U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number 1-14478
December 31, 1997
ROOM PLUS, INC.
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(Name of small business issuer in its charter)
New York 11-2622051
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
91 Michigan Avenue, Paterson, New Jersey 07503
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(Address of principal executive offices) (Zip Code)
(973) 523-4600
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(Issuer's telephone number,
including area code)
Securities registered under Section 12 (b) of the Exchange Act:
<TABLE>
<CAPTION>
Title of each Class Name of each exchange on which registered
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<S> <C>
Common Stock, par value $.00133 per share NASDAQ SmallCap & Boston Stock Exchange
Redeemable Common Stock Purchase Warrants NASDAQ SmallCap & Boston Stock Exchange
Securities registered under Section 12 (g) of the Exchange Act:
</TABLE>
Common Stock, par value $.00133 per share
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(Title of Class)
Redeemable Common Stock Purchase Warrants
- -----------------------------------------
(Title of Class)
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15 (d) of the Exchange Act during the past 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.
<PAGE>
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this form 10-KSB. [ X ]
The issuer's revenues for the fiscal year ended December 31, 1997 were
$16,851,321.
The aggregate market value of the voting stock held by
non-affiliates computed by reference to the closing price of the
stock on February 27, 1998 was $6,187,222.
The Company has not issued any stock which does not possess voting rights.
The number of shares of the issuer's Common Stock, par value $.00133 per share,
outstanding as of March 20, 1998 was 4,385,000. The actual number of the
issuer's Redeemable Common Stock Purchase Warrants outstanding as of
March 20, 1998 was 2,530,000.
Transitional Small Business Disclosure Format (check one):
Yes No X
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TABLE OF CONTENTS
ROOM PLUS, INC. PAGE #
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PART I
Item 1 Description of Business 1
Item 2 Description of Property 5
Item 3 Legal Proceedings 6
Item 4 Submission of Matters to a Vote of Security Holders 6
PART II
Item 5 Market for Common Equity and Related Stockholder
Matters 7
Item 6 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 7 Financial Statements 12
Item 8 Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure 25
PART III
Item 9 Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16 (a)
of the Exchange Act 25
Item 10 Executive Compensation 26
Item 11 Security Ownership of Certain Beneficial Owners
and Management 27
Item 12 Certain Relationships and Related Transactions 28
Item 13 Exhibits, Lists and Reports on Form 8-K 29
SIGNATURES 32
Forward Looking Statements
This Report on Form 10-KSB may contain statements that are forward-looking in
nature and such statements should not be considered as guarantees of future
performance because they involve many uncertainties and risks. Actual results
may vary materially from projected results based upon a number of factors,
including, but not limited to, the Company's ability to successfully expand its
retail distribution, to further automate the manufacturing process to increase
productivity and reduce costs and to compete with its direct and indirect
competitors.
<PAGE>
Item 1. Description of Business
(a) General
The Company is a New York corporation that was organized in 1982 under the
name RPF Holding Corp. ("RPF Holding") and was engaged in the retail sale of
mica-laminated furniture. From 1979 to 1982, the founders of the Company had
engaged in the same business under other corporate names. In March 1995, Bunk
Trunk Manufacturing Company, Inc. ("Bunk Trunk"), which was the principal
manufacturer of the furniture sold by RPF Holding, was merged into RPF
Holding. The surviving entity in such merger, which was named TAM Industries,
Inc., changed its name to Room Plus, Inc. in June 1995. The Company's
principal offices are located at 91 Michigan Avenue, Paterson, New Jersey
07503, and its telephone number at that address is (973) 523-4600.
The Company is a fully-integrated manufacturer and retailer of mica-laminated
furniture for residential uses, primarily bedroom furniture for children ages
three to 16 years old. The Company's products are of a modular design and are
intended to be multi-functional, interchangeable and space-saving.
The Company distributes its products through its own distribution network of
17 retail showrooms located in the greater New York City and Philadelphia
metropolitan areas. Management believes that stores located in strip malls
and densely populated areas offer the highest visibility of the Company's
products and ease of access for the Company's targeted customers. The
Company's retail showrooms range from approximately 2,000 to 5,000 square
feet and yield average annual sales of $259 per square foot.
The Company uses standard component pieces to manufacture furniture for
children's and adult's bedrooms and home offices. The approximately 300
standard components can be finished in various colors and textures and
combined in various configurations to produce a finished product which is
personalized to the customer's taste, space and budget. The use of standard
components also permits the Company's furniture to be reconfigured as the
customer's needs or tastes change. For example, a loft bed can be converted
into separate beds, a desk, a dresser and a bookcase, and a baby's changing
table can be converted into a child's play table and a dresser.
Unlike many of its direct competitors, the Company uses high quality raw
materials in the manufacture of its products, including high-pressure,
mica-laminate that is more resistant to impact and engineered wood that has
been laminated on both sides to provide greater stability and protection
against warping. The quality of materials and manufacturing processes used by
the Company enable it to offer a limited lifetime warranty against structural
defects.
Because the Company's finished products are manufactured from standard
components and personalized to the customer's needs, the Company does not
maintain a large inventory of finished products (other than showroom display
models). Finished products are manufactured to meet a specified desired
delivery date, which is generally fixed at the time of the order and is
generally within two to six weeks thereafter.
The Company's manufacturing operations are conducted in a 78,000 square foot
facility located in Paterson, New Jersey. In the past two years, the Company
has implemented numerous changes to its manufacturing facility and processes
in order to significantly reduce the future direct costs of manufacturing and
to produce more contemporary styles of high quality, mica-laminated
furniture.
The Company's existing manufacturing facility currently operates on a single
shift and has sufficient capacity to more than double its manufacturing
volume without substantially increasing indirect costs of manufacture. During
1997, the Company established five additional retail showrooms, three in the
Philadelphia metropolitan area and two in New York City. The Company
continues to upgrade and automate its manufacturing process and to further
reduce direct manufacturing costs.
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The residential furniture industry is cyclical, fluctuating with the general
economy. While the Company believes that furniture sales are influenced by a
number of macroeconomic factors including existing home sales, housing
starts, consumer confidence, interest rates and demographic trends, the
Company believes that it is less affected by industry economic trends because
of its focus on furniture for children. The Company believes that regardless
of economic trends, parents will place a high priority on furnishing their
children's rooms with affordable, high-quality furniture.
(b) Manufacturing Process
The Company manufactures its products in a 78,000 square foot plant located
in Paterson, New Jersey. The plant currently operates on one shift, five days
per week, utilizing a "Just In Time" manufacturing process that allows the
Company to reduce expenses associated with the maintenance of inventory. The
plant has sufficient capacity to enable the Company to more than double its
manufacturing volume without substantially increasing indirect manufacturing
costs.
Many of the current production processes used by the Company in the
manufacture of its products are highly labor intensive as is traditional in
the furniture manufacturing industry. Management believes that additional
shifts of workers, together with the continued automation of the
manufacturing process, will permit the Company to meet its manufacturing
requirements over the foreseeable future without the necessity of expanding
its manufacturing facility beyond its current size. The Company is also
exploring the possibility of using any excess manufacturing capacity to
provide independent retailers with a private label of the Company's products.
(c) Raw Materials and Suppliers
The raw materials used by the Company in manufacturing its products include
laminate, lumber, plywood, fiberboard, engineered wood, hardware, adhesives,
finishing materials and mirrored glass. Management believes that such raw
materials are readily available.
The Company has no long-term supply contracts for its raw materials and
generally purchases its raw materials from a small number of suppliers.
Although the Company has strategic reasons such as price, quality and
delivery for using a limited number of suppliers, the Company believes that
sufficient other sources of raw materials are available should its current
supply sources be disrupted. Raw materials prices fluctuate over time
depending on factors such as supply and demand and increases in prices may
have a short-term negative impact on the Company's financial condition.
(d) Products
The Company manufactures and sells multi-functional high quality
mica-laminated furniture designed both to make small spaces larger and to be
convertible into other uses. The furniture offered by the Company is
primarily made of engineered wood covered on the interior with low-pressure
mica-laminate and on the exterior with high-pressure mica-laminate. The
Company has begun producing a thinner, low-pressure laminated furniture line
that sells at lower prices, and management believes that there is strong
demand for this product line. The Company manufactures contemporary modular
furniture that has rounded (post-formed) edges on tops and drawers. The
benefits of rounded edges to the consumer include enhanced visual appeal and
elimination of hard edges, which is an important safety consideration since
the Company principally targets the children's furniture market. The Company
also produces traditional square edge products.
The Company manufactures approximately 300 standard components that can be
combined in various configurations to meet a customer's space limitations or
storage needs, and such components can be finished in hundreds of colors and
textures. In addition, the Company offers numerous options and features to
personalize its products for each customer. For example, telephone jacks can
be added to bedroom headboards, dividers can be
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included in drawers and night tables can be manufactured with a tray that
slides away when not in use. Such features allow customers to have the look
and utility of customized furniture at a lower cost.
The Company maintains an open stock policy, which enables customers to add
additional matching pieces over time to previously purchased furniture
products and to change the look of their furniture by replacing door and
drawer fronts and other accent pieces. The Company believes that such
flexibility enhances the value of the furniture to the customer and
encourages repeat business.
A substantial majority of the Company's sales relate to bedroom furniture for
children and young adults. The Company offers a wide range of beds for
children with matching desks and dressers, including multi-functional bunk
and storage modules. One of the most popular models for children is the loft
bed that utilizes space more efficiently than conventional bedroom furniture.
It is able to sleep one or two people and has a built-in desk and storage
drawers. Since a child's room is often the smallest room in the house, the
Company's children's furniture line is designed to save space through modular
designs and filling space vertically, leading to the Company's motto "A LOT
OF LIVING in a Little Space". See "Advertising and Promotion".
In addition, a portion of the Company's sales relate to adult bedroom
furniture and home office furniture. The Company offers, among other items,
night tables, headboards, armoires, bookcases, computer stations and desks.
Approximately 5% of the Company's sales are comprised of accessory
furnishings such as lamps, bed coverings, bookends, picture frames and other
small items that give the Company the ability to complete the design of the
room in the showroom.
(e) Gallery/Specialty Format
Two formats widely used by retailers of furniture to market their products
are the gallery format and the specialty format. The gallery format displays
products in complete room settings, including furnishings, wall decor,
accents and accessories and typically feature the products of one
manufacturer, such as Ethan Allen, La-Z-Boy, Thomasville and Drexel Heritage.
The specialty format specializes in a category of merchandise such as
bedding, sofas or lighting and is utilized by retailers such as Pier 1
Imports, Sleepy's and The Bombay Company.
The Company utilizes a combination gallery/specialty format as its
high-pressure, mica-laminated furniture is displayed in settings designed to
allow the consumers to envision the look of a complete room in their homes.
Each retail showroom features approximately 10-12 settings. This presentation
format encourages consumers to purchase an entire room of furniture and
accessories from the Company, instead of individual pieces from different
manufacturers and results in an average sale per customer of approximately
$2,000. The Company believes that distributing its products through dedicated
Company owned stores strengthens brand awareness, provides well-informed and
focused sales personnel and encourages the purchase of multiple items per
visit.
(f) Advertising and Promotion
The Company marketing effort is supported by extensive advertising and
promotion featuring the Company's slogan "Just Round the Corner" and "A LOT
OF LIVING in a Little Space" motto. The Company has taken all necessary steps
to register its slogan and motto. Management believes that advertising on
broadcast and cable television has made the Company a household name in the
area of children's furniture in the New York metropolitan area.
For the year ended December 31, 1997, the Company's advertising budget was
approximately $1,800,000 or 10.6% of revenues. The increase in advertising
costs over the prior year is largely attributable to the Company's entry into
metropolitan Philadelphia through the opening of three showrooms. The Company
achieves savings in advertising costs through its use of an affiliated entity
to purchase advertising at discounts and its strategy of making long-term
advance purchases and purchasing time blocks in bulk to achieve discounted
rates. The Company also advertises to a lesser extent in newspapers and on
radio.
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The Company's primary target market is women in the 24 to 50 age bracket,
since the Company believes they most strongly influence the buying decision
for children's furniture. Much of the Company's advertising is also shown
during programming for children because children may influence their parents'
decision on what type of furniture to have in their rooms.
Retail Media Plus, Inc. ("Retail Media Plus"), which is owned by three
executive officers of the Company, places all of the Company's advertising
and bills the Company only for the actual cost of such advertising, without
any additional expenses or mark-ups. See "Certain Relationships and Related
Transactions".
Pursuant to an agreement with King Features, the Company utilizes the Dennis
the Menace character as part of its corporate logo. The Company believes that
this recognizable character has assisted in market recognition as the Company
began its expansion in 1997 outside its traditional market areas.
(g) Expansion Strategy
The Company's expansion strategy is primarily focused on opening additional
retail showrooms in the existing markets of New York, New Jersey and greater
Philadelphia, PA. In 1997, management opened two sites in the metropolitan
New York area and three sites in greater Philadelphia. The Company does not
plan to open new showrooms in 1998. The Company is supplementing its
management information system in 1998 with point of sale equipment to permit
on line order processing, and provide on demand sales and marketing
information.
(h) Customer Satisfaction
The Company is committed to providing high-quality customer service in all
phases of its business, including offering instant store credit, a decorating
service and professional delivery. The Company offers no interest, deferred
payment plans to qualified purchasers, which the Company believes gives
customers the flexibility to structure their purchases of the Company's
furniture according to their budget.
The Company is generally able to offer delivery and in-home set-up of its
products within two to six weeks from the date of the order. Delivery is
provided by an independent professional furniture delivery company whose
delivery personnel are trained by the Company in the set-up of its products.
The Company also offers free in-home decorating service with a minimum
purchase of $1,000. A trained salesperson will travel to a customer's home
with pictures of the Company's products, floor plans and charts of available
colors and finishes, assist the customer in the selection of products and
take measurements to ensure that the furniture selected will fit properly in
the intended location.
In addition to its sales personnel, skilled customer satisfaction
representatives are available to answer customer questions during business
hours. The Company believes that its commitment to customer service has
contributed to the number of repeat purchases by the Company's customers.
(I) Government Regulation
The Company's manufacturing operations are subject to a wide range of
federal, state and local laws and regulations relating to the protection of
the environment, workers' health and safety and the emission, discharge,
storage, treatment and disposal of hazardous materials. These laws include
the Clean Air Act of 1970, as amended, the Resource Conservation and Recovery
Act, the Federal Water Pollution Control Act and the Comprehensive
Environmental, Response, Compensation and Liability Act. Certain of the
Company's operations uses glues and coating materials that contain chemicals
that are considered hazardous under various environmental laws. Accordingly,
management closely monitors the Company's environmental performance at its
manufacturing facility. The Company is also a voluntary participant in the
Occupational Safety and Health Administration ("OSHA") Consultation Program
in which OSHA periodically inspects the Company's facilities and makes
recommendations on how to eliminate unsafe conditions in the manufacturing
process before a complaint is filed. The cost to the
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Company to comply with government regulation of its manufacturing process and
the effect of such compliance on the Company's operations are not material.
The Company's retail operations are not subject to material federal, state
and local laws and regulations other than consumer protection laws.
Management believes that the Company is in substantial compliance with all
laws and regulations affecting its business.
(j) Competition
The home furniture industry is a highly competitive and fragmented market
with estimated annual U.S. sales of $49.6 billion in 1996 and estimated
annual U.S. sales of $53 billion in 1997.
The Company is the largest retailer of mica-laminated home furniture in the
metropolitan New York and Philadelphia areas, where its 17 retail showrooms
are located. Several small retailers such as Atlantic Furniture and Kids'
Room, and large retailers, such as IKEA, also sell mica-laminated furniture
similar to that sold by the Company in the same geographic region, but
generally through only one or two retail outlets. The Company also competes
with many companies, including much larger and diverse furniture companies,
such as Huffmann Koos, Levitz, Thomasville and Drexel Heritage, that sell
primarily wood furniture that is not mica-laminated.
(k) Employees
All Company personnel are employees of Employee Solutions, Inc. ("ESI")
successors to Corporate Management Group Recruiting, Inc. and their services
are leased to the Company pursuant to an employee leasing agreement (the
"Employee Leasing Agreement") between the Company and ESI. All references to
employees herein refer to personnel whose services are leased by the Company
from ESI under the Employee Leasing Agreement.
Pursuant to the Employee Leasing Agreement, ESI is responsible for payment of
all federal, state and local employment taxes and providing workers'
compensation and disability coverage and other mandated employee benefits for
the employees. The Company retains the right to make all decisions concerning
the hiring and termination of employees. The Employee Leasing Agreement
provides that it shall continue in full force and effect unless terminated by
(i) either party for cause, as described in such agreement, (ii) the Company
on thirty (30) days prior notice, or (iii) ESI on ninety (90) days prior
notice.
The Company provides intensive two-week, 100-hour training program to all
sales personnel. Topics include merchandising, room layout, product knowledge
and salesmanship and are taught by a full-time professional trainer. The
Company believes that a well-trained sales force helps increase sales,
encourages repeat customers and minimizes employee turnover. The Company
attempts to select its retail managers from the pool of sales personnel
employed by the Company. The average store manager has been with the Company
for approximately seven years, and the vice president for sales has been with
the Company for over 14 years.
As of December 31, 1997, the Company had approximately 203 employees, of whom
four were executive officers, 75 were engaged in sales, 97 were engaged in
manufacturing and 27 were administrative staff. Approximately 60 of the
Company's manufacturing employees are covered by a collective bargaining
agreement with a local division of the International Union of Electronic,
Electrical, Salaried, Machine and Furniture Workers, AFL-CIO (the "Union").
The Company entered into a three-year collective bargaining agreement with
the Union in September 1997. The Company has never experienced a material
work stoppage and believes that its relationship with its employees is
generally satisfactory.
Item 2. Description of Property
The Company distributes substantially all of its products through a network
of Company-owned retail showrooms dedicated solely to the display of the
Company's products. All of such showrooms are located in premises leased
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by the Company. As of the date of this 10-KSB, the Company operates 17 retail
showrooms in New York, New Jersey and Pennsylvania, which showrooms are set
forth below:
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Month and Year Square Feet
Location Opened (Approximate)
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Manhattan (3rd Ave.), NY June 1981 3,500
Manhattan (Lexington Ave.), November 1995 2,700
Manhattan (Broadway between
18th & 19th Sts.), NY September 1996 5,000
Scarsdale, NY January 1982 3,500
Farmingdale, NY February 1995 3,700
Carle Place, NY August 1987 4,400
Forest Hills, NY October 1987 2,000
Staten Island, NY March 1997 4,000
Brooklyn, NY January 1997 2,700
Paramus, NJ (Rt.4) March 1983 5,000
Paramus, NJ (Rt. 17) February 1988 5,000
East Hanover, NJ August 1983 4,000
East Brunswick, NJ August 1985 4,800
Union, NJ October 1995 3,900
Cherry Hill, NJ March 1997 5,000
Langhorne, PA February 1997 3,200
King of Prussia, PA June 1997 4,000
The leases for the Company's retail showrooms have terms ranging from five to
13 years and some leases contain optional renewal provisions for additional
five-year periods. Certain leases require the Company to pay real estate
taxes and insurance.
The Company's retail showrooms are open seven days a week, generally from 10
a.m. to 9 p.m. Monday through Saturday and 12 p.m. to 5 p.m. on Sundays. The
two retail showrooms located in Paramus, New Jersey are closed on Sundays.
In addition to its retail showrooms, the Company currently leases a 78,000
square foot plan in Paterson, New Jersey, which houses its administrative
offices, executive staff, sales and marketing staff and its manufacturing and
shipping facilities. The Company leases the facility at a monthly rent of
approximately $24,000, subject to annual adjustment as more fully set forth
in such lease. The lease expires on May 31, 1999, and the Company has the
option to renew the lease for an additional 15 year period on the same terms
and conditions as the original lease, including annual adjustments in rent.
The owner of the Paterson facility is M&S Realty Company, which is owned by
Theodore Shapiro, the Company's Executive Vice President and Director of
Manufacturing. See "Certain Relationships and Related Transactions".
Item 3. Legal Proceedings
The Company is not a party to any material pending legal proceedings, nor, to
the Company's knowledge is any material legal proceeding threatened.
Item 4. Submission of Matters to a Vote of Security Holders
None during the fourth quarter of the year ended December 31, 1997.
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PART II
Item 5. Market For Common Equity and Related Stockholder Matters
(a) Market Information
The Company's Common Stock and Redeemable Common Stock Purchase Warrants are
traded on the National Association of Securities Dealers Automated Quotation
System (NASDAQ) SmallCap Market under the Symbols "PLUS" and "PLUSW"
respectively, and on the Boston Stock Exchange under the symbols "RPF" and
"RPF.WT", respectively. Set forth below are the range of reported high and
low sales price information for the Company's Common Stock and Redeemable
Common Stock Purchase Warrants for 1997 and the fourth quarter of 1996 (when
the Company went public) as reported by NASDAQ. All over-the-counter market
price quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
Price Per
Price Per Share Redeemable
of Common Common Stock
Stock Purchase Warrant
Year ended December 31, 1996 --------------- ----------------
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Fourth Quarter High 8-7/8 4
Low 4-5/8 1-1/4
Year ended December 31, 1997
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First Quarter High 5-1/2 2-7/8
Low 2-7/8 21/32
Second Quarter High 6-1/4 1-3/4
Low 3 7/8
Third Quarter High 6-3/4 11/2
Low 5-1/8 3/4
Fourth Quarter High 8-1/4 21/2
Low 2 7/16
(b) Holders
As of March 13, 1998, the Company had approximately 642 beneficial owners of
its Common Stock and 447 record holders of its Redeemable Common Stock
Purchase Warrants.
(c) Dividends
The Company has not paid any dividends on its Common Stock in the last two
fiscal year and does not anticipate paying dividends to its shareholders in
the foreseeable future. The Company currently intends to reinvest earnings,
if any, in the development and expansion of its business. The declaration
and payment of dividends in the future will be at the election of the Board
of Directors and will depend upon the Company's earnings, current and
anticipated capital requirements, results of operations, financial position
of the Company, plans for expansion, future prospects, general economic
conditions, and restrictions under then existing credit and other debt
instruments and arrangements, and other factors deemed pertinent by the
Board.
(d) Recent Sales of Unregistered Securities
Effective January 31, 1997, the Company issued warrants to acquire 25,000
shares of common stock to each of three executive officers at an exercise
price of $3.0625. Such warrants expire five years from the date of grant.
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Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with the
Company's Financial Statements (and the related notes thereto) included
elsewhere in this Form 10-KSB.
Description of Business
(a) General
The Company is a New York corporation that was organized in 1982 under the
name RPF Holding Corp. ("RPF Holding") and was engaged in the retail sale of
mica-laminated furniture. From 1979 to 1982, the founders of the Company had
engaged in the same business under other corporate names. In March 1995,
Bunk Trunk Manufacturing Company, Inc. ("Bunk Trunk"), which was the
principal manufacturer of the furniture sold by RPF Holding, was merged into
RPF Holding. The surviving entity in such merger, which was named TAM
Industries, Inc., changed its name to Room Plus, Inc. in June 1995. The
Company is a fully-integrated manufacturer and retailer of mica-laminated
furniture for residential uses, primarily bedroom furniture for children
ages three to 16 years old. The Company's products are of a modular design
and are intended to be multi-functional, interchangeable and space-saving.
In November 1996, the Company completed its initial public offering ("IPO")
of 1,165,000 shares of its Common Stock and 2,530,000 Redeemable Common
Stock Purchase Warrants. Net proceeds to the Company after underwriting
commissions, related underwriting expenses, and additional expenses incurred
in connection with the offering were approximately $4,600,000.
(b) Results of Operations -- Ratios
The following tables set forth, for the periods indicated, certain items
from the Company's Statements of Operations, presented as a percentage of
revenues. The operating results for any period are not necessarily
indicative of results that can be expected for any future period.
Years ended December 31
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1997 1996
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Revenues 100.0% 100.0%
Cost of goods sold 44.0% 40.3%
Gross profit 56.0% 59.7%
Selling, general & administrative expenses 71.9% 59.7%
Loss from operations (15.9)% 0.0%
Other income (deductions) (1.3)% 0.0%
Net loss (11.3)% 0.0%
1997 Compared with 1996
Revenues
Revenues for the year ended December 31, 1997 were $16,851,321, as compared
to $14,427,108 for the year ended December 31, 1996, an increase of
$2,424,213 or 16.8%. This increase is primarily the result of five new
showrooms in 1997. The new showrooms contributed revenues of $3,078,696
while revenues of existing showrooms decreased $654,483. Management believes
that the opening of two showrooms in 1997 in the same geographic area of
existing showrooms contributed to the decrease in existing showroom
revenues, primarily as a result of the dilution of experienced sales
personnel. The remaining three new showrooms were opened in a new geographic
area for the Company and have required greater investments in personnel and
advertising than anticipated to generate revenues.
Cost of goods sold
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Cost of goods sold for the year ended December 31, 1997 was $7,418,128 or
44.0% of revenues as compared to $5,814,485 or 40.3% of revenues for the
same period in 1996. The increase in cost of goods sold was primarily the
result of increased production cost (labor) in anticipation of increased
volume from new showrooms. As these new showrooms have taken longer than
anticipated to generate the expected revenues, costs as a percentage of
revenues has increased. Inventory has increased approximately $450,000
primarily due to the addition of the five aforementioned new showrooms.
As a result of the foregoing, gross profit decreased in 1997 to 56.0% of
revenues from 59.7%
Selling, general and administrative expenses
Selling, general and administrative expenses amounted to $12,110,370 or
71.9% of revenues in 1997 as compared to $8,613,398 or 59.7% of revenues in
1996. The increase of $3,496,972 is primarily due to expenses associated
with the opening of one new showroom in late-1996 and five new showrooms in
1997. Such expenses included payroll, rent and related showroom overhead
costs of $1,950,000 and an increase in advertising of $400,000.
Other income and expenses
Other income and expenses was a net expense of $219,679 in 1997 as compared
to a net expense of $21,487 in 1996. The increase is the result of costs
accrued in anticipation of closing one showroom, increased interest expense
caused by the Company's use of its line of credit and the costs associated
with a proposed acquisition which was terminated in 1998.
Income before income taxes
The preceding factors combined to produce a loss before income taxes of
$2,896,856 as compared to a loss before income taxes of $22,262 in 1996.
1996 Compared with 1995
Revenues
Revenues for the year ended December 31, 1996 were $14,427,108, as compared
to $13,149,018 for the year ended December 31, 1995, an increase of
$1,278,090 or 9.7%. This increase is primarily the result of four new
showroom openings during late-1995 and 1996, which increased revenues by
approximately $1,391,382. Revenues from existing showrooms also increased by
$399,687. Such increases were partially offset by the closing of one
showroom in 1996.
Cost of goods sold
Cost of goods sold for the year ended December 31, 1996 were $5,814,485 or
40.3% of revenues as compared to $6,881,282 or 52.3% of revenues for the
same period in 1995. This decrease is due to changes in the manufacturing
processes and sale of inventory, including a reduction of direct labor, and
manufacturing overhead of $264,197 and $120,422, respectively, as compared
to the same period for 1995. In addition, inventory was reduced from
$1,739,995 in January 1995 to $1,229,561 in December 1995. The inventory was
sold at the Paramus, New Jersey showroom, which was used as a Clearance
Center for several months in 1995. At December 31, 1996 inventory increased
by $220,846 to $1,450,407, primarily due to the addition of four showrooms
in late- 1995 and 1996.
As a result of the foregoing, the Company realized an increase in gross
profit in 1996 as compared to 1995, with a gross profit of $8,612,623 or
59.7% of revenues in the year ended December 31, 1996, as compared to
$6,267,736 or 47.7% of revenues achieved during the same period in 1995.
Selling, general and administrative expenses
Selling, general and administrative expenses amounted to $8,613,398 or 59.7%
of revenues in 1996 as compared to $7,932,515 or 60.3% of revenues in 1995.
The increase of $680,883 is primarily due to expenses associated with the
opening of four new showrooms in late-1995 and 1996. Such expenses included
payroll, rent and related showroom overhead expenses of $588,231 and an
increase in advertising of $300,000 over the 1995 levels. These additional
expenses were partially offset by a reduction in employee benefits and
related Workers'
-10-
<PAGE>
Compensation insurance premiums achieved when the Company entered into an
employee leasing agreement with ESI, Inc. in January of 1996.
Operating income
Operating loss for the year ended December 31, 1996 was $775 as compared to
an operating loss of $1,664,779 or 12.7% of revenues during the year ended
December 31, 1995. See "Liquidity and Capital Resources."
Other income and expenses
Other income and expenses for the year ended December 31, 1996 was a net
expense of $21,487 as compared to a net expense of $159,572 in the year
ended December 31, 1995. The primary reasons for the $126,900 net decrease
in other expenses were a reduction in interest expenses and proceeds from an
insurance claim for water damage.
Income before income taxes
The preceding factors combined to show an increase in net income totaling
$1,802,089 in the year ended December 31, 1996 as compared to the year ended
December 31, 1995. There was a net loss of $22,262 in 1996 as compared to a
net loss of $1,824,351 or 13.9% of revenues in 1995.
Liquidity and Capital Resources
The Company had a working capital deficit of $315,361 at December 31, 1997
which represented a decrease in working capital of $3,089,849 from the
working capital surplus of $2,774,488 at December 31, 1996. The decrease in
the surplus is primarily caused by the Company's program to establish new
showrooms and to re-merchandise and refurbish existing showrooms. The
Company has substantially depleted its cash reserves and will need to seek
additional capital in the near term. The Company has received several
financing proposals and is currently considering such proposals and other
possible financing alternatives. While there can be no assurances as to the
ultimate availability or terms of such additional financing, the Company
believes that sufficient financing will be available to fund its operations
for at least the next twelve months.
The Company's operating activities used cash of $2,711,402 and $989,274 for
the years ended December 31, 1997 and 1996, respectively. The principal use
of the cash in 1997 was to finance operating expenses and inventory
associated with the opening of one showroom in late-1996 and five new retail
showrooms in 1997, a $453,919 increase in inventory, a provision for closing
one showroom and a $100,000 deposit in connection with a proposed
acquisition. In February 1998, the Company terminated its letter of intent
to acquire The Baby's Room, Inc. and Baby's Room USA, Inc. Upon such
termination, the Company's deposit of $100,000 was returned.
The Company's investing activities used cash of $514,469 and $975,506 for
the years ended December 31, 1997 and 1996, respectively. The principal use
of cash in 1997 and 1996 was the money expended on leasehold improvements as
well as the purchase of fixtures and inventory for new showrooms and the
purchase of equipment to improve manufacturing efficiency. In management's
opinion, all such assets are adequately insured.
The Company's financing activities provided cash of $233,626 and $5,204,304
for the years ended December 31, 1997 and 1996, respectively. Utilization of
the Company's line of credit and borrowing for equipment acquisitions was
the primary source of cash in 1997. The cash provided by the Company's
financing activities for the year 1996 primarily resulted from the proceeds
of the sale of common stock and warrants of $6,478,000 which was partially
offset by $1,273,344 of charges connected with the IPO.
In August 1997, the Company increased its line of credit facility from
$350,000 to $500,000. Such line bears interest at the prime rate plus 2% per
annum and matures in August 1998. In June 1996, the Company also obtained a
bank loan in the amount of $50,000, which bore interest at prime rate plus
2% per annum. The Company repaid all outstanding balances on the bank loan
and the 1996 line of credit with a portion of the net proceeds from the IPO.
-11-
<PAGE>
In June 1996, a bridge loan in the amount of $150,000 was obtained from four
investors. The loan bore interest at the rate of 13% per annum and was due
on June 18, 1997. In connection with this bridge loan, the Company issued an
aggregate of 20,000 shares of Common Stock to the investors.
In July 1996, a private placement of 500,000 shares of Common Stock at a
purchase price of $.80 per share was completed by the Company (the "1996
Private Placement"). The Company received net proceeds of $332,500 from the
1996 Private Placement and such proceeds were utilized for expenses relating
to the IPO, repayment of a portion of the Company's bank borrowings and
working capital.
-12-
<PAGE>
Item 7. Financial Statements
The following financial statements are furnished as part of this Annual
Report on Form 10-KSB:
Index to Financial Statements Page No.
----------------------------- --------
Independent Auditors' Report 13
Balance Sheets as of December 31, 1997 and 1996 14
Statements of Operations
Years Ended December 31, 1997 and 1996 15
Statements of Stockholders' Equity
Years Ended December 31, 1997 and 1996 16
Statements of Cash Flows
Years Ended December 31, 1997 and 1996 17
Notes to Financial Statements 18
-13-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and
Shareholders of Room Plus, Inc.
Paterson, New Jersey
We have audited the accompanying balance sheets of Room Plus, Inc. as of
December 31, 1997 and 1996, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Room Plus, Inc. as of December
31, 1997 and 1996, and the results of its operations and cash flows the years
then ended in conformity with generally accepted accounting principles.
Certain conditions indicate that the Company may be unable to continue as a
going concern. As discussed in Note 20 to the financial statements, the Company
has suffered recurring losses from operations and has a working capital
deficiency. These conditions raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. Management's
plans with regard to this matter are discussed in Note 20.
/s/ EHRENKRANTZ STERLING & CO., LLC
- -----------------------------------
EHRENKRANTZ STERLING & CO., LLC
Certified Public Accountants
Roseland, New Jersey
March 30, 1998
-14-
<PAGE>
ROOM PLUS, INC.
BALANCE SHEETS
December 31
---------------------
1997 1996
------ -------
ASSETS
Current Assets
Cash and cash equivalents...........................$ 185,843 $3,178,088
Accounts receivable................................. 67,685 38,888
Inventories......................................... 1,904,326 1,450,407
Notes receivable, officers.......................... 12,400 48,600
Prepaid expenses and other current assets........... 492,555 375,538
Deferred income taxes............................... 134,500 67,329
----------- ----------
Total Current Assets............................... 2,797,309 5,158,850
----------- ----------
Property and Equipment, at cost....................... 3,745,196 2,820,083
Less accumulated depreciation....................... 1,940,893 1,752,099
----------- ----------
1,804,303 1,067,984
----------- ----------
Other Assets
Security deposits................................... 165,183 159,549
Deferred charges.................................... 84,291 240,780
Deferred income taxes............................... 1,038,500 106,048
Notes receivable, officers.......................... 177,965 177,092
----------- ----------
1,465,939 683,469
----------- ----------
$6,067,551 $6,910,303
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt...................$ 212,791 $ 190,869
Notes payable....................................... 400,070 75,000
Due to related company.............................. 258,770 135,514
Accounts payable and accrued expenses............... 1,604,047 1,384,803
Sales taxes payable................................. 108,475 122,772
Customer deposits and other advances................ 528,517 475,404
----------- ----------
Total Current Liabilities.......................... 3,112,670 2,384,362
----------- ----------
Long-term Debt, less current portion.................. 447,857 118,866
----------- ----------
Commitments and Contingency........................... -- --
Stockholders' Equity
Capital stock
Authorized, 10,000,000 shares at $.00133 par value,
4,385,000 shares issued and outstanding............ 5,832 5,832
Additional paid-in capital.......................... 6,512,645 6,512,645
Deficit.............................................(4,011,453) (2,111,402)
----------- ----------
2,507,024 4,407,075
----------- ----------
$6,067,551 $6,910,303
=========== ==========
See notes to financial statements.
-15-
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31
----------------------------
1997 1996
----------- ------------
Revenues ...................................... $16,851,321 $14,427,108
Cost of goods sold ............................ 7,418,128 5,814,485
------------ -----------
Gross Profit ................................ 9,433,193 8,612,623
------------ -----------
Expenses
Selling ..................................... 9,979,319 7,062,219
General and administrative .................. 2,131,051 1,551,179
------------ -----------
12,110,370 8,613,398
------------ -----------
Loss from operations .......................... (2,677,177) (775)
------------ -----------
Other Income (Deductions)
Interest expense ............................ (106,205) (65,135)
Proposed acquisition costs .................. (104,003) --
Provision for store closing ................. (100,000) --
Interest and other income ................... 90,529 43,648
------------ -----------
(219,679) (21,487)
Loss before income taxes (benefits) ........... (2,896,856) (22,262)
Income taxes (benefits) ....................... (996,805) (19,177)
------------ -----------
Net Loss .................................... $ (1,900,051) $ (3,085)
============ ===========
Weighted average common shares outstanding .... 4,385,000 3,896,875
============ ===========
Basic and diluted net loss per share .......... $ (0.43) $ --
============ ===========
See notes to financial statements.
-16-
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Issued and Issued and
Authorized Outstanding Outstanding Additional
Common Common Common Paid-in
Shares Shares Amount Warrants Amount Capital Deficit Total
---------- --------- ------ ----------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 10,000,000 2,325,000 $3,092 -- $ -- $1,310,729 $(2,108,317) $ (794,496)
Issuance of common stock 300,000 399 -- -- 240,000 -- 240,399
Issuance of common stock 20,000 27 -- -- 16,000 -- 16,027
Issuance of common stock 75,000 100 -- -- -- -- 100
Issuance of common stock 500,000 665 -- -- 331,499 -- 332,164
Initial Public Offering 1,165,000 1,549 2,530,000 253,000 4,361,417 -- 4,615,966
Net loss -- -- -- -- -- (3,085) (3,085)
---------- --------- ------ ----------- -------- ---------- ----------- ------------
Balance, December 31, 1996 10,000,000 4,385,000 5,832 2,530,000 253,000 6,259,645 (2,111,402) 4,407,075
Net loss -- -- -- -- -- (1,900,051) (1,900,051)
---------- --------- ------ ----------- -------- ---------- ----------- ------------
Balance, December 31, 1997 10,000,000 4,385,000 $5,832 2,530,000 $253,000 $6,259,645 $(4,011,453) $2,507,024
---------- --------- ------ ----------- -------- ---------- ----------- ------------
</TABLE>
See notes to financial statements.
-17-
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31
--------------------------
1997 1996
----------- -----------
Cash Flows from Operating Activities
Net loss........................................... $(1,900,051) $ (3,085)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation .................................... 250,200 134,901
Reserve for bad debts ........................... -- (77,412)
Deferred income taxes ........................... (999,623) (18,877)
Loss on store closing ........................... 100,000 --
(Increase) decrease in operating assets
Accounts receivable ........................... (28,797) 203,687
Inventories ..................................... (453,919) (220,846)
Prepaid expenses ................................ (117,017) (230,694)
Deferred charges ................................ 156,489 (237,476)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses ........... 295,613 (480,631)
Sales taxes payable ............................. (14,297) (64,159)
Cash surrender value of officers' life insurance -- 5,318
----------- -----------
Net cash used in operating activities ......... (2,711,402) (989,274)
----------- -----------
Cash Flows from Investing Activities
Purchases of property and equipment ............... (544,162) (816,210)
Net loans (to) from executive officers ............ 35,327 (106,747)
Increase in security deposits and deferred charges (5,634) (52,549)
----------- -----------
Net cash used in investing activities ......... (514,469) (975,506)
----------- -----------
Cash Flows from Financing Activities
Net proceeds of short-term debt ................... 325,070 75,000
Repayment of long-term debt ....................... (91,444) (75,352)
Proceeds from issuance of common stock ............ -- 6,478,000
Charges in connection with initial public offering -- (1,273,344)
----------- -----------
Net cash provided by financing activities ..... 233,626 5,204,304
----------- -----------
Net Increase (Decrease) in Cash ................. (2,992,245) 3,239,524
See notes to financial statements.
-18-
<PAGE>
Cash (Overdraft), beginning of year ............... 3,178,088 (61,436)
----------- -----------
Cash, end of year.................................. $ 185,843 $ 3,178,088
=========== ===========
See notes to financial statements.
-19-
<PAGE>
ROOM PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company is located in Paterson, New Jersey, and manufactures high
quality mica furniture. The Company distributes substantially all of its
products through a network of 17 Company-owned retail showrooms
dedicated solely to the display of the Company's products. The retail
showrooms are located in New York, New Jersey and Pennsylvania under the
trade name of Room Plus Furniture.
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
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Inventories
Inventories are stated at the lower of cost determined by the first-in,
first-out method or market.
Depreciation and Amortization
Depreciation is computed by the straight-line and various accelerated
methods over the estimated useful lives of the related assets, which
range between five and ten years. Amortization of leasehold improvements
is computed by the straight-line method over the estimated useful lives
of the related assets or the lease term, if shorter.
Guaranty and Warranty Policies
The Company maintains a limited lifetime defective product warranty for
products that are manufactured by the Company to ultimate retail
customers. Product warranty expense is not significant in relation to
the product sale and is expensed when incurred. The effect of this
accounting treatment is not material to the financial position or the
results of operations for any period presented.
Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities which constitute
financial instruments as defined in Statement of Financial Accounting
Standards No. 107 approximate their recorded value.
Advertising
The Company expenses the production costs of advertising the first time
the advertising takes place. Advertising expense was $1,780,380 and
$1,295,839 in 1997 and 1996, respectively.
Earnings per Common Share
In the fourth quarter of 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS 128),
which supersedes Accounting Principles Board Opinion No. 15. Under FAS
128, earnings per common share is computed by dividing net income (loss)
available to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted earnings per share
reflects the potential dilution that could occur if securities
-20-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
or other contracts to issue common shares were exercised or converted
into common shares or resulted in the issuance of common shares.
Prior-period amounts have been restated, where appropriate, to conform
to the requirements of FAS 128.
For 1996, pro forma net loss per common share has been computed by
dividing pro forma net loss by the pro forma number of common shares
outstanding. As required by the Securities and Exchange Commission
rules, all warrants, options and shares issued within one year of the
public offering at less than the public offering price are assumed to be
outstanding for each year presented for purposes of the per share
calculation. Such incremental shares were determined utilizing the
treasury stock method as if they were outstanding for all periods
presented.
Note 2: INVENTORIES
Inventories consist of the following:
December 31
----------------------
1997 1996
---------- ----------
Showrooms and warehouse................. $1,451,814 $1,151,107
Raw materials........................... 427,254 290,498
Work-in-process......................... 25,258 8,802
---------- ----------
$1,904,326 $1,450,407
========== ==========
Note 3: PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31
----------------------
1997 1996
---------- ----------
Automobiles................................ $ 109,723 $ 20,304
Office furniture, fixtures and equipment... 460,283 426,149
Factory machinery and equipment............ 1,448,194 1,009,612
Leasehold improvements..................... 1,726,996 1,364,018
---------- ----------
$3,745,196 $2,820,083
========== ==========
Note 4: LINE OF CREDIT AND BANK LOAN
The Company has a line of credit of $500,000 from BSB Bank and Trust
Company bearing interest at prime plus 2% per annum (10 1/2% at December
31, 1997) and expires in August 1998. Substantially all of the Company's
assets collateralize the loan, along with personal guarantees by three
executive officers of the Company.
Note 5: LONG-TERM DEBT
Long-term debt consists of the following:
-21-
<PAGE>
<TABLE>
<CAPTION>
December 31
-------------------
1997 1996
-------- --------
<S> <C> <C>
Obligations under capital leases are payable in monthly
installments of $15,877 maturing in 2002 and bear interest
at rates between 4.5% and 23.18%. The obligations are
collateralized by machinery and equipment and guaranteed by
certain executive officers (see Note 6) ............................ $542,532 $ 86,558
Notes payable in monthly installments of $1,543 maturing in 2001 and
bearing interest at rates between 8.74% and 9.15%, collateralized by
transportation equipment with a book value of $46,400 .............. 41,756 --
Unsecured obligation payable to a landlord which matured
in January 1998 .................................................... 10,660 91,667
Non-interest bearing note due a spouse of an executive
officer (paid in 1997) ............................................. -- 9,909
Note due a finance company relating to Directors and
Officers insurance requiring monthly payments of $5,289
including interest at 7.85% and maturing in January 1999 ........... 65,700 121,601
-------- --------
660,648 309,735
Less current portion, including obligations under capital
leases of $126,264 and $33,391 in 1997 and 1996 .................... 212,791 190,869
-------- --------
$447,857 $118,866
======== ========
</TABLE>
Note 5: LONG-TERM DEBT (Continued)
Annual payments of long-term debt are as follows:
Years ending
December 31 Amount
----------- ------
1998.................................. $212,791
1999.................................. 148,426
2000.................................. 135,205
2001.................................. 131,579
-22-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
2002.................................. 32,647
--------
$660,648
========
Note 6: OBLIGATIONS UNDER CAPITAL LEASES
The Company leases certain machinery and equipment under capital leases
with a capitalized cost of $689,275 less accumulated depreciation of
$98,525.
The following is a schedule of future minimum payments required under
the leases together with their present value as of December 31, 1997:
Years Ending
December 31 Amount
----------- ------
1998.................................. $187,371
1999.................................. 171,298
2000.................................. 157,969
2001.................................. 140,414
2002.................................. 33,531
--------
690,583
Less amount representing interest.......... 148,051
--------
$542,532
========
Note 7: RELATED PARTY TRANSACTIONS
The aggregate balance due from certain executive officers was $190,365
and $225,692 at December 31, 1997 and 1996, respectively, which is
represented by promissory notes bearing interest at 8% per annum and
matures in January 1999.
During the years ended December 31, 1997 and 1996, the Company incurred
advertising costs of approximately $1,780,000 and $1,069,000,
respectively, with a related company.
The Company had a consulting agreement with a former director pursuant
to which he made recommendations aimed at reducing the Company's
operating costs which resulted in payments of approximately $91,000
during 1996.
See Notes 4, 5, 9, 12 and 13 for other related party transactions.
Note 8: INCOME AND DEFERRED TAXES
A deferred tax asset results from timing differences in the recognition
of depreciation for tax and financial reporting purposes and the
recognition of net operating loss carryforwards for financial statement
purposes in 1997 and 1996 of approximately $2,946,000 and $198,000 for
Federal income taxes. These net operating loss carryforwards expire in
2010 to 2012. In addition, net operating loss carryforwards of
approximately $1,816,000, $3,010,000 and $109,000 for the States of New
York,
-23-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
New Jersey and Pennsylvania, respectively, expire between 2002 and 2012.
The Company has provided a valuation reserve of approximately $460,000
and $39,000 in 1997 and 1996, respectively, against the future benefits
of the net operating loss carryforwards.
-24-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
Note 8: INCOME AND DEFERRED TAXES (Continued)
The deferred tax asset consists of the following:
December 31
----------------------
1997 1996
---------- ---------
Federal $1,093,000 $107,707
State 540,000 104,670
---------- ---------
1,633,000 212,377
Valuation allowance (460,000) (39,000)
---------- ---------
$1,173,000 $173,377
========== ========
The provision (benefit) for Federal and State income taxes is comprised
of the following:
Years Ended December 31
-----------------------
1997 1996
---------- ---------
Current income taxes (benefits)
Federal $ -- $ --
State 2,818 (300)
---------- ---------
2,818 (300)
Deferred income taxes (benefits)
Federal (735,293) (28,307)
State (264,330) 9,430
----------- ---------
(999,623) (18,877)
---------- ---------
$ (996,805) $ (19,177)
========== =========
Note 9: COMMITMENTS AND CONTINGENCY
Leasing Activities
Leases for retail showrooms in New York, Pennsylvania and New Jersey
expire at various dates through May 2009. The leases require the Company
to pay various operating expenditures including real estate taxes, while
certain leases contain provisions for rent escalations.
The Company leases its corporate office and manufacturing facility from
M & S Realty Company, a related party, under a lease which expires May
31, 1999 at an annual rental of approximately $292,000. The lease
requires the Company to pay certain operating expenses of the facility,
including real estate taxes and insurance. In addition, the lease
contains provisions for rent escalations and an optional renewal term of
fifteen years.
-25-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
In 1998, the Company entered into a capital lease totaling $180,000 for
equipment that will be operational in 1998. The lease will require
monthly payments of approximately $4,200 including interest through
maturity in the year 2003.
Rent expense for retail showrooms and the manufacturing facility totaled
$2,489,086 and $1,600,919 in 1997 and 1996, respectively.
The Company has automotive and other equipment leases expiring through
December 2000 with future minimum lease payments of approximately
$76,000. Rent expense for these leases totaled approximately $40,000 and
$49,000 in 1997 and 1996, respectively.
-26-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
Note 9: COMMITMENTS AND CONTINGENCY (Continued)
Approximate future minimum rentals under all operating lease
arrangements are due as follows:
Years Ending
December 31 Amount
----------- --------
1998 $2,118,000
1999 1,754,900
2000 1,396,600
2001 1,305,000
2002 995,500
Thereafter 2,394,300
----------
$9,964,300
==========
Litigation
The Company is subject to routine litigation that is incidental to the
business. In the opinion of management, the amount of ultimate liability
with respect to these actions will not materially affect the financial
position or the results of operations of the Company.
Employment Contracts
Employment contracts between the Company and three executive officers
through 2000 each provide for minimum annual salaries of $125,000,
adjusted for incentives based on the Company's attainment of specified
levels of revenues or gross profit. In addition, the executive officers
receive an allowance for certain expenses.
Note 10: PENSION PLANS
The Company funds a union sponsored defined contribution pension plan
which covers its leased union personnel. Contributions totaled $17,792
in 1997 and $13,523 in 1996.
The Company had a deferred compensation plan under section 401(k) of the
Internal Revenue Code. The plan was terminated in August 1996. No
contributions were made by the Company in 1996.
Note 11: ACQUISITION TRANSACTIONS
In 1997, the Company signed a letter of intent to acquire and/or merge
with two unrelated companies in the furniture industry located in
Chicago, Illinois. In February 1998, the proposed transactions were
terminated and escrow funds were returned to the Company.
Note 12: OUTSTANDING WARRANTS
-27-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
At December 31, 1997 and 1996, the Company had outstanding warrants to
purchase 4,576,250 and 4,441,250 shares of its common stock,
respectively, at prices ranging from $1.20 to $8.25 per share. The
warrants expire at various dates through 2001. At December 31, 1997 and
1996, 4,576,250 and 4,441,250 shares of common stock, respectively, were
reserved for that purpose.
Note 13: CAPITAL TRANSACTIONS
1. In June 1996, the Company entered into a three year consulting
agreement with a Director which included a $25,000 cash payment and
250,000 shares of common stock issued at $.80 per share. In
addition, the Company issued 50,000 shares of common stock at $.80
per share to an unrelated individual under a one year consulting
agreement.
2. In June 1996, the Company received four bridge loans totaling
$150,000 from unrelated parties and a Director in the form of
promissory notes which bore interest at 13% and matured in June
1997. In addition, the Company issued 20,000 shares of common stock
to the holders of the notes. The effective price of $.80 per share
for such common stock represents a cost of financing and was
amortized over the term of the promissory notes as interest expense.
The proceeds of the bridge loans were used to finance costs of
opening a new retail showroom.
Note 13: CAPITAL TRANSACTIONS (Continued)
3. On July 1, 1996, the Board of Directors and the shareholders
approved a 4 for 3 reverse stock split of the Company's common stock
with an increase in par value to $.00133.
4. In July 1996, the Company completed an additional private placement
of 500,000 shares of common stock which raised approximately
$332,000 in capital, net of expenses. The proceeds were utilized for
the payment of fees incurred in connection with the public offering
and to provide for working capital.
5. On November 1, 1996, the Company sold to the public in an initial
public offering 1,000,000 shares of the Company's common stock at a
price of $5.00 per share as well as 2,200,000 redeemable common
stock purchase warrants (the "warrants") at a price of $.10 per
warrant. In addition, 165,000 shares of the Company's common stock
and 330,000 of the Company's warrants were issued upon the exercise
of an over-allotment option granted to the underwriters of the
initial public offering. Net proceeds to the Company after
underwriting expenses and additional expenses were approximately
$4,616,000.
6. During 1997, warrants were granted to executive officers to purchase
85,000 shares of common stock at prices ranging from $3.00 to $6.00.
In addition, warrants were granted to a consultant to purchase
50,000 shares of the Company's common stock at $5.75.
Note 14: SUPPLEMENTAL CASH FLOW INFORMATION
December 31
-------------------
1997 1996
-------- ---------
Cash paid during the year for:
Interest.................................. $106,205 $ 55,385
-28-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
Income taxes (benefits)................... 2,818 (300)
Non Cash Investing Activity
During 1997, the Company financed the acquisition of certain equipment
through capital leases. The cost of such equipment and the related debt
incurred was $389,765. In addition, the Company purchased
transportation equipment in 1997 at a cost of $52,592 and incurred a
like amount of debt.
Non Cash Financing Activity
Issuance of 300,000 common shares at $.80
per share to a Director and a consultant.... -- 240,000
Issuance of 20,000 common shares to unrelated
parties and a Director at $.80 per share for
fees in connection with receiving four bridge
loans....................................... -- 16,000
Note 15: CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at a financial institutions located
in New Jersey and New York. Accounts at these institutions are secured
by the Federal Deposit Insurance Corporation up to $100,000.
Note 16: RECLASSIFICATIONS
Certain reclassifications have been reflected on the 1996 financial
statements to conform to 1997 classifications.
-29-
<PAGE>
ROOM PLUS, INC
NOTES TO FINANCIAL STATEMENTS
(Continued)
Note 17: PREPAID EXPENSES AND OTHER CURRENT ASSETS
December 31
---------------------
1997 1996
--------- ---------
Proposed acquisition deposit............. $ 100,000 $ --
Prepaid advertising...................... 161,115 120,000
Prepaid insurance........................ 80,168 127,791
Prepaid consulting fees.................. 140,884 112,308
Other.................................... 10,388 15,439
--------- ---------
$ 492,555 $ 375,538
========= =========
Note 18: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31
----------------------
1997 1996
---------- ----------
Trade payables........................... $1,063,349 $1,057,627
Accrued leased personnel expenses........ 108,334 172,329
Accrued professional fees................ 178,148 40,000
Accrued rent............................. 127,956 41,511
Accrued store closing costs.............. 100,000 --
Other.................................... 26,260 73,336
---------- ----------
$1,604,047 $1,384,803
========== ==========
Note 19: SUBSEQUENT EVENT
In March 1998, the Company obtained a commitment from a financial
institution for an asset-based credit facility of $1,500,000 at the
prime rate plus 2%, based upon 55% to 65% of eligible inventory, as
defined. In addition, a commitment for a two year term loan totaling
$200,000 at the prime rate plus 2-1/2% was obtained and is based upon
the liquidation value of machinery and equipment. The agreements
contain a covenant on minimum net worth, as defined.
Note 20: GOING CONCERN
The financial statements have been prepared assuming the Company will
continue as a going concern. The Company has had recurring losses
before taxes of approximately $2,900,000, $22,000 and $1,800,000 for
the years ended December 31, 1997, 1996 and 1995, respectively, and
has a working capital deficiency of approximately $315,000 at December
31, 1997, which raises substantial doubt about the Company's ability
to continue as a going concern. As described in Note 19 to the
financial statements, the Company intends to raise additional capital
through long and short term borrowings in connection with asset-based
financing. The Company believes upon successful completion of the
financing, which is expected to be completed by May 1998, the
substantial doubt about the Company's ability to continue as a going
concern will be eliminated.
-30-
<PAGE>
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Part III.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The directors, executive officers and significant employees of the
Company are as follows:
<TABLE>
<CAPTION>
Name Age Position with Company
---- --- ---------------------
<S> <C> <C>
Marc Zucker 49 Chairman of the Board and Chief Executive Officer
Allan Socher 47 President, Director of Marketing and Director
Theodore Shapiro 63 Executive Vice President, Director of Manufacturing and Director
Alan Hirschfeld 46 Director
Alan Granetz 53 Director
Frank Terzo 38 Director
Jay Goldberg 52 Secretary and Chief Financial Officer
</TABLE>
Marc Zucker has been the Chairman of the Board and Chief Executive
Officer of the Company since March 1995. He was co-founder of RPF
Holding and was its president from 1982 until its merger with Bunk
Trunk in March 1995. In addition, he was Vice President and General
Manager of Bunk Trunk from its inception in 1984 until the merger with
RPF Holding. Prior to that, Mr. Zucker worked in other areas of the
retail furniture business for 10 years.
Allan Socher has been the President, Director of Marketing and a
Director of the Company since March 1995. Mr. Socher is also the
Company's spokesperson in its extensive television commercials. He was
a Vice-President, Secretary and co-founder of RPF Holding from 1982
until its merger with Bunk Trunk in March 1995 and was a Vice-President
and Secretary of Bunk Trunk from its inception in 1984 until the merger
with RPF Holding. Prior to that, Mr. Socher worked in other areas of
the retail furniture business for 10 years.
Theodore Shapiro has been the Executive Vice President, Director of
Manufacturing and a Director of the Company since March 1995. He was
one of the original founders of Bunk Trunk in 1982 and was its
President from inception until the merger with RPF Holding in March
1995. Mr. Shapiro had worked in the retail furniture business for over
12 years before founding his own retail furniture chain, Mr. Sandman
Furniture, in 1960.
Alan Hirschfeld has been a Director of the Company since December 1996.
Since 1987 he has been the Executive Vice President, Chief Financial
Officer and a Director of IVC Industries, Inc., a public traded company
that manufactures and distributes vitamins and nutritional supplements.
Prior to that, Mr. Hirschfeld was a partner in Grossman, Brown,
Weinberg & Lawson, certified public accountants.
31
<PAGE>
Alan Granetz has been a Director of the Company since December 1996.
Since 1968 he has been the Vice President of Granetz Group, a holding
company for real estate ventures and retail and commercial furniture
sales. From 1988 to the present, Mr. Granetz has also been the
Executive Director of the Metropolitan Furnishings Association of New
Jersey.
Frank Terzo has been a Director of the Company since December 1996. He
was founder of the New York retail clothing chain, Nicholas Flynn Men's
Club, from 1983 until 1988. From 1987 to May 1996 Mr. Terzo was a
registered representative with a number of different NASD member firms.
Mr. Terzo is a Partner of The Thornwater Company, L.P. (the Company's
underwriter). He is also President of Small Cap. Consulting
International, Inc., a consulting and investment advisory company which
also invests in small capital market companies. Mr. Terzo was elected a
member of the Board pursuant to the right of the underwriter for the
Company's IPO to designate one member of the Board until November 1999,
subject to the Company's good faith approval.
Jay Goldberg, CPA, has been the Chief Financial Officer of the Company
since September 1997 and Secretary since March 1998. Mr. Goldberg was a
director in Ehrenkrantz Sterling & Co., LLC, certified public
accountants and a partner in Sterling, Nappen, Chavkin & Co., L.L.C.,
its predecessor firm, from February 1989 to September 1997. Prior to
that, he was a partner of Touche Ross & Co., a predecessor to Deloitte
& Touche LLP, from 1982 to 1989. He holds a B.S. degree in accounting
from Seton Hall University.
Mr. Zucker and Mr. Socher are brothers-in-law and Mr. Shapiro is the
uncle of their spouses.
Directors are elected to serve until the next meeting of stockholders
and until their successors are elected and qualified. Meetings of
stockholders of the Company are expected to be held on an annual basis.
However, if at any time a meeting is not held for the election of
directors, the then current directors will continue to serve until
their successors are elected and qualified. Officers serve at the
discretion of the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934 requires that the Company's
executive officers, Directors, and any persons owning more than 10% of
a class of the Company's stock to file certain reports of ownership and
changes in ownership with the Securities and Exchange Commission (the
"SEC"). Copies of these reports must also be furnished to the Company.
Based solely on a review of copies of all reports filed with the SEC
and representations of certain officers, directors and shareholders
holding more than 10% of the Company's Common Stock, the Company
believes that the directors and officers are not delinquent in their
16(a) reporting obligations.
Item 10. Executive Compensation
The following table sets forth the cash compensation paid by the
Company to, as well as any other compensation paid to or earned by, the
Chairman and Chief Executive Officer of the Company and those executive
officers compensated at or greater than $100,000 for services rendered
to the Company in all capacities during the years ended December 31,
1997 and 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation Awards
------------------- -------------------
Name of Individual Securities Underlying
and Principal Position Year Salary Bonus Warrants
---------------------- ------ -------- ------- -------------------
32
<PAGE>
<S> <C> <C> <C> <C>
Marc Zucker 1997 $125,000 $119,250 --
Chairman, Chief Executive Officer 1996 125,000 42,500 25,000
Allan Socher 1997 $125,000 $119,250 --
President and Director of Marketing 1996 125,000 43,159 25,000
Theodore Shapiro
Executive Vice President and 1997 $125,000 $ 93,577 --
Director of Manufacturing 1996 125,000 42,800 25,000
</TABLE>
Warrants
The following table sets forth certain information concerning
individual issues of warrants made during the year ended December 31,
1997 to the Company's executive officers. These warrants were issued in
lieu of compensation for the year ended December 31, 1996.
<TABLE>
<CAPTION>
Individual Grants as % of Total
Number of Securities Warrants Issued to Personnel Exercise or Base Expiration
Name Underlying Warrants in Fiscal Year Price per Share Date
---- ------------------- -------------- --------------- ----
<S> <C> <C> <C> <C>
Marc Zucker 25,000 29.4% $3.0625 1/31/02
Allan Socher 25,000 29.4% $3.0625 1/31/02
Theodore Shapiro 25,000 29.4% $3.0625 1/31/02
</TABLE>
33
<PAGE>
Compensation of Directors
Outside Directors of the Company are currently entitled to receive
$500 for attendance at each Board meeting.
Employment Agreements
The Company has entered into employment agreements effective June 30,
1995, as amended on August 1, 1996, with each of Marc Zucker, Allan
Socher and Theodore Shapiro (the "Principals"). Pursuant to each
employment agreement, Messrs. Zucker, Socher and Shapiro will act as
Chairman and Chief Executive Officer, President and Director of
Marketing, and Executive Vice President and Director of
Manufacturing, respectively, and each will be entitled to receive,
among other things, (a) a salary of $125,000 per annum, (b) such
further sum by way of bonus or otherwise as determined by the
Compensation Committee of the Board, or if no such committee is
established by the Board, the entire Board, in each year of the
employment agreement, and (c) pension contributions as set forth in
any future plan adopted by the Company.
In addition, pursuant to their employment agreements, Allan Socher is
entitled to a performance bonus of .75% of revenues and Marc Zucker
and Theodore Shapiro are each entitled to a performance bonus of 1.5%
of gross profit. For the year ended December 31, 1997, each of the
officers has agreed to a reduced bonus.
Each employment agreement shall continue unless terminated by the
Company for cause, as described in such employment agreement, or
terminated by not less than three (3) years written notice if given
by the Company or not less than three (3) months written notice if
given by the respective Principal.
In the event any person shall become beneficially entitled to 50%
plus one share or more of the issued and outstanding Common Stock of
the Company pursuant to an offer, the terms of which are not
recommended by the Board, each of the Principals shall be permitted
to terminate his employment agreement within one week of the
completion of the change in control or such later date as may be
agreed upon by such Principal and the Company. In the event of such
termination, the Principal shall be entitled to payment from the
Company of an amount calculated in accordance with the provisions of
his employment agreement.
For a period of one year following the termination of each employment
agreement, such Principal shall not solicit or endeavor to entice
away any employee, director or agent of the Company or any entity
affiliated with the Company. In addition, such Principal may not, at
any time after the termination of the employment agreement, use the
names or slogans "Room Plus", "Just 'Round the Corner" or "A LOT OF
LIVING in a Little Space" or any similar name for the purpose of a
business competing with the Company or any entity affiliated with the
Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock by each person or
group that is known by the Company to be the beneficial owner of more
than 5% of its outstanding Common Stock, each Director of the
Company, each person named in the Summary Compensation Table, and all
Directors and executive officers of the Company as a group as of
March 13, 1997. Unless otherwise indicated, the Company believes that
the persons named in the table below, based on information furnished
by such owners, have sole voting and investment power with respect to
the Common Stock beneficially owned by them, subject to community
property laws, where applicable.
34
<PAGE>
Principal Stockholders
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Percent Ownership of
Name and Address of Beneficial Owner Beneficially Owned Common Stock Outstanding
- ------------------------------------ ------------------ ------------------------
<S> <C> <C>
Marc Zucker 697,501 (1) 15.0%
91 Michigan Avenue
Paterson, NJ 07503
Allan Socher 697,500 (2) 15.0%
91 Michigan Avenue
Paterson, NJ 07503
Theodore Shapiro 773,266 (3) 16.5%
91 Michigan Avenue
Paterson, NJ 07503
Frank Terzo 358,000 (4) 7.8%
107A East 37th Street
New York, NY 10016
All Directors and Officers as a Group 2,533,366 (5) 46.5%
(7 Persons)
</TABLE>
- --------------
(1) Includes currently exercisable warrants to purchase 275,000 shares of Common
Stock.
(2) Includes currently exercisable warrants to purchase 275,000 shares of Common
Stock.
(3) Includes currently exercisable warrants to purchase 315,000 shares of Common
Stock.
(4) Includes currently exercisable warrants to purchase 190,000 shares of Common
Stock.
(5) Includes an aggregate of 1,060,000 shares of Common Stock issuable upon
exercise of outstanding options and warrants.
Item 12. Certain Relationships and Related Transactions
The Company leases its manufacturing facility located in Paterson, New
Jersey from M&S Realty Company, which is owned by Theodore Shapiro, a
director and the Executive Vice President and Director of Manufacturing
of the Company. The leases for the facility expire May 31, 1999
(subject to extension at the option of the Company) and provide for an
annual rental of approximately $292,000.
In 1996, the Company advanced $106,747 on open account to three
executive officers of the Company, Marc Zucker, Allan Socher and
Theodore Shapiro. Such advances increased the total net amount
receivable to the Company from these executive officers to $225,692.
Such increase consisted of additional advances to the
35
<PAGE>
executive officers in the amount of $90,711 and accrued interest in the
amount of $16,036. In 1997, the Company advanced $14,373 to the
executive officers consisting of additional advances of $296 and
accrued interest of $14,077. The executive officers made repayments of
$49,700 in 1997, resulting in a balance of $190,365 at December 31,
1997. Such balance bears interest at the rate of 8% per annum and
matures in January 1999.
Retail Media Plus (which is owned by three executive officers of the
Company) places all of the Company's advertising and passes through any
cost savings to the Company. For 1997 and 1996, the Company reimbursed
Retail Media Plus approximately $1,780,000 and $1,069,000,
respectively, for advertising costs.
In July 1996, Frank Terzo became a consultant to the Company. Under his
consulting agreement, which is for a term of three years, Mr. Terzo
received a cash payment of $25,000 and 250,000 shares of Common Stock,
which shares were valued at $.80 per share (the price of the stock sold
in the 1996 Private Placement) for financial accounting purposes.
Mr. Terzo became a director of the Company in December 1996.
All future transactions and/or loans between the Company and officers
and directors will be on terms no less favorable than could be obtained
from independent, third parties and will be approved by a majority of
the directors of the Company disinterested in such transactions and/or
loans.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits to Form 10-KSB
Additional exhibits filed herewith are as follows:
EXHIBIT INDEX
Exhibit
No.
- ------
1 Form of Underwriting Agreement among the Company, the holders of the
Directors Shares and The Thornwater Company, L.P. (1)
3.1 Certification of Incorporation of the Company, as amended (1)
3.2 Restated and Amended By-laws of the Company (1)
4.1 Form of Representative Warrant Agreement between the Company and The
Thornwater Company, L.P., with form of Warrant attached (1)
4.2 Form of Warrant Agreement between the Company and American Stock Transfer
& Trust Company, with form of Warrant attached (1)
4.3 Form of Warrant issued by Company to Allan J. Socher, Theodore Shapiro,
Marc I. Zucker and Kirlin Securities Corp. (1)
4.4 Form of Warrant issued by the Company to Mark Rubin (1)
5 Opinion of Wilentz, Goldman & Spitzer, P.A. (1)
10.1 Employment Agreement dated June 16, 1995 between the Company and Allan J.
Socher (1)
10.2 Employment Agreement dated June 16, 1995 between the Company and Theodore
Shapiro (1)
10.3 Employment Agreement dated June 16, 1995 between the Company and Marc I.
Zucker (1)
10.4 Lease dated June 1, 1984 between M&S Realty Company and Bunk Trunk
Manufacturing Company, Inc., as amended on December 1, 1988 and January 2,
1996 (1)
10.5 Lease dated June 6, 1996 between Milford Management Corp., as agent, and
the Company (1)
10.6 Lease dated November 1, 1991 between Dilstan Realty Corporation and Room
Plus Furniture of Westchester, Inc. (1)
10.7 Indenture of Lease dated October 1, 1988 between Daper Realty, Inc. and
RPF Holding Corporation (1)
10.8 Lease dated June 1, 1983 between Hannon's and the Company, as modified by
and Extension of Lease dated July 31, 1993 (1)
10.9 Agreement of Lease dated August 9, 1985 between Patrician Equities Corp.
and Room Plus Furniture of East Brunswick, as modified by a Lease
Extension Agreement dated August 25, 1995 (1)
36
<PAGE>
10.10 Lease dated August 26, 1987 between Country Glen Associates and Room Plus
Furniture, Inc. (1)
10.11 Agreement of Lease between Austin Mall Associates and Room Plus Furniture
of Forest Hills, Inc. (1)
10.12 Sublease Agreement dated February 5, 1988 between NYNEX Business
Information Systems Company and RPF Holding Corporation, as modified by a
letter agreement dated March 25, 1993 (1)
10.13 Shopping Center Agreement of Lease dated October 1, 1995 between Alexander
Carpet Company and the Company (1)
10.14 Lease dated November 21, 1995 between 205/215 Lexington Limited
Partnership and the Company (1)
10.15 Assignment of Lease dated June 26, 1996 between Reliable Broadway, Inc.
and the Company (1)
10.16 Lease dated January 11, 1996 between Comalgri Holding Corp. and the
Company (1)
10.17 Form of Financial Advisory and Investment Banking Agreement between the
Company and The Thornwater Company, L.P. (1)
10.18 Lease dated September 20, 1996, between Heartland Shopping Center LLC and
Room Plus, Inc. (2)
10.19 Sublease and Assumption Agreement dated October 11, 1996 between Bedding
Discount Center, Inc. and Room Plus, Inc. (2)
10.20 Lease dated December 19, 1996 between Ackrik Associates, and Room Plus,
Inc. (3)
10.21 Lease dated December 2, 1996 between Pitrock Realty Corp. and Room Plus,
Inc. (*)
10.22 Lease dated March 20, 1997 between CMW Investments, Ltd. and Room Plus,
Inc. (*)
10.23 Lease modification agreement dated July 22, 1997 between Austin Mall
Associates and Room Plus, Inc. (*)
10.24 Extension of lease dated January 26, 1998 between Hannon's and Room Plus,
Inc. (*)
11 Calculation of Net Income (Loss) per Common Share (*)
27 Financial Data Schedule (*)
- ----------------
(1) Incorporated by reference to the exhibit of the same number filed as part
of the Registration Statement on Form SB-2 (File No. 333-10483).
(2) Incorporated by reference to the exhibit of the same number filed as part
of the Quarterly Report on Form 10-QSB for the period ended September 30,
1996 (File No. 1-14478).
(3) Incorporated by reference to the exhibit of the same number filed as part
of the Annual Report on Form 10-KSB for the period ended December 31, 1996
(File No. 1-14478).
(*) Exhibit filed with this Form 10-KSB.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on October 24, 1997 announcing
the naming of a new chief financial officer and the signing of a letter
of intent to acquire the Baby's Room, Inc. and Baby's Room USA, Inc.
Such letter of intent was subsequently terminated in February 1998.
37
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ROOM PLUS, INC.
Date: April 3, 1998 By:/s/ Marc Zucker
---------------
Marc Zucker, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature and Title Date
------------------- ----
By: /s/ Marc Zucker April 3, 1998
---------------
Name: Marc Zucker
Title: Chairman of the Board,
Chief Executive Officer
and a Director
By: /s/ Allan Socher April 3, 1998
----------------
Name: Allan Socher
Title: President and a Director
By: /s/ Theodore Shapiro April 3, 1998
--------------------
Name: Theodore Shapiro
Title: Executive Vice President
and a Director
By: /s/ Jay H. Goldberg April 3, 1998
-------------------
Name: Jay H. Goldberg
Title: Chief Financial Officer and
Chief Accounting Officer
By: /s/ Frank Terzo April 3, 1998
---------------
Name: Frank Terzo
Title: Director
By: /s/ Alan Hirschfeld April 3, 1998
-------------------
Name: Alan Hirschfeld
Title: Director
38
<PAGE>
By: /s/ Alan Granetz April 3, 1998
----------------
Name: Alan Granetz
Title: Director
39
L E A S E
THIS INDENTURE OF LEASE (hereinafter called "Lease") dated the 2nd
day of December 1996 by and between PITROCK REALTY CORP., with an address at 940
Third Avenue, New York, New York 10022 (hereinafter called "Landlord"), and ROOM
PLUS, INC., a New York corporation with an address at 91 Michigan Avenue,
Patterson, New Jersey (hereinafter referred to as "Tenant").
W I T N E S S E T H:
ARTICLE 1
DEMISED PREMISES - TITLE - TERM OF LEASE
Section 1.01 - Demised Premises. In consideration of the rents,
covenants and agreements hereinafter reserved and contained on the part of the
Tenant to be observed and performed, Landlord does hereby lease and demise to
the Tenant and the Tenant does hereby hire, lease and take from Landlord, for
the term subject to and upon the covenants and conditions hereinafter set forth,
the store premises ("Premises" or "Demised Premises") previously occupied by
West Coast Video in a building located at 2019 East Lincoln Highway (a/k/a US
1), Langhorne, Pennsylvania ("Building").
Section 1.02 - Title. At the commencement of the term of the Lease
("Term"), Landlord shall own the fee title to the Demised Premises, subject to
restrictions and encumbrances of record, if any, zoning regulations affecting
such Premises and any state of facts shown on an accurate survey or as a visual
inspection of the Premises would disclose.
Section 1.03 - Term of Lease. To have and to hold unto the Tenant,
its successors and permitted assigns, for a term of five (5) years which shall
commence on December 1, 1996 ("Commencement Date") and terminate on November 30,
2001. The aforesaid period shall be referred to as the "Term" or "Lease Term".
Section 1.04 - Options to Extent. Tenant shall have the option to
extend the term of the Lease for two five (5) year periods, in the following
manner upon the following terms and conditions:
(i) First Option. On or before March 31, 2001, Tenant shall notify
Landlord in writing by certified mail, return receipt
requested, and by regular mail ("Notice"), of tenant's
intention to extend the Term of the Lease for an additional
five (5) year period. In the event the option is exercised,
<PAGE>
the Term shall expire on November 30, 2006. Time shall be of
the essence in the exercise of the option.
(ii) Second Option. On or before March 31, 2006, Tenant shall
notify Landlord in writing by certified mail, return receipt
requested, and by regular mail ("Notice"), of Tenant's
intention to extend the Term of the Lease for an additional
five (5) year period. In the event the second option is
exercised, the Term shall expire on November 30, 2011. Time
shall be of the essence in the exercise of the option.
(iii) The exercise of the options shall only be effective if, at the
date each option is exercised, and on one day prior to
commencement of each option period the Lease is in full force
and effect, and Tenant is neither in default of the terms of
the Lease after expiration of the applicable cure period, nor
in arrears with any Annual Basic Rent or additional rent
payment as set forth herein. In the event Tenant exercises its
options to extend the Term of this Lease, the Term shall be
deemed to include the extended period.
Section 1.05 - Acknowledgment of Commencement. Upon the commencement
of the Term, the parties, if requested by Landlord, shall execute and exchange a
recordable instrument, specifying the commencement and expiration dates of the
Term. Tenant shall not record this Lease or any memorandum of this Lease without
the Landlord's express written consent which consent may be withheld for any or
no reason.
ARTICLE 2
USE OF PREMISES
Section 2.01 - Use. The Tenant shall use and occupy the Premises for
the retail sale of furniture and home furnishings (but not floor coverings) and
for no other purpose. Tenant shall limit all displays to the interior of the
Premises. Tenant shall not sell beer, wine, liquor or food on the Premises.
Tenant shall not permit the Premises to be used for food preparation or sale.
Any use of the Premises in violation of this Article 2 shall be deemed to be a
breach of a substantial obligation of this Lease. Tenant shall not use or occupy
or permit the Premises to be used or occupied, nor do or permit anything to be
done in or on the Premises, in a manner which will in any way violate any
Certificate of Occupancy (if there is an existing Certificate of Occupancy)
affecting the Premises, the zoning laws or make void or
-2-
<PAGE>
voidable any insurance then in force with respect thereto, or which will make it
impossible to obtain fire or other insurance, or which will cause or be likely
to cause structural damage to the Building or any part thereof, or which will
constitute a public or private nuisance, and shall not use or occupy or permit
the Premises to be used or occupied in any manner which will violate any present
or future laws or regulations of any governmental authority. If future laws or
regulations prohibit Tenant use (as set forth above), Tenant shall have the
right to terminate this lease on thirty (30) days written notice. Landlord
represents that the Premises are zoned for the use set forth above. Landlord
makes no representation as to the existence of a certificate of occupancy for
the Premises.
ARTICLE 3
RENT AND OTHER CHARGES
Section 3.01 - Rent.
A. (i) The initial Annual Basic Rent to be paid by Tenant to
Landlord shall be seventy-two thousand ($72,000) dollars per year, payable in
equal monthly installments. Commencing December 1, 1997 and on each subsequent
December 1st of the Term (as extended pursuant to Tenant's exercise of its
options to extend), the Annual Basic Rent shall increase by three percent (3%).
Each annual increase shall be cumulative.
Landlord shall waive the monthly installment of Annual Basic Rent
("Rent Concession") through February 28, 1997 or until Tenant "opens for
business", whichever date occurs first ("Rent Commencement Date"). "Open for
Business" shall mean the date customers are permitted on the Premises. Upon the
signing of this Lease, Tenant shall tender payment of the monthly installment of
Annual Basic Rent for the first month of the Term in which Annual Basic Rent is
due.
B. The monthly installment of Annual Basic Rent is due on the first
day of each month of the Term. Said Annual Basic Rent, additional rent and all
other payments due under this Lease shall be paid to the Landlord at its address
hereinabove first specified, or, as the Landlord may otherwise direct in
writing. Failure to pay Annual Basic Rent and/or additional rent within ten (10)
days after the due date shall be deemed to be a breach of a substantial
obligation of this Lease. In addition to any other remedies Landlord may have
under this Lease, if Annual Basic Rent and/or additional rent are not paid
within ten (10) days after the due date, a late charge of five (5 cents) cents
for each dollar so overdue shall become immediately due to Landlord and shall be
deemed to be additional rent.
C. If Tenant shall submit any check to Landlord for payment of any
obligation hereunder and said check is returned unpaid ("bounced" check), Tenant
shall pay fifty ($50.00) dollars to Landlord for the bookkeeping charge
incurred. In the event Tenant submits more than
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one "bounced" check during any consecutive sixty (60) month period of the Term,
Tenant shall be obligated to make all payments to Landlord by certified check or
bank check. In such event, if tenant fails to submit a certified check or bank
check to Landlord, it shall be deemed to be a substantial breach of the terms of
this Lease. The fifty ($50.00) dollar bookkeeping charge is in addition to any
other remedies Landlord may have pursuant to the terms of this Lease or at law.
Section 3.02 - Additional Rent. All payments Tenant is required to
make pursuant to this Lease, other than Annual Basic Rent payments (including
but not limited to refurnishing of security or payment of additional security),
shall constitute additional rent and, if Tenant defaults in any such payment so
as to create an Event of Default (as hereinafter defined), Landlord shall have
(in addition to any rights and remedies granted hereby) all rights and remedies
provided by law for nonpayment of rent.
Section 3.03 - Persistent Defaults. If Tenant shall have defaulted
in the performance of the same or a substantially similar covenant hereunder,
other than a covenant for the payment of rent or additional rent, two (2) times
during any consecutive sixty (60) month period and Landlord, in each case, shall
have given a written notice of default in respect of each such default, then,
regardless of whether Tenant shall have cured each such default within any
applicable grace period, if Tenant shall again default in respect of the same or
a substantially similar covenant hereunder after Landlord gave the second
written notice of default, Landlord, at it option, and without further notice to
Tenant or opportunity for Tenant to cure such default, may elect to cancel this
Lease by serving a written fifteen (15) day notice of cancellation f this Lease
and the term hereunder shall end and expire as fully and completely as if the
expiration of such fifteen (15) day period were the day herein definitely fixed
for the end and expiration of this Lease and the term hereof, and Tenant shall
then quit and surrender the Premises to Landlord, but Tenant shall remain liable
as elsewhere provided in this Lease.
ARTICLE 4
ADDITIONAL RENT
Section 4.01. Tenant agrees to pay, or cause to be paid, its
"Proportionate Share" (as hereinafter defined) of Real Estate Taxes, Insurance
Costs and Common Area Maintenance charges (as hereinafter defined).
(i) "Real Estate Tax(es)" shall mean the property taxes, sewer
rents, and assessments imposed upon the building and the land,
or upon the rent (excluding Landlord's income taxes due as a
result of receipt of the rent, inheritance taxes, succession
taxes, capital levy or transfer taxes of the Landlord), as
such, payable by the Landlord and shall also
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include all assessments payable during the Term. If due to a
future change in the method of taxation, any franchise, income
or profit tax shall be levied against Landlord in substitution
for, or in lieu of, any tax which would otherwise constitute a
Real Estate Tax, such franchise, income or profit tax shall be
deemed to be a Real Estate Tax for the purposes hereof;
conversely, any additional real estate tax hereafter imposed
in substitution for, or in lieu of, any franchise, income or
profit tax (which is not in substitution for, or in lieu of,
or in addition to, a Real Estate Tax as hereinabove provided),
shall not be deemed a Real Estate Tax for the purposes hereof.
Any expenses incurred by the Landlord to challenge the Real
Estate Taxes or the assessed value of the Building shall be
deemed to be Real Estate Taxes for purposes of this Article.
Landlord will provide copies of the tax bills to the Tenant
upon demand.
(ii) Insurance Costs. Tenant shall pay to Landlord, as additional
rent, Tenant's "Proportionate Share" of the Landlord's
Insurance Costs. "Insurance Costs" shall mean casualty, fire,
liability, and business interruption insurance for the
Building. Landlord will provide copies of the insurance bills
to the Tenant upon demand.
(iii) Common Area Maintenance ("CAM"). Tenant shall pay to Landlord
as additional rent, Tenant's "Proportionate Share" of the
Landlord's common area maintenance costs which are reasonably
incurred to operate, maintain and repair all of the common
elements of the Building including maintenance and repair
and/or replacement of the roof and parking lot.
Notwithstanding the foregoing, during the first five (5) years
of the Term CAM shall not include the cost to replace the
roof. CAM shall also exclude structural repairs to the
exterior and load-bearing walls, and the foundation. In the
event any of the foregoing are damaged by Tenant or as a
result of its negligence, Tenant shall be liable for the cost
of such repairs and alterations.
Section 4.02 - Proportionate Share. Tenant's Proportionate Share
shall be equal to fifty (50%) percent.
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Section 4.03 - Payment. On the Rent Commencement Date and thereafter
on the first day of each month of the Term, Tenant shall pay to Landlord an
amount equal to one-twelfth (1/12th) of Landlord's reasonable estimate of Real
Estate Taxes, Insurance Costs and CAM charges for the then current year. If the
amount collected by the Landlord hereunder for such year shall be less than the
actual amounts incurred for Real Estate Taxes, Insurance Costs and CAM charges,
then upon ten (10) days notice, Tenant shall pay the additional amount due. In
the event Tenant shall have overpaid the expenses, Landlord shall, at its
option, refund the overpayment or apply such overpayment within thirty (30) days
to Annual Basic Rent and additional rent coming due until such overpayment has
been fully applied.
A. Notwithstanding anything herein contained to the contrary, in the
event the last period prior to termination of the Lease is less than twelve (12)
months, the additional rent for that period shall be proportionately reduced to
correspond to the duration of said final period.
B. Landlord shall have the exclusive right but not the obligation to
institute proceedings to reduce the amount of the Real Estate Taxes. Tenant may
not, without Landlord's express written consent, bring any proceeding to reduce
the Real Estate Taxes. Tenant will be reimbursed its Proportionate Share of any
Real Estate Tax refund received by the Landlord. Such refund shall be net of
Landlord's costs and expenses, including but not limited to legal fees.
ARTICLE 5
UTILITY EXPENSE
Section 5.01 - Utility Expense. Tenant agrees to pay, or cause to be
paid directly to the utility supplying the applicable service, all charges for
gas, sewage, light, electricity, hot and cold water (if water is separately
metered, otherwise Tenant shall pay fifty (50%) percent of the water charges for
the Building), air-conditioning, heat, power, or service used, rendered or
supplied upon or in connection with the Premises throughout the term of this
Lease and any renewal thereof, and to indemnify the Landlord and save it
harmless against any liability or damages on such account. The Tenant shall
also, at its sole cost and expense, procure any and all necessary permits,
licenses and other authorizations required for the lawful and proper
installation and maintenance upon the Premises of Tenant's own wires, pipes,
conduits, tubes and other equipment and appliances for use in supplying any such
service to and upon the Premises. Tenant may at its own cost and expense,
install its own water meter for the Premises.
ARTICLE 6
INTENTIONALLY DELETED
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ARTICLE 7
REPAIRS AND ALTERATIONS
Section 7.01 - Structural Repairs. Except as set forth in this Lease
and in the Exhibit attached hereto, Tenant shall make or cause to be made all
interior and exterior repairs and alterations to the Premises and the adjacent
sidewalk. Any repair or alteration requiring expenditure of ten thousand
($10,000.00) dollars or more shall require the consent of the Landlord, which
consent shall not be unreasonably withheld. Landlord shall not be obligated to
maintain the Premises.
Section 7.02 - Violations. Tenant shall do whatever is necessary to
remove any violations issued by any Federal, State or local governmental or
quasi-governmental agencies or units, within a reasonable period of time. The
aforesaid shall only apply to violations issued or which accrued during the Term
on the Premises. Tenant's obligation to make said repairs and correct violations
shall survive the termination of this Lease so long as the obligations accrued
prior to the date of termination. Landlord shall be responsible for the removal
of record of any violations affecting the Demised Premises which violations are
of record as of the Commencement Date.
Section 7.03 - Condition of Premises. At the date of termination of
this Lease, the electrical, plumbing, heating, ventilation, air conditioning
system (HVAC), shall be in working order. Tenant shall not be obligated to
remove any alterations which had been previously approved by the Landlord.
Landlord shall deliver the Demised Premises vacant and broom clean, with all
prior installations removed except for any fixtures, equipment and improvements
provided for in the Lease.
ARTICLE 8
ADDITIONAL OBLIGATIONS AND COVENANTS OF TENANT
Section 8.01 - Affirmative Obligations. Tenant covenants and agrees,
at its own cost and expense, at all times during the Term, except as stated in
Article 8 hereof to:
A. Comply with Laws. Promptly comply with all laws, ordinances,
rules and regulations of governmental authorities (including, but not limited
to, environmental laws, zoning ordinances and building codes) affecting the
Premises as they pertain to Tenant's use.
B. Garbage and Extermination. Handle and dispose of all rubbish,
garbage and waste from Tenant's operation in accordance with, all laws and
ordinances, and reasonable regulations established by Landlord. Tenant shall not
permit the accumulation (unless in concealed enclosed containers), or burning of
any rubbish or garbage in, on or about any part
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of the Premises. Tenant shall sort and dispose its garbage in accordance with
all applicable laws and regulations. All waste shall be removed from the
Premises on a regular basis and disposed of with a licensed carter. Tenant shall
have the Premises exterminated by a licensed exterminator on a regular basis to
keep the Premises free of vermin.
C. Maintain Premises. Maintain the Premises including, but not
limited to, snow removal and removal of debris from the roof and the gutters of
that portion of the roof directly above the Premises. Landlord shall be
responsible for removal of snow from the parking lot (said costs shall be added
to the CAM charges).
D. Hazardous Materials. Tenant shall not store or maintain hazardous
or toxic materials on the Premises.
ARTICLE 9
COVENANT AGAINST LIENS
Section 9.01 - No Liens. Tenant shall neither create nor permit to
be created any lien or encumbrance affecting the Premises and shall discharge,
promptly upon notice, any lien or encumbrance arising out of any act or omission
of Tenant. Notice is hereby given that Landlord shall not be liable for any work
performed or to be performed at the Premises for Tenant, or for any materials
furnished or to be furnished at the Premises for Tenant, and that no mechanic's
or other lien for such work or materials shall attach to or affect the interest
of Landlord in and to the premises. Any contractors or subcontractors who shall
do work at the building on behalf of Tenant shall be insured in an amount of not
less than five hundred thousand ($500,000.00) dollars and shall have adequate
workers' compensation insurance with employer liability coverage and such
workers shall be properly bonded and licensed. Tenant shall provide lien waivers
prior to commencement of any work at the Premises.
ARTICLE 10
EASEMENT
Section 10.01 - Easement. Upon request by the Landlord Tenant shall
permit Landlord or its assignees to show the Premises to Landlord's lenders,
prospective lenders, appraisers, prospective buyers or for reasonable business
purposes, at times and dates reasonably convenient to Tenant to any person that
Landlord deems appropriate. Such showings, visits or repairs shall be done upon
reasonable notice to Tenant, and so far as practicable, in such manner as to
avoid unreasonably interfering with or adversely affecting Tenant's use of the
Premises. It is hereby agreed that the aforesaid easement does not grant
Landlord dominion and control over the Premises therefore such easement shall
not relieve Tenant of indemnifying Landlord from any and all liability for any
injury which may be sustained by any person on the Premises.
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Landlord shall during the final three (3) months of the Term be entitled to
display, on the Premises in such manner as not unreasonably to interfere with
the Tenant's business, the usual "For Sale" or "To Let" signs or such other
signage indicating Landlord's proposed development plans for the Premises, and
the Tenant agrees that such signs may remain unmolested upon the Premises.
ARTICLE 11
ADDITIONAL NEGATIVE OBLIGATIONS AND COVENANTS OF TENANT
Section 11.01 - Additional Covenants. Tenant covenants and agrees
that at all times during the Term it shall not at any time without first
obtaining Landlord's prior written consent:
A. Alterations. Make any alterations, improvements, and/or additions
to the Premises or any part thereof in excess of ten thousand ($10,000.00)
dollars without the prior written consent of the Landlord, which consent will
not be unreasonably withheld or delayed.
B. Not Change Exterior Architecture. Change (whether by alteration,
replacement, rebuilding or otherwise) the exterior color and/or architectural
treatment of the Premises without the prior written consent of the Landlord,
which consent will not be unreasonably withheld. If Tenant changes the exterior
of the Premises during the Term or any extension, Tenant must, unless notified
by the Landlord to the contrary, return the exterior to its original state prior
to vacating the Premises.
C. Not Misuse Plumbing Facilities. Use the plumbing facilities for
any purpose other than that for which they were constructed, or dispose of any
garbage or other foreign substance therein, whether through the utilization of
so-called "disposal" or similar units, or otherwise.
D. Not Damage the Premises. Perform any act or carry on any practice
which may damage, mar or deface the Premises.
E. Not Exceed Floor Loads. Place a load on any floor in the
Premises, which is in excess of the floor load per square foot as established by
standard engineering principles; or install, operate or maintain therein any
heavy item or equipment except in such manner as to achieve a proper
distribution of the weight.
F. Not Exceed Electrical Load. Install, operate or maintain in the
Premises, any electrical equipment which does not bear Underwriters' Laboratory
("UL") approval, or would overload the electrical system therein, or any part
thereof, beyond its reasonable capacity for proper and safe operation.
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G. Not Permit Odors, etc. Suffer, allow or permit any offensive or
obnoxious vibration, noise, odor or other undesirable effect to emanate from the
Premises, or any machine or other installation therein, or otherwise suffer,
allow or permit the same to constitute a nuisance or otherwise unreasonable
interfere therefor with the safety, comfort or convenience of the area
surrounding the Premises, upon notice by Landlord to Tenant that any of the
aforesaid is occurring, Tenant shall forthwith (but in all events within ten
(10) days) remove or control the same.
H. Not Interfere with Insurance; Compliance, Improper Use. Use or
occupy the Premises or do not permit anything to be done thereon in any manner
which shall prevent Landlord from obtaining at standard rates any insurance
required or desired, or which would invalidate or increase the cost to Landlord
of any existing insurance (unless Tenant pays such additional cost and the
change does not endanger the Premises or the Building), or which might cause
structural injury to the building, or which would constitute a public or private
nuisance or which would violate any present or future laws, regulations,
ordinances or requirements (ordinary or extraordinary, foreseen or unforeseen)
of the federal, state or municipal governments, or of any department,
subdivisions, bureaus or offices thereof, or of any other governmental public or
quasi-public authorities now existing or hereafter created having jurisdiction
of the Premises.
ARTICLE 12
INSURANCE, CASUALTY, CONDEMNATION
Section 12.01. A. Tenant shall, at its own cost and expense,
maintain comprehensive public liability (containing the so-called "occurrence
clause") against claims for personal injury, death and property damage occurring
in or about the Premises; such insurance shall afford minimum protection of two
million ($2,000,000.00) dollars combined single limit for bodily injury and one
million ($1,000,000.00) dollars for property damage liability in any one
occurrence. Landlord shall be named as an additional named insured under this
public liability insurance policy.
B. Tenant shall reimburse Landlord for fifty (50%) percent of
Landlord's cost of obtaining property, fire and casualty insurance (multi-peril
casualty insurance and rental value insurance in an amount equal to a year's
Annual Basic Rent) on the Premises to afford minimum protection to the Landlord
in the amount of not less than one million ($1,000,000.00) dollars for any
damage caused to the Premises, or one hundred (100%) percent of the "full
replacement cost" of the Building and the fixtures. Landlord shall be named as
the sole loss payee and insured of such policy. Tenant acknowledges that it
shall have no right to any of the proceeds of said insurance and that Tenant has
no insurance coverage under any policies obtained on behalf of the Landlord
where Landlord is named as the sole loss payee. Tenant shall reimburse Landlord
for said insurance within ten (10) days after Landlord bills Tenant for the cost
of the
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insurance. The cost of obtaining the casualty insurance shall be deemed to be
additional rent. Landlord may increase the amount of the insurance if, in
Landlord's reasonable judgment, the full replacement cost of the Building
increases. Landlord shall not increase the amount of the insurance during the
first year of the Term.
Section 12.02. All insurance required to be maintained by Tenant by
this Article 12 shall be effective under policies issued by insurers licensed by
the State of Pennsylvania. Such insurance may be effected by policies of blanket
insurance, covering property other than the Premises, provided such coverage is
not less than it would be under a separate policy. Tenant shall furnish Landlord
with reasonable proof of compliance with the requirements of this Article.
Section 12.03. All insurance maintained by Tenant pursuant to
Article 12 shall:
A. Be provided by policies which may not be canceled or modified
with respect to the Premises without at least thirty (30) days prior written
notice by the insurer to Landlord;
B. Provide that no act or omission of Landlord or Tenant shall
affect the coverage afforded thereunder;
C. With respect to liability policies to be maintained by Tenant
pursuant to this Article, name Landlord as an additional insured party and, if
obtainable (even if at additional cost to the Tenant), provide that the insurer
waives all right of subrogation against Landlord for losses insured thereunder.
D. Be provided by an insurer licensed to do business in the State of
Pennsylvania.
E. The multi-peril casualty insurance shall name the Landlord as
sole loss payee.
Section 12.04 - Landlord's Non-Liability, Tenant's Own Insurance.
A. Tenant hereby waives all right of recovery which it might have
against Landlord, Landlord's agents and employees, for loss or damage to
Tenant's furniture, inventory, furnishings, fixtures, equipment, chattels and
articles of personal property located on the Premises, notwithstanding that such
loss or damage may result from the passive negligence or fault of Landlord.
Tenant shall obtain insurance policies covering its furnishings, inventory,
fixtures, equipment and articles of personal property (collectively, "Personal
Property") in the Premises, and Tenant shall cause Landlord to be named as an
additional insured party under such policies (without entitling Landlord to
receive any loss proceeds thereof) and obtain the
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insurer's waiver of all rights of subrogation against Landlord with respect to
losses insured under such policies. All policies obtained by the Tenant
(including any liability or casualty policies), shall provide that the insurer
waives all rights of subrogation against the Landlord for losses insured
thereunder.
B. Tenant shall advise Landlord promptly of the applicable
provisions of such insurance policies and notify Landlord promptly of any
cancellation or change therein. Tenant shall provide copies of original
insurance policies to Landlord evidencing the insurance coverage required by
this Article.
Section 12.05. As a consideration for the making of this Lease, the
Landlord shall not be liable for any failure of water supply, electric current,
gas or any other utility, nor for injury or damage which may be sustained to any
person or property by the Tenant or any other person caused by or resulting from
steam, electricity, gas, water, rain, ice, or snow which may leak or flow from
or into any part of said Building or from the breakage, leakage, obstruction or
other defect of the pipes, wiring, appliances, plumbing or lighting fixtures of
the same, the condition of said Premises or any part thereof, or from the street
or subsurface, or from any other source or cause whatsoever, unless such damage
or injury shall be caused by or be due to the negligence of the Landlord, the
Landlord's agents, servants or employees. Tenant acknowledges that it will
obtain appropriate insurance to cover any of the contingencies set forth above.
Section 12.06 - Safety Compliance. Tenant agrees, at its own cost
and expense, to comply with all of the rules and regulations of the Fire
Insurance Rating Organization having jurisdiction and any similar body if caused
by Tenant's use. If Tenant installs any electrical equipment that overloads the
lines of the Building, Tenant shall, at its own cost and expense, promptly make
whatever changes are necessary to remedy such condition and to comply with all
requirements of the Landlord and the Board of Fire Insurance Underwriters and
any similar body and any governmental authority having jurisdiction thereof.
Section 12.07 - Fire or Other Casualty. A. Annual Basic Rent and
additional rent shall be apportioned for any month hereunder, in which the
Premises are "substantially damaged". "Substantially damaged" shall mean that
Tenant has ceased operating at the Premises as a result of the damage caused by
the casualty. In the event the Premises shall be damaged or destroyed and the
cost to repair the same shall amount to less than twenty (20%) percent of the
cost of replacement thereof, Landlord shall repair and/or rebuild the Premises.
The Annual Basic Rent and additional rent shall be apportioned until the repairs
are substantially completed. Landlord shall commence rebuilding within one
hundred eighty (180) days after the casualty.
B. Notwithstanding anything to the contrary contained in the
preceding Paragraph A of this Section or elsewhere in this Lease, Landlord may
terminate this Lease on thirty (30) days notice to Tenant, given within sixty
(60) days after the Premises shall be
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damaged or destroyed and the cost to repair the same shall amount to twenty
(20%) percent or more of the cost of replacement thereof; the term "cost of
replacement" shall be determined by the company or companies selected by
Landlord insuring Landlord against the casualty in question. In the event
Landlord does not elect to terminate this Lease, Landlord shall commence
rebuilding the Premises within one hundred eighty (180) days after the casualty.
Within sixty (60) days after the date of the casualty if Landlord does not
terminate the Lease, Landlord shall notify the Tenant if it intends to rebuild
and how long it is anticipated the rebuilding will take ("Rebuilding Notice").
In the event the anticipated date for substantial completion of the rebuilding
shall be more than eighteen (18) months from the date of the casualty, the
Tenant shall have the option, to be exercised within thirty (30) days after
receipt of the Rebuilding Notice, to terminate the Lease. Notwithstanding
anything to the contrary set forth herein, in the event the Premises are
substantially damaged during the final twelve (12) months of the Term, Tenant
may cancel the Lease upon thirty (30) days written notice to the Landlord.
Section 12.08 - Condemnation.
A. Total or Substantial Partial Condemnation. If the whole of the
Premises shall be taken for any public or any quasi-public use under any statute
or by right of eminent domain, or by private purchase in lieu thereof, then this
Lease shall automatically terminate as of the date that title shall be taken. If
a substantial part of the Premises shall be taken so as to substantially
interfere with the operation of Tenant's business, then Landlord and Tenant
shall each have the right to terminate this Lease on thirty (30) days notice to
the other given within ninety (90) days after the date of such taking. In the
event that this Lease shall terminate or be terminated, the rent shall, if and
as necessary, be equitably adjusted.
B. Disposition of Proceeds. All compensation awarded for the
Building, land and/or structures, or paid upon such a total or partial taking of
the Premises shall belong to and be the property of Landlord without any
participation by Tenant. Nothing herein shall preclude Tenant from asserting any
claim against the municipality enforcing the condemnation.
ARTICLE 13
TENANT'S INDEMNIFICATION OF LANDLORD AGAINST LIABILITY
Section 13.01. Tenant shall indemnify Landlord against all liability
and expense (including reasonable architects' and attorneys' fees) incurred by
Landlord by reason of:
A. Any action commenced by Tenant (or by Landlord to cure an event
of default as hereinafter defined) on or relating to the Premises, in which
Landlord prevails;
B. Any use, non-use or maintenance of the Premises;
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C. Any negligence of Tenant, or intentional acts by Tenant, its
agents, invitees, congregates, contractors, officers or directors;
D. Any injury or damage to any person or property occurring on or
about the Premises (including the commencement of an action as a result of such
damage or injury) or adjacent area and it is admitted by Tenant that Landlord
has no liability for any such injury since Tenant has control of the Premises;
or
E. Any failure by Tenant to pay Annual Basic Rent, additional rent
or to perform any of its obligations under the Lease.
ARTICLE 14
LANDLORD'S REMEDIES IN EVENT OF TENANT'S DEFAULT OR BANKRUPTCY
Section 14.01 - Events of Default. Tenant shall be in default of
this Lease if any one or more of the following events (referred to herein as
"events of default") occurs:
A. Tenant shall default in payment of any installment of Annual
Basic Rent, additional rent or other sums required to be paid by Tenant under
this Lease, and such default continues for ten (10) days after written notice of
such default.
B. In the observance or performance of any other covenant or
provision of this Lease (other than non-payment of Annual Basic Rent, additional
rent or other sums to be paid under this Lease) and such default continues for
thirty (30) days after notice of such default from Landlord or such longer
period if the default, cannot by its nature, be cured within such thirty (30)
day period and Tenant has commenced curing the same within such thirty (30) day
period and shall diligently and continuously prosecute the same to completion.
C. Tenant shall make an assignment for the benefit of creditors or
shall assign or sublet, except as permitted hereunder; or
D. A voluntary petition is filed by Tenant under any laws for the
purpose of adjudication of Tenant as a bankrupt or the extension of time of
payment, composition, arrangement, adjustment, modification, settlement or
satisfaction of the liabilities of Tenant, or the reorganization of Tenant under
the Bankruptcy Act of the United States or any future laws of the United States
having the same general purpose, or receivers appointed for Tenant by reason of
insolvency or alleged insolvency of Tenant; an involuntary petition shall be
filed against Tenant for such relief and shall not be dismissed within sixty
(60) days.
Section 14.02 - Termination of Lease. Landlord, notwithstanding any
other right or remedy it may have under the Lease, at law or in equity, may, in
the event of Tenant's
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material breach of this Lease and its failure to cure as set forth above,
terminate the Lease, by written notice to Tenant setting forth the basis
therefor and effective not less than ten (10) days thereafter, whereupon, upon
such effective date, the Lease shall terminate (with the same effect as if such
date were the date fixed herein for the natural expiration of the Term), Tenant
shall surrender the Premises to Landlord and Tenant shall have no further rights
hereunder, but Tenant shall remain liable as hereinafter provided. In such
event, Landlord may, without further notice, enter the Premises, repossess the
same and dispossess Tenant and all other persons and property therefrom.
Section 14.03 - Landlord's Damages.
A. If Landlord so terminates the Lease, Tenant shall pay Landlord,
as damages:
(i) Sums equal to the Annual Basic Rent, impositions and
additional rent, when the same would have been payable if not
for such termination, less any net rents received by Landlord
from any reletting, after deducting all costs incurred in
connection with such termination and reletting (but Tenant
shall not receive any excess of such net rents over such
sums). Brokerage fees and reasonable legal fees incurred by
the Landlord in reletting the Premises and the costs of
repairing or doing construction necessary to subdivide for any
new tenant or tenants shall be deemed to be costs incurred in
reletting.
Section 14.04. Landlord may commence actions or proceedings to
recover such damages or installments thereof at any lawful time. No provisions
hereof shall be construed to preclude Landlord's recovery from Tenant of any
other damages to which Landlord is lawfully entitled.
Section 14.05 - Nonexclusivity. No right or remedy herein conferred
upon Landlord is intended to be exclusive of any other right or remedy herein or
by law provided, but each shall be cumulative and subject to the grace and
notice provisions set forth in this Lease, in addition to every other right or
remedy given herein or now or hereafter existing at law or in equity or by
statute.
Section 14.06 - Landlord's Right to Perform Tenant's Covenants. If
Tenant shall fail to maintain the Premises or shall fail to make any other
payment or perform any other act which Tenant is obligated to make or perform
under this Lease, and Tenant has not proceeded to diligently cure such failure
to pay or perform after written notice by Landlord to Tenant stating such
nonperformance, then Landlord, after fifteen (15) day written notice to Tenant,
may
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perform for the account of Tenant any covenant in the performance of which
Tenant is in default. Tenant shall pay to the Landlord as additional rent, upon
demand, any amount paid by Landlord in the performance of such covenant in any
amount which Landlord shall have paid by reason of failure of Tenant to comply
with any covenant or provision of this Lease, including reasonable amounts of
fees incurred in connection with the prosecution or defense of any proceedings
instituted by reason of default of Tenant, together with interest at the maximum
lawful rate of interest then allowed by the State of Pennsylvania, but not more
than fourteen (14%) percent per annum from the date any outstanding amount is
due until paid by Tenant.
Section 14.07 - No Waiver. The failure of the Landlord to seek
redress for violation of, or to insist upon the strict performance of any
covenant or condition of this Lease of any of the rules or regulations set forth
or hereafter adopted by Landlord, shall not prevent a subsequent act which would
have originally constituted a violation from having all the force and effect of
an original violation. The receipt by Landlord of rent with knowledge of the
breach of any covenant of this Lease shall not be deemed a waiver of such breach
and no provision of this Lease shall be deemed to have been waived by Landlord
unless such waiver be in writing signed by Landlord. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than account of the earliest stipulated rent, nor
shall any endorsement or statement of any check or any letter accompanying any
check or payment as rent 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 rent or pursue any other remedy in this Lease provided. No
act or thing done by Landlord or Landlord's agents during the Term hereby
demised shall be deemed an acceptance of a surrender of said Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord.
Section 14.08 - Right of Re-Entry. In the event that the termination
of this Lease is the result of any election exercised by Landlord pursuant to
the terms of this Article, the Landlord shall be entitled to the rights,
remedies and damages set forth in this Article and elsewhere in this Lease,
subject to the laws of the State of Pennsylvania. To the extent permitted by
law, Tenant waives any right of re-entry to the Premises.
Section 14.09 - Confession of Judgment. Upon the occurrence of an
event of default (as defined above) by Tenant under the Lease, Tenant hereby
empowers any prothonotary or any attorney of any court of record within the
United States or elsewhere to appear for Tenant, without declaration filed, and
confess judgment against Tenant in favor of Landlord, its successors or assigns,
as of any Term, for any determined amount to which Landlord would be entitled as
damages under any of the provisions of the Lease, as amended, including also an
attorney's fee for collection of 5% of the total amount of such damages,
together with costs of suit, and Tenant hereby waives all errors, defects and
imperfections in entering said judgment or in any writ, process of proceeding
thereon or thereto or in any way touching or concerning the same and for the
confession and entry of
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such judgment, the Lease or a true and correct copy thereof shall be sufficient
warrant and authority. The authority and power contained herein shall not be
exhausted by one exercise thereof, but judgment may be confessed as aforesaid
from time to time and as often as there is an occurrence of any event, and
furthermore such authority and power may be exercised during the Term or any
renewal thereof, or after the expiration or earlier termination of the Term
hereof. Tenant understands that following entry of such judgment, Landlord may
levy execution or proceed in any lawful manner Landlord determines to enforce
such judgment. Tenant, with full knowledge of such remedies, waives its rights
to notice thereof, except as specifically provided in the Lease. Tenant
acknowledges that the Lease grants Tenant adequate grace and notice periods and
Tenant accepts such grace and notice provisions as satisfying all of Tenant's
rights including but not limited to its constitutional rights.
Upon the occurrence of an event of default by Tenant under the
Lease, the expiration of the Term of the Lease or the earlier termination or
surrender hereof as provided in the Lease, it shall be lawful for an attorney to
appear as attorney for Tenant and to confess judgment for the recovery by
Landlord in possession of the Premises, for which the Lease shall be its
sufficient warrant, whereupon, if Landlord so desires, a writ of possession or
other appropriate writ under the Rules of Civil Procedure then in effect may
issue forthwith without any prior writ or proceedings and Tenant, with full
knowledge of such remedies, waives its rights to notice thereof, except as
specifically provided in the Lease. Tenant acknowledges that the Lease grants to
Tenant adequate grace and notice periods and Tenant accepts such grace and
notice provisions as satisfying all of Tenant's rights including but not limited
to its constitutional rights; provided, however, if for any reason after such
action shall have been commenced, the same shall be determined that the
possession of the Premises hereby demised remain in or be restored to Tenant,
Landlord shall have the right for the same default and upon any subsequent
default or defaults, or upon the termination of the Lease under any of the terms
of the Lease to bring one or more further action or actions as hereinbefore set
forth to recover possession of the Premises and confess judgment for the
recovery of possession of the Premises as hereinabove provided.
In any action for money or possession by confession, Landlord shall
first cause to be filed in such action an affidavit made by it or someone acting
for it, setting forth the facts necessary to authorize the entry of judgment,
and, if a true copy of the Lease (and of the truth of the copy such affidavit
shall be sufficient evidence) be filed in such action, it shall not be necessary
to file the original as a warrant of attorney, any rule of court, custom or
practice to the contrary notwithstanding. Tenant hereby releases to Landlord and
to any and all attorneys who may appear for Tenant all errors in said
proceedings and all liability thereof. Under the Acts of Assembly and Rules of
Civil Procedure, either at the end of the term or earlier termination of the
Lease, Tenant, acknowledging the adequacy of the grace and notice provisions
contained herein,
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specifically waives any rights to notice required by the Landlord and Tenant Act
of 1951, as amended, and agreed that five days notice shall be sufficient in any
such case.
ARTICLE 15
ASSIGNMENT AND SUBLETTING
Section 15.01. Tenant may not sublet or assign this Lease without
the express written consent of the Landlord which consent will not be
unreasonably withheld. If Tenant wants the Landlord to consider a sublet or
assignment request, it must comply with the following terms and conditions:
A. Tenant must give the Landlord not less than thirty (30) days
written notice of the proposed sublet or assignment.
B. The Tenant must not be in violation of any terms of this Lease as
of the date of the request for the sublet or assignment and as of the date the
assignment or sublet is to commence.
C. Tenant must send a copy of the proposed sublease or assignment
documents to the Landlord with the notice of intention to sublet or assign
together with financial information and bank references about the proposed
assignee or sublessee.
D. The proposed sublease or assignment must contain the explicit
provision that the Tenant agrees to remain fully liable for all terms and
conditions of the Lease (as a principal and not as a surety) until the Lease
expires or until the sublessee or assignee vacates the Premises, whichever event
occurs later.
E. Tenant tenders a certified check in the amount of seven hundred
fifty ($750) dollars payable to Landlord for its fees in connection with
reviewing the sublet request or assignment request. Said fee is non-refundable.
F. Tenant delivers two (2) months of Annual Basic Rent (as of the
date the assignment or sublet is to commence) as rental security if the proposed
assignee or sublessee is not a publicly traded company. Said payment is to be
made with the request for an assignment or sublet. In the event the assignment
or sublet request is denied, this payment shall be returned to the Tenant.
Section 15.02. Landlord shall, within thirty (30) days after receipt
of the above information, notify Tenant whether it consents to the sublet or
assignment. If Landlord does not notify Tenant within thirty (30) days, consent
shall be deemed granted. In the event Landlord
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requests additional information concerning the proposed sublessee or assignee,
the thirty (30) day period shall run from the date of the Landlord's request for
additional information.
Section 15.03. Landlord may in the case of a proposed assignment,
but specifically excluding any sublease or assignment under Section 15.04, at
its option, by notice given within thirty (30) days after receipt of Tenant's
notice given pursuant to Section 15.01A above and Landlord's receipt of the
documents and information required by Section 15.01C above, terminate this Lease
as of the date which shall not be earlier than sixty (60) days after Landlord's
notice to Tenant; provided, however, that upon the termination date as set forth
in Landlord's notice, all of Landlord's and Tenant's obligations relating to the
period after such termination date (but not those relating to the period before
such termination date) shall cease; or in the case of a proposed subleasing of
all or any portion of the Premises, but specifically excluding any sublease or
assignment under Section 15.03, Landlord elects, at its option, by notice given
within fifteen (15) days after receipt of Tenant's notice given pursuant to
Section 15.01A above and Landlord's receipt of the documents and information
required by Section 15.01C above, either to terminate this Lease in its entirety
or as to such portion of the Premises proposed to be sublet, as the case may be,
as of a date which shall not be earlier than the date the sublease was to
commence. If Landlord elects to terminate this Lease in its entirety as
aforesaid upon the termination date as set forth in Landlord's notice, all of
Landlord's and Tenant's obligations relating to the period after such
termination date (but not those relating to the period before such termination
date) shall cease. If Landlord elects to terminate this Lease only as to such
portion of the Premises proposed to be sublet, upon the termination date, as set
forth in Landlord's notice, all of Landlord's and Tenant's obligations as to the
portion of the Premises so terminated relating to the period after such
termination date (but not those relating to the period before such termination
date) shall cease and provided, further, that this Lease shall remain in full
force and effect as to the remainder of the Premises, except that from and after
the termination date, the Annual Basic Rent and additional rent shall be
equitably reduced based on the remaining floor area. Notwithstanding anything to
the contrary set forth above, if Landlord elects to terminate this Lease, Tenant
may withdraw its assignment or sublet request by written notice thereof given to
Landlord within fifteen (15) days of Tenant's receipt of Landlord's election to
terminate and thereupon such termination shall be without force and effect.
In the case of any assignment or subleasing as to which Landlord may
consent, such consent shall be upon the express and further condition, covenant
and agreement, that Landlord shall be entitled to fifty (50%) percent of the
excess, if any, of (x) all revenue received by Tenant in connection with any
assignment or subleasing (y) less monthly amortization (in accordance with GAAP)
of Tenant's reasonable cost to prepare the Premises for use by the subtenant or
assignee), (z) over the Annual Basic Rent, and additional rent provided in this
Lease after Tenant has recaptured its unamortized costs incurred in improving
the Premises and its brokerage fees and reasonable legal fees incurred in the
sublet or assignment. Any payments due Landlord as aforesaid shall be made
within ten (10) days of receipt of same by Tenant.
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Landlord shall not be deemed to be unreasonably withholding its
consent to such proposed assignment or subleasing if in Landlord's reasonable
opinion: (a) the proposed assignee or subtenant is not of a character consistent
with the operation of the Building or does not have a good reputation; or (b)
the assignee or subtenant intends to use the Premises (or parts thereof) for
purposes other than the purpose the Premises may be used as stated in Section
2.01 or uses Hazardous Material; or (c) the proposed assignee or Subtenant does
not possess adequate financial capabilities to perform the tenant or subtenant
obligations (whichever is applicable) as or when due or required; or (d) the
character of the business to be conducted or the proposed use of the Premises by
the proposed subtenant or assignee shall (i) be likely to increase unreimbursed
operating expenses for the Building beyond that which Landlord would incur for
Tenant; (ii) be likely to unreasonably increase the burden on Building systems
or equipment over the burden prior to such proposed subletting or assignment; or
(iii) violate or be likely to violate any provisions or restrictions contained
herein relating to the use or occupancy of the Premises; or (e) there shall be
existing an Event of Default (defined in Section 14.01) at any time on or after
the date the request to sublet or assign is made; or (f) have a business which
competes with or will materially detract from the business of other tenants in
the Building.
If this Lease be assigned, or if the Premises or any part thereof be
sublet or occupied by anyone other than Tenant, Landlord may upon prior notice
to Tenant at any time and from time to time, collect Annual Basic Rent and
additional rent and all the charges from the assignee, sublessee or occupant and
apply the net amount collected to such sums reserved herein; provided, however,
no such assignment, subletting, occupancy or collection shall be deemed a waiver
of this covenant, or a waiver of the provisions of this Article 15 hereof, or
the acceptance of the assignee, sublessee or occupant as a tenant, or a release
of Tenant from the further performance by Tenant or covenants on the part of the
Tenant herein contained, the Tenant herein named to remain primarily liable
under this Lease.
The consent by Landlord to an assignment or subletting under any of
the provisions of this Article 15 shall in no way be construed to relieve Tenant
from obtaining the express consent in writing of Landlord to any further
assignment or subletting.
Section 15.04. Notwithstanding anything to the contrary set forth
above or in this Lease, Tenant shall have the right to sublet, assign or
otherwise transfer its interest in this Lease to any parent or wholly owned
operating subsidiary of Tenant, or wholly owned subsidiary of Tenant's parent,
or to an entity with which Tenant, its parent or subsidiary may merge or
consolidate, or to an entity which is purchasing all of the Tenant's or its
parent's assets, upon sixty (60) days notice to the Landlord. However,
notwithstanding such assignment, transfer or subletting, Tenant shall remain
primarily and fully liable for all of its obligations under this Lease. In the
event of any subletting or assignment pursuant to this Section 15.04, the
assignee or sublessee shall be required to use the Premises for the use set
forth in Article 2.
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Section 15.05. In the event Landlord denies the assignment or sublet
request, Tenant's sole remedy shall be to get a declaratory judgment permitting
the assignment or sublet. It is agreed by and between the parties that in the
event permission to assign or sublet is denied, Tenant shall not be entitled to
monetary damages or to an abatement of Annual Basic Rent or additional rent even
if Tenant obtains a declaratory judgment compelling the Landlord to consent to
the assignment or sublet request.
ARTICLE 16
SUBORDINATION OF LEASE TO MORTGAGES ON THE PREMISES
Section 16.01 - Subordination. The Lease shall be subject and
subordinate to any mortgage on the Premises ("Mortgage") and any renewal,
replacement, extension or consolidation thereof, provided Landlord makes a good
faith effort to obtain a commercially reasonable non-disturbance agreement from
any such mortgage holder. In the event any mortgagee requests Tenant to execute
a subordination agreement in conjunction with or which contains a commercially
reasonable non-disturbance provision, Tenant shall execute such document within
fifteen (15) business days after it is presented to the Tenant. Landlord
represents that as of the Commencement Date there is no mortgage encumbering the
Premises.
Section 16.02 - Attornment Agreement. This Article shall be
self-operative but Tenant shall promptly, upon Landlord's request, execute and
deliver proper instruments subordinating the Lease to the Mortgage, agreeing to
attorn to the Mortgagee (at the Mortgagee's request) in the event the Mortgagee,
by foreclosure or otherwise, terminates Landlord's interest in the Premises and
agreeing further to notify the Mortgagee of any default by Landlord hereunder
and afford the Mortgagee reasonable opportunity to remedy such default should it
wish to do so.
ARTICLE 17
EXONERATION OF INDIVIDUALS
Section 17.01 - Exoneration. If the Landlord or any successor in
interest shall be an individual, joint venture, tenancy in common, firm or
partnership, general or limited, there shall be no personal liability on such
individual or on any member of such joint venture, tenancy in common, firm or
partnership or on such joint venture, tenancy in common, firm or partnership in
respect to any of the covenants or conditions of this Lease. The Tenant shall
look solely to the equity of the Landlord in the Premises for satisfaction of
the remedies of the Tenant in the event of a breach by the Landlord of any of
the covenants or conditions of this Lease and no other property or assets of
Landlord shall be subject to levy, execution or other enforcement procedure for
the satisfaction of Tenant's remedies in the event of a breach or violation by
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Landlord of any of the terms of this Lease or any other liability which the
Landlord might have to the Tenant.
ARTICLE 18
NOTICES
Section 18.01 - Notices. All notices, demands and requests which may
or are required to be given by either party to the other shall be in writing.
All notices, demands and requests by the Landlord to the Tenant shall be sent by
United States Certified Mail, (return receipt requested is optional), postage
prepaid, addressed to the Tenant at 91 Michigan Avenue, Patterson, New Jersey or
at such other place as the Tenant may from time to time designate in a written
notice to the Landlord. All notices, demands and requests by the Tenant to the
Landlord shall be sent by United States Certified Mail, postage prepaid, return
receipt requested, addressed to the Landlord at the address shown on the first
page of this Lease or at such other place as the Landlord may from time to time
designate in a written notice to the Tenant. Notices, demands and requests which
shall be served upon the Landlord or the Tenant in the manner aforesaid shall be
deemed sufficiently served or given for all purposes hereunder two (2) days
after such notice, demand or request shall be mailed. Notices on behalf of the
Landlord may be signed by Gary A. Kreinik as attorney, with the same force and
effect as if signed by the Landlord. The time requirements for notices required
by this Lease shall be the longer of the time set forth in this Lease or the
time required by law.
ARTICLE 19
ACCEPTANCE
Section 19.01 - Acceptance. Except as specifically set forth in this
Lease, neither the Landlord nor its agents have made any representations with
respect to the Building, the land upon which it is erected except as expressly
set forth herein and no rights, easements, or licenses are acquired by the
Tenant by this Lease. The taking of possession of the leased property by the
Tenant shall be conclusive evidence that the Tenant will have accepted the same
"as is" at the time of the commencement of the Term. In no event shall the
Landlord be liable for any defect, latent or otherwise, in such property or for
any limitation on its use. The Landlord represents that the Premises are zoned
for Tenant's use as defined in Article 2.
ARTICLE 20
QUIET ENJOYMENT - CONVEYANCE BY LANDLORD
Section 20.01 - Quiet Enjoyment. Tenant, upon paying the rent and
all additional rent and other charges herein provided for and performing all
covenants and conditions of this
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Lease, on its part to be performed, shall quietly have and enjoy the Premises
during the term, without hindrance or molestation by Landlord or any other
person claiming through Landlord.
Section 20.02 - Conveyance by Landlord. If Landlord shall convey the
Premises, all liabilities and obligations on the part of Landlord under this
Lease accruing subsequent to such transfer shall terminate upon such conveyance
and thereafter all such liabilities and obligations shall be the liabilities and
obligations of such transferee and shall be binding upon such transferee of the
Premises.
ARTICLE 21
ESTOPPEL CERTIFICATE
Section 21.01 - Estoppel Certificate. Within ten (10) days after the
request therefrom by Landlord, or if on a sale, assignment or hypothecation by
Landlord of its interest in the Premises, or any part thereof, an estoppel
certificate shall be required from Tenant and Tenant shall deliver, in
recordable form, a certificate to any proposed mortgagee or purchaser, or to
Landlord, certifying if such can be the case that this Lease is in full force
and effect, the date of Tenant's most recent payment of rent, and that there are
no defenses or offsets outstanding, or stating those claimed by Tenant. Tenant's
failure to deliver said statements shall be conclusive upon Tenant that (1) this
Lease is in full force and effect without modification except as may be
represented by Landlord, (2) there are no uncured defaults in Landlord's
performance and Tenant has no right of offset, counterclaim or deduction, and
(3) that no more than one (1) month's rent has been paid in advance.
ARTICLE 22
NO ABATEMENT OF RENT
Section 22.01 - No Abatement of Rent. Except as otherwise
specifically provided in this Lease, there shall be no abatement, diminution or
deduction of rent charges or other compensation due to the Landlord by the
Tenant or any person claiming under it, under any circumstances including but
not limited to the complete or partial destruction of the Building or any
inconveniences, discomfort, interruption of business or otherwise caused by a
taking or destruction of the Premises except as otherwise specifically provided
herein.
ARTICLE 23
SURRENDER
Section 23.01. On the last day or sooner termination of the Lease,
Tenant shall quit and surrender the Premises broom-clean, in good condition and
repair, exclusive of all
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alterations, additions and improvements which may have been made in, on, or to
the Premises (including, but not limited to, replacement of any walls which were
removed and removal of any partitions or walls installed), movable furniture or
unattached movable trade fixtures normal wear and tear excepted. If the Premises
are not surrendered as and when aforesaid, Tenant shall indemnify Landlord
against loss or liability resulting from the delay by Tenant in so surrendering
the Premises including, without limitation, any claims made by any succeeding
occupant founded on such delay if Tenant is notified in writing that such delay
will give rise to liability. Tenant's obligations under this section shall
survive the expiration or sooner termination of the Term. In the event Tenant
remains in possession of the Premises after the expiration of the Term created
hereunder, and without the execution of a new lease, Tenant, shall be deemed to
be holding over and the rate of use and occupation shall be equal to two (2x)
times the monthly payment of Annual Basic Rent payable for the last month of the
Term or any renewal thereof plus the additional rent as calculated on a month by
month basis.
Section 23.02. Any property left at the Premises by the Tenant at
the expiration of the Term or, when Tenant abandons the Premises, shall be
deemed abandoned. Landlord may sell or dispose of said property in any manner it
deems appropriate. Any costs of disposal incurred by Landlord shall be paid by
Tenant. This obligation shall survive termination of the Lease.
ARTICLE 24
MISCELLANEOUS
Section 24.01. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option to Lease, and
it is not effective as a Lease or otherwise until execution and delivery by both
Landlord and Tenant.
Section 24.02 - Applicable Law. This Lease shall be governed by and
construed in accordance with the laws of the State of Pennsylvania and shall be
deemed to have been created by both parties.
Section 24.03 - Broker. Tenant warrants and represents that it has
dealt with no realtors, brokers or agents in connection with the negotiation of
this Lease and the renting of the Premises other than Julius Feinblum and Mike
Ullian ("Broker"). Landlord shall be responsible for paying the Broker. Should
any claims be made for brokerage commissions through or on account of dealings
of Tenant or its agents or representatives with anyone other than Broker, Tenant
shall indemnify, defend and hold Landlord harmless against any liability in
connection therewith.
Section 24.04 - Jury Trial. Anything herein contained to the
contrary notwithstanding, the Tenant agrees and does hereby waive trial by jury
in any action, proceeding
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or counterclaim brought by either of the parties hereto against the other on any
matter whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant and/or Tenant's use or occupancy of the
Premises. This waiver of trial by jury is subject to the laws of the State of
Pennsylvania. If such waiver is illegal or void, then and in that event this
paragraph shall have no force and effect and shall be deemed deleted from this
Lease.
Section 24.05 - Counterclaim, Etc. Anything herein contained to the
contrary notwithstanding, in any action or summary proceeding brought for the
collection of any of the rent or additional rent provided for herein or for the
non-payment thereof to the Landlord, or for any proceeding or action wherein
Tenant has violated the terms of this Lease, the Tenant hereby waives and agrees
not to introduce any non-compulsory counterclaims which the Tenant now has or
hereafter may have. The Tenant, however, shall have the right to litigate any
such claim in a separate independent action. Moreover, Tenant shall not assert
as an affirmative defense, in any summary proceedings commenced by the Landlord,
any claim which is based on Landlord's alleged negligence. Subject to the terms
of this Lease, Tenant may assert any negligence claims against Landlord in a
plenary action brought against Landlord.
Section 24.06 - Savings Clause. It is the desire and intent of the
parties that the provisions of this Lease shall be enforced to the fullest
extent permitted by law. Accordingly, the invalidity or unenforceability of any
provision of this Lease shall not affect the validity or enforceability of any
other provision of this Lease, which shall remain in full force and effect, nor
shall the invalidity or unenforceability of any portion of any provision of this
Lease affect the validity or enforceability of the balance of such provisions.
24.07 - Signage. Tenant may install such signage on the exterior of
the Premises as is permitted by law. Any such signs shall be installed in
accordance with all applicable laws, rules and regulations and such signage must
not interfere with access or visibility of the other tenant's display windows or
entrance and shall not be placed on the other tenant's portion of the Building.
Tenant may, to the extent available and as permitted by law, install its sign on
any existing pylon sign at the Building or install a sign on the parapet wall.
Any such use of the pylon sign or sign on the parapet wall must not interfere
with the other tenant's use of the pylon sign or interfere with the other
Tenant's use of the Building. Landlord makes no representation that any signage
may be placed at the Premises or on the pylon. At Landlord's request, given at
any time up to thirty (30) days after expiration of the Term, Tenant shall
remove, at its own cost and expense, any signage which it installed at the
Premises.
24.08 - Condition of the Premises. At the commencement of the Term
the Premises shall be delivered free of hazardous and toxic materials including,
but not limited to, asbestos. The electrical, plumbing and HVAC systems shall be
in working order and the roof shall be free of leaks. Moreover, Landlord shall
perform the work set forth on Exhibit "A" attached hereto. The work shall be
completed on or before December 31, 1996. Landlord
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represents that to his actual knowledge there are no violations of record filed
against the Premises. The HVAC unit at the premises serves only the Premises and
no other tenant at the Building.
24.09 - Exclusivity. Landlord will not lease a portion of the
Building to a business whose primary business is the sale of laminated youth and
adult bedroom sets. Notwithstanding the following, Landlord may Lease a portion
of the Building to a furniture store or mattress/bed store so long as their
primary business is not the sale of youth and adult bedroom sets. Landlord will
not lease the Premises to a business whose primary business is the sale of
X-rated adult videos.
IN WITNESS WHEREOF the Landlord and Tenant have caused these
presents to be signed by their duly authorized agent on the day and year first
above written.
WITNESS: PITROCK REALTY CORP., Landlord
/s/ Gary A. Kreinik By: /s/ Norman P. Rappaport
- ------------------- -----------------------
Norman P. Rappaport, President
WITNESS: ROOM PLUS, INC.
/s/ Mary M. Martin By: /s/ Marc Zucker
- ------------------ ---------------
Marc Zucker, Chairman
Corporation Resolution to be provided by Tenant together with
appropriate acknowledgment page.
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EXHIBIT "A"
Landlord's Work
Landlord shall perform the following work at the Premises:
1. Fix all damaged glass.
2. Repair any window frames (mullions to be cleaned).
3. Replace existing floor saddles.
4. Demolish small backroom at Premises, or, at Tenant's option, Tenant may
demolish the back room and it shall be entitled to a credit against Annual
Basic Rent in an amount of the cost of demolition or $750.00, whichever
amount is less.
5. Soffits repaired.
6. Fascia material repaired.
7. Exterior lighting on facade of soffit to be repaired (Tenant to repair,
Landlord to reimburse Tenant up to $350).
SHOPPING CENTER
LEASE AGREEMENT
INDEX CAPTION
Data Sheet
Additional Rent Rider
1 Parties
2 Demised Premises
3 Possession
4 Use
5 Term
6 Rental
7 Tenant's Share of Operating Expenses
8 Utilities
9 Taxes
10 Repairs
11 Alterations
12 Affirmative Covenants of Tenant
13 Negative Covenants of Tenant
14 Signs
15 Rights of Landlord
16 Insurance and Waiver of Subrogation
17 Indemnification
18 Waiver of Claims
19 Trade Fixtures
20 Assigning, Mortgaging, Subletting
21 Subordination
22 Performance of Tenant's Covenants
23 Marketing Fund
24 Custom and Usage
25 Surrender and Holding Over
26 Changes to Shopping Center; Approvals
27 Relocation
28 Eminent Domain or Damage
29 Bankruptcy or Insolvency
30 Events of Default; Remedies
31 Notices
32 Successors and Assigns
33 Scope and Interpretation
34 Force Majeure
35 Estoppel Certification
36 Notice to Mortgagee
37 Quiet Enjoyment
38 Miscellaneous Provisions
39 Renewal Option
LIST OF EXHIBITS AND ADDENDUM
"A" Site Plan
"B" Description of Landlord's Work
"C" Description of Tenant's Work
"D" Construction
"E" Sign Criteria
"F" Tenant's/Building Signage
"G" Addendum to Lease Agreement
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LEASE AGREEMENT
DATA SHEET
LEASE DATE: As of the 20th day of March, 1997
LANDLORD: CMW Investments, Ltd.
LANDLORD'S ADDRESS: C/O Willner Properties, 150 Allendale Road, King of
Prussia, PA 19406
TENANT: Room Plus, Inc. Main Office, 91 Michigan Avenue,
Paterson, NJ 07503
SHOPPING CENTER: Courtside Square, 140 Allendale Road, King of Prussia, PA
DEMISED PREMISES: Approximate Store Size: 4000 Rentable Square Feet. See
Exhibit "A" (Site Plan) for approximate store location as
marked in red.
PERMITTED USE: Tenant shall be permitted to use the Demised Premises
only for the following: Tenant shall have the right to
operate the Premises for the sale of retail of furniture,
home furnishings, related accessories, related services
and any other use or purpose incidental or similar
thereto (the "Permitted Use") and for no other purpose.
In no event, may more than twenty percent (20%) of
Tenant's sales from the Premises be generated by products
of the type sold, as of the date of the execution of this
Lease, in the Pier I Imports store located within the
building containing the Premises. It being expressly
understood that the foregoing restriction shall not apply
to Tenant's right to sell furniture. Tenant shall not,
however, sell wicker or wrought iron furniture. Tenant's
primary business is the sale of laminated youth and adult
bedroom sets.
TENANT TRADE NAME: Room Plus
TERM: Ten (10) Calendar years and two (2) months subsequent to
the delivery of possession by Landlord to Tenant.
ANNUAL
MINIMUM RENT: See Minimum Rent Rider incorporated herein and made a
part hereof.
MONTHLY
MINIMUM RENT: See Minimum Rent Rider incorporated herein and made a
pert hereof.
ADDITIONAL RENT: See Additional Rent Rider incorporated herein and made a
part hereof.
ADVANCE MINIMUM
RENT DEPOSIT: One Month's Minimum Rental
PERCENTAGE RENT: N/A
VOLUME ALLOWANCE: N/A
GUARANTOR(S): Room Plus, Inc.
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MINIMUM RENT RIDER
Annual Monthly Per Square Foot
Year(s) Minimum Rent Minimum Rent Minimum Rent
1 $108,000.00 $ 9,000.00 $27.00
2 $108,000.00 $ 9,000.00 $27.00
3 $111,240.00 $ 9,270.00 $27.81
4 $114,560.00 $ 9,546.66 $28.64
5 $118,000.00 $ 9,833.34 $29.50
6 $121,560.00 $10,130.00 $30.39
7 $125,240.00 $10,436.67 $31.31
8 $129,000.00 $10,750.00 $32.25
9 $132,880.00 $11,073.34 $33.22
10 $136,880.00 $11,406.67 $34.22
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ADDITIONAL RENT RIDER
ESTIMATED ADDITIONAL
RENTAL CHARGES:
1. Operating Expenses:
Per Sq. Ft. $1.75; Per Year $7,000.00; /$ 583.33/monthly
2. Real Estate Taxes:
Per Sq. Ft. $1.15; Per Year $4,600.00; /$383.33/monthly
3. Insurance:
Per Sq. Ft. $ .40; Per Year $1,600.00; /$133.33/monthly
COMPLETION OF TENANT'S WORK
AND OPENING FOR BUSINESS: Sixty (60) days after delivery of Possession in
accordance with Section 3.1 hereof.
This is a Legally binding document. Please read it thoroughly before you sign;
the items contained on this DATA SHEET relate to various of the contents of this
Lease. The Lease includes the Data Sheet and all exhibits attached hereto. There
are no agreements between the parties unless contained in this Lease.
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TERMS AND CONDITIONS
1. PARTIES. This Lease Agreement (the "Lease") is made as of the Lease Date by
and between Landlord and Tenant, and Landlord and Tenant intend to be legally
bound hereby. All terms defined on the Data Sheet shall have the meaning set
forth on the Data Sheet whenever used in this Lease. The Data Sheet is
incorporated herein and made a part hereof.
2. DEMISED PREMISES. Landlord hereby demises and lets to Tenant, and Tenant
hereby Leases and takes from Landlord, upon the terms and conditions of this
Lease, the Demised Premises, now, or to be, erected in and as a part of the
Shopping Center; the Demised Premises consisting of a store having a width
measured approximately from the exterior of outside wall(s) to the centerline of
interior wall(s), by a depth measured approximately from the front building line
of the Demised Premises to rear building line, together with the right to the
nonexclusive use, in common with others, of all such automobile parking areas,
driveways, footways and other facilities, designed for common use and as may be
installed or changed from time to time by Landlord, in the Shopping Center,
subject, however, to the terms and conditions of this Lease and to the rules and
regulations for the use thereof as may be prescribed from time to time by
Landlord.
3. POSSESSION.
3.1. Delivery of possession within the meaning of this Lease shall be
accomplished by delivery to Tenant of a key to the Demised Premises after
Landlord has substantially completed Landlord's Work, as described in Exhibit
"B" attached hereto and made a part hereof.
3.2. Upon receiving possession of the Demised Premises from Landlord,
Tenant will, with due diligence and dispatch, proceed to complete, at Tenant's
sole cost and expense, "Tenant's Work" denoted in Exhibit "C" and in accordance
with the specifications set forth therein, and to install such stock, fixtures
and equipment and to perform such other work as shall be necessary or
appropriate in order to prepare the Demised Premises for the opening of business
by Tenant. The agreement of Landlord, and Tenant concerning construction of the
Demised Premises is set forth in Exhibit "D" attached hereto and made a part
hereof. In the event that Tenant does not complete Tenant's Work and open the
Demised Premises for the conduct of Tenant's business within the period set
forth on the Data Sheet as "Completion of Tenant's Work and Opening for
Business", then Landlord shall have, in addition to any and all remedies herein
provided, the right at its option to collect not only the Monthly Minimum Rent
herein provided, but additional rent as delineated in this Lease Agreement.
3.3. By occupying the Demised Premises after the delivery of possession,
Tenant shall be deemed to have accepted the same and to have acknowledged that
the Demised Premises are in the condition required by this Lease.
4. USE.
4.1. Tenant shall use and occupy the Demised Premises solely and
exclusively for the conduct of the Permitted Use and for no other purpose
without the prior written consent of the Landlord and under the name of the
Tenant Trade Name. Tenant shall not engage in any type of business that may
conflict with the primary business of any of the other tenants in the Shopping
Center as of the date of full execution of the Lease Agreement.
4.2. Neither Tenant, nor any person, firm or corporation affiliated with
Tenant, shall directly or indirectly engage in any similar or competing business
within a radius of five (5) miles of the outside boundaries of the Shopping
Center during the term hereof.
4.3. Tenant shall continuously, actively and diligently during the full
term of this Lease maintain the Demised Premises fully equipped, fixtured and
open for business to the public during the days, nights and hours specified in,
and in accordance, with the provisions of, Article 12 hereof and all other
applicable provisions of this Lease, and shall conduct its business therein in a
high-grade and reputable manner with an adequate staff of employees and a full
stock of merchandise so as to produce the maximum volume of sales in the Demised
Premises. Failure of Tenant to operate its business in accordance with this
Section 4.3 shall constitute a default under this Lease.
4.4. Tenant acknowledges that Landlord has leased or may, in Landlord's
sole discretion, lease on various terms and conditions other space(s) in the
Shopping Center to businesses in store sizes, all as Landlord may elect.
4.5. By executing this Lease Tenant specifically confirms that Landlord
has made no representations or warranties concerning tenant mix, shopper traffic
volumes or how the same will or might affect Tenant, and that Tenant will take
all necessary and appropriate business steps and actions, including all prudent
advertising and marketing, to develop necessary shopper traffic and sales
volume.
5. TERM. The term of this Lease shall commence on the date when Landlord shall
deliver possession of the Demised Premises to Tenant, as provided in Section 3.1
hereof, and shall end (unless sooner terminated as provided herein) at 11:59
p.m. E.D.T. on the date of the expiration of the last of the number of years
constituting the Lease Term from the first day of the first calendar month
succeeding the Rental Commencement Date, as defined in Section 6.1 hereof. The
parties hereto agree to execute, within ten (10) days after the Rental
Commencement Date, a Supplement to this Lease, in the form attached hereto as
Supplement 1, fixing the definite date of the ending of the term of this Lease.
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6. RENTAL.
6.1. Minimum Rent. From the date of Rent Commencement, Tenant shall pay to
Landlord the Minimum Rent and Additional Rent in the currency of the United
States of America in equal monthly installments, (in the amount designated as
Monthly Minimum Rent on the Data Sheet), without deduction or set-off, on the
first day of each calendar month during the term hereof. Tenant shall pay to
Landlord one month's Minimum Rental and Additional Rental at the execution of
this Lease Agreement to be applied to the first month's Minimum Rental otherwise
due and owing in accordance with the terms of this Lease Agreement.
6.2. Intentionally Omitted.
6.3. Relationship of Parties. Anything in the foregoing to the contrary
notwithstanding, it is agreed that Landlord shall in no event be deemed to be a
partner or engaged in a joint venture with, or an associate of, Tenant in the
conduct of Tenant's business, nor shall Landlord be liable for any debts or
obligations incurred by Tenant in the conduct of Tenant's business. Nothing
contained in this Lease shall be deemed or construed to confer upon Landlord any
interest in the business of Tenant, and the relationship of the parties during
the term of this Lease shall at all times be that of Landlord end Tenant and no
other.
6.4. Intentionally Omitted.
6.5. Place of Payment. Tenant will pay all rentals and other charges
hereunder, without notice or demand, by check payable to Landlord, and render
all statements herein prescribed to Springfield Plaza Associates, a Pennsylvania
Limited Partnership, 150 Allendale Road, King of Prussia, PA 19406 Attention:
Accounting, or to such other person or corporation and at such other place as
shall be designated by Landlord in writing at least ten (10) days prior to the
next ensuing rental payment date. Failure to pay all rentals and other charges
due shall constitute a default hereunder and, in addition to all of Landlord's
remedies hereunder, interest at the rate of the lower of six percent (6%) per
annum above the announced "prime" rate of interest being charged from time to
time by Meridian Bank, or at the highest rate permitted by law shall be added to
all sums not paid within five (5) days of the due date.
6.6. Intentionally Omitted.
6.7. Additional Rent. In addition to the foregoing Minimum Rent, all other
payment to be made by Tenant under this Lease shall be deemed to be and shall
become Additional Rent hereunder, whether or not the same be designated as such
and shall be due and payable on demand or together with the next succeeding
installment of rent, whichever shall first occur; and Landlord shall have the
same remedies for failure to pay the same as for a non-payment of rent.
7. TENANT'S SHARE OF OPERATING EXPENSES.
7.1. Tenant shall pay to Landlord, during the Term of this Lease, its
proportionate share of the Operating Expenses of the Shopping Center. The
proportionate share to be paid by Tenant shall be computed by multiplying the
Operating Expenses by a fraction, the numerator of which shall be the number of
leasable square foot of floor area in the Demised Premises and the denominator
of which shall be the total number of leasable square feet of floor area
(exclusive of any mezzanine storage area) in the Shopping Center. Tenant's
proportionate share of the Operating Expenses for each Lease Year shall be paid
in monthly installments on the first day of each calendar month in advance in an
amount estimated by Landlord from time to time. Estimated payments for the first
Lease Year shall be as set forth on the Data Sheet. Within one hundred and
twenty (120) days or such other reasonable time after the end of each Lease
Year, Landlord shall furnish Tenant with a statement of the actual amount of
Tenant's proportionate share of the Operating Expenses for such period, but
failure by Landlord to furnish such statement within such period shall not
relieve Tenant of its obligations to make the payment due hereunder. In the
event the total of Tenant's monthly installments for any Lease Year does not
equal Tenant's proportionate share as shown on such statement, then Tenant
shall, within thirty (30) days of receipt of such statement, pay Landlord any
deficiency or Landlord upon receipt of such annual statement shall issue to
Tenant a credit invoice for such excess, as the case may be. For any period
within the Term of this Lease that is less than a full year, the annual charge
shall be prorated by multiplying the Operating Expenses for such year by a
fraction, the numerator of which shall be the number of days of such year during
which the Term of this Lease was in effect and the denominator shall be three
hundred sixty five (365).
7.2. Operating Expenses shall be all expenses incurred by Landlord in
operating and maintaining the Shopping Center and the common areas and
facilities maintained for the benefit of the Shopping Center, including, without
limitation, all expenses incurred to keep the Shopping Center and all buildings
comprising it in good order and repair, and for lighting, all utilities for the
common areas, elevator maintenance and repair, cleaning, painting, insurance
(including Liability insurance for personal injury, death and property damage,
and insurance against fire, theft or other casualties), removing snow, ice,
debris, and surface water, sewer, striping, security police, electronic
intrusion and fire control devices and telephonic alert system devices,
equipment depreciation, workers' compensation insurance covering personnel,
fidelity bonds for personnel, fees for permits, licenses and management
services, all costs and expenses of plantings, rebuilding and replacing flowers,
shrubbery and planters, and all costs and expenses of operating, maintaining,
repairing, and replacing paving, curbs, sidewalks, walls, retaining walls,
ramps, foundations, walkways, roadways, parking surfaces, roofing, signage,
landscaping, drainage, utilities, machines and equipment, and lighting
facilities, and all utilities, conduits, facilities and appurtenances serving
buildings and its common areas and facilities that are part of the Shopping
Center and the annual amortization or depreciation of any capital improvement
Landlord makes in order to comply with safety or any other requirements of any
federal, state, or local law or governmental regulation, cost of personnel
required or deemed necessary by Landlord to provide such aforesaid services, and
to the sum total of all the above shall be added a sum equal to fifteen percent
(15%) thereof for administration. Such costs and expenses shall not include the
initial construction costs incurred in
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building the Shopping Center, but shall include the acquisition cost (rental
fees and/or purchase price or, in lieu of purchase price, the annual
depreciation allocable thereto) of machinery and equipment used in connection
with said maintenance and operation. An annual statement of the Operating
Expenses shall be made available to Tenant for inspection.
7.3. Landlord shall not be liable for any loss or damage suffered by
Tenant either by failure to supply security service or for any loss attributable
to such security services when they are supplied no matter how caused. It is
specifically understood and agreed that by supplying security services, Landlord
shall not be deemed to relieve Tenant of its duty to maintain security within
the Demised Premises nor of its performance of the terms covenants and
conditions of this Lease.
8. UTILITIES.
8.1. Tenant shall make application and arrange for and pay or cause to be
paid all charges for gas, water, sewer, electricity, light, power, telephone and
all other utility services used, rendered, or supplied upon or in connection
with the Demised Premises, and shall defend and indemnify Landlord and save it
harmless against any liability or charges on account thereof. Utility deposits,
connection fees and/or charges for meters shall be the sole responsibility of
Tenant. Landlord shall be obligated to bring the utility services to the
boundaries of the Shopping Center. The obligation of Tenant to pay for such
utilities shall commence as of the date possession of the Demised Premises is
delivered to Tenant. In case any such utility charges are not paid by Tenant
when due, Landlord may pay the same to the utility company or department
furnishing the same, and any amounts so paid by Landlord shall be paid by Tenant
as Additional Rental for the month next following such payment by Landlord.
Tenant shall send the Landlord annually receipted water and sewer bills relating
to the Demised Premises.
8.2. In the event any of the aforesaid services are billed to Landlord,
Tenant shall pay such bill to Landlord as Additional Rent promptly upon demand
therefor.
8.3. In the event Landlord shall elect to furnish any utility services to
Tenant, Tenant agrees to purchase the same from Landlord, providing Landlord
shall charge therefor the same retail consumer rate as is charged by the public
service corporation or municipal authority, as the case may be, supplying
similar services in the general area in which the Shopping Center is situated,
and Tenant's respective charge shall be based upon consumption measured by
separate meters installed for such purpose or a profile of usage prepared by an
independent engineer.
8.4. Landlord shall not be liable to Tenant for any damages should the
furnishing of any utilities be interrupted or required to be determined because
of necessary repairs or improvements or any cause beyond the reasonable control
of Landlord, nor shall any such interruption or cessation relieve Tenant from
the performance of any of Tenant's covenants, conditions and agreements under
this Lease.
9. TAXES.
9.1. Tenant shall pay to Landlord for each Lease Year during the term
hereof, on demand, as Additional Rent, Tenant's proportionate share of Real
Estate Taxes, if any, as hereinafter described. For the purposes of this
Section, the term "Real Estate Taxes" shall include all taxes, assessments,
gross receipts taxes, water and sewer rents, and other governmental impositions
and charges of every kind and nature whatsoever, extraordinary as well as
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 arise in connection with the use, occupancy or
possession of, or grow due or payable out of, or for the Shopping Center or any
part thereof, or any land, building or other improvements therein, or be imposed
upon the Lease, the recordation thereof, the rents issuing or receivable
therefrom or gross receipts taxes on rents. All costs and expenses incurred by
Landlord during negotiations for or contests of the amount of Taxes shall be
included within the term "Real Estate Taxes." Nothing herein contained shall be
construed to include as a "Real Estate Tax" any inheritance, estate, succession,
transfer, gift, franchise, corporation, income or profit tax or capital levy
that is or may be imposed upon Landlord; however, that if at any time during the
Term of the Lease the methods of taxation prevailing at the commencement of the
Term of the Lease shall be altered so that in lieu of, or as a substitute for,
the whole or any part of the taxes now or in the future levied, assessed or
imposed on real estate as such there shall be levied assessed or imposed (i) a
tax on the rents or gross receipts received from such real estate, or (ii) a
license fee measured by the rents receivable by Landlord from the Shopping
Center or any portion thereof, or (iii) a tax or license fee imposed upon
Landlord which is otherwise measured by or based on whole or in part upon the
Shopping Center or any portion thereof, then the same shall be included in the
computation or "Real Estate Taxes" hereunder, computed as if the amount of such
taxes or fee so payable were that due if the Shopping Center were the only
property of Landlord subject thereto.
9.2. Tenant's proportionate share of Real Estate Taxes shall be equal to
the product obtained by multiplying the Taxes by a fraction, the numerator of
which shall be the number of leasable square feet of floor area in the Demised
Premises and the denominator of which shall be the total number of leasable
square feet of floor Center. Tenant's proportionate share of the Real Estate
Taxes 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 any mortgage covering the Shopping Center
to escrow Real Estate Taxes, Landlord may, but shall not be obligated to, use
the amount required to be so escrowed as a basis for its estimate of monthly
installments due from Tenant hereunder. Upon receipt of all tax bills and
assessment bills attributable to any Lease Year during the Term hereof, Landlord
shall furnish Tenant with a written statement of the actual amount of Tenant's
proportionate share of the Real Estate Taxes for such Lease Year. If the total
amount of monthly installments paid by Tenant pursuant to this Article does not
equal the sum due from Tenant as shown on such statement, Tenant shall pay to
Landlord the deficiency upon receipt of such statement, or Landlord shall issue
to Tenant at the time the statement is furnished a credit invoice for such
excess, as the case may be. 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
Real Estate
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Taxes against the Shopping Center to which such bill related. Tenant's
obligations under this Article shall survive the expiration of this Lease. For
the Lease Years in which this Lease commences and terminates the provisions of
this Article shall apply and Tenant's liability for its proportionate share of
the Real Estate Taxes for such years shall be subject to a pro rata adjustment
based on the number of days in the Lease Year during which the Term of this
Lease is in effect. If a refund is obtained, Landlord shall issue a credit
invoice for same, such portion to be based upon the percentage of the original
Taxes paid by Tenant from which the refund was derived. In addition to the
foregoing, Tenant at all times shall be responsible for and shall pay before
delinquency all taxes levied, assessed, or unpaid on any Leasehold interest, any
right of occupancy, any investment of Tenant in the Demised Premises, or any
personal property of any kind owned, installed, or used by Tenant, including
Tenant's leasehold improvements, or on Tenant's right to occupy the Demised
Premises. If any of the foregoing is assessed against Landlord or as part of the
real property of which the Demised Premises are a part, Tenant shall pay to
Landlord upon demand the amount of such additional taxes as may be levied
against Landlord or said real property by reason thereof. For the purpose of
determining said amount, figures supplied by the assessing authority as to any
amounts so assessed shall be conclusive.
9.3. In the event that the Shopping Center is not separately assessed, but
rather is included within the assessment for one or more parcels on which the
Shopping Center is located, the real property taxes and assessments allocable to
the Shopping Center shall be determined as follows:
The tax bill for each such other parcel for the year prior to any
assessment of the Shopping Center over the tax bill for the first year in which
the Shopping Center is assessed shall equal the "Total Parcel Ratio." One (1)
minus the Total Parcel Ratio shall equal the "Shopping Center Ratio". The
Shopping Center Ratio shall be multiplied by the tax bill for the first year in
which the Shopping Center is assessed.
In each year thereafter the tax bill shall be multiplied by the Shopping
Center Ratio in order to determine the tax allocable to the Shopping Center.
Tenant's proportionate share of taxes shall be the reel property taxes and
assessments allocated to the numerator of which is the number of gross leasable
square footage of the Demised Premises and the denominator of which is the
number of gross leasable square feet (exclusive of any mezzanine storage area)
in the Shopping Center.
10. REPAIRS.
10.1 Landlord will keep the roof, foundation and the exterior walls of the
Demised Premises in proper repair, excepting any work done by Tenant and any
glass or doors, provided that in each case Tenant shall have given Landlord
prior written notice of the necessity of such repairs; and provided further that
if any such repair is required by reason of the negligence of Tenant or any of
its agents, employees or customers, or other persons using the Demised Premises
with Tenant's consent, express or implied, or if the need for such repair is
directly or indirectly attributable to or results from the business activity
being conducted within the Demised Premises, Landlord may make such repair and
add the cost thereof to the first installment of Minimum Rent which shall
thereafter become due. Tenant will keep the interior of the Demised Premises
(which includes, but is not limited to, all electrical, plumbing, heating, air
conditioning and other mechanical installations, the ceiling, lighting,
flooring, all doors, door frames, door checks, and all glass) in good order and
repair, accomplishing any and all repairs, alterations, replacements and
modifications at its own expense and using materials and labor of a kind and
quality equal to the original work, and will surrender the Demised Premises at
the expiration or earlier termination of this Lease in as good condition as when
received, excepting only deterioration caused by ordinary wear and tear and
damage by fire or other casualty of the kind insured against in standard
policies of fire insurance with extended coverage. Except as hereinabove
provided, Landlord shall have no obligation to repair, maintain, alter, replace
or modify the Demised Premises or the Shopping Center or any part thereof, or
any plumbing, heating, electrical, air conditioning or other mechanical
installation therein. Under no circumstances shall Landlord be obligated to
repair, replace or maintain any glass or doors.
10.2. If any repairs required to be made by Tenant hereunder are not made
within fifteen (15) days after written notice delivered to Tenant by Landlord,
Landlord may, at its own option, make such repairs without any liability on the
part of the Landlord for any loss or damage which shall result to the stock or
business of Tenant by reason of such repairs, and Tenant shall pay to Landlord,
upon demand, as Additional Rental hereunder, the cost of such repairs plus
interest from the date of payments by Landlord until repaid by Tenant at the
rate of the lower of three percent (3%) per annum above the announced "prime"
rate of interest being charged from time to time by Royal Bank, or the highest
rate permitted by law.
10.3. Landlord shall not be liable to Tenant for any damages for failure
to repair the roof and the exterior walls of the Demised Premises if such
failure is due to events beyond the reasonable control of Landlord, nor shall
any such failure to make repairs by Landlord relieve Tenant from the performance
of any of Tenant's covenants, conditions and agreements under this Lease.
11. ALTERATIONS. Tenant will not make any alterations, improvements or additions
to the Demised Premises during the term of this Lease without first obtaining
the written consent of Landlord. Tenant will not cut or drill into, or secure
any fixture, apparatus or equipment of any kind to any part of the Demised
Premises without first obtaining the written consent of Landlord. All
alterations, improvements and additions made by Tenant, as aforesaid, shall
remain upon the Demised Premises at the expiration or earlier termination of
this Lease and shall become the property of Landlord. Prior to the commencement
of any construction by Tenant, including all of Tenant's Work Tenant shall
deliver to Landlord a written waiver executed by Tenant's contractor pursuant to
which such contractor shall waive, for itself and its subcontractor, the right
to file any mechanic's, materialmen's or similar liens against the Demised
Premises or the Shopping Center. Tenant shall remove all of its furnishing,
fixtures and equipment prior to the expiration of the Lease.
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12. AFFIRMATIVE COVENANTS OF TENANT. Tenant agrees at all times during the Term
of this Lease:
12.1. To comply with any and all requirements of any constituted public
authorities, and with the terms of any State or Federal statutes or local
ordinances or regulations applicable to Tenant for its use of the Demised
Premises, including, without limitation, the Americans with Disabilities Act,
and defend, indemnify and save Landlord harmless from penalties, fines, costs,
expenses or damages resulting from failure to do so.
12.2. To give to Landlord prompt written notice of any accident, fire or
damage occurring on or to the Demised Premises and/or common areas or common
facilities of the Shopping Center.
12.3. To keep the Demised Premises sufficiently heated to prevent freezing
water in pipes and fixtures. Tenant, at Tenant's sole cost and expense, shall
maintain and keep in good order, condition and repair (including replacement, if
necessary) including, without limitation, all plumbing and sewage facilities
within the Demised Premises, including free flow up to the main sewer line,
fixtures, heating, ventilation and air conditioning and electrical systems,
sprinkler system, walls, floor and ceilings.
12.4. To keep the Demised Premises open for business to the public seven
(7) days in each week, opening by at least ten o'clock A.M., prevailing time,
each morning and remaining open each night until nine o'clock P.M. and Sundays
opening by at least twelve noon and remaining open until at least five o'clock
P.M., and such additional hours as may become the standard (or temporary during
holidays and holiday seasons) as maintained by a majority of the tenants in the
Shopping Center. Failure to keep the Demised Premises open for business in
accordance herewith shall constitute a default under this Lease.
12.5. To keep all display windows, if any, exterior signs and exterior
advertising displays adequately illuminated (during such hours as the Landlord
may prescribe. In any event, Tenant shall keep such illumination in effect until
ten o'clock P.M. prevailing time each day.
12.6. To keep the Demised Premises, including store fronts, vestibules,
entrances, sidewalks, walkways, ramps, doors, fixtures, windows and plate glass
in a safe, neat and clean condition at all times.
12.7. To remove regularly from the Demised Premises, at Tenant's sole cost
and expense, all trash, refuse and waste materials and until removal, to store
the same in adequate containers within the Demised Premises or as Landlord shall
otherwise designate, which shall be located so as not to be visible to the
general public shopping in the Shopping Center and so as not to constitute any
health or fire hazard or nuisance to any store within the Shopping Center. In
the event Landlord provides for trash removal, Tenant shall pay its pro-rata
share as Additional Rent hereunder.
12.8. To perform all loading and unloading of goods only, at such times,
in the areas and through such entrances as may be designated for such purposes
by Landlord from time to time, and Tenant will not permit any trailers or trucks
to remain parked overnight in any area of the Shopping Center whether loaded or
unloaded.
12.9. To keep the outside areas immediately adjoining the Demised Premises
clean and free from ice and snow and to refrain from placing and/or permitting
any rubbish, obstruction or merchandise in such areas.
12.10. To keep the Demised Premise clean, orderly, sanitary and free from
objectionable odors and from insects, vermin and other pests, about or upon the
Demised Premises, and to carry out the extermination of the same at such times
and by such persons as may be.
12.11. To store or stock in the Demised Premises only such goods, wares,
merchandise or other property as shall be reasonably required in connection with
Tenant's business at the Demised Premises and not use any portion thereof for
storage or warehouse purposes beyond such needs.
12.12. To use for office, clerical or other non-selling purposes only such
space in the Demises Premises as is from time to time reasonably required for
Tenant's business therein.
12.13. To conduct its business in the Demised Premises in all respects in
a dignified manner and to keep the Demised Premises in first class condition in
accordance with the highest standards of store operation, maintaining a full and
complete stock of seasonable merchandise so as to obtain the highest possible
sales volume.
12.14. To require Tenant's employees to park their cars only in those
portions of the parking areas or at such other places as are designated for that
purpose by Landlord. Tenant agrees, that from time to time upon written notice
from Landlord, Tenant will within ten (10) days furnish Landlord with the State
automobile license numbers assigned to Tenant's cars and the cars of all of
Tenant's directors, officers, employees, agents, contractors, subtenants,
licensees and concessionaires that work at the Demised Premises. Violation of
this clause after notice shall render Tenant liable to a parking fee at the rate
of Ten and 00/100 Dollars ($10.00) per day, per car, collectible as Additional
Rent hereunder. Landlord may without liability and at Tenant's sole cost and
expense arrange for the towing of each improperly parked car.
12.15. To comply with all rules and regulations of Landlord in effect at
the time of the execution of this Lease and from time to time promulgated by
Landlord, as Landlord shall deem necessary in its sole discretion, in connection
with the Demised Premises or the Shopping Center, including the installation of
such fire extinguishers and other safety equipment as Landlord may require, and
to comply with the recommendations of Landlord's insurance carriers and their
rate making bodies.
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12.16. To do all things reasonably necessary to prevent the filing of any
mechanics' or other liens against the Demised Premises or any part thereof by
reason of work, labor, services or materials supplied or claimed to have been
supplied to Tenant, or anyone holding the Demised Premises, or any part thereof,
through or under Tenant. If any such lien shall at any time be filed against the
Demised Premises or the Shopping Center, Tenant shall cause the same to be
discharged of record, by bonding or otherwise, within twenty (20) days after the
date of filing of the same. If Tenant shall fail to discharge such lien within
such period, then, in addition to any other right or remedy of Landlord
resulting from Tenant's said default; Landlord may, but shall not be obligated
to, discharge the same either by paying the amount claimed to be due or by
procuring the discharge of such lien by giving security or in such other manner
as is, or may be, prescribed by law. Tenant shall repay the Landlord, as
Additional Rental, on demand, all sums disbursed or deposited by Landlord
pursuant to the foregoing, including Landlord's costs, expenses and reasonable
attorney's fees incurred by Landlord in connection therewith, plus interest at
the rate of the lower of six percent (6%) per annum above the announced "prime"
rate of interest being charged from time to time by Royal Bank, or the highest
rate permitted by law from the date of payment by Landlord until repaid by
Tenant. Nothing contained herein shall imply any consent or agreement on the
part of Landlord to subject Landlord's estate to liability under any mechanics'
or other lien law.
12.17. To perform all work, including repairs, alterations, renovations or
improvements, employing labor who will work compatibly with other trades working
or employees within the Shopping Center or employed by Landlord in the area.
12.18. To pay all costs, expenses and reasonable attorneys' fees that may
be incurred or paid by Landlord in enforcing the covenants, conditions and
agreements of this Lease whether incurred as a result of litigation or
otherwise.
12.19. Tenant, at its sole cost and expense, shall install and maintain
fire extinguishers and other fire protection devices as may be required by any
governmental body having jurisdiction over the Demised Premises.
12.20. To repay to Landlord, as Additional Rental, on demand, all sums
disbursed or deposited by Landlord pursuant to the foregoing provisions of this
Article 12, including Landlord's costs, expenses and reasonable attorneys' fees
incurred by Landlord in connection therewith in accordance with Article 22.
13. NEGATIVE COVENANTS OF TENANT. Tenant agrees that it will not do any of the
following during the term of this Lease:
13.1. Use or suffer or permit to be used the Demised Premises or any part
thereof for any purpose or use in violation of any law or ordinance or any
regulation of any governmental authority, or in any manner that will constitute
an unreasonable annoyance to any occupant of the Shopping Center, or a nuisance,
or that will injure the reputation of Shopping Center or any part thereof, or
for any hazardous purpose, or in any manner that will violate, suspend, void or
serve to increase the premium rate of, or make inoperative, any policy or
policies of insurance of any kind whatsoever at any time carried on any
property, buildings of improvements in the Shopping Center or any part thereof,
including the Demised Premises. In the event of a breach of this covenant, in
addition to all other remedies of Landlord hereunder, Tenant agrees to pay to
Landlord as Additional Rent any and all increase or increases of premiums on
insurance carried by Landlord on the Demised Premises or the building of which
the same may be a part.
13.2. Use or operate any machinery that is harmful to the building of
which the Demised Premises are a part or disturbing to other tenants of the
Shopping Center.
13.3. Burn any papers, trash, refuse or waste materials of any kind in or
about the Demised Premises or the Shopping Center.
13.4. Use the Demised Premises or any portion thereof for lodging purposes
or any purpose other than the Permitted Use.
13.5. Use the sidewalks, parking lot and/or walkways for the display,
storage, placement and/or sale of any merchandise, equipment and/or devices.
13.6. Use any objectionable advertising medium within the Shopping Center
or in or about the Demised Premises, including without limiting the generality
of the foregoing, flashing lights, search lights, handbills, signs (except as
permitted by Exhibit "E" attached hereto), loudspeakers, phonographs, public
address systems, sound amplifiers, radios or televisions which are visible or
can be heard or experienced outside the Demised Premises.
13.7. Solicit business for itself or permit its licensees or
concessionaires to solicit business, distribute handbills, engage in public
sales demonstrations, itinerant vending or other activity, whether similar or
dissimilar to any of the foregoing, in the parking areas, common areas or other
common facilities.
13.8. Advertise or conduct an auction, fire, bankruptcy and/or going out
of business sale in the Demised Premises or any portion hereof.
13.9. Use or permit the use of any trading stamps in the conduct of its
business.
13.10. Use the plumbing facilities for any purpose other than that for
which they were constructed and refrain from disposing of any damaging or
injurious substances therein.
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13.11. Store or dispose of trash or refuse on, or in any other manner
obstruct, any parking areas, common areas or other common areas or other common
facilities.
13.12. Park or permit the parking of delivery vehicles so as to interfere
with the use of any parking areas or common facilities or in any fire lanes.
13.13. Attach any awning, or antenna or other projection to the roof or
the outside walls of the Demised Premises or the building of which the same are
a part.
13.14. Execute or deliver any financing statement and/or security
agreement in any trade fixtures or other property placed in or on the Demised
Premises at any time.
13.15. Penetrate the roof of the Demised Premises without Landlord's prior
written consent. Tenant shall be responsible for the repair of roof leaks caused
by such penetration even though Tenant has obtained Landlord's written consent
thereto.
14. SIGNS. Tenant shall not exhibit, paint, inscribe or affix any sign, device,
fixture, advertisement, notice or other lettering or attachment on or to the
exterior of the Demised Premises, or the building or the Shopping Center of
which the Demised Premises is a part, or inside, the Demised Premises, if
visible from the outside, without first obtaining Landlord's written consent,
and Tenant agrees that in any event Tenant will comply in all respects with the
sign standards and sign restrictions set forth in Exhibit "E" attached hereto;
and if Tenant shall do any of the foregoing acts in contravention of this
provision, Landlord shall have the right to remove any such decoration, paint,
alteration, sign, device, fixture or attachment and restore the Demised Premises
or common facility to the condition hereof prior to such act, and the cost of
such removal and restoration shall be paid by Tenant as Additional Rental
payable for the month next following such removal or restoration. Tenant shall
have installed, at its expense, a sign along the sign bank of the Shopping
Center and under the canopy of the Shopping Center. Such sign shall comply with
the sign standards and criteria established by Landlord. Tenant's building
signage area shall be designated as the approximate area below Nevada Bob's
Golf.
15. RIGHTS OF LANDLORD. Landlord reserves, in addition to and not in
substitution for other rights reserved herein, he following rights with respect
to the Demised Premises:
15.1. At all reasonable times and with prior advance notice, Landlord will
provide notice unless it is an emergency, by itself or its duly authorized
agents, to go upon and inspect the Demised Premises and every part hereof and at
its option to make repairs, alterations and additions to the Demised Premises or
the building of which the Demised Premises are a part. If Tenant shall not be
personally present to open and permit an entry by Landlord into the Demised
Premises at any time and for any reason an entry thereon shall be necessary, in
the sole discretion of Landlord. Landlord or Landlord's agents may enter the
same by a master key, or may forcibly enter the same without rendering the
Landlord or such agents liable therefor and without in any manner affecting the
obligations and covenants of this Lease.
15.2. To display a "For Sale" sign at any time and also, after notice from
either party of intention to terminate this Lease, or at any time within three
(3) months prior to the expiration of this Lease, to display a "For Rent" sign,
or both "For Rent" and "For Sale" signs, and all such signs shall be placed upon
such part of the Demised Premises as Landlord shall require, except on display
windows or door or doors leading into the Demised Premises. Prospective
purchasers or tenants authorized by Landlord may inspect the Demised Premises at
reasonable hours at any time, provided Landlord gives Tenant prior notice.
15.3. To install or place upon or affix to the roof and exterior walls of
the Demised Premises equipment, signs, displays, antenna, and any other object
or structure of any kind, provided the same shall not materially impair the
structural integrity of the building.
The exercise of any rights reserved to Landlord in this Article or otherwise
shall not be deemed an eviction or disturbance of Tenant's use and possession of
the Demised Premises and shall not render Landlord liable in any manner to
Tenant or to any other person.
16. INSURANCE AND WAIVER OF SUBROGATION.
16.1. At all times during the term of this Lease, Tenant shall pay all
premiums for and maintain in effect with a responsible company or companies
policies of insurance for the benefit of Landlord and Tenant, as their interests
may appear, as follows:
16.1.1. Insurance covering Tenant's trade fixtures, furnishings,
equipment, betterments and leasehold improvements (whether included in Tenant's
work under Exhibit "C" or existing at the time Tenant took possession),
inventory and other installments of Tenant, providing protection to the extent
of not less than eighty (80%) of the insurable value of the same against
casualties included under standard insurance industry practices within the
classification "Fire, Extended Coverage, Vandalism and Malicious Mischief, and
Sprinkler Leakage." For the purpose of this Section 16.1, leasehold improvements
shall include all improvements to the Demised Premises excepting the roof, floor
slab and exterior walls.
16.1.2. Plate glass insurance covering the plate glass in the Demised
Premises.
16.1.3. Broad form comprehensive public liability insurance in companies
acceptable to Landlord, and naming as additional insured Landlord and Landlord's
Managing Agent, with minimum limits of ONE MILLION DOLLARS
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($1,000,000.00) on account of bodily injuries to or death of one or more persons
as a result of any one accident or disaster, and ONE HUNDRED THOUSAND DOLLARS
($100,000.00) on account of damage to property.
16.2. Tenant will furnish to Landlord, at the time Tenant receives
possession of the Demised Premises (as set forth in Section 3.1 herein), copies
of policies or certificates of insurance evidencing coverages required by this
Lease. All policies required hereunder shall contain an endorsement providing
that the insurer will not cancel or materially change the coverage of said
policy or policies without first giving thirty (30) days prior written notice
thereof to Landlord.
16.3. In the event the Demised Premises or its contents are damaged or
destroyed by fire or other insured casualty, (i) Landlord, to the extent of the
coverage of Landlord's policies of insurance, hereby waives its rights, if any,
against Tenant with respect to such damage or destruction, even if such fire or
other casualty shall have been caused, in whole or in part, by the negligence of
Tenant, its agents, servants or employees, and (ii) Tenant, to the extent of the
Tenant's policies of insurance, hereby waives its rights, if any, against
Landlord with respect to such damage or destruction, even if such fire or other
casualty shall have been caused, in whole or in part, by the negligence of
Landlord, its agents, servants or employees; provided, however, such waivers of
subrogation shall be effective only with respect to loss or damage occurring
during such time as Landlord's or Tenant's policies of insurance (as the case
may be) shall contain a clause or endorsement providing in substance that the
aforesaid waiver of subrogation shall not prejudice the type and amount of
coverage under such policies or the right of Landlord or Tenant (as the case may
be) to recover thereunder. If, at any time, Landlord's or Tenant's insurance
carrier refuses to write insurance which contains a consent to the foregoing
waiver of subrogation, Landlord or Tenant, as the case may be, shall notify the
other party thereof in writing and upon the giving of such notice, the
provisions of this Section shall be null and void as to any casualty which
occurs after such notice. If Landlord's or Tenant's insurance carrier shall make
a charge for the incorporation of the aforesaid waiver of subrogation in its
policies, then the party requesting the waiver shall promptly pay such charge to
the other party, upon demand. In the event the party requesting the waiver fails
to pay such charge upon demand, the other party shall be released of its
obligation to supply such waiver.
16.4 Notwithstanding anything contained herein to the contrary, Tenant
shall maintain at a minimum the following insurance coverages for the Demised
Premises:
A) General Aggregate $2,000,000.00
B) Products' Comprehensive/
Operations Aggregate $2,000,000.00
C) Personal and Advertising $1,000,000.00
D) Each Occurrence $1,000,000.00
E) Fire Damage (any one fire) $1,000,000.00
17. INDEMNIFICATION. Tenant will defend and indemnify Landlord and save it
harmless from and against any and all claims, actions, damages, liability and
expenses in connection with loss of life, personal injury and/or damage to
property occurring in or about, or arising out of, the Demised Premises and
adjacent sidewalks and loading platforms or areas, or occasioned wholly or in
part by any act or omission of Tenant, its agents, subtenants, licensees,
concessionaires, contractors, customers or employees. In case Landlord shall be
made a party to any litigation commenced by or against Tenant, its agents,
subtenants, licensees, concessionaires, contractors, customers or employees,
then Tenant shall protect and hold Landlord harmless and shall pay all costs,
expenses and reasonable attorneys' fees incurred or paid by Landlord in
connection with such litigation. Notwithstanding anything contained herein to
the contrary, Tenant shall indemnify Landlord with respect to the foregoing for
incidents relating to the Premises and Landlord shall indemnify Tenant for
incidents relating to the common areas.
18. WAIVER OF CLAIMS. Landlord and Landlord's agents, employees and contractors
shall not be liable for, unless caused by Landlord, his employees, agents, or
assigns, and Tenant hereby releases all claims for, damage to person or property
sustained by Tenant or any person claiming through Tenant resulting from any
fire, accident, occurrence or condition in or upon the Demised Premises or
building of which it shall be a part or the Shopping Center, including, but not
limited to, such claims for damage resulting from (unless caused by Landlord,
its employees, agents or assigns (i) any defect in or failure of the roof,
plumbing, heating or air conditioning equipment, electrical wiring or
installation thereof, stairs, railings or walks; (ii) any equipment or
appurtenances becoming out of repair; (iii) the bursting, leaking or running of
any tank, washstand, water closet, waste pipe, sprinkler system, drain or any
other pipe or tank in, upon or about such building or Demised Premises; (iv) the
backing up of any sewer pipe or downspout; (v) the escape of steam or hot water;
(vi) water, snow or ice being upon or coming through the roof or any other place
upon or near such building or Demised Premises or otherwise; (vii) the falling
of any fixture,, plaster or stucco; (viii) broken glass; (ix) loss of electric
power or power surges, including, without limitation, damage to computers or
machinery, or loss of information; and (x) any act or omission of co-tenants or
other occupants of said building or of adjoining or contiguous property or
buildings.
19. TRADE FIXTURES. All trade fixtures installed by Tenant in the Demised
Premises shall remain the property of Tenant and shall be removable at the
expiration or earlier termination of this Lease, provided Tenant shall not at
such time be in default under any covenant, condition or agreement contained in
this Lease, and provided further, that in the event of such removal, Tenant
shall repair the damage caused by such removal and Tenant shall also promptly
restore the Demised Premises to their original order and condition. Any such
trade fixture not removed at or prior to such termination shall be and become
the property of Landlord. Lighting fixtures, heating and air conditioning
equipment, plumbing, sprinkler and electrical systems and fixtures, ceilings,
partitions, store fronts, and floor covering, whether or not installed by
Tenant, shall not be removable at the expiration or earlier termination of this
Lease and shall become the property of Landlord, without any compensation
therefor to Tenant.
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20. ASSIGNING, MORTGAGING, SUBLETTING. Without first obtaining the written
consent of Landlord (which consent shall not be unreasonably withheld, Tenant
shall not voluntarily, involuntarily or by operation of law, assign, transfer,
mortgage, pledge or otherwise encumber this Lease, all or any part of Tenant's
interest in this Lease or the Demised Premises, in whole or in part, or sublet
the whole or any part of the Demised Premises, or permit the use of the whole or
any part of the Demised Premises by any licensee or concessionaire. Any such
action shall be an event of default under this Lease. Payment of rentals due
hereunder by any party other than the Tenant named herein shall not be deemed to
act as a consent to the assignment of this Lease or to the subletting of the
whole or any part of the Demised Premises to such party nor relieve Tenant of
its obligation to pay the rentals provided herein for the full term of this
Lease. Tenant agrees that, in the event of any such assignment, subletting,
licensing or granting of a concession, made with the written consent of Landlord
as aforesaid, Tenant will nevertheless remain liable for the performance of all
the terms, conditions and covenants of this Lease. If Tenant is a corporation,
and if control thereof changes at any time during the term hereof, Landlord, at
its option, may by giving sixty (60) days prior written notice to Tenant,
declare such change an event of default under this Lease. Any transfer, sale,
pledge or other disposition, in any single transaction or cumulatively during
the Term of this Lease, of fifty percent (50%) or more of the stock of Tenant if
Tenant is a corporation, or fifty percent (50%) of the partnership interests of
Tenant if Tenant is a partnership, shall be deemed an assignment of this Lease,
and therefore, prohibited. Tenant agrees that in case of any assignment of this
Lease or subletting of the Demised Premises with the prior written consent of
Landlord, it will not cause or allow any agent to represent it in such
assignment or subletting other than Landlord or such other agent as may be
designated in writing by Landlord.
Notwithstanding anything contained herein to the contrary, in the event
that Tenant receives a bona fide written offer from a third party for the
sublease or assignment of the Demised Premises, Tenant shall forthwith notify
Landlord in writing attaching a copy of said offer, of Tenant's desire to sublet
or assign this Lease upon the terms of said offer, whereupon Landlord shall have
thirty (30) days to accept or reject said assignment or sublease, or at
Landlord's sole option cancel and terminate this Lease, including the right to
enter into a direct Lease with the proposed assignee or subtenant before or
after such termination.
21. SUBORDINATION. This Lease and all of its term, covenants and provisions are
and shall always be subordinate to the lien of any mortgage or mortgages now or
hereafter placed from time to time upon the Demised Premises and to any
renewals, extensions, modifications or consolidations thereof, and to all
advances hereafter made from time to time upon the security thereof without the
necessity of any further instrument or act on the part of Tenant to effect
subordination. Tenant, shall, upon request from Landlord, execute instruments or
assurances further evidencing such subordination. If any mortgagee elects to
have the Tenant's interest in this Lease superior to the interest of such
mortgagee and gives notice to Tenant to that effect at any time prior to or at
the time of institution of foreclosure proceedings, this Lease shall be deemed
to be superior to any such mortgage whether this Lease was executed before or
after such mortgage or any advance made upon security of such mortgage.
Notwithstanding anything contained herein to the contrary, Tenant as a condition
to agree to a Subordination as aforesaid, shall obtain a non-disturbance
agreement from the mortgagee, if applicable.
22. PERFORMANCE OF TENANT'S COVENANTS. If Tenant shall default in the
performance of any covenant required to be performed by it under this Lease,
Landlord may perform the same for the account and at the expense of Tenant,
after first giving notice to Tenant of its intention to do so, and in connection
therewith Landlord shall have the right to cause its agents, employees and
contractors to enter upon the Demised Premises, and Landlord shall have no
liability to Tenant for any loss or damage resulting in any way from such
action. If Landlord at any time is compelled to pay, or elects to pay, any sum
of money or to do any act which will require the payment of any sum of money, by
reason of the failure of Tenant to comply with any provisions hereof, or if
Landlord incurs any expense, including reasonable counsel fees, in instituting,
prosecuting or defending against any action or proceeding instituted by reason
of any default of Tenant hereunder, the amount of such payments or expenses
shall be paid by Tenant to Landlord as Additional Rent on the next day following
such payment or the incurring of such expenses, upon which a regular monthly
rental payment is due, together with interest thereon at the rate of the lower
of the rate of six percent (6%) per annum above the announced "prime" rate of
interest being charged from time to time by Royal Bank, NA or the highest rate
permitted by law.
23. Intentionally omitted.
24. CUSTOM AND USAGE. Notwithstanding any law, usage or custom to the contrary
or any conduct or custom on the part of the Landlord in refraining from
enforcing its rights hereunder at any time or times, Landlord shall have the
right at all times to enforce the covenants conditions and agreements of this
Lease in strict accordance with the terms hereof; and the failure of Landlord at
any time to enforce its rights under the covenants, conditions and agreements of
this Lease in strict accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific covenants,
conditions and agreements of this Lease or as having in any way or manner
modified or waived the same.
25. SURRENDER AND HOLDING OVER. Tenant, upon the expiration or termination of
this Lease, either by lapse of time or otherwise, agrees peaceably to surrender
to Landlord the Demised Premises in broom clean condition and in the condition
and good repair required to be maintained by Tenant during the term as provided
by Article 10 hereof. In the event that Tenant shall fail to surrender the
Demised Premises, as aforesaid, Landlord, in addition to all other remedies
available to it hereunder, shall have the right to receive, as liquidated
damages for all the time Tenant shall so retain possession of the Demised
Premises, or any part thereof, an amount equal to twice the Minimum and
Percentage Rent specified in Article 6 of this Lease, as applied as such period.
If Tenant remains in possession of the Demised Premises with Landlord's consent
after the expiration of the Term of this Lease, but without a new Lease or an
extension or renewal of the Term reduced to writing and duly executed, Tenant
shall be deemed to be occupying the Demised Premises as a Tenant from month to
month only, but otherwise subject to all the covenants, conditions and
agreements of this Lease. If Landlord and Tenant shall enter into a written
extension or renewal of the Term of this Lease, all of the terms, covenants and
conditions of this Lease (except as otherwise provided therein) shall apply to
such extended or renewal term and in that
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event all references to the "Term of this Lease" referred to herein shall apply
(except as otherwise stated in such extension or renewal agreement) to such
extended or renewal term.
26. CHANGES TO SHOPPING CENTERS; APPROVALS.
26.1. Landlord hereby reserves the absolute right at any time and from
time to time to: (a) make changes or revisions in the layout of the Shopping
Center as shown on Exhibit "A", including but not limited to additions to,
subtractions from, or rearrangements of the building areas and/or common areas
(both interior and/or exterior) indicated on Exhibit "A"; (b) construct
additional or other buildings or improvements in the Shopping Center and to make
alterations thereof or additions thereto and to build additional stores on any
such building or buildings; and (c) to increase or decrease the land size of the
Shopping Center and any land so added shall thereafter be subject to the terms
of this Lease and shall be included in the term Shopping Center as used in this
Lease and any land so withdrawn shall thereafter not be subject to the terms of
this Lease and shall be excluded from the term Shopping Center as used in this
Lease. In the event Landlord shall elect to construct additional buildings, all
easement rights granted herein to Tenant shall automatically terminate as to the
land upon which such additional buildings are constructed, and Landlord shall
have the absolute right to redefine the property comprising the Shopping Center.
It is understood and agreed hereto that the site plan attached hereto as Exhibit
"A" sets forth the general layout of the Shopping Center but shall not be deemed
a warranty, representation or agreement on the part of Landlord that the
Shopping Center layout will be exactly as depicted on said Exhibit.
26.2. In the event that the Shopping Center Is not yet built and
construction thereof has not commenced as of the date of this Lease then
Landlord's obligations hereunder are conditioned upon Landlord obtaining all
permits and approvals required from all governmental authorities for Landlord to
build the Shopping Center. If Landlord does not obtain such permits and
approvals within one (1) year after the date hereof, then Landlord shall have
the right to terminate this Lease by giving written notice to Tenant at any time
after the expiration of one (1) year from the date hereof, in which event the
Security Deposit shall be returned to Tenant, this Lease shall terminate, and
neither party shall have any further liability hereunder. Subject to Section 34
and provided Tenant shall not be in default hereunder, Tenant shall have the
option to terminate this Lease if Landlord shall not have delivered possession
of the Demised Premises to Tenant within the meaning of Section 3.1. within
fifteen (15) months from the full execution of this Lease.
27. RELOCATION. Landlord reserves the right of relocation at any time and from
time to time during the Term hereof or any renewal thereof, to another store in
the Shopping Center subject to the following conditions:
27.1. The size and dimensions of the new store shall not be materially
different from the Demised Premises;
27.2. All costs of relocation, including all moving costs and the costs of
all improvements required to be made o make the new store substantially the same
as the Demised Premises shall be borne by Landlord, and Landlord shall make all
such improvements;
27.3. All Minimum Rent shall abate during any period of time when, due to
such relocation, Tenant cannot be open for business.
28. EMINENT DOMAIN OR DAMAGE.
28.1. EMINENT DOMAIN.
28.1.1. In the event that the whole of the Demised Premises shall be taken
under the power of eminent domain, this Lease shall thereupon terminate as of
the date possession shall so be taken.
28.1.2. In the event that a portion of the floor area of the Demised
Premises shall be taken under the power of eminent domain and the portion not so
taken will not be reasonably adequate for the operation of Tenant's business,
notwithstanding Landlord's performance of restoration as hereinafter provided,
this Lease shall thereupon terminate as of the date possession of such portion
is taken. In the event of any taking under the power of eminent domain, which
does not terminate this Lease as aforesaid, all of the provisions of this Lease
shall be reduced in the same proportion that the amount of floor area of the
Demised Premises taken bears to the total floor area of the Demised Premises
immediately prior to such taking, and Landlord shall, at Landlord's own cost and
expense, restore such part of the Demised Premises as is not taken to as near
its former condition as the circumstances will permit and Tenant shall do
likewise with respect to all exterior signs, trade fixtures, equipment, display
cases, furniture, furnishings and other installations of Tenant.
28.1.3. All damages awarded for any such taking under the power of eminent
domain, whether for the whole or part of the Demised Premises, shall belong to
and be the property of Landlord in their entirety, whether such damages shall be
awarded as compensation for loss or diminution in value of the Leasehold or for
the fee of the Demised Premises; provided, however, that Landlord shall not be
entitled to any separate award made directly to Tenant for loss of, or damage
to, Tenant's trade fixtures and removable personal property or for damages for
cessation or interruption of Tenant's business.
28.1.4. If this Lease is terminated as provided in this Section 28.1, all
Minimum Rent, Percentage Rent, Operating Expenses, Real Estate Taxes and other
sums due hereunder shall be paid to date that possession is taken by public
authority, and Landlord shall make an equitable refund of any rent paid by
Tenant in advance and not yet earned.
28.1.5. A voluntary sale by Landlord to any public or quasi-public body,
agency or person, corporate or otherwise, having the power of eminent domain,
either under threat of condemnation, or while condemnation proceedings are
pending, shall be deemed to be a taking by eminent domain for the purposes of
this Section 28.1.
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28.2. DAMAGE
28.2.1. If all or, in Landlord's opinion a significant portion, of the
Demised Premises or of the Shopping Center shall be damaged by fire or other
casualty, then Landlord shall have the right, at its sole option, to terminate
this Lease by giving written notice of such termination to Tenant within sixty
(60) days following the occurrence of such fire or other casualty, and this
Lease shall then terminate immediately upon Landlord's giving Tenant written
notice of such termination. In the event of such termination of this Lease,
Landlord and Tenant shall be relieved from any and all further liability or
obligation hereunder, but shall not be relieved from any liability or obligation
that arose prior to such termination. Tenant hereby waives any all rights to
terminate this Lease that it may have by reason of damage to the Demised
Premises by fire or other casualty, pursuant to any presently existing or
hereafter enacted statute or pursuant to any other law.
28.2.2. If all or any portion of the Demised Premises is damaged by fire
or other casualty insured under Landlord's fire insurance policy, and this Lease
if not terminated in accordance with the provisions of Section 28.2.1, above,
then Landlord shall within one hundred twenty (120) days after such damage
occurs (except for taking into account the time necessary to effectuate a
satisfactory settlement with any insurance company which may delay Landlord's
commencing of the repair or rebuild) repair or rebuild the Demised Premises or
such portion thereof to its condition immediately prior to such occurrence;
provided, however, that in no event shall Landlord be obligated to expend in
such repair or rebuilding any sums in excess of the proceeds of any insurance
policy actually paid in hand to Landlord (including insurance proceeds released
for such purposes by holders of mortgages encumbering the Demised Premises, it
being understood that Landlord shall not be required to rebuild as aforesaid
unless such holders of mortgages make such proceeds available). Notwithstanding
any other provision of this Lease, nothing contained herein shall be deemed to
require Landlord, and in no event shall Landlord be required to repair, restore
or rebuild any part or portions of the Demised Premises, or of Tenant's
fixtures, equipment or appurtenances therein, constituting a part of Tenant's
Work as defined in Section 3.2 hereof.
28.2.3. The Minimum Rent shall be abated proportionately based on the
extent to which Tenant's use of the Demised Premises is impaired during the
period of any damage, repair or restoration provided for in this Section 28.2.
Tenant shall continue the operation of its business on the Demised Premises
during any such period to the extent reasonably practicable from the standpoint
of prudent business management and any obligation of Tenant under the Lease
Minimum Rent hereinabove provided, Tenant shall not be entitled to any
compensation or damage for loss in the use of the whole or any part of the
Demised Premises and/or any inconvenience or annoyance occasioned by any damage,
destruction, repair or restoration.
29. BANKRUPTCY OR INSOLVENCY.
29.1. The "bankruptcy" (as hereinafter defined) of Tenant shall be deemed
to constitute and shall be construed as a repudiation of the obligations of
Tenant and a breach of this Lease. Landlord may, at Landlord's election,
terminate this Lease in the event of the occurrence of Tenant's bankruptcy by
giving not less than three (3) days written notice to Tenant, and upon such
termination, Landlord may re-enter the Demised Premises, and this Lease shall
not be treated as an asset of Tenant's estate. Landlord shall be entitled, upon
such re-entry, notwithstanding any other provisions of this Lease, to exercise
such rights and remedies and to recover from Tenant as damages for loss of the
bargain resulting from such breach, and not as a penalty, such amounts as are
specified in Section 30.2.1 hereof, unless any statute or rule of law governing
the proceeding in which such damages are to be proved shall lawfully limit the
amount of such claims capable of being so proved, in which case Landlord shall
be entitled to recover as and for liquidated damages the maximum amount which
may be allowed under any such statute or rule of law.
29.2. The term "bankruptcy" shall mean (i) the commencement by Tenant of a
voluntary case under any Chapter of the Bankruptcy Code (Title 11 of the United
States Codes, as now or hereafter in effect, or the taking by Tenant of any
equivalent or similar action by the filing of a petition or otherwise under any
other federal or state law in effect at the time relating to bankruptcy or
insolvency, (ii) the filing of a petition against Tenant under any Chapter of
the Bankruptcy Code (Title 11 of the United States Code), as now or hereafter in
effect, or the filing of a petition seeking any equivalent or similar relief
against Tenant under any other federal or state law in effect at the time
relating to bankruptcy or insolvency, and in either case the failure by Tenant
to secure tho discharge of any such petition within sixty (60) consecutive days
from the date of filing, (iii) the making by Tenant of a general assignment for
the benefit of his, its or any of their creditors, (iv) the appointment of a
receiver, trustee, custodian or similar officer for Tenant or for the property
of Tenant and the failure by such Tenant to secure the discharge of such
receiver, trustee, custodian or similar officer within sixty (60) consecutive
days from the date of appointment, or (v) the admission in writing by Tenant of
any inability to pay debts generally as they become due.
30. EVENTS OF DEFAULT; REMEDIES
30.1. The following events or any one or more of them shall be events of
default under this Lease:
30.1.1. Tenant shall fail to pay any Minimum Rent, Operating Expenses,
Real Estate Taxes, Additional Rent or other sum payable hereunder when the same
is due and payable and such failure continues for five (5) days; or
30.1.2. Tenant shall fail to perform or comply with any of the terms,
covenants, agreements or conditions hereof and such failure shall continue for
more than fifteen (15) days after written notice thereof from Landlord; provided
however, that if the default cannot be cured within fifteen (15) days, Tenant
shall not be considered in default if Tenant shall, within such period, have
commenced with due diligence and dispatch to cure such default, and shall
thereafter complete the curing of such default within thirty (30) days after
such written notice; or
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30.1.3. If Tenant shall refuse to take possession of the Demised Premises
or shall fail to open its store in the Demised Premises for business by the date
required in Article 3 hereof, or shall vacate the Demised Premises and permit
the same to remain unoccupied and unattended; or
30.1.4. The Bankruptcy (as defined in Section 29.2 of this Lease) of any
Surety of this Lease. The grace period provisions in Section 30.1.1 and the
notice and grace period provision in Section 30.1.2 above shall have no
application to the defaults referred to in Sections 30.1.3 and 30.1.4.
30.2. In the event of any such event of default (regardless of the
pendency of any proceeding which has or might have the effect of preventing
Tenant from complying with the terms of this Lease), Landlord, at any time
thereafter, may exercise any one or more of the following remedies:
30.2.1. Landlord may terminate this Lease, without any right by Tenant to
reinstate its rights by payment of rent due or other performance of the terms
and conditions hereof. Upon such termination Tenant shall immediately surrender
possession of the Demised Premises to Landlord, and Landlord shall immediately
become entitled to receive from Tenant, as liquidated, agreed final damages, an
amount equal to the difference between the aggregate of all rentals reserved
under this Lease for the balance of the term, and the fair rental value of the
Demised Premises for that period, determined as of the date of such termination.
30.2.2. With or without terminating this Lease, as Landlord may elect,
Landlord may renter and repossess the Demised Premises, or any part thereof, and
lease them to any other person upon such terms as Landlord shall deem
reasonable, for a term within or beyond the term of this Lease; provided, that
any such reletting prior to termination shall be for the account of Tenant, and
Tenant shall remain liable for (i) all Minimum Rent, Operating Expenses, Real
Estate Taxes, Additional Rent and other sums which would be payable under this
Lease by Tenant in the absence of such expiration, termination or repossession,
less (ii) the net proceeds, if any, of any reletting effected for the account of
Tenant after deducting from such proceeds all of Landlord's expenses in
connection with such reletting (including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees and expenses,
employees' expenses, reasonable alternation costs, and expenses of preparation
for such reletting). If the Demised Premises are at the time of default sublet
or leased by Tenant to others, Landlord may, as Tenant's agent, collect rents
due from any subtenant or other tenant and apply such rents to the rent and
other amounts due hereunder without in any way affecting Tenant's obligation to
Landlord hereunder. Such agency, being given for security, is hereby declared to
be irrevocable.
30.2.3. Landlord may declare the Minimum Rent and all items of, Operation
Expenses, Real Estate Taxes and Additional Rent for the entire balance of the
then current term immediately due and payable, together with all other charges,
payments, costs and expenses payable by Tenant as though such amounts were
payable in advance on the date the event of default occurred.
30.3. No expiration or termination of this Lease Term pursuant to Section
30.2.1 above or by operation of law or otherwise (except as expressly provided
herein), and no repossession of the Demised Premises or any part thereof
pursuant to Section 30.2.2 above or otherwise shall relieve Tenant of its
liabilities and obligations hereunder, all of which shall survive such
expiration, termination or repossession, and Landlord may, at his option, sue
for and collect rent and other charges due hereunder at any time as and when
such charges accrue.
30.4. With respect to any portion of the Demised Premises which is vacant
or which is physically occupied by Tenant, Landlord may remove all persons and
property therefrom, and store such property in a public warehouse or elsewhere
at the cost of and for the account of Tenant, after service of notice or resort
to legal process (all of which Tenant, expressly waives) and without being
deemed guilty of trespass or becoming liable for any loss or damage which may be
occasioned thereby. Landlord shall have a lien for the payment of all sums
agreed to be paid by Tenant herein upon all Tenant's property, which lien is to
be in addition to any Landlord's lien now or hereafter provided by law.
30.5. The parties hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of them against the other on any matters arising
out of or in any way connected with this Lease, the relationship of Landlord and
Tenant, Tenant's use or occupancy of the Demised Premises, and/or any claim of
injury or damage. In the event Landlord commences any proceedings for
non-payment of Minimum Rent, Operating Expenses, Real Estate Taxes, Additional
Rent or other sums due from Tenant hereunder, Tenant will not interpose any
counterclaim of any nature or description in any such proceedings. This shall
not be construed, however, as a waiver of Tenant's right to assert any such
claims in any separate action brought by Tenant.
30.6. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future law in the event this Lease is
terminated or Tenant is evicted or dispossessed by reason of violation by Tenant
of any of the provisions of this Lease.
30.7. In the event of breach or threatened breach by Tenant of any
provision of this Lease, Landlord shall have the right of injunction as if other
remedies were not provided for herein.
30.8. No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any ether right or remedy herein or by law provided,
but each shall be cumulative and in addition to every other right or remedy
given herein or new or hereafter existing at law or in equity or by statute.
30.9. No waiver by Landlord of any breach by Tenant of any of his
obligations, agreements or covenants hereunder shall be a waiver of any
subsequent breach or of any other obligation, agreement or covenant, nor shall
any forbearance by Landlord to seek a remedy for any breach by Tenant be a
waiver by Landlord of his rights and remedies
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with respect to such or any subsequent breach. No payment by Tenant or receipt
by Landlord of a lesser amount than rent due from time to time shall be deemed
to be other than on account of the rent due, nor shall any statement or
endorsement on any check or in any letter accompanying any check or payment of
rent 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
rent or pursue any remedy provided in this Lease.
30.10. Tenant expressly waives any right of defense which it may have
based on any purported merger of any cause of action, and neither the
commencement of any action or proceeding nor the settlement thereof or entering
of judgment therein shall bar Landlord from bringing subsequent actions or
proceedings from time to time.
THE FOLLOWING THREE SECTIONS SET FORTH WARRANTS OF AUTHORITY FOR ANY ATTORNEY TO
CONFESS JUDGEMENTS AGAINST TENANT. IN GRANTING THESE WARRANTS OF ATTORNEY TO
CONFESS JUDGEMENTS AGAINST TENANT, TENANT HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TENANT HAS OR MAY
HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE
CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF
PENNSYLVANIA.
30.11. Tenant hereby empowers any Prothonotary or attorney of any Court of
Record to appear for Tenant in any and all actions which may be brought for
Minimum Rent, Operating Expenses, Real Estate Taxes, Additional Rent and other
charges, payments, costs and expenses herein reserved as rent, or herein agreed
to be paid by Tenant and/or to sign for Tenant an agreement for entering in any
competent Court an action or actions for recovery of such rent or other charges,
payments, costs and expenses reserved as rent or Additional Rent, together with
an attorney's payments, costs and expenses reserved as rent or Additional Rent,
together with an attorney's commission of 5% (but not less than $1,000). Such
authority shall not be exhausted by one exercise thereof, but judgment may be
confessed as aforesaid from time to time as often as any of such rent and/or
other charges reserved as rent or agreed to be paid by Tenant shall fall due or
be in arrears.
30.12. Upon the expiration of the then current term of this Lease or the
earlier termination or surrender hereof as provided in this Lease, it shall be
lawful for any attorney of any court of record to appear as attorney for Tenant
as well as for all persons claiming by, through or under Tenant, and to sign an
agreement for entering in any competent Court an action in ejectment against
Tenant and all persons claiming by, through or under Tenant and therein confess
judgment for the recovery by Landlord of possession of the Demised Premises, for
which this Lease shall be its sufficient warrant, whereupon, if Landlord so
desires, a writ of possession or other appropriate writ under the Rules of Civil
Procedure then in effect may issue forthwith, without any prior writ or
proceedings; provided, however, if this Lease is terminated and the possession
of the Demised Premises remain in or be restored to Tenant, Landlord shall have
the right for the same default and upon any subsequent default or defaults, or
upon the termination of this Lease under any of the terms of this Lease to bring
one or more further action or actions as hereinbefore set forth to recover
possession of the Demised Premises and confess judgment for the recovery of
possession of the Demised Premises as hereinabove provided.
30.13. In any action of ejectment and/or for rent, Landlord shall first
cause to be filed in such action an affidavit made by him or someone acting for
him, setting forth the facts necessary to authorize the entry of judgment, and,
if a true copy of this Lease (and of the truth of the copy such affidavit shall
be sufficient evidence) be filed in such action, it shall not be necessary to
file the original as a warrant of attorney, any rule of Court, customer or
practice to the contrary notwithstanding. Tenant thereby releases to Landlord
and to any and all attorneys who may appear for Tenant all errors in such
proceedings and all liability thereof. If proceedings shall be commenced by
Landlord to recover possession under the Acts of Assembly and Rules of Civil
Procedure, either at the end of the term or upon the earlier termination of this
Lease, or for non-payment of rent or any other reason, Tenant, specifically
waives the right to the three month's notice and to the fifteen or thirty days'
notice required by the Landlord and Tenant Act of 1951, and agrees that five (5)
days' notice shall be sufficient in either or any such case.
30.14. Intentionally omitted.
30.15. In addition to all other rights and remedies of Landlord, if an
event of default shall occur, Landlord shall, to the extent permitted by law,
have a right of distress for rent and lien on all of Tenant's fixtures,
merchandise and equipment in the Demised Premises, as security for rent and all
other charges payable hereunder.
30.16. In the event that Landlord commences suit for the repossession of
the Demised Premises, for the recovery of rent or any other amount due under the
provisions of this Lease, or because of the breach of any other covenant herein
contained on the part of Tenant to be kept or performed, and a breach shall be
established, Tenant shall pay to Landlord all expenses incurred in connection
therewith, including, without limitation, reasonable attorney's fees.
31. NOTICES. Wherever in this Lease it shall be required or permitted that
notice or demand be given or served by either party to this Lease to the other,
such notice or demand shall not be deemed to have been duly given or served
unless in writing and either personally delivered (including, without
limitation, delivery by courier or messenger service) or forwarded by United
States registered or certified mail, postage prepaid, to the respective
addresses as set forth on the Data Sheet. Such addresses may be changed from
time to time by either party by serving notice as above provided. Notices shall
have been deemed made upon receipted personal delivery or when sent (whether
actually received or not) by either registered or certified mail.
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32. SUCCESSORS AND ASSIGNS.
32.1. All rights, obligations and liabilities herein imposed upon the
respective parties hereto shall extend to and bind the several and respective
heirs, executors, administrators, successors, subleases, licensees,
concessionaires and assigns of the parties, subject to the provisions of Article
20 and except as expressly provided in this Article; and if there shall be more
than one Tenant, they shall all be bound jointly and severally by the terms,
covenants, conditions and agreements herein and the word "Tenant" shall be
deemed and taken to mean each and every person or party mentioned as a Tenant
herein, be the same one or more; and if there shall be more than one Tenant, any
notice required or permitted by the terms of this Lease may be given by or to
any one thereof. No rights, however, shall inure to the benefit of any assignee
of Tenant unless such assignment is permitted under this Lease. The use of the
neuter or singular pronoun to refer to Landlord or Tenant shall be deemed a
proper reference even though Landlord or Tenant may be an individual, a
partnership, a corporation, or a group of two or more individuals or
corporations. The necessary grammatical changes required to make the provisions
of this Lease apply in the plural sense where there is more than one Landlord or
Tenant and to either corporations, associations, partnerships, or individuals,
males or females, shall in all instances be assumed as though in each case fully
expressed.
32.2. The term "Landlord" as used in this Lease, so far as covenants,
conditions and agreements on the part of the Landlord are concerned, shall be
limited to mean the Landlord named in the heading to this Lease, its successors
and assigns; and, in the event of any transfer or transfers of the title to the
Demised Premises, the said Landlord (and in the case of any subsequent transfer
or conveyance, the then grantor) shall be automatically freed and relieved, from
and after the date of such transfer or conveyance, or all liability as respects
the performance of any covenants, conditions and agreements on the part for a
standard dry good with no interior partitions, and thermostat of said Landlord
contained in this Lease thereafter to be performed, it being intended hereby
that the covenants, conditions and agreements contained in this Lease on the
part of Landlord shall, subject as aforesaid, be binding on Landlord, its
successors and assigns, only during and in respect of their respective
successive period of ownership. If Landlord shall fail to perform any covenant,
term, or condition of this Lease upon Landlord's part to be performed, and if as
a consequence of such default any party claiming through, under, or by way of
Tenant thereunder, including Tenant itself, shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the proceeds of
sale received upon execution of such judgment and levied thereon against the
right, title and interest of Landlord in the Shopping Center, and Landlord shall
not be liable for any deficiency, and there shall be no recourse by Tenant
against any other assets of Landlord.
33. SCOPE AND INTERPRETATION. This Lease contains all the covenants and
agreements between the Landlord and Tenant relating in any manner to the rental,
use and occupancy of the Demised Premises and other matters set forth in this
Lease. No prior agreement or understanding pertaining to the same shall be valid
or of any force or effect, and the covenants and agreements of this Lease cannot
be altered, changed, modified or added to, except in writing signed by Landlord
and Tenant. No representation, inducement, understanding or anything of any
nature whatsoever, made, stated or represented on Landlord's behalf, either
orally or in writing (excepting this Lease), has induced Tenant to enter into
this Lease. The laws of the Commonwealth of Pennsylvania shall govern the
validity, interpretation, performance and enforcement of this Lease.
34. FORCE MAJEURE. In the event that either Landlord or Tenant shall be delayed,
or hindered or prevented from the performance of any act required hereunder, by
reason of act of God, fire casualty, action of the elements, strikes, lockouts,
other labor troubles, inability to procure, or general shortage of labor,
equipment, facilities, materials or supplies, failure of transportation or of
power, restrictive governmental laws or regulations, riots, insurrection, war or
any other case similar or dissimilar to the foregoing beyond the control of
Landlord, the 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 the
period necessary to complete performance after the end of the period of such
delay.
35. ESTOPPEL CERTIFICATION. Tenant agrees that at any time and from time to time
at reasonable intervals, within twenty (20) days after written request by
Landlord, Tenant will execute, acknowledge and deliver to Landlord, Landlord's
mortgagee, or other person designated by Landlord, a certificate in a form as
may, from time to time, be provided, ratifying this Lease and certifying (i)
that Tenant has entered into occupancy of the Demised Premises and the date of
such entry if such is the case; (ii) that the Lease is in full force and effect,
and has not been assigned, modified, supplemented, or amended in any way (or, if
there have been any assignment, modification, supplement, or amendment,
identifying the same); (iii) that this Lease represents the entire agreement
between Landlord and Tenant as to the subject matter thereof; (iv) the date of
commencement and expiration of the Term; (v) that all conditions under this
Lease to be performed by Landlord have been satisfied and all required
contributions by Landlord to Tenant on account of Tenant's improvements have
been received (and if not, what conditions remain imperforate); (vi) that to the
knowledge of the signer of such writing no default exists in the performance or
observance of any covenant or condition in this Lease and there are not defenses
or offsets against the enforcement of this Lease by Landlord (or specifying each
default, defense or offset of which the signer may have knowledge); (vii) that
no Minimum Rent or other rental has been paid in advance and no security has
been deposited with Landlord except as set forth in this Lease, and (viii) the
date to which Minimum Rent and all other rentals have been paid under this
Lease, (ix) the amount of Minimum Rent and other charges payable by Tenant under
the Lease, (x) that Landlord has no obligation for painting, repairs or
improvements to the Demised Premises, and (xii) that there are no renewal
options or options to purchase or expand the Demised Premises (except as stated
in this Lease). Tenant hereby irrevocably appoints Landlord its attorney-in-fact
to execute such a writing in the event Tenant shall fail to do so within twenty
(20) days of receipt of Landlord's request.
36. NOTICE TO MORTGAGEE. Tenant agrees that Landlord shall not be in default
under any of the provisions of this Lease to be performed or complied with by
Landlord unless Tenant shall first have given written notice to Landlord and to
the holders of any mortgages upon the Shopping Center (if Landlord shall have
notified Tenant of the names and addresses of the holders of such mortgages)
specifying the default, and if such alleged default shall not have been cured by
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Landlord or the holder of any such mortgages within thirty (30) days after such
written notice or such additional time as is reasonably required to cure the
default after the giving of the written notice.
37. QUIET ENJOYMENT. Tenant, upon paying the Minimum Rent, Operating Expenses,
Real Estate Tax Rent and other charges herein provided for, and observing and
keeping all covenants, agreements and conditions of this Lease on its part to be
kept, shall quietly have and enjoy the Demised Premises during the term of this
Lease without hindrance or molestation by anyone claiming by or through
Landlord, however, to the exceptions, reservations and conditions of this Lease.
38. MISCELLANEOUS PROVISIONS.
38.1. Tenant hereby grants to Landlord such licenses and easements in or
over the Demised Premises or any portion or portions thereof as shall be
reasonable required for the installation or maintenance of mains, conduits,
pipes or other facilities to serve the Shopping Center or any part thereof,
including, but not limited to, the premises of any other occupant; provided,
however, that Landlord shall pay for any alteration required on the Demised
Premises as a result of any such exercise, and provided further, that no
exercise, occupancy under or enjoyment of any such license or easement shall
result in any unreasonable interference with Tenant's use, occupancy or
enjoyment of the Demised Premises as contemplated by this Lease.
38.2. Tenant shall at any time and from time to time upon not less than
ten (10) days prior written request by Landlord, deliver to Landlord an executed
and acknowledged instrument amending this Lease in such respects as may be
required by any mortgagee, or prospective mortgagee, under any mortgage on the
Shopping Center, provided that any such amendment shall not materially alter or
impair any of the rights and remedies of Tenant under this Lease or the
operation of Tenant's business.
38.3. Any provision or provisions of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof, and the remaining provisions hereof shall nevertheless remain
in full force and effect.
38.4. Any default by Tenant under any instrument, undertaking or agreement
executed by Tenant in favor of or with Landlord relating to this Lease or the
tenancy created hereby shall constitute a breach of this Lease and entitle
Landlord to pursue each and all of its rights and remedies hereunder and at law.
38.5 Intentionally Omitted.
38.6 Intentionally Omitted.
38.7. Recording. Tenant shall not record this Lease without the consent
of the Landlord.
38.8. Intentionally Omitted.
38.9. Landlord's Use of Common Areas. Landlord reserves the right, from
time to time, to utilize portions of the common areas for carnival type shows,
rides and entertainment, outdoor shows, displays, automobile and other product
shows, or such other uses which in Landlord's judgment tend to utilize the
lighting standards and other areas in the parking lot for advertising purposes.
38.10. Transfer of Landlord's Interest. In the event of any transfer of
Landlord's interest in the Leased Premises, the transferor shall be
automatically relieved of any and all obligations and liabilities on the part of
the Landlord accruing from and after the date of such transfer.
38.11. Interest on Past Due Obligations. Any amount due from Tenant to
Landlord hereunder which is not paid when due shall bear interest at a rate of
fourteen percent (14%) per annum or the highest rate permitted by law from the
due date until paid, but the payment of such interest shall not excuse or cure
any default by Tenant under this Lease.
38.12. Liability of Landlord. If Landlord shall fail to perform any
covenant, term or condition of this Lease upon Landlord's part to be performed,
and if, as a consequence of such default, Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the proceeds of
sale received upon execution of such judgment and levied thereon against the
right, title and interest of Landlord in the Shopping Center and out of rents
and other income from such property receivable by Landlord, and neither Landlord
nor any of its shareholders and/or partners shall be liable for any deficiency.
38.13. Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the rents herein stipulated shall be deemed to
be other than the rents herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent 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 rent or pursue any
other remedy in this Lease provided.
38.14. Laws of the State Where the Premises are Situated. This Lease shall
be governed by, and construed in accordance with, the laws of the State wherein
the leased premises are situated. If any provision of this Lease or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease shall not be affected
thereby and each provision of the Lease shall be valid and enforceable to the
fullest extent permitted by the law.
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<PAGE>
38.15. Any headings preceding the text of the Articles and Sections hereof
are inserted solely for convenience of reference and shall not constitute a part
of this Lease, nor shall they effect its meaning, construction or effect.
38.16. Submission by Landlord of this Lease for review and execution by
Tenant shall confer no rights or impose any obligations on either party unless
and until both Landlord and Tenant shall have executed this Lease and duplicate
originals thereof shall have been delivered to the respective parties.
38.17. All Exhibits attached hereto are incorporated herein and made a
part hereof.
39.
39.1. Tenant shall have the right and option, which said option and right
shall not be severed from this Lease or separately assigned, mortgaged or
transferred, to extend the initial term of this Lease for an additional
consecutive period of five (5) years (hereinafter referred to as the "First
Extension Period") provided that (a) Tenant shall give Landlord written notice
of Tenant's exercise of such options at least One Hundred Eighty (180) days
prior to the expiration of the initial term, or then applicable extended term of
this Lease, and (b) Tenant shall not be in default in the performance or
observance of any of the terms and provisions of the Lease on the part of Lessee
to be performed or observed at either the time Tenant exercises its option as
aforesaid or prior to the commencement of the First Extension Period. Except for
the amount of Minimum Rental (which is to be determined as hereinafter
provided), all the terms, covenants, conditions, provisions and agreements in
the Lease contained shall be applicable to the Extension Period through which
the initial term of this Lease shall be extended as aforesaid. If Tenant shall
give notice of its exercise of the option to extend in the manner and within the
time period provided aforesaid, the initial term of this Lease shall be extended
upon the giving of such notice without the requirement of any further attention
on the part of either Landlord or Tenant.
39.2. If Tenant shall fail to give timely notice of the exercise of such
options as aforesaid, Tenant shall have no right to extend the initial term of
this Lease, time being of the essence of the foregoing provisions.
39.3. The Minimum Rental payable during each year of the Extension Period
shall be the fair market rental as mutually agreed to by Landlord and Tenant at
least Two Hundred Forty (240) days prior to the commencement of the then
applicable Extension Period. In the event that the parties hereto shall fail to
agree as to the fair market rental for the then applicable Extension Period
within the time frame indicated hereinabove; said rental shall be determined by
a reputable, independent real estate appraiser, which shall have at least ten
(10) years experience in the appraisal of retail properties in the Philadelphia,
Pennsylvania area. Said appraiser shall be selected by both Landlord and Tenant.
In the event the parties cannot agree as to an appraiser, said appraiser shall
be appointed by a court of competent jurisdiction. The cost and expenses of the
appraiser and any court costs, if necessary, appointed shall be borne equally by
both Landlord and Tenant. The fair market rent of the subject space determined
in accordance with the provisions of this Section shall be binding and
conclusive on Tenant and Landlord. If, for any reason, fair market rent shall
not have been determined by the time of commencement of the then applicable
Extension Period and until such rent is determined, Tenant shall pay Minimum
Annual Rental during the then applicable Extension Period in an amount (the
"Interim Rent") equal to the Minimum Rent then payable by Tenant during the last
month of the then current term increased by five (5) percent and upon receipt of
a final determination of fair market rent as hereinafter set forth, any
overpayment or underpayment of Interim Rent shall be made up promptly between
the parties.
IN WITNESS WHEREOF, the parties hereto have set their hand and seals on
the day and year first above written.
ATTEST: LANDLORD:
CMW INVESTMENTS, LTD.
A PENNSYLVANIA LIMITED PARTNERSHIP
By: CMW DEVELOPMENT, INC.
(General Partner)
/s/ D. Scott Brehman By: /s/ Michael J. Willner
- -------------------- ----------------------
Title: President
---------
ATTEST: TENANT:
ROOM PLUS, INC.
/s/ William Halpern By: /s/ Marc Zucker
- --------------------- ---------------
Title: Chairman
--------
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TENANT:
STATE OF NEW JERSEY, COUNTY OF UNION ss
On the 19th day of March, 1997 before me personally appeared, Marc Zucker to me
known, who, being by me duly sworn, did depose and say that he is the Chairman
of Room Plus, Inc., the corporation described in and which executed the
foregoing instrument, that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the board of directors of said corporation, and that he signed his name
thereto by like order.
(Seal)
Mary M. Martin
Notary Public in and for
the State of New Jersey
My commission expires: November 13, 2001
LANDLORD:
STATE OF PENNSYLVANIA COUNTY OF MONTGOMERY ss
On the 20th day of March, 1997 before me personally appeared to me known,
Michael J. Willner, who, being by me duly sworn, did depose and say that he is
the President of CMW Investments, Ltd., the corporation described in and which
executed the foregoing instrument, that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation, and that he
signed his name thereto by like order.
(Seal)
Thomas P. Halfpenny
Notary Public in and for
the State of Pennsylvania
My commission expires: September 1, 1997
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EXHIBIT "A"
SITE PLAN
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EXHIBIT "B"
DESCRIPTION OF LANDLORD'S WORK
The following work is to be done by Landlord at Landlord's expense:
1. PARKING AREAS AND ROADS:
Landlord shall provide hard surfaced, drained, lighted and striped parking areas
as shown on the Site Plan market Exhibit "A" attached hereto, subject to such
changes as Landlord may make as permitted in Article 26 of this Lease.
2. BUILDING SHELL:
Landlord shall provide the building shell of the Demised Premises in accordance
with the following specifications:
(a) Structural steel or concrete and masonry frame.
(b) Walls: Construct demising partitions of metal studs and implanted
drywall. Rear wall to contain a metal door.
(c) Roof: Construct roof of Demised Premises.
(d) Floor: Provide existing floor "as is".
(e) Electrical: Electrical service - 200 amps.
(f) Open and exposed ceiling to be provided by Landlord.
3. STORE FRONT:
Landlord will finish and install straight standard aluminum and clear plate
glass store front, with a pair of 3' entry doors.
4. SANITARY FACILITIES:
Two bathrooms with one wall hung lavatory, one water closet, one six (6) gallon
electric hot water heater, one exhaust fan, one ceiling light, one paper towel
dispenser, one mirror and one toilet paper holder. Note: Landlord's work does
not include furnishing or installing soap dishes, deodorizers, dispensers, or
other similar items in toilet rooms within the Demised Premises. All work to
comply with ADA.
5. HEATING AND AIR CONDITIONING:
Landlord shall install an air handler and condensing unit equal to approximately
one (1) ton for every 400 square ft. Tenant shall be responsible for the run of
duct.
6. TELEPHONE:
Landlord will provide conduit at rear of Demised Premises and plywood panel for
phone company to mount telephone equipment. Tenant is responsible for obtaining
phone service, including wiring and phone equipment, through phone company.
7. PLANS AND SPECIFICATIONS:
(a) Tenant shall submit to Landlord, within fifteen (15) days after the
date of this Lease, three (3) copies of plans and specifications (the "Tenant's
Plans") for those improvements intended to be constructed by Tenant. Upon
receipt of Tenant's Plans, Landlord shall review them and return them to Tenant
within fifteen (15) days after receipt thereof, either indicating approval by
signing one copy of such Plans or indicating additional revisions. The cost and
expense of the Tenant's Plans shall be Tenant's sole responsibility.
(b) Tenant's Plans shall include, but shall not be limited to, floor plan,
electrical, heating and air conditioning, fixtures and signs.
(c) Tenant's plans shall be prepared in accordance with the laws,
ordinances and regulations of all governing authorities having jurisdiction.
Tenant shall also be required to obtain at Tenant's expense all necessary
permits for tenant's work.
8. LIMIT ON LANDLORD'S WORK:
Landlord's Work shall be strictly limited to those matters and items
specifically mentioned in this Exhibit as obligations of Landlord.
Landlord's work shall comply with ADA.
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EXHIBIT "C"
DESCRIPTION OF TENANT'S WORK
The following work is to be done by Tenant at Tenant's sole cost and expense:
1. COMPLETION OF DEMISED PREMISES:
All work required to complete and place the Demised Premises in finished
condition for opening for business, except only for the work specifically
described in Exhibit "B" as Landlord's Work, is to be done by Tenant at Tenant's
sole expense; included in such work as are all subdivision walls, floor
coverings, wall finishes, all store fixture work, all painting and decorating,
and other work shown on Tenant's Plans attached hereto and made a part hereof as
Exhibit "D".
2. TENANT'S CONSTRUCTION:
In connection with Tenant's work, Tenant shall comply with the following:
(a) Non-combustible materials must be used above ceiling.
(b) Mezzanines not permitted unless approved by Landlord.
(c) Plastered or dry walls, or their equivalent finish, required throughout the
sales area. Any exposed studs in storeroom area will be finished with dry wall
or its equivalent. Paint and decorate interior of Demised Premises.
(d) Provide all partitions.
(e) Provide all floor coverings.
(f) Provide trash room within Demised Premises.
(g) Provide for any heating and air conditioning equipment required by Tenant in
addition to units supplied by Landlord, all wiring and duct work, designed by a
professional engineer with seal. Space above ceiling shall be insulated. No roof
penetrations will be permitted without prior written approval of Landlord. All
such equipment shall be in proper operation on the day that Tenant opens the
Demised Premises for business.
(h) All cutting and patching of the roof area required for installation of air
conditioning and ventilation systems, plumbing or utilities shall be paid by the
Tenant; however, in all cases such work shall be performed by the Landlord's
roofing contractor.
(i) Provide all utilities, plumbing, electric and telephone, as well as other
Tenant requirements, in excess of Landlord's work.
(j) Tenant shall furnish information to Landlord for its requirements for lights
and power, and its estimated load for design load information only, but any
requirements in excess of those to be installed by Landlord as Landlord's Work
shall be the responsibility of Tenant.
(k) Provide fire extinguishers as required by governmental authorities.
3. FIXTURING:
Tenant shall furnish, install and connect trade fixtures as required by
Tenant's merchandising layout, which fixture shall be new, unless otherwise
approved in writing by Landlord.
4. SIGNS:
Landlord has approved signage as shown on Exhibit "F".
5. ACCESS TO DEMISED PREMISES:
Landlord, Landlord's agent or designee, and independent contractor, or an
authorized utility company, as the case may be, shall have the right to run
utility lines, pipes, conduits or duct work where necessary or desirable,
through attic space, column space, or other parts of the Demised Premises, and
to repair, alter, replace or remove the same, all in a manner which does not
interfere unnecessarily with Tenant's use of the Demised Premises.
6. LABOR DISPUTES:
To the end that there shall be no labor dispute which would interfere with
the construction, completion or alteration of the Shopping Center, or with any
work being carried on therein, Tenant shall engage the services of only such
contractors and subcontractors as will work in harmony with each other, those of
Landlord, and any others then working in the Shopping Center, and only such
labor as will work in harmony with all other labor then working in the Shopping
Center.
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<PAGE>
7. INSURANCE:
Tenant's contractors shall not be permitted to commence any work until all
required insurance has been obtained and certificates have been received by
Landlord. In addition to the insurance required under Article 16 of this Lease,
Tenant shall secure, pay for, and maintain or cause its contractor(s) to secure
and maintain during preparation of Demised Premises the following insurance in
the following amounts, which shall be endorsed in all policies to include
Landlord and Landlord's designated agents as additional insured parties, and
which shall provide in all policies that Landlord shall be given ten (10) days'
prior written notice of any alternation or termination of coverage:
(a) Workers' Compensation, employer's liability insurance with limits of
not less than $200,000.00 and where required by state law any insurance required
by any employee benefit acts or other statutes applicable where the work is to
be performed as will protect the contractor and subcontractors from any and all
liability under the aforementioned Act.
(b) Completed Value Form "All Physical Loss: Builder's Risk" coverage on
its work in the Demised Premises as it relates to the building within which the
Demised Premises is located, naming the interests of the Landlord, as general
contractor, and all subcontractors, as their respective interests may appear,
within a radius of 100 feet of the Demised Premises. Tenant agrees to defend,
indemnify, and hold harmless Landlord and Landlord's contractors from and
against any claims, actions or damages resulting from acts of negligence of
Tenant, its agents, employees or contractors in performance of Tenant's work.
8. TENANT'S EMPLOYEES AND CONTRACTORS:
Tenant shall be limited to performing its work, including any office or
storage for construction purposes within 10 Demised Premises only. Tenant and
Tenant's contractors shall be responsible for daily removal from the Shopping
Center of all trash, rubbish and surplus materials resulting from construction,
fixturing and merchandising of the Demised Premises.
9. TEMPORARY UTILITIES:
Tenant shall be responsible for temporary utility connections for its
work, including payment of utility charges.
10. APPROVALS:
Any approval or consent by Landlord shall in no way obligate Landlord in any
manner whatsoever in respect to the finished product, design and/or construction
by Tenant. Any deficiency in design or construction, although the same had prior
approval of Landlord, shall be solely the responsibility of Tenant.
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<PAGE>
EXHIBIT "D"
CONSTRUCTION
1. CONSTRUCTION
1.1 TENANT'S WORK:
All work, other than that specifically agreed to in writing to be performed by
Landlord, shall be performed by Tenant, at Tenant's sole cost and expense, and
in accordance with the Tenant's Plans approved by Landlord as described in
Exhibit "B" of this Lease.
1.2 COMMENCEMENT OF TENANT'S WORK:
Tenant shall expeditiously commence construction of Tenant's Work at a time and
in a manner that will not interfere with completion of Landlord's Work and will
perform and complete Tenant's Work in compliance with such reasonable rules and
regulations as Landlord and its architect or contractor or contractors may make
(provided that Tenant shall have been given notice thereof) and in accordance
with all applicable laws, orders, regulations and requirements of all
governmental authorities and Board of Fire Underwriters having jurisdiction.
Tenant's Work shall be commenced within thirty (30) days after the last of the
following to occur ("Tenant Construction Commencement Date"): (a) Landlord's
approval of Tenant's Plans and (b) Landlord's notice to Tenant that the Demised
Premises will, within ten (10) days after said notice be substantially completed
(except for finishing operations or items of work necessarily awaiting the
performance of Tenant's Work) to the extent reasonably required that Tenant's
Work can be commenced. Tenant's Work shall be performed in accordance with the
approved Tenant's Plans and Exhibit "C" and shall be completed within the number
of days set forth on the Data Sheet for Completion of Tenant's Work.
2. CONSTRUCTION SCHEDULE:
Time is of the essence with respect to the performance by Tenant of each of the
provisions concerning construction and the opening of the Demised Premises for
business. If Tenant fails or omits to make timely submission to Landlord of
Tenant's Plans or unreasonable delays in submitting or supplying information or
in giving authorization or in performing or commencing to perform or completing
Tenant's Work, or unreasonably delays or interferes with the performance of
Landlord's Work, Landlord, in addition to any other right or remedy it may have
under this Lease or at law or in equity, may pursue any one or more of the
following remedies: (a) Until Tenant shall have commenced Tenant's Work,
Landlord may give Tenant at least ten (10) days written notice that if a
specified failure, omission or delay is not cured by the date therein stated,
this Lease shall be deemed canceled and terminated; and if such notice shall not
be complied with, this Lease shall, on the date stated in such notice, be
canceled and terminated without prejudice to Landlord's rights hereunder; or (b)
Landlord may, after written notice of intention to do so, at Tenant's cost and
expense, including, without limitation, all expenses for such overtime as
Landlord may deem necessary, proceed with the completion of any such plans,
drawings or specifications or Tenant's Work, as the case may be, and such
performance by Landlord shall have the same effect hereunder as if the desired
plans, drawings, specifications, information, approval authorization work or
other action by Tenant had been done as herein required; and Landlord may
require Tenant to pay to Landlord, as Additional Rent hereunder, the full cost
to Landlord of completing the Demised Premises in accordance with the terms of
this Lease, together with an administrative fee equal to 15% of the sums
incurred by Landlord, and, alternatively, (c) Landlord may give written notice
of Tenant (notwithstanding that such a notice is not required hereunder) that
the Lease Term will be deemed to have commenced on the date to be therein
specified when the same would have commenced if Tenant had made timely
submission or supply of plans, drawings, specifications, estimates or other
information or approval of any thereof, and on and after the date so specified,
Landlord shall be entitled to be paid on the terms as agreed the Annual Minimal
Rent and any other rents and charges which are payable under this Lease by
Tenant during the Lease Term. In exercising any of the foregoing remedies set
forth in (a), (b), or (c), Landlord shall be entitled to Security Deposit
previously deposited by Tenant under this Lease.
3. OBLIGATION BEFORE LEASE TERM COMMENCES:
Tenant shall perform promptly such of its obligation under this Lease,
including, without limitation, its obligation to pay charges for temporary
water, heating, cooling and lighting pursuant to Exhibit "C" from the date upon
which the Demised Premises are made available to Tenant for its work (or from
the date when Tenant commenced to perform its said work, if earlier) until the
actual commencement of the Lease Term in the same manner as though the Lease
Term began when the Demised Premises were so made available to Tenant or when
Tenant commenced performing its work, if earlier.
4. COMPLETION OF TENANT'S WORK:
Upon the completion of Tenant's Work and prior to Tenant opening it store for
business, Tenant shall deliver to Landlord: (a) an affidavit by Tenant stating
that Tenant's Work has been substantially completed in accordance with Exhibit
"C", which shall include a detailed breakdown of Tenant's final and total
construction costs, together with receipted invoiced showing payment thereof;
(b) a final Release of Lien from Tenant's general contractor, together with an
affidavit from the general contractor that all bills for labor and materials
furnished to the Demised Premises have been paid; and (c) copies of all written
certifications and approvals with respect to Tenant's Work and its right to use
and occupy the Demised Premises that may be required for any government
authority and any Board of Fire Underwriters or similar body.
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<PAGE>
5. OWNERSHIP OF IMPROVEMENTS:
Without limiting any other similar provision(s) contained elsewhere in the
Lease, all installations, additions, betterments or improvements in or upon the
Demised Premises, made by either party, including, without limitation, all
pipes, ducts, conduits, wiring, paneling, partitions, railings, mezzanine
floors, galleries and the like shall become the property of Landlord and shall
remain upon and be surrendered with the Demised Premises as a part thereof at
the expiration or sooner termination of the Lease Term; provided, however, that
Landlord shall have the right to require Tenant to remove any such
installations, additions, betterments or improvements made by Tenant by giving
written notice to Tenant prior to the termination of this Lease, in which event
Tenant shall remove all such items as Landlord may designate and restore the
Demised Premises to the condition that existed prior to such installation.
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<PAGE>
EXHIBIT "E"
SIGN CRITERIA
1. The advertising or informative content of all signs shall be limited to
letters designating the store name/or type of store (which such designation of
the store type shall be by general descriptive terms and shall not include any
specification of the merchandise offered for sale therein or the services
rendered therein) only and shall contain no advertising devices, slogans,
symbols or marks (other than the store name and/or type of store, as aforesaid
and other than crests, symbols, trademarks, corporate shields, which shall be
permitted).
2. The character, design, color and layout of all signs shall be subject to the
approval of the Landlord who shall endeavor to establish uniform standards
consonant with an integrated sign control policy for the Shopping Center, and
further, however, shall give proper consideration to the style, design and
character of signs used by Tenant(s) for the same or similar retail operations
elsewhere.
3. Any sign and any part or parts thereof, except as otherwise provided in
paragraph 5 hereof, shall be located within the physical limits of the store
front of the Demised Premises of the Tenant, and shall not project at a right
angle to the facade.
4. All signs shall be fabricated and installed in compliance with all applicable
building and electrical codes and bear a U.L. Label.
5. Signs may be located on the exterior portions of the Demised Premises of
Tenant at such locations as may be designated by the Landlord. These signs shall
be limited to the store name and/or store type only, shall be constructed of
suitable materials for weather exposure, and shall conform to all applicable
limitations set forth above. The portion of such signs shall be mounted above
the fascia. Landlord shall designate the company to install such signs.
6. No Tenant shall erect more than one (1) sign along the sign band as
designated by Landlord.
7. The fabrication, installation and operation of all signs shall be subject to
the following restrictions:
(a) No exposed neon, fluorescent and/or incandescent tubing or lamps,
ballast boxes and/or electrical transformers, crossovers, conduit and/or sign
cabinets shall be permitted.
(b) No flashing, moving, flickering and/or blinking illumination,
animation, moving lights and/or flood light illumination shall be permitted.
(c) The name and/or stamp of the sign contractor or sign company or both
shall not be exposed to view, unless required by applicable law.
The following type signs, if visible from the exterior of the stores, are
prohibited:
(a) Paper signs and/or stickers utilized as signs.
(b) Signs of a temporary character or purpose, irrespective of the
composition of the sign or material used therefore (provided, however, on
limited occasions, as determined by Landlord, paper signs affixed to store
windows tenants may be used).
(c) Outrigger signs.
(d) Moving signs.
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EXHIBIT "F"
TENANT'S/BUILDING SIGNAGE
-29-
<PAGE>
EXHIBIT "G"
ADDENDUM TO LEASE AGREEMENT
This ADDENDUM is annexed and made a part of the Lease Agreement dated
20th, March, 1997 by and between CMW Investments, Ltd. as Landlord and Room
Plus, Inc., as Tenant.
1. Wherever there is any conflict between this Addendum and the Lease
Agreement, the provisions of this Addendum are paramount and the Lease Agreement
shall be construed accordingly.
SECTION 4.
Add the following to the end of Section 4.
Notwithstanding anything contained herein to the contrary, Tenant may
change its trade name from "Room Plus", provided that such changed trade name
shall be adopted by the majority of other "Room Plus" stores in the greater
Philadelphia area.
SECTION 4.3.
Add the following to the end of Section 4.3.
Notwithstanding anything contained herein to the contrary, Tenant
acknowledges and agrees that the Shopping Center's success and Landlord's
success is dependent upon the continued operation of Tenant's business, and the
maintenance of the character and quality of the Shopping Center is enhanced by
the continued occupancy of the Premises id the regular conduct of Tenant's
business as required herein. In the event Tenant ceases operation prior to the
Lease expiration date, Landlord shall have the right to obtain a court order for
specific performance of the operating covenant as )t forth in this Article 4.
During any period Tenant shall fail to operate in the Premises as provided
herein, Tenant shall pay to Landlord as liquidated damages (and not exclusive of
any other damages Landlord may be entitled to by the terms of is Lease
Agreement), as a reasonable estimate of damages suffered by Landlord due to the
damage to the character and ability of the Shopping Center, the loss of future
business suffered by Landlord and other non-qualifiable adverse effects caused
by Tenant's failure to continually operate, a sum equal to fifty percent (50%)
of the fixed rent payable hereunder in addition to the fixed rent payable to
Landlord. The payment of such sums shall not relieve Tenant of any of its
obligations under this Lease Agreement.
SECTION 4.4
Add the following to the end of Section 4.4.
Notwithstanding anything contained herein to the contrary, Landlord will
not lease a portion of the Building to a business whose primary business is the
sale of laminated youth and adult bedroom sets. Notwithstanding the following,
Landlord may Lease a portion of the Building to a furniture store or
mattress/bed store so long as their primary business not the sale of youth and
adult bedroom sets. Landlord has leased a portion of the Building of which the
Demised Premises is a part to Pier 1 Imports. Pier 1 Imports may sell certain
items that compete with Tenant.
SECTION 9.1
Add the following to the end of Section 9.1
Notwithstanding anything contained herein to the contrary, In the event
there is a reduction in the amount of Real Estate Taxes, Tenant shall benefit to
the extent of its pro-rata percentage of the reduction.
SECTION 10.
Add the following to the end of Section 10.
Notwithstanding anything contained herein to the contrary, Tenant shall
maintain and repair the Premises in the manner required by Article 10 of the
Lease Agreement. Tenant further agrees to maintain and repair the heating,
ventilating, and air-conditioner system (HVAC System) located in and serving the
Premises, and shall with the execution and delivery of this Lease Agreement,
provide Tenant with a copy of a maintenance/service contract for said HVAC
system. At the end, expiration, or other termination of the term hereby granted,
the Tenant shall remove its property as required by Article 25 of the Lease
Agreement and shall deliver up the Premises in as good order and condition as
they were at the commencement of the term or may be put in thereafter,
reasonable wear and tear and damage by fire or other casualty as excepted.
Landlord represents that the HVAC System serving the Demised Premises is in good
working order as of the date of full execution of this Lease Agreement.
Notwithstanding the aforementioned, Tenant acknowledges that Tenant inspected
the HVAC System units and determined that they are in good working order and
condition.
SECTION 11.
Add the following to the end of Section 11.
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<PAGE>
Notwithstanding anything contained herein to the contrary, Tenant shall
not make any structural changes to the Premises or the Shopping Center. Tenant
shall not need the consent of Landlord for any nonstructural changes made to
Premises, in the event the amount of the work is less than Twenty Thousand
Dollars ($20,000.00).
SECTION 12.
Add the following to the end of Section 12.4.
Notwithstanding anything contained herein to the contrary, Tenant shall be
open for business during the hours specified in Article 12, except that Tenant
shall not be required to remain open beyond 6 p.m. more than three (3) nights
per week. Tenant shall fully illuminate the Premises and its signs during the
hours specified in Article 12.5 of this Lease Agreement.
SECTION 14.
Add the following to the end of Section 14.
Notwithstanding anything contained herein to the contrary, to the extent
permitted by law and government regulation, Tenant shall have the right to place
sign panels on the sign pylons serving the Shopping Center. Tenant may only
place its pylon sign panels in one half (1/2) of each sign panel location
formerly occupied by Strawberries sign panels. Tenant may install an
identification sign on the fascia of the building of which the Premises are a
part in the locations identified as "Tenant B" and "Tenant C" and Exhibit G.
Tenant shall cause its signs to comply with Article 14 of the Lease Agreement
and with Landlord's sign standards and restrictions. Any signs, awnings,
lighting effects and fixtures installed by Tenant shall be new or like new, of
first class quality, and similar to those installed in other recently opened
"Room Plus" stores. Any such installation shall be performed in compliance with
all applicable government regulations, including building and zoning codes and
regulations. The approval of Landlord is not a representation that any such
installation complies with applicable government regulations.
SECTION 20.
Add the following to the end of Section 20.
Notwithstanding anything contained herein to the contrary. Landlord's
consent to any proposed assignment or sublease shall not be unreasonably
withheld, further provided and upon the minimum conditions, inter alia, that:
a) Tenant shall give notice to Landlord of the proposed assignment or
sublease, as to which consent is included, including, without limitation (i) a
conformed or photostatic copy of the proposed assignment or sublease, (ii) a
comment setting forth in reasonable detail the identity of the proposed assignee
or subtenant, the nature of its business and its proposed use of the Premises
and (iii) current financial information with respect to the proposed assignee or
subtenant, including, without limitations, its most recent financial report;
b) In the reasonable judgment of Landlord, the proposed assignee or
subtenant's intended use does not conflict with any then commitment made by
Landlord to any other Tenant of the Building; that the proposed assignee or
subtenant not of such a financial condition that in the reasonable discretion of
Landlord, such assignee or subtenant would have difficulty in conforming to the
terms and conditions of this Lease Agreement;
c) The proposed assignee or subtenant is not a person with whom Landlord
is then negotiating to lease space in reject;
d) Tenant shall remain primarily liable for the payment of Gross Rent and
for the performance of all the rules, covenants, and conditions of this Lease
Agreement, notwithstanding any assignment or sublease;
e) The form of the proposed lease shall be in form and substance
satisfactory to Landlord and shall comply with the applicable provisions of this
Section;
f) The use of the Premises shall be for the same use and occupancy as set
forth in Section 3.1 of this Lease Agreement;
g) The density of use for the proposed assignee or subtenant would not be
detrimental to the parking field available for the Shopping Center;
h) The amount of the aggregate rent to be paid by the proposed subtenant
or assignee if less than the rent set forth in this Lease is not less than fifty
percent (50%) of the then current market rent per rentable square foot for the
premises as though the Premises were vacant, and the rental and other terms and
conditions of the sublease are the same as those contained in the proposed
sublease furnished to Landlord;
i) Tenant shall reimburse Landlord on demand as Additional Rent for any
reasonable costs that may be incurred by Landlord In connection with said
assignment or sublease, including, without limitation, the costs of making
investigations as the acceptability of the proposed assignee or subtenant, and
reasonable attorney's fees incurred in connection with the granting of any
requested consent;
-31-
<PAGE>
j) Tenant shall not have, (i) advertised (as distinguished from
publicized) in any way the availability of the Premises without prior notice to
an approval by Landlord, nor shall any advertisement state the name [as
distinguished by the address] of the Building or the Project or the proposed
rental;
k) Tenant shall have used a reputable licensed real estate broker subject
to the reasonable approval of Landlord Tenant's exclusive agent in respect of
the sublease or assignment, or a broker appointed by Tenant whose approval shall
not be unreasonably withheld by Landlord, as the case may be;
l) The assignment or sublease agreement shall be for the whole Premises,
the entirety, and not for any parts hereof except that affiliates of Tenant may
sublet less than the entire Premises, however, no more than two such affiliates
may be in such possession at any one time; and
m) No subtenant or assignee, other than affiliates, shall have the further
right to sublet or assign.
SECTION 30.
Add the following to the end of Section 30.
Notwithstanding anything contained herein to the contrary, Tenant has
discussed the foregoing provisions of this Section 30 with its attorney, and
accepts the same as its willful, knowing and informed agreement.
SECTION 38.
Add the following to the end of Section 38.
Notwithstanding anything contained herein to the contrary, each of
Landlord and Tenant hereby represent and warrant to the other that it has dealt
with no broker in connection with this Lease, other than Michael Ullian of
Julius M. Feinblum Real Estate, Inc., and there are no other brokerage
commissions or other finders' fees in connection herewith, other than any fee or
commission owed to Michael Ullian of Julius M. Feinblum Real Estate, Inc. for
which Landlord is solely responsible provided that Tenant shall have taken
occupancy pursuant to an executed Lease Agreement and Tenant shall have
commenced the payment of Minimum Rent and Additional Rent. Each party hereby
agrees to hold the other harmless from and indemnify the other against loss or
damage (including, without limitation, the cost of defending same) arising from
any claim by any broker claiming to have dealt with the indemnifying party. In
no event shall Landlord have any liability for any brokerage commission or
finder's fee on account of this Lease.
SECTION 38.
Add the following to the end of Section 38 by creating new sub-section 38.18.
Notwithstanding anything contained herein to the contrary, Tenant shall do
whatever is necessary to remove any violations issued by Federal, State or local
governmental or quasi-governmental agencies or units, within a reasonable period
of time. The aforesaid shall only apply to violations issued or which accrued
during the term on the Premises. Tenant's obligation to make said repairs and
correct violations shall survive the termination of this Lease so long as the
obligations accrued prior to the date of termination. Landlord shall be
responsible for the removal of record of any violations, of which Landlord is
aware, affecting the Demised Premises which violations are of record as of the
Commencement Date.
-32-
MODIFICATION AGREEMENT, DATED THIS 22nd DAY OF JULY 1997, AMENDING AND
MODIFYING A CERTAIN LEASE, DATED THE 1st OF JULY 1992, BETWEEN AUSTIN MALL
ASSOCIATES, HAVING AN OFFICE AT 71-25 AUSTIN STREET, FOREST HILLS, NEW
YORK, AS LANDLORD, AND ROOM PLUS FURNITURE OF FOREST HILLS, INC., AS
TENANT, HAVING AN OFFICE AT 91 MICHIGAN AVENUE, PATERSON, NEW JERSEY
07503, LOCATED IN THE GROUND FLOOR STORE IN THE BUILDING KNOWN AS 70-09
AUSTIN STREET, FOREST HILLS, NEW YORK.
Agreement made this 22nd day of July 1997, between Austin Mall Associates,
LLC, having an office at 71-25 Austin Street, Forest Hills, NY, as Landlord, and
Room Plus Furniture of Forest Hills, Inc., as Tenant, having a store at 91
Michigan Avenue, Paterson, New Jersey 07503.
W I T N E S S E T H
WHEREAS, the Landlord, by Lease dated the 1st day of July 1992, leased to
the Tenant the demised premises consisting of store space in the building
described in the aforementioned lease, and
WHEREAS, the parties desire to continue the Lease on all the same terms and
conditions as stated therein and as modified, except as herein modified and
stated following:
NOW, THEREFORE, in consideration of mutual covenants herein and in the said
above-mentioned Lease, the parties do hereby agree:
1. The term of the Lease shall be extended for five years. The Lease
will now expire on February 28, 2003.
2. The annual rent payable for March 1st 1998 through February 28th 2003
shall be as follows:
A. The Fixed Annual Rent payable per annum under this Lease
Modification shall be payable in monthly installments, on the first
day of each month as follows:
For the period commencing from March 1st 1998 until the first
anniversary date of this Lease Extension, the Fixed Annual Rent shall
be payable at the rate of $91,819.40 per annum and shall, for each
succeeding lease year thereafter until the expiration or earlier
termination of the Lease Extension be payable at the annual rate
payable for the next preceding year plus an amount obtainable by
multiplying the Fixed Annual Rent For the next preceding year by the
Annual C.P.I. increase.
1
<PAGE>
Definitions:
Price Index:
The Consumer Price Index for all Urban Consumers (presently
denominated "CPI-U"), All Items, New York, NY - Northeastern NJ,
published by the Bureau of Labor Statistics of the United Sates
Department of Labor or its successor. If at any time said Consumer
Price Index is no longer issued, then the term "Price Index" shall
mean an index selected by the parties hereto comparable to said
Consumer Price Index.
Annual C.P.I. Increase:
Annual C.P.I. Percentage by which the Price Index for the lease year
in question exceeds the Price Index of the next preceding lease year.
Lease Year:
The twelve (12) month period commencing with the Commencement Date of
this Lease Extension and each twelve (12) month period thereafter.
Example:
For example, if the C.P.I. index increases 5% from March 1st 1998
through February 28th 1999, then the Annual Rent for March 1st 1999
through February 29th 2000 shall be $91,819.40 x 105% = $96,410.37.
If the C.P.I. Index then increases between March 1st 1999 and
February 29th 2000 by 3% then the rent for the period March 1st 2000
through February 28th 2001 shall be $96,410.37 x 103% = $99,302.68.
3. In the event the Tenant is not in default of this lease, then 1/2 of
the base rent for March 1998 and 1/2 of the base rent for February
1999 shall be abated.
4. If Tenant shall keep, observe and perform all of the terms,
covenants and conditions of this Lease on Tenant's part to be kept,
observed and performed, Tenant shall have the right to extend this
Lease for a period of 5 years commencing at the termination of this
Lease from March 1st 2003 through February 29th 2008 provided Tenant
shall notify Landlord in writing by certified or registered mail,
return receipt requested, not less than 1 (one) year prior to the
expiration of the then existing term hereof that Tenant desires such
extension, provided, further, that said Lease as extended shall be
upon the same terms, conditions and covenants as are contained
herein, except as to the duration of the term hereof and the
amount of annual rental, and upon expiration of such
2
<PAGE>
extension period, there shall be no further option or extension. The
annual rental for said extension period shall continue to increase
annually based on the C.P.I. Formula in paragraph 2 hereinabove with
Annual C.P.I. Increase for each year during the extension period.
5. Paragraph 61 of the lease is hereby modified by removing the figure
$20,633.33 from the paragraph and putting $3,000 in its place. It is
the intention of the parties that the Tenant will have a $3,000
credit only towards the last month rent under the lease.
6. Tenant has informed Landlord that the name of the company has
changed to Rooms Plus, Inc.
All the other terms and conditions of the Lease dated July 1, 1992 shall
remain in full force and effort during the extension period.
IN WITNESS WHEREOF, the parties hereto have HEREOF, their respective
corporate and authorized signatures to be hereunto affixed the day and year
first above written, namely as of the 19th day of August, 1997.
WITNESS FOR OWNER AUSTIN MALL ASSOCIATES, LLC
By: /s/ Joel Mandel
- ----------------- -------------------
JOEL MANDEL
WITNESS FOR TENANT ROOMS PLUS, INC.
/s/ Mary M. Martin By: /s/ Marc Zucker
- ------------------ ---------------
MARC ZUCKER
Chairman
3
EXTENSION OF LEASE
HANNON'S, a partnership, as Landlord and ROOM PLUS OF EAST HANOVER, INC., a
corporation of New Jersey, as Tenant, entered into a lease for a portion of a
building located at #319 Route 10, East Hanover, NJ consisting of approximately
4,000 square feet, which commenced on August 1, 1983. The original term of five
years under that lease has passed and the single five year option period will
terminate on July 31, 1998.
The parties wish to extend the lease under all the same terms and
conditions for a period of five years beginning on August 1, 1998 and
terminating on July 31, 2003 except that the fixed annual rental shall be
$82,000.00 per year payable $6,833.33 per month.
If the tenant shall not then be in default in performing any of its
obligations under this lease, then the tenant shall have the option of extending
the term of this lease for an additional five (5) year period from August 1,
2003 through July 31, 2008 at a rental of $90,000.00 per year for each of the
five years, under all the same conditions except for the amount of the rent.
Notice of tenant's exercise of the renewal option shall be given to the
Landlord, in writing, by certified mail, at least 6 months prior to the
expiration of the original term of this extension, i.e., by January 31, 2003.
HANNON'S a partnership
By: /s/ Harold J. Hannon
---------------------
HAROLD J. HANNON,
a partner Landlord
ROOM PLUS OF EAST HANOVER, INC.
By: /s/ Allan J. Socher
-------------------
ALLAN J. SOCHER
President, Tenant
ATTEST:
/s/ Marc Zucker
- ---------------
Secretary
ROOM PLUS OF EAST HANOVER, INC.
EXHIBIT 11
ROOM PLUS, INC.
Computation of Earnings per Common Share
(See Note 1 of Notes to Financial Statements)
<TABLE>
<CAPTION>
Years Ended December 31
1997 1996
------------ -----------
Basic/diluted loss per share (proforma)
<S> <C> <C>
Net loss applicable to common stock $(1,900,051) $ (3,085)
=========== ===========
Weighted average common shares outstanding 4,385,000 2,983,125
Stock options and warrants issued to outside
consultants and employees within one year of the
Offering at less than the initial public offering price -- 913,750
----------- -----------
Total common shares and equivalent common shares 4,385,000 3,896,875
=========== ===========
Basic/diluted loss per common share$ (.43) $ --
=========== ===========
</TABLE>
Computation of dilutive loss per share would have an anti-dilutive effect.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001009773
<NAME> Room Plus, Inc.
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 185,843
<SECURITIES> 0
<RECEIVABLES> 67,685
<ALLOWANCES> 0
<INVENTORY> 1,904,326
<CURRENT-ASSETS> 2,797,309
<PP&E> 3,745,196
<DEPRECIATION> 1,940,893
<TOTAL-ASSETS> 6,067,551
<CURRENT-LIABILITIES> 3,112,670
<BONDS> 0
0
0
<COMMON> 5,832
<OTHER-SE> 6,512,645
<TOTAL-LIABILITY-AND-EQUITY> 6,067,551
<SALES> 16,851,321
<TOTAL-REVENUES> 16,851,321
<CGS> 7,418,128
<TOTAL-COSTS> 9,979,319
<OTHER-EXPENSES> 2,131,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 106,205
<INCOME-PRETAX> (2,896,856)
<INCOME-TAX> (996,805)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,900,051)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
