MODIFICATION OF LEASES
This Modification of Leases ("Modification") is made by and between X'Xxxx
Building Company Seattle LLC, a Washington limited liability company
("Landlord") and Xxx Xxxxxx, Inc., a Washington corporation ("Tenant") as of
this 1st day of December 1997.
BACKGROUND
A. WHEREAS, Tenant and the predecessor-in-interest of Landlord entered into
certain leases ("Leases") covering certain premises more specifically defined
therein ("Premises"), which Premises include space on the basement, first floor,
mezzanine, second floor, third floor, and fourth floor of the X'Xxxx Building,
located at 5th and Pine in Seattle, Washington, which building ("Building") is
situated on Xxxx 0 xxx 0, Xxxxx 00, XX. Xxxxx'x Third Addition to the City of
Seattle, State of Washington. Such Leases include the Leases listed on Exhibit A
attached hereto, including all amendments, modifications and extensions thereof,
and
B. WHEREAS, Landlord and Tenant further desire to modify the Leases as more
fully described herein and to memorialize Landlord's consent to certain
transactions more fully described below,
AGREEMENT
THEREFORE, Landlord and Tenant agree as follows:
1. Notwithstanding any other provisions of the Leases, from and after
January 1, 1998, through and including January 31, 2000, minimum rent payable
for the Premises in the Building shall be as follows:
1.1 For the period commencing on January 1, 1998 and extending through
December 31, 1998, annual minimum rental shall equal $275,000, which amount
shall be payable monthly by the first date of each month in the amount of
$22,916.67.
1.2 For the period commencing on January 1, 1999 and extending through
January 31, 2000, annual minimum rental shall equal $300,000, which amount
shall be payable monthly by the first day of each month in the amount of
$25,000. This minimum rent remains only one component of the rent to be
paid by Tenant. By signing this Modification, Tenant acknowledges its
liability for percentage rent, Excess Rental, and all other costs,
expenses, taxes and fees as set forth in the Leases and other agreements
described in Exhibit A hereto. The minimum rental provided in this Section
1 shall not be subject to any increases.
2. Notwithstanding any other provision of the Leases:
2.1 Percentage rent payable by Tenant for the period commencing
January 1, 1998 and ending on December 31, 1998, shall equal three percent
(3%) of gross sales made from the Premises during such period in excess of
$1,500,000, which percentage rent shall be paid at such time, by such
procedures and at such place as otherwise provided in the Leases.
2.2 Percentage rent payable by Tenant for the period commencing
January 1, 1999 and ending on January 31,
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2000, shall equal three percent (3%) of gross sales made from the Premises
during such period in excess of $1,500,000, which percentage rent shall be
payable at such time, by such procedures and at such place as otherwise
provided in the Leases.
2.3 The percentage rent due under the Leases described in Exhibit A
for the calendar year 1997 is unaffected by this Modification, and remains
due and payable by Tenant at the time and at the place as set forth in said
Leases.
3.
3.1 Tenant has informed Landlord that (a) Tenant is in the process of
exploring options for an equity infusion and, at the date hereof, Tenant
proposes to obtain substantial additional equity from one or more
affiliates of Xxxxxx, Xxxxxxx and Company, LLC and/or possibly other
accredited or institutional investors ("Purchasers"); (b) by virtue of such
a proposed equity investment, it is anticipated that a change of ownership
of or power to vote the majority of the outstanding voting stock of the
Tenant will occur and/or a change of control of the Tenant will occur,
which changes may occur immediately or in the future; (c) Purchasers
propose to purchase from Tenant $4.6 million of Series A Preferred Stock
and $2.5 million of Series B convertible Preferred Stock ("Contemplated
Transaction"); (d) the Contemplated Transaction may be composed of one or
more separate phases; (e) the Post Confirmation Creditors Committee and Mr.
Xxx Xxxxxx acting for himself and as trustee of the Xxxx Xxxxxx
Testamentary Trust entered into that certain April 15, 1997 Letter
Agreement (a copy of which is attached hereto as EXHIBIT B) to which Tenant
consented and agreed (in part) as more fully described therein ("Letter
Agreement"); (f) the period described in Paragraph 1(b) of the Letter
Agreement has been extended by the PCC through the date hereof. The
Contemplated Transaction and the Letter Agreement, and the reasonable and
necessary implementation thereof, shall be referred to as the "Consent
Transactions."
3.2 In reliance upon the truthfulness and accuracy of the above
representations made by Tenant, Landlord consents to the Consent
Transactions.
3.3 Notwithstanding any other provision of the Leases, so long as the
ground floor of the Building is used as part of the retail chain that is
presently conducted under the trade name "Xxx Xxxxxx" (or any substitute
trade name used for substantially all of the then-existing stores in the
chain presently conducted under the trade name "Xxx Xxxxxx"), and so long
as the business is conducted in substantially the same manner as presently
conducted by "Xxx Xxxxxx," Tenant shall not be obligated to obtain the
consent of Landlord for any assignment, other transfer, change of
ownership, or power to vote any of the outstanding shares of Tenant, or
change of control of the Tenant; provided, however, in the event that
Tenant shall be merged into another existing chain and conducted under the
trade name thereof, or in the event that Tenant's ownership or control
changes, is assigned or otherwise transferred and Tenant commences to
conduct business in a manner substantially different than as presently
conducted by "Xxx Xxxxxx," Tenant shall be obligated to comply with the
terms and provisions of the Leases with respect to any assignment, or
change of ownership, or power to vote a majority of the outstanding shares
of
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Tenant in connection therewith. By way of illustration only, in the event
that a majority of shares of Xxx Xxxxxx, Inc. are hereafter sold to a
person or entity not related to the Contemplated Transaction or the Letter
Agreement, but the business conducted in and on the ground floor of the
Building shall continue to be conducted under the trade name "Xxx Xxxxxx"
(or such other trade name as employed solely by substantially all of the
other then-existing stores presently operated under the trade name "Xxx
Xxxxxx"), no consent of the Landlord shall be required. By way of
illustration only, in the event that a chain presently operating under the
trade name "ABCD Stores" shall acquire Tenant and shall change the trade
name of the business conducted in and on the ground floor of the Building
to ABCD Stores, such transaction shall not fall within the provisions of
this paragraph and shall be subject to the provisions of the Leases
concerning assignment, change of ownership, or power to vote a majority of
outstanding shares of Tenant.
3.4 Notwithstanding any provision of the Leases, transfer of shares
pursuant to the public trade thereof shall not be prohibited or require
Landlord's consent.
3.5 Notwithstanding any other provisions in the Leases, in the event
that Tenant shall assign or sublet some or all of the Premises at a rental
in excess of the rental (including minimum rent and percentage rent
provided herein) payable under the Leases (as modified), the Excess Rental
received by Tenant shall be paid by Tenant to Landlord within ten (10) days
of the date on which such rent is due under the terms of any such sublease.
For purpose of the preceding sentence, the term "Excess Rental" shall
include rental payable to Tenant pursuant to such assignment or sublease in
excess of the rental payable under the Leases.
3.6 Tenant acknowledges that it presently is party to subleases for
some of the Premises with Xxxxxx Xxxxxx Construction and Xxxxxx Co. Tenant
agrees that these two subleases will not be renewed upon the expiration
thereof without Landlord's written consent. Rent credits received by Tenant
under these two subleases shall not constitute Excess Rental.
4. Landlord has agreed to waive any radius restrictions in the Leases and,
as a result, such restrictions, including (without limitation) paragraph 39 of
the April 16, 1965 Lease (as amended), are hereby deleted.
5. Notwithstanding any other provision of the Leases, Tenant's obligation
to continuously operate in the Premises shall be limited to the conduct of
business on the ground floor of the X'Xxxx Building during reasonable business
hours, except for holidays, closures due to casualty or condemnation, and
closing in accordance with applicable law or other bona fide force majeure
events that are not within the reasonable control of the Tenant. In addition,
Tenant will make reasonable and good faith efforts to re-commence operations on
the mezzanine level of the Building by the month of June 1998. Tenant will, in
good faith, consider and evaluate use of some or all of the basement level
retail space in the Building for retail sale and displays by the month of June
1998.
6. Tenant acknowledges and agrees that Landlord has neither interfered with
nor otherwise acted impermissibly in connection with the Consent Transactions.
Tenant hereby discharges and releases the Landlord from all claims, liabilities,
damages,
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obligations, controversies, charges, accounting, suits, actions, causes of
action, rights, demands, costs, losses, debts and expenses (including attorneys
fees and costs), past, present or future, known or unknown, latent or patent,
arising out of, or in connection [with] any claim that Landlord interfered with
the Consent Transactions, or any aspect thereof. Tenant hereby agrees to
indemnify, defend and hold Landlord harmless from and against all claims,
liabilities, damages, obligations, controversies, charges, accountings, suits,
actions, causes of action, rights, demands, costs, losses, debts and expenses
(including attorneys fees and costs), past, present or future, known or unknown,
latent or patent, arising out of or in connection with any claim that Landlord
interfered with the Consent Transactions, or any aspect thereof.
7. Tenant and Landlord acknowledge and agree that the Leases are in full
force and effect.
8. Landlord waives any alleged breach or default identified in its Amended
10-Day Notice to Perform Lease or Vacate pursuant to RCW 59.12 attached hereto
as EXHIBIT C. So long as Tenant pays and performs its obligations under the
aforesaid Leases, as described in Exhibit A and as modified by this
Modification, Landlord shall not be entitled to raise insolvency, bankruptcy,
appointment of a receiver, assignor or other liquidating officer as breach or
default of the Leases. Landlord waives any alleged breach or default identified
in the Landlord's Notice to Quit dated October 24, 1997 (EXHIBIT D).
9. Landlord has informed Tenant that Landlord intends to remodel and/or
re-lease the Premises at the expiration of the Leases. In order to accommodate
Landlord's re-leasing and/or remodeling plans, Tenant agrees to allow Landlord,
upon reasonable notice and at reasonable times, access to the Premises relating
to re-leasing or remodeling so long as such access does not interfere with the
use of and operations in the Premises by Tenant. Landlord may also place on or
about the Premises any ordinary "for sale" or "for lease" signs of a size and
type customary in the downtown Seattle area, during the last 12 months of the
term, so long as such signs are not placed on windows or doors. As used herein,
"reasonable notice" means at least 24 hours oral or written notice, and
"reasonable times" means between 10:00 a.m. and 6:00 p.m., or such other times
as agreed upon by Landlord and Tenant. The parties agree that nothing herein or
in the leases affects Landlord's sole right, at any time, to commence marketing
the Premises for a lease or leases to be effective upon the termination of
Tenant's tenancy.
10. This Modification shall be effective and binding upon the undersigned
parties and their successors on December 1, 1997. This Modification shall remain
valid and be unaffected whether or not Tenant receives the equity infusion
described in Section 3.1 above or whether or not Tenant receives any other
financing or financial support.
11. The Leases (as modified) shall terminate on January 31, 2000. Tenant
agrees to vacate the Premises at or before 6:00 p.m. on January 31, 2000.
12. Except, as expressly provided herein, the Leases remain unmodified,
except as previously modified.
X'XXXX BUILDING COMPANY SEATTLE LLC,
a Washington limited liability company
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By /s/ XXXXXX X. XXXXXX
------------------------------------------
Its
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and
By /s/ XXXXXX X. XXXXXX
------------------------------------------
Its
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XXX XXXXXX, INC.,
a Washington corporation
By /s/ XXXXXXX X. XXXXXXXX, XX.
------------------------------------------
Its Vice President and CFO
-----------------------------------------
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EXHIBIT A
PREMISES DOCUMENT DATE
First floor, basement, mezzanine Lease 4/16/65
First floor, basement, mezzanine Modification 4/16/65
First floor, basement, mezzanine Extension 1/2/76
First floor, basement, mezzanine Modification 2/4/80
First floor, basement, mezzanine Modification 8/18/83
First floor, basement, mezzanine Modification 5/1/89
Second floor Lease 1/25/80
Second floor Modification 2/7/80
Second floor Extension 1/15/81
Second floor Modification 5/1/89
Third floor Lease 12/31/75
Third floor Modification 2/7/80
Third floor Modification 5/1/89
Fourth floor Lease 12/23/74
Fourth floor Extension 12/31/75
Fourth floor Modification 2/7/80
Fourth floor Modification 5/1/89
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CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California )
)
County of San Francisco )
On December 4, 1997, before me, X. Xxxxxxxx, personally appeared Xxxxxx X.
Xxxxxx and Xxxxxx X. Xxxxxx, personally known to me to be the persons whose
names are subscribed to the within instrument and acknowledged to me that they
executed the same in their authorized capacities, and that by their signatures
on the instrument the persons, or the entity upon behalf of which the persons
acted, executed the instrument.
WITNESS my hand and official seal.
Signature: /s/ X. Xxxxxxxx
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DESCRIPTION OF ATTACHED DOCUMENT
Title or Type of Document: Modification of Leases
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