Delaware 13-4048787
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
76 Ninth Avenue, New York, NY 10011
(Address of Principal Executive Offices) (Zip Code)
(212) 414-6000
(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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K [ ]
The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the closing sale price of the Common Stock on March 17, 2000 as reported on the NASDAQ National Market System, was approximately $259,190,839.
Number of shares of $.001 par value Class A Common Stock, Class B Common Stock and Class C Common Stock outstanding as of March 17, 2000 was 30,270,463, one and one, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III is incorporated by reference to a definitive proxy statement to be filed by the Registrant not later than April 29, 2000 pursuant to Regulation 14A.
This document contains 52 pages.
Exhibit index located on pages 27 - 31.
Table of Contents
Part I Page:
------ -----
Item 1. Business................................................... 3
Item 2. Properties................................................. 14
Item 3. Legal Proceedings.......................................... 15
Item.4. Submission of Matters to a Vote of Security Holders........ 15
Part II
-------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................ 16
Item 6. Selected Financial Data.................................... 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results Of Operations........................ 18
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk................................................ 26
Item 8. Financial Statements and Supplementary Data................ 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Disclosure.................................. 26
Part III
--------
Item 10. Directors and Executive Officers of the Registrant......... 26
Item 11. Executive Compensation..................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 26
Item 13. Certain Relationships and Related Transactions............. 26
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................ 27
|
General
Prior to October 31, 1998, the business of barnesandnoble.com llc ("B&N.com") was conducted by a wholly owned subsidiary of Barnes & Noble, Inc. ("Barnes & Noble"), which subsidiary was originally incorporated on January 14, 1997 in the State of Delaware under the name Barnes & Noble Online, Inc. ("B&N Online"). As of October 31, 1998, B&N Online contributed substantially all of its assets and liabilities to B&N.com and Bertelsmann A.G. ("Bertelsmann") contributed $150 million in cash to B&N.com. Bertelsmann subsequently contributed an additional $50 million in cash to B&N.com. The completion of the foregoing transaction resulted in Barnes & Noble and Bertelsmann each having a 50% beneficial interest in B&N.com.
On March 10, 1999, barnesandnoble.com inc. (the "Company") was established as a new Delaware subsidiary wholly-owned by Barnes & Noble. Prior to the effective date of the Registration Statement filed in connection with the Company's Initial Public Offering (the "Offering") the Company filed an Amended Charter which, among other things, reclassified its outstanding Common Stock to one share of Class B Common Stock. The Company then issued one share of Class C Common Stock constituting a 50.0% interest in the Company to a wholly-owned subsidiary of Bertelsmann. The foregoing transactions in this paragraph are collectively referred to as the "Recapitalization." Following the Recapitalization, Barnes & Noble and Bertelsmann each had a 50% beneficial interest in the Company through their ownership of all of the outstanding Class B and Class C Common Stock.
In connection with the Offering, the Company issued 28,750,000 shares of Class A Common Stock to the public and immediately thereafter contributed the proceeds to B&N.com in exchange for 28,750,000 Membership Units in B&N.com. Immediately following the Offering, Barnes & Noble and Bertelsmann each owned an approximate 40.0% interest in B&N.com, with the remaining 20.0% interest owned by the Company. As of December 31, 1999 the Company owned an approximate 20.3% interest in B&N.com and Barnes & Noble and Bertelsmann owned approximately 39.85% each. The Company's Class B Common Stock and Class C Common Stock (collectively, "High Vote Stock") are convertible into shares of Class A Common Stock at any time by the holder thereof on a one-for-one basis. The holders of Class A Common Stock and High Vote Stock generally have identical rights, except that each holder of Class A Common Stock is entitled to one vote per share and each holder of High Vote Stock is entitled to the number of votes per share equal to: (i) ten, multiplied by the sum of (a) the aggregate number of High Vote Stock owned by such holder and (b) the aggregate number of Membership Units owned by such holder; divided by (ii) the number of shares of High Vote Stock owned by such holder. As a result of their ownership of High Vote Stock, Barnes & Noble and Bertelsmann each beneficially control 48.9% of the voting power (97.8% in the aggregate) of the Company's voting stock. The Company's sole business is to act as the sole Manager of B&N.com. As sole Manager of B&N.com, the Company controls all of the affairs of B&N.com. Barnes & Noble and Bertelsmann, as a result of their ownership of the High Vote Stock and Membership Units, control both the Company and B&N.com.
B&N.com has pursued a strategy of focusing on the sale of a broad range of knowledge, information, education and entertainment related products. Since opening its initial online store in March 1997, B&N.com has sold products to over 4.7 million customers in 224 countries. B&N.com has created a model for e-commerce based upon a compelling value proposition. B&N.com's suite of online stores is anchored by its online bookstore, and also includes online stores offering software, magazines, music, prints & posters and related products, all seamlessly integrated within B&N.com's Web site located at www.bn.com. B&N.com's online bookstore, which contains over
According to Media Metrix, in January 2000, B&N.com's Web site was the fourth most trafficked shopping site and was among the top 25 largest Web properties on the Internet. Distribution and co-marketing agreements with major Web portals and content sites, such as America Online ("AOL"), MSN and Lycos, have extended B&N.com's brand and consumer exposure to its online stores. B&N.com has also established a network of remote storefronts across the Internet by creating direct links with over 360,000 affiliate Web sites. B&N.com is also a leader in business-to-business e-commerce with its unique Business Solutions program.
During 1999, B&N.com introduced many major enhancements to its online stores, including the full rollout of its online music store. It launched its Prints & Posters Gallery, a unique collection of images that can be produced on demand on museum-quality canvas or high-quality paper, and its free electronic greeting card ("eCards") service, an exclusive selection of greeting card images that can be personalized and enhanced with animation and music. B&N.com On the Go, a company-wide wireless strategy designed to allow customers to shop at B&N.com from wireless devices such as the Palm VII handheld computer from Palm Computing, was established in late 1999. In December 1999, B&N.com announced the expansion of its presence in the online magazine subscription market through the investment and acquisition of an equity stake in Enews.com, subsequently completed in January 2000. In February 2000, B&N.com launched bnRadio, the first Internet radio service linked to an e-commerce company that allows customers to listen to full-length songs and excerpts from audio books. The full rollout of video and DVD product lines are anticipated in 2000.
The Company believes that B&N.com's relationships with Barnes & Noble, the nation's largest bookseller, and Bertelsmann, one of the world's largest media companies, provide B&N.com with meaningful advantages relative to other online retailers in its category, including:
o The superior brand recognition of the Barnes & Noble trade name, which is a strong motivating factor in attracting customers, especially with regard to the post-early adopter market of consumers who have yet to make an online purchase;
o The use of Barnes & Noble's state-of-the-art distribution center as its primary product supplier, which enables B&N.com to offer over 750,000 in-stock book titles for fast delivery, representing the largest standing inventory of any online bookseller and to benefit from cost savings as B&N.com lessens reliance on wholesalers, a more expensive sourcing alternative;
o The enterprise value of Barnes & Noble and Bertelsmann, including Barnes & Noble's network of over 1,000 retail bookstores nationwide and Bertelsmann's position as one of the largest integrated media companies in the world, which provides significant advantages in attracting strategic partnerships;
o The ability to conduct cross-marketing, co-promotion and customer acquisition programs with Bertelsmann's U.S. book clubs, which provide B&N.com with: (i) access to millions of established book buyers; (ii) the opportunity to directly promote its online store to this vast audience of proven buyers; and
o The potential ability to directly link and cross-promote B&N.com's online stores with the online stores operated or intended to be operated by Bertelsmann's Books Online ("BOL") in the United Kingdom, Germany, France, the Netherlands and Italy, which will enable B&N.com to more rapidly acquire new streams of international customers, as well as to offer its existing customer base access to a vast selection of foreign language books, which the Company believes will help B&N.com further strengthen customer loyalty and repeat business; and
o Ongoing access to the substantial book selling and direct marketing knowledge and experience of the management of Barnes & Noble and Bertelsmann.
Industry Background
E-Commerce. The new arena of e-commerce provides retailers with the opportunity to serve a rapidly growing market due to increased consumer acceptance of the Internet as an alternative shopping channel. According to Jupiter Communications' November 1999 report, US online shopping for 1999 was estimated at $14.9 billion and is expected to reach $78 billion in the year 2003. The total number of US online buyers at the end of 1999 was estimated at 28.8 million and is forecasted to grow to approximately 85 million by the end of the year 2003, which represents approximately 54% of overall US online households. The Company believes that these figures will continue to grow as Internet use becomes easier and more pleasurable through higher-speed access and less expensive and alternative Internet access devices.
The Internet also provides e-commerce companies with an opportunity to serve a global market. Jupiter Communications' September 1999 estimates project that the number of Internet-connected households worldwide will grow from approximately 100.1 million at the end of 1999 to approximately 156.6 million by the end of 2003. IDC estimates that the number of Web users worldwide will exceed 315 million by the end of 2002.
The Book Industry. The size of the U.S. consumer book market, according to Veronis Suhler, an investment banking firm specializing in, among other things, the publishing industry, was $16.9 billion in 1998 and is expected to grow to $22.5 billion by the year 2003. Worldwide book sales, according to Euromonitor, were expected to be $82 billion in 1999 and are anticipated to grow to approximately $93 billion by the year 2002. B&N.com's early history with non-U.S. consumers indicates that the demand for U.S. published books abroad is large and relatively untapped.
Online Shopping Forecast. Industry analysts, including Forrester Research and Jupiter Communications, forecast continued and accelerating acceptance of the Internet as a channel that consumers will turn to for a wide range of products. Within the categories where B&N.com has placed its primary focus, namely books and complementary information-based products such as music, video and software, industry analysts forecast a large and rapidly growing market for online sales. Forrester Research estimates that U.S. online sales of books will grow to nearly $3.3 billion by 2004. In addition, Forrester Research estimates U.S. online sales in 2004 for music to be $4.3 billion, software to be $3.3 billion and video to be $1.7 billion.
Products That Are Well Suited for E-Commerce. The book, music, video and software businesses are particularly well suited for e-commerce because an online store has virtually unlimited shelf space and can offer
Business Strategy
B&N.com has pursued a strategy of focusing on the sale of a broad range of knowledge, information, education and entertainment related products. To achieve this objective, B&N.com has focused its efforts on providing the highest possible levels of value and service, which it believes are reflected in the completeness of its product selection, the ease-of-use of its Web site, the price of its products and the speed of delivery it can offer its customers. While the principal focus of B&N.com is online bookselling, it continues to seek opportunities that expand its product offering to complementary information, entertainment and intellectual property-based products, and to present them to customers with the highest contextual relevance. It is B&N.com's goal to be recognized as the most innovative and customer-focused of e-commerce merchants, making online purchasing a simple, personal and gratifying experience that results in the highest levels of customer loyalty.
Central to achieving these objectives, B&N.com's operating strategy is focused on rapidly extending its brand and increasing its customer and revenue base by:
Continually Enhancing the User Experience. B&N.com is committed to making every aspect of browsing and shopping in its online stores an easy and pleasurable experience. It makes continual efforts to improve the design, layout and navigation of all elements of its Web site, as well as to ensure that the site's performance metrics are competitive, especially with regard to page download times and the speed of all search functions. B&N.com also strives to make the entire ordering and checkout process easy, intuitive, fast and secure.
Offering a Large Product Selection and Fast Delivery. B&N.com offers one of the largest selections of books, currently over 1 million in-print titles and 15.6 million items available for sale in out-of-print, of any online bookseller. This includes virtually every English-language book currently in print as well as millions of out-of-print, pre-owned and rare books. B&N.com's online databases act as a highly searchable catalog for the spectrum of English-language books. B&N.com, through Barnes & Noble, maintains the largest in-stock position of any online bookseller, enabling it to uniquely serve customers by having over 750,000 titles available for immediate shipping. Preparing two distribution centers for operation in 2000 will bring the number of titles available to over one million and enhance the expediting of products as well. B&N.com's music store is rapidly growing as well, currently having over 200,000 titles available for purchase. Over 9,500 images are available for printing on museum-quality canvas or high-quality paper and are printed and shipped on demand from B&N.com's strategic partner BuyEnlarge.com Inc.
Expanding Its Product Offering. B&N.com intends to be the best place to buy books online as well as the most authoritative source for information about books and authors. While B&N.com's major focus is and will be selling books, the Company believes that offering complementary information products such as
Building Brand Awareness and Driving Customer Acquisition through Advertising and Promotion. B&N.com will continue to invest in building its online brand and in communicating the benefits and convenience of shopping at its online stores. The Company believes that B&N.com is well positioned to benefit from the large post-early-adopter market that is just beginning to access the internet, many of whom have yet to make their first online purchase. A variety of media, including online, radio, television, print and outdoor advertising, was selectively deployed in 1999 to further B&N.com's goal of rapidly growing its customer base. The Company began 1999 with 1.3 million customers and grew this base to almost 4 million by year-end. Customer retention has also been growing steadily, with repeat business rising from 52 percent in 1998 to 66 percent in December 1999. B&N.com also benefits from the cross-marketing with Barnes & Noble retail stores, wherever possible, as well as from cross-marketing with Bertelsmann's U.S. book clubs and with Bertelsmann's internet business BOL in Europe. In all of its advertising and promotion initiatives, B&N.com seeks to continuously drive down new customer acquisition cost, as well as to get customers to return to the site more frequently and to increase the size of their average purchase per visit.
Leveraging its Relationship with Barnes & Noble. The Company believes that B&N.com's relationship with Barnes & Noble provides it with competitive advantages, including the ability to use the Barnes & Noble state-of-the-art distribution center as its primary supplier, leverage its well-respected brand name and utilize the substantial bookselling experience of its management.
Strengthening and Expanding Strategic Alliances. B&N.com will continue to provide its major strategic partners with merchandising support, strengthening their ability to generate sales for B&N.com and to promote B&N.com's brand. The Company believes that B&N.com's connections to Barnes & Noble and Bertelsmann enables B&N.com to negotiate more competitively for new strategic and marketing partners as major media and content companies place a high value on these connections.
Increasing the Number of Web Sites in its Affiliate Network. B&N.com's affiliate network, which was launched in October 1997, currently has over 360,000 members. The affiliate network, which began 1999 with 48,000 members, is among the fastest-growing in e-commerce.
Continuing to Invest in Technology. The Company believes that B&N.com currently utilizes a state-of-the-art interactive e-commerce platform. B&N.com plans to continue to invest in technologies that improve its
Pursuing Acquisitions and Strategic Relationships. B&N.com pursues acquisitions, joint ventures and other similar strategic investments and relationships with complementary businesses and companies in order to augment or expand its current offerings. Examples of recent strategic relationships include the following:
o In January 2000 B&N.com announced an agreement to develop and market a co-branded credit card with MBNA America Bank, N.A., the world's largest independent credit card company. B&N.com expects the agreement to generate more than $25 million in revenues over the five-year term of the agreement, which allows B&N.com to market its products to MBNA's tens of millions of customers, among the largest credit card customer bases in the world. The deal is the first example of B&N.com's ability to monetize customers over multiple channels, and is an example of the Company's ability to attract industry-leading strategic partners.
o In January 2000 B&N.com and Microsoft announced that they would develop an eBook Superstore using Microsoft Reader software. The eBook initiative will provide B&N.com's millions of customers with access to thousands of eBook titles through Microsoft Reader, a new software application designed to deliver an on-screen computer reading experience rivaling that offered by traditional paper-based text.
o In December 1999 B&N.com announced its plan to expand its presence in the growing online magazine subscription market by acquiring an equity stake of up to 40 percent in Enews.com, the largest retailer of magazine subscriptions on the Internet.
o B&N.com also launched B&N.com On the Go in December 1999, a company-wide wireless strategy designed to allow customers to shop at bn.com from wireless devices such as the Palm VII handheld computer from Palm Computing.
B&N.com's Online Stores
The principal focus of B&N.com is online bookselling, which generated approximately 93%, 98% and 100% of B&N.com's total revenues for the years ended December 31, 1999, 1998 and 1997, respectively. However, B&N.com continues to seek out opportunities to expand its product offering to complementary information, entertainment and intellectual property-based products, and to present them to customers with the highest contextual relevance. Accordingly, in addition to its online bookstore, B&N.com provides online stores for software, magazines, music, prints & posters and other information-based products of a complementary nature. All of its online stores are seamlessly integrated and presented to customers with B&N.com's single Web site. B&N.com's initial online bookstore, launched in 1997, was augmented by the introduction of a magazine store and a software store in 1998. Music, the Prints & Posters Gallery and eCards were launched in 1999 and a full rollout of the video and DVD store is planned for 2000.
The Company believes that the following factors make B&N.com's online bookstore an easy and convenient way to shop for books:
Large Standing Inventory for Fast Delivery. The Company believes that consumers will increasingly demand an assured in-stock position and fast delivery from online booksellers. It also believes that B&N.com offers the fastest delivery on the largest number of titles of any online bookseller because the Barnes & Noble distribution center is able to provide B&N.com with immediate shipment on over 750,000 titles. Preparing two distribution centers for operation in Memphis and Reno in 2000, with the most advanced materials handling equipment and related technology, will offer even faster delivery and bring the number of available titles to over one million.
Easy and Secure Ordering. B&N.com seeks to ensure that all transactions are safe and secure. B&N.com has created a set of applications that allow customers to establish an account to store an address book, credit card information and shipping preferences.
Rich Editorial Content. B&N.com strives to provide its users with the most accurate and authoritative online database about books and authors. B&N.com's online database currently includes editorial content such as synopses, book reviews, author biographies and user reviews on over 1 million titles. Included in this content are book reviews from many respected industry sources, such as The New York Times Book Review, Publisher's Weekly and Kirkus Reviews. B&N.com's Web site includes a microsite featuring the highly acclaimed `Reader's Catalog', a listing of over 40,000 recommended titles, individually selected and reviewed by an editorial board under the supervision of the New York Review of Books. B&N.com's in-house group of editorial experts also write and commission feature articles, columns and interviews.
Online Community. B&N.com has introduced author chats to its online bookstore that are a natural extension of the type of community building activities pioneered in Barnes & Noble's superstores. It was the first online bookseller to introduce a regular series of real-time author chats. In 1999, it started adding musicians in its online chats as well. Since going online in May, 1997, over 1,050 authors and musicians from a wide variety of genres have participated in these events, including JK Rowling, Hillary Rodham Clinton, Beck, LeAnn Rimes and Michael Crichton. B&N.com also encourages users to write their own book and music reviews. As a result, B&N.com's Web site contains thousands of readers and listeners reviews.
Personalized Services. B&N.com's e-nnouncements program allows users to sign up for free e-mail book reviews. Users sign up by area of interest and receive monthly bulletins about new and noteworthy publications, handpicked by B&N.com's editors.
B&N.com's magazine store currently offers customers the ability to obtain subscriptions to over 1,000 magazines in 25 categories with support through Enews.com. Subscriptions are offered at extremely competitive prices.
B&N.com's software store currently offers approximately 2,000 software titles in eight major categories, including software for business and productivity, games, kids and entertainment and for home and reference. The titles that B&N.com offers encompass a title mix that represents 80% of all of the software sold in the U.S.
B&N.com's music store currently offers over 200,000 music titles in sixteen major categories. The site also contains more than 20,000 artist biographies, more than 50,000 music reviews and album ratings.
B&N.com's Prints & Posters Gallery offers over 9,500 images that can be produced on demand on museum-quality canvas or high-quality paper.
B&N.com's bnRadio, an Internet radio service that allows customers to listen to more than 25,000 full-length songs and three-to-five minute selections from hundreds of audio books can be accessed at http://music.bn.com/radio/. The site features access to B&N.com's music store and audio book section.
During 2000, B&N.com plans to expand its offering of videos and DVDs by introducing an online video store as well as other complementary information and entertainment-based products.
Marketing and Promotion
Online Strategic Alliances. Since inception, B&N.com has aggressively pursued strategic alliances with premier online companies and high-traffic Web sites in order to drive traffic to its online stores. The Company believes that B&N.com's affiliation with Barnes & Noble and Bertelsmann greatly facilitates its ability to enter into agreements with many high profile portal and content sites. B&N.com's largest strategic alliance is with AOL. In November 1997, it entered into a four-year agreement with AOL to be the exclusive bookseller on AOL's commercial service, which is the largest online service of any kind, serving approximately 17 million members. B&N.com has also entered into strategic alliances with MSN, Microsoft, Lycos, ZDNet, Disney, The New York Times, CNN, TicketMaster and USA Today.
Affiliate Network. In addition to securing alliances with high-traffic
Web sites, B&N.com has established an affiliate network consisting of over
360,000 Web sites operated by third parties, whereby Web site operators can earn
referral fees by linking users from their sites to B&N.com's online stores.
B&N.com believes that its affiliate program goes beyond that of other online
retailers by: (i) paying higher referral fees; (ii) enabling members to take
content from B&N.com's online bookstore to enhance their merchandising; and
(iii) providing members with real-time reporting and analysis tools. About 4,000
affiliates are added each week to B&N.com's network.
Advertising. During 1999 B&N.com continued its comprehensive national print, radio, television and online banner campaign to significantly increase awareness of B&N.com's Web site. It intends to continue to advertise in each of those forms of media, allocating expenditures in relation to the effectiveness of the advertising.
International. B&N.com believes that the demand for U.S. published books abroad is substantial and untapped. B&N.com implements a cross-linking and cross-marketing program with the Web sites operated by BOL in the United Kingdom, Germany, France, the Netherlands and Italy, pursuant to which BOL customers who wish to order from B&N.com are linked to B&N.com's Web site.
Order Fulfillment
B&N.com utilizes an extensive electronic shopping network for order fulfillment, which is connected to the Barnes & Noble distribution center and various book wholesalers, including the Ingram Book Company ("Ingram"), Baker & Taylor and Bookazine. From these sources, B&N.com can quickly obtain approximately 900,000 different titles, the majority of which are currently sourced from the Barnes & Noble distribution center. Orders for music are fulfilled through AEC One Stop Group, Inc. ("AEC").
Internet customer orders are processed at B&N.com's fulfillment center in central New Jersey, which is in close proximity to the Barnes & Noble distribution center. Additionally, B&N.com has a dedicated customer service group in northern New Jersey.
In the second quarter of 2000, B&N.com anticipates opening its own distribution center in Memphis, Tennessee. A second distribution center is expected to open in Reno, Nevada within the next twelve months. These facilities will have the most advanced materials handling equipment and technology for direct to consumer fulfillment.
Technology
B&N.com believes that it currently has a state-of-the-art interactive e-commerce platform, and it plans to continue to invest in technologies that will enable B&N.com to offer its customers the most convenient and user-friendly online shopping experience possible. B&N.com has been able to quickly establish suites of "best of breed" solutions by following a strategy of leveraging existing systems and the best demonstrated processes of Barnes & Noble, licensing existing commercial technology when available and focusing its internal development efforts on those proprietary systems necessary to provide the highest level of value and service to its customers. The overall mix of technologies and applications currently in use by B&N.com allow it to support a distributed, scalable and secure e-commerce environment.
B&N.com's integrated systems and tools provide functionality in the following areas:
Title Database and Search Functionality. B&N.com has been able to establish a comprehensive and accurate book database by employing a multi-channel data sourcing strategy. B&N.com obtains its primary title data directly from Barnes & Noble. Weekly updates are automatically sent to B&N.com's servers. B&N.com complements this primary title database content feed with data from multiple external sources and is able to systematically evaluate data, identify inconsistencies and correct inaccuracies. B&N.com has also developed a powerful proprietary search engine. This software allows a user to search for books using a variety of criteria, including author, title, keywords, subject area, ISBN number, book format, subject, price and a series of children's age ranges. Search results can then be sorted by user-defined sequences including "bestseller", "date published", a "Readers Catalog highly recommended book", or in alphabetical sequence.
E-Commerce. B&N.com has developed its e-commerce applications using the Microsoft SiteServer Architecture. Working with Microsoft, B&N.com has created a set of server applications that allow customers to establish an account to store an address book, credit cards and ordering preferences. A customer needs to set up an account only once. Once the account has been established the customer can shop the traditional "e-commerce" path by adding items to their shopping cart. Options for gift certificates, gift-wrap, gift message and the ability to select from a variety of shipping methods are available for customers.
Community and Interactivity. B&N.com has established several applications to facilitate interaction with its customers. An "Auditorium", which uses Microsoft's Chat technology, is used to host real-time author chats each night on B&N.com's online bookstore. Since going online in May, 1997, over 1,050 authors and musicians from a wide variety of genres have participated in these chats.
Order Processing. B&N.com has created a proprietary application to expedite orders into the fulfillment process. This application has real-time connectivity to Barnes & Noble's distribution center as well as other third party suppliers. In addition to immediately securing the inventory for the customer, application logic determines the best possible choice of shipping warehouse by evaluating purchase margin, postage cost and customer delivery time.
Order Fulfillment and Customer Service. B&N.com has developed propriety applications which enable it to receive products and assign it to customers based upon various ordering, handling and shipping criteria. B&N.com has also developed proprietary e-mail applications which are used for customer service.
Sales Tracking and Analysis. B&N.com licenses technology from Be Free Inc. to support its affiliate program. The software provides sophisticated sales tracking for the members of the affiliate network with real
Competition
Both the e-commerce market and retail bookselling business are highly competitive. Since the introduction of e-commerce to the Internet, the number of e-commerce Web sites competing for customer attention has increased rapidly. The Company expects future competition to intensify given the relative ease with which new Web sites can be developed. The Company believes that the primary competitive factors in e-commerce are brand recognition, site content, ease of use, price, fulfillment speed, customer support and reliability. The Company believes that B&N.com's success will depend heavily upon its ability to provide a compelling and satisfying shopping experience. The Company believes that other factors that will affect B&N.com's success include B&N.com's continued ability to attract experienced marketing, technology, operations and management talent. The nature of the Internet as an electronic marketplace (which may, among other things, facilitate competitive entry and comparison-shopping) may render it inherently more competitive than traditional retailing formats. Increased competitiveness among online retailers may result in reduced operating margins, loss of market share and a diminished brand franchise.
With respect to the sale of books, which constitutes B&N.com's largest source of revenue, B&N.com currently competes with numerous booksellers including other Internet-based companies such as Amazon.com, and traditional book retailers. With respect to the sale of music, software and videos, B&N.com competes with numerous merchants including other Internet-based companies, such as Amazon.com, Cdnow, Reel.com, Beyond.com and traditional retailers. B&N.com's main online competitor, Amazon.com, has a longer online operating history and a larger existing customer base than B&N.com. B&N.com is aware that Amazon.com has and may continue to adopt aggressive pricing and marketing strategies. B&N.com is also aware of other online retailers that are offering substantial discounts on products, including books, music, software and videos, which are subsidized by advertising revenue from their Web sites. An increase in the prevalence of this type of business model could lead to additional pricing pressures on B&N.com's products. If and when B&N.com decides to add additional products in its online stores, it will most probably face intense competition for those products as well.
Seasonality
B&N.com experiences seasonality in its business, reflecting a combination of seasonal fluctuations in Internet usage and traditional retail seasonality patterns.
Government Regulation and Legal Uncertainties
E-commerce is new and rapidly changing, and federal and state regulation relating to the Internet and e-commerce is evolving. Currently, there are few laws or regulations directly applicable to the access of the Internet or e-commerce on the Internet. Due to the increasing popularity of the Internet, it is possible that laws and regulations may be enacted with respect to the Internet, covering issues such as user privacy, pricing, taxation, content, copyrights, distribution, antitrust and quality of products and services. Additionally, the rapid growth of e-commerce, may trigger the development of tougher consumer protection laws. The adoption of such laws or regulations could reduce the rate of growth of the Internet, which could potentially decrease the usage of B&N.com's online stores or could otherwise have a material adverse effect on B&N.com's business. In addition, applicability to the Internet of existing laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel, obscenity and personal privacy is uncertain. The vast majority of such laws were adopted prior
Further, several telecommunications carriers have requested the Federal Communications Commission ("FCC") to regulate telecommunications over the Internet. Due to the increasing use of the Internet and the burden it has placed on the current telecommunications infrastructure, telephone carriers have requested the FCC to regulate Internet service providers and online service providers and impose fees on those providers. If the FCC imposes access fees, the costs of using the Internet could increase dramatically. This could result in the reduced cost of the Internet, as a medium for commerce, which could have a material adverse effect on B&N.com's business, financial condition, results of operations or prospects.
Employees
As of February 29, 2000, B&N.com employed approximately 1,237 full-time and part-time employees. B&N.com also employs independent contractors to perform duties in various departments, including software development, editorial and administration. B&N.com's employees are not represented by unions, and B&N.com considers its relationship with its employees to be excellent. B&N.com believes that its success is dependent on its ability to attract and retain qualified personnel in numerous areas.
B&N.com's principal administrative, marketing and technical facilities are located in New York, New York and are covered by two leases. The leases are for approximately 150,000 square feet of office space and expire in 2015. The rent is approximately $1 million in 1999, $3 million in 2000, $4 million per year through 2007, and $6 million per year thereafter.
B&N.com currently leases a 380,000 square foot building in Memphis, Tennessee for distribution purposes. The lease term is five years commencing in January 2000. The annual rent is approximately $1.1 million.
B&N.com entered into an agreement to lease 600,000 square feet of space in Reno, Nevada for a second distribution facility. The building will be completed and ready for occupancy in stages throughout 2000. The lease is for a period of ten years commencing with substantial completion of the facility. Annual rent for the entire completed facility will be approximately $2.1 million for years one through five and approximately $2.4 million for years six through ten. Four five-year options to renew are included in the terms of the lease.
B&N.com leases 30,000 square feet in New Jersey for its customer service operations. The lease term is ten years commencing June 1, 1999. Annual rent for years one through five is approximately $700,000. Annual rent for years five through ten is approximately $750,000. The lease may be renewed for one five-year period at an agreed upon prevailing fair market value rate.
Barnes & Noble leases a 300,000 square foot facility located in New Jersey, of which B&N.com utilizes approximately 100,000 square feet for its current fulfillment operations. B&N.com currently pays Barnes & Noble $31,800 per month for its proportionate share of such lease. This lease expires in March 2003, however, Barnes & Noble has an option to extend the lease for up to three additional successive two-year periods.
B&N.com is involved in various routine legal proceedings incidental to the conduct of its business. The Company does not believe that any of these legal proceedings will have a material adverse effect on the financial condition, results of operations or cash flows of B&N.com.
In August 1998, The Intimate Bookshop, Inc. and its owner, Wallace Kuralt, filed a lawsuit in the United States District Court for the Southern District of New York against a predecessor of the Company, Barnes & Noble, Inc., Borders Group, Inc. and others, alleging violation of the Robinson-Patman Act and other federal law, New York statutes governing trade practices and common law. In March 2000 a Second Amended Complaint was served on the Company and other defendants alleging a single cause of action for violations of the Robinson-Patman Act. The Second Amended Complaint claims that the Intimate Bookshop, Inc. has suffered damages of $10,000,000 or more and requests treble damages, costs, attorneys' fees and interest, as well as declaratory and injunctive relief prohibiting the defendants from violating the Robinson-Patman Act. The Company and B&N.com intend to vigorously defend this action.
In March 1998, the American Booksellers Association and 26 independent bookstores filed a lawsuit in the United States District Court for the Northern District of California against Barnes & Noble, Inc. and Borders Group Inc. alleging violations of the Robinson-Patman Act, the California Unfair Trade Practice Act and the California Unfair Competition Law. The Complaint seeks injunctive and declaratory relief; treble damages on behalf of each of the bookstore plaintiffs, and, with respect to the California bookstore plaintiffs, any other damages permitted by California law; disgorgement of money, property and gains wrongfully obtained in connection with the purchase of books for resale, or offered for resale, in California from March 18, 1994 until the action is completed and pre-judgment interest on any amounts awarded in the action, as well as attorney fees and costs. In October 1999, the Company and B&N.com were added as defendants in the action. The Company and B&N.com intend to vigorously defend this action.
On October 21, 1999, Amazon.com, Inc. ("Amazon") filed a lawsuit against the Company and B&N.com in the United States District Court for the Western District of Washington alleging that B&N.com's use of its Express Lane one-click ordering system infringes upon Amazon's patent for its 1-Click ordering system. The complaint seeks injunctive and declaratory relief and treble damages, as well as attorneys fees and costs. The Company and B&N.com have filed a counterclaim for a declaratory judgment that the Amazon patent at issue is invalid. On December 1, 1999, the Court granted Amazon's motion for a preliminary injunction. As a result, consistent with the Court's order, B&N.com replaced its Express Lane feature with an Express Checkout feature requiring two clicks. The Company and B&N.com intend to vigorously defend this action.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock is listed on the NASDAQ National Market under the symbol "BNBN" and began trading on May 25, 1999. On March 17, 2000, the Company had 546 shareholders of record. The Company's Class A Common Stock price at the close of business on March 17, 2000 was $8 9/16 per share.
The table below sets forth the high and low sale prices of the Company's Class A Common Stock for the periods indicated, as reported by the NASDAQ National Market.
High Low
---- ---
1999
----
May 25 through June 30 $ 26 5/8 $ 14 1/4
Third Quarter $ 20 7/8 $ 15
Fourth Quarter $ 23 1/2 $ 14 1/16
|
The Company has not declared or paid any dividends on its Common Stock and B&N.com has not made any distributions to its members, since their respective dates of inception. Both the Company and B&N.com do not currently anticipate paying any dividends or distributions, except for amounts which may be distributed by B&N.com to cover income tax liabilities, if any, of its members arising from the taxable income of B&N.com. Cash distributions by B&N.com may also be restricted by future debt covenants. The Company currently intends to cause B&N.com to retain future earnings, if any, to finance the expansion of the business of B&N.com.
Item 6. SELECTED FINANCIAL DATA (thousands of dollars, except per share data)
The selected financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and notes thereto appearing elsewhere in this Form 10-K.
barnesandnoble.com inc. and subsidiary || barnesandnoble.com llc and its predecessor
-------------------------------------- || ------------------------------------------
(Consolidated) ||
Pro forma ||
year ended May 25, 1999 || January 1, Year Ended December 31,
December 31, to December 31, || 1999 to -----------------------------
1999 (1)(2) 1999 (3) || May 24, 1999 (4) 1998(4) 1997(4)
---------------- --------------- || ----------------- ------------- -----------
||
Statement of Operations Data: ||
Net sales $ 202,567 $ 148,263 || $ 54,304 $ 61,834 $ 11,949
Cost of sales 159,937 117,850 || 42,087 47,569 10,117
--------- --------- || --------- --------- ---------
Gross profit 42,630 30,413 || 12,217 14,265 1,832
--------- --------- || --------- --------- ---------
Operating expenses: ||
Marketing and sales 111,553 79,257 || 32,296 70,423 8,855
Technology & web site development 21,006 15,058 || 5,948 8,532 3,256
General and administrative 32,714 22,765 || 9,949 19,166 3,273
--------- --------- || --------- --------- ---------
Total operating expense 165,273 117,080 || 48,193 98,121 15,384
--------- --------- || --------- --------- ---------
Operating loss (122,643) (86,667) || (35,976) (83,856) (13,552)
Interest income, net 20,238 18,615 || 1,623 708 -
--------- --------- || --------- --------- ---------
Loss before minority interest (102,405) (68,052) || (34,353) (83,148) (13,552)
Minority interest 54,253 54,253 || - - -
--------- --------- || --------- --------- ---------
Net loss-historical (48,152) $ (13.799) || (34,353) (83,148) (13,552)
========= || ========= =========
Pro forma adjustment to ||
minority interest (5) 27,534 || 27,534 66,518 10,842
--------- || --------- --------- ---------
Net loss-pro forma (2) $ (20,618) || $ (6,819) $ (16,630) $ (2,710)
========= || ========= ========= =========
||
Basic and diluted net loss ||
per common share (6) $ (0.72) $ (0.48) || $ (0.24) $ (0.58) $ (0.09)
Basic and diluted weighted average common ||
shares outstanding (6) 28,778 28,797 || 28,750 28,750 28,750
||
Basic and diluted loss before minority ||
interest per share (6)(7) $ (0.72) $ (0.48) || $ (0.24) $ (0.58) $ (0.09)
Basic and diluted weighted average shares ||
outstanding, if converted (6)(7) 143,939 144,064 || 143,750 143,750 143,750
||
Balance Sheet Data: ||
Cash and cash equivalents $ 247,403 || $ 96,940 $ -
Long term marketable securities 71,852 || - -
Working capital 429,674 || 78,681 3,176
Total assets 679,518 || 202,144 26,327
Minority interest (8) 482,896 || - -
Equity $ 120,682 || $ 169,149 $ 19,213
|
(1) Includes the historical results of barnesandnoble.com llc for the entire
year and the historical results of the Company from May 25, 1999.
barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
(2) The pro forma amounts do not give effect to the assumed charges to
operating results which might have resulted had the Company's Initial
Public Offering occurred at the beginning of the repective periods.
(3) barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
(4) Includes the historical results of barnesandnoble.com llc and its
predecessor.
(5) Represents the approximate 80% interest of Barnes & Noble and Bertelsmann
in the net loss of barnesandnoble.com llc for periods prior to May 25,
1999.
(6) For periods prior to May 25, 1999, reflects the pro forma effect of the
shares issued in the Company's Initial Public Offering assuming they were
issued at the beginning of 1997.
(7) Includes the conversion of membership units in barnesandnoble.com llc held
by Barnes & Noble and Bertelsmann into outstanding shares of the Company.
(8) Represents the approximate 80% interest in Barnes & Noble and Bertelsmann
in the equity of barnesandnoble.com llc.
Forward-Looking Statements
This report may contain certain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and information relating to the Company and B&N.com that are based on the beliefs of the management of the Company as well as assumptions made by and information currently available to the management of the Company. When used in this report, the words "anticipate," "believe," "estimate," "expect," "intend," "plan" and similar expressions, as they relate to the Company, B&N.com or the management of the Company, identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events, the outcome of which is subject to certain risks, including among others general economic and market conditions, changes in product demand, the growth rate of Internet usage and e-commerce, possible disruptions in the Company's or B&N.com's computer or telephone systems, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible work stoppages or increases in labor costs or labor shortages, unanticipated adverse litigation results or effects, the performance of B&N.com's current and future investments and new product initiatives, unanticipated costs associated with B&N.com's new warehouses or the failure to successfully integrate those warehouses into B&N.com's distribution network, unanticipated costs or affects associated with Year 2000 compliance problems of the Company or B&N.com or their service or supply providers, the factors described below under "Quarterly Results of Operations," changes in tax and other governmental rules and regulations applicable to the Company or B&N.com and other factors that may be outside of the Company's control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to the Company, B&N.com or persons acting on their behalf are expressly qualified in their entirety by the cautionary statements in this paragraph.
Overview
The Company is a holding company whose sole asset is its 20.3% equity interest in B&N.com and whose sole business is acting as sole manager of B&N.com. B&N.com launched its initial online store in March 1997 and since that time has become the fourth largest e-commerce Web site, based on the Media Metrix January 2000 report.
B&N.com has pursued a strategy of focusing on the sale of a broad range of knowledge, information, education and entertainment related products. Through February 2000, B&N.com has offered for sale both new and out-of -print books, music, software, magazine subscriptions and prints & posters. In October 1999, the Company also launched eCards, offering an exclusive selection of over 1,700 unique images that can be personalized and enhanced with animation and music. The eCards can be sent for free through e-mail. The Company intends to continue to expand its product offering within the broad categories of knowledge, information, education and entertainment including entering into the video and DVD category in 2000.
The results of operations discussed hereafter include the pro forma results of the Company and B&N.com for the year ended December 31, 1999 and the historical results of B&N.com and its predecessors for the years ended December 31, 1998 and 1997. In view of the rapidly changing nature of B&N.com's business and its limited operating history, the Company believes that period-to-period comparisons of the operating results of B&N.com,
Results of Operations
Net Sales
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
Net sales $ 202,567 228% $ 61,834 417% $11,949
|
Net sales are composed of sales of books, music, software, prints & posters and related products, net of returns, as well as outbound shipping and handling charges. In 1999, sales more than tripled from $61.8 million in 1998 to $202.0 million in 1999. Growth in net sales reflects a significant increase in units sold due to the growth of B&N.com's customer base and repeat purchases from B&N.com's existing customers, in addition to the introduction of music and prints & posters product lines during 1999. During 1999, B&N.com's cumulative customer base more than tripled to approximately 4 million customers. Repeat customer orders increased to 66% as of the year end December 31, 1999 from 52% as of the year end December 31, 1998. International sales represented 6.3%, 10.0% and 10.0% of net sales for the years ended December 31, 1999, 1998 and 1997, respectively. B&N.com expects that sales from new product categories to be introduced in 2000, coupled with its growing market share in its core business, will result in significant sales growth in the future.
Gross Profit
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
Gross profit $ 42,630 199% $ 14,265 679% $1,832
Gross margin 21.0% 23.1% 15.3%
|
Gross profit is net sales less the cost of sales, which consists of the cost of merchandise sold to customers, and outbound and inbound shipping costs. Gross profit increased due to the Company's increased sales volume, however, gross margin decreased in 1999 to 21.0% from 23.1%. The decrease in gross margin is due primarily to the increase, from 40% to 50%, in the discount offered on New York Times best sellers and the introduction of music during the third quarter of 1999, which has a lower gross margin than books. Gross margin increased in 1998 to 23.1% from 15.3% primarily as a result of an improvement in merchandise mix
Marketing and Sales
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
Marketing and sales $ 111,553 58% $ 70,423 695% $8,855
Percentage of net sales 55.1% 113.9% 74.1%
|
Marketing and sales expenses consist primarily of advertising and promotional expenditures, as well as payroll and related expenses for personnel engaged in marketing, selling, editorial, fulfillment and customer service activities. Fulfillment activities include receiving of goods, picking of goods for shipment and assembly for shipment. All fulfillment costs, including the cost of operating and staffing distribution centers and customer service, are included in marketing and sales. Marketing and sales expenses increased primarily due to the increases in B&N.com's advertising and promotional expenditures and increased payroll and related costs associated with fulfilling customer demand. Such expenses decreased as a percentage of net sales due to the significant increase in net sales. B&N.com is focusing on lowering the cost of customer acquisition while continuing to pursue its aggressive branding and marketing campaign. Fixed fulfillment costs are expected to increase in 2000 as a result of the additional fixed costs associated with two new distribution facilities. B&N.com expects fulfillment costs as a percentage of sales to also be higher in 2000.
Accounting standard setters are currently reviewing financial statements of internet companies in order to achieve a consensus with respect to the financial statement presentation of certain items. Included in this review is the current practice of including certain warehouse and fulfillment costs in marketing and sales expense instead of in cost of sales. During 1999 and 1998 B&N.com included warehouse and customer service costs of $28,634 and $10,914, respectively, in marketing and sales expense. Also being reviewed by accounting standard setters is the practice of classifying certain coupon redemption costs as marketing and sales expense instead of as a reduction to sales. B&N.com has included in marketing expenses approximately $6 million, or 3% of sales, of coupon redemptions for the full year ended 1999. No coupons were redeemed in 1998. Had B&N.com treated coupon redemptions as a reduction to sales and marketing expense in 1999, gross margin would have decreased from 21.0% to 18.6% and marketing and sales expense as a percentage of sales would have decreased from 55.1% to 53.7%. In addition, the accounting standard setters are reviewing Web site development costs. The Company's accounting for the features, content and functionality of B&N.com's online stores, transaction-processing systems, telecommunications infrastructure and network operations is described in Note 2 to the financial statements.
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
Technology & Web site $ 21,006 146% $ 8,532 162% $3,256
development
Percentage of net sales 10.4% 13.8% 27.2%
|
Technology and Web site development expenses consist principally of payroll and related expenses for web page production, editorial and network operations personnel and consultants, and infrastructure related to systems and telecommunications. As a percentage of net sales, technology and Web site development expenses have steadily decreased, demonstrating the leveraging of these expenses. The increase in technology and Web site development expenses in dollars, was primarily attributable to increased staffing and associated costs related to enhancing the features, content and functionality of B&N.com's Web site and transaction-processing systems. Technology and Web site development expenses are also a result of increased investments in systems and telecommunications infrastructure, including investments associated with entry into music and print & poster sales and the development of eCards and expenses required to support the significant increase in net sales. B&N.com believes that continued investment in technology and Web site development is critical to attaining its strategic objectives. As a result, B&N.com expects technology and Web site development expenses to continue to increase. B&N.com has evaluated all software development projects that were in progress as of December 31, 1999 to determine whether or not it was no longer probable that any of the projects would be placed in service. Based on that evaluation, B&N.com expects to complete and put in service all software development projects that existed as of year end.
General and Administrative
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
General and administrative $ 32,714 71% $ 19,166 486% $3,273
Percentage of net sales 16.1% 31.0% 27.4%
|
General and administrative expenses consist of payroll and related expenses for executive, finance and administrative personnel, recruiting, professional fees and other general corporate expenses including costs to process credit card transactions. The increase in general and administrative expenses was primarily a result of expenses associated with the hiring of additional personnel and professional fees related to B&N.com's growth and expanded activities and an increase in depreciation and amortization. Such expenses decreased as a percentage of net sales from the year ended December 31, 1998 to the year ended December 31, 1999 due to the significant increase in net sales and the effects of leveraging these expenses over a larger sales base. B&N.com expects general and administrative expenses
Interest Income, Net
Year Ended
December 31,
--------------------------------------------------------------
Pro forma
1999 % Change 1998 % Change 1997
-------------- -------------- --------------
(in thousands)
Interest income, net $ 20,238 2,758% $ 708 N/A --
Percentage of net sales 10.0% 1.1% --
|
Interest income on cash and marketable securities increased in 1999 due to the higher cash and marketable securities balances resulting from the Company's financing activities. In addition to the approximately $484.4 million raised through the Company's initial public offering, the Company has received $200 million of capital investment by B&N.com's members since November 1998.
Income Taxes
The Company has not generated any taxable income to date and therefore has not paid any federal income taxes since inception. The Company has provided a full valuation allowance on the deferred tax asset, consisting primarily of net operating loss carryforwards, because of uncertainty regarding its realizability.
Seasonality
B&N.com experiences seasonality in its business, reflecting a combination of seasonal fluctuations in Internet usage and traditional retail seasonality patterns.
Quarterly Results of Operations
The Company expects that B&N.com may experience significant fluctuations in its future quarterly operating results due to a variety of factors, many of which are outside B&N.com's control. Factors that may adversely affect B&N.com's quarterly operating results include: (i) B&N.com's ability to retain existing customers, attract new customers at a steady rate and maintain customer satisfaction; (ii) B&N.com's ability to acquire product and to manage fulfillment operations; (iii) B&N.com's ability to maintain gross margins in its existing business and in future product lines and markets; (iv) the development, announcement, or introduction of new sites, service and products by B&N.com and its competitors; (v) price competition; (vi) B&N.com's ability to upgrade and develop its systems and infrastructure; (vii) the level of use of the Internet and increasing consumer acceptance of the Internet for the purchase of consumer products such as those offered by B&N.com; (viii) B&N.com's ability to attract new and qualified personnel in a timely and effective manner; (ix) the level of traffic on B&N.com's online stores; (x) B&N.com's ability to manage effectively its development of new business segments and markets; (xi) B&N.com's ability to successfully manage the integration of operations and technology of acquisitions and other business combinations; (xii) technical difficulties, system downtime or Internet brownouts; (xiii) the amount and
Liquidity and Capital Resources
The Company finished 1999 with a debt-free balance sheet. At December 31, 1999, the Company's cash, cash equivalents and short-term marketable securities were $478.0 million, compared to $96.9 million on December 31, 1998. In addition, at December 31, 1999 the Company had $71.9 million in long-term marketable securities, compared with no long-term marketable securities at December 31, 1998. On May 25, 1999, the Company completed an initial public offering of 28,750,000 shares of Class A Common Stock at a price of $18 per share. The net proceeds to the Company from the offering were approximately $484.4 million. At the completion of the initial public offering, the Company received additional capital contributions of $50.0 million and reclassified $50.4 million from restricted cash to marketable securities.
Net cash flows used in operating activities were $58.4 million, $54.7 million and $14.4 million for the years ended December 31, 1999, 1998 and 1997, respectively. Cash used in 1999 was primarily attributable to a net loss of $48.2 million after minority interest of $54.2 million. In addition, receivables increased $13.1 million and merchandise inventories increased $2.3 million. This was partially offset by depreciation and amortization of $13.8 million, an increase in payables to affiliates of $3.9 million, a $19.2 million increase in accounts payable, an increase in accrued liabilities of $19.8 million and a decrease of $2.6 million in prepaid expenses and other current assets. Cash used in 1998 was primarily attributable to a net loss of $83.1 million. In addition, net receivables increased $2.0 million, merchandise inventories increased $1.0 million, prepaid expenses and other current assets increased $1.5 million and accounts payable decreased $3.9 million. This was partially offset by depreciation and amortization of $6.8 million, an increase in payables to affiliates of $13.2 million and a $16.5 million increase in accrued liabilities. Cash used in 1997 was primarily attributable to a net loss of $13.6 million. In addition, net receivables totaling $0.4 million, purchase of merchandise inventories totaling $0.6 million and increases in prepaid expenses and other current assets totaling $9.2 million utilized cash in 1997. This was partially offset by depreciation and amortization of $2.3 million, an increase in payables of $3.9 million and a $3.3 million increase in accrued liabilities.
Net cash used in investing activities of $327.9 million for the year ended December 31, 1999 was attributable to a $302.5 million increase in marketable securities, purchases of fixed assets totaling $71.9 million and a $3.9 million increase in other non-current assets, partially offset by a $50.4 million decrease in restricted cash. Net cash used in investing activities of $81.5 million for the year ended December 31, 1998 was primarily attributable to purchases of fixed assets totaling $31.0 million and an increase in restricted cash of $50.4 million. Net cash used in investing activities of $18.3 million for the year ended December 31, 1997 was primarily attributable to purchases of fixed assets.
Net cash flows from financing activities were $536.8 million for the year ended December 31, 1999, primarily due to proceeds of $484.4 million from the Company's initial public offering and capital contributions of $50.0 million. Net cash flows from financing activities of $233.1 million and $32.8 million for the years ended December 31, 1998 and 1997, respectively, resulted entirely from capital contributions.
At December 31, 1999, the Company's principal sources of liquidity consisted of $247.4 million of cash and cash equivalents and $230.6 million of short-term marketable securities. Long term marketable securities totaled
The Company believes that current cash and cash equivalent balances and short-term investments will be sufficient to meet its anticipated cash needs for at least 12 months. However, any projection of future cash needs and cash flows is subject to substantial uncertainty. If current cash and short term investments in addition to cash generated from operations is insufficient to satisfy the Company's liquidity requirements, the Company may seek to sell additional equity or debt securities or to obtain a credit facility. The sale of additional equity or convertible debt securities could result in additional dilution to the Company's stockholders. There can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all. In addition, the Company will, from time to time, consider the acquisition of or investment in complementary businesses, products and technologies, which might increase the Company's liquidity requirements or cause the Company to issue additional equity or debt securities.
Beginning in the Year 2000, the date fields coded in some software products and computer systems needed to accept four digit entries in order to distinguish 21st century dates from 20th century dates and, as a result, many companies' software and computer systems needed to be upgraded or replaced in order to comply with such Year 2000 requirements. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail.
B&N.com developed a remediation plan for the Year 2000 issue that involved identification, assessment and testing of the equipment and systems affected, including:
o an assessment of information technology (IT) equipment and systems, which
includes web servers and web serving technology;
o an assessment of non-information technology (non-IT) embedded systems such as
building security, voice mail, fire prevention, climate control and other
systems; and
o the readiness of significant third party vendors and suppliers of services.
o development of an inventory of all IT equipment and systems and non-IT
systems that were potentially affected;
o determination of those systems that required repair or replacement;
o repair or replacement of those systems;
o testing of those repaired or replaced systems; and
o creation of contingency plans in the event of Year 2000 failures.
To date, less than 10% of assessed systems have required repair or replacement. Non-IT systems and internally developed programs were reviewed, and were not considered to be date sensitive to the Year 2000. Based on this evaluation, the Company's management did not believe that B&N.com's systems and programs presented Year 2000 issues.
The Company has not experienced any material Year 2000 problems. However, there can be no assurance that problems will not arise for the Company, its suppliers or others with whom the Company does business with in 2000. The Company intends to continue to monitor its compliance, as well as the compliance of others whose operations are material to its business.
Costs to Address Year 2000 Compliance
To date, B&N.com has incurred approximately $1.0 million in connection with identifying or evaluating Year 2000 compliance issues. Most of these expenses have related to the opportunity cost of time spent by B&N.com's employees evaluating its software, the current versions of its products and Year 2000 compliance matters generally. The Company expects that B&N.com's future Year 2000 costs will be minimal and will be funded from cash on hand. However, the full impact of the Year 2000 issues cannot be determined at this time. The failure by certain third parties to address their Year 2000 issues on a timely basis could adversely affect B&N.com's business.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal quarters beginning after June 15, 2000. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are to be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. B&N.com does not expect that the adoption of SFAS 133 will have a material impact on its consolidated financial statements because B&N.com does not currently hold any derivative instruments.
In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB No. 101"), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB No. 101 did not impact the Company's revenue recognition policies.
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND DISCLOSURE
None
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required in this item is incorporated herein by reference to portions of the Proxy Statement for Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days of the close of the fiscal year ended December 31, 1999.
Item 11. EXECUTIVE COMPENSATION
The information required in this item is incorporated herein by reference to portions of the Proxy Statement for Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days of the close of the fiscal year ended December 31, 1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in this item is incorporated herein by reference to portions of the Proxy Statement for Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days of the close of the fiscal year ended December 31, 1999.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in this item is incorporated herein by reference to portions of the Proxy Statement for Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days of the close of the fiscal year ended December 31, 1999.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements: Page(s)
Reports of Independent Certified Public Accountants F-1
Balance Sheets F-3
Statements of Operations F-4
Consolidated Statement of Stockholders' Equity F-5
Statements of Members' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
(a) (2) Financial Statement Schedules:
None.
All schedules are omitted because the required information is not
present or is not present in amounts sufficient to require
submission of the schedule or because the information required is
given in the consolidated financial statements or notes thereto.
(a) (3) Exhibits
Exhibit No. Description
3.1 Form of Amended and Restated Certificate of Incorporation of the
Company. (Incorporated herein by reference to Exhibit 3.1 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
3.2 Form of Amended and Restated By-laws of the Company. (Incorporated
herein by reference to Exhibit 3.2 in Amendment No. 2 of the
Company's Registration Statement No. 333-64211, filed May 6, 1999)
10.1 Form of the Company's 1999 Incentive Plan. (Incorporated herein by
reference to Exhibit 10.1 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
|
10.2 Interactive Services Agreement, dated as of July 31, 1997, by and
between the Company and Lycos, Inc. (Incorporated herein by
reference to Exhibit 10.2 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.3 Interactive Marketing Agreement, dated as of November 1, 1997, by
and between the Company and America Online, Inc. (Incorporated
herein by reference to Exhibit 10.3 in Amendment No. 2 of the
Company's Registration Statement No. 333-64211, filed May 6, 1999)
10.4 Ecommerce Merchant Agreement, dated as of October 27, 1997, between
the Company and Microsoft Corporation, together with Amendment No. 4
to Ecommerce Merchant Agreement. (Incorporated herein by reference
to Exhibit 10.4 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.5 Formation Agreement, effective as of 11:59 p.m., October 31, 1998,
among Bertelsmann AG, BOL.US Online, Inc., Barnes & Noble, Inc., the
Company, B&N.com Holding Corp. and B&N.com Member Corp.
(Incorporated herein by reference to Exhibit 10.5 in Amendment No. 2
of the Company's Registration Statement No. 333-64211, filed May 6,
1999)
10.6 Form of Second Amended and Restated Limited Liability Company
Agreement of barnesandnoble.com llc. (Incorporated herein by
reference to Exhibit 10.6 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.7 Form of Stockholders Agreement between Barnes & Noble, Inc. and
Bertelsmann AG. (Incorporated herein by reference to Exhibit 10.7 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.8 Technology Sharing and Licensing Agreement, dated as of October 31,
1998, between barnesandnoble.com llc, as Licensor and BOL.Global,
Inc., as Licensee. (Incorporated herein by reference to Exhibit 10.8
in Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.9 Technology Sharing and Licensing Agreement, dated as of October 31,
1998, between barnesandnoble.com llc, as Licensee and BOL.Global,
Inc., as Licensor. (Incorporated herein by reference to Exhibit 10.9
in Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.10 Amended and Restated Services Agreement, dated as of October 31,
1998, among the Company, barnesandnoble.com llc and Barnes & Noble,
Inc. (Incorporated herein by reference to Exhibit 10.10 in Amendment
No. 2 of the Company's Registration Statement No. 333-64211, filed
May 6, 1999)
10.11 Amended and Restated Services Agreement, dated as of October 31,
1998, among the Company, barnesandnoble.com llc and Marboro Books
Corp. (Incorporated herein by reference to Exhibit 10.11 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
|
10.12 Amended and Restated Trademark License Agreement, dated as of
October 31, 1998, between Barnes & Noble College Bookstores, Inc.
and barnesandnoble.com llc. (Incorporated herein by reference to
Exhibit 10.12 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.13 Trademark License Agreement dated as of October 31, 1998, between
BOL.Global, Inc. and barnesandnoble.com llc. (Incorporated herein by
reference to Exhibit 10.13 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.14 Supply Agreement, dated as of October 31, 1998, between
barnesandnoble.com llc and Barnes & Noble, Inc. (Incorporated herein
by reference to Exhibit 10.14 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.15 Amended and Restated Database and Software License Agreement, dated
as of October 31, 1998, among the Company, barnesandnoble.com llc
and Barnes & Noble, Inc. (Incorporated herein by reference to
Exhibit 10.15 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.16 Form of Amendment No. 1 to the Amended and Restated Services
Agreement, among the Company, barnesandnoble.com llc and Barnes &
Noble, Inc. (Incorporated herein by reference to Exhibit 10.16 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.17 Form of Amendment No. 1 to the Amended and Restated Services
Agreement, among the Company, barnesandnoble.com llc and Marboro
Books Corp. (Incorporated herein by reference to Exhibit 10.17 in
Amendment No. 2 of the Company's Registration Statement No.
333-64211, filed May 6, 1999)
10.18 Form of Amendment No. 1 to the Amended and Restated Trademark
License Agreement, between Barnes & Noble College Bookstores, Inc.
and barnesandnoble.com llc. (Incorporated herein by reference to
Exhibit 10.18 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.19 Form of Amendment No. 1 to the Trademark License Agreement, between
BOL.Global, Inc. and barnesandnoble.com llc. (Incorporated herein by
reference to Exhibit 10.19 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.20 Form of Amendment No. 1 to the Supply Agreement, between
barnesandnoble.com llc and Barnes & Noble Inc. (Incorporated herein
by reference to Exhibit 10.20 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.21 Form of Amendment No. 1 to the Amended and Restated Database and
Software License Agreement, among the Company, barnesandnoble.com
llc and Barnes & Noble Inc. (Incorporated herein by reference to
Exhibit 10.21 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
|
10.22 Indenture of Lease and Amendments thereto, dated as of June 7, 1994,
between SDI Technologies, Inc., as Landlord, and B.Dalton
Bookseller, Inc., as Tenant. (Incorporated herein by reference to
Exhibit 10.22 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.23 Lease, dated as of June 30, 1997, between P.A. Building Company, as
Landlord, and Barnes & Noble, Inc., as Tenant. (Incorporated herein
by reference to Exhibit 10.23 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.24 Employment Agreement (Chief Executive Officer), dated as of November
1, 1998, among barnesandnoble.com llc, Barnes & Noble, Inc.,
Bertelsmann A.G. and Jonathan Bulkeley. (Incorporated herein by
reference to Exhibit 10.24 in Amendment No.2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.25 Deferred Compensation Plan of the Company. (Incorporated herein by
reference to Exhibit 10.25 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.26 Retirement Plan of the Company. (Incorporated herein by reference to
Exhibit 10.26 in Amendment No. 2 of the Company's Registration
Statement No. 333-64211, filed May 6, 1999)
10.27 Form of Amendment No. 1 to the Technology Sharing and License
Agreement, between BOL.Global, Inc., as Licensor, and
barnesandnoble.com llc, as Licensee. (Incorporated herein by
reference to Exhibit 10.27 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.28 Form of Amendment No. 1 to the Technology Sharing and License
Agreement, between BOL.Global, Inc., as Licensee, and
barnesandnoble.com llc, as Licensor. (Incorporated herein by
reference to Exhibit 10.28 in Amendment No. 2 of the Company's
Registration Statement No. 333-64211, filed May 6, 1999)
10.29 Employment Termination Agreement, dated as of February 22, 1999,
between barnesandnoble.com llc and Jeffrey Killeen. (Incorporated
herein by reference to Exhibit 10.29 in Amendment No. 2 of the
Company's Registration Statement No. 333-64211, filed May 6, 1999)
10.30 Amendment No. 1 to Second Amended and Restated Limited Liability
Company Agreement of barnesandnoble.com llc.
10.31 Amended and Restated Industrial Lease Agreement effective as of July
27, 1999 between Industrial Developments International (Tennessee),
L.P., as landlord and barnesandnoble.com llc, as tenant.
10.32 Lease Agreement, dated September 8, 1999, between ProLogis
Development Services Incorporated, as landlord, and
barnesandnoble.com llc, as tenant.
10.33 Agreement of Lease, dated as of October 1, 1999, between 111 Chelsea
LLC, as landlord, and barnesandnoble.com llc, as tenant.
|
10.34 Assignment, Assumption and Consent Agreement and Amendment to Lease
dated as of October 1, 1999, among Barnes & Noble, Inc., as
assignor, barnesandnoble.com llc, as assignee and 111 Chelsea LLC,
as landlord.
23.1 Consent of BDO Seidman, LLP.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
|
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.
barnesandnoble.com inc.
Date: March 29, 2000 By: /s/ STEPHEN RIGGIO
-------------------
Stephen Riggio
Vice Chairman and Acting Chief
Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant in the capacities and on the dates indicated:
Name Capacity Date
---- -------- ----
/s/ LEONARD RIGGIO Chairman of the Board March 29, 2000
---------------------------
Leonard Riggio
/s/ STEPHEN RIGGIO Vice Chairman and March 29, 2000
--------------------------- Acting Chief Executive Officer
Stephen Riggio (Principal Executive Officer)
/s/ MARIE J. TOULANTIS Chief Financial Officer March 29, 2000
--------------------------- (Principal Accounting and
Marie J. Toulantis Financial Officer)
/s/ MICHAEL N. ROSEN Secretary and Director March 29, 2000
---------------------------
Michael N. Rosen
/s/ THOMAS MIDDELHOFF Director March 29, 2000
---------------------------
Thomas Middelhoff
/s/ MARKUS WILHELM Director March 29, 2000
---------------------------
Markus Wilhelm
/s/ KLAUS EIERHOFF Director March 29, 2000
---------------------------
Klaus Eierhoff
/s/ JAN MICHIEL HESSELS Director March 29, 2000
---------------------------
Jan Michiel Hessels
/s/ WILLIAM RIELLY Director March 29, 2000
---------------------------
William Rielly
|
To the Board of Directors
barnesandnoble.com inc.
We have audited the accompanying consolidated balance sheet of barnesandnoble.com inc. and subsidiary, as of December 31, 1999 and the related consolidated statements of operations, stockholders' equity and cash flows for the period May 25, 1999 to December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of barnesandnoble.com inc. and subsidiary at December 31, 1999, and the results of their operations and their cash flows for the period May 25, 1999 to December 31, 1999 in conformity with generally accepted accounting principles.
New York, New York
February 7, 2000
BDO Seidman, LLP
To the Board of Directors
barnesandnoble.com llc
We have audited the accompanying balance sheet of barnesandnoble.com llc, and its predecessor, as of December 31, 1998 and the related statements of operations, members' equity and cash flows for the period January 1, 1999 to May 24, 1999 and the years ended December 31, 1998 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, on the basis described in Note 1 to the financial statements, the financial position of barnesandnoble.com llc and its predecessor at December 31, 1998, and the results of their operations and their cash flows for the period January 1, 1999 to May 24, 1999 and the years ended December 31, 1998 and 1997 in conformity with generally accepted accounting principles.
New York, New York
February 7, 2000
BDO Seidman, LLP
barnesandnoble.com inc. ||
and subsidiary ||
(Consolidated) || barnesandnoble.com llc
December 31, || December 31,
1999 || 1998
------------ || ------------
ASSETS: ||
Current assets: ||
Cash and cash equivalents $ 247,403 || $ 96,940
Marketable securities 230,644 || -
Receivables, net 15,520 || 2,387
Merchandise inventories 3,886 || 1,579
Prepaid expenses and other current assets 8,161 || 10,770
--------- || --------
Total current assets 505,614 || 111,676
--------- || --------
Fixed assets, net 97,854 || 39,770
Restricted cash - || 50,393
Long term marketable securities 71,852 || -
Other non-current assets 4,198 || 305
--------- || --------
Total assets $ 679,518 || $202,144
========= || ========
||
LIABILITIES AND EQUITY ||
Current liabilities: ||
Accounts payable $ 19,204 || $ -
Accrued liabilities 39,627 || 19,804
Due to affiliate 17,109 || 13,191
--------- || --------
Total current liabilities 75,940 || 32,995
--------- || --------
Minority interest 482,896 || -
--------- || --------
Stockholders' equity: ||
Preferred Stock: $0.001 par value; 50,000,000 shares ||
authorized; none issued and outstanding - || -
Common Stock Series A; $0.001 par value; 750,000,000 ||
shares authorized; 29,347,067 and 0 shares issued and ||
outstanding, respectively 29 || -
Common Stock Series B; $0.001 par value; 1,000 shares ||
authorized; 1 and 0 shares issued and outstanding, ||
respectively - || -
Common Stock Series C; $0.001 par value; 1,000 shares ||
authorized; 1 and 0 shares issued and outstanding, ||
respectively - || -
Paid-in capital 134,452 || -
Accumulated deficit (13,799) || -
Members' equity - || 169,149
--------- || --------
Total equity 120,682 || 169,149
--------- || --------
Commitments and contingencies ||
Total liabilities and equity $ 679,518 || $202,144
========= || ========
|
See accompanying notes to financial statements.
barnesandnoble.com inc. and subsidiary || barnesandnoble.com llc and its predecessor
-------------------------------------- || ------------------------------------------
(Consolidated) ||
Pro forma ||
year ended May 25, 1999 || January 1, Year Ended December 31,
December 31, to December 31, || 1999 to ---------------------------------
1999 (1)(2) 1999 (3) || May 24, 1999 (4) 1998 (4) 1997 (4)
----------- ----------- || ---------------- --------------- --------------
Net sales $ 202,567 $ 148,263 || $ 54,304 $ 61,834 $ 11,949
||
Cost of sales 159,937 117,850 || 42,087 47,569 10,117
--------- --------- || -------- --------- --------
||
Gross Profit 42,630 30,413 || 12,217 14,265 1,832
--------- --------- || -------- --------- --------
||
Operating expenses: ||
Marketing and sales 111,553 79,257 || 32,296 70,423 8,855
Technology and web site ||
development 21,006 15,058 || 5,948 8,532 3,256
General and administrative 32,714 22,765 || 9,949 19,166 3,273
--------- --------- || -------- --------- --------
Total operating expenses 165,273 117,080 || 48,193 98,121 15,384
--------- --------- || -------- --------- --------
||
||
Loss from operations (122,643) (86,667) || (35,976) (83,856) (13,552)
Interest income, net 20,238 18,615 || 1,623 708 -
--------- --------- || -------- --------- --------
Loss before minority interest (102,405) (68,052) || (34,353) (83,148) (13,552)
||
Minority interest 54,253 54,253 || - - -
--------- --------- || -------- --------- --------
Net loss-historical (48,152) $ (13,799) || (34,353) (83,148) (13,552)
========= ||
||
Pro forma adjustment to ||
minority interest (5) 27,534 || 27,534 66,518 10,842
--------- || -------- --------- --------
Net loss-pro forma (2) $ (20,618) || $ (6,819) $ (16,630) $ (2,710)
========= || ======== ========= ========
||
Basic and diluted net loss per ||
common share (6) $ (0.72) $ (0.48) || $ (0.24) $ (0.58) $ (0.09)
Basic and diluted weighted average ||
common shares outstanding (6) 28,778 28,797 || 28,750 28,750 28,750
||
Basic and diluted loss before ||
minority interest per share (6)(7) $ (0.72) $ (0.48) || $ (0.24) $ (0.58) $ (0.09)
Basic and diluted weighted average ||
shares outstanding, if ||
converted (6) (7) 143,939 144,064 || 143,750 143,750 143,750
|
(1) Include the historical results of barnesandnoble.com llc for the entire year
and the historical results of the Company from May 25, 1999.
barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
(2) The pro forma amounts do not give effect to the assumed charges to operating
results which might have resulted had the Company's Initial Public Offering
occurred at the beginning of the respective periods.
(3) barnesandnoble.com inc. was incorporated on March 10, 1999, but had no
activity until the Company's initial public offering on May 25, 1999.
(4) Includes the historical results of barnesandnoble.com llc and its
predecessor.
(5) Represents the approximate 80% interest of Barnes & Noble and Bertelsmann in
the net loss of barnesandnoble.com llc for periods prior to May 25, 1999.
(6) For periods prior to May 25, 1999, reflects the pro forma effect of the
shares issued in the Company's Initial Public Offering assuming they were
issued at the beginning of 1997.
(7) Includes the conversion of membership units in barnesandnoble.com llc held
by Barnes & Noble and Bertelsmann into outstanding shares of the
Company.
See accompanying notes to financial statements.
Common
Stock Paid in Accumulated
Series A Capital Deficit
-------- ------- -------
Balance, May 24, 1999 $ - $ - $ -
Issuance of common stock in IPO 29 484,353 -
Exercise of stock options - 2,452 -
Capital contribution from
Bertelsmann - 50,000 -
Acquisition of
barnesandnoble.com llc - 134,796 -
Reclassification to minority
interest (1) - (537,149) -
Net loss, May 25, 1999 -
December 31, 1999, net of
$54,253 minority interest - - (13,799)
-------------------------------------------
Balance, December 31, 1999 $ 29 $ 134,452 $ (13,799)
===========================================
|
(1) To adjust minority interest based on net book equity of barnesandnoble.com llc (after contribution of the proceeds from the Company's initial public offering) multiplied by the ownership percentage in that entity of Barnes & Noble and Bertelsmann.
See accompanying notes to financial statements
Accumulated Capital Members'
Loss Contributions Equity
----------- ------------- --------
Balance, January 1, 1997 $ - $ - $ -
Capital contributions from
Barnes & Noble, Inc., net - 32,765 32,765
Net loss, year ended
December 31, 1997 (13,552) - (13,552)
---------------------------------------
Balance, December 31, 1997 (13,552) 32,765 19,213
Capital contribution from
Barnes & Noble, Inc., net - 83,084 83,084
Capital contribution from
Bertelsmann - 150,000 150,000
Net loss, year ended
December 31, 1998 (83,148) - (83,148)
---------------------------------------
Balance, December 31, 1998 (96,700) 265,849 169,149
Net loss, January 1, 1999-
May 24, 1999 (34,353) - (34,353)
---------------------------------------
Balance, May 24, 1999 $(131,053) $265,849 $ 134,796
=======================================
|
See accompanying notes to financial statements
barnesandnoble.com inc. ||
and subsidiary || barnesandnoble.com llc and its predecessor
------------------------------- || ------------------------------------------
(Consolidated) ||
Pro forma || Year
Year Ended May 25, 1999 || January 1, Ended December 31,
December 31, to December 31, || 1999 to ------------------------
1999 1999 (1) || May 24, 1999 1998 1997
-------------- -------------- || ------------ ---------- ----------
Cash flows from operating activities: ||
Net loss $ (48,152) $ (13,799) || $(34,353) $ (83,148) $ (13,552)
Adjustments to reconcile net loss to net ||
cash flows from operating activities: ||
Depreciation and amortization 13,848 9,336 || 4,512 6,823 2,280
Loss on sale of fixed assets - - || - 205 -
Increase in receivables, net (13,133) (11,894) || (1,239) (1,957) (430)
Increase in merchandise inventories (2,307) (1,747) || (560) (964) (615)
Decrease (increase) in prepaid expenses ||
and other current assets 2,609 2,284 || 325 (1,525) (9,245)
Increase (decrease) in accounts payable 19,204 16,683 || 2,521 (3,857) 3,857
Increase (decrease) in due to affiliate 3,918 8,878 || (4,960) 13,191 -
Increase (decrease) in accrued liabilities 19,823 27,855 || (8,032) 16,547 3,257
Minority interest in loss (54,253) (54,253) || - - -
--------- --------- || -------- --------- ---------
Net cash flows used in operating activities (58,443) (16,657) || (41,786) (54,685) (14,448)
--------- --------- || -------- --------- ---------
||
Cash flows from investing activities: ||
Purchases of fixed assets (71,889) (63,973) || (7,916) (31,035) (18,233)
Purchases of marketable securities (302,496) (302,496) || - - -
Decrease (increase) in restricted cash 50,393 - || 50,393 (50,393) -
Proceeds from sale of fixed assets - - || - 200 -
Net assets of barnesandnoble.com llc at ||
date of acquisition - 97,729 || (97,729) - -
(Increase) decrease in other non-current ||
assets (3,936) (4,034) || 98 (231) (84)
--------- --------- || -------- --------- ---------
Net cash flows used in investing activities (327,928) (272,774) || (55,154) (81,459) (18,317)
--------- --------- || -------- --------- ---------
||
Cash flows from financing activities: ||
Proceeds from initial public offering 484,382 484,382 || - - -
Capital contributions from members 50,000 50,000 || - 233,084 32,765
Proceeds from exercise of stock options 2,452 2,452 || - - -
--------- --------- || -------- --------- ---------
Net cash flows from financing activities 536,834 536,834 || - 233,084 32,765
--------- --------- || -------- --------- ---------
||
Net change in cash and cash equivalents 150,463 247,403 || (96,940) 96,940 -
Cash and cash equivalents at beginning ||
of period 96,940 - || 96,940 - -
--------- --------- || -------- --------- ---------
Cash and cash equivalents at end of period $ 247,403 $ 247,403 || $ - $ 96,940 $ -
========= ========= || ======= ========= ========
|
(1) barnesandnoble.com inc. was incorporated on March 10, 1999, but had no activity until the Company's initial public offering on May 25, 1999.
See accompanying notes to financial statements.
1. Business
barnesandnoble.com inc. (the "Company") is a holding company whose sole asset is a 20.3% equity interest in barnesandnoble.com llc ("B&N.com"), an online retailer of knowledge, information, education and entertainment related products, and whose sole business is currently acting as sole manager of B&N.com. As sole manager of B&N.com, the Company controls all of the affairs of B&N.com and as a result, B&N.com is consolidated with the Company. Barnes & Noble, Inc. ("Barnes & Noble") and Bertelsmann A.G. ("Bertelsmann") each beneficially own a 39.85% equity interest (equivalent to an aggregate of 115,000 Membershiup Units) in B&N.com. Each Membership Unit held by these companies is convertible into one share of the Company's Class A Common Stock. As reflected in the statements of operations, the loss before minority interest represents the total loss for the period and the net loss represents the portion of the loss attributable to the Company subsequent to the commencement of its activities.
Prior to October 31, 1998, the business of B&N.com was conducted by a wholly owned subsidiary of Barnes & Noble, which subsidiary was originally incorporated on January 14, 1997 in the State of Delaware under the name Barnes & Noble Online, Inc. ("B&N Online"). Effective October 31, 1998, Barnes & Noble and Bertelsmann completed a transaction that established B&N.com as the owner and operator of the business (the "Formation Transaction"). In connection with the Formation Transaction, B&N Online contributed substantially all of its assets and liabilities to B&N.com at their historical cost and Bertelsmann contributed $150 million and contributed an additional $50 million in cash prior to the effective date of the public offering. B&N.com accounted for the investment made by Bertelsmann in B&N.com as a capital contribution. The completion of the foregoing transactions resulted in Barnes & Noble and Bertelsmann each having a 50% beneficial interest in B&N.com, and B&N Online changing its name to B&N Sub Corp.
On March 10, 1999, Barnes & Noble caused B&N Sub Corp. to establish the Company. On May 24, 1999, B&N Sub Corp. transferred its ownership of the Company to B&N.com Holding Corp ("BN.com Holding Corp."). This resulted in Barnes & Noble owning 100% of BN.com Holding Corp. which owns 100% of the Company. Subsequent to that, the Company filed an amended charter which, among other things, reclassified its outstanding common stock to one share of Class B Common Stock. The Company then issued a share of Class C Common Stock constituting a 50% interest in the Company to a wholly owned subsidiary of Bertelsmann. The completion of the foregoing transactions resulted in Barnes & Noble and Bertelsmann each having a 50% beneficial interest in the Company through their ownership of all of the outstanding Class B and Class C Common Stock.
On May 25, 1999 the Company sold 28,750 shares of Class A Common Stock in a public offering (the "Offering"). The Company used the $484,382 in proceeds of the Offering to acquire its interest in B&N.com. The acquisition of the ownership interest in B&N.com was treated as a reorganization of entities under common control in a manner similar to a pooling of interests, analogous to the type of transaction described in Emerging Issues Task Force Issue 97-2 ("EITF 97-2"). Accordingly, the net assets of B&N.com contributed by Barnes & Noble were reported in the consolidated financial statements at Barnes & Noble's historical cost, and the minority interests in B&N.com were based on the net book equity of B&N.com (after contribution of the proceeds from the Offering) multiplied by the ownership percentages of Barnes & Noble and Bertelsmann.
The financial information of B&N.com and the Company's business which was previously conducted by a wholly-owned subsidiary of Barnes & Noble is included in the accompanying financial statements as predecessor information.
References to 1999 are to the Company as of the year end and to the Company and its predecessor to the full year. References prior to 1999 are for B&N.com and its predecessor. Operating information included in these notes for 1999 is presented on a full year basis because, as a result of the reorganization described above, it is not considered meaningful to present separate data for the periods before and after May 25, 1999.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates.
Restricted Cash
The amount classified as restricted cash as of December 31, 1998 in the accompanying financial statements represents the portion of the Bertelsmann investment remaining in a reserve account, including accumulated interest. In connection with the Company's Offering, Bertelsmann contributed $50,000, at which time, the restricted cash became available to B&N.com.
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market as determined on a first-in, first-out basis. B&N.com purchases a substantial majority of its products from two major vendors, Ingram Book Group ("Ingram") and Barnes & Noble. Ingram accounted for 22.5%, 25.9% and 50.1% of B&N.com's inventory purchases during the years ended December 31, 1999, 1998 and 1997, respectively. Barnes & Noble accounted for 58.9%, 60.3% and 38.5% of B&N.com's inventory purchases during the years ended December 31, 1999, 1998 and 1997, respectively. Barnes & Noble charges B&N.com the cost associated with such purchases, plus incremental overhead incurred by Barnes & Noble in connection with providing such inventory.
Fixed Assets
Fixed assets are carried at cost, less accumulated depreciation and amortization. Computers and equipment are depreciated using the straight-line method over their estimated useful lives of 3 to 10 years. Leasehold improvements are capitalized and amortized over the shorter of their estimated useful lives or the terms of the respective leases. In March 1998, the Accounting Standards Executive Committee issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires all costs related to the development of internal use software other than those
incurred during the application development stage to be expensed as incurred. Costs incurred during the application development stage are required to be capitalized and amortized over the estimated useful life of the software. Accordingly, direct internal and external costs associated with the development of the features, content and functionality of B&N.com's online store, transaction-processing systems, telecommunications infrastructure and network operations, incurred during the application development stage, have been capitalized, and are amortized over the estimated useful lives of three years. B&N.com has evaluated all software development projects that were in progress as of December 31, 1999 to determine whether or not it was no longer probable that any of the projects would be placed in service. Based on that evaluation, B&N.com expects to complete and put in service all software development projects that existed as of year end.
Impairment of Long-Lived Assets
B&N.com reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121"). Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to undiscounted pre-tax future net cash flows expected to be generated by that asset. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. To date no such impairment has been recognized.
Fair Value of Financial Instruments
The carrying amounts for the Company's cash and cash equivalents, accounts payable and other liabilities approximate fair value. The fair value for marketable securities is based on quoted market prices which approximate cost.
Net Sales
Sales of B&N.com's products are recognized, net of estimated returns, at the time the products are shipped to customers. International net sales were $12,817, $6,212 and $1,200 for the years ended December 31, 1999, 1998 and 1997, respectively.
Advertising Costs
B&N.com expenses the costs of advertising for magazines, television, radio and other media the first time the advertising takes place. Advertising expense was $41,845, $32,435 and $3,100 for the years ended December 31, 1999, 1998 and 1997, respectively.
Technology and Web site Development
Development expenses included in the accompanying statements of operations consist principally of indirect development costs and all costs associated with the maintenance of the features, content and functionality of B&N.com's online stores, transaction-processing systems, telecommunications infrastructure and network operations.
Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options. Accordingly, diluted net loss per share for the period May 25, 1999 to December 31, 1999 excludes the effect of outstanding stock options.
Net loss per share for the period May 25, 1999 to December 31, 1999 is also presented on an "if-converted" basis which assumes the outstanding Membership Units of B&N.com were converted into 115,000 shares of the Company and the minority interest in the net loss was eliminated.
Income Taxes
Through October 31, 1998, B&N.com, as a wholly owned subsidiary, was included in Barnes & Noble's U.S. consolidated income tax returns. As such, any benefit for income taxes due to losses generated by B&N.com were realized and recognized by Barnes & Noble. Effective November 1, 1998, the operations of the entity were contributed to a limited liability company, and as such is not considered a taxable entity for Federal income tax purposes and most state income tax purposes. Any taxable income or losses recorded subsequent to the formation of the limited liability company are reported by the members on their respective income tax returns. As a result, no tax benefits have been allocated to B&N.com for its losses for all periods presented.
Concentration of Credit Risk
B&N.com is subject to concentrations of credit risk from its holdings of cash, cash equivalents and short term investments. B&N.com's credit risk is managed by investing its cash in high-quality money market instruments and securities of the U.S. government and its agencies, foreign governments and high-quality corporate issuers. In addition, B&N.com's accounts receivable are not significant and are due from domestic banks. B&N.com believes it had no unusual concentrations of credit risk at December 31, 1999 and 1998.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal quarters beginning after June 15, 2000. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are to be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company does not expect that the adoption of SFAS 133 will have a material impact on its consolidated financial statements because B&N.com does not currently hold any derivative instruments.
In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB No. 101"), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB No. 101 did not impact the Company's revenue recognition policies.
3. Investments
B&N.com invests certain of its excess cash in debt instruments of the U.S. Government and its agencies, and of high quality corporate issuers. All highly liquid instruments with an original maturity of three months or less are considered cash equivalents; those with original maturities greater than three months are considered marketable securities. B&N.com classified investments in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities".
At December 31, 1999, short-term investments in marketable securities consist primarily of U.S. Treasury Securities, U.S. government agency securities and investments in high quality corporate issuers and were classified as held-to-maturity. Unrealized holding gains and losses at December 31, 1999 were not significant.
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
December 31,
1999 1998
--------- ---------
AOL marketing advances .....................$ 2,780 $ 1,400
Other marketing advances ................... 2,899 7,905
Other current assets ....................... 2,482 1,465
--------- ---------
$ 8,161 $ 10,770
========= =========
|
On November 1, 1997, B&N.com and America Online ("AOL") formed a strategic alliance pursuant to an Interactive Marketing Agreement (the "AOL Agreement") which provides for B&N.com to be featured as the exclusive online book retailer within AOL's commercial service which as of December 31, 1999 has approximately 20 million subscribers, excluding AOL.com. The AOL Agreement also gives B&N.com an extensive package of placements and visibility throughout the AOL service. In consideration of the marketing, promotion, advertising and other services AOL will provide under the AOL Agreement, B&N.com will pay AOL a total of $40,000 over the term of the AOL Agreement, of which $18,000 has been paid as of December 1999, and $11,000 will be paid in each of the years 2000 and 2001. The AOL Agreement also contains revenue sharing provisions for sales above specified amounts. B&N.com amortizes the payments associated with the AOL Agreement based on impressions over the subsequent 12 months.
5. Fixed Assets
Fixed assets, at cost, consist of the following:
December 31,
1999 1998
---------- ----------
Computers and equipment ....................$ 56,363 $ 22,319
Leasehold improvements ..................... 10,699 8,418
Software ................................... 34,236 16,938
Construction in Progress ................... 18,263 -
---------- ----------
119,561 47,675
Less accumulated depreciation .............. 21,707 7,905
---------- ----------
Fixed assets, net .................$ 97,854 $ 39,770
========== ==========
|
Total capital expenditures to complete the construction in progress are expected to be approximately $25,000.
6. Accrued Liabilities
Accrued liabilities consist of the following:
December 31,
1999 1998
--------- ---------
Accrued advertising ....................$ 12,990 $ 10,727
Accrued fixed assets ................... 12,644 3,156
Accrued compensation ................... 3,470 2,509
Other .................................. 10,523 3,412
--------- ---------
$ 39,627 $ 19,804
========= =========
|
7. Stockholders' Equity
There are three classes of common stock authorized: Class A Common Stock ("Class A Common"), Class B Common Stock ("Class B Common") and Class C Common Stock ("Class C Common"). The holders of Class A Common generally have rights identical to holders of Class B Common and Class C Common (collectively "High Vote Stock"), except that each holder of Class A Common is entitled to one vote per share and each holder of High Vote Stock is entitled to the number of votes per share equal to: (i) ten, multiplied by the sum of (a) the aggregate number of High Vote Stock owned by such holder and (b) the aggregate number of Membership Units owned by such holder; divided by (ii) the number of shares of High Vote Stock owned by such holder. Pursuant to the Company's Amended and Restated Certificate of Incorporation ( the "Amended Charter"), each of the holders of the High Vote Stock has the right to directly elect three of the Company's directors. Otherwise, holders of Class A Common and High Vote Stock (collectively "Common Stock") generally will vote together as a single class on all matters (including the election of the directors who are not elected directly by the holders of the High Vote Stock) presented to the stockholders for their vote or approval except as otherwise required by applicable Delaware law.
The Board of Directors is authorized to issue up to an aggregate of 50 million shares of Preferred Stock. The rights and characteristics of the Preferred Stock are at the discretion of the Board of Directors. There is no Preferred Stock outstanding.
8. Lease Commitments
B&N.com currently leases warehouse facilities, office space and equipment under noncancelable operating leases. Rental expense under operating lease agreements was $2,265, $1,317 and $200 for the years ended December 31, 1999, 1998 and 1997, respectively.
Future minimum lease payments under noncancelable operating leases as of December 31, 1999 are:
Future
Year ending Minimum Lease
December 31, Payments
-----------------------------------------------------
2000...................................$ 6,331
2001................................... 8,224
2002................................... 8,292
2003................................... 7,872
2004................................... 7,826
Thereafter............................. 70,923
--------------
$ 109,468
==============
|
9. Employees' Retirement and Defined Contribution Plans
B&N.com maintains a noncontributory defined benefit pension plan (the "Pension Plan") for the benefit of substantially all of its employees who meet certain eligibility requirements, primarily age and length of service. Benefits provided by the Pension Plan are based on years of credited service and covered earnings for Social Security benefits. B&N.com's contributions to the Pension Plan are generally in amounts determined by independent consulting actuaries. The Pension Plan was separated from the Barnes & Noble Pension Plan as of October 31, 1998. Pension expense allocable to B&N.com for 1999 was $90 and for the last two months of 1998 was not material. Norwest Bank is the trustee for the Pension Plan and all assets are managed by Fidelity Investments.
Actuarial assumptions used in determining the funded status of the Pension Plan are as follows:
December 31,
1999 1998
-------- --------
Discount rate (beginning of year).................... 7.25% 7.25%
Discount rate (end of year).......................... 7.75% 7.25%
Expected long-term rate of return on plan assets..... 9.50% 9.50%
Assumed rate of compensation increase................ 4.75% 4.25%
|
The following table sets forth the funded status of the Pension Plan and the pension liability recognized for the Pension Plan in the accompanying balance sheets:
December 31,
1999 1998
-------- --------
Actuarial present value of benefit obligation:
Vested benefits .................................$ (158) $ (160)
Non-vested benefits ............................. (73) (115)
-------- --------
Accumulated benefit obligation ...................... (231) (275)
Effect of projected future compensation increases ... (271) (363)
-------- --------
Projected benefit obligation ........................ (502) (638)
Plan assets at market value ......................... 430 429
-------- --------
Projected benefit obligation in excess of
plan assets ...................................... (72) (209)
Unrecognized net loss ............................... (6) -
Unrecognized net obligation remaining ............... - -
Unrecognized prior service cost ..................... (12) 209
-------- --------
Pension liability ...............................$ (90) $ -
======== ========
|
B&N.com, through Barnes & Noble, also sponsors a defined contribution plan (the "Savings Plan") for the benefit of substantially all of its employees who meet certain eligibility requirements, primarily age and length of service. The Savings Plan allows employees to invest up to 15% of their current gross cash compensation on a pre-tax or post-tax basis, at their option. Participants have investment options of various mutual funds. B&N.com's contributions to the Savings Plan are generally in amounts based upon a certain percentage of the employees' pre-tax contributions and are in Barnes & Noble stock. B&N.com charged $100 to employee benefit expenses for each of the years ended December 31,1999 and 1998.
10. Stock Incentive Plan
As of December 31, 1998, B&N.com had one incentive plan (the "1998 Plan") under which stock options were granted to key officers, employees, consultants, advisors, and managers of B&N.com and its subsidiaries and affiliates. The Compensation Committee of the Board of Managers was responsible for the administration of the 1998 Plan. Generally, options were granted at fair market value, began vesting one year after grant in 25% increments, were to expire ten years from issuance and were conditioned upon continual employment during the vesting period. Options granted under the 1998 Plan were replaced with options to purchase shares of the Class A Common Stock of the Company under the Company's 1999 Incentive Plan (the "1999 Plan"). The 1999 Plan is substantially the same as the 1998 Plan, and is administered by the Compensation Committee of the Company's Board of Directors. The 1999 Plan allows the Company to grant options to purchase 25,500 shares of the Company's Class A Common Stock.
A summary of the status of stock options as of December 31, 1999 issued under the 1998 Plan is presented below:
Outstanding Options
-----------------------------
Weighted Average
Number of Exercise Price
Shares Per Share
--------- ----------------
Balance December 31, 1998 ............. 18,155 $ 3.94
Options granted .............. 5,903 15.20
Options canceled ............. (3,870) 5.87
Options exercised ............ (597) 4.11
--------- --------
Balance December 31, 1999 ............. 19,591 $ 6.95
========= ========
|
During 1998 option grants of 5,060 and 4,140 were made to Leonard Riggio and Jonathan Bulkeley, respectively.
The following table summarizes information as of December 31, 1999 concerning outstanding and exercisable options:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Remaining Exercise Exercise
Price Number Contractual Price Number Price
Per Share Outstanding Life (in years) Per Share Exercisable Per Share
--------- ----------- --------------- --------- ----------- ---------
3.48-4.06 12,639 8.63 $ 3.90 4,869 $ 3.90
4.35-6.09 2,544 8.73 4.56 777 5.03
15.75-16.88 1,999 9.60 15.82 0 0
17.69-18.00 2,017 9.43 17.98 225 18.00
18.38-19.31 392 9.81 18.61 0 0
-------- ------- -------- ------- --------
19,591 8.85 $ 6.95 5,871 $ 4.59
======== ======= ======== ======= ========
|
During the year ended December 31, 1999, all option grants were granted at fair value and as a result there was no compensation expense recorded for options granted.
Had the Company determined the compensation cost of employee stock options based on the fair value of the stock option grant dates in accordance with the Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's pro forma loss before minority interest would have been increased to the pro forma amounts below:
Year Ended
December 31,
------------
1999 1998
------------ ------------
Pro forma loss before minority interest:
As reported $ (102,405) $ (83,148)
Pro forma SFAS 123 (107,336) (84,800)
Basic and diluted loss per share before
minority interest:
As reported (0.72) (0.58)
Pro forma SFAS 123 (0.75) (0.59)
|
The fair value for each option granted was estimated at the date of grant using the Black-Scholes option pricing model, one of the allowable valuation methods under SFAS 123, with the following assumptions:
Year Ended
December 31,
------------
1999 1998
------------- -----------
Average risk free interest rates 5.25% 5.25%
Average expected life (in years) 5.00 5.00
Volatility 57.50% N/A
|
The weighted-average fair value of the options granted during the years 1999 and 1998 was estimated to be $8.34 and $0.91, respectively, for options granted at fair market value.
11. Litigation
B&N.com is involved in various routine legal proceedings incidental to the conduct of its business. The Company does not believe that any of these legal proceedings will have a material adverse effect on the financial condition, results of operations or cash flows of B&N.com.
In August 1998, The Intimate Bookshop, Inc. and its owner, Wallace Kuralt, filed a lawsuit in the United States District Court for the Southern District of New York against a predecessor of the Company, Barnes & Noble, Borders Group, Inc. and others, alleging violation of the Robinson-Patman Act and other federal law, New York statutes governing trade practices and common law. In March 2000, a Second Amended Complaint was served on the Company and other defendants alleging a single cause of action for violations of the Robinson-Patman Act. The Second Amended Complaint claims that the Intimate Bookshop, Inc. has suffered damages of $10,000 or more and requests treble damages, costs, attorneys' fees and interest, as well as declaratory and injunctive relief prohibiting the defendants from violating the Robinson-Patman Act. The Company and B&N.com intend to vigorously defend this action.
In March 1998, the American Booksellers Association and 26 independent bookstores filed a lawsuit in the United States District Court for the Northern District of California against Barnes & Noble and Borders Group Inc. alleging violations of the Robinson-Patman Act, the California Unfair Trade Practice Act and the California Unfair Competition Law. The Complaint seeks injunctive and declaratory relief; treble damages on behalf of each of the bookstore plaintiffs, and, with respect to the California bookstore plaintiffs, any other damages permitted by California law; disgorgement of money, property and gains wrongfully obtained in connection with the purchase of books for resale, or offered for resale, in California from March 18, 1994 until the action is completed and pre-judgment interest on any amounts awarded in the action, as well as attorney fees and costs. In October 1999, the Company and B&N.com were added as defendants in the action. The Company and B&N.com intend to vigorously defend this action.
On October 21, 1999, Amazon.com, Inc. ("Amazon") filed a lawsuit against the Company and B&N.com in the United States District Court for the Western District of Washington alleging that B&N.com's use of its Express Lane one-click ordering system infringes upon Amazon's patent for its 1-Click ordering system. The complaint seeks injunctive and declaratory relief and treble damages, as well as attorneys fees and costs. The Company and B&N.com have filed a counterclaim for a declaratory judgment that the Amazon patent at issue is invalid. On December 1, 1999, the Court granted Amazon's motion for a preliminary injunction. As a result, consistent with the Court's order, B&N.com replaced its Express Lane feature with an Express Checkout feature requiring two clicks. The Company and B&N.com intend to vigorously defend this action.
12. Related Party Transactions
Through its distribution facilities, Barnes & Noble accounted for approximately 58.9%, 60.3% and 38.5% or $64,112, $26,929 and $3,900, of B&N.com's purchases during the years ended December 31, 1999, 1998 and 1997, respectively. B&N.com has entered into an agreement (the "Supply Agreement") with Barnes & Noble whereby Barnes & Noble charges B&N.com the costs associated with such purchases plus incremental overhead incurred by Barnes & Noble in connection with providing such inventory. As of December 31, 1999 and 1998, $18,495 and $13,250, respectively, was payable to Barnes & Noble in connection with such purchases. The Supply Agreement is subject to certain termination provisions.
B&N.com has entered into agreements (the "Services Agreements") whereby B&N.com receives various services from Barnes & Noble and its subsidiaries, including, among other things, services for payroll processing, benefits administration, insurance (property and casualty, medical, dental and life), tax and traffic. In accordance with the terms of the Services Agreements, B&N.com has paid, and expects to continue to pay, fees to Barnes & Noble and its subsidiaries in an amount equal to the direct costs plus incremental expenses associated with providing such services. B&N.com paid $1,672, $870 and $200 for such services during the years ended December 31, 1999, 1998 and 1997, respectively. The Services Agreements are subject to certain termination provisions.
B&N.com subleases from Barnes & Noble approximately one-third of a 300,000 square foot warehouse facility located in New Jersey. B&N.com paid Barnes & Noble $473, $271 and $0 for such subleased space during the years ended December 31, 1999, 1998 and 1997, respectively.
Since 1998, B&N.com has used the music distributor AEC One Stop Group, Inc. ("AEC'), as its primary supplier, to fulfill its orders for music and to provide a music database. Subsequent to an agreement between AEC and B&N.com, AEC's parent corporation was acquired by an investor group in which Leonard Riggio, the Company's Chairman, was a significant minority investor. B&N.com paid AEC $2,908 in connection with this agreement during the year ended December 31, 1999. At December 31, 1999, $4,508 was payable to AEC in connection with this agreement.
B&N.com has entered into an agreement (the "License Agreement") with Barnes & Noble College Bookstores, Inc., of which the principal stockholder is also a principal stockholder/director/executive officer of Barnes & Noble and the Company. Pursuant to the License Agreement, B&N.com has been granted an exclusive license (the "License") to use the Barnes & Noble name and trademark (excluding sales of college textbooks). The License Agreement is subject to certain limitation provisions.
B&N.com has entered into an agreement (the "Database and Software License Agreement") whereby B&N.com licenses from Barnes & Noble, the right to use Barnes & Noble's title database, inventory sourcing and special order software. The Database and Software License Agreement is renewable and is subject to certain termination provisions.
B&N.com has entered into a Trademark License Agreement with Bertelsmann Online ("BOL") (the "BOL Trademark License Agreement"), pursuant to which B&N.com was granted a non-exclusive license to use BOL's name and trademark in its operations and to sublicense the BOL name in accordance with the terms of the license as the Class C Directors, in their sole discretion, see fit. The License remains effective until B&N.com either defaults or becomes subject to certain bankruptcy events.
B&N.com has entered into Technology Sharing and License Agreements with BOL ("the Technology Sharing License Agreements"), the subsidiary through which Bertelsmann conducts its Internet business, pursuant to which BOL granted B&N.com a license to view, access and use BOL's computer technology and systems, and B&N.com granted BOL a license to view, access and use B&N.com's computer technology and systems. These agreements remain effective until (i) the date both parties mutually agree to terminate, or (ii) from and after the date either Barnes & Noble or Bertelsmann cease having an equity interest of ten percent (10%) or more in B&N.com. Following termination, each party may continue to use in perpetuity any technology it obtained from the other prior to such termination.
B&N.com believes that the transactions discussed above, as well as the terms of any future transactions and agreements (including renewals of any existing agreements) between B&N.com and its affiliates, are and will be at least as favorable to B&N.com as could be obtained from unaffiliated parties. The Board of Directors must approve in advance any proposed transaction or agreement and will utilize such procedures in evaluating the terms and provisions of such proposed transaction or agreement as are appropriate in light of the fiduciary duties of directors under Delaware law.
13. Subsequent Events
In January 2000, B&N.com acquired approximately 32% of Enews.com, the largest retailer of magazine subscriptions on the Internet, for $26,428 in cash and stock valued at $12,857, to expand its presence in the growing on-line magazine subscription market.
On February 29, 2000, the Company repriced 5,994 of 16,086 outstanding options which were originally granted at an average exercise price of $16.15. The new exercise price for the options is $8.00, the closing market price of the Company's stock as of February 28, 2000. Based on current accounting literature, the Company expects to account for these repriced options as variable options in the future.
In March 2000, B&N.com paid Jonathan Bulkeley $10,940 for the surrender of one million stock options which was charged to expense at that time.
F-20
THIS AMENDMENT NO. 1 (this "Amendment") amends the Second Amended and Restated Limited Liability Company Agreement (the "Restated Agreement") of barnesandnoble.com llc, a Delaware limited liability company (the "Company"), made and entered into, effective as of May 28, 1999, by and among Barnes & Noble, Inc., a corporation organized and existing under the laws of Delaware, with its principal place of business at 122 Fifth Avenue, New York, New York 10011 ("BN"), B&N.com Holding Corp., a corporation organized and existing under the laws of Delaware, with its principal place of business at 122 Fifth Avenue, New York, New York 10011 ("BN Holding"), barnesandnoble.com inc., a corporation organized and existing under the laws of Delaware, with its principal place of business at 76 Ninth Avenue, New York, New York 10011 (the "Public Corp."), Bertelsmann AG, an Aktiengesellschaft organized and existing under the laws of Germany, with its principal place of business at Carl-Bertelsmann-Strasse 270, 33311 Gutersloh, Germany ("BAG"), and BOL.US Online, Inc., a corporation organized and existing under the laws of Delaware, with its principal place of business at 1540 Broadway, New York, New York 10036 ("USO").
WHEREAS, the Company was formed as a limited liability company pursuant to the Delaware Limited Liability Company Law (6 Del. C.ss. 18-101, et seq.) by the filing of a Certificate of Formation with the Office of the Secretary of State of the State of Delaware on October 27, 1998;
WHEREAS, the parties entered into the Restated Agreement to reflect the addition of the Public Corp. as a Member and the sole Manager of the LLC pursuant to the terms and conditions of the Restated Agreement; and
WHEREAS, the parties hereto desire to amend the Restated Agreement, effective as of May 28, 1999, to accurately reflect their understanding with respect to Section 5.4(c) and Schedule I of the Restated Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Amendment to Section 5.4(c). Section 5.4(c) of the Restated Agreement is hereby amended and restated in its entirety to read as follows:
"When the Gross Asset Value of a Company asset differs from its basis for federal or other income tax purposes, solely for purposes of the relevant tax and not for purposes of computing Capital Account balances, income, gain, loss, deduction and credit with respect to such asset shall be allocated among the Members (i) with respect to any contributions of assets to the Company on or after May 28, 1999, under the traditional method allowed pursuant to Treasury Regulations Section 1.704-3(b), unless otherwise determined by BN Holding and USO, and (ii) with respect to all contributions of assets to the Company before May 28, 1999, under the remedial allocation method under Treasury Regulation Section 1.704-3(d). The members
Amendment to Schedule I. Schedule I of the Restated Agreement is hereby amended and replaced in its entirety by Schedule I attached hereto.
References. Any references in the Restated Agreement to "the Agreement", "this Agreement", "hereof", "herein", "hereunder" or terms of similar import shall mean the Restated Agreement as amended by this Amendment.
No Other Changes. Except as amended hereby, all other terms and provisions of the Restated Agreement remain unchanged and in full force and effect.
Counterparts. This Amendment may be executed in counterparts which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment this 14th day of January, 2000, effective and effectuating their agreement as of May 28, 1999.
By: /s/ Thomas Middelhoff -------------------------- Name: Thomas Middelhoff Title: Chief Executive Officer |
By: /s/ Robert Sorrentino -------------------------- Name: Robert Sorrentino Title: President |
By: /s/ Leonard Riggio -------------------------- Name: Leonard Riggio Title: Chairman B&N.com Holding Corp. |
By: /s/ Leonard Riggio -------------------------- Name: Leonard Riggio Title: Chairman |
barnesandnoble.com inc.
By: /s/ Leonard Riggio -------------------------- Name: Leonard Riggio Title: Chairman |
Member Membership Units Capital Account
------ ---------------- ---------------
barnesandnoble.com inc. 28,750,002 $ 517,500,000
Membership Units
B&N.com Holding Corp. 57,500,000 $1,035,000,000
Membership Units
BOL.US Online, Inc. 57,500,000 $1,035,000,000
Membership Units
|
Section Subject
1 Basic Lease Provisions
2 Demised Premises
3 Term
4 Base Rent
5 Security Deposit
6 Operating Expenses and Additional Rent
7 Use of Demised Premises
8 Insurance
9 Utilities
10 Maintenance and Repairs
11 Tenant's Personal Property; Indemnity
12 Tenant's Fixtures
13 Signs
14 Landlord's Lien
15 Governmental Regulations
16 Environmental Matters
17 Construction of Demised Premises
18 Tenant Alterations and Additions
19 Services by Landlord
20 Fire and Other Casualty
21 Condemnation
22 Tenant's Default
23 Landlord's Right of Entry
24 Lender's Rights
25 Estoppel Certificate
26 Landlord's Liability
27 Notices
28 Brokers
29 Assignment and Subleasing
30 Termination or Expiration
31 Intentionally Omitted
32 Late Payments
33 Rules and Regulations
34 Quiet Enjoyment
35 Miscellaneous
36 Special Stipulations
37 Intentionally omitted
38 Authority
39 No Offer Until Executed
Exhibit "A" Demised Premises
Exhibit "B" Preliminary Plans
Exhibit "C" Special Stipulations
Exhibit "D" Rules and Regulations
Exhibit "E-1" Tenant's Certificate of Authority
Exhibit "E-2" Landlord's Certificate of Authority
|
Exhibit "F" Sign Criteria Exhibit "G" Form SNDA |
THIS AMENDED AND RESTATED INDUSTRIAL LEASE AGREEMENT (the "Lease") is made to be effective as of the 27th day of July, 1999 (the "Lease Date") by and between Industrial Developments International (Tennessee), L.P., a Georgia limited partnership ("Landlord"), and BARNESANDNOBLE.COM LLC, a Delaware limited liability company ("Tenant") (the words "Landlord" and "Tenant" to include their respective legal representatives, successors and permitted assigns where the context requires or permits).
1. Basic Lease Provisions. The following constitute the basic
provisions of this Lease:
(a) Demised Premises Address: 6000 Freeport Avenue, Suite 101
Memphis, Tennessee 38141
(b) Demised Premises Square Footage: approximately 380,000 sq. ft.
(c) Building Square Footage: approximately 540,000 sq. ft.
(d) Annual Base Rent (based on $2.89/sq. foot, and subject to adjustment as provided in
Special Stipulation 9 on Exhibit C hereto):
Lease Year 1 $915,170.00
Lease Year 2 $1,098,204.00
Lease Year 3 $1,098,204.00
Lease Year 4 $1,098,204.00
Lease Year 5 $1,098,204.00
Lease Year 6 $183,034.00
(2 months)
(e) Monthly Base Rent Installments (based on $2.89/sq. foot, and subject to adjustment as
provided in Special Stipulation 9 on Exhibit C hereto):
Lease Year 1
(Months 1-2) $0.00
(Months 3-12) $91,517.00
Lease Year 2 $91,517.00
Lease Year 3 $91,517.00
Lease Year 4 $91,517.00
Lease Year 5 $91,517.00
Lease Year 6 $91,517.00
(2 months)
(f) Lease Commencement Date: The later to occur of (i) "substantial completion" of the
Improvements, or (ii) November 15, 1999
(g) Base Rent Commencement Date: Sixty (60) days after the Lease Commencement Date, but in
no event earlier than January 15, 2000
(h) Expiration Date: The day immediately preceding the fifth (5th) anniversary of the Base
Rent Commencement Date.
(i) Primary Term: 62 months
(j) Tenant's Operating Expense Percentage: 70.37%, subject to adjustment as provided in
Special Stipulation 9 on Exhibit C hereto.
(k) Security Deposit: See Section 5 hereof
|
(l) Permitted Use: Distribution and warehousing of books (including books on tape, disks and
CD-ROM), magazines, periodicals, computer software, compact discs and other forms of
recorded music and video tapes, together with consumer products reasonably related to any of
the foregoing, and office and administrative uses reasonably ancillary thereto
(collectively, the "Initial Use"), or for distribution and warehousing (but not
manufacturing) of any other retail consumer goods and products; provided, however, that
Tenant shall obtain Landlord's prior written consent to a use which is different from the
Initial Use and which involves the distribution, warehousing or other handling or use of
either (1) Hazardous Substances, or other substances or materials which would materially
increase the risk of Contamination (as defined in Section 16) or have a material adverse
affect on the value or marketability of the Building if a Contamination involving such other
substance or material occurs, or (2) noxious substances or materials which would likely
interfere with the business operations of any other tenant and occupant of the Project, or
violate any of the terms or conditions of this Lease, including, without limitation, Section
16 hereof.
(m) Address for notice:
Landlord: Industrial Developments International (Tennessee), L.P.
c/o Industrial Developments International, Inc.
3424 Peachtree Road, N.E., Suite 1500
Atlanta, Georgia 30326
Attn: Vice President - Operations
Tenant: barnesandnoble.com llc
76 Ninth Avenue
New York, New York 10011
Attn: William Duffy
(n) Address for rental payments:
Industrial Developments International (Tennessee), L.P.
c/o IDI Services Group, Inc.
P. O. Box 281464
Atlanta, Georgia 30384-1464
(o) Broker(s): Benchmark Associates, Inc. (Tenant's Broker)
Attn: Mr. David Haut
IDI Services Group, Inc. (Landlord's Broker)
Attn: Mr. Kurt Nelson
|
2. Demised Premises. For and in consideration of the rent hereinafter reserved and the mutual covenants hereinafter contained, Landlord does hereby lease and demise unto Tenant, and Tenant does hereby hire, lease and accept, from Landlord all upon the terms and conditions hereinafter set forth the following premises, referred to as the "Demised Premises", as outlined on Exhibit A attached hereto and incorporated herein: approximately 380,000 square feet of space, approximately 28,244 square feet of which is office space, having an address as set forth in Section 1(a), located within Building G (the "Building"), which contains a total of approximately 540,000 square feet and is located within Chickasaw Distribution Center (the "Project"), located in Shelby County, Tennessee. In addition, Tenant shall have the non-exclusive right to use and enjoy the Building Common Area (as hereinafter defined), as shown on Exhibit A hereto, subject to the terms and conditions of this Lease.
3. Term. To have and to hold the Demised Premises for a preliminary term (the "Preliminary Term") commencing on the Lease Date and ending on the Lease Commencement Date as set forth in Section 1(f), and a primary term (the "Primary Term") commencing on the Lease Commencement Date and terminating on the Expiration Date as set forth in Section 1(h), as the Lease Commencement Date and the Expiration Date may be revised pursuant to Section 17 (the Preliminary Term, the Primary Term, and any and all extensions thereof, herein referred to as the "Term"). The term "Lease Year" shall mean each one (1) year period of the Term (or portion thereof if the last Lease Year of the Term is less than one (1) full year) beginning on the Lease Commencement Date, and each anniversary thereof, and ending on the day immediately prior to the next succeeding anniversary of the Lease Commencement Date.
4. Base Rent. Tenant shall pay to Landlord at the address set forth in
Section 1(n), as base rent for the Demised Premises, commencing on the Base Rent
Commencement Date and continuing throughout the Term in lawful money of the
United States, the annual amount set forth in Section 1(d) payable in equal
monthly installments as set forth in Section 1(e) (the "Base Rent"), payable in
advance and, except as otherwise provided herein, without demand and without
abatement, reduction, set-off or deduction, on the first day of each calendar
month during the Term. If the Base Rent Commencement Date shall fall on a day
other than the first day of a calendar month, the Base Rent shall be apportioned
pro rata
5. Security Deposit. If at any time there shall remain one hundred
eighty (180) days left in the Term without any then available renewal option
hereunder having been validly exercised by Tenant, Tenant agrees that, prior to
such one hundred eightieth (180th) day, Tenant will have delivered to Landlord
an Irrevocable Letter of Credit in the amount of the Monthly Base Rent
Installment applicable for the month which includes such one hundred eightieth
(180th) day (the "Security Deposit"), in a form and from a financial institution
reasonably acceptable to Landlord, and that Tenant shall cause the same to be
maintained in full force and effect throughout the remainder of the Term, and
during the thirty (30) day period after the later of (a) the Expiration Date or
(b) the date that Tenant delivers possession of the Demised Premises to
Landlord, as security for the full and faithful performance by Tenant of each
and every term, covenant and condition of this Lease. The Security Deposit may
be commingled with Landlord's other funds or held by Landlord in a separate
interest bearing account, with interest paid to Landlord, as Landlord may elect.
In the event that Tenant is in default under this Lease beyond any applicable
grace or cure period, Landlord may retain the security Deposit for the payment
of any sum due Landlord or which Landlord may expend or be required to expend by
reason of Tenant's default or failure to perform; provided, however, that any
such retention by Landlord shall not be or be deemed to be an election of
remedies by Landlord or viewed as liquidated damages, it being expressly
understood and agreed that Landlord shall have the right to pursue any and all
other remedies available to it under the terms of this Lease or otherwise. In
the event all or any portion of the Security Deposit is so retained by Landlord,
Tenant shall, within five (5) days of demand therefor from Landlord, replenish
the Security Deposit to the full amount set forth in Section 1(k). In the event
that Tenant shall comply with all of the terms, covenants and conditions of this
Lease, the security deposit shall be returned to Tenant within thirty (30) days
after the later of (a) the Expiration Date or (b) the date that Tenant delivers
possession of the Demised Premises to Landlord. In the event of a sale of the
Building, Landlord shall have the right to transfer the security deposit to the
purchaser, and upon acceptance by such purchaser, Landlord shall be released
from all liability for the return of the security deposit. Tenant shall not
assign or encumber the money deposited as security, and neither Landlord nor its
successors or assigns shall be bound by any such assignment or encumbrance.
6. Operating Expenses and Additional Rent. (See Special Stipulations 3 and 10 on Exhibit C hereto)
(a) Tenant agrees to pay as Additional Rent (as defined in
Section 6(b) below) its proportionate share of Operating Expenses (as
hereinafter defined). "Operating Expenses" shall be defined as all reasonable
expenses for operation, repair, replacement and maintenance as necessary to keep
the Building and the common areas, driveways, and parking areas associated
therewith (collectively, the "Building Common Area") in good order, condition
and repair, including but not limited to, utilities for the Building Common
Area, expenses associated with the driveways and parking areas (including
sealing and restriping, and snow, trash and ice removal), security systems for
the Building Common Area, fire detection and prevention systems for the Building
Common Area, lighting facilities, landscaped areas, walkways, painting and
caulking, directional signage, curbs, drainage strips, sewer lines, all
maintenance, repair and replacement costs required to be paid for or contributed
toward by Landlord pursuant to any applicable access, driveway, shared truck
court or other such easements benefiting the Building (subject, with respect to
any replacements or improvement of a capital nature made thereunder, to the same
limitations on passing through the costs of capital replacements or improvements
as are set forth in the fourth (4th) sentence of this Section 6), all real
property taxes and special assessments imposed upon the Building, the Building
Common Area and the land on which the Building and the Building Common Area are
constructed, all costs of insurance paid by Landlord with respect to the
Building and the Building Common Area, and costs of improvements to the Building
and the Building Common Area required by any law, ordinance or regulation
applicable to the Building and the Building Common Area generally (and not
because of the particular use of or alterations within the Building or the
Building Common Area by a particular tenant), which cost shall be amortized on a
straight line basis over the useful life of such improvement in accordance with
generally accepted accounting principles ("GAAP"); provided, however, that no
such cost to comply with any such law, ordinance or regulation shall be included
in Operating Expenses to the extent the Building or Building Common Area failed
to comply with any such law, ordinance or regulation in effect as of the Lease
Commencement Date. Notwithstanding anything to the contrary contained herein,
Operating Expenses shall not include expenses for the costs of any maintenance
and repair required to be performed by Landlord at its own expense under Section
(10)(b). Further, Operating Expenses shall not include the costs for capital
replacements and/or improvements unless such costs (i) are incurred for the
purpose of causing a material decrease in the Operating Expenses of the Building
or the Building Common Area, provided such costs are amortized (and included in
Operating Expenses as so amortized) on a straight line basis over the useful
life of such improvement in accordance with GAAP, (ii) are incurred with respect
to improvements made to comply with laws, ordinances or regulations as described
above, or (iii) constitute a commercially reasonable deductible, not to exceed
$20,000.00, paid by Landlord in the event of a casualty under any
(b) Any amounts required to be paid by Tenant hereunder (in addition to Base Rent) and any charges or expenses incurred by Landlord on behalf of Tenant under the terms of this Lease shall be considered "Additional Rent" payable in the same manner and upon the same terms and conditions as the Base Rent reserved hereunder except as set forth herein to the contrary. Any failure on the part of Tenant to pay such Additional Rent when and as the same shall become due shall entitle Landlord to the remedies available to it for non-payment of Base Rent. Tenant's obligations for payment of Additional Rent shall begin to accrue on the Base Rent Commencement Date.
(c) If applicable in the jurisdiction where the Demised Premises are located, Tenant shall pay and be liable for all rental, sales, use and inventory taxes or other similar taxes, if any, on the amounts payable by Tenant hereunder levied or imposed by any city, state, county or other governmental body having authority, such payments to be in addition to all other payments required to be paid Landlord by Tenant under the terms of this Lease. Such payment shall be made by Tenant directly to such governmental body if billed to Tenant, or if billed to Landlord, such payment shall be paid concurrently with the payment of the Base Rent, Additional Rent, or such other charge upon which the tax is based, all as set forth herein.
7. Use of Demised Premises.
(a) The Demised Premises shall be used for the Permitted Use set forth in Section 1(l) and for no other purpose.
(b) Tenant will permit no liens to attach or exist against the Demised Premises, and shall not commit any waste.
(c) The Demised Premises shall not be used for any illegal purposes, and Tenant shall not allow, suffer, or permit any vibration, noise, odor, light or other effect to occur within or around the Demised Premises that could constitute a nuisance or trespass for Landlord or any occupant of the Building or an adjoining building, its customers, agents, or invitees. Upon notice by Landlord to Tenant that any of the aforesaid prohibited uses are occurring, Tenant agrees to promptly remove or control the same. Notwithstanding the foregoing, Landlord acknowledges and agrees that this subparagraph (c) shall not be deemed to prohibit vibrations, odors and/or noises that are customarily associated with the operation of a warehouse facility for the uses permitted herein including, without limitation, loading and unloading of trucks, and the use of conveyor belts, generators, and heating, ventilating and air conditioning units and air compressors.
(d) Tenant shall not in any way violate any law, ordinance or restrictive covenant affecting the Demised Premises, and shall not in any manner use the Demised Premises so as to cause cancellation of, prevent the use of, or increase the rate of, the fire and extended coverage insurance policy required hereunder. Except as expressly set forth below in this subsection 7(d), Landlord makes no (and does hereby expressly disclaim any) covenant, representation or warranty as to the Permitted Use being allowed by or being in compliance with any applicable laws, rules, ordinances or restrictive covenants now or hereafter affecting the Demised Premises, and any zoning letters, copies of zoning ordinances or other information from any governmental agency or other third party provided to Tenant by Landlord or any of Landlord's agents or employees shall be for informational purposes only, Tenant hereby expressly acknowledging and agreeing that Tenant shall conduct and rely solely on its own due diligence and investigation with respect to the compliance of the Permitted Use with all such applicable laws, rules, ordinances and restrictive covenants and not on any such information provided by Landlord or any of its agents or employees. Landlord hereby represents to Tenant that, as of the Lease Date, (i) neither the current zoning classification applicable to the Demised Premises nor the Declaration of Protective Covenants established by Landlord and currently encumbering the Building (the "Declaration") prohibits Tenant from operating a warehouse/distribution facility for the Initial Use twenty-four (24) hours a day, three hundred
(e) In the event insurance premiums pertaining to the Demised Premises, the Building, or the Building Common Area, whether paid by Landlord or Tenant, are increased over the least hazardous rate available due to the nature of the use of the Demised Premises by Tenant, to the extent such increase is solely a result of Tenant's use of the Demised Premises, Tenant shall pay such additional amount as Additional Rent, provided Landlord's insurance company delivers to Tenant a certification showing the manner in which Tenant's use has brought about such increase. To Landlord's actual knowledge, as of the Lease Date Tenant's use of the Demised Premises for the Permitted Use (as opposed to Tenant's manner of use) shall not cause an increase in Landlord's insurance rates.
8. Insurance.
(a) Tenant covenants and agrees that from and after the Lease Commencement Date or any earlier date upon which Tenant enters or occupies the Demised Premises or any portion thereof, Tenant will carry and maintain, at its sole cost and expense, the following types of insurance, in the amounts specified and in the form hereinafter provided for:
(i) Liability insurance in the Commercial General Liability form (or reasonable equivalent thereto) covering the Demised Premises (including any portion of the Building Common Area fenced in by Tenant pursuant to Special Stipulation 12 of Exhibit C hereto) and Tenant's use thereof against claims for bodily injury or death, property damage and product liability occurring upon, in or about the Demised Premises, such insurance to be written on an occurrence basis (not a claims made basis), to be in combined single limits amounts not less than $3,000,000.00 and to have general aggregate limits of not less than $5,000,000.00 for each policy year. The insurance coverage required under this Section 8(a)(i) shall, in addition, extend to any liability of Tenant arising out of the indemnities provided for in Section 11 and, if necessary, the policy shall contain a contractual endorsement to that effect.
(ii) Insurance covering (A) all of the items
included in the leasehold improvements constructed in the Demised Premises by or
at the expense of Landlord (collectively, the "Improvements"), including but not
limited to demising walls and the heating, ventilating and air conditioning
system and (B) Tenant's trade fixtures, fencing, merchandise and personal
property from time to time in, on or upon the Demised Premises (including any
portion of the Building Common Area fenced in by Tenant pursuant to Special
Stipulation 12 of Exhibit C hereto), in an amount not less than one hundred
percent (100%) of their full replacement value from time to time during the
Term, providing protection against perils included within the standard form of
"all-risks" fire and casualty insurance policy, together with insurance against
sprinkler damage, vandalism and malicious mischief. Any policy proceeds from
such insurance relating to the Improvements shall be used solely for the repair,
construction and restoration or replacement of the Improvements damaged or
destroyed unless this Lease shall cease and terminate under the provisions of
Section 20.
(b) All policies of the insurance provided for in Section 8(a) shall be issued in form reasonably acceptable to Landlord by insurance companies with a rating of not less than "A," and financial size of not less than Class XII, in the most current available "Best's Insurance Reports", and licensed to do business in the state in which the Building is located. Each and every such policy:
(i) shall name Landlord, Lender (as defined in
Section 24), and any other party reasonably designated by Landlord, as an
additional insured. In addition, the coverage described in Section 8(a)(ii)(A)
relating to the Improvements shall also name Landlord as "loss payee";
(ii) shall be delivered to Landlord, in the form of an insurance certificate reasonably acceptable to Landlord as evidence of such policy, prior to the Lease Commencement Date and thereafter within thirty (30) days prior to the expiration of each such policy, and, as often as any such policy shall expire or terminate. Renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent;
(iii) shall contain a provision that the insurer will give to Landlord and such other parties in interest at least fifteen (15) days notice in writing in advance of any material change, cancellation, termination or lapse, or the effective date of any reduction in the amounts of insurance; and
(iv) shall be written as a primary policy which does not contribute to and is not in excess of coverage which Landlord may carry.
(c) In the event that Tenant shall fail to carry and maintain
the insurance coverages set forth in this Section 8, Landlord may upon thirty
(30) days notice to Tenant (unless such coverages will lapse in which event no
such notice shall be necessary) procure such policies of insurance and Tenant
shall promptly reimburse Landlord therefor.
9. Utilities. During the Term, Tenant shall promptly pay as billed to Tenant all costs and charges for gas, steam, electricity, fuel, light, power, telephone, heat and any other utility or service used or consumed in or servicing the Demised Premises, all of which (other than water and sewer service to the Demised Premises) shall be separately metered and billed to Tenant. The cost of water and sewer service to the Demised Premises shall be passed through to Tenant by Landlord (at Landlord's actual cost) on a prorata basis as an Operating Expense under Section 6 hereof. In no event shall such charges include any Landlord-imposed surcharge, administrative fee, overhead or profit. In the event Tenant's use of any utility not separately metered to the Demised Premises is in excess of the average use by other tenants, Landlord shall have the right to install a meter for such utility, at Tenant's expense, and bill Tenant for Tenant's actual use, or to increase equitably Tenant's proportionate share of the cost of such utility based on such excess use. If Tenant fails to pay any utility bills or charges, Landlord may, at its option and upon reasonable notice to Tenant, pay the same and in such event, the amount of such payment, together with interest thereon at the Interest Rate as defined in Section 32 from the date of such payment by Landlord, will be added to Tenant's next due payment as Additional Rent.
10. Maintenance and Repairs.
(a) Subject to Landlord's obligations under Section 17 hereof,
Tenant shall, at its own cost and expense, maintain in good condition and repair
the interior of the Demised Premises, including but not limited to the heating,
air conditioning and ventilation systems, glass, windows and doors, sprinkler,
all components of any plumbing and sewage systems located within or under the
Demised Premises [i.e., inside of the exterior walls and the middle of any
interior demising walls of the Demised Premises, and/or within or under the
floor slab or the underlying foundation], fixtures, interior walls, floors
(including floor slabs, unless specifically reserved unto Landlord in subsection
(b) below), ceilings, storefronts, gutters, flashing and downspouts, plate
glass, skylights, all electrical facilities and equipment including, without
limitation, lighting fixtures, lamps, fans and any exhaust equipment and
systems, electrical motors, and all other appliances and equipment (including,
without limitation, dock levelers, dock shelters, dock seals and dock lighting)
of every kind and nature located in, upon or (to the extent exclusively serving
the Demised Premises) about the Demised Premises, except as to such maintenance
and repair as is the obligation of Landlord pursuant to Section 10(b). During
the Term, Tenant shall maintain in full force and effect a service contract for
the maintenance of the heating, ventilation and air conditioning systems with an
entity reasonably acceptable to Landlord. Tenant shall deliver to Landlord (i) a
copy of said service contract prior to the Lease Commencement Date, and (ii)
thereafter, a copy of a renewal or substitute service contract within thirty
(30) days prior to the expiration of the existing service contract. Tenant's
obligation shall exclude any maintenance and repair required because of the act
or negligence of Landlord, its employees, contractors or agents, which shall be
the responsibility of Landlord.
(b) Landlord shall, at its own cost and expense, maintain in good condition and repair the roof (including, without limitation, keeping the same free of leaks), foundation (beneath the floor slab, provided that Landlord shall repair any damage to the floor slab resulting solely from improperly compacted subgrade located beneath the same), exterior walls, columns, and structural frame of the Building. Landlord's obligation shall exclude the cost of any maintenance or repair required because of the act or negligence of Tenant or Tenant's agents, contractors, employees and invitees (collectively, "Tenant's Affiliates"), the cost of which shall be the responsibility of Tenant.
(c) Unless the same is caused solely by the negligent action or inaction of Landlord, its employees or agents, and is not covered by the insurance required to be carried by Tenant pursuant to the terms of this Lease, Landlord shall not be liable to Tenant or to any other person for any damage occasioned by failure in any utility system or by the bursting or leaking of any vessel or pipe in or about the Demised Premises, or for any damage occasioned by water coming into the Demised Premises or arising from the acts or neglects of occupants of adjacent property or the public.
(d) Landlord shall give Tenant two (2) days prior written notice of any repairs or replacements required of Landlord pursuant to subsection 10(b) above to, or which would otherwise materially adversely affect the normal operation of Tenant's business in, the Demised Premises [except in the case of an emergency posing significant risk of physical damage to the Demised Premises or any other part of the Building, including, without limitation, Tenant's property located within the Demised Premises, or injury to persons, in which event Landlord shall only be required to give such notice (including oral notice to any on-site, management personal, provided such oral notice is followed by written notice given in the manner provided for notices herein within three (3) days of such oral notice) as is reasonable under the circumstances]. Landlord shall use reasonable efforts to perform such repairs or replacements in a manner that does not interfere with the operation of Tenant's business at the Demised Premises (or any portion thereof).
11. Tenant's Personal Property; Indemnity. All of Tenant's personal property in the Demised Premises (including any portion of the Building Common Area enclosed by fencing installed by Tenant pursuant to Special Stipulation 12 of Exhibit C hereto) shall be and remain at Tenant's sole risk. Landlord, its agents, employees and contractors, shall not be liable for, and Tenant hereby releases Landlord from, any and all liability for theft of such personal property or any damage to such personal property occasioned by any act of God or by any acts, omissions or negligence of any persons, other than to the extent occasioned by the negligence of Landlord or its agents, employees or contractors. Landlord, its agents, employees and contractors, shall not be liable for any injury to the person or property of Tenant or other persons within the Demised Premises (including any portion of the Building Common Area enclosed by fencing installed by Tenant pursuant to Special Stipulation 12 of Exhibit C hereto), Tenant expressly agreeing to indemnify and save Landlord, its agents, employees and contractors, harmless, in all such cases, except to the extent caused by the negligence of Landlord, its agents, employees and contractors. Tenant further agrees to indemnify and reimburse Landlord for any costs or expenses, including, without limitation, attorneys' fees, that Landlord reasonably may incur in investigating, handling or litigating any such claim against Landlord by a third person, unless such claim arose from the negligence of Landlord, its agents, employees or contractors. Landlord agrees to indemnify and save Tenant harmless from and against any claims, actions, damages, losses, costs or expenses, including, without limitation, attorneys' fees, that Tenant reasonably may suffer or incur as a result of any injury to person or property in or about the Building Common Area (excluding any portion of the Building Common Area enclosed by fencing installed by Tenant pursuant to Special Stipulation 12 of Exhibit C hereto) resulting from the negligence or willful misconduct of Landlord or its employees or agents, except to the extent caused by the negligence or willful misconduct of Tenant or its agents, employees, invitees or contractors. The provisions of this Section 11 shall survive the expiration or earlier termination of this Lease with respect to any damage, injury or death occurring before such expiration or termination, and are in any event subject to the provisions of Section 8(d) hereof.
12. Tenant's Fixtures. Tenant shall have the right to install in the Demised Premises trade fixtures required by Tenant or used by it in its business, and if installed by Tenant, to remove any or all such trade fixtures from time to time during and upon termination or expiration of this Lease, provided no Event of Default, as defined Section 22, then exists; provided, however, that Tenant shall repair and restore any damage or injury to the Demised Premises (to the condition in which the Demised Premises existed prior to such installation) caused by the installation and/or removal of any such trade fixtures.
13. Signs. No sign, advertisement or notice shall be inscribed, painted, affixed, or displayed on the windows or exterior walls of the Demised Premises or on any public area of the Building, except in such places, numbers, sizes, colors and styles as are approved in advance in writing by Landlord, and which conform to all applicable laws, ordinances, or covenants affecting the Demised Premises. Any and all signs installed or constructed by or on behalf of Tenant pursuant hereto shall be installed, maintained and removed by Tenant at Tenant's sole cost and expense. Notwithstanding the foregoing, Tenant shall have the right, at Tenant's sole cost and expense, to attach one (1) sign on the exterior of the Building of such size and in such location and manner as are approved in advance by Landlord in writing (which approval shall not be unreasonably withheld), provided such sign otherwise complies with this Section 13 and with the sign criteria for the Project, a copy of which is attached hereto as Exhibit F.
15. Governmental Regulations. Tenant shall promptly comply throughout the Term, at Tenant's sole cost and expense, with all present and future laws, ordinances, orders, rules, regulations or requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof (collectively, "Governmental Requirements") relating to (a) all or any part of the Demised Premises, and (b) to Tenant's use or manner of use of the Demised Premises and/or to Tenant's manner of use of the Building Common Area. Tenant shall also observe and comply with the requirements of all policies of public liability, fire and other policies of insurance at any time in force with respect to the Demised Premises. Without limiting the foregoing, if as a result of one or more Governmental Requirements it is necessary, from time to time during the Term, to perform an alteration or modification of the Demised Premises (a "Code Modification") to the extent made necessary as a result of the specific use being made by Tenant of the Demised Premises or any other alteration performed by Tenant with respect to the Demised Premises, then such Code Modification shall be the sole and exclusive responsibility of Tenant in all respects; any such Code Modification shall be promptly performed by Tenant at its expense in accordance with the applicable Governmental Requirement and with Section 18 hereof. If as a result of one or more Governmental Requirements it is necessary from time to time during the Term to perform a Code Modification which (i) would be characterized as a capital expenditure under generally accepted accounting principles and (ii) is not made necessary as a result of the specific use being made by Tenant of the Demised Premises (as distinguished from an alteration or modification which would be required to be made by the owner of any warehouse-office building comparable to the Building irrespective of the use thereof by any particular occupant), or by any other alteration performed by Tenant with respect to the Demised Premises, then (a) Landlord shall have the obligation to perform the Code Modification at its expense, (b) the cost of such Code Modification shall be amortized on a straight-line basis over the useful life of the item in question, as determined in accordance with GAAP, and (c) Tenant shall be obligated to pay (as Additional Rent, payable in the same manner and upon the same terms and conditions as the Base Rent reserved hereunder) for the portion of such amortized costs attributable to the remainder of the Term, including any extensions thereof (if exercised). Tenant shall promptly send to Landlord a copy of any written notice received by Tenant requiring a Code Modification.
16. Environmental Matters.
(a) For purposes of this Lease:
(i) "Contamination" as used herein means the presence of or release of Hazardous Substances (as hereinafter defined) into any environmental media from, upon, within, below, into or on any portion of the Demised Premises, the Building, the Building Common Area or the Project so as to require remediation, cleanup or investigation under any applicable Environmental Law (as hereinafter defined).
(ii) "Environmental Laws" as used herein means all federal, state, and local laws, regulations, orders, permits, ordinances or other requirements, which exist now or as may exist hereafter, concerning protection of human health, safety and the environment, all as may be amended from time to time.
(iii) "Hazardous Substances" as used herein means any hazardous or toxic substance, material, chemical, pollutant, contaminant or waste as those terms are defined by any applicable Environmental Laws (including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq. ("CERCLA") and the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. ["RCRA"]) and any solid wastes, polychlorinated biphenyls, urea formaldehyde, asbestos, radioactive materials, radon, explosives, petroleum products and oil.
(b) Landlord represents that, except as revealed to Tenant in writing by Landlord, to Landlord's actual knowledge, (i) Landlord has not treated, stored or disposed of any Hazardous Substances upon or within the Building and/or Building Common Area, nor, to Landlord's actual knowledge, has any predecessor owner of the Building and/or Building Common Area, (ii) no Hazardous Substances are present on or under the Building and/or Building Common Area as of the Lease Date, and (iii) no underground storage tanks exist at or under the Building and/or Building Common Area.
(d) Tenant shall not cause or permit any Hazardous Substances to be brought upon, kept or used in or about the Demised Premises, the Building, or the Project without the prior written consent of Landlord, which consent shall not be unreasonably withheld; provided, however, that the consent of Landlord shall not be required for the use at the Demised Premises of cleaning supplies, toner for photocopying machines and other similar materials, in containers and quantities reasonably necessary for and consistent with normal and ordinary use by Tenant in the routine operation or maintenance of Tenant's office equipment or in the routine janitorial service, cleaning and maintenance for the Demised Premises. For purposes of this Section 16, Landlord shall be deemed to have reasonably withheld consent if Landlord determines that the presence of such Hazardous Substance within the Demised Premises could result in a risk of harm to person or property or otherwise negatively affect the value or marketability of the Building or the Project.
(e) Tenant shall not cause or permit the release of any Hazardous Substances by Tenant or Tenant's Affiliates into any environmental media such as air, water or land, or into or on the Demised Premises, the Building or the Project in any manner that violates any Environmental Laws. If such release shall occur, Tenant shall (i) take all steps reasonably necessary to contain and control such release and any associated Contamination, (ii) clean up or otherwise remedy such release and any associated Contamination to the extent required by, and take any and all other actions required under, applicable Environmental Laws and (iii) notify and keep Landlord reasonably informed of such release and response.
(f) Regardless of any consents granted by Landlord pursuant to
Section 16(d) allowing Hazardous Substances upon the Demised Premises, Tenant
shall under no circumstances whatsoever cause or permit (i) any activity on the
Demised Premises which would cause the Demised Premises to become subject to
regulation as a hazardous waste treatment, storage or disposal facility under
RCRA or the regulations promulgated thereunder, (ii) the discharge of Hazardous
Substances into the storm sewer system serving the Project or (iii) the
installation of any underground storage tank or underground piping on or under
the Demised Premises.
(g) Tenant shall and hereby does indemnify Landlord and hold
Landlord harmless from and against any and all expense, loss, and liability
suffered by Landlord (except to the extent that such expenses, losses, and
liabilities arise out of Landlord's own negligence or willful act), by reason of
the storage, generation, release, handling, treatment, transportation, disposal,
or arrangement for transportation or disposal, of any Hazardous Substances
(whether accidental, intentional, or negligent) by Tenant or Tenant's Affiliates
or by reason of Tenant's breach of any of the provisions of this Section 16.
Such expenses, losses and liabilities shall include, without limitation, (i) any
and all expenses that Landlord may incur to comply with any Environmental Laws;
(ii) any and all costs that Landlord may incur in studying or remedying any
Contamination at or arising from the Demised Premises, the Building, or the
Project; (iii) any and all costs that Landlord may incur in studying, removing,
disposing or otherwise addressing any Hazardous Substances; (iv) any and all
fines, penalties or other sanctions assessed upon Landlord; and (v) any and all
legal and professional fees and costs incurred by Landlord in connection with
the foregoing. The indemnity contained herein shall survive the expiration or
earlier termination of this Lease. Landlord shall indemnify Tenant and hold
Tenant harmless from and against any and all expenses, losses and liabilities
actually suffered by Tenant (with the exception of any and all consequential
damages, including but not limited to the loss of use of the Demised Premises,
lost profits and loss of business, and those expenses, losses, and liabilities
arising from Tenant's own negligence or willful act) as a result of a
governmental authority having jurisdiction ordering a cleanup, removal or other
remediation by Tenant of any Hazardous Substances placed on, under or about the
Demised Premises by Landlord or its agents or employees.
17. Construction of Demised Premises.
(a) Within thirty (30) days following the Lease Date, Landlord shall prepare, at Landlord's sole cost and expense, and submit to Tenant a set of plans and specifications and/or construction drawings (collectively, the "Plans and Specifications") covering all work to be performed by Landlord in constructing the Improvements (as defined in Section 8(a)(ii)), which Plans and Specifications shall be based on the preliminary plans and specifications set forth on Exhibit B attached hereto and incorporated herein, including, without limitation, Tenant's operational plan (the "Operational Plan") incorporated therein
(b) Landlord shall use reasonable speed and diligence to
"substantially complete" the Improvements, at Landlord's sole cost and expense,
and have the Demised Premises ready for occupancy on or before November 15,
1999. If the Demised Premises are not substantially complete on that date, such
failure to complete shall not in any way affect the obligations of Tenant
hereunder except that the Lease Commencement Date, the Base Rent Commencement
Date, and the Expiration Date shall be postponed one day for each day
substantial completion is delayed until the Demised Premises are substantially
complete, unless the delay is caused by Tenant's disapproval of any revised
portions of the Plans and specifications (except to the extent Tenant's
disapproval is as a result of Landlord having failed reasonably to incorporate
reasonable comments of Tenant), or by change orders requested by Tenant after
approval of the Plans and Specifications; provided, however, that (x) in the
event the Demised Premises are not substantially complete on or before November
15, 1999, as extended by "Construction Delay" (as defined below), and provided
Tenant has not exercised its right to terminate this Lease as provided in part
(y) of this sentence, then for each day after the ultimate Base Rent
Commencement Date Tenant shall receive "free" Base Rent (i.e., Base Rent shall
be waived) on a one (1) for one (1) basis for each day substantial completion
was delayed beyond November 15, 1999, as extended by Construction Delay, and (y)
in the event that Landlord is unable to achieve substantial completion on or
before February 15, 2000, as extended by Construction Delay, Tenant may, at its
option and as its sole and exclusive remedy, terminate this Lease by written
notice to Landlord given on or before February 29, 2000 (provided that
substantial completion has not occurred prior to Landlord's receipt of said
termination notice), and thereafter neither Landlord nor Tenant shall have any
further obligation hereunder. Except as set forth in this subsection (b), no
liability whatsoever shall arise or accrue against Landlord by reason of its
failure to deliver or afford possession of the Demised Premises, and Tenant
hereby releases and discharges Landlord from and of any claims for damage, loss,
or injury of every kind whatsoever as if this Lease were never executed. For
purposes of this Lease, the term "Construction Delay" shall mean delays incurred
by reason of Tenant's failure to deliver the Operation Plan by August 1, 1999,
Tenant's failure to approve the Plans and Specifications as set forth in Section
17(a) or changes requested by Tenant in the Plans and Specifications after
Tenant's approval thereof, and for such additional time as is equal to the time
lost by Landlord or Landlord's contractors or suppliers in connection with the
performance of Landlord's work and/or the construction of the Demised Premises
and related improvements due to industry-wide strikes or other labor troubles
that are not specific to Landlord or the Demised Premises, governmental
restrictions and limitations not known to Landlord (or reasonably capable of
being known to Landlord) as of the Lease Date, war or other national emergency,
non-availability of materials or supplies, delay in transportation, accidents,
floods, fire, damage or other casualties, weather or other conditions, acts or
omissions of Tenant, or delays by utility companies in bringing utility lines to
the Demised Premises to the extent not resulting from Landlord's failure to
order or apply for the same in a timely manner. For purposes of this Lease, the
term "substantial completion" or any grammatical variation
(c) Upon substantial completion of the Demised Premises, a representative of Landlord and a representative of Tenant together shall inspect the Demised Premises and generate a punchlist of defective or uncompleted items relating to the completion of construction of the Improvements (the "Punchlist"). Landlord shall use reasonable efforts to complete such incomplete work and remedy such defective work as is set forth on the Punchlist within thirty (30) days after the Punchlist is prepared and agreed upon by Landlord and Tenant, subject to Punchlist Delay (as defined below). All construction work performed by Landlord shall be deemed approved by Tenant in all respects except for items of said work which are not completed or do not conform to the Plans and Specifications and which are included on the Punchlist. For purposes of this Lease, "Punchlist Delay" shall mean such additional time as is equal to the time lost by Landlord or Landlord's contractors or suppliers in connection with the performance of Landlord's work and/or the construction of the Building or the Demised Premises and related improvements due to industry-wide strikes or other labor troubles that are not specific to Landlord or the Demised Premises, governmental restrictions and limitations not known to Landlord (or reasonably capable of being known to Landlord) as of the Lease Date, war or other national emergency, non-availability of materials or supplies, delay in transportation, accidents, floods, fire, damage or other casualties, weather or other conditions, acts or omissions of Tenant, or delays by utility companies in bringing utility lines to the Building or the Demised Premises to the extent not resulting from Landlord's failure to order or apply for the same in a timely manner.
(d) Upon substantial completion of the Demised Premises and the creation of the Punchlist, Tenant shall execute and deliver to Landlord a letter of acceptance in which Tenant (i) accepts the Demised Premises subject only to Landlord's completion of the items listed on the Punchlist and (ii) confirms the Lease Commencement Date, the Base Rent Commencement Date and the Expiration Date.
(e) Landlord hereby warrants to Tenant (i) that the materials and equipment furnished by Landlord's contractors in the initial construction of the Building (including all plumbing, utility lines and sewage systems serving the same) and the performance and completion of the Improvements to be constructed pursuant hereto will be of good quality and new, (ii) that during the one (1) year period following the Lease Commencement Date, such materials and equipment and the work of such contractors shall be free from defects (subject to the limitations inherent in the quality required or permitted hereunder or in the Plans and Specifications, including the Performance Specifications), (iii) that such work will conform to the Plans and Specifications, and (iv) that the design and construction of the Building and the Improvements will comply in all material respects with the Performance Specifications. This warranty shall exclude damages or defects caused by Tenant or Tenant's Affiliates, improper or insufficient maintenance, improper operation, or normal wear and tear under normal usage.
18. Tenant Alterations and Additions.
(a) Tenant shall not make or permit to be made any alterations, improvements, or additions to the Demised Premises (a "Tenant's Change"), without first obtaining on each occasion Landlord's prior written consent (which consent Landlord agrees not to unreasonably withhold or delay) and Lender's prior written consent (if such consent is required); provided, however, that Tenant shall have the right without Landlord's (or Lender's) prior written consent to make a Tenant's Change which is non-structural and which requires an expenditure of less than $75,000.00 for any one Tenant's Change and less than $200,000.00 in the aggregate either for the initial Term or for any extended Term, provided that Tenant shall, at Landlord's option and request and at Tenant's sole cost and expense, remove any such non-structural Tenant's Change for which Landlord's consent was not obtained (or was obtained but was conditioned upon removal) and/or restore the Demised Premises to its condition prior to such non-structural Tenant's Change upon the termination or expiration of this Lease. As part of its approval process, if applicable, Landlord may require that Tenant submit plans and specifications to Landlord, for Landlord's approval or disapproval, which approval shall not be unreasonably withheld or delayed. All Tenant's Changes shall be performed in accordance with all legal requirements applicable thereto and in a good and workmanlike manner with first-class materials. Tenant shall maintain insurance reasonably satisfactory to Landlord during the construction of all Tenant's Changes. If, where Landlord's approval is required or otherwise requested by Tenant, Landlord at the time of giving its approval to any Tenant's Change notifies Tenant in writing that approval is conditioned upon restoration, then Tenant shall, at its sole cost and expense and at Landlord's option and request upon the termination or expiration of this Lease, remove the same and restore the Demised Premises to its condition prior to such Tenant's Change. No Tenant's Change shall be structural in nature or impair the structural strength of the Building or reduce its value. Tenant shall pay the full cost of any Tenant's Change. Except as otherwise provided herein and in Section 12, all Tenant's Changes and all repairs and all other property attached to or installed on the Demised Premises by
(b) To the extent permitted by law, all of Tenant's contracts and subcontracts for such Tenant's Changes shall provide that no lien shall attach to or be claimed against the Demised Premises or any interest therein other than Tenant's leasehold interest in the Demised Premises, and that all subcontracts let thereunder shall contain the same provision. Whether or not Tenant furnishes the foregoing, Tenant agrees to hold Landlord harmless against all liens, claims and liabilities of every kind, nature and description which may arise out of or in any way be connected with such work. Tenant shall not permit the Demised Premises to become subject to any mechanics', laborers' or materialmen's lien on account of labor, material or services furnished to Tenant or claimed to have been furnished to Tenant in connection with work of any character performed or claimed to have been performed for the Demised Premises by, or at the direction or sufferance of Tenant and if any such liens are filed against the Demised Premises, Tenant shall promptly discharge the same; provided, however, that Tenant shall have the right to contest, in good faith and with reasonable diligence, the validity of any such lien or claimed lien if Tenant shall give to Landlord, within thirty (30) days after demand, such security as may be reasonably satisfactory to Landlord to assure payment thereof (or bond over any such lien with a surety company licensed to do business in Tennessee) and to prevent any sale, foreclosure, or forfeiture of Landlord's interest in the Demised Premises by reason of non-payment thereof; provided further that on final determination of the lien or claim for lien, Tenant shall immediately pay any judgment rendered, with all proper costs and charges, and shall have the lien released and any judgment satisfied. If Tenant fails to post such security or bond or does not diligently contest such lien, Landlord may, upon thirty (30) days notice to Tenant, without investigation of the validity of the lien claim, discharge such lien and Tenant shall reimburse Landlord upon demand for all costs and expenses incurred in connection therewith, which expenses shall include any attorneys' fees, paralegals' fees and any and all costs associated therewith, including litigation through all trial and appellate levels and any costs in posting bond to effect a discharge or release of the lien. Nothing contained in this Lease shall be construed as a consent on the part of Landlord to subject the Demised Premises to liability under any lien law now or hereafter existing of the state in which the Demised Premises are located.
19. Services by Landlord. Landlord shall be responsible for providing for maintenance of, and at all time during the Term shall keep in good condition and repair, the Building Common Area, and, except as required by Section 10(b) hereof, Landlord shall be responsible for no other services whatsoever. Tenant, by payment of Tenant's share of the Operating Expenses, shall pay Tenant's pro rata share of the expenses incurred by Landlord hereunder pursuant to Section 6 hereof.
20. Fire and Other Casualty. In the event the Demised Premises are damaged by fire or other casualty insured or required hereunder to be insured by Landlord, Landlord agrees to promptly restore and repair the Demised Premises at Landlord's expense, including the Improvements to be insured by Tenant but only to the extent Landlord receives insurance proceeds or adequate alternative funds from Tenant for the restoration of such Improvements to be insured by Tenant. Notwithstanding the foregoing, in the event that the Demised Premises are (i) in the reasonable opinion of Landlord's project architect and Tenant's architect selected pursuant to subsection 17(b) above, acting in cooperation (or such other architect as Landlord or Tenant, as the case may be, may select as its architect for purposes of this Section 20 by written notice to the other within five (5) days of such casualty), so destroyed that they cannot be repaired or rebuilt within one hundred eighty (180) days after the date of such damage, joint notice of such determination (the "Determination Notice") to be given to Landlord and Tenant by such architects within thirty (30) days of such casualty; or (ii) destroyed or damaged in any material respect during the last Lease Year of the Term (without Tenant having validly extended or thereupon agreeing to extend the Term pursuant to an existing renewal option ), then in the event only part (i) of the immediately preceding sentence applies, then Tenant (not Landlord) may terminate and cancel this Lease effective as of the date of such casualty by giving written notice to the Landlord within thirty (30) days after Tenant's receipt of the Determination Notice, and in the event part (ii) of the immediately preceding sentence applies, then either Landlord or Tenant may terminate and cancel this Lease effective as of the date of such casualty by giving written notice to the other party within thirty (30) days after the date of such casualty. Upon the giving of any such termination notice, all obligations hereunder with respect to periods from and after the effective date of termination shall thereupon cease and terminate. If no such termination notice is given, Landlord shall make such repair or restoration of the Demised Premises to the approximate condition existing prior to such casualty [but, as to the Improvements to be insured by Tenant hereunder, only to the extent of insurance proceeds received by Landlord, provided that nothing herein shall relieve Tenant of its obligation under Section 30(b) hereof to return the Demised Premises to Landlord at the expiration of the Term in substantially the same condition (i.e., with substantially the same Improvements and in good condition and repair) as existed at the Lease Commencement Date, subject to any Tenant's Changes made in accordance with Section 18 hereof], promptly and in such manner as not to unreasonably interfere with Tenant's use and occupancy of the Demised Premises (if Tenant is still occupying the Demised Premises). Base Rent and Additional Rent shall proportionately abate during the time that the Demised Premises or any part thereof are unusable by reason of any such damage thereto (except to the extent they remain unusable due to the lack of available insurance proceeds with respect to the Improvements to be insured by Tenant). If Landlord fails to
21. Condemnation.
(a) If (i) all of the Demised Premises is taken or condemned for a public or quasi-public use, (ii) a material portion of the Demised Premises (which shall include one-third (1/3) or more of the loading docks exclusively serving the Demised Premises) is taken or condemned for a public or quasi-public use and the remaining portion thereof is not usable by Tenant in the reasonable opinion of Landlord and Tenant, cooperating together in good faith, (iii) if a taking or condemnation reduces the number of parking spaces in Tenant's Exclusive Parking Area (as hereinafter defined) to below 250 spaces and Landlord is unable to provide reasonable alternative parking, or (iv) if in connection with a taking or condemnation access to Tenant's Exclusive Parking Area or the loading area serving the Demised Premises is taken and no alternative access reasonably acceptable to Tenant is provided by Landlord, this Lease shall terminate as of the earlier of the date title to the condemned real estate vests in the condemnor or the date on which (i) Tenant is deprived of possession of the Demised Premises or (ii) such amount of (or access to) Tenant's Exclusive Parking Area, as the case may be. In such event, the Base Rent herein reserved and all Additional Rent and other sums payable hereunder shall be apportioned and paid in full by Tenant to Landlord to that date, all Base Rent, Additional Rent and other sums payable hereunder prepaid for periods beyond that date shall forthwith be repaid by Landlord to Tenant, and neither party shall thereafter have any liability hereunder, except that any obligation or liability of either party, actual or contingent, under this Lease which has accrued on or prior to such termination date shall survive.
(b) If only part of the Demised Premises is taken or condemned
for a public or quasi-public use and this Lease does not terminate pursuant to
Section 21(a), Landlord shall, to the extent of the award it receives, restore
the Demised Premises to a condition and to a size as nearly comparable as
reasonably possible to the condition and size thereof immediately prior to the
taking, and there shall be an equitable adjustment to the Base Rent and
Additional Rent based on the actual loss of use of the Demised Premises suffered
by Tenant from the taking.
(c) Landlord shall be entitled to receive the entire award in any proceeding with respect to any taking provided for in this Section 21, without deduction therefrom for any estate vested in Tenant by this Lease, and Tenant shall receive no part of such award. Nothing herein contained shall be deemed to prohibit Tenant from making a separate claim, against the condemnor, to the extent permitted by law, for the value of Tenant's moveable trade fixtures, machinery and moving expenses, provided that the making of such claim shall not and does not adversely affect or diminish Landlord's award.
22. Tenant's Default.
(a) The occurrence of any one or more of the following events shall constitute an "Event of Default" of Tenant under this Lease:
(i) if Tenant fails to pay Base Rent or any Additional Rent hereunder as and when such rent becomes due and such failure shall continue for more than ten (10) days after Landlord gives written notice to Tenant of such failure;
(ii) if Tenant fails to pay Base Rent or
any Additional Rent on time more than three (3) times in any period of twelve
(12) months, notwithstanding that such payments have been made within the
applicable cure period;
(iii) if Tenant fails to take possession of the Demised Premises on the Lease Commencement Date or promptly thereafter;
(iv) if Tenant permits to be done anything
which creates a lien upon the Demised Premises and fails to discharge or bond
such lien, or post security with Landlord acceptable to Landlord within thirty
(30) days after receipt by Tenant of written notice thereof;
(vi) if any petition is filed by or against Tenant or any guarantor of this Lease under any present or future section or chapter of the Bankruptcy Code, or under any similar law or statute of the United States or any state thereof (which, in the case of an involuntary proceeding, is not permanently discharged, dismissed, stayed, or vacated, as the case may be, within ninety (90) days of commencement), or if any order for relief shall be entered against Tenant or any guarantor of this Lease in any such proceedings;
(vii) if Tenant or any guarantor of this Lease becomes insolvent or makes a transfer in fraud of creditors or makes an assignment for the benefit of creditors;
(viii) if a receiver, custodian, or trustee is appointed for the Demised Premises or for all or substantially all of the assets of Tenant or of any guarantor of this Lease, which appointment is not vacated within ninety (90) days following the date of such appointment; or
(ix) if Tenant fails to perform or observe any other term of this Lease and such failure shall continue for more than thirty (30) days after Landlord gives Tenant written notice of such failure, or, if such failure cannot be corrected within such thirty (30) day period, if Tenant does not commence to correct such default within said thirty (30) day period and thereafter diligently prosecute the correction of same to completion within a reasonable time.
(b) Upon the occurrence of any one or more Events of Default, Landlord may, at Landlord's option, without any demand or notice whatsoever (except as expressly required in this Section 22):
(i) Terminate this Lease by giving Tenant notice of termination, in which event this Lease shall expire and terminate on the date specified in such notice of termination and all rights of Tenant under this Lease and in and to the Demised Premises shall terminate. Tenant shall remain liable for all obligations under this Lease arising up to the date of such termination, and Tenant shall surrender the Demised Premises to Landlord on the date specified in such notice; or
(ii) Terminate this Lease as provided in Section
22(b)(i) hereof and recover from Tenant all damages (to the exclusion of
consequential damages) Landlord may incur by reason of Tenant's default,
including, without limitation, an amount which, at the date of such termination,
is calculated as follows: (1) the value of the excess, if any, of (A) the Base
Rent, Additional Rent and all other sums which would have been payable hereunder
by Tenant for the period commencing with the day following the date of such
termination and ending with the Expiration Date had this Lease not been
terminated (the "Remaining Term"), over (B) the aggregate reasonable rental
value of the Demised Premises for the Remaining Term (which excess, if any shall
be discounted to present value at the "Treasury Yield" as defined below for the
Remaining Term); plus (2) the costs of recovering possession of the Demised
Premises and all other expenses incurred by Landlord due to Tenant's default,
including, without limitation, reasonable attorney's fees; plus (3) the unpaid
Base Rent and Additional Rent earned as of the date of termination plus any
interest and late fees due hereunder, plus other sums of money and damages owing
on the date of termination by Tenant to Landlord under this Lease or in
connection with the Demised Premises. The amount as calculated above shall be
deemed immediately due and payable. The payment of the amount calculated in
subparagraph (ii)(1) shall not be deemed a penalty but shall merely constitute
payment of liquidated damages, it being understood and acknowledged by Landlord
and Tenant that actual damages to Landlord are extremely difficult, if not
impossible, to ascertain. "Treasury Yield" shall mean the rate of return in
percent per annum of Treasury Constant Maturities for the length of time
specified as published in document H.15(519) (presently published by the Board
of Governors of the U.S. Federal Reserve System titled "Federal Reserve
Statistical Release") for the calendar week immediately preceding the calendar
week in which the termination occurs. If the rate of return of Treasury Constant
Maturities for the calendar week in question is not published on or before the
business day preceding the date of the Treasury Yield in question is to become
effective, then the Treasury Yield shall be based upon the rate of return of
Treasury Constant Maturities for the length of time specified for the most
recent calendar week for which such publication has occurred. If no rate of
return for Treasury Constant Maturities is published for the specific length of
time specified, the Treasury Yield for such length of time shall be the weighted
average of the rates of return of Treasury Constant Maturities most nearly
corresponding to the length of the applicable period specified. If the
publishing of the rate of return of Treasury Constant Maturities is ever
discontinued, then the Treasury Yield shall be based upon the index which is
published by the Board of Governors of the U.S. Federal Reserve System in
replacement thereof or, if no such replacement index is published, the index
which, in Landlord's reasonable determination, most nearly corresponds to the
rate of return of Treasury Constant Maturities. In determining the aggregate
reasonable rental value pursuant to subparagraph (ii)(1)(B) above, the parties
hereby agree that, at the time Landlord seeks to enforce this remedy, all
relevant factors should be considered, including, but not limited to, (a) the
length of time remaining in the Term, (b) the then current market conditions in
the general area in which the Building is located, (c) the likelihood of
reletting the Demised Premises for a period of time equal to the remainder of
the Term, (d) the net effective rental rates then being obtained by landlords
for similar type space of similar
(iii) Intentionally omitted;
(iv) Without terminating this Lease, in its own name but as agent for Tenant, enter into and upon and take possession of the Demised Premises or any part thereof. Any property remaining in the Demised Premises may be removed and stored in a warehouse or elsewhere at the cost of, and for the account of, Tenant without Landlord being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby unless caused by Landlord's negligence. Thereafter, Landlord may, but shall not be obligated to, lease to a third party the Demised Premises or any portion thereof as the agent of Tenant upon such terms and conditions as Landlord may deem necessary or desirable in order to relet the Demised Premises. The remainder of any rentals received by Landlord from such reletting, after the payment of any indebtedness due hereunder from Tenant to Landlord, and the payment of any costs and expenses of such reletting, shall be held by Landlord to the extent of and for application in payment of future rent owed by Tenant, if any, as the same may become due and payable hereunder. If such rentals received from such reletting shall at any time or from time to time be less than sufficient to pay to Landlord the entire sums then due from Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for any such previous default provided same has not been cured; or
(v) Without terminating this Lease, and with or without notice to Tenant, enter into and upon the Demised Premises and, without being liable for prosecution or any claim for damages therefor, maintain the Demised Premises and repair or replace any damage thereto or do anything or make any payment for which Tenant is responsible hereunder. Tenant shall reimburse Landlord immediately upon demand for any expenses which Landlord incurs in thus effecting Tenant's compliance under this Lease and Landlord shall not be liable to Tenant for any damages with respect thereto; or
(vi) Intentionally omitted; or
(vii) With or without terminating this Lease, allow the Demised Premises to remain unoccupied and collect rent from Tenant as it comes due; or
(viii) Pursue such other remedies as are available at law or equity.
(c) If this Lease shall terminate as a result of or while there exists an Event of Default hereunder, any funds of Tenant held by Landlord may be applied by Landlord to any damages payable by Tenant (whether provided for herein or by law) as a result of such termination or default.
(d) Neither the commencement of any action or proceeding, nor the settlement thereof, nor entry of judgment thereon shall bar Landlord from bringing subsequent actions or proceedings from time to time, nor shall the failure to include in any action or proceeding any sum or sums then due be a bar to the maintenance of any subsequent actions or proceedings for the recovery of such sum or sums so omitted.
(e) No agreement to accept a surrender of the Demised Premises and no act or omission by Landlord or Landlord's agents during the Term shall constitute an acceptance or surrender of the Demised Premises unless made in writing and signed by Landlord. No re-entry or taking possession of the Demised Premises by Landlord shall constitute an election by Landlord to terminate this Lease unless a written notice of such intention is given to Tenant. No provision of this Lease shall be deemed to have been waived by either party unless such waiver is in writing and signed by the party making such waiver. Landlord's acceptance of Base Rent or Additional Rent in full or in part following an Event of Default hereunder shall not be construed as a waiver of such Event of Default. No custom or practice which may grow up between the parties in connection with the terms of this Lease shall be construed to waive or lessen either party's right to insist upon strict performance of the terms of this Lease, without a written notice thereof to the other party.
(f) If an Event of Default shall occur, Tenant shall pay to Landlord, on demand, all expenses incurred by Landlord as a result thereof, including reasonable attorneys' fees, court costs and expenses actually incurred; provided, however, that Landlord and Tenant shall each reimburse the other for the reasonable and actual attorneys' fees incurred by such other party in connection with any litigation initiated by Landlord or Tenant, as the case may be, pursuant to this Lease which results in a final, unappealable judgment as to the merits in the other party's favor.
23. Landlord's Right of Entry. Tenant agrees to permit Landlord and the authorized representatives of Landlord and of Lender to enter upon the Demised Premises at all reasonable times for the purposes of inspecting the Demised Premises and Tenant's compliance with this Lease, and making any necessary repairs thereto; provided that, except in the case of an emergency posing significant physical damage to the Demised Premises, including, without limitation, Tenant's property located within the Demised Premises, or injury to persons, Landlord shall give Tenant at least forty-eight (48) hours prior
24. Lender's Rights.
(a) For purposes of this Lease:
(i) "Lender" as used herein means the holder of a Mortgage;
(ii) "Mortgage" as used herein means any or all mortgages, deeds to secure debt, deeds of trust or other instruments in the nature thereof which may now or hereafter affect or encumber Landlord's title to the Demised Premises, and any amendments, modifications, extensions or renewals thereof.
(b) This Lease and all rights of Tenant hereunder are and shall be subject and subordinate to the lien and security title of any Mortgage provided that the holder of said Mortgage agrees not to disturb Tenant's possession of the Demised Premises or otherwise diminish Tenant's rights hereunder so long as Tenant is not in default hereunder beyond any applicable grace or cure period, as evidenced by a subordination and non-disturbance agreement signed by said holder which agreement shall include (i) conditions substantially in the form contained in Section 24(e) of this Lease, (ii) a requirement that said holder be given notice and opportunity to cure a landlord default and (iii) other commercially reasonable provisions customarily required by such holder and reasonably acceptable to Tenant. Tenant shall promptly execute such a subordination and non-disturbance agreement upon Landlord's request.. Tenant recognizes and acknowledges the right of Lender to foreclose or exercise the power of sale against the Demised Premises under any Mortgage.
(c) Tenant shall, in confirmation of the subordination set forth in Section 24(b) and notwithstanding the fact that such subordination is self-operative, and no further instrument or subordination shall be necessary, upon demand, at any time or times, execute, acknowledge, and deliver to Landlord or to Lender any and all instruments requested by either of them to evidence such subordination, provided that such instrument contains the non-disturbance provisions referred to in Section 24(b) above.
(d) At any time during the Term, Lender may, by written notice to Tenant, make this Lease superior to the lien of its Mortgage. If requested by Lender, Tenant shall, upon demand, at any time or times, execute, acknowledge, and deliver to Lender, any and all instruments that may be reasonably necessary to make this Lease superior to the lien of any Mortgage.
(e) If Lender (or Lender's nominee, or other purchaser at foreclosure) shall hereafter succeed to the rights of Landlord under this Lease, whether through possession or foreclosure action or delivery of a new lease, Tenant shall, if requested by such successor, attorn to and recognize such successor as Tenant's landlord under this Lease without change in the terms and provisions of this Lease and shall promptly execute and deliver any instrument that may be reasonably necessary to evidence such attornment, provided that such successor shall not be bound by (i) any payment of Base Rent or Additional Rent for more than one month in advance, except prepayments in the nature of security for the performance by Tenant of its obligations under this Lease, and then only if such prepayments have been deposited with and are under the control of such successor, (ii) any provision of any amendment to the Lease to which Lender has not consented (unless such amendment merely confirms the occurrence of an event or a decision by Landlord or Tenant which is expressly contemplated by a specific provision hereof), (iii) the defaults of any prior landlord under this Lease, unless the same shall be continuing, or (iv) any offset rights arising out of the defaults of any prior landlord under this Lease (unless if such right of offset is expressly provided in this Lease and Lender has been given notice of an opportunity to cure Landlord's default which gave rise to Tenant's offset right). Upon such attornment, this Lease shall continue in full force and effect as a direct lease between each successor landlord and Tenant, subject to all of the terms, covenants and conditions of this Lease.
(f) Tenant hereby acknowledges that the Building is currently subject to a Mortgage in favor of Bank of America, N.A. d/b/a NationsBank, N.A. ("Bank of America"). It shall be a condition of this Lease and of Tenant's obligation to accept the Demised Premises that Landlord deliver a subordination, non-disturbance and attornment agreement to Tenant, executed by Bank of America and to be executed by Tenant, substantially in the form attached hereto as Exhibit G, with such modifications as Tenant may reasonably request. In the event there is any other Mortgage at any time during the Term, Landlord shall
25. Estoppel Certificate. Landlord and Tenant agree, at any time, and from time to time, within fifteen (15) days after written request of the other, to execute, acknowledge and deliver a statement in writing in recordable form to the requesting party and/or its designee certifying that: (i) this Lease is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect, as modified), (ii) the dates to which Base Rent, Additional Rent and other charges have been paid, (iii) whether or not, to the best of its knowledge, there exists any failure by the requesting party to perform any term, covenant or condition contained in this Lease, and, if so, specifying each such failure, (iv) (if such be the case) Tenant has unconditionally accepted the Demised Premises and is conducting its business therein, and (v) and as to such additional matters as may be reasonably requested, it being intended that any such statement delivered pursuant hereto may be relied upon by the requesting party and by any purchaser of title to the Demised Premises or by any mortgagee or any assignee thereof or any party to any sale-leaseback of the Demised Premises, or the landlord under a ground lease affecting the Demised Premises.
26. Landlord Liability. No owner of the Demised Premises, whether or not
named herein, shall have liability hereunder after it ceases to hold title to
the Demised Premises, provided any transferee assume in writing Landlord's
obligations under this Lease arising from and after the date of such transfer.
Neither Landlord nor any officer, director, shareholder, partner or principal of
Landlord, whether disclosed or undisclosed, shall be under any personal
liability with respect to any of the provisions of this Lease. In the event
Landlord is in breach or default with respect to Landlord's obligations or
otherwise under this Lease, Tenant shall look solely to the equity of Landlord
in the Building (and any future rents and profits derived therefrom) for the
satisfaction of Tenant's remedies. It is expressly understood and agreed that
Landlord's liability under the terms, covenants, conditions, warranties and
obligations of this Lease shall in no event exceed the loss of Landlord's equity
interest in the Building. Notwithstanding the foregoing provisions of this
Section 26, Industrial Developments International (Tennessee), L.P. ("IDI") (but
not its officers, directors, shareholders, employees, partners or principals)
shall be personally liable for the completion of the construction and
installation of the Improvements in accordance with the Plans and
Specifications, and, other than any collateral or other grants or assignments
made in connection with any construction financing of such work, IDI shall not
grant a security interest in, nor assign or convey any of its ownership of, the
Demised Premises prior to substantial completion of such work, unless, in
connection with any such conveyance, IDI agrees to remain liable for completion
of all such work (and provides Tenant with reasonable evidence of such
agreement).
27. Notices. Any notice required or permitted to be given or served by either party to this Lease shall be deemed given when made in writing, and either (i) personally delivered, (ii) deposited with the United States Postal Service, postage prepaid, by registered or certified mail, return receipt requested, or (iii) delivered by licensed overnight delivery service providing proof of delivery, properly addressed to the address set forth in Section 1(m) (as the same may be changed by giving written notice of the aforesaid in accordance with this Section 27). If any notice mailed is properly addressed with appropriate postage but returned for any reason, such notice shall be deemed to be effective notice and to be given on the date of mailing. The time period in which a party must respond to any such notice given by deposit with the United States Postal Service pursuant to part (ii) hereof shall commence upon such party's actual receipt of such notice as evidenced by the return receipt,
28. Brokers. Landlord and Tenant hereby represent and warrant, each to the other that, except for those parties set forth in Section 1(o) (the "Brokers"), the representing party has not engaged or had any conversations or negotiations with any broker, finder or other third party concerning the leasing of the Demised Premises to Tenant who would be entitled to any commission or fee based on the execution of this Lease. Landlord and Tenant hereby indemnify each other against and from any claims for any brokerage commissions (except those payable to the Brokers, all of which are payable by Landlord pursuant to a separate agreement) and all costs, expenses and liabilities in connection therewith, including, without limitation, reasonable attorneys' fees and expenses, for any breach of the foregoing representation by the indemnifying party. The foregoing indemnification shall survive the termination of this Lease for any reason. Tenant hereby acknowledges and agrees that notwithstanding any affiliation between Benchmark Associates and IDI Services Group, Inc. for commission sharing or any other purposes, IDI Service Group, Inc. is only representing Landlord in connection with this Lease and Tenant hereby expressly waives any conflict of interest to which such affiliation may give rise.
29. Assignment and Subleasing.
(a) Tenant may not assign, mortgage, pledge, encumber or otherwise transfer this Lease, or any interest hereunder, or sublet the Demised Premises, in whole or in part, without on each occasion first obtaining the prior express written consent of Landlord, which consent Landlord shall not unreasonably withhold. Any change in control of Tenant resulting from a merger, consolidation, stock transfer or asset sale shall be considered an assignment or transfer which requires Landlord's prior written consent.
(b) Notwithstanding subsection (a) of this Section 29, provided that no Event of Default has occurred and is then continuing, Tenant shall have the right, upon fifteen (15) days prior written
(c) If Tenant desires to assign this Lease or sublet the Demised Premises or any part thereof, Tenant shall give Landlord written notice no later than thirty (30) days in advance of the proposed effective date of any proposed assignment or sublease, specifying (i) the name and business of the proposed assignee or sublessee, (ii) the amount and location of the space within the Demised Premises proposed to be subleased, (iii) the proposed effective date and duration of the assignment or subletting and (iv) the proposed rent or consideration to be paid to Tenant by such assignee or sublessee. Tenant shall promptly supply Landlord with financial statements and other information as Landlord may reasonably request to evaluate the proposed assignment or sublease. Landlord shall have a period of twenty (20) days following receipt of such notice and other information requested by Landlord within which to notify Tenant in writing that Landlord elects: (i) to terminate this Lease as to the space so affected as of the proposed effective date set forth in Tenant's notice, in which event Tenant shall be relieved of all further obligations hereunder as to such space, except for obligations under Sections 11 and 28 and all other provisions of this Lease which expressly survive the termination hereof; or (ii) to permit Tenant to assign or sublet such space; or (iii) to refuse, in Landlord's reasonable discretion, to consent to Tenant's assignment or subleasing of such space and to continue this Lease in full force and effect as to the entire Demised Premises. If Landlord should fail to notify Tenant in writing of such election within the aforesaid twenty (20) day period, Landlord shall be deemed to have elected option (ii) above. Tenant agrees to reimburse Landlord for reasonable legal fees and any other reasonable costs incurred by Landlord in connection with any requested assignment or subletting. Tenant shall deliver to Landlord copies of all documents executed in connection with any permitted assignment or subletting, which documents shall be in form and substance reasonably satisfactory to Landlord and which shall require such assignee to assume performance of all terms of this Lease on Tenant's part to be performed. This subsection (c) shall not apply to any related assignment.
(d) No acceptance by Landlord of any rent or any other sum of money from any assignee, sublessee or other category of transferee shall be deemed to constitute Landlord's consent to any assignment, sublease, or transfer. Permitted subtenants or assignees shall become liable directly to Landlord for all obligations of Tenant hereunder, without, however, relieving Tenant of any of its liability hereunder. No such assignment, subletting, occupancy or collection shall be deemed the acceptance of the assignee, tenant or occupant, as Tenant, or a release of Tenant from the further performance by Tenant of Tenant's obligations under this Lease. Any assignment or sublease consented to by Landlord shall not relieve Tenant (or its assignee) from obtaining Landlord's consent to any subsequent assignment or sublease.
30. Termination or Expiration.
(a) No termination of this Lease prior to the normal ending thereof, by lapse of time or otherwise, shall affect Landlord's right to collect rent for the period prior to termination thereof.
(b) At the expiration or earlier termination of the Term of this
Lease, Tenant shall surrender the Demised Premises and all improvements,
alterations and additions thereto, and keys therefor to Landlord, clean and
neat, and in substantially the same condition (i.e., with substantially the same
Improvements and in good condition and repair) as existed at the Lease
Commencement Date, subject to any Tenant's Changes made in accordance with
Section 18 hereof, and excepting normal wear and tear, condemnation and casualty
other than that required to be insured against by Tenant hereunder.
31. Intentionally Omitted.
32. Late Payments. In the event any installment of rent, inclusive of
Base Rent, or Additional Rent or other sums due hereunder, if any, is not paid
(i) within five (5) days after Tenant's receipt of written notice of such
failure to pay on the first two (2) occasions during any twelve (12) month
period, or (ii) as and when due with respect to any subsequent late payments in
any twelve (12) month period, Tenant shall pay an administrative fee equal to
three percent (3%) of such past due amount, plus interest on the amount past due
at the lesser of (i) the maximum interest rate allowed by law or (ii) a rate of
fifteen percent (15%) per annum (the "Interest Rate") to defray the additional
expenses incurred by Landlord in processing such payment.
33. Rules and Regulations. Tenant agrees to abide by the rules and regulations set forth on Exhibit D attached hereto, as well as other rules and regulations reasonably promulgated by Landlord from time to time, so long as such rules and regulations are uniformly enforced against all tenants of Landlord in the Building and do not materially diminish the rights or increase the obligations of Tenant hereunder.
34. Quiet Enjoyment. So long as Tenant has not committed an Event of Default hereunder, Landlord agrees that Tenant shall have the right to quietly use and enjoy the Demised Premises for the Term.
35. Miscellaneous.
(a) The parties hereto hereby covenant and agree that, except as otherwise provided herein, Landlord shall receive the Base Rent, Additional Rent and all other sums payable by Tenant hereinabove provided as net income from the Demised Premises, without any abatement, reduction, set-off, counterclaim, defense or deduction whatsoever.
(b) If any clause or provision of this Lease is determined to be illegal, invalid or unenforceable under present or future laws effective during the Term, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby, and that in lieu of such illegal, invalid or unenforceable clause or provision there shall be substituted a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.
(c) All rights, powers, and privileges conferred hereunder upon the parties hereto shall be cumulative, but not restrictive to those given by law.
(d) Time is of the essence of this Lease.
(e) No failure of Landlord or Tenant to exercise any power given Landlord or Tenant hereunder or to insist upon strict compliance by Landlord or Tenant with its obligations hereunder, and no custom or practice of the parties at variance with the terms hereof shall constitute a waiver of Landlord's or Tenant's rights to demand exact compliance with the terms hereof.
(g) This contract shall create the relationship of landlord and tenant between Landlord and Tenant; no estate shall pass out of Landlord; Tenant's interest shall not be subject to levy and sale, and shall not be assignable by Tenant except as expressly set forth herein.
(h) Under no circumstances shall Tenant have the right to record this Lease; provided, however, that upon Tenant's request, Landlord and Tenant shall enter into a recordable Memorandum of Lease, provided such Memorandum of Lease does not disclose the rent payable by Tenant hereunder, and further provided that such Memorandum of Lease is in form reasonably acceptable to Landlord (it being hereby agreed that any such Memorandum of Lease may reference the Right of First Refusal contained in Special Stipulation 6 hereof, but shall not reference the Right of First Notice contained in Special Stipulation 7 hereof).
(i) The captions of this Lease are for convenience only and are not a part of this Lease, and do not in any way define, limit, describe or amplify the terms or provisions of this Lease or the scope or intent thereof.
(j) This Lease may be executed in multiple counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement.
(k) This Lease shall be interpreted under the laws of the State where the Demised Premises are located.
(l) The parties acknowledge that this Lease is the result of negotiations between the parties, and in construing any ambiguity hereunder no presumption shall be made in favor of either party. No inference shall be made from any item which has been stricken from this Lease other than the deletion of such item.
(m) The provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns.
36. Special Stipulations. The Special Stipulations attached hereto as Exhibit C, are incorporated herein and made a part hereof, and to the extent of any conflict between the foregoing provisions and the Special Stipulations, the Special Stipulations shall govern and control.
37. Intentionally omitted.
38. Authority. If Tenant is not a natural person, Tenant shall cause its corporate secretary or general partner, as applicable, to execute the certificate attached hereto as Exhibit E-1. Tenant is authorized by all required corporate or partnership action to enter into this Lease and the individual(s) signing this Lease on behalf of Tenant are each authorized to bind Tenant to its terms. Landlord shall cause its corporate secretary or the corporate secretary of its general partner, as applicable, to execute the certificate attached hereto as Exhibit E-2. Landlord is authorized by all required corporate or partnership action to enter into this Lease and the individual(s) signing this Lease on behalf of Landlord are authorized to bind Landlord to its terms.
39. No Offer Until Executed. The submission of this Lease to Tenant for examination or consideration does not constitute an offer to lease the Demised Premises and this Lease shall become effective, if at all, only upon the execution and delivery thereof by Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands under seals, the day and year first above written.
By: /s/Timothy L. Gunter
----------------------------
Name: Timothy L. Gunter
Title: Secretary
Attest: /s/G. Bryan Blasingame, Jr.
----------------------------
Name: G. Bryan Blasingame, Jr.
Title: Assistant Secretary
|
[Corporate Seal]
[Signatures continued on next page]
By: /s/William F. Duffy
Name: William F. Duffy
Title: Vice President, Operations
|
[Corporate Seal]
Landlord:
STATE OF
COUNTY OF
BEFORE ME, a Notary Public in and for said County, personally appeared __________________________ and, known to me to be the person(s) who, as ___________________________________ and ____________________________________, respectively, of IDI (Tennessee), Inc., a Georgia corporation, the corporation which executed the foregoing instrument in its capacity as general partner of Landlord, signed the same, and acknowledged to me that they did so sign said instrument in the name and upon behalf of said corporation, in its capacity as general partner of Landlord, that the same is their free act and deed and they were duly authorized thereunto by the corporation and the partnership.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed my official seal, this day __ of ____________________________, 19___.
STATE OF
COUNTY OF
BEFORE ME, a Notary Public in and for said County, personally appeared __________________________, known to me to be the person who, as ___________________________________ of barnesandnoble.com inc., the corporation which executed the foregoing instrument in its capacity as the managing member of Tenant, signed the same, and acknowledged to me that he did so sign said instrument in the name and upon behalf of said corporation as an officer of said corporation, that the same is his free act and deed as such officer and he was duly authorized thereunto by its board of directors; and that the seal affixed to said instrument is the corporate seal of said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed my official seal, this day of _________________________, 19___ .
The Special Stipulations set forth herein are hereby incorporated into the body of the lease to which these Special Stipulations are attached (the "Lease"), and to the extent of any conflict between these Special Stipulations and the preceding language, these Special Stipulations shall govern and control.
1. Extension Option
(a) Landlord hereby grants to Tenant four (4) consecutive options to extend the Term for a period of five (5) years each time (each such period to be referred to herein as an "Option Period"), each such option to be exercised by Tenant giving written notice of its exercise to Landlord in the manner provided in this Lease at least two hundred ten (210) days prior to (but not more than three hundred (300) days prior to) the expiration of the Term, as it may have been previously extended. No extension option may be exercised by Tenant if an Event of Default has occurred and is then continuing at the time of exercise of the option.
(b) If Tenant exercises its option[s] to extend the Term, Landlord shall, within thirty (30) days after the receipt of Tenant's notice of exercise, notify Tenant in writing of the following:
(i) Landlord's reasonable determination of the Base Rent for
the Demised Premises (including any Refusal Space, as hereinafter
defined) during the applicable Option Period based on ninety-five
percent (95%) of the market rate for such space, as reasonably
determined by Landlord taking into account all relevant factors for
space of this type in the Memphis, Tennessee area (which notice shall
also remind Tenant that it has ten (10) days in which either to accept
Landlord's determination of the Base Rent for the Demised Premises
during the applicable Option Period or to select an appraiser pursuant
to this Special Stipulation 1 in the event Tenant disagrees with such
determination by Landlord of the Base Rent for the Demised Premises
during the applicable Option Period). Tenant shall have ten (10) days
from its receipt of Landlord's notice to notify Landlord in writing
that Tenant does not agree with Landlord's determination of ninety-five
percent (95%) of the market rate for such space and that Tenant elects
to determine the Prevailing Market Rate (as defined and calculated
below). If Tenant does not notify Landlord of such election within ten
(10) days of its receipt of Landlord's notice, Base Rent for the
applicable Option Period for purposes of this subpart (i) of this
Special Stipulation 1 shall be as set forth in Landlord's notice to
Tenant. The phrase "Prevailing Market Rate" shall mean ninety-five
percent (95%) of the then prevailing market rate for base minimum
rental calculated on a per square foot basis for leases covering
buildings comparable to the Building (as adjusted for any variances
between such buildings and the Building) located in the area of
Memphis, Tennessee (hereinafter referred to as the "Market Area"). The
Prevailing Market Rate shall be determined by an appraisal procedure as
follows: in the event that Tenant notifies Landlord that Tenant
disagrees with Landlord's determination of ninety-five percent (95%) of
the then market rate and that Tenant elects to determine the Prevailing
Market Rate, then Tenant shall specify, in such notice to Landlord,
Tenant's selection of a real estate appraiser who shall act on Tenant's
behalf in determining the Prevailing Market Rate. Within twenty (20)
days after Landlord's receipt of Tenant's selection of a real estate
appraiser, Landlord, by written notice to Tenant, shall designate a
real estate appraiser, who shall act on Landlord's behalf in the
determination of the Prevailing Market Rate. Within twenty (20) days of
the selection of Landlord's appraiser, the two (2) appraisers shall
render a joint written determination of the Prevailing Market Rate,
which determination shall take into consideration any differences
between the Building and those buildings comparable to the Building
located in the Market Area, including without limitation age, location,
setting and type of building. If the two (2) appraisers are unable to
agree upon a joint written determination within said twenty (20) day
period, the two appraisers shall select a third appraiser within such
twenty (20) day period. Within twenty (20) days after the appointment
of the third appraiser, the third appraiser shall render a written
determination of the Prevailing Market Rate by selecting, without
change, the determination of one (1) of the original appraisers as to
the Prevailing Market Rate and such determination shall be final,
conclusive and binding. All appraisers selected in accordance with this
subparagraph shall have at least ten (10) years prior experience in the
commercial leasing market of the Market Area and shall be members of
the American Institute of Real Estate Appraisers or similar
professional organization. If either Landlord or Tenant fails or
refuses to select an appraiser, the other appraiser shall alone
determine the Prevailing Market Rate. Landlord and Tenant agree that
they shall be bound by the determination of Prevailing Market Rate
pursuant to this paragraph. Landlord shall bear the fee and expenses of
its appraiser; Tenant shall bear the fee and expenses of its appraiser;
and Landlord and Tenant shall share equally the fee and expenses of the
third appraiser, if any;
(ii) Landlord's determination of Base Rent for the Demised Premises during the applicable Option Period based on CPI (as hereinafter defined), which amount shall be determined by multiplying the Annual Base Rent in effect during the Lease Year in which the determination is made (blended to take into account any space added to the Demised Premises pursuant to Special Stipulations 6 or 7 or otherwise, and, for purposes of the first (1st) renewal Term only, using $2.79 as the deemed "Annual Base Rental" rate in effect for the initial Demised Premises during the Lease Year in which the determination is made notwithstanding anything in Section 1 of this Lease
(iii) Landlord's determination of Base Rent for the Demised Premises during the applicable Option Period based on a fixed increase, which amount shall be determined by multiplying the Annual Base Rent in effect during the Lease Year in which such determination is made (blended to take into account any space added to the Demised Premises pursuant to Special Stipulations 6 or 7 or otherwise, and, for purposes of the first (1st) renewal Term only, using $2.79 as the deemed "Annual Base Rental" rate in effect for the initial Demised Premises during the Lease Year in which the determination is made notwithstanding anything in Section 1 of this Lease to the contrary) by one hundred twelve and one-half percent (112.5%).
Tenant shall have ten (10) days from its receipt of Landlord's notice to notify Landlord in writing that Tenant elects to retract its option to extend the Term, in which case (i) Tenant shall reimburse Landlord upon demand for Landlord's actual out-of-pocket expenses associated with the appraisal approach set forth in subpart (i) above, if applicable, and (ii) the Term, as it may have been previously extended, shall expire on its scheduled expiration date and Tenant's option (and any remaining subsequent options) to extend the Term shall be void and of no further force and effect. If Tenant does not notify Landlord of such retraction within ten (10) days of its receipt of Landlord's notice, Landlord and Tenant hereby agree that the Base Rent that will be in effect for the applicable Option Period shall be the lowest of the Base Rent determinations made in accordance with clauses (i), (ii) and (iii) above; provided, however, that (A) with respect to the first (1st) renewal Term only, an additional $.10 shall be added to the lowest of the per square foot rental rate determinations made in accordance with clauses (i), (ii) and (iii) above, which additional $.10 per square foot shall later be backed out of the Annual Base Rental rate in effect for the first (1st) renewal Term for purposes of making the per square foot rental rate determinations for the second (2nd) renewal Term (if applicable) in accordance with clauses (ii) and (iii) above, and (B) in no event shall the Annual Base Rent for the applicable Option Period be less than the Annual Base Rent rate in effect during the Lease Year immediately preceding the applicable Option Period. In the event Tenant does not validly exercise (or exercises but retracts as permitted herein) the first (1st) renewal option granted herein, then prior to the expiration of the then current Term, Tenant shall pay to Landlord the sum of One Hundred Ninety Thousand and No/100 Dollars ($190,000.00) in immediately available funds.
(c) Except for the Base Rent, which shall be determined as set forth in subparagraph (b) above, leasing of the Demised Premises by Tenant for the applicable Option Period shall be subject to all of the same terms and conditions set forth in this Lease, including Tenant's obligation to pay Tenant's share of Operating Expenses as provided in this Lease; provided, however, that any improvement allowances, rent abatements or other concessions applicable to the Demised Premises during the initial Term shall not be applicable during any such extended term, nor shall Tenant have any additional extension options unless expressly provided for in this Lease. Landlord and Tenant shall enter into an amendment to this Lease to evidence Tenant's exercise of its renewal option. If this Lease is guaranteed, it shall be a condition of Landlord's granting the renewal that Tenant deliver to Landlord a reaffirmation of the guaranty in which the guarantor acknowledges Tenant's exercise of its renewal option and reaffirms that the guaranty is in full force and effect and applies to said renewal.
2. Early Entry. Provided Tenant shall have first obtained any and all permits and other governmental authorizations required in connection therewith, Tenant shall have the right to enter the Demised Premises for the period commencing October 1, 1999 and ending with the Lease Commencement Date (the "Early Entry Period") in order to install its equipment and racking provided that during said period: (i) Tenant shall comply with all terms and conditions of this Lease other than the obligation to pay Base Rent or Additional Rent, (ii) Tenant shall not begin operation of its business (Landlord hereby acknowledging that the installation of racking and a conveyor system, and acceptance of inventory, shall not constitute "operation of business"), and (iii) Tenant shall not interfere with Landlord's completion of the Demised Premises. Landlord hereby agrees that on or before the commencement of the Early Entry Period, as such date may be extended by Construction Delay, Landlord shall deliver to Tenant approximately 150,000 square feet of secure (i.e., all walls and doors constructed) warehouse space within the Demised Premises, complete with lights, floor, floor seal and sprinkler system installed in accordance with the Plans and Specifications (and in compliance with applicable building codes to the extent necessary to allow Tenant to exercise is rights under this Special Stipulation 2), said space being delineated in the Operational Plan comprising a part of the Performance Specifications.
3. Operating Expenses - Cap on Controllable Expenses. Landlord and Tenant hereby acknowledge and agree that for purposes of calculating Tenant's proportionate share of Operating Expenses (as Tenant's proportionate share may have been adjusted to account for any changes in the size of the Demised Premises due to any expansions or reductions) for the Building and the Building Common Area attributable to all items except taxes, utilities, insurance, and snow removal (which four (4) items shall be referred to collectively herein as the "Non-Controllable Expenses," and Operating Expenses attributable to all items
4. Reimbursable Costs and Tenant Allowance Work.
(a) Landlord and Tenant hereby agree that Landlord shall pay for and install the heating, air conditioning and ventilation system (such installation to be in accordance with Section 14.4 of the Performance Specifications) and the energy management system in the warehouse portion of the Demised Premises, and that the combined cost thereof, less the sum of $90,000.00 (the "Net Combined Cost"), shall be reimbursed by Tenant to Landlord in full within ten (10) calendar days following Tenant's receipt of a bill therefor from Landlord (accompanied by a paid invoice or other evidence reasonably satisfactory to Tenant of the cost incurred by Landlord for such work), which bill may be delivered by Landlord at any time after substantial completion of the Improvements.
(b) Landlord and Tenant hereby acknowledge that Landlord is providing
an allowance with respect to the following portions of Landlord's work within
the Demised Premises (collectively, the "Allowance Work"): electrical
distribution for Tenant's equipment, the alarm system, the mezzanine related
sprinkler system and the computer room; the total allowance with respect to the
Allowance Work being in the amount of $290,000.00 (which total is hereinafter
referred to as the "Maximum Allowance", and which Maximum Allowance may be
allocated between and among the Allowance Work items, and/or any upgrades or
changes made by Tenant in the Plans and Specifications for which Tenant would be
obligated to pay pursuant to the terms and conditions hereof, in such manner as
Tenant may elect). Upon substantial completion of the Improvements, Landlord
shall deliver to Tenant a bill for all amounts expended in connection with the
Allowance Work and/or such upgrades or changes in excess of the Maximum
Allowance, and Tenant agrees to pay such bill in full to Landlord within ten
(10) calendar days following receipt of such bill. If the actual aggregate cost
attributable to the Allowance Work, less any cost savings resulting solely from
any reduction in the scope of the Plans and Specification made by Tenant (the
"Net Work Cost"), is less than the Maximum Allowance, the difference between the
Maximum Allowance and such Net Work Cost (such difference being referred to
herein as the "Net Savings"), up to a maximum equal to the Net Combined Cost,
shall be credited by Landlord against the Net Combined Cost owing from Tenant to
Landlord pursuant to part (a) of this Special Stipulation 4 above. Tenant shall
not be entitled to any payment or other remuneration from Landlord for any Net
Savings in excess of The Net Combined Cost. For an illustration of the operation
of this Stipulation 4 (and for illustration purposes only), if (i) the Net
Combined Cost under subparagraph (a) above is $700,000.00, and (ii) the actual
aggregate cost attributable to the Allowance Work is $300,000.00, and there is a
cost savings resulting solely from a reduction in the scope of the Plans and
Specification made by Tenant equal to $100,000.00, for a Net Work Cost of
$200,000.00, then the Net Savings would be calculated as follows: $290,000.00
(the Maximum Allowance) - $200,000.00 (the Net Work Cost) = $90,000.00 (the Net
Savings), and Tenant would only be responsible for reimbursing Landlord for
$610,000.00 of the Net Combined Cost [i.e., $700,000.00 - $90,000.00 =
$610,000.00]. For purposes of this Special Stipulation 4, the cost of
performance of the Allowance Work shall be deemed to include, but not be limited
to, the cost of plans and specifications, permits and all tenant buildout
attributable or allocable thereto.
(c) After a final determination is made pursuant to this Special Stipulation 4 regarding any amounts or credits owing from one party to the other and after all such payments or credits are made, Landlord and Tenant shall, upon request of either Landlord or Tenant, execute and deliver an amendment and restatement of this Lease which will delete this Special Stipulation 4 in its entirety and any reference elsewhere in this Lease to the provisions of this Special Stipulation 4.
5. Intentionally omitted.
6. Right of First Refusal. So long as the Lease is in full force and effect and no Event of Default has occurred and is then continuing, Landlord hereby grants to Tenant a right of first refusal (the "Right of First Refusal") to expand the Demised Premises to include all or any portion of the remaining 160,000 square feet of space within the Building (the "Refusal Space"), subject to the terms and conditions set forth herein. The Right of First Refusal shall be subject to the following terms and conditions:
(a) Tenant's then current financial condition, as revealed by its most current financial statements (which shall include quarterly and annual financial statements, including income statements, balance sheets, and cash flow statements, as required by Landlord), must demonstrate that Tenant meets financial criteria reasonably acceptable to Landlord.
(c) Subject to the other terms of this Right of First Refusal, after any part of the Refusal Space has or will become "Available Refusal Space" (as defined herein) for leasing by Landlord, Landlord shall not, during the Refusal Period, lease to another tenant that available portion of the Refusal Space without first offering Tenant the right to lease such Refusal Space.
(i) Space shall be deemed to become "Available Refusal Space" in the event Landlord, during the Refusal Period, either (1) receives a bona fide proposal for the lease of some or all of the Refusal Space from a third party that Landlord desires to secure, the terms of which are acceptable to Landlord, or (2) makes a bona fide proposal for the lease of some or all of the Refusal Space to a third party that Landlord desires to secure and that such third party is willing to accept.
(ii) Notwithstanding subsection (c)(i) above, the Refusal Space shall not be deemed to become "Available Refusal Space" if the space is assigned or subleased by the current tenant of the space; or re-let by a current tenant of the space by renewal, extension, or renegotiation.
(d) Consistent with subsection (c) above, Landlord shall not lease any such Available Refusal Space to another tenant unless and until Landlord has first offered the Available Refusal Space to Tenant in writing (the "Offer"). The Offer shall contain the following terms that have been offered by Landlord to the third party and that such third party is willing to accept, or by the third party to Landlord and such terms are acceptable to Landlord: (i) a description of the Available Refusal Space (which description shall include the square footage amount and location of such Available Refusal Space) and an attached floor plan that shows the Available Refusal Space; (ii) the date on which Landlord expects the Available Refusal Space to be leased; (iii) the Base Rent for the Available Refusal Space; and (iv) the increase in Tenant's Operating Expense Percentage as defined in Paragraph 1(j) of the Lease. Upon receipt of the Offer, Tenant shall have the right, for a period of three (3) business days after receipt of the Offer, to exercise the Right of First Refusal by giving Landlord written notice that Tenant desires to lease the Available Refusal Space upon the terms and conditions as are contained in the Offer.
(e) If, within such three (3) business-day period, Tenant exercises the Right of First Refusal, then Landlord and Tenant shall amend the Lease to include the Available Refusal Space subject to the same terms and conditions as the Lease, as modified by the terms and conditions of the Offer.
(f) If, within such three (3) business-day period, Tenant declines or fails to exercise the Right of First Refusal, Landlord shall then have the right to lease the Available Refusal Space as long as Landlord enters into a lease with a third party under the basic terms and conditions contained in the Offer. If Landlord does not enter into a lease with a third party under the terms and conditions contained in the Offer within one hundred eighty (180) days after Tenant receives the Offer, or if Landlord desires to materially alter or modify the terms and conditions of the Offer, Landlord shall be required to present the altered or modified Offer to Tenant pursuant to this Right of First Refusal, in the same manner that the original Offer was submitted to Tenant.
.
(g) In the event that the Available Refusal Space is leased to such a
third party, this Right of First Refusal shall continue throughout the Refusal
Term, but shall be subordinate to any extension or renewal options contained in
said third party lease. Further, if at the end of the term of said third party
lease, said third party tenant desires to remain in the Available Refusal Space,
Landlord shall be entitled to renew said lease and this Right of First Refusal
shall be subject and subordinate to said renewal.
(h) Without limiting the foregoing, Landlord hereby agrees that, if as
of the beginning of the second Lease Year of this Lease or at any time
thereafter during the remainder of the Refusal Period the Refusal Space is or
becomes "Available Offer Space" (as defined herein), Landlord shall provide
Tenant with prompt written notice thereof (provided that IDI shall thereafter be
under no obligation whatsoever to accept, entertain, or negotiate or enter into
any agreement in respect of any such Available Offer Space other than in
accordance with the foregoing right of first refusal provisions of this Special
Stipulation 6, if and when applicable). The Refusal Space shall be deemed to be
"Available Offer Space" if and when there exists no written lease or occupancy
agreement in full force and effect with respect thereto, provided that the
Refusal Space shall not be deemed to be "Available Offer Space" if the space is
(a) assigned or subleased by the current tenant of the space; or (b) re-let by
the current tenant of the space by renewal, extension, or renegotiation or (c)
leased on a temporary basis for a period of less than twelve (12) months without
any right to extend.
(i) This Right of First Refusal is personal to barnesandnoble.com llc
(and any assignee pursuant to part (ii) of the first sentence of subsection
29(b) of this Lease) and shall become null and void upon the occurrence of an
assignment of the Lease (except for an assignment allowed without Landlord's
consent under part (ii) of the first sentence of subsection 29(b) of this Lease)
or a sublet of all of the Demised Premises (other than pursuant to part (i) of
the first sentence of subsection 29(b) of the Lease).
7. Right of First Notice.
(a) So long as the Lease is in full force and effect and no Event of Default has occurred and is then continuing, and so long as Industrial Developments International (Tennessee), L.P. ("IDI") is the "Landlord" under this Lease, IDI hereby agrees to notify Tenant in writing prior to IDI 's sale, lease or commencement of development of the adjacent site within the Project located to the west of the Building, which site is currently owned by IDI and is designated as the "Building A Site" on the Site Plan. Tenant shall have the right to respond to such notice, within ten (10) calendar days after IDI 's delivery of such notice, by delivering to IDI a proposal for the lease (including an expansion of the Building onto the Building A Site) or purchase of such site by Tenant. Tenant hereby acknowledges that IDI shall be under no obligation whatsoever to accept, entertain, or negotiate or enter into any agreement in respect of, Tenant's proposal. If within such ten (10)-day period, Tenant declines or fails to submit such proposal, or IDI and Tenant do not enter into any binding agreement to the contrary, then IDI shall be entitled to proceed with the sale, lease or development of the Building A Site upon such terms and conditions as IDI may elect in its sole and absolute discretion, and shall no longer be subject to this Special Stipulation 7. Tenant's right to receive notice of the sale, lease or development of the Building A Site is personal to barnesandnoble.com llc (and any assignee pursuant to part (ii) of the first sentence of subsection 29(b) of this Lease) and shall become null and void upon the occurrence of an assignment of the Lease (except for an assignment allowed without Landlord's consent under part (ii) of the first sentence of subsection 29(b) of this Lease) or a sublet of all of the Demised Premises (other than pursuant to part (i) of the first sentence of subsection 29(b) of the Lease).
(b) The following transactions shall be excluded from IDI's obligation to provide Tenant with the notice set forth in subsection (a) above:
(i) A sale of the Building A Site by foreclosure or transfer in lieu of foreclosure of a deed to secure debt loan.
(ii) A sale of the Building A Site to the appropriate condemning authority pursuant to eminent domain or under threat of eminent domain.
8. PILOT Program. Tenant shall have the right to attempt to reduce the real estate taxes and other impositions for the Demised Premises by participating in the Payment In Lieu Of Taxes ("PILOT Program") available through the City of Memphis and Shelby County, Tennessee. Tenant shall be responsible for preparing and filing the application for such PILOT Program and paying all fees in connection therewith. Landlord will cooperate with Tenant (which cooperation shall include attendance at meetings or hearings, supplying supporting documentation and executing documents reasonably required to obtain the benefits of the Pilot Program) in its attempt to participate in the PILOT Program but Landlord shall not be obligated to incur any expenses in connection with such cooperation. Tenant shall promptly reimburse to Landlord any and all of Landlord's expenses related to the PILOT Program, including, but not limited to, attorneys' fees and the cost of a leasehold title insurance policy insuring Landlord's interest in the Demised Premises if the PILOT Program requires Landlord to convey title to the Building (any such conveyance to be subject to Bank of America's, or any other then current Lender's, prior written consent, which consent Landlord hereby agrees to diligently and in good faith pursue, and, if so consented to, to be subject to Bank of America's, or such other Lender's, Mortgage; provided, however, that in the event any such Lender does not consent to any such conveyance upon the terms and conditions set forth herein, Landlord shall and does hereby agree promptly to pay the note evidenced by any such Mortgage, and to satisfy or release the Building from the lien of such Mortgage, in full). Tenant agrees to prepare and file such application and pursue participation of the Demised Premises in the PILOT Program in a manner reasonably acceptable to Landlord so as to minimize to the greatest extent reasonably possible any adverse affect on Landlord's ability to sell, finance or market the Demised Premises. If the City of Memphis or Shelby County, Tennessee elects not to include the Demised Premises in the PILOT Program or Tenant is unable to qualify the Demised Premises for participation in the PILOT Program, Tenant shall nevertheless remain fully obligated to pay the real estate taxes and other impositions as described in Section 6 of this Lease without any change or reduction in such obligations and such Tenant's obligations under this Lease shall not be affected in any way whatsoever. In the event that Tenant is successful in making the Demised Premises part of the PILOT Program, (a) Landlord shall pass through to Tenant all reductions or abatements applicable to the Demised Premises, and (b) Landlord and Tenant agree and acknowledge that:
(i) Participation in the PILOT Program requires Landlord to convey title to the Demised Premises to The Industrial Development Board of the City of Memphis and County of Shelby, Tennessee (the "IDB") with a leaseback of the Demised Premises to Landlord (the "PILOT Lease") and thus, this Lease shall automatically become a sublease for the term of the PILOT Lease and subject to the terms and conditions of the PILOT Lease. Tenant shall execute any and all documents reasonably necessary to confirm the status of this Lease as a sublease of the PILOT Lease, and that this Lease shall survive and become a prime lease if the Term shall extend beyond the term of the PILOT Lease.
(iii) The documents to be executed by Landlord to implement the PILOT Program must be in a form reasonably acceptable to Landlord. The PILOT Lease must contain an option in favor of Landlord to purchase the Demised Premises for One Dollar (or such greater amount acceptable to Landlord and Tenant, which shall be paid by Tenant) (the "Option") and Landlord shall receive a leasehold title insurance policy, the cost of which shall be paid by Tenant, insuring Landlord's interest as tenant under the PILOT Lease and the Option.
9. Measurement of Demised Premises. Within sixty (60) calendar days after
substantial completion of the Demised Premises, either party may have the
Demised Premises and Building measured by a licensed architect other than the
project architect for the initial design of the Demised Premises, based on a
"drip-line" measurement from the outside of the exterior walls of the Building
and the Demised Premises and to the middle of any demising wall of the Demised
Premises. The architect shall be subject to the other party's prior approval,
which approval shall not be unreasonably withheld or delayed. The square footage
so certified by such architect shall conclusively determine the square footage
of the Building (the "Building Square Footage") and the square footage of the
Demised Premises (the "Demised Premises Square Footage") for all purposes under
this Lease, including, without limitation, calculation of Annual Base Rent and
Monthly Base Rent Installments. If the Building Square Footage and the Demised
Premises Square Footage differ from the amounts set forth in Sections 1(b) and
1(c) above, the Annual Base Rent and Monthly Base Rent Installments shall be
adjusted on the basis of the square footage of the Building and the Demised
Premises so certified by such architect, using the rental rates per square foot
set forth in Section 1(d) above. In addition, Tenant's Operating Expense
Percentage in Section 1(j) shall be adjusted as necessary. If neither party
elects to have the Demised Premises and Building measured in accordance with
this Special Stipulation 9, then the square footage of the Demised Premises and
Building shall be deemed to be as set forth in Sections 1(b) and 1(c) above.
10. Operating Expense Exclusions. Notwithstanding any contrary provision in the Lease, Operating Expenses for any calendar year shall exclude (in addition to any exclusions set forth in Section 6 of this Lease) the following:
(a) work that Landlord performs for any other tenant or prospective tenant of the Project;
(b) repairs or other work (including rebuilding) occasioned by fire, windstorm or other casualty or by condemnation to the extent that Landlord is reimbursed by insurance proceeds or would have been reimbursed if Landlord had maintained the insurance policies required herein;
(c) any costs that are separately charged to and payable by tenants or for which Landlord is compensated by insurance proceeds or warranties (or would have been compensated if Landlord had maintained the insurance policies required herein);
(d) leasing commissions and expenses of procuring tenants, including lease concessions;
(e) advertising or promotional costs including advertising or promotional costs incurred by any owners' or tenant association;
(f) depreciation, except as provided herein, and except on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party where such depreciation would otherwise have been included in the charge for such third party's services, all as determined in accordance with GAAP, and when depreciation is permitted or required, the item shall be amortized over its reasonably anticipated useful life;
(g) interest on debts or amortization on any mortgage or other debt instrument encumbering the Building;
(h) rent payable under any lease to which this Lease is subject;
(i) costs and expenses of enforcing leases against tenants, including legal fees;
(j) any administrative fee, office overhead and/or managing agents' commissions, and salaries of off-premises personnel (other than maintenance personnel, which shall be prorated on a reasonable basis to account for any other Buildings owned by Landlord and maintained by such maintenance personnel);
(k) expenses resulting from any violation by Landlord of the terms of any lease of space in the Project or of any ground or underlying lease or any mortgage;
(m) expenses for vacant or vacated space, including utility, security and renovating costs for such space;
(n) reserves for future expenses;
(o) all costs and expenses associated with compliance with Environmental Laws; and
(p) assessments under the Declaration.
For purposes of determining Tenant's share of Operating Expenses, but without limiting anything in Section 6(c) of this Lease, taxes shall not include any: (1) income, excise, profits, estate, inheritance, succession, gift, transfer, franchise, capital, or other tax or assessment upon Landlord; (2) fine, penalty, cost or interest for any tax or assessment, or part thereof, which Landlord or Lender failed to timely pay (except if same are caused solely by Tenant's failure to timely pay its taxes); (3) assessment for a public improvement arising from the initial construction of the Building or Project; and (4) fees imposed upon Landlord in connection with Landlord's development of the Building and/or Project. All assessments imposed during the Term which are permitted to be included within taxes hereunder shall, for the purposes of computing Tenant's share of Operating Expenses, be deemed to have been paid in the maximum number of installments permitted by the applicable taxing authority.
11. Inspection Rights.
(a) Landlord's books and records pertaining to the calculation of Operating Expenses for any calendar year within the Term may be inspected by Tenant (or by an independent certified accountant) at Tenant's expense, at any reasonable time within one (1) year after Tenant's receipt of Landlord's statement for Operating Expenses; provided that Tenant shall give Landlord not less than fifteen (15) days' prior written notice of any such inspection. If Landlord's calculation of Tenant's share of Operating Expenses for the inspected calendar year was incorrect, then Tenant shall be entitled to a credit against future Base Rent for said overpayment (or a refund of any overpayment if the Term has expired) or Tenant shall pay to Landlord the amount of any underpayment, as the case may be. If Tenant's inspection proves that Landlord's calculation of Tenant's share of Operating Expenses for the inspected calendar year resulted in an overpayment by more that five percent (5%) of Tenant's share, Landlord shall also pay the reasonable fees and expenses of Tenant's independent professionals, if any, conducting said inspection.
(b) All of the information obtained through Tenant's inspection with respect to financial matters (including, without limitation, costs, expenses, income) and any other matters pertaining to Landlord, the Demised Premises, the Building and/or the Project as well as any compromise, settlement, or adjustment reached between Landlord and Tenant relative to the results of the inspection shall be held in strict confidence by Tenant and its officers, agents, and employees; and Tenant shall cause its independent professionals and any of its officers, agents or employees to be similarly bound. The obligations within this subsection (b) shall survive the expiration or earlier termination of the Lease.
12. Parking. Landlord acknowledges and agrees that Tenant shall have the exclusive use of (i) forty-five (45) loading docks serving the Demised Premises, and (ii) the parking area located within that portion of the Building Common Area labeled "Tenant's Exclusive Parking Area" on Exhibit A (which shall contain approximately 300 parking spaces). During the initial Term or any extended term of this Lease, Tenant shall have the right to construct and maintain, at its sole cost and expense, a fence either around Tenant's Exclusive Parking Area or in such a manner as to divide and separate it from the remainder of the Building Common Area. Any such construction shall be performed pursuant to plans and specifications reasonably satisfactory to Landlord and in compliance with any and all applicable laws, statutes, ordinances, regulations and protective covenants (including any architectural review requirements thereof). If Tenant elects to install any such fence, Tenant shall, at its sole cost and expense, keep and maintain such fence in good condition and repair, and shall, to the extent any such fencing fully encloses any portions of the Building Common Area, provide Landlord with access to such portions of the Building Common Area in order to perform Landlord's repair, replacement and maintenance obligations with respect thereto. Nothing herein shall limit Tenant's obligation to pay its proportionate share of Operating Expenses for the entire Building Common Area pursuant to Section 6 of this Lease. If Tenant should fail to perform its obligations in the immediately preceding sentence as to maintenance of the fencing, Landlord shall have the right, following reasonable prior notice to Tenant and Tenant's failure to cure or to undertake to cure such failure and to diligently pursue same to completion, to enter into any such fenced in area, without liability or trespass therefor, and to perform such obligations of Tenant, and Tenant shall reimburse Landlord upon demand for all reasonable amounts incurred by Landlord in so doing, which amounts shall bear interest at the lesser of (i) the maximum interest rate allowed by law or (ii) a rate of fifteen percent (15%) per annum, from the date of such demand by Landlord until paid. prior to the expiration of the Term or within ten (10) days following any earlier termination of this Lease, Tenant shall, at Landlord's option, remove any such fencing and repair any damage to the Building or the Building Common Area resulting from such removal, all at Tenant's sole cost and expense. The obligations of Tenant in this Special Stipulation 12 which, by their nature, are to survive the expiration or any earlier termination of the Lease, shall so survive. Landlord agrees that, during the Term of this Lease, it will not construct or permit to be constructed any building,
13. Building Compliance With Law. Landlord represents and warrants to Tenant that, to Landlord's actual knowledge, the design and construction of the Building and the Improvements materially complies with all applicable federal, state, county and municipal laws, ordinances and codes in effect as of the Lease Commencement Date relating to warehousing and distribution buildings similar to the Building generally and/or relating to Tenant's use of the Demised Premises in accordance with the Operational Plan.
14. Landlord Insurance.
(a) Landlord shall maintain at all times during the Term of this Lease, with such deductible as Landlord in its sole judgment determines advisable, insurance on the "All-Risk" or equivalent form on a Replacement Cost Basis against loss or damage to the Building. Such insurance shall be in the amount of 80% of the replacement value of the Building (excluding all fixtures and property required to be insured by Tenant under this Lease).
(b) Landlord shall maintain at all times during the Term commercial liability insurance with limits at least equal to the amount as Tenant is required to maintain pursuant to Section 8(a)(i) of this Lease.
These Rules and Regulations have been adopted by Landlord for the mutual benefit and protection of all the tenants of the Building in order to insure the safety, care and cleanliness of the Building and the preservation of order therein. In the event of any conflict between the terms of this Exhibit D and the terms of the Lease, the terms of the Lease shall control.
1. The sidewalks shall not be obstructed or used for any purpose other than ingress and egress. No tenant and no employees of any tenant shall go upon the roof of the Building without the consent of Landlord.
2. No awnings or other projections shall be attached to the outside walls of the Building without Landlord's prior written consent, which consent shall not be unreasonably withheld.
3. The plumbing fixtures shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags or other substances, including Hazardous Substances, shall be thrown therein.
4. No tenant shall cause or permit any objectionable or offensive odors to be emitted from the Demised Premises.
5. The Demised Premises shall not be used for lodging or sleeping or for any immoral or illegal purposes.
6. No tenant shall make, or permit to be made any unseemly or disturbing noises, sounds or vibrations or disturb or interfere with tenants of this or neighboring buildings or premises or those having business with them, except warehouse noises and sounds customarily associated with operation of a warehouse facility for the uses permitted in this Lease.
7. Each tenant must, upon the termination of this tenancy, return to Landlord all keys of stores, offices, and rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys so furnished, such tenant shall pay to Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such change.
8. Canvassing, soliciting and peddling in the Building and the Project are prohibited and each tenant shall cooperate to prevent such activity.
9. Landlord will direct electricians as to where and how telephone or telegraph wires are to be introduced. No boring or cutting for wires or stringing of wires will be allowed without written consent of Landlord, which consent is not to be unreasonably withheld or delayed.
10. Parking spaces associated with the Building are intended for the exclusive use of passenger automobiles. Except for intermittent deliveries, no vehicles other than passenger automobiles may be parked in a parking space without the express written permission of Landlord. Trucks and tractor trailers may only be parked at designated areas of the Building. Trucks and tractor trailers shall not block access to the Building.
11. No tenant shall use any area within the Project for storage purposes other than the interior of the Demised Premises.
The undersigned, Secretary of BARNESANDNOBLE.COM LLC, a Delaware limited liability company ("Tenant"), hereby certifies as follows to Industrial Developments International (Tennessee), L.P., a Georgia limited partnership ("Landlord"), in connection with Tenant's proposed lease of premises in Building G, at Chickasaw Distribution Center, Shelby County, Tennessee (the "Premises"):
1. Tenant is duly organized, validly existing and in good standing under the laws of the State of Delaware, and has applied for qualification to do business in the State of Tennessee (and will provide Landlord with evidence of such qualification having been achieved within fifteen (15) days of the Lease Date).
2. That the following named persons, acting individually, are each authorized and empowered to negotiate and execute, on behalf of Tenant, a lease of the Premises and that the signature opposite the name of each individual is an authentic signature:
-------------------- -------------------- ---------------------
(name) (title) (signature)
-------------------- -------------------- ---------------------
(name) (title) (signature)
-------------------- -------------------- ---------------------
(name) (title) (signature)
|
3. That the foregoing authority was conferred upon the person(s) named above by the Board of Directors of Tenant's managing member, at a duly convened meeting held _____________, 19___.
The undersigned, Secretary of IDI (Tennessee), Inc., a Georgia corporation, as sole general partner of INDUSTRIAL DEVELOPMENTS INTERNATIONAL (TENNESSEE), L.P., a Georgia limited partnership ("Landlord"), hereby certifies as follows to barnesandnoble.com llc, a Delaware limited liability company ("Tenant"), in connection with Tenant's proposed lease of premises in Building G, at Chickasaw Distribution Center, Shelby County, Tennessee (the "Premises"):
1. Landlord is duly formed, validly existing and in good standing under the laws of the State of Georgia, and duly qualified to do business in the State of Tennessee.
2. That the following named persons, acting individually, are each authorized and empowered to negotiate and execute, on behalf of IDI (Tennessee), Inc., as the general partner of Landlord, a lease of the Premises and that the signature opposite the name of each individual is an authentic signature:
-------------------- -------------------- ---------------------
(name) (title) (signature)
-------------------- -------------------- ---------------------
(name) (title) (signature)
-------------------- -------------------- ---------------------
(name) (title) (signature)
|
3. Landlord has obtained all requisite partnership consent to enter into the lease of the Premises and IDI (Tennessee), Inc. is authorized to execute the lease on behalf of Landlord.
General Requirements. All signs, including directional and temporary signs, must be approved in writing by the Architectural Committee prior to installation. The location, size, color and construction of signs must be in keeping with the character of the park. Unless otherwise approved in writing by the Architectural Committee, only one (1) Structure-mounted sign per tenant is acceptable. Additionally, unless otherwise approved in writing by the Architectural Committee, the only ground-mounted signs that are permissible are those belonging to a tenant who occupies more than forty percent (40%) of the total square footage of the Structure located on a particular Lot. Except as set forth herein, only signs identifying the occupant's name shall be permitted. All signs must be either attached to the Structure or ground-mounted and adhere to the guidelines set forth herein.
Structure-Mounted Signs. All signs to be mounted on a Structure shall:
(a) be installed so as to be parallel to and contiguous with the Structure wall;
(b) not project more than fifteen (15) inches from the Structure wall;
(c) at its tallest and widest points, the sign dimensions shall not exceed 66% of the height, nor 66% of the width, of the face of the structure above the storefront;
(d) have letters constructed as separate pieces of individual construction (pieces may match bn.com's logo);
(e) be of a design and material compatible with the design of the structure on which it will be installed;
(f) be of a color matching the structures' primary accent color (i.e., painted reveal) or a dark bronze color to match the storefronts. The sign colors may match bn.com's prototype colors including the orange accent; and
(g) not contain any internal lighting, unless the Architectural Committee allows any other tenant to do so.
Ground-Mounted Signs. All ground-mounted signs shall:
(a) be installed at least ten (10) feet away from any boundary of the Lot in which sign is erected;
(b) not be closer than three (3) feet from a driveway or parking area serving the lot in which such sign is to be installed;
(c) not have a gross surface area of more than fifty (50) square feet;
(d) not exceed six (6) feet in height from ground elevation; and
(e) be connected to the ground along the entire base length of the sign;
(f) have a base being of a design and material similar to that of the Structure located on the Lot on which such sign is to be installed, with the face of such sign being of a design and material compatible with the design of said Structure;
(g) be surrounded by landscaping; and
(h) not contain any internal lighting.
This Instrument Prepared By And
Return To:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Tammi D. Parker, Esq.
This Subordination, Non-Disturbance and Attornment Agreement (this "Agreement") dated ___________________, 1999, is made among barnesandnoble.com llc ("Tenant"), Industrial Developments International (Tennessee), L.P. ("Landlord"), and Bank of America, N.A., a national banking association formerly known as NationsBank, N.A., a national banking association ("Mortgagee").
WHEREAS, Mortgagee is the owner of a promissory note (herein, as it may have been or may be from time to time renewed, extended, amended or supplemented, called the "Note") dated September 30, 1998, executed by Landlord, payable to the order of Mortgagee, bearing interest and payable as therein provided, and secured by, among other things, a Tennessee Construction Mortgage, Deed of Trust, Assignment, Security Agreement and Financing Statement (herein, as it may have been or may be from time to time renewed, extended, amended or supplemented, called the "Mortgage"), recorded or to be recorded in the real property records of Shelby County, Tennessee, covering, among other property, the land (the "Land") described in Exhibit "A" of the Mortgage, and the improvements ("Improvements") now and hereafter located thereon (such Land and Improvements being herein together called the "Property");
WHEREAS, Tenant is the tenant under a lease from Landlord dated ____________, 1999 (herein, as it may from time to time be renewed, extended, amended or supplemented, called the "Lease"), covering a portion of the Property (said portion being herein referred to as the "Premises"); and
WHEREAS, the term "Landlord" as used herein means the present landlord under the Lease or, if the landlord's interest is transferred in any manner, the successor(s) or assign(s) occupying the position of landlord under the Lease at the time in question;
THEREFORE, in consideration of the mutual agreements herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Subordination. Tenant agrees and covenants that the Lease and the
rights of Tenant thereunder, all of Tenant's right, title and interest in and to
the property covered by the Lease, and any lease thereafter executed by Tenant
covering any part of the Property, are and shall be subordinate and inferior to
(a) the Mortgage and the rights of Mortgagee thereunder, and all right, title
and interest of Mortgagee in the Property, and (b) all other security documents
now or hereafter securing payment of any indebtedness of the Landlord (or any
prior landlord) to Mortgagee which cover or affect the Property (the "Security
Documents"). This Agreement is not intended and shall not be construed to
subordinate the Lease to any mortgage, deed of trust or other security document
other than those referred to in the preceding sentence, securing the
indebtedness to Mortgagee. Without limitation of any other provision hereof,
Mortgagee may, at its option and without joinder or further consent of Tenant,
Landlord, or anyone else, at any time after the date hereof subordinate the lien
of the Mortgage (or any other lien or security interest held by Mortgagee which
covers or affects the Property) to the Lease by executing an instrument which is
intended for that purpose and which specifies such subordination; and, in the
event of any such election by Mortgagee to subordinate, Tenant will execute any
documents required to
2. Non-Disturbance. Mortgagee agrees that so long as the Lease is in full force and effect and Tenant is not in default in the payment of rent, additional rent or other payments or in the performance of any of the other terms, covenants or conditions of the Lease on Tenant's part to be performed (beyond the period, if any, specified in the Lease within which Tenant may cure such default),
a. Tenant's possession of the Premises under the Lease shall not be disturbed or interfered with by Mortgagee in the exercise of any of its rights under the Mortgage, including any foreclosure or conveyance in lieu of foreclosure, and
b. Mortgagee will not join Tenant as a party defendant for the purpose of terminating Tenant's interest and estate under the Lease in any proceeding for foreclosure of the Mortgage.
3. Attornment.
a. Tenant covenants and agrees that in the event of foreclosure of the Mortgage, whether by power of sale or by court action, or upon a transfer of the Property by conveyance in lieu of foreclosure (the purchaser at foreclosure or the transferee in lieu of foreclosure, including Mortgagee if it is such purchaser or transferee, being herein called "New Owner"), Tenant shall attorn to the New Owner as Tenant's new landlord, and agrees that the Lease shall continue in full force and effect as a direct lease between Tenant and New Owner upon all of the terms, covenants, conditions and agreements set forth in the Lease and this Agreement, except for provisions which are impossible for New Owner to perform; provided, however, that in no event shall the New Owner be:
(1) liable for any act, omission, default, misrepresentation, or breach of warranty, of any previous landlord (including Landlord) or obligations accruing prior to New Owner's actual ownership of the Property;
(2) subject to any offset, defense, claim or counterclaim which Tenant might be entitled to assert against any previous landlord (including Landlord);
(3) bound by any payment of rent, additional rent or other payments, made by Tenant to any previous landlord (including Landlord) for more than one (1) month in advance;
(4) bound by any amendment, or modification of the Lease hereafter made, or consent by any previous landlord (including Landlord) under the Lease to any assignment or sublease hereafter granted, without the written consent of Mortgagee; or
(5) liable for any deposit that Tenant may have given to any previous landlord (including Landlord) which has not, as such, been transferred to New Owner.
b. The provisions of this Agreement regarding attornment by Tenant shall be self-operative and effective without the necessity of execution of any new lease or other document on the part of any party hereto or the respective heirs, legal representatives, successors or assigns of any such party. Tenant agrees, however, to execute and deliver at any time and from time to time, upon the request of Landlord or of any holder(s) of any of the indebtedness or other obligations secured by the Mortgage, any instrument or certificate which, in the reasonable judgment of Landlord or of such holder(s), may be necessary or appropriate in any such foreclosure proceeding or otherwise to evidence such attornment, including, if requested, a new lease of the Premises on the same terms and conditions as the Lease for the then unexpired term of the Lease.
4. Estoppel Certificate. Tenant agrees to execute and deliver from time to time, upon the request of Landlord or of any holder(s) of any of the indebtedness or other obligations secured by the Mortgage, a certificate regarding the status of the Lease, consisting of statements, if true (or if not, specifying why not), () that the Lease is in full force and effect, (b) the date through which
5. Acknowledgment and Agreement by Tenant. Tenant acknowledges and agrees as follows:
a. Tenant acknowledges that Landlord has executed and delivered to Mortgagee in connection with the financing of the Property an Assignment of Lessor's Interest in Leases. Tenant hereby expressly consents to such assignment and agrees that such assignment shall, in all respects, be superior to any interest Tenant has in the Lease of the Property, subject to the provisions of this Agreement. Tenant will not amend, alter, terminate, or waive any provision of, or consent to the amendment, alteration, termination or waiver of any provision of the Lease without the prior written consent of Mortgagee, and no termination of the Lease, whether pursuant to the terms of the Lease or otherwise, will be effective without the prior written consent of Mortgagee. Tenant shall not prepay any rents or other sums due under the lease for more than one (1) month in advance of the due date therefor. Tenant acknowledges that Mortgagee will rely upon this instrument in connection with such financing.
b. Mortgagee, in making any disbursements to Landlord, is under no obligation or duty to oversee or direct the application of the proceeds of such disbursements, and such proceeds may be used by Landlord for purposes other than improvement of the Property.
c. From and after the date hereof, in the event of any act or omission by Landlord which would give Tenant the right, either immediately or after the lapse of time, to terminate the Lease or to claim a partial or total eviction, Tenant will not exercise any such right (i) until it has given written notice of such act or omission to the Mortgagee; and (ii) until the same period of time as is given to Landlord under the Lease to cure such act or omission shall have elapsed following such giving of notice to Mortgagee and following the time when Mortgagee shall have become entitled under the Mortgage to remedy the same, but in any event 30 days after receipt of such notice or such longer period of time as may be necessary to cure or remedy such default, act, or omission including such period of time necessary to obtain possession of the Property and thereafter cure such default, act, or omission, during which period of time Mortgagee shall be permitted to cure or remedy such default, act or omission; provided, however, that Mortgagee shall have no duty or obligation to cure or remedy any breach or default. It is specifically agreed that Tenant shall not, as to Mortgagee, require cure of any such default which is personal to Landlord, and therefore not susceptible to cure by Mortgagee.
d. In the event that Mortgagee notifies Tenant of a default under the Mortgage, Note, or Security Documents and demands that Tenant pay its rent and all other sums due under the Lease directly to Mortgagee, Tenant shall honor such demand and pay the full amount of its rent and all other sums due under the Lease directly to Mortgagee or as otherwise required pursuant to such notice beginning with the payment next due after such notice of default, without inquiry as to whether a default actually exists under the Mortgage, Security Documents or otherwise in connection with the Note, and notwithstanding any contrary instructions of or demands from Landlord.
e. Tenant shall send a copy of any notice or statement under the Lease to Mortgagee at the same time such notice or statement is sent to Landlord if such notice or statement has a material impact on the economic terms, operating covenants or duration of the Lease.
f. Tenant has no right or option of any nature whatsoever, whether pursuant to the Lease or otherwise, to purchase the Premises or the Property, or any portion thereof or any interest therein, and to the extent that Tenant has had, or hereafter acquires, any such right or option, same is hereby acknowledged to be subject and subordinate to the Mortgage and is hereby waived and released as against Mortgagee.
g. This Agreement satisfies any condition or requirement in the Lease relating to the granting of a non-disturbance agreement and Tenant waives any requirement to the contrary in the Lease.
h. Mortgagee and any New Owner shall have no liability to Tenant or any other party for any conflict between the provisions of the Lease and the provisions of any other lease affecting the Property, including, but not limited to, any provisions relating to exclusive or
i. Mortgagee and any New Owner shall have no obligation nor incur any liability with respect to the erection or completion of the improvements in which the Premises are located or for completion of the Premises or any improvements for Tenant's use and occupancy, either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space, pursuant to any expansion rights contained in the Lease.
j. Mortgagee and any New Owner shall have no obligation nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession.
k. In the event that Mortgagee or any New Owner shall acquire title to the Premises or the Property, Mortgagee or such New Owner shall have no obligation, nor incur any liability, beyond Mortgagee's or New Owner's then equity interest, if any, in the Property or the Premises, and Tenant shall look exclusively to such equity interest of Mortgagee or New Owner, if any, for the payment and discharge of any obligations imposed upon Mortgagee or New Owner hereunder or under the Lease or for recovery of any judgment from Mortgagee, or New Owner, and in no event shall Mortgagee, New Owner, nor any of their respective officers, directors, shareholders, agents, representatives, servants, employees or partners ever be personally liable for such judgment.
l. Nothing herein contained is intended, nor shall it be construed, to abridge or adversely affect any right or remedy of Landlord under the Lease in the event of any default by Tenant in the payment of rent and/or any other sums due under the Lease or in the performance of any of the other terms, covenants or conditions of the Lease on Tenant's part to be performed.
m. Landlord has not agreed to any abatement of rent or other sums or period of "free rent" for the Premises unless same is specifically provided in the Lease, and Tenant agrees that in the event Mortgagee, or any New Owner becomes the owner of the Property, no agreement for abatement of rent or any other sum not specifically provided in the Lease will be binding on Mortgagee or New Owner.
n. Tenant has never permitted, and will not permit, the generation, treatment, storage or disposal of any hazardous substance as defined under federal, state, or local law, on the Premises or Property except for such substances of a type and only in a quantity normally used in connection with the occupancy or operation of buildings (such as non-flammable cleaning fluids and supplies normally used in the day to day operation of first class establishments similar to the Improvements), which substances are being held, stored, and used in strict compliance with federal, state and local laws. Tenant shall be solely responsible for and shall reimburse Landlord for any loss, liability, claim or expense, including without limitation, cleanup and all other expenses, that Landlord may incur by reason of Tenant's violation of the requirements of this Paragraph 5(n).
6. Acknowledgment and Agreement by Landlord. Landlord, as landlord under the Lease and grantor under the Mortgage, acknowledges and agrees for itself and its heirs, representatives, successors and assigns, that: (a) this Agreement does not constitute a waiver by Mortgagee of any of its rights under the Mortgage, Note, or Security Documents, or in any way release Landlord from its obligations to comply with the terms, provisions, conditions, covenants, agreements and clauses of the Mortgage, Note, or Security Documents; (b) the provisions of the Mortgage, Note, or Security Documents remain in full force and effect and must be complied with by Landlord; and (c) Tenant is hereby authorized to pay its rent and all other sums due under the Lease directly to Mortgagee upon receipt of a notice as set forth in paragraph 5(d) above from Mortgagee and that Tenant is not obligated to inquire as to whether a default actually exists under the Mortgage, Security Documents or otherwise in connection with the Note. Landlord hereby releases and discharges Tenant of and from any liability to Landlord resulting from Tenant's payment to Mortgagee in accordance with this Agreement. Landlord represents and warrants to Mortgagee that a true and complete copy of the Lease has been delivered by Landlord to Mortgagee.
7. Lease Status. Landlord and Tenant certify to Mortgagee that neither Landlord nor Tenant has knowledge of any default on the part of the other under the Lease, that the Lease is
8. Notices. All notices, requests, consents, demands and other communications required or which any party desires to give hereunder shall be in writing and shall be deemed sufficiently given or furnished if delivered by personal delivery, by telegram, telex, or facsimile, by expedited delivery service with proof of delivery, or by registered or certified United States mail, postage prepaid, at the addresses specified at the end of this Agreement (unless changed by similar notice in writing given by the particular party whose address is to be changed). Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of delivery service or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of telegram, telex or facsimile, upon receipt. Notwithstanding the foregoing, no notice of change of address shall be effective except upon receipt. This Paragraph 8 shall not be construed in any way to affect or impair any waiver of notice or demand provided in this Agreement or in the lease or in any document evidencing, securing or pertaining to the loan evidenced by the Note or to require giving of notice or demand to or upon any person in any situation or for any reason.
9. Miscellaneous.
a. This Agreement supersedes any inconsistent provision of the Lease.
b. Nothing contained in this Agreement shall be construed to derogate from in any way impair, or affect the lien, security interest or provisions of the Mortgage, Note, or Security Documents.
c. This Agreement shall inure to the benefit of the parties hereto, their respective successors and permitted assigns, and any New Owner, and its heirs, personal representatives, successors and assigns; provided, however, that in the event of the assignment or transfer of the interest of Mortgagee, all obligations and liabilities of the assigning Mortgagee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Mortgagee's interest is assigned or transferred; and provided further that the interest of Tenant under this Agreement may not be assigned or transferred without the prior written consent of Mortgagee.
d. THIS AGREEMENT AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TENNESSEE AND APPLICABLE UNITED STATES FEDERAL LAW EXCEPT ONLY TO THE EXTENT, IF ANY, THAT THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED NECESSARILY CONTROL.
e. The words "herein", "hereof", "hereunder" and other similar compounds of the word "here" as used in this Agreement refer to this entire Agreement and not to any particular section or provision.
f. This Agreement may not be modified orally or in any manner other than by an agreement in writing signed by the parties hereto or their respective successors in interest.
g. If any provision of the Agreement shall be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not apply to or affect any other provision hereof, but this Agreement shall be construed as if such invalidity, illegibility, or unenforceability did not exist.
h. If any bankruptcy proceedings shall hereafter commence with
respect to Landlord, and if the Lease is rejected by the trustee pursuant to
Section 365(h) of the United States Bankruptcy Code, Tenant agrees with
Mortgagee (i) not to treat such lease as terminated and (ii) to remain in
possession of the Premises.
STATE OF ____________
COUNTY OF _________
Personally appeared before me, ________________, a Notary Public in and for said State and County duly commissioned and qualified, ______________________ and ______________________, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who upon oath acknowledged that they executed the within instrument for the purposes therein contained and who further acknowledged that they are the ___________________ and _______________ respectively of barnesandnoble.com llc, a Delaware limited liability company (the "Tenant"), and are authorized by the Tenant to execute this instrument on behalf of the Tenant.
Witness my hand, at office, this ____ day of ___________, 1999.
My Commission Expires:
COUNTY OF _________
Personally appeared before me, ________________, a Notary Public in and for the said State and County duly commissioned and qualified, ______________________ and _________________________ with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who upon oath acknowledged that they executed the within instrument for the purposes therein contained and who further acknowledged that they are the ___________________ and __________________ respectively of IDI (Tennessee), Inc., a Georgia corporation and sole general partner of Industrial Developments International (Tennessee), L.P., a Georgia limited partnership (the "Landlord"), and are authorized by IDI (Tennessee), Inc. as sole general partner of the Landlord to execute this instrument on behalf of the Landlord.
Witness my hand, at office, this ____ day of ___________, 1999.
My Commission Expires:
BANK OF AMERICA, N.A., formerly known as NationsBank, N.A.
By:
STATE OF ____________
COUNTY OF _________
Personally appeared before me, ________________, a Notary Public in and for the said State and County duly commissioned and qualified, ___________________, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who upon oath acknowledged that _____________________ executed the within instrument for the purposes therein contained and who further acknowledged that _________________ is the ________________ of Bank of America, N.A., formerly known as NationsBank, N.A. (the "Mortgagee"), and is authorized by the Mortgagee to execute this instrument on behalf of the Mortgagee.
Witness my hand, at office, this ____ day of ___________, 1999.
My Commission Expires:
barnesandnoble.com llc
76 Ninth Avenue
New York, New York 10011
Attn: William Duffy
ADDRESS OF LANDLORD:
Industrial Developments International (Tennessee), L.P.
c/o Industrial Developments International, Inc.
3424 Peachtree Road, N.E., Suite 1500
Atlanta, Georgia 30326
Attn: Vice President - Operations
ADDRESS OF MORTGAGEE:
NationsBank, N.A.
NationsBank Plaza - Sixth Floor
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Real Estate Banking Group
THIS LEASE AGREEMENT is made this 8th day of September, 1999 (the "Commencement Date") between ProLogis Development Services Incorporated, a Delaware corporation, having its principal office at 14100 East 35th Place, Aurora, Colorado 80011 ("Landlord"), and the Tenant named below ("Tenant").
Tenant: barnesandnoble.com llc
Tenant's representative, William F. Duffy, Vice President of Operations
address, and phone no.: 76 Ninth Avenue, 11th Floor
New York, NY 10011
(212) 414-6006
Premises: The Land and the Building, together with (x)
any and all other improvements and structures
(now or hereafter erected) on the Land, and
(y) all of Landlord's right, title and
interest in and to all easements, rights and
other matters appurtenant to the Land or the
Building and in and to any land lying in the
bed of any roads adjacent to the Land.
Project: That certain industrial project commonly known
as Damonte Ranch Trade Center I, which
industrial project is composed of the parcels
of land lying and being in the County of
Washoe, State of Nevada, as more particular
described in Exhibit B annexed hereto,
together with any improvements now or
hereafter erected thereon.
Building: That certain building that is to be erected by
Landlord in accordance with Addendum 2 of this
Lease, which building is to contain
approximately 600,000 rentable square feet of
space.
Land: That certain parcel of land lying and being in
the County of Washoe and State of Nevada, as
more particularly described in Exhibit A
annexed hereto.
|
Common Area Land: That certain parcel of land lying and being in
the County of Washoe and State of Nevada, as
more particularly described in Exhibit C
annexed hereto.
Tenant's Project
Proportionate
Share: 33.96% (subject to downward adjustment as
provided for under this Lease). Tenant's
Project Proportionate Share has been
calculated based on the fraction, the
numerator of which is the square footage of
the Building (for purposes of this estimate is
deemed to be 600,000) and the denominator of
which is the maximum buildable area contained
within the Project (which maximum buildable
area Landlord represents and warrants is, as
of the Commencement Date, 1,766,727 square
feet, it being agreed that (x) Tenant's sole
remedy in the event of a breach of such
representation and warranty shall be a
re-calculation of Tenant's Project
Proportionate Share and a reduction, both
retroactively and prospectively, in the
Additional Rent for the Common Area Land (as
defined below) and (y) in no event shall
Tenant's Project Proportionate Share ever
exceed 33.96%)
Lease Term: Beginning on the Commencement Date and ending
on the last day of the 120th full calendar
month following the Rent Commencement Date (as
hereinafter defined), the term "Lease Term" to
include any renewal or extension terms.
Rent Commencement
Date: Thirty (30) days following "Substantial
Completion of the Base Building Work" (as such
term is defined in Addendum 2).
Initial Monthly Base
Rent: $174,000.00 (subject to adjustment in
accordance with Addendum 1 and the second
paragraph of Paragraph 4).
|
Initial Estimated Monthly
Additional Rent
Payments for the Common
Area Land: $6,000.00 (which is composed of the
Association Fees (estimated at $1,500), the
Property Management Fee (estimated at $3,000),
and the Insurance Fee (estimated at $1,500),
such terms being defined below)
Initial Estimated Monthly
Base Rent and
Additional Rent for Common
Area Land Payments: $180,000.00
Security Deposit: $180,000.00
Broker: Benchmark Associates, Inc./David Haut; C.B.
Richard Ellis/Dave Simonsen
Addenda: Addendum 1 (Base Rent Adjustments); Addendum 2
(Construction); Addendum 3 (Renewal Options);
Addendum 4 (Right of First Offer); Addendum 5
(Letter of Credit)
|
Granting Clause. In consideration of the terms, covenants, and conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord, the Premises, to have and to hold for the Lease Term, subject to the terms, covenants and conditions of this Lease.
Acceptance of Premises. Subject to (i) Punch List items (as defined in Addendum 2), (ii) all of Landlord's obligations and warranties as set forth in Paragraphs 3, 10, 15, 16, 30 and 43 of this Lease, and (iii) any latent defects, Tenant shall accept the Premises in its as-is condition as of the Rent Commencement Date. Except for Punch List Items or as otherwise provided in Paragraphs 3, 10, 15, 16, 30 and 43 of this Lease, in no event shall Landlord have any obligation to repair or cure any defects in the Premises (except for latent defects).
Landlord represents and warrants, to Landlord's knowledge, that:
(i) as of the Commencement Date, there are no deed restrictions, use
restrictions or other restrictive covenants (including, without limitation, the
Declaration (as hereinafter defined) and the other Permitted Encumbrances (as
hereinafter defined)) that would adversely affect Tenant's Intended Use (as
defined below) of the Premises; (ii) on the Rent Commencement Date, Tenant shall
be able to operate in the Premises twenty-four (24) hours a day, seven (7) days
a week, three hundred sixty-five (365) days a year for general warehouse
purposes; (iii) as of the
Use. Tenant may use the Premises for the following uses twenty-four
(24) hours a day, seven (7) days a week, three hundred sixty-five (365) days a
year (such uses for such time periods, collectively, the "Intended Use"): (i) as
a warehouse facility for the purpose of receiving, shipping, storing, processing
and selling products, materials and merchandise (which may include, without
limitation, the receiving, shipping, storing, processing and selling of books,
books on tape, books on computer disk, books on CD-ROM, magazines, periodicals,
computer software, compact discs and other forms of recorded music and
videotapes, together with any other consumer products), (ii) for general,
executive and administrative offices, and (iii) for all lawful uses ancillary to
the uses described in the preceding clauses (i) and (ii) of this sentence. In
addition, Tenant may use the Premises for any other legally permitted use which
shall not reduce the value of the Project. Tenant shall not permit any
objectionable smoke, dust, gas, noise, or vibrations (other than vibrations from
any generator) to emanate from the Premises, or take any other action, that
would constitute a nuisance or would unreasonably disturb, unreasonably
interfere with, or endanger Landlord or any tenants of the Project. Landlord
acknowledges and agrees that Tenant's Intended Use will not violate any of the
restrictions in the preceding sentence.
Except as otherwise expressly set forth in the Lease, including, without limitation, Paragraph 43 of the Lease, Tenant shall comply with all Legal Requirements (as defined below) relating to the Premises. Notwithstanding the foregoing, if (i) a new Legal Requirement is enacted during the Lease Term, and (ii) repairs, alterations or modifications to the Premises are necessary and legally required (i.e. the Premises is not grandfathered) in order for the Premises to comply with such new Legal Requirement, then Landlord shall make those necessary repairs, modifications or alterations to the Premises. Upon completion thereof, (i) Landlord shall furnish Tenant with a statement setting forth the actual out-of-pocket cost to Landlord of such repairs, modifications or alterations to the Premises (together with invoices and other evidence reasonably necessary to corroborate such cost), and (ii) the actual out-of-pocket cost of such repairs,
Base Rent. Tenant shall pay Base Rent in the amount set forth above. The Security Deposit shall be due and payable on the date hereof, and the first month's Base Rent and the first monthly installment of estimated Additional Rent for Common Area Land shall be due and payable on the Rent Commencement Date. Tenant promises to pay to Landlord in advance, without demand, deduction or set-off (except as expressly provided in this Lease), monthly installments of Base Rent on or before the first day of each calendar month succeeding the Rent Commencement Date. Payments of Base Rent for any fractional calendar month shall be appropriately prorated. All payments required to be made by Tenant to Landlord hereunder shall be payable at such address in the United States as Landlord may specify from time to time by written notice delivered in accordance herewith. The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Tenant shall have no right at any time to abate, reduce or set-off any rent due hereunder except as may be expressly provided in this Lease.
Within ten (10) days after the Substantial Completion of the Building Shell (as defined in Addendum 2), Landlord, at Landlord's cost and expense, shall have Landlord's project architect measure the square footage of the Building from dripline to dripline on each side of the exterior of the outer walls of the Building. If the measured square footage of the Building (as finally determined under this paragraph) is less than 600,000 square feet, then this Lease shall be amended to reflect the actual measured square footage of the Building, the monthly Base Rent under the Lease shall be reduced (both retroactively and for the remainder of the Lease Term) by $3.48 per year for each square foot by which the Building is less than 600,000 square feet, and Tenant's Project Proportionate Share and Additional Rent for the Common Area Land shall be adjusted accordingly (both retroactively and for the remainder of the Lease Term). Within 5 days after Landlord's architect determines the square footage of the Building in accordance with the method contained in the first sentence of this paragraph, Landlord shall cause Landlord's project architect to certify to Landlord and Tenant in writing such determination of the square footage of the Building. Tenant's architect may review such certification and if Tenant's architect disputes such measurement, then Landlord's project architect and Tenant's architect shall use good faith efforts to try and resolve the dispute over the measurement. In connection therewith, Tenant's architect shall have the right to measure the Building in accordance with the method of measurement set forth in the first sentence of this paragraph. If the two architects are unable to resolve the dispute over the measurement within 15 days, then the two architects shall choose a third architect who is impartial and independent and the third architect shall measure the total square footage of the Building in accordance with the terms of this paragraph and the third architect's measurement of the square footage of the Building shall be final and binding on both Landlord and Tenant. If the measured square footage of the Building (as finally determined under this paragraph) is equal to or greater than 600,000 square feet, then the Lease shall not be amended or modified.
Additional Rent Payments for the Common Area Land. Landlord will maintain in good order and repair the Common Area Land and Landlord hereby grants to Tenant, its agents, employees and invitees the nonexclusive right to use the Common Area Land in common with other tenants of the Project. Commencing on the Rent Commencement Date, during each month of the Lease Term, on the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12, as reasonably estimated by Landlord from time to time, of Tenant's Project Proportionate Share of the projected Additional Rent for the Common Area Land for the applicable calendar year. Payments thereof for any fractional calendar month or fractional calendar year shall be appropriately prorated. The term "Additional Rent for the Common Area Land" means, for any calendar year all or any part of which occurs during the Lease Term, only the following costs and expenses: (A) the actual charges or assessments levied against the Premises for such calendar year pursuant to the Declaration (the "Association Fee") (it being agreed, however, that (x) the Association Fee for the 12-month period following the Rent Commencement Date shall, for purposes of this Lease, be capped at $.03 per square foot of the
Landlord shall provide Tenant within 120 days following the final day of each calendar year during the Lease Term an itemized statement setting forth in reasonable detail the actual Additional Rent for Common Area Land for such year (which statement shall be accompanied by invoices and such other reasonable corroborating documentation as Tenant may request from time to time). If Tenant's total estimated payments of Additional Rent for Common Area Land on account of any such calendar year are less than Tenant's Project Proportionate Share of actual Additional Rent for the Common Area Land for such year (as limited by the Cap), then Tenant shall pay the difference to Landlord within 30 days after demand, and if more, then Landlord shall retain such excess and credit it against Tenant's next payments due on account of Additional Rent for the Common Area Land (or if there is less than 6 months remaining in the Lease Term, or if the Lease Term has terminated or expired, Landlord shall refund such excess to Tenant). The estimated Additional Rent for the Common Area Land set forth in this paragraph of this Lease and any other operating expenses for the Premises or for Items as set forth in Paragraph 11 of this Lease are only estimates, and Landlord makes no guaranty or warranty that such estimates will be accurate.
Utilities. Tenant shall pay directly to the utility provider servicing the Premises for all water, gas, electricity, heat, light, power, telephone, sewer, sprinkler services, refuse and trash collection, and other utilities and services used on the Premises, all maintenance charges for utilities, and any storm sewer charges or other similar charges for utilities imposed by any
Notwithstanding anything to the contrary contained in this Lease, if an interruption or cessation of utilities results from a cause within the Landlord's reasonable control and the Premises or any portion thereof are not usable by Tenant for the conduct of Tenant's business as a result thereof, Base Rent, the Additional Rental Amount and applicable Additional Rent for Common Area Land shall be abated for the period which commences three (3) business days after the date Tenant gives to Landlord notice of such interruption until such utilities are restored.
Taxes. "Taxes" shall mean all real property taxes, assessments and governmental charges which shall be levied, assessed or imposed against the Premises during the Lease Term; the parties hereby acknowledge that the Premises constitute a separate tax parcel (i.e., Parcel 1 of Parcel 1 of Parcel Map No. 3487, APN: 140-010-09) provided, however, that if, at any time during the Lease Term, the methods of a taxation prevailing on the date hereof shall be altered so that in lieu of, in addition to, or as a substitute for, the whole or any part of the items referred to above now levied, assessed or imposed on real estate or upon the owner or owners of real estate, there shall be levied, assessed or imposed any franchise tax, any excise, transaction, sales for privilege tax, assessment, levy or charge measured by or based, in whole or in part, upon the rents from the Premises the same shall be included within Taxes, provided, however, that the terms of the legislation imposing any such tax, assessment, levy or charge or any other factors, documents or instruments evidence that such tax, assessment, levy or charge was intended to serve as a real estate tax. Notwithstanding the foregoing, "Taxes" shall not include: (A) any inheritance, estate, succession, transfer, gains, mortgage recording, gift, franchise, corporation, income or profit tax or capital levy; and (B) any special non-recurring assessments arising as a result of the development of the Project (and not specifically related to the Premises). Assessments included within Taxes shall, regardless of how actually paid, be deemed to be paid in the maximum number of installments permitted by the taxing authority imposing any such assessment.
Commencing on the Rent Commencement Date and thereafter throughout the Lease Term, Tenant shall, in the manner set forth in this Paragraph 8, pay the Taxes for each tax
Landlord shall cause each taxing authority having jurisdiction over
the Premises to send statements for Taxes directly to Tenant and Tenant shall
make timely payment of all such Taxes, subject to the provisions of Paragraph
8(b) hereof. Tenant shall, upon written request of Landlord, furnish Landlord
with (i) evidence that Taxes have been paid in accordance with this Paragraph
8(b) and 8(c) all correspondence sent to, or received by, Tenant from
governmental authorities regarding Taxes. If Landlord is unable to cause any
such taxing authority to render statements for Taxes directly to Tenant, then,
Landlord, at anytime prior to the end of any Tax Year may deliver to Tenant a
statement for Taxes for such Tax Year. Tenant, for each such Tax Year, shall pay
to Landlord the amount set forth on such statement for such Tax Year in equal
installments in the same number of installments as Taxes are required to be paid
to the such taxing authority, with each such installment being due on the later
to occur of (x) the date that is thirty (30) days prior to the due date of the
corresponding installment of Taxes and (y) the date that is ten (10) business
days after the date that Tenant receives the statement from Landlord. Landlord
shall, together with the provision of any statement to Tenant, provide Tenant
with a copy of any tax bill to which such statement applies. If there shall be
any increase in Taxes for any Tax Year, whether prior to, during or after such
Tax Year, or if there shall be any decrease in Taxes for any such Tax Year,
whether prior to, during or after such Tax Year, then Tenant's payment for Taxes
for such Tax Year shall be recalculated and (i) if there has been an
underpayment, Tenant shall pay to Landlord, within 30 days after Landlord's
request therefor, the amount of such underpayment, or (ii) if there has been an
overpayment, Landlord shall, within 30 days after Tenant's request therefor,
refund to Tenant the amount of such overpayment.
If with respect to any Tax Year for which Tenant shall have made payment of Taxes, Landlord shall receive a refund of any portion of Taxes, Landlord, within 30 days after Tenant's request therefor, shall pay to Tenant the amount of such refund.
Tenant shall, at its sole cost and expense, have the right to file a protest with respect to the assessed valuation of the Premises and commence any administrative or judicial proceeding as may be necessary in connection therewith. Tenant shall keep Landlord informed of the progress of any such proceeding, including, by providing copies of any correspondence and other documents submitted in connection therewith. Landlord, at Tenant's cost and expense, shall fully cooperate with Tenant with respect to any such protest and proceeding, including, without limitation, by promptly providing Tenant with copies of all relevant materials, documents, contracts, invoices and, if necessary, by attending meetings and/or appearing at proceedings. Tenant shall indemnify, defend and hold harmless Landlord from and against all
Insurance. (a) Landlord, throughout the Lease Term, shall maintain
(i) commercial liability insurance, including a contractual liability
endorsement, and (ii) all risk property insurance covering the full replacement
cost of the Building. All insurance to be maintained by Landlord pursuant to
this Paragraph 9, (i) shall be carried in favor of Landlord and shall name
Tenant as an additional insured (for commercial liability insurance only), (ii)
shall be in such form normally carried by prudent owners of premises similarly
situated, due regard given to the type of premises (i.e., size, age, condition),
its construction and its use and occupancy, (iii) shall be issued by domestic
insurance companies, licensed to do business in the State of Nevada and having a
Best's rating of AVIII or better or the then equivalent of such rating and
having a policyholders surplus of at least $100,000,000, and (iv) shall be
written on policies which have a term of not less than one year, and which shall
provide that no cancellation, non-renewal, change or reduction in the coverages
afforded under said policies will be effective until at least thirty (30) days'
prior written notice of such cancellation or reduction has been given to Tenant.
Certificates of the foregoing insurance shall be delivered by Landlord to Tenant
on or prior to the Rent Commencement Date Landlord may, but is not obligated to,
maintain such other insurance and additional coverages as it may deem reasonably
necessary, including, but not limited to, rent loss insurance; provided,
however, such other insurance and additional coverage shall be consistent (in
both type and limit) with insurance maintained in connection with industrial
warehouse buildings owned by institutional landlords in the Reno, Nevada area.
The cost of all insurance maintained by Landlord under this Paragraph 9 shall be
competitive with the cost of comparable insurance available from other insurance
carriers. The Project or Building may be included in a blanket policy (in which
case the cost of such insurance allocable to the Project or Building will be
reasonably allocated by Landlord based upon the insurer's cost calculations),
provided that such blanket policy (i) complies in all respects with the terms of
this Paragraph 9, (ii) expressly identifies the Premises as being covered by
such blanket insurance policy, and (iii) does not provide for any possibility of
reduction of coverage by reason of any damage to any other property named in
such blanket insurance policy.
Tenant, at its expense, shall maintain during the Lease Term: all risk property insurance covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant's expense; worker's compensation insurance with no less than the minimum limits required by law; employer's liability insurance with such limits as required by law; and commercial liability insurance, with a minimum limit of $1,000,000 per occurrence and a minimum umbrella limit of $1,000,000, for a total minimum combined general liability and umbrella limit of $2,000,000 for property damage, personal injuries, or deaths of persons occurring in or about the Premises. Landlord may from time to time require reasonable increases in any such limits, such increases to be consistent with the insurance limits required by comparable landlords at comparable projects. The commercial liability policies shall name Landlord as an additional insured, insure on an occurrence and not a claims-made basis, be issued by insurance companies which are domestic insurance companies, licensed to do business
The all risk property or comparable insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, their officers, directors, members, employees, managers, agents, invitees and contractors, in connection with any loss or damage thereby insured against. Neither party nor its officers, directors, employees, members, managers, invitees or agents shall be liable to the other for loss or damage caused by any risk coverable by all risk property insurance, and each party waives any claims against the other party, and its officers, directors, employees, members managers, invitees and agents for such loss or damage. The failure of a party to insure its property shall not void this waiver.
Subject to Tenant's rent abatement rights contained in Paragraph 7 above, Landlord and its agents and employees shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever, including without limitation, damage caused in whole or in part, directly or indirectly, by the negligence of Landlord or its agents, contractors or employees, it being agreed that the foregoing release of liability and waiver shall apply only to the extent that such business interruption and losses can be covered by customary business interruption insurance.
Tenant and its subtenants, assignees, invitees, employees, members and agents shall not be liable for, and Landlord hereby waives all claims against Tenant and its subtenants, assignees, invitees, employees, members and agents for loss of rents derived from the Premises sustained by Landlord or any person claiming through Landlord resulting from any accident or occurrence in or upon the Premises or in or about the Project from any cause whatsoever, including, without limitation, damage caused in whole or in part, directly or indirectly, by the negligence of Tenant or its subtenants, assignees, invitees, employees, contractors, members or agents, it being agreed that the foregoing release of liability and waiver shall apply only to the extent such rent interruption and losses can be covered by customary rental interruption insurance.
Landlord's Repairs. For the Lease Term, Landlord shall maintain, repair, and replace, at its expense, the following portions of the Premises (such portions of the Premises being collectively the "Landlord's Structural Obligations"): (i) all utility lines servicing the Premises to
In the event of an emergency (being defined for purposes hereof as an imminent threat of injury to persons or material damage to Tenant's equipment, inventory or other property at the Premises or any other event that impedes more than 20% of Tenant's business operations at the Premises, Tenant shall have the right to make such temporary, emergency repairs to the Premises as may be reasonably necessary to (x) prevent material damage to Tenant's equipment, inventory or other property at the Premises, (y) repair an imminent threat of personal injury to persons at the Premises, or (z) repair the condition that is the cause of any material impediment to Tenant's business operations at the Premises; provided Tenant has either (i) notified Landlord's representative, as soon as possible under the circumstances, of such emergency by telephone (with subsequent written notice as soon as practicable), and Landlord has failed to initiate (and diligently continue to pursue all necessary emergency repairs within twenty-four (24) hours of such notification, or (ii) Tenant has attempted in good faith to notify Landlord's representative of such emergency by telephone (with subsequent written notice as soon as practicable) and has been unsuccessful in its attempts to contact such representative for a period of twenty-four (24) hours. If because of the circumstances it is necessary for Tenant to act immediately (i.e. Tenant does not reasonably have time to notify Landlord), then Tenant may do so without prior notice to Landlord provided that Tenant uses commercially reasonable efforts to notify Landlord of such actions as soon as possible. In the event that Tenant makes any emergency repairs to the Premises in accordance with this paragraph, Landlord shall reimburse Tenant, up to the Self-Help Maximum (as defined below), for the actual, reasonable, out-of-pocket third party costs incurred by Tenant (as evidenced by written invoices or other reasonable evidence) in making such emergency repairs. The term "Self Help Maximum" shall mean (i) the aggregate sum of $25,000 for each emergency that occurs during each lease year (other than Catastrophic Emergencies (as defined below)), such sum to increase each year of the Lease Term
Tenant's exercise of its right to self help or offset Base Rent and the Additional Rental Amount shall in no way be an acknowledgment of or be construed as an agreement by Landlord that such payment (or work) required is the obligation of Landlord and shall in no way hinder the Landlord from disputing such claims and Base Rent and Additional Rental Amount offsets by Tenant. In the event of a dispute, and if Landlord prevails, Tenant shall promptly reimburse Landlord for all amounts paid by Landlord to Tenant, or any amounts offset by Tenant or any amounts on which Landlord has prevailed, whichever is appropriate, plus interest at the Interest Rate from the date the amount was offset or paid. Further the prevailing party shall be entitled to reasonable attorneys' fees and costs incurred in the offset dispute.
If and only if requested by Tenant in writing, Landlord shall make
any reasonably necessary Capital repairs or replacements to the Premises for
which Tenant is responsible under Paragraph 11 below. Upon completion thereof,
(i) Landlord shall furnish Tenant with a statement setting forth the actual
out-of-pocket cost to Landlord of any such Capital repairs or replacements
(together with invoices and other evidence reasonably necessary to corroborate
such cost) and (ii) the actual out-of-pocket cost to Landlord of such Capital
repairs or replacements to the Premises shall be amortized on a straight line
basis in equal monthly installments over a period equal to the useful life
thereof under GAAP, and such monthly installments shall thereafter be payable by
Tenant to Landlord on the first day of each calendar month during the Lease Term
until the sooner of (i) the last day of Lease Term and (ii) the last day of such
useful life (it being agreed that Tenant shall not be responsible for any
portion of such costs that relates to the portion of such useful life that
extends beyond the Lease Term).
Tenant's Repairs. (a) Subject to Landlord's obligations in Paragraphs 3, 9, 10, 15, 16, 30 and 43, Tenant, at its sole cost and expense, shall be responsible for the maintenance, repair and replacement of all portions of the Premises, Building and Land and for all costs and expenses related thereto (including, without limitation, paving and parking areas, alleys, driveways, mowing, landscaping, exterior painting, dock and loading areas, truck doors, plumbing from and after the point of connection to the Building, fire sprinklers and fire protection systems, entries, doors, windows, interior walls, and the interior side of demising walls heating, ventilation and air conditioning systems, lighting, electrical and utility systems from and after the point of connection to the Building and other mechanical and building systems; amounts paid to contractors and subcontractors for work or services performed in connection with any of the foregoing; security services, if any; and trash collection, sweeping and removal). Except as set forth in the last paragraph of Paragraph 10 above, such repair and replacements may include Capital expenditures and repairs whose benefit may extend beyond the Lease Term. Heating, ventilation and air conditioning systems and other mechanical and building systems serving the Premises shall be maintained at Tenant's expense pursuant to maintenance service contracts entered into by Tenant. If, (i) Tenant fails to make any repair for which Tenant is responsible pursuant to this Paragraph 11 within thirty (30) days after notice thereof from Landlord (except in case of emergency) (unless such performance will, due to the nature of the obligation, require a period of time in excess of thirty (30) days, then after such period of time as is reasonably necessary) and (ii) Tenant's failure to make such repair has a material adverse effect on any structural component of the Building or otherwise results in a hazardous condition, then, Landlord may, at its option, make such repair, and Tenant shall pay the actual, reasonable, out-of-pocket third party costs incurred by the Landlord (as evidenced by written invoices or other reasonable evidence), within 30 days after demand. If Tenant fails to pay such amount within 30 days after demand, then such amount shall accrue interest at the Interest Rate.
(b) Notwithstanding anything contained herein to the contrary, Tenant shall have the right, from time to time and for such periods of time as Tenant shall desire throughout the Lease Term, to require Landlord (without cost to Tenant) to provide asset management services to Tenant as may be necessary for Tenant to maintain the Premises in accordance with the provisions of Paragraph 11(a) hereof. Such asset management services shall include, but not be limited to, the hiring of contractors, subcontractors and suppliers on behalf of Tenant for each of the items of maintenance and repair (each an "Item") for which Tenant is responsible under Paragraph 11(a) hereof using competitive bidding procedures with entities which are not affiliated with Landlord (with each such hiring being subject to Tenant's prior written approval,
Tenant-Made Alterations and Trade Fixtures. For purposes of this Lease, the following definitions shall apply:
"Tenant-Made Alteration" shall mean any alteration, addition or improvement performed by, or to be performed by, Tenant in or about the Premises.
"Material Tenant-Made Alteration" shall mean any Tenant-Made Alteration that will have an effect on the structural soundness of the Building, including, without limitation the slab or floor of the Building, or cause a penetration of the roof of the Building.
Tenant, without any need to obtain Landlord's consent or approval, shall have the right to perform any Tenant-Made Alterations in and about the Premises, other than Material Tenant-Made Alterations. In addition, Tenant, upon obtaining Landlord's consent, which may be withheld only if a Material Tenant-Made Alteration would have an adverse affect on the
Tenant, prior to commencing any Material Tenant-Made Alteration, shall give Landlord written notice thereof, and to the extent that good construction practice requires plans and specifications to be prepared with respect to such Tenant-Made Alteration, such notice shall be accompanied by a copy of such plans and specifications. In the case of any Material Tenant-Made Alteration, Landlord, within ten (10) business days after its receipt of such notice, shall either (i) give its written consent to the Material Tenant-Made alteration, or (ii) deny its consent and request revisions or modifications to such Material Tenant-Made Alteration (but only if and to the extent that the proposed Material Tenant-Made Alteration fails to meet the Approval Criteria). Notwithstanding anything in this Lease to the contrary, if during the Lease Term, Tenant removes from the Premises any items in the Performance Specifications (defined in Addendum 2) installed by Landlord at Landlord's cost and expense as part of the Base Building Work (defined in Addendum 2) ("Base Improvements"), then, except for the in-rack sprinkler system and heads referenced in Section 8.1.3 of the Performance Specifications which shall be excluded from the Base Improvements and which Tenant shall not be obligated to replace or restore, Tenant, upon or prior to the expiration or sooner termination of the Lease, shall replace all such Base Improvements it has removed from the Premises with other items or equipment of comparable size, age, make and quality to that of the removed Base Improvements (taking into consideration the condition that such Base Improvements would have been in if they had remained throughout the Lease Term, it being agreed, however, that if Tenant removes any Base Improvements that are typical office improvements, then Tenant, upon the re-installation thereof, shall replace such office improvements with new office improvements).
Tenant at its own expense may perform all Tenant-Made Alterations with contractors and subcontractors of Tenant's own choosing. Tenant shall perform all Tenant-Made
Any and all Tenant-Made Alterations made by, or on behalf of, Tenant in, to or upon the Premises and Tenant's Property (as defined below) installed on the Premises by (or on behalf of) Tenant, shall remain the property of Tenant and may be removed from the Premises at any time during the Lease Term, provided that any damage caused by such removal shall be repaired by Tenant. Tenant may (subject to the next succeeding sentence) elect not to remove any or all of its Tenant-Made Alterations, Tenant's Initial Work, its fixtures or Tenant's Property, in which case the same shall become the property of Landlord upon Tenant's surrender of the Premises. Notwithstanding the foregoing, at the expiration or earlier termination of the Term, Tenant shall remove (i) its movable business equipment and other movable personal property, (ii) any Extraordinary Fixture (as defined below) in respect of which Landlord, in accordance with Paragraph (f) below, has not waived (or been deemed to have waived) its right to cause Tenant to remove, and (iii) any trade fixtures ("Tenant's Trade Fixtures") installed by Tenant in the Building, including the warehouse racking system to be installed in the Premises by or for Tenant (it being agreed that (x) in removing any trade fixtures from the Building that are bolted to the slab, Tenant shall only be required to cut and file the bolts connecting such trade fixtures to the slab, rather than remove such bolts from the slab, and (y) Tenant shall not be required to remove the wiring relating to such trade fixtures that will be imbedded in the slab, behind walls and doors and below the floor). Moreover, for purposes of this Lease, the term "Tenant's Property" shall mean all office furniture and equipment, movable partitions, communications equipment and other articles of movable personal property owned or leased by Tenant and located in the Premises.
Signs. Subject to the Declaration (as defined below) and any applicable Legal Requirements, Tenant may install any exterior lights, decorations, balloons, flags, pennants, banners, or painting, or erect or install any signs, windows or door lettering, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises, without Landlord's prior written consent. Upon surrender or vacation of the Premises, Tenant, at its sole cost and expense, shall remove all signs and repair, paint, and/or replace the building facia surface to which its signs are attached. Tenant shall obtain all applicable governmental permits and approvals for sign and exterior treatments (and Landlord shall cooperate with Tenant in connection therewith, including, without limitation, by signing any applications in connection therewith). Subject to the Declaration, any applicable Legal Requirements and Landlord's reasonable approval, Tenant may place directional signs as appropriate throughout the Project for the benefit of its customers. Landlord represents to Tenant that, to Landlord's knowledge, as of the Commencement Date, other than the Declaration, there are no other signage restrictions or controls that adversely affect Tenant's ability to install any signage on the Building. Landlord agrees to use commercially reasonable efforts to obtain a variance from the necessary parties to enhance the signage size on the east half of the Building facing Highway 395. For purposes of this paragraph, Landlord's knowledge shall mean the actual knowledge of David Morze and John Hanson, after due investigation and inquiry. Landlord represents and warrants to Tenant that no employee of Landlord has any material knowledge that is not possessed by David Morze or John Hanson about any of the matters that are the subject of the representations and warranties contained in this paragraph.
Restoration. If the Building shall be partially or totally damaged
or destroyed by fire or other casualty, then, unless this Lease is terminated as
hereinafter provided, and whether or not the damage or destruction shall have
resulted from the fault or neglect of Tenant or its employees, agents,
contractors or invitees, Landlord, at its sole expense, shall perform Landlord's
Restoration Work (as hereinafter defined) with reasonable dispatch and
continuity. For purposes hereof, the term "Landlord's Restoration Work" shall
mean all of the work necessary to repair and restore the Premises (including,
without limitation, all the building systems) to substantially the same
condition as that in which they were in immediately prior to the happening of
the fire or other casualty (it being agreed that Landlord's Restoration Work
shall not include the repair and restoration of (w) any Tenant-Made Alterations,
(x) Tenant's Initial Work installed by Tenant, (y) any Tenant's Trade Fixtures,
and/or (z) any Tenant's Property). Notwithstanding anything to the contrary in
this Paragraph 15, in the event a fire or other casualty to the Premises occurs
that is covered by the all risk insurance referenced in Paragraph 9(a) above,
Tenant shall, within 30 days after demand therefor, pay to Landlord the lesser
of (i) the amount of any deductible in respect of the insurance adjustment
relating to such fire or other casualty and (ii) $25,000 (it being agreed that,
in any event, the payment of such amount by Tenant is not a condition precedent
to any of Landlord's obligations under this Paragraph 15).
If the Premises shall be partially damaged or destroyed or rendered untenantable or inaccessible as a result of a fire or other casualty, then the Base Rent, the Additional Rental Amount and all other rent payable under this Lease (including any amounts payable under Sections 6 and 8 above) shall be abated in proportion to the area of the Premises that has been rendered untenantable, inaccessible or unfit for Tenant's use and occupancy for the period from the date of such damage or destruction until the earlier of (a) the last day of a reasonable period (beginning on the date on which Landlord's Restoration Work is substantially completed and Tenant has reasonable access to the Premises) for Tenant to repair and restore any Tenant's Initial Work, Tenant-Made Alterations, Tenant Trade Fixtures and Tenant's Property damaged as a result of such fire or other casualty and (b) the date on which Tenant reoccupies the Premises (or such portion thereof) for the normal conduct of its business (as opposed to the repair or restoration of any of Tenant's Initial Work, Tenant's Trade Fixtures, Tenant-Made Alterations or Tenant's Property). If the Premises shall be totally damaged or destroyed or rendered untenantable or inaccessible, then the Base Rent, the Additional Rental Amount and all other rent payable under this Lease (including any amounts payable under Sections 6 and 8 above) shall abate from the date of the damage or destruction until the earlier of (a) the last day of a reasonable period (beginning on the date on which Landlord's Restoration Work is substantially completed and Tenant has reasonable access to the Premises) for Tenant to repair and restore any Tenant's Initial Work, Tenant-Made Alterations, Tenant Fixtures and Tenant's Property damaged as a result of such fire or other casualty and (b) the date on which Tenant reoccupies the Premises (or such portion thereof) for the normal conduct of its business (as opposed to the repair or restoration of any of Tenant's Initial Work, Tenant's Trade Fixtures, Tenant-Made Alterations or Tenant's Property).
If (i) the Building shall be damaged or destroyed by fire or other casualty during the last 12 months of the then current Lease Term, (ii) the Estimate indicates that Landlord's Restoration Work will require a period of time which exceeds 20% of the then remaining Lease Term, and (iii) Tenant, on or prior to the date of the fire or other casualty shall not have elected to extend the then current Lease Term in accordance with the provisions of Addendum 3 hereto (assuming Tenant had the right to do so), then and in such events, either Landlord or Tenant shall have the right, to be exercised by written notice to the other party given within thirty (30) days the electing party's receipt of the Estimate, to terminate this Lease. If either party terminates this Lease as provided in this Paragraph 15, then such termination shall be effective on the date specified in such party's notice of termination but no later than one hundred eighty (180) days after the date of such notice as if said date were the date fixed for the expiration of the Lease Term; and any Base Rent, Additional Rental Amount or other amounts paid by Tenant for a period beyond the date of such termination of this Lease or for any period of abatement shall promptly be refunded by Landlord to Tenant.
If the named Landlord herein (i.e., ProLogis Development Services Incorporated) shall transfer its interest in the Premises to a third party, then, from and after the effective date of such transfer, the following provision of this Section 15(f) shall apply:
For purposes of this Lease, the term the "Depository" shall mean any commercial bank having a net worth of at least $500,000,000 as designated by Landlord and approved by Tenant (which approval shall not be unreasonably withheld, conditioned or delayed). All funds held by Depository shall at all times be deposited in trust for the benefit of Landlord and Tenant pursuant to the terms of this Lease in an account or accounts maintained in the State of Nevada.
All insurance required to be maintained by Landlord under
Section 9 above shall name the Depository as the loss payee. All
insurance proceeds to be paid (the "Deposited Sums") in connection with
any insurance to be maintained by Landlord under such Section 9 shall be
paid to the Depository. In the event, and to the extent, that Landlord is
required to perform any Landlord's Restoration Work, the Depository shall
disburse such proceeds to Landlord, from time to time and as and to the
extent Landlord's Restoration Work progresses, but not more often than
monthly upon receipt of a request therefor prepared by Landlord and
consented to in writing by Tenant, which consent shall not be
unreasonably withheld or delayed, provided that Landlord shall have
provided Tenant with the following:
A certificate of Landlord (1) requesting payment of a specified amount of the Deposited Sums to Landlord or to persons whose names and addresses shall be stated, (2) describing in reasonable detail the services or materials theretofore applied to Landlord's Restoration Work, (3) stating that such specified amount does not exceed the cost of the services and materials previously supplied, and (4) stating that the cost of the services and materials has not been previously made the basis of any withdrawal of any of the Deposited Sums; and
A certificate of an engineer or architect selected and paid by Landlord who shall be reasonably satisfactory to Tenant, stating (1) that the services and materials described in the accompanying certificate of Landlord were necessary or appropriate to Landlord's Restoration Work, (2) that the amount specified in such certificate of Landlord is not in excess of the cost of the services and materials supplied,
(III) After the completion of and payment for Landlord's Restoration Work, the balance, if any, of the Deposited Sums shall be paid first to Tenant, up to the amount that Tenant shall have paid to Landlord pursuant to Section 9 above (i.e., the amount of the deductible paid by Tenant to Landlord), and the balance to Landlord.
(IV) Upon the designation of the Depository or the substitution of a new Depository, the parties and the Depository shall execute an agreement, in form reasonably satisfactory to the Depository, which shall provide that the Depository shall receive, hold and disburse any monies deposited with it pursuant to and in accordance with the terms of this Lease
Condemnation. If any part of the Premises should be taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a "Taking" or "Taken"), and the Taking (a) is of more than (i) 20% of the rentable area of the Building or (ii) 20% of the parking area on the Land or (b) would otherwise prevent or materially interfere with Tenant's use of the Premises for the normal conduct of its business, then upon written notice by Tenant this Lease shall terminate and Base Rent and all other sums payable under this Lease shall be apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not terminated as provided above, the Base Rent and all other sums payable under this Lease payable hereunder during the unexpired Lease Term shall be reduced to such extent as may be fair and reasonable under the circumstances and Landlord shall proceed with due diligence to perform any work necessary to restore the remaining portions of the Premises to the condition that they were in immediately prior to the Taking, or as near thereto as possible. In the event of the Taking of the entire Premises, this Lease shall terminate as of the date of such Taking. In the event of any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord's award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for moving expenses, the unamortized amount of any Tenant-Made Alterations, damage to Tenant's Trade Fixtures and Tenant's Property, if a separate award for such items is made to Tenant.
Assignment and Subletting. Without Landlord's prior written consent
which may only be withheld pursuant to the terms set forth below, Tenant shall
not assign this Lease or enter into a sublease that demises more than 300,000
rentable square feet of the Building (any such sublease being a "Triggering
Sublease") or mortgage, pledge, or hypothecate its leasehold interest, and any
attempt to do any of the foregoing shall be void and of no effect.
Notwithstanding the above, without Landlord's prior written consent, Tenant may
(x) assign this
If Tenant desires to assign this Lease other than to a Tenant Affiliate, or enter into a Triggering Sublease other than with a Tenant Affiliate, then Tenant shall give Landlord notice (each, a "Transfer Notice") of such desire. Each Transfer Notice shall be accompanied by a statement setting forth in reasonable detail the identity of the proposed assignee or subtenant, the nature of its business and its proposed use of the Premises. Landlord shall approve or disapprove a proposed assignment or Triggering Sublease described in any Transfer Notice within 10 business days after Landlord's receipt of such Transfer Notice and the information required pursuant to the provisions of the preceding sentence. If Landlord fails to approve or disapprove such proposed assignment or Triggering Sublease within such 10 business day period, then such proposed assignment or Triggering Sublease shall be deemed approved. Notwithstanding anything in this Paragraph 17 to the contrary, if there is an assignment or sublease involving any portion of the Premises, Tenant covenants to promptly notify Landlord of such assignment or sublease within thirty (30) days after such assignment or sublease becomes effective and to set forth in reasonable detail the identity of the proposed assignee or subtenant, the nature of its business and its use of the Premises. Landlord may withhold its consent to any proposed assignment or any Triggering Sublease for only one of the following reasons:
(i) if the proposed assignee or subtenant will use Hazardous Materials in materially larger quantities or of materially greater environmental risk than the Hazardous Materials used
(ii) the proposed assignee or subtenant has a poor record or reputation pertaining to environmental matters; and
(iii) if the proposed assignee or subtenant's use of the Premises is in violation of the Declaration or Legal Requirements.
Any approved assignment or sublease shall be expressly subject to the terms and conditions of this Lease. Tenant shall provide to Landlord all information concerning the assignee or sublessee as Landlord may reasonably request.
Notwithstanding any assignment or subletting under this Lease, including, without limitation, any assignment or sublease (including a Triggering Sublease and any other type of sublease) to a Tenant Affiliate or to an independent third party, Tenant shall at all times remain fully responsible and liable for the payment of the rent (including, without limitation, Base Rent and Additional Rent) and for compliance with all of Tenant's other obligations under this Lease (regardless of whether Landlord's approval has been obtained for any such assignments or sublettings). Except in connection with an assignment to a Tenant Affiliate, in the event that Tenant shall receive rent and any bonus or other consideration due and payable by an assignee (or a combination of the rental payable under such assignment plus any bonus or other consideration therefor or incident thereto) and such amount exceeds the rental payable under this Lease (after deducting required tenant improvements, reasonable brokerage fees, and reasonable attorney's fees and the net, unamortized or undepreciated cost of Tenant's Initial Work, Tenant's Trade Fixtures, Tenant's Property and any Tenant-Made Alterations, determined on the basis of Tenant's Federal income tax returns), then Tenant shall be bound and obligated to pay Landlord as additional rent hereunder 50% of all such excess rental and other excess consideration within 10 days following receipt thereof by Tenant. Tenant shall be entitled to receive 100% of all profits from a sublease of the Premises.
If this Lease is assigned or if the Premises is subleased (whether in whole or in part) or in the event of the mortgage, pledge, or hypothecation of Tenant's leasehold interest or grant of any concession or license within the Premises or if the Premises is occupied in whole or in part by anyone other than Tenant, then upon an Event of Default by Tenant hereunder Landlord may collect rent from the assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest was hypothecated, concessionee or licensee or other occupant and apply the amount collected to the next rent payable hereunder; and all such rentals collected by Tenant shall be held in trust for Landlord and immediately forwarded to Landlord. No such transaction or collection of rent or application thereof by Landlord, however, shall be deemed a waiver of these provisions or a release of Tenant from the further performance by Tenant of its covenants, duties, or obligations hereunder.
(b) Except for the negligence or willful misconduct of Tenant, any assignee or subtenant of Tenant, or their agents, employees or contractors, and to the extent permitted by law, Landlord covenants and agrees to indemnify and save Tenant, its employees and agents harmless of and from any and all claims, costs, expenses and liabilities, including, without limitation, attorneys' fees, arising on account of or by reason of claims by third parties for injuries or death to persons resulting from the negligence or willful misconduct of Landlord or its agents, employees, or contractors; subject, however, to the provisions of the last paragraph of Paragraph 25 of this Lease. This indemnity does not cover claims arising from the presence or release of Hazardous Materials.
(c) If any claim that is within the scope of any indemnity set forth in this Lease is asserted against any indemnified party, or any legal action with respect to any such claim is commenced against an indemnified party, such indemnified party shall promptly notify the indemnifying party. The indemnifying party shall have the right to assume the defense with counsel chosen by the indemnifying party subject to the approval of the indemnified party (such approval not to be unreasonably withheld) or by the indemnifying party's insurance company. If the indemnifying party so assumes the defense, the indemnifying party shall not be responsible for the fees of any separate counsel employed by the indemnified party.
Inspection and Access. Landlord and its agents, representatives, and contractors may, upon reasonable prior notice to Tenant (except in the case of an emergency), enter the Premises at any reasonable time to inspect the Premises and to make such repairs as may be required or permitted pursuant to this Lease and for any purpose that relates to the performance of Landlord's obligations under this Lease. Landlord and Landlord's representatives may, upon reasonable prior notice to Tenant, enter the Premises during business hours for the purpose of showing the Premises to prospective purchasers and, during the last 9 months of the Lease Term, to prospective tenants. Tenant may request that any entry pursuant to this paragraph be at a reasonably convenient time other than the time specified in Landlord's notice or that such entry be during hours other than during business hours on business days (except in an emergency). Such rights of entry shall be subject to Tenant's reasonable security regulations or procedures, provided that Tenant shall have given Landlord prior written notice thereof. Tenant shall have the right to designate one or more portions of the Premises as "security areas" and if Tenant does so designate one or more portions of the Premises as "security areas", then Landlord shall not have access to such designated security areas, unless Landlord is accompanied by a
Quiet Enjoyment. Tenant shall, subject to the terms of this Lease, at all times during the Lease Term, have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.
Surrender. Upon termination of the Lease Term or earlier
termination of Tenant's right of possession, Tenant shall surrender the Premises
to Landlord in compliance with the applicable provisions of Sections 12(b),
12(c) and 12(e) above and broom clean and in good order, condition and repair,
ordinary wear and tear, damages for which Landlord is responsible under this
Lease, and casualty loss and condemnation excepted. Any Tenant's Property,
Extraordinary Fixture, Tenant-Made Alterations and Tenant's Trade Fixtures not
removed by Tenant as permitted or required herein on the expiration or within 15
days after the termination of this Lease shall be deemed abandoned and may be
stored, removed, and disposed of by Landlord at Tenant's expense (except that
any Tenant-Made Alterations, any Extraordinary Fixtures, any Tenant's Trade
Fixtures and any items of Tenant's Property that Tenant was not required to
remove and that Landlord so stores, removes or disposes of shall be stored,
removed and disposed of at Landlord's expense, rather than at Tenant's expense),
and Tenant waives all claims against Landlord for any damages resulting from
Landlord's retention and disposition of such property. All obligations of Tenant
and Landlord hereunder not fully performed as of the termination of the Lease
Term shall survive the termination of the Lease Term, including without
limitation, indemnity obligations, payment obligations with respect to
Additional Rent for the Common Area Land and obligations concerning the
condition and repair of the Premises.
Holding Over. If Tenant retains possession of the Premises after the termination of the Lease Term, unless otherwise agreed in writing, such possession shall be subject to immediate termination by Landlord at any time, and all of the other terms and provisions of this Lease (excluding any expansion or renewal option or other similar right or option) shall be applicable during such holdover period, except that Tenant shall pay Landlord from time to time, upon demand, as Base Rent for the holdover period, an amount equal to the following (i) 150% of the Base Rent in effect on the termination date, computed on a monthly basis for each month or part thereof during such holding over for the first 60 days following the expiration of the Lease Term, (ii) 200% of the Base Rent in effect on the termination date, computed on a monthly basis for each month or part thereof during such holding over for the period commencing 61 days following the expiration of the Lease Term and ending 60 days later, (iii) 250% of the Base Rent in effect on the termination date, computed on a monthly basis for each month or part thereof during such holding over for the period commencing 122 days following the expiration of the
Events of Default. Each of the following events shall be an event of default ("Event of Default") by Tenant under this Lease:
Tenant shall fail to pay any installment of Base Rent or any other payment required herein when due, and such failure shall continue for a period of 5 business days after notice from Landlord to Tenant that such payment was due.
Tenant or any guarantor or surety of Tenant's obligations hereunder shall (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a "proceeding for relief").
Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or shall be reduced or materially changed, except, in each case, as permitted in this Lease and after 3 days' prior notice by Landlord.
Intentionally deleted.
Tenant shall attempt or there shall occur any assignment or other transfer of Tenant's interest in or with respect to this Lease except as otherwise permitted in this Lease and such failure shall go uncured for a period of five (5) business days after notice from Landlord to Tenant.
Tenant shall fail to discharge or bond any lien placed upon the Premises in violation of this Lease within 45 days after notice of any such lien or encumbrance is filed against the Premises.
Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Paragraph 23, and except as otherwise expressly provided herein, such default shall continue for more than 30 days after Landlord shall have given
Landlord's Remedies. Upon each occurrence of an Event of Default and so long as such Event of Default shall be continuing, Landlord may at any time thereafter at its election: terminate this Lease or Tenant's right of possession, (but Tenant shall remain liable as hereinafter provided) and/or pursue any other remedies at law or in equity except to the extent expressly limited hereby. Upon the termination of this Lease or termination of Tenant's right of possession, it shall be lawful for Landlord, without formal demand or notice of any kind, to re-enter the Premises by summary dispossession proceedings or any other legal proceeding and to remove Tenant and all persons and property therefrom. If Landlord re-enters the Premises, Landlord shall have the right to keep in place and use, or remove and store, all of the furniture, fixtures and equipment at the Premises.
If Landlord terminates this Lease, Landlord may recover from Tenant the sum of: all Base Rent and all other amounts accrued hereunder to the date of such termination; the cost of reletting the whole or any part of the Premises, including without limitation brokerage fees and/or leasing commissions incurred by Landlord, and costs of removing and storing Tenant's or any other occupant's property, repairing, altering, remodeling, or otherwise putting the Premises into condition acceptable to a new tenant or tenants, and all reasonable expenses incurred by Landlord in pursuing its remedies, including reasonable attorneys' fees and court costs; and the excess of the then present value of the Base Rent and other amounts payable by Tenant under this Lease as would otherwise have been required to be paid by Tenant to Landlord during the period following the termination of this Lease measured from the date of such termination to the expiration date stated in this Lease, over the then present value of the aggregate fair market rental value for the same period which Tenant establishes Landlord can reasonably expect to recover by reletting the Premises for such period, taking into consideration the availability of acceptable tenants and other market conditions affecting leasing. Such present values shall be calculated at a discount rate equal to the 90-day U.S. Treasury bill rate at the date of such termination.
If Landlord terminates Tenant's right of possession (but not this Lease), Landlord may relet the Premises for the account of Tenant for such rent and upon such terms as shall be satisfactory to Landlord without thereby releasing Tenant from any liability hereunder and without demand or notice of any kind to Tenant. For the purpose of such reletting Landlord is authorized to make any repairs, changes, alterations, or additions in or to the Premises as Landlord deems reasonably necessary or desirable. If the Premises are not relet for any period or periods, then Tenant shall pay to Landlord as liquidated damages a sum equal to the amount of the rental reserved in this Lease for such period or periods as and when such rents are due under this Lease in respect of such period or periods, plus the cost of recovering possession of the Premises (including attorneys' fees and costs of suit), the unpaid Base Rent and other amounts accrued hereunder at the time of repossession, and the costs incurred in any attempt by Landlord to relet the Premises. If the Premises are relet and a sufficient sum shall not be realized from
Exercise by Landlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Landlord, whether by agreement or by operation of law, it being understood that such surrender and/or termination can be effected only by the written agreement of Landlord and Tenant. Any law, usage, or custom to the contrary notwithstanding, either party shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of either party at any time to enforce its rights under this Lease strictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same. Tenant and Landlord further agree that forbearance or waiver by either party to enforce its rights pursuant to this Lease or at law or in equity, shall not be a waiver of either party's right to enforce one or more of its rights in connection with any subsequent default. A receipt by Landlord of rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by either party of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by either party. The terms "enter," "re-enter," "entry" or "re-entry," as used in this Lease, are not restricted to their technical legal meanings. Any reletting of the Premises shall be on such terms and conditions as Landlord in its sole discretion may determine (including without limitation a term different than the remaining Lease Term, rental concessions, alterations and repair of the Premises, lease of less than the entire Premises to any tenant and leasing any or all other portions of the Project before reletting the Premises). Notwithstanding anything to the contrary contained in this Lease, except as and to the extent otherwise set forth in this Paragraph
Notwithstanding any provisions of this Lease to the contrary, to the extent permitted by applicable law, in no event shall either party be liable to the other for consequential damages, even in cases of negligence, willful misconduct or breach of this Lease, and each party hereby waives and releases the other party from any and all liability for consequential damages suffered by either party under this Lease.
Tenant's Remedies/Limitation of Liability. Except as otherwise expressly set forth in this Lease, Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligations under this Lease (including, without limitation, its obligations under Paragraphs 10 and 43 of this Lease and its obligations with respect to any Punch List items) within 7 days after receipt of written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of 7 days, then provided that Landlord commences such performance within such seven (7) day period, Landlord shall have as much time as is reasonably necessary as long as Landlord diligently pursues such performance, up to a maximum amount of 150 days). All obligations of Landlord hereunder shall be construed as covenants, not conditions. If Landlord is in default hereunder, Tenant's remedies shall include, without limitation, the right (a) to take commercially reasonable actions to cure such default on behalf of and at the sole cost and expense of Landlord, in which event Landlord shall reimburse Tenant for its reasonable, out-of-pocket costs and expenses incurred and paid in connection therewith within 30 days after Tenant's delivery to Landlord of an invoice therefor, together with reasonable supporting documentation for such reasonable costs and expenses, and/or (b) to exercise any other actions available at law or to bring an action for injunctive relief, and/or (c) to bring an action for damages. If Landlord fails to reimburse Tenant for the reasonable costs, fees and expenses incurred by Tenant in taking curative actions under clause (a) above within 30 days after demand therefor, Tenant may bring an action for damages against Landlord to recover such costs, fees and expenses, together with interest thereon at the Interest Rate from the due date therefor (i.e. the date 30 business days after demand), and reasonable attorney's fees incurred by Tenant in bringing such action for damages. Upon Tenant obtaining a court ordered judgment against Landlord for damages as described herein, Tenant may offset such amounts together with interest at the Interest Rate from the due date therefor (being the date that is 30 days following Landlord's receipt of a demand therefor) against the Base Rent, Additional Rental Amount and all other amounts payable hereunder. Additionally, if Landlord is in default under this Lease during the last six (6) months of the Lease Term (including any renewals or extensions of the Lease Term), Tenant exercises its right of self help under this Paragraph 25, and Landlord does not timely reimburse Tenant for such costs and expenses incurred by Tenant in taking such curative actions, then Tenant may pay its Base Rent and Additional Rental Amount for the remainder of the Lease Term (up to six months only) into an escrow account managed by an independent third party until the matter is decided by a court of law.
All obligations of Landlord under this Lease will be binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term "Landlord" in this Lease shall mean only the owner, for the time being of the Premises, and in the event of the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, and the new owner shall automatically be deemed to have assumed all obligations of "Landlord" under the Lease commencing from the Commencement Date.
Any liability of Landlord for a default by Landlord under the Lease, or a breach by Landlord of any of its obligations under the Lease, shall be limited solely to its interest in the Project, and in no event shall any personal liability be asserted against Landlord in connection with the Lease nor shall any recourse be had to any other property or assets of Landlord. If Tenant obtains a final court ordered judgment against Landlord, then Landlord's interest in the Project shall be deemed to include: (i) the rents or other income from the Project received by Landlord, (ii) the net proceeds received by Landlord from the sale, financing or other disposition of all or any part of Landlord's right, title and interest in the Project, (iii) the net proceeds received by Landlord from any condemnation or conveyance in lieu of condemnation of all or any portion of the Project, and (iv) the net proceeds of insurance received by Landlord from any casualty loss of all or any portion of the Project.
Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
Subordination. Landlord represents and warrants that, as of the date hereof, (i) there are no mortgages that constitute a lien or charge on the whole or any portion of the Land, other than that certain mortgage (the "Existing Mortgage"), dated June 11, 1998, made by Landlord's predessor-in-interest in favor of ProLogis Trust, in the original principal amount of $25,269,697.00, (ii) there are no ground or underlying leases covering the whole or any portion
Mechanic's Liens. Tenant has no express or implied authority to create or place any lien or encumbrance of any kind upon, or in any manner to bind the interest of Landlord or Tenant in, the Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises and that it will save and hold Landlord harmless from all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the interest of Landlord in the Premises or under this Lease as a result of any such amount payable by Tenant. Tenant shall give Landlord immediate written notice of the placing of any lien or encumbrance against the Premises and cause such lien or encumbrance to be discharged or bonded within 45 days of the notice of the filing or recording thereof; provided, however, Tenant may contest such liens or encumbrances as long as such contest prevents foreclosure of the lien or encumbrance and Tenant causes such lien or encumbrance to be bonded or insured over in a manner satisfactory to Landlord within such 45 day period.
Environmental Requirements. Except for Hazardous Material contained
in products used by Tenant (i) in de minimis quantities for ordinary cleaning,
(ii) in de minimis quantities for office purposes and (iii) in de minimis
quantities for warehouse purposes, Tenant shall not cause or permit its agents,
employees, subtenants, contractors or invitees to bring any Hazardous Material
upon the Premises or transport, store, use, generate, manufacture or release any
Hazardous Material in or about the Premises without Landlord's prior written
consent. Tenant, at its sole cost and expense, shall operate its business in the
Premises in strict compliance with all Environmental Requirements (defined
below) and shall remediate in a manner in compliance with Environmental
Requirements any Hazardous Materials released on or from the Project by Tenant,
its agents, employees, contractors, subtenants or invitees. Tenant shall
complete and certify to Landlord disclosure statements as reasonably requested
by Landlord from time to time (but not more often than twice in any calendar
year) relating to Tenant's transportation, storage, use, generation, manufacture
or release of Hazardous Materials on the Premises. The term "Environmental
Requirements" means all applicable present and future statutes, regulations,
ordinances, rules, codes, judgments, orders or other similar enactments of any
governmental authority or agency regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the environment,
including without limitation, the following: the Comprehensive Environmental
Response, Compensation and Liability Act; the Resource Conservation and Recovery
Act; and all state and local counterparts thereto, and any regulations or
policies promulgated or issued thereunder. The term "Hazardous Materials" means
and includes any substance, material, waste, pollutant, or contaminant listed or
defined as hazardous or toxic, under any Environmental Requirements, asbestos
and petroleum, including crude oil or any fraction thereof, natural gas liquids,
liquified natural gas, or synthetic gas usable for fuel (or mixtures of natural
gas and such synthetic gas). As defined in Environmental Requirements, Tenant is
and shall be deemed to be the owner of all Hazardous Materials brought on the
Premises by Tenant, its agents, employees, contractors or invitees, and the
wastes, by-products, or residues generated, resulting, or produced therefrom.
Landlord shall have access to, and a right to perform reasonable inspections and tests of the Premises to determine Tenant's compliance with Environmental Requirements (but not more often than once in any calendar year), its obligations under this Paragraph 30, or the environmental condition of the Premises. Access shall be granted to Landlord upon Landlord's prior notice to Tenant and at such times and in such a manner so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant's operations. Such inspections and tests shall be conducted at Landlord's expense, unless such inspections or tests reveal that Tenant has not complied with any Environmental Requirement in a manner which materially and adversely affects the value of the Premises or the Project, in which case Tenant shall reimburse Landlord for the reasonable cost of such inspection and tests. Landlord's receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant.
Notwithstanding anything to the contrary in this Paragraph 30, Tenant shall have no liability of any kind to Landlord as to Hazardous Materials on the Premises caused or permitted by: (i) Landlord, its agents, employees, contractors or invitees; or (ii) any other tenants in the Project or their agents, employees, contractors, subtenants, assignees or invitees; or (iii) any other person or entity located outside of the Premises or the Project.
If: (i) Hazardous Materials are hereafter discovered on the Project during Landlord's (or any affiliate of Landlord's) ownership of the Project (or the relevant portion thereof, including the Premises), and such Hazardous Materials were not introduced onto the Project by Tenant or its agents, employees, contractors, subtenants or invitees, and the presence of such Hazardous Materials results in any contamination, damages, or injury to the Premises that materially and adversely affects Tenant's occupancy or use of the Premises or human health, or (ii) Landlord, its agents, contractors or employees release any Hazardous Materials onto the Premises; then, in either such event, Landlord shall promptly take all actions at its sole expense as are necessary to remediate such Hazardous Materials as required by Environmental Requirements in order to permit Tenant to use and occupy the Premises for the Intended Use and without restrictions or
Landlord represents and warrants, to Landlord's knowledge, that as of the Commencement Date, except for information contained in the Phase I Environmental Assessment Report dated August 21, 1997, as amended by letter report dated June 9, 1998 and prepared by SECOR International Incorporated, there has not been (i) any violation of Environmental Requirements pertaining to the Land, or (ii) any release of Hazardous Materials on the Land. For purposes of this paragraph, Landlord's knowledge shall mean the actual knowledge of Dave Morze and John Hanson, without any duty of inquiry or investigation. Landlord represents and warrants to Tenant that no employee of Landlord has any material knowledge that is not possessed by David Morze or John Hanson about any of the matters that are the subject of the representations and warranties contained in this paragraph.
Rules and Regulations. Tenant shall, at all times during the Lease Term and any extension thereof, comply with the rules and regulations attached hereto. In the event of any conflict between said rules and regulations and other provisions of this Lease, the other terms and provisions of this Lease shall control. Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Project.
Security Service. Tenant acknowledges and agrees that, while Landlord may patrol the Project, Landlord is not providing any security services with respect to the Premises and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises.
Entire Agreement. This Lease (together with all of the exhibits and addenda attached hereto) and the guaranty delivered to Tenant by Prologis Trust on the date hereof constitute the complete agreement of Landlord and Tenant with respect to the subject matter hereof. No representations, inducements, promises or agreements, oral or written, have been made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not contained herein or in such guaranty, and any prior agreements, promises, negotiations, or representations are superseded by this Lease and such guaranty. This Lease may not be amended except by an instrument in writing signed by both parties hereto.
Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.
Brokers. Landlord and Tenant represent and warrant to the other that neither has dealt with any broker,
Miscellaneous. Any payments or charges due from Tenant to Landlord hereunder shall be considered rent for all purposes of this Lease.
This Lease may be executed in one or more counterparts each of which shall together constitute a single document.
All notices required or permitted to be given under this Lease shall be in writing and shall be sent by registered or certified mail, return receipt requested, or by a reputable national overnight courier service, postage prepaid, or by hand delivery addressed to the parties at their addresses on the signature page, and (i) in the case of notices to Landlord, with a copy sent to Landlord at 14100 East 35th Place, Aurora, Colorado 80011, and (ii) in the case of notices to Tenant, with a copy sent to: (aa) barnesandnoble.com llc, 76 Ninth Avenue, 11th Floor, New York, NY 10011, Attn: William F. Duffy, Vice President of Operations, and (bb) Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York 10104, Attn: Michael N. Rosen, Esq. Either party may by notice given aforesaid change its address for all subsequent notices. Except where otherwise expressly provided to the contrary, notice shall be deemed given upon receipt or refusal of receipt.
Except as otherwise expressly provided in this Lease or as otherwise required by law, in any instance in this Lease for which Landlord's consent or approval is required, such consent or approval shall not be unreasonably withheld, conditioned or delayed.
Intentionally deleted.
Landlord, at anytime after the date hereof and within ten (10) days after its receipt of a request therefor, shall execute, acknowledge and deliver to Tenant (i) a memorandum of lease in respect of this Lease, sufficient for recording and in form of Exhibit J annexed hereto and made a part hereof, which memorandum may be recorded by Tenant, and (ii) any other instrument(s) necessary to the effective recordation of such memorandum of lease. Simultaneously with the execution of such a memorandum of lease, Tenant shall execute and deliver to Landlord an instrument (the "Release") releasing such memorandum of lease from the applicable real property records; provided, however, that the Release shall be held in escrow by a third party law firm reasonably acceptable to Landlord and Tenant, and shall not be released from escrow
The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any exhibits or amendments hereto. (n) (o) The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.
Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.
If Tenant fails to pay Landlord any Base Rent or other amounts due under this Lease by the date such amount is due (any such failure, a "Non-Payment Event") and such failure shall continue for a period of ten (10) days after written notice (each, a "Late Notice"), then such past due amount shall bear interest at the Interest Rate (as defined below) from the due date therefor until the date paid. Notwithstanding the preceding sentence, if (and only if) (a) a Non-Payment Event occurs and continues for five (5) days and (b) within the 365-day period preceding the date of such occurrence, at least two other Non-Payment Events shall have also occurred in respect of which Tenant shall have received Late Notices, then (x) Landlord shall have no obligation to give to Tenant a Late Notice in respect of the Non-Payment Event in question, and (y) the past due amount in connection with such Non-Payment Event shall bear interest at the Interest Rate from the due date therefor until the date paid, and (z) Tenant shall pay Landlord a late charge equal to three percent (3%) of the past due amount. For purposes hereof, the term "Interest Rate" shall mean the lesser of (i) two percent (2%) above the so-called annual "Base Rate" of interest publicly announced by Citibank, N.A., New York, New York (or any successor thereof) from time to time, as its interest rate charged for unsecured loans to its corporate customers, but in no event greater than the highest lawful rate from time to time in effect and (ii) the highest rate permitted by applicable law. It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rate or amount of any interest payable on or in connection with this Lease. If applicable law is ever judicially interpreted so as to render usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord's and Tenant's express intent that all excess amounts theretofore collected by Landlord or Tenant, as the case may be, be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full, refunded to Tenant or Landlord as the case may be), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder.
Time is of the essence as to the performance of Tenant's and Landlord's obligations under this Lease.
All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof.
Within two (2) years from the Commencement Date, upon Tenant's request, from time to time within such two (2) year period, Landlord shall provide up to $60,000.00 of Insight software logistics consulting services to Tenant at no cost to Tenant.
Landlord's Lien/Security Interest. Intentionally deleted.
Limitation of Liability of Trustees, Shareholders, and Officers of ProLogis Trust. Any obligation or liability whatsoever of ProLogis Trust, a Maryland real estate investment trust, which may arise at any time under this Lease or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction, or undertaking contemplated hereby shall not be personally binding upon, nor shall resort for the enforcement thereof be had to the property of, its trustees, directors, shareholders, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort, or otherwise.
Restriction on Transfer of the Premises. Landlord hereby covenants and agrees that Landlord shall not, without Tenant's prior written consent, which consent may be withheld by Tenant in its sole and absolute discretion, sell, convey or otherwise transfer its interests in the Premises prior to the Rent Commencement Date In the event of a breach by Landlord of the covenant contained in this Paragraph 40, Tenant, in addition to any and all other rights and remedies which Tenant may have against Landlord under this Lease, at law or in equity, shall be entitled to terminate this Lease upon ten (10) days' prior written notice to Landlord and, upon such termination, this Lease shall terminate and be of no further force and effect. Landlord and Tenant hereby represent and warrant to each other that the Landlord's restriction on transfer of the Premises as set forth herein shall in no event restrict Landlord from transferring its ownership interests in the Premises and this Lease at any time following the Rent Commencement Date.
Intentionally omitted.
Corporate Authority. Tenant represents and warrants that (i) it has
full corporate right and authority to lease the Premises from Landlord and to
otherwise enter into this Lease on the terms and conditions set forth herein and
(ii) the officer executing this Lease on behalf of Tenant has the full corporate
right, authority and power to execute and deliver this Lease on behalf of
Tenant. Landlord represents and warrants that (i) it is the sole owner in fee
simple of the Land, (ii) it has full corporate right and authority to lease the
Premises to Tenant and to otherwise enter
Warranties. Landlord warrants and covenants to Tenant that, upon the Rent Commencement Date, the Base Building Work will be free from defects in workmanship and material for the twenty-four (24) month period ("Warranty Period") following the Rent Commencement Date. In amplification and not in limitation of the preceding sentence, if at anytime during the Warranty Period, any of the Base Building Work (including any equipment and/or materials installed at the Premises in connection with the Base Building Work) (a) is found to be defective, or (b) requires adjustment due to a defect or such adjustment is customary in connection with the installation and initial operation of such portion of the Base Building Work (e.g., a building system which requires periodic adjustment in connection with the installation and "fine tuning" of such system to make such system fully operational), or (c) fails to conform to any Legal Requirements that were enacted prior to the Rent Commencement Date, then Landlord shall correct such defect, adjustment or nonconformity promptly after receipt of written notice from Tenant to do so. Landlord shall bear the costs of correcting such defective or nonconforming Base Building Work. On or prior to the Rent Commencement Date, (x) Landlord shall cause Landlord's general contractor to issue all of the general contractor warranties and guarantees relating to the Base Building Work to both Landlord and Tenant and (y) Landlord shall deliver to Tenant an original of, and assign to Tenant, all Landlord's right, title and interest in and to, each of the other warranties and guarantees shown on Exhibit L annexed hereto, in the forms annexed hereto, from each of the contractors, subcontractors and suppliers shown on such warranties and guarantees. Landlord shall cooperate with Tenant, at Tenant's expense, (unless any such warranty or guaranty relates to an item for which Landlord is responsible under the terms of this Lease, in which case, such cooperation shall be at Landlord's expense) in all of Tenant's efforts to enforce any and all such warranties and/or guarantees (whether or not assigned or assignable to Tenant).
Notwithstanding the preceding paragraph or anything else in the Lease to the contrary, if at anytime during the Lease Term (as the same may be renewed or extended), it is determined that any of the Base Building Work (including any equipment and/or materials installed at the Premises in connection with the Base Building Work) was not constructed by Landlord and delivered to Tenant on the Rent Commencement Date strictly in accordance with the terms and provisions of the Performance Specifications, then Landlord shall promptly correct any such matters after receipt of written notice from Tenant to do so and Landlord shall bear all the costs of correcting such matter; provided, however, that with respect to the items indicated in the Performance Specifications as being required to comply with the Performance Specifications only as of the Rent Commencement Date, Landlord shall have no further obligations under this paragraph with respect thereto following Tenant's acceptance of each such item on the Rent Commencement Date (it being agreed that nothing contained herein shall relieve Landlord of its obligations and liabilities under the immediately preceding paragraph with respect to each such item).
Declaration. (a) Landlord represents to Tenant that as of the
Commencement Date: (i) Landlord has delivered to Tenant a true and complete copy
(together with all exhibits thereto) of: (x) that certain Final Development
Agreement (the "Development Agreement") dated April 14, 1998, and made between
County of Washoe and Nevada Tri Partners, a memorandum of which was recorded on
May 15, 1999 in the Official Records of Washoe County in Book 5274, Page 734 as
Document No. 2221194; and (y) that certain declaration of covenants, conditions
and restrictions and reservation of easements (the "Covenants") for Damonte
Ranch Trade Center I (the "Development Agreement" and the "Covenants" are
hereinafter collectively referred to as the "Declaration"); (ii) to Landlord's
knowledge the Declaration has not been modified, amended or terminated; (iii) to
Landlord's knowledge, the Declaration is currently in full force and effect; and
(iv) to Landlord's knowledge, no default exists under the Declaration. For
purposes of this paragraph, Landlord's knowledge shall mean the actual knowledge
of David Morze and John Hanson, after appropriate due inquiry and investigation.
Landlord represents and warrants to Tenant that no employee of Landlord has any
material knowledge that is not possessed by David Morze and John Hanson about
any of the matters that are the subject of the representations and warranties
contained in the foregoing representations and warranties.
Landlord shall throughout the Lease Term: (i) perform and observe all of the material terms, covenants, provisions and conditions of the Declaration on Landlord's part to be performed and observed; (ii) defend, indemnify and hold harmless Tenant from and against any and all claims, demands, causes of action, suits, actual damages, liabilities and actual expenses of any nature arising out of or in connection with a default by Landlord under the Declaration; and (iii) use commercially reasonable efforts (without the obligation to commence litigation) to cause each of the other tenants and occupants of any buildings owned by Landlord (or an affiliate of Landlord) and located within the Project to comply with all of the material covenants, provisions and conditions of the Declaration.
Landlord shall, immediately upon receipt, forward to Tenant a copy of any and all notices and/or demands received by Landlord under or pursuant to the Declaration, which relate to, or could adversely affect, Tenant's use or occupancy of the Premises, the conduct of Tenant's business therein or Tenant's rights pursuant to this Lease.
Landlord shall not amend or modify (or consent to any amendment or modification of) the Declaration if such amendment or modification could diminish the rights or increase the obligations of Tenant thereunder or under this Lease, or could adversely affect Tenant's use or occupancy of the Premises or the conduct of Tenant's business therein, without first obtaining Tenant's prior written consent, such consent not to be unreasonably withheld or delayed. Landlord agrees that it will place (or cause to be placed) a provision in all future leases executed by Landlord (or an affiliate of Landlord) at the Project setting forth that Landlord's
Landlord shall use commercial reasonable efforts to obtain from the "Declarant" under the Declaration, within thirty (30) days after the date hereof, a letter agreement made in favor of Tenant providing for Declarant's agreement: (i) to make any material modifications or amendments to the Declaration, without Tenant's reasonable prior approval; and (ii) to provide Tenant with a copy of any notices of default sent by Declarant to Landlord under the Declaration simultaneously with the delivery of such notice to Landlord, provided, however, that Landlord's failure to obtain such letter agreement shall not be deemed to be a default of Landlord under this Lease. 24.
As between Landlord and Tenant, in the event of any conflict between the terms and provisions of the Declaration and the terms and provisions of this Lease, the terms and provisions of this Lease shall control in all respects.
3. 4. 5. 6. TENANT: LANDLORD: barnesandnoble.com llc ProLogis Development Services Incorporated |
By: /s/ William Duffy By: /s/ John W. Seiple, Jr.
Title: Vice President, Operations Title: Senior Vice President
--------------------------- ---------------------------
Address: Address:
76 Ninth Avenue, 11th Floor 47775 Fremont Blvd.
New York, NY 10011 Fremont, CA 94538
|
1. The sidewalk, entries, and driveways of the Project shall not be obstructed by Tenant, or its agents, or used by them for any purpose other than ingress and egress to and from the Premises.
1. Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any manner do any act in violation of these Rules and Regulations.
1. No auction, public or private, will be permitted on the Premises or the Project.
1. The Premises shall not be used for any immoral or illegal purposes or for any purpose other than that specified in the Lease. No gaming devices shall be operated in the Premises.
1. Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage.
The monthly Base Rent for Month 1 through Month 60 shall be $174,000, subject to adjustments as provided in Addendum 2 to the Lease. Once the monthly Base Rent for Month 1 through Month 60 is determined, then the monthly Base Rent for Month 61 through Month 120 shall be determined by multiplying the monthly Base Rent for Month 1 through Month 60 by 113%.
1.01. Definitions. All capitalized terms used in this Workletter and not defined herein shall have the meaning ascribed thereto in the lease (the "Lease") to which this Workletter is annexed. In addition, for the purposes of this Workletter the following terms shall have the following meanings:
"Performance Specifications" shall mean those certain performance specifications and criteria annexed to this Workletter as Schedule 1, together with all exhibits and attachments thereto (including, without limitation, the Operational Plan and the Site Plan), as the same may be modified or supplemented by any Change Order (as defined below).
"Base Building Work" shall mean all of the work, materials and equipment necessary to construct the Building and other improvements on the Land in accordance with the Performance Specifications, using at least the specifications set forth in the Minimum Design Criteria.
"Base Building Plans" shall mean the scaled, dimensioned and
coordinated architectural and engineering working drawings that will
describe the Base Building Work, as such scaled, dimensioned and
coordinated architectural and engineering working drawings (a) have
been approved (or deemed approved) by Tenant in accordance with Section
2.01(c) below and (b) may be changed in accordance with the provisions
of Section 2.01(e) and Section 2.03 below.
"Minimum Design Criteria" shall mean the minimum design criteria referenced in Schedule 3 annexed hereto.
"Tenant's Initial Work" shall mean all work, equipment and improvements which, in Tenant's opinion, are necessary or desirable to prepare the Premises for Tenant's occupancy, other than the Base Building Work.
"Milestone" shall have the meaning ascribed to it in Section
2.07 below.
"Substantially Completed" shall mean, with respect to any portion of the Base Building Work, that such portion of the Base Building Work has been completed, other than minor details or minor adjustments (collectively, "Punch List Items") that do not affect Tenant's ability to occupy the applicable portion of the Premises for the prosecution of Tenant's Initial Work or, as the case may be, for the ordinary use of the Building for the Intended Use (it being agreed that, in any event, Landlord shall nevertheless remain obligated to complete the Punch List Items applicable to each portion of the Base Building Work in accordance with the terms and provisions of this Workletter).
"Substantial Completion of the First-Half Dried-In Construction" shall mean that all of the following have occurred: (I) the following work has been completed (in accordance with the Performance Specifications, the Base Building Plans, all applicable Legal Requirements and the Declaration) with respect to the eastern one-half of the Building (the eastern one-half of the Building being referred to herein as the "Applicable Portion of the Building"): the exterior walls are erected, the roof structure and roofing work are complete to the point where the Building is dry, overhead electrical and mechanical work in the Building is complete to allow fixturizing of the Building, electrical service to the Building has been energized, overhead mechanical equipment in the Building has been installed, the high bay lighting fixtures in the Building have been installed and are functional, the Building floor has been cleaned and sealed and truck access to the Building from Old Virginia Road shall be available, (II) the Applicable Portion of the Building is in such a condition that Tenant is able to install its racking, conveyor and other equipment, subject to Tenant obtaining the permits described in the parenthetical in the immediately succeeding clause (III); and (III) Landlord has obtained all governmental licenses, permits and approvals with respect to the Applicable Portion of
"Substantial Completion of the Dried-In Construction" shall mean that all of the following have occurred: (I) the following work has been completed (in accordance with the Performance Specifications, the Base Building Plans, the Declaration and all applicable Legal Requirements) with respect to the entire Building: the exterior walls are erected, the roof structure and roofing work are complete to the point where the Building is dry, overhead electrical and mechanical work in the Building is complete to allow fixturizing of the Building, electrical service to the Building has been energized, overhead mechanical equipment in the Building has been installed, the high bay lighting fixtures in the Building have been installed and are functional, the Building floor has been cleaned and sealed and truck access to the Building from Old Virginia Road shall be available; (II) the Building is in such a condition that Tenant is able to install its racking, conveyor and other equipment, subject to Tenant obtaining the permits described in the parenthetical in the immediately succeeding clause (III); and (III) Landlord has obtained all governmental licenses, permits and approvals with respect to the Building that may be necessary for Tenant to commence and proceed with the prosecution of Tenant's Initial Work (other than any licenses, permits and approvals required in connection with Tenant's Initial Work).
"Substantial Completion of the Building Shell" shall mean that all of the following have occurred: (I) Substantial Completion of the Dried-In Construction has occurred, (II) an operable restroom has been installed in the Building; and (III) Landlord has obtained a temporary certificate of occupancy for the Building that allows delivery and receipt of goods and products in connection with the Intended Use.
"Substantial Completion of the Base Building Work" shall mean that all of the following conditions have been satisfied: (I) the Base Building Work has been Substantially Completed in accordance with the Performance Specifications, the Base Building Plans, the Declaration and all applicable Legal Requirements (except for exterior painting and landscaping work, which shall be completed by Landlord within 30 days thereafter); (II) Landlord has delivered to Tenant a certificate, addressed to Tenant and executed by Landlord's architect, stating that the Base Building Work has been Substantially Completed in accordance with Performance Specifications, the Base Building Plans, the Declaration and all applicable Legal Requirements; (III) Landlord has obtained (and evidenced such obtainment to Tenant's reasonable satisfaction) (x) a "final" (not a temporary) certificate of occupancy or its equivalent for the entire Building that permits Tenant to use, operate and occupy the Premises for the Intended Use, and (y) all other certificates, permits and approvals with respect to the Building as may be necessary for Tenant lawfully to use, operate and occupy the Premises for the Intended Use; (IV) Tenant has vehicular and pedestrian access to and from the Land via Old Virginia Road at no less than the access points shown on the Site Plan annexed to the
"Capped Base Building Work Items" shall mean all of the portions of the Base Building Work that, pursuant to the Performance Specifications, are subject to a monetary allowance or a monetary cap (by way of example only, the portions of the Base Building Work described in Sections 10.1.1 and 8.1.3 of the Performance Specifications are Capped Base Building Work Items).
2.01. Base Building Plans; Permit Submissions. (a) Landlord, promptly after the date hereof, shall cause Landlord's architect to prepare proposed scaled, dimensioned and coordinated architectural and engineering working drawings that describe the Base Building Work (the "Proposed Base Building Plans"). The Proposed Base Building Plans shall fully incorporate, and shall be fully consistent with, the Performance Specifications and shall provide for no less than the specifications set forth in the Minimum Design Criteria. Tenant, at no cost or expense to Tenant, shall (as and to the extent reasonably requested by Landlord) cooperate with Landlord and Landlord's architect in connection with the preparation of the Proposed Base Building Plans and shall respond to any inquiries of Landlord during the development of the Proposed Base Building Plans within five (5) days after Tenant's receipt of a written notice requesting such response.
(b) In connection with the construction of the Base Building Work on a "fast track" basis, Landlord shall submit the Proposed Base Building Plans to Tenant for its approval in the following parts on or before the following dates (and the provisions of this Article II shall apply separately as to each such part):
Portion of Proposed Base Building Plans Submission Date by Landlord
--------------------------------------- ---------------------------
Preliminary Office Space Plan September 15, 1999
Preliminary Shell Drawings September 13, 1999
---------
Shell Construction Drawings September 24, 1999
---------
Office Space Plan Construction Drawings November 8, 1999
|
(c) Within five (5) days after receipt by Tenant of any of the foregoing parts of the Proposed Base Building Plans (together with a notice from Landlord stating that the same
(d) Landlord expressly acknowledges and agrees that (notwithstanding anything to the contrary in the Lease or this Workletter): (I) If there is any conflict or inconsistency between the Minimum Design Criteria and any portion of the Performance Specifications, then (x) such portion of the Performance Specifications shall govern and control, and (y) the Base Building Plans shall be prepared, and the Base Building Work shall be performed, in accordance with such portion of the Performance Specifications (rather than the conflicting portion(s) of the Minimum Design Criteria); (II) if there is any conflict or inconsistency between the Base Building Plans and any portion of the Performance Specifications, then (x) such portion of the Performance Specifications shall govern and control, and (y) the Base Building Work shall be performed in accordance with such portion of the Performance Specifications (rather than the conflicting portion(s) of the Base Building Plans); and (III) Tenant's approval of the Base Building Plans (or any component thereof or any changes thereto) shall not in any way (A) be deemed to be an agreement by Tenant that the Base Building Plans adequately reflect and incorporate the Performance Specifications, (B) be deemed to be an agreement by Tenant that, upon completion of the construction thereof, the Premises will be in conformance with the Performance Specifications, (C) be deemed to be a waiver of, or to otherwise relieve Landlord from, any of Landlord's obligations in Section 43 of the Lease, (D) be deemed to be a waiver of, or to otherwise relive Landlord from, any of Landlord's other obligations in the Lease and this Workletter, or (E) be deemed to be an agreement that the work contemplated by the Base Building Plans complies with applicable Legal Requirements or the Declaration.
(e) Landlord shall not make any changes to the Base Building Plans
without the prior written consent of Tenant in each instance, except that
Landlord may make changes to the Base Building Plans without Tenant's consent if
(i) such changes are consistent with the Performance Specifications and (ii)
such changes will not result in any increased architectural or engineering costs
to Tenant in connection with Tenant's Plans (as defined below).
2.03 Change Orders (a) Tenant shall, subject to the provisions of this
Section 2.03, be permitted (i) prior to the completion of the Base Building
Plans, to direct changes to the Performance Specifications (in which event
Landlord shall cause Landlord's architect/engineer to incorporate such changes
into the Proposed Base Building Plans), and (ii) following the completion of the
Base Building Plans, to direct changes to the Performance Specifications and/or
the actual Base Building Plans (in which event Landlord shall cause Landlord's
architect/engineer to incorporate such changes into the Base Building Plans)
(any change described in the preceding clauses (i) and (ii), a "Change Order").
Tenant shall pay to Landlord, within 30 days after Tenant's receipt of a demand
therefor (together with such corroborating materials as may be reasonably
requested by Tenant), Landlord's reasonable out-of-pocket costs and expenses of
any third party architect, engineer, contractor or consultant employed by
Landlord for reviewing any proposed Change Order. Any Change Order requested by
Tenant shall be governed by the following provisions of this Section 2.03.
(b) Price Adjustment/Time Adjustment: If Tenant proposes to make a Change Order, then Tenant shall notify Landlord in writing of such proposed Change Order. Within five (5) Business Days after its receipt of any proposed Change Order, Landlord shall furnish Tenant with a statement (each, a "Landlord's Change Order Statement") setting forth Landlord's good faith reasonable estimate of (1) all the costs and expenses that will either be saved or incurred by Landlord in connection with (x) incorporating the proposed Change Order into the Base Building Plans and (y) the performance of the work necessary to perform such proposed Change Order (the "Price Adjustment") and (2) the number of days (either positive or negative) by which the time required to complete one or more of the Milestones will be increased or decreased by such Change Order (such number of days as applicable to any Milestone, the "Time Adjustment"). Within five (5) Business Days after receipt by Tenant of the applicable Landlord's Change Order Statement, Tenant shall in writing either (a) accept the Price Adjustment and the Time Adjustment set forth in Landlord's Change Order Statement, by signing same and returning it to Landlord (subject to the final determination of the Price Adjustment and the Time Adjustment in accordance with the provisions of Sections 2.03(c) and 2.03(d) below, respectively), or (b) withdraw such Change Order (it being agreed that if Tenant makes any changes to any Landlord's Change Order Statement and returns it to Landlord, Tenant shall be
In connection with the Initial Slab Change Order (as defined below),
Landlord and Tenant, promptly after the date hereof, shall employ value
engineering to determine, by September 20, 1999, to what extent the Initial Slab
Change Order in its current scope will be required (in accordance with the
recommendation of Landlord's structural engineer). Landlord shall use reasonable
good faith efforts to eliminate the extent to which the Initial Slab Change
Order is required (it being agreed that in no event shall Landlord be required
to reduce the scope of the Initial Slab Change Order unless Landlord receives
written confirmation from its structural engineer that the reduced scope will be
adequate to accommodate the Performance Specifications). If and to the extent
that Landlord, in the good faith exercise of its judgment, determines that the
Initial Slab Change Order is required, then (notwithstanding anything to the
contrary contained herein) the following provisions shall apply thereto: (i)
Landlord shall competitively bid the work associated with the Initial Slab
Change Order in accordance with the Bidding Procedures (as defined below); (ii)
there shall be no Time Adjustment or Price Adjustment (as such terms are used in
this Workletter) for the Initial Slab Change Order; and (iii) in lieu of there
being a Price Adjustment with respect to the Initial Slab Change Order, the
lesser of the following amounts shall be added to the annual Base Rent (and
increased after the 60th month following the Rent Commencement Date in
accordance with Addendum 1 to the Lease): (a) $27,700 (i.e., 10% of 277,000) and
(b) 10% of the actual out-of-pocket costs incurred by Landlord in performing the
Initial Slab Change Order (in the scope required by Landlord). For purposes
hereof, the term "Initial Slab Change Order" means the change order relating to
the slab that is described on Schedule 5 annexed hereto.
(c) Price Adjustment: For any Change Order, the final Price Adjustment binding on Landlord and Tenant with respect to such Change Order shall be equal to (I) in the case of any Change Order that results in an increase in the cost to Landlord of the Base Building Work, the lesser of (x) the amount of the Price Adjustment set forth in the Landlord's Change Order Statement, and (y) the out-of-pocket costs and expenses actually incurred or paid by Landlord in performing such Change Order; and (II) in the case of any Change Order that results in a decrease in the cost to Landlord to perform the Base Building Work, the greater of (x) the amount of the Price Adjustment set forth in the Landlord's Change Order Statement, and (y) the
(d) Time Adjustment: For any Change Order, the final Time Adjustment binding on Landlord and Tenant in connection with such Change Order shall be equal to (I) in the case of any Change Order that results in an increase in the number of days to complete one or Milestones, the lesser of (x) the Time Adjustment set forth in the applicable Landlord's Change Order and (y) the number of days by which the time required to complete such Milestone(s) is actually increased by such Change Order, and (II) in the case of any Change Order that results in a decrease in the number of days to complete one or more Milestones, the number of days by which the time required to complete such Milestone(s) is actually decreased by such Change Order. Any dispute under this subparagraph (d) shall be resolved by mutual agreement of Landlord's architect and Tenant's architect; provided, however, that if such architects are unable to reach mutual agreement within 15 days, then such dispute shall be resolved by arbitration in accordance with Section 4.01 below (except that the arbitrator shall be an independent third-party architect having at least 15 years experience in the area of industrial/warehouse construction). For purposes hereof, the term "Cumulative Time Adjustment", shall mean, as to any Milestone, the sum of the final Time Adjustments applicable to such Milestone.
2.04 Capped Base Building Work Items. (a) Landlord shall competitively
bid the work associated with each of the Capped Base Building Work Items in
accordance with the Bidding Procedures. For purposes of this Workletter, the
term "Bidding Procedures" means, with respect to (i) any work to be performed by
Landlord in connection with the Capped Base Building Work Items or (ii) any
other work that, pursuant to this Workletter or the Lease, Landlord is required
to competitively bid (in either case, the "Bid Work"), the following procedures:
Upon approval by Tenant of the applicable portions of the Base Building Plans,
Landlord shall solicit competitive bids for the Bid Work on a fixed price lump
sum basis from a minimum of two (2) qualified bidders (as reasonably determined
by Landlord) who are not affiliated with Landlord, consistent with construction
practices in Reno, Nevada (it being agreed,
(b) Upon completion by Landlord of all of the Capped Base Building Work Items, Landlord shall furnish to Tenant a statement setting forth in reasonable detail (i) the Selected Contract Price with respect to each of the Capped Base Building Work Items, and (ii) the aggregate sum (the "Total Cost of the Capped Items") of the Selected Contract Prices for all of the Capped Base Building Work Items (which statement shall be accompanied by such corroborating documentation as Tenant may reasonably request).
(c) If the Total Cost of the Capped Items (as finally determined) shall exceed the aggregate monetary allowance (the "Aggregate Capped Items Allowance") allocated to all of the Capped Base Building Work Items under the Performance Specifications, then the Rent Adjustment Amount (as defined below) shall be increased by the amount of such excess. If the Total Cost of the Capped Items shall be less than the Aggregate Capped Items Allowance, then the Rent Adjustment Amount shall be decreased by the amount by which the Total Cost of the Capped Items is less than the Aggregate Capped Items Allowances.
2.05 Rent Adjustment; Payments to Landlord. (a) For purposes of this
Workletter, the term "Rent Adjustment Amount" shall mean, subject to Section
2.05(d) below, an amount equal to the sum of the following (as such amount shall
be increased or decreased in accordance with Section 2.04(c) above): (i) an
amount equal to zero, plus (ii) an amount equal to the Cumulative Price
Adjustment, if the Cumulative Price Adjustment is a positive number, or minus
(iii) an amount equal to the Cumulative Price Adjustment, if the Cumulative
Price Adjustment is a negative number.
(b) Within sixty (60) days after both (i) the Cumulative Price Adjustment has been determined, and (ii) the Total Cost of the Capped Items has been determined, Landlord shall furnish Tenant with a statement (the "Rent Adjustment Statement"), certified by Landlord, setting forth the Rent Adjustment Amount, together with a list of the Price Adjustments used to compute the Rent Adjustment Amount.
(d) Notwithstanding the foregoing, if either (I) (A) Tenant requests and accepts a Change Order that will result in an increase in the cost to Landlord of the Base Building Work, and (B) at the time such Change Order is accepted, the sum of all the final Price Adjustments is a positive amount that exceeds $2,400,000, or (II) Tenant requests and accepts a Change Order that is a Non-Fixture Change Order, then (instead of adding the cost of such work to the Rent Adjustment Amount as provided above) the following provisions shall apply to such Change Order:
(i) Tenant, as and to the extent the work necessary to perform such Change Order is completed, shall pay to Landlord the cost of such work in progress payments (but no more often than monthly), each of which progress payments shall be due and payable to Landlord within 15 days after Tenant's receipt of the following (collectively, a "Disbursement Request"): (x) an invoice from Landlord requesting payment of a specified portion of the cost of such work and describing in reasonable detail the services or materials furnished in connection with such work, and (y) a certificate from Landlord's architect (on an appropriate AIA Form), certifying (1) that the services and materials for which payment is being sought were necessary or appropriate in connection with such work, (2) that the amount specified in such invoice of Landlord is not in excess of the cost of the services and materials supplied in connection with such work and (3) that such work was completed in accordance with the Base Building Plans and the Performance Specifications.
(ii) Notwithstanding anything to the contrary contained herein, in no event shall any of the amounts paid by Tenant pursuant to this Section 2.05(d) be included in the calculation of the Rent Adjustment Amount (and thereby added to the Base Rent).
(e) If the Rent Adjustment Amount is a negative amount that is less than or equal to $900,000.00, then the annual Base Rent shall be decreased by an amount equal to 10% of the Rent Adjustment Amount. There shall be no other decrease in the annual Base Rent (other than the preceding sentence) if the Rent Adjustment Amount is a negative amount, including, without limitation, if the Rent Adjustment Amount is a negative amount greater than $900,000.
(f) Promptly after the Rent Adjustment Amount is determined in accordance with this Section 2.05, a retroactive adjustment in Base Rent shall be made and the appropriate payment shall be made by one party hereto to the other.
2.06. Performance of Base Building Work. Landlord, at its sole cost and
expense (except as and to the extent expressly set forth above), shall perform
the Base Building Work. Landlord shall commence the Base Building Work promptly
after the date hereof and shall prosecute the same with diligence and continuity
until completion, using only new first-class materials. Landlord shall perform
the Base Building Work in accordance with (i) the Performance Specifications,
(ii) the Base Building Plans, (ii) all Change Orders approved by Tenant, (iii)
good construction practices, (iv) the Minimum Design Criteria and (v) all Legal
Requirements and the Declaration. Landlord shall at its sole cost and expense
obtain all proper zoning and land development approvals from all necessary
governmental authorities for the prosecution of the Base Building Work. Landlord
shall also obtain (i) the building permit and all other permits, licenses and
inspections necessary for the proper prosecution and completion of the Base
Building Work and (ii) all permits and licenses (including a permanent
certificate of occupancy or its equivalent) necessary for Tenant lawfully to use
and occupy the Premises pursuant to the Lease for the Intended Use. Landlord
shall pay for, as part of the Base Building Work, the cost of the building
permit and all other permits, licenses (including a permanent certificate of
occupancy), impact fees and inspections necessary for the proper prosecution and
completion of Base Building Work. In amplification and not in lieu of the
foregoing, (x) Landlord shall be responsible to obtain and pay for all
improvements (including, without limitation egress lines, fire extinguishers,
and emergency and exit lighting) necessary to obtain all such permits, licenses
and inspections and (y) all requirements of any governmental authority or other
governing body with respect to off-site improvements are to be provided by and
are the responsibility of Landlord at its sole cost and expense. Notwithstanding
anything in this Lease or Workletter to the contrary, Tenant shall be solely
responsible, at its sole cost and expense, to obtain any and all permits
necessary in connection with Tenant's Initial Work.
(b) Landlord shall complete the First Milestone on or prior to February
23, 2000 (the "First Milestone Completion Date"); provided, however, that the
First Milestone Completion Date shall be postponed beyond February 23, 2000 for
each day that Landlord is actually delayed in completing the First Milestone as
a result of (x) one or more Tenant Late Days that occur between the date hereof
and the completion of the First Milestone and (y) one or more Force Majeure
Events that occur between the date hereof and the completion of the First
Milestone. Moreover, the First Milestone Completion Date shall be (aa) further
postponed by the number of days equal to the Cumulative Time Adjustment
applicable to the First Milestone, if such Cumulative Time Adjustment is a
positive number or (bb) accelerated by the number of days equal to the
Cumulative Time Adjustment applicable to the First Milestone, if such Cumulative
Time Adjustment is a negative number. Landlord shall complete the Second
Milestone on or prior to March 15, 2000 (the "Second Milestone Completion
Date"); provided, however, that the Second Milestone Completion Date shall be
postponed beyond March 15, 2000 for each day that Landlord is actually delayed
in completing the Second Milestone as a result of (x) one or more Tenant Late
Days that occur between the date hereof and the completion of the Second
Milestone and (y) one or more Force Majeure Events that occur between the date
hereof and the completion of the Second Milestone. Moreover, the Second
Milestone Completion Date shall be (aa) further postponed by the number of days
equal to the Cumulative Time Adjustment applicable to the Second Milestone, if
such Cumulative Time Adjustment is a positive number or (bb) accelerated by the
number of days equal to the Cumulative Time Adjustment applicable to the Second
Milestone, if such Cumulative Time Adjustment is a negative number. Landlord
shall complete the Third Milestone on or prior to March 31, 2000 (the "Third
Milestone Completion Date"); provided, however, that the Third Milestone
Completion Date shall be postponed beyond March 31, 2000 for each day that
Landlord is actually delayed in completing the Third Milestone as a result of
(x) one or more Tenant Late Days that occur between the date hereof and the
completion of the Third Milestone and (y) one or more Force Majeure Events that
occur between the date hereof and the completion of the Third Milestone.
Moreover, the Third Milestone Completion Date shall be (aa) further postponed by
the number of days equal to the Cumulative Time Adjustment applicable to the
Third Milestone, if such Cumulative Time Adjustment is a positive number or (bb)
accelerated by the number of days equal to the Cumulative Time Adjustment
applicable to the Third Milestone, if such Cumulative Time Adjustment is a
negative
(c) The term "Milestone Completion Date" shall mean (as the case may be) (i) with respect to the First Milestone, the First Milestone Completion Date; (ii) with respect to the Second Milestone, the Second Milestone Completion Date; (iii) with respect to the Third Milestone, the Third Milestone Completion Date; and (iv) with respect to Fourth Milestone, the Fourth Milestone Completion Date. If Landlord shall fail for any reason to complete any Milestone by the Milestone Completion Date applicable thereto (as such Milestone Completion Date may be postponed pursuant to the express provisions of Section 2.07(b) above), then, for each day that any Milestone is not completed by the Milestone Completion Date applicable thereto (as such Milestone Completion Date may be postponed pursuant to the express provisions of Section 2.07(b) above), Landlord shall pay to Tenant the following amounts (collectively the "Liquidated Damages"):
(A) For each of the first fourteen (14) days that Landlord fails to complete any Milestone by the Milestone Completion Date applicable thereto, Landlord shall pay to Tenant $5,800 (representing 1 day's Base Rent); and
(B) If such Milestone is not completed by the fourteenth day
(14th) following the Milestone Completion Date applicable
thereto, then (in addition to the amount set forth in the
preceding clause (A)), Landlord shall pay to Tenant an amount
equal to the product of (i) $17,400 (representing 3 day's Base
Rent), multiplied by (ii) the number of days in the period
commencing on the fifteenth (15th) day following such
Milestone Completion Date, and ending on the forty-second
(42nd) day
(C) If such Milestone is not completed by the forty-third (43rd)
day following the Milestone Completion Date applicable
thereto, then (in addition to the amounts set forth in the
preceding clauses (A) and (B)), Landlord shall pay to Tenant
an amount equal to the product of (i) $11,600 (representing 2
day's Base Rent), multiplied by (ii) the number of days in the
period commencing on the forty-third (43rd) day following such
Milestone Completion Date, and ending on the sixty-third
(63rd) day following such Milestone Completion Date, during
which such Milestone remains uncompleted; and
(D) If such Milestone is not completed by the sixty-fourth (64th)
day following the Milestone Completion Date applicable
thereto, then (in addition to the amounts set forth in the
preceding clauses (A), (B) and (C)), Landlord shall pay to
Tenant an amount equal to the product of (i) $5,800
(representing 1 days' Base Rent), multiplied by (ii) the
number of days in the period commencing on such sixty-fourth
(64th) day and ending on the date (if ever) on which such
Milestone is completed.
Tenant hereby acknowledges and agrees that (except as provided in the immediately succeeding sentence) the Liquidated Damages shall be Tenant's sole and exclusive remedy under this Lease or at law or in equity for Landlord's failure to complete the Milestones by the Milestone Completion Dates, Tenant hereby waiving all other remedies available to Tenant under this Lease or at law or in equity (except as provided in the immediately succeeding sentence) in the event Landlord fails to timely meet the Milestone Completion Dates. Notwithstanding the preceding sentence, Tenant shall be entitled to the remedy of specific performance if Landlord fails to complete any Milestone by the Milestone Completion Date applicable thereto. Landlord and Tenant hereby agree that it would be impracticable or extremely difficult to affix damages if Landlord fails to meet the Milestone Completion Dates as set forth above and the Liquidated Damages represent a reasonable estimate of Tenant's damages. All amounts payable by Landlord to Tenant under this Section 2.07(c) shall be paid within thirty (30) days after a demand therefor. If Landlord fails to pay Tenant all or any portion of any amount due under this Section 2.07(c) by the due date therefor, then such past due amount shall bear interest at the Interest Rate from the due date therefor until the date paid, and Tenant may deduct and set-off such amount (together with such interest) until exhausted, against all Base Rent and any other amounts due and payable under the Lease (at Tenant's option, before or after the expiration of any other offsets or credits in Tenant's favor). The obligations of Landlord under this Section 2.07(c) shall survive the termination, cancellation or expiration of the Lease.
2.08. Inspection and Monitoring by Tenant; Construction Meetings; "As Built" Drawings. (a) Tenant, Tenant's architect, Tenant's engineers, Tenant's contractors, Tenant's representatives, and any agents of Tenant shall have access to the Building at all times during business hours, and at all other reasonable times upon reasonable prior written notice, in order to
(b) From and after the date hereof, Landlord shall conduct weekly construction meetings (to be held on Tuesday of each week) to discuss the performance and progress of the Base Building Work; Landlord shall use commercially reasonable efforts to give Tenant reasonable advance notice of each such meeting and Tenant's representatives shall have the right to attend such meetings. Landlord, within two (2) business days after each such weekly construction meeting, shall deliver to the representatives of Tenant set forth on Schedule 6 annexed hereto (at their addresses set forth on such Schedule 6) a copy of the minutes (the "Construction Minutes") of each such construction meeting, which minutes Landlord shall cause to be prepared by its contractor. The Construction Minutes of each such weekly construction meeting shall clearly specify (i) any events that have occurred since the previous weekly construction meeting (or, in the case of the first such meeting, since the date hereof) that could result in a Tenant Late Day and (ii) any Tenant Late Days that have occurred since the previous weekly meeting (or, in the case of the first such meeting, since the date hereof).
(c) Landlord shall use commercially reasonable efforts to (i) keep
Tenant apprised of the progress of the Base Building Work on at least a weekly
basis, (ii) promptly notify Tenant of any actual or anticipated delays, and
(iii) promptly notify Tenant of any problems or anticipated problems with
respect to the Base Building Work or any portion thereof. Landlord shall
maintain at the Premises for inspection by Tenant and Tenant's architect during
Business Hours one record copy of (i) the Base Building Plans, together with all
field notes and changes of Landlord's contractor marked on said plans during the
course of construction, (ii) the progress schedule, any progress schedules
prepared by any subcontractor, and all updates, supplements and amendments
thereto; (iii) specifications and samples prepared in connection with the Base
Building Work; and (iv) all drawings, diagrams, schedules, brochures and other
data or information specially prepared for or otherwise provided in connection
with the Base Building Work to illustrate some portion of the Base Building Work
or any product, material or system to be installed or utilized in connection
therewith. All of the foregoing shall be maintained in good order and marked
currently to record all changes made during construction of the Building and the
Parking Area. Within ninety (90) days after the Base Building Work is
Substantially Completed, Landlord shall deliver to Tenant four (4) copies of
"as-built" drawings and plans for the Base Building Work showing all changes
made during the course of performing the Base Building Work, together with four
(4) copies of an "as-built" survey of the Building, the parking area and the
Land showing all existing easements, rights of way, building set-back lines and
improvements. Landlord shall also furnish to Tenant, promptly after completion
thereof, two complete sets of shop drawings and operation and maintenance
manuals with respect to the Base Building Work.
2.09 Correcting Base Building Punch List Items and Defective Work. (a) Within five (5) business days following the later to occur of (i) Substantial Completion of the Base Building Work and (ii) the date that is ten (10) days after Tenant receives notice that such
2.10 Outside Termination Date. If for any reason (including Force Majeure Events) Substantial Completion of the Base Building Work does not occur by the Limitation Date (as defined below), then, in addition to Liquidated Damages and the right to specific performance (but excluding all other rights and remedies available to Tenant at law or in equity or otherwise under this Lease), Tenant shall have the right, at any time after the Limitation Date, but prior to the date upon which Substantial Completion of the Base Building Work occurs, to terminate the Lease by serving written notice to Landlord, in which event the Lease shall terminate and be deemed null and void. The failure of Tenant to exercise its right of termination hereunder shall not relieve Landlord of its obligation to cause the Substantial Completion of the Base Building Work to occur or be deemed a waiver of the other remedies available to Tenant under this Workletter (i.e., the Liquidated Damages and specific performance). For purposes hereof, the term "Limitation Date" shall mean October 31, 2000; provided, however, that the Limitation Date shall be postponed by one day for each Tenant Late Day that occurs prior to the Substantial Completion of the Base Building Work.
2.11 Acceptance. Within thirty (30) days after the Rent Commencement Date, Landlord and Tenant shall execute and deliver to Landlord a letter confirming the Rent Commencement Date.
2.12 Miscellaneous. (a) Landlord acknowledges that Tenant will use non-union labor in connection with its prosecution of Tenant's Initial Work, and in no event shall the utilization of such labor constitute a Tenant Late Day. Landlord shall use only non-union contractors for the Base Building Work and will insure that there will be no labor disputes relative to the prosecution of Tenant's Initial Work.
(b) Landlord hereby designates John Hanson to serve as Landlord's representative and Tenant hereby designates Taner Kiranbay to serve as Tenant's representative during the design and construction of the Base Building Work. All communications between Landlord and Tenant relating to the design and construction of the Base Building Work shall be forwarded to or made by such party's representative.
(d) Landlord represents and warrants that, to Landlord's knowledge, based on Exhibit 1 to the Performance Specifications, smoke curtains, in-rack sprinklers and fire proofing of steel are not required in order for the Premises to comply with Legal Requirements (other than in-rack sprinklers in the multi-level Pallet Pick Mezzanine area and bin supported mezzanine area). For purposes of this paragraph, Landlord's knowledge shall mean the actual knowledge of David Morze and John Hanson, after appropriate due inquiry and investigation. Landlord represents and warrants to Tenant that no employee of Landlord has any material knowledge that is not possessed by David Morze or John Hanson about any of the matters that are the subject of the representation and warranty contained in this paragraph.
(e) For purposes of this Article II, the term "Legal Requirements" (as defined in the Lease) shall include, without limitation, all onsite and offsite drainage requirements, zoning, seismic (except as and to the extent set forth in the Performance Specifications), NFPA and ADA requirements.
3.01. Tenant's Initial Work; Preparation and Approval of Tenant's
Plans. Except as and to the extent otherwise set forth in this Article III, the
installation, performance and removal of Tenant's Initial Work shall be governed
by Section 12 of the Lease (as if the same were Tenant-Made Alterations). If any
portion of Tenant's Initial Work shall constitute a Material Tenant-Made
Alteration, then Tenant, at its expense, shall prepare and submit to Landlord
(i) architectural drawings of such portion of Tenant's Initial Work and (ii)
specifications for such portion of Tenant's Initial Work (such architectural
drawings and specifications are herein collectively referred to as the "Tenant's
Plans"). Within ten (10) days after receipt by Landlord of Tenant's Plans,
Landlord (i) shall give its written approval thereto or (ii) if Landlord
reasonably believes that the work set forth on Tenant's Plans will have an
adverse effect on the structural integrity of the Building or will penetrate the
roof and thereby invalidate the roof warranty (the "Tenant's Initial Work
Approval Criteria"), shall request revisions or modifications to the Tenant's
Plans (but only to the extent the same fail to comply with the Tenant's Initial
Work Approval Criteria). Tenant may thereafter submit such revisions or
modifications to Landlord. Within seven (7) days following receipt by Landlord
of such revisions or modifications, Landlord shall give its written approval
thereto or shall request other revisions or modifications therein (but relating
only to the extent Tenant has failed to comply with Landlord's earlier
requests). The preceding two sentences shall be implemented repeatedly until
Landlord gives its written approval to the Tenant's Plans. If Landlord shall
fail to respond to Tenant's Plans with its approval or request for
revisions/modification within the time period(s) provided above, such failure
shall be deemed Landlord's approval of Tenant's Plans. The Tenant's Plans as
approved or deemed approved by Landlord shall herein be referred to as the
"Final Tenant's Plans". At any time after the Final Tenant's Plans are approved
(or deemed approved) by Landlord and thereafter throughout Tenant's prosecution
of the Tenant's Initial Work, Tenant shall be permitted to direct changes in the
Tenant's Initial Work (it being agreed, however, that Tenant must obtain
Landlord's consent in accordance with the foregoing provisions of this Section
3.01(a) before prosecuting any such change that constitutes a Material
Tenant-Made Alteration, and the foregoing approval provisions of this Section
3.01(a) shall be applied to such proposed change). Tenant, at Tenant's option,
may submit the Tenant's Plans to Landlord for its approval in one or more parts
(and, in any case where the same are submitted in more than one part, the
provisions of this Article III shall apply separately as to each such part).
Landlord, at no cost to Tenant, shall cooperate (and cause Landlord's architect
and contractor to cooperate) with Tenant and Tenant's architect in preparing the
Tenant's Plans.
(b) Notwithstanding anything to the contrary in the Lease or this Workletter, in no event shall Tenant be required to obtain Landlord's prior consent in connection with (i) the installation of Tenant's racking systems in the Building, (ii) the installation of any mezzanine in the Building, (iii) the installation of any conveyors or other equipment in the Building or (iv) the installation in the Building of any of the other items shown on the Operational Plan attached to the Performance Specifications as Exhibit 1.
(d) Landlord shall from time to time, upon request of Tenant, supply, at no additional charge to Tenant, architectural services to assist Tenant with its office layout and design in the Building (including, without limitation, electrical, phone, data lines, etc.).
Except as otherwise provided in this Workletter, any dispute under this Workletter shall be resolved by arbitration in accordance with the Commercial Arbitration Rules (Expedited Procedures) of the American Arbitration Association, subject to the requirement that a single arbitrator unaffiliated with either party shall decide each matter in dispute within 15 days of the date of his selection, based solely upon the written statements of position submitted by each party. The parties consent to the jurisdiction of any appropriate court to enforce these arbitration provisions and to enter judgments upon the decision of the arbitration. Unless otherwise required by state law, arbitration shall be conducted in the Reno, Nevada area. In the event of an arbitration, the losing party shall pay the cost of arbitrator and the arbitration, but each party shall bear its own attorneys' fees and costs in preparing for and participating in such arbitration.
(a) For purposes hereof, the term "Offer Space" shall mean the Premises or any portion thereof.
(b) Landlord hereby agrees that if, from time to time and at any time during the Lease Term (as the same may be renewed or extended), Landlord desires to convey all or any portion of the Offer Space, then Landlord shall so notify Tenant (each, an "Offer Notice"), which notice shall contain the following information: (i) the proposed sales price; (ii) the desired closing date, which shall not be less than forty-five (45) days after the date Tenant receives the applicable Offer Notice; and (iii) all of the other material economic terms and conditions that are material to a sale of such Offer Space. Each Offer Notice shall constitute an offer to Tenant to purchase the Offer Space covered thereby (the "Right of First Offer to Purchase") on the terms and conditions set forth in such Offer Notice including, without limitation, the sales price set forth therein.
(c) Tenant shall have fifteen (15) business days to accept such an offer with respect to any Offer Space. If Tenant fails to accept such an offer with respect to any Offer Space within such fifteen (15) business day period, then (1) Tenant shall be deemed to have rejected such offer, and (2) Landlord, for a period of one (1) year from the date of the applicable Offer Notice, shall be free to sell such Offer Space to any prospective purchaser (which sale shall be subject to this Lease, if the Offer Space comprises the Premises), for a price of not less than ninety five percent (95%) of the net effective sales price set forth in the applicable Offer Notice and otherwise on terms and conditions no more materially advantageous to the purchaser than the terms and conditions set forth in such Offer Notice and in the event of such sale Tenant shall have no further right with respect to the Offered Space under this Addendum 4. If such Offer Space is not sold and title thereto transferred within such one (1) year period (for a price of not less than ninety five percent (95%) of the net effective sales price set forth in the Offer Notice and otherwise on terms and conditions no more materially advantageous to the purchaser than the terms and conditions set forth in the Offer Notice), then Tenant's Right of First Offer to Purchase such Offer Space shall remain in full force and effect (i.e., Landlord shall again offer such Offer Space to Tenant in accordance with the foregoing). If (x) Tenant rejects or is deemed to have rejected any offer to sell any Offer Space in accordance with this Addendum and (y) within twelve (12) months after such rejection Landlord desires to sell such Offer Space to a third party on terms and conditions (the "New Offer Terms") that are materially more advantageous (economically) to such third party than the terms and conditions contained in the Offer Notice in question (including, without limitation, if Landlord desires to sell such Offer Space to a third
(c) If Tenant accepts any such offer for any Offer Space, Landlord and Tenant (or any designee of Tenant) shall close title to such Offer Space in accordance with and pursuant to the terms and conditions set forth in the Offer Notice. In connection therewith, Landlord and Tenant promptly shall enter into a customary contract of sale that incorporates the terms and provisions set forth in the Offer Notice.
ProLogis Development Services Incorporated
14100 East 35th Place
Aurora, Colorado 80011
Attention: Legal Department
Re: Irrevocable Transferrable Letter of Credit No.____________________________
Beneficiary:
By order of our client, ____________________ (the "Applicant"), we hereby establish this Irrevocable Transferrable Letter of Credit No. ________ in your favor for an amount up to but not exceeding the aggregate sum of Two Hundred Eight Thousand Five Hundred and No/100 Dollars ($208,500.00) (as reduced from time to time in accordance with the terms hereof, the "Letter of Credit Amount"), effective immediately, and expiring on the close of business at our office at the address set forth above one year from the date hereof unless renewed as hereinafter provided.
Funds under this Letter of Credit are available to you on or prior to the expiry date against presentation by you of your (i) sight drafts drawn on us in the form of Annex 1 hereto, indicating this Letter of Credit number and (ii) request in the form of Annex 2 hereto (such sight draft and request, together referred to as a "Drawing Request"), sight draft(s), completed and signed by one of your officers. Presentation of your Drawing Requests may be made by you to us at the address set forth above or may be made by facsimile transmission, to the following facsimile number ___________. You may present to us one or more Drawing Requests from time to time prior to the expiry date in an aggregate amount not to exceed the Letter of Credit Amount
This Letter of Credit will be automatically renewed for a one-year period upon the expiration date set forth above and upon each anniversary of such date, unless at least sixty (60) days prior to such expiration date, or prior to any anniversary of such date, we notify both you and the Applicant in writing by certified mail that we elect not to so renew the Letter of Credit.
This Letter of Credit sets forth in full the terms of our undertaking and such undertaking shall not in any way be modified, amended or amplified by reference to any document or instrument referred to herein or in which this Letter of Credit is referred to or to which this Letter of Credit relates, and no such reference shall be deemed to incorporate herein by reference any document or instrument.
All bank charges and commissions incurred in this transaction are for the Applicant's account.
This Letter of Credit is transferrable by you and your successors and assigns any number of times in its entirety and not in part, but only by delivery to us of a Notice of Assignment in the form of Annex 3 hereto.
We hereby agree with the drawers, endorsers, and bona fide holders of drafts drawn under and in compliance with the terms of this Letter of Credit that such drafts will be duly honored upon presentation to the drawee from our own funds and not the funds of the Applicant and shall be available to such drawers, endorsers, and bona fide holders, as the case may be, on or before noon, New York time, on the Business Day (defined below) next following the date on which such drafts are received by us. "Business Day" shall mean any day which is not a Saturday, Sunday or day on which we are required or authorized by law to be closed in New York, New York.
To the extent not inconsistent with the express terms hereof, this Letter of Credit shall be governed by, and construed in accordance with, the terms of the Uniform Customs and Practice for Commercial Documentary Credits (1993 Revision), I.C.C. Publication No. 500 (the "UCP 500") and as to matters not governed by the UCP 500, this Letter of Credit shall be governed by and construed in accordance with the laws of the State of New York.
Very truly yours,
For value received, at sight pay to the order of [Name of Landlord], the sum of [Amount in words] [Amount in Figures] United States Dollars drawn under [Name of Letter of Credit Bank] Irrevocable Transferrable Letter of Credit No. ________ dated _________________, 199_____.
[NAME AND ADDRESS OF LETTER
OF CREDIT BANK]
Re: Irrevocable Transferrable Letter of Credit No._______ (the "Letter of Credit")
The undersigned (the "Beneficiary"), hereby certifies to [Name of Letter of Credit Bank] (the "Issuer") that:
(a) The Beneficiary is making a request for payment in lawful currency of the United States of America under Irrevocable Transferrable Letter of Credit No. (the "Letter of Credit") in the _______________ amount of $___________.
(b) The Letter of Credit Amount (as defined in the Letter of Credit) as of the date hereof and prior to payment of the amount demanded in this Drawing Request is $___________ . The amount requested by this Drawing Request does not exceed the Letter of Credit Amount.
[(c) Demand is made for payment under the Letter of Credit as a result of the occurrence and continuation of an Event of Default (as defined in the Lease Agreement).]
Please wire transfer the proceeds of the drawing to the following account of the Beneficiary at the financial institution indicated below:
Unless otherwise defined, all capitalized terms used herein have the meanings provided in, or by reference in, the Letter of Credit.
[NAME AND ADDRESS OF
LETTER OF CREDIT BANK]
Re: Irrevocable Transferable Letter of Credit No.
The undersigned (the "Beneficiary"), hereby notifies [Name of Letter of Credit Bank] (the "Issuer") that it has irrevocably assigned the above-referenced Letter of Credit to ______________ (the "Assignee") with an address at ________________ effective as of the date the Issuer receives this Notice of Assignment. The Assignee acknowledges and agrees that the Letter of Credit Amount may have been reduced pursuant to the terms thereof, and that the Assignee is bound by any such reduction.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Notice of Assignment as of this _____ day of _______, 199_.
Agreed:
[Assignee]
[Diagram]
[Diagram]
[Diagram]
Those encumbrances listed on Schedule B to the Preliminary Report #992107340, dated as of July 29, 1999, of Stewart Title of Northern Nevada, Reno, Nevada, but only to the extent such encumbrances pertain to Parcel 1 of Parcel Map. No. 3487 filed in the office of the County Recorder of Washoe County, State of Nevada, on March 19, 1999 as File No. 2318611; provided, however, that (notwithstanding the foregoing) the following exceptions described on said Schedule B do not encumber the Property and shall not constitute Permitted Encumbrances: 5, 6 and 21.
[NAME AND ADDRESS OF LETTER
OF CREDIT BANK]
Re: Irrevocable Transferrable Letter of Credit No. ____ (the "Letter of Credit")
The undersigned (the "Beneficiary"), hereby certifies to [Name of Letter of Credit Bank] (the "Issuer") that:
(a) The Beneficiary is making a request for payment in lawful currency of the United States of America under Irrevocable Transferrable Letter of Credit No. ____ (the "Letter of Credit") in the amount of $ ________.
(b) The Letter of Credit Amount (as defined in the Letter of Credit) as of the date hereof and prior to payment of the amount demanded in this Drawing Request is $__________ . The amount requested by this Drawing Request does not exceed the Letter of Credit Amount.
(c) Demand is made for payment under the Letter of Credit as a result of the occurrence and continuation of an Event of Default (as defined in the Lease Agreement).
Please wire transfer the proceeds of the drawing to the following account of the Beneficiary at the financial institution indicated below:
Unless otherwise defined, all capitalized terms used herein have the meanings provided in, or by reference in, the Letter of Credit.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Drawing Request as of the ___ day of _______________, 199__.
By: __________________________
Name:
[Intentionally Omitted]
Tenant has requested Landlord's consent to use the Hazardous Materials listed below in its business at the Premises (the "Permitted Hazardous Materials"). Subject to the conditions set forth herein, Landlord hereby consents to the Use (hereinafter defined) of the Permitted Hazardous Materials. Any Permitted Hazardous Materials on the Premises will be generated, used, received, maintained, treated, stored, or disposed in a manner consistent with good engineering practice and in compliance with all Environmental Requirements.
The storage, uses or process involving the Permitted Hazardous Materials (the "Use") are described below.
Use [If limited to receiving and storage, so specify]:
No Current Investigation. Tenant represents and warrants that it is not currently subject to an inquiry, regulatory investigation, enforcement order, or any other proceeding regarding the generation, use, treatment, storage, or disposal of a Hazardous Material.
Notice and Reporting. Tenant immediately shall notify Landlord in writing of any spill, release, discharge, or disposal of any Hazardous Material in, on or under the Premises or the Project. All reporting obligations imposed by Environmental Requirements are strictly the responsibility of Tenant. Tenant shall supply to Landlord within 5 business days after Tenant
Indemnification. Tenant's indemnity obligation under the Lease with respect to Hazardous Materials shall include indemnification for the liabilities, expenses and other losses described therein as a result of the Use of the Hazardous Materials or the breach of Tenant's obligations or representations set forth above. It is the intent of this provision that Tenant be strictly liable to Landlord as a result of the Use of Hazardous Materials without regard to the fault or negligence of Tenant, Landlord or any third party.
Disposal Upon Lease Termination. At the expiration or earlier termination of the Lease, Tenant, at its sole cost and expense, shall: (i) remove and dispose off-site any drums, containers, receptacles, structures, or tanks storing or containing Hazardous Materials (or which have stored or contained Hazardous Materials) and the contents thereof; (ii) remove, empty, and purge all underground and above ground storage tank systems, including connected piping, of all vapors, liquids, sludges and residues; and (iii) restore the Premises to its original condition. Such activities shall be performed in compliance with all Environmental Requirements and to the satisfaction of Landlord. Landlord's satisfaction with such activities or the condition of the Premises does not waive, or release Tenant from, any obligations hereunder.
THE STATE OF NEVADA ss.
ss.
COUNTY OF WASHOE ss.
|
THIS AGREEMENT is made as of September 8, 1999, among Prologis Trust, formerly known as Security Capital Industrial Trust ("Lender"), barnesandnoble.com llc (hereinafter called "Tenant"), and ProLogis Development Services Incorporated (hereinafter called "Landlord").
WHEREAS, Lender has made or has agreed to make loans to Landlord (the "Loan"), to be evidenced by promissory notes executed by Landlord payable to the order of each Lender (the "Notes"), bearing interest as therein specified;
WHEREAS, the Notes are secured by, among other things, a Deed of Trust, Security Agreement, Financing Statement and Assignment of Rental (the "Deed of Trust"), creating a first lien upon that certain tract of real property described in Exhibit A attached hereto (the "Property"), and an Assignment of Leases and Rents (all such security instruments and all security instruments now or hereafter executed between Landlord and Lender in connection with the Loan, the Notes, or the Property, and all renewals, extensions, modifications, and/or increases thereof to be referred to hereinafter collectively as the "Collateral Documents");
WHEREAS, Tenant and Landlord have requested that Lender agree that it will not disturb Tenant's possession of the Demised Premises and Lender has agreed to do so provided that Tenant expressly subordinates the Lease and all of Tenant's rights thereunder to the Collateral Documents and the liens and security interests created thereby and that Tenant agrees to attorn to Lender or a subsequent purchaser of the Demised Premises;
NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, Lender, Landlord, and Tenant hereby agree as follows:
Subordination. The Lease and all of Tenant's rights thereunder are, shall be, shall remain, and are expressly made subordinate and inferior to the liens and security interests created by the Collateral Documents, and Tenant also agrees that the liens and security interests created by the Collateral Documents shall be and remain prior and superior to the Lease and to all of the rights of the Tenant thereunder, regardless of how often or in what manner the Notes, together with the liens securing the same, and any of the Collateral Documents, may be renewed, extended, increased, changed, or altered.
Non-Disturbance. So long as Tenant is not in default in the payment of basic rent or percentage rent or additional rent (each as applicable under the Lease) beyond any applicable notice and grace periods provided for under the Lease or in the performance of any of the terms, covenants, or conditions of the Lease on Tenant's part to be performed beyond any applicable notice and grace periods provided for under the Lease, Tenant's use and possession of the Demised Premises and Tenant's rights and privileges under the Lease, or any extensions
Attornment. In the event that any proceedings are brought for the foreclosure of the Deed of Trust or if the Demised Premises are conveyed to Lender by deed in lieu of foreclosure, Tenant shall attorn to Lender or the purchaser upon any such conveyance or foreclosure sale or trustee's sale and shall recognize Lender or such purchaser as Landlord under the Lease. Such attornment shall be effective and self-operative without the execution of any further instrument on the part of either of the parties hereto. Tenant agrees, however, to execute and deliver at any time and from time to time, upon the request of Landlord or of any holder(s) of any of the indebtedness or other obligations secured by the Deed of Trust and other Collateral Documents or any such purchaser (1) any instrument or certificate, reasonably requested by Landlord or of such holder(s) or such purchaser, which may be necessary or appropriate in any such foreclosure proceeding or otherwise to evidence such attornment, and (2) an instrument of certificate regarding the status of the Lease, consisting of statements, if true, (i) that the Lease is in full force and effect, (ii) the date through which rentals have been paid, (iii) the date of the commencement of the term of the Lease, (iv) the nature of any amendments or modifications to the Lease, (v) that, to the best of Tenant's knowledge, no default, or state of facts, which with the passage of time or notice would constitute a default, exists on the part of either party to the Lease, and (vi) the date on which payment of additional rents and/or percentage rents, if any, are due under the terms of the Lease.
(a) liable for any action or omission of any prior landlord (including Landlord), it being understood, however, that (i) the foregoing is not intended to relieve Lender or such purchaser of any liability arising by reason of its acts or omissions from and after the date that it succeeds to the interests of Landlord, including a continuation of the failure of the prior Landlord to perform its obligations under the Lease; and (ii) the foregoing shall in no way diminish Tenant's Express Set-Off Rights (as hereinafter defined), even if such rights exist by reason of circumstances occurring before the date on which Lender or such purchaser succeeds to Landlord's interest under the Lease; or
(a) bound by any rent which Tenant might have paid for more than the current month to any prior landlord (including Landlord); or
(a) subject to any offsets or defenses which Tenant might be entitled to assert against Landlord it being understood, however, that the foregoing shall in no way diminish Tenant's Express Set-Off Rights, even if such rights exist by reason or circumstances occurring before the date on which Purchaser acquires Landlord's interest in the Lease; or
(a) liable for any security deposits except to the extent received from Landlord.
Notwithstanding the foregoing, in the event that Lender or any such purchaser is an affiliate or is otherwise related to Landlord (or any prior Landlord) then in such event, clauses 4(a) - 4(e) hereof shall have no application and in the event that such Lender or purchaser shall succeed to the interests of Landlord under the Lease then such Lender or purchaser shall be responsible for all of the obligations of Landlord under the Lease as if such Lender or purchaser shall have originally executed the Lease as the landlord thereunder.
For purposes of this Agreement, the term "Tenant's Express Set-Off Rights" shall mean Tenant's rights to any abatement, credit or setoff that are expressly provided for in the Lease or the exhibits annexed thereto, regardless of whether such rights arise by reason of a failure or default by Landlord or a failure or default by a Lender or a purchaser.
No Waiver. Nothing herein contained is intended, nor shall it be construed, to abridge or adversely affect any right or remedy of Landlord provided for under the Lease in the event of default by Tenant in the payment of any rent or in the performance of any of the terms, covenants or conditions of the Lease on Tenant's part to be performed.
To Lender: ProLogis Trust
14100 E. 35th Place
Aurora, Colorado 80011
Attention: Legal Department
To Tenant: Barnes & Noble/Bn.com
76 Ninth Avenue, 11th Floor
New York, New York 10011
Attention: William F. Duffy
To Landlord: ProLogis Development Services Incorporated
14100 E. 35th Place
Aurora, Colorado 80011
Attention: Legal Department
|
or to such other address or in care of such other person as hereinafter shall be designated in writing by the applicable party, and shall be deemed to have been given as of the date of deposit in an official receptacle of the United States mail in the manner aforesaid.
Governing Law. The validity and construction of this Agreement shall be governed by the laws of the State of Nevada.
Counterparts. This Agreement may be executed in several counterparts, and all so executed shall constitute one agreement, binding on all parties hereto, notwithstanding that all parties are not signatories to the original or the same counterpart.
Lender:
By: /s/ David Morze
--------------------------
Name: David Morze
--------------------------
Title: Senior Vice President
--------------------------
|
By: /s/ John W. Seiple
--------------------------
Name: John W. Seiple
--------------------------
Title: Senior Vice President
--------------------------
|
By: /s/ William F. Duffy
--------------------------
Name: William F. Duffy
--------------------------
Title: Vice President, Operations
--------------------------
|
THE STATE OF __________ ss.
ss.
COUNTY OF _____________ ss.
|
This instrument was acknowledged before me on this ______ day of ______________, 19___, by ________________________________________ of __________________________, a ____________________________, on behalf of said ___________.
THE STATE OF __________ ss.
ss.
COUNTY OF _____________ ss.
|
This instrument was acknowledged before me on this ______ day of _______________, 19___, by ________________________________________ of _____________________________________, on behalf thereof.
THE STATE OF __________ ss.
ss.
COUNTY OF _____________ ss.
|
This instrument was acknowledged before me on this _______ day of __________________, 19___, by ________________________________ of _________________________________________________, on behalf thereof.
Parcel 1 of PARCEL MAP NO. 3487, according to the map thereof, filed in the office of the County Recorder of Washoe County, State of Nevada, on March 19, 1999 as File No. 2318611, and any and all existing or future improvements located thereon.
[Name and Address of Landlord]
Re: Lease (the "Lease", dated ____________, between _________________ ("Landlord") and _____________________ ("Tenant") Premises:
Dear Sir or Madam:
Tenant hereby certifies the following information as of the date of this certificate:
1. The Lease is in full force and effect and has not been modified, supplemented, or amended, except as set forth on Schedule I annexed hereto.
3. Except as otherwise provided in the Lease or on Schedule II annexed hereto, no payment of Base Rent or additional rent has been paid by Tenant more than thirty days in advance.
4. Except as set forth on Schedule III annexed hereto, to the best of Tenant's knowledge, as of the date hereof, Landlord is not in default under the terms of the Lease.
[Letterhead of Landlord]
[Date]
[Name and Address of Tenant]
Re: Lease (the "Lease", dated ____________, between _________________ ("Landlord") and _____________________ ("Tenant") Premises:
Dear Sir or Madam:
Landlord hereby certifies the following information as of the date of this certificate:
1. The Lease is in full force and effect and has not been modified, supplemented, or amended, except as set forth on Schedule I annexed hereto. ----------
2. The Base Rent due under the Lease has been paid through ____________.
4. Except as set forth on Schedule III annexed hereto, to the best of Tenant's knowledge, as of the date hereof, Landlord is not in default under the terms of the Lease.
RECORD AND RETURN TO:
David Blaivas, Esq.
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
PROPERTY DESCRIPTION
Parcel 1 of Parcel Map No. 3487, APN: 140-010-09
County of Washoe
State of Nevada
This Memorandum of Lease is made the 8th day of September, 1999, by and between PROLOGIS DEVELOPMENT SERVICES INCORPORATED, a Delaware corporation, having its principal office at 14100 East 35th Place, Aurora, Colorado 80011
WHEREAS, Landlord (as successor in interest to SCI Development Services Incorporated) is the sole owner in fee simple of the piece, parcel or tract of land lying and being in the County of Washoe and State of Nevada, more particularly described in Schedule I annexed hereto (the "Land");
WHEREAS, Landlord, as landlord, and Tenant, as tenant, have entered into a lease, dated September 8, 1999 (the "Lease"), covering the Land and all improvements now or hereafter erected thereon (including, without limitation, that certain building (the "Building") that is to be erected by Landlord on the Land and that is to contain approximately 600,000 square feet of space);
WHEREAS, the Land and the Building are part of that certain industrial project (the "Project") commonly known as Damonte Ranch Trade Center I, which industrial project is composed of the parcels of land lying and being in the County of Washoe, State of Nevada, as more particular described in Schedule II annexed hereto, together with any improvements now or hereafter erected thereon; and
WHEREAS, Landlord and Tenant desire to have a Memorandum of Lease recorded in the official public records of real property of Washoe County, Nevada.
I.
The premises demised by the Lease (the "Premises") consist of, inter alia, the Land and the Building, together with (x) any and all other improvements and structures (now or hereafter erected) on the Land, and (y) all of Landlord's right, title and interest in and to all easements, rights and other matters appurtenant to the Land or the Building and in and to any land lying in the bed of any roads adjacent to the Land.
II.
1. The Commencement Date of the Lease is September 8, 1999. The Rent Commencement Date (as defined in the Lease) will occur 30 days after the Substantial Completion of the Base Building Work (as defined in the Lease), which is estimated to occur on or before April 15, 2000, subject to certain delays, as provided in the Lease.
2. The initial term of the Lease will commence on the Commencement Date and shall end on the last day of the 120th full calendar month following the Rent Commencement Date.
Tenant may extend the term of the Lease for four (4) additional extension terms of five (5) years each, upon the terms and conditions set forth in the Lease.
IV.
Tenant has a right of first offer to purchase the Premises, upon the terms and conditions set forth in the Lease.
V.
Tenant has the right, subject to the terms and conditions of the Lease, to place directional signs as appropriate throughout the Project for the benefit of its customers.
Notice is hereby given that the Lease contains additional terms, covenants, conditions and provisions not set forth in or referred to in this Memorandum of Lease.
* * * * *
THIS MEMORANDUM OF LEASE IS NOT A COMPLETE SUMMARY OF THE LEASE. The provisions of this Memorandum of Lease shall not be construed to interpret, vary or modify the terms, covenants, conditions or provisions of the Lease and in the event of any conflict between the terms hereof and the terms of the Lease, the terms of the Lease shall control. A true copy of the Lease is located at the Premises.
[Remainder of Page Intentionally Blank]
TENANT: LANDLORD:
barnesandnoble.com llc ProLogis Development Services Incorporated
By: /s/ William F. Duffy By: /s/ John W. Seiple, Jr.
------------------------------ -----------------------------
Title: Vice President, Operations Title: Senior Vice President
--------------------------- ----------------------
Address: Address:
76 Ninth Avenue, 11th Floor 47775 Fremont Blvd.
New York, NY 10011 Fremont, CA 94538
|
Parcel 1 of PARCEL MAP NO. 3487, according to the map thereof, filed in the office of the County Recorder of Washoe County, State of Nevada, on March 19, 1999 as File No. 2318611.
Parcels 1 and 2 of PARCEL MAP NO. 3487, according to the map thereof, filed in the office of the County Recorder of Washoe County, State of Nevada, on March 19, 1999 as File No. 2318611.
Parcels 1 and 2 of PARCEL MAP NO. 3488, according to the map thereof, filed in the office of the County Recorder of Washoe County, State of Nevada, on March 19, 1999 as File No. 2318612.
An easement for temporary access as set forth in an instrument recorded June 16, 1998, as Document No. 2221195 of Official Records.
An easement for sanitary sewer as set forth in an instrument recorded June 16, 1998, as Document No. 2221193 of Official Records.
[Intentionally Omitted]
[Forms of Warranties and Guarantees]
111 CHELSEA LLC
PREMISES: Portions of the Ninth Floor
111 Eighth Avenue
(a/k/a 76 Ninth Avenue)
New York, New York 10011
DATED: as of October 1, 1999
|
TABLE OF CONTENTS
Page
----
DEFINITIONS ............................................................ 1
ARTICLE 1. DEMISE, PREMISES, TERM, RENT................................ 7
ARTICLE 2. USE AND OCCUPANCY........................................... 8
ARTICLE 3. ALTERATIONS.................................................11
ARTICLE 4. CONDITION OF THE PREMISES; LANDLORD'S WORK..................14
ARTICLE 5. REPAIRS; FLOOR LOAD.........................................17
ARTICLE 6. REAL ESTATE TAXES AND LABOR RATE INCREASES..................19
ARTICLE 7. LEGAL REQUIREMENTS..........................................24
ARTICLE 8. SUBORDINATION AND NON-DISTURBANCE; ESTOPPEL CERTIFICATES....26
ARTICLE 9. SERVICES....................................................29
ARTICLE 10. INSURANCE...................................................40
ARTICLE 11. DESTRUCTION OF THE PREMISES; PROPERTY LOSS OR DAMAGE........42
ARTICLE 12. EMINENT DOMAIN..............................................44
ARTICLE 13. ASSIGNMENT AND SUBLETTING...................................45
ARTICLE 14. ACCESS TO PREMISES..........................................54
ARTICLE 15. CERTIFICATE OF OCCUPANCY....................................56
ARTICLE 16. DEFAULT.....................................................56
ARTICLE 17. REMEDIES AND DAMAGES........................................59
ARTICLE 18. FEES AND EXPENSES...........................................61
ARTICLE 19. NO REPRESENTATIONS BY LANDLORD..............................61
ARTICLE 20. END OF TERM.................................................62
ARTICLE 21. QUIET ENJOYMENT.............................................62
ARTICLE 22. NO WAIVER; NON-LIABILITY....................................63
ARTICLE 23. WAIVER OF TRIAL BY JURY.....................................64
ARTICLE 24. INABILITY TO PERFORM........................................64
ARTICLE 25. BILLS AND NOTICES...........................................65
ARTICLE 26. RULES AND REGULATIONS.......................................65
ARTICLE 27. BROKER......................................................66
ARTICLE 28. INDEMNITY...................................................66
ARTICLE 29. REDUCED PREMISES............................................67
ARTICLE 30. RIGHT OF FIRST OFFER........................................68
ARTICLE 31. LANDLORD'S CONTRIBUTION.....................................71
ARTICLE 32. SECURITY DEPOSIT............................................73
ARTICLE 33. BUILDING NAME AND SIGNAGE; FLAGPOLE.........................77
ARTICLE 34. GUARANTY OF LEASE...........................................78
ARTICLE 35. MISCELLANEOUS...............................................78
|
Exhibit A: Floor Plan of Space A
Exhibit B: Floor Plan of Space B
Exhibit C: Floor Plan of Space C
Exhibit D: Form of Letter of Credit
Exhibit E: Rules and Regulations
Exhibit F: Approved Contractors
Exhibit G: Certificate of Occupancy
Exhibit H: Form of Existing Mortgagee Non-Disturbance Agreement
Exhibit I: Roof Space
Exhibit J: Article 29 Space
Exhibit K: Section 2.3 Occupancies
Exhibit L: Section 30.2 Occupancies
Exhibit M: Intentionally Deleted
Exhibit N: Existing Emergency Stairwell
Exhibit O: Form of Agreement and Guaranty
Exhibit P: Floor Plan of the Remaining B Space
Exhibit P-1: Lease Modifications Re: Remaining B Space
Exhibit Q: Louver Locations
Exhibit R: Center Shaft Location
-ii-
|
AGREEMENT OF LEASE ("Lease"), dated as of October 1, 1999,
|
The parties hereto, for themselves, their legal representatives, successors and assigns, covenant and agree as follows.
Additional Rent: Tenant's Tax Payment, Tenant's Labor Rate Payment, and any and
all other sums, other than Fixed Rent, payable by Tenant to
Landlord under this Lease.
Affiliate: With respect to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such first
Person.
Alterations: Alterations, installations, improvements, additions or other
physical changes (other than decorations, movable fixtures and
equipment) in or about the Premises or elsewhere in the
Building.
Bertelsmann: Bertelsmann AG, a business entity organized pursuant to the
laws of the Federal Republic of Germany.
B&N Inc.: Barnes & Noble, Inc., a Delaware corporation.
Base Rate: The annual rate of interest publicly announced from time to
time by Citibank, N.A., New York, New York (or any successor
thereto) as its "base rate", or such other term as may be used
by Citibank, N.A. from time to time for the rate presently
referred to as its base rate.
Building: All the buildings, equipment and other improvements and
appurtenances of every kind and description now located or
hereafter erected, constructed or placed upon the land and any
and all alterations, renewals, replacements, additions and
substitutions thereto, presently known by the address of 111
Eighth Avenue (a/k/a 76 Ninth Avenue), New York, New York.
|
Building Systems: The mechanical, electrical, heating, ventilating, air conditioning, elevator, plumbing, sanitary, life-safety and other service systems of the Building, but shall not include the portions of such systems installed in the Premises or elsewhere in the Building by Tenant.
Business Days: All days, excluding Saturdays, Sundays, and all days observed
by either the State of New York, the United States of America
or by the labor unions servicing the Building as legal
holidays.
Commencement As to Space A, October 1, 1999. As to Space B and Space C, the
Date: respective Delivery Dates for Space B and Space C.
Control: As to any Person: (a) the ownership, directly or indirectly,
of more than thirty per cent (30%) of (i) the outstanding
voting stock of a corporation, or (ii) the beneficial
ownership interests, however characterized, of any other
entity, or (b) the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of
voting securities or other ownership interests, by statute, or
by contract.
Default Rate: A rate per annum equal to four (4) percentage points above the
Base Rate.
Delivery Date: As to each of Space A, Space B and Space C, the date upon
which Landlord delivers possession of such Space, whether or
not the portions of Landlord's Work applicable to such Space
have been Substantially Completed.
Entity: Defined in Section 13.10(a).
Environmental
Laws: All Legal Requirements now or hereafter in effect relating to
the environment, health, safety or Hazardous Materials.
Expiration Date: February 28, 2015.
Governmental
Authority: Any of the United States of America, the State of New York,
the City of New York, any political subdivision thereof and
any agency, department, commission, board, bureau or
instrumentality of any of the foregoing, now existing or
hereafter created, having jurisdiction over the Real Property
or any portion thereof or the vaults, curbs, sidewalks,
streets and areas adjacent thereto.
Guarantor: barnesandnoble.com inc., a Delaware corporation, and any other
Person which shall from time to time guaranty to Landlord the
payment and performance of all or any portion of the
obligations of Tenant under this Lease.
Guaranty: The Agreement and Guaranty, dated as of the date hereof, made
by Guarantor to Landlord, in the form attached to this Lease
as Exhibit O, and any amendment, modification, restatement,
confirmation or extension thereof, and any other agreement
pursuant to which any Guarantor shall
|
Hazardous
Materials: Any substances, materials or wastes regulated by any
Governmental Authority or deemed or defined as a "hazardous
substance", "hazardous material", "toxic substance", "toxic
pollutant", "contaminant", "pollutant", "solid waste",
"hazardous waste" or words of similar import under applicable
Legal Requirements, including oil and petroleum products,
natural or synthetic gas, polychlorinated biphenyls, asbestos
in any form, urea formaldehyde, radon gas, or the emission of
non-ionizing radiation, microwave radiation or electromagnetic
fields at levels in excess of those (if any) specified by any
Governmental Authority or which may cause a health hazard or
danger to property, or the emission of any form of ionizing
radiation.
Initial
Alterations: Defined in Section 4.3.
Landlord's
Contribution: Defined in Section 31.1.
Landlord's Work: Defined in Section 4.2.
Legal
Requirements: All present and future laws, rules, orders, ordinances,
regulations, statutes requirements, codes, executive orders,
rules of common law, and any judicial interpretations thereof,
extraordinary as well as ordinary, of all Governmental
Authorities, including the Americans with Disabilities Act (42
U.S.C.ss.12,101 et seq.), New York City Local Law 58 of 1987,
and any law of like import, and all rules, regulations and
government orders with respect thereto, and of any applicable
fire rating bureau, or other body exercising similar
functions, affecting the Real Property or the maintenance, use
or occupation thereof, or any street or sidewalk comprising a
part of or in front thereof or any vault in or under the
Building.
Mortgage: Any mortgage or trust indenture which may now or hereafter
affect the Real Property, the Building or any Superior Lease
and the leasehold interest created thereby, and all renewals,
extensions, supplements, amendments, modifications,
consolidations and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
Mortgagee: Any mortgagee, trustee or other holder of a Mortgage.
Permitted Use: The use by Tenant of the Premises as executive, administrative
and/or general offices and the lawful uses ancillary thereto
described in Article 2, and for no other purpose.
|
Person: Any individual, corporation, partnership, limited liability
company, limited liability partnership, joint venture, estate,
trust, unincorporated association, business trust,
tenancy-in-common or other entity, or any Governmental
Authority.
Premises: Collectively, Space A, Space B and Space C, as and when
delivered to Tenant.
Premises Area: The Rentable Square Foot area of (i) from the Space A Delivery
Date until the Space B Delivery Date, Space A, hereby deemed
and agreed to be 46,053 Rentable Square Feet; plus (ii) from
the Space B Delivery Date until the Space C Delivery Date,
Space B, hereby deemed and agreed to be 25,763 Rentable Square
Feet (such that during such period the Premises Area of the
entire Premises (comprising Space A and Space B) shall be
deemed to be 71,816 Rentable Square Feet); plus (iii) from the
Space C Delivery Date until the Expiration Date, Space C,
hereby deemed and agreed to be 18,324 Rentable Square Feet
(such that during such period the Premises Area of the entire
Premises (comprising Space A, Space B and Space C) shall be
deemed to be 90,140 Rentable Square Feet), as such Premises
Area may be increased or decreased from time to time pursuant
to this Lease.
Real Property: The Building, together with the plot of land upon which it
stands.
Rentable Square
Feet: The deemed rentable area of the Building or any portion
thereof, computed on the basis of the current standard
employed by Landlord on the date hereof with respect to the
calculation of the deemed Rentable Square Foot area of the
Building, and according to such calculation, the Building is
deemed to contain 2,300,000 Rentable Square Feet of Space;
provided, however, that in no event shall such deemed Rentable
Square Footage constitute or imply any representation or
warranty by Landlord as to the actual size of any floor or
other portion of the Building, including the Premises.
Rules and
Regulations: The rules and regulations attached to this Lease as Exhibit E,
and such additional rules and regulations as Landlord may
reasonably adopt from time to time in accordance with the
provisions of Article 26.
Roof
Equipment: As defined in Section 9.7.
Roof Space: As defined in Section 9.7.
|
Security Deposit: As defined in Section 32.1.
Space: Any of Space A, Space B or Space C.
Space A: A portion of the ninth (9th) floor of the Building,
substantially as shown on the floor plan attached as Exhibit A
to this Lease.
Space B: A portion of the ninth (9th) floor of the Building,
substantially as shown on the floor plan attached as Exhibit B
to this Lease.
Space C: A portion of the ninth (9th) floor of the Building,
substantially as shown on the floor plans attached as Exhibit
C to this Lease.
Space A Rent
Commencement March 1, 2000.
Date:
Space B Rent
Commencement The later of (i) 150 days following the Space B Delivery Date,
Date: or (ii) June 1, 2000.
Space C Rent
Commencement The later of (i) 150 days following the Space C Delivery Date,
Date: or (ii) November 1, 2000.
Substantial
Completion: As to any construction performed by any party in the Premises,
including the Initial Alterations, any other Alterations, or
Landlord's Work, that such work has been completed
substantially in accordance with (i) the provisions of this
Lease applicable thereto, (ii) the plans and specifications
for such work, and (iii) all applicable Legal Requirements,
except for minor details of construction, decoration and
mechanical adjustments, if any, the noncompletion of which
does not materially interfere with Tenant's use of the
Premises, or which, in accordance with good construction
practice, should be completed after the completion of other
work to be performed in the Premises.
Superior Lease: Any ground or underlying lease of the Real Property or any
part thereof heretofore or hereafter made by Landlord and all
renewals, extensions, supplements, amendments and
modifications thereof.
Superior Lessor: A lessor under a Superior Lease.
Tenant's
Alterations: All Alterations, including the Initial Alterations and the
installation of Roof Equipment, in and to the Premises and
elsewhere in the Building which may be made by or on behalf of
Tenant prior to and during the Term, or any renewal thereof.
5
|
Tenant Delay: Any delay which results from any act, neglect, failure to act
(where this Lease or Legal Requirements impose a duty to act)
or omission of any Tenant Party, including delays due to
Tenant's changes in or additions to, or interference with, any
work to be done by Landlord, or delays by Tenant beyond the
periods set forth herein in submission of information,
approving working drawings or estimates or giving
authorizations or approvals.
Tenant Party: Any of Tenant, any Affiliate of Tenant, any subtenant or any
other occupant of the Premises, or any of their respective
direct or indirect partners, officers, shareholders,
directors, members, trustees, beneficiaries, employees,
principals, contractors, licensees, servants, agents or
representatives.
Tenant's Other
Lease: That certain Agreement of Lease, dated as of June 30, 1997,
between Landlord's predecessor-in-interest, as landlord, and
Tenant's predecessor-in-interest, as tenant, as amended by (i)
letter agreement of even date therewith, (ii) letter
agreement, dated July 1, 1997, (iii) Modification of Lease
Agreement dated as of January ___, 1998, (iv) Amendment of
Lease dated as of September 1, 1998, and (v) Assignment,
Assumption and Consent Agreement and Amendment to Lease, of
even date herewith, pursuant to which the tenant's interest in
Tenant's Other Lease is being assigned to and assumed by
Tenant. Landlord and Tenant mutually acknowledge that, except
as may be expressly set forth herein, this Lease and Tenant's
Other Lease represent separate and distinct agreements and
legal interests.
Tenant's
Property: Tenant's movable fixtures and movable partitions, telephone
and other communications equipment, computer systems,
furniture, trade fixtures, furnishings, and other items of
personal property which are removable without material damage
to the Premises or Building.
Term: The term of this Lease, which shall commence on the
Commencement Date and shall expire on the Expiration Date.
Transaction
Expenses: All actual, reasonable and customary costs and expenses
incurred by Tenant in effectuating a subletting or assignment,
including brokerage commissions, advertising costs, attorney's
fees and disbursements, remodeling and redecorating costs in
connection with such subletting or assignment, rental
abatements or concessions to the subtenant or assignee, and
any fees or cost reimbursements paid to Landlord pursuant to
this Lease in connection with Landlord's review or approval of
such subletting or assignment.
|
Section 1.1 Landlord hereby leases to Tenant, and Tenant hereby hires from Landlord, the Premises, for the Term to commence, as to Space A on October 1, 1999 and as to each of Space B and Space C on the applicable Delivery Date for such Space, and to end on the Expiration Date, at an annual rent ("Fixed Rent") as follows:
(a) For the portion of the Term commencing on the Space A Rent Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent for Space A as follows:
(i) One Million Three Hundred Eighty One Thousand Five Hundred Ninety and 00/100 Dollars ($1,381,590.00) per annum ($115,132.50 per month) for the period commencing on the Space A Rent Commencement Date and ending one day prior to the fifth (5th) anniversary of the Commencement Date for Space A;
(ii) One Million Five Hundred Nineteen Thousand Seven Hundred Forty Nine and 00/100 Dollars ($1,519,749.00) per annum ($126,645.75 per month) for the period commencing on the fifth (5th) anniversary of the Commencement Date for Space A and ending one day prior to the tenth (10th) anniversary of the Commencement Date for Space A; and
(iii) One Million Six Hundred Fifty Seven Thousand Nine Hundred Eight and 00/100 Dollars ($1,657,908.00) per annum ($138,159.00 per month) for the period commencing on the tenth (10th) anniversary of the Commencement Date for Space A and ending on the Expiration Date.
(b) For the portion of the Term commencing on the Space B Rent Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent for Space B as follows:
(i) Seven Hundred Seventy Two Thousand Eight Hundred Ninety and 00/100 Dollars ($772,890.00) per annum ($64,407.50 per month) for the period commencing on the Space B Rent Commencement Date and ending one day prior to the fifth (5th) anniversary of the Commencement Date for Space A;
(ii) Eight Hundred Fifty Thousand One Hundred Seventy
Nine and 00/100 Dollars ($850,179.00) per annum ($70,848.25 per month)
for the period commencing on the fifth (5th) anniversary of the
Commencement Date for Space A and ending one day prior to the tenth
(10th) anniversary of the Commencement Date for Space A; and
(iii) Nine Hundred Twenty Seven Thousand Four Hundred Sixty Eight and 00/100 Dollars ($927,468.00) per annum ($77,289.00 per month) for the period
(c) For the portion of the Term commencing on the Space C Rent Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent for Space C as follows:
(i) Five Hundred Forty Nine Thousand Seven Hundred Twenty and 00/100 Dollars ($549,720.00) per annum ($45,810.00 per month) for the period commencing on the Space C Rent Commencement Date and ending one day prior to the fifth (5th) anniversary of the Commencement Date for Space A; and
(ii) Six Hundred Four Thousand Six Hundred Ninety Two and 00/100 Dollars ($604,692.00) per annum ($50,391.00 per month) for the period commencing on the fifth (5th) anniversary of the Commencement Date for Space A Rent and ending one day prior to the tenth (10th) anniversary of the Commencement Date for Space A; and
(iii) Six Hundred Fifty Nine Thousand Six Hundred Sixty Four and 00/100 Dollars ($659,664.00) per annum ($54,972.00 per month) for the period commencing on the tenth (10th) anniversary of the Commencement Date for Space A and ending on the Expiration Date.
Tenant agrees to pay Fixed Rent to Landlord, without notice or demand, in lawful
money of the United States, in monthly installments in advance on the first
(1st) day of each calendar month during the Term, at the office of Landlord or
such other place as Landlord may designate, without any set-off, offset,
abatement or deduction whatsoever, except as expressly set forth herein. Fixed
Rent and Additional Rent shall be payable by check drawn upon a bank which is a
member of the New York Clearinghouse Association or by wire transfer of
immediately available funds.
Section 1.2 Notwithstanding anything to the contrary set forth in Section 1.1, Tenant shall have no obligation to pay Tenant's Tax Payment or Tenant's Labor Rate Payment applicable to (a) Space A, on account of the period commencing on the Commencement Date for Space A and ending on the day prior to the Space A Rent Commencement Date; (b) Space B, on account of the period commencing on the Delivery Date for Space B and ending on the day prior to the Space B Rent Commencement Date; and (c) Space C, on account of the period commencing on the Delivery Date for Space C and ending on the day prior to the Space C Rent Commencement Date. Nothing contained herein shall affect Tenant's obligation to make any other payment under this Lease during the aforementioned periods.
Section 2.1 (a) Tenant shall use and occupy the Premises for the Permitted Use and for no other purpose. Tenant shall not use or occupy or permit the use or occupancy of any part of the Premises in any manner not permitted hereunder, or which in Landlord's reasonable judgment would adversely affect (a) the rendition of any service required to be
(b) Tenant, incidental to its executive, administrative and general office use, shall have the right to use a portion or portions of the Premises (i) for storage of office supplies and (ii) as a pantry or pantries for use solely by Tenant, which may contain reheating but not cooking equipment, including items such as a microwave, coffee maker, sink, ice maker, dishwasher, hot water heater and refrigerator, upon and subject to the satisfaction of the following conditions, at Tenant's sole cost and expense and subject to and in accordance with all applicable Legal Requirements and the provisions of this Lease (including the provisions of Article 3) and with such other reasonable regulations as Landlord may adopt from time to time in accordance with the provisions of Article 26: (x) no cooking or other preparation of food (other than the reheating of food by microwave and the preparation of beverages) shall be done in any such pantry, (y) no food or beverages will be kept or served in the Premises in a manner or under any conditions which result in fumes or odors being emitted from, or detectable outside of, the Premises, and (z) such portion or portions of the Premises shall be at all times maintained by Tenant in a clean and sanitary condition and free of refuse (including use of extermination services whenever reasonably required).
Section 2.2 Tenant shall not use or permit the Premises or any
part thereof to be used: (a) for the business of printing or other manufacturing
of any kind, (b) as a retail branch of a bank or savings and loan association,
or as a retail loan company, or as a retail stock broker's or dealer's office,
(c) except as permitted herein, for the storage of merchandise, (d) for the
distribution, by mail-order or otherwise, of merchandise, except in connection
with Tenant's business of selling books at retail by means of the Internet, (e)
as a restaurant or bar or for the sale of food or beverages, (f) as a news or
cigar stand, (g) as an employment agency, labor union office, school,
physician's or dentist's office, dance or music studio, (h) as a barber shop or
beauty salon, (i) for the sale to the public visiting the Premises, at retail or
otherwise, of any goods or products, (j) by the United States Government, the
City or State of New York, any Governmental Authority, any foreign government,
the United Nations or any agency or department of any of the foregoing or any
Person having sovereign or diplomatic immunity, (k) for the rendition of
medical, dental or other therapeutic or diagnostic services, or (l) for the
conduct of an auction.
Section 2.3 (a) Landlord anticipates that the Delivery Date for Space B will occur on January 1, 2000 and that the Delivery Date for Space C will occur on June 1, 2000; provided, however, that Landlord shall not be subject to any liability for failure of either such Delivery Date to occur on such dates (or on any other date or dates), and the validity of this Lease shall not be impaired under such circumstances, nor shall the same be construed to extend the term of this Lease. The foregoing shall constitute an express negation of Section 223-a of the New York Real Property Law or any successor law or ordinance, which shall be inapplicable hereto, and Tenant hereby waives any right to rescind this Lease which Tenant might otherwise have thereunder.
(b) Notwithstanding the foregoing provisions of Section
2.3(a), if the Delivery Date for Space B shall not occur on or before September
1, 2000, unless such failure is due to Tenant Delay, then, as Tenant's sole and
exclusive remedy for such delay in the Delivery Date for
(c) Notwithstanding the foregoing provisions of Section
2.3(a), if the Delivery Date for Space C shall not occur on or before February
1, 2001, unless such failure is due to Tenant Delay, then, as Tenant's sole and
exclusive remedy for such delay in the Delivery Date for Space C, Tenant shall
have the right to terminate this Lease with respect to Space C only, by notice
to Landlord given no later than February 10, 2001, such termination to be
effective on the date which shall be thirty (30) days after the date such notice
is given, upon which date this Lease with respect to Space C only shall come to
an end and terminate, and thereafter neither party shall have any liability to
the other hereunder with respect to Space C. Notwithstanding anything to the
contrary contained herein, if the Delivery Date for Space C shall occur at any
time within thirty (30) days following Landlord's receipt of such notice by
Tenant, such termination shall be void and of no force and effect, and Tenant
shall have no further right to terminate this Lease with respect to Space C only
pursuant to this Section 2.3(c).
(d) In the event of any holding over by any tenant or occupant of Space B beyond January 1, 2000, or by any tenant or occupant of Space C beyond June 1, 2000, Landlord will (i) promptly take commercially reasonable actions to obtain possession of such Space, including commencing and diligently prosecuting (to completion, if necessary) appropriate legal proceedings against any such holdover tenant or occupant, and (ii) keep Tenant advised of the progress of such proceedings.
(e) Landlord represents that to the best of its knowledge, as of the date of this Lease, the tenants and other occupants of each Space, and the respective expiration dates with respect to each such Space, are as set forth on Exhibit K attached to this Lease.
Section 3.1 Tenant shall not make any Alterations without
Landlord's prior written consent in each instance, provided that Tenant's
changing of wall coverings, carpeting, paint or other decorative Alterations
(collectively, "Decorative Alterations") shall not be deemed to be Alterations
requiring such consent. Landlord's consent shall be granted or denied in
Landlord's sole discretion; provided, however, that Landlord shall not
unreasonably withhold its consent to Alterations proposed to be made by Tenant
provided that such Alterations (a) are non-structural and do not affect the
Building Systems or services, (b) are performed only by contractors approved in
writing by Landlord (subject to and in accordance with the provisions of Section
3.2(b) below), (c) do not affect any part of the Building other than the
Premises and (d) do not adversely affect any service required to be furnished by
Landlord to Tenant or to any other tenant or occupant of the Building.
Section 3.2 (a) Prior to making any Alterations (excluding Decorative Alterations), Tenant shall (i) submit to Landlord, for Landlord's written approval, detailed plans and specifications therefor in form reasonably satisfactory to Landlord, (ii) if such Alterations require a filing with any Governmental Authority or require the consent of such authority, then such plans and specifications shall (A) be prepared and certified by a registered architect or licensed engineer, and (B) comply with all Legal Requirements to the extent necessary for such governmental filing or consent, (iii) at its expense, obtain all required permits, approvals and certificates, (iv) furnish to Landlord duplicate original policies or certificates of insurance which evidence worker's compensation coverage (covering all persons to be employed by Tenant, and all contractors and subcontractors supplying materials or performing work in connection with such Alterations), comprehensive general liability (including property damage coverage) insurance, comprehensive form automobile liability insurance and Builder's Risk coverage (issued on a completed value basis) all in such form, with such companies, for such periods and in such amounts as Landlord may reasonably require, naming Landlord and any Superior Lessor and any Mortgagee whose name and address has been furnished to Tenant as additional insureds, and (v) with respect to any Alteration (other than the Initial Alterations) costing more than $100,000.00 to complete, furnish to Landlord such evidence of Tenant's ability to complete and to fully and completely pay for such Alteration as is reasonably satisfactory to Landlord. All Alterations shall be performed by Tenant at Tenant's sole cost and expense (A) in a good and workmanlike manner using materials of first class quality, (B) in compliance with all Legal Requirements, and (C) substantially in accordance with the plans and specifications previously approved by Landlord. Tenant shall at its cost and expense obtain all approvals, consents and permits required for such Alterations from every Governmental Authority having or claiming jurisdiction prior to, during and upon completion of such Alterations. Tenant shall promptly
(b) Landlord shall not unreasonably withhold, condition or delay its approval of the contractors proposed to be used by Tenant for Tenant's Alterations, provided that in the case of the mechanical, electrical, plumbing and fire safety trades, Tenant shall select its contractors and sub-contractors from Landlord's list of approved contractors. Attached hereto as Exhibit F is a list of contractors currently approved by Landlord for the performance of work in the Building, which list may be modified by Landlord from time to time.
(c) Notwithstanding the foregoing provisions of this Article 3, Tenant shall be permitted to make minor, non-structural alterations to the Premises ("Minor Alterations") upon prior notice to Landlord, but without the necessity of procuring Landlord's consent thereto, provided that the estimated cost of each such Minor Alteration does not exceed $200,000.00 in any one instance. The provisions of Sections 3.2(a) and 3.2(b) shall be applicable to Minor Alterations. Prior to commencing any Minor Alteration, Tenant shall furnish Landlord with (i) working drawings or plans for such Minor Alteration in sufficient detail to permit Landlord to determine that such Alteration complies with the requirements hereof, and (ii) the names of the contractors proposed to be used by Tenant for such Minor Alteration.
(d) Upon completion of any Alterations, Tenant, at its expense, shall promptly obtain certificates of final approval of such Alterations as may be required by any Governmental Authority, and (except with respect to Decorative Alterations), shall furnish Landlord with copies thereof (together with "as-built" plans and specifications for such Alterations (or, in case of any Minor Alterations, final plans and specifications reflecting the final configuration thereof) prepared on an Autocad Computer Assisted Drafting and Design System (or such other system or medium as Landlord may reasonably accept) using naming conventions issued by the American Institute of Architects in June, 1990 (or such other naming convention as Landlord may reasonably accept) and magnetic computer media of such record drawings and specifications, translated into DXF format or another format reasonably acceptable to Landlord).
Section 3.3 (a) All Tenant's Alterations shall become the property of Landlord upon the expiration or sooner termination of this Lease. Landlord may condition its approval of kitchen facilities, vaults, raised floors, internal stairways, slab penetrations, private bathrooms or any other Alterations not constituting ordinary office installations on a requirement that Tenant agrees in writing to remove such Alterations at the end of the Term as set forth in this Section 3.3 (any such Alterations which Landlord so requires Tenant to agree to remove, "Non-Standard Alterations"). If Landlord does not specify at the time of its approval that an Alteration constitutes a Non-Standard Alteration, Tenant shall have no obligation to remove such Alteration upon the expiration or sooner termination of this Lease. On the Expiration Date or earlier termination of the Term or any renewal thereof (i) Tenant shall remove Tenant's Property from the Premises, and (ii) unless Landlord notifies Tenant no later than sixty (60) days prior to the Expiration Date that any or all of the Non-Standard Alterations shall not be removed from the Premises, Tenant shall remove the Non-Standard Alterations from the Premises, at Tenant's sole
(b) Landlord agrees to respond to any written request for approval of contractors proposed to be engaged to perform Alterations within five (5) Business Days after Tenant's request therefor. Landlord agrees to respond to any written request for approval of plans and specifications for Alterations proposed to be made by Tenant within twelve (12) Business Days (or within fifteen (15) Business Days, in case such request relates to Tenant's Initial Alterations) after receipt by Landlord of such written request, together with substantially complete and detailed architectural, structural, mechanical and engineering plans and specifications as required for such Alteration (collectively, "Tenant's Plans"), and Landlord agrees that Tenant's Plans may be submitted, and will be reviewed by Landlord, on a "fast track" basis (i.e., architectural, mechanical and structural plans may be submitted sequentially). In addition, Landlord agrees to respond to any resubmission of Tenant's Plans within five (5) Business Days after written resubmission, unless substantial revisions are required to Tenant's Plans, in which event in which event Landlord shall respond to Tenant within a reasonable time thereafter. If Landlord shall disapprove all or any portion of Tenant's Plans, Landlord shall inform Tenant of the grounds for such disapproval with reasonable specificity. If Landlord fails to approve or disapprove Tenant's Plans or a contractor proposed by Tenant on or before the end of the applicable review period set forth herein, Tenant shall have the right to provide Landlord with a second written request for approval (a "Second Request"), which shall specifically identify Tenant's Plans or the contractor, as the case may be, to which such request relates, and set forth in bold capital letters the following statement: IF LANDLORD FAILS TO RESPOND WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN TENANT SHALL BE ENTITLED TO COMMENCE CONSTRUCTION IN ACCORDANCE WITH THE PLANS AND SPECIFICATIONS (OR TO ENGAGE THE CONTRACTOR) PREVIOUSLY SUBMITTED TO LANDLORD AND TO WHICH LANDLORD HAS FAILED TO TIMELY RESPOND. In the event that Landlord fails to respond to a Second Request within five (5) Business Days after receipt by Landlord, then the Tenant's Plans or revisions thereto, or Tenant's engagement of a contractor, as the case may be, for which the Second Request is submitted, shall be deemed to be approved by Landlord, and Tenant shall be entitled to engage the contractor for which approval was requested, or commence construction of the Alteration or portion thereof to which Tenant's Plans relate, provided that in the case of performing Alterations, Tenant's Plans have been appropriately filed in accordance with applicable Legal Requirements, all permits and
Section 3.4 If, because of any alleged act or omission of Tenant or any Tenant Party, any mechanic's lien, U.C.C. financing statement or other lien, charge or order for the payment of money shall be filed against Landlord, or against all or any portion of the Premises, the Building or the Real Property, Tenant shall, at its own cost and expense, cause the same to be discharged of record, by bonding or otherwise, within thirty (30) days after receipt of notice thereof, and Tenant shall indemnify, defend and save Landlord harmless against and from all costs, expenses, liabilities, suits, penalties, claims and demands (including reasonable attorneys' fees and disbursements) resulting therefrom (subject to reimbursement by Landlord in the event that it shall be finally adjudicated that the acts or omissions of Landlord or another tenant in the building shall have given rise to such lien, charge or order).
Section 3.5 Tenant shall not, at any time prior to or during the Term, directly or indirectly employ, or permit the employment of, any contractor, mechanic or laborer in the Premises, whether in connection with any Alteration or otherwise, if in Landlord's sole judgment such employment will interfere or cause any conflict with other contractors, mechanics, or laborers engaged in the construction, maintenance or operation of the Building by Landlord, Tenant or others, or the use and enjoyment of other tenants or occupants of the Building.
Section 4.1 Tenant has examined the Premises and agrees to accept possession of each Space in its "as is" condition on the applicable Delivery Date subject to the performance of Landlord's Work, and Tenant further agrees that, except for the performance of such Landlord's Work and the making of Landlord's Contribution as expressly set forth in this Article 4, Landlord shall have no obligation to perform any work, supply any materials, incur any expenses or make any installations in order to prepare the Premises for Tenant's occupancy. The taking of possession of each Space by Tenant shall be conclusive evidence as against Tenant that at the time such possession was so taken, such Space was in the condition required hereunder, provided, however, that if Tenant shall subsequently become aware of any latent defects in Landlord's Work or latent defects existing in the Premises (or the Building Systems serving the Premises) at the time such possession was so taken, which latent defects are the responsibility of Landlord to repair pursuant to Article 5 (but excluding any latent defects in Tenant's Alterations or arising from the negligence or misconduct of Tenant or any Tenant Party), Tenant shall give Landlord notice of any such latent defects promptly upon Tenant's becoming aware thereof, and Landlord shall repair the same in accordance with the provisions of Article 5, but the existence of any such latent defects shall not be deemed to modify the Delivery Date hereunder.
Section 4.2 (a) With due diligence and reasonable promptness following (y) the Commencement Date, as to Space A, and (z) the Delivery Date for each of Space B and Space C, Landlord shall perform the following work in the applicable Space, at Landlord's sole cost and in accordance with all Legal Requirements ("Landlord's Work"): (i) demolish any existing improvements, including piping and electrical conduit, which (x) are not then being used by tenants or other occupants of any space in the Building (including use by Landlord for any
(b) Notwithstanding Landlord's compliance with its obligations to abate ACM pursuant to Section 4.2(a)(i), in the event the performance of Tenant's Initial Alterations, in accordance with Tenant's plans for the Initial Alterations as approved by Landlord, causes the Premises to become out of compliance with any Legal Requirements applicable to ACM, Tenant shall within seven (7) days of the occurrence of such state of facts provide to Landlord a copy of a written report prepared at Tenant's expense by a New York City Department of Environmental Protection-certified asbestos investigator setting forth in reasonable detail (i) such state of facts, and (ii) the abatement work (solely within the Premises) such investigator reasonably deems necessary in order to abate such condition in accordance with all Legal Requirements. Subject to Unavoidable Delays and Landlord's right to contest such Legal Requirements, Landlord shall reasonably promptly thereafter cause the abatement work specified in such report to be commenced and thereafter prosecuted to completion with reasonable diligence by a contractor selected by Landlord in its sole discretion; and throughout the performance of such abatement work by Landlord, Fixed Rent, Tenant's Tax Payment and Tenant's Labor Rate Payment shall
Section 4.3 Landlord acknowledges that Tenant intends to
perform certain Alterations in order to prepare the Premises for its occupancy
(collectively, the "Initial Alterations"), which alterations shall, subject to
all the terms, covenants and conditions of this Lease applicable to Alterations,
include (i) the installation of a sprinkler system or other fire suppression
system reasonably satisfactory to Landlord, (ii) the installation of exterior
louvers as reasonably required by Tenant through the Building's existing window
openings at the locations on the Fifteenth Street and Sixteenth Street sides of
the Building shown on the floor plan attached as Exhibit Q to this Lease, (iii)
connection to the existing Building toilet exhaust riser for one (1)
supplemental private bathroom, (iv) the installation of noise suppression
materials and/or equipment with respect to any of Tenant's Property reasonably
designated by Landlord, including Tenant's HVAC System (as defined in Section
9.7), if any, reasonably satisfactory to Landlord, and (v) the renovation of the
two (2) existing bathrooms on the ninth avenue side lobby of the ninth floor of
the Building in order to meet the requirements of the Americans With
Disabilities Act of 1990, as amended (the "ADA") in Space A, which bathrooms
shall throughout the Term remain accessible to the common areas of the ninth
floor of the Building and which renovations shall be completed by Tenant as a
part of the Initial Alterations, all in compliance with applicable Legal
Requirements. Notwithstanding anything set forth in this Article 4, Landlord
agrees to make Landlord's Contribution toward the cost of the Initial
Alterations, subject to and in accordance with Article 31.
Section 4.4 Upon the request of Tenant, Landlord, at Tenant's cost and expense (limited to an amount equal to all out of pocket expenses incurred by Landlord to third parties), shall join in any applications for any permits, approvals or certificates from any Governmental Authority required to be obtained by Tenant, and shall sign such applications reasonably promptly after request by Tenant (provided that (i) the provisions of the applicable Legal Requirement shall require that Landlord join in such application, and (ii) such application is acceptable to Landlord) and shall otherwise cooperate with Tenant in connection therewith,
Section 4.5 Notwithstanding anything set forth in Article 2 or this Article 4, Landlord and Tenant acknowledge that following the Delivery Date for each Space, the performance of Landlord's Work in such Space will in accordance with good construction practice (and except as expressly set forth below) necessitate that Tenant not commence the Initial Alterations in such Space until Landlord's Work in such Space is Substantially Complete. Notwithstanding the foregoing, Landlord may, but shall not be obligated to, afford Tenant access to Space A, Space B and Space C following the Delivery Date for such Space but prior to the completion of Landlord's Work therein (any such access subsequent to the Delivery Date but prior to the completion of Landlord's Work in such Space being herein referred to as "Early Access") in order for Tenant to commence performance of the Initial Alterations in such Space (but Landlord shall use reasonable efforts to afford Tenant Early Access to Space C). Landlord's grant of permission to Tenant for Early Access shall be at Landlord's sole discretion, and shall be revocable by Landlord at will, immediately upon notice from Landlord to Tenant that any of following conditions have not been satisfied or no longer continue to be satisfied: (A) Tenant shall not commence any portion of the Initial Alterations which is dependent upon the completion of a related item of Landlord's Work until, in accordance with sound construction practice, such item of Landlord's Work has been substantially completed, (B) Tenant's access to or activities in such Space during the period of Early Access shall not increase the cost to Landlord of Landlord's Work, unless Tenant agrees in writing to pay Landlord for any such increase in the cost of Landlord's Work, and shall not delay the progress of Landlord's Work, and (C) Tenant shall have complied with all applicable provisions of this Lease with respect to the commencement of the Initial Alterations, including the provisions of Articles 3 and 10.
Section 5.1 (a) Landlord shall maintain in condition customary for buildings similar to the Building in Manhattan, and shall repair and replace, to the extent necessary to achieve such condition, the Building Systems and the public portions of the Building, both exterior and interior, and the structural elements thereof, including the roof, foundation and curtain wall. Tenant, at Tenant's expense, shall take good care of the Premises and the fixtures, systems, equipment and appurtenances therein, and make all non-structural repairs thereto as and when needed to preserve them in good working order and condition, except for reasonable wear and tear, obsolescence and damage for which Tenant is not responsible pursuant to the provisions of Articles 11 and 12. Tenant shall throughout the Term, at Tenant's sole cost and expense, cause the Premises to be exterminated on a periodic basis such that the Premises and adjoining portions of the Building do not become infested with vermin, employing such exterminators and such exterminating company or companies as shall be reasonably acceptable to Landlord. Landlord shall throughout the Term maintain Landlord's standard vermin extermination program in the Building's public areas. Notwithstanding the foregoing, all damage or injury to the Premises or to any other part of the Building, or to its fixtures, equipment and appurtenances, caused by or resulting from negligence or misconduct of, or Alterations made by, Tenant or any Tenant Party shall be repaired at Tenant's expense, (a) by Tenant to the satisfaction of Landlord (if the required repairs are non-structural and do not affect any Building System), or (b) by Landlord (if the
(b) Landlord represents to Tenant that, to the best of Landlord's knowledge, all Building Systems for which Landlord is responsible under this Lease, including elevators, heating systems, sprinkler systems, fire detection and life safety systems and other Building Systems, will remain fully functional and perform their normal operations on and after January 1, 2000, without interruption or malfunction as a result of the passage from the year 1999 to the year 2000. Landlord shall make all repairs, alterations or replacements to any Building Systems required in order to eliminate any such interruptions or malfunctions resulting from the passage from the year 1999 to the year 2000.
Section 5.2 Tenant shall not place a load upon any floor of the Premises exceeding the floor load per square foot which such floor was designed to carry and which is allowed by law. Tenant shall not move any safe, heavy equipment, business machines, freight, bulky matter or fixtures into or out of the Building without Landlord's prior consent. If such safe, equipment, freight, bulky matter or fixtures requires special handling, Tenant shall employ only persons holding a Master Rigger's license to do such work.
Section 5.3 There shall be no allowance to Tenant for a diminution of rental value, no constructive eviction of Tenant and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to business arising from Landlord making, or failing to make, any repairs, alterations, additions or improvements in or to any portion of the Building or the Premises, or in or to fixtures, appurtenances or equipment thereof. Landlord shall use reasonable efforts to minimize interference with Tenant's access to and use and occupancy of the Premises in making any repairs, alterations, additions or improvements; provided, however, that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any other overtime costs or additional expenses whatsoever.
Section 5.4 Notwithstanding anything to the contrary contained in any other provision of this Lease, in the event that (a) Tenant is unable to use the Premises for the ordinary conduct of Tenant's business, due to Landlord's breach of an obligation under this Lease to provide services, perform repairs, or comply with Legal Requirements, in each case other than as a result of Unavoidable Delays, and such condition continues for a period in excess of seven (7) consecutive days (or, if Tenant's inability to use the Premises results, in whole or in part, from Unavoidable Delays and such condition continues for a period in excess of fifteen (15) consecutive days) after Tenant gives a notice to Landlord (the "Abatement Notice") stating that Tenant's inability to use the Premises is solely due to such condition, (b) Tenant does not actually use or occupy the Premises during such period, and (c) such condition has not resulted from the negligence or misconduct of Tenant or any Tenant Party, then Fixed Rent, Tenant's Tax Payment
Section 5.5 Tenant shall not require, permit, suffer or allow
the cleaning of any window in the Premises from the outside in violation of
Section 202 of the New York Labor Law or any successor statute thereto, or of
any other Legal Requirement.
Section 6.1 The following terms shall have the meanings set forth below:
(a) "Taxes" shall include the aggregate amount of (i) all real estate taxes, assessments (special or otherwise), sewer and water rents, rates and charges and any other governmental levies, impositions or charges, whether general, special, ordinary, extraordinary, foreseen or unforeseen, which may be assessed, levied or imposed upon all or any part of the Real Property, and (ii) any expenses (including attorneys' fees and disbursements and experts' and other witness' fees) incurred in contesting any of the foregoing or the Assessed Valuation (as defined in Section 6.1(d)) of all or any part of the Real Property. If at any time after the date hereof the methods of taxation prevailing at the date hereof shall be altered so that in lieu of or as an addition to or as a substitute for the whole or any part of the taxes, assessments, rents, rates, charges, levies or impositions now assessed, levied or imposed upon all or any part of the Real Property, there shall be assessed, levied or imposed (A) a tax, assessment, levy, imposition or charge based on the rents received therefrom whether or not wholly or partially as a capital levy or otherwise, (B) a tax, assessment, levy, imposition or charge measured by or based in whole or in part upon all or any part of the Real Property and imposed upon Landlord, (C) a license fee measured by the rents or (D) any other tax, assessment, levy, imposition, charges or license fee however described or imposed, then all such taxes, assessments, levies, impositions, charges or license fees or the part thereof so measured or based shall be deemed to be Taxes; provided, however, that any such taxes, fees or charges which are in "addition to" taxes otherwise payable under this Section 6.1(a) shall (1) only be deemed Taxes if such taxes shall be imposed upon owners of commercial office buildings in Manhattan generally, and treated by such owners as constituting real estate taxes for the purpose of calculating similar lease tax escalation provisions, and (2) be calculated on the basis that the Real Property is the only asset of Landlord. Taxes shall not include franchise, gift, inheritance, estate, sales, income or profit taxes imposed upon Landlord, any Superior Lessor or any Mortgagee by any Governmental Authority, or any penalties imposed for late payment of Taxes.
(b) "Tenant's Share" means Two and 2/1000ths percent (2.002%); provided, however, that, from and after the Space B Delivery Date, "Tenant's Share" shall be and be deemed modified to mean Three and 122/1000ths percent (3.122%); provided, further, that, from and after the Space C Delivery Date, "Tenant's Share" shall be and be deemed modified to mean Three and 92/100ths percent (3.92%).
(d) "Assessed Valuation" means the amount for which the Real Property is assessed pursuant to applicable provisions of the New York City Charter and of the Administrative Code of the City of New York for the purpose of imposition of Taxes.
(e) "Tax Year" means the period July 1 through June 30 (or such other period as may be duly adopted by the City of New York as its fiscal year for real estate tax purposes).
(f) "Comparison Year" means, with respect to Taxes, any Tax Year commencing subsequent to the 1999/2000 Tax Year.
(g) "Landlord's Statement" means an instrument or instruments containing a comparison of either (i) the Base Taxes and the Taxes payable for any Comparison Year, or (ii) the Base Labor Rates and the Labor Rates applicable to any Comparison Year.
(h) "Tenant's Tax Payment" means Tenant's Share of the excess of the Taxes payable for any Comparison Year over the Base Taxes.
Section 6.2 (a) If the Taxes payable for any Comparison Year
(any part or all of which falls within the Term) shall exceed the Base Taxes,
Tenant shall pay Tenant's Tax Payment to Landlord. Tenant shall pay Tenant's Tax
Payment in two semiannual installments in advance on the first day of June (with
respect to the period July 1 through December 31 following such payment date)
and December (with respect to the period January 1 through June 30 following
such payment date), each installment equal to one-half of Tenant's Tax Payment
for such Comparison Year, except that if Landlord has not received tax bills for
the following Tax Year in time to bill the June 1 installment of Tenant's Tax
Payment, Landlord may estimate the payment due on June 1, based on Landlord's
estimate of Taxes for the following Tax Year. If, upon issuance of the tax bills
for any Tax Year, the estimated amount resulted in (i) an underpayment by
Tenant, Tenant shall pay to Landlord the amount of the underpayment within ten
(10) Business Days after notice from Landlord, or (ii) an overpayment by Tenant,
Landlord shall apply a credit in the amount of the overpayment against future
installments of Fixed Rent under this Lease, and if any such credit remains
outstanding as of the Expiration Date, Landlord will pay the amount thereof to
Tenant within a reasonable time thereafter. Each of the parties' respective
obligations hereunder in the case of overpayment or underpayment shall survive
the expiration or earlier termination of this Lease.
(b) If at any time during the Term, Taxes are required to be paid (either to the appropriate taxing authorities or as a tax escrow to the holder of a Superior Lease or Mortgage) on any other date or dates than as presently required, then Tenant's Tax Payments shall be correspondingly accelerated or revised so that such payments are due at least thirty (30) days prior to the date payments are due to the taxing authorities, Lessor or Mortgagee, as appropriate. The benefit of any discount for any early payment or prepayment of Taxes relating to all or any part of the Real Property shall accrue solely to the benefit of Landlord and Taxes shall be computed without subtracting such discount. Upon request by Tenant, Landlord will furnish
(c) Only Landlord shall be eligible to institute Tax reduction or other proceedings to reduce the Assessed Valuation of the Real Property, and the filing of any such proceeding by Tenant without Landlord's prior written consent shall constitute a default hereunder. At no time shall any recomputation be made hereunder of Base Taxes for any Comparison Year, nor shall any adjustment be made of Additional Rent theretofore paid or payable on account of Tenant's Tax Payment hereunder, by reason of any reduction or increase in the Taxes payable for the 1999/2000 Tax Year by final determination of legal proceedings, settlement or otherwise, and Tenant shall not receive or be entitled to claim any credit or refund in connection therewith. The provisions of this Section 6.2 shall survive the expiration or earlier termination of this Lease. Nothing herein contained shall obligate Landlord to file any application or institute any proceeding seeking a reduction in Taxes or Assessed Valuation. To the best of Landlord's knowledge as of the date of this Lease, the Real Property is not (and will not be) the subject of any tax abatement, tax exemption or tax incentive program, or otherwise specially assessed or classified for purposes of the imposition of Taxes, which would affect the amount of Base Taxes, and Landlord has not applied for any such abatement, exemption or incentive program.
(d) Tenant's Tax Payment shall be made as provided in this
Section 6.2 regardless of the fact that Tenant may be exempt, in whole or in
part, from the payment of any taxes by reason of Tenant's diplomatic or other
tax exempt status or for any other reason whatsoever, it being understood that
the foregoing shall not be construed to affect the calculation of Taxes pursuant
to Section 6.1(a).
(e) Tenant shall pay to Landlord, as Additional Rent upon demand, any occupancy tax or rent tax now in effect or hereafter enacted, if payable by Landlord in the first instance or hereafter required to be paid by Landlord.
(f) If the Expiration Date shall occur on a date other than
June 30, any Additional Rent payable by Tenant to Landlord under this Section
6.2 for the Comparison Year in which the Expiration Date shall occur shall be
apportioned in that percentage which the number of days in the period from June
30 to the Expiration Date, inclusive, shall bear to the total number of days in
such Comparison Year. In the event of a termination of this Lease, any
Additional Rent under this Section 6.2 shall be paid or adjusted within thirty
(30) days after submission of Landlord's Statement. In no event shall Fixed Rent
ever be reduced by operation of this Section 6.2 and the rights and obligations
of Landlord and Tenant under the provisions of this Section 6.2 with respect to
any Additional Rent shall survive the expiration or earlier termination of this
Lease.
Section 6.3 The following terms shall have the meanings set forth below:
(a) "R.A.B." shall mean the Realty Advisory Board on Labor Relations, Incorporated, or its successor.
(c) "Class A Office Buildings" shall mean office buildings so categorized under any agreement between R.A.B. and Local 32B-32J, regardless of the designation given to such office buildings in any such agreement.
(d) "Labor Rates" shall mean a sum equal to the regular hourly wage rate required to be paid to Others (as defined below) employed in Class A Office Buildings pursuant to an agreement between R.A.B. and Local 32B-32J; provided, however, that:
(i) if any such agreement shall require Others in Class A Office Buildings to be regularly employed on days or during hours when overtime or other premium pay rates are in effect pursuant to such agreement, then the term "regular hourly wage rate", as used in this Section 6.3 shall mean the average hourly wage rate for the hours in a calendar week during which Others are required to be regularly employed;
(ii) if no such agreement is in effect as of October 1st of any Comparison Year with respect to Others, then the term "regular hourly wage rate", as used in this Section 6.3 shall mean the regular hourly wage rate actually paid to Others employed in the Building by Landlord or by an independent contractor engaged by Landlord, provided, however, that upon the effectiveness of such agreement, such regular hourly wage rate shall be adjusted to that provided in such agreement, effective retroactively to the effective date of such agreement; and
(iii) the term "regular hourly wage rate" shall exclude all benefits of any kind, including those payable directly to taxing authorities or others on account of the employment and all welfare, pension and fringe employee benefits and payments of any kind paid or given pursuant to such agreement.
(e) "Others" shall mean that classification of employee engaged in the general maintenance and operation of Class A Office Buildings most nearly comparable to the classification now applicable to "others" in the current agreement between R.A.B. and Local 32B-32J.
(f) "Base Labor Rates" shall mean an amount equal to the sum
of (i) one-half (1/2) of the Labor Rates in effect for calendar year 1999, plus
(ii) one-half (1/2) of the Labor Rates in effect for calendar year 2000.
(g) "Tenant's Labor Rate Payment" is defined in Section
6.4(a).
(h) "Comparison Year" means, with respect to Labor Rates, any calendar year commencing subsequent to December 31, 1999.
Section 6.4 (a) If the Labor Rates in effect for any Comparison Year (any part or all of which falls within the Term) shall be greater than the Base Labor Rates, then Tenant shall pay, as Additional Rent for such Comparison Year and continuing thereafter until a new
(b) At any time prior to, during or after any Comparison Year Landlord shall render to Tenant a Landlord's Statement showing (i) a comparison of the Labor Rates for the Comparison Year with the Base Labor Rates, and (ii) the amount of Tenant's Labor Rate Payment resulting from such comparison. Landlord's failure to render a Landlord's Statement during or with respect to any Comparison Year shall not prejudice Landlord's right to render a Landlord's Statement during or with respect to any subsequent Comparison Year and shall not eliminate or reduce Tenant's obligation to pay Tenant's Labor Rate Payment pursuant to this Article 6 for such Comparison Year, provided that Landlord shall not be entitled to issue a Landlord's Statement or corrected Landlord's Statement later than two (2) years after the end of the Comparison Year to which such Landlord's Statement relates. Upon written request to do so, Landlord shall promptly give Tenant a copy of any written notice actually received by Landlord of changes in the Labor Rates which will result in an increase in Tenant's Labor Rate Payment for the Comparison Year in which such request is made.
(c) Tenant's Labor Rate Payment shall be payable by Tenant on the first day of the month following the furnishing to Tenant of a Landlord's Statement, in equal monthly installments, each such installment to be equal to 1/12th of Tenant's Labor Rate Payment for such Comparison Year multiplied by the number of months (and any fraction thereof) of the Term then elapsed since the commencement of such Comparison Year, continuing monthly thereafter until rendition of the next succeeding Landlord's Statement.
(d) The provisions of this Section 6.4 shall be effective irrespective of whether or not (i) the Building is classified as a Class A office building from time to time, or (ii) any Building employees are members of Local 32B-32J. Tenant acknowledges and agrees that the computation of Labor Rates hereunder is intended to serve solely as a formula for an agreed rental adjustment, rather than an actual operating expense calculation, and is not intended to reflect the actual cost to Landlord of wages at the Building or any increases or decreases in such cost.
Section 6.5 (a) If the Expiration Date shall occur on a date other than December 31, any Additional Rent under this Article 6 for the Comparison Year in which the Expiration Date shall occur shall be apportioned in that percentage which the number of days in the period from January 1 to the Expiration Date, inclusive, shall bear to the total number of days in such Comparison Year. In the event of a termination of this Lease, any Additional Rent under this Article 6 shall be paid or adjusted within thirty (30) days after submission of a Landlord's Statement. In no event shall Fixed Rent ever be reduced by operation of this Section 6.5 and the rights and obligations of Landlord and Tenant under the provisions of this Article 6 with respect to any Additional Rent shall survive the expiration or earlier termination of this Lease.
Section 6.6 Landlord's failure to render a Landlord's Statement with respect to any Comparison Year shall not prejudice Landlord's right to thereafter render a Landlord's Statement with respect thereto or with respect to any subsequent Comparison Year, nor shall the rendering of a Landlord's Statement prejudice Landlord's right to thereafter render a corrected Landlord's Statement for that Comparison Year, provided that Landlord shall not be entitled to issue a Landlord's Statement or corrected Landlord's Statement later than two (2) years after the end of the Comparison Year to which such Landlord's Statement relates. Subject to the foregoing, nothing herein contained shall restrict Landlord from issuing a Landlord's Statement at any time there is an increase in Taxes or Labor Rates during any Comparison Year or any time thereafter.
Section 6.7 If any capital improvement is made to the Real Property during any calendar year during the Term to effectuate compliance with any Legal Requirements enacted after the date of this Lease (including the cost of compliance with Legal Requirements enacted prior to the date of this Lease if such compliance is required pursuant to any amendment, modification or reinterpretation thereof which is imposed or enacted after the date of this Lease), then Tenant shall pay to Landlord, within ten (10) Business Days after demand therefor, Tenant's Proportionate Share of the reasonable annual amortization (based upon the reasonable useful life of the item, but in no event less than ten (10) years), with interest at the Base Rate, of the cost of such improvement in each calendar year during the Term during which such amortization occurs.
Section 7.1 Tenant, at its sole expense, shall comply with all
Legal Requirements applicable to the Premises or the use and occupancy thereof
by Tenant, and make all repairs or Alterations required thereby, whether
structural or nonstructural, ordinary or extraordinary, unless otherwise
expressly provided herein; provided, however, that Tenant shall not be obligated
to comply with any Legal Requirement requiring any structural Alteration to the
Premises unless the application of such Legal Requirement arises from (i)
Tenant's manner of use or occupancy of the Premises (as distinguished from the
use or occupancy of the Premises for office purposes generally), (ii) any cause
or condition created by or on behalf of any Tenant Party (including any
Alterations), (iii) the breach of any of Tenant's obligations under this Lease,
(iv) any Hazardous Material having been brought into the Building by any Tenant
Party or (v) the enforcement, by any Governmental Authority or as a consequence
of private action, of Title I of the Americans With Disabilities Act. 42 U.S.C.
ss. 12101 (et seq.) or New York City Local Law 58 of 1987 with respect to any
condition at the Premises. Tenant shall not do or permit to be done any act or
thing upon the Premises which will invalidate or be in conflict with Landlord's
insurance policies, and shall not do or permit anything to be done in or upon
the Premises, or use the Premises in a manner, or bring or keep anything
therein, which shall increase the rates for casualty or liability insurance
applicable to the Building. If, as a result of any act or omission by Tenant or
by reason of Tenant's failure to comply with the provisions of this Article 7,
the
Section 7.2 Tenant, at its expense, shall comply with all Environmental Laws and with any directive of any Governmental Authority which shall impose any violation, order or duty upon Landlord or Tenant under any Environmental Laws with respect to the Premises or the use or occupation thereof. Tenant's obligations hereunder with respect to Hazardous Materials shall extend only to those matters arising or resulting from (a) the actual or alleged presence of Hazardous Materials on the Premises or in the Building which is actually caused or permitted to be brought into the Premises by Tenant subsequent to the delivery of the Premises to Tenant hereunder, and (b) any Environmental Claim (defined below) relating in any way to Tenant's operation or manner of use of the Premises or the Building.
Section 7.3 Tenant shall provide Landlord with copies of all communications and related materials regarding the Premises which Tenant shall receive from or send to (a) any Governmental Authority relating in any way to any Environmental Laws, or (b) any Person with respect to any claim based upon any Environmental Laws or relating in any way to Hazardous Materials (any such claim, an "Environmental Claim"). Landlord or its agents may perform an environmental inspection of the Premises for any commercially reasonable purpose at any time during the Term, upon prior notice to Tenant except in an emergency. Landlord shall use reasonable efforts to minimize interference with Tenant's use and occupancy of the Premises for any commercially reasonable purpose and shall promptly restore any damage to the Premises which may be caused by any such inspection, provided that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any other overtime costs or additional expenses whatsoever, unless Tenant shall first pay to Landlord Landlord's reasonable estimate of all incremental cost increases to do so. In such event Tenant shall pay, as Additional Rent upon presentation of appropriate invoices, all additional costs incurred by Landlord in connection therewith.
Section 7.4 Tenant, at its expense, after notice to Landlord, may contest by appropriate proceedings prosecuted diligently and in good faith, the validity or applicability to the Premises or Tenant of any Legal Requirement, provided that: (a) Landlord shall not be subject to criminal penalty or to prosecution for a crime, or any other fine or charge, nor shall the Premises or any part thereof or the Real Property or any part thereof be subject to being condemned or vacated, nor shall the Real Property or any part thereof be subjected to any lien or encumbrance, by reason of non-compliance or otherwise by reason of such contest; (b) no unsafe or hazardous condition shall remain unremedied; (c) such non-compliance or contest shall not constitute or result in any violation of any Superior Lease or Superior Mortgage, or if any such Superior Lease or Superior Mortgage shall permit such non-compliance or contest on condition of the taking of action or furnishing of security by Landlord, such action shall be taken and such security shall be furnished at the expense of Tenant; (d) if Landlord so requires, Tenant shall furnish to Landlord the bond of a surety company, in form and substance reasonably satisfactory to Landlord, in an amount equal to one hundred ten percent (110%) of the cost (as reasonably
Section 7.5. (a) Landlord, at its expense (except as otherwise provided herein), shall comply with all Legal Requirements, including those requiring the performance of alterations, additions, improvements, replacements or repairs (whether the same are structural or non-structural, ordinary or extraordinary, foreseen or unforeseen) in, to or upon the Building (excluding the Premises, to the extent Tenant is obligated to comply with such Legal Requirements pursuant to Section 7.1), only to the extent that the failure to effect such compliance would subject Tenant to material liability or materially adversely affect (A) Tenant's use or occupancy of the Premises for the Permitted Use, (B) Tenant's access to the Premises, (C) the provision of Building services which Landlord is required by this Lease to provide to Tenant, or (D) Tenant's ability to perform Alterations which would otherwise be permitted hereunder.
(b) Notwithstanding the provisions of Section 7.5(a), Landlord
may defer compliance with any Legal Requirements which it is obligated to comply
with hereunder, so long as Landlord shall be contesting the validity or
applicability thereof in good faith by appropriate proceedings, provided that
(i) Tenant shall not be subject to criminal penalty or to prosecution for a
crime, or any other fine or charge (unless Landlord pays such other fine or
charge), (ii) neither the Premises (or any part thereof) nor any part of the
Building or Real Property which affects the Premises or Tenant's use and
occupancy thereof, shall be subject to being condemned or vacated, by reason of
non-compliance or otherwise by reason of such contest, (iii) such non-compliance
or contest shall not prevent Tenant from lawfully occupying the Premises for the
Permitted Use or performing any Alterations in the Premises, or obtaining any
and all permits and licenses required to be obtained by it in connection
therewith, and (iv) Landlord, after request by Tenant, shall use reasonable
efforts to keep Tenant advised as to the status of such proceedings.
Section 8.1 This Lease, and all rights of Tenant hereunder, are and shall be subject and subordinate in all respects to all Mortgages and Superior Leases. This Section 8.1 shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall promptly execute and deliver any instrument that Landlord or any Superior Lessor or Mortgagee may reasonably request to evidence such subordination.
Section 8.2 In the event of any act or omission of Landlord which would give Tenant the right, immediately or after lapse of a period of time, to cancel or terminate this lease,
Section 8.3 If a Mortgagee or Superior Lessor shall succeed to the rights of Landlord under this Lease, whether through possession or foreclosure action or delivery of a new lease or deed, then at the request of such party so succeeding to Landlord's rights ("Successor Landlord") and upon Successor Landlord's written agreement to accept Tenant's attornment, Tenant shall attorn to and recognize Successor Landlord as Tenant's landlord under this Lease, and shall promptly execute and deliver any instrument that Successor Landlord may reasonably request to evidence such attornment. Upon such attornment this Lease shall continue in full force and effect as, or as if it were, a direct lease between Successor Landlord and Tenant upon all of the terms, conditions and covenants as are set forth in this Lease and shall be applicable after such attornment except that Successor Landlord shall not:
(a) be liable for any previous act or omission of Landlord under this Lease (provided, however, that nothing contained herein shall be deemed to relieve Mortgagee or Successor Landlord of any liability arising by reason of Mortgagee's or Successor Landlord's acts or omissions from and after the date that Mortgagee or Successor Landlord shall become landlord under this Lease, and Mortgagee or Successor Landlord, as landlord under this Lease, shall be obligated to properly maintain, operate and repair the Premises in accordance with the provisions of this Lease, notwithstanding the fact that any condition requiring such maintenance or repair may have arisen prior to the date of any such foreclosure, or assignment in lieu of foreclosure, of this Mortgage);
(b) be subject to any offset which shall have theretofore accrued to Tenant against Landlord; or
(c) be bound by any previous modification of this Lease, not expressly provided for in this Lease, or by any previous prepayment of more than one month's fixed rent, unless such modification or prepayment shall have been expressly approved in writing by such Mortgagee or Superior Lessor.
Section 8.5 Each party agrees, at any time and from time to time, as requested by the other party, upon not less than ten (10) Business Days' prior notice, to execute and deliver to the other a written statement executed and acknowledged by such party (a) stating that this Lease is then in full force and effect and has not been modified (or if modified, setting forth all modifications), (b) setting forth the then annual Fixed Rent, (c) setting forth the date to which the Fixed Rent and Additional Rent have been paid, (d) stating whether or not, to the best knowledge of the signatory, the other party is in default under this Lease, and if so, setting forth the specific nature of all such defaults, (e) stating the amount of the Security Deposit, (f) stating whether there are any subleases affecting the Premises, (g) stating the address of the signatory to which all
Section 9.1 Landlord shall provide, at Landlord's expense, except as otherwise set forth herein, the following services:
Section 9.2 Electricity
(a) Landlord, at Landlord's expense, subject to the provisions
of this Article 9, shall make available to Tenant 1400 amperes (from a 1600
ampere switch), 460 volts, 3-phase, 4-wire AC electric capacity dedicated to
Tenant for use in the Premises (the "Basic Capacity"). Landlord, at Tenant's
expense, shall, as an Alteration, bring all such Basic Capacity from the bus
duct in Landlord's electrical closet "C" on the ninth floor of the Building to
the Premises and distribute it therein. In the event that Tenant shall require
electric capacity in excess of the Basic Capacity, then upon request, and
subject to the availability of additional electrical capacity in the Building,
as determined by Landlord in its sole judgment, Landlord shall make additional
electric power available to Tenant, at a location in the basement of the
Building to be designated by Landlord, and Tenant shall be solely responsible,
at Tenant's sole cost and expense for the installation of all risers and other
electrical facilities and equipment required in order to deliver such additional
electric power to the Premises and distribute it therein (and shall use
Landlord's designated electrical contractor to perform the tap into the
Building's electrical system in the basement of the Building), and Tenant shall
pay to Landlord a one-time charge equal to Landlord's then-applicable rate per
ampere (which is currently equal to $300.00 per ampere) for additional power,
multiplied by each ampere in excess of the Basic Capacity so provided by
Landlord. Tenant covenants that Tenant's use and consumption of electric current
shall not at any time exceed the electric capacity required to be supplied to
the bus duct on the ninth floor by Landlord from time to time pursuant to this
Section 9.2, nor exceed the capacity of any of the electrical facilities and
installations in or otherwise serving or being used in the Premises. Tenant
shall pay Landlord, as Additional Rent, at any time and from time to time, but
no more frequently than monthly, for its consumption of electrical energy at the
Premises, as provided herein. Notwithstanding the foregoing, in the event Tenant
shall terminate this Lease with respect to Space B or Space C in accordance with
Section 2.3, the Basic Capacity shall be reduced by an amount proportionate to
the ratio of the area of such Space to the aggregate area of Spaces A, B and C.
(b) The calculations and determinations of the charges for electric energy consumed by Tenant shall be based on the readings of one or more submeters to be installed reasonably promptly by Landlord at Tenant's sole expense, applied to Landlord's Electricity Cost,
(c) "Landlord's Electricity Cost" means the cost per kilowatt hour and cost per kilowatt demand, adjusted by time of day factors, fuel adjustment charges and other applicable rate adjustments, to Landlord for the purchase of electricity from the public utility or other electricity provider furnishing electricity service to the Building from time to time (the "Electricity Provider"), including sales and other taxes imposed by any Governmental Authority on Landlord's purchase of electricity. If at any time during the Term the cost elements comprising Landlord's Electricity Cost shall be increased by the Electricity Provider, or Landlord's Electricity Cost shall be increased for any other reason, then effective as of the date of such increase, Tenant's payment for submetered electricity under this Section 9.2 shall be proportionately increased. Landlord reserves the right to contract with different Electricity Providers from time to time in its sole judgment, and without reference to whether any Electricity Provider selected by Landlord provides lower rates than any other electricity supplier. Currently, Landlord's Electricity Cost is based upon Consolidated Edison Company's Service Classification rate schedule S.C. #4 Rate II as in effect on the Commencement Date.
(d) During the period beginning on the Commencement Date and ending on the date upon which the submeters to be installed by Landlord in the Premises become operational, Tenant shall pay to Landlord a fixed fee for electric energy supplied to the Premises of (i) during the period prior to the date upon which Tenant first occupies all or any portion of the Premises for the conduct of its business, an amount per annum equal to One and 00/100 Dollar ($1.00) multiplied by the number of Rentable Square Feet in the delivered portion of the Premises, in equal monthly installments on the first (1st) day of each month during such period, and (ii) from and after the date upon which Tenant first occupies all or any portion of the Premises for the conduct of its business, an amount per annum equal to Four and 00/100 Dollars ($4.00) multiplied by the number of Rentable Square Feet in the delivered portion of the Premises, in equal monthly installments on the first (1st) day of each month during such period, through the date upon which such submeters become operational.
(e) Tenant covenants that Tenant's use and consumption of electric current shall not at any time exceed the capacity of any of the electrical facilities and installations in or otherwise serving or being used in any Space and Tenant shall, upon the submission by Landlord to Tenant of written notice, promptly cease the use of any of Tenant's electrical equipment which Landlord reasonably believes will cause Tenant to exceed such capacity. Any additional feeders, risers, electrical facilities and other such installations required for electric service to the Premises will be supplied by Landlord, at Tenant's expense, upon Landlord's prior consent in each instance, which consent shall not be unreasonably withheld or delayed, provided that, in Landlord's reasonable judgment, such additional electrical facilities and installations, feeders or risers are necessary and are permissible under Legal Requirements (including the New York
(f) Except as otherwise expressly provided herein, Landlord shall not in any way be liable or responsible to Tenant for any loss, damage or expense which Tenant may sustain or incur as a result of the unavailability of or interruption in the supply of electric current to the Premises or a change in the quantity or character or nature of such current and such change, interruption or unavailability shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent (except that Tenant's liability to pay Landlord for electricity under this Section 9.2 shall cease as of the date of such disturbance), or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Landlord or its agents, by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise.
(g) Landlord reserves the right to discontinue furnishing electricity to Tenant in the Premises on not less than sixty (60) days' notice to Tenant. If Landlord exercises such right to discontinue, or is compelled to discontinue furnishing electricity to Tenant, this Lease shall continue in full force and effect and shall be unaffected thereby, except only that from and after the effective date of such discontinuance, Landlord shall not be obligated to furnish electricity to Tenant, and Tenant shall have no further obligation to pay Landlord for electricity supplied to the Premises. If Landlord so discontinues furnishing electricity to Tenant, Tenant shall arrange to obtain electricity directly from the Electricity Provider. Such electricity may be furnished to Tenant by means of the then existing electrical facilities serving the Premises to the extent that the same are available, suitable and safe for such purposes. All meters and all additional panel boards, feeders, risers, wiring and other equipment which may be required by Tenant to obtain electricity directly from the Electricity Provider shall be installed by Landlord, at the sole cost and expense of (i) Landlord, if Landlord voluntarily discontinues such service, or (ii) Tenant, if (A) Landlord is compelled to discontinue such service by the Electricity Provider or pursuant to applicable Legal Requirements, or (B) such discontinuance arises out of the acts or omissions of Tenant. Landlord will not voluntarily discontinue furnishing electricity to Tenant until Tenant is able to receive electricity directly from the Electricity Provider unless the Electricity Provider is not prepared to furnish electricity to the Premises on the date required as a result of Tenant's delay or negligence in arranging for service or Tenant's refusal to take any other action reasonably requested by the Electricity Provider.
(i) Landlord acknowledges that Tenant has advised Landlord that: (i) Tenant and the New York City Industrial Development Agency, a New York public benefit corporation (the "IDA"), intend to enter into an agreement, detailing a package of financial incentives that are to be made available to Tenant or an Affiliate of Tenant (the "Incentive Program") by the New York City Economic Development Corp. ("EDC"), (ii) pursuant to the Incentive Program, Tenant shall be entitled to certain exemptions, abatements and/or savings in the cost of electricity used by Tenant at the Premises (including certain savings pursuant to Con Ed's Business Incentive Rate Program) (collectively, "Electricity Savings"), and (iii) Electricity Savings may be made available to Tenant pursuant to reductions in the total cost incurred by Landlord to provide electricity to the Building (whether the Electricity Provider is Con Ed or any other entity). In connection with the foregoing, Landlord hereby agrees that if and to the extent the total cost incurred by Landlord to provide electricity to the Building during a particular billing period is reduced as a result of Electricity Savings pursuant to the Incentive Program, then such Electricity Savings shall be for the account of and the sole property of Tenant, directly payable solely to and/or earned by Tenant. If and so long as Tenant is paying Landlord for electricity pursuant to Sections 9.2(a), 9.2(b) and/or 9.2(d), then the amount of any Electricity Savings which are expressly indicated (including the specific amount of such reduction) on Landlord's statement from the Electricity Provider, shall be offset against and deducted from Additional Rent otherwise due from Tenant to Landlord for the next following billing period. If Tenant shall not be paying Landlord for electricity (including if electricity is obtained by Tenant pursuant to Sections 9.2(g) or 9.2(h)), then such Electricity Savings shall be for the account of and the sole property of Tenant, directly payable solely to and/or earned by Tenant. Landlord agrees (at no cost to Landlord) to cooperate with Tenant (by, for example, executing any necessary documents, forms, applications and surveys) to facilitate Tenant's obtaining the Electricity Savings pursuant to the Incentive Program.
Section 9.3 Heat, Ventilation And Air-Conditioning
(a) Landlord shall provide heat to the Premises on Business Days from 8:00 A.M. to 6:00 P.M., when required in Landlord's judgment for the comfortable use and occupancy of the Premises, through use of the Building standard perimeter radiator heating system serving the Premises (the "Building Heating System").
(b) Anything in this Section 9.3 to the contrary notwithstanding, Landlord shall not be responsible if the normal operation of the Building Heating System shall fail to
(c) Landlord shall not be required to furnish heat during periods other than the hours and days set forth in this Section 9.3 for the furnishing and distributing of such services ("Overtime Periods"), unless Landlord has received advance notice from Tenant requesting such service not less than twenty-four (24) hours prior to the time when such service shall be required; provided, however, that Landlord shall use reasonable efforts to furnish heat during Overtime Periods on less than twenty-four (24) hours notice if requested to do so by Tenant. Accordingly, if Landlord shall furnish heat to the Premises at the request of Tenant during Overtime Periods, Tenant shall pay Landlord, as Additional Rent within ten (10) days after demand, for such services at the standard rate then fixed by Landlord for the Building, which rate as of the date of this Lease is $75.00 per hour, subject to increase during the Term to reflect increases in Landlord's costs.
(d) Landlord shall have no obligation to provide air-conditioning or ventilation services to the Premises. Landlord acknowledges that Tenant desires to install Tenant's HVAC System (as defined in Section 9.7), as part of the Initial Alterations to be installed, subject to the provisions of Article 3, at a location on the roof of the Building as provided in Section 9.7.
Section 9.4 Elevators. (a) Landlord shall provide passenger
elevator service to the Premises on Business Days from 8:00 A.M. to 6:00 P.M.
and freight elevator facilities on a non-exclusive basis, on Business Days from
8:00 A.M. to 4:45 P.M. ("Freight Business Hours"), without charge, and shall
have one passenger elevator available at all other times. Such elevator service
shall be subject to such rules and regulations as Landlord may reasonably
promulgate from time to time with respect thereto. Landlord shall have the right
to change the operation or manner of operation of any of the elevators in the
Building and/or to discontinue, temporarily or permanently, the use of any one
or more cars in any of the passenger, freight or truck elevator banks; provided
that in no event (other than for repairs or maintenance or due to Unavoidable
Delays) shall the Premises be serviced during Business Hours by fewer than three
(3) passenger elevator cars and one (1) freight elevator car. Landlord shall
afford Tenant access to the Premises 24 hours per day, 7 days per week. In
addition, if Tenant shall terminate this Lease with respect to Space B and Space
C pursuant to Section 2.3(c), then all Tenant Parties and their respective
invitees shall thereafter exclusively use the passenger elevators located on the
Ninth Avenue side of the Building, and shall not use the passenger elevators
located on the Eighth Avenue side of the Building.
(b) During the performance of Tenant's Initial Alterations and during Tenant's move-in, Tenant shall have the right to use the freight elevator without charge during Freight Business Hours for the delivery of construction materials and for moving into (but not out of) the Premises provided that such usage (i) shall be on a non-exclusive "first come first served" basis, and (ii) shall be subject to Landlord's reasonable determination as to the availability of such freight elevators. Landlord will make the freight elevator available to Tenant during other than
Section 9.5 Cleaning and Rubbish Removal. Tenant shall, at Tenant's sole cost, provide cleaning services at the Premises pursuant to reasonable rules and regulations established by Landlord from time to time, and use a cleaning contractor approved by Landlord in the exercise of its reasonable judgment. Tenant shall, at Tenant's sole cost, provide refuse and rubbish removal service at the Premises at times, and pursuant to regulations, reasonably established by Landlord from time to time.
Section 9.6 Water. Landlord shall furnish cold water in such quantities as Landlord deems sufficient for ordinary drinking, lavatory and cleaning purposes to the Premises. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory, cleaning and drinking purposes (including any water required for use in any pantry), Landlord may install a water meter and thereby measure Tenant's consumption of water for all purposes. Tenant shall (a) pay to Landlord the cost of any such meters and their installation, (b) at Tenant's sole cost and expense, keep any such meters and any such installation equipment in good working order and repair, and (c) pay to Landlord, as Additional Rent, as and when billed therefor for water consumed, Landlord's cost for water plus seven percent (7%) which Landlord's cost may include (without duplication of any Tenant's Tax Payment) sewer rents, charges or any other taxes, rents, levies or charges which now or hereafter are assessed, imposed or shall become a lien upon the Premises or the Real Property pursuant to law, order or regulation made or issued in connection with any such metered use, consumption, maintenance or supply of water, water system, or sewage or sewage connection or system (and in default in making such payment Landlord may pay such charges and collect the same from Tenant). Landlord agrees that Tenant shall have the right to connect Tenant's sprinkler system to the standpipe provided therefor, and there shall be no charge for use of water from such standpipe.
Section 9.7 Roof Equipment
(a) Landlord hereby grants to Tenant, for Tenant's own use commencing on the Commencement Date and not for resale purposes, a license of an area of the roof above the 17th floor of the Building, as shown on Exhibit I to this Lease, containing approximately 700 square feet (the "Roof Space") for the installation by Tenant of (i) a floor packaged direct expansion water cooled air conditioning system, including a two cell, cross flow induced draft cooling tower with a capacity not in excess of 454 tons of condenser water and with pumps and auxiliary equipment ("Tenant's HVAC System") and (ii) Tenant's telecommunications equipment, antenna and satellite dish (collectively, together with related cabling, pumps, mountings and supports, the "Roof Equipment"), at a location or locations within the Roof Space reasonably designated by Landlord and reasonably acceptable to Tenant. In connection therewith, and subject to the rights of other existing tenants in the Building, Landlord shall make available to Tenant reasonable access to the roof for the construction, installation, upgrade,
(b) The installation of the Roof Equipment shall constitute an
Alteration and shall be performed by Tenant at Tenant's sole cost and expense
(including any costs and expenses in connection with reinforcing the roof of the
Building, if required) in accordance with and subject to the provisions of
Article 3. Tenant shall pay a license fee to Landlord for the Roof Space, as
Additional Rent in advance on the first day of each month during the Term, as
follows: (i) during the period from the Commencement Date through the day before
the fifth (5th) anniversary of the Commencement Date, the product of the square
foot area of the Roof Space, multiplied by Eighteen and 00/100 Dollars ($18.00),
(ii) during the period from the fifth (5th) anniversary of the Commencement Date
through the day before the tenth (10th) anniversary of the Commencement Date,
the product of the square foot area of the Roof Space, multiplied by Twenty-One
and 00/100 Dollars ($21.00), and (iii) during the period from the tenth (10th)
anniversary of the Commencement Date through the Expiration Date, the product of
the square foot area of the Roof Space, multiplied by Twenty-Four and 00/100
Dollars ($24.00). All of the provisions of this Lease shall apply to the
installation, use and maintenance of the Roof Equipment, including all
provisions relating to compliance with Legal Requirements (including all FCC
rules and regulations), insurance, indemnity, repairs and maintenance. The
license granted to Tenant in this Section 9.7 shall not be assignable by Tenant
separately from this Lease.
(c) Landlord retains the right to use the portion of the roof on which the Roof Equipment is located for any purpose whatsoever. Tenant shall have reasonable access to the Roof Equipment at all times, and Landlord shall not interfere with Tenant's use of the Roof Equipment so as to cause Tenant's operation thereof to be materially interrupted or impaired. Tenant shall use the Roof Equipment so as not to cause any material interference with Landlord's use of the roof, including the use by Landlord or other tenants or occupants of the Building of other equipment thereon (including data transmission or other similar or dissimilar equipment), or damage to or interference with the operation of the Building or the Building Systems. If any of Tenant's Roof Equipment materially interferes with any equipment installed by Landlord or
(d) Landlord may at its option, at any time during the Term after reasonable prior notice to Tenant (except in the event of an emergency) relocate the Roof Equipment to another area on the roof designated by Landlord, provided that such relocation of the Roof Equipment does not cause the operation thereof to be interrupted or impaired, other than temporarily, and except as set forth in Section 9.7(c), such relocation is performed at Landlord's sole cost and expense. Landlord shall use reasonable efforts to minimize the duration of such interruption, and agrees to employ contractors or labor at overtime or other premium pay rates and to incur other reasonable overtime costs and additional expenses, provided that Tenant shall first pay to Landlord Landlord's reasonable estimate of all incremental cost increases to do so. In such event Tenant shall pay, as Additional Rent upon presentation of appropriate invoices, all additional costs incurred by Landlord in connection therewith.
(e) Landlord shall not have any obligations with respect to the Roof Equipment or compliance with any Legal Requirements (including the obtaining of any required permits or licenses, or the maintenance thereof) relating thereto, nor shall Landlord be responsible for any damage that may be caused to Tenant or the Roof Equipment by any other tenant or occupant of the Building. Landlord makes no representation that the Roof Equipment (if same includes communications equipment) will be able to receive or transmit communication signals without interference or disturbance (whether or not by reason of the installation or use of similar equipment by others on the roof) and Tenant agrees that Landlord shall not be liable to Tenant therefor. Notwithstanding the foregoing, upon request by Tenant, Landlord, at Tenant's cost and expense, shall join in any applications for any permits, approvals or certificates from any Governmental Authority required to be obtained by Tenant, and shall sign such applications reasonably promptly after request by Tenant, and shall otherwise cooperate with Tenant in connection therewith, provided that Landlord shall not be obligated to incur any cost or expense (other than incidental administrative expenses), including attorneys' fees and disbursements, or suffer or incur any liability, in connection therewith.
(g) The privileges granted Tenant under this Section 9.7 merely constitute a license and shall not, now or at any time after the installation of the Roof Equipment, be deemed to grant Tenant a leasehold or other real property interest in the Building or any portion thereof, including the Building's roof. The license granted to Tenant in this Section 9.7 shall continue until and automatically terminate and expire upon the expiration or earlier termination of this Lease and the termination of such license shall be self-operative and no further instrument shall be required to effect such termination. Notwithstanding the foregoing, upon request by Landlord, Tenant, at Tenant's sole cost and expense, shall promptly execute and deliver to Landlord, in recordable form, any certificate or other document reasonably required by Landlord confirming the termination of Tenant's right to use the roof of the Building upon the expiration or sooner termination of this Lease.
(h) The Roof Equipment shall be treated for all purposes of this Lease as Tenant's Property. If requested by Landlord, Tenant shall cause the Roof Equipment and all equipment and installations appurtenant thereto to be designated as one or more separate tax lots by the City of New York for all purposes of assessment and payment of Taxes, and Tenant shall pay all Taxes imposed thereon directly to the taxing authorities, without deduction or offset against Rent under this Lease. If for any reason Tenant fails (with or without Landlord's consent thereto) to so cause the Roof Equipment to be designated as one or more separate tax lots, Tenant shall pay to Landlord monthly, as Additional Rent upon demand, the amount, determined by Landlord in its reasonable discretion, by which Taxes imposed upon the Building have been increased on account of Tenant's installation of the Roof Equipment.
Section 9.8 Conduit. Landlord will make available to Tenant,
without additional charge, riser space in the "Center Shaft" as shown on Exhibit
R (except as set forth in (b) below) sufficient to accommodate the following:
(a) the two (2) two1/2-inch (2 1/2") diameter electrical conduits and such other
electrical conduits as shall be required in order to deliver the Basic Capacity
to the Premises, (b) four (4) four-inch (4"), one (1) one1/2-inch (1 1/2") and
one (1) one-inch (1") diameter riser conduit sleeves for telecommunications
lines and cabling and security systems in the number eighteen freight elevator
shaft, (c) two (2) ten-inch (10") diameter riser conduit sleeves for condenser
water supply and return lines connecting the Roof Equipment to the Premises, (d)
the electrical conduits required in order to deliver EPS (if any) to the
Premises, and (e) four (4) four-inch (4") diameter riser conduit sleeves
connecting the Premises
Section 9.9 Listings in Building Directory. Landlord shall, at the request of Tenant, maintain listings on the Building directory in the Building lobby of the names of Tenant and any officers or employees of Tenant (or any permitted Subtenant) provided that the number of listings shall be in the same proportion to the capacity of the Building directory as the rentable area of the Premises is to the rentable area of the Building. Tenant shall deliver to Landlord, on or prior to the Commencement Date, a list of all names to be included in the directory. Tenant may deliver revised listings to Landlord from time to time throughout the Term (but Landlord shall not be obligated to revise the directory more often than once a month).
Section 9.10 No Warranty of Landlord. Landlord does not
warrant that any of the services to be provided by Landlord to Tenant hereunder,
or any other services which Landlord may supply (a) will be adequate for
Tenant's particular purposes or as to any other particular need of Tenant, or
(b) will, subject to the provisions of the fourth sentence of this Section 9.10,
be free from interruption, and Tenant acknowledges that any one or more such
services may be interrupted or suspended by reason of Unavoidable Delays.
Landlord reserves the right to stop, interrupt or reduce service of the Building
Systems by reason of Unavoidable Delays, or for repairs, additions, alterations,
replacements or improvements which are, in the judgment of Landlord, necessary
to be made, until said repairs, alterations, replacements or improvements shall
have been completed. Any such interruption or discontinuance of service, or the
exercise of such right by Landlord to suspend or interrupt such service shall
not (i) constitute an actual or constructive eviction, or disturbance of
Tenant's use and possession of the Premises, in whole or in part, (ii) entitle
Tenant to any compensation or to any abatement or diminution of Fixed Rent or
Additional Rent, (iii) relieve Tenant from any of its obligations under this
Lease, or (iv) impose any responsibility or liability upon Landlord or its
agents by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business, or otherwise. Landlord shall use reasonable
efforts to minimize interference with Tenant's access to and use and occupancy
of the Premises in making any repairs, alterations, additions, replacements,
decorations or improvements; provided, however, that Landlord shall have no
obligation to employ contractors or labor at "overtime" or other premium pay
rates or to incur any other "overtime" costs or additional expenses whatsoever.
Landlord shall not be required to furnish any services except as expressly
provided in this Article 9.
Section 9.12 Emergency Generator.
(a) Landlord shall make available to Tenant for use in the Premises 350 amperes of 460-volt emergency electric power service ("EPS") available to Tenant for use in the Premises from the Building's emergency electric generator (the "Generator") as provided in this Section 9.12, for the balance of the Term. Landlord shall install (i) an automatic transfer switch (the "Transfer Switch"), in the Premises at a location to be reasonably designated by Tenant, sufficient to supply a total connected load of up 350 amperes of EPS at 460 volts to the Premises, and (ii) a connection from the Generator to the Transfer Switch.
(b) Tenant shall pay Landlord for EPS as follows:
(i) Tenant shall pay all actual costs and expenses incurred by Landlord in making EPS available to the Premises, including the actual costs to furnish and install the Transfer Switch and all cabling and other devices necessary to connect the Generator to the Transfer Switch, within ten (10) days after demand by Landlord; and
(ii) (A) Tenant shall pay an annual fee (the "EPS Fee") for the period commencing on the date on which Landlord makes EPS available to the Premises but not earlier than January 1, 2000 through the Expiration Date, irrespective of whether or not emergency power is ever required or used by Tenant, in the amount of $150.00 per ampere per year. The EPS Fee shall be payable by Tenant to Landlord as Additional Rent in advance in equal monthly installments on the first day of each month during the Term in which EPS is made available to Tenant pursuant to this Section 9.12.
(c) Tenant understands and agrees that EPS will be supplied to Tenant only if there is an interruption or failure in the supply of electric current to the Premises due to service failure or in connection with customary, routine testing of Tenant's electrical systems and under no other circumstances.
(d) Tenant shall be responsible for the payment of any occupancy tax and any other tax (other than Landlord's income tax) imposed upon the Additional Rent paid by Tenant pursuant to this Section 9.12.
(e) The privilege of using the EPS service described in this
Section 9.12 cannot be transferred or assigned by Tenant except in connection
with an assignment of this Lease permitted under Sections 13.1, 13.10 or 13.11,
or otherwise with the express written consent of Landlord, which may be withheld
in Landlord's sole discretion, and under no circumstances can this privilege be
transferred or assigned to any party who is not a tenant under this Lease.
Tenant
(f) Landlord shall have the right, in Landlord's sole discretion, at any time and from time to time during the EPS Term, upon not less than thirty (30) days' prior written notice to Tenant, to relocate the Generator to another area of the Building, and/or to substitute another Building generator in lieu of the Generator, in either case at Landlord's expense. Tenant shall cooperate with Landlord to effectuate any such relocation or substitution of the Generator, provided that Landlord shall promptly reimburse any reasonable out-of-pocket expenses incurred by Tenant in connection therewith.
(g) Upon and subject to the provisions of this Lease, Landlord shall, at Landlord's expense, maintain and repair the Generator in accordance with the manufacturer's recommendations and good industry standards, and shall maintain such service contracts and take such other actions as may be necessary in Landlord's reasonable judgment to keep the Generator in good working order during the EPS Term; provided, however, so long as Landlord shall comply with its obligations pursuant to this subsection (g), Landlord shall not be liable in any way to Tenant for any delay, interruption, failure, variation or defect in or with regard to the Generator or EPS. In no event shall Landlord be liable to Tenant for special, indirect or consequential damages which may result from any such delay, interruption, failure, variation or defect.
Section 10.1 Tenant, at its expense, shall obtain and keep in full force and effect a policy of commercial general liability insurance including premises - operations and contractual liability under which the insurer agrees to insure Tenant's obligations under Article 28 and under which Tenant is named as the insured and Landlord, Landlord's asset manager, Landlord's managing agent for the Building and any Superior Lessors and any Mortgagees (whose names shall have been furnished to Tenant) are named as additional insureds, which insurance shall provide primary coverage without contribution from any other insurance carried by or for the benefit of Landlord, Landlord's asset manager, Landlord's managing agent and any Superior Lessors or Mortgagees named as additional insureds. Tenant's primary commercial general liability policy shall contain a provision that the policy shall be noncancellable unless thirty (30) days' written notice shall have been given to Landlord and Landlord shall similarly receive thirty (30) days' notice of any material change in coverage. The minimum limits of liability shall be a combined single limit with respect to each occurrence in an amount of not less than $5,000,000 per location general aggregate limit; provided, however, that Landlord shall retain the right to require Tenant to increase said coverage to that amount of insurance which in Landlord's reasonable judgment is then being customarily required by prudent landlords of comparable buildings in the City of New York, and provided further that Landlord shall require similar increases of other tenants of space in the Building comparable to the Premises, to the extent Landlord shall then have the right to do so under applicable leases. Tenant shall also obtain and keep in full force and effect during the Term (a) insurance against loss or damage by fire, and such other risks and hazards as are insurable under then available standard forms of "all risk" insurance policies with extended coverage (including theft, sprinkler leakage, and boiler
Section 10.2 (a) Each party hereto does hereby waive any and all rights of recovery against the other and against the officers, employees, partners, agents and representatives of the other, for loss of or damage to the property of the waiving party to the extent such loss or damage is insured against under any insurance policy carried by Landlord or Tenant hereunder. In addition, the parties hereto shall procure an appropriate clause in, or endorsement on, any fire or extended coverage insurance covering the Premises, the Building and personal property, fixtures and equipment located thereon or therein, pursuant to which the insurance companies waive subrogation or consent to a waiver of right of recovery and subject to obtaining such clauses or endorsements of waiver of subrogation or consent to a waiver of right of recovery, hereby agree not to make any claim against or seek to recover from the other for any loss or damage to its property or the property of others resulting from fire or other hazards covered by such fire and extended coverage insurance; provided, however, that the release, discharge, exoneration and covenant not to sue herein contained shall be limited by and coextensive with the terms and provisions of the waiver of subrogation clause or endorsements or clauses or endorsements consenting to a waiver of right of recovery. If the payment of an additional premium is required for the inclusion of such waiver of subrogation or consent to waiver provision, each party shall advise the other of the amount of any such additional premiums and the other party at its own election may, but shall not be obligated to, pay the same. If such other party shall not elect to pay such additional premium, the first party shall not be required to obtain such waiver of subrogation or consent to waiver provision. Tenant acknowledges that Landlord shall not carry insurance on and shall not be responsible for damage to, Tenant's Alterations (if any) or Tenant's Property, and that Landlord shall not carry insurance against, or be responsible for any loss suffered by Tenant due to, interruption of Tenant's business.
(b) As to each party hereto, provided such party's right of full recovery under the applicable insurance policy is not adversely affected, such party hereby releases the other (its servants, agents, contractors, employees and invitees) with respect to any claim (including a claim for negligence) which it might otherwise have against the other party for loss, damages or destruction of the type covered by such insurance with respect to its property by fire or other casualty i.e., in the case of Landlord, as to the Building, and, in the case of Tenant, as to Tenant's Property and Tenant's Alterations (including rental value or business interruption, as the case may be) occurring during the Term.
Section 10.4 Landlord agrees to maintain (a) insurance against loss or damage to the Building by fire and such other risks and hazards as are insurable under then available forms of "all risk" insurance policies with extended coverage, and (b) a policy of commercial general liability insurance, in each case with minimum limits of liability in amounts comparable to insurance maintained by other prudent landlords of comparable office buildings in the City of New York.
ARTICLE 11. Destruction of the Premises; Property Loss or Damage
Section 11.1 (a) If the Premises shall be damaged by fire or other casualty, or if the Building shall be so damaged that Tenant shall be deprived of reasonable access to the Premises, Tenant shall give prompt notice thereof to Landlord, and the damage shall be repaired by and at the expense of Landlord to substantially the condition prior to the damage, including Tenant's Alterations, but excluding Tenant's Property. Until such repairs shall be substantially completed, Fixed Rent and Additional Rent shall be reduced in the proportion which the area of the part of the Premises which is neither usable nor used by Tenant bears to the Premises Area (provided, however, in the event that ninety percent (90%) or more of the floor area of the Premises shall be so damaged so as not to be usable, and Tenant is unable to conduct its business in the remaining portion of the Premises, or if the Premises shall be rendered inaccessible, then Fixed Rent and Additional Rent shall be entirely abated). Tenant shall pay to Landlord all proceeds of insurance policies covering Tenant's Alterations, and such proceeds shall be used by Landlord in the repair of Tenant's Alterations. Landlord shall have no obligation to repair any damage to, or to replace, any of Tenant's Property.
(b) Concurrently with the collection of any insurance proceeds attributable to damage to Tenant's Alterations (or the payment by Tenant to Landlord of an amount equal to such insurance proceeds, pending collection of such proceeds from its insurer), and as a condition precedent to Landlord's obligation to commence those repairs to Tenant's Alterations required to be performed by Landlord pursuant to this Section 11.1, Tenant shall pay to Landlord (i) the amount of any deductible under the policy insuring Tenant's Alterations, and (ii) the amount, if any, by which the cost of repairing and restoring Tenant's Alterations, as estimated by a reputable independent contractor designated by Landlord, exceeds the available insurance proceeds therefor; provided, however, that Tenant may dispute the reasonableness of such estimate by arbitration of the issue in accordance with the procedural provisions set forth in Section 30.6. If the arbitrator determines such estimate to have been reasonable, Tenant's payment shall be calculated based upon such estimate; and if the arbitrator determines such estimate to have been unreasonable, the arbitrator shall, without hearing any additional submission of evidence or arguments by the parties, further determine the highest reasonable estimate, and Tenant's payment shall be calculated based upon such estimate. The amounts
Section 11.2 (a) If the Building shall be so damaged by fire or other casualty that, in Landlord's reasonable opinion, substantial alteration, demolition, or reconstruction of the Building shall be required (whether or not the Premises shall have been damaged or rendered untenantable), then in any of such events, Landlord may, not later than sixty (60) days following the date of the damage, give Tenant a notice in writing terminating this Lease, provided (i) Landlord similarly terminates the leases of other tenants in the Building covering at least twenty-five percent (25%) of the Rentable Square Footage (exclusive of the Premises) of the then leased space in the Building, and (ii) Landlord does not restore the Premises and lease the same for office purposes.
(b) If this Lease is so terminated, the Term shall expire upon the tenth (10th) day after such notice is given, and Tenant shall vacate the Premises and surrender the same to Landlord. Upon the termination of this Lease under the conditions provided for in this Section 11.2, Tenant's liability for Fixed Rent and Additional Rent shall cease as of the date of such fire or other casualty, and any prepaid portion of Fixed Rent or Additional Rent for any period after such date shall be refunded by Landlord to Tenant.
(c) If this Lease is terminated pursuant to the provisions of this Article 11, then Landlord shall collect the insurance proceeds of policies providing coverage for Tenant's Alterations as provided in Section 11.1(a). Landlord shall retain such proceeds to the extent of sums, if any, advanced by Landlord to Tenant with respect to any of Tenant's Alterations. The balance of such proceeds, if any, shall be paid to Tenant.
Section 11.3 (a) If the Premises are damaged by fire or other casualty and are rendered wholly untenantable thereby, or if the Building shall be so damaged that Tenant shall be deprived of reasonable access to the Premises, and if Landlord shall not elect to terminate this Lease as permitted by this Article 11, Landlord shall, within sixty (60) days following the date of the damage, cause a contractor or architect selected by Landlord to give notice (the "Restoration Notice") to Tenant of the date by which such contractor or architect believes the restoration of the Premises shall be Substantially Completed. If the Restoration Notice shall indicate that reasonable access to the Premises shall not be restored, or the restoration shall not be Substantially Completed on or before the date which shall be nine (9) months following the date of such damage or destruction or prevention of access, Tenant shall have the right to terminate this Lease by giving written notice (the "Termination Notice") to Landlord not later than thirty (30) days following receipt of the Restoration Notice. If Tenant gives a Termination Notice, this Lease shall be deemed cancelled and terminated as of the date of the giving of the Termination Notice as if such date were the Expiration Date, and Fixed Rent and Additional Rent shall be apportioned and shall be paid or refunded, as the case may be up to and including the date of such damage or destruction. Notwithstanding anything set forth to the contrary in this Article 11, in the event that a fire or other casualty rendering the Premises wholly untenantable shall occur during the final year of the Term, either Landlord or Tenant may terminate this Lease by giving the other party a Termination Notice as set forth herein. As used in this Section 11.3(a), the term "wholly untenantable" shall be deemed to include a condition
(b) If (i) Tenant shall have had the right to give a Termination Notice pursuant to Section 11.3(a) but shall not have done so, and Landlord fails thereafter to Substantially Complete the restoration of the Premises on or before the date which is thirty (30) days following the later to occur of (y) nine (9) months following the date of such damage or destruction, or (z) the date set forth in the Restoration Notice, or (ii) if Tenant shall not have had the right to give a Termination Notice pursuant to Section 11.3(a) and thereafter Landlord shall fail to substantially complete the restoration of the Premises on or before the date which is nine (9) months following the date of such damage or destruction, then in either of such events Tenant shall again have the right to terminate this Lease by giving a Termination Notice (a "Second Termination Notice"), and, unless Landlord Substantially Completes the restoration of the Premises within thirty (30) days following the giving of such Second Termination Notice, this Lease shall be deemed canceled and terminated as set forth in Section 11.3(a).
Section 11.4 This Article 11 constitutes an express agreement governing any case of damage or destruction of the Premises or the Building by fire or other casualty, and Section 227 of the Real Property Law of the State of New York, which provides for such contingency in the absence of an express agreement, and any other law of like nature and purpose now or hereafter in force shall have no application in any such case.
Section 12.1 (a) If (i) all of the floor area of the Premises, or so much thereof as shall render the Premises wholly untenantable, shall be acquired or condemned for any public or quasi-public use or purpose, or (ii) a portion of the Real Property, not including the Premises, shall be so acquired or condemned, but by reason of such acquisition or condemnation, Tenant no longer has means of access to the Premises, then this Lease and the Term shall end as of the date of the vesting of title with the same effect as if that date were the Expiration Date. In the event of any termination of this Lease and the Term pursuant to the provisions of this Article 12, Fixed Rent and Additional Rent shall be apportioned as of the date of such termination and any prepaid portion of Fixed Rent or Additional Rent for any period after such date shall be refunded by Landlord to Tenant.
(b) If the part of the Real Property so acquired or condemned contains more than twenty-five percent (25%) of the total area of the Premises immediately prior to such acquisition or condemnation, or if, by reason of such acquisition or condemnation Tenant no longer has reasonable means of access to the Premises, Tenant may terminate this Lease by notice to Landlord given within thirty (30) days following the date upon which Tenant receives notice of such acquisition or condemnation. If Tenant so notifies Landlord, this Lease shall terminate and the Term shall end and expire upon the thirtieth (30th) day following the giving of such notice.
Section 12.2 In the event of any such acquisition or condemnation of all or any part of the Real Property, Landlord shall be entitled to receive the entire award for any such
Section 12.3 If only a part of the Real Property shall be so acquired or condemned then, subject to Section 12.1, this Lease and the Term shall continue in force and effect. If a part of the Premises shall be so acquired or condemned and this Lease and the Term shall not be terminated, Landlord, at Landlord's expense, shall restore that part of the Premises not so acquired or condemned so as to constitute tenantable Premises. From and after the date of the vesting of title, Fixed Rent and Additional Rent shall be reduced in the proportion which the area of the part of the Premises so acquired or condemned bears to the total area of the Premises immediately prior to such acquisition or condemnation.
Section 13.1 Except as otherwise expressly provided herein, Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage, pledge, encumber, or otherwise transfer this Lease, nor sublet (nor underlet), nor suffer, nor permit the Premises or any part thereof to be used or occupied by others (whether for desk space, mailing privileges or otherwise), without the prior written consent of Landlord in each instance. If this Lease is assigned, or if the Premises or any part thereof are sublet or occupied by anybody other than Tenant, or if this Lease or the Premises are encumbered (whether by operation of law or otherwise) without Landlord's consent, then Landlord may, after default by Tenant beyond applicable grace or notice periods, collect rent from the assignee, subtenant or occupant, and apply the net amount collected to Fixed Rent and Additional Rent, but no assignment, subletting, occupancy or collection shall be deemed a waiver by Landlord of the provisions hereof, the acceptance by Landlord of the assignee, subtenant or occupant as a tenant, or a release by Landlord of Tenant from the further performance by Tenant its obligations under this Lease, and Tenant shall remain fully liable therefor. The consent by Landlord to any assignment or subletting shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Landlord to any further assignment or subletting. In no event shall any permitted subtenant assign or encumber its sublease or further sublet all or any portion of its sublet space, or otherwise suffer or permit the sublet space or any part thereof to be used or occupied by others, without Landlord's prior written consent in each instance. Any assignment, sublease, mortgage, pledge, encumbrance or transfer in contravention of the provisions of this Article 13 shall be void.
Section 13.2 (a) If Tenant shall, at any time or from time to time, during the Term desire to assign this Lease or sublet all or part of the Premises, Tenant shall give notice (a "Tenant's Notice") thereof to Landlord, which Tenant's Notice shall set forth: (i) with respect to an assignment of this Lease, the date Tenant desires the assignment to be effective and any consideration Tenant would receive under such assignment, (ii) with respect to a sublet of all or a
(b) Landlord agrees to respond to any Tenant's Notice given in
accordance with Section 13.2(a) within twenty (20) days after request, provided
the Tenant's Notice complies in all material respects with the requirements of
Section 13.2(a). If Landlord fails to either approve or disapprove the requested
assignment or subletting on or before the end of such twenty-day period, Tenant
shall have the right to provide Landlord with a second written request for
approval (a "Second Request"), which shall include all material previously
delivered to Landlord together with Tenant's Notice, and set forth in bold
capital letters the following statement: IF LANDLORD FAILS TO RESPOND WITHIN
FIVE (5) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN TENANT SHALL BE
ENTITLED TO ENTER INTO THE PROPOSED [ASSIGNMENT] [ SUBLEASE] DESCRIBED IN THE
NOTICE ENCLOSED HEREWITH, WHICH WAS PREVIOUSLY SUBMITTED TO LANDLORD AND TO
WHICH LANDLORD HAS FAILED TO TIMELY RESPOND. In the event that Landlord fails to
respond to a Second Request within five (5) Business Days after receipt by
Landlord, the proposed assignment or sublease as to which the Second Request is
submitted shall be deemed to be approved by Landlord, and Tenant shall be
entitled to enter into such transaction, provided that such assignment or
sublease complies with the requirements of this Article 13 and all other
provisions of this Lease applicable thereto.
Section 13.3 If Landlord exercises its option to terminate this Lease with respect to all or a portion of the Premises pursuant to Section 13.2, then this Lease shall terminate and expire (in its entirety or as it relates to the portion of the Premises identified in the Tenant's Notice, as applicable) on the date that such assignment or sublease was to be effective or commence, as the case may be, and the Fixed Rent and Additional Rent due hereunder shall be paid and apportioned to such date. In such event, Landlord and Tenant, upon request of either party, shall enter into an amendment of this Lease ratifying and confirming such total or partial termination, and setting forth appropriate modifications, if any, to the terms and provisions hereof. Following such termination, Landlord shall be free to and shall have no liability to
Section 13.4 If Landlord exercises its option to sublet the Leaseback Space, such sublease to Landlord or its designee (as subtenant) shall be at a rental rate equal to the product of (i) the lesser of (A) the rental rate per rentable square foot of Fixed Rent and Additional Rent then payable pursuant to this Lease, or (B) the rental rate per rentable square foot of rent and additional rent set forth in Tenant's Notice, multiplied by (ii) the number of rentable square feet of the Leaseback Space, and shall be for the same term as that of the proposed subletting, and such sublease shall:
(a) be upon such other terms and conditions as are contained in Tenant's Notice, and be expressly subject to all of the covenants, agreements, terms, provisions and conditions of this Lease, except such as are irrelevant or inapplicable, and except as expressly set forth in this Article 13 to the contrary;
(b) give the subtenant the unqualified and
unrestricted right, without Tenant's permission, to assign such
sublease or any interest therein and/or to sublet the space covered by
such sublease or any part or parts of such space and to make any and
all changes, alterations and improvements in the space covered by such
sublease, provided that such changes, alterations or improvements do
not materially adversely affect Tenant's use and occupancy of the
portion of the Premises other than the Leaseback Space; and if the
proposed sublease will result in all or substantially all of the
Premises being sublet, grant Landlord or its designee the option to
extend the term of such sublease for the balance of the Term less one
day, and provided further that, if the term of such sublease is twelve
(12) or more months shorter than the Term, the Premises being sublet
shall be suitable for the Permitted Use upon expiration of the sublease
term;
(c) provide that any assignee or further subtenant of Landlord or its designee, may, at Landlord's option, be permitted to make alterations, decorations and installations in such space or any part thereof, provided that such changes, alterations or improvements do not materially adversely affect Tenant's use and occupancy of the portion of the Premises other than the Leaseback Space, and shall also provide in substance that any such alterations, decorations and installations in such space therein made by any assignee or subtenant of Landlord or its designee may be removed, in whole or in part, by such assignee or subtenant, at its option, prior to or upon the expiration or other termination of such sublease; provided, however, that such assignee or subtenant shall, at its sole cost and expense, repair any damage and injury caused by such removal; and provided further that, if the term of such sublease is twelve (12) or more months shorter than the Term, the Premises being sublet shall be suitable for the Permitted Use upon expiration of the sublease term; and
(d) provide that (i) the parties to such sublease expressly negate any intention that any estate created under such sublease be merged with any other estate held by either of said parties, (ii) any assignment or sublease by Landlord or its designee (as the subtenant) may be for any purpose or purposes that Landlord, in Landlord's
Section 13.5 (a) If Landlord exercises its option to sublet the Leaseback Space, Landlord shall indemnify and save Tenant harmless from all obligations under this Lease as to the Leaseback Space during the period of time it is so sublet to Landlord, except as to any obligation which arises out of or results from the negligence or willful misconduct of Tenant or any Tenant Party.
(b) Performance by Landlord, or its designee, under a sublease of the Leaseback Space shall be deemed performance by Tenant of any similar obligation under this Lease and any default under any such sublease shall not give rise to a default under a similar obligation contained in this Lease nor shall Tenant be liable for any default under this Lease or deemed to be in default hereunder, unless such default is occasioned by or arises from the negligence or willful misconduct of Tenant or any Tenant Party.
(c) Tenant shall have no obligation, at the expiration or earlier termination of the Term, to remove any alteration, installation or improvement made in the Leaseback Space by Landlord (or Landlord's designee).
Section 13.6 In the event Landlord does not exercise either option provided to it pursuant to Section 13.2, and provided that no Event of Default shall have occurred and be continuing under this Lease as of the time Landlord's consent is requested by Tenant, Landlord's consent (which must be in writing, subject to the provisions of Section 13.2(b)) to the proposed assignment or sublease shall not be unreasonably withheld or delayed; provided, however, that:
(a) Tenant shall have complied with the provisions of
Section 13.2, and Landlord shall not have exercised any of its options
thereunder within the time permitted therefor;
(b) In Landlord's judgment, the proposed assignee or subtenant is engaged in a business or activity, and the Premises, or the relevant part thereof, will be used in a manner, which (i) is in keeping with the then standards of the Building, and (ii) does not violate the restrictions set forth in Article 2;
(c) The proposed assignee or subtenant has sufficient financial worth considering the responsibility involved, and Landlord has been furnished with evidence thereof;
(d) In the event Landlord has comparable space in the Building available for lease, then (i) neither the proposed assignee or subtenant nor any Person which, directly or indirectly, controls, is controlled by, or is under common control with, the proposed assignee or subtenant, is then an occupant of any part of the Building, and (ii) the proposed assignee or subtenant is not a Person (or Affiliate of a Person) with whom Landlord or Landlord's agent is then, or has been within the previous four (4) month period, negotiating in connection with rental of space in the Building;
(e) The form of the proposed sublease or instrument of assignment shall be reasonably satisfactory to Landlord and shall comply with the applicable provisions of this Article 13, and Tenant shall deliver a true and complete original, fully executed counterpart of such sublease or other instrument to Landlord promptly upon the execution and delivery thereof;
(f) Tenant and its proposed subtenant or assignee, as the case may be, shall execute and deliver to Landlord an agreement, in form and substance reasonably satisfactory to Landlord, setting forth the terms and conditions upon which Landlord shall have granted its consent to such assignment or subletting, and the agreement of Tenant and such subtenant or assignee, as the case may be, to be bound by the provisions of this Article 13;
(h) The amount of the aggregate rent to be paid by the proposed subtenant shall not be twenty percent (20%) or more below the then current market rent per rentable square foot for the Premises, determined as though the Premises were vacant, and the rental and other terms and conditions of the sublease shall be substantially the same as those contained in Tenant's Notice;
(i) Tenant shall reimburse Landlord, as Additional Rent upon demand, for (A) the reasonable costs and expenses incurred by Landlord in connection with the assignment or sublease, including the costs of investigations as to the acceptability of the proposed assignee or subtenant and the cost of reviewing plans and specifications proposed to be made in connection therewith, and (B) Landlord's reasonable legal fees and disbursements incurred in connection with the granting of any requested consent and the preparation of Landlord's written consent to the sublease or assignment;
(j) Tenant shall not have (i) advertised or publicized in any way the availability of the Premises without prior notice of and approval by Landlord, or (ii) advertised or publicized in any way (or caused or permitted to be advertised or publicized in any way) the Premises for sublease or assignment at a rental rate materially less than the fixed rent and additional rent at which Landlord is then offering to lease comparable space in the Building for a comparable term;
(k) The proposed occupancy shall not impose a material extra burden upon services to be supplied by Landlord to Tenant, unless Tenant and such proposed subtenant or assignee shall agree with Landlord in writing to pay the costs of such additional services; and
(l) The proposed subtenant or assignee shall not be entitled, directly or indirectly, to diplomatic or sovereign immunity and shall be subject to the service of process in, and the jurisdiction of the courts of New York State.
Except for any sublease by Tenant to Landlord or its designee pursuant to this Article 13, each sublease pursuant to this Section 13.6 shall be subject to all of the covenants, agreements, terms, provisions and conditions contained in this Lease. Notwithstanding any such sublease to Landlord or any such sublease to any other subtenant, or any acceptance of Fixed Rent or Additional Rent by Landlord from any subtenant, Tenant will remain fully liable for the payment of the Fixed Rent and Additional Rent due and to become due hereunder and for the performance of all the covenants, agreements, terms, provisions and conditions contained in this Lease on Tenant's part to be observed and performed, and for all acts and omissions of any licensee or subtenant or anyone claiming under or through any subtenant which shall be in violation of any of the obligations of this Lease, and any such violation shall be deemed to be a violation by Tenant. If Landlord shall decline to give its consent to any proposed assignment or sublease, or if Landlord shall exercise either of its options under Section 13.2, Tenant shall indemnify, defend and hold harmless Landlord against and from any and all losses, liabilities, damages, costs, and expenses (including reasonable attorneys' fees and disbursements) resulting from any claims that
Section 13.7 In the event that (a) Landlord fails to exercise either of its options under Section 13.2 and consents to a proposed assignment or sublease, and (b) Tenant fails to execute and deliver the assignment or sublease to which Landlord consented within one hundred twenty (120) days after the giving of such consent, then, Tenant shall again comply with all of the provisions and conditions of Section 13.2 before assigning this Lease or subletting all or part of the Premises.
Section 13.8 With respect to each and every sublease authorized by Landlord under the provisions of this Lease, it is further agreed that:
(a) No sublease shall be for a term ending later than one day prior to the Expiration Date of this Lease;
(b) No sublease shall be delivered, and no subtenant
shall take possession of the Premises or any part thereof, until an
executed counterpart of such sublease has been delivered to Landlord
and approved in writing by Landlord (or deemed approved pursuant to
Section 13.2(a) or (b)); and
(c) Each sublease shall be subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and each subtenant by entering into a sublease is deemed to have agreed that in the event of termination, re-entry or dispossession by Landlord under this Lease, Landlord may, at its option, take over all of the right, title and interest of Tenant, as sublandlord, under such sublease, and such subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not (i) be liable for any previous act or omission of Tenant under such sublease (except to the extent such act or omission is a default under the Sublease and continues beyond the date on which Landlord succeeds to Tenant's interest, provided that the subtenant gives notice of such act or omission to Landlord prior to such takeover by Landlord), (ii) be subject to any counterclaim, offset or defense, not expressly provided in such sublease, which theretofore accrued to such subtenant against Tenant, (iii) be bound by any previous modification of such sublease not consented to in writing by Landlord, or by any previous prepayment of more than one month's Fixed Rent or of any Additional Rent, or (iv) be obligated to perform any work in the subleased space or to prepare it for occupancy, and in connection with such attornment, the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Each subtenant or licensee of Tenant shall be deemed, automatically upon and as a condition of its occupying or using the Premises or any part thereof, to have agreed to be bound by the terms and conditions set forth in this Article 13. The provisions of this Article 13 shall be self-operative and no further instrument shall be required to give effect to this provision.
(a) In the case of an assignment, on the effective date of the assignment, an amount equal to fifty percent (50%) of (i) all sums and other consideration paid to Tenant by the assignee for or by reason of such assignment (including sums paid for Tenant's Property, less, in the case of a sale thereof, the then net unamortized or undepreciated cost thereof, determined on the basis of Tenant's federal income tax returns) less (ii) all Transaction Expenses reasonably and actually incurred by Tenant in connection with such assignment; or
(b) In the case of a sublease, an amount equal to
fifty percent (50%) of (i) all rents, additional charges or other
consideration payable to Tenant under the sublease in excess of the
Fixed Rent and Additional Rent accruing during the term of the sublease
in respect of the subleased space (at the rate per square foot payable
by Tenant hereunder) pursuant to the terms hereof (including sums paid
for the sale or rental of Tenant's Property, less, in the case of the
sale thereof, the then net unamortized or undepreciated cost thereof,
determined on the basis of Tenant's federal income tax returns) less
(ii) all Transaction Expenses reasonably and actually incurred by
Tenant in connection with such sublease. The sums payable under this
clause shall be paid by Tenant to Landlord as Additional Rent as and
when paid by the subtenant to Tenant.
Section 13.10 (a) Subject to the provisions of Section 13.11, if Tenant is a corporation, limited liability company, limited partnership, limited liability partnership, general partnership, business trust, foundation, or any other legal entity (any of the foregoing, an "Entity"), and a majority of the outstanding voting stock, membership interests, partnership interests or other legal or equitable ownership interests of any kind (any of the foregoing, "Ownership Interests") are not publicly traded on a recognized stock exchange or over-the-counter market, then any transfer (by one or more transfers), of a majority of the Ownership Interests of Tenant shall be deemed an assignment of this Lease for all purposes of this Article 13. The term "transfer" shall be deemed to include the issuance of new Ownership Interests resulting in a majority of the Ownership Interests of Tenant being held by Persons (other than barnesandnoble.com inc.) which do not hold a majority of the Ownership Interests of Tenant on the date hereof, except in the case of a public offering of Ownership Interests on a recognized stock exchange or over-the-counter market. The transfer of a majority of the Ownership Interests of Tenant through one or more transfers on a recognized stock exchange or over-the-counter market shall not be deemed an assignment of this Lease for purposes of this Article 13.
(b) If Tenant is an Entity, and Tenant is merged or consolidated with another Entity, or if substantially all of Tenant's assets are transferred to another Entity, then such merger, consolidation or transfer of assets shall be deemed an assignment of this Lease for all purposes of this Article 13. Notwithstanding the foregoing, Landlord's consent shall not be required for such assignment, and the provisions of Sections 13.2, 13.6 and 13.9 shall not be applicable thereto, so long as each of the following conditions have been satisfied: (i) such merger, consolidation or transfer of assets shall have been made for a legitimate independent business purpose and not for
(c) The limitations set forth in this Section 13.10 shall be deemed to apply to assignees of this Lease, if any, and any transfer of Ownership Interests in, or any merger, consolidation or transfer of assets of, any such assignee in violation of this Section 13.10 shall be deemed to be an assignment of this Lease in violation of Section 13.1.
(d) A material modification or amendment or an extension of a
sublease shall be deemed a sublease for the purposes of Section 13.1, and a
takeover agreement shall be deemed a transfer of this Lease for the purposes of
Section 13.1.
Section 13.11 Tenant may, without Landlord's consent but upon not less than ten (10) days prior notice to Landlord, assign this Lease or sublet all or any portion of the Premises to any wholly owned subsidiary, Affiliate or parent of Tenant, Bertelsmann or B&N Inc. (any of the foregoing, a "Permitted Occupant"), or permit any Permitted Occupant to occupy all or any portion of the Premises, provided that each Permitted Occupant shall be engaged in a business or activity which is in keeping with the standards of the Building and which is a Permitted Use. The provisions of Sections 13.2, 13.6, 13.9 and 13.10 shall not be applicable to any such assignment, subleasing or occupancy. Any assignment or subleasing to, or occupancy by, any such Permitted Occupant shall not relieve, release, impair or discharge any of Tenant's obligations under this Lease. Each notice to Landlord with respect to any assignment, subleasing or occupancy granted pursuant to this Section 13.11 shall include (i) the name and the nature of
Section 13.12 (a) Any assignment or transfer, whether made with Landlord's consent pursuant to Section 13.1 or without Landlord's consent to the extent permitted under Sections 13.10 and 13.11, shall be made only if, and shall not be effective until, the assignee shall execute, acknowledge and deliver to Landlord an agreement in form and substance reasonably satisfactory to Landlord whereby the assignee shall assume the obligations of this Lease on the part of Tenant to be performed or observed from and after the effective date of such assignment or transfer, and whereby the assignee shall agree that the provisions in Section 13.1 shall, notwithstanding such assignment or transfer, continue to be binding upon it in respect of all future assignments and transfers.
(b) The joint and several liability of Tenant and any immediate or remote successor in interest of Tenant and the due performance of the obligations of this Lease on Tenant's part to be performed or observed shall not be discharged, released or impaired in any respect by any agreement or stipulation made by Landlord, or any grantee or assignee of Landlord by way of mortgage or otherwise, extending the time, or modifying any of the obligations of this Lease, or by any waiver or failure of Landlord, or any grantee or assignee of Landlord by way of mortgage or otherwise, to enforce any of the obligations of this Lease.
(c) The listing of any name other than that of Tenant, whether on the doors of the Premises or the Building directory, or otherwise, shall not operate to vest any right or interest in this Lease or in the Premises, nor shall it be deemed to be the consent of Landlord to any assignment or transfer of this Lease or to any sublease of Premises or to the use or occupancy thereof by others. Any such listing shall constitute a privilege extended by Landlord, revocable at Landlord's will by notice to Tenant, provided that Landlord shall not unreasonably revoke such privilege as to any Affiliate of Tenant, or any subtenant of Tenant or assignee of this Lease approved by Landlord pursuant to this Article 13 (or without Landlord's approval, to the extent permitted pursuant to Section 13.11).
Section 14.1 Tenant shall permit Landlord, Landlord's agents and public utilities servicing the Building to erect, use and maintain concealed ducts, pipes and conduits in and through the Premises. Landlord or Landlord's agents shall have the right to enter the Premises at all reasonable times upon reasonable prior notice (except no such prior notice shall be required in case of emergency), which notice may be oral, to examine the same, to show them to prospective purchasers, Mortgagees, Superior Lessors or lessees of the Building and their respective agents and representatives or (during the last twelve (12) months of the Term) prospective tenants of the Premises, and to make such repairs, alterations, improvements or additions (a) as Landlord may deem necessary to the Premises or to any other portion of the Building, or (b) which Landlord may elect to perform following Tenant's failure to make repairs or perform any work which Tenant is obligated to make or perform under this Lease after expiration of any applicable notice and cure periods, or (c) for the purpose of complying with Legal Requirements, and Landlord shall be allowed to take all material into and upon the Premises that may be reasonably required
Section 14.2 If Tenant shall not be present when for any reason entry into the Premises shall be necessary, Landlord or Landlord's agents may enter the same without rendering Landlord or such agents liable therefor (if during such entry Landlord or Landlord's agents shall accord reasonable care to Tenant's Property), and without in any manner affecting this Lease. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever for the care, supervision or repair of the Building or any part thereof, other than as herein provided.
Section 14.3 Landlord shall have the right from time to time to alter the Building and, without the same constituting an actual or constructive eviction and without incurring any liability to Tenant therefor, to change the arrangement or location of entrances or passageways, doors and doorways, and corridors, elevators, stairs, toilets, or other public parts of the Building and (subject to the provisions of Article 33) to change the name, number or designation by which the Building is commonly known, provided that (except as may be permitted pursuant to the provisions of Article 29) such alterations or changes do not interfere (except to a de minimis extent) with Tenant's layout, usable floor area, use or enjoyment of the Premises, or access to the Building or Premises. All parts (except surfaces facing the interior of the Premises) of all walls, windows and doors bounding the Premises (including exterior Building walls, exterior core corridor walls, exterior doors and entrances other than doors and entrances solely servicing the Premises), all balconies, terraces and roofs adjacent to the Premises, all space in or adjacent to the Premises used for shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan rooms, heating, air cooling, plumbing and other mechanical facilities, service closets and other Building facilities are not part of the Premises, and Landlord shall have the use thereof, as well as access thereto through the Premises for the purposes of operation, maintenance, alteration and repair.
Tenant shall not at any time use or occupy the Premises in violation of the certificate of occupancy at such time issued for the Premises or for the Building and in the event that any department of the City or State of New York shall hereafter contend or declare by notice, violation, order or in any other manner whatsoever that the Premises are used for a purpose which is a violation of such certificate of occupancy, Tenant shall, upon five (5) days' written notice from Landlord or any Governmental Authority, immediately discontinue such use of the Premises. Failure by Tenant to discontinue such use after such notice shall be considered a default in the fulfillment of a material covenant of this Lease and Landlord shall have the right to terminate this Lease immediately, and in addition thereto shall have the right to exercise any and all rights and privileges and remedies given to Landlord by and pursuant to the provisions of Articles 16 and 17. Landlord represents that a true and complete copy of the current certificate of occupancy for the Building is attached as Exhibit G. Landlord will not amend or modify the existing Certificate of Occupancy for the Building as to prevent the use of the Premises for the Permitted Use.
Section 16.1 Each of the following events shall be an "Event of Default" hereunder:
(a) if Tenant defaults in the payment when due of any installment of Fixed Rent or Additional Rent, and such default shall continue for a period of seven (7) days after notice thereof from Landlord; provided, however, that if Tenant shall default in the timely payment of Fixed Rent or Additional Rent such that Landlord has given a notice hereunder more than three (3) times in any period of twelve (12) consecutive months which notices shall have made specific reference to Landlord's right to terminate pursuant to this Section 16.1, then, notwithstanding that such defaults shall have each been cured within the applicable period provided above, upon any further similar default, Landlord may serve a five days' notice of termination upon Tenant without affording to Tenant an opportunity to cure such further default; or
(b) if Tenant's interest in this Lease is transferred in violation of Article 13; or
(c) if the Premises are abandoned; or
(d) (i) if Tenant or any Guarantor admits in writing its inability to pay its debts as they become due; or
(ii) if Tenant or any Guarantor commences or institutes any case, proceeding or other action (A) seeking relief as a debtor, or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts under any existing or future law of any jurisdiction, domestic or
(iii) if Tenant or any Guarantor makes a general assignment for the benefit of creditors; or
(iv) if any case, proceeding or other action is commenced or instituted against Tenant or any Guarantor (A) seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, which either (1) results in any such entry of an order for relief, adjudication of bankruptcy or insolvency or such an appointment or the issuance or entry of any other order having a similar effect, or (2) remains undismissed for a period of one hundred twenty (120) days; or
(v) if any case, proceeding or other action
is commenced or instituted against Tenant or any Guarantor
seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial
part of its property which results in the entry of an order
for any such relief which has not been vacated, discharged, or
stayed or bonded pending appeal within one hundred twenty
(120) days from the entry thereof; or
(vi) if Tenant or any Guarantor takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in Subsections 16.1(d)(ii), (iii), (iv) or (v); or
(vii) if a trustee, receiver or other custodian is appointed for any substantial part of the assets of Tenant or any Guarantor, which appointment is not vacated or effectively stayed within seven (7) Business Days, or if any such vacating or stay does not thereafter remain in effect; or
(e) if Tenant defaults in the observance or performance of any other term, covenant or condition of this Lease on Tenant's part to be observed or performed and Tenant fails to remedy such default within thirty (30) days after notice by Landlord to Tenant of such default, or, if such default is of such a nature that it cannot be completely remedied within said period of thirty (30) days, if Tenant fails to commence to remedy such default within such thirty-day period, or fails thereafter to diligently prosecute to completion all steps necessary to remedy such default; or
(f) if any Guarantor defaults beyond applicable grace and notice periods in the payment or performance of any of its obligations under any Guaranty; or
Notwithstanding the foregoing, if any of the acts set forth in Subsections 16.1(d)(i), (ii), (iii), (iv) or (v) is the act of any Guarantor, such act shall not be an Event of Default if Tenant shall, within five (5) days after the date on which such act occurs, deliver to Landlord proof satisfactory to Landlord that Tenant (or a substitute Guarantor acceptable to Landlord in its sole discretion which provides Landlord with a Guaranty, substantially in the form attached as Exhibit O to this Lease) then has a net worth, computed in accordance with generally accepted accounting principles consistently applied, of not less than $300,000,000.00.
Section 16.2 If an Event of Default occurs, Landlord may at any time thereafter give written notice to Tenant stating that this Lease and the Term shall expire and terminate on the date specified in such notice, which date shall not be less than seven (7) days after the giving of such notice. If Landlord gives such notice, this Lease and the Term and all rights of Tenant under this Lease shall expire and terminate as if the date set forth in such notice were the Fixed Expiration Date and Tenant immediately shall quit and surrender the Premises, but Tenant shall remain liable as hereinafter provided. Anything contained herein to the contrary notwithstanding, if such termination shall be stayed by order of any court having jurisdiction over any proceeding described in Section 16.1(d), or by federal or state statute, then, following the expiration of any such stay, or if the trustee appointed in any such proceeding, Tenant or Tenant as debtor-in-possession shall fail to assume Tenant's obligations under this Lease within the period prescribed therefor by law or within one hundred twenty (120) days after entry of the order for relief or as may be allowed by the court, or if said trustee, Tenant or Tenant as debtor-in-possession shall fail to provide adequate protection of Landlord's right, title and interest in and to the Premises or adequate assurance of the complete and continuous future performance of Tenant's obligations under this Lease, Landlord, to the extent permitted by law or by leave of the court having jurisdiction over such proceeding, shall have the right, at its election, to terminate this Lease on seven (7) days' notice to Tenant, Tenant as debtor-in-possession or said trustee and upon the expiration of said seven (7) day period this Lease shall cease and expire as set forth above and Tenant, Tenant as debtor-in-possession or said trustee shall immediately quit and surrender the Premises as aforesaid.
Section 16.3 If, at any time, (a) Tenant shall comprise two
(2) or more Persons, (b) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (c) Tenant's interest in this
Lease shall have been assigned, the word "Tenant," as used in Section 16.1(d),
shall be deemed to mean any one or more of the Persons primarily or secondarily
liable for Tenant's obligations under this Lease. Any monies received by
Landlord from or on behalf of Tenant during the pendency of any proceeding of
the types referred to in Section 16.1(d) shall be deemed paid as compensation
for the use and occupation of the Premises and the acceptance of any such
compensation by Landlord shall not be deemed an acceptance of Fixed Rent and/or
Additional Rent or a waiver on the part of Landlord of any rights under this
Lease.
Section 17.1 (a) If an Event of Default shall occur, and this Lease and the Term shall expire and come to an end as provided in Article 16:
(i) Tenant shall quit and peacefully surrender the Premises to Landlord, and Landlord and its agents may immediately, or at any time after such Event of Default or after the date upon which this Lease and the Term shall expire and come to an end, re-enter the Premises or any part thereof, without notice, either by summary proceedings, or by any other applicable action or proceeding, or by legal force or other legal means (without being liable to indictment, prosecution or damages therefor), and may repossess the Premises and dispossess Tenant and any other Persons from the Premises and remove any and all of their property and effects from the Premises; and
(ii) Landlord, at Landlord's option, may relet the whole or any part or parts of the Premises from time to time, either in the name of Landlord or otherwise, to such tenant or tenants, for such term or terms ending before, on or after the Expiration Date, at such rental or rentals and upon such other conditions, which may include concessions and free rent periods, as Landlord, in its sole discretion, may determine; provided, however, that Landlord shall have no obligation to relet the Premises or any part thereof and shall in no event be liable for refusal or failure to relet the Premises or any part thereof, or, in the event of any such reletting, for refusal or failure to collect any rent due upon any such reletting, and no such refusal or failure shall operate to relieve Tenant of any liability under this Lease or otherwise affect any such liability, and Landlord, at Landlord's option, may make such repairs, replacements, alterations, additions, improvements, decorations and other physical changes in and to the Premises as Landlord, in its sole discretion, considers advisable or necessary in connection with any such reletting or proposed reletting, without relieving Tenant of any liability under this Lease or otherwise affecting any such liability.
(b) Tenant hereby waives the service of any notice of
intention to re-enter or to institute legal proceedings to that end which may
otherwise be required to be given under any present or future law. Tenant, on
its own behalf and on behalf of all Persons claiming through or under Tenant,
including all creditors, does further hereby waive any and all rights which
Tenant and all such Persons might otherwise have under any present or future law
to redeem the Premises, or to re-enter or repossess the Premises, or to restore
the operation of this Lease, after (i) Tenant shall have been dispossessed by a
judgment or by warrant of any court or judge, (ii) any re-entry by Landlord, or
(iii) any expiration or termination of this Lease and the Term, whether such
dispossess, re-entry, expiration or termination shall be by operation of law or
pursuant to the provisions of this Lease. The words "re-enter", "re-entry" and
"re-entered" as used in this Lease shall not be deemed to be restricted to their
technical legal meanings. In the event of a breach or threatened breach by
Tenant, or any Persons claiming through or under Tenant, of any term, covenant
or condition of this Lease, Landlord shall have the right to enjoin such breach
and the right to invoke any other remedy allowed by law or in equity as if
re-entry, summary proceedings and other special remedies were not provided in
this Lease for such
Section 17.2 (a) If this Lease and the Term shall expire and come to an end as provided in Article 16, or by or under any summary proceeding or any other action or proceeding, or if Landlord shall re-enter the Premises as provided in Section 17.1, or by or under any summary proceeding or any other action or proceeding, then, in any of such events:
(i) Tenant shall pay to Landlord all Fixed Rent and Additional Rent payable under this Lease by Tenant to Landlord to the date upon which this Lease and the Term shall have expired and come to an end or to the date of re-entry upon the Premises by Landlord, as the case may be;
(ii) Tenant also shall be liable for and shall pay to Landlord, as damages, any deficiency (the "Deficiency") between (A) Fixed Rent and Additional Rent for the period which otherwise would have constituted the unexpired portion of the Term (conclusively presuming the Additional Rent for each year thereof to be the same as was payable for the year immediately preceding such termination or re-entry), and (B) the net amount, if any, of rents collected under any reletting effected pursuant to the provisions of Subsection 17.1(a)(ii) for any part of such period (first deducting from the rents collected under any such reletting all of Landlord's expenses in connection with the termination of this Lease, Landlord's re-entry upon the Premises and with such reletting including all repossession costs, brokerage commissions, legal expenses, attorneys' fees and disbursements, alteration costs and other expenses of preparing the Premises for such reletting). Tenant shall pay the Deficiency in monthly installments on the days specified in this Lease for payment of installments of Fixed Rent, and Landlord shall be entitled to recover from Tenant each monthly Deficiency as the same shall arise. No suit to collect the amount of the Deficiency for any month shall prejudice Landlord's right to collect the Deficiency for any subsequent month by a similar proceeding; and
(iii) whether or not Landlord shall have collected any monthly Deficiency as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord, on demand, in lieu of any further Deficiency as and for liquidated and agreed final damages, a sum equal (A) to the amount by which the Fixed Rent and Additional Rent for the period which otherwise would have constituted the unexpired portion of the Term (conclusively presuming the Additional Rent for each year thereof to be the same as was payable for the year immediately preceding such termination or re-entry) exceeds (B) the then fair and reasonable rental value of the Premises, including Additional Rent for the same period, both discounted to present value at the rate of five percent (5%) per annum less (C) the aggregate amount of Deficiencies previously collected by Landlord pursuant to the provisions of Subsection 17.2(a)(ii) for the same period. If, before presentation of proof of such liquidated damages to any court, commission or tribunal, Landlord shall have relet the Premises or any part thereof for the period which otherwise would have constituted the unexpired portion of the Term, or any part thereof, the amount of net rents collected in connection with such reletting shall be
(b) If Landlord shall relet the Premises, or any part thereof, together with other space in the Building, the net rents collected under any such reletting and the expenses of any such reletting shall be equitably apportioned for the purposes of this Section 17.2. Tenant shall in no event be entitled to any rents collected or payable under any reletting, whether or not such rents shall exceed the Fixed Rent reserved in this Lease. Nothing contained in Article 16 or this Article 17 shall be deemed to limit or preclude the recovery by Landlord from Tenant of the maximum amount allowed to be obtained as damages by any statute or rule of law, or of any sums or damages to which Landlord may be entitled in addition to the damages set forth in this Section 17.2.
Section 18.1 If an Event of Default shall occur under this Lease, or if Tenant shall fail to comply with its obligations under this Lease and the preservation of property or the safety of any tenant, occupant or other person is threatened, Landlord may, after reasonable prior notice to Tenant except in an emergency, perform the same for the account of Tenant or make any expenditure or incur any obligation for the payment of money for the account of Tenant. All amounts expended by Landlord in connection with the foregoing, including reasonable attorneys' fees and disbursements in instituting, prosecuting or defending any action or proceeding or recovering possession, and the cost thereof, with interest thereon at the Default Rate, shall be deemed to be Additional Rent hereunder and shall be paid by Tenant to Landlord within twenty (20) days of rendition of any bill or statement to Tenant therefor.
Section 18.2 If Tenant shall fail to pay any installment of
Fixed Rent and/or Additional Rent when due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent and/or Additional Rent, as the case
may be, as a late charge and as Additional Rent, a sum equal to interest at the
Default Rate on the amount unpaid, computed from the date such payment was due
to and including the date of payment, provided, however, that on not more than
one (1) occasion during any twelve (12) consecutive monthly period during the
Term, Tenant's failure to pay an installment of Fixed Rent or Additional Rent
when due shall not require the payment of interest at the Default Rate on such
overdue amount, provided such installment of Fixed Rent or Additional Rent shall
be paid prior to the expiration of the applicable grace period provided in
Section 16.1 or elsewhere in this Lease.
Except as expressly set forth in this Lease, Landlord and Landlord's agents have made no warranties, representations, statements or promises with respect to (a) the rentable and usable areas of the Premises or the Building, (b) the amount of any current or future Labor Rates or Taxes, (c) the compliance with applicable Legal Requirements of the Premises or the Building, or (d) the suitability of the Premises for any particular use or purpose. No rights, easements or licenses are acquired by Tenant under this Lease, by implication or otherwise, except as expressly set forth herein. This Lease (including any Exhibits referred to herein and all
Section 20.1 Upon the expiration or other termination of this Lease, Tenant shall quit and surrender to Landlord the Premises, vacant, broom clean, in good order and condition, ordinary wear and tear and damage for which Tenant is not responsible under the terms of this Lease excepted, and Tenant shall remove all of Tenant's Property from the Premises, and this obligation shall survive the expiration or sooner termination of the Term. If the last day of the Term or any renewal thereof falls on Saturday or Sunday, this Lease shall expire on the Business Day immediately preceding. Tenant expressly waives, for itself and for any Person claiming through or under Tenant, any rights which Tenant or any such Person may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any successor law of like import then in force in connection with any holdover summary proceedings which Landlord may institute to enforce the foregoing provisions of this Article 20.
Section 20.2 Tenant acknowledges that Tenant or any Tenant
Party remaining in possession of the Premises after the expiration or earlier
termination of this Lease would create an unusual hardship for Landlord and for
any prospective tenant. Tenant therefore covenants that if for any reason Tenant
or any Tenant Party shall fail to vacate and surrender possession of the
Premises or any part thereof on or before the expiration or earlier termination
of this Lease and the Term, then Tenant's continued possession of the Premises
shall be as a "month-to-month" tenant, during which time, without prejudice and
in addition to any other rights and remedies Landlord may have hereunder or at
law, Tenant shall pay to Landlord for each month and for each portion of any
month during which Tenant holds over, an amount equal to one and one half (1
1/2) times the total monthly amount of Fixed Rent and Additional Rent payable
hereunder. The provisions of this Section 20.2 shall not in any way be deemed to
(a) permit Tenant to remain in possession of the Premises after the Expiration
Date or sooner termination of this Lease or (b) imply any right of Tenant to use
or occupy the Premises upon expiration or termination of this Lease and the
Term, and no acceptance by Landlord of payments from Tenant after the Expiration
Date or sooner termination of the Term shall be deemed to be other than on
account of the amount to be paid by Tenant in accordance with the provisions of
this Article 20. Tenant's obligations under this Article 20 shall survive the
expiration or earlier termination of this Lease.
For so long as this Lease is in full force and effect, Tenant may peaceably and quietly enjoy the Premises without hindrance by Landlord or any Person lawfully claiming through or under Landlord, subject, nevertheless, to the terms and conditions of this Lease.
Section 22.1 No act or thing done by Landlord or Landlord's agents during the Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Landlord. No employee of Landlord or of Landlord's agents shall have any power to accept the keys of the Premises prior to the termination of this Lease. The delivery of keys to any employee of Landlord or of Landlord's agents shall not operate as a termination of this Lease or a surrender of the Premises. Any Building employee to whom any property shall be entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's agent with respect to such property and neither Landlord nor its agents shall be liable for any damage to property of Tenant or of others entrusted to employees of the Building, nor for the loss of or damage to any property of Tenant by theft or otherwise.
Section 22.2 The failure of Landlord to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease, or any of the Rules and Regulations set forth or hereafter adopted by Landlord, shall not prevent a subsequent act, which would have originally constituted a violation, from having all of the force and effect of an original violation. The receipt by Landlord of Fixed Rent and/or Additional Rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. The failure of Landlord to enforce any of the Rules and Regulations set forth, or hereafter adopted, against Tenant or any other tenant in the Building shall not be deemed a waiver of any such Rules and Regulations. Landlord shall not enforce the Rules and Regulations against Tenant in a discriminatory manner. No provision of this Lease shall be deemed to have been waived by Landlord, unless such waiver be in writing signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly Fixed Rent or any Additional Rent shall be deemed to be other than on account of the next installment of Fixed Rent or Additional Rent, as the case may be, or as Landlord may elect to apply same, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Fixed Rent or Additional Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Fixed Rent or Additional Rent or pursue any other remedy in this Lease provided. Any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of this Lease in whole or in part unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. All references in this Lease to the consent or approval of Landlord shall be deemed to mean the written consent or approval of Landlord and no consent or approval of Landlord shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Landlord.
Section 22.3 (a) Except to the extent arising from the negligence or willful misconduct of Landlord or its agents, employees or contractors, neither Landlord nor its agents shall be liable for any injury or damage to persons or property or interruption of Tenant's business resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain or snow or leaks from any part of the Building or from the pipes, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause of whatsoever nature provided, however, that Tenant shall, in accordance with Section 10.2, first
(b) If, at any time or from time to time, any windows of the Premises are temporarily closed, darkened or bricked-up for any reason whatsoever, or any of such windows are permanently closed, darkened or bricked-up if required by any Legal Requirement or related to any construction upon property adjacent to the Real Property by parties other than Landlord, Landlord shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement of Fixed Rent or Additional Rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction or constructive eviction of Tenant from the Premises. Landlord shall take such reasonable measures as may be available to Landlord (without the commencement or prosecution of legal action or the expenditure of money) to minimize the period of time during which any such windows are temporarily closed, darkened or bricked up. Landlord shall not voluntarily close or darken such windows except temporarily in connection with repairs or maintenance permitted or required hereunder.
The respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, or for the enforcement of any remedy under any statute, emergency or otherwise. If Landlord commences any summary proceeding against Tenant, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding (unless failure to impose such counterclaim would preclude Tenant from asserting in a separate action the claim which is the subject of such counterclaim), and will not seek to consolidate such proceeding with any other action which may have been or will be brought in any other court by Tenant.
This Lease and the obligation of Tenant to pay Fixed Rent and Additional Rent hereunder and the obligations of Landlord and Tenant to perform all of the other covenants and agreements hereunder will not be affected, impaired or excused because the other party hereto is unable to fulfill any of its obligations under this Lease expressly or impliedly to be performed by such party or because such party is unable to make, or is delayed in making any repairs, additions, alterations, improvements or decorations or is unable to supply or is delayed in supplying any equipment or fixtures, if either Landlord or Tenant is prevented or delayed from so
Except as otherwise expressly provided in this Lease, any bills, statements, consents, notices, demands, requests or other communications given or required to be given under this Lease shall be in writing and shall be deemed sufficiently given or rendered if delivered by hand (against a signed receipt), sent by a nationally recognized overnight courier service, or sent by registered or certified mail (return receipt requested) and addressed:
if to Tenant, (a) at Tenant's address at the Premises, Attention: Marie J. Toulantis (or, if a regularly scheduled rent bill or rent escalation statement, Mike Caputo), or (b) at any place where Tenant or any agent or employee or Tenant may be found if mailed subsequent to Tenant's abandoning or surrendering the Premises, in either case (except if a routine bill or statement), with a copy to Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York 10104, Attention: Michael N. Rosen, Esq.; or
if to Landlord, as follows: 111 Chelsea LLC, c/o Taconic Investment Partners LLC, 1500 Broadway, New York, New York 10036, Attention: Mr. Paul Pariser, with a copy to: Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022, Attention: Robert S. Nash, Esq.
Any such bill, statement, consent, notice, demand, request or other communication given as provided in this Article 25 shall be deemed to have been rendered or given (i) on the date when it shall have been hand delivered, (ii) three (3) Business Days from the date when it shall have been mailed, or (iii) one (1) Business Day from the date when it shall have been sent by overnight courier service.
Landlord reserves the right, from time to time, to adopt additional reasonable and non-discriminatory Rules and Regulations and to reasonably amend the Rules and Regulations then in effect on a nondiscriminatory basis. Tenant and all Tenant Parties shall comply with the Rules and Regulations, as so supplemented or amended. Nothing contained in this Lease shall be construed to impose upon Landlord any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease against any other tenant, and Landlord shall not be liable to Tenant for violation of the same by any other tenant, its employees, agents, visitors or licensees. If there shall be any inconsistencies between this Lease and the Rules and Regulations, the provisions of this Lease shall prevail.
Section 27.1 Each of Landlord and Tenant represents and warrants to the other that it has not dealt with any broker in connection with this Lease other than Insignia/Edward S. Gordon Company, Inc. ("Broker") and that to the best of its knowledge and belief, no other broker, finder or similar Person procured or negotiated this Lease or is entitled to any fee or commission in connection herewith. Landlord has agreed to pay or cause to be paid a commission to Broker in connection with this Lease pursuant to a separate written agreement.
Section 27.2 Each of Landlord and Tenant shall indemnify, defend, protect and hold the other party harmless from and against any and all losses, liabilities, damages, claims, judgments, fines, suits, demands, costs, interest and expenses of any kind or nature (including reasonable attorneys' fees and disbursements) which the indemnified party may incur by reason of any claim of or liability to any broker, finder or like agent (other than Broker) arising out of any dealings claimed to have occurred between the indemnifying party and the claimant in connection with this Lease, or the above representation being false. The provisions of this Article 27 shall survive the expiration or earlier termination of the Term.
Section 28.1 Tenant shall not do or permit any act or thing to be done upon the Premises which may subject Landlord to any liability or responsibility for injury, damages to persons or property or to any liability by reason of any violation of law or of any Legal Requirement, but shall exercise such control over the Premises as to fully protect Landlord against any such liability. Tenant shall defend, indemnify and save harmless Landlord from and against (a) all claims of whatever nature against Landlord arising from any act, omission or negligence of Tenant or any Tenant Party, (b) all claims against Landlord arising from any accident, injury or damage whatsoever caused to any person or to the property of any person and occurring during the Term in or about the Premises, (c) all claims against Landlord arising from any accident, injury or damage occurring outside of the Premises but anywhere within or about the Real Property, where such accident, injury or damage results or is claimed to have resulted from an act, omission or negligence of Tenant or any Tenant Party, and (d) any breach, violation or nonperformance of any covenant, condition or agreement in this Lease set forth and contained on the part of Tenant to be fulfilled, kept, observed and performed. This indemnity and hold harmless agreement shall include indemnity from and against any and all liability, fines, suits, demands, costs and expenses of any kind or nature (including reasonable attorneys' fees and disbursements) incurred in or in connection with any such claim or proceeding brought thereon, and the defense thereof.
Section 28.2 Tenant agrees to defend, indemnify and hold harmless Landlord and any partner, shareholder, director, officer, principal, employee or agent, directly and indirectly, of Landlord, from and against all obligations (including removal and remedial actions), losses, claims, suits, judgments, liabilities, penalties, damages (including consequential and punitive damages), costs and expenses (including reasonable attorneys' and consultants' fees and expenses) of any kind or nature whatsoever that may at any time be incurred by, imposed on or asserted against Landlord or any such party directly or indirectly based on, or arising or
Section 28.3 In no event shall Tenant be obligated to defend, indemnify or save harmless Landlord or any partner, shareholders, director, officer, principal, employee or agent of Landlord against any loss, cost or damage to the extent such loss, cost or damage is caused solely by the negligence or misconduct of such party claiming a right to be indemnified.
Throughout the Term, including renewals and extensions, Tenant agrees that Landlord shall have the right, upon Landlord's giving Tenant not less than thirty (30) days prior written notice, to recapture a portion or portions of the Premises solely for the purpose of (a) installing additional elevator(s) in the Building, together with such space as may be required for lobbies and other common areas, (b) improving the Building Systems, or (c) constructing public corridors to create access to rentable space now existing or to be constructed in the future on the floor(s) on which the Premises are located (any or all of the foregoing work, "Building Improvements"). The amount of such recaptured space which may be taken by Landlord pursuant to this Article 29 shall be limited to the areas shown on Exhibit J to this Lease (which Landlord and Tenant hereby deem and agree consists of 1,800 Rentable Square Feet of space), and within such areas, such space as is reasonably and actually required for the proper installation, access and operation of such Building Improvements. Tenant shall provide Landlord with access to the Premises to perform the work to install and maintain the Building Improvements, including the right to take all necessary materials and equipment into the Premises, without the same constituting an eviction, and Tenant shall not be entitled to any damages by reason of loss or interruption of business or otherwise. Landlord shall use reasonable efforts to minimize interference with Tenant's access to and use and occupancy of the Premises in making any Building Improvements; provided, however, that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any other overtime costs or additional expenses whatsoever, unless reimbursed by Tenant therefor within ten (10) days after demand. Promptly following the completion of any Building Improvements, Landlord shall at Landlord's expense make such repairs to and restoration of the Premises and reasonable access thereto (including installation of demising walls) as may be reasonably required as a direct result thereof. Upon the earlier of (i) the date set forth for such recapture in Landlord's notice described above, or (ii) the date on which Landlord's work in the space to be recaptured renders such space unusable by Tenant for the ordinary conduct of its business therein, the Lease shall be deemed automatically amended by the deletion of such recaptured space from the Premises, Fixed Rent and Additional Rent shall be reduced in the proportion which the area of the part of the Premises so recaptured bears to the total area of the Premises immediately prior thereto, and Tenant shall promptly vacate and surrender such portion of the Premises to Landlord, and Landlord shall pay Tenant an amount equal to (i) Tenant's actual out-of-pocket costs in performing any Tenant's Alterations made to such recaptured space, minus (ii) the amount of Landlord's Contribution applied to the performance of such Tenant's
Section 30.1 If at any time prior to the tenth (10th)
anniversary of the Commencement Date, Landlord shall propose to lease all or any
portion of the space on the ninth (9th) floor of the Building which is
contiguous to the Premises as then constituted (all or any such portion of such
space, an "Expansion Space"), Landlord shall in each such case deliver notice
thereof to Tenant (the "Expansion Notice") setting forth (i) a description of
the Expansion Space in question, (ii) the Fixed Rent, (iii) the number of
Rentable Square Feet (determined in accordance with the standard set forth in
Section 30.4(e), (iv) the amount of electrical power (which shall be the
then-Building standard number of watts per square foot) for the Expansion Space,
and (v) the date Landlord anticipates that such Expansion Space will become
available for leasing. Provided that all of the conditions precedent set forth
in this Article 30 are fully satisfied by Tenant, Tenant shall have the option
(the "Expansion Option"), exercisable by Tenant delivering written notice to
Landlord (an "Acceptance Notice") within ten (10) business days of the giving by
Landlord of the Expansion Notice, to lease the Expansion Space upon the terms
and conditions set forth in this Article 30, and this Lease shall thereupon be
modified as provided in Section 30.4. Time shall be of the essence as to
Tenant's giving of any Acceptance Notice. The Expansion Option may be exercised
only with respect to all of the Expansion Space which is the subject of an
Expansion Notice. If Tenant fails to timely give an Acceptance Notice with
respect to any Expansion Space, Landlord shall be free to lease such Expansion
Space to any third party or to otherwise dispose of such Expansion Space, and
Tenant shall have no further rights hereunder to lease any such Expansion Space;
provided, however, that if Landlord leases such Expansion Space to a third
party, and subsequently (but prior to the tenth anniversary of the Commencement
Date) such Expansion Space becomes available for leasing, then Tenant's rights
under this Article 30 shall again be applicable to such Expansion Space.
Section 30.2 For purposes of this Article 30, the phrase "available for leasing" shall mean that on the date set forth in the Expansion Notice as being the date Landlord anticipates that such Expansion Space will become available for leasing, (a) no party leases or occupies the Expansion Space, whether pursuant to a written lease or other written agreement, and (b) no party holds any written option or right to lease and/or occupy the Expansion Space, or to renew its lease and/or right(s) of occupancy therefor. In addition, so long as a tenant or other occupant leases or occupies a portion of the Expansion Space, Landlord shall be free to extend any such tenancy or occupancy, whether or not pursuant to a written lease or other agreement, and such space shall not be deemed to be available for leasing, unless Landlord shall then have given Tenant an Expansion Notice with respect to such space. In no event shall Landlord be liable to Tenant for any failure by any then existing tenant or occupant to vacate any of the Expansion Space. Landlord agrees that from and after the date hereof, it will not grant any rights to any tenant or other occupant of the Building with respect to the Expansion Space unless such rights are subordinate to the rights granted Tenant hereunder, except (i) to tenants or other occupants leasing or occupying such portions of the Expansion Space as of the date hereof, or (ii)
Section 30.3 Tenant shall have no right to exercise the Expansion Option unless all of the following conditions have been satisfied on the date of the Acceptance Notice and on the Expansion Space Commencement Date (as defined in Section 30.4):
(a) No Event of Default shall have occurred and be continuing under this Lease; and
(b) The named Tenant hereunder (or a permitted assignee, sublessee, successor or transferee pursuant to Section 13.10, but not any other assignee or successor tenant), or its Affiliates shall occupy not less than seventy five percent (75%) of the rentable area of the Premises.
Section 30.4 Provided that Tenant timely delivers an Acceptance Notice, then, effective as of the date on which Landlord delivers the Expansion Space to Tenant (the "Expansion Space Commencement Date"):
(a) the Expansion Space shall be added to and be deemed to be a part of the Premises for all purposes of this Lease (except as otherwise provided in this Article 30);
(b) the Expansion Space shall be delivered "as is", and Landlord shall not be obligated to perform any work with respect thereto;
(c) Fixed Rent for the Expansion Space shall be determined as of the Expansion Space Commencement Date, and shall be the greater of (i) ninety five percent (95%) of the fair market rental (the "FMV") for the Expansion Space as set forth in the Expansion Notice, or (ii) the total of the per square foot amount of Fixed Rent then payable under this Lease, multiplied by the number of rentable square feet contained in the Expansion Space;
(d) Tenant shall pay Tenant's Tax Payment and Tenant's Labor Rate Payment with respect to the Expansion Space in accordance with the Base Taxes and the Base Labor Rate applicable thereto as set forth in Article 6;
(e) Tenant's Share shall be proportionately increased to reflect the inclusion of the Expansion Space in the Premises, and the Premises Area shall be deemed to have been increased by the number of Rentable Square Feet contained in the Expansion Space (as determined in accordance with the standard of measurement then employed by Landlord); and
Section 30.5 If Landlord shall be prevented from delivering possession of any portion of the Expansion Space to Tenant as provided for in this Article 30 due to the holding over or retention of possession of any tenant or any other occupant after using reasonable efforts to obtain possession thereof, including, if necessary in Landlord's reasonable judgment, the initiation and diligent prosecution of appropriate legal proceedings against any such holdover tenant or other occupant, Landlord shall not be subject to any liability for failure to give possession of the Expansion Space to Tenant, the validity of this Lease shall not be impaired thereby, and Tenant shall take possession of the Expansion Space when, as and if such space can be delivered to Tenant; provided, however, that (a) Landlord shall keep Tenant advised of the progress of Landlord's efforts to obtain possession of such space, and (b) Tenant shall have no obligation to lease any Expansion Space as to which Landlord offers to deliver possession to Tenant more than one (1) year after the date of the applicable Acceptance Notice.
Section 30.6 (a) If Tenant shall, within ten (10) days of the giving by Landlord of the Expansion Notice, dispute Landlord's calculation of the FMV for the Expansion Space as set forth in an Expansion Notice, such dispute shall be submitted to arbitration and shall be determined by a single arbitrator appointed in accordance with the American Arbitration Association Real Estate Valuation Arbitration Proceeding Rules. Such arbitrator shall be impartial and shall have not less than ten (10) years' experience in the New York metropolitan area in a calling related to the leasing of commercial space in buildings comparable to the Building, and the fees of such arbitrator shall be shared by Landlord and Tenant.
(b) Within fifteen (15) days following the appointment of such arbitrator, each party shall attend a hearing before such arbitrator wherein each party shall submit a report setting forth its determination of the FMV of the Expansion Space, together with such information on comparable rentals, or such other evidence, as such party shall deem relevant.
(c) The arbitrator shall, within fifteen (15) days following such hearing and submission of evidence, render his or her decision by selecting the determination of FMV of the Expansion Space submitted by either Landlord or Tenant which, in the judgment of the arbitrator, most nearly reflects the FMV of the Expansion Space. It is expressly understood that the decision of such arbitrator shall be final and binding upon the parties hereto.
(d) (i) For purposes of the foregoing arbitration the Expansion Space shall be considered in its "as is" condition, reasonable wear and tear excepted.
(ii) Additionally, for purposes of the determination of the FMV of the Expansion Space, whether by estimate of Landlord or by arbitration, Landlord or such arbitrator shall take into account the then current rentals or occupancy fees which Landlord shall then be receiving for the renting of or granting of use or occupancy rights for comparable office space in the Building for the Permitted Use, taking into account rent concessions, abatement periods and construction allowances then being granted for comparable space. The Base Taxes and the Base Labor Rate applicable to Tenant's Tax Payment and Tenant's Labor Rate Payment, respectively,
(iii) It is expressly understood that any determination of the FMV for the Expansion Space shall be based on the assumptions and criteria stated in this Article 30, and that the arbitrator shall not have the power to add to, modify or change any of the provisions of this Lease.
(e) After a determination has been made of the FMV for the
Expansion Space (whether or not determined in accordance with this Section
30.6), the parties shall execute and deliver to each other an agreement setting
forth the Fixed Rent therefor as hereinabove determined, and the other terms,
provisions, covenants and conditions of the leasing of the Expansion Space,
which terms, conditions, covenants and provisions shall be as set forth in
Section 30.4.
(f) If the final determination of Fixed Rent for the Expansion Space shall not be made on or before the Expansion Space Commencement Date in accordance with the provisions of this Article 30, then pending such final determination, Tenant shall pay as the Fixed Rent for the Expansion Space the amount of Fixed Rent as set forth by Landlord in the Rental Notice. If, based upon the final determination of such Fixed Rent as provided herein, the payments made by Tenant on account of Fixed Rent were (i) less than the Fixed Rent as finally determined in accordance with the provisions hereof, Tenant shall pay to Landlord the amount of such deficiency within ten (10) days after demand therefor, or (ii) greater than Fixed Rent as finally determined in accordance with the provisions hereof, Landlord shall, at Landlord's option, either credit the amount of such excess against the next installments of Fixed Rent due under this Lease, or refund the amount of such excess to Tenant.
Section 31.1 (a) Landlord shall contribute toward the actual
cost of the Initial Alterations (including carpeting, wall covering, telephone
and computer installations and wiring, and "soft costs" incurred in connection
with such alterations, including architectural, consulting, engineering and
legal fees, provided that such "soft costs" shall not exceed ten percent (10%)
of Landlord's Contribution) an amount ("Landlord's Contribution") equal to the
lesser of (a) One Million Eight Hundred Seventeen Thousand Eight Hundred and
00/100 Dollars ($1,817,800.00) (subject, however, to reduction in the amounts
set forth in Subsections 31.1(a)(ii) and 31.1(a)(iii) in the event that Tenant
shall exercise one or more of its rights of partial termination pursuant to
Section 2.3), or (b) the aggregate amount of all costs and expenses actually
incurred by Tenant in connection with the Initial Alterations; provided,
however, that this Lease shall be in full force and effect and no Event of
Default shall have occurred and be continuing hereunder, and provided, further,
that Landlord's Contribution shall be payable in stages commencing on the
Delivery Date with respect to each Space, in the following maximum amounts:
(ii) with respect to Space B, Five Hundred Fifteen Thousand Two Hundred Sixty and 00/100 Dollars ($515,260.00); and
(iii) with respect to Space C, Three Hundred Sixty Six Thousand Four Hundred Eighty and 00/100 Dollars ($366,480.00).
(b) Any cost of the Initial Alterations in excess of Landlord's Contribution shall be paid by Tenant. Tenant shall not be entitled to receive any portion of Landlord's Contribution with respect to each Space (and with respect to Tenant's bathroom renovations as set forth in Section 31.1(a)(i)) if such funds are not actually expended by Tenant in the performance of the Initial Alterations for such Space (or in the performance of such bathroom renovations, as applicable), nor shall Tenant have any right to apply any unexpended portion of Landlord's Contribution as a credit against Fixed Rent, Additional Rent or any other obligation of Tenant hereunder. No part of Landlord's Contribution may be assigned by Tenant prior to actual payment thereof by Landlord to Tenant.
(c) A portion of the Initial Alterations, to be constructed at a cost of $1,817,800 (subject to reduction as set forth in Section 31.1(a)), shall be deemed to be paid for from Landlord's Contribution, and such portion of the Initial Alterations shall not be deemed alterations, additions or improvements made at Tenant's expense, and Landlord shall be the owner of such portion of the Initial Alterations for all purposes (including financial reporting and income tax purposes).
Section 31.2 Landlord shall make progress payments to Tenant on a monthly basis, for the work performed during the previous month, less a retainage of 10% of each progress payment (the "Retainage"). Each of Landlord's progress payments will be limited to an amount equal to (a) the aggregate amounts (reduced by the Retainage) theretofore paid by Tenant (as certified by an authorized officer of Tenant and by Tenant's independent, licensed architect) to Tenant's contractors, subcontractors and material suppliers (excluding any payments for which Tenant has previously been reimbursed out of previous disbursements from Landlord's Contribution), multiplied by (b) a fraction, the numerator of which is the amount of Landlord's Contribution applicable to the Space (or such bathroom renovations, if applicable) which is the subject of the advance requested by Tenant, and the denominator of which is the total contract price (or, if there is no specified or fixed contract price for the Initial Alterations, then Landlord's reasonable estimate thereof) for the performance of all of the Initial Alterations to be made to the Space (or such bathroom renovations, if applicable) which is the subject of the advance requested by Tenant, as shown on the plans and specifications approved by Landlord. Provided that Tenant delivers requisitions to Landlord on or prior to the first (1st) day of any month, such progress payments shall be made within thirty (30) days next following the delivery to Landlord of
Section 32.1 Tenant has deposited with Landlord the sum of Five Million and 00/100 Dollars ($5,000,000.00) as security for the full and faithful performance of every provision of this Lease to be performed by Tenant (all or any part of such amount, the "Security Deposit"). If an Event of Default shall have occurred with respect to any provision of this Lease,
Section 32.2 In lieu of a cash deposit, Tenant may deliver to Landlord a clean, irrevocable, non-documentary and unconditional letter of credit (the "Letter of Credit") issued by and drawn upon any commercial bank, trust company, national banking association or savings and loan association having offices for banking purposes in the City of New York and which is a member of the New York Clearinghouse Association (the "Issuing Bank") and which (or the parent company of which) shall have outstanding unsecured, uninsured and unguaranteed indebtedness, or shall have issued a letter of credit or other credit facility that constitutes the primary security for any outstanding indebtedness (which is otherwise uninsured and unguaranteed), that is then rated, without regard to qualification of such rating by symbols such as "+" or "-" or numerical notation, "Aa" or better by Moody's Investors Service and "AA" or better by Standard & Poor's Corporation, and has combined capital, surplus and undivided profits
Section 32.3 (a) Notwithstanding anything set forth in this Article 32 to the contrary, and provided that each of the conditions set forth in Section 32.3(b) shall have been satisfied, then reasonably promptly after notice from Tenant to Landlord, signed by an authorized financial officer of Tenant and certifying that the condition set forth in Section 32.3(b)(ii) has been satisfied, the Security Deposit shall be reduced to $3,002,292.00.
(b) The following are the conditions precedent to the reduction of the Security Deposit as provided in Section 32.3(a):
(ii) Tenant shall have submitted to Landlord true and complete copies of (A) if Tenant is a publicly traded Entity, Tenant's annual financial statements as filed with the Securities and Exchange Commission, or (B) if Tenant is not a publicly traded Entity, Tenant's annual financial statements for the preceding three (3) fiscal years of Tenant (the "Financial Statements"), audited by a firm of certified public accountants reasonably satisfactory to Landlord, (including B.D.O. Seidman), and substantially in the form of Tenant's financial statement delivered by Tenant to Landlord immediately prior to the execution and delivery of this Lease, showing that:
(A) for the eight (8) immediately preceding fiscal quarters of Tenant (which shall not include any fiscal quarter all or part of which falls within calendar year 1999 or earlier years), Tenant shall have achieved positive "Net Cash Flow from Operating Activities" after payment of all operating expenses and debt service, as evidenced in the Statement of Cash Flows contained in the Financial Statements; and
(B) Tenant has a net worth, computed in accordance with generally accepted accounting principles consistently applied, of not less than Three Hundred Million and 00/100 Dollars ($300,000,000.00).
(c) If Tenant has deposited the Security Deposit in cash, Landlord shall refund to Tenant the amounts by which the Security Deposit is reduced pursuant hereto, within fifteen (15) days after notice from Tenant pursuant to Section 32.3(a). If Tenant has provided a Letter of Credit, then, provided that Tenant tenders to Landlord a replacement Letter of Credit (which replacement must meet the applicable requirements set forth in Section 32.2) for the appropriately reduced amount of the Security Deposit, Landlord shall exchange the Letter of Credit then held by Landlord for the replacement Letter of Credit tendered by Tenant. Tenant may, in lieu of replacing the Letter of Credit, cause the Letter of Credit to be amended as of the date of such reduction to reflect the reduced Security Deposit pursuant hereto.
Section 32.4 Notwithstanding anything set forth in this Article 32 to the contrary: (a) if Tenant shall provide Landlord with a Guaranty, substantially in the form attached as Exhibit O to this Lease, of Tenant's obligations under this Lease executed by Bertelsmann, then the Security Deposit shall be reduced to $1,500,000.00; and (b) if Tenant shall provide Landlord with a guaranty, substantially in the form attached as Exhibit O to this Lease, of Tenant's obligations under this Lease executed by B&N Inc., then the Security Deposit shall be reduced to $3,002,292.00, provided that at the time of execution and delivery of any such Guaranty, Tenant shall provide to Landlord reasonable evidence that such guarantor shall have a net worth, computed in accordance with generally accepted accounting principles consistently applied, of not less than $300,000,000.00.
Section 33.1 The Building may be designated and known by any
name Landlord may choose and such designated name may be changed from time to
time in Landlord's sole discretion. Tenant shall not refer to or otherwise
characterize the Building, in any written material generated or circulated by
Tenant, as the "barnesandnoble.com Building" or any other name identifying the
Building with Tenant, and shall not place any signage anywhere in or on the
Building or the Premises, except as specifically permitted in this Section 33.1.
So long as the named Tenant hereunder and its Affiliates ("Original Tenant")
(i.e., exclusive of any subtenants who are not Affiliates) shall be in actual
occupancy for the conduct of its business of not less than the greater of (a)
ninety (90%) percent of the then Demised Premises or (b) 125,000 Rentable Square
Feet of space (the "Signage Threshold"), Original Tenant may install and
maintain, at Tenant's sole cost, at locations reasonably designated by Landlord:
(i) two signs identifying Original Tenant, to be located below the existing
signs identifying Insignia/Edward S. Gordon Company, Inc. or the then managing
agent of the Building on the exterior of the Ninth Avenue side of the Building,
(ii) two signs identifying Original Tenant, to be located on the wall currently
housing the Building directory in the lobby on the Ninth Avenue side of the
Building and (iii) a flag identifying Original Tenant on one of the existing
flagpoles (designated by Landlord) attached to the exterior of the ninth floor
side of the Building; provided that such signage and flag (A) shall not diminish
access to and from the Building by other tenants, other occupants of the
Building and the general public, (B) shall not reduce the size or accessibility
of the Ninth Avenue Building entrance, (C) shall be subject to and in accordance
with all Legal Requirements and all precautions and safeguards required by
Landlord's insurance company, and (D) shall be approved by Landlord as to size,
materials and design (which approval shall not be unreasonably withheld or
delayed). Landlord may at any time during the Term after reasonable prior notice
to Tenant and at Landlord's sole cost and expense relocate any of Tenant's signs
or flag to locations designated by Landlord and reasonably acceptable to Tenant,
in order to accommodate any changes in the arrangement or location of, or other
renovations, improvements or modifications to, any public parts of the Building,
provided that such relocation does not cause the visibility of such signs or
flag to be interrupted or impaired, other than temporarily. Tenant shall be
solely responsible for any damage caused as a result of its use of, and shall be
solely responsible to promptly and diligently perform all necessary repairs or
replacements to, or maintenance of, the flagpole used by Tenant, provided,
however, that if Tenant's failure after five (5) days' notice from Landlord to
so repair, replace or maintain the flagpole materially jeopardizes in any way
Landlord's or any other tenant's property located on or within the Building,
Landlord may, at Landlord's option, elect to perform such repairs, replacements
or maintenance at Tenant's sole cost and expense. Landlord shall give Tenant
reasonable prior notice of its election to perform such repairs, except in an
emergency. Landlord represents that to the best of its knowledge, as of the date
of this Lease, no other Person has the right to use the flagpole to be
designated for Tenant's use; provided, however, that Tenant shall, at Landlord's
request, promptly remove its flag if Landlord shall become aware of any such
right of any other Person, and Tenant agrees that Landlord shall not be liable
to Tenant in connection therewith.
Section 33.2 If and when Original Tenant is no longer in actual occupancy of the Signage Threshold, then (i) Tenant shall, at Landlord's request, remove all of the signage
Section 33.3 So long as Original Tenant shall be in actual occupancy of not less than the Signage Threshold, Landlord shall not name the Building for Borders Booksellers or Amazon.com, and, to the extent that Landlord's consen