<PAGE> 1
================================================================================
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ______________
COMMISSION FILE NUMBER: 0-28234
CASA OLE RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0493269
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1135 EDGEBROOK, HOUSTON, TEXAS 77034-1899
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 713/943-7574
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates of the
registrant, based on the sale trade price of the Common Stock as reported by
the Nasdaq National Market on March 4, 1997 was $23,775,673. For purposes of
this computation, all officers, directors and 10% beneficial owners of the
registrant are deemed to be affiliates. Such determination should not be deemed
an admission that such officers, directors or 10% beneficial owners are, in
fact, affiliates of the registrant. Number of shares outstanding of each of the
issuer's classes of common stock, as of March 4, 1997: 3,597,705 shares of
common stock, par value $.01.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's definitive proxy statement in connection with the Annual Meeting
of Shareholders to be held May 28, 1997, to be filed with the Commission
pursuant to Regulation 14A, is incorporated by reference into Part III of this
report.
================================================================================
<PAGE> 2
PART 1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K under "Item 1. Business", "Item
3. Legal Proceedings", "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties and other facts which
may cause the actual results, performance or achievements of Casa Ole
Restaurants, Inc. (the "Company"), its area developers, market partners,
franchisees and Casa Ole restaurants to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; competition; success of operating
initiatives; development and operating costs; area developers' adherence to
development schedules; advertising and promotional efforts; brand awareness;
adverse publicity; acceptance of new product offerings; consumer trial and
frequency; availability, locations and terms of sites for store development;
changes in business strategy or development plans; quality of management;
availability, terms and development of capital; business abilities and judgment
of personnel; availability of qualified personnel; food, labor and employee
benefit costs; changes in, or the failure to comply with government
regulations; regional weather conditions; construction schedules; and other
factors referenced in the Form 10-K. The use in this Form 10-K of such words
as "believes", "anticipates", "expects", "intends" and similar expressions are
intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. The success of the Company is dependent
on the efforts of the Company, its employees and its area developers, market
partners and franchisees and the manner in which they operate and develop
stores.
ITEM 1. BUSINESS
GENERAL
Casa Ole Restaurants, Inc. (the "Company") was incorporated under the
laws of the state of Texas in February 1996, and had its initial public
offering in April 1996. The Company operates as a holding company for 13
corporations and conducts substantially all of its operations through its
subsidiaries. Immediately prior to the initial public offering and pursuant to
a Master Contribution Agreement, the shareholders of the prior corporations
exchanged their shares in such corporations for shares in the Company, and
these corporations became wholly-owned subsidiaries of the Company. All
references to the Company include the Company and its subsidiaries, unless
otherwise stated.
The Company operates and franchises Mexican-theme neighborhood family
dining restaurants featuring certain elements associated with the casual dining
experience, under the name Casa Ole. The first Casa Ole restaurant was opened
in Pasadena, Texas in 1973, and today the Company operates 17 restaurants and
franchises 29 restaurants in various communities across Texas, Louisiana and
Indiana. Casa Ole restaurants are designed to appeal to a broad range of
middle-income family customers, and are located primarily in small and
medium-sized communities and middle-income areas of larger markets. The
restaurants offer fresh, quality food, affordable prices, friendly service and
comfortable surroundings. Casa Ole's menu features a variety of traditional
Mexican and Tex-Mex selections, complemented by the Company's own original
Mexican-based recipes designed to have broad appeal. The Company believes that
the established success of the Casa Ole concept in existing markets, its focus
on middle-income family customers and the skills of its management team provide
significant opportunities to realize the value inherent in the Casa Ole
concept, increase revenues in existing markets and penetrate new markets.
STRATEGY AND CONCEPT
Casa Ole's objective is to be considered the value leader of the
Mexican segment of the full-service neighborhood family dining marketplace. To
accomplish this objective, the Company has developed strategies designed to
achieve and maintain high levels of customer loyalty, frequent patronage and
profitability. The key strategic elements of the Casa Ole concept are:
o Offering consistent, high-quality, freshly prepared products
created in each restaurant from original recipes;
o Pricing menu offerings at levels comparable to upper-end
quick-service restaurants and below many family and
casual-dining restaurant concepts;
o Selecting, training and motivating its employees to enhance
customer dining experiences and the friendly casual atmosphere
of Casa Ole restaurants;
o Providing customers with the friendly, attentive service
typically associated with the casual-dining experience; and
o Reinforcing the perceived value of the dining experience with
an understated but comfortable and inviting
Mexican/Southwestern decor.
MENU. Casa Ole restaurants offer high-quality products with a
distinctive, yet mild taste profile with mainstream appeal. Fresh ingredients
are a critical recipe component, and the majority of menu items are prepared
daily in the kitchen of
2
<PAGE> 3
each restaurant from original Casa Ole recipes. Menu offerings and sauces are
prepared by Company chefs who are trained to consistently prepare the Casa Ole
recipes.
The menu features a wide variety of entrees including enchiladas,
combination platters, burritos, fajitas and other house specialties. The menu
also includes soup, salads, appetizers and desserts. From time to time the
Company also introduces new dishes designed to keep the menu fresh. While Casa
Ole restaurants generally offer alcoholic beverages, in keeping with Casa Ole's
family orientation, the Company's concept does not feature a traditional
customer bar area. Alcoholic beverages are served as a complement to meals and
represent approximately 3% of average Company-owned restaurant revenues. At
Company-owned Casa Ole restaurants the dinner menu entrees presently range in
price from $3.99 to $7.99, with most items priced between $4.99 and $5.99.
Lunch prices at Company-owned restaurants presently range from $3.85 to $4.95.
ATMOSPHERE AND LAYOUT. Casa Ole emphasizes an attractive interior and
exterior design for its restaurants. The typical Casa Ole restaurant appears
modestly Mexican/Southwestern and inviting on the exterior. The interior decor
is Mexican/Southwestern in appearance, but understated to reinforce the
perceived value of the dining experience. Stucco, tile floors, plants and a
variety of paint colors are integral features of each restaurant's decor.
These decor features are incorporated in a floor plan designed to provide a
comfortable atmosphere. While each Casa Ole restaurant has a similar internal
and external appearance, the restaurant's design is sufficiently flexible to
accommodate a variety of available sites and development opportunities, such as
malls, end-caps of strip shopping centers and free standing buildings,
including conversions. The physical facility is also designed to serve a high
volume of customers in a relatively limited period of time. The Company's
restaurants typically range in size from approximately 4,000 to 4,800 square
feet, with an average of approximately 4,500 square feet and a seating capacity
of approximately 180.
EXPANSION STRATEGY
The Company believes that the Casa Ole concept's unit economics,
combined with the concept's value orientation and focus on middle-income family
customers, provide significant opportunities for expansion. The Company's
strategy to capitalize on these expansion opportunities is comprised of three
key elements:
INCREASED PENETRATION OF EXISTING MARKETS. Increasing the number of
restaurants in existing Designated Market Areas ("DMAs") is a key component of
the Company's expansion strategy. The DMA concept is a mapping tool developed
by the A.C. Nielsen Co. that measures the size of a particular market by
reference to communities included within a common television market. The
Company's objective in increasing the density of Company-owned restaurants
within existing markets is to improve operating efficiencies in such markets
through improved overhead absorption. In addition, the Company believes that
increasing the density of restaurants in both Company-owned and franchised
markets will assist it in achieving effective media penetration while
maintaining or reducing advertising costs as a percentage of revenues in the
relevant markets. During fiscal 1996, the Company opened two new restaurants,
both of which were in an existing DMA (Waco/Temple/Bryan). The Company also
acquired a franchised store in Corpus Christi, which gave the Company direct
control in a market in which it hopes to add two to three additional
restaurants. Additionally, the Company has purchased real estate for two
proposed restaurants in the Lubbock DMA, a market in which the Company
currently operates one restaurant. The opening of these two restaurants,
anticipated in the first and second quarters of 1997, along with the existing
Lubbock restaurant, will make that market television efficient. Lastly, the
Company has secured real estate for an anticipated second quarter store opening
in Bryan, Texas, which will comprise the sixth store in that market.
EXPANSION INTO SELECTED NEW MARKETS. In targeting markets for
expansion, the Company has focused and intends to continue to focus on smaller
and medium-sized markets within and outside Texas. As a result of their
relatively small size, these markets are frequently underserved by restaurant
chains, and the Company believes that they offer opportunities for significant
growth. In addition, the Company believes that the ability to achieve
cost-effective media penetration with relatively few restaurants, the value
orientation of the Case Ole concept and the nature of the Company's customer
base enhance the attractiveness of these markets. Areas identified by the
Company as a "market" generally coincide with the DMAs established for those
areas.
DEVELOPMENT OF FRANCHISED, MARKET PARTNER AND COMPANY-OWNED
RESTAURANTS. In implementing its expansion strategy, the Company intends to
focus on adding a combination of franchised, market partner and Company-owned
restaurants. (See "Item 1. Business--Market Partner Program.") The number of
such restaurants developed in any period will vary. The Company believes that
a mix of franchised, market partner and Company-owned restaurants will enable
it to realize accelerated expansion opportunities, while maintaining majority
or sole ownership of a significant number of restaurants. Generally the
Company does not anticipate opening franchised, market partner and
Company-owned restaurants within the same market. In seeking franchisees and
market partners, the Company will continue to primarily target experienced
multi-unit restaurant operators with knowledge of a particular geographic
market and financial resources sufficient to execute the Company's development
strategy. During fiscal 1996, the Company added franchisees and a market
partner to the system who have had operations experience with quick-serve,
family and casual dining concepts such as Subway, Pizza Hut, McDonald's, JB's
Family Restaurants and Hometown Buffet. With the addition of these new
franchisees, the franchise system is anticipated to open eight to ten Casa Ole
restaurants during 1997.
In adding to its Company-owned restaurants, the Company anticipates it
will continue to develop new units, and, to a lesser extent, selectively
acquire existing franchised restaurants. During fiscal 1996, the Company
constructed and opened new units in Copperas Cove and Bellmead, Texas, and
purchased a franchised unit in Corpus Christi, Texas. Immediately subsequent
to year end, the Company also acquired the franchised Casa Ole unit in
Victoria, Texas. Additionally, the Company has an option to purchase certain
units from its Beaumont franchisee during 1997 and 1998. See "Item 1.
3
<PAGE> 4
Business--Franchising--Option to Acquire Franchise Operations." Exclusive of
the potential Beaumont acquisitions, the Company, including its market
partners, is planning to open approximately seven units in 1997.
SITE SELECTION
Execution of the expansion strategy requires locating, evaluating and
securing adequate sites. Senior management devotes significant time and
resources to analyzing each prospective site. The Company's site selection
criteria focuses on local demographics, site characteristics such as
visibility, accessibility and traffic volume, parking availability, trade-area
activity and area restaurant competition.
The Company believes that a sufficient number of suitable sites are
available for Company, market partner and franchise development in existing and
target markets. Based on its current planning and market information, the
Company expects to open approximately seven Company-owned and/or market partner
restaurants in 1997 and believes that its franchisees will open approximately
eight to ten additional restaurants. As previously mentioned, the Company has
purchased or otherwise secured real estate for three of its targeted 1997
openings. It also has escrow deposits on, or has entered into letters of
intent with respect to, one additional Company site and one market partner
site. The Company's ability to open the number of restaurants contemplated by
its expansion plans is subject to certain risks. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations--Risk
Factors." The anticipated total investment, including land, building,
equipment, signage, site work, furniture, fixtures and decor for a 4,200 to
4,500 square foot restaurant, approximates $950,000. Additionally, training
and other pre-opening costs are anticipated to approximate $30,000. The cost
of developing and operating a Casa Ole restaurant can vary based upon
fluctuations in land acquisition and site improvement costs, construction costs
in various markets, the size of the particular restaurant and other factors.
Although the Company anticipates that the construction costs associated with
near-term restaurants will approximate $950,000, there can be no assurance of
this.
RESTAURANT OPERATIONS
MANAGEMENT AND EMPLOYEES. The management staff of each Casa Ole
restaurant is primarily responsible for managing the restaurant's operations.
Each Company-owned restaurant operates with a general manager, one or two
assistant managers and a chef. Including managers, restaurants have an average
of 50 full-time and part-time employees. The Company historically has spent
considerable effort developing its employees, allowing it to promote from
within. As an additional incentive to its restaurant management personnel, the
Company has a two-part bonus plan. In the first part, restaurant managers can
receive bonuses based on achieving budgeted sales and profit objectives,
subject to their ability to maintain quality standards as measured by "mystery
shoppers." In the second part, the restaurant managers can share in profits
incremental to predetermined budgets.
Four regional supervisors, who report directly to the Company's
Director of Operations, offer support to the store managers. Each supervisor
is eligible for a bonus based on the performance of the stores under his
control. Each supervisor oversees three to five restaurants.
As of February 24, 1997, Casa Ole employed 874 people, of whom 857
were restaurant personnel at the Company- owned restaurants and 17 were
corporate personnel. Casa Ole considers its employee relations to be good.
Most employees, other than restaurant management and corporate personnel, are
paid on an hourly basis. Casa Ole employees are not covered by a collective
bargaining agreement.
TRAINING AND QUALITY CONTROL. The Company requires its hourly
employees to participate in a formal training program carried out at the
individual restaurants, with the on-the-job training program varying from three
days to two weeks based upon the applicable position. Managers of both
Company-owned and franchised Casa Ole restaurants are trained at one of the
Company's specified training stores by that store's general manager and then
certified upon completion of a four to six week program that encompasses all
aspects of restaurant operations as well as personnel management and policy and
procedures, with special emphasis on quality control and customer relations.
To evaluate ongoing employee service and provide rewards to employees, Casa Ole
employs a "mystery shopper" program which consists of two anonymous visits per
month per restaurant. The Company's franchise agreement requires each
franchised restaurant to employ a general manager who has completed the
Company's training program at one of the Company's specified training stores,
and at least one other manager. Compliance with the Company's operational
standards is monitored for both Company-owned and franchised restaurants by
random, on-site visits by corporate management, regular inspections by regional
supervisors, the ongoing direction of a corporate quality control manager and
the mystery shopper program. To demonstrate the Company's emphasis on
training, the Company recently created a Director of Training position and
promoted one of the regional supervisors to fill the position.
MARKETING AND ADVERTISING. The Company believes that when media
penetration is achieved in a particular market, investments in radio and
television advertising can generate significant increases in revenues in a
cost- effective manner. During fiscal 1996, the Company spent approximately
2.9% of total revenues on various forms of advertising. For fiscal 1997, the
Company expects to spend approximately 3.5% of total revenues on advertising.
With the addition of restaurants in existing DMAs and the increase in
advertising dollars during 1997, the Company has planned to be on television
and/or radio during a substantial portion of fiscal 1997. Besides radio and
television, the Company makes use of in-store promotions, involvement in
community activities and customer word-of-mouth to maintain their performance.
Achieving effective media penetration in each market which it enters is a key
component of Casa Ole's expansion strategy.
4
<PAGE> 5
PURCHASING. The Company strives to obtain consistent quality products
at competitive prices from reliable sources. To reinforce this, the Company
hired an experienced Director of Purchasing during the year. This individual
works with the Company's distributor and other purveyors to ensure the
integrity, quality, price and availability of the various raw ingredients. The
Company researches and tests various products in an effort to maintain quality
and to be responsive to changing customer tastes. Casa Ole operates a
centralized purchasing system that is utilized by all of the Company-owned
restaurants and is available to the Company's franchisees. Under the Company's
franchise agreement, if a franchisee wishes to purchase from a supplier other
than a currently approved supplier, it must first submit the products and
supplier to the Company for approval. Regardless of the purchase source, all
purchases must comply with the Company's product specifications. The Company's
ability to maintain consistent product quality throughout its operations
depends upon acquiring specified food products and supplies from reliable
sources. Management believes that all essential food and beverage products are
available from other qualified sources at competitive prices.
FRANCHISING
The Company currently has 13 franchisees operating a total of 29 Casa
Ole restaurants. Three additional franchisees signed during the year and are
in the site-selection stage for their first restaurant. Franchising allows the
Company to expand the number of stores and penetrate markets more quickly and
with less capital than developing Company-owned stores. Franchisees are
selected on the basis of various factors, including business background,
experience and financial resources. In seeking new franchisees, the Company
targets experienced multi-unit restaurant operators with knowledge of a
particular geographic market and financial resources sufficient to execute the
Company's development schedule. Under the current franchise agreement,
franchisees are required to operate their stores in compliance with the
Company's policies, standards and specifications, including matters such as
menu items, ingredients, materials, supplies, services, fixtures, furnishings,
decor and signs. In addition, franchisees are required to purchase, directly
from the Company or its authorized agent, spice packages for use in the
preparation of certain menu items, and must purchase certain other items from
approved suppliers unless written consent is received from the Company.
FRANCHISE AGREEMENTS. The Company enters into a franchise agreement
with each franchisee which grants the franchisee the right to develop a single
store within a specific territory at a site approved by the Company. The
franchisee will have limited exclusive rights within the territory. Under the
Company's current standard franchise agreement, the franchisee is required to
pay a franchise fee of $25,000 per restaurant. The current standard franchise
agreement provides for an initial term of 15 years (with a limited renewal
option) and payment of a royalty of up to 5% of gross sales. The termination
dates of the Company's franchise agreements with its existing franchisees
currently range from 1999 to 2015.
Franchise agreements are not assignable without the prior written
consent of the Company. Also, the Company retains rights of first refusal with
respect to any proposed sales by the franchisee. Franchisees are not permitted
to compete with the Company during the term of the franchising agreement and
for a limited time, and in a limited area, after the term of the franchise
agreement. The enforceability of such noncompete provisions varies from state
to state. The Company has the right to terminate any franchise agreement for
certain specific reasons, including a franchisee's failure to make payments
when due or failure to adhere to the Company's policies and standards. Many
state franchise laws, however, limit the ability of a franchisor to terminate
or refuse to renew a franchise. See "Item 1. Business--Government
Regulation."
Prior forms of the Company's franchise agreements may contain terms
that vary from those described above, including with respect to the payment or
nonpayment of advertising fees and royalties, the term of the agreement, and
assignability, noncompete and termination provisions.
AREA DEVELOPERS. The area development agreement is an extension of
the standard franchise agreement. The area development agreement provides area
developers with the right to execute more than one franchise agreement in
accordance with a fixed development schedule. Restaurants established under
these agreements must be located in a specific territory in which the area
developer will have limited exclusive rights. Area developers pay an initial
development fee generally equal to the total initial franchise fee for the
first franchise agreement to be executed pursuant to the development schedule
plus 10% of the initial franchise fee for each additional franchise agreement
to be executed pursuant to the development schedule. Generally the initial
development fee is not refundable, but will be applied in the proportions
described above to the initial franchise fee payable for each franchise
agreement executed pursuant to the development schedule. New area developers
will pay monthly royalties for all restaurants established under such franchise
agreements on a declining scale generally ranging from 5% of gross sales for
the initial restaurant to 3% of gross sales for the fourth restaurant and
thereafter as additional restaurants are developed.
It is intended that area development agreements will not be assignable
without the prior written consent of the Company. The Company will retain
rights of first refusal with respect to proposed sales of restaurants by the
area developers. Area developers are not permitted to compete with the
Company. If an area developer fails to meet its development schedule
obligations, the Company can, among other things, terminate the area
development agreement or modify the territory in the agreement.
FRANCHISEE TRAINING AND SUPPORT. Under the current franchise
agreement, each franchisee (or if the franchisee is a corporation, a manager
designated by the franchisee) is required to personally participate in the
operation of the franchise. Before opening the franchisee's business to the
public, the Company provides training at its approved training facility for
each franchisee's general manager, assistant manager and chef. The Company
recommends that the franchisee, if the franchisee is other than the general
manager, or if a corporation, its chief operating officer, attend such
training. The Company also provides a training team to assist the franchisee
in opening its restaurant. The team, supervised by the Director of Training,
will assist and advise the franchisee and/or its manager in all phases of the
opening operation for a
5
<PAGE> 6
seven to fourteen day period. The formal training program required of hourly
employees and management, along with continued oversight by the Company's
quality control manager, promotes consistency of operations
OPTION TO ACQUIRE FRANCHISE OPERATIONS. The Company has an option to
acquire up to six restaurants in the Beaumont, Texas area from its largest
franchisee, Casa Ole of Beaumont, Inc., in a two-tiered transaction. The first
tier covers two restaurants and must be exercised during July 1997, with
closing in October 1997. In the event the first option is exercised, the
second tier would allow the Company to exercise the right to purchase four
additional restaurants in July 1998, with closing in October 1998. Although
the Company and the franchisee have entered into a definitive agreement setting
forth the principal economic terms of such rights, the acquisition of these
restaurants is dependent upon the availability of financing and the priority
for use of funds as opposed to other expansion opportunities for the Company.
At the current time, management of the Company anticipates that it will
exercise its option to acquire two stores in 1997; however, completion of such
acquisition cannot be assured.
MARKET PARTNER PROGRAM
The Company has developed a market partner program whereby the Company
will form a partnership agreement with an individual to build a number of Casa
Ole restaurants. In return for site selection work, training, supervising and
other operational activities, the market partner will receive 10% of the cash
flow of each restaurant that he opens. The Company, as a 90% partner, will
fund the majority of the costs associated with constructing and opening each
restaurant and will provide administrative and accounting support. The Company
has entered into agreements with three market partners, the first of which is
in training and has an escrow deposit on property in Idaho. As with
franchising, the market partner program will allow the Company to expand the
number of stores and penetrate markets more quickly than it could with only
100% Company-owned units. The partnership entity will be required to sign the
Company's standard franchise agreement. Other than the payment of royalties,
which will be at a rate less than stipulated in the standard franchise
agreement, the partnership entity will be subject to all criteria contained
within the franchise agreement.
COMPETITION
The restaurant industry is intensely competitive. Competition is
based upon a number of factors, including concept, price, location, quality and
service. The Company competes against a broad range of other family dining
concepts, including those focusing on various other types of ethnic food, as
well as local restaurants in its various markets. The Company also competes
against other quick service and casual dining concepts within the Mexican and
Tex-Mex food segment. Many of the Company's competitors are well established
and have substantially greater financial and other resources than the Company.
Some of the Company's competitors may be better established in markets where
Casa Ole's restaurants are or may be located. The Company believes that it
competes with franchisors of other restaurants and various other concepts for
franchisees.
The restaurant business is affected by many factors, including changes
in consumer tastes and eating habits, national, regional or local economic and
real estate conditions, demographic trends, weather, traffic patterns, and the
type, number and location of competing restaurants. In addition, factors such
as inflation, increased food, labor and benefit costs, and the availability of
experienced management and hourly employees may adversely affect the restaurant
industry in general and the Company's restaurants in particular.
GOVERNMENT REGULATION
Each Casa Ole restaurant is subject to regulation by federal agencies
and to licensing and regulation by state and local health, sanitation, safety,
fire and other departments relating to the development and operation of
restaurants. These include regulations pertaining to the environmental,
building and zoning requirements in the preparation and sale of food. Casa Ole
is also subject to laws governing the service of alcohol and its relationship
with employees, including minimum wage requirements, overtime, working
conditions and immigration requirements. Difficulties or failures in obtaining
the required construction and operating licenses, permits, or approvals could
delay or prevent the opening of a specific new restaurant. The Company
believes that it is operating in substantial compliance with applicable laws
and regulations that govern its operations.
Alcoholic beverage control regulations require each of the Casa Ole
restaurants to apply to a state authority and, in certain locations, county or
municipal authorities, for a license or permit to sell alcoholic beverages on
the premises and to provide service for extended hours. Typically licenses
must be renewed annually and may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations relate to numerous aspects of the
Company's restaurants, including minimum age of patrons drinking alcoholic
beverages and employees serving alcoholic beverages, hours of operation,
advertising, wholesale purchasing, inventory control and handling, storage and
dispensing of alcoholic beverages. The Company is also subject to "dramshop"
statutes which generally provide a person injured by an intoxicated person the
right to recover damages from an establishment that wrongfully served alcoholic
beverages to the intoxicated person. The Company carries liquor liability
coverage as part of its existing comprehensive general liability insurance.
Additionally, within thirty days of employment by the Company, each employee of
the Company who serves alcoholic beverages is required to attend an alcoholic
seller training program that has been approved by the Texas Alcoholic Beverage
Commission and endorsed by the Texas Restaurant Association and which endeavors
to educate the server to detect and prevent overservice of the Company's
customers.
In connection with the sale of franchises, the Company is subject to
the United States Federal Trade Commission rules and regulations and state laws
that regulate the offer and sale of franchises and business opportunities. The
Company is
6
<PAGE> 7
also subject to laws that regulate certain aspects of such relationships.
Although certain potential compliance issues were historically identified, the
Company has had no claims with respect to its programs and, based on the nature
of the potential compliance issues identified, does not believe that compliance
issues associated with its historical franchising programs will have a material
adverse effect on its results of operations or financial condition. The
Company believes that it is operating in substantial compliance with applicable
laws and regulations that govern franchising programs.
The Company is subject to various local, state and federal laws
regulating the discharge of pollutants into the environment. The Company
believes that it conducts its operations in substantial compliance with
applicable environmental laws and regulations. The Company conducts
environmental audits of a proposed restaurant site in order to determine
whether there is any evidence of contamination prior to purchasing or entering
into a lease with respect to such site. To date the Company's operations have
not been materially adversely affected by the cost of compliance with
applicable environmental laws.
TRADEMARKS, SERVICE MARKS AND TRADE DRESS
The Company believes its trademark, service marks and trade dress have
significant value and are important to its marketing efforts. It has
registered the trademarks for "Casa Ole" and "Casa Ole Mexican Restaurant" with
the U.S. Patent Office. The Company is also in the process of applying for
registration marks on its Casa Characters that are seen on the menu and
incorporated into the decor of certain of the restaurants.
ITEM 2. PROPERTIES
Casa Ole's executive offices are located in approximately 5,000 square
feet of office space in Houston, Texas. The offices are currently leased by
the Company from CO Properties No. 3, a Texas partnership owned by Larry N.
Forehand and Michael D. Domec, under a gross lease (where the landlord pays
utilities and property taxes) expiring in April 1998, with rental payments of
$5,000 per month. See "Notes to Consolidated Financial Statements--Related
Party Transactions." The Company believes that its properties are suitable and
adequate for its operations.
All of the Casa Ole restaurants, except three (two in Pasadena and the
site in Copperas Cove), rest on leased sites. Real estate leased by Casa Ole
for its Company-owned restaurants is typically leased under triple net leases
that require the Company to pay real estate taxes and utilities, to maintain
insurance with respect to the premises and in certain cases to pay contingent
rent based on sales in excess of specified amounts. Generally the non-mall
locations for the Company-owned restaurants have initial terms of 10 to 20
years with renewal options.
The following table provides information with respect to the existing
Company-owned restaurants and the five future locations which are either under
contract or are subject to an executed letter of intent:
<TABLE>
<CAPTION>
LOCATION DATE OPENED LEASE OR OWN DMA
- -------- ----------- ------------ ---
<S> <C> <C> <C>
Pasadena, Texas 12/1/73 Own Houston
Pasadena, Texas 3/20/76 Own Houston
Houston, Texas 2/12/78 Lease Houston
Odessa, Texas 6/19/79 Lease Odessa/Midland
Lubbock, Texas 4/14/80 Lease Lubbock
Texas City, Texas 6/8/81 Lease Houston
College Station, Texas 11/1/83 Lease Waco/Temple/Bryan
Stafford, Texas 6/11/84 Lease Houston
Houston, Texas 11/13/85 Lease Houston
Lake Jackson, Texas 12/18/85 Lease Houston
Waco, Texas 4/13/86 Lease Waco/Temple/Bryan
Houston, Texas 6/12/87 Lease Houston
Temple, Texas 7/10/89 Lease Waco/Temple/Bryan
Corpus Christi, Texas 10/14/96 (1) Lease Corpus Christi
Copperas Cove, Texas 10/28/96 Own Waco/Temple/Bryan
Bellmead, Texas 12/16/96 Land Lease Waco/Temple/Bryan
Victoria, Texas 12/30/96 (1) Lease Victoria
Plainview, Texas Target 1st Qtr Own Lubbock
Lubbock, Texas Target 2nd Qtr Own Lubbock
Bryan, Texas Target 2nd Qtr Own Waco/Temple/Bryan
Corpus Christi Target 3rd Qtr Own (2) Corpus Christi
Pocatello, Idaho (3) Target 3rd Qtr Own (2) Idaho Falls/Pocatello
</TABLE>
- ---------------
(1) Date operations assumed by the Company from the prior franchisee.
(2) Property is under a non-binding letter of intent.
(3) Market partner restaurant whereby the market partner will own 10% of the
cash flow from the restaurant.
7
<PAGE> 8
ITEM 3. LEGAL PROCEEDINGS
Special Note: Certain statements set forth below under this caption
constitute "forward-looking statements" within the meaning of the Reform Act.
See "Special Note Regarding Forward-Looking Statements" for additional factors
relating to such statements.
From time to time the Company is party to certain legal proceedings
arising in the ordinary course of business. Although the amount of any
liability that could arise with respect to these proceedings cannot be
predicted accurately, in the opinion of the Company, any liability that might
result from such claims will not have a material adverse effect on the Company
or its business. Nevertheless, a future lawsuit or claim could result in a
material adverse effect on the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the shareholders of the Company
during the fourth quarter of the fiscal year ended December 27, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades on the Nasdaq National Market tier
of The Nasdaq Stock Market under the symbol "CASA." The following table sets
forth the range of quarterly high and low closing sale prices of the Company's
Common Stock on the Nasdaq National Market during each of the Company's fiscal
quarters since the inception of trading on April 25, 1996.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR 1996:
First Quarter (ended April 19, 1996) ................... N/A N/A
Second Quarter (ended July 12, 1996) ................... 15 1/4 13 3/8
Third Quarter (ended October 4, 1996) .................. 14 1/8 12 7/8
Fourth Quarter (ended December 27, 1996) ............... 13 1/2 8 3/4
FISCAL YEAR 1997:
First Quarter (through March 4, 1997) .................. 9 1/2 8 3/4
</TABLE>
As of March 4, 1997, the Company estimates that there were
approximately 1,000 beneficial owners of the Company's Common Stock,
represented by approximately 23 holders of record.
Since its initial public offering, the Company has not paid cash
dividends on its Common Stock. The Company intends to retain earnings of the
Company to support operations and to finance expansion and does not intend to
pay cash dividends on the Common Stock for the foreseeable future. The payment
of cash dividends in the future will be at the discretion of the Board of
Directors and will depend upon such factors as earnings levels, capital
requirements, the Company's financial condition and other factors deemed
relevant by the Board of Directors. In addition, the Company's current credit
agreement prohibits the payment of any cash dividends.
During certain periods prior to the Company's initial public offering,
substantially all of the corporations were treated for federal and state income
tax purposes as S corporations under Subchapter S of the Code, and accordingly,
such corporations made S corporation distributions to its shareholders to pay
federal income taxes on the earnings taxed directly to the shareholders thereof
and to provide a return on the shareholders' investment. During fiscal years
1994 and 1995, such corporations declared aggregate distributions of $1.8
million and $1.5 million, respectively, to its shareholders. During fiscal
1996, distributions of $1.5 million, representing a combination of the 1995
working capital balance of approximately $618,000 and earnings of the prior
corporations through the date of the initial public offering of approximately
$866,000, were paid to the then existing shareholders.
8
<PAGE> 9
ITEM 6. SELECTED FINANCIAL DATA
Balance sheet data as of December 31, 1993, December 30, 1994,
December 29, 1995 and December 27, 1996, and income statement data for the
fiscal years then ended have been derived from combined and consolidated
financial statements audited by KPMG Peat Marwick LLP, independent certified
public accountants. Balance sheet data as of December 25, 1992, and income
statement data for the fiscal year then ended have been derived from the
unaudited financial statements of the prior corporations, which have been
combined for purposes of presentation and adjusted to present information on a
basis consistent with subsequent periods. The selected pro forma financial
information presented below is for informational purposes only and may not
necessarily be indicative of the results of operations and financial position
of the Company as they may be in the future. The selected financial data set
forth below should be read in conjunction with and are qualified by reference
to the Consolidated Financial Statements and the Notes thereto included in Item
8. hereof and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 7. hereof.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------- -----------------------------------------
DEC. 25, DEC. 31, DEC. 30, DEC. 29, DEC. 27,
1992 1993(1) 1994 1995 1996
-------- -------- -------- -------- --------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(2):
Revenues:
Restaurant sales ................... $ 19,109 $ 18,762 $ 17,420 $ 16,691 $ 17,574
Franchise fees and royalties ....... 733 795 885 930 998
Other .............................. 79 125 67 69 90
-------- -------- -------- -------- --------
Total revenues .............. 19,921 19,682 18,372 17,690 18,662
-------- -------- -------- -------- --------
Costs and expenses:
Cost of sales ...................... 4,630 4,595 4,427 4,199 4,405
Restaurant operating expenses ...... 12,106 11,521 10,264 9,791 9,609
General and administrative ......... 1,949 1,947 2,222 1,987 2,081
Depreciation and amortization ...... 284 374 342 266 208
Restaurant closure costs ........... -- 339 265 -- --
-------- -------- -------- -------- --------
Total costs and expenses .... 18,969 18,776 17,520 16,243 16,303
-------- -------- -------- -------- --------
Operating income ..................... 952 906 852 1,447 2,359
Other income (expense) ............... 51 41 143 32 367
-------- -------- -------- -------- --------
Income before income tax expense ..... $ 1,003 $ 947 $ 995 $ 1,479 $ 2,726
======== ======== ======== ======== ========
Net income ........................... $ 984 $ 831 $ 927 $ 1,404 $ 1,868
======== ======== ======== ======== ========
Pro forma net income (3) ............. $ 1,449 $ 1,819
======== ========
Pro forma net income per share (4) ... $ 0.52 $ 0.54
======== ========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------
DEC. 25, DEC. 31, DEC. 30, DEC. 29, DEC. 27,
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital .............. $ 1,258 $ 547 $ 134 $ 618 $ 6,857
Total assets ................. $ 3,815 $ 3,547 $ 2,890 $ 2,858 $ 12,146
Long-term debt, less
current portion ............ $ 368 $ 257 $ 82 $ 62 $ --
Total stockholders' equity ... $ 2,627 $ 2,091 $ 1,614 $ 1,934 $ 10,720
</TABLE>
- ---------------
(1) The fiscal year ended December 31, 1993 consisted of 53 weeks. All
other fiscal years presented consisted of 52 weeks.
9
<PAGE> 10
(2) Includes the results of operations of the Non-contributed Restaurants
(except where otherwise indicated). The Non-contributed Restaurants
were closed during the periods presented. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations--General." Summarized operating results of the
Non-contributed Restaurants included in the above combined financial
data are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------
Dec. 25, Dec. 31, Dec. 30, Dec. 29, Dec. 27,
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues ..................... $ 2,224 $ 2,223 $ 1,199 $ 432 $ --
Restaurant closure costs ..... -- (339) (265) -- --
Net loss ..................... (237) (823) (511) (194) --
</TABLE>
(3) For fiscal 1995, the pro forma income statement data reflect
adjustments to eliminate historical executive compensation for Larry
N. and Robert L. Forehand ($470,000) and related party expense
arrangements ($679,000), and to add salaries of new management
($329,000) to conform to compensation arrangements applicable
subsequent to the Company's initial public offering. For fiscal 1996,
the pro forma income statement data reflect adjustments to eliminate
executive compensation for Larry N. and Robert L. Forehand ($126,500)
and related party expense arrangements ($35,200) through the date of
the Company's initial public offering. Elimination of costs related
to executive compensation and other related party arrangements are
necessary adjustments as these costs were primarily income
distribution techniques used by the S corporation owners. Also, an
adjustment has been made to reflect federal and state income taxes (at
an assumed rate of 37%) that would have been paid had the Company been
taxed as a C corporation. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--General."
(4) For fiscal 1995, the computation of pro forma net income per share is
based upon 2,732,705 weighted average shares of Common Stock
outstanding issued to the shareholders of the 13 corporations that
were party to the reorganization and 60,411 shares assumed to be
issued at an initial public offering price of $11.00 per share (after
deducting the estimated underwriting discount), to fund S corporation
distributions of approximately $618,000. For fiscal 1996, it was
assumed that the number of shares up to the date of the public
offering were the same as weighted average shares outstanding for
fiscal 1995.
10
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Special Note: Certain statements set forth below under this caption
constitute "forward-looking statements" within the meaning of the Reform Act.
See "Special Note Regarding Forward-Looking Statements" for additional factors
relating to such statements.
The following discussion and analysis should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Report.
GENERAL
The Company was organized under the laws of the State of Texas on
February 16, 1996. Pursuant to the reorganization of the Company in
preparation for the initial public offering, the shareholders of the prior
corporations contributed to the Company all outstanding shares of capital stock
of each corporation, and the Company issued to such shareholders in exchange
therefor an aggregate of 2,732,705 shares of its Common Stock. The exchange
transaction was completed April 24, 1996, and, as a result, the corporations
became wholly owned subsidiaries of the Company, and each shareholder of the
Company received a number of shares of Common Stock in the Company. In
addition, subsequent to the completion of the offering, the Company purchased
1,135,000 shares of Common Stock owned by Michael D. Domec, an original
principal of the Company, at an aggregate purchase price of $11.35 million, or
$10.00 per share.
The Company's audited financial statements for each of the fiscal
years presented in this Form 10-K prior to fiscal 1996 include the results of
operations of four restaurants that were closed prior to the Company's public
offering. These restaurants did not conform to the Company's operating model
at the time of the offering in one or more important respects (such as location
demographics, exterior identification or menu format) or were operated by
persons other than shareholders of the Company (the "Non-contributed
Restaurants"). Although the operations of the Non- contributed Restaurants
affected the Company's results of operations in each of the prior fiscal years,
the majority of the costs associated with the closure of these restaurants
impacted fiscal 1993 and fiscal 1994. Two Non-contributed Restaurants were
closed during each of fiscal 1994 and fiscal 1995. The Non-contributed
Restaurants located in Abilene and Midland were managed by persons other than
the shareholders of the Operating Corporations, and the Midland restaurant
lacked the signage and other elements of the exterior decor associated with the
Casa Ole concept. The other Non-contributed Restaurants, located in Lubbock
and The Woodlands, were in-line shopping center locations. The Midland
restaurant also featured an upscale menu, while The Woodlands restaurant was
located in an affluent suburb of Houston.
The Company's primary source of revenues is the sale of food and
beverages at Company-owned restaurants. The Company also derives revenues from
franchise fees, royalties and other franchise-related activities. Under the
terms of the Company's current franchise agreement, franchisees are generally
required to pay a franchise fee of $25,000 per restaurant and royalty fees of
up to 5% of gross sales. The royalty fees vary from franchise to franchise.
Area developers (franchisees who plan to develop more that one restaurant) will
be required to pay an initial development fee equal to the total initial
franchise fee for the first franchise agreement to be executed pursuant to the
development schedule specified in the agreement, plus 10% of the initial
franchise fee payable for each additional franchise agreement. The development
fee will be non-refundable, but will be applied proportionately to the
franchise fees associated with additional restaurants. New area developers
will be required to pay monthly royalties for all restaurants developed
pursuant to such franchise agreements on a declining scale ranging from 5% to
3% of gross sales. Franchise fee revenue from an individual franchise sale is
recognized when all services relating to the sale have been performed and the
restaurant has commenced operation. Initial franchise fees relating to area
franchise sales are recognized ratably in proportion to services that are
required to be performed pursuant to the area franchise or development
agreements and proportionately as the restaurants within the area are opened.
Prior to the Company's initial public offering in April 1996, a
significant portion of the Company's operating expenses was attributable to the
compensation of Larry N. Forehand and Michael D. Domec, the original principals
of the Company, and payment of compensation and fees to certain of their
respective affiliates. Subsequent to the offering, Mr. Domec has continued to
serve as a director of the Company, but is no longer an employee and has
instead focused on development of additional Casa Ole restaurants in his
capacity as a franchisee. Mr. Forehand has reduced his compensation to that of
an outside member of the Board of Directors. In addition, certain transactions
and compensation arrangements between the Company and affiliates of Messrs.
Forehand and Domec were terminated subsequent to the offering. The Company has
employment agreements with each of Louis P. Neeb, Patrick A. Morris and Stacy
M. Riffe. The pro forma effect of the elimination of Mr. Domec's compensation
and payments to certain entities related to Messrs. Domec and Forehand, the
reduction in Mr. Forehand's compensation and the compensation arrangements for
the new executive officers is reflected in the Financial Statements and
Supplementary Data--Consolidated Statements of Income found elsewhere in this
Report.
Concurrent with the initial public offering and the reorganization,
the Company terminated the S corporation status of the prior corporations that
had elected to be taxed as S corporations under the Code, and such corporations
became taxable as C corporations, adopting the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Accordingly, a pro forma provision for federal and state income taxes,
using a combined 37% effective rate, is presented for fiscal 1995 and the first
quarter of fiscal 1996, as if the Company was taxed in its entirety as a C
corporation. Income taxes for the restaurants originally structured as C
corporations have historically been calculated in accordance with SFAS 109.
11
<PAGE> 12
FISCAL YEAR
The Company has a 52/53 week fiscal year ending on the last Friday of
December. References in this Report to fiscal 1994, 1995 and 1996 relate to
the periods ended December 30, 1994, December 29, 1995 and December 27, 1996,
respectively. All fiscal years presented herein consisted of 52 weeks.
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
REVENUES. Fiscal 1996 revenues increased $972,000, or 5.5%, over
revenues in fiscal 1995. Comprising this increase were restaurant sales, up
5.3%, franchise fees and royalties, up 7.3%, and other revenues, up 31.1%. The
increase of $883,000 in restaurant sales was attributed to a same-store sales
increase of 5.1%, or $829,000, new store sales of approximately $424,000 and
sales of $62,000 from conforming changes in operating periods for predecessor
companies, offset by the loss of approximately $432,000 in sales from
Non-contributed Restaurants closed during fiscal 1995 that did not conform to
the Company's current operating model. The average sales volume for the 13
same-stores was $1.3 million for fiscal 1996, up from $1.25 million in fiscal
1995.
Franchise fees and royalties and other revenues had a combined
increase of $89,000, or 8.9%, which was related to additional royalties from
three new franchised stores, along with increased sales of marketing materials
(primarily menus and promotional items) to the franchise system.
COSTS AND EXPENSES. Cost of sales increased $207,000 or 4.9%, over
fiscal 1995. As a percentage of restaurant sales, cost of sales was 25.1% for
fiscal 1996, as compared to 25.2% for fiscal 1995. This slight decrease as a
percentage of restaurant sales was due to modest fluctuations in ingredient
costs, coupled with a slight menu price increase that was implemented late in
the third quarter of the current fiscal year.
Restaurant operating expenses decreased $182,000, or 1.9%, in fiscal
1996. As a percentage of restaurant sales, restaurant operating expenses
decreased to 54.7% in fiscal 1996 as compared to 58.7% in fiscal 1995. The
significant components of this decrease were a reduction in repair and
maintenance costs of $146,000, the elimination of $200,000 of franchise fee
expense, savings of $63,000 in the employee benefits area and savings of
$118,000 in property and casualty insurance premiums. As an offset to these
decreases, the Company implemented television advertising during fiscal 1996
and increased its use of radio marketing, the combination of which increased
advertising expense by $147,000, or 0.7%, over fiscal 1995. Additionally, with
the opening of two new stores during 1996 and the acquisition of a franchised
unit, labor costs increased by $130,000, or 0.7%. Finally, the Company accrued
$68,000 related to the annual manager's bonus program, which was implemented
during fiscal 1996.
General and administrative expenses (G&A) increased $94,000, or 4.7%,
over fiscal 1995. As a percentage of total revenues, G&A remained flat at
11.2%. The dollar increase was attributed to various new expenses related to
being a publicly traded company, as well as expenses necessary for the
execution of the Company's growth strategy. Specifically, the Company incurred
an additional $209,000 in salaries, benefits and travel related to training,
store review and corporate-level bonuses. Legal and professional fees, board
of director fees and directors and officers liability insurance also
contributed to the increase by $178,000. Offsetting these increases was a
reduction of $293,000 in officer salaries, which related to the officers of the
Company prior to the initial public offering.
Depreciation and amortization expense as a percentage of total
revenues decreased from 1.5% in fiscal 1995 to 1.1% in fiscal 1996. This
decrease was the result of certain equipment being fully depreciated, combined
with the relatively small amount of equipment placed in service by the Company
throughout fiscal 1995 and most of fiscal 1996.
OTHER INCOME (EXPENSE). Net other income increased to 2.0% of total
revenues, an increase of $335,000 over fiscal 1995. The Company earned
$271,000 in interest related to the investment of the proceeds from the initial
public offering. During the year the Company also received a refund of $60,000
related to the overpayment of rent that occurred over the past four years.
INCOME TAX EXPENSE. Effective with the initial public offering, the
Company became subject to federal and state taxes as a C corporation. The
Company's effective tax rate since becoming a C corporation has been 37%.
During the Company's first fiscal quarter when substantially all of the
corporations were taxed as S corporations under the provisions of Subchapter S
of the Code, the federal income taxes on the net income of the corporations
were payable personally by the shareholders. The provision for income taxes
reflected in the first quarter of fiscal 1996 is for state franchise taxes on
all restaurants and for federal income taxes on the corporations which were
taxable as C corporations.
FISCAL 1995 COMPARED TO FISCAL 1994
REVENUES. Fiscal 1995 revenues for the Company decreased by $683,000,
or 3.7%, from fiscal 1994 revenues. The decrease reflects the impact of
closures of the Non-contributed Restaurants during fiscal 1995 and 1994, offset
in part by higher sales at the other Company restaurants and increased
royalties from franchisees. A revenue decrease of approximately $693,000
resulted from the closure during fiscal 1995 of the two Non-contributed
Restaurants located in Lubbock and The Woodlands. Those restaurants were open
for a collective 24 months during 1994, as compared to a collective ten months
during 1995. Revenues for fiscal 1995 were also adversely affected by
approximately $74,000 due to the closing during
12
<PAGE> 13
fiscal 1994 of the two Non-contributed Restaurants in Midland and Abilene.
Those Non-contributed Restaurants were closed after approximately 35 days of
operation during fiscal 1994.
Sales at Company-owned restaurants open for the entire year in both
fiscal 1994 and 1995 were up 0.2% over fiscal 1994 due primarily to slight menu
price adjustments made throughout the year. Average sales volumes for the 13
presently operating Company-owned Casa Ole restaurants for both years were
approximately $1,251,000.
COSTS AND EXPENSES. Cost of sales decreased $229,000, or 5.2%, in
fiscal 1995 from fiscal 1994, and, as a percentage of restaurant sales,
decreased from 25.4% in fiscal 1994 to 25.2% in fiscal 1995. This decrease
related entirely to the reduction in sales due to the Non-contributed
Restaurant closures previously discussed. The slight decrease as a percentage
of restaurant sales was due to the small menu price increases that were made
throughout the year.
Restaurant operating expenses decreased $473,000, or 4.6%, in fiscal
1995 as compared with the prior year. As a percentage of restaurant sales,
restaurant operating expenses decreased slightly from 58.9% in fiscal 1994 to
58.7% in fiscal 1995. The decrease resulted from the elimination of
approximately $568,000 in expenses associated with Non-contributed Restaurants,
offset in part by an increase of approximately $95,000 in expenses at the
Company-owned restaurants.
Excluding the impact of the Non-contributed Restaurants, restaurant
operating expenses as a percentage of restaurant sales for the Company-owned
restaurants were 57.5% and 57.0% in fiscal 1995 and 1994, respectively. This
increase was due to costs incurred in securing workers' compensation insurance
for seven Company-owned restaurants that had historically been self-insured,
increased costs of providing health insurance to employees, upgrading to
current operating standards various small equipment and kitchenware and
introducing a new uniform in approximately half of the Company's restaurants in
late fiscal 1995. The increase in these costs was offset in part by a decrease
in repair and maintenance expense. The restaurant operating expenses of the
Non-contributed Restaurants were comprised of the same categories of expense
items as were the presently operating Company-owned Casa Ole restaurants.
However, due to the indirect relationship of certain expenses to restaurant
sales, primarily management salaries and occupancy costs, these restaurants had
higher restaurant operating expenses as a percentage of restaurant sales.
General and administrative expenses decreased by $235,000, or 10.6%,
in fiscal 1995 as compared with the previous fiscal year. As a percentage of
total revenues, general and administrative expenses decreased from 12.1% in
fiscal 1994 to 11.2% in fiscal 1995. This decrease was due to a reduction in
both officer salaries and ad valorem taxes. The tax reduction was the result
of filing property valuation protests. These reductions were partially offset
by modest increases in various expense categories in preparation for this
proposed offering, including travel and research and development expenses.
Depreciation and amortization expense as a percentage of total
revenues decreased from 1.9% in fiscal 1994 to 1.5% in fiscal 1995. This small
decrease was the result of using accelerated methods of depreciation on
equipment in the early years of equipment life, combined with the relatively
small amount of equipment additions made by the Company during fiscal 1995.
Restaurant closure costs in fiscal 1994 represent the actual occupancy
costs of the Lubbock restaurant from the date of closing in 1995 through the
end of the lease in 1995 and the anticipated occupancy costs of The Woodlands
restaurant from the date of closing in 1995 through the expected date of
subleasing of the property. Decisions to close both restaurants were made in
late fiscal 1994.
OTHER INCOME (EXPENSE). Net other income as a percentage of total
revenues decreased from 0.8% in fiscal 1994 to 0.2% in fiscal 1995. This 0.6%
decrease was due primarily to the fiscal 1994 gain on sale of a parcel of land.
INCOME TAX EXPENSE. Prior to the initial public offering,
substantially all of the corporations elected to be taxed as S corporations
under the provisions of Subchapter S of the Code. As a result of such
election, federal income taxes on the net income of these corporations were
payable personally by the shareholders. The provision for income taxes
reflected in the financial statements is for state franchise taxes on all
restaurants and for federal income taxes on the corporations which were taxable
as C corporations. The effective tax rates on those corporations were less
than the expected rates due to applicable graduated tax rates.
LIQUIDITY AND CAPITAL RESOURCES
Historically the Company has required capital to fund the operations and
capital expenditure requirements of its Company-owned restaurants. In
addition, since substantially all of the prior corporations were S corporations
for federal and state income tax purposes, the Company has made significant
cash distributions to its shareholders in order to enable them to pay income
taxes associated with the Company's earnings and to provide a return on
investment. During the fiscal years 1994, 1995 and 1996, the Company made
distributions to its shareholders of approximately $1.8 million, $1.5 million
and $1.5 million, respectively. The 1996 distribution was a combination of the
1995 working capital balance of approximately $618,000 and earnings of the
prior corporations through the date of the initial public offering of
approximately $866,000.
In late April 1996, the Company received the proceeds from its initial
public offering of 2,000,000 shares of Common Stock. On May 1, $11.35 million
of the proceeds were used to redeem 1,135,000 shares of Common Stock owned by
Michael D. Domec. Approximately $2.3 million of the proceeds were used to
cover offering related costs, including underwriting discounts and commissions.
The remaining proceeds are being used for the development or acquisition of
13
<PAGE> 14
additional restaurants, the continued implementation of the point-of-sale
system, the remodel of existing restaurants and general corporate purposes.
In July 1996, the Company entered into a $10 million unsecured credit
agreement with NationsBank of Texas, N.A. The facility is divided into a $4
million Revolving Line of Credit (the "Revolver) and a $6 million Advised
Guidance Loan Commitment (the "Guidance Loan"). The Revolver is to be used for
general corporate purposes, including the construction or acquisition of new
restaurants, and can be drawn on (with interest only payments) through May 31,
1998, at which time the outstanding balance will be placed in a four-year term
note. The Guidance Loan can be used at any time through May 31, 1998, to
acquire certain operations of a specified franchisee. (See "Item 1.
Business--Franchising--Option to Acquire Franchise Operations.") Any draws on
the Guidance Loan will be placed in a five-year term note from the date of
funding. The interest rate on both components of the credit agreement is
either the prime rate or LIBOR plus a stipulated percentage. The Company is
subject to a non-use fee of 0.25% on the unused portion of the Revolver from
the date of the credit agreement. At the time of funding of the Guidance Loan,
there will be a one-time fee of 0.25%. Within the terms of the credit
agreement, the Company must meet certain financial covenants. As of March 4,
1997, the Company had not made any draws on the Revolver or the Guidance Loan.
The Company met fiscal 1996 capital requirements with cash generated
by operations and proceeds from the initial public offering. In fiscal 1996,
the Company's operations generated approximately $2.4 million in cash, as
compared with $1.7 million in fiscal 1995 and $1.4 million in fiscal 1994. The
Company's restaurant operations are labor intensive and do not have significant
receivables or inventory. The Company receives trade credit based upon
negotiated terms in purchasing food and supplies and ordinarily operates with a
relatively small level of working capital. However, because of the $7.4
million in cash and marketable securities at the end of the year, the Company
currently maintains a strong working capital position. As of December 27,
1996, the Company had working capital of approximately $6.9 million, compared
with approximately $618,000 at December 29, 1995.
The Company's principal capital requirements are the funding of new
restaurant development or acquisitions and remodeling of older units. During
fiscal 1996, the Company constructed and opened two new units, purchased
property for two of the fiscal 1997 openings, acquired a franchise unit,
remodeled several of the older restaurants and installed a point of sale system
in many of the stores. The total capital outlay for the year was $2.8 million.
Opening additional Company-owned restaurants is a key component of its
expansion strategy, and management plans to open a combination of seven
Company-owned and market partner restaurants during the balance of fiscal 1997.
Currently the Company has two sites under construction, one site nearing
ground-breaking and two sites under non-binding letters of intent. The
estimated capital needed for such 1997 openings, along with preparing for
fiscal 1998 openings and for general corporate purposes, including the remodel
of an estimated six units, is approximately $9.5 million. This estimate is
based upon an anticipated total investment of approximately $950,000 per
restaurant, of which approximately $260,000 is anticipated to represent
furniture, fixtures and equipment and approximately $30,000 represents training
and pre-opening expenses, and is inclusive of the capitalized cost of leasing
or acquiring real estate. This estimate, however, does not include any amounts
related to the Company's option to purchase certain units from one of its
franchisees, or any other significant acquisitions.
In addition to developing new restaurants, the Company intends to add
Company-owned restaurants through selective acquisitions of existing
franchisees. As mentioned above, the Company acquired one franchise restaurant
during fiscal 1996. Immediately after the end of the fiscal year, the Company
acquired another franchised unit. Additionally, the Company has an option to
acquire, in a two-tiered transaction, up to six restaurants in the Beaumont,
Texas area from its largest franchisee, Casa Ole of Beaumont, Inc. (See "Item
1. Business--Franchising--Option to Acquire Franchise Operations.") The
purchase price payable with respect to any such acquisition would be equal to
five times restaurant operating cash flow on a post-occupancy basis for the
twelve months preceding the date of such purchase. Although the Company and
the franchisee have entered into a definitive purchase agreement, exercise of
the option remains subject to the availability of financing and the priority
for use of funds as opposed to other expansion opportunities for the Company.
Although management of the Company presently believes it will exercise its
option to acquire such restaurants, the ability of the Company to complete such
acquisition cannot be assured.
Based on the Company's expansion plans and historical results of
operations, management believes that cash generated by operations and the
remaining proceeds of the offering will be sufficient to meet its operating
requirements and to finance its expansion plans (exclusive of any significant
acquisitions) through the end of the 1997 fiscal year. If circumstances
warrant, the Company may decide to draw on its credit facility, thereby
financing a portion of its future expansion with debt.
RISK FACTORS
The Company cautions readers that its business is subject to a number
of risks, any of which could cause the actual results of the Company to differ
materially from those indicated by forward-looking statements made from time to
time in releases, including this Form 10-K, and oral statements. Such risks
were presented in the Company's Form S-1 registration statement, which was
declared effective on April 24, 1996, and the related prospectus, and are being
presented again in this Form 10-K. Certain risk factors have been presented
throughout this document, including, among others, expansion strategy; site
selection; attracting and retaining franchisees, managers and other employees;
availability of food products; competition and government regulation. Certain
other risks to which the Company is subject include:
SEASONALITY. The Company's sales and earnings fluctuate seasonally.
Historically the Company's highest sales and earnings have occurred in the
third and fourth calendar quarters, which the Company believes is typical of
the restaurant industry and consumer spending patterns in general with respect
to the third quarter and is due to increased holiday traffic at
14
<PAGE> 15
the Company's mall restaurants for the fourth quarter. In addition, quarterly
results have been and, in the future are likely to be, substantially affected
by the timing of new restaurant openings. Because of the seasonality of the
Company's business and the impact of new restaurant openings, results for any
calendar quarter are not necessarily indicative of the results that may be
achieved for a full fiscal year and cannot be used to indicate financial
performance for the entire year.
IMPACT OF INFLATION. The Company does not believe that inflation has
materially impacted net income during the past three years. Substantial
increases in costs and expenses, particularly food, supplies, labor and
operating expenses, could have a significant impact on the Company's operating
results to the extent such increases cannot be passed along to customers. If
operating expenses increase, management intends to attempt to recover increased
costs by increasing prices to the extent deemed advisable considering
competitive conditions.
ACCELERATING GROWTH STRATEGY. The Company's ability to expand by
adding Company-owned, market partner and franchised restaurants will depend on
a number of factors, including the availability of suitable locations, the
ability to hire, train and retain an adequate number of experienced management
and hourly employees, the availability of acceptable lease terms and adequate
financing, timely construction of restaurants, the ability to obtain various
government permits and licenses and other factors, some of which are beyond the
control of the Company, its franchisees and market partners. The opening of
additional franchised restaurants will depend, in part, upon the ability of
existing and future franchisees to obtain financing or investment capital
adequate to meet their market development obligations. There can be no
assurance that the Company will be able to open the number of restaurants it
currently plans to open or that new restaurants can be operated profitably. In
addition, the Company intends to expand into new geographic markets in which it
has no operating experience and in which Mexican and Tex-Mex food restaurants
are less prevalent than in Texas. Consumer tastes vary from region to region
in the United States, and there can be no assurance that customers located in
the regions of the United States into which the Company intends to expand will
be as receptive to Mexican and Tex-Mex food or the Casa Ole concept as those
customers in its existing markets. There can be no assurance as to the success
of the Company's efforts to expand into other geographic regions or that the
cost of such efforts will not have a material adverse effect on the Company's
results of operations or financial condition.
SMALL RESTAURANT BASE AND GEOGRAPHIC CONCENTRATION. The results
achieved to date by the Company's relatively small restaurant base may not be
indicative of the results of a larger number of restaurants in a more
geographically dispersed area. Because of the Company's relatively small
restaurant base, an unsuccessful new restaurant could have a more significant
effect on the Company's results of operations than would be the case in a
company owning more restaurants. Additionally, given the Company's present
geographic concentration (all Company-owned units are currently in Texas),
results of operations may be adversely affected by economic or other conditions
in the region and adverse publicity relating to the Company's restaurants could
have a more pronounced adverse effect on the Company's overall sales than might
be the case if the Company's restaurants were more broadly dispersed.
CONTROL OF THE COMPANY BY MANAGEMENT. Approximately 32.2% of the
Common Stock and rights to acquire Common Stock of the Company are beneficially
owned or held by Larry N. Forehand, Michael D. Domec, Louis P. Neeb, Patrick A.
Morris, John C. Textor and Stacy M. Riffe.
SHARES ELIGIBLE FOR FUTURE SALE AND STOCK PRICE. Sales of substantial
amounts of shares in the public market could adversely affect the market price
of the Common Stock. The Company currently has 3,597,705 shares of Common
Stock outstanding. Of these shares 1,297,705 shares are "restricted
securities," as defined by Rule 144 adopted under the Securities Act of 1993,
as amended. Beginning two years from the effective date of the Company's
initial public offering, these shares may be sold in compliance with the
volume, manner of sale and other provisions of Rule 144. In addition, the
Securities and Exchange Commission has adopted revisions to Rule 144 to permit
the resale of limited amounts of restricted securities after a one-year holding
period. The Company is unable to predict the effect that future sales made
under Rule 144, or otherwise, will have on the then prevailing market price of
the Common Stock. The Company has granted limited registration rights to
holders of warrants granted by the Company and Larry N. Forehand to Louis P.
Neeb, Tex-Mex Partners, L.C., Patrick A. Morris and Stacy M. Riffe to register
the 880,766 underlying shares of Common Stock covered by such warrants in
connection with registrations otherwise undertaken by the Company. In any
event, the market price of the Common Stock could be subject to significant
fluctuations in response to the Company's operating results and other factors.
COMPETITION. The restaurant industry is intensely competitive. The
Company competes against other family dining concepts, as well as quick service
and casual dining concepts, for customers, employees, franchisees and market
partners. See "Item 1. Business--Competition."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data are set forth herein
commencing on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
15
<PAGE> 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required in response to this Item is incorporated
herein by reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this Item is incorporated
herein by reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in response to this Item is incorporated
herein by reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this Item is incorporated
herein by reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of Report.
1. Financial Statements:
The Financial Statements are listed in the index to
Consolidated Financial Statements on page F-1 of this Report.
1. Exhibits:
<TABLE>
<S> <C>
++3.1 Articles of Incorporation of the Company.
++3.2 Bylaws of the Company.
++4.1 Specimen of Certificate of Common Stock of the Company.
++4.2 Articles of Incorporation of the Company (see 3.1
above).
++4.3 Bylaws of the Company (see 3.2 above).
++10.1 Employment Agreement by and between the Company and
Louis P. Neeb dated February 28, 1996.
++10.2 Employment Agreement by and between the Company and
Patrick A. Morris dated February 28, 1996.
++10.3 Employment Agreement by and between the Company and
Stacy M. Riffe dated February 28, 1996.
++10.4 Indemnity Agreement by and between the Company and Louis
P. Neeb dated as of April 10, 1996.
++10.5 Indemnity Agreement by and between the Company and Larry
N. Forehand dated as of April 10, 1996.
++10.6 Indemnity Agreement by and between the Company and John
C. Textor dated as of April 10, 1996.
++10.7 Indemnity Agreement by and between the Company and
Patrick A. Morris dated as of April 10, 1996.
++10.8 Indemnity Agreement by and between the Company and
Michael D. Domec dated as of April 10, 1996.
++10.9 Indemnity Agreement by and between the Company and Stacy
M. Riffe dated as of April 10, 1996.
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
++10.10 Indemnity Agreement by and between the Company and J.J.
Fitzsimmons dated as of April 10, 1996.
++10.11 Indemnity Agreement by and between the Company and
Richard E. Rivera dated as of April 10, 1996.
++10.12 Corrected Warrant Agreement by and between the Company
and Louis P. Neeb dated as of February 26, 1996.
++10.13 Corrected Warrant Agreement by and between the Company
and Tex-Mex Partners, L.C. dated as of February 26,
1996.
++10.14 Form of the Company's Multi-Unit Development Agreement.
++10.15 Form of the Company's Franchise Agreement.
+++10.16 1996 Long Term Incentive Plan.
+++10.17 Stock Option Plan for Non-Employee Directors.
++10.18 Lease Agreement, dated July 15, 1977, between Weingarten
Realty, Inc. and Fiesta Restaurants, Inc., for property
located at 1020 Federal Road, Houston, Texas (Casa Ole
No. 4).
++10.19 Lease Agreement, dated July 12, 1978, between W & W
Investments, a Texas partnership, and Fiesta
Restaurants, Inc., for property located at 2727 John Ben
Shepperd Pkwy, Odessa, Texas (Casa Ole No. 8).
++10.20 Lease Agreement, dated August 11, 1986, between
Hartford-Lubbock Limited Partnership, a Texas limited
partnership, and Casa Ole No. 10, Inc., for property
located at 4413 South Loop 289, Lubbock, Texas (Casa Ole
No. 10).
++10.21 Lease Agreement, dated July 29, 1983, between Phil R.
Kensinger, Trustee, and Quality Mexican Restaurants,
Inc., for property located at 12203 Murphy Rd.,
Stafford, Texas (Casa Ole No. 13).
++10.22 Lease Agreement, dated July 17, 1987, between Leroy
Melcher and Fiesta Restaurants, Inc., for property
located at 3121 Palmer Hwy, Texas City, Texas (Casa Ole
No. 14).
++10.23 Lease Agreement, dated February 17, 1981, between Eldred
Doty, wife Joyce C. Doty and Fiesta Restaurants, Inc.,
for property located at 3121 Palmer Hwy, Texas City,
Texas (Casa Ole No. 14).
++10.24 Lease Agreement, dated May 16, 1983, between CBL
Management, Inc., a Tennessee corporation, and Fiesta
Restaurants, Inc., d/b/a Casa Ole, for property located
at Post Oak Mall #3026, College Station, Texas (Casa Ole
No. 22).
++10.25 Lease Agreement, dated June 5, 1985, between David Z.
Mafrige Interests and Fiesta Restaurants, Inc., for
property located at 12350 Gulf Freeway, Houston, Texas
(Casa Ole No. 28).
++10.26 Lease Agreement, dated March 13, 1985, between
Plantation Village Plaza Joint Venture and Fiesta
Restaurants, Inc., for property located at 415 This Way,
Lake Jackson, Texas (Casa Ole No. 29).
++10.27 Lease Agreement, dated August 6, 1985, between Dalsan
Properties--Waco II, Service Life and Casualty Insurance
Co. and Casa Ole No 34, Inc., for property located at
414 N. Valley Mills Dr., Waco, Texas (Casa Ole No. 34).
++10.28 Lease Agreement, dated May 6, 1976, between Federated
Store Realty, Inc., Prudential Insurance Company of
America and Fiesta Restaurants, Inc., for property
located at 263 Greenspoint Mall, Houston, Texas (Casa
Ole No. 35).
++10.29 Lease Agreement, dated May 30, 1989, between Temple Mall
Company, a Texas General Partnership, and Casa Ole
Franchise Services, Inc., for property located at 3049
S. 31st Street, Temple, Texas (Casa Ole No. 37).
++10.30 Lease Agreement, dated May 3, 1995, between CO
Properties No. 3, a Texas general partnership, and Casa
Ole Franchise Services, Inc., for property located at
1135 Edgebrook, Houston, Texas.
++10.31 Corrected Warrant Agreement by and between Larry N.
Forehand and Louis P. Neeb dated as of February 26,
1996.
++10.32 Corrected Warrant Agreement by and between Larry N.
Forehand and Tex-Mex Partners, L.C. dated as of February
26, 1996.
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
++10.33 Corrected Warrant Agreement by and between Larry N.
Forehand and Patrick A. Morris dated as of February 26,
1996.
++10.34 Corrected Warrant Agreement by and between Larry N.
Forehand and Stacy M. Riffe dated as of February 26,
1996.
++10.35 Indemnification letter agreement by Larry N. Forehand
dated April 10, 1996.
+10.36 1996 Manager's Stock Option Plan (incorporated by
reference to Exhibit 99.2 of the Company's Form S-8
Registration Statement Under the Securities Act of 1933,
dated February 24, 1997, filed by the Company with the
Securities and Exchange Commission).
*10.37 Lease Agreement, dated June 21, 1996, between Sam Jack
McGlasson and Casa Ole Restaurants, Inc., for property
located at 725 North Loop 340, Bellmead, Texas (Casa Ole
No. 51).
*10.38 Amended Lease Agreement, dated November 7,1996, between
The Prudential Insurance Company of America, by and
through its Agent, Terranomics Retail Services, Inc. and
Casa Ole Restaurants, Inc., for property located at 263
Greenspoint Mall, Houston, Texas (Casa Ole No. 35).
*10.39 Assignment of Lease and Consent to Assign, dated October
11, 1996, between Roy M. Smith and W.M. Bevly d/b/a
Padre Staples Mall (landlord) and Pepe, Inc. d/b/a Casa
Ole Restaurant and Cantina (tenant/assignor) and Jack
Goodwin (guarantor) and Casa Ole No. 29, Inc., for
property located at 1184 Padre Staples Mall, Corpus
Christi, Texas (Casa Ole No. 36).
*10.40 Option Contract and Agreement dated January 11, 1997,
between Casa Ole of Beaumont, Inc., a Texas corporation,
and Casa Ole Restaurants, Inc.
*10.41 $750,000 Promissory Note, dated December 30, 1996,
between Casa Ole No. 29, Inc. and Rainbolt, Inc. for the
purchase of Victoria, Texas restaurant (Casa Ole No.
15).
10.42 Credit Agreement Between Casa Ole Restaurants, Inc., as
the Borrower, and NationsBank of Texas, N.A., as the
Bank, for $10,000,000, dated July 10, 1996 (incorporated
by reference to Exhibit 10.1 of the Company's Form 10-Q
Quarterly Report Under the Securities Exchange Act of
1934, dated August 22, 1996, filed by the Company with
the Securities and Exchange Commission).
*10.43 Amendment No. 1, dated January 13, 1997, to the Credit
Agreement Between Casa Ole Restaurants, Inc., as the
Borrower, and NationsBank of Texas, N.A., as the Bank,
for $10,000,000, dated July 10, 1996.
*11.1 Statement re Computation of Net Income Per Share.
++21.1 List of subsidiaries of the Company (incorporated by
reference to Exhibit 22.1 of the Company's Form S-1
Registration Statement Under the Securities Act of 1933,
dated April 24,1996, filed by the Company with the
Securities and Exchange Commission).
*23.1 Consent of KPMG Peat Marwick LLP.
*24.1 Power of Attorney (included on the signature page to
this Form 10-K).
*27.1 Financial Data Schedule.
</TABLE>
---------------
* Filed herewith.
++ Incorporated by reference to corresponding Exhibit number of
the Company's Form S-1 Registration Statement Under the
Securities Act of 1933, dated April 24, 1996, filed by the
Company with the Securities and Exchange Commission.
+ Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during the last
quarter of the period covered by this Report.
18
<PAGE> 19
CASA OLE RESTAURANTS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors ................................................... F-2
Consolidated Balance Sheets as of December 29, 1995 and December 27, 1996 ........ F-3
Consolidated Statements of Income for each of the years in the three fiscal-year
period ended December 27, 1996 ................................................. F-4
Consolidated Statements of Stockholders' Equity for each of the years in
the three fiscal-year period ended December 27, 1996 ........................... F-5
Consolidated Statements of Cash Flows for each of the years in the three
fiscal-year period ended December 27, 1996 ..................................... F-6
Notes to Consolidated Financial Statements ....................................... F-7
</TABLE>
F-1
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Casa Ole Restaurants, Inc.:
We have audited the accompanying consolidated balance sheets of Casa
Ole Restaurants, Inc. (the Company) as of December 29, 1995 and December 27,
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three fiscal-year period ended
December 27, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Casa
Ole Restaurants, Inc. as of December 29, 1995 and December 27, 1996, and the
results of their operations and their cash flows for each of the years in the
three fiscal-year period ended December 27, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
F-2
<PAGE> 21
CASA OLE RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 29, 1995 AND DECEMBER 27, 1996
<TABLE>
<CAPTION>
1995 1996
------------ ------------
ASSETS
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................... $ 1,003,585 $ 6,419,305
Marketable securities (approximates fair value) ... -- 1,007,255
Royalties receivable .............................. 125,983 110,254
Receivables from affiliates ....................... 32,701 14,000
Other receivables ................................. 33,554 195,287
Notes receivable from related parties ............. 38,964 --
Inventory ......................................... 160,442 197,475
Prepaid expenses and other current assets ......... 84,337 260,459
------------ ------------
Total current assets ....................... 1,479,566 8,204,035
------------ ------------
Property, plant and equipment ....................... 4,787,706 7,326,761
Less accumulated depreciation ..................... 3,408,945 3,470,953
------------ ------------
Net property, plant and equipment .......... 1,378,761 3,855,808
Other assets ........................................ -- 85,930
------------ ------------
$ 2,858,327 $ 12,145,773
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current installments of long-term debt ............ $ 182,959 $ 34,469
Accounts payable .................................. 267,956 532,039
Income taxes payable .............................. -- 352,375
Accrued sales and liquor taxes .................... 116,474 132,407
Accrued payroll and taxes ......................... 127,951 266,597
Accrued expenses .................................. 166,261 29,420
------------ ------------
Total current liabilities .................. 861,601 1,347,307
------------ ------------
Long-term debt ...................................... 62,486 --
Deferred income taxes ............................... -- 35,577
Deferred franchise fees ............................. -- 42,500
Stockholders' equity:
Preferred stock, $.01 par value,
1,000,000 shares authorized ..................... -- --
Capital stock, $0.01 par value, 20,000,000 shares
authorized, 4,732,705 shares issued at
December 27, 1996 ............................... 141,660 47,327
Additional paid-in capital ........................ 2,069,922 20,685,610
Retained earnings (deficit) ....................... (77,342) 1,337,452
Treasury stock, cost of 1,135,000 shares
at December 27, 1996 ............................ (200,000) (11,350,000)
------------ ------------
Total stockholders' equity ................. 1,934,240 10,720,389
------------ ------------
$ 2,858,327 $ 12,145,773
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 22
CASA OLE RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1994,
DECEMBER 29, 1995 AND DECEMBER 27, 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Restaurant sales .................... $ 17,420,507 $ 16,690,682 $ 17,573,911
Franchise fees and royalties ........ 884,979 929,880 997,524
Other ............................... 66,790 68,986 90,474
------------ ------------ ------------
18,372,276 17,689,548 18,661,909
Costs and expenses (see note 7 for
related party costs):
Cost of sales ....................... 4,427,179 4,198,412 4,405,330
Restaurant operating expenses ....... 10,263,936 9,790,998 9,608,834
General and administrative .......... 2,221,955 1,986,958 2,081,161
Depreciation and amortization ....... 341,803 266,389 208,132
Restaurant closure costs ............ 265,361 -- --
------------ ------------ ------------
17,520,234 16,242,757 16,303,457
------------ ------------ ------------
Operating income ............. 852,042 1,446,791 2,358,452
------------ ------------ ------------
Other income (expense):
Interest ............................ (47,277) (38,531) 253,655
Other, net .......................... 190,642 71,198 114,232
------------ ------------ ------------
143,365 32,667 367,887
------------ ------------ ------------
Income before income tax expense ...... 995,407 1,479,458 2,726,339
Income tax expense .................... 68,375 75,000 858,153
------------ ------------ ------------
Net income ................... $ 927,032 $ 1,404,458 $ 1,868,186
============ ============ ============
Pro forma income statement data:
Net income as reported .............. $ 1,404,458 $ 1,868,186
Pro forma adjustments:
Compensation and related party
expense arrangements ............ 820,000 161,700
Provision for income taxes ........ (775,799) (210,422)
Pro forma net income ................ $ 1,448,659 $ 1,819,464
============ ============
Pro forma net income per share ...... $ .52 $ .54
============ ============
Pro forma weighted average number
of shares ......................... 2,793,116 3,384,977
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 23
CASA OLE RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1994,
DECEMBER 29, 1995 AND DECEMBER 27, 1996
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
CAPITAL PAID-IN EARNINGS TREASURY STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) STOCK EQUITY
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993 ...... $ 141,660 $ 1,026,806 $ 972,248 $ (50,000) $ 2,090,714
Net income ....................... -- -- 927,032 -- 927,032
Capital contribution ............. -- 584,128 -- -- 584,128
Distributions paid ............... -- -- (1,838,256) -- (1,838,256)
Treasury stock purchased ......... -- -- -- (150,000) (150,000)
------------ ------------ ------------ ------------ ------------
Balances at December 30, 1994 ...... 141,660 1,610,934 61,024 (200,000) 1,613,618
Net income ....................... -- -- 1,404,458 -- 1,404,458
Capital contribution ............. -- 458,988 -- -- 458,988
Distributions paid ............... -- -- (1,542,824) -- (1,542,824)
------------ ------------ ------------ ------------ ------------
Balances at December 29, 1995 ...... 141,660 2,069,922 (77,342) (200,000) 1,934,240
Net income ....................... -- -- 1,868,186 -- 1,868,186
Issuance of Common Stock ......... 20,000 21,980,000 -- -- 22,000,000
Offering costs and adjustments ... (114,333) (1,916,250) (453,392) 200,000 (2,283,975)
Warrants issued .................. -- 35,977 -- -- 35,977
Treasury stock purchased ......... -- -- -- (11,350,000) (11,350,000)
Distributions paid ............... -- (1,484,039) -- -- (1,484,039)
------------ ------------ ------------ ------------ ------------
Balances at December 27, 1996 ...... $ 47,327 $ 20,685,610 $ 1,337,452 $(11,350,000) $ 10,720,389
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 24
CASA OLE RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED DECEMBER 30, 1994,
DECEMBER 29, 1995 AND DECEMBER 27, 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................... $ 927,032 $ 1,404,458 $ 1,868,186
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .................... 341,803 266,389 208,132
Restaurant closure costs ......................... 265,361 -- --
(Gain) loss on sale of fixed assets .............. (52,010) (54) 28,068
Deferred income taxes ............................ -- -- 35,577
Changes in assets and liabilities:
Royalties receivable ............................. (2,803) (42,142) 15,729
Receivable from affiliates ....................... 17,581 42,351 18,701
Other receivables ................................ 2,463 (21,284) (161,733)
Inventory ........................................ 20,519 (10,587) (37,033)
Prepaids and other current assets ................ (23,768) (23,848) (176,122)
Accounts payable ................................. (48,821) (39,430) 264,083
Accrued expenses and other liabilities ........... (59,156) 54,601 370,113
Other assets ..................................... -- 35,150 (95,022)
Deferred franchise fees .......................... -- -- 42,500
------------ ------------ ------------
Total adjustments ........................... 461,169 261,146 512,993
------------ ------------ ------------
Net cash provided by operating activities ... 1,388,201 1,665,604 2,381,179
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from collection (issuance)
of notes receivable .............................. -- (38,964) 38,964
Purchase of property, plant and equipment .......... (157,482) (103,749) (2,764,152)
Purchase of marketable securities .................. -- -- (1,007,255)
Proceeds from sale of property, plant
and equipment .................................... 85,000 9,500 6,100
------------ ------------ ------------
Net cash used in investing activities ....... (72,482) (133,213) (3,726,343)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution ............................... 245,400 193,627 --
Payment of distributions ........................... (1,756,278) (1,542,824) (1,484,039)
Payments of notes payable .......................... (183,989) (127,106) (157,079)
Proceeds from issuance of Common Stock ............. -- -- 19,752,002
Purchase of treasury stock ......................... (25,000) -- (11,350,000)
------------ ------------ ------------
Net cash provided by (used in)
financing activities .................... (1,719,867) (1,476,303) 6,760,884
------------ ------------ ------------
Increase (decrease) in cash and
cash equivalents ......................... (404,148) 56,088 5,415,720
Cash and cash equivalents at beginning of year ....... 1,351,645 947,497 1,003,585
------------ ------------ ------------
Cash and cash equivalents at end of year ............. $ 947,497 $ 1,003,585 $ 6,419,305
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year:
Interest ......................................... $ 26,874 $ 28,134 $ 24,051
Income taxes ..................................... 52,106 36,417 390,000
Non-cash financing activities:
Note issued for repurchase of capital stock ...... $ 125,000 $ -- $ --
Investment distributed as dividend in-kind ....... 81,978 -- --
Liability assumption/capital contribution ........ 338,728 265,361 --
Exchange of equipment for note balance ........... -- -- 53,897
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 25
CASA OLE RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1994, DECEMBER 29, 1995 AND DECEMBER 27, 1996
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
On February 16, 1996, Casa Ole Restaurants, Inc. was incorporated in
the state of Texas, and on April 24, 1996, its initial public offering of
2,000,000 shares of Common Stock became effective. Casa Ole Restaurants, Inc.
is the holding company for Casa Ole Franchise Services, Inc. and twelve
subsidiary restaurant operating corporations (collectively the "Company").
Casa Ole Franchise Services, Inc. was incorporated in 1977, and derives its
revenues from the collection of franchise fees under a series of protected
location franchise agreements and from the sale of restaurant accessories to
the franchisees of those protected location franchise agreements. The Casa Ole
restaurants feature moderately priced Mexican and Tex-Mex food served in a
casual, family atmosphere. The first restaurant was opened in 1973.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Casa Ole
Restaurants, Inc. and its wholly-owned subsidiaries, after elimination of all
significant intercompany transactions. For years prior to fiscal 1996, the
financial statements are combined and include the operations of four
restaurants that were closed prior to the public offering and do not constitute
the ongoing operations of the Company.
The reorganization of the Company in preparation for the initial
public offering was accounted for as a contribution to Casa Ole Restaurants,
Inc. at historical cost. The financial statements presented herein reflect the
assets, liabilities and operations of the entities presented at their
historical values consistent with the requirements of Staff Accounting Bulletin
Number 48.
(c) Fiscal Year
The Company maintains its accounting records on a 52/53 week fiscal
year ending the last Friday in December.
(d) Cash Equivalents
For purposes of the statements of cash flows, the Company considers
all highly liquid investments with original maturities of three months or less
to be cash equivalents.
(e) Inventory
Inventory, which is comprised of food and beverages, is stated at the
lower of cost or market. Cost is determined using the first-in, first-out
method. Miscellaneous restaurant supplies are included in inventory and valued
on a specific identification basis.
(f) Pre-opening Costs
Costs, primarily the hiring and training of employees, associated with
the opening of a new restaurant are deferred and amortized over a one-year
period commencing with the opening of each respective restaurant.
(g) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation on
buildings and improvements is calculated on the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized
straight- line over the shorter of the lease term plus options or estimated
useful life of the assets, and depreciation on equipment is calculated on the
straight-line method over the estimated useful lives of the assets.
<TABLE>
<S> <C>
Buildings and improvements .................. 15-31 years
Vehicles .................................... 5 years
Equipment ................................... 5-7 years
Leasehold improvements ...................... 10-31 years
</TABLE>
Significant expenditures that add materially to the utility or useful
lives of property, plant and equipment are capitalized. All other maintenance
and repair costs are charged to current operations. The cost and related
accumulated depreciation of assets replaced, retired or otherwise disposed of
are eliminated from the property accounts and any gain or loss is reflected as
other income and expense.
F-7
<PAGE> 26
CASA OLE RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(h) Income Taxes
Prior to the Company's reorganization, substantially all the companies
had elected to be taxed under the provisions of Subchapter S of the Internal
Revenue Code. Accordingly, no provision for federal income taxes has been
provided for these entities prior to the reorganization, as the shareholders of
these entities have included the income on their personal income tax returns.
Federal income taxes for the companies that were C corporations are provided
based on the asset and liability method of accounting pursuant to Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
State income taxes have been provided for all entities.
The S corporation elections terminated on the effective date of the
Company's reorganization, April 24, 1996. Accordingly, a pro forma provision
for federal and state income taxes, using a 37% effective tax rate, is
presented as if the Company was taxed as a C corporation. Subsequent to the
reorganization, federal income taxes are provided based on the asset and
liability method of accounting pursuant to SFAS No. 109.
(i) Pro Forma Data
The pro forma income statement data reflects adjustments to
compensation and related party expense arrangements and reflects an adjustment
to the provision for income taxes as discussed above.
(j) Franchise Fees
Franchise fee revenue from an individual franchise sale is recognized
when all services relating to the sale have been performed and the restaurant
has commenced operation. Initial franchise fees relating to area franchise
sales are recognized ratably in proportion to services that are required to be
performed pursuant to the area franchise or development agreements and
proportionately as the restaurants within the area are opened.
(k) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(l) Fair Value of Financial Instruments
The carrying value of financial instruments (cash, receivables,
accounts payable, etc.) approximates fair value due to the short duration of
these instruments.
(m) Pro Forma Net Income per Share
For fiscal 1996, both primary and fully diluted net income per share
are based on the weighted average number of shares outstanding during the year
increased by dilutive common equivalent shares (stock options and warrants)
determined using the treasury stock method. Because of the April offering
date, the shares outstanding for the first quarter were approximately 865,000
shares less than the number outstanding at the end of the year.
For fiscal 1995, pro forma weighted average shares include the
2,732,705 shares that were issued pursuant to the reorganization of the Company
and 60,411 shares assumed to be issued at the initial public offering price of
$11.00 per share (after deducting the estimated underwriting discount), to fund
a 1995-related S corporation distribution of approximately $618,000.
(2) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 29, 1995 and December 27,
1996 were as follows:
<TABLE>
<CAPTION>
1995 1996
----------- ------------
<S> <C> <C>
Land .................................. $ 271,584 $ 882,297
Buildings and improvements ............ 1,040,144 1,997,677
Vehicles .............................. 23,050 25,850
Equipment and smallwares .............. 2,732,653 3,511,847
Leasehold improvements ................ 720,275 848,220
Construction in progress .............. -- 60,870
----------- ------------
Total ........................ $ 4,787,706 $ 7,326,761
=========== ============
</TABLE>
F-8
<PAGE> 27
CASA OLE RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) LONG-TERM DEBT
Long-term debt consists of the following at December 29, 1995 and
December 27, 1996:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Notes payable to bank, principal and interest due monthly
in the amount of $3,585, interest at 10.0%, due
through September 1997 ................................................ $ 66,144 $ --
Note payable to individual, principal and interest due monthly
in the amount of $3,975, interest at 9.0%, due through October 1997 ... 76,966 34,469
Note payable to stockholder, interest at 9.0%, due on demand ............ 52,751 --
Note payable to stockholder, interest at 9.0%, due on demand ............ 7,500 --
Note payable to stockholder, non-interest bearing due on demand ......... 40,000 --
Other ................................................................... 2,084 --
---------- -----------
Total long-term debt ............................................ 245,445 34,469
Less current installments ............................................... 182,959 34,469
---------- -----------
Long-term debt, excluding current installments .................. $ 62,486 $ --
========== ===========
</TABLE>
In July 1996, the Company entered into a $10 million unsecured credit
agreement with NationsBank of Texas, N.A. The facility is divided into a $4
million Revolving Line of Credit (the "Revolver) and a $6 million Advised
Guidance Loan Commitment (the "Guidance Loan"). The Revolver is to be used for
general corporate purposes, including the construction or acquisition of new
restaurants, and can be drawn on, with interest only payments, through May 31,
1998, at which time the balance will be placed in a four-year term note. The
Guidance Loan can be used at any time through May 31, 1998, to acquire certain
operations of a specified franchisee. Any draws will be placed in a five-year
term note from the date of funding. The interest rate on both components of
the agreement is either the prime rate or LIBOR plus a stipulated percentage.
The Company is subject to a non-use fee of 0.25% on the unused portion of the
Revolver from the date of the agreement. At the time of funding of the
Guidance Loan, there will be a one time fee of 0.25%. Within the terms of the
agreement, the Company must meet certain financial covenants. As of the
balance sheet date, the Company had not made any draws on the Revolver or the
Guidance Loan.
(4) INCOME TAXES
The provision for income tax expense is summarized as follows for
fiscal years 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal ......................... $ -- $ -- $ 659,303
State and local ................. 68,375 75,000 163,273
Deferred ............................ -- -- 35,577
----------- ----------- ----------
$ 68,375 $ 75,000 $ 858,153
=========== =========== ==========
</TABLE>
The actual income tax expense differs from expected income tax expense
computed by applying the U.S. federal corporate tax rate to income before
income tax expense as follows for fiscal year 1996:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Expected tax expense ...................................... $ 927,000
Subchapter S corporation status until April 24, 1996 ...... (205,156)
State tax expense, net .................................... 107,773
Other ..................................................... 28,536
---------
$ 858,153
=========
</TABLE>
The Company's deferred tax liability of $35,577 represents excess tax
depreciation over financial statement depreciation. Prior to April 24, 1996,
the Company was comprised of 13 separate entities that were primarily S
corporations. For pro forma presentation purposes, taxes for the year ended
December 29, 1995, and the period ended April 23, 1996, are assumed to be
provided using a 37% effective tax rate.
F-9
<PAGE> 28
CASA OLE RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) COMMON STOCK, OPTIONS AND WARRANTS
In April 1996, the Company completed an initial public offering of
2,000,000 shares of Common Stock. Immediately prior to the effectiveness of
the Registration Statement, there was an exchange of shares by the shareholders
of the prior corporations for proportional shares of the Company. Immediately
following the effectiveness of the Registration Statement, the Company redeemed
shares held by Michael D. Domec for an aggregate $11.35 million. These shares
are reflected in treasury at December 27, 1996.
(a) 1996 Long Term Incentive Plan
The Board of Directors and shareholders of the Company have approved
the Casa Ole 1996 Long Term Incentive Plan (the "Incentive Plan"). The
Incentive Plan authorizes the granting of up to 320,000 shares of Common Stock
in the form of incentive stock options and non-qualified stock options to key
executives and other key employees of the Company, including officers of the
Company and its subsidiaries. The purpose of the Incentive Plan is to attract
and retain key employees, to motivate key employees to achieve long-range goals
and to further align the interests of key employees with those of the other
shareholders of the Company. Options granted under the Incentive Plan will
vest and become exercisable at the rate of 10% on the first anniversary of the
date of grant, 15% on the second anniversary of the date of grant, and 25% on
each of the third through fifth anniversaries of the date of grant. At the
balance sheet date, the Company had granted 288,908 shares under the Incentive
Plan, with option prices ranging from $11.00 to $13.25 per share. No portion
of the options have yet vested. The Incentive Plan will terminate on December
31, 2005.
(b) Stock Option Plan for Non-Employee Directors
The Company has adopted the Casa Ole Stock Option Plan for
Non-Employee Directors (the "Directors Plan") for its outside directors and has
reserved 100,000 shares of Common Stock for issuance thereunder. The Directors
Plan provides that each outside director will automatically be granted an
option to purchase 10,000 shares of Common Stock at the time of becoming a
director. These options will be exercisable in 20% increments at the initial
public offering price of $11.00 per share and will vest equally over the
five-year period from the date of grant. Except with respect to the initial
outside directors options granted as described in the preceding sentences, each
outside director will automatically receive options to purchase 3,000 shares of
Common Stock annually immediately following his or her reelection to the Board
and after his or her first three years of service, exercisable at the fair
market value of the Common Stock at the close of business on the date
immediately preceding the date of grant (the initial outside directors will be
eligible for such grants once their initial options have fully vested). Such
annual options will vest at the conclusion of the outside director's annual
term. All stock options granted pursuant to the Directors Plan will be
nonqualified stock options and will remain exercisable until the earlier of ten
years from the date of grant or six months after the optionee ceases to be a
director of the Company. At the balance sheet date, the Company had granted
20,000 shares under the Directors Plan, at an option price of $11.00 per share,
none of which have yet vested.
(c) 1996 Manager's Stock Option Plan
The Company has adopted the 1996 Manager's Stock Option Plan (the
"Manager's Plan") specifically for its store- level managers. The Manager's
Plan authorizes the granting of up to 200,000 shares of Common Stock in the
form of non- qualified stock options to store-level managers of the Company.
The purpose of the Manager's Plan is to attract, retain and motivate restaurant
managers to achieve long-range goals and to further align the interests of
those employees with those of the other shareholders of the Company. Options
granted under the Manager's Plan will generally vest and become exercisable at
the rate of 10% on the first anniversary of the date of grant, 15% on the
second anniversary of the date of grant, and 25% on each of the third through
fifth anniversaries of the date of grant. At the balance sheet date, the
Company had not yet granted options under the Manager's Plan.
(d) Warrants
In conjunction with the initial public offering, the Company entered into
war.aNeebgandmTexs with Louis P Mex, a limited liability company of which John
C. Textor (a member of the Board of Directors) is a principal, pursuant to
which Mr. Neeb and Tex-Mex acquired warrants to purchase shares of Common Stock
at the initial public offering ($11.00 per share) price less the amount paid
for the warrant ($.10 per share) for an aggregate amount of Common Stock equal
to ten percent (10%) of the shares of Common Stock of the Company outstanding
upon consummation of the initial public offering, such shares to be allocated
5%, or 179,885 shares, to Mr. Neeb and 5%, or 179,885 shares, to Tex-Mex. The
Company's warrants to Mr. Neeb become exercisable on the second anniversary of
the initial public offering, and the Company's warrants to Tex-Mex become
exercisable on the first anniversary of the initial public offering.
F-10
<PAGE> 29
CASA OLE RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(e) SFAS No. 123. "Accounting for Stock-Based Compensation"
The Company has adopted the disclosure-only provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," and has accounted for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, no compensation cost has
been recognized for stock options or warrants. Had compensation cost for the
Company's outstanding stock options and warrants been determined based on the
fair value at the grant date for awards in 1996 consistent with the provisions
of SFAS No. 123, the Company's net income and net income per share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Pro forma net income - as reported ............................ $1,819,464
Pro forma net income - pro forma for SFAS No. 123 ............. $1,309,931
Pro forma net income per share - as reported .................. $0.54
Pro forma net income per share - pro forma for SFAS No. 123 ... $0.39
</TABLE>
The weighted average fair value of the options and warrants granted
during 1996 is estimated at $3.69 on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: volatility of 25.0%, risk-
free interest rate of 6.5% and an expected life of 5 years for options and 4
years for warrants.
(6) LEASES
The Company leases restaurant operating space and equipment under
noncancelable operating leases which expire at various dates through June 2005.
The restaurant operating space base agreements typically provide for a
minimum lease rent plus common area maintenance, insurance, and real estate
taxes, plus additional percentage rent based upon revenues of the restaurant
(generally 2% to 7%) and may be renewed for periods ranging from five to
fifteen years.
Future minimum lease payments under noncancelable operating leases
with initial or remaining lease terms in excess of one year as of December 27,
1996 are:
<TABLE>
<S> <C>
1997 .............................................. $ 892,000
1998 .............................................. 778,000
1999 .............................................. 613,000
2000 .............................................. 548,000
2001 .............................................. 520,000
Thereafter ........................................ 1,696,000
----------
$5,047,000
==========
</TABLE>
Rent expense for restaurant operating space and equipment amounted to
$1,170,825, $1,170,269 and $1,137,891 for the fiscal years 1994, 1995 and 1996,
respectively.
(7) RELATED PARTY TRANSACTIONS
Casa Ole Management Services, Inc. (COMS), owned jointly by two
Company shareholders, provided supervisory and administrative services to Casa
Ole Franchise Services, Inc. and the Casa Ole restaurants. COMS was dissolved
as of December 30, 1994. Expenses paid to COMS amounted to $522,457 in fiscal
1994.
MDD Investments, Inc., a corporation formed in 1991 by a Company
shareholder, charged fees directly to certain Casa Ole restaurants owned by the
shareholder. Net amounts paid to MDD Investments, Inc. in fiscal 1994, 1995
and 1996 (prior to the offering) were $322,040, $302,962 and $102,759,
respectively.
Bay Area Management, Inc., owned entirely by the brother of a Company
shareholder and director, provides accounting and administrative services on a
fee basis, to all of the Company-owned Casa Ole restaurants and some franchise
entities. Amounts paid to Bay Area Management, Inc. by the Company in fiscal
1994, 1995 and 1996 were $162,016, $117,683 and $177,707, respectively.
F-11
<PAGE> 30
CASA OLE RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Four restaurants that operated under the Casa Ole name were closed
prior to the reorganization of the Company and were not part of the
reorganization. However, for reporting purposes, the results of those
restaurants have been included in the years in which those units were open.
The obligations associated with the Non-contributed Restaurants were not
assumed by the Company in the case of the closed Abilene and Midland
restaurants and have been indemnified against by Larry N. Forehand in the case
of the closed Lubbock and The Woodlands restaurants. Restaurant closure costs,
primarily representing continuing lease payment commitments and leasehold
abandonment costs were accrued in fiscal 1994 in conjunction with the
formulation of closure plans. Cash requirements of these restaurants, created
primarily by the losses incurred by these restaurants, were funded by the two
principal shareholders and have been recorded in the combined financial
statements as capital contributions.
The Company leases its executive offices from a company owned by two
shareholders of Casa Ole Restaurants, Inc. Net lease expense related to these
facilities in fiscal 1994, 1995 and 1996 was $72,000, $57,500 and $50,375,
respectively.
F-12
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CASA OLE RESTAURANTS, INC.
By: /s/ Louis P. Neeb
------------------------------------
Louis P. Neeb,
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Louis P. Neeb, Patrick A.
Morris and Stacy M. Riffe, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments to this Form 10-K under
the Securities Exchange Act of 1934, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Louis P. Neeb Chairman of the Board of
- ------------------------- Directors and Chief Executive
Louis P. Neeb Officer (Principal Executive
Officer) March 17, 1997
/s/ Larry N. Forehand Founder and Vice Chairman of the
- ------------------------- Board of Directors March 17, 1997
Larry N. Forehand
/s/ Patrick A. Morris Director, President and Chief
- ------------------------- Executive Officer March 17, 1997
Patrick A. Morris
/s/ Stacy M. Riffe Vice President, Chief Financial
- ------------------------- Officer, Secretary and Treasurer
Stacy M. Riffe (Principal Financial Officer and
Principal Accounting Officer) March 17, 1997
/s/ John C. Textor Director March 17, 1997
- -------------------------
John C. Textor
/s/ Michael D. Domec Director March 17, 1997
- -------------------------
Michael D. Domec
/s/ J. J. Fitzsimmons Director March 17, 1997
- -------------------------
J. J. Fitzsimmons
/s/ Richard E. Rivera Director March 17, 1997
- -------------------------
Richard E. Rivera
</TABLE>
F-13
<PAGE> 32
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
++3.1 Articles of Incorporation of the Company.
++3.2 Bylaws of the Company.
++4.1 Specimen of Certificate of Common Stock of the Company.
++4.2 Articles of Incorporation of the Company (see 3.1
above).
++4.3 Bylaws of the Company (see 3.2 above).
++10.1 Employment Agreement by and between the Company and
Louis P. Neeb dated February 28, 1996.
++10.2 Employment Agreement by and between the Company and
Patrick A. Morris dated February 28, 1996.
++10.3 Employment Agreement by and between the Company and
Stacy M. Riffe dated February 28, 1996.
++10.4 Indemnity Agreement by and between the Company and Louis
P. Neeb dated as of April 10, 1996.
++10.5 Indemnity Agreement by and between the Company and Larry
N. Forehand dated as of April 10, 1996.
++10.6 Indemnity Agreement by and between the Company and John
C. Textor dated as of April 10, 1996.
++10.7 Indemnity Agreement by and between the Company and
Patrick A. Morris dated as of April 10, 1996.
++10.8 Indemnity Agreement by and between the Company and
Michael D. Domec dated as of April 10, 1996.
++10.9 Indemnity Agreement by and between the Company and Stacy
M. Riffe dated as of April 10, 1996.
</TABLE>
<PAGE> 33
<TABLE>
<S> <C>
++10.10 Indemnity Agreement by and between the Company and J.J.
Fitzsimmons dated as of April 10, 1996.
++10.11 Indemnity Agreement by and between the Company and
Richard E. Rivera dated as of April 10, 1996.
++10.12 Corrected Warrant Agreement by and between the Company
and Louis P. Neeb dated as of February 26, 1996.
++10.13 Corrected Warrant Agreement by and between the Company
and Tex-Mex Partners, L.C. dated as of February 26, 1996.
++10.14 Form of the Company's Multi-Unit Development Agreement.
++10.15 Form of the Company's Franchise Agreement.
+++10.16 1996 Long Term Incentive Plan.
+++10.17 Stock Option Plan for Non-Employee Directors.
++10.18 Lease Agreement, dated July 15, 1977, between Weingarten
Realty, Inc. and Fiesta Restaurants, Inc., for property
located at 1020 Federal Road, Houston, Texas (Casa Ole No. 4).
++10.19 Lease Agreement, dated July 12, 1978, between W & W
Investments, a Texas partnership, and Fiesta Restaurants, Inc.,
for property located at 2727 John Ben Shepperd Pkwy, Odessa,
Texas (Casa Ole No. 8).
++10.20 Lease Agreement, dated August 11, 1986, between
Hartford-Lubbock Limited Partnership, a Texas limited
partnership, and Casa Ole No. 10, Inc., for property
located at 4413 South Loop 289, Lubbock, Texas (Casa Ole No. 10).
++10.21 Lease Agreement, dated July 29, 1983, between Phil R. Kensinger,
Trustee, and Quality Mexican Restaurants, Inc., for property
located at 12203 Murphy Rd., Stafford, Texas (Casa Ole No. 13).
++10.22 Lease Agreement, dated July 17, 1987, between Leroy Melcher and
Fiesta Restaurants, Inc., for property located at 3121 Palmer Hwy,
Texas City, Texas (Casa Ole No. 14).
++10.23 Lease Agreement, dated February 17, 1981, between Eldred Doty, wife
Joyce C. Doty and Fiesta Restaurants, Inc., for property located at
3121 Palmer Hwy, Texas City, Texas (Casa Ole No. 14).
++10.24 Lease Agreement, dated May 16, 1983, between CBL Management, Inc.,
a Tennessee corporation, and Fiesta Restaurants, Inc., d/b/a Casa
Ole, for property located at Post Oak Mall #3026, College Station,
Texas (Casa Ole No. 22).
++10.25 Lease Agreement, dated June 5, 1985, between David Z. Mafrige
Interests and Fiesta Restaurants, Inc., for property located at
12350 Gulf Freeway, Houston, Texas (Casa Ole No. 28).
++10.26 Lease Agreement, dated March 13, 1985, between Plantation Village
Plaza Joint Venture and Fiesta Restaurants, Inc., for property
located at 415 This Way, Lake Jackson, Texas (Casa Ole No. 29).
++10.27 Lease Agreement, dated August 6, 1985, between Dalsan
Properties--Waco II, Service Life and Casualty Insurance Co. and
Casa Ole No 34, Inc., for property located at 414 N. Valley Mills
Dr., Waco, Texas (Casa Ole No. 34).
++10.28 Lease Agreement, dated May 6, 1976, between Federated Store Realty,
Inc., Prudential Insurance Company of America and Fiesta
Restaurants, Inc., for property located at 263 Greenspoint Mall,
Houston, Texas (Casa Ole No. 35).
++10.29 Lease Agreement, dated May 30, 1989, between Temple Mall Company, a
Texas General Partnership, and Casa Ole Franchise Services, Inc.,
for property located at 3049 S. 31st Street, Temple, Texas (Casa
Ole No. 37).
++10.30 Lease Agreement, dated May 3, 1995, between CO Properties No. 3, a
Texas general partnership, and Casa Ole Franchise Services, Inc.,
for property located at 1135 Edgebrook, Houston, Texas.
++10.31 Corrected Warrant Agreement by and between Larry N. Forehand and
Louis P. Neeb dated as of February 26, 1996.
++10.32 Corrected Warrant Agreement by and between Larry N. Forehand and
Tex-Mex Partners, L.C. dated as of February 26, 1996.
</TABLE>
<PAGE> 34
<TABLE>
<S> <C>
++10.33 Corrected Warrant Agreement by and between Larry N.
Forehand and Patrick A. Morris dated as of February 26,
1996.
++10.34 Corrected Warrant Agreement by and between Larry N.
Forehand and Stacy M. Riffe dated as of February 26,
1996.
++10.35 Indemnification letter agreement by Larry N. Forehand
dated April 10, 1996.
+10.36 1996 Manager's Stock Option Plan (incorporated by
reference to Exhibit 99.2 of the Company's Form S-8
Registration Statement Under the Securities Act of 1933,
dated February 24, 1997, filed by the Company with the
Securities and Exchange Commission).
*10.37 Lease Agreement, dated June 21, 1996, between Sam Jack
McGlasson and Casa Ole Restaurants, Inc., for property
located at 725 North Loop 340, Bellmead, Texas (Casa Ole
No. 51).
*10.38 Amended Lease Agreement, dated November 7,1996, between
The Prudential Insurance Company of America, by and
through its Agent, Terranomics Retail Services, Inc. and
Casa Ole Restaurants, Inc., for property located at 263
Greenspoint Mall, Houston, Texas (Casa Ole No. 35).
*10.39 Assignment of Lease and Consent to Assign, dated October
11, 1996, between Roy M. Smith and W.M. Bevly d/b/a
Padre Staples Mall (landlord) and Pepe, Inc. d/b/a Casa
Ole Restaurant and Cantina (tenant/assignor) and Jack
Goodwin (guarantor) and Casa Ole No. 29, Inc., for
property located at 1184 Padre Staples Mall, Corpus
Christi, Texas (Casa Ole No. 36).
*10.40 Option Contract and Agreement dated January 11, 1997,
between Casa Ole of Beaumont, Inc., a Texas corporation,
and Casa Ole Restaurants, Inc.
*10.41 $750,000 Promissory Note, dated December 30, 1996,
between Casa Ole No. 29, Inc. and Rainbolt, Inc. for the
purchase of Victoria, Texas restaurant (Casa Ole No.
15).
10.42 Credit Agreement Between Casa Ole Restaurants, Inc., as
the Borrower, and NationsBank of Texas, N.A., as the
Bank, for $10,000,000, dated July 10, 1996 (incorporated
by reference to Exhibit 10.1 of the Company's Form 10-Q
Quarterly Report Under the Securities Exchange Act of
1934, dated August 22, 1996, filed by the Company with
the Securities and Exchange Commission).
*10.43 Amendment No. 1, dated January 13, 1997, to the Credit
Agreement Between Casa Ole Restaurants, Inc., as the
Borrower, and NationsBank of Texas, N.A., as the Bank,
for $10,000,000, dated July 10, 1996.
*11.1 Statement re Computation of Net Income Per Share.
++21.1 List of subsidiaries of the Company (incorporated by
reference to Exhibit 22.1 of the Company's Form S-1
Registration Statement Under the Securities Act of 1933,
dated April 24,1996, filed by the Company with the
Securities and Exchange Commission).
*23.1 Consent of KPMG Peat Marwick LLP.
*24.1 Power of Attorney (included on the signature page to
this Form 10-K).
*27.1 Financial Data Schedule.
</TABLE>
- ---------------
* Filed herewith.
++ Incorporated by reference to corresponding Exhibit number of the Company's
Form S-1 Registration Statement Under the Securities Act of 1933, dated
April 24, 1996, filed by the Company with the Securities and Exchange
Commission.
+ Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10.37
COMMERCIAL LEASE
This lease agreement is made and entered into by and between Sam Jack
McGlasson (Landlord) and Casa Ole Restaurant and Cantina (Tenant). Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord that certain
property containing approximately 40,390 square feet, herein called the "leased
premises" known as Exhibit A (Address), Lot ____________, Block __________,
_______________________________________ Addition, City of Bellmead, McLennan
County, Texas; or as more particularly described below or on attached exhibit:
Subject property shall be surveyed and replated to a single lot subdivision by
Tenant with Landlord's full cooperation.
The primary term of this lease shall be twenty years (240 months)
commencing 90 days after Tenant opens business to the public at the above
described property.
1. TAXES. Each year during the term of this lease, Tenant shall pay real
estate taxes assessed against the leased premises in an amount equal to the
total real estate taxes assessed against the leased premises.
2. UTILITIES. Tenant shall pay all charges for utility services to the
leased premises.
3. HOLDING OVER. Failure of Tenant to surrender the leased premises at
the expiration of the lease constitutes a holding over which shall be construed
as a tenancy from month to month at a rental of $3,000.00 per month.
4. RENT. Tenant agrees to and shall pay Landlord at 1 Hidden Valley St.,
Waco, TX 76710, County of McLennan, Texas or at such other place Landlord shall
designate from time to time in writing as rent for the leased premises, the
total sum of $452,700.00, payable without demand in equal monthly installments
of $* see Rent Schedule Addendum, cash in advance on or before the 1st day of
each month, commencing on 90 days after Tenant opens business to public,
19_____, and continuing thereafter until the total sum shall be paid.
Adjustment to the rent, if any, for rent escalators, for percentage of net
rent, or for increases in building operation costs (including but not limited
to insurance, custodial services, maintenance and utilities) shall be as set
forth in an attached addendum. Rent received after the first day of the month
shall be deemed delinquent. If rent is not received by Landlord by the 5th of
each month, Tenant shall pay a late charge of $50.00 plus a penalty of $10.00
per day until rent is received in full. Tenant shall pay $50.00 for each
returned check.
5. USE. Tenant shall use the leased premises for the following purpose
and no other: Tenant shall construct an approximately
1
<PAGE> 2
4,200 sq. ft. restaurant building which will be opened to the public.
6. SECURITY DEPOSIT. Tenant shall pay to Landlord a security deposit in
the sum of $ NA , payable on or before the commencement of this lease for
Tenant's faithful performance hereunder. Refund thereof shall be made upon
performance of this lease agreement by Tenant, minus any assessments or damages
unless Landlord and Tenant provide otherwise in Special Provisions.
7. INSURANCE. Tenant shall pay for fire and extended coverage insurance
on the buildings and other improvements on the leased premises in an amount not
less than $ replacement value , which amount shall be increased yearly in
proportion to the increase in market value of the premises. If Landlord
provides any insurance herein, Tenant shall pay to Landlord, during the term
hereof, the amount of any increase in premiums for the insurance required over
and above such premiums paid during the first-year of this lease. Tenant shall
provide public liability and property damage insurance for its business
operations on the leased premises in the amount of $1,000,000.00 which policy
shall cover the Landlord as well as the Tenant. Said insurance policies
required to be provided by Tenant herein shall name Landlord as an insured and
shall be issued by an insurance company approved by Landlord. Tenant shall
provide Landlord with certificates of insurance evidencing the coverage
required herein. Tenant shall be solely responsible for fire and casualty
insurance on Tenant's property on or about the leased premises. If Tenant does
not maintain such insurance in full force and effect, Landlord may notify
Tenant of such failure and if Tenant does not deliver to Landlord within 10
days after such notice certification showing all such insurance to be in full
force and effect, Landlord may at his option, take out the necessary insurance
to comply with the provision hereof and pay the premiums on the items specified
in such notice, and Tenant covenants thereupon on demand to reimburse and pay
Landlord any amount so paid or expended in the payment of the insurance
premiums required hereby and specified in the notice with interest thereon at
the rate of 10 percent per annum from the date of such payments by Landlord
until repaid by Tenant.
8. CONDITION OF PREMISES. Tenant has examined and accepts the leased
premises in its present as is condition as suitable for the purposes for which
the same are leased, and does hereby accept the leased premises regardless of
reasonable deterioration between the date of this lease and the date Tenant
begins occupying the leased premises unless Landlord and Tenant agree to
repairs or refurbishment as noted in Special Provisions.
9. MAINTENANCE AND REPAIRS. Tenant shall keep the foundation, the
exterior walls (except glass; windows; doors; door closure devices; window and
door frames, molding, locks, and hardware; and interior painting or other
treatment of exterior walls), and the
2
<PAGE> 3
roof of leased premises in good repair except that Landlord shall not be
required to make any repairs occasioned by the act or negligence of Tenant, its
employees, subtenants, licenses and concessionaires. Tenant is responsible for
maintenance of the common area and common area equipment. At the termination
of this lease, Tenant shall deliver the leased premises in good order and
condition, normal wear and tear excepted. Normal wear and tear means
deterioration which occurs without negligence, carelessness, accident or abuse.
10. ALTERATIONS. All alterations, additions and improvements, except
trade fixtures, installed at expense of Tenant, shall become the property of
Landlord and shall remain upon and be surrendered with the leased premises as a
part thereof on the termination of this lease. At the termination of this
lease, Tenant shall deliver the leased premises in good order and condition,
natural deterioration only excepted. Any damage caused by the installation or
removal of trade fixtures shall be repaired at Tenant's expense prior to the
expiration of the lease term. All alterations, improvements, additions, and
repairs made by Tenant shall be made in good and workmanlike manner.
11. COMPLIANCE WITH LAWS AND REGULATIONS. Tenant shall, at its own
expenses, comply with all laws, orders, and requirements of all governmental
entities with reference to the use and occupancy of the leased premises.
Tenant and Tenant's agents, employees and invitees shall fully comply with any
rules and regulations governing the use of the buildings or other improvements
to the leased premises as required by Landlord. Landlord may make responsible
changes in such rules and regulations from time to time as deemed advisable for
the safety, care and cleanliness of the leased premises, provided same are in
writing and are not in conflict with this lease.
12. ASSIGNMENT AND SUBLETTING. Tenant shall not assign this lease nor
sublet the leased premises or any interest therein without first obtaining the
written consent of the Landlord. An assignment or subletting without the
written consent of Landlord shall be void and shall, at the option of Landlord,
terminate this lease.
13. DESTRUCTION. In the event the leased premises is partially damaged or
destroyed or rendered partially unfit for occupancy by fire or other casualty,
Tenant shall give immediate notice to Landlord. Tenant shall maintain loss of
business insurance to assure Landlord is paid rent during any casualty period.
14. TENANT DEFAULT AND REMOVAL OF ABANDONED PROPERTY. If Tenant abandons
the premises or otherwise defaults in the performance of any obligations or
covenants herein, Landlord may enforce the performance of this lease in any
manner provided by law. This lease may be terminated at Landlord's discretion
if such abandonment or default continues for a period of 10 days after
3
<PAGE> 4
Landlord notifies Tenant of such abandonment or default and of Landlord's
intention to declare this lease terminated. Such notice shall be sent by
Landlord to Tenant at Tenant's last known address by certified mail. If Tenant
has not completely removed or cured default within the 10-day period, this
lease shall terminate. Thereafter, Landlord or its agents shall have the
right, without further notice or demand, to enter the leased premises and
remove all property without being deemed guilty of trespass and without waiving
any other remedies for arrears of rent or breach of covenant. Upon abandonment
or default by the Tenant, the remaining unpaid portion of the rental from
paragraph 4 herein, shall become due and payable. For purposes of this
section, Tenant is presumed to have abandoned the premises if goods, equipment,
or other property, in an amount substantial enough to indicate a probable
intent to abandon the premises, is being or has been removed from the premises
and the removal is not within the normal course of Tenant's business. Landlord
shall have the right to store any property of Tenant that remains on premises
that are abandoned; and, in addition to Landlord's other rights, Landlord may
dispose of the stored property if Tenant does not claim the property within 60
days after the date the property is stored, provided Landlord delivers by
certified mail to Tenant at Tenant's last known address a notice stating that
Landlord may dispose of Tenant's property if Tenant does not claim the property
within 60 days after the date the property is stored.
15. INTERRUPTION OF UTILITIES. Landlord or Landlord's agent may not
interrupt or cause the interruption of utility service paid directly to the
utility company by Tenant.
16. EXCLUSION OF TENANT. Landlord may not intentionally prevent Tenant
from entering the leased premises except by judicial process unless the
exclusion results from (a) bona fide repairs, construction, or an emergency;
(b) removing the contents of premises abandoned by Tenant; or (c) changing the
door locks of Tenant in the event Tenant is delinquent in paying at least part
of the rent. If Landlord or Landlord's agent changes the door lock of Tenant,
in the event Tenant is delinquent in paying rent, Landlord or Landlord's agent
must place a written notice on Tenant's front door stating the name and the
address or telephone number of the individual or company from which the new key
may be obtained. The new key is required to be provided only during Tenant's
regular business hours.
17. LIEN. Landlord is granted an express contractual lien, in addition to
any lien provided by law, and a security interest in all property of Tenant
found on the leased premises to secure the compliance by Tenant with all terms
of this lease.
18. SUBORDINATION. Landlord is hereby irrevocably vested with full power
and authority to subordinate this lease to any mortgage, deed of trust, or
other lien hereafter placed on the demised
4
<PAGE> 5
premises and Tenant agrees, on demand to execute such further instruments
subordinating this lease as Landlord may request, provided such subordination
shall be on the express condition that this lease shall be recognized by the
mortgagee and the rights of Tenant shall remain in full force and effect during
the term of this lease so long as Tenant shall continue to perform all of the
covenants and conditions of this lease.
19. INDEMNITY. Landlord and its employees and agents shall not be liable
to Tenant or Tenant's employees, patrons, visitors, invitees, or any other
persons for any such injury to any such persons or for damage to personal
property caused by an act, omission, or neglect of Tenant or Tenant's agents or
of any other tenant of the premises of which the leased premises is a part.
Tenant agrees to indemnify and hold Landlord and its employees and agents
harmless from any and all claims for such injury and damages, whether the
injury occurs on or off the leased premises.
20. SIGNS. Tenant must follow sign requirements as established by the
City of Bellmead.
21. TENANT BANKRUPTCY. If Tenant becomes bankrupt or makes voluntary
assignment for the benefit of creditors or if a receiver is appointed for
Tenant, Landlord may terminate this lease by giving five (5) days written
notice to Tenant of Landlord's intention to do so.
22. CONDEMNATION. If the whole or any substantial part of the leased
premises is taken for any public or quasi- public use under any governmental
law, ordinance or regulation or by right of eminent domain or should the leased
premises be sold to a condemning authority under threat of condemnation, this
lease shall terminate and the rent shall be abated during the unexpired portion
of the lease effective from the date of the physical taking of the leased
premises.
23. HAZARDOUS MATERIALS. Landlord warrants and represents that the
Property does not contain "Hazardous Materials", as that phrase is defined
herein. For purposes of this provision, the phrase "Hazardous Materials" shall
mean and include any toxic contaminated or other hazardous materials including,
without limitation, asbestos, PCB, transformers, underground storage
containers, materials containing any radioactive substances, petroleum base
products, paints, solvents, lead, cyanide, DDT, acids, pesticides, ammonium
compounds, and any other substance forming a component part of the improvements
which has heretofore or may in the future be determined to contain toxic
wastes, hazardous materials, or undesirable substance injurious to the health
of occupants living or working in or around the subject Property. Landlord
acknowledges that current and future federal, state, and local laws and
regulations may require the clean up of any such Hazardous Materials at the
expense of those persons who in the past, present
5
<PAGE> 6
or future may have had or continues to have any interest in the Property
including, but not limited to, current, past, and future owners and users,
including tenants, of the Property. The cost and expense of such clean up may
be substantial. Landlord further acknowledges that the real estate Brokers and
their agents involved in the negotiation of this transaction have no expertise
with respect to any such Hazardous Materials. Landlord acknowledges and agrees
that Landlord shall look solely to experts and professionals selected by
Landlord to advise Landlord with respect to the condition of the Property and
shall not hold the real estate Brokers or their agents responsible for any
Hazardous Material condition or problem relating to the Property. Landlord
hereby agrees to indemnify, defend and hold the real estate Brokers and their
agents participating in this transaction harmless of and from any and all
liability, claim, debt, damage, cost or expense, including reasonable
attorneys' fees, related to or arising out of or in any way connected to
Hazardous Materials and/or toxic wastes and/or any other undesirable substances
affecting the Property.
24. BROKER'S FEE. JIM STEWART REALTORS, Broker and NA, Co-Broker, as Real
Estate Broker (the Broker), has negotiated this lease and Landlord agrees to
pay Broker in McLennan County, Texas, upon commencement of this lease a
negotiated fee of $____________ or 4% of the total rental provided for in this
lease be divided as follows: NA. In the event this lease is extended, expanded
or renewed, Landlord agrees to pay to Broker an additional negotiated fee of
$____________ or 4% of the total rental for such extension, expansion or
renewal period, payable at the time of commencement of such extension,
expansion or renewal, said fee to be divided as follows: NA. Tenant warrants
that it has had no dealings with any real estate broker or agents in connection
with the negotiation of this lease excepting only NA and it knows of no other
real estate broker or agent who is entitled to a commission in connection with
this Lease. If Tenant during the term of this Lease, or any extension,
expansion or renewal period thereof, or within 60 days of the expiration of
this Lease, or any extension, expansion or renewal period thereof, purchases
the property herein leased, Landlord agrees to pay the Broker, JIM STEWART,
REALTORS in McLennan County, Texas, a negotiated fee of $_ ____________ or 6%
of the sales price upon closing of the sale of this property.
25. NOTICES. Notices to Tenant shall be by certified mail or other
delivery to the leased premises or to Tenant's last known address. Notices to
Landlord shall be by certified mail to the place where rent is payable.
26. DEFAULT BY LANDLORD. In the event of breach by Landlord of any
covenant, warranty, term or obligation of this lease, then Landlord's failure
to cure same or commence a good faith effort to cure same within 10 days after
written notice thereof by Tenant shall be considered a default and shall
entitle Tenant either to terminate this lease or cure the default and make the
necessary
6
<PAGE> 7
repairs and any expense incurred by Tenant shall be reimbursed by the Landlord
after reasonable notice of the repairs and expenses incurred.
27. [INTENTIONALLY DELETED]
28. RIGHT OF ENTRY. Landlord shall have the right during normal business
hours to enter the demised premises; (a) to inspect the general condition and
state of repair thereof, (b) to make repairs required or permitted under this
lease, or (c) for any other reasonable purpose.
29. WAIVER OF BREACH. The waiver by Landlord of any breach of any
provision of this lease shall not constitute a continuing waiver or a waiver of
any subsequent breach of the same or a different provision of this lease.
30. TIME OF ESSENCE. Time is expressly declared to be of the essence in
this lease.
31. BINDING OF HEIRS AND ASSIGNS. Subject to the provisions of this lease
pertaining to assignment of the Tenant's interest, all provisions of this lease
shall extend to and bind, or inure to the benefit not only of the parties to
this lease but to each and every one of the heirs, executors, representatives,
successors, and assigns of Landlord or Tenant.
32. RIGHTS AND REMEDIES CUMULATIVE. The right and remedies by this lease
agreement are cumulative and the use of any one right or remedy by either party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance, or otherwise.
33. TEXAS LAW TO APPLY. This agreement shall be construed under and in
accordance with the law of the State of Texas.
34. LEGAL CONSTRUCTION. In case any one or more of the provisions
contained in this agreement shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof and this agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
35. PRIOR AGREEMENTS SUPERCEDED. This agreement constitutes the sole and
only agreement of the parties to this lease and supersedes any prior
understandings or written or oral agreements between the parties respecting the
subject matter of this lease.
7
<PAGE> 8
36. AMENDMENT. No amendment, modification, or alteration of the terms
hereof shall be binding unless it is in writing, dated subsequent to the date
hereof, and duly executed by the parties.
37. ATTORNEY'S FEES. Any signatory to this lease agreement who is the
prevailing party in any legal proceeding against any other signatory brought
under or with relation to this lease agreement or this transaction shall be
additionally entitled to recover court costs, reasonable attorney fees, and all
other out-of-pocket costs of litigation, including deposition, travel and
witness costs, from the nonprevailing party.
38. SPECIAL PROVISIONS. (This section to include additional factual data
not included above.) Casa Ole has the right of first refusal on any contract
to purchase this property. Upon being given written notice that a contract of
purchase has been submitted and accepted by Landlord, Tenant shall have 14
business days to match said offer. The Addendum to Commercial Lease attached
hereto is incorporated herein and made a part hereof for all purposes.
THE TEXAS ASSOCIATION OF REALTORS AND THE WACO ASSOCIATION OF REALTORS
DO NOT FIX, CONTROL, RECOMMEND, SUGGEST OR MAINTAIN COMMISSION RATES OR FEES
FOR SERVICES TO BE RENDERED BY THEIR MEMBERS OR THE DIVISION OF COMMISSIONS OR
FEES BETWEEN COOPERATING PARTICIPANTS OR BETWEEN PARTICIPANTS AND
NON-PARTICIPANTS. THE AMOUNT OF COMPENSATION AND THE CONTRACT TERMS HEREIN ARE
NOT PRESCRIBED BY LAW AND ARE SUBJECT TO NEGOTIATION BETWEEN BROKER AND
SUBLESSOR.
THIS IS A LEGAL DOCUMENT, READ IT CAREFULLY. IF YOU DO NOT UNDERSTAND
THE EFFECT OF ANY PART OF THIS AGREEMENT, SEEK COMPETENT LEGAL ADVICE.
EXECUTED this 21st day of June, 1996.
Casa Ole Restaurants
By: /s/ Patrick M. Morris /s/ Sam Jack McGlasson
-------------------------- --------------------------
TENANT OR TENANTS LANDLORD SIGNATURE
SIGNATURE(S) President Sam Jack McGlasson
1135 Edgebrook 1 Hidden Valley
Houston, TX 77034 Waco, Texas 76710
713-943-7574 817-772-1554
8
<PAGE> 9
- --------------------------
BROKER SIGNATURE
JIM STEWART, REALTORS
By: /s/ Randy Reid
--------------------------
AGENT SIGNATURE
Randy Reid
500 N. Valley Mills Drive
Waco, Texas 76710
817/776-0000
9
<PAGE> 10
ADDENDUM TO COMMERCIAL LEASE
Reference is made to that certain Commercial Lease in which Sam Jack
McGlasson is named as the Landlord and Casa Ole Restaurant and Cantina is named
as the Tenant and which provides for the lease by Tenant of a certain tract of
land containing approximately 40,390 square feet in the City of Bellmead,
McLennan County, Texas situated on Loop 340. This Addendum is intended to
supplement and modify such Commercial Lease, and wherever the terms of this
Addendum are inconsistent with the terms of such Commercial Lease, the terms of
this Addendum shall prevail.
1. Tenant shall be Casa Ole Restaurants, Inc.
2. The rent to be paid by Tenant for each month for the lease of
the property during each period of five (5) years, including periods which may
be added to the lease by reason of Tenant's exercise of options to extend the
lease, shall be as follows:
<TABLE>
<S> <C> <C>
First period of five years - $1,570.00 per month
Second period of five years - $1,775.00 per month
Third period of five years - $2,100.00 per month
Fourth period of five years - $2,100.00 per month
Fifth period of five years - $2,205.00 per month
Sixth period of five years - $2,315.00 per month
</TABLE>
3. In addition to the rent referred to above, commencing with
such third period of five years, Tenant shall pay an additional rent equal to
two percent (2%) of its net sales receipts in excess of $1,260,000.00 annually
in the restaurant to be constructed upon the property.
4. Tenant shall have two options to extend the lease term for
successive periods of five (5) years each. Tenant may exercise each of such
options by giving Landlord notice in writing no less than 120 days before the
end of the lease term (including the previously extended lease term).
5. Tenant's obligation to lease the Leased Premises shall be
subject to such property being replatted as a single lot. Tenant shall use its
best efforts to cause such property to be replatted as a single lot. Landlord
will consent to such replatting and will cooperate with Tenant in such
undertaking.
6. Should Tenant determine, within its sole discretion, that
business operations in the Leased Premises should be discontinued, such
discontinuance shall not be deemed an abandonment or other default unless
Tenant fails to pay the rent referred to above.
Addendum - Page 1
<PAGE> 11
7. Tenant, without Landlord's consent and within its sole
discretion, may sublease the Leased Premises or assign the Commercial Lease,
but in such event, Tenant shall not be relieved of its obligations under the
Commercial Lease and shall remain primarily liable for the payment of rent.
8. If Tenant should determine, within its sole discretion, within
thirty (30) days from the date it signs the Commercial Lease that the Leased
Premises is unsuitable for the construction and operation of a restaurant and
gives Landlord notice thereof in writing, the Commercial Lease shall become
null, void and of no effect and neither Landlord not Tenant shall have any
further obligation thereunder.
9. Upon the expiration of the lease term, Tenant shall be entitle
to remove from the building constructed upon the Leased Premises, any property
which can be removed therefrom without permanent damage to such building,
without regard to whether such property is classified as real or personal. If
the removal of such property causes damage to the building it shall be repaired
by the Tenant at its cost and expense.
10. Should the improvements erected upon the Leased Property be
destroyed or damaged by fire or other casualty, Tenant's obligation to continue
to pay the rent shall not be abated, but Tenant shall not be required to carry
business interruption or similar insurance coverage.
11. Landlord's damages for Tenant's failure to pay rent pursuant
to paragraph 14 shall be equal to the value of unpaid rental then due and to
become due in the future, discounted at the rate of ten percent (10%) per
annum. Such amount shall become immediately due and payable pursuant to
paragraph 14 and subject to the provisions for notice and opportunity to cure
set forth there. In such case the lease shall continue until the end of the
initial lease term of twenty (20) years, but in such case, Tenant's options to
extend the lease term shall lapse. Landlord, at his option, shall have as his
remedy the cancellation of the Commercial Lease and the termination of the
lease term, but Landlord's damages in such event shall be limited to such rents
as have theretofore become due and payable.
12. Paragraph 16 of the Commercial Lease is hereby deleted.
13. If all or any part of the property is taken in a condemnation
proceeding pursuant to paragraph 22 of the Commercial Lease, Tenant shall be
entitle to a share of the award in condemnation equal to the value of its loss
as the result of the condemnation. In determining Tenant's loss, there shall
be considered, without limitation, Tenant's future profits.
14. Paragraph 28 of the Commercial Lease is hereby deleted.
Addendum - Page 2
<PAGE> 12
15. The Landlord warrants and represents the following:
(a) Landlord has good and indefeasible legal title to the
Leased Premises.
(b) The Leased Premises are free and clear of liens and
other encumbrances.
(c) Tenant shall have quiet enjoyment of the Leased
Premises in accordance with the terms of the
Commercial Lease and this Addendum, and Landlord will
defend Tenant against any person claiming an interest
in therein.
16. When the Leased Premises is surveyed, the metes and bounds or
other description set forth in the surveyor's field notes will be substituted
in the place and stead of the Exhibit A to the Commercial Lease.
Addendum - Page 3
<PAGE> 13
VANNOY & ASSOC., INC.
Surveyors - Planners
DESCRIPTION
CASA OlE 0.927 ACRES
STATE OF TEXAS
COUNTY OF McLENNAN
BEING all that tract of land in the City of Bellmead, McLennan County, Texas,
and a part of the Tomas de la Vega Grant and a part of that called 202.634
acres described in a deed to Sam J. McGlasson as recorded in Volume 1041, Page
831 of the McLennan County Deed Records, and being further described as
follows:
BEGINNING at a point on the South line of Loop 340 (240' R.O.W.), being also
the Northeast corner of the Hillcrest Medical 2.48 acres as described in a deed
recorded in Volume 1704, Page 4 of the McLennan County Deed Records, a 1/2"
steel rod found for corner;
THENCE South 81 degrees 10 minutes 41 seconds East (Reference), 140.00 feet
along Loop 340 to a 1/2" steel rod set for corner;
THENCE South 08 degrees 52 minutes 53 seconds West, 288.50 feet to a 1/2" steel
rod set on the North line of Lot 1, Block 1 of the TRI-CITIES ADDITION as
recorded in Volume 1505, Page 700 of the McLennan County Deed Records;
THENCE North 81 degrees 10 minutes 41 seconds West, 140.00 feet along the North
line of said Lot 1 to a 1/2" steel rod found at the Southeast corner of said
Hillcrest Medical tract;
THENCE North 08 degrees 52 minutes 53 seconds East, 288.50 feet to the Point of
Beginning, containing 0.927 acres of land.
The description shown hereon was prepared from an on-the-ground survey
performed by me during the month of July, 1996.
July 11, 1996
/s/ Ray L. Vannoy
--------------------------
Ray L. Vannoy
R.P.L.S. No. 1988
1
<PAGE> 1
EXHIBIT 10.38
GREENSPOINT MALL, HOUSTON, TEXAS
SHOPPING CENTER LEASE
by and between
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By and through its Agent
TERRANOMICS RETAIL SERVICES, INC.
"Landlord"
and
FIESTA RESTAURANTS, INC., d/b/a
CASA OLE RESTAURANT AND CANTINA
"Tenant"
November 7, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. BASIC LEASE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. LEASE TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. COMMENCEMENT OF LEASE TERM . . . . . . . . . . . . . . . . . . . . . . . 4
5. FAILURE TO DO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. FIXED MINIMUM RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. PERCENTAGE RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. DEFINITION OF "GROSS SALES . . . . . . . . . . . . . . . . . . . . . . . 6
9. BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11. AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12. ADDITIONAL RENT AND ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . 8
13. PAST DUE RENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
14. PLACE OF PAYMENTS AND ESTIMATES. . . . . . . . . . . . . . . . . . . . . 8
15. ADVANCE RENT AND SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . 9
16. FINANCING: [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . 9
17. CANCELLATION: [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . 9
18. CONDITION OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . 9
19. OWNERSHIP OF IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 10
20. TENANT'S INSTALLATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
21. PERMITTED USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
22. OPERATION OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
23. LAWS, WASTE OR NUISANCE . . . . . . . . . . . . . . . . . . . . . . . . 11
24. HAZARDOUS MATERIALS... . . . . . . . . . . . . . . . . . . . . . . . . . 12
25. COMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
26. CONCESSIONAIRES AND LICENSEES... . . . . . . . . . . . . . . . . . . . . 13
27. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
28. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . 14
29. REPAIRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
30. TENANT'S FAILURE TO REPAIR . . . . . . . . . . . . . . . . . . . . . . . 17
31. COVENANT AGAINST LIENS . . . . . . . . . . . . . . . . . . . . . . . . . 17
32. UTILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
33. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
34. COMMON AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
35. COST OF MAINTENANCE OF COMMON AREAS . . . . . . . . . . . . . . . . . . . 22
36. PROMOTION OF CENTER AND TENANT'S BUSINESS . . . . . . . . . . . . . . . . 25
(a) Promotional Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Merchants' Association . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Media Fund, Joint Advertising . . . . . . . . . . . . . . . . . . . . 25
(d) Payments, Increases, and Unused Funds . . . . . . . . . . . . . . . . 25
(e) Tenant Advertising . . . . . . . . . . . . . . . . . . . . . . . . . 26
(f) Landlord's Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 26
37. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
38. FIRE INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) BY LANDLORD.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) BY TENANT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) WAIVER OF SUBROGATION... . . . . . . . . . . . . . . . . . . . . . . 28
(d) TENANT'S ADDITIONAL INSURANCE . . . . . . . . . . . . . . . . . . . . 28
39. INSURANCE REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 28
40. PAYMENT OF INSURANCE PREMIUMS . . . . . . . . . . . . . . . . . . . . . . 29
41. DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
42. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
43. BANKRUPTCY-INSOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . 32
44. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
45. LANDLORD'S LIEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
46. ACCESS TO PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
47. EXCAVATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
48. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
49. ATTORNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
50. ATTORNEY-IN-FACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
51. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
52. UNAVOIDABLE DELAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
53. SURRENDER OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . 39
54. HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
55. RELATIONSHIP OF PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . 39
56. NO WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
57. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
58. RECORDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
59. PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
60. BROKER'S COMMISSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 40
61. DEFINITION OF LAW(S) . . . . . . . . . . . . . . . . . . . . . . . . . . 40
62. PROVISIONS BINDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
63. ENTIRE AGREEMENT, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . 40
64. WAIVER OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
65. TENANT STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
66. DELETIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
67. RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
68. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
69. SPECIAL STIPULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
EXHIBIT "A" SITE PLAN
EXHIBIT "A-1" DESCRIPTION OF SHOPPING CENTER LAND
EXHIBIT "A-1"- PART 2 DESCRIPTION OF LANDLORD'S SITE
EXHIBIT "B" DESCRIPTION OF TENANT'S WORK AND WORK TO BE
PERFORMED BY LANDLORD IN THE PREMISES
EXHIBIT "C" RULES
iii
<PAGE> 5
SHOPPING CENTER LEASE
THIS LEASE made as of the 7 day of November, 1996, between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Landlord"), a New Jersey
corporation, by and through its agent, TERRANOMICS RETAIL SERVICES, INC.,
having a place of business at 455 North Point, San Francisco, California 94133
and FIESTA RESTAURANTS, INC., d/b/a Casa Ole Restaurant and Cantina
("Tenant"), a Texas corporation whose principal place of business is located
at 1130 Edgebrook, Houston, Texas 77060.
BASIC PROVISIONS
1. BASIC LEASE PROVISIONS:
A. Tenant's Tradename: Casa Ole Restaurant and Cantina
B. Shopping Center: Greenspoint Mall which is more
particularly described on Exhibit "B"
attached hereto and by this reference
made a part hereof
Address: 208 Greenspoint Mall
Houston, TX 77060
C. Premises: Space No. 263 at the Shopping Center,
consisting of approximately 5,973
rentable square feet, the approximate
location of which is shown cross-
hatched on Exhibit "A" hereto. (See
Par. 2)
D. Lease Term: (See Par. 3 and Par. 4) Seven (7)
years
The Lease Term shall commence upon
the Commencement Date. If the
Commencement Date is any day other
than the first day of a calendar
month, the first lease year shall be
the period of time from the
Commencement Date through January 31;
each lease year thereafter shall
be a successive period of twelve (12)
calendar months beginning on February
1, and expiring on January 31
(hereinafter referred to as "Lease
Year").
E. Commencement Date: (i) October 1, 1996, or (ii) the date
upon which Tenant opens the Premises
for business to the public, whichever
shall first occur.
F. Expiration Date: January 31, 2004
G. Permitted Use: The operation of a Mexican Food sit
down restaurant, including the sale
of alcoholic beverages and for no
other use or purpose whatsoever.
H. Fixed Minimum Rent (See Par. 6)
<TABLE>
<CAPTION>
Rent Period Monthly Amount Annual Amount
----------- -------------- -------------
<S> <C> <C> <C>
(a) Commencement Date Through
Lease Year 3 $5,113.51 $61,362.12
(b) Years 4 - Expiration Date $5,624.86 $67,498.33
</TABLE>
lop
<PAGE> 6
1. Percentage Rent:
Period Amount Each Lease Year
------ ----------------------
Commencement Date through Expiration Date Six percent (6%) of
Annual Gross Sales
over $1,073,837.10
Prorations of Breakpoints for Partial Lease Years, and prorations for
Lease Years containing two different Breakpoints for different periods,
shall be as described in Par. 7
J. Initial Estimated Annual Operating Costs: $7.93 psf (See Par. 35)
K. Initial Estimated Annual Taxes: $4.61 psf (See Par. 33)
L. Initial Annual Promotion Fund Charge: $2.00 psf (See Par. 36)
M. Media Fund: $1.75 (See Par. 36[c])
N. Initial Annual Sprinkler Main Charge: $0.10 psf (See Par.
32(d))
O. Trash Charge: $0.25 psf (See Par. 32)
P. Food Court Charge: (See Food Court Tenant Addendum)
Water, Storm and Sewer (Submetered)
Seating Area Maintenance Cost N/A
Grease Trap Cleaning N/A
Q. Security Deposit: N/A
R. Radius Restriction: Six (6) miles from the Shopping Center
S. Guarantor: N/A
T. Rent Payment Address: Tenant shall forward all rent to Landlord at
the following address, or such other address
or addresses as to which Landlord shall
provide advance notice: P.O. Box 840677,
Dallas, Texas 75284-0677. Tenant shall
forward all insurance certificates and gross
sales reports to Landlord at the following
address, or such other address or addresses
as to which Landlord shall provide advance
notice: 208 Greenspoint Mall, Houston, Texas
77060.
U. Rent Shall Be Payable To: Terranomics Retail Services, Inc., or such
other entity as Landlord shall designate
from time to time in writing.
V. Advance Rent: N/A
2. PREMISES: (a) Landlord does hereby lease to Tenant and Tenant does
hereby lease from Landlord those certain premises constituting a part of a
shopping center development hereafter to be erected, or presently erected,
whichever the case may be, now known as the Greenspoint Mall (the "Shopping
Center"), situated in Houston, Texas, which premises are more particularly
identified on Exhibit "A" attached to this Lease and made a part hereof.
Frontage of the Premises shall be measured from the center of partition to
center of partition except in the event the Premises or any part thereof is an
end space, said measurement shall include the full width of end walls; and the
Gross Leasable Area ("GLA") of the Premises shall be measured from the
exterior faces of the walls (outside dimensions) or if the Premises or any
part thereof are not surrounded by walls, then the space within and up to the
lease lines of the Premises as shown on Exhibit "A" shall be included in the
computation (store fronts shall not be deemed wells); and in computing the GLA
2
<PAGE> 7
of the Premises no deduction or exclusion shall be made from areas or space
otherwise computed by reason of any installations, interior partitions,
mezzanines, basements or other interior construction or equipment (all
hereinafter collectively called the "Premises"). If Tenant at any time
constructs a mezzanine in the Premises, then the GLA of the Premises mentioned
herein shall be increased in an amount equal to the square footage of such
mezzanine; and, the rents and other charges reserved hereunder shall be
proportionately adjusted. Prior to the commencement of the construction of any
such mezzanine, Landlord and Tenant shall execute an amendment to this Lease
confirming such adjustments. No mezzanines shall be permitted in stores located
on the upper level of a two (2) level mall.
(b) Whenever reference in this Lease is made to the "Shopping Center"
it is understood to mean only that portion of the property owned by Landlord or
controlled by Landlord under a leasehold interest or reciprocal operating
agreement. The Shopping Center's GLA shall equal the aggregate amount of the
gross leasable areas of all premises in the Shopping Center as same may be
modified, altered, expanded or reduced from time to time, excluding the GLA of
Department Stores and any noncontiguous storage areas, mezzanines, basements or
kiosks, community rooms, and space donated to government agencies. The term
"Department Stores" shall mean any store, other than a supermarket, which
occupies 25,000 square feet or more and the respective sublessees, successors
and assigns of such stores.
(c) The location and boundaries of the Premises is outlined on
diagrams of the Shopping Center which are marked Exhibit "A" attached to this
Lease, and made a part hereof. Exhibit "A" shows the general layout of the
Shopping Center, certain proposed Department Stores adjoining the Shopping
Center and other tenants, but shall not be deemed to be a warranty,
representation or agreement on the part of Landlord that said Shopping Center or
said Department Stores and/or any additional or different Department Stores or
other tenants will be as shown on Exhibit "A" or will, in fact, occupy stores in
the Shopping Center. Landlord reserves the right without any liability to Tenant
and without detracting from the agreement of the parties that the location of
the Premises is fixed and determined; (i) to shift the location of the Premises
along the enclosed mall a distance within but not in excess of thirty (30) feet
in either direction by Landlord giving to Tenant a twenty (20) day notice in
writing at any time prior to the Delivery of Possession Date of the Premises;
(ii) to increase, reduce or change the number, size, height, layout or locations
of the buildings, walks, parking and/or other common areas and facilities now or
at any time hereafter forming a part of the Shopping Center; and (iii) to make
alterations or additions to, and to build additional stories on the buildings of
which the Premises forms a part, and to add buildings adjoining the same or
elsewhere in the Shopping Center. Landlord also reserves the right to relocate
the Premises upon not less than six (6) months notice to Tenant, if Landlord
effects an expansion or renovation of the Shopping Center. Such relocation shall
be at the sole cost and expense of the Landlord. In the event Tenant declines to
accept the substituted premises, this Lease shall terminate at the expiration of
the six (6) month notice period or at such earlier date agreed upon by Landlord
and Tenant.
(d) Tenant's right to use and occupy the Premises during the Lease
Term shall include a license to use the common areas and facilities of the
Shopping Center as defined in this Lease in common with others.
(e) Nothing contained in this Lease shall be construed as a
conveyance by Landlord to Tenant of the roof or exterior walls of the building
of which the Premises forms a part, of the space above the Premises and below
the underside of the roof slab, of the land below the sub-base of or air rights
above the Premises, or of the common areas and facilities of the Shopping
Center. Landlord also reserves the right to install, maintain, use, repair and
replace pipes, duct work, conduits, utility lines and wires through hung
ceiling space, column space, and partitions, in or beneath the floor slab or
above or below the Premises and serving the Premises or other parts of the
Shopping Center, except that Landlord shall not unreasonably interfere with or
interrupt the business operations of Tenant within the Premises, and except
where necessary as determined by Landlord's architect, no pipes, conduits,
utility lines or wires installed by Landlord shall be exposed in the sales area
of the Premises.
3. LEASE TERM: To have and to hold the Premises for the period set forth in
Paragraph 1(D) of this Lease unless sooner terminated or extended as
hereinafter provided.
4. COMMENCEMENT OF LEASE TERM: (a) The Commencement Date of the Lease Term
shall be the date set forth in Paragraph 1(E) of this Lease. If Paragraph 1(E)
does not provide for a fixed
3
<PAGE> 8
Commencement Date, then the Lease Term shall commence upon the earlier of the
following dates; (i) thirty (30) days following the date Landlord has notified
Tenant that the Premises are ready for Tenant's work to commence in accordance
with Section (d) of Paragraph 5; or (ii) the date on which Tenant shall open
the Premises for business. However, Tenant agrees to cooperate with Landlord to
effect a joint opening or reopening of the Shopping Center (where the Shopping
Center is not yet open to the public or a grand reopening is planned following
renovation of the Shopping Center), and, at Landlord's request, agrees to delay
the opening of Tenant's business in the Premises (and to delay the Commencement
Date hereof) from the date Tenant otherwise would have been required to open
for business under the provisions of this Lease. If Landlord requests such a
delay, then the Commencement Date shall be the date set by Landlord for such
joint opening or reopening ("Grand Opening") of the Shopping Center. Landlord
shall not be responsible or liable to Tenant or those claiming by, through or
under Tenant for loss or damages caused by or resulting from a delayed joint
opening of the Shopping Center.
(b) When the Commencement Date is determined, Tenant agrees, upon
request of Landlord, to execute and deliver to Landlord, without charge, a
certificate: (1) ratifying this Lease; (2) confirming the commencement and
expiration dates of the Lease Term; (3) certifying that Tenant is in occupancy
of the Premises, the date Tenant commenced operating Tenant's business therein
and that this Lease is in full force and effect and has not been assigned,
modified, supplemented or amended, except by such writings as shall be stated;
(4) that all conditions under this Lease to be performed by the Landlord have
been satisfied, except such as shall be stated; (5) that there are no defenses
or offsets against the enforcement of this Lease by Landlord, or stating those
claimed by Tenant; (6) reciting the amount of advance rental, if any, paid by
Tenant and the date to which rental has been paid; and (7) reciting the amount
of Security Deposit, if any. Tenant further agrees to execute and deliver
similar certificates from time to time when requested by Landlord, Landlord's
mortgage lenders, ground or underlying lessors and/or purchasers, and each of
such parties shall be entitled to rely upon such certificates made by Tenant.
5. FAILURE TO DO BUSINESS: The parties covenant and agree that because of
the difficulty or impossibility of determining Landlord's damages by way of
loss of the anticipated Percentage Rent from Tenant or other tenants or
occupants in or adjoining the Shopping Center, or by way of loss of value in
the property because of diminished saleability or mortgageability or adverse
publicity or appearance by Tenant's actions, should Tenant (a) subject to
Paragraphs 4 and 52 hereof, fail to take possession and open for business in
the Premises fully fixtured, stocked and staffed on the Commencement Date of
the Lease Term, or (b) vacate, abandon or desert the Premises; or (c) cease
operating or conducting Tenant's business in the Premises (except where the
Premises are made untenantable by reason of fire, casualty, permitted repairs
or alterations or other causes beyond Tenant's control mentioned in Paragraph
51 hereof), or (d) fail or refuse to maintain business hours on such days or
nights or any part thereof as provided in Paragraph 22 hereof, then and in any
such event (hereinafter collectively referred to as "failure to do business"),
Landlord shall have the right to collect not only Fixed Minimum Rent and other
rents and charges herein reserved, but also Additional Rent equal to one-
quarter (1/4) of the Fixed Minimum Rent reserved for the period of the Tenant's
failure to do business, computed at a monthly rate for each and every month or
part thereof during such period; and such Additional Rent shall be deemed to be
liquidated damages instead of any Percentage Rent that might have been payable
to Landlord for such period. As used herein the terms "vacate," "abandon" or
"desert" shall not be avoided because Tenant may have left all or any part of
its trade fixtures or other personal property in the Premises.
6. FIXED MINIMUM RENT: Tenant agrees to pay to Landlord during the Lease
Term, without any prior demand therefor and without any setoffs or deductions
whatsoever, the Fixed Minimum Rent, payable in equal monthly installments, in
advance, on the first day of each and every calendar month throughout the Lease
Term.
7. PERCENTAGE RENT: (a) In addition to the Fixed Minimum Rent, Tenant
agrees to pay to Landlord, as additional rent (hereinafter referred to as
"Percentage Rent") for each Lease Year or partial
4
<PAGE> 9
Lease Year, a sum equal to the amount of Tenant's Gross Sales in excess of the
Breakpoint multiplied by the Percentage Rent Rate payable as provided in
subsection (b) of this Paragraph 7.
(b) Percentage Rent shall be determined and paid, without any prior
demand therefor, on a monthly basis commencing with the first month in each
Lease Year in which Tenant's Gross Sales for such Lease Year exceed the
applicable Breakpoint. Such payments shall be made on or before the fifteenth
(15th) day of each calendar month with respect to Gross Sales made during each
preceding month as set forth in Paragraph 1(I) of this Lease.
(c) If the Fixed Minimum Rent shall be abated or reduced as a result
of any event mentioned under this Lease, then the amount of the Breakpoint
shall be appropriately reduced in an amount equal to the percentage of decrease
in the Fixed Minimum Rent.
8. DEFINITION OF "GROSS SALES": (a) The phrase "Gross Sales," shall mean
the dollar total of (i) the entire amount of the price charged for all goods,
wares and merchandise sold, leased, licensed or delivered, and all charges for
all services sold or performed by Tenant from all business conducted at, upon
or from the Premises by Tenant, whether made for cash, by check, on credit,
charge accounts or otherwise, without reserve or deduction for inability or
failure to collect the same, including, but not limited to, transactions: (1)
where the orders therefor originate at or are accepted by Tenant in the
Premises, but delivery or performance thereof is made from or at any other
place; all sales made and orders received in or at the Premises shall be deemed
as made and completed therein, even though the payment of account may be
transferred to another office for collection, and all orders which result from
solicitation off the Premises but which are conducted by personnel operating
from or reporting to or under the control or supervision of any employee of
Tenant employed at the Premises shall be deemed part of Gross Sales; (2)
pursuant to mail, telephone, telegraph or other similar orders received or
billed at or from the Premises; (3) by means of mechanical or other vending
devices; (4) originating from whatever source, and which Tenant in the normal
and customary course of Tenant's operations would credit or attribute to
Tenant's business conducted in the
5
<PAGE> 10
Premises, and (ii) all monies or other things of value received by Tenant from
Tenant's operations at, upon or from the Premises which are neither included in
nor excluded from Gross Sales by the other provisions of this definition but
without any duplication, including, without limitation, finance charges, price
of gift or merchandise certificates and all deposits not refunded to customers.
(b) Each charge or sale upon installment or credit shall be treated
as a sale for the full price in the month during which such charge or sale is
made, whether Tenant shall actually receive full or partial payment. Each lease
or rental of merchandise shall be treated as a sale in the month during which
such lease or rental is made, for a price equal to the total rent payable.
(c) For the purpose of ascertaining the amount of Gross Sales upon
which the payment of Percentage Rent is to be computed, the following may be
deducted from Gross Sales: (i) the exchange of merchandise between stores of
Tenant or its subsidiaries where such exchanges are made solely for the
convenient operation of Tenant's business and not for the purpose of
consummating a sale which has been made at, upon or from the Premises; (ii)
returns to shippers or manufacturers; (iii) sales of trade fixtures after use
thereof, which are not part of Tenant's stock in trade and not sold in the
regular course of Tenant's business; (iv) cash or credit refunds made upon
transactions included within Gross Sales but not exceeding the selling price of
the merchandise returned by the purchaser; or (v) the amount of any local,
county, State or Federal sales, luxury or excise tax on such sales provided
such tax is both added to the selling price and paid to the taxing authority by
Tenant (but not by any vendor of Tenant) provided, however, no franchise or
capital stock tax and no income or similar tax based upon income, profits or
gross sales as such, shall be deducted from Gross Sales in any event whatsoever
in the computation of Percentage Rent.
(d) The term "Tenant" shall be deemed to include any of Tenant's
subtenants, concessionaires or licensees.
9. BOOKS AND RECORDS: Tenant shall prepare and keep for a period of at
least thirty-six (36) months following the end of each Lease Year, true and
accurate books of account and records, conforming to generally sound and
accepted accounting principles consistently applied, including, but not limited
to, sales tax and other reports filed with governmental agencies, all purchases
and receipts of merchandise, inventories and all sales and other transactions
by Tenant from which Gross Sales at, upon or from the Premises can be
determined. Tenant agrees to record all sales, at the time each sale is made,
and to retain cumulative cash register tapes or such other cumulative records
concerning such sales as are approved by Landlord.
10. REPORTS: (a) Tenant agrees to submit to Landlord on or before the tenth
(10th) day following the end of each calendar month during the Lease Term
(including the tenth [10th] day of the month following the end of the Lease
Term) a written statement, signed by an authorized representative of Tenant as
true and correct showing the amount of Gross Sales from the business conducted
at, upon or from the Premises by Tenant during the preceding calendar month,
and an itemization of all permissible deductions therefrom. Tenant further
agrees to submit to Landlord on or before the sixtieth (60th) day following the
end of each Lease Year or partial Lease Year (including the last Lease Year
hereof, as to which Tenant's obligation shall survive the expiration of the
Lease Term) a written statement, signed and verified by an authorized
representative of Tenant as true and correct, showing the amount of such Gross
Sales during the preceding Lease Year or partial Lease Year and an itemization
of all permissible deductions therefrom. Said annual statement shall also be
duly certified to be true and correct in compliance with the definition of
Gross Sales contained in Paragraph 8 by Tenant or an officer of Tenant in
accordance with sound and accepted accounting practice consistently applied.
The statements referred to in this Paragraph shall be in such form and style
and shall contain such details and information as Landlord may reasonably
designate and shall be delivered to the address as Landlord may from time to
time designate. The acceptance by Landlord of payments of Percentage Rent or
Gross Sales reports shall be without prejudice and shall not constitute a
waiver of Landlord's right to claim a deficiency in the payment of Percentage
Rent or to audit Tenant's books and records. The Gross Sales for any portion of
a calendar month prior to the commencement of the first full calendar month,
shall be included in the report due for the next succeeding month.
(b) If Tenant's Gross Sales are required to be reported on any
Federal, State or local sales tax return and Gross Sales so reported on any of
said returns shall exceed the Gross Sales as reported by Tenant under
6
<PAGE> 11
this Lease, then the Gross Sales shall be taken at the highest figure so
reported. If any governmental authority shall increase the Gross Sales reported
by Tenant on any such tax return for any Lease Year for which such sales have
been reported, then Tenant shall notify Landlord promptly of such increase,
supply to Landlord a true copy of such governmental action and pay any
additional Percentage Rent due under this Lease.
11. AUDIT: Landlord shall have the right, upon fifteen (15) days' notice to
Tenant to cause a complete audit of all statements of Gross Sales and in
connection with such audit, to examine Tenant's books of account and records
(including all supporting data and any other records from which Gross Sales may
be tested or determined) of Gross Sales disclosed in any statement given to
Landlord by Tenant; and Tenant shall make all such records available for such
examination at the office where such records are regularly maintained. Landlord
shall have the right to copy and duplicate such information as Landlord may
require. If any such audit discloses that the actual Gross Sales transacted by
Tenant exceed those reported, then Tenant shall pay Landlord such additional
Percentage Rent as may be payable and if the excess so disclosed shall be one
percent (1%) or more, Tenant shall also pay the reasonable costs of such audit
and examination. If such audit or examination shall disclose an understatement
of more than five percent (5%), Landlord shall also have the right to cancel
this Lease by written notice given to Tenant within six (6) months after such
audit. The furnishing by Tenant of any fraudulent or materially inaccurate
statement shall constitute a breach of this Lease. If any audit shall be
commenced by Landlord or if a difference or dispute shall arise concerning
Gross Sales, then Tenant's books of account and records (including all
supporting data and any other records from which Gross Sales may be tested or
determined) shall be preserved and retained by Tenant until a final resolution
of such audit, dispute or difference. Any information obtained by Landlord as a
result of such audit shall be treated as confidential, except Landlord may
disclose the same to its property manager, employees and agents and in any
litigation or proceeding between the parties and, except further, that Landlord
may disclose such information to prospective purchasers, to prospective or
existing lenders, to prospective or existing ground lessors and in any
statement filed with the Securities and Exchange Commission, Internal Revenue
Service, or other similar governmental agency or pursuant to any subpoena or
judicial process. If Landlord shall fail to audit any annual reports within
thirty-six (36) months after the same have been actually received by Landlord,
then any such report shall be deemed conclusively true and correct, except as
to any fraudulent report.
12. ADDITIONAL RENT AND ADJUSTMENTS: (a) In addition to the Fixed Minimum
Rent and Percentage Rent, all other payments to be made by Tenant hereunder
shall be deemed for the purposes of securing collection to be Additional Rent
under this Lease, whether so designated or not, and shall be due and payable on
demand or together with the next succeeding installment of Fixed Minimum Rent,
whichever shall first occur; and Landlord shall have the same rights and
remedies upon Tenant's failure to pay the same as for the non-payment of Fixed
Minimum Rent. Landlord shall have the right (but not the obligation) to pay for
or perform any act which requires the expenditure of any sums of money by
reason of the failure or neglect of Tenant to perform any of the provisions of
this Lease within any applicable grace period; and, in the event Landlord shall
elect to pay such sums or perform such acts requiring money expenditures,
Tenant agrees to pay Landlord, upon demand, all such sums, which shall be
deemed for the purpose of securing the collection thereof to be Additional Rent
hereunder.
(b) In the event the Commencement Date of the Lease Term is other
than the first day of a calendar month, the Fixed Minimum Rent, Additional Rent
and other charges reserved under this Lease for the portion of such partial
month shall be prorated and payable based on a thirty (30) day month and shall
be paid on the Commencement Date of the Lease Term.
13. PAST DUE RENTS: (a) If Tenant shall fail to pay any rents, Additional
Rents or other charges after the same become due and payable, such unpaid
amounts shall bear interest from the due date thereof to the date of payment at
the greater of (i) fourteen percent (14%) per annum, or (ii) two points above
the prime rate then being charged by Chase Manhattan Bank, N.A. to its most
credit worthy customers determined as of the first day of the calendar year
quarter that any rents become due and payable by Tenant under this Lease
("Default Interest Rate") provided, however, that such Default Interest Rate
shall not exceed the maximum legal rate of interest allowed to be charged to
Tenant under any applicable law of the state where the Shopping Center is
located.
7
<PAGE> 12
(b) In addition thereto, if Tenant shall fail to pay any rents,
Additional Rents or other charges within ten (10) days after the same become
due and payable, then Tenant shall also pay to Landlord a late payment service
charge (covering administrative and overhead expense) equal to four cents
($.04) per each One Dollar ($1.00) owed but not less than Fifty Dollars
($50.00) for each calendar month or part thereof after the due date of such
payment until received by Landlord. The provisions herein for late payment
service charges shall not be construed to extend the date for payment of any
sums required to be paid by Tenant hereunder or to relieve Tenant of its
obligation to pay all such sums when due. Notwithstanding the imposition of
such service charges, Tenant shall be in default under this Lease if any or all
payments required to be made by Tenant are not made when due, and the demand by
Landlord for payment of such late payment service charges shall not be
construed as a cure of such default on the part of the Tenant.
14. PLACE OF PAYMENTS AND ESTIMATES: (a) All payments required to be paid by
Tenant to Landlord shall be made payable to the order of the Landlord and shall
be delivered to Landlord's Payment Address set forth in paragraph 1(Q) of this
Lease.
(b) Landlord shall estimate the amount of monthly Additional Rent
required to be paid by Tenant and shall bill Tenant for the amount of such rent
either prior to or as promptly as possible after the term Commencement Date and
thereafter from time to time during the Lease Term. Tenant shall continue to
pay such estimated monthly charges until billed for the new estimated monthly
charges, at which time the new estimated monthly charge shall be paid. For
convenience, Tenant may include the total of the estimated monthly charges with
its payment of the Fixed Minimum Rent. Landlord shall annually furnish Tenant
with a reconciliation of all estimated charges not previously reconciled based
on the applicable computation, and shall credit Tenant's next succeeding
estimated monthly charges for any overpayment (or shall refund such amount to
Tenant if the Lease has terminated and Tenant is not then indebted to Landlord
under the Lease) or shall bill Tenant for any underpayment.
The Additional Rent to be estimated pursuant to this subparagraph (b)
shall consist of the Tax Charge, Common Area Charge, Scavenger Charge,
Sprinkler Charge, Water, Storm and Sewer Charge, Utilities Charge, Media Fund,
Promotion Fund, and any other fixed or adjustable charge required to be paid by
Tenant under this Lease excluding the Fixed Minimum Rent and Percentage Rent.
15.
8
<PAGE> 13
16. FINANCING: [INTENTIONALLY DELETED]
17. CANCELLATION: [INTENTIONALLY DELETED]
18. CONDITION OF PREMISES: Tenant agrees to accept the Premises, Shopping
Center and any Systems and Equipment serving the Premises "as is" without any
agreements, representations, understandings or obligations on the part of
Landlord to perform any alterations, repairs or improvements except as may be
expressly provided in Exhibit ""B'' hereto or elsewhere in this Lease
("Landlord's Work"). Tenant shall on or before the Commencement Date: (i)
completely remodel the Premises and install a new storefront, storefront sign
and trade fixtures in and for the same in accordance with the other provisions
of this Lease, including Exhibit "B" and the Rules ("Tenant's Initial Work"),
and (ii) open the Premises for business to the public, fully stocked and staffed
and in compliance with all provisions of this Lease, including without
limitation, Paragraph 22. Landlord may require that Tenant accept possession of
the Premises and proceed with Tenant's Initial Work and/or the preparation and
submission of plans therefor prior to the Commencement Date upon ten (10) days
advance notice. During any period that Tenant shall be permitted or required to
enter the Premises prior to the Commencement Date (to plan or perform Tenant's
Initial Work), Tenant shall comply with all terms and provisions of this Lease,
except those provisions requiring the payment of Rent.
19. OWNERSHIP OF IMPROVEMENTS: (a) All betterments and improvements in or
upon the Premises, made by either party (except Tenant's personal property,
furniture, signs and trade fixtures) including all affixed lighting fixtures,
heating, ventilating and air conditioning equipment, and all pipes, ducts,
conduits, wiring, paneling, partitions, floor covering, railing, mezzanine
floors, galleries and the like, shall become the property of Landlord and shall
remain upon and be surrendered with the Premises at the expiration or sooner
termination of the Lease Term.
(b) Tenant shall not assign, lien, encumber, chattel mortgage or
create a security interest in, to or upon any improvement or its sign, trade
fixtures or other personal property in or serving the Premises without first
obtaining in each and every instance the prior written consent of Landlord. Any
consent by Landlord to such security interest shall apply only to the specific
transaction thereby authorized and shall not be a waiver of consent to any
subsequent transaction. Any chattel mortgage, security interest or other
encumbrance granted by Tenant in violation of the terms of this provision shall
be null and void and of no force and effect. Any consent by Landlord to such
security interest shall be subject and subordinate to Landlord's security
interest and lien provided under Paragraph 44 hereof and Tenant shall notify
all other secured parties of Landlord's prior interest. In no event shall
Tenant assign, lien, encumber, chattel mortgage or create a security interest
in leasehold improvements which have been incorporated in the Premises
including, but not limited to, affixed lighting fixtures, heating, ventilating,
air conditioning equipment, pipes, ducts, conduits, wiring, paneling,
partitions, floor covering, railing, mezzanine floors, galleries and the like
which become the property of Landlord.
20. TENANT'S INSTALLATIONS: Tenant shall fully equip the Premises with all
trade fixtures and equipment necessary for the proper operation of Tenant's
business. Tenant shall not install any equipment or fixtures on the roof or
exterior to the Premises without the prior written consent of Landlord. Should
Tenant install air conditioning, heating or other equipment on the roof or
otherwise penetrate such roof of the building of which the Premises forms a
part, Tenant agrees to assume primary responsibility for the cost of
maintenance and repair of that portion of the roof (including all areas and
space covered by such equipment or penetration) where such installation is
made; and such installation and the operation, maintenance and repair thereof
shall be made so that the rights of Landlord under any roofing bond or roofing
guaranty then in force shall not be affected or voided thereby and Tenant shall
be solely responsible for all damages to Landlord and/or other tenants
resulting from the installation, operation, maintenance and/or repair of such
equipment or penetration.
9
<PAGE> 14
21. PERMITTED USE: Tenant agrees to and shall use the Premises solely for
the purpose of conducting the Permitted Use as outlined in Section 1(G) of this
Lease and for no other business or purpose. Tenant shall occupy 100% of the
Premises during the Term and shall use not less than 80% thereof as the sales
and display area. Tenant also agrees not to conduct any catalogue, mail or
telephone order sales in or from the Premises, except of merchandise which
Tenant is permitted to sell "over the counter" in the Premises. Tenant agrees
to conduct Tenant's business in the Premises under Tenant's Trade Name, which
Tenant represents that it has the right to use. Tenant acknowledges that the
Permitted Use is not a use granted exclusively to Tenant and that Landlord
reserves the right to lease premises in the Shopping Center to others for the
same or a similar permitted use. Tenant further acknowledges that it has
received no written or oral inducements from Landlord or any of Landlord's
representatives concerning this Lease (other than as specifically set forth
herein) or that Tenant will be granted any such exclusive rights.
22. OPERATION OF BUSINESS: Tenant agrees: (a) subject to Paragraph 51
hereof, to continuously and uninterruptedly occupy and use the entire Premises
for the Permitted Use during the Lease Term and to conduct Tenant's business in
a reputable manner;
(b) to remain open for business during the "Required Hours." Required
Hours herein shall mean those hours established from time to time by Landlord
for the Shopping Center in general, in Landlord's sole discretion; provided,
Landlord shall not require that Tenant open for business before 9:00 a.m. or
remain open after 10:00 p.m., except; (i) for holiday, seasonal or other
special sales or promotions, or (ii) when at least one Department Store or a
majority of the tenants at the Shopping Center will be open. If Tenant desires
to operate the Premises during additional hours beyond those required by
Landlord hereunder, Tenant shall first obtain Landlord's written approval
(which may be withheld in Landlord's sole discretion), and Tenant shall pay all
additional costs and expenses and Landlord's reasonable charges in connection
therewith, including, without limitation, any additional utilities, security
services, cleaning and trash removal. Without limiting the generality of the
foregoing, Landlord reserves the right to close the Shopping Center on holidays
or certain hours of holidays, including without limitation, New Year's Day,
Easter, Thanksgiving and Christmas;
(c) to adequately staff its store with sufficient employees to handle
the maximum business and carry sufficient stock of seasonal merchandise of a
character and quality to accomplish the same;
(d) to maintain displays of merchandise in any display windows;
(e) to keep any display windows and signs well lighted during such
hours and days that the enclosed mall is lighted by Landlord, but in no event
beyond 11:00 p.m.;
(f) to keep and maintain the Premises, Tenant's personal property and
signs therein or thereon and all exterior and interior portions of windows,
doors and glass in a neat, clean, sanitary and safe condition;
(g) to warehouse, store or stock in the Premises only such goods,
wares and merchandise as Tenant is permitted to offer for sale;
(h) to apply for, secure, maintain and comply with all licenses or
permits which may be required for the conduct by Tenant of the business
permitted to be conducted in the Premises and to pay when due all license and
permit fees and charges of a similar nature in connection therewith;
(i) to use for office or other non-selling purposes only such space
as is reasonably required for the conduct of Tenant's business in the Premises;
(j) not to conduct any auction, distress, fire or bankruptcy sale or
any going out of business sale, but nothing contained herein shall restrict
Tenant from determining the selling price of its own merchandise or preclude
periodic seasonal, promotional or clearance sales; and
(k) not to operate its business under this Lease so as to breach or
violate any restrictive covenant to which the Shopping Center is subject or
contained in any other lease entered into by Tenant, or violate any restrictive
agreement contained in any contract, judgment or decree of a court of competent
jurisdiction
10
<PAGE> 15
entered into or imposed upon Tenant, and Tenant represents that its execution
of this Lease and operation of the Permitted Use will not violate any such
restrictive covenants or agreements.
23. LAWS, WASTE OR NUISANCE: (a) Tenant agrees, at Tenant's cost and
expense; (i) to comply with all present and future governmental laws,
ordinances, orders and regulations concerning Tenant's use or occupancy or the
general use or occupancy of the Premises (including Tenant's alterations and
additions thereto) including the Americans with Disabilities Act of 1990 and
any rules or regulations now or hereafter promulgated thereunder; and (ii) to
comply with all present and future rules, regulations and recommendations of
the Board of Fire Underwriters, Landlord's insurance carriers and organizations
establishing insurance rates concerning Tenant's use of the Premises (including
Tenant's alterations and additions thereto); and (iii) to comply with all
restrictive covenants of record which affect or are applicable to the Shopping
Center and/or the Premises and/or the common areas, provided, however, the same
do not prohibit the Permitted Use of the Premises.
(b) Tenant further agrees not to suffer, permit or commit any waste,
nor to allow, suffer or permit any odors, vapors, steam, water, vibrations,
noises or undesirable effects to emanate from the Premises or any equipment or
installation therein into other portions of the building of which the Premises
forms a part or into the mall, nor to allow, suffer or permit any material or
device defined as hazardous or otherwise controlled under any governmental law,
rule or regulation to be installed, used or kept in the Premises, or otherwise
to allow, suffer or permit the Premises or any use thereof to constitute a
nuisance or to unreasonably interfere with the safety, comfort or enjoyment of
the Shopping Center by Landlord, any other occupants of the Shopping Center or
their customers, invitees or any others lawfully in or upon the Shopping
Center. Upon written notice by Landlord to Tenant that any of the aforesaid is
occurring, Tenant agrees forthwith to cease and discontinue the same and within
ten (10) days thereafter to make such changes in the Premises and/or install or
remove such apparatus or equipment therein or therefrom as may be required by
Landlord for the purpose of obviating any such condition; and if any such
condition is not remedied, then Landlord may, at its option, enter upon the
Premises and cure such condition in any manner Landlord shall deem necessary
and add the cost and expense incurred by Landlord together with all damages,
including reasonable attorneys' fees, sustained by Landlord to the next
installment of the Fixed Minimum Rent due and Tenant agrees to pay such amount.
Tenant hereby further agrees to indemnify and save Landlord free and harmless
from all fines, claims, demands, actions, proceedings, judgments and damages
(including court costs and reasonable attorneys' fees) of any kind or nature by
anyone whomsoever arising or growing out of any breach or non-performance by
Tenant of the covenants contained in this Paragraph.
24. HAZARDOUS MATERIALS: (a) Tenant shall not incorporate into the Shopping
Center nor transport, use, store, maintain, generate, manufacture, handle,
dispose, release or discharge any "Hazardous Material" (as defined below) upon
or about the Shopping Center, or permit Tenant's employees, agents,
contractors, invitees and other occupants of the Premises to engage in such
activities upon or about the Shopping Center. However, the foregoing provisions
shall not prohibit the transportation to and from, and use, storage,
maintenance, and handling within the Premises of substances customarily used in
the business or activity expressly permitted to be undertaken in the Premises
pursuant to Paragraph 1(G) of this Lease, provided (i) such substances shall be
used and maintained only in such quantities as are reasonably necessary for
such permitted use of the Premises and the ordinary course of Tenant's business
therein, strictly in accordance with applicable Law, highest prevailing
standards, and the manufacturer's instructions therefor, (ii) such substances
shall not be disposed of, released or discharged in the Shopping Center, and
shall be transported to and from the Premises in compliance with all applicable
Laws, and as Landlord shall reasonably require, (iii) if any applicable Law or
Landlord's trash removal contractor requires that any such substances shall be
disposed of separately from ordinary trash, Tenant shall make arrangement; at
Tenant's expense for such disposal directly with a qualified and licensed
disposal company at a lawful disposal site (subject to scheduling and approval
by Landlord), (iv) any remaining such substances shall be completely, properly
and lawfully removed from the Shopping Center upon expiration or earlier
termination of this Lease, and (v) for purposes of removal and disposal of any
such substances, Tenant shall be named as the owner and generator, obtain a
waste generator identification number, and execute all permit applications,
manifests, waste characterization documents and any other required forms.
(b) Tenant shall promptly notify Landlord of: (i) any enforcement,
cleanup or other regulatory action taken or threatened by any governmental or
regulatory authority with respect to the presence of any
11
<PAGE> 16
Hazardous Material on the Premises or the migration thereof from or to other
property, (ii) any demands or claims made or threatened by any party relating
to any loss or injury resulting from any Hazardous Material on the Premises,
(iii) any release, discharge or non-routine, improper or unlawful disposal or
transportation of any Hazardous Material on or from the Premises or in
violation of this Paragraph 24, and (iv) any matters where Tenant is required
by Law to give a notice to any governmental or regulatory authority respecting
any Hazardous Material on the Premises. Landlord shall have the right (but not
the obligation) to join and participate, as a party, in any legal proceedings
or actions affecting the Premises initiated in connection with any
environmental, health or safety Law. At such times as Landlord may reasonably
request, Tenant shall provide Landlord with a written list, certified to be
true and complete, identifying any Hazardous Material then used, stored, or
maintained upon the Premises, the use and approximate quantity of each such
material, a copy of any material safety data sheet ("MSDS") issued by the
manufacturer therefor, and such other information as Landlord may reasonably
require or as may be required by law. The term "Hazardous Material" for
purposes hereof shall mean any chemical, substance, material or waste or
component thereof which is now or hereafter listed, defined or regulated as a
hazardous or toxic chemical, substance, material or waste or component thereof
by any federal, state or local governing or regulatory body having
jurisdiction, or which would trigger any employee or community "right-to-know"
requirements adopted by any such body, or for which any such body has adopted
any requirements for the preparation or distribution of an MSDS, including but
not limited to OSHA and EPA as defined in paragraph (d) hereinbelow.
(c) If any Hazardous Material is incorporated into the Shopping
Center or released, discharged or disposed of by Tenant or any other occupant
of the Premises, or their employees, agents or contractors, on or about the
Shopping Center in violation of the foregoing provisions, Tenant shall
immediately, properly and in compliance with applicable laws clean up and
remove the property (whether or not owned by Landlord), at Tenant's expense
(without limiting Landlord's other remedies therefor). Such clean up and
removal work shall be subject to Landlord's prior written approval (except in
emergencies), and shall include, without limitation, any testing,
investigation, and the preparation and implementation of any remedial action
plan required by any court or governmental body having jurisdiction or
reasonably required by Landlord. If Landlord or any Lender or governmental body
arranges for any tests or studies showing that this Paragraph 24 has been
violated by Tenant, Tenant shall pay the costs of such tests. If any Hazardous
Material is released, discharged or disposed of on or about the Shopping Center
and such release, discharge or disposal is not caused by Tenant or other
occupants of the Premises, or their employees, agents or contractors and is in
excess of levels set by EPA or OSHA for such materials and affect Tenant's use
of occupancy of the Premises, such release, discharge or disposal shall be
deemed casualty damage under Paragraph 41 of this Lease to the extent that the
Premises is affected thereby; in such case, Landlord and Tenant shall have the
obligations and rights respecting such casualty damage provided under this
Paragraph 41 of this Lease. Tenant's obligations under this Paragraph 24 shall
survive the expiration or earlier termination of this Lease.
(d) Tenant acknowledges that Landlord has made available at
Landlord's offices for Tenant's inspection, review and copying an asbestos
survey of the Premises ("Asbestos Survey"). The purpose of said Asbestos Survey
is to indicate the presence or absence of asbestos-containing material(s) at
the Premises. In addition, Tenant acknowledges that Landlord has received
copies of asbestos surveys for other premises at the Center which indicate the
presence of asbestos-containing materials at such other premises. Copies of all
such surveys are available at Landlord's offices at the Center for review and
copying by Tenant upon request. However, the Asbestos Survey and other asbestos
surveys in Landlord's possession do indicate that the asbestos is in a
condition or state which violates lawful levels or requires removal or controls
beyond those already implemented by Landlord [based on the present levels or
content of said material as said levels or content are presently set by the
U.S. Environmental Protection Agency ("EPA") or the U.S. Occupational Safety
and Health Administration ("OSHA"). To insure that the asbestos containing
materials (as identified by the Asbestos Survey or any other asbestos surveys
in Landlord's possession) are not improperly disturbed or handled by untrained
persons, all maintenance, repairs or renovations by Tenant to any area shown on
the Asbestos Survey to contain asbestos, must be coordinated with and approved
in advance by Landlord. Tenant shall insure and agrees that all contractors
(and their subcontractors) engaged by Tenant agree in writing to be bound by
and will perform all work in accordance with the Operations and Maintenance
Program ("O&M Program") as from time to time in force at the Center to
periodically monitor
12
<PAGE> 17
and deal with the asbestos at the Center. Tenant agrees to cooperate with
Landlord in all reasonable procedures or actions necessary for the conduct of
any O&M Program.
Landlord makes no representations or warranties whatsoever to Tenant
regarding (i) hazardous materials at the Center or in the Premises or (ii) the
Asbestos Survey, the same being furnished as a courtesy, and Landlord has
informed Tenant that the Asbestos Survey is not a comprehensive survey of the
Premises or the Center for all asbestos or for all hazardous or toxic
materials. Tenant has the right and should make such studies and
investigations, conduct such test and surveys and engage such specialists as
Tenant deems appropriate to fairly evaluate the Premises or the Center and any
risks from the presence of asbestos-containing material at the Center or
hazardous or toxic materials. In connection with any inspections or tests to be
conducted by Tenant at the Premises or at the Center, Tenant shall first notify
Landlord of each proposed inspection or test and the scope, impact and intent
thereof and obtain Landlord's written consent to perform same, which consent
shall not be unreasonably withheld. Tenant shall furnish Landlord with a
complete and legible copy of any study, report, test, survey or investigation
performed by or on behalf of Tenant involving any portion of the Premises or
the Center. Tenant shall restore the Premises and/or the Center to the
condition existing immediately prior to any such test and/or inspection, and
Tenant hereby agrees to indemnify and hold Landlord harmless from any loss,
damage, liability or claim resulting from or arising from Tenant's samples,
investigations or activities (including, but not limited to, those of Tenant's
agents, employees and/or contractors). If Tenant ever has knowledge of the
presence in the Premises or the Center of toxic or hazardous materials or
asbestos-containing material, Tenant shall notify Landlord in writing promptly
after obtaining such knowledge.
25. COMPETITION: In recognition of the fact that this Lease provides for a
Percentage Rent based on Gross Sales made by Tenant in or from the Premises,
Tenant agrees that if Tenant, or any of its principal shareholders, or any
affiliate or subsidiary of Tenant, directly or indirectly shall operate, manage
or have any interest in any other competing store or business for the sale of
merchandise similar to that permitted under Paragraph 1(G) of this Lease
including a department or concession in another store, the distance specified
in Paragraph 1(o) of this Lease, as shown on Exhibit "A," then Tenant shall
include fifty percent (50%) of the Gross Sales of such other store in the Gross
Sales transacted in the Premises for the purpose of computing Percentage Rent
due hereunder, as though said sales had actually been made from the Premises.
However, any such store owned or leased by Tenant and existing as of the Date of
Lease shall be excluded from the provisions of this Paragraph provided there is
no increase in the size of such other store.
26. CONCESSIONAIRES AND LICENSEES: Tenant shall not grant any concessions or
licenses except upon Landlord's written consent and except for the operation in
the Premises of one or more departments of the business permitted to be
conducted by Tenant under this Lease, provided, however, that such concessions
or licenses shall be subject to the following conditions:
(a) each such concession or license shall be subject to all of the
terms and provisions of this Lease including provisions concerning statements,
reports and audits;
(b) the Gross Sales (as herein defined) from the operation of each
such concession or license shall be deemed to be part of the Gross Sales of
Tenant for the purpose of determining the Percentage Rent payable to Landlord;
(c) the business to be operated by such concessionaires or licensees
shall occupy, in total, no more than 25% of the sales area of the Premises; and
(d) in no event shall Tenant suffer, permit, install or operate in
the Premises any coin-operated vending machines or similar or other devices for
the sale of goods, wares, merchandise, food and beverages, including but not
limited to, machines for the sale of candy, gum, cigarettes or other edibles,
except in areas restricted to the sole and exclusive use of Tenant's employees.
27. SIGNS: Subject to Exhibit "B," Tenant shall, at its cost and expense,
install a suitable identification sign of such size, design and character as
Landlord shall first approve in writing at a place or places designated by
Landlord. Tenant shall maintain any such sign in good condition and repair.
Other than such permitted signs, Tenant shall not place or install or suffer to
be placed or installed or maintain any sign upon
13
<PAGE> 18
or outside the Premises or in the Shopping Center. Tenant shall not place or
install or suffer to be placed or installed on the exterior of the Premises any
awning, canopy, banner, flag, pennant, aerial, antenna or the like; nor shall
Tenant place or maintain on the glass of any window or door of the Premises any
sign, decoration, lettering, advertising matter, shade, blind or other thing of
any kind. Landlord shall have the right, without liability and with or without
notice to Tenant, to remove any item installed by Tenant in violation of this
Paragraph 27 and to charge Tenant for the cost of such removal and/or any
repairs necessitated thereby.
28. ASSIGNMENT AND SUBLETTING: (a) Tenant may sublet the Premises in part or
in its entirety or assign this entire Lease only with the prior written
permission and consent of Landlord, subject to the conditions hereafter
mentioned. Any such subletting or assignment shall be subject to and
conditioned upon the following: (i) at the time of any such proposed subletting
or assignment, Tenant shall not be in default under any of the terms,
provisions or conditions of this Lease; (ii) the sublessee or assignee shall
only occupy the Premises and conduct business in accordance with the Permitted
Use; and (iii) that if the Fixed Minimum Rent, or any additional rent or
charges required to be paid by any such sublessee or assignee exceeds the
rentals and/or charges reserved hereunder, then Tenant shall pay to Landlord
monthly the entire amount of such excess, which shall be deemed Additional
Rent, and in no event shall the annual Fixed Minimum Rent required to be paid
by the assignee or sublessee be less than the average sum (or in the case of a
partial subletting, the proportionate share) of the Fixed Minimum Rent plus
Percentage Rent paid by Tenant from the term Commencement Date to the end of
the Lease Year immediately preceding such assignment or subletting or during
the immediately preceding two (2) Lease Years, whichever period is shorter; and
(iv) Tenant and its assignee or sublessee shall execute, acknowledge and
deliver to Landlord a fully executed counterpart of a written assignment of
lease or sublease as the case may be, duly consented to by Tenant's Guarantor,
if any, by the terms of which: (x) in case of an assignment, Tenant assigns to
such assignee Tenant's entire interest in this Lease, together with all prepaid
rents hereunder, and the assignee accepts said assignment and assumes and
agrees to perform, directly for the benefit of Landlord, all of the terms,
covenants and conditions of this Lease on the Tenant's part to be performed
hereunder; or (y) in case of subletting, the sublease is in all respects
subject and subordinate to all of the terms, covenants and conditions of this
Lease and that the sublessee thereunder will agree to be bound by and to
perform all of the terms, covenants and conditions of this Lease on the
Tenant's part to be performed hereunder, except the payment of rent,
additional rents and other charges reserved hereunder, which Tenant shall
continue to pay to Landlord (provided that Landlord may elect, at Landlord's
option, to collect such sublease rents directly from such subtenant); and (v)
notwithstanding any such assignment or subletting or the consent of Landlord
under the terms of this Paragraph 28, both Tenant and its Guarantor, if any,
will not be released or discharged from any liability whatsoever under this
Lease and will continue liable thereon with the same force and effect as though
no assignment or sublease has been made; and (vi) Tenant shall pay to Landlord
the sum of One Thousand Dollars ($1,000.00) to cover the Landlord's
administrative costs, overhead and counsel fees in connection with such
assignment or subletting, and review of same.
(b) A request for Landlord's consent to a subletting or an assignment
shall be deemed an offer by Tenant for Landlord to either sublease the Premises
for the remainder of the Lease term upon the terms and conditions contained
herein or to take an assignment of this Lease, which offer shall remain
irrevocable for a one (1) month period commencing on the date Landlord actually
receives a written request for such consent
(c) Other than the foregoing permitted assignment or subletting,
Tenant shall not voluntarily, involuntarily or by operation of law, assign,
transfer, mortgage or otherwise encumber this Lease or any interest of Tenant
therein, in whole or in part, nor sublet the whole or any part of the Premises
or permit the Premises or any part thereof to be used or occupied by others.
Any attempt to encumber, assign the Lease or sublet the Premises not in
compliance with the provisions of this Paragraph shall be void and of no force
and effect
(d) If Tenant or its Guarantor, if any, is a corporation or
partnership, and if at any time during the Lease Term the persons who, on the
Date of Lease, own a majority of such corporation's voting shares or the
general partner's interest in such partnership, as the case may be, cease to
own a majority of such shares (whether such sale occurs at one time or at
intervals so that, in total, such a transfer shall have occurred), or general
partner's interest, as the case may be (except as the result of transfer by
gift or inheritance) or if
14
<PAGE> 19
Tenant's Guarantor, if any, is dissolved, Tenant shall so notify Landlord and
Landlord shall have the right, at its option, to terminate this Lease by notice
to Tenant given within thirty (30) days thereafter or within ninety (90) days
after Landlord shall have received other notice thereof, except that this
subparagraph (d) shall not be applicable to any corporation, all the
outstanding voting stock of which is listed on a national securities exchange
(as defined in the Securities Exchange Act of 1934, as amended). For the
purpose of this subparagraph (d), stock ownership shall be determined in
accordance with the principles set forth in Section 544 of the Internal Revenue
Code of 1954, as the same existed on August 16, 1954, and the term "voting
stock" shall refer to shares of stock regularly entitled to vote for the
election of directors of the corporation.
29. REPAIRS: (a) Landlord shall not be required to make any repairs or
improvements of any kind upon or to the Premises, except as stated in this
Paragraph 29. Landlord shall maintain in good condition throughout the Lease
term and make all necessary repairs to the Shopping Center foundations, roofs,
downspouts, gutters and structural repairs to the exterior of the building
(excluding the interior of all walls within the Premises and the exterior and
interior of all windows, glass, showcases, doors, door frames and bucks) and
the sewer and water lines servicing the Premises that are located outside of
the Premises and the sprinkler system, unless the necessity for any of such
repairs shall have been occasioned by any action, omission to act or negligence
of Tenant, its assignees, subtenants, concessionaires or licensees, or their
respective employees, agents, or contractors, in which event Tenant agrees to
make such repairs, at Tenant's cost and expense. Landlord shall not be required
to commence any such repair until after written notice from Tenant that the
same is necessary, which notice, except in case of an emergency, shall allow
Landlord a reasonable time in which to commence and complete such repair.
Landlord shall use reasonable efforts to do said repair work with minimum
inconvenience, annoyance, disturbance and loss of business to Tenant, as may be
reasonably possible under the circumstances consistent with accepted
construction practice in the vicinity, and so that such work shall be
expeditiously completed, but in no event shall Landlord be required to incur
any additional expenses for work to be done during hours or days other than
regular business hours and days.
(b) Subject to the provisions of subparagraph (a) of this Paragraph
29, Tenant agrees, at Tenant's cost and expense, to keep and maintain the
Premises and each and every part thereof for Tenant's use and general use, in
good repair, order and condition and in compliance with all Laws and to make
all repairs and replacements thereto, and to the fixtures and equipment therein
and the appurtenances thereto, including without limiting the generality of the
foregoing, the Tenant's Work designated in Exhibit "B," the exterior and
interior windows and window frames, doors and door frames, entrances, store
fronts, including store front metal work, signs, showcases, floor and wall
coverings, interior walls, partitions, insulation, and the lighting, electrical,
heating, air conditioning, plumbing, and sewerage systems, lines, pipes,
equipment, fixtures and facilities within or serving the Premises, or plenum
above the Premises, and the escalators and elevators therein, if any, and the
floor slab and that portion of any pipes, lines, ducts, wires or conduits
installed by Landlord or Tenant contained under, above or within, and
exclusively serving the Premises. Tenant shall keep and maintain the Premises in
a first-class and attractive condition throughout the Lease Term. Tenant shall
replace all damaged or broken glass with glass of equal quality with that broken
or damaged, except in the case of damage or destruction by fire or other
insurable casualty or by eminent domain, the obligations of Landlord and Tenant
shall be controlled as hereinafter provided.
(c) Following the initial construction of the Premises in compliance
with this Lease, Tenant may, with prior notice to Landlord, at Tenant's cost
and expense, paint or paper interior walls or change floor coverings in the
interior of the Premises only, provided that (i) the structural integrity of
the building shall not be affected or diminished; (ii) the value of the
building is not diminished; (iii) the exterior appearance (including store
front) of the Premises is not altered or changed; (iv) the cost of any such
alteration, addition or decoration does not exceed Five Thousand Dollars
($5,000.00); and (v) the sprinkler system design is not affected, modified,
altered or changed. In all other instances, Tenant shall secure the prior
approval and consent of Landlord for any alteration, construction or
improvement.
(d) In the event (i) Landlord undertakes a substantial remodeling of
the common areas and/or the exterior of the Shopping Center, including, without
limitation, an expansion of the Shopping Center in an amount equal to or in
excess of ten percent (10%) of the then existing GLA of the enclosed mail, or
(ii) this Lease provides for a lease term in excess of five (5) years, then, in
the event mentioned in (i) hereof, Tenant
15
<PAGE> 20
shall, at Tenant's cost and expense, remodel the exterior and interior of the
Premises and such remodeling work shall be completed within sixty (60) days
after Landlord's completion of such remodeling and/or expansion of the Shopping
Center, and, in the event mentioned in (ii) hereof, Tenant shall remodel the
storefront and install new floor and wall covering in the Premises within one
hundred eighty (180) days after the fifth (5th) full Lease Year. Nothing
contained in this Paragraph shall constitute a representation or warranty by
Landlord that it will remodel and/or expand the Shopping Center.
(e) Tenant shall submit to Landlord plans and specifications for any
such remodeling work, together with a statement of the estimated costs of such
work and the name of the contractor Tenant proposes to engage at least sixty
(60) days prior to the date Tenant is to commence any such remodeling work.
After receiving Landlord's written approval and prior to the commencement of
such work, Tenant agrees to deliver to Landlord a policy or certificate of
workmen's compensation insurance in statutory limits from Tenant's contractor
as well as evidence of maintenance by Tenant of the insurance coverages to be
maintained by Tenant hereunder. Such work may then be commenced and shall be
diligently prosecuted to completion in accordance with such approved plans and
specifications and all applicable laws, ordinances, rules and requirements of
Landlord's insurance carriers, subject, however, to the terms of Tenant's
indemnity set forth under Paragraph 36 and Tenant's obligation to insure such
assumed liability under Tenant's Comprehensive General Liability policy.
(f) "Repairs," as used in this Paragraph, shall mean all repairs,
replacements, alterations, additions, improvements and betterments. "Maintain"
or "maintenance," as used in this Paragraph 29, shall include appropriate
heating, cooling, inspection, drainage, insulation and cleaning or cleanout of
all portions of the Premises, including all lines and pipes, as appropriate.
(g) Tenant shall enter into a service repair agreement which provides
for the regular maintenance, service, repair and replacement (for example,
without limitation, regular filter changes, fan belt replacement, etc.) to the
heating, ventilating and air conditioning equipment serving the Premises, and
shall provide Landlord with a copy of such service repair agreement within
thirty (30) days after request together with reasonable evidence of the
performance of such repairs.
30. TENANT'S FAILURE TO REPAIR: If Tenant shall fail, refuse or neglect to
maintain or make repairs in accordance with the terms and provisions of this
Lease or if Landlord is required to make any repairs by reason of any act,
omission to act or negligence of Tenant, or its assignees, subtenants,
concessionaires or licensees, or their respective employees, agents or
contractors, Landlord shall have the right, at its option, after Landlord shall
have given to Tenant a ten (10) day notice (except in case of an emergency), to
make such repairs on behalf of and for the account of Tenant and to enter upon
the Premises for such purposes, and add the cost and expense thereof, to the
next installment of the Fixed Minimum Rent due and Tenant agrees to pay such
amount, but nothing contained in this Paragraph shall be deemed to impose such
duty upon Landlord or affect in any manner the obligations of Tenant hereunder.
Any cost or expense incurred by Landlord and chargeable to Tenant as herein
provided shall be reduced to the extent that Landlord is reimbursed therefor
under any policy of insurance.
31. COVENANT AGAINST LIENS: Tenant shall do all things necessary to prevent
the filing of any mechanics' or other liens against the Premises or any other
portion of the Shopping Center or the interest of the Landlord or any ground or
underlying lessors or the interest of any mortgagees or holders of any deed of
trust covering the Shopping Center by reason of any work, labor, services or
materials performed or supplied or claimed to have been performed or supplied
to Tenant, or anyone holding the Premises, or any part thereof, through or
under Tenant. If any such lien shall at any time be filed, Tenant shall either
cause the same to be vacated and cancelled of record within thirty (30) days
after the date of the filing or, if Tenant in good faith determines that such
lien should be contested, Tenant shall furnish such security, by surety bond or
as is otherwise prescribed by applicable law, to release the same as a lien
against the real property and to prevent any foreclosure of such lien during
the pendency of such contest and upon any final non-appealable judgment of any
such contest to promptly pay any adjudicated amount due. If Tenant shall fail
to vacate or release such lien in the manner and within the time period
allowed, then, in addition to any other right or remedy of Landlord resulting
from Tenant's default, Landlord may, but shall not be obligated to, vacate or
release the same either by paying the amount claimed to be due or by procuring
the release of such lien by giving security or in such other manner as may be
prescribed by law. Tenant shall repay to
16
<PAGE> 21
Landlord, on demand, all sums disbursed or deposited by Landlord pursuant to
this Paragraph, including Landlord's costs, expenses and reasonable attorney's
fees incurred in connection therewith. Nothing contained herein shall imply the
consent or agreement on the part of Landlord or any ground or underlying
lessors or mortgagees or holders of deeds of trust of the Shopping Center to
subject their respective estates or interest to liability under a mechanics' or
other lien law, whether or not the performance or the furnishing of such work,
labor, services or materials to Tenant or anyone holding the Premises, or any
part thereof, through or under Tenant, shall have been consented to by Landlord
and/or any of such parties.
32. UTILITIES: (a) Tenant shall install and use the utilities (including
water, gas, electricity, sewers and telephone supplied to or serving the
Premises) in accordance with the criteria set forth in Exhibit "B," the rules
and regulations of Landlord and the public utility company or the governmental
agency supplying the same. Landlord shall not be liable in damages or otherwise
for any interruption in the supply of any utility to the Premises nor shall any
such interruption constitute any ground for an abatement of any of the rents
reserved hereunder. Tenant shall not at any time overburden or exceed the
capacity of the mains, feeders, ducts, conduits or other facilities by which
such utilities are supplied to, distributed in or serve the Premises. If Tenant
desires to install any equipment which requires additional utility facilities or
utility facilities of a greater capacity than the facilities to be provided by
Landlord under Exhibit "B," such installation shall be at Tenant's expense and
subject to Landlord's prior written approval of Tenant's plans and
specifications therefor. If approved by Landlord, Tenant agrees to pay Landlord,
on demand, the cost for providing such additional utility facilities or utility
facilities of greater capacity.
(b) Landlord shall not be responsible for providing any meters or
other devices for the measurement of utilities supplied to the Premises. Tenant
shall make application for and arrange for the installation of all such meters
or other devices and Tenant shall be solely responsible for and promptly pay,
when due and payable, all charges for water, sewer, electricity, gas, telephone
and any other utility used or consumed in the Premises.
(c) (i) Should Landlord elect or be requited to supply any utility
services used or consumed in the Premises, Tenant agrees to reimburse Landlord
for the same at a cost not to exceed that which the utility company would have
charged Tenant for furnishing such utilities and based on a distribution or
other use method for computing the amount of utility usage. In the event of any
dispute, Tenant shall pay the bill for all such utilities furnished for the
Premises in accordance with Landlord's billing, and such payment shall not
prejudice Tenant's position. If the dispute is determined in Tenant's favor, by
agreement or otherwise, Landlord shall refund the overpayment to Tenant. Any
bill or statement shall be binding and conclusive on Tenant if Tenant fails to
object thereto in writing (stating the reasons therefor) within thirty (30)
days after the date thereof. If Landlord is furnishing Tenant any utility or
utilities hereunder, Landlord may, at any time, at Landlord's option and on at
least thirty (30) days' prior notice to Tenant, discontinue furnishing any such
utility to the Premises; and in such case, Tenant shall contract directly with
the public or private service company supplying such utility service for the
purchase by Tenant of such utility, and (ii) throughout the Lease Term Landlord
shall keep in good order and repair and shall maintain the telephone raceway
and interface wiring system and shall make any necessary repairs to or
replacements of such telephone raceway and/or interface wiring system (except
that Landlord's obligation shall not include repair or replacement of service
extensions, wiring or other telephone systems exclusively servicing the
Premises and that Tenant shall reimburse Landlord for any and all repairs
thereto necessitated by any acts, omissions to act or negligence of Tenant or
Tenant's agents, employees and contractors).
(d) (i) Throughout the Lease Term Landlord shall keep in good order
and repair and shall maintain the sprinkler system in the Premises, including
checking, testing and servicing thereof, and shall make any necessary repairs
to or replacements of such sprinkler system (except that Tenant, at its expense,
shall make any or all repairs and replacements thereto necessitated by any
acts, omissions to act or negligence of Tenant or Tenant's agents, employees
and contractors and any expansions or improvements desired by Tenant to such
portion of the sprinkler system servicing the Premises). In consideration
thereof, Tenant shall pay to Landlord, for each Lease Year or partial Lease
Year during the Lease Term hereof, a Sprinkler Charge as set forth in Section
1M of this Lease, which shall be payable in twelve (12) equal monthly
installments, in advance, on the first day of each month during the Lease Term
and any additional charge billed by Landlord for repairs or replacements made
necessary by reason of the acts, omissions to act or negligence of Tenant or
Tenant's agents, employees or contractors. All modifications to such sprinkler
system that Tenant may
17
<PAGE> 22
desire shall be performed as provided in Exhibit "B" and (ii) should the
utility company furnishing water to the Shopping Center levy, assess or
impose upon Landlord a sprinkler system backup charge, then Tenant shall pay
to Landlord its proportionate share thereof, which shall be in an amount equal
to the product obtained by multiplying said charge by a fraction, the numerator
of which shall be the GLA of the Premises and the denominator of which shall
be the GLA in the Shopping Center served by such sprinkler system determined as
of the date such charge is billed to Tenant; and shall be paid by Tenant
within ten (10) days after billing by Landlord.
(e) (i) Tenant shall pay to Landlord for each Lease Year or partial
Lease Year during the Lease Term, the Water Charge for normal usage of cold
water for drinking and sanitary purposes. Tenant's Water Charge shall be paid
in twelve (12) equal monthly installments, in advance, on the first day of each
month during the Lease Term, (ii) Tenant agrees that the Water Charge shall be
adjusted from time to time by a percentage factor equal to the percentage of
increase or decrease in the amount of water used in the Premises and/or of the
water rates existing as of the Commencement Date of the Lease Term, and (iii)
the Water Charge shall also include all sewer charges if such sewer charges are
billed to Landlord by the utility company as a combined water and sewer charge.
(f) Tenant shall pay to Landlord a charge (the "Trash Charge") in the
amount set forth in Paragraph 1(O) of the Lease, on the first day of each month
in advance, for the furnishing of trash and garbage removal from the Premises
by Landlord.
33. TAXES: (a) Tenant shall, in all instances, pay its proportionate
share of all real estate taxes ("Taxes") which may be levied or assessed by the
lawful taxing authorities against the land, buildings and all other improvements
and betterments in the Shopping Center. For the purpose of this Paragraph 33
only, the term "Shopping Center" shall include any adjacent property leased by
Landlord to a Department Store if Landlord is the owner of the Department Store
building. The term "Taxes" shall mean and include all real estate taxes,
assessments, water and sewer rents (except such water and sewer charges which
are measured by the consumption by the actual user of the item or service for
which the charge is made) and other governmental levies and charges of every
kind and nature whatsoever, general and special, extraordinary and ordinary,
foreseen and unforeseen, and each and every installment thereof, which shall or
may during the Lease Term be levied, assessed, imposed, become due and payable,
or liens upon, or arising in connection with the use, increased valuation from
sale or otherwise, occupancy or possession of, or grow due and payable out of,
or for, the Shopping Center or any part thereof or any land, buildings or other
improvements therein (as initially constructed or as the same may at any time
thereafter be enlarged or reduced), including interest on installment payments,
and all costs, expenses and fees (including reasonable attorney's and
appraiser's fees) incurred or expended by Landlord in reviewing tax charges or
contesting such Taxes, assessments and/or negotiating with the public
authorities as to the same; provided, however, that if at any time during the
Lease Term the methods of taxation prevailing at the Commencement Date of the
Lease Term shall be altered so that in addition to, or in lieu of, or as a
substitute for the whole or any part of the Taxes now levied, assessed or
imposed on real estate as such there shall be levied, assessed or imposed (i) a
tax on the rents received from such real estate, (ii) a license fee measured by
the rents receivable by Landlord for the Shopping Center or any portion thereof,
or (iii) a tax or license imposed upon Landlord which is otherwise measured by
or based in whole or in part upon the Shopping Center or any portion thereof,
then the same shall be included in the computation of Taxes, computed as if the
amount of such tax or fee so payable were that part due if the Shopping Center
were the only property of Landlord subject thereto. Nothing herein contained
shall be construed to include as Taxes any inheritance, estate, succession,
transfer, gift, franchise, corporation, income or profit tax or capital levy
that is or may be imposed upon the Landlord.
(b) Tenant shall pay to Landlord the Tax Charge (as defined
hereafter) based on the amount of Taxes to be assessed or levied as soon as
such amount is reasonably determinable in an amount equal to the product
obtained by multiplying the entire amount of such Taxes by a fraction, the
numerator of which shall be the GLA of the Premises and the denominator of
which shall be the greater of (i) eighty percent (80%) of the GLA in the
Shopping Center, or (ii) the GLA in the Shopping Center occupied by tenants of
the Shopping Center, both determined as of August 1 of each Lease Year
(hereinafter called the "Tax Charge"). GLA in the Shopping Center, for the
purposes of this Section 33(b) only, shall be deemed to mean the actual number
of square feet of floor space in all buildings in the Shopping Center (as
initially constructed or as the same may be enlarged or reduced) which is
exclusively appropriated for use by lessees and tenants of the
18
<PAGE> 23
Shopping Center, excluding the square footage of the building roofs, common
areas of the Shopping Center (as defined in Paragraph 33 hereof), outdoor sales
areas, project manager's offices, mechanical penthouses and machinery utility
and equipment rooms. All measurements shall be made in the manner set forth in
Paragraph 2. A determination by Landlord's architect shall be conclusive as to
the number of square feet of GLA and space in each instance in which a
determination thereof shall be required under the provisions of this Lease. If
any part or parcel of the Shopping Center property and/or the buildings and
improvements erected thereon shall be separately assessed and taxed and
Landlord shall not be required to pay the Taxes levied thereon, then, and in
such event, for the purpose of computing such Taxes the GLA and the Taxes
levied against such part or parcel and/or the buildings and improvements
thereon as may be separately assessed shall not form a part of the foregoing
computation. Tenant's Tax Charge shall be paid to Landlord in equal monthly
installments, in advance (as the same may be subsequently increased or
decreased). If the amount of such monthly payments paid by Tenant exceeds the
amount actually due, the overpayment shall be credited on Tenant's next
succeeding payment or during the last Lease Year, Landlord will refund such
excess to Tenant within thirty (30) days following the expiration of the Lease
Term. If the amount of such monthly payments paid by Tenant shall be less than
the actual amount due, Tenant shall pay to Landlord the difference between the
amount paid by Tenant and the actual amount due, within ten (1O) days after
demand by Landlord. If, on the first day of the month in question the amount of
Taxes payable during the then current tax year shall not have been determined
by the taxing authority, the Tax Charge then payable by Tenant shall be
estimated by Landlord based on the amount of the corresponding Taxes for the
immediately preceding tax year, and any anticipated increase, subject to
adjustment when the amount of such Taxes shall be determined and payment of any
adjustment shall be made by Tenant upon billing by Landlord. If any mortgagee
or ground lessor of Landlord should require tax escrow deposits, in advance of
the due date, then Tenant shall deposit with Landlord, in advance, its share of
such Taxes.
(c) Any fiscal tax year or years commencing during any Lease Year or
partial Lease Year shall be deemed to correspond to such Lease Year or partial
Lease Year, except that with respect to the first and last Lease Years of the
Lease Term, the Taxes for the then current fiscal tax year or years and the Tax
Charge payable by Tenant shall be prorated from the Commencement Date of the
first Lease Year or partial Lease Year and to the end of the last Lease Year,
as to which Tenant's obligation shall survive the expiration of the Lease Term.
(d) Tenant agrees to pay, prior to delinquency, any and all taxes and
assessments levied or assessed during the Lease Term upon or against (i) all
furniture, fixtures, signs, equipment and any other personal property installed
or located within the Premises, (ii) all alterations, additions, betterments
and improvements of whatsoever kind or nature, made by Tenant to the Premises,
including such improvements and betterments mentioned in Exhibit "B" as
Tenant's Work, as the same may be separately levied, taxed and assessed against
or imposed directly upon Tenant by the taxing authorities, and (iii) the
rentals payable hereunder by Tenant to Landlord (other than Landlord's Federal,
State and local income taxes thereon).
(e) Should any governmental authority require that a tax, other than
the Taxes above mentioned, be paid by Tenant, but collected by Landlord, for
and on behalf of the governmental authority, and forwarded by the Landlord to
the governmental authority, the same shall be paid by Tenant to Landlord,
monthly, in advance.
(f) Landlord shall have the right, if permitted by law, to make
installment payments of any assessments levied against the Shopping Center, and
such Taxes shall be computed upon the installments and interest thereon paid by
Landlord in each Lease Year if Landlord elects such installment method.
Landlord shall have the right to contest the validity or amount of any Tax by
appropriate proceedings. In the event Landlord receives any refund of such
Taxes, Landlord shall proportionately credit such refund as shall be allocable
to payments of the Tax Charge actually made by Tenant (less costs, expense and
reasonable attorneys' and appraisers' fees) against the next succeeding
payments of the Tax Charge due from Tenant, or during the last Lease Year,
Landlord will refund Tenant's share of such net refund to Tenant within thirty
(30) days following the expiration of the Lease Term.
(g) Any amount payable by Tenant to Landlord under this Paragraph
shall be paid within ten (10) days after receipt by Tenant from Landlord of a
bill setting forth such amount.
19
<PAGE> 24
(h) In the event of a good faith dispute, Tenant shall pay the Tax
Charge in accordance with the applicable bill or statement, and such payment
shall be without prejudice to Tenant's position. If the dispute shall be
determined in Tenant's favor, by agreement or otherwise, Landlord shall refund
to Tenant the amount of Tenant's overpayment.
(i) Any such bill or statement shall be deemed binding and conclusive
on Tenant if Tenant fails to object thereto in writing (stating the reasons
therefor) within thirty (30) days after the date thereof or if Tenant fails to
comply with the provisions of subparagraph (h) of this Paragraph 33.
(j) With respect to any Taxes for which Tenant is responsible
hereunder, the official tax bill shall be conclusive evidence of the amount of
Taxes assessed or levied, and of the items taxed. A copy of such tax bill
shall, upon request of Tenant, be submitted when available by Landlord to
Tenant.
34. COMMON AREAS: All common areas and other common facilities (hereinafter
collectively called "common areas") made available by Landlord in or about the
Shopping Center shall be subject to the exclusive control and management of
Landlord, expressly reserving to Landlord, without limitation, the right to
erect, install or operate within the enclosed malls or the parking areas,
kiosks, planters, pools, sculpture, free-standing buildings, advertising
displays, entertainment, educational displays, events or otherwise. Common
areas (as initially constructed or as the same may at any time thereafter be
enlarged or reduced) shall mean all areas, space, facilities, equipment, signs
and special services from time to time made available by Landlord for the
common and joint use and benefit of Landlord, the Tenant and other tenants and
occupants of the Shopping Center, and their respective employees, agents,
subtenants, concessionaires, licensees, customers and invitees, which may
include (but shall not be deemed a representation as to their availability),
the sidewalks, parking areas, access roads, driveways, landscaped areas, truck
serviceways, tunnels, loading docks, pedestrian malls (enclosed or open),
courts, stairs, ramps, elevators, escalators, comfort and first aid stations,
public washrooms, community hall or auditorium and parcel pick-up stations.
Landlord hereby expressly reserves the right, from time to time, to
construct, maintain and operate lighting and other facilities, equipment and
signs on all of said common areas; to police the same; to change the area,
level, location and arrangement of the parking areas and other facilities
forming a part of said common areas; to build multi-story parking facilities;
to restrict parking by tenants and other occupants of the Shopping Center and
their employees, agents, subtenants, concessionaires and licensees; to enforce
parking charges (by operation of meters or otherwise), but in such event the
net proceeds from such charges, after deducting the cost of enforcing the same,
shall be applied in reduction of the cost of maintaining the common area except
when multi-story parking facilities are constructed by Landlord after the
initial grand opening of the Shopping Center; to close temporarily all or any
portion of the common areas for the purpose of making repairs or changes
thereto and to discourage non-customer parking; and to establish, modify and
enforce reasonable rules and regulations with respect to the common areas and
the use to be made thereof. Landlord shall operate, manage, equip, light and
maintain the common areas in such manner as Landlord, in its reasonable
discretion, may from time to time determine, and Landlord shall have the right
and exclusive authority to employ and discharge all personnel with respect
thereto.
Tenant, its customers, employees, invitees and guests, are hereby given
a license during the Lease Term (in common with all others to whom Landlord has
or may hereafter grant rights) to use the common areas of the Shopping Center
as they may now or at any time during the Lease Term exist, provided, however,
that if the size, location or arrangement of such common areas or the type of
facilities at any time forming a part thereof be changed or diminished,
Landlord shall not be subject to any liability, nor shall Tenant be entitled to
any compensation or diminution or abatement of rent, nor shall such change or
diminution of such areas be deemed a constructive or actual eviction. In order
to establish that the Shopping Center or any portion thereof is and will
continue to remain private property and to prevent a dedication thereof or the
accrual of any rights to any person or to the public therein, Landlord hereby
reserves the unrestricted right to close all or any portion of the Shopping
Center owned, leased or controlled by Landlord to the general public for one
(1) day in each calendar year, and, in connection therewith, to seal off all
entrances to the Shopping Center, or any portion thereof. Tenant hereby
acknowledges, consents and agrees that any and/or all services, facilities and
access by the public to the Premises and/or to the Shopping Center may be
suspended in whole or in part during such temporary times as all of the
Department Stores adjoining
20
<PAGE> 25
the Shopping Center are not open for business, on legal holidays, on such other
days as may be declared by local, State or Federal authorities as days of
observance, and/or during any periods of actual or threatened civil commotion,
insurrection or other circumstances beyond Landlord's control when Landlord, in
Landlord's reasonable judgment, shall deem the suspension of such services,
facilities and access necessary for the protection and/or preservation of
persons and/or property.
35. COST OF MAINTENANCE OF COMMON AREAS: (a) Landlord shall maintain the
common areas and facilities in good order, condition and repair. Tenant agrees
to pay Landlord, in the manner provided and as computed in subparagraph (b) of
this Paragraph 35, a share of the Operating Costs of the common areas of the
Shopping Center. "Operating Costs" shall mean the total costs and expenses
incurred in operating, maintaining and repairing the common areas and
facilities, including, without limitation, personal and real property taxes and
special assessments; surcharges levied upon or assessed against parking spaces
or areas; payments toward mass transit or car pooling facilities or otherwise
as required by Federal, State or local governmental authorities; costs and
expenses in connection with maintaining Federal, State and local governmental
ambient air and environmental standards; the cost of all materials, supplies
and services purchased or hired therefor; the cost and expense of operating,
maintaining, repairing and replacement of curbs, sidewalks, parking surfaces,
paving, walkways, roadways, landscaping, gardening and planting, cleaning,
painting (including line painting), decorating, repairing, paving, lighting,
sanitary control, removal of snow, trash, garbage and other refuse, heating,
ventilating, air conditioning of and smoke control for the enclosed malls and
other enclosed portions of the common areas, fire protection, water and
sewerage charges, the cost of all types of insurance coverages carried by
Landlord covering the common areas, including, without limitation, public
liability, personal and bodily injury and property damage liability and
automobile coverage, fire and extended coverage, vandalism and malicious
mischief and all broad form coverages, sign insurance and any other insurance
that may be carried by Landlord covering the common areas all in limits
selected by Landlord (it is agreed and understood that Landlord may self-insure
or internally perform other functions relating to the Shopping Center included
in Operating Costs, and, in such event, Landlord may include in Operating Costs
the reasonable and competitive cost of such functions performed internally by
Landlord), operation of loud speakers and any other equipment supplying music
to the common areas or any parts thereof, operation of public toilets,
installing and renting of signs, maintenance and repair of roofs, foundations,
exterior walls, downspouts and gutters, maintenance, repair and replacement of
utility systems serving the common areas, including water, sanitary sewer and
storm water lines and other utility lines, pipes and conduits, replacement
reserve for heating, ventilating, air conditioning and/or smoke control
equipment, depreciation or rental value of machinery and equipment owned and
used in the operation, maintenance and repair of the common areas, or the
rental charges for such machinery and equipment, the cost of any services
deemed necessary by Landlord to prevent, restrict or control the use of the
Common Areas by members of the public for uses for which they are not intended
and/or to maintain such common areas as private property, including court costs
and attorneys' fees, the cost of the Shopping Center manager and the personnel
reasonably required (including applicable benefits, payroll taxes, workmen's
compensation insurance and disability insurance) to implement all of the
foregoing, including the policing of the common areas and the directing of
traffic and parking of automobiles on the parking areas thereof, administrative
costs attributable to the common areas and an overhead cost equal to fifteen
percent (15%) of the total Operating Costs (hereinafter referred to as the
"Total Operating Costs"). Subject to the provisions hereof, Operating Costs
shall not include initial costs of equipment properly chargeable to capital
account consisting of items real estate in nature and the original cost of
constructing the common areas but shall, however, include those capital costs
allowed as "Permitted Capital Pass Through Costs" as defined in subparagraph
35(7) below. Landlord may cause any or all of said services to be provided by
an independent contractor or contractors.
(b) Tenant's Common Area Charge shall be an amount equal to the
product obtained by multiplying the Total Operating Costs paid or incurred by
Landlord during the first accounting period and each subsequent accounting
period, as hereafter defined, by a fraction, the numerator of which shall be
the GLA of the Premises and the denominator of which shall be the greater of
(i) eighty percent (80%) of the GLA in the Shopping Center, or (ii) the GLA in
the Shopping Center occupied by tenants of the Shopping Center, both determined
as of August 1 of each Lease Year. If any Tenant or occupant of any free-
standing buildings or structures which shall be erected in the Shopping Center
make payment toward the common area Operating Costs of the Shopping Center,
then the GLA of such free-standing buildings or structures shall not be
included in the GLA in the Shopping Center and payments actually received by
Landlord from
21
<PAGE> 26
the tenants or occupants of such free-standing buildings or structures as their
share of the Operating Costs shall be deducted from the Total Operating Costs
paid or incurred by Landlord during the particular accounting period when such
payments are received before computing Tenant's Common Area Charge; and (iii)
if Landlord should elect or be required to maintain the common areas owned or
leased by Department Stores adjoining the Shopping Center, then for the purpose
of computing Tenant's Common Area Charge, the Operating Costs paid or incurred
by Landlord in maintaining such adjoining common areas shall be included in the
Operating Costs defined under subparagraph (a) of this Paragraph and payments
actually received by Landlord from such Department Stores as their share of
Operating Costs shall be deducted from the Total Operating Costs paid or
incurred by Landlord during the particular accounting period when such payments
are received before computing Tenant's Common Area Charge. The term "accounting
period" shall be such period as Landlord shall select using accepted accounting
principles and practices consistently applied but shall initially be the
applicable calendar year. Tenant's share of such Total Operating Costs shall be
payable as follows:
(1) During that portion of the Lease Term falling within the first
accounting period (subject to adjustment as set forth in subparagraph [b][3]
hereof), Tenant shall pay Landlord monthly, in advance, on the first day of
each month, a sum in such amounts as are billed to Tenant by Landlord, as an
estimate of Tenant's share of such Total Operating Costs during the first
accounting period.
(2) The foregoing estimated sum under subparagraph (b)(1) shall be
adjusted and revised by Landlord from time to time during the Lease Term on the
basis of the actual Total Operating Costs for the immediately preceding
accounting period plus reasonable anticipated increases or decreases in such
costs. Upon Landlord furnishing to Tenant a written statement setting forth
such revised estimated Operating Costs, Tenant shall pay Landlord the revised
Common Area Charge in monthly installments, in advance, on the first day of
each month until the next succeeding revision in such estimate.
(3) Within ninety (90) days following the end of the first accounting
period and each subsequent accounting period, Landlord shall furnish Tenant a
written statement covering the accounting period just expired, showing in
reasonable detail a general breakdown of the actual Total Operating Costs, the
amount of Tenant's Common Area Charge for such accounting period and the
payments made by Tenant with respect to such accounting period. Tenant shall
pay Landlord the deficiency within ten (10) days after the furnishing of said
statement; and if said payments exceed Tenant's Common Area Charge, Tenant
shall be entitled to a credit for such excess against payments next thereafter
to become due Landlord on account of Tenant's Common Area Charge, or during the
last Lease Year, Landlord will refund such excess to Tenant within thirty (30)
days following the expiration of the Lease Term.
(4) As to the first accounting period or any subsequent accounting
period a portion only of which is contained in the Lease Term, Tenant's
obligation for a share of the actual Total Operating Costs shall be prorated on
the basis of the actual number of days in the portion of such accounting period
contained in the Lease Term, as to which Tenant's obligation shall survive the
expiration of the Lease Term.
(5) In the event of any dispute, Tenant shall pay the amount of
Landlord's bill or statement, and such payment shall be without prejudice to
Tenant's position. If the dispute shall be determined in Tenant's favor, by
agreement or otherwise, Landlord shall refund to Tenant the amount of Tenant's
overpayment. Provided Tenant is not then in default under this Lease, Tenant
may, at its expense and on not less than fifteen (15) days prior written notice
to Landlord and not more than once during each Lease Year, review the Total
Common Area Charges for the immediately preceding Lease Year at the office of
Landlord where such records are maintained.
Failure by Tenant to exercise any audit right granted herein, or
Landlord to dispute any Tenant audit within the specified time period or the
failure of either party to otherwise fail to contest or dispute the allocation
of Additional Rent or Common Area Maintenance Charges ("CAM") within twelve
(12) months of the date any statement for Additional Rent or CAM charges or
fees is submitted to Tenant:
(a) is deemed a waiver of the applicable audit or dispute
right and any right to contest the Additional Rent charges
(undercharges or overcharges) for the applicable Lease Year;
22
<PAGE> 27
(b) is deemed acceptance of the Additional Rent charges as
submitted to and reviewed by Tenant; and
(c) constitutes full release of Landlord by Tenant for any
overcharges of Additional Rent more than one (1) year old
and a full release of Tenant by Landlord for any
undercharging of Additional Rent more than one (1) year
old.
(6) Any such bill or statement shall be deemed binding and conclusive
if Tenant fails to object thereto in writing (stating the reason therefor),
within thirty (30) days after the date thereof or if Tenant fails to comply
with the provisions of subparagraph (5) of this Paragraph 35.
Notwithstanding anything to the contrary contained herein, failure by
Tenant to exercise any audit right granted herein or Landlord to dispute any
Tenant audit within the specified time period or the failure of either party to
otherwise fail to contest or dispute the allocation of Additional Rent or CAM
charges within twelve (12) months of the date any statement for Additional Rent
or CAM charges or fees is submitted to Tenant:
(a) is deemed a waiver of the applicable audit or dispute
right and any right to contest the Additional Rent charges
(undercharges or overcharges) for the applicable Lease
Year;
(b) is deemed acceptance of the Additional Rent charges as
submitted to and reviewed by Tenant; and
(c) constitutes full release of Landlord by Tenant for any
overcharges of Additional Rent more than one year old and
a full release of Tenant by Landlord for any undercharging
of Additional Rent more than one year old.
(7) "Permitted Capital Pass Through Cost" shall mean the following
costs and expenses incurred by Landlord from and after January 1 of the calendar
year in which this Lease is executed: (i) the cost of any capital improvement
made to the Property by Landlord that is required under any governmental law or
regulation which was not promulgated, or which was promulgated but was not
applicable to the Building, at the time the Building was constructed, amortized
over such period as Landlord shall reasonably determine, together with an
amount equal to interest at the rate of twelve percent (12%) per annum (the
"Amortization Rate") on the unamortized balance thereof; (ii) the cost of any
capital improvement made to the Common Areas of the Property that is required
under interpretations or regulations issued from time to time under the
provisions of Tex. Rev. Civ. Stat. Ann. art. 9102 and the provisions of the
Americans with Disabilities Act of 1990, 42 U.S.C.
Sections 12101-12213 (collectively, the "Disability Acts"), amortized over such
period as Landlord shall reasonably determine, together with an amount equal to
interest at the Amortization Rate on the unamortized balance thereof; (iii) the
cost of any labor-saving or energy-saving device or other equipment installed
in the Building (provided Landlord reasonably anticipates that the installation
thereof will reduce Operating Expenses), amortized over such period as is
reasonably determined by Landlord, together with an amount equal to interest at
the Amortization Rate on the unamortized balance thereof; and (iv) all other
capital costs and expenses which would generally be regarded as ownership,
operating, maintenance and management costs and expenses which would normally
be amortized over a period not to exceed five (5) years.
36. PROMOTION OF CENTER AND TENANT'S BUSINESS.
(a) Promotional Fund: Tenant shall pay Landlord the monthly Promotion
Fund Charge set forth in Paragraph 1(L), subject to increases as described
below (the fund created by such charges and any similar charges paid by other
tenants or parties shall be referred to herein as the "Promotional Fund").
Landlord shall use the Promotional Fund to promote, advertise and market the
Shopping Center through television, radio, newspaper or other media, or through
other non-media promotions or events. Although Landlord may appoint a committee
of representatives from one or more tenants or Department Stores to advise
Landlord concerning the use of the Promotion Fund, Landlord reserves the right
to use the Promotion Fund for the foregoing purposes in Landlord's sole
discretion. Tenant shall also pay a non-recurring supplemental
23
<PAGE> 28
Promotion Fund Charge equal to twelve (12) times the monthly amount: (i) upon
Tenant's execution of this Lease, and (ii) each time Landlord spends at least
$1,000,000 expanding or renovating the Shopping Center from time to time during
the Term upon ten (10) days written request by Landlord.
(b) Merchants' Association: Landlord may, from time to time in
Landlord's sole discretion, require that Tenant participate in a merchants'
association for the Shopping Center sponsored or designated by Landlord. In
such case: (i) Tenant shall participate as an active member in such
association, (ii) Tenant shall continue to pay the Promotion Fund Charge to
Landlord, and such Promotion Fund Charge shall be deemed to satisfy any
obligations of Tenant to pay regular monthly dues to such association, (iii)
Landlord shall turn over such Promotion Fund Charge to the association, or at
Landlord's option shall continue to use the same or a portion thereof in
conjunction with or on behalf of the association for the purpose of promoting,
advertising and marketing the Shopping Center, and (iv) Tenant shall pay any
special assessments and participate in any joint advertising or promotional
events sponsored by such association, and shall comply with all other
requirements of such association.
(c) Media Fund, Joint Advertising: Tenant shall pay Landlord the
monthly Media Fund Charge set forth in Paragraph 1(M), subject to increases as
described below (the fund created by such charges and any similar charges paid
by other tenants or parties shall be referred to herein as the "Media Fund").
Landlord shall use the Media Fund to supplement any Promotion Fund or in order
to promote, advertise and market the Shopping Center through television, radio,
newspaper or other electronic or print media, in Landlord's sole discretion.
Landlord may, from time to time in Landlord's sole discretion and until further
notice, reduce the Media Fund Charge and in lieu thereof require that Tenant
spend an amount not exceeding such reduction on joint advertising prepared,
established, sponsored or required for the Shopping Center by Landlord (with
such design and content as Landlord shall reasonably approve in advance).
(d) Payments, Increases, and Unused Funds: Tenant shall pay the
Promotion Fund Charge and Media Fund Charge in advance on or before the first
day of each calendar month during the Term. The Promotion Fund Charge and Media
Fund Charge shall be subject to increases effective each January 1 during the
Term or at such other times as Landlord may reasonably determine. Landlord
shall determine each increase based on the percentage increases in the "CPI"
from the Commencement Date through the latest date for which a current index is
available prior to the scheduled increase. Notwithstanding the foregoing, in
the case of the Media Fund Charge, Landlord may use the percentage increase in
the electronic, print and outdoor advertising rates of the media utilized by
Landlord over such rates for the preceding year in the media market in which
the Shopping Center is located. In no event shall the Promotion Fund Charge or
Media Fund Charge ever be reduced, even if the "CPI" or advertising rates
decrease for any given period. Any amounts of the respective Funds remaining
after the end of any calendar year shall be used by Landlord in subsequent
years, and Landlord shall have no obligation to refund any unused amounts to
Tenant after expiration of this Lease or otherwise whatsoever. For the purposes
of this provision CPI shall mean "The Revised Consumer's Price Index for Urban
Wage Earners and Clerical Workers, all Cities (CPI-W) (1982 = 100)," issued by
the Bureau of Labor Statistics of the U.S. Department of Labor in the Current
Labor Statistic Section of the Monthly Labor Review ("CPI").
(e) Tenant Advertising: In order to help maximize Gross Sales, Tenant
agrees to spend an amount equal to at least two percent (2%) of Tenant's Gross
Sales to advertise Tenant's business in the Premises in the market area in
which the Shopping Center is located during each Lease Year. Such amount shall
be in addition to the Promotion Fund Charge and Media Fund Charge. Tenant shall
provide Landlord with evidence of such advertising programs in the market area
in which the Shopping Center is located, Tenant shall include the Premises so
that it receives at least as much publicity as other stores owned or operated
by Tenant in such market area. All references to Landlord or the Shopping
Center in such programs shall be in good taste and shall identify the Shopping
Center by the name designated by Landlord from time to time.
(f) Landlord's Expenses: Landlord shall be reimbursed out of the
Promotion Fund or by any merchants' association for all costs and expenses
incurred by Landlord in administering such Funds or in providing services to
such association, including without limitation, costs for performing or
procuring services for audits, tax filings and bookkeeping, and the
compensation, benefits and related expenses for a marketing director and staff,
rental value of space in the Shopping Center used by the same, all office
24
<PAGE> 29
equipment, utilities and supplies, postal and travel expenses in connection
therewith, and the cost of all Shopping Center advertisements and promotional
and marketing activities and events.
37. INDEMNITY: (A) LANDLORD'S INDEMNITY OF TENANT. EXCLUSIVE OF: (I) ANY
CLAIM OR LOSS COVERED BY TENANT'S INSURANCE ACTUALLY CARRIED BY TENANT OR
REQUIRED TO BE CARRIED BY TENANT UNDER THIS LEASE, (II) ANY HAZARDOUS OR TOXIC
MATERIAL CLAIMS OR LIABILITY, CONDEMNATION OR FIRE OR CASUALTY CLAIMS, EACH OF
WHICH SHALL BE CONTROLLED BY THE SPECIFIC PARAGRAPHS UNDER THIS LEASE DEALING
WITH THOSE MATTERS, AND/OR (III) ANY INJURY, DEATH, DAMAGE, LIABILITY OR CLAIMS
ARISING FROM OR OUT OF THE WILLFUL ACTS, MISCONDUCT OR NEGLIGENCE OF TENANT,
ITS EMPLOYEES, CONTRACTORS, AGENTS AND INVITEES, LANDLORD SHALL INDEMNIFY AND
HOLD TENANT HARMLESS (INCLUDING TENANT'S OFFICERS, DIRECTORS AND EMPLOYEES),
FROM AND AGAINST (SUBJECT TO THE FOREGOING EXCLUSIONS) ANY AND ALL FINES,
ORDERS, DECREES, CLAIMS, LIABILITIES, SUITS, JUDGMENTS, LOSSES OR DAMAGES
(INCLUDING COSTS AND REASONABLE ATTORNEY FEES) ARISING OUT OF OR CONNECTED WITH
ANY INJURY TO PERSON, DEATH, OR DAMAGE TO PROPERTY OCCURRING IN, ON OR ABOUT
THE COMMON AREAS OF THE SHOPPING CENTER. TENANT AGREES TO LOOK FIRST TO ANY
INSURANCE COVERAGE CARRIED BY TENANT (WHICH SHALL BE PRIMARY) FOR RELIEF FROM
OR UNDER ANY FINE, ORDER, DECREE, CLAIM, LIABILITY, LOSS SUIT, JUDGMENT OR
DAMAGE INCURRED BY OR BROUGHT AGAINST TENANT PRIOR TO MAKING A CLAIM UNDER OR
SEEKING TO ENFORCE THIS INDEMNITY.
TENANT'S INDEMNITY OF LANDLORD. EXCLUSIVE OF: (I) ANY CLAIM OR LOSS
COVERED BY LANDLORD'S INSURANCE ACTUALLY CARRIED BY LANDLORD OR REQUIRED TO BE
CARRIED BY LANDLORD UNDER THIS LEASE, (II) ANY HAZARDOUS OR TOXIC MATERIAL
CLAIMS, EACH WHICH SHALL BE CONTROLLED BY THE SPECIFIC PARAGRAPHS UNDER THIS
LEASE DEALING WITH THOSE MATTERS, AND/OR (III) ANY INJURY, DEATH, DAMAGE,
LIABILITY OR CLAIMS ARISING FROM OR OUT OF THE WILLFUL ACTS, MISCONDUCT OR
NEGLIGENCE OF LANDLORD, ITS EMPLOYEES, CONTRACTORS, AGENTS AND INVITEES, TENANT
SHALL INDEMNIFY AND HOLD LANDLORD AND LANDLORD'S PROPERTY MANAGER FOR THE
SHOPPING CENTER HARMLESS (INCLUDING LANDLORD'S AND LANDLORD'S PROPERTY
MANAGER'S OFFICERS, DIRECTORS AND EMPLOYEES), FROM AND AGAINST (SUBJECT TO THE
FOREGOING EXCLUSIONS) ANY AND ALL FINES, ORDERS, DECREES, CLAIMS, LIABILITIES,
SUITS, JUDGMENTS, LOSSES OR DAMAGES (INCLUDING COSTS AND REASONABLE ATTORNEY
FEES) ARISING OUT OF OR CONNECTED WITH ANY INJURY TO PERSON, DEATH, OR DAMAGE
TO PROPERTY OCCURRING IN, OR ABOUT THE PREMISES OR IN CONNECTION WITH ANY
IMPROVEMENTS THEREIN. EXCEPT FOR COMPREHENSIVE GENERAL LIABILITY COVERAGE
REQUIRED TO BE CARRIED BY TENANT UNDER THIS LEASE (WHERE LANDLORD AND
LANDLORD'S PROPERTY MANAGER ARE NAMED INSUREDS, SUCH COVERAGE BEING PRIMARY FOR
ALL PURPOSES), LANDLORD AGREES TO LOOK FIRST TO ANY INSURANCE COVERAGE REQUIRED
TO BE CARRIED BY LANDLORD UNDER THIS LEASE (WHICH, EXCEPT AS SET FORTH ABOVE,
SHALL BE PRIMARY) FOR RELIEF FROM OR UNDER ANY FINE, ORDER, DECREE, CLAIM,
LIABILITY, LOSS, SUIT, JUDGEMENT OR DAMAGE INCURRED BY OR BROUGHT AGAINST
LANDLORD PRIOR TO MAKING A CLAIM UNDER OR SEEKING TO ENFORCE THIS INDEMNITY.
(B) TENANT AND ALL THOSE CLAIMING BY, THROUGH, OR UNDER TENANT SHALL
STORE THEIR PROPERTY IN AND SHALL OCCUPY AND USE THE PREMISES AND ANY
IMPROVEMENTS THEREIN AND APPURTENANCES THERETO AND ALL PORTIONS OF THE SHOPPING
CENTER SOLELY AT THEIR OWN RISK AND TENANT AND ALL THOSE CLAIMING BY, THROUGH,
AND UNDER TENANT HEREBY RELEASE LANDLORD, TO THE FULL EXTENT PERMITTED BY LAW,
FROM ALL CLAIMS OF EVERY KIND, INCLUDING LOSS OF LIFE, PERSONAL OR BODILY
INJURY, DAMAGE TO MERCHANDISE, EQUIPMENT, FIXTURES OR OTHER PROPERTY, OR DAMAGE
TO BUSINESS OR FOR
25
<PAGE> 30
BUSINESS INTERRUPTION, ARISING, DIRECTLY OR INDIRECTLY, OUT OF OR FROM OR ON
ACCOUNT OF SUCH OCCUPANCY AND USE OR RESULTING FROM ANY PRESENT OR FUTURE
CONDITION OR STATE OF REPAIR THEREOF.
(C) LANDLORD SHALL NOT BE RESPONSIBLE OR LIABLE FOR DAMAGES AT ANY
TIME TO TENANT, OR TO THOSE CLAIMING BY, THROUGH OR UNDER TENANT, FOR ANY LOSS
OF LIFE, BODILY OR PERSONAL INJURY, OR DAMAGE TO PROPERTY OR BUSINESS, OR FOR
BUSINESS INTERRUPTION, THAT MAY BE OCCASIONED BY OR THROUGH THE ACTS, OMISSIONS
OR NEGLIGENCE OF ANY OTHER PERSONS, OR ANY OTHER TENANTS OR OCCUPANTS OF ANY
PORTION OF THE SHOPPING CENTER AND/OR THE DEPARTMENT STORES ADJOINING THE
SHOPPING CENTER.
(D) LANDLORD SHALL NOT BE RESPONSIBLE OR LIABLE FOR DAMAGES AT ANY
TIME FOR ANY DEFECTS, LATENT OR OTHERWISE, IN ANY BUILDINGS OR IMPROVEMENTS IN
THE SHOPPING CENTER OR ANY OF THE EQUIPMENT, MACHINERY, UTILITIES, APPLIANCES
OR APPARATUS THEREIN, NOR SHALL LANDLORD BE RESPONSIBLE OR LIABLE FOR DAMAGES
AT ANY TIME FOR LOSS OF LIFE, OR INJURY OR DAMAGE TO ANY PERSON OR TO ANY
PROPERTY OR BUSINESS OF TENANT, OR THOSE CLAIMING BY, THROUGH OR UNDER TENANT,
CAUSED BY OR RESULTING FROM THE BURSTING, BREAKING, LEAKING, RUNNING, SEEPING,
OVERFLOWING OR BACKING UP OF WATER, STEAM, GAS, SEWAGE, SNOW OR ICE IN ANY PART
OF THE PREMISES OR CAUSED BY OR RESULTING FROM ACTS OF GOD OR THE ELEMENTS, OR
RESULTING FROM ANY DEFECT OR NEGLIGENCE IN THE OCCUPANCY, CONSTRUCTION,
OPERATION OR USE OF ANY BUILDINGS OR IMPROVEMENTS IN THE SHOPPING CENTER,
INCLUDING THE PREMISES, AND/OR THE DEPARTMENT STORES ADJOINING THE SHOPPING
CENTER OR ANY OF THE EQUIPMENT, FIXTURES, MACHINERY, APPLIANCES OR APPARATUS
THEREIN.
(E) TENANT EXPRESSLY ACKNOWLEDGES THAT ALL OF THE FOREGOING
PROVISIONS OF THIS PARAGRAPH 37 SHALL APPLY AND BECOME EFFECTIVE FROM AND AFTER
THE DATE TENANT OR ITS AGENTS ENTER UPON THE PREMISES TO UNDERTAKE ACTIVITIES
PERMITTED HEREUNDER.
(F) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, TENANT
SPECIFICALLY ACKNOWLEDGES THAT THE INDEMNITY UNDERTAKING HEREIN SHALL APPLY TO
CLAIMS IN CONNECTION WITH OR ARISING OUT OF ANY "WORK" AS DESCRIBED IN
PARAGRAPH 18, THE USE OR CONSUMPTION OF ANY UTILITIES IN THE PREMISES, ANY
REPAIRS OR OTHER WORK BY OR FOR TENANT (WHETHER OR NOT SUCH MATTERS SHALL HAVE
BEEN THERETOFORE APPROVED BY LANDLORD), EXCEPT TO THE EXTENT THAT ANY OF THE
SAME ARISES FROM THE INTENTIONAL OR GROSSLY NEGLIGENT ACTS OF LANDLORD OR
LANDLORD'S AGENTS OR EMPLOYEES.
38. FIRE INSURANCE: (a) BY LANDLORD: Landlord agrees, during the Lease Term,
to procure and maintain insurance against fire, vandalism and malicious
mischief and such other perils as are from time to time included in a standard
extended coverage endorsement insuring the building improvements and
betterments described in Exhibit "B," (Description of Landlord's Work) in an
amount equal to one hundred percent (100%) actual replacement cost (exclusive
of the cost of footings below floor level, excavations and foundations). Any
insurance provided for in this subparagraph 38(a) above may be effected by
self-insurance or by a policy or policies of blanket insurance covering
additional items or locations or assureds, provided that the requirements of
this subparagraph (a) are otherwise satisfied. Tenant shall have no rights in
any policy or policies maintained by Landlord.
(b) BY TENANT: Tenant agrees, during the Lease Term, to procure and
maintain insurance against fire, earthquake, vandalism, malicious mischief,
water damage and sprinkler leakage and such other perils as are from time to
time included in a standard extended coverage endorsement insuring the (i)
building improvements and betterments to the Premises described in Exhibit "B,"
(Description of Tenant's Work), (ii) any permitted alterations, additions or
improvements made by Tenant to the Premises at any time, (iii)
26
<PAGE> 31
Tenant's trade fixtures, furniture, furnishings, decorations, personal
property, signs, inventory and contents, in an amount equal to one hundred
percent (100%) actual replacement cost, including, by endorsement, any increase
in the value of any of such improvements, betterments or property mentioned in
subsections (i), (ii), and (iii) hereof resulting from increased construction
costs, exclusive of depreciation, and (iv) business interruption and loss
coverage. In addition, Tenant shall provide worker's compensation insurance
insuring against and satisfying Tenant's obligations and liabilities under the
worker's compensation laws of the State of Texas and Employer's liability
insurance in an amount not less than $1,000,000.00. Such policies of insurance
shall be issued in the names of and for the benefit of Tenant, Landlord and
Landlord's mortgagee, as their respective interest may appear. If Tenant fails
or refuses to procure and maintain the required amount of insurance and as a
result thereof Landlord is adjudged a coinsurer then any losses or penalties
sustained by Landlord shall be paid for by Tenant upon receipt of a bill from
Landlord together with reasonably satisfactory evidence of such loss or
penalty.
(c) WAIVER OF SUBROGATION: LANDLORD AND TENANT EACH HEREBY WAIVES ANY
RIGHTS IT MAY HAVE AGAINST THE OTHER (INCLUDING, BUT NOT LIMITED TO, A DIRECT
ACTION FOR DAMAGES) ON ACCOUNT OF ANY LOSS OR DAMAGE OCCASIONED TO LANDLORD OR
TENANT, AS THE CASE MAY BE (WHETHER OR NOT SUCH LOSS OR DAMAGE IS CAUSED BY THE
FAULT, NEGLIGENCE OR OTHER TORTIOUS CONDUCT, ACTS OR OMISSIONS OF LANDLORD OR
TENANT OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR INVITEES),
TO THEIR RESPECTIVE PROPERTY, THE PREMISES, ITS CONTENTS OR TO ANY OTHER
PORTION OF THE BUILDING OR THE PROPERTY ARISING FROM ANY RISK COVERED BY THE
CURRENT TEXAS STATE BOARD OF INSURANCE PROMULGATED FORM OF PROPERTY INSURANCE
AND FIRE AND EXTENDED COVERAGE INSURANCE REQUIRED TO BE CARRIED BY TENANT AND
LANDLORD, RESPECTIVELY, UNDER THIS LEASE. IF A PARTY WAIVING RIGHTS UNDER THIS
PARAGRAPH CARRYING A FIRE AND EXTENDED COVERAGE INSURANCE POLICY IN THE
PROMULGATED FORM USED IN THE STATE OF TEXAS AND AN AMENDMENT TO SUCH
PROMULGATED FORM IS PASSED, SUCH AMENDMENT SHALL BE DEEMED NOT A PART OF SUCH
PROMULGATED FORM UNTIL IT APPLIES TO THE POLICY BEING CARRIED BY THE WAIVING
PARTY. WITHOUT IN ANY WAY LIMITING THE FOREGOING WAIVERS AND TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO EACH, ON BEHALF OF THEIR
RESPECTIVE INSURANCE COMPANIES INSURING THE PROPERTY OF EITHER LANDLORD OR
TENANT AGAINST ANY SUCH LOSS, WAIVE ANY RIGHT OF SUBROGATION THAT LANDLORD OR
TENANT OR THEIR RESPECTIVE INSURERS MAY HAVE AGAINST THE OTHER PARTY OR THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR INVITEES AND ALL RIGHTS OF
THEIR RESPECTIVE INSURANCE COMPANIES BASED UPON AN ASSIGNMENT FROM ITS INSURED.
EACH PARTY TO THIS LEASE AGREES IMMEDIATELY TO GIVE TO EACH SUCH INSURANCE
COMPANY WRITTEN NOTIFICATION OF THE TERMS OF THE MUTUAL WAIVERS CONTAINED IN
THIS PARAGRAPH AND TO HAVE SAID INSURANCE POLICIES PROPERLY ENDORSED, IF
NECESSARY, TO PREVENT THE INVALIDATION OF SAID INSURANCE COVERAGE BY REASON OF
SAID WAIVERS. THE FOREGOING WAIVER SHALL BE EFFECTIVE WHETHER OR NOT THE
PARTIES MAINTAIN THE REQUIRED INSURANCE.
(d) TENANT'S ADDITIONAL INSURANCE: Tenant agrees to secure and keep
in force from and after the date Landlord shall deliver possession of the
Premises to Tenant and throughout the Lease Term, at Tenant's cost and expense
(i) Comprehensive General Liability Insurance on an occurrence basis with
minimum limits of liability in an amount of One Million Dollars ($1,000,000.00)
per occurrence and Two Million Dollars ($2,000,000.00) aggregate, including
water damage and sprinkler leakage legal liability; and which insurance shall
contain a contractual liability endorsement covering the matters set forth in
Paragraph 37. Such insurance shall be issued in the names and for the benefit
of Landlord, Landlord's management company, if any, and Tenant, and shall
contain an endorsement that Landlord, and Landlord's management company, if
any, although named as insured, nevertheless shall be entitled to recover under
said policies for any loss or damage occasioned to them, their servants, agents
and employees by reason of the negligence of Tenant; (ii) Broad Form Boiler and
Machinery Insurance or other similar insurance on all air conditioning
equipment, boilers, other pressure vessels or systems, whether fired or
unfired, and electrical panels and
27
<PAGE> 32
miscellaneous electrical apparatus adjoining, above or beneath and serving the
Premises in an amount not less than Forty Thousand Dollars ($40,000.00); and
(iii) Plate Glass Insurance covering all plate glass in the Premises, but
Tenant shall have the option either to insure for this risk or self-insure.
39. INSURANCE REQUIREMENTS: (a) All policies of insurance shall be issued by
insurance companies with general policy holder's rating of not less than B+
and a financial rating of not less than Class 9 as rated in the most current
"Best's Insurance Reports," and licensed to do business in the State where the
Shopping Center is located and authorized to issue such policy or policies.
(b) Each party shall have the right to insure and maintain the
insurance coverages required by this Lease under blanket insurance coverages
covering other premises so long as such blanket insurance policies specify a
stated value for the Premises and comply with the amounts of insurance and the
other requirements hereof.
(c) All policies of insurance procured by Tenant shall contain
endorsements providing as follows: (i) such insurance may not be materially
changed, amended or cancelled with respect to Landlord except after thirty (30)
days' prior written notice from the insurance company to Landlord, sent by
registered mail; (ii) that Tenant shall be solely responsible for the payment
of all premiums under such policy and that Landlord or other parties required
to be named as additional insureds shall have no obligation for the payment
thereof notwithstanding that such parties are named as an insured.
(d) The original policy or policies, or duly executed certificates
for the same, together with reasonably satisfactory evidence of payment of the
premium thereof shall be delivered to Landlord on or before the Commencement
Date of the Lease Term and upon renewals of such policies not less than twenty
(20) days prior to the expiration of any such coverage.
(e) The minimum limits of any insurance coverage required to be
carried by Tenant shall not limit Tenant's liability under Paragraph 37 of this
Lease.
40. PAYMENT OF INSURANCE PREMIUMS: (a) Tenant shall not stock, use or sell
or permit or suffer to be stocked, used or sold any article or do anything in
or about the Premises which may be prohibited by or violate the rules and
regulations of the Fire Insurance Rating Organization having jurisdiction which
will increase any insurance rates and premiums on the Premises, the building of
which it forms a part and/or any other buildings or improvements in the
Shopping Center. If as a result of: (i) any failure of Tenant, or anyone
claiming by, through or under Tenant, to comply with the foregoing sentence;
or, (ii) Tenant's abandonment or desertion of the Premises; the insurance rates
applicable to any policies of insurance carried by Landlord covering the
Shopping Center property or the rental income to be derived therefrom shall be
increased, Tenant agrees to pay Landlord, within ten (10) days after Landlord's
written demand therefor, the entire portion of the premiums for said insurance
which shall be attributable to such higher rates. In determining whether any
increase in such rates is the result of any of the aforementioned acts or
omissions of Tenant or anyone claiming by, through or under Tenant, a schedule
or rule book issued by the applicable rating organization shall be conclusive
evidence of the several items and charges which make up the insurance rates and
premiums on the Premises and the Shopping Center. If any such insurance carried
by Landlord shall be cancelled by the insurance carrier as a result of any of
the aforementioned acts or omissions of Tenant or anyone claiming by, through
or under Tenant, Tenant agrees to indemnify and hold Landlord free and harmless
from all damages, costs and expenses which Landlord may sustain by reason
thereof.
(b) In each Lease Year during the Lease Term, Tenant agrees to
reimburse Landlord within thirty (30) days after billing for Tenant's share of
the premium for fire insurance and extended coverage procured and maintained by
Landlord covering the buildings and improvements now or hereafter constructed
in the Shopping Center. Tenant's share of the premium shall equal the product
obtained by multiplying the total premiums by a fraction, the numerator of
which shall be the GLA of the Premises and the denominator of which shall be
the greater of (i) eighty percent (80%) of the GLA in the Shopping Center, or
(ii) the GLA in the Shopping Center occupied by tenants of the Shopping Center,
both determined as of August 1 of each Lease Year. Together with Landlord's
statement of any sum payable by Tenant hereunder, Landlord shall
28
<PAGE> 33
furnish Tenant with a copy of the computations thereof. Landlord reserves the
right to include such charge in Operating Costs.
41. DESTRUCTION: Tenant shall give prompt notice to Landlord in case of any
fire or other damage to the Premises. If (a) the Premises shall be damaged to
the extent of thirty percent (30%) or more of the costs of replacement thereof
during the last two (2) years of the Lease Term or (b) the buildings
constituting the Shopping Center shall be damaged to the extent of fifty percent
(50%) or more of the cost of replacement thereof during the last two (2) years
of the Lease Term, whether or not the Premises shall be damaged, or (c) any of
the Department Stores adjoining the Shopping Center are damaged and such
store(s) does not intend to reopen for business after such damage and
destruction, then or in any such events, Landlord (as to [a], [b] and [c], and
Tenant (as to [a] and [b]) shall have the right and option to cancel this Lease
by written notice within ninety (90) days after the date of such occurrence, and
this Lease shall thereupon cease and terminate with the same force and effect as
though such date were the date fixed for the expiration of the Lease Term. In
such case, Tenant shall vacate and surrender the Premises to Landlord. Tenant's
liability for the rents and other charges reserved hereunder shall cease as of
the later of the date of such damage or destruction or the date of termination
and vacation of the Premises and Landlord shall make an equitable refund of any
rents or other charges paid by Tenant in advance and not earned or accrued. In
the event this Lease is terminated, Tenant covenants and agrees to pay to
Landlord the insurance proceeds payable to Tenant under the property insurance
policies mentioned under Paragraph 38, subparagraph (b) (i) and (b) (ii), which
obligation shall survive the expiration of the Lease Term. Unless this Lease is
terminated by Landlord or Tenant, this Lease shall remain in full force and
effect and the parties waive the provisions of any law to the contrary, and
Landlord and Tenant agree that the Premises shall be repaired and restored,with
due diligence to substantially the condition thereof immediately prior to such
damage or destruction in conformity with the approved working drawings (plans
and specifications) under Exhibit "B." Landlord's obligation to repair and
restore shall be limited to the repair and restoration of the work required to
be insured by Landlord under the provisions of Paragraph 38(a) hereof. Tenant's
obligation to repair and restore shall be the repair and restoration of the work
required to be insured by Tenant under the provisions of Paragraph 38(b) hereof.
Tenant shall continue the operation of Tenant's business in the Premises or any
part thereof not so damaged during any such period to the extent reasonably
practicable from the standpoint of prudent business management.
42. CONDEMNATION: (a) Total: If the whole of the Premises or such part
thereof as will render the remainder untenantable or inaccessible shall be
acquired or taken by eminent domain for any public or quasi-public use or
purpose or by private purchase in lieu thereof, then this Lease and the Lease
Term hereof shall automatically cease and terminate as of the date of title
vesting in such proceedings.
(b) Partial: If twenty-five percent (25%) or more of the GLA of the
Premises shall be so taken, then Landlord and Tenant shall each have the right
to terminate this Lease by written notice given to the other within sixty (60)
days after the date of title vesting in such proceedings. If any part of the
Premises shall be so taken and this Lease shall not be terminated, then this
Lease and all of the terms and provisions thereof shall continue in full force
and effect, except that the Fixed Minimum Rent shall be reduced in the same
proportion that the GLA of the Premises taken bears to the original GLA
demised, and Landlord shall, upon receipt of the award in condemnation, make
all necessary repairs or alterations (exclusive of Tenant's trade and lighting
fixtures, furniture, furnishings, personal property, decorations, signs and
contents) to restore the portion of the Premises remaining to as near its
former condition as circumstances will permit, and to the building of which the
Premises forms a part to the extent necessary to constitute the portion of the
building not so taken to a complete architectural unit; provided, however, that
Landlord, in any event, shall not be required to spend for such repair and
alteration work an amount in excess of the respective amounts received by
Landlord as damages for the taking of such part of the Premises and of the
building of which it forms a part; and Tenant, at Tenant's expense, shall make
all necessary repairs and alterations to Tenant's trade and lighting fixtures,
decoration, signs and contents.
(c) As used herein, the amount received by Landlord shall mean that
portion of the award in condemnation received by Landlord from the condemning
authority which is free and clear of all prior claims or collections by the
holders of any mortgages or deeds of trust or any ground or underlying lessors
and less reasonable attorney's and appraiser's fees.
29
<PAGE> 34
(d) If more than fifty percent (50%) of the GLA of the building of
which the Premises forms a part or of the Shopping Center shall be taken as
aforesaid, Landlord shall have the right, by written notice given to Tenant, to
terminate this Lease, such termination to be effective as of the date of title
vesting in such proceeding.
(e) If as a result of such taking, any or all of the Department
Stores adjoining the Shopping Center cease operating its business with the
public or cancel or terminate its or their respective leases or operating
agreements, Landlord shall have the right, by written notice given to Tenant,
to terminate this Lease, such termination to be effective as of the date of
cessation of business with the public or cancellation of such leases or
agreements, whichever the case may be.
(f) If part or parts of the parking areas as a result of such taking,
equal or exceed sixty percent (60%) thereof as the same existed prior to such
taking, Tenant shall not be entitled to compensation, diminution or abatement
of any rent or other charges, nor shall the same be deemed an actual or
constructive eviction. If as a result of such taking of the parking areas the
same are reduced below sixty percent (60%) thereof, Landlord shall have the
right within one hundred eighty (180) days after receipt of the award in
condemnation, to supply substitute parking facilities on the property of
Landlord or within reasonable proximity to the Shopping Center; and in
connection therewith, Landlord shall have the right to construct multi-deck,
elevated, subterranean or vertical parking facilities. If Landlord shall be
unable to replace or substitute such parking area so taken to comply with the
provisions of the preceding sentence of this Paragraph, then Landlord and
Tenant shall have the right to cancel and terminate this Lease, within ninety
(90) days thereafter by giving the other party a thirty (30) days' notice in
writing; and in such event this Lease shall come to an end upon the expiration
of said thirty (30) days and neither party shall thereafter have any further
rights and obligations as against the other.
(g) If this Lease is terminated as provided in this Paragraph, all
rents shall be paid by Tenant up to the later of the date that possession is so
taken by public authority or the date Tenant vacates the Premises, and Landlord
shall make an equitable refund of any rents paid by Tenant in advance and not
earned.
(h) Award: All damages or compensation awarded or paid for any such
taking, whether for the whole or a part of the Premises or any part of the
land, buildings and improvements constituting the Shopping Center, shall belong
to and be the property of Landlord without any participation by Tenant, whether
such damages or compensation shall be awarded or paid for diminution in value
of the fee or any interest of Landlord in any ground or underlying lease
covering the Shopping Center or in the leasehold estate created hereby, and
Tenant hereby expressly waives and relinquishes all claims to such award or
compensation or any part thereof and of the right to participate in any such
condemnation proceedings against the owners of any interest in the Shopping
Center; provided, however, that nothing herein contained shall be construed to
preclude Tenant from prosecuting any claim directly against the condemning
authority, but not against Landlord, for the value of or damage to and/or the
cost of removal of Tenant's trade fixtures and other personal property which
under the terms of this Lease would remain Tenant's property upon the
expiration of the Lease Term, as may be recoverable by Tenant in Tenant's own
right, provided further that no such claim shall diminish or otherwise affect
Landlord's award. Each party agrees to execute and deliver to the other all
instruments that may be required to effectuate the provisions of this Paragraph
42.
(i) Any sale, grant, dedication or taking of peripheral or perimeter
parts or portions of the parking area of the Shopping Center for road widening
or road improvement purposes or for the installation of utilities shall not be
deemed a condemnation or taking within the meaning of this Paragraph and Tenant
shall not, in any such event, be entitled to compensation, diminution or
abatement of any rent or other charges.
43. BANKRUPTCY-INSOLVENCY: The parties acknowledge that the Premises
occupied by Tenant consist of a store building located within an integrated
shopping center development owned and operated by Landlord, and in the event
Tenant becomes subject to voluntary or involuntary proceedings under the
Bankruptcy Reform Act of 1978 (the "Act"), as the same may be amended, the
specific provisions of the Act relating to shopping centers shall be applicable
to such proceedings. The parties further acknowledge that in order to protect
the mix of tenants within the Shopping Center and to provide the sales volume
anticipated from Tenant's business operation within the Premises, the purposes
for which the Tenant may use the Premises have been specifically limited by the
provisions of Paragraphs 1(G) and 21 hereof, and that
30
<PAGE> 35
the economics of this Lease, particularly with respect to the agreed upon Fixed
Minimum Rent and Additional Rent, were established on the basis of Tenant's
expected business operations. Notwithstanding anything in this Lease to the
contrary, in the event Tenant becomes subject to voluntary or involuntary
proceedings under the Act and Tenant or any trustee, receiver or other
custodian of Tenant or of its assets or properties shall assign this Lease, any
and all amounts paid or to be paid by or for the account of the assignee in
consideration of such assignment shall be and remain the property of the
Landlord and any and all such amounts received by Tenant or such trustee,
receiver or custodian shall be held in trust for the Landlord and remitted to
the Landlord promptly after receipt thereof.
44. DEFAULT: A. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant and shall give rise to Landlord's
remedies set forth in Paragraph 44(B) below: (i) failure to make when due any
payment of Rent, unless such failure is cured within five (5) days of the due
date of such payment; (ii) failure to observe or perform any term or condition
of this Lease other than the payment of Rent, following written notice, unless
such failure is cured within any period of time specified in other Paragraphs
of this Lease or otherwise within a reasonable time, but in no event more than
fifteen (15) days following written notice plus such additional time as may be
required due to Unavoidable Delays as described herein, and (iii) (a) making by
Tenant or any guarantor of this Lease ("Guarantor") any general assignment for
the benefit of creditors, (b) filing by or against Tenant or any Guarantor of a
petition to have Tenant or such Guarantor adjudged a bankrupt or a petition for
reorganization or arrangement under any Law relating to bankruptcy or
insolvency (unless, in the case of a petition filed against Tenant or such
Guarantor, the same is dismissed within ninety [90] days), (c) appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located in the Premises or of Tenant's interest in this Lease, where possession
is not restated to Tenant within thirty (30) days, (d) attachment, execution or
other judicial disposition of substantially all of Tenant's assets located on
the Premises or of Tenant's interest in this Lease, (e) Tenant's or any
Guarantor's convening of a meeting of its creditors or any class thereof for
the purpose of effecting a moratorium upon or composition of its debt, (f)
Tenant's or any Guarantor's insolvency or admission of an inability to pay its
debts as they mature, or (g) a violation by Tenant or any affiliate of Tenant
under any other lease or agreement with Landlord relating to the Shopping
Center which is not cured within the time permitted for cure thereunder.
Failure by Tenant to comply with the same term or condition of this Lease on
two occasions during any twelve month period shall cause any failure to comply
with such term or condition during the succeeding twelve month period, at
Landlord's option, to constitute a default without any notice of the same being
required by Landlord and the same shall constitute, at Landlord's option, an
incurable Default. The notice and cure periods provided herein are in lieu of,
and not in addition to, any notice and cure periods provided by Law; provided,
Landlord may at any time and from time to time elect to comply with such notice
and cure periods as may be provided by Law in lieu of the notice and cure
periods provided herein.
B. Remedies. If a Default occurs, Landlord shall have the rights
and remedies hereinafter set forth to the extent permitted by Law, which shall
be distinct, separate and cumulative with and in addition to any other right or
remedy allowed under any Law or other provisions of this Lease:
(1) Termination of Lease. Upon the occurrence of a default by
Tenant hereunder, Landlord may, terminate this Lease by giving written notice
thereof to Tenant (whereupon all obligations and liabilities of Landlord
hereunder shall terminate) and, without further notice and without liability,
repossess the Premises. Landlord shall be entitled to recover all loss and
damage Landlord may suffer by reason of such termination, whether through
inability to relet the Premises on satisfactory terms or otherwise, including
without limitation, the following (without duplication by any element of
damages):
(a) accrued Rent to the date of termination and late
charges, plus interest thereon at the default interest rate from the date due
through the date paid or date of any judgment or award by any court of
competent jurisdiction, the unamortized cost of Tenant's improvements, brokers'
fees and commissions, attorneys' fees, moving allowances and any other costs
incurred by Landlord in connection with making or executing this Lease, the
cost of recovering the Premises and the costs of reletting the Premises
(including, without limitation, advertising costs, brokerage fees, leasing
commissions, reasonable attorneys' fees and refurbishing costs and other costs
in readying the Premises for a new tenant);
31
<PAGE> 36
(b) the present value of the Rent (discounted at a rate
of interest equal to eight percent [8.0%] per annum [the "Discount Rate"]) that
would have accrued under this Lease for the balance of the Lease term but for
such termination, reduced by the reasonable fair market rental value of the
Premises for such balance of the Lease term (determined from the present value
of the actual base rents, discounted at the Discount Rate, received and to be
received from Landlord's reletting of the Premises or, if the Premises are not
relet, the base rents, discounted at the Discount Rate, that would be received
from a comparable lease and comparable tenant for a comparable term and taking
into account among other things, the condition of the Premises, market
conditions and the period of time the Premises may reasonably remain vacant
before Landlord is able to re-lease the same to a suitable replacement tenant,
it being agreed that Landlord shall have no obligation to relet or attempt to
relet the Premises); and any other amounts necessary to compensate Landlord for
all damages proximately caused by Tenant's failure to perform its obligations
under this Lease. For purposes of computing the amount of Rent herein that
would have accrued for the termination date, Tenant's obligation for Percentage
Rent shall be projected based on Tenant's average annual Gross Sales for the 36
months (or lesser period, if 36 months of the Term have not expired) preceding
Tenant's Default, and Tenant's obligations for Taxes, Center Expenses, and
Promotion and Media Fund Charges shall be projected, based upon the average
rate of increase, if any, in such items from the Commencement Date through the
termination date;
(c) plus any other costs or amounts necessary to
compensate Landlord for its damages.
(2) Repossession and Re-entry. Upon the occurrence of a
default by Tenant hereunder, Landlord may, immediately terminate Tenant's right
of possession of the Premises (whereupon all obligations and liability of
Landlord hereunder shall terminate), but not terminate this Lease, and, without
notice, demand or liability, enter upon the Premises or any part thereof, take
absolute possession of the same, expel or remove Tenant and any other person or
entity who may be occupying the Premises and change the locks. If Landlord
terminates Tenant's possession of the Premises under this subparagraph 44B(2)
(i) Landlord shall have no obligation whatsoever to tender to Tenant a key for
new locks installed in the Premises, (ii) Tenant shall have no further right to
possession of the Premises, and (iii) Landlord shall have no obligation
whatsoever to relet or attempt to relet the Premises. Landlord may, however, at
its sole option relet the Premises or any part thereof for such terms and such
rents as Landlord may in its sole discretion elect. If Landlord elects to relet
the Premises, rent received by Landlord from such reletting shall be applied
first, to the payment of any indebtedness other than Rent due hereunder from
Tenant to Landlord (in such order as Landlord shall designate), second, to the
payment of any cost of such reletting, including, without limitation,
refurbishing costs, reasonable attorneys' fees, advertising costs, brokerage
fees and leasing commissions and third, to the payment of Rent due and unpaid
hereunder (in such order as Landlord shall designate), and Tenant shall satisfy
and pay to Landlord any deficiency upon demand therefor from time to time.
Landlord shall not be responsible or liable for any failure to relet the
Premises or any part thereof or for any failure to collect rent due upon any
such reletting. No such re-entry or taking of possession of the Premises by
Landlord shall be construed as an election on Landlord's part to terminate this
Lease unless a written notice of such termination is given to Tenant pursuant
to subparagraph 44(B)(1) above. If Landlord relets the Premises, either before
or after the termination of this Lease, all such rentals received from such
lease shall be and remain the exclusive property of Landlord and Tenant shall
not be, at any time, entitled to recover any such rental. Landlord may at any
time after a reletting elect to terminate this Lease.
(3) Continuing Obligations. No repossession of or re-entering
upon the Premises or any part thereof pursuant to subparagraph 44(B)(2) above
or otherwise and no reletting of the Premises or any part thereof pursuant to
subparagraph 44(B)(2) above shall relieve Tenant or any Guarantor of its
liabilities and obligations hereunder, all of which shall survive such
repossession or re-entering. In the event of any such repossession of or
re-entering upon the Premises or any part thereof by reason of the occurrence
of a default, Tenant will continue to pay to Landlord Rent required to be paid
by Tenant.
(4) Cumulative Remedies. No right or remedy herein conferred
upon or reserved to Landlord is intended to be exclusive of any other right or
remedy and each and every right and remedy shall be cumulative and in addition
to any other right or remedy given hereunder or now or hereafter existing at
law or in equity or by statute. In addition to the other remedies provided in
this Lease, Landlord shall be entitled, to the extent permitted by applicable
law, to injunctive relief in case of the violation, or attempted
32
<PAGE> 37
or threatened violation, of any of the covenants, agreements, conditions or
provisions of this Lease, as to a degree compelling performance of any of the
covenants, agreements, conditions or provisions of this Lease or to any other
remedy allowed to Landlord at law or in equity.
(5) Specific Performance and Collection of Rent. Landlord
shall at all times have the right without prior demand or notice except as
required by applicable Law to: (i) seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease or restrain or enjoin a
violation of any provision hereof, and Tenant hereby waives any right to
require that Landlord post a bond in connection therewith, and (ii) sue for and
collect any unpaid Rent which has accrued.
(6) Late Charges and Interest. If Landlord rightfully issues a
notice to Tenant that Tenant has violated this Lease, Tenant shall pay
Landlord, as Additional Rent, an additional notice charge in the amount of One
Hundred Dollars ($100.00) therefor. In addition, any Rent not paid when due
shall accrue interest from the due date at the Default Rate until payment is
received by Landlord. Such notice charges and interest payments shall not be
deemed consent by Landlord to late payments, nor a waiver of Landlord's rights
to insist upon timely payments at any time, nor a waiver of any remedies to
which Landlord is entitled as a result of the late payment of Rent.
(7) Landlord's Cure of Tenant Defaults. If Tenant fails to
perform any obligation under this Lease for five (5) days after notice thereof
by Landlord (except that no notice shall be required in emergencies), Landlord
shall have the right (but not the duty), to perform such obligation on behalf
and for the account of Tenant. In such event, Tenant shall reimburse Landlord
upon demand, as additional Rent, for all expenses incurred by Landlord in
performing such obligation together with an amount equal to fifteen percent
(15%) thereof for Landlord's overhead, and interest thereon at the Default Rate
from the date such expenses were incurred. Landlord's performance of Tenant's
obligations hereunder shall not be deemed a waiver or release of Tenant
therefrom.
(8) Bad Rent Checks. If during the Term, as it may be
extended, Landlord receives two (2) or more checks from Tenant which are
returned by Tenant's bank for insufficient funds, Landlord may require that all
checks thereafter be bank certified or cashier's checks (without limiting
Landlord's other remedies). All bank service charges resulting from any bad
checks shall be borne by Tenant.
(9) Other Matters. No re-entry or repossession, repairs,
changes, alterations and additions, reletting, acceptance of keys from Tenant,
or any other action or omission by Landlord shall be construed as an election
by Landlord to terminate this Lease or Tenant's right to possession, or accept
a surrender of the Premises, nor shall the same operate to release the Tenant
in whole or in part from any of Tenant's obligations hereunder, unless express
written notice of such intention is sent by Landlord or its agent to Tenant.
Landlord may bring suits for amounts owed by Tenant hereunder or any portions
thereof, as the same accrue or after the same have accrued, and no suit or
recovery of any portion due hereunder shall be deemed a waiver of Landlord's
right to collect all amounts to which Landlord is entitled hereunder, nor shall
the same serve as any defense to any subsequent suit brought for any amount not
therefor reduced to judgment. Landlord may pursue one or more remedies against
Tenant and need not make an election of remedies until findings of fact are
made by a court of competent jurisdiction. All rent and other consideration
paid by any replacement tenants shall be applied, at Landlord's option; first,
to the Costs of Reletting, second, to the payment of all costs of enforcing
this Lease against Tenant or any Guarantor, third, to the payment of all
interest and service charges accruing hereunder fourth, to the payment of Rent
theretofore accrued, and the residue, if any, shall be held by Landlord and
applied to the payment of other obligations of Tenant to Landlord as the same
become due (with any remaining residue to be retained by Landlord). "Costs of
Reletting" shall include without limitation, all reasonable costs and expenses
incurred by Landlord for any repairs, maintenance, changes, alterations and
improvements to the Premises (whether to prevent damage or to prepare the
Premises for reletting), brokerage commissions, advertising costs, attorneys'
fees, any economic incentives given to enter leases with replacement tenants,
and costs of collecting rent from replacement tenants. Landlord shall be under
no obligation to observe or perform any provision of this Lease on its part to
be observed or performed which accrues after the date of any Default by Tenant.
The times set forth herein for the curing of violations by Tenant are of the
essence of this Lease. Tenant hereby irrevocably waives any right otherwise
available under any Law to redeem or reinstate this
33
<PAGE> 38
Lease or Tenants' right to possession after this Lease or Tenant's right to
possession is terminated based on a Default by Tenant.
C. Mitigation of Damages. If Landlord terminates this Lease or
Tenant's right to possession, Landlord shall have no obligation to mitigate
Landlord's damages except to the extent required by applicable Law. If Landlord
has not terminated this Lease or Tenant's right to possession, Landlord shall
have no obligation to mitigate under any circumstances and may permit the
Premises to remain vacant or abandoned. If Landlord is required by applicable
Law to mitigate damages under this Lease: (a) Landlord shall be required only
to use reasonable efforts to mitigate, which shall not exceed such efforts as
Landlord generally uses to lease other space at the Shopping Center, (b)
Landlord will not be deemed to have failed to mitigate if Landlord leases any,
other portions of the Shopping Center before reletting all or any portion of
the Premises, and (c) any failure to mitigate as described herein with respect
to any period of time shall only reduce the Rent and other amounts to which
Landlord is entitled hereunder by the reasonable rental value of the Premises
during such period, taking into account among other things, the condition of
the Premises, market conditions and the period of time the Premises may
reasonably remain vacant before Landlord is able to re-lease the same to a
suitable replacement tenant, and Cost of Reletting (as defined in subparagraph
[B][1]) that Landlord may incur in order to enter into such replacement lease.
In recognition that the value of the Shopping Center depends on the rental
rates and terms of leases therein, Landlord's rejection of a prospective
replacement tenant based on an offer of rentals below Landlord's published
rates for new leases of comparable space at the Shopping Center at the time in
question, or at Landlord's option, below the rates provided in this Lease, or
containing terms less favorable than those contained herein, shall not give
rise to a claim by Tenant that Landlord failed to mitigate Landlord's damages.
D. Defaults By Landlord. Landlord shall be in default under this
Lease if Landlord fails to perform any of its obligations hereunder and said
failure continues for a period of thirty (30) days after Tenant delivers
written notice thereof to Landlord (to each of the addresses required by this
Section) and each mortgagee who has a lien against any portion of the Property
and whose name and address has been provided to Tenant, provided that if such
failure cannot reasonably be cured within said thirty (30) day period, Landlord
shall not be in default hereunder if the curative action is commenced within
said thirty (30) day period and is thereafter diligently pursued until cured.
In no event shall (i) Tenant claim a constructive or actual eviction or that
the Premises have become unsuitable hereunder or (ii) a constructive or actual
eviction or breach of the implied warranty of suitability be deemed to have
occurred under this Lease, prior to the expiration of the notice and cure
periods provided under this subparagraph 44(D). Any notice of a failure to
perform by Landlord shall be sent to Landlord at the addresses and to the
attention of the parties set forth in the Basic Lease Provisions. Any notice of
a failure to perform by Landlord not sent to Landlord at all addresses and/or
to the attention of all parties required under this Paragraph and to each
mortgagee who is entitled to notice or not sent in compliance with Paragraph 57
below shall be of no force or effect.
E. CERTAIN LIMITATIONS ON LANDLORD'S LIABILITY. UNLESS OTHERWISE
COVERED IN THE LEASE OR CAUSED BY LANDLORD'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, LANDLORD SHALL NOT BE LIABLE TO TENANT FOR ANY CLAIMS, ACTIONS,
DEMANDS, COSTS, EXPENSES, DAMAGE OR LIABILITY OF ANY KIND (I) ARISING OUT OF
THE USE, OCCUPANCY OR ENJOYMENT OF THE PREMISES BY TENANT OR ANY PERSON THEREIN
OR HOLDING UNDER TENANT OR BY OR THROUGH THE ACTS OR OMISSIONS OF ANY OF THEIR
RESPECTIVE EMPLOYEES, OFFICERS, AGENTS, INVITEES OR CONTRACTORS, (II) CAUSED BY
OR ARISING OUT OF FIRE, EXPLOSION, FALLING SHEETROCK, GAS, ELECTRICITY, WATER,
RAIN, SNOW OR DAMPNESS, OR LEAKS IN ANY PART OF THE PREMISES, (III) CAUSED BY
OR ARISING OUT OF DAMAGE TO THE ROOF, PIPES, APPLIANCES OR PLUMBING WORKS OR
ANY DAMAGE TO OR MALFUNCTION OF HEATING, VENTILATION OR AIR CONDITIONING
EQUIPMENT OR (IV) CAUSED BY TENANTS OR ANY PERSONS EITHER IN THE PREMISES OR
ELSEWHERE IN THE BUILDING (OTHER THAN COMMON AREAS) OR BY OCCUPANTS OF PROPERTY
ADJACENT TO THE BUILDING OR COMMON AREAS OR BY THE PUBLIC OR BY THE
CONSTRUCTION OF ANY PRIVATE, PUBLIC OR QUASI-PUBLIC WORK. IN NO EVENT SHALL
LANDLORD BE LIABLE TO TENANT FOR ANY LOSS OF OR DAMAGE TO PROPERTY OF TENANT OR
OF OTHERS LOCATED IN THE PREMISES OR THE BUILDING BY REASON OF THEFT OR
BURGLARY.
34
<PAGE> 39
F. WAIVER OF CONSUMER RIGHTS, TEXAS DECEPTIVE TRADE PRACTICES ACT IT
IS THE INTENT OF LANDLORD AND TENANT TO WAIVE ALL OF THE PROVISIONS OF THE
TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, AS SUCH PROVISIONS
ARE OR MAY BE APPLICABLE TO THIS LEASE. TENANT WAIVES ALL ITS RIGHTS UNDER THE
TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET.
SEQ. OF THE TEXAS BUSINESS AND COMMERCE CODE (THE "DTPA"), A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY
OF TENANT'S OWN SELECTION, TENANT VOLUNTARILY CONSENTS TO THIS WAIVER. THE
FOREGOING WAIVER BY TENANT IS ALSO BINDING ON ANY PERMITTED SUCCESSOR OR ASSIGN
OF TENANT UNDER THIS LEASE. THE PROVISIONS OF THIS PARAGRAPH SURVIVE ANY
TERMINATION OF THIS LEASE. TENANT REPRESENTS TO LANDLORD:
(A) TENANT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION WITH RESPECT TO THIS LEASE AND THE TRANSACTION EVIDENCED
HEREBY.
(B) TENANT IS REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH
THIS LEASE.
45. LANDLORD'S LIENS: Tenant hereby expressly grants to Landlord a security
interest in and an express contractual lien upon Tenant's or any other party's
goods, wares, equipment, signs, fixtures, furniture and other personal property
situated in or on the Premises, including all after-acquired property,
replacements and proceeds ("secured property") to secure the performance by
Tenant of its obligations under this Lease, and such property shall not be
removed from the Premises without the written consent of Landlord until all
rents and other sums of money then due to Landlord shall have first been paid
except for the sale of inventory in the ordinary course of Tenant's business so
long as such inventory is replaced by Tenant. Tenant hereby appoints Landlord
as Tenants attorney-in-fact and authorizes Landlord to execute and to file
financing statements signed only by Landlord (as attorney-in-fact) covering
such security or to otherwise take such action as may be necessary to perfect
such security interest and/or contractual lien. Upon an occurrence of an Event
of Default by Tenant, Landlord may, in addition to any other remedies, enter
upon the Premises and take possession of such secured property situated on the
Premises without liability for trespass or conversion, and sell the same with
notice at public or private sale, with or without having such property at the
sale, at which Landlord or its assigns may purchase, and may apply the proceeds
thereof less any and all expenses connected with the taking of possession and
sale of the property, as a credit against any sums due by Tenant to Landlord.
Any surplus shall be paid to Tenant, and Tenant agrees to pay any deficiency
forthwith, after demand. Landlord, at its option may foreclose said security
interest and/or contractual lien in the manner provided by law. The security
interest and contractual lien herein granted to Landlord shall be in addition
to any Landlord's lien that may now or at any time hereafter be provided by
law.
46. ACCESS TO PREMISES: Landlord and its authorized representatives shall
have the right to enter upon the Premises during all regular business hours for
the purpose of inspecting or exhibiting the same to prospective purchasers,
mortgagees and tenants. Landlord shall have the right to maintain and repair
all utility equipment, in, upon, above or under the Premises as may be
necessary for the servicing of the Premises and/or other portions of the
Shopping Center. Landlord shall also have the right to enter the Premises
during all regular business hours (and in emergencies at all times) for the
purpose of making any repairs to the Premises or to the building of which it
forms a part as Landlord may deem necessary, and for any other lawful purpose;
and in connection therewith, Landlord shall have the right to take materials,
tools and equipment in, through or above the Premises that may be required
without the same constituting an actual or constructive eviction of Tenant from
the Premises or any part thereof. Nothing herein shall be deemed to impose any
duty upon Landlord to do any such work which Tenant is required to perform, and
the performance thereof by Landlord shall not be a waiver of Tenant's default
in failing to perform the same. Landlord shall not be liable for any
inconvenience, disturbance, loss of business or other damage to Tenant due to
the performance by Landlord of any work in, upon, above or under the Premises
or for bringing materials, tools and equipment in, through or above the
Premises, and the obligations of Tenant under this Lease shall not thereby be
affected in any manner, nor shall the same constitute any ground for an
abatement of any rents, provided, however, Landlord shall use reasonable
efforts not to interfere with the
35
<PAGE> 40
conduct of Tenant's business in the Premises, but Landlord shall not be
required to incur any expense nor perform work during hours or days other than
regular business hours and days. If Tenant or its' employees shall not be
present to permit an entry into the Premises when an emergency or casualty
occurs, Landlord may enter by the use of force or otherwise without rendering
Landlord liable and without in any manner affecting Tenant's obligations under
this Lease. During the period commencing twelve (12) months prior to the
expiration of the Lease Term (or any renewal term), Landlord may place upon the
exterior of the Premises "For Lease," "To Let" or "For Rent" signs of
reasonable size which signs shall not be removed, obliterated or hidden by
Tenant.
47. EXCAVATION: If any excavation shall be made upon land adjacent to the
Premises, Tenant shall permit the party authorized to cause such excavation to
be made to enter upon the Premises for the purpose of doing work as such party
may deem necessary to preserve the wall of the building of which the Premises
forms a part from damage and to support the same with foundations and shoring,
and Tenant hereby waives all claims for inconvenience, disturbance, loss of
business or other damages against Landlord and without in any manner affecting
Tenant's obligations under this Lease, nor shall the same constitute any ground
for an abatement of any rents, provided, however, Landlord shall use reasonable
efforts not to interfere with or interrupt the conduct and operation of
Tenant's business in the Premises, but Landlord shall not be required to incur
any expense nor perform work during hours or days other than regular business
hours and days.
48. SUBORDINATION: Landlord and Tenant agree that this Lease be and is
subject and subordinate at all times to all covenants, restrictions, easements,
reciprocal easement agreements, and ground and underlying leases now or
hereafter affecting the fee title of the Shopping Center property and to all
modifications, amendments and supplements thereto. At Landlord's option, this
Lease shall be and the same is subject and subordinate at all times to all
mortgages or any other method of financing or refinancing in any amounts, and
all advances thereon, which may now or hereafter be placed against or affect
any or all of the land and/or the Premises and/or any or all of the buildings
and improvements now or at any time hereafter constituting a part of or
adjoining the Shopping Center, and to all renewals, modifications,
consolidations, participations, replacements and extensions thereof and to any
reciprocal easement agreement affecting the Shopping Center or any
modifications, amendments or supplements thereto. The term "mortgages" as used
herein shall be deemed to include trust indentures and deeds of trust. The
aforesaid provisions shall be self-operative and no further instrument or
subordination shall be necessary unless required by any such ground or
underlying lessors or mortgagees. Should Landlord or any ground or underlying
lessors or mortgagees desire confirmation of such subordination, the Tenant,
within ten (10) days following Landlord's written request therefore, agrees to
execute and deliver, without charge, any and all documents (in form acceptable
to such ground or underlying lessors or mortgagees) subordinating this Lease
and the Tenant's rights hereunder. Should any such ground or underlying lessors
or mortgagees request that this Lease be made superior, rather than
subordinate, to any such ground or underlying lease and/or mortgage, then
Tenant, within ten (10) days following Landlord's written request therefor
agrees to execute and deliver, without charge, any and all documents (in form
acceptable to such ground or underlying lessors or mortgagees) effectuating
such priority.
49. ATTORNMENT: Tenant agrees that in the event of a sale, transfer, or
assignment of the Landlord's interest in the Shopping Center or any part
thereof, including the Premises, or in the event that any proceedings are
brought for the foreclosure of or for the exercise of any power of sale under
any mortgage made by Landlord covering the Shopping Center or any part thereof,
including the Premises, or in the event of a cancellation or termination of any
ground or underlying lease covering the Shopping Center or any part thereof,
including the Premises, to attorn to and to recognize such transferee,
purchaser, ground or underlying lessor or mortgagee as Landlord under this
Lease.
50. ATTORNEY-IN-FACT: In the event tenant shall fail or refuse to execute
and deliver to Landlord the documents mat may be requited to evidence the
intent of Paragraphs 4, 42, 45 and 48 hereof within ten (10) days after
Landlord's written request therefor, and after Landlord shall have given to
Tenant a further ten (10) day notice thereof, Tenant hereby irrevocably
appoints Landlord as attorney-in-fact for Tenant with full power and authority
to execute and deliver such instruments for and in the name of Tenant.
51. QUIET ENJOYMENT: If Tenant timely pays the rents reserved and performs
all of the other terms, covenants and conditions of this Lease on the Tenant's
part to be performed, then Tenant shall peaceably
36
<PAGE> 41
and quietly have, hold and enjoy the Premises during the Lease Term, subject to
the terms of this Lease, and to any mortgages, ground or underlying lease&
agreement and encumbrances to which this ease is or may be subordinated.
52. UNAVOIDABLE DELAYS: The provisions of this Paragraph shall be applicable
if there shall occur any strikes, lockouts or labor disputes, inability to
obtain labor or materials or reasonable substitutes therefor or acts of God,
governmental restrictions, regulations or controls, enemy or hostile government
action, civil commotion, fire or other casualty or other conditions similar or
dissimilar to those enumerated in this Paragraph beyond the reasonable control
of the party obligated to perform and commonly referred to as "force majeure."
If Landlord or Tenant shall, as a direct result of any of the above mentioned
events, fail to timely perform any obligation on its part to be performed, then
the time period for such performance shall be extended and such failure shall
be excused and not be a breach of this Lease by the applicable party in
question, but only to the extent and for the time occasioned by such event. The
provisions of this Paragraph shall not apply to Tenant's obligation to pay when
due, the Fixed Minimum Rent or any additional rents or sums or charges; and in
addition, lack of funds and inability to procure financing shall not be deemed
to be an event beyond the reasonable control of Tenant. In the event of such an
unavoidable delay and as a condition precedent to either Landlord or Tenant
claiming or relying upon such delay, the applicable party shall give notice in
writing describing such event to the other party within ten (10) days after the
occurrence of same.
53. SURRENDER OF PREMISES:Upon the expiration or sooner termination of the
Lease Term, Tenant agrees to quit and surrender the Premises, broom-clean, in
good condition and repair, reasonable use, wear and tear, natural deterioration
and insured casualty excepted, together with all keys and combinations to
locks, safes and vaults and all improvements, alterations, additions, lighting
fixtures and equipment at any time made or installed in, upon or to the
interior or exterior of the Premises (except personal property, signs and trade
fixtures put in at Tenant's expense) all of which shall then become the
property of Landlord without any claim by Tenant, but the surrender of such
property to Landlord shall not be deemed to be a payment of rent or in lieu of
any rent reserved hereunder. Before surrendering the Premises, Tenant shall
remove all of Tenant's personal property, signs and trade fixtures and any and
all materials, substances, devices or equipment defined as hazardous or
otherwise controlled under any governmental law, rule or regulation and, at
Landlord's option, Tenant shall also remove any alterations, additions,
fixtures, equipment and decorations at any time made or installed by Tenant in,
upon or to the interior or exterior of the Premises, and Tenant shall repair
any damage caused thereby. If Tenant shall fail to remove any of Tenant's
personal property and trade fixtures, then at the option of Landlord, the same
shall either be deemed abandoned and become the exclusive property of Landlord,
or Landlord shall have the right to remove and store said property, at the
expense of Tenant, without further notice to or demand upon Tenant and hold
Tenant responsible for any and all charges and expenses incurred by Landlord
therefor. If Tenant shall leave any of said personal property or trade fixtures
on the Premises with Landlord's consent, then Landlord shall have the right to
remove and store such property, at the expense of the Tenant, upon twenty-four
(24) hours notice to Tenant and to hold Tenant responsible for any and all
charges and expenses incurred therefor. If Tenant shall fail to remove any
hazardous or controlled materials, substances, devices or equipment, then
Landlord shall have the right, without further notice or demand, to cause the
removal of such hazardous or controlled materials, substances, devices or
equipment and hold Tenant responsible for any and all cost incurred therefor.
If the Premises be not surrendered as and when aforesaid and after Landlord
shall have given to Tenant a three (3) day notice to quit, Tenant shall
indemnify Landlord against all loss or liability resulting from the delay of
Tenant in so surrendering the same, including, without limitation, any claims
made by any succeeding occupant founded on such delay. Tenant's obligations
under this Paragraph shall survive the expiration or sooner termination of the
Lease Term.
54. HOLDING OVER: Should Tenant remain in possession of the Premises after
the expiration of the Lease Term (or any renewal term hereof) without the
execution of a new lease, such holding over shall be deemed to have created and
be construed as a tenancy from month-to-month terminable on thirty (30) days'
written notice by either party to the other, at a monthly rental equal to twice
the sum of (i) the monthly installment of Minimum Rent payable during the last
month of the Lease Term, (ii) one-twelfth (1/12th) of the average Percentage
Rent payable for the last three Lease Years, (iii) one-twelfth (1/12th) of the
Tax Charge payable for the last Lease Year of the Lease Term, (iv) the monthly
Common Area Charge payable
37
<PAGE> 42
for such month, (v) the monthly Sprinkler Charge, (vi) the monthly Water
Charge, (vii) the monthly Marketing Charge, and (viii) one-twelfth (1/12th) of
the Insurance Charge, subject to all the other conditions, provisions and
obligations of the Lease insofar as the same are applicable to a month-to-month
tenancy. Tenant shall not interpose any counterclaim or counterclaims in a
summary proceeding or other action based on holdover except for mandatory or
compulsory counterclaims under the procedural laws of the state where the
Shopping Center is located.
55. RELATIONSHIP OF PARTIES: Nothing contained in this Lease shall be
deemed, construed or implied as creating the relationship of principal and
agent, partnership, joint venture or any other relationship between the parties
hereto, other than the relationship of Landlord and Tenant.
56. NO WAIVER: The failure of Landlord or Tenant to insist upon the strict
performance of any provisions of this Lease, or the failure of Landlord or
Tenant to exercise any right, option or remedy hereby reserved shall not be
construed as a future waiver of any such provision, right, option or remedy or
as a waiver of a subsequent breach thereof. The consent or approval by Landlord
of any act by Tenant requiring Landlord's consent or approval shall not be
construed to waive or render unnecessary the requirement for Landlord's consent
or approval of any subsequent similar act by Tenant. The receipt by Landlord of
rent or other charges with knowledge of a breach of any provision of this Lease
shall not be deemed a waiver unless such waiver shall be specific, in writing,
and signed by the Landlord. No payment by Tenant or receipt by Landlord of a
lesser amount than the rents and/or other charges hereby reserved shall be
deemed to be other than on account of the earliest rents and/or charges then
unpaid, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment by Tenant be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice
to Landlord's right to recover the balance of such rents and/or other charges
due or Landlord may pursue any other remedy in this Lease or by law provided,
and no waiver by Landlord in favor of any other tenant or occupant of the
Shopping Center or Department Store adjoining the Shopping Center shall
constitute a waiver in favor of the Tenant.
57. NOTICES: Every notice, demand, request or other communication which may
be or is required to be given under this Lease shall be in writing and shall be
sent by recognized overnight carrier, United States Certified or Registered
Mail, postage prepaid, return receipt requested, and shall be addressed: (a) if
to Landlord, to the address referred to in subparagraph 1B of this Lease, with
a copy to Legal Department, 51 JFK Parkway, 2nd Floor, Short Hills, New Jersey
07078, and (b) if to Tenant, to Tenant's Address; and the same shall be deemed
delivered when deposited in the United States Mail. Either party may designate,
by written notice to the other party, any other address for such purposes. Each
of the parties hereto waive personal or any service other than as provided for
in this Paragraph. Either party may, however, give the other party telegraphic
notice of the need for emergency repairs subject to subsequent formal notice as
above provided.
58. RECORDING: Tenant shall not record this Lease or any memorandum thereof
without the prior written consent of the Landlord.
59. PARTIAL INVALIDITY: If any provision of this Lease or the application
thereof to any person or circumstance shall to any extent be held void and
invalid, then the remainder of this Lease or the application of such provision
to persons or circumstances other than those as to which it is held void or
invalid shall not be affected thereby, and each provision of this Lease shall
be valid and enforced to the fullest extent permitted by law.
60. BROKER'S COMMISSIONS: Tenant covenants, warrants and represents to
Landlord that there was no broker instrumental in consummating this Lease and
that no conversation nor prior negotiations were had by Tenant with any broker
concerning the renting of the Premises other than Terranomics Retail Services,
Inc., whose commission shall be paid by Landlord pursuant to separate
agreement. Tenant agrees to indemnify and hold Landlord harmless against and
from all liabilities, including reasonable attorney's fees, arising from any
claims for brokerage commissions or finders fees resulting from or arising out
of any conversations or negotiations had by Tenant with any broker.
38
<PAGE> 43
61. DEFINITION OF LAW(S): "Law" or "Laws" shall mean all applicable federal,
state, county and local governmental and municipal laws, statutes, ordinances,
rules, regulations, codes, decrees orders and other such requirements, as from
time to time are in force or promulgated applicable equitable remedies and
decisions by courts in cases where such decisions are binding precedents in the
state in which the Shopping Center is located, and decisions of federal courts
applying the Laws of such state.
62. PROVISIONS BINDING: Except as otherwise expressly provided in this
Lease, all covenants, conditions and provisions of this Lease shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns. Each provision of this
Lease to be performed by Tenant shall be construed to be both a covenant and a
condition, and if there shall be more than one Tenant, they shall all be bound,
jointly and severally, by the provisions of this Lease.
63. ENTIRE AGREEMENT, ETC.: (a) This Lease, including the Exhibits attached
hereto, sets forth the entire agreement between the parties.
(b) All prior conversations or writings between the parties or their
representatives are merged herein and extinguished.
(c) This Lease shall not be modified except by a writing signed by
the parties, nor may this Lease be cancelled by Tenant or the Premises
surrendered except with the express written authorization of Landlord, unless
otherwise specifically provided herein.
(d) The initial submission by Landlord to Tenant of this Lease shall
be deemed to be solely for Tenant's consideration and not for acceptance and
execution. Such submission shall have no binding force and effect, shall not
constitute an option for the leasing of the Premises, and shall not confer any
rights or impose any obligations upon either party. The submission by Landlord
of this Lease for execution by Tenant and the actual execution and delivery
thereof by Tenant to Landlord shall similarly have no binding force and effect
unless and until Landlord shall execute this Lease and a counterpart thereof is
delivered to Tenant.
(e) If any provision contained in any attached Exhibit is
inconsistent or in conflict with any printed provision of this Lease, the
provision contained in such Exhibit shall supersede said printed provision and
shall be paramount and superior.
(f) Tenant hereby acknowledges that this Lease shall not be deemed,
interpreted or construed to contain, by implication or otherwise, any warranty,
representation or agreement on the part of Landlord that any Department Store
or regional or national chain store or any other merchant shall open or remain
open for business or occupy or continue to occupy any premises in or adjoining
the Shopping Center during the Lease Term or any part thereof and Tenant hereby
expressly waives all claims with respect thereto and acknowledges that Tenant
is not relying on any such warranty, representation or agreement by Landlord
either as a matter of inducement in entering into this Lease or as a condition
of this Lease or as a covenant by Landlord.
(g) The captions, numbers, and index appearing herein are inserted
only as matter of convenience and are not intended to define, limit, or
describe the scope or intent of any Paragraph, nor in any way affect this
Lease.
64. WAIVER OF LIABILITY: (A) ANYTHING CONTAINED IN THIS LEASE TO THE
CONTRARY NOTWITHSTANDING, TENANT AGREES THAT TENANT SHALL LOOK SOLELY TO THE
ESTATE AND PROPERTY OF THE LANDLORD IN THE LAND, AND BUILDINGS COMPRISING THE
SHOPPING CENTER OF WHICH THE PREMISES FORMS A PART AND THE NET RENTALS
THEREFROM FOR THE COLLECTION OF ANY JUDGMENT, (OR OTHER JUDICIAL PROCESS)
REQUIRING THE PAYMENT OF MONEY BY LANDLORD IN THE EVENT OF ANY DEFAULT OR
BREACH BY LANDLORD WITH RESPECT TO ANY OF THE TERMS AND PROVISIONS OF THIS
LEASE TO BE OBSERVED AND/OR PERFORMED BY LANDLORD, SUBJECT, HOWEVER, TO THE
PRIOR RIGHTS OF ANY GROUND OR UNDERLYING LESSOR OR THE HOLDER OF ANY MORTGAGE
COVERING
39
<PAGE> 44
THE SHOPPING CENTER; AND NO OTHER ASSETS OF THE LANDLORD SHALL BE SUBJECT TO
LEVY, EXECUTION OR OTHER JUDICIAL PROCESS FOR THE SATISFACTION OF TENANT'S
CLAIMS. IN THE EVENT LANDLORD CONVEYS OR TRANSFERS ITS INTEREST IN THE
SHOPPING CENTER OR IN THIS LEASE, EXCEPT AS COLLATERAL SECURITY FOR A LOAN,
UPON SUCH CONVEYANCE OR TRANSFER LANDLORD (AND IN THE CASE OF ANY SUBSEQUENT
CONVEYANCES OR TRANSFERS, THE THEN GRANTOR OR TRANSFEROR) SHALL BE ENTIRELY
RELEASED AND RELIEVED FROM ALL LIABILITY WITH RESPECT TO THE PERFORMANCE OF ANY
COVENANTS AND OBLIGATIONS ON THE PART OF THE LANDLORD TO BE PERFORMED HEREUNDER
FROM AND AFTER THE DATE OF SUCH CONVEYANCE OR TRANSFER, PROVIDED THAT ANY
AMOUNTS THEN DUE AND PAYABLE TO TENANT BY LANDLORD (OR BY THE THEN GRANTOR OR
TRANSFEROR) OR ANY OTHER OBLIGATIONS THEN TO BE PERFORMED BY LANDLORD (OR BY
THE THEN GRANTOR OR TRANSFEROR) FOR TENANT UNDER ANY PROVISIONS OF THIS LEASE,
SHALL EITHER BE PAID OR PERFORMED BY LANDLORD (OR BY THE THEN GRANTOR OR
TRANSFEROR) OR SUCH PAYMENT OR PERFORMANCE ASSUMED BY THE GRANTEE OR
TRANSFEREE; IT BEING INTENDED THAT THE COVENANTS AND OBLIGATIONS ON THE PART OF
THE LANDLORD TO BE PERFORMED SHALL, SUBJECT AS AFORESAID, BE BINDING ON
LANDLORD, ITS SUCCESSORS AND ASSIGNS ONLY DURING AND IN RESPECT OF THEIR
RESPECTIVE PERIODS OF OWNERSHIP OF AN INTEREST IN THE SHOPPING CENTER OR IN
THIS LEASE.
(b) Limitations on Landlord's Liability. Unless caused by Landlord's
gross negligence or willful misconduct, Landlord shall not be liable to Tenant
for any claims, actions, demands, costs, expenses, damage or liability of any
kind (i) arising out of the use, occupancy or enjoyment of the Premises by
Tenant or any person therein or holding Tenant under or by or through the acts
or omissions of any of their respective employees, officers, agents, invitees
or contractors, (ii) caused by or arising out of fire, explosion, falling
sheetrock, gas, electricity, water, rain, snow or dampness, or leaks in any
part of the Premises, (iii) caused by or arising out of damage to the roof,
pipes, appliances or plumbing works or any damage to or malfunction of heating,
ventilation or air conditioning equipment, or (iv) caused by tenants or any
persons either in the Premises or elsewhere in the Building (other than Common
Areas) or by occupants of property adjacent to the Building or Common Areas or
by the public or by the construction of any private, public or quasi-public
work. In no event shall Landlord be liable to Tenant for any loss of or damage
to property of Tenant or of others located in the Premises or the Building by
reason of theft or burglary.
65. TENANT STATUS: (a) If Tenant is or will be a corporation, the persons
executing this Lease on behalf of Tenant hereby covenant, represent and warrant
that Tenant is duly incorporated or a duly qualified corporation and is
authorized to do business in the State where the Shopping Center is located (a
copy of evidence thereof to be supplied to Landlord upon request); and that the
person or persons executing this Lease on behalf of Tenant is an officer or are
officers of such Tenant and that he or they as such officers are duly
authorized to sign and execute this Lease (a copy of a resolution of the same
to be supplied to Landlord upon request).
(b) Tenant agrees to furnish Landlord, from time to time, and within
thirty (30) days after Landlord's request therefor, financial statements in
accordance with generally accepted accounting principles and practices
reflecting Tenant's then current financial condition. If Tenant shall be a
corporation, the stock of which is traded on a national securities exchange,
this obligation shall be deemed satisfied by the submission of the most current
annual report prepared for Tenant's shareholders. The submission of such a
financial statement applicable to any and all Guarantors of this Lease shall
also be deemed to satisfy the obligation of this Section.
66. DELETIONS: Provisions which have been deleted from the printed portions
of the Lease or any of its Exhibits shall not be used to interpret the
remaining provisions thereof and no implication can be drawn from such deletion
nor shall such deletions be deemed to constitute a waiver, consent or
acquiescence with respect to the subject matter of the deleted provision.
40
<PAGE> 45
67. RULES AND REGULATIONS: Tenant covenants and agrees to fully comply with
all of the Rules, Regulations and agreements set forth and mentioned under
Exhibit "C" attached to this Lease and made a part hereof.
68. COUNTERPARTS: This Lease may be executed in several counterparts, each
of which shall be deemed an original, and all such counterparts shall together
constitute one and the same instrument.
69. SPECIAL STIPULATIONS: Insofar as the Special Stipulations attached as to
the Lease, if any, conflict with any of the foregoing provisions, the Special
Stipulations shall control and apply.
IN WITNESS WHEREOF, The parties hereto have respectively executed
this Lease as of the Date of Lease set forth in Paragraph 1(b).
LANDLORD: THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By and through its Agent
ATTEST: TERRANOMICS RETAIL SERVICES, INC.
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- -------------------------------- ---------------------------------------
TENANT:
ATTEST: CASA OLE' RESTAURANTS, INC.
By: /s/ PATRICK D. MORRIS
- -------------------------------- --------------------------------------
Its President Patrick D. Morris
--------------------------------------
By: (See Par. 44)
-----------------------------
Attorney for Tenant
By: (See Par. 44)
-----------------------------
Attorney for Landlord
41
<PAGE> 46
SPECIAL STIPULATIONS
To the extent the following Special Stipulations conflict with any of
the provisions contained in the Lease, the Special Stipulations shall control.
1. Tenant Remodeling; Recapture Allowance: As an inducement to Landlord's
entering into this Lease, Tenant has agreed to remodel the Premises. Tenant
shall deliver to Landlord a set of plans and specifications for its proposed
improvements within thirty (30) days of the Commencement Date, such plans being
subject to Landlord's reasonable approval. Tenant agrees to begin to remodel
the Premises within seven (7) months and to proceed diligently to complete such
remodeling. Tenant agrees to expend a minimum of one Hundred Twenty Thousand
and No/100 Dollars ($120,000.00) for such remodeling and shall deliver to
Landlord paid invoices evidencing such expenditures. Provided Tenant has
expended a minimum of One Hundred Twenty Thousand and No/100 Dollars
($120,000.00) toward such remodeling, Tenant may recapture, from its Percentage
Rent payments, up to a maximum of Sixty Thousand and No/100 Dollars
($60,000.00) (the "Recapture Allowance"). In the event Tenant's Gross Sales in
any Lease Year exceed the Percentage Rent Breakpoint of one Million
Seventy-Three Thousand Eight Hundred Thirty-Seven and 10/100, Tenant may deduct
from the Percentage Rent otherwise due and payable a portion of the Recapture
Allowance until such time as Tenant has recaptured the full Recapture
Allowance. Tenant shall provide to Landlord in its annual report of Gross
Sales, a statement specifying the amount recaptured by Tenant during the
preceding Lease Year. From and after the date Tenant has recaptured the entire
Recapture Allowance, Tenant shall commence payment of Percentage Rent as set
forth in the Lease.
2. Grease Traps: In the event Tenant prepares food in the Premises: (I)
grease traps of type designated by Landlord shall be installed and maintained
in a clean and sanitary condition and in good repair in all sinks in the
Premises, and such traps shall be cleaned on a monthly basis; (ii) Tenant shall
have the filters in the hoods for food processing exhaust systems removed daily
and washed, and shall have the hoods scraped and cleaned and exhaust ducts
cleaned a minimum of once every three (3) months, or as designated by Landlord;
and (iii) if gas is used in the Premises, Tenant shall install a proper gas
cut-off valve in the Premises. Immediately after each required cleaning of the
hoods and exhaust ducts, Tenant shall deliver an affidavit from the company
performing such service stating that such work has been performed and stating
the date of such cleaning.
3. Liquor Liability Insurance: If the Premises shall ever be utilized (with
Landlord's express prior written consent) for the sale and/or consumption of
alcoholic or other beverages contemplated by the "Georgia Alcoholic Beverage
Code," as amended, including, without limitation, the sale for on or
off-Premises consumption of alcohol, distilled spirits, beer, malt beverage;
wine or fortified wine (hereinafter sometimes referred to as "alcoholic
beverages"), then Tenant shall obtain and maintain (by endorsement to the
general liability policy required to be maintained by Tenant hereunder or by
separate policy) throughout the term of the Lease so-called "liquor liability"
or "dram shop" insurance (hereinafter sometimes referred to as "liquor
liability insurance"), causing Landlord, and such other entities as Landlord
shall designate from time to time, to be named insureds, in combined single
limit coverage per occurrence of not less than THREE MILLION AND NO/100
($3,000,000.00) DOLLARS (or such higher amount which Landlord may proscribe
from time to time in its sole judgment). Such liquor liability insurance shall
(I) be written in form acceptable to Landlord, and its counsel, by a licensed
insurance carrier in good-standing in the State of Georgia acceptable to
Landlord, and (ii) specifically include, without limitation, liability coverage
for the violation of any governmental statute, ordinance, regulation or rule
pertaining to the sale, gift, distribution or use of any alcoholic beverages,
or liability by reason of the selling, serving or giving of alcoholic beverages
to a minor or to a person under the influence of alcohol, or which causes or
contributes to the intoxication of any persons. The aforementioned liquor
liability insurance policies shall be for the mutual and joint benefit and
protection of Landlord, Tenant, and such other entities as Landlord shall
designate from time to time, and executed copies of such policies of insurance
or certificates thereof shall be delivered to the Landlord within ten (10) days
prior to the delivery of possession of the Premises to Tenant, and
<PAGE> 47
thereafter within thirty (30) days prior to the term of each such policy.
Additionally, all such insurance shall contain a provision stating that the
Landlord, although named as an insured, shall nevertheless be entitled to
recovery under said policies for any loss occasioned to it, its servants,
agents, and employees by reason of the negligence of Tenant, its servants,
agents, and employees. As often as any such policy shall expire or terminate,
renewal or additional policies shall be maintained and procured like extent,
subject at all times to the approval of Landlord and its counsel. All such
insurance policies shall likewise contain a provision stating that the
insurance carrier of said policies shall grant to Landlord thirty (30) day's
prior written notice of any cancellation or lapse or the effective date of any
reduction in the amounts of insurance. Notwithstanding the foregoing to the
contrary, in the event Tenant shall fail to procure and/or maintain any
insurance required by this Special Stipulation, or fails to carry insurance
required by law or governmental regulation, Tenant shall be deemed in default
under this Lease and Landlord may, but shall not be required or obligated to,
at any time (without the granting of notice) procure such insurance and pay the
premium therefor, in which event Tenant shall repay all sums so paid by
Landlord, together with interest thereon as provided in this Lease, and any and
all other incidental costs and expenses incurred by Landlord in connection
therewith, within five (5) days after demand by Landlord or its designated
representative or legal counsel.
In furtherance of the foregoing, Tenant hereby agrees and
covenants to indemnify and hold Landlord, its servants, agents, employees, and
representatives, wholly harmless from any and all claims, liabilities, losses,
damages and expenses of whatever kind or nature, including, without limitation,
court costs and attorney's fees, incurred by Landlord in connection with the
sale, gift, distribution or use of any alcoholic beverages in or from the
Premises, including, without limitation, the violation by Tenant of any
statute, ordinance, regulation or rule of whatever kind or nature which shall
be established from time to time by any governmental agency or insurance
carrier in connection therewith. As further assurance for the fulfillment of
the foregoing indemnity, Tenant hereby agrees and covenants to specifically
cause its contractual liability insurance for the Premises to include and cover
this indemnity by Tenant regarding any and all claims, liabilities, losses,
damages and expenses sustained by Landlord, its servants, agents, employees,
and representatives, as a result of the sale, gift, distribution, or use of any
alcoholic beverages in or from the Premises.
2
<PAGE> 48
EXHIBIT "A"
[DIAGRAM OF GREENSPOINT MALL]
<PAGE> 49
EXHIBIT "A-1"
DESCRIPTION OF SHOPPING CENTER LAND
A tract of land containing 136.694 acres out of Block 2, Reserve
"C" Greensgate Subdivision, Section 1, said Greensgate Subdivision containing
177.7361 acres of land located in the Pierce Sullivan Survey, Abstract No.749,
Harris County, Texas, correct map of said Greensgate Subdivision, Section 1,
being of record in Volume 226, Page 113 of the Map Records of Harris County,
Texas, said 136.694 acres of land being fully described as follows:
COMMENCING at an iron rod in the East line of Interstate Highway
No. 45, said iron rod marking the most Westerly corner of said Block 2, Reserve
"C" and said corner being in the Southerly line of Greens Road;
THENCE North 42 degrees 28'39" East with the said Southerly line
of Greens Road, a distance of 10.90 feet to an iron rod;
THENCE North 87 degrees 28'39" East with the said Southerly line
of Greens Road, a distance of 320.37 feet to an iron rod and beginning of a
curve to the left;
THENCE in an Easterly direction with the said Southerly line of
Greens Road, following a curve to the left, said curve having a radius of
2061.00 feet, a central angle of 3 degrees 31'56" and a long chord that bears
North 85 degrees 42'41" East (127.04-foot chord), an arc distance of 127.06
feet to a point for corner and the POINT OF BEGINNING of said 136.694 acres of
land;
THENCE in an Easterly direction with said Southerly line of
Greens Road, following a curve to the left, said curve having a radius of
2061.00 feet, a central angle of 22 degrees 41'13" and a long chord that bears
north 72 degrees 36'06" East (810.76-foot chord), an arc distance of 816.08
feet to an iron rod for corner;
THENCE North 61 degrees 15'30" East with said Southerly line of
Greens Road, a distance of 144.00 feet to an iron rod for corner and the
beginning of a curve to the right;
THENCE in an Easterly direction with the said Southerly line of
Greens Road, following a curve to the right, said curve having a radius of
1939.00 feet, a central angle of 8 degrees 32'29" and a long chord that bears
North 65 degrees 31'44" East (288.79-foot chord), an arc distance of 289.06
feet to an iron rod for corner;
THENCE South 64 degrees 42'54" East with the said Southerly line
of Greens Road, a distance of 14.06 feet to an iron rod for corner in the
Westerly line of Greenspoint Drive;
THENCE South 19 degrees 42'54" East with the said Westerly line of
Greenspoint Drive, a distance of 19.98 feet to an iron rod for corner and the
beginning of a curve to the left;
THENCE in a Southerly direction with the said Westerly line of
Greenspoint Drive, following a curve to the left, said curve having a radius of
1640.00 feet, a central angle of 22 degrees 06'20" and a long chord that bears
South 30 degrees 46'04" East (628.82-foot chord), an arc distance of 632.74
feet to an iron rod for corner;
THENCE South 41 degrees 49'14" East with said Westerly line of
Greenspoint Drive, a distance of 542.35 feet to an iron rod for corner and the
beginning of a curve to the right;
THENCE in a Southerly direction with said Westerly line of
Greenspoint Drive, following a curve to the right, said curve having a radius
of 1960.00 feet, a central angle of 39 degrees 02'56" and a long chord that
bears South 22 degrees 17'46" East (1310.10-foot chord), an arc distance of
1335.80 feet to an iron rod for corner;
THENCE South 02 degrees 46'18" East with the said Westerly line of
Greenspoint Drive, a distance of 969.99 feet to an iron rod for corner;
THENCE South 42 degrees 13'42" West with the said Westerly line of
Greenspoint Drive, a distance of 13.22 feet to an iron rod for corner in the
North line of Beltway 8;
THENCE North 88 degrees 45'59" West with the said North line of
Beltway 8, a distance of 1192.29 feet to an iron rod for corner;
Page 1 of Exhibit A-1
<PAGE> 50
THENCE in a Westerly direction with the said North line of
Beltway 8, following a curve to the left, said curve having a radius of 662.80
feet, a central angle of 17 degrees 11'00" and a long chord that bears South 82
degrees 38'31" West (198.03-foot chord), an arc distance of 198.78 feet to an
iron rod for corner;
THENCE South 74 degrees 03'01" West with the said North line of
Beltway 8, a distance of 188.48 feet to an iron rod corner;
THENCE in a Northwesterly direction with the said North line of
Beltway 8 and then the said East line of Interstate Highway No. 45, following a
curve to the right, said curve having a radius of 370.50 feet, a central angle
of 86 degrees 50'54", and a long chord that bears North 62 degrees 31'32" West
(509.36-foot chord), an arc distance of 561.60 feet to the T.H.D. concrete
R.O.W. monument for corner;
THENCE North 19 degrees 06'05" West with the said East line of
Interstate Highway No. 45, a distance of 299.34 feet to an iron rod for corner;
THENCE North 24 degrees 26'05" West with the said East line of
Interstate Highway No. 45, a distance of 583.40 feet to an iron rod for corner;
THENCE North 19 degrees 05'02" West with the said East line of
Interstate Highway No. 45, a distance of 1146.93 feet to an iron rod for
corner;
THENCE North 14 degrees 15'08" West with the said East line of
Interstate Highway No. 45, a distance of 226.29 feet to an iron rod for corner;
THENCE North 19 degrees 04'44" West with the said East line of
Interstate Highway No. 45, a distance of 49.61 feet to an iron rod for corner;
THENCE South 78 degrees 27'10" East, a distance of 240.53 feet to
an iron rod for corner;
THENCE in a Northeasterly direction, following a curve to the
left, said curve having a radius of 50.00 feet, a central angle of 53 degrees
07'48" and a long chord that bears North 38 degrees 06'44" East (44.72-foot
chord), an arc distance of 46.36 feet to a point for corner;
THENCE North 11 degrees 32'50" East, a distance of 382.65 feet to
the POINT OF BEGINNING, containing 136.694 acres of land, more or less.
Page 2 of Exhibit A-1
<PAGE> 51
EXHIBIT "A-1" - PART.2
DESCRIPTION OF LANDLORD'S SITE
A tract of land containing 41.254 acres out of Block 2, Reserve "C" Greensgate
Subdivision, Section 1, said Greensgate Subdivision containing 177.7361 acres
of land located in the Pierce Sullivan Survey, Abstract No. 749, Harris County,
Texas, correct map of said Greensgate Subdivision, Section 1 being of record in
Volume 226, Page 113 of the Map Records of Harris County, Texas, said 41.254
acres of land being fully described as follows:
COMMENCING at an iron rod in the West line of Greenspoint Drive,
said iron rod marking the most easterly corner of said Block 2, Reserve "C" and
located North 42 degrees 13'42" East, a distance of 13.22 feet from an iron rod
in the north line of Beltway 8;
THENCE, North 02 degrees 46'1 8" West, with the west line of said
Greenspoint Drive, a distance of 744.71 feet to the POINT OF BEGINNING;
THENCE, South 87 degrees 13'42" West, a distance of 35.31 feet to
a point of curvature for corner;
THENCE, in a westerly direction, following a curve to the right,
said curve having a radius of 470.00 feet, a central angle of 14'22'39" and a
long chord that bears North 85 degrees 34'58" West (117.63-foot chord), an arc
distance of 117.94 feet to a point of tangency for corner;
THENCE, in a northerly direction, following a curve to the right,
said curve having a radius of 50.00 feet, a central angle of 97 degrees 28'51"
and a long chord that bears North 29 degrees 39'14" West (75.17-foot chord), an
arc distance of 85.07 feet to a point for corner;
THENCE, North 19 degrees 05'12" East, a distance of 166.75 feet to
a point of curvature for corner;
THENCE, in a northerly direction, following a curve to the left,
said curve having a radius of 150.00 feet, a central angle of 45 degrees 00'00"
and a long chord that bears North 03 degrees 24'48" West (114.81-foot chord), an
arc distance of 1 17.81 feet to a point of tangency for corner;
THENCE, North 25 degrees 54'48" West, a distance of 219.78 feet to
a point of curvature for corner;
THENCE, in a northerly direction following a curve to the left,
said curve having a radius of 500.00 feet, a central angle of 09 degrees 29'50"
and a long chord that bears North 30 degrees 39'43" West (82.78-foot chord),
and an arc distance of 82.88 feet to a point for corner;
THENCE, South 64 degrees 05'12" West, a distance of 597.65 feet
to a point for corner;
THENCE, South 19 degrees 05'12" West, a distance of 290.68 feet
to a point for corner;
THENCE, North 70 degrees 54'48" West, a distance of 63.00 feet to
a point for corner;
THENCE, South 19 degrees 05'12" West, a distance of 372.88 feet
to a point for corner;
THENCE, South 7 degrees 054'48" East, a distance of 317.50 feet
to a point for corner;
THENCE, South 64 degrees 05'12" West, a distance of 3136 feet to
a point for corner;
THENCE, South 19 degrees 05'12" West, a distance of 380.30 feet
to a point on the said north line of Beltway 8 for corner;
THENCE, with said north line of Beltway 8, the following 2
courses and distances:
1. North 88 degrees 45'59" West, a distance of 214.43 feet to
a point of curvature for corner; and
2. In a westerly direction following a curve to the left
having a radius of 662.80 feet, a central angle of 09 degrees 16'35", and a long
chord that bears South 86 degrees 35'43" West (107.19-foot chord), an arc
distance of 107.31 feet to a point for corner;
THENCE, North 08 degrees 02'34" West, a distance of 99.45 feet to
a point for corner;
Page 1 of Exhibit A-1- Part 2
<PAGE> 52
THENCE, North 19 degrees 05'12" East, a distance of 588.26 feet to a
point for corner;
THENCE, North 70 degrees 54'48" West, a distance of 329.00 feet to a
point for corner;
THENCE, North 19 degrees 05'12" East, a distance of 20.96 feet to a
point for corner;
THENCE, North 25 degrees 54'48" West, a distance of 20.57 feet to a point
for corner;
THENCE, North 19 degrees 05'12" East, a distance of 474.11 feet to a
point for corner;
THENCE, North 25 degrees 54'48" West, a distance of 67.89 feet to a point
for corner;
THENCE, North 70 degrees 54'48" West, a distance of 192.91 feet to a
point for corner;
THENCE, South 19 degrees 05' 12" West, a distance of 8.96 feet to a point
for corner;
THENCE, South 70 degrees 54'48" West, a distance of 163.08 feet to a
point for corner;
THENCE, South 19 degrees 05'12" West, a distance of 301.54 feet to a
point for corner;
THENCE, South 25 degrees 54'48" East, a distance of 179.70 feet to a
point for corner;
THENCE, South 19 degrees 05'12" West, a distance of 303.99 feet to a
point for corner;
THENCE, North 48"54'48" West, a distance of 179.80 feet to a point for
corner;
THENCE, South 64 degrees 05'12" West, a distance of 275.00 feet to a
point for corner;
THENCE, with said east line of Interstate Highway No. 45, the following
2 courses and distances:
1. North 24 degrees 26'05" West, a distance of 347.10 feet to an iron
rod for corner;
2. North 19 degrees 05'02" West, a distance of 360.00 feet to a point
for corner;
THENCE, North 70 degrees 54'58" East, a distance of 142.38 feet to a
point for corner;
THENCE, North 64 degrees 05'12" East, a distance of 72.99 feet to a
point for corner;
THENCE, South 21 degrees 06'34" East, a distance of 109.28 feet to a
point for corner;
THENCE, North 67 degrees 1 4'53" East, a distance of 20.00 feet to a
point for corner;
THENCE, North 64 degrees 05'12" East, a distance of 176.1
THENCE, North 25 degrees 54'48" West, a distance of 55.00 feet to a point
for corner;
THENCE, North 64 degrees 05'12" East, a distance of 10.39 feet to a
point for corner;
THENCE, North 25 degrees 54'48" West, a distance of 55.00 feet to a
point for corner;
THENCE, North 64 degrees 05'12"East, a distance of 348.17 feet to a
point for corner;
THENCE, North 25 degrees 54'48" West, a distance of 135.62 feet to a
point for corner;
THENCE, North 19 degrees 05'12" East, a distance of 476.65 feet to a
point for corner;
THENCE, South 70 degrees 54'48" East, a distance of 167.38 feet to a
point for corner;
THENCE, North 64 degrees 05'12" East, a distance of 366.07 feet to a
point for corner;
THENCE, South 19 degrees 05'12" West, a distance of 220.85 feet to a
point for corner;
THENCE, South 70 degrees 54'48" East, a distance of 36.77 feet to a
point for corner;
Page 2 of Exhibit A-1 - Part 2
<PAGE> 53
THENCE, South 19 degrees 05' 12" West, a distance of "441.00 feet to a
point for corner;
THENCE, South 70 degrees 54'48 " East, a distance of 296.95 feet to a
point for corner;
THENCE, South 19 degrees 05'12" West, a distance of 56.67 feet to a
point for corner;
THENCE, South 25 degrees 54' 48" East, a distance of 255.84 feet to a
point for corner;
THENCE, North 64 degrees 05'12" East, a distance of 597.50 feet to a
point for corner;
THENCE, North 25 degrees 54'48" West, a distance of 220.00 feet to a
point of curvature for corner;
THENCE, in a northerly direction following a curve to the left, said
curve having a radius of 493.19 feet, a central angle of 16 degrees 51'09" and a
long chord that bears North 34 degrees 20'23" West (144.54-foot chord), an arc
distance of 145.06 feet to a point of reverse curvature for corner;
THENCE, in a northerly direction following a curve to the right, said
curve having a radius of 493.19 feet, a central angle of 16 degrees 51'09" and a
long chord that bears North 34 degrees 20'23"West (144.54-foot chord), an arc
distance of 145.06 feet to a point of compound curvature for corner;
THENCE, in an easterly direction following a curve to the right, said
curve having a radius of 50.00 feet, a central angle of 90 degrees 00'00" and a
long chord that bears North 19 degrees 05'12" East (70.71-foot chord), an arc
distance of 78.54 feet to a point of tangency for corner;
THENCE, North 64 degrees 05'12" East, a distance of 10.00 feet to a
point of curvature for corner;
THENCE, in an easterly direction following a curve to the left, said
curve having a radius of 436.69 feet, a central angle of 15 degrees 54'26" and
a long chord that bears North 56 degrees 07'59" East (120.85-foot chord), an
arc distance of 121.24 feet to a point of tangency for corner;
THENCE, North 48 degrees 10'46" East, a distance of 12.93 feet to a point
on a curve in the said west line of Greenspoint Drive, for corner;
THENCE, in a southerly direction with said west line of Greenspoint
Drive, following a curve to the right, said curve having a radius of 1,960.00
feet, a central angle of 38 degrees 33'07", and a long chord that bears South 22
degrees 02'51" East (1,294.06-foot chord), an arc distance of 1,318.80 feet to
an iron rod at a point of tangency for corner;
THENCE, South 02 degrees 46'18"East, with said west line of Greenspoint
Drive, a distance of 225.28 feet to the POINT OF BEGINNING, containing 41.254
acres of land, more or less.
Page 3 of Exhibit A-1 - Part 2
<PAGE> 54
REFERENCES IN THIS EXHIBIT B TO "TENANT'S WORK"
SHALL BE DEEMED TO BE REFERENCES TO THE WORK
AS DEFINED IN THE LEASE
EXHIBIT "B"
DESCRIPTION OF TENANT'S WORK AND WORK TO BE
PERFORMED BY LANDLORD IN THE PREMISES
PREFACE:
This EXHIBIT "B" describes the obligations of the Landlord and the
Tenant for the design and construction of the Premises. Each term used in this
Exhibit which is defined in the main body of the Lease shall have the same
meaning when used herein.
The work described in Section C will be performed by Landlord at
Tenant's expense.
The work described in Section B will be performed by Tenant at Tenant's
expense and shall be completed in accordance with Tenant's Final Plans, as
defined in Exhibit "B", Section D.4, as approved by Landlord.
Landlord wad Tenant have a common interest in opening the Premises on
the Commencement Date. To this end, Landlord will coordinate its work with the
Tenant's work insofar as the schedule and prudent construction practice will
allow.
In order to insure an orderly and aesthetically coordinated storefront
and design and to insure that storefront and signing requirements are
understood by tenants, their respective contractors and fabricators, reference
should be made to the store design criteria ("Store Design Criteria").
SECTION A: LANDLORD'S FACILITIES IN THE BUILDING AT THE CENTER IN WHICH THE
PREMISES ARE LOCATED ("LANDLORD'S BUILDING").
(1) A non-combustible structure including columns, girders, beams,
joists, roof deck, and floors.
(2) Public area floors of concrete with special finishes in various
areas.
(3) Enclosed Mall ("Enclosed Mall") ceilings of various heights, but
not less than twelve feet-six inches (12'6") at the storefront line.
(4) Insulated, built-up roofing to provide a U factor of not more
than.15.
(5) Exterior walls.
(6) Exits from the Enclosed Mall to the exterior in accordance with
the requirements of jurisdictional authorities.
(7) The Climate Controlled Enclosed Mall, which may include without
limitation courts, arcades and public corridors, climate controlled,
landscaping, seating, decorative treatment, areas for promotional features, and
structures leased for retail sales.
(8) Public toilet facilities and public pay telephones.
(9) Demising Partitions.
Non-combustible, unfinished, masonry partitions between the
Premises and any service corridors; unfinished precast concrete panels at
exterior wall, where applicable. Demising partitions between tenant premises
will be metal studs without drywall.
B-1
<PAGE> 55
(10) Egress Doors
Egress doors, if any, from the Premises shall be provided with
slide bolt hardware only. Door will be bored to accept dead bolt hardware. The
location of any such egress doors will be indicated on the Lease Outline
Drawing. Such egress doors shall not include customer or storefront doors since
they are the responsibility of Tenant.
(11) Electric Service
An empty conduit for a 277/480 V 3 phase, 4 wire, 60 cycle AC
service with a service capacity sized to accommodate a maximum load of 15 watts
per square foot to Premises will be provided from Landlord's utility room to a
point within the Premises.
(12) Water Service
A 3/4 inch domestic cold water service will be brought to one
point within the Premises. The location of such connection will be indicated on
the Lease Outline Drawing.
(13) Sprinklers
A sprinkler system connection will be installed within the
Premises for extension by Tenant, in accordance with the requirements of the
jurisdictional authorities and the Landlord's insurance carrier. The quantity
of sprinkler heads which may be extended from this connection shall be one per
100 square feet.
(14) Heating and Air Conditioning System
Landlord has installed a heating and air conditioning system for
common and Patio area use. Conditioned air is delivered to unfinished areas
such as stock and storage rooms. Tenant warrants that the heated and cooled are
acceptable to him "AS IS".
(15) Sanitary Sewer
A 4 inch sanitary sewer connection will be installed at one point
below the Premises. The location of such connection will be indicated on the
Lease Outline Drawing.
SECTION B: WORK BY TENANT IN PREMISES
All work by Tenant in the Premises will be performed by contractors
selected by Tenant and approved in advance by Landlord. As one of the
conditions for approval, Landlord may require the contractor to procure a
Payment and Performance Bond for the benefit of the Tenant.
A store with storefront and signing will be designed and installed by
Tenant in accordance with the Store Design Criteria, the Lease Outline Drawing,
the Final Plans as approved in writing by Landlord and the requirements of the
jurisdictional authorities. Storefront construction must extend from the floor
slab to the horizontal neutral strip as indicated in said Criteria. All
storefront track systems will be surface mounted and flush with Mall finish
floor. All partitions facing on the Enclosed Mall, as indicated on the Lease
Outline Drawing, will be considered as Tenant's storefront. For a description
of that portion of work to be performed by the Landlord, at Tenant's expense,
see Section C herein.
Tenant must directly arrange for and procure at Tenant's expense all
state and local building, plumbing, electrical and occupancy permits required
in connection with the construction of its Premises. All construction must be
in accordance with the BOCA Basic Building Code 1978 Edition and amendments, as
adopted by Harris County, Texas, NFPA Life Safety Code 101 and other codes as
required.
To the extent that any item of Tenant's Work is in place upon delivery
of possession of the Premises to Tenant and is in compliance with all
requirements of the jurisdictional authorities and the provisions of this
Lease, Tenant shall not be required, as between Landlord and Tenant, to replace
or reconstruct such Work.
Tenant shall commence Tenant's Work and diligently and continually
proceed to complete the Premises in accordance with the approved Final Plans
and permit Landlord to commence the Work specified in Section C.
B-2
<PAGE> 56
(1) Utilities by Tenant
Tenant shall directly arrange for and procure at Tenant's
expense:
(a) All building, plumbing, occupancy and other required
permits.
(b) Telephone service between the point of entry in Landlord's
Building and the Premises.
(c) All required utility meters, including, without
limitation, a water meter if requested by Landlord.
(d) Connection to the Landlord-installed utilities.
(e) Gas service between the utility meter and the Premises.
(f) Copper electrical conductor from Landlord's Utility Room
to and throughout the Premises.
(2) Insulation
Tenant shall install wall insulation to the interior surface of
the building exterior wall to the underside of the roof deck, which insulation
shall have an R factor of 10.22 BTU per hour square foot.
The Premises shall have a finished drop ceiling, unless Landlord
gives its prior written consent not to have such a ceiling (which consent
Landlord may withhold in its sole judgment). Tenant shall not construct any
mezzanines in the Premises without Landlord's prior written approval. If Tenant
shall construct a mezzanine in the Premises without such approval, or fails to
construct a drop ceiling throughout the Premises without such consent, Landlord
may in addition to its other remedies hereunder and at law and in equity,
either (i) cause Tenant to remove the mezzanines, or install drop ceiling, as
the case may be, at Tenant's expense or (ii) if Tenant has not removed the
mezzanines or installed drop ceiling, as the case may be, after thirty (30)
days written notice from Landlord to Tenant to do so, remove the mezzanines or
install drop ceilings, as the case may be, and charge Tenant the actual cost of
doing so plus fifteen percent (15%) of the cost as an administration fee.
(3) Demising Partitions
One-half (1/2) inch drywall shall be installed, taped and
floated upon all metal stud demising partitions from the floor to the underside
of the deck and provided fire safing in the deck flutes over the top track when
the partition is 90 deg. to the deck flute direction.
(4) Non-Combustible Construction
All Tenant construction shall be non-combustible. Treated,
fire retardant (Class A) wood will be permitted where approved by the
jurisdictional authorities.
(5) Ceilings
A drop ceiling shall be installed throughout the entire
Premises with a minimum fire rating of at least 2 hours, but shall not be more
than twelve feet (12 ft.) nor less than nine feet (9 ft.) above finished floor
without prior approval by the Landlord. Access (i.e., access panels) will be
provided by Tenant where Landlord deems necessary. All ceilings must also
conform to the requirements of the jurisdictional authorities.
(6) Column Fireproofing
All free-standing structural steel columns shall be
enclosed in accordance with the detail indicated on the Lease Outline Drawing
and the requirements of jurisdictional authorities.
(7) Fixture Support
All Tenant improvements, other than ceilings and lighting
fixtures, shall be floor mounted unless written approval is obtained from the
Landlord to support improvements otherwise.
B-3
<PAGE> 57
(8) Mezzanines
No mezzanine shall be constructed unless Landlord approves
such construction in writing. If Landlord approves the construction of a
mezzanine in the Premises, it must meet the following criteria:
(a) The mezzanine framing shall be completely independent
of the Landlord's Building's structural frame.
(b) Additional heating, ventilating, air conditioning,
plumbing, electrical and sprinkler costs will be at
Tenant's expense as described in Section C hereof.
(c) Mezzanine area and construction shall also be in
accordance with the requirements of the
jurisdictional authorities.
(9) HVAC
Tenant will install a heating and air conditioning system. The
system will be designed to maintain a condition, in the sales area only, of 78
degrees F., with fifty percent (50%) relative humidity when the outside
temperature is 95 degrees F., dry-bulb and 79 degrees F., wet-bulb; and 65
degrees F. when the outside temperature is 33 degrees F. The system will be
based upon a minimum of 0.10 CFM of outside air per square foot of rentable
square footage ("GLA") and deliver 1 CFM of supply air per square foot of GLA
with an internal cooling load (lights and occupants) not to exceed 29.2 BTU per
square foot of GLA in the Premises. Conditioned air will be delivered to
unfinished areas such as stock and storage rooms, but without the
qualifications stated for sales area. The HVAC system may be either self-
contained roof top units or "split system" type with the air-cooled condensing
unit located on the roof as indicated on the Lease Outline Drawing and the
fan-coil floor mounted in the Premises. The maximum height of roof top mounted
equipment, including curbs, base, etc. shall not exceed 5'-0" and be mounted on
manufactured metal curbs. Location will be limited to structural bay areas
designated on the Lease Outline Drawing. No wood sleeper mounted equipment over
the roof membrane will be permitted.
Food service establishments will install an independent
ventilation system composed of one hundred ten percent (110%) make-up and
exhaust air capable of eliminating from the Premises all heat and/or odors
associated with food preparation and ducting said odor to the exterior of
Landlord's Building. Systems are to be designed to meet all local Health
Department requirements. Tenant shall supply Landlord with a certified Balancing
Report.
(10) Tenant Mechanical System
(a) No exhaust or vent shall be located within
twenty-five (25) feet of any supply of air intake.
(b) No openings, fans, vents, louvers, grilles, or other
devices shall be installed in any demising partition
or exterior wall without Landlord's written approval.
(c) The requirements for roof openings described in
Section C hereof.
(d) An independent ventilation system composed of make-up
and exhaust air capable of eliminating from the
Premises all heat and/or odors and ducting the
exterior of Landlord's Building.
(e) Hoods and exhaust systems for food processing shall
be protected by a C02 fire extinguishing system
installed in accordance with the requirements of the
jurisdictional authorities and the Landlord's
insurance carrier.
(f) Product-of-combustion vents for gas fired equipment
shall be discharged directly to the exterior of
Landlord's Building.
(g) Combustion of make-up air for any Tenant-installed
system or appliance shall be obtained directly from
the exterior.
(h) Condensate lines for refrigeration and/or
conditioning must terminate within the Premises in
accordance with jurisdictional authorities.
(i) Grease trap for any Tenant installed system on
appliance producing grease or fats.
B-4
<PAGE> 58
(11) Tenant Electrical Systems
All electrical work, including without limitation Tenant's
main disconnect switch, current transformers, meter sockets, dry type
transformers, circuit panels, branch circuit wiring, wiring devices, lighting
fixtures, lamps, emergency lighting, communication systems, burglar alarms,
sign and logo lighting, and TV and radio systems shall conform to the following
criteria:
(a) The requirements of the jurisdictional authorities,
the National Electric Code and the local utility.
(b) The requirements for roof openings described in
Section C hereof.
(c) All fluorescent lighting should have High Power
Factor Ballast.
(d) Main disconnect in Landlord's Utility Room shall be
bus-duct circuit breaker type bus plug, compatible
with Landlord's bus-duct. Interrupting rating of main
disconnect shall be approved by Landlord prior to
purchase by Tenant. No appurtenances shall be affixed
to the interior walls, exterior wall or roof of the
Landlord's Building without Landlord's written
approval.
(e) Current transformers and meter bases shall be:
(f) Service conductors must be copper throughout the
Premises.
1. 200 Amp service and under - Milbank U-7421,
7 JAW, complete with closure plates and
manual by-pass.
2. Over 200 Amp service - CT's in approved
enclosure, Milbank S-7545, 13 JAW, complete
with closure plates and manual by-pass.
(g) Service conductors from Landlord's Utility Room to
Premises and throughout the Premises shall be copper.
(h) No appurtenances shall be affixed to the exterior
wall or roof of the Landlord's Building without
Landlord's written approval.
(i) Background music systems shall require Landlord's
written approval and shall not be audible outside
the Premises.
(12) Sprinklers
Tenant shall install a fire sprinkler system within its
demised Premises in accordance with drawings approved by Landlord, Landlord's
insurance carrier and the Texas State Board of Insurance, designed on the basis
of not less than one (1) Head per one hundred square feet of GLA in the
Premises.
(13) Certificate of Occupancy
Tenant must secure a certificate of occupancy from the
jurisdictional authorities in sufficient time to allow Tenant to open the
Premises in accordance with the opening requirements of this Lease and will
deliver a copy of the certificate to the Landlord.
(14) Tenant's Obligation
Landlord's work is limited to that required of Landlord by this
Exhibit "C", and Tenant shall be required to make all improvements to the
Premises in accordance with Final Plans (as approved by Landlord) except those
which Landlord is specifically required to make hereunder. Tenant shall conduct
his construction work in such a manner as to not disturb neighbors by dust,
odors, noises, or any other activity. If such activity would be a nuisance to
others it should be done before or after hours. Tenant's contractor is required
to confine his construction procedures to the demised Premises, except as
required to encroach on the Enclosed Mall to erect his storefront. Tenant shall
commence and proceed continually with construction of the Premises in such a way
as not to interfere unreasonably with Landlord, other Tenants or any Center
activities.
B-5
<PAGE> 59
(15) Discipline
Tenant shall enforce strict discipline and good order among
the employees of Tenant's contractors and subcontractors.
(16) Character of Employees
Tenant shall not employ any unfit person or anyone not skilled
in the work he is performing, or any workman that is incompatible with the
balance of the work force or who will cause, or whose presence will cause,
labor disputes or work stoppages.
(17) Clean Up
Tenant shall maintain the Premises in a clean and orderly
condition during construction and merchandising. Tenant shall promptly remove
at least once a day all unused construction materials, equipment, shipping
containers, packaging, debris and flammable waste from the Center. Tenant shall
contain all construction materials, equipment, fixtures, merchandise, shipping
containers and debris within the Premises. Malls, courts, arcades, public
corridors, service corridors and the exterior of the Landlord's Building shall
be clear of Tenant's equipment, merchandise, fixtures refuse, and debris at all
times. Trash storage within the Premises shall be confined to covered metal
containers.
(18) As-Built Plans
Within thirty (30) days after completion of Tenant's Work
Tenant shall furnish to Landlord a complete set of as-built plans for the
Premises, prepared from Tenant's Final Plans (the "As-Built Plans"). If Tenant
so fails to provide the As-Built Plans, Landlord may obtain such plans from the
local jurisdictional building or planning authorities or otherwise at Tenant's
cost. Such cost shall be payable to Landlord as additional Rent immediately
upon delivery to Tenant of a bill therefor.
SECTION C: WORK BY LANDLORD IN PREMISES AT TENANT'S EXPENSE
(1) Required Work
Tenant shall reimburse Landlord for the actual cost of the
work plus fifteen percent (15%) thereof for administration costs. The following
work in the Premises will be done by the Landlord at the Tenant's expense:
(a) Furnish and install base building standard pavers as
the finished floor material between the storefront
lease line and the Tenant's storefront closure. Tenant
shall reimburse Landlord for the actual cost of the
work plus fifteen percent (15 %) thereof for
administration costs.
(b) Furnish and install a service corridor identification
sign setting forth Tenant's name and address number at
the actual cost per door plus fifteen percent (15%)
thereof for administration costs.
(c) Roof penetrations as required. Tenant shall reimburse
Landlord for the actual cost of the work plus fifteen
percent (15%) thereof for administration costs.
(d) Grease traps and grease trap waste line. Tenant shall
reimburse Landlord for the cost of installation plus
fifteen percent (15%) thereof for administration
costs.
(2) Temporary Storefront
Landlord has provided (or will provide) a temporary storefront
in front of the Premises. This storefront shall remain in front of the Premises
during Tenant's construction therein in order to present a barricade to the
Premises for customers in the Center, and to present an aesthetic appearance
during Tenant's construction period. Any lettering, logos, signage or other
visual material which Tenant desires to place upon the temporary storefront in
addition to or in substitution for Landlord's graphics or other finish must be
submitted in advance to Landlord for written approval, which may be given or
withheld in Landlord's sole discretion. Any changes, additions or deletions to
temporary storefront graphics shall similarly require Landlord's prior written
approval. Tenant shall pay Landlord for such temporary storefront an amount
equal to Twenty-Five Dollars ($25.00) per Lineal Foot.
B-6
<PAGE> 60
If Landlord has not installed a temporary storefront as
contemplated herein as of the date of the execution of this Lease, Tenant may
request permission from Landlord to have Tenant's contractor construct the
temporary storefront or barricade to Landlord's specifications at Tenant's
expense; in such event, the temporary storefront must be completely installed
prior to the commencement of demolition or construction within the Premises.
At such time as Tenant commences construction of the permanent
storefront, the temporary storefront barricade may be moved into the Enclosed
Mall with additional inside enclosures to be constructed by Tenant's contractor
at Tenant's expense. The distance that this barricade may be moved into the
Enclosed Mall must be approved by Landlord's mall manager. Because the Center
is currently open for business, all construction in the Premises that produces
loud or obnoxious noises (such as jackhammering concrete) must be performed
prior to 9:00 a.m. or after the Enclosed Mall is closed to the public.
It shall be Tenant's responsibility to remove the temporary
barricade after the completion of Tenant's construction. However, Tenant shall
not remove said temporary barricade without prior written approval from
Landlord. If Tenant removes, either partially or completely, the temporary
barricade without Landlord's prior written approval, Tenant shall be required
to pay to Landlord a fine of One Thousand Dollars ($1,000.00) as additional
Rent and shall be required to reconstruct the barricade at Tenant's expense.
(3) Roof Penetration
All roof penetrations and flashing will be performed solely by
Landlord. Tenant will reimburse Landlord for the actual cost of the roof
penetrations required by the installation of Tenant's mechanical equipment plus
fifteen percent (15%) thereof for administration. Landlord reserves the right
to disallow any installation which may exceed the structural capabilities of
the roof system or if, in Landlord's opinion, the appearance of such equipment
will be detrimental to the appearance of the Landlord's Building.
(4) Pavers
A limited supply of building standard pavers is available for
purchase from Landlord for use as finished floor material between the
storefront lease line and Tenant's storefront closure. Tenant may use
compatible, similar pavers of equal or better quality subject to Landlord's
prior written approval.
(5) Additional Work
If the design of the Premises or anything therein necessitates
any or all of the following, Landlord at its sole option shall perform such
work at Tenant's expense, but before proceeding therewith Landlord shall give
Tenant not less than ten (10) days notice of the need for such work; if Tenant
does not eliminate the need therefor within such time and so notify Landlord,
Landlord shall proceed with and thereafter complete such work, the cost to
Tenant of such work shall be Landlord's actual cost, plus fifteen percent (15%)
thereof for administration costs.
(a) Electrical Service. Electrical conduit larger
than installed size; relocation of conduit.
(b) Additional sanitary sewer connection;
relocation of sanitary sewer inverts.
(c) Increase in permitted number of sprinkler
heads. Landlord may refuse to allow
additional sprinkler heads in the event such
additional heads may contribute to exceeding
the capacity of the sprinkler system.
(d) Any roof openings approved by Landlord. Such
openings will include supporting structures,
curbs, flashings, ducts, vents and grilles.
Landlord may refuse any openings which, in
Landlord's judgment, exceed the capability of
the structural system.
(e) Openings in demising partitions, provided
such openings have been approved by the
Landlord in writing.
(f) Any Tenant equipment that requires mounting
on the roof or the exterior walls. Landlord
may refuse the installation of any roof or
wall mounted equipment if, in Landlord's
opinion, the appearance of such equipment
would be detrimental to the appearance of the
Landlord's Building.
B-7
<PAGE> 61
(g) Violations
In the event the Tenant is notified of any
violation of codes, ordinances, regulations,
requirements or guidelines, either by the
jurisdictional authorities or by the
Landlord, Tenant shall, at its expense,
correct such violations within ten (10)
calendar days after such notification. Should
Tenant fail to correct such violations within
ten (10) calendar days, Landlord may correct
such violations at Landlord's actual cost
plus fifteen percent (15%) thereof for
administration costs. Such corrections will
be at Tenant's expense.
SECTION D: PROCEDURE
(1) Tenant Coordinator
Landlord's Tenant Coordinator will be responsible for
coordination and review of Tenant's Design Drawings (as hereinafter defined)
and Final Plans. All questions pertaining to the design and construction of
Tenant's Premises and all plan submittals shall be directed to the Tenant
Coordinator at the Center.
(2) Lease Outline Drawing
Landlord shall furnish to Tenant a drawing of the Premises of
the type commonly known as a lease outline drawing (herein sometimes referred
to as the "Lease Outline Drawing" or the " L.0.D."). The L.O.D. will be
prepared by Landlord's architect at a scale of 1/4 inch equal 1 foot and will
show the dimensions and square footage of the Premises. In addition, the L.O.D.
will show the location of the sprinkler feed, electrical conduit, sanitary
sewer, water line, and points of entry of other Landlord supplied services, and
will include an elevation and section of the storefront and a plan of the
structural system showing the approved location for Tenant's rooftop units.
(3) Design Drawings
Tenant shall submit to the Tenant Coordinator for Landlord's
approval two (2) sets of prints and one (1) sepia of the design drawings
(herein called "Design Drawings") specifically including a colored rendering of
the proposed storefront, signage, a sample of materials to be used, and
interior layout of the Premises. The Design Drawings will, to the extent
applicable, be prepared in accordance with the Store Design Criteria and the
Lease Outline Drawing. On or before twenty (20) days after receipt of the
Design Drawings, Landlord will return to Tenant the Design Drawings, marked
either "approved" or "disapproved"; if they are marked "disapproved", Landlord
will also note the reasons for such disapproval.
(4) Final Plans
Upon receipt of marked up Design Drawings, Tenant shall
promptly, within thirty (30) days, submit to the Tenant Coordinator for
Landlord's approval three (3) sets of prints and one (1) sepia of the final
working drawings and specifications ("Final Plans") for architectural,
electrical, mechanical, sprinkler, and plumbing work within the Premises and
all other work required to be performed by Tenant pursuant to Exhibit B. The
Final Plans will be prepared in accordance with the Design Drawings, as marked
"approved" by Landlord; if the Design Drawings have been marked "disapproved"
by Landlord, the Final Plans will incorporate any revisions to the Design
Drawings required to satisfy Landlord's reasons for disapproval of the Design
Drawings. On or before twenty (20) days after receipt of the Final Plans,
Landlord will return to Tenant the Final Plans, marked either "approved" or
"disapproved". If they are marked " disapproved", Landlord will also note the
reasons for such disapproval, and Tenant will, on or before ten (10) days after
receipt of such "disapproved" Final Plans, correct any deficiencies noted by
Landlord and resubmit the corrected Final Plans to Landlord. Tenant's Work
shall be performed only in accordance with the Final Plans, as approved by
Landlord.
(5) Delivery of Premises; Commencement of Tenant's Work
Landlord will give Tenant notice when the Premises have been
or will be sufficiently completed to permit Tenant's Work to begin. Tenant will
thereupon notify the Tenant Coordinator of the date on which Tenant's
Contractor intends to commence construction and the date on which Tenant's
Building Permit was issued. At such time as Tenant's Contractor is actually
prepared to commence work, the Tenant Coordinator will deliver possession of
the Premises.
B-8
<PAGE> 62
Tenant will commence Tenant's Work and proceed diligently and
continuously to completion including installation of fixtures and equipment in
the Premises. Further, Tenant will permit Landlord to commence or continue (if
Landlord has already commenced) the work specified in, Exhibit "B", Section C.
Neither Landlord nor Tenant will unreasonably interfere with the others
construction work nor permit their contractors or subcontractors to so
interfere. Tenant agrees that Tenant's Final Plans and the improvements
constructed by Tenant in accordance with Tenant's Work and those Final Plans
will comply with all applicable Laws, and Tenant agrees to indemnify and hold
harmless Landlord from any suit, loss, damage, claims, fine or penalty arising
out of any violation of the same.
(6) Certificate of Occupancy
Tenant must secure a certificate of occupancy from the
jurisdictional authorities in sufficient time to allow Tenant to open the
Premises in accordance with the opening requirements of this Lease and shall
deliver a copy of the certificate to the Tenant Coordinator.
(7) Tenant's Obligation
Landlord's Work is limited to that required of Landlord
by this Exhibit "B" and Tenant shall be required to make all improvements to the
Premises in accordance with Tenant's Final Plans (as approved by Landlord)
except those which Landlord is specifically required to make hereunder.
(8) Tenant's Insurance
Tenant shall not permit Tenant's contractors or any
subcontractor to commence any work until all required insurance has been
obtained and certificates evidencing such coverage have been delivered to
Landlord. Tenant shall secure, pay for and maintain or cause Tenant's
contractors to secure, pay for and maintain during the performance of Tenant's
Work the following insurance, which shall be endorsed in all policies to
include Landlord, Landlord's managing agent for the Center, and any designees
of Landlord as additional insured parties and which shall provide in all
policies that Landlord shall be given ten (10) days' prior written notice of
any alteration or termination of coverage.
(a) Bodily Injury and Property Damage Insurance providing
coverage for explosion, collapse and underground
exposures and contractual liability coverage.
Such insurance shall be provided in the following
minimum amounts:
Bodily Injury Liability - $2,000,000
each occurrence; $2,000,000 aggregate
Property Damage Liability - $2,000,000 each
occurrence; $2,000,000 aggregate
Personal Injury Liability - $2,000,000
aggregate
(b) Comprehensive Automobile Liability Insurance
including the ownership, maintenance and operation of
any automotive equipment owned, hired or non-owned,
including the loading and unloading thereof, in the
following minimum amounts:
Bodily Injury Liability - $2,000,000
each accident
Property Damage Liability - $2,000,000
each accident
The insurance required under (a) and (b)
shall insure Tenant's contractors against any
and all claims for personal injury including
death resulting therefrom and damage to
property of others, arising from operations
under contracts whether such operations are
performed by Tenant's Contractors or by
anyone directly or indirectly employed by any
of them, or by anyone for whose acts any of
them may be liable.
(c) Owner's Protective Liability Insurance insuring
Tenant against any and all liability to third parties
for damage because of bodily injury, including death
resulting therefrom, property damage to others or a
combination thereof which may arise from work in the
completion of the Premises and any other liability for
damages which Tenant's Contractors are required to
insure against under any provisions herein. Said
insurance shall be provided in the following minimum
amounts:
B-9
<PAGE> 63
Bodily Injury Liability - $2,000,000 each
occurrence; $2,000,000 aggregate
Property Damage Liability - $2,000,000 each
occurrence; $2,000,000 aggregate
(d) Builder's Risk Completed Value Form affording "All
Risks of Physical Loss or Damage" on Tenant's Work in
the Premises as it relates to the Building in which
the Premises are located, naming the interests of
Landlord and its agents and employees and Tenant's
Contractors, as their respective interest may appear,
within a radius of one hundred (100) feet of the
Premises.
SECTION E: SPECIAL PROVISIONS
(1) This Lease and this Exhibit "B" shall become a part of the
contract between the Tenant and its contractor, subcontractors
and architects.
(2) A superintendent shall be on the Premises during the
Construction Period.
B-10
<PAGE> 64
DESIGN CRITERIA & EXHIBIT "B" ADDENDUM
Photographic Processing Tenants and Tenants whose operations include dumping
and alkaline and deleterious chemicals into Landlord's sewer system are
required to comply with the following additional regulations and criteria.
1. Safety Regulations
Comply with all applicable OSHA, Federal, State and Local governing
authority regulations pertaining to the handling and use of chemicals
required for Tenant's process and operation.
Tenant is responsible for determining these requirements, which may in
addition to other regulations, require the use of special showers, eye
wash stations, protective clothing and eye protection, and special
exhaust and fresh air make-up.
2. Environmental
In addition to Landlord Requirements, Tenant shall comply with all
applicable regulations of the most stringent of Local, State, and
Federal requirements for the handling and disposal of chemicals listed
for use by Tenant.
3. Chemicals Used In Process
Submit to Landlord a "Hazardous Material List" of all chemicals used
in Tenant process.
4. PH Neutralizing
Prior to dumping chemicals in Landlord's sewer system, all material is
to be neutralized to a Ph between Ph 6.8 and Ph 9, through a
Tenant-supplied water make-up neutralizing system containing calcium
carbonate and approved for this use by Landlord.
The water make-up sequence of operation shall be such that dilution
water is turned "on" no less than 60 seconds prior to chemical
dumping, and turned "off" no less than 180 seconds after completion of
chemical NEUTRALIZATION PROCESS.
5. Water Quantity Control
The water make-up supply pipe must contain a Bell & Gossett "Circuit
Setter" set for minimum quantity to maintain effluent neutralization.
The "Circuit Setter" must be provided with a tag listing the quantity
and "Circuit Setter" number setting, the date set and the name of the
person and company making the setting.
Tenant must submit control schematic and sequence of operation
outlining method of controlling dilution cycle and proposed water
consumption for each dump cycle.
6. Tenant Sewer Pipe
All Tenant sewer piping emanating from equipment, sinks or
receptacles, dumping non-neutralized chemicals must be contained
within the Tenant space prior to neutralization. Piping material must
be suitable for the chemical waste it is transporting. (No piping will
be permitted below the slab).
7. Tenant Floor Treatment Under Chemical Waste Piping
All floor area under Tenant chemical waste piping must be protected
with a containment system suitable for containing all the chemical
effluent which may leak from piping and equipment in the event of a
pipe seal failure, breakage or equipment leak.
Raised floors above sewer piping must be accessible. The area under
the raised floor will be inspected daily by Landlord for evidence of
leaking equipment or piping.
8. Exhaust
All equipment discharging corrosive or odorous fumes into the Tenant
space must be provided with an exhaust system discharging to outside
atmosphere.
<PAGE> 65
The exhaust fan shall operate during all business hours, and be roof
mounted to the "Utility Set" type, discharging vertically at a
velocity exceeding 2000 feet per minute.
The space containing the equipment discharging odorous or corrosive
fumes shall be isolated from other of this Tenant space, and shall be
maintained at a negative pressure of twenty-five percent (25%) less
than the air supplied to this space.
NOTE: A supplementary exhaust system is recommended for all apparatus
rejecting "heat" only, to reduce HVAC cooling requirements.
9. System Maintenance, Operation and Design
Tenant is responsible for design, maintenance and operation of all
apparatus associated with this Criteria Addendum. Landlord "Approval"
shall not constitute release of Tenant liability for maintaining
Tenant's disposal system or deleterious effects of the chemicals used
by Tenant on Landlord's or other tenant's areas or systems.
2
<PAGE> 66
EXHIBIT "C"
RULES
(1) Common Areas. Tenant shall not use the Common Areas, including areas
adjacent to the Premises, for any purpose other than ingress and
egress, and any such use thereof shall be subject to the other
provisions of this Lease, including these Rules. Without limiting the
generality of the foregoing, Tenant shall not use the Common Areas to
canvass, solicit business or information from, or distribute any
article or material to, other tenants, occupants or invitees of the
Center. Tenant shall not allow anything to remain in any passageway,
sidewalk, court, corridor, stairway, entrance, exit, elevator,
shipping area, or other area outside the Premises. Janitorial closets,
utility closets, telephone closets, broom closets, electrical closets,
storage closets, and other such closets, rooms and areas shall be used
only for the purposes and in the manner designated by Landlord, and
may not be used by Tenant, or its contractors, agents, employees, or
other parties without Landlord's prior written consent
(2) Deliveries. Furniture, inventory and all other deliveries may be
brought into the Center only at times and in the manner designated by
Landlord, in compliance with all Laws, and always at Tenant's sole
risk. Landlord may inspect items brought into the Center or Premises
with respect to weight or dangerous nature or compliance with this
Lease or applicable Laws. Tenant's use of any freight elevators,
loading and service areas at the Center shall be subject to scheduling
by Landlord. Tenant shall not take or permit to be taken in or out of
other entrances or elevators of the Center, any item normally taken,
or which Landlord otherwise requires to be taken, in or out through
service doors or on freight elevators. Tenant shall move all
inventory, supplies, furniture, equipment and other items as soon as
received directly to the Premises. Any hand-carts used at the Center
shall have rubber wheels and side guards. No other material handling
equipment may be brought upon the Center except as Landlord shall
approve in writing in advance.
(3) Trash. All garbage, refuse, trash and other waste shall be kept in the
kind of container, placed in the areas, and prepared for collection in
the manner and at the times and places specified by Landlord, subject
to Article 26 respecting Hazardous Materials. If Landlord designates a
service to pick up such items, Tenant shall use the same at Tenant's
cost. If Landlord shall provide or arrange for such service, Tenant
shall pay Tenant's Proportionate Share of the cost thereof (or such
other share as Landlord may fairly and reasonably determine) to
Landlord on or before the first day of each calendar month in advance,
or Landlord may include such charges in Center Expenses. Landlord
reserves the right to require that Tenant participate in any recycling
program designated by Landlord.
(4) Fire Protection. If Landlord installs or has heretofore installed a
supervised fire sprinkler and/or alarm system for the protection of
the Center, Tenant shall pay Tenant's Proportionate Share of the cost
thereof (or such other share as Landlord may fairly and reasonably
determine) to Landlord on or before the first day of each calendar
month in advance, or Landlord may include such charges in Center
Expenses.
(5) Pest Control. Tenant shall use, at Tenant's cost such pest and rodent
extermination contractor as Landlord may direct and at such intervals
as Landlord may require. In the alternative, from time to time,
Landlord may arrange for pest control (in which case, Tenant shall pay
Tenant's Proportionate Share of the cost thereof, or such other share
as Landlord may fairly and reasonably determine to Landlord on or
before the first day of each calendar month in advance, or Landlord
may include such charges in Center Expenses). Tenant shall provide
Landlord with evidence of Tenant's compliance with this provision
within five (5) days after Landlord's written request.
(6) Signs and Display Windows. Tenant shall not place any sign or other
thing of any kind outside the Premises (including without limitation,
exterior walls and roof), or on the interior or exterior surfaces of
glass panes or doors, except such single sign as Landlord shall
expressly approve in writing for or in connection with Tenant's
storefront. Within the Premises, Tenant shall not: (i) install any
sign that advertises any product, (ii) install any sign within 24
inches of any window, or (iii) install any sign that is visible from
outside the Premises or that is illuminated, without Landlord's prior
written approval. If Landlord approves or requires illuminated signs,
Tenant shall keep the same illuminated each day of the Term during the
hours designated by Landlord from time to time. All Tenant's signs
shall be professionally designed, prepared and installed and in good
taste so as not to detract from the general appearance of the Premises
or the Center and shall comply with the sign criteria or otherwise
developed by Landlord from time to time. After the initial
installation of Tenant's storefront sign as approved in writing by
Landlord in accordance with these provisions, Landlord reserves the
right to require from time to time that Tenant change or replace such
sign in order to comply with any new
<PAGE> 67
sign criteria developed by Landlord, at Landlord's expense. The term
"sign" in this Rule shall mean any sign, placard, picture, name,
direction, lettering, insignia or trademark, advertising material,
advertising display, awning or other such item, except that Tenant's
storefront sign shall be an actual sign. Blinds, shades, drapes or
other such items shall not be placed in or about the windows in the
Premises except to the extent, if any, that the character, shape,
design, color, material and make thereof is first approved by Landlord
in writing.
(7) Display of Merchandise. Tenant shall not place or maintain any
permanent or temporary fixture or item or display any merchandise: (i)
outside the Premises, or (ii) anywhere inside the Premises within six
(6) feet of any entrance to the Premises (except that for any recessed
entry of the Premises, Tenant shall not so place or maintain fixtures
within three [3] feet of such entrance). All displays of merchandise
shall be tasteful and professional.
(8) Plumbing Equipment. The toilet rooms, urinals, wash bowls, drains and
sewers and other plumbing fixtures, equipment and lines shall not be
misused or used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be
thrown therein, and Tenant shall properly install, maintain, clean,
repair and replace adequate grease traps.
(9) Roof; Awnings and Projections. Tenant shall not install any aerial,
antennae, satellite dish or any other device on the roof, exterior
walls or Common Areas of the Center. Tenant may install and have
access to rooftop HVAC equipment only to the extent approved or
required by Landlord from time to time in connection with Tenant's
obligations under Articles 10 and 11 of this Lease. No awning or
other projection shall be attached by or for Tenant to the exterior
walls of the Premises or the building of which it is a part.
(10) Overloading Floors. Tenant shall not overload any floor or part
thereof in the Premises or Center including any public corridors or
elevators therein, and Landlord may direct and control the location of
safes, vaults and all other heavy articles and require supplementary
supports of such material and dimensions as Landlord may deem
necessary to properly distribute the weight at Tenant's expense
(including expenses for structural review and engineering).
(11) Locks and Keys. Upon termination of the Lease or Tenant's right to
possession, Tenant shall: (i) return to Landlord all keys, parking
stickers or key cards, and in the event of loss of any such items
shall pay Landlord therefor, and (iii) advise Landlord as to the
combination of any vaults or locks that Landlord permits to remain in
the Premises.
(12) Unattended Premises. Before leaving the Premises unattended, Tenant
shall close and securely lock all doors or other means of entry to the
Premises and shut off all lights (except signs required to be
illuminated hereunder), water faucets and other utilities in the
Premises (except heat to the extent necessary to prevent the freezing
or bursting of pipes). This provision shall not imply that Tenant may
leave the Premises unattended in violation of the operating
requirements set forth elsewhere in this lease.
(13) Energy Conservation. Subject to Rule (6) concerning illumination,
Tenant shall not waste electricity, water, heat or air conditioning,
or other utilities or services, and agrees to cooperate fully with
Landlord and comply with any Laws to assure the most effective and
energy efficient operation of the Center.
(14) Food, Beverages, Game and Vending Machines Except to the extent
expressly permitted under Article 1 of this Lease, Tenant shall not:
(i) use the Premises for the manufacture, preparation, display, sale,
barter, trade, gift or service of food or beverages, including without
limitation, intoxicating liquors, or (ii) install, operate or use any
video, electronic or pinball game or machine, or any coin or token
operated vending machine or device to provide products, merchandise,
food, beverages, candy, cigarettes or other commodities or services
including, but not limited to, pay telephones, pay lockers, pay
toilets, scales, and amusement devices; provided, however, that Tenant
may install vending machines for the sale of non-alcoholic beverages,
food, and candy in an area not visible from the sale area or exterior
of the Premises for the exclusive use of Tenant's employees.
(15) Going-Out-Of-Business Sales and Auctions. Tenant shall not use, or
permit any other party to use, the Premises for any distress, fire,
bankruptcy, close-out, "lost our lease" or going-out-of-business sale
or auction. Tenant shall not display any signs advertising the
foregoing anywhere in or about the Premises. This prohibition shall
also apply to Tenant's creditors.
C-2
<PAGE> 68
(16) Labor Relations. Tenant shall conduct its labor relations and
relations with employees so as to avoid strikes, picketing, and
boycotts of, on or about the Premises or Center. If any employees
strike, or if picket lines or boycotts or other visible activities
objectionable to Landlord are established, conducted or carried out
against Tenant, its employees, agents, contractors, or subcontractors
in or about the Premises or Center, Tenant shall immediately close the
Premises and remove or cause to be removed all such employees, agents,
contractors, and subcontractors until the dispute has been settled.
(17) Landlord's Tradename and Trademarks. No symbol, design, name, mark or
insignia adopted by Landlord for the Center or picture or likeness of
the Center shall be used by Tenant without the prior written consent
of Landlord, except as provided in Article 9 of this Lease.
(18) Prohibited Activities. Tenant shall not: (i) use strobe or flashing
lights in or on the Premises or in any signs therefor, (ii) use, sell
or distribute any leaflets, handbills, bumper stickers, other stickers
or decals, balloons or other such articles in the Premises (or other
areas of the Center), (iii) operate any loudspeaker, television set,
phonograph, radio, CD player or other musical or sound producing
instrument or device so as to be heard outside the Premises, (iv)
operate any electrical or other device which interferes with or
impairs radio, television, microwave, or other broadcasting or
reception from or in the Center or elsewhere, (v) bring or permit any
bicycle or other vehicle, or dog (except in the company of a blind
party) or other animal, fish or bird in the Center, (vi) make or
permit objectionable noise, vibration or odor to emanate from the
Premises or any equipment serving the same, (vii) do or permit
anything in or about the Premises that is unlawful, immoral, obscene,
pornographic, or which tends to create or maintain a nuisance or do
any act tending to injure the reputation of the Center, (viii) use or
permit upon the Premises anything that violates the certificates of
occupancy issued for the Premises or the Center, or causes a
cancellation of Landlord's insurance policies or increases Landlord's
insurance premiums (and Tenant shall comply with all requirements of
Landlord's insurance carriers, the American Insurance Association, and
any board of fire underwriters), (ix) use the Premises for any
purpose, or permit upon the Premises anything, that may be dangerous
to parties or property (including but not limited to flammable oils,
fluids, paints, chemicals, firearms or any explosive articles or
materials), nor (x) do or permit anything to be done upon the Premises
in any way tending to disturb, bother or annoy any other tenant at the
Center or the occupants of neighboring property.
(19) Parking. Tenant and Tenant's employees shall park their cars only in
those portions of the parking area designated by Landlord for tenant
and employee parking and shall use such areas only for parking cars
(or at Landlord's option, Landlord may require that any or all such
employees park offsite). Tenant shall furnish Landlord with a list
containing the description and automobile license numbers (and State
of issuance) of the cars of Tenant and is employees within five (5)
days of any request by Landlord, and shall thereafter advise Landlord
of any changes, additions or deletions to such list. Landlord reserves
the right to: (i) adopt additional requirements pertaining to parking,
including without limitation, a parking system with charges favoring
carpooling for tenants and their employees, and any other parking
system by validation, metering or otherwise, (ii) assign specific
spaces, and reserve spaces for small cars, handicapped individuals,
and other tenants, customers of tenants or other parties (and Tenant
and its employees and visitors shall not park in any such assigned or
reserved spaces) and (iii) restrict or prohibit full size vans and
other large vehicles. In case of any violation of these provisions or
any applicable Laws, Landlord may: (a) refuse to permit the violator
to park, and remove the vehicle owned or driven by the violator from
the Center without liability whatsoever, at such violator's risk and
expense and/or (b) charge Tenant such reasonable rates as Landlord may
from time to time establish for such violations, which shall be at
least Fifty and No/100 Dollars ($50.00) per day for each vehicle that
is parked in violation of these Rules. These provisions shall be in
addition to any other remedies available to Landlord under this Lease
or otherwise. Notwithstanding the foregoing, Landlord agrees that no
fine shall be due unless and until Landlord has given 24 hours prior
written notice to Tenant of such infractions.
(20) Responsibility for Compliance. Tenant shall be responsible for
ensuring compliance with these Rules, as they may be amended, by
Tenant's employees and as applicable, by Tenant's agents, invitees,
contractors, subcontractors, and suppliers.
C-3
<PAGE> 1
EXHIBIT 10.39
ASSIGNMENT OF LEASE AND CONSENT TO ASSIGNMENT
This Assignment of Lease and Consent to Assignment is entered into this
11th day of October, 1996 between Roy M. Smith and W. M. Bevly d/b/a Padre
Staples Mall ("Landlord") and Pepe, Inc. d/b/a Casa Ole Restaurant and Cantina
("Tenant/Assignor") and Jack Goodwin ("Guarantor") and Casa Ole No. 29
Incorporated ("Assignee").
WHEREAS, Landlord and Rainbolt, Inc. d/b/a Casa Ole entered into a
Lease Agreement ("the Lease Agreement") for Space Number 1184 at Padre Staples
Mall, Corpus Christi, Nueces County, Texas dated March 23, 1988, which
Lease Agreement was subsequently assigned to Pepe, Inc. on September 8, 1993
and remains in full force and effect.
WHEREAS, Tenant/Assignor desires to assign the Lease Agreement to
Assignee and requests Landlord's consent to the assignment.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties agree as follows:
(1) ASSIGNMENT. Assignor does hereby assign and transfer to Assignee all of
its right, title and interest as Tenant pursuant to the terms and
conditions of the Lease Agreement as of the effective date hereof.
(2) ASSUMPTION. In consideration of the foregoing assignment, Assignee
hereby assumes and agrees to be bound by and perform all covenants,
conditions, obligations and duties of the Lease Agreement on Tenant's
part to be performed, accruing from and after the effective date hereof.
(3) LANDLORD'S CONSENT. Landlord hereby consents to the assignment, subject
to the following terms and conditions:
<PAGE> 2
(a) Tenant shall not be in violation or default of any provision of
the Lease Agreement prior to the effective date of this
Assignment of Lease.
(b) Landlord's consent shall not constitute its consent to any
further assignment.
(c) Landlord's execution hereof shall not be deemed to be effective
until Assignor and Assignee have both executed and returned this
original Assignment of Lease and Consent to Assignment to
Landlord and the accompanying Exhibit "E" Guaranty has been
executed and returned by the guarantor, Casa Ole Restaurants,
Inc.
(d) Landlord's consent is conditional upon Assignee accepting and
honoring the Lease Agreement as written.
(e) Tenant reimburses Landlord for administrative and attorney fees
incurred as a result of this Assignment of Lease in the amount
of $500.00.
(4) CONTINUING LIABILITY. Notwithstanding the foregoing, nothing contained
herein shall be construed as a release of Assignor or any guarantor,
nor is Landlord's consent to the assignment a release of Assignor or any
guarantor as to any of the terms, conditions and obligations of the
Lease Agreement which have accrued or may accrue in the future.
(5) LEASE AMENDMENT. (a) Landlord and Assignee agree that Article 9.
Additional Construction of the Lease Agreement is hereby amended by
adding the following provision.
"In the event of an expansion of the Shopping Center or construction or
the addition of a new department store, Landlord and Tenant agree that
Landlord shall have the right to relocate Tenant to a new space within
the Shopping Center, provided that Landlord gives Tenant no less than
six (6) months prior written notice of such intent to relocate.
2
<PAGE> 3
Landlord agrees to relocate Tenant to a space resulting from the
combining of Spaces 1370, 1374 and 1378 into one new "relocation space"
or such other space as may be mutually agreeable between the parties.
Further, Landlord agrees to reimburse Tenant for fifty percent (50%) of
Tenant's construction costs (not to exceed a total construction cost of
One Hundred Thousand and 00/100 Dollars ($100,000.00) at the new
location. All construction reimbursement payments by Landlord to Tenant
shall be made as credits against Tenant's monthly installments of
Minimum Annual Rent and Percentage Rent. In the event the Tenant elects
not to relocate, Tenant shall have the right to terminate this Lease by
giving Landlord thirty (30) days prior written notice of its election to
terminate.
Notwithstanding the foregoing to the contrary, Landlord may
elect to terminate its right to relocate Tenant by giving Tenant written
notice of such election and this relocation provision shall henceforth
be null and void and of no further effect."
(b) Landlord and Assignee further agree that the Lease Agreement is
hereby amended by adding Exhibit "E" Guaranty to the Lease Agreement,
a true and correct copy of which is attached hereto and incorporated
by reference for all purposes.
(6) EFFECTIVE DATE. This assignment is effective at 12:01 o'clock a.m.,
C.S.T., on the 14th day of October, 1996.
PADRE STAPLES MALL
/s/ ROY M. SMITH
-----------------------------
Roy M. Smith
/s/ W.M. BEVLY by Permission
-----------------------------
W.M. Bevly
"LANDLORD"
3
<PAGE> 4
PEPE, INC. D/B/A CASA OLE
RESTAURANT AND CANTINA
By: /s/ JOSE A. TORRES
---------------------
Name: Jose A. Torres
---------------------
Title: President PEPE, INC.
---------------------
"TENANT/ASSIGNOR"
JACK GOODWIN
/s/ JACK R. GOODWIN
----------------------------
"GUARANTOR"
CASA OLE NO. 29 INCORPORATED
By: /s/ PATRICK A. MORRIS
-------------------------
Name: Patrick A. Morris
----------------------
Title: President
---------------------
"ASSIGNEE"
CASA OLE RESTAURANTS, INC.
By: /s/ STACY M. RIFFE
------------------------
Name: Stacy M. Riffe
----------------------
Title: Vice President
---------------------
"GUARANTOR"
4
<PAGE> 5
STATE OF TEXAS )
COUNTY OF NUECES )
BEFORE ME, the undersigned, a Notary Public in and for said county and
state, on this day personally appeared Roy M. Smith and W.M. Bevly, owners of
Padre Staples Mall, known to me to be the persons whose names are subscribed to
the foregoing instrument, and acknowledged to me that they executed the same
for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 10th day of October, 1996.
[SEAL]
GABRIELA GEHLMAN /s/ GABRIELA GEHLMAN
Notary Public ------------------------------
STATE OF TEXAS Notary Public, State of Texas
My Comm. Exp. July 21 1999
Print Name: Gabriela Gehlman
------------------
My Commission Expires: 7-21-99
-------
STATE OF TEXAS )
COUNTY OF NUECES )
BEFORE ME, the undersigned, a Notary Public in and for said county and
state, on this day personally appeared Jose A. Torres, President of Pepe, Inc.
d/b/a Casa Ole Restaurant and Cantina, a Texas corporation, known to me to be
the person whose name is subscribed to the foregoing instrument and acknowledged
to me that he/she executed the same for the purposes and consideration therein
expressed, in the capacity therein stated and as the act and deed of said
corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 10th day of October,
1996.
[SEAL]
GABRIELA GEHLMAN /s/ GABRIELA GEHLMAN
Notary Public ------------------------------
STATE OF TEXAS Notary Public, State of Texas
My Comm. Exp. July 21 1999
Print Name: Gabriela Gehlman
-------------------
My Commission Expires: 7-21-99
-------
5
<PAGE> 6
STATE OF TEXAS )
COUNTY OF NUECES )
BEFORE ME, the undersigned, a Notary Public in and for said county and
state, on this day personally appeared Jack Goodwin, known to me to be the
person whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and consideration therein
expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 11th day of October, 1996.
[SEAL]
KELLEY LANDINI /s/ KELLEY LANDINI
Notary Public ------------------------------
STATE OF TEXAS Notary Public, State of Texas
My Comm. Exp. Nov. 26, 1998
Print Name: Kelley Landini
------------------
My Commission Expires: 11-26-98
-------
STATE OF TEXAS )
COUNTY OF NUECES )
BEFORE ME, the undersigned, a Notary Public in and for said county and
state, on this day personally appeared Patricia A. Morris, President of Casa
Ole No. 29 Incorporated, a Texas corporation, known to me to be the person whose
name is subscribed to the foregoing instrument and acknowledged to me that
he/she executed the same for the purposes and consideration therein expressed,
in the capacity therein stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 10th day of October,
1996.
[SEAL]
GABRIELA GEHLMAN /s/ GABRIELA GEHLMAN
Notary Public ------------------------------
STATE OF TEXAS Notary Public, State of Texas
My Comm. Exp. July 21 1999
Print Name: Gabriela Gehlman
-------------------
My Commission Expires: 7-21-99
-------
6
<PAGE> 7
STATE OF TEXAS )
COUNTY OF NUECES )
BEFORE ME, the undersigned, a Notary Public in and for said county and
state, on this day personally appeared Stacy M. Riffe, Vice President of Casa
Ole Restaurants, Inc., a Texas corporation, known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that
he/she executed the same for the purposes and consideration therein expressed,
in the capacity therein stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 10th day of October,
1996.
[SEAL]
GABRIELA GEHLMAN /s/ GABRIELA GEHLMAN
Notary Public ------------------------------
STATE OF TEXAS Notary Public, State of Texas
My Comm. Exp. July 21 1999
Print Name: Gabriela Gehlman
-------------------
My Commission Expires: 7-21-99
-------
7
<PAGE> 8
ASSIGNMENT OF LEASE AND CONSENT TO ASSIGNMENT
This Assignment of Lease and Consent to Assignment is entered into this
8 day of September, 1993, between Roy M. Smith and W.M. Bevly d/b/a Padre
Staples Mall ("Landlord"), Rainbolt, Inc. d/b/a Casa Ole ("Tenant/Assignor")
and Pepe, Inc. d/b/a Casa Ole Restaurant and Cantina ("Assignee").
WITNESSETH
WHEREAS, Landlord and Assignor are parties to that certain Lease dated March
23, 1988, between Roy M. Smith and W.M. Bevly, d/b/a Padres Staples Mall and
Rainbolt, Inc. d/b/a Casa Ole and that certain Lease Assignment and Consent to
Assignment dated May 1, 1988, between Roy W. Smith and W.M. Bevly, d/b/a Padre
Staples Mall ("Landlord"), Rainbolt Inc. ("Assignor"), Jack Goodwin
("Guarantor") and Modern Restaurant Concepts, Inc. ("Assignee"), and all
amendments and extensions thereto, if any, ("the Lease") for the premises
containing approximately 3,919 square feet of space located at Padre Staples
Mall, Corpus Christi, Texas, said premises being more fully described in the
Lease (the "Premises") and;
WHEREAS, Assignor and Assignee desire to assign to Assignee all Assignor's
right, title and interest in and to the Premises (the "Assignment"); and
WHEREAS, Assignor and Assignee desire to obtain Landlord's consent to said
Assignment as set forth in this Agreement,
NOW THEREFORE, in consideration of the Premises and of the mutual covenants and
conditions contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereby agree
as follows:
1. ASSIGNMENT Assignor hereby assigns, conveys, grants and
transfers to Assignee all of its right, title and interest as
Tenant in the Lease.
2. CONSENT TO ASSIGNMENT Landlord hereby agrees and consents to the
Assignment referenced herein and accepts Assignee as the Tenant
under the Lease with all of the rights, privileges and
obligations incident thereto subject to the provisions of
paragraph 4 hereof.
3. ASSUMPTION Assignee agrees that from and after the effective
date of the Assignment it will faithfully perform, discharge and
fulfill all of assignor's obligations and duties as the Tenant
under the Lease. Assignee acknowledges that it has inspected the
Premises and hereby agrees to accept the Premises in its "as is"
condition.
4. CONTINUING LIABILITY Landlord's consent to the Assignment is
granted subject to Assignor and Guarantor remaining fully liable
under the Lease and Assignor and Guarantor hereby acknowledge
the continuing liability of Assignor and Guarantor to Landlord
under the Lease.
<PAGE> 9
IN WITNESS WHERE, the parties have set their hands the day and year first
written above.
LANDLORD
/s/ ROY M. SMITH
-------------------------------------
Roy M. Smith d/b/a Padre Staples Mall
/s/ W.M. BEVLY
-------------------------------------
W.M. Bevly d/b/a Padre Staples Mall
ASSIGNOR
/s/ JACK R. GOODWIN
------------------------------------
Jack R. Goodwin
Modern Restaurant Concepts, Inc.
ASSIGNEE
/s/ JOSE A. TORRES
------------------------------------
Jose Torres, President
Pepe, Inc.
<PAGE> 10
STATE OF TEXAS
COUNTY OF NUECES
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ROY M. SMITH and W.M. BEVLY, owners of PADRE STAPLES MALL,
known to me to be the persons whose names are subscribed to the foregoing
instrument, and acknowledged to me that they executed the same for the purposes
and consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 8 day of September, 1993.
/s/ STEFANIE DELMASTRO
------------------------------
NOTARY PUBLIC IN AND FOR THE
STATE OF TEXAS
------------------------------
TYPED OR PRINTED NAME
[SEAL]
STEPHANIE DELMASTRO
MY COMMISSION EXPIRES
MY COMMISSION EXPIRES: June 30, 1996
- ----------------------
STATE OF
--------------
COUNTY OF
-------------
Before me, the undersigned authority, a Notary Public in and for said
County and State, personally appeared Jack R. Goodwin, the President of Modern
Restaurant Concepts Inc., a _______ corporation, known to me to be the person
and officer whose name is subscribed to the foregoing instrument, and acknow-
ledged to me that (s)he executed the same as the act and deed of said corpora-
tion, and in the capacity therein stated.
WITNESS MY HAND AND SEAL this 30th day of August, 1993.
/s/ SYLVIA HARTLEY
------------------------------
NOTARY PUBLIC IN AND FOR THE
STATE OF TEXAS
Sylvia Hartley
------------------------------
TYPED OR PRINTED NAME
MY COMMISSION EXPIRES:
9-15-95
- ---------------------
STATE OF TEXAS
COUNTY OF VICTORIA
Before me, the undersigned authority, a Notary Public in and for said
County and State, personally appeared Jose A. Torres, who acknowledged
that (s)he executed the foregoing instrument as his/her act and deed.
WITNESS MY HAND AND SEAL this 30th day of August, 1993.
/s/ SYLVIA HARTLEY
------------------------------
NOTARY PUBLIC IN AND FOR THE
STATE OF TEXAS
Sylvia Hartley
------------------------------
TYPED OR PRINTED NAME
My COMMISSION EXPIRES:
9-15-95
- ---------------------
<PAGE> 11
PADRE
STAPLES
MALL
LEASE
AGREEMENT
<PAGE> 12
INDEX
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<S> <C> <C>
1 Leased Premises Term and Use . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Exhibits and Original Construction. . . . . . . . . . . . . . . . . . . . . . . . 2
3 Date on Which Rent Begins . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4 Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5 Definition of Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6 Records and Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8 Subordination and Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9 Additional Construction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10 Condition of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11 Repairs and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
12 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
13 Fixtures and Personal Property . . . . . . . . . . . . . . . . . . . . . . . 6
14 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
15 Laws and Ordinances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
16 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
17 Joint Use Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
18 Damage to Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
20 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
21 Assignment, Subletting and Ownership . . . . . . . . . . . . . . . . . . . . . . 11
22 Access to Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
23 Defaults by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
24 Surrender of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
25 Tenant's Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 13
26 Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
27 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
28 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
29 Sales of Premises by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . 16
30 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
31 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
32 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
33 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
34 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
35 Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
36 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
37 Marketing Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
38 Covenant of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
39 Waiver of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
40 Tenant's Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
41 Lease Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
42 Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
43 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
44 Broker's Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
45 Limitations on Landlord's Liability . . . . . . . . . . . . . . . . . . . . . . . 18
46 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
47 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 13
THIS LEASE made and entered into this 23 day of March, 1988
hereinafter referred to as the "date hereof" by and between ROY M.
SMITH and W. M. BEVLY, d/b/a PADRE STAPLES MALL with its principal
office at 5488 Padre Staples Mall, Corpus Christi, Texas 78411
(hereinafter called "Landlord") and RAINBOLT, INC. d/b/a Casa Ole
(hereinafter called "Tenant")
WITNESSETH:
LANDLORD and TENANT hereby agree as follows:
Landlord, for and in consideration of the covenants and
agreements hereinafter set forth to be kept and performed by both
parties, does hereby demise and lease to Tenant (for the term
hereinafter stipulated) the premises (hereinafter called the "leased
premises") being that portion of a building, shown hatched and
dimensioned on the plan attached hereto and made a part hereof as
"EXHIBIT A" to be located in the Padre Staples Mall (hereinafter
called the "Shopping Center") in the City of Corpus Christi, County of
Nueces, State of Texas, as shown on the site plan attached hereto and
made a part hereof as "EXHIBIT B."
ARTICLE 1
Leased Premises,
Term and Use
(a) LEASED PREMISES: An area consisting of approximately 3,919
square feet with a front width of approximately 39 feet, 11
inches and a depth of approximately 86 feet, (SPACE NO. 1184)
measured to the center line of all walls, common to other
tenant premises, to the exterior faces of all other walls, and
to be the building line or common Enclosed Mall plane where
there is no wall. If the Leased Premises is to be newly
constructed and is not a previously completed room, the
Landlord may confirm the measurements thereof upon completion,
and upon notice to Tenant, the floor area stated in such
notice shall be deemed to be the floor area of the Leased
Premises for all purposes of this Lease unless, within ten
(10) days after receipt of notice, Tenant notifies Landlord
that Tenant believes Landlord's measurement to be inaccurate,
in which event the Landlord shall cause its architect or
engineer to make such measurement and certify the same to the
parties. The floor area so certified (which may not exceed the
floor area set forth above by more than ten percent (10%))
shall be accepted by the parties and the Minimum Annual Rental
and other charges based on floor area shall be proportionately
adjusted.
(b) TERM: The term of this lease shall commence upon the date
hereof and shall end upon the January 1st next following the
15th anniversary of the date upon which rental is determined
to commence under the provisions of ARTICLE 3 hereof, unless
such date upon which rental shall be determined to commence
shall be January 1st, in which event the term hereof shall end
upon the 15th anniversary of such date of commencement.
(c) USE: The leased premises shall be used and occupied only
for the purpose of: The retail sale of Mexican specialty
dishes, fajitas, enchiladas, tacos, nachos, chile rellenos,
chicken fried steak, chicken nuggets, Mexican seafood
specialties, self-service lunch & dinner buffet, Incidental to
Tenant's Mexican food business, Tenant shall be entitled to
sell mixed drinks, beer and wine (l) and for no other purpose
whatsoever.
(d) TENANT TRADE NAME: CASA OLE
(e) TENANT NOTICE ADDRESS(es):
(i) Legal Address for Notice:
391 Victoria Mall
Victoria, Texas 77904
(ii) Billing Address (if different from above):
SAME AS ABOVE
(1) provided Tenant first obtains at its sole cost and expense all necessary
local and government permits.
-1-
<PAGE> 14
ARTICLE 2
Exhibits and Original Construction
(a) The exhibits listed below and attached to this lease are incorporated
herein by this reference:
EXHIBIT "A" Location of the Leased Premises within the Enclosed Mall.
EXHIBIT "B" Site Plan of Shopping Center.
EXHIBIT "C" Schedule for Tenant Improvements
Description of Landlord Work and Tenant Work.
EXHIBIT "D" Tenant Sign Criteria.
(b) The construction of the Shopping Center has as of the date of execution
of this lease been completed. Notwithstanding Exhibits A, B, C or D or
anything else in this lease, Landlord reserves the right to change or modify
and add to or subtract from the size and dimensions of the Shopping Center or
any part thereof, the number, location and dimensions of buildings and stores,
dimensions of hallways, malls and corridors, the number of floors in any
building, the location, size and number of tenant spaces and kiosks which may
be erected in or fronting on any mall or otherwise, the identity, type and
location of other stores and tenants, and the size, shape, location and
arrangement of joint use areas, and to design and decorate any portion of the
Shopping Center as it desires, but the general character of the Shopping Center
and the size and the approximate location of the tenant premises in relation to
the major department stores and the main entrances to the Enclosed Mall shall
not be substantially changed.
(d) Landlord agrees, at Landlord's expense, to perform Landlord's Work in the
construction of the leased premises substantially in accordance with the
outline specifications entitled "Schedule for Tenant Improvements, Description
of Landlord Work and Tenant Work" attached hereto and made a part hereof as
"EXHIBIT C." All work on the leased premises other than that to be so performed
by Landlord is to be done by Tenant, at Tenant's expense (hereinafter called
"Tenant's Work"). Tenant's Work shall include, but not be limited to, those
items listed in Exhibits C and D.
Tenant agrees to commence work in accordance with Exhibit C hereof, to proceed
diligently and to complete the work in strict accordance with Exhibit C hereof
(including the installation of all store and trade fixtures, equipment, stock
and inventory).
NOTWITHSTANDING ANYTHING CONTAINED IN THIS LEASE TO THE CONTRARY, OTHER THAN
ARTICLE 43 HEREOF, TENANT IS REQUIRED TO OPEN THE LEASED PREMISES FOR BUSINESS
TO THE PUBLIC ON OR BEFORE AUGUST 1, 1988. UNLESS REQUESTED TO DELAY SUCH AN
OPENING PURSUANT TO ARTICLE 3(b).
Landlord's ability to perform Landlord's obligations hereunder is dependent upon
prompt receipt of Tenant's plans.
In the event Tenant shall not have commenced Tenant's Work during the time
period specified herein, Landlord shall have the right and option to cancel and
terminate this lease by so notifying Tenant in writing, in which event Tenant
agrees to pay to Landlord, as liquidated damages, the cost of any work done by
Landlord for Tenant's account (on the basis of the actual cost plus twenty
percent (20%) for overhead and supervision), including, but not limited to,
sprinkler and electrical work, plumbing, concrete floor slabs, and cooled air
equipment and facilities, if any. In the event Tenant shall not have completed
Tenant's Work and shall not have opened its store for business as provided
herein (subject to the provisions of ARTICLE 3 hereof), then Tenant's rental
shall nevertheless commence on the date on which tenant should have opened for
business in accordance with the schedule contained herein at the rate of
one-fifteenth (1/15th) of the monthly amount of Tenant's Minimum Annual
Rental payments per day until Tenant shall open for business.
-2-
<PAGE> 15
(e) Landlord agrees, at Landlord's expense, to obtain and maintain public
liability insurance and Workmen's Compensation insurance adequate to fully
protect Tenant as well as Landlord from and against any and all liability for
death of or injury to person or damage to property caused in or about, or by
reason of, the construction of Landlord's Work. Tenant agrees, at Tenant's
expense, to obtain and maintain public liability insurance and Workmen's
Compensation insurance adequate to fully protect Landlord as well as Tenant
from and against any and all liability for death of or injury to person or
damage to property caused in or about, or by reason of, the construction of
Tenant's Work.
(f) In the event Landlord's Work and Tenant's Work shall progress
simultaneously, Landlord shall not be liable for any injury to person or damage
to property of Tenant, or of Tenant's employees, licensees or invitees, from
any cause whatsoever occurring upon or about the leased premises, and Tenant
shall and will indemnify and save Landlord harmless from any and all liability
and claims arising out of or connected with any such injury or damage.
(g) Tenant hereby releases Landlord from any claim whatsoever for damages
against Landlord for any delay in the date on which the leased premises shall be
ready for delivery to Tenant.
(h) During any period of construction of the leased premises, Tenant agrees to
conduct its labor relations and its relations with its employees in such a
manner as to avoid all strikes, picketing and boycotts of, on, or about the
leased premises and the Shopping Center. Tenant further agrees that if, during
the period of construction of the leased premises, any of its employees strike,
or if picket lines or boycotts or other visible activities objectionable to
Landlord are established, conducted or carried out against Tenant or its
employees, or any of them, on or about the leased premises or the Shopping
Center, Tenant shall immediately close the leased premises and remove all
employees therefrom until the dispute giving rise to such strike, picket line,
boycott or objectionable activity has been settled to Landlord's satisfaction
ARTICLE 3
Date on Which Rent Begins
(a) The Minimum Annual Rental, and additional rentals and charges, shall begin
to accrue on the earlier of the following dates: (August 1, 1988)
(i) the date which is set forth in ARTICLE 2(d) as the date on which
Tenant is required to open for business
OR
(ii) The date on which Tenant shall open the leased premises for
business to the public.
ARTICLE 4
Rental
Tenant agrees to pay as rental for the use and occupancy of the leased premises,
at the times and in the manner hereinafter provided, the following sums of
money:
(a) MINIMUM ANNUAL RENTAL: Tenant, in consideration of said demise, does hereby
covenant and agree with Landlord to pay to Landlord, without deduction or
set-off of any kind, the sum of [SEE ADDENDA] DOLLARS ($SEE ADDENDA) per annum
as minimum annual rental (the "Minimum Annual Rental") for said leased
premises. The Minimum Annual Rental shall be payable in twelve (12) equal
monthly installments, in advance, without notice or invoice from Landlord, upon
the first day of each and every month during the term hereof, commencing upon
the date on which rental is determined to commence under the provisions of
ARTICLE 3 hereof and ending upon the termination date of this lease. In the
event such rental shall be determined under the provisions of ARTICLE 3 hereof
to commence on a day other than the first day of a month, then the Minimum
Annual Rental for the period from such commencement date until the first day of
the month next following shall be prorated accordingly. All past due rentals,
additional rentals, and/or other sums due to Landlord under the terms of this
lease shall bear interest at the rate of 18%, from the due date thereof until
paid by Tenant. All
-3-
<PAGE> 16
rentals in this lease provided (those hereinafter stipulated as well as Minimum
Annual Rental) shall be paid or mailed to:
ROY M. SMITH and W. M. BEVLY
d/b/a PADRE STAPLES MALL
5488 PADRE STAPLES MALL
CORPUS CHRISTI, TEXAS 78411
or to such other payee or address as Landlord may designate, in writing, to
Tenant.
Notwithstanding anything to the contrary contained in this lease, in order to
cover the extra expense involved in handling delinquent payments, Tenant, at
Landlord's sole option, shall pay a "late charge" of $200.00 when any
installment of rent (basic percentage or other, as may be considered additional
rental under this lease) is received at the address listed above more than five
(5) days after. It is hereby understood that this amount is charged as
additional rent, and not as penalty or interest, for the purpose of defraying
Landlord's expenses incident to the processing of such overdue payments.
(c) PERCENTAGE RENTAL: In addition to the Minimum Annual Rental, Tenant agrees
to pay the Landlord, in the manner and upon the conditions and at the times
hereinafter set forth, during and for each calendar year of the term hereof and
as "percentage rental" hereunder an amount equal to six percent (6%) of all
"net sales" (as defined in ARTICLE 5 hereof) in excess of SEE ADDENDA DOLLARS
($ SEE ADDENDA) (prorated for the proportionate part, if any, of (i) the first
calendar year of the term hereof commencing on the date upon which rental shall
commence under ARTICLE 3 hereof and ending on the next following December 31;
or (ii) any year during which rental payments are terminated as a result of a
casualty or condemnation as expressly provided for in this lease) made by
Tenant in the leased premises during any calendar year of the term hereof. Said
percentage rental shall be first paid for the month in which the aggregate net
sales for such calendar year shall first have exceeded SEE ADDENDA DOLLARS ($
SEE ADDEND) and thereafter shall be paid monthly on all additional net sales
made during the remainder of such calendar year (or partial year, as the case
may be), such payments to be made not later than the fifteenth (15th) day of
the next following month.
ARTICLE 5
Definition of Net Sales
The term "net sales" as used in this lease shall mean and include (as of the
date of the transaction) The sale price of all merchandise sold (including gift
and merchandise certificates) and charges for all services and all other
receipts from the business performed by Tenant or any person, firm or
corporation selling merchandise or services in, upon or from any part of the
leased premises, whether such amounts shall be for cash, charge accounts or
credit cards, paid or unpaid, collected or uncollected. Each installment or
credit sale shall be treated as a sale for the full price in the month during
which such sale is made, irrespective of whether or when Tenant receives
payment
-4-
<PAGE> 17
therefor. The term "net sales" shall also mean and include gross sales from
vending machines, (except telephone and postage stamp); mail or telephone
orders received or filled at the leased premises; all deposits not refunded to
purchasers; orders taken, although such orders may be filled elsewhere;
insurance proceeds realized for loss of sales, profits, or business; but
deducting or excluding, as the case may be, the following: (a) refunds and
allowances to customers made upon transactions included within net sales, but
not exceeding the selling price of the merchandise returned by the purchaser
and accepted by Tenant; (b) the amount of all sales, use, excise, retailer's
occupation or similar taxes imposed in a specific amount, or percentage upon,
or determined by the amount of retail sales made at the leased premises to the
extent that such taxes were added to or absorbed within the sale price of the
merchandise sold and paid directly to the taxing authority by Tenant; (c)
interest, service, finance or sales carrying charges paid by customers for
extension of credit on sales and where not included in the merchandise sales
price; (d) returns to shippers and manufacturers; (e) the amount of sales, not
in the ordinary course of Tenant's business, of fixtures, machinery or
equipment which Tenant has the right to remove from the leased premises after
use thereof in the conduct of the Tenant's business in the leased premises; and
(f) the value of any exchange or transfer of merchandise between stores of
Tenant where such exchange or transfer is made solely for the convenient
operation of Tenant's business and not for the purpose of consummating a sale
made in, at, or from the leased premises. No deduction shall be allowed for
uncollected or uncollectible credit amounts, and no deduction shall be allowed
for trade-ins.
ARTICLE 6
Records and Audits
Tenant agrees to record all sales in accordance with generally accepted
accounting principles, which records, together with all sales and income tax
reports, shall be preserved by Tenant for three (3) years, either (a) at the
leased premises or (b) at the home or regional offices of Tenant and made
available to Landlord at the leased premises or such offices upon demand.
Tenant agrees to deliver to Landlord a statement of each month's sales on or
before the fifteenth (15th) day of the following month and, by January 30th of
each year of the term of this lease, a statement, certified by a Certified
Public Accountant or a financial officer, owner or partner of Tenant
satisfactory to Landlord of the net sales made during the preceding calendar
year. Landlord shall be entitled at Landlord's expense, to have a reaudit of the
net sales made during the period covered by such audit and account either by
Landlord or an auditor designated by Landlord, and to recalculate the rentals
payable for such period. If it shall be determined as a result of such reaudit
or such certified statement that there has been a deficiency in the payment of
percentage or additional rentals, then such deficiency shall become immediately
due and payable with interest at the maximum legal rate, from the date when
said payments should have been made. In addition, if net sales have been
understated by more than two percent (2%) and Landlord is entitled to an
increase in percentage or additional rental as a result of such understatement,
then Tenant shall pay all costs of such reaudit, including a $500 administrative
charge. In the event Tenant shall be delinquent in furnishing to Landlord any
monthly sales statement or statements required hereunder, then Landlord shall
have the right, without notice, to conduct such reaudit as provided by this
ARTICLE 6 and any and all charges occasioned by reason thereof shall be the
sole obligation of Tenant, which obligation shall be deemed an item of
additional rent. If net sales are determined to have been understated by more
than five (5%), Landlord may elect to terminate this lease by notice to Tenant
given within six (6) months after receipt of such statement and this lease
shall terminate and be null and void sixty (60) days after delivery of such
notice.
ARTICLE 7
Taxes
In addition to the Minimum Annual Rental provided for in ARTICLE 4(a) hereof,
Tenant agrees to pay to Landlord additional rent as follows:
(a) Tenant shall pay its proportionate share of all real property taxes and
assessments which may be levied or assessed against the Shopping Center by any
lawful authority for each calendar year commencing on the date on which rental
shall be determined to commence under ARTICLE 3 hereof, excluding taxes or
assessments levied or assessed against land and/or buildings owned or leased by
department stores which may be located in the Shopping Center Tenant's
proportionate share shall be equal to the product obtained by multiplying such
taxes and assessments, and Landlord's expenses in obtaining or attempting to
obtain any refund or reduction thereof, by a fraction, the numerator of which
shall be the number of square feet of floor area in the leased premises and the
denominator of which shall be the total number of square feet of leased floor
area in the Shopping Center, excluding the floor area contained in the
department store buildings. Should the State of Texas or any political
subdivision thereof or any governmental authority having jurisdiction
thereover, impose a tax and/or assessment (other than a net income or franchise
tax) upon or against the rental payable to Landlord in respect of the Shopping
Center, either by way of substitution for the taxes and assessments levied or
assessed against such land and such buildings, or in addition thereto, such tax
and/or assessment shall be deemed to constitute a tax and/or assessment against
such land and such buildings for the purpose of this ARTICLE 7.
(b) Tenant's proportionate share of all real property taxes and assessments
during the term hereof shall be paid in monthly installments on or before the
first day of each calendar month, in advance, in an amount estimated by
Landlord, provided, that in the event Landlord is required under a mortgage
covering the Shopping Center to escrow real estate taxes, Landlord may, but
shall not be obligated to, use the amount required to be escrowed as a basis
for its estimate of the monthly installments due from Tenant hereunder. Upon
receipt of all tax bills and assessment bills attributed to any calendar year
during the term hereof Landlord shall furnish Tenant with a written statement
of the actual amount of Tenant's proportionate share of the taxes and
assessments for such year. If the total amount paid by Tenant under this
ARTICLE 7 for any calendar year during the term of this lease shall be less
than the actual amount due from Tenant for such year, as shown on such
statement, Tenant shall pay to
-5-
<PAGE> 18
Landlord the deficiency within ten (10) days after demand therefor by Landlord;
and if the total amount paid by Tenant hereunder for any such calendar year
shall exceed such amount due from Tenant for such calendar year, Tenant shall
be entitled to offset the excess against payments next thereafter becoming due
under this ARTICLE 7. For the calendar years in which this lease commences or
terminates, the provisions of this ARTICLE 7 shall apply and Tenant's liability
for its proportionate share of any taxes and assessments for any such year
shall be subject to a prorata adjustment based on the number of days of any
such year during which the term of this lease is in effect. A copy of a tax
bill or assessment bill submitted by Landlord to Tenant shall at all times be
sufficient evidence of the amount of taxes and/or assessments levied or
assessed against the property to which such bill relates. Prior to or at the
commencement of the term of this lease and from time to time thereafter
throughout the term hereof, Landlord shall notify Tenant in writing of
Landlord's estimate of Tenant's monthly installments due hereunder. Landlord's
and Tenant's obligations under this ARTICLE 7 shall survive the expiration of
the term of this lease. No taxes, assessments, fees or charges referred to in
this paragraph shall be considered as taxes under the provisions of ARTICLE 13
hereof.
ARTICLE 8
Subordination and Attornment
(a) Upon written request of Landlord, or any mortgagee or beneficiary of
Landlord, Tenant will, in writing, subordinate its rights hereunder to the lien
of any first mortgage or deed of trust now or hereafter in force against the
land and building of which the leased premises are a part, and upon any building
hereafter placed upon the land of which the leased premises are a part and to
all advances made or hereafter to be made upon the security thereof; provided,
however, that the first mortgagee or trustee named in said first mortgage or
trust deed shall agree that Tenant's peaceable possession of the leased
premises will not be disturbed on account thereof, as long as no default exists
under this lease by Tenant.
(b) In the event any proceedings are brought for foreclosure, or in the event
of the exercise of the power of sale under any mortgage or deed of trust made
by Landlord covering the leased premises, Tenant shall attorn to the purchaser
upon any such foreclosure or sale pursuant thereto and recognize such purchaser
as the Landlord under this lease, provided, however, that said Purchaser shall
agree that Tenant's peaceable possession of the leased premises will not be
disturbed on account thereof, as long as no default exists under this Lease by
Tenant.
ARTICLE 9
Additional Construction
Landlord hereby reserves the right at any time to make alterations or additions
to, and to build additional stories on, the building in which the leased
premises are contained and to build adjoining the same. Landlord also reserves
the right to add to and subtract land from the Shopping Center, and to
construct other buildings or improvements, including elevated or double-deck
parking facilities in the Shopping Center, from time to time and to make
alterations or additions thereto, and to build additional stories on any such
building or buildings, and to build adjoining same, however, access to and
visibility of Tenant's premises shall not be impaired by virtue of such
additional construction or additions.
ARTICLE 10
Condition of Premises
Tenant's taking possession of the leased premises shall be conclusive evidence
of Tenant's acceptance thereof and that the leased premises are in good order
and satisfactory condition. Tenant agrees that no representations respecting
the condition of the leased premises and no promises to decorate, alter, repair
or improve the leased premises either before or after the execution hereof,
have been made by Landlord or its agents to Tenant unless the same are
contained herein or made a part hereof.
ARTICLE 11
Repairs and Maintenance
Landlord agrees, at its expense, to keep the foundations, sprinkler mains,
structural systems and masonry walls of the leased premises in good condition
and repair, but Landlord shall not be liable to Tenant for any damage caused by
the same being or becoming out of repair until it has had reasonable opportunity
to have same repaired after being notified in writing of the need of same by
Tenant. Landlord shall not be liable to Tenant for any damage to merchandise,
trade fixtures, floor coverings, drywall, ceilings, lighting or personal
property of Tenant in the leased premises caused by water leakage from water
lines, roof leaks, sanitary sewage, storm drain, sprinkler or cooled air
equipment. Tenant agrees, at Tenant's expense, to keep all other parts of the
leased premises in good order and repair, and in a clean, sanitary and safe
condition, including the replacement of equipment, fixtures and all plate
glass, and to paint the interior and store front when necessary in order to
maintain at all times a clean and sightly appearance. If Tenant refuses or
neglects to make repairs and/or maintain the leased premises or any part
thereof in a manner reasonably satisfactory to Landlord, Landlord shall have
the right, upon giving Tenant reasonable written notice of its election to do
so, to make such repairs or perform such maintenance on behalf of and for the
account of Tenant. In such event, such work shall be paid for by Tenant as
additional rental promptly upon receipt of a bill therefor.
If any damage is caused by any act, omissions, or negligence of Tenant or
Tenant's permittees, Tenant shall upon demand pay or cause its insurance
carrier to pay, for any necessary repairs.
ARTICLE 12
Alterations
Tenant shall not make any structural alterations in any portion of the leased
premises, nor any alterations in the storefront or the exterior of the leased
premises, nor any interior alterations without, in each instance, first
obtaining the written consent of Landlord. All alterations, additions,
improvements, and Tenant's Work provided for herein, shall become, upon
completion, the property of Landlord, subject to the terms of this lease.
ARTICLE 13
Fixtures and Personal Property
Any trade fixtures, signs and other personal property of Tenant not permanently
affixed to the leased premises shall remain the property of Tenant, subject to
Landlord's lien for unpaid rent, and Landlord agrees that Tenant shall have the
right, at any time, and from time to time, to remove any and all of it as trade
fixtures, signs and other personal property which it may have stored or
installed in the leased premises, including, but not limiting the same to
counters, shelving, showcases, mirrors and other
-6-
<PAGE> 19
moveable personal property. Nothing contained in this ARTICLE 13 shall be
deemed or construed to permit Tenant to remove so much of such personal
property, without the immediate replacement thereof with similar personal
property of comparable or better quality, as to render the leased premises
unsuitable for conducting the type of business specified in ARTICLE 1(c)
hereof. Tenant, at its expense, shall immediately repair any damage occasioned
to the leased premises by reason of the removal of any such trade fixtures,
signs, and other personal property, and upon expiration or earlier termination
of this lease, shall leave the leased premises in a neat and clean condition,
free of debris. All trade fixtures, signs, and other personal property
installed in or attached to the leased premises by Tenant must be new when so
installed or attached. Tenant shall pay before delinquency all taxes,
assessments, license fees and public charges levied, assessed or imposed upon
its business operation in the leased premises as well as upon its trade
fixtures, leasehold improvements (including, but not limited to, those Tenant
is required to make in accordance with the provisions of ARTICLE 2 hereof),
merchandise and other personal property in, or upon the leased premises. If any
such items of property are assessed with property of Landlord, then such
assessment shall be equitably divided between Landlord and Tenant to the end
that Tenant shall pay only its equitable portion of such assessment. Landlord
shall determine the basis of so prorating any such assessments and such
determination shall be binding upon both Landlord and Tenant. No taxes,
assessments, fees or charges referred to in this paragraph shall be considered
as taxes under the provisions of ARTICLE 7 hereof except any such taxes,
assessments, fees or charges which are apportioned to the Landlord pursuant to
the second preceding sentence.
ARTICLE 14
Liens
Tenant shall not permit to be created nor to remain undischarged any lien,
encumbrance or charge arising out of any work or work claim of any contractor,
mechanic, laborer or any material supplied or claimed to be supplied by any
materialman which might be or become a lien, encumbrance or charge upon the
leased premises or the Shopping Center of which the leased premises is a part
or the income therefrom and Tenant shall not suffer any other matter or thing
whereby the estate, right and interest of Landlord in the leased premises or in
the Shopping Center of which the leased premises is a part might be impaired. If
any lien or notice of lien on account of an alleged debt of Tenant or any
notice of contract by a party engaged by Tenant or Tenant's contractor to work
in the leased premises shall be filed against the leased premises or the
Shopping Center of which the leased premises is a part, Tenant shall, within ten
(10) days after notice of the filing thereof, cause the same to be discharged
of record by payment, deposit or bond in the amount required by a court of
competent jurisdiction or otherwise. If Tenant shall fail to cause such lien or
notice of lien to be discharged within the period provided, then Landlord, in
addition to any other rights or remedies, may but shall not be obligated to,
discharge the same by either paying the amounts claimed to be due or by
procuring the discharge of such lien by deposit or by bonding proceedings; and
in any such event, Landlord shall be entitled, if Landlord so elects, to defend
any prosecution of an action for foreclosure of such lien by the lienor or to
compel the prosecution of an action for the foreclosure of such lien by the
lienor and to pay the amount of the judgment in favor of the lienor with
interest, costs and allowances. Any amount paid by Landlord and all costs and
expenses, including attorney's fees, incurred by Landlord in connection
therewith, together with interest thereon at the maximum legal rate from the
respective dates of Landlord's making of the payment or incurring of the cost
and expense, shall be paid by Tenant to Landlord on demand.
ARTICLE 15
Laws and Ordinances
(a) Tenant agrees to comply with all laws, ordinances, orders and regulations
affecting the use and occupancy of the leased premises and the cleanliness,
safety or operation thereof. Tenant agrees to comply with the regulations and
requirements of any insurance underwriter, inspection bureau or similar agency
with respect to that portion of the leased premises installed by Tenant. Tenant
also agrees to permit Landlord to comply with such recommendations and
requirements with respect to that portion of the leased premises installed by
Landlord. In addition, Tenant agrees to comply, to the extent that the same may
be applicable to the leased premises, with the standards and requirements and
subsequent amendments thereto of the Williams-Steiger Act (PL 91-596), known as
the "Occupational Safety and Health Act of 1970," notwithstanding the fact that
Tenant may otherwise be exempted from the provisions of said Act.
(b) Tenant agrees not to: (i) permit any immoral practice to be carried on or
committed on the leased premises; (ii) make use of or allow the leased premises
to be used for any purpose other than that permitted under ARTICLE 1(c) hereof
or that might invalidate or increase the rate of insurance therefor; (iii)
keep, use or permit to be kept or used on the leased premises any flammable
fluids, gases, or explosives without the prior written permission of Landlord;
(iv) use the leased premises for any purpose whatsoever which might create a
nuisance or injure the reputation of the leased premises or of the Shopping
Center; (v) deface or injure the building of the leased premises; (vi) overload
the floors; (vii) commit or suffer any waste; or (viii) install any electrical
equipment that overloads lines.
(c) In connection with the installation of any electrical equipment, Tenant
shall, at Tenant's own expense, make from time to time whatever changes are
necessary to comply with the requirements of the insurance inspectors,
underwriters, government authorities and codes.
ARTICLE 16
Services
(a) Landlord agrees to cause the necessary mains, conduits and other facilities
to be provided to make water, sewer and electricity available to the leased
premises and other occupied space in the Shopping Center and to make available
to Tenant water and electrical services through the plumbing and electrical
systems to be provided within the leased premises by Tenant, in accordance with
and subject to the provisions of EXHIBIT C hereof.
Tenant shall be solely responsible for and promptly pay all charges for the use
or consumption of sewer, gas, electricity, water and all other utility
services.
-7-
<PAGE> 20
If Landlord makes available electrical service, it shall I be made available as
provided in EXHIBIT C, and Tenant agrees to purchase the same from Landlord and
to pay Landlord, as additional rent, on the first day of each month in advance,
for the electrical service at the same cost as would be charged to Tenant from
time to time by the utility company which otherwise would furnish such services
and meter the same directly to the leased premises. Landlord shall compute
Tenant's monthly electrical demand and consumption from the electrical
information provided by Tenant in Tenant's plans, the operating hours of the
center, the shell construction and local weather data. Landlord shall provide
Tenant with the computations of demand and consumption totals. Review of the
totals may be initiated at Tenant's request or Landlord's option.
If Landlord elects to supply water, Tenant shall pay Landlord at the same rate
as would be charged to Tenant by the utility company which otherwise would
furnish such service and meter to same directly to the leased premises, but in
any event not less than the minimum monthly charge which would have been
charged by the water utility company for the size of meter which would have
been installed by Tenant in or for the leased premises.
(b) Tenant agrees, at its own cost and expense, to construct, operate and
maintain, or cause to be operated and maintained, a Cooled Air System designed
to provide cooled air to, and within the leased premises in accordance with
the provisions of EXHIBIT C hereof. Tenant agrees to operate said Cooled Air
System so that the temperature within the leased premises will be reasonably
identical to that within the Enclosed Mall.
(d) If Tenant fails to pay any payment to Landlord within ten (10) days from the
date such payment is due, Landlord may, without limitation, cut off and
discontinue any such utilities and services furnished to the leased premises,
without any liability to Tenant. Any action by Landlord pursuant to the
provisions of this ARTICLE 16(d) shall not be construed as an eviction or
disturbance of Tenant's possession of the leased premises, or as an election by
Landlord to terminate this lease.
(e) Landlord shall not be liable to Tenant in damages or otherwise if the said
utilities or services are interrupted or terminated because of necessary
repairs, installations or improvements, or any cause beyond the Landlord's
reasonable control, nor shall any such interruption or termination relieve
Tenant of the performance of any of its obligations hereunder. Tenant shall
operate the leased premises in such manner as to not waste electricity, water
or heating and cooling effect. Landlord may cease to furnish any one or more of
said services without responsibility to Tenant except to connect the service
facilities with such other nearby source of supply as may be available for the
services so discontinued and to adjust the charge accordingly.
(f) Tenant shall not install any equipment which can exceed the capacity of any
utility facilities as specified in EXHIBIT C and if any equipment installed by
Tenant requires additional utility facilities, the same shall be installed at
Tenant's expense in compliance with all code requirements and plans and
specifications, which must be approved in writing by Landlord.
-8-
<PAGE> 21
(g) Landlord has the right to take any energy management measures Landlord may
deem necessary for energy conservation which shall include, but not be limited
to, control of all Tenant's energy consumption.
(h) If Landlord shall provide or designate a service for collection of refuse
and garbage, Tenant shall use same, at Tenant's expense, provided the cost
thereof is competitive to any identical service available to Tenant.
ARTICLE 17
Joint Use Areas
(a) The "joint use areas," as herein referred to, shall consist of all parking
areas, landscaped areas, floors, ceilings, walls, benches, fountains, stairs,
fire exits, windows, glass, doors and hardware, streets, sidewalks, malls,
roof, driveways, loading platforms, canopies, elevators, escalators, washrooms,
lounges and shelters, and other facilities available for joint use, all as they
may from time to time exist and be available to all the tenants in the Shopping
Center, their employees, agents, customers, licensees and invitees.
(b) Landlord shall, subject to events beyond its reasonable control, maintain,
or cause to be maintained, the joint use areas in good order and repair.
(c) It is understood that certain department stores will be occupants of the
Shopping Center, and that one or more other department store companies may
become occupants of a part or parts of Landlord's tract or tracts. Said
department stores may participate in the "joint use area costs" (as hereinafter
defined) incurred by Landlord for the repair and maintenance of all the
Shopping Center in accordance with the terms of their respective agreements
with Landlord.
(d) As used in this lease, the term "joint use area costs" means the total of
all items of expense relating to operating, managing, equipping, policing and
protecting, lighting, repairing, replacing and maintaining the utility of the
joint use areas in at least as good condition as when originally installed.
Such costs and expense shall include, but not be limited to, removal of snow,
ice, trash, garbage, rubbish, dirt and debris, costs of planting, replanting and
replacing landscaping and supplies required therefor, and all costs of
utilities used in connection therewith, including, but not by way of
limitation, all costs of maintaining elevators, speed ramps and escalators,
lighting facilities and storm drainage systems, maintenance, repair and
depreciation of all items used in the operation and maintenance of the joint
use areas, the costs of heating and cooling the enclosed malls, labor salaries
and benefits, security and all premiums for Workmen's Compensation insurance,
wages, unemployment taxes, social security taxes and personal property taxes;
fees for required licenses and permits and administrative costs equal to
fifteen percent (15%) of the total costs of operating and maintaining the
"joint use area".
(e) Effective upon the date on which rental shall be determined to commence
under the provisions of ARTICLE 3 hereof, and at any time thereafter, Tenant
shall pay to Landlord as additional rent hereunder, upon demand, but not more
often than once a month, Tenant's share of the joint use area costs (based upon
Landlord's estimates, subject to readjustment as hereinafter provided in
paragraph (f) of this ARTICLE 17), which share shall be computed as follows:
Tenant's proportionate share of joint use area costs shall be equal to the
product obtained by multiplying such joint use area costs (less any
contributions to said cost made by the department stores) by a fraction, the
numerator of which shall be the number of square feet of floor area in the
leased premises and the denominator of which shall be the total number of
square feet of leased floor area in the shopping center, excluding the floor
area contained in the department store buildings. Notwithstanding any other
provisions of this ARTICLE 17, in no event will Tenant's share of total joint
use area costs be less than an annual minimum payment of TWO THOUSAND AND
NO/100 DOLLARS ($2,000.00).
(f) Within ninety (90) days following the end of each calendar year, Landlord
shall furnish to Tenant a statement, certified as correct by a Certified Public
Accountant or an officer of Landlord, showing the total joint use area costs
for the calendar year just expired, the amount of Tenant's share of such joint
use area costs and payment made by Tenant during such calendar year under
paragraph (e) of this ARTICLE 17. If Tenant's share of such joint use area costs
for such calendar year shall exceed Tenant's payment so made, Tenant shall pay
to Landlord the deficiency within ten (10) days after receipt of said
statement. If the total amount paid by Tenant shall exceed such amount due for
such calendar year, Tenant shall be entitled to offset the excess against
payments next thereafter becoming due.
ARTICLE 18
Damage to Premises
In the event the leased premises are hereafter damaged or destroyed or rendered
partially untenable for their accustomed uses by fire or other casualty insured
under the coverage which Landlord is obligated to carry pursuant to ARTICLE
19(a) hereof, then, except as hereinafter provided, Landlord shall promptly
repair said premises and restore the same to substantially the condition in
which they were immediately prior to the happening of such casualty, provided
that Landlord shall not be obligated to expend for such repair an amount in
excess of the insurance proceeds recovered as a result of such damage and that
in no event shall Landlord be required to repair or replace Tenant's stock in
trade, interior partitions, fixtures, equipment, furniture, furnishings, wall
covering, floor covering and draperies. From the date of such casualty until
the leased premises are so repaired and restored, Minimum Annual Rental
payments and all items of additional rental, except Taxes and Insurance, shall
abate in such proportion as the square footage of the leased premises thus
destroyed or rendered untenable bears to the total square footage of the leased
premises, provided, however, that in the event fifty percent (50%)
-9-
<PAGE> 22
or more of the leased premises or the Shopping Center of which they are a part
be hereafter destroyed or rendered untenable by fire or other casualty during
the term of this lease (based upon the cost to replace the premises immediately
prior to such fire or other casualty as shown by certificate of Landlord's
architect, or if one (1) or more department stores are damaged by fire or other
casualty such that they remain closed for business for a period exceeding
twelve (12) months), then Landlord shall have the right to terminate this lease
effective as of the date of such casualty, by giving Tenant, within thirty (30)
days after the happening of such casualty, written notice of such termination.
If said notice be given within said thirty (30) day period, this lease shall
terminate and Minimum Annual Rental and all other charges and items of
additional rental shall abate as aforesaid from the happening of such casualty,
and Landlord shall promptly repay to Tenant any rental theretofore paid in
advance which has not been earned at the date of such casualty. If said notice
be not given and Landlord is required or elects to repair or rebuild the leased
premises as herein provided, then Tenant shall repair and replace its
merchandise, trade fixtures, furnishings and equipment in a manner and to at
least a condition equal to that prior to its damage or destruction. Except as
herein expressly provided to the contrary, this lease shall not terminate nor
shall there be any abatement of rent or other charges or items of additional
rent as the result of a fire or other casualty.
ARTICLE 19
Insurance
(a) Landlord agrees to carry, or cause to be carried, during the term hereof
public liability insurance on the joint use areas, providing coverage
of not less than Three Million Dollars ($3,000,000.00) for personal injury or
death arising out of any one occurrence. Landlord also agrees to carry, during
the term hereof, insurance for fire, extended coverage, vandalism and malicious
mischief, insuring the improvements located on Landlord's property in the
Shopping Center, including the leased premises and all appurtenances thereto
(excluding Tenant's interior partitions, merchandise, trade fixtures,
furnishings, equipment and personal property) for the full insurable value
thereof, such insurance coverage to include Tenant's Work (but excluding
Tenant's merchandise, trade fixtures, furnishings, equipment, wall coverings,
floor covering, drapes, interior partitions and other personal property). Upon
request of Landlord, Tenant shall provide Landlord with a certificate setting
forth the cost of said Tenant's Work. During the term of this lease or any
renewals or extensions thereof, Tenant agrees to reimburse to Landlord as
additional rent, a prorata share of Landlord's annual total costs for the
premiums for such insurance. Tenant's proportionate share for the costs of the
premiums for such insurance shall be equal to the product obtained by
multiplying Landlord's total costs for such premiums by a fraction, the
numerator of which shall be the number of square feet of floor area in the
leased premises and the denominator of which shall be the total number of square
feet of leased floor area in the Shopping Center, excluding the floor area
contained in the department store buildings. Tenant's prorata share of the costs
for such premium shall be due and payable, in advance, as follows:
(i) Within ten (10) days after opening, Tenant shall pay to Landlord,
Tenant's prorata share of the costs for such premiums for the first
full calendar year of the term of this lease;
(ii) On the commencement of the payment of rent Tenant shall pay, in
advance, on the first day of each month one-twelfth (1/12th) of
Tenant's annual prorata share of such premium for the next
succeeding calendar year. Tenant's prorata share for the next
succeeding calendar year shall be based upon an estimate determined by
Landlord.
In the event that Landlord's estimate for any year is less than Tenant's actual
prorata share, Tenant shall promptly pay such excess to Landlord upon demand.
If the total amount paid by Tenant shall exceed Tenant's actual prorata share
for any year, Tenant shall be entitled to offset the excess against payments
next thereafter becoming due. As deductibles are paid, Tenant will be assessed
its prorata share of the deductible.
(b) Tenant agrees to carry public liability insurance including product and/or
completed operations liability on the leased premises; and if the Tenant is in
the business of selling or serving alcoholic beverages, Tenant shall also carry
liquor legal liability insurance (in a State having a Dram Shop Statute, then
wording shall be changed to Dram Shop Liability) during the term hereof,
covering both Tenant and Landlord as insureds and, if Landlord elects, any
owner and/or occupant of a tract in the Shopping Center which adjoins
Landlord's tract or tracts, as additional insureds, with terms and companies
satisfactory to Landlord and giving Landlord, Tenant and other additional
insureds a minimum of ten (10) days written notice by the insurance company
prior to cancellation, termination or change in such insurance. Such insurance
shall be for limits of not less than Two Million Dollars ($2,000,000.00) for
bodily injury, including death, and personal injury, arising out of any one
occurrence; and not less than Five Hundred Thousand Dollars ($500,000.00) for
damage to property arising out of any one occurrence, or a policy having a
combined single limit of Two Million Dollars ($2,000,000).
Tenant further agrees to carry insurance against fire and such other risks as
are, from time to time, included in standard extended coverage insurance, for
the full insurable value, covering all of Tenant merchandise, interior
partitions, trade fixtures, furnishings, wall covering, floor covering,
draperies, equipment and all other items of personal property of Tenant located
on or within the leased premises. Tenant shall provide Landlord with copies of
the policies or certificates evidencing that such insurance is in full force
and effect and stating the terms thereof.
(c) Landlord and Tenant and all parties claiming under them mutually release
and discharge each other from all claims and liabilities arising from or caused
by any casualty or hazard, covered or required hereunder to be covered in whole
or in part by insurance on the leased premises or in connection with property
on or activities conducted on the leased premises, and waive any right of
subrogation which
-10-
<PAGE> 23
might otherwise exist in or accrue to any person on account thereof, provided
that such release shall not operate in any case where the effect is to
invalidate such insurance coverage.
(d) Tenant shall be responsible for the maintenance of the plate glass in or on
the leased premises, but shall have the option either to insure the risk or to
self-insure.
ARTICLE 20
Indemnification
Tenant shall and will indemnify, defend and save harmless Landlord, owner
and/or operator of the Shopping Center, their agents, officers and employees,
from and against any and all liability, claims, demands, damages, expenses,
fees, fines, penalties, suits, proceedings actions, and causes of action of any
and every kind and nature arising or growing out of or in any way connected
with Tenant's use, occupancy, management or control of the leased premises
and/or Tenant's operations or activities in the Shopping Center. This
obligation to indemnify shall include reasonable legal and investigation costs
and all other reasonable costs, expense and liabilities from the first notice
that any claim or demand is to be made or may be made.
ARTICLE 21
Assignment, Subletting and Ownership
(a) Tenant shall not transfer, assign, sublet, enter into license or concession
agreements, change ownership or hypothecate this lease or Tenant's interest in
and to the leased premises without first procuring the written consent of
Landlord, which Landlord may grant or refuse to grant at its sole discretion.
Any attempt at transfer, assignment, subletting, license or concession
agreement, change of ownership or hypothecation without Landlord's written
consent shall be void and confer no rights upon any third person. The
prohibitions of this ARTICLE 21 shall be construed to refer to any acts or
events which occur by operation of law, legal process, receivership, bankruptcy
or otherwise. Without limiting the generality of the foregoing, Tenant shall
not sublease all or any portion of its interest in the leased premises or this
Lease for an amount of rent determined in whole or in part on the income or
profits derived by any person from such interest (other than an amount based on
a fixed percentage or percentages of receipts or sales).
(b) Tenant agrees to pay Landlord the sum of Five Hundred Dollars ($500.00) as
reimbursement for reasonable professional and administrative expenses incurred
by Landlord in connection with the processing and documentation of any
requested transfer, assignment, subletting, licensing or concession agreement,
creation of a security interest, granting of a collateral assignment, change of
ownership or hypothecation of this lease or Tenant's interest in and to the
leased premises, it being agreed that Landlord shall not be required to take
any action thereon until Landlord is paid such amount. The consent by Landlord
to any transfer, assignment, subletting, license or concession agreement,
change of ownership or hypothecation shall not constitute a waiver of the
necessity for such consent to any subsequent attempted transfer, assignment,
subletting, license or concession agreement, change of ownership or
hypothecation.
(c) Each transfer, assignment, subletting, license or concession agreement and
hypothecation to which there has been consent shall be by instrument in
writing, in form satisfactory to Landlord, and shall be executed by the
transferor, assignor, sublessor, licensor, concessionaire, hypothecator or
mortgagor and the transferee, assignee, sublessee, licensee, concessionaire, or
mortgagee shall agree in writing for the benefit of Landlord to assume, to be
bound by, and to perform the terms, covenants and conditions of this lease to
be done, kept and performed by Tenant. One executed copy of such written
instrument shall be delivered to Landlord. Failure to first obtain in writing
Landlord's consent or failure to comply with the provisions of this ARTICLE 21
shall operate to prevent any such transfer, assignment, subletting, license,
concession agreement or hypothecation from becoming effective.
(d) If Tenant is a corporation, and if the control thereof changes at any time
during the term hereof, then Landlord, at its option, may, by giving sixty (60)
days' prior written notice to Tenant, declare such a change a breach of this
lease, subject to the remedies provided for breach in ARTICLE 23 hereof. The
provisions of the preceding sentence, however, shall not be applicable if
control of the corporation changes as the result of a public offering. If, at
any time during the term of this lease, any part or all of its outstanding
voting stock, if Tenant is a corporation, or any interest in the partnership,
if Tenant is a partnership, shall be transferred by sale, assignment, bequest,
inheritance, operation of law, or other dispositions so as to result in a
change in the present effective voting control of Tenant by the person or
persons owning a majority of said outstanding voting stock or a majority
interest in the partnership, as the case may be, on the date of this lease,
then such event shall constitute an assignment for the purposes of this lease.
In the event there is a surety of this lease, then if at any time during the
term of this lease (a) any part or all of such surety's outstanding voting
stock, if such surety is a corporation, or any interest in the partnership, if
such surety is a partnership, shall be transferred by sale, assignment,
bequest, inheritance, operation of law, or other dispositions so as to result
in a change in the present effective voting control of such surety by the
person or persons owning a majority of said outstanding voting stock or a
majority interest in the partnership, as the case may be, on the date of this
lease, or (b) such surety is dissolved, Tenant shall so notify Landlord. Such
notice shall be effective in accordance with this ARTICLE 21, paragraph (d)
only if said notice shall include or state all of the following: (a) that said
notice is given pursuant to ARTICLE 21, paragraph (d) of this lease; (b) the
occurrences giving rise to such notice, stated with particularity as to the
effective date, parties involved or affected and the shares or interests
affected; (c) in the event of a transfer of shares or a partner's interest, a
recent financial statement (certified by an independent Certified Public
Accountant) of the transferee or transferees; and (d) that Landlord shall have
thirty (30) days from receipt of such notice to terminate this lease as
described in this ARTICLE 21, paragraph (d). Landlord shall have the right, at
its option, to terminate this lease by notice to Tenant given within thirty
(30) days after Landlord's receipt of such notice from Tenant. In the event
Landlord receives other notice of such transfer or of the dissolution of such
surety, then Landlord shall have the right, at its option within ninety (90)
days after receipt of such other notice,
-11-
<PAGE> 24
to terminate this lease or to declare an event of default under ARTICLE 23 of
this lease. The foregoing provisions shall not apply to any corporation if, and
so long as all the outstanding voting stock of such corporation is listed on a
National Securities Exchange as defined in the Securities Exchange Act of 1934,
as amended. For the purposes of this paragraph (d), stock ownership shall be
determined in accordance with the principles set forth in Section 544 of the
Internal Revenue Code of 1954, as the same existed on August 16, 1954, and the
term "voting stock" shall refer to the shares of stock regularly entitled to
vote for the election of directors of the corporation.
ARTICLE 22
Access to Premises
Tenant agrees that Landlord, its agents, employees or servants, or any person
authorized by Landlord, may enter the leased premises for the purpose of: (a)
inspecting the condition of same; (b) making such repairs, additions or
improvement thereto, or to the building of which they are a part, as Landlord
may elect or be required to make; (c) exhibiting the same to prospective
purchasers of the building in which the leased premises are contained; and (d)
placing notices, during the last sixty (60) days of the term hereof, in and
upon said premises at such places as may be determined by Landlord. Tenant
agrees that neither Tenant nor any person within Tenant's control will
interfere with such notices. Landlord shall not disturb Tenant's conduct of
business, except in cases of emergency.
ARTICLE 23
Defaults by Tenant
(a) The occurrence of any of the following shall constitute a material
default and breach of this lease by Tenant:
(i) Any failure by Tenant to pay the rental or make any other payment
required to be made by Tenant hereunder when same shall become due and
payable;
(ii) The abandonment or vacation of the leased premises by Tenant;
(iii) A failure by Tenant to observe and perform any other provision
of this lease to be observed or performed by the Tenant, where such
failure continues for three (3) days after written notice thereof by
Landlord to Tenant; or
(iv) The making by Tenant of any general assignment for the benefit of
creditors; the filing by or against Tenant of a petition to have
Tenant adjudged as bankrupt or of a petition for reorganization or
arrangement under any law relating to bankruptcy (unless in the case
of a petition filed against Tenant, the same is dismissed within sixty
(60) days); the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the
leased premises or of Tenant's interest in this lease; or the
attachment, execution or other judicial seizure of substantially all
of Tenant's assets located at the leased premises or of Tenant's
interest in this lease, where such seizure is not discharged within
thirty (30) days.
(b) In the event of any such default by Tenant, then in addition to any
other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this lease and all rights of Tenant hereunder
by giving written notice of such intention to terminate. In the event that
Landlord shall elect to so terminate this lease, then Landlord may recover from
Tenant:
(i) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss Tenant proves could have
been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably
avoided; plus
(iv) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligations under this lease or which in the ordinary course of things
would be likely to result therefrom; and
(v) At Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by
applicable law.
(c) The term "rent" as used herein shall be deemed to be and to mean the
Minimum Annual Rental and all other sums required to be paid by Tenant pursuant
to the terms of this lease. For purposes of this ARTICLE 23, all such sums,
other than the Minimum Annual Rental, shall be computed on the basis of the
average monthly amount thereof, accruing during the immediately preceding
twenty-four (24) month period prior to default, except that if it becomes
necessary to compute such rental before such twenty-four (24) month period has
occurred, then such rental shall be computed on the basis of the average
monthly amount accruing during such shorter period. As used in paragraph (b)
(i) and (b) (ii) above, the "worth at the time of award" is computed by
allowing interest at the maximum legal rate. As used in paragraph (b) (iii)
above, the "worth at the time of award" is computed by discounting such amount
at the discount rate of the Federal Reserve Bank of Dallas at the time of award
plus one percent (1%).
(d) In the event of any such default by Tenant, Landlord shall also have
the right to re-enter the leased premises and remove all persons and property
from said premises, which property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant.
(e) In the event of the vacation or abandonment of the leased premises by
Tenant or in the event that Landlord shall elect to re-enter as provided in
paragraph (d) above or shall take possession of the leased premises pursuant to
legal proceeding or pursuant to any notice provided by law, and if Landlord
does
-12-
<PAGE> 25
not elect to terminate this lease as provided in paragraph (b) above, then
Landlord may from time to time, without terminating this lease, either recover
all rental as it becomes due or relet the leased premises or any parts thereof
for such term or terms and at such rental or rentals and upon such other terms
and conditions as Landlord in its sole discretion may deem advisable, with the
right to make alterations and repairs to the leased premises.
(f) In the event that Landlord shall elect to so relet pursuant to the
preceding paragraph, then rentals received by Landlord from such reletting
shall be applied: first, to the payment of any indebtedness other than rent due
hereunder from Tenant to Landlord; second, to the payment of any cost of such
reletting; third, to the payment of the cost of any alterations and repairs to
the leased premises; fourth, to the payment of rent due and unpaid hereunder;
and the residue, if any, shall be held by Landlord and applied in payment of
future rent as the same may become due and payable hereunder. Should that
portion of such rentals received from such reletting during any month, which is
applied to the payment of rent hereunder, be less than the rent payable during
that month by Tenant hereunder; then Tenant shall pay such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any costs and expenses incurred
by Landlord in such reletting or in making such alterations and repairs not
covered by the rentals received from such reletting of the leased premises.
(g) No re-entry or taking possession of the leased premises by Landlord
pursuant to paragraphs (d) or (e) of this ARTICLE 23 shall be construed as an
election to terminate this lease, nor shall it cause a forfeiture of rents or
other charges remaining to be paid during the balance of the term hereof,
unless a written notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may at any time after such reletting elect to
terminate this lease for any such default.
ARTICLE 24
Surrender of Premises
Tenant shall, upon termination of the term hereof, or any earlier termination
of this lease for any cause, surrender to Landlord the leased premises,
including, without limitation, all building apparatus and equipment then upon
the leased premises; and all alterations, improvements and other additions
which may be made or installed by either party to, in, upon or about the leased
premises, other than trade fixtures, signs, and other personal property which,
if Tenant is not then in default, remain the property of Tenant as provided in
ARTICLE 13 hereof, shall be surrendered to Landlord by Tenant without any
damage, injury or disturbance thereto, or payment therefor.
ARTICLE 25
Tenant's Conduct of Business
Tenant covenants and agrees that, continuously and uninterruptedly from and
after its initial opening for business, it will operate and conduct within the
leased premises the business it is permitted to operate and conduct under the
provisions of this lease, except while the leased premises are untenable by
reason of fire or other casualty. Tenant agrees to conduct its business at all
times in a first-class manner consistent with reputable business standards and
practices, and that it will at all times keep and maintain within and upon the
leased premises an adequate stock of merchandise and trade fixtures to service
and supply the usual and ordinary demands and requirements of its customers and
that it will keep the leased premises in a neat, clean, and orderly condition.
Tenant also agrees to conduct Tenant's business under the trade name agreed to
by Landlord in ARTICLE 1. Tenant further agrees to keep open the leased
premises and operate the business conducted thereon at such hours and on such
days and evenings of the week as may be determined from time to time by
Landlord.
ARTICLE 26
Rules and Regulations
Landlord agrees that in carrying out the rules and regulations applicable to
all of Landlord's merchant tenants in the Shopping Center, Tenant shall not be
discriminated against, and Tenant covenants and agrees that Tenant will comply
with reasonable rules and regulations set by Landlord from time to time for the
operation of the Shopping Center, including the following:
(a) Tenant shall not affix or maintain upon the glass panes and supports
of the show windows (and within thirty-six (36) inches of any window), doors
and the exterior walls of the leased premises, any signs, advertising placards,
names, insignia, trademarks, descriptive material or any other such like item
or items, and Landlord shall have the right, without giving prior notice to
Tenant and without any liability for damage to the leased premises, to remove
any signs, advertising placards, names, insignia, trademarks, descriptive
material or any other such like item or items, except such as shall have first
received written approval of Landlord as to size, type, color, location, copy,
nature and display qualities. Anything to the contrary in this lease
notwithstanding, Tenant shall not affix any sign to the roof of the leased
premises;
(b) No awning or other projections shall be attached to the outside walls
of the leased premises or the building of which they form a part without, in
each instance, the prior written consent of Landlord; and
(c) All loading and unloading of goods shall be done only at such times,
in the areas and through the entrances designated for such purpose by Landlord.
Tenant shall advise and use its best efforts to cause its vendors to deliver
all merchandise before noon on Mondays through Fridays and not at any other
times. All deliveries are to be made to designated service or receiving areas
and Tenant shall request delivery trucks to approach their service or receiving
areas by designated service routes and drives.
No parking or storing of tractor trailers will be permitted in the Shopping
Center without Landlord's permission. Tractor trailers, which must be unhooked
or parked must use steel plates under dolly wheels to prevent damage to the
asphalt paving surface. In addition, wheel blocking must be available for use.
Tractor trailers are to be removed from the loading areas after unloading. No
parking or storing of such trailers will be permitted in the Shopping Center;
13
<PAGE> 26
Except for small parcel packages, no deliveries will be permitted through the
Mall unless the leased premises do not have a rear service door. In such event,
prior arrangements must be made with the Resident Mall Manager for delivery at
such leased premises. Merchandise being received shall immediately be moved
into the leased premises and not be left in the service or receiving areas.
(d) All garbage and refuse shall be kept in the kind of container
specified by Landlord, and shall be disposed of in the manner and at the times
and places specified by Landlord. Tenant is responsible for storage and removal
of its trash, refuse and garbage. Tenant shall not dispose of the following
items in sinks or commodes: plastic products (plastic bags, straws, boxes);
sanitary napkins; tea bags; cooking fats, cooking oils; any meat scraps or
cutting residue; petroleum products (gasoline, naphtha, kerosene, lubricating
oils); paint products (thinner, brushes); or any other items which the same are
not designed to receive. All tenant store floor area, including vestibules,
entrances and returns, doors, fixtures, windows and plate glass, shall be
maintained in a safe, neat and clean condition;
(e) No radio or television aerial shall be erected on the roof or exterior
walls of the leased premises without the prior written consent of Landlord. Any
aerial so installed shall be subject to removal without notice at any time and
any damage to the walls or roof caused by such removal shall be the
responsibility of Tenant;
(f) Tenant shall not permit or suffer the use of any advertising medium
which can be heard or experienced outside of the leased premises, including,
without limiting the generality of the foregoing, flashing lights,
searchlights, loud speakers, phonographs, radios or television. No radio,
television, or other communication antenna equipment or device is to be
mounted, attached, or secured to any part of the roof, exterior surface, or
anywhere outside the leased premises, unless Landlord has previously given its
written consent;
(g) No auction, fire, bankruptcy, going out of business or liquidation
sales shall be conducted on or about the leased premises without the prior
written consent of Landlord;
Tenant shall not permit or suffer merchandise of any kind at any time to be
placed, exhibited or displayed outside its leased premises, nor shall Tenant use
the exterior sidewalks or exterior walkways of its premises to display, store or
place any merchandise. No sale of merchandise by tent sale, truck load sale, or
the like shall be permitted on the parking lot or other Joint Use Areas;
(h) Tenant shall keep Tenant's display windows illuminated and the signs
and exterior lights lighted each and every day of the term hereof during the
hours designated by Landlord. Tenant shall promptly repair any malfunctions in
sign lighting; or at Landlord's request, Tenant shall turn sign lighting off
until such malfunction is corrected;
(i) The outside areas immediately adjoining the leased premises shall be
kept clear at all times by Tenant and Tenant shall not place nor permit any
obstructions, garbage, refuse, merchandise or displays in such areas;
(j) Nothing is to be attached or placed on the roof or exterior walls of
the leased premises, and Tenant's access to the roof is to be limited to
inspection for damages only. Absolutely no roof penetrations shall be made by
Tenant;
(k) Landlord may from time to time designate specific areas in which
vehicles owned or operated by Tenant or Tenant's employees must be parked and
may prohibit the parking of any such vehicles in any other part of the common
areas. Landlord will formally notify Tenant, at Tenant's Shopping Center
address, of such parking designation. Upon receipt and acknowledgement of said
notice, Tenant shall notify each of its employees of the provisions of this
section prior to commencing employment connected with the premises. Tenant
shall furnish Landlord a list of license numbers of the motor vehicles operated
by Tenant or Tenant's employees within five (5) days after request by Landlord,
and Tenant shall thereafter notify Landlord of any and all changes to such list
within five (5) days after each change occurs. Landlord may cause to be towed
away, at Tenant's expense, any violating vehicles, and Tenant waives any
liability of Landlord to Tenant resulting therefrom; or Landlord may, for any
such violating vehicles, charge Tenant, as additional rent, a daily rate equal
to Ten Dollars ($10.00) for each violating vehicle per day or part thereof.
All amounts due under the provisions of this paragraph shall be paid by Tenant
upon demand;
(l) Tenant shall use, at Tenant's expense, such pest extermination
contractor as Landlord may direct and at such intervals as Landlord may
require, providing the cost thereof is competitive to any similar service
available to Tenant;
(m) Tenant, its employees and/or agents shall not solicit business in the
parking or other Joint Use Areas, nor shall Tenant, its employees and/or its
agents, distribute any handbills or other advertising matter in or on
automobiles parked in the parking or other Joint Use Areas;
Other than as permitted under the provisions of the EXHIBITS, Tenant shall not
permit or suffer any advertising medium to be placed on Enclosed Mall walls, on
Tenant's mall or exterior windows, on standards in the Enclosed Mall, on the
sidewalks or on the parking lot areas, or outside walls or roof, or light
poles. No permission, expressed or implied, is granted to exhibit or display
any banner, pennant, sign, and trade or seasonal decoration of any size, style
or material within the Shopping Center, outside the Tenant premises;
(n) In the event Landlord installs a central music system in the Shopping
Center,and Tenant desires to purchase outside music system, then in that event,
Tenant shall purchase such system from Landlord, provided Landlord's charge
therefor is competitive to any similar service available to Tenant;
-14-
<PAGE> 27
(o) Tenant shall not carry on any trade or occupation or operate any
instrument, apparatus or equipment which emits an odor or causes a noise
discernible outside of the leased premises and which may be deemed offensive in
nature;
(p) Tenant shall not place or maintain any temporary fixtures for the
display of merchandise, other than those approved by Landlord in accordance
with EXHIBIT C hereof, within six (6) feet of any entrance to the leased
premises, and Landlord shall have the right, without giving prior notice to
Tenant and without any liability for damage to the leased premises or Tenant's
merchandise, to remove any of the same from the leased premises, except such as
shall have first received the written approval of Landlord as to size, color,
location, nature and display qualities;
(q) Tenant shall not permit or suffer any portion of the leased premises
to be used for lodging purposes;
(r) Tenant shall not, in or on any part of the (inside or outside) Joint
Use Areas:
Vend, peddle, or solicit orders for sale or distribution of any merchandise,
device, service, periodical, book, pamphlet or other matter whatsoever;
Exhibit any sign, placard, banner, notice or other written material;
Distribute any circular, booklet, handbill, placard or other material;
Solicit membership in any organization, group or association or contribution
for any purpose;
Create a nuisance;
Use any Joint Use Area (including the Enclosed Mall) for any purpose when none
of the other retail establishments within the Shopping Center is open for
business or employment;
Throw, discard, or deposit any paper, glass or extraneous matter of any kind,
except in designated receptacles, or create litter or hazards of any kind; or
Deface, damage or demolish any sign, light standard or fixture, landscaping
materials or other improvement within the Shopping Center, or the property of
customers, business invitees or employees situated within the Shopping Center.
(s) Tenant agrees to comply with regulations requiring a clear exiting
path through Tenant's stockroom to Tenant's rear exit door within those Tenant
Premises that contain a rear door.
Landlord shall, for the enforcement of the covenants, conditions and agreements
now or hereafter made a part of this ARTICLE 26, to be referred to as "Rules and
Regulations," have all remedies in this lease provided for breach of the
provisions hereof.
ARTICLE 27
Eminent Domain
(a) In the event the entire leased premises shall be appropriated or taken
under the power of eminent domain by any public or quasi-public authority, this
lease shall terminate and expire as of the date of such taking, and both
Landlord and Tenant shall thereupon be released from any liability thereafter
accruing hereunder. In the event more than twenty-five percent (25%) of the
square footage of floor area (including mezzanine, if any) of the leased
premises is taken under the power of eminent domain by any public or
quasi-public authority, or if by reason of any appropriation or taking,
regardless of the amount so taken, the remainder of the leased premises is not
usable for the purposes for which the leased premises were leased, then either
Landlord or Tenant shall have the right to terminate this lease as of the date
Tenant is required to vacate a portion of the leased premises so taken upon
giving notice to the other in writing of such election within sixty (60) days
after the date of such taking. In the event of such termination, both Landlord
and Tenant shall thereupon be released from any liability thereafter accruing
hereunder. In the event a portion of the Shopping Center shall be taken,
condemned or transferred as aforesaid and as a result thereof Landlord, in its
sole discretion, elects to discontinue the operation of Landlord's Parcel,
Landlord may cancel this Lease by giving Tenant notice of its election and
this Lease shall terminate and shall become null and void ninety (90) days
after said notice and the provisions with respect to the awards shall be as set
forth in paragraph (b) of this ARTICLE 27.
(b) Whether or not this lease is terminated, Landlord shall be entitled to
the entire award or compensation in such proceedings, but nothing herein shall
be deemed to affect Tenant's right to apply for and receive a separate award
for compensation or damages for its fixtures and personal property. If this
lease is terminated as herein above provided, all items of rent, additional
rent and other charges for the last month of Tenant's occupancy shall be
prorated and Landlord agrees to refund to Tenant any rent, additional rent or
other charges paid in advance.
(c) Except as otherwise provided in the final sentence in paragraph (a) of
this ARTICLE 27, if both Landlord and Tenant elect not to so terminate this
lease, Tenant shall remain in that portion of the leased premises which shall
not have been appropriated or taken as herein provided, and Landlord agrees
Landlord's cost and expense, to, as soon as reasonably possible, restore the
remaining portion of the leased premises to a complete unit of like quality and
character as existed prior to such appropriation or taking; and thereafter the
Minimum Annual Rental provided for in ARTICLE 4 hereof shall be adjusted on an
equitable basis, taking into account the relative value of the portion taken as
compared to the portion remaining. For the purpose of this ARTICLE 27, a
voluntary sale or conveyance in lieu of condemnation, but under threat of
condemnation, shall be deemed an appropriation or taking under the power of
eminent domain.
-15-
<PAGE> 28
ARTICLE 28
Attorney's Fees
In the event that at any time during the term of this lease either Landlord or
Tenant shall institute any action or proceeding against the other relating to
the provisions of this lease, or any default hereunder, then, and in that
event, the unsuccessful party in such action or proceeding agrees to reimburse
the successful party for the reasonable expenses of attorney's fees and
disbursements incurred therein by the successful party.
ARTICLE 29
Sale of Premises by Landlord
In the event of any sale or exchange of the leased premises by Landlord and
assignment by Landlord of lease, Landlord shall be and is hereby entirely freed
and relieved of all liability under any and all of its covenants and
obligations contained in or derived from this lease arising out of any act,
occurrence or omission relating to the leased premises or this lease occurring
after the consummation of such sale or exchange and assignment.
ARTICLE 30
Notices
Notices and demands required or permitted to be given hereunder shall be sent
by certified mail addressed, if to Landlord, at the address at which the last
rental payment was made or required to be made, and if to Tenant, addressed to
Tenant at the legal address for notice in ARTICLE 1, or such other address as
was last specified respectively by notice by Landlord or Tenant. The effective
time of such notice shall be when the same is deposited in an official United
States Post Office, postage prepaid, certified or registered mail, return
receipt requested.
ARTICLE 31
Remedies
All rights and remedies of Landlord herein created or otherwise extending at
law are cumulative, and the exercise of one or more rights or remedies may be
exercised and enforced concurrently and whenever and as often as deemed
desirable.
ARTICLE 32
Successors and Assigns
All covenants, promises, conditions, representations and agreements herein
contained shall be binding upon, apply and inure to the parties hereto and
their respective heirs, executors, administrators, successors and assigns; it
being understood and agreed, however, that the provisions of ARTICLE 21 are in
nowise impaired by this ARTICLE 32.
ARTICLE 33
Representations
It is understood and agreed by Tenant that Landlord and Landlord's agents have
made no representations or promises with respect to the leased premises or the
making or entry into this lease, except as in this lease expressly set forth,
and that no claim or liability, or cause for termination, shall be asserted by
Tenant against Landlord for and Landlord shall not be liable by reason of, the
breach of any representations or promises not expressly stated in this lease.
ARTICLE 34
Waiver
The failure of Landlord to insist upon strict performance by Tenant of any of
the covenants, conditions, and agreements of this lease shall not be deemed a
waiver of any of Landlord's rights or remedies and shall not be deemed a waiver
of any subsequent breach or default by Tenant in any of the covenants,
conditions and agreements of this lease. No surrender of the leased premises
shall be affected by Landlord's acceptance of rental or by any other means
whatsoever unless the same be evidenced by Landlord's written acceptance of
such as a surrender.
ARTICLE 35
Holding Over
If Tenant or any party claiming under Tenant remains in possession of the
premises, or any part thereof, after any termination or expiration of this
lease, no tenancy or interest in the premises shall result therefrom, but such
holding over shall be an unlawful detainer and all such parties shall be
subject to immediate eviction and removal, and Tenant shall pay upon demand to
Landlord, during any period which Tenant shall hold the premises after the term
has expired, as liquidated damages, a sum equal to all percentage rent and
additional rent provided for in this lease plus an amount computed at the rate
of double the Minimum Annual Rental for such period.
ARTICLE 36
Interpretation
The parties hereto agree that it is their intention hereby to create only the
relationship of Landlord and Tenant, and no provision hereof, or act of either
party hereunder, shall ever be construed as creating the relationship of
principal and agent, or a partnership, or a joint venture or enterprise between
the parties hereto.
ARTICLE 37
Marketing Service
(a) Landlord will establish a Marketing Service to furnish and maintain
professional advertising and sales promotions which will benefit all merchants
in the shopping center. In conjunction with said Service, Landlord agrees to
provide personnel, including sufficient secretarial services, to pay salaries
and benefits for such personnel, and to pay for office rental, utilities,
supplies, telephone and all equipment expense necessary for efficient
operation. A committee composed of a representative of each department store,
an equal number of representatives of the mall tenants, and a representative of
Landlord will be formed by Landlord to review the advertising and promotional
activities sponsored by the Service.
Tenant agrees to pay for the Marketing Service an amount equal to $0.75 per
square foot of the floor area of leased premises per year, or a minimum annual
fee of $1,200.00, whichever is greater, payable in equal monthly installments
on the same day rent is due under ARTICLE 3 hereof. All monies received under
this ARTICLE 37 (a) shall be used solely for the purpose of advertising and
promotional services of the Shopping Center. The Marketing Service Fee owed by
Tenant hereunder will be increased effective as of January 1 of each calendar
year during the term of this lease by a percentage equal to the percentage
increase, if any, in (i) the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index for all Urban Consumers (CPI-U) Dallas, Texas
- - All Items (1967 = 100) (the "Index") applicable for the
-16-
<PAGE> 29
month of December of the immediately preceding calendar year, over and above
(ii) the corresponding Index figure for the first full month of the term of
this lease; provided that if such index should be discontinued, such
calculation shall be made by use of another reputable index selected by
Landlord and provided further, that if the base period for the Index (currently
1967 = 100) is hereafter changed, the new base period shall be used in making
the foregoing calculation.
(b) Landlord shall plan as a part of the yearly advertising and sales
promotion calendar, a variety of joint advertising efforts which Landlord deems
to be in the best sales and traffic generation interest of the Shopping Center.
Tenant agrees to join in a minimum of four (4) said joint advertising efforts
per calendar year with a minimum of one-quarter (1/4) page print ad or the
equivalent expenditure in broadcast or other effort planned by Landlord.
Landlord's representative shall supply to Tenant's designee a schedule of the
coming year's joint advertising efforts no later than ninety (90) days prior to
the close of the previous calendar year. Tenant agrees to supply to Landlord a
list of at least four (4) said joint advertising efforts in which Tenant will
advertise within thirty (30) days of its receipt of the above mentioned notice
from Landlord. Tenant may adjust its commitment at any time so long as it joins
in a minimum of four (4) joint advertising efforts during the calender year.
If Tenant fails to fulfill its advertising obligation set forth above for any
rent year, then Tenant shall, within (60) days after the end of such rent year,
pay to Landlord the difference between the amount properly spent by Tenant in
fulfillment of its advertising obligation, and one percent (1%) of Tenant's
gross sales for such rent year period. Funds paid to the Landlord pursuant to
the preceding sentence shall be spent for the promotion of the Shopping Center
in such a manner as Landlord may determine.
Tenant may, at its option, pay the equivalent of four (4) one-quarter (1/4) page
ads or the equivalent amount in broadcast or other medias selected by the
Shopping Center, into an advertising pool which Landlord agrees to use to
advertise Tenant's store or in a method deemed appropriate by Landlord. Said
monies will be adjusted yearly by the increase or decrease in the cost of
aforementioned one-quarter (1/4) page ad or equivalent broadcast or other effort
planned by Landlord.
ARTICLE 38
Covenant of Title
Landlord covenants that it has full right, power and authority to make this
lease and that Tenant or any permitted assignee or sublessee of Tenant, upon the
payment of the rentals and performance of the covenants upon Tenant's part to be
performed hereunder, shall and may peaceably and quietly have, hold and enjoy
the leased premises and improvements thereon during the term or any renewal or
extension hereof.
ARTICLE 39
Waiver of Redemption
Tenant hereby expressly waives any and all rights of redemption granted by or
under any present or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Landlord obtaining possession of
the leased premises by reason of the violation by Tenant of any of the
covenants and conditions of this lease or otherwise. The rights given to
Landlord herein are in addition to any rights that may be given to Landlord by
any statute or otherwise.
ARTICLE 40
Tenant's Property
Landlord, its agents or employees, shall not be liable and Tenant waives all
claims for any, damage to persons or property sustained by Tenant or any person
claiming through Tenant located on the leased premises, nor for the loss of or
damage to any property of Tenant or of others by theft or otherwise, whether
caused by other tenants or persons in the Shopping Center or in the leased
premises, occupants of adjacent property, or the public, or caused by
operations in construction of any private, public or quasi-public work. All
property of Tenant kept or stored on the leased premises shall be so kept or
stored at the risk of Tenant only and Tenant shall hold Landlord harmless from
any claims arising out of damage to the same or damage to Tenant's business,
including subrogation claims by Tenant's insurance carrier.
ARTICLE 41
Lease Status
At any time and from time to time, upon request of Landlord, Tenant will
execute, acknowledge and deliver to Landlord an instrument prepared by Landlord
stating, if the same be true, that this lease is a true and exact copy of the
lease between the parties hereto, that there are no amendments hereof (or
stating what amendments there may be), that the same is then in full force and
effect and that, to the best of Tenant's knowledge, there are then no offsets,
defenses or counterclaims with respect to the payment of rent reserved
hereunder or in the performance of the other terms, covenants and conditions
hereof on the part of Tenant to be performed, and that as of such date no
default has been declared hereunder by either party hereto and that Tenant at
the time has no knowledge of any facts or circumstances which it might
reasonably believe would give rise to a default by either party.
ARTICLE 42
Recording
Tenant shall not record this lease without the written consent of Landlord.
However, upon the request of either party hereto the other party shall join in
the execution of a memorandum or so-called "short form" of this lease for the
purposes of recordation. Said memorandum or short form of this lease shall
describe the parties, the leased premises and the term of this lease and shall
incorporate this lease by reference.
ARTICLE 43
Force Majeure
In the event that either party hereto shall be delayed or hindered in or
prevented from the performance of any act required hereunder by reason of
strikes, lockouts, labor troubles, inability to procure materials, failure of
power, restrictive governmental laws or regulations, riots, insurrection, war
or other reason of a like nature not the fault of the party delayed in
performing work or doing acts required under the terms of this lease, then
performance of such act shall be excused for the period of delay and the period
for the performance of any such act shall be extended for a period equivalent
to the period of such delay. The provisions of this ARTICLE 43 shall not
operate to excuse Tenant from the prompt payment of rent, percentage rent,
additional rent or any other payments required by the terms of this lease.
-17-
<PAGE> 30
ARTICLE 44
Broker's Commission
Tenant warrants that it has dealt with no broker or agent in connection with
this lease, and agrees to indemnify and save Landlord harmless from Al claims,
actions, damages, costs and expenses and liability whatsoever, including
reasonable attorney's, fees, that may arise from any claim by or through Tenant
for commission or finder's fees in connection with this lease.
ARTICLE 45
Limitations On Landlord's Liability
Notwithstanding anything to the contrary contained in this lease, in the event
of any default or breach by Landlord with respect to any of the terms,
covenants and conditions of this lease to be observed, honored or performed by
Landlord, Tenant shall look solely to the estate and property of Landlord in
the land and building owned by Landlord comprising the Shopping Center for the
collection of any judgment (or any other judicial procedures requiring; be
payment of money by Landlord) and no other property or assets of Landlord shall
be subject to levy, execution, or other procedures for satisfaction of Tenant's
remedies.
ARTICLE 46
Security Agreement
1. For valuable consideration and as security for the payment of rent and
other charges becoming due hereunder, Tenant hereby grants to Landlord a
security interest in the following described collateral: (a) All inventory in
the leased premises during the term of this lease; (b) all equipment and other
personalty placed in the leased premises during the term of this lease; and (c)
all of the proceeds of said inventory, equipment and personalty.
2. Upon the happening of any of the following events or conditions,
namely: (1) Default in the payment of rent or performance of any of the
obligations or of any covenant or liability contained or referred to herein;
(2) making of any levy, seizure or attachment of the collateral; or (3) death,
dissolution, termination of existence, insolvency, business failure,
appointment of a receiver, assignment for the benefit of creditors by, or the
commencement of any proceeding under any bankruptcy or insolvency laws by or
against, Tenant or any guarantor or surety for Tenant thereupon, or any) time
thereafter (such default not having previously been cured) Landlord shall then
have all the remedies of a secured party under the laws of the state in which
the leased premises are located, including, without limitation thereto, the
right to take possession of the collateral, and for that purpose Landlord may
enter upon the leased premises and remove the same therefrom. Landlord will
give Tenant at last ten (10) days' prior written notice of any public sale
thereof or of the date after which any private sale or any other intended
disposition is to be made, and at any such sale the Landlord may purchase the
collateral.
3. This security agreement and the security interest and collateral
created hereby shall be terminated when all of the rent and other charges
becoming due during the term of this lease or extension thereof have been paid
in full.
ARTICLE 47
Entire Agreement
IT IS UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT THIS LEASE AGREEMENT
SHALL CONSTITUTE THE ONLY AGREEMENT BETWEEN THEM RELATIVE TO THE DEMISED
PREMISES AND THAT NO ORAL STATEMENTS OR PRIOR WRITTEN MATTER EXTRINSIC TO THIS
INSTRUMENT SHALL HAVE ANY FORCE OR EFFECT. FURTHER, TENANT ACKNOWLEDGES AND
AGREES THAT NEITHER LANDLORD NOR ANY AGENT OR REPRESENTATIVE OF LANDLORD,
INCLUDING ANY LEASING AGENT ACTING ON BEHALF OF LANDLORD, HAS MADE, AND TENANT
HAS NOT RELIED UPON, ANY REPRESENTATIONS OR ASSURANCES AS TO TENANT'S PROJECTED
OR LIKELY SALES VOLUME, CUSTOMER TRAFFIC OR PROFITABILITY.
IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement on
the day and year first above mentioned, the corporate party or parties by its
or their proper officers duly authorized hereunto.
RAINBOLT, INC.
BY: /s/ JACK R. GOODWIN PADRE STAPLES MALL
--------------------------
ATTEST: /s/ JOSE A. TORRES BY: /s/ ROY M. SMITH
----------------------- -----------------------
ROY M. SMITH
BY: /s/ W. M. BEVLY
-----------------------
W. M. BEVLY
TENANT LANDLORD
-18-
<PAGE> 31
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement to
Landlord making the within lease with Tenant, the undersigned, on behalf of
himself, his legal representatives, heirs, successors and assigns,
unconditionally and absolutely guarantees to Landlord, Landlord's successor and
assigns, the full performance and observance of all the provisions therein
provided to be performed and observed by Tenant, including the rules and
regulations, without requiring any notice of non-payment, non-performance, or
non-observance, or proof, notice, or demand, whereby to charge the undersigned
therefor, all of which the undersigned expressly waives and expressly agrees
that the validity of this agreement and the obligations of the Guarantor
hereunder shall in no event and in no manner be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant of any of the
rights or remedies reserved to Landlord pursuant to the provisions of the within
lease. The undersigned further agrees that this Guaranty shall remain and
continue in full force and effect as to any renewal, modification or extension
of this lease. As a further inducement to Landlord to make this lease and in
consideration thereof, Landlord and the undersigned agree that in any action or
proceeding brought by either Landlord or the undersigned against the other on
any matters whatsoever arising out of, under, or by virtue of the terms of this
lease or of this Guaranty, that Landlord and the undersigned shall and do
hereby waive trial by jury.
Dated: 2-29-88
-----------------------
Witnesses: /s/ JOSE A. TORRES Guarantor: /s/ JACK GOODWIN
------------------ -----------------------
Jack Goodwin
- ----------------------------- Address: 502 Santa Fe
-------------------------
Victoria, Texas 77904
---------------------------------
STATE OF TEXAS
COUNTY OF VICTORIA
Personally appeared before me, a Notary Public in and for said County
and State, Jack Goodwin, known personally by me, and being sworn, did dispose
and say that s(he) executed the foregoing LEASE AGREEMENT as Guarantor thereof.
WITNESS MY HAND AND THIS NOTARIAL SEAL this 4th day of March, 1988.
/s/ SYLVIA HARTLEY
------------------------------
NOTARY PUBLIC IN AND FOR THE
STATE OF TEXAS
Sylvia Hartley
------------------------------
TYPED OR PRINTED NAME
MY COMMISSION EXPIRES:
9-15-91
- ---------------------
<PAGE> 32
[DIAGRAM EXHIBIT]
PADRE STAPLES MALL
APPROVED
EXHIBIT A
/s/ JRG
------------------
TENANT'S INITIALS
/s/ RS WMB
-------------------
LANDLORD'S INITIALS
NOTE: This is a lease plan and is not a representation as to the size,
location, or opening date of any tenant or occupancy of building at Padre
Staples Mall. This plan is subject to change and to the approval of all
governmental agencies having jurisdiction. Exact dimensions and store locations
are binding only to the extent provided for in executed lease.
<PAGE> 33
[DIAGRAM EXHIBIT]
PADRE STAPLES MALL
APPROVED
EXHIBIT B
/s/ JRG
------------------
TENANT'S INITIALS
/s/ RS WMB
-------------------
LANDLORD'S INITIALS
NOTE: This is a site plan and is not a representation as to the size,
location, or opening date of any tenant or occupancy of building at Padre
Staples Mall. This plan is subject to change and to the approval of all
governmental agencies having jurisdiction. Exact dimensions and store locations
are binding only to the extent provided for in executed lease.
<PAGE> 34
EXHIBIT "C" - FOOD COURT
SCHEDULE FOR TENANT IMPROVEMENTS
DESCRIPTION OF LANDLORD WORK AND OF TENANT WORK
The Landlord is exercising special and strict design control over the
Tenant stores that are within the Food Court section of the Mall. The
character of the Food Court has been carefully developed by the Landlord
and the Landlord's Architect to display an ambiance and quality that
departs from the traditional "franchise" look.
The Landlord will respect Tenant's method of operation, including food
service and flow; however, the design appearance of all elements visible
to customers will be designed by Landlord and his Architect. The schedule
for Tenant Improvements is outlined below:
I. SCHEDULE FOR TENANT IMPROVEMENTS - Lease Outline Drawings, Delivery Date,
Schedule and Acceptance By Lessor of Tenant Work
A. Landlord has delivered to Tenant by separate enclosure,
illustrative outline drawings of the leased premises (hereinafter
called the "lease outline drawings") which contain the basic
architectural, electrical and mechanical information necessary for
the preparation of Tenant's plans and specifications for Tenant's
Work. By its execution of this lease, Tenant acknowledges receipt
of the outline drawings and by this reference the same are
incorporated herein. The date of this lease (or the date of actual
delivery whichever shall be later), shall be deemed to be the date
of delivery (hereinafter called the "delivery date") of the outline
drawings for the purpose of establishing construction schedules:
1. WITHIN FIFTEEN (15) CALENDAR DAYS AFTER THE DELIVERY DATE:
Tenant agrees to notify Landlord of the identity and mailing
address of the licensed architect engaged by Tenant for the
preparation of plans for Tenant's Work and Landlord agrees to
accept such licensed architect as Tenant's authorized agent
(unless notified to the contrary, in writing, by Tenant).
2. WITHIN FORTY-FIVE (45) CALENDAR DAYS AFTER DELIVERY DATE:
Tenant, at Tenant's expense, shall cause Tenant's architect
to prepare and deliver to Landlord for Landlord's approval
four(4) sets of plans and specifications for Tenant's Work
plus one (1) set of sepias, using the outline drawings as the
basis for same. Landlord shall notify Tenant of the matters,
if any, in which said plans fail to conform to Tenant's
construction requirements or otherwise fail to meet with
Landlord's approval. Tenant shall promptly, upon receipt of
any such notice from Landlord, cause said plans to be revised
in such manner as is requisite to obtaining Landlord's
approval and shall submit revised plans for Landlord's
approval.
When Landlord has approved Tenant's plans or revised plans, as the
case may be, Landlord shall initial and return one set of approved
plans to Tenant, which so shall also show the date of Landlord's
approval, and the same shall be made a part hereof by express
reference thereto as "EXHIBIT C-2." Tenant agrees not to commence
work upon any of the aforesaid Tenant's Work until Landlord has
approved EXHIBIT C-2.
B. Tenant agrees to notify Landlord of the name and address of
Tenant's Contractor, and to commence construction work within
twenty (20) days, to proceed with it diligently, and complete it in
strict accordance with EXHIBIT C-2 hereof (including the
installation of all store and trade fixtures, equipment, stock and
inventory), and to open for business (subject to the provisions of
ARTICLE 3 hereof) within sixty (60) days (subject to force majeure)
after the later of the following dates:
1. The date of Landlord's approval of EXHIBIT C-2 hereof,
provided Tenant has complied with all of the requirements of
the preceding Section A with respect to the time limitations
for submitting plans and specifications for Tenant's Work; or
2. The date upon which the leased premises are sufficiently
completed to permit the commencement of Tenant's Work as
established by notice from Landlord to Tenant.
Landlord agrees to notify Tenant fifteen (15) days in advance of
the time when Tenant can commence Tenant's Work.
C. Landlord agrees to issue to Tenant a written acceptance of Tenant
Work and materials provided in connection with Tenant Work on the
leased premises not later than thirty (30) days after full
completion of Tenant Work, provided that Tenant has furnished
Landlord with all of the following:
1. Tenant's affidavit that Tenant Work on the leased premises
has been completed and was performed in strict accordance
with Tenant Plans approved by Landlord pursuant to ARTICLE 2,
and any negligent or false statement as to a material fact
therein shall constitute a material breach of this lease.
2. An affidavit from the prime contractor or contractors
performing Tenant Work that all work has been fully completed
in accordance with approved Tenant Plans and that all
subcontractors, laborers and material suppliers have been
discharged and paid in full.
C-1
<PAGE> 35
3. A waiver of lien identifying the store name and the nature
of the work performed with respect to the leased premises
executed by said prime contractor or contractors and, if
requested by Landlord, waivers of lien executed by every
subcontractor supplying labor or materials for the leased
premises.
4. Tenant's written acceptance of the leased premises stating,
in part, that Tenant reserves no rights for claims, offsets
or backcharges.
5. A copy of the Tenant's Certificate of Insurance on file with
the center manager.
6. Tenant's affidavit that all corrections have been made to the
leased premises as required by the Landlord's underwriter.
7. Tenant's completion of all items listed on Landlord's punch
list.
II. LANDLORD WORK - The following work is to be performed exclusively by
Landlord at Landlord's sole expense:
A. Floor Slab
Landlord shall install a minimum four inch (4") reinforced concrete
floor slab. Concrete to be a minimum 3000 PSI concrete with a
minimum 6 x 6 x 10 x 10 wire mesh reinforcement. All slab
penetrations shall be at Tenant's expense and must be approved in
writing by Landlord.
B. Parking Areas, Roads and Sidewalks
Landlord will provide paved, drained and lighted parking areas,
together with access roads, sidewalks, directional signs and
markers.
C. Utilities
Landlord shall provide the following utilities:
1. Sanitary Sewer - Landlord will install a sanitary sewer to
the Tenant premises within an area and sized as indicated on
the lease outline drawing.
2. Domestic Water - Landlord will install domestic water to the
Tenant premises within an area and sized as indicated on the
lease outline drawing.
3. Electrical Service - Landlord will install electrical conduit
(without wiring) to the Tenant premises within an area
indicated on the lease outline drawing. Electrical service
shall be 277/480 volt, three phase, four-wire, for Tenant's
lighting requirements. Conduit shall be sized to accommodate
a service of 10 watts per square foot of floor area of the
leased premises. Any increase in the conduit size or other
hardware to accommodate electrical service in excess of the
amounts stated herein shall be at Tenant's sole expense.
4. Telephone - All telephone service to and within the leased
premises shall be the sole responsibility of Tenant.
5. Gas - No gas service will be available or permitted except
with the written approval of Landlord. If such approval is
granted, Landlord agrees to cause gas mains to be installed
leading to Tenant's meter located at a point determined by
Landlord. Connections from this point to the boundary line of
the Tenant premises shall be provided by Tenant at Tenant's
sole expense. Any further extension within the leased
premises shall be constructed by Tenant at its cost. All
connections and construction relating to supply of gas shall
be subject to approval by all governing bodies.
6. Sprinkler System - An automatic wet sprinkler supply main
shall be brought to the leased premises within an area
indicated on the lease outline drawing. At least one supply
Tee connection shall be provided by Landlord. If required by
the local governing authority, Landlord will provide
sprinkler systems based on one sprinkler head per 100 square
feet. Tenant will reimburse Landlord at the rate of $140.00
per sprinkler head. Any further modifications to the
Landlord's sprinkler system will be the sole responsibility
and at the sole expense of the Tenant.
7. HVAC System - Tenant shall provide all systems facilities and
equipment necessary for the distribution and control of the
cooled air delivered to and within the leased premises.
D. Public Spaces
1. Mall and Courts - The Malls and Courts shall be hard
surfaced, lighted, heated and cooled.
2. Service Corridors - Landlord shall complete all construction
and finishes to service corridors.
3. Service doors to Outside Service Areas - Where possible, a
frame and door three feet (3'-0") in width without lockset
shall be provided between the Tenant premises and outside
service courts, unless Tenant premises can be served from a
Landlord-provided service corridor, in which case Tenant will
furnish and install a recessed door, frame and lockset.
C-2
<PAGE> 36
2. Mall and Courts - The Malls and Courts shall be hard
surfaced, lighted, heated and cooled.
3. Service Corridors - Landlord shall complete all construction
and finishes to service corridors.
4. Service doors to Outside Service Areas - Where possible, a
frame and door three feet (3'-0") in width without lockset
shall be provided between the Tenant premises and outside
service courts, unless Tenant premises can be served from a
Landlord-provided service corridor in which case Tenant will
furnish and install a recessed door, frame and lockset.
5. Public Toilet Facilities - Public toilet facilities shall be
located outside of the Tenant premises at such locations as
the Landlord shall determine.
E. Building
1. Frame, etc. - The structural frame, columns, beams and roof
deck shall be constructed of steel.
2. Roof - The roof shall be built-up asphalt and gravel or other
membrane roofing over insulation to provide a minimum "U"
factor of.15.
3. Exterior Walls - Exterior walls shall be of non-combustible
construction with an exterior finish of suitable nature and
of appropriate materials having a finished appearance and
decorative quality designed by Landlord's Architect.
4. Partitions - Partitions of exposed studs or exposed masonry
shall, at Landlord's option, be provided between the Tenant
premises and other Tenant areas. These partitions shall
extend from finished floor to the underside of the roof.
5. Space Heights - Landlord shall maintain a clear height of
eleven feet (11'-0") above Tenant's finished floor slab
unless otherwise indicated on the lease outline drawing.
6. Neutral Strips - Where desirable in Landlord's opinion, a
vertical neutral strip shall separate the leased premises
from any adjoining Tenant premises; the center line of said
strip may coincide with the vertical lines separating the
leased premises.
III. TENANT WORK - The following work required to complete and place the
leased premises in finished condition ready to open for business is to be
performed by the Tenant at the Tenant's own expense. Tenant Work
includes, but is not limited to, the following:
A. Food Court Storefronts
The Food Court area is distinguished from the balance of the center
by selected design features which the Tenant is required to
incorporate into his storefront design, food service operation, and
display of merchandise. In order to achieve the design continuity
in the Food Court, the storefronts shall be constructed of ceramic
tile which has been selected by the Landlord's Project Architect,
and as set forth in the Tenant Design Criteria Handbook. Landlord
has complete Design and Construction approval for all Tenant work.
1. The Food Court area storefront of the leased premises shall
be no less than 75% open. Security shall be provided by
dark bronze anodized roll up or sliding grilles.
2. The flooring used in the Food Court public spaces shall be
carried into the leased premises to the base of any counters,
gondolas, merchandise display units and any other visible
areas. This material shall be provided and installed by
Tenant.
3. All counters, serving lines, display units, etc. shall be
located as indicated on the lease outline drawings.
4. Tenant shall submit for Landlord approval, a complete palette
of materials and colors to be used within the store.
B. Signs
In order to assure an orderly and aesthetically coordinated
signing, plans for all Tenant's signs must conform to Exhibit "D"
hereto attached and the Tenant Design Criteria Handbook and before
installation must be approved by Landlord. Sign drawing submittals
shall include not only all storefront signage, but also all menu
board and other graphic material intended for use in the store. No
permission is granted, expressed or implied to permit Tenant to
erect an exterior sign of any type.
C. Ceiling
1. Tenant shall provide all finished ceilings and coves within
the leased premises, the height of which shall not exceed
eleven feet (11'-0") above the finished floor, unless
specifically approved by Landlord.
C-3
<PAGE> 37
2. Tenant ceilings shall be non-combustible Class A acoustic
tile, gypsum board and/or plaster, suspended by adequate
noncombustible suspension systems to conform to final
requirements of governing authorities.
3. The space above the ceiling line, which is not occupied or
allotted to Landlord Work (structural members, duct work,
piping, etc.) may be used for the installation of suspended
ceiling, recessed lighting fixtures and duct work, and shall
not contain any combustible material.
Tenant shall provide twenty-four inch by twenty-four inch
(24" x 24") access panels in the ceiling within the leased
premises at dampers and elsewhere as required by Landlord to
provide access to equipment.
Expansion joints are installed as a necessary function of
this structure. These joints do not occur in all Tenant
spaces, and those spaces in which they occur shall be clearly
identified. The ceiling expansion joint shall be a complete
installation by Tenant.
D. Walls
1. Tenant shall provide all interior walls and curtain walls
within the leased premises, including all interior lath
and plastering and gypsum board thereon, and including lath
and plastering, or dry wall on Landlord's exposed masonry or
stud party wall partitions. Dividing wall between Tenant
premises shall meet code requirements and be continuous from
floor to the underside of the roof deck. Tenant will
fireproof according to code all steel columns within the
premises, including sides of columns within Tenants'
demising walls. Tenant shall provide bracing and/or studs
as necessary to support wall mounted fixtures. Cracks,
joints and openings in walls are to be filled with
appropriate fire resistive materials. Top of demising walls
joining roof deck, beams or joists must be sealed airtight.
Tenant shall insulate and seal to deck, bulk head above
Tenant lease line as shown on lease outline drawing.
2. Tenant shall provide insulation blankets of non-combustible
glass fiber or spun mineral fiber, with flame spread rating
not exceeding 25, open-faced, foil-covered on vapor barrier
side in widths sized to fit snugly between Landlord
provided structural members as shown on the lease outline
drawings for all exterior walls. The wall construction shall
provide a minimum "U" value of.30. If Landlord utilizes
tilt-up or masonry construction, Tenant will be required
to install insulation and fireproofing to meet the values
herein or requirements of the Code for Energy Conservation
in New Building Construction, whichever is higher.
3. Tenant will not be permitted to install openings in exterior
or interior demising walls for any purpose without the prior
written approval of Landlord. Such approved openings will
be Tenant's responsibility and installed at its expense by
the Landlord's general contractor or by Tenant's contractor
with Landlord's approval.
4. Expansion joints are installed as a necessary function of
this structure. These joints do not occur in all Tenant
spaces, and those spaces in which they occur shall be
clearly identified. The wall expansion joint shall be a
complete installation by Tenant.
E. Interior Painting
All interior painting and decoration shall be provided by Tenant.
F. Floor Coverings
All floor coverings and floor finishes, including recesses for
special floor finishes, are Tenant's responsibility. It is Tenant's
responsibility to join neatly and flush to the mall finish provided
by Landlord. Jointage of materials on floor at Tenant's storefront
control limits joint shall be joined by caulking if applicable.
Tenant may elect to set back storefront element within the leased
premises. If such set-back storefront configuration is established,
Tenant shall furnish and install flooring material identical in
quality, color and pattern to the adjacent mall flooring and caulk
at Tenant's storefront control limits joint. Tenant is encouraged,
but not required, to contact Landlord's Project Manager to arrange
for purchase of floor materials at storefront.
Expansion joints are installed as a necessary function of this
structure. These joints do not occur in all Tenant spaces, and
those spaces in which they occur shall be clearly identified. The
floor expansion joint shall be a complete installation by Landlord,
and it shall be Tenant's responsibility to install finish floor
covering material to this joint in a workmanship manner. Landlord
will not accept responsibility for finished floor material
installed over the expansion joint.
G. Show Window Backgrounds
All show window backgrounds, show windows, show window floors and
ceilings, and show window lighting installations are Tenant's
responsibility
C-4
<PAGE> 38
ADDENDA
This Addenda dated this day of 23 day of March, 1988 is attached to and made
part of this Lease Agreement by and between ROY M. SMITH AND W. M. BEVLY, D/B/A
PADRE STAPLES MALL, Landlord, and . Rainbolt,... d/b/a Casa Ole, Tenant.
ARTICLE 4(a)
RENTAL
Tenant agrees to pay as rental for the use and occupancy of the leased
premises, at the times and in the manner hereinafter provided, the following
sums of money:
(a) MINIMUM ANNUAL RENTAL: Tenant, in consideration of said demise, does hereby
covenant and agree with Landlord to pay to Landlord without deduction or
set-off of any kind, the sum of THIRTY-NINE THOUSAND ONE HUNDRED NINETY AND
N0/100 DOLLARS ($39,190.00) per annum from the date of opening or August 1,
1988, whichever is earlier, for the first sixty (60) months of this lease;
FORTY-SEVEN THOUSAND TWENTY-EIGHT AND N0/100 DOLLARS ($47,028.00) per annum for
the sixty-first (61st) month through the one hundred twentieth (120th) month
of this lease; and FIFTY-FOUR THOUSAND EIGHT HUNDRED SIXTY-SIX AND N01100
DOLLARS ($54,866.00) per annum for the one hundred twenty-first (121st) month
through the expiration of this lease term as minimum annual rental (the
"Minimum Annual Rental") for said leased premises.
ARTICLE 4(c)
PERCENTAGE RENTAL
Date of opening or August 1, 1988, whichever is earlier, through the first
sixty (60) months:
$653,166.67
Sixty-first (61st) month through the one hundred twentieth (120th) month:
$783,800.00
One hundred twenty-first (121st) month through the expiration
of this lease term:
$914,433.00
ARTICLE 4
RENT CREDIT
Notwithstanding anything in this Addenda to the contrary, during each of the
first twenty-four (24) months after the Rental Commencement Date (i) Tenant may
offset, as a rent credit, the sum of THREE THOUSAND TWO HUNDRED SIXTY-FIVE AND
N0/100 DOLLARS ($3,265.00) per month Against Minimum Annual Rental otherwise
due hereunder, and (ii) Tenant shall not be obligated to pay percentage rent,
the marketing service fee referred to in Article 37(a) or participate in the
joint ads referred to in Article 37(b). All other rentals and charges due
Landlord hereunder shall be due and payable from the Rental Commencement Date.
ARTICLE 46
SUBORDINATION
Notwithstanding anything in this ARTICLE 46 to the contrary, Landlord agrees to
subordinate the security interest granted by this ARTICLE 46 to any bona-fide
third party lender or equipment lessor of Tenant, provided such subordination
is on such terms and conditions and in such form approved by Landlord.
/s/ JRG /s/ RS /s/ WMB
- ------------------------------- -------------------------------
TENANTS INITIAL LANDLORD'S INITIAL
PAGE 1 OF ADDENDA
<PAGE> 39
ADDENDA
This Addenda dated this 23 day of March, 1988, is attached to and made part of
this Lease Agreement by and between ROY M. SMITH AND W. M. BEVLY, D/B/A PADRE
STAPLES MALL, Landlord, and Rainbolt, Inc. d/b/a Casa Ole, Tenant.
ARTICLE 48
FRANCHISE AGREEMENT
Tenant warrants and represents to Landlord that it is a bona-fide franchisee of
Casa Ole' and has the exclusive right to operate a Casa Ole' Mexican Restaurant
at the shopping center for the full term of this lease. Tenant recognizes that
Landlord would not enter into this lease, but for the fact that Tenant is to
operate Casa Ole' Restaurant at the leased premises for the full term of this
Lease and in the event Tenant ceases to operate the leased premises as a Casa
Ole' franchisee under the trade name Casa Ole' as a result of the termination
of Tenant's franchise agreement or otherwise, same shall at Landlord's option
constitute a default under this Lease.
ARTICLE 48
EARLY TERMINATION
(MUTUAL)
Landlord and Tenant shall each have the right to terminate this lease on the
last day of the month next following the expiration of ninety (90) days after
the tenth (10th) anniversary of the date on which rental is determined to
commence, if, and only if, Tenant does not achieve net sales of SEVEN HUNDRED
FIFTY THOUSAND AND N0/100 DOLLARS ($750,000.00) or more for at least one (1)
year of the eighth (8th), ninth (9th), and tenth (10th) years after the rental
commencement date, provided that the party so terminating gives the other
written notice of such election to terminate no later than the sixtieth (60th)
day after the end of the tenth (10th) year. Tenant's right to terminate
pursuant to this Article is contingent upon Tenant not being in default of any
provision of this lease.
ARTICLE 49
POP-OUT
Tenant shall have the right, provided Landlord first approves in writing the
size, location and plans and specifications for same, to construct in
accordance with the provisions of Exhibit C, a "pop-out" of the leased premises
along the present southern demising line of the leased premises at Tenant's
sole cost and expense. Such pop-out shall be constructed no later than the date
which is 90 days after Landlord approves Tenant's plans same and in no event
later than the third(3rd) year after the rental commencement date. In the event
Tenant constructs such pop-out, Tenant's Minimum Annual Rental shall increase
by an amount equal to the product of $10 (Ten Dollars) ($12.00, years 6-10 and
$14.00,years 11-15) times the number of square feet in the pop-out and such
additional square footage shall be added to the leased premises for all
purposes (including but not limited to the calculation of additional rentals
and charges), provided however, that for the first twenty-four (24) months
after the pop-out space is completed, Tenant shall not be obligated to pay the
increase in Minimum Annual Rental and increase in marketing service fee
/s/ JRG /s/ RS /s/ WMB
- ------------------------------- -------------------------------
TENANTS INITIAL LANDLORD'S INITIAL
PAGE 2 OF ADDENDA
<PAGE> 40
ADDENDA
This Addenda dated this 23 day of March, 1988, is attached to and made part of
this Lease Agreement by and between ROY M. SMITH AND W. M. BEVLY, D/B/A PADRE
STAPLES MALL, Landlord, and Rainbolt, Inc. d/b/a Casa Ole, Tenant.
ARTICLE 49 cont'd.
attributable to such increase in square footage. It is understood and agreed
by Tenant that Landlord must obtain certain approvals before Landlord can
permit Tenant to construct such pop-out, and Landlord's obligations under this
Lease are expressly contingent on obtaining such approvals. In the event
Landlord has not notified Tenant that it has obtained such approvals by April
1, 1988, either party at its option can cancel this lease by giving the other
party written notice at any time prior to the date Landlord subsequently gives
Tenant written notice that it has obtained such approvals.
ADDEN90.044
022588
In the event tenant constructs said "pop out" tenant shall be entitled to
"recapture" from 1/2 the percentage rent which tenant owes Landlord if any for
the first sixty (60) months after the pop out space is completed, tenants
actual out of pocket construction cost (excluding soft costs) incurred in
connection with such pop out. Tenant's right of recapture shall be contingent
upon tenant furnishing Landlord upon demand copies of all receipts, paid
invoices, cancelled checks, work orders or other proof of payment Landlord
requires which accurately evidences tenants out of pocket construction cost. In
no event shall tenants right of recapture (i) apply to any rent or other rent
or charges owed Landlord, except percentage rent (ii) extend beyond such sixty
(60) month period regardless of whether or not tenant has recaptured any or all
of its construction cost or (iii) exceed forty thousand dollars ($40,000).
/s/ JRG /s/ RS /s/ WMB
- ------------------------------- -------------------------------
TENANTS INITIAL LANDLORD'S INITIAL
PAGE 3 OF ADDENDA
<PAGE> 41
STATE OF TEXAS
COUNTY OF NUECES
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ROY M. SMITH and M. W. BEVLY, owners of PADRE STAPLES MALL,
known to me to be the persons whose names are subscribed to the foregoing
instrument and acknowledged to me that they executed the same for the purposes
and consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23 day of March, 1988.
/s/ NANCY A. HAYES
-----------------------------------
NOTARY PUBLIC IN AND FOR THE
STATE OF TEXAS
[SEAL]
NANCY A. HAYES, Notary Public
In and for the State of Texas
My commission expires Dec. 23, 1990
-----------------------------------
TYPED OR PRINTED NAME
MY COMMISSION EXPIRES:
9-15-91
- ------------------------------------
STATE OF Texas
----------------------------
COUNTY OF Victoria
---------------------------
Before me, the undersigned authority, a Notary Public in and for said
County and State, personally appeared Jack R. Goodwin, the President of
Rainbolt, Inc., a Texas corporation, known to me to be the person and officer
whose name is subscribed to the foregoing instrument, and acknowledged to me
that (s)he executed same as the act and deed of said corporation, and in the
capacity therein stated.
WITNESS MY HAND AND SEAL this 4th day of March, 1988.
/s/ SYLVIA HARTLEY
-----------------------------------
NOTARY IN AND FOR THE
STATE OF Texas
---------------------------
Sylvia Hartley
-----------------------------------
TYPED OR PRINTED NAME
MY COMMISSION EXPIRES:
- -----------------------------------
STATE OF
---------------------------
COUNTY OF
--------------------------
Before me, the undersigned authority, a Notary Public in and for said
County and State, personally appeared ________________, who acknowledged that
(s)he executed the foregoing instrument as his/her act and deed.
WITNESS MY HAND AND SEAL this ___ day of ______________ 19___.
-----------------------------------
NOTARY PUBLIC IN AND FOR THE
STATE OF
---------------------------
-----------------------------------
TYPED OR PRINTED NAME
MY COMMISSION EXPIRES:
- -----------------------------------
<PAGE> 42
Expansion joints as installed as a necessary function of this structure.
These joints do not occur in all Tenant spaces, and those spaces in which
they occur shall be clearly identified. The floor expansion joint shall
be a complete installation by Landlord, and it shall be Tenant's
responsibility to install finish floor covering material to this joint in
a workmanship manner. Landlord will not accept responsibility for
finished floor material installed over the expansion joint.
G. Show Window Backgrounds
All show window backgrounds, show windows, show window floors and
ceilings, and show window lighting installations are Tenant's
responsibility.
H. Furniture, Fixtures and Signs
Tenant shall install all furnishings, trade fixtures, signs, and related
parts, including installation. Location and design of all signs are
subject to prior written consent of Landlord.
I. Plumbing
All plumbing fixtures are to be installed by Tenant except utility
service to the area, including a properly sized water meter, if the same
is required by Landlord, in which latter event Tenant shall make any
required utility deposits.
J. Water Heater
Domestic electric water heater should be installed by Tenant, where
required, including final connections.
K. Toilet Room
A toilet room is required.
Tenant is responsible for furnishing and installation of wiring,
lighting, fixtures, mechanical toilet exhaust systems, vents, towel
cabinets, soap dishes, hand driers, deodorizers, mirrors and other
similar items in toilet rooms within the leased premises.
L. Cooled Air Systems
1. Tenant shall provide all systems facilities and equipment necessary
for the distribution and control of the cooled air delivered to and
within the leased premises.
2.
3. In the event that Tenant's supply air requirements deviate from the
air quantity scheduled for his space on Landlord's mechanical
drawings, which is based on a lighting and miscellaneous load of 5.5
watts per square foot, Tenant shall be responsible for and assume
additional costs, based on $1700.00 per ton, which may be required
to permit Landlord to accommodate Tenant's requirements.
4. Tenant shall arrange and pay for a certified test and air balance
for its space, within two (2) months after completion of the
construction. A certified air balance report shall be submitted to
the Landlord for final review and approval. In the event that
Landlord requires adjustments to Tenant's air distribution, Tenant
shall pay all costs related thereto.
5. Supply air for a complete exhaust system from kitchen dining room,
cafeteria area, pet shops,beauty salons and other Tenants who may
emit odors in Landlord's opinion, must be by Tenant-furnished and
installed air fans. Tenant shall design, furnish and install a
complete supplementary make-up air system, complete with all
required heating and cooling as required to meet Tenant's specific
needs.
Maximum Exhaust Air shall be based on codes and special requirements.
Food or other odors from kitchen, dining rooms and cafeterias must be
exhausted to atmosphere through Tenant-furnished and installed
exhaust system equipped with a high velocity vertical air discharge
exhaust fan equal to Penn Ventilator Co. Fume X. The manufactured fan
unit shall be modified by the addition of a fabricated venturi type
duct adaptor to assure a discharge velocity of 2000 F.P.M. The
exhaust fan shall be provided with a drainage area at the bottom of
the unit complete with a residue trough equipped to be cleaned
periodically by Tenant. The location of the exhaust fan shall be such
as to avoid contaminating air intakes to other tenants as
specifically approved in writing by Landlord, and in general, shall
not be installed closer than fifteen feet (15-0") to any outside air
intake. Tenant's plans and specifications shall clearly define the
exhaust equipment to be furnished and installed by Tenant at Tenant's
expense. Landlord shall approve final equipment selection, in
writing, before equipment is erected.
6. Tenants who provide their own roof-top mounted cooled air units or
other equipment shall have the
C-5
<PAGE> 43
M. Gas
If gas service is made available, Tenant shall provide a gas service
cut-off, and shall install its own gas meter and shall install all gas
connections and piping to and within the leased premises.
N. Mechanical Equipment
All mechanical equipment, including dumb-waiters, elevators, escalators,
freight elevators, conveyors and their shafts and doors located within
the leased premises, including electrical work for these items, are
Tenant's responsibility.
O. Electrical
1. Tenant shall install fused main disconnect, A1 interior
distribution panels, lighting panels, (except those relating to
Landlord's cooled air system), transformers, outlet boxes, switches,
outlets and wires to and within the leased premises (except conduit
to lease space provided by Landlord) and all other electrical
equipment relating to Tenant's space as may be necessary, whether
located within demised premises or at a remote location. Tenant
shall provide electrical conduit boxes in the concrete floor slab,
walls, and ceiling, including all other electrical equipment, as
required to permit Landlord to construct his work as outlined in
Landlord Work. All electrical work shall be installed in accordance
with correct National Electric Code and other approving
authorities.
2. All electrical fixtures, including lighting fixtures and equipment
and installation thereof is Tenant's responsibility.
3. All ceiling lighting fixtures which are fluorescent shall be
recessed and shall have lenses. There shall be no exposed tube or
surface mounted fluorescent lighting fixtures installed in any
public space or sales area. Surface mounted fluorescent fixtures
shall be permitted in non-sales areas.
4. All systems and conduit where required for intercommunication,
music, antenna, material handling or conveyor, burglar alarm, vault
wiring, fire protection alarm, time clock and necessary telephone
equipment and telephone wires in the leased premises are to be
installed by Tenant.
5. Tenant must install feeder cable from Landlord's facilities to the
leased premises, including all connections.
6. Electrical drawing submittals to Landlord must include a tabulation
of the electrical load, including quantities and size of lamps,
appliances, signs, and water heater.
7. The total load within the Tenant's space shall be balanced to
within ten percent (10%) on each of the three (3) phases provided.
8. Tenant shall furnish and install time clocks for control of Tenant
signs and show window lighting.
P. Sprinkler System
Tenant shall contract for a wet type fire protection sprinkler system
compatible with Landlord's system and it shall be installed throughout
the leased premises by Tenant in accordance with, but not limited to, the
following requirements:
1. All work shall be in accordance with the requirements of, and be
approved by Landlord's underwriter and the appropriate state
governing authorities. If required by the governing authorities,
Landlord will provide sprinkler systems based on one sprinkler head
per 100 square feet. Tenant will reimburse Landlord at the rate of
$140.00 per sprinkler head. Any further modifications to the
Landlord's sprinkler system will be the sole responsibility and at
the sole expense of the Tenant.
2. Before proceeding with any installation work, Tenant shall forward
a set of reproducible engineered sprinkler plans to Landlord which
bear the written approval of appropriate state governing
authorities. Upon completion, and before Tenant takes possession of
the leased premises, Tenant shall submit written proof from the
Landlord's underwriter that the system was inspected and approved.
3. Tenant's installation shall provide for a minimum temperature of
forty degrees F (40 degrees F) in all areas in which the sprinkler
lines are installed.
4. Landlord shall furnish a flanged connection Tee on the building's
sprinkler distribution main, capped with a test blank. Tenant Work
begins at this point. The test blank shall not be removed until the
Tenant's system has been pressure tested by approved method and
certified in the field by the inspecting authority.
5. Any damage caused by Tenant to Landlord's sprinkler system may be
repaired by Landlord at Tenant's expense.
C-6
<PAGE> 44
6. An electrically activated alarm device, if required, shall be
installed by Tenant.
7. Tenant shall provide all facilities for properly draining the
system, and any necessary test valves or equipment required, if
deemed necessary by inspecting authority.
8. Landlord's sprinkler main will become active on a schedule
established by Landlord. Should Tenant require the Landlord's
sprinkler mains be drained, it shall be done by Landlord's
contractor at Tenant's expense.
9. Tenant's sprinkler system shall be based on the following coverages,
subject to approval of design by Landlord's underwriter and any
governing authorities.
a. Maximum coverage per head: 120 sq. ft.
b. Minimum coverage per head: 90 sq. ft.
If Tenant's design requires less area than ninety (90) square feet
per sprinkler head, and said design compels Landlord to increase
service to Tenant, Tenant shall pay all costs, expenses, and
charges incurred by Landlord by reason of such increase of service.
10. Landlord's fire underwriter shall from time to time during the term
of this lease have the right to inspect the fire protection system
and the component parts thereof. Such system shall at all times
comply with the requirements of such underwriter and shall meet the
conditions established for approval.
11. Restaurant Tenants
Automatic Extinguishing Equipment - Tenant shall furnish and
install automatic extinguishing equipment in accordance with the
National Fire Protection Association Standard 96, latest edition,
Section 10, in all food preparation areas.
Basic guidelines for the installation are contained herein and
listed below.
The extinguishing system should be Underwriter's Laboratories,
Inc., approved, pre-engineered system with at least the following
features:
a. Protection of the hood and duct must be provided.
b. The system should include surface protection for deep fat
fryer, griddle, broiler and range.
C. Automatic devices should be provided for shutting down fuel
or power supply to the appliances getting the surface
protection. It should be noted that these devices must be of
the manual reset type and not automatic reset. In addition,
gas fired cooking equipment must have a permanent notice
posted at the reset device cautioning the operator to shut
off the gas at all appliances before resetting the device.
d. A readily accessible means to manually actuate the fire
extinguisher equipment shall be provided in a path of exit
and shall be clearly identified. This means shall be
mechanical and shall not rely on electric power for
actuation.
e. National Fire Protection Association Standard 96 calls for
the installation of these systems to be made only by persons
properly trained and qualified by the manufacturer of the
system being installed. Tenant shall also have an inspection
agreement for regular routine inspection with an approved
firm whose personnel are properly trained and qualified (by
the manufacturer) to perform these inspections. A copy of
this agreement shall be filed with Landlord. The agreement
shall remain in effect the full term of this lease.
f. If dry chemical systems are used, the exhaust fan must run
during the actuation of the extinguishing system in order to
draw the dry chemical extinguishant up through the duct work.
g. Before the system is fabricated and installed, the system
vendor should submit plans and other pertinent information on
the proposed system to Landlord for review and approval.
h. All exhaust system duct work and exhaust fans used for
exhausting cooking odors and grease contaminated air shall be
cleaned on a regular schedule by an established contractor
engaged in that type of service. This cleaning will occur at
intervals often enough to insure against grease accumulation
in exhaust system, thus eliminating the possibility of fires
in the system. A copy of this agreement shall be filed with
Landlord. Tenant shall cause this agreement to remain in
effect the full term of this lease.
Q. Fire Extinguisher Requirements
Tenant shall furnish and install fire extinguishers throughout the
leased premises as required by governing authorities.
C-7
<PAGE> 45
R. Doors and Exiting Requirements
1. Tenant will furnish recessed rear exit door, hardware and
framing from leased premises to Landlord provided service
corridor.
2. Tenant will be responsible for adherence to existing codes.
3. Tenant will maintain a clear exiting path through the
stockroom to Tenant's rear door for those Tenant premises
that contain a rear door.
S. Pest Control
In order to maintain the highest quality of standards in selling
food and beverage items to be consumed by the public, the Tenant
shall contract with a licensed pest control service. The
maintenance of this service shall occur at intervals often enough
to insure against any insects or pests. A copy of the agreement
between pest control service and Tenant must be filed with center
manager. Tenant shall cause this agreement to remain in effect the
full term of this Lease.
IV. General Provisions
All work performed by Tenant shall be governed in all respects by, and be
subject to, the following:
A. Landlord shall have the right to require Tenant to furnish payment
and performance bonds or other security in a form satisfactory to
Landlord for the prompt and faithful performance of Tenant Work,
assuring completion of Tenant Work with a provision that Landlord
will be held harmless from payment of any claim either by way of
damages or liens on account of bills for labor or material in
connection with Tenant Work. Tenant agrees to deliver to Landlord,
upon completion of construction, a complete "Release of Liens" from
all Tenant contractors or material suppliers who have contracted
with or furnished Tenant work or materials, on forms provided by
Landlord.
B. It is understood and agreed between Landlord and Tenant that costs
incurred by Landlord if any, as a result of Tenant's failure or
delay in providing the information as required in this Exhibit C
and in the lease to which this Exhibit C is attached, shall be the
sole responsibility of Tenant and Tenant will pay such costs, if
any, promptly upon Landlord's demand.
C. Tenant's work shall be coordinated with that of Landlord and other
Tenants in the Shopping Center to such extent that Tenant's Work
will not interfere with or delay completion of other construction
work in the Shopping Center. Tenant will at all times enforce
strict discipline and good order among its contractors and
employees hired to perform Tenant's Work and Tenant will not
employ, on the work, any unfit person or anyone not skilled in the
work assigned to him or any workman that will cause labor disputes
or stoppages among other contractors performing work in the
Shopping Center.
D. Plans and specifications must have written approval of Landlord, as
well as all governing bodies having jurisdiction. These documents
plus supporting calculation data must be submitted for written
approval of Landlord before any contracts are let. Tenant will
furnish complete plans to Landlord for approval prior to
construction.
Method of submittal of Tenant's plans and specifications will be
detailed with transmittal of Lease Drawing.
E. Tenant shall prepare all plans and perform all work to comply with
all governing statutes, ordinances, regulations, codes and
insurance rating boards; take out all necessary permits and obtain
certificates of occupancy for the work performed, all subject to
Landlord's approval. Landlord's approval of Tenant's plans does not
relieve Tenant of its obligation to complete the development in
accordance with the terms of the lease agreement, nor does it
relieve Tenant of the necessity of complying with the laws, rules,
regulations and requirements of local governing authorities.
Certificates of Occupancy, or copy thereof, shall be filed with
Landlord before Tenant opens for business.
Landlord reserves the right to require changes in Tenant Work at
Tenant expense when necessary by reason of code requirements.
F. Tenant shall comply with any existing or future city, state or
federal regulations or legislation regarding the control of
pollution as it applies to the Tenant's operation.
G. Landlord, Tenant or utility company shall have the right, subject
to Landlord's approval to run utility lines, pipes, roof drainage
pipe, conduit, wire or duct work, where necessary, through attic
space, or other parts of the leased premises, and to maintain this
installation in a manner which does not interfere unnecessarily
with Tenant's use thereof. It shall be Tenant's responsibility to
provide access panels in its finish work where required by
Landlord.
H. Tenant and its contractor must comply and conform to all of the
requirements of the OSHA Act, and no exceptions will be recognized.
C-8
<PAGE> 46
I. Construction Activities
1. During the leased premises interior construction, Tenant shall use
rear opening to the leased premises for moving in/ out of materials,
for those Tenant premises that contain a rear door.
2. Use of the Enclosed Mall shall be kept to a minimum, and shall be
for those tenant premises not served by a rear door. Tenant shall
be responsible for any damage caused by Tenant or its contractors
to any Enclosed Mall finishes.
3. If the leased premises are not complete and ready to open pursuant
to the provisions of Exhibit C of the Lease, Tenant, at is expense,
shall install a temporary store front shielding the interior of the
leased premises from the Enclosed Mall, the design and construction
of which temporary store front shall be previously approved by
Landlord. If Tenant fails to timely install said temporary store
front, Landlord shall have the right to do so at Tenant's expense.
4. All roof cuts and openings shall be performed by Landlord's roofer
at Tenant's expense. Location, size and design of roof vents, hoods
and caps shall be approved by Landlord. Landlord reserves the right
to approval of any equipment to be placed on the roof. Tenant shall
install equipment at locations where structural reinforcement are
provided. All roof openings or changes in structural design caused
by Tenant's equipment shall be made by Landlord and paid for by
Tenant.
All drilling, welding, or other attachment to the structural system must
be approved by Landlord in writing before work is begun.
J. Temporary Services
1. Temporary electrical service, when available, will be provided by
Landlord during construction from designated areas. Tenant shall
not connect temporary lines to the power source for service to the
leased premises without the written consent of Landlord, which
consent shall be requested in writing. The cost to Tenant for this
service shall be $250.00 per month or six (6) cents per square foot
of floor area within the leased premises, whichever is greater
Payment for this cost is to be remitted to Landlord in advance, on
or before the first day of each month after service is initiated
and shall continue until permanent electric service has commenced
or one-time central billing.
2. Landlord will, during the periods of initial construction and
Tenant fixturing and merchandise stocking, make available a trash
removal service from designated areas. Tenant shall be responsible
for breaking down all boxes and placing trash in appropriate
containers in such areas. Tenant's cost for this service shall be
remitted to Landlord in advance, on or before the first day of each
month after service is initiated on the following basis:
<TABLE>
<CAPTION>
Area of Leased Premises Monthly Charge in $
<S> <C>
30,001 sq. ft. or more $250.00
20,001 sq. ft. to 30,000 sq ft. $235.00
15,001 sq. ft. to 20,000 sq ft. $220.00
10,001 sq. ft. to 15,000 sq ft. $210.00
5,001 sq. ft. to 10,000 sq ft. $200.00
2,00I sq. ft. to 5,000 sq ft. $185.00
2,000 sq. ft. or less $175.00
</TABLE>
Tenant is cautioned against allowing trash to accumulate within its
area or in the corridor, mall or arcade adjacent to Tenant's space.
Should Landlord be forced to remove Tenant's or Tenant contractor's
trash because of failure to remove trash, the charge will be two
(2) times Landlord's actual cost, but in no event less than
$200.00.
K. Insurance
Prior to the commencement of Tenant Work and continuously until
completion and acceptance by the owner, Tenant shall effect and maintain
Builder's Risk Insurance or an Installation Floater covering Landlord,
Tenant and Tenant's Contractors, as their interest may appear, against
loss or damage by fire, "Extended Coverage Endorsement," Vandalism and
Malicious Mischief, and "All Risk" upon all Tenant Work in place and all
materials in transit and stored at the site of Tenant's Work and
elsewhere for the full insurable value thereof at all times. All other
materials equipment, supplies and temporary structures of all kinds
incidental to Tenant Work shall remain at the risk of the Tenant and be
insured. In addition, Tenant agrees to indemnify and hold Landlord
harmless against any and all claims for injury to persons or damage to
property by reason of the use of the leased premises for the performance
of Tenant Work, and claims, fines, and penalties arising out of the
failure of Tenant or its agents, contractors and employees to comply with
any law, ordinance, code requirement, regulations or other requirement
applicable to Tenant Work and to effect and deliver to Tenant and
Landlord prior to commencement of said work and maintain continuously
until completion of said work certificates with a thirty (30) day notice
of cancellation or non-renewal evidencing the existence of the following
insurance coverages:
1. Workmen's Compensation Insurance in accordance with the laws of the
State in which the property is located, including Employer's
Liability Insurance to the limit of $100,000.00.
C-9
<PAGE> 47
2. Comprehensive General Liability Insurance, including Contractual
Liability recognizing the liability imposed by this lease and
including product and/or completed operations liability against
bodily injury, including death, and personal injury for
$1,000,000.00. Bodily injury for any one occurrence and against
property damage insurance for $500,000.00 or a combined single
limit policy of $1,000,000.00. The policy shall not exclude the
explosion, collapse, or underground property damage liability
hazard.
3. Automobile Liability Insurance covering owned and non-owned
automobiles for bodily injury including death for a limit of
$1,000,000.00 for any one occurrence and property damage for a limit
of $500,000.00 for any one occurrence, or a combined single limit
policy of $1,000,000.00.
L. Should Tenant request that the Landlord perform some of "Tenant Work" as
outlined in Exhibit C, and Landlord agrees to perform such work, within
the leased premises prior to, during or after Tenant commences
construction, Tenant agrees to execute a Work Order directing Landlord to
perform said work at an agreed price plus twenty percent (20%)
administrative charge, provided a provision for Landlord to perform such
work is not included in other exhibits of this lease. Tenant may be
billed for the work completed in whole or in part as construction
progresses and agrees to pay Landlord within thirty (30) days after
request for payment.
M. Tenant shall design space in accordance with applicable energy codes.
/s/ JRG /s/ RS /s/ WMB
- ------------------------------- -------------------------------
TENANT'S INITIAL LANDLORD'S INITIAL
C-10
<PAGE> 48
EXHIBIT "D"
Tenant Sign Criteria
A. Purpose, Administration, and Responsibility
The purpose of this Sign Exhibit is to establish a quality atmosphere
while creating an environment which produces maximum traffic and promotes
the greatest sales for all Tenants in the Shopping Center.
Tenant's storefront signing must be unique, original, in proportion, in
excellent taste, and will be approved only after this criteria has been
demonstrated to the Landlord.
Detail drawings, in triplicate and one set of sepias, as well as samples
of materials and colors to be used for each sign, must be prepared and
submitted by Tenant in conjunction with the storefront design
information. Sign drawings must be approved in writing by the Landlord
before the sign may be installed. No Tenant will be allowed to open
without an approved sign.
Tenant's sign drawings and submittal must include the following:
1. Elevation view of storefront showing sign (drawn to accurate scale)
with dimensions of height of letters and length of sign.
2. Color sample of sign.
3. Color sample of sign letters (unless they are to be WHITE).
4. Cross section view through sign letter and sign panel showing
location of sign relative to the storefront line and showing the
dimensioned projection of the face of the letter from the face of
the sign panel. The drawings shall also show other elements such as
soffits, canopies, and the relationship of the sign to the other
elements of the storefront, especially the vertical facia.
The Landlord shall not be responsible for the cost of refabrication of
signs fabricated, ordered or constructed, that do not conform to the sign
criteria.
All signs, permits and related or resulting construction shall be
Tenant's responsibility, and all signs shall be installed with the
approval of the Project Supervisor. No sign maker's identification tabs
or stickers shall be permitted. Sign contractor shall repair any damage
to any work caused by his work. All signs must conform to Local Building
and Electrical Codes.
B. Criteria - Interior Signs
Tenant will not erect signs except in conformity with the following
policy:
Wording shall be limited to the name of the store; however, each party's
customary signature or logo, hallmark, insignia, or other trade
identification will be respected.
All signs must be compatible to colors and materials of Tenant's
storefront and submitted to the Landlord for approval.
All signs must be internally illuminated, and connected to Tenant's
electric service.
Light boxes will not be permitted.
Signs with individually illuminated letters should have lamps or tubes
entirely concealed within the depth of the letter with translucent
plastic face with no visible openings. Maximum brightness allowed for
interior (Enclosed Mall) signs will be 100 foot lamberts taken at the
letter face and must comply with all building and electrical codes.
Reverse channel letter signs are not permitted.
The size of all Tenant's signs shall be limited. The scale and concept
of the Enclosed Mall requires the use of signs which are not larger than
necessary to be legible from within the Enclosed Mall. Thus, except for
department store signs, Tenant's signs shall be located within the limits
of its storefront and shall not project more than six inches (6") beyond
the store front and shall conform to the following maximum height
criteria:
<TABLE>
<S> <C> <C>
(1) Up to 30' storefront: . . . . . . . . . . . 18" capitals, 12" lower case
all capital letters 15"
(2) 30' to 60' storefront: . . . . . . . . . . 21" capitals, 15" lower case
all capital letters 18"
(3) 60'and over storefront: . . . . . . . . . . 24" capitals, 18" lower case
all capitals letters 21"
</TABLE>
D-1
<PAGE> 49
In addition to complying with the above criteria, signs in the Enclosed Mall
shall be limited in length to seventy percent (70%) of Tenant's frontage on the
Enclosed Mall, and shall in no case exceed a length of thirty feet (30'-0").
Signs and identifying marks shall be placed entirely within the boundaries of
the leased premises with no part higher than twelve feet (12'-0") above the
finished floor line, nor shall any projecting sign be located closer than eight
feet (8'-0") to the finished floor line, but in no event shall such a sign
extend above the wall or parapet upon which it is mounted.
The total sign area (rectangle enclosing each group of letters, symbols or
logos) shall not exceed ten percent (10%) of the area of the storefront, and
shall be located at least thirty inches (30") from each lease line.
Except as otherwise approved in writing by Landlord, only one (1) sign per
Tenant will be permitted within the Enclosed Mall area. Corner Tenants must
have two (2) such signs, one on each mail front.
Signs may be installed at right angles to the mall storefront provided that
they are wholly contained within the lease line of the leased premises and
otherwise conform to the provisions of these regulations and criteria. Said
signs may not exceed fifty inches (50") in width and eighteen inches (18") in
height.
No other sign, advertisement, notice, decal or other lettering shall be
exhibited, inscribed, painted, affixed on any part of any storefront, unless
specifically approved by the Landlord.
Paper signs and stickers are prohibited.
Exposed neon tubes forming letters or logs: This type of signage is encouraged,
especially in food court Tenant spaces. It is to be used in a decorative as
well as an informative fashion, and shall be allowed only at the discretion of
Landlord on an individual basis.
There shall be no exposed conduits, raceways, transformers, or other electrical
connections.
Signs of the flashing, blinking, rotating, moving, or animated types or audible
type signs are not permitted.
Sign company names or stamps shall be concealed (Code permitting).
Banners or flags are prohibited.
Tenant shall not install any roof top signs.
Pylon signs are not permitted, except at the locations shown on the site plan
and they shall be subject to the approval of the parties hereto as to the
design and size.
No signs will be permitted at the rear of any building, except in the case of
stores with customer entrances opening directly onto the parking areas and only
as approved by the Landlord in writing.
All non-customer service doors for receiving merchandise will have a standard
block letter sign with the name of the Tenant and mall address. These signs
will be furnished by Landlord to Tenant at a cost of $20.00 per sign to be paid
within thirty (30) days of opening of Tenant's store.
Public safety decals or artwork on glass in minimum sizes to comply with
applicable Code, subject to the approval of Landlord may be used, as required
by building codes or other governmental regulations.
/s/ JRG /s/ RS /s/ WMB
- ------------------------------- -------------------------------
TENANTS INITIAL LANDLORD'S INITIAL
D-2
<PAGE> 50
EXHIBIT "E"
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement to
Landlord to make this Lease with Tenant, the undersigned, on behalf of himself,
his legal representatives, heirs, successors and assigns, unconditionally and
absolutely guarantees to Landlord, Landlord's successor and assigns, the full
performance and observance of all the provisions therein provided to be
performed and observed by Tenant, including the rules and regulations, without
requiring any notice of non-payment, non-performance, or non-observance, or
proof, notice, or demand, whereby to charge the undersigned therefor, all of
which the undersigned expressly waives and expressly agrees that the validity
of this agreement and the obligations of the Guarantor hereunder shall in no
event and in no manner be terminated, affected or impaired by reason of the
assertion by Landlord against Tenant or any of its sub Tenants and/or assignees
or successors of any of the rights or remedies reserved to Landlord pursuant to
the provisions of the within Lease. The undersigned further agrees to pay, on
demand, all attorney fees, costs and other expenses, including court costs,
incurred by Landlord in connection with the administration enforcement or
collection of the obligations set forth in this Guaranty. The undersigned
further agrees that this Guaranty shall remain and continue in full force and
effect as to any renewal, amendment, modification, hold over, assignment or
extension of this Lease. As a further inducement to Landlord to make this Lease
and in consideration thereof, Landlord and the undersigned agree that in any
action or proceeding brought by either Landlord or the undersigned against the
other on any matters whatsoever arising out of, under, or by virtue of the
terms of this Lease or of this Guaranty, that Landlord and the undersigned
shall and do hereby waive trial by jury.
Dated: 10/11/96
--------
Guarantor:
CASA OLE RESTAURANTS, INC.
By: /s/ STACEY M. RIFFE
----------------------
Name: Stacey M. Riffe
--------------------
Title: Vice President
-------------------
Address: 1135 Edgebrook
-----------------
Houston, TX 77034
-------------------------
STATE OF TEXAS )
COUNTY OF NUECES )
-------
Personally appeared before me, a Notary Public in and for said State,
Stacy Rife, of Casa Ole Restaurants, Inc., a Texas corporation, known personally
by me, and being sworn, did dispose and say that s(he) executed the foregoing
GUARANTY for and on behalf of said corporation by authority of its Board of
Directors.
WITNESS MY HAND AND THIS NOTARIAL SEAL this 11th day of October, 1996
[SEAL]
KELLEY LANDINI /s/ KELLEY LANDINI
Notary Public ------------------------------
STATE OF TEXAS Notary Public, State of Texas
My Comm. Exp. Nov. 26, 1998 Print Name: Kelley Landini
-------------------
My Commission Expires: 11-26-98
---------
<PAGE> 1
EXHIBIT 10.40
OPTION CONTRACT AND AGREEMENT
THIS OPTION CONTRACT AND AGREEMENT (this "Agreement") is entered into between
and among:
1. Casa Ole of Beaumont, Inc., a Texas general business corporation
(referred to herein as "Seller");
2. Thomas L. Harken, Melba J. Harken and Victor M. Gonzalez (herein
referred to collectively as "Shareholders"); and
3. Casa Ole Restaurants, Inc., a Texas general business corporation
(referred to herein as "Purchaser").
All of the Shareholders of Seller are referred to as Seller's owners. Seller,
Shareholders and Purchaser are sometimes collectively referred to as the
"Parties" or individually as a "Party".
W I T N E S S E T H:
Section 1. OPTION AND CONTRACT.
The options granted pursuant to this Agreement are granted in
consideration of $250,000 to be released to Seller pursuant to a certain escrow
agreement funded for the benefit of Purchaser.
Subject to and in accordance with all of the provisions of this
Agreement, in consideration of good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller hereby grants to Purchaser
an option to purchase (herein referred to as the "FIRST OPTION") from Seller
all of the property and assets of Seller that are a part of, comprise and
include the two Casa Ole restaurants owned by Seller located in Silsbee, Texas
and Jasper, Texas, generally referred to by Seller as Numbers 42 and 43 (herein
referred to as the "Restaurants"), and including all of the Seller's furniture
and fixtures, equipment, inventory, and other assets located within the
Restaurants, all as more particularly described in Exhibit "A" attached hereto
and incorporated herein by reference (herein referred to as the "Property"),
except that the Property shall not include any of the Excluded Assets defined
below. The Property shall not include (i) any of Seller's existing bank
accounts or cash, (ii) the land and buildings on or in which any of the
Restaurants are located, (iii) any of the equipment or property of Seller
located at 8050 Eastex Freeway, Beaumont, Texas, and (iv) the cash registers
located in any of the Restaurants (herein collectively referred to as the
"Excluded Assets").
The FIRST OPTION may be exercised by Purchaser one time only and only
during the month of July, 1997, with the closing of the sale to occur during
the month of October, 1997. If the FIRST OPTION is not exercised during the
month of July 1997, it shall automatically expire and all rights of the parties
under this Agreement shall terminate and Purchaser shall have no further rights
to acquire any of Seller's restaurants. Purchaser must give Seller written
notice during the month of July, 1997, of the exercise of the FIRST OPTION.
Upon the exercise of the FIRST OPTION, the parties shall proceed to complete
the sale of the Property pursuant to the terms and conditions of this
Agreement, and the closing of such sale shall take place during the month of
October, 1997.
<PAGE> 2
The FIRST OPTION and the Purchaser's rights under this Agreement may
not be assigned, sold or transferred to any other person or entity without the
Seller's prior written consent, other than to any wholly-owned subsidiary or
subsidiaries of Purchaser but only if Purchaser guarantees the obligations of
the assignee.
Section 2. PURCHASE PRICE.
(a) Purchase Price. The price and total consideration (the "Purchase
Price") for which Seller agrees to sell the Property to Purchaser and which
Purchaser agrees to pay to Seller shall be an amount equal to five times the
Seller's annual "Net Earnings" (as defined herein) realized by Seller from the
operation of the Restaurants during the period from July 1, 1996, through June
30, 1997. For purposes hereof, Net Earnings shall be defined as the income/loss
from operations realized and reported by Seller for each of the Restaurants on
its internally generated financial statements for the period July 1, 1996,
through June 30, 1997, plus there shall be added to such amount the following
additional amounts reflected in Seller's financial statements: depreciation and
amortization expenses, administrative fees, interest expense, franchise taxes,
legal expenses, repairs and maintenance expenses in excess of three percent of
the gross sales, income realized by the Big Thicket Social Club, Inc. with
respect to the Restaurants during the same twelve month period, and any other
nonreoccurring and extraordinary expenses. In addition, the Purchase Price
shall be reduced by a rent calculation factor based on the rental to be paid by
Purchaser under the Leases to be entered into pursuant to Section 4 below, and
such reduction shall be calculated for each restaurant as set forth in
paragraphs (b) and (c) below.
(b) Silsbee Restaurant. The amount of reduction in the Purchase Price
shall be calculated for the Silsbee Restaurant as follows:
$78,000 annual base rent
+ 5% of gross sales in excess of $1,560,000 for the period of 7-1-96
through 6-30-97
---------------------------
= Rent amount
x 8
---------------------------
= Reduction in purchase price amount
(c) Jasper Restaurant. The amount of reduction in the Purchase Price
shall be calculated for the Jasper Restaurant as follows:
$30,600 annual base rent
+ 5% of gross sales in excess of $1,320,000 for the period of 7-1-96
through 6-30-97
---------------------------
= Rent amount
x 8
---------------------------
= Reduction in purchase price amount
(d) Examples. By way of example only, attached hereto as Exhibit "B"
and incorporated herein by reference is a calculation of the Purchase Price for
each of the Jasper and Silsbee Restaurants, including the reduction for rent as
provided above, assuming a closing in October of 1996 and using the Net
Earnings for such restaurants during the period from July 1, 1995 through June
30, 1996.
Page 2 of 87
<PAGE> 3
(e) Liabilities Excluded. The Purchase Price set forth above shall be
the total consideration paid by Purchaser to Seller and Shareholders and under
no circumstances shall Purchaser assume, pay, perform or discharge any of the
debts, liabilities, obligations and accounts payable (collectively referred to
as the "Liabilities") of Seller relating to the Property, except as expressly
provided herein.
(f) Payment at Closing. Upon the closing of this transaction, the full
amount of the Purchase Price shall be paid in cash to Seller as provided
herein.
Section 3. SECOND OPTION.
As additional consideration for the closing of this transaction, and
conditioned upon the closing of the sale of the first two restaurants taking
place, Seller hereby grants Purchaser a second option (herein referred to as
the "SECOND OPTION") to acquire all but not less than all of the following four
restaurants owned by Seller:
Port Arthur, Texas No. 12
Port Arthur, Texas No. 19
Orange, Texas No. 27
Vidor, Texas No. 47.
The SECOND OPTION may be exercised one time only during the month of July,
1998, with the closing of the sale to occur during the month of October, 1998.
If the SECOND OPTION is not exercised during the month of July, 1998, it shall
automatically expire and Purchaser shall have no further rights to acquire any
of Seller's other restaurants. Purchaser must give Seller written notice during
the month of July, 1998, of the exercise of the SECOND OPTION and the closing
of the sale of the restaurants covered by such notice shall take place on a
date mutually acceptable to Seller and Purchaser during the month of October,
1998, but in no event later than October 31, 1998. The terms of the acquisition
of each restaurant shall be on the same terms and conditions as the sale of the
Restaurants under this Agreement, and for this purpose the purchase price for
each restaurant will be determined based on the Net Earnings for the period
July 1, 1997, through June 30, 1998, and calculated in the same manner as
provided in Section 2 of this Agreement and as provided below for the Vidor
Restaurant. For this purpose, with respect to calculating the reduction in the
Purchase Price for the rent calculation factor, the formula and base rent
stated in Section 2(b) for the Silsbee Restaurant will be used for the Port
Arthur Restaurant (No. 12) and the Orange Restaurant (No. 27). With respect to
the Vidor Restaurant, in calculating the Purchase Price for the Vidor
Restaurant, there shall be added to the Net Earnings of such restaurant the
amount of rental paid under the land lease for the Vidor Restaurant to Harken
Real Estate Company for the period July 1, 1997 through June 30, 1998; and the
reduction in the Purchase Price for the rent calculation factor with respect to
the Vidor Restaurant shall be calculated as follows:
$30,600 annual base building lease rent paid to Casa Ole of Beaumont, Inc.
+ $35,400 annual base land lease rent paid to Harken Real Estate Company
+ 5% of gross sales in excess of $1,320,000 for the period 7-1-98 through
6-30-98
---------------------------
= Rent Amount
x 8
---------------------------
= Reduction in Purchase Price Amount for the Vidor Restaurant
Page 3 of 87
<PAGE> 4
There will be no reduction in the purchase price relating to the Port Arthur
Restaurant (No. 19 - Central Mall location).
The SECOND OPTION and Purchaser's rights thereunder may not be
assigned, sold or transferred to any other person or entity without Seller's
prior written consent, other than to any wholly-owned subsidiary or
subsidiaries of Purchaser but only if Purchaser guarantees the obligations of
the assignee.
Section 4. LEASES.
(a) The Parties acknowledge that the Restaurant located in Jasper,
Texas is on land leased by Seller from Harken Real Estate Company, Inc., and
the Restaurant located in Silsbee, Texas, is on land owned by Seller. All of
the buildings of each Restaurant are owned by Seller. Title to the Jasper
restaurant building reverts to the landowner upon expiration of the lease. As
provided in Section 2, the land and buildings of each Restaurant are not
included as part of the Property and are not being sold hereunder to Purchaser.
At closing, Purchaser agrees to enter into the following leases:
i. A Land & Building Lease for the Silsbee Restaurant in
substantially the form attached hereto as Exhibit "C" and
incorporated herein by reference (the "Silsbee Land &
Building Lease"). The rent payable under the Silsbee Land
& Building Lease will be equal to a base rent of $6,500
per month, plus percentage rent of 5% of annual gross
sales in excess of $1,560,000. The base rent will be
increased as provided in the lease.
ii. A Building Lease for the building relating to the Jasper
Restaurant in substantially the form attached hereto as
Exhibit "D" and incorporated herein by reference (the
"Jasper Building Lease"), and a Land Lease for the land on
which the Jasper Restaurant is located in substantially
the form attached hereto as Exhibit "E" and incorporated
herein by reference (the "Jasper Land Lease"). The rent
payable under the Jasper Building Lease will be equal to
base rent of $2,550.00 per month, increased as provided in
the lease and with no percentage rent. The rent payable
under the Jasper Land Lease will be equal to base rent of
$2,950.00 per month, increased as provided in the Lease,
plus percentage rent of 5% of annual gross sales in excess
of $1,320,000.
Each lease shall be for an initial term of fifteen (15) years, with three
options to renew in favor of Purchaser for an additional five (5) years during
each renewal term, and with a rental payable by Purchaser in accordance with
the terms stated in the form of leases attached hereto.
(b) The parties further acknowledge that the Property shall not
include any of the cash registers located in the Restaurants and that the Cash
Registers are leased by Seller from Tom and Melba Harken. At closing, Seller
agrees to assign to Purchaser and Purchaser agrees to assume the leases for the
cash registers.
(c) If Purchaser exercises the SECOND OPTION, then at closing
Purchaser shall enter into the appropriate leases for the restaurants covered
by the SECOND OPTION, which leases shall be on substantially the same terms as
contained and referenced in Section 4(a) above, and shall include the
following: a Land & Building Lease for Restaurant No. 12 (Twin City Highway), a
Land & Building Lease for Restaurant No. 27 (Orange), a Building Lease and a
Land Lease for Restaurant No. 47 (Vidor). With respect to Restaurant No. 19
(Central Mall), Seller has no interest
Page 4 of 87
<PAGE> 5
in the land and building and Seller's lease with the landlord will be assigned
and assumed by Purchaser at closing.
Section 5. CONDITION OF THE BUSINESS AND PROPERTY; LIMITED WARRANTY.
(a) The term "Condition of the Business and Property" means and
includes all facts and circumstances about the Property, including without
limitation:
(i) The quality, nature and adequacy of the physical
condition of the Property, including without limitation the mechanical
and operating condition of the Property;
(ii) The merchantability, fitness, suitability and
adequacy of the Property for any particular use or purpose;
(iii) The development potential, economic feasibility, cash
flow, earnings and profits and expenses of or related to the Property
being purchased hereunder; and
(iv) Any and all other aspects relating to the Property,
including without limitation, the risks associated with this
transaction, the competition with businesses competing with the
Property, the number of customers and clients of Seller's business and
all other matters relating to or concerning the Seller's business or
the Property.
(b) Other than the express limited warranties made in Section 9
hereof, Seller and Purchaser hereby agree that Seller and Shareholders make no
representations or warranties whatsoever, express or implied, with respect to
Seller's business, the Property or the Condition of the Business and the
Property. Purchaser further represents and warrants that Purchaser has already
independently inspected or caused to be inspected on Purchaser's behalf
Seller's business, the Property and every aspect of the Condition of the
Business and the Property and Purchaser has not entered into this Agreement
based upon any representation, warranty, agreement, statement or expression of
opinion by Seller or by any person or entity acting or allegedly acting for or
on behalf of Seller as to Seller's business, the Property or the Condition of
the Business and the Property. Purchaser agrees that Seller's business and the
Property will be sold and conveyed to and accepted by Purchaser at the closing
in its then present condition, AS IS, WHERE IS, WITH ALL FAULTS AND WITHOUT
REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, other than the
limited special warranty of title to be included in the Bill of Sale (hereafter
defined). Nothing herein will limit the indemnity afforded by Seller and
Seller's owners, however. Further, Purchaser represents and warrants to Seller
and Shareholders that Purchaser has knowledge and expertise in financial and
business matters that enable Purchaser to evaluate the merits and risks of the
transaction contemplated by this Agreement and that Purchaser is not in a
significantly disparate bargaining position. The provisions of this Section
5(b) shall survive the closing or a termination of this Agreement.
Section 6. RESTRICTIVE COVENANT NOT TO COMPETE.
In consideration for this transaction and the benefits to be realized
by Shareholders, Seller and Shareholders hereby agree, individually and
jointly, that neither of them shall in any manner own, operate, lease, invest
in or have any interest in any Mexican food restaurant that is located within
the City limits of Lumberton, Texas, nor any Mexican food restaurant that is
located within a three mile radius of either of the Restaurants sold to
Purchaser hereunder (or any of the restaurants acquired by Purchaser under the
SECOND OPTION) (herein referred to as the "Restrictive Covenant"); provided,
however, this restriction shall not apply to the existing Casa Ole restaurants
Page 5 of 87
<PAGE> 6
or Crazy Jose's restaurant located in Beaumont, Texas. This Restrictive
Covenant shall remain in force and effect so long as the Leases referred to in
Section 4 above remain in effect. If any of such Leases expire or ever or
terminated or canceled, then the Restrictive Covenant shall terminate with
respect to the location covered by such Lease.
Section 7. CLOSING.
(a) The consummation of the transaction contemplated in this
Agreement, including the funding of the sums required under Section 7(c)(i)
hereof, shall occur on a day in October, 1997, that is mutually agreeable to
Seller and Purchaser, but in no event later than October 31, 1997 (the "Closing
Date"). As used in this Agreement, the terms "Closing" and "Closing Date" mean
the date, time and event described in this Section 7.
(b) Subject to the terms, conditions and provisions hereof and
provided Purchaser contemporaneously performs all of Purchaser's obligations
set forth in Sections 7(c) and 7(f) hereof, at the Closing, Seller shall
deliver or cause to be delivered the following:
(i) A bill of sale and an assignment (the "Bill of Sale")
covering the Property, naming Seller as grantor and Purchaser as
grantee, executed and acknowledged by Seller and to be executed by
Purchaser, and in substantially the form set forth on Exhibit "F"
attached hereto and made a part thereof for all purposes and
containing such reservations and exceptions set forth therein;
(ii) The leases for each of the Restaurants in
substantially the forms attached hereto and executed pursuant to the
terms of Section 4(b);
(iii) An assignment of the leases for the cash registers;
and
(iv) Such certificates as necessary to evidence that
Seller has good and marketable title to the Property free from any
liens, including UCC lien searches, tax and lien searches, and a
certificate of good standing and that the representations and
warranties of Seller are true and correct as of the Closing.
(c) Contemporaneously with the performance by Seller of Seller's
obligations under Section 7(b) hereof, Purchaser, at Purchaser's sole cost and
expense, shall execute, acknowledge (when the form of the document so provides)
and deliver to Seller at Closing the following:
(i) Cash in the amount the Purchase Price, together with
such additional cash, if any, as may be necessary to pay Purchaser's
share of the closing costs and prorations hereunder;
(ii) A closing certificate in substantially the form
attached hereto as Exhibit "G" (the "Closing Certificate"); and
(iii) Any and all other documents reasonably required by
Seller to facilitate and consummate the Closing.
(d) As a condition to closing any purchase pursuant to this
Agreement, Purchaser must be satisfied with the accuracy of Seller's
representations and warranties and with the results of any environmental audit
or review conducted at the request of or for the benefit of Purchaser. As a
condition to closing this transaction, Purchaser shall also cause to be
executed and delivered to
Page 6 of 87
<PAGE> 7
Seller by Casa Ole Franchise Services, Inc. (herein referred to as the
"Franchise Company"), an appropriate amendment to Seller's existing franchise
agreement with the Franchise Company acknowledging that the Restaurants (and
any restaurants sold under the Option) have been sold by Seller to Purchaser
and that such Restaurants shall no longer be covered by the franchise
agreement. Seller shall not assign to Purchaser any of Seller's rights under
its franchise agreement with the Franchise Company and it shall be Purchaser's
responsibility to enter into a new franchise agreement, if necessary or
required, with the Franchise Company.
(e) Upon completion of the Closing and Seller's receipt of the
Purchase Price (less Seller's closing costs) in cash, Purchaser shall have and
acquire title to the Property.
(f) In connection with the transaction contemplated in this
Agreement, Purchaser hereby covenants and agrees to pay in cash at or prior to
closing each and all of the following fees, costs and expenses, to-wit:
(i) Purchaser's attorney's fees incurred in negotiating
this Agreement and in Closing the transaction contemplated in this
Agreement;
(ii) All costs and expenses incurred by Purchaser in
performing Purchaser's review and inspections of the Property and the
Condition of the Business and the Property; and
(iii) Purchaser's proportionate share of the items prorated
pursuant to Section 8 hereof.
(h) In connection with the transaction contemplated in this
Agreement, Seller hereby covenants and agrees to pay each and all of the
following fees, costs and expense, to-wit:
(i) Seller's attorney's fees incurred in drafting and
negotiating this Agreement, the closing documents referred to herein
and in Closing the transaction contemplated in this Agreement; and
(ii) Seller's proportionate share of the items prorated
pursuant to Section 8 hereof.
Section 8. PRORATIONS.
(a) Except for hazard and liability insurance premiums, at the
Closing, all normal and customarily prorated items, including without
limitation, maintenance fees and assessments, ad valorem taxes for the current
year (based on the most recent tax statement[s] for the Property, adjusted for
the most current tax rates and appraised value), rent, prepaid Yellow Pages
advertisements and other prepaid obligations and, to the extent available at
Closing, utility services being continued to the Property, shall be prorated as
of the Closing Date. In addition, all real estate taxes on the land and
building covered by any of the leases to be executed pursuant to Section 4 of
this Agreement shall be prorated as of the Closing Date. Seller (or the
landlord under any leases, as appropriate) shall be charged for and credited
with all prorated items up to and including the Closing Date and Purchaser
shall be charged for and credited with all of same from and after the Closing
Date.
(b) Premiums for hazard, liability and any other insurance will
not be prorated since Purchaser will not have the right to assume the coverage
maintained by Seller. Purchaser hereby
Page 7 of 87
<PAGE> 8
acknowledges that Purchaser will be solely responsible for obtaining
Purchaser's own insurance coverage.
(c) If Purchaser desires to have existing utility services
continued to the Property after the Closing, Purchaser shall be solely
responsible to make arrangements for such continuation, including advising the
provider of such utility services of changes in billing name and address and
paying security deposits, if any are required by the provider of such utility
services. Absent Purchaser having made all such arrangements prior to the
Closing, Seller will order all existing utility services to the Property
discontinued as of 11:59 p.m. on the Closing Date. Whether existing utility
services to the Property are continued or discontinued, all deposits held by
the providers of such utility services shall be paid to Seller.
(d) The provisions of this Section 8 shall survive the Closing.
Section 9. WARRANTIES AND REPRESENTATIONS.
Seller hereby covenants, represents and warrants to Purchaser that as
of the date of execution of this Agreement and on the Closing Date:
(a) Seller has full power and authority to execute, deliver and
perform its obligations under and has duly executed and delivered this
Agreement and all of the documents and instruments required herein and this
Agreement and all of such documents and instruments constitute legal, valid and
binding obligations of Seller;
(b) Seller will not sell or otherwise dispose of any of the
Property prior to the Closing Date except for the sale and use of inventory and
supplies in the ordinary course of business;
(c) Until the Closing Date, Seller will continue to operate its
business and the Restaurants on a regular basis in the ordinary and usual
course in which it has customarily been conducted; and
(d) Seller possesses and will deliver unto Purchaser pursuant
hereto good and marketable title to all of the Property, free and clear of all
claims, security interests, liens and encumbrances of any nature whatsoever.
(e) Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas.
(f) Shareholders and their spouses own all of the issued and
outstanding stock of Seller and have consented to the terms of this Agreement
and their spouses shall at closing execute and deliver a consent to the closing
of this Agreement.
(g) The execution, delivery and performance of this Agreement by
the Seller has been duly authorized by all necessary corporate action. This
Agreement has been duly executed by the Seller and constitutes a valid and
legally binding obligation of the Seller enforceable in accordance with its
terms.
(h) The Seller has delivered to Purchaser its financial statements
dated as of June 30, 1997, consisting of a balance sheet and statement of
income (the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally acceptable accounting principles
consistently applied and fairly present the financial condition of the Seller
for the periods
Page 8 of 87
<PAGE> 9
covered thereby. The Seller has no liabilities except as reflected in the
Financial Statements or as otherwise incurred in the ordinary course of
business since the date of the Financial Statements.
(i) No lien imposed under Section 401(a)(29) or Section 412(n) of
the Code, Section 302(f) or Section 4068 of ERISA, or arising out of any action
filed under ERISA Section 4301(b), exists upon the Property. Neither Seller nor
any ERISA Affiliate has terminated any employee pension benefit plan (within
the meaning of Section 3(2) of ERISA) subject to Title IV of ERISA (herein
referred to as a "Title IV Plan") under circumstances giving rise to, or that
would give to any actual or potential liability to the Pension Benefit Guaranty
Corporation ("PBGC") or any other person, (ii) no event or condition exists
which presents a risk of termination of any Title IV Plan by the PBGC, (iii)
there is no actual or potential liability to the PBGC or any other person
expected b the Seller or any ERISA Affiliate to be incurred with respect to any
Title IV Plan, including, but not limited to, any liability for any accumulated
funding deficiency as defined in Section 302 of ERISA or for any minimum
funding contribution under Section 302 of ERISA, and (iv) no Title IV Plan has
applied for or obtained a waiver from the Internal Revenue Service of any
minimum funding requirement under Section 412 of the Code. Neither Seller nor
any ERISA Affiliate is required, or has been required during the past five (5)
years, to contribute to any "multiemployer plan" as such term is defined by
ERISA Section 3(37). "ERISA Affiliate" means any member of any "controlled
group of corporations" as defined by Section 414(b) of the Code that includes
Seller, any member of any group of "trades or businesses under common control"
as defined by Section 414(c) of the Code that includes the Seller, or any
member of any "affiliated service group" as defined in Section 414(m) of the
Code that includes Seller.
(j) Seller is not aware of any material liabilities affecting the
Property which have not been disclosed to Purchaser in writing.
Section 10. INDEMNIFICATION.
(a) Seller and Seller's owners hereby agree to indemnify and hold
harmless Purchaser for all losses, damages, liabilities and claims, and all
fees, costs and expenses of any kind related thereto (including, without
limitation, any and all Legal Fees), incurred, arising out of, based upon or
resulting from (i) the inaccuracy as of the date hereof or as of the Closing
Date of any representation or warranty of the Seller which is contained in or
made pursuant to this Agreement or (ii) the breach of, or failure to perform by
the Seller of any of its agreements, covenants or obligations contained in or
made pursuant to this Agreement, or (iii) any liability or obligation of, or
claim against Purchaser arising out of, or resulting from any act, or failure
to act, by Seller as of and prior to the Closing Date including without
limitation any failure of Seller to pay its debts or obligations, or trade
payables, which have not been expressly assumed by Purchaser hereunder, any
product liability claims, or negligence claims, workmen's compensation claims,
claims for COBRA continuation coverage by Seller's employees, former employees
and qualified beneficiaries, and use or misuse of the Property.
(b) Purchaser hereby agrees to indemnify and hold harmless Seller
and Seller's owners from any losses, damages, liabilities, and claims, and all
fees costs and expenses of any kind related thereto (including, without
limitation, any and all Legal Fees) incurred, arising out of, based upon or
resulting from (i) the inaccuracy as of the date hereof or as of the Closing
Date of any representation or warranty of the Purchaser which is contained in
or made pursuant to this Agreement, (ii) the breach of, or failure to perform
by, the Purchaser of any of its respective agreements, covenants or obligations
contained in this Agreement, including but not limited to, the failure by
Purchaser to perform and satisfy all obligations under the leases assumed by
Purchaser, or (iii) any liability or obligation of, or claim against, Seller or
Seller's owners in connection with any
Page 9 of 87
<PAGE> 10
claim, demand or cause of action made by any person or entity and arising out
of any event directly or indirectly related to the conduct by Purchaser of its
business, or, the use or misuse of the Property subsequent to the Closing Date,
including but not limited to any claim filed by any employee under applicable
worker's compensation laws as a result of any injury or illness covered by such
laws that occurs subsequent to the Closing Date, or any product liability claim
or negligence claim arising after the Closing Date.
(c) As used herein, the term "Legal Fees" shall mean any and all
fees, costs and expenses of any kind (including without limitation any sales
taxes on such amounts) reasonably incurred by the indemnified party and its
counsel in investigating, preparing for, defending against or providing
evidence, producing documents or taking other action with respect to any
threatened or asserted claim, including the cost of settlement thereof.
(d) In the event of the occurrence of any event which the Seller
or Purchaser, as the case may be, (herein called the "Indemnitee") asserts is
an indemnifiable event pursuant to this Section 10 the Indemnitee shall notify
the Seller or the Purchaser, as the case may be (the "Indemnitor"), promptly.
Such notice shall set forth the nature and amount of the loss, damage,
liability or claim for which indemnification is to be made hereunder. If such
event involves the claim of any third person and the Indemnitor confirms in
writing its responsibility therefor, the Indemnitor shall have sole control
over, and shall assume all expense with respect to, the defense or settlement
of such claim; provided, however, that:
(i) the Indemnitee shall be entitled to participate in
the defense of such claim and to employ counsel at its own expense to assist in
the handling of such claim,
(ii) the Indemnitor shall obtain the prior written approval of
the Indemnitee before entering into any settlement of such claim or ceasing to
defend against such claim, if pursuant to or as a result of such settlement or
cessation, injunctive or other relief would be imposed against the Indemnitee,
and
(iii) the Indemnitor shall not be entitled to control (but
shall be entitled to participate at their own expense in the defense of), and
the Indemnitee shall be entitled to have sole control over, the defense or
settlement of any claim to the extent the claim seeks an order, injunction or
other equitable relief against the Indemnitee which, if successful, could
materially interfere with the business, operations, assets, conditions
(financial or otherwise) or prospects of the Indemnitee.
If Indemnitor does not assume sole control over the defense or
settlement of such claim as provided in this Section (d) the Indemnitee shall
have the right to defend and settle the claim in such manner as it may deem
appropriate at the cost and expense of the Indemnitor, and Indemnitor will
promptly reimburse and indemnify the Indemnitee therefor in accordance with
this Section 10.
(e) In the event that Indemnitor shall be obligated to indemnify
the Indemnitee pursuant to this Section 11 the Indemnitor shall, upon payment
of such indemnity in full, be subrogated to all rights of the Indemnitee with
respect to the claims to which such indemnification relates.
Section 11. NOTICES.
Any notice (hereinafter called "Notice") in this Agreement provided or
permitted to be given by either Party to the other Party must be in writing and
shall be given or be served by depositing the same in the United States Mail,
postage prepaid and registered or certified and addressed to
Page 10 of 87
<PAGE> 11
the Party to be notified, with return receipt requested. Notice deposited in
the mail in the manner hereinabove described shall be effective from and after
the expiration of three (3) days after it is so deposited. Notice given in any
other manner shall be effective only if and when received and acknowledged as
received by the Party to be notified. For purposes of notice, the addresses of
the Parties shall, until changed as hereinafter provided, be as follows:
If to Seller, to: With a copy to:
Casa Ole of Beaumont, Inc. Orgain, Bell & Tucker, L.L.P.
Attention: Thomas L. Harken Attention: Lance Fox
8050 Eastex Freeway 470 Orleans
Beaumont, TX 77708 Beaumont, TX 77701
Phone: (409) 898-8906 Phone: (409) 838-6412
Telecopier: (409) 838-6959
If to Purchaser, to: With a copy to:
Casa Ole Restaurants, Inc. Locke Purnell Rain Harrell
Attention: Lou Neeb Attention: Don M. Glendenning
1135 Edgebrook 2200 Ross Avenue, Suite 2200
Houston, TX 77034-1899 Dallas, TX 75201
Phone: (713)943-7574 Phone: (214) 740-8623
Telecopier: (214) 740-8800
Section 12. BROKER.
Each Party represents and warrants to the other that no broker or
sales agent has been used, consulted or retained by such representing and
warranting Party in connection with the negotiation or execution of this
Agreement or the purchase and sale of the Business and the Property. Each Party
agrees to indemnify the other Party against all liabilities, claims, demands
and actions by third parties for brokerage, commission, finder's or other fees
(including reasonable attorney's fees and costs of court) in any way or manner
whatsoever arising out of, related to, connected with or emanating from the
negotiation or execution of this Agreement or the purchase and sale of the
Property and alleged to be due by the authorization or on account of the
actions of the indemnifying Party. The indemnities of this Section 12 shall
survive the Closing.
Section 13. ASSIGNMENT; BINDING EFFECT; NO THIRD PARTY BENEFICIARY.
(a) No party hereto shall assign its rights or duties hereunder
without the prior written consent of the other party, which consent shall not
be unreasonably withheld.
(b) This Agreement shall inure to the benefit of and be binding on
Seller and Purchaser (subject to clause (a) above) and their respective
successors, receivers and assigns. No other person or entity is intended to or
shall have any rights or benefits under this Agreement or be deemed to be a
third party beneficiary of this Agreement.
Page 11 of 87
<PAGE> 12
Section 14. REMEDIES ON DEFAULT.
The parties agree that:
(a) If Purchaser defaults in the performance of its obligations
under this Agreement, Seller may pursue all remedies, at law or in equity, for
Purchaser's breach, including without limitation the right of specific
performance, without the necessity of proving the inadequacy of money damages
as a remedy. Seller, at Seller's option and in Seller's sole discretion, may
waive any default of Purchaser and close pursuant to this Agreement.
(b) If Seller defaults in the performance of its obligation under
this Agreement, Buyer may pursue all remedies, at law or in equity, for
Seller's breach, including without limitation the right of specific
performance, without the necessity of proving the inadequacy of money damages
as a remedy. Buyer, at Buyer's option and in Buyer's sole discretion, may waive
any default of Seller and close pursuant to this Agreement.
Section 15. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between Seller and
Purchaser concerning the sale by Seller to Purchaser of Seller's business and
the Property. This Agreement supersedes all prior and contemporaneous oral or
written negotiations, understandings, agreements and covenants by or between
the Parties.
Section 16. EXHIBITS.
The Exhibits referred to herein and attached hereto and incorporated
herein by this reference for all purposes.
Section 17. ATTORNEY'S FEES.
Should either party employ an attorney to enforce any provision hereof
or to protect such Party's interests in any manner arising under this Agreement
or any other document executed by such Party in connection herewith, the non-
prevailing Party in any such action pursued in an alternative dispute
resolution format or in courts of competent jurisdiction, the finality of which
is not legally contestable, agrees to pay to the prevailing Party all
reasonable attorneys' fees expended or incurred by the prevailing Party in
connection therewith. The provisions of this Section 17 shall survive the
Closing or a termination of this Agreement.
Section 18. COUNTERPARTS.
This Agreement is executed in multiple counterparts, each of which
shall be deemed to be an original, but all of which taken together shall
constitute but one and the same instrument which may be sufficiently evidenced
by any one counterpart. Without limiting the generality of the foregoing, the
signatures of the Parties may appear on multiple separate signature pages.
Section 19. EFFECTIVE DATE.
The Effective Date of this Agreement shall be the date that the
Agreement has been executed by Purchaser and delivered to Seller and has been
accepted and executed by Seller.
Section 20. ACCESS TO INFORMATION, AUDITS AND REVIEWS.
At any time within ninety (90) days prior to the exercise periods of
the FIRST OPTION or SECOND OPTION, Purchaser will be granted full access to all
premises and relevant information regarding each restaurant covered by such
option, including all applicable financial information, upon reasonable notice
during regular business hours of Seller. Purchaser will expressly be permitted
to conduct or have conducted, at Purchaser's sole risk and expense, any
environmental or other compliance audit or review Purchaser may deem
appropriate prior to the purchase of any restaurant.
Page 12 of 87
<PAGE> 13
EXECUTED in multiple original counterparts as of the date and year
written below the respective signatures of the Parties.
SELLER:
CASA OLE OF BEAUMONT, INC.
Date: January 10, 1997 By: /s/ Thomas L. Harken
--------------------------------------
Thomas L. Harken, Chairman and CEO
SHAREHOLDERS:
Date: January 10, 1997 /s/ Thomas L. Harken
--------------------------------------
Thomas L. Harken
Date: January 10, 1997 /s/ Melba J. Harken
--------------------------------------
Melba J. Harken
Date: January 10, 1997 /s/ Victor M. Gonzalez
--------------------------------------
Victor M. Gonzalez
PURCHASER:
CASA OLE RESTAURANTS,INC.
Date: January 16, 1997
By: Louis P. Neeb
--------------------------------------
Title: CEO and Chairman
-----------------------------------
Page 13 of 87
<PAGE> 14
LIST OF EXHIBITS
Exhibit "A" - Description of Property
Exhibit "B" - Example of Purchase Price Calculations
Exhibit "C" - Form of Silsbee Land & Building Lease
Exhibit "D" - Form of Jasper Building Lease
Exhibit "E" - Form of Jasper Land Lease
Exhibit "F" - Form of Bill of Sale
Exhibit "G" - Form of Purchaser's Closing Certificate
Page 14 of 87
<PAGE> 15
EXHIBIT "A" TO OPTION CONTRACT AND AGREEMENT
All of the furniture and fixtures, equipment, tools, utensils, inventory, food
and beverages, and supplies of Seller's Casa Ole Restaurants located in
Silsbee, Texas, and in Jasper, Texas, but excluding the cash registers located
in such restaurants.
Page 15 of 87
<PAGE> 16
EXHIBIT "B" TO OPTION CONTRACT AND AGREEMENT
EXAMPLE OF PURCHASE PRICE CALCULATIONS
Page 16 of 87
<PAGE> 17
CASA OLE OF BEAUMONT, INC.
CALCULATION OF ESTIMATED SALES PRICE
KEEPING THE BUILDING
JASPER 943
<TABLE>
<CAPTION>
YEAR 9 MONTHS 3 MONTHS 9 MONTHS 12 MONTHS
ENDED ENDED ENDED ENDED ENDED
9/30/95 6/30/95 9/30/95 6/30/96 6/30/96
-------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
TOTAL SALES 940,488 669,204 271,284 833,021 1,104,305
================================================== ============
NET INCOME (LOSS) FROM OPERATIONS (12,367) 7,755 (20,372) 72,849 72,477
ADD DEPRECIATION & AMORTIZATION 52,061 43,511 8,440 31,602 40,042
ADMINISTRATIVE FEES 65,826 46,834 18,992 58,325 77,317
INTEREST EXPENSE 47,455 36,252 18,992 58,325 42,184
FRANCHISE TAXES 5,564 0 5,564 0 5,564
LEGAL EXPENSES 26,000 26,094 (94) 1,500 1,405
REPAIRS & MAINTENANCE GREATER THAN 3% OF SALES 0 0 0 0 0
BIG THICKET INCOME (LOSS) 11,157 6,947 2,210 20,261 22,471
OTHER NONREOCCURRING 0
DEPREC. ADJ..[(52.051 1/4) - 8,440] (4,573) 4,573 4,573
LEASE PROPERTY ADJUSTMENT 17,650 (9,950) 27,500 (950) 25,750
-------------------------------------------------- ------------
213,318 154,200 50,118 233,858 292,784
MULTIPLE 5
------------
1,483,920
LEASE HYPOTHETICAL RENT (5,500/MO - 2,950/MO + 5% OF SALES GREATER THAN 1,320,000) - 5 (244,800)
------------
SALES PRICE 1,219,120
============
</TABLE>
Page 17 of 87
<PAGE> 18
CASA OLE OF BEAUMONT, INC.
CALCULATION OF ESTIMATED SALES PRICE
KEEPING THE BUILDING
SILSBEE 942
<TABLE>
<CAPTION>
YEAR 9 MONTHS 3 MONTHS 9 MONTHS 12 MONTHS
ENDED ENDED ENDED ENDED ENDED
9/30/95 6/30/95 9/30/95 6/30/96 6/30/96
-------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
TOTAL SALES 1,410,993 1,053,472 357,521 1,082,244 1,439,765
================================================== ============
NET INCOME (LOSS) FROM OPERATIONS 293,042 221,915 71,127 215,933 287,080
ADD DEPRECIATION & AMORTIZATION 52,143 43,059 9,084 31,871 40,955
ADMINISTRATIVE FEES 96,764 73,738 25,026 75,755 100,781
INTEREST EXPENSE 48,646 36,028 12,818 32,800 45,418
FRANCHISE TAXES 5,564 0 5,564 0 5,564
LEGAL EXPENSES 0 94 (94) 1,537 1,443
REPAIRS & MAINTENANCE GREATER THAN 3% OF SALES 0 0 0 0 0
BIG THICKET INCOME (LOSS) (2,433) (3,061) 648 30 670
OTHER NONREOCCURRING 0
DEPREC. ADJ..[(52.143 1/4) - 9,084] (3,952) 3,952 3,952
-------------------------------------------------- ------------
495,726 367,601 127,925 367,926 488,851
MULTIPLE 5
------------
2,429,255
LEASE HYPOTHETICAL RENT (5,500/MO - 2,950/MO + 5% OF SALES GREATER THAN 1,320,000) - 5 (624,000)
------------
SALES PRICE 1,805,255
============
</TABLE>
Page 18 of 87
<PAGE> 19
EXHIBIT "C" TO OPTION CONTRACT AND AGREEMENT
FORM OF SILSBEE LAND & BUILDING LEASE
Page 19 of 87
<PAGE> 20
SILSBEE LAND & BUILDING LEASE AGREEMENT
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF HARDIN )
WITNESS THIS LEASE AGREEMENT made and entered into by and between Casa
Ole of Beaumont, Inc., a Texas general business (hereinafter referred to as
"Landlord" or "Lessor"), and Casa Ole Restaurants, Inc., a Texas general
business (hereinafter referred to as "Tenant" or "Lessee").
WHEREAS, Lessee desires to lease certain property from Lessor for the
conduct of its business;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE 1
Lessor has leased, demised and rented, and by these presents does
lease, demise and rent to Lessee the land, building and premises, including
expressly Lessor's interest in the parking and delivery areas and all interests
and rights appurtenant to the premises, and easements for pedestrian and
vehicular ingress and egress over and across the relevant paved areas as exist
from time to time, situated in Silsbee, Hardin County, Texas, as more fully
described in Exhibit A attached hereto, which exhibit is hereby incorporated
for all purposes, hereinafter referred to as the "leased premises".
ARTICLE 2
2.1 The primary term ("Primary Term") of this Lease shall be for
fifteen (15) years and shall commence on ______________, 199___ (the "Date of
Commencement") and shall expire on _______________, 200___.
2.2 Lessee is hereby granted and shall, if not at the time in
default under this Lease, have an option to renew and extend the term of this
Lease for three (3) additional terms of five (5) years each (each such five
year renewal term referred to herein as a "Renewal Term"), otherwise on the
same terms, covenants and conditions and, subject to the same exceptions and
reservations herein contained.
2.3 The renewal options set forth in paragraph 2.02 above shall be
exercised only by Lessee's delivering to Lessor in person or by United States
mail not less than two hundred seventy (270) days prior
Page 20 of 87
<PAGE> 21
to the commencement of each the Renewal Term, written notice of Lessee's
intention to exercise such option as herein provided. If mailed, notice shall
be deemed given when it is deposited in the U.S. mail, postage prepaid,
addressed to Lessor at the address provided herein for the giving of notice.
2.4 If Lessee shall fail to appropriately exercise the renewal
options set forth above, then the Lease shall expire at the end of the current
term of the Lease then in effect.
ARTICLE 3
3.1 During the Primary Term of this Lease, Lessee agrees and
obligates itself to pay to Lessor rental in the amount set forth herein, which
shall be due and payable as hereinafter provided.
3.2 Lessee agrees to pay Lessor base rental in monthly
installments of SIX THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($6,500.00) each
month, said rent being payable on the first (1st) day of each calendar month,
monthly in advance, beginning the 1st day of _________, 199___, and continuing
monthly thereafter, provided however, upon Lessor's request, Lessee will pay
the first month's rental installment to Lessor upon the execution hereof,
notwithstanding the fact that this Lease Agreement may be signed prior to the
beginning of the Primary Term. At the beginning of each Renewal Term, the base
rent shall increase by the sum of THREE HUNDRED DOLLARS ($300.00) per month.
3.3 The monthly installments of base rent shall be due and payable
by Lessee monthly in advance as above provided, without demand or other notice.
3.4 All rental installments, when due and payable, shall be paid
in lawful money of the United State of America to Lessor at Lessor's address
set forth herein or at such other address as shall be designated by Lessor by
written notice given to Lessee at least ten (10) days prior to the next ensuing
rental payment date. All rental payable hereunder shall be due and payable
without prior demand and without any set-offs or deductions whatsoever.
3.5 (a) In addition to the base rent provided above, Lessee
agrees to pay to Lessor, as additional rent for the use and occupancy of the
leased premises, a sum equal to five percent (5%) of all of Lessee's annual
gross receipts in excess of ONE MILLION FIVE HUNDRED SIXTY THOUSAND
Page 21 of 87
<PAGE> 22
DOLLARS ($1,560,000.00) that Lessee realizes each lease year from operation of
the leased premises. This percentage rent shall be paid monthly, beginning on
the twentieth (20th) day of the month immediately following the month in which
Lessee's gross receipts for the current lease year have reached ONE MILLION
FIVE HUNDRED SIXTY THOUSAND DOLLARS ($1,560,000.00), and continuing on the same
day of each succeeding month thereafter for the remainder of the then current
lease year.
(b) The term GROSS RECEIPTS as used in this Lease means
receipts from gross retail sales of Lessee and of all licensees,
concessionaires and lessees of Lessee from all business conducted on or from
the leased premises by Lessee and all others, whether such sales be evidenced
by check, credit, charge account, exchange or otherwise.
1. The term GROSS RECEIPTS includes, but is not limited
to, the following:
(i) The amounts received from the sale of food,
beverages, merchandise and services sold or performed
in, on or from the leased premises, whether such
orders be filled from the leased premises or
elsewhere.
(ii) Proceeds from all automatic vending and other
machines owned and operated by Lessee in or on the
premises.
(iii) Commissions received by Lessee from automatic vending
and other machines not owned by Lessee but operated
in or on the leased premises.
(iv) Commissions received by Lessee from the operation of
public telephones in or on the leased premises.
(v) Proceeds from sales of merchandise or services based
on orders solicited or taken from, in or on the
leased premises, to be delivered or performed off of
the leased premises or from sources outside of the
leased premises.
2. The term GROSS RECEIPTS does not include the
following items, which may be excluded from gross receipts to the
extent they have been included:
(i) Credits and refunds made to customers for foods,
beverages or merchandise returned or exchanged or for
services performed unsatisfactorily.
(ii) Any sales, use, value added or gross receipts tax
imposed by any federal, state, municipal or
governmental authority directly on sales and
collected from customers, provided that the amount of
the tax is added to the selling price or absorbed in
that price and paid by Lessee to the governmental
authority.
Page 22 of 87
<PAGE> 23
(c) On or before the twentieth (20th) day following each
month during the term and each renewal term of this Lease, Lessee shall furnish
Lessor with a true and accurate statement, signed by Lessee or by an authorized
representative of Lessee, showing the gross receipts, as defined in paragraph
(b) for the preceding month.
(d) For the purpose of ascertaining the amount payable as
rent, Lessee agrees to prepare and maintain for a period of not less than three
(3) years following the end of each lease year, adequate records that will show
inventories and receipts of food, beverages and merchandise at the leased
premises and daily receipts from all sales and other transactions on or from
the leased premises by Lessee and any other persons conducting any business on
or from the leased premises. At the time of each transaction, Lessee or any
other person conducting the transaction on or from the leased premises will
record all receipts from sales and other transactions, whether for cash or
credit, in a cash register or registers having a cumulative total and sealed in
a manner approved by Lessor and having such other features as approved by
Lessor. Lessee further agrees to maintain on the leased premises, or at its
corporate headquarters, for at least five (5) years following the end of each
lease year, all sales, use, value added, gross receipts and occupation tax
returns with respect to the lease year and all pertinent original sales
records. Pertinent original sales records shall include the following: all cash
register tapes, serially numbered sales slips and originals of all orders
filled by Lessee from the leased premises or processed by Lessee at the leased
premises and filled from some location other than the leased premises.
(e) Lessor and authorized representatives of Lessor shall have
the right to examine the records described in the preceding paragraph at the
leased premises during Lessee's regular business hours. If, on examination of
the books or records of Lessee, an error shall be revealed in favor of Lessor
that results in additional percentage rental due Lessor in excess of $2,500.00,
then the reasonable costs of the examination must be paid by Lessee to Lessor.
Otherwise, Lessor will bear the cost of the examination.
Page 23 of 87
<PAGE> 24
ARTICLE 4
4.1 Lessee shall pay, in addition to the rent herein required, all
taxes, assessments, and other governmental charges, general or special,
ordinary and extraordinary, and any kind and nature whatsoever applicable to
the leased premises and all improvements, fixtures and equipment thereon,
including but not limited to assessments for public improvements or benefits
which shall, during the term hereof, be laid, assessed, levied or imposed or
become due and payable and a lien upon the leased premises or any part thereof.
4.2 Lessee shall pay all personal property taxes levied upon any
property in or about said premises; provided that Lessee will not be obligated
to pay personal property taxes levied on Lessor's property not utilized by
Lessee in the ordinary course of its business.
4.3 Real property taxes for the fiscal year pertaining to the
commencement of this Lease and for the fiscal year pertaining to the
termination of this Lease shall be prorated as of the date of said commencement
and termination.
4.4 Except as hereinafter provided, all payments to be made by Lessee
pursuant to this article shall be made before any fine, penalty, interest or
cost may be added thereto for the non-payment thereof, and Lessee shall furnish
Lessor, within thirty (30) days after written request thereof by Lessor, with
official receipts or other evidence satisfactory to Lessor that such tax has
been paid.
4.5 Lessee shall have the right in good faith to contest or review by
legal proceedings, or in such other manner as it deems suitable (which
proceedings, if instituted, shall be conducted promptly at Lessee's expense and
free of expense to Lessor) any such charges, real property and personal
property taxes, and assessments, provided that upon the conclusion of such
proceedings Lessee shall pay the amount that shall be finally assessed or
imposed against said premises or be adjudicated or otherwise determined to be
due and payable. Lessor will join in any contest or protest provided for in
this article at the request of Lessee, but at Lessee's sole cost and expense,
and as a condition of such joinder may require reasonable indemnity against
costs or other damages by reason of such joinder.
Page 24 of 87
<PAGE> 25
ARTICLE 5
5.1 During the term of this Lease, Lessee, at its expense, shall keep
and maintain upon all improvements and fixtures on the leased premises fire
insurance with extended coverage endorsement, written by a responsible
insurance company or companies authorized to do an insurance business in Texas
and acceptable to Lessor in an amount equal to not less than the full insurable
value thereof, excluding foundation and excavation costs. Said policy or
policies of insurance shall provide that payment for any losses covered under
or by said policy or policies shall be made to Lessor and Lessor shall be
entitled to retain the proceeds of any such insurance. A certificate of such
insurance shall be forwarded to Lessor by Lessee or on Lessee's behalf.
5.2 In addition to the insurance required under Section 5.1, Lessee
agrees to carry and maintain, and have in full force and effect throughout the
term of this Lease, workmen's compensation insurance, general comprehensive
liability insurance (which includes, but is not limited to, coverage for
products and completed operations and premises operation), and liquor liability
insurance, with an insurance company or companies authorized to transact
business in the State of Texas, for the benefit of Lessor and Lessee, and for
the protection of all persons who may suffer injury while in, on or about the
premises or from Lessee's activities and conduct of business. The amount and
coverage of such insurance shall be as reasonably approved by Lessor from time
to time. Such liability policies, if available, shall be endorsed to insure
contractual liabilities of Lessee including but not limited to the indemnities
of Lessee to Lessor under this Lease. Lessee agrees to deliver to Lessor, upon
request, a certificate showing that said insurance is in full force and effect.
The obligation of Lessee for the insurance specified herein may be brought
under the provisions of any so-called blanket policies carried by Lessee which
otherwise meet the requirements hereof, provided that all of said policies of
insurance shall name Lessor as co-insured.
5.3 LESSEE AGREES TO PROTECT AND TO INDEMNIFY AND SAVE HARMLESS LESSOR
AGAINST AND FROM ANY AND ALL CLAIMS, DAMAGES, LIABILITIES, COSTS, LOSSES, AND
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OR RESULTING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, (i) FROM THE CONDUCT OF LESSEE'S BUSINESS, OR
(ii) FROM ANY WORK, CONSTRUCTION, REPAIRS, MAINTENANCE, OR THING WHATSOEVER
DONE OR SUFFERED TO BE
Page 25 of 87
<PAGE> 26
DONE BY LESSEE ON OR ABOUT THE LEASED PREMISES, OR (iii) FROM ANY CONDITION OF
OR DEFECT IN THE LEASED PREMISES CAUSED BY LESSEE OR IN ANY FIXTURES,
IMPROVEMENTS OR EQUIPMENT NOW OR HEREAFTER LOCATED THEREON OR THEREUNDER CAUSED
BY LESSEE, OR (iv) FROM ANY BREACH OR DEFAULT ON THE PART OF LESSEE IN THE
PERFORMANCE OF ANY COVENANT OR AGREEMENT ON THE PART OF LESSEE TO BE PERFORMED
PURSUANT TO THE TERMS OF THIS LEASE, WHETHER OR NOT ACTED UPON BY LESSOR, OR
(v) FROM ANY ACT OR OMISSION OF LESSEE, OR ANY OF ITS AGENTS, DEALERS,
CONTRACTORS, SERVANTS, EMPLOYEES, LICENSEES, OR INVITEES, OR (vi) FROM LEAKS,
DISCHARGES, OR EMISSIONS OF ANY KIND FROM THE LEASED PREMISES CAUSED BY LESSEE
OR ANY FIXTURES, IMPROVEMENTS OR EQUIPMENT THEREON OR THEREUNDER CAUSED BY
LESSEE WHETHER OR NOT SUCH OCCURRENCE CONSTITUTES A VIOLATION OF ANY APPLICABLE
LEGAL REQUIREMENTS OR A NUISANCE, OR (vii) FROM ANY FIRE OR EXPLOSION CAUSED BY
LESSEE OCCURRING ON OR ABOUT THE LEASED PREMISES OR IN CONNECTION WITH THE
OPERATION OF LESSEE'S BUSINESS, OR (viii) FROM ANY NUISANCE CREATED OR SUFFERED
TO EXIST BY LESSEE, ITS AGENTS, DEALERS, CONTRACTORS, SERVANTS, EMPLOYEES,
LICENSEES, OR INVITEES, OR (ix) ANY VIOLATION OF OR FAILURE TO SATISFY ANY
LEGAL REQUIREMENT BY LESSEE DURING THE TERM OF THIS AGREEMENT. THESE
INDEMNITIES SHALL APPLY TO ACTS, OMISSIONS, AND OCCURRENCES DURING THE TERM OF
THIS LEASE. THESE INDEMNITIES BY LESSEE SHALL APPLY REGARDLESS OF THE SOLE OR
ANY CONTRIBUTING NEGLIGENCE OR NON-NEGLIGENT ACTS OR OMISSIONS OF OR VIOLATION
OR LACK OF COMPLIANCE WITH ANY LEGAL REQUIREMENTS BY LESSOR, THEIR AGENTS,
CONTRACTORS, EMPLOYEES, SERVANTS, DEALERS, OR LICENSEES. FOR PURPOSES OF THESE
INDEMNITIES, DAMAGES SHALL BE DEEMED TO INCLUDE ACTUAL, CONSEQUENTIAL, TREBLE,
AND PUNITIVE DAMAGES AND FINES AND PENALTIES OF ANY KIND PAYABLE TO THIRD
PARTIES. IN NO EVENT SHALL LESSEE BE LIABLE FOR (i) ANY ACT, OMISSION OR
OCCURRENCE OR OTHER LIABILITY (WHETHER CONTRACTUAL OR TORT) RELATING TO THE
LEASED PREMISES ARISING PRIOR TO THE DATE OF THIS LEASE, AND/OR (ii) ANY
CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES TO LESSOR FOR ANY MATERS ARISING
OUT OF OR RELATED TO THIS LEASE.
IN CASE ANY ACTION OR PROCEEDING COVERED BY THE FOREGOING INDEMNITY
SHOULD BE BROUGHT AGAINST LESSOR, LESSEE, UPON NOTICE FROM LESSOR, COVENANTS TO
RESIST OR DEFEND SUCH ACTION OR PROCEEDING BY RETAINING COUNSEL REASONABLY
SATISFACTORY TO LESSOR.
Page 26 of 87
<PAGE> 27
LESSEE COVENANTS AND AGREES TO PAY, AND TO INDEMNIFY LESSOR AGAINST,
ALL LEGAL COSTS AND CHARGES, INCLUDING COUNSEL FEES, LAWFULLY AND REASONABLY
INCURRED IN OBTAINING POSSESSION OF THE PREMISES AFTER DEFAULT BY LESSEE OR
UPON EXPIRATION OR EARLIER TERMINATION OF THE TERM OF THIS LEASE OR IN
ENFORCING ANY COVENANT OR AGREEMENT OF LESSEE HEREIN CONTAINED.
THE COVENANTS BY LESSEE TO INDEMNIFY LESSOR PROVIDED IN THIS ARTICLE
SHALL SURVIVE THE TERMINATION OF THIS LEASE WITH RESPECT TO ANY CLAIMS,
DAMAGES, LIABILITIES, COSTS, LOSSES AND EXPENSES THEREAFTER ASSERTED OR
INCURRED BASED UPON, ARISING FROM OR TRACEABLE TO (IN WHOLE OR IN PART) ANY
EVENTS, ACTS, OMISSIONS, OR OCCURRENCES DURING THE TERM OF THIS LEASE.
5.4 LESSOR AGREES TO PROTECT AND TO INDEMNIFY AND SAVE HARMLESS LESSEE
AGAINST AND FROM ANY AND ALL CLAIMS, DAMAGES, LIABILITIES, COSTS, LOSSES, AND
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OR RESULTING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, (i) FROM ANY ACT OR OMISSION OF LESSOR OR ANY
OF LESSOR'S AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, INVITEES, CONTRACTORS OR
REPRESENTATIVES OCCURRING PRIOR TO THE DATE OF THIS LEASE AGREEMENT, (ii) FROM
THE OPERATION OF LESSOR'S BUSINESS OR THE BUSINESS OF ANY PRIOR TENANT ON AND
ABOUT THE LEASED PREMISES PRIOR TO THE DATE OF THIS LEASE AGREEMENT, OR (iii)
FROM ANY ENVIRONMENTAL CONTAMINATION OR THE PRESENCE OF ANY TOXIC OR HAZARDOUS
SUBSTANCE THAT EXISTS ON THE LEASED PREMISES AS OF OR PRIOR TO THE DATE OF THIS
LEASE AGREEMENT, OR (iv) FROM ANY BREACH OR DEFAULT ON THE PART OF LESSOR IN
THE PERFORMANCE OF ANY COVENANT OR AGREEMENT ON THE PART OF LESSOR TO BE
PERFORMED PURSUANT TO THE TERMS OF THIS LEASE, WHETHER OR NOT ACTED UPON BY
LESSEE.
ARTICLE 6
Lessee shall not assign or hypothecate this Lease, or any part
thereof, of the leased premises, either voluntarily or involuntarily, or by
operation of law, without the prior written consent of Lessor, which consent
shall not be unreasonably withheld or delayed. Lessee shall not sublease and
grant concessions on all or any part of the leased premises without the consent
of Lessor and shall in all such cases remain fully and directly responsible for
all of the obligations of Lessee hereunder.
Page 27 of 87
<PAGE> 28
ARTICLE 7
All improvements erected upon the leased premises shall become a part
thereof and shall become the property of Lessor upon the termination of this
Lease. All trade fixtures installed by and belonging to Lessee may be removed
by Lessee upon termination of this Lease, provided Lessee is not in default
under the terms of this Lease and that same may be so removed without permanent
damage to any building or improvements on the premises, and provided further
that any damage to the said building or improvements occasioned by such removal
shall be promptly repaired by Lessee. In the event said fixtures are not so
removed within sixty (60) days from and after termination of this Lease, the
same shall become the property of Lessor.
ARTICLE 8
Lessee accepts the leased premises as is, in its present condition,
and Lessor has made no representation or warranty as to the condition,
habitability, or fitness for any purpose of the leased premises, and Lessor
shall not be liable for any latent or patent defects therein; provided,
however, Lessor has not received notice of and is not aware of any material
violations of applicable laws that exist at the leased premises.
Lessee agrees that it accepts the premises "as is" and hereby waives
any claim against Lessor for any latent defects which may exist. Any building
and improvements constructed upon the leased premises shall constitute and be a
part of the leased premises for all purposes.
Lessee shall be obligated, at its sole cost and expense, to keep all
of the leased premises, including, but not limited to, all glass, roofs,
fixtures, plumbing, wiring, HVAC equipment, walls and parking and driveway
areas in good order and repair, usual wear and tear and damage by the elements,
earthquake and fires excepted. Lessee may, at its sole cost and expense, make
additional alterations and improvements to any building and improvements as it
deems necessary during the period of said Lease, provided, however, that no
structural improvements, alterations or additions shall be made without
Lessor's written consent, which consent shall not be unreasonably withheld.
Lessee shall hold Lessor harmless for any cost or
Page 28 of 87
<PAGE> 29
expenses incurred in connection with any such initial or subsequent
improvements or additions. Notwithstanding the foregoing, Lessee shall be
permitted to make any alterations to the leased premises that may be required
from time to time by applicable law without the consent of Lessor; provided,
however, prior to making any alteration Lessee shall notify Lessor and shall be
subject to the reasonable directions of the Lessor in making such alteration,
and all of such alterations shall be made at Lessee's sole expense. If any
repair should be necessitated by reason of an insured casualty, Lessee's
obligation shall be limited to the extent of insurance proceeds received by
Lessee.
Nothing in this article limits the indemnities for third-party
liabilities provided by this Lease.
ARTICLE 9
Lessee shall comply with all laws, ordinances, judgments, injunctions,
orders, regulations, rules, requirements, guidelines, and notices (hereinafter
called "legal requirements") of every kind or nature, applicable in any way to
the conduct of Lessee's business, or any maintenance, repair or construction
work undertaken on the leased premises, or to Lessee's use or occupancy of the
leased premises, and whether the same or any of them relate to ordinary or
extraordinary, structural or nonstructural, changes or requirements to or in
and about said premises, or any improvements thereon or any such property or
changes or requirements incident to or as the result of any use or occupation
thereof and Lessee shall pay any and all costs and expenses incidental to such
compliance with all legal requirements. Without relieving Lessee of its duty to
indemnify Lessor under this Lease or under any other agreement, Lessee shall
have the right to contest the validity of or seek a variance from or review of
said legal requirements by legal proceedings or in any such other manner as it
deems suitable, and may have, if able, said legal requirements cancelled,
removed, or revoked without actual compliance with the same, and if such
actions or proceedings are instituted, they shall be conducted promptly at the
expense of Lessee and free of expense to Lessor. Notwithstanding the foregoing,
Lessee shall not be obligated to indemnify Lessor for any violation of legal
requirements relating to the condition of the leased premises existing on the
date hereof. If and whenever said legal requirements shall become absolute
against Lessee and the leased premises, or against Lessor,
Page 29 of 87
<PAGE> 30
after contest thereof, Lessee shall then comply with the same with due
diligence. Lessor shall have no duty to inspect, monitor, check or otherwise
supervise, review or enforce any of Lessee's responsibilities hereunder and
Lessor's failure to do so shall in no way limit the liability of Lessee to
indemnify Lessor as provided in this Lease or any other agreement. Lessor will
join in any contest provided for in this article at the request of Lessee, but
at Lessee's sole cost and expense, and as a condition of such joinder may
require reasonable indemnity against costs or other damages by reason of such
joinder.
ARTICLE 10
Lessor shall not be liable for any damage occasioned by failure to
keep the premises in repair and shall not be liable for any damage done or
occasioned by or from plumbing, gas, water, steam, or other pipes or sewerage,
nor for any damages arising from acts of neglect of Lessee, sub-lessees or
other occupants of the premises, with or without Lessor's consent, or of any
owners or occupants of adjacent or contiguous property.
ARTICLE 11
Lessee may use the premises solely for the purpose of operating a
Mexican food restaurant. Lessee shall not permit said premises to be used for
any unlawful purpose or purposes that will injure the reputation of the same or
the improvements thereon and will not permit the same or any portion thereof to
remain vacant or unoccupied for more than one (1) month without the consent of
Lessor, which consent will not be unreasonably withheld.
ARTICLE 12
Lessee shall pay, in addition to the rents above specified, all
utility bills of any nature, and garbage, sewerage, and waste disposal costs
and expenses levied or charged on said premises for and during the time for
which this Lease is granted.
Page 30 of 87
<PAGE> 31
ARTICLE 13
If Lessee shall fail to pay any rental as herein provided when the
same is due and payable, or if Lessee shall fail to observe, keep or perform
any other provisions of this Lease required to be observed, kept or performed
by Lessee, Lessee shall have twenty (20) days from and after written notice of
default within which to cure same; provided if such default is of a nature that
it cannot be cured within twenty (20) days and Lessee commences to cure such
default within such twenty (20) day period and thereafter diligently proceeds
to cure such default, the twenty (20) day period shall be extended for an
additional one hundred twenty (120) days so long as Lessee is diligently
proceeding in good faith to cure such default. If Lessee shall fail to cure any
default as provided herein, Lessor shall have the right at its election and in
addition and without prejudice to any other remedies, to declare the entire
amount of rental due and payable forthwith, and/or to terminate this Lease
and/or enter upon said leased premises or any part thereof either with, or
without, process of law, and Lessee, or any person or persons occupying the
same, may be expelled, removed or put out, using such force as may be necessary
so to do, and repossess and enjoy said premises as before this Lease, without
prejudice to any remedies which might otherwise be used for arrears of rent or
preceding breach of covenants.
Any repossession of said premises shall not constitute a termination
of this Lease unless Lessor so notified Lessee in writing, and Lessor shall
have the right, at its option, to lease the premises so repossessed to any
other person or persons upon such terms and conditions as Lessor shall
determine. In such event, Lessee shall be and remain liable to Lessor for the
difference between the rental provided herein and the rentals so obtained from
any third person, plus all costs and expenses to Lessor of repossessing and
releasing said premises, and of transporting, repairing and/or otherwise
handling the fixtures and equipment located thereon.
ARTICLE 14
If at any time during the term hereof, proceedings in bankruptcy shall
be instituted by or against Lessee and result in an adjudication of bankruptcy,
or if Lessee shall file, or any creditor shall file, or any
Page 31 of 87
<PAGE> 32
other person shall file, any petition in bankruptcy, under the Bankruptcy Act
of the United States of America as such act is now in force, or the same may be
amended or superseded, and shall be judicially approved, or a receiver of the
business or assets of Lessee shall be appointed, and if such appointment be not
vacated within twenty (20) days after notice thereof to Lessee, or if a general
assignment is made by Lessee or sub-lessee for the benefit of creditors, any
sheriff, marshal, constable or keeper take possession thereof by authority of
any attachment or execution proceedings, Lessor may at its option, in either or
any of such events, without notice to Lessee or any other person or persons,
immediately recapture and take possession of the leased premises and terminate
this Lease, with or without process of law; such process being expressly waived
by Lessee.
ARTICLE 15
In the event that greater than fifty percent (50%) of the leased
premises is destroyed or significantly damaged by fire or other casualty, the
Lessee shall have the right to terminate this Lease in accordance with this
Article 15, and the Lessor shall have the right to terminate this Lease in
accordance with this Article 15 if fewer than five (5) years remain for the
balance of this Lease and any renewals at such time. Upon such event, any party
entitled to terminate the Lease must do so by giving written notice to the
other party within thirty (30) days of the date that the damaged was sustained
by the leased premises. If the parties do not exercise any right they have to
terminate the Lease, or if less than fifty percent (50%) of the leased premises
is destroyed or significantly damaged by fire or other casualty, then the Lease
will not terminate and in that event Lessor shall be obligated to restore the
leased premises to substantially the same condition as before the damage was
sustained thereto, provided that Lessor shall not be obligated to spend any
amount to restore the leased premises that exceeds the amount of insurance
proceeds that Lessor receives as a result of the damage sustained to the leased
premises. Lessor shall not be obligated to begin restoring the leased premises
until Lessor has received the insurance proceeds payable as a result of the
damage. So long as the damage to the leased premises was not caused of Lessee's
negligence or intentional act, then the rent payable hereunder shall be abated
during such time that the Lessee is unable to use the leased premises
Page 32 of 87
<PAGE> 33
until they have been restored. Lessee shall not be entitled to any abatement of
rent if the damage to the leased premises was caused by Lessee's negligence or
intentional act.
Regardless of the cause of any damage sustained by the leased
premises, in no event shall Lessee receive or be entitled to compensation or
damages from Lessor on account of any loss, whether of business, profits,
property, or otherwise, or for inconvenience, annoyance or personal injury
resulting from such destruction, or from or in the course of restoration,
repair or reconstruction of all or any part of the buildings or improvements,
nor for any loss, injury to or damage to persons or property in, upon or from
the leased premises from any cause or from the termination of this Lease, as
herein provided.
ARTICLE 16
Each and all of the terms, conditions, covenants and obligations
hereof shall inure to the benefit of and bind the successors in interest of the
parties hereto, provided that these provisions shall not be deemed to alter the
provisions of Article 6 hereof.
ARTICLE 17
17.1 Total Taking. If all or substantially all of the improvements
on the Leased Premises or the Leased Premises shall be taken by condemnation or
in any other manner for any public or quasi-public use or purpose (other than
for temporary use or occupancy), the term of this Lease shall terminate as of
the date of vesting of title (the "Date of the Taking") and, subject to a
proration and apportionment of all rental and other sums due hereunder as of
the Date of the Taking, no further rent shall be due hereunder.
17.2 Partial Taking. If a part of the Leased Premises shall be so
taken by condemnation, then Lessor shall give Lessee prompt written notice
thereof and the part so taken shall no longer constitute part of the Leased
Premises, but this Lease shall continue in force and effect as to the part not
so taken; provided, however, that Lessee may elect to terminate this Lease (i)
if a partial taking is more than fifty percent (50%) of the Leased Premises;
(ii) if the partial taking lasts for more than one (1) year; or (iii) if, in
the good faith and mutual judgment of Lessee and Lessor, the remaining portion
of the Leased Premises cannot be economically and practicably used by Lessee
for the conduct of its business. Lessee shall give
Page 33 of 87
<PAGE> 34
notice of any election to terminate to Lessor not later than sixty (60) days
after notice of such taking is given by Lessor to Lessee. Upon the date
specified in Lessee's notice (which shall not be more than one hundred eighty
(180) days thereafter), the term of this Lease shall terminate and, subject to
a proration and apportionment of all rental and other sums due hereunder as of
the Date of the Taking and such date, as applicable, no further rent shall be
due hereunder. Upon a partial taking and the term of this Lease continuing in
force as to any part of the Leased Premises, the rental shall be reduced
proportionately based upon the part or parts of the Leased Premises and/or
other parts of the improvements so taken.
17.3 Award. Lessor shall be entitled to receive the entire award in
any proceeding with respect to any taking (other than for temporary use and
occupancy) provided for in this Article without deduction therefrom for any
estate vested in Lessee by this Lease and Lessee shall receive no part of such
award, except as hereinafter expressly provided. Lessee shall have the right to
make a separate claim with the condemning authority for (i) any moving expenses
incurred by Lessee as a result of such condemnation; (ii) any costs incurred
and paid by Lessee in connection with any alteration or improvement made by
Lessee to the Leased Premises; (iii) the value of any of Lessee's property
taken; and (iv) any other separate claim which Lessee may hereafter be
permitted to make, provided, however, that such separate claim shall not reduce
or adversely affect the amount of the award (as hereinafter defined) to which
Lessor is entitled. If Lessee shall not be permitted to make a separate claim
in such proceeding, Lessor shall prosecute all claims in such proceeding on
behalf of both Lessor and Lessee in which event Lessee may, if it so elects and
at its expense, attend hearings, present arguments and generally participate in
the conduct of the proceeding; provided, however, that if Lessor incurs any
additional expense because of Lessee's exercising its rights under this
sentence, Lessee will bear such additional expense.
17.4 Temporary Taking. If all or any part of the Leased Premises
shall be temporarily taken by condemnation or otherwise for any public or
quasi-public use or purpose (unless Lessee shall have elected to terminate the
term of this Lease in accordance with the option provided in the last sentence
of this section), this Lease shall nevertheless remain in full force and
effect. Lessee shall continue to be
Page 34 of 87
<PAGE> 35
responsible for all of its obligations hereunder insofar as such obligations
are not affected by such taking; provided, however, that Lessee shall not be
liable for the payment of rental or other sums for the part of the Leased
Premises so temporarily taken.
ARTICLE 18
No express or implied waiver of Lessor or of any default hereunder
shall be in any way construed to be a waiver of any future or subsequent
default of Lessee, or a waiver of any of the rights of Lessor under the terms
of this Lease. If any clause or provision of this Lease is invalid or
unenforceable for any reason, such clause or provision shall be deemed
severable and the other clauses and provisions hereof shall remain in full
force and effect and shall be enforceable to the full extent permitted by law.
ARTICLE 19
Notices and demands by either party hereto may be given by certified
or registered mail, postage prepaid, addressed as follows:
LESSOR: Casa Ole of Beaumont, Inc.
8050 Eastex Freeway
Beaumont, TX 77708
LESSEE: Casa Ole Restaurants, Inc.
1135 Edgebrook
Houston, TX 77034
subject to the right of either party to designate, by notice in writing, any
new address to which said notices or demands must be sent.
ARTICLE 20
Lessor shall have the right to mortgage the leased premises and this
Lease shall be subordinate to any existing or future mortgage; provided,
however, that the mortgage holder must agree to enter into a nondisturbance
agreement with Lessee on terms reasonably acceptable to Lessee and the mortgage
holder.
ARTICLE 21
This Lease shall be binding upon and inure to the benefit of the
successors, assigns, heirs, administrators and executors of each of the parties
hereto. The parties may concurrently herewith for
Page 35 of 87
<PAGE> 36
recording purposes execute a short form of the within lease, the same to be
acknowledged by all parties before a Notary Public. Whenever in this Lease the
word "mortgage" is used, it shall be deemed to include in its use a "Deed of
Trust" and shall also be deemed to include interim mortgages during
construction and permanent mortgages after completion of construction.
ARTICLE 22
This Lease is subject in all events to all easements, restrictions,
rights-of-way, and covenants of record affecting the leased premises, and
Lessee hereby covenants to abide by all such covenants and restrictions.
Page 36 of 87
<PAGE> 37
IN WITNESS WHEREOF, the parties have hereunto set their hands
effective as of the _____ day of _______________, 199__.
CASA OLE OF BEAUMONT, INC.
By:
----------------------------------
Thomas L. Harken, Chairman and CEO
LESSOR
CASA OLE RESTAURANTS, INC.
By:
----------------------------------
Title:
-------------------------------
LESSEE
Page 37 of 87
<PAGE> 38
THE STATE OF TEXAS )
)
COUNTY OF JEFFERSON )
This instrument was acknowledged before me on the _______ day of
__________________, 199___, by Thomas L. Harken, Chairman and CEO of Casa Ole
of Beaumont, Inc., a Texas corporation, on behalf of said corporation.
----------------------------------
Notary Public, State of Texas
THE STATE OF TEXAS )
)
COUNTY OF JEFFERSON )
This instrument was acknowledged before me on the _______ day of
_____________________, 199___, by ___________________, ________________ of Casa
Ole Restaurants, Inc., a Texas corporation, on behalf of said corporation.
----------------------------------
Notary Public, State of Texas
Page 38 of 87
<PAGE> 39
EXHIBIT "A"
DESCRIPTION OF LEASED PREMISES
Page 39 of 87
<PAGE> 40
JASPER BUILDING LEASE AGREEMENT
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF JASPER )
WITNESS THIS LEASE AGREEMENT made and entered into by and between Casa
Ole of Beaumont, Inc., a Texas general business (hereinafter referred to as
"Landlord" or "Lessor"), and Casa Ole Restaurants, Inc., a Texas general
business (hereinafter referred to as "Tenant" or "Lessee").
WHEREAS, Lessee desires to lease certain property from Lessor for the
conduct of its business;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE 1
Lessor has leased, demised and rented, and by these presents does
lease, demise and rent to Lessee the building and improvements, including
expressly Lessor's interest in the premises, parking and delivery areas and all
interests and rights appurtenant to the premises, and easements for pedestrian
and vehicular ingress and egress over and across the relevant paved areas as
exist from time to time, situated in Jasper, Jasper County, Texas, as more
fully described in Exhibit A attached hereto, which exhibit is hereby
incorporated for all purposes, hereinafter referred to as the "leased
premises".
ARTICLE 2
2.1 The primary term ("Primary Term") of this Lease shall be for
fifteen (15) years and shall commence on ______________, 199___ (the "Date of
Commencement") and shall expire on _______________, 200___.
2.2 Lessee is hereby granted and shall, if not at the time in
default under this Lease, have an option to renew and extend the term of this
Lease for three (3) additional terms of five (5) years each (each such five
year renewal term referred to herein as a "Renewal Term"), otherwise on the
same terms, covenants and conditions and, subject to the same exceptions and
reservations herein contained.
2.3 The renewal options set forth in paragraph 2.02 above shall be
exercised only by Lessee's delivering to Lessor in person or by United States
mail not less than two hundred seventy (270) days prior
Page 40 of 87
<PAGE> 41
EXHIBIT "D" TO OPTION CONTRACT AND AGREEMENT
FORM OF JASPER BUILDING LEASE
Page 41 of 87
<PAGE> 42
to the commencement of each the Renewal Term, written notice of Lessee's
intention to exercise such option as herein provided. If mailed, notice shall
be deemed given when it is deposited in the U.S. mail, postage prepaid,
addressed to Lessor at the address provided herein for the giving of notice.
2.4 If Lessee shall fail to appropriately exercise the renewal
options set forth above, then the Lease shall expire at the end of the current
term of the Lease then in effect.
ARTICLE 3
3.1 During the Primary Term of this Lease, Lessee agrees and
obligates itself to pay to Lessor rental in the amount set forth herein, which
shall be due and payable as hereinafter provided.
3.2 Lessee agrees to pay Lessor base rental in monthly
installments of TWO THOUSAND FIVE HUNDRED FIFTY AND NO/100 DOLLARS ($2,550.00)
each month, said rent being payable on the first (1st) day of each calendar
month, monthly in advance, beginning the 1st day of _________, 199___, and
continuing monthly thereafter, provided however, upon Lessor's request, Lessee
will pay the first month's rental installment to Lessor upon the execution
hereof, notwithstanding the fact that this Lease Agreement may be signed prior
to the beginning of the Primary Term. At the beginning of each Renewal Term,
the base rent shall increase by the sum of ONE HUNDRED FIFTY DOLLARS ($150.00)
per month.
3.3 The monthly installments of base rent shall be due and payable
by Lessee monthly in advance as above provided, without demand or other notice.
3.4 All rental installments, when due and payable, shall be paid
in lawful money of the United State of America to Lessor at Lessor's address
set forth herein or at such other address as shall be designated by Lessor by
written notice given to Lessee at least ten (10) days prior to the next ensuing
rental payment date. All rental payable hereunder shall be due and payable
without prior demand and without any set-offs or deductions whatsoever.
3.5 Not applicable.
Page 42 of 87
<PAGE> 43
ARTICLE 4
4.1 Lessee shall pay, in addition to the rent herein required, all
taxes, assessments, and other governmental charges, general or special,
ordinary and extraordinary, and any kind and nature whatsoever applicable to
the leased premises and all improvements, fixtures and equipment thereon,
including but not limited to assessments for public improvements or benefits
which shall, during the term hereof, be laid, assessed, levied or imposed or
become due and payable and a lien upon the leased premises or any part thereof.
4.2 Lessee shall pay all personal property taxes levied upon any
property in or about said premises; provided that Lessee will not be obligated
to pay personal property taxes levied on Lessor's property not utilized by
Lessee in the ordinary course of its business.
4.3 Real property taxes for the fiscal year pertaining to the
commencement of this Lease and for the fiscal year pertaining to the
termination of this Lease shall be prorated as of the date of said commencement
and termination.
4.4 Except as hereinafter provided, all payments to be made by Lessee
pursuant to this article shall be made before any fine, penalty, interest or
cost may be added thereto for the non-payment thereof, and Lessee shall furnish
Lessor, within thirty (30) days after written request thereof by Lessor, with
official receipts or other evidence satisfactory to Lessor that such tax has
been paid.
4.5 Lessee shall have the right in good faith to contest or review by
legal proceedings, or in such other manner as it deems suitable (which
proceedings, if instituted, shall be conducted promptly at Lessee's expense and
free of expense to Lessor) any such charges, real property and personal
property taxes, and assessments, provided that upon the conclusion of such
proceedings Lessee shall pay the amount that shall be finally assessed or
imposed against said premises or be adjudicated or otherwise determined to be
due and payable. Lessor will join in any contest or protest provided for in
this article at the request of Lessee, but at Lessee's sole cost and expense,
and as a condition of such joinder may require reasonable indemnity against
costs or other damages by reason of such joinder.
Page 43 of 87
<PAGE> 44
ARTICLE 5
5.1 During the term of this Lease, Lessee, at its expense, shall keep
and maintain upon all improvements and fixtures on the leased premises fire
insurance with extended coverage endorsement, written by a responsible
insurance company or companies authorized to do an insurance business in Texas
and acceptable to Lessor in an amount equal to not less than the full insurable
value thereof, excluding foundation and excavation costs. Said policy or
policies of insurance shall provide that payment for any losses covered under
or by said policy or policies shall be made to Lessor and Lessor shall be
entitled to retain the proceeds of any such insurance. A certificate of such
insurance shall be forwarded to Lessor by Lessee or on Lessee's behalf.
5.2 In addition to the insurance required under Section 5.1, Lessee
agrees to carry and maintain, and have in full force and effect throughout the
term of this Lease, workmen's compensation insurance, general comprehensive
liability insurance (which includes, but is not limited to, coverage for
products and completed operations and premises operation), and liquor liability
insurance, with an insurance company or companies authorized to transact
business in the State of Texas, for the benefit of Lessor and Lessee, and for
the protection of all persons who may suffer injury while in, on or about the
premises or from Lessee's activities and conduct of business. The amount and
coverage of such insurance shall be as reasonably approved by Lessor from time
to time. Such liability policies, if available, shall be endorsed to insure
contractual liabilities of Lessee including but not limited to the indemnities
of Lessee to Lessor under this Lease. Lessee agrees to deliver to Lessor, upon
request, a certificate showing that said insurance is in full force and effect.
The obligation of Lessee for the insurance specified herein may be brought
under the provisions of any so-called blanket policies carried by Lessee which
otherwise meet the requirements hereof, provided that all of said policies of
insurance shall name Lessor as co-insured.
5.3 LESSEE AGREES TO PROTECT AND TO INDEMNIFY AND SAVE HARMLESS LESSOR
AGAINST AND FROM ANY AND ALL CLAIMS, DAMAGES, LIABILITIES, COSTS, LOSSES, AND
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OR RESULTING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, (i) FROM THE CONDUCT OF LESSEE'S BUSINESS, OR
(ii) FROM ANY WORK, CONSTRUCTION, REPAIRS, MAINTENANCE, OR THING WHATSOEVER
DONE OR SUFFERED TO BE
Page 44 of 87
<PAGE> 45
DONE BY LESSEE ON OR ABOUT THE LEASED PREMISES, OR (iii) FROM ANY CONDITION OF
OR DEFECT IN THE LEASED PREMISES CAUSED BY LESSEE OR IN ANY FIXTURES,
IMPROVEMENTS OR EQUIPMENT NOW OR HEREAFTER LOCATED THEREON OR THEREUNDER CAUSED
BY LESSEE, OR (iv) FROM ANY BREACH OR DEFAULT ON THE PART OF LESSEE IN THE
PERFORMANCE OF ANY COVENANT OR AGREEMENT ON THE PART OF LESSEE TO BE PERFORMED
PURSUANT TO THE TERMS OF THIS LEASE, WHETHER OR NOT ACTED UPON BY LESSOR, OR
(v) FROM ANY ACT OR OMISSION OF LESSEE, OR ANY OF ITS AGENTS, DEALERS,
CONTRACTORS, SERVANTS, EMPLOYEES, LICENSEES, OR INVITEES, OR (vi) FROM LEAKS,
DISCHARGES, OR EMISSIONS OF ANY KIND FROM THE LEASED PREMISES CAUSED BY LESSEE
OR ANY FIXTURES, IMPROVEMENTS OR EQUIPMENT THEREON OR THEREUNDER CAUSED BY
LESSEE WHETHER OR NOT SUCH OCCURRENCE CONSTITUTES A VIOLATION OF ANY APPLICABLE
LEGAL REQUIREMENTS OR A NUISANCE, OR (vii) FROM ANY FIRE OR EXPLOSION CAUSED BY
LESSEE OCCURRING ON OR ABOUT THE LEASED PREMISES OR IN CONNECTION WITH THE
OPERATION OF LESSEE'S BUSINESS, OR (viii) FROM ANY NUISANCE CREATED OR SUFFERED
TO EXIST BY LESSEE, ITS AGENTS, DEALERS, CONTRACTORS, SERVANTS, EMPLOYEES,
LICENSEES, OR INVITEES, OR (ix) ANY VIOLATION OF OR FAILURE TO SATISFY ANY
LEGAL REQUIREMENT BY LESSEE DURING THE TERM OF THIS AGREEMENT. THESE
INDEMNITIES SHALL APPLY TO ACTS, OMISSIONS, AND OCCURRENCES DURING THE TERM OF
THIS LEASE. THESE INDEMNITIES BY LESSEE SHALL APPLY REGARDLESS OF THE SOLE OR
ANY CONTRIBUTING NEGLIGENCE OR INTENTIONAL OR NON-NEGLIGENT ACTS OR OMISSIONS
OF OR VIOLATION OR LACK OF COMPLIANCE WITH ANY LEGAL REQUIREMENTS BY LESSOR,
THEIR AGENTS, CONTRACTORS, EMPLOYEES, SERVANTS, DEALERS, OR LICENSEES. FOR
PURPOSES OF THESE INDEMNITIES, DAMAGES SHALL BE DEEMED TO INCLUDE ACTUAL,
CONSEQUENTIAL, TREBLE, AND PUNITIVE DAMAGES AND FINES AND PENALTIES OF ANY KIND
PAYABLE TO THIRD PARTIES. IN NO EVENT SHALL LESSEE BE LIABLE FOR (I) ANY ACT,
OMISSION OR OCCURRENCE OR OTHER LIABILITY (WHETHER CONTRACTUAL OR TORT)
RELATING TO THE LEASED PREMISES ARISING PRIOR TO THE DATE OF THIS LEASE, AND/OR
(ii) ANY CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES TO LESSOR FOR ANY MATERS
ARISING OUT OF OR RELATED TO THIS LEASE.
IN CASE ANY ACTION OR PROCEEDING COVERED BY THE FOREGOING INDEMNITY
SHOULD BE BROUGHT AGAINST LESSOR, LESSEE, UPON NOTICE FROM LESSOR, COVENANTS TO
RESIST OR DEFEND SUCH ACTION OR PROCEEDING BY RETAINING COUNSEL REASONABLY
SATISFACTORY TO LESSOR.
Page 45 of 87
<PAGE> 46
LESSEE COVENANTS AND AGREES TO PAY, AND TO INDEMNIFY LESSOR AGAINST,
ALL LEGAL COSTS AND CHARGES, INCLUDING COUNSEL FEES, LAWFULLY AND REASONABLY
INCURRED IN OBTAINING POSSESSION OF THE PREMISES AFTER DEFAULT BY LESSEE OR
UPON EXPIRATION OR EARLIER TERMINATION OF THE TERM OF THIS LEASE OR IN
ENFORCING ANY COVENANT OR AGREEMENT OF LESSEE HEREIN CONTAINED.
THE COVENANTS BY LESSEE TO INDEMNIFY LESSOR PROVIDED IN THIS ARTICLE
SHALL SURVIVE THE TERMINATION OF THIS LEASE WITH RESPECT TO ANY CLAIMS,
DAMAGES, LIABILITIES, COSTS, LOSSES AND EXPENSES THEREAFTER ASSERTED OR
INCURRED BASED UPON, ARISING FROM OR TRACEABLE TO (IN WHOLE OR IN PART) ANY
EVENTS, ACTS, OMISSIONS, OR OCCURRENCES DURING THE TERM OF THIS LEASE.
ARTICLE 6
Lessee shall not assign or hypothecate this Lease, or any part
thereof, of the leased premises, either voluntarily or involuntarily, or by
operation of law, without the prior written consent of Lessor, which consent
shall not be unreasonably withheld or delayed. Lessee shall not sublease and
grant concessions on all or any part of the leased premises without the consent
of Lessor and shall in all such cases remain fully and directly responsible for
all of the obligations of Lessee hereunder.
ARTICLE 7
All improvements erected upon the leased premises shall become a part
thereof and shall become the property of Lessor upon the termination of this
Lease. All trade fixtures installed by and belonging to Lessee may be removed
by Lessee upon termination of this Lease, provided Lessee is not in default
under the terms of this Lease and that same may be so removed without permanent
damage to any building or improvements on the premises, and provided further
that any damage to the said building or improvements occasioned by such removal
shall be promptly repaired by Lessee. In the event said fixtures are not so
removed within sixty (60) days from and after termination of this Lease, the
same shall become the property of Lessor.
Page 46 of 87
<PAGE> 47
ARTICLE 8
Lessee accepts the leased premises as is, in its present condition,
and Lessor has made no representation or warranty as to the condition,
habitability, or fitness for any purpose of the leased premises, and Lessor
shall not be liable for any latent or patent defects therein; provided,
however, Lessor has not received notice of and is not aware of any material
violations of applicable laws that exist at the leased premises.
Lessee agrees that it accepts the premises "as is" and hereby waives
any claim against Lessor for any latent defects which may exist. Any building
and improvements constructed upon the leased premises shall constitute and be a
part of the leased premises for all purposes.
Lessee shall be obligated, at its sole cost and expense, to keep all
of the leased premises, including, but not limited to, all glass, roofs,
fixtures, plumbing, wiring, HVAC equipment, walls and parking and driveway
areas in good order and repair, usual wear and tear and damage by the elements,
earthquake and fires excepted. Lessee may, at its sole cost and expense, make
additional alterations and improvements to any building and improvements as it
deems necessary during the period of said Lease, provided, however, that no
structural improvements, alterations or additions shall be made without
Lessor's written consent, which consent shall not be unreasonably withheld.
Lessee shall hold Lessor harmless for any cost or expenses incurred in
connection with any such initial or subsequent improvements or additions.
Notwithstanding the foregoing, Lessee shall be permitted to make any
alterations to the leased premises that may be required from time to time by
applicable law without the consent of Lessor; provided, however, prior to
making any alteration Lessee shall notify Lessor and shall be subject to the
reasonable directions of the Lessor in making such alteration, and all of such
alterations shall be made at Lessee's sole expense. If any repair should be
necessitated by reason of an insured casualty, Lessee's obligation shall be
limited to the extent of insurance proceeds received by Lessee.
Nothing in this article limits the indemnities for third-party
liabilities provided by this Lease.
Page 47 of 87
<PAGE> 48
ARTICLE 9
Lessee shall comply with all laws, ordinances, judgments, injunctions,
orders, regulations, rules, requirements, guidelines, and notices (hereinafter
called "legal requirements") of every kind or nature, applicable in any way to
the conduct of Lessee's business, or any maintenance, repair or construction
work undertaken on the leased premises, or to Lessee's use or occupancy of the
leased premises, and whether the same or any of them relate to ordinary or
extraordinary, structural or nonstructural, changes or requirements to or in
and about said premises, or any improvements thereon or any such property or
changes or requirements incident to or as the result of any use or occupation
thereof and Lessee shall pay any and all costs and expenses incidental to such
compliance with all legal requirements. Without relieving Lessee of its duty to
indemnify Lessor under this Lease or under any other agreement, Lessee shall
have the right to contest the validity of or seek a variance from or review of
said legal requirements by legal proceedings or in any such other manner as it
deems suitable, and may have, if able, said legal requirements cancelled,
removed, or revoked without actual compliance with the same, and if such
actions or proceedings are instituted, they shall be conducted promptly at the
expense of Lessee and free of expense to Lessor. Notwithstanding the foregoing,
Lessee shall not be obligated to indemnify Lessor for any violation of legal
requirements relating to the condition of the leased premises existing on the
date hereof. If and whenever said legal requirements shall become absolute
against Lessee and the leased premises, or against Lessor, after contest
thereof, Lessee shall then comply with the same with due diligence. Lessor
shall have no duty to inspect, monitor, check or otherwise supervise, review or
enforce any of Lessee's responsibilities hereunder and Lessor's failure to do
so shall in no way limit the liability of Lessee to indemnify Lessor as
provided in this Lease or any other agreement. Lessor will join in any contest
provided for in this article at the request of Lessee, but at Lessee's sole
cost and expense, and as a condition of such joinder may require reasonable
indemnity against costs or other damages by reason of such joinder.
ARTICLE 10
Lessor shall not be liable for any damage occasioned by failure to
keep the premises in repair and shall not be liable for any damage done or
occasioned by or from plumbing, gas, water, steam, or other
Page 48 of 87
<PAGE> 49
pipes or sewerage, nor for any damages arising from acts of neglect of Lessee,
sub-lessees or other occupants of the premises, with or without Lessor's
consent, or of any owners or occupants of adjacent or contiguous property.
ARTICLE 11
Lessee may use the premises solely for the purpose of operating a
Mexican food restaurant. Lessee shall not permit said premises to be used for
any unlawful purpose or purposes that will injure the reputation of the same or
the improvements thereon and will not permit the same or any portion thereof to
remain vacant or unoccupied for more than one (1) month without the consent of
Lessor, which consent will not be unreasonably withheld.
ARTICLE 12
Lessee shall pay, in addition to the rents above specified, all
utility bills of any nature, and garbage, sewerage, and waste disposal costs
and expenses levied or charged on said premises for and during the time for
which this Lease is granted.
ARTICLE 13
If Lessee shall fail to pay any rental as herein provided when the
same is due and payable, or if Lessee shall fail to observe, keep or perform
any other provisions of this Lease required to be observed, kept or performed
by Lessee, or if Lessee shall default under the Land Lease relating to the
premises entered into between Lessee and Harken Real Estate Company, Inc.,
Lessee shall be in default under this Lease and Lessee shall have twenty (20)
days from and after written notice of default within which to cure same;
provided if such default is of a nature that it cannot be cured within twenty
(20) days and Lessee commences to cure such default within such twenty (20) day
period and thereafter diligently proceeds to cure such default, the twenty (20)
day period shall be extended for an additional one hundred twenty (120) days so
long as Lessee is diligently proceeding in good faith to cure such default. If
Lessee shall fail to cure any default as provided herein, Lessor shall have the
right at its election and in addition and without prejudice to any other
remedies, to declare the entire amount of rental due and payable forthwith,
and/or to
Page 49 of 87
<PAGE> 50
terminate this Lease and/or enter upon said leased premises or any part thereof
either with, or without, process of law, and Lessee, or any person or persons
occupying the same, may be expelled, removed or put out, using such force as
may be necessary so to do, and repossess and enjoy said premises as before this
Lease, without prejudice to any remedies which might otherwise be used for
arrears of rent or preceding breach of covenants.
Any repossession of said premises shall not constitute a termination
of this Lease unless Lessor so notified Lessee in writing, and Lessor shall
have the right, at its option, to lease the premises so repossessed to any
other person or persons upon such terms and conditions as Lessor shall
determine. In such event, Lessee shall be and remain liable to Lessor for the
difference between the rental provided herein and the rentals so obtained from
any third person, plus all costs and expenses to Lessor of repossessing and
releasing said premises, and of transporting, repairing and/or otherwise
handling the fixtures and equipment located thereon.
ARTICLE 14
If at any time during the term hereof, proceedings in bankruptcy shall
be instituted by or against Lessee and result in an adjudication of bankruptcy,
or if Lessee shall file, or any creditor shall file, or any other person shall
file, any petition in bankruptcy, under the Bankruptcy Act of the United States
of America as such act is now in force, or the same may be amended or
superseded, and shall be judicially approved, or a receiver of the business or
assets of Lessee shall be appointed, and if such appointment be not vacated
within twenty (20) days after notice thereof to Lessee, or if a general
assignment is made by Lessee or sub-lessee for the benefit of creditors, any
sheriff, marshal, constable or keeper take possession thereof by authority of
any attachment or execution proceedings, Lessor may at its option, in either or
any of such events, without notice to Lessee or any other person or persons,
immediately recapture and take possession of the leased premises and terminate
this Lease, with or without process of law; such process being expressly waived
by Lessee.
Page 50 of 87
<PAGE> 51
ARTICLE 15
In the event that greater than fifty percent (50%) of the leased
premises is destroyed or significantly damaged by fire or other casualty, the
Lessee shall have the right to terminate this Lease in accordance with this
Article 15, and the Lessor shall have the right to terminate this Lease in
accordance with this Article 15 if fewer than five (5) years remain for the
balance of this Lease and any renewals at such time. Upon such event, any party
entitled to terminate the Lease must do so by giving written notice to the
other party within thirty (30) days of the date that the damaged was sustained
by the leased premises. If the parties do not exercise any right they have to
terminate the Lease, or if less than fifty percent (50%) of the leased premises
is destroyed or significantly damaged by fire or other casualty, then the Lease
will not terminate and in that event Lessor shall be obligated to restore the
leased premises to substantially the same condition as before the damage was
sustained thereto, provided that Lessor shall not be obligated to spend any
amount to restore the leased premises that exceeds the amount of insurance
proceeds that Lessor receives as a result of the damage sustained to the leased
premises. Lessor shall not be obligated to begin restoring the leased premises
until Lessor has received the insurance proceeds payable as a result of the
damage. So long as the damage to the leased premises was not caused of Lessee's
negligence or intentional act, then the rent payable hereunder shall be abated
during such time that the Lessee is unable to use the leased premises until
they have been restored. Lessee shall not be entitled to any abatement of rent
if the damage to the leased premises was caused by Lessee's negligence or
intentional act.
Regardless of the cause of any damage sustained by the leased
premises, in no event shall Lessee receive or be entitled to compensation or
damages from Lessor on account of any loss, whether of business, profits,
property, or otherwise, or for inconvenience, annoyance or personal injury
resulting from such destruction, or from or in the course of restoration,
repair or reconstruction of all or any part of the buildings or improvements,
nor for any loss, injury to or damage to persons or property in, upon or from
the leased premises from any cause or from the termination of this Lease, as
herein provided.
Page 51 of 87
<PAGE> 52
ARTICLE 16
Each and all of the terms, conditions, covenants and obligations
hereof shall inure to the benefit of and bind the successors in interest of the
parties hereto, provided that these provisions shall not be deemed to alter the
provisions of Article 6 hereof.
ARTICLE 17
17.1 Total Taking. If all or substantially all of the improvements
on the Leased Premises or the Leased Premises shall be taken by condemnation or
in any other manner for any public or quasi-public use or purpose (other than
for temporary use or occupancy), the term of this Lease shall terminate as of
the date of vesting of title (the "Date of the Taking") and, subject to a
proration and apportionment of all rental and other sums due hereunder as of
the Date of the Taking, no further rent shall be due hereunder.
17.2 Partial Taking. If a part of the Leased Premises shall be so
taken by condemnation, then Lessor shall give Lessee prompt written notice
thereof and the part so taken shall no longer constitute part of the Leased
Premises, but this Lease shall continue in force and effect as to the part not
so taken; provided, however, that Lessee may elect to terminate this Lease (i)
if a partial taking is more than fifty percent (50%) of the Leased Premises;
(ii) if the partial taking lasts for more than one (1) year; or (iii) if, in
the good faith and mutual judgment of Lessee and Lessor, the remaining portion
of the Leased Premises cannot be economically and practicably used by Lessee
for the conduct of its business. Lessee shall give notice of any election to
terminate to Lessor not later than sixty (60) days after notice of such taking
is given by Lessor to Lessee. Upon the date specified in Lessee's notice (which
shall not be more than one hundred eighty (180) days thereafter), the term of
this Lease shall terminate and, subject to a proration and apportionment of all
rental and other sums due hereunder as of the Date of the Taking and such date,
as applicable, no further rent shall be due hereunder. Upon a partial taking
and the term of this Lease continuing in force as to any part of the Leased
Premises, the rental shall be reduced proportionately based upon the part or
parts of the Leased Premises and/or other parts of the improvements so taken.
Page 52 of 87
<PAGE> 53
17.3 Award. Lessor shall be entitled to receive the entire award in
any proceeding with respect to any taking (other than for temporary use and
occupancy) provided for in this Article without deduction therefrom for any
estate vested in Lessee by this Lease and Lessee shall receive no part of such
award, except as hereinafter expressly provided. Lessee shall have the right to
make a separate claim with the condemning authority for (i) any moving expenses
incurred by Lessee as a result of such condemnation; (ii) any costs incurred
and paid by Lessee in connection with any alteration or improvement made by
Lessee to the Leased Premises; (iii) the value of any of Lessee's property
taken; and (iv) any other separate claim which Lessee may hereafter be
permitted to make, provided, however, that such separate claim shall not reduce
or adversely affect the amount of the award (as hereinafter defined) to which
Lessor is entitled. If Lessee shall not be permitted to make a separate claim
in such proceeding, Lessor shall prosecute all claims in such proceeding on
behalf of both Lessor and Lessee in which event Lessee may, if it so elects and
at its expense, attend hearings, present arguments and generally participate in
the conduct of the proceeding; provided, however, that if Lessor incurs any
additional expense because of Lessee's exercising its rights under this
sentence, Lessee will bear such additional expense.
17.4 Temporary Taking. If all or any part of the Leased Premises
shall be temporarily taken by condemnation or otherwise for any public or
quasi-public use or purpose (unless Lessee shall have elected to terminate the
term of this Lease in accordance with the option provided in the last sentence
of this section), this Lease shall nevertheless remain in full force and
effect. Lessee shall continue to be responsible for all of its obligations
hereunder insofar as such obligations are not affected by such taking;
provided, however, that Lessee shall not be liable for the payment of rental or
other sums for the part of the Leased Premises so temporarily taken.
ARTICLE 18
No express or implied waiver of Lessor or of any default hereunder
shall be in any way construed to be a waiver of any future or subsequent
default of Lessee, or a waiver of any of the rights of Lessor under the terms
of this Lease. If any clause or provision of this Lease is invalid or
unenforceable for any
Page 53 of 87
<PAGE> 54
reason, such clause or provision shall be deemed severable and the other
clauses and provisions hereof shall remain in full force and effect and shall
be enforceable to the full extent permitted by law.
ARTICLE 19
Notices and demands by either party hereto may be given by certified
or registered mail, postage prepaid, addressed as follows:
LESSOR: Casa Ole of Beaumont, Inc.
8050 Eastex Freeway
Beaumont, TX 77708
LESSEE: Casa Ole Restaurants, Inc.
1135 Edgebrook
Houston, TX 77034
subject to the right of either party to designate, by notice in writing, any
new address to which said notices or demands must be sent.
ARTICLE 20
Lessor shall have the right to mortgage the leased premises and this
Lease shall be subordinate to any existing or future mortgage; provided,
however, that the mortgage holder must agree to enter into a nondisturbance
agreement with Lessee on terms reasonably acceptable to Lessee and the mortgage
holder.
ARTICLE 21
This Lease shall be binding upon and inure to the benefit of the
successors, assigns, heirs, administrators and executors of each of the parties
hereto. The parties may concurrently herewith for recording purposes execute a
short form of the within lease, the same to be acknowledged by all parties
before a Notary Public. Whenever in this Lease the word "mortgage" is used, it
shall be deemed to include in its use a "Deed of Trust" and shall also be
deemed to include interim mortgages during construction and permanent mortgages
after completion of construction.
ARTICLE 22
This Lease is subject in all events to all easements, restrictions,
rights-of-way, and covenants of record affecting the leased premises, and
Lessee hereby covenants to abide by all such covenants and restrictions.
Page 54 of 87
<PAGE> 55
IN WITNESS WHEREOF, the parties have hereunto set their hands
effective as of the _____ day of _______________, 199__.
CASA OLE OF BEAUMONT, INC.
By:
------------------------------
Tom Harken, President
LESSOR
CASA OLE RESTAURANTS, INC.
By:
------------------------------
Title:
------------------------------
LESSEE
Page 55 of 87
<PAGE> 56
THE STATE OF TEXAS )
)
COUNTY OF JEFFERSON )
This instrument was acknowledged before me on the _______ day of
__________________, 199___, by Tom Harken, President of Casa Ole of Beaumont,
Inc., a Texas corporation, on behalf of said corporation.
------------------------------
Notary Public, State of Texas
THE STATE OF TEXAS )
)
COUNTY OF JEFFERSON )
This instrument was acknowledged before me on the _______ day of
_____________________, 199___, by ___________________, ________________ of Casa
Ole Restaurants, Inc., a Texas corporation, on behalf of said corporation.
------------------------------
Notary Public, State of Texas
Page 56 of 87
<PAGE> 57
EXHIBIT "A"
DESCRIPTION OF LEASED PREMISES
Page 57 of 87
<PAGE> 58
EXHIBIT "E" TO OPTION CONTRACT AND AGREEMENT
FORM OF JASPER LAND LEASE
Page 58 of 87
<PAGE> 59
JASPER LAND LEASE AGREEMENT
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF JASPER )
WITNESS THIS LEASE AGREEMENT made and entered into by and between
Harken Real Estate Company, Inc., a Texas general business (hereinafter
referred to as "Landlord" or "Lessor"), and Casa Ole Restaurants, Inc., a Texas
general business (hereinafter referred to as "Tenant" or "Lessee").
WHEREAS, Lessee desires to lease certain property from Lessor for the
conduct of its business;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE 1
Lessor has leased, demised and rented, and by these presents does
lease, demise and rent to Lessee the land, including expressly Lessor's
interest in the parking and delivery areas and all interests and rights
appurtenant to the premises, and easements for pedestrian and vehicular ingress
and egress over and across the relevant paved areas as exist from time to time,
situated in Jasper, Jasper County, Texas, as more fully described in Exhibit A
attached hereto, which exhibit is hereby incorporated for all purposes,
hereinafter referred to as the "leased premises", but in all events subject to
the provisions of Article 23 hereof.
ARTICLE 2
2.1 The primary term ("Primary Term") of this Lease shall be for
fifteen (15) years and shall commence on ______________, 199___ (the "Date of
Commencement") and shall expire on _______________, 200___.
2.2 Lessee is hereby granted and shall, if not at the time in
default under this Lease, have an option to renew and extend the term of this
Lease for three (3) additional terms of five (5) years each (each such five
year renewal term referred to herein as a "Renewal Term"), otherwise on the
same terms, covenants and conditions and, subject to the same exceptions and
reservations herein contained.
2.3 The renewal options set forth in paragraph 2.02 above shall be
exercised only by Lessee's delivering to Lessor in person or by United States
mail not less than two hundred seventy (270) days prior
Page 59 of 87
<PAGE> 60
to the commencement of each the Renewal Term, written notice of Lessee's
intention to exercise such option as herein provided. If mailed, notice shall
be deemed given when it is deposited in the U.S. mail, postage prepaid,
addressed to Lessor at the address provided herein for the giving of notice.
2.4 If Lessee shall fail to appropriately exercise the renewal
options set forth above, then the Lease shall expire at the end of the current
term of the Lease then in effect.
ARTICLE 3
3.1 During the Primary Term of this Lease, Lessee agrees and
obligates itself to pay to Lessor rental in the amount set forth herein, which
shall be due and payable as hereinafter provided.
3.2 Lessee agrees to pay Lessor base rental in monthly
installments of TWO THOUSAND NINE HUNDRED FIFTY AND NO/100 DOLLARS ($2,950.00)
each month, said rent being payable on the first (1st) day of each calendar
month, monthly in advance, beginning the 1st day of _________, 199___, and
continuing monthly thereafter, provided however, upon Lessor's request, Lessee
will pay the first month's rental installment to Lessor upon the execution
hereof, notwithstanding the fact that this Lease Agreement may be signed prior
to the beginning of the Primary Term. At the beginning of each Renewal Term,
the base rent shall increase by the sum of ONE HUNDRED FIFTY DOLLARS ($150.00)
per month.
3.3 The monthly installments of base rent shall be due and payable
by Lessee monthly in advance as above provided, without demand or other notice.
3.4 All rental installments, when due and payable, shall be paid
in lawful money of the United State of America to Lessor at Lessor's address
set forth herein or at such other address as shall be designated by Lessor by
written notice given to Lessee at least ten (10) days prior to the next ensuing
rental payment date. All rental payable hereunder shall be due and payable
without prior demand and without any set-offs or deductions whatsoever.
3.5 (a) In addition to the base rent provided above, Lessee
agrees to pay to Lessor, as additional rent for the use and occupancy of the
leased premises, a sum equal to five percent (5%) of all of
Page 60 of 87
<PAGE> 61
Lessee's annual gross receipts in excess of ONE MILLION THREE HUNDRED TWENTY
THOUSAND DOLLARS ($1,320,000.00) that Lessee realizes each lease year from
operation of the leased premises. This percentage rent shall be paid monthly,
beginning on the twentieth (20th) day of the month immediately following the
month in which Lessee's gross receipts for the current lease year have reached
ONE MILLION THREE HUNDRED TWENTY THOUSAND DOLLARS ($1,320,000.00), and
continuing on the same day of each succeeding month thereafter for the
remainder of the then current lease year.
(b) The term GROSS RECEIPTS as used in this Lease means
receipts from gross retail sales of Lessee and of all licensees,
concessionaires and lessees of Lessee from all business conducted on or from
the leased premises by Lessee and all others, whether such sales be evidenced
by check, credit, charge account, exchange or otherwise.
1. The term GROSS RECEIPTS includes, but is not limited
to, the following:
(i) The amounts received from the sale of food,
beverages, merchandise and services sold or performed
in, on or from the leased premises, whether such
orders be filled from the leased premises or
elsewhere.
(ii) Proceeds from all automatic vending and other
machines owned and operated by Lessee in or on the
premises.
(iii) Commissions received by Lessee from automatic vending
and other machines not owned by Lessee but operated
in or on the leased premises.
(iv) Commissions received by Lessee from the operation of
public telephones in or on the leased premises.
(v) Proceeds from sales of merchandise or services based
on orders solicited or taken from, in or on the
leased premises, to be delivered or performed off of
the leased premises or from sources outside of the
leased premises.
2. The term GROSS RECEIPTS does not include the
following items, which may be excluded from gross receipts to the
extent they have been included:
(i) Credits and refunds made to customers for foods,
beverages or merchandise returned or exchanged or for
services performed unsatisfactorily.
(ii) Any sales, use, value added or gross receipts tax
imposed by any federal, state, municipal or
governmental authority directly on sales and
collected from customers, provided that the amount of
the tax is added to the selling price or absorbed in
that price and paid by Lessee to the governmental
authority.
Page 61 of 87
<PAGE> 62
(c) On or before the twentieth (20th) day following each
month during the term and each renewal term of this Lease, Lessee shall furnish
Lessor with a true and accurate statement, signed by Lessee or by an authorized
representative of Lessee, showing the gross receipts, as defined in paragraph
(b) for the preceding month.
(d) For the purpose of ascertaining the amount payable as
rent, Lessee agrees to prepare and maintain for a period of not less than three
(3) years following the end of each lease year, adequate records that will show
inventories and receipts of food, beverages and merchandise at the leased
premises and daily receipts from all sales and other transactions on or from
the leased premises by Lessee and any other persons conducting any business on
or from the leased premises. At the time of each transaction, Lessee or any
other person conducting the transaction on or from the leased premises will
record all receipts from sales and other transactions, whether for cash or
credit, in a cash register or registers having a cumulative total and sealed in
a manner approved by Lessor and having such other features as approved by
Lessor. Lessee further agrees to maintain on the leased premises, or at its
corporate headquarters, for at least five (5) years following the end of each
lease year, all sales, use, value added, gross receipts and occupation tax
returns with respect to the lease year and all pertinent original sales
records. Pertinent original sales records shall include the following: all cash
register tapes, serially numbered sales slips and originals of all orders
filled by Lessee from the leased premises or processed by Lessee at the leased
premises and filled from some location other than the leased premises.
(e) Lessor and authorized representatives of Lessor shall have
the right to examine the records described in the preceding paragraph at the
leased premises during Lessee's regular business hours. If, on examination of
the books or records of Lessee, an error shall be revealed in favor of Lessor
that results in additional percentage rental due Lessor in excess of $2,500.00,
then the reasonable costs of the examination must be paid by Lessee to Lessor.
Otherwise, Lessor will bear the cost of the examination.
Page 62 of 87
<PAGE> 63
ARTICLE 4
4.1 Lessee shall pay, in addition to the rent herein required, all
taxes, assessments, and other governmental charges, general or special,
ordinary and extraordinary, and any kind and nature whatsoever applicable to
the leased premises and all improvements, fixtures and equipment thereon,
including but not limited to assessments for public improvements or benefits
which shall, during the term hereof, be laid, assessed, levied or imposed or
become due and payable and a lien upon the leased premises or any part thereof.
4.2 Lessee shall pay all personal property taxes levied upon any
property in or about said premises; provided that Lessee will not be obligated
to pay personal property taxes levied on Lessor's property not utilized by
Lessee in the ordinary course of its business.
4.3 Real property taxes for the fiscal year pertaining to the
commencement of this Lease and for the fiscal year pertaining to the
termination of this Lease shall be prorated as of the date of said commencement
and termination.
4.4 Except as hereinafter provided, all payments to be made by Lessee
pursuant to this article shall be made before any fine, penalty, interest or
cost may be added thereto for the non-payment thereof, and Lessee shall furnish
Lessor, within thirty (30) days after written request thereof by Lessor, with
official receipts or other evidence satisfactory to Lessor that such tax has
been paid.
4.5 Lessee shall have the right in good faith to contest or review by
legal proceedings, or in such other manner as it deems suitable (which
proceedings, if instituted, shall be conducted promptly at Lessee's expense and
free of expense to Lessor) any such charges, real property and personal
property taxes, and assessments, provided that upon the conclusion of such
proceedings Lessee shall pay the amount that shall be finally assessed or
imposed against said premises or be adjudicated or otherwise determined to be
due and payable. Lessor will join in any contest or protest provided for in
this article at the request of Lessee, but at Lessee's sole cost and expense,
and as a condition of such joinder may require reasonable indemnity against
costs or other damages by reason of such joinder.
Page 63 of 87
<PAGE> 64
ARTICLE 5
5.1 During the term of this Lease, Lessee, at its expense, shall keep
and maintain upon all improvements and fixtures on the leased premises fire
insurance with extended coverage endorsement, written by a responsible
insurance company or companies authorized to do an insurance business in Texas
and acceptable to Lessor in an amount equal to not less than the full insurable
value thereof, excluding foundation and excavation costs. Said policy or
policies of insurance shall provide that payment for any losses covered under
or by said policy or policies shall be made to Lessor and Lessor shall be
entitled to retain the proceeds of any such insurance. A certificate of such
insurance shall be forwarded to Lessor by Lessee or on Lessee's behalf.
5.2 In addition to the insurance required under Section 5.1, Lessee
agrees to carry and maintain, and have in full force and effect throughout the
term of this Lease, workmen's compensation insurance, general comprehensive
liability insurance (which includes, but is not limited to, coverage for
products and completed operations and premises operation), and liquor liability
insurance, with an insurance company or companies authorized to transact
business in the State of Texas, for the benefit of Lessor and Lessee, and for
the protection of all persons who may suffer injury while in, on or about the
premises or from Lessee's activities and conduct of business. The amount and
coverage of such insurance shall be as reasonably approved by Lessor from time
to time. Such liability policies, if available, shall be endorsed to insure
contractual liabilities of Lessee including but not limited to the indemnities
of Lessee to Lessor under this Lease. Lessee agrees to deliver to Lessor, upon
request, a certificate showing that said insurance is in full force and effect.
The obligation of Lessee for the insurance specified herein may be brought
under the provisions of any so-called blanket policies carried by Lessee which
otherwise meet the requirements hereof, provided that all of said policies of
insurance shall name Lessor as co-insured.
5.3 LESSEE AGREES TO PROTECT AND TO INDEMNIFY AND SAVE HARMLESS LESSOR
AGAINST AND FROM ANY AND ALL CLAIMS, DAMAGES, LIABILITIES, COSTS, LOSSES, AND
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OR RESULTING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, (i) FROM THE CONDUCT OF LESSEE'S BUSINESS, OR
(ii) FROM ANY WORK, CONSTRUCTION, REPAIRS, MAINTENANCE, OR THING WHATSOEVER
DONE OR SUFFERED TO BE
Page 64 of 87
<PAGE> 65
DONE BY LESSEE ON OR ABOUT THE LEASED PREMISES, OR (iii) FROM ANY CONDITION OF
OR DEFECT IN THE LEASED PREMISES CAUSED BY LESSEE OR IN ANY FIXTURES,
IMPROVEMENTS OR EQUIPMENT NOW OR HEREAFTER LOCATED THEREON OR THEREUNDER CAUSED
BY LESSEE, OR (iv) FROM ANY BREACH OR DEFAULT ON THE PART OF LESSEE IN THE
PERFORMANCE OF ANY COVENANT OR AGREEMENT ON THE PART OF LESSEE TO BE PERFORMED
PURSUANT TO THE TERMS OF THIS LEASE, WHETHER OR NOT ACTED UPON BY LESSOR, OR
(v) FROM ANY ACT OR OMISSION OF LESSEE, OR ANY OF ITS AGENTS, DEALERS,
CONTRACTORS, SERVANTS, EMPLOYEES, LICENSEES, OR INVITEES, OR (vi) FROM LEAKS,
DISCHARGES, OR EMISSIONS OF ANY KIND FROM THE LEASED PREMISES CAUSED BY LESSEE
OR ANY FIXTURES, IMPROVEMENTS OR EQUIPMENT THEREON OR THEREUNDER CAUSED BY
LESSEE WHETHER OR NOT SUCH OCCURRENCE CONSTITUTES A VIOLATION OF ANY APPLICABLE
LEGAL REQUIREMENTS OR A NUISANCE, OR (vii) FROM ANY FIRE OR EXPLOSION CAUSED BY
LESSEE OCCURRING ON OR ABOUT THE LEASED PREMISES OR IN CONNECTION WITH THE
OPERATION OF LESSEE'S BUSINESS, OR (viii) FROM ANY NUISANCE CREATED OR SUFFERED
TO EXIST BY LESSEE, ITS AGENTS, DEALERS, CONTRACTORS, SERVANTS, EMPLOYEES,
LICENSEES, OR INVITEES, OR (ix) ANY VIOLATION OF OR FAILURE TO SATISFY ANY
LEGAL REQUIREMENT BY LESSEE DURING THE TERM OF THIS AGREEMENT. THESE
INDEMNITIES SHALL APPLY TO ACTS, OMISSIONS, AND OCCURRENCES DURING THE TERM OF
THIS LEASE. THESE INDEMNITIES BY LESSEE SHALL APPLY REGARDLESS OF THE SOLE OR
ANY CONTRIBUTING NEGLIGENCE OR INTENTIONAL OR NON-NEGLIGENT ACTS OR OMISSIONS
OF OR VIOLATION OR LACK OF COMPLIANCE WITH ANY LEGAL REQUIREMENTS BY LESSOR,
THEIR AGENTS, CONTRACTORS, EMPLOYEES, SERVANTS, DEALERS, OR LICENSEES. FOR
PURPOSES OF THESE INDEMNITIES, DAMAGES SHALL BE DEEMED TO INCLUDE ACTUAL,
CONSEQUENTIAL, TREBLE, AND PUNITIVE DAMAGES AND FINES AND PENALTIES OF ANY KIND
PAYABLE TO THIRD PARTIES. IN NO EVENT SHALL LESSEE BE LIABLE FOR (I) ANY ACT,
OMISSION OR OCCURRENCE OR OTHER LIABILITY (WHETHER CONTRACTUAL OR TORT)
RELATING TO THE LEASED PREMISES ARISING PRIOR TO THE DATE OF THIS LEASE, AND/OR
(ii) ANY CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES TO LESSOR FOR ANY MATERS
ARISING OUT OF OR RELATED TO THIS LEASE.
IN CASE ANY ACTION OR PROCEEDING COVERED BY THE FOREGOING INDEMNITY
SHOULD BE BROUGHT AGAINST LESSOR, LESSEE, UPON NOTICE FROM LESSOR, COVENANTS TO
RESIST OR DEFEND SUCH ACTION OR PROCEEDING BY RETAINING COUNSEL REASONABLY
SATISFACTORY TO LESSOR.
Page 65 of 87
<PAGE> 66
LESSEE COVENANTS AND AGREES TO PAY, AND TO INDEMNIFY LESSOR AGAINST,
ALL LEGAL COSTS AND CHARGES, INCLUDING COUNSEL FEES, LAWFULLY AND REASONABLY
INCURRED IN OBTAINING POSSESSION OF THE PREMISES AFTER DEFAULT BY LESSEE OR
UPON EXPIRATION OR EARLIER TERMINATION OF THE TERM OF THIS LEASE OR IN
ENFORCING ANY COVENANT OR AGREEMENT OF LESSEE HEREIN CONTAINED.
THE COVENANTS BY LESSEE TO INDEMNIFY LESSOR PROVIDED IN THIS ARTICLE
SHALL SURVIVE THE TERMINATION OF THIS LEASE WITH RESPECT TO ANY CLAIMS,
DAMAGES, LIABILITIES, COSTS, LOSSES AND EXPENSES THEREAFTER ASSERTED OR
INCURRED BASED UPON, ARISING FROM OR TRACEABLE TO (IN WHOLE OR IN PART) ANY
EVENTS, ACTS, OMISSIONS, OR OCCURRENCES DURING THE TERM OF THIS LEASE.
ARTICLE 6
Lessee shall not assign or hypothecate this Lease, or any part
thereof, of the leased premises, either voluntarily or involuntarily, or by
operation of law, without the prior written consent of Lessor, which consent
shall not be unreasonably withheld or delayed. Lessee shall not sublease and
grant concessions on all or any part of the leased premises without the consent
of Lessor and shall in all such cases remain fully and directly responsible for
all of the obligations of Lessee hereunder.
Page 66 of 87
<PAGE> 67
ARTICLE 7
All improvements erected upon the leased premises shall become a part
thereof and shall become the property of Lessor upon the termination of this
Lease. All trade fixtures installed by and belonging to Lessee may be removed
by Lessee upon termination of this Lease, provided Lessee is not in default
under the terms of this Lease and that same may be so removed without permanent
damage to any building or improvements on the premises, and provided further
that any damage to the said building or improvements occasioned by such removal
shall be promptly repaired by Lessee. In the event said fixtures are not so
removed within sixty (60) days from and after termination of this Lease, the
same shall become the property of Lessor.
ARTICLE 8
Lessee accepts the leased premises as is, in its present condition,
and Lessor has made no representation or warranty as to the condition,
habitability, or fitness for any purpose of the leased premises, and Lessor
shall not be liable for any latent or patent defects therein; provided,
however, Lessor has not received notice of and is not aware of any material
violations of applicable laws that exist at the leased premises.
Lessee agrees that it accepts the premises "as is" and hereby waives
any claim against Lessor for any latent defects which may exist. Any building
and improvements constructed upon the leased premises shall constitute and be a
part of the leased premises for all purposes.
Lessee shall be obligated, at its sole cost and expense, to keep all
of the leased premises, including, but not limited to, all glass, roofs,
fixtures, plumbing, wiring, HVAC equipment, walls and parking and driveway
areas in good order and repair, usual wear and tear and damage by the elements,
earthquake and fires excepted. Lessee may, at its sole cost and expense, make
additional alterations and improvements to any building and improvements as it
deems necessary during the period of said Lease, provided, however, that no
structural improvements, alterations or additions shall be made without
Lessor's written consent, which consent shall not be unreasonably withheld.
Lessee shall hold Lessor harmless for any cost or
Page 67 of 87
<PAGE> 68
expenses incurred in connection with any such initial or subsequent
improvements or additions. Notwithstanding the foregoing, Lessee shall be
permitted to make any alterations to the leased premises that may be required
from time to time by applicable law without the consent of Lessor; provided,
however, prior to making any alteration Lessee shall notify Lessor and shall be
subject to the reasonable directions of the Lessor in making such alteration,
and all of such alterations shall be made at Lessee's sole expense. If any
repair should be necessitated by reason of an insured casualty, Lessee's
obligation shall be limited to the extent of insurance proceeds received by
Lessee.
Nothing in this article limits the indemnities for third-party
liabilities provided by this Lease.
ARTICLE 9
Lessee shall comply with all laws, ordinances, judgments, injunctions,
orders, regulations, rules, requirements, guidelines, and notices (hereinafter
called "legal requirements") of every kind or nature, applicable in any way to
the conduct of Lessee's business, or any maintenance, repair or construction
work undertaken on the leased premises, or to Lessee's use or occupancy of the
leased premises, and whether the same or any of them relate to ordinary or
extraordinary, structural or nonstructural, changes or requirements to or in
and about said premises, or any improvements thereon or any such property or
changes or requirements incident to or as the result of any use or occupation
thereof and Lessee shall pay any and all costs and expenses incidental to such
compliance with all legal requirements. Without relieving Lessee of its duty to
indemnify Lessor under this Lease or under any other agreement, Lessee shall
have the right to contest the validity of or seek a variance from or review of
said legal requirements by legal proceedings or in any such other manner as it
deems suitable, and may have, if able, said legal requirements cancelled,
removed, or revoked without actual compliance with the same, and if such
actions or proceedings are instituted, they shall be conducted promptly at the
expense of Lessee and free of expense to Lessor. Notwithstanding the foregoing,
Lessee shall not be obligated to indemnify Lessor for any violation of legal
requirements relating to the condition of the leased premises existing on the
date hereof. If and whenever said legal requirements shall become absolute
against Lessee and the leased premises, or against Lessor,
Page 68 of 87
<PAGE> 69
after contest thereof, Lessee shall then comply with the same with due
diligence. Lessor shall have no duty to inspect, monitor, check or otherwise
supervise, review or enforce any of Lessee's responsibilities hereunder and
Lessor's failure to do so shall in no way limit the liability of Lessee to
indemnify Lessor as provided in this Lease or any other agreement. Lessor will
join in any contest provided for in this article at the request of Lessee, but
at Lessee's sole cost and expense, and as a condition of such joinder may
require reasonable indemnity against costs or other damages by reason of such
joinder.
ARTICLE 10
Lessor shall not be liable for any damage occasioned by failure to
keep the premises in repair and shall not be liable for any damage done or
occasioned by or from plumbing, gas, water, steam, or other pipes or sewerage,
nor for any damages arising from acts of neglect of Lessee, sub-lessees or
other occupants of the premises, with or without Lessor's consent, or of any
owners or occupants of adjacent or contiguous property.
ARTICLE 11
Lessee may use the premises solely for the purpose of operating a
Mexican food restaurant. Lessee shall not permit said premises to be used for
any unlawful purpose or purposes that will injure the reputation of the same or
the improvements thereon and will not permit the same or any portion thereof to
remain vacant or unoccupied for more than one (1) month without the consent of
Lessor, which consent will not be unreasonably withheld.
ARTICLE 12
Lessee shall pay, in addition to the rents above specified, all
utility bills of any nature, and garbage, sewerage, and waste disposal costs
and expenses levied or charged on said premises for and during the time for
which this Lease is granted.
ARTICLE 13
If Lessee shall fail to pay any rental as herein provided when the
same is due and payable, or if Lessee shall fail to observe, keep or perform
any other provisions of this Lease required to be observed,
Page 69 of 87
<PAGE> 70
kept or performed by Lessee, or if Lessee shall default under the Building
Lease relating to the improvements on the premises entered into between Lessee
and Casa Ole of Beaumont, Inc., Lessee shall be in default under this Lease and
Lessee shall have twenty (20) days from and after written notice of default
within which to cure same; provided if such default is of a nature that it
cannot be cured within twenty (20) days and Lessee commences to cure such
default within such twenty (20) day period and thereafter diligently proceeds
to cure such default, the twenty (20) day period shall be extended for an
additional one hundred twenty (120) days so long as Lessee is diligently
proceeding in good faith to cure such default. If Lessee shall fail to cure any
default as provided herein, Lessor shall have the right at its election and in
addition and without prejudice to any other remedies, to declare the entire
amount of rental due and payable forthwith, and/or to terminate this Lease
and/or enter upon said leased premises or any part thereof either with, or
without, process of law, and Lessee, or any person or persons occupying the
same, may be expelled, removed or put out, using such force as may be necessary
so to do, and repossess and enjoy said premises as before this Lease, without
prejudice to any remedies which might otherwise be used for arrears of rent or
preceding breach of covenants.
Any repossession of said premises shall not constitute a termination
of this Lease unless Lessor so notified Lessee in writing, and Lessor shall
have the right, at its option, to lease the premises so repossessed to any
other person or persons upon such terms and conditions as Lessor shall
determine. In such event, Lessee shall be and remain liable to Lessor for the
difference between the rental provided herein and the rentals so obtained from
any third person, plus all costs and expenses to Lessor of repossessing and
releasing said premises, and of transporting, repairing and/or otherwise
handling the fixtures and equipment located thereon.
ARTICLE 14
If at any time during the term hereof, proceedings in bankruptcy shall
be instituted by or against Lessee and result in an adjudication of bankruptcy,
or if Lessee shall file, or any creditor shall file, or any other person shall
file, any petition in bankruptcy, under the Bankruptcy Act of the United States
of
Page 70 of 87
<PAGE> 71
America as such act is now in force, or the same may be amended or superseded,
and shall be judicially approved, or a receiver of the business or assets of
Lessee shall be appointed, and if such appointment be not vacated within twenty
(20) days after notice thereof to Lessee, or if a general assignment is made by
Lessee or sub-lessee for the benefit of creditors, any sheriff, marshal,
constable or keeper take possession thereof by authority of any attachment or
execution proceedings, Lessor may at its option, in either or any of such
events, without notice to Lessee or any other person or persons, immediately
recapture and take possession of the leased premises and terminate this Lease,
with or without process of law; such process being expressly waived by Lessee.
ARTICLE 15
In the event that greater than fifty percent (50%) of the leased
premises is destroyed or significantly damaged by fire or other casualty, the
Lessee shall have the right to terminate this Lease in accordance with this
Article 15, and the Lessor shall have the right to terminate this Lease in
accordance with this Article 15 if fewer than five (5) years remain for the
balance of this Lease and any renewals at such time. Upon such event, any party
entitled to terminate the Lease must do so by giving written notice to the
other party within thirty (30) days of the date that the damaged was sustained
by the leased premises. If the parties do not exercise any right they have to
terminate the Lease, or if less than fifty percent (50%) of the leased premises
is destroyed or significantly damaged by fire or other casualty, then the Lease
will not terminate and in that event Lessor shall be obligated to restore the
leased premises to substantially the same condition as before the damage was
sustained thereto, provided that Lessor shall not be obligated to spend any
amount to restore the leased premises that exceeds the amount of insurance
proceeds that Lessor receives as a result of the damage sustained to the leased
premises. Lessor shall not be obligated to begin restoring the leased premises
until Lessor has received the insurance proceeds payable as a result of the
damage. So long as the damage to the leased premises was not caused of Lessee's
negligence or intentional act, then the rent payable hereunder shall be abated
during such time that the Lessee is unable to use the leased premises
Page 71 of 87
<PAGE> 72
until they have been restored. Lessee shall not be entitled to any abatement of
rent if the damage to the leased premises was caused by Lessee's negligence or
intentional act.
Regardless of the cause of any damage sustained by the leased
premises, in no event shall Lessee receive or be entitled to compensation or
damages from Lessor on account of any loss, whether of business, profits,
property, or otherwise, or for inconvenience, annoyance or personal injury
resulting from such destruction, or from or in the course of restoration,
repair or reconstruction of all or any part of the buildings or improvements,
nor for any loss, injury to or damage to persons or property in, upon or from
the leased premises from any cause or from the termination of this Lease, as
herein provided.
ARTICLE 16
Each and all of the terms, conditions, covenants and obligations
hereof shall inure to the benefit of and bind the successors in interest of the
parties hereto, provided that these provisions shall not be deemed to alter the
provisions of Article 6 hereof.
ARTICLE 17
17.1 Total Taking. If all or substantially all of the improvements
on the Leased Premises or the Leased Premises shall be taken by condemnation or
in any other manner for any public or quasi-public use or purpose (other than
for temporary use or occupancy), the term of this Lease shall terminate as of
the date of vesting of title (the "Date of the Taking") and, subject to a
proration and apportionment of all rental and other sums due hereunder as of
the Date of the Taking, no further rent shall be due hereunder.
17.2 Partial Taking. If a part of the Leased Premises shall be so
taken by condemnation, then Lessor shall give Lessee prompt written notice
thereof and the part so taken shall no longer constitute part of the Leased
Premises, but this Lease shall continue in force and effect as to the part not
so taken; provided, however, that Lessee may elect to terminate this Lease (i)
if a partial taking is more than fifty percent (50%) of the Leased Premises;
(ii) if the partial taking lasts for more than one (1) year; or (iii) if, in
the good faith and mutual judgment of Lessee and Lessor, the remaining portion
of the Leased Premises cannot be economically and practicably used by Lessee
for the conduct of its business. Lessee shall give
Page 72 of 87
<PAGE> 73
notice of any election to terminate to Lessor not later than sixty (60) days
after notice of such taking is given by Lessor to Lessee. Upon the date
specified in Lessee's notice (which shall not be more than one hundred eighty
(180) days thereafter), the term of this Lease shall terminate and, subject to
a proration and apportionment of all rental and other sums due hereunder as of
the Date of the Taking and such date, as applicable, no further rent shall be
due hereunder. Upon a partial taking and the term of this Lease continuing in
force as to any part of the Leased Premises, the rental shall be reduced
proportionately based upon the part or parts of the Leased Premises and/or
other parts of the improvements so taken.
17.3 Award. Lessor shall be entitled to receive the entire award in
any proceeding with respect to any taking (other than for temporary use and
occupancy) provided for in this Article without deduction therefrom for any
estate vested in Lessee by this Lease and Lessee shall receive no part of such
award, except as hereinafter expressly provided. Lessee shall have the right to
make a separate claim with the condemning authority for (i) any moving expenses
incurred by Lessee as a result of such condemnation; (ii) any costs incurred
and paid by Lessee in connection with any alteration or improvement made by
Lessee to the Leased Premises; (iii) the value of any of Lessee's property
taken; and (iv) any other separate claim which Lessee may hereafter be
permitted to make, provided, however, that such separate claim shall not reduce
or adversely affect the amount of the award (as hereinafter defined) to which
Lessor is entitled. If Lessee shall not be permitted to make a separate claim
in such proceeding, Lessor shall prosecute all claims in such proceeding on
behalf of both Lessor and Lessee in which event Lessee may, if it so elects and
at its expense, attend hearings, present arguments and generally participate in
the conduct of the proceeding; provided, however, that if Lessor incurs any
additional expense because of Lessee's exercising its rights under this
sentence, Lessee will bear such additional expense.
17.4 Temporary Taking. If all or any part of the Leased Premises
shall be temporarily taken by condemnation or otherwise for any public or
quasi-public use or purpose (unless Lessee shall have elected to terminate the
term of this Lease in accordance with the option provided in the last sentence
of this section), this Lease shall nevertheless remain in full force and
effect. Lessee shall continue to be
Page 73 of 87
<PAGE> 74
responsible for all of its obligations hereunder insofar as such obligations
are not affected by such taking; provided, however, that Lessee shall not be
liable for the payment of rental or other sums for the part of the Leased
Premises so temporarily taken.
ARTICLE 18
No express or implied waiver of Lessor or of any default hereunder
shall be in any way construed to be a waiver of any future or subsequent
default of Lessee, or a waiver of any of the rights of Lessor under the terms
of this Lease. If any clause or provision of this Lease is invalid or
unenforceable for any reason, such clause or provision shall be deemed
severable and the other clauses and provisions hereof shall remain in full
force and effect and shall be enforceable to the full extent permitted by law.
ARTICLE 19
Notices and demands by either party hereto may be given by certified
or registered mail, postage prepaid, addressed as follows:
LESSOR: Harken Real Estate Company, Inc.
8050 Eastex Freeway
Beaumont, TX 77708
LESSEE: Casa Ole Restaurants, Inc.
1135 Edgebrook
Houston, TX 77034
subject to the right of either party to designate, by notice in writing, any
new address to which said notices or demands must be sent.
ARTICLE 20
Lessor shall have the right to mortgage the leased premises and this
Lease shall be subordinate to any existing or future mortgage; provided,
however, that the mortgage holder must agree to enter into a nondisturbance
agreement with Lessee on terms reasonably acceptable to Lessee and the mortgage
holder.
ARTICLE 21
This Lease shall be binding upon and inure to the benefit of the
successors, assigns, heirs, administrators and executors of each of the parties
hereto. The parties may concurrently herewith for
Page 74 of 87
<PAGE> 75
recording purposes execute a short form of the within lease, the same to be
acknowledged by all parties before a Notary Public. Whenever in this Lease the
word "mortgage" is used, it shall be deemed to include in its use a "Deed of
Trust" and shall also be deemed to include interim mortgages during
construction and permanent mortgages after completion of construction.
ARTICLE 22
This Lease is subject in all events to all easements, restrictions,
rights-of-way, and covenants of record affecting the leased premises, and
Lessee hereby covenants to abide by all such covenants and restrictions.
ARTICLE 23
Lessor expressly reserves in favor of Lessor and its assigns a
nonexclusive ingress and egress easement across the existing driveway located
on the leased premises for purpose of providing Lessor and its assigns and
invitees with ingress and egress to and from Lessor's property located adjacent
to the leased premises. Lessee consents to and agrees to such nonexclusive
easement in favor of Lessor and Lessor's assigns.
Page 75 of 87
<PAGE> 76
IN WITNESS WHEREOF, the parties have hereunto set their hands
effective as of the _____ day of _______________, 199__.
HARKEN REAL ESTATE COMPANY, INC.
By:
------------------------------
Tom Harken, President
LESSOR
CASA OLE RESTAURANTS, INC.
By:
------------------------------
Title:
---------------------------
LESSEE
Page 76 of 87
<PAGE> 77
THE STATE OF TEXAS )
)
COUNTY OF JEFFERSON )
This instrument was acknowledged before me on the _______ day of
__________________, 199___, by Tom Harken, President of Harken Real Estate
Company, Inc., a Texas corporation, on behalf of said corporation.
------------------------------
Notary Public, State of Texas
THE STATE OF TEXAS )
)
COUNTY OF JEFFERSON )
This instrument was acknowledged before me on the _______ day of
_____________________, 199___, by ___________________, ________________ of Casa
Ole Restaurants, Inc., a Texas corporation, on behalf of said corporation.
------------------------------
Notary Public, State of Texas
Page 77 of 87
<PAGE> 78
EXHIBIT "A"
DESCRIPTION OF LEASED PREMISES
Page 78 of 87
<PAGE> 79
EXHIBIT "F" TO OPTION CONTRACT AND AGREEMENT
FORM OF BILL OF SALE
Page 79 of 87
<PAGE> 80
BILL OF SALE
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF JEFFERSON )
That CASA OLE OF BEAUMONT, INC., in consideration of the sum of TEN
AND NO/100 DOLLARS ($10.00) and other good and valuable consideration to
Grantor in hand paid by Grantee hereinafter named, the receipt of which is
hereby acknowledged has, subject to all of the matters set forth or referred to
herein, has BARGAINED, SOLD and DELIVERED, and by these presents does BARGAIN,
SELL and DELIVER unto CASA OLE RESTAURANTS, INC., Grantee herein, all of the
equipment, assets and property of Grantor's Casa Ole Restaurants located in
Jasper, Texas, and in Silsbee, Texas, as more fully described in Exhibit "A"
attached hereto and incorporated herein by reference (the "Property"), BUT
EXCLUDING any of Grantor's existing bank accounts and cash, the land and
buildings on which the restaurants are located, any of the equipment or
property of Grantor located at 8050 Eastex Freeway, and the cash registers
located in such restaurants.
Ad valorem taxes with respect to the Property for the current year
have been prorated as of the date hereof and Grantee assumes and agrees to pay
same and to indemnify and hold Grantor harmless in respect thereof.
BY THE ACCEPTANCE OF THIS BILL OF SALE, GRANTEE TAKES THE PROPERTY "AS
IS", AND WITH ALL FAULTS, EXCEPT FOR THE WARRANTIES OF TITLE AS PROVIDED AND
LIMITED HEREIN. GRANTOR HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATIONS AS
TO THE PHYSICAL CONDITION, MECHANICAL OPERATION, WORKING ORDER OR ANY OTHER
MATTER AFFECTING OR RELATED TO THE PROPERTY AND GRANTEE HEREBY EXPRESSLY
ACKNOWLEDGES THAT NO SUCH REPRESENTATIONS HAVE BEEN MADE. GRANTOR MAKES NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY,
Page 80 of 87
<PAGE> 81
MARKETABILITY, FITNESS OR SUITABILITY FOR A PARTICULAR PURPOSE OF OR RELATING
TO THE PROPERTY. ANY IMPLIED WARRANTIES ARE EXPRESSLY DISCLAIMED AND EXCLUDED.
When this Bill of Sale is executed by more than one person or when
Grantee is more than one person, the instrument shall read as though pertinent
verbs, nouns and pronouns were changed correspondingly and when executed by or
to a corporation or other entity other than a natural person, the words
"heirs", "executors" and "administrators" or "heirs and assigns" shall be
construed to mean "successors and assigns".
IN WITNESS WHEREOF, this Bill of Sale is executed by Grantor to be
effective as of the ____ day of_________________, 199__.
CASA OLE OF BEAUMONT, INC.
By:
------------------------------
Title:
---------------------------
RECEIVED, ACCEPTED AND AGREED TO
BY GRANTEE:
CASA OLE RESTAURANTS, INC.
By:
--------------------------
Title:
-----------------------
Page 81 of 87
<PAGE> 82
THE STATE OF TEXAS )
)
COUNTY OF JEFFERSON )
This instrument was acknowledged before me by TOM HARKEN, President of
Casa Ole of Beaumont, Inc. on this _____ day of _________________, 199__.
---------------------------------
Notary Public, State of
---------
THE STATE OF )
------------ )
COUNTY OF )
--------------
This instrument was acknowledged before me by _____________,
_____________ of Casa Ole Restaurants, Inc., on this _____ day of
_________________, 199__.
---------------------------------
Notary Public, State of Texas
Page 82 of 87
<PAGE> 83
EXHIBIT "G" TO OPTION CONTRACT AND AGREEMENT
FORM OF PURCHASER'S CLOSING CERTIFICATE
Page 83 of 87
<PAGE> 84
PURCHASER'S CLOSING CERTIFICATE
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF JEFFERSON )
WHEREAS, Casa Ole of Beaumont, Inc., Thomas L. Harken, Melba J. Harken
and Victor M. Gonzalez (herein referred to collectively as "Sellers"), have
heretofore entered into a certain Option Contract and Agreement the "Contract")
with Casa Ole Restaurants, Inc. ("Purchaser"), pursuant to which Sellers have
agreed to sell to Purchaser certain assets of Sellers' Casa Ole restaurants
located in Jasper, Texas, and Silsbee, Texas (the "Restaurants"); and
WHEREAS, Purchaser and Sellers now desire to consummate the
transaction contemplated in the Contract.
NOW, THEREFORE, in consideration of the premises and in compliance
with the provisions of the Contract and in order to induce Sellers to
consummate the transaction contemplated thereby, Purchaser hereby represents,
warrants, covenants, acknowledges and agrees to and with Sellers as follows:
1. To the best of Purchaser's knowledge, Sellers have fully and
completely performed, fulfilled, accomplished, complied with and satisfied all
duties, obligations, requirements, undertakings, covenants, agreements,
prerequisites and conditions precedent to consummation of the transaction
contemplated in the Contract which are required thereby or by law to be
performed, fulfilled, accomplished, complied with or satisfied by Sellers
through and including the Closing (as defined in the Contract).
2. Purchaser hereby acknowledges timely and complete receipt of
and full satisfaction with all instruments, documents and other writings
required by the Contract or applicable law to be produced, provided, delivered
or furnished by Sellers or any officer, director, employee, agent,
Page 84 of 87
<PAGE> 85
attorney, principal or independent contractor of Sellers; Purchaser and
Purchaser's counsel have had ample opportunity to and have examined each and
every such instrument, document and other writing and all such instruments,
documents and other writings are acceptable to Purchaser and Purchaser's
counsel in all respects.
3. Purchaser and Purchaser's counsel have had ample opportunity
to examine and have examined each and every instrument, document and other
writing required to be executed, sworn to, acknowledged and/or delivered by or
on behalf of Sellers pursuant to the provisions of the Contract and all such
instruments, documents and other writings are acceptable to Purchaser and
Purchaser's counsel in form and content and fully comply with all requirements
therefor under the Contract.
4. Purchaser and Purchaser's counsel have received and have had
ample opportunity to review, question, examine and verify Purchaser's closing
statement and the information and documentation supporting each and every entry
on such closing statement and all other instruments, documents and other
writings prepared by or otherwise required by the Contract to be executed,
sworn to, acknowledged and/or delivered by Purchaser and Purchaser and
Purchaser's counsel have approved all of same and have no questions about same
or objections thereto and Purchaser will execute, swear to, acknowledge and/or
deliver all of same as applicable.
5. Upon delivery by Sellers of the instruments, documents and
other writings required by the Contract to be executed, sworn to, acknowledged
and delivered by Sellers and payment by Sellers of the fees, costs and expenses
required by the Contract to be paid by Sellers, Purchaser hereby acknowledges
and agrees that Sellers have no continuing duty to Purchaser under the Contract
except for those covenants, representations, warranties and agreements of
Sellers which are specifically provided in the Contract to survive the Closing.
6. Purchaser is not consummating the transaction contemplated in
the Contract and is not purchasing the Business in reliance upon any
representations, warranties, agreements, statements or
Page 85 of 87
<PAGE> 86
expressions of opinions, oral or written, by any person or entity whatsoever,
including, without limitation, any agent or broker, property manager, tenant,
governmental official, Sellers or Sellers' employees, agents, attorneys,
principals or independent contractors, unless each such representation,
warranty, agreement, statement or expression of opinion is set forth in writing
and signed by the person or entity responsible for or making the
representation, warranty, agreement, statement or expression of opinion.
7. Purchaser acknowledges that Sellers are relying upon each and
all of the representations, statements and agreements of Purchaser set forth in
this Purchaser's Closing Certificate and that but for such and all of such
representations, statements and agreements and the truth and accuracy thereof,
Sellers would not consummate the transaction contemplated in the Contract.
8. All of the representations, statements and agreements of
Purchaser set forth in this Purchaser's Closing Certificate are now and shall
continue to be binding upon Purchaser and all of Purchaser's successors,
assigns, officers, directors, employees, agents, principals, attorneys,
independent contractors and all other persons and entities claiming by, through
or under Purchaser or asserting, claiming or receiving any interest of any
kind, type, nature or description in or to the Property or any part thereof.
All of the representations, warranties, statements and agreements of Purchaser
set forth in this Purchaser's Closing Certificate do now and shall continue to
inure to the benefit of Sellers and all Sellers' employees, agents, principals,
attorneys and independent contractors and their respective heirs, executors,
administrators, successors, legal representatives and assigns.
9. Purchaser acknowledges that Sellers have employed the law firm
of Orgain, Bell & Tucker, L.L.P. to act as Sellers' attorneys in this
transaction and that such attorneys have not given legal advice to Purchaser
nor have they in any manner represented or attempted to represent Purchaser in
this transaction.
Page 86 of 87
<PAGE> 87
EXECUTED AND DELIVERED this _____ day of __________________, 199___.
Casa Ole Restaurants, Inc.
By:
---------------------------------
Title:
------------------------------
Page 87 of 87
<PAGE> 1
EXHIBIT 10.41
PROMISSORY NOTE
$750,000 Houston, Texas December 30, 1996
FOR VALUE RECEIVED, the undersigned, Casa Ole No. 29, Inc.
("Maker"), promises to pay to the order of Rainbolt, Inc. ("Payee"), the
principal sum of Seven Hundred Fifty Thousand and No/100 Dollars ($750,000) as
provided below. All payments on this Note shall be due and payable in lawful
currency of the United States of America, in immediately available funds at the
office of Payee, at 709 Oakridge, Victoria, Texas 77905, or such other address
as Payee may designate.
1. Payments. The principal balance on this Note shall be due and
payable in equal annual installments commencing on the first
business day of January 1997 and concluding on the first business
day of January 2001 (the "Maturity Date"). Interest on the
balance of this Note shall accrue from the date of this Note
until the Maturity Date and be payable by Maker to Payee annually
with a final payment of all then unpaid and accrued interest due
and payable on the Maturity Date. The principal amount
outstanding from time to time hereunder shall bear interest
calculated daily on the basis of a 365-day year, at an annual
rate equal to 6%. A fee of $25.00 per day will accrue for each
day payment is late.
2. Prepayments. The unpaid principal balance of this Note or any
accrued and unpaid interest on this Note may be prepaid in whole
or in part at any time without premium or penalty.
3. Events of Default and Remedies. Without notice or demand (which
are hereby waived), the entire unpaid principal balance of, and
all accrued interest on, this Note shall immediately become due
and payable at the option of the holder hereof upon the
occurrence of any Event of Default. An Event of Default shall
occur (a) if Maker defaults in the payment of any amount due
hereunder, and such default continues for a period of ten (10)
days after written notice is received from Payee, or (b) if Maker
defaults in the performance of any covenant, condition,
obligation or agreement contained herein and such default
continues for a period of ten (10) days after written notice is
received from Payee.
4. Maximum Rate. It is the intention of the parties hereto to
conform strictly to any usury laws in force that apply to this
transaction. Accordingly, all agreements among the parties
hereto, whether previously existing, now existing or hereafter
arising and whether written or oral, are hereby limited so that
in no contingency, whether by reason of acceleration of the
maturity of
<PAGE> 2
Page 2
Promissory Note
the amounts owing under this Note or otherwise, shall the
interest (and all other sums that are deemed to be interest)
contacted for, charged or received by Payee with respect to this
Note, exceed the "Highest Lawful Rate". The "Highest Lawful Rate"
means the maximum nonusurious interest rate, if any, that at any
time or from time to time may be contracted for, taken, reserved,
charged or received under the laws of the United States and the
laws of such states as may be applicable thereto which are
presently in effect or, to the extent allowed under such
applicable laws of the United States and the laws of such states,
which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow. If,
from any circumstance whatsoever, interest under any agreement to
which Maker and Payee are parties would otherwise be payable in
excess of the Highest Lawful Rate, and if from any circumstance
Payee shall ever receive anything of value deemed interest by
applicable law in excess of the Highest Lawful Rate, then Payee's
receipt of such excess interest shall be deemed a mistake and the
same shall, so long as no Event of Default under this Note or the
Security Agreement shall be continuing, at the option of Maker,
either be repaid to Maker or credited to the unpaid principal;
provided, however that if an Event of Default shall have occurred
and be continuing, and Payee shall receive excess interest during
such period, then Payee shall have the option of either crediting
such excess amount to principal or refunding such excess amount
to Maker. All interest paid or agreed to be paid to Payee shall,
to the extent allowed by applicable law, be amortized, prorated,
allocated, and spread throughout the full period of Maker's
credit relationship with Payee until payment in full of the
principal (including the period of any renewal or extension) so
that the interest for such full period shall not exceed the
Highest Lawful Rate.
5. Attorneys' Fees and Costs. In the event this Note is placed in
the hands of an attorney for collection, or in the event this
Note is collected in whole or in part through legal proceedings
of any nature, Maker promises to pay all costs of collection,
including, but not limited to, reasonable attorneys' fees
incurred by the holder hereof on account of such collection,
regardless of whether suit is filed.
6. Successors and Assigns. All of the covenants, stipulations,
promises and agreements in this Note by or on behalf of Maker
shall bind Maker's successors and assigns, regardless of whether
so expressed; provided, however, that Maker may not, without the
prior written consent of Payee, assign any of its rights, powers,
duties, or obligations under this Note.
7. Invalid Provisions. Any provision in this Note prohibited by law
shall be ineffective only to the extent of such prohibition and
shall not invalidate the remainder of this Note.
<PAGE> 3
Page 3
Promissory Note
8. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAW.
9. Notices. Any notice or demand given hereunder by the holder
hereof shall be deemed to have been given and received (a) when
actually received by Maker, if delivered in person, or (b) if
mailed, on the earlier of the date actually received or,
regardless of whether ever received, three (3) business days
after a letter containing such notice, certified or registered,
with postage prepaid, addressed to Maker, is deposited in the
United States mail. The address of Maker is as follows:
Casa Ole No. 29, Inc.
1135 Edgebrook
Houston, TX 77034
Attn: Stacy M. Riffe
Fax No.: (713) 943-9554
Maker may change its address by written notice to Payee.
10. Headings. The headings of the sections of this Note are inserted
for convenience only and shall not be deemed to constitute a part
hereof.
EXECUTED as of the day and year first above written.
Rainbolt, Inc.
----------------------------------
Maker
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE> 4
BILL OF SALE AND ASSIGNMENT
Date.
December 30, 1996 at 12:01 o'clock A.M.
Seller:
Rainbolt, Inc., a Texas corporation
Seller's Address (including County)
709 Oakridge
Victoria, Texas 77905
(Victoria County)
Purchaser:
Casa Ole' No. 29, Inc.
Purchaser's Address (including County)
1135 Edgebrook
Houston, Texas 77034
(Harris County, Texas)
Consideration:
Seven Hundred Fifty Thousand Dollars
($750,000)
Goods:
All of the assets, property, leaseholds, business, goodwill, trade
names, and franchises used in or required for that certain restaurant business
owned and operated by Seller at 391 Victoria Mall in Victoria, Texas,
including, but not limited to, its furniture, fixtures, inventories, and
supplies..
Excluded Goods:
None
Encumbrances:
None
<PAGE> 5
Sale and Conveyance:
Seller, for the Consideration, hereby sells and conveys the Goods to
Purchaser, but does not sell or convey to Purchaser the Excluded Goods. Title
to the Goods is intended to pass from Seller to Purchaser upon the delivery of
this Bill of Sale and Assignment, regardless where the Goods may be situated.
Warranties:
Seller warrants to Purchaser that:
1) the title to the Goods is good and its transfer rightful.
2) the Goods are hereby delivered free from any security
interest or other lien or encumbrance, except the
Encumbrances.
3) the Goods are merchantable.
Negation of Assumption:
Seller hereby acknowledges that the Purchaser does not assume or agree
to pay or satisfy any of Seller's liabilities or obligations, whether
associated with the business referred to above or otherwise.
SELLER:
Rainbolt, Inc.
BY
----------------------------------
Jack R. Goodwin, President
ACKNOWLEDGEMENT
STATE OF TEXAS
COUNTY OF NUECES
This instrument was acknowledged before me on the ____ day of December,
1996 by Jack R. Goodwin in his capacity as president of Rainbolt, Inc.
----------------------------------
Notary Public
(Affix Seal)
<PAGE> 6
GUARANTY
For value received, CASA OLE RESTAURANTS, INC. hereby guarantees payment
to RAINBOLT, INC., or its successors and assigns, obligee, of the City of
Victoria, County of Victoria, State of Texas, of that certain Promissory Note
in the amount of SEVEN HUNDRED FIFTY THOUSAND AND NO\100 ($750,000.00) payable
from CASA OLE NO.29, INC. to RAINBOLT, INC., dated the 30th day of December,
1996, a copy of which is attached hereto as Exhibit "A" and incorporated
herein by this reference. CASA OLE RESTAURANTS, INC., acknowledges, as
evidenced by the resolution of its board of directors, attached hereto as
Exhibit "B" and incorporated herein by this reference, that this guaranty is
authorized by the Board of Directors and that the guaranty is reasonably
expected to directly or indirectly benefit CASA OLE RESTAURANTS, INC.
CASA OLE RESTAURANTS, INC. waives diligence on the part of RAINBOLT,
INC., its successors and assigns, in the collection of that indebtedness, and
agree that RAINBOLT, INC., its successors and assigns, shall be under no
obligation to notify CASA OLE RESTAURANTS, INC. of the acceptance of the
guaranty or of any credit extended on the face of this guaranty, or of any
renewals or extensions of the indebtedness. RAINBOLT, INC., its successors and
assigns, shall have the privilege of granting such renewals and extensions as
it may deem proper. Notwithstanding language to the contrary herein, RAINBOLT,
INC. agrees to give
Page 1
<PAGE> 7
CASA OLE RESTAURANTS, INC., 10 days written notice of a default on the part of
CASA OLE 29, INC. and an opportunity to cure the default as provided in the
note. This guaranty is in addition to such other security, if any, as RAINBOLT,
INC., its successors and assigns, now or hereafter may have. RAINBOLT, INC.,
its successors and assigns, may surrender or release all or any portion of such
other security, without in any way affecting the liability herein of CASA OLE
RESTAURANTS, INC. It shall not be necessary for RAINBOLT, INC., its successors
and assigns, in order to enforce payment by CASA OLE RESTAURANTS, INC., of the
indebtedness, to first institute suit or to pursue or exhaust its remedies
against CASA OLE NO. 29, INC., or against any other security that RAINBOLT,
INC., its successors and assigns, may have.
CASA OLE RESTAURANTS, INC., acknowledges that this guaranty is in effect
and that it is binding on it without reference to whether it is signed by any
other person, persons or entities. CASA OLE RESTAURANTS, INC., agrees that the
guaranty shall continue in full force and effect, notwithstanding the death or
the release by agreement or by operation of law of, or the extension of time
to, any other guarantor or guarantors as to obligations then existing.
This agreement is to be performed in the County of Victoria, State of
Texas, and any suit on this guaranty or for any breach
Page 2
<PAGE> 8
of this guaranty may be brought and prosecuted in the courts of that county.
Executed the 31 day of December, 1996.
CASA OLE RESTAURANTS, INC.
BY: /s/ STACY M. RIFFE
----------------------------------
STACY M. RIFFE
----------------------------------
(Printed Name)
----------------------------------
ITS: VICE PRESIDENT, CFO
----------------------------------
(Official Capacity)
THE STATE OF TEXAS )
COUNTY OF HARRIS) )
This instrument was acknowledged before me on this the 31 day of
December, 1996, by Stacy M. Riffe, Vice President, CFO of CASA OLE RESTAURANTS,
INC., a Texas (State) corporation, on behalf of said corporation.
SUE SONDEREGGER
[SEAL] -------------------------------------
SUE SONDEREGGER NOTARY PUBLIC, STATE OF TEXAS
MY COMMISSION EXPIRES
June 12, 1999 SUE SONDEREGGER
-------------------------------------
My commission expires: June 12, 1999
Page 3
<PAGE> 1
EXHIBIT 10.43
AMENDMENT NO. I
This Amendment No. 1 dated as of January 13, 1997 ("Agreement"), is
among Casa Old Restaurants, Inc., a Texas corporation ("Borrower") and
NationsBank of Texas, N.A. ("Bank").
INTRODUCTION
The Borrower and the Bank are parties to the Credit Agreement dated as
of July 10, 1996 (as modified, the "Credit Agreement"). The Borrower and the
Bank have agreed to make certain amendments to the Credit Agreement in
connection with the Borrower's request to enter into certain transactions.
THEREFORE, in connection with the foregoing and for other good and
valuable consideration, the Borrower and the Bank hereby agree as follows:
Section 1. Definitions, References. Unless otherwise defined in this
Agreement, each term used in this Agreement which is defined in the Credit
Agreement has the meaning assigned to such term in the Credit Agreement.
Section 2. Amendment.
(a) Section 1.1 of the Credit Agreement is amended by replacing the
definition of "Funded Debt" in its entirety with the following:
"Funded Debt" means with respect to any Person and as of any date
of its determination, without duplication, (a) indebtedness of such
Person for borrowed money, (b) obligations of such Person evidenced by
notes, bonds, debentures, or other similar instruments, (c) obligations
of such Person as lessee under Capital Leases, and (d) obligations of
such Person to pay the deferred purchase price of property or services
(other than trade debt and current operating liabilities incurred in the
ordinary course of business); provided, however, that if there is any
default, under the Guaranteed Note, the full unpaid amount of the
Borrowers guaranty thereof shall be deemed to be Funded Debt for the
purposes of this Agreement.
<PAGE> 2
(b) Section 1.1 of the Credit Agreement is amended by inserting in
appropriate alphabetical order the following definition:
"Guaranteed Note" means the $425,000 promissory note dated
January 6, 1997, made by Bogan Enterprises, Inc. and payable to the
order of NationsBank of Texas, N.A.
(c) Section 1.1 of the Credit Agreement is amended by renumbering
the current subparagraph (c) of the definition of "Permitted Debt" as
subparagraph (e) and inserting as subparagraphs (c) and (d) to the definition
of "Permitted Debt" the following:
(c) Debt in the form of unsecured indebtedness not to exceed
$750,000 incurred by the Borrower in connection with its purchase of its
Victoria, Texas, franchise that is payable to the seller of such
franchise;
(d) Debt in the form of the Borrower's guaranty of the
Guaranteed Note provided that the principal amount of the indebtedness
guaranteed thereunder shall not exceed $425,000; and
(d) Section 5.2 of the Credit Agreement is amended by renumbering the
current subparagraph (k) of such Section as subparagraph (1) and inserting as
subparagraph (k) the following:
(k) Guaranteed Note Default, Exercise of Guaranty. Promptly
after obtaining knowledge thereof, notice of (i) any breach by David
Bogan of any obligation under the Guaranteed Note, and (ii) any notice
received from the payee of the (Guaranteed Note regarding its intent to
exercise the Borrower's guarantee of such note, together with a copy of
the same; and
(e) Section 5.10 of the Credit Agreement is amended by replacing such
section in its entirety with the following:
Section 5.10 Distributions. The Borrower shall not (a) declare or
pay any dividends; (b) purchase, redeem, retire, or otherwise acquire
for value any of such Person's capital stock now or hereafter
outstanding in an aggregate amount in excess of (i) prior to June 1,
1998, and provided that at the time of the making thereof no Default
exists, up to $1,000,000, and (ii) thereafter, provided that the
Borrower has made purchases under subparagraph (b)(i) above in an
aggregate total amount less than $500,000,
-2-
<PAGE> 3
and further provided at the time of the making thereof no Default
exists, the difference of (A) $500,000 less (B) the aggregate total
amount of purchases made by the Borrower under subparagraph (b)(i)
above; (c) make any distribution of assets to such Person's stockholders
as such, whether in cash, assets, or in obligations of such Person; (d)
allocate or otherwise set apart any sum for the payment of any dividend
or distribution on, or for the purchase, redemption, or retirement of,
any shares of such Person's capital stock (other than repurchases
permitted in paragraph (b) above; or (e) make any other distribution by
reduction of capital or otherwise in respect of any shares of such
Person's capital stock.
Section 3. Representations and Warranties. The Borrower represents
and warrants that (a) the execution, delivery and performance of this Agreement
are within the corporate power and authority of the Borrower and have been duly
authorized by appropriate proceedings, (b) this Agreement constitutes legal,
valid, and binding obligations of the Borrower enforceable in accordance with
their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the rights of creditors
generally and general principles of equity, and (c) upon the effectiveness of
this Agreement and the amendment of the Credit Documents as provided for
herein, no Event of Default shall exist under the Credit Documents and there
shall have occurred no event which with notice or lapse of time would become an
Event of Default under the Credit Documents, as amended.
Section 4. Effect on Credit Documents. Except as amended herein, the
Credit Agreement and all other Credit Documents remain in full force and effect
as originally executed. Nothing herein shall act as a waiver of the Bank's
rights under the Credit Documents as amended, including the waiver of any
default or event of default, however denominated. The Borrower must continue to
comply with the terms of the Credit Documents, as amended. This Agreement is a
Credit Document for the purposes of the provisions of the other Credit
Documents. Without limiting the foregoing, any breach of representations,
warranties, and covenants under this Agreement may be a default or event of
default under other Credit Documents.
Section 5. Effectiveness. This Agreement shall become effective and
the Credit Agreement shall be amended as provided in this Agreement effective
on the date first set forth above when the Borrower and the Bank shall have
duly and validly executed originals of this Agreement and the Borrower shall
have delivered the same to the Bank.
-3-
<PAGE> 4
Section 6. Miscellaneous. The miscellaneous provisions of the Credit
Agreement apply to this Agreement. This Agreement may be signed in any number
of counterparts, each of which shall be an original.
THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS DEFINED IN THIS
AGREEMENT, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
BORROWER:
CASA OLE RESTAURANTS, INC.
By: STACY M. RIFFE
---------------------------------
Name: STACY M. RIFFE
-------------------------------
Title: VICE PRESIDENT
------------------------------
BANK:
NATIONSBANK OF TEXAS, N.A.
By: /s/ MARK W. MONTGOMERY
---------------------------------
Mark W. Montgomery
Vice President
-4-
<PAGE> 1
EXHIBIT 11.1
CASA OLE' RESTAURANTS, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE FISCAL YEARS ENDED
DECEMBER 29, 1995 AND DECEMBER 27, 1996
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Income (or pro forma income) applicable
to common stock $ 1,448,659 $ 1,819,464
============ ============
Computation of weighted average common shares:
Shares issued pursuant to
contribution agreement 2,732,705 2,732,705
Shares assumed issued to
fund certain distributions 60,411 --
Shares issued in initial public offering -- 2,000,000
Shares redeemed -- (1,135,000)
Effect of days outstanding on
weighted average calculation -- (278,036)
Assumed net common share
equivalents of options and warrants
using the treasury stock method -- 65,308
------------ ------------
2,793,116 3,384,977
============ ============
Pro forma net income per share $ 0.52 $ 0.54
============ ============
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Case Ole Restaurants, Inc.:
We consent to incorporation by reference in registration statement (No.
333-22271) on Form S-8 of Casa Ole Restaurants, Inc. of our report dated
February 7, 1997, relating to the consolidated balance sheets of Casa Ole
Restaurants, Inc. as of December 27, 1996 and December 29, 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three fiscal-year period ended December 27, 1996,
which report appears in the December 27, 1996 annual report on Form 10-K of
Casa Ole Restaurants, Inc.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Houston, Texas
March 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> DEC-27-1996
<CASH> 6,419,305
<SECURITIES> 1,007,255
<RECEIVABLES> 319,541
<ALLOWANCES> 0
<INVENTORY> 197,475
<CURRENT-ASSETS> 8,204,035
<PP&E> 7,326,761
<DEPRECIATION> 3,470,953
<TOTAL-ASSETS> 12,145,773
<CURRENT-LIABILITIES> 1,347,307
<BONDS> 0
0
0
<COMMON> 47,327
<OTHER-SE> 10,673,062
<TOTAL-LIABILITY-AND-EQUITY> 12,145,773
<SALES> 17,573,911
<TOTAL-REVENUES> 18,661,909
<CGS> 4,405,330
<TOTAL-COSTS> 14,014,164
<OTHER-EXPENSES> 2,289,293
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (253,655)
<INCOME-PRETAX> 2,726,339
<INCOME-TAX> 858,153
<INCOME-CONTINUING> 1,868,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,868,186
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
