UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Fiscal Year Ended June 30, 2003 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
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Commission File Number 0-24395
bebe stores, inc.
(Exact name of registrant as specified in its charter)
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California
(State or Jurisdiction of Incorporation or Organization) |
94-2450490
(IRS Employer Identification Number) |
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400 Valley Drive Brisbane, California 94005 (Address of principal executive offices) |
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(415) 715-3900 (Telephone) |
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is an accelerated filer. Yes o No ý
The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $65,254,168 as of December 31, 2002, the last business day of the registrant's most recently completed second fiscal quarter, based upon the closing sale price per share of $13.40 of the registrant's Common Stock as reported on the Nasdaq National Market on such date. Shares of Common Stock held by each executive officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive for other purposes.
As of August 29, 2003, 25,759,149 shares of Common Stock, $0.001 per share par value, of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive Proxy Statement for the 2003 Annual Meeting of Shareholders, to be filed with the Commission no later than 120 days after the end of the registrant's fiscal year covered by this Form 10-K.
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. This Form 10-K includes forward-looking statements that could differ from actual future results. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "thinks" and similar expressions are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, including our ability to respond to changing fashion trends, competition within our industry, our ability to manage our growth and other factors described below, that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Although we believe that these statements are based upon reasonable assumptions, we cannot assure you that our goals will be achieved. These forward-looking statements are made as of the date of this Form 10-K, and we assume no obligation to update or revise them or provide reasons why actual results may differ. Factors that might cause such a difference include, but are not limited to, current openings in key management positions, miscalculation of the demand for our products, effective management of our growth, decline in comparable store sales performance, ongoing competitive pressures in the apparel industry, changes in the level of consumer spending or preferences in apparel, our ability to attract and retain key management personnel and/or other factors discussed in "Risk Factors" and elsewhere in this Form 10-K.
General
We design, develop and produce a distinctive line of contemporary women's apparel and accessories. While we attract a broad audience, our target customers are 21 to 35-year-old women who seek current fashion trends interpreted to suit their lifestyle needs. The "bebe look," appeals to a hip, sophisticated, body-conscious woman who takes pride in her appearance. The bebe customer expects value in the form of quality at a competitive price.
Our broad product offering includes tops, pants, skirts, dresses, suits, logo products, casual sportswear, activewear, outerwear, handbags and other accessories. We design and develop the majority of our merchandise in-house. The merchandise is then manufactured to our specifications, the majority of which is produced domestically. The remainder of our merchandise is selected directly from third party manufacturers' lines.
Our stores are designed to create a clean, upscale boutique environment, featuring contemporary furnishings and sophisticated details. The open floor design allows customers to readily view the majority of the merchandise on display while store fixtures allow for the efficient display of garments, outfits and accessories.
We market our products under the bebe and BEBE SPORT brand names through our 180 retail stores, of which 153 are bebe stores, 9 are BEBE SPORT stores, and 18 are bebe outlet stores. These stores are located in 32 states, the District of Columbia and Canada. In addition, we have an on-line store at www.bebe.com and our licensees operate 16 international stores.
bebe stores. The Company was founded by Manny Mashouf, our current Chairman of the Board and Chief Executive Officer. We opened our first store in San Francisco, California in 1976, which was also the year we incorporated.
BEBE SPORT stores. The Company launched BEBE SPORT in the first half of fiscal 2003 to satisfy the casual lifestyle needs of the bebe customer. The BEBE SPORT product line is active inspired sportswear featuring cotton knits, fleece, casual active bottoms, sweaters, outerwear and
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accessories that are easy, sexy and modern. During fiscal 2003 we opened 6 BEBE SPORT stores and converted 3 bbsp stores (a concept the Company has discontinued). As of June 30, 2003 the Company operated 9 BEBE SPORT stores in 7 states.
bebe outlet stores. As of June 30, 2003 the Company operated 18 bebe outlet stores in 10 states. Strategically the company utilizes the outlets as a clearance vehicle for merchandise from our retail stores. Additionally, we round out the inventory of these stores with full price logo merchandise and, to a lesser extent, garments specifically produced for the outlet stores often using excess fabric inventory.
On-line store. During fiscal 1999 the Company launched our web based store, bebe.com. The on-line store was created to offer the customer an extension of the bebe store experience and provide a broader merchandise assortment from which the customer can choose. It is also used as a vehicle to communicate with our customers through advertising and direct mail. For the fiscal year ended 2003, bebe.com represented approximately 2% of total revenue.
We reinforce our brand with a distinctive lifestyle image advertising campaign, using prominent fashion photographers. We believe that our emphasis on non-product specific lifestyle advertising promotes brand awareness and attracts customers. We communicate the images to consumers through a variety of advertising vehicles including fashion magazines, bus shelters, in-store displays, customer mailings and the BEBE SPORT catalog. We further enhance the bebe brand image by designing our on-line and retail stores to create an upscale, inviting, boutique environment.
Operating Strategy
Our objective is to satisfy the fashion needs of the modern, sexy and sophisticated woman. The principal elements of our operating strategy to achieve this objective are as follows:
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awareness. We seek to create an upscale, inviting environment that further enhances the bebe brand and builds customer loyalty and demand for bebe merchandise.
Stores and Expansion Opportunities
We believe that there is a significant opportunity to expand the number of bebe and BEBE SPORT stores in new and existing domestic markets. In selecting a specific site, we look for high traffic locations primarily in regional shopping centers and in freestanding street locations. We evaluate proposed sites based on the traffic pattern, co-tenancies, average sales per square foot achieved by neighboring stores, lease economics, demographic characteristics and other factors considered important within the specific location.
For fiscal 2004, we plan to grow our operations in a controlled manner, primarily through the opening of new stores. We have been conservative in our growth plans while we continue to evaluate the new BEBE SPORT concept. In addition, we are focused on recruiting key management personnel in order to ensure the infrastructure can support a more aggressive growth plan.
Our stores typically have achieved profitability at the store operating level within the first full quarter of operation; however, we cannot assure you that our stores will do so in the future. Actual store growth and future store profitability and rates of return will depend on a number of factors that include, but are not limited to, individual store economics and suitability of available sites.
During fiscal 2003, we opened 20 stores and closed 5 stores and in fiscal 2004 we plan to open approximately 12 to 16 stores and close approximately 2 stores. The majority of the new stores will be BEBE SPORT.
bebe stores. During fiscal 2003, we opened 14 and closed 3 stores. In addition to opening new stores, we expanded or relocated 3 existing stores to larger spaces during fiscal 2003. Our stores average approximately 3,650 square feet in size and are primarily located in regional shopping malls and freestanding street locations. Future bebe stores will average 3,500 square feet. In fiscal 2004, we plan on opening approximately 4 to 6 bebe stores.
BEBE SPORT stores. During fiscal 2003, we opened 6 BEBE SPORT stores and converted 3 bbsp stores. Our stores average approximately 2,200 square feet in size and are primarily located in regional shopping malls. Future BEBE SPORT stores will average 1,800 to 2,000 square feet. In fiscal 2004, we plan on opening approximately 8 to 10 BEBE SPORT stores.
bebe outlet stores. During fiscal 2003, we closed 2 stores. Our stores average approximately 3,700 square feet in size and are primarily located in outlet malls. Current growth plans do not include additional outlet stores.
Our ability to expand will depend on a number of factors, including the availability of desirable locations, the negotiation of acceptable leases and our ability to manage expansion and to source adequate inventory. We cannot assure you that we will be able to achieve our planned expansion on a timely and profitable basis. Furthermore, we cannot assure you that store openings in existing markets will not result in reduced net sales volumes and profitability of existing stores in those markets.
Store Closures. During fiscal 2003, we closed 5 stores. We monitor the financial performance of our stores and have closed and will continue to close stores that we do not consider to be viable. Many of the store leases contain early termination options that allow us to close the stores in certain specified years of the leases if certain minimum sales levels are not achieved.
On-line store. During fiscal 2004, we plan on upgrading our on-line store to simplify and enhance our customers' on-line shopping experience and may continue to invest in such upgrades to further capitalize on the encouraging sales performance of our store.
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Merchandising
Our merchandising strategy is to provide current, timely fashions in a broad selection of categories to suit the lifestyle needs of our customers. We market all of our merchandise under the "bebe" and "BEBE SPORT" brand names. In some cases, we select merchandise directly from third-party apparel manufacturers' lines and market it under our "bebe" or "BEBE SPORT" labels. We do not have long-term contracts with any third party apparel manufacturers and purchase all of the merchandise from such manufacturers by purchase order.
Product Categories. After building a strong women's suiting business in the early 1990s, and we have since diversified our product line. We significantly increased the breadth of our product offerings by expanding categories such as sweaters, tops, related separates, leather, dresses, lingerie, shoes, swimwear, eyewear, logo merchandise and accessories. While each category's contribution as a percentage of total net sales varies seasonally, each of the product classifications is represented throughout the year. We regularly evaluate new categories that may be appropriate for introduction. We also plan to grow by introducing new product categories. These categories can be internally developed or developed in conjunction with licensees. As of June 30, 2003, our product licensee business represented less than 1% of total revenue. We currently license rights for footwear, eyewear and swimwear. Under the terms of these agreements, the licensees will manufacture and distribute products branded with the bebe logo to be sold at bebe stores and selected retailers.
Product Development. Our approach to the product development process allows our merchants to gain as much information as possible concerning current fashion trends before making fabric or product purchase commitments. We control the process by focusing on key color selection, fabric order, pattern development and production order deadlines. We establish the deadlines to ensure an adequate flow of inventory into the stores. While product development is seasonal, we make commitments monthly based on current sales and fashion trends. This enhances our ability to react promptly to customer demand.
A detailed merchandising plan supports the product development process. This merchandising plan includes sales, inventory and profitability targets for each product classification. We use the plan to adjust production orders as needed to meet inventory and sales targets. If we miscalculate consumer demand for our products, we may be faced with significant excess inventory and fabric for some products and missed sales opportunities for others. Weak sales and resulting markdowns could cause our profitability to be impaired.
Marketing
We have an extensive image advertising program, which addresses the lifestyle needs and aspirations of our target customers. Through edgy, high-impact, visual advertising campaigns, we attract customers who are intrigued by the playfully sensual and evocative imagery. We believe that our emphasis on non-product specific lifestyle advertising promotes brand awareness and supports numerous product line expansion opportunities. An outside advertising agency works with our internal Marketing Department to create a lifestyle advertising campaign. This campaign, which emphasizes a forward-looking view of fashion, is communicated to consumers through a variety of means including fashion magazines, bus shelters, in-store displays, customer mailings and the BEBE SPORT catalog. In addition, our Public Relations Department communicates directly with fashion editors and supplies them with a continuous flow of product information. We are often featured in fashion magazine editorials. On occasion, we have co-sponsored promotional events with fashion magazines, such as Elle, Glamour, Marie Claire, Vogue, InStyle and Vanity Fair .
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Store Operations
Store operations are organized into four regions and twenty-eight districts. Each region is managed by a regional manager, and each district is managed by a district manager. Each regional manager is typically responsible for five to eight districts, and each district manager is typically responsible for five to nine stores. Each store is typically staffed with two to four managers in addition to sales associates.
We seek to instill enthusiasm and dedication in our store management personnel and our sales associates through incentive programs and regular communication with the stores. Sales associates, excluding associates in outlet stores, receive commissions on sales with a guaranteed minimum hourly compensation. Store managers receive base compensation plus incentive compensation based on sales and inventory control. Our regional and district managers receive base compensation plus incentive compensation based on meeting profitability benchmarks.
Sourcing, Quality Control and Distribution
All of our merchandise is marketed under the "bebe" and "BEBE SPORT" brand names. The majority of our merchandise is designed and developed in-house and manufactured to our specifications. The balance is developed primarily in conjunction with third-party apparel manufacturers. In some cases, we select merchandise directly from these manufacturers' lines. When we contract for merchandise production, we use facilities primarily in the United States and some foreign manufacturers. These facilities produce garments based on designs, patterns and detailed specifications produced by us.
We use computer aided design systems to develop patterns and production markers as part of our product development process. We fit test sample garments before production to make sure patterns are accurate. We maintain a formalized quality control program. Garments that do not pass inspection are returned to the manufacturer for rework or accepted at reduced prices for sale in our outlet stores.
The majority of our merchandise is received, inspected, processed, warehoused and distributed through our distribution center. Details about each receipt are supplied to merchandise planners who determine how the product should be distributed among the stores based on current inventory levels, sales trends and specific product characteristics. Advance shipping notices are electronically communicated to the stores and any goods not shipped are stored for replenishment purposes. Merchandise typically is shipped to the stores three times per week using common carriers.
We do not have any long-term contracts with any manufacturer or supplier and place all of our orders by purchase order. If we fail to obtain sufficient quantities of manufacturing capacity or raw materials, it would have a harmful effect on our business, financial condition and results of operations. We have received in the past, and may receive in the future, shipments of products from manufacturers that fail to conform to our quality control standards. In such event, unless we are able to obtain replacement products in a timely manner, we may lose sales which could harm our operating results.
Competition
The retail and apparel industries are highly competitive and are characterized by low barriers to entry. Key competitors include, but are not limited to Arden B, BCBG, Express, Guess, Forever 21, and the Savvy Department within Nordstrom. We expect competition in our markets to increase. The primary competitive factors in our markets are: brand name recognition, product styling, product quality, product presentation, product pricing, store ambiance, customer service, and convenience.
We also compete with traditional department stores, specialty store retailers, on-line retailers, off-price retailers and direct marketers for, among other things, raw materials, market share, retail space, finished goods, sourcing and personnel. Because many of our competitors are larger and have substantially greater financial, distribution and marketing resources than we do, we may lack the
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resources to adequately compete with them. If we fail to compete in any way, it may have a harmful effect on our business, financial condition and results of operations.
Intellectual Property and Proprietary Rights
"bebe", "BEBE SPORT" and certain other trademarks either have been registered or applications are pending with United States Patent and Trademark Office and with certain foreign registries.
Information Services and Technology
We are committed to utilizing technology to enhance our competitive position. Our information systems provide integration of the store, merchandising, distribution and financial systems. The core business systems, which consist of both purchased and internally developed software, are accessed over a Company-wide network providing corporate employees with access to all key business applications.
Our investments in information systems have focused on our production, merchandise, store and financial accounting systems. We made investments to improve existing management information systems and implemented new systems during fiscal 2003. During fiscal 2003, we wrote-off approximately $800,000 in IT investments as the company direction changed from developing new software applications to leveraging and upgrading our existing systems.
Currently, our focus is on better utilizing our production, planning and point of sale system. In fiscal 2004, we plan to make additional investments of approximately $2.9 million. We cannot assure you that we will be successful with the implementation of these new systems or plans. Failure to implement and integrate such systems or plans could have a harmful effect on our business, financial condition and results of operations.
Employees
As of June 30, 2003, we had approximately 2,400 employees, of whom approximately 300 were employed at the corporate offices and distribution center. The remaining 2,100 employees were employed in store operations. Approximately 940 were full-time employees and 1,460 were employed on a part-time basis. This is comparable to last fiscal year. In addition, our employees are not represented by any labor union, and we believe our relationship with our employees is good.
EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
Executive Officers, Directors, and Key Personnel
The following table sets forth certain information with respect to the executive officers, directors, and key personnel as of September 1, 2003:
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Name
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Age
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Position
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| Manny Mashouf(1) | 65 | Chairman of the Board and Chief Executive Officer | ||
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Robert Jaffe(2*)(3)(4*) |
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52 |
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Vice Chairman of the Board |
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Barbara Bass(2)(3*)(4) |
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52 |
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Director |
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Corrado Federico(2)(3)(4) |
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62 |
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Director |
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Neda Mashouf(1) |
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40 |
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Director and General Merchandising Manager of Design—BEBE SPORT |
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Daniel Wardlow(3) |
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52 |
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Director |
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John Kyees(1) |
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56 |
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Chief Financial Officer and Chief Administrative Officer |
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Renee Bell |
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41 |
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Acting General Merchandise Manager of Design—bebe |
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Tom Curtis |
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40 |
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General Merchandise Manager of BEBE SPORT |
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Paul Mashouf(1) |
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38 |
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Vice President of Sourcing |
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Ferrell Ostrow(1) |
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44 |
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Vice President of Stores and Loss Prevention |
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Michelle Perna(1) |
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50 |
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Vice President of Human Resources |
Manny Mashouf founded bebe stores, inc. and has served as Chairman of the Board and Chief Executive Officer since our incorporation in 1976. Mr. Mashouf is the husband of Neda Mashouf, Director and General Merchandising Manager of Design—BEBE SPORT.
Robert Jaffe has served as a Director since November 2002. Mr. Jaffe is a Co-Founder, and has served as President and Chief Executive Officer of Sorrento Associates, Inc., a venture capital firm, since 1985. He currently serves as Chairman of the Board of A-Life Medical, Inc., a transcription and medical billing code company. He is also a Director of Digirad Corporation, Perlan Therapeutics, and IP Mobilenet Corporation. From 1992 to 2002, Mr. Jaffe was Chairman of the Board of Hot Topic, Inc. Mr. Jaffe was previously an investment banker with Merrill Lynch Capital Markets, Salomon Brothers and Goldman, Sachs & Company.
Barbara Bass has served as a Director since February 1997. Since 1993, Ms. Bass has served as the President of the Gerson Bakar Foundation. From 1989 to 1992, Ms. Bass served as President and Chief Executive Officer of the Emporium Weinstock Division of Carter Hawley Hale Stores, Inc., a department store chain. Ms. Bass also serves on the Board of Directors of Starbucks Corporation and DFS Group Limited.
Corrado Federico has served as a Director since November 1996. Mr. Federico is President of Solaris Properties and has served as the President of Corado, Inc., a land development firm, since 1991. From 1986 to 1991, Mr. Federico held the position of President and Chief Executive Officer of Esprit de Corp, Inc., a wholesaler and retailer of junior and children's apparel, footwear and accessories ("Esprit"). Mr. Federico also serves on the Board of Directors of Hot Topic, Inc.
Neda Mashouf has served as Director since June 1985, General Merchandising Manager of Design—BEBE SPORT since August 2003, and has been with the Company since 1984. Ms. Mashouf is the wife of Manny Mashouf, Chairman of the Board and Chief Executive Officer.
Daniel Wardlow has served as a Director since November 2002. Dr. Wardlow is a Professor of Marketing at San Francisco State University, and from 1995 to 1998 served as the chairman of SFSU's Marketing Department. He completed his MBA and PhD studies in 1991 at the Broad Graduate School of Management at Michigan State University. He is the author and a co-author of a number of books and articles in the fields of logistics management and consumer behavior. Dr. Wardlow's work experience includes broadcasting, ownership of two retail stores and a small independent music label. Until joining the bebe Board of Directors, he was a frequent industry consultant.
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John Kyees has served as Chief Financial Officer and Chief Administrative Officer since March 2002. From 1997 to 2002, Mr. Kyees held various executive positions at HC Holdings and Skinmarket, Inc., both specialty retailers. From 1984 to 1996, Mr. Kyees was the Chief Financial Officer of Express, a division of the Limited, Inc.
Renee Bell has served as Acting General Merchandise Manager of Design since June 2003. From 1997 to 2003, Ms. Bell served as Vice President of Merchandising for Rampage, a division of Charlotte Russe. From 1987 to 1996, Ms. Bell held various positions at bebe stores, inc. and other specialty retailers.
Tom Curtis has served as General Merchandise Manager of BEBE SPORT since June 2002. From 1998 to 2002, Mr. Curtis served as a Senior Merchandising Manager. From 1986 to 1998, Mr. Curtis held various positions at the following specialty retailers: The Walt Disney Co., Rampage Clothing Co. and R.H. Macy & Co., Inc.
Paul Mashouf has served as a Vice President of Sourcing since March 2003 and has been with the Company since 1990. Prior to his role as Vice President of Sourcing, Mr. Mashouf held various positions within the Company, including Director of IS&T for Production, Production Manager and Store Manager.
Ferrell Ostrow has served as Vice President of Stores since April 2003 and Vice President of Loss Prevention since March 1999. From 1998 to 1999, Mr. Ostrow served as the Director of Loss Prevention for The Wet Seal Inc. From 1988 to 1998, Mr. Ostrow served as Director of Loss Prevention with Pacific Sunwear of California Inc.
Michelle Perna has served as Vice President of Human Resources since November 2000. From 1997 to 2000, Ms. Perna was President of HR1, an HR consulting company. From 1989 to 1997, Ms. Perna was Vice President of Human Resources at Merv Griffin's Resorts Casino.
As of June 30, 2003, our 180 stores, all of which are leased, encompassed approximately 654,000 total square feet. The typical store lease is for a 10-year term and requires us to pay a base rent and a percentage rent if certain minimum sales levels are achieved. Many of the leases provide a lease termination option in certain specified years of the lease if certain minimum sales levels are not achieved. In addition, leases for locations typically require us to pay property taxes, utilities and repairs and common area maintenance fees.
Our main corporate headquarters are currently located in a facility in Brisbane, California. The facility located at 400 Valley Drive is approximately 35,000 square feet and houses administrative offices, store support services, and our on-line store. The lease for 400 Valley Drive expires in April 2014. We also lease a 144,000 square foot distribution center in Benicia, California and a 22,500 square foot design studio and production facility in Los Angeles, California. The leases expire in April 2013 and February 2005, respectively.
From time to time, we may be involved in litigation relating to claims arising out of our operations. As of the date of this filing, we are currently involved in several ongoing legal proceedings; however, none of these proceedings are expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or results of operations.
The lawsuit we filed on August 16, 2002 in the Federal District Court for the Eastern District of Missouri (the "Court") against May Department Stores Company ("May Company") has been settled to our satisfaction. This was a civil action for preliminary and permanent injunctive relief and damages
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sought against May Company for trademark infringement, trademark dilution, unfair competition and false designation of origin, arising, in part under the Lanham Act. This action also arose under the statutes and common law of the State of Missouri involving trademark infringement and dilution. We were seeking (i) a permanent injunction prohibiting May Company from using or permitting the use of the name "be" and all other names which are confusingly similar to the bebe marks; (ii) an accounting and disgorgement of May Company's profits; (iii) an award of punitive damages; and (iv) any other relief including prejudgment interest, post-judgment interest and costs that the Court deems just and proper.
Along with approximately one hundred and seven other parties, we were named in a class action suit filed in Los Angeles Superior Court (case No. BC294155) concerning the substance of one of the questions on our employment application.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our shareholders since June 30, 2003.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock trades on the Nasdaq National Market under the symbol "BEBE". The following table sets forth the high and low sales of our common stock for the two years ended June 30, 2003, as reported by Nasdaq:
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High
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Low
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| Fiscal 2002 | ||||||
| First Quarter | $ | 35.50 | $ | 14.50 | ||
| Second Quarter | 21.91 | 12.87 | ||||
| Third Quarter | 26.20 | 18.27 | ||||
| Fourth Quarter | 24.78 | 17.26 | ||||
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Fiscal 2003 |
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| First Quarter | $ | 21.22 | $ | 11.52 | ||
| Second Quarter | 14.97 | 9.58 | ||||
| Third Quarter | 17.27 | 10.97 | ||||
| Fourth Quarter | 19.99 | 11.72 | ||||
As of August 29, 2003, the number of holders of record of our common stock was 60 and the number of beneficial holders of our common stock was approximately 2,140.
We have never declared or paid any dividends on our common stock and do not intend to pay any dividends on our common stock in the foreseeable future. In addition, our current line of credit arrangements prohibit the payment of cash dividends on our capital stock.
Information with respect to equity plan compensation is incorporated by reference from our definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of our fiscal year.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial and Operating Data
The following selected financial data is qualified by reference to, and should be read in conjunction with, the Financial Statements and Notes thereto and the other financial information
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appearing elsewhere in this filing. These historical results are not necessarily indicative of results to be expected in the future.
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Fiscal Year Ended June 30,
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2003
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2002
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2001
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2000
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1999
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(Dollars in thousands, except per share data)
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| Statements of Operations Data: | |||||||||||||||||
| Net sales | $ | 323,549 | $ | 316,424 | $ | 290,836 | $ | 241,802 | $ | 201,341 | |||||||
| Cost of sales, including buying and occupancy | 179,058 | 174,048 | 151,204 | 119,850 | 95,440 | ||||||||||||
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| Gross profit | 144,491 | 142,376 | 139,632 | 121,952 | 105,901 | ||||||||||||
| Selling, general and administrative expenses | 115,851 | 101,828 | 97,817 | 76,294 | 61,069 | ||||||||||||
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| Income from operations | 28,640 | 40,548 | 41,815 | 45,658 | 44,832 | ||||||||||||
| Interest and other expenses (income), net | (2,199 | ) | (2,074 | ) | (3,407 | ) | (3,201 | ) | (2,242 | ) | |||||||
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| Earnings before income taxes | 30,839 | 42,622 | 45,222 | 48,859 | 47,074 | ||||||||||||
| Provision for income taxes | 11,560 | 16,138 | 17,415 | 19,454 | 19,065 | ||||||||||||
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| Net earnings | $ | 19,279 | $ | 26,484 | $ | 27,807 | $ | 29,405 | $ | 28,009 | |||||||
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| Basic earnings per share | $ | 0.75 | $ | 1.04 | $ | 1.12 | $ | 1.20 | $ | 1.16 | |||||||
| Diluted earnings per share | $ | 0.74 | $ | 1.02 | $ | 1.08 | $ | 1.17 | $ | 1.11 | |||||||
| Basic weighted average shares outstanding | 25,644 | 25,404 | 24,792 | 24,481 | 24,055 | ||||||||||||
| Diluted weighted average shares outstanding | 25,902 | 25,964 | 25,697 | 25,226 | 25,327 | ||||||||||||
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Selected Operating Data: |
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| Number of stores: | |||||||||||||||||
| Opened during period | 20 | 20 | 26 | 24 | 17 | ||||||||||||
| Closed during the period | 5 | 1 | 4 | 1 | 2 | ||||||||||||
| Open at end of period | 180 | 165 | 146 | 124 | 101 | ||||||||||||
| Net sales per average store (1) | $ | 1,770 | $ | 1,957 | $ | 2,030 | $ | 2,164 | $ | 2,181 | |||||||
| Comparable store sales increase (decrease) (2) | (6.8 | )% | (5.7 | )% | (2.3 | )% | 0.4% | 25.1% | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
2000
|
1999
|
||||||||||
| Balance Sheet Data: | |||||||||||||||
| Working capital | $ | 149,840 | $ | 133,738 | $ | 107,323 | $ | 80,711 | $ | 62,144 | |||||
| Total assets | 241,978 | 213,165 | 174,730 | 137,662 | 107,366 | ||||||||||
| Long-term debt, including current portion | 0 | 2 | 82 | 173 | 260 | ||||||||||
| Shareholders' equity | 201,345 | 180,541 | 147,296 | 111,800 | 80,094 | ||||||||||
Comparable store sales. Comparable store sales are calculated by including the net sales of stores that have been open at least one year. Therefore, a store is included in the comparable store sales base beginning with its thirteenth month. Stores that have been expanded or remodeled by 15 percent or more or have been permanently relocated are excluded from the comparable store sales base. In addition, comparable store sales are calculated on a calendar month basis using a same day sales comparison. On-line store sales are not included in the comparable store sales calculation.
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Financial Statements and Notes thereto included elsewhere in this Form 10-K. The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risks That May Affect Results" in this section. Our fiscal year ends on June 30 of each calendar year.
Critical Accounting Policies
Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the financial statements. We believe our application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Our accounting policies are more fully described in Note 1 to the financial statements.
We have identified certain critical accounting policies, which are described below.
Inventories. Our inventories are stated at the lower of weighted average cost or market. We estimate shortage for the period between the last physical count and balance sheet date. Our estimate can be affected by shortage trends. In order to assess that raw material is recorded properly we age the fabric inventory and record a reserve to reduce the cost in accordance with our established policy, which is based on historical experience. To ensure that finished goods inventory is recorded properly; we review our inventory and reduce the cost if the selling price is marked down below cost. These assumptions can have an impact on current and future operating results and financial position.
Long-lived assets. We review long-lived assets for impairment whenever events or changes in circumstances, such as store closures, indicate that the carrying value of an asset may not be recoverable. If the undiscounted cash flows from the long-lived assets are less than the carrying value we record an impairment charge equal to the difference between the carrying value and the asset's fair value. In addition, at the time a decision is made to close a store, we record an impairment charge, if appropriate, or accelerate depreciation over the revised useful life. For fiscal 2003, we recorded a charge for the impairment of store assets of $265,000.We believe at this time that the long-lived assets' carrying values and useful lives continue to be appropriate.
Sales Return Reserve. We record a reserve for estimated product returns based on historical return trends. For fiscal 2003, the reserve was $498,000 compared to $470,000 in fiscal 2002. If actual returns are greater than those projected, additional sales returns may be recorded in the future.
Income Taxes. We record reserves for estimates of probable settlements of domestic and foreign tax audits. At any one time, many tax years may be subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of
13
these issues. Our effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings.
Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and establishes standards for the recognition and measurement of asset impairment and disposal cost. SFAS No. 144 supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. The Company adopted this Statement on July 1, 2002. Adoption of this Statement did not have a significant impact on our financial position or results of operations.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities", which addresses accounting for restructuring and similar costs. SFAS 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue No. 94-3. SFAS 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost was recognized at the date of the company's commitment to an exit plan. SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS 146 may affect the timing of recognizing any future restructuring costs as well as the amounts recognized. The Company adopted this Statement on December 31, 2002. Adoption of this Statement did not have a significant impact on our financial position or results of operations.
Results of Operations
The following table sets forth certain financial data as a percentage of net sales for the periods indicated:
|
|
Fiscal Year Ended
June 30, |
||||||
|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
||||
| Statements of Operations Data: | |||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | |
| Cost of sales, including buying and occupancy(1) | 55.3 | 55.0 | 52.0 | ||||
|
|
|
|
|||||
| Gross profit | 44.7 | 45.0 | 48.0 | ||||
| Selling, general and administrative expenses(2) | 35.8 | 32.2 | 33.6 | ||||
|
|
|
|
|||||
| Income from operations | 8.9 | 12.8 | 14.4 | ||||
| Interest and other expenses (income), net | (0.7 | ) | (0.7 | ) | (1.2 | ) | |
|
|
|
|
|||||
| Earnings before income taxes | 9.6 | 13.5 | 15.6 | ||||
| Provision for income taxes | 3.6 | 5.1 | 6.0 | ||||
|
|
|
|
|||||
| Net earnings | 6.0 | % | 8.4 | % | 9.6 | % | |
|
|
|
|
|||||
14
Years Ended June 30, 2003 and 2002
Net Sales. Net sales increased to $323.5 million during the year ended June 30, 2003 from $316.4 million in fiscal 2002, an increase of $7.1 million, or 2.2%. Of this increase, new, expanded or remodeled stores not included in the comparable store sales base added $27.3 million to sales, while a decrease in comparable store sales of 6.8% reduced sales by $20.2 million. The decrease in comparable store sales performance was attributed to the following: marketplace conditions which impacted customer traffic to our stores, missed opportunities in key product categories and production delays which resulted in missed sales opportunities and increased promotional activities.
Gross Profit. Gross profit increased to $144.5 million for the year ended June 30, 2003 from $142.4 million in fiscal 2002, an increase of $2.1 million, or 1.5%. As a percentage of net sales, gross profit decreased to 44.7% for the year from 45.0% during fiscal 2002. The decrease in gross profit as a percentage of net sales resulted from negative occupancy leverage offset by slightly higher net merchandise margins. Negative occupancy expense leverage was the result of lower sales productivity.
Selling, General and Administrative Expenses. Selling, general and administrative expenses, which primarily consist of non-occupancy store costs, corporate overhead and advertising costs, increased to $115.9 million during the year ended June 30, 2003 from $101.8 million in fiscal 2002, an increase of $14.1 million, or 13.9%. As a percentage of net sales, these expenses increased to 35.8% during the year ended June 30, 2003 from 32.2% in fiscal 2002. This increase as a percentage of net sales was primarily due to higher compensation associated with the store commission structure, higher depreciation due to negative leverage and investments in the Company's infrastructure, and store closure expenses and reserves which amounted to $557,000 related to 5 store closures and an impairment reserve for 2 stores. Expenses were also impacted by charges related to abandoned information technology projects which were offset by a favorable legal settlement.
Interest and Other Expense (Income), Net. We generated $2.2 million of interest and other income (net of other expenses) during the year ended June 30, 2003 as compared to $2.1 million in fiscal 2002. Average cash balances continued to increase arising from operating results offset by lower interest rates.
Provision for Income Taxes. The effective tax rate for the year ended June 30, 2003 was 37.5% as compared to 37.9% in fiscal 2002. The lower effective tax rate for fiscal 2003 was primarily attributable to a lower effective state tax rate due to the benefits of the corporate legal entity restructuring.
Years Ended June 30, 2002 and 2001
Net Sales. Net sales increased to $316.4 million during the year ended June 30, 2002 from $290.8 million in fiscal 2001, an increase of $25.6 million, or 8.8%. Of this increase, new, expanded or remodeled stores not included in the comparable store sales base added $41.0 million to sales, while a decrease in comparable store sales of 5.7% reduced sales by $15.4 million. Comparable store sales for the first half of fiscal 2002 decreased 3.7%. Comparable store sales for the second half of fiscal 2002 decreased 8.1%. Comparable store sales were positive from July 1, 2001 through September 10, 2001. Following the September 11, 2001 terrorist attack, the decrease in comparable store sales was attributed to the following: marketplace conditions, missed opportunities in key product categories, a product assortment heavily skewed toward the casual lifestyle, and the move of the production operation from Brisbane, California to Los Angeles, California.
Gross Profit. Gross profit, which includes the cost of merchandise, buying and occupancy, increased to $142.4 million for the year ended June 30, 2002 from $139.6 million in fiscal 2001, an increase of $2.8 million, or 2.0%. As a percentage of net sales, gross profit decreased to 45.0% for the year from 48.0% during fiscal 2001. The decrease in gross profit as a percentage of net sales resulted from negative occupancy expense leverage and reduced merchandise margins. Negative occupancy
15
expense leverage was attributed to the lower sales productivity. Reduced merchandise margins were due to increased production costs related to the move of the production facility to Los Angeles, California, production delays and charges associated with the write-off of fabric of approximately $1.5 million. Merchandise margins were also reduced by a weaker product sell-through, primarily in the first six months of the fiscal year, resulting in an increased level of markdowns and a change in the mix of sales between full price and outlet stores.
Selling, General and Administrative Expenses. Selling, general and administrative expenses, which primarily consist of non-occupancy store costs, corporate overhead and advertising costs, increased to $101.8 million during the year ended June 30, 2002 from $97.8 million in fiscal 2001, an increase of $4.0 million, or 4.1%. As a percentage of net sales, these expenses decreased to 32.2% during the year ended June 30, 2002 from 33.6% in fiscal 2001. This decrease as a percentage of net sales was primarily due to lower compensation resulting from a change in our incentive plan, and a favorable settlement on a lawsuit. In fiscal 2001, we recorded $890,000 of expenses related to the tentative resolution of a lawsuit. The decrease in expenses was offset by negative leverage associated with the decrease in comparable store sales and $1.2 million of charges related to abandoned information technology projects.
Interest and Other Expense (Income), Net. We generated $2.1 million of interest and other income (net of other expenses) during the year ended June 30, 2002 as compared to $3.4 million in fiscal 2001. Average cash balances continued to increase, however lower interest rates during fiscal 2002 resulted in a reduction in interest income.
Provision for Income Taxes. The effective tax rate for the year ended June 30, 2002 was 37.9% as compared to 38.5% in fiscal 2001. The lower effective tax rate for fiscal 2002 was primarily attributable to the benefits of converting United Kingdom operations into a disregarded entity for U.S. federal income tax purposes.
Seasonality of Business and Quarterly Results
Our business varies with general seasonal trends that are characteristic of the retail and apparel industries. As a result, our typical store generates a disproportionate amount of our annual net sales and profitability in the second quarter of our fiscal year (which includes the fall and holiday selling seasons) compared to other quarters of our fiscal year. If for any reason our sales were below seasonal norms during the second quarter of our fiscal year, our annual operating results would be negatively impacted. Because of the seasonality of our business, results for any quarter are not necessarily indicative of results that may be achieved for a full fiscal year.
Liquidity and Capital Resources
Our working capital requirements vary widely throughout the year and generally peak in the first and second fiscal quarters. At June 30, 2003, we had approximately $151.3 million of cash, cash equivalents and marketable securities (short-term and long-term) on hand. In addition, we had a revolving line of credit, under which we could borrow or issue letters of credit up to a combined total of $10.0 million. As of June 30, 2003, there were no borrowings under the line of credit and letters of credit outstanding totaled $4.4 million.
Net cash provided by operating activities in fiscal 2003, 2002 and 2001 was $41.6 million, $49.9 million and $33.7 million, respectively. The decrease in cash provided by operating activities in fiscal 2003 compared to 2002 was primarily the result of a decrease in net income, increase in inventories, and other changes in working capital.
Net cash used by investing activities was $33.2 million, $21.9 million and $18.0 million in fiscal 2003, 2002 and 2001, respectively. The primary use of these funds was for capital expenditures and for
16
2003, to purchase marketable securities of $23.4 million. Capital expenditures in 2003 relate to the opening of new stores, investments in management information systems and the expansion of our corporate offices. We opened 20 new stores in fiscal 2003, 20 new stores in fiscal 2002 and 26 new stores in fiscal 2001. We expect to open approximately 12 to 16 stores in fiscal 2004.
During fiscal 2003, new store construction costs (before tenant allowances) averaged $475,000. The average gross inventory investment was $70,000.
Net cash provided by financing activities was $0.7 million, $4.2 million and $2.9 million in fiscal 2003, fiscal 2002 and fiscal 2001, respectively, and was derived from proceeds from the issuance of common stock arising from stock option exercises.
We believe that our cash on hand, together with our cash flow from operations, will be sufficient to meet our capital and operating requirements through fiscal 2004. We expect to renew our line of credit which expires in the second quarter of fiscal year 2004 to one with similar terms. Our future capital requirements, however, will depend on numerous factors, including without limitation, the size and number of new and expanded stores, investment costs for management information systems, potential acquisitions and/or joint ventures, repurchase of stock and future results of operations.
Summary Disclosures about Contractual Obligations and Commercial Commitments:
The following table summarizes significant contractual obligations as of June 30, 2003:
|
|
Total
|
2004
|
2005
|
2006
|
2007
|
2008
|
Thereafter
|
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
(Dollars in thousands)
|
||||||||||||||||||||
| CONTRACTUAL OBLIGATIONS | |||||||||||||||||||||
|
Operating leases |
|
$ |
211,098 |
|
$ |
28,895 |
|
$ |
28,189 |
|
$ |
26,936 |
|
$ |
26,173 |
|
$ |
25,330 |
|
$ |
75,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of commitment expiration period
|
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Total
|
Less than 1
year |
1-3 years
|
4-5 years
|
After 5 years
|
||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
| OTHER COMMERCIAL COMMITMENTS | |||||||||||||||
|
Revolving line of credit, net of outstanding letters of credit |
|
$ |
5,643 |
|
$ |
5,643 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
| Standby letters of credit | 578 | 578 | — | — | — | ||||||||||
| Trade letters of credit | 3,779 | 3,779 | — | — | — | ||||||||||
|
|
|
|
|
|
|||||||||||
| Total Commercial Commitments | $ | 10,000 | $ | 10,000 | $ | — | $ | — | $ | — | |||||
|
|
|
|
|
|
|||||||||||
As of June 30, 2003, there were no borrowings outstanding under the line of credit.
Inflation
We do not believe that inflation has had a material effect on the results of operations in the recent past. However, we cannot assure that our business will not be affected by inflation in the future.
17
RISKS THAT MAY AFFECT RESULTS
Factors that might cause our actual results to differ materially from the forward looking statements discussed elsewhere in this report, as well as affect our ability to achieve our financial and other goals, include, but are not limited to, the following:
RISKS RELATING TO OUR BUSINESS:
In addition, if we decide to change a key element of the design after the manufacturing process has begun we may negatively impact the manufacturer's ability to deliver the products on a timely basis which could impact earnings.
18
In addition, we depend upon the expertise and execution of our key employees, particularly Manny Mashouf, the founder, Chairman of the Board, Chief Executive Officer and majority shareholder. We do not carry "key person" life insurance policies on any of our employees. If we lose the services of Mr. Mashouf or any key officers or employees, it could harm our business and results of operations.
We compete with traditional department stores, specialty store retailers, business to consumer websites, off-price retailers and direct marketers for, among other things, raw materials,
19
market share, retail space, finished goods, sourcing and personnel. Because many of these competitors are larger and have substantially greater financial, distribution and marketing resources than we do, we may lack the resources to adequately compete with them. If we fail to compete in any way, it could harm our business, financial condition and results of operations.
The outlook for the United States economy is uncertain and is directly affected by global political factors that are beyond our control. Any escalation of military action involving the United States could cause increased volatility in financial markets, further adversely affecting consumer confidence and spending habits. If current economic conditions do not improve, our business, financial condition and results of operations could be adversely affected.
We are seeking to register our trademarks in targeted international markets. In some of these markets, obstacles exist that may prevent us from obtaining a trademark for the bebe name or related names. In such countries, we may not be able to register trademarks in these international markets, purchase the right or obtain a license to use the bebe name on commercially reasonable terms. If we fail to obtain trademark, ownership or license rights, it would limit our ability to expand into certain international markets. Furthermore, in some jurisdictions, despite successful registration of our trademarks, third parties may allege infringement and bring actions against us. In addition, if our licensees fail to use our intellectual property correctly, the goodwill associated with our trademarks may be diluted.
Both domestically and internationally, if we do not show use of our trademarks, our trademark rights may lapse over time.
20
with respect to these actions cannot be accurately predicted, in the opinion of Management, any such liability will not individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations.
RISKS RELATING TO OUR COMMON STOCK:
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, which include changes in U.S. interest rates and, to a lesser extent, foreign exchange rates. We do not engage in financial transactions for trading or speculative purposes.
Interest Rate Risk.
We currently maintain a portfolio of fixed and variable investments consisting of cash equivalents, short-term marketable securities and long-term marketable securities, which can be affected by changes in market interest rates. According to our investment policy, we may invest in taxable and tax exempt instruments. In addition, the policy establishes limits on credit quality, maturity, issuer and type of instrument. Marketable securities are classified as "available for sale". Marketable securities are comprised of tax-exempt municipal bonds. We do not use derivative financial instruments in our investment portfolio.
All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. The remaining investments are considered short-term marketable securities if maturities range between four and twelve months or long term marketable securities if maturities are over twelve months.
21
The following table lists our cash equivalents, short-term marketable securities and long-term marketable securities at June 30, 2003:
|
|
2003
|
Fair Value
|
||||||
|---|---|---|---|---|---|---|---|---|
|
|
(Dollars in thousands)
|
|||||||
| Cash equivalents | $ | 118,475 | $ | 118,475 | ||||
| Weighted average interest rate | 1.85 | % | ||||||
| Short-term marketable securities | 10,500 | 10,500 | ||||||
| Weighted average interest rate | 2.42 | % | ||||||
| Long-term marketable securities | 7,875 | 7,875 | ||||||
| Weighted average interest rate | 2.72 | % | ||||||
|
|
|
|||||||
| Total | $ | 136,850 | $ | 136,850 | ||||
|
|
|
|||||||
The interest payable on our bank line of credit is based on variable interest rates and therefore affected by changes in market interest rates. If interest rates rose .4 basis points (a 10% change from the bank's reference rate as of June 30, 2003), our results from operations and cash flows would not be significantly affected.
Foreign Currency Risks.
We enter into a significant amount of purchase obligations outside of the U.S. which are settled in U.S. Dollars and, therefore, we have only minimal exposure to foreign currency exchange risks. We also operate a subsidiary with a functional currency other than the U.S. Dollar. This subsidiary represented less than two percent of total revenues for fiscal year 2003 and, therefore, presents only minimal exposure to foreign currency exchange risks. We do not hedge against foreign currency risks and believe that foreign currency exchange risk is immaterial.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is set forth in "Index to Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item is incorporated by reference from the Registrant's definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the registrant's fiscal year.
22
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference from the Registrant's definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the registrant's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference from the Registrant's definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrant's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is incorporated by reference from the Registrant's definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrant's fiscal year.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to this item is incorporated by reference from the Registrant's definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrant's fiscal year.
23
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
|
Date of Report
|
Items
|
Description
|
||
|---|---|---|---|---|
| April 16, 2003 | 7, 9 | The Company issued a press release announcing March 2003 sales and a press release announcing the Company's updated financial outlook for the third quarter of fiscal 2003. | ||
|
April 24, 2003 |
|
7, 9 |
|
The Company issued a press release announcing third quarter earnings of fiscal 2003. |
|
May 8, 2003 |
|
7, 9 |
|
The Company issued a press release announcing April 2003 sales. |
|
June 5, 2003 |
|
7, 9 |
|
The Company issued a press release announcing May 2003 sales and a press release announcing the Company's updated financial outlook for the fourth quarter of fiscal 2003. |
|
EXHIBIT
NUMBER |
DESCRIPTION OF DOCUMENT
|
|
|---|---|---|
| 3.1* | Amended and Restated Articles of Incorporation of Registrant. | |
|
3.2 |
|
Amended and Restated Bylaws of Registrant. |
|
4.1* |
|
Specimen certificate representing the Common Stock (in standard printer form, not provided). |
|
10.1 |
|
1997 Stock Plan. |
|
10.2* |
|
1998 Stock Purchase Plan. |
|
10.3* |
|
Form of Indemnification Agreement. |
|
10.6** |
|
Standard Industrial/Commercial-Tenant Lease-Net dated November 30, 1998 between Registrant and Far Western Land and Investment Company, Inc., (lease for additional building to house administrative departments in Brisbane, California). |
24
|
10.7** |
|
Retail Store License Agreement between Registrant and Sakal Duty Free LTD., a duly registered Israeli private company, and Sakal Sports LTD., a duly registered Israeli private company, effective as of November 1, 1998. |
|
10.8*** |
|
Form of Retail Store License Agreement between Registrant and [company]. |
|
10.9**** |
|
Amendment No. 1 to Lease Agreement (amendment to Standard Industrial/Commercial-Tenant Lease-Net dated November 30, 1998 between Registrant and Far Western Land and Investment Company, Inc.) |
|
10.10 |
|
Lease Agreement dated October 24, 2000, as amended, between Registrant and Lincoln PO Benecia Limited Partnership. |
|
10.11 |
|
Lease Agreement dated November 3, 2000, as amended, between Registrant and Stanley Hirsh and Anita Hirsh as trustees, D/B/A Mercantile Center. |
|
10.12 |
|
Form of Restricted Stock Units Agreement |
|
10.13 |
|
Notice of Grant of Restricted Stock Units to Barbara Bass |
|
10.14 |
|
Notice of Grant of Restricted Stock Units to Corrado Federico |
|
10.15 |
|
Notice of Grant of Restricted Stock Units to Robert Jaffe |
|
10.16 |
|
Notice of Grant of Restricted Stock Units to Daniel Wardlow |
|
21.1 |
|
Subsidiaries of Registrant. |
|
23.1 |
|
Independent Auditors' Consent and Report on Schedules. |
|
24.1 |
|
Power of Attorney (see signature page). |
|
31.1 |
|
Section 302 Certification of Chief Executive Officer. |
|
31.2 |
|
Section 302 Certification of Chief Financial Officer. |
|
32.1 |
|
Section 906 Certification of Chief Executive Officer. |
|
32.2 |
|
Section 906 Certification of Chief Financial Officer. |
25
Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Brisbane, State of California, on the 29th day of September 2003.
| bebe stores, inc. | ||||
|
|
|
|
|
|
| By: |
/s/
MANNY MASHOUF
Manny Mashouf Chief Executive Officer (Principal Executive Officer) |
|||
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Manny Mashouf and John Kyees, and each of them acting individually, as his true and lawful attorneys-in-fact and agents, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Exchange Act, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated:
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Name
|
Title
|
Date
|
||
|---|---|---|---|---|
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|
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|
|
|
|
/s/
MANNY MASHOUF
Manny Mashouf |
Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | September 29, 2003 | ||
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/s/ JOHN KYEES John Kyees |
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Chief Financial and Chief Administrative Officer (Principal Financial Officer and Principal Accounting Officer) |
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September 29, 2003 |
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/s/ ROBERT JAFFE Robert Jaffe |
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Vice Chairman of the Board |
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September 29, 2003 |
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/s/ NEDA MASHOUF Neda Mashouf |
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Director |
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September 29, 2003 |
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/s/ BARBARA BASS Barbara Bass |
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Director |
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September 29, 2003 |
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/s/ CORRADO FEDERICO Corrado Federico |
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Director |
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September 29, 2003 |
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/s/ DANIEL WARDLOW Daniel Wardlow |
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Director |
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September 29, 2003 |
S-1
bebe stores, inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2003, 2002 AND 2001:
| Independent auditors' report | F-2 | |
|
Consolidated balance sheets as of June 30, 2003 and 2002 |
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F-3 |
|
Consolidated statements of income for the fiscal years ended June 30, 2003, 2002 and 2001 |
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F-4 |
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Consolidated statements of shareholders' equity for the fiscal years ended June 30, 2003, 2002 and 2001 |
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F-5 |
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Consolidated statements of cash flows for the fiscal years ended June 30, 2003, 2002 and 2001 |
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F-6 |
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Notes to consolidated financial statements |
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F-7 |
F-1
To
the Board of Directors and Shareholders of
bebe stores, inc.:
We have audited the accompanying consolidated balance sheets of bebe stores, inc. as of June 30, 2003 and 2002 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three fiscal years in the period ended June 30, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of bebe stores, inc. as of June 30, 2003 and 2002 and the results of its operations and its cash flows for each of the three fiscal years in the period ended June 30, 2003 in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
San
Francisco, California
September 15, 2003
F-2
bebe stores, inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
|
|
As of June 30,
|
||||||||
|---|---|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
|||||||
| Assets: | |||||||||
| Current assets: | |||||||||
| Cash and equivalents | $ | 132,889 | $ | 123,431 | |||||
| Short-term marketable securities | 10,500 | — | |||||||
| Receivables (net of allowance of $531 and $190) | 1,750 | 2,249 | |||||||
| Inventories | 25,422 | 23,357 | |||||||
| Deferred income taxes | 3,226 | 2,389 | |||||||
| Prepaid and other | 3,063 | 4,849 | |||||||
|
|
|
||||||||
| Total current assets | 176,850 | 156,275 | |||||||
| Equipment and leasehold improvements, net | 52,305 | 50,573 | |||||||
| Long-term marketable securities | 7,875 | — | |||||||
| Deferred income taxes | 3,202 | 4,563 | |||||||
| Other assets | 1,746 | 1,754 | |||||||
|
|
|
||||||||
| Total assets | $ | 241,978 | $ | 213,165 | |||||
|
|
|
||||||||
| Liabilities and Shareholders' Equity: | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 15,310 | $ | 12,138 | |||||
| Accrued liabilities | 11,700 | 10,399 | |||||||
|
|
|
||||||||
| Total current liabilities | 27,010 | 22,537 | |||||||
| Deferred rent | 13,623 | 10,087 | |||||||
|
|
|
||||||||
| Total liabilities | 40,633 | 32,624 | |||||||
|
|
|
||||||||
| Commitments and contingencies | — | — | |||||||
| Shareholders' equity: | |||||||||
| Preferred stock-authorized 1,000,000 shares at $0.001 par value per share; no shares issued and outstanding | |||||||||
| Common stock-authorized 40,000,000 shares at $0.001 par value per share; issued and outstanding 25,682,875 and 25,612,056 shares | 26 | 26 | |||||||
| Additional paid-in capital | 39,918 | 38,624 | |||||||
| Deferred compensation | (75 | ) | — | ||||||
| Accumulated other comprehensive (income) loss | 269 | (37 | ) | ||||||
| Retained earnings | 161,207 | 141,928 | |||||||
|
|
|
||||||||
| Total shareholders' equity | 201,345 | 180,541 | |||||||
|
|
|
||||||||
| Total liabilities and shareholders' equity | $ | 241,978 | $ | 213,165 | |||||
|
|
|
||||||||
See accompanying notes to consolidated financial statements.
F-3
bebe stores, inc.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
|
|
Fiscal Year Ended June 30,
|
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
||||||||
| Net sales | $ | 323,549 | $ | 316,424 | $ | 290,836 | |||||
| Cost of sales, including buying and occupancy | 179,058 | 174,048 | 151,204 | ||||||||
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|
|
|
|||||||||
| Gross profit | 144,491 | 142,376 | 139,632 | ||||||||
| Selling, general and administrative expenses | 115,851 | 101,828 | 97,817 | ||||||||
|
|
|
|
|||||||||
| Income from operations | 28,640 | 40,548 | 41,815 | ||||||||
| Other expense (income): | |||||||||||
| Interest expense | 1 | 4 | 16 | ||||||||
| Interest income | (2,043 | ) | (2,191 | ) | (3,453 | ) | |||||
| Other, net | (157 | ) | 113 | 30 | |||||||
|
|
|
|
|||||||||
| Earnings before income taxes | 30,839 | 42,622 | 45,222 | ||||||||
| Provision for income taxes | 11,560 | 16,138 | 17,415 | ||||||||
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|
|
|
|||||||||
| Net earnings | $ | 19,279 | $ | 26,484 | $ | 27,807 | |||||
|
|
|
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|||||||||
| Basic earnings per share | $ | 0.75 | $ | 1.04 | $ | 1.12 | |||||
| Diluted earnings per share | $ | 0.74 | $ | 1.02 | $ | 1.08 | |||||
| Basic weighted average shares outstanding | 25,644 | 25,404 | 24,792 | ||||||||
| Diluted weighted average shares outstanding | 25,902 | 25,964 | 25,697 | ||||||||
See accompanying notes to consolidated financial statements.
F-4
bebe stores, inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
|
|
Common Stock
|
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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|
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Accumulated
Other Comprehensive Loss |
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||||||||||||||||||
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|
Number of
Shares |
Amount
|
Additional
Paid-in Capital |
Deferred
Compensation |
Retained
Earnings |
Total
|
Comprehensive
Income |
|||||||||||||||||
| Balance as of June 30, 2000 | 24,590 | $ | 24 | $ | 24,661 | $ | (433 | ) | $ | (90 | ) | $ | 87,637 | $ | 111,799 | |||||||||
| Net earnings | 27,807 | 27,807 | $ | 27,807 | ||||||||||||||||||||
| Foreign currency translation adjustment | (100 | ) | (100 | ) | (100 | ) | ||||||||||||||||||
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|
||||||||||||||||||||||||
| Total comprehensive income | $ | 27,707 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Deferred compensation | (20 | ) | 433 | 413 | ||||||||||||||||||||
| Common stock issued under stock plans including tax benefit | 598 | 1 | 7,376 | 7,377 | ||||||||||||||||||||
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||||||||||||||||||
| Balance as of June 30, 2001 | 25,188 | $ | 25 | $ | 32,017 | $ | 0 | $ | (190 | ) | $ | 115,444 | $ | 147,296 | ||||||||||
| Net earnings | 26,484 | 26,484 | $ | 26,484 | ||||||||||||||||||||
| Foreign currency translation adjustment | 153 | 153 | 153 | |||||||||||||||||||||
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|
||||||||||||||||||||||||
| Total comprehensive income | $ | 26,637 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Deferred compensation | ||||||||||||||||||||||||
| Common stock issued under stock plans including tax benefit | 424 | 1 | 6,607 | 6,608 | ||||||||||||||||||||
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|
|
|
|
|
|
|
||||||||||||||||||
| Balance as of June 30, 2002 | 25,612 | $ | 26 | $ | 38,624 | $ | 0 | $ | (37 | ) | $ | 141,928 | $ | 180,541 | ||||||||||
| Net earnings | 19,279 | 19,279 | $ | 19,279 | ||||||||||||||||||||
| Foreign currency translation adjustment | 306 | 306 | 306 | |||||||||||||||||||||
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|
||||||||||||||||||||||||
| Total comprehensive income | $ | 19,585 | ||||||||||||||||||||||
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|
||||||||||||||||||||||||
| Deferred compensation | 100 | (100 | ) | |||||||||||||||||||||
| Amortization of deferred compensation | 25 | 25 | ||||||||||||||||||||||
| Common stock issued under stock plans including tax benefit | 71 | — | 1,194 | 1,194 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||
| Balance as of June 30, 2003 | 25,683 | $ | 26 | $ | 39,918 | $ | (75 | ) | $ | 269 | $ | 161,207 | $ | 201,345 | ||||||||||
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||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-5
bebe stores, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amount in thousands)
|
|
Fiscal Year Ended June 30,
|
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|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings | $ | 19,279 | $ | 26,484 | $ | 27,807 | |||||
| Adjustments to reconcile net earnings to cash provided by operating activities: | |||||||||||
| Non-cash compensation expense | 25 | — | 413 | ||||||||
| Depreciation and amortization | 12,785 | 10,071 | 8,280 | ||||||||
| Tax benefit from stock options exercised | 451 | 2,289 | 4,381 | ||||||||
| Net loss on disposal of property | 293 | 713 | 691 | ||||||||
| Deferred income taxes | 524 | (1,578 | ) | (215 | ) | ||||||
| Deferred rent | 3,534 | 6,130 | 589 | ||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Receivables | 356 | 33 | 405 | ||||||||
| Inventories | (2,034 | ) | 4,414 | (3,437 | ) | ||||||
| Other assets | 94 | (404 | ) | (765 | ) | ||||||
| Prepaid expenses | 1,791 | 2,347 | (6,058 | ) | |||||||
| Accounts payable | 3,171 | 1,261 | (2,088 | ) | |||||||
| Accrued liabilities | 1,344 | (1,835 | ) | 3,710 | |||||||
|
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|
|
|||||||||
| Net cash provided by operating activities | 41,613 | 49,925 | 33,713 | ||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of equipment and leasehold improvements | (14,878 | ) | (21,945 | ) | (17,963 | ) | |||||
| Proceeds from sales of equipment | 6 | 39 | — | ||||||||
| Purchase of marketable securities | (23,375 | ) | — | — | |||||||
| Proceeds from sale of marketable securities | 5,000 | — | — | ||||||||
|
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|
|
|||||||||
| Net cash used by investing activities | (33,247 | ) | (21,906 | ) | (17,963 | ) | |||||
| Cash flows from financing activities: | |||||||||||
| Repayments of capital leases | (2 | ) | (73 | ) | (69 | ) | |||||
| Repayments of investment note | (13 | ) | — | (18 | ) | ||||||
| Net proceeds from issuance of common stock | 743 | 4,318 | 2,995 | ||||||||
|
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|
|
|||||||||
| Net cash provided by financing activities | 728 | 4,245 | 2,908 | ||||||||
| Effect of exchange rate changes on cash | 364 | 167 | (199 | ) | |||||||
| Net increase in cash and equivalents | 9,458 | 32,431 | 18,459 | ||||||||
| Cash and equivalents: | |||||||||||
| Beginning of year | 123,431 | 91,000 | 72,541 | ||||||||
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|
|||||||||
| End of year | $ | 132,889 | $ | 123,431 | $ | 91,000 | |||||
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| Supplemental information: | |||||||||||
| Cash paid for interest | $ | 1 | $ | 4 | $ | 16 | |||||
|
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|
|||||||||
| Cash paid for income taxes | $ | 8,389 | $ | 17,825 | $ | 18,274 | |||||
|
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|
|||||||||
See accompanying notes to consolidated financial statements.
F-6
bebe stores, inc.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of the business— bebe stores, inc., the "Company," designs, develops and produces a distinctive line of contemporary women's apparel and accessories, which it markets under the bebe and BEBE SPORT brand names primarily through its 180 specialty retail stores located in 32 states, the District of Columbia, Canada, 16 licensed stores internationally and an on-line store at www.bebe.com.
The Company has one reportable segment and has two brands with product lines of a similar nature. Revenues of the Company's international retail operations represent less than two percent of total revenues for fiscal year 2003.
Basis of financial statement presentation — The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP).
Consolidation —The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany transactions and balances have been eliminated.
Use of estimates— The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications— Certain amounts for prior years have been reclassified to conform with current year presentation.
Foreign currency adjustments— Translation adjustments result from the translation of foreign subsidiaries financial statements into US Dollars. The results of operations of foreign subsidiaries are translated using the average exchange rate during the period. Balance sheet amounts are translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustment is included in shareholders' equity.
Cash and cash equivalents represent cash and short-term, highly liquid investments with original maturities of less than 90 days.
Marketable Securities —The Company's marketable securities are classified as "available for sale". Marketable securities are comprised of tax-exempt municipal bonds. Short-term marketable securities consist of investments with maturities less than or equal to 1 year. Long-term marketable securities consist of investments with maturities greater than 1 year. As of June 30, 2003, the carrying value equaled the fair value based on the nature of the investments held.
Inventories are stated at the lower of weighted average cost or market. Cost includes certain indirect purchasing, merchandise handling and storage costs.
Equipment and leasehold improvements, net are stated at cost. Depreciation on equipment and leasehold improvements is computed using the straight-line method over the following estimated useful lives.
|
Description
|
Years
|
|
|---|---|---|
| Leasehold improvements | 10 | |
| Furniture, fixtures, equipment and vehicles | 5 | |
| Computer hardware and software | 3 |
F-7
Leasing commissions associated with negotiating new store leases are capitalized in other assets and amortized over the lease term.
Deferred rent— Many of the Company's operating leases contain predetermined fixed increases of the minimum rental rate during the initial lease term. For these leases, the Company recognizes the related rental expense on a straight-line basis and records the difference between the amount charged to expense and the rent paid as deferred rent
Construction allowance— The Company receives construction allowances from landlords, which are deferred and amortized on a straight-line basis over the life of the lease as a reduction of rent expense. Construction allowances are recorded under deferred rent on the balance sheet.
Store preopening costs associated with the opening or remodeling of stores, such as preopening rent and payroll, are expensed as incurred.
Advertising costs are charged to expense when the advertising first takes place. Advertising costs were $12.2 million, $10.7 million and $10.4 million, respectively, during fiscal 2003, 2002 and 2001.
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, all expected future events then known to management are considered other than changes in the tax law or rates.
Fair value of financial instruments— The carrying values of cash and cash equivalents, marketable securities, receivables and accounts payable approximates the estimated fair values.
Concentration of credit risk— Financial instruments, which principally subject the Company to concentration of credit risk, consist principally of cash and cash equivalents and marketable securities. The Company invests its cash through financial institutions. At times, such amounts may be in excess of FDIC insurance limits.
Impairment of long-lived assets— The Company regularly reviews the carrying value of its long-lived assets. Whenever events or changes in circumstances indicate that the carrying amount of its assets might not be recoverable, the Company, using its best estimates based on reasonable and supportable assumptions and projections, has reviewed for impairment the carrying value of long-lived assets. Based on the review of certain underperforming stores, the Company recorded an impairment charge of $265,000 in 2003.
Stock based compensation— The Company accounts for stock based awards to employees using the intrinsic value-based method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related Interpretations.
Had compensation expense for the Stock Plan been determined based on the fair value at the grant dates for awards under the Stock Plan, consistent with the method of SFAS No. 123, the
F-8
Company's net earnings, basic EPS and diluted EPS would have been reduced to the pro forma amounts indicated below:
|
|
Fiscal Year Ended June 30,
|
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|---|---|---|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
|||||||
|
|
(Dollars in thousands,
except per share amounts) |
|||||||||
| As reported | $ | 19,279 | $ | 26,484 | $ | 27,807 | ||||
| Add: Stock-based employee compensation expense included in reported net income, net of income tax | 16 | — | — | |||||||
| Deduct: Stock based employee compensation determined under the fair value method, net of income tax | (2,191 | ) | (2,785 | ) | (2,277 | ) | ||||
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|
||||||||
| Pro forma | $ | 17,104 | $ | 23,699 | $ | 25,530 | ||||
|
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|
||||||||
| As reported | $ | 0.75 | $ | 1.04 | $ | 1.12 | ||||
| Pro forma | $ | 0.67 | $ | 0.93 | $ | 1.03 | ||||
| As reported | $ | 0.74 | $ | 1.02 | $ | 1.08 | ||||
| Pro forma | $ | 0.66 | $ | 0.91 | $ | 0.99 | ||||
The fair value of each option grant was estimated on the date of the grant using the minimum value method with the following weighted-average assumptions:
|
|
Fiscal Year Ended June 30,
|
||||||
|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
||||
| Expected dividend rate | 0.00 | % | 0.00 | % | 0.00 | % | |
| Volatility | 60.23 | % | 63.50 | % | 97.74 | % | |
| Risk-free interest rate | 2.27 | % | 5.52 | % | 5.75 | % | |
| Expected lives (years) | 5.39 | 5.32 | 5.67 | ||||
Earnings per share— Basic earnings per share (EPS) is computed as net earnings divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through the exercise of outstanding dilutive stock options.
The following is a reconciliation of the number of shares used in the basic and diluted earnings per share computations:
|
|
Fiscal Year Ended June 30,
|
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|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
|||
|
|
(in thousands)
|
|||||
| Basic weighted average number of shares outstanding | 25,644 | 25,404 | 24,792 | |||
| Incremental shares from assumed issuance of stock options | 258 | 560 | 905 | |||
|
|
|
|
||||
| Diluted weighted average number of shares outstanding | 25,902 | 25,964 | 25,697 | |||
|
|
|
|
||||
The number of incremental shares from the assumed issuance of stock options is calculated by applying the treasury stock method.
F-9
Excluded from the computation of the number of diluted weighted average shares outstanding were antidilutive options of 1.2 million, 1.2 million and 0.3 million, respectively.
Revenue recognition— Net sales consist of all product sales, net of estimated returns. Gift certificates sold are carried as a liability and revenue is recognized when the gift certificate is redeemed. Similarly, customers may receive a store credit in exchange for returned goods. Store credits are carried as a liability until redeemed. Royalty revenue is recorded as earned.
Comprehensive income consists of net income and other comprehensive income (income, expenses, gains and losses that bypass the income statement and are reported directly as a separate component of equity). The Company's comprehensive income equals net income plus foreign currency translation adjustments for all periods presented. Such components of comprehensive income are shown in the Consolidated Statements of Shareholders' Equity.
New accounting pronouncements
In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and establishes standards for the recognition and measurement of asset impairment and disposal cost. SFAS No. 144 supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. The Company adopted this Statement on July 1, 2002. Adoption of this Statement did not have a significant impact on our financial position or results of operations.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities", which addresses accounting for restructuring and similar costs. SFAS 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue No. 94-3. SFAS 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost was recognized at the date of the company's commitment to an exit plan. SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS 146 may effect the timing of recognizing any future restructuring costs as well as the amounts recognized. The Company adopted this Statement, as required, on December 31, 2002. Adoption of this Statement did not have a significant impact on our financial position or results of operations.
F-10
2. Inventories
The Company's inventories consist of:
|
|
As of June 30,
|
|||||
|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
||||
|
|
(Dollars in thousands)
|
|||||
| Raw materials | $ | 4,775 | $ | 3,758 | ||
| Merchandise available for sale | 20,647 | 19,599 | ||||
|
|
|
|||||
| Inventories | $ | 25,422 | $ | 23,357 | ||
|
|
|
|||||
3. Credit Facilities
The Company has an unsecured commercial line of credit agreement with a bank, which provides for borrowings and issuance of letters of credit of up to $10.0 million and expires on December 1, 2003. The outstanding balance bears interest at either the bank's reference rate (which was 4.00% and 4.75%, as of June 30, 2003 and 2002, respectively) or the LIBOR rate plus 1.75 percentage points. As of June 30, 2003 and 2002, there were no outstanding borrowings, and there was $4.4 million and $2.3 million, respectively, outstanding in letters of credit.
This credit facility requires the Company to comply with certain financial covenants, including a minimum tangible net worth and certain restrictions on making loans and investments. In addition, under the line of credit, cash dividends can not be paid without the prior consent of the lending institution.
4. Operating Leases
The Company leases its retail store locations, corporate headquarters, distribution center and certain office equipment and accounts for these leases as operating leases. Store leases typically provide for payment by the Company of certain operating expenses, real estate taxes and additional rent based on a percentage of net sales if a specified net sales target is exceeded. In addition, certain leases have escalation clauses and provide for terms of renewal and/or early termination based on the net sales volumes achieved.
Rent expense for the fiscal years ended June 30, 2003, 2002 and 2001 was $44.5 million, $40.2 million and $34.5 million, respectively. Rent expense includes percentage rent and other lease-required expenses for the years ended 2003, 2002 and 2001 of $14.4 million, $12.7 million, and $11.3 million, respectively.
F-11
Future minimum lease payments under operating leases at June 30, 2003 are as follows:
| Fiscal year ending June 30 (Dollars in thousands), | |||||
| 2004 | $ | 28,895 | |||
| 2005 | 28,189 | ||||
| 2006 | 26,936 | ||||
| 2007 | 26,173 | ||||
| 2008 | 25,330 | ||||
| Thereafter | 75,575 | ||||
|
|
|||||
| Total minimum lease payments | $ | 211,098 | |||
|
|
|||||
5. Accrued Liabilities
Accrued liabilities consist of the following:
|
|
June 30, 2003
|
June 30, 2002
|
||||
|---|---|---|---|---|---|---|
|
|
(In thousands)
|
|||||
| Gift Certificates and Store Credits | $ | 4,547 | $ | 4,699 | ||
| Employee Compensation | 3,137 | 2,633 | ||||
| Store operations and other | 2,858 | 2,026 | ||||
| Sales/Use Tax Payable | 1,158 | 1,041 | ||||
|
|
|
|||||
| Total | $ | 11,700 | $ | 10,399 | ||
|
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|
|||||
6. Income Taxes
Significant components of the provision for income taxes are as follows:
|
|
Fiscal Year Ended June 30,
|
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||
| Current: | |||||||||||
| Federal | $ | 9,051 | $ | 13,639 | $ | 13,538 | |||||
| State | 1,848 | 3,869 | 3,894 | ||||||||
| Foreign | 137 | 208 | 198 | ||||||||
|
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|
|
|||||||||
| 11,036 | 17,716 | 17,630 | |||||||||
|
|
|
|
|||||||||
| Deferred | |||||||||||
| Federal | 285 | (1,278 | ) | (92 | ) | ||||||
| State | 12 | (328 | ) | (80 | ) | ||||||
| Foreign | 227 | 28 | (43 | ) | |||||||
|
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|
|
|||||||||
| 524 | (1,578 | ) | (215 | ) | |||||||
|
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|
|||||||||
| Provision | $ | 11,560 | $ | 16,138 | $ | 17,415 | |||||
|
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F-12
A reconciliation of the federal statutory tax rate with the Company's effective income tax rate is as follows:
|
|
Fiscal Year Ended June 30,
|
||||||
|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
2001
|
||||
| Federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | |
| State rate, net of federal benefit | 3.9 | 5.4 | 5.5 | ||||
| Tax-exempt interest | (2.0 | ) | (1.5 | ) | (2.2 | ) | |
| Other | 0.6 | (1.0 | ) | 0.2 | |||
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|
|||||
| Effective tax rate | 37.5 | % | 37.9 | % | 38.5 | % | |
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|||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.
Significant components of the Company's deferred tax assets (liabilities) are as follows:
|
|
As of June 30,
|
||||||||
|---|---|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
|||||||
|
|
(Dollars in thousands)
|
||||||||
| Current: | |||||||||
| Gift Certificates/Store Credits | $ | 866 | $ | 892 | |||||
| Inventory Reserve | 608 | 745 | |||||||
| Accrued Vacation | 594 | 273 | |||||||
| Uniform Capitalization | 76 | (135 | ) | ||||||
| Other | 1,082 | 614 | |||||||
|
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|
||||||||
| Total Current | 3,226 | 2,389 | |||||||
|
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|
||||||||
| Non-Current: | |||||||||
| Basis Difference in Fixed Assets | 1,208 | 2,575 | |||||||
| Deferred Rent | 1,833 | 1,674 | |||||||
| Foreign Tax Credit | 350 | 0 | |||||||
| Other | (127 | ) | 314 | ||||||
|
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|
||||||||
| Total Non-Current | 3,264 | 4,563 | |||||||
| Valuation allowance | (62 | ) | 0 | ||||||
|
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||||||||
| Net deferred tax assets | $ | 6,428 | $ | 6,952 | |||||
|
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||||||||
The Company has foreign tax credit carryforwards of approximately $350,000 which will expire at various dates from June 30, 2004 to June 30, 2008. Utilization of these credits is limited by the generation of foreign source income in future years. A valuation allowance of approximately $62,000 has been established related to these foreign tax credit carryforwards as the utilization of such amount is not assured.
F-13
7. Equipment and Leasehold Improvements
Equipment and leasehold improvements consist of the following:
|
|
As of June 30,
|
||||||
|---|---|---|---|---|---|---|---|
|
|
2003
|
2002
|
|||||
|
|
(Dollars in thousands)
|
||||||
| Leasehold improvements | $ | 52,538 | $ | 44,006 | |||
| Furniture, fixtures, equipment and vehicles | 17,278 | 15,538 | |||||
| Computer hardware and software | 21,540 | 16,454 | |||||
| Assets under capital lease | 330 | 329 | |||||
| Construction in progress | 2,601 | 4,611 | |||||
|
|
|
||||||
| Total | 94,287 | 80,938 | |||||
| Less: accumulated depreciation and amortization | (41,982 | ) | (30,365 | ) | |||
|
|
|
||||||
| Equipment and leasehold improvements, net | $ | 52,305 | $ | 50,573 | |||
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||||||
8. Employee Benefit Plan
Employees are eligible to participate in the Company's 401(k) plan if they have been employed by the Company for one year, have reached age 21, and work at least 1,000 hours annually. Generally, employees can defer up to 15% of their gross wages up to the maximum limit allowable under the Internal Revenue Code. The employer can make a discretionary matching contribution for the employee. Employer contributions to the plan for the years ended June 30, 2003, 2002 and 2001 were $131,000, $132,000, and $126,000, respectively.
9. Shareholders' Equity
Preferred Stock
Our shareholders have granted the Board of Directors the authority to issue up to 1,000,000 shares of $0.001 par value preferred stock and to fix the rights, preferences, privileges and restrictions including voting rights, of these shares without any further vote or approval by the shareholders. No preferred stock has been issued to date.
Common Stock Plans
The 1997 Stock Plan as amended (the "Stock Plan") provides for the grant of incentive stock options, non-qualified stock options, stock purchase rights, stock awards and restricted stock units. As of June 30, 2003, the Company has reserved 4,330,000 shares of common stock for issuance under the Stock Plan.
F-14
The following table summarizes information about stock options outstanding at June 30, 2003:
|
|
Options Outstanding
|
|
|
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Options Vested
|
|||||||||||
|
|
|
Weighted
Average Remaining Life (in years) |
|
|||||||||
|
Exercise Prices
|
Number
(in thousands) |
Weighted
Average Exercise Price |
Number
(in thousands) |
Weighted
Average Exercise Price |
||||||||
| $0.00 to $9.97 | 441 | 4.72 | $ | 3.74 | 383 | $ | 3.05 | |||||
| $10.13 to $14.06 | 361 | 8.89 | 13.11 | 62 | 13.13 | |||||||
| $14.10 to $17.40 | 462 | 9.07 | 16.18 | 68 | 16.26 | |||||||
| $17.61 to $23.08 | 456 | 8.89 | 21.12 | 96 | 21.70 | |||||||
| $23.15 to $35.05 | 261 | 7.27 | 29.28 | 166 | 29.53 | |||||||
|
|
|
|||||||||||
| 1,981 | 7.79 | $ | 15.73 | 775 | $ | 13.02 | ||||||
|
|
|
|||||||||||
The following summarizes stock option activity:
|
|
Shares
Outstanding |
Weighted
Average Exercise Price Per Share |
||||
|---|---|---|---|---|---|---|
|
|
(Amounts in thousands)
|
|||||
| Balance June 30, 2000 | 1,680 | $ | 10.24 | |||
| Granted | 1,230 | 13.90 | ||||
| Exercised | (568 | ) | 4.71 | |||
| Cancelled | (352 | ) | 15.52 | |||
|
|
|
|||||
| Balance June 30, 2001 | 1,990 | 12.75 | ||||
| Granted | 779 | 25.16 | ||||
| Exercised | (407 | ) | 9.92 | |||
| Cancelled | (760 | ) | 18.19 | |||
|
|
|
|||||
| Balance June 30, 2002 | 1,602 | 17.02 | ||||
| Granted | 994 | 15.75 | ||||
| Exercised | (58 | ) | 10.04 | |||
| Cancelled | (557 | ) | 19.99 | |||
|
|
|
|||||
| Balance June 30, 2003 | 1,981 | 15.73 | ||||
|
|
|
|||||
The weighted average fair value of options granted during the fiscal year ended June 30, 2003, 2002, and 2001 was $8.47, $11.80 and $6.26, respectively. As of June 30, 2003 there were 687,795 shares available for future grant.
Stock Purchase Plan
The 1998 Employee Stock Purchase Plan (the "Plan") has a total of 750,000 shares of common stock reserved for issuance under the Plan. The Plan allows eligible employees to purchase our common stock in an amount, which may not exceed 10% of the employee's compensation. The Plan is implemented in sequential 24-month offerings. Each offering is generally comprised of eight, three-month purchase periods, with shares purchased on the last day of each purchase period (a "Purchase
F-15
Date"). The price at which stock may be purchased is equal to 85% of the lower of fair market value of our common stock on the first and last day of the offering period or the Purchase Date. Under the Purchase plan in the years ended June 30, 2003, 2002 and 2001 there were 12,992, 16,908 and 29,109 shares issued, respectively.
10. Litigation
From time to time, the Company may be involved in litigation relating to claims arising out of our operations. As of the date of this filing, the Company is currently involved in several ongoing legal proceedings; however, none of these proceedings are expected, individually or in the aggregate, to have a material adverse effect on the Company's business, financial condition or results of operations.
The lawsuit we filed on August 16, 2002 in the Federal District Court for the Eastern District of Missouri (the "Court") against May Department Stores Company ("May Company") has been settled to our satisfaction. This was a civil action for preliminary and permanent injunctive relief and damages sought against May Company for trademark infringement, trademark dilution, unfair competition and false designation of origin, arising, in part under the Lanham Act. This action also arose under the statutes and common law of the State of Missouri involving trademark infringement and dilution. We were seeking (i) a permanent injunction prohibiting May Company from using or permitting the use of the name "be" and all other names which are confusingly similar to the bebe marks; (ii) an accounting and disgorgement of May Company's profits; (iii) an award of punitive damages; and (iv) any other relief including prejudgment interest, post-judgment interest and costs that the Court deems just and proper.
Along with approximately one hundred and seven other parties, we were named in a class action suit filed in Los Angeles Superior Court (case No. BC294155) concerning the substance of one of the questions on our employment application.
F-16
11. Quarterly Financial Information (Unaudited)
The quarterly financial information presented below reflects all adjustments which, in the opinion of the Company's management, are of a normal and recurring nature necessary to present fairly the results of operations for the periods presented.
|
|
2003 Quarter Ended
|
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Sept. 30
|
Dec. 31
|
March 31
|
June 30
|
||||||||
| Net sales | $ | 73,842 | $ | 100,823 | $ | 68,772 | $ | 80,112 | ||||
| Gross profit | 33,692 | 48,420 | 28,933 | 33,446 | ||||||||
| Selling, general and administrative expenses | 26,026 | 31,730 | 29,258 | 28,837 | ||||||||
| Income/(Loss) from operations | 7,666 | 16,690 | (325 | ) | 4,609 | |||||||
| Earnings before income taxes | 8,149 | 17,252 | 227 | 5,211 | ||||||||
| Net earnings | 5,095 | 10,791 | 142 | 3,251 | ||||||||
| Basic earnings per share | $ | 0.20 | $ | 0.42 | $ | 0.01 | $ | 0.13 | ||||
| Diluted earnings per share | $ | 0.20 | $ | 0.42 | $ | 0.01 | $ | 0.13 | ||||
|
|
2002 Quarter Ended
|
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Sept. 30
|
Dec. 31
|
March 31
|
June 30
|
||||||||
| Net sales | $ | 73,645 | $ | 98,707 | $ | 70,611 | $ | 73,461 | ||||
| Gross profit | 34,270 | 47,018 | 28,981 | 32,107 | ||||||||
| Selling, general and administrative expenses | 24,618 | 27,697 | 23,408 | 26,105 | ||||||||
| Income from operations | 9,652 | 19,321 | 5,573 | 6,002 | ||||||||
| Earnings before income taxes | 10,306 | 19,838 | 6,041 | 6,437 | ||||||||
| Net earnings | 6,487 | 12,259 | 3,774 | 3,964 | ||||||||
| Basic earnings per share | $ | 0.26 | $ | 0.48 | $ | 0.15 | $ | 0.16 | ||||
| Diluted earnings per share | $ | 0.25 | $ | 0.47 | $ | 0.15 | $ | 0.15 | ||||
F-17
SCHEDULE
bebe stores, inc.
VALUATION AND QUALIFYING ACCOUNTS
|
Column A
|
Column B
|
Column C
Additions |
Column D
|
Column E
|
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Description
|
Balance at
Beginning of Period |
Charged to
Costs and Expenses |
Charged to
Other Accounts |
Deduction
|
Balance at
End of Period |
|||||||||
| Year Ended June 30, 2001 | ||||||||||||||
| Allowance for doubtful accounts receivable | $ | 164 | $ | 349 | $ | (97 | ) | $ | 416 | |||||
| Reserve for store closures | 702 | 245 | (724 | ) | 223 | |||||||||
|
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|
|||||||||||||
| $ | 866 | $ | 594 | $ | (821 | ) | $ | 639 | ||||||
|
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|
|||||||||||||
| Year Ended June 30, 2002 | ||||||||||||||
| Allowance for doubtful accounts receivable | $ | 416 | $ | 235 | $ | (461 | ) | $ | 190 | |||||
| Reserve for store closures | 223 | — | (223 | ) | — | |||||||||
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|||||||||||||
| $ | 639 | $ | 235 | $ | (684 | ) | $ | 190 | ||||||
|
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| Year Ended June 30, 2003 | ||||||||||||||
| Allowance for doubtful accounts receivable | $ | 190 | $ | 384 | $ | (43 | ) | $ | 531 | |||||
| Reserve for store closures | — | 265 | — | 265 | ||||||||||
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| $ | 190 | $ | 649 | $ | (43 | ) | $ | 796 | ||||||
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S-1
|
EXHIBIT
NUMBER |
DESCRIPTION OF DOCUMENT
|
|
|---|---|---|
| 3.1* | Amended and Restated Articles of Incorporation of Registrant. | |
|
3.2 |
|
Amended and Restated Bylaws of Registrant. |
|
4.1* |
|
Specimen certificate representing the Common Stock (in standard printer form, not provided). |
|
10.1 |
|
1997 Stock Plan. |
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10.2* |
|
1998 Stock Purchase Plan. |
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10.3* |
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Form of Indemnification Agreement. |
|
10.6** |
|
Standard Industrial/Commercial-Tenant Lease-Net dated November 30, 1998 between Registrant and Far Western Land and Investment Company, Inc., (lease for additional building to house administrative departments in Brisbane, California). |
|
10.7** |
|
Retail Store License Agreement between Registrant and Sakal Duty Free LTD., a duly registered Israeli private company, and Sakal Sports LTD., a duly registered Israeli private company, effective as of November 1, 1998. |
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10.8*** |
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Form of Retail Store License Agreement between Registrant and [company]. |
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10.9**** |
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Amendment No. 1 to Lease Agreement (amendment to Standard Industrial/Commercial-Tenant Lease-Net dated November 30, 1998 between Registrant and Far Western Land and Investment Company, Inc.) |
|
10.10 |
|
Lease Agreement dated October 24, 2000, as amended, between Registrant and Lincoln PO Benecia Limited Partnership. |
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10.11 |
|
Lease Agreement dated November 3, 2000, as amended, between Registrant and Stanley Hirsh and Anita Hirsh as trustees, D/B/A Mercantile Center. |
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10.12 |
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Form of Restricted Stock Units Agreement |
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10.13 |
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Notice of Grant of Restricted Stock Units to Barbara Bass |
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10.14 |
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Notice of Grant of Restricted Stock Units to Corrado Federico |
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10.15 |
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Notice of Grant of Restricted Stock Units to Robert Jaffe |
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10.16 |
|
Notice of Grant of Restricted Stock Units to Daniel Wardlow |
|
21.1 |
|
Subsidiaries of Registrant. |
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23.1 |
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Independent Auditors' Consent and Report on Schedules. |
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24.1 |
|
Power of Attorney (see signature page). |
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31.1 |
|
Section 302 Certification of Chief Executive Officer. |
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31.2 |
|
Section 302 Certification of Chief Financial Officer. |
|
32.1 |
|
Section 906 Certification of Chief Executive Officer. |
|
32.2 |
|
Section 906 Certification of Chief Financial Officer. |
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
bebe stores, inc.
INDEX
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iii
AMENDED AND RESTATED BYLAWS
OF
bebe stores, inc.
OFFICES
SECTION 1.1 PRINCIPAL EXECUTIVE OFFICE.
The principal executive office for the transaction of the business of bebe stores, inc. (the “Corporation”) is hereby fixed and located at 400 Valley Drive, Brisbane, California 94005, County of San Mateo, State of California. The Board of Directors is hereby granted full power and authority to change said principal office from one location to another.
Branch or subordinate offices may at any time be established by the Board of Directors at any place or places where the corporation is qualified to do business.
MEETINGS OF SHAREHOLDERS
An annual meeting of the shareholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date and at such time as the Board shall each year fix, which date shall be within thirteen months of the last annual meeting of shareholders.
Special meetings of the shareholders may be called at any time by the Board of Directors, the Chairman of the Board, the President, or by the holders of shares entitled to cast not less than ten percent (10%) of the votes at the meeting. Notice of such special meeting shall be given in the same manner as for the annual meeting of shareholders.
SECTION 2.3 NOTICE OF MEETINGS.
Written notice of the place, date and time of all meetings of the shareholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each shareholder entitled to vote at such meeting, and to each shareholder not
1
entitled to vote who is entitled by statute to notice, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the California General Corporation Law or the Articles of Incorporation (the “Articles”) of the corporation). In the case of a special meeting, such notice shall include the purpose or purposes for which the meeting is called. Notice shall be given either by mail or by presenting it to the shareholder personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at his post-office address as it appears on the records of the corporation, with postage thereon prepaid.
SECTION 2.4 LIMITATION ON BUSINESS AT SPECIAL MEETINGS.
Business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice.
At any meeting of the shareholders, the holders of a majority of all the issued and outstanding shares of the capital stock of the corporation entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business at such meeting, unless or to the extent that the presence of a larger number may be required by the Articles or by law. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting to another place, date or time.
SECTION 2.6 VOTING AND PROXIES.
A majority of the votes cast at a meeting of shareholders, duly called and at which a quorum is present, shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute, by these Bylaws or by the Articles. Unless otherwise provided by statute or in the Articles, each shareholder shall, at every meeting of the shareholders, be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such shareholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.
At any meeting of the shareholders, every shareholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. No shareholder may authorize more than one proxy for his shares.
SECTION 2.7 INSPECTORS OF ELECTION.
The Board or, if the Board shall not have made the appointment, the chairman presiding at any meeting of shareholders, shall have power to appoint one or more persons to act as
2
inspectors of election at the meeting or any adjournment thereof, but no candidate for the office of director shall be appointed as an inspector at any meeting for the election of directors.
SECTION 2.8 CONDUCT OF THE SHAREHOLDERS’ MEETING.
At every meeting of the shareholders, the Chairman, if there is such an officer, or if not, the President of the corporation, or in his absence the Vice President designated by the President, or in the absence of such designation any Vice President, or in the absence of the President or any Vice President, a chairman chosen by the majority of the voting shares represented in person or by proxy, shall act as Chairman. The Secretary of the corporation or a person designated by the Chairman shall act as Secretary of the meeting. Unless otherwise approved by the Chairman, attendance at the shareholders’ meeting is restricted to shareholders of record, persons authorized in accordance with Section 2.6 of these Bylaws to act by proxy and officers of the corporation.
SECTION 2.9 CONDUCT OF BUSINESS.
The Chairman shall call the meeting to order, establish the agenda and conduct the business of the meeting in accordance therewith or, at the Chairman’s discretion, it may be conducted otherwise in accordance with the wishes of the shareholders in attendance. The date and time of the opening and closing of the polls for each matter upon which the shareholders will vote at the meeting shall be announced at the meeting.
The Chairman shall also conduct the meeting in an orderly manner, rule on the precedence of and procedure on, motions and other procedural matters, and exercise discretion with respect to such procedural matters with fairness and good faith toward all those entitled to take part. The Chairman may impose reasonable limits on the amount of time taken up at the meeting on discussion in general or on remarks by any one shareholder. Should any person in attendance become unruly or obstruct the meeting proceedings, the Chairman shall have the power to have such person removed from participation. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 2.9 and Section 2.10, below. The Chairman of a meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 0 and Section 0, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
SECTION 2.10 NOTICE OF SHAREHOLDER BUSINESS.
At an annual or special meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) properly brought before the meeting by or at the direction of the Board of Directors, (c) properly brought before an annual meeting by a shareholder or (d) properly brought before a special meeting by a shareholder, but if, and only if, the notice of a special meeting provides for business to be brought before the meeting by shareholders. For business to be properly brought before a meeting by a shareholder,
3
the shareholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a shareholder proposal to be presented at an annual meeting shall be received at the corporation’s principal executive offices not less than 120 calendar days in advance of the date that the corporation’s (or the corporation’s predecessor’s) proxy statement was released to shareholders in connection with the previous year’s annual meeting of shareholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the date contemplated at the time of the previous year’s proxy statement, or in the event of a special meeting, notice by the shareholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A shareholder’s notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual or special meeting (a) a brief description of the business desired to be brought before the annual or special meeting and the reasons for conducting such business at the special meeting, (b) the name and address, as they appear on the corporation’s books, of the shareholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the shareholder and (d) any material interest of the shareholder in such business.
SECTION 2.11 ACTION WITHOUT MEETING.
An action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the actions so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the Secretary of the Corporation and shall be maintained in the corporate records. Prompt notice of the taking of a corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who have not consented in writing.
A complete list of shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order for each class of stock and showing the address of each such shareholder and the number of shares registered in his name, shall be open to the examination of any such shareholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such shareholder who is present. This list shall presumptively determine the identity of the shareholders entitled to vote at the meeting and the number of shares held by each of them.
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DIRECTORS
Subject to the limitations stated in the Articles of Incorporation, these Bylaws, and the California General Corporation Law as to actions which shall be approved by the shareholders or by the affirmative vote of a majority of the outstanding shares entitled to vote, and subject to the duties of Directors as prescribed by the California General Corporation Law, all corporate powers shall be exercised by, or under the direction of, and the business and affairs of the corporation shall be managed by, the Board of Directors.
SECTION 3.2 NUMBER OF DIRECTORS.
The authorized number of Directors of the corporation shall not be less than five (5), nor more than nine (9), with the exact number of Directors to be fixed from time to time within such limit by a duly adopted resolution of the Board of Directors or the Shareholders. The exact number of Directors shall be six (6) until changed within the limits specified above by a duly adopted resolution of the Board of Directors or Shareholders.
SECTION 3.3 ELECTION AND TERM OF OFFICE.
The Directors shall be elected at each annual meeting of shareholders, but if any such annual meeting is not held, or the Directors are not elected thereat, the Directors may be elected at any special meeting of the shareholders held for that purpose. All Directors shall hold office until the expiration of the term for which elected and until their respective successors are elected, except in the case of the death, resignation or removal of any Director. A Director need not be a shareholder.
Any Director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.
The entire Board of Directors or any individual Director may be removed from office, prior to the expiration of their or his term of office only in the manner and within the limitations provided by the California General Corporation Law.
No reduction of the authorized number of Directors shall have the effect of removing any Director prior to the expiration of such Director’s term of office.
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A vacancy in the Board of Directors shall be deemed to exist in case of the death, resignation or removal of any Director, or if the authorized number of Directors be increased, or if the shareholders fail at any annual or special meeting of shareholders at which any Director or Directors are elected to elect the full authorized number of Directors to be voted for at that meeting.
Vacancies in the Board of Directors may be filled by a majority of the Directors then in office, whether or not less than a quorum, or by a sole remaining Director. Each Director so elected shall hold office until the expiration of the term for which he was elected and until his successor is elected at an annual or a special meeting of the shareholders, or until his death, resignation or removal.
The shareholders may elect a Director or Directors at any time to fill any vacancy or vacancies not filled by the Directors. Any such election by written consent other than to fill a vacancy created by removal requires the consent of a majority of the outstanding shares entitled to vote. A Director may not be elected by written consent to fill a vacancy created by removal except by unanimous written consent of all shares entitled to vote for the election of directors.
SECTION 3.7 ORGANIZATION MEETING.
Immediately after each annual meeting of shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization, the election of officers and the transaction of other business. No notice of such meeting need be given.
SECTION 3.8 OTHER REGULAR MEETINGS.
The Board of Directors may provide by resolution the time and place for the holding of regular meetings of the Board; provided, however, that if the date so designated falls upon a legal holiday, then the meeting shall be held at the same time and place on the next succeeding day which is not a legal holiday. No notice of such regular meetings of the Board need be given.
Meetings of the Board of Directors for any purpose or purposes shall be held whenever called by the Chairman of the Board, the Vice Chairman of the Board, the President or the Secretary or any two Directors of the corporation.
SECTION 3.10 PLACE OF MEETINGS.
Meetings of the Board of Directors shall be held at any place within or without the State of California which may be designated in the notice of the meeting, or, if not stated in the notice or there is no notice, designated by resolution of the Board. In the absence of such designation, meetings of the Board of Directors shall be held at the principal executive office of the corporation.
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SECTION 3.11 TELEPHONIC MEETINGS.
Members of the Board may participate in a regular or special meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Participation in a meeting pursuant to this Section 3.11 constitutes presence in person at such meeting.
SECTION 3.12 NOTICE OF SPECIAL MEETINGS.
Written notice of the time and place of special meetings of the Board of Directors shall be delivered personally to each Director, or sent to each Director by mail, telephone or telegraph. In case such notice is sent by mail, it shall be deposited in the United States mail at least four (4) days prior to the time of the holding of the meeting. In case such notice is delivered personally, or by telephone or telegraph, it shall be so delivered at least forty-eight (48) hours prior to the time of the holding of the meeting. Such notice may be given by the Secretary of the corporation or by the persons who called said meeting. Such notice need not specify the purpose of the meeting, and notice shall not be necessary if appropriate waivers, consents and/or approvals are filed in accordance with Section 3.13 of these Bylaws.
SECTION 3.13 WAIVER OF NOTICE.
Notice of a meeting need not be given to any Director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Director.
The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
SECTION 3.14 ACTION WITHOUT MEETING.
Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such Directors.
A majority of the authorized number of Directors shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be the act of the Board of Directors, unless the Articles of Incorporation, or the California General Corporation Law, specifically requires a greater number. In the absence of a quorum at any meeting of the Board of Directors, a majority
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of the Directors present may adjourn the meeting as provided in Section 3.16 of these Bylaws. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of enough Directors to leave less than a quorum, if any action taken is approved by at least a majority of the required quorum for such meeting.
Any meeting of the Board of Directors, whether or not a quorum is present, may be adjourned to another time and place by the vote of a majority of the Directors present. Notice of the time and place of the adjourned meeting need not be given to absent Directors if said time and place are fixed at the meeting adjourned.
SECTION 3.17 INSPECTION RIGHTS.
Every Director shall have the absolute right at any time to inspect, copy and make extra copies of, in person or by agent or attorney, all books, records and documents of every kind and to inspect the physical properties of the corporation.
SECTION 3.18 FEES AND COMPENSATION.
Directors shall not receive any stated salary for their services as directors, but, by resolution of the Board, a fixed fee, with or without expenses of attendance, may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent, employee or otherwise, and receiving compensation therefor.
SECTION 3.19 LOANS TO OFFICERS.
The corporation may not, directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for the extension of credit, or renew an extension of credit, in the form of a personal loan to or for any member of the Board of Directors or any executive officer (or equivalent thereof) of the corporation.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 4.1 EXECUTIVE COMMITTEE.
The Board of Directors may, by resolution adopted by a majority of the authorized number of Directors, appoint an executive committee, consisting of two or more Directors. The Board may designate one or more Directors as an alternate member of such committee, who may replace any absent member of any meeting of the committee. The executive committee, subject to any limitations imposed by the California General Corporation Law, or by resolution adopted by the affirmative vote of a majority of the authorized number of Directors, or imposed by the Articles
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of Incorporation or by these Bylaws, shall have and may exercise all of the powers of the Board of Directors.
The Board of Directors may, by resolution adopted by a majority of the authorized number of Directors, designate such other committees, each consisting of 2 or more Directors, as it may from time to time deem advisable to perform such general or special duties as may from time to time be delegated to any such committee by the Board of Directors, subject to the limitations contained in the California General Corporation Law, or imposed by the Articles of Incorporation or by these Bylaws. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent member at any meeting of the committee.
SECTION 4.3 MINUTES AND REPORTS.
Each committee shall keep regular minutes of its proceedings, which shall be filed with the Secretary. All action by any committee shall be reported to the Board of Directors at the next meeting thereof, and, insofar as rights of third parties shall not be affected thereby, shall be subject to revision and alteration by the Board of Directors.
Except as otherwise provided in these Bylaws or by resolution of the Board of Directors, each committee shall adopt its own rules governing the time and place of holding and the method of calling its meetings and the conduct of its proceedings and shall meet as provided by such rules, and it shall also meet at the call of any member of the committee. Unless otherwise provided by such rules or by resolution of the Board of Directors, committee meetings shall be governed by Sections 3.11, 3.12 and 3.13 of these Bylaws.
SECTION 4.5 TERM OF OFFICE OF COMMITTEE MEMBERS.
The term of office of any committee member shall be as provided in the resolution of the Board of Directors designating him but shall not exceed his term as a Director. Any member of a committee may be removed at any time by resolution adopted by Directors holding a majority of the directorships, either present at a meeting of the Board or by written approval thereof.
OFFICERS
The officers of the corporation shall be a President, a Vice President, a Secretary and a Treasurer, who shall be the Chief Financial Officer of the corporation. The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, a Vice Chairman of
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the Board, one or more additional Vice Presidents, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3. One person may hold two or more offices. At least one of the Chairman of the Board and the Vice Chairman of the Board must be a person who is neither an employee nor a controlling stockholder or relative or affiliate of an employee or controlling stockholder.
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 and 5.5, shall be chosen annually by the Board of Directors and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified.
SECTION 5.3 SUBORDINATE OFFICERS, ETC.
The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine.
SECTION 5.4 REMOVAL AND RESIGNATION.
Any officer may be removed, either with or without cause, by a majority of the Directors at the time in office, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board of Directors, by an officer upon whom such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office.
SECTION 5.6 CHAIRMAN OF THE BOARD.
The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these Bylaws.
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SECTION 5.7 VICE CHAIRMAN OF THE BOARD.
The Vice Chairman of the Board, if there shall be such an officer, shall, in the absence of the Chairman of the Board, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these Bylaws.
Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the general manager and chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and officers of the corporation. He shall preside at all meetings of the shareholders. He shall be ex officio a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or by these Bylaws.
In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or these Bylaws.
The Secretary shall keep, or cause to be kept, a book of minutes in written form of the proceedings of the Board of Directors, committees of the Board, and shareholders. Such minutes shall include all waivers of notice, consents to the holding of meetings, or approvals of the minutes of meetings executed pursuant to these Bylaws or the California General Corporation Law. The Secretary shall keep, or cause to be kept at the principal executive office or at the office of the corporation’s transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each.
The Secretary shall give or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by these Bylaws or by law to be given, and shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.
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SECTION 5.11 TREASURER AND CHIEF FINANCIAL OFFICER.
The Treasurer and Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of account in written form or any other form capable of being converted into written form.
The Treasurer and Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. He shall disburse all funds of the corporation as may be ordered by the Board of Directors, shall render to the President and Directors, whenever they request it, an account of all of his transactions as Treasurer and Chief Financial Officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws.
SECTION 5.12 ASSISTANT SECRETARY.
The Assistant Secretary shall have all the powers, and perform all the duties of, the Secretary in the absence or inability of the Secretary to act.
The compensation of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such compensation by reason of the fact that he is also a Director of the corporation.
MISCELLANEOUS
The Board of Directors may fix, in advance, a time in the future as the record date for the determination of shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action. Shareholders on the record date are entitled to notice and to vote or receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares in the books of the corporation after the record date, except as otherwise provided by law. Said record date shall not be more than sixty (60) or less than ten (10) days prior to the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than forty-five (45) days from the date set for the original meeting.
If no record date is fixed by the Board of Directors, the record date shall be fixed pursuant to the California General Corporation Law.
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SECTION 6.2 INSPECTION OF CORPORATE RECORDS.
The accounting books and records, and minutes of proceedings of the shareholders and the Board of Directors and committees of the Board shall be open to inspection upon written demand made upon the corporation by any shareholder or the holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to his interest as a shareholder, or as the holder of such voting trust certificate. The record of shareholders shall also be open to inspection by any shareholder or holder of a voting trust certificate at any time during usual business hours upon written demand on the corporation, for a purpose reasonably related to such holder’s interest as a shareholder or holder of a voting trust certificate. Such inspection may be made in person or by an agent or attorney, and shall include the right to copy and to make extracts.
SECTION 6.3 EXECUTION OF CORPORATE INSTRUMENTS.
The Board of Directors may, in its discretion, determine the method and designate the statutory officer or officers, or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the corporation. Unless otherwise specifically determined by the Board of Directors, formal contracts of the corporation, promissory notes, mortgages, evidences of indebtedness, conveyances or other instruments in writing, and any assignment or endorsement thereof, executed or entered into between the corporation and any person, may be signed by the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer of the corporation.
SECTION 6.4 RATIFICATION BY SHAREHOLDERS.
The Board of Directors may, subject to applicable notice requirements, in its discretion, submit any contract or act for approval or ratification of the shareholders at any annual meeting of shareholders, or at any special meeting of shareholders called for that purpose; and any contract or act which shall be approved or ratified by the affirmative vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of shareholders, shall be as valid and binding upon the corporation and upon the shareholders thereof as though approved or ratified by each and every shareholder of the corporation, unless a greater vote is required by law for such purpose.
SECTION 6.5 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The President and Vice President of this corporation are authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted to said officers to vote or represent on behalf of this corporation any and all shares held by this corporation and any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney and duly executed by said officers.
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SECTION 6.6 INSPECTION OF BYLAWS.
The corporation shall keep in its principal executive office in this State the original or a copy of the Bylaws as amended or otherwise altered to date, which shall be open to inspection by the shareholders at all reasonable times during office hours.
SECTION 6.7 FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
SHARES OF STOCK
SECTION 7.1 FORM OF CERTIFICATES.
Certificates for shares of stock of the corporation shall be in such form and design as the Board of Directors shall determine and shall be signed in the name of the corporation by the Chairman of the Board, or the President or Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or any Assistant Secretary. Each certificate shall state the certificate number, the date of issuance, the number, class or series and the name of the record holder of the shares represented thereby, the name of the corporation, and, if the shares of the corporation are classified or if any class of shares has two or more series, there shall appear the statement required by the California General Corporation Law.
SECTION 7.2 TRANSFER OF SHARES.
Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 7.3 of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.
SECTION 7.3 LOST CERTIFICATES.
The Board of Directors may order a new certificate for shares of stock to be issued in the place of any certificate alleged to have been lost, stolen or destroyed, but in every such case, the owner or the legal representative of the owner of the lost, stolen or destroyed certificates may be required to give the corporation a bond (or other adequate security) in such form and amount as the Board may deem sufficient to indemnify it against any claim that may be made against the corporation (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or issuance of such new certificate.
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INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION BY CORPORATION.
Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (“Proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, or was a director, officer, employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the California General Corporation Law, against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in Section 8.2 of this Article VIII, the corporation shall indemnify any such person seeking indemnity in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the board of directors of the corporation. The right to indemnification conferred by this Section shall include the right to be paid by the corporation expenses incurred in defending any such Proceeding in advance of its final disposition to the fullest extent authorized by the California General Corporation Law; PROVIDED, HOWEVER, that, if required by the California General Corporation Law, the payment of such expenses incurred by such person in advance of the final disposition of such Proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under this Section or otherwise.
SECTION 8.2 RIGHT OF CLAIMANT TO BRING SUIT.
If a claim under Section 8.1 of this Article VIII is not paid in full by the corporation within ninety (90) days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the California General Corporation Law for the corporation to indemnify the claimant for the amount claimed.
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Neither the failure of the corporation (including its board of directors, independent legal counsel, or it shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the California General Corporation Law, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.
SECTION 8.3 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the advancement of expenses to any employee or agent of the corporation to the fullest extent of the provisions of this Article with respect to the indemnification of and advancement of expenses to directors and officers of the corporation.
SECTION 8.4 RIGHTS NOT EXCLUSIVE.
The rights conferred on any person by this Article VIII above shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaw, agreement, vote of shareholders or disinterested directors or otherwise.
SECTION 8.5 INDEMNITY AGREEMENTS.
The Board of Directors is authorized to enter into a contract with any Director, officer, employee or agent of the corporation, or any person who is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, or any person who was a director, officer, employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than, those provided for in this Article VIII.
The corporation may purchase and maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the corporation or another corporation (including a predecessor corporation), partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the California General Corporation Law.
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SECTION 8.7 AMENDMENT, REPEAL OR MODIFICATION.
Any amendment, repeal or modification of any provision of this Article VIII by the shareholders or the Directors of the corporation shall not adversely affect any right or protection of a Director or officer of the corporation existing at the time of such amendment, repeal or modification.
AMENDMENTS
SECTION 9.1 POWER OF SHAREHOLDERS.
New Bylaws may be adopted or these Bylaws may be amended or repealed by the affirmative vote of a two-thirds majority of the outstanding shares entitled to vote or by the written consent thereof, except as otherwise provided by law or by the Articles of Incorporation.
SECTION 9.2 POWER OF DIRECTORS.
Subject to the right of shareholders as provided in Section 9.1 of these Bylaws, Bylaws other than a Bylaw or amendment thereof specifying or changing the authorized number of Directors, or the minimum or maximum number of a variable Board of Directors, or changing from a fixed to a variable Board of Directors or vice versa, may be adopted, amended or repealed by a unanimous vote of the Board of Directors.
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CERTIFICATE OF SECRETARY
I hereby certify that I am the duly elected and acting Secretary of bebe stores, inc., a California corporation and that the foregoing Amended and Restated Bylaws, comprising eighteen (18) pages, constitute the Bylaws of said corporation as duly adopted by the Board of Directors.
IN WITNESS WHEREOF, I have hereunder subscribed my name this day of , 2003.
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/s/ John Kyees |
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John Kyees, Secretary |
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Exhibit 10.1
bebe stores, inc.
1997 STOCK PLAN
(As amended and restated Effective June 13, 2003)
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Accelerated Vesting and Settlement of Restricted Stock Unit Awards. |
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(d) |
Promissory Note. |
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ii
bebe stores, inc.
1997 STOCK PLAN
The purpose of the Plan is to offer selected individuals an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, by purchasing Shares of the Company’s Stock. The Plan provides for the direct award or sale of Shares, the grant of Options to purchase Shares and the grant of Restricted Stock Units. Options granted under the Plan may include Nonstatutory Options (“NSOs”) as well as Incentive Stock Options (“ISOs”) intended to qualify under Section 422 of the Code.
Capitalized terms are defined in Section 13.
1
Stock Units. For purposes of the foregoing sentence, “Employees,” “Outside Directors” and “Consultants” shall include prospective Employees, prospective Outside Directors and prospective Consultants to whom Options or Shares are granted in connection with written offers of an employment or other service relationship with the Company (or any Parent or Subsidiary). Only Employees shall be eligible for the grant of ISOs.
2
3
Exercise Price of an NSO shall not be less than 85 % of the Fair Market Value of a Share on the date of grant. Subject to the preceding two sentences, the Exercise Price under any Option shall be determined by the Board of Directors at its sole discretion. The Exercise Price shall be payable in a form described in Section 8.
4
The Optionee may exercise all or part of the Optionee’s Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination). The balance of such Options shall lapse when the Optionee’s Service terminates. In the event that the Optionee dies after the termination of the Optionee’s Service but before the expiration of the Optionee’s Options, all or part of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination).
or
All or part of the Optionee’s Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s death or became exercisable as a result of the death. The balance of such Options shall lapse when the Optionee dies.
5
this Section 6(l) “ Cause ” shall mean any of the following: (1) the Optionee’s theft, dishonesty, or falsification of any Company documents or records; (2) the Optionee’s improper use or disclosure of a the Company’s confidential or proprietary information; (3) any action by the Optionee which has a material detrimental effect on the Company’s reputation or business; (4) the Optionee’s failure or inability to perform any reasonable assigned duties after written notice from the Company of, and a reasonable opportunity to cure, such failure or inability; (5) any material breach by the Optionee of any employment or service agreement between the Optionee and the Company, which breach is not cured pursuant to the terms of such agreement; (6) the Optionee’s conviction (including any plea of guilty or nolo contendere) of any criminal act which impairs the Optionee’s ability to perform his or her duties with the Company; or (7) Optionee’s conviction for a violation of any securities law.
6
7
8
Nothing in the Plan or in any right, Option or Restricted Stock Unit granted under the Plan shall confer upon the Purchaser, Optionee, or Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Purchaser, Optionee or Participant) or of the Purchaser, Optionee or Participant which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.
9
shareholders. In the event that the shareholders fail to approve the Plan within 12 months after its adoption by the Board of Directors, any grants of Options or sales or awards of Shares that have already occurred shall be rescinded, and no additional grants, sales or awards shall be made thereafter under the Plan. The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the Shares available for issuance under the Plan have been issued and all restrictions on such Shares under the terms of the Plan and the agreements evidencing Options and awards granted under the Plan have lapsed. However, all ISOs shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board of Directors or the date the Plan is duly approved by the shareholders of the Company. Notwithstanding the foregoing, if the maximum number of Shares issuable pursuant to the Plan as provided in Section 4 has been increased at any time (other than pursuant to Section 9), all ISOs shall be granted, if at all, within ten (10) years from the earlier of (i) the date on which the latest such increase in the maximum number of Shares issuable under the Plan was approved by the shareholders of the Company or (ii) the date such amendment was adopted by the Board of Directors.
10
A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
11
12
The undersigned hereby certifies that the foregoing is the bebe stores, inc. 1997 Stock Plan as amended.
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bebe stores, inc. |
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By: |
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Title: |
President |
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13
PLAN HISTORY
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June 26, 1997 |
Plan adopted by the Company’s Board of Directors with a share reserve of 1,000,000 shares |
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July 15, 1997 |
Plan approved by the Company’s shareholders |
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April 6, 1998 |
Plan amended and restated by the Company’s Board of Directors (effective upon the effective date of the initial registration by the Company of its stock under Section 12 of the Securities Exchange Act of 1934, as amended (the “Company’s IPO”) |
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April 9, 1998 |
Company effected a 2.83:1 stock split resulting in a share reserve of 2,830,000 shares
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May 18, 1998 |
Amended and Restated Plan approved by the Company’s shareholders (effective upon the Company’s IPO) |
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June 16, 1998 |
Effective date of the Company’s IPO |
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August 2000 |
Increase of the maximum number of shares that may be issued to 4,330,000 approved by Board |
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November 2000 |
Increase of the maximum number of shares that may be issued to 4,330,000 approved by Shareholders |
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March 25, 2003 |
Plan amended by the Company’s Board of Directors to provide for the grant of Restricted Stock Units. |
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June 13, 2003 |
Plan amended to include “a conviction for a violation of any securities law” as a part of the definition of “Termination for Cause”. |
14
Exhibit 10.10
LEASE AGREEMENT
Between
LINCOLN PO BENICIA LIMITED PARTNERSHIP, Landlord
and
BEBE STORES, INC., Tenant
Lincoln Distribution Center
Benicia, California
TABLE OF CONTENTS
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LIABILITY, INDEMNIFICATION, WAIVER OF SUBROGATION AND NEGLIGENCE |
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i
LEASE AGREEMENT
This Lease Agreement (this “ Lease ” ) is entered into as of October 24, 2000 by and between LINCOLN PO BENICIA LIMITED PARTNERSHIP, a Delaware limited partnership ( “ Landlord ” ), and BEBE STORES, INC., a California corporation ( “ Tenant ” ).
1. PREMISES , TERM, AND INITIAL IMPROVEMENTS .
(a) Subject to and upon the terms, provisions and conditions hereinafter set forth, and each in consideration of the duties, covenants and obligations of the other hereunder, Landlord hereby leases to Tenant, and Tenant hereby leases and takes from Landlord, 144,000 square feet of Net Rentable Area (hereinafter defined) (the “ Premises ” ) located in a building (the “ Building ” ) to be constructed upon certain land situated in the City of Benicia, California (the “ Land ” ). The Building contains an aggregate of approximately 240,000 square feet of Net Rentable Area on the Land known as the “Lincoln Distribution Center” (the “ Project ” ). A legal description of the Land is attached hereto as Exhibit “A-1” . A preliminary Site Plan depicting the Premises is attached hereto as Exhibit “A-2” . Landlord anticipates that it may be necessary for Landlord to make certain modifications to the Site Plan; accordingly, if and when such Site Plan is revised by Landlord, such revised Site Plan shall be initialed by Landlord and Tenant and substituted in place of the then current Site Plan attached to this Lease. The term “ Net Rentable Area ” refers to the square footage of the Premises, as calculated within the boundaries defined by (i) the exterior surface of the exterior walls and windows of the Building, and (ii) the center line of any demising walls separating the Premises from space to be occupied by another tenant. The Net Rentable Area in the Premises has been calculated on the basis of the foregoing definition and is hereby stipulated to be 144,000 square feet.
(b) The term of this Lease (the “ Term ” ) shall be twelve (12) years, beginning ninety (90) days following the later to occur of (i) “Building Shell Completion” (as defined in Exhibit “B” ) or (ii) January 4, 2001 (the “ Commencement Date ” ) and, unless extended by Tenant pursuant to the terms and conditions contained in Exhibit “E” attached hereto, ending on the last day of the calendar month in which the twelve (12) year anniversary of the Commencement Date shall occur; provided, however, that if the Commencement Date shall occur on the first day of a calendar month, the Expiration Date shall be the last day of the calendar month immediately preceding the twelve (12) year anniversary of the Commencement Date ( “ Expiration Date ” ). Notwithstanding the foregoing, if Landlord is unable to deliver possession of the Premises to Tenant on or before January 4, 2001 for any reason, then, subject to the provisions of Section 1.(d) below, (1) this Lease shall not be void or voidable by either party, and (2) Landlord shall not be liable to Tenant for any loss or damage resulting therefrom. Although the Term may not commence until after the date hereof, from and after the date hereof, this Lease shall be deemed to be a contract between Landlord and Tenant and the provisions hereof shall be effective for all purposes.
1
(c) Landlord shall construct the Building Shell in a good and workmanlike manner in substantial accordance with the plans and specifications referenced on Exhibit “B-1” , and, by occupying the Premises, Tenant shall be deemed to have accepted the Premises in their then “as is” condition, subject only to the completion of any punch-list items and any latent defects noted by Tenant in writing to Landlord within one (1) year following Building Shell Completion. Neither Landlord nor Landlord’s agents have made any express or implied representations or promises with respect to the Building or the Premises or the repair or alteration thereof, except as expressly set forth in this Lease, and no rights or easements or licenses are acquired by Tenant by implication or otherwise, except as expressly set forth herein.
(d) In the event that Building Shell Completion does not occur on or before April 1, 2001 (the “ Outside Building Completion Deadline ” ), Tenant, as its sole remedy, shall have the right to terminate this Lease by giving written notice of such termination to Landlord at any time after the Outside Building Completion Deadline and prior to the date Building Shell Completion occurs, in which case this Lease shall be terminated effective thirty (30) days after Landlord’s receipt of Tenant’s termination notice, unless Building Shell Completion occurs within said thirty (30) day period; provided, however, that the Outside Building Completion Deadline shall be extended by the number of days that Building Shell Completion is delayed due to a Tenant Delay (as defined in Exhibit “B” attached hereto). In the event Tenant terminates this Lease pursuant to this Section 1.(d), neither party shall have any obligations to the other under this Lease, except for obligations arising before such termination. For purposes of this Lease, the term “Tenant Delay” shall mean any delay in Building Shell Completion caused by or attributable to any act, neglect, failure or omission of Tenant or any of Tenant’s agents, employees, contractors or subcontractors.
2. BASE RENT , SECURITY DEPOSIT AND ADDITIONAL RENT .
(a) Tenant shall pay to Landlord monthly “ Base Rent ” , in advance, without demand, deduction or set off, the sums specified below:
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Months in Term |
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Monthly Base Rent |
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Rate Per
Square
|
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1-36 |
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$ |
53,280 |
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$ |
4.44 |
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37-72 |
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$ |
56,520 |
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$ |
4.71 |
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73-108 |
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$ |
60,480 |
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$ |
5.04 |
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109-144 |
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$ |
64,080 |
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$ |
5.34 |
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(b) The first monthly installment, plus the other monthly charges for Tenant’s Proportionate Share of Operating Expenses (as defined and set forth in Section 2.(c) below), shall be due on the date hereof; thereafter, monthly installments of Base Rent shall be due on the first day of each calendar month following the Commencement Date. If the Term begins on a day other than the first day of a month or ends on a day other than the last day of a month, then Base Rent and additional rent for such partial month shall be prorated.
2
(c) Intentionally Omitted
(d) Tenant shall pay, as additional rent, Tenant’s Proportionate Share (herein-after defined) of all costs incurred by Landlord in owning, operating, maintaining, repairing and replacing the Land and Project and the facilities and services provided for the common use of Tenant and any other tenants of the Project (collectively, “ Operating Expenses ” ), including the following items: (1) Taxes (as defined below) and the cost of any tax consultant employed to assist Landlord in determining the fair tax valuation of the Project and Land or otherwise in contesting the Taxes; (2) the cost of all utilities used in the Project which are not billed separately to a tenant of the Project for above standard utility consumption; (3) insurance premiums (including the related deductibles); (4) the cost of repairs, replacement, management fees and expenses, landscape maintenance and replacement, security service (if provided), sewer service (if provided), trash service (if provided); (5) the cost of dues, assessments, and other charges applicable to the Land payable to any property or community owner association under restrictive covenants or deed restrictions to which the Premises are subject; and (6) alterations, additions, and improvements made by Landlord to comply with any change in any applicable Laws (defined in Section 23.(a) below) enacted subsequent to the time of construction of the Building. Throughout the Term on the same day that Base Rent is due, Tenant shall pay to Landlord an amount equal to 1/12 of Landlord’s estimate of Tenant’s Proportionate Share of annual Operating Expenses. The initial monthly payments are based upon Landlord’s estimate of the Operating Expenses for the calendar year in question, and shall be increased or decreased annually to reflect the actual Operating Expenses determined by Landlord for that calendar year. If Tenant’s total payments in respect of Operating Expenses for any calendar year are less than Tenant’s Proportionate Share of actual Operating Expenses for that calendar year, Tenant shall pay the difference to Landlord within ten days after Landlord’s request therefor; if such payments are more than Tenant’s Proportionate Share of actual Operating Expenses for that calendar year, Landlord shall retain such excess and credit it against Tenant’s future annual payments. Operating Expenses shall not include the following: (A) any costs for interest, amortization, or other payments on loans to Landlord, except as provided in clause (H) below; (B) expenses incurred in leasing or procuring tenants; (C) legal expenses other than those incurred for the general benefit of the Project’s tenants; (D) allowances, concessions, and other costs of renovating or otherwise improving space for occupants of the Project or vacant space in the Project; (E) income taxes imposed on or measured by the income of Landlord from the operation of the Project; (F) rents under ground leases; (G) costs incurred in selling, syndicating, financing, mortgaging, or hypothecating any of Landlord’s interests in the Project; (H) the cost of any capital improvements (except for the amortization over such reasonable period as Landlord shall determine, with interest at a rate per annum equal to the “Reference Rate” defined in Section 23.(k) below, of the cost of (1) capital improvements made by Landlord or equipment purchased by Landlord as a means to accomplish savings in operating, repairing, managing or maintaining the Project, and (2) capital improvements made by Landlord to comply with any change in any applicable Laws enacted subsequent to the time of construction of the Building); (I) depreciation of the Project; (J) management fees in excess of three percent (3%) of total rent payable hereunder; and (K) the cost of repairs or other work occasioned by
3
fire, windstorm or other insured casualty or hazard, to the extent that Landlord shall receive proceeds of such insurance or would have received such proceeds had Landlord maintained the insurance coverage required under this Lease (costs of repairing an insured casualty to the extent of the commercially reasonable deductible amount under the applicable insurance policy shall constitute an Operating Expense). There shall be no duplication of costs or reimbursements in calculating Operating Expenses.
(e) If during any calendar year the Project is less than 100% occupied, then, for purposes of calculating Tenant’s Proportionate Share of water and sewer charges for that calendar year, the amount of such charges shall be “grossed-up” to the amount which, in Landlord’s estimation, would have been incurred by Landlord had the Project been 100% occupied for that entire calendar year.
(f) If any payment required of Tenant under this Lease is not paid when due, such late payment will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Landlord by the terms of any encumbrance and/or note secured by an encumbrance covering the Premises. Therefore, if any payment required of Tenant under this Lease is not paid when due, except to the extent limited by any applicable Laws, and not in limitation or waiver of any of Landlord’s other rights and remedies under this Lease, Landlord may charge Tenant and Tenant shall pay to Landlord a fee equal to five percent (5%) of the delinquent payment as a late charge. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment of rent by Tenant.
(g) All payments and reimbursements required to be made by Tenant under this Lease shall constitute “ rent ” (herein so called).
(h) The term “ Tenant’s Proportionate Share ” means the ratio from time to time of the Net Rentable Area of the Premises to the Net Rentable Area of the Project. Tenant’s Proportionate Share has been initially determined to be sixty percent (60%). If the Net Rentable Area of the Premises changes, Tenant’s Proportionate Share shall change accordingly.
(i) Tenant shall have the right, at Tenant’s sole cost upon thirty (30) days’ written notice to Landlord, during the sixty (60) day period following the end of each calendar year, to review in Landlord’s offices Landlord’s records of Operating Expenses for the subject calendar year. Such review shall be carried out only by regular employees of Tenant or by a major national or regional accounting firm and not by any other third party. No person conducting such an audit shall be compensated on a “contingency” or other incentive basis. Tenant shall keep any information gained from its inspection of Landlord’s books and records confidential and shall not disclose any such information to any other party, except as required by applicable Law, as defined in Section 23(a) below. If, as of the sixtieth (60th) day after the end of the calendar year, Tenant shall not have delivered to Landlord an objection statement (as defined below),
4
then the calculation of Operating Expenses for the subject calendar year shall be final and binding upon Landlord and Tenant, and Tenant shall have no further right to object to such calculation of Operating Expenses. If within such sixty (60) day period, Tenant delivers to Landlord a written statement specifying objections to the calculation of Operating Expenses for the subject calendar year (an “objection statement”), then Tenant and Landlord shall meet to attempt to resolve such objection within thirty (30) days after delivery of the objection statement. Notwithstanding that any such dispute remains unresolved, Tenant shall be obligated to pay Landlord all amounts payable in accordance with this Section 2 (including any disputed amount). If such objection is not resolved within such thirty (30) day period, then either party shall have the right to require that the dispute be submitted to binding arbitration under the rules of the American Arbitration Association. All costs and expenses of Tenant’s initial review of Landlord’s records shall be paid by Tenant. In the event either party shall submit the dispute over Tenant’s objection statement to arbitration as provided above, the prevailing party shall be entitled to receive from the non-prevailing party, in addition to the arbitration costs incurred by the prevailing party, such amount as the arbitrator may adjudge to be reasonable attorneys’ fees for the services rendered the prevailing party in such proceeding. Landlord and Tenant agree that, notwithstanding any provision of this Lease or any provision of the rules of the American Arbitration Association to the contrary, Landlord shall be deemed the prevailing party in any arbitration proceeding brought by either party under this Section 2 unless the final determination of such arbitration proceeding is that Landlord overstated Tenant’s Proportionate Share of Operating Expenses, in the aggregate, for the applicable calendar year by more than ten percent (10%). If such dispute results in an agreement or determination that Tenant is entitled to a refund, Landlord shall, at its option, either pay such refund or credit the amount thereof to the Base Rent next becoming due from Tenant.
3. TAXES .
(a) Landlord shall pay all taxes, assessments and governmental charges whether federal, state, county, or municipal and whether they are imposed by taxing or management districts or authorities presently existing or hereafter created but excluding any interest or penalties for late or delinquent payments (collectively, “ Taxes ” ) that accrue against the Premises, the Land and the Project. If, during the Term, there is levied, assessed or imposed on Landlord a capital levy or other tax directly on the rent or a franchise tax, assessment, levy or charge measured by or based, in whole or in part, upon rent, then all such taxes, assessments, levies or charges, or the part thereof so measured or based, shall be included within the term “ Taxes ” . Taxes shall not include income, franchise, transfer, inheritance or capital stock taxes, unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other charge which would otherwise constitute a part of Taxes. Further, Taxes shall not include penalties and interest on Taxes caused by the failure of Landlord to make timely payment (not due to any failure of Tenant to make timely payment of Tenant’s Proportionate Share of Taxes to Landlord). Tenant shall pay, as additional rent, Tenant’s Proportionate Share of Taxes as specified in Section 2.(d) above; provided, however, if the Project is occupied by more than one tenant and the
5
cost of any improvements constructed in the Premises is disproportionately higher than the cost of improvements constructed in the premises of other tenants of the Project, then Landlord may require that Tenant pay the amount of Taxes attributable to such improvements in addition to Tenant’s Proportionate Share of other Taxes.
(b) Tenant shall (1) pay when due all taxes levied or assessed against any personal property, fixtures or alterations placed in the Premises and (2) upon the request of Landlord, deliver to Landlord receipts from the applicable taxing authority or other evidence acceptable to Landlord to verify that such taxes have been paid. If any such taxes are levied or assessed against Landlord or Landlord’s property and (A) Landlord pays them or (B) the assessed value of Landlord’s property is increased thereby and Landlord pays the increased taxes, then Tenant shall pay to Landlord such taxes immediately upon Landlord’s request therefor.
(a) This Lease is intended by Landlord and Tenant to be a net lease; accordingly, Landlord’s maintenance obligations are limited to the replacement of the Building’s roof and maintenance of the foundation and structural members of the exterior walls and load bearing columns within the Premises (collectively, the “ Building’s Structure ” ); however, Landlord shall not be responsible (1) for any such work until Tenant delivers to Landlord written notice of the need therefor, or (2) for alterations to the Building’s Structure required by any applicable Law (including, without limitation, the Americans with Disabilities Act of 1990) because of Tenant’s use of the Premises (which alterations shall be performed by Tenant at Tenant’s sole cost and expense). The Building’s Structure does not include skylights, windows, glass or plate glass, doors, special store fronts or office entries, all of which shall be maintained by Tenant at Tenant’s sole cost and expense. Landlord’s liability for any defects, repairs, replacement or maintenance for which Landlord is responsible hereunder shall be limited to the cost of performing such work. Landlord shall perform all maintenance work hereunder as expeditiously as reasonably practicable (without overtime or premium time labor) and shall make commercially reasonable efforts to minimize any interference with Tenant’s use.
(b) Landlord shall maintain the parking areas, driveways, alleys and grounds surrounding the Premises in a clean and sanitary condition, including, without limitation, maintenance, repairs and replacements of (i) any drill or spur track servicing the Premises, (ii) the exterior of the Building (including painting), (iii) sprinkler systems and sewage lines, and (iv) any other items normally associated with the foregoing. Tenant shall repair or replace, as applicable, and pay for any damage caused to such parking areas, driveways, alleys and grounds by a Tenant Party (as defined in Section 23.(a) below) or caused by Tenant’s default hereunder.
(c) The cost of performing Landlord’s maintenance and repair obligations shall be an Operating Expense (except to the limited extent any such cost is specifically excluded from being an Operating Expense pursuant to Section 2.(c) above).
6
5. TENANT’S MAINTENANCE AND REPAIR OBLIGATIONS .
(a) Tenant shall maintain all parts of the Premises (except for maintenance work for which Landlord is expressly responsible under Section 4 above) in good condition and promptly make all necessary repairs and replacements to the Premises, and Tenant waives all rights under, and benefits of, subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code and under any similar law or ordinance now or hereafter in effect. Tenant shall also be responsible for the cleaning and sweeping of the Premises and for the removal of any trash which originates from the Premises. Tenant shall be responsible for disposal of its trash from the Premises and will maintain adequate receptacles for such disposal, the design, placement and capacity of such receptacles to be subject to the prior approval of Landlord. Outdoor storage of trash or any other material and receptacles or containers not approved by Landlord is strictly prohibited. At its sole cost and expense, Tenant shall provide interior pest and insect extermination at the Premises as often as is reasonably necessary to eliminate any pests or insects, whether endemic to the Building or specific to the Premises or Tenant’s use thereof.
(b) Subject to Landlord’s obligations set forth in Section 4.(c) above, Tenant shall maintain the hot water equipment and the HVAC System in good repair and condition and in accordance with all applicable Laws and with such equipment manufacturers’ suggested operation/maintenance service program. Tenant shall enter into a regularly scheduled (at least monthly) preventive maintenance/service contract for the hot water equipment and the HVAC System, in form and substance and with a contractor reasonably acceptable to Landlord, and deliver copies thereof to Landlord. At least fourteen (14) days before the end of the Term, Tenant shall deliver to Landlord a certificate from an engineer reasonably acceptable to Landlord certifying that the hot water equipment and the HVAC System are then in good repair and working order.
(c) If Tenant fails to perform any of Tenant’s maintenance or repair obligations, and if such failure continues for thirty (30) days after written notice thereof is delivered to Tenant, then Landlord may perform such obligation, in which event Tenant shall pay to Landlord the reasonable cost incurred by Landlord in performing such obligation within thirty (30) days after Landlord’s written request therefor; provided, however, that if, by the nature of such maintenance or repair, Tenant cannot reasonably complete the work within the 30-day period described above, Landlord shall not perform such maintenance or repair obligation so long as Tenant commences such maintenance or repair with due diligence and dispatch within the 30-day period described above, and, having so commenced, thereafter performance such maintenance and repair with diligence and dispatch and completes the same.
(d) Tenant acknowledges that Landlord is not providing security services of any kind to the Premises or for Tenant’s property and that the keys given to Tenant for the Premises may not be secure. At its expense, Tenant shall provide whatever security and/or alarm systems Tenant deems necessary or appropriate for the protection of the Premises and of Tenant’s personal property and personnel located therein, including, if Tenant desires to do so, installing new locks for the Premises with
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new keys. Tenant shall provide to Landlord copies of all keys and access codes to allow Landlord entry to the Premises. In no event shall Landlord be responsible for, and Tenant waives any and all claims arising from, the loss or damage to any of Tenant’s personal property situated in and on the Premises, even though Landlord may have provided general area security or guard services. Landlord may elect to, but shall have no obligation to, provide general area security or guard services. In the event Landlord elects to provide general area security or guard services, it may discontinue such security or guard services with at least thirty (30) days’ notice. At its expense, Tenant is also responsible for the maintenance, repair, or replacement of any mechanical, security, and fire protection systems which Tenant has installed within the Premises. Tenant is expressly advised that if Tenant should place any fixtures, inventory or equipment in or on the Premises prior to the time the Premises are completed and delivered to the Tenant, the risk of loss or damage to such inventory, fixtures, or equipment will be greatly increased in view of the fact that, out of necessity, numerous people will be permitted access to the Premises for the purpose of completion of any work. All such risk of loss or damage shall be borne exclusively by the Tenant and not by the Landlord, and the Tenant hereby waives any claim for any such loss or damage against the Landlord.
6. ALTERATIONS . Tenant shall not make any alterations, additions or improvements to the Premises (collectively, “ Alterations ” ) without the prior written consent of Landlord; provided, however, that Landlord’s consent shall not be required for Alterations to the interior of the Premises that are reasonably anticipated to cost less than Fifty Thousand Dollars ($50,000.00), provided that such Alterations do not affect, or require work to be performed on, the Building’s Structure, the HVAC System or any Building systems, including, without limitation, the electrical, life-safety, plumbing and fire protection systems (collectively, the “ Building Systems ” ) (such alterations, additions or improvements are herein referred to as “ Minor Alterations ” ). Landlord shall not be required to notify Tenant of whether it consents to any Alterations until it (a) has received plans and specifications therefor which are sufficiently detailed to allow construction of the work depicted thereon to be performed in a good and workmanlike manner, and (b) has had a reasonable opportunity to review them. If the Alterations will affect the Building’s Structure, HVAC System, or other Building Systems, then the plans and specifications therefor must be prepared by a licensed engineer acceptable to Landlord. Landlord’s approval of any plans and specifications shall not be a representation or warranty that the plans or the work depicted thereon will comply with applicable Laws or be adequate for any purpose, but shall merely be Landlord’s consent to performance of the work by Tenant. Upon completion of any Alterations, Tenant shall deliver to Landlord accurate, reproducible as-built plans therefor. Tenant may erect shelves, bins, machinery and trade fixtures provided that such items (1) do not alter the basic character of the Premises or the Building; (2) do not overload or damage the same; and (3) may be removed without damage to the Premises. Unless Landlord specifies in writing otherwise, all Alterations shall be Landlord’s property when installed in the Premises; provided, however, the following shall remain Tenant’s property: (i) furniture, movable equipment and other personal property that is not attached to the floors, walls, or ceiling of the Premises; and (ii) any other fixture, equipment, or other item, regardless of the manner of attachment, that is used primarily in Tenant’s trade or
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business and that can be removed as a separate physical unit without damage to the Building and without interference with other tenants’ use and enjoyment of their leased premises. All work performed by a Tenant Party in the Premises (including that relating to the installation, repair, replacement, or removal of any item) shall be performed in accordance with all applicable Laws and with Landlord’s specifications and requirements, in a good and workmanlike, lien-free manner, and so as not to damage or alter the Building’s Structure or the Premises. In connection with any such Alterations, Tenant shall pay to Landlord an administration fee of five percent (5%) of all costs incurred for such work. Upon expiration of the Term or termination of Tenant’s right to possess the Premises, Landlord may require Tenant to remove Alterations installed in the Premises by or at the request of Tenant (excluding the Initial Improvements described on Exhibit “B ” ), to repair any damage to the Premises caused by such removal, and to restore the Premises to good condition and repair, ordinary wear and tear excepted. If Landlord elects to require Tenant to remove any Alterations, it may do so by delivering to Tenant written notice thereof at the time Landlord consented to the Alterations or at any time thereafter. Attached hereto as Exhibit “C” is a list of trade fixtures, equipment, or other items that shall remain the property of Tenant. Subject to Landlord’s prior written approval, this list may be updated as Alterations are made to the Premises.
7. SIGNS . Tenant shall not place, install or attach any signage, decorations, advertising media, blinds, draperies, window treatments, bars, or security installations to the Premises or the Building without Landlord’s prior written consent; provided, however, that Landlord agrees that Tenant may install the signage approved by Landlord and shown on the Final Working Drawings (as defined in Exhibit “B” attached hereto) (the “ Pre-Approved Signage ” ). Tenant shall repair, paint, and/or replace any portion of the Premises or the Building damaged or altered as a result of its signage when it is removed (including, without limitation, any discoloration of the Building). Except for the Pre-Approved Signage, Tenant shall not (a) make any changes to the exterior of the Premises or the Building, (b) install any exterior lights, decorations, balloons, flags, pennants, banners or paintings; or (c) erect or install any signs, windows or door lettering, decals, window or storefront stickers, placards, decorations or advertising media of any type that is visible from the exterior of the Premises without Landlord’s prior written consent. Landlord shall not be required to notify Tenant of whether it consents to any sign until it (1) has received detailed, to-scale drawings thereof specifying design, material composition, color scheme, and method of installation, and (2) has had a reasonable opportunity to review them.
8. UTILITIES .
(a) Tenant shall obtain and pay for all water, gas, electricity, heat, telephone, sewer, sprinkler charges and other utilities and services used at the Premises, together with any taxes, penalties, surcharges, deposits, maintenance charges, and the like pertaining to Tenant’s use of such utilities within the Premises. Tenant or Landlord may, at Tenant’s expense, separately meter and bill Tenant directly for its use of any such utility service, in which case, the amount separately billed to Tenant for Building—standard utility service shall not be duplicated in Tenant’s obligation
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to pay Tenant’s Proportionate Share of Operating Expenses under Section 2.(c) above. All amounts due from Tenant under this Section 8 shall be payable immediately upon Landlord’s request therefor.
(b) If solely as a result of Landlord’s gross negligence or willful misconduct, Landlord fails to provide an Essential Service (as hereinafter defined) which Landlord is required to provide to the Premises pursuant to the terms of this to Section 8 (an “ Abatement Condition ” ), which prevents Tenant from occupying all or a material portion of the Premises (the “ Abatement Space ” ), then Tenant may elect, by notice to Landlord, to have Base Rent and Tenant’s Proportionate Share of Operating Expenses and Taxes abate, subject to the following additional conditions having been satisfied in each instance:
(i) With respect to the Abatement Condition in question, Tenant shall have given notice to Landlord of the occurrence thereof, which notice shall designate the cause or suspected cause of the Abatement Condition, if known to Tenant, and the portion of the Premises which is not usable by Tenant, and the Abatement Condition in question shall have continued after Tenant has given such notice for a period of not less than seven (7) consecutive days; and
(ii) Tenant, solely because of the occurrence of the Abatement Condition, shall have actually vacated the Abatement Space for not less than seven (7) consecutive days after giving its notice to Landlord of the Abatement Condition.
If, with respect to the Abatement Condition in question, the conditions of this Section 8.(b) are fulfilled, then Base Rent and Tenant’s Proportionate Share of Operating Expenses and Taxes shall abate, in the proportion that the rentable square foot area of the Abatement Space actually vacated bears to the rentable square foot area of the Premises, for a period equal to the lesser of (A) the period during which Tenant has actually vacated the Abatement Space, or (B) the period of time between Tenant’s having vacated the Abatement Space and the date Tenant receives notice from Landlord that the Abatement Condition has been cured, provided that such time periods shall not commence to run until the day after Tenant gives Landlord notice of the Abatement Condition as required above. For purposes of this Section 8.(b), vacation of the Abatement Space shall not require Tenant to remove furniture, fixtures or equipment. Tenant shall be deemed to have vacated the Abatement Space if, due to the Abatement Condition, the Abatement Space is not occupiable by Tenant, and Tenant does not in fact conduct any business in or use the Abatement Space. Tenant agrees that furnishing Landlord with notice of the Abatement Condition shall be an election of remedies, and Tenant shall be deemed to have waived any other rights against Landlord at law or in equity, including, but not limited to, an action for money damages in connection with the Abatement Condition in question. Nothing contained herein shall limit Tenant’s right to an abatement of rent or termination of this Lease in the case of a Casualty as provided in Section 10 hereof. For purposes hereof, an “ Essential Service ” shall mean the standard services to be provided by the heating, ventilation and air conditioning systems, life safety systems, mechanical systems, plumbing and waste disposal systems and electrical systems to the extent Landlord is
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required to provide such services to the Premises pursuant to the terms of this Section 8.
(c) Except as expressly provided above, Landlord shall not be liable for any interruption or failure of utility service to the Premises, and Tenant hereby waives the provisions of California Civil Code Section 1932(1) or any other applicable Laws permitting the termination of this Lease due to such failure or interruption.
9. INSURANCE . Tenant shall maintain (a) workers’ compensation insurance (with a waiver of subrogation endorsement reasonably acceptable to Landlord) and commercial general liability insurance (with contractual liability endorsement), including personal injury and property damage in the amount of $2,000,000 per occurrence combined single limit for personal injuries and death of persons and property damage occurring in or about the Premises, plus umbrella coverage of at least $5,000,000 per occurrence, (b) fire and extended coverage insurance covering (1) the replacement cost of all alterations, additions, partitions and improvements installed in the Premises by or on behalf of a Tenant Party (including the Initial Improvements described on Exhibit “B” ), and (2) the replacement cost of all of Tenant’s personal property in the Premises, and (c) business interruption insurance and such other insurance as any Landlord’s Mortgagee (as defined in Section 21.(a) below) may reasonably require, provided that any such other insurance shall be reasonably consistent with the insurance requirements of prudent landlords of comparable projects in the vicinity of the Project. Such policies shall (A) name Landlord, Landlord’s agents, and their respective affiliates (as defined in Section 23.(a) below), as additional insureds (and as loss payees on the fire and extended coverage insurance), (B) be issued by an insurance company licensed to do business in the State of California with a Best’s Guide Insurance Rating of A-VII, or better, and otherwise acceptable to Landlord, (C) provide that such insurance may not be canceled unless thirty (30) days’ prior written notice is first given to Landlord, (D) be delivered to Landlord by Tenant before the Commencement Date and at least 30 days before each renewal thereof, and (E) provide primary coverage to Landlord when any policy issued to Landlord is similar or duplicate in coverage, in which case Landlord’s policy shall be excess over Tenant’s policies.
Landlord shall procure and maintain throughout the Term, the cost of which shall be included as an Operating Expense, (1) fire and extended coverage insurance covering the Building in an amount not less than the full replacement cost of the Building, and (2) such other insurance as Landlord or Landlord’s Mortgagee (hereinafter defined) shall require.
10. CASUALTY DAMAGE .
(a) Tenant immediately shall give written notice to Landlord of any damage to the Premises or the Building. If the Premises or the Building are totally destroyed by an insured peril, or so damaged by an insured peril that, in Landlord’s reasonable estimation, rebuilding or repairs cannot be substantially completed within 180 days after the date of Landlord’s actual knowledge of such damage, then either
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Landlord or (if a Tenant Party did not cause such damage) Tenant may terminate this Lease by delivering to the other written notice thereof within thirty (30) days after such damage, in which case, the rent shall be abated during the unexpired portion of this Lease, effective upon the date such damage occurred. Time is of the essence with respect to the delivery of such notices.
(b) Subject to Section 10.(c) below, if this Lease is not terminated under Section 10.(a), then Landlord shall restore the Premises to substantially its previous condition, except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements or personal property required to be covered by Tenant’s insurance under Section 9. If the Premises are untenantable, in whole or in part, during the period beginning on the date such damage occurred and ending on the date of substantial completion of Landlord’s repair or restoration work (the “ Repair Period ” ), then the rent for such period shall be reduced to such extent as may be fair and reasonable under the circumstances and the Term shall be extended by the number of days in the Repair Period.
(c) If the Premises are destroyed or damaged by any peril not covered by the insurance maintained by Landlord or any Landlord’s Mortgagee requires that insurance proceeds be applied to the indebtedness secured by its Mortgage (defined below) or to the Primary Lease (defined below) obligations, Landlord may terminate this Lease by delivering written notice of termination to Tenant within thirty (30) days after such destruction or damage or such requirement is made known by any such Landlord’s Mortgagee, as applicable, whereupon all rights and obligations hereunder shall cease and terminate, except for any liabilities of Tenant which accrued before this Lease is terminated.
(d) If the Premises are destroyed or damaged by any peril not covered by the insurance maintained by Landlord and, in Landlord’s reasonable estimation, rebuilding or repairs cannot be substantially completed within 180 days after the date of such damage, then (if a Tenant Party did not cause such damage) Tenant may terminate this Lease by delivering to Landlord written notice thereof within thirty (30) days after Tenant’s receipt of Landlord’s estimation of the time to repair such damage, in which case, the rent shall be abated during the unexpired portion of this Lease, effective upon the date such damage occurred. Time is of the essence with respect to the delivery of such notices.
(e) The provisions of this Lease, including this Section 10, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises or the Building, and any statute or regulation of the State of California, including, without limitation, subsection 2 of Section 1932, subsection 4 of Section 1933, and Sections 1941 and 1942 of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises or the Building.
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11. LIABILITY , INDEMNIFICATION, WAIVER OF SU BROGATION AND NEGLIGENCE .
(a) Subject to Section 11.(b) below, Tenant shall, to the maximum extent permitted by Law, protect, indemnify, defend, and hold harmless Landlord, its successors, assigns, agents, employees, contractors, partners, directors, officers and affiliates (collectively, the “ Indemnified Parties ” ) from and against all fines, suits, losses, costs, liabilities, claims, demands, actions and judgments of every kind or character (1) arising from Tenant’s failure to perform its covenants hereunder, (2) arising from, or caused, wholly or in part, by a Tenant Party or any other person entering upon the Premises under or with a Tenant Party’s express or implied invitation or permission, (3) arising from or out of the occupancy or use of the Premises by a Tenant Party or arising from or out of any occurrence in the Premises, howsoever caused, or (4) suffered by, recovered from or asserted against any of the Indemnified Parties by the employees, agents, contractors, or invitees of Tenant or its subtenants or assignees. However, such indemnification of the Indemnified Parties by Tenant shall not be applicable if such loss, damage, or injury is caused by the sole active negligence or willful misconduct of Landlord or any of its duly authorized agents or employees.
(b) Landlord and Tenant both waive any claim it might have against the other for any damage to or theft, destruction, loss, or loss of use of any property, to the extent the same is insured against under any insurance policy maintained by it that covers the Building, the Premises, Landlord’s or Tenant’s fixtures, personal property, leasehold improvements, or business, or is required to be insured against by the waiving party under the terms hereof, regardless of whether the negligence or fault of the other party caused such loss. Each party shall cause its insurance carrier to endorse all applicable policies waiving the carrier’s rights of recovery under subrogation or otherwise against the other party.
12. USE .
(a) The Premises shall be used only for receiving, storing, shipping and selling clothing products, materials and merchandise made or distributed by Tenant and for such other lawful purposes as may be incidental thereto; however, no retail sales may be made from the Premises. Tenant shall not use, or permit the use of, the Premises to receive, store or handle any product, material or merchandise that is explosive or highly inflammable or hazardous. Outside storage is prohibited. Tenant shall be solely responsible for complying with all Laws applicable to the use, occupancy, and condition of the Premises. Tenant and all Tenant Parties shall comply with all reasonable non-arbitrary rules and regulations governing the use and occupancy of the Premises which are now or hereafter imposed by Landlord. A copy of the rules and regulations now in force are attached as Exhibit “D” . Tenant shall not cause or permit any objectionable or unpleasant odors, smoke, dust, gas, light, noise or vibrations to emanate from the Premises; nor take or permit any other action that would constitute a nuisance or would disturb, unreasonably interfere with, or endanger Landlord or any other person; nor cause or permit the Premises to be used for any purpose or in any manner that would (1) void the insurance thereon, (2) materially increase the insurance
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risk, or (3) cause the disallowance of any sprinkler credits. Tenant shall pay to Landlord on demand any increase in the cost of any insurance on the Premises or the Building incurred by Landlord which is caused by Tenant’s use of the Premises.
(b) Tenant and its employees and invitees shall have the non-exclusive right to use, in common with others, a proportionate share of the parking spaces in the Project (based on the ratio from time to time of the Net Rentable Area of the Premises to the Net Rentable Area of the Project) which Landlord has designated for such use, subject to (1) such reasonable rules and regulations as Landlord may promulgate from time to time and (2) rights of ingress and egress of other tenants and their employees, agents and invitees. Landlord shall not be responsible for enforcing Tenant’s parking rights against third parties.
13. INSPECTION . Landlord and Landlord’s agents and representatives may enter the Premises during business hours to: inspect the Premises; to make such repairs as may be required or permitted under this Lease; to perform any unperformed obligations of Tenant hereunder; and to show the Premises to prospective purchasers, mortgagees, ground lessors, and (during the last six (6) months of the Term) tenants. During the last six (6) months of the Term, Landlord may erect a sign on the Premises indicating that the Premises are available. Tenant shall notify Landlord in writing of its intention to vacate the Premises at least sixty (60) days before Tenant will vacate the Premises; such notice shall specify the date on which Tenant intends to vacate the Premises (the “ Vacation Date ” ). At least thirty (30) days before the Vacation Date, Tenant shall arrange to meet with Landlord for a joint inspection of the Premises. After such inspection, Landlord shall prepare a list of items, if any, that Tenant must perform before the Vacation Date. If Tenant fails to arrange for such inspection, then Landlord may conduct such inspection and Landlord’s determination of the work Tenant is required to perform before the Vacation Date shall be conclusive. If Tenant fails to perform such work before the Vacation Date, then Landlord may perform such work at Tenant’s cost. Tenant shall pay all reasonable costs incurred by Landlord in performing such work within ten days after Landlord’s request therefor.
14. ASSIGNMENT AND SUBLETTING .
(a) Tenant shall not, without the prior written consent of Landlord, which consent Landlord shall not unreasonably withhold, (1) advertise that any portion of the Premises is available for lease or cause or allow any such advertisement, (2) assign, transfer, or encumber this Lease or any estate or interest herein, whether directly or by operation of law, (3) if Tenant is an entity other than a corporation whose stock is publicly traded, permit the transfer of an ownership interest in Tenant so as to result in a change in the current control of Tenant, (4) sublet any portion of the Premises, (5) grant any license, concession, or other right of occupancy of any portion of the Premises, or (6) permit the use of the Premises by any parties other than Tenant (any of the events listed in Sections 14.(a)(2) through 14.(a)(6) being a “ Transfer ” and any person or entity to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a “ Transferee ” ).
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(b) If Tenant requests Landlord’s consent to a Transfer, then Tenant shall provide Landlord with a written description of all terms and conditions of the proposed Transfer, copies of the proposed documentation, the portion of the Premises to be Transferred (herein called the “ Subject Space ” ) and the following information about the proposed Transferee: name and address; satisfactory information about its business and business history; its proposed use of the Premises; banking, financial, and other credit information; and general references sufficient to enable Landlord to determine the proposed Transferee’s creditworthiness and character (collectively, the “ Notice of Proposed Transfer ” ). Tenant shall reimburse Landlord for its reasonable attorneys’ fees and other expenses incurred in connection with considering any request for its consent to a Transfer, up to a maximum of One Thousand Five Hundred Dollars ($1,500.00).
(c) If Landlord consents to a proposed Transfer, then the proposed Transferee shall deliver to Landlord a written agreement whereby it expressly assumes the Tenant’s obligations hereunder (however, any Transferee of less than all of the space in the Premises shall be liable only for obligations under this Lease that are properly allocable to the space subject to the Transfer, and only to the extent of the rent it has agreed to pay Tenant therefor). Landlord’s consent to a Transfer shall not release Tenant from performing its obligations under this Lease, but rather Tenant and its Transferee shall be jointly and severally liable therefor. Tenant hereby waives its rights under Section 2819 of the California Civil Code or any similar statute or law now or hereafter in effect, and agrees that Landlord may consent to subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto, and such action shall not relieve Tenant of its liability under this Lease. If an Event of Default occurs while the Premises or any part thereof are subject to a Transfer, then Landlord, in addition to its other remedies, may collect directly from such transferee all rents becoming due to Tenant and apply such rents against Tenant’s rent obligations. Tenant authorizes its transferees to make payments of rent directly to Landlord upon receipt of notice from Landlord to do so.
(d) Notwithstanding the foregoing, Landlord’s consent shall not be required for the following Transfers (herein referred to as “ Permitted Transfers ” and a Transferee under any such Permitted Transfer is herein referred to as a “ Permitted Transferee ” ): (i) an assignment of this Lease to a Transferee that purchases all or substantially all of the assets of Tenant, or to a Transferee that is the resulting entity of a merger or consolidation of Tenant with another entity, or (ii) an assignment or subletting of all or a portion of the Premises to an affiliate of Tenant; provided that (1) Tenant shall not be in default (beyond applicable notice and cure periods ) in the performance of any of its obligations under this Lease at the time of the Transfer; (2) Tenant delivers to Landlord a Notice of Proposed Transfer with respect to such proposed Transfer at least thirty (30) days prior to the effective date thereof and promptly supplies Landlord with any documents or information reasonably requested by Landlord regarding such Transfer or Transferee, including, but not limited to, copies of the sublease or instrument of assignment, copies of documents establishing to the reasonable satisfaction of Landlord that the transaction in question is one described in
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clause (i) or (ii) above; and (3) any such proposed Transfer is made for a good faith operating business purpose and not, whether in a single transaction or in a series of transactions, be entered into as a subterfuge to evade the obligations and restrictions relating to Transfers set forth in this Section 14. In the event of a transfer to a Permitted Transferee, Tenant shall not be released from performing its obligations under this Lease, but rather Tenant and the Permitted Transferee shall be jointly and severally liable therefor.
(e) Tenant hereby assigns, transfers and conveys one-half of all consideration received by Tenant under any Transfer (excluding Permitted Transfers), which are in excess of (i) the rents payable by Tenant under this Lease, plus (ii) the unamortized cost of the Initial Improvements, and any other Alterations to the Premises paid for by Tenant (such amortization to be made on a straight-line basis over the initial Term), and Tenant shall hold such amounts in trust for Landlord and pay them to Landlord within twenty (20) days after receipt.
15. CONDEMNATION . If more than 50% of the Premises is taken for any public or quasi—public use by right of eminent domain or private purchase in lieu thereof (a “ Taking ” ), and the Taking prevents or materially interferes with the use of the remainder of the Premises for the purpose for which they were leased to Tenant, either party may terminate this Lease by delivering to the other written notice thereof within thirty (30) days after the Taking, in which case rent shall be abated during the unexpired portion of the Term, effective as of the date of such Taking. If (a) less than 50% of the Premises are subject to a Taking or (b) more than 50% of the Premises are subject to a Taking, but the Taking does not prevent or materially interfere with the use of the remainder of the Premises for the purpose for which they were leased to Tenant, then neither party may terminate this Lease, but the rent payable during the unexpired portion of the Term shall be reduced to such extent as may be fair and reasonable under the circumstances. All compensation awarded for any Taking shall be the property of Landlord and Tenant assigns any interest it may have in any such award to Landlord. Specifically, and without limiting the generality of the foregoing, said assignment is intended to include: (i) the “bonus value” represented by the difference, if any, between rent under this Lease and market rent for the unexpired Term; (ii) the value of improvements to the Premises, whether said improvements were paid for by Landlord or by Tenant; and (iii) the value of any and all other items and categories of property for which payment of compensation may be made in any such proceeding. Notwithstanding the foregoing, Tenant shall be entitled to receive any award of compensation for (1) loss of or damage to the goodwill of Tenant’s business and lost profits (but only to the extent the same does not constitute “bonus value”), (2) the taking of trade fixtures and equipment owned and paid for by Tenant (meaning the trade fixtures, furniture, and personal property placed in the Premises by Tenant and described on Exhibit “C” ), and (3) any moving or relocation expenses which Tenant is entitled under the law to recover directly from the public agency which acquires the Premises. Tenant hereby waives sections 1265.110 through 1265.160 of the California Code of Civil Procedure.
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16. SURRENDER OF PREMISES, HOLDING OVER .
(a) No act by Landlord shall be an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless it is in writing and signed by Landlord. At the end of the Term or the termination of Tenant’s right to possess the Premises, Tenant shall (1) deliver to Landlord the Premises with all improvements located thereon in good repair and condition, reasonable wear and tear (subject however to Tenant’s maintenance obligations) excepted, and with the HVAC System and hot water equipment, any remaining light fixtures (including ballasts), and overhead doors and related equipment in good working order, (2) deliver to Landlord all keys to the Premises, and (3) remove all signage placed on the Premises, the Building, or the Land by or at Tenant’s request. All fixtures, alterations, additions, and improvements (whether temporary or permanent) shall be Landlord’s property and shall remain on the Premises except as provided in the next two sentences. Tenant may remove all trade fixtures, furniture, and personal property placed in the Premises by Tenant and described on Exhibit “C” (but Tenant shall not remove any such item which was paid for, in whole or in part, by Landlord). Additionally, Tenant shall remove such alterations, additions, improvements, fixtures, equipment, wiring, furniture, and other property as Landlord may request in writing (excluding the Initial Improvements described on Exhibit “B ” ), provided such request is made within six (6) months after the end of the Term. All items so requested to be moved which are not so removed shall, at the option of Landlord, be deemed abandoned by Tenant and may be appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant and without any obligation to account for such items and Tenant shall pay for the costs incurred by Landlord in connection therewith. Any such disposition shall not be considered a strict foreclosure or other exercise of Landlord’s rights in respect of the security interest granted under Section 26 below. All work required of Tenant under this Section 16.(a) shall be coordinated with Landlord and be done in a good and workmanlike manner, in accordance with all applicable Laws, and so as not to damage the Building or unreasonably interfere with other tenants’ use of their premises. Tenant shall, at its expense, repair all damage caused by any work performed by Tenant under this Section 16.(a). Without limiting the generality of the foregoing, delivery of the Premises in compliance with this Section 16.(a) shall require that Tenant cause the following (which is not an exclusive list) to be true as of the date of surrender:
(i) All interior lights are operational and burning.
(ii) All exhaust, ceiling and overhead fans are operational.
(iii) Warehouse floor is broom swept and clean of all trash and materials.
(iv) Warehouse floor is cleaned of excessive oils, fluids and other foreign materials.
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(v) All electrical, plumbing, and other utilities which are terminated are disconnected, capped and/or terminated according to applicable building codes and all other governmental requirements.
(vi) Overhead interior and exterior doors are operational and in good condition.
(vii) Any bolts secured to floor are cut off flush and sealed with epoxy.
(viii) All furniture, trash and debris are removed.
(ix) All pictures, posters, signage, stickers and all similar items are removed from all walls, windows, doors and all other interior and exterior surfaces of the Premises.
(x) Carpet areas are vacuumed.
(xi) All uncarpeted office floors are swept and any excess wax buildup on tile and vinyl floors is removed.
(xii) All Tenant installed computer cable is removed to point of origin.
(xiii) All doors, windows, and miscellaneous hardware are operational if Landlord so requires.
(xiv) All heating, air conditioning and mechanical equipment is operational and in good working condition.
(xv) Ceiling tiles, grid, light lenses, air grills and diffusers are in place with no holes or stains.
(xvi) There are no broken windows or other glass items.
(xvii) Bathroom walls, floors, and fixtures are clean.
(xviii) All plumbing fixtures are intact and operational and do not leak.
(xix) Inside walls are reasonably clean and any holes in the walls or roof are properly and permanently patched.
(xx) If Tenant fails to vacate the Premises at the end of the Term, then Tenant shall be a Tenant at sufferance and Tenant shall pay, in addition to the other rent due hereunder, a daily Base Rent equal to (i) for the first sixty (60) days, One Hundred Fifty Percent (150%) of the daily Base Rent payable during the last month of the Term, and (ii) thereafter and until such time as the Premises are surrendered, Two
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Hundred Percent (200%) of the daily Base Rent payable during the last month of the Term. Additionally, Tenant shall defend, indemnify, and hold harmless Landlord from any damage, liability and expense (including attorneys’ fees and expenses) incurred because of such holding over. No payments of money by Tenant to Landlord after the Term shall reinstate, continue or extend the Term, and no extension of this Term shall be valid unless it is in writing and signed by Landlord and Tenant.
17. QUIET ENJOYMENT . Provided Tenant has fully performed its obligations under this Lease, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from any party claiming by, through, or under Landlord.
18. EVENTS OF DEFAULT . Each of the following events shall constitute an “ Event of Default ” under this Lease:
(a) Tenant fails to pay any rent when due or any payment or reimbursement required under any other lease with Landlord when due.
(b) The filing of a petition by or against Tenant or any guarantor of Tenant’s obligations hereunder (1) in any bankruptcy or other insolvency proceeding; (2) seeking any relief under any debtor relief Law; (3) for the appointment of a liquidator, receiver, trustee, custodian, or similar official for all or substantially all of Tenant’s property or for Tenant’s interest in this Lease; or (4) for reorganization or modification of Tenant’s capital structure (however, if any such petition is filed against Tenant, then the filing of such petition shall not constitute an Event of Default, unless it is not dismissed within 60 days after the filing thereof).
(c) Tenant fails to discharge any lien placed upon the Premises in violation of Section 22 below within thirty (30) days after any such lien or encumbrance is filed against the Premises.
(d) Tenant fails to comply with any term, provision or covenant of this Lease (other than those listed above in this Section 18), and such failure continues for thirty (30) days after written notice thereof to Tenant.
19. REMEDIES .
(a) If an Event of Default occurs, Landlord shall have the right at any time to give a written termination notice to Tenant and, on the date specified in such notice, Tenant’s right to possession shall terminate and this Lease shall terminate. Upon such termination, Landlord shall have the right to recover from Tenant:
(i) The worth at the time of award of all unpaid rent which had been earned at the time of termination;
(ii) The worth at the time of award of the amount by which all unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided;
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(iii) The worth at the time of award of the amount by which all unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and
(iv) All other amounts necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform all of Tenant’s obligations under this Lease or which in the ordinary course of things would be likely to result therefrom. The “worth at the time of award” of the amounts referred to in clauses (i) and (ii) above shall be computed by allowing interest at the Interest Rate set forth in Section 23.(k). The “worth at the time of award” of the amount referred to in clause (iii) above shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). For the purpose of determining unpaid rent under clauses (i), (ii) and (iii) above, the rent reserved in this Lease shall be deemed to be the total rent payable by Tenant under Sections 2 and 3 hereof. For purposes of computing the amount of rent hereunder that would have accrued after the time of award, the amounts of Tenant’s obligations to pay increases in Operating Expenses and Taxes shall be projected based upon the average rate of increase, if any, in such items from the Commencement Date through the time of award.
(b) Even though Tenant has breached this Lease, this Lease shall continue in effect for so long as Landlord does not terminate Tenant’s right to possession, and Landlord shall have all of its rights and remedies, including the right, pursuant to California Civil Code Section 1951.4, to recover all rent as it becomes due under this Lease, if Tenant has the right to sublet or assign, subject only to reasonable limitations. Acts of maintenance or preservation or efforts to relet the Premises or the appointment of a receiver upon initiative of Landlord to protect Landlord’s interest under this Lease shall not constitute a termination of Tenant’s right to possession unless written notice of termination is given by Landlord to Tenant.
(c) If Tenant shall fail to perform any act required to be performed by it hereunder or to pay any sum of money required to be paid by it hereunder (other than Base Rent), or shall fail to cure any default and such failure shall continue beyond any applicable notice and grace period set forth herein, then Landlord may, at its option, and without waiving or releasing Tenant from any of its obligations hereunder, make any such payment or perform any such act on behalf of Tenant. All sums so paid and all costs incurred by Landlord in taking such action shall be deemed additional rent and shall be paid to Landlord on demand.
(d) The remedies provided for in this Lease are in addition to all other remedies available to Landlord at law or in equity by statute or otherwise. Tenant, to the greatest extent permitted by law, waives redemption or relief from forfeiture under Section 1174 and 1179 of the California Code of Civil Procedure, or under any other present or future law, in the event Tenant is evicted or Landlord takes possession of the Premises by reason of any default of Tenant hereunder.
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20. LANDLORD’S DEFAULT . If Landlord fails to perform any of its obligations hereunder within thirty (30) days after written notice from Tenant specifying such failure, Tenant’s exclusive remedy shall be an action for damages. Unless Landlord fails to so cure such default after such notice, Tenant shall not have any remedy or cause of action by reason thereof. In the event Landlord shall be delayed, hindered or prevented from the performance of any act required hereunder of Landlord by reason of acts of God, strikes, lockouts, labor disputes, weather, labor troubles, inability to procure materials, the acts of Tenant or other causes beyond the reasonable control of Landlord, then the performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. Liability of Landlord to Tenant for any default by Landlord shall be limited to the actual and direct, but not consequential, special or punitive, damages therefor and shall be recoverable only from the interest of Landlord in the Building and the Land, and neither Landlord nor Landlord’s partners, shareholders, officers, directors, employees, agents or attorneys shall have any personal liability therefor.
21. MORTGAGES .
(a) This Lease shall be subordinate to any deed of trust, mortgage or other security instrument (a “ Mortgage ” ), and any ground lease, master lease, or primary lease (a “ Primary Lease ” ) that now or hereafter covers any portion of the Premises (the mortgagee under any Mortgage or the lessor under any Primary Lease is referred to herein as “ Landlord’s Mortgagee ” ), and to increases, renewals, modifications, consolidations, replacements, and extensions thereof. However, any Landlord’s Mortgagee may elect to subordinate its Mortgage or Primary Lease (as the case may be) to this Lease by delivering written notice thereof to Tenant. The provisions of this Section 21 shall be self-operative, and no further instrument shall be required to effect such subordination; however, Tenant shall from time to time within twenty (20) days after request therefor, execute any instruments that may be required by any Landlord’s Mortgagee to evidence the subordination of this Lease to any such Mortgage or Primary Lease. If Tenant fails to execute the same within such 20-day period, Landlord may execute the same as attorney-in-fact for Tenant. Tenant also agrees to modify this Lease as reasonably requested by Landlord’s Mortgagee which does not cause increased expense to Tenant, a decrease in Tenant’s rights under this Lease, or otherwise materially adversely affect Tenant’s interest under this Lease.
(b) With respect to any Mortgage or Primary Lease to which this Lease is now or shall hereafter become subordinate, Landlord shall use commercially reasonable efforts to obtain from the Landlord’s Mortgagee, for the benefit of Tenant, a non-disturbance agreement, in the usual form of such Landlord’s Mortgagee, providing generally that as long as Tenant is not in default under this Lease, this Lease will not be terminated if such Landlord’s Mortgagee acquires title to the Project by reason of foreclosure proceedings, acceptance of a deed in lieu of foreclosure, or termination of the leasehold interest of Landlord, provided that Tenant attorns to such Landlord’s Mortgagee in accordance with its requirements. Except for making such commercially reasonable efforts, Landlord will be under no duty or obligation hereunder with respect
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to any Mortgage or Primary Lease, nor will the failure or refusal of any Landlord’s Mortgagee(s) to grant a non-disturbance agreement render Landlord liable to Tenant, or affect this Lease, in any manner. Tenant will bear all costs and expenses (including attorneys’ fees) of the Landlord Mortgagee(s) in connection with Landlord’s reasonable efforts to obtain a non-disturbance agreement.
(c) Tenant shall attorn to any party succeeding to Landlord’s interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party’s request, and shall execute such agreements confirming such attornment as such party may reasonably request. Tenant shall not seek to enforce any remedy it may have for any default on the part of Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail to any Landlord’s Mortgagee whose address has been given to Tenant, and affording such Landlord’s Mortgagee a reasonable opportunity to perform Landlord’s obligations hereunder.
(d) Notwithstanding any such attornment or subordination of a Mortgage or Primary Lease to this Lease, the Landlord’s Mortgagee shall not be liable for any acts of any previous landlord, shall not be obligated to install the Initial Improvements, and shall not be bound by any amendment to which it did not consent in writing nor any payment of rent made more than one month in advance.
22. ENCUMBRANCES . Tenant has no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind Landlord’s property or the interest of Landlord or Tenant in the Premises or the Building or to charge the rent for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs. Tenant shall pay or cause to be paid all sums due for any labor performed or materials furnished in connection with any work performed on the Premises by or at the request of Tenant. Tenant shall give Landlord immediate written notice of the placing of any lien or encumbrance against the Premises.
23. MISCELLANEOUS .
(a) Words of any gender used in this Lease shall include any other gender, and words in the singular shall include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way affect the interpretation of this Lease. The following terms shall have the following meanings: “Laws” shall mean all federal, state, and local laws, rules, and regulations; all court orders, governmental directives, and governmental orders; and all restrictive covenants affecting Tenant or the Premises, and “ Law ” shall mean any of the foregoing; “ affiliate ” shall mean any person or entity which, directly or indirectly, controls, is controlled by, or is under common control with the party in question; and “ Tenant Party ” shall include Tenant, any assignees claiming by, through, or under Tenant, any subtenants claiming by, through, or under Tenant, and any of their respective agents, contractors, employees, and invitees.
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(b) Landlord may transfer and assign, in whole or in part, its rights and obligations in the Building and property that are the subject of this Lease, in which case Landlord shall have no further liability hereunder provided that Landlord’s assignee assumes all of Landlord’s obligations under this Lease. Each party shall furnish to the other, promptly upon demand, a corporate resolution, proof of due authorization by partners, or other appropriate documentation evidencing the due authorization of such party to enter into this Lease.
(c) Tenant shall, from time to time, within 20 days after request of Landlord, deliver to Landlord, or Landlord’s designee, a certificate of occupancy for the Premises, financial statements for itself and any guarantor of its obligations hereunder, evidence reasonably satisfactory to Landlord that Tenant has performed its obligations under this Lease, and an estoppel certificate stating that this Lease is in full effect, the date to which rent has been paid, the unexpired Term and such other factual matters pertaining to this Lease as may be requested by Landlord. Tenant’s obligation to furnish the above-described items in a timely fashion is a material inducement for Landlord’s execution of this Lease. Tenant’s failure to deliver said statement in the time required shall be conclusive upon Tenant that: (i) this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured defaults in Landlord’s performance and Tenant has no right of offset, counterclaim or deduction against rent under this Lease and (iii) no more than one month’s Base Rent has been paid in advance.
(d) This Lease constitutes the entire agreement of the Landlord and Tenant with respect to the subject matter of this Lease, and contains all of the covenants and agreements of Landlord and Tenant with respect thereto. Landlord and Tenant each acknowledge that no representations, inducements, promises or agreements, oral or written, have been made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not contained herein, and any prior agreements, promises, negotiations, or representations not expressly set forth in this Lease are of no effect. This Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.
(e) All obligations of Tenant hereunder not fully performed by the end of the Term shall survive, including, without limitation, all payment obligations with respect to Taxes and insurance and all obligations concerning the condition and repair of the Premises. Tenant shall, prior to vacating the Premises, pay to Landlord the prorated amount, as estimated by Landlord, of Tenant’s obligation hereunder for Operating Expenses for the year in which the Term ends. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant hereunder, with Tenant being liable for any additional costs therefor upon demand by Landlord or with any excess to be returned to Tenant after all such obligations have been determined and satisfied as the case may be.
(f) The parties acknowledge and agree that no rule of construction to the effect that any ambiguities are to be resolved against the drafting parties shall be employed in the interpretation of this Lease. This Lease shall be construed and
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interpreted in accordance with the laws of the State of California. If any provision of this Lease is illegal, invalid or unenforceable, then the remainder of this Lease shall not be affected thereby, and in lieu of each such provision, there shall be added, as a part of this Lease, a provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. Time is of the essence of each provision of this Lease.
(g) All references in this Lease to “ the date hereof ” or similar references shall be deemed to refer to the last date, in point of time, on which all parties hereto have executed this Lease.
(h) Landlord and Tenant each warrant to the other that it has not dealt with any broker or agent in connection with this Lease except for Colliers International. Tenant and Landlord shall each indemnify the other against all costs, attorneys’ fees, and other liabilities for commissions or other compensation claimed by any broker or agent claiming the same by, through, or under the indemnifying party. Landlord shall pay Colliers International a real estate commission as per separate agreement.
(i) If and when included within the term “ Tenant ” , as used in this instrument, there is more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of a notice specifying an individual at a specific address within the continental United States for the receipt of notices and payments to Tenant. All parties included within the terms “ Landlord ” and “ Tenant ” , respectively, shall be bound by notices given in accordance with the provisions of Section 24 to the same effect as if each had received such notice.
(j) The terms and conditions of this Lease are confidential and Tenant shall not disclose the terms of this Lease to any third party except as may be required by law or to enforce its rights hereunder.
(k) Tenant shall pay interest on all past-due rent from the date due until paid at an annual rate of interest (the “ Interest Rate ” ) equal to the greater of (i) eighteen percent (18%) per year, or (ii) a rate equal to the sum of five (5) percentage points over the publicly announced reference rate (the “ Reference Rate ” ) charged on such due date by the San Francisco Main Office of Bank of America NT & SA (or any successor bank thereto) (or if there is no such publicly announced rate, the rate quoted by such bank in pricing ninety (90) day commercial loans to substantial commercial borrowers); provided, however, Tenant’s total liability for interest payments under this Lease shall not exceed the limits, if any, imposed on such payments by the usury laws of the State of California.
(l) This Lease may be executed in any number of counterparts, each of which shall be an original, but such counterparts together shall constitute one and the same instrument.
(m) In case any suit or other proceeding shall be brought for an unlawful detainer of the Premises or for the recovery of any rent due under the
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provisions of this Lease or because of the failure of performance or observance of any other term or covenant herein contained on the part of Landlord or Tenant, the unsuccessful party in such suit or proceeding shall pay to the prevailing party therein reasonable attorneys’ fees and costs which shall include fees and costs of any appeal, all as fixed by the court. Any such attorneys’ fees and other expenses incurred by either party in enforcing a judgment in its favor under this Lease shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligation is intended to be severable from the other provisions of this Lease and to survive and not be merged into any such judgment.
(n) Each party hereto shall not seek a jury trial, hereby waives trial by jury, and hereby further waives any objection to venue in the County of Solano and agrees and consents to personal jurisdiction of the courts of the State of California, in any action or proceeding or counterclaim brought by any party hereto against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises, or any claim of injury or damage, or the enforcement of any remedy under any statute, emergency or otherwise, whether any of the foregoing is based on this Lease or on tort law. No party will seek to consolidate any such action in which a jury has been waived with any other action in which a jury trial cannot or has not been waived. It is the intention of the parties that these provisions shall be subject to no exceptions. By execution of this Lease the parties agree that this provision may be filed by any party hereto with the clerk or judge before whom any action is instituted, which filing shall constitute the written consent to a waiver of jury trial pursuant to and in accordance with Section 631 of the California Code of Civil Procedure. No party has in any way agreed with or represented to any other party that the provisions of this Section 23.(n) will not be fully enforced in all instances. The provisions of this Section 23.(n) shall survive the expiration or earlier termination of this Lease.
24. NOTICES . Each provision of this instrument or of any applicable Laws and other requirements with reference to the sending, mailing or delivering of notice or the making of any payment hereunder shall be deemed to be complied with when and if the following steps are taken:
(a) All rent shall be payable to Landlord at the address for Landlord set forth below or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant’s obligation to pay rent shall not be deemed satisfied until such rent has been actually received by Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder shall be payable to Tenant at the address set forth below, or at such other address within the continental United States as Tenant may specify from time to time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to be delivered hereunder or under the laws of the State of California, including, but not limited to, notice under the provisions of Section 1161 of the California Code of Civil Procedure
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and Section 1946 of the California Civil Code (each, a “Notice”), shall be made in writing and shall be deemed to be delivered upon the earlier to occur of (1) tender of delivery (in the case of a hand delivered notice), (2) deposit in the United States Mail, postage prepaid, certified mail, return receipt requested, or (3) receipt by facsimile transmission, in each case, addressed to the parties hereto at the respective addresses set out next to their signatures below, or at such other address as they have theretofore specified by written notice delivered in accordance herewith; or, in the case of notice given to Tenant subsequent to Tenant’s vacating, deserting, abandoning or surrendering the Premises, if delivered to the Premises or any place where Tenant or any agent or employee of Tenant may be found. Tenant hereby appoints as its agent to receive the service of process in any action, or any notice required by law to be given prior to the commencement of any action, for recovery of possession of the Premises or any part thereof, and to receive service of all dispossessory or distraint proceedings and notices thereunder, the person in charge of or occupying the Premises at the time, and, if no person shall be in charge of or occupying the same, then such service may be made by attaching the same on the main entrance of the Premises. Tenant hereby agrees that service of notice in accordance with the terms of this Lease shall be in lieu of the methods of service specified in Section 1162 of the California Code of Civil Procedure. The provisions of subdivision (a) of Section 1013 of the California Code of Civil Procedure, extending the time within which a right may be exercised or an act may be done, shall not apply to a notice given pursuant to this Lease. Landlord may act through its property manager for the Project, through its legal counsel or through any other person who may from time to time be designated by Landlord in writing.
25. HAZARDOUS WASTE . The term “Hazardous Substances”, as used in this Lease, shall mean pollutants, contaminants, toxic or hazardous wastes, or any other substances, the removal of which is required or the use of which is restricted, prohibited or penalized by any “ Environmental Law ” , which term shall mean any Law relating to health, pollution, or protection of the environment. Tenant hereby agrees that (a) no activity will be conducted on the Premises that will produce any Hazardous Substances; (b) the Premises will not be used in any manner for the storage of any Hazardous Substances, except for de minimis quantities of general office supplies customarily used by office tenants in the ordinary course of Tenant’s business their business, such as copier toner, liquid paper, glue, ink and cleaning solvents (the “ Permitted Materials ” ), provided such Permitted Materials are properly stored in a manner and location satisfying all Environmental Laws; (c) no portion of the Premises will be used as a landfill or a dump; (d) Tenant will not install any underground tanks of any type; (e) Tenant will not cause any surface or subsurface conditions to exist or come into existence that constitute, or with the passage of time may constitute a public or private nuisance; and (f) Tenant will not permit any Hazardous Substances to be brought onto the Premises, except for the Permitted Materials, and if so brought or found located thereon, the same shall be immediately removed by Tenant, with proper disposal, and all required cleanup procedures shall be diligently undertaken pursuant to all Environmental Laws. If at any time during or after the Term, the Premises are found to be so contaminated or subject to such conditions as a result of Tenant’s use of the Premises or breach of this Lease, Tenant shall defend, indemnify and hold Landlord harmless from all claims, demands, actions, liabilities, costs, expenses, damages and
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obligations of any nature arising from or as a result of the use of the Premises by Tenant. Landlord may enter the Premises and conduct environmental inspections and tests therein as it may require from time to time, provided that Landlord shall use reasonable efforts to minimize the interference with Tenant’s business. Such inspections and tests shall be conducted at Landlord’s expense, unless they reveal the presence of Hazardous Substances (other than Permitted Materials) or that Tenant has not complied with the requirements set forth in this Section 25, in which case Tenant shall reimburse Landlord for the reasonable cost thereof within ten days after Landlord’s request therefor. Nothing in this Section shall require Tenant to indemnify Landlord for any matters arising out of or caused by the actions or omissions of Landlord, its employees, agents, contractors, licensees, or invitees.
26. RENEWAL OPTION . Tenant shall be granted one (1) option to renew this Lease for an additional term of ten (10) years on the terms and conditions set forth in EXHIBIT “E” .
27. RIGHT OF FIRST OFFER . Tenant shall be granted a conditional right to make a first offer to lease additional space in the Project on the terms and conditions set forth in EXHIBIT “F”
TENANT ACKNOWLEDGES THAT (1) NO REPRESENTATIONS AS TO THE REPAIR OF THE PREMISES, NOR PROMISES TO ALTER, REMODEL OR IMPROVE THE PREMISES HAVE BEEN MADE BY LANDLORD (EXCEPT AS MAY BE SET FORTH IN EXHIBIT “B” ATTACHED TO THIS LEASE), AND (2) THERE ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY, THAT EXTEND BEYOND THE DESCRIPTION OF THE PREMISES.
SIGNATURES ON FOLLOWING PAGE
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TENANT : |
LANDLORD : |
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BEBE STORES, INC., |
LINCOLN PO BENICIA LIMITED |
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a California corporation |
PARTNERSHIP, |
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a Delaware limited partnership |
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By: |
Lincoln-Benicia LLC, |
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a Delaware limited liability company, |
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its general partner |
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By: |
/s/ Manny Mashouf |
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By: |
Lincoln MM Benicia, Inc. |
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Name: |
Manny Mashouf |
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a Texas corporation, |
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Title: |
President & CEO |
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its managing member |
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By: |
/s/ Lilliemae Stephens |
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By: |
/s/ John Herr |
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Name: |
Lilliemae Stephens |
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Name: |
John Herr |
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Title: |
Vice President and General Counsel |
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Title: |
VICE PRESIDENT |
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Address: |
Address: |
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380 Valley Drive |
Lincoln Property Company |
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Brisbane, CA 94005 |
500 North Akard Street |
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3300 Lincoln Plaza |
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Dallas, TX 75201-3394 |
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Attention: Manny Mashouf |
Attention: Gregory Courtwright |
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Telephone: (415) 715-3900 |
Telephone: (214) 740-3300 |
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Fax: (415) 715-3939 |
Fax: (214) 740-3460 |
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Dated: |
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Dated: |
10-27-00 |
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REAL PROPERTY in the City of Benicia, County of Solano, State of California, described as follows:
PARCEL ONE:
Beginning at the most southerly corner of Lot 6 as shown on the Subdivision Map for “Fleetside Industrial Park”, recorded July 24, 1985 in Book 45 of Maps, at Pages 57 - 50, Solano County Records, said point being a point on a curve concave to the southeast having a radius of 2,032 feet and whose radial bears North 53º 48’ 41” West; thence North 58º 33’ 10” West 698.33 feet; thence North 33º 26’ 50” East 82.16 feet to the beginning of a non-tangent curve concave to the southeast having a radius of 11,359.17 feet and whose radial bears North 56º 39’ 25” West; thence northerly along the curve 123.91 feet through a central angle of 0º 37’ 30” to a point on a compound curve concave to the southeast having a radius of 5,629.60 feet and whose radial bears North 55º 55’ 35” West; thence northerly along the curve 629.34 feet (629.35 record) through a central angle of 6º 24’ 19”; thence South 52º 07’ 58” East 710.95 feet to a point on a non-tangent curve concave to the northwest having a radius of 968.00 feet and whose radial bears North 58º 41’ 58” West; thence southerly along the curve 110.94 feet through a central angle of 6º 34’ 00”; thence South 37º 52’ 02” West 610.43 feet to the beginning of a tangent curve concave to the southeast having a radius of 2,032 feet; thence southerly along the curve 59.53 feet through a central angle of 1º 40’ 43” to the point of beginning.
PARCEL TWO:
A non-exclusive storm drain easement for construction, maintenance of storm drainage facilities, works, structures and lines, including reasonable rights of access thereto, as granted in the Easement Deed recorded April 9, 1996, Series No. 96-22958, Solano County Records, and being described as follows:
Being a portion of “New Lot 7” as shown on the Lot Line Adjustment Map recorded Jun 15, 1994, Series No. 1994-58782, Solano County Records, beginning at the most southerly corner of said “New Lot 7”; thence along the general southwest property line North 52º 07’ 58” West 10.03 feet; thence North 30º 42’ 31” East 8.75 feet; thence South 59º 17’ 29” East 10.00 feet to a point on a curve concave to the northwest having a radius of 968.00 feet and whose radial bears North 59º 17’ 29” West; thence southwest along the curve 10.00 feet through a central angle of 0º 35’ 31” to the point of beginning.
A.P. Nos.: 080-301-200 and 210
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A-1
SITE PLAN OF PREMISES
[GRAPHIC]
A-2
This Tenant Work Letter is attached to and forms a part of the Lease dated as of October 24, 2000 (the “Lease”), by and among LINCOLN PO BENICIA LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”), and BEBE STORES, INC., a California corporation (“Tenant”) pertaining to certain premises located in the Lincoln Distribution Center, Benicia, California. Except where clearly inconsistent or inapplicable, the provisions of the Lease are incorporated into this Tenant Work Letter, and capitalized terms used without being defined in this Tenant Work Letter shall have the meanings given them in the Lease.
The purpose of this Tenant Work Letter is to set forth the respective responsibilities of Landlord and Tenant with respect to the design and construction of the Building and all alterations, additions and improvements which Tenant may deem necessary or appropriate to prepare the Premises for occupancy by Tenant under the Lease.
Landlord and Tenant agree as follows:
1. Definitions . Wherever used in the Lease or this Tenant Work Letter, the following terms are defined as follows:
1.1 “ Building Shell ” means the portion of the Premises being constructed by Landlord as part of Landlord’s Work, including the building structure, exterior walls, exterior glass, floor slab, roof, parking lot, landscaping and the base for any street monument sign. The Building Shell does not include any elevators, stairs, HVAC, roof screens or thermal insulation. Tenant shall be responsible for installing the HVAC system for the Building.
1.2 “ Initial Improvements ” means the alterations, additions and improvements which Tenant may deem necessary or appropriate to prepare the Premises for occupancy by Tenant under the Lease (excluding the Personal Property shown on Exhibit “C” to the Lease).
1.3 “ Landlord’s Work ” means the work specifically described in Exhibit B-1 attached hereto. Landlord’s Work shall also include bringing telecommunications, electrical and plumbing service to the Building (i.e., stubbed but not distributed) and for installing the main fire sprinkler trunks (i.e., installed but not distributed or “dropped”).
1.4 “ Outside Opening Date ” means the date six (6) months following Building Shell Completion; provided, however, that the Outside Opening Date shall be extended one day for each day that completion of the Initial Improvements is delayed by strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotion, fire or other casualty, and other causes beyond Tenant’s reasonable control.
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1.5 “ Building Shell Completion ” means the date when a notice of completion (or equivalent) is issued for the Building Shell by the City of Benicia. Tenant agrees and acknowledges that Building Shell Completion may occur notwithstanding the fact that certain tasks to be performed by Landlord have yet to be completed. For instance, Tenant agrees that Building Shell Completion may occur notwithstanding the fact that Landlord has not completed certain “punch list” items, the parking lot and landscape installation and/or street improvements, so long as such uncompleted items do not materially affect Tenant’s ability to commence without interruption the construction of the Initial Improvements.
1.6 “ Tenant Delay ” means any delay in Building Shell Completion caused by or attributable to (a) any failure by Tenant to perform its obligations under this Tenant Work Letter by or within the time specified for such performance, or (b) any act, neglect, failure or omission of Tenant or any of Tenant’s agents, employees, contractors or subcontractors which interferes with Landlord’s ability to perform the Landlord’s Work.
1.7 “ Tenant Improvement Work ” means the work of constructing the Initial Improvements.
2. Delivery of Premises .
2.1 Landlord’s Work . Landlord shall, at its sole cost of expense, perform Landlord’s Work.
2.2 Tenant’s Early Entry . On reasonable prior notice, Landlord will permit Tenant and Tenant’s Agents (as defined below) to enter the Premises from time to time prior to Building Shell Completion as may be reasonably necessary or appropriate. Tenant shall indemnify, protect, defend and hold Landlord and the other Indemnitees harmless from and against any and all claims, losses, liability, damages, costs or expenses (including, without limitation, attorneys’ fees and costs) suffered or incurred by the Indemnified Parties arising from such entry.
3. Design and Approval of the Initial Improvements .
3.1 Selection of Tenant’s Architect; Construction Drawings .
(a) Tenant shall retain an architect/space planner (“Tenant’s Architect”) to prepare the Construction Drawings. Tenant’s Architect shall be subject to the written approval of Landlord, which approval will not be unreasonably withheld, conditioned or delayed; provided, however, Landlord approves Berger/Detmer as Tenant’s Architect. Tenant shall retain engineering consultants approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed, to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, life-safety and sprinkler work in the Premises in connection with the Initial Improvements. The plans and drawings to be prepared by Tenant’s Architect and the engineers hereunder shall be known, collectively, as the “Construction Drawings”.
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(b) All Construction Drawings shall be subject to Landlord’s approval, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord’s sole interest in reviewing and approving the Construction Drawings is to protect the Building and Landlord’s interests, and no such review or approval by Landlord shall be deemed to create any liability of any kind on the part of Landlord, or constitute a representation on the part of Landlord or any person consulted by Landlord in connection with such review and approval that the Construction Drawings are correct or accurate, or are in compliance with any applicable Laws. Prior to execution of the Lease, Landlord has supplied Tenant with a set of drawings of the Building which Tenant may use in connection with the preparation of the Construction Drawings, but Tenant agrees that Landlord shall have no liability for the completeness or accuracy thereof, and Tenant’s Architect shall be responsible for performing all necessary field measurements and confirming the completeness and accuracy of such drawings.
3.2 Space Plans . Prior to drafting any Construction Drawings, Tenant shall furnish Landlord with Tenant’s final space plans for the Premises (“Space Plans”). The Space Plans shall show locations of all proposed improvements, including partitions, cabinetry, equipment and fixtures, shall identify materials and finishes by location, and shall specify the location of any proposed structural floor penetrations, any special HVAC requirements, the location and description of any special plumbing requirements, and any special electrical requirements. In addition, the Space Plans shall show telephone and telecommunications facilities, and computer and electronic data facilities. Landlord shall approve or disapprove the Space Plans by written notice given to Tenant within five (5) business days after receipt of the Space Plans. Landlord shall not unreasonably withhold or condition its approval of the Space Plans. If Landlord disapproves the Space Plans, Landlord shall return the Space Plans to Tenant with a statement of Landlord’s reasons for disapproval, or specifying any required corrections and/or revisions. Landlord shall approve or disapprove of any revisions to the Space Plans by written notice given to Tenant within five (5) business days after receipt of such revisions. This procedure shall be repeated until Landlord approves the Space Plans.
3.3 Final Working Drawings . Following Landlord’s approval of the Space Plans, Tenant shall cause Tenant’s Architect and the Engineers to prepare and submit for Landlord’s approval complete and detailed construction plans and specifications, including a fully coordinated set of architectural, structural, mechanical, fire protection, electrical and plumbing working drawings for the Tenant Improvement Work, in a form which is sufficiently complete to permit subcontractors to bid on the work, obtain all required Permits (as hereinafter defined) and commence construction (the “Final Working Drawings”). Tenant shall furnish Landlord with four (4) copies signed by Tenant of such Final Working Drawings. Landlord shall approve or disapprove of the Final Working Drawings by giving written notice to Tenant within five (5) business days after receipt thereof. Landlord shall not unreasonably withhold, condition or delay its approval of the Final Working Drawings, provided that, without limiting the generality of the foregoing, Landlord shall be entitled to withhold its consent to the Final Working Drawings if in Landlord’s good faith judgment, the Final Working Drawings are inconsistent with, or do not conform to, the Space Plans. If Landlord
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disapproves the Final Working Drawings, Landlord shall return the Final Working Drawings to Tenant with a statement of Landlord’s reasons for disapproval and/or specifying any required corrections or revisions. Landlord shall approve or disapprove of any such revisions to the Final Working Drawings within five (5) business days after receipt of such revisions. This procedure shall be repeated until Landlord approves the Final Working Drawings (as so approved, the “Approved Working Drawings”).
4. Construction of Initial Improvements .
4.1 Contracts with Tenant’s Contractor and Subcontractors .
(a) Tenant shall retain a licensed general contractor as the contractor for the construction of the Initial Improvements (“Tenant’s Contractor”). Tenant’s Contractor must be experienced in the performance of work comparable to the work of the Initial Improvements in buildings comparable to the Building, and shall be subject to Landlord’s prior approval, which approval shall not be unreasonably withheld, conditioned or delayed. All subcontractors, laborers, materialmen and suppliers used by Tenant (such subcontractors, laborers, materialmen and suppliers, together with Tenant’s Contractor, are collectively referred to herein as “Tenant’s Agents”) must be approved in writing by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.
(b) Tenant shall furnish Landlord with true and correct copies of all construction contracts between or among Tenant, Tenant’s Contractor and all subcontractors relating to the Tenant Improvement Work, provided that Landlord’s review of such contracts shall not relieve Tenant from its obligations under this Tenant Work Letter nor shall such review be deemed to constitute Landlord’s representation that such contracts comply with the requirements of this Tenant Work Letter. All such contracts shall expressly provide that (i) the work to be performed thereunder shall be subject to the terms and conditions of this Tenant Work Letter, and (ii) the Tenant Improvement Work (or in the case of a subcontractor, the portion thereof performed by such subcontractor) shall be warranted in writing to Tenant and Landlord to be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion of the Tenant Improvement Work. Tenant agrees to give to Landlord any assignment or other assurances which may be necessary to permit Landlord to directly enforce such warranties (such warranties shall include, without additional charge, the repair of any portion of the Building or Common Areas which may be damaged as a result of the removal or replacement of the defective Initial Improvements). Tenant shall cause Tenant’s Agents to engage only labor that is harmonious and compatible with other labor working in the Building. In the event of any labor disturbance caused by persons employed by Tenant or Tenant’s Contractor, Tenant shall immediately take all actions necessary to eliminate such disturbance. If at any time any of Tenant’s Agents interferes with any other occupant of the Building, or hinders or delays any other work of improvement in the Building, or performs any work which may or does impair the quality, integrity or performance of any portion of the Building, including any building systems, Tenant shall cause such subcontractor, laborer, materialman or supplier to leave the Building and remove all tools, equipment
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and materials immediately upon written notice delivered to Tenant, and, without limiting Tenant’s indemnity obligations set forth in Section 11 of the Lease, Tenant shall reimburse Landlord for all costs, expenses, losses or damages incurred or suffered by Landlord resulting from the acts or omissions of Tenant’s Agents in or about the Building.
4.2 Permits . Tenant shall obtain all building permits and other permits, authorizations and approvals which may be required in connection with, or to satisfy all applicable Laws applicable to, the construction of the Initial Improvements in accordance with the Approved Working Drawings (the “Permits”). Tenant agrees that neither Landlord nor Landlord’s consultants shall be responsible for obtaining any Permits or the certificate of occupancy for the Premises, and that obtaining the same shall be Tenant’s responsibility; provided, however, that Landlord will cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such Permit or certificate of occupancy. Any amendments or revisions to the Approved Working Drawings that may be necessary to obtain any such Permits or certificate of occupancy, or which may be required by city officials or inspectors to comply with code rulings or interpretations, shall be prepared by Tenant’s Architect, at Tenant’s expense, and submitted to Landlord for Landlord’s review and approval as a Change Order under Section 6 below. If Landlord disapproves of such amendments or revisions, Landlord shall return the same to Tenant with a statement of Landlord’s reasons for disapproval, or specifying any required corrections. This procedure shall be repeated until Landlord approves the amendments or revisions and all Permits have been obtained for the Approved Working Drawings, as so amended.
4.3 Commencement of Work . At least ten (10) days prior to the commencement of construction of the Initial Improvements, or the delivery of any construction materials for the Tenant Improvement Work to the Building, whichever is earlier, Tenant shall submit to Landlord a notice specifying the date Tenant will commence construction of the Initial Improvements, the estimated date of completion of the Initial Improvements and the construction schedule provided by Tenant’s Contractor. In addition, prior to the commencement of construction of the Initial Improvements, or the delivery of any construction materials for the Tenant Improvement Work to the Building, whichever is earlier, Tenant shall submit to Landlord the following: (a) all Permits required to commence construction of the Initial Improvements; (b) a certificate from Tenant stating that the costs which have theretofore been incurred in connection with the design and construction of the Initial Improvements, which costs of construction form a basis for the amount of the construction contract; and (c) original certificates of insurance policies obtained pursuant to this Tenant Work Letter, together with any endorsements referred to in Section 4.6 below, confirming to Landlord’s reasonable satisfaction compliance with the insurance requirements of this Tenant Work Letter.
4.4 Performance of Work .
(a) Following Building Shell Completion, Tenant shall be permitted to enter the Premises for the sole purpose of constructing the Initial
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Improvements, provided that Tenant’s occupancy of the Premises prior to the Commencement Date shall be subject to all of the terms, covenants and conditions of the Lease (including, without limitation, Tenant’s obligations under Section 11 (regarding Tenant’s indemnity obligations). Notwithstanding any provision of the Lease to the contrary, Tenant shall pay for all utility and other costs incurred by Landlord to the extent they relate to Tenant’s work prior to the Commencement Date. Further, if Tenant occupies any part of the Premises prior to the Commencement Date for purposes of doing business (as opposed to constructing the Initial Improvements), then Tenant shall pay all Base Rent and Tenant’s Proportionate Share of Operating Expenses and Real Property Taxes at the rate for the first Lease Year prorated for any partial month.
(b) Without limiting the provisions of Section 4.4(a) above, all work performed by Tenant’s Contractor shall strictly conform to the Approved Working Drawings, shall comply with all applicable Laws (including building codes) and all applicable standards of the American Insurance Association and the National Electrical Code and all building material manufacturer’s specifications, shall comply with all reasonable non-arbitrary rules and regulations from time to time adopted by Landlord to govern construction in or about the Building, and shall be performed in a good and professional manner and so as not to interfere with the performance of any other work within the Building, or with Landlord’s maintenance or operation of the Building. At all times during construction of the Initial Improvements, Landlord and Landlord’s employees and agents shall have the right to enter the Premises to perform Landlord’s Work, inspect the Tenant Improvement Work, and to require the correction of any faulty work or any material deviation from the Approved Working Drawings by written notice to Tenant. Tenant shall deliver notice to Landlord at least two (2) business days prior to Tenant’s closing-up of any Tenant Improvement Work affecting the life safety, telecommunications, heating, ventilation and air conditioning, plumbing, electrical or other building systems in the Premises, in order to give Landlord or Landlord’s agents an opportunity to inspect and approve the same. No inspection or approval by Landlord of any such work shall constitute an endorsement thereof or any representation as to the adequacy thereof for any purpose or the conformance thereof with any applicable Laws, and Tenant shall be fully responsible and liable therefor. Tenant shall reimburse Landlord for the cost of any repairs, corrections or restoration which must be made, in Landlord’s good faith judgment, to the Premises or any other portion of the Building, if caused by Tenant’s Contractor or any other of Tenant’s Agents.
4.5 Outside Opening Date . Tenant agrees to complete the Tenant Improvement Work and open for business in the Premises on or before the Outside Opening Date.
4.6 Insurance . At all times during the construction of the Initial Improvements, in addition to the insurance required to be maintained by Tenant under the Lease, Tenant shall require all of Tenant’s Agents to maintain (i) Commercial General Liability Insurance with limits of not less than $2,000,000 combined single limit for bodily injury and property damage, including personal injury and death, and Products and Completed Operations Coverage; (ii) Comprehensive automobile liability insurance with a policy limit of not less than $1,000,000 each accident for bodily injury and
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property damage, providing coverage at least as broad as the Insurance Services Office (ISO) Business Auto Coverage form covering Automobile Liability, code 1 “any auto”, and insuring against all loss in connection with the ownership, maintenance and operation of automotive equipment that is owned, hired or non-owned; (iii) Worker’s Compensation with statutory limits and Employer’s Liability Insurance with limits of not less than $100,000 per accident, $500,000 aggregate disease coverage and $100,000 disease coverage per employee. In addition, Tenant shall carry “Builder’s Risk” insurance on a replacement cost, agreed value basis, in an amount equal to at least the initial sum of the construction contract(s) for the construction of the Initial Improvements, and shall include loss or damage to the work of Tenant’s Contractor and any subcontractors (the amount of this insurance to be adjusted as needed to reflect any subsequent material changes), it being understood and agreed that the Initial Improvements shall be insured by Tenant pursuant to Section 9 of the Lease immediately upon completion thereof. Tenant’s liability insurance shall be written on an “occurrence” basis and shall name Landlord and Landlord’s Mortgagee(s) as additional insureds (by endorsement reasonably acceptable to Landlord). The “Builder’s Risk” insurance shall name Landlord and such other parties as Landlord may reasonably specify as the loss payee(s), as their interest may appear, with respect to all proceeds received therefrom. All of the insurance required to be carried by Tenant hereunder shall provide that it is primary insurance, and not excess over or contributory with any other valid, existing, and applicable insurance in force for or on behalf of Landlord, shall provide that Landlord shall receive thirty (30) days’ written notice from the insurer prior to any cancellation or material reduction of coverage, and shall be placed with companies which are rated A:VII or better by Best’s Insurance Guide and licensed to business in the State of California. All deductibles and self-insured retentions under Tenant’s policies are subject to Landlord’s reasonable approval, and all insurance, except Workers’ Compensation, maintained by Tenant’s Agents shall preclude subrogation claims by the insurer against anyone insured thereunder. Tenant’s compliance with the provisions of this Section shall in no way limit Tenant’s liability under any of the other provisions of the Lease.
4.7 Liens . Tenant shall keep the Premises and the Building free from any liens arising out of work performed, materials furnished or obligations incurred by Tenant; provided, however, Tenant shall have the right, at its sole cost and expense, to contest in good faith any such mechanics’ or other liens so long as Tenant has posted a release bond in an amount equal to one hundred fifty percent (150%) of the amount of the lien and otherwise in accordance with applicable Laws. Should Tenant fail to remove any such lien (or record a bond as provided above) within five (5) business days after notice to do so from Landlord, Landlord may, in addition to any other remedies, record a bond pursuant to California Civil Code Section 3143 and all costs and obligations incurred by Landlord in so doing shall immediately become due and payable by Tenant to Landlord as additional rent under the Lease. Landlord shall have the right to post and keep posted on the Premises any notices that may be required or permitted by applicable Laws, or which Landlord may deem to be proper, for the protection of Landlord and the Building from such liens. Promptly following completion of construction, Tenant shall provide Landlord a copy of a final unconditional lien release from Tenant’s Contractor and each of Tenant’s Agents who performed work or supplied
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materials for the Initial Improvements. Upon completion of construction, Tenant shall promptly record a Notice of Completion in a ccordance with California Civil Code Section 3093 and provide a copy thereof to Landlord.
5. Responsibility for Design and Construction Costs . Landlord’s Work shall be performed by Landlord at Landlord’s sole cost and expense and the Tenant Improvement Work shall be performed by Tenant at Tenant’s sole cost and expense. Except as otherwise provided in the Lease, Tenant shall not be obligated to pay for any chargebacks, reimbursables, fees, bonds, security deposits or barricades in connection with Landlord’s Work or the Initial Improvements.
6. Change Orders . Landlord will not unreasonably withhold its approval of (a) any request by Tenant, or by Tenant’s Contractor with Tenant’s approval, to amend or change the Approved Working Drawings, or (b) any change or amendment to the Approved Working Drawings that may be necessary to obtain any Permits, or which may be required by city officials or inspectors to comply with code rulings or interpretations (any of the foregoing, a “Change Order”). No material changes or modifications to the Approved Working Drawings shall be made unless by written Change Order signed by Landlord and Tenant. Tenant shall pay all costs attributable to Change Orders, including reasonable costs incurred by Landlord in reviewing proposed Change Orders. Landlord agrees to respond to any request for approval of a Change Order within three (3) business days following Landlord’s receipt of such request.
7. Ownership of Initial Improvements . The Initial Improvements shall be deemed, effective upon installation, to be a part of the Premises and the Building and shall be deemed to be the property of Landlord (subject to Tenant’s right to use the same during the Term of the Lease), and shall be surrendered at the expiration or earlier termination of the Term, unless Landlord shall have conditioned its approval of the Final Working Drawings or any Change Order on Tenant’s agreement to remove any items thereof, in which event, prior to the expiration or termination of the Term, the specified items shall be removed at Tenant’s expense, any damage caused by such removal shall be repaired, and the Premises shall be restored to their condition existing prior to the installation of the items in question, normal wear and tear excepted. The removal, repair and restoration described above shall, at Landlord’s sole election, be performed either by Tenant or by Landlord; and if such work shall be performed by Landlord, Tenant shall pay to Landlord, within twenty (20) days following Landlord’s demand, the reasonable cost and expense of such work.
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DESCRIPTION OF LANDLORD’S WORK
Landlord’s Work is shown on those certain plans prepared by Tulloch Construction dated January 16, 1998, and identified as Job No. 2147.
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All furniture, movable equipment and other personal property that is not attached to the floors, walls or ceiling of the Premises; and any other fixture, equipment, or other item, regardless of the manner of attachment, that is used primarily in Tenant’s trade or business and that can be removed as a separate physical unit without material damage to the Building and without unreasonable interference with other tenants’ use and enjoyment of their leased premises, including, without limitation, the following:
1. the personal property and fixtures of Tenant’s Customers, Contractors or Employees; and
2. lighting fixtures.
[To be completed by Tenant after execution of Lease, with final Exhibit C to be slip sheeted into original executed Lease]
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1. Landlord shall have the right to prescribe the weight, position and manner of installation of heavy equipment which, if considered necessary by Landlord, shall be installed in a manner which shall insure satisfactory weight distribution. The time, routing and manner of moving such heavy equipment shall be subject to prior approval by Landlord.
2. Tenant, or the employees, agents, visitors or licensees of Tenant, shall not at any time place, leave or discard any rubbish, paper, articles or objects of any kind whatsoever outside the doors of the Premises or the Property. No animals or birds shall be brought or kept in or about the Premises or the Property.
3. Canvassing, soliciting or peddling in or about the Premises or the Property is prohibited and Tenant shall cooperate to prevent same.
4. Landlord shall have the right to exclude any person from the Property other than during customary business hours, and any person in the Property will be subject to identification by employees and agents of Landlord. All persons in or entering the Property shall be required to comply with the security policies of the Property. If Tenant desires any additional security service for the Premises or the Property, Tenant shall have the right (with the prior written consent of Landlord) to obtain such additional service at Tenant’s sole cost and expense. Tenant shall keep doors to unattended areas locked and shall otherwise exercise reasonable precautions to protect its property from theft, loss or damage. Landlord shall not be responsible for the theft, loss or damage of any property or for any error with regard to the exclusion from or admission to the Premises or the Property of any person. In case of invasion, mob, riot or public excitement, Landlord reserves the right to prevent access to the Premises or the Property during the continuance of same by closing the doors or taking other measures for the safety of the tenants and protection of the Premises or the Property and property or persons therewith.
5. Tenant shall not cause or permit any odors to permeate in or emanate from the Premises or the Property, or permit or suffer the Premises or the Property to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Premises or the Property by reason of light, radiation, magnetism, noise, odors, and/or vibrations, or interfere in any way with other tenants or those having business in the Premises or the Property.
6. All keys shall be returned to Landlord upon the termination of this Lease and Tenant shall give to Landlord the explanations of the combinations of all safes, vaults and combination locks remaining with the Premises. Landlord may at all times keep a pass key to the Premises. All entrance doors to the Premises shall be left closed at all times and left locked when the Premises are not in use.
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7. Tenant shall give immediate notice to Landlord in case of any known emergency at the Premises or the Property.
8. Tenant shall not advertise for temporary laborers giving the Premises or the Property as an address, nor pay such laborers at a location in the Premises or the Property.
9. No portion of the Premises or any part of the Property shall at any time be used or occupied as sleeping or lodging quarters.
10. The toilet rooms, urinals, wash bowls and other apparatus in the Premises shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Tenant who or whose employees or invitees shall have caused it.
11. Landlord reserves the right to exclude or expel from the Property any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the Rules and Regulations of the Premises or the Property.
12. Landlord reserves the right to rescind any of these rules and regulations and to make such other and further rules and regulations as in its reasonable judgment shall, from time to time, be required for the safety, protection, care and cleanliness of the Property, the operation thereof, the preservation of good order therein and the protection and comfort of the tenants and their agents, employees, and invitees, which rules and regulations shall be binding upon it in like manner as if originally herein prescribed.
13. Tenant shall park trailers and other oversized vehicles only in areas designated by Landlord for the parking of trailers or oversized vehicles.
14. Tenant shall not utilize the Premises for outside storage except with the written consent of Landlord.
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If, at the end of the primary term of this Lease, Tenant is not in default of any of the terms, conditions, or covenants of the Lease after notice and the expiration of applicable cure periods, Tenant, but not any assignee or subtenant of Tenant, is hereby granted one (1) option to renew this Lease for an additional term of ten (10) years upon the same terms and conditions contained in this Lease with the following exceptions:
1. Renewal option term will contain no further renewal options unless granted by Landlord in writing; and
2. Base rent for the renewal term shall be based on ninety-five percent (95%) of the then prevailing rental rates for properties of equivalent quality, size, utility and location, with the length of the Lease term and credit standing of Tenant to be taken into account; provided, however, that in no event will the base rent for any year of the renewal term be less than the base rent payable by Tenant for the twelve (12) month period immediately preceding the commencement of the renewal term (without regard to any periods of rent abatement on account of casualty, etc.). If Tenant desires to renew this Lease, Tenant will notify Landlord in writing of its intention to renew no later than six (6) months prior to the expiration date of the Lease, the time of such exercise being of the essence; Landlord shall, within the next fifteen (15) days, after receipt of such notice, deliver to Tenant the proposed rent and terms with respect to the renewal term. Tenant shall have fifteen (15) days to accept or reject such proposed rent and terms. In the event Tenant rejects such proposed rent and terms and Landlord and Tenant are thereafter unable to agree upon the rent and terms to be applicable during the renewal term within the thirty (30) days after such rejection by Tenant after reasonably and in good faith attempting to reach such an agreement, Tenant’s renewal option shall terminate and thereafter be of no force or effect.
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Subject to the conditions set forth in this Exhibit “F”, Tenant shall have a right of first offer to lease the remainder of the Building in which the Premises is located (the “ First Offer Space ” ), in the event the First Offer Space becomes available for lease to third parties during the Term (excluding the Renewal Term) following the initial leasing thereof after the Commencement Date. Prior to leasing the First Offer Space to a third party, Landlord will give notice to Tenant (an “Offering Notice”) specifying Landlord’s good faith estimate of (i) the Base Rent which Landlord proposes to charge for the First Offer Space, which Base Rent shall equal Landlord’s good faith estimate of the prevailing market rate for the First Offer Space for a term equal to the remainder of the Term (taking into account the Renewal Term), (ii) the approximate date upon which the First Offer Space is anticipated to be available for delivery, and (iii) any other material conditions or provisions relating to the leasing of the First Offer Space which vary from the provisions of this Lease. If Tenant wishes to lease the First Offer Space on the terms specified by Landlord in the Offering Notice, Tenant shall so notify Landlord within ten (10) business days after receipt thereof, which notice shall be unconditional and irrevocable. Tenant may exercise its right of first offer only with respect to all of the First Offer Space identified in the Offering Notice, and only if Tenant intends to occupy such First Offer Space in connection with its own reasonably foreseeable needs.
If Tenant timely exercises its right to lease the First Offer Space, then except as specified in this Exhibit “F” or in the Offering Notice (which shall govern to the extent of any conflict with this Lease), the First Offer Space shall become a portion of the Premises on all of the terms and conditions of this Lease for the remainder of the Term (including any Renewal Term), provided that (i) Base Rent for the First Offer Space shall be determined as specified above, (ii) Tenant’s Proportionate Share of Operating Expenses and Taxes shall be adjusted to reflect the addition of the First Offer Space, and (iii) the First Offer Space shall be delivered in its then existing “as is” condition, without obligation on the part of Landlord to make any repairs or construct any improvements to the First Offer Space in connection with Tenant’s contemplated use, or to demolish existing improvements therein, and Tenant shall be responsible for the construction and installation, in accordance with the provisions of Section 6 of the Lease, of any tenant improvements it desires to install within the First Offer Space, at Tenant’s sole cost and expense. Tenant shall commence paying Base Rent and all additional rent with respect to the First Offer Space on the date of delivery of the First Offer Space to Tenant in the condition required hereunder. Landlord shall promptly prepare and Landlord and Tenant shall promptly execute an amendment to this Lease reflecting the addition of the First Offer Space. Tenant’s right of first offer under this Exhibit “F” shall be a one-time right as to the First Offer Space. If Tenant fails to timely notify Landlord that it wishes to lease the First Offer Space, or if Tenant fails to execute and deliver said lease amendment to Landlord within ten (10) business days following receipt thereof by Tenant, Landlord may thereafter lease the First Offer Space to any person on any terms and conditions it may deem appropriate, including terms and conditions more favorable than the terms and conditions set forth in the Offering Notice,
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and Tenant shall have no further rights with respect to the First Offer Space, either at such time or at any future time.
If Tenant timely exercises its right to lease the First Offer Space, and Landlord fails to deliver possession of all or any portion of the First Offer Space to Tenant on or before the scheduled date for delivery of possession for any reason, this Lease shall not be void or voidable and Landlord shall not be deemed in default or otherwise liable to Tenant for any claims, damages, or liabilities in connection therewith or by reason thereof, but Tenant shall have no obligation to pay Base Rent or Tenant’s Proportionate Share of Operating Expenses or Taxes with respect to the First Offer Space until possession of the First Offer Space has been delivered to Tenant. Notwithstanding anything to the contrary set forth herein, if Tenant is in default under this Lease beyond applicable notice and cure periods at the time an Offering Notice would otherwise be required to be sent under this Exhibit, or any other time following Tenant’s exercise of its right to lease the First Offer Space and prior to the date upon which possession of the First Offer Space is to be delivered to Tenant, Landlord shall have, in addition to any other remedies, the right to terminate Tenant’s rights under this Exhibit “F”, and in such event Landlord shall not be required to deliver the Offering Notice or to deliver possession of the First Offer Space to Tenant. If not earlier terminated, the rights of Tenant pursuant to this Exhibit “F” shall automatically terminate upon the Expiration Date. Nothing contained in this Exhibit “F” shall be deemed to impose any obligation on Landlord to refrain from negotiating with existing or future tenants of the First Offer Space, to withhold the First Offer Space from the market, or to take any other action or omit to take any other action in order to make the First Offer Space available to Tenant.
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THIS FIRST AMENDMENT OF LEASE (this “Amendment”) is made as of the “Effective Date” (defined in Section 1.2 below), by and between LINCOLN PO BENICIA LIMITED PARTNERSHIP, a Delaware limited partnership ( “ Landlord ” ), and BEBE STORES, INC., a California corporation ( “ Tenant ” ).
R E C I T A L S:
A. Landlord and Tenant entered into a certain Lease Agreement dated as of October 24, 2000 (the “Lease”), for certain premises located in the Lincoln Distribution Center, Benicia, California, as more particularly described in the Lease (the “Premises”). Capitalized terms used but not defined herein shall have their respective meanings set forth in the Lease.
B. As provided in the Tenant Work Letter, attached to the Lease as Exhibit “B”, Landlord shall perform certain improvements to the Premises (referred to in the Tenant Work Letter as “Landlord’s Work”). Landlord and Tenant desire to modify the definition of Landlord’s Work under the Lease as more particularly described herein.
NOW, THEREFORE, in consideration of the agreements of Landlord and Tenant herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. Addition to Landlord’s Work . In addition to the Landlord’s Work described in Exhibit B-1 attached to the Lease, Landlord shall, at its cost (except as specified below), (i) provide electrical service to the Premises at 1200 amps, 277/480 volts (such service to be provided to a main panel and meter section within the Premises); and (ii) construct and install a full height demising wall of approximately 400 linear feet separating the Premises from the adjacent 96,000 square feet in the Building. Within thirty (30) days following receipt of reasonably detailed invoices therefor, Tenant shall reimburse Landlord, as additional rent under the Lease, for the cost of labor and materials (per bid from Tulloch Construction) associated with the installation of the sheet rock on Tenant’s side of such demising wall.
2. Miscellaneous . Except as modified by this Amendment, all of the terms, conditions and provisions of the Lease shall remain in full force and effect and are hereby ratified and confirmed. This Amendment contains the entire agreement of Landlord and Tenant with respect to the subject matter hereof. Tenant acknowledges that all prior communications
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from Landlord or its agents are not and were not, and shall not be construed to be, representations or warranties of Landlord or its agents as to the matters communicated, and have not and will not be relied upon by Tenant.
IN WITNESS WHEREOF, the parties have caused this First Amendment of Lease to be executed as of the day and year first written above.
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LANDLORD : |
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BEBE STORES, INC., |
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LINCOLN PO BENICIA LIMITED PARTNERSHIP, |
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a California corporation |
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a Delaware limited partnership |
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By: |
Lincoln-Benicia LLC, |
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a Delaware limited liability company, |
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its general partner |
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By: |
Lincoln MM Benicia, Inc. |
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By: |
/s/ Manny Mashouf |
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a Texas corporation, |
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Name: |
Manny Mashouf |
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its managing member |
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Title: |
Chief Executive Officer |
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By: |
/s/ Lilliemae Stephens |
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By: |
/s/ John Herr |
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Name: |
Lilliemae Stephens |
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Name: |
John Herr |
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Title: |
V.P. & General Counsel |
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VICE PRESIDENT |
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Dated: |
11/21/00 |
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Dated: |
11-22-00 |
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2
Exhibit 10.11
LEASE
860113540–110300
THIS LEASE, executed in duplicate this 3rd day of November, 2000, between Stanley Hirsh and Anita Hirsh as Trustees DBA Mercantile Center, hereinafter called Lessor and bebe stores inc., hereinafter called Lessee
WITNESSETH , That for and in consideration of the terms, covenants and conditions herein contained, Lessor hereby leases to Lessee the premises known as Rooms 1135, 1137, 1139 1140 situated on the eleventh floor located at 860 S. Los Angeles Street, Los Angeles, CA 90014
In the City of Los Angeles, County of Los Angeles, State of California, to be used by said Lessee as and for Design Studio and for no other purpose, for the term of two (2) years** see addendum -page 6 commencing on the 1st day of December, 2000, and ending on the 30th day of November, 2002
First: Not Applicable.
• Second: Base Rental. The Lessee agrees to pay as gross base rent for said premises the sum of forty three hundred eighty five and 00/100 ($4,385.00) per month, due and payable in full on the first day of each month commencing December 1, 2000 through November 30, 2002.
• Third: Additional Rental. Immediately upon receipt of notice from Lessor that the same is due, Lessee agrees to pay as additional rental: See paragraphs 33, 36, 40, 43, 44, 50, 51, and 52 – see 50th-C on page 5
(1) All taxes levied and assessed against Lessor on account of trade fixtures, machinery, or other equipment installed or maintained by Lessee on the demised premises.
(3) Other amounts as herein provided.
Fourth: Security Deposit - see paragraph 46.
Fifth: Services Supplied By Lessor. Lessor agrees to supply in the demised premises, at Lessor’s expense, during usual business hours, water in the toilets, lavatories, and sinks, if any, heat, through radiators as now installed or which may hereafter be installed by Lessor, when in the judgment of Lessor such heat is necessary, and passenger and freight elevator service. The Lessor shall be the sole judge as to the amount and kind of service or commodity to be furnished hereunder, provided the same is reasonable.
Lessor agrees, subject to the provisions herein contained, to furnish electricity for Lessee’s use provided the building is equipped to supply such, and if so equipped, to furnish and maintain facilities from which electricity can be obtained by Lessor for Lessee’s use in the leased premises. The furnishing of electricity and the furnishing and maintenance of facilities for bringing the same into the building does not constitute a sale of such by Lessor to Lessee. If the building is equipped to supply steam, Lessee shall use in the leased premises only the steam supplied by Lessor, and Lessee shall not install, equip, or operate a boiler to supply his own steam from any other source.
Lessor shall furnish at Lessee’s expense all electric lamps required in the leased premises.
Lessee will notify Lessor in writing of any contemplated increase in power consumption on the demised premises before Lessee uses said increased amount of electricity.
Lessor shall not be liable for any stoppage or interruption in furnishing any of said services or commodities above mentioned or any other service arising under this lease, caused by riots, strikes, labor disputes or accidents, or any other contingency over which the Lessor has no control, or occasioned by making needed repairs, provided the Lessor uses reasonable diligence to resume such service.
Sixth: Assignment and Subletting. Lessee agrees that he will not assign, mortgage or hypothecate this lease, or any interest therein, or sublet the said premises, or any part thereof, without the written consent of the Lessor first had and obtained. This lease may, at the option of the Lessor, be terminated if the Lessee assign, mortgage or hypothecate this lease of any interest therein or sublet the premises or any part thereof, to be adjudicated a bankrupt or insolvent or make an assignment for the benefit of creditors of if the demised premises of Lessee’s property therein come into the possession of a receiver, sheriff, marshal or other court custodian and be unreleased therefrom for twenty days, and in no event shall this lease be considered as an asset in bankruptcy, receivership or other judicial proceedings. Any transfer by operation of law, including the taking of possession by the administrator of the estate or executor of the will of the Lessee or by a trustee for the Lessee or any transfer of the premises in a parent, subsidiary or successor corporation or to any partnership having different additional, or lower partners than Lessee, shall be considered an assignment prohibited by this section. Consent to one assignment by Lessor shall not be deemed to authorize any other assignment.
Seventh: Condition of Premises. The entry of the Lessee into the possession of the said premises shall be a conclusive acknowledgment on Lessee’s part that they are in good and tenantable conditions, and no representations as to the condition thereof or as to the terms of this lease have been made by the Lessor or its agents prior to or at the execution hereof other than herein stated.
Eighth: Alterations to Premises. Without the written consent of the Lessor, no alterations, installations, improvements of changes shall be made in or to the demised premises, or any part thereof, and any alteration, installations, changes or improvements desired by the Lessee, and which the Lessor may consent to have made, shall be made only by or under the direction of the Lessor but at the cost of the Lessee, and any and all structural alterations or Improvement made by the Lessee shall, unless otherwise provided by written agreement, be and become the property of the Lessor and remain upon and be surrendered with the demised premises at the expiration or sooner termination of said term. At least five (5) days before any of such work is started, Lessee will notify Lessor in writing of the proposed work and will supply Lessor with a surety bond satisfactory to Lessor to protect Lessor against mechanic’s and materialmen’s liens. Lessee will hold Lessor harmless from any claims or liens asserted against Lessor or the demised premises arising from said work and if any lien is assorted against Lessor or the demised premised as a result of said work, Lessor, at its option, may pay the claim which is the basis of said lien, and Lessee will immediately reimburse Lessor for said amount so paid, plus 7% per annum interest from the date of payment Lessee will pay Lessor for any attorney’s fee incurred by Lessor, resulting from said lien, claim, or any litigation arising from therefrom.
Ninth: Use of Premises. Lessee will not use or suffer to be used the said premises, or any part thereof, for any purpose other than that hereinabove specified, and particularly said premises shall not be used for cooking, lodging, sleeping or for any immoral purpose, and no objectionable noise or odors shall be permitted to escape from said premises. Lessee agrees not to connect with the water pipes any apparatus using water without the written consent of Lessor. The Lessee further promises and agrees not to conduct, directly or indirectly, any auction in the demised premises, nor permit any other person under Lessee’s control to conduct an auction therein. Lessee will comply with all the laws, ordinances and orders of public authorities relating in his business and the demised premises.
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Tenth: Destruction of Premises. If said building shall be totally destroyed this lease shall thereupon terminate. If said building or demised premises shall be damaged by fire, earthquake or any other cause, without the fault or neglect of Lessee, so that the leased premises become untenantable, then if such leased premises are not made tenantable within ninety (90) days from the date of the injury, this lease may be terminated by either party in the event this lease be so terminated the Lessor premises and agrees to refund to the Lessee all unearned rent theretofore paid in advance. In any case where the leased premises and rendered untenantable by fire, earthquake or other cause without the fault or neglect of Lessee, the Lessee shall not be bound to pay rent for that period during which such premises remain untenantable.
Eleventh: Repair of Building. The Lessor shall neither be obligated nor required to replace or repair any plumbing in, upon or about said premises, nor be liable or accountable to said Lessee for any damages occurring by reason of any defect therein, nor be liable for any damage occasioned by said premises being out of repair, nor for any damage done or occasioned by or from plumbing, gas, water, steam, or other pipes or sewerage, or the bursting, leaking or running of any closet, tank, sprinkler system, plumbing or other damage by water, in above, upon or about said premises, nor any damage occasioned by water or being upon or coming through the roof, skylight, trap door or otherwise, nor for any damage arising from any act or neglect of any co-tenant or other occupants of the same building, or of any owners or occupants of adjoining or continguous party.
The Lessee agrees to pay for all damage to the building as well as all damage to the tenants or occupants thereof caused by the Lessee’s misuse or neglect of said leased premises, its apparatus or appurtenances, Lessee agrees at his own cost and expense to keep the demised premises and each and every part thereof, in good condition and repair at all times during the term hereof; to make promptly any and all repairs, renewals and replacements which may at any time be necessary or proper to put and keep the premises in as good condition as when received by Lessee from Lessor, reasonable wear and tear and damage by fire or other casually excepted; to replace immediately any and all glass which is now or hereafter may be installed in the demised premises, should the same or any part thereof be broken, with other glass of the same quality, and to keep premises and all appurtenances thereto in a clean and sanitary condition. Lessor shall neither be obligated nor required to furnish janitorial service to Lessee in the leased premises; all janitorial service required by Lessee in said premises shall be furnished by Lessee at Lessee’s expense, Lessor shall maintain at Lessor’s expense entry passages, halls, stairways and rest rooms, not a part of or included in the leased premises, and Lessor shall be the solo judge as to the amount and kind of service to be furnished. The Lessee hereby expressly waives all right to make repairs at the expense of the Lessor or to deduct the cost thereof from the rent and all rights under Sections 1941 and 1942 of the Civil Code of California.
Twelfth: Lessor’s Right of Entry. The Lessor, Lessor’s officers, agents and representatives shall have the right to enter the demised premises by pass keys or otherwise to examine the same, or to make such repairs and alterations as Lessor may deem necessary for the safety, care of preservation thereof, or of the building or of the comfort or enjoyment or other tenants, or to care for any emergency that may arise, or to show the demised premises to persons wishing on lease the same or for the purpose of serving or posting and keeping posted thereon, legal notices provided by any law which Lessor may deem to be for the protection of Lessor and said property from mechanic’s liens or other liens or in general for the protection of Lessor’s interest.
Thirteenth: Repossession of Premises. If in compliance with any law or ordinance now or hereafter enacted, or if required to comply with the direction or requirements of any public office, board or commission, it becomes necessary for Lessor to acquire permanently all or any portion of the demised premises. Lessor shall have the right to repossess the demised premises, of any portion thereof, at any time upon thirty (30) days’ written notice to Lessee, and when said space shall have been so permanently repossessed the Lessor shall, in lieu of any and all claims for damages, allow Lessee a credit on Lessee’s rent in the proportion that the space taken bears to the whole of the demised premises; provided, however, that if the space taken is of such an amount or size as to make the remaining space undesirable to the Lessee, then the Lessee may, upon thirty (30) days’ written notice to Lessor, terminate and cancel this lease. No exercise by Lessor of any rights herein reserved shall entitle Lessee to damages for any injury or inconvenience occasioned thereby, nor shall Lessee by reason thereof be entitled to any abatement in rent (except as above set forth in case of taking of space permanently). However, all such work shall be done in such a manner as to cause Lessee the least inconvenience practicable.
Fourteenth: Condemnation. Should Lessor at any time during the term of the lease agreement be deprived of the building in which the demised premises are situate, or any part thereof, or any part of the land on which it is situated by condemnation or eminent domain proceedings, this lease will terminate, at Lessor’s option, on the date when Lessor is actually deprived of possession of the said land or building, or some part thereof, and thereupon the parties hereto shall be released from all further obligations hereunder, and Lessor shall thereupon repay in Lessee any rental theretofore paid by Lessee and unearned at the date of such termination. Lessee shall not be entitled to any compensation, allowance, claim or offset of any kind against the Lessor, as damages or otherwise by reason of such condemnation or eminent domain proceedings or by reason of being deprived of the demised premises or the termination of this lease, and said Lessee does hereby waive, renounce and quit claim any right in and to any award, judgment, payment or compensation which shall or may be made or given to the Lessor because of the taking of said premises, or any portion thereof by virtue of any such condemnation or eminent domain proceedings, whether received in any such action or in settlement or compromise thereof by said Lessor.
Fifteenth: Possession of Premises at Beginning of Term. If Lessor is unable to deliver possession of the demised premises to Lessee at the commencement of the term of this lease because of the retention of the possession thereof by other parties than Lessor or because Lessor is unable to have the premises ready for occupancy by Lessee, then Lessor shall not be liable to Lessee in damages and this lease shall not terminate; provided, however, that Lessee shall have no obligation to pay rent hereunder until possession of the demised premises is delivered to Lessee. In the event, however, that Lessor does not deliver possession of said premises within sixty (60) days after the time fixed for the beginning of the term hereof, Lessee may, at his opinion, terminate the lease.
Sixteenth Damage to Property or Injury of Person on Premises. Lessor shall not in any event be liable for any loss or theft of any property in or from the leased premises, nor for any damage or injury to the property of Lessee or any occupant of the leased premises, nor for any damage or injury to the person or Lessee or any such occupant or any person in said building or the leased premises with the express or implied consent of Lessee. Lessee will hold Lessor harmless from any claims asserted against Lessor by an employee of Lessee or any other person in the building with Lessee’s express or implied consent arising from alleged injury to said person because of claimed negligence in the maintenance or repair or the building or any part thereof. All freight, express or other articles delivered to Lessor or its employees will be received solely as a courtesy to Lessee and Lessor assumes no liability therefor.
Seventeenth: Name of Building. The Lessee shall not be allowed to use the name of the building in which the demised premises are located, or words to that effect, in connection with any business carried on in said premises (except as Lessee’s address) without the written consent of Lessor. Lessor reserves the right to change the name and title of the building at any time during the term of said lease and the Lessee hereby expressly consents to such change at the option of the Lessor and waives any and all damages occasioned thereby.
Eighteenth: Default by Lessee. Should default be made by Lessee in the payment of any of the rents or other moneys provided to be paid hereunder as and when the same become payable or should Lessee or any of Lessee’s agents or employees violate any of the terms or provisions of this lease or should Lessee move out, vacate or abandon the leased premises or any part thereof (absence for ten days after default in payment or rental shall constitute such an abandonment), or should Lessee petition for voluntary bankruptcy or corporate reorganization under Chapter 10, or an arrangement under Chapter 11 of the Bankruptcy Act, or be adjudged a bankrupt, make an assignment for the creditors, or suffer any other person to remain in possession for more than ten (10) days by virtue of a receivership, attachment or execution (or should Lessee remain in the premises after this lease or the leasehold estate has expired or after this lease of the leasehold estate has been terminated either by act of the Lessee, by notice from the Lessor, or by operation of law), the Lessor may, at its option, and without notice to the Lessee, reenter and take possession of the said premises and remove all persons and property therefrom, place Lessee’s property in storage in a public warehouse or other suitable place at the risk and expense of the Lessee and make any repairs, changes, alterations or additions in or to said premises. Should the Lessor elect to reenter and take possession of said premises under the provisions of this paragraph (whether or not by or through legal proceedings) Lessor may either terminate this lease and recover from the Lessee all damages which the Lessor may incur in recovering possessions of said premises, or the Lessor may relet said premises, or any part thereof, for all or any part of the remainder of said term, to a tenant or tenants satisfactory to it, and at such monthly rental as Lessor may with reasonable diligence secure, and should such monthly rental be less than herein agreed to be paid by the Lessee, said Lessee agrees to pay such deficiency to the Lessor in advance on the first day of each and every month for the term thereof, and to pay to the Lessor, within ten days after such reletting, the costs and expenses which the Lessor may incur by reason thereof. No reentry of said premises by the Lessor as herein provided shall be construed as an election on its part to terminate this lease unless written notice of such intention is given to the Lessee, which notice may be given at any time prior to the expiration of the term hereof; it being expressly understood that the election of the Lessor not to terminate this lease at the time of or upon taking possession of the demised premises as herein provided shall not be irrevocable but the Lessor may, at any time thereafter, elect to terminate this lease by giving notice of such election as hereinbefore provided, and such termination shall not operate to release the Lessee from any liability theretofore incurred or accrued under the terms hereof.
Nineteenth: Holding Over. If Lessee shall hold possession of the leased premises after the expiration or other termination of this lease with the consent of Lessor, expressed or implied, Lessee shall become a tenant from month to month, upon the other terms and conditions of this lease and at the rate of monthly rental herein specified, which rental shall be payable monthly in advance as herein provided, and such tenancy shall continue until terminated by Lessor or until Lessee shall give Lessor at least thirty (30) days’ notice in writing prior thereto of the termination on the last day of any calendar month. Nothing herein contained, however, shall be deemed a consent by Lessor to the occupancy or possession of said premises by Lessee after expiration of the term of the lease. No holding of the demised premises by Lessee after the expiration of this lease shall be construed to be a renewal of this lease unless Lessor agrees thereto in writing. Lessor may change any of the terms of, or terminate, the month-to-month tenancy by a written notice served upon Lessee at any time not less than seven (7) days before the expiration of any monthly term, to be effective upon the expiration of such term.
Twentieth: Notices. Any notice in any way relating to this lease, or to any matter arising hereunder, shall be deemed to have been served upon Lessee whenever the same in writing, addressed to Lessee, shall be delivered to Lessee personally, or shall be left at the leased premises for Lessee, or shall be mailed to Lessee, postage prepaid, addressed to Lessee at demised premises.
Twenty -first: Lease Subject to Mortgage. This lease and rights of Lessee are expressly made subject and subordinate to the lien and effect of any and all mortgages and/or deeds of trust in any way affecting said building, or any part thereof, or all or any of the property upon which it is built, whether heretofore or hereafter executed, including their lien and effect as security for any advances made in accordance with their terms, whether heretofore or hereafter made, and whether the making thereof be obligatory or optional.
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Twenty-second: Rules of Building. The Lessee hereby promises and agrees to keep and perform each and all of the rules and regulations of said building hereinafter set forth, which are hereby referred to and made a part hereof. The Lessor shall have the right to amend or delete said rules and to make other and different rules and regulations limiting, restricting and regulating the privileges of tenants in the said building, and all such rules and regulations so made by the Lessor, after notice thereof to the Lessee, shall be binding upon the Lessee and become conditions of the Lessee’s tenancy and covenants on the part of and to be performed by the Lessee. Nothing in this paragraph contained, however, shall be deemed or construed as constituting the violation of any such rules or regulations as a breach of this lease unless Lessor shall have given written notice of such violation to Lessee and Lessee shall have failed for a period of five (5) days after the receipt of such notice to remedy such violation.
Twenty-third: Attorney’s fees. If an action be brought for the recovery of rent or other moneys due or to become due under this lease or by reason of a breach of any covenant herein contained or for the recovery of the possession of said premises or to compel the performance of anything agreed to be done by the Lessee or to enjoin any act contrary to the provisions hereof, or if Lessor is made a party to any legal proceedings because of Lessee’s tenancy in the building, Lessee will pay to the Lessor a reasonable attorney’s fee, to be fixed by the court and which may be included in any judgment that may be rendered in any such action or in any other action.
Twenty-fourth: Modification, Waiver and Alteration. No modification, alteration or waiver of any term, covenant or condition of this lease shall be valid unless in writing, subscribed by the Lessor or by the Lessor’s agent thereunto authorized in writing. No waiver of a breach of any covenant or condition shall be construed to be a waiver of any succeeding breach. No act, delay or omission done, suffered or permitted by the Lessor shall be deemed to exhause or impair any right, remedy or power of the Lessor hereunder.
Twenty-fifth: Powers of Lessor Cumulative. All rights, powers, options, elections and remedies of or in favor of the Lessor shall be considered cumulative and no one of them as exclusive of any other or of any rights or remedies allowed by law. The right of the Lessor to collect rent or any other payment, or the right herein given to the Lessor to enforce any provisions of this lease, shall not affect the right of the Lessor to declare this lease void or ended immediately upon the happening of any default upon the part of the Lessee.
Twenty-sixth: Lease Not to be Recorded. Lessee shall not record this lease without the written consent of the Lessor first obtained. If this lease is recorded by the Lessee or anyone on his behalf, at the option of the Lessor, all rights of the Lessee in the demised premises may be immediately terminated by a written notice to the Lessee.
Twenty-seventh: Signs Prohibited. Lessee shall not construct, erect or maintain any signs, pennants, flags or other displays on the exterior of the building.
Twenty-eighth: Remedying Lessee’s Defaults. Lessor may, at its option, remedy any default by Lessee and any moneys expended by Lessor to rectify such default shall be considered additional rental, payable immediately upon notice from Lessor, and shall bear ten percent (10%) interest from the day Lessor makes said expenditures.
Twenty-ninth: Miscellaneous. The word “Lessee” herein and in all endorsements hereon shall be applicable to one or more Lessees, as the case may be, and the singular shall include the plural and the masculine shall include the feminine and the neuter. If there be more than one Lessee, their obligations hereunder shall be joint and several. The heading of each paragraph is done solely to aid in locating provisions of this lease and shall not be considered part of the agreement of the parties.
Thirtieth: (a) The occurrence of any of the following shall constitute a default and breach of this clause by Lessee:
(i) Any failure by Lessee to pay the rental or to make any other payment required to be made by Lessee hereunder;
(ii) The abandonment or vacation of the premises by Lessee;
(iii) A failure by Lessee to observe and perform any other provision of this Lease to be observed or performed by Lessee, where such failure continues for three (3) days after written notice thereof by Lessor to Lessee;
(iv) The making by Lessee of any general assignment for the benefit of creditors; the filing by or against Lessee of a petition to have Lessee adjugded a bankrupt or of a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the premises or of Lessee’s interest in this Lease, where such seizure is not discharged within thirty (30) days
(b) In the event of any such default by Lessee, then, in addition to any other remedies available to Lessor at law or in equity, Lessor shall have the immediate option to terminate this Lease and all rights of Lessee hereunder by giving written notice of such intention to terminate in the manner specified in the Lease. In the event that Lessor shall elect to so terminate this Lease, then Lessor may recover from Lessee:
(i) The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonable avoided; plus
(iii) The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that lessee proves could have been reasonably avoided; plus
(iv) Any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee’s failure to perform Lessee’s obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom:
(v) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law.
As used in subparagraphs (i) and (ii) above, the worth at the time of award, is computer by allowing interest at the rate of Ten Per Cent (10%) per annum. As used in subparagraph (iii) above, the “worth at the time of award” is computer by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus One Per Cent (1%).
(c) In the event of any such default by Lessee, Lessor also shall have the right, with or without terminating this Lease, to reenter the premises and remove all persons and property from the premises; such property may be removed and stored in a public warehouse or elsewhere at the cost and for the account of Lessee.
(d) In the event of the vacation or abandonment of the premises by Lessee or in the event that Lessor shall elect to reenter as provided in paragraph (c) above, or shall take possession of the premises pursuant to legal proceeding of pursuant to any notice provided by law, then, if Lessor does not elect to terminate this Lease as provided in paragraph (b) above, then Lessor, from time to time, without terminating this lease, either may recover all rental as becomes due or relet the premises or any part thereof for such term or terms and at such rental or rentals and upon such other terms and conditions as Lessor, in Lessor’s sole discretion, may deem advisable, with the right to make alterations and repairs to the premises.
In the event that Lessor shall elect to so relet, then rentals received by Lessor from such reletting shall be applied first to the payment of an indebtedness other than rent due hereunder from Lessee or Lessor, second to the payment of any cost of such reletting, third to the payment of any cost of any alterations and repairs to the premises, fourth to the payment of rent due and unpaid hereunder, and the residue if any, shall be held by Lessor and applied in payment of future rent as the same may become due and payable hereunder. Should that portion of such rentals received from such reletting during any month which is applied by the payment of rent hereunder be less than the rent payable during that month by Lessee hereunder, then Lessee shall pay such deficiency to Lessor immediately upon demand therefor from Lessor. Such deficiency shall be calculated and paid monthly. Lessee shall also pay to Lessor, as soon as ascertained, any costs and expense incurred by Lessor in such reletting or in making such alterations and repairs not covered by the rentals received from such reletting.
(e) No reentry or taking possession of the premises by Lessor pursuant to paragraphs (c) and (d) of the Article THIRTIETH shall be construed as an election to terminate this lease unless a written notice of such intention be given to Lessee or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any reletting without termination by Lessor because of any default by Lessee, Lessor, at any time after such reletting, may elect to terminate this Lease for any such default.
(f) In addition to the remedies contained herein Lessor shall have the remedies provided for under Sections 1951.2 and 1951.4 of the Civil Code of the State of California.
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Thirty-second: Lessee agrees to clean the windows of space rented at least three (3) times per year at four- (4) month intervals at Lessee’s expense. If Lessee neglects such cleaning, Lessor, at Lessor’s option, may have the work done and the costs paid by Lessee.
Thirty third: Lessor is not obligated to provide any cleaning or janitorial services, but if Lessee shall supply said services to Lessee, Lessor shall be entitled to charge and received from Lessee reasonable compensation for said cleaning services. This shall be deemed additional rent.
Thirty-fourth: If Lessor’s right to reentry is exercised following abandonment of the premises by Lessee, then Lessor may consider any personal property belonging to Lessee and left on the premises also to have been abandoned, in which case Lessor may dispose of all such personal property in any manner Lessor shall deem proper and is hereby relieved of all liability for doing so.
Thirty-fifth: It is understood and agreed that all covenants and agreements of said Lease herein contained are conditions of this Lease and that in default or Lessee’s fulfilling any of same, the Lessor, at any time thereafter, at its option, may forfeit this Lease; and any holding over thereafter by Lessee shall be construed to be a tenancy from month to month only, for the same rental payable in the same manner as stated above.
Thirty-seventh: The Lessee hereby promises and agrees to keep and perform each and all of the rules and regulations of said building hereinafter set forth which are hereby referred to and made a part hereof. The Lessor shall have the right to amend or delete said rules and to make other and different rules and regulations limiting, restricting, and regulating the privileges of tenants in the said building and all such rules and regulations so made by the Lessor, after notice thereof to the Lessee, shall be binding upon the Lessee and become conditions of the Lessee’s tenancy and covenants on the part of and to be performed by the Lessee. Nothing in this Article contained, however, shall be deemed or construed as constituting the violation of any such rules or regulations as a breach of this Lease unless Lessor shall have given written notice of such violation to Lessee and Lessee shall have failed to remedy such violation for a period of five (5) days after the receipt of such notice.
Thirty-eighth: A. Lessee shall obtain plate glass insurance in which Lessor shall be named as co-insured.
B. Lessee shall carry, during the term here of, $1,000,000.00 combined single limit for bodily injury and personal damage. Such insurance shall be primary and non contributory. In the event Lessee fails to obtain any insurance as provided in this Lease, Lessor may obtain any such insurance, and the cost thereof shall be paid by Lessee as additional rent with the first payment rent which is due subsequent to Lessor’s incurring such cost; and Lessor shall have all remedies to collect the same as rent as in this Lease provided and/or as otherwise provided by law for the collection of rent. Lessor shall be named co-insured. Lessee agrees to indemnify and hold harmless Lessor, and to include Lessor as additional named insured on the insurance policy in force.
Thirty-ninth: Lessee covenants that it will not use, suffer, or permit any person to use the demised premises or any part thereof for any use or purpose in violation of the laws of the United States of America, State of California, ordinances, regulations, and requirements of the City of Los Angeles at the County of Los Angeles, or other lawful authorities; and that during said term, the demised premises and every part thereof shall be kept by Lessee in a clean and wholesome condition and that all health and police regulations. In all respects and at all times, shall be fully complied with by the Lessee and also that all areas contiguous to the demised premises shall be kept by Lessee, safe and secure and conformable to the requirements of the City of Los Angeles and Lessor kept harmless and indemnified at all times against the loss, damage, cost, or expense by reason of a failure so to do in any respect or by reason of any accident, loss, or damage resulting to person or persons or property by reason of any use which may be made of said premises by Lessee and all persons holding or using said premises under or through Lessee or by Lessee’s sufferance or consent.
Fortieth: If the unit cost of supplies and the rates for insurance premiums, utilities, service contracts and wages for services performed in the building in which the parties are located, excluding garage facilities, are greater in any calendar year during the term hereof than said unit cost or rates in the first calendar year during which this Lease commences, Lessee shall pay as additional rental N.A.% of the increased amount due to the increase in unit cost of rates as applied to the aforesaid items furnished in the year of said increase.
On of about January 10 of any calendar year after the aforesaid first year, Lessor will furnish Lessee with a comparative statement of operating costs for the preceding calendar year and for said first year. At the time of furnishing such statement, Lessor shall bill Lessee for Lessee’s aforesaid share of said increase in operating costs. Lessee shall pay in full the amount shown in said statement within thirty (30) days after receipt thereof. Anything to the contrary in this paragraph and the preceding paragraph notwithstanding, it is expressly understood and agreed that the total of such increases due under this paragraph and the preceding paragraph shall not exceed 5% of the annual rental during any single lease year.
Forty-first: Assignment, Subletting, Etc. Lessee shall not assign this Lease or any interest therein, and shall not sublet the demised premises or any portion thereof, or any right or privilege appurtenant thereto, or suffer any other person (the employees of Lessee excepted) to occupy or use the demised premises or any portion thereof, without the prior written consent of Lessor; and the consent to one assignment, subletting, occupancy, or use by any other person shall not be deemed to be a consent to any subsequent assignment, subletting, occupancy or use by any other person. Any such assignment, subletting occupancy of use without Lessor’s prior written consent shall be void and, at Lessor’s option, shall terminate this Lease. Neither this Lease nor any interest therein shall be assignment by operation at law, as to Lessee’s interest, without Lessor’s prior written consent. If Lessee shall have obtained Lessor’s prior written consent to either assignment, or subleasing, then any rental premium or other consideration paid by such assignee, or sublessee, in excess of the rental provided by this Lease, shall be for the benefit of and shall be immediately paid to Lessor. In any event, Lessor’s consent to any assignment of subleasing, shall not relieve Lessee from any obligation under this Lease. In the event that Lessee is a corporation, the hereinafter named majority stockholder(s) shall not transfer, sell, assign, or hypothecate their stock or voting power in said corporation without prior consent of Lessor. A change in ownership, whether voluntary, by operation of law, or otherwise, of fifty percent or more of the capital stock of Lessee, if Lessee is a corporation, shall at the option of Lessor, be deemed an assignment prohibited hereby.
Lessee agrees to reimburse Lessor for Lessor’s reasonable costs incurred in connection with the processing and documentation of any such requested assignment, subletting, transfer, change of ownership, or hypothecation of this Lease or Lessee’s interest in and to the Premises.
If Lessee desires at any time to assign this Lease or to sublet the Premises of any portion thereof, it shall first notify Lessor of its desire to do so and shall submit in writing to Lessor (i) the name of the proposed subtenant or assignee; (ii) the nature of the proposed subtenant’s or assignee’s business to be carried on in the Premises: (iii) the terms and provisions of the proposed sublease or assignment; (iv) such reasonable financial information as Lessor may request concerning the proposed subtenant within thirty (30) days of the proposed subletting; (v) agreement of assignee to assume, pay or perform the obligations of the Lease; and (vi) the purpose clause shall be limited to the same purpose as are set forth in respect to Lessee.
Forty-second: It is agreed that electric lighting, electric light bulbs, power and utility units, air-conditioning equipment, and attached fixtures, whether installed or provided by Lessor or Lessee and the replacement thereof, are and shall be the property of the Lessor and may not be removed by the Lessee upon any termination of the Lease from any cause. The Lessee shall maintain at its expense all the foregoing in good condition, replacement and repair during the term of the lease.
Forty-third Lessee shall pay N.A.% of the total tax bill of the BUILDING and land of which the premises are a part. Said payment shall be due upon demand and statement given by Lessor to Lessee. If the Lessee is in possession of the leased premises for less than any full year, the Lessee will pay for that period the proportionate amount of the total taxes as his fractional tenancy bears to a full year. (The tax amount is -0- )
Forty-fourth: Late charges. Lessee hereby acknowledges that late payment by Lessee in Lessor of rent or other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to processing and accounting charges, and late charges which may be imposed upon Lessor by terms of any mortgage or trust deed covering the premises. Accordingly, if any installment of rent or any sum due from Lessee shall not received by Lessor or Lessor’s designee within five (5) days after said amount is past due, then Lessee shall pay to Lessor a late charge equal to the maximum amount permitted by law (and in the absence of any governing law, ten percent (10%) of such overdue amount), plus any attorney’s fees incurred by Lessor by reason of Lessee’s failure to pay rent and/or other charges when due hereunder. The parties hereby agree that such late charges represent a fair and reasonable estimate of the cost that Lessor will incur by reason of the late payment by Lessee. Acceptance of such late charges by the Lessor shall in no event constitute a waiver of Lessee’s default with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder.
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This provision shall not be construed to relieve Lessee from any default hereunder arising through the failure on the part of Lessee to make any payment at the time and in the manner herein specified.
Forty-fifth: Waiver. The waiver by Lessor of any breach 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, covenants, or condition herein contained. The subsequent acceptance of rent hereunder by Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of any term, covenant, or condition of this Lease, other than the failure of Lessee to pay the particular rental so accepted regardless of Lessor’s knowledge of such preceding breach at the time of acceptance of such rent.
Forty-sixth: Security Deposit. Lessee shall deposit with Lessor upon execution hereof $ 8,770.00**
** The security deposit shall increase to equal two month gross rental, when the new rate goes into effect-per addendum -page 6.
as security for Lessee’s faithful performance of Lessee’s obligations hereunder. If Lessee fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lease, Lessor may use, apply or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Lessor may become obligated by reason of Lessee’s default, or to compensate Lessor for any loss of damage which Lessor may suffer thereby. If Lessor so uses or applies all or any portion of said deposit, Lessee shall within (10) days after written demand therefor deposit cash with Lessor in an amount sufficient to restore said deposit to the full amount hereinabove stated and Lessee’s failure to do so shall be material breach of this Lease. Lessor shall not be required to keep said deposit separate from its general accounts. If Lessee performs all of Lessee’s obligations hereunder, said deposit, or so much thereof as has not theretofore been applied by Lessor, shall be returned, without payment of interest or other increment for its use to Lessee (or, at Lessor’s option, to the last assignee, if any, or Lessee’s interest hereunder) fourteen (14) days after the expiration of the term hereof, and after Lessee has vacated the Premises, in broom-swept and good condition and repair.
Forty-seventh: Substitution of Lease. The parties hereto agree that the Lessor at its option, may during the term of this Lease of any renewals or extensions thereof, move the Lessee to another location within the building of which the demised premises are a part. On the effective date of such substitution, this Lease shall cease and terminate as to the above-described premises and become effective as to the substituted space for the same as though this lease had originally covered the substituted space only. Lessee’s failure to comply with each and all of the provisions hereof from and after the date set forth in a twenty (20) day notice of such substitution, shall constitute a breach of this Lease.
Forty ninth: CPI. The minimum monthly net rent shall be adjusted upward (only) as of the 1st day of December – per addendum on page 6 of each year (the adjustment date), beginning in the year 2003, according to the following computations:
The base for computing the adjustment is the index figure for the month of November (the index claim) as shown in the Consumer Price Index (CPI) for all Items Urban Consumers Los Angeles — Long Beach Area based on the period 1967 equals 100, as published by the U.S. Department of Labor’s Bureau of Labor Statistics. The base figure for the index date is * .
The index for the adjustment date shall be computed as a percentage of the base figure. For example, assuming the base figure on the index date in 173 and the index figure on the adjustment date is 190.3, the percentage to be applied is 190.3 + 173 - 1.10 or 110% .The percentage shall be applied to the initial minimum monthly net rental for the period beginning on the adjustment date and continuing until the next adjustment date (being one year from the previous adjustment date).
The index for the adjustment date shall be the one reported in the U.S. Department of Labor’s most comprehensive official index, then in use and most nearly answering the foregoing description of the index to be used. If it is calculated from a base different that the base period 1967 equals 100, use for the base figure above, the base figure used for calculating the adjustment percentage shall first be converted under a formula supplied by the Bureau.
If the described index no longer is being published, another generally recognized as authoritative shall be substituted by agreement of the parties. If they are unable to agree within ten (10) days after demand by either party, shall be selected by the chief officer of the San Francisco regional office of the Bureau of Labor Statistics or its successor.**
* Insert true base figure when obtained. (Base figure for September 2000 was 173.3
** The CPI shall be adjusted upward only commencing on per addendum on page 6
The increase is to be in no event less than Seven Percent (7%). (In addition to the rental payment) of the rental payment due for
END OF RETAIL LEASE
MFG LEASE
Fiftieth: The monthly rent in no event shall be less than the greater of:
(a) Base Rent increased by the percentage of gross sales; or
(b) Base Rent increased by the CPI (whatever amount is greater).
** 50th-C: Air-conditioning: Lessee shall pay $774.00 per month for air conditioning. Air conditioning shall purchased on a monthly basis. Request for air-conditioning shall be made in writing to Lessor from Lessee.
IN WITNESS THEREOF, the said parties have hereunto set their hands and seals in duplicate the day and year first hereinbefore written.
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/s/ Manny Mashouf |
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5
AMENDMENT TO LEASE
Lease dated November 3, 2000
bebe stores inc. as Lessee
Paragraph 1:
Lessee will have a one time Option to extend said Lease for an additional five-(5) years. Base rent for said Option period shall include a 5% increase each year using the prior year as the base. Lessee must give Lessor written notice 120 days prior to the termination of said Lease of Lessee’s desire to exercise it’s Option. If Lessee does not give Lessor proper notice, said Option shall be null and void.
Paragraph 2:
Space shall be delivered to Lessee in a clean manner. Said Premises shall be painted white and all existing electrical will be working., and will adequately support the premises and equipment (14 sewing machines, phones, faxes, computers, and other miscellaneous office equipment).
Paragraph 3:
Lessee agrees and understands that Lessor will not provide any additional improvements to said space and any improvements that Lessee elects to do will be at the sole cost to Lessee. Any construction or improvements must first be submitted to Lessor in writing for Lessors approval. Lessor will not unreasonably withhold.
Paragraph 4:
Lessee agrees and understands that said space is to be used solely as a design studio only. Lessor has acknowledged the use of up to fifteen sewing machines which will be used for design only. Should Lessee required additional machines for the purpose of design. Lessee agrees to notify Lessor immediately in writing. Lessor may require Lessee to limit the amount of sewing machines brought into the building.
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6
Amendment to Lease
Fire Department Regulations and Safety Notice
The following are regulations of the Los Angeles Fire Department for which you are responsible:
1. EACH SPACE MUST HAVE AT LEAST ONE FULLY CHARGED FIRE EXTINGUISHER with a TAG showing it is current, and must be hung on the wall for easy access, and identified with a FIRE EXTINGUISHER sign. This fire extinguisher shall be recharged and tagged each year to indicate it has been recharged.
2. Doors and SECURITY GATES to all spaces must be able to be opened from the inside without any key, tool, or special knowledge. THIS MEANS THAT THE INSIDE LOCKS OF YOUR SPACE MUST HAVE THUMBTURNS TO PROVIDE EMERGENCY EXIT ACCESS.
PADLOCKS ON YOUR DOORS ARE PROHIBITED.
3. All Fire Escapes, Entrances AND Exits to your space must remain clear at all times .
4. NOTHING MAY BE ATTACHED TO THE FIRE SPRINKLER SYSTEM PIPES. ANYTHING attached to these pipes must be removed immediately. Make sure that nothing is tied to, or attached to the sprinkler pipes in your space. This includes all telephone and security alarm wires.
5. No Extension Cords are permitted . If you have electric equipment that is not next to an electric outlet, move the equipment near to the outlet, or have a licensed electrician make a new outlet where you need it. Contact our office before you have any electrical or mechanical work done in your space.
6. ALL ELECTRIC PANNELS MUST HAVE AT LEAST THREE FEET OF CLEARANCE . There must be at least three feet clearance in front of the electric panels in your room.
7. Storage of any flammable materials such as Fabrics, Finished Garments, Paper Goods, Flammable Liquids, or debris near an electric panel is prohibited.
8. The Mercantile Center does not monitor the above requirements. It is the sole responsibility of the lessee to govern itself according to the law.
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Cooper Building
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June 1 st , 2000 |
Bendix Building
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To: All Cooper Building and Mercantile Center Tenants
This is a Los Angeles City Fire Department Requirement:
No Trash or Debris May Be Left Out In the Hallways.
Please take out your trash at the end of each working day after 5:00 PM.
• Please do not leave any trash out in the hallways or by the freight elevator during the day.
• When trash is left out in the hallways during the daytime, a health and fire safety problem is created for all of us.
• If you need additional trash service during the day, please call our office and and we will be sure the trash is taken out quickly without remaining in the hallway.
• All cardboard containers and boxes must be broken down flat before they are put out in the hallway to be thrown away. Open boxes in the hallways create a fire hazard.
If you have any questions, please call the office.
Thank You for your cooperation.
The Mercantile Center Management
MERCANTILE CENTER • 860 S, LOS ANGELES STREET, LOS ANGELES, CA 90014 • (213) 627-3754 • FAX (213) 629-5484
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RULES & REGULATIONS OF THE BUILDING
REFERRED TO HEREIN AND
CONSTITUTING A PART OF THIS LEASE
1. The Lessee, and the Lessee’s employees, shall not loiter in the entrance or corridors, or in any way obstruct the sidewalks, entry passages, halls, stairways and elevators, and shall use the same only as passage ways and means of passages to and from their respective offices.
2. The sash doors, sashes, windows, glass doors, lights and skylights that reflect or admit light into the halls shall not be covered or obstructed or in any manner so treated as shall diminish the light in the halls or corridors or be unsightly or show through said glass, without the written consent of Lessor.
The lavatories, sinks, slop-hoppers, water-closets and urinals shall not be used for any purpose other than those for which they were intended, and no rubbish, newspapers or other substances of any kind shall be thrown into them which tend to stop or clog the same, or in any wise damage said fixture.
3. No awning, shade, sign, advertisement, or notice shall be inscribed, painted or affixed on or to any part of the outside or inside of the building except by the written consent of the Lessor, and except it be of such color, size and style and in such place upon or in the building as may be designated by the Lessor.
All signs on doors or window glass will be painted for the Lessee by the Lessor, but the cost of painting shall be paid by the Lessee.
Lessor hereby expressly reserves the right to use the roof and exterior walls of said building for Lessor’s sole use and benefit, for advertising and/or other purpose, and Lessee shall be entitled to no rights thereon or thereto without the written consent of Lessor first had and obtained.
4. The location of telephone, telegraph instruments, electric appliances, call boxes, etc., shall be prescribed by the Lessor.
5. The Lessee shall not permit anything to be done in the building, nor bring nor keep anything therein, which will in any way increase or tend to increase the rate of fire insurance, or which will obstruct or interfere with the rights of other tenants, or in any way injure or annoy them, or which shall conflict with the regulations of the Fire Department or with the fire laws or with any insurance policy on the building or any part thereof, or with any laws or ordinances regulating health and sanitation or with any rule or regulation of the Health Department of the City of Los Angeles. The Lessee shall pay any damages that the Lessee may suffer by a violation of this clause by Lessee, or Lessee’s clerks, agents, employees or servants.
6. The Lessee and the Lessee’s officers, agents and employees shall not play any musical instrument nor make nor permit any unnecessary or improper noises in the building nor interfere in any way with other tenants or those having business with them, nor smoke nor expectorate in the elevators nor keep in the building any animal, bird or bicycle.
The Lessee and the Lessee’s officers, agents and employees shall not throw cigar or cigarette butts or other substances of any kind out of the windows or doors, or down the passageways or skylights of the building, or sit on or place anything upon the window sills or outside ledges.
7. Lessee shall see that the windows and doors of said leased premises are closed and securely locked before leaving the building and must observe strict care not to leave windows open when it rains and Lessee shall exercise extraordinary care and caution that all water faucets or water apparatus are entirely shut off before Lessee or Lessee’s employees leave the building, and that all electricity, gas or air shall likewise be carefully shut off so as to prevent waste or damage, and for any default or carelessness the Lessee shall make good all injuries sustained by other tenants or occupants of the building or to the Lessor.
8. Lessee shall give prompt written notice of any accident or to defects in the plumbing, water pipes, electric wires or heating apparatus, so that the same may be attended to promptly.
9. Lessee agrees to clean the windows of space leased at least once a month at Lessee’s expense. If Lessee neglects such cleaning, Lessor may, at Lessor’s option, have the work done and the cost shall be paid by Lessee.
10. Ice, drinking water, towels and toilet supplies shall be furnished to the Lessee only from such persons as may be satisfactory to the Lessor.
11. The Lessor shall have the right to limit the weight and size and prescribe the position of all safes and other heavy property brought into the building, and also the times of moving the same in and out of the building; and all such moving shall be done under the supervision of the Lessor. All safes shall stand on timbers of such size as shall be designated by the Lessor. The Lessor will not be responsible for loss at or damage to any such safe or property from any cause; but all damages done to the building by moving or maintaining any such safe or property shall be repaired at expense of the Lessee.
All Lessee’s machinery in the premises shall be installed in a good and workmanlike manner as to prevent any unnecessary noise, jar or tremor to the floors or walls.
Machinery or presses calling for water or heavy oiling shall be installed on suitable drip pans to properly prevent leakage of oil or water onto the floor, said installation to be approved by Lessor. Vents carrying steam or fumes shall be carried to a proper height above the roof on exterior or building as designated by Lessor, to dissipate steam or fumes so as to cause no annoyance to other tenants.
12. No furniture nor equipment of any kind shall be brought into nor be removed from the building without the consent of the Lessor or Lessor’s agent; and all moving of same, into or out of the building by tenants shall be done at such times and in such manner as Lessor designates, but the Lessor will not be responsible for the loss of or damages to such freight from any cause and no permit, in writing or otherwise, to remove any such furniture, freight or equipment, shall in any wise indicate or be evidence of any consent to cancel or abrogate the lease in any manner.
13. The requirements of the Lessee will be attended to only upon application at the office of the building. Employees shall not perform any work nor do anything outside of their regular duties unless under special instructions from the office of the building.
14. Night Watch: After the regular service hours as fixed by Lessor, the building may be in charge of the night watchman or other building employee provided by lessor, and every person entering or leaving the building during such time is expected to be questioned by him as to his business in the building and shall register if thereto required by such employee.
15. No additional or different lock or locks shall be placed by the Lessee on any door in the building unless written consent of the Lessor shall have first been obtained. Two keys will be furnished by the Lessor without charge and extra keys, if desired, will be furnished through the office of the building upon payment therefor by Lessee. Neither Lessee, Lessee’s agents nor employees shall have any duplicate keys made.
16. The Lessor may waive any one or more of these rules for the benefit of any particular tenant or tenants of said building from time to time as Lessor sees fit, but no such waiver by the Lessor of any such rule shall be construed as a waiver of such rule in favor of any tenant or tenants of said building, nor prevent the Lessor from thereafter enforcing any such rule against any or all of the tenants of said building.
17. No freight permitted in passenger elevators, Premises and building are closed from 5:30 P.M. Saturday to 6:30 A.M. Monday. No facilities or service will be maintained by Lessor during said time except upon special written arrangement with Lessee and at the expense of Lessee (watchman, electricity, etc.) No children permitted in the premises unless in the immediate physical custody of parent.
18. No janitor or electrical service is provided by Lessor.
19. Lessee agrees that it shall not permit or place any rubbish, cartons or debris in hallways (see also Rules and Regulations No. 1 and 5)
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AMENDMENT/EXTENSION TO LEASE
LESSOR: Mercantile Center
LESSEE: bebe stores Inc.
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ORIGINAL PREMISES: |
Room 1135,1137,1139 & 1140, situated on the eleventh floor located at 860 S. Los Angeles Street, Los Angeles, CA 90014 |
This Extension/Amendment to Lease is dated, November 3, 2000 (“Lease”) for the original Premises is hereby entered into by and between Lessor and Lessee for the purpose of Amending the Lease and Extensions and Amendment thereof dated; June 1, 2001, October 21, 2001 and March 12, 2002, to accommodate Lessee’s request to add another space known as room 640. This amendment to lease is dated for reference purposes only, this 3 th day of September, 2002.
In consideration of the mutual promises herein set forth and other valuable consideration, the parties agree as follow:
1. PREMISES:
1.1 The description of the original Premises set forth in paragraph 1.1 of the lease is hereby amended by deleting said description in its entirety and inserting in its place the following: rooms 600 and 640 situated on the sixth floor located at 860 S. Los Angeles Street, Los Angeles, CA 90014 (herein referred to as the ‘New Premises’). The description of the New Premises set forth in paragraph 1.1 shall become effective September 16, 2002.
2. RENT:
a) The Gross Base rental for rooms 600 shall remain the same per lease amendment dated January 17, 2002.
b) The Gross base rent for room 640 shall be thirty three hundred twenty five and 00/100 ($3,325.00) per month commencing September 16, 2002 through August 31, 2003. The second and third year commencing September 1, 2003 and September 1, 2004, the gross base rent shall increase by the increase in actual CPI (Consumer Price Index) from previous year.
3. TERM:
a) The term of said Extension/Amendment of Lease for rooms 600 shall remain the same per lease amendment dated January 17, 2002.
b) The Lease term for room 640 shall be for twenty nine (29) months commencing September 16, 2002 though February 28, 2005.
4. SECURITY DEPOSITS:
Lessee currently has $29,000.00 in security deposit, Lessee shall pay an additional $6,650.00 for room #640 to bring the security deposit to $35,650.00. The security deposit shall increase to equal two month gross base rent when the new rate goes into effect and at annual CPI increases.
5. Air-Conditioning: Lessee shall pay $3,000.00 per month for air conditioning for Room #600 and $525.00 for Room 640. Air conditioning shall be purchased on a monthly basis. Request for air conditioning shall be made in writing from Lessee to Lessor.
6. Paragraph-Fortieth: Shall be amended to read: Lessee shall pay as additional rental 5.263% for room 600 and .1914% of the increased amount due to the increase rate costs as applied to the aforesaid items furnished in the year of said increase.
7. RATIFICATION OF LEASE:
The Lease is hereby ratified in all respects except as herein specifically amended which amendments are hereby incorporated into the Lease.
The parties hereto have executed this Amendment to Lease at the place and on the date specified immediately adjacent to their respective signatures.
Executed on 9-9-02
at Los Angeles, CA
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Mercantile Center |
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bebe stores inc. |
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/s/ Steve Hirsh |
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/s/ Manny Mashouf |
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Lessor |
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Manny Mashouf Lessee |
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10
AMENDMENT/EXTENSION TO LEASE
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LESSOR: |
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Mercantile Center |
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LESSEE: |
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bebe stores inc. |
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ORIGINAL PREMISES: |
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Rooms 1135, 1137, 1139 & 1140, situated on the eleventh floor located at 860 S. Los Angeles Street, CA 90014 |
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This Extension/Amendment to Lease is dated, November 3, 2000 (“Lease”) for the original Premises is hereby entered into by and between Lessor and Lessee for the purpose of Amending the Lease and Extensions and Amendment thereof dated; June 1, 2001 and October 21, 2001, to accommodate Lessee’s request to move to a bigger space and amend paragraph fortieth of the original lease. This amendment to lease is dated for reference purposes only, this 15 th day of January, 2001.
In consideration of the mutual promises herein set forth and other valuable consideration, the parties agree as follow:
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1. |
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PREMISES: |
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1.1 |
The description of the original Premises set forth in paragraph 1.1 of the lease is hereby amended by deleting said description in its entirety and inserting in its place the following: room 680 situated on the sixth floor located at 860 S. Los Angeles Street, Los Angeles, CA 90014 (herein referred to as the ‘New Premises’). The description of the New Premises set forth in paragraph 1.1 shall become effective March 1, 2001. |
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2. |
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RENT: |
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The Gross Base rental for two (2) years shall be fourteen thousand five hundred and 00/100 ($14,500.00) per month, due and payable in full on the first day of each month commencing March 1, 2002 through February 28, 2003. The second and third year thereafter commencing March 1, 2003 and March 1, 2004 the gross base rent shall increase by the increase in actual CPI (Consumer Price Index) from previous year, CPI increase not to exceed 3%. |
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3. |
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TERM : |
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The term of said Extension/Amendment of Lease shall be three (3) years commencing March 1, 2002 through February 28, 2005. Lessee will have a one time option to extend the lease for an additional thee (3) years. Gross Base rent for said Option period shall include a CPI increase each year but not to exceed 3% using the prior year as the base. Lessee must give Lessor written notice 90 days prior to the termination of said Lease of Lessee’s desire to exercise it’s option. If Lessee does not give Lessor proper notice, said option shall be null and void. |
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4. |
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SECURITY DEPOSITS: |
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Lessee currently has $12,310.00 in security deposit on record. Lessee shall pay an additional $16,690.00 to increase the security deposit to $29,000.00. The second and third concurrently Lessee shall also be billed the additional security deposit required to reflect the same CPI percentage increase. |
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5. |
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Air-Conditioning: Lessee shall pay $3000.00 per month for air conditioning. Air conditioning shall be purchased on a monthly basis. Request for air conditioning shall be made in writing from Lessor to Lessee. |
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6. |
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Paragraph-Fortieth: Shall be amended to read: Lessee shall pay as additional rental 5.263 % of the increased amount due to the increase rate costs as applied to the aforesaid items furnished in the year of said increase. |
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7. |
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RATIFICATION OF LEASE: |
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The Lease is hereby ratified in all respects except as herein specifically amended which amendments are hereby incorporated into the Lease. |
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The parties hereto have executed this Amendment to Lease at the place and on the date specified immediately adjacent to their respective signatures. |
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Executed on 1-17-02 |
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at Los Angeles, CA |
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Mercantile Center |
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bebe stores, inc. |
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/s/ Steve Hirsh |
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/s/ Manny Mashouf |
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Lessor |
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Lessee |
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11
AMENDMENT/EXTENSION TO LEASE
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LESSOR: |
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Mercantile Center |
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LESSEE: |
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bebe stores inc. |
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ORIGINAL PREMISES: |
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Room 1135, 1137, 1139 and 1140 situated on the tenth floor located at 860 S. Los Angeles Street, CA 90014 |
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This Extension/Amendment to Lease is dated, November 3, 2000 (“Lease”) for the original Premises is hereby entered into by and between Lessor and Lessee for the purpose of Amending the Lease and Extensions and Amendment thereof dated; to accommodate Lessee’s request to add a space known as room #1136. This amendment to lease is dated for reference purposes only, this 11 th day of October, 2001.
In consideration of the mutual promises herein set forth and other valuable consideration, the parties agree as follows:
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1. |
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PREMISES: |
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1.1 |
The description of the original Premises set forth in paragraph 1.1 of the lease is hereby amended by deleting said description in its entirety and inserting in its place the following: rooms 1132, 1134, 1135, 1136, 1137, 1139 and 1140 situated on the eleventh floor located at 860 S. Los Angeles Street, Los Angeles, CA 90014 (herein referred to as the “New Premises”). The description of the New Premises set forth in paragraph 1.1 shall become effective October 15, 2001. |
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1.2 |
No changes shall be made to the space. All existing demising walls shall remain in place. |
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2. |
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RENT: |
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a) The Gross Base rental for rooms 1132, 1134, 1135, 1137, 1139 and 1140 shall remain the same at fifty five hundred thirty five and 00/100 ($5,535.00) per month. |
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b) The Gross Base rental for room 1136 shall be six hundred twenty and 00/100 ($620.00) per month due and payable in full on the first day of each month commencing October 15, 2001 and continue on a month to month basis. |
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3. |
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TERM : |
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a. The term of said Extension/Amendment of Lease for rooms 1132, 1134, 1135, 1137, 1139 and 1140 shall remain the same per lease amendment/extension to lease dated June 1, 2001. |
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b. The term for room 1136 shall be month to month. This space may be returned to Lessor with 30-thirty day written notice by Lessee, or be recovered by Lessor with 30-thirty day written notice to Lessee from Lessor. The term shall commence (Room 1136) Nov. 1, 2001 |
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4. |
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SECURITY DEPOSITS: |
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The security Deposit currently is $11,070.00, Lessee shall pay an additional $1,240.00 of security deposit for room #1136. |
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5. |
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Air-Conditioning: Lessee shall pay $1,195.65 per month for air conditioning. Air conditioning shall be purchased on a monthly basis. Request for air conditioning shall be made in writing from Lessor to Lessee. |
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6. |
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RATIFICATION OF LEASE: |
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The Lease is hereby ratified in all respects except as herein specifically amended which amendments are hereby incorporated into the Lease. |
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The parties hereto have executed this Amendment to Lease at the place and on the date specified immediately adjacent to their respective signatures. |
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Executed on 10/25/01 |
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at Los Angeles, CA |
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Mercantile Center |
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bebe stores inc. |
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/s/ Steve Hirsh |
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/s/ Manny Mashouf |
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Lessor |
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Lessee |
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12
AMENDMENT/EXTENSION TO LEASE
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LESSOR: |
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MERCANTILE CENTER |
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LESSEE: |
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bebe stores inc. |
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ORIGINAL PREMISES: |
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Room 1135, 1137, 1139 and 1140, situated on the eleventh floor located at 860 S. Los Angeles Street, CA 90014 |
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This Extension/Amendment to Lease is dated, November 3, 2000 (“Lease”) for the original Premises is hereby entered into by and between Lessor and Lessee for the purpose of Amending the Lease and Extensions and Amendment thereof dated; to accommodate Lessee’s request to add another space known as rooms # 1132 & 1134. This amendment to lease is dated for reference purposes only, this 25th day of May 2001.
In consideration of the mutual promises herein set forth and other valuable consideration, the parties agree as follow:
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1. |
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PREMISES: |
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1.1 |
The description of the original Premises set forth in paragraph 1.1 of the lease is hereby amended by deleting said description in its entirety and inserting in its place the following: rooms 1132, 1134, 1135, 1137, 1139 and 1140 situated on the eleventh floor located at 860 S. Los Angeles Street, Los Angeles, CA 90014 (herein referred to as the ‘New Premises’). The description of the New Premises set forth in paragraph 1.1 hereof shall become effective May 25, 2001. |
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2. |
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RENT: |
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The Gross Base rental shall be fifty five hundred eighty one and 00/100 ($5,535.00) per month, due and payable in full on the first day of each month commencing June 1, 2002 through November 30, 2002. |
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3. |
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TERM: |
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The term of said Extension/Amendment of Lease shall be eighteen (18)month(s), commencing June 1, 2001 through November 30, 2002. |
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4. |
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SECURITY DEPOSITS: |
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Lessee currently has $8,770.00 in security deposit; Lessee shall pay an additional amount of $2,300.00 to increase the security deposit to $11,070.00. |
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5. |
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Air-Conditioning: Lessee shall pay $998.00 per month for air conditioning. Air conditioning shall be purchased on a monthly basis. Request for air conditioning shall be made to Lessor from Lessee. |
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6. |
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RATIFICATION OF LEASE: |
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The Lease is hereby ratified in all respects except as herein specifically amended which amendments are hereby incorporated into the Lease. |
The parties hereto have executed this Amendment to Lease at the place and on the date specified immediately adjacent to their respective signatures.
Executed on 6/01/01
at Los Angeles, CA
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MERCANTILE CENTER |
bebe stores inc. |
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/s/ Steve Hirsh |
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/s/ Manny Mashouf |
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Lessor |
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Lessee |
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13
Exhibit 10.12
bebe stores, inc.
RESTRICTED STOCK UNITS AGREEMENT
bebe stores, inc. has granted to the individual (the “ Participant ” ) named in the Notice of Grant of Restricted Stock Units (the “ Notice ” ) to which this Restricted Stock Units Agreement (the “ Agreement ” ) is attached an award (the “ Award ” ) of Restricted Stock Units upon the terms and conditions set forth in the Notice and this Agreement. The Award has been granted pursuant to the bebe stores, inc. 1997 Stock Plan (the “ Plan ” ), as amended to the Date of Grant. The provisions of the Plan are incorporated into this Agreement by this reference. By signing the Notice, the Participant : (a) represents that the Participant has read and is familiar with the terms and conditions of the Notice, the Plan and this Agreement, (b) accepts the Award subject to all of the terms and conditions of the Notice, the Plan and this Agreement, (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors upon any questions arising under the Notice, the Plan or this Agreement, and (d) acknowledges receipt of a copy of the Notice, the Plan and this Agreement.
A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
1
2
3
Prior the Settlement Date, neither this Award nor any Restricted Stock Unit subject to this Award shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except by will or by the laws of descent and distribution.
If the Participant’ s Service with the Company terminates for any reason, the Award shall be settled as provided in Section 3. If the Award is subject to vesting conditions which have not been satisfied, the Award will be forfeited as of the date of termination of Service.
In the event of any transaction described in Section 9(a) of the Plan, the terms of the Restricted Stock Unit shall be adjusted as set forth in Section 9(a) of the Plan. In the event that the Company is a party to a merger and consolidation, the Restricted Stock Unit shall be subject to the agreement of merger or consolidation, as provided in Section 9(b) of the Plan.
The Participant shall have no rights as a stockholder with respect to any shares which may be issued in settlement of this Award until the date of the issuance of a certificate for such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between the Company and the Participant, the Participant ’ s employment is “at will” and is for no specified term. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of the Company or interfere in any way with any right of the Company Group to terminate the Participant’ s Service as a Director, an Employee or a Consultant, as the case may be, at any time.
The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section.
4
5
Exhibit 10.13
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bebe stores, Inc. dba bebe |
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Notice of Grant of Stock Options and Option Agreement |
ID: 94-2450490 |
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400 Valley Drive |
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Brisbane, CA 94005-1208 |
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BARBARA BASS |
Option Number: |
00001177 |
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2310 HYDE STREET |
Plan: |
0697 |
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SAN FRANCISCO, CA USA 94109 |
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Effective 04/01/03, you have been granted a(n) Discounted Stock Option to buy 2133 shares of bebe stores, inc. dba bebe (the Company) stock at $0.00 per share.
The total option price of the shares granted is $0.00.
Shares in each period will become fully vested on the date shown.
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Shares |
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Vest Type |
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Full Vest |
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Expiration |
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2,133 |
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On Vest Date |
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11/01/03 |
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06/01/04 |
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By your signature and the Company’s signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company’s Stock Option Plan as amended and the Option Agreement, all of which are attached and made a part of this document.
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/s/ John E. Kyees |
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bebe stores, inc. dba bebe |
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Date |
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/s/ Barbara Bass |
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6-13-03 |
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BARBARA BASS |
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Date |
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Date: 05/14/03 |
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Time: 3:53:04PM |
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bebe stores inc.
NOTICE OF GRANT OF
RESTRICTED STOCK UNITS
Barbara Bass (the “ Participant” ) has been granted an award (the “Award” ) pursuant to the bebe stores, inc. 1997 Stock Plan (the “Plan” ) consisting of one or more rights (each such right being hereinafter referred to as a “ Restricted Stock Unit ” ) to receive in settlement of each such right one (1) share of Stock of bebe stores, inc., as follows:
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Date of Grant: |
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April 1, 2003 |
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Number of Restricted Stock Units: |
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2133 |
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Settlement Date: |
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As soon as practicable after termination of Participant’s Service. |
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Vesting Schedule: |
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100% of the Number of Restricted Stock Units shall be vested on November 1, 2003. |
By their signatures below, the Company and the Participant agree that the Award is governed by this Notice and by the provisions of the Restricted Stock Unit Agreement attached to and made a part of this document. The Participant acknowledges receipt of a copy of the Restricted Stock Units Agreement, represents that the Participant has read and is familiar with its provisions, and hereby accepts the Award subject to all of its terms and conditions.
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bebe stores, inc. |
PARTICIPANT |
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By: |
/s/ John E. Kyees |
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/s/ Barbara Bass |
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Signature |
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Its: |
CFO & CAO |
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6-13-03 |
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Date |
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Address: |
400 Valley Drive |
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2310 Hyde St |
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Brisbane, California 94005 |
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Address |
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San Francisco, CA 94109 |
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ATTACHMENTS: Restricted Stock Units Agreement and 1997 Stock Plan
2
Exhibit 10.14
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bebe stores, inc. dba bebe |
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Notice of Grant of Stock Options and Option Agreement |
ID: 94-2450490 |
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400 Valley Drive |
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Brisbane, CA 94005-1208 |
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CORRADO FEDERICO |
Option Number: |
00001178 |
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1717 NORTH BAYSHORE DRIVE APT 2240 |
Plan: |
0697 |
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APT 2240 |
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MIAMI, FL USA 33132 |
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Effective 04/01/03, you have been granted a(n) Discounted Stock Option to buy 2133 shares of bebe stores, inc. dba bebe (the Company) stock at $0.00 per share.
The total option price of the shares granted is $0.00.
Shares in each period will become fully vested on the date shown.
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Shares |
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Vest Type |
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Full Vest |
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Expiration |
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2,133 |
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On Vest Date |
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11/01/03 |
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06/01/04 |
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By your signature and the Company’s signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company’s Stock Option Plan as amended and the Option Agreement, all of which are attached and made a part of this document.
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/s/ John E. Kyees |
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bebe stores, inc. dba bebe |
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Date |
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/s/ Corrado Federico |
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CORRADO FEDERICO |
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Date |
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Date: 05/14/03 |
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Time: 3:53:21PM |
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bebe stores inc.
NOTICE OF GRANT OF
RESTRICTED STOCK UNITS
Corrado Federico (the “ Participant ” ) has been granted an award (the “Award” ) pursuant to the bebe stores, inc. 1997 Stock Plan (the “ Plan ” ) consisting of one or more rights (each such right being hereinafter referred to as a “ Restricted Stock Unit ” ) to receive in settlement of each such right one (1) share of Stock of bebe stores, inc., as follows:
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Date of Grant: |
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April 1, 2003 |
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Number of Restricted Stock Units: |
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2133 |
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Settlement Date: |
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As soon as practicable after termination of Participant’s Service. |
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Vesting Schedule: |
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100% of the Number of Restricted Stock Units shall be vested on November 1, 2003. |
By their signatures below, the Company and the Participant agree that the Award is governed by this Notice and by the provisions of the Restricted Stock Unit Agreement attached to and made a part of this document. The Participant acknowledges receipt of a copy of the Restricted Stock Units Agreement, represents that the Participant has read and is familiar with its provisions, and hereby accepts the Award subject to all of its terms and conditions.
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bebe stores, inc. |
PARTICIPANT |
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By: |
/s/ John E. Kyees |
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/s/ Corrado Federico |
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Signature |
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Its: |
CFO & CAO |
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6/13/03 |
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Date |
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Address: |
400 Valley Drive |
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1717 N. Bayshore Drive # 1432 |
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Brisbane, California 94005 |
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Address |
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Miami - FL 33132 |
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ATTACHMENTS: Restricted Stock Units Agreement and 1997 Stock Plan
2
Exhibit 10.15
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bebe stores, Inc. dba bebe |
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Notice of Grant of Stock Options and Option Agreement |
ID: 94-2450490 |
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400 Valley Drive |
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Brisbane, CA 94005-1208 |
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ROBERT M JAFFE |
Option Number: |
00001176 |
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4370 LA JOLLA VILLAGE DR NO 1040 |
Plan: |
0697 |
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SAN DIEGO, CA USA 92122- |
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Effective 04/01/03, you have been granted a(n) Discounted Stock Option to buy 2133 shares of bebe stores, inc. dba bebe (the Company) stock at $0.00 per share.
The total option price of the shares granted is $0.00.
Shares in each period will become fully vested on the date shown.
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Shares |
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Vest Type |
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Full Vest |
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Expiration |
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2,133 |
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On Vest Date |
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11/01/03 |
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06/01/04 |
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By your signature and the Company’s signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company’s Stock Option Plan as amended and the Option Agreement, all of which are attached and made a part of this document.
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/s/ John E. Kyees |
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bebe stores, Inc. dba bebe |
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Date |
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/s/ Robert M. Jaffe |
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ROBERT M. JAFFE |
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Date |
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Date: 05/14/03 |
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Time: 3:53:33PM |
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|||
bebe stores inc.
NOTICE OF GRANT OF
RESTRICTED STOCK UNITS
Robert Jaffe (the “ Participant ” ) has been granted an award (the “Award” ) pursuant to the bebe stores, inc. 1997 Stock Plan (the “ Plan ” ) consisting of one or more rights (each such right being hereinafter referred to as a “ Restricted Stock Unit ” ) to receive in settlement of each such right one (1) share of Stock of bebe stores, inc., as follows:
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Date of Grant: |
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April 1, 2003 |
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Number of Restricted Stock Units: |
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2133 |
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Settlement Date: |
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As soon as practicable after termination of Participant’s Service. |
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Vesting Schedule: |
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100% of the Number of Restricted Stock Units shall be vested on November 1, 2003. |
By their signatures below, the Company and the Participant agree that the Award is governed by this Notice and by the provisions of the Restricted Stock Unit Agreement attached to and made a part of this document. The Participant acknowledges receipt of a copy of the Restricted Stock Units Agreement, represents that the Participant has read and is familiar with its provisions, and hereby accepts the Award subject to all of its terms and conditions.
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bebe stores, inc. |
PARTICIPANT |
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By: |
/s/ John E. Kyees |
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/s/ Robert M. Jaffe |
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Signature |
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Its: |
CFO & CAO |
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Date |
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Address: |
400 Valley Drive |
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Brisbane, California 94005 |
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Address |
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ATTACHMENTS: Restricted Stock Units Agreement and 1997 Stock Plan
2
Exhibit 10.16
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bebe stores, inc. dba bebe |
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Notice of Grant of Stock Options and Option Agreement |
ID: 94-2450490 |
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400 Valley Drive |
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Brisbane, CA 94005-1208 |
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DANIEL L WARDLOW |
Option Number: |
00001179 |
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1600 HOLLOWAY AVENUE |
Plan: |
0697 |
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SAN FRANCISCO, CA USA 94132- |
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Effective 04/01/03, you have been granted a(n) Discounted Stock Option to buy 2133 shares of bebe stores, inc. dba bebe (the Company) stock at $0.00 per share.
The total option price of the shares granted is $0.00.
Shares in each period will become fully vested on the date shown.
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Shares |
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Vest Type |
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Full Vest |
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Expiration |
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2,133 |
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On Vest Date |
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11/01/03 |
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06/01/04 |
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By your signature and the Company’s signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company’s Stock Option Plan as amended and the Option Agreement, all of which are attached and made a part of this document.
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/s/ John E. Kyees |
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bebe stores, inc. dba bebe |
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Date |
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/s/ Daniel L Wardlow |
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June 13, 2003 |
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DANIEL L WARDLOW |
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Date |
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Date: 05/14/03 |
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Time: 3:53:45PM |
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bebe stores inc.
NOTICE OF GRANT OF
RESTRICTED STOCK UNITS
Daniel Wardlow (the “ Participant ” ) has been granted an award (the “Award” ) pursuant to the bebe stores, inc. 1997 Stock Plan (the “ Plan ” ) consisting of one or more rights (each such right being hereinafter referred to as a “ Restricted Stock Unit ” ) to receive in settlement of each such right one (1) share of Stock of bebe stores, inc., as follows:
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Date of Grant: |
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April 1, 2003 |
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Number of Restricted Stock Units: |
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2133 |
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Settlement Date: |
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As soon as practicable after termination of Participant’s Service. |
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Vesting Schedule: |
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100% of the Number of Restricted Stock Units shall be vested on November 1, 2003. |
By their signatures below, the Company and the Participant agree that the Award is governed by this Notice and by the provisions of the Restricted Stock Unit Agreement attached to and made a part of this document. The Participant acknowledges receipt of a copy of the Restricted Stock Units Agreement, represents that the Participant has read and is familiar with its provisions, and hereby accepts the Award subject to all of its terms and conditions.
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bebe stores, inc. |
PARTICIPANT |
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By: |
/s/ John E. Kyees |
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/s/ Daniel L. Wardlow |
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Signature |
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Its: |
CFO & CAO |
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June 13, 2003 |
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Date |
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Address: |
400 Valley Drive |
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634 Edna St. |
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Brisbane, California 94005 |
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Address |
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San Francisco, CA 94127 |
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ATTACHMENTS: Restricted Stock Units Agreement and 1997 Stock Plan
2
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Name
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Domicile
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| bebe stores (Canada), inc. | California | |
| bebe UK Limited | England | |
| bebe studio, inc. | California | |
| bebe management, inc. | Virginia |
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
Board
of Directors
bebe stores, inc.
We consent to the incorporation by reference in Registration Statement Nos. 333-65201 and 333-62096 of bebe stores, inc. on Form S-8 of our report dated September 15, 2003, appearing in this Annual Report on Form 10-K of bebe stores, inc. for the fiscal year ended June 30, 2003.
Our audits of the financial statements referred to in our aforementioned report also included the financial statement schedules of bebe stores, inc., listed in Item 14(a)2. The financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth herein.
/s/ DELOITTE & TOUCHE LLP
San
Francisco, California
September 29, 2003
I, Manny Mashouf, certify that:
| Date: September 29, 2003 | ||
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/s/
MANNY MASHOUF
Manny Mashouf Chief Executive Officer |
I, John Kyees, certify that:
| Date: September 29, 2003 | ||
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/s/
JOHN KYEES
John Kyees Chief Financial Officer |
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of bebe stores, inc. (the "Company") on Form 10-K for the fiscal year ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Manny Mashouf, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906"), that:
(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/
MANNY MASHOUF
Manny Mashouf Chief Executive Officer September 29, 2003 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to bebe stores, inc. and will be retained by bebe stores, inc. and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of bebe stores, inc. (the "Company") on Form 10-K for the fiscal year ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John Kyees, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906"), that:
(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/
JOHN KYEES
John Kyees Chief Financial Officer September 29, 2003 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to bebe stores, inc. and will be retained by bebe stores, inc. and furnished to the Securities and Exchange Commission or its staff upon request.