Document:

Exhibit
10.18

 

UNIVERSITY VILLAGE

 

LEASE AGREEMENT

 

THIS LEASE is made
and entered into this 14th day of October, 2003 between UNIVERSITY VILLAGE
LIMITED PARTNERSHIP, a Washington limited partnership (“Landlord”), whose
address is 2673 Northeast University Village Mall, Suite 7, Seattle, Washington
98105, and GRACE HOLMES, INC., a Delaware corporation (“Tenant”), whose address
is 770 Broadway, New York, NY 10003.

 

Landlord owns the
real property and improvements located thereon as described in Subsection 2.1 (“University
Village”).

 

Landlord desires
to lease certain space in University Village more particularly described on
Exhibit D attached hereto and by this reference incorporated herein (the “Leased
Premises”) to Tenant and Tenant desires to take and lease such space from
Landlord.

 

NOW THEREFORE, for
and in consideration of the rents reserved hereunder, the terms and conditions
hereof and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Landlord hereby leases to Tenant and Tenant
leases from Landlord, the Leased Premises upon the following terms and
conditions:

 

1.                                      LEASE
TERMS AND EXHIBITS.

 

The following
terms as used herein shall have the meanings set forth below unless
specifically modified elsewhere in this Lease:

 

1.1                               Leased Premises:  That
certain space in University Village known as Space “19” and more particularly
described on Exhibit D attached hereto and by this reference incorporated
herein.

 

1.2                               Minimum
Rent:

 

Years 1-5:                                            $40.00 per square foot of the Area of Leased
Premises per annum

Years 6-10:                                      $44.00 per square foot of the Area of Leased
Premises per annum

 

1.3                               Lease
Term:  Ten (10) Lease Years plus a “partial
year” (if any) from the Commencement Date to January 31 of the following
year.  The Lease Term shall commence as
provided in Section 3 below, and shall end on the January 31 next following the
10th anniversary of the Commencement Date (“Expiration Date”).

 

1.4                               Area
of Leased Premises:  Approximately
7,400 square feet, consisting of 5,700 square
feet on the ground level and 1,700 square feet of mezzanine space, and
containing approximately 45 lineal feet of frontage.  The exact size of the Leased Premises will be
determined following remeasurement pursuant to Section 20.4 below.

 

 

1.5                               Tenant’s
Fraction:  A fraction, the numerator
of which is the ground level portion of the Area of Leased Premises and the
denominator of which is the sum of the numerators (gross leasable areas) used
in all leases in University Village (whether or not leases are actually in
effect for all of such space) in determining University Village Expenses
payable by the tenants under such leases, provided the same shall include not
less than 90% of the total leasable retail area in University Village.

 

1.6                             Percentage
Rent Rate:  Five Percent (5%)

 

1.7                               Percentage
Rent Period:  Lease Year.

 

1.8                               Lease
Year:  The twelve month period ending
each January 31 during the Lease Term.

 

1.9                               Retail
Trade Area:  [none]

 

1.10                        Security
Deposit:  [none]

 

1.11                        Permitted
Use:  Tenant shall use the Leased
Premises solely for the retail sale of men’s, women’s and children’s
ready-to-wear apparel, accessories, footwear, outerwear, related items sold
under the J. Crew label, facial and body care products and home furnishings
(the display of which shall not be more than 30% of the retail sales floor
area), and for the retail sale of any other item featured in any catalogue
offered by Tenant, its parent(s), affiliate(s) or subsidiary(ies) and any other
item manufactured by or for Tenant, its parent(s), affiliate(s) or
subsidiary(ies) provided such other item (i) is offered for sale in the
majority of J. Crew retail stores, (ii) carries the J. Crew name/label and
(iii) is complementary in nature to the J. Crew retail store at the time of the
Commencement Date, and for no other purpose whatsoever.

 

1.12                        Tenant’s
Trade Name:  J. Crew

 

1.13                        Name
and Address of Tenant’s Guarantor: [none]

 

1.14                        Default
Rate:  The “Default Rate” is that
rate of interest per annum equal to two percent (2%) over the prime rate
of interest charged, quoted or published by Bank of America or its successor
or, if Bank of America or its successor should fail to publish such
information, by a comparable bank.

 

1.15                        Exhibits:  The Exhibits attached to this Lease are
incorporated in this Lease by this reference. 
Each party agrees to perform any obligations on its part stated in any
of such Exhibits:

 

Exhibit A.                                            Legal
Description of University Village

 

Exhibit B.                                              Site
Plan of University Village

 

2

 

Exhibit C.                                              Description
of Landlord’s and Tenant’s Work

 

Exhibit D.                                             Plan
of Leased Premises (which shall establish the floor area (“Floor Area”)
contained therein).

 

Exhibit 15.2                                    Similarly
Situated Tenants

 

2.                                      PREMISES.

 

2.1                               University
Village.

 

(a)                                  Definition.  Landlord is the owner of University Village,
which is legally described in Exhibit A and depicted in the Site Plan of
University Village attached hereto as Exhibit B.  University Village shall include any adjacent
property acquired by the Landlord from time to time during the term of this
Lease, whether owned or leased by Landlord as a tenant under a ground lease or
sublease, or which is otherwise operated on an integrated basis with University
Village, whether or not the same is owned or controlled by Landlord.

 

(b)                                  No
Representations.  The depiction of
University Village in Exhibit B does not constitute a representation, covenant
or warranty of any kind by Landlord, and subject to Section 13.2 below,
Landlord reserves the right from time to time to change the size and dimensions
of University Village; locate, relocate, alter and/or modify the number and
location of buildings, building dimensions, the number of floors in any of the
buildings, parking areas, driveways and entrances and exits to and from
adjoining streets and ways, store dimensions, identity and type of other stores
and tenancies and the common areas located from time to time in or on
University Village.  The term “University
Village” as used herein shall refer to University Village described and
depicted in Exhibits A and B, respectively, and as so changed, relocated,
altered and/or modified.  Landlord
further agrees that it will make no change in the layout of the Leased Premises
or University Village which will materially reduce the size, dimensions or
usable area of the Leased Premises or materially adversely affect access to the
Leased Premises.  Landlord will make
reasonable efforts to minimize the impact of any noise, dust, dirt and the like
caused by Landlord’s improvements or alterations on Tenant’s business.

 

2.2                               Leased
Premises.  Landlord hereby leases and
demises to Tenant, and Tenant hereby accepts from Landlord, subject to and with
the benefit of the terms and provisions of this Lease, the Leased Premises
depicted in Exhibit D.  The gross
leasable area of the Leased Premises is as stated in Section 1.4 above.

 

3.                                      TERM.

 

3.1                               Lease
Term.  This Lease shall be for the
term stated in Section 1.3 above (the “Term” or “Lease Term”) and shall
commence on the earlier of (a) one hundred twenty (120) days following the
latest to occur of (i) Landlord’s approval of Tenant’s plans for Tenant’s Work
(defined below) provided Tenant submits plans for Tenant’s Work to Landlord no
later than November 1, 2003 and thereafter timely responds to comments from
Landlord, (ii) Landlord’s delivery of the

 

3

 

Leased Premises to Tenant in a broom clean condition,
free of all violations and the personal property and signage of any previous
occupant, with Substantial Completion of Landlord’s Work (as defined in Section
3.2(a) below) and (iii) the date Tenant receives a building permit for the
construction of Tenant’s Work provided Tenant submits plans for Tenant’s Work
to the City of Seattle no later than December 1, 2003 and thereafter timely
responds to comments from the City of Seattle or (b) the day that Tenant opens
for business (the “Commencement Date”). 
It is anticipated that Landlord will deliver possession of the Leased
Premises to Tenant on March 1, 2004 (the “Anticipated Delivery Date”), however,
Landlord’s failure to do so shall not result in any liability to Landlord or
otherwise affect Tenant’s obligations under this Lease except as otherwise set
forth below.  If for any reason Landlord
is unable to deliver possession of the Leased Premises on the Anticipated
Delivery Date, Landlord must provide written documentation to Tenant no later
than forty-five (45) days prior to the Anticipated Delivery Date.  If Landlord is unable to deliver possession
of the Leased Premises on the Anticipated Delivery Date and Landlord fails to
provide such notification to Tenant when required, then Landlord shall pay to
Tenant, as liquidated damages, $750.00 per day for each day of delay (the “Late
Fee”).  If such delay continues beyond
July 1, 2004, then, in addition to any Late Fee that may be due Tenant, Tenant
shall have the right to terminate this Lease upon notice to Landlord delivered
no later than the earlier of (i) July 15, 2004 and (ii) the date of Landlord’s
Delivery of the Leased Premises to Tenant. 
In the event Tenant terminates this Lease in accordance with the
preceding sentence, Landlord shall reimburse Tenant for the reasonable
out-of-pocket costs incurred by Tenant in preparation and/or review of Tenant’s
plans and specifications for the Leased Premises.  In no event shall Tenant be required to
accept delivery of possession of the Leased Premises prior to the Anticipated
Delivery Date.

 

Notwithstanding
anything to the contrary contained herein, Tenant shall not be required to
begin construction or initially open for business in the Leased Premises unless
(a) tenants occupying ninety percent (90%) or more of the retail portion of
University Village and (b) Crate & Barrel, Apple, Victoria’s Secret and
Talbots (the “Named Tenants”) have signed leases and are scheduled to open no
later than sixty (60) days following the date Tenant is required to open for
business hereunder.  Landlord shall
verify the foregoing in writing and provide a leasing plan showing the names,
square foot areas and opening dates of the Named Tenants no later than
forty-five (45) days prior to the date Tenant is scheduled to commence
construction.

 

3.2                               Landlord’s
and Tenant’s Work.

 

(a)                                  If
the Leased Premises are not presently complete, Landlord shall deliver to
Tenant, and Tenant agrees to accept from Landlord, possession of the Leased
Premises forthwith upon Substantial Completion of Landlord’s Work as described
in Exhibit C hereto (“Landlord’s Work”). 
Landlord shall, at its sole cost and expense, as soon as it is
reasonably possible after the execution of this Lease, commence and pursue to
completion the Landlord’s Work shown on and/or described in the attached
Exhibit C.  “Substantial Completion
of Landlord’s Work” occurs when Landlord, or its project architect, notifies
Tenant in writing that the Leased Premises are substantially complete to the
extent of Landlord’s Work specified in Exhibit C hereof, with the exception of
such work as Landlord cannot complete until Tenant performs necessary portions
of its work.  Tenant shall commence the
installation of fixtures,

 

4

 

equipment and any of its
work as set forth in Exhibit C (“Tenant’s Work”) promptly upon Substantial
Completion of Landlord’s Work, and Tenant shall diligently pursue such work to
completion.  There shall be no
chargebacks to Tenant for the cost of any item included in Landlord’s Work
and/or performed prior to delivery of the Leased Premises to Tenant (i.e.,
so-called “back charges”) and Tenant shall not be obligated to pay any
additional construction charges or fees such as, without limitation, barricade
charges, freight elevator fees, dumpster or other trash fees, sprinkler system
shut-down fees or other such charges for work which is not included in Tenant’s
Work.  Prior to installation of a
temporary barricade in front of the Leased Premises, Tenant shall provide
Landlord with barricade appropriate artwork for an “opening soon” advertisement
thereon.

 

(b)                                 Punchlist.  Not later
than thirty (30) days after Substantial Completion of Landlord’s Work, Tenant
shall deliver to Landlord a “punchlist” of defects in Landlord’s Work.  Landlord shall promptly cure such defects at
Landlord’s sole cost and expense.  Latent
defects appearing as a result of Landlord’s Work shall not be deemed waived
until the first anniversary of the Commencement Date.  Upon the first anniversary of the
Commencement Date, all latent defects shall be waived unless Tenant shall have
given notice of the same to Landlord prior to such first anniversary.  However, Landlord shall warrant all repairs
made in response to any notice of latent defects within the one (1) year period
for a period of one (1) year from the date of repair.  Notwithstanding such waiver, Landlord’s
obligations to make repairs set forth explicitly elsewhere in this Lease shall
not be subject to the one-year limitation described in this paragraph.

 

3.3                               Statement
as to Lease Term.  When the
Commencement Date has been determined as provided in Section 3.1, Landlord and
Tenant shall execute, acknowledge and deliver a written statement specifying
the Commencement Date and Expiration Date.

 

4.                                      RENT.

 

4.1                               Minimum
Rent.  Tenant shall pay to Landlord,
without notice or demand and without any set-off or deduction whatsoever
(except as set forth in Section V of Exhibit C attached hereto), the Minimum
Rent set forth in Section 1.2 above (the “Minimum Rent”), which shall be paid
in advance on or before the first day of each calendar month of the Lease
Term.  If the Lease Term commences on a
day other than the first day of a calendar month or expires on a day other than
the last day of a calendar month, the Minimum Rent for such month shall be paid
together with the Minimum Rent for the first full month, and shall be a
prorated portion of the monthly Minimum Rent, based upon a thirty (30) day
month.  Notwithstanding anything to the
contrary contained herein, provided Tenant is not then in default of this Lease
beyond any applicable notice and cure periods, Minimum Rent shall be abated (i)
for the one hundred eighty (180) day period following Landlord’s delivery of
the Leased Premises to Tenant and (ii) during the months of January and
February, 2005.

 

(a)                                  Future
Expansion.  [omitted]

 

(b)                                  Renovation
or Expansion of Common Areas. 
[omitted]

 

5

 

4.2                               Landlord’s
Security.  [omitted]

 

4.3                               Percentage
Rent.

 

(a)                                  Percentage
Rent.  In addition to the Minimum
Rent to be paid by Tenant pursuant to Section 4.1 above, Tenant shall pay to
Landlord Percentage Rent in a sum equal to five percent (5%) of the amount of
Tenant’s Gross Sales as defined below, during each Lease Year of the Lease Term
in excess of the “Breakpoint.” 
Commencing with the first month of the Lease Year when total Gross Sales
for the Lease Year exceed the applicable Breakpoint for such Lease Year, Tenant
shall pay to Landlord, within twenty (20) days after the end of each calendar
month, the Percentage Rent for such calendar month.  The Breakpoint during any Lease Year shall be
the Minimum Rent payable with respect to such Lease Year divided by .05 (the “Natural
Breakpoint”).  For example if the Minimum
Rent is $296,000, then the Breakpoint is $296,000/.05 = $5,920,000.  It is acknowledged by the parties that the
Breakpoints applicable to a given full lease year are computed by dividing the
Minimum Rent payable by Tenant for that same Lease Year by five percent
(5%).  All computation and/or
reconciliation of Percentage Rent payable by Tenant for a full Lease Year shall
be determined in accordance with and governed by the foregoing sentence.  Notwithstanding anything to the contrary
herein, for the purposes of calculating the Breakpoint only, Minimum Rent shall
be deemed paid in full during any portion of the rent abatement period
described in Section 4.1 that Tenant is open for business in the Leased
Premises.

 

Percentage Rent for any partial Lease Year shall be
established by multiplying the percentage rental due for the twelve month
period following the Commencement Date with respect to a partial lease year at
the beginning of the term or the 12 month period preceding the expiration date
with respect to a partial lease year at the end of the term by a fraction, the
numerator of which shall be the number of days in the partial lease year and
the denominator of which shall be 365.

 

(b)                                  Tenant’s
Statements Regarding Gross Sales. 
Tenant shall provide Landlord with an unaudited monthly statement of
Gross Sales within twenty (20) days after the end of each calendar month,
certified by Tenant to be correct, which shall show Gross Sales and an
itemization of any exclusions or deductions therefrom for such month, as well
as year-to-date amounts for the current Lease Year.  If any Percentage Rent is due for such month,
the payment shall accompany such statement. 
In addition to such regular monthly statements, Tenant shall provide an
annual statement within sixty (60) days after the end of each Lease Year, which
shall show the total amount of Gross Sales for such Lease Year, and shall be
certified to be true, complete and correct by Tenant, or in Landlord’s
reasonable discretion following occurrence of an Event of Default as a result
of Tenant’s failure to comply with Section 4.3, an independent certified public
accountant reasonably satisfactory to Landlord. 
If such annual statement shows that Tenant underpaid Percentage Rent for
such Lease Year, Tenant shall include the additional amount, together with
interest at the Default Rate with such statement, and if such statement shows
that Tenant overpaid Percentage Rent, Landlord shall provide a credit or
refund.

 

(c)                                  Tenant’s
Records.  Tenant shall keep full,
complete and proper books,

 

6

 

records and accounts
prepared in accordance with generally accepted accounting principles
(collectively, “Tenant’s Records”) of its daily Gross Sales in, upon, or from
the Leased Premises.  Original sales
records shall be separately maintained for the Leased Premises and shall
include: (i) daily dated sealed, continuous, cash register tapes,
(ii) serially numbered sales slips, (iii) settlement report sheets of
transactions with subtenants, concessionaires and licensees, (iv) bank
statements, (v) general ledger or summary record of all receipts and
disbursements from operations in, at or from the Leased Premises,
(vi) state and local sales and use tax returns, and (vii) such other
records that would normally be kept pursuant to generally accepted accounting
principles, or as the Landlord may reasonably require in order to determine
Gross Sales hereunder.  Tenant shall be
permitted to use such cash registers and maintain its business records in the
same manner as all of Tenant’s other stores. 
Landlord and its agents and employees shall have the right at any and
all reasonable times upon fourteen (14) days prior written notice to Tenant, to
examine and inspect all of the books and records of Tenant, including any sales
tax reports pertaining exclusively to the business of Tenant conducted in, upon
or from the Leased Premises, for the purpose of investigating and verifying the
accuracy of any statement of Gross Sales, but in no event more than one (1)
time per year.  Tenant may excise any
portions of such sales tax reports pertaining to other stores owned or operated
by Tenant.  Tenant shall keep all such
records for a period of three (3) years.  All records shall be maintained by Tenant on
the Leased Premises, or at the corporate office of Tenant.

 

(d)                                  Audit.  Landlord may from time to time (but not more
frequently than once each calendar year), upon fourteen (14) days prior written
notice to Tenant, cause a complete audit or examination to be made of Tenant’s
Records and such books and records of any subtenant, licensee or concessionaire
for all or any part of the three Lease Years immediately preceding such
notice.  During such audit, Landlord or
its authorized representatives shall have full and free access to Tenant’s
Records and the right to require that Tenant, its agents and employees furnish such
information or explanation with respect to such items as may be necessary for a
proper examination and audit thereof. 
Tenant may, however, excise any portions of tax returns pertaining to
other stores owned or operated by Tenant. 
If such audit or examination discloses that any of Tenant’s statements
of Gross Sales understates Gross Sales made during any Lease Year by three
percent (3%) or more which resulted in underpayment of Percentage Rent, or if
Tenant shall have failed to furnish Landlord any monthly Gross Sales statements
during any Lease Year or shall have failed to prepare and maintain Tenant’s
Records as required herein, Tenant shall pay Landlord the reasonable cost of
such audit or examination, including reasonable travel and related expenses,
and any deficiency in Percentage Rent, with interest at the Default Rate.  If such audit or examination shall disclose
an understatement of more than ten percent (10%) which results in underpayment
of Percentage Rent, upon the second occurrence of such understatement of more
than 10% which results in underpayment of Percentage Rent, Landlord shall also
have the right to cancel this Lease by written notice given to Tenant within
six (6) months after such audit.  Landlord’s
acceptance of Percentage Rent shall be without prejudice to the Landlord’s
examination, audit and other rights hereunder. 
Any information obtained by Landlord pursuant to its audit shall be
treated as confidential and shall not be disclosed except (i) in connection
with litigation with Tenant, (ii) to prospective purchasers or lenders of
University Village and (iii) as may be required by law.

 

7

 

(e)                                  Gross
Sales Defined.  “Gross Sales” shall
mean the entire amount of the actual sale price, whether for cash, credit or
otherwise, of all sales of goods and services and all other income and receipts
whatsoever of all business conducted at, on or from the Leased Premises,
including, without limitation:

 

	
  (i)

  	
   

  	
  mail, telephone,
  facsimile, E-mail, Internet and other orders originating in, at, from or
  arising out of the use of the Premises,

  
	
  (ii)

  	
   

  	
  deposits not refunded
  to purchasers

  
	
  (iii)

  	
   

  	
  gross receipts from
  vending and game machines, except those for exclusive use of employees
  (inclusion of this definition shall not to be construed to authorize vending
  or game machines)

  
	
  (iv)

  	
   

  	
  sale price of gift and
  merchandise certificates

  
	
  (v)

  	
   

  	
  payments from other
  parties for shelf or advertising space at or respecting the Leased Premises

  
	
  (vi)

  	
   

  	
  the full value of all
  consideration other than money received

  
	
  (vii)

  	
   

  	
  all other gross income
  or receipts from any business or operation at, on or from the Leased Premises

  
	
  (viii)

  	
   

  	
  Gross Sales by any
  sublessee, concessionaire or licensee.

  

 

However, Gross Sales shall not include (but Tenant’s Records shall
itemize):

 

	
  (a)

  	
   

  	
  returns to shippers or manufacturers

  
	
  (b)

  	
   

  	
  any cash or credit refunds made upon any sale in or
  from the Leased Premises where the merchandise is returned by the customer,

  
	
  (c)

  	
   

  	
  any sales, use or excise tax imposed by any duly
  constituted governmental authority (provided that no income or franchise tax,
  capital stock tax, tax based upon assets or net worth, or similar tax shall
  be deducted from Gross Sales)

  
	
  (d)

  	
   

  	
  sales to employees at a discount (not to exceed 2.5%
  of Gross Sales)

  
	
  (e)

  	
   

  	
  the exchange of merchandise between the stores and
  warehouses of Tenant, if any, where such exchange of merchandise is made
  solely for the convenient operation of the business of Tenant and not for the
  purpose of consummating a sale that was made in or from the Leased Premises

  
	
  (f)

  	
   

  	
  postage, parcel post freight, express or other
  delivery charges paid in connection with any sale

  
	
  (g)

  	
   

  	
  discounts, allowances and refunds to customers

  
	
  (h)

  	
   

  	
  layaways until the sale is completed or the deposit
  abandoned by the customer

  
	
  (i)

  	
   

  	
  bad debts written off by Tenant for income tax
  purposes (not to exceed in the aggregate 1% of Gross Sales), provided that if
  later collected, the amount shall be included in Gross Sales in the year in
  which collected

  
	
  (j)

  	
   

  	
  luxury and excise taxes levied upon the purchase of
  merchandise manufactured by Tenant

  
	
  (k)

  	
   

  	
  bulk sales of inventory, including damaged or aged
  merchandise, sales of fixtures and equipment, and sales to jobbers

  
	
  (l)

  	
   

  	
  charges for repairs, alterations, delivery and gift
  wrapping of merchandise,

  

 

8

 

	
  (m)

  	
   

  	
  proceeds of claims for damaged merchandise

  
	
  (n)

  	
   

  	
  catalog sales of goods not stocked on the Leased
  Premises, not to exceed three percent (3%) of Gross Sales

  
	
  (o)

  	
   

  	
  workroom, alteration, shipping and delivery charges,
  and charges for check cashing and wrapping, at no profit to Tenant

  

 

No deduction shall be allowed for any uncollected or uncollectible
amounts or reserves therefor, nor for cost of products or services sold, or
other costs, charges or expenses of purchasing, financing, selling,
transportation, overhead or taxes except as set forth above.

 

(f)                                    No
Partnership.  It is understood and
agreed that the fixing of a portion of the rental on a percentage of the sales
of the business to be done by Tenant does not create a partnership or joint
venture relationship between the parties hereto, that Landlord assumes no
liability hereunder for the operation of the business of Tenant, and that the
provisions with reference to rents herein are for the sole purpose of fixing
and determining the total rents to be paid by Tenant to Landlord.

 

(g)                                 No
Waiver.  The acceptance by Landlord
of any monies paid to Landlord by Tenant pursuant to this Section 4.3 shall not
be an admission by Landlord of the accuracy of any monthly or annual statement
furnished by Tenant during the month or year reported therein, or of the
sufficiency of the amount of any such payment. 
Landlord shall be entitled to inspect the books and records of Tenant
and receive any additional sums due from Tenant disclosed by such inspection,
as described above.

 

(h)                                 No
Diversion.  To ensure that the Leased
Premises will produce an optimum volume of gross sales, Tenant covenants not to
divert elsewhere any business, trade or commerce which would ordinarily be
transacted by Tenant at, in, on, from or arising out of the Leased Premises.

 

(i)                                    Opening
for Business; Continuous Operations. 
Because of the difficulty and impossibility of determining Landlord’s
damages by way of loss of anticipated Percentage Rent from Tenant or from other
tenants or occupants of University Village or by way of loss of value of the
property, if Tenant, subject to Section 30.12 hereof, shall fail to take
possession of the Leased Premises and open for business within thirty (30) days
of the time provided herein, or shall abandon the Leased Premises, cease
operating or conducting Tenant’s business therein, or fail to maintain business
hours in accordance with the terms of this Lease following 48 hours notice from
Landlord, then Landlord shall have the right, in addition to any or all other
rights or remedies under this Lease or at law or in equity, to collect not only
Minimum Rent and all other items of Additional Rent herein, but also Additional
Rent equal to Two Hundred Fifty Dollars ($250.00) per day for each day or
portion thereof Tenant is required to be open and is not open, subject to
Section 30.12 hereof (provided that in the case where Tenant has opened its
store to the public, but is late opening on a particular business day, the $250
Additional Rent shall not apply until the second such late opening following
notice by Landlord to Tenant of the first late opening each Lease Year).  Such Additional Rent shall be deemed to be
liquidated damages in lieu of any Percentage Rent that might have been paid
during such period.

 

9

 

Acceptance by Landlord of
such liquidated damages shall not be deemed permission for Tenant to continue
such violation, and shall not preclude Landlord from seeking any other remedy
for such violation, including, but not limited to, specific performance or
termination of this Lease.

 

4.4                               Tenant
to Share Expenses.  It is intended
that this shall be a “net lease” in that tenants in University Village
collectively shall pay all operating, repair and maintenance costs and expenses
of any kind or nature.  In addition to
the Minimum Rent, Tenant shall pay to Landlord, as Additional Rent (defined
below), in the manner provided in Subsection 4.4(e) below, Tenant’s share of
all operating, maintenance and repair costs, charges and expenses incurred by
Landlord with respect to University Village, except as otherwise specified
herein, including, without limitation, the items described in Subsections
4.4(a) through (d) below (herein collectively called “Other Charges”).  For purposes of this Section, the term “Accounting
Period” shall mean each consecutive twelve (12) month period during the Lease
Term commencing July 1 and expiring the following June 30 or, if so determined
by Landlord at any time during the Term of this Lease, the calendar year.

 

(a)                                  Tenant’s
Share of Taxes.  Tenant shall pay to
Landlord, as Additional Rent, in the manner provided in Section 4.4(e),
Tenant’s share of the total amount of real estate taxes (“Taxes”) on University
Village.   For purposes of this Section,
the term “Taxes” shall be an amount equal to all real estate taxes and
assessments (including but not limited to local improvement district, road
improvement district and water improvement district assessments provided such
assessments do not relate to the initial development of University Village), if
any, that are levied upon or assessed against University Village during the
Lease Term.  Tenant’s share of Taxes
shall be an amount equal to the total Taxes due and payable during each
calendar year of the Lease Term with respect to the lands and improvements
comprising University Village, deducting any contribution toward Taxes and
Insurance by other parties who are not paying a proportionate share of same,
multiplied by Tenant’s Fraction; provided, however, that if any tenants in any
building or buildings pay real estate taxes directly to any taxing authority as
may be provided in their leases, their square footage shall not be deemed a
part of the denominator used for purposes of computing Tenant’s share of
Taxes.  Tenant shall not be required to
reimburse Landlord for taxes based upon the following:  (1) rent taxes (except to the extent that
same are directly assessed against the tenants by the taxing authority, (2)
gross receipts taxes levied on gross receipts of landlord, (3) income taxes,
(4) franchise taxes, (5) transfer taxes, (6) inheritance taxes, and (7) capital
stock taxes.  Tenant shall not be obligated
to reimburse Landlord for any penalty or interest for the late payment by
Landlord of taxes.  Landlord shall
promptly pay or credit to Tenant, Tenant’s proportionate share of any refunds
or rebate of Taxes after deducting reasonable expenses incurred by Landlord in
obtaining same.

 

(b)                                  Tenant’s
Share of Insurance.  Tenant shall pay
to Landlord, as Additional Rent, in the manner provided in Section 4.4(e),
Tenant’s share of the cost of insurance for University Village.  The cost of insurance (“Insurance”) shall
include all insurance premiums for fire, all risk endorsement coverage,
earthquake, liability, loss of rental income, and any other insurance that
Landlord deems necessary or desirable to cover University Village.  Tenant’s share of Insurance shall be an
amount equal to the total of such premiums paid during each Accounting Period
or portion thereof of the Lease Term, after deducting any contribution toward
Taxes and

 

10

 

Insurance by other
parties who are not paying a proportionate share of same, multiplied by Tenant’s
Fraction.

 

(c)                                  University
Village Expenses.  Tenant shall pay
to Landlord, as Additional Rent, in the manner provided in Section 4.4(e),
Tenant’s share of the operating costs (“University Village Expenses”) of
University Village, including all common areas and facilities (collectively,
the “Common Area”).  Tenant’s share of
University Village Expenses shall be an amount equal to the total University
Village Expenses during each actual Accounting Period, or portion thereof,
during the Lease Term multiplied by Tenant’s Fraction.

 

“University Village Expenses” shall mean, without
duplication, all expenses, costs and amounts of every kind and nature (to the
extent not a capital expense) which Landlord shall pay during any calendar year
any portion of which occurs during the Term in connection with the management,
repair, maintenance, replacement, insurance and operation of University
Village, including, without limitation, any amounts paid for:

 

	
  (a)

  	
   

  	
  utilities serving the common areas, including but
  not limited to electricity, power, gas, steam, oil or other fuel, water,
  sewer, lighting, heating, air conditioning and ventilating

  
	
  (b)

  	
   

  	
  permits, licenses and certificates necessary to
  operate and manage University Village, and costs of complying with other
  legal requirements, including, without limitation, the Americans with
  Disabilities Act, 42 U.S.C. 12101 et seq. and the regulations promulgated
  thereunder

  
	
  (c)

  	
   

  	
  supplies, materials, tools, equipment, and vehicles
  used in the operation, repair, maintenance and security, floor care and
  cleaning, landscaping, and other services for University Village, including
  rental, installment purchase and financing agreements therefor and interest
  thereunder

  
	
  (d)

  	
   

  	
  reasonable accounting, legal, inspection, consulting
  and other services for services performed for University Village

  
	
  (e)

  	
   

  	
  wages, salaries, bonuses, and other compensation and
  benefits for any on-site manager, personnel and other parties engaged in the
  operation, maintenance or security of University Village, and employer’s
  Social Security taxes, unemployment taxes or insurance, and any other taxes
  which may be levied on such wages, salaries, compensation and benefits, data
  or payroll processing expenses relating thereto (if the manager or other
  personnel are located off-site and handle other properties, the foregoing
  expenses shall be allocated appropriately between University Village and such
  other properties)

  
	
  (f)

  	
   

  	
  payments under any easement, operating agreement,
  declaration, restrictive covenant, or instrument pertaining to the sharing of
  costs in any development of which University Village is part

  
	
  (g)

  	
   

  	
  alarm monitoring and security service, janitorial
  service, trash removal, removal of ice and snow (and salting and sanding in
  connection therewith)

  
	
  (h)

  	
   

  	
  parking surcharges or fees that may result from any
  environmental or other law or guideline, and the cost of obtaining, providing
  and operating public transportation or shuttle bus systems to bring customers
  or workers to or from University Village if

  

 

11

 

	
   

  	
   

  	
  required by such laws or guidelines, or if otherwise
  deemed desirable by Landlord

  
	
  (i)

  	
   

  	
  the costs of operating and maintaining any on-site
  office at University Village, including without limitation, the fair rental
  value thereof, telephone charges, postage, stationery and photocopying
  expenses

  
	
  (j)

  	
   

  	
  music programs and equipment, whether rented or
  purchased

  
	
  (k)

  	
   

  	
  telephone directory listings for University Village

  
	
  (l)

  	
   

  	
  appropriate reasonable reserves for operation of
  University Village and for covering uninsured portions, including deductible
  amounts, of casualty damage and general liability claims relating to the
  University Village

  
	
  (m)

  	
   

  	
  operation, maintenance, repair, installation and
  replacement (to the extent not a capital expense), inspection, testing,
  painting, decorating and cleaning of: (i) elevators, escalators, fire exits,
  pedestrian bridges, skywalks, skybridges, arrival zones and stairways, (ii)
  sidewalks, curbs, gutters, guardrails, bumpers, fences, flagpoles, flags,
  banners, bicycle racks, University Village identification and pylon signs,
  directional signs, hand-out pamphlet directories, traffic signals and
  markers, including those located off-site but installed for the benefit of
  University Village, (iii) parking structures, parking lots, loading and
  service areas and driveways (including sweeping, cleaning, re-striping,
  repairing, sealing, re-surfacing and replacement), (iv) storm and sanitary
  drainage systems, including disposal plants, lift stations and detention
  ponds and basins, (v) irrigation systems, (vi) any Systems and Equipment,
  (which shall mean any plant, machinery, transformers, ducts, cables, wires,
  and other equipment, facilities, and systems designed to supply light, heat,
  ventilation, air conditioning and humidity or any other services or
  utilities, or comprising or serving as any component or portion of any
  electrical, gas, steam, plumbing, water, sewer, sprinkler, communications,
  alarm, security, or fire/life/safety systems or equipment, or any other
  mechanical, electrical, electronic, computer or other systems or equipment
  for University Village and depreciation relating thereto, (except to the
  extent that any of the same serves any tenant exclusively or is subject to
  shared tenant use), (vii) exterior planting, replanting and replacement of
  flowers, shrubbery, plants, trees, grass, sod, plants in hanging baskets, and
  other landscaping, (viii) all portions of buildings, both interior and
  exterior, in the University Village, including without limitation, Common
  Areas and fixtures, equipment and other items therein or thereon, including
  but not limited to floors, floor coverings, corridors, ceilings, foundations,
  walls, wall-coverings, restrooms, lobbies, canopies, skylights, trash and ash
  cans and receptacles, trash compactors, planters, waterfalls, fountains,
  pools, benches, furniture, doors, locks and hardware, windows, glass and
  glazing, (ix) gutters and downspouts, roof flashings and roofs (including
  repairs and replacements)

  
	
  (n)

  	
   

  	
  an amount equal to fifteen percent (15%) of all of
  the foregoing costs and expenses (excluding insurance premiums, utilities and
  taxes) as a liquidation of Landlord’s general overhead (which amount shall be
  in addition to the compensation and related expenses for the manager and
  other aforementioned expenses). The foregoing provision is for definitional
  purposes only and shall not be construed to impose any obligation upon
  Landlord to incur such expenses.

  

 

The following items are to be excluded from such
operating expenses:

 

12

 

	
  A)

  	
   

  	
  Costs attributable to seeking and obtaining new
  tenants as well as retaining existing tenants - such as advertising,
  brokerage commissions, architectural, engineering, attorney’s fees,
  renovations and improvements;

  
	
   

  	
   

  	
   

  
	
  B)

  	
   

  	
  Costs that are reimbursed to the Landlord by tenants
  as a result of provisions contained in their specific leases;

  
	
   

  	
   

  	
   

  
	
  C)

  	
   

  	
  Costs for alterations and additions that are in the
  nature of capital improvements;

  
	
   

  	
   

  	
   

  
	
  D)

  	
   

  	
  Costs for capital improvements and repairs;

  
	
   

  	
   

  	
   

  
	
  E)

  	
   

  	
  Costs incurred due to violations by the Landlord of
  any of the terms and conditions of any leases in the center;

  
	
   

  	
   

  	
   

  
	
  F)

  	
   

  	
  Interest on any mortgages of the Landlord and rental
  under any ground or underlying lease;

  
	
   

  	
   

  	
   

  
	
  G)

  	
   

  	
  Rentals and other related expenses incurred in
  leasing air conditioning systems, elevators or other equipment ordinarily
  considered to be of a capital nature, except equipment used in providing
  janitorial services not affixed to the building;

  
	
   

  	
   

  	
   

  
	
  H)

  	
   

  	
  All items and services for which other tenants have
  reimbursed Landlord or have paid third persons directly;

  
	
   

  	
   

  	
   

  
	
  I)

  	
   

  	
  Advertising and promotional expenditures in excess
  of those amounts provided in Section 27 below, unless part of a specific
  marketing plan agreed upon by the tenants;

  
	
   

  	
   

  	
   

  
	
  J)

  	
   

  	
  Repairs and other work occasioned by fire, windstorm
  or other casualty to the extent that the Landlord is reimbursed by insurance
  that was required to be carried under the lease;

  
	
   

  	
   

  	
   

  
	
  K)

  	
   

  	
  Costs incurred in operating and maintaining the
  project’s parking facilities if the Landlord charges for parking, unless
  Landlord uses the income from the parking facility as a credit against
  operating expenses;

  
	
   

  	
   

  	
   

  
	
  L)

  	
   

  	
  Any costs, fines or penalties incurred due to
  violations by Landlord of any governmental rule or authority;

  
	
   

  	
   

  	
   

  
	
  M)

  	
   

  	
  Costs for sculpture, paintings or other objects of
  art to the extent such are items of a capital nature;

  

 

13

	
  N)

  	
   

  	
  Costs attributable to repairing items that are
  covered by warranties to the extent such costs are reimbursed pursuant to
  such warranties; and

  
	
  O)

  	
   

  	
  Repairs and maintenance performed in a tenant’s
  exclusive space and not in the common areas.

  

 

Provided the Term of the Lease commences in the 2004
calendar year, Tenant’s share of the following Other Charges shall not exceed
the caps set forth herein for the first twelve (12) months of the Term.  In the event that the Term commences in a
calendar year subsequent to the 2004 calendar year, then the following caps
shall be increased by five percent (5%) for each calendar year thereafter until
the Term commences.  All Other Charges
stated on a per square foot basis shall be calculated on the ground level
portion of the Area of Leased Premises only.

 

	
  University Village Expenses:

  	
   

  	
  $6.20 per square foot

  
	
  Insurance:

  	
   

  	
  $0.97 per square foot

  
	
  Taxes:

  	
   

  	
  $3.53 per square foot

  

 

(d)                                  Heating
and Air Conditioning Charge.  Tenant
shall contract for service and maintenance checks and filter changes for the
heating and air conditioning system serving the Leased Premises, and Tenant
shall pay the cost thereof.  Tenant shall
provide to Landlord, upon Landlord’s reasonable request for the same, copies of
all work orders and other documents necessary to verify that the heating and
air conditioning system serving the Leased Premises has been and is being
adequately serviced, maintained and inspected on a regular basis, which need
not exceed once every calendar quarter. 
If Tenant shall fail to contract for such service and maintenance to be
performed, Landlord, following reasonable notice to Tenant, may elect to
perform such service and maintenance and Tenant shall pay to Landlord the costs
thereof immediately upon receipt of billing therefor.  Such payments shall be deemed Additional Rent
hereunder.

 

(e)                                  Payment
of Other Charges.  Within sixty (60)
days after the expiration of each Accounting Period of the Lease Term (or as
soon thereafter as such information becomes available), Landlord will notify
Tenant in writing of Landlord’s estimate of Tenant’s share of the Other Charges
due for the then current Accounting Period. 
Landlord’s estimate shall be based upon the actual amount of the Other
Charges for the previous Accounting Period plus Landlord’s reasonable estimate
of the increase in such operation costs for the then current Accounting
Period.  Notwithstanding Landlord’s
actual estimate, in no event shall Tenant’s payment to Landlord for the portion
of University Village Expenses payable by Tenant increase by more than five
percent (5%) per year on a non-cumulative basis.  Tenant shall pay the estimated Tenant’s share
in advance in equal monthly installments on the first day of each month of such
Accounting Period.  Within sixty (60)
days after the end of each Accounting Period, Landlord will compute Tenant’s
share for such Accounting Period based upon the actual amount of the Other
Charges for that Accounting Period. 
Landlord shall furnish Tenant with a reasonably detailed statement of
Tenant’s proportionate share, and if the total amount paid by Tenant for such
Accounting Period is less than the actual amount of Tenant’s share for such
Accounting Period, Tenant shall pay Landlord any deficiency, subject to the 5%
cap on annual increases described above. 
If the

 

14

 

total amount paid by
Tenant for such Accounting Period exceeds the actual amount of Tenant’s share,
Landlord shall credit such excess to the next monthly payments of Tenant’s
share which thereafter come due.  Any
excess payments made by Tenant of taxes, common area maintenance expenses,
promotional fund payments, Merchants’ Association Dues or any other items of
Additional Rent, shall be refunded to Tenant within thirty (30) days following
reconciliation of the accounting period for which such payments were made,
unless credited to the next Rent due.  If
this Lease expires at a time other than the expiration date of an Accounting
Period, Tenant shall be obligated to pay immediately any deficiencies which
shall be computed at the expiration of that Accounting Period.  If the estimated amount Tenant has paid for
that Accounting Period exceeds the actual amount of Tenant’s share, and if
Tenant has otherwise complied with all of the terms and provisions of this
Lease, Landlord shall refund such excess to Tenant.  If at any time during an Accounting Period
after the first Lease Year, the amount of the Other Charges increases over the
actual amount thereof for the preceding Accounting Period, Landlord may, at its
election, but not more than once in any Accounting Period and subject to the
cap on increases, adjust the amount of monthly estimated installments due
during the balance of that calendar year to reflect such increase.  Any increased payments required to be made
pursuant to this Section shall be made within thirty (30) days after Landlord
has notified Tenant thereof.  Tenant’s
obligations under this Section shall survive the expiration or termination of
this Lease.  Landlord shall provide
Tenant with a receipted copy of the tax bill upon Tenant’s written request.

 

(f)                                    Disputes.  Within two (2) years after receipt by Tenant
of any statement from Landlord with respect to payment of charges pursuant to
this Section 4.4, if Tenant disagrees with such statement for any reason,
Tenant shall notify Landlord in writing stating the basis of such
objection.  Failure to object in writing
during such two year period shall be deemed Tenant’s agreement with such
statement and Tenant waives the right to dispute any such statement after the
expiration of such two year period.  In
the event of any dispute regarding the applicability, amount, or other matter
relating to Other Charges hereunder, such dispute shall be resolved on the
basis of an investigation, analysis and report prepared by Landlord’s
independent certified public accounting firm, which report shall be conclusive
and binding upon the parties.

 

5.                                      USE
OF PREMISES AND OPERATION OF TENANT’S BUSINESS.

 

5.1                               Permitted
Uses.  Tenant shall not use or permit
or suffer the use of the Leased Premises for any business or purpose or under
any other trade name other than the Permitted Uses set forth at Section 1.11
above and Tenant’s Trade Name set forth in Section 1.12 above or under such
other name as is used by Tenant for a majority of its stores, including all of
its stores in the Pacific Northwest (defined as Northern California, Oregon and
Washington), without the prior written consent of Landlord.  Tenant expressly understands and acknowledges
that its Permitted Use is nonexclusive and that other tenants or occupants
within University Village may sell items similar to those sold by Tenant.  Permitted Use is a material consideration to
Landlord in order to maintain an appropriate tenant mix in University Village
and achieve maximum gross sales for all tenants and to insure continual
operation of a full-service shopping center. 
Landlord shall have no obligation to consent to any change in the
Permitted Uses for the Leased Premises.

 

5.2                               Permitted
Trade Name. Landlord does not represent that Tenant may use the

 

15

 

Tenant’s permitted trade
name and Tenant shall indemnify Landlord against any claims, suits, costs, liabilities
and expenses, including attorneys’ fees, arising from use of Tenant’s permitted
trade name by Tenant, including any infringement claims.  Tenant warrants that it has the full and
unfettered right to use Tenant’s trade name for the entire term of this Lease
and such use will not in any way infringe on the rights of others.

 

5.3                               Uses
Prohibited.  Tenant shall not do or
permit anything to be done in or about the Leased Premises nor bring or keep
anything therein which will in any way increase the existing rate of, or
affect, any fire or other insurance upon the Leased Premises or the building of
which the Leased Premises are a part, or cause a cancellation of any insurance
policy covering the Leased Premises or building or any part thereof or any of its
contents.  Tenant shall not do or permit
or suffer anything to be done in or about the Leased Premises which will in any
way obstruct or interfere with the rights of other tenants or occupants of
University Village or injure or harass them, nor shall the Tenant use or allow
the Leased Premises to be used for any purpose which is objectionable or
offensive in Landlord’s reasonable judgment or is unlawful.  If Tenant permits or engages in any activity
which, in Landlord’s reasonable judgment, is objectionable, offensive or
otherwise constitutes a nuisance to the customers or other tenants of
University Village, Tenant shall, within thirty (30) days after written notice
from Landlord, discontinue such practice. 
Tenant’s failure to comply shall constitute a default under this Lease
and entitle Landlord to pursue its remedies for default or, in the alternative,
perform such work required on behalf of Tenant and recover, as Additional Rent,
the cost thereof, plus interest thereon at the Default Rate on the first day of
each month, commencing on the date due through the date of payment.  Such Additional Rent shall become due and
payable to Landlord twenty (20) days following completion of the work and
delivery of an invoice for same to Tenant.  
Tenant shall not use, occupy, suffer or permit any portion of the Leased
Premises to be used as an office (other than incidental office use in
connection with the Permitted Uses), living, sleeping or lodging quarters.  Tenant shall not display any merchandise or
sign outside the Leased Premises or in any way obstruct the malls or sidewalks
adjacent thereto or otherwise solicit business within the Common Areas except
as specifically allowed in writing by Landlord. 
Landlord reserves and retains the right not to approve or consent to any
proposed exterior display of goods or signs. 
Tenant shall not, without the prior written consent of Landlord, use the
name of University Village for any purpose other than the address of the Leased
Premises.  In any event, Tenant shall not
acquire any rights in or to such name.

 

5.4                               Operation
of Business.  Tenant shall conduct
its business on the Leased Premises during the entire Lease Term hereof with
diligence and efficiency, consistent with prudent business practices, so as to
produce the optimum amount of gross sales which may be produced by such
business, unless prevented from doing so by causes beyond Tenant’s
control.  Tenant shall keep the store
shelves on the Leased Premises fully and continuously stocked with all standard
merchandise and products for the purpose of operating its business and shall
maintain an adequate sales force. 
Subject to the provisions of this Lease, Tenant shall continuously
during the entire Lease Term hereof conduct and carry on Tenant’s business in
the Leased Premises and shall keep the Leased Premises open for business during
at least the days, nights and hours designated from time to time by Landlord as
the hours of operation for University Village (which are currently Monday
through Saturday 10:00 a.m. to 8:00 p.m. and Sunday 11:00 a.m. to 6:00 p.m.),

 

16

 

provided at least ninety
percent (90%) of all other retail tenants are open such hours; provided,
however, that this provision shall not apply if the Leased Premises should be
closed and the business of Tenant temporarily discontinued thereon on account
of strikes, lockouts or similar causes beyond the reasonable control of
Tenant.  Notwithstanding anything to the
contrary herein or any amendments hereto, nothing in this Lease shall be
construed, interpreted or deemed to authorize the cessation of Tenant’s
operations in the Leased Premises nor to authorize Tenant to “Go Dark” at any
time during the Lease Term, as it may be extended.  Tenant’s failure to open for business or to
maintain business hours in accordance with this Section 5.4 shall be subject to
payment of Additional Rent as provided in Section 4.3(i) above, without
limitation of any other remedies available to Landlord with respect to such
default under this Lease, at law or otherwise. 
Tenant shall not be required to participate in any “midnight madness” or
“sidewalk sales” or any similar type of sale that Tenant reasonably deems
inappropriate with its corporate image. 
Notwithstanding any other requirements set forth in this Lease, Tenant
shall have the right to close its store for business on the following
days:  New Year’s Day, Thanksgiving Day
and Christmas Day and one (1) other day each year for the taking of inventory
and up to ten (10) days during the Term for repairs and renovations; provided
that Tenant shall give Landlord at least 10 days prior written notice of such
closures for repairs.

 

5.5                               Compliance
with Laws.  Tenant shall not use the
Leased Premises in any way (or permit or suffer anything to be done in or about
the Leased Premises) which will conflict with any law, statute, ordinance or
governmental rule or regulation or any covenant, condition or restriction
(whether or not of public record) affecting University Village, now in force or
which may hereafter be enacted or promulgated. 
Tenant shall, at its sole cost and expense, promptly comply with (a) all
laws, statutes, ordinances, and governmental rules and regulations, now in
force or which may hereafter be in force, including, without limitation, the
Americans with Disabilities Act, 42 U.S.C. 12101 et seq. and the regulations
promulgated thereunder, (b) all requirements, covenants, conditions and
restrictions, now in force or which may hereafter be in force, and (c) all
requirements (now in force or which may hereafter be in force) of any board of
fire underwriters or other similar body now or hereafter constituted relating
to or affecting the condition, use or occupancy of the Leased Premises.  The judgment of any court of competent jurisdiction
or the admission by Tenant in any action against Tenant, whether Landlord be a
party thereto or not, that Tenant has violated any law, statute, ordinance,
governmental rule or regulation or any requirement, covenant, condition or
restriction shall be conclusive of the fact as between Landlord and
Tenant.  Landlord shall comply with legal
requirements applicable to the Leased Premises, including without limitation,
the Americans with Disabilities Act, 42 U.S.C. 12101 et seq. and the
regulations promulgated thereunder, insofar as they require structural repairs,
improvements or alterations to the roof, foundation, columns, load-bearing
walls, lintels, beams or any exterior portion of the Leased Premises.

 

5.6                               Deliveries.  Tenant shall load and unload merchandise,
supplies, fixtures, equipment and furniture, and cause the collection of
rubbish, only through rear service door or doors of the Leased Premises.  Notwithstanding the foregoing, deliveries by
UPS and overnight courier may be made through the front of the Leased
Premises.  Tenant shall not permit
trailers or trucks servicing the Leased Premises to remain parked in University
Village beyond periods necessary to service Tenant’s operations.

 

17

 

5.7                               Other
Stores.  Tenant shall not during the
first five (5) years following Tenant’s opening for business at the Leased
Premises, open a “J. Crew” store at the Northgate Mall in Seattle, Washington.

 

5.8                               Co-Tenancy.   If at any time during the Lease Term less
than eighty-five percent (85%) of the retail portion of University Village is
leased and open for business for a continuous period of more than one hundred
eighty (180) days, Tenant shall have the option to pay the lesser of (i)
Minimum Rent, Percentage Rent and Other Charges, or (ii) ten percent (10%) of
Gross Sales in substitution for Minimum Rent, Percentage Rent and Other Charges
until such time as Landlord notifies Tenant that at least eighty-five percent
(85%) of the retail portion of University Village is leased and open for
business.  Landlord shall, upon written
request of Tenant, verify in writing the names and square foot areas of all
tenants open and operating in University Village.

 

6.                                      UTILITIES.

 

6.1                               Tenant’s
Obligation.  Tenant shall pay before
delinquency, at its sole cost and expense, all charges for water, gas, heat,
electricity, power, garbage removal, telephone service, and sewer service
charges, charged or attributable to the Leased Premises, and all other services
or utilities used in, upon or about the Leased Premises during the Lease Term
and the cost of installing meters therefor; provided, however, that if any such
services or utilities shall be billed to Landlord and are not separately
metered to the Leased Premises, the amount thereof shall be prorated, and
Tenant shall pay to Landlord upon demand, as Additional Rent hereunder, an
amount equal to that proportion of the total charges therefor which the amount
of utility services consumed on the Leased Premises bears to the total amount
of utility services consumed in the area covered by such combined charges.  In no event shall Landlord be liable for
services consumed in the area covered by such combined charges.  In no event shall Landlord be liable for an
interruption or failure in the supply of any such utilities to the Leased
Premises unless and to the extent caused by the negligence or willful
misconduct of Landlord, its employees, agents or contractors.  Tenant shall not overburden or exceed the
capacity of any of the utilities serving the Leased Premises.  Any interruption or failure of utilities will
not constitute a termination or constructive eviction of Tenant.  No garbage shall be placed outside of the
Leased Premises at any time except in proper, approved containers in designated
garbage collection areas.  Tenant shall
store all trash and refuse in appropriate containers within the Leased Premises
and attend to the daily disposal thereof in the manner designated by Landlord.  If Landlord supplies utilities to Tenant,
Tenant shall purchase such utilities from Landlord, at Landlord’s request, at
rates not exceeding the amount Tenant would otherwise be required to pay to the
applicable utility company.  In the event
that Landlord no longer desires to supply any utility service, Landlord agrees
to continue to provide such service until suitable arrangements have been made
for a public utility to assume the obligation.

 

6.2                               Interruption.  Landlord may, with reasonable notice to
Tenant, or without notice in the case of an emergency, discontinue gas, water,
electricity and any and all other utilities whenever such discontinuance is
necessary to make repairs or alterations to the Leased Premises or University
Village or for the protection of persons or property.  No such action by Landlord

 

18

 

shall be construed as an
eviction or a disturbance of the possession of the Tenant or an election by
Landlord to terminate this Lease nor shall Landlord be in any way liable
therefor.  Notwithstanding the foregoing,
in the event Landlord discontinues utility service or such utility service is
interrupted by the negligence or willful misconduct of Landlord, its employees,
agents or contractors, in excess of 48 hours, Minimum Rent shall abate until service
is restored.

 

7.                                      TENANT
TO PAY PERSONAL PROPERTY TAXES. 
Tenant shall pay, or cause to be paid, before delinquency, any and all
taxes levied or assessed during the Lease Term upon all Tenant’s leasehold
improvements, equipment, furniture, fixtures, and any other personal property
located in the Leased Premises.  In the
event any or all of the Tenant’s leasehold improvements, equipment, furniture,
fixtures, and other personal property shall be assessed and taxed with the real
property, Tenant shall pay to Landlord its share of such taxes within twenty
(20) days after delivery to Tenant by Landlord of a statement in writing
setting forth the amount of such taxes applicable to Tenant’s property.  There shall be no duplication of taxes
between Sections 4.4 and 7 hereof.

 

8.                                      LICENSES
AND TAXES.

 

8.1                               Tenant’s
Obligation.  Subject to Section
4.4(a), Tenant shall be liable for, and shall pay throughout the Lease Term,
all license and excise fees and occupation taxes covering the business
conducted on the Leased Premises. 
Subject to Section 4.4(a), if any governmental authority or unit under
any present or future law effective at any time during the Lease Term hereof
shall in any manner levy a tax on rents payable under this Lease or rents
accruing from use of the Leased Premises or a tax in any form against Landlord
because of or measured by revenue derived by Landlord from the leasing or
rental of such property or any amounts payable by Tenant hereunder (such as an
excise, sales or rental tax), such tax shall be paid by Tenant, either directly
or through Landlord, and upon Tenant’s default therein, Landlord shall have the
same remedies as for failure to pay rent. 
It is understood and agreed, however, that Tenant shall not be liable to
pay any net income tax imposed on Landlord.

 

8.2                               Additional
Rent.  As used herein, “Additional
Rent” shall refer to any amounts payable by Tenant to Landlord under this Lease
other than Minimum Rent and Percentage Rent. 
Additional Rent shall include any such sums whether or not designated as
Rent or Additional Rent hereunder. 
Landlord shall have, with respect to any failure to pay Additional Rent
hereunder, all of the remedies as for the failure to pay Minimum or Percentage
Rent.

 

9.                                      ALTERATIONS.

 

9.1                               Acceptance
of Leased Premises.  Upon completion
of Landlord’s Work, and except as otherwise provided in Section 3.2(b) hereof,
Tenant shall accept the Leased Premises in their then condition “AS IS” and
waives the right to make any claim against Landlord for any matter directly or
indirectly arising out of the condition of the Leased Premises, appurtenances
thereto, the improvements thereon and the equipment thereof, and Tenant shall
thereafter save and hold Landlord harmless from liability as provided in
Section 14 of this Lease.  Except as set
forth in Section 3.2(b), Landlord shall not be liable for any latent or patent
defects within the

 

19

 

Leased Premises.  Tenant acknowledges neither Landlord nor any
agent or employee of Landlord has made any representation with respect to the
suitability of the Leased Premises or University Village to the conduct of
Tenant’s business, nor has Landlord agreed to undertake any modifications,
alterations or improvements of the Leased Premises except as expressly and
specifically provided in Exhibit C to this Lease.

 

9.2                               Alterations
by Tenant.

 

(a)                                  Consent.  Tenant shall not attach any fixtures,
equipment or other items to the Leased Premises, or make any alterations,
additions or improvements in or to the Leased Premises without the prior
written consent of Landlord, which consent may be subject to such conditions as
Landlord may reasonably deem appropriate. 
Notwithstanding the foregoing, Tenant shall have the right to make
interior, non-structural design changes to the Leased Premises without Landlord’s
consent so long as such changes do not affect the mechanical or electrical
systems outside of the Leased Premises and in the aggregate cost less than
$50,000. Subject to Section 5.5. Tenant shall make any alterations in or to the
Leased Premises which are required to cause the Leased Premises to comply with
applicable governmental laws, rules, ordinances or regulations.  Any alterations, additions or improvements consented
to by Landlord shall be made at Tenant’s sole cost and expense.  Tenant shall secure any and all governmental
permits, approvals or authorizations required in connection with any such work,
and shall hold Landlord harmless from any liability, costs, damages, expenses
(including reasonable attorneys’ fees) and any liens resulting therefrom.  Except as otherwise provided herein, upon
expiration or sooner termination of this Lease, all alterations, additions and
improvements (and expressly including all light fixtures and floor coverings),
shall become the property of the Landlord, except trade fixtures, appliances
and equipment which do not become a part of the Leased Premises.

 

(b)                                  Removal
upon Termination.  Upon the
expiration or sooner termination of the term hereof, Tenant shall, at Tenant’s
sole cost and expense remove its movable trade fixtures, appliances and
equipment, and Tenant shall at its sole cost and expense, repair any damage to
the Leased Premises caused by such removal.

 

(c)                                  Plans.  No alterations, additions or improvements in
or to the Leased Premises shall be done until all of Tenant’s plans and
specifications have been submitted to and approved by Landlord in writing, all
required permits therefor have been obtained from appropriate governmental
authorities.

 

(d)                                  Work.
All Work shall be performed: (i) in a thoroughly first class, professional
and workmanlike manner, (ii) only with materials that are new, high
quality, and free of material defects, (iii) strictly in accordance with
plans and specifications approved by Landlord in advance in writing,
(iv) not to adversely affect any systems and equipment or structure within
University Village, (v) diligently to completion and so as to cause the
least possible interference with other tenants and the operation of University
Village, and (vi) in compliance with all laws and other provisions of this
Lease.  Upon completion, the Landlord
shall be provided complete “as-built” drawings and specifications for all
alterations and additions

 

20

 

to the Leased Premises
made by Tenant.

 

(e)                                  Failure
to Prosecute.  In the event Tenant is
required or undertakes to perform or complete any construction work,
installation of fixtures or other construction pursuant to this Lease, either
before or after the Commencement Date, if Tenant shall neglect, fail or refuse
to commence its work as required or thereafter to diligently proceed and
complete such work, then Landlord, in addition to any other rights or remedies
it may have, may (i) after thirty (30) days prior written notice to Tenant,
complete Tenant’s Work at Tenant’s expense; (ii) commence or recommence all of
Tenant’s payment obligations pursuant to this Lease, notwithstanding
incompletion of such work; and/or (iii) proceed pursuant to Section 16 with
respect to any default under this Lease.

 

(f)                                    Completion.  Within ninety (90) days after the date upon
which Tenant opens for business in the Leased Premises, or following completion
of any material alterations, additions or improvements to the Leased Premises,
Tenant shall deliver to Landlord the following material:  (i) Tenant’s certificate stating that
the work to be performed by Landlord and Tenant pursuant to the terms of this
Lease has been completed in compliance with approved plans and specifications;
that no security interest or other lien or claim is outstanding or has been
filed with respect to the Leased Premises or the Tenant’s interest therein;
which certificate may be relied upon by Landlord and any lender or purchaser of
University Village; (ii) a certificate of the general contractor
performing Tenant’s work stating that all subcontractors, laborers and
materialmen who have performed work or furnished materials to the Leased
Premises have been paid in full and that all liens or rights or claims of lien
have been discharged of record or waived; (iii) complete releases and
waivers of lien from Tenant’s general contractor and from all subcontractors
with contracts of $5,000 or more in recordable form and otherwise in compliance
with all applicable Washington law; (iv) Tenant’s written acceptance of
the Leased Premises; (v) a certificate of occupancy for the Leased
Premises issued by the City of Seattle; and (vi) Tenant shall provide a
statement as to the dollar value of leasehold improvements (as opposed to
equipment and trade fixtures) made by Tenant at Tenant’s sole cost and expense
to the Leased Premises.

 

10.                               MAINTENANCE
AND REMODEL OF LEASED PREMISES.

 

10.1                        Maintenance
and Repair by Tenant.  Tenant shall
at all times throughout the Lease Term at its sole cost and expense keep the
non-structural portions of the Leased Premises (including exterior doors and
entrances, all windows and moldings and trim of all doors and windows) and all
partitions, door surfaces, fixtures, equipment and appurtenances thereof
(including lighting, heating and air conditioning systems which exclusively
serve the Leased Premises) in good order, condition and repair, damage by
unavoidable casualty excepted (but not excluding damage from burglary or
attempted burglary of the Leased Premises). 
Without limiting the generality thereof, Tenant shall keep the glass of
all windows, doors, and showcases clean and presentable and free of graffiti;
replace immediately all broken glass in the Leased Premises; at reasonable intervals
as may be required to keep the Leased Premises in a first class condition,
paint or refinish the interior of the Leased Premises and the store front,
including entrances; make any necessary repairs to, or replacements of, all
door closure apparatuses and

 

21

 

mechanisms; keep all
plumbing within and exclusively serving the Leased Premises, or where Tenant
has caused blockage or some other problem outside the Leased Premises (in which
case Landlord may repair such blockage or problem and charge Tenant for the
same as provided herein,) clean and in good state of repair including pipes,
drains, toilets and basins at Landlord’s request, assist Landlord to remove all
snow and ice from the sidewalk in front of the Leased Premises; and keep all
utilities within and exclusively serving the Leased Premises, or where Tenant
has caused blockage or some other problem outside the Leased Premises (in which
case Landlord may repair such blockage or problem and charge Tenant for the
same as provided herein), in a good state of repair.  Tenant shall maintain the Leased Premises
free of insects, rodents, and other pests and shall employ a pest exterminating
contractor to service the Leased Premises at such intervals as Landlord may
reasonably require.  Tenant shall
maintain the heating, ventilating and air conditioning (“HVAC”) equipment and
plumbing and electrical installations within and exclusively serving the Leased
Premises or where Tenant has caused blockage or some other problem outside the
Leased Premises in accordance with such reasonable standards for regular
maintenance and repair thereof as Landlord may provide to Tenant from time to
time.  Tenant shall contract for in its
own name and shall pay for a qualified service contractor to inspect, adjust,
clean and repair HVAC equipment, including changing filters on a quarterly
basis.  If Tenant’s use of the Leased
Premises requires a grease trap, Tenant shall contract for in its own name and
shall pay for a qualified service contractor to inspect, clean and repair such
grease trap at such intervals as may be required by Tenant’s use, but not less
frequently than monthly.  In the event
such grease trap services Tenant and other tenants in University Village,
Landlord may elect to perform such inspection, cleaning and repairing and
Tenant shall pay to Landlord its proportionate share of the costs thereof
immediately upon receipt of billing therefor based on the number of tenants
serviced by such grease trap.  Such
payments shall be deemed Additional Rent hereunder.

 

10.2                        Failure
to Maintain.  If Tenant fails to keep
and preserve the Leased Premises as set forth in Section 10.1 above, Landlord
may at its option (following ten (10) business days’ notice except in case of
emergency) cause the same to be repaired, and in such case, upon receipt of
written statements from Landlord, Tenant shall promptly pay the entire cost
thereof as Additional Rent.  Landlord
shall have the right, without liability, to enter the Leased Premises for the
purpose of making such repairs upon the failure of Tenant to commence repairs
following ten (10) business days notice (except in case of emergency, where
Landlord may, but shall not be obligated to, make such repairs immediately).

 

10.3                        Repairs
by Landlord.  Landlord shall keep the
floor slab, columns, the roof, exterior and load bearing walls (other than
Tenant’s storefront), common utility lines to the point of connection for
Tenant, all conduits passing through the Leased Premises servicing exclusively
others. foundations and building structure of the Leased Premises in a good
state of repair, and shall accomplish such repairs as may be needed reasonably
promptly after receipt of written notice from Tenant.  Subject to the mutual waiver of subrogation,
should such repairs be required by reason of Tenant’s negligent acts or failure
to act, Tenant shall promptly pay Landlord for the cost thereof as Additional
Rent.  Except as otherwise specifically
provided herein, there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant’s business
arising from the making of any repairs, alterations or improvements in or to

 

22

 

any portion of the Leased
Premises, the building of which the Leased Premises is a part, or in or to
fixtures, appurtenances and equipment therein.

 

10.4                        Tenant’s
Obligation to Remodel the Leased Premises. 
[omitted]

 

10.5                        Surrender
of Leased Premises.  At the
expiration or sooner termination of this Lease, Tenant shall return the Leased
Premises, broom clean, to Landlord in the same condition as received (or, if
altered by Landlord or by Tenant with the Landlord’s consent, or where consent
is not required, in such altered condition), reasonable wear and tear, or
damage by casualty leading to termination of this Lease excepted.  Tenant shall remove all trade fixtures,
appliances and equipment which do not become a part of the Leased Premises, and
shall restore the Leased Premises to the condition they were in prior to the
installation of such items.  Tenant’s
obligation to perform this covenant shall survive the expiration or termination
of this Lease.  If Tenant fails to remove
any of its property required to be removed hereunder, Landlord may remove and
store the same at the expense of Tenant. 
Any of such property may be sold to cover the expenses of removal and
storage if not paid for by Tenant.

 

11.                               LIENS
AND ENCUMBRANCES.

 

11.1                        Liens.  Tenant shall keep the Leased Premises and
University Village free from any liens or encumbrances arising out of any work
performed, materials furnished or obligations incurred by Tenant, and shall
indemnify and hold Landlord harmless from any and all costs, liability or
expenses (including reasonable attorneys’ fees) arising therefrom.  Tenant shall place such contractual
provisions as Landlord may reasonably request in all contracts and subcontracts
for Tenant’s improvements assuring Landlord that no mechanics liens will be
asserted against Landlord’s interest in the Leased Premises or University
Village.  Said contracts and subcontracts
shall provide, among other things, the following:  That notwithstanding anything in said contracts
or subcontracts to the contrary, Tenant’s contractors, subcontractors,
suppliers and materialmen (hereinafter collectively referred to as “Contractors”)
will perform the work and furnish the required materials on the sole credit of
Tenant; that no lien for labor or materials will be filed or claimed by the
Contractors against Landlord’s interest in the Leased Premises or University
Village; that the Contractors will immediately discharge any such lien filed by
any of the Contractor’s suppliers, laborers, materialmen or subcontractors; and
that the Contractors will indemnify and save Landlord harmless from any and all
costs and expenses, including reasonable attorneys’ fees, suffered or incurred
as a result of any such lien against Landlord’s interest that may be filed or
claimed in connection with or arising out of work undertaken by the
Contractors.

 

11.2                        Claims.  If any lien is filed against the Leased
Premises or University Village by any person claiming through Tenant, Tenant
shall discharge the same by payment or by providing a bond in form and amount
and issued by a surety reasonably satisfactory to Landlord adequate to
discharge the same as a lien against the Leased Premises and University
Village.  If Tenant shall fail to cause
such lien to be discharged of record, within thirty (30) days following written
notice from Landlord, Landlord may pay or otherwise discharge the same by
paying the amount claimed to be due and the amount so paid by Landlord,
including reasonable attorneys’ fees incurred by Landlord in defending against
such lien or in procuring its payment or discharge, shall be due and

 

23

 

payable by Tenant as
Additional Rent.

 

12.                               ASSIGNMENT
AND SUBLETTING.

 

12.1                        Assignment
or Sublease.  Tenant shall not,
directly or indirectly, assign, transfer, mortgage, pledge, hypothecate or
encumber this Lease or any interest therein, nor permit the Leased Premises to
be occupied by anyone other than Tenant or sublet the whole or any part of the
Leased Premises, nor shall this Lease or any interest hereunder be assignable or
transferable by operation of law or by any process or proceeding of any court,
or otherwise, without the prior written consent of Landlord.

 

Notwithstanding the foregoing, Tenant shall be
permitted to assign this Lease, or sublet the Leased Premises without landlord’s
consent to an affiliate of Tenant (affiliate meaning an entity which controls
Tenant, is controlled by tenant, or under common control with Tenant, including
any subsidiary or parent of Tenant), or to a corporation resulting from a
merger or consolidation with Tenant, or to any person or entity which acquires
substantially all of the assets of Tenant, or to any person or entity which
acquires substantially all of the stock of Tenant.  Following any assignment or sublease pursuant
to this paragraph, Tenant will remain liable hereunder.  The public sale or transfer of the common
stock of Tenant shall not constitute an assignment under this Lease.

 

If Tenant desires at any time to enter an assignment
of this Lease or a sublease of the Leased Premises or any portion thereof,
where Landlord’s consent is required, Tenant shall first give written notice to
Landlord of Tenant’s desire to do so, which notice shall contain (a) the name
of the proposed assignee or subtenant, (b) the proposed merchandising plan for
the assignee’s or subtenant’s business to be carried on in the Leased Premises
in accordance with the uses permitted under Section 5 hereof, (c) the terms and
provisions of the proposed assignment or sublease, (d) such financial
information and past merchandising experience as Landlord may reasonably
request concerning the proposed assignee or subtenant, including a resume of
the principals of the proposed assignee or subtenant, and (e) a check made
payable to the order of Landlord for Seven Hundred Fifty and No/100 Dollars
($750.00) as a deposit toward Landlord’s costs incurred in conjunction with the
processing and documentation of the proposed assignment or sublease.  Tenant agrees to reimburse Landlord for
Landlord’s reasonable attorneys’ fees incurred in conjunction with the
processing and documentation of any such requested transfer, assignment,
subletting, licensing or concession agreement, change of ownership or
hypothecation of this Lease or Tenant’s interest in the Leased Premises, such
costs and attorneys’ fees not to exceed $1,000. 
Tenant shall provide Landlord promptly with fully executed copies of all
assignments, subleases and related instruments. 
No consent by Landlord to any assignment or sublease by Tenant shall
relieve Tenant of any obligation to be performed by Tenant under this Lease,
whether arising before or after the assignment or sublease.  The consent by Landlord to any assignment or
sublease shall not relieve Tenant of the obligation to obtain Landlord’s
express written consent to any other assignment or sublease.

 

12.2.                     Consent/Recapture.  If Landlord’s consent is requested for an
assignment or sublease of all or any portion of the Leased Premises, Landlord
shall have the right to terminate

 

24

 

the Lease with respect to
that portion of the Leased Premises unless Tenant revokes Tenant’s notice of
proposed Transfer by notice to Landlord within ten (10) days after acceptance
or refusal of Landlord’s notice of termination. 
Landlord shall have the right at its option to enter into the
relationship of landlord and tenant with the proposed assignee or subtenant
based upon the rent and other economic consideration agreed to by such proposed
assignee or subtenant and otherwise upon the terms and conditions of this Lease
insofar as applicable to such portion of the Leased Premises.

 

12.3                        Recapture.  [omitted]

 

12.4.                     Increase
in Minimum Rent.  In the event that
Landlord is required and Landlord consents to a transfer, the monthly Minimum Rent
shall be increased on the effective date of the transfer to an amount
equal to the average total monthly Minimum Rent and Percentage Rent payable by
Tenant during the thirty-six (36) months prior thereto (or such shorter period
as may have occurred since the Commencement Date).  If the Minimum Rent is increased hereunder,
there shall be a proportionate adjustment to the Breakpoint.

 

12.5                        Guarantor
of Lease.  [omitted]

 

13.                               COMMON
AREAS AND FACILITIES.

 

13.1                        General.  The term “Common Area” refers to all areas
within the exterior boundaries of University Village (exclusive of buildings
and sites reserved for future buildings) which are now or hereafter made
available for general use, convenience and benefit of Landlord and other
persons entitled to occupy space in University Village, which areas shall
include, but not be limited to, parking areas, driveways, mall, sidewalks,
landscaped and planted areas.  “Common
Area” shall also include all on-site and off-site areas and facilities, which
may not be accessible to tenants or other persons, which are used in connection
with the operation, management, repair or maintenance of University Village,
including janitorial closets, management offices and maintenance areas, storm
and sanitary sewer systems, utility lines, disposal plants, lift stations, and
retention ponds or basins, whether located within or outside of University
Village.

 

The Common Areas may, at Landlord’s election, include
areas in adjoining properties which are or become available to Landlord, tenants,
employees and invitees of University Village and which are maintained with the
Common Area under any reciprocal easement agreement, operating agreement or
other such agreement now or hereafter in effect.  Without limiting the generality of the foregoing,
the Common Area may include, as designated by Landlord from time to time, any
parking areas and structures (whether in tiers or at, above or below grade),
mall enclosures and roofs covering University Village buildings, entrances,
sidewalks, streets or roadways, passageways, concourses, courts, arcades,
service corridors, loading platforms and truck docks, delivery areas,
escalators and elevators, ramps, stairs, landscaped and vacant areas,
pedestrian bridges, skywalks, skybridges, arrival zones, public bathrooms,
information and telephone booths, directory signs and equipment, common
lighting facilities, drainage areas, lounges and shelters, package pick-up
stations, drinking fountains, public comfort and first aid

 

25

 

stations, public meeting
rooms, auditoriums, bus stops, taxi stands, and all furniture, decorations,
fixtures, improvements, Systems and Equipment, and other facilities, located in
or serving any of the foregoing, except to the extent reserved for use by one
or more designated tenants.

 

13.2                        Control
and Maintenance of Common Area by Landlord. 
Landlord shall at all times have the exclusive control and management of
the Common Area.  Landlord shall keep or
cause to be kept the Common Area in a neat, clean, and orderly condition,
properly lighted and landscaped, in a first class condition consistent with
other upscale regional shopping centers, and shall repair any damage
thereto.  With respect to the Common
Area, Landlord shall have the right from time to time to: employ personnel;
establish, modify and enforce reasonable rules and regulations governing the
use thereof; construct, maintain and operate lighting facilities; patrol the
Common Area; change the area, level, location and arrangement of parking areas
and other facilities; restrict parking by Tenant, its officers, agents and
employees to employee parking areas; enforce parking charges (by operation of
meters or otherwise), with appropriate provisions for free parking ticket
validating by Tenant; close all or any portion of the Common Area to such
extent as may, in the opinion of Landlord’s counsel, be legally sufficient to
prevent a dedication thereof or the accrual of any interest therein by any
person or the public; close temporarily all or any portion of the parking areas
or facilities; discourage non-customer parking; and do and perform such other
acts in and to the Common Area as, in the use of good business judgment,
Landlord shall determine to be advisable with a view to the improvement of the
convenience and use thereof by tenants of University Village, their employees,
invitees and customers.  Landlord agrees
not to place any permanent or temporary kiosks, carts, automatic teller
machines (“ATM”), telephones or any other obstructions within an area extending
fifteen (15) feet from each of the side demising lines of the Leased Premises,
except for customer amenities in the pedestrian sidewalk areas including
landscape pots, sidewalk lamppost lighting, landscape “hanging pots”, pedestrian
moveable signage, customer benches and trash receptacles as are typically found
in University Village.  If Landlord
violates the foregoing prohibition and such violation continues for a period of
ten (10) days following written notice from Tenant to Landlord, then Tenant
shall be entitled to an abatement of Minimum Rent, Percentage Rent and Other
Charges for each day such violation continues.

 

The other provisions notwithstanding, neither Landlord
nor its agents shall be responsible for any law enforcement activities within
University Village, and Landlord’s employment of security agencies, personnel,
or devices, or any other instrumentalities or agents which are intended to
deter criminal activity within University Village shall not be deemed to create
any such responsibilities for Landlord. 
Tenant shall be responsible for the protection of its property and, to
the extent required by law or as it further deems appropriate, the property of
its customers, from theft, vandalism and similar acts.

 

13.3                        License.  All Common Area which Tenant may be permitted
to use and occupy shall be used and occupied under a revocable license.   If the amount of such areas or facilities be
diminished, such diminution shall not be subject to any liability, nor shall
Tenant be entitled to any compensation or diminution or abatement of rent.

 

13.4                        Additional
Land.  Subject to Section 4.4(c),
should Landlord acquire any interest

 

26

 

in land not shown as part
of University Village on Exhibit B and make the same available for parking
or other Common Area purposes, then the operating costs of the Common Area
shall also include all of the costs and expenses incurred and paid in
connection with such additional land, other than the costs and expenses of
acquiring the same.

 

13.5                        Rules
and Regulations.  Tenant shall comply
with the rules and regulations that Landlord may from time to time promulgate
and/or modify regarding use and operation of the Common Area.  The rules and regulations shall be binding
upon Tenant upon delivery of a copy thereof to Tenant.  Landlord shall not be responsible to Tenant
for the nonperformance of such rules and regulations by any other tenants or
occupants of space in University Village. 
Landlord shall exercise reasonable efforts to enforce the rules of
University Village uniformly.

 

13.6                        Employee
Parking.  It is understood that the
employees of Tenant employed at the Leased Premises and the other tenants of
Landlord within University Village may not park their motor vehicles in the
parking areas of the Common Area which may from time to time be designated for
patrons of University Village.  Landlord
may furnish or cause to be furnished, but shall not be obligated to furnish,
space for employee automobile parking. 
Nothing contained herein shall be deemed to impose liability upon
Landlord for personal injury or theft or damage to any motor vehicle or for
loss of property from within any motor vehicle, which is suffered by Tenant’s
employees, customers, service suppliers or other invitees in connection with
their use of any parking area.  Landlord
at all times shall have the right to designate the particular parking areas to
be used by any or all of such employees and any such designation may be changed
from time to time.  Tenant and its
employees shall park their automobiles only in those portions of the Common
Area, if any, designated for that purpose by Landlord.  Tenant shall comply with any system or
procedure developed by Landlord, including but not limited to the use of
identification stickers, to identify the automobiles of Tenant’s
employees.  If Tenant or its employees
fail to park their automobiles in designated parking areas, then Landlord may
charge Tenant a fee of Ten and No/100 Dollars ($10.00) per day for each day or
partial day per vehicle parked in any areas other than those designated;
provided, however, for the first violation during any calendar year for each
Tenant or employee, Landlord will give Tenant written notice and reasonable
time during the day the violation occurs to move the vehicle to a permitted
parking area and, if the vehicle is promptly moved to a permitted parking area,
no fee will be charged.  After notice of
the first such violation by Tenant or such employee during each calendar year,
no notice of any subsequent violation by the same person shall be required
prior to the imposition of any parking fine. 
All amounts due under the provisions of this Section shall be payable by
Tenant within twenty (20) days after demand therefor.  A Tenant or an employee of Tenant who is
using the facilities of University Village as a customer during time periods
other than the work shift during which the employee is on-duty may leave on the
dashboard of his or her motor vehicle a legible notice which indicates that
such person is shopping in University Village. 
If a Tenant receives a violation notice with respect to the Tenant or an
employee who was shopping during a time other than during such employee’s work
shift and if the Tenant or the employee placed the notice on the dashboard as
provided above, the fine shall be rescinded if Tenant so notifies Landlord
prior to 5:00 p.m. on the next weekday following receipt of the notice of
violation.  Any vehicle of a Tenant or an
employee of Tenant parked in areas of the Common Area not designated for
employee parking may be removed by Landlord and the expense thereof charged to
the owner of

 

27

 

the vehicle.  The failure of any employee to park in an appropriate
employee parking area shall not be a default by Tenant under this Lease.  Tenant shall use its best efforts to cause
its employees employed at the Leased Premises to park their personal motor
vehicles only in designated employee parking areas.  In the event Landlord provides remote parking
for Tenant’s employees, Landlord shall provide all transportation which may be
reasonably required by Tenant’s employees with respect to such parking
areas.  Landlord will cause all employee
parking areas (adjacent or remote) to be lit for a period of one (1) hour after
the close of University Village and will provide security for such areas.

 

14.                               INSURANCE
AND INDEMNITY.

 

14.1                        Indemnification.  Landlord shall not be liable for injury to
any person, or for the loss of or damage to any property (including property of
Tenant) occurring in or about the Leased Premises from any cause whatsoever,
except to the extent of Landlord’s gross negligence or willful misconduct or
the gross negligence or willful misconduct of Landlord’s employees, agents or
contractors.  Landlord shall not be
responsible or liable to Tenant for any loss or damage which may be occasioned
by the acts or omissions of third parties or persons occupying space adjoining
the Leased Premises or any part of University Village or by theft or by any act
or neglect of any tenant or occupant of University Village.  Tenant hereby indemnifies and holds Landlord
harmless from and against and agrees to defend Landlord against any and all
claims, charges, liabilities, obligations, penalties, damages, costs and
expenses (including reasonable attorneys’ fees) arising, claimed, charged or
incurred against or by Landlord from any matter or thing arising from Tenant’s
use of the Leased Premises, the conduct of its business or from any activity,
work or other things done, permitted or suffered by the Tenant in or about the
Leased Premises, and Tenant shall further indemnify and hold harmless Landlord
from and against any and all claims arising from any breach or default in the
performance of any obligation on Tenant’s part or to be performed under the
terms of this Lease, or arising from any act or negligence of the Tenant, or
any officer, agent, employee, or while within the Leased Premises, guest, or
invitee of Tenant, and from all costs, reasonable attorneys’ fees, and
liabilities incurred in or about the defense of any such claim or any action
proceeding brought thereon and in case any action or proceeding be brought
against Landlord by reason of such claim.  
Tenant, upon notice from Landlord, shall defend the same at Tenant’s
expense by counsel reasonably satisfactory to Landlord.  In the event of concurrent negligence of
Tenant, its agents, employees, sublessees, invitees while within the Leased
Premises, licensees or contractors on the one hand, and that of Landlord, its
partners, directors, officers, agents, employees, or contractors on the other
hand, which concurrent negligence results in the injury or damage to persons or
property and relates to the construction, alteration, repair, addition to,
subtraction from, improvement to or maintenance of the Leased Premises, Common
Areas or buildings, Tenant’s obligation to indemnify Landlord as set forth in
this Section shall be limited to the extent of Tenant’s negligence, and that of
its agents, employees, sublessees, invitees, while within the Leased Premises,
licensees or contractors, including Tenant’s proportional share of costs, and
reasonable attorneys’ fees and expenses incurred in connection with any claim,
action or proceeding brought with respect to such injury or damage.  Tenant hereby agrees to waive its immunity
under Industrial Insurance with respect to Landlord.  Tenant and Landlord further agree that this
indemnification provision was specifically negotiated and agreed to by the
parties hereto.  None

 

28

 

of the events or
conditions set forth in this Section shall be deemed a constructive or actual
eviction or entitle Tenant to any abatement or reduction of rent.  Tenant’s indemnification obligation pursuant
to this paragraph shall survive the expiration or termination of this Lease.

 

Landlord shall indemnify and hold Tenant harmless from
and against and agrees to defend Tenant against any and all claims, charges,
liabilities, obligations, penalties, damages, costs and expenses (including
reasonable attorneys’ fees) to the extent arising from any negligence or
willful misconduct of Landlord, its employees, agents or contractors in or
about the Leased Premises and the University Village, or to the extent arising
from any breach or default in the performance of any obligation on Landlord’s
part to be performed under the terms of this Lease, including all costs,
attorneys’ fees, and liabilities incurred in the defense of any such claim,
action or proceeding.  In addition,
except for instances of negligence or willful misconduct of Tenant or its
agents, employees, or contractors, Landlord indemnifies and agrees to hold
Tenant harmless from and against any and all claims, charges, liabilities,
obligations, penalties, damages, costs and expenses (including reasonable
attorneys fees) arising, claimed, charged or incurred against or by Tenant from
any matter or thing occurring in or about or relating to the common areas of University
Village.  Landlord’s indemnification
obligation pursuant to this paragraph shall survive the expiration or
termination of this Lease.

 

14.2                        Insurance.  During the entire Lease Term, Tenant shall,
at its sole cost and expense pay for and keep in full force and effect:
(a) an occurrence form Commercial General Liability policy, to indemnify
both Landlord and Tenant against any such claims, demands, losses, damages,
liabilities and expenses, including insurance against assumed or contractual liability
under this Lease, with respect to the Leased Premises and operations of Tenant
and any person or entity conducting business in, on or about the Leased
Premises for the Tenant or on the Tenant’s behalf, in which the limits with
respect to liability and property damage shall not be less than $2,000,000 each
occurrence nor less than $4,000,000 annual aggregate on a location basis;
(b) product liability coverage, including, without limitation (if this
Lease covers premises in which food and/or alcoholic beverages are sold and/or
consumed) liquor liability coverage of not less than $1,000,000 per occurrence
nor less than $2,000,000 general aggregate on a location basis;
(c) special perils form of property insurance, written at replacement cost
value in an adequate amount to avoid coinsurance, insuring Tenant’s furniture,
fixtures, equipment and inventory, including property of Tenant’s customers
located on the Leased Premises, boiler and machinery coverage, if applicable.

 

All policies of
insurance required to be carried by Tenant pursuant to this Section 14.2 shall
be written by responsible insurance companies with a Best rating of at least
A-XI.  Any such insurance required of
Tenant hereunder may be furnished by Tenant under any blanket policy carried by
it or under a separate policy therefor. 
A copy of each policy evidencing such insurance or a certificate of the
insurer certifying that such policy has been issued, providing the coverage
required by this Section and containing provisions specified herein, shall be
delivered to Landlord prior to the commencement of the term of this Lease and,
upon renewals, not less than thirty (30) days prior to the expiration of such
coverage.  Self-insurance shall be
permitted for all insurance required of Tenant under this Lease so long as
Tenant maintains net worth of at least $75,000,000.00.

 

29

 

Each policy
evidencing insurance required to be carried by Tenant pursuant to this Section
shall contain the following provisions and/or clauses: (a) cross
liability, severability or substantially similar clause; (b) a provision
that such policy and the coverage evidenced thereby shall be primary and
noncontributing with respect to any policies carried by Landlord, and that any
coverage carried by Landlord shall be excess insurance; (c) a provision
including Landlord and any other parties in interest designated in writing by
Landlord as an additional insured; and (d) a provision that the insurer
will not cancel, materially change or fail to renew the coverage provided by
such policy without first giving Landlord thirty (30) days prior written
notice.

 

If Tenant fails to
maintain the insurance required by this Section 14.2, Landlord may obtain and
maintain insurance covering such items and interests.  Any premiums paid by Landlord therefor shall
be deemed Additional Rent and shall be due immediately upon demand.  If, on account of the failure of Tenant to
comply with the provisions of this Section, Landlord is deemed a co-insurer by
its insurance carrier, then any loss or damage which Landlord shall sustain by
reason thereof shall be borne by Tenant and shall be immediately paid by Tenant
upon receipt of a bill therefor and evidence of such loss.

 

14.3                        Increase
in Insurance Premium.  Tenant shall
not keep, use, sell or offer for sale in or upon the Leased Premises any
article which may be prohibited by the customary forms of extended coverage
direct damage insurance policies typically in effect for properties similar to
University Village in the greater Seattle area. 
Tenant shall pay any increase in premiums for casualty and fire
(including extended coverage) insurance that may be charged during the Lease
Term on the amount of such insurance which may be carried by Landlord on the
Leased Premises or the building of which they are a part, resulting from Tenant’s
occupancy or from the type of merchandise which Tenant stores or sells on the
Leased Premises, whether or not Landlord has consented thereto.  In such event, Tenant shall also pay any
additional premium on the insurance policy that Landlord may carry for its
protection against rent loss through fire or casualty.  In determining whether increased premiums are
the result of Tenant’s use of the Leased Premises, a schedule, issued by the organization
setting the insurance rate on the Leased Premises, showing the various
components of such rate, shall be conclusive evidence of the several items and
charges which make up the casualty and fire insurance rate on the Leased
Premises.  Landlord shall deliver bills
for such additional premiums to Tenant at such times as Landlord may elect, and
Tenant shall immediately reimburse Landlord therefor.

 

14.4                        Waiver
of Subrogation.  Landlord and Tenant
hereby mutually release each other from liability and waive all right of
recovery against each other for any loss in or about the Leased Premises or
University Village, from perils insured against or required to be insured
against under all-risk insurance contracts (whether or not such insurance
contracts are in force), including any extended coverage endorsements thereof,
whether due to negligence or any other cause (and each party shall attempt to
obtain a waiver of subrogation endorsement from its insurance company);
provided that this Section shall be inapplicable if it would have the effect,
but only to the extent it would have the effect, of invalidating any insurance
coverage of Landlord or Tenant.

 

30

 

15.                               EMINENT
DOMAIN.

 

15.1                        Total
Taking.  If all the Leased Premises
are taken by the power of eminent domain exercised by any governmental or
quasi-governmental authority, this Lease shall terminate as of the date Tenant
is required to vacate the Leased Premises and all Minimum Rent and other
rentals and charges due hereunder shall be allocated as of that date.  The term “eminent domain” shall include the
taking or damaging of property by, through or under any governmental or
quasi-governmental authority, and any purchase or acquisition in lieu thereof,
whether or not the damaging or taking is by the government or any other person.

 

15.2                        Partial
Taking.  If more than ten percent
(10%) of Tenant’s sales area or twenty percent (20%) of the Leased Premises
shall be taken or appropriated, this Lease may, at the option of either party,
be terminated by written notice given to the other party not more than thirty
(30) days after Landlord or Tenant receive notice of the taking or
appropriation, and such termination shall be effective as of the date when
Tenant is required to vacate any portion of the Leased Premises.  In the event that more than twenty percent
(20%) of the parking areas or other Common Area of University Village shall be
taken or appropriated, then the Landlord may at its option terminate this Lease
by written notice given to Tenant within sixty (60) days of the date of such
taking.  If this Lease is so terminated,
all Minimum Rent and other charges due hereunder shall be paid to the date of
termination.  Whenever any portion of the
Leased Premises or Common Area is taken by eminent domain and this Lease is not
terminated, Landlord shall at its expense proceed with all reasonable dispatch
to restore, to the extent that it is reasonably prudent to do so, the remainder
of the Leased Premises and Common Area to the condition they were in
immediately prior to such taking, and Tenant shall at its expense proceed with
all reasonable dispatch to restore its fixtures, furniture, furnishings, floor
covering and equipment to the same condition immediately prior to such
taking.  From the date Tenant is required
to vacate that portion of the Leased Premises taken, the Minimum Rent and Other
Charges payable hereunder shall be reduced in the same proportion that the area
taken bears to the total area of the Leased Premises prior to taking.  Landlord shall not terminate this Lease as a
result of a Taking unless the Leases for all other tenants identified as
“similarly situated” on Exhibit 15.2 attached hereto which Landlord would be
permitted to terminate under the facts and circumstances of the taking and
under the terms of said leases shall also be terminated.

 

15.3                        Damages.  Landlord reserves all rights to the entire
damage award or payment for any taking by eminent domain, and Tenant shall make
no claim whatsoever against Landlord for damages for termination of its
leasehold interest in the Leased Premises or for interference with its
business.  Tenant hereby grants and
assigns to Landlord any right Tenant may now have or hereafter acquire to such
damages and agrees to execute and deliver such further instruments of
assignment thereof as Landlord may from time to time reasonably request.  Tenant shall, however, have the right to
claim from the condemning authority all compensation that may be recoverable by
Tenant on account of any loss incurred by Tenant in removing, relocating,
and/or loss of Tenant’s merchandise, furniture, trade fixtures and equipment or
for damage to Tenant’s business; provided, however, that Tenant may claim such
damages only if they are awarded separately in the eminent domain proceeding
and not as part of Landlord’s damages.

 

31

 

16.                               TENANT’S
DEFAULT.

 

16.1                        Default.  The occurrence of any one or more of the
following events shall constitute a default and breach of this Lease by Tenant.

 

(a)                                  Vacating
the Leased Premises.  The vacating or
abandonment of the Leased Premises by Tenant or the failure of Tenant to be
open for business (except in the event of damage or destruction to the Leased
Premises or due to an other event or circumstances affecting Tenant and covered
by Section 30.12 which prevents Tenant from conducting any business thereon) as
required by any provision of this Lease where such failure shall continue for a
period of 24 hours after acceptance or refusal of written notice thereof from
Landlord.

 

(b)                                  Failure
to Pay Rent. The failure by Tenant to make any payment of Minimum Rent,
Percentage Rent, Other Charges, Additional Rent, or any other payment required
to be made by Tenant hereunder, as and when due, where such failure shall
continue for a period of ten (10) days after acceptance or refusal by Tenant of
written notice thereof from Landlord.

 

(c)                                  Failure
to Perform.  The failure by Tenant to
observe or perform any of the covenants, conditions or provisions of this Lease
to be observed or performed by Tenant, other than those described in
Subsections 16.1(a) and (b) above, where such failure shall continue for a
period of thirty (30) days after written notice thereof by Landlord to Tenant; provided,
however, that if the nature of Tenant’s default is such that more than thirty
(30) days are reasonably required for its cure, then Tenant shall not be deemed
to be in default if Tenant commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.

 

(d)                                  Bankruptcy.  The making by Tenant of any general
assignment or general arrangement for the benefit of creditors; or the filing
by or against Tenant of a petition to have Tenant adjudged a bankrupt, or a
petition of reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
within sixty (60) days of filing); or the appointment of a trustee or a
receiver to take possession of substantially all of Tenant’s assets located at
the Leased Premises or of Tenant’s interest in this Lease, where such seizure
is not discharged within thirty (30) days after appointment of such trustee or
receiver, or the filing of the petition for the appointment of the same,
whichever shall first occur.

 

(e)                                  Renewed
Default. The commission by Tenant of any default described in section (b)
above a third time and within nine (9) consecutive months following the time
that Tenant has been given two prior notices of such a default and has cured
the same within the permitted time.

 

16.2                        Remedies
in Default.  In the event of any such
default or breach by Tenant, Landlord may at any time thereafter, with or
without notice or demand and without limiting Landlord in the exercise of any
other right or remedy which Landlord may have by reason of such default or
breach:

 

32

 

(a)                                  Terminate
Lease.  Terminate Tenant’s right to
possession of the Leased Premises by any lawful means, in which case this Lease
shall terminate and Tenant shall immediately surrender possession of the Leased
Premises to Landlord.  In such event
Landlord shall be entitled to recover from Tenant all past due rents, and other
necessary expenses of renovation and alteration of the Leased Premises and
commissions paid in re-letting even if paid to Landlord or any affiliate of
Landlord; reasonable attorneys’ fees; the worth at the time of award by the
court having jurisdiction thereof of the amount by which the unpaid rent,
Additional Rent, and other charges called for herein for the balance of the
Lease Term after the time of such award exceeds the amount of such loss for the
same period that Tenant proves could be reasonably avoided; and that portion of
any leasing commission paid by Landlord and applicable to the unexpired Lease
Term of this Lease.  Unpaid installments
of rent or other sums shall bear interest from the date due at the Default Rate
on the first day of each month, commencing on the date due through the date of
payment; or

 

(b)                                  Continue
the Lease.  Maintain Tenant’s right
to possession, in which case this Lease shall continue in effect whether or not
Tenant shall have abandoned the Leased Premises.   In such event Landlord shall be entitled to
enforce all Landlord’s rights and remedies under this Lease, including the
right to recover the Minimum Rent and any other charges as may become due
hereunder.

 

(c)                                  Reletting.  In the event of a default by Tenant, whether
or not Landlord elects to terminate or continue the Lease, Landlord may re-let
the Leased Premises in whole or in part to one or more tenants, either in the
name of Landlord or as agent for Tenant for a term or terms which may be less
or greater than the remainder of the term of the Lease, and may agree to grant
concessions, free rent and/or additional improvements in connection with any
such re-letting.  Landlord may receive
rent from such re- letting and apply the same first to any expenses incurred in
connection with re-entering, ejecting, removing, re-letting, altering,
repairing, redecorating, subdividing or otherwise preparing the Leased Premises
for re-letting, including brokerage and reasonable attorneys’ fees; secondly,
to any indebtedness of Tenant to Landlord other than Minimum Rent or items of
Additional Rent payable under the Lease; and third, to the fulfillment of any
terms or conditions of the Tenant under the Lease and rent payable
hereunder.  Tenant shall be liable to
Landlord for any deficiency; or

 

(d)                                  Other
Remedies.  Pursue any other remedy
now or hereafter available to Landlord under the laws or judicial decisions of
the State of Washington.  Landlord shall
at all times have the right without prior demand or notice except as required
by applicable law to: (i) seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease or restrain or enjoin a
violation of any provision hereof, and Tenant hereby waives any right to
require that Landlord post a bond in connection therewith, and (ii) sue
for and collect any unpaid Rent which has accrued.  Notwithstanding anything to the contrary
contained in this Lease, to the extent not expressly prohibited by applicable
law, in the event of any default by Tenant, Landlord may terminate this Lease
or Tenant’s right to possession and accelerate and declare that all Rent
reserved for the remainder of the Term shall be immediately due and payable (in
which event, Tenant’s obligations for Percentage Rent, Taxes, Center Expenses,
and Marketing Fund Charge

 

33

 

herein that would have
accrued thereafter shall be projected in the manner described in Section B(1)
above; provided the Rent so accelerated shall be reduced by the amount of such
loss for the same period that Tenant proves could reasonably have been avoided
by Landlord and thereafter discounted in accordance with accepted financial
practice at the rate of four percent (4%) per annum to the then present
value.  Landlord shall use reasonable
efforts to mitigate its damages.

 

16.3                        Legal
Expenses.  If either party is
required to bring or maintain any action (including assertion of any
counterclaim or cross-claim, or claim in a proceeding in bankruptcy,
receivership or any other proceeding instituted by a party hereto or by
others), or otherwise refers this Lease to an attorney for the enforcement of
any of the covenants, terms or conditions of this Lease, the prevailing party
in such action shall, in addition to all other payments required herein, receive
from the other party all the costs (including reasonable attorneys’ fees)
incurred by the prevailing party in the enforcement of the covenants, terms and
conditions of this Lease (whether or not an action is instituted) and including
any such costs and fees incurred by the prevailing party on appeal.

 

16.4                        Proceedings.  The parties waive trial by jury in any
action, proceeding or counterclaim brought by either party against the other
with respect to any matter arising out of or in any way connected with this
Lease or University Village.  Any action,
suit or proceeding relating to, arising out or in connection with this Lease or
University Village brought by either Landlord or Tenant shall be brought in the
King County Superior Court, King County, State of Washington.  Tenant hereby waives any objection to
jurisdiction or venue in any proceeding before such court and agrees that the
same shall be the exclusive venue for any such proceeding.

 

16.5                        Remedies
Cumulative - Waiver.  Landlord’s
remedies hereunder are cumulative and the Landlord’s exercise of any right or
remedy due to a default or breach by Tenant shall not be deemed a waiver of, or
to alter, affect or prejudice any right or remedy which Landlord may have under
this Lease or by law.  Neither the acceptance
of rent nor any other acts or omission of Landlord at any time or times after
the happening of any event authorizing the cancellation or forfeiture of this
Lease, shall operate as a waiver of any past or future violation, breach or
failure to keep or perform any covenant, agreement, term or condition hereof or
to deprive Landlord of its right to cancel or forfeit this Lease, upon the
written notice provided for herein, at any time that cause for cancellation or
forfeiture may exist, or be construed so as at any time to stop Landlord from
promptly exercising any other option, right or remedy that it may have under
any term or provision of this Lease, at law or in equity.

 

16.6                        Waiver
of Redemption Right.  Tenant
expressly waives any and all rights of redemption granted by or under any
present or future laws or statutes applicable to the Leased Premises.

 

17.                               DEFAULT
BY LANDLORD.

 

17.1                        Default
by Landlord.  Landlord shall not be
in default unless Landlord fails to perform obligations required of Landlord
within a reasonable time, but in no event shall a reasonable time be earlier
than thirty (30) days after written notice by Tenant to Landlord (and to

 

34

 

the holder of any first
mortgage or deed of trust covering the Leased Premises whose name and address
shall have theretofore been furnished to Tenant in writing) specifying wherein
Landlord has failed to perform such obligation; provided, however, that if the
nature of Landlord’s obligation is such that more than thirty (30) days are
required for performance, then Landlord shall not be in default if Landlord or
the holder of any such mortgage or deed of trust commences performance within
such thirty (30) day period and thereafter diligently prosecutes the
same to completion.  Tenant further
agrees not to invoke any of its remedies under this Lease until such
thirty (30) days have elapsed. 
Tenant’s remedies for Landlord’s default hereunder shall be limited to
damages and/or an injunction to the extent suitable, and the parties agree that
Tenant shall not have the right to terminate this Lease except in such cases
where termination is Tenant’s only suitable remedy.

 

If Landlord shall
fail to make a repair Landlord is required to perform under this Lease, and Landlord
shall not commence such repair within thirty (30) days after Tenant gives
written notice of such failure, or if Landlord fails to diligently pursue such
repair once commenced, then Tenant may perform such repair for the account of
and at the expense of Landlord and render a bill to Landlord for such
reasonable expense.  If Landlord fails to
pay the bill within ten (10) days after it is rendered, Tenant may bring
suitable legal action to require Landlord to pay the bill.  If the final judgment of the action
determines that Landlord was obligated to make the repair and that Tenant, in
making the repair, incurred a reasonable expense, then Tenant, in addition to
its normal remedies, shall be entitled to deduct such expenses from payments of
rent and other charges due or to become due in the future under this
Lease.  The amount which may be deducted
shall include interest on the judgment at the statutory interest rate for
judgments from the date of the cure to the date of payment.

 

18.                               RECONSTRUCTION.

 

18.1                        Reconstruction - Insured Loss.  In the event the Leased Premises are damaged
by fire or other perils covered by Landlord’s insurance, Landlord agrees to
forthwith repair same, and this Lease shall remain in full force and effect,
except that Tenant shall be entitled to a proportionate reduction of the
Minimum Rent and Other Charges from the date of damage and while such repairs
are being made until the earlier of (i) the date Tenant reopens for business,
or (ii) the time reasonably required to make the repairs required to restore
the Leased Premises, such proportionate reduction to be based upon the extent
to which the damage and making of such repairs shall reasonably interfere with
the business carried on by Tenant in the Leased Premises.  If the damage is due to the fault or neglect
of Tenant or its employees, there shall be no abatement of rent except to the
extent covered by Landlord’s insurance. 
Landlord shall not be required to repair any injury or damage to any
leasehold improvements, fixtures or personal property of Tenant.  No damages, compensation or claims shall be
payable by Landlord for inconvenience, loss of business or other damage arising
from repair or restoration of any portion of the Leased Premises or University
Village.

 

If the Leased Premises
shall be damaged by fire or casualty and Landlord has the obligation to repair
under this Lease, if Landlord fails to repair during the twelve (12) month
period after occurrence of the damage, Tenant may cancel this Lease by giving
notice of

 

35

 

cancellation within
ninety (90) days after the twelve (12) month period expires.

 

18.2                        Uninsured
Loss.  In the event the Leased
Premises are damaged as a result of any cause other than the perils covered by
all-risk insurance coverage maintained by Landlord, then Landlord shall
forthwith repair the same, but only if the extent of the damage is less than
ten percent (10%) of the then full replacement cost of the Leased Premises and
of the building of which the Leased Premises are a part.  If the damage to the Leased Premises or to
the building of which the Leased Premises are a part is greater than ten
percent (10%) or more of the then full replacement cost of the Leased Premises
or the building, respectively, then Landlord shall have the option: (1) to
repair or restore such damage, this Lease continuing in full force and effect,
but the Minimum Rent and Other Charges to be proportionately reduced as
hereinabove provided in this Section; or (2) give notice to Tenant at any
time within sixty (60) days after such damage, terminating this Lease as of the
date specified in such notice, which date shall be no more than thirty (30)
days after the date of such notice.  In
the event of giving such notice, this Lease shall expire and all interest of
Tenant in the Leased Premises shall end on the date so specified in such notice
and the Minimum Rent and Other Charges, reduced by a proportionate reduction,
based upon the extent, if any, to which such damage interfered with the
business carried on by the Tenant in the Leased Premises, shall be paid up to
the date of such termination.

 

18.3                        No
Obligation.  Notwithstanding anything
to the contrary contained in this Section 18, Landlord shall not have any
obligation whatsoever to repair, reconstruct or restore the Leased Premises
when the damage resulting from any casualty covered under this Section occurs
during the last twenty-four (24) months of the Lease Term.  If Landlord so elects not to repair or
restore during the last 24 months of the Lease, Tenant shall have the right to
terminate this Lease within thirty (30) days following notice from Landlord
that Landlord does not intend to repair or restore.  Landlord shall not have any obligation to
make any repairs or replacements of any leasehold improvements, fixtures, or
other personal property.

 

18.4                        Partial
Destruction of University Village. 
If fifty percent (50%) or more of the gross leasable area of University
Village is damaged or destroyed by fire or other cause, notwithstanding that
the Leased Premises may be unaffected by such fire or other cause, Landlord may
terminate this Lease and the tenancy hereby created by giving Tenant not less
than thirty (30) days prior written notice of Landlord’s election; provided,
however, that such notice shall be given, if at all, within the sixty (60) days
following the date of occurrence of such damage or destruction.  Minimum Rent and Other Charges shall be
prorated as of the date of such termination. 
Landlord shall not terminate this Lease as a result of partial
destruction of University Village unless the leases for all other tenants
identified as “similarly situated” on Exhibit 15.2 attached hereto which
Landlord would be permitted to terminate under the facts and circumstances of the
partial destruction and under the terms of said leases, shall also be
terminated.

 

19.                               SUBORDINATION
AND ATTORNMENT; MORTGAGEE PROTECTION.

 

19.1                        Subordination
- Notice to Mortgagee.  Tenant hereby
subordinates this Lease to any existing or future mortgages or deeds of trust
on University Village or on any leasehold

 

36

 

interest held by Landlord
and to any extensions, renewals, or replacements thereof.  At the request of Landlord, Tenant shall
promptly execute and deliver all instruments which may be appropriate to
subordinate this Lease to any existing or future mortgages or deeds of trust on
University Village or on the leasehold interest held by Landlord, and to any
extensions, renewals, or replacements thereof, on forms reasonably satisfactory
to the lender under such future mortgage or deed of trust; provided that any
such subordination agreements also provide that Tenant’s possession shall not
be disturbed following foreclosure so long as Tenant is not in default
hereunder, subject to applicable notice and cure periods expressly provided
herein.  Notwithstanding anything to the
contrary in this Lease, Landlord shall not be in default under any provision of
this Lease unless written notice specifying such default is given to Landlord
and to all persons who have an interest in all or part of University Village as
mortgagees and/or deed of trust beneficiaries, provided that Tenant has been
notified in writing (by way of Notice of Assignment of Rents and Leases, or
otherwise) of the addresses of such mortgagees or deed of trust holders, and
the provisions of Section 17.1 have been complied with.  Landlord agrees to use reasonable efforts to
obtain from its existing lender, following execution of this Lease by all
parties, a Non-Disturbance and Attornment Agreement (which agreement shall be
on such lender’s standard form and which may also provide additional terms
reasonably satisfactory to Tenant regarding subordination of this Lease if
required by such lender).

 

19.2                        Tenant’s
Certificate.  Tenant shall at any
time and from time to time upon not less than fifteen (15) days prior
written notice from Landlord execute, acknowledge and deliver to Landlord a
statement in writing (a) certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such modification
and certifying that this Lease as so modified is in full force and effect), and
the date to which the rental and other charges are paid in advance, if any, and
(b) acknowledging that there are not, to Tenant’s knowledge, any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if any
are claimed, (c) setting forth the date of commencement of rents and
expiration of the Lease Term hereof; and (d) setting forth such other
information with respect to this Lease as Landlord may reasonably request.  Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of University
Village.  If Tenant fails to respond to a
request hereunder in a timely fashion (but in no event longer than thirty (30)
days), Tenant shall be deemed to have admitted the accuracy of any information
provided by Landlord to the prospective purchaser or lender and to have
certified that this Lease is in full force and effect with no uncured defaults
on the part of Landlord; that the security deposit is as stated in the Lease;
and that no more than one month’s rent has been paid in advance.

 

19.3                        Mortgagee
Protection Clause.  Tenant agrees to
give any mortgagees and/or deed of trust holders, by registered mail, a copy of
any notice of default served upon the Landlord, provided that prior to such
notice Tenant has been notified in writing (by way of Notice of Assignment of
Rents and Leases, or otherwise) of the addresses of such mortgagees or deed of
trust holders.  Tenant further agrees
that if Landlord shall have failed to cure such default within the time
provided for in this Lease, then the mortgagees or deed of trust holders shall
have an additional thirty (30) days within which to cure such default or if
such default cannot be cured within that time, then such additional time as may
be necessary if within such thirty (30) days any mortgagee or deed of trust
holder has commenced and is diligently pursuing the remedies

 

37

 

necessary to cure such
default (including but not limited to commencement of foreclosure proceedings
if necessary to effect such cure), in which event this Lease shall not be
terminated if such remedies are being so diligently pursued.

 

19.4                        Ground
Lease.  [omitted]

 

20.                               ACCESS
BY LANDLORD.

 

20.1                        Right
of Entry.  Landlord or Landlord’s
employees, agents, and contractors shall have the right (upon reasonable notice
depending upon the circumstances) to enter the Leased Premises at any
reasonable time to examine the same, and to show them to prospective purchasers
or during the last six (6) months of the Lease Term tenants of the building,
and to make such repairs, alterations, improvements or additions as Landlord
may deem necessary or desirable to the Leased Premises or to University
Village.  If Tenant is not personally
present to permit entry and an entry is necessary, Landlord may in case of
emergency forcibly enter the same, without rendering Landlord liable
therefor.  Nothing contained herein shall
be construed to impose upon Landlord any duty of repair of the Leased Premises
or building of which the Leased Premises are a part except as otherwise
specifically provided for herein. 
Landlord shall exercise its best reasonable efforts to make repairs and
alterations to the Leased Premises only during reasonable hours except in the
event of an emergency.  In connection
with the exercise of any of these rights, Landlord agrees that to the extent
practicable, Landlord will not interfere with the operation of Tenant’s
business and will attempt to complete repairs during non-business hours.

 

20.2                        Excavation.  If an excavation is made upon property
adjacent to the Leased Premises, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter upon the Leased Premises
for the purpose of doing such work as Landlord shall deem necessary to preserve
the wall of the building of which the Leased Premises is a part from injury or
damage and to support the same by proper foundations, without any claim for
damages or indemnification against Landlord or diminution or abatement of rent.

 

20.3                        Reserved
Areas.  Landlord reserves all rights
to use (or grant other parties the right to use) and Tenant shall have no
right, title or interest in: (i) the roof of any structures,
(ii) exterior non-storefront portions of the Leased Premises (including,
without limitation, demising walls and outer walls of the area of the building
in which the Leased Premises are located), (iii) air rights above the
Leased Premises and rights to the land and improvements below the floor level
of the Leased Premises, and (iv) areas within the Leased Premises
necessary for utilities, services, safety and operation of University Village
that will not materially interfere with Tenant’s use of the Leased Premises,
including any systems and equipment, fire stairways, and space between the
suspended ceiling of the Leased Premises and the slab of the floor or roof
thereabove.  If the Leased Premises does
not contain a suspended ceiling, the Leased Premises shall extend vertically to
the height where, in Landlord’s reasonable opinion, a suspended ceiling would otherwise
exist, and Landlord reserves the right to install a suspended ceiling and use
the area thereabove.  Tenant utilizes a
“Frame Relay” service in its operations in connection with its
telecommunications system.  Landlord
shall permit Tenant to install the equipment and facilities necessary to
utilize such Frame Relay service for the Leased Premises, including connections

 

38

 

from Landlord’s local
exchange carrier’s telecommunications facilities at University Village to the
Leased Premises, exclusively in connection with Tenant’s business, provided
that (a) Tenant shall be continuously complying with all governmental laws,
ordinances and regulations; (b) upon expiration of the term of this Lease,
Tenant shall remove such equipment and facilities and repair all damage caused
by installation and removal; (c) Tenant shall indemnify and hold harmless
Landlord from any damages, expenses, costs, reasonable attorney’s fees, and
other costs and expenses arising in connection with the installation, operation,
removal and repair of such equipment and facilities; (d) Tenant shall give
Landlord at least thirty (30) days prior written notice of its intention to
install such equipment and facilities; (e) Tenant shall comply with all
requirements of Landlord’s local exchange carrier in connection with the
installation of such equipment and facilities; (f) Tenant shall comply with
Landlord’s construction requirements and criteria as set forth in this Lease,
and (g) Tenant shall use its best efforts to minimize interference with the
operations of Landlord and other tenants in University Village.  In the event of any future changes or
modifications in Tenant’s telecommunications requirements, Landlord shall not
unreasonably withhold its approval of Tenant’s installations, including without
limitation installations required to connect the Leased Premises to University
Village’s telecommunications access facilities. 
Except as to conduits in place as of the date that Tenant takes
possession of the Leased Premises, any utility conduits (electrical, HVAC,
water, etc.) installed for the benefit of other tenants and running through the
Leased Premises shall be installed above Tenant’s lowered ceiling, and as close
to the back wall of the Leased Premises as possible.

 

20.4                        Remeasurement.  Landlord shall remeasure the Leased Premises
prior to the date Tenant takes possession of the Leased Premises.  All measurements shall be made from the
outside of exterior walls, shaft walls or corridors or the center of any common
walls, without deduction for columns, stairs or other interior construction or
equipment.  If such remeasurement
determines that the Leased Premises contain a different number of square feet
than set forth in Article 1, the Minimum Rent, Breakpoint and Other Charges
shall be adjusted retroactively and prospectively on a pro rata basis to
reflect the number of square feet determined by such remeasurement; provided,
however, that if such measurement reveals that the floor area of the Leased
Premises is more than three percent (3%) above the figure therefore set forth
in Section 1.4, then such charges hereunder shall nevertheless be increased as
aforesaid but only by three percent (3%). 
Upon either party’s request, the revised square footage shall be
confirmed in an amendment to this Lease signed by both parties.  Landlord shall give Tenant 48 hours prior
notice before such remeasurement and Tenant may elect to have a representative
of Tenant present during such remeasurement.

 

20.5                        Access
to University Village.  Landlord may
prevent or restrict access to University Village or designated portions thereof
by such security procedures as Landlord may from time to time impose on days
and hours when University Village is, or portions thereof are, closed for
business to the public.  Landlord
reserves the right to control, prevent access by and remove, any person whose
presence in the judgment of Landlord shall be prejudicial to the safety,
character, reputation and interests of University Village, or who in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs.

 

20.6                        Emergency
Closings.  Landlord shall have the
right (but not the obligation) to

 

39

 

limit or prevent access
to all or any portion of University Village, shut down elevator and escalator
service, activate emergency controls or procedures, or otherwise take such
action or preventive measures deemed necessary by Landlord for the safety of
tenants or other occupants of University Village or the protection of
University Village or other property located thereon or therein, in case of
fire or other casualty, riot or other civil disorder, strike or labor unrest,
public excitement or other dangerous condition, or threat thereof.

 

20.7                        Other
Tenants.  Landlord reserves the right
to lease any portion of University Village to such other tenants as Landlord,
in Landlord’s sole discretion, deems appropriate, whether or not engaged in the
same or similar business for which Tenant is permitted to use the Leased
Premises under this Lease.  Except as
specifically provided herein, Tenant acknowledges that Landlord has made no
representations as to the presence of any specific tenant or number or types of
tenants at University Village as of or after the Commencement Date, hours or
days that such other tenants shall or may be open for business, or gross sales
which may be achieved by Tenant or any other tenants at University
Village.  Except as specifically provided
herein, a vacation or abandonment of its premises or cessation of business in
University Village by any other tenant or occupant shall not release or excuse
Tenant from Tenant’s obligations under any provision of this Lease.

 

21.                               SURRENDER
OR ABANDONMENT OF LEASED PREMISES.

 

21.1                        Surrender
of Possession.  Tenant shall promptly
yield and deliver to Landlord possession of the Leased Premises at the
expiration or prior termination of this Lease.

 

21.2                        Holding
Over.  Any holding over by Tenant
after the expiration of the Lease Term hereof, with Landlord’s written consent,
shall be construed to be a tenancy from month to month at the rents and on all
of the terms and conditions set forth herein, to the extent not inconsistent
with a month-to-month tenancy; provided, however, monthly Minimum Rent shall be
one hundred fifty percent (150%) of the monthly minimum Rent in effect during
the calendar month prior to the expiration of the Lease.  Notwithstanding the foregoing, Tenant shall
not be required to pay the increased Minimum Rent if Landlord and Tenant are
engaged in good faith negotiations to extend this Lease and enter into an
agreement providing for the same within 45 days after expiration of this Lease.

 

21.3                        Abandonment.  Should Tenant vacate or abandon the Leased
Premises or be dispossessed by process of law or otherwise, such abandonment,
vacation or dispossession shall be deemed a breach of this Lease, and, in
addition to any other rights which Landlord may have, Landlord may remove any
personal property belonging to Tenant which remains on the Leased Premises and
store the same, the cost of such removal and storage to be charged to the
account of Tenant.

 

21.4                        Voluntary
or other Surrender.  The voluntary or
other surrender of this Lease by Tenant, or a mutual cancellation thereof,
shall not work a merger, but shall, at the option of Landlord, terminate all or
any existing subleases or subtenancies, or operate as an assignment to it of
any or all such subleases or subtenancies.

 

40

 

22.                               QUIET
ENJOYMENT.   Upon fully complying
with and promptly performing all of the terms, covenants and conditions of this
Lease on its part to be performed, and upon the prompt and timely payment of
all sums due hereunder, Tenant shall have and quietly enjoy the Leased Premises
for the Lease Term set forth herein.

 

23.                               TENANT’S
REPRESENTATIONS.

 

23.1                        Corporate
Authority.  Tenant represents and
warrants that the individual(s) executing this Lease on Tenant’s behalf is/are
duly authorized to execute and deliver this Lease on behalf of said entity, in
accordance with a duly adopted resolution of the board of directors or other
governing body of such entity, that such action and execution are in accordance
with the bylaws or other governing documents of such entity, and that this
Lease is binding upon such entity in accordance with its terms.

 

23.2                        Financial
Matters.  Tenant represents and
warrants that there are no proceedings pending, or to the best of Tenant’s
knowledge, threatened, which would adversely affect the financial condition of
Tenant or the ability of Tenant to enter into this Lease, or the validity and
enforceability of this Lease; no provision of any mortgage, contract or
agreement binding on Tenant which would conflict with or prevent the
performance of this Lease by Tenant; that the financial statements of Tenant
provided to Landlord are true and correct and prepared in accordance with
generally accepted accounting principles consistently applied; and that there
have been no material, adverse changes in financial condition of Tenant since
the date of such financial statements.

 

23.3                        No
Reliance.  Tenant acknowledges and
agrees that neither Landlord nor any agent or representative of Landlord,
including any leasing agent, has made, and Tenant has not relied upon, any
representations or assurances as to Tenant’s projected or likely sales volume,
customer traffic or profitability in the Leased Premises or University
Village.  Tenant acknowledges that to the
extent any projections, materials, discussions, reports or other information
relating to sales volume, customer traffic or profitability have been provided
to Tenant by Landlord, that the same are not to be construed as a promise,
guarantee or representation that Tenant will realize any sales volume, customer
traffic or profitability.

 

24.                               SIGNS.  Tenant shall not place or suffer to be placed
on the exterior walls of the Leased Premises or upon the roof or any exterior
door or wall or on the exterior or interior of any window thereof any sign,
awning, canopy, marquee, advertising matter, decoration, letter or other thing
of any kind (exclusive of the signs, if any, which may be provided for in the
original construction or improvement plans and specifications approved by the
Landlord and Tenant hereunder, and interior signs in accordance with Tenant’s
national sign program) without the prior written consent of Landlord.  Landlord hereby reserves the exclusive right
to the use for any purpose whatsoever of the roof and exterior of the walls of
the Leased Premises and the building of which the Leased Premises are a
part.  Notwithstanding anything to the
contrary herein, Tenant shall have the right to place reasonably sized,
professionally prepared signs and decals consistent with J. Crew’s national
signage program in Tenant’s store windows.

 

41

 

25.                               DISPLAYS.  Tenant may not display or sell merchandise or
allow grocery carts or other similar devices within the control of Tenant to be
stored or to remain outside the defined exterior walls and permanent doorways
of the Leased Premises.   Tenant further
agrees not to install or use any exterior lighting, amplifiers or similar
devices in or about the Leased Premises, such as flashing lights, searchlights,
loudspeakers, phonographs or radio broadcasts.  
If music or any other audio transmission emanating from within the
Leased Premises is objectionable or offensive (in the reasonable judgment of
Landlord), Landlord may require Tenant to decrease the volume of such sounds to
a reasonable level, as determined by Landlord, and Tenant shall comply
immediately.

 

26.                               AUCTIONS
AND SALES.

 

26.1                        General.  Tenant shall not conduct or permit to be
conducted any sale by auction upon or from the Leased Premises, whether the
auction be voluntary, involuntary, pursuant to any assignment for the payment
of creditors, or pursuant to any bankruptcy or other insolvency proceeding.

 

26.2                        No
Distress Sales.  No auction, fire,
bankruptcy, “going out of business” or other distress sales of any nature may
be conducted on the Leased Premises without the prior written consent of
Landlord.

 

27.                               MERCHANTS’
ASSOCIATION.

 

27.1                        General.  Tenant shall become a member of, participate
fully in, pay dues to, and remain in good standing in the Merchants’
Association for University Village. 
Tenant will further abide by the bylaws, regulations and rules of the
Merchants’ Association.  The sole
objectives of the Association shall be (i) to promote and advertise University
Village as an entity through cooperative advertising efforts, relying on
assistance from the Landlord’s representative in promoting University Village,
(ii) to encourage its members to deal fairly and courteously with their
customers, and (iii) to encourage ethical business practices.  The Merchants’ Association shall not act or
attempt to function as a collective body for the purpose of engaging in
discussions or advice concerning management, leasing, or other administrative
functions of University Village nor shall it exercise any control over the
Common Area or sponsor or hold any activities in or on behalf of University
Village other than through the Landlord and with the Landlord’s prior approval.

 

27.2                        Board
of Directors.  The Merchants’
Association is governed by a Board of Directors elected by the members of the
Merchants’ Association with the number of such board members being determined
from time to time in accordance with its bylaws.  Landlord, the major department store tenant,
the major drug store tenant, the major hardware store tenant and the major
supermarket tenant may not be denied membership on the Board of Directors.

 

27.3                        Dues.   Tenant shall pay an annual Promotional
Assessment in the amount of $0.50 per square foot of the ground level portion
of the Area of Leased Premises.

 

42

 

27.4                        Method
of Payment; Annual Adjustment. The Tenant shall pay its Promotional
Assessment in monthly installments, payable in advance on the first day of each
month during the calendar year.  Tenant’s
assessment shall be adjusted bi-annually on the first day of every second
calendar year after 2004 (“Adjustment Date”) during the term of this Lease by
adjusting the amount per square foot set forth in Section 27.3 above for any
increase in the cost of living index for December 2004 as compared to the index
for the December immediately preceding each Adjustment Date.  Adjustments shall be based upon the U.S. city
Average Consumer Price Index for Urban Wage Earners and Clerical Workers for
All Items (1982-84 = 100) published by the bureau of Labor of the U.S.
Department of Labor as published for December 2004 and as published for the
month of December immediately preceding the Adjustment Date.  If the index ceases to be published or is
modified, such increase shall be based on the replacement index and/or such
adjustment factors as provided by the bureau, or otherwise upon a reasonably
comparable cost of living index. 
Notwithstanding the foregoing, in no event shall the Promotional
Assessment increase by more than six percent (6%) every two years on a
non-cumulative basis.

 

27.5                        Landlord’s
Contribution.  Landlord shall be a
member of the Merchants’ Association and shall pay, on a noncumulative basis, a
contribution equal to twenty-five percent (25%) of all contributions collected
by the Merchants’ Association; provided, however, that the Landlord’s
contribution shall not exceed the sum of Fifty Thousand and No/100 Dollars
($50,000) in any one (1) fiscal year. 
Landlord may elect to contribute part or all of the services of a
marketing director in lieu of all or a portion of its cash contribution.  In the event Landlord makes the above
election, the marketing director shall be under the exclusive control and
supervision of Landlord.

 

27.6                        Use
of Tenant’s Name.  Landlord covenants
that it will not advertise the Tenant’s business or its merchandise in any
media without first obtaining Tenant’s consent, which consent may be withheld
in Tenant’s sole discretion.

 

27.7                        Conversion
to Marketing Fund.  At any time
during the Term of this Lease, Landlord shall have the right to disband the
Merchants’ Association by written notice to each member thereof.  In lieu of the Merchants’ Association,
Landlord shall establish a Marketing Fund to furnish and maintain advertising
and sale promotions, which, in Landlord’s sole opinion, will benefit University
Village.  The Marketing Director, staff
and any consultants shall be hired by the Landlord to direct and perform the
activities of the Marketing Fund and shall be under the exclusive control and
supervision of Landlord.  Tenant’s
advertising requirements under the Marketing Fund shall be the same as those
under the Merchants’ Association as provided above.  Landlord shall appoint a committee comprised
of a representative from each of four tenants occupying premises in University
Village to review the advertising and other promotional activities provided by
the Marketing Fund.  During each Lease
Year, Tenant shall pay to Landlord in equal monthly installments, as its share
of the cost of the Marketing Fund, an amount herein equal to the then current
Merchants’ Association dues payable by Tenant in accordance with this Section
27.  Tenant’s obligations to participate
in the Marketing Fund and pay its share of the costs are subject to the same
conditions and caps as Tenant’s obligations to participate in

 

43

 

and pay its share of
funding the Merchant’s Association.

 

28.                               MAJOR
RENOVATION.

 

28.1                        Cooperation of Tenant. 
[omitted]

 

28.2                        Construction Coordination. 
If Landlord shall undertake an expansion and/or reconfiguration of
University Village, in whole or in part, such construction and reconfiguration
may result in noise, dust, debris and other disruption which could adversely
impact Tenant’s business in the Leased Premises.  Landlord shall use reasonable efforts to
mitigate the adverse impact on Tenant, including any adverse affect on access
to or visibility of Tenant’s storefront and the Leased Premises, but Tenant
understands and accepts that such impacts may not be capable of mitigation
without unreasonable expense.  Such
adverse impacts shall not constitute a default under this Lease by Landlord or
a constructive eviction of Tenant.  In
connection with such a project, Landlord may find it necessary or desirable, as
determined by Landlord, to enter into the Leased Premises to inspect the same
or perform work in or around the Leased Premises, including, without
limitation, the installation of temporary and/or permanent supports and other
structures and facilities, provided the installation of same shall not
materially adversely affect Tenant’s ability to operate its business in the
Leased Premises for the Permitted Use, no such installations shall be made in
the sales area of the Leased Premises unless no other reasonable alternative is
available and Landlord shall use reasonable efforts to perform any such work in
the Leased Premises during non-business hours. 
If, as a result of no other reasonable alternative being available,
Landlord notifies Tenant of its intention to install a column or columns in the
sales area of the Leased Premises in connection with such a project, Tenant
shall have the right, upon one hundred twenty (120) days notice to Landlord
delivered within twenty (20) days of receipt of such notice from Landlord, to
terminate this Lease, unless within sixty (60) days following Landlord’s
receipt of Tenant’s notice of termination, Landlord delivers notice to Tenant
advising Tenant of its decision to not proceed with the installation of any
columns within the Leased Premises. 
Tenant consents to such actions by Landlord and Landlord’s agents and
contractors.

 

29.                               HAZARDOUS
AND TOXIC SUBSTANCES.

 

29.1                        Tenant’s
Representation and Warranty.  Tenant
represents, warrants and covenants that throughout the term of this Lease, no
chemical, substance, material or waste or component thereof which is now or
hereafter listed, defined or regulated as a hazardous or toxic chemical,
substance, material or waste or component thereof by any federal, state or
local governing or regulatory body having jurisdiction, or which would trigger
any employee or community “right-to-know” requirements adopted by any such body
(“Hazardous Substances”) will be improperly generated, treated, released,
stored or disposed of, or otherwise deposited in or on the Leased Premises by
Tenant, its employees, agents, contractors, subtenants, licensees or invitees,
including without limitation the surface waters and subsurface waters thereof,
no underground tanks will be located on the Leased Premises, and there will be
no Hazardous Substances or hazardous conditions in or on the Leased Premises
which may support a claim or cause of action under any federal, state or local
environmental statutes regulations, ordinances or

 

44

 

regulatory
requirements.   Tenant may store in the
Leased Premises household quantities of cleaning supplies provided Tenant uses
care in storing them and otherwise complies with all applicable laws.

 

29.2                        Tenant’s
Notice to Landlord.  Tenant shall
promptly notify Landlord of: 
(i) any enforcement, cleanup or other regulatory action taken or
threatened by any governmental or regulatory authority with respect to the
presence of any Hazardous Substances on the Leased Premises or the migration
thereof from or to other property, (ii) any demands or claims made or
threatened by any party relating to any loss or injury resulting from any
Hazardous Substances on the Leased Premises, (iii) any release, discharge
or nonroutine, improper or unlawful disposal or transportation of any Hazardous
Substances on or from the Leased Premises or in violation of this Section 29,
and (iv) any matters where Tenant is required by law to give a notice to
any governmental or regulatory authority respecting any Hazardous Substances on
the Leased Premises.  Landlord shall have
the right (but not the obligation) to join and participate, as a party, in any
legal proceedings or actions affecting the Leased Premises initiated in
connection with any environmental, health or safety law.

 

29.3                        Remediation
of Contamination.  If any Hazardous
Substances are released, discharged or disposed of by Tenant, or their
employees, agents or contractors, on or about University Village in violation
of the foregoing provisions, Tenant shall immediately, properly and in
compliance with applicable laws clean up and remove the Hazardous Substances
from University Village and any other affected property and clean or replace
any affected personal property, at Tenant’s expense.  Such clean up and removal work shall be
subject to Landlord’s prior written approval (except in emergencies), and shall
include, without limitation, any testing, investigation, and the preparation
and implementation of any remedial action plan required by any court or
governmental body having jurisdiction or reasonably required by Landlord.  If Landlord or any lender to Landlord or any
governmental body arranges for any tests or studies showing that this Section
has been violated, Tenant shall pay for the costs of such tests.

 

29.4                        Indemnity
of Landlord.  Tenant shall defend,
indemnify, and hold Landlord harmless from all claims, liabilities, damages,
costs, expenses fees fines and penalties (both civil and criminal) (including,
but not limited to, reasonable attorneys’ fees) resulting from any personal
injury, property damage, water pollution, air pollution, hazardous waste
combination, Hazardous Substances contamination, damage to fish or wildlife,
damage to natural resources, or environmental harm due to the release,
discharge or disposal of Hazardous Substances by Tenant or Tenant’s employees,
agents or contractors on or about University Village.  Without limiting the generality of the
foregoing, Tenant’s obligations under this subsection shall extend to liability
arising under common law or under any federal, state, local, or other
governmental requirement.  This indemnity
shall apply to the fullest extent permitted by applicable law.  Tenant’s indemnification obligation pursuant
to this paragraph shall survive the expiration or termination of this Lease.

 

29.5                        Acceptance
of Leased Premises.  Tenant accepts
the Leased Premises “AS IS” subject only to completion of Landlord’s Work.

 

45

 

29.6                        Soil
Contamination.  In the event that any
preexisting contamination in the soils beneath the building in which the Leased
Premises are located and affecting the construction or use of the Leased
Premises is discovered following the date of this Lease, and if the same
requires remediation pursuant to any applicable law, rule, regulation or order
of any governmental agency having jurisdiction over the same, or otherwise in
the judgment of Landlord, then, Landlord shall promptly remediate the same at
Landlord’s sole cost and expense and, if Landlord is required to enter into the
Leased Premises or if such remediation measures require the disruption of
Tenant’s use of the Leased Premises, the parties agree that to the extent that
Tenant is unable to use the Leased Premises for Permitted Uses under this
Lease, the Minimum Rent and Other Charges payable by Tenant hereunder shall
equitably abate in proportion to the extent of the Leased Premises so affected
for the period of any such interruption.

 

29.7                        Indemnity
of Tenant.  To the best of Landlord’s
knowledge, there are no Hazardous Substances, including, without limitation,
any asbestos containing materials, located within or under the Leased
Premises.  Landlord shall defend,
indemnify, and hold Tenant harmless from all claims, liabilities, damages,
costs, expenses, fees, fines and penalties (both civil and criminal)
(including, but not limited to, reasonable attorneys’ fees) resulting from any
personal injury, property damage, water pollution, air pollution, hazardous
waste contamination, Hazardous Substances contamination, damage to fish or
wildlife, damage to natural resources, or environmental harm due to preexisting
contamination of the Leased Premises by Hazardous Substances (except to the
extent such Hazardous Substances are within the Leased Premises due to acts by
Tenant or Tenant’s employees, agents or contractors on or about University
Village).  Landlord’s indemnification
obligation pursuant to this paragraph shall survive the expiration or termination
of this Lease.

 

30.                               MISCELLANEOUS.

 

30.1                        Successors
or Assigns.  All the terms,
conditions, covenants and agreements of this Lease shall extend to and be
binding upon Landlord, Tenant and their respective heirs, administrators,
executors, successors and assigns, and upon any person or persons coming into
ownership or possession of any interest in the Leased Premises by operation of
law or otherwise, and shall be construed as covenants running with the land.

 

30.2                        Tenant
Defined.  The word “Tenant” as used
herein shall mean each and every person, partnership or corporation who is
mentioned as Tenant herein or who executes this Lease as Tenant.

 

30.3                        Broker’s
Commission.  Landlord and Tenant
represent and warrant that it has incurred no liabilities or claims for
brokerage commissions or finder’s fees in connection with the execution of this
Lease and that it has not dealt with or has any knowledge of any real estate
broker, agent or salesperson in connection with this Lease.  Each party agrees to indemnify and hold the
other harmless from all such liabilities or claims (including, without
limitation, attorneys’ fees).

 

46

 

30.4                        Partial
Invalidity.  If any term, covenant,
or condition of this Lease or the application thereof to any person or circumstance
is, to any extent, invalid or unenforceable, the remainder of this Lease, or
the application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.  Titles of sections and paragraphs herein are
for convenience only and shall not affect the meaning or interpretation of any
provision of this Lease.

 

30.5                        Recording.  Tenant shall not record this Lease without
the prior written consent of Landlord. 
However, upon the request of Landlord, both parties shall execute a
memorandum or “short form” of this Lease for the purposes of recordation in a
form customarily used for such purposes. Said memorandum or short form of this
Lease shall describe the parties, the Leased Premises and the Lease Term and
shall incorporate this Lease by reference.

 

30.6                        Notices.   Any notices required in accordance with any
of the provisions herein shall be in writing and, if to Landlord, shall be
delivered or mailed by registered or certified mail or reputable air courier
such as Federal Express to the address of Landlord as set forth at the
beginning of this Lease or at such other place as Landlord may in writing from
time to time direct to Tenant, and if to Tenant, shall be delivered or mailed
by registered or certified mail or reputable air courier such as Federal
Express to Tenant at 770 Broadway, New York, NY 10003, Attn:  General Counsel.  If there is more than one Tenant, any notice
required or permitted hereunder may be given by or to any one thereof and shall
have the same force and effect as if given by or to all thereof.  Notice shall be deemed delivered upon
acceptance or refusal of the same.

 

30.7                        Waiver.  The waiver by Landlord or Tenant of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained.  The subsequent acceptance of Minimum Rent or
Percentage Rent or any other charges or sum hereunder by Landlord shall not be
deemed to be a waiver of any preceding default by Tenant of any term, covenant
or condition of this Lease, other than the failure of Tenant to pay the
particular sum so accepted, regardless of Landlord’s knowledge of such
preceding default at the time of the acceptance of such sum.

 

30.8                        Joint
Obligation.  If there be more than one
Tenant, the obligations hereunder imposed shall be joint and several.

 

30.9                        Time.  Time is of the essence of this Lease and each
and all of its provisions in which performance is a factor.

 

30.10                 Late
Charges.  If Tenant fails to pay,
when the same is due and payable, any Minimum Rent or Percentage Rent or
Additional Rent, or the Other Charges described herein, such unpaid amounts
shall bear interest at Default Rate on the first day of each month, commencing
on the date due to the date of payment. 
In addition to such interest, Tenant

 

47

 

acknowledges that either
the late reporting of gross sales or late payment by Tenant of any monthly
installment of Minimum Rent, Percentage Rent or Other Charges will cause
Landlord to incur certain costs and expenses not contemplated under this Lease,
the exact amount of such costs being extremely difficult or impractical to
fix.  Such costs and expenses will
include, without limitation, administrative and collection costs, and
processing and accounting expenses. 
Therefore, if any gross sales or any installment of Minimum Rent,
Percentage Rent or Other Charges is not received by Landlord from Tenant within
ten (10) days after Landlord has given written notice of such delinquency to
Tenant, Tenant shall immediately pay to Landlord a late charge of Two Hundred
and No/100 Dollars ($200.00) for each delinquency.  Landlord and Tenant agree that this late
charge represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for its loss suffered by such nonpayment by
Tenant.  Acceptance of this late charge
shall not constitute a waiver of Tenant’s default with respect to such
nonpayment by Tenant nor prevent Landlord from exercising all other rights and
remedies available to Landlord under this Lease.  Landlord shall apply payments made by Tenant
first to accrued charges, interest and rent in the following order:  Late Charges, interest, Minimum Rent,
Percentage Rent, Other Charges and Additional Rent; and any balance remaining
to current Minimum Rent, Percentage Rent, Other Charges and Additional Rent.

 

30.11                 Prior
Agreements.  This Lease contains all
of the agreements of the parties hereto with respect to any matter covered or
mentioned in this Lease, and no prior agreements or understanding pertaining to
any such matters shall be effective for any purpose.  No provisions of this Lease may be amended or
added to except by an agreement in writing signed by the parties hereto or
their respective successors in interest. 
This Lease shall not be effective or binding on any party until fully
executed by both parties hereto.

 

30.12                 Inability
to Perform.  Except for the
obligation of the Tenant to pay Rent, which shall not be excused by force
majeure, this Lease and the obligations of the parties hereunder shall be
excused for the period of a delay in performing its obligations hereunder, if
such inability or delay is caused by reason of strike, labor troubles, acts of
God, or any other cause beyond the reasonable control of the obligated party.

 

30.13                 Choice
of Law.  This Lease shall be governed
by the laws of the State of Washington.

 

30.14                 Landlord’s
Consent.  Except as otherwise
specifically provided herein, whenever Landlord’s consent or approval is required,
the same may be withheld in Landlord’s sole discretion.

 

30.15                 Negotiations.  This Lease, and any Riders and Exhibits
hereto, have been mutually negotiated by Landlord and Tenant, and any
ambiguities shall not be interpreted in favor of either party.  Any printed provisions that have been deleted
shall not be used to interpret the remaining provisions.

 

30.16                 Landlord’s
Liability.  Anything in this Lease to
the contrary notwithstanding, the covenants, undertakings and agreements herein
made on the part of Landlord are made and

 

48

 

intended not as personal
covenants, undertakings and agreements for the purpose of binding Landlord
personally or the assets of Landlord, but are made and intended for the purpose
of binding only Landlord’s interest in the Leased Premises and University
Village, as the same may from time to time be encumbered.  In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns, covenant and agree that in
the event of any actual or alleged failure, breach or default hereunder by
Landlord, the sole and exclusive remedy of Tenant hereunder shall be against
the Landlord’s interest in the Leased Premises and University Village, and no
general or limited partner of Landlord, or any director, officer, agent or
employee of any corporation which is the Landlord or a general or limited
partner of Landlord, shall be sued or named as a party in any such suit or
action and no judgment shall be taken against any such general or limited
partner of Landlord.  In case Landlord or
any successor owner of University Village shall convey or otherwise dispose of
any portion thereof in which the Leased Premises are located to another party (and
nothing herein shall be construed to restrict or prevent such conveyance or
disposition), such other party shall thereupon be and become landlord hereunder
and shall be deemed to have fully assumed and be liable for all obligations of
this Lease to be performed by Landlord, including the return of any Security
Deposit.  Tenant shall attorn to such
other party, and Landlord or such successor owner shall, from and after the
date of conveyance, be free of all liabilities and obligations hereunder.

 

30.17                 Conflict.  In the event there is a conflict between the
terms of this Lease and Exhibits and the plans for Tenant’s work approved in
writing by Landlord, the approved plans shall prevail.

 

49

 

IN WITNESS WHEREOF, the parties hereto have executed
this instrument the day and year first above set forth.

 

	
  LANDLORD:

  	
  UNIVERSITY VILLAGE
  LIMITED PARTNERSHIP,

  
	
   

  	
  a Washington limited
  partnership

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  UV, INC.,

  
	
   

  	
   

  	
  a Washington
  corporation,

  
	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Matt Griffin

  	
   

  
	
   

  	
  Matt Griffin

  
	
   

  	
  V P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TENANT:

  	
  GRACE HOLMES, INC.,

  	
   

  
	
   

  	
  a Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott Gilbertson

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Printed Name:

  	
  Scott Gilbertson

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer

  	
   

  
										

 

50

 

LANDLORD ACKNOWLEDGMENT

 

	
  STATE OF WASHINGTON

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF KING

  	
  )

  

 

On this             
day of                        ,
2003, before me, the undersigned, a notary public in and for the state of
Washington, duly commissioned and sworn personally appeared Stuart M. Sloan, to
me known to be the President of UV, Inc., the general partner of UNIVERSITY
VILLAGE LIMITED PARTNERSHIP, the partnership that executed the foregoing
instrument, and acknowledged the said instrument to be the free and voluntary
act and deed of said partnership, for the uses and purposes therein mentioned
and on oath stated that he is authorized to execute the said instrument.

 

WITNESS my hand
and official seal hereto affixed the day and year in this certificate
abovewritten.

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Printed Name:

  	
   

  
	
   

  	
   

  	
  Notary Public for the
  State of Washington,

  
	
   

  	
   

  	
  residing at

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  My appointment expires:

  	
   

  
						

 

CORPORATE
ACKNOWLEDGMENT

 

	
  STATE OF

  	
   

  	
  )

  
	
   

  	
   

  	
  ) ss.

  
	
  COUNTY OF

  	
   

  	
  )

  

 

On this            day
of
                        ,
2003, before me, the undersigned, a Notary Public in and for said State,
personally appeared                                                        
and                                                        ,
known or identified to me to be the                                       
and                                            
of                                            ,
the corporation that executed the within instrument, or the persons who
executed the instrument on behalf of said corporation, and acknowledged to me
that such corporation executed the same.

 

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

 

	
   

  	
   

  
	
   

  	
  Printed Name:

  	
   

  
	
   

  	
  Notary Public for the
  state of

  	
   

  
	
   

  	
  residing at

  	
   

  
	
   

  	
   

  
	
   

  	
  My appointment expires:

  	
   

  
						

 

51

 

INDIVIDUAL ACKNOWLEDGMENT

 

	
  STATE OF

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF

  	
  )

  

 

On this               
day of                                 ,
20    , before me, the undersigned, a Notary Public in and
for said State, personally appeared                                                   ,
who acknowledged that                                                   
authorized to sign the foregoing instrument, and that the same is                           
free act and deed.

 

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

 

	
   

  	
   

  
	
   

  	
  Printed Name:

  	
   

  
	
   

  	
  Notary Public for the
  state of

  	
   

  
	
   

  	
  residing at

  	
   

  
	
   

  	
   

  
	
   

  	
  My appointment expires:

  	
   

  
						

 

PARTNERSHIP
ACKNOWLEDGMENT

 

	
  STATE OF

  	
   

  	
  )

  
	
   

  	
   

  	
  ) ss.

  
	
  COUNTY OF

  	
   

  	
  )

  

 

On this                 day
of                                              ,
20     before me, the undersigned, a Notary Public in and
for the state of                                                                     
duly commissioned and sworn personally appeared                                               
to me known to be the                                                                                
of                                                                    
the partnership that executed the foregoing instrument, and acknowledged the
said instrument to be the free and voluntary act and deed of said partnership,
for the uses and purposes therein mentioned and on oath stated that he/she is
authorized to execute the said instrument.

 

WITNESS my hand
and official seal hereto-affixed the day and year in this certificate above
written.

 

	
   

  	
   

  
	
   

  	
  Printed Name:

  	
   

  
	
   

  	
  Notary Public for the
  state of

  	
   

  
	
   

  	
  residing at

  	
   

  
	
   

  	
   

  
	
   

  	
  My appointment expires:

  	
   

  
						

 

52

 

LIMITED LIABILITY COMPANY
ACKNOWLEDGMENT

 

	
  STATE OF

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF

  	
  )

  

 

On this                day
of                                          ,
20     before me, the undersigned, a Notary Public in and
for the state of                                                                
duly commissioned and sworn personally appeared                                                
to me known to be the                                                                                       
of                                                                                       
the limited liability company that executed the foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said limited liability company, for the uses and purposes therein mentioned and
on oath stated that he/she is authorized to execute the said instrument.

 

WITNESS my hand
and official seal hereto-affixed the day and year in this certificate above
written.

 

	
   

  	
   

  
	
   

  	
  Printed Name:

  	
   

  
	
   

  	
  Notary Public for the
  state of

  	
   

  
	
   

  	
  residing at

  	
   

  
	
   

  	
   

  
	
   

  	
  My appointment expires:

  	
   

  
						

 

53

 

GUARANTY OF LEASE

 

THIS GUARANTY OF
LEASE is made as of the 7th day of November, 2003 by J. CREW GROUP, INC., a New
York corporation, with offices at 770 Broadway, New York, NY 10003
(“Guarantor”).

 

UNIVERSITY VILLAGE
LIMITED PARTNERSHIIP, a Washington limited partnership (“Landlord”), and GRACE
HOLMES, INC., a Delaware corporation (“Tenant”), are entering into a certain
Shopping Center Lease as of the date hereof (the “Lease”), with respect to
certain premises containing approximately 7,400 square feet (the “Premises)
within the shopping center located in Seattle, Washington, known as University
Village.

 

In order to induce
Landlord to lease the Premises to Tenant, Guarantor agreed to guarantee the
performance of all of the terms, conditions, covenants, obligations,
liabilities and agreements contained in the Lease which are required to be
fulfilled or performed by Tenant, subject to the terms and provisions hereof.

 

1.                                       (a)  Guarantor unconditionally guarantees to
Landlord and the successors and assigns of Landlord the full and punctual
performance and observance by Tenant of all the terms, covenants and conditions
in the Lease contained on Tenant’s part to be kept, performed or observed.

 

(b)  If at any time default shall be made by
Tenant in the performance or observance of any of the terms, covenants or
conditions in the Lease contained on Tenant’s part to be kept, performed or
observed, Guarantor will keep, perform and observe the same, as the case may
be, in place and stead of Tenant.

 

2.                                       Any act of Landlord, or the successors or assigns of
Landlord, consisting of a waiver of any of the terms or conditions of the
Lease, or the giving of any consent to any manner or thing relating to the
Lease, or the granting of any indulgences or extensions of time to Tenant, may
be done without notice to Guarantor and without releasing the obligations of
Guarantor hereunder.  Landlord agrees to
give to Guarantor notice of any Tenant default under the Lease at the address
of Guarantor set forth below (or any subsequent address of which Guarantor
gives Landlord written notice) in the same manner as notice to Tenant as
provided under the Lease and shall afford Guarantor the period of time to cure
such default as provided Tenant under the Lease with respect to such
default.  Failure to give any such notice
by Landlord hereunder shall not discharge Guarantor of any obligation or liability
under this Guaranty except that Landlord must give such notice and opportunity
to cure to Guarantor prior to enforcement of any rights, remedies, liabilities
or obligations under this Guaranty.

 

3.                                       The
obligations of Guarantor hereunder shall not be released by Landlord’s receipt,
application or release of security given for the performance and observance of
covenants and conditions in the Lease contained on Tenant’s part to be
performed or observed; nor by any modification of the Lease, but in case of any
such modification the liability of Guarantor shall be

 

54

 

deemed modified in
accordance with the terms of any such modification of the Lease.

 

4.                                       The
liability of Guarantor hereunder shall in no way be affected by (a) the release
or discharge of Tenant in any creditors’, receivership, bankruptcy or other
proceedings; (b) the impairment, limitation or modification of the liability of
the Tenant or the estate of the Tenant in bankruptcy, or of any remedy for the
enforcement of Tenant’s liability under the Lease resulting from the operation
of any present or future provision of the National Bankruptcy Act or other
statute or from the decision in any court; (c) the rejection or disaffirmance
of the Lease in any such proceedings; (d) the assignment or transfer of the
Lease by Tenant or the sublease of all or any part of the premises described
therein; or (e) any disability of Tenant. 
Guarantor further agrees that this Guaranty shall continue to be
effective or be reinstated as the case may be if at any time payment, or any
part thereof, of any amount pursuant to the Lease is rescinded or must
otherwise be restored by Landlord as a result of the bankruptcy or
reorganization of Tenant.

 

5.                                       The
liability of Guarantor under this Guaranty shall be continuing and shall remain
in full force and effect as long as Tenant is or may be obligated to Landlord
on account of any obligation covered by this Guaranty.  The obligations of Guarantor to Landlord
hereunder are independent of Tenant’s obligations and a separate action or
actions may be brought and prosecuted by Landlord against Guarantor whether or
not such action or actions are also brought against Tenant.  This Guaranty constitutes a guarantee of
payment when due and not of collection. 
Guarantor waives and agrees not to assert or otherwise take advantage of
any right which it may have (a) to require Landlord to proceed against Tenant
or any other person, firm or corporation or to proceed against or exhaust any
security held by it at any time or to pursue any other remedy; or (b) any
defense which it may have by reason of incapacity, lack of authority or other
approvals relating either to Tenant or Guarantor, or based upon any statute of
limitations or an election of remedies by Landlord.

 

6.                                       This
Guaranty shall be construed and performed in accordance with the laws of the
State of Washington.  Guarantor hereby
irrevocably submit to the jurisdiction of King County Superior Court in
Seattle, King County, Washington in any action or proceeding brought to enforce
or otherwise arising out of or relating to this Guaranty and waive to the
fullest extent permitted by law any objection which it may have now or
hereafter to such venue or any claim that such forum is an inconvenient forum.

 

7.                                       This
guarantee shall apply to the Lease, any extension or renewal thereof pursuant
to the exercise by Tenant of any option to extend contained in the Lease or
otherwise consented to by Guarantor, and to any holdover term following the
term granted by the Lease or any extension or renewal thereof.

 

8.                                       This
instrument may not be changed, modified, discharged or terminated orally or in
any manner other than by an agreement in writing signed by Guarantor and the
Landlord.  If there is more than one
Guarantor, the obligations of the undersigned shall be joint and several.  This Guarantee shall be binding upon
Guarantor and its/their successors and assigns.

 

9.                                       Notwithstanding
anything herein to the contrary, the obligations of Guarantor

 

55

 

hereunder shall not
include any increased obligations of Tenant evidenced by any amendment or
modification of the Lease entered into by Landlord and any successor to Tenant
who is not affiliated with Guarantor.

 

DATED as of the
day and year first above written.

 

	
  GUARANTOR:

  	
  J. CREW GROUP, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas Lamberti

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nicholas Lamberti

  	
   

  
	
   

  	
   

  	
  Title:

  	
  VP Controller

  	
   

  

 

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EXHIBIT 10.14.1  

 
 

AMENDMENT NO. 1 TO CREDIT AGREEMENT    
    

        This
AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "Amendment") is entered into as of May 25, 2004 by and among SAMSONITE
CORPORATION, a Delaware corporation ("U.S. Borrower"), SAMSONITE EUROPE N.V., a Belgian corporation ("European
Borrower") (U.S. Borrower and European Borrower are sometimes collectively referred to herein as the "Borrowers" and
individually as a "Borrower"), the other Credit Parties signatory hereto, GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its
individual capacity, "GE Capital"), for itself, as Agent and as North American Collateral Agent, and the other Lenders signatory hereto. Unless
otherwise specified herein, capitalized terms used in this Amendment shall have the meanings ascribed to them in Annex A to the Credit Agreement
(as hereinafter defined). 

R E C I T A L S: 

        WHEREAS,
Borrowers, the other Credit Parties, the Agent, the North American Collateral Agent, the Fronting Lender, the European Agent and the Lenders entered into that certain Credit
Agreement dated as of July 31, 2003 (as amended, supplemented, restated or otherwise modified from time to time prior to the date hereof, the "Credit
Agreement"); and 

        WHEREAS,
Borrowers have requested that the Agent, Requisite Lenders and Supermajority U.S. Revolving Lenders amend certain provisions of the Credit Agreement. 

        NOW,
THEREFORE, in consideration of the premises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows: 

        1    Amendments.    The Credit Agreement is hereby amended as follows: 

        (a)   Section 1.3(g) of the Credit Agreement is amended to add at the end thereof the following sentence: 

"Notwithstanding
any of the foregoing in this Section 1.3(b), Section 1.3(b)(v) shall
apply and be in full force and effect at all times prior to the 2004 Indentures Date and shall not apply and have no force and effect on the 2004 Indentures Date and all times thereafter." 

        (b)   Section 3.24 of the Credit Agreement is amended and restated to read in its entirety as follows: 

"3.24    Subordinated Debt and 2004 Senior Notes.    As of the Closing Date, Borrowers have delivered to Agent a complete and
correct copy of the Indentures governing the Subordinated Notes other than the 2004 Senior Subordinated Notes (including all schedules, exhibits, amendments, supplements, modifications, assignments
and all other documents delivered pursuant thereto or in connection therewith). As of the 2004 Indentures Date, Borrowers have delivered to Agent a complete and correct copy of the Indentures
governing the 2004 Senior Notes and the 2004 Senior Subordinated Notes (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered
pursuant thereto or in connection therewith). All Obligations, including any Letter of Credit Obligation, constitute Indebtedness entitled to the benefits of the subordination provisions contained in
the Subordinated Notes. As of the 2004 Indentures Date, all aspects of the transactions contemplated by the 2004 Senior Notes Documents and the 2004 Senior Subordinated Notes Documents have been
effected in all material respects in accordance with the terms of the 2004 Senior Notes Documents and the 2004 Senior Subordinated Notes Documents and applicable law. Borrower has the corporate power
and authority to incur the Indebtedness evidenced by the 2004 Senior Notes Documents and the 2004 Senior Subordinated Notes Documents." 

 

        (c)   Section 5 of the Credit Agreement is amended by amending and restating  Section 5.10 thereof to read in its entirety as follows: 

"5.10    2004 Senior Notes and 2004 Senior Subordinated Notes Documents.    Promptly after the issuance of the 2004 Senior Notes and
the 2004 Senior Subordinated Notes, Borrowers shall deliver to Agent an
officer's certificate, in form and substance reasonably satisfactory to Agent, from the Borrowers, certifying and representing that attached thereto are the true, correct and complete copies of the
2004 Senior Notes Indenture and all documents, agreement and instruments related thereto (together with all annexes, attachments, exhibits and schedules attached thereto), and the true, correct and
complete copies of the 2004 Senior Subordinated Notes Indenture and all documents, agreement and instruments related thereto (together with all annexes, attachments, exhibits and schedules attached
thereto)." 

        (d)   Section 6.2 of the Credit Agreement is amended by amending and restating  clause (a) thereof to read in its entirety as follows: 

"(a)(X) at
all times prior to the 2004 Indentures Date, the Samsonite Entities may make loans or other investments to or in one or more other Samsonite Entities (other than Joint Venture
Subsidiaries) as long as the aggregate outstanding principal amount of investments, loans and advances made by all Samsonite Entities does not exceed the Dollar Equivalent of $50,000,000 and
(Y) on the 2004 Indentures Date and at all times thereafter, (i) as long as (A) at the time of each of the following proposed investments, loans or advances and after giving
effect thereto, U.S. Borrower is Solvent, (B) no Default or Event of Default has occurred and is continuing or would result after giving effect to each of the following proposed investments,
loans or advances and (C) U.S. Borrower shall have U.S. Borrowing Availability of at least $5,000,000 after giving effect to each of the following proposed investments, loans or advances:
(1) additional investments, loans or advances made by U.S. Borrower after the Closing Date in or to Samsonite Canada as long as the aggregate outstanding amount thereof at any time does not
exceed the Dollar Equivalent of $3,500,000; (2) additional investments, loans or advances made by U.S. Borrower after the Closing Date in or to Samsonite Stores as long as the aggregate
outstanding amount thereof at any time does not exceed the Dollar Equivalent of $10,000,000; (3) additional investments, loans or advances made by U.S. Borrower after the Closing Date in or to
European Borrower as long as the aggregate outstanding amount thereof at any time does not exceed the Dollar Equivalent of $10,000,000; (4) additional investments, loans or advances made by
U.S. Borrower after the Closing Date in or to any Samsonite Entity (other than Joint Venture Subsidiaries, Samsonite Canada, Samsonite Stores and European Borrower) (and any Person which, immediately
following such investment, loan or advance, becomes a Samsonite Entity) as long as the aggregate outstanding amount thereof at any time does not exceed the Dollar Equivalent of $5,000,000; and
(5) additional investments, loans or advances made by U.S. Borrower after the Closing Date in or to other Foreign Samsonite Entities (other than Joint Venture Subsidiaries) (and any Person
which, immediately following such investment, loan or advance, becomes a Foreign Samsonite Entity) as long as the aggregate outstanding amount thereof at any time does not exceed the Dollar Equivalent
of $10,000,000 and (ii) as long as (A) at the time of each of the following proposed investments, loans or advances and after giving effect thereto, European Borrower is Solvent,
(B) no Default or Event of Default has occurred or is continuing or would result after giving effect to the following proposed investments, loans or advances and (C) European Borrower
shall have European Borrowing Availability of at least the Dollar Equivalent of $5,000,000 after giving effect to the following proposed investments, loans or advances: additional investments, loans
or advances made by European Borrower after the Closing Date in or to another Foreign Samsonite Entity (other than Joint Venture Subsidiaries) (and any Person which, immediately following such
investment, loan or advance, 

2

 

becomes
a Foreign Samsonite Entity) as long as the aggregate outstanding amount thereof at any time does not exceed the Dollar Equivalent of $10,000,000;" 

        (e)   Section 6.2 of the Credit Agreement is further amended by adding at the end thereof the following sentence: 

"For
purposes of this Section 6.2, the value of any non-cash investment shall be its fair market value at the time of investment in
Dollar Equivalents." 

        (f)    Section 6.3(a)(iv) of the Credit Agreement is amended by replacing the phrase "(other than Foreign Credit Lines)"
with the phrase "(other than Foreign Credit Lines and the Indebtedness evidenced by the 1995 Subordinated Notes and the 1998 Subordinated Notes)". 

        (g)   Section 6.3(a) of the Credit Agreement is amended by deleting the word "and" at the end of  clause (xi) thereof, by relettering clause (xii) thereof as  clause (xv) thereof and by adding clause (xii),  clause (xiii) and clause (xiv) thereto at the end of  clause (xi) thereof immediately after the phrase "the
applicable Pledge Agreement", which  clause(xii), clause (xiii) and  clause (xiv) shall read in
their entirety as follows: 

"(xii) unsecured
Indebtedness of U.S. Borrower evidenced by the 2004 Senior Notes and the 2004 Senior Subordinated Notes, and, in each case, refinancings thereof or amendments or modifications
thereto that do not have the effect of increasing the principal amount thereof or changing the amortization thereof (other than to extend the same) and that are otherwise on terms and conditions no
less favorable to Agent or any Lender and on conditions not materially less favorable to any Samsonite Entity, in each case as determined by Agent in its reasonable discretion, than the terms of the
Indebtedness being refinanced, amended or modified; as long as (u) the aggregate principal amount of the 2004 Senior Notes and the 2004 Senior Subordinated Notes does not exceed the Dollar
Equivalent of $325,000,000 at any time outstanding (it being understood and agreed that the 2004 Senior Notes shall be denominated in Euros; and it is further understood and agreed that the principal
amount of the 2004 Senior Notes shall not be deemed increased for the purposes of this Agreement if such increase is caused solely by currency exchange rate gains of Euros
vis-à-vis Dollars that may occur after the 2004 Indentures Date and the resulting increase in the Dollar Equivalent amount of such principal amount),
(v) the aggregate principal amount of the 2004 Senior Notes does not exceed at any time the aggregate principal amount thereof outstanding on the 2004 Indentures Date, (w) the aggregate
principal amount of the 2004 Senior Subordinated Notes does not exceed at any time the aggregate principal amount thereof outstanding on the 2004 Indentures Date (x) the aggregate gross
proceeds of the issuance of the 2004 Senior Notes and the 2004 Senior Subordinated Notes are not less than the Dollar Equivalent of $325,000,000, and (z) the proceeds of the issuance of the
2004 Senior Notes and the 2004 Senior Subordinated Notes are, on or prior to August 16, 2004, used to repurchase, redeem or otherwise acquire for value outstanding 1998 Subordinated Notes
(including, as applicable, principal, accrued and unpaid interest, related fees and expenses and prepayment premiums) promptly upon receipt thereof by U.S. Borrower; it being agreed that all such
proceeds which are not used to repurchase, redeem or otherwise acquire for value the outstanding 1998 Subordinated Notes (including, as applicable, principal, accrued and unpaid interest, related fees
and expenses and prepayment premiums) promptly upon receipt thereof by U.S. Borrower shall be placed in an investment or bank account subject to the control of the North American Collateral Agent and
in which the North American Collateral Agent has a first priority perfected security interest to secure the Obligations pursuant to a control agreement in form and substance satisfactory to North
American Collateral Agent (and the North American Collateral Agent agrees that, as long as no Default or Event of Default has occurred and is continuing, it will promptly release amounts credited
thereto upon the request 

3

 

of
the U.S. Borrower solely to the extent such amounts are promptly upon such release being used to repurchase, redeem or otherwise acquire for value then outstanding 1998 Subordinated Notes
(including, as applicable, principal, accrued and unpaid interest, related fees and expenses and prepayment premiums) on or before August 16, 2004); (xiii) Indebtedness evidenced by the
1995 Subordinated Notes; (xiv) Indebtedness evidenced by the 1998 Subordinated Notes; and" 

        (h)   Section 6.3(b) of the Credit Agreement is amended and restated to read in its entirety as follows: 

"(b) No
Samsonite Entity (other than a JVCP) shall, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable
in respect of any Indebtedness prior to its scheduled maturity (other than repurchase of the preferred Stock of U.S. Borrower with the common Stock of U.S. Borrower or with the proceeds of the
contemporaneous sale of Stock of U.S. Borrower), other than (i) the Obligations; (ii) Indebtedness secured by a Permitted
Encumbrance if the asset securing such Indebtedness has been sold or otherwise disposed of in accordance with Sections 6.8(b) or (c);
(iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancing thereof in accordance with  Section 6.3(a)(iv); (iv)
 Indebtedness permitted by Section 6.3(a)(xii) upon any
refinancing thereof in accordance with Section 6.3(a)(xii); (v) payments with respect to the 1998 Subordinated Notes to the extent such
payments are permitted pursuant to Section 6.13(h); (vi) repurchases, redemptions or other acquisitions for value of the 1995 Subordinated
Notes to the extent such payments are permitted pursuant to Section 6.13(j); (vii) repurchases, redemptions or other acquisitions for
value of the outstanding 1998 Subordinated Notes to the extent such payments are permitted pursuant to Section 6.13(k); and
(viii) payments with respect to the 2004 Senior Notes and the 2004 Senior Subordinated Notes to the extent permitted pursuant to  Section 6.13(l)." 

        (i)    Section 6.13(e) of the Credit Agreement is amended by replacing the phrase "scheduled payments of interest with
respect to Subordinated Debt" with the phrase "scheduled payments of interest with respect to Subordinated Debt and the Indebtedness evidenced by the 2004 Senior Notes". 

        (j)    Section 6.13(h) of the Credit Agreement is amended by replacing the phrase "(A) make Restricted Payments
with respect to the Subordinated Notes" with the phrase "(A) at all times prior to the 2004 Indentures Date, make Restricted Payments with respect to the 1998 Subordinated Notes". 

        (k)   Section 6.13 of the Credit Agreement is further amended by deleting the word "and" at the end of  clause (h) thereof, by deleting the period at the end of
clause (i) thereof and inserting
a semicolon in its place, and by adding clause (j), clause (k) and  clause (l) thereto, which
shall read in their entirety as follows: 

"(j)
repurchase, redeem or otherwise acquire for value all (but not less than all) of the outstanding 1995 Subordinated Notes (including, as applicable, principal, accrued and unpaid interest, related
fees and expenses and prepayment premiums), (k) repurchase, redeem or otherwise acquire for value on or before July 30, 2004 all (but not less than all) of the outstanding 1998
Subordinated Notes (including, as applicable, principal, accrued and unpaid interest, related fees and expenses and prepayment premiums) in one or a series of related transactions, as long as each
such repurchase, redemption or other acquisition for value is funded from the proceeds from the issuance of the 2004 Senior Notes and the 2004 Senior Subordinated Notes and proceeds of Revolving
Credit Advances in an aggregate amount not to exceed $18,000,000, and (l) make Restricted Payments with respect to the 2004 Senior Notes or the 2004 Senior Subordinated Notes as long as
(i) the aggregate principal balance of 

4

 

the
Revolving Loans immediately prior to and after giving effect to such Restricted Payments and all Loans funded in connection therewith does not exceed $10,000,000 and (ii) no Event of
Default has occurred and is continuing or would result after giving effect to any Restricted Payment or funding of all Loans in connection therewith pursuant to this  clause (l)." 

        2    Amendments to
Annex A.    Annex A to the Credit Agreement is hereby amended as follows: 

        (a)   The
following definitions are added to Annex A to the Credit Agreement in their appropriate alphabetical order: 

"2004 Indentures Date" means the one, single date of each of (i) the 2004 Senior Subordinated Notes Indenture, (ii) the 2004 Senior Notes
Indenture and (iii) the issuance of the 2004 Senior Subordinated Notes and the 2004 Senior Notes. 

"2004 Offering Memorandum" means that certain preliminary confidential offering memorandum dated as of April 30, 2004 with respect to the
proposed issuance by U.S. Borrower of the 2004 Senior Notes and the 2004 Senior Subordinated Notes (which offering memorandum is subject to the completion of the business terms which shall be no less
favorable to Agent or any Lender, and not materially less favorable to any Samsonite Entity, than the terms of the Indebtedness being refinanced from the proceeds of the 2004 Senior Notes and the 2004
Senior Subordinated Notes). 

"2004 Senior Notes" means those certain Floating Rate Senior Notes due 2011 issued pursuant to the 2004 Senior Notes Indenture. 

"2004 Senior Notes Indenture" means the indentures which governs the terms and issuance of the 2004 Senior Notes and which has the terms, provisions and
conditions as described in the 2004 Offering Memorandum, as in effect on the 2004 Indentures Date (or as in effect after that date, if an amendment or modification thereof has been approved by Agent
in writing). 

"2004 Senior Notes Documents" means the 2004 Senior Notes Indenture and any other instrument, document or agreement delivered pursuant thereto or in
connection therewith. 

"2004 Senior Subordinated Notes" means those certain Senior Subordinated Notes due 2012 issued pursuant to the 2004 Senior Subordinated Notes Indenture. 

"2004 Senior Subordinated Notes Indenture" means the indenture which governs the terms and issuance of the 2004 Senior Subordinated Notes and which has
the terms, provisions and conditions as described in the 2004 Offering Memorandum, as in effect on the 2004 Indentures Date (or as in effect after that date, if an amendment or modification thereof
has been approved by Agent in writing). 

"2004 Senior Subordinated Notes Documents" means the 2004 Senior Subordinated Notes Indenture and any other instrument, document or agreement delivered
pursuant thereto or in connection therewith. 

        (b)   Each
of the following definitions in Annex A to the Credit Agreement is amended and restated to read in its
entirety as follows: 

"U.S. Borrowing Base" means, as of any date of determination, from time to time, an amount equal to 

	(A)
	the
sum at such time of:

	(a)
	up
to 85% of the book value of Eligible Accounts; plus

5

 

	(b)
	up
to the lesser of (i) 85% of the Net Orderly Liquidation Value of Eligible Inventory or (ii) 65% of the book value of Eligible Inventory valued at the lower of cost
(determined on a first-in, first-out basis) or market; plus

	(c)
	(A) at
all times prior to the consummation of the sale and leaseback (or a transfer by U.S. Borrower to the Denver SPE) of the Denver Warehouse Real Estate, up to the lesser of
(i) $7,500,000 or (ii) 50% of the fair market value of the Eligible Denver Real Estate, as determined by an appraisal thereof in form, scope and from an appraiser, acceptable to Agent
and (B) immediately upon and at all times after the consummation of the sale and leaseback (or a transfer by U.S. Borrower to the Denver SPE) of the Denver Warehouse Real Estate, up to the
lesser of (i) $7,500,000 or (ii) 15% of the fair market value of the Eligible Trademarks, as determined by the most recent appraisal thereof in form, scope and from an appraiser,
acceptable to Agent; 

in
each case, less any Reserves established by Agent at such time (assets denominated in a currency other than Dollars shall for purposes hereof be
valued at the Dollar Equivalents); 

minus

	(B)
	$2,500,000. 

"Subordinated Debt Documents" means (i) the Subordinated Indenture (and any related subordinated guarantees), (ii) the 1995 Subordinated
Indenture (and any related subordinated guarantees) and (iii) the 2004 Senior Subordinated Notes Documents, or any of them. 

"Subordinated Notes" means (i) the 1998 Subordinated Notes, (ii) the 1995 Subordinated Notes and (iii) the 2004 Senior Subordinated
Notes, or any of them. 

"Eligible Trademark" means a Trademark listed on Disclosure Schedule (ET) which (a) is owned by
U.S. Borrower (b) is subject to a first priority Lien in favor of North American Collateral Agent, (c) is owned by U.S. Borrower free and clear of all Liens and rights of any other
Person, except the Liens in favor of the North American Collateral Agent, (d) does not breach any of the representations or warranties pertaining to such property set forth in the Loan
Documents, (e) has been appraised pursuant to an appraisal in form, scope and from an appraiser, reasonably acceptable to Agent, and (f) is not subject to any license or agreement which
prohibits any Person or impairs any Person's right or ability to assign, transfer or otherwise dispose, license or sublicense, pledge or grant a Lien upon it." 

        (c)   The
definition of the term "Restricted Payment" in Annex A to the Credit Agreement is amended by deleting the word
"and" at the end of clause (f) thereof, by deleting the period at the end of clause (g)
thereof and inserting the phrase "; and" in its place, and by adding clause (h),thereto, which shall read in their entirety as follows: 

"(h) any
payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or
similar payment and any claim for rescission with respect to, any Indebtedness evidenced by any of the 2004 Senior Notes." 

        (d)   The
definition of the term "Permitted Encumbrances" in Annex A to the Credit Agreement is amended by deleting the
word "and" at the end of clause (k) thereof and inserting a semicolon in its place, by deleting the period at the end of  clause (l) thereof and
inserting the 

6

 

phrase
"; and" in its place, and by adding clause (m) thereto, which shall read in their entirety as follows: 

"(m)
statutory banker's Liens, statutory rights of setoff and similar statutory Liens with respect to cash and Cash Equivalents on deposit in one or more bank accounts (other than the Collection
Accounts) arising in the ordinary course of business." 

        (e)   The
definition of the term "Change of Control" in Annex A to the Credit Agreement is amended by amending and
restating clause (f) thereof to read in its entirety as follows: 

"(f) a
Change of Control (as defined in the Subordinated Indenture), or a "change of control" or similar event as described in any Subordinated Debt Documents, in the New Preferred Stock
Documents, in the 2004 Senior Notes Indenture, or in the 2004 Senior Subordinated Notes Indenture or any change in control (or similar event, however denominated) with respect to U.S. Borrower or any
Subsidiary shall occur under and as defined in any other indenture or agreement to which U.S. Borrower or any Subsidiary is a party." 

        3    Amendments to
Annex E.    Annex E to the Credit Agreement is amended as follows: 

        (a)   Clause (i) of paragraph (a) of  Annex E to the Credit Agreement is amended by replacing the phrase "and
statement of cash flows" with the phrase "and summary of select cash flow
items by region as agreed by Agent". 

        (b)   Annex E to the Credit Agreement is amended by amending and restating the first sentence of  paragraph (d) thereof to read in its entirety as follows:

"(d) Within
ninety (90) days after the end of each Fiscal Year, audited Financial Statements for Borrowers and their Subsidiaries on a consolidated basis, consisting of balance sheets
and statements of income and retained earnings and cash flows, which Financial Statements shall be prepared in accordance with GAAP and certified without qualification, by an independent certified
public accounting firm of national standing or otherwise acceptable to Agent, and, in addition, such unaudited consolidating balance sheet, income statement and cash flow information as agreed to by
Agent." 

        (c)   Annex E to the Credit Agreement is further amended by amending and restating  paragraph (g) thereof to read in its entirety as follows: 

        (d)   "(g) [Intentionally Omitted]" 

        4    Amendments to
Annex F.    Annex F to the Credit Agreement is amended by amending and restating  clause (i)
of paragraph (c) thereof to read in its entirety as follows: 

"(i) a
reconciliation of the Accounts trial balance of U.S. Borrower and Samsonite Stores to such Person's most recent Borrowing Base Certificate, general ledger and monthly Financial
Statements delivered pursuant to Annex E, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in
its reasonable discretion; provided, however, that if U.S. Borrowing Availability is greater than
$15,000,000 at all times during the Fiscal Month for which a monthly Financial Statement is to be delivered pursuant to Annex E, such
reconciliation shall not be required with respect to such Financial Statement, the then most recent Borrowing Base Certificate, the corresponding general ledger and such Account trial balance," 

        5    Amendment to Disclosure Schedules.    Disclosure Schedule (ET) attached hereto is
added to the Credit Agreement as Disclosure Schedule (ET) thereto. 

7

 

        6    Conditions to Effectiveness.    This Amendment shall be effective on the date on which
this Amendment shall have been duly executed and delivered by the Borrowers, each other Credit Party party hereto, Agent, Requisite Lenders and Supermajority U.S. Revolving Lenders. 

        7    Representations and Warranties.    In order to induce Agent and the Lenders to enter into
this Amendment, the Borrowers and each other Credit Party represents and warrants to Agent and each Lender (which representations and warranties shall survive the execution and delivery of this
Amendment), that: 

        (a)   The
execution, delivery and performance by each Credit Party of this Amendment has been duly authorized by all necessary corporate and partnership action (and in the
case of each Foreign Credit Party such corporation and partnership action will have been ratified on or before the 2004 Indentures Date) and this Amendment is a legal, valid and binding obligation of
such Credit Party enforceable
against such Credit Party in accordance with its terms, except as the enforcement thereof may be subject to (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar law affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law); and 

        (b)   upon
the effectiveness of this Amendment, all of the representations and warranties contained in the Credit Agreement and in the other Loan Documents (other than those
which speak expressly only as of an earlier date) are true and correct in all material respects on and as of the date of the effectiveness of this Amendment after giving effect to this Amendment and
the transactions contemplated hereby. 

        8    Miscellaneous.    

        8.1    Effect; Ratification.    

        (a)   Except
as specifically set forth above, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. 

        (b)   The
execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Agent or any Lender under the Credit Agreement
or any other Loan Document, nor constitute amendment of any provision of the Credit Agreement or any other Loan Document, except as specifically set forth herein. Upon the effectiveness of this
Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of similar import shall mean and be a reference to the Credit Agreement as amended
hereby. 

        (c)   Each
Credit Party acknowledges and agrees that the amendments set forth herein are effective solely for the purposes set forth herein and that the execution and delivery
by Agent, Requisite Lenders and the Supermajority U.S. Revolving Lenders of this Amendment shall not be deemed (i) except as expressly provided in this Amendment, to be a consent to any
amendment, waiver or modification of any term or condition of the Credit Agreement or of any other Loan Document, (ii) to create a course of dealing or otherwise obligate Agent or Lenders to
forbear, waive, consent or execute similar amendments under the same or similar circumstances in the future, or (iii) to amend, prejudice, relinquish or impair any right of Agent or Lenders to
receive any indemnity or similar payment from any Person or entity as a result of any matter arising from or relating to this Amendment. 

        8.2    Counterparts and Signatures by Fax.    This Amendment may be executed in any number of
counterparts, each such counterpart constituting an original but all together one and the same instrument. Any party delivering an executed counterpart of this Amendment by fax shall also 

8

 

deliver
an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment. 

        8.3    Severability.    In case any provision in or obligation under this Amendment shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. 

        8.4    Costs and Expenses.    Borrowers agree to reimburse Agent for all fees, costs and
expenses, including the fees, costs and expenses of counsel or other advisors for advice, assistance, or other representation in connection with this Amendment. 

        8.5    Loan Document.    This Amendment shall be deemed to be a Loan Document. 

        8.6    GOVERNING LAW.    THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 

[Signature
Pages Follows] 

9

        IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. 

	 	 	BORROWERS
	

 	
 	
SAMSONITE CORPORATION
	

 	
 	

By:	
 	

/s/  RICHARD H. WILEY      

	 	 	Print Name: Richard H. Wiley

Title: CFO, Secretary and Treasurer
	

 	
 	
SAMSONITE EUROPE N.V.
	

 	
 	

By:	
 	

/s/  RICHARD H. WILEY      

	 	 	Print Name: Richard H. Wiley

Title: Director
	

 	
 	
AGENTS AND LENDERS
	

 	
 	
GENERAL ELECTRIC CAPITAL CORPORATION, as Agent, North American Collateral Agent and a Lender
	

 	
 	

By:	
 	

/s/  CHRISTOPHER COX      

	 	 	Print Name: Christopher Cox

        Duly Authorized Signatory
	

 	
 	
KBC Bank NV

as European Agent, Fronting Lender and a Lender
	

 	
 	

By:	
 	

/s/  FRANS SERCU      

	 	 	Print Name: Frans Sercu

Title: [illegible on original]
	

 	
 	

By:	
 	

/s/  FILIP AUDENAERT      

	 	 	Print Name: Filip Audenaert

Title: [illegible on original]

        The
following Persons are signatories to this Amendment in their capacity as Credit Parties and not as Borrowers. 

	 	 	C.V. HOLDINGS, INC.
	

 	
 	

By:	
 	

/s/  RICHARD H. WILEY      

	 	 	Print Name: Richard H. Wiley

Title: Secretary and Treasurer
	

 	
 	
SAMSONITE COMPANY STORES, INC.
	

 	
 	

By:	
 	

/s/  RICHARD H. WILEY      

	 	 	Print Name: Richard H. Wiley

Title: Secretary and Treasurer
	

 	
 	
SC INTERNATIONAL HOLDINGS C.V.
	

 	
 	

By:	
 	

/s/  RICHARD H. WILEY      

	 	 	Print Name: Richard H. Wiley

Title: Secretary and Treasurer
	

 	
 	
MCGREGOR II, LLC
	

 	
 	
By:	
 	

Samsonite Corporation, its Sole Member
	

 	
 	

By:	
 	

/s/  RICHARD H. WILEY      

	 	 	Print Name: Richard H. Wiley

Title: CFO, Secretary and Treasurer
	

 	
 	
SC DENMARK APS
	

 	
 	

By:	
 	

/s/  RICHARD H. WILEY      

	 	 	Print Name: Richard H. Wiley

Title: Manager

QuickLinks

AMENDMENT NO. 1 TO CREDIT AGREEMENT

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