-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TBYLtgrM1LQhX2fE6r5kzHCeF5gscDZISTzRokTqu7PClkiW5S4BsZDCF/Jxf9rN rnUDLPcit2pxS9hBSxDodw== 0000950169-98-000697.txt : 19980616 0000950169-98-000697.hdr.sgml : 19980616 ACCESSION NUMBER: 0000950169-98-000697 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980502 FILED AS OF DATE: 19980615 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK JOS A CLOTHIERS INC /DE/ CENTRAL INDEX KEY: 0000920033 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 363189198 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23874 FILM NUMBER: 98648121 BUSINESS ADDRESS: STREET 1: 500 HANOVER PIKE CITY: HAMPSTEAD STATE: MD ZIP: 21074 BUSINESS PHONE: 4102392700 10-Q 1 United States Securities and Exchange Commission Washington, DC 20549 FORM 10 - Q x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended May 2, 1998 --------------- or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-23874 ----------- Jos. A. Bank Clothiers, Inc. Delaware 5611 36-3189198 -------------- ------------ ---------------- (State incorporation) (Primary Standard (I.R.S. Employer Industrial Identification Classification Number) Code Number) 500 Hanover Pike, Hampstead, MD 21074-2095 - ------------------------------- --------------- none ---------------------------------- (Former name or former address, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding as of June 10, 1998 - ---------------------------- ------------------------------- Common stock. $.01 par value 6,791,152 Jos. A. Bank Clothiers, Inc. Index Part I. Financial Information Page No. --------------------- -------- Item 1. Financial Statements Condensed Consolidated Statements 3 of Income - Three Months ended May 2, 1998 and May 3, 1997 Condensed Consolidated Balance 4 Sheets - as of May 2, 1998 and January 31, 1998 Condensed Consolidated Statements 5 of Cash Flows -Three Months ended May 2, 1998 and May 3, 1997 Notes to Condensed Consolidated 6-8 Financial Statements Item 2. Management's Discussion and Analysis 9-11 of Results of Operations and Financial Condition Part II. Other Information ----------------- Item 6. Exhibits and Reports on Form 8-K 12 (a) Exhibits - Exhibit 27-Financial Data Schedule (EDGAR filing only) Signatures 13 - ---------- 2 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited) Three Months Ended ------------------ May 2, May 3, 1998 1997 ------- ------- NET SALES $43,383 $38,655 Costs and expenses: Cost of goods sold 22,151 19,793 General and administrative 4,528 4,120 Sales and marketing 14,670 13,427 Store opening costs 240 -- ------- ------- 41,589 37,340 ------- ------- Operating income 1,794 1,315 Interest expense, net 437 590 ------- ------- Income from continuing operations before provision for income taxes 1,357 725 Provision for income taxes 529 288 ------- ------- INCOME FROM CONTINUING OPERATIONS 828 437 Loss from discontinued operations (51) (55) ------- ------- NET INCOME $ 777 $ 382 ======= ======= Earnings per share: Income from continuing operations: Basic $0.12 $0.06 Diluted $0.12 $0.06 Discontinued operations (net of tax): Basic $(0.01) $(0.01) Diluted $(0.01) $(0.01) Net income: Basic $0.11 $0.06 Diluted $0.11 $0.06 Weighted average shares outstanding: Basic 6,791 6,791 Diluted 6,918 6,827 See accompanying notes. 3 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) May 2, January 31, 1998 1998 -------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 677 $ 564 Accounts receivable 3,466 2,737 Inventories: Raw materials 7,938 6,994 Finished goods 39,016 33,120 ------- ------- Total inventories 46,954 40,114 ------- ------- Prepaid expenses and other current assets 4,695 4,338 Deferred income taxes 4,084 4,030 ------- ------- Total current assets 59,876 51,783 ------- ------- Property, plant and equipment, at cost 47,674 46,925 Accumulated depreciation and amortization (24,917) (24,818) ------- ------- Net property, plant and equipment 22,757 22,107 ------- ------- Deferred income taxes 1,207 1,680 Other assets 713 791 Net noncurrent assets of discontinued operations 750 783 ------- ------- TOTAL ASSETS $85,303 $77,144 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $16,381 $13,319 Accrued expenses 10,740 9,774 Current portion of long-term debt 1,720 1,885 Net current liabilities of discontinued operations 438 663 ------- ------- Total current liabilities 29,279 25,641 Long-term liabilities 18,832 15,105 ------- ------- Total liabilities 48,111 40,746 ------- ------- Shareholders' equity: Common stock 70 70 Additional paid-in capital 56,353 56,336 Accumulated deficit (17,311) (18,088) ------- ------- 39,112 38,318 Less treasury stock (1,920) (1,920) ------- ------- TOTAL SHAREHOLDERS' EQUITY 37,192 36,398 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $85,303 $77,144 ======= ======= See accompanying notes. 4 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended -------------------- May 2, May 3, 1998 1997 ------- ------- Cash flows from operating activities: Net income $ 777 $ 382 Loss from discontinued operations 51 55 ------- ------- Income from continuing operations 828 437 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Decrease in deferred taxes 419 240 Depreciation and amortization 950 854 Net increase in operating working capital (4,032) (5,929) ------- ------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES OF CONTINUING OPERATIONS (1,835) (4,398) ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (1,550) (599) ------- ------- NET CASH USED IN INVESTING ACTIVITIES OF CONTINUING OPERATIONS (1,550) (599) ------- ------- Cash flows from financing activities: Borrowings under long-term Credit Agreement 10,625 14,573 Repayment under long-term Credit Agreement (7,090) (9,435) Borrowings of other long-term debt 277 -- Repayment of other long-term debt (88) (98) Other 17 -- ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES OF CONTINUING OPERATIONS 3,741 5,040 ------- ------- Net cash used in discontinued operations (243) (106) ------- ------- Net increase (decrease) in cash and cash equivalents 113 (63) Cash and cash equivalents - beginning of period 564 719 ------- ------- Cash and cash equivalents - end of period $ 677 $ 656 ======= ======= See accompanying notes. 5 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 5/2/98 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION Jos. A. Bank Clothiers, Inc. (the Company) is a nationwide retailer of classic men's clothing through conventional retail stores and catalog direct marketing. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. These adjustments are of a normal recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's January 31, 1998 Annual Report on Form 10-K. 2. SIGNIFICANT ACCOUNTING POLICIES Inventories are stated at the lower of first-in, first-out, cost or market. The Company capitalizes into inventories certain warehousing and delivery costs associated with getting its manufactured and purchased inventory to the point of sale. Costs related to mail order catalogs and promotional materials are included in prepaid expenses and other current assets. These costs are amortized over the expected periods of benefit, not to exceed six months. The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (SFAS 109). This standard requires, among other things, recognition of future tax benefits, measured by enacted tax rates attributable to deductible temporary differences between financial statement and income tax basis of assets and liabilities and to tax net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. 6 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 5/2/98 3. WORKING CAPITAL The net change in operating working capital is composed of the following:
Three Months Ended ----------------------- May 2, May 3, 1998 1997 ------- ------- Increase in accounts receivable $ (729) $ (342) Increase in inventories (6,840) (6,929) (Increase)decrease in prepaids and other assets (279) 424 Increase in accounts payable 3,062 2,566 Increase (decrease) in accrued expenses and other liabilities 754 1,648) ------- ------- Net increase in operating working capital $(4,032) $(5,929) ======= =======
4. NEW ACCOUNTING STANDARDS Earnings Per Share - During 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128 (SFAS No. 128), "Earnings Per Share," which establishes new standards for computing and presenting earnings per share. The Company has adopted SFAS No. 128 and restated earnings per share data presented to reflect the new standard. SFAS No. 128 requires presentation of basic earnings per share and diluted earnings per share. The weighted average shares used to calculate basic and diluted earnings per share in accordance with SFAS No. 128 is as follows:
Three Month Ended ------------------- May 2, May 3, 1998 1997 ----- ------ Weighted average shares outstanding for basic EPS 6,791 6,791 Diluted EPS: Dilutive effect of common stock equivalents 127 36 ----- ----- Weighted average shares outstanding for 6,918 6,827 diluted EPS ===== =====
Weighted average shares outstanding for calculating dilutive EPS include basic shares outstanding, plus shares issuable upon the exercise of stock options, using the treasury stock method. Reclassifications - Certain reclassifications have been made to the May 3, 1997 financial statements in order to conform with the May 2, 1998, presentation. 7 Jos. A. Bank Clothiers, Inc. S.E.C. Form 10-Q, 5/2/98 5. DISCONTINUED OPERATIONS In January 1998, the Company formalized a plan to dispose of its manufacturing operations. Accordingly, the consolidated financial statements have been presented to reflect the disposition of the manufacturing operations as discontinued operations. The revenues, costs and expenses, assets and liabilities, and cash flows of the manufacturing operations have been excluded from the respective captions in the Consolidated Statements of Income, Consolidated Balance Sheets and Consolidated Statements of Cash Flows and the related footnotes included herein. In April 1998, the Company entered into an agreement which included the disposition of the Company's manufacturing operations. Based upon the agreement, an estimated loss on disposal of $2.5 million was reported net of an income tax benefit of $1.0 million for an after-tax loss of $1.5 million during the fiscal year ended January 31, 1998. Summarized financial information for the discontinued operations is as follows (in thousands): May 2, Jan 31, 1998 1998 ------ ------ Loss before income taxes $ (84) $ (374) Net loss $ (51) $ (266) ------ ------ Current assets $3,743 $3,839 Less current liabilities 4,181 4,502 ------ ------ Net current assets (liabilities) $ (438) $ (663) ------ ------ Noncurrent assets $ 991 $1,028 Noncurrent liabilities 241 245 ------ ------ Net noncurrent assets $ 750 $ 783 ------ ------ Revenues of the manufacturing operations primarily represent intercompany sales which have been eliminated in consolidation. Net current and noncurrent assets/liabilities of discontinued operations noted above includes inventories, plant and equipment, pension termination and other transaction costs associated with the discontinued manufacturing operations. 8 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 5/2/98 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion should be read in conjunction with the attached condensed consolidated financial statements and notes thereto and with the Company's audited financial statements and notes thereto for the fiscal year ended January 31, 1998. OVERVIEW - The Company's income from continuing operations for the quarter ended May 2, 1998 increased to $.8 million or $.12 per share compared to $.4 million or $.06 per share for the same period in 1997. This improvement was due primarily to higher sales attributable to an increase in comparable store sales and the opening of 15 new stores since May 3, 1997. The Company continues to pursue its expansion strategy of opening new stores in existing markets and opened seven new stores in existing markets during the quarter. This provides the Company with greater leverage of selling, marketing and general and administrative expenses. The Company's availability under the Credit Agreement increased to $25.6 million as of May 2, 1998 which was $11.8 million higher than the same time last year. RESULTS OF OPERATIONS - The following table is derived from the Company's condensed consolidated statements of income and sets forth, for the periods indicated, the items included in the condensed consolidated statements of income, expressed as a percentage of net sales. Percentage of Net Sales Quarter Ended ----------------------- May 2, May 3, 1998 1997 ------ ------ Net Sales......................................... 100.0% 100.0% Cost of goods sold................................ 51.1 51.2 ----- ----- Gross profit...................................... 48.9 48.8 General and administrative expenses............... 10.4 10.7 Sales and marketing expenses...................... 33.8 34.7 Store opening costs............................... .6 -- ----- ----- Operating income.................................. 4.1 3.4 Interest expense, net............................. 1.0 1.5 ----- ----- Income from continuing operations before income taxes 3.1 1.9 Provision for income taxes........................ 1.2 0.7 ----- ----- Income from continuing operations................. 1.9 1.1 Loss from discontinued operations, net............ (0.1) (0.1) ----- ----- Net income........................................ 1.8% 1.0% ===== ===== 9 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 5/2/98 NET SALES - Net sales increased 12.2 percent to $43.4 million in the first quarter of 1998 from $38.7 million in the same period last year. Comparable store sales increased 5.0 percent in the quarter compared to a 1.5 percent decline in the first quarter of 1997. The increase in comparable stores was achieved despite the opening of 15 new stores in the existing markets in the past 12 months. Sales generated by the new stores are not included in comparable sales. Catalog sales decreased 10.2 percent in the first quarter despite an 18.0 percent decrease in catalog circulation. COST OF GOODS SOLD - Gross profit increased $2.3 million to $21.2 million in the first quarter of 1998 compared to $18.9 million for the same period in the prior year. Gross profit as a percent of sales remained strong and increased .1 percent over the same period in the prior year, reflecting strong performance in all major categories especially sportcoats and slacks. GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses decreased to 10.4 percent of sales in the first quarter of 1998 compared to 10.7 percent in the first quarter of 1997. This improvement reflects the Company's continued effort to control overhead costs while growing the business. SALES AND MARKETING EXPENSES - Sales and marketing expenses (which include store and catalog payroll, marketing and occupancy expenses, among others) decreased .9 percent of sales to 33.8 percent in the first quarter of 1998 from 34.7 percent in the same period in the prior year. This improvement is primarily the result of achieving existing store sales increases while maintaining appropriate staffing levels in stores, sales generated by new stores in existing markets and a strong response to the catalog mailings. INTEREST EXPENSE - Interest expense was $.2 million lower in the first quarter of 1998 compared to the same period in 1997 due primarily to a $6.8 million decrease in total debt outstanding at May 2, 1998 compared to May 3, 1997. INCOME TAXES - At May 2, 1998, the Company had approximately $14.0 million of tax net operating loss carryforwards (NOLs) which expire through 2010. SFAS No. 109 requires that the tax benefit of such NOLs be recorded as an asset to the extent that management assesses the utilization of such NOLs to be "more likely than not". Realization of the future tax benefits is dependent on the Company's ability to generate taxable income within the carryforward period. Future levels of operating income are dependent upon general economic conditions, including interest rates and general levels of economic activity, competitive pressures on sales and margins and other factors beyond the Company's control. Therefore no assurance can be given that sufficient taxable income will be generated for full utilization of the NOLs. Management has determined, based on the Company's history of earnings, that future earnings of the Company will more likely than not be sufficient to utilize at least $10 million of NOLs prior to their expiration. Accordingly, the Company has recorded a deferred tax asset of $4 million and a valuation allowance of $1.4 million relating to the NOLs. Management believes that although the prior earnings and current year operating results might justify a higher amount, the recorded asset represents a reasonable estimate of the future utilization of the NOLs. The Company will continue to evaluate the likelihood of future profit and the necessity of future adjustments to the deferred tax asset valuation allowance. 10 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 5/2/98 LIQUIDITY AND CAPITAL RESOURCES - At May 2, 1998 the Company had outstanding borrowings of $16.7 million with $25.6 million of availability under its Credit Agreement compared to borrowings of $23.1 million and availability of $13.8 million at the same time last year. The Company's availability at May 2, 1998 increased $11.8 million compared to the same time in 1997. The increase in availability was generated principally by cash provided by operating activities during the preceding twelve months and a higher borrowing base created by an additional $4.0 million term loan facility which was obtained in September, 1997. The following table summarizes the Company's sources and uses of funds as reflected in the condensed consolidated statements of cash flows: Three Months Ended ------------------- May 2, May 3, 1998 1997 ------- ------- Cash provided by (used in): Operating activities $(1,835) $(4,398) Investing activities (1,550) (599) Financing activities 3,741 5,040 Discontinued operations (243) (106) ------- ------- Net increase (decrease) in cash and cash equivalents $ 113 $ (63) ======= ======= Cash used by operating activities was due primarily to higher inventory levels to support new stores, although the average inventory per store decreased. Cash used in investing activities relates primarily to improvements to new stores. Cash provided by financing activities represents primarily borrowings on the revolving loan. The Company expects to spend between $6.0 and $7.0 million on capital expenditures in 1998, primarily to open up to 17 new stores and to relocate two existing stores. The store expansion program is being financed through operations and the Credit Agreement. The Company also expects to open up to 46 additional stores (including 12 relocations) beyond 1998, mostly in existing markets. The Company believes that its existing markets can support these additional stores which will provide leverage for its management, distribution, advertising and sourcing infrastructure. To support this growth, the Company expects to upgrade certain information systems and its existing distribution center in 1998 and 1999. The Company believes that its current liquidity and its Credit Agreement will be adequate to support its current working capital and investment needs. Further expansion beyond 1998 may necessitate revised financing arrangements for the Company. The Company's plans and beliefs concerning future operations contained herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forecast due to a variety of factors that can adversely affect the Company's operating results, liquidity and financial condition such as risks associated with economic, weather and other factors affecting consumer spending, the mix of goods sold, pricing, availability of lease sites for new stores and other competitive factors. 11 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 5/2/98 PART 2. OTHER INFORMATION Item 6. Exhibits - ----------------- Exhibits 10.15 Brookhill Lease Agreement, filed herewith 10.15a First Amendment to Brookhill Lease Agreement, filed herewith 10.16 Brookhill Sublease Agreement, filed herewith 10.17 North Avenue Lease Agreement, filed herewith 27.0 Financial Date Schedule, filed herewith 12 Jos. A. Bank Clothiers, Inc. S.E.C.Form 10-Q 5/2/98 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: June 15, 1998 Jos. A. Bank Clothiers, Inc. (Registrant) /s/: David E. Ullman _________________________________________________ Executive Vice President, Chief Financial Officer 13 EX-10 2 EXHIBIT 10.15 EXHIBIT 10.15 LANDLORD: CONTINENTAL STEWART WAREHOUSE LIMITED PARTNERSHIP TENANT: JOS. A. BANK CLOTHIERS, INC. LEASE Dated: May 11, 1994 Continental Stewart Warehouse 4241 Brookhill Road Baltimore City, Maryland 21215 -1- TABLE OF CONTENTS 1. PAYMENT OF RENTAL........................................3 2. USE .....................................................3 3. UTILITIES................................................3 4. COMPLIANCE WITH LAWS.....................................3 5. ASSIGNMENT AND SUBLETTING................................4 6. LOADING CAPACITY.........................................5 7. INCREASE IN LANDLORD'S INSURANCE RATES...................5 8. INDEMNIFICATION - LIABILITY INSURANCE....................5 9. ALTERATIONS..............................................5 10. OWNERSHIP OF ALTERATIONS.................................6 11. REPAIRS AND MAINTENANCE..................................6 12. TAX/INSURANCE ESCALATION.................................7 13. DEFAULT..................................................7 14. DAMAGE OR DESTRUCTION....................................8 15. POSSESSION...............................................9 16. EXTERIOR OF PREMISES - SIGNS.............................9 17. RELOCATION...............................................9 18. FOR RENT/SALE SIGNS......................................9 19. RIGHT OF ENTRY...........................................9 20. TERMINATION OF TERM.....................................10 21. CONDEMNATION............................................10 22. SUBORDINATION...........................................10 23. ATTORNMENT..............................................10 24. PARKING AND COMMON FACILITIES...........................11 25. NOTICES.................................................12 26. NON-WAIVER..............................................12 27. SUCCESSORS AND ASSIGNS..................................12 28. SECURITY DEPOSIT........................................12 29. NOTICES TO MORTGAGEE/TENANT FINANCIAL STATEMENT...................................13 30. ESTOPPEL CERTIFICATE....................................13 31. TENANT REPRESENTATIVE...................................13 32. NO OFFER................................................14 33. CONSTRUCTION............................................14 34. EXISTING EQUIPMENT......................................14 35. WAIVER OF JURY TRIAL AND RIGHT TO COUNTERCLAIM.................................14 36. BROKERAGE...............................................15 37. LANDLORD'S DEFAULT......................................15 38. RENEWAL OPTION..........................................15 39. HAZARDOUS SUBSTANCES....................................15 40. MISCELLANEOUS...........................................16 41. EARLY TERMINATION RIGHT.................................17 Exhibit A - Plot Plan Exhibit A-1 - Space Plan Exhibit A-2 - Survey Exhibit B - Tax Bill Exhibit C - Assessment Notice Exhibit D - Hart Refrigeration Letter -2- LEASE AGREEMENT THIS LEASE, made this day of 11th day of May, 1994, by and between CONTINENTAL STE-WART WAREHOUSE LIMITED PARTNERSHIP, a Maryland limited partnership, having an address at P.O. Box 10147, Baltimore, Maryland 21285, (hereinafter called "Landlord"), and JOS. A. BANK CLOTHIERS, INC., a Delaware corporation, having an address at 500 Hanover Pike, Hampstead, Maryland 21074-2095 (hereinafter called "Tenant") WITNESSETH, that in consideration of the rental hereinafter agreed upon and the performance of all the conditions and covenants hereinafter set forth on the part of the Tenant to be performed, the Landlord does hereby lease unto the said Tenant, and the latter does lease from the former, the following premises (hereinafter sometimes called the "premises"): BEING all those premises outlined in red on the Plat attached hereto as Exhibit A, comprising 51,062 square feet, as shown on Exhibit A-1 said premises being located within a building known as Continental Stewart Warehouse, 4241 Brookhill Road, Baltimore City, Maryland 21215, as shown on the survey attached hereto as Exhibit A-2, for the term of ten (10) years, beginning sixty (60) days after delivery of premises to Tenant with Landlord's Work complete, and ending on the last day of the 120th full calendar month during the term, subject to the early termination right set forth in Section 41, at and for the annual rental of One Hundred Fifty-three Thousand One Hundred Eighty-six Dollars ($153,186.00) per annum, payable in advance, in equal monthly installments, as follows: Twelve Thousand Seven Hundred Sixty-five Dollars Fifty Cents ($12,765.50) for the first thirty (30) months of the term; at and for the annual rental of One Hundred Sixty-five Thousand Nine Hundred Fifty-one Dollars Fifty Cents ($165,951.40) per annum, payable in advance, in equal monthly installments, as follows: thirteen Thousand Eight Hundred Twenty-nine Dollars Twenty-nine Cents ($13,829.29) for the thirty first (31st) through sixtieth (60th) month of the term; at and for the annual rental of One Hundred Seventy-eight Thousand Seven Hundred Seventeen Dollars ($178,717.00) per annum, payable in advance, in equal monthly installments, as follows: Fourteen Thousand Eight Hundred Ninety-three Dollars Eight Cents ($14,893.08) for the sixty first (61st) through ninetieth (90th) month of the term; at and for the annual rental of One Hundred Ninety-one Thousand Four Hundred Eighty-two Dollars Fifty Cents ($191,482.50) per annum, payable in advance, in equal monthly installments, as follows: Fifteen Thousand Nine Hundred Fifty-six Dollars Eighty-seven Cents ($15,956.87) for the ninety first (91st) month through the one hundred twentieth (120th) month. Landlord and Tenant agree that once the commencement date is finally determined, Landlord and Tenant will enter into a separate Lease Commencement Agreement setting forth the commencement and expiration dates of the Lease. Payments are due on the first day of each and every month during the term of this Lease, without setoff or deduction except as specifically hereinafter Bet forth. In the event the term commences on other than the first day of any calendar month, rental for such calendar month shall be payable in an amount equal to the product of $12,765.50 multiplied by a fraction the numerator of which is the number of days within the term during such calendar month and the denominator of which is the number of days within such calendar month. All rentals shall be paid to Landlord at: P.O. Box 10147, Baltimore, Maryland 21285, or at such other place or to such appointee of the Landlord as Landlord may from time to time designate in writing. This Lease is made subject to the following additional terms, covenants and conditions: 1. Payment of Rental. Tenant covenants and agrees to pay the rental herein reserved and each installment thereof promptly when and as due, without setoff or deduction whatsoever, except as specifically set forth herein. 2. Use. Tenant covenants and agrees to use and occupy the premises solely for the following purpose: office use, warehousing, and cutting facility of clothing and related materials and for no other purpose or purposes. 3. Utilities. Landlord shall install a water meter or submeter at Landlord's expense and thereafter Tenant shall pay all water and sewer charges for the premises based on such meter readings. Tenant will open its own account with Baltimore Gas and Electric Company for gas and electricity upon taking possession of the Premises. Tenant shall timely pay all costs of electricity, gas, telephone and other utilities used or consumed on the premises, together with all taxes, levies or other charges on such Utilities. 4. Compliance with Laws. Tenant covenants and agrees that it will, at its own expense, observe, comply with and execute all laws, orders, rules, requirements and regulations of all governmental agencies, and all rules, directions, requirements and recommendations of the local board of fire underwriters and the fire insurance rating organizations having jurisdiction over the area in which the premises are situated, or other bodies or -3- agencies now or hereafter exercising similar functions in the area in which the premises are situated, in any way pertaining to the premises or the use and occupancy thereof, provided, however, that Landlord shall be BO obligated with respect to the building and those portions of the premises for which Landlord is responsible in accordance with this Lease. If Tenant receives any violation notices from any governmental agencies regarding the premises, it agrees to forward a copy of such notice to Landlord for Landlord's records, together with, if the correction of such violation is Tenant's responsibility, written information evidencing Tenant's correction of such violation. 5. Assignment. (a) Tenant covenants and agrees not to assign this Lease, in whole or in part, nor sublet the premises, or any part or portion thereof, nor grant any license or concession for all or any part thereof, without the prior written consent of the Landlord in each instance first had and obtained, and which consent may be withheld for any reason or no reason. If such assignment or subletting is permitted, Tenant shall not be relieved from any liability whatsoever under this Lease. In the event that the amount of the rent to be paid to the Tenant by any assignee or sublessee is greater than the rent required to be paid by the Tenant to the Landlord pursuant to this Lease, Tenant shall pay to Landlord any such excess as is received by Tenant from such assignee or sublessee. An assignment for the benefit of Tenant's creditors or otherwise by operation of law shall not be effective to transfer or assign Tenant's interest under this Lease unless Landlord shall have first consented thereto in writing. (b) In the event this Lease contains a renewal option exercisable by Tenant, Landlord's consent to an assignment or sublease of the premises or any portion thereof during the original Lease term shall be deemed to be conditioned upon the agreement of Tenant and such assignee or sublessee that such renewal right or option shall terminate and be of no further force or effect unless Landlord's consent to such assignment or sublease expressly provides otherwise. (c) In the event Tenant desires to assign this Lease other than to an assignee for which Landlord's consent is not required or to sublease all or any substantial portion of the premises, Landlord shall have the right and option to terminate this Lease, which right or option shall be exercisable by written notice from Landlord to Tenant within thirty (30) days from the date Tenant gives Landlord written notice of its desire to assign or sublease. (d) Notwithstanding anything to the contrary contained in this Lease, Tenant shall be entitled to assign this Lease upon the following terms and conditions: (i) Tenant may, without obtaining Landlord's consent: (1) assign or otherwise transfer the leasehold estate created by this Lease to any "affiliate, of Tenant, which for purposes of this Lease shall be any entity under common control with Tenant, or to the parent, or any subsidiary or successor corporation of Tenant, provided said affiliate has a net worth of Five Million Dollars ($5,000,000.00) or more; and (2) merge into or consolidate with any corporation, provided, following such merger or consolidation, the net worth of the surviving entity shall be Five Million Dollars ($5,000,000.00) or more; and (3) assign or otherwise transfer the leasehold estate created by this Lease: (A) to a purchaser of all or substantially all of the assets of Tenant, as a going business, or (B) to the purchaser of the assets comprising a substantial number of Tenant's locations, provided that in any such instance the acquiring entity, immediately following such acquisition, assumes directly to Landlord the obligations to perform and be bound by this Lease for all payments and performances accruing from and after the date of such acquisition and has a net worth of Five Million Dollars ($5,000,000.00) or more. (ii) In the event Tenant seeks to assign or transfer only the leasehold estate created by this Lease and does not seek to assign or transfer in conjunction therewith any of the other locations, assets or shares of Tenant, Tenant shall, subject (ii), be entitled to effect such acquiring entity has a net worth more and agrees in writing to be obligations of Tenant under this any such assignment or transfer o the ensuing provisions of this paragraph an assignment or transfer provided that the of Five Million Dollars ($5,000,000.00) or bound by all of the covenants, duties and Lease. However, prior to the consummation of Tenant shall notify Landlord in writing that such transaction is being considered, which notice ("Tenant's Transfer Notice") shall set forth (1) the trade name and legal name of proposed assignee or transferee (which trade name and legal name shall be deemed to be expressly approved by Landlord for use at the premises if Landlord does not cancel this Lease as hereinafter provided in this paragraph), and (2) a description of the business conducted by the proposed assignee or transferee (which business shall be deemed to be expressly approved by Landlord as the use of the premises if Landlord does not cancel this Lease as hereinafter provided in this paragraph). In addition, together with Tenant's Transfer Notice, Tenant shall provide Landlord with an audited financial statement of the proposed assignee or transferee. Within thirty (30) days after the date of Tenant's Transfer Notice, Landlord shall have the right to terminate this Lease by sending Tenant written notice of such termination ("Landlord's Transfer Termination Notice"). In the event Tenant receives -4- Landlord's Transfer Termination Notice, Tenant shall, within thirty (30) days after Tenant's receipt of Landlord's Transfer Termination Notice, notify Landlord, in writing, of the date upon which this Lease shall terminate, which date (A) shall thereafter be the Termination Date, and (B) shall not be more than twelve (12) months after the date Tenant received Landlord's Transfer Termination Notice. In the event Tenant does not receive Landlord's Transfer Termination Notice within thirty (30) days after the date of Tenant's Transfer Notice, Landlord shall be deemed to have approved the proposed assignment or transfer, and Tenant may proceed to effect same. (iii) In the event of any permitted assignment heretofore described in this paragraph (d), Tenant shall be and remain liable for the full performance of this Lease and for all payments and performance falling due or accruing up to the date of any such assignment or transfer, which liability shall survive the permitted assignment, but Tenant shall be relieved of any responsibility with respect to any and all covenants, duties and obligations under this Lease occurring or accruing from and after the date of any such assignment or transfer. (iv) No transfer or issuance of the shares of Tenant shall be regarded as an assignment or transfer of the leasehold estate created by this Lease to which Landlord's consent shall be required. (v) No consent of Landlord shall be required to any pledge or assignment of this Lease or Tenant's interest herein in connection with the Tenant's general corporate financing or a pledge or assignment of all or substantially all of Tenant's assets, leases or leasehold interests. 6. Loading Capacity. Tenant covenants and agrees that it shall not load the premises beyond its present carrying or loading capacity. 7. Increase in Landlord's Insurance Rates. Tenant will not do, or suffer to be done, anything in or about the premises, or keep or suffer to be kept, anything in or about the premises which will contravene or affect any policy of insurance, now existing or which the Landlord may hereafter place thereon, or which will prevent the Landlord from procuring such policies in companies acceptable to Landlord at standard rates. Tenant will, at Tenant's sole expense, take all such reasonable actions and make any reasonable installations or alterations as may be necessary to obtain the greatest possible reduction in the insurance rates for the premises and the building in which the premises are located, caused solely by the occupancy of Tenant and the nature of the business carried on by Tenant in the premises, or otherwise resulting directly from any act of Tenant, its agents, servants, employees or customers. Landlord represents that Tenant's uses of the premises as herein above set forth do not contravene or affect any policy of insurance now existing or the rate therefore. 8. Indemnification - Liability Insurance. (a) Except as may be covered by any policy of insurance carried or required hereunder to be carried by Landlord, Tenant shall and does hereby indemnify and save harmless Landlord, its successors or assigns, from all claims and demands of every kind, that may be brought against it, them or any of them for or on account of any damage, loss or injury to persons or property in or about the premises or the building and appurtenances in which the premises are situated, arising from or out of Tenant's use or occupancy thereof or occasioned wholly or in part (in which event the indemnification shall be proportional) by any act or omission of Tenant, its agents, servants, contractors, employees or invitees, and from any and all costs and expenses, counsel fees, and other charges which may be imposed upon Landlord, its successors or assigns, or which it or they may be obligated to incur in consequence thereof. (b) Tenant covenants and agrees that it will, throughout the term of this Lease, carry and pay for public liability insurance in a company reasonably satisfactory to Landlord naming Landlord as an additional insured, with combined single limits of liability of not less than $2,000,000 for bodily injury or death for one person and $5,000,000 for bodily injury or death to any number of persons in any one occurrence, and $1,000,000 for property damage, and will furnish Landlord with a certificate of same showing a ten (10) days, notice of cancellation clause. In addition, Tenant agrees to carry casualty and property damage on its property or on any property of Landlord which is specifically demised to Tenant pursuant to this Lease, including water damage and sprinkler leakage legal liability, and Tenant specifically agrees that Landlord shall have no liability to Tenant for any property damage arising from any cause whatsoever except for any negligence of or imputed to Landlord. (c) Except as may be covered by any policy of insurance carried or required hereunder to be carried by Tenant, Landlord shall and does hereby indemnify and save harmless Tenant, its permitted successors or assigns, from all claims and demands of every kind, that may be brought against it, them, or any of them for or on account of any damage, loss or injury to persons or property in or about the premises or the building and appurtenances in which the premises are situated arising from or out of Landlord's use thereof or occasioned wholly or in part (in which event the indemnification shall be proportional) by any act or omission of Landlord, its agents, servants, contractors, employees or invitees, and from any and all costs and expenses, counsel fees, and other charges which may be imposed upon Tenant, its permitted successors or assigns, or which it or they may be obligated to -5- incur in consequence thereof. (d) Landlord and Tenant shall each require their respective insurers to include in all their insurance policies which could give rise to a right of subrogation against the other, a clause or endorsement whereby said insurers shall waive any rights of subrogation against Tenant in the case of Landlord's insurers or against Landlord in the case of Tenant's insurers. 9. Alterations. Tenant shall not make any structural alterations to the premises, or any part thereof, without prior written consent of Landlord in each instance first had and obtained. If Tenant shall desire to make such alterations, plans for the same shall first be submitted to and approved by Landlord, and all work and installations shall be performed by Tenant at its own expense in accordance with approved plans. Tenant agrees that all such work shall be done in a good and workmanlike manner, that the structural integrity of the building shall not be impaired, and that no liens shall attach to the premises by reason thereof. Tenant agrees to obtain, at Tenant's expense, all permits required for such alterations. Tenant, may, without Landlord's consent, make any and all interior, non-structural repairs, replacements, alterations, additions, improvements or changes to the premises which Tenant may deem necessary or appropriate. Any alterations, additions or improvements installed or placed by or for Tenant in the premises (except for movable furniture, other personally, tailor shop equipment, light fixtures, trade fixtures and any other property that belongs to Tenant which may be removed without substantial alteration or damage to the premises), regardless of when made, may, at the termination of this Lease, at the option of the Landlord, become the property of Landlord and remain upon the premises. 10. Ownership of Alterations. Unless Landlord shall elect that all or part of any alteration made by Tenant to the premises (including any alteration consented to by Landlord pursuant to Paragraph 9 hereof) shall remain on the premises after the termination of this Lease, the premises shall be restored to their original condition by Tenant before the expiration of this Lease at Tenant's sole expense. Landlord and Tenant agree, however, that with respect to the Tenant Work set forth in Section 33 of this Lease, such Tenant Work shall be deemed as having been completed prior to the commencement date of this Lease and therefore Tenant will not have to remove any of such improvements upon the expiration or earlier termination of this Lease. Upon such election by Landlord, any such alterations, improvements, betterments or mechanical equipment, including but not limited to, heating and air conditioning systems, shall become the property of the Landlord at the expiration or sooner of the termination of this Lease, and all right, title and interest thereof of Tenant shall immediately cease, unless otherwise agreed to in writing by Landlord. Tenant shall repair promptly, at its own expense, any damage to the premises caused by bringing into the premises any property for Tenant's use, or by the installation or removal of such property, regardless of fault or by whom such damage shall be caused. Tenant, upon the expiration or earlier termination of the Term, and/or at any time during the Term, shall have the right to remove from the premises all trade fixtures belonging to Tenant (including, but not limited to, movable furniture, other personalty, tailor shop equipment, light fixtures and any other property of Tenant which may be removed without substantial alteration or damage to the premises) and all personal property of Tenant. In the event Tenant shall effect any such removal, Tenant shall be required to repair any damage to the premises caused by such removal. 11. Repairs and Maintenance. (a) The premises hereby leased, are leased to Tenant "As Is," except as specifically provided herein. Further, except as herein expressly provided, Landlord shall be under no liability, nor have any obligation to do any work or make any repairs in or to the premises, and any work which may be necessary to outfit the premises for Tenant's occupancy or for the operation of Tenant's business therein is the sole responsibility of Tenant and shall be performed by Tenant at its own cost and expense. Tenant acknowledges that it has fully inspected the premises prior to the execution of this Lease, and Tenant further acknowledges that Landlord has made no warranties or representations with respect to the condition or state of repairs of the premises. (b) Tenant will, during the term of this Lease, keep the premises and appurtenances (including windows, doors, plumbing, heating and electrical facilities and installations), in good order and repair and will make all necessary repairs thereof at its own expense, except that Landlord will make all necessary repairs and replacements to the exterior masonry walls, structural components, and roof of the premises, after being notified in writing by Tenant of the need for such repairs, and shall have a reasonable time in which to complete such repairs, provided Landlord commences such repairs within twenty (20) days (or within the shortest period necessary in order to prevent imminent death, personal injury or damage, or destruction of property) of written notification from Tenant and diligently pursues same to completion. Tenant agrees to carry a maintenance and/or service agreement or policy on the HVAC system in the premises; provided Tenant carries such policy and supplies evidence to Landlord of same upon request, Landlord will warrant the repair or replacement of any major component (e.g. heat exchangers, compressor, condenser, motors) in the HVAC system during the first twelve (12) months of the Lease. Tenant will, at the expiration of the term or at the sooner termination, deliver up the premises and any equipment specifically demised to Tenant hereunder in the same good order and condition as they were at the beginning of the tenancy, reasonable wear and tear excepted. Tenant further agrees that it will maintain the premises at its own expense in a clean, orderly and sanitary condition, free of insects, rodents, vermin and other pests; and that it will not permit undue accumulation of garbage, trash, rubbish or other refuse, but will remove the same at its own expense and will -6- keep such refuse in proper containers inside the premises until removed. Tenant's "proportionate share" of such cost shall be the same percentage of the total cost as the square foot area demised to Tenant bears to the total square foot leasable area of the entire building. Tenant further agrees that it will not install any additional electrical and/or plumbing capacity unless it has first obtained Landlord's written consent thereto, and, if such consent is given, Tenant will install the same at its own cost and expense, and Tenant shall obtain, at Tenant's expense, all permits required for such installation. The foregoing restrictions shall not apply to any distribution or redistribution of electrical and/or plumbing capacity exclusively serving the premises by Tenant within such premises. (c) In the event Tenant shall not proceed promptly and diligently to make any repairs or perform any obligation imposed upon it by subparagraphs (a) and (b) hereof within twenty (20) days (or within the shortest period necessary in order to prevent imminent death, personal injury or damage, or destruction of property) of written notification from Landlord and/or thereafter diligently pursue such repairs or perform such obligations to completion, then and in such event, Landlord may, at its option, enter the premises and do and perform the things specified in said notice, without liability on the part of Landlord for any lose or damage resulting from any such action by Landlord except in the event of negligence of or imputed to Landlord, and Tenant agrees to pay promptly upon demand any Cost or expense incurred by Landlord in taking such action. 12. Tax/Insurance Escalation. Notwithstanding the gross leasable area shown on Exhibit A, Landlord represents and warrants that the gross leasable area of the building is 160,840, per Landlord's rent roll. The premises hereby leased comprise approximately thirty-one and seven tenths percent (31.7%) (51,062/premises square footage divided by 160,840/gross leasable area of the building as of the date of this Lease) of the total land and/or buildings within which the premises are located. (a) Tenant agrees to pay Landlord as additional rent, thirty-one and seven tenths percent (31.7%) of any increases in real estate taxes assessed against the land and/or buildings), in excess of the taxes for the 1994/1995 fiscal year (July 1, 1994 - June 30, 1995), whether as a result of an increase in the tax rate, or the levy, assessment or imposition of any tax on real estate as such not now levied, assessed or imposed. Tenant's proportionate share shall be paid to Landlord within thirty (30) days after being billed therefor, not more than once per year. The foregoing shall apply to increase in real estate taxes assessed against the land or buildings) generally, and not resulting from improvements placed thereon by Tenant. In the event of any increases in real estate taxes resulting from improvements, alterations or additions made by Tenant, Tenant shall pay the entire amount of said increase, provided, however, that increases resulting from improvements, alterations or additions made by other tenants in the building shall be paid for by Landlord or such other tenants prior to the calculation of Tenant's share of real estate taxes. (Appraiser's worksheet shall be the sole determinate of how such increases resulted.) If this Lease shall be in effect for less than a full fiscal year, Tenant shall pay its pro rata share of taxes, based upon the number of months that this Lease is in effect. "Taxes" as used herein shall include, but not by way of limitation, all paving taxes, special paving taxes, Metropolitan District Charges, and any and all other benefits or assessments which may be levied on the premises or the land and/or buildings) in which the same are situate, and shall also include any reasonable legal fees or costs incurred by Landlord in contesting any such benefits or assessments, but shall not include any income tax on the income or rent payable hereunder. Attached hereto as Exhibits B and C, respectively, are copies of the tax bill for the land and building for the 1993/1994 fiscal year and all current assessment notices for the land and building, which notices contain, inter alia, the assessment for 1994/1995 fiscal year. Landlord represents that such copies are true, correct and complete reproductions of the originals. Any penalties or interest for late payments of real estate taxes shall not be included in the definition of real estate taxes and shall be the sole responsibility of Landlord. If any real estate taxes may be paid in installments, Landlord shall cause such real estate taxes to be paid over the longest installment period permitted and only the installment coming due during the Term shall be included within real estate taxes hereunder. All refunds, rebates and discounts received by Landlord in connection with such real estate taxes shall be deducted prior to the calculation of Tenant's proportionate share of the real estate taxes. Landlord warrants and represents to Tenant that none of the expenses included within Tenant's proportionate share of real estate taxes shall be included within any other charge payable under this Lease. The definition of real estate taxes shall not include any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax that is or may be imposed upon Landlord. Tenant shall have the right to audit Landlord's books and records from time to time, but not more often than once per tax year and only if Landlord fails to provide Tenant with a copy of the tax bill from which Landlord computed Tenant's proportionate share as well as copies of back-up bills for any other items properly included within the real estate taxes billed to Tenant. (b) Tenant agrees to pay, as additional rent, thirty-one and seven tenths percent (31.7%), of any increases in premiums for any insurance (including but not limited to property and liability premiums) which shall be maintained by Landlord in respect to the building over the premiums for such insurance for the first twelve (12) month period covered by such insurance beginning on or after the commencement date of the term. Insurance premiums for the base year, October 1, 1993 - September 30, 1994, the current insurance year, total $8,162.00. Landlord estimates that insurance premiums for next year's insurance year, October 1, 1994 - September 30, 1995, will total $9,800.00. Tenant's proportionate share shall be paid to Landlord within thirty (30) days after being billed therefor, not more than once per year. 13. Tenant's Default. -7- (a) Tenant shall be deemed in default upon the occurrence of any one or more of the following circumstances: (i) if Tenant shall fail to pay any rent, fee, charge or other amount due Landlord hereunder within ten (10) days after notice that the same has become due, all of which shall be deemed to be "rent" pursuant to this Lease; or (ii) if Tenant shall fail to commence performance of any non-monetary term, condition or covenant of this Lease applicable to Tenant within twenty (20) days after written notice of such failure from Landlord or shall fail to thereafter diligently prosecute completion thereof; or (iii) if Tenant or an agent of Tenant shall falsify any report required to be furnished to Landlord pursuant to the terms of this Lease; or (iv) if Tenant is adjudicated by final non-appealable order a bankrupt or insolvent by any court of competent jurisdiction, or if any such court enters any order, judgment or decree finally approving any petition against Tenant seeking reorganization, liquidation, dissolution or similar relief or if a receiver, trustee, liquidator or conservator is appointed for all or substantially all of Tenant's assets and such appointment is not contested within the period allowed by applicable rule or law and thereafter diligently defended to dismissal, or if Tenant seeks or consents to any of the relief herein above enumerated in this subparagraph or files a voluntary petition of bankruptcy or insolvency or makes an assignment of all or substantially all of its assets for the benefit of creditors or admits in writing its inability to pay its debts generally as they come due or files Articles of Dissolution, or similar writing indicating its intention to wind up or liquidate its business, with the appropriate authority of the place of its incorporation; or (v) if Tenant shall suffer this Lease to be taken under any writ of execution. (b) Landlord may exercise any right under this Section without service of notice except as otherwise set forth herein or resort to legal process and without being deemed guilty of trespass, or becoming liable for any lose or damage which may be occasioned thereby. Any notice of default shall also operate as a Notice to Quit and Tenant hereby expressly waives any other notice required by law. (c) Upon default by Tenant, this Lease shall, at Landlord's option, cease and terminate. Upon default by Tenant, Landlord upon not less than 3 days' notice may re-enter the premises, using such force as may be necessary, and remove all persons and chattels therefrom and store such property in a public warehouse or elsewhere at the cost of, and for the account of, Tenant. Landlord shall not be liable (except in the event of negligence of or imputed to Landlord) in damages or otherwise by reason of reentry or termination of the term of this Lease nor shall such re-entry or termination waive, bar, or in any way prejudice any other remedies available to Landlord. Notwithstanding such termination, the liability of Tenant for any rent provided for herein shall not be extinguished for the balance of the lease term remaining after said termination, and Landlord shall be entitled to recover immediately as liquidated damages an amount equal to the present value (calculated at prime) of the monthly rent and additional rent for the balance of the lease term, times the number of months remaining in the balance of the lease term. (d) In the event of any default hereunder by Tenant, Landlord may upon not less than three (3) days' notice or any time thereafter cure such default for the account, and at the expense of, Tenant. In the case of an emergency, Landlord need not give Tenant any notice before undertaking to cure Tenant's default. If Landlord at any time, by reason of such default, is compelled to pay or elects to pay any sum of money or do any act that will require the payment of any sum of money, or is compelled to incur any expense, the sum or sums so paid by Landlord, plus an additional fifteen percent (15%) of such sum or sums for administrative or overhead expenses shall be deemed to be additional rent hereunder and shall be due from Tenant to Landlord on the first day of the month following Landlord's payment of such respective SUMB or expenses but not less than thirty (30) days after invoice to Tenant. (e) Tenant shall, at the expiration or termination of this Lease, yield possession to Landlord, and, failing to do so, shall pay as liquidated damages for each day possession is withheld an amount per day equal to one-fifteenth (1/15th) of the monthly rent, or the highest amount permitted by law, plus other damages caused by Tenant's failure to yield Possession. All rights and remedies of Landlord herein enumerated shall be cumulative and none shall exclude any other right or remedy allowed by law and said rights and remedies may be exercised and enforced concurrently and whenever and as often as occasion therefor arises. Notwithstanding anything in this Lease to the contrary, Landlord hereby forever waives and relinquishes any lien (contractual, statutory or otherwise) which Landlord may have or claim upon Tenant's chattels, movable and non-movable fixtures, furniture, equipment, machinery, inventory and any other property now or hereafter located at the Premises and belonging to Tenant. In the event Landlord shall take possession of the Premises for any reason, Landlord shall so notify Tenant and shall permit Tenant to remove such property therefrom. The waiver of any breach of this Lease shall not constitute a waiver of the term, covenant or condition breached or of any subsequent breach of the same or any other term, covenant or condition of this Lease; and the acceptance of payment or rent during the continuance of any breach of this Lease shall not constitute a waiver of such breach. Rent including any fee, charge or other amount due from Tenant hereunder may be recovered by Landlord from Tenant by distress or action or by any legal process as may at the time be in operation and force relating to proceedings between landlords and tenants. (f) Landlord may relet the whole or any portion of the Premises, for any period equal to or greater or less than the period which would have constitute the balance of the Term, for any sum which Landlord may deem reasonable, to any tenant(s) which Landlord may deem suitable and satisfactory, and for any use -8- and purposes which Landlord may deem appropriate, and Landlord may grant concessions of free rent. Landlord shall in no event be liable in any way whatsoever for its failure or refusal to relet the Premises or any part thereof, or in the event that the Premises are relet for its failure to collect the rent under such reletting, and no such refusal or failure to relet or failure to collect rent shall release or affect Tenant's liability for damages or otherwise under this Lease. Notwithstanding anything in this Lease to the contrary, Landlord agrees that it is obligated to act in good faith in dealing with any prospects proposed by Tenant. (g) In the event Tenant fails to pay Landlord any rent including any other charge due hereunder, also deemed to be rent, within ten (10) days from the date on which any such payment was due, Landlord may, at its option, charge Tenant a late charge equal to fifteen percent (15%) of the rental payment or other such charge, which late charge shall also be collectible as rent and shall be payable by Tenant to Landlord within ten (10) days after written notice from Landlord to Tenant assessing the same. Landlord agrees, however, that it shall not assess any late charge against Tenant until the second time during the Term that Tenant fails to pay Landlord any rent due hereunder, within ten (10) days from the date on which any such payment was due. 14. Damage or Destruction. (a) If, during the Lease term, the premises hereby leased are damaged by fire or other casualty, but not to the extent that Tenant is prevented from carrying on business in the Premises, Landlord shall promptly cause such damage to be repaired; if such damage renders any portion of the premises untenantable, the rent reserved hereunder (except Tenant's share of any charges for water) shall be reduced during the period of its untenantability proportionately to the amount by which the area so rendered untenantable bears to the entire area leased hereunder, and such reduction shall be apportioned from the date of the casualty to the date when the leased premises are rendered fully tenantable. Notwithstanding the foregoing, in the event such fire or other casualty damages or destroys any of Tenant's leasehold improvements, alterations, betterments, fixtures or equipment, including Landlord's equipment specifically demised to Tenant hereunder, Tenant shall cause the same to be repaired or restored at Tenant's sole cost and expense and Landlord shall have no liability for the restoration or repair thereof. (b) If, during the Lease term, the premises, or a substantial portion of the building in which the premises is situated is rendered wholly untenantable as the result of fire, the elements, unavoidable accident or other casualty, Landlord shall have the option to terminate this Lease, such option to be exercised by Landlord by written notice to Tenant within thirty (30) days after the fire, accident or casualty. If, during the Lease term, the premises are rendered wholly untenantable as the result of fire, the elements, unavoidable accident or other casualty, Tenant shall have the option to terminate this Lease, such option to be exercised by Tenant by written notice to Landlord within thirty (30) days after the fire, accident or casualty. If, during the Lease term, a substantial portion of the premises is damaged (as hereinafter defined) as the result of fire, the elements, unavoidable accident or other casualty, then either Landlord or Tenant shall have the option to terminate this Lease, such option to be exercised by written notice to the other within fifteen (15) days after the expiration of the thirty (30) day period provided for in the sentence following. For the purpose of the immediately preceding sentence, a substantial portion of the premises shall be deemed to have been damaged if Landlord as a result of the extent of the fire, accident or casualty does not restore the premises within thirty (30) days following the fire, accident or casualty to its condition on the date Landlord delivered the premises to Tenant after completion of Landlord's Work pursuant to Section 33(a) of this Lease. In the event neither party elects to terminate this Lease as aforesaid, and Landlord has restored the premises as specified herein within thirty (30) days following the fire, accident or casualty, Tenant shall promptly and diligently perform the balance of the work necessary to restore the premises to its condition after the completion of Tenant's Work specified in Section 33(b) herein. Except in the case of substantial damage, wherein Landlord is required to complete its restoration work within thirty (30) days following the date of the casualty, all restoration performed pursuant to this Section 14 shall be completed as promptly as reasonably possible and the rent reserved hereunder shall abate until the earlier of thirty (30) days after the premises are again rendered tenantable or the date Tenant recommences manufacturing operations at the premises; and in the event this Lease is not earlier terminated and Landlord undertakes to restore the premises and such restoration is not completed within 180 days after the casualty, Tenant shall have the right to terminate this Lease. 15. Possession. In case possession of the premises, in whole or in part, cannot be given to Tenant on or before sixty (60) days prior to the commencement date of the term of this Lease, Landlord agrees to abate the rent and additional rent proportionately until sixty (60) days after possession is given to Tenant, and Tenant agrees to accept such pro rata abatement as liquidated damages for the failure to obtain possession on the commencement date herein specified. The parties hereto covenant and agree that if the term of this Lease commences on a date other than the date herein specified, they will, upon the request of either of them, execute an agreement in recordable form setting forth the new commencement and termination dates of the Lease term. Under no circumstances shall Landlord be under any liability for failure to deliver possession of the premises to Tenant on the date herein specified, except that if Landlord fails to deliver to Tenant possession of the premises with Landlord's Work as set forth in Section 33, (a), (i)-(iii), completed on or before July 1, 1994, Tenant shall have the right to terminate this Lease. -9- 16. Exterior of Premises - Signs. (a) Tenant covenants and agrees that it will not place or permit any sign or other thing of any kind, in or about the exterior of the premises or the building in which the premises are situate, nor paint or make any change in, to or on the exterior of said premises to change the uniform architecture, paint or appearance of the building, without in each such instance obtaining the prior written consent of Landlord. (b) Tenant further covenants and agrees not to pile or place anything on the sidewalk, parking lot or other exterior portion of the building, nor block the sidewalk, parking lot or other exterior portion of the premises or building, nor do anything that directly or indirectly will interfere with any of the rights or ingress or egress or of light from any other tenants, nor do anything which will, in any way, change the uniform and general design of any property of Landlord in which the premises are situate. 17. Relocation. Deleted. 18. For Rent/Sale Signs. Landlord shall have the right to place a "For Rent" sign on any portion of the exterior of said premises for six (6) months prior to termination of this Lease and to place a "For Sale" sign on the exterior thereof at any time. Subject to Section 19, during such six month period, Landlord may show the premises and all parts thereof to prospective tenants between the hours of 9:00 a.m. and 5:00 p.m. on any day except Saturday (unless Tenant shall otherwise then be operating the premises), Sunday or any legal holiday on which Tenant shall not be open for business. 19. Right of Entry. Subject to the hereinafter set forth conditions, Landlord and its agents, servants, employees, including any builder or contractor employed by Landlord, shall have the right, license and permission, at any and all reasonable times, to enter and inspect the premises or any part thereof, and at the option of Landlord, to make such reasonable repairs and/or changes in the premises to enforce and carry out any provision of this Lease. Any non-emergency entry by Landlord, or anyone acting by, through or under Landlord, shall be made at a time when Tenant is open and operating. No portion of the premises is open to members of the general public and Bo neither Landlord, nor anyone acting by, through or under Landlord, shall enter upon any portion of the premises in a non-emergency entry unless accompanied by a representative of Tenant. No work performed by or on behalf of Landlord in the premises shall unreasonably interfere with the continuation of Tenant's operations therein, and such work shall not interrupt the production schedule of Tenant, and Landlord shall use all reasonable precautions for the protection of Tenant's property. Landlord shall be responsible for restoring the premises following, and for any damage caused by, any such work. 20. Termination of Term. It is agreed that the term of this Lease shall expire and terminate at the end of the original term hereof (or at the expiration of the last renewal term, if this Lease contains a renewal option and the same is properly exercised), without the necessity of any notice by or to any of the parties hereto, unless otherwise provided herein. If Tenant shall occupy the premises after such expiration or termination, it is understood that Tenant shall hold the premises as a tenant from month-to-month, subject to all the other terms and conditions of this Lease. 21. Condemnation. (a) If, during the term of this Lease, all of the premises or such portion thereof such that the remainder is insufficient (in Tenant's reasonable judgment) for the continuation of operations therein shall be taken by or under power of eminent domain, this Lease shall terminate as of, and the rent (basic and additional) shall be apportioned to and abate from and after, the date of taking. Tenant shall have no right to participate in any award or damages for such taking and hereby assigns all of its right, title and interest therein to Landlord. (b) If, during the Lease term, less than such portion of the premises is taken by or under power of eminent domain, this Lease shall remain in full force and effect according to its terms; and Tenant shall not have the right to participate in any award or damages for such taking and Tenant hereby assigns all of its right, title and interest in and to the award to Landlord. In such event Landlord shall, at its expense, promptly make such repairs and improvements as may be necessary to make the remainder of the premises adequate to permit Tenant to carry on its business to substantially the same extent and with substantially the same efficiency as before the taking; provided that in no event shall Landlord be required to expend an amount in excess of the award received by Landlord for such taking. If, as a result of such taking, any part of the premises is rendered permanently unusable, the basic annual rent reserved hereunder shall be reduced in such amount as may be fair and reasonable, which amount shall not exceed the proportion which the area so taken or made unusable bears to the total area which was usable by Tenant prior to the taking. If the taking does not render any part of the premises unusable, there shall be no abatement of rent. (c) Nothing herein shall be deemed to prevent Tenant from claiming and receiving from the condemning authority, if legally payable, compensation for the taking of Tenant's own tangible property and such amount as may be payable by statute or ordinance toward Tenant's damages for Tenant's loss of business, -10- removal and relocation expenses. 22. Subordination. Provided the holder of such mortgage or deed of trust agrees not to disturb Tenant in its use and occupancy of the premises hereunder, this Lease shall be subject to and subordinate at all times to the lien of any mortgages and/or deeds of trust now or hereafter to be made thereunder unless the mortgagee or holder of the deed of trust elects to have Tenant's interest hereunder superior to the interest of the mortgagee or holder of such deed of trust. This subordination provision shall be self-operative and no further instrument of subordination shall be required. Landlord covenants and agrees to make best efforts to obtain for and provide to Tenant from each lender, mortgagee, trustee under a deed of trust, beneficiary under a deed of trust, underlying landlord or other party whose title is now or might hereafter become superior to the title of Landlord, or who may have perfected or may perfect any title that might otherwise cause a termination of this Lease, a written agreement, providing that Tenant's use, occupancy and possession of the premises, and other rights, under this Lease will not be disturbed so long as Tenant is not then deemed to be in default hereunder at the time any such superior party (or anyone taking under such superior party) shall succeed to the interest of Landlord hereunder. 23. Attornment. (a) If Landlord assigns this Lease or the rents hereunder to a creditor as security for a debt, Tenant shall, after notice of such assignment and upon demand by Landlord or the assignee, make all sums thereafter becoming due Landlord hereunder payable both to Landlord and such assignee and shall mail such sums as set forth in said notice. Tenant shall also, upon receipt of such notice, have all policies of insurance required hereunder endorsed so as to protect the assignee's interest as it may appear and shall deliver such policies, or certificates thereof, to assignee. Tenant shall be entitled to rely upon any notice from any such assignee, or any individual acting or apparently acting on behalf of such assignee, and Tenant shall not be obligated to ascertain whether such assignee, under the circumstances then existing, has the right to demand payment of the rent. In the event of any conflict between the terms of this Lease and the terms of such notice, the terms of this Lease shall control. (b) In the event the premises are sold at any foreclosure sale Or Bales, or by deed in lieu of foreclosure, by virtue of any judicial proceedings or otherwise, this Lease shall continue in full force and effect and Tenant agrees, upon request, to attorn to and acknowledge the foreclosure purchaser or purchasers at such sale as the landlord hereunder; provided such purchasers) agrees to assume Landlord's obligations and to recognize Tenant's rights hereunder. 24. Parking and common Facilities. (a) Landlord hereby further demises and leases to Tenant the right to use the parking spaces within the parking lot adjacent to the building (which parking spaces are outlined in red on the site plat attached hereto) for the use solely of Tenant's employees, agents, officers and invitees and Landlord agrees to restripe a portion of such spaces for handicapped parking space(s), as required by law, before June 15, 1994. Section 16(b) herein to the contrary notwithstanding, Tenant shall have the right to install, at Tenant's sole expense, and subject to Landlord's prior approval as to size and type, sign(s) designating the parking area or spaces reserved for Tenant's exclusive use. Tenant agrees not to use, and not to permit its employees, agents, officers and invitees to use, any other parking spaces except the parking spaces made available to Tenant by Landlord and such other parking spaces on the site which are not dedicated from time to time to the exclusive use of other tenants of the building, and which such other parking, if any, will be in common with all other tenants of the building. Tenant agrees that it will, at Landlord's request, furnish Landlord with a list of license plate numbers of all automobiles regularly used by Tenant's employees, agents, officers and invitees. Tenant further agrees that if any automobiles of Tenant's agents, employees, officers or invitees are found in parking areas designated for use by other tenants in the building, Landlord shall have the right to have such improperly parked vehicles towed away by a towing company designated by Landlord, and Tenant shall pay Landlord, upon demand, all costs incurred by Landlord. Landlord reserves the right to relocate (but not to an area farther from the premises than the original spaces) any of Tenant's parking spaces by reassigning to Tenant other parking spaces within the property shown on the site plan attached hereto for the exclusive use of Tenant's employees, agents, officers and invitees; provided Landlord gives Tenant written notice of such reassignment at least ten (10) days prior to the effective date thereof. In the event Landlord gives such notice to Tenant, Tenant shall instruct all of its employees, agents, officers and invitees to use only the reassigned spaces and to cease use of the spaces formerly assigned. Landlord further demises and leases to Tenant the exclusive right to use that portion of the common area outlined in green on the location plan attached hereto as Exhibit A. Such area shall be used by Tenant for loading and unloading and for the permanent location of one or more trash dumpsters. (b) For purposes of this Lease, common areas and facilities shall mean all areas, space, equipment and services provided by Landlord for the common use and benefit of tenants of the building, their employees, agents, servants, customers and other invitees; such common facilities shall include without limitation parking areas, lighting fixtures, access roads, retaining walls, landscaped areas, toilet facilities, common hallways, mechanical equipment and pedestrian walkways as Landlord shall designate. The fact that exclusive use -11- of some portions of the common area has been given to a tenant does not operate to remove such portions from the definition of "common areas and facilities., (c) Tenant further agrees to pay Tenant's proportionate share (as hereinafter defined) of Landlord's costs of operating, maintaining, and repairing the common areas and facilities, including, but not limited to, elevators, stairwells, loading areas, parking areas, pavements and walkways, and the cost of utilities for such common areas and facilities. Such cost shall not include the cost of any capital improvements to the building as determined under sound accounting principles or work which Landlord performs specifically for or at the expense of any tenant of the building. As used herein, Tenant's "proportionate share" shall mean the same proportion of such costs and expenses heretofore described as the square foot area leased to Tenant bears to the total leasable square foot area of the building or thirty-one and seven tenths percent (31.7%). Tenant's pro rata share of common area costs shall not in any event include: (a) any depreciation expense; (b) the cost of capital improvements made to the building and/or the property; (c) the cost of Landlord's federal, state or local income taxes; (d) the expense of principal and interest payments made by Landlord pursuant to the provisions of any mortgage or deed of trust covering any or all of the property and/or the expenses of rental payments made by Landlord pursuant to any grant or lease covering any or all of the property; (e) charges or fees for, or taxes on, the furnishing of water, sewer service, gas, fuel, electricity or other utility services to those portions of the building which are leased to tenants; (f) the cost of providing janitorial or trash removal service to those portions of the building which are leased to tenants; or (g) the cost of removing any Hazardous Materials located in the building and/or the property and/or complying with all Environmental Laws. Landlord warrants and represents that none of the expenses included in determining Tenant's pro rata share of common area costs shall be included in any other charge payable under this Lease. Tenant shall have the right to audit Landlord's books and records from time to time, but not more often than once per year, to verify the accuracy of the statements being provided by Landlord with respect to common area costs; Tenant shall only be permitted to audit for the prior year and if such a request is not made within ninety (90) days after receipt of Landlord's billing, then Landlord's billing for that year shall be deemed conclusive. Notwithstanding anything in this Lease to the contrary, Tenant's pro rata share shall not exceed $.10 per square foot for the first Lease year. (d) Landlord shall notify Tenant from time to time of the amount which Landlord reasonably estimates will be the amount payable by Tenant in accordance with paragraph (c) above, and Tenant shall pay such amounts to Landlord in equal monthly installments, in advance, on the first day of each month, simultaneously with payments of the rent reserved pursuant to page 1 hereof. Within a reasonable period of time following the end of each annual period of the term, Landlord shall submit to Tenant a statement showing the actual amounts incurred by Landlord as set forth in paragraph (c), the amount theretofore paid by Tenant, and the balance payable by, or overpayment owed to, Tenant. Tenant shall pay said balance within thirty (30) days from the date of such statement. In the event Tenant has made any overpayment, such overpayment shall be credited by Landlord against the next installment or installments of rent which are due and payable hereunder, or if the term of this Lease has expired, such overpayment shall be refunded by Landlord to Tenant, without interest, within ten (10) days after the date of such statement. Each such statement submitted by Landlord shall be final and conclusive between the parties hereto as to the matters therein set forth, if no objection is raised with respect thereto within ninety (90) days after submission of each such statement. (e) Except as hereinafter specifically set forth, Landlord shall at all times have the right and privilege of determining the nature and extent to which such common facilities may be used, and of making such changes, rearrangements, additions or reductions therein or thereto, which in Landlord's opinion are deemed to be desirable and in the best interests of all tenants of the building, or which are required as the result of any law or regulation. Tenant agrees that Landlord may establish and from time to time change, alter and enforce against Tenant such reasonable rules and regulations as Landlord may deem necessary or advisable for the proper and efficient use, operation and maintenance Of such common facilities. Landlord shall, at all times, have sole and exclusive control, management and direction of such common facilities, and may, at any time and from time to time, exclude and restrain any person from use or occupancy thereof (for good cause, if the person to be excluded or restrained is an employee, agent, officer, invites or contractor of Tenant). It shall be the duty of Tenant to keep any such facilities which Tenant is permitted to use free and clear of any obstructions created or permitted by Tenant or resulting from Tenant's use. Tenant shall be fully liable for any damage to any such facilities resulting from the negligence or misuse by Tenant, its agents, employees, contractors or invitees. Except as otherwise specifically set forth herein, Landlord may, at any time and from time to time, either temporarily or permanently, close all or any portion of such common facilities to make repairs or changes, and to do and perform such other acts as, in the exercise of good business judgment, Landlord shall determine to be advisable with a view to the improvement of the convenience and use thereof by tenants, their employees, agents and invitees. Notwithstanding anything contained herein to the contrary or Landlord's authority to promulgate new or modify existing rules or regulations, (i) Tenant shall not be required to comply with any rule or regulation which either increases Tenant's obligations or decreases Tenant's rights hereunder; (ii) Landlord shall notify Tenant in writing of all rules and regulations from time to time established and (iii) in the event of any conflict between this Lease and any rule or regulation, this Lease shall control and prevail. Notwithstanding anything to the contrary contained herein, Landlord shall not alter the nature or utility of that portion of the common facilities of which Tenant has been granted exclusive possession pursuant to Section 24(a); (ii) reduce the number of, or -12- relocate farther from the premises the parking spaces granted to Tenant pursuant to Section 24(a); or (iii) alter or reduce in a manner not reasonably acceptable to Tenant the exterior lighting of the building or parking lot. 25. Notices. Any notice required by this Lease shall be sent by certified mail to Landlord at: 17 West Pennsylvania Avenue, Baltimore, Maryland 21204, Attention: Lawrence Rief, with copy to Legal Department, P.O. Box 10147, Baltimore, Maryland 21285. Any notice required by this Lease shall be sent by certified mail to Tenant at: 500 Hanover Pike, Hampstead, Maryland 21074-2095, Attention: Mr. Timothy P. Finley with a copy to Tenant's General Counsel at the same address (if no other address specified, such notices to Tenant shall be addressed to the leased premises). Either party may, at any time, or from time to time, designate in writing a substitute address for that above set forth, and thereafter all notices to such party shall be sent by certified mail to such substitute address. 26. Non-Waiver. It is understood and agreed that nothing herein shall be construed to be a waiver of any of the terms, covenants or conditions herein contained, unless the same shall be in writing, signed by the party to be charged with such waiver and no waiver of the breach of any covenant herein shall be construed as a waiver of such covenant or any subsequent breach thereof. No mention in this Lease of any specific right or remedy shall preclude Landlord or Tenant from exercising any other right or from having any other remedy or from maintaining any action to which it may be otherwise entitled either at law or in equity. 27. Successors and Assigns. Except as herein provided, this Lease and the covenants and conditions herein contained shall inure to the benefit of and be binding upon Tenant, its successors and assigns, and shall inure to the benefit of Tenant and only such assignees of Tenant to whom an assignment by Tenant has been consented to in writing by Landlord or to whom an assignment is otherwise permitted hereunder. In the event Landlord's interest under this Lease is transferred or assigned and written notice thereof is given to Tenant, the Landlord herein named (or any subsequent assignee or transferee of Landlord's interest under this Lease who gives such notice to tenant) shall automatically be relieved and released from and after the date of such transfer or conveyance from all liability hereunder. Further, in the event of any sale or transfer of the fee of any premises which includes the premises (other than a sale with the leaseback to the grantor) or any assignment of any ground or underlying lease of any premises which includes the premises, the grantor, transferror, or assignor, as the case may be, shall be and hereby is entirely relieved and freed of all obligations under this Lease from and after the date of such sale or transfer or assignment. Further, the liability of Landlord, its successors and assigns, under this Lease shall at all times be limited solely to Landlord's interest in the building and property of which the premises is a part and the rents and insurance therefrom. In the event the owner of Landlord's interest in this Lease is at any time an individual, partnership, joint venture or unincorporated association, Tenant agrees that such individual or members or partners of such partnership, joint venture or unincorporated association shall not be personally or individually liable or responsible for the performance of any of Landlord's obligations hereunder. 28. Condition at End of Term/Security Deposit. (a) Tenant agrees that at the expiration of this Lease, or its earlier termination, there shall be no damage to the premises demised hereunder, nor to Landlord's equipment as set forth in Section 34, beyond ordinary wear and tear, and Tenant further agrees that the premises and any equipment demised hereunder shall be left in a clean, operating condition and in good order with all debris, rubbish and trash placed in proper containers. Tenant shall return all keys to the premises to Landlord. Landlord reserves the right to request that any alterations, improvements, additions made by Tenant during the term shall be removed and the premises be restored to its original condition. Notwithstanding anything in this Lease to the contrary, however, Landlord agrees that with respect to the equipment set forth in Section 34, in the event Tenant replaces any such item, then Tenant shall not be obligated to leave the replacement in place at the expiration of the term. (b) Landlord reserves the right, pursuant to Section 29, that if the net worth of the Tenant at any time drops below Five Million Dollars ($5,000,000.00), as evidenced by the annual audited financial statement Tenant is required to supply to Landlord, then Landlord may demand a security deposit from Tenant of Sixteen Thousand One Hundred Dollars ($16,100.00), which sum represents a security deposit for the faithful performance of Tenant's obligations under this Lease. Tenant will, upon such demand from Landlord, pay said deposit to Landlord within ten (10) days. Thereafter, Tenant agrees that Landlord shall have the right, but not the obligation, to apply said security deposit or any portion thereof to cure or remedy any default by Tenant hereunder, including default in the payment of rent. Landlord may also, at the end of the term, apply said deposit in accord with the Maryland Annotated Code provision relating to security deposits. Said deposit, if not sooner applied, shall be returned to Tenant, without interest, within thirty (30) days after vacating of the premises by Tenant and termination of this Lease (or upon termination of the last renewal term of this Lease if this Lease contains a renewal option and Tenant exercises said option); provided (i) Tenant is not then in default under any of the provisions of this Lease; (ii) there is no damage to the premises beyond ordinary wear and tear and the premises and any equipment demised hereunder have been left in a clean condition and in good order with all debris, rubbish and trash placed in proper -13- containers; (iii) all keys to the premises have been returned to the Landlord; and (iv) Tenant's forwarding address has been left with Landlord. Notwithstanding anything in this Lease to the contrary, however, Landlord expressly reserves the right to apply all or any portion of the security deposit against any unamortized portion of any commission paid to any real estate brokers in conjunction with this Lease, in the event this Lease is terminated prior to its scheduled expiration. Tenant further agrees that Landlord shall be entitled to commingle said security deposit with its own funds. 29. Notices to Mortgagee/Tenant Financial Statement. Tenant agrees that a copy of any notice of default from Tenant to Landlord shall also be sent to the holder of any mortgage or deed of trust on the premises, provided Tenant has been given written notice of the fact that such mortgage or deed of trust has been made; and Tenant shall allow said mortgagee or holder of the deed of trust a reasonable time, not to exceed thirty (30) days from the receipt of said notice, to cure, or cause to be cured, any such default. If such default cannot reasonably be cured within the time specified herein, then such additional time as may be necessary shall be allowed, provided the curing of such default is commenced and diligently pursued (including, but not limited to, commencement of foreclosure proceedings if necessary to effect such cure) in which event this Lease shall not be terminated while such remedies are being thus diligently pursued. Tenant (and the guarantor of this Lease, if this Lease is guaranteed) shall at any time and from time to time (but not more than once per year), within fifteen (15) days of written request by Landlord, deliver to Landlord Tenant's most recently prepared annual audited financial statement. Tenant represents to Landlord that as of the date of execution of this Lease, Tenant has a net worth of at lease Five Million Dollars ($5,000,000.00). If at any time Tenant's net worth drops below Five Million Dollars ($5,000,000.00) as set forth in said annual statement, Landlord reserves the right to request the security deposit. Landlord agrees to hold all Tenant supplied statements strictly confidential. Such statements, and the information shown therein, may be disclosed by Landlord to current or prospective lenders or purchasers of the property but may not be disclosed to any other parties, including, but not limited to, current or prospective tenants of the property. At the time of any request hereunder by Landlord, Landlord shall inform Tenant of the identity of any third party to which Landlord proposes to disclose Tenant's (or such guarantor's) financial statement or the information shown therein and Tenant shall be under no obligation to supply such statement for disclosure to any entity in the retail clothing or clothing manufacturing business or any entity controlling or controlled by any entity in the retail clothing or clothing manufacturing business. 30. Estoppel Certificate. Tenant shall, at any time and from time to time during the term of this Lease or any renewal thereof, upon request of Landlord, execute, acknowledge, and deliver to Landlord or its designee, a statement in writing, certifying that this Lease is unmodified and in full force and effect if such is the fact (or if there have been any modifications thereof, that the same is in full force as modified and stating the modifications) and the dates to which the rents and other charges have been paid in advance, if any. Any such statement delivered pursuant to this paragraph may be relied upon by any prospective purchaser of the estate of Landlord or by the mortgagee or any assignee of any mortgagee or the trustee or beneficiary of any deed of trust constituting a lien on the premises or upon property in which the premises are situate. 31. Tenant Representative. Name, address and telephone number of Tenant representative to be contacted in the event of emergency: Mr. Ed Jecelin, 305 Deep Dale Drive, Timonium, Maryland 21093. 32. No Offer. The submission of this Lease does not constitute a binding or irrevocable option or offer by Landlord to lease the premises to Tenant on the terms herein set forth, or on any other terms. Neither Landlord nor Tenant shall be bound or legally obligated in any way until such time as this Lease is fully executed by both parties hereto, and executed counterparts thereof are delivered to each of the parties. 33. Construction. (a) At or prior to the commencement date, Landlord shall deliver the premises to the Tenant with the following Landlord Work completed: (i) Landlord will have entire premises cleaned, including roof-joists and bathrooms, will also install a separate meter or submeter for any utilities servicing the premises and not separately metered as of the date hereof; will construct the new demising wall (taped, spackled and ready for painting); will construct (taped, spackled and ready for painting) approximately fifty-four (54) feet of additional, interior partition wall as follows: (A) one wall running north/south on column H, between columns 13 and 14; and (B) one wall (with access opening as designated by Tenant) running east/west on column 14 between columns G & H; Landlord will remove approximately eighty-one (81) feet of existing, interior partition wall as follows: (A) one wall running east/west on column 13, between columns G and H; and (B) one wall running north/south on column G 1/2, between columns 13 and 15. (ii) Landlord will paint bathrooms and replace damaged sinks and for the -14- existing handicapped bathroom, will make any changes necessary in order for such bathroom to fully comply with all ADA requirements. (iii) Landlord will perform such repairs to the roof of the premises as may be necessary to prevent roof leaks. (iv) Landlord will install new exterior lighting to enhance outside light levels, to meet Tenant's work schedule requirements, and will complete maintenance and repair recommendations as set forth in the Hartford Refrigeration Co., Inc. letter, dated April 29, 1994, attached hereto as Exhibit D. With respect to (iv), Landlord can complete said work on or before June 15, 1994, but will be able to deliver possession of the premises earlier to Tenant provided (i), (ii) and (iii) above have been completed by Landlord. All work to be done by Landlord shall be completed in a good and workmanlike manner in compliance with all federal, state and local laws. (b) Within the first six (6) months of occupancy, Tenant will do the following Tenant Work to the premises at Tenant's sole cost and expense: (i) Tenant will design and build a 4,000 square foot office to be serviced by a separate HVAC system, which Tenant will install and maintain at its sole cost and expense. (ii) Tenant will rehab existing office area (2,700 square feet) per Tenant's specifications. (iii) Tenant will add additional 400 amp electrical service and one (1) distribution panel (1,200 amp total). (iv) Tenant will paint the new demising wall. In addition, Tenant may do a complete interior lighting retrofit (T-8 and ballast). All work to be done by Tenant shall be completed in a good and workmanlike manner in compliance with all federal, state and local laws. Tenant shall have the right to use and occupy the premises and common facilities prior to the commencement date of the term provided that neither Tenant, its agents, employees nor contractors shall interfere with the completion of Landlord Work. 34. Existing Equipment. Landlord hereby agrees to demise to Tenant pursuant to this Lease the following existing equipment: Cutting tables - approximately 1,150 linear feet; feed rail; cutting floor lights; 25 h.p. compressor (Kaiser); 10 h.p. compressor (Joy); one (1) air dryer, bailer, alarm system, telephone system and intercom, time clocks and fire extinguishers, all of which equipment is currently installed in the premises and is being demised to Tenant "as is" with no express or implied warranties and no representation as to fitness or condition. 35. Waiver of Jury Trial and Right to Counterclaim. This Lease shall be construed in accordance with the laws of the state of Maryland. Landlord and Tenant shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters 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, and any emergency or other statutory remedy. Tenant further agrees that it shall not interpose any non-mandatory counterclaims) in a summary proceeding or in any action based on holdover or non-payment of rent and/or additional charges. 36. Brokerage. The parties hereto recognize Manekin Corporation as the broker bringing about this transaction, and Landlord shall be responsible for such broker's commission. Tenant and Landlord each covenants and agrees that it has had no other dealings with any broker or agent in connection with this Lease and covenants to pay, hold harmless and indemnify the other from and against any and all costs, expenses and liabilities for any compensation, commissions and charges claimed by any broker or agent in respect of this Lease or the negotiation thereof with whom Tenant or Landlord, as the case may be, is claimed to have had dealings. 37. Landlord's Default. (a) Landlord shall be deemed in default upon the occurrence of any one or more of the following circumstances: -15- (i) If Landlord shall fail to pay any sum due Tenant hereunder within ten (10) days after notice that the same has become due; or (ii) If Landlord shall fail to commence performance of any non-monetary term, condition or covenant of this Lease applicable to Landlord within twenty (20) days after written notice of such failure from Tenant or shall fail to thereafter or diligently prosecute completion thereof. (b) Upon any Landlord default, Tenant shall have the right to pursue any or all of the following remedies: (i) The right to maintain any and all actions at law or suits in equity or other proper proceedings (including the right to injunctive relief) to enforce the curing or remedying of such default or for damages resulting from such default; and (ii) in the event of a final judgment in Tenant's favor against Landlord, to collect said judgment by deducting from any one or more succeeding payments of rent due hereunder the amount of such final judgment, excluding any court costs, attorneys fees, or other disbursements. 38. Renewal Option. Deleted. 39. Hazardous Substances. (a) The term "Hazardous Substances" as used in this Lease is defined to mean any substance defined as a "hazardous substance" or 'hazardous material" under the Comprehensive Environmental Response, Compensation and Liability Act of 1989, as amended (42 USC 9601, et seq.), or substances declared to be hazardous or toxic under any other federal, state of municipal law or regulation now or hereafter enacted or promulgated by any governmental authority having jurisdiction. (b) Landlord shall indemnify, defend and hold harmless Tenant, its permitted successors and assigns, and their respective officers, directors, beneficiaries, shareholders, partners, agents and employees from all fines, suits, procedures, claims and actions of every kind and all costs associated therewith (including attorneys' and consultants' fees) arising out of or in any way connected with any deposit, spill, discharge or other release of Hazardous Substances that occurs prior to the date hereof or that occurs after the date hereof but not caused by Tenant, its agents, contractors or employees. Landlord's obligation and liabilities under this Section shall survive the expiration of the Lease. (c) Tenant shall not cause or permit to occur by its agents, contractors or employees: (i) Any violation of any federal, state or local law, ordinance or regulation now or hereafter enacted, related to environmental conditions on, under or about the Premises and arising from Tenant's use or occupancy of the Premises, including, but not limited to soil and ground water conditions; or (ii) The use, generation, release, manufacture, refining, production, processing, storage or disposal of any Hazardous Substance on, under or about the Premises or the transportation to or from the Premises of any Hazardous Substance. Further, it is agreed that: (iii) Tenant shall, at Tenant's own expense, comply with all laws regulating the use, generation, storage, transportation or disposal of Hazardous Substances by Tenant ("Laws"). (iv) Tenant shall, at Tenant's own expense, make all submissions to, provide all information required by, and comply with all requirements of all governmental authorities (the "Authorities") under the Laws in connection with the use, generation, storage, transportation or disposal of Hazardous Substances by Tenant. (v) Should any Authority or any third party demand that a cleanup plan be prepared and that a clean-up be undertaken because of any deposit, spill, discharge or other release by Tenant or its agents, contractors, employees, of Hazardous Substances that occurs during the term of this Lease, at or from the Premises, or which arises at any time from Tenant's use or occupancy of the Premises, then Tenant shall, at Tenant's own expense, prepare and submit the required plans and all related bonds and other financial assurances; and Tenant shall carry out all such cleanup plans. Landlord shall be so obligated with regard to any deposit, spill, discharge or other release of Hazardous Substances in the premises occurring prior to the date hereof or occurring after the date hereof but not caused by Tenant, its agents, contractors or employees. -16- (vi) Tenant shall promptly provide all information regarding the use, generation, storage, transportation or disposal of Hazardous Substances by Tenant or its agents, contractors, employees that is requested by Landlord. If Tenant fails to fulfill any duty imposed under this section within a reasonable time, Landlord may do so; and in such case, Tenant shall cooperate with Landlord in order to prepare all documents Landlord deems necessary or appropriate to determine the applicability of the Laws to the Premises and Tenant's Use thereof, and for compliance therewith, and Tenant shall execute all documents promptly upon Landlord's request. No such action by Landlord and no attempt made by Landlord to mitigate damages under any Law shall constitute a waiver of any of Tenant's obligations under this Section. (vii) All obligations and liabilities under this Section shall survive the expiration of this Lease. (d) Tenant shall indemnify, defend and hold harmless Landlord, the manager of Landlord's buildings and their respective officers, directors, beneficiaries, shareholders, partners, agents and employees from all fines, suits, procedures, claims and actions of every kind, and all costs associated therewith (including attorneys' and consultants' fees) arising out of or in any way connected with any deposit, spill, discharge or other release of Hazardous Substances that occurs after the date hereof and is caused by Tenant, its agents, contractors or employees. Tenant's obligations and liabilities under this Section shall survive the expiration of the Lease. 40. Miscellaneous. (a) Binding Effect. The terms, conditions and agreements herein contained shall be kept and performed by the respective parties hereto and will be binding upon them and each of their successors, heirs and assigns. (b) Partial Invalidity. The invalidity of any particular clause, phrase, section of part of this Lease by order of court or decision of any judicial authority having jurisdiction over the same shall not be construed to void or invalidate the Lease in its entirety and the remaining parts shall continue in full force and effect. (c) Captions. All captions used in this Lease are for reference purposes only. The captions do not limit and should not be used to interpret or construe any of the provisions which follow the captions. (d) Attorney's Fees. Deleted. (e) Landlord shall have the right at any time to change the name or the current address of the warehouse or both, in Landlord's sole discretion. Landlord shall incur no liability as to Tenant as the result of such change; furthermore, such change shall not entail a decrease in rental value, constitute an eviction or diminution of services, or excuse Tenant from the full performance of all its Lease obligations. Tenant agrees not to refer to the warehouse by any name or address other than that designated by Landlord. (f) Joint and Several Liability. If this Lease is executed by two or more individuals, as Tenant, the liability for all obligations on Tenant's part to be performed hereunder, specifically including but not limited to the obligation to pay all rent and additional rent provided for herein, shall be deemed to be joint and several. (g) Any monies owed to Landlord by Tenant pursuant to this Lease shall be deemed rent in the event such monies are left unpaid beyond the time set forth hereunder. (h) Applicable Laws. The parties agree that this Agreement shall be construed only in accordance with the laws of the State of Maryland. (i) Except for Tenant's obligation to pay rent, the time of Landlord or Tenant, as the case of may be, to perform any of its respective obligations hereunder shall be extended if and to the extent that the performance thereof shall be prevented due to any strike, lockouts, civil commotions, war-like operations, invasions, rebellions, hostilities, military or usurped power, governmental regulations or controls, acts of God, or other causes beyond the control of the party whose performance is required. If Landlord shall be prevented from delivery the premises to Tenant for causes beyond the control of Landlord, then the commencement and expiration of the Term shall be extended accordingly. (j) This Lease and the Riders and Exhibits attached hereto, if any, set forth all the covenants, promises, assurances, agreements, and understandings between Landlord and Tenant concerning the -17- premises and supersede and revoke any previous negotiations, arrangements, letters of intent, offers to lease, lease proposals, and information conveyed. 41. Early Termination Right. Landlord and Tenant agree that Tenant shall have the one time only right to terminate this Lease prior to its scheduled expiration, provided this Lease is in full force and effect, then free of defaults by Tenant, under the following terms and conditions: (a) Tenant shall send written notice to Landlord, certified mail, return receipt requested, notifying Landlord of its intention to exercise its right of early termination, which notice Must be received by Landlord on or before February 1, 1999; (b) Provided Tenant has vacated the premises and left the premises and Landlord equipment (whatever has not been replaced by Tenant in the interim) in the condition required hereunder pursuant to Section 28, at the time of the expiration of the term, this Lease shall be deemed terminated effective July 31, 1999, and neither party shall have any further liability to the other, except Tenant shall remain liable to Landlord for any obligations or liabilities that have accrued up to and including July 31, 1999, which liability shall survive the termination of this Lease. WITNESS the hands and seals of the parties hereto the day and year first above written. WITNESS: LANDLORD: CONTINENTAL STEWART WAREHOUSE LIMITED PARTNERSHIP By: Continental Realty Corporation, Agent /s/ Mary P. Baxter By: /s/: John A. Luetkemeyer, Jr. (Seal) ____________________ _____________________________________ John A. Luetkemeyer, Jr., President WITNESS: TENANT: JOS. A. BANK CLOTHIERS, INC. /s/: Deborah S. Timm By: /s/: Timothy F. Finley (SEAL) ____________________ _____________________________________ Timothy F. Finley, Chairman and Chief Executive Officer STATE OF MARYLAND, COUNTY OF BALTIMORE, to wit: On this 11th day of May, 1994, before me, the subscriber a Notary Public of the State of Maryland, personally appeared JOHN A. LUETKEMEYER, JR. President of the above named agent for Landlord, and he acknowledged the above Lease to be the act of the said Landlord. IN WITNESS WHEREOF, I have hereunto set my hand and Notarial Seal. /s/: Delores F. Schafer ________________________________________ Notary Public My Commission Expires: July 22, 1995 ___________________ STATE OF MARYLAND, COUNTY OF BALTIMORE, TO WIT: On this 10th day of May, 1994, before me, the subscriber a Notary Public of the State of Maryland, personally appeared TIMOTHY F. FINLEY Chairman and Chief Executive Officer of the above named Tenant, and he acknowledged the above Lease to be the act of the said Tenant. IN WITNESS WHEREOF, I have hereunto set my hand and Notarial Seal. /s/: Karen M. Mays _________________________________________ Notary Public My Commission Expires: 10/29/96 ______________ -18- EX-10 3 EXHIBIT 10.15A Exhibit 10.15a FIRST AMENDMENT TO LEASE AGREEMENT AND CONSENT ---------------------------------------------- THIS FIRST AMENDMENT TO LEASE AGREEMENT AND CONSENT (this "Amendment"), made this 26th day of March, 1998, by and between CONTINENTAL STEWART WAREHOUSE LIMITED PARTNERSHIP ("Landlord") and JOS. A. BANK CLOTHIERS, INC. ("Tenant"), W I T N E S S E T H T H A T: WHEREAS, Landlord and Tenant are the parties to that certain Lease Agreement, dated May 11, 1994 (the "Lease"), pursuant to which Landlord leased to Tenant 51,062 square feet of space, as shown on Exhibit A-1 to the Lease (the "Premises"), located within a building known as Continental Stewart Warehouse, 4241 Brookhill Road, Baltimore City, Maryland 21215; and WHEREAS, Landlord and Tenant have agreed to amend the Lease and enter into certain other agreements as hereinafter set forth, NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant hereby amend the Lease and agree as follows: 1. Section 41 of the Lease is hereby deleted in its entirety and the following is hereby inserted in lieu thereof: 41. Early Termination Right. Landlord and Tenant agree that Tenant shall have the one time only right to terminate this Lease prior to its scheduled expiration, provided this Lease is in full force and effect, then free of defaults by Tenant, under the following terms and conditions: (a) Tenant shall send written notice to Landlord, certified mail, return receipt requested, notifying Landlord of its intention to exercise its right of early termination, which notice must be received by Landlord on or before September 1, 1999; (b) Provided Tenant has vacated the premises and left the premises and Landlord equipment (whatever has not been replaced by Tenant in the interim) in the condition required hereunder pursuant to Section 28, at the time of the expiration of the term, this Lease shall be deemed terminated effective February 29, 2000, and neither party shall have any further liability to the other, except Tenant shall remain liable to Landlord for any obligations or liabilities that have accrued up to and including February 29, 2000, which liability shall survive the termination of this lease. (c) In the event Tenant shall exercise its early termination right as herein provided, notwithstanding the rental set forth in the WITNESSETH paragraph of this Lease, the monthly installments of rental for the period from September 1, 1999 through February 29, 2000 shall be $17,375.26, except as Landlord and Tenant may otherwise agree. 2. Notwithstanding the amendment to Section 41 of the Lease as set forth in paragraph 1 above, in the event Tenant shall lease space in the Bed, Bath and Beyond Shopping Center in Naples, Florida, the monthly installments of rental for the period from September 1, 1999 through February 29, 2000 shall be $14,893.08. 3. Nothing in paragraphs 1 or 2 above is intended to, or shall, alter the terms and conditions of the Lease with respect to the scheduled August 1, 1999 rental increase. Rental shall be as stated in the Lease except as specifically amended hereby. 4. Landlord hereby consents to the sublease of the Premises to SourceOne, L.L.C.; provided, however, that in no event shall such consent affect or limit Tenant's continued liability under the Lease. Except as specifically amended hereby, the Lease shall remain in full force an effect according to its terms. To the extent of any conflict between the terms of this Amendment and the terms of the remainder of the Lease, the terms of this Amendment shall control and prevail. Capitalized terms used but not defined herein shall have those respective meanings attributed to them in the Lease. This Amendment shall hereafter be deemed a part of the Lease for all purposes. IN WITNESS WHEREOF, this Amendment is executed as of the day and year first above written. WITNESS: LANDLORD: CONTINENTAL STEWART WAREHOUSE LIMITED PARTNERSHIP By: Continental Realty Corporation, Agent /s/: Mary Patricia Baxter /s/: Gene Parker _________________________ __________________________ Name: Gene Parker Title: Vice President WITNESS: TENANT: JOS. A. BANK CLOTHIERS, INC. /s/: Charles Frazer By: /s/: Timothy F. Finley _________________________ __________________________ Timothy F. Finley, Chairman and Chief Executive Officer EX-10 4 EXHIBIT 10.16 Exhibit 10.16 SUBLEASE THIS SUBLEASE is made as of the 17 day of April 1998, by and between JOS. A. BANK CLOTHIERS, INC., a Delaware corporation (hereinafter called "Sublandlord") and SOURCEONE, L.L.C., a New York limited liability company (hereinafter called "Subtenant"). RECITALS WHEREAS, pursuant to the Lease Agreement by and between Continental Stewart Warehouse Limited Partnership (hereinafter called the "Landlord") and Sublandlord dated May 11, 1994 and amended March 26, 1998, a copy of which is attached hereto as Exhibit I (as the same may be amended from time to time, hereinafter called the "Lease"), Sublandlord is the tenant of certain space consisting of approximately 51,062 square feet in the building known as Continental Stewart Warehouse located at 4241 Brookhill Road, Baltimore City, Maryland 21215 (hereinafter called the "Building") as shown on Exhibit A attached to the Lease (hereinafter called the "Premises"); and WHEREAS, Subtenant desires to sublease from Sublandlord all of the Premises in the Building (hereinafter called the "Subleased Premises"); and WHEREAS, the parties desire to enter into this Sublease defining their respective rights, duties, and liabilities relating to the Subleased Premises; and WHEREAS, the effectiveness of this Sublease and the delivery of the Premises to Subtenant is a condition to the effectiveness of that certain Primary Supply Agreement dated as of April 16, 1998 (the "Supply Agreement") between Sublandlord and MS Pietrafesa, L.P. ("Pietrafesa"). NOW, THEREFORE, WITNESSETH in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sublandlord and Subtenant hereby covenant and agree as follows: SECTION 1 DEMISE Sublandlord, for and in consideration of the payment of the rent and the performance of the covenants hereinafter mentioned, does hereby demise, lease and assign unto Subtenant, the Subleased Premises, for a term (the "Term") from April 17, 1998 (hereinafter called the "Commencement Date") to February 29, 2000 at which time this Sublease shall terminate. SECTION 2 RENT The rent during the Term hereunder (hereinafter called the "Annual Rent") shall be payable in arrears, without demand, deduction, set-off, recoupment or counterclaim, as follows: for the period from the Commencement Date through July 31, 1999 at the rate of $165,951.50 per year, payable in equal monthly installments of $13,829.29 payable commencing June 1, 1998 and ending on August 1, 1999 (the period from the Commencement Date through April 30, 1998 shall be prorated and paid together with the June 1, 1998 installment of Annual Rent); $14,893.08 for the month of August, 1999 payable on September 1, 1999; and for the period from September 1, 1999 through February 29, 2000 at the rate of $208,503.12 per year, payable in equal monthly installments of $17,375.26, payable on October 1, November 1, December 1, 1999 and January 1, February 1 and March 1, 2000. Notwithstanding anything to the contrary, contained therein, in the event Sublandlord shall lease space from Landlord in the Bed, Bath and Beyond Shopping Center in Naples, Florida and shall be given the benefit of the rent reduction set forth in paragraph 2 of the March 26, 1998 amendment to the Lease, Annual Rent for the period from September 1, 1999 through February 29, 2000 shall be $14,893.08 per month. SECTION 3 EXTENSION There is no right of Sublease extension. SECTION 4 SUBJECT TO LEASE This Sublease is subject and subordinate to the Lease. The Sections of the Lease listed below (except as may be inconsistent with other provisions of this Sublease) shall be deemed a part of this Sublease, with references in the Lease to "Landlord" deemed made to Sublandlord, references to "Tenant" deemed made to Subtenant, and references to the "Premises" deemed made to the Subleased Premises: Section 2 Use Section 3 Utilities Section 4 Compliance with Laws Section 5(a) Assignment Section 6 Loading Capacity Section 7 Increase in Landlord's Insurance Rates Section 8 Indemnification - Liability Insurance Section 9 Alterations Section 10 Ownership of Alterations Section 11 Repairs and Maintenance Section 12 Tax/Insurance Escalation Section 13 Tenant's Default Section 14 Damage or Destruction Section 15 Possession Section 16 Exterior of Premises - Signs Section 18 For Rent/Sale Signs Section 19 Right of Entry Section 20 Termination of Term Section 21 Condemnation Section 22 Subordination Section 23 Attornment Section 24 Parking and Common Facilities Section 26 Non Waiver Section 27 Successors and Assigns Section 28 Condition at End of Term - Security Deposit Section 30 Estoppel Certificates Section 32 No Offer Section 34 Existing Equipment Section 35 Waiver of Jury Trial and Right to Counterclaim Section 37 Landlord's Default Section 39 Hazardous Substances Section 40 Miscellaneous SECTION 5 ASSIGNMENT Notwithstanding anything contained herein or the Lease to the contrary, Subtenant shall have no right to assign this Sublease, in whole or in part, nor sublet the Subleased Premises, or any part or portion thereof, nor grant any license or concession for all or any part thereof, without the prior written consent of the Sublandlord which may be withheld for any reason or for no reason. Subtenant agrees to seek Sublandlord's prior written consent for the assignment of this Sublease to an "affiliate" of Subtenant, which consent shall not be unreasonably withheld. Subtenant agrees that any such assignment without the prior written consent of Sublandlord shall be null and void. SECTION 6 REPAIRS AND MAINTENANCE Notwithstanding anything contained herein or the Lease to the contrary, Sublandlord shall have no obligation to repair or maintain the exterior masonry, walls, structural components, roof or other portion of the Subleased Premises. In the event that a condition exists in the Subleased Premises that Landlord is obligated to repair under the Lease, Subtenant shall so advise Sublandlord, and Sublandlord, in turn, shall promptly advise Landlord thereof. Sublandlord shall have no liability to Subtenant for Landlord's failure to make any such repair; provided that Sublandlord exercises its rights in good faith and in a timely manner to procure such performance by the Landlord. SECTION 7 DOCUMENTS Notwithstanding anything contained herein or the Lease to the contrary, Sublandlord shall have no obligation to provide Subtenant with any tax bills, utility charges, insurance premium reports or any other documents relating to the Premises or relating to Landlord's ownership or operation of the Premises, except to the extent that Landlord or Sublandlord seek reimbursement or direct payment by Subtenant of amounts evidenced by such amounts. SECTION 8 POSSESSION Notwithstanding anything contained herein or the Lease to the contrary, under no circumstances shall Sublandlord be under any obligation to Subtenant for failure to deliver possession of the Subleased Premises to Tenant on the date herein specified. Subtenant's sole remedy for Sublandlord's failure to deliver the Subleased Premises is to terminate the Sublease; provided, that Sublandlord acknowledges that until such failure is remedied,(i) Subtenant shall have no obligation to make any payment to Sublandlord hereunder and (ii) the Supply Agreement shall not be effective. This shall not be a continuing condition and Subtenant's acceptance of the Premises shall satisfy same. Sublandlord undertakes no obligation to perform work to prepare the Subleased Premises for Subtenant's occupancy. SECTION 9 SUBORDINATION AND ATTORNMENT Subtenant agrees that this Sublease shall at all times be subordinate to the lien of any of Landlord's mortgages and/or deeds of trust unless the mortgagee or the holder of such mortgage or deed of trust elects to have Subtenant's interest hereunder superior to the interest of said mortgagee or holder of such deed of trust. Subtenant further agrees to attorn to any assignee of Landlord. SECTION 10 OPERATING COSTS Notwithstanding anything contained in the Lease to the contrary, Subtenant shall pay all operating costs of any nature whatsoever in connection with the Building or the Premises, except such any costs arising as a result of a breach by Sublandlord of its obligations under the Lease (to the extent that such breach is not due to a breach by Subtenant of its payment obligations hereunder). SECTION 11 INDEMNITIES 11.1. Compliance with Environmental Laws. Subtenant shall comply in all respects with all "Environmental Laws" (as hereinafter defined) now in force or which may hereafter be enacted or promulgated applicable to the Premises and the conduct of Subtenant's business at the Premises. Sublandlord represents that it has complied in all respects with all "Environmental Laws" applicable to the Premises for the period from May 12, 1994 to the date hereof (the "Environmental Indemnification Period"). 11.2 Indemnities Subtenant does hereby indemnify and hold Sublandlord harmless against all Environmental Liabilities and Costs (as hereinafter defined) to the extent that such Environmental Liabilities and Costs arise from the operation of the Premises during the Term; Sublandlord does hereby indemnify and hold Subtenant and its affiliates harmless against, (i) Environmental Liabilities and Costs arising from the operation of the Premises during the Environmental Indemnification Period, (ii) any Release that occurred during the Environmental Indemnification Period, or (iii) any noncompliance with any Environmental Laws during the Environmental Indemnification Period, except that Subtenant shall be responsible to the extent any aggravation of or contribution to any such Release is caused by Subtenant noncompliance of any Existing Environmental Condition during the Lease Term. Sublandlord does hereby assign to Subtenant all of its right, title and interest to the Landlord's indemnification of Sublandlord set forth in Section 39 of the Lease. 11.3. Definitions. For purposes of this Section, the following definitions shall apply: "Environment" means navigable waters, waters of the contiguous zone, ocean waters, natural resources, surface waters, ground water, drinking water supply, land surface, subsurface strata, and ambient air, both inside and outside of buildings and structures. "Environmental Laws" means federal, state, local and foreign laws, common law, regulations and codes, as well as orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to pollution, protection of the environmental or public health and safety, including, but not limited to the Release or threatened Release of Hazardous Substances into the Environment or otherwise relating to the presence, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances. "Environmental Liabilities and Costs" means all liabilities, losses, fines, penalties, charges, damages (including damages to persons, property or the Environment), costs, or expenses (including legal, engineering, and other consultant and expert witness fees and expenses) arising under Environmental Laws, or related to Remedial Actions, or otherwise arising out of or in respect of: (a) the operation of the Premises or any real property, assets, equipment or facilities related to it; or (b) the environmental conditions on, under, above, or about the Premises or any real property, assets, equipment or facilities related to it; or (c) expenditures necessary to cause alter, maintain, or restore the Premises so as to be or remain in compliance with any and all requirements of Environmental Laws including, without limitation, all permits, licenses or other authorization issued under or pursuant to such Environmental Laws. "Existing Environmental Condition" means any environmental condition on, under, above, or about the Premises existing prior to the Commencement Date. "Governmental Authority" means any government or political subdivision thereof, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision. "Hazardous Substance" means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or waste, petroleum or petroleum-derived substance or waste, or any constituent of any such substance or waste, including without limitation any such substance regulated under or defined by any Environmental Law. "Losses" means all liabilities, losses, fines, penalties, changes, damages, costs (including, without limitation, court costs) or expenses (including, without limitation, reasonable attorneys fees). "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the Environmental or into or out of any property, including the movement of Hazardous Substances through or in the air, soil, surface water, ground water or property. "Remedial Action" means all actions reasonably necessary, whether voluntary or involuntary, to (i) clean up, remove, treat or in any other way adjust Hazardous Substances in the Environment; (ii) prevent the Release or further movement of Hazardous Substances so that they do not migrate or endanger or threaten to endanger public health or welfare or the Environment; or (iii) perform remedial studies, investigations, restoration and post-remedial studies, investigations and monitoring at, on, under or about the Premises. SECTION 12 CROSS DEFAULT (a) Subtenant covenants and agrees that it shall constitute a default by Subtenant hereunder if any "Pietrafesa Event of Default" (as defined in the Supply Agreement) shall have occurred and be continuing. (b) Sublandlord covenants and agrees that it shall constitute a default by Sublandlord hereunder if any "Bank Event of Default" (as defined in the Supply Agreement) shall have occurred and be continuing. (c) Upon and during the continuation of a default described in clause (b) above, Subtenant shall be entitled to terminate this Sublease and all its obligations hereunder on notice to Sublandlord, which notice and termination shall be effective as of the date sent by Subtenant (unless provided otherwise in the relevant notice.) SECTION 13 UTILITIES AND SERVICES All services for and supplying of utilities to the Subleased Premises are the obligations of the Landlord under the Lease, and the covenants herein by Sublandlord to furnish any services for, or to supply any utilities to, the Subleased Premises shall be subject to the condition that Sublandlord shall not be liable for any failure of the Landlord to furnish any services or to supply any utilities; provided the same is not caused by the negligence or willful act of Sublandlord or its contractors or subcontractors or its or their agents or employees nor shall any such failure constitute an abrogation of any of the other terms or conditions of this Sublease; provided that Sublandlord exercises its rights in good faith and in a timely manner to procure such performance by the Landlord. SECTION 14 DAMAGE AND DESTRUCTION It is understood and agreed that in the event the Subleased Premises is damaged by fire, storm, the elements, act of God, unavoidable accident and/or the public enemy, but not to such an extent as to render the same untenantable, then it is the obligation of the Landlord under the Lease to restore, or cause to be restored, the Subleased Premises as speedily as possible, and there shall be no abatement of Rent. If the Subleased Premises is injured or damaged by any of the aforesaid causes to such an extent as to render the same wholly or partially untenantable, then upon written notice from either party to the other this Sublease shall thereupon become null and void, and all liability of Subtenant shall terminate upon payment of all Rent due and payable to the date of such happening. If the Subleased Premises is to be repaired under this Section, Subtenant shall, at Subtenant's sole cost and expense, be responsible for repairing and restoring all of Subtenant's improvements and of replacing any equipment and trade fixtures of Subtenant located in the Subleased Premises. SECTION 15 INDEMNIFICATION (a) Subtenant does hereby indemnify and hold harmless Sublandlord from and against any loss, claim, damage, or expense, including reasonable attorney's fees which Sublandlord may suffer, incur, or expend arising out of any failure on the part of Subtenant to perform fully its obligations hereunder. (b) Sublandlord does hereby indemnify and hold harmless Subtenant and its affiliates from and against any loss, claim, damage or expense, including reasonable attorneys' fees which Subtenant or any such affiliate may suffer, incur or expend arising out of any failure on the part of Sublandlord to perform fully its obligations hereunder or under the Lease. SECTION 16 NOTICES In every instance in which notice is required to be given hereunder, such notice shall be in writing and personally delivered, sent by telecopier, or sent by certified or registered mail addressed as follows: If to Sublandlord: Jos. A. Bank Clothiers, Inc. 500 Hanover Pike Hampstead, Maryland 21074 Attention: Chief Financial Officer Copy to: Newton B. Fowler III, Esquire Venable, Baetjer and Howard, LLP 1800 Mercantile Bank & Trust Building 2 Hopkins Plaza Baltimore, Maryland 21201 If to Subtenant: SourceOne, L.L.C. 4241 Brookhill Road Baltimore, Maryland 21215 Attention: President Copy to: L. Kevin Sheridan, Esquire Roberts, Sheridan & Kotel Tower 49 12 E. 49th Street New York, NY 10017 All notices sent by mail shall be deemed given the second day after the same are posted (except as provided in Section 12(c) hereof). All notices sent by telecopier shall be deemed given the day sent, but such notices shall be sent promptly by first class mail as well. Either party may change the address or telecopier number to which notices to it are to be sent by sending written notice of such new address or telecopier number to the other party. SECTION 17 BROKERAGE Each party warrants to the other that it has had no dealings with any broker or agent in connection with this Sublease and covenants to pay, hold harmless and indemnify the other party from and against any and all costs (including reasonable attorney's fees), expense or liability for any compensation, commissions and charges claimed by any other broker or other agent with respect to this Sublease or the negotiation thereof on behalf of such party. SECTION 18 NO RECOURSE TO AFFILIATES Sublandlord and Subtenant each agree that its obligations hereunder are primary in nature and that neither party hereto shall have any recourse to any officer, director, partner, member or affiliate (including in the case of SourceOne, Pietrafesa), and that no such person or entity shall have any liability, in respect of the payment and performance obligations of Sublandlord and Subtenant hereunder. SECTION 19 TABLE OF CONTENTS; CAPTIONS The captions appearing in this Sublease are inserted only as a matter of convenience and do not define, limit, construe, or describe scope or intent of the Sections of this Sublease nor in any way affect this Sublease. IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be properly executed as of the day and year first above written. ATTEST/WITNESS: JOS. A. BANK CLOTHIERS, INC. By: /s/ Timothy F. Finley __________________________ _________________________(SEAL) SOURCEONE, L.L.C. __________________________ By: /s/: David McDonough __________________________(SEAL) Name David McDonough ________________________ Title VP-Finance __________________________ EX-10 5 EXHIBIT 10.17 Exhibit 10.17 NET LEASE AGREEMENT ------------------- THIS NET LEASE AGREEMENT (this "Lease") is made and entered into as of this 17 day of April, 1998, by and between THE JOSEPH A. BANK MFG. CO., INC., a New Jersey corporation ("Landlord"), and SOURCEONE, L.L.C. a New York limited liability company ("Tenant"). ARTICLE 1 LEASE OF FACILITY 1.1. Lease of Facility. ----------------- Landlord does lease to Tenant, and Tenant leases from Landlord, all of the following (collectively the "Facility"): (a) That certain tract or parcel of land consisting of approximately 43,386 square feet, more or less, located in Baltimore City, Maryland, as more particularly described in Exhibit A (the "Land"); (b) All buildings, structures and other improvement of every kind including, but not limited to, sidewalks, utility pipes, conduits and lines, parking areas and roadways appurtenant to such buildings, structures and improvements presently situated on the Land (collectively, the "Building"); (c) All easements, rights and appurtenances relating to the Land and the Building; (d) All Building systems, including all components thereof, now permanently affixed to or incorporated into the Building; and This Lease Agreement is subject to the terms, covenants and conditions set forth herein. Tenant covenants as a material part of the consideration for this Lease Agreement to keep and perform each and all of the terms, covenants and conditions by it to be kept and performed, and this Lease Agreement is made upon the condition of such performance. Landlord covenants as a material part of the consideration for this Lease Agreement to keep and perform each and all of the terms and covenants by it to be kept and performed. 1.2. Governmental Approvals. ---------------------- The Facility is leased to Tenant from Landlord in an "AS-IS" condition with respect to compliance with applicable statutes, ordinances, rules, regulations, zoning variances and special exceptions. Tenant hereby undertakes, at its sole cost and expense, the responsibility to obtain all appropriate governmental approvals, certificates, licenses and permits in order to operate the Facility for uses described herein. In no event shall Landlord be liable for any limitation on the use of the Facility which may be imposed by statute, ordinance, rule, regulation, zoning variance or special exception, economic -1- condition or otherwise. 1.3 Space Reserved. -------------- Notwithstanding the terms of Section 1.1. there is specifically and exclusively reserved to Landlord, and the Facility shall not include, the vault and other area presently used by Landlord for record storage (the "Storage Areas"). In addition, Tenant shall have the right at all times, in common with others, for ingress and egress to the Storage Areas including, but not limited to, loading and unloading facilities in the Facility used in conjunction therewith. 1.4 Condition to Lease. ------------------ The effectiveness of this Lease and the delivery of the Facility to Tenant is a condition to the effectiveness of that certain Primary Supply Agreement dated as of April 16, 1997 (the "Supply Agreement") between Landlord and M.S. Pietrafesa, L.P. ("Pietrafesa"). This shall not be a continuing condition and Tenant's acceptance of the Facility shall satisfy it. ARTICLE 2 LEASE TERM 2.1. Initial Term. ------------ The initial term of this Lease Agreement (the "Initial Lease Term") shall commence on April 17, 1998 (the "Commencement Date") and shall terminate on February 29, 2000, or on such earlier date on which the Initial Lease Term may expire or be terminated pursuant to this provisions of the Lease. Tenant shall be entitled to, and its obligations hereunder shall be conditioned on, possession of the Facility as of the Commencement Date. 2.2. Renewal Term. ------------ The Initial Lease Term may be renewed at the option of Tenant. If renewed, the renewal shall be for one additional twelve-month term (the "Renewal Lease Term"; the Initial Lease Term and the Renewal Lease Term are collectively referred to as the "Lease Term"). 2.2.1 If Tenant elects to renew, it shall be a condition to renewal that (i) Tenant not be in default under any of the terms hereof and (ii) Tenant give Landlord at least four (4) months written notice of its desire to renew. 2.2.2 If Tenant elects to renew all terms, this Lease shall continue to apply except Base Rent which shall be calculated in the manner set forth in Section 2.2.3 hereof. -2- 2.2.3 The Base Rent for the Renewal Lease Term shall be equal to the fair rental value (the "FRV") of the Facility. For the purposes of this Lease, the FRV shall be determined as follows: (a) By agreement between Landlord and Tenant; or, (b) If Landlord and Tenant have not or are unable to agree on the FRV within thirty (30) days after the date on which Tenant exercises such option for the Renewal Lease Term then the FRV shall be determined by an independent and qualified MAI appraiser with at least ten (10) years' commercial real estate appraisal experience in the vicinity of the Facility (a "Qualified Appraiser"). Landlord and Tenant shall agree on the appointment of a Qualified Appraiser within seven (7) days after the expiration of the foregoing thirty (30) day period, and each party shall bear one-half (1/2) of the costs and expenses of the Qualified Appraiser. If Landlord and Tenant fail or are unable to agree on the appointment of a Qualified Appraiser within such seven (7) day period, the FRV shall be determined by three (3) Qualified Appraisers, one selected by Landlord and one selected by Tenant (such Qualified Appraisers to be selected within seven (7) days after the expiration of the immediately preceding seven (7) day period specified in this sentence), and the third Qualified Appraiser shall be selected by the appointed Qualified Appraisers. If either Landlord or Tenant shall fail to appoint a Qualified Appraiser, the Qualified Appraiser appointed by the other of them shall select the second Qualified Appraiser within seven (7) days after such failure to appoint. If the two Qualified Appraisers so determined shall be unable to agree on the selection of a third Qualified Appraiser within seven (7) days after the two Qualified Appraisers are determined, then either Qualified Appraiser, on behalf of both, may request such appointment by the American Institute of Real Estate Appraisers (or any successor association or body of comparable standing if such institute is not then in existence). The FRV shall be the average of the two closest valuations of the Premises as determined by the Qualified Appraisers. The costs, fees, and expenses of each Qualified Appraiser appointed separately by Landlord and Tenant, respectively, shall be borne by the party who appointed the Qualified Appraiser. The costs, fees, and expenses of the third Qualified Appraiser shall be shared equally between Landlord and Tenant. The FRV determined by such Qualified Appraisers in accordance with this Section, together with copies of their appraisal reports, shall be submitted to Landlord and Tenant within thirty (30) days after the panel of three Qualified Appraisers is constituted. The FRV of the Premises determined in accordance with the provisions of this Section shall be binding and conclusive on Landlord and Tenant. 2.3. Lease Year. ---------- As used herein during the Initial Lease Term and the Renewal Lease Term, the term "Lease Year" means (i) with respect to the first Lease Year, the period from the Commencement Date through February 28, 1999, (ii) thereafter, the twelve (12) month period commencing on the day after the last day of the preceding Lease Year and ending on the first anniversary of the last day of the preceding Lease Year. ARTICLE 3 RENT 3.1. Base Rent. --------- -3- Tenant covenants and agrees to pay to Landlord throughout the Initial Lease Term and, if applicable, the Renewal Lease Term, base rent (the "Base Rent"), equal to $1.00 per Lease Year. 3.1.1. Base Rental. Base Rent for the Initial Term has been paid to Landlord, and Landlord acknowledges receipt of the same. 3.2. Triple Net Lease. ---------------- It is the intention of Landlord and Tenant that this Lease Agreement be a "triple net lease," with Tenant paying during the Lease Term the Base Rent described in Section 3.1 without notice or demand and free of any recoupment, counterclaim, offset, abatement or other deduction whatsoever. Not in limitation of the foregoing sentence but by way of example, Tenant shall be obligated to pay, as additional rent, any and all costs and expenses relating to the Facility, including but not limited to taxes (in the manner and at the times set forth in Section 4.1.2), maintenance, repair, replacement, utilities, capital expenditures and operational expenses, but excepting however insurance as set forth in Article 10. This Lease shall always be construed to effectuate the foregoing declared intent of the parties. 3.3 Late Payments. ------------- Any installment of additional rent or any other payment required to be made by Tenant hereunder that is due to, or paid by, Landlord and which is not paid when due shall bear simple interest of eighteen percent (18%) per annum (the "Default Rate") from the date each installment shall have fallen due. 3.4. Additional Rent. --------------- Whenever under the terms of this Lease Agreement any sum of money is required to be paid by Tenant to Landlord in addition to the Base Rent reserved herein, such sum shall be deemed to be additional rent, regardless of whether designated as such, and shall be collectible as rent. 3.5. Payment of Rental. ----------------- All additional rent shall be paid without any set off or deduction whatsoever. Any payment by Tenant or acceptance by Landlord of additional rent of a lesser amount than shall be due from Tenant to Landlord shall be treated as a payment on account. The acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon any letter accompanying such check, that such lesser amount is payment in full, shall be given no effect, and Landlord may accept such check without prejudice to any other rights or remedies which Landlord may have against Tenant. ARTICLE 4 TAXES AND ASSESSMENTS 4.1. Taxes. ----- -4- 4.1.1. As additional rent hereunder, Tenant hereby agrees to pay all real and personal property taxes (including, without limitation, rental taxes, if any), assessments, impositions and other charges of every description and character levied on or assessed against all or any portion of the Facility, improvements located on or affixed to the Facility, and personal property located on or affixed to the Facility, to the extent that such taxes, assessments, impositions, and other charges relate to the Lease Term. 4.1.2. Payment of Taxes. Taxes shall be paid by Tenant in arrears in equal monthly installments in such amounts as are estimated and billed for each tax year by Landlord at the commencement of the Term and at the beginning of each successive tax year during the Lease Term, each such installment being due on the first day of each calendar month (commencing May 1, 1998). At any time during a tax year, Landlord may revise its estimate of Tenant's Taxes and adjust Tenant's equal monthly installments payable thereafter during the Tax Year to reflect such revised estimate. Within twenty (20) days after Landlord's receipt of tax bills for each tax year, Landlord will certify to Tenant the amount of Taxes for the tax year in question. The failure of Landlord to provide such certification within the time prescribed above shall not relieve Tenant of its obligations generally or for the specific Tax Year in which any such failure occurs unless the Landlord fails promptly thereafter to provide such certification. 4.2. Right to Seek Reduction. ----------------------- Tenant, at its own cost and expense, shall have the right to seek a reduction in the assessed valuation of the Facility. 4.3. Substitute Taxes. ---------------- If at any time during the Lease Term the laws concerning the methods of real property taxation prevailing at the Commencement Date are changed so that a tax or excise on rent or any other such tax, however described, is levied or assessed against Landlord as a direct substitution in whole or in part for any real property taxes, or in addition thereto, Tenant shall pay as additional rent before delinquency (subject to timely invoicing to Tenant for the same) the substitute or additional tax or excise on rents; provided, however, that Tenant shall not be required to pay any municipal, county, state or federal income taxes of Landlord. ARTICLE 5 ARTICLE 5 IS INTENTIONALLY OMITTED ARTICLE 6 USE OF FACILITY/ ENVIRONMENTAL COMPLIANCE 6.1. Permitted Use. ------------- Tenant hereby agrees to use the Facility for the operation of a manufacturing facility for clothing and related apparel products, and for no other use without Landlord's -5- prior written consent, which consent will not be unreasonably withheld. 6.2. Compliance with Environmental Laws. ---------------------------------- Without limiting the provisions of Article 14 hereof, Tenant shall comply in all respects with all "Environmental Laws" (as hereinafter defined) now in force or which may hereafter be enacted or promulgated applicable to the Facility and the conduct of Tenant's business at the Facility. Landlord represents that it has complied in all respects with all "Environmental Laws" applicable to the Facility for the period from August 28, 1984 to the date hereof (the "Environmental Indemnification Period"). Further, Tenant shall bear all Environmental Liabilities and Costs (as hereinafter defined) to the extent that such Environmental Liabilities and Costs arise from the operation of the Facility during the Lease Term or any condition of the Land that arises from activities by Tenant or its agents during the Lease Term; provided, however, that Tenant shall have no obligation, expense, cost or liability under any provision of this Lease Agreement as a result of, and Landlord shall indemnify and hold Tenant and its affiliates harmless against, (i) Environmental Liabilities and Costs arising from the operation of the Facility prior to the Commencement Date, (ii) any Release that occurred prior to the Commencement Date, or (iii) any noncompliance with any Environmental Laws prior to the Commencement Date, except that Tenant shall be responsible to the extent of any aggravation of or contribution to any such Release is caused by Tenant noncompliance of any Existing Environmental Condition during the Lease Term. 6.3. Definitions. ----------- For purposes of this Article, the following definitions shall apply: "Environment" means navigable waters, waters of the contiguous zone, ocean waters, natural resources, surface waters, ground water, drinking water supply, land surface, subsurface strata, and ambient air, both inside and outside of buildings and structures. "Environmental Laws" means federal, state, local and foreign laws, common law, regulations and codes, as well as orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to pollution, protection of the environmental or public health and safety, including, but not limited to the Release or threatened Release of Hazardous Substances into the Environment or otherwise relating to the presence, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances. "Environmental Liabilities and Costs" means all liabilities, losses, fines, penalties, charges, damages (including damages to persons, property or the Environment), costs, or expenses (including legal, engineering, and other consultant and expert witness fees and expenses) arising under Environmental Laws, or related to Remedial Actions, or otherwise arising out of or in respect of: (a) the operation of the Facility or any real property, assets, equipment -6- or facilities related to it; or (b) the environmental conditions on, under, above, or about the Facility or any real property, assets, equipment or facilities related to it; or (c) expenditures necessary to cause alter, maintain, or restore the Facility so as to be or remain in compliance with any and all requirements of Environmental Laws including, without limitation, all permits, licenses or other authorization issued under or pursuant to such Environmental Laws. "Existing Environmental Condition" means any environmental condition on, under, above, or about the Facility or any real property, assets, equipment or facilities related to it existing prior to the Commencement Date. "Governmental Authority" means any government or political subdivision thereof, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision. "Hazardous Substance" means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or waste, petroleum or petroleum-derived substance or waste, or any constituent of any such substance or waste, including without limitation any such substance regulated under or defined by any Environmental Law. "Losses" means all liabilities, losses, fines, penalties, changes, damages, costs (including, without limitation, court costs) or expenses (including, without limitation, reasonable attorneys fees). "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the Environmental or into or out of any property, including the movement of Hazardous Substances through or in the air, soil, surface water, ground water or property. "Remedial Action" means all actions reasonably necessary, whether voluntary or involuntary, to (i) clean up, remove, treat or in any other way adjust Hazardous Substances in the Environment; (ii) prevent the Release or further movement of Hazardous Substances so that they do not migrate or endanger or threaten to endanger public health or welfare or the Environment; or (iii) perform remedial studies, investigations, restoration and post-remedial studies, investigations and monitoring at, on, under or about the Facility. 6.4. Environmental Compliance. ------------------------ (a) Tenant agrees that promptly after the Commencement Date, it will, at no expense to Landlord, apply for the transfer into Tenant's name of all permits, licenses and approvals required under the Environmental Laws for the operation and use of the Facility, and if any of the same are not transferable, promptly apply for new permits, licenses and approvals to replace any that are not transferable. Tenant will diligently pursue such applications and use its best efforts to cause the transfers or issuances of new licenses to be approved. Tenant represents and -7- warrants that it will at no expense to Landlord, maintain compliance with the terms and conditions of all such permits and will obtain any other such permits necessary for the operation and use of the Facility. (b) Tenant agrees to notify Landlord, and Landlord agrees to notify Tenant, promptly in writing, upon the party or any of its representatives learning of any of the following with respect to the Facility: (i) notice or claim to the effect that Landlord or Tenant is or may be liable to any person as a result of the Release or threatened Release of any Hazardous Substance into the Environment; (ii) notice that Landlord or Tenant is subject to investigation by any Governmental Authority evaluating whether any Remedial Action is needed to respond to the Release or threatened Release of any Hazardous Substance into the Environment; (iii) notice of a condition which might reasonably be expected to result in a notice of violation of any Environmental Law; or (iv) notice of the commencement of any judicial or administrative proceeding alleging a violation of any Environmental Law. (c) Without limiting the generality of the foregoing, Tenant shall identify and dispose of hazardous wastes, as defined by any Environmental Laws, generated by Tenant during the Lease Term in the manner required by any and all applicable federal, state and local laws, rules and regulations. Upon the expiration or earlier termination of the Lease Agreement, Tenant shall, unless otherwise agreed by the parties, identify and dispose of all containers of Hazardous Substances that have been placed on the site by the Tenant during the Lease, in accordance with all applicable federal, state, and local laws, rules and regulations. 6.5. Waste; Nuisance. --------------- Tenant shall not use the Facility nor permit any use of the Facility which in any manner will cause or constitute waste, nuisance or unreasonable annoyance to owners or occupants of adjacent or neighboring properties. Tenant shall not do, bring, keep or permit anything in or about the Facility that will cause a cancellation of any insurance or any increase in the cost of insurance covering the Facility unless, in the case of any increase in the cost, Tenant agrees to pay the increased cost. Tenant shall, at its expense, comply with any and all requirements pertaining to the Facility of any insurance company necessary for the maintenance of reasonable property and public liability insurance for the Facility. Tenant shall, at its expense, keep the Facility, including walkways and landscaping adjacent to the Facility, clean and free from rubbish and dirt at all times, and shall arrange for the regular pick up and cartage of trash and garbage at Tenant's expense. 6.6. Covenant of Continuous Use. -------------------------- -8- Except as provided in the following paragraph, Tenant shall (subject to any right to terminate this Lease) continuously and diligently use the Facility for the use specified in this Lease Agreement. If the Facility is partially destroyed or condemned and this Lease Agreement remains in full force and effect, Tenant shall continue operation of the Facility to the extent reasonably practical from the standpoint of good business judgment during any period of reconstruction or restoration. Tenant may temporarily close the Facility, for a period not to exceed an aggregate of thirty (30) days, in order to perform repairs, alterations, improvements or renovations which are required by this Lease Agreement or approved by Landlord, if closing the Facility, in the Tenant's reasonable opinion, is the most cost-effective way to accomplish such repairs, alterations, improvements or renovations and does not violate any applicable laws. ARTICLE 7 IMPROVEMENTS, ALTERATIONS AND ADDITIONS 7.1. Additions. --------- Tenant shall not make any alterations, improvements and/or additions (collectively "Additions") to the Facility without first obtaining the prior written consent of Landlord, which consent may not be unreasonably withheld. When making such determination, Landlord may consider all relevant factors, including, but not limited to, the other provisions of this Agreement. 7.2. Removal. ------- If approved by Landlord in accordance with Section 7.1 herein, any and all Additions shall become a part of the Facility, and except for personal property and trade fixtures owned by Tenant (including equipment owned by Tenant and affixed to the Premises), shall remain on and be surrendered with the Facility on expiration or sooner termination of this Lease Agreement. 7.3. Mechanics' and Materialmen's Liens. ---------------------------------- Tenant shall pay all costs and expenses for any construction done on the Facility, and shall keep the Facility free and clear of all mechanics' or materialmen's liens resulting from construction done by or for the Tenant or with the permission of Tenant. Any mechanic's or materialmen's lien filed against the Facility shall be discharged by Tenant, by bond or otherwise, within ten (10) days after Tenant's receipt of notice of the filing thereof, at the sole cost and expense of Tenant. Tenant shall have the right to contest the correctness or validity of any such lien if Tenant procures and posts a lien release bond in recordable form issued by a corporation authorized to issue surety bonds in the State of Maryland in an amount equal to one and one-half (1-1/2) times the amount of the claim of lien. The bond shall meet all requirements of Maryland law and shall provide for the payment of any sum that claimant may recover on the claim together with costs of suit if it recovers in the action. ARTICLE 8 -9- MAINTENANCE AND REPAIRS 8.1. Maintenance and Repairs. ----------------------- Tenant, at its sole cost and expense, shall maintain the Facility in good condition and shall deliver the same and surrender the Facility to Landlord at the expiration or earlier termination of the Lease Term in the same condition as received at the Commencement Date less the effects of normal wear-and-tear. In addition, on or before _________ of each year during the Lease Term, Tenant shall, at its sole cost, cause a boiler inspection to be performed on the boiler included in the Facility by an inspector mutually selected by Tenant and Landlord. Tenant shall deliver to Landlord a copy of the inspection report prepared by such inspector promptly upon Tenant's receipt thereof. Also, Tenant shall, at its sole cost, have the boiler properly serviced and maintained on a regular basis in accordance with accepted standards and practices in the boiler industry, including, without limitation, appropriate feed water testing and conditioning. 8.2. Condition of Facility. --------------------- Tenant accepts the Facility from the Landlord on an "As Is/Where Is" basis and each party acknowledges that Landlord has made, makes and shall make no representations or warranties (except under Article (6)) with respect to the Facility, express or implied. Without limiting the generality of the foregoing, each party acknowledges and agrees that Landlord has made, makes and shall make (i) no representation or warranty of tenantability or habitability with respect to the Facility, (ii) no representation or warranty of fitness with respect to any fixtures contained therein, and (iii) no representation or warranty with respect to the physical condition of the Facility or the operating order or condition of any fixtures; and Tenant agrees that, except for the express representation and warranty set forth in Section 14.3 hereof, Tenant is not relying upon any representations or warranties of Landlord with respect to the tenantability, habitability, fitness, physical condition, or operating order of the Facility or any of the fixtures contained therein. 8.3. Tenant's Responsibility. ----------------------- Tenant agrees that during the Lease Term, it will at its own cost and expense keep (i) the Facility and fixtures in a clean and sightly condition consistent with the Facility's current condition less the effects of normal wear-and-tear and in compliance with all applicable legal requirements and (ii) all components and systems thereof (including, but not limited to, boilers, air conditioning, heating and ventilation systems, and all other electrical and mechanical systems), and the grounds and paved and impervious areas surrounding the Facility, in good order and repair and in good operating condition less the effects of normal wear-and tear. Tenant, except as may be otherwise expressly provided in this Lease Agreement, shall promptly, at its sole cost and expense, make all necessary repairs, restorations, renewals and replacements to the Facility whether interior or exterior, structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen. Such repairs, restorations, renewals and replacements shall, to the extent practicable, be comparable in quality to the original work or property replaced. 8.4. Landlord's Responsibility. ------------------------- -10- Landlord shall have no responsibility or obligation whatsoever to maintain, repair, replace, restore, or keep safe the Facility or fixtures and Landlord shall not be required to make any repairs, replacements, alterations, or renewals of any nature or description to the Facility, whether interior or exterior, ordinary or extraordinary, structural or nonstructural, foreseen or unforeseen, or to make any expenditure whatsoever in connection with this Lease Agreement or to impact or maintain the Facility in any way. Landlord and its agents shall have the right, but not the obligation, without additional notice to Tenant and at Tenant's expense (which expense shall constitute additional rent and shall be payable upon written demand therefor), to enter onto and make any repairs to the Facility that Landlord reasonably believes are necessary to maintain the Facility if Tenant fails to make such repairs within twenty (20) days after Landlord delivers written notice to Tenant requesting Tenant to complete the necessary repairs. No such twenty (20) day notice period shall be required prior to Landlord's entry and repair in the event that the failure to immediately make such repair could cause a substantial amount of damage to the Facility. ARTICLE 9 UTILITIES AND SERVICES Tenant shall, at its sole cost and expense, make all arrangements for and pay for all charges for utilities and services furnished to it or used by it, including, without limitation, gas, electricity, water, sanitary sewer, telephone service, trash collection and for all connection charges for such services. Landlord shall have no obligation whatsoever to provide or pay for any utilities now available or which may in the future become available at the Facility pursuant to appropriate utilities easements, including but not limited to: gas, electricity, water, telephone, storm and sanitary sewer, provided that Landlord shall reasonably cooperate with Tenant (but without any out-of-pocket expense to Landlord) in the securing thereof. ARTICLE 10 INSURANCE 10.1. Facility. During the Lease Term, Landlord, at its sole cost and expense, shall keep the Facility and fixtures insured against loss or damage by, flood, fire and such other risks as are now or hereafter are included in an extended coverage endorsement in common use for commercial property in the geographic location of the Facility, including vandalism and malicious mischief in an amount equal to the full replacement value of the Facility. 10.2. Public Liability and Automobile Insurance. ----------------------------------------- During the Lease Term, Tenant, at its sole cost and expense, shall keep or cause to be kept in force, for the mutual benefit of Landlord and Tenant, the following types of insurance coverage: (a) comprehensive general bodily injury liability insurance and property damage liability insurance, including contractual and products and completed -11- operations, with a combined single limit of liability of Ten Million Dollars ($10,000,000.00) for personal injuries or deaths of persons or for property damage occurring in or about the Facility. (b) comprehensive automobile property damage liability insurance, providing protection of at least $10,000,000.00 per accident. 10.3. Workers' Compensation, Unusual Hazards, and Other Insurance. ------------------------------------------------- During the Lease Term, Tenant, at its sole cost and expense, shall keep in force in form and coverage reasonably satisfactory to Landlord: (a) Workmen's compensation (or equivalent) insurance, including employer's liability insurance, in an amount necessary to meet all legally required limits. (b) Boiler and machinery insurance. (c) If Tenant commits, permits, or causes the conduct of any activity or the bringing or operation of any equipment (other than the equipment currently located at the Facility and similar equipment) on or about the Facility creating, in Landlord's reasonable judgment, unusual hazards, Tenant shall procure and maintain in force during such activity or operation insurance sufficient to cover the risks represented thereby. Landlord's demand for unusual hazard insurance hereunder shall not constitute a waiver of any right Landlord may have to demand the removal, cessation, or abatement of such activity or operation. (d) Tenant may procure and maintain any insurance not required by this Lease Agreement, but all such insurance shall be subject to all other provisions of this Lease Agreement pertaining to insurance and shall be for the mutual benefit of Landlord and Tenant. 10.4. General Insurance Matters. ------------------------- All insurance required under Sections 10.4 and 10.5 of this Lease Agreement shall be carried only with responsible insurance companies having a rating by A.M. Best Company of A- or better, and shall: (a) Name Landlord as an additional insured or additional loss payee, as applicable, and contain cross-liability endorsements; (b) Contain a waiver of subrogation by the insurance company in favor of the landlord; (c) Be primary as to Landlord and noncontributing with any insurance that may be carried by Landlord; (d) Not provide for a deductible of more than Ten Thousand Dollars ($10,000.00); -12- (e) Be provided by insurance companies duly licensed in the State of Maryland and reasonably acceptable to Landlord; and (f) Provide that they cannot be canceled or materially changed except after thirty (30) days' written notice by the insurer to Landlord. 10.5. Proof of Compliance; Failure to Maintain Insurance. -------------------------------------------------- Tenant shall deliver to Landlord, in the manner required for notices herein, copies of policies and certificates of all insurance policies required by this Lease Agreement, together with evidence satisfactory to Landlord of payment required for procurement and maintenance of the policy, within the following time limits: (a) For insurance required at the commencement of this Lease Agreement, upon the Commencement Date. (b) For insurance becoming required at a later date, at least ten (10) days before the requirement takes effect. (c) For any renewal or replacement of a policy already in existence, Tenant will provide evidence at least ten (10) days before expiration or other termination of the existing policy. If Tenant fails or refused to procure or to maintain insurance as required by this Lease Agreement or fails or refuses to furnish Landlord with required proof that the insurance has been procured and is in force and paid for, Landlord shall have the right, but not the obligation, at Landlord's election, to procure and maintain such insurance. The premiums paid by Landlord shall be treated as additional rent due from Tenant with interest at the Default Rate, to be paid on the first day of the month following the date on which the premiums were paid. Landlord shall give Tenant prompt notice of the payment of such premiums, stating the amounts paid and the name of the insurer or insurers, and interest at the Default Rate shall run from the date of payment by Landlord. ARTICLE 11 DESTRUCTION 11.1. Destruction of Facility. ----------------------- If during the Lease Term the Facility is totally or partially destroyed from any cause whatsoever, whether or not such cause is covered by insurance maintained by Landlord, rendering the Facility totally or partially inaccessible or unusable, Landlord, at its sole option, may either (i) cancel and terminate this Lease or (ii) with due diligence and dispatch, restore the Facility to substantially the same condition as it was in immediately before destruction. There shall be no abatement of Base Rent or any other payment to be made by Tenant hereunder, except that Landlord will credit against any additional rent (i) any business interruption insurance proceeds actually received by Landlord and (ii) any credit actually received by Landlord for items prepaid by Tenant but which were reduced as a result of such destruction. Upon cancellation of this Lease by Landlord, Landlord shall be then entitled to all insurance proceeds payable by reason of the destruction. -13- ARTICLE 12 CONDEMNATION 12.1. Certain Definitions. ------------------- The following terms shall have the following meanings: (i) "Taking" shall mean the transfer of the use, occupancy or title of the Facility or any portion thereof to an entity exercising the power of eminent domain in any actual or threatened action or proceeding pursuant to any law, general or special, and shall include such transfer made in settlement or in lieu of any such threatened action or proceeding; (ii) the "Date of Taking" shall mean the earlier of the date upon which the use, occupancy or title of the Facility or any portion thereof is vested in, or possession thereof is taken by, such entity; and (iii) "Award" shall mean the amounts recovered as compensation or damages on account of a Taking, including all amounts paid pursuant to any agreement with such entity which has been made in settlement or under threat or in lieu of any such action or proceeding, less the reasonable costs and expenses incurred in collecting such amounts (including any such amounts held or received by or on behalf of Landlord by the holder of any mortgage and any attorneys' fees). 12.2. Taking. ------ If there shall occur any Taking of all or any part of the Facility, then this Lease Agreement shall terminate effective as of the Date of Taking provided, however, that such termination shall be without prejudice to the rights of Landlord to recover and retain the Award in its own name. 12.3 Claims of Landlord and Tenant. ----------------------------- Landlord shall be entitled to receive the entire Award in any proceeding with respect to such Taking without deduction therefrom for any estate vested in Tenant by this Lease Agreement, and Tenant shall receive no part of such Award, except as herein expressly provided. Tenant shall have the right to make a separate claim with the condemning authority for (i) any moving or relocation expenses incurred by Tenant as a result of such condemnation; and (ii) any costs incurred and paid by Tenant in connection with any alteration or improvement made by Tenant to the Facility, provided, however, that such separate claim shall not reduce or adversely affect the amount of Landlord's Award. ARTICLE 13 DEFAULT AND REMEDIES 13.1. Default by Tenant. ----------------- The occurrence of any one or more of the following events shall constitute a default and breach of this Lease Agreement by Tenant: (a) Failure by Tenant to make any payment of additional rent, or any other payment required to be made by Tenant hereunder as and when due. -14- (b) The occurrence of a Pietrafesa Event of Default (as defined in the Supply Agreement). (c) Any default under Sublease of even date herewith between Jos. A Bank Clothiers, Inc., Sublandlord and Tenant, as Subtenant. 13.2 Notices of Default to Tenant. ---------------------------- Landlord shall give Tenant written notice of default and Tenant shall have the right to cure defaults hereunder and be relieved from the effects thereof if, in the case of a monetary default, Tenant remedies such default by making the required payment(s) within five (5) days after the giving of notice by Landlord or, in the case of nonmonetary defaults, Tenant remedies such default within thirty (30) days after the giving of notice by Landlord; provided, however, if such nonmonetary default cannot reasonably be cured within such thirty (30) days period, Tenant shall have up to an additional thirty (30) days to remedy such default so long as Tenant is diligently pursuing such remedy. No further notices shall be required to pursue any remedy of Landlord, including the commencement of an unlawful detainer proceeding, and to the extent the law may be construed to require additional notices, such notices are specifically waived by Tenant. 13.3 Remedies of Landlord. -------------------- (a) Cumulative Remedies. If, and only if, any default by Tenant is not cured within the cure period after notice provided in the foregoing Section 13.2, Landlord shall have the following remedies set forth in this Section 13.3. (b) Performance of Tenant's Obligations. Landlord, with or without terminating this Lease Agreement, may immediately or at any time thereafter reenter the Facility and correct or repair any condition which shall constitute a failure on Tenant's part to keep, observe, perform, satisfy, or abide by any term, condition, covenant, agreement, or obligation of this Lease Agreement or of any notice given Tenant by Landlord pursuant to the terms of this Lease Agreement, and Tenant shall fully reimburse and compensate Landlord on demand (which sums shall constitute additional rent). (c) Vacation of Facility. Landlord, with or without terminating this Lease Agreement, may immediately or at any time thereafter demand in writing that Tenant vacate the Facility and thereupon Tenant shall vacate the Facility and remove therefrom all property thereon belonging to or placed on the Facility by, at the direction of, or with consent of Tenant within thirty (30) days of receipt by Tenant of such notice from Landlord, whereupon Landlord shall have the right to reenter and take possession of the Facility. Any such demand, reentry and taking possession of the Facility by Landlord shall not of itself constitute an acceptance by Landlord of a surrender of this Lease Agreement or of the Facility by Tenant and shall not of itself constitute a termination of this Lease Agreement by Landlord. (d) Reentry. Landlord, with or without terminating this Lease Agreement, may immediately or at any time thereafter reenter the Facility and remove therefrom Tenant and all property belonging to or placed on the Facility by, at the direction -15- of, or with consent of Tenant. Any such reentry and removal by Landlord shall not of itself constitute an acceptance by Landlord of a surrender of this Lease Agreement or of the Facility by Tenant and shall not of itself constitute a termination of this Lease Agreement by Landlord. (e) Reletting. Landlord, with or without terminating this Lease Agreement, may immediately or at any time thereafter relet the Facility or any part thereof for such time or times, at such rental or rentals and upon such other terms and conditions as Landlord may deem advisable in its sole and absolute subjective discretion, and Landlord may make any alterations or repairs to the Facility which it may deem necessary or proper to facilitate such reletting; and Tenant shall pay as additional rent all costs of such reletting including but not limited to the cost of any such alterations and repairs to the Facility, attorneys' fees, advertising costs, and brokerage commissions; and if this Lease Agreement shall not have been terminated, Tenant shall continue to pay all Base Rent, and all other forms of rent and all other charges due under this Lease Agreement up to and including the date of beginning of payment of such rent by any subsequent tenant of part or all of the Facility, and thereafter Tenant shall pay monthly during the remainder of the Lease Term the difference, if any, between the rent and other charges collected from any such subsequent tenant or tenants and the Base Rent, and all other liabilities of Tenant hereunder arising and other charges reserved in this Lease Agreement, but Tenant shall not be entitled to receive any excess of any such rents collected over the rents reserved herein. (f) Termination. Landlord may immediately or at any time thereafter terminate this Lease Agreement, and this Lease Agreement shall be deemed to have been terminated upon receipt by Tenant of written notice of such termination; upon such termination Landlord shall recover from Tenant all damages Landlord may suffer by reason of such termination, all arrearages in and all other forms of rent, costs, charges, and reimbursements, the cost (including court costs and attorneys' fees) of recovering possession of the Facility, the cost of any alteration of or repair to the Facility which is necessary or proper to prepare the same for re-letting. Such election shall be made by Landlord by serving written notice upon Tenant of its choice of one of the two said alternatives within thirty (30) days of the notice of termination. (g) Waiver and Indemnity. If Landlord reenters the Facility or terminates this Lease Agreement pursuant to any of the provisions of this Lease Agreement, Tenant hereby waives all claims for damages which may be caused by such reentry or termination by Landlord. Tenant shall and does hereby indemnify and hold Landlord harmless from any loss, cost (including court costs and attorneys' fees), or damage suffered by Landlord by reason of such reentry or termination. No such reentry or termination shall be considered or construed to be a forcible entry. 13.4 Non-Waiver; Forbearance. ----------------------- Landlord's pursuit of any one or more of its stated remedies shall not preclude pursuit of any other remedy or remedies provided for in this Lease Agreement or any other remedy or remedies provided for or allowed by law or in equity, separately or concurrently, or in any combination. Pursuit of any one or more of the remedies provided in this Lease Agreement shall not constitute an election of remedies excluding the election of another remedy or other remedies, or a forfeiture or waiver of any damages or other sums accruing to Landlord by reason of Tenant's default. Landlord's forbearance in -16- pursuing or exercising one or more of its remedies shall not be deemed or construed to constitute a waiver of any future default or remedy. No waiver by Landlord of any right or remedy on one occasion shall be construed as a waiver of that right or remedy on any subsequent occasion or as a waiver of any right or remedy then or thereafter existing. No failure of Landlord to pursue or exercise any of its powers rights or remedies or to insist upon compliance by Tenant with any agreement, term, covenant, condition, requirement, provision or restriction of this Lease Agreement, and no custom or practice at variance with the terms of this Lease Agreement, shall constitute a waiver by Landlord of the right to demand compliance with the terms and conditions of this Lease Agreement. 13.5 Default by Landlord. ------------------- (a) Landlord covenants and agrees that it shall constitute a default by Landlord hereunder if any "Bank Event of Default" (as defined in the Supply Agreement) shall have occurred and be continuing. (b) Upon and during the continuation of a default described in clause (a) above, Tenant shall be entitled to terminate this Lease and all its obligations hereunder on notice to Landlord, which notice and termination shall be effective as of the date sent by Tenant (unless provided otherwise in the relevant notice.) ARTICLE 14 COMPLIANCE WITH LAW 14.1. Tenant's Compliance with Laws. ----------------------------- Tenant, at its expense, shall comply with all applicable laws, rules, orders, ordinances, conditional use permits, zoning variances, regulations and other requirements, present or future, including all Environmental Laws defined in Section 6.3 herein (collectively, "Legal Requirements"), affecting the Facility that are promulgated by any governmental authority or agency having jurisdiction, including, without limitation, all Legal Requirements affecting the design, construction, use, condition, occupancy, and/or operation of the Facility, or relating to the performance by Tenant of any duties or obligations to be performed by it hereunder; provided, however, that Tenant shall have no obligation, expense, cost or liability under any provision of this Lease Agreement as a result of (i) Environmental Liabilities and Costs arising from the operation of the Facility prior to the Commencement Date, (ii) any Release that occurred prior to the Commencement Date, or (iii) any noncompliance with any Environmental Laws prior to the Commencement Date, except that Tenant shall be responsible for any aggravation of or contribution to any such Release, noncompliance or any Existing Environmental Condition during the Lease Term. 14.2. Contest of Legal Requirements. ----------------------------- Tenant, at its expense and by appropriate proceedings diligently prosecuted, may contest the validity or applicability of any Legal Requirement, and may postpone its compliance therewith until such contest shall be decided, provided such postponement does not subject the Landlord or the Facility to penalty or material loss, damage or reduction in value. -17- ARTICLE 15 ASSIGNMENT AND SUBLETTING 15.1. Prohibition Against Lease Agreement Transfers. --------------------------------------------- Tenant may not sell, assign, encumber or otherwise transfer this lease Agreement, or any portion of Tenant's interest in this Lease Agreement, or sublease or grant any license or concession for all or any part of the Facility, or allow any other person or entity to occupy all or any part of the Facility, whether voluntarily or involuntarily (hereinafter collectively referred to as "Transfer") without Landlord's prior written consent, which consent may be granted or withheld in the sole and absolute subjective discretion of Landlord. Any Transfer shall be subject to and governed by the terms of this Lease Agreement, and Tenant shall thereafter remain primarily liable for the full performance of all terms and conditions of this Lease Agreement, including the payment of all additional rent and all other forms of rent and other payments required hereunder. Any Transfer without Landlord's prior consent shall be voidable at the Option of Landlord and shall be a material breach of this Lease Agreement. The approval of one Transfer shall not be deemed approval of or consent to any subsequent Transfer. As a condition to Landlord's consent to any Transfer, Landlord may require a fee to reimburse Landlord for reasonable attorneys' fees and costs incurred in reviewing the proposed Transfer, and that the transferee assume Tenant's obligations hereunder in writing in a form approved by Landlord. Such fee shall constitute additional rent hereunder. Notwithstanding the foregoing, Landlord will not unreasonably withhold its consent to a subletting of a portion of the Facility provided that: (a) the space to be sublet shall be subject to Landlord approval as being unneeded space for the purpose set forth in the Supply Agreement. (b) the subletting shall in no way affect the Reserved Space provided in Section 1.3. (c) all proceeds of any nature whatsoever to the extent exceeding applicable Base Rent and additional rent from said subletting shall be promptly paid to Landlord. 15.2. Transfer of Limited Liability Company Member Interests. -------------------------------------------- If at any time after execution of this Lease, any part or all of the member interests of Tenant shall be transferred by sale, assignment, bequest, inheritance, operation of law, or other disposition (including such a transfer to or by a receiver or trustee in Federal or state bankruptcy, insolvency, or other proceedings) so as to result in a change in the present control of the limited liability company by the person or persons now owning a majority of such interests (or any affiliate of such persons), Tenant shall give Landlord notice of such event within five (5) days from the date of such transfer. In such event and regardless of whether Tenant has given such notice, Landlord may elect to terminate this Lease at any time thereafter by giving Tenant notice of such election, in which event this Lease and the rights and obligations of the parties hereunder shall cease as of a date set -18- forth in such notice which date shall not be less than ten (10) days after the date of such notice. In the event of any such termination, all additional rent due Landlord resulting from Tenant's failure to perform any of its obligations hereunder) shall be adjusted as of the date of such termination. 15.3. Landlord's Right to Assign Agreement and Mortgage the Facility. ----------------------------------------------------- Landlord shall have the right to assign its rights and obligations under this Lease Agreement and, in such event, Landlord shall provide written notice thereof to Tenant. Landlord shall also have the right to mortgage or otherwise encumber the Facility at any time during the Lease Term and Landlord shall provide Tenant written notice thereof. ARTICLE 16 ENTRY BY LANDLORD DURING THE LEASE TERM Landlord and its authorized representatives shall have the right to enter the Facility either (i) at all times for purposes of entering the Reserved Space as set forth in Section 1.3 or (ii) on prior notice during normal business hours, for any reason or purpose in accordance with the Primary Supply Agreement. Landlord may post "for sale," "for rent" or "for lease" signs during the last six (6) months of the Lease Term, or at any time after Tenant has failed to cure a default under the terms of this Lease Agreement within the cure period, if any, specified in Section 13.2 hereof and, in addition show the Facility to prospective brokers, agents, buyers, tenants, lenders or persons interested in the Facility at any time during the last six (6) months of the Lease Term, or at any time after Tenant has failed to cure a default under the terms of this Lease Agreement within the cure period specified in Section 13.2 hereof. Tenant shall not be entitled to an abatement or reduction in Base Rent, or any other form of rent if Landlord exercises any rights reserved in this Article. Nothing in this Article shall be construed to require Landlord to make any repairs to the Facility whatsoever, it being acknowledged by the parties that such responsibility is the sole responsibility of Tenant hereunder. ARTICLE 17 SUBORDINATION AND ATTORNMENT 17.1. Subordination ------------- Tenant shall from time to time, upon request from Landlord, execute and deliver all documents that may be required by a lender to effectuate a subordination of this Lease Agreement to any encumbrance recorded before or after the date of this Lease Agreement which constitutes a lien against the Facility. 17.2. Attornment ---------- It is acknowledged and agreed that Landlord has the right to transfer Landlord's interest in the Facility, in whole or in part, to encumber Landlord's fee title, and to assign any or all rent due hereunder. Tenant shall attorn to any purchaser at any foreclosure sale, or to any grantee or transferee designated in any deed given in lieu of foreclosure, and any grantee in an outright sale or exchange of the Facility or any part -19- thereof from Landlord. In the event of such attornment, this Lease Agreement shall remain in full force and effect so long as Tenant is not in default hereunder. 17.3 In the event that Tenant loses possession of the Facility as a result of foreclosure of a mortgage encumbering the Facility, this shall constitute a "Bank Event of Default" under the Supply Agreement. 17.4. Further Documents. ----------------- Tenant hereby agrees to execute any documents reasonably required by a lender or grantee from Landlord hereunder to accomplish the purposes of this Article. If Tenant fails to execute such documents within ten (l0) days of a request therefor, Tenant hereby grants to Landlord a power of attorney, coupled with an interest, to execute and deliver such documents on behalf of Tenant; provided, however, Landlord shall not be authorized to so execute such documents in the event that during such ten-day period Tenant reasonably objects on the basis that such documents are unreasonable in light of the purposes of this Article. -20- ARTICLE 18 NOTICES ------- Any notice, demand or request, consent, approval or other communication that either Landlord or Tenant desires or is required to give hereunder shall be in writing and shall be deemed to have been duly given and received if delivered by hand or mailed by registered or certified mail (return receipt requested), postage prepaid, or if given by facsimile or telecopy (followed by a mailed copy), transmitted to the parties at the following addresses: If to Landlord: The Joseph A. Bank Mfg. Co., Inc. 500 Hanover Road Hampstead, Maryland 21074 Attn: Chief Financial Officer Copy to: Newton B. Fowler III, Esquire Venable, Baetjer and Howard, LLP 1800 Mercantile Bank & Trust Building 2 Hopkins Plaza Baltimore, Maryland 21201 If to Tenant: SourceOne, LLC 4241 Brookhill Road Baltimore, MD 21215 Attention: President Copy to: L. Kevin Sheridan, Esquire Roberts, Sheridan & Kotel Towers 49 12 E. 49th Street New York, NY 10017 or at such other address as may be substituted by notice given as herein provided. Every notice, demand, request, consent, approval or other communication hereunder shall be deemed to have been duly given on the date on which personally delivered, with receipt acknowledged, on the date of telecopier transmission, on the date of delivery by overnight courier or three (3) business days after the same shall have been deposited with the United States mail. For purposes of this Section, a "business day" means any day other than Saturday, Sunday or other day on which the commercial banks of the State of Maryland are authorized to close. ARTICLE 19 REPRESENTATIONS AND COVENANTS OF THE PARTIES -------------------------------------------- 19.1. Landlord's Representations and Covenants. ---------------------------------------- -21- Landlord hereby makes the following representations: (a) Landlord is a corporation, organized, validly existing and in good standing under the laws of the State of New Jersey and is authorized to transact business as a foreign corporation under the laws of the State of Maryland. (b) Landlord is the record owner of the Facility, and has the corporate power and authority to execute and deliver this Lease Agreement and the other agreements to be delivered pursuant thereto (collectively, the "Transaction Documents") and to perform its obligations hereunder and thereunder. (c) The execution and delivery by Landlord of the Transaction Documents and the performance of its obligations thereunder have been duly authorized by all action (corporate or otherwise) that is necessary to authorize Landlord to enter into the Transaction Documents or to perform its obligations thereunder. Each of the Transaction Documents is the legal, valid and binding obligation of Landlord, enforceable against Landlord in accordance with its terms. (d) None of the Transaction Documents conflicts with, violates or will cause a default under any existing agreements to which Landlord is a party and all consents and approvals necessary for Landlord to enter into each of the Transaction Documents have been obtained. 19.2. Representations and Covenants of Tenant. --------------------------------------- Tenant hereby makes the following representations: (a) Tenant is a limited liability Company organized, validly existing and in good standing under the laws of the State of New York and is authorized to transact business as a foreign limited liability Company under the laws of the State of Maryland. (b) Tenant has the limited liability company power and authority to execute and deliver each of the Transaction Documents and to perform its obligations thereunder. -22- (c) The execution and delivery by Tenant of the Transaction Documents and the performance of its obligations thereunder have been duly authorized by all action that is necessary to authorize Tenant to enter into the Transaction Documents or to perform its obligations thereunder. Each of the Transaction Documents is the legal, valid and binding obligation of Tenant, enforceable against Tenant in accordance with its terms. (d) None of the Transaction Documents conflicts with, violates or will cause a default under any existing agreements to which Tenant is a party, and all consents and approvals necessary for Tenant to enter into each of the Transaction Documents have been obtained. ARTICLE 20 SUCCESSORS Subject to the provisions of this Lease Agreement regarding Transfers, each and all of the covenants and conditions of this Lease Agreement shall be binding upon and shall inure to the benefit of the heirs, successors, executors, administrators, assigns and personal representatives of the respective parties. ARTICLE 21 EXPIRATION, TERMINATION AND HOLDER OVER 21.1. Surrender of the Facility. ------------------------- At the expiration or earlier termination of the Lease Term, Tenant shall surrender to Landlord the possession of the Facility, Fixtures, improvements, alterations and/or additions to or of the Facility (excepting only movable fixtures and trade fixtures, including all manufacturing equipment installed by Tenant), which shall, upon the expiration or earlier termination of the Lease Term, become a part of the Facility and the property of the Landlord, subject to Landlord's right to require removal in accordance with Section 7.2 hereof. Tenant shall leave the surrendered Facility and any other property in good and broom-clean condition and, except as provided to the contrary in provisions of this Lease Agreement on maintenance and repair, in the same condition as delivered to Tenant or as improved during the Lease Term, normal wear and tear excepted. All property that Tenant is not required to surrender but that Tenant does not remove from the Facility on or before the date of termination of this Lease Agreement shall, at Landlord's election, automatically become Landlord's property at termination without the necessity of any further act by Landlord or Tenant. 21.2. Holding Over. ------------ If Tenant fails to surrender the Facility at the expiration or sooner termination of this Lease Agreement, Tenant shall defend and indemnify Landlord from all liability and expense including, without limitation, attorneys' fees resulting from Tenant's failure to surrender. This Lease Agreement shall terminate without further notice at the expiration of the Lease Term. Any holding over by Tenant after expiration with the consent of Landlord shall not constitute a renewal or extension or give Tenant any right in or to the Facility, but will be deemed to be a tenancy on a month-to-month basis, subject to the -23- covenants and conditions of this Lease Agreement, including without limitation, the obligation to pay the rent reserved to Landlord, except that Base Rent shall be increased to an amount equal to two (2) times the then current Base Rent. ARTICLE 22 NO RECOURSE TO AFFILIATES Landlord and Tenant each agree that its obligations hereunder are primary in nature and that neither party hereto shall have any recourse to any officer, director, partners, member or affiliate (including in the case of SourceOne, Pietrafesa), and that no such person or entity shall have any liability, in respect of the payment and performance obligations of Landlord and Tenant hereunder. ARTICLE 23 MISCELLANEOUS PROVISIONS 23.1. Counterparts. ------------ This Lease Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 23.2. Time of the Essence. ------------------- In the performance of all of the covenants and conditions of this Lease Agreement, time shall be of the essence. 23.3. Brokers. ------- Tenant and Landlord each warrants that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Lease Agreement and it knows of no real estate commissions and/or fee in connection with the making and entering into of this Lease Agreement. Further, the parties each hereby indemnify and hold harmless the other party from the payment of any such claims for commissions or fees arising from the indemnifying party's contacts with a claiming broker or agent. 23.4. Estoppel Certificates. --------------------- Tenant shall, at any time and from time to time upon not less than ten (10) business days' prior written notice from Landlord, execute a statement in writing which shall set forth the following: (a) an unequivocal certification that this Lease Agreement is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease Agreement, as so modified, is in full force and effect), and the amount of and date to which the rental or other charges have been paid in advance, if any; and (b) an acknowledgment that there are not any defenses, offsets or to Tenant's knowledge and belief, outstanding uncured defaults on the part of Landlord hereunder or specifying such defenses, offsets or defaults if any. Failure to deliver the -24- certificate within ten (l0) business days shall be conclusive upon Tenant for the benefit of Landlord and third parties relying on the certificate that this Lease Agreement is in full force and effect, has not been modified, and there is no default on the part of Landlord, except as may be represented by Landlord. Tenant hereby agrees that any statement delivered pursuant to this paragraph may be relied upon by the person to whom it is addressed at Landlord's request. Landlord agrees to deliver to Tenant upon request, a statement similar to the foregoing, except with the parties reversed, upon the same terms and conditions as required of Tenant herein. 23.5. Applicable Law. -------------- This Lease Agreement shall be governed by and construed in accordance with the laws of the State of Maryland (without regard to its conflicts of law doctrines). 23.6. Prior Agreements and Modifications. ---------------------------------- No provision of this Lease Agreement may be amended or added to except by a subsequent contract in writing signed by the parties hereto or their respective successors in interest. Further, the Transaction Documents take the place of all other oral and written agreements between Landlord and Tenant made prior to the date hereof and contain the entire agreement of Landlord and Tenant. 23.7. Captions and Headings. --------------------- The captions and headings used throughout this Lease Agreement have been provided for the convenience of the parties and for reference only. Such are not to be deemed a part of this Lease Agreement nor to be considered in the construction or interpretation of any part hereof. -25- 23.8. Provisions are Covenants and Conditions. --------------------------------------- All provisions, whether covenants or conditions on the part of Tenant, shall be deemed as both covenants and conditions hereunder. 23.9. Severability. ------------ The unenforceability, invalidity or illegality of any provision of this Lease Agreement shall not render any other provision unenforceable, invalid or illegal. 23.10. Exhibits and Schedules Incorporated. ----------------------------------- All Exhibits to which reference is made are deemed incorporated in this Lease Agreement. 23.11. Relationship of Parties. ----------------------- The relationship between the parties shall at all times be deemed to be that of Landlord and Tenant. The parties do not intend, nor shall this Lease Agreement be deemed to create, a partnership or joint venture. 23.12. Modifications. ------------- The parties agree to modify this Lease Agreement in order to accommodate any reasonable requirements of Landlord's lenders so long as such modifications do not affect the rent or other financial responsibilities of the parties, do not alter significantly the non-financial responsibilities of the parties, or otherwise have a material and adverse economic effect on the parties hereunder. 23.13. Covenant of Quiet Enjoyment. --------------------------- So long as Tenant is not in default hereunder, and subject to all of the other provisions of this Lease Agreement, Tenant shall be entitled to quiet enjoyment of the Facility during the Lease Term without molestation or hindrance by Landlord or any party claiming by, through, or under Landlord. 23.14. Recordation. A short form of this Lease, in the form prescribed by statute, suitable for recordation, shall be executed by the parties hereto upon the request of either Landlord or Tenant. Recordation shall not be required. If either party desires to record the short form lease, all costs of recordation shall be at the expense of that party. 23.15. Landlord Exculpation. The term "Landlord" as used in this Lease, shall be limited to mean and include only the then lawful owner (at the time in question) of the Facility; in the event of any transfer or transfers of said estate, the Landlord, herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall be automatically freed and relieved, from and after the date of such transfer and conveyance, of all liability with respect to the performance of any covenants and agreements on the part of Landlord contained in this Lease thereafter to be performed. It is understood and agreed that if any Landlord or grantor shall have committed default prior to such transfer, the Landlord or grantor committing such default shall not be exempt from such liability -26- attaching thereto; it being intended that the covenants and agreements contained in this Lease on the part of the Landlord to be performed, subject to that which is hereafter set forth, be binding on Landlord and its successors and assigns, only during and in respect to their successive periods of ownership. Tenant agrees that the Facility is within the exclusive control of Tenant. 23.16. No Option. The submission of this Lease for examination does not constitute a reservation of or option for the leased premises and this Lease become effective as a Lease only upon execution and delivery thereof by Landlord and Tenant. IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement as of the date first written above with the intention of creating a document under seal. LANDLORD: Witness: THE JOSEPH A. BANK MFG. CO., INC. By: /s/ Timothy F. Finley (SEAL) ________________________ _______________________ Name: Timothy F. Finley ____________________ Title: CEO ____________________ [CORPORATE SEAL) -27- TENANT: SOURCEONE, L.L.C. By: /s/ David McDonough (SEAL) ________________________ _______________________ Name: David McDonough ____________________ Title: VP-Finance Member ____________________ By: (SEAL) ________________________ _______________________ Name: ____________________ Title: Member ____________________ -28- EXHIBITS AND SCHEDULES ---------------------- EXHIBIT A - Land -29- EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-30-1999 MAY-02-1998 677 0 3,466 0 46,954 59,876 47,674 24,917 85,303 29,279 0 0 0 70 37,122 85,303 43,383 43,383 22,151 19,438 0 0 437 1,357 529 828 (51) 0 0 777 0.11 0.11
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