EXHIBIT 10.27

 

SIXTH AMENDMENT TO LEASE AGREEMENT

 

THIS SIXTH AMENDMENT TO LEASE AGREEMENT is made and entered into as of the 26th
day of June, 2003, between RAINIER COMMONS, LLC, a Washington limited liability
company (“Lessor”), and TULLY’S COFFEE CORPORATION, a Washington corporation
(“Lessee”).

 

RECITALS

 

A.    Lessor has entered into a written agreement with Kent Central, LLC (“KCL”)
to purchase the real property located at 3100 Airport Way South, Seattle,
Washington, which is legally described as set forth on the attached Exhibit A
(the “Property”). Pursuant to that certain Lease Agreement dated August 16,
1999, entered into between KCL and Lessee, as modified by those certain
amendments described in the attached Exhibit B (collectively, the “Lease”), KCL
agreed to lease to Lessee certain premises as further described in the Lease
(the “Original Lease Premises”).

 

B.    If and when Lessor closes the purchase of the Property from KCL, Lessor
will assume all of KCL’s rights and obligations under the Lease.

 

C.    Subject to the Lessor’s acquisition of fee title to the Property, Lessor
and Lessee have agreed to make certain modifications to the Lease on the terms
and conditions set forth in this Sixth Amendment to Lease Agreement (“Sixth
Amendment”).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of foregoing and the promises made below, and
other good and valuable consideration, the parties agree as follows:

 

1.    Effective Date.    This Sixth Amendment shall become effective upon the
date (the “Effective Date”) upon which Lessor unconditionally acquires fee title
to the Property from KCL. If Lessor does not unconditionally acquire fee title
to the Property from KCL on or before August 31, 2003, this Sixth Amendment
shall be null and void and of no further effect.

 

2.    Amendments.    Effective as of the Effective Date, the Lease is hereby
amended as follows:

 

2.1    Premises.    Section 1 of the Lease is hereby amended to as follows: (a)
Lessee and Lessor have agreed that Lessee shall occupy the spaces within the
Property identified on Exhibit C, comprising approximately 80,115 square feet
(the “Tully’s Premises”).and (b) the term “Premises” as used in the Lease will
be limited to the Tully’s Premises as determined above. Without limiting the
foregoing, the Tully’s Premises shall include exclusive and unrestricted access
to and use of the existing loading dock and all other areas included in the
Tully’s Premises. The parking spaces reserved for Lessee, the loading dock, and
any other spaces outside of the buildings comprising the Property that may be
used exclusively by Lessee or in common with the New Tenants (as defined below),
and the additional storage space as set

 

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forth in the next paragraph are not considered in the determination of the
square feet of the Tully’s Premises.

 

In addition to the Tully’s Premises, Lessor shall make available to Lessee
additional storage space within the Original Lease Premises (but not included
within the Tully’s Premises). The maximum total amount of additional storage
space which may be provided to Lessee under this section at any time is 5,000
square feet. The additional storage space shall be located at Lessor’s
discretion and may be in more than one location in the Property. The additional
storage space shall be subject to reasonable security and shall be suitable for
dry storage of equipment, records or merchandise. Lessor shall have no
obligation to install any tenant improvements in the additional storage space,
or to perform any maintenance services for the additional storage space, and may
change the location of the additional storage space from time to time. Lessee
shall give Lessor a written request for such additional storage space not less
than 30 days prior to its anticipated requirement. There shall be no additional
Base Rent or Monthly Operating Expense paid by Lessee in connection with the
additional storage space, and Lessee shall not be entitled to any reduction in
Base Rent or Monthly Operating Expense if Lessee does not use the additional
storage space or if the actual additional storage space used is less than 5,000
square feet.

 

2.2    Rent.    Section 3 of the Lease is hereby amended and restated to read as
follows:

 

3.    Rent.    Lessee covenants and agrees to pay Lessor rent in advance without
offset or deduction on or before the 1st day of each month of the Lease term in
the amounts as follows:

 

Months

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Monthly

Base
Rent

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(from date of this Sixth Amendment until December 31, 2003)

   $ 51,033

January 1, 2004 through May 14, 2005

   $ 43,378

May 15, 2005 through May 14, 2010

   $ 49,885

 

2.3    Monthly Operating Expense Adjustments.    Section 9 of the Lease is
hereby amended to provided that, commencing on January 1, 2004 and continuing
through the end of the Lease term, Lessee will pay 50% of the actual Monthly
Operating Expenses for the Property as its pro rata share. From the Effective
Date to January 1, 2004 Lessee shall continue to pay 100% of the actual Monthly
Operating Expenses for the Property.

 

2.4    Utilities.    Section 8 of the Lease is hereby amended to provide that
the utilities for the Tully’s Premises shall be separately metered, and that for
utilities and services not subject to metering, such as garbage collection,
separate service and billings shall be established with the service provider. If
separate metering (or separate service and billings, as

 

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applicable) is not reasonably practicable, the parties shall negotiate an
appropriate method to allocate such costs. If separate metering (or separate
service and billings, as applicable) is not reasonably practicable and the
parties are unable to agree upon an appropriate method to allocate such costs,
and during the time that the parties may be discussing the allocation method
and/or until separate metering (or separate service and billings, as applicable)
is accomplished if at all, Tully’s shall pay an amount equal to the average
monthly usage in the applicable units of measure over the two (2) year period
prior to the Effective Date, priced at the actual average current cost per unit
set forth on the service provider’s billing, but shall not pay in any case more
that the total actual cost set forth on the service provider’s billing. Any
costs related to establishment of separate metering shall be considered to be
costs of Lessor Work.

 

2.5    Termination of Right to Require Lessee to Vacate Premises in 150
Days.    The parties agree that the provisions granting KCL a right to terminate
the Lease and/or require Lessee to vacate the Original Lease Premises upon 150
days notice contained in (i) that certain letter dated March 19, 2002, executed
by KCL and Lessee, and (ii) Section 2 of the Fifth Lease Amendment referred to
in Exhibit B are here are hereby terminated and that such provisions shall be
considered null and void and of no further force and effect.

 

2.6    Impact of Lessor Work.    Lessor expects to rehabilitate, remodel,
develop, demolish, improve and partition the portion of the Property that is not
within the Tully’s Premises (the “Available Space”) (the “Lessor Work.”). Lessor
hereby agrees that any and all Lessor Work and any and all other development,
demolition, improvement, partitioning and remodeling of the Property undertaken
by Lessor or any of its agents shall not disturb Lessee’s use and enjoyment of
the Tully’s Premises nor negatively impact Lessee’s security nor increase
Lessee’s costs of security in the Tully’s Premises. All Lessor Work shall be
performed in compliance with applicable codes, regulations and laws. All Lessor
Work shall be performed at no cost to Lessee.

 

2.7    Signage.    Lessor agrees that Lessee shall continue to have the right
(but not the obligation) to maintain in place the Tully’s green “T” on top of
the building where it is currently placed. In addition, Lessee shall continue to
have the right to maintain, use, replace and update all other existing exterior
signage that is currently present on any of the buildings on the Property or
otherwise located on the Property. Lessor will pay to repair or replace any such
signage that is affected by any repainting or remodeling of the Property by
Lessor. With the consent of Lessor, which may not be unreasonably withheld,
Lessee may hang seasonal promotional banners on the exterior of the buildings
included in the Property. Lessee shall pay no additional rent or charges to
Lessor in connection with the green “T”, the other exterior signage, or the
promotional banners, but Lessee shall pay all costs associated with the
replacement, maintenance and operation of such signage except when such costs
result from the repainting or remodeling of the Property by Lessor. Lessee’s
signage rights under this Section 2.7 shall be subject to the limitations and
requirements of applicable laws, regulations and ordinances. All such signage
referred to herein shall not be subject to Section 15 of the Lease, except that
the last sentence in Section 15 of the Lease shall apply to such signage.

 

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2.8    Removal of Lessee’s Properties.    Lessee shall remove its inventories
and other properties (“Lessee Properties”) from the Available Space no later
than 90 days from the Effective Date (the “hand-over date”). If any Lessee
Properties are in the Available Space after the hand-over date, the Lessee
Properties may be removed by Lessor from the Available Space upon two business
days notice to Lessee, and Lessor shall not be responsible for loss or damage
incurred as a consequence of such action.

 

2.9    Quiet Enjoyment and Use of the Premises.    Lessee acknowledges that
Lessor expects to rent some or all of the Available Space to other parties (the
“New Tenants”). Lessor shall conduct its leasing of the Available Space, and its
administration of the leases to the New Tenants, in a manner that preserves and
protects the quiet enjoyment of the Tully’s Premises by Lessee and that does not
in any way diminish or conflict with Tully’s rights under the Lease. Lessor
shall establish reasonable parking rules and regulations for the Property and
shall identify parking spaces as reserved or unreserved- general use. During
normal business hours (which shall be defined for this purpose as 8:00 AM to
5:00 PM Pacific Time, Monday through Friday, excluding New Years Day, Memorial
Day, July 4th, Labor Day, Veteran’s Day, Thanksgiving Day, and Christmas Day),
Tully’s shall have 80 reserved parking spaces for its exclusive use, located in
front of the Tully’s Premises, and may also use unreserved- general use parking
spaces as they may be available. Outside of normal business hours all parking
spaces on the Property shall be unreserved-general use. Lessor may establish any
fees for parking; provided that any such fees for parking at the Property shall
not apply to Lessee, nor shall they apply to Lessee’s employees, vendors and
visitors. Lessee may not charge for parking on the Property.

 

2.10    Offering of Additional Space.    From time to time, space within the
Available Space may become available for rent or lease. As such space becomes
available for rent or lease, Lessor shall notify Lessee of the particulars of
the space, including the Lessor’s requirements for rent and other reimbursements
and terms for such space. Notification of Lessee does not establish any right of
first refusal or other right for Lessee and Lessor shall have the right to enter
into a rental or lease agreement with any party or parties whether or not such
notice is given and whether or not Lessee is interested in the space.

 

If Lessee wishes to enter into a lease or rental agreement for such space, it
shall inform Lessor. If Lessor agrees to enter into a lease for such space with
Lessee any such agreement shall be separate from the Lease, and the terms and
conditions of the Lease shall not apply to the lease for such additional space.

 

2.11    Lessor Use of the Mountain Room.    This section 2.11 shall apply only
if the portion of the Property commonly described as the “Mountain Room” is
included in the Tully’s Premises. From time to time, Lessor may request from
Lessee that the Mountain Room be made available as the site for a future meeting
or special event to be hosted by Lessor or a New Tenant of Lessor. Subject to
the availability of the Mountain Room, and subject to the other administrative
policies and requirements that Lessee may have established for third-party use
of the Mountain Room, Lessee shall reasonably cooperate with the requests of
Lessor.

 

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3.    No Other Changes.    Except as modified by this Sixth Amendment and as
otherwise agreed upon herein, all other terms of the Lease, including without
limitation all exhibits thereto, remain unchanged and in full force and effect.

 

4.    Conflict and Construction; Definitions.    In the event of any conflict
between the terms of this Sixth Amendment and the terms of the Lease, the terms
and provisions of this Sixth Amendment shall prevail. Capitalized terms not
otherwise defined in this Sixth Amendment shall have the meanings set forth in
the Lease.

 

5.    Amendment and Restatement of Lease and Further Modifications.    After the
Effective Date, the parties hereby agree to use their respective reasonable best
efforts to amend and restate the Lease into a single amended and restated lease
taking into account all of the prior lease amendments including this Sixth
Amendment. In addition, the parties acknowledge that the existing Lease is based
on a single tenant in an industrial setting and that given the changes to the
Lease incorporated by this Sixth Amendment, Lessee will no longer be the sole
tenant of the Property. In addition, the parties acknowledge that Lessor’s
development plans for the portions of the Property that are not leased to Lessee
may require further adjustments and modifications to the Lease. Accordingly, the
parties also agree that, in connection with the amendment and restatement of the
Lease described above, the parties will also use their reasonable best efforts
to amend and modify the Lease to (i) reflect that the Property will now have
multiple tenants, and (ii) to take into account the development work that Lessor
may undertake with respect to the Property.

 

6.    Successor and Assigns.    The terms and provisions of this Sixth Amendment
shall bind and inure to the benefit of Lessor and Lessee and their respective
successors and assigns. This Sixth Amendment may not be assigned by either party
without the consent of the other party, which may be withheld in its sole
judgment.

 

7.    Counterparts; Facsimile.    This Sixth Amendment of Lease Agreement may be
executed in counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument. Executed
counterparts may be executed and transmitted via facsimile and such version
shall be deemed an original.

 

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IN WITNESS WHEREOF, Lessor and Lessee have executed this Sixth Amendment
effective as the date set forth above.

 

LESSOR:

  LESSEE:

RAINIER COMMONS, LLC

  TULLY’S COFFEE CORPORATION

 

By:   /s/    SHIMON MIZRAHI                By:   /s/    ANTHONY J. GIOIA        
 

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    Shimon Mizrahi           Anthony J. Gioia  

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Its:   Manager       Its:   President and CEO

 

STATE OF WASHINGTON    )

                                           ) ss.

COUNTY OF KING                 )

 

On this              day of             , 2003, before me personally appeared
            , the              of             , who executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument.

 

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year first above written.

 

                                          
                                                     
                                                                               
 (Print Name)     Notary Public in and for the State    

of Washington, residing at                                                      

   

My Commission Expires:                                                        

 

STATE OF WASHINGTON    )

                                           ) ss.

COUNTY OF KING                 )

 

On this              day of             , 2003, before me personally appeared
            , the              of TULLY’S COFFEE CORPORATION, who executed the
within and foregoing instrument, and acknowledged said instrument to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said
instrument.

 

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IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year first above written.

 

                                          
                                                     
                                                                               
 (Print Name)     Notary Public in and for the State    

of Washington, residing at                                                      

   

My Commission Expires:                                                        

 

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EXHIBIT A

 

LEGAL DESCRIPTION OF PROPERTY

 

PARCEL 2:

 

Lots 1 through 6, Block 233, Seattle Tidelands, in King County, Washington, as
shown on the official maps on file in the Office of the Commissioner of Public
Lands at Olympia, Washington;

 

TOGETHER WITH Lots 1 through 12, Block 17, Hanford’s Addition to South Seattle,
according to the plat thereof recorded in Volume 1 of Plats, page 37, in King
County, Washington;

TOGETHER WITH ALL of vacated alley in said Block 17, as vacated under City of
Seattle Ordinance No. 38522;

TOGETHER WITH Lots 1 through 12, Block 16, Hanford’s Addition to South Seattle,
according to the plat thereof recorded in Volume 1 of Plats, page 37, in King
County, Washington;

TOGETHER WITH ALL of vacated alley in said Blocks 16, as vacated under City of
Seattle Ordinance No. 38521;

TOGETHER WITH ALL of vacated South Winthrop Street between said Blocks 16 and
17, as vacated under City of Seattle Ordinance No. 38522;

TOGETHER WITH that portion of vacated South Hanford Street adjoining Block 16,
as vacated under City of Seattle Ordinance No. 69571 and would attach by
operation of law;

TOGETHER WITH that portion of vacated Tenth Avenue South, as vacated under City
of Seattle Ordinance No. 95836, and described as follows:

 

BEGINNING at the intersection of the production south of the East line of Block
16 of said Plat of Hanford’s Addition to South Seattle and the Westerly
right-of-way line of the Seattle Freeway (Primary State Highway No. 1); thence
Northerly along said Westerly right-of-way line to the production east of the
North line of Lot 12, Block 17 of said plat; thence West along said produced
line to the East line of Block 17; thence South along said East line and the
same produced and along the East line of Block 16 to the POINT OF BEGINNING;
EXCEPT from the above described Parcel 2 any portion lying within the Northern
Pacific Railway Company right-of-way; EXCEPT that portion as conveyed to the
State of Washington for Primary State Highway No. 1 by deed recorded under
Recording No. 6199964.

 

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EXHIBIT B

 

AMENDMENTS TO THE ORIGINAL LEASE

 

1.    First Lease Amendment dated December 17, 1999, entered into between KCL
and Lessee;

 

2.    Second Lease Amendment dated June 6, 2000, entered into between KCL and
Lessee;

 

3.    Third Lease Amendment dated November 7, 2000, entered into between KCL and
Lessee;

 

4.    Fourth Lease Amendment dated February 21, 2001, entered into between KCL
and Lessee; and

 

5.    Fifth Lease Amendment dated November 1, 2002, entered into between KCL and
Lessee.

 

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Exhibit C to Sixth Amendment to Lease Agreement

 

    LEVEL NUMBER

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BLDG. NUMBER

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  BSMNT

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    LVL 1

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  LVL 2

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  LVL 3

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  LVL 4

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  LVL 5

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  LVL 6

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  LVL 7

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  LVL 8

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  S.F. PER BLDG.

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  TULLY'S

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COMMENTS

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    AREA 1                                              

24

  *1632 *   1617   1632                           3249   3,249    

1

        1358   1344                           2702   2,702    

2

            2232                           2232   2,232    

3

            3587                           3587   3,587         AREA 2          
                                   

4

            1295   1295                       2590   1,295    

5

            1211   1198       1198   1179   1297       6083   2,396    

5A

            1828   1828       1826               5482   3,654    

13

        3033   1146                           4179        

12

        1172                               1172   1,172    

23

        586   586                           1172   1,172    

11

        1348   1349                           2697   2,697    

10

        1279   1278   504   1284                   4345   2,557    

19

                1486           977           2463        

20

                458                       458        

21

                2793       2793   2874       3107   11567        

39

                                        0             AREA 3                    
                         

22

                5291   5291   5291   5289           21162        

25

            1062   5512   8854   8854   8854   8854   2047   44037   100  

Rooftop space on SE corner

containing cell tower

6

            3921   4043   4025   3921               15910   11,989    

7

            4486   4381   4381   4489               17737        

9

        5244/3000   5106/2500                           10350   5,500   Tully's
space: 3,000 on level 1, 2500 on level 2

8

        6840   8307   8327   6636                   30110   23,474    

26

        957                               957   957    

27

                                        0             AREA 4                    
                         

14

        5714   6978                           12692   5,714    

15

        5668   5647                           11315   5,668    

16

                                        0        

100

            3532                           3532        

S.F. PER LEVEL

  *1632 *   29572   51421   37116   30471   28372   19173   10151   5154        
   

TOTAL

                                        221780             NEW FLOOR INFILL    
                           

13 NEW FLOOR INFILL

            1635                                    

21 NEW FLOOR INFILL

                        320                        

22 NEW FLOOR INFILL

                    2838   2838   2838                    

TOTAL NEW FLOOR INFILL

        0   1635   0   2838   3158   2838   0   0   10469        

FLOOR INFILL

  *1632 *   29572   53056   37116   33309   31530   22011   10151   5154        
   

TOTAL

                                        232249   80,115    

 

xxx Highlighted areas represent the Tully’s Premises under the Sixth Amendment

 

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