BY LANDLORD
- --------------------------
14.01 - ASSIGNMENT OF RIGHTS. Landlord shall have the right to
assign its rights under this Lease at any time during the Term of this Lease,
subject only to the rights of Tenant hereunder; and such assignment shall
operate to release Landlord from liability hereunder for all acts or omissions
occurring after the date of such assignment.
14.02 - SUBORDINATION. Unless a mortgagee shall otherwise
elect, as provided in Section 14.03, this Lease is and shall be subject and
subordinate to the lien of any and all mortgages (which term "mortgages" shall
include both construction and permanent financing and shall include deeds of
trust and similar security instruments) which may now or hereafter encumber or
otherwise affect this Lease, the Building, the Campus, or both, and to all and
any renewals, extensions, modifications, recastings or refinancings thereof. In
confirmation of such subordination, Tenant shall, at the request of Landlord,
promptly execute any requisite or appropriate certificate or other document.
Tenant agrees that in the event that any proceedings are brought for the
foreclosure of any such mortgage, Tenant shall attorn to the purchaser at such
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<PAGE> 17
foreclosure sale, if requested to do so by such purchaser, and to recognize such
purchaser as the landlord under this Lease, provided that such purchaser agrees
not to disturb Tenant's possession and other rights under this Lease so long as
Tenant is not in default hereunder, and Tenant waives the provisions of any
statute or rule of law, now or hereafter in effect, which may give or purport to
give Tenant any right to terminate or otherwise adversely affect this Lease and
the obligations of Tenant hereunder, in the event that any such foreclosure
proceeding is prosecuted or completed.
14.03 - MORTGAGEE'S UNILATERAL SUBORDINATION. If a mortgagee
shall so elect by notice to Tenant or by the recording of a unilateral
declaration of subordination, this Lease and Tenant's rights hereunder shall be
superior and prior in right to the mortgage of which such mortgagee has the
benefit, with the same force and effect as if this Lease had been executed,
delivered and recorded prior to the execution, delivery and recording of such
mortgage, subject, nevertheless, to such conditions as may be set forth in any
such notice of declaration which do not result in Tenant's occupancy under this
Lease being disturbed while Tenant is not in default hereunder.
14.04 - SUBORDINATION TO COVENANTS, CONDITIONS AND
RESTRICTIONS. Tenant agrees that this Lease shall be subordinate and subject to
any covenants, conditions, easements and restrictions ("CCR's") which Landlord,
in its sole discretion, has previously or hereafter grants or adopts with
respect to or imposes upon the Campus, or any portion thereof, as long as such
CCR's do not substantially impair Tenant's use of the Premises for the permitted
uses hereunder. In confirmation of such subordination, Tenant shall, at
Landlord's request, promptly execute any requisite or appropriate certificate or
other document.
14.05 - EXCULPATION. 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
Landlord's interest in the Building and out of rents or other income from the
Building 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
interest in the Building, subject, nevertheless, to the rights of any mortgagee,
and neither Landlord nor any of the shareholders, directors or officers of
Landlord shall be liable for any deficiency.
XV -- DEFAULTS AND REMEDIES
- ---------------------------
15.01 - DEFAULTS BY TENANT. The occurrence of any one or more
of the following events shall be a default and breach of this Lease by Tenant:
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<PAGE> 18
A. Tenant shall fail to pay any monthly installment of Rent
within five (5) calendar days after the same shall be due and payable, or any
other sum(s) within ten (10) calendar days after the same shall be due and
payable, and such nonpayment continues for a period of ten (10) days after
Landlord gives to Tenant written notice of such nonpayment.
B. Tenant shall fail to perform or observe any term,
condition, covenant or obligation required to be performed or observed by it
under this Lease for a period of thirty (30) calendar days or more after notice
thereof from Landlord; provided, however, that if the term, condition, covenant
or obligation to be performed by Tenant is of such nature that the same cannot
reasonably be performed within such thirty (30) day period, such default shall
be deemed to have been cured if Tenant commences such performance within said
thirty (30) day period and thereafter diligently completes the same.
C. A trustee or receiver shall be appointed to take possession
of substantially all of Tenant's assets in or about the Premises or of Tenant's
interest in this Lease (and Tenant does not regain possession within sixty (60)
calendar days after such appointment); Tenant makes an assignment for the
benefit of creditors; or substantially all of Tenant's assets in or about the
Premises or Tenant's interest in this Lease are attached or levied upon under
execution (and Tenant does not discharge the same within sixty (60) calendar
days thereafter).
D. A petition in bankruptcy, insolvency, or for reorganization
or arrangement is filed by or against Tenant pursuant to any federal or state
statute (and, with respect to any such petition filed against it, Tenant fails
to secure a stay or discharge thereof within sixty (60) calendar days after the
filing of the same).
15.02 - REMEDIES OF LANDLORD - Upon the occurrence of any
event of default set forth in Section 15.01, Landlord shall have the following
rights and remedies, in addition to those allowed by law, any one or more of
which may be exercised without further notice to or demand upon Tenant:
E. Landlord may re-enter the Premises and cure any default of
Tenant, in which event Tenant shall reimburse Landlord as additional rent for
any costs and expenses which Landlord may incur to cure such default; and
Landlord shall not be liable to Tenant for any loss or damage which Tenant may
sustain by reason of Landlord's action, regardless of whether caused by
Landlord's negligence or otherwise.
F. Landlord may terminate this Lease as of the date of such
default, in which event: (1) neither Tenant nor any person claiming under or
through Tenant shall thereafter be entitled to possession of the Premises, and
Tenant shall immediately thereafter surrender the Premises to Landlord; (2)
Landlord may re-enter the Premises and dispossess Tenant or any other occupants
of the Premises by force, summary proceedings, ejectment or otherwise, and may
remove their effects, without prejudice to
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<PAGE> 19
any other remedy which Landlord may have for possession or arrearages in rent;
and (3) notwithstanding the termination of this Lease (a) Landlord may recover
from Tenant, as general damages, the maximum amount allowed by law, which, at a
minimum, shall be the present value of the balance of the Rent which would have
been due and payable for the balance of the Term of this Lease, less the present
value of the fair rental value of the Premises for such period (with said
present values being determined using an eight percent (8%) discount rate),
whereupon Tenant shall be obligated to pay the same to Landlord, together with
all costs, losses and damages which Landlord may sustain by reason of such
termination and re-entry, or (b) Landlord may relet all or any part of the
Premises for a term different from that which would otherwise have constituted
the balance of the Term of this Lease, and for rent and on terms and conditions
different from those contained herein, whereupon Tenant shall immediately be
obligated to pay to Landlord, as liquidated damages, the difference between the
Rent provided for herein and that provided for in any lease covering a
subsequent reletting of the Premises, for the period which would otherwise have
constituted the balance of the Term of this Lease, together with all of
Landlord's costs and expenses for preparing the Premises for reletting,
including all repairs, brokers' and attorneys' fees, and all costs, losses and
damages which Landlord may sustain by reason of such termination, re-entry and
reletting, it being expressly understood and agreed that the liabilities and
remedies specified in clauses (a) and (b) hereof shall survive the termination
of this Lease. Notwithstanding the foregoing, Landlord shall use all reasonable
efforts to mitigate its damages.
G. Landlord may sue for injunctive relief or to recover
damages for any loss resulting from the breach.
15.03 - NON-WAIVER OF DEFAULTS. The failure or delay by
Landlord or Tenant to enforce or exercise, at any time, any of the rights or
remedies or other provisions of this Lease shall not be construed to be a waiver
thereof, nor affect the validity of any part of this Lease or the right of
Landlord or Tenant thereafter to enforce each and every such right or remedy or
other provision. No waiver of any default and breach of the Lease shall be held
to be a waiver of any other default and breach. The receipt by Landlord of less
than the full rent due shall not be construed to be other than a payment on
account of rent then due, nor shall any statement on Tenant's check or any
letter accompanying Tenant's check be deemed an accord and satisfaction, and
Landlord may accept such payment without prejudice to Landlord's right to
recover the balance of the rent due or to pursue any other remedies provided in
this Lease. No act or omission by Landlord or its employees or agents during the
Term of this Lease shall be deemed an acceptance or a surrender of the Premises,
and no agreement to accept such a surrender shall be valid unless in writing and
signed by Landlord.
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<PAGE> 20
XVI -- NOTICE AND PLACE OF PAYMENT
- ----------------------------------
16.01 - NOTICE. Any notice or other communication required or
permitted to be given to a party under this Lease shall be in writing, unless
otherwise specified in this Lease, and shall be given by one of the following
methods to such party at the address set forth in Item H of the Basic Lease
Provisions: (1) it may be sent by registered or certified United States mail,
return receipt requested and postage prepaid, or (2) it may be sent by ordinary
United States mail or delivered in person or by courier, telecopier, telex,
telegram, interconnected computers, or any other means for transmitting a
written communication. Any such notice shall be deemed to have been given as
follows: (i) when sent by registered or certified United States mail, as of the
earlier of date of delivery shown on the receipt, or as of the second calendar
day after it was mailed, and (ii) when delivered by any other means, upon
receipt. Either party may change its address for notice by giving written notice
thereof to the other party.
16.02 - PLACE OF PAYMENT. All rent and other payments required
to be made by Tenant to Landlord shall be made by inter-company transfers or
shall be delivered or mailed to Landlord at the address specified in Item H of
the Basic Lease Provisions, or any other address Landlord may specify from time
to time by written notice given to Tenant.
XVII -- HAZARDOUS SUBSTANCES
- ----------------------------
17.01 - HAZARDOUS SUBSTANCES. Tenant shall not cause or permit
any Hazardous Substance (as hereinafter defined) to be used, stored, generated
or disposed of on or in the Premises, the Building or the Campus by Tenant,
Tenant's agents, employees, contractors, invitees or sublessees, without first
obtaining Landlord's written consent. If Hazardous Substances are used, stored,
generated or disposed of on or in the Premises, or if the Premises, the Building
or the Campus becomes contaminated in any manner for which Tenant is legally
liable, Tenant shall indemnify and hold harmless Landlord from any and all
claims, damages, fines, judgments, penalties, costs, liabilities or losses
(including, without limitation, a decrease in value of the Building or the
Campus, damages caused by loss or restriction of rentable or usable space, or
any damages caused by adverse impact on marketing of the space, and any and all
sums paid for settlement of claims, attorneys' fees, consultant and expert fees)
arising during or after the Term of the Lease, and arising as a result of that
contamination by Tenant. This indemnification includes, without limitation, any
and all costs incurred because of any investigation of the site or any cleanup,
removal or restoration mandated by a federal, state or local agency or political
subdivision. Without limitation of the foregoing, if Tenant causes or permits
the presence of any Hazardous Substance on or in the Premises, the Building or
the Campus and that results in contamination, Tenant shall promptly, at its sole
expense, take any and all necessary actions to return the Premises, the Building
and the Campus to the condition existing prior to the presence of any such
Hazardous Substance on or
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<PAGE> 21
in the Premises. Tenant shall first obtain Landlord's approval for any such
remedial action. As used herein, "Hazardous Substance" means any substance that
is toxic, ignitable, reactive or corrosive and that is regulated by any local
government, the State of Ohio, or the United States Government. "Hazardous
Substance" includes any and all materials or substances that are defined as
"hazardous waste", "extremely hazardous waste", or a "hazardous substance"
pursuant to state, federal or local government law. "Hazardous Substance"
includes, but is not restricted to, asbestos, polychlorinated biphenyls,
petroleum, petroleum products, and petroleum wastes.
XVIII -- MISCELLANEOUS GENERAL PROVISIONS
- -----------------------------------------
18.01 - RELOCATION; TERMINATION. Tenant acknowledges and
agrees that Landlord has the right and option to relocate Tenant to different
premises within the Building or to a different building within the Campus or to
a different building on another campus controlled by Landlord. Tenant agrees
that this Lease is, and Tenant's possession rights hereunder are, subject to
said relocation rights. In such event, Tenant agrees to relocate in accordance
with Landlord's plan of relocation and to cooperate fully with Landlord in
completing the relocation. In the event that Tenant should cease to be an entity
which is controlled by The Limited, Inc., then Landlord shall have the right and
option to terminate this Lease by giving Tenant written notice of such
termination at least one hundred eighty (180) days prior to the proposed
Effective Date of the termination. For the purposes of this section, a tenant is
"controlled by" The Limited, Inc. if The Limited, Inc., or one of its
subsidiaries, owns in excess of 50% of the voting shares of such tenant.
18.02 - DEFINITION OF RENT. Any amounts of money to be paid by
Tenant to Landlord pursuant to the provisions of this Lease, whether or not such
payments are denominated "Rent" and whether or not they are to be periodic or
recurring, shall be deemed "Rent" for purposes of this Lease; and any failure to
pay any of the same, as provided in Section 16.01 hereof, shall entitle Landlord
to exercise all of the rights and remedies afforded hereby or by law for the
collection and enforcement of Tenant's obligation to pay Rent. Tenant's
obligation to pay any such Rent, pursuant to the provisions of this Lease, shall
survive the expiration or other termination of this Lease and the surrender of
possession of the Premises after any hold over period.
18.03 - ESTOPPEL CERTIFICATE. Tenant agrees, at any time and
from time to time, upon not less than ten (10) calendar days prior written
notice by Landlord, to execute, acknowledge and deliver to Landlord, as
appropriate, a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect, (or, if there have been modifications, stating
such modifications); (ii) stating the dates to which the rent and any other
charges hereunder have been paid by Tenant;, (iii) stating whether or not, to
the best of Tenant's knowledge, Landlord is in default in the performance of any
covenant, agreement or condition contained in this Lease, and, if so, specifying
each such default of which Tenant may have knowledge; and (iv) stating the
address to
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<PAGE> 22
which notices to Tenant should be sent. Any such statement delivered pursuant
hereto may be relied upon by any owner of the Building or the Campus, any
prospective purchaser of the Building, any mortgagee or prospective mortgagee of
the Building, or any prospective assignee of any such mortgagee.
18.04 - GOVERNING LAW. This Lease shall be construed and
enforced in accordance with the laws of the State of Ohio.
18.05 - SUCCESSORS AND ASSIGNS. This Lease and the respective
rights and obligations of the parties hereto shall inure to the benefit of and
be binding upon the successors and assigns of the parties hereto, as well as the
parties themselves; provided, however, that Landlord, its successors and
assigns, shall be obligated to perform Landlord's covenants under this Lease
only during and in respect to their successive periods of ownership during the
Term of this Lease.
18.06 - SEVERABILITY OF INVALID PROVISIONS. If any provision
of this Lease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
18.07 - CERTAIN WORDS, GENDER AND HEADINGS. As used in this
Lease, the word "person" shall mean and include, where appropriate, an
individual, corporation, partnership or other entity; the plural shall be
substituted for the singular and the singular for the plural, where appropriate;
and words of any gender shall include any other gender. The topical headings of
the several paragraphs of this Lease are inserted only as a matter of
convenience and reference, and do not affect, define, limit or describe the
scope or intent of this Lease.
18.08 - QUIET ENJOYMENT. So long as Tenant pays the prescribed
rent and performs or observes all of the terms, conditions, covenants and
obligations of this Lease required to be performed or observed by it hereunder,
Tenant shall, at all times during the Term hereof, have the peaceable and quiet
enjoyment, possession, occupancy and use of the Premises, without any
interference from Landlord or any person or persons claiming the Premises, by,
through or under Landlord.
18.09 - COMPLETE AGREEMENT; AMENDMENTS. This Lease, including
all Exhibits, Riders and Addenda, constitutes the entire agreement between the
parties hereto; it supersedes all previous understandings and agreements between
the parties, if any, and no oral or implied representation or understandings
shall vary its terms; and it may not be amended, except by a written instrument
executed by both parties hereto.
18.10 - REASONABLE MODIFICATIONS. Tenant will consent to such
reasonable modifications of this Lease as Landlord may hereafter find it
necessary to make in order to obtain mortgage financing, provided that such
modifications (a) do not change the rental to be paid hereunder or the length of
the Term of the Lease; and
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(b) do not impose obligations upon Tenant which are substantially or practically
more burdensome to it than the obligations contained herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Lease as of the day and year first above written.
Witnesses as to Landlord: LANDLORD:
DISTRIBUTION LAND CORP., a Delaware corporation
By:
______________________________ ____________________________________________
Print Name:___________________ George R. Sappenfield
______________________________ Vice President - Real Estate
Print Name:___________________
ATTESTED BY:
______________________________ ____________________________________________
Print Name:___________________ C. David Zoba
Vice President and Senior Counsel
______________________________ - Real Estate
Print Name:___________________
Witnesses as to Tenant: TENANT:
VICTORIA'S SECRET CATALOGUE, INC., a
Delaware corporation
By:
______________________________ ____________________________________________
Print Name:___________________ George R. Sappenfield
______________________________ Vice President - Real Estate
Print Name:___________________
ATTESTED BY:
______________________________ ____________________________________________
Print Name:___________________ C. David Zoba
Vice President and Senior Counsel
______________________________ - Real Estate
Print Name:___________________
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<PAGE> 25
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this _____ day of
____________, 1999, by George R. Sappenfield and C. David Zoba, Vice President -
Real Estate and Vice President and Senior Counsel - Real Estate, respectively,
of Distribution Land Corp., a Delaware corporation, on behalf of the
corporation.
______________________________
Notary Public
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this _____ day of
_____________, 1999, by George R. Sappenfield and C. David Zoba, Vice President
- - Real Estate and Vice President and Senior Counsel - Real Estate, respectively,
of Victoria's Secret Catalogue, Inc., a Delaware corporation, on behalf of the
corporation.
______________________________
Notary Public
This Instrument Prepared By:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
P.O. Box 1008
Columbus, OH 43216-1008
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<PAGE> 1
EXHIBIT 10.9
------------
LEASE AGREEMENT
This Lease Agreement (this "Lease") is entered into and made
as of the 31st day of January, 1999, by and between Distribution Land Corp., a
Delaware corporation (hereinafter referred to as "Landlord") and Bath & Body
Works, Inc., a Delaware corporation (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord owns a certain office/warehouse distribution
facility containing approximately 699,552 square feet of floor space identified
on EXHIBIT A attached hereto and made a part hereof by this reference (the
"Building"); and
WHEREAS, the Building is located upon an approximately 321.1
acre parcel of land located at the intersection of East Broad Street (State
Route 16) and Taylor Road, Reynoldsburg, Ohio, which land is depicted on EXHIBIT
A attached hereto and made a part hereof by this reference (the "Campus"); and
WHEREAS, Landlord wishes to lease to Tenant a portion of the
Building as more particularly described in Section 1.02 below (the "Premises")
and to grant to Tenant the right to utilize certain common areas and facilities
located within the Building and the Campus, all subject to the terms and
conditions of this Lease; and
WHEREAS, Tenant wishes to lease, from Landlord, a portion of
the Building and to utilize those certain common areas and facilities located
within the Building and the Campus.
NOW, THEREFORE, in consideration of the premises described
above and the mutual promises set forth herein, Landlord and Tenant, intending
to be legally bound, hereby agree as follows:
I -- LEASE OF PREMISES
- ----------------------
1.01 - LEASE OF PREMISES. Landlord, in consideration of the
rents and covenants hereinafter set forth, does hereby demise, let and lease to
Tenant, and Tenant does hereby hire, take and lease from Landlord, on the terms
and conditions
<PAGE> 2
hereinafter set forth, the Premises, to have and to hold the same, with all
appurtenances unto Tenant for the Term hereinafter specified.
1.02 - BASIC LEASE PROVISIONS.
A. Building Address: 8525 East Broad Street
Reynoldsburg, Ohio 43068
B. Building Description: an office/warehouse
distribution facility, containing approximately
144,726 square feet of office space, 547,437 square
feet of distribution space and 7,389 square feet of
Building Common Area (as hereinafter defined)
C. Premises Description: the floors of the Building on
which the Premises are located and the square footage
of the Premises are depicted on the floor plan
attached hereto as Exhibit B and made a part hereof
by this reference.
D. Term: Fifteen (15) years, beginning on January 31,
1999 (the "Commencement Date") and ending on January
30, 2014 (the "Expiration Date")
E. Annual Rent:
(i) Office space and Pro Rata Share of Building
Common Areas - $16.15 per square foot, or
$2,177,391.50
(ii) Distribution space - $4.35 per square foot,
or $1,593,613.80
(iii) Total Annual Rent of $3,771,005.30
(iv) The Annual Rent shall be subject to periodic
adjustments as provided in Section 4.02 of
this Lease
F. Monthly Installments of Rent: $314,250.44
G. Renewal Option(s): three (3) five (5) year Renewal
Option(s) - See Section 4.05 of this Lease for terms
of the Renewal Options
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<PAGE> 3
H. Addresses for Notices and Payments:
Tenant: Bath & Body Works, Inc.
8525 East Broad Street
Reynoldsburg, Ohio 43068
with a copy to:
Bath & Body Works, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Corporate Real Estate
Department
Landlord: Distribution Land Corp.
Three Limited Parkway
Columbus, Ohio 43230
with a copy to:
Distribution Land Corp.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Corporate Real Estate
Department
I. Use: office/warehouse distribution use related to
distribution for retail sale of men's, women's and
children's apparel, accessories, personal care items
and other products, and for all administrative
activities relating thereto
1.03 - DESCRIPTION OF THE BUILDING, THE PREMISES AND THE
COMMON AREAS.
J. THE BUILDING. The Building is depicted on the attached
Exhibit A. The address and description of the Building are specified in Items A
and B of the Basic Lease Provisions (which are set forth in Section 1.02 of this
Lease).
K. THE PREMISES. The Premises consist of space which: (i)
is located on the floor or floors of the Building designated on the attached
EXHIBIT B, (ii) is located in one or more areas or parts of each such floor, and
(iii) is bound by the proposed or existing demising walls therefor, the
approximate locations of such demising walls and space being marked in color or
cross-hatched and shown on the diagram of the floor plan for each such floor,
such diagram being attached to this Lease as EXHIBIT B and made a part hereof by
this reference. The Premises also include that portion of the Building Common
Areas (as defined in Section 1.03(L) of this Lease) which has been allocated to
Tenant on the basis of the square footage of office
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<PAGE> 4
space designated for Tenant's use in items (i), (ii) and (iii) above divided by
the total square footage of office space located within the Building ("Pro Rata
Share of Building Common Areas"). The approximate number of square feet
contained in the area which comprises the Premises is also specified on EXHIBIT
B.
L. COMMON AREAS. The Building is located within, and
constitutes a part of, the Campus. The Campus has been improved with the
Building, additional buildings and structures not subject to this Lease,
security buildings and facilities and roadways, driveways, walkways, parking
areas, loading areas, fences, walls, hedges, plantings, poles, ponds, lakes,
signs, utility improvements, trees, plantings and other landscaping features
(the Campus, excluding the Building, being referred to herein as the "Campus
Common Areas"). The Building contains certain areas or parts which are
designated for use in common by all of the tenants of the Building and their
respective employees, agents, customers, and invitees. Such areas include
entrances, exits and doors, lobbies, hallways, corridors and stairwells,
elevators and restrooms, but excluding certain "special amenities" such as the
cafeteria, mail room and reception area (all of which are referred to herein as
the "Building Common Areas"). The Campus Common Areas and the Building Common
Areas are sometimes referred to herein collectively as the "Common Areas".
II -- COMMON AREAS
- ------------------
2.01 - USE OF BUILDING COMMON AREAS. Subject to Landlord's
right at any time to use the Building Common Areas for its own purposes and the
right of any other tenant to operate the Building Common Areas, Landlord hereby
gives to Tenant and its employees, agents, customers and invitees, the
nonexclusive right to use the Building Common Areas in common with and subject
to the rights given to other tenants of the Building.
2.02 - USE OF CAMPUS COMMON AREAS. Subject to Landlord's right
at any time to use the Campus Common Areas for its own purposes, Landlord hereby
gives to Tenant and its employees, agents, customers and invitees, the
nonexclusive right to use the Campus Common Areas.
2.03 - RULES AND REGULATIONS FOR COMMON AREAS. The Campus
Common Areas and the Building Common Areas shall at all times be subject to the
exclusive management and control of Landlord which shall have the right, from
time to time, to establish, modify and enforce reasonable rules and regulations
with respect to all such Common Areas, and the use of such Campus Common Areas
and the Building Common Areas by Tenant, its subtenants and their respective
employees, agents, customers and invitees shall be subject to such rules and
regulations. Such rules and regulations may include, but shall not be limited
to, restrictions on parking, hours of operation, access routes, hours of access
to the Building and the Campus, rules with respect to the Building and such
other matters as may be deemed appropriate by Landlord from time to time.
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<PAGE> 5
2.04 - CHANGES IN COMMON AREAS. Landlord may do and perform
such acts in and to the Campus Common Areas and the Building Common Areas,
respectively, as it shall determine to be advisable. Landlord hereby reserves
the right to make reconfigurations, alterations, additions, deletions or changes
to the Campus Common Areas and Building Common Areas, respectively, including,
but not limited to, changes in the size and configuration of said Common Areas.
Landlord reserves the right to restrict and limit the use of the Campus Common
Areas and Building Common Areas, respectively, by Tenant, its subtenants and
their respective employees, agents, customers and invitees.
2.05 - MAINTENANCE OF COMMON AREAS. Subject to the provisions
of Section 4.03 hereof, Landlord shall adequately maintain the Campus Common
Areas and Building Common Areas, respectively, in a good and usable condition
throughout the Term of this Lease.
2.06 - COMMON AREA CAPITAL IMPROVEMENTS. Landlord may make
capital improvements to the Campus Common Areas and Building Common Areas,
respectively.
III -- TERM AND POSSESSION
- --------------------------
3.01 - TERM. The Term of this Lease shall be for the period of
years and months specified in Item D of the Basic Lease Provisions; and shall
begin and end on the Commencement Date and Expiration Date, respectively,
specified in Item D of the Basic Lease Provisions, unless the Term of this Lease
is renewed, modified or terminated as provided elsewhere herein.
3.02 - TENANT'S ACCEPTANCE OF THE PREMISES. Tenant hereby
accepts the Premises in an "as is" condition and acknowledges that Landlord has
made no representations or warranties with respect thereto, and that Tenant has
inspected the Premises and found it to be in satisfactory condition.
3.03 - SURRENDER OF THE PREMISES. Upon the expiration or
earlier termination of this Lease, or upon the exercise by Landlord of its right
to re-enter the Premises without terminating this Lease, Tenant shall
immediately surrender the Premises to Landlord, together with all alterations,
improvements and other property as provided elsewhere herein, in broom-clean
condition and in good order, condition and repair, except for ordinary wear and
tear and damage which Tenant is not obligated to repair, failing which Landlord
may restore the Premises to such condition at Tenant's expense. Upon such
expiration or termination, Tenant may, provided Tenant is not in default and
unless prohibited from doing so by other provisions of this Lease, have the
right to remove its personal property and trade fixtures. Tenant shall promptly
repair any damage caused by any such removal, and shall restore the Premises to
the
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<PAGE> 6
condition existing prior to the installation of the items so removed, ordinary
wear and tear and damage which Tenant is not obligated to repair excepted. If
Tenant fails to remove any and all such trade fixtures from the Premises on the
Expiration Date or earlier termination of this Lease, all such trade fixtures
shall become the Property of Landlord, unless Landlord elects to require their
removal, in which case Tenant shall, at its cost, promptly remove the same and
restore the Premises to its prior condition.
3.04 - HOLDING OVER. In the event that Tenant shall not
immediately surrender the Premises on the Expiration Date of the Term hereof,
Tenant shall, by virtue of the provisions hereof, become a tenant by the month
at the monthly rent in effect during the last month of the Term of this Lease,
which monthly tenancy shall commence with the first day next after the
Expiration Date. Tenant, as a monthly tenant, shall be subject to all of the
terms, conditions, covenants and agreements of this Lease. Tenant shall give to
Landlord at least thirty (30) calendar days written notice of any intention to
quit the Premises, and Tenant shall be entitled to thirty (30) calendar days
written notice to quit the Premises, unless Tenant is in default hereunder, in
which event Tenant shall not be entitled to any notice to quit, the usual thirty
(30) calendar days notice to quit being hereby expressly waived. Notwithstanding
the foregoing provisions of this Section 3.04, in the event that Tenant shall
hold over after the expiration of the Term of this Lease, and if Landlord shall
desire to regain possession of the Premises promptly at the expiration of the
Term of this Lease, then, at any time prior to Landlord's acceptance of rent
from Tenant as a monthly tenant hereunder, Landlord, at its option, may
forthwith re-enter and take possession of the Premises without process, or by
any legal process in force.
3.05 - RENEWAL OPTIONS. So long as Tenant is not in default
under the terms of this Lease, Landlord does hereby grant to Tenant the right
and option to extend and renew the fifteen (15) year Term of this Lease (herein
called the "Initial Term") for three (3) additional period(s) of five (5) years
each (herein the "Renewal Term(s)"), beginning on the date immediately following
the Expiration Date of the Initial Term or the preceding Renewal Term, as
appropriate, upon the same terms, conditions, covenants and provisions as are
provided in this Lease (except the Rent, which will be subject to adjustment as
provided in Section 4.02 hereof). Unless in respect of each Renewal Term
Landlord or Tenant notifies the other party, at least one (1) year prior to the
expiration of the Initial Term or Renewal Term then in effect, of its intent not
to extend and renew the Term of this Lease, then the Tenant shall be deemed to
have exercised its Renewal Option in respect of that Renewal Term. If the
Renewal Option is exercised as provided herein, then this Lease shall be amended
to reflect the changes which will result from such extension of the Term of this
Lease, including the modification to all references in the Lease to the "Term"
thereof (as defined in Section 3.01) to include the Renewal Term as well as the
Initial Term.
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<PAGE> 7
IV -- RENT
- ----------
4.01 - RENT.
MONTHLY RENT. Commencing on January 31, 1999, Tenant shall pay
to Landlord, as Rent for the Premises, the annual sum specified in Item E of the
Basic Lease Provisions, payable in equal consecutive monthly installments as
specified in Item F of the Basic Lease Provisions, in advance, on or before the
first day of each and every calendar month during the Term of this Lease;
provided, however, that if the Expiration Date shall be a day other than the
first day of a calendar month, the Rent installment for such last fractional
month shall be prorated on the basis of the number of days during the month this
Lease was in effect in relation to the total number of days in such month.
4.02 - RENT ADJUSTMENT.
A. CPI ADJUSTMENTS DURING THE INITIAL TERM. Commencing on
the first (1st) anniversary of the Commencement Date and continuing on the same
date every year thereafter during the Initial Term, the Rent due and payable to
Landlord shall be adjusted for the next succeeding year. The adjusted Rent for
each year shall be equal to the Rent paid during the immediately preceding
twelve (12) month period (the "lease year") increased by a percentage equal to
the percentage increase in the CPI (as hereinafter defined) computed by
comparing the CPI figure for that month which is two (2) months prior to the
adjustment date (the "adjustment month") with the CPI figure for the month
occurring twelve (12) months prior to the adjustment month (the "base month").
For example, in computing the percentage increase for the lease year commencing
January 31, 2002, the percentage increase in the CPI would be determined by
comparing the CPI figure for November, 2001, the adjustment month, with the CPI
figure for November, 2000, the base month, and similar comparisons would be made
using the CPI figures for adjustment months and base months every year
thereafter. For the purposes hereof, "CPI" shall mean the Consumer Price Index,
published by the Bureau of Labor Statistics of the United States Department of
Labor, in the column for "all items" in the table titled "Consumer Price Index
for all Urban Consumers: U.S. City average, 1982-1984 = 100".
If the CPI at any time herein is no longer published or
issued, Landlord and Tenant shall agree on such other index as is then generally
recognized for determination of purchasing power in the United States.
B. ADJUSTMENTS DURING THE RENEWAL TERM. Commencing on the
first day of each Renewal Term the Rent shall be adjusted to an amount which, in
Landlord's reasonable judgment, is equal to the then current market rental rate
for similar buildings, in similar locations and in the same geographic area.
Provided, however, in no event shall the Rent for the Renewal Term be less than
the Rent which was paid by Tenant during the immediately preceding Term.
Commencing on the first
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<PAGE> 8
anniversary of such date and continuing on the same date every year thereafter
during the Renewal Term, the Rent due and payable to Landlord shall be adjusted
for the next succeeding year. The adjusted Rent for each year shall be equal to
the Rent paid during the immediately preceding 12 month period (the "lease
year") increased by a percentage equal to the percentage increase in the CPI
computed by comparing the CPI figure for that month which is two months prior to
the adjustment date (the "adjustment month") with the CPI figure for the month
occurring 12 months prior to the adjustment month (the "base month"). For
example, in computing the percentage increase for the lease year commencing
January 31, 2002, the percentage increase in the CPI would be determined by
comparing the CPI figure for November, 2001, the adjustment month with the CPI
figure for November, 2000, the base month, and similar comparisons will be made
using the CPI figures for adjustment months and base months every year
thereafter.
C. EXTRAORDINARY CAPITAL EXPENDITURES. If, during the Term
of this Lease, Landlord should agree to make any extraordinary Capital
Improvements to the Premises, such extraordinary Capital Improvements being the
result of either (i) Tenant's request, or (ii) Landlord's determination, in its
sole discretion, that, due to Tenant's activities upon the Premises such
improvements are necessary, then Landlord may either immediately charge Tenant
for the costs of all such Capital Improvements, which costs shall be paid by
Tenant within 30 days of Landlord's request therefor, or add to the Rent (to be
paid in monthly installments), an amount equal to the annual depreciation or
amortization with respect to the cost of such equipment or capital improvement,
as determined by Landlord in accordance with generally accepted accounting
principles, together with interest on such cost or the unamortized balance
thereof at the rate as may have to be paid by or accrued on the books of
Landlord on the unamortized balance.
D. EXTRAORDINARY SERVICES. If, during the Term of this
Lease, Landlord provides to Tenant services, including but not limited to
repair, maintenance and janitorial services, (i) in excess of those normally
required to maintain the Building in a manner consistent with similar buildings,
in similar locations in the same geographic areas, and (ii) such extraordinary
services are the result of or made necessary as a result of Tenant's activities
within the Premises, then Landlord shall have the right to calculate the cost of
such extraordinary services and to charge Tenant the cost thereof. All such
charges shall be calculated and charged to Tenant, on a monthly basis, to be
paid by Tenant as Rent hereunder.
4.03 - LATE PAYMENT SERVICE CHARGE; INTEREST. In the event any
installment of Rent, or any other amount which may become due under this Lease
is not paid when due, and such nonpayment continues for a period of ten (10)
days after Landlord gives to Tenant written notice of such nonpayment, then, for
each and every such payment, Tenant shall immediately pay a service charge equal
to five percent (5%) of the amount not timely paid, together with interest on
the amount not timely paid at the rate of eight percent (8%) per annum, from the
due date of such payment until
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<PAGE> 9
paid. The provisions of this Section 4.03 shall not be construed to extend the
date for payment of Rent, or any other amount which may become due under this
Lease, or to relieve Tenant of its obligations to pay all such items at the time
or times herein stipulated, and neither demand for, nor collection by Landlord
of, late payment service charges and interest pursuant to this Section 4.03
shall be construed as a cure of any default in payment by Tenant.
V -- USE OF PREMISES
- --------------------
5.01 - SPECIFIC USE. The Premises shall be occupied and used
exclusively for the purposes specified in Item I of the Basic Lease Provisions
and for purposes incidental thereto, and shall not be used for any other
purposes.
5.02 - COVENANTS REGARDING USE. In connection with its use of
the Premises, Tenant agrees to do the following:
A. Tenant shall use the Premises and conduct its business
therein in a safe, careful, reputable and lawful manner; shall keep any garbage,
trash, rubbish or other refuse in sealed containers within the interior of the
Premises until removed and placed in a dumpster or other authorized container
for the deposit of garbage and refuse, which shall be located in an area
designated by Landlord.
B. Tenant shall not commit, nor allow to be committed, in,
on or about the Premises any act of waste, including any act which might deface,
damage or destroy the Premises or any part thereof; use or permit to be used
within the Premises any hazardous substance, equipment, or other thing which
might cause injury to person or property or increase the danger of fire or other
casualty in, on or about the Premises; or permit any objectionable or offensive
noise or odors to be emitted from the Premises. Notwithstanding the foregoing,
Landlord acknowledges that Tenant will utilize certain distribution equipment
which, but for this sentence, might be deemed to violate this provision and use
of such equipment is expressly permitted.
C. Tenant shall not use the Premises, or allow the
Premises to be used, for any purpose or in any manner other than the permitted
uses which would, in Landlord's opinion, invalidate any policy of insurance now
or hereafter carried on the Premises or the Building or increase the rate of
premiums payable on any such insurance policy. Should Tenant fail to comply with
this covenant, Landlord may, at its option, require Tenant to stop engaging in
such activity or to reimburse Landlord as additional rent for any increase in
premiums charged during the Term of this Lease on the insurance carried by
Landlord on the Premises and the Building and attributable to the use being made
of the Premises by Tenant.
5.03 - ACCESS TO AND INSPECTION OF THE PREMISES. Landlord, its
employees and agents, shall have the right to enter any part of the Premises, at
all reasonable
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<PAGE> 10
times after reasonable notice, for the purpose of examining or inspecting the
same, showing the same to prospective purchasers, mortgagees or tenants, and for
making such repairs, alterations or improvements to the Premises and the
Building as Landlord may deem necessary or desirable. Landlord shall incur no
liability to Tenant for such entry, except with respect to the negligence or
intentional, wrongful acts or omissions of Landlord, its agents, employees and
invitees, nor shall such entry constitute an eviction of Tenant or a termination
of this Lease, or entitle Tenant to any abatement of rent therefor.
5.04 - COMPLIANCE WITH LAWS. Tenant shall comply with all
laws, statutes, ordinances, rules, regulations and orders of any federal, state,
municipal, or other government or agency thereof having jurisdiction over and
relating to the use and occupancy of the Premises, including any such laws,
statutes or regulations requiring modifications or alterations to the Premises.
5.05 - RULES AND REGULATIONS. The Building shall at all times
be subject to the management and control of the Landlord, and Landlord shall
have the right, from time to time, to establish, modify and enforce reasonable
rules and regulations with respect to the Building, and the use of the Building
by Tenant, its subtenants and their respective employees, agents, customers and
invitees shall be subject to such rules and regulations. Such rules and
regulations may include, but shall not be limited to restrictions upon Tenant's
hours of operation, noise levels with the Building, load placement and utility
usage.
VI -- UTILITIES, EQUIPMENT MAINTENANCE AND OTHER SERVICES
- ---------------------------------------------------------
6.01 - ELECTRIC, GAS AND WATER. Landlord, or Limited
Distribution Services, Inc. ("LDS"), acting as Landlord's agent, shall contract
with the appropriate public utilities companies or other providers supplying
electric, gas, water, sanitary sewer and all other utilities and services to the
Premises or to Tenant and shall pay directly all charges for such services from
and after the Commencement Date. Thereafter, Landlord or LDS shall reasonably
allocate these utility or service charges attributable to the Premises or to
Tenant and, on a periodic basis, provide to Tenant a written statement detailing
Tenant's allocation thereof. Tenant shall pay to Landlord or LDS, as
appropriate, within fifteen (15) days of Tenant's receipt of the written
statement therefor, all such utility and service charges.
6.02 - EQUIPMENT MAINTENANCE. LDS shall provide all
maintenance as is required to or deemed advisable for Tenant's distribution
center equipment located within the Premises. Tenant shall pay directly to LDS
all sums charged by LDS in connection with such equipment maintenance.
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6.03 - JANITORIAL AND REFUSE COLLECTION SERVICE. Landlord
shall contract for janitorial and refuse collection services for the Premises
and shall pay for all charges for such services.
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6.04 - DISCONTINUANCES AND INTERRUPTIONS OF UTILITY SERVICES.
Neither Landlord nor LDS shall be liable to Tenant in damages or otherwise (i)
if any utilities shall become unavailable from any public utility company,
public authority, or any other person supplying or distributing such utility, or
(ii) for any interruption in any utility service (including, without limitation,
any heating, ventilation or air conditioning) caused by the making of any
necessary repairs or improvements or by any cause beyond Landlord's and LDS's
reasonable control, and the same shall not constitute a termination of this
Lease or an eviction of Tenant.
6.05 - CAFETERIA, MAIL ROOM AND RECEPTION SERVICES. Included
within the Premises are areas designated for use as the cafeteria and the mail
room. Excluded from the Premises, but comprising part of the Building Common
Areas, is the reception area (the cafeteria, mailroom and reception area being
referred to herein as the "Special Amenities"). Tenant shall maintain, staff and
operate the Special Amenities, including providing security services, for the
benefit of all tenants within the Building. Tenant will also control the Special
Amenities for purposes of decorating and equipping the areas in which each of
the Special Amenities is located. Tenant will charge directly the other tenants
within the Building for the use of the Special Amenities. Neither Landlord nor
LDS shall be liable to Tenant or any other tenant in the Building as a result of
Tenant's operation of the Special Amenities.
VII -- SIGNS
- ------------
7.01 - SIGNS. Tenant shall not inscribe, paint, affix or
display any signs, advertisements or notices on the Premises, the Building, or
the Campus without Landlord's prior written consent, which consent Landlord
shall have no obligation to give and which may be given or withheld in
Landlord's sole discretion.
VIII -- REPAIRS, MAINTENANCE, ALTERATIONS, IMPROVEMENTS
- -------------------------------------------------------
AND FIXTURES
------------
8.01 - REPAIR AND MAINTENANCE OF BUILDING. Landlord shall keep
and maintain the Building (including all doors, whether interior or exterior,
any plate glass in the exterior walls and doors, the roof, exterior and interior
structural walls, and the foundation) and the electrical, plumbing, heating,
ventilation and air conditioning systems serving the Building in good order,
condition and repair, and shall make all necessary repairs to the Building and
the electrical, plumbing, heating, ventilation and air conditioning systems
serving the Building, and will make all replacements from time to time required
thereto.
8.02 - REPAIR AND MAINTENANCE OF PREMISES. Landlord shall
provide cleaning, janitorial, maintenance, repair and restoration services to
the Premises. If a repair is needed to so maintain the Building, then Tenant
shall give to Landlord verbal
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notice, and as soon thereafter as possible confirming written notice, of such
need for repair. Within a reasonable period of time thereafter, Landlord shall
examine the item or matter described in Tenant's notice, and if Landlord should
determine that such item or matter is in need of repair, Landlord shall make
such repair.
8.03 - ALTERATIONS OR IMPROVEMENTS. Tenant shall neither make,
nor permit to be made, any alterations or improvements to the Premises without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld. If Landlord allow Tenant to make any such alterations or
improvements, Tenant shall make the same in accordance with all applicable laws
and building codes, in a good and workmanlike manner and in quality equal to or
better than the original construction of the Building, and shall comply with
such requirements as Landlord considers necessary or desirable, including,
without limitation, requirements as to the manner in which and the times at
which such work shall be done and the contractor or subcontractors to be
selected to perform such work. Tenant shall promptly pay all costs attributable
to such alterations and improvements and shall indemnify Landlord against any
mechanics' liens or other liens or claims filed or asserted as a result thereof
and against any costs or expenses which may be incurred as a result of building
code violations attributable to such work. Tenant shall promptly repair any
damage to the Premises and the Building caused by any such alterations or
improvements. Any alterations or improvements to the Premises, except movable
equipment and trade fixtures, shall become a part of the realty and the property
of Landlord, and shall not be removed by Tenant.
8.04 - TRADE FIXTURES. Any trade fixtures installed in the
Premises by Tenant at its own expense, such as movable partitions, counters,
shelving, and the like, may and, at the request of Landlord, shall be removed on
the Expiration Date or earlier termination of this Lease, provided that Tenant
is not then in default, that Tenant bears the cost of such removal, and further
that Tenant repairs, at its own expense, any and all damage to the Premises and
the Building resulting from such removal. If Tenant fails to remove any and all
such trade fixtures from the Premises on the Expiration Date or earlier
termination of this Lease, all such trade fixtures shall become the property of
Landlord, unless Landlord elects to require their removal, in which case Tenant
shall, at its cost, promptly remove same and restore the Premises to its prior
condition.
IX -- FIRE OR OTHER CASUALTY; CASUALTY INSURANCE
- ------------------------------------------------
9.01 - DAMAGE OR DESTRUCTION BY CASUALTY. If the Building
should be substantially destroyed or damaged (which, as used herein, means
destruction or material damages to at least fifty percent (50%) of the Building)
by fire or other casualty, then either party hereto may, at its option,
terminate this Lease by giving written notice thereof to the other party within
thirty (30) calendar days after the date of such casualty. In such event, all
Rent due under this Lease shall be apportioned to and shall cease as of the date
of such casualty, and Tenant shall be given a reasonable period of time, not
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<PAGE> 14
to exceed forty-five (45) calendar days after receipt of written notice of
termination (or fourteen (14) days after giving notice of termination to
Landlord as appropriate) under this Section 9.01, in which to remove its trade
fixtures and personal property, whereupon both parties shall be released from
all further obligations and liability hereunder (except for any obligations
previously incurred hereunder). If neither party exercises this option, then the
Building shall be reconstructed and restored at Landlord's expense, to
substantially the same condition as it was prior to the casualty; provided,
however, that, if Tenant has made any additional improvements pursuant to
Section 8.03, Tenant shall reimburse Landlord for the cost of reconstructing the
same. In the event of such reconstruction, all Rent due under this Lease shall
be abated from the date of the casualty until such substantial completion of the
reconstruction repairs; and this Lease shall continue in full force and effect
for the balance of the Term. Landlord shall use reasonable diligence in
completing such reconstruction repairs. Notwithstanding the foregoing, if the
Premises are substantially destroyed or damaged (which, as used herein, means
destruction or material damages to at least fifty percent (50%) of the Premises,
as applicable), then Tenant may, at its option, terminate this Lease by giving
written notice thereof to Landlord within thirty (30) calendar days after the
date of such casualty. In such event, all Rent due under this Lease shall be
apportioned to and shall cease as of the date of such casualty, and Tenant shall
be given a reasonable period of time, not to exceed thirty-five (35) calendar
days, in which to remove its trade fixtures and personal property, whereupon
both parties shall be released from all further obligations and liabilities
hereunder (except for any obligations previously incurred hereunder).
9.02 - CASUALTY INSURANCE. Landlord shall obtain and pay for
insurance against fire and other casualty in respect of the Building. Landlord
shall not be responsible for, and shall not be obligated to insure against, any
loss of or damage to any personal property of Tenant or which Tenant may have in
the Premises, or any trade fixtures installed by or paid for by Tenant in the
Premises, or any additional improvements which Tenant may construct in the
Premises, as provided in Section 8.03.
9.03 - WAIVER OF SUBROGATION. Landlord and Tenant each hereby
waive any and all right that they may have to recover from the other damages for
any loss occurring to them by reason of any act or omission of the other, but
only to the extent that the waiving party is actually compensated therefor by
insurance; provided that this waiver shall be effective only with respect to
loss or damage occurring during such time as the waiving party's coverage under
the appropriate policy of insurance is not adversely affected by this waiver.
If, in order to avoid such adverse effect, an endorsement must be added to any
insurance policy required hereunder, Landlord and Tenant shall cause such
endorsement immediately to be added and thereafter maintained throughout the
Term of this Lease.
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<PAGE> 15
X -- GENERAL PUBLIC LIABILITY, INDEMNIFICATION AND INSURANCE
- ------------------------------------------------------------
10.01 - INDEMNIFICATION. Tenant shall indemnify Landlord and
hold it harmless from any and all liability for any loss, damage or injury to
person or property occurring in, on or about the Campus, the Building and the
Premises, regardless of cause, except for that caused by the negligence or
intentional wrongful acts of Landlord and its employees, agents, customers and
invitees; and Tenant hereby releases Landlord from any and all liability for the
same. Landlord shall indemnify Tenant and hold it harmless from any and all
liability for any loss, damage or injury to person or property resulting from
the gross negligence or intentional wrongful acts of Landlord and its employees,
agents, customers and invitees; and Landlord hereby releases Tenant from any and
all liability for the same. The obligation to indemnify hereunder shall include
the duty to defend against any claims asserted by reason of such loss, damage or
injury and to pay any judgments, settlements, costs, fees and expenses,
including attorneys' fees, incurred in connection therewith.
10.02 - TENANT'S INSURANCE. Tenant, shall, at all times during
the Term of this Lease, carry, at its own expense, policies of insurance, with
such coverages, in such amounts, and with such insurers as are reasonably
acceptable to Landlord, covering Tenant's property and fixtures located in the
Premises.
XI -- EMINENT DOMAIN
- --------------------
11.01 - EMINENT DOMAIN. If the whole or any part of the
Building shall be taken for public or quasi-public use by a governmental or
other authority having the power of eminent domain, or shall be conveyed to such
authority in lieu of such taking, and if such taking or conveyance shall cause
the remaining part of the Building to be untenantable and inadequate for use by
Tenant for the purpose for which it was leased, then Tenant may, at its option,
terminate this Lease as of the date Landlord is required to surrender possession
of the Building. In such event, all Rent due under this Lease shall be
apportioned to and shall cease as of the date Landlord is required to surrender
possession of the Building, and Landlord and Tenant shall be released from all
further obligations and liability hereunder (except for any obligations
previously incurred hereunder). If a part of the Building shall be taken or
conveyed, but the remaining part is tenantable and adequate for Tenant's use,
Landlord shall make such repairs, alterations and improvements (exclusive of
repairs, alterations or improvements to tenant improvements, if any, installed
by Tenant pursuant to Section 8.03) as may be necessary to render the part not
taken or conveyed tenantable. If such taking or conveyance includes any part of
the Premises, the Rent shall be reduced in proportion to the part of the
Premises so taken or conveyed. All compensation awarded for such taking or
conveyance shall be the property of Landlord, without any deduction therefrom
for any present or future estate of Tenant, and Tenant hereby assigns to
Landlord all of its right, title and interest in and to any such award. However,
Tenant shall have the right to recover from such authority, but not from
Landlord, such compensation as
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may be awarded to Tenant on account of moving and relocation expenses and
depreciation to and removal of Tenant's trade fixtures and personal property and
alterations or tenant improvements, if any, installed by Tenant pursuant to
Section 8.03.
XII -- LIENS
- ------------
12.01 - LIENS. If, because of any act or omission of Tenant or
anyone claiming by, through or under Tenant, any mechanic's lien or other lien
shall be filed against the Campus, the Building, the Premises or against other
property of Landlord (whether or not such lien is valid or enforceable as such),
Tenant shall, at its own expense, cause the same to be discharged or bonded of
record within a reasonable time, not to exceed thirty (30) calendar days after
the date Tenant becomes aware of the filing thereof, and shall also indemnify
Landlord and hold it harmless from any and all claims, losses, damages,
judgments, settlements, costs and expenses, including attorneys' fees, resulting
therefrom or by reason thereof.
XIII -- ASSIGNMENT AND SUBLETTING
- ---------------------------------
13.01 - ASSIGNMENT AND SUBLETTING. Tenant will not assign,
transfer, mortgage, or otherwise encumber this Lease or sublet or rent (or
permit occupancy or use of) the Premises, or any part thereof, without obtaining
the prior written consent of Landlord, which consent Landlord shall have no
obligation to give and which may be given or withheld in Landlord's sole
discretion.
XIV - TRANSFER BY LANDLORD
- --------------------------
14.01 - ASSIGNMENT OF RIGHTS. Landlord shall have the right to
assign its rights under this Lease at any time during the Term of this Lease,
subject only to the rights of Tenant hereunder; and such assignment shall
operate to release Landlord from liability hereunder for all acts or omissions
occurring after the date of such assignment.
14.02 - SUBORDINATION. Unless a mortgagee shall otherwise
elect, as provided in Section 14.03, this Lease is and shall be subject and
subordinate to the lien of any and all mortgages (which term "mortgages" shall
include both construction and permanent financing and shall include deeds of
trust and similar security instruments) which may now or hereafter encumber or
otherwise affect this Lease, the Building, the Campus, or both, and to all and
any renewals, extensions, modifications, recastings or refinancings thereof. In
confirmation of such subordination, Tenant shall, at the request of Landlord,
promptly execute any requisite or appropriate certificate or other document.
Tenant agrees that in the event that any proceedings are brought for the
foreclosure of any such mortgage, Tenant shall attorn to the purchaser at such
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<PAGE> 17
foreclosure sale, if requested to do so by such purchaser, and to recognize such
purchaser as the landlord under this Lease, provided that such purchaser agrees
not to disturb Tenant's possession and other rights under this Lease so long as
Tenant is not in default hereunder, and Tenant waives the provisions of any
statute or rule of law, now or hereafter in effect, which may give or purport to
give Tenant any right to terminate or otherwise adversely affect this Lease and
the obligations of Tenant hereunder, in the event that any such foreclosure
proceeding is prosecuted or completed.
14.03 - MORTGAGEE'S UNILATERAL SUBORDINATION. If a mortgagee
shall so elect by notice to Tenant or by the recording of a unilateral
declaration of subordination, this Lease and Tenant's rights hereunder shall be
superior and prior in right to the mortgage of which such mortgagee has the
benefit, with the same force and effect as if this Lease had been executed,
delivered and recorded prior to the execution, delivery and recording of such
mortgage, subject, nevertheless, to such conditions as may be set forth in any
such notice of declaration which do not result in Tenant's occupancy under this
Lease being disturbed while Tenant is not in default hereunder.
14.04 - SUBORDINATION TO COVENANTS, CONDITIONS AND
RESTRICTIONS. Tenant agrees that this Lease shall be subordinate and subject to
any covenants, conditions, easements and restrictions ("CCR's") which Landlord,
in its sole discretion, has previously or hereafter grants or adopts with
respect to or imposes upon the Campus, or any portion thereof, as long as such
CCR's do not substantially impair Tenant's use of the Premises for the permitted
uses hereunder. In confirmation of such subordination, Tenant shall, at
Landlord's request, promptly execute any requisite or appropriate certificate or
other document.
14.05 - EXCULPATION. 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
Landlord's interest in the Building and out of rents or other income from the
Building 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
interest in the Building, subject, nevertheless, to the rights of any mortgagee,
and neither Landlord nor any of the shareholders, directors or officers of
Landlord shall be liable for any deficiency.
XV -- DEFAULTS AND REMEDIES
- ---------------------------
15.01 - DEFAULTS BY TENANT. The occurrence of any one or more
of the following events shall be a default and breach of this Lease by Tenant:
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<PAGE> 18
A. Tenant shall fail to pay any monthly installment of
Rent within five (5) calendar days after the same shall be due and payable, or
any other sum(s) within ten (10) calendar days after the same shall be due and
payable, and such nonpayment continues for a period of ten (10) days after
Landlord gives to Tenant written notice of such nonpayment.
B. Tenant shall fail to perform or observe any term,
condition, covenant or obligation required to be performed or observed by it
under this Lease for a period of thirty (30) calendar days or more after notice
thereof from Landlord; provided, however, that if the term, condition, covenant
or obligation to be performed by Tenant is of such nature that the same cannot
reasonably be performed within such thirty (30) day period, such default shall
be deemed to have been cured if Tenant commences such performance within said
thirty (30) day period and thereafter diligently completes the same.
C. A trustee or receiver shall be appointed to take
possession of substantially all of Tenant's assets in or about the Premises or
of Tenant's interest in this Lease (and Tenant does not regain possession within
sixty (60) calendar days after such appointment); Tenant makes an assignment for
the benefit of creditors; or substantially all of Tenant's assets in or about
the Premises or Tenant's interest in this Lease are attached or levied upon
under execution (and Tenant does not discharge the same within sixty (60)
calendar days thereafter).
D. A petition in bankruptcy, insolvency, or for
reorganization or arrangement is filed by or against Tenant pursuant to any
federal or state statute (and, with respect to any such petition filed against
it, Tenant fails to secure a stay or discharge thereof within sixty (60)
calendar days after the filing of the same).
15.02 - REMEDIES OF LANDLORD - Upon the occurrence of any
event of default set forth in Section 15.01, Landlord shall have the following
rights and remedies, in addition to those allowed by law, any one or more of
which may be exercised without further notice to or demand upon Tenant:
E. Landlord may re-enter the Premises and cure any default
of Tenant, in which event Tenant shall reimburse Landlord as additional rent for
any costs and expenses which Landlord may incur to cure such default; and
Landlord shall not be liable to Tenant for any loss or damage which Tenant may
sustain by reason of Landlord's action, regardless of whether caused by
Landlord's negligence or otherwise.
F. Landlord may terminate this Lease as of the date of such
default, in which event: (1) neither Tenant nor any person claiming under or
through Tenant shall thereafter be entitled to possession of the Premises, and
Tenant shall immediately thereafter surrender the Premises to Landlord; (2)
Landlord may re-enter the Premises and dispossess Tenant or any other occupants
of the Premises by force, summary proceedings, ejectment or otherwise, and may
remove their effects, without prejudice to
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any other remedy which Landlord may have for possession or arrearages in rent;
and (3) notwithstanding the termination of this Lease (a) Landlord may recover
from Tenant, as general damages, the maximum amount allowed by law, which, at a
minimum, shall be the present value of the balance of the Rent which would have
been due and payable for the balance of the Term of this Lease, less the present
value of the fair rental value of the Premises for such period (with said
present values being determined using an eight percent (8%) discount rate),
whereupon Tenant shall be obligated to pay the same to Landlord, together with
all costs, losses and damages which Landlord may sustain by reason of such
termination and re-entry, or (b) Landlord may relet all or any part of the
Premises for a term different from that which would otherwise have constituted
the balance of the Term of this Lease, and for rent and on terms and conditions
different from those contained herein, whereupon Tenant shall immediately be
obligated to pay to Landlord, as liquidated damages, the difference between the
Rent provided for herein and that provided for in any lease covering a
subsequent reletting of the Premises, for the period which would otherwise have
constituted the balance of the Term of this Lease, together with all of
Landlord's costs and expenses for preparing the Premises for reletting,
including all repairs, brokers' and attorneys' fees, and all costs, losses and
damages which Landlord may sustain by reason of such termination, re-entry and
reletting, it being expressly understood and agreed that the liabilities and
remedies specified in clauses (a) and (b) hereof shall survive the termination
of this Lease. Notwithstanding the foregoing, Landlord shall use all reasonable
efforts to mitigate its damages.
G. Landlord may sue for injunctive relief or to recover
damages for any loss resulting from the breach.
15.03 - NON-WAIVER OF DEFAULTS. The failure or delay by
Landlord or Tenant to enforce or exercise, at any time, any of the rights or
remedies or other provisions of this Lease shall not be construed to be a waiver
thereof, nor affect the validity of any part of this Lease or the right of
Landlord or Tenant thereafter to enforce each and every such right or remedy or
other provision. No waiver of any default and breach of the Lease shall be held
to be a waiver of any other default and breach. The receipt by Landlord of less
than the full rent due shall not be construed to be other than a payment on
account of rent then due, nor shall any statement on Tenant's check or any
letter accompanying Tenant's check be deemed an accord and satisfaction, and
Landlord may accept such payment without prejudice to Landlord's right to
recover the balance of the rent due or to pursue any other remedies provided in
this Lease. No act or omission by Landlord or its employees or agents during the
Term of this Lease shall be deemed an acceptance or a surrender of the Premises,
and no agreement to accept such a surrender shall be valid unless in writing and
signed by Landlord.
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XVI -- NOTICE AND PLACE OF PAYMENT
- ----------------------------------
16.01 - NOTICE. Any notice or other communication required or
permitted to be given to a party under this Lease shall be in writing, unless
otherwise specified in this Lease, and shall be given by one of the following
methods to such party at the address set forth in Item H of the Basic Lease
Provisions: (1) it may be sent by registered or certified United States mail,
return receipt requested and postage prepaid, or (2) it may be sent by ordinary
United States mail or delivered in person or by courier, telecopier, telex,
telegram, interconnected computers, or any other means for transmitting a
written communication. Any such notice shall be deemed to have been given as
follows: (i) when sent by registered or certified United States mail, as of the
earlier of date of delivery shown on the receipt, or as of the second calendar
day after it was mailed, and (ii) when delivered by any other means, upon
receipt. Either party may change its address for notice by giving written notice
thereof to the other party.
16.02 - PLACE OF PAYMENT. All rent and other payments required
to be made by Tenant to Landlord shall be made by inter-company transfers or
shall be delivered or mailed to Landlord at the address specified in Item H of
the Basic Lease Provisions, or any other address Landlord may specify from time
to time by written notice given to Tenant.
XVII -- HAZARDOUS SUBSTANCES
- ----------------------------
17.01 - HAZARDOUS SUBSTANCES. Tenant shall not cause or permit
any Hazardous Substance (as hereinafter defined) to be used, stored, generated
or disposed of on or in the Premises, the Building or the Campus by Tenant,
Tenant's agents, employees, contractors, invitees or sublessees, without first
obtaining Landlord's written consent. If Hazardous Substances are used, stored,
generated or disposed of on or in the Premises, or if the Premises, the Building
or the Campus becomes contaminated in any manner for which Tenant is legally
liable, Tenant shall indemnify and hold harmless Landlord from any and all
claims, damages, fines, judgments, penalties, costs, liabilities or losses
(including, without limitation, a decrease in value of the Building or the
Campus, damages caused by loss or restriction of rentable or usable space, or
any damages caused by adverse impact on marketing of the space, and any and all
sums paid for settlement of claims, attorneys' fees, consultant and expert fees)
arising during or after the Term of the Lease, and arising as a result of that
contamination by Tenant. This indemnification includes, without limitation, any
and all costs incurred because of any investigation of the site or any cleanup,
removal or restoration mandated by a federal, state or local agency or political
subdivision. Without limitation of the foregoing, if Tenant causes or permits
the presence of any Hazardous Substance on or in the Premises, the Building or
the Campus and that results in contamination, Tenant shall promptly, at its sole
expense, take any and all necessary actions to return the Premises, the Building
and the Campus to the condition existing prior to the presence of any such
Hazardous Substance on or
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in the Premises. Tenant shall first obtain Landlord's approval for any such
remedial action. As used herein, "Hazardous Substance" means any substance that
is toxic, ignitable, reactive or corrosive and that is regulated by any local
government, the State of Ohio, or the United States Government. "Hazardous
Substance" includes any and all materials or substances that are defined as
"hazardous waste", "extremely hazardous waste", or a "hazardous substance"
pursuant to state, federal or local government law. "Hazardous Substance"
includes, but is not restricted to, asbestos, polychlorinated biphenyls,
petroleum, petroleum products, and petroleum wastes.
XVIII -- MISCELLANEOUS GENERAL PROVISIONS
- -----------------------------------------
18.01 - RELOCATION; TERMINATION. Tenant acknowledges and
agrees that Landlord has the right and option to relocate Tenant to different
premises within the Building or to a different building within the Campus or to
a different building on another campus controlled by Landlord. Tenant agrees
that this Lease is, and Tenant's possession rights hereunder are, subject to
said relocation rights. In such event, Tenant agrees to relocate in accordance
with Landlord's plan of relocation and to cooperate fully with Landlord in
completing the relocation. In the event that Tenant should cease to be an entity
which is controlled by The Limited, Inc., then Landlord shall have the right and
option to terminate this Lease by giving Tenant written notice of such
termination at least one hundred eighty (180) days prior to the proposed
Effective Date of the termination. For the purposes of this section, a tenant is
"controlled by" The Limited, Inc. if The Limited, Inc., or one of its
subsidiaries, owns in excess of 50% of the voting shares of such tenant.
18.02 - DEFINITION OF RENT. Any amounts of money to be paid by
Tenant to Landlord pursuant to the provisions of this Lease, whether or not such
payments are denominated "Rent" and whether or not they are to be periodic or
recurring, shall be deemed "Rent" for purposes of this Lease; and any failure to
pay any of the same, as provided in Section 16.01 hereof, shall entitle Landlord
to exercise all of the rights and remedies afforded hereby or by law for the
collection and enforcement of Tenant's obligation to pay Rent. Tenant's
obligation to pay any such Rent, pursuant to the provisions of this Lease, shall
survive the expiration or other termination of this Lease and the surrender of
possession of the Premises after any hold over period.
18.03 - ESTOPPEL CERTIFICATE. Tenant agrees, at any time and
from time to time, upon not less than ten (10) calendar days prior written
notice by Landlord, to execute, acknowledge and deliver to Landlord, as
appropriate, a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect, (or, if there have been modifications, stating
such modifications); (ii) stating the dates to which the rent and any other
charges hereunder have been paid by Tenant;, (iii) stating whether or not, to
the best of Tenant's knowledge, Landlord is in default in the performance of any
covenant, agreement or condition contained in this Lease, and, if so, specifying
each such default of which Tenant may have knowledge; and (iv) stating the
address to
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<PAGE> 22
which notices to Tenant should be sent. Any such statement delivered
pursuant hereto may be relied upon by any owner of the Building or the Campus,
any prospective purchaser of the Building, any mortgagee or prospective
mortgagee of the Building, or any prospective assignee of any such mortgagee.
18.04 - GOVERNING LAW. This Lease shall be construed and
enforced in accordance with the laws of the State of Ohio.
18.05 - SUCCESSORS AND ASSIGNS. This Lease and the respective
rights and obligations of the parties hereto shall inure to the benefit of and
be binding upon the successors and assigns of the parties hereto, as well as the
parties themselves; provided, however, that Landlord, its successors and
assigns, shall be obligated to perform Landlord's covenants under this Lease
only during and in respect to their successive periods of ownership during the
Term of this Lease.
18.06 - SEVERABILITY OF INVALID PROVISIONS. If any provision
of this Lease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
18.07 - CERTAIN WORDS, GENDER AND HEADINGS. As used in this
Lease, the word "person" shall mean and include, where appropriate, an
individual, corporation, partnership or other entity; the plural shall be
substituted for the singular and the singular for the plural, where appropriate;
and words of any gender shall include any other gender. The topical headings of
the several paragraphs of this Lease are inserted only as a matter of
convenience and reference, and do not affect, define, limit or describe the
scope or intent of this Lease.
18.08 - QUIET ENJOYMENT. So long as Tenant pays the prescribed
rent and performs or observes all of the terms, conditions, covenants and
obligations of this Lease required to be performed or observed by it hereunder,
Tenant shall, at all times during the Term hereof, have the peaceable and quiet
enjoyment, possession, occupancy and use of the Premises, without any
interference from Landlord or any person or persons claiming the Premises, by,
through or under Landlord.
18.09 - COMPLETE AGREEMENT; AMENDMENTS. This Lease, including
all Exhibits, Riders and Addenda, constitutes the entire agreement between the
parties hereto; it supersedes all previous understandings and agreements between
the parties, if any, and no oral or implied representation or understandings
shall vary its terms; and it may not be amended, except by a written instrument
executed by both parties hereto.
18.10 - REASONABLE MODIFICATIONS. Tenant will consent to such
reasonable modifications of this Lease as Landlord may hereafter find it
necessary to make in order to obtain mortgage financing, provided that such
modifications (a) do not change the rental to be paid hereunder or the length of
the Term of the Lease; and
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<PAGE> 23
(b) do not impose obligations upon Tenant which are substantially or practically
more burdensome to it than the obligations contained herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-23-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this
Lease as of the day and year first above written.
Witnesses as to Landlord: LANDLORD:
DISTRIBUTION LAND CORP., a Delaware
corporation
By:
- ------------------------------- -------------------------------------
Print Name: George R. Sappenfield
-------------------- Vice President - Real Estate
- -------------------------------
Print Name:
-------------------- ATTESTED BY:
- ------------------------------- ----------------------------------
Print Name: C. David Zoba
-------------------- Vice President and Senior Counsel
- ------------------------------- - Real Estate
Print Name:
--------------------
Witnesses as to Tenant: TENANT:
BATH & BODY WORKS, INC., a
Delaware corporation
By:
- ------------------------------- -------------------------------------
Print Name: George R. Sappenfield
-------------------- Vice President - Real Estate
- -------------------------------
Print Name:
--------------------
ATTESTED BY:
- ------------------------------- ----------------------------------
Print Name: C. David Zoba
-------------------- Vice President and Senior Counsel
- ------------------------------- - Real Estate
Print Name:
--------------------
-24-
<PAGE> 25
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this _____ day of
____________, 1999, by George R. Sappenfield and C. David Zoba, Vice President -
Real Estate and Vice President and Senior Counsel - Real Estate, respectively,
of Distribution Land Corp., a Delaware corporation, on behalf of the
corporation.
------------------------------
Notary Public
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this _____ day of
_____________, 1999, by George R. Sappenfield and C. David Zoba, Vice President
- - Real Estate and Vice President and Senior Counsel - Real Estate, respectively,
of Bath & Body Works, Inc., a Delaware corporation, on behalf of the
corporation.
------------------------------
Notary Public
This Instrument Prepared By:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
P.O. Box 1008
Columbus, OH 43216-1008
-25-
<PAGE> 1
Exhibit 15
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Commissioners:
We are aware that our report dated May 12, 1999 on our review of the interim
consolidated financial information of Intimate Brands, Inc. and Subsidiaries
(the "Company") as of and for the thirteen-week period ended May 1, 1999 and
included in this Form 10-Q is incorporated by reference in the Company's
registration statements on Form S-3, Registration No. 333-78485, Form S-8,
Registration Nos. 333-04921 and 333-04923. Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered a part of the
registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
Very truly yours,
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
June 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements (unaudited) of Intimate Brands, Inc. and
Subsidiaries for the quarter ended May 1, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> MAY-01-1999
<CASH> 15,472
<SECURITIES> 0
<RECEIVABLES> 16,819
<ALLOWANCES> 0
<INVENTORY> 524,754
<CURRENT-ASSETS> 658,085
<PP&E> 846,403
<DEPRECIATION> 441,513
<TOTAL-ASSETS> 1,133,506
<CURRENT-LIABILITIES> 569,068
<BONDS> 0
0
0
<COMMON> 2,527
<OTHER-SE> 292,983
<TOTAL-LIABILITY-AND-EQUITY> 1,133,506
<SALES> 877,821
<TOTAL-REVENUES> 877,821
<CGS> 544,394
<TOTAL-COSTS> 544,394
<OTHER-EXPENSES> 249,233
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,864
<INCOME-PRETAX> 77,306
<INCOME-TAX> 30,900
<INCOME-CONTINUING> 46,406
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,406
<EPS-BASIC> $.19
<EPS-DILUTED> $.19
</TABLE>
