<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 October 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to ______________
------------
Commission File No. 0-26608
CUTTER & BUCK INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Washington 91-1474587
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
2701 First Avenue, Suite 500
Seattle, WA 98121
(Address of Principal Executive Offices, Including Zip Code)
(206) 622-4191
(Registrant's Telephone Number, Including Area Code)
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
----- -----
The number of shares of Common Stock of the registrant outstanding as
of December 10, 1998 was 5,522,738.
Page 1 of 15
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CUTTER & BUCK INC.
Quarterly Report on Form 10-Q
For the Quarter Ended October 31, 1998
Index
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Condensed Balance Sheets 3
Condensed Statements of Income 4
Condensed Statements of Cash Flows 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
CUTTER & BUCK INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
April 30, October 31,
1998 1998
------------ -------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash $ 7,589,731 $ 5,055,345
Accounts receivable, net of allowances for doubtful
accounts and returns and allowances of $1,187,813 at
April 30, 1998 and $1,581,951 at October 31, 1998 20,216,721 19,174,735
Inventories 13,247,892 18,662,276
Deferred income taxes 782,545 782,545
Prepaid expenses and other current assets 1,502,634 2,473,183
----------- -----------
Total current assets 43,339,523 46,148,084
Furniture and equipment 4,568,515 6,547,558
Other assets 236,329 337,569
----------- -----------
Total assets $48,144,367 $53,033,211
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,110,405 $ 4,667,765
Accrued liabilities 1,606,994 2,333,805
Income taxes payable 1,498,720 830,684
Loan payable to bank 486,913 1,019,530
Current portion of capital lease obligations 194,040 223,253
----------- -----------
Total current liabilities 8,897,072 9,075,037
Capital lease obligations 626,682 1,058,081
Shareholders' equity:
Common stock, no par value: 25,000,000 shares
authorized; 5,250,796 issued and outstanding at
April 30, 1998 and 5,521,488 at October 31, 1998 30,577,648 32,269,060
Retained earnings 8,168,003 10,626,563
Accumulated other comprehensive income (125,038) 4,470
----------- -----------
Total shareholders' equity 38,620,613 42,900,093
----------- -----------
Total liabilities and shareholders' equity $48,144,367 $53,033,211
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
Page 3
<PAGE>
CUTTER & BUCK INC.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------ --------------------------------
October 31, October 31, October 31, October 31,
1997 1998 1997 1998
------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 17,349,588 $ 25,993,442 $ 29,727,619 $ 43,756,937
Cost of sales 10,204,620 15,054,145 17,622,289 25,205,330
------------ ------------ ------------ ------------
Gross profit 7,144,968 10,939,297 12,105,330 18,551,607
Operating expenses:
Design and production 604,317 858,624 1,022,790 1,460,552
Selling and handling 3,196,228 5,296,162 5,881,185 9,284,906
General and administrative 1,558,075 2,238,337 2,697,246 4,099,560
------------ ------------ ------------ ------------
Total operating expenses 5,358,620 8,393,123 9,601,221 14,845,018
------------ ------------ ------------ ------------
Operating income 1,786,348 2,546,174 2,504,109 3,706,589
Other income (expense):
Factor commission and
interest expense, net
of interest income (41,602) (45,499) (52,683) (45,532)
License and royalty income,
net of other expense 15,090 93,732 28,680 174,503
------------ ------------ ------------ ------------
Total other income (26,512) 48,233 (24,003) 128,971
------------ ------------ ------------ ------------
Income before income taxes 1,759,836 2,594,407 2,480,106 3,835,560
Income taxes (600,000) (930,000) (845,000) (1,377,000)
------------ ------------ ------------ ------------
Net income $ 1,159,836 $ 1,664,407 $ 1,635,106 $ 2,458,560
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic net income per share $ 0.22 $ 0.30 $ 0.31 $ 0.45
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted net income per share $ 0.21 $ 0.29 $ 0.30 $ 0.43
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares used in computation of:
Basic net income per share 5,256,575 5,504,182 5,235,699 5,419,736
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted net income per share 5,528,719 5,681,054 5,495,046 5,667,792
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
Page 4
<PAGE>
CUTTER & BUCK INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
---------------------------------
October 31, October 31,
1997 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,635,106 $ 2,458,560
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 694,420 943,026
Changes in assets and liabilities:
Receivables, net 1,785,683 1,094,975
Inventories (867,648) (5,414,384)
Prepaid expenses and other current assets (1,046) (970,549)
Accounts payable and accrued liabilities (2,527,937) 284,171
Income taxes payable (738,972) (668,036)
----------- -----------
Net cash used in operating activities (20,394) (2,272,237)
INVESTING ACTIVITIES
Purchases of furniture and equipment (802,861) (2,343,314)
Increase in trademarks and patents (93,451) (111,145)
----------- -----------
Net cash used in investing activities (896,312) (2,454,459)
FINANCING ACTIVITIES
Proceeds from loan from bank 0 532,617
Payments under capital lease obligations (77,311) (108,238)
Net decrease in advances from factor (314,091) (52,989)
Issuance of common stock, net of offering costs 231,831 1,691,412
----------- -----------
Net cash provided by (used in) financing activities (159,571) 2,062,802
Effects of foreign exchange rate changes on cash (26,039) 129,508
----------- -----------
Net decrease in cash (1,102,316) (2,534,386)
Cash, beginning of period 7,441,717 7,589,731
----------- -----------
Cash, end of period $ 6,339,401 $ 5,055,345
----------- -----------
----------- -----------
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest $ 43,144 $ 170,245
----------- -----------
----------- -----------
Cash paid during the period for income taxes $ 1,584,500 $ 2,045,036
----------- -----------
----------- -----------
Noncash financing and investing activities:
Equipment acquired with capital leases $ 48,976 $ 568,850
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
Page 5
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
Cutter & Buck Inc. ("Company") in accordance with generally accepted
accounting principles for interim financial statements and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and disclosures required by generally
accepted accounting principles for complete financial statements. In the
opinion of the Company's management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation have been included. The
Company's revenues are seasonal, and therefore the results of operations for
the three months ended October 31, 1998 may not be indicative of the results
for the full fiscal year. For further information, refer to the financial
statements and footnotes thereto for the year ended April 30, 1998, included
in the Company's filing on Form 10-K.
2. NET INCOME PER SHARE
Basic net income per share is based on the weighted average number of
common shares outstanding. Diluted net income per share is based on the
weighted average number of common shares and equivalents outstanding. Common
share equivalents included in the computation represent shares issuable upon
assumed exercise of outstanding stock options and warrants except when the
effect of their inclusion would be antidilutive.
3. ACCOUNTS RECEIVABLE
Pursuant to the terms of factoring agreements, the Company assigns a
portion of its qualifying accounts receivable to factors on a preapproved,
non-recourse basis and a portion on a recourse basis. The Company is
permitted to receive advances from the European factor against uncollected
amounts factored. Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
April 30, 1998 October 31, 1998
-------------- ----------------
<S> <C> <C>
Unmatured receivables:
Nonrecourse $ 2,622,705 $ 1,841,719
With recourse 1,945,238 1,374,258
Matured receivables 290,112 132,309
Advances (751,214) (698,225)
------------ ------------
Due from factor 4,106,841 2,650,061
Non-factored receivables 17,297,693 18,106,625
Allowance for doubtful accounts
and reserve for sales returns
and allowances (1,187,813) (1,581,951)
------------ ------------
$ 20,216,721 $ 19,174,735
------------ ------------
------------ ------------
</TABLE>
Page 6
<PAGE>
4. LINE OF CREDIT
The Company has a loan agreement with Washington Mutual Bank d/b/a
Western Bank ("Western Bank") for a $30.0 million revolving line of credit
and a $5.0 million term credit facility. The Western Bank revolving line of
credit is to be used for international letters of credit, working capital
advances of up to $25.0 million and fixed asset purchases of up to $5.0
million. Interest on borrowings is charged and payable monthly at The Wall
Street Journal Prime rate or an alternative fixed rate of LIBOR plus 2.0%.
The first $10.0 million of direct debt is granted on an unsecured basis.
Direct debt in excess of $10.0 million is secured by a first lien perfected
security interest in the Company's inventory and accounts receivable. The
loan agreement contains certain restrictive covenants covering minimum
working capital and tangible net worth, as well as a maximum debt to equity
ratio and a maximum ratio of long term funded debt to earnings. Western Bank
and Republic Business Credit Corp., the Company's factor in the United
States, have entered into an intercreditor agreement allocating between them
priority as to the Company's assets in which both financial institutions have
a security interest. At October 31, 1998, letters of credit outstanding
against this line of credit totaled $17,147,684 and there were no working
capital advances.
The Company's European subsidiary has a loan agreement with Cooperatieve
Rabobank "Huizen" B.A. ("Rabobank") for a $1.8 million line of credit. The
line of credit with Rabobank is to be used for international letters of
credit and working capital advances. Interest on borrowings is charged and
payable quarterly at a variable rate (4.95% at October 31, 1998). The line of
credit is secured by the Company's European inventory, an irrevocable standby
letter of credit issued by Western Bank of $1.6 million and subordination of
$2.2 million of intercompany debt. At October 31, 1998, letters of credit
outstanding against this line of credit totaled $230,532 and working capital
advances totaled $1,019,530.
5. SHAREHOLDERS' EQUITY
The Company has four stock incentive plans that provide for the granting
of options to employees, officers and directors of the Company to purchase up
to 875,313 shares of Common Stock and the granting of shares of restricted
stock to these individuals as well as consultants or advisors of the Company.
Options granted under the 1991 plan provide for 50% vesting on the first
anniversary from the date of grant and 25% vesting on each of the second and
third anniversaries. Options granted under the 1995 employee plan generally
provide for vesting over a four-year period with vesting at 25% each year.
Options granted under the 1995 director plan become exercisable six months
after the date of grant. Options or shares granted under the 1997 stock
incentive plan are subject to terms established by the Compensation Committee
of the Board of Directors and generally provide for vesting of options over a
four-year period with vesting at 25% each year. Options granted under these
plans expire after 10 years and have been granted at fair market value on the
date of grant. At October 31, 1998, options to purchase 479,369 shares of
common stock were outstanding under these plans, of which options to purchase
128,483 shares were exercisable. At October 31, 1998, 118,901 shares under
these plans remained available for future grant.
In August 1998, the Company established a stock bonus plan whereby
officers and key employees may be granted restricted stock. The plan provides
for the issuance of not more than 25,000 shares of restricted stock which
vest while the participant is an employee of the Company over a two-year
period, with 25% of such shares vesting every six months from the date of
grant. As of October 31, 1998, 6,799 shares of restricted stock have been
granted, leaving 18,201 shares available for future grant.
Page 7
<PAGE>
6. REPORTING COMPREHENSIVE INCOME
As of May 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of this statement had no impact on
the Company's net income or shareholders' equity. SFAS No. 130 requires
unrealized gains or losses on the Company's foreign currency translation
adjustments to be included in comprehensive income. For quarterly reporting
purposes, the following table sets forth the components of comprehensive
income:
<TABLE>
<CAPTION>
Three months ended Six months ended
October 31, October 31,
------------------- ----------------
1997 1998 1997 1998
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net income $ 1,159,836 $ 1,664,407 $ 1,635,106 $ 2,458,560
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Foreign currency translation adjustments 20,931 119,734 (26,039) 129,508
---------- ---------- ----------- ----------
Comprehensive income $ 1,180,767 $ 1,784,141 $ 1,609,067 $ 2,588,068
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
Page 8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
STATEMENTS MADE IN THIS FILING THAT ARE NOT HISTORICAL FACTS ARE FORWARD LOOKING
INFORMATION. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY
FORWARD LOOKING INFORMATION. SPECIFICALLY, THERE ARE A NUMBER OF IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED BY ANY FORWARD LOOKING INFORMATION. THOSE FACTORS INCLUDE, BUT ARE
NOT LIMITED TO, STYLE CHANGES AND PRODUCT ACCEPTANCE, RELATIONS WITH SUPPLIERS
AND INDEPENDENT SALES REPRESENTATIVES, THE ABILITY OF THE COMPANY TO CONTROL
COSTS AND EXPENSES, THE ABILITY OF THE COMPANY TO CARRY OUT SUCCESSFUL DESIGN
AND PLANNED PRODUCT AND BRAND EXTENSION ACTIVITIES AND TO PENETRATE ITS CHOSEN
DISTRIBUTION CHANNELS, COMPETITION, FOREIGN CURRENCY RISKS, RISKS ASSOCIATED
WITH OPENING AND OPERATING A RETAIL LOCATION, THE SUCCESSFUL IMPLEMENTATION OF
THE COMPANY'S YEAR 2000 COMPLIANCE INITIATIVE, POLITICAL AND TRADE RELATIONS
AND GENERAL ECONOMIC CONDITIONS. FINALLY, THERE MAY BE OTHER FACTORS NOT
MENTIONED ABOVE OR INCLUDED IN THE COMPANY'S SEC FILINGS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING INFORMATION.
OVERVIEW
The Company designs, sources and markets updated, traditional sportswear
and outerwear. It distributes its products primarily through golf pro shops
and resorts, corporate sales accounts and better specialty stores. The
Company continues to emphasize the golf distribution channel because it
believes this is an effective venue to build brand identity and to reach its
target consumers who are sports-minded and want high-quality casual clothing
that reflects an active lifestyle. The Company has found golf pro shops to be
receptive to its distinctive product, merchandising approach and sales
support. The Company continues to leverage a growing awareness of the Cutter
& Buck brand and its expanded product line by selling into the corporate
channel, which is targeted to Fortune 1000 companies.
Historically, the Company has experienced its lowest level of net sales
and profitability in its first and third quarters, ending July 31 and January
31, respectively. Correspondingly, the Company's highest level of sales and
profitability have been achieved in its second and fourth quarters, ending
October 31 and April 30, respectively. This seasonality has resulted
primarily from the timing of shipments to golf pro shops and specialty stores
due to seasonal fluctuations in consumer demand, the timing and amount of
orders from key customers, the timing of sales of seasonal remainder
merchandise and availability of product. This pattern of sales affects
working capital requirements and liquidity, as the Company generally must
finance higher levels of inventory during the first and third quarters in
advance of sales taking place in the second and fourth quarters.
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1998 COMPARED WITH THREE MONTHS ENDED
OCTOBER 31, 1997
NET SALES increased 49.8% in the three months ended October 31, 1998 to
$25,993,442 from $17,349,588 in the three months ended October 31, 1997. For
the second quarter of fiscal 1999 compared to the second quarter of fiscal
1998, net sales to the golf distribution channel increased 73.0% or
$5,753,520 to $13,631,720, net sales to the corporate channel increased 67.5%
or $3,109,360 to $7,718,419, and net sales to the specialty store channel
increased 3.6% or $160,273 to $3,497,826. Other sales, including sales to the
liquidation and international channels, decreased 17.0% or $379,299 to
$1,145,477, for the three months ended October 31, 1998 compared to the same
three month period of the previous year primarily due to reduced liquidation
sales. Net sales in the golf distribution channel through the Company's
European subsidiaries included in the golf figures increased 68.7% or $428,468
to $1,052,017.
Page 9
<PAGE>
GROSS PROFIT increased in the three months ended October 31, 1998 to
$10,939,297 from $7,144,968 in the three months ended October 31, 1997. Gross
profit as a percentage of net sales was 42.1% for the second quarter of
fiscal 1999 compared to 41.2% for the second quarter of fiscal 1998. The
increase in gross profit margin in the second quarter of fiscal 1999 was
primarily due to the Company's ability to negotiate lower production costs
based on higher volumes.
OPERATING EXPENSES increased to $8,393,123 in the three months ended
October 31, 1998 from $5,358,620 in the three months ended October 31, 1997,
and increased as a percentage of net sales to 32.3% in the second quarter of
fiscal 1999 from 30.9% in the second quarter of fiscal 1998. The increase in
operating expenses when expressed as a percentage of net sales reflects
increased investments in senior management, brand promotion and distribution,
systems, staffing and facilities in support of the Company's growth. Selling
and handling expenses increased by $2,099,934 making up 69.2% of the overall
increase in operating expenses. The majority of the increase in selling and
handling expenses was due to increased sales commissions, staffing costs and
travel related to a higher sales volume and a larger sales force. The Company
also has increased its advertising expenditures and has incurred additional
handling expenses associated with expanding its warehouse facility in Seattle
and supporting the increase in sales volume. General and administrative
expenses increased by $680,262 making up 22.4% of the overall increase in
operating expenses. The majority of the increase in general and
administrative expenses was due to increased staffing costs, professional
fees and other operating costs to support expanded operations and open a
retail store. Design and production expenses increased by $254,307 primarily
due to the costs associated with expansion of the Company's sportswear
collections, including the addition of a women's line of apparel and shoe
product extension along with expenses associated with developing additional
manufacturing sources.
OTHER INCOME. Net interest and factor commission expense was $45,499 in
the quarter ended October 31, 1998 compared $41,602 in the quarter ended
October 31, 1997. The increase in this net expense is primarily due to
increased bank borrowing by the Company's European subsidiary and reduced net
interest income earned on invested cash balances. License and royalty income
earned under licensing contracts totaled $93,732 for the three months ended
October 31, 1998 compared to $53,775 for the three months ended October 31,
1997. The increase in license and royalty income was primarily due to
increased sales volume of the Company's existing licensees. The Company
experienced no significant gain or loss on foreign currency transactions in
the quarter ended October 31, 1998 compared to a loss of $38,685 in the
quarter ended October 31, 1997.
INCOME TAXES. The Company recorded $930,000 of income tax expense in the
three months ended October 31, 1998 and $600,000 in the three months ended
October 31, 1997. Tax expense has been recorded at statutory rates.
As a result of the foregoing factors, the Company had net income of
$1,664,407 for the three months ended October 31, 1998 compared to $1,159,836
for the three months ended October 31, 1997.
Page 10
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 COMPARED WITH SIX MONTHS ENDED OCTOBER
31, 1997
NET SALES increased 47.2% in the six months ended October 31, 1998 to
$43,756,937 from $29,727,619 in the six months ended October 31, 1997. For
the first half of fiscal 1999 compared to the first half of fiscal 1998, net
sales to the golf distribution channel increased 57.5% or $8,358,739 to
$22,899,718, net sales to the corporate channel increased 63.1% or $5,238,747
to $13,542,713 and net sales to the specialty store channel increased 13.6%
or $606,546 to $5,077,483. Other sales, including sales to the liquidation
and international channels, decreased 7.2% or $174,714 to $2,237,023 for the
six months ended October 31, 1998 compared to the same six month period of
the previous year primarily due to reduced liquidation sales. Net sales in the
golf distribution channel through the Company's European subsidiaries included
in the golf figures increased 59.0% or $850,186 to $2,291,231.
GROSS PROFIT increased in the six months ended October 31, 1998 to
$18,551,607 from $12,105,330 in the six months ended October 31, 1997. Gross
profit as a percentage of net sales was 42.4% for the first half of fiscal
1999 compared to 40.7% for the first half of fiscal 1998. The increase in
gross profit margin in the first half of fiscal 1999 was primarily due to the
Company's ability to negotiate lower production costs based on higher
volumes.
OPERATING EXPENSES increased to $14,845,018 in the six months ended
October 31, 1998 from $9,601,221 in the six months ended October 31, 1997,
and increased as a percentage of net sales to 33.9% in the first half of
fiscal 1999 from 32.3% in the first half of fiscal 1998. The increase in
operating expenses when expressed as a percentage of net sales reflects
increased investments in senior management, brand promotion and distribution,
systems, staffing and facilities in support of the Company's growth. Selling
and handling expenses increased by $3,403,721 making up 64.9% of the overall
increase in operating expenses. The majority of the increase in selling and
handling expenses was due to increased sales commissions, staffing costs and
travel related to a higher sales volume and a larger sales force. The Company
also has increased its advertising expenditures and has incurred additional
handling expenses associated with expanding its warehouse facility in Seattle
and supporting the increase in sales volume. General and administrative
expenses increased by $1,402,314 making up 26.7% of the overall increase in
operating expenses. The majority of the increase in general and
administrative expenses was due to increased staffing costs, professional
fees and other operating costs to support expanded operations. Design and
production expenses increased by $437,762 primarily due to the costs
associated with expansion of the Company's sportswear collections, including
the addition of a women's line of apparel along with expenses associated with
developing additional manufacturing sources.
OTHER INCOME. Net interest and factor commission expense was $45,532 in
the six months ended October 31, 1998 compared $52,683 in the six months
ended October 31, 1997. The reduction in this net expense is primarily due to
increased interest income earned on invested cash balances, mainly in the
first quarter of fiscal 1999. License and royalty income earned under
licensing contracts totaled $174,503 for the six months ended October 31,
1998 compared to $106,919 for the six months ended October 31, 1997. The
increase in license and royalty income was primarily due to increased sales
volume of the Company's existing licensees. The Company experienced no
significant gain or loss on foreign currency transactions in the six months
ended October 31, 1998 compared to a loss of $78,239 in the six months ended
October 31, 1997.
Page 11
<PAGE>
INCOME TAXES. The Company recorded $1,377,000 of income tax expense in
the six months ended October 31, 1998 and $845,000 in the six months ended
October 31, 1997. Tax expense has been recorded at statutory rates.
As a result of the foregoing factors, the Company had net income of
$2,458,560 for the six months ended October 31, 1998 compared to $1,635,106
for the six months ended October 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for funds is to finance working capital
associated with growth in sales volume, specifically accounts receivable and
finished goods inventory. Working capital for the six months ended October
31, 1998 was funded primarily by profitable operations and collections of
accounts receivable.
Net cash used for operating activities was $2,272,237 for the six months
ended October 31, 1998 compared to $20,394 for the six months ended October
31, 1997. For the six months ended October 31, 1998, cash was primarily
provided by net income and by a net decrease in accounts receivable of
$1,094,975. These were offset by an increase in inventory of $5,414,384 and
an increase in prepaid expenses of $970,549. The reduction in accounts
receivable is primarily seasonal in nature. The increase in inventory
primarily relates to planned sales volume in the third quarter and the need
for the Company to have a sufficient stock of products with multi-season
appeal to service the Corporate sales channel and other expedited business.
For the six months ended October 31, 1997, cash was primarily provided by net
income and by a net decrease in accounts receivable of $1,785,683 which were
offset by an increase in inventory of $867,648, a reduction in accounts
payable and accrued liabilities of $2,527,937 and a reduction in income taxes
payable of $738,972.
Net cash used in investing activities of $2,454,459 for the six months
ended October 31, 1998 was primarily attributable to investments in warehouse
leasehold improvements and equipment totaling $332,000, in-store fixtures of
$781,000, computer systems and equipment totaling $508,000, other furniture,
equipment and leasehold improvements totaling $723,000 and investments in
trademarks of $111,000. For the six months ended October 31, 1997, net cash
used in investing activities was $896,312 and was primarily attributable to
purchases of in-store fixtures totaling $206,000, investments in warehouse
equipment and leasehold improvements totaling $281,000 and purchases of other
furniture and equipment totaling $316,000 and investments in trademarks of
$93,000.
Net cash provided by financing activities for the six months ended
October 31, 1998 was $2,062,802 compared to net cash used of $159,571 during
the six months ended October 31, 1997. During the six months ended October
31, 1998, the Company sold 270,692 shares under its employee stock purchase
plan and pursuant to the exercise of stock options and warrants, generating
$1,691,412, increased its borrowing from banks by $532,617 and decreased its
borrowing from the factor by $52,989. For the six months ended October 31,
1997, cash used for financing activities of $159,571 was primarily due to
$231,831 generated by the sale of 66,780 shares of Common Stock under its
employee stock purchase plan and pursuant to the exercise of stock options,
offset by decreased borrowing from the factor totaling $314,091 and principal
payments on capital leases totaling $77,311.
The Company has a loan agreement with Washington Mutual Bank d/b/a
Western Bank for a $35.0 million line of credit and a loan agreement with
Cooperatieve Rabobank "Huizen" B.A., for a $1.8 million line of credit which
are more fully described in footnote four to the Company's financial
statements on page seven hereof.
Page 12
<PAGE>
YEAR 2000
The Company recognizes the need to ensure that its systems,
applications and hardware will recognize and process transactions for the
year 2000 and beyond. With the recent hire of a Chief Information Officer,
the Company has developed and is implementing a company-wide plan which
includes identifying all issues related to the impact of year 2000 on its
internal systems, testing these systems and addressing deficiencies before
March 31, 1999. The Company expects to successfully implement the systems and
programming changes necessary to address year 2000 issues with respect to its
internal systems and believes that the total cost of such actions will be
approximately $100,000. The Company estimates that it has completed
approximately 65% of this effort and all costs incurred to date have been
expensed. Due to the nature of the Company's business, its operations
generally do not include significant systems relying on embedded technology
such as microcontrollers which are difficult to evaluate and repair.
The Company has a fully integrated, real-time management information
system that is specifically designed for the apparel industry. The system
runs on a UNIX platform with IBM's RISC 6000 hardware. The Company has
received assurances from the vendors for these systems that they are year
2000 compliant. The Company is developing a complete testing program for both
systems to verify compliance and will complete this testing by March 1999. In
the event these systems fail the testing program, the Company's existing
information technology staff will arrange for the assistance of outside
professionals to remedy the deficiencies. Although the Company is not
presently aware of any material operational issues or costs associated with
preparing its internal systems for the year 2000, there can be no assurance
that there will not be a delay in, or increased costs associated with, the
implementation of the necessary systems and changes to address all year 2000
issues.
The Company is in the process of identifying and working with its
significant suppliers, customers and financial institutions to ensure that
those parties have appropriate plans to remediate year 2000 issues when their
systems may affect the Company's systems or otherwise impact operations. The
Company has received assurances from the majority of its significant
suppliers, but cannot definitively determine that all major suppliers will
reach a year 2000-ready status that will ensure no disruption of business.
Although the Company has no reason to conclude that any specific supplier
represents a risk, the most reasonably likely worst-case scenario would
entail production disruption due to the inability of a number of its
suppliers to obtain raw materials or components, or encounter transportation
or communications problems affecting delivery of products to the Company. The
Company is unable to quantify such a scenario, but it could potentially
result in a material adverse impact on results of operations, liquidity or
financial position of the Company. Contingency plans for suppliers and
systems are under development and are expected to be complete by May, 1999.
Page 13
<PAGE>
PART II - OTHER INFORMATION
<TABLE>
<S> <C>
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
</TABLE>
The Company's Annual Meeting of Shareholders was held on September 23,
1998. Out of the Company's 5,427,756 shares of Common Stock entitled to vote
at the meeting, 4,788,848 were represented, either in person or by proxy.
Proposal Number 1 - Election of Directors
<TABLE>
<CAPTION>
NOMINEE FOR AGAINST
------- --- -------
<S> <C> <C>
Frances M Conley 4,768,888 19,960
Larry C. Mounger 4,764,738 24,110
</TABLE>
Proposal Number 2 - Ratification of Appointment of Auditors
<TABLE>
<CAPTION>
VOTES
-----
<S> <C>
For 4,748,875
Against 3,623
Withheld 36,350
</TABLE>
Item 5. Other Information
None
Page 14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 10.16 Stock Bonus Plan, filed herewith
Exhibit 10.17 Lease dated August 11, 1998 between Pine Street
Development L.L.C. and Cutter & Buck Inc., filed herewith
Exhibit 10.18 Lease dated April 15, 1998 between Whitmac Company and
Cutter & Buck Inc., filed herewith
b) Reports on Form 8-K
On November 20, 1998, the Company filed a Form 8-K covering the
adoption of a Shareholder Rights Plan. The terms of the Rights
Plan provide for a dividend of one Right for each outstanding
share of Cutter & Buck Inc. Common Stock to holders of record at
the close of business on December 7, 1998. The Rights will
generally become exercisable if an acquiring party accumulates
20% or more of Cutter & Buck's voting stock, or if a party
announces an offer to acquire 20% or more of Cutter & Buck's
voting stock. The Rights will expire on December 7, 2008. Each
Right will entitle the holder (other than the acquiring party) to
buy, at a 50% discount, Preferred Stock having an economic value
equal to one full share of the Company's Common Stock. In
addition, upon the occurrence of certain events, holders of the
Rights will be entitled to purchase shares in an "acquiring
entity" at half of their market value.
SIGNATURES
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.
CUTTER & BUCK INC.
---------------------------------------
(Registrant)
Dated: December 15, 1998 By /s/ Stephen S. Lowber
-- --------------------------------------
Stephen S. Lowber
Vice-President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 15
<PAGE>
EXHIBIT 10.16
CUTTER & BUCK
STOCK BONUS PLAN
Section 1. PURPOSES OF THE PLAN. The purposes of this Cutter & Buck Stock
Bonus Plan (the "Plan") are to enable Cutter & Buck Inc. and its subsidiaries
(the "Company") to attract, retain and motivate officers and other key
employees and to encourage ownership of stock in the Company on the part of
such personnel.
Section 2. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee").
Section 3. ELIGIBILITY. Any officer of the Company shall be eligible to
participate in the Plan. In addition, other key employees of the Company who
are, in the judgment of the Committee, responsible for or contribute to the
management, growth and/or profitability of the Company may be designated by
the Committee from time to time as being eligible to participate in the Plan
(such officers and key employees who are so designated by the Committee are
referred to herein as "Eligible Employees").
Section 4. PARTICIPATION. Eligible Employees who are participants in the
Company's discretionary cash bonus plan (the "Cash Bonus Plan") may, but are
not required to, elect to receive shares of Restricted Stock under the Plan
in lieu of the right to receive all or any portion of the payment in cash
under the Cash Bonus Plan. The number of shares of Restricted Stock to be
issued to a Participant under the Plan shall be determined by multiplying (i)
the participation percentage elected by such Participant by (ii) the gross
amount of the cash bonus which would have been payable to that Participant
with respect to that fiscal year under the Cash Bonus Plan if the Participant
had not elected to participate in the Plan, and then dividing the resultant
amount by the applicable Computation Value (defined below) of the Stock;
provided that no fractional shares of Restricted Stock shall be issued, and
the amount computed by multiplying any fractional share interest otherwise
resulting from such determination by the applicable Computation Value shall
be paid over to the Participant (net of any applicable tax withholding).
"Computation Value" shall be computed by multiplying the closing price of the
Company's Common Stock as reported by Nasdaq (or such other principal market
on which such stock is traded on such date) as of the day on which the
applicable cash bonus is declared under the Cash Bonus Plan by such factor
(the "Discount Factor") as is determined by the Committee from time to time
to be appropriate to reflect both the impact on valuation of the restrictions
applicable to the Restricted Stock under Section 5 and the risk of forfeiture
of the Restricted Stock by a Participant. Until such time as determined
otherwise by the Committee, the Discount Factor shall be 85 percent.
Section 5. RESTRICTED STOCK.
(a) The maximum number of shares of Restricted Stock which may be
issued under the Plan shall be not more than 25,000 and the maximum number of
shares of Restricted Stock which may be issued under the Plan to any one
Participant in any one year shall be not more than 7,500, both subject to
adjustment as provided in Section 6 hereof. In the event shares of Restricted
Stock are forfeited prior to the end of the period during which the
restrictions on the
<PAGE>
Restricted Stock expire, the forfeited shares of Restricted Stock will become
available for future issuance under the Plan.
(b) Each Participant who receives shares of Restricted Stock
hereunder may, but need not, be issued a stock certificate in respect of such
shares of Restricted Stock. Each certificate, if any, issued to a
Participant shall be registered in the name of such Participant and, during
the applicable Restricted Period, shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such shares of
Restricted Stock, substantially in the following form:
"The transferability of the certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Cutter & Buck Stock Bonus Plan. A copy of such plan
is on file in the offices of Cutter & Buck, 2701 First Avenue, Suite
500, Seattle, Washington 98121."
The Committee may require that any stock certificate issued in the
name of a Participant evidencing shares of Restricted Stock be held in the
custody of the Company until the restrictions thereon shall have lapsed, and
that, as a condition of the issuance of a certificate for Restricted Stock,
the Participant shall have delivered to the Company a stock power, endorsed
in blank, relating to the shares covered by such certificate.
In lieu of the issuance of a certificate for any shares of Restricted
Stock during the applicable Restricted Period, a "book entry" (i.e., a
computerized or manual entry) may be made in the records of the Company to
evidence the ownership of such shares of Restricted Stock in the name of the
applicable Participant.
(c) The shares of Restricted Stock received by a Participant under
the Plan shall be subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan, shares of
Restricted Stock received hereunder may not be sold, transferred, pledged or
assigned until the Shares are vested. Shares of Restricted Stock shall vest
while the Participant is an employee of the Company over a two-year period,
with twenty-five percent (25%) of such shares vesting every six (6) months
from the date of grant.
(ii) The Participant shall have the right to vote or direct the
vote of his or her shares of Restricted Stock, whether vested or unvested,
and shall have the right to receive any regular cash dividends on all such
shares of Restricted Stock. Shares of Common Stock received as a result of a
stock dividend or stock split with respect to shares of unvested Restricted
Stock shall be treated as additional shares of unvested Restricted Stock. The
Committee shall in its sole discretion determine the Participant's rights
with respect to any other extraordinary dividends on the shares of unvested
Restricted Stock.
(iii) Certificates for shares of Restricted Stock shall be
delivered to the Participant promptly after they are vested. If certificates
evidencing such shares of Restricted Stock were previously issued bearing the
legend set forth in Section 5(b) hereof, such certificates
2
<PAGE>
shall be canceled and new certificates not bearing such legend shall be
issued for delivery to the Participant.
(iv) Upon termination of a Participant's employment with the
Company for any reason other than death or Disability (defined below), such
Participant shall forfeit all unvested Restricted Stock, and shall be
entitled to receive nothing in lieu thereof, not even the amount by which the
Participant's right to receive compensation in cash was reduced in connection
with the receipt of such forfeited Restricted Stock.
(v) In the event of the termination of the Participant's
employment with the Company as the result of the death or Disability of such
Participant, the rights of such Participant in and to the shares of
Restricted Stock held by or for the account of such Participant shall
immediately vest and such shares of Restricted Stock shall no longer be
subject to forfeiture hereunder. "Disability" shall mean total and permanent
disability as determined under the Company's long-term disability program as
from time to time in effect.
(vi) It shall be a condition to the obligation of the Company
to issue Stock upon the lapse of restrictions on Restricted Stock that the
Participant (or any beneficiary) pay to the Company, upon its demand, such
amount as may be requested by the Company for the purpose of satisfying any
liability to withhold federal, state or local income or other taxes. If the
amount requested is not paid, the Company may refuse to issue shares.
Section 6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION/CHANGE IN CONTROL. In
the event of any change in the outstanding capital stock of the Company by
reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares or other
similar event and such change equitably requires an adjustment in the number
or kind of shares that may be issued under the Plan, such adjustment shall be
made by the Board and shall be conclusive and binding for all purposes of the
Plan. If the Company or the shareholders of the Company enter into an
agreement to dispose of all or substantially all of the assets or shares by
means of a sale, a reorganization, a liquidation, or otherwise, all
restrictions on any shares of Restricted Stock granted hereunder shall be
immediately removed and such shares shall be deemed fully vested and no
longer subject to forfeiture.
Section 7. AMENDMENT AND TERMINATION. The Plan may be amended or terminated
at any time and from time to time by the Board. Neither an amendment to the
Plan nor the termination of the Plan shall adversely affect any right of any
Participant with respect to any Restricted Stock theretofore received
hereunder without such Participant's written consent.
Section 8. NO EMPLOYMENT RIGHTS. Neither the adoption of the Plan by the
Company nor the participation in the Plan by any employee shall confer upon
any employee of the Company any right to continued employment with the Company
or interfere in any way with the right of the Company to terminate the
employment of any of its employees at any time.
3
<PAGE>
CENTER: PACIFIC PLACE
TENANT: CUTTER & BUCK, INC.
SPACE: 300
DATE: AUGUST 11, 1998
TRADENAME: CUTTER & BUCK
SHOPPING CENTER LEASE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1 Basic Provisions . . . . . . . . . . . . . . . . . . . . . . . . 1
Article 2 Premises, Term and Commencement Date . . . . . . . . . . . . . . 3
Article 3 Minimum Rent and Percentage Rent . . . . . . . . . . . . . . . . 3
Article 4 Payment of Rent, Rent Taxes and Prorations . . . . . . . . . . . 4
Article 5 Taxes and Center Expenses. . . . . . . . . . . . . . . . . . . . 5
Article 6 Condition of Premises; Opening for Business. . . . . . . . . . . 6
Article 7 Trade Fixtures, Alterations and Liens. . . . . . . . . . . . . . 6
Article 8 Use and Operating Requirements . . . . . . . . . . . . . . . . . 7
Article 9 Promotion of Center and Tenant's Business. . . . . . . . . . . . 8
Article 10 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Article 11 Maintenance and Repair of Premises . . . . . . . . . . . . . . . 9
Article 12 Common Areas . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Article 13 Insurance, Subrogation, and Waiver of Claims . . . . . . . . . . 11
Article 14 Casualty Damage. . . . . . . . . . . . . . . . . . . . . . . . . 12
Article 15 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article 16 Return of Possession . . . . . . . . . . . . . . . . . . . . . . 13
Article 17 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Article 18 Subordination, Attornment and Mortgagee Protection . . . . . . . 13
Article 19 Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . 14
Article 20 Assignment and Subletting. . . . . . . . . . . . . . . . . . . . 14
Article 21 Rights Reserved by Landlord. . . . . . . . . . . . . . . . . . . 15
Article 22 Landlord's Remedies. . . . . . . . . . . . . . . . . . . . . . . 17
Article 23 Landlord's Right to Cure . . . . . . . . . . . . . . . . . . . . 19
Article 24 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 19
Article 25 Safety and Security Devices, Services and Programs . . . . . . . 19
Article 26 Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . 20
Article 27 Captions and Severability. . . . . . . . . . . . . . . . . . . . 20
Article 28 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Article 29 Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Article 30 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Article 31 Attorneys' Fees, Counterclaims, Venue and Jury Trial . . . . . . 24
Article 32 Personal Property Taxes. . . . . . . . . . . . . . . . . . . . . 24
Article 33 Conveyance by Landlord and Liability . . . . . . . . . . . . . . 24
Article 34 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Article 35 Real Estate Brokers. . . . . . . . . . . . . . . . . . . . . . . 25
Article 36 Security Deposit and Landlord's Lien . . . . . . . . . . . . . . 25
Article 37 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 25
Article 38 Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Article 39 Americans With Disabilities Act. . . . . . . . . . . . . . . . . 26
Article 40 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 27
Rider One Rules
Rider Two Standard Rider
Rider Three Construction Allowance Rider
Exhibit A The Premises
Exhibit A-1 Legal Description
Exhibit A-2 Depiction of Window Area
Exhibit B Construction Exhibit
Exhibit C Sign Exhibit
Exhibit D Annual Service Charge for Landlord's Utilities
Exhibit E Key Design/Construction Dates
</TABLE>
<PAGE>
SHOPPING CENTER LEASE
THIS LEASE made as of the 11th day of August, 1998, between PINE STREET
DEVELOPMENT L.L.C., a Washington limited liability company ("Landlord"), having
a place of business at 520 Pike Tower, Suite 2200, Seattle, Washington 98101 and
CUTTER & BUCK, INC., a WASHINGTON corporation ("Tenant"), whose principal place
of business is located at 2701 FIRST AVENUE, SEATTLE, WASHINGTON 98121.
ARTICLE 1
BASIC PROVISIONS
A. TENANT'S TRADE NAME: Cutter & Buck
B. CENTER: Pacific Place
ADDRESS: Seattle, Washington
C. PREMISES: Space No. 300 at the Center, consisting of approximately
3,346 rentable square feet, the approximate location of which is shown
cross-hatched on Exhibit A hereto. In addition, Tenant shall have the
right, during the Term, to use a display window, to be located on Sixth
Avenue at the location shown on Exhibit A-2 (the "Display Window").
Tenant shall have the right, at reasonable times and upon reasonable
prior notice, of ingress and egress to the Display Window. Tenant shall
merchandise, clean and maintain the Display Window. Landlord shall, at
Landlord's cost and as part of Landlord's Work (as hereinafter defined),
construct the Display Window. All of the provisions of this Lease,
including without limitation, the provisions with respect to Tenant's
indemnity and insurance obligations, shall be applicable to the Display
Window, except that Tenant shall pay no Rent or charges in connection
therewith.
D. COMMENCEMENT DATE: October 28, 1998, provided that Landlord has delivered
possession of the Premises to Tenant no later than August 10, 1998.
Notwithstanding the foregoing, IF, due to Landlord's delay or an
Unavoidable Delay and not due to any fault of Tenant, Tenant is not able to
open for business by November 17, 1998, THEN, Tenant shall not be required
to open for business or pay Minimum Rent or Percentage Rent during the
period from November 17, 1998 through February 20, 1999.
E. EXPIRATION DATE: The date immediately preceding the fifth (5th)
anniversary of the Commencement Date. SEE PAGE 1A
F. PERMITTED USE: Retail sale of apparel, gift items, footwear, and related
accessories, AND FOR NO OTHER PURPOSE WHATSOEVER.
G. MINIMUM RENT:
<TABLE>
<CAPTION>
PERIOD PER SQ. FT. MONTHLY AMOUNT ANNUAL AMOUNT
- ------ ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Commencement Date Through Date immediately preceding $40.00 $11,153.33 $133,840.00
1st anniversary of the ------ ---------- -----------
Commencement Date
1st anniversary of the Through Date immediately preceding $44.00 $12,268.67 $147,224.00
Commencement Date 2nd anniversary of the ------ ---------- -----------
Commencement Date
2nd anniversary of the Through Date immediately preceding $45.00 $12,547.50 $150,570.00
Commencement Date 3rd anniversary of the ------ ---------- -----------
Commencement Date
3rd anniversary of the Through Expiration Date $46.50 $12,965.75 $155,589.00
Commencement Date ------ ---------- -----------
</TABLE>
1
<PAGE>
ARTICLE 1(E) EXPIRATION DATE.
Tenant shall have the option to extend the Term for an additional period of five
(5) years (the "Extension Period") upon all terms and conditions of the Lease,
except that Tenant shall have no further right to extend the Term, and the
Minimum Rent and the Breakpoint shall be increased to the amounts set forth
below. The option to extend may be exercised only by Tenant giving Landlord
irrevocable and unconditional written notice thereof no later than nine (9)
months before the commencement of the Extension Period. Said exercise shall, at
Landlord's election, be null and void if Tenant is in default under the Lease at
the date of said notice or at the commencement of said Extension Period.
If Tenant shall fail to exercise the option herein provided in accordance with
the terms hereof, said option shall terminate and be null and void. Tenant's
exercise of said option shall not operate to cure any default by Tenant of any
of the terms or provisions in the Lease, nor to extinguish or impair any rights
or remedies of Landlord arising by virtue of such default. If the Lease or
Tenant's right to possession of the Premises shall terminate in any manner
whatsoever before Tenant shall exercise the option herein provided, or before
the commencement of the Extension Period, then immediately upon such
termination, the option herein granted to extend the Term shall simultaneously
terminate and become null and void. Time is of the essence of this provision.
The Minimum Rent for the Extension Period shall be the greater of (a) one
hundred five percent (105%) of the Minimum Rent for the last year of the Term
prior to the Extension Period, or (b) eighty-five percent (85%) of the average
of Minimum Rent plus Percentage Rent over the last two (2) full Lease Years
prior to the Extension Period.
The Breakpoint for each Lease Year of the Extension Period shall be the amount
of Minimum Rent due for the Lease Year divided by six percent (6%). Tenant
shall pay Percentage Rent for each Lease Year of the Extension Period equal to
six percent (6%) of all Gross Sales for the Lease Year in excess of the
Breakpoint for the Lease Year.
All provisions contained in the Lease for annual or other adjustment to charges,
shall remain in full force and effect during the Extension Period, provided that
the no caps shall be applicable with respect to the Marketing Fund Charge.
1A
<PAGE>
H. PERCENTAGE RENT:
<TABLE>
<CAPTION>
PERIOD AMOUNT EACH LEASE YEAR
------ ----------------------
<S> <C> <C> <C>
Commencement Date Through Date immediately preceding Eight percent (8%) of Gross Sales
1st anniversary of the exceeding a Breakpoint of $1,673,000.00
Commencement Date
1st anniversary of Through Date immediately preceding Six percent (6%) of Gross Sales
the Commencement Date 2nd anniversary of the exceeding a Breakpoint of $2,453,733.33
Commencement Date
2nd anniversary of Through Date immediately preceding Six percent (6%) of Gross Sales
the Commencement Date 3rd anniversary of the exceeding a Breakpoint of $2,509,500.00
Commencement Date
3rd anniversary Through Expiration Date Six percent (6%) of Gross Sales
of the Commencement Date exceeding a Breakpoint of $2,593,150.00
</TABLE>
Prorations of Breakpoints for Partial Lease Years, and prorations for Lease
Years containing two different Breakpoints for different periods, shall be
as described in Article 3.
I. SECURITY DEPOSIT: $None
J. RADIUS RESTRICTION: One (1) mile from the Center
K. GUARANTOR: None
L. RENT PAYMENT ADDRESS: Tenant shall forward all Rent, insurance
certificates and Gross Sales reports to Landlord at the following address,
or such other address or addresses as to which Landlord shall provide
advance notice:
RGHK Seattle L.L.C.
520 Pike Tower
Suite 2200
Seattle, Washington 98101
M. RENT SHALL BE PAYABLE TO: Pine Street Development L.L.C.
or such other entity as Landlord shall designate from time to time in
writing.
The foregoing provisions shall be interpreted and applied in accordance
with the other provisions of this Lease set forth below. The terms in this
Article, and the terms defined in Article 28, shall have the meanings specified
therefor, herein or therein, when used as capitalized terms in other provisions
of this Lease.
N. TENANT'S INITIAL DESIGNATED CONTACT PERSON: Scott Darkenwald
Telephone No. (206) 622-4191
Facsimile No. (206) 448-0589
2
<PAGE>
ARTICLE 2
PREMISES, TERM AND COMMENCEMENT DATE
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the Premises for a term ("Term") commencing on the Commencement Date and
ending on the Expiration Date set forth in Article 1, unless sooner
terminated as provided herein, subject to the provisions herein contained.
The Commencement Date set forth in Article 1 shall be advanced to such
earlier date as Tenant opens the Premises for business. If Landlord delays
delivering possession of the Premises or substantial completion of any
Landlord's Work under Exhibit B, this Lease shall not be void or voidable and
Landlord shall have no liability for loss or damage resulting therefrom. In
such case, or in the case of Unavoidable Delays, the Commencement Date shall
be postponed for a period equal to the delay, except to the extent that such
delays arise from the acts or omissions of Tenant or Tenant's employees,
agents or contractors. If the Commencement Date is advanced or postponed,
the Rent and other obligations of Tenant, and the Term and initial Lease Year
hereunder, shall all commence on the Commencement Date as advanced or
postponed. However, the Expiration Date set forth in Article 1 shall not be
changed. Landlord and Tenant shall confirm in writing any adjustment to the
Commencement Date hereunder upon written request by either party. In the
event of any dispute concerning such adjustment, Tenant shall pay Rent
commencing on the Commencement Date set forth in Article 1, subject to
adjustment between the parties after such dispute is resolved.
Notwithstanding the foregoing to the contrary, Landlord may delay delivery of
the Premises and performance of any Landlord's Work until this Lease has been
mutually signed and delivered, and such delays shall not postpone the
Commencement Date set forth in Article 1 or the SEE RIDER TWO commencement of
Rent hereunder, except as the parties may expressly agree otherwise in
writing. SEE PAGE 3A
ARTICLE 3
MINIMUM RENT AND PERCENTAGE RENT
A. MINIMUM RENT. Tenant shall pay Landlord the monthly Minimum Rent set
forth in Article 1 in advance on or before the first day of each calendar month
during the Term.
B. PERCENTAGE RENT. Tenant shall pay Landlord Percentage Rent each Lease
Year equal to the applicable percentage of the amount by which Gross Sales
exceed the applicable Breakpoint for such Lease Year set forth in Article 1.
Percentage Rent for each Lease Year shall be paid on a monthly basis commencing
with the first month in each Lease Year in which Tenant's Gross Sales for such
Lease Year exceed the applicable Breakpoint. Such payments shall be made on or
before the fifteenth (15th) day of each calendar month with respect to Gross
Sales made during each preceding month. The term "Lease Year" shall have the
meaning specified therefor in Article 28.
C. BREAKPOINT PRORATIONS. The Breakpoint for any Partial Lease Year
shall be prorated on a per diem basis. If Minimum Rent is reduced for any
reason during any Lease Year, the Breakpoint for such period shall be reduced
proportionately. If two Breakpoint amounts are in effect during different
portions of a given Lease Year under Article 1, the Breakpoint for such Lease
Year shall be the weighted average of both Breakpoint amounts, determined as
follows: (a) each Breakpoint amount shall be multiplied by the number of days
during which it is in effect, and then divided by 365, and (b) the amounts so
computed shall be added to obtain the weighted average Breakpoint for such Lease
Year.
D. ADJUSTMENTS.
E. GROSS SALES RECORDS. Tenant shall ensure that the business of
Tenant and of any subtenant, licensee or concessionaire in, at or from the
Premises is operated such that the following books and records (collectively,
"Tenant's Records") are prepared, preserved and maintained in accordance with
generally accepted accounting principles: (i) daily dated sealed,
continuous, cash register tapes, (ii) serially numbered sales slips, (iii)
settlement report sheets of transactions with subtenants, concessionaires and
licensees, (iv) bank statements, (v) general ledger or summary record of all
receipts and disbursements from operations in, at or from the Premises, (vi)
state and local sales and use tax returns, and (vii) such other records that
would normally be kept pursuant to generally accepted accounting principles,
or as the Landlord may reasonably require in order to determine Gross Sales
hereunder. Tenant shall retain Tenant's Records at the Premises or at the
home or regional office of Tenant for at least three (3) years from the end
of the Lease Year to which they are applicable or, if any audit is required
or a controversy should arise between the parties regarding Percentage Rent,
until such audit or controversy is terminated, even though such retention
period may be after the expiration of the Term or earlier termination of this
Lease.
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ARTICLE 2 PREMISES, TERM AND COMMENCEMENT DATE.
Notwithstanding anything herein to the contrary, IF Landlord fails to deliver
the Premises to Tenant by March 31, 1999 with Landlord's Work substantially
complete (extended by one [1] day for each day of Tenant Delay, THEN Tenant
shall have the right, as its sole and exclusive remedy, to terminate this Lease,
effective upon written notice to Landlord delivered no later than April 30,
1999.
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F. GROSS SALES STATEMENTS. Tenant shall provide Landlord with a monthly
statement of Gross Sales within fifteen (15) days after the end of each calendar
month, signed by an authorized representative, which shall show Gross Sales and
an itemization of any exclusions or deductions therefrom for such month, as well
as year-to-date amounts for the current Lease Year. If any Percentage Rent is
due for such month, the payment shall accompany such statement. In addition to
such regular monthly statements, Tenant shall provide an annual statement within
sixty (60) days after the end of each Lease Year, which shall show the total
amount of Gross Sales for such Lease Year, and shall be certified to be true,
complete and correct by an independent certified public accountant reasonably
satisfactory to Landlord, or at Tenant's option by Tenant's chief financial
officer. If such annual statement shows that Tenant underpaid Percentage Rent
for such Lease Year, Tenant shall include the additional amount with such
statement, and if such statement shows that Tenant overpaid Percentage Rent,
Landlord shall provide a credit or refund. Tenant shall require that any
subtenant, licensee or concessionaire furnish similar statements.
G. AUDITS. Landlord may, at Landlord's cost, except as provided below,
from time to time (but not more frequently than once each calendar year), upon
at least ten (10) days' notice to Tenant, cause a complete audit or examination
to be made of Tenant's Records and such books and records of any subtenant,
licensee or concessionaire for all or any part of the three Lease Years
immediately preceding such notice. During such audit, Tenant shall furnish such
information or explanation with respect to such items as may be necessary for a
proper examination and audit thereof. If such audit or examination discloses
that any of Tenant's statements of Gross Sales understates Gross Sales made
during any Lease Year by three percent (3%) or more, or if Tenant shall have
failed to furnish Landlord any monthly Gross Sales statements during any Lease
Year or shall have failed to prepare and maintain Tenant's Records as required
herein, Tenant shall pay Landlord the cost of such audit or examination, and any
deficiency in Percentage Rent, with interest at the Default Rate.
H. GROSS SALES DEFINED. "Gross Sales" shall mean the entire amount of
the actual sale price, whether for cash, credit or otherwise, of all sales of
goods and services and all other income and receipts whatsoever of all
business conducted at, on or from the Premises, including, without
limitation: (i) mail, telephone, facsimile and other orders received or
filled at the Premises, including but not limited to catalogue sales (except
as expressly provided below), (ii) deposits not refunded to purchasers, (iii)
orders taken at the Premises although filled elsewhere (except as expressly
provided below), (iv) gross receipts from vending and game machines (not to be
construed to authorize vending or game machines unless specifically set forth
in Article 1), (v) sale price of gift and merchandise certificates, (vi)
payments from other parties for shelf or advertising space at or respecting
the Premises, (vii) the full value of all consideration other than money
received, (viii) all other gross income or receipts from any business or
operation at, on or from the Premises, and (ix) Gross Sales by any sublessee,
concessionaire or licensee. However, Gross Sales shall not include (but
Tenant shall keep separate records therefor as part of Tenant's Records):
(a) returns to shippers or manufacturers, (b) proceeds from the sale of used
trade fixtures, (c) any cash or credit refunds made upon any sale in or from
the Premises where the merchandise is returned by the purchaser, (d) any
sales or excise tax imposed by any duly constituted governmental authority
(provided that no income or franchise tax, capital stock tax, tax based upon
gross receipts, assets or net worth, or similar tax shall be deducted from
Gross Sales), and (e) the exchange of merchandise between the stores and
warehouses of Tenant, if any, where such exchange of merchandise is made
solely for the convenient operation of the business of Tenant and not for the
purpose of consummating a sale that has theretofore been made in or from the
Premises or for the purpose of depriving Landlord of the benefit of a sale
that otherwise would be made in or from the Premises. No deduction shall be
allowed for any uncollected or uncollectible amounts or reserves therefor,
nor for cost of products or services sold, or other costs, charges or
expenses of purchasing, financing, selling, transportation, overhead or taxes
except as expressly provided herein. Trade-ins shall not reduce the sale
price of the item sold for purposes hereof. Layaway, credit and installment
sales shall be included in the month in which the goods or services are
delivered or provided, or in which any portion of the payment is received,
whichever first occurs, regardless of when or whether full payment is
received. SEE PAGE 4A
ARTICLE 4
PAYMENT OF RENT, RENT TAXES AND PRORATIONS
A. RENT AND RENT TAXES. Minimum Rent, Percentage Rent, Taxes, Center
Expenses, Marketing Fund Charges and any other amounts which Tenant is or
becomes obligated to pay Landlord under this Lease are sometimes herein referred
to collectively as "Rent", and all remedies applicable to the non-payment of
Rent shall be applicable thereto. Rent shall be paid without any prior demand
or notice therefor, and shall in all events be paid without any deduction,
recoupment, set-off or counterclaim, and without relief from any valuation or
appraisement laws. Tenant shall pay any rent tax, sales tax, service tax,
transfer tax, value added tax, or any other applicable tax on the Rent,
utilities or services herein or otherwise respecting this Lease or any other
document entered in connection herewith. Landlord may apply payments received
from Tenant to any obligations of Tenant then accrued, without regard to such
obligations as may be designated by Tenant.
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ARTICLE 3(H) GROSS SALES DEFINED.
The following items shall also be excluded from Gross Sales:
(a) Incidental catalog sales of merchandise, which are made solely for the
convenience of a customer and not for the purpose of consummating a sale that
has theretofore been made in the Premises or for the purpose of depriving
Landlord of the benefit of a sale that otherwise would be made on or from the
Premises, not to exceed three percent (3%) of Gross Sales at the Premises per
Lease Year. No refunds from catalogue sales shall be excluded from Gross Sales.
(b) The amount of any sales to employees at a discount, such excluded amount
not to exceed two percent (2%) of Tenant's Gross Sales at the Premises per Lease
Year.
(c) Bad debts actually written off by Tenant for federal tax purposes up to a
maximum of one percent (1%) of Gross Sales at the Premises in any one Lease
Year, provided that Tenant has exhausted all reasonable methods for collecting
said bad debts and provided that any amount so written off which is later
received by Tenant shall be included in Gross Sales when and to the extent
received.
(d) All sales of gift certificates or like vouchers, so long as gift
certificates and like vouchers are similarly treated in all of the stores of
Tenant, its parent, affiliates and subsidiaries, and provided that sales of
merchandise made at the Premises and paid for by such gift certificates or
vouchers (regardless of where such certificates or vouchers were issued) shall
be included as Gross Sales and, further provided, if at any time Tenant deems
the certificates or vouchers forfeited, the amount of the certificates or
vouchers shall at that time be included in Gross Sales under this Lease.
(e) Charges for shipping, boxes and gift wrapping provided to customers at no
profit to Tenant in connection with a purchase of store merchandise.
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B. PRORATIONS. If the Term commences on a day other than the first day
of a calendar month or ends on a day other than the last day of a calendar
month, the Minimum Rent, monthly payments of estimated Taxes and Center
Expenses, Marketing Fund Charge, and any other amounts payable on a monthly
basis shall be prorated on a per diem basis for such partial calendar months. If
the Minimum Rent is scheduled to increase under Article 1 other than on the
first day of a calendar month, the amount for such month shall be prorated on a
per diem basis to reflect the number of days of such month at the then current
and increased rates, respectively. If the Term commences other than on January
1, or ends other than on December 31, Tenant's obligations to pay amounts
towards actual Taxes and Center Expenses for such first or final calendar years
shall be prorated on a per diem basis to reflect the portion of such years
included in the Term. Prorations of Breakpoints for Partial Lease Years, and
prorations for Lease Years containing two different Breakpoints for different
periods, shall be as described in Article 3.
ARTICLE 5
TAXES AND CENTER EXPENSES
A. TAXES. Tenant shall pay Landlord an amount equal to Tenant's
Proportionate Share of Taxes in the manner described below.
B. CENTER EXPENSES. Tenant shall pay Landlord an amount equal to
Tenant's Proportionate Share of Center Expenses in the manner described
below. SEE PAGE 5A
C. MANNER OF PAYMENT. Taxes and Center Expenses shall be paid in the
following manner:
(i) Landlord may reasonably estimate in advance the amounts
Tenant shall owe for Taxes and Center Expenses for any full or partial
calendar year of the Term. In such event, Tenant shall pay such estimated
amounts, on a monthly basis, on or before the first day of each calendar
month, together with Tenant's payment of Minimum Rent. Landlord may
reasonably adjust the estimated amounts from time to time during the Term.
(ii) Within 180 days after the end of each calendar year, or as
soon thereafter as practicable, Landlord shall provide a statement (the
"Statement") to Tenant showing: (a) the amount of actual Taxes and Center
Expenses for such calendar year, with a listing of amounts for major
categories of Center Expenses, (b) any amount paid by Tenant towards Taxes
and Center Expenses during such calendar year on an estimated basis, and
(c) any revised estimate of Tenant's obligations for Taxes and Center
Expenses for the current calendar year.
(iii) If the Statement shows that Tenant's estimated payments were
less than Tenant's actual obligations for Taxes and Center Expenses for
such year, Tenant shall pay the difference. If the Statement shows an
increase in Tenant's estimated payments for the current calendar year,
Tenant shall pay the difference between the new and former estimates for
the period from January 1 of the current calendar year through the month in
which the Statement is sent. Tenant shall make such payments within thirty
(30) days after Landlord sends the Statement.
(iv) If the Statement shows that Tenant's estimated payments
exceeded Tenant's actual obligations for Taxes and Center Expenses, Tenant
shall receive a credit for the difference against payments of Rent next
due. If the Term shall have expired and no further Rent shall be due,
Landlord shall refund such difference when Landlord sends the Statement.
D. TAX REFUNDS, SUPPLEMENTAL BILLINGS AND FISCAL TAX YEARS. Tax
refunds shall be deducted from Taxes in the year they are received by Landlord.
If Taxes for any period during the Term or any extension thereof shall be
increased after payment thereof by Landlord for any reason, including without
limitation error, reassessment, or supplemental billing by applicable
governmental or municipal authorities, Tenant shall pay Landlord within ten (10)
days after notice Tenant's Proportionate Share of such increased Taxes. If any
Taxes shall be paid based on assessments or bills by a governmental or municipal
authority using a fiscal year other than a calendar year, Landlord may elect
from time to time to bill Tenant and make adjustments: (i) based on such fiscal
year, or (ii) based on tax payments becoming due during the subject calendar
year without regard to such fiscal year.
E. FINALITY OF STATEMENTS. SEE PAGE 5A
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ARTICLE 5(B) CENTER EXPENSES.
Notwithstanding anything contained in this Lease to the contrary, the amount
Tenant is obligated to pay on an annualized basis for Center Expenses shall not
(i) exceed $13.20 per square foot per annum for the first twelve (12) months of
the Term, or (ii) commencing with the first anniversary of the Commencement
Date, increase by more than five percent (5%) (the "Cap Percentage") from one
such year to the following year provided, however, if for any one year to the
following year the increase is less than the Cap Percentage, then the difference
may be applied to any future increase(s) from one year to the next year such
that the cap applicable to that future year-to-year increase(s) in Center
Expenses may be higher than the Cap Percentage and, further, the amount of
Center Expenses that falls outside the Cap Percentage for a year may be included
in the unused portion of a future year's Cap Percentage.
ARTICLE 5(E) FINALITY OF STATEMENTS.
By notice to Landlord within one (1) year after Tenant shall have received a
Statement with respect to a particular calendar year, Tenant shall have the
right, at its sole cost and expense (unless the audit determines that Tenant was
overbilled by at least three percent (3%) in which event Landlord shall pay the
cost of such audit), through its agents and representatives, upon notice to
Landlord, to audit and inspect the books and records of Landlord with respect to
the Center Expenses at the Center for such year ("Tenant's Audit"). Tenant
shall reimburse Landlord for any photocopying done at Landlord's or Landlord's
agent's office in connection therewith. Tenant's Audit shall take place at such
time and location as may be reasonably determined by Landlord, and Tenant shall
have such audit right only once with respect to each Statement. Unless Landlord
agrees to a longer period of time, Tenant's Audit shall be performed within
sixty (60) days after Tenant's notice to Landlord. If an error in the amount of
such Center Expense charge billed to Tenant for such calendar year has been
made, there shall be a recalculation of Tenant's Center Expense charge for such
calendar year and an appropriate readjustment between Landlord and Tenant to
reflect any underpayment or overpayment by Tenant, provided Tenant notifies
Landlord within ninety (90) days after the audit of any error Tenant believes
exists in the Statement.
Notwithstanding the foregoing, Landlord shall have the right to challenge
Tenant's Audit in which event the matter shall be submitted to an independent
certified public accountant mutually acceptable to both parties. Pending
resolution of the matter, Tenant shall pay the amounts as determined by
Landlord, subject to retroactive adjustment after the matter is resolved.
Tenant shall keep the results of all Tenant audits confidential.
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F. GENERAL MATTERS. So long as Tenant's obligations hereunder are
not materially adversely affected thereby, Landlord reserves the right to
reasonably change, from time to time, the manner or timing of the foregoing
payments. Although this Lease contemplates the computation of Taxes and
Center Expenses on a cash basis, Landlord may make reasonable and appropriate
accrual adjustments and Landlord reserves the right to change to a full
accrual system of accounting. In lieu of providing one Statement covering
Taxes and Center Expenses, Landlord may provide separate statements at the
same or different times. No delay by Landlord in providing the Statement (or
separate statements) shall be deemed a default by Landlord or a waiver of
Landlord's right to require payment of Tenant's obligations for actual or
estimated Taxes or Center Expenses.
ARTICLE 6
CONDITION OF PREMISES; OPENING FOR BUSINESS
Tenant agrees to accept the Premises, Center, and any Systems and
Equipment serving the Premises "as is," without any agreements,
representations, understandings or obligations on the part of Landlord to
perform any alterations, repairs or improvements except as may be expressly
provided in Exhibit B hereto or elsewhere in this Lease ("Landlord's Work").
Tenant does not accept the Premises subject to latent defects in the Premises
of which Tenant notifies Landlord in writing within one hundred eighty (180)
days after the Premises are delivered to Tenant. Tenant shall on or before
the Commencement Date: (i) demolish all existing tenants improvements, where
applicable, and completely construct or remodel (as the case may be) the
Premises and install a new storefront, storefront sign and trade fixtures in
and for the same in accordance with the other provisions of this Lease,
including, without limitation, Article 7, Exhibits B and C and the Rules
("Tenant's Initial Work"), and (ii) open the Premises for business to the
public, fully stocked and staffed and in compliance with all provisions of
this Lease, including, without limitation, Article 8. Landlord may require
that Tenant accept possession of the Premises and proceed with Tenant's
Initial Work and/or the preparation and submission of plans therefor prior to
the Commencement Date upon ten (10) days' advance notice. During any period
that Tenant shall be permitted or required to enter the Premises prior to the
Commencement Date (to plan or perform Tenant's Initial Work), Tenant shall
comply with all terms and provisions of this Lease, except those provisions
requiring the payment of Rent (other than such charges as Landlord may impose
under Article 7 or Exhibit B). The parties agree that Tenant's obligations
under this Article go to the essence of the parties' agreement hereunder, and
that any failure to perform such obligations will result in damages to
Landlord that are extremely difficult and impractical to determine and for
which Landlord's remedies at law will not be adequate. Accordingly, as a fair
and reasonable estimate and liquidation of Landlord's damages and not a
penalty, if Tenant fails to complete Tenant's Initial Work and open the
Premises for business in the manner required herein by the date which is
thirty (30) days after the Commencement Date, Tenant shall pay Landlord as
additional Rent an amount equal to 25% of the Minimum Rent then in effect
prorated on a per diem basis until Tenant completes Tenant's Initial Work and
so opens for business. Acceptance by Landlord of such liquidated damages
shall not be deemed permission for Tenant to continue such violation, and
shall not preclude Landlord from seeking any other remedy (other than
damages) for such violation including, without limitation, specific
performance or termination of this Lease or Tenant's right to possession as
described in Article 22.
ARTICLE 7
TRADE FIXTURES, ALTERATIONS AND LIENS
A. APPROVAL. Tenant shall not attach any fixtures, equipment or
other items to the Premises or make any additions, changes, alterations or
improvements to the Premises or the Systems and Equipment serving the
Premises, including without limitation Tenant's Initial Work described in
Article 6 and Exhibit B hereto (all such work referred to collectively herein
as the "Work"), without the prior written consent of Landlord. Landlord
shall not unreasonably withhold consent, except that Landlord reserves the
right to withhold consent in Landlord's sole discretion for Tenant's Initial
Work, and Work affecting the structure, safety or security of the Center or
Premises, the Systems and Equipment, or the appearance of the Premises from
any Common Areas. SEE PAGE 6A
B. CONDITIONS. Landlord reserves the right to impose requirements
as a condition of such consent or otherwise in connection with the Work,
including without limitation, requirements that Tenant: (i) submit for
Landlord's prior written approval detailed plans and specifications prepared
by licensed and competent architects and engineers, (ii) submit for
Landlord's prior written approval the names, addresses and background
information concerning all contractors, subcontractors and suppliers, (iii)
obtain and post permits, and additional insurance, (iv) submit contractor,
subcontractor and supplier lien waivers, (v) use union labor, and (vi) comply
with such other reasonable requirements as Landlord may impose concerning the
manner and times in which such Work shall be done and other aspects of the
Work. If Landlord consents or supervises, or recommends any suppliers,
contractors, architects, or engineers, the same shall not be deemed a
warranty as to the adequacy of the design, workmanship or quality of
materials, or compliance of the Work with any Laws.
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ARTICLE 7(A) APPROVAL.
Tenant may, without Landlord's consent, make alterations to the interior of the
Premises which do not affect the structural or storefront portions of the
Premises, or the plumbing, heating, ventilating, air-conditioning, mechanical,
or life-safety systems in the Premises, provided (i) the cost of said
alterations does not exceed TWENTY THOUSAND AND NO/100 DOLLARS ($20,000.00) in
any twelve (12) month period, and (ii) such alterations comply with all the
requirements of this Lease, including Exhibit B and Landlord's design criteria
for the Center, and do not materially alter the original design concept or
detrimentally affect the appearance of the Premises. Tenant shall submit to
Landlord copies of all invoices documenting that the cost of such work does not
exceed such amount.
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C. PERFORMANCE OF WORK. All Work shall be performed: (i) in a
first class, professional and workmanlike manner, (ii) only with materials
that are new, high quality, and free of material defects, (iii) in accordance
with plans and specifications approved by Landlord in advance in writing,
(iv) not to adversely affect the Systems and Equipment or the structure of
the Center, (v) diligently to completion and so as to minimize to the extent
possible interference with other tenants and the operation of the Center, and
(vi) in compliance with all Laws and other provisions of this Lease,
including without limitation, Exhibit B and the Rules attached hereto as
Rider One. If Tenant fails to perform the Work as required herein or the
materials supplied fail to comply herewith or with the specifications
approved by Landlord, and Tenant fails to cure such failure within 48 hours
after notice by Landlord (except that notice shall not be required in
emergencies), Landlord shall have the right to stop the Work until such
failure is cured (which shall not be in limitation of Landlord's other
remedies and shall not serve to abate the Rent or Tenant's other obligations
under this Lease).
D. LIENS. Tenant shall keep the Center, Premises and this Lease
free from any mechanic's, materialman's or similar liens or encumbrances, and
any claims therefor, in connection with any Work. Tenant shall give Landlord
notice at least ten (10) days prior to the commencement of any Work (or such
additional time as may be necessary under applicable Laws), to afford
Landlord the opportunity of posting and recording appropriate notices of
non-responsibility. Tenant shall remove any such claim, lien or encumbrance
by bond or otherwise within sixty (60) days after notice by Landlord. If
Tenant fails to do so, Landlord may pay the amount or take such other action
as Landlord deems necessary to remove such claim, lien or encumbrance,
without being responsible for investigating the validity thereof. The amount
so paid and costs incurred by Landlord shall be deemed additional Rent under
this Lease payable upon demand, without limitation as to other remedies
available to Landlord. Nothing contained in this Lease shall authorize Tenant
to do any act which shall subject Landlord's title to the Center or Premises
to any such notices, liens or encumbrances whether claimed by operation of
statute or other Law or express or implied contract. Any claim to a lien or
encumbrance upon the Center or Premises arising in connection with any Work
shall be null and void, or at Landlord's option shall attach only against
Tenant's interest in the Premises and shall in all respects be subordinate to
Landlord's title to the Center and Premises.
E. LANDLORD'S FEES AND COSTS. Tenant shall pay Landlord such fees
as Landlord may reasonably impose for utilities, trash removal, temporary
barricades, hoisting and other matters in connection with the Work, or such
fees therefor (if any) set forth in Exhibit B hereto. Tenant shall also pay
the reasonable cost of any outside engineer, architect or consultant retained
by Landlord to review Tenant's work when Tenant's work includes structural
changes, changes to life safety systems or may otherwise affect the Center's
structure. Not-withstanding anything herein or in Exhibit B to the contrary,
in no event shall Tenant's fees or chargebacks for the foregoing items,
including without limitation all temporary facilities and other charges set
forth in Exhibit B (except for barricades, if required), exceed the aggregate
amount of $1.42 per square foot in connection with Tenant's Initial Work
(provided that Tenant shall pay all incremental costs if Tenant utilizes
Landlord's hoisting services outside Landlord's normal business hours).
ARTICLE 8
USE AND OPERATING REQUIREMENTS
A. USE; COMPLIANCE WITH LAWS. Tenant shall use the Premises for the
purposes, specified in Article 1 (and Tenant shall use the Premises for all
the purposes specified therein except that Tenant shall not be required to
sell gift items or footwear in the Premises), and for no other purpose
whatsoever, subject to and in compliance with all other provisions of this
Lease, including without limitation the Rules attached as Rider One hereto.
Tenant shall comply with all Laws relating to the Premises and Tenant's use
thereof, including without limitation, Laws requiring the Premises to be
closed on Sundays or any other days or hours, health, safety and building
codes, and any permit or license requirements. Landlord makes no
representation that the Premises are suitable for Tenant's purposes.
B. REQUIRED HOURS. Tenant agrees to continuously operate and
conduct its business in one hundred percent (100%) of the Premises during the
Required Hours. "Required Hours" herein shall mean those hours established
from time to time by Landlord for the Center in general, in Landlord's sole
discretion; provided, Landlord shall not require that Tenant open for
business before 9:30 a.m. or remain open after 9:30 p.m., except: (i) for
holiday, seasonal or other special sales or promotions, or (ii) when at least
one Major and a majority of the tenants at the Center will be open. If
Tenant desires to operate the Premises during additional hours beyond those
required by Landlord hereunder, Tenant shall first obtain Landlord's written
approval (which may be withheld in Landlord's sole discretion), and Tenant
shall pay all additional costs and expenses and Landlord's reasonable charges
in connection therewith, including, without limitation, any additional
utilities, security services, cleaning and trash removal. Without limiting
the generality of the foregoing, Landlord reserves the right to close the
Center on holidays or certain hours of holidays, including without
limitation, New Year's Day, Easter, Thanksgiving and Christmas.
C. REQUIRED OPERATIONS. Tenant shall conduct its business at all
times in a first-class, professional and businesslike manner consistent with
reputable business standards and practices, and such that a high reputation
of the Center is developed and enhanced. Tenant shall operate the Premises
continuously, actively and diligently in a good faith manner designed to
maximize Gross Sales. Tenant shall keep the Premises adequately staffed with
well-trained personnel for efficient first class service, and adequately
stocked with new "in season" merchandise in good condition and displayed in a
professional and tasteful manner. Tenant agrees that storage and office space
in the Premises shall be limited to that necessary for, and used in
conjunction with, the business provided in Article 1 to be conducted in the
Premises. Sales and services permitted under Article 1 shall be provided
only on a retail basis to the general public. Tenant shall not use SEE PAGE
7A the Premises for catalogue sales, except for incidental catalog sales.
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ARTICLE 8(C) REQUIRED OPERATIONS.
OPENING CO-TENANCY.
1. TERMS. Notwithstanding anything to the contrary contained herein, IF on
the Commencement Date, Victoria's Secret, Williams-Sonoma and Starbucks
(third floor space only) and either Bennetton or American Eagle Outfitters
(or Comparable Replacement Tenant, as hereinafter defined) are not open for
business, THEN Tenant shall nonetheless be required to open for business, BUT
Tenant shall pay to Landlord, in lieu of Minimum Rent and Percentage Rent,
Substitute Rent (as hereinafter defined) until such time as the earlier of
(a) the date the foregoing named tenants (or Comparable Replacement Tenant
for Bennetton or American Eagle Outfitters), are open for business, and (b)
the date on which Tenant first achieves monthly Gross Sales of at least
$400.00 per square foot of the Premises, averaged over a six (6) consecutive
month period of operation.
2. DEFINITION OF SUBSTITUTE RENT. "Substitute Rent" shall mean eight
percent (8%) of each months Gross Sales and shall be payable in accordance
with the terms and conditions above, in lieu of Minimum Rent and Percentage
Rent only, and Tenant shall continue to pay all other Rent provided for in
this Lease. Whenever applicable, Substitute Rent shall be payable on or
before the fifteenth (15th) day of the following month and shall be
accompanied by Tenant's statement of Gross Sales for the respective month.
3. DEFINITION OF COMPARABLE REPLACEMENT TENANT. "Comparable Replacement
Tenant" shall mean a mutually agreeable replacement tenant comparable, in
national name recognition and quality of retail delivery, to any of the
following examples: Timberland; Guess; Talbots; Disney; Apothecaria: Banana
Republic; Abercrombie & Fitch; Brooks Brothers; Pottery Barn; Barnes & Noble;
J. Crew; Williams - Sonoma; Warner Brothers; Armani A/X; Ann Taylor; J.
Peterman; Restoration hardware; Victoria's Secret; Bally's; Brookstone; Eddie
Bauer; Body Shop; Crate & Barrel; Polo; Patagonia; Helly Hansen; Godiva;
Sundance; Coach; Polo Sport; Gap; Old Navy; Nike Town; F.A.O. Schwartz; Cole
Haan; Mark Shale; Harold's; Guess Kids; Talbot Kids; The Learning Store;
Sharper Image; The Nature Company; Barney's; Crabtree & Evelyn; Tommy
Hilfiger; and Nautica.
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D. TRADE NAME AND RADIUS RESTRICTIONS. Except in the case of an
assignment or sublet approved in writing by Landlord or not requiring such
consent, Tenant shall conduct Tenant's business only under the trade name set
forth in Article 1. Until the fifth (5th) anniversary of the Commencement
Date, Tenant and Tenant's affiliates, owners and subsidiaries shall not
directly or indirectly own, operate, control, engage or have a financial
interest in any business similar to that authorized to be conducted hereunder
(including a department or concession in another store), or use or permit the
use of the same or similar trade names, within the area set forth in Article
1, provided, however, that nothing herein shall prevent the operation of any
of Tenant's existing stores under their present trade names, or require that
Tenant violate any Law, prevent wholesale distribution from Tenant's
corporate headquarters, prevent the distribution of Tenant's catalogues or
prevent Tenant's standard, twice yearly, unadvertised retail sale of surplus
non-seasonal items of merchandise from Tenant's corporate headquarters.
E. VIOLATION OF REQUIREMENTS. The parties agree that Tenant's
obligations under Articles 8(B) and 8(D) go to the essence of the parties'
agreement hereunder, and that any failure to perform such obligations will
result in damages to Landlord that are extremely difficult and impractical to
determine and for which Landlord's remedies at law will not be adequate.
Accordingly, as a fair and reasonable estimate and liquidation of Landlord's
damages and not a penalty, if Tenant fails to perform any obligations under
Articles 8(B) and 8(D) during any portion of any day of the Term, Tenant
shall pay Landlord as additional Rent an amount equal to 30% of the Minimum
Rent then in effect prorated on a per diem basis. Acceptance by Landlord of
such liquidated damages shall not be deemed permission for Tenant to continue
such violation, and shall not preclude Landlord from seeking any other remedy
(other than damages) for such violation including, without limitation,
specific performance or termination of this Lease or Tenant's right to
possession as described in Article 22. Notwithstanding the foregoing, IF
Tenant fails to maintain the hours required hereunder by a period of less
than sixty (60) minutes as to either opening or closing of its business in
the Premises, such failure shall not be deemed a default hereunder and the
foregoing additional Rent shall not be payable until Tenant has received two
(2) notices of a late opening or early closing in any six (6) month period.
ARTICLE 9
PROMOTION OF CENTER AND TENANT'S BUSINESS
A. MARKETING FUND. Until the fifth (5th) anniversary of the
Commencement Date, Tenant shall pay Landlord a monthly Marketing Fund Charge in
the amount of 1/12 of $1.25 per square foot of the Premises (the fund created by
such charges and any similar charges paid by other tenants or parties shall be
referred to herein as the "Marketing Fund"). Landlord shall use the Marketing
Fund to promote, advertise and market the Center through television, radio,
newspaper or other media, or through other non-media promotions or events.
Although Landlord may appoint a committee of representatives from one or more
tenants or Majors to advise Landlord concerning the use of the Marketing Fund,
Landlord reserves the right to use the Marketing Fund for the foregoing purposes
in Landlord's sole discretion.
B. GRAND OPENING FUND. Tenant shall also pay a non-recurring
supplemental Marketing Fund Charge equal to $1.00 per square foot of the
Premises no later than ten (10) days prior to the Commencement Date, IF AND ONLY
IF Tenant is scheduled to open on the Grand Opening (or, IF Tenant subsequently
actually opens on the Grand Opening, THEN Tenant shall pay such amount within
ten [10] days thereafter). which shall be used in connection with the promotion,
advertising and marketing of the Grand Opening of the Center.
C. TENANT ADVERTISING. Tenant shall provide Landlord with evidence of
advertising costs as Landlord shall reasonably request from time to time. In any
of Tenant's advertising and publicity programs in the market area in which the
Center is located, Tenant shall include the Premises so as to receive at least
as much publicity as other stores owned or operated by Tenant in such market
area. All references to Landlord or the Center in such programs shall be in good
taste and shall identify the Center by the name designated by Landlord from time
to time.
D. LANDLORD'S EXPENSES. Landlord shall be reimbursed out of the
Marketing Fund for all reasonable costs and expenses incurred by Landlord in
administering such Fund, including without limitation, costs for performing or
procuring services for audits, tax filings and bookkeeping, and the
compensation, benefits and related expenses for any marketing director and
staff, rental value of space in the Center used by the same, all office
equipment, utilities and supplies, postage and travel expenses in connection
therewith, and the cost of all Center advertisements and promotional and
marketing activities and events.
ARTICLE 10
UTILITIES
A. UTILITIES PROVIDED BY TENANT. Tenant shall: (i) make
application in Tenant's own name for all utilities not provided by Landlord,
(ii) comply with all utility company regulations for such utilities,
including requirements for the installation of meters, and (iii) obtain
such utilities directly from, and pay for the same when due directly to, the
applicable utility company. The term "utilities" for purposes hereof shall
include but not be limited to electricity, gas, water, sewer, steam, fire
protection, telephone and other communication and alarm services, HVAC, and
all taxes or other charges thereon. Tenant shall install and connect all
equipment and lines required to supply such utilities to the extent not
already available at or serving the Premises, or at Landlord's option shall
repair, alter or replace any such existing items. Tenant shall maintain,
repair and replace all such items, operate the same, and keep
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the same in good working order and condition, as further provided in Article
11. Tenant shall not install any equipment or fixtures, or use the same, so
as to exceed the safe and lawful capacity of any utility equipment or lines
serving the same. The installation, alteration, replacement or connection of
any utility equipment and lines shall be subject to the requirements for
alterations of the Premises set forth in Article 7. Tenant shall ensure that
all HVAC equipment is installed and operated at all times in a manner to
prevent roof leaks, damage, or noise due to vibrations or improper
installation, maintenance or operation. Tenant shall at all times keep the
Premises sufficiently heated or air-conditioned such that heated or chilled
air is not drawn to or from the Premises. Notwithstanding the foregoing,
Landlord shall be responsible for (and Tenant shall have no responsibility
for) installation, maintenance and operation of Landlord's Work and for the
equipment required in connection with the furnishing of utilities by Landlord
as set forth in Exhibit D.
B. UTILITIES PROVIDED BY LANDLORD. Landlord reserves the right from
time to time to provide any or all utilities to the Premises. In such case,
Tenant shall pay such charges as Landlord may establish from time to time, which
Landlord may determine on a per square foot basis applicable to the square
footage of the Premises as a monthly charge, or which Landlord may determine
based on the quantity of utilities used or consumed at the Premises on a monthly
or other regular basis. Such charges shall not exceed the rates, if any, that
Landlord is permitted to charge pursuant to applicable Law and shall not exceed
the rate that Tenant would be charged directly by the applicable utility
company, plus Landlord's overhead (not to exceed fifteen percent [15%] of the
actual cost). In addition, if Landlord establishes charges based on consumption
or use: (i) such charges shall not be in excess of the rate that Tenant would
be charged directly by the utility company serving the general area in which the
Center is located, (ii) if the Premises are separately metered for such
utilities, Tenant shall pay for amounts of such utilities based on such meters,
and (iii) if the Premises are not separately metered for such utilities, Tenant
shall pay for amounts of such utilities based on the reasonable estimates of
Landlord's engineer or consultant, or at Landlord's election, shall pay
Landlord's cost for installing separate meters, and shall thereafter pay based
on such meters. If no such charges are established by Landlord, then the cost
of such utilities shall be included as part of Center Expenses. Except to the
extent prohibited by applicable Law, Landlord may also impose a reasonable
administrativecharge to cover meter-reading and other overhead expenses. All
such charges shall be payable as additional Rent ten (10) days after billed by
Landlord. Landlord may discontinue providing any utilities then being provided
by Landlord upon ten (10) days' advance written notice to Tenant (in which case
Tenant shall obtain such utilities directly from the applicable utility
company). If Landlord supplies ventilated air or chilled or heated air or water
for air-conditioning or heating of the Premises, Landlord may nevertheless
require that Tenant at Tenant's expense maintain, repair and replace any portion
of the systems and equipment therefor exclusively serving the Premises,
including without limitation any air handling equipment, ductwork and lines.
C. INTERRUPTIONS. Landlord does not warrant that any utilities
provided by Landlord will be free from shortages, failures, variations, or
interruptions caused by repairs, maintenance, replacements, improvements,
alterations, changes of service, strikes, lockouts, labor controversies,
accidents, inability to obtain services, fuel, steam, water or supplies,
governmental requirements or requests, or other causes beyond Landlord's
reasonable control. None of the same shall be deemed an eviction or
disturbance of Tenant's use and possession of the Premises or any part
thereof, or render Landlord liable to Tenant for abatement of Rent, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of such shortage,
failure, variation, or interruption, including without limitation, loss of
profits, business interruption or other incidental or consequential
damages. SEE PAGE 9A
ARTICLE 11
MAINTENANCE AND REPAIR OF PREMISES
A. TENANT MAINTENANCE AND REPAIRS. Tenant shall keep the Premises
in good working order, repair and condition (which condition shall also be
clean, sanitary, sightly and free of pests and rodents, and which repairs
shall include necessary replacements and capital expenditures and compliance
with all Laws now or hereafter adopted), except to the extent provided to the
contrary in Article 14 respecting casualty damage. Tenant's obligations
hereunder shall include but not be limited to Tenant's trade fixtures and
equipment, security gates, ceilings, walls, storefront, entrances, signs,
interior decorations, floor-coverings, wall-coverings, entry and interior
doors, exterior and interior glass, plumbing fixtures, light fixtures and
bulbs, keys and locks, fire extinguishers and fire protection systems, and
equipment and lines for water, sewer (including free flow up to the common
sewer line), HVAC, electrical, gas, steam, sprinkler and mechanical
facilities, and other systems and equipment which serve the Premises
exclusively whether located within or outside the Premises, and all
alterations and improvements to the Premises whether installed by Landlord or
Tenant. Tenant shall also at Landlord's option perform or reimburse Landlord
for any repairs, maintenance and replacements to areas of the Center outside
the Premises caused as a result of moving any furniture, fixtures, or other
property to or from the Premises, or otherwise caused by Tenant or any other
occupant of the Premises, or any of their employees, agents, invitees or
contractors. Any repairs or other work by Tenant hereunder shall be deemed
"Work" under Article 7, and shall be subject to all of the requirements
thereunder, including Landlord's prior written approval. Tenant shall
provide Landlord with evidence that any Work required hereunder has been
performed from time to time within five (5) days after Landlord's request
therefor. SEE PAGE 9A
B. HVAC MAINTENANCE. If the Premises are served exclusively by any
HVAC units or other systems or equipment, Tenant shall enter annual, written
maintenance contracts with competent, licensed contractors reasonably approved
or designated by Landlord. Such contracts shall include, and Tenant shall
require that such contractors provide: (i) inspection, cleaning and testing at
least monthly for HVAC units and semi-annually for other systems and equipment
(or more frequently if required by applicable Law or if reasonably required by
Landlord), (ii) any servicing, maintenance, repairs and replacements of filters,
belts or other items determined to be necessary or appropriate as a result of
such inspections and tests, or by the manufacturers' warranty, service manual or
technical bulletins, or otherwise required to ensure proper and efficient
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ARTICLE 10(C) INTERRUPTIONS.
Notwithstanding anything to the contrary contained herein, if, as a result of
the negligence of Landlord, its agents or employees, there is an interruption or
discontinuance in the furnishing by Landlord of any utilities to the Premises
which results in Tenant being unable to operate at the Premises, and Tenant is
closed at the Premises, for a period in excess of three (3) consecutive full
days after notice to Landlord by Tenant, the Minimum Rent required under this
Lease shall abate from the end of such period until the earlier of the date
Tenant reopens at the Premises or such time as utility service is restored such
that Tenant is again reasonably able to operate at the Premises, except such
abatement shall not apply to the extent such Rent is reimbursable by rent (or
business interruption) insurance carried by, or required to be carried by,
Tenant.
ARTICLE 11(A) TENANT MAINTENANCE AND REPAIRS.
Notwithstanding anything contained in Article 11(A) to the contrary, Tenant
shall not be responsible for the performance of any structural changes or
structural repairs to the Premises or changes to the Center's building systems
required by Law unless arising out of (i) Tenant's specific use or operations at
the Premises, (ii) any act or omission of Tenant, or (iii) any improvement,
alteration, addition or other work to the Premises made by Tenant. The
foregoing does not in an way relieve Tenant from any responsibility to pay
Tenant's Proportionate Share of Center Expenses as provided in this Lease.
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operation, including emergency work, (iii) all other work as shall be reasonably
required by Tenant, Landlord or Landlord's insurance carriers, (iv) a detailed
record of all services performed, and (v) an annual service report at the end of
each calendar year (Tenant shall provide Landlord with a copy of such annual
reports promptly upon Tenant's receipt thereof). Not later than thirty (30)
days prior to the Commencement Date and annually thereafter, Tenant shall
provide Landlord with a copy of all maintenance contracts required hereunder,
and written evidence reasonably satisfactory to Landlord that the annual fees
therefor have been paid. Such maintenance contracts represent part of Tenant's
obligations under this Article, and shall not be deemed to limit Tenant's
general obligations to keep any HVAC equipment and other systems and equipment
hereunder in good working order, repair and condition as further described in
Paragraph A, above.
C. SHARED EQUIPMENT.
D. LANDLORD MAINTENANCE AND REPAIRS. Landlord shall keep the Common
Areas, the roof above, foundation, exterior walls other than storefront, common
utility lines and other building systems if installed by Landlord to the point
of connection for Tenant, and structural portions of the Premises in good
working order and repair (the cost of which shall be included in Center
Expenses, to the extent described in Article 28), provided that Tenant shall
give Landlord reasonable prior notice of the necessity for such repairs, and
further provided that any damage thereto shall not have been caused by any act
or omission of, or violation of this Lease by, Tenant or any other occupant of
the Premises, or any of their employees, agents, or contractors, in which event
Landlord may perform or require that Tenant perform such repairs as provided
above (without limiting Landlord's other remedies therefor).
ARTICLE 12
COMMON AREAS
A. USE OF COMMON AREAS. Tenant may use the Common Areas to which, and
for the purposes for which, other tenants at the Center are given access during
the Term, subject to the following conditions:
(1) The Common Areas shall be used by Tenant and Tenant's employees and
invitees on a non-exclusive basis in common with employees and invitees of
Landlord and other tenants and parties to whom the right to use the Common Areas
has been or is hereafter granted.
(2) Tenant shall not directly or indirectly conduct business in the
Common Areas or make any use of the Common Areas which interferes in any way
with the use of the Common Areas by other parties.
(3) Tenant's use of the Common Areas shall be subject to the other
provisions of this Lease, including without limitation, the Rules attached as
Rider One hereto.
(4) Tenant's right to use the Common Areas shall terminate upon the
expiration or earlier termination of this Lease or Tenant's right to possession
of the Premises.
B. COMMON AREA MAINTENANCE AND CONTROL. Landlord shall administer,
operate, clean, maintain and repair the Common Areas, and Tenant shall pay
Tenant's Proportionate Share of Landlord's costs therefor as part of Center
Expenses. Landlord reserves the right at all times to determine the nature and
extent of all Common Areas, and shall have exclusive control and management
thereof (except to the extent that Majors or other parties own or control
portions thereof). Landlord shall have the right to close all or a portion of
the Common Areas to discourage non-customer parking or prevent a dedication
thereof to public use or otherwise prevent the acquisition of public rights in
such areas, and shall have the right to take such other actions as are further
described in Article 21. Landlord reserves the right to use, permit or deny the
use of the Common Areas for any purpose which in Landlord's sole opinion may be
in the best interests of the Center, including without limitation promotions,
events, exhibits, displays, shows and other activities, provided that such use
does not materially, adversely interfere with visibility of the Premises from
the Common Areas or access to the Premises.
C. INTERRUPTION OF SERVICES OR USE. Landlord does not warrant that
any services to, or any use of, the Common Areas will be free from shortages,
failures, variations, or interruptions caused by repairs, maintenance,
replacements, improvements, alterations, changes of service, strikes, lockouts,
labor controversies, accidents, inability to obtain services, fuel, steam, water
or other utilities or supplies, governmental requirements or requests, or other
causes beyond Landlord's reasonable control. None of the same shall be deemed
an eviction or disturbance of Tenant's use and possession of the Premises or any
part thereof, or render Landlord liable to Tenant for abatement of Rent, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of such shortages,
failures, variations or interruptions, including without limitation loss of
profits, business interruption or other incidental or consequential damages. SEE
PAGE 10A
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ARTICLE 12(C) INTERRUPTIONS OF SERVICES OR USE.
Notwithstanding anything to the contrary contained in Article 12(C), if, as a
result of the negligence of Landlord, its agents or employees, there is an
interruption or discontinuance in the furnishing by Landlord of Common Area
services which results in Tenant being unable to operate at the Premises, and
Tenant is closed at the Premises, for a period in excess of three (3)
consecutive full days after notice from Tenant to Landlord, the Minimum Rent
required under this Lease shall abate from the end of such period until the
earlier of the date Tenant reopens at the Premises or such time as the Common
Area services are restored such that Tenant is again reasonably able to operate
at the Premises, except such abatement shall not apply to the extent such Rent
is reimbursable by rent (or business interruption) insurance carried by, or
required to be carried by, Tenant.
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D. DEFINITION OF COMMON AREAS. The term "Common Areas" herein means
all areas of the Center which are now or hereafter made available by Landlord
from time to time for the general use or benefit of Landlord, any Majors, other
tenants at the Center, other parties to whom the right to use the Common Areas
has been or is hereafter granted, and their employees and invitees, as such
areas currently exist and as they may be changed from time to time. Without
limiting the generality of the foregoing, the Common Areas may include, as
designated by Landlord from time to time, any parking areas and structures
(whether in tiers or at, above or below grade), mall enclosures and roofs
covering Center buildings, entrances, sidewalks, streets or roadways,
passageways, concourses, courts, arcades, service corridors, loading platforms
and truck docks, delivery areas, escalators and elevators, ramps, stairs,
landscaped and vacant areas, pedestrian bridges, skywalks, skybridges, arrival
zones, public bathrooms, information and telephone booths, directory signs and
equipment, common lighting facilities, drainage areas, lounges and shelters,
package pick-up stations, drinking fountains, public comfort and first aid
stations, public meeting rooms, auditoriums, bus stops, taxi stands, and all
furniture, decorations, fixtures, improvements, Systems and Equipment, and other
facilities, located in or serving any of the foregoing, except to the extent
reserved for use by one or more designated tenants.
ARTICLE 13
INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS
A. REQUIRED INSURANCE. Tenant shall maintain during the Term: (i)
commercial general liability insurance, with a contractual liability endorsement
covering Tenant's indemnity obligations under this Lease, and with limits of not
less than $2,000,000 combined single limit for bodily injury, death, or property
damage or destruction (including loss of use thereof) per occurrence, including
liquor legal liability where appropriate, (ii) workers' compensation insurance
as required by statute, and employer's liability insurance in the amount of at
least $500,000 per occurrence, and (iii) "all-risk" property damage insurance
("Hazard Insurance") covering Tenant's inventory, personal property, furniture,
floor coverings, fixtures and equipment, and all Work installed by Tenant for
damage or other loss caused by fire or other casualty or cause including, but
not limited to, vandalism and malicious mischief, theft, explosion, business
interruption, and water damage of any type, including sprinkler leakage,
bursting and stoppage of pipes. All insurance required hereunder shall be
provided by responsible insurers rated at least A and 10 in the then current
edition of Best's Insurance Guide and shall be licensed in the State in which
the Center is located. Tenant's property damage insurance shall include full
replacement cost coverage and the amount shall satisfy any coinsurance
requirements under the applicable policy. Tenant's insurance shall be primary,
and any insurance maintained by Landlord or any other additional insureds
hereunder shall be excess and noncontributory. Landlord shall have the right,
consistent with industry standards, to reasonably increase the amount or expand
the scope of insurance to be maintained by Tenant hereunder from time to time.
B. CERTIFICATES, SUBROGATION AND OTHER MATTERS. Tenant shall provide
Landlord with certificates evidencing the coverage required hereunder (and, with
respect to liability coverage showing Landlord and Landlord's managing agent for
the Center and others designated by Landlord as additional insureds, and with
respect to leasehold improvements showing Landlord as an additional insured).
Tenant shall provide such certificates prior to the Commencement Date or
Tenant's possession of the Premises or construction of improvements therein
(whichever first occurs). Tenant shall provide renewal certificates to Landlord
at least thirty (30) days prior to expiration of such policies. Such
certificates shall state that the coverage may not be changed or cancelled
without at least thirty (30) days' prior written notice to Landlord. The
parties mutually hereby waive all rights and claims against each other for all
losses covered by their respective personal insurance policies, and waive all
rights of subrogation of their respective insurers. The parties agree that
their respective personal insurance policies are now, or shall be, endorsed so
that such waivers of subrogation shall not affect their respective rights to
recover thereunder.
C. WAIVER OF CLAIMS. SEE PAGE 11A
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ARTICLE 13(C) WAIVER OF CLAIMS.
Landlord and Tenant mutually agree that with respect to any loss suffered by one
of the parties (the "Loss Party") which is covered by the Hazard Insurance that
the Loss Party actually maintains or was required to maintain under this Lease,
the Loss Party releases the other party (the "Other Party") of and from any and
all claims with respect to such loss to the extent of the amount of the Hazard
Insurance the Loss Party was required to maintain or did maintain (whichever is
higher) with respect thereto; and the parties further mutually agree that, in
the event of the foregoing, the Loss Party's insurance company shall have no
right of subrogation against the Other Party on account thereof. Nothing in
this section shall be deemed to modify or otherwise affect releases of claims by
the parties contained elsewhere in this Lease.
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ARTICLE 14
CASUALTY DAMAGE
A. RESTORATION BY LANDLORD. If the Premises shall be damaged by fire
or other casualty, Landlord shall use available insurance proceeds to repair the
Premises, except that Landlord shall not be required to repair or replace any of
Tenant's furniture, furnishings, fixtures or equipment, or any alterations or
improvements in excess of any Landlord's Work under Exhibit B hereto, and
Landlord's obligations shall be subject to any governmental requirements or
requirements of any Mortgagee(s) and such Mortgagee's right to control, apply or
withhold such insurance proceeds. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's
business resulting in any way from such damage or the repair thereof.
B. RESTORATION BY TENANT. If Landlord repairs the Premises as
provided herein, Tenant shall repair and replace Tenant's Work, all items
required to be insured by Tenant hereunder, and all other items required to
restore the Premises to the condition required under Article 11 of this Lease.
Tenant shall commence such work within ten (10) days following substantial
completion by Landlord of any repairs required by Landlord hereunder and shall
proceed diligently therewith to completion. Tenant's work hereunder shall
constitute "Work" under Article 7 and shall be subject to all of the provisions
thereof. Tenant may close the Premises for business to the extent reasonably
required in connection with such Work.
C. ABATEMENT OF RENT. Landlord shall allow Tenant a proportionate
abatement of Minimum Rent from the date of the casualty through the earlier of
(i) the date which is seventy-five (75) days after the date that Landlord
substantially completes Landlord's repair obligations hereunder (or the date
that Landlord would have substantially completed such repairs, but for delays by
Tenant, its agents, employees, invitees, Transferees and contractors), and (ii)
the date Tenant actually reopens for business in the Center, provided such
abatement: (i) shall apply only to the extent the Premises are untenantable for
the purposes permitted under this Lease and not used by Tenant as a result
thereof, based proportionately on the square footage of the Premises so affected
and not used, and (ii) shall not apply if Tenant or any other occupant of the
Premises, or any of their employees, agents, invitees or contractors cause the
damage.
D. TERMINATION OF LEASE. Notwithstanding the foregoing to the
contrary, Landlord may elect to terminate this Lease, if the Center is
materially damaged by Tenant or any other occupant of the Premises, or any of
their agents, employees, invitees or contractors, or if the Center is damaged by
fire or other casualty or cause such that: (a) more than 25% of the Premises is
affected by the damage, (b) the damage occurs less than one year prior to the
end of the Term, (c) any Mortgagee(s) requires that the insurance proceeds or
any portion thereof be applied to the Mortgage debt (or terminates the ground
lease, as the case may be), or the damage is not fully covered by Landlord's
insurance policies, or (d) in Landlord's reasonable opinion, the cost of the
repairs, alterations, restoration or improvement work would exceed 25% of the
replacement value of the Center or of the portion thereof owned or ground leased
by Landlord (whether or not the Premises are affected). In any such case,
Landlord may terminate this Lease by notice to Tenant within 120 days after the
date of damage (such termination notice to include a termination date providing
at least thirty (30) days for Tenant to vacate the Premises). Tenant agrees
that Landlord's obligation to restore, and the abatement of Rent provided
herein, shall be Tenant's sole recourse in the event of such damage, and waives
any other rights Tenant may have under any applicable Law to terminate this
Lease by reason of damage to the Premises or Center. SEE PAGE 12A
ARTICLE 15
CONDEMNATION
If at least 20% of the rentable area of the Premises shall be taken by
power of eminent domain or condemned by a competent authority or by conveyance
in lieu thereof for public or quasi-public use ("Condemnation"), including any
temporary taking for a period of one year or longer, this Lease shall terminate
on the date possession for such use is so taken. If: (i) less than 20% of the
Premises is taken, but the taking includes a material portion of the Center or
of the portion thereof owned or ground leased by Landlord, or (ii) the taking is
temporary and will be in effect for less than one year but more than thirty (30)
days, then in either such event, Landlord or Tenant may elect to terminate this
Lease upon at least thirty (30) days' prior written notice to the other party.
The parties further agree that: (a) if this Lease is terminated, all Rent shall
be apportioned as of the date of such termination or the date of such taking,
whichever shall first occur, (b) if the taking is temporary, Rent shall be
abated for the period of the taking (but the Term shall not be extended
thereby), and (c) if this Lease is not terminated but any part of the Premises
is taken, the Minimum Rent, Breakpoint, Taxes, Center Expenses, and Marketing
Fund Charge shall be proportionately abated based on the square footage of the
Premises so taken. Landlord shall be entitled to receive the entire award or
payment in connection with such Condemnation and Tenant hereby assigns to
Landlord any interest therein for the value of Tenant's unexpired leasehold
estate or any other claim and waives any right to participate therein, except
that Tenant shall have the right to file any separate claim available to Tenant
for moving expenses and any taking of Tenant's personal property, and leasehold
improvements installed and paid for by Tenant without reimbursement by Landlord,
provided such award is separately payable to Tenant and does not diminish the
award available to Landlord or any Mortgagee(s).
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ARTICLE 14(D) TERMINATION OF LEASE.
(a) Notwithstanding anything to the contrary herein contained, in the event the
Premises are damaged by fire, explosion or other casualty or occurrence to
the extent of thirty percent (30%) or more of their insurable value at any
time during the final twenty-four (24) calendar months of the Term of this
Lease, then Tenant may elect to terminate this Lease by written notice to
Landlord given within thirty (30) days after the happening of the event
causing the damage.
(b) Further, Landlord agrees that in the exercise of its rights under clauses
(a) and (d) of this Article 14(D), Landlord shall not terminate this Lease
unless the leases of the two (2) tenants whose premises are located on each
side of and most immediately adjacent to the Premises are also terminated
(provided such tenants' lease allow for termation by Landlord) or such
spaces have been vacated or are otherwise vacant.
(c) In the event of any fire, explosion or other casualty or occurrence in
which: (i) the Premises shall be damaged to the extent of more than fifty
percent (50%) of the insurable value, and (ii) the Center (excluding any
Major) is damaged to the extent of fifty percent (50%) or more of the
insurable value; or in the event of any such damage in which the damage is
caused by an occurrence not covered by the insurance that Landlord carries,
then, unless Landlord elects to and does exercise its right to terminate
this Lease, Landlord shall use reasonable efforts to give written notice to
Tenant within thirty (30) days after such damage as to the approximate
length of time Landlord will require in order to restore the Premises. If
Landlord informs Tenant in such notice that it will take longer than twelve
(12) months after receipt by Landlord of insurance proceeds for any reason
other than Unavoidable Delays, Tenant may terminate this Lease upon thirty
(30) days prior written notice to Landlord given after receipt of such
notice. Further, if such restoration is not completed within twelve (12)
months after receipt by Landlord of insurance proceeds for any reason other
than Unavoidable Delays, Tenant may terminate this Lease upon thirty (30)
days prior written notice to Landlord given after the expiration of said
twelve (12) month period but prior to the completion of such restoration
work by Landlord. In the event of any such termination, both Landlord and
Tenant shall be relieved of their respective obligations under this Lease,
saving and excepting those obligations accruing before the date of such
termination.
(d) If the Center is damaged to the extent of fifty percent (50%) or more of
the insurable value hereof, and Landlord, due to reasons other than
Unavoidable Delays, does not commence reconstruction of such damage within
one hundred fifty (150) days after the date of such casualty and, due to
reasons other than Unavoidable Delays, does not thereafter diligently
proceed to complete such reconstruction within twelve (12) months after
receipt by Landlord of insurance proceeds relative thereto, Tenant may
terminate this Lease upon no less than thirty (30) days prior written
notice to Landlord given after receipt of such notice. Further, if such
restoration is not completed within a twelve (12) month period after
receipt by Landlord of insurance proceeds, due to reasons other than
Unavoidable Delays. Tenant may terminate this Lease, upon no less than
thirty (30) days prior written notice to Landlord given after the
expiration of said one hundred fifty (150) day period but prior to the
completion of such restoration work by Landlord. In the event of any such
termination, both Landlord and Tenant shall be relieved of their respective
obligations under this Lease, saving and excepting those obligations
accruing before the date of such termination.
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ARTICLE 16
RETURN OF POSSESSION
At the expiration or earlier termination of this Lease or Tenant's right of
possession, Tenant shall surrender possession of the Premises in broom-clean
condition and good repair (ordinary wear and tear and damage by casualty
excepted), free of debris, and otherwise in the condition required under Article
11, and shall ensure that all signs, vaults, safes, shelving, showcases,
mirrors, and movable trade fixtures and personal property have been removed
therefrom (subject to Article 36) and that any damage caused thereby has been
repaired. All leasehold improvements and other fixtures, such as light fixtures
and HVAC equipment, plumbing fixtures, hot water heaters, fire suppression and
sprinkler systems, wall coverings, carpeting and drapes, in or serving the
Premises, whether installed by Tenant or Landlord, shall be Landlord's property
and shall remain, all without compensation, allowance or credit to Tenant.
However, if prior to installation of such items Landlord so directs by notice,
Tenant shall promptly remove such of the foregoing items as are designated in
such notice and repair any damage to the Premises caused by such removal. If
Tenant shall fail to perform any repairs or restoration, or fail to remove any
items from the Premises as required hereunder, Landlord may do so after at least
ten (10) days prior written notice to, and Tenant shall pay Landlord the cost
thereof upon demand. All property removed from the Premises by Landlord
hereunder may be handled, discarded or stored by Landlord at Tenant's expense,
and Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. All such property shall at Landlord's option be
conclusively deemed to have been conveyed by Tenant to Landlord as if by bill of
sale without payment by Landlord. If Landlord arranges for storage of any such
property, Landlord shall have a lien against such property for costs incurred in
removing and storing the same.
ARTICLE 17
HOLDING OVER
Tenant shall pay Landlord 150% of the amount of Rent then applicable
prorated on a per diem basis for each day Tenant shall retain possession of the
Premises or any part thereof after expiration or earlier termination of this
Lease, together with all damages sustained by Landlord on account thereof. The
foregoing provisions shall not serve as permission for Tenant to hold-over, nor
serve to extend the Term (although Tenant shall remain a tenant at sufferance,
bound to comply with all provisions of this Lease until Tenant vacates the
Premises). Landlord shall have the right, at any time after expiration or
earlier termination of this Lease or Tenant's right to possession, to reenter
and possess the Premises and remove all property and persons therefrom, and
Landlord shall have such other remedies for holdover as may be available to
Landlord under other provisions of this Lease or applicable Laws.
ARTICLE 18
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages now or hereafter
placed upon the Center, and all other encumbrances and matters of public record
applicable to the Center, including without limitation, any reciprocal easement
or operating agreements, covenants, conditions and restrictions (and Tenant
shall not act or permit the Premises to be operated in violation thereof),
provided, however, Tenant shall not be required to subordinate to a Mortgage
that is entered into with a new mortgagee after the date of this Lease unless
Tenant is furnished with a non-disturbance agreement from the Mortgagee on
Mortgagee's standard form or a form which is otherwise reasonably acceptable to
the Mortgagee, provided furnishing such non-disturbance agreement shall not be a
condition to Tenant's subordination to the Mortgage if Tenant is in default. If
any foreclosure or power of sale proceedings are initiated by any Mortgagee(s)
or a deed in lieu is granted (or if any ground lease is terminated), Tenant
agrees, upon written request of any such Mortgagee(s) or any purchaser at such
sale, to attorn and pay Rent to such party and to execute and deliver any
instruments necessary or appropriate to evidence or effectuate such attornment.
In the event of attornment, no Mortgagee(s) shall be: (i) liable for any act or
omission of Landlord, or subject to any offsets or defenses which Tenant might
have against Landlord (prior to such Mortgagee(s) becoming Landlord under such
attornment), (ii) liable for any security deposit or bound by any prepaid Rent
not actually received by such Mortgagee(s), or (iii) bound by any future
modification of this Lease not consented to by such Mortgagee(s). Any
Mortgagee(s) may elect to make this Lease prior to the lien of its Mortgage, and
if the Mortgagee(s) under any prior Mortgage shall require, this Lease shall be
prior to any subordinate Mortgage; such elections shall be effective upon
written notice to Tenant. Tenant agrees to give any Mortgagee(s) by certified
mail, return receipt requested, a copy of any notice of default served by Tenant
upon Landlord, provided that prior to such notice Tenant has been notified in
writing (by way of service on Tenant of a copy of an assignment of leases, or
otherwise) of the name and address of such Mortgagee(s). Tenant further agrees
that if Landlord shall have failed to cure such default within the time
permitted Landlord for cure under this Lease, any such Mortgagee(s) whose
address has been so provided to Tenant shall have an additional period of thirty
(30) days in which to cure (or such additional time as may be required due to
causes beyond such Mortgagee's control, including time to obtain possession of
the Center by power of sale or judicial action). The provisions of this Article
shall be self-operative; however, Tenant shall execute such documentation as
Landlord or any Mortgagee(s) may request from time to time in order to confirm
the matters set forth in this Article in recordable form. To the extent not
expressly prohibited by Law, Tenant waives the provisions of any Law now or
hereafter adopted which may give or purport to give Tenant any right or election
to terminate or otherwise adversely affect this Lease or Tenant's obligations
hereunder if such foreclosure or power of sale proceedings are initiated,
prosecuted or completed.
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ARTICLE 19
ESTOPPEL CERTIFICATE
Tenant shall from time to time, within fifteen (15) days after written
request from Landlord, execute, acknowledge and deliver a statement: (i)
certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified, is in full force and effect (or if this Lease is claimed not to
be in force and effect, specifying the ground therefor) and the dates to which
the Minimum Rent, Percentage Rent and other charges hereunder have been paid,
and the amount of any Security Deposit, (ii) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or specifying such defaults if any are claimed, and (iii) certifying such other
matters as Landlord may reasonably request, or as may be reasonably requested by
Landlord's current or prospective Mortgagees, insurance carriers, auditors, and
prospective purchasers. Any such statement may be relied upon by any such
parties. If Tenant shall fail to execute and return such statement within the
time required herein, Tenant shall be deemed to have agreed with the matters set
forth in clauses (i), (ii), and (iii) above, and Landlord acting in good faith
shall be authorized as Tenant's attorney-in-fact to execute such statement on
behalf of Tenant (which shall not be in limitation of Landlord's other remedies
therefor).
ARTICLE 20
ASSIGNMENT AND SUBLETTING
A. TRANSFERS. Tenant acknowledges that Landlord has entered this
Lease in order to obtain the unique attraction of Tenant's trade name, the
unique services and/or merchandising mix and product lines associated with
Tenant's business and the unique combination of Tenant's apparent operating
expertise and financial integrity. Tenant shall not, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld: (i)
assign, mortgage, pledge, hypothecate, encumber, permit any lien to attach to,
or otherwise transfer, this Lease or any interest hereunder, by operation of law
or otherwise, (ii) sublet the Premises or any part thereof, or extend, renew or
modify any sublease, or (iii) permit the use of the Premises by any parties
other than Tenant and its employees, whether as licensee, concessionaire,
franchisee or otherwise (all of the foregoing are hereinafter referred to
collectively as "Transfers" and any party to whom any Transfer is made or sought
to be made is hereinafter referred to as a "Transferee"). Any Transfer made
without complying with this Article shall, at Landlord's option, be null, void
and of no effect (which shall not be in limitation of Landlord's other
remedies). Whether or not Landlord grants consent, Tenant shall pay $750.00
towards Landlord's review and processing expenses, as well as any reasonable
legal fees incurred by Landlord in connection therewith. SEE PAGE 14A
B. PROCEDURE. If Tenant shall desire Landlord's consent to any
Transfer, Tenant shall notify Landlord, which notice shall include: (a) a
reference to the Center, Premises and this Lease, (b) the name and address of
the proposed Transferee and a detailed description of the business operation
proposed to be conducted in the Premises, (c) the proposed effective date (which
shall not be less than 45 nor more than 180 days after Tenant's notice), (d) the
terms of the proposed Transfer, a copy of all documentation pertaining thereto,
and a detailed description of any alterations to the Premises required in
connection with the Transfer, and (e) current financial statements of the
proposed Transferee certified by an officer, partner or owner thereof.
C. CONSENT. If Landlord consents to a Transfer: (a) the terms and
conditions of this Lease shall in no way be deemed to have been waived or
modified, including without limitation, the purposes for which the Premises
shall be used under Article 1, (b) Tenant shall remain fully liable for all
obligations under this Lease, including without limitation, those obligations
arising before and after the Transfer, and any assignee shall expressly assume
all of Tenant's obligations, (c) such consent shall not be deemed consent to any
further Transfer by either Tenant or a Transferee, and (d) Tenant shall deliver
to Landlord promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord. Any sublease hereunder shall be subordinate and subject to the
provisions of this Lease, and if this Lease shall be terminated during the term
of any sublease, Landlord shall have the right to: (i) treat such sublease as
cancelled and repossess the Premises by any lawful means, or (ii) require that
such subtenant attorn to and recognize Landlord as its landlord under any such
sublease. If Tenant shall Default hereunder, Landlord is hereby irrevocably
authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to
make all payments under or in connection with the Transfer directly to Landlord
(which Landlord shall apply towards Tenant's obligations under this Lease).
D. RECAPTURE. Notwithstanding anything to the contrary contained in
this Article, Landlord shall have the option, by giving notice to Tenant within
thirty (30) days after receipt of Tenant's notice of any proposed Transfer
(which may be delivered to Landlord prior to Tenant's marketing of the
Premises), to recapture the Premises. Such recapture notice shall cancel and
terminate this Lease as of the date stated in Tenant's notice as the effective
date of the proposed Transfer, unless Tenant revokes Tenant's notice of proposed
Transfer by notice to Landlord within ten (10) days after Landlord's notice of
recapture.
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ARTICLE 20(A) TRANSFERS.
Landlord shall not unreasonably withhold consent to an assignment of this Lease
PROVIDED:
(i) that such assignment or transfer shall in no manner relieve Tenant
of any of the obligations undertaken by it under the Lease;
(ii) the same shall not be binding on Landlord until a fully executed
copy of such assignment, the assumption of this Lease by the assignee, and such
other information regarding the assignment as Landlord may reasonably request
shall have been delivered to Landlord within twenty (20) days of Landlord's
request therefor, including but not limited to financial statements, bank
references, credit reports, and information concerning the proposed assignee's
character, reputation and business experience;
(iii) Tenant shall not then be in default under this Lease;
(iv) in each instance such succeeding entity shall assume in writing all
of the obligations of this Lease on the part of Tenant;
(v) the net worth of the succeeding entity immediately following such
assignment shall not be less than $3,000,000.00;
(vi) in exercising its reasonable approval, Landlord shall be entitled
to consider, among other things, the mix of tenants at the Center, the character
and reputation of both the Center and the proposed Transferee (taking into
account, among other things, the location of the Premises), the experience of
the proposed Transferee (which shall in no event consist of less than three [3]
years successful experience and positive EBITDA, as determined in Landlord's
reasonable business judgment, that demonstrates a sustainable business
operation) in operating a business of the type and character which is to be
operated in the Premises, and the financial ability of the proposed Transferee;
and
(vii) the Transferee shall operate under the trade name set forth in
Article 1 or such other trade name reasonably approved by Landlord.
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E. INCREASE IN MINIMUM RENT.
F. CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer"
shall also include the following, whether accomplished directly or indirectly:
(a) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary
or by operation of law, of a majority of the partners, or a transfer of a
majority of partnership interests, in the aggregate on a cumulative basis, or
the dissolution of the partnership, and (b) if Tenant is a closely held
corporation (i.e., whose stock is not publicly held and not traded through an
exchange or over the counter), the: (i) dissolution, merger, consolidation or
other reorganization of Tenant, (ii) sale or other transfer of more than a
cumulative aggregate of 50% of the voting shares of Tenant (other than to
immediate family members by reason of gift or death) or (iii) sale, mortgage,
hypothecation or pledge of more than a cumulative aggregate of 50% of Tenant's
net assets.
ARTICLE 21
RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein, Landlord reserves full
rights to control the Center (which rights may be exercised without subjecting
Landlord to claims for constructive eviction, abatement of Rent, damages or
other claims of any kind), including more particularly, but without limitation,
the following rights:
A. ACCESS TO PREMISES. Landlord and its authorized representatives
may upon reasonable notice to Tenant (which notice may be delivered to a store
manager of Tenant at the Premises, except as provided below), except in the case
of emergency, in which case no notice need be given: (i) inspect the Premises,
(ii) exhibit the Premises to current and prospective tenants, purchasers,
lenders, insurers, governmental authorities, and brokers, (iii) place in and
upon the Premises or such other places as may be determined by Landlord "For
Rent" signs or notices if Tenant shall abandon or vacate the Premises, (iv) upon
notice at the address set forth herein for Tenant notices, enter or permit entry
to the Premises in emergencies or for any other reasonable purpose, or for the
purpose of exercising any other rights or remedies expressly granted or reserved
to Landlord under this Lease or applicable Law, or to make any repairs,
maintenance, improvements or alterations, or other work in or about the Center,
and (v) upon notice at the address set forth herein for Tenant notices, in
connection therewith, erect scaffolding and temporary barricades and take into,
upon or through the Premises, materials required to perform the same, and if
reasonably required, move Tenant's leasehold improvements, fixtures, property
and equipment. However, in connection with entering the Premises to exercise any
of the foregoing rights, Landlord shall take reasonable steps to minimize any
interference with Tenant's business, and following completion of the work,
return Tenant's leasehold improvements, fixtures, property and equipment to the
original locations and condition to the fullest extent reasonably possible. SEE
PAGE 15A
B. RESERVED AREAS. Landlord reserves all rights to use (or grant
other parties the right to use) and Tenant shall have no right, title or
interest in: (i) the roof of the Center, (ii) exterior non-storefront portions
of the Premises (including, without limitation, demising walls and outer walls
of the area of the Center in which the Premises are located), (iii) air rights
above the Premises and rights to the land and improvements below the floor level
of the Premises, and (iv) areas within the Premises necessary for utilities,
services, safety and operation of the Center that will not materially interfere
with Tenant's use of the Premises, including the Systems and Equipment, fire
stairways, and space between the suspended ceiling of the Premises and the slab
of the floor or roof of the Center thereabove. If the Premises does not contain
a suspended ceiling, the Premises shall extend vertically to the height where,
in Landlord's reasonable opinion, a suspended ceiling would otherwise exist, and
Landlord reserves the right to install a suspended ceiling and use the area
thereabove.
C. REMEASUREMENT. Landlord and Tenant each reserve the right to
remeasure the Premises at any time within sixty (60) days of the Commencement
Date . All measurements shall be made from the outside of exterior walls, shaft
walls or corridors or the center of any common walls, without deduction for
columns, stairs or other interior construction or equipment, and shall include
any basements and mezzanines in the Premises. If any remeasurement determines
that the Premises contain a different number of square feet than set forth in
Article 1, the Minimum Rent, Breakpoint, Center Expenses, Taxes, Marketing Fund
Charge, and Security Deposit shall be adjusted retroactively and prospectively
on a pro rata basis to reflect the number of square feet determined by such
remeasurement. Upon either party's request, the revised square footage shall be
confirmed in an amendment to this Lease signed by both parties.
D. ACCESS TO CENTER. Landlord may prevent or restrict access to the
Center or designated portions thereof by such security procedures as Landlord
may from time to time impose on days and hours when the Center is, or portions
thereof are, closed for business to the public. Landlord reserves the right to
control, prevent access by and remove, any person whose presence in the judgment
of Landlord shall be prejudicial to the safety, character, reputation and
interests of the Center, or who in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs.
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ARTICLE 21(A) ACCESS TO PREMISES.
If for a reason other than a violation of this Lease by Tenant, or the act,
omission or negligence of Tenant, Landlord performs work within the Premises and
such work causes interference to Tenant's business operations such that Tenant
cannot reasonably operate for business at the Premises, and does not operate at
the Premises, in excess of three (3) consecutive full days after notice to
Landlord, Minimum Rent under this Lease shall abate from the end of said period
until the earlier of the date Tenant reopens in the Premises or the date
Landlord's work diminishes or stops such that Tenant can again reasonably
operate for business within the Premises, except the aforesaid abatement shall
not apply to the extent Tenant carries, or is required to carry, rent insurance.
15A
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E. EMERGENCY CLOSINGS. Landlord shall have the right (but not the
obligation) to limit or prevent access to all or any portion of the Center, shut
down elevator and escalator service, activate emergency controls or procedures,
or otherwise take such action or preventive measures deemed necessary by
Landlord for the safety of tenants or other occupants of the Center or the
protection of the Center or other property located thereon or therein, in case
of fire or other casualty, riot or other civil disorder, strike or labor unrest,
public excitement or other dangerous condition, or threat thereof.
F. OTHER TENANTS. Landlord reserves the right to lease any portion of
the Center to such other tenants as Landlord, in Landlord's sole discretion,
deems appropriate, whether or not engaged in the same or similar business for
which Tenant is permitted to use the Premises under this Lease. Tenant
acknowledges that Landlord has made no representations as to the presence of any
specific tenant or number or types of tenants at the Center as of or after the
Commencement Date, hours or days that such other tenants shall or may be open
for business, or gross sales which may be achieved by Tenant or any other
tenants at the Center. A vacation or abandonment of its premises or cessation of
business in the Center by any other tenant or occupant shall not release or
excuse Tenant from Tenant's obligations under any provision of this Lease.
G. INSUFFICIENT GROSS SALES.
H. CHANGES TO THE CENTER. Landlord reserves the right to: (i) change
the name of the Center and the address or designation of the Premises or the
building in which the Premises are located, (ii) install, maintain, alter and
remove signs on or about the exterior and interior of the Center, (iii) and
grant easements and other interests and rights in the Center to other parties,
(iv) add, alter, expand, reduce, eliminate, relocate or change the shape, size,
location, character, design, appearance, use, number or height of any permanent
or temporary buildings, structures, improvements, surface parking, subterranean
and multiple level parking decks, kiosks, planters, pools, waterfalls, parking
areas, driveways, landscaped areas and other Common Areas, change the striping
of parking areas and direction and flow of traffic, and convert Common Areas to
leasable areas and leasable areas to Common Areas, (v) enclose any mall or other
area, or remove any such enclosure, or add one or more additional levels or
stories to the Center or any portion thereof, whether or not the Premises are
contained therein, and add structural support columns that may be required
within the Premises or Common Areas, (vi) relocate any HVAC equipment serving
the Premises installed on the roof or other area outside the Premises if
Landlord constructs an additional story or level or otherwise alters the Center,
and (vii) in connection with the foregoing matters, or with any other
inspections, repairs, maintenance, improvements or alterations in or about the
Center, or as a result of any casualty, incident, strike, condemnation, act of
God, Law or governmental requirement or request, or any other cause, erect
scaffolding, barricades, and other structures reasonably required in, or
otherwise close, Common Areas or portions thereof, including but not limited to
public entry ways and areas, restrooms, stairways, escalators, elevators and
corridors. However, in connection with exercising such rights, Landlord shall:
(a) take reasonable steps to minimize or avoid any denial of access to the
Premises or visibility of the Premises from the Common Area, except when
necessary on a temporary basis, (b) take reasonable steps to avoid materially
changing the configuration or reducing the square footage of the Premises,
unless required by Laws or other causes beyond Landlord's reasonable control
(and in the event of any permanent material reduction, the Minimum Rent,
Breakpoint, Center Expenses, Taxes, and Marketing Fund Charge shall be
proportionately reduced), (c) at Landlord's expense, move Tenant's entrance
doorway if access thereto is materially impaired, and (d) if Landlord enters the
Premises in connection with any of the foregoing matters, comply with
Paragraph A above. Landlord agrees that the Center shall never become a
discount or off-price shopping center.
I. TERMINATION OR RELOCATION.
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ARTICLE 22
LANDLORD'S REMEDIES
A. DEFAULT. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant and shall give rise to Landlord's
remedies set forth in Paragraph (B), below: (i) failure to make when due any
payment of Rent, unless such failure is cured within five (5) days after notice,
(ii) failure to observe or perform any term or condition of this Lease other
than the payment of Rent, unless such failure is cured within any period of time
following notice expressly provided in other Articles hereof, or otherwise
within a reasonable time, but in no event more than thirty (30) days following
notice (or such additional time as may be required if such failure cannot be
cured within thirty (30) days and Tenant is diligently prosecuting such cure,
not to exceed an aggregate of 150 days, due to Unavoidable Delays as described
in Article 28), or (iii) (a) making by Tenant or any guarantor of this Lease
("Guarantor") of any general assignment for the benefit of creditors, (b) filing
by or against Tenant or any Guarantor of a petition to have Tenant or such
Guarantor adjudged a bankrupt or a petition for reorganization or arrangement
under any Law relating to bankruptcy or insolvency (unless, in the case of a
petition filed against Tenant or such Guarantor, the same is dismissed within
sixty (60) days), (c) appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located in the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within thirty
(30) days, (d) attachment, execution or other judicial seizure of substantially
all of Tenant's assets located on the Premises or of Tenant's interest in this
Lease, (e) Tenant's or any Guarantor's convening of a meeting of its creditors
or any class thereof for the purpose of effecting a moratorium upon or
composition of its debt, (f) Tenant's or any Guarantor's insolvency or admission
of an inability to pay its debts as they mature, or (iv) a violation by Tenant
or any affiliate of Tenant under any other lease or agreement with Landlord
relating to the Center which is not cured within the time permitted for cure
thereunder. Failure by Tenant to comply with the same term or condition of this
Lease on two occasions during any twelve month period shall cause any failure to
comply with such term or condition during the succeeding twelve month period, at
Landlord's option, to constitute an incurable Default. The notice and cure
periods provided herein are in lieu of, and not in addition to, any notice and
cure periods provided by Law; provided, Landlord may at any time and from time
to time elect to comply with such notice and cure periods as may be provided by
Law in lieu of the notice and cure periods provided herein.
B. REMEDIES. If a Default occurs, Landlord shall have the rights and
remedies hereinafter set forth to the extent permitted by Law, which shall be
distinct, separate and cumulative with and in addition to any other right or
remedy allowed under any Law or other provisions of this Lease:
(1) Landlord may terminate Tenant's right of possession, reenter and
repossess the Premises by detainer suit, summary proceedings or other lawful
means, with or without terminating this Lease (and if applicable Law permits,
and Landlord shall not have expressly terminated this Lease in writing, any
such action shall be deemed a termination of Tenant's right to possession
only). In such event, Landlord may recover from Tenant: (i) any unpaid Rent
as of the termination date, (ii) the amount by which: (a) any unpaid Rent
which would have accrued after the termination date during the balance of the
Term exceeds (b) the reasonable rental value of the Premises under a lease
substantially similar to this Lease for the balance of the Term, taking into
account among other things, the condition of the Premises, market conditions
and the period of time the Premises may reasonably remain vacant before
Landlord is able to re-lease the same to a suitable replacement tenant, and
Costs of Reletting (as defined in Paragraph l below) that Landlord may incur
in order to enter such replacement lease, and (iii) any other amounts
necessary to compensate Landlord for all damages proximately caused by
Tenant's failure to perform its obligations under this Lease. For purposes
of computing the amount of Rent herein that would have accrued after the
termination date, Tenant's obligation for Percentage Rent shall be projected
based on Tenant's average annual Gross Sales for the 36 months (or lesser
period, if 36 months of the Term have not expired) preceding Tenant's
Default, and Tenant's obligations for Taxes, Center Expenses, and Marketing
Fund Charge shall be projected, based upon the average rate of increase, if
any, in such items from the Commencement Date through the termination date.
The amounts computed in accordance with the foregoing subclauses (a) and (b)
shall both be discounted in accordance with accepted financial practice at
the rate of five percent (5%) per annum to the then present value.
(2) Landlord may terminate Tenant's right of possession, reenter and
repossess the Premises by detainer suit, summary proceedings or other lawful
means, with or without terminating this Lease (and if applicable Law permits,
and Landlord shall not have expressly terminated this Lease in writing, any such
action shall be deemed a termination of Tenant's right of possession only). In
such event, Landlord may recover from Tenant: (i) any unpaid Rent as of the
date possession is terminated, (ii) any unpaid Rent which accrues during the
Term from the date possession is terminated through the time of judgment (or
which may have accrued from the time of any earlier judgment obtained by
Landlord), less any consideration received from replacement tenants as further
described and applied pursuant to Paragraph l, below, and (iii) any other
amounts necessary to compensate Landlord for all damages proximately caused by
Tenant's failure to perform its obligations under this Lease, including without
limitation, all Costs of Reletting (as defined in Paragraph l). Tenant shall
pay any such amounts to Landlord as the same accrue or after the same have
accrued from time to time upon demand. At any time after terminating Tenant's
right to possession as provided herein, Landlord may terminate this Lease as
provided in clause (1) above by written notice to Tenant, and Landlord may
pursue such other remedies as may be available to Landlord under this Lease or
applicable Law.
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C. MITIGATION OF DAMAGES. If Landlord is required by applicable Law
to mitigate damages under this Lease: (a) Landlord shall be required only to
use reasonable efforts to mitigate, which shall not exceed such efforts as
Landlord generally uses to lease other space at the Center, (b) Landlord will
not be deemed to have failed to mitigate if Landlord leases any other portions
of the Center before reletting all or any portion of the Premises, and (c) any
failure to mitigate as described herein with respect to any period of time shall
only reduce the Rent and other amounts to which Landlord is entitled hereunder
by the reasonable rental value of the Premises during such period, taking into
account the factors described in clause B(1), above. In recognition that the
value of the Center depends on the rental rates and terms of leases therein,
Landlord's rejection of a prospective replacement tenant based on an offer of
rentals below Landlord's published rates for new leases of comparable space at
the Center at the time in question, or at Landlord's option, below the rates
provided in this Lease, or containing terms less favorable than those contained
herein, shall not give rise to a claim by Tenant that Landlord failed to
mitigate Landlord's damages.
D. RELETTING. If this Lease or Tenant's right to possession is
terminated, or Tenant vacates or abandons the Premises, Landlord may: (i) enter
and secure the Premises, change the locks, install barricades, remove any
improvements, fixtures or other property of Tenant therein, perform any
decorating, remodelling, repairs, alterations, improvements or additions and
take such other actions as Landlord shall determine in Landlord's sole
discretion to prevent damage ordeterioration to the Premises or prepare the same
for reletting, and (ii) relet all or any portion of the Premises (separately or
as part of a larger space), for any rent, use or period of time (which may
extend beyond the Term hereof), and upon any other terms as Landlord shall
determine in Landlord's sole discretion, directly or as Tenant's agent (if
permitted or required by applicable Law). The consideration received from such
reletting shall be applied pursuant to the terms of Paragraph l hereof, and if
such consideration, as so applied, is not sufficient to cover all Rent and
damages to which Landlord may be entitled hereunder, Tenant shall pay any
deficiency to Landlord as the same accrues or after the same has accrued from
time to time upon demand, subject to the other provisions hereof.
E. SPECIFIC PERFORMANCE, COLLECTION OF RENT AND ACCELERATION.
Landlord shall at all times have the right without prior demand or notice except
as required by applicable Law to: (i) seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease or restrain or enjoin a
violation of any provision hereof, and Tenant hereby waives any right to require
that Landlord post a bond in connection therewith, and (ii) sue for and collect
any unpaid Rent which has accrued. Notwithstanding anything to the contrary
contained in this Lease, to the extent not expressly prohibited by applicable
Law, in the event of any Default by Tenant, Landlord may terminate this Lease or
Tenant's right to possession and accelerate and declare that all Rent reserved
for the remainder of the Term shall be immediately due and payable (in which
event, Tenant's obligations for Percentage Rent, Taxes, Center Expenses, and
Marketing Fund Charge herein that would have accrued thereafter shall be
projected in the manner described in Section B(1), above); provided the Rent so
accelerated shall be discounted in accordance with accepted financial practice
at the rate of five percent (5%) per annum to the then present value, and
Landlord shall, after receiving payment of the same from Tenant, be obligated to
turn over to Tenant any actual net reletting proceeds (net of all Costs of
Reletting) thereafter received during the remainder of the Term, up to the
amount so received from Tenant pursuant to this provision.
F. LATE CHARGES AND INTEREST. Tenant shall pay, as additional Rent, a
service charge of Two Hundred Dollars ($200.00) for bookkeeping and
administrative expenses, if any portion of Rent is not received when due. If
Landlord rightfully issues a Notice of Default to Tenant, Tenant shall pay
Landlord an additional service charge in the amount of One Hundred Dollars
($100.00). In addition, any Rent not paid when due shall accrue interest from
the due date at the Default Rate until payment is received by Landlord. Such
service charges and interest payments shall not be deemed consent by Landlord to
late payments, nor a waiver of Landlord's right to insist upon timely payments
at any time, nor a waiver of any remedies to which Landlord is entitled as a
result of the late payment of Rent.
G. LANDLORD'S CURE OF TENANT DEFAULTS. If Tenant fails to perform any
obligation under this Lease for thirty (30) days after notice thereof by
Landlord (except that no notice shall be required in emergencies), Landlord
shall have the right (but not the duty), to perform such obligation on behalf
and for the account of Tenant. In such event, Tenant shall reimburse Landlord
upon demand, as additional Rent, for all expenses incurred by Landlord in
performing such obligation together with an amount equal to fifteen percent
(15%) thereof for Landlord's overhead, and interest thereon at the Default Rate
from the date such expenses were incurred. Landlord's performance of Tenant's
obligations hereunder shall not be deemed a waiver or release of Tenant
therefrom.
H. BAD RENT CHECKS. If during the Term, as it may be extended,
Landlord receives two (2) or more checks from Tenant which are returned by
Tenant's bank for insufficient funds, Landlord may require that all checks
thereafter be bank certified or cashier's checks (without limiting Landlord's
other remedies). All bank service charges resulting from any bad checks shall
be borne by Tenant.
I. OTHER MATTERS. No re-entry or repossession, repairs, changes,
alterations and additions, reletting, acceptance of keys from Tenant, or any
other action or omission by Landlord shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession, or accept a
surrender of the Premises, nor shall the same operate to release the Tenant
in whole or in part from any of the Tenant's obligations hereunder, unless
express written notice of such intention is sent by Landlord or its agent to
Tenant. Landlord may bring suits for
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amounts owed by Tenant hereunder or any portions thereof, as the same accrue or
after the same have accrued, and no suit or recovery of any portion due
hereunder shall be deemed a waiver of Landlord's right to collect all amounts to
which Landlord is entitled hereunder, nor shall the same serve as any defense to
any subsequent suit brought for any amount not theretofore reduced to judgment.
Landlord may pursue one or more remedies against Tenant and need not make an
election of remedies until findings of fact are made by a court of competent
jurisdiction. All rent and other consideration paid by any replacement tenants
shall be applied, at Landlord's option: first, to the Costs of Reletting,
second, to the payment of all costs of enforcing this Lease against Tenant or
any Guarantor, third, to the payment of all interest and service charges
accruing hereunder, fourth, to the payment of Rent theretofore accrued, and the
residue, if any, shall be held by Landlord and applied to the payment of other
obligations of Tenant to Landlord as the same become due (with any remaining
residue to be retained by Landlord). "Costs of Reletting" shall include without
limitation, all reasonable costs and expenses incurred by Landlord for any
repairs, maintenance, changes, alterations and improvements to the Premises
(whether to prevent damage or to prepare the Premises for reletting), brokerage
commissions, advertising costs, attorneys' fees, any economic incentives given
to enter leases with replacement tenants, and costs of collecting rent from
replacement tenants. Landlord shall be under no obligation to observe or
perform any provision of this Lease on its part to be observed or performed
which accrues after the date of any Default by Tenant. The times set forth
herein for the curing of violations by Tenant are of the essence of this Lease.
Tenant hereby irrevocably waives any right otherwise available under any Law to
redeem or reinstate this Lease or Tenant's right to possession after this Lease
or Tenant's right to possession is terminated based on a Default by Tenant.
ARTICLE 23
LANDLORD'S RIGHT TO CURE
If Landlord shall fail to perform any obligation under this Lease required
to be performed by Landlord, Landlord shall not be deemed to be in default
hereunder nor subject to claims for damages of any kind, unless such failure
shall have continued for a period of thirty (30) days after written notice
thereof by Tenant or such additional time as may be required due to Unavoidable
Delays. If Landlord shall fail to cure within the time permitted for cure
herein, Landlord shall be subject to such claims for damages and remedies as may
be available to Tenant (subject to the other provisions of this Lease);
provided, Tenant shall have no right of self-help to perform repairs or any
other obligation of Landlord, and shall have no right to withhold, set off, or
abate Rent.
ARTICLE 24
INDEMNIFICATION
Except to the extent arising from the intentional or negligent acts of
Landlord or Landlord's agents or employees, Tenant shall defend, indemnify and
hold harmless Landlord from and against any and all claims, demands,
liabilities, damages, judgments, orders, decrees, actions, proceedings, fines,
penalties, costs and expenses, including without limitation, court costs and
attorneys' fees arising from or relating to any violation of Law, loss of life,
diminution in value of the Center, damage or injury to persons, property or
business occurring in, about or from the Premises, or directly or indirectly
caused by or in connection with any violation of this Lease or use of the
Premises or Center by, or any other negligent act or omission of, Tenant, any
other occupant of the Premises, or any of their respective agents, employees, or
contractors. Without limiting the generality of the foregoing, Tenant
specifically acknowledges that the indemnity undertaking herein shall apply to
claims in connection with or arising out of any "Work" as described in Article
7, the use or consumption of any utilities in the Premises under Article 10, any
repairs or other work by or for Tenant under Article 11 and the transportation,
use, storage, maintenance, generation, manufacturing, handling, disposal,
release or discharge of any "Hazardous Material" as described in Article 26
(whether or not such matters shall have been theretofore approved by Landlord),
except to the extent that any of the same arises from the intentional or
negligent acts of Landlord or Landlord's agents or employees.
ARTICLE 25
SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
Landlord shall have no obligation to provide any safety or security
devices, services or programs for Tenant or the Center and shall have no
liability for failure to provide the same or for inadequacy of any measures
provided. However, Landlord may institute or continue such safety or security
devices, services and programs as Landlord reasonably necessary. The costs and
expenses of instituting and maintaining such devices, services and programs
shall be borne by Tenant as a part of Center Expenses. The parties acknowledge
that safety and security devices, services and programs provided by Landlord, if
any, while intended to deter crime and enhance safety, may not in given
instances prevent theft or other injurious acts or ensure safety of parties or
property. The risk that any safety or security device, service or program may
not be effective, or may malfunction, or be circumvented, is assumed by Tenant
with respect to Tenant's property and interests, and Tenant shall obtain
insurance coverage to the extent Tenant desires protection against such acts and
other losses, beyond that described in Article 13. Tenant agrees to cooperate
in any safety or security program developed by Landlord or required by Law.
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ARTICLE 26
HAZARDOUS MATERIALS
A. Tenant shall not transport, use, store, maintain, generate,
manufacture, handle, dispose, release or discharge any "Hazardous Material" (as
defined below) upon or about the Center, or permit Tenant's employees, agents,
contractors, and other occupants of the Premises to engage in such activities
upon or about the Center. However, the foregoing provisions shall not prohibit
the transportation to and from, and use, storage, maintenance and handling
within, the Premises of substances customarily used in the business or activity
expressly permitted to be undertaken in the Premises under Article 1, provided:
(a) such substances shall be used and maintained only in such quantities as are
reasonably necessary for such permitted use of the Premises and the ordinary
course of Tenant's business therein, strictly in accordance with applicable Law,
prevailing standards, and the manufacturers' instructions therefor, (b) such
substances shall not be disposed of, released or discharged in the Center, and
shall be transported to and from the Premises in compliance with all applicable
Laws, and as Landlord shall reasonably require, (c) if any applicable Law or
Landlord's trash removal contractor requires that any suchsubstances be disposed
of separately from ordinary trash, Tenant shall make arrangements at Tenant's
expense for such disposal directly with a qualified and licensed disposal
company at a lawful disposal site (subject to scheduling and approval by
Landlord), (d) any remaining such substances shall be completely, properly and
lawfully removed from the Center upon expiration or earlier termination of this
Lease, and (e) for purposes of removal and disposal of any such substances,
Tenant shall be named as the owner and generator, obtain a waste generator
identification number, and execute all permit applications, manifests, waste
characterization documents and any other required forms.
B. Tenant shall promptly notify Landlord of: (i) any enforcement,
cleanup or other regulatory action taken or threatened by any governmental or
regulatory authority with respect to the presence of any Hazardous Material on
the Premises or the migration thereof from or to other property, (ii) any
demands or claims made or threatened by any party relating to any loss or injury
resulting from any Hazardous Material on the Premises, (iii) any release,
discharge or nonroutine, improper or unlawful disposal or transportation of any
Hazardous Material on or from the Premises or in violation of this Article, and
(iv) any matters where Tenant is required by Law to give a notice to any
governmental or regulatory authority respecting any Hazardous Material on the
Premises. Landlord shall have the right (but not the obligation) to join and
participate, as a party, in any legal proceedings or actions affecting the
Premises initiated in connection with any environmental, health or safety Law.
At such times as Landlord may reasonably request, Tenant shall provide Landlord
with a written list, certified to be true and complete, identifying any
Hazardous Material then used, stored, or maintained upon the Premises, the use
and approximate quantity of each such material, a copy of any material safety
data sheet ("MSDS") issued by the manufacturer therefor, and such other
information as Landlord may reasonably require or as may be required by Law.
The term "Hazardous Material" for purposes hereof shall mean any chemical,
substance, material or waste or component thereof which is now or hereafter
listed, defined or regulated as a hazardous or toxic chemical, substance,
material or waste or component thereof by any federal, state or local governing
or regulatory body having jurisdiction, or which would trigger any employee or
community "right-to-know" requirements adopted by any such body, or for which
any such body has adopted any requirements for the preparation or distribution
of an MSDS.
C. If any Hazardous Material is released, discharged or disposed of
by Tenant or any other occupant of the Premises, or their employees, agents
or contractors, on or about the Center in violation of the foregoing
provisions, Tenant shall immediately, properly and in compliance with
applicable Laws clean up and remove the Hazardous Material from the Center
and any other affected property and clean or replace any affected personal
property (whether or not owned by Landlord), at Tenant's expense (without
limiting Landlord's other remedies therefor). Such clean up and removal work
shall be subject to Landlord's prior written approval (except in
emergencies), and shall include, without limitation, any testing,
investigation, and the preparation and implementation of any remedial action
plan required by any court or governmental body having jurisdiction or
reasonably required by Landlord. If Landlord or any Mortgagee(s) or
governmental body arranges for any tests or studies showing that this Article
has been violated, Tenant shall pay for the costs of such tests. If any
Hazardous Material is released, discharged or disposed of on or about the
Center and such release, discharge or disposal is not caused by Landlord or
Tenant or other occupants of the Premises, or their employees, agents or
contractors, such release, discharge or disposal shall be deemed casualty
damage under Article 14 to the extent that the Premises are affected thereby;
in such case, Landlord and Tenant shall have the obligations and rights
respecting such casualty damage provided under such Article.
ARTICLE 27
CAPTIONS AND SEVERABILITY
The captions of the Articles and Paragraphs of this Lease are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation. If any term or provision of this
Lease or portion thereof shall be found invalid, void, illegal, or
unenforceable generally or with respect to any particular party, by a court
of competent jurisdiction, it shall not affect, impair or invalidate any
other terms or provisions or the remaining portion thereof, or its
enforceability with respect to any other party.
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ARTICLE 28
DEFINITIONS
A. "Center" shall mean the building or structure in which the Premises
are located together with the Common Areas, and all parcels or tracts of land
owned or ground leased by Landlord from time to time on which all or any portion
of the foregoing items are located and any fixtures, Systems and Equipment,
furniture and other personal property owned or leased by Landlord located
thereon or therein and used in connection therewith. .
B. "Center Expenses" shall mean all expenses, costs and amounts of
every kind and nature which Landlord shall pay during any calendar year any
portion of which occurs during the Term in connection with the management,
repair, maintenance, replacement, insurance and operation of the Center,
including, without limitation, any amounts paid for: (a) utilities, including
but not limited to electricity, power, gas, steam, oil or other fuel, water,
sewer, lighting, heating, air conditioning and ventilating, (b) permits,
licenses and certificates necessary to operate and manage the Center, and costs
of complying with other legal requirements which become effective after the
Commencement Date, including, without limitation, the "ADA" (as described in
Article 39), (c) insurance applicable to the Center, which may include without
limitation, commercial liability insurance for personal injury, death, property
damage, defamation and false arrest, "all risk" insurance on the Center,
including without limitation, earthquake, flood, boiler and rent loss coverage,
automobile, worker compensation and employer liability insurance, (d) supplies,
materials, tools, equipment, and vehicles used in the operation, repair,
maintenance and security, floor care and cleaning, landscaping, and other
services for the Center, including rental, installment purchase and financing
agreements therefor and interest thereunder, (e) accounting, legal, inspection,
consulting and other services, (f) wages, salaries, bonuses, and other
compensation and benefits for any manager, personnel and other parties engaged
in the operation, maintenance or security of the Center, and employer's Social
Security taxes, unemployment taxes or insurance, and any other taxes which may
be levied on such wages, salaries, compensation and benefits, data or payroll
processing expenses relating thereto (if the manager or other personnel are
located off-site and handle other properties, the foregoing expenses shall be
allocated appropriately between the Center and such other properties), (g)
payments under any easement, operating agreement, declaration, restrictive
covenant, or instrument pertaining to the sharing of costs in any development of
which the Center is part, (h) alarm monitoring and security service, janitorial
service, trash removal, removal of ice and snow (and salting and sanding in
connection therewith), (i) parking surcharges or fees that may result from any
environmental or other Law or guideline, and the cost of obtaining, providing
and operating public transportation or shuttle bus systems to bring customers or
workers to or from the Center if required by such Laws or guidelines, (j) the
costs of operating and maintaining any on-site office at the Center, including
without limitation, the fair rental value thereof, telephone charges, postage,
stationery and photocopying expenses, (k) music programs and equipment, whether
rented or purchased, (l) telephone directory listings for the Center, (m)
appropriate reserves for operation of the Center and for covering uninsured
portions, including deductible amounts, of casualty damage and general liability
claims relating to the Center, (n) operation, maintenance, repair, installation,
replacement, inspection, testing, painting, decorating and cleaning of: (i)
elevators, escalators, fire exits pedestrian bridges, skywalks, skybridges,
arrival zones and stairways, (ii) sidewalks, curbs, gutters, guardrails,
bumpers, fences, flagpoles, flags, banners, bicycle racks, Center identification
and pylon signs, directional signs, traffic signals and markers, including those
located off-site but installed for the benefit of the Center, (iii) loading and
service areas and driveways (including sweeping, cleaning, re-striping,
repairing, sealing, re-surfacing and replacement), (iv) storm and sanitary
drainage systems, including disposal plants, lift stations and detention ponds
and basins, (v) irrigation systems, (vi) any Systems and Equipment, (vii)
interior and exterior planting, replanting and replacement of flowers,
shrubbery, plants, trees, grass, sod and other landscaping, (viii) all portions
of buildings, both interior and exterior, in the Center, including without
limitation, Common Areas and fixtures, equipment and other items therein or
thereon, including but not limited to floors, floor coverings, corridors,
ceilings, foundations, walls, wall-coverings, restrooms, lobbies, canopies,
skylights, trash and ash cans and receptacles, trash compactors, planters,
waterfalls, fountains, pools, benches, furniture, doors, locks and hardware,
windows, glass and glazing, (ix) gutters and downspouts, roof flashings and
roofs (including repairs and replacements), and (o) an amount equal to fifteen
percent (15%) of all of the foregoing costs and expenses as a liquidation of
Landlord's general off-site overhead (which amount shall be in addition to the
compensation and related expenses for the manager and other aforementioned
expenses). The foregoing provision is for definitional purposes only and shall
not be construed to impose any obligation upon Landlord to incur such expenses.
Landlord reserves the right to: (x) determine and bill Tenant's Proportionate
Share of insurance costs relating to the Center separately from other Center
Expenses, and (y) include Taxes attributable to the Common Areas as a part of
Center Expenses rather than determining and billing the same separately.
Notwithstanding the foregoing, Center Expenses shall not, however, include:
(i) interest and amortization on Mortgages, and other debt costs or
ground lease payments, if any, except as provided herein; depreciation of
buildings and other improvements (except permitted amortization of certain
capital expenditures as provided below); improvements, repairs or alterations to
spaces leased to other tenants; the cost of providing any service directly to
and paid directly by, any tenant; costs of any items to the extent Landlord
receives reimbursement from insurance proceeds or from a third party (such
proceeds to be deducted from Center Expenses in the year in which received); and
(ii) capital expenditures, except those: (a) made primarily to
reduce Center Expenses, or to comply with any Laws or other governmental
requirements which become effective after the Commencement Date,, or (b) for
repairs or
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replacements (as opposed to additions or new improvements, except that Landlord
shall be permitted to include new improvements involving pylon or other signs
for the Center or the upgrading or addition of lights in the parking and other
Common Areas); provided, all such permitted capital expenditures (together with
reasonable finance charges) shall be amortized for purposes of this Lease over
three (3) years. Tenant shall be responsible for Tenant's Proportionate Share
of such permitted amortization of capital expenditures during the Term,
including any remaining amortization of permitted capital expenditures made
prior to the Commencement Date. SEE PAGE 22A
C. "Common Areas" shall have the meaning specified therefor in Article
12.
D. "CPI" shall mean the Consumer Price Index for All Urban Consumers,
All Items (Base year 1982-1984 = 100) published by the United States Department
of Labor, Bureau of Labor Statistics, All City Average. If the Bureau of Labor
Statistics substantially revises the manner in which the CPI is determined, an
adjustment shall be made in the revised index which would produce results
equivalent, as nearly as possible, to those which would be obtained hereunder if
the CPI were not so revised. If the CPI becomes unavailable to the public
because publication is discontinued, or otherwise, Landlord shall substitute
therefor a comparable index based upon changes in the cost of living or
purchasing power of the consumer dollar published by a governmental agency,
major bank, other financial institution, university or recognized financial
publisher.
E. "Default Rate" shall mean three percent (3%) per annum over the
Prime Rate, or the highest rate permitted by applicable Law, whichever shall
be less. SEE PAGE 22A
F. "Gross Sales" shall have the meaning specified therefor in Article
3.
G. "HVAC" shall mean heating, ventilating and air-conditioning.
H. "Landlord" and "Tenant" shall be applicable to one or more parties
as the case may be, and the singular shall include the plural, and the neuter
shall include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, Mortgagees, agents,
affiliates, investment advisors, successors and assigns.
I. "Law" or "Laws" shall mean all federal, state, county and local
governmental and municipal laws, statutes, ordinances, rules, regulations,
codes, decrees, orders and other such requirements, applicable equitable
remedies and decisions by courts in cases where such decisions are binding
precedents in the state in which the Center is located, and decisions of federal
courts applying the Laws of such state, at the time in question.
J. "Lease Year" shall mean each calendar year or portion thereof
during the Term, and any initial or final partial years are sometimes referred
to herein as "Partial Lease Years"; provided, Landlord reserves the right to
change the "Lease Year" to each consecutive twelve month period commencing on
the Commencement Date or such other date as Landlord shall designate by notice
to Tenant.
K. "Major" shall mean any store of any type in excess of 25,000 square
feet of rentable area and any restaurant or theatre in.
L. "Mortgage" shall mean all mortgages, deeds of trust, ground leases
and other such encumbrances now or hereafter placed upon the Center or any part
thereof, and all renewals, modifications, consolidations, replacements or
extensions thereof, and all indebtedness now or hereafter secured thereby and
all interest thereon.
M. "Mortgagee(s)" shall mean the holder of any Mortgage at the time in
question, and where such Mortgage is a ground lease, such term shall refer to
the ground lessor.
N. "Rent" shall have the meaning specified therefor in Article 4.
O. "Systems and Equipment" shall mean any plant, machinery,
transformers, ducts, cables, wires, and other equipment, facilities, and systems
designed to supply light, heat, ventilation, air conditioning and humidity or
any other services or utilities, or comprising or serving as any component or
portion of any electrical, gas, steam, plumbing, water, sewer, sprinkler,
communications, alarm, security, or fire/life/safety systems or equipment, or
any other mechanical, electrical, electronic, computer or other systems or
equipment for the Center, except to the extent that any of the same serves any
tenant exclusively or is subject to shared tenant use as described in Article
11.
P. "Taxes" shall mean all federal, state, county, or local
governmental, special district, improvement district, municipal or other
political subdivision taxes, fees, levies, required installments of assessments,
charges or other impositions of every kind and nature, whether foreseen or
unforeseen, general, special, ordinary or extraordinary (unless required to be
paid by Tenant under Article 4), respecting the Center, including without
limitation, real estate and other ad valorem taxes, general and special
assessments, interest on any special assessments paid in installments, transit
taxes, water and sewer rents, taxes based upon the receipt of rent including,
without limitation, gross receipts taxes applicable to the receipt of rent,
personal property taxes imposed upon the fixtures, machinery, equipment,
apparatus, Systems and Equipment, appurtenances, furniture and other personal
property used in connection with the Center which Landlord shall pay during any
calendar year, any portion of which occurs during the Term (without regard to
any different fiscal year used by such government or municipal authority except
as provided in Article
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ARTICLE 28(B) DEFINITIONS.
Center Expenses shall also not include:
1. Costs incurred in the initial development or construction of Center; and
2. Costs of correcting bonafide defects in the original construction of the
Center (this shall in no event include the cost of maintenance or repair
resulting from wear and tear or by damage by outside elements).
ARTICLE 28(E) DEFINITIONS.
"Prime Rate" shall mean the prime, base or reference lending rate from time to
time announced by the First National Bank of Chicago or any successor thereto.
If such rate shall cease to be quoted by the First National Bank of Chicago or
any successor thereto, or if the successor to the First National Bank of Chicago
cannot be reasonably determined by Landlord, then the Prime Rate shall be a
publicly quoted reference lending rate reasonably designated by Landlord.
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5). Notwithstanding the foregoing, Taxes shall not include excess profits
taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord's general or net income (as opposed to
rents, receipts or income attributable to operations at the Center). If the
method of taxation of real estate prevailing to the time of execution hereof
shall be, or has been altered, so as to cause the whole or any part of the taxes
now, hereafter or theretofore levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially, as a capital levy
or otherwise, or on or measured by the rents received therefrom, then such new
or altered taxes attributable to the Center shall be included within the term
"Taxes", except that the same shall not include any enhancement of said tax
attributable to other income of Landlord. Tenant shall pay increased Taxes
whether Taxes are increased as a result of increases in the assessment or
valuation of the Center (whether based on a sale, change in ownership or
refinancing of the Center or otherwise), increases in tax rates, reduction or
elimination of any rollbacks or other deductions available under current law,
scheduled reductions of any tax abatement, elimination, invalidity or withdrawal
of any tax abatement, or for any other cause whatsoever. Where allowed by Law,
Landlord shall elect to pay Taxes over the longest permitted amortization
period. In addition, Landlord may include in Taxes any actual, out-of-pocket
expenses incurred by Landlord in attempting to protest, reduce or minimize Taxes
(including without limitation, fees for attorneys, consultants, appraisers and
other experts) in the calendar year such expenses are paid.
Q. "Tenant's Proportionate Share" shall be a fraction equal to the
rentable square footage of the Premises set forth in Article 1 (as the same
may be remeasured pursuant to Article 21) divided by the total rentable
square footage of the Center; provided Landlord may exclude from such
rentable floor space of the Center, at Landlord's option, any portions of the
Center: (i) not occupied and open for business during all or any portion of
the subject year, SEE PAGE 23A (ii) leased to or used by other parties as
Majors, theatres, restaurants, kiosks, (not to exceed an aggregate of 2,000
square feet in the Center) storage areas, or premises which do not front on
any enclosed mall area of the Center, where such parties are not required to
pay a full pro rata share of Center Expenses or Taxes, as the case may be,
pursuant to a lease or other agreement with Landlord, and (iii) with respect
to Taxes, areas of the Center for which separate Tax bills are received and
which are the sole responsibility of separate parties pursuant to a lease or
other agreement with Landlord; provided, Landlord shall also deduct from
Center Expenses or Taxes, as the case may be, all amounts received from such
excluded parties for Center Expenses or Taxes. If the Center shall be part
of or shall include any space used for office, medical, dental or other
non-retail purposes, Landlord may determine separately and allocate Taxes or
Center Expenses between the retail and non-retail areas of the Center, in
accordance with sound accounting and management principles, in which event
Tenant's Proportionate Share shall be based on the ratio of the rentable area
of the Premises to the rentable floor space of the buildings, structures or
areas for which Landlord separately determines such Taxes or Center Expenses,
subject to the adjustments set forth above.
R. "Unavoidable Delays" shall mean delays due to strikes, lockouts,
labor troubles, inability to procure labor or materials or reasonable
substitutes therefor, failure of power, governmental requirements, restrictions
or Laws, fire or other casualty damage, war or civil disorder, or other causes
beyond the reasonable control of the party delayed; provided, Unavoidable Delays
hereunder shall not include delays resulting from changes in economic or market
conditions, or financial or internal problems of the parties or problems that
can be satisfied by the payment of money.
ARTICLE 29
RULES
Tenant shall comply with all of the rules which are set forth in Rider One
attached to this Lease, as the same may be amended or supplemented hereunder
(the "Rules"). Landlord shall have the right by notice to Tenant or by posting
at the Center to reasonably amend such Rules and supplement the same with other
reasonable Rules relating to the Center or the promotion of safety, care,
cleanliness or good order therein. Nothing herein shall be construed to give
Tenant or any other party any claim against Landlord arising out of the
violation of such Rules by any other tenant, occupant or visitor of the Center,
or out of the enforcement, modification or waiver of the Rules by Landlord in
any particular instance. Landlord shall not act in a discriminatory fashion
against Tenant in the enforcement of the Rules in relation to other similarly
situated in-line tenants at the Center.
ARTICLE 30
NO WAIVER
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay or any other act or omission of either party. No waiver by
either party of any provision of this Lease shall be deemed a waiver of such
provision with respect to any subsequent matter relating to such provision, and
Landlord's consent respecting any action by Tenant shall not constitute a waiver
of the requirement for obtaining Landlord's consent respecting any subsequent
action. Acceptance of Rent by Landlord shall not constitute a waiver of any
breach by Tenant of any term or provision of this Lease. No acceptance of a
lesser amount than the Rent herein stipulated shall be deemed a waiver of
Landlord's right to receive the full amount due, nor shall any endorsement or
statement
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ARTICLE 28(Q) TENANT'S PROPORTIONATE SHARE.
provided that, for purposes of determining Tenant's Proportionate Share, in no
event shall less than eighty-five percent (85%) of the rentable floor area of
the Center (excluding, at Landlord's option, the areas included in (ii) and
(iii) below) be deemed occupied and open for business.
23A
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on any check or payment or any letter accompanying such check or payment be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the full amount due. The
acceptance of Rent or of the performance of any other term or provision from any
party other than Tenant, including any Transferee, shall not constitute a waiver
of Landlord's right to approve any Transfer.
ARTICLE 31
ATTORNEYS' FEES, COUNTERCLAIMS, VENUE AND JURY TRIAL
If Landlord or any of its officers, directors, trustees, beneficiaries,
partners, agents, affiliates, investment advisors or employees shall be made a
party to any litigation commenced by or against Tenant and are not found to be
at fault, Tenant shall pay all costs, expenses and reasonable attorneys' fees
incurred by Landlord or any such party in connection with such litigation.
Tenant shall also pay all costs, expenses and reasonable attorneys' fees that
may be incurred by Landlord in successfully enforcing this Lease. IN THE
INTEREST OF OBTAINING A SPEEDIER AND LESS COSTLY HEARING OF ANY DISPUTE, EACH OF
LANDLORD AND TENANT HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER AND ANY
RIGHTS TO A TRIAL BY JURY UNDER ANY STATUTE, RULE OF LAW OR PUBLIC POLICY IN
CONNECTION WITH ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATING TO
THIS LEASE, THE PREMISES OR THE CENTER. Although such jury waiver is intended
to be self-operative and irrevocable, Landlord and Tenant each further agree, if
requested, to confirm such waivers in writing at the time of commencement of any
such action, proceeding or counterclaim. If Landlord commences any detainer
suit, summary proceedings or other action seeking possession of the Premises,
Tenant agrees not to interpose by consolidation of actions, removal to chancery
or otherwise, any counterclaim, claim for set-off, recoupment or deduction of
Rent, or other claim seeking affirmative relief of any kind (except a mandatory
or compulsory counterclaim which Tenant would forfeit if not so interposed).
Any action or proceeding brought by either party against the other for any
matter arising out of or in any way relating to this Lease, the Premises or the
Center, shall be heard, at Landlord's option, in the County where the Center is
located.
ARTICLE 32
PERSONAL PROPERTY TAXES
Tenant shall pay before delinquent all taxes, assessments, license fees,
charges or other governmental impositions assessed against or levied or imposed
upon Tenant's business operations, Tenant's leasehold interest, or based on
Tenant's use or occupancy of the Premises, or Tenant's fixtures, furnishings,
equipment, leasehold improvements (to the extent constituting personal
property), inventory, merchandise, and personal property located in the Premises
(whether or not title shall have vested in Landlord pursuant to any provision
hereof). Whenever possible, Tenant shall cause all such items to be assessed
and billed separately from the property of Landlord and other parties. If any
such items shall be assessed and billed with the property of Landlord or another
party, Landlord shall include the same or an appropriate portion thereof in
Center Expenses, or shall reasonably allocate the same or an appropriate share
thereof between Tenant and such other party (and Tenant shall promptly pay the
amount so allocated to Tenant).
ARTICLE 33
CONVEYANCE BY LANDLORD AND LIABILITY
In case Landlord or any successor owner of the Center shall convey or
otherwise dispose of any portion thereof in which the Premises are located to
another party (and nothing herein shall be construed to restrict or prevent
such conveyance or disposition), such other party shall thereupon be and
become landlord hereunder and shall be deemed to have fully assumed and be
liable for all obligations of this Lease to be performed by Landlord,
including the return of any Security Deposit. Tenant shall attorn to such
other party, and Landlord or such successor owner shall, from and after the
date of conveyance, be free of all liabilities and obligations hereunder.
The liability of Landlord to Tenant for any default by Landlord under this
Lease or arising in connection herewith or with Landlord's operation,
management, leasing, repair, renovation, alteration, or any other matter
relating to the Center or the Premises, shall be limited to the interest of
Landlord in the Center (and rental proceeds). Tenant agrees to look solely
to Landlord's interest in the Center (and rental proceeds) for the recovery
of any judgment against Landlord, and Landlord shall not be personally liable
for any such judgment or deficiency after execution thereon. Under no
circumstances shall any present or future general or limited partner of
Landlord (if Landlord is a partnership), or trustee or beneficiary (if
Landlord or any partner of Landlord is a trust) have any liability for the
performance of Landlord's obligations under this Lease.
ARTICLE 34
NOTICES
Except as expressly provided to the contrary in this Lease, every notice,
demand or other communication given by either party to the other with respect
hereto or to the Premises or Center,
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shall be in writing and shall not be effective for any purpose unless the same
shall be served personally or by national air courier service, or United States
registered or certified mail, return receipt requested, postage prepaid,
addressed, if to Tenant, at the address first set forth in the Lease, and if to
Landlord, at the address at which the last payment of Rent was required to be
made and to Kennedy & Associates, Attention: John Parker, 1215 Fourth Avenue,
2400 Financial Center Bldg., Seattle, WA 98161, or such other address or
addresses as Tenant or Landlord may from time to time designate by notice given
as above provided. Every notice or other communication hereunder shall be
deemed to have been given as of the second business day following the date of
such mailing or dispatch by national air courier service (or as of any earlier
date evidenced by a receipt from such national air carrier service or the United
States Postal Service) or immediately if personally delivered. Notices not sent
in accordance with the foregoing shall be of no force or effect until received
by the foregoing parties at such addresses required herein.
ARTICLE 35
REAL ESTATE BROKERS
Each party (the "first party") shall defend, indemnify and hold the other
party harmless from all damages, judgments, liabilities and expenses
(including attorneys' fees) arising from any claims or demands of any broker,
agent or finder with whom the first party has dealt for any commission or fee
alleged to be due in connection with its participation in the procurement of
Tenant or the negotiation of this Lease, other than a broker with whom has
signed a written agreement relating to the other party this Lease. Landlord
has agreed to pay the commission of Susan Zimmerman of CB Commercial pursuant
to the terms and conditions of a separate agreement between Landlord and CB
Commercial.
ARTICLE 36
SECURITY DEPOSIT AND LANDLORD'S LIEN
Tenant shall deposit with Landlord the amount set forth in Article 1 as
a Security Deposit upon Tenant's execution and submission of this Lease. The
Security Deposit shall serve as security for the prompt, full and faithful
performance by Tenant of the terms and provisions of this Lease. If Tenant
commits a Default, or owes any amount to Landlord upon the expiration of this
Lease, Landlord may use or apply the whole or any part of the Security
Deposit for the payment of Tenant's obligations hereunder. The use or
application of the Security Deposit shall not prevent Landlord from
exercising any other right or remedy available to Landlord and shall not be
construed as liquidated damages. If the Security Deposit is reduced by such
use or application, Tenant shall deposit with Landlord within ten (10) days
after written notice, an amount sufficient to restore the full amount of the
Security Deposit. In the event of bankruptcy or other insolvency proceeding
against Tenant or Tenant's guarantor, the Security Deposit shall be deemed
automatically applied to the payment of overdue Rent from the earliest time
such Rent became overdue prior to the filing of such proceeding. Landlord
shall not be required to keep the Security Deposit separate from Landlord's
general funds or pay interest on the Security Deposit. Any remaining portion
of the Security Deposit shall be returned to Tenant within sixty (60) days
after Tenant has vacated the Premises in accordance with Article 16.
ARTICLE 37
MISCELLANEOUS
A. Each of the terms and provisions of this Lease shall be binding
upon and inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, guardians, custodians, successors and assigns,
subject to the provisions of Article 20 respecting Transfers. However, if
Tenant is an individual and dies or becomes incapacitated, Landlord reserves the
right to terminate this Lease upon thirty (30) days' advance notice to Tenant or
Tenant's legal representative.
B. Neither this Lease nor any memorandum of lease or short form lease
shall be recorded by Tenant.
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C. This Lease shall be construed in accordance with the Laws of the
state and county in which the Center is located.
D. All obligations (including indemnity obligations) or rights of
either party arising during or attributable to the period prior to expiration or
earlier termination of this Lease shall survive such expiration or earlier
termination, except as provided to the contrary in Article 33.
E. If the Commencement Date is delayed in accordance with Article 2
for more than one year, Landlord may declare this Lease terminated by notice to
Tenant, and if the Commencement Date is so delayed for more than three years,
this Lease shall thereupon be deemed terminated without further action by either
party.
F. Landlord agrees that if Tenant timely pays the Rent and performs
the terms and provisions hereunder, Tenant shall hold and enjoy the Premises
during the Term, free of lawful claims by any party acting by or through
Landlord, subject to all other terms and provisions of this Lease.
G. The parties agree that they intend hereby to create only the
relationship of landlord and tenant. No provision hereof, or act of either
party hereunder, shall be construed as creating the relationship of principal
and agent, or as creating a partnership, joint venture or other enterprise, or
render either party liable for any of the debts or obligations of the other
party, except under any indemnity provisions of this Lease.
H. Tenant acknowledges that any site or lease plan of the Center
attached as an Exhibit hereto shall not be deemed a representation, warranty or
agreement by Landlord respecting the Center or any other matter shown thereon
other than the approximate location of the Premises, and that Majors and other
parties unrelated to Landlord may own or control portions of the Center shown on
such Exhibit.
I. If applicable Laws require that this Lease be in the form of a
deed, this Lease shall be deemed a deed of lease for all purposes, and Landlord
shall be deemed to have granted and demised the Premises to Tenant for the Term
hereof, subject to the other terms and provisions contained herein.
J. This Lease, and any Riders and Exhibits hereto, have been mutually
negotiated by Landlord and Tenant, and any ambiguities shall not be interpreted
in favor of either party. Any printed provisions that have been deleted shall
not be used to interpret the remaining provisions.
ARTICLE 38
OFFER
The submission and negotiation of this Lease shall not be deemed an offer
to enter the same by Landlord, but the solicitation of such an offer by Tenant.
During such period and in reliance on the foregoing, Landlord may, at Landlord's
option, deposit any Security Deposit and Rent, proceed with any alterations or
improvements, and permit Tenant to enter the Premises and make alterations or
improvements. If Landlord shall fail to execute and mail or deliver this Lease
to Tenant within such period, Tenant may revoke its offer to enter this Lease by
sending notice thereof to Landlord before Landlord mails or delivers an executed
copy of this Lease to Tenant. In such case, Landlord shall return any Security
Deposit and Rent to Tenant, and Tenant shall promptly remove any alterations,
improvements, fixtures or personal property made or placed in or upon the
Premises by Tenant or its contractors, agents or employees and restore the same
to good condition as required under Article 16. If Tenant shall seek to revoke
its offer to enter this Lease in violation of the foregoing provisions, Landlord
shall have the options of forfeiting and retaining any Security Deposit and Rent
theretofore paid, as liquidated damages without executing and delivering this
Lease to Tenant, or executing and delivering this Lease to Tenant and enforcing
the same as a valid and binding lease agreement.
ARTICLE 39
AMERICANS WITH DISABILITIES ACT
The parties acknowledge that the Americans With Disabilities Act of 1990
(42 U.S.C. Section 12101 ET SEQ.) and regulations and guidelines promulgated
thereunder, as all of the same may be amended and supplemented from time to
time (collectively referred to herein as the "ADA") establish requirements
for business operations, accessibility and barrier removal, and that such
requirements may or may not apply to the Premises and Center depending on,
among other things: (1) whether Tenant's business is deemed a "public
accommodation" or "commercial facility", (2) whether such requirements are
"readily achievable", and (3) whether a given alteration affects a "primary
function area" or triggers "path of travel" requirements. The parties hereby
agree that: (a) Landlord shall be responsible for ADA Title III compliance in
the Common Areas, except as provided below, (b) Tenant shall be responsible
for ADA Title III compliance in the Premises, including any leasehold
improvements or other work to be performed in the Premises under or in
connection with this Lease, and (c) Landlord may perform, or require that
Tenant perform, and Tenant shall be responsible for the cost of, ADA Title
III "path of travel" requirements triggered by alterations in the Premises.
Tenant shall be solely responsible for requirements under Title I of the ADA
relating to Tenant's employees.
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ARTICLE 40
ENTIRE AGREEMENT
This Lease, together with Riders One through THREE, and Exhibits A
through E (WHICH COLLECTIVELY ARE HEREBY INCORPORATED WHERE REFERRED TO
HEREIN AND MADE A PART HEREOF AS THOUGH FULLY SET FORTH), contains all the
terms and provisions between Landlord and Tenant relating to the matters set
forth herein and no prior or contemporaneous agreement or understanding
pertaining to the same shall be of any force or effect. Without limiting the
generality of the foregoing, Tenant hereby acknowledges and agrees that
Landlord's leasing and field personnel are only authorized to show the
Premises and negotiate terms and conditions for leases subject to Landlord's
final approval, and are not authorized to make any agreements,
representations, understandings or obligations binding upon Landlord,
respecting the present or future condition of the Premises or Center,
suitability of the same for Tenant's business, or any other matter, and no
such agreements, representations, understandings or obligations not expressly
contained herein shall be of any force or effect. TENANT HAS RELIED ON
TENANT'S INSPECTIONS AND DUE DILIGENCE IN ENTERING THIS LEASE AND NOT ON ANY
REPRESENTATIONS OR WARRANTIES MADE BY LANDLORD CONCERNING THE CONDITION OR
SUITABILITY OF THE PREMISES OR CENTER FOR ANY PARTICULAR PURPOSE. Neither
this Lease, nor any Riders or Exhibits referred to above may be modified,
except in writing signed by both parties.
IN TESTIMONY WHEREOF, the parties have caused this Lease to be signed
under seal by their respective representatives designated below, or if either
party is a corporation, it has caused these presents to be signed by its
president or other officer designated below, attested by its secretary, and
its corporate seal to be affixed, and if the Center is in Washington, D.C.,
does hereby appoint such president or other officer its true and lawful
attorney-in-fact to acknowledge and deliver these presents as its act and
deed as of the day and year first above written.
LANDLORD: PINE STREET DEVELOPMENT L.L.C.,
a Washington limited liability company
BY: RGHK SEATTLE L.L.C., a Washington
limited liability company, Manager
BY:
--------------------------------------
NAME PRINTED:
--------------------------------------
TITLE:
--------------------------------------
ATTEST: TENANT: CUTTER & BUCK, INC.,
a Washington corporation
By: BY:
--------------------- --------------------------------------
Its: NAME PRINTED:
--------------------- --------------------------------------
TITLE:
--------------------------------------
STATE OF )
---------------
) SS
COUNTY OF )
---------------
I, __________________________, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY that ______________________, personally known
to me to be the ______________ of RGHK SEATTLE L.L.C., a Washington limited
liability company, Manager of Pine Street Development L.L.C., and
_____________________________, personally known to me to be the ____________ of
said company and personally known to me to be the same persons whose names are
subscribed to the foregoing instrument, appeared before me this day in person
and severally acknowledged that they signed and delivered the said instrument as
______________ and ____________ of said company, as their free and voluntary act
and as the free and voluntary act and deed of said company, for the uses and
purposes therein set forth.
GIVEN under my hand and Notarial Seal this ____ day of August, 1998.
My Commission Expires: ----------------------------------
Notary Public
- -----------------------
STATE OF )
---------------
) SS
COUNTY OF )
---------------
I, ____________________________, a Notary Public in and for said County, in the
State aforesaid, do hereby certify that ____________________________, personally
known to me to be the ______________ President of CUTTER & BUCK, INC., a
Washington corporation, duly licensed to transact business in the State of
_____________, and ______________, personally known to me to be the ____________
Secretary of said corporation and personally known to me to be the same persons
whose names are subscribed to the foregoing instrument, appeared before me this
day in person and severally acknowledged that they signed and delivered the said
instrument as ___________ President and ____________ Secretary of said
corporation, and caused the Corporate Seal of said corporation to be affixed
thereto, pursuant to authority given by the Board of Directors of said
corporation, as their free and voluntary act and as the free and voluntary act
and deed of said corporation, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this ____ day of August, 1998.
My Commission Expires: ----------------------------------
Notary Public
- -----------------------
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RIDER ONE
RULES
(1) COMMON AREAS. Tenant shall not use the Common Areas, including
areas adjacent to the Premises, for any purpose other than ingress and egress,
and any such use thereof shall be subject to the other provisions of this Lease,
including these Rules. Without limiting the generality of the foregoing, Tenant
shall not use the Common Areas to canvass, solicit business or information from,
or distribute any article or material to, other tenants, occupants or invitees
of the Center. Tenant shall not allow anything to remain in any passageway,
sidewalk, court, corridor, stairway, entrance, exit, elevator, shipping area, or
other area outside the Premises. Janitorial closets, utility closets, telephone
closets, broom closets, electrical closets, storage closets, and other such
closets, rooms and areas shall be used only for the purposes and in the manner
designated by Landlord, and may not be used by Tenant, or its contractors,
agents, employees, or other parties without Landlord's prior written consent.
(2) DELIVERIES. Furniture, inventory and all other deliveries may be
brought into the Center only at times and in the manner designated by Landlord,
in compliance with all Laws, and always at Tenant's sole risk. Landlord may
inspect items brought into the Center or Premises with respect to weight or
dangerous nature or compliance with this Lease or applicable Laws. Tenant's use
of any freight elevators, loading and service areas at the Center shall be
subject to scheduling by Landlord. Tenant shall not take or permit to be taken
in or out of other entrances or elevators of the Center, any item normally
taken, or which Landlord otherwise requires to be taken, in or out through
service doors or on freight elevators. Tenant shall move all inventory,
supplies, furniture, equipment and other items as soon as received directly to
the Premises. Any hand-carts used at the Center shall have rubber wheels and
side guards and no other material handling equipment may be brought upon the
Center except as Landlord shall approve in writing in advance.
(3) TRASH. All garbage, refuse, trash and other waste shall be kept in
the kind of container, placed in the areas, and prepared for collection in the
manner and at the times and places specified by Landlord, subject to Article 26
respecting Hazardous Materials. If Landlord designates a service to pick up
such items, Tenant shall use the same at Tenant's cost. If Landlord shall
provide or arrange for such service, Tenant shall pay Tenant's Proportionate
Share of the cost thereof (or such other share as Landlord may fairly and
reasonably determine) to Landlord on or before the first day of each calendar
month in advance, or Landlord may include such charges in Center Expenses.
Landlord reserves the right to require that Tenant participate in any recycling
program designated by Landlord.
(4) FIRE PROTECTION. If Landlord installs or has heretofore installed
a supervised fire sprinkler and/or alarm system for the protection of the
Center, Tenant shall pay Tenant's Proportionate Share of the cost thereof (or
such other share as Landlord may fairly and reasonably determine) to Landlord on
or before the first day for each calendar month in advance, or Landlord may
include such charges in Center Expenses.
(5) PEST CONTROL. Tenant shall use, at Tenant's cost, such pest and
rodent extermination contractor as Landlord may direct and at such intervals as
Landlord may require. In the alternative, from time to time, Landlord may
arrange for pest control (in which case, Tenant shall pay Tenant's Proportionate
Share of the cost thereof, or such other share as Landlord may fairly and
reasonably determine to Landlord on or before the first day of each calendar
month in advance, or Landlord may include such charges in Center Expenses).
Tenant shall provide Landlord with evidence of Tenant's compliance with this
provision within five (5) days after Landlord's written request.
(6) SIGNS AND DISPLAY WINDOWS. Tenant shall not place any sign or
other thing of any kind outside the Premises (including without limitation,
exterior walls and roof), or on the interior or exterior surfaces of glass panes
or doors, except such single sign as Landlord shall expressly approve in writing
for or in connection with Tenant's storefront. Notwithstanding the foregoing,
Tenant shall have the right, during the Term and only so long as Tenant is open
for business in the Premises, to place one (1) sign on the exterior of the third
floor of the Center immediately adjacent the Premises, subject to Landlord's
approval and compliance with Laws. The exterior sign shall be well lit during
such hours designated by Landlord and Tenant shall clean, repair, and maintain
the same so that it remains in first class condition. Within the Premises,
Tenant shall not: (i) install any sign that advertises any product, (ii)
install any sign within 24 inches of any window, or (iii) install any sign that
is visible from outside the Premises or that is illuminated, without Landlord's
prior written approval. If Landlord approves or requires illuminated signs,
Tenant shall keep the same illuminated each day of the Term during the hours
designated by Landlord from time to time. All Tenant's signs shall be
professionally designed, prepared and installed and in good taste so as not to
detract from the general appearance of the Premises or the Center and shall
comply with the sign criteria attached hereto as Exhibit C or otherwise
developed by Landlord from time to time. After the initial installation of
Tenant's storefront sign as approved in writing by Landlord in accordance with
these provisions, Landlord reserves the right to require from time to time that
Tenant change or replace such sign in order to comply with any new sign criteria
developed by Landlord, at Landlord's expense. The term "sign" in this Rule
shall mean any sign, placard, picture, name, direction, lettering, insignia or
trademark, advertising material, advertising display, awning or other such item,
except that Tenant's storefront sign shall be an actual sign. Blinds, shades,
drapes or other such items shall not be placed in or about the windows in the
Premises except to the extent, if any, that the character, shape, design, color,
material and make thereof is first approved by Landlord in writing.
(7) DISPLAY OF MERCHANDISE. Tenant shall not place or maintain any
permanent or temporary fixture or item or display any merchandise: (i) outside
the Premises, or (ii) anywhere inside the Premises within six (6) feet of any
entrance to the Premises (except that for any recessed entry of the Premises,
Tenant shall not so place or maintain fixtures within three (3) feet of such
entrance). All displays of merchandise shall be tasteful and professional.
<PAGE>
(8) PLUMBING EQUIPMENT. The toilet rooms, urinals, wash bowls, drains
and sewers and other plumbing fixtures, equipment and lines shall not be misused
or used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein, and Tenant
shall properly install, maintain, clean, repair and replace adequate grease
traps.
(9) ROOF; AWNINGS AND PROJECTIONS. Tenant shall not install any
aerial, antennae, satellite dish or any other device on the roof, exterior walls
or Common Areas of the Center. Tenant may install and have access to rooftop
HVAC equipment only to the extent approved or required by Landlord from time to
time in connection with Tenant's obligations under Articles 10 and 11 of this
Lease. No awning or other projection shall be attached by or for Tenant to the
exterior walls of the Premises or the building of which it is a part.
(10) OVERLOADING FLOORS. Tenant shall not overload any floor or part
thereof in the Premises or Center including any public corridors or elevators
therein, and Landlord may direct and control the location of safes, vaults and
all other heavy articles and require supplementary supports of such material and
dimensions as Landlord may deem necessary to properly distribute the weight at
Tenant's expense (including expenses for structural review and engineering).
(11) LOCKS AND KEYS. Upon termination of the Lease or Tenant's right
to possession, Tenant shall: (i) return to Landlord all keys, parking stickers
or key cards, and in the event of loss of any such items shall pay Landlord
therefor, and (ii) advise Landlord as to the combination of any vaults or locks
that Landlord permits to remain in the Premises.
(12) UNATTENDED PREMISES. Before leaving the Premises unattended,
Tenant shall close and securely lock all doors or other means of entry to the
Premises and shut off all lights (except signs required to be illuminated
hereunder), water faucets and other utilities in the Premises (except heat to
the extent necessary to prevent the freezing or bursting of pipes). This
provision shall not imply that Tenant may leave the Premises unattended in
violation of the operating requirements set forth elsewhere in this Lease.
(13) ENERGY CONSERVATION. Subject to Rule (6) concerning illumination,
Tenant shall not waste electricity, water, heat or air conditioning, or other
utilities or services, and agrees to cooperate fully with Landlord and comply
with any Laws to assure the most effective and energy efficient operation of the
Center.
(14) FOOD, BEVERAGES, GAME AND VENDING MACHINES. Except to the extent
expressly permitted under Article 1 of this Lease, Tenant shall not: (i) use
the Premises for the manufacture, preparation, display, sale, barter, trade,
gift or service of food or beverages, including without limitation, intoxicating
liquors, or (ii) install, operate or use any video, electronic or pinball game
or machine, or any coin or token operated vending machine or device to provide
products, merchandise, food, beverages, candy, cigarettes or other commodities
or services including, but not limited to, pay telephones, pay lockers, pay
toilets, scales, and amusement devices; provided, however, that Tenant may
install vending machines for the sale of non-alcoholic beverages, food, and
candy in an area not visible from the sale area or exterior of the Premises for
the exclusive use of Tenant's employees.
(15) GOING-OUT-OF-BUSINESS SALES AND AUCTIONS. Tenant shall not use,
or permit any other party to use, the Premises for any distress, fire,
bankruptcy, close-out, "lost our lease" or going-out-of-business sale or
auction. Tenant shall not display any signs advertising the foregoing anywhere
in or about the Premises. This prohibition shall also apply to Tenant's
creditors.
(16) LABOR RELATIONS. Tenant shall conduct its labor relations and
relations with employees so as to avoid strikes, picketing, and boycotts of, on
or about the Premises or Center. If any employees strike, or if picket lines or
boycotts or other visible activities objectionable to Landlord are established,
conducted or carried out against Tenant, its employees, agents, contractors, or
subcontractors in or about the Premises or Center, Tenant shall immediately
close the Premises and remove or cause to be removed all such employees, agents,
contractors, and subcontractors until the dispute has been settled.
(17) LANDLORD'S TRADENAME AND TRADEMARKS. No symbol, design, name,
mark or insignia adopted by Landlord for the Center or picture or likeness of
the Center shall be used by Tenant without the prior written consent of
Landlord, except as provided in Article 9 of this Lease.
(18) PROHIBITED ACTIVITIES. Tenant shall not: (i) use strobe or
flashing lights in or on the Premises or in any signs therefor, (ii) use, sell
or distribute any leaflets, handbills, bumper stickers, other stickers or
decals, balloons or other such articles in the Premises (or other areas of the
Center), (iii) operate any loudspeaker, television set, phonograph, radio, CD
player or other musical or sound producing instrument or device so as to be
heard outside the Premises, (iv) operate any electrical or other device which
interferes with or impairs radio, television, microwave, or other broadcasting
or reception from or in the Center or elsewhere, (v) bring or permit any bicycle
or other vehicle, or dog (except in the company of a blind party) or other
animal, fish or bird in the Center, (vi) make or permit objectionable noise,
vibration or odor to emanate from the Premises or any equipment serving the
same, (vii) do or permit anything in or about the Premises that is unlawful,
immoral, obscene, pornographic, or which tends to create or maintain a nuisance
or do any act tending to injure the reputation of the Center, (viii) use or
permit upon the Premises anything that violates the certificates of occupancy
issued for the Premises or the Center, or
Rider One - 2
<PAGE>
causes a cancellation of Landlord's insurance policies or increases Landlord's
insurance premiums (and Tenant shall comply with all requirements of Landlord's
insurance carriers, the American Insurance Association, and any board of fire
underwriters), (ix) use the Premises for any purpose, or permit upon the
Premises anything, that may be dangerous to parties or property (including but
not limited to flammable oils, fluids, paints, chemicals, firearms or any
explosive articles or materials), nor (x) do or permit anything to be done upon
the Premises in any way tending to disturb, bother or annoy any other tenant at
the Center or the occupants of neighboring property.
(19) PARKING. Except as expressly provided in the Lease, Tenant and
Tenant's employees shall park their cars only in off-site parking areas. Tenant
shall furnish Landlord with a list containing the description and automobile
license numbers (and State of issuance) of the cars of Tenant and its employees
within five (5) days of any request by Landlord, and shall thereafter advise
Landlord of any changes, additions or deletions to such list. Landlord reserves
the right to: (i) adopt additional requirements pertaining to parking,
including without limitation, a parking system with charges favoring shoppers
and any other parking system by validation, metering or otherwise, (ii) assign
specific spaces or areas, and reserve spaces for small cars, handicapped
individuals, valet patrons, customers of tenants or other parties (and Tenant's
visitors shall not park in any such assigned or reserved spaces) and (iii)
restrict or prohibit full size vans and other large vehicles. In case of any
violation of these provisions or any applicable Laws, Landlord may refuse to
permit the violator to park, and remove the vehicle owned or driven by the
violator from the Center without liability whatsoever, at such violator's risk
and expense. These provisions shall be in addition to any other remedies
available to Landlord under this Lease or otherwise. Landlord also reserves the
right to lease or convey the parking operation to the City of Seattle or an
independent parking operator and Tenant agrees to abide by such rules and
regulations as such party shall from time to time promulgate.
(20) RESPONSIBILITY FOR COMPLIANCE. Tenant shall be responsible for
ensuring compliance with these Rules, as they may be amended, by Tenant's
employees and as applicable, by Tenant's agents, contractors, subcontractors,
and suppliers.
Rider One - 3
<PAGE>
RIDER TWO
STANDARD RIDER
Notwithstanding anything to the contrary contained in the Lease, the
parties agree as follows (and in case of any express inconsistency between the
Lease and this Rider, the latter shall control):
1. AGENCY. This Lease is executed by RGHK SEATTLE L.L.C., not
personally, but as managing agent for the Landlord in the exercise of the power
and authority conferred on it by Landlord. It is expressly understood and
agreed that nothing in this Lease will be construed as creating any liability
whatsoever against said managing agent, or its officers, directors, shareholders
or partners and, in particular, without limiting the generality of the
foregoing, there shall be no personal covenant, either express or implied,
herein contained to the end that Landlord will be solely responsible therefor.
2. CENTER HVAC CHARGE. "Center Expenses" shall, in addition to
amounts specified in Articles 5 and 28B of the Lease, include the cost of
heating, ventilating and cooling the enclosed Common Areas of the Center as of
the Commencement Date. Tenant shall, pay its Proportionate Share of the Center
HVAC charge in an amount determined from time to time by Landlord, in advance,
on or before the first day of each calendar month as a part of the "Center
Expenses". Landlord reserves the right to discontinue the HVAC charge as a part
of the "Center Expenses" and to include such costs as a separate "Center HVAC
Charge" at any time.
3. LANDLORD'S UTILITIES. In accordance with and subject to the
provisions of Article 10 of the Lease, Landlord shall make arrangements to
furnish those utility services ("Landlord's Utilities") described in Exhibit D
hereto on the terms set forth therein. Tenant shall purchase the Landlord's
Utilities from Landlord (or from such other party that may, from time to time,
operate a plant in the Center or the Building and provide the Landlord's
Utilities) pursuant to and in accordance with Exhibit D. Such payments shall be
made within ten (10) days after receipt of invoice therefor, but not more often
than once a month, commencing with the month that the Landlord's Utilities are
first furnished to Tenant (which shall not be earlier than the Commencement
Date) and continuing during the Term of this Lease, whether or not the Premises
is being occupied by Tenant. At Landlord's option, Tenant shall pay for such
services, in advance, on or before the first day of each calendar month in an
amount equal to one-twelfth (1/12) of the amount estimated by Landlord for each
calendar year, subject to annual adjustments in the manner described in Exhibit
D. In the event Tenant installs or constructs a mezzanine or similar structure
which increases the floor area of the Premises, such additional floor area shall
be added to the original rentable area of the Premises for the purpose of
calculating the Landlord Utility Charge. In the event of any express
inconsistency between Article 10 and Exhibit D, the latter shall control.
4. TENANT'S INITIAL WORK. In connection with Tenant's Initial Work
under Article 6 of the Lease and Exhibit B, Landlord shall deliver to Tenant
illustrative outline drawings of the Premises which contain basic architectural,
electrical and mechanical information necessary for the preparation of Tenant's
plans and specifications for Tenant's Initial Work. Tenant shall submit
Tenant's Working Drawings, as defined in Exhibit B, to Landlord not later than
thirty (30) days after Landlord's approval of Tenant's Preliminary Drawings (or
such earlier date that will allow Tenant to complete all work and open the
Premises by the Commencement Date as aforesaid). If Landlord rejects Tenant's
Preliminary Drawings or Tenant's Working Drawings, Tenant shall resubmit the
same with appropriate changes as required by Landlord within ten (10) days after
Landlord's rejection notice. For any requirements under Exhibit B as to which
no time frame for compliance is set, Tenant shall comply promptly and
diligently, and in no event later than ten (10) days after written notice from
Landlord (and any failure to comply within such time, or within any time periods
specified for any other matters herein or in Exhibit B, shall be a Default under
the Lease). At Landlord's sole discretion, Tenant shall not be permitted to
open the Premises for business, nor shall any storefront barricade be removed,
until construction of Tenant's Initial Work is completed consistent with
Tenant's Approved Working Drawings, the Premises is fully fixtured, and Tenant
is prepared to operate the Premises in accordance with the provisions of
Articles 6 and 8 of the Lease. The term "Rent Commencement Date" used in
Exhibit B shall mean the Commencement Date set forth in Article 1 of the Lease.
5.
<PAGE>
RIDER THREE
CONSTRUCTION ALLOWANCE RIDER
1. CONSTRUCTION ALLOWANCE AND PAYMENT. Subject to the provisions of
this Rider, Landlord shall pay to Tenant a construction allowance (the
"Allowance") in an amount equal to ONE HUNDRED TWENTY-THREE THOUSAND EIGHT
HUNDRED TWO DOLLARS ($123,802.00), provided that in no event shall the
Allowance exceed the actual cost of the improvement work performed by Tenant
at the Premises. Landlord shall pay portions of the Allowance to Tenant
within sixty (60) days after the request of Tenant (but not more than three
[3] installments in the aggregate), provided that Tenant is not then in
default under this Lease. Landlord shall pay the Allowance in three (3)
installments as follows: (i) the first installment shall be for thirty
percent (30%) of the Allowance and shall be payable at such time as at least
thirty percent (30%) of the total Tenant's Initial Work has been performed in
Landlord's reasonable determination, (ii) the second installment shall be for
an additional thirty percent (30%) of the Allowance provided that at least
sixty percent (60%) of the total Tenant's Initial Work has been performed in
Landlord's reasonable determination, and (iii) the balance of the Allowance
shall be payable upon Tenant having completed and paid for all of Tenant's
Initial Work and opened for business, provided that payments of the Allowance
shall be further subject to the following:
(a) With respect to the first installment, Tenant has obtained building
permits and has furnished to Landlord copies thereof;
(b) With respect to each of the first two (2) installments:
(i) Tenant has furnished Landlord with evidence that Tenant has
theretofore performed all the work for which that portion of
the Allowance is being requested in accordance with the
approved plans and specifications and in accordance with all
other applicable provisions of this Lease;
(ii) Tenant has fully paid for all of the work theretofore
performed and has furnished to Landlord a certificate from
an officer of Tenant stating that all the work theretofore
performed has been paid for and setting forth the total
amount that was spent on the work;
(iii) Tenant has furnished Landlord original, valid, partial
mechanic's lien releases from the general and all other
contractors and suppliers who performed work or furnished
supplies for or in connection with Tenant's work at the
Premises with respect to contracts in excess of $2,000.00
covering all of the work theretofore performed and such
other evidence, including, without limitation, the general
contractor's sworn statement, as Landlord may reasonably
request to evidence that no liens can arise from the work
theretofore performed;
(iv) Tenant has furnished Landlord (a) an affidavit from Tenant
listing all contractors and suppliers whom Tenant has
contracted with in connection with the work, together with
the cost of each contract, and (b) an affidavit from
Tenant's general contractor listing all subcontractors and
suppliers whom the general contractor has contracted with in
connection with the work, together with the cost of each
contract; and
(v) Tenant shall not be in default under the Lease beyond any
applicable cure period.
(c) With respect to the last installment:
(i) Tenant has performed all the work in accordance with the
approved plans and specifications and in accordance with all
other applicable provisions of this Lease, including, but
not limited to the completion of all punchlist items;
<PAGE>
(ii) Tenant has furnished Landlord (a) an affidavit from Tenant
listing all contractors and suppliers whom Tenant has
contracted with in connection with the work, together with
the cost of each contract, and (b) an affidavit from
Tenant's general contractor listing all subcontractors and
suppliers whom the general contractor has contracted with in
connection with the work, together with the cost of each
contract;
(iii) Tenant has obtained a certificate of occupancy with respect
to the Premises;
(iv) Tenant has fully paid for all of the work and has furnished
to Landlord a certificate from an officer of Tenant stating
that all the work has been paid for and setting forth the
total amount that was spent on the work;
(v) Tenant has furnished Landlord original, valid, unconditional
mechanic's lien releases from the general and all other
contractors and suppliers who performed work or furnished
supplies for or in connection with Tenant's work at the
Premises (including all parties listed in the affidavits
referenced in item [c][ii] above) covering all of the work
and such other evidence as Landlord may reasonably request
to evidence that no liens can arise form the work;
(vi) receipt by Landlord of an Air Balance Report if required by
the Lease or by Landlord;
(vii) receipt by Landlord from Tenant of two (2) copies of
approved sprinkler shop drawings, and (if Landlord so
requests) an as-built drawing of the work;
(viii) Tenant shall not be in default under the Lease beyond any
applicable cure period;
(ix) the execution by Tenant and delivery to Landlord of Tenant's
estoppel certificate or statement as described in the Lease
and stating, in part, that Tenant reserves no rights for
claims, offsets, or back-charges, except as expressly
provided in Paragraph 5 below;
(x) receipt by Landlord from Tenant of all certificates of
insurance required under the Lease;
(xi) receipt by Landlord from Tenant of a written representation
that all bills for labor and materials for work done or
authorized by Tenant or performed to Tenant's account in
connection with the Premises have been paid (with invoices
or other back-up confirming all costs incurred by Tenant for
the work with such costs equal to or in excess of the
Allowance);
(xii) the opening by Tenant of its business in the Premises; and
(xiii) such other documents as may be reasonably required by
Landlord, Mortgagee(s) or the title company.
All documents required pursuant to the Rider shall be delivered to 520 Pike
Tower, Suite 2200, Seattle, Washington 98101.
2. PAYMENT OF COSTS; RIGHT OF DEDUCTION. Tenant shall have paid
Landlord any and all costs payable by Tenant under the Lease, or, if applicable,
Landlord and Tenant shall have agreed in writing to an offset against the
Allowance for such amounts. Any improvement or work done or authorized by the
Tenant or performed to Tenant's account, the cost of which remains unpaid at the
time the Allowance is otherwise payable, and any accrued Rent which remains
unpaid at the time the Allowance is payable, will be deducted from any Allowance
payment of Landlord to Tenant and Landlord may hold the same as security against
any liens arising therefrom or Landlord may pay such unpaid cost for and on
behalf of Tenant.
Rider Three - 2
<PAGE>
3. LATE OPENING.
4. CERTIFICATE. In addition to Tenant's estoppel certificate, Tenant
shall, upon request by Landlord or any lender of Landlord, promptly execute and
deliver to Landlord or such lender, or such other party as either shall specify,
a certificate certifying whichever of the following is then true: that the
Allowance has been paid in full by Landlord to Tenant; that the Allowance or a
portion thereof is due and payable by Landlord to Tenant specifying such due and
payable amount; that one or more of the conditions precedent set forth in
Section 1 hereof has not been met, specifying such unmet condition or
conditions; that the Allowance has been offset by a certain amount payable by
Tenant to Landlord pursuant to Sections 2 and 3 hereof, specifying the amount of
the offset.
5. APPLICATION AGAINST MINIMUM RENT. In the event that Landlord fails
to pay any installment of the Allowance within sixty (60) days after all of the
conditions of payment of the respective installment are met then, after receipt
by Landlord of written notice from Tenant advising Landlord that the respective
installment has not been paid, Tenant shall have the right, in addition to any
other rights or remedies it may have, to set-off the unpaid amount of the
installment plus interest on that part of the Allowance remaining unpaid from
time to time at the Default Rate commencing with the ninety-first (91st) day
following the date Tenant has satisfied all requirements for the disbursement of
the respective installment from the Minimum Rent that is otherwise payable
pursuant to the terms of this Lease. Tenant shall advise Landlord in writing of
the amount of the Allowance which is being set-off against each installment of
Minimum Rent as such portion of the Allowance is so set-off. The notice
required pursuant to the terms of this paragraph shall be given to Landlord at
the address for notices provided in this Lease.
Rider Three - 3
<PAGE>
EXHIBIT A
CUTTER & BUCK/PACIFIC PLACE
PAGE 1 OF 2
[GRAPHIC]
<PAGE>
EXHIBIT A
CUTTER & BUCK/PACIFIC PLACE
PAGE 2 OF 2
[GRAPHIC]
<PAGE>
EXHIBIT A-1
LEGAL DESCRIPTION
Lots 1 through 11 and the westerly 40 feet of Lot 12 in Block 3 of addition to
the town of Seattle. As laid off by the heirs of Sarah A. Bell, deceased
(commonly known as the Heirs of Sarah A. Bell's Addition to the City of
Seattle), as per plat recorded in Volume 1 of Plats, page 103, records of King
County:
Together with the vacated alley living within said block, as vacated under City
of Seattle Ordinance Nos. 82259, 82351 and 110092;
Except the southerly 7 feet of said Lot 1 and the southerly 7 feet of the
westerly 40 feet of said Lot 12 condemned in King County Superior Court Cause
No. 57057 for the widening of Pine Street, as provided by City of Seattle
Ordinance No. 14500;
And except that portion of the alley lying adjacent to the southerly 7 feet of
Lot 1 and the southerly 7 feet of the westerly 40 feet of Lot 12;
Together with that portion of Lot 12, Block 3, Heirs of Sarah A. Bell's Addition
to the City of Seattle, according to plat recorded in Volume 1 of Plats, page
103, records of King County, Washington, particularly described as follows:
Beginning at the intersection of the northerly line of Pine Street as now
established by Ordinance No. 14500 of the City of Seattle with the westerly line
of Seventh Avenue and running thence westerly along the northerly line of Pine
Street as now established 80 feet; thence northwesterly parallel with the
westerly line of Seventh Avenue, 50 feet, more or less, to the northwesterly
line of said Lot 12 thence northeasterly along the last mentioned line 80 feet
to the westerly line of Seventh Avenue; thence southeasterly along the last
mentioned line to the place of beginning.
Situated in the City of Seattle, County of King, State of Washington.
<PAGE>
EXHIBIT A-2
CUTTER & BUCK/PACIFIC PLACE
DEPICTION OF WINDOW AREA
[GRAPHIC]
<PAGE>
NAME OF CENTER: PACIFIC PLACE
TENANT: CUTTER & BUCK
EXHIBIT B
CONSTRUCTION EXHIBIT
This Exhibit B is subject to and shall be supplemented by the Design
Criteria (defined below) for the Center. All terms herein that are defined in
the body of the Lease to which this Exhibit is attached shall have the meanings
provided for them in the body of the Lease. The Term "Tenant's Work" shall mean
any work performed by Tenant, whether Tenant's Initial Work or work subsequent
thereto.
Attachment 2 hereto contains special provisions that pertain to most or all
of the tenants at the Center, or to certain types of tenants at the Center, or
to tenants in certain locations at the Center, as noted in said Attachment.
With respect to such tenants, said provisions on Attachment 2 shall govern in
case of any conflict with the other provisions of this Exhibit.
SECTION I. DELIVERY OF PREMISES BY LANDLORD
1. Except as may be otherwise specifically set forth in this Lease, and
except for punchlist items with respect to those items which Landlord is
required to furnish or perform pursuant to Paragraph 3 below, Tenant shall take
the Premises in an "as is" condition and all work to be performed at the
Premises shall be performed by Tenant at Tenant's expense.
2. Landlord does not warrant any information Landlord may have furnished
or will furnish Tenant regarding the Premises. It shall be Tenant's
responsibility to verify existing field conditions and measurements of the
Premises. Tenant's failure to verify the existing conditions and measurements
of the Premises shall not relieve Tenant of any expenses or responsibilities
resulting from such failure, nor shall Landlord have any liability or
obligations to Tenant arising from such failure.
3. Landlord has provided the following at Landlord's expense:
a. A basic structure for the Premises. The floor structure has
been designed to accommodate 75/psf of live load with an
additional 25/psf allowed for partition load, 10/psf for
mechanical/ceiling and 25/psf for floor fill and/or finish
materials.
b. Float finish/clean floor; depressed two inches (2") from
mall finish floor elevation at the lease line.
c. A tappable sanitary waste & vent located in the vicinity of
the Premises.
d. A tappable water line riser between Gridlines J & K and 4 &
5 and below the Premises for distribution of cold water.
e. Designated connection point on a distribution backboard at
the Common Area telephone closet for Tenant's telephone
line, and an empty conduit stubbed into Tenant's space from
the closet.
f. Designated connection point at the tenant switchboard for
Tenant's electric service. See Attachment 1 hereto for
further information regarding electrical.
g. Sprinkler trunk lines leading up to the Premises. A
sprinkler grid may or may not exist within the Premises and,
if existing, Tenant, at Tenant's cost, shall be responsible
for making all modifications to it such that it will be
adequate for Tenant's use and in compliance with applicable
Law and the Design Criteria.
h. Neutral piers at the front lease line.
B - 1
<PAGE>
i. Soffit at the front lease line at a height as designated in
the Landlord's Design Criteria.
j. Metal studs with insulation and vapor barrier (no dry wall)
at Tenant side of exterior building walls to the height of
the exterior wall movement joint.
k. Unfinished ceiling consisting of exposed fireproofed
structural steel.
l. Landlord shall provide a louver at the exterior wall or a
duct to the Tenant spaces for connection by Tenant to
provide toilet exhaust for the tenant's Premises in
accordance with the Design Criteria. Alternatively, tenants
with roof access shall provide a toilet exhaust system
through the roof in accordance with the Design Criteria.
Toilet exhaust means shall be determined by Landlord as
designated on the Tenant's Lease outline drawing(s).
m. There will be a central fire alarm system for tenant spaces;
Landlord shall furnish a designated connection point for
connection by Tenant.
n. See Attachment 1 hereto with respect to HVAC for the
Premises.
o. Landlord may or may not have gas service available at the
Center. If gas service is not available and Tenant needs
gas service, Tenant shall be responsible for obtaining gas
service at its cost.
p. There will be a building automation system provided for the
Tenant spaces to control Tenant lighting for show windows
and signage; and HVAC controls. Landlord shall provide a
designated connection point or points for connection of
Tenant control systems in the vicinity of the Premises.
q. Landlord shall provide a designated connection point in the
vicinity of the Premises for those tenants required to
furnish an emergency page speaker system within the
Premises.
4. If any of the Landlord Work described above is not already in
place, and Tenant wishes to perform such work, Landlord, at Landlord's option,
may agree to Tenant performing the work at Landlord's expense. Tenant shall not
perform any such work unless it has received prior written consent from
Landlord.
SECTION II. TENANT'S WORK
PART ONE. General Criteria for Tenant's Work.
1. Subject to the provisions of this Lease, including this Exhibit,
Tenant shall construct the Premises as provided in Article 6 of the
Lease.
2. Tenant shall perform Tenant's Work in accordance with all Laws
including, without limitation, the building code of the
jurisdiction in which the Center is located and all requirements of
the Americans with Disabilities Act.
3. Tenant shall prepare its plans and specifications for its Work in
accordance with this Exhibit, Landlord's design criteria for the
Center, as the same may be revised or supplemented from time to
time, and such other criteria as Landlord may furnish Tenant (such
criteria herein referred to as the "Design Criteria"). The Design
Criteria contains specific criteria for the design and performance
of the Work, including the mechanical and electrical work. The
Design Criteria may contain "Standard Project Details" as issued
from time to time with which Tenant shall comply. In the event
Landlord changes the Design Criteria after Landlord has approved
Tenant's plans and specifications, Landlord shall either waive the
applicability of such change as to the item previously approved, or
reimburse Tenant for all reasonable costs and expenses incurred by
Tenant due to such change.
4. Tenant's Initial Work and, except to the extent as may be
specifically otherwise provided in the Lease, all subsequent Work
in the Premises which Tenant may wish to perform, shall be subject
to the advance written approval by Landlord.
B - 2
<PAGE>
5. Tenant shall, prior to commencement of Work, obtain all required
building and other permits at Tenant's expense and post said
permits at the Premises as required.
6. The loads imposed by Work at the Premises (including dead and live
loads) shall not exceed the allowable load capacity of the existing
structural systems and components thereof.
7. Tenant shall use only new materials for the Work, including
improvements, equipment, trade fixtures and all other fixtures.
Notwithstanding the foregoing, Tenant may reuse portions of
existing improvements subject to Landlord's prior written approval,
provided that said approval shall in no manner relieve Tenant from
the requirement that all Work comply with this Lease, the Design
Criteria and all Laws. Reuse of existing improvements shall be
clearly indicated on Tenant's Drawings (as defined below).
Landlord makes no warranty or representation as to the condition or
suitability of existing improvements reused by Tenant.
8. Tenant shall make no marks or penetrations into the roof, upper
floor decks, exterior walls, or floors, unless approved by Landlord
in advance.
9. If any Work being performed by Tenant to connect to Landlord's
utilities requires access through the premises of any other tenant
or otherwise will affect any other tenant and Landlord has approved
such Work, Tenant shall be responsible for coordinating such Work
with such other tenant, restoring said tenant's premises to its
original condition following the Work, and compensating said other
tenant for any costs incurred by it on account of such Work.
10. If any of Tenant's Work necessitates any special work, such as, but
not limited to, structural modification, increasing the size of
electric conduit or adding or relocating water service or sanitary
service, Landlord, at Landlord's election, may perform such work
and Tenant shall reimburse Landlord the cost thereof plus 15%
thereof for administration, or require Tenant perform the work at
Tenant's cost. If Landlord does any work on behalf of Tenant,
Tenant shall pay fifty percent (50%) of the anticipated cost to
Landlord prior to commencement of the work and the balance upon
completion thereof.
11. Tenant shall retain Landlord's identification signs or, at Tenant's
cost, provide new signs for Landlord's utilities, valves, and other
such devices in the Premises.
12. Landlord may at its election require any aspect of Tenant's Work to
be tested, and Tenant shall cooperate with any such testing
procedure.
13. No approval from Landlord with respect to any aspect of Tenant's
Work shall be valid unless in writing.
PART TWO. Certain Specific Criteria for Tenant's Work
A. WALLS; PARTITIONS; DOORS; FLOORS.
1. All partitions within the interior of the Premises shall be
of metal stud construction, and shall extend to the
structure with gypsum board to the ceiling (except if
required as a rated wall in which case the gypsum board
shall extend to the structure), and shall have gypsum board
finish on all sides with taped and sanded joints. Any
combustible materials applied to partitions shall be covered
with a fire retardant coating and must be approved by the
Fire Marshall in writing.
2. Tenant shall install and finish gypsum board at the
demising walls for the Premises. Gypsum wall board
at demising walls shall be continuous from the floor
to the structure above; fire-taped and fire-safed above
Tenant's ceiling. The cost of the metal studs at the
demising walls shall be split with adjacent tenants (if any)
and shall be billed to Tenant. Tenant's share of such cost
shall not exceed $2,500.00. Landlord, at its option,
B - 3
<PAGE>
reserves the right to install the demising wall studs for
the Tenant(s) and charge each tenant for their share of the
installation cost. If the Premises are adjacent to a
service corridor, Tenant shall install and finish the gypsum
board at Tenant's side of the service corridor walls. If
the Premises have existing walls and Landlord consents to
Tenant retaining said walls, Tenant shall be responsible for
causing the walls to comply with the fire rating
requirements of any and all applicable jurisdictional
authorities.
3. Where the Premises have been previously occupied Tenant
shall repair all structural fireproofing to comply with the
fire rating requirements.
4. Commercial grade finish hardware, labeled where required,
shall be used throughout.
5. A two inch (2") floor depression (below the mall finish
floor elevation) will exist in the Premises. Tenant shall
be responsible to provide all filler (except Landlord is
responsible for filler excess over 2"), sub-flooring and
other related flooring materials required to allow Tenant's
finish floor elevation to match the mall floor elevation.
6. If any part of the floor of the Premises may be exposed to
liquids, either accidentally, for cleaning purposes, or as a
hazard due to space usage (e.g., restaurants), then Tenant
shall provide adequate waterproofing protection beneath its
finished flooring. Tenant shall sleeve, fire stop, flash
and caulk all penetrations of floors so that odors or
liquids will not penetrate the slab at openings. Such
sleeves shall extend two (2) inches above the finished floor
and be installed according to the Design Criteria. All
floor shaft openings to be installed by Tenant, if any,
shall have six (6) inch high enclosing curbs integral with
Tenant's floor and partition construction in accordance with
the Design Criteria. Tenant shall flood test waterproofed
areas for Landlord approval prior to installation of
finished floor materials.
7. Tenant shall install base building standard flooring as the
finished floor material between the storefront lease line
and Tenant's storefront closure. Landlord may at its option
require Tenant to purchase the flooring material from
Landlord and in such event the cost to Tenant shall be as
set forth in Attachment 1.
8. Tenant shall not use flooring or tile at the Premises within
the sales area containing vinyl or similar material, nor use
any adhesives containing asbestos anywhere in the Premises.
All flooring materials must comply with governing codes for
flame and smoke spread requirements.
9. If Tenant has a door leading to an egress/service corridor
and/or an egress stairway, Tenant shall furnish and install
the door and an identification sign setting forth Tenant's
name and address number. Landlord shall furnish said sign
at a cost to Tenant of $50.00.
B. CEILINGS.
1. Ceilings shall be non-combustible construction, and shall be
gypsum board or acoustical tile of concealed suspension
type, or, at a minimum, a tegular type regressed metal grid
lay-in type incorporating a 2' x 2' tegular type acoustical
tile. 2' x 4' grid systems shall be permitted only in stock
areas not visible to the public. The color of the gypsum
board or tile shall match the grid. Other ornamental or
acoustical tile ceilings may be permitted only if Landlord
shall so approve in writing.
2. Ceilings shall be of the accessible type, or access panels
shall be provided as required.
B - 4
<PAGE>
3. Furring, framing, and blocking above ceiling shall be of
non-combustible materials meeting codes.
4. No wood (even if fire treated) or any other combustible
material shall be permitted above the ceiling.
C. STRUCTURAL.
1. Without limitation, any alterations, additions or
reinforcements to Landlord's structure, piping, conduit or
duct work to accommodate Tenant's Work, or any work that may
otherwise affect Landlord's structure, including mezzanines,
shall not be performed without in each instance the prior
written approval of Landlord. Tenant shall not suspend any
of its work from Landlord's construction which was not
designed for such purpose. Tenant shall provide a
suspension system as required to suspend Tenant's Work from
Landlord's structure only.
2. Any live loads required beyond those provided by Landlord in
Section I.3.a. shall be submitted for review and approval by
Landlord. Increased live loads shall be at Landlord's sole
discretion. All costs, including engineering, associated
with upgrading structure to accommodate increased live loads
shall be at Tenant's expense.
3. Following its Work Tenant shall leave Landlord's structure
as strong or stronger than the original design and with
finishes and fireproofing unimpaired. Landlord may elect to
require that structural modifications be performed by
Landlord's contractor at Tenant's cost.
4. Tenant shall submit detailed and certified engineering
documents to show any proposed work involving Landlord's
structure, and Landlord may require said documents to be
reviewed by Landlord's structural engineer at Tenant's cost.
Also, Landlord may require Tenant to use, at Tenant's cost,
Landlord's structural engineer to design Tenant's structural
modifications.
5. No welding to building structure shall be permitted.
6. Channelling or cutting of the suspended structural slabs
shall not be permitted (except coring of the slab shall be
permitted subject to Landlord's prior written approval of
core size and location).
7. Support of all mechanical and electrical equipment shall be
subject to Landlord's advance written approval. If in the
Landlord's opinion structural analysis of the method of
support is necessary, Tenant shall at Tenant's expense
utilize Landlord's structural engineer to evaluate the
support.
D. ROOFS. All work affecting or pertaining to the roof, including
roof penetration and installation of structural supports, curbing
and flashing on or to the roof, shall be subject to Landlord's
prior written consent and, if consented to, shall be performed only
in the manner specifically approved by Landlord. All such approved
work (including repair or maintenance of such work) shall be
performed by Landlord's designated roofing contractor at Tenant's
expense.
E. FIRE PROTECTION.
1. Tenant shall contract with a sprinkler contractor approved
by Landlord to install within the Premises a sprinkler
system as required in the Design Criteria. If feasible
Tenant may use any existing sprinkler system within the
Premises provided Tenant makes all modifications and
additions necessary to bring the system into compliance with
the Design Criteria and applicable Law. (See also Section I,
Item 3.G).
B - 5
<PAGE>
2. All sprinkler work shall be done without interrupting
service to the remainder of the Center during occupied
hours. Draindown and recharge of sprinkler system will be
performed by Landlord. Tenant shall give Landlord three (3)
days' notice of any requested draindown. First draindown
and recharge free, thereafter Tenant shall reimburse
Landlord for each draindown the amount set forth on
Attachment 1 hereto.
3. All sprinkler work shall be in accordance with the
requirements of, and be approved by, Landlord's insurance
underwriter and any governmental and quasi-governmental
authorities having jurisdiction.
4. If Tenant is modifying an existing sprinkler system or
installing a new system, Tenant's sprinkler contractor shall
prepare shop drawings and sepia reproducible prints of the
proposed work, with appropriate calculations, and submit
them to the local Fire Marshall, Landlord and Landlord's
insurance underwriter for approval prior to commencing work.
Approved sepia reproducible shop drawings from Landlord's
insurance underwriter and the Fire Marshall shall be filed
with Landlord prior to commencement of fire protection
construction activity. Upon completion of work, copies of
the material and test certificates shall be filed with all
agencies and the Landlord prior to occupancy of the
Premises. Tenant shall pay for any inspections required by
the Fire Marshall or any jurisdictional authority.
5. Should Tenant's Work or use of the Premises require
increases in Landlord's maintained main trunk lines or
underground service, Tenant shall be responsible for the
cost of providing such increase in service to meet its
requirements.
6. Any damage to Landlord's sprinkler system caused by Tenant's
Work will be repaired by Landlord at Tenant's expense.
7. Automatic sprinkler equipment, controls wiring, emergency
annunciation system and any required fire alarm system shall
be tested by a party approved by Landlord, at the Tenant's
expense, before Tenant opens for business in the Premises.
The introduction of stock, furniture, fixtures, equipment,
or other combustible material to the Premises is prohibited
until automatic sprinklers are placed in service.
8. Tenant shall install a fire alarm system and an emergency
page speaker system for the Premises, if required by Law,
and, if there is a central system at the Center, Tenant
shall connect up to Landlord's designated connection points,
as further set forth in the Design Criteria. Landlord may
require Tenant to use, at Tenant's expense, a contractor
designated by Landlord for any work that could affect
Landlord's central systems, such as, but not limited to,
reprogramming or connection to the central systems. For
lighting and signage lighting controls, HVAC controls, fire
alarm, emergency annunciation, any metering of utilities,
Landlord's contractor shall provide addressable transponder
at each connection to Landlord's control loops, as required,
at the Tenant's expense, in accordance with the Design
Criteria.
9. Landlord's fire insurance underwriter shall from time to
time during the Term have the right to inspect the fire
protection system and its component parts. Said system
shall at all times comply with the reasonable requirements
of said underwriter, and any alterations, improvements,
repairs, or maintenance required by such underwriter shall
be Tenant's sole responsibility and shall be performed
promptly at Tenant's expense upon notice of the necessity
for such work.
10. Tenant shall install fire dampers as required by Law and by
the Design Criteria.
B - 6
<PAGE>
F. PLUMBING. Tenant shall at its expense furnish and install all
required plumbing work for the Premises and shall at its expense
make connections to plumbing services provided by Landlord as
follows:
1. Connect to Landlord designated tappable sanitary line at
locations approved by Landlord.
2. Connect to Landlord designated tappable domestic water line
at locations approved by Landlord. Tenant shall install a
water meter with remote reader capability, if required by
Landlord in accordance with the Design Criteria.
3. Connect to Landlord's sanitary vent, if available, or
alternatively, install a sanitary vent through the roof, all
as specifically set forth in the Design Criteria. (The
Design Criteria shall state which alternative applies.)
4. Provide domestic hot water using electric storage type water
heaters.
5. Insulate all hot and cold water piping and all piping and
connections for refrigeration or cold condensate water waste
in the Premises and all above ground horizontal waste
piping.
6. Install accessible sanitary drain cleanouts which terminate
within the Premises.
G. HEATING, VENTILATING, AND AIR CONDITIONING.
1. Tenant shall design, provide, and install a complete
heating, ventilating, and cooling system within the Premises
as specified in Attachment 1 hereto and the Design Criteria.
2. Tenant shall provide toilet room exhaust at a ventilation
rate complying with applicable Law. Tenant shall install a
toilet exhaust system, at a location approved by Landlord
all as specifically set forth in the Design Criteria. (The
Design Criteria and the Tenant's Lease outline drawing shall
state which alternative applies.)
3. If odors, excessive heat, moisture, smoke or other air
contaminants, can be expected to emanate from the Premises
when Tenant's business is in operation, then Tenant shall
provide a separate exhaust system for the Premises such that
no odors or other contaminants emanate beyond the Premises.
In the event of a dispute, Landlord's reasonable
determination that a separate exhaust system is needed shall
govern. Without limitation, Landlord may require a separate
exhaust system for restaurants, beauty salons, tenants that
do film developing, and pet stores. All exhaust systems
shall comply with NFPA standards, applicable Law and the
Design Criteria.
4. Tenant's air supply, and, if Tenant has a supplemental
condenser, chilled and/or hot water system(s), Tenant's
water supply distribution and exhaust systems, shall be
balanced at Tenant's expense prior to opening for business
to comply with Law and Tenant's Working Drawings, as
approved by Landlord. Such balancing shall be performed by
a Landlord-approved independent air balance contractor not
affiliated with Tenant's mechanical contractor. Tenant
shall furnish Landlord a certified air-balance report after
completion of Tenant's Work.
5. The support Tenant intends to use for its mechanical
equipment shall comply with all Local Codes and shall be
subject to Landlord's prior written approval.
6. Tenant shall not permit any rooftop ducts, piping or
equipment with respect to the Premises to be visible from
the exterior of the Center without the prior written
approval of Landlord.
B - 7
<PAGE>
7. Tenant shall install a DDC control system (for control of
Tenant's HVAC system) that is compatible with Landlord's
central system. Landlord shall require Tenant to use, at
Tenant's expense, a designated controls contractor, system
type, installation of addressable devices and set-up to
insure compatibility with Landlord's central system.
H. ELECTRICAL. Subject to and in accordance with Attachment 1, Tenant
shall design and install a complete electrical system
for the Premises as specified in the Design Criteria, which system
shall include the following:
1. Dry-type transformers as may be necessary to accommodate
Tenant's requirements.
2. All work required to connect the electrical system within
the Premises to the power source at the location designated
by Landlord, using appropriate sized electrical conduit and
feeders to connect up to Premises. (If existing conduit and
feeders are adequate for Tenant's electrical load and are
otherwise in compliance with the Design Criteria and Law,
Tenant may use them.) Tenant shall have its electrical
contractor coordinate the electrical connection with
Landlord.
3. Electrical meters are required by the Design Criteria. They
will be furnished at Tenant's request by the serving utility
and installed by the utility in a meter base provided by
Landlord.
Without limitation to any other requirements in connection with the
electrical work, (i) all wiring shall be installed in conduit and
(ii) Tenant shall balance all phases of Tenant's electrical system
upon completion of construction to a tolerance of seven percent
(7%).
I. FIRE ALARM. Tenant shall utilize Landlord's designated controls
contractor to perform the connection of the Tenant's provided fire
alarm system to the Landlord's wiring and to provide and install an
addressable device for the Tenant. Tenant shall provide a fire
alarm system which shall be compatible with Landlord's system.
J. TELEPHONE. Tenant shall make arrangements with the telephone
company and provide all telephone system panels, outlets, and
conduits in the Premises and wire to the distribution point outside
the Premises. All telephone wire in the ceiling shall be installed
to conform to applicable requirements of Law for a ceiling return
air plenum.
K. STOREFRONT. Tenant shall install a new storefront in accordance
with the Design Criteria.
L. RESTROOM. Tenant may install a restroom (or restrooms) within the
Premises in accordance with the Design Criteria, to the extent
approved in writing by Landlord on the Drawings.
M. SECURITY DEVICES. Tenant's security devices, if any, shall not be
installed or placed in operation unless the size, location and
design of such security devices are shown on the Working Drawing
and have specifically been approved by Landlord. Any such device
installed without such prior consent shall be subject to removal by
Landlord without notice to Tenant or liability therefor.
Landlord's approval of the Working Drawings shall not be deemed as
its approval of such security devices unless such devices are
specifically shown as approved on said Working Drawings.
N. GREASE TRAPS. Food service or other tenants who produce grease to
any extent shall install a point-of-use grease interceptor within
the Premises in accordance with the Design Criteria and all
applicable laws. Tenant shall maintain and clean interceptor and
arrange disposal from the Center.
B - 8
<PAGE>
O. GAS SERVICE. Subject to Landlord's advance written approval, and
available capacity, if Tenant desires gas service at the Premises,
Tenant shall, at Tenant's sole expense, arrange for connecting up
the Premises to Landlord's gas service and install a submeter and
remote reader systems in accordance with the Design Criteria at
Landlord's designated connection point.
SECTION III. PROCEDURES AND SCHEDULES FOR THE COMPLETION OF PLANS AND
SPECIFICATIONS
1. All prints, drawing information, and other materials to be
furnished by Tenant as required hereinafter, shall be delivered to
Landlord in care of Pine Street Development, Attention Tenant
Coordinator, or such different address as Landlord may designate to
Tenant from time to time. Tenant's preliminary drawings and
specifications are herein referred to as the "Preliminary
Drawings" and Tenant's final drawings and specifications are herein
referred to as the "Working Drawings". The Preliminary Drawings
and Working Drawings are sometimes referred to herein as the
"Drawings."
2. Tenant shall, at its sole expense, utilize the services of an
architect and engineer to prepare all Drawings. Said architect and
engineer shall be registered in the state in which the Center is
located. All Drawings shall be submitted to Landlord for approval
in the form of one (1) set of reproducible sepia prints and three
(3) sets of blueline prints.
Tenant shall, with the Drawings, furnish sample boards indicating
materials, color selections and finishes to be used. Tenant shall
also submit to Landlord such further information on Tenant's
planned electrical and mechanical usage at the Premises as
requested by Landlord (herein referred to as "Mechanical/Electrical
Design Submittal Forms"). Tenant shall accurately indicate on the
Plans any existing equipment or conditions that Tenant proposes to
reuse.
3. Unless this Lease is a renewal or extension of a previous lease
with Tenant for the same Premises, Landlord will furnish Tenant a
drawing that shows the dimensions and square footage of the
Premises (the "Layout Drawing"). The Layout Drawing may also show
the location of certain existing improvements, such as utility
lines. Also, unless Tenant is not required to perform, and is not
electing to perform, any Work at the Premises, Landlord shall
furnish Tenant the Design Criteria for the Center. If, pursuant to
the foregoing, Tenant is supposed to receive the Layout Drawing
and/or the Design Criteria, and has not received the same by the
date this Lease is fully executed, Tenant shall promptly notify
Landlord and Landlord shall furnish said item(s) to Tenant as soon
as reasonably possible. Landlord does not warrant the information
or measurements shown on the Layout Drawing, or on any other
drawings it furnishes to Tenant with respect to the Premises. It
shall be the Tenant's responsibility to field measure and field
verify all existing conditions at the Center.
4. Tenant shall submit the Preliminary Drawings promptly. The
Preliminary Drawings shall include interior floor plans, interior
elevations, reflected ceiling plan(s) and storefront elevations,
signage design, size and location, and any other work Tenant
intends to perform. With the Preliminary Drawings Tenant shall
submit a color rendering of Tenant's proposed storefront and
signage, and a sample board of the materials to be used in the
storefront and interior of the Premises. If Landlord disapproves,
Landlord shall specify the reasons for the disapproval. If
Landlord disapproves, Tenant shall within ten (10) days after
receipt of Landlord's disapproval, send Landlord revised
Preliminary Drawings addressing Landlord's comments. This
procedure shall be repeated until Landlord has approved the
Preliminary
B - 9
<PAGE>
Drawings. Landlord may give approval "as noted" in which event the
changes noted by Landlord shall be deemed incorporated into the
Preliminary Drawings; provided, if Tenant notifies Landlord within
five (5) days thereafter that it does not accept said changes, then
the Preliminary Drawings shall be deemed disapproved on account of
the changes Landlord had requested.
5. The Working Drawings shall include detailed final drawings for
architectural, electrical, mechanical, sprinkler and plumbing and
all other work to be performed by Tenant and shall be prepared
consistent with the approved Preliminary Drawings. If Landlord
disapproves the Working Drawings, Landlord shall specify the
reasons for the disapproval. If Landlord disapproves, Tenant shall
within twenty-one (21) days after receipt of Landlord's
disapproval, send Landlord revised Working Drawings addressing
Landlord's comments. This procedure shall be repeated until
Landlord has approved the Working Drawings. Landlord may give
approval "as noted" in which event the changes noted by Landlord
shall be deemed incorporated into the Working Drawings; provided,
if Tenant notifies Landlord within five (5) days thereafter that it
does not accept said changes, the Working Drawings shall be deemed
disapproved on account of the absence of the changes Landlord had
requested.
6. Working Drawings shall include, but not be limited to, the
following:
a) Floor and fixture layout: 1/4" = 1'0"
b) Reflected ceiling plan: 1/4" = 1'0"
c) Plan, elevations and sections of
storefront with signs indicated: 1/4" = 1'0"
d) Storefront details: 1-1/2" = 1'0"
e) Special condition details: 1-1/2" = 1'0"
f) Interior elevations: 1/4" = 1'0"
g) Full sections of partition types: 1/2" = 1'0"
h) Door schedule with jamb details,
including hardware list: 1/2" = 1'0"
i) Color sample and material board for
storefront and interior finishes.
j) A key plan locating the Premises within the Center.
k) Details of merchandising fixtures.
l) Mechanical floor plan and/or reflected ceiling plan at
1/4" = 1'0" scale or larger, including all ductwork, exhaust
systems, hoods, piping and equipment.
m) Schematic diagram of the HVAC system controls, including all
fire/smoke detection and alarm devices with all
manufacturer's model numbers listed.
n) Equipment schedules, including fan powered VAV boxes,
condensing units, roof units, exhaust fans, air devices
(diffusers, registers and grilles), and any other equipment
used, including manufacturer's name and number.
o) Complete project specifications.
p) Partial roof plan, if applicable, including location of
roof-mounted equipment and roof penetration details.
q) Roof shop drawing by Tenant's mechanical contractor with
roof top equipment locations for coordination with
Landlord's roofer.
r) Access panel locations for all equipment including
fire/smoke dampers.
s) Maximum drawing sheet size shall be 30" X 42".
t) Landlord's design submittal forms.
u) Electrical floor plan at 1/4" = 1'0" or larger (for power
branch circuit and wiring).
v) Reflected ceiling plan at 1/4" = 1'0" or larger (for
lighting branch circuit and wiring).
w) Electrical riser diagram, including type and size of
feeders, fuses, disconnect switches, transformers, meters
and main breakers.
B - 10
<PAGE>
x) Electrical panel schedule(s), including main and branch
circuit breaker sizes and all connected load calculations.
Panel schedules shall provide a balanced load design as
required by the criteria.
y) Lighting fixture schedule, including type, lamps, mounting,
wattage, quantities and manufacturer's catalog number.
z) Required fire/smoke alarm system devices/controls.
aa) Plumbing floor plans at 1/4" = 1'0" scale or larger,
including all plumbing fixtures, proper piping sizes,
equipment locations and plumbing to Landlord's designated
connection points.
bb) Isometric diagram of water system (hot and cold) and
santiary system and venting within the demised Premises.
cc) All applicable details for floor drains, clean outs, slab
and roof penetrations, etc., sufficient for construction.
dd) Plumbing fixture unit calculations (Landlord Design
Submittal Form DS8).
ee) Within restaurants or as applicable, isometric diagram of
gas system, including meters and all equipment locations
within the demised Premises, extending to the Landlord's
designated connection point outside the demised Premises,
including fuel shut-off solenoid valves.
7. The approval by Landlord or Landlord's agent of any Drawings or of
Tenant's Work shall not constitute an implication, representation
or certification by Landlord or Landlord's agent that either said
Drawings or Tenant's Work is accurate, sufficient, efficient or in
compliance with insurance and indemnity requirements, or any Laws,
including but not limited to code and the Americans with
Disabilities Act, the responsibility for which belongs solely to
Tenant.
8. In those instances where multiple standards and requirements apply
with respect to Tenant's Work, the strictest of such standards
and/or requirements shall control unless prohibited by applicable
Law.
9. Upon completion of Tenant's Work and before Tenant opens for
business at the Premises, Tenant shall submit to Landlord written
proof from Landlord's insurance underwriter that the fully
installed sprinkler system was approved by said underwriter, and
Tenant shall submit to Landlord and Landlord's insurance
underwriter copies of all material and test and inspection
certificates.
SECTION IV. CONSTRUCTION
1. Tenant may not commence any Work until this Lease has been fully
executed, Landlord has approved Tenant's Working Drawings, all
required insurance certificates have been furnished Landlord, all
building permits have been obtained, and Tenant has complied with
all other requirements herein and elsewhere in this Lease.
2. A representative of Tenant shall meet with Landlord at the mall
office prior to start of construction to discuss construction-
related items. Tenant's representative shall contact the mall
office in advance to schedule said meeting at a mutually
satisfactory time.
3. Without limitation to any provision of this Lease, prior to
commencement of any Work at the Premises Tenant shall furnish
Landlord the following:
a. The names, addresses, representatives and telephone numbers
of the general contractor and all subcontractors ("Tenant's
Contractors").
b. Amounts of the general contract and each subcontract.
c. Certificates of Insurance evidencing the insurance required
of Tenant and Tenant's general contractors as provided in
this Lease, including this Exhibit B.
d. A copy of the building permit(s).
e. A detailed construction schedule.
B - 11
<PAGE>
f.
g. Prior to commencement of work, Tenant shall furnish to
Landlord, subject to Landlord's approval of the following:
(a) A copy of the executed contract between Tenant and
Tenant's general contractor covering all of Tenant's
obligations under this Exhibit B;
h. Tenant's general contractor's acknowledgment of receipt of
the Landlord's retail tenant contractor manual.
i. Proof that Tenant's general contractor is licensed to work
in the State of Washington.
j. A specific job-site safety program, as required by the State
of Washington.
4. All Tenant's Contractors shall be union, bondable, licensed
contractors, having good labor relations, capable of working in
harmony with Landlord's general contractor and other contractors in
the Center. Tenant shall coordinate Tenant's Work with other
construction work at the Center, if any. Landlord specifically
reserves the right to approve Tenant's Contractors. If Landlord
does not give Tenant such approval with respect to any
contractor(s) Tenant shall contract with another general contractor
and/or subcontractors(s), as the case may be, for the completion of
Tenant's Work.
5.
6. Tenant's Work shall be subject to the inspection of Landlord's
representative from time to time during the period in which the
Work is being performed.
7. Tenant's general contractor shall maintain at the Premises during
construction a complete set of approved Working Drawings bearing
Landlord's approval stamp.
8. Prior to the commencement of construction, Landlord shall have the
right to post, in a conspicuous location, on Tenant's Premises, as
well as record with the City of Seattle, a Notice of
Nonresponsibility.
9. Temporary Facilities.
a. If not already available in the Premises, Tenant shall
provide temporary heat, air-conditioning and ventilation for
the Premises during construction if Tenant desires the same.
B - 12
<PAGE>
b. Tenant shall make the necessary temporary electrical
connections at a source designated by Landlord prior to
beginning its Work at the Premises so that it shall have
electricity during its construction period. Tenant shall
pay for said electricity as billed by the electrical company
or by Landlord (as Landlord reasonably determines), as is
applicable. The charge to Tenant for Landlord's provided
service will be $200.00 per month for each month or a
portion of a month, or $0.10 per square foot of the Premises
per month (pro rated on a per diem basis for a partial
month), whichever is greater.
c. If Tenant requires water service during construction and
Landlord is able to provide it, Landlord shall do so at a
designated location and bill Tenant as Landlord reasonably
determines.
d. Tenant shall place all trash in trash containers at a
pick-up area or areas designated by Landlord. Tenant shall
be responsible for breaking down boxes. Tenant shall furnish
its own trash containers at its cost unless Landlord elects
to furnish the containers. Tenant shall not permit trash to
accumulate within the Premises or in the corridor or mall
adjacent to the Premises. Should Landlord elect to remove
Tenant's trash from the designated pick-up areas for any
reason the charge to Tenant for Landlord's provided services
will be determined by multiplying the square footage of the
Premises by the applicable charge set forth below:
<TABLE>
<CAPTION>
Tenant's Rentable Area Charge
---------------------- ------
<S> <C>
5,001 square feet or more. . . . . . . . . . . . . . . $0.20
2,001 square feet to 5,000 square feet . . . . . . . . $0.22
2,000 square feet or less. . . . . . . . . . . . . . . $0.30
</TABLE>
Example. . . . . . . . . 2,500 square feet X $0.22 = $550.00
Tenant shall be solely responsible for removal from Premises
and legal disposal of any containers considered as hazardous
waste by the local sanitation authority and Tenant shall
take all precautions to assure that such containers are not
placed in Landlord's disposal containers.
Landlord may utilize a recycle bin refuse program and, if
made available to Tenant, Tenant shall take necessary
precautions to sort refuse and to prevent cross
contamination of recycle containers.
e. Landlord shall provide temporary sanitary facilities for
Tenant's use and charge Tenant a reasonable amount for such
service, which charge shall not exceed $200.00 per month
(prorated on a weekly basis).
f. Tenant shall take all necessary precautions to contain
construction "wash-up" liquids (such as grout wash, paint
wash, etc.) and prevent entry of such liquids into
Landlord's sanitary or storm waste system. All construction
wash-up shall be conducted at a location designated by
Landlord.
g. In the event Tenant buildout is concurrent with the
construction of the building shell, Tenant shall schedule
usage of the operated material hoist or service elevator for
conveyance of Tenant's materials. Hours of usage shall be
solely at the discretion of Landlord's General Contractor
and all scheduling shall be conducted directly with
Landlord's General Contractor. If Tenant's buildout occurs
before completion of the initial construction of the
Center, freight elevator hoisting will be provided by
Landlord on an 8 hour basis during weekdays only. Tenant
shall coordinate all hoisting through Landlord's designated
representative for such purpose. In either event, the cost
of such usage shall be payable to Landlord
B - 13
<PAGE>
and the charge to Tenant for such service will be $1.00 per
square foot of the Premises.
Tenant shall make prior written request to Landlord's designated
representative for any overtime scheduling for freight hoisting. Provided
Landlord determines, at its sole discretion, that same is available, Tenant
shall pay for all operator overtime incurred during such special hoisting
period(s) in addition to the charge determined as set forth above.
10. In the event Tenant is not open for business in the Premises by the
Grand Opening, Tenant shall not perform any work at the Premises
without a temporary construction barricade in front of the
entire Premises. The barricade shall be constructed in such a
manner to not interfere with Landlord's construction and shall
be installed in accordance with Landlord's requirements. In
the event Tenant is not open for business in the Premises by
the Grand Opening, Tenant shall at Tenant's cost install its
own barricade in which event Landlord may designate the
specific type of design required for the barricade or have
Tenant prepare the design for the barricade which design shall
be subject to Landlord's advance written approval. No signs
shall be allowed on any barricades except those, if any,
provided by Landlord. Landlord shall have the right to remove
any nonpermitted signs without liability or prior notice.
11. The cost of any work permitted or required to be performed by
Landlord on behalf of Tenant under this Exhibit shall become due
and payable in full within thirty (30) days after Tenant has been
invoiced for same by Landlord and said charges shall be deemed Rent
under the Lease.
12. Upon completion of Tenant's Initial Work, Tenant shall notify the
Landlord's Tenant Coordinator . Upon said notification, Landlord's
designated representative shall inspect the Premises and, if the
Premises are constructed in accordance with the approved Drawings,
said representative shall issue a Letter of Acceptance for the
Premises. If Landlord believes the Premises have not been
constructed in accordance with the approved Drawing, Landlord shall
so notify Tenant or Tenant's Contractor. Tenant shall not open
prior to Landlord's issuance of a Letter of Acceptance. Tenant
shall furnish Landlord a copy of a certificate of occupancy for the
Premises before Tenant opens for business.
13. All work performed by Tenant during its construction period, or
otherwise during the Term, shall be performed so as not to cause
unreasonable interference with other tenants and the operation of
the Center, and Landlord shall have the right to impose reasonable
requirements with respect to timing and performance of the Work in
order to minimize such interference. Work causing noise, odor or
vibration outside the Premises shall be performed only during hours
the stores at the Center are not open. Tenant shall take all
precautionary steps to protect its facilities and the facilities of
others affected by the Work (including Landlord flooring in the
vicinity of the Premises) and shall police same properly.
Construction equipment and materials are to be located in confined
areas and truck traffic is to be routed to and from the site as
directed by Landlord so as not to burden the construction or
operation of the Center. All Work shall be confined to the
Premises. Tenant's Contractor shall coordinate with Landlord's
on-site representative for the delivery and removal of its equipment
and materials. Landlord shall have the right to order Tenant or
any Tenant's contractor or subcontractor who willfully violates the
above requirements to cease work and to remove its equipment and
employees from the building.
B - 14
<PAGE>
Tenant and/or Tenant's contractor shall take precautions to protect
adjacent tenants and tenants on common air distribution systems
from airborne dust, dirt and contaminants, VOC's (volatile organic
compounds such as paint thinner or varnish vapors) including, if
necessary, isolating or otherwise protecting Landlord's central air
distribution and return air systems (including return air plenum)
from entry of these potential contaminants.
14. It is understood and agreed that Tenant's contractor shall perform
said work in a manner and at times that do not impede or delay
Landlord's Construction Manager/General Contractor in the
completion of the Premises as provided in the Lease, and that
Tenant and its contractor shall not in the performance of Tenant's
Work do anything that tends to jeopardize the labor relations of
others in the Building. Any delays in the completion of the
Premises or the commencement of the Lease term and any damage to
any work caused by Tenant's contractor shall be at the cost and
expense of Tenant.
15. Contractor Insurance. Tenant shall cause its general contractor
and all subcontractors to maintain during the construction period
the following insurance: (i) commercial general liability
insurance, with limits of not less than $2 million per occurrence
(the portion of such coverage over $1 million may be provided under
an umbrella or excess liability policy), for personal injury,
bodily injury or death or property damage or destruction, arising
out of or relating to the contractor's work at or in connection
with the Premises and completed operations for one (1) year
following job completion and shall provide for a waiver of
subrogation by the insurance company; (ii) workers' compensation
insurance with respect to each contractor's workers at the site or
involved in the Tenant's Work, in the amount required by statute;
(iii) employer's liability insurance in the amount of at least
$1,000,000.00 per accident and at least $1,000,000.00 for disease,
each employee; (iv) comprehensive automobile liability insurance
covering all owned, hired or non-owned vehicles, including the
loading and unloading thereof, with limits of not less than $2
million per occurrence (the portion of such coverage over $1
million may be provided under an umbrella or excess liability
policy); and (v) builder's risk property insurance upon the entire
Tenant's Work to the full replacement cost value thereof.
Landlord, Landlord's managing agent, and such other parties as
designated by Landlord, shall be additional insureds under (i),
naming owner/landlord, tenant, general contractor, and all
subcontractors. All insurance required hereunder shall be provided
by responsible insurers rated at least A and X in the then current
edition of Best's Key Rating Insurance Guide and shall be licensed
in the State in which the Center is located. Tenant shall provide,
or cause its contractors to provide, such certificates prior to any
Tenant's Work being performed at the Premises. Such certificates
shall state that the coverage may not be changed or cancelled
without at least thirty (30) day's prior written notice to
Landlord.
B - 15
<PAGE>
ATTACHMENT 1 TO EXHIBIT B FOR
PACIFIC PLACE
SEATTLE, WASHINGTON
1. ELECTRICAL. An empty conduit for feeder conductors from Landlord's
switchboard room to the Premises will be provided by Landlord. Tenant
shall extend electrical feeder conductors from Landlord's switchboard to
Tenant electrical panel and arrange for meter installation with Seattle
City Light in order to obtain electricity. Landlord shall make available
to Tenant, at the tenant switchboard, electrical capacity based on Tenant
occupancy type at 16 volt/amps per square foot of the leasable area of the
Premises at 480 Y/277 V, 3 phase, 4 wire; said electrical capacity is
intended to accommodate Tenant requirements for power, lighting and VAV
terminal reheat. If Tenant's total electrical power requirements exceed
such amount Landlord may require Tenant to pay for the incremental cost to
upgrade the available capacity.
In the event Tenant is a restaurant, electrical capacity provided by
Landlord is as follows:
N/A Restaurant Tenant #1 (3726 sf): 200 amp, 180V, 3 phase, 4
------- wire, yielding 50 volt amps per square foot.
N/A Restaurant Tenant #2 (6553 sf): 300 amp, 480 Y/277 volt, 3
------- phase, 4 wire, yielding 38 volt amps per square foot.
N/A Marche Tenant (23,914 sf): 600 amp, 480 Y/277 volt, 3 phase,
------- 4 wire, yielding 21 volt amps per square foot.
2. HVAC. Tenant shall perform the following with respect to HVAC (the
alternative which is checked shall apply):
X The Center has a conditioned air system for cooling and
------- supplemental heating (morning warm-up) of the Premises.
Tenant shall install a master VAV box or boxes with
controls, inside the lease line, electric re-heat coils for
Tenant's heating requirements, distribution ductwork and
controls, and connect to the Landlord-designated connection
points, as specifically set forth in the Design Criteria.
N/A Tenant shall install special systems for make-up or exhaust
------- air requirements, and all associated ductwork, shafts,
equipment and controls, as specifically set forth in the
design criteria.
N/A (Other)
-------
3. FLOORING COST. Cost to Tenant of Building Standard Flooring purchased from
Landlord.
- Sealed Concrete Pavers: $15/sf
4. BARRICADE COST.
5. SPRINKLER DRAINDOWN. Cost to Tenant per sprinkler draindown: First
draindown and recharge free; thereafter, charged on an hourly basis in an
amount Landlord reasonably determines, not to exceed $250.00 per draindown.
6. CONSTRUCTION DEPOSIT. N/A
Attachment 1 to Exhibit B
<PAGE>
ATTACHMENT 2 TO EXHIBIT B FOR
PACIFIC PLACE
SEATTLE, WASHINGTON
SPECIAL PROVISIONS.
None
Attachment 2 to Exhibit B
<PAGE>
EXHIBIT C
SIGN EXHIBIT
A. GENERAL
1. The furnishing and installation of a sign and the costs so incurred
shall be the responsibility of Tenant. Sign construction is to be
completed in compliance with the criteria contained in this EXHIBIT
C and the DESIGN CRITERIA MANUAL FOR TENANT IMPROVEMENTS ("Tenant
Design Criteria"). As used in this Lease, the term "Sign" shall
refer to all graphics.
2. Each Tenant will be required to identify its Premises by signage in
accordance with this EXHIBIT C.
3. The Tenant Design Criteria for signs is intended to encourage
creativity, individual store expression and visual interest. All
three elements are of key importance to the consumer's shopping
experience and recall of the Center. Storefront plans and
merchandising techniques are to be integrated with the Sign design.
4. Landlord encourages Tenant to raise with Landlord any questions
Tenant may have regarding the Sign Criteria and the intent of this
EXHIBIT C prior to commencing preliminary design of the Sign.
5. Tenant's Sign drawings and specifications must be submitted with
the working drawings for Tenant's Premises. All Signs are subject
to approval by the Center Environmental Design Board ("Design
Board"). The Design Board consists of Landlord's representative and
Landlord's retail leasing representative, Landlord's architect and
Landlord's graphic designer. The Design Board will review proposed
Sign drawings and specifications for sophistication in design and
detail; use and quality of materials; excellence in fabrication
techniques; and compatibility of the proposed design with existing
storefronts in the Center.
6. The Landlord will provide uniform Signs identifying stores on
service doors. Tenant shall not post any other additional Signs.
7. The Tenant shall acquire any municipal required sign permits.
B. GENERAL SIGN CRITERIA
1. The Signs shall be limited to the store name only, and the name
shall not include any items sold in the store.
2. The use of corporate shields, crests, logos or insignia will be
permitted, subject to Landlord's approval, and provided that they
meet all other design criteria set forth in this EXHIBIT C.
C. PROHIBITED TYPES OF SIGNS OR SIGN COMPONENTS (Unless approved in writing by
the Center Environmental Design Board)
1. Moving or rotating signs.
2. Signs employing moving or flashing lights.
3. Signs employing exposed raceways, conduit, ballast boxes or
transformers.
4. Exposed (as opposed to channeled) neon tubing.
5. Signs exhibiting the names, stamps or decals of the Sign
manufacturer or installer, except as required by applicable codes.
6. Signs employing luminous vacuum-formed type plastic letter.
7. Showcard signs, cloth, paper, cardboard and similar stickers,
die-cut vinyl letters or decals around or on exterior surfaces
(including interior and exterior surfaces of doors and/or windows)
of the Premises.
<PAGE>
8. Temporary signs without Landlord's prior written approval.
9. Signs employing noise making devices and components.
10. Free-standing signs outside the Tenant's Premises.
11. Cabinet or boxed type signs.
12. Odor producing signs.
13. Rooftop signs.
D. PROCEDURE FOR SIGN DRAWINGS
1. Plans and specifications for Signs must be submitted with the
working drawings for Tenant's Premises. Tenant shall submit
drawings and specifications, in quadruplicate, including samples of
materials and colors, for all its proposed Sign work. The drawings
shall clearly show the location of Sign on storefront elevation
drawing, graphics, color, construction and attachment details.
2. As soon as reasonably possible after receipt of the Sign drawings,
the Design Board shall return to Tenant one (1) set of the Sign
drawings with its suggested modifications and/or approval. Upon
receipt of approved Sign drawings bearing the Design Board's
comments, and if Tenant wishes to take exception to those comments,
Tenant may do so in writing, by certified or registered mail,
RETURN RECEIPT REQUESTED, addressed to the Design Board within ten
(10) days from the date of receipt of the Sign drawings. Any
exception shall be reviewed by the Design Board, which shall notify
Tenant of its decision by certified or registered mail, return
receipt requested. This decision on review shall be final and
binding on all parties. Unless Tenant takes exception to the
Design Board's comments as provided above, all comments made by the
Design Board on the Sign drawings shall be deemed to be acceptable
to and approved by Tenant.
C - 2
<PAGE>
EXHIBIT D
ANNUAL SERVICE CHARGE
FOR LANDLORD'S UTILITIES
SECTION I. GENERAL
A. Subject to the terms and conditions set forth in Tenant's Lease, Landlord
shall furnish or cause to be furnished electrical, gas (if applicable)
potable water, sewer and air for ventilating and cooling the Premises via
the system(s) to be installed by Tenant within the Premises in accordance
with the provisions of Exhibit B and the Mechanical-Electrical Design
Criteria ("Design Criteria"), said services hereinafter referred to as
"Landlord's Utilities." The furnishing of Landlord's Utilities shall be
deemed to include lubrication, calibration and adjustment of the required
master air volume control box(es) (located inside the lease line) and
associated temperature control system which provide conditioned air to the
Tenant's air volume control box(es) within the Premises.
B. Tenant shall be responsible for the repair, maintenance and replacement of
all equipment, facilities and fixtures (including hardware and heating,
cooling, ventilating, electrical, plumbing and other mechanical facilities)
located in the Premises.
C. For purposes of this Exhibit D only, the following terms shall hereinafter
have the following meanings:
1. TRA - The rentable area of the Premises expressed in square feet as
set forth in Tenant's Lease.
2. CRA - The rentable area of the Center expressed in square feet.
3. Included Area - The portion of the CRA with respect to which
tenants were billed for Landlord's Utilities under this Exhibit D
during the calendar year in question.
4. UCR - Tenant's Unit Charge Rate expressed in dollars per square
foot of the TRA per year.
5. Watts/SF - Tenant's lighting, electrical VAV reheat, and
miscellaneous power thermal load requirement, as determined by
Landlord from time to time, expressed in watts per square foot of
the TRA.
6. CFM - Cubic feet per minute.
7. CFM/SF - Tenant's air supply requirement in cubic feet per minute
per square foot of the TRA.
8. Design CFM - CFM allowed by Center HVAC design criteria.
9. Excess Hours - Tenant's actual business hours in each calendar year
in excess of the SCBH, as hereinafter defined.
10. SCBH - Tenant's required business hours as designated by Landlord
from time to time.
11. ASC - Tenant's annual service charge for Landlord's Utilities.
12. ACP - Actual unit cost of energy during each calendar year, as
determined by Landlord, required to furnish Landlord's Utilities to
the Included Area, expressed in dollars per square foot of the
Included Area per year.
D. Tenant UCR and ASC shall be determined as hereinafter provided:
1. Tenant UCR shall be based on Landlord's cost to deliver conditioned
air, potable water, sewer, electricity and gas to the Tenant's
space. In certain cases gas and certain other utilities will not
be required and the UCR will be adjusted by leaving the appropriate
space blank in the formula below. In all cases electricity usage
by the Tenant will be separately metered and billed by Seattle City
Light directly to the Tenant. The electrical portion of the UCR
includes only the Landlord's cost of operation and maintenance of
the electrical system.
D - 1
<PAGE>
Tenant's UCR shall be based on the following formula:
UCR = $1.77 Cost per square foot of TRA for conditioned air
+ $0.12 Cost per square foot of TRA for water and sewer
*or*
* (+ $ N/A Cost per square foot of TRA for water/sewer
delivery system only
+ $0.26 Cost per square foot of TRA for electrical
delivery system
+ $ N/A Cost per square foot of TRA for gas delivery
system
-------------------------------------------------------
+ $2.15 Tenant UCR cost per square foot of TRA
*To be utilized for restaurant/theatre Tenants with separate metering for
water usage.
The charges for each of these utilities can be found in Schedule #1, which
is attached hereto and made a part of this agreement.
2. The Adjusted UCR shall be determined by adding to the UCR the
adjustments described in Sections II and III of this Exhibit.
3. Tenant's ASC shall be obtained by multiplying the Adjusted UCR by
the TRA.
4. Tenant's Adjusted ASC shall be determined by adding to Tenant's ASC
the adjustment described in Section IV of this Exhibit.
E. Landlord may elect to bill monthly on the basis of an annual projection of
the charges set forth herein, and all Adjustments in this Exhibit are
expressed in terms of dollars per square foot per year.
SECTION II. ADJUSTMENT TO THE UCR BASED ON USAGE
A. In the event Tenant's excess hours in any calendar year exceed the SCBH in
such calendar year, the UCR shall be increased as of the beginning of such
calendar year by an amount determined as follows:
TENANT'S ACTUAL HOURS - SCBH
Adjustment II.A. = $1.65 X ----------------------------
SCBH
B. The UCR rates are based upon the Design Criteria. In the event Tenant
requires air in excess of that set forth in the Design Criteria for reasons
other than serving exhaust air need, the UCR shall be increased as of the
beginning of such calendar year by an amount determined as follows:
REQUIRED CFM/SF
Adjustment II.B. = ----------------- X $1.65
DESIGN CFM/SF
SECTION III. ADJUSTMENTS TO THE UCR BASED ON OPERATING COST CHANGES
A. The UCR shall be adjusted as of the end of each calendar year as follows:
1. To reflect changes in the cost of electrical, gas, water, sewer and
any other applicable utility company rates.
2. To reflect changes in the cost of labor required to furnish
Landlord's Utilities.
3. To reflect changes in the cost of material, parts, replacements,
operating or energy conserving improvements, insurance, taxes and
fees required to furnish Landlord's Utilities.
SECTION IV. ADJUSTMENTS TO THE ASC BASED ON USAGE
A. In the event Tenant requires and Landlord provides (using the standard HVAC
system) a source of conditioned air as make-up air for special exhaust
purposes in excess of 0.25 CFM/SF, Tenant's ASC shall be increased at the
rate of $1.65 per CFM of such excess exhaust air.
D - 2
<PAGE>
B. In the event Tenant requires central kitchen exhaust air and/or make-up
air, all related costs for shafts, ductwork, equipment and controls shall
be paid by Tenant.
SECTION V. POTABLE WATER
If Landlord determines, in its sole judgment, that Tenant's usage of water
exceeds that assumed for the average tenant in the Center, Landlord may, or
require Tenant to, purchase and install a water meter on Tenant's potable water
service at Tenant's expense. In such event, Tenant may be billed monthly based
on the following formula:
Tenant's Annual = Landlord's Cost of X Tenant's Metered X 2.5
Water Charge Water per Gallon Usage in Gallons
SECTION VI. PROCESS LOADS
In the event Landlord determines, in its reasonable judgment, that Tenant may
have process loads wherein a measurable portion of internal heat gain is to be
exhausted by mechanical means, Section I.D.1 hereof shall be inapplicable, and
Landlord shall use the method set forth below in lieu thereof.
A. Tenant's ASC before adjustments, shall be $1.65 per CFM of conditioned air
for the first 0.80 CFM/SF and the cost per CFM of conditioned air for the
balance of needed delivered conditioned air shall be determined based on
Tenant's requirements.
B. Landlord reserves the right to require Tenant to provide all related
equipment and systems that may be required to service Tenant's process
loads.
SECTION VII. EXPERIENCE ADJUSTMENTS
Landlord reserves the right to revise this Exhibit D from time to time to
reflect Tenant's operating procedures and physical plant configuration as well
as Landlord's accumulated experience with, and adoption of, technological
advances, equipment, automation features and energy conservation measures and to
reflect current utility rates as pertains to Landlord's accumulated experience
with the costs of operating the plant and equipment furnishing Landlord's
Utilities.
D - 3
<PAGE>
SCHEDULE #1
Section I.
A. The following schedule of charges shall be utilized in determining
the Tenants' UCR. Each charge shall be applied according to the
specific tenant requirements.
- CONDITIONED AIR (exclusive of Tenant VAV reheat): $1.77/sf of TRA
- WATER/SEWER: $0.12/sf of TRA
- WATER/SEWER SYSTEM OPERATION and MAINTENANCE
(usage metered separately):
- ELECTRICAL SYSTEM OPERATION and MAINTENANCE
(usage metered separately): $0.26/sf of TRA
- GAS SYSTEM OPERATION and MAINTENANCE
(usage metered separately):
NOTE: These charges are based on projected 1998 utility costs. N/A
D - 4
<PAGE>
EXHIBIT E
CUTTER & BUCK/KEY DESIGN/CONSTRUCTION DATES
05/25/98 Tenant shall provide a Preliminary Drawing submittal showing the
proposed configuration of the complete premises, interior and
exterior storefronts, a finish materials sample board, signage
concepts, and any other submissions required to illustrate the
proposed intent and quality of the Tenant's build-out.
07/09/98 Tenant shall provide Completed Working Drawings and specifications
including final detailed drawings for architectural, electrical,
mechanical, sprinkler, fire alarm and plumbing, and all other work
to be performed by Tenant and shall be prepared consistent with
approved Preliminary Drawings. Final engineering 'DS' forms shall
also be submitted.
07/13/98 Submittal date for Tenant's Building and Mechanical Permits.
08/10/98 Proposed delivery of Tenant premises by Landlord.
10/28/98 Tenant's premises completed, approved by DCLU and Landlord for
occupancy, merchandised, and ready to open for business.
<PAGE>
LEASE AGREEMENT
1. PARTIES. This Lease, dated for reference purposes only April 15, 1998,
is made by and between WHITMAC COMPANY, A WASHINGTON GENERAL PARTNERSHIP
(herein called "Landlord"), and CUTTER & BUCK, INC., A WASHINGTON CORPORATION
(herein called "Tenant").
2. PREMISES. Landlord hereby leases to Tenant and Tenant leases from
Landlord for the term, at the rental, and upon all of the conditions set
forth herein, approximately 13,200 square feet of warehouse space commonly
known as the north bay (the "Premises") of the 3434 Fourth Avenue South
Building, in Seattle, Washington (the "Building"), located on the real
property situated in the City of Seattle, County of King, State of
Washington, and legally described as follows: LOTS 6, 7 AND 8, BLOCK 272 OF
TIDELAND ADDITION TO THE CITY OF SEATTLE, COUNTY OF KING, STATE OF
WASHINGTON; EXCEPT THE WEST 20 FEET THEREOF CONDEMNED IN KING COUNTY SUPERIOR
COURT CASE NO. 332470 FOR WIDENING OF FOURTH AVENUE SOUTH AS PROVIDED BY
ORDINANCE NO. 71249 AND 71453 OF THE CITY OF SEATTLE, AND THE EAST 60 FEET
THEREOF CONDEMNED BY THE O & W RAILROAD COMPANY THROUGH CONDEMNATION
PROCEEDINGS 5 NOVEMBER 1909 (the "Land"). As used herein, the term "the
Property" shall mean the Premises, the Building and the Land. A map showing
the Premises outlined in red is attached hereto as Exhibit "A" and is by this
reference made a part hereof.
3. TERM. The Term of this Lease shall be for sixty (60) months commencing
on July 1, 1998 and ending on June 30, 2003 unless sooner terminated pursuant
to any provisions hereof.
3.1 DELAY IN POSSESSION. Notwithstanding said commencement date, if for
any reason Landlord cannot deliver possession of the Premises to Tenant on
said date, Landlord shall not be subject to any liability therefor, nor shall
such failure affect the validity of this Lease or the obligations of Tenant
hereunder or extend the Term hereof, but in such case, Tenant shall not be
obligated to pay Rent or perform any other obligation of Tenant under the
terms of this Lease, except as may be otherwise provided in this Lease, until
possession of the Premises is tendered to Tenant; provided, however, that if
Landlord shall not have delivered possession of the Premises within sixty
(60) days from said commencement date, Tenant may, at Tenant's option, by
notice in writing to Landlord within ten (10) days thereafter, cancel this
Lease, in which event the parties shall be discharged from all obligations
hereunder; provided further, however, that if such written notice of Tenant
is not received by Landlord within said ten (10) day period, Tenant's right
to cancel this Lease hereunder shall terminate and be of no further force or
effect.
3.2 EARLY POSSESSION. In the event that Landlord shall permit Tenant
to occupy the Premises prior to the commencement date of the Term, such
occupancy shall be subject to all of the provisions of this Lease. Said early
possession shall not advance the termination date of this Lease.
4. RENT. Tenant shall, without notice or demand, pay to Landlord as Rent for
the Premises the following amounts as to the following periods during the
Term of this Lease.
<TABLE>
<CAPTION>
Period Monthly Amount
------ --------------
<S> <C>
July 1, 1998 to June 30, 1999 $5,016.00 per month
July 1, 1999 to June 30, 2000 $5,148.00 per month
July 1, 2000 to June 30, 2001 $5,280.00 per month
July 1, 2001 to June 30, 2002 $5,412.00 per month
July 1, 2002 to June 30, 2003 $5,544.00 per month
</TABLE>
Monthly installments are due, in advance, on the first day of each month
of the Term hereof. Tenant shall pay Landlord upon execution hereof the sum
of Five Thousand Sixteen and no/100ths Dollars ($5,016.00). Rent for any
period during the Term hereof which is for less than one (1) month shall be a
pro rata portion of the monthly installment. Rent shall be payable without
notice or demand and without any deduction, offset, or abatement, in lawful
money of the United States of America to Landlord at the address stated
herein or to such other persons or at such places as Landlord may designate
in writing.
5. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon execution
hereof the sum of Five Thousand Five Hundred Forty-four and no/100ths Dollars
($5,544.00) as security for Tenant's faithful performance of Tenant's
obligations hereunder. If Tenant fails to pay Rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Landlord may use, apply or retain all or any portion of said deposit for the
payment of any Rent or other charge in default or for the payment of any
other sum to which Landlord may become obligated by reason of Tenant's
default, or to compensate Landlord for any loss or damage which Landlord may
suffer thereby. If Landlord so uses or applies all or any portion of said
deposit, Tenant shall within ten (10) days after written demand therefor
deposit cash with Landlord in an amount sufficient to restore said deposit to
the full amount hereinabove stated, and Tenant's failure to do so shall be a
breach of this Lease and Landlord may at its option terminate this Lease.
Landlord shall not be required to keep said deposit separate from its general
accounts. If Tenant performs all of Tenant's obligations hereunder, said
deposit or so much thereof as has not theretofore been applied to Landlord,
shall be returned, without payment of interest or other increment for its
use, to Tenant (or, at Landlord's option, to the last assignee, if any, of
Tenant's interest hereunder) within thirty (30) days after the expiration of
the Term hereof, or after Tenant has vacated the Premises, whichever is later.
6. USE.
6.1 USE. The Premises shall be used and occupied only for warehousing,
embellishment and distribution of clothing and related office usage and for
no other purpose without the prior written consent of Landlord, which consent
may be withheld or conditioned as Landlord may deem appropriate within the
exercise of its sole, but reasonable, discretion.
6.2 COMPLIANCE WITH LAW. Tenant shall, at Tenant's expense, comply
promptly with all laws, rules, orders, ordinances, directions, regulations,
and requirements of federal, state, county and municipal authorities,
1
<PAGE>
including without limitation, those relating to persons with disabilities
(ADA) now in force or which may hereafter be in force, which shall impose any
duty upon Landlord or Tenant with respect to Tenant's use, occupation or
alteration of the Premises. Tenant shall not use or permit the use of the
Premises in any manner that will tend to create waste or a nuisance, or, if
there shall be more than one tenant of the Building containing the Premises,
which shall tend to unreasonably disturb such other tenants.
6.3 CONDITION OF PREMISES. Tenant hereby accepts the Premises in
their condition existing as of the date of the possession hereunder, subject
to the provisions of Section 21 of this Lease and subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Tenant acknowledges that neither Landlord nor Landlord's
agent has made any representation or warranty as to the suitability of the
Premises for the conduct of Tenant's business.
6.4 INSURANCE CANCELLATION. Notwithstanding the provisions of Section
6.1 hereinabove, no use shall be made or permitted to be made of the Premises
nor acts done which will cause the cancellation of any insurance policy
covering said Premises or any building of which the Premises may be a part,
and if Tenant's use of the Premises causes an increase in said insurance
rates, Tenant shall pay any such increase.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 LANDLORD'S OBLIGATIONS. Subject to the provisions of Section 9,
and except for damage caused by anY negligent or intentional act or omission
of Tenant, Tenant's agents, employees, or invitees, Landlord, at Landlord's
expense, shall keep in good order, condition and repair the foundations and
exterior walls of the Building. Landlord shall not however, be obligated to
paint such exterior, nor shall Landlord be required to maintain the interior
surfaces of exterior walls, windows, doors or plate glass. Landlord shall
have no obligations to make repairs under this Section 7.1 until a reasonable
time after receipt of written notice of the need for such repairs and except
for damage caused by any negligent or intentional act or omission of Landlord
or Landlord's agents, employees, or invitees. Tenant expressly waives the
benefits of any statute now or hereafter in effect which would otherwise
afford Tenant the right to make repairs at Landlord's expense or to terminate
This Lease because of Landlord's failure to keep the Building in good order,
condition and repair.
7.2 TENANT'S OBLIGATIONS. Subject to the provisions of Section 7.1 and
Section 9, Tenant, at Tenant's expense, shall keep in good order, condition
and repair the Premises and every part thereof (regardless of whether the
damaged portion of the Premises or the means or repairing the same are
accessible to Tenant) including, without limiting the generality of the
foregoing, all plumbing, heating, air conditioning, ventilating, electrical
and lighting facilities and equipment, fixtures, cleaning catch basins, all
interior walls, ceilings, all windows, doors, plate glass, and skylights,
tenant identification signs and fences surrounding the Building or Premises
including by not limited to damage due to break-ins, theft or vandalism or
graffiti. The Premises include a fire sprinkler system. Tenant shall be
responsible for all repairs and maintenance including performing an annual
inspection of said system and providing Landlord with a copy of the
inspection report. Tenant shall be responsible for all costs of central
monitoring station, phone lines, etc. as acceptable to and as required by the
Seattle Fire Department. Tenant shall reimburse Landlord for all damage done
to the Premises, normal wear and tear excepted, occasioned by any act or
omission of Tenant or Tenant's officers, contractors, agents, invitees,
licensees, or employees, including, but not limited to, cracking or breaking
of glass.
In the event that any of the above referenced Tenant Obligations
are determined to serve the entire Building versus the demised Premises,
Tenant shall contact Landlord's agent and request maintenance and repair.
Landlord shall then undertake said repairs and invoice the tenants in the
Building in accordance with Section 20. In the event that the repair or
maintenance need arises within, and solely supporting the demised Premises,
then Tenant shall undertake the repairs and pay the costs directly.
7.3 SURRENDER. On the last day of the Term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in good
condition, broom clean, ordinary wear and tear excepted. Tenant shall repair
any damage to the Premises occasioned by its use thereof, or by the removal
of Tenant's trade fixtures, signs, furnishings and equipment pursuant to
Section 7.5, which repair shall include the patching and filling of holes and
repair of structural damage.
7.4 LANDLORD'S RIGHTS. If Tenant fails to perform Tenant's obligations
under this Section 7, Landlord may, at its option (but shall not be required
to) enter upon the Premises, after ten (10) days prior written notice to
Tenant or with no prior written notice if an emergency, and put the same in
good order, condition and repair, and immediately upon written notice to
Tenant, including copies of invoices or other bona fide documentation for all
sums expended by Landlord, the cost thereof together with interest thereon at
the rate of twelve percent (12%) per annum, shall become due and payable as
Additional Rent to Landlord together with Tenant's next rental installment.
7.5 ALTERATIONS AND ADDITIONS.
(a) Tenant shall not, without Landlord's prior written consent which
shall not be unreasonably withheld, make any alterations, improvements or
additions in, on or about the Premises or the Building, except for
non-structural alterations to the Premises not exceeding Two Thousand Dollars
($2,000) in cost, and except for those changes as detailed in paragraph 21 of
the lease. As a condition to giving such consent, Landlord may require that
Tenant remove any such alterations, improvements, additions or utility
installations at the expiration of the Term, and to restore the Premises to
their prior condition.
(b) Before commencing any work relating to alterations, additions and
improvements affecting the Premises or the Building (none of which are
required or requested by Landlord, nor any obligation of Tenant under this
Lease), Tenant shall notify Landlord in writing of the expected date of
commencement thereof. Landlord shall then have the right at any time and from
time to time to post and maintain on the Premises or the Building such
notices as Landlord reasonably deems necessary to protect the Premises, the
Building, the Property and Landlord from mechanic's liens, materialmen's
liens, or any other liens. In any event, Tenant shall pay, when due, all
claims for labor or materials furnished to or for Tenant or for use in the
Premises or the
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Building. Tenant shall not permit any mechanic's or materialmen's liens to be
levied against the Premises, the Building or the Property for any labor or
material furnished to Tenant or claimed to have been furnished to Tenant or
to Tenant's agents or contractors in connection with work of any character
performed or claimed to have been performed on the Property by or at the
direction of Tenant.
(c) Unless Landlord requires their removal, as set forth in Section
7.5(a), all alterations, improvements, or additions which may be made on the
Premises shall become the property of Landlord and remain upon and be
surrendered with the Premises at the expiration of the Term. Notwithstanding
the provisions of this Section 7.5(c), Tenant's production machinery,
equipment and trade fixtures, other than that which is structurally affixed
to or penetrating the Premises so that it cannot be removed without
structural damage to the Premises, shall remain the property of Tenant and
may be removed by Tenant subject to the provisions of Section 7.5. Locations
of structural modifications or penetrations shall be restored to the initial
condition and structural integrity prior to Tenant's modification, with
penetrations through exterior exposures made weatherproof and watertight.
8. INSURANCE INDEMNITY.
8.1 INSURING PARTY. As used in this Section 8, the term "insuring
party" shall mean the party who has the obligation to obtain the insurance
required hereunder. The insuring party in this case shall be the Landlord.
Tenant shall reimburse the Landlord for the cost of the insurance, as
Additional Rent, upon fifteen (15) days advance written notice.
8.2 LIABILITY INSURANCE. Tenant shall obtain and keep in force during
the Term of this Lease a policy of commercial general liability insurance
insuring Landlord and Tenant against all liability arising out of the use,
occupancy or maintenance of the Premises and all areas appurtenant thereto.
Insurance for bodily injury liability and property damage liability shall be
in the amount of Two Million Dollars ($2,000,000) per occurrence. Tenant
shall provide a certificate of insurance naming Landlord and Landlord's
agent, Martin Smith Inc, as additional primary insured. The limits of said
insurance shall not, however, limit the liability of Tenant hereunder. In the
event that the Premises constitute a part of a larger property said insurance
shall have a Landlord's Protective Liability endorsement attached thereto. If
Tenant shall fail to procure and maintain said insurance, Landlord may, but
shall not be required to, procure and maintain the same, but at the expense
of Tenant.
8.3 PROPERTY INSURANCE. The insuring party shall obtain and keep in
force during the Term of this Lease a policy or policies of insurance
covering loss or damage to the Premises, in the amount of the full
replacement value thereof, or as required by any lender, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, special extended perils (all risk) and
sprinkler leakage. Landlord may, at its sole option, obtain and keep in force
earthquake and flood insurance with the cost to be borne in accordance with
Section 8.1. Said policy may include a deductible, and the cost of said
deductible shall be borne in accordance with Sections 7.1 and 7.2. In
addition thereto, the insuring party shall maintain rent loss insurance in
favor of Landlord insuring Landlord against any loss of rental from damage or
destruction of the Premises for a period of at least twelve (12) months from
the date of such damage or destruction. Said insurance shall provide for
payment for loss thereunder to Landlord or to the holder of a first mortgage
or deed of trust on the Premises. If the insuring party shall fail to procure
and maintain said insurance, the other party may, but shall not be required
to, procure and maintain the same, but at the expense of Tenant.
8.4 INSURANCE POLICIES. Insurance required hereunder shall be in
companies rated AVII or better in "Best's Insurance Guide". The insuring
party shall deliver prior to possession, to the other party, copies of
policies of such insurance or certificates evidencing the existence and
amount of such insurance with loss payable clauses satisfactory to Landlord.
No such policy shall be cancelable or subject to reduction of coverage or
other modification except after ten (10) days prior written notice to
Landlord. If Tenant is the insuring party, Tenant shall, within ten (10) days
prior to the expiration of such policies, furnish Landlord with renewals
thereof, or Landlord may order such insurance and charge the cost thereof to
Tenant, which amount shall be payable by Tenant upon demand. Tenant shall not
do or permit to be done anything which shall invalidate the insurance
policies referred to in Section 8.3. Tenant shall forthwith, upon Landlord's
demand, reimburse Landlord for any additional premiums attributable to any
act or omission or operation of Tenant causing such increase in the cost of
insurance. If Landlord is the insuring party, and if the insurance policies
maintained hereunder cover other improvements in addition to the Premises,
Landlord shall deliver to Tenant a written statement setting forth the amount
of any such cost increase showing in reasonable detail the manner in which it
has been computed.
8.5 WAIVER OF SUBROGATION. Tenant and Landlord each waive any and all
rights of recovery against the other, or against the officers, employees,
agents and representatives of the other, for loss of or damage to such
waiving party or its property or the property of others under its control,
where such loss or damage is insured against under any insurance policy in
force at the time of such loss of damage, provided that this waiver of
subrogation shall not in any manner absolve Tenant of its obligations to make
repairs pursuant to Section 7.2 or its obligation to indemnify Landlord
pursuant to Section 8.6. Tenant and Landlord shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance
carriers that the foregoing mutual waiver of suborgation is contained in this
Lease.
8.6 HOLD HARMLESS. Tenant shall indemnify, defend and hold Landlord
harmless from any and all claims arising from Tenant's use of the Premises or
from the conduct of its business or from any activity, work or things which
may be permitted or suffered by Tenant in or about the Premises and shall
further indemnify, defend and hold Landlord harmless from and against any and
all claims arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the provisions of this
Lease or arising from any negligence of Tenant or any of its agents,
contractors, employees or invitees and from any and all costs, attorneys'
fees, expenses and liabilities incurred in the defense of any such claim or
action or proceeding brought thereon. Tenant hereby assumes all risk of
damage to property or injury to persons in or about the Premises from any
cause, and Tenant hereby waives all claims in respect thereof against
Landlord, excepting where said damage arises out of the negligence of
Landlord.
8.7 EXEMPTION OF LANDLORD FROM LIABILITY. Except to the extent of
Landlord's sole negligence or willful misconduct, Tenant hereby agrees that
Landlord shall not be liable for injury to Tenant's business or any loss
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of income therefrom or from damage to the goods, wares, merchandise or other
property of Tenant, or about the Premises, nor, unless through its
negligence, shall Landlord be liable for injury to the person of Tenant,
Tenant's employees, agents, contractors or invitees, whether such damage or
injury is caused by or results from fire, steam, electricity, gas, water or
rain or from the breakage, leakage, obstruction or other defects of pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether the said damage or injury results
from conditions arising upon the Premises or upon other portions of the
Property or the Building of which the Premises are a part, or from other
sources or places, and regardless of whether the cause of such of damage or
injury or the means of repairing the same is inaccessible to Landlord or
Tenant. Landlord shall not be liable for any damages arising from any act or
neglect of any other tenant, if any, of the Building in which the Premises
are located.
9. DAMAGE OR DESTRUCTION. Partial damage is defined as not greater than
forty percent (40%) of the total rentable square feet improved building area
within the Tenant space.
9.1 PARTIAL DAMAGE--INSURED. Subject to the provisions of Section 7.1,
if the Premises are damaged and such damage was caused by a casualty covered
under an insurance policy required to be maintained pursuant to Section 8.3,
Landlord shall, at Landlord's expense, repair such damage as soon as
reasonably possible and this Lease shall continue in full force and effect.
9.2 DAMAGE--UNINSURED. In the event the Premises may be damaged or
destroyed by a casualty which is not covered by fire and extended coverage
insurance carried by Landlord, the Landlord shall restore same, provided that
if the damage or destruction is to an extent greater than ten percent (10%)
of the then replacement cost of improvements on the Premises (exclusive of
Tenant's trade fixtures and equipment and exclusive of foundations) then
Landlord may elect not to restore and to terminate this Lease. Landlord must
give Tenant written notice of its election not to restore the Premises within
thirty (30) days from the date Landlord received notice of such damage and,
if not given, Landlord shall be deemed to have elected to restore and in such
event shall repair any damage as soon as reasonably possible. In the event
Landlord elects to give such notice of Landlord's intention to cancel and
terminate this Lease, Tenant shall have the right within fifteen (15) days
after receipt of such notice to give written notice to Landlord of Tenant's
intention to repair such damage at Tenant's expense, without reimbursement
from Landlord, in which event this Lease shall continue in full force and
effect and Tenant shall proceed to make such repairs as soon as reasonably
possible. If Tenant does not give such notice within such fifteen (15) day
period, this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.
9.3. TOTAL DESTRUCTION. If at any time during the Term hereof the
Premises are totally destroyed to an extent greater than forty percent (40%)
of rentable square feet from any cause whether or not covered by the
insurance required to be maintained by the insuring party pursuant to Section
8.3 (including total destruction required by any authorized public
authority), this Lease shall automatically terminate as of the date of such
total destruction, unless Landlord elects to repair pursuant to Section 9.1.
In the event of termination, Rent shall be prorated and returned to Tenant
along with the Security Deposit.
9.4 DAMAGE NEAR END OF TERM. If the Premises are partially destroyed or
damaged during the last twelve (12) months of the Term of this Lease,
Landlord may, at Landlord's option cancel and terminate this Lease as of the
date of occurrence of such damage by giving written notice to Tenant of
Landlord's election to do so within thirty (30) days after Landlord receives
notice of occurrence of such damage. In the event of termination, Rent shall
be prorated and returned to Tenant along with the Security Deposit.
9.5 ABATEMENT OF RENT.
(a) If the Premises are partially destroyed or damaged and Landlord
or Tenant repairs or restores them pursuant to the provisions of this
Section 9, the Rent payable hereunder for the period during which such damage,
repair or restoration continues shall be abated in proportion to the degree to
which Tenant's reasonable use of the Premises is substantially impaired. Except
for abatement of Rent, if any, Tenant shall have no claim against Landlord for
any damage suffered by reason of any such damage, destruction, repair or
restoration, unless the damage is caused by Landlord's sole negligence or
willful misconduct.
(b) If Landlord shall be obligated to repair or restore the Premises
under the provisions of this Section 9 and shall not commence such repair or
restoration within ninety (90) days after such obligations shall accrue,
Tenant may, at Tenant's option, cancel and terminate this Lease by giving
Landlord written notice of Tenant's election to do so at any time prior to
the commencement of such repair or restoration. In such event this Lease
shall terminate as of the date of such notice. Any abatement in Rent shall be
computed as provided in Section 9.5(a).
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Tenant shall pay all real property taxes, as
Additional Rent in accordance with Section 20 upon fifteen (15) days advance
written notice, applicable to the Premises during the Term of this Lease
including reasonable costs for attorneys or tax experts secured by Landlord
in seeking reduction of the taxes assessed on the Premises. If any such
taxes shall cover any period of the time prior to or after expiration of the
Term hereof, Tenant's share of such taxes shall be equitably prorated to
cover only the period of time within the tax fiscal year during which this
Lease shall be in effect.
10.2 DEFINITION OF "REAL PROPERTY TAXES". As used herein, the term "real
property tax" shall include any form of assessment, license fee, tax on rent,
levy, penalty, or tax (other than inheritance or estate taxes) imposed by any
authority having the direct or indirect power to tax, including city, county,
state or federal government, or any school, agricultural, lighting, drainage
or other improvement district thereof, as against any legal or equitable
interest of Landlord in the Premises or in the real property of which the
Premises are a part, as against Landlord's right to Rent or other income
therefrom, or as against Landlord's business of leasing the Premises, and
Tenant shall pay any and all charges and fees which may be imposed by the EPA
or other similar governmental regulations or authorities.
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10.3 PERSONAL PROPERTY TAXES.
(a) Tenant shall pay prior to delinquency all taxes assessed against and
levied upon leasehold improvements, fixtures, furnishings, equipment and all
other personal property of Tenant contained in the Premises or elsewhere.
Tenant shall cause said leasehold improvements, trade fixtures, furnishings,
equipment and all other personal property to be assessed and billed
separately from the real property of Landlord.
(b) If any of Tenant's personal property shall be assessed with
Landlord's real property, Tenant shall pay Landlord the taxes attributable to
Tenant within ten (10) days after receipt of a written statement setting
forth the taxes applicable to Tenant property.
11. EXTERIOR PARKING AREAS. During the Term of this Lease, Tenant shall
manage and maintain the exterior parking lot areas and sidewalks so that they
are clean and free from accumulation of debris, filth, rubbish, garbage,
snow, ice, surface breaks or depressions or other pedestrian falling hazards.
12. UTILITIES. Tenant shall pay for all water, gas, heat, fuel, light,
power, and other utilities and services supplied to the Premises, together
with any taxes thereon in accordance with Section 20. Telephone and garbage
services shall be the sole responsibility of Tenant to administer and pay for
during the Term of this Lease.
13. ASSIGNMENT AND SUBLETTING.
13.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Tenant's interest in this Lease or in the
Premises without Landlord's prior written consent, which Landlord shall not
unreasonably withhold. Any attempted assignment, transfer, mortgage,
encumbrance, or subletting without written consent shall be void and shall
constitute a breach of this Lease. Any transfer of Tenant's interest in this
Lease or in the Premises from tenant by merger, consolidation, or
liquidation, or by any subsequent change in the ownership of thirty percent
(30%) or more of the capital stock of Tenant or thirty percent (30%) or more
partnership interest of Tenant shall be deemed a prohibited assignment within
the meaning of this Section 13. No option to extend, if any, may be assigned
by Tenant and no subtenant shall have any right to exercise any such option.
13.2 NO RELEASE OF TENANT. Regardless of Landlord's consent, no
subletting or assignment shall release Tenant of Tenant's obligation to pay
Rent and to perform all other obligations to be performed by Tenant hereunder
for the Term of this Lease. The acceptance of Rent by Landlord from any other
person or entity shall not be deemed to be a waiver by Landlord of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting, proposed or actual.
13.3 ASSIGNMENT FEE. In the event that Landlord shall consent to a
sublease or assignment under Section 13.1, Tenant shall pay to Landlord
reasonable fees, not to exceed Five Hundred Dollars ($500), incurred in
connection with giving such consent.
All rent received by Tenant from its subtenants in excess of the
Rent payable by Tenant to Landlord under this Lease shall be paid to Landlord.
Any sums to be paid by an assignee to Tenant in consideration of the
assignment of this Lease shall be paid to Landlord.
13.4 ASSIGNMENT BY LANDLORD. Landlord shall be permitted freely to
assign all of its rights and obligations hereunder, and upon such assignment
of its obligations, Landlord shall no longer be liable under this Lease.
Tenant hereby agrees to attorn to any assignee of Landlord's interest
hereunder, whether such assignment is voluntary or by operation of law.
13.5 REASONABLE CONSENT. In aid to Landlord's determination whether
to consent to any assignment, transfer or subletting, but without limiting
reasons for which such consent may be withheld, Tenant, at Landlord's
request, shall submit in writing to Landlord: (1) the name and legal
composition of the proposed subtenant, assignee or transferees, and the nature
of the transaction contemplated and purposes of it; (2) the nature of the
proposed subtenant's business to be carried on in the Premises; (3) the
terms and provisions of the proposed sublease, assignment or transfer; and
(4) current financial statements of the subtenant or assignee and such other
reasonable financial information as Landlord may request concerning the
proposed transaction and the proposed subtenant, assignee or transferee
without limiting the authority of the Landlord to withhold reasonably its
consent. Landlord may require any assignee or subtenant to assume all of the
obligations of Tenant with respect to this Lease, but such assumption shall
not release Tenant from its obligations under this Lease.
14. DEFAULTS; REMEDIES.
14.1 DEFAULTS. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant:
(a) The vacation or abandonment of the Premises by Tenant for a period
of thirty (30) consecutive days or more.
(b) The failure by Tenant to make any payment of Rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of ten (10) days.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions, or provisions of this Lease to be observed or performed by
Tenant, other than described in Section 14.1(b) above, where such failure
shall continue for a period of thirty (30) days after written notice thereof
from Landlord to Tenant; provided, however, that if the nature of Tenant's
default is such that more than thirty (30) days are reasonably required for
its cure, then Tenant shall not be deemed to be in default if Tenant
commenced such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
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(d) (1) The making by Tenant of any general assignment, or general
assignment for the benefit of creditors; (2) the filing by or against Tenant
of a petition to have Tenant adjudged a bankrupt or petition for
reorganization or arrangement under any law relating to bankruptcy (unless,
in the case of a petition filed against Tenant, the same is dismissed within
sixty (60) days); (3) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or
of Tenant's interest in this Lease, where possession is not restored to
Tenant within thirty (30) days; or (4) the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located at the
Premises of Tenant's interest in this Lease, where such seizure is not
discharged within thirty (30) days.
14.2 REMEDIES IN DEFAULT. In the event of any such default or breach by
Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including but not limited to: (i) the
cost of recovering possession of the Premises; (ii) expenses of reletting,
including necessary renovation and alteration of the Premises; (iii)
reasonable attorneys' fees, and any real estate commission actually paid
applicable to the unexpired Term of this Lease; (iv) the worth at the time of
the award determined by the court having jurisdiction thereof of the unpaid
Rent that had been earned at the time of termination of this Lease; and (v)
any other reasonable amount, and court costs necessary to compensate Landlord
for all detriment proximately caused by Tenant's default. In the event Tenant
shall have abandoned the Premises, Landlord shall have the option of (1)
retaking possession of the Premises subject to applicable laws and
regulations, taking possession of all personal property remaining in the
Premises and recovering from Tenant the amount specified in this Section
14.2(a) and Section 14.2(d); or (2) proceeding under Section 14.2(b). As used
in this Section, the term "the worth at the time of the award" is to be
computed by discounting the total Rent payable by the amount of the discount
rate of the Federal Reserve Bank of San Francisco at the time of the award,
plus one percent (1%).
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event, Landlord shall be entitled to all of Landlord's
rights and remedies under this Lease including the right to recover the Rent
as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Premises are
located.
(d) Any Rent or other charge that is not paid when due shall bear
interest from the date due until paid at the rate of twelve (12%) per annum;
provided, however, that in no event shall such rate to be charged Tenant
exceed the rate otherwise permitted by law.
14.3 DEFAULT BY LANDLORD. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a
reasonable time, but in no event later than thirty (30) days after written
notice by Tenant to Landlord and to the holder of any first mortgage or deed
of trust covering the Premises, where name and address shall have theretofore
been furnished to Tenant in writing, specifying wherein Landlord has failed
to perform such obligation; provided, however, that the nature of Landlord's
obligation is such that more than thirty (30) days are required for
performance, then Landlord shall not be in default if Landlord commences
performance within such thirty (30) day period and thereafter diligently
prosecutes the same to completion.
14.4 LATE CHARGES. Tenant hereby acknowledges that late payment by
Tenant to Landlord of Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which will
be extremely difficult to ascertain. Such costs include, but are not limited
to, processing and accounting charges, and late charges which may be imposed
on Landlord by the term of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of Rent or any other sums due from Tenant
shall not be received by Landlord or Landlord's designee within ten (10) days
after said amount is due then Tenant shall pay to Landlord a late charge of
seven and one-half percent (7.5%) of such overdue amount, per each monthly
period, but not any interest thereon. In no event shall any late charge be
required in violation of any law. Further, the parties agree that a
Twenty-five Dollar ($25) charge shall be paid by Tenant to Landlord for any
returned check.
The parties hereby agree that such late charge represents a fair and
reasonable estimate of the cost Landlord will incur by reason of late payment
by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount,
nor prevent Landlord from exercising any of the other rights and remedies
granted hereunder.
14.5 CURE BY LANDLORD. Landlord, at any time after Tenant commits a
default, may cure the default at Tenant's cost. If Landlord at any time by
reason of Tenant's default, pays any sum or does any act that requires the
payment of any sum, the sum paid by Landlord at the time the sum is paid
shall be due from Tenant to Landlord, and if paid at a later date shall bear
interest at the rate of twelve percent (12%) per annum form the date the sum
is paid by Landlord until Landlord is reimbursed by Tenant. The sum, together
with interest, shall be deemed Additional Rent hereunder.
15. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain, or sold by Landlord under the threat of the
exercise of said power (all of which is herein referred to as
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession; whichever occurs
first. If more than twenty-five percent (25%) of the floor area of any
building on the Premises, or more than twenty-five percent (25%) of the land
area of the Property not covered with buildings, is taken by condemnation,
either Landlord or Tenant may terminate this Lease as of the date the
condemning authority takes possession by notice in writing of such selection
within twenty (20) days after the condemning authority shall have taken
possession.
If this Lease is not terminated by either Landlord or Tenant, then it
shall remain in full force and effect as to the portion of the Premises
remaining, provided the rental and any other charges payable hereunder shall
6
<PAGE>
be reduced in proportion to the floor area of the buildings taken within the
Premises as bears to the total floor area of all buildings located on the
Premises. In the event this Lease is not so terminated, then Landlord agrees,
at Landlord's sole cost, as soon as reasonably possible, to restore the
Premises to a complete unit of like quality and character as existed prior to
the condemnation. All awards for the taking of any part of the Premises or
any payment made under the threat of the exercise of power of eminent domain
shall be the property of Landlord, whether made as compensation for
diminution of value of the leasehold or for the taking of the fees or as
severance damages; provided, however, that Tenant shall be entitled to any
award for loss of or damage to Tenant's trade fixtures and removable personal
property.
16. GENERAL PROVISIONS.
16.1 ESTOPPEL CERTIFICATE.
(a) Tenant shall, at any time, upon not less than ten (10) days prior
written notice from Landlord, execute, acknowledge and deliver to Landlord a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification
and certifying that this Lease, as so modified, is in full force and effect)
and the date to which the Rent, Security Deposit, and other charges are paid
in advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or
specifying such defaults, if any, which are claimed. Any such statement may
be conclusively relied upon by any prospective purchaser or encumbrancer of
the Premises.
(b) Tenant's failure to deliver such statement within such time period
shall be conclusive upon Tenant that (i) this Lease is in full force and
effect without modification except as may be represented by Landlord, (ii)
there are no uncured defaults in Landlord's performance, and (iii) no more
than one (1) month's Rent has been paid in advance.
(c) If Landlord desires to finance or refinance the Premises, or any
part thereof, Tenant hereby agrees to deliver to any lender designated by
Landlord such financial statements of Tenant as may be reasonably required by
such lender. Such statements shall include the past three (3) years'
financial statements of Tenant. All such financial statements shall be
received by Landlord in confidence and shall be used only for the purposes
herein set forth. Tenant shall execute any estoppel certificate,
subordination agreement, and/or attornment agreement submitted to Tenant by
Landlord for purposes of said financing; provided however, that Tenant shall
be allowed the quiet use and enjoyment of the Premises as long as Tenant is
not in default under the terms of this Lease.
16.2 LANDLORD'S INTEREST. The term "Landlord" as used herein shall mean
only the owner or owners at the time in question of the fee title, vendee's
interest under a real estate contract, or a tenant's interest in aground
lease of the Premises. In the event of any transfer of such title or
interest, Landlord herein named (and in case of any subsequent transfers, the
then grantor) shall be relieved from and after the date of such transfer of
all liability as respects Landlord's obligations thereafter to be performed,
provided that any funds in the hands of Landlord or the then grantor at the
time of such transfer, in which Tenant has an interest, shall be delivered to
the grantee. The obligations contained in this Lease to be performed by
Landlord shall, subject to aforesaid, be binding upon Landlord's successors
and assigns, only during their respective periods of ownership.
16.3 SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
16.4 INTEREST ON PAST DUE OBLIGATIONS. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
twelve percent (12%) per annum from the due date. Payment of such interest
shall not excuse or cure any default by Tenant under this Lease.
16.5 TIME OF ESSENCE. Time is of the essence.
16.6 CAPTIONS. Section and paragraph captions are not a part hereof.
16.7 INCORPORATION OF PRIOR AGREEMENT; AMENDMENTS. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This lease may be modified in writing only, signed by the parties
in interest at the time of modification.
16.8 WAIVERS. No waiver by Landlord of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provision. Landlord's consent to or approval
of any act shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act by Tenant. The
acceptance of Rent hereunder by Landlord shall not be a waiver of any
preceding breach by Tenant of any provision hereof, other than the failure of
Tenant to pay the particular Rent so accepted regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such Rent.
16.9 RECORDING. Tenant shall not record this Lease without Landlord's
prior written consent, and such recordation shall, at the option of Landlord,
constitute a non-curable default of Tenant hereunder. Either party shall,
upon request of the other, execute, acknowledge and deliver to the other a
"short form" memorandum of this Lease for recording purposes.
16.10 HOLDING OVER. If Tenant remains in possession of the Premises or
any part thereof after the expiration of the Term hereof without the express
written consent of Landlord, such occupancy shall be a tenancy from month to
month at a rental in the amount of 150% of the last monthly rental plus all
other charges payable hereunder, and upon the terms hereof applicable to
month to month tenancy.
16.11 CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive, but shall wherever possible be cumulative with all other
remedies at law or in equity.
7
<PAGE>
16.12 COVENANTS AND CONDITIONS. Each provision of this Lease
performable by Tenant shall be deemed both a covenant and a condition.
16.13 BINDING EFFECT; CHOICE OF LAW; PRORATION. Subject to any
provisions hereof restricting assignment or subletting by Tenant and subject
to the provision of Section 13.2, this Lease shall bind the parties, their
representatives, successors and assigns. This Lease shall be governed by the
laws of the state where the Premises are located. All prorations shall be on
the basis of a thirty (30) day month.
16.14 SUBORDINATION.
(a) This Lease, at Landlord's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any hypothecation for security now
or hereafter placed upon the real property of which the Premises are a part
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Tenant's rights to quiet possession of
the Premises shall not be disturbed if Tenant is not in default and so long
as Tenant shall pay the Rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms.
If any mortgagee, trustee or ground lessor shall elect to have this Lease
prior to the lien of its mortgage, deed of trust or ground lease, and shall
give written notice thereof to Tenant, this Lease shall be deemed prior to
such mortgage, deed of trust or ground lease, whether this Lease is dated
prior or subsequent to the date of said mortgage, deed of trust or ground
lease, or the date of recording thereof.
(b) Tenant agrees to execute and deliver any documents required to
effectuate such subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be, and failing to
do so within ten (10) days after written demand, does hereby make, constitute
and irrevocably appoint Landlord as Tenant's attorney-in-fact and in Tenant's
name, place and stead, to do so.
16.15 ATTORNEYS' FEES. If either party named herein brings an action
to enforce the terms hereof or declare rights hereunder the prevailing party
in any such action, on trial or appeal, shall be entitled to his reasonable
attorneys' fees to be paid by the losing party as fixed by the court.
16.16 LANDLORD'S ACCESS. Landlord and Landlord's agents shall have the
right to enter the Premises at reasonable times and upon reasonable notice to
Tenant, except in cases of emergency access shall be immediate with no
notice, for the purpose of inspecting the same, showing the same to
prospective tenants, purchasers or lenders, and making such alterations,
repairs, improvements or additions to the Premises or to the Building of
which the Premises are a part as Landlord may deem necessary or desirable.
Landlord may at any time place on or about the Premises any ordinary "For
Sale" or "For Lease" signs, and Landlord may at any time during the last one
hundred twenty (120) days of the Term hereof place on or about the Premises
any ordinary signs all without rebate or rent or liability to Tenant.
16.17 SIGNS. Tenant shall not place any sign upon the Premises without
Landlord's prior written consent. All signs installed by Tenant shall be
removed by Tenant upon termination of this Lease, and Tenant shall restore
the location of all such signage to its former state.
16.18 MERGER. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger, and shall,
at the option of Landlord, terminate all or any existing subtenancies, or
may, at the option of Landlord, operate as an assignment to Landlord of any
or all subtenancies.
16.19 CORPORATE AUTHORITY. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants
that he is duly authorized to execute and deliver this Lease on behalf of
said corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the bylaws of said
corporation, and that this Lease is binding upon said corporation in
accordance with its terms.
16.20 LANDLORD'S LIABILITY. If Landlord is a joint venture or limited
partnership, the liability of the partners of Landlord pursuant to this Lease
shall be limited to assets of the partnership, and Tenant, its successors and
assigns hereby waive all rights to proceed against any of the partners, or
the officers, shareholders, or directors of any corporate partner of
Landlord, except to the extent of their interest in the partnership. As used
in this Section, the term "Landlord" shall mean only the owner or owners at
the time in question of the fee title, vendee's interest under a real estate
contract, or its interest in a ground lease of the Premises, and in the event
of any transfer of such title or interest, Landlord herein named (and in case
of any subsequent transfers the then grantor) shall be relieved from and after
the date of such transfer, and any funds in the hands of Landlord or the
obligations thereafter to be preformed; provided that any funds in the hands
of Landlord or the then grantor at the time of such transfer, in which Tenant
has an interest, shall be delivered to the grantee. The obligations contained
in this Lease to be performed by Landlord shall, subject as aforesaid, be
binding on Landlord's successors and assigns only during the respective
period of ownership.
16.21 FINANCING. Tenant shall not execute any document purporting of
affect the Premises or any other property of which the Premises area part,
including, without limitation; any financing statement, without prior written
consent of Landlord, which may be withheld or conditioned in Landlord's
reasonable discretion.
16.22 INABILITY TO PERFORM. This Lease and the obligations of the
Tenant hereunder shall not be effected or impaired because the Landlord is
unable to fulfill any of its obligations hereunder or is delayed in doing so,
if such inability or delay is caused by reason of strike, labor troubles,
force majeure, weather and acts of God, or any other cause beyond the
reasonable control of the Landlord, and Landlord shall not be liable to any
such delay.
17. COMPLETION OF BOND. At any time, Tenant either desires to or is
required to make any repairs, alterations, additions, improvements or utility
installations thereon, pursuant to Sections 7.5 or 9.2 herein or otherwise,
Landlord may at its sole option, require Tenant, at Tenant's sole cost and
expense, to obtain and provide to Landlord a lien and completion bond in an
amount equal to one and one-half (1-1/2) times the estimated cost of such
improvements, to insure Landlord against any liability for mechanic's and
materialmen's liens and to insure completion of the work.
8
<PAGE>
18. NOTICES. Wherever under this Lease provision is made for any demand,
notice or declaration of any kind, or where it is deemed desirable or
necessary by either party to give or serve any such notice, demand or
declaration to the other party, it shall be in writing and served either
personally or sent by United States mail, certified and return receipt
requested, postage prepaid, addressed to the address set forth below:
To Landlord: 3434 Fourth Avenue South Building
c/o Martin Smith Inc.
1109 First Avenue, Suite 500
Seattle, WA 98101-2988
To Tenant: Phil Davis
Cutter & Buck, Inc.
2701 First Avenue, Suite 500
Seattle, WA 98121
19. HAZARDOUS AND TOXIC WASTE MATERIALS. Tenant shall be responsible for
all expenses, damages, and liabilities, including reasonable attorneys' fees,
occurring as a result of Tenant's use, storage or release of any hazardous
and toxic waste materials as they may affect the leased premises. "Release"
means any spill, visible leak, pumping, pouring, explosion, emission,
discharge, injection, escape, dumping, disposing or other entering into the
environment of any substance, chemical, material, pollutant or contaminant
at, in, by, form or related to the leased premises. Tenant's obligations in
this regard shall survive and extend beyond the termination date of this
Lease. Whereby the statute of limitation for any indemnification action
shall not begin to run until Landlord has sustained damage. Landlord is
entitled to indemnity under the terms of this Agreement.
In the event that Tenant's use of the Premises includes storage of
hazardous and toxic waste materials Tenant agrees to remove all storage upon
lease termination or earlier termination.
20. PAYMENT OF UTILITIES AND COMMON AREA EXPENSES, INSURANCE AND REAL
PROPERTY TAXES. In conjunction with monthly rental payments, Tenant shall
pay within 15 days of receipt of invoice from Landlord, a sum representing
Tenant's pro rata share of utilities, repairs, misc. expenses, insurance,
real property taxes, a reasonable management fee and any other non-segregated
expense obligation of Tenant as called out in Section 7.2, 8, 10, 11, and 12.
Tenant's pro rata share shall be computed by multiplying the aforementioned
charges times a percentage obtained by dividing the total square footage of
the Premises by the total building square footage.
21. ACCEPTANCE OF PREMISES. Tenant accepts the Premises in "AS-IS"
condition, subject to the following: Landlord agrees to clean the walls, the
ceiling and the floor surface in the Premises prior to the commencement of
the Term. Also, the Premises shall be clear of all equipment, debris,
inventory and racking.
22. AGENCY DISCLOSURE; BROKER.
(a) AGENCY DISCLOSURE. Martin Smith Inc hereby discloses that it
represents the Landlord in this transaction.
(b) BROKER. The term "Broker(s) means Martin Smith Inc, representing
the Landlord. Landlord and Tenant each represent to the other that neither is
represented by any broker, agent or finder with respect to this Lease in any
manner, except the Broker(s). The commission due to the Broker(s) shall be
paid by Landlord pursuant to a separate agreement. Each party agrees to
indemnify and hold the other party harmless from and against any and all
liability, costs, damages, causes of action or other proceedings instituted
by any broker, agent or finder, licensed or otherwise, claiming through,
under or by reason of the conduct of the indemnifying party in any manner
whatsoever in connection with this Lease. If Tenant engages a broker, agent
or finder to represent Tenant in connection with any renewal of this Lease,
then the commission or any fee of such broker, agent or finder shall be paid
by Tenant.
THE PARTIES HERETO have executed this Lease at the place and on the
respective dates set forth below.
LANDLORD: TENANT:
Whitmac Company, Cutter & Buck, Inc.,
a Washington general partnerhip a Washington corporation
By /s/ Elmer James White, Jr. By /s/ [illegible]
--------------------------- -----------------------
Elmer James White, Jr. Its VP Operations
Partner -----------------------
Date 17 July 1998 Date 5/13/98
--------------------------- -----------------------
By /s/ [illegible]
-----------------------
Its CFO
-----------------------
Date 5/27/98
-----------------------
This Lease has been prepared for submission to you and your attorney. Martin
Smith Inc is not authorized to give legal or tax advice. Neither Landlord nor
Martin Smith Inc makes any representations or recommendations as to the legal
sufficiency, legal effect or tax consequences of this document or any
transaction relating thereto. These are questions for your attorney with whom
you should consult before signing this document to determine whether your
legal rights are adequately protected.
9
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Philip C. Davis is
the person who appeared before me, and said person acknowledged that he/she
signed this instrument, on oath stated that he/she was authorized to execute
the instrument, and acknowledged it as the (title) V.P. Operations of
(entity) Cutter & Buck Inc., a corporation to be the free and voluntary act
of such party for the uses and purposes mentioned in the instrument.
Witness my hand and official seal this 29th day May 1998.
/s/ Karen Heerensperger
--------------------------------------
Notary Public
(Print Name)
---------------------------
Residing at Seattle
---------------------------
My Commission Expires:
----------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Stephen S. Lowber is
the person who appeared before me, and said person acknowledged that he/she
signed this instrument, on oath stated that he/she was authorized to execute
the instrument, and acknowledged it as the (title) C.F.O. of (entity) Cutter
& Buck Inc., a corporation to be the free and voluntary act of such party for
the uses and purposes mentioned in the instrument.
Witness my hand and official seal this 29th day May 1998.
/s/ Karen Heerensperger
--------------------------------------
Notary Public
(Print Name)
---------------------------
Residing at Seattle
---------------------------
My Commission Expires:
-----------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that ELMER JAMES WHITE,
JR. is the person who appeared before me, and said person acknowledged that
he/she signed this instrument, on oath stated that he/she was authorized to
execute the instrument, and acknowledged it as the (title) PARTNER of
(entity) WALLACE ENTERPRISES, a PARTNERSHIP to be the free and voluntary act
of such party for the uses and purposes mentioned in the instrument.
Witness my hand and official seal this 6TH day NOVEMBER 1998.
/s/ Kay Baum
---------------------------------------
Notary Public
(Print Name) KAY BAUM
-------------------------
Residing at BOTHELL, WA
-------------------------
My Commission Expires: 4/30/01
----------------
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