U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO ______
COMMISSION FILE NUMBER 0-21423
CHICAGO PIZZA & BREWERY, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0485615
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
26131 MARGUERITE PARKWAY
SUITE A
MISSION VIEJO, CALIFORNIA 92692
(Address and zip code of Registrant's principal executive offices)
(949) 367-8616
(Registrants telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO.
--
As of July 30, 1999, there were 7,658,321 shares of Common Stock of the
Registrant outstanding and 8,884,584 Redeemable Warrants of the Registrant
outstanding.
<PAGE>
CHICAGO PIZZA & BREWERY, INC. AND SUBSIDIARIES
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 1
Consolidated Balance Sheets -
June 30, 1999 (Unaudited) and December 31, 1998 1
Unaudited Consolidated Statements of Operations -
Three Months Ended and Six Months Ended
June 30, 1999 and June 30, 1998 2
Unaudited Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1999 and
June 30, 1998 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of
Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
CHICAGO PIZZA & BREWERY, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED)
- -------------------------------------------------------------------- ------------ --------------
ASSETS:
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,119,570 $ 1,490,705
Accounts receivable 192,883 175,712
Inventory 393,130 345,874
Prepaid and other current assets 178,934 295,176
------------ --------------
Total current assets 2,884,517 2,307,467
Property and equipment, net 11,003,796 9,567,604
Other assets 356,128 352,916
Intangible assets, net 5,284,846 5,366,722
------------ --------------
Total assets $19,529,287 $ 17,594,709
============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 1,289,511 $ 1,130,691
Accrued expenses 1,623,699 1,286,539
Current portion of notes payable to related parties 336,187 339,727
Current portion of long-term debt 356,483 210,367
Current portion of obligations under capital leases 143,618 135,809
------------ --------------
Total current liabilities 3,749,498 3,103,133
Notes payable to related parties 1,547,371 1,718,954
Long-term debt 765,093 355,313
Obligations under capital leases 96,986 167,219
Other liabilities 115,614 122,099
------------ --------------
Total liabilities 6,274,562 5,466,718
------------ --------------
Minority interest in partnership 255,099 235,040
------------ --------------
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized, none issued
or outstanding
Common stock, no par value, 60,000,000 shares authorized; 7,658,321
and 6,408,321 shares issued and outstanding as of
June 30, 1999 and December 31, 1998, respectively. 16,076,132 15,039,646
Capital surplus 1,036,029 1,196,029
Accumulated deficit (4,112,535) (4,342,724)
------------ --------------
Total shareholders' equity 12,999,626 11,892,951
------------ --------------
Total liabilities and shareholders' equity $19,529,287 $ 17,594,709
============ ==============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHICAGO PIZZA & BREWERY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------ --------------------------
1999 1998 1999 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $9,947,282 $7,825,198 $18,039,685 $14,713,454
Cost of sales 2,790,237 2,158,675 5,014,633 4,171,001
Gross profit 7,157,045 5,666,523 13,025,052 10,542,453
Costs and expenses:
Labor and benefits 3,529,931 2,791,966 6,507,561 5,292,686
Occupancy 751,154 639,139 1,460,377 1,232,645
Operating expenses 1,016,763 867,164 1,924,526 1,739,574
Preopening costs 126,711 321,913
General and administrative 752,074 613,535 1,415,768 1,206,744
Depreciation and amortization 389,550 470,694 743,755 923,140
------------ ------------
Total cost and expenses 6,566,183 5,382,498 12,373,900 10,394,789
----------- ----------- ------------ ------------
Income from operations 590,862 284,025 651,152 147,664
Other income (expense):
Interest expense, net (65,859) (73,162) (123,190) (107,826)
Other expense, net (161,731) (15,030) (160,964) (5,781)
------------ ------------
Total other expense (227,590) (88,192) (284,154) (113,607)
----------- ----------- ------------ ------------
Income before minority interest, income
taxes and change in accounting 363,272 195,833 366,998 34,057
Minority interest in partnership (10,403) (16,673) (20,059) (33,598)
----------- ----------- ------------ ------------
Income (loss) before income taxes and
change in accounting 352,869 179,160 346,939 459
Income tax expense (8,960) (800) (10,575) (1,600)
----------- ----------- ------------ ------------
Income (loss) before change in accounting 343,909 178,360 336,364 (1,141)
Cumulative effect of change in accounting (106,175)
----------- ----------- ------------ ------------
Net income (loss) $ 343,909 $ 178,360 $ 230,189 ($1,141)
=========== =========== ============ ============
Net income per share:
Basic and dilutive:
Income before cumulative effect of change in
accounting $0.05
Cumulative effect of change in accounting ($0.02)
----------- ----------- ------------ ------------
Net income $0.04 $0.03 $0.03 $0.00
=========== =========== ============ ============
Weighted average number of shares outstanding:
Basic 7,658,321 6,408,321 7,161,083 6,408,321
=========== =========== ============ ===========
Dilutive 7,667,598 6,408,321 7,170,058 6,408,321
=========== =========== ============ ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHICAGO PIZZA & BREWERY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------------
1999 1998
------------ -----------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss) $ 230,189 ($1,141)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 743,755 923,140
Change in accounting principle 106,175
Minority interest in partnership 20,059 33,598
Loss on disposal of assets 136,925
Changes in assets and liabilities:
Accounts receivable (17,171) (29,557)
Inventory (47,258) 10,334
Prepaid and other current assets (142,533) 48,901
Other assets (8,389) (19,246)
Accounts payable 158,819 62,962
Accrued expenses 337,160 107,125
Other liabilities (6,484) (6,484)
------------ -----------
Net cash provided by operating activities 1,511,247 1,129,632
------------ -----------
Cash flows used in investing activities:
Purchases of equipment (2,249,598) (795,954)
Proceeds from sale of restaurant equipment 48,867 7,000
------------ -----------
Net cash used in investing activities (2,200,731) (788,954)
Cash flows provided by (used in) financing activities:
Proceeds from sale of common stock 1,000,000
Equipment loan proceeds 699,604
Payments on related party debt (175,123) (189,286)
Payments on debt (143,708) (174,416)
Capital lease payments (62,424) (60,014)
Distribution to minority interest partners (11,580)
------------ ------------
Net cash provided by (used in) financing activities 1,318,349 (435,296)
------------ -----------
Net increase (decrease) in cash and cash equivalents 628,865 (94,618)
Cash and cash equivalents, beginning of period 1,490,705 1,705,349
------------ -----------
Cash and cash equivalents, end of period $ 2,119,570 $1,610,731
============ ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
CHICAGO PIZZA & BREWERY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Chicago
Pizza & Brewery, Inc. and its subsidiaries (the "Company") for the three months
and six months ended June 30, 1999 and 1998 have been prepared in accordance
with generally accepted accounting principles, and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. These financial statements have not been
audited by independent accountants, but include all adjustments (consisting of
normal recurring adjustments) which are, in Management's opinion, necessary for
a fair presentation of the financial condition, results of operations and cash
flows for such periods. However, these results are not necessarily indicative of
results for any other interim period or for the full year.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted pursuant to requirements of the Securities and Exchange Commission
(SEC). A description of the Company's accounting policies and other financial
information is included in the audited consolidated financial statements as
filed with the SEC on Form 10-KSB for the year ended December 31, 1998.
Management believes that the disclosures included in the accompanying interim
financial statements and footnotes are adequate to make the information not
misleading, but should be read in conjunction with the consolidated financial
statements and notes thereto included in the Form 10-KSB. The accompanying
consolidated balance sheet as of December 31, 1998 has been derived from the
audited financial statements.
ORGANIZATION
Chicago Pizza & Brewery, Inc. (the "Company" or "BJ's") owns and operates,
as of June 30, 1999, 26 restaurants located in Southern California, Oregon,
Washington and Colorado and an interest in one restaurant in Lahaina, Maui.
Each of these restaurants is operated as either a BJ's Pizza, Grill & Brewery,
BJ's Pizza & Grill, BJ's Pizza & Grill - OTC or a Pietro's Pizza restaurant.
The menu at the BJ's restaurants feature BJ's award-winning, signature deep-dish
pizza, BJ's own hand-crafted beers as well as a great selection of appetizers,
entrees, pastas, sandwiches, specialty salads and desserts. The five BJ's
Pizza, Grill & Brewery restaurants feature in-house brewing facilities where
BJ's handcrafted beers are produced. The one BJ's Pizza & Grill - OTC restaurant
has a limited menu and service level. The eight Pietro's Pizza restaurants
serve primarily Pietro's thin-crust pizza in a very casual, counter-service
environment.
During the second quarter of 1999, the Company opened its fifth BJ's Pizza,
Grill & Brewery in Woodland Hills, California. The Company also recently signed
a lease for a BJ's Pizza & Grill in Valencia, California; the anticipated
opening of this new facility is early 2000. The Company also is in escrow to
acquire a restaurant location in La Mesa, California. The closing of escrow and
acquisition of this location is contingent on the transfer of the existing
liquor license. Pending approval of the liquor license transfer, the Company
anticipates opening a BJ's Pizza & Grill at this location in late 1999.
On May 31, 1999, the lease on the BJ's Pizza & Grill - OTC in The Dalles,
Oregon terminated. The Company and the landlord could not reach an agreement on
the terms of a lease extension. A portion of the restaurant equipment was sold
to the landlord, and additional equipment was removed for use at other BJ's
locations. The Company incurred a non-cash charge of $132,900 for a loss on the
sale of assets to the landlord, primarily leasehold improvements, at this
location and an additional $28,700 for the settlement of claims made by the
landlord. While this restaurant showed fairly strong initial sales after its
conversion from a Pietro's to a BJ's Pizza & Grill in February 1998, management
felt the very low population density in the area was not sufficient to sustain
revenues necessary to make it a successful restaurant. Sales at The Dalles for
the five months through May 31, 1999 were $292,000, compared to $357,000 for the
comparable five-month period of the prior year.
On June 30, 1999, a Pietro's restaurant located in Eugene, Oregon was
closed. The Company and the landlord could not reach an agreement on the terms
of a new lease. This restaurant did not figure significantly in the Company's
future plans, and the Company chose to close it rather than meet the landlord's
request for an extensive remodel. The Company incurred a non-cash charge of
$4,000 on the closure of this restaurant. Sales at this restaurant for the
six-month period ended June 30, 1999 were $378,000, compared to $391,000 for the
similar period of the prior year.
PER SHARE INFORMATION
SFAS 128, "Earnings Per Share", was adopted in the fourth quarter of 1997
and supersedes the Company's previous standards for computing net income per
share under Accounting Principals Board (APB) No. 15. The new standard requires
dual presentation of basic net income per common share and net income per common
share assuming dilution on the face of the income statement. Basic net income
per share is computed by dividing the net income attributable to common
stockholders by the weighted average number of common shares outstanding during
the period. Dilutive net income per share is equal to basic net income per
share, as both stock options and warrants are antidilutive for the periods
presented.
RECENTLY ISSUED ACCOUNTING STANDARDS
As had been the practice of many restaurant entities, the Company
previously deferred its restaurant preopening costs and amortized them over the
twelve-month period following the opening of each new restaurant. In April 1998,
the Accounting Standards Executive Committee of the American Institute of
Certified Public Accounts issued Statement of Position 98-5 (SOP 98-5),
Accounting for the Costs of Start-Up Activities. SOP 98-5 requires all costs of
start-up activities that are not otherwise capitalizable as long-lived assets to
be expensed as incurred. The Company adopted SOP 98-5 during the first quarter
of 1999. This new accounting standard will accelerate the Company's recognition
of costs associated with the opening of new restaurants but will benefit the
post-opening results of new restaurants. The Company's total deferred preopening
costs were $106,175 at January 1, 1999. As provided by SOP 98-5, the Company
wrote off the balance of deferred preopening costs during the first quarter of
1999.
Other recently issued standards of the FASB are not expected to affect the
Company, as conditions to which those standards apply are absent.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and has
currently not allocated any funds for the payment of dividends. Rather, it is
the current policy of the Company to retain earnings, if any, for expansion of
its operations, remodeling of existing restaurants and other general corporate
purposes and to not pay any cash dividends in the foreseeable future. Should the
Company decide to pay dividends in the future, such payments would be at the
discretion of the Board of Directors.
LONG-TERM EQUIPMENT LOAN
In January 1999, the Company completed an agreement with a lender to
provide equipment financing up to $1,000,000 for equipment and furnishings
required in the Arcadia, Woodland Hills and other restaurant developments. The
note has a term of eighty-four months, and the interest rate is fixed at the
time of funding; to date funds provided for equipment financing under this
facility have been at effective interest rates ranging from 11.63% to 13.68%.
Amounts borrowed are collateralized by the financed equipment and additional
equipment and property owned by the Company up to the amount of the loan
balance. At June 30, 1999, the outstanding principal balance under the borrowing
agreement was $671,000.
PRIVATE PLACEMENT
In March 1999, the Company sold, through a private placement, 1,250,000
shares of its common stock to ASSI, Inc. (the "ASSI Transaction") in exchange
for a cash payment of $1,000,000, the termination of two consulting agreements,
cancellation of 3,200,000 of the Company's redeemable warrants held by ASSI,
Inc. and the agreement by ASSI, Inc. and its sole stockholder to finance future
Company development projects subject to pre-commitment approval. The Company
also has the right of first refusal to repurchase the shares of its common
stock; in the event the shareholder decides to sell such shares.
ITEM 2. 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 Unaudited Consolidated Financial Statements and notes thereto
included elsewhere in this Form 10-Q. Except for the historical information
contained herein, the discussion in this Form 10-Q contains certain forward
looking statements that involve risks and uncertainties, such as statements of
the Company's plans, objectives, expectations and intentions. The cautionary
statements made in this Form 10-Q should be read as being applicable to all
related forward-looking statements wherever they appear in this Form 10-Q. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, without
limitation, those factors discussed herein and in the Company's annual report as
reported on Form 10-KSB dated December 31, 1999 including, without limitation:
(i) the Company's ability to manage growth and conversions, (ii) construction
delays, (iii) marketing and other limitations as a result of the Company's
historic concentration in Southern California and current concentration in the
Northwest, (iv) restaurant and brewery industry competition, (v) impact of
certain brewery business considerations, including without limitation,
dependence upon suppliers and related hazards, (vi) increase in food costs and
wages, including without limitation the recent increase in minimum wage, (vii)
consumer trends, (viii) potential uninsured losses and liabilities, (ix)
trademark and servicemark risks, (x) year 2000 risk issues, and (xi) other
general economic and regulatory conditions and requirements.
RESULTS OF OPERATIONS
Three-Month Period Ended June 30, 1999 Compared to Three-Month Period Ended June
30, 1998.
Revenues. Total revenues for the three-month period ended June 30, 1999
increased to $9,947,000 from $7,825,000 for the comparable period in 1998, an
increase of $2,122,000 or 27.1%. The increase is primarily the result of:
The opening of the Arcadia, California and Woodland Hills restaurants on January
21, 1999 and April 10, 1999, respectively. These new restaurants generated
revenues of $2,018,000 during the second quarter of 1999.
An increase in same store sales at the BJ's restaurants that were open both
periods of $478,000 or 8.3%. Management believes this increase was due to (i)
an increase in customer counts, (ii) an increase in check averages produced by a
price increase implemented in late May 1998 and the implementation of more
effective suggestive selling techniques at the restaurants.
The above-mentioned increases in revenues at the BJ's restaurants were
partially offset by a $201,000 decrease in sales at the BJ's restaurant in
Gresham, Oregon for the second quarter of 1999, compared to the same period of
the prior year. A former Pietro's restaurant, it experienced a high level of
sales during the second quarter of 1998 after its conversion to the BJ's format.
During the second quarter of 1999 it also was necessary to close this restaurant
for two weeks to repair damage caused by a minor fire. Sales at the remaining
nine Pietro's restaurants in Oregon and Washington were essentially flat, when
comparing second quarter 1999 with second quarter 1998.
Cost of Sales. Cost of food, beverages and paper (cost of sales) for the
restaurants increased to $2,790,000 for the three month period ended June 30,
1999 from $2,159,000 for the comparable period in 1998, an increase of $631,000
or 29.2%. However, as a percentage of revenues, cost of sales increased
slightly to 28.0% during the 1999 period from 27.6% in the 1998 period. The
increase in cost of sales as a percentage of revenues was primarily due to the
opening of the Arcadia, California and Woodland Hills, California restaurants.
Cost of sales for these new restaurants was 29.7 % as a percentage of their
revenues. A higher than normal cost of sales was anticipated based on previous
experience when opening new restaurants.
Labor. Labor costs for the restaurants increased to $3,530,000 in the
three-month period ended June 30, 1999 from $2,792,000 for the comparable period
in 1998, an increase of $738,000 or 26.4%. As a percentage of revenues, labor
costs decreased slightly to 35.5% in the 1999 period from 35.7% in the 1998
period. This control of labor costs was achieved despite the planned initial
overstaffing of the Arcadia, California restaurant opened in January 1999 and
the Woodland, Hills, California restaurant opened in April 1999. For the portion
of the second quarter that these new restaurants were operating, as a percentage
of revenues, their combined labor costs were 39.4%.
Occupancy. Occupancy costs increased to $751,000 during the three-month
period ended June 30, 1999 from $639,000 during the comparable period in 1998,
an increase of $112,000 or 17.5%. The new stores in Arcadia, California and
Woodland Hills, California accounted for $88,000 of the increase in occupancy
costs. The balance was due to annual lease escalations and higher revenues at
restaurants with lease provisions requiring rental payments based on a
percentage of sales. As a percentage of revenues, occupancy costs for all stores
decreased to 7.6% in the 1999 period from 8.2% in the 1998 period.
Operating Expenses. Operating expenses increased to $1,017,000 during the
three-month period ended June 30, 1999 from $867,000 during the comparable
period in 1998, an increase of $150,000 or 17.3%. However, as a percentage of
revenues, operating expenses decreased to 10.2% in the 1999 period from 11.1% in
the 1998 period. The primary reasons for the decrease in operating expenses as
a percentage of revenues were (i) the increase in same store sales, (ii) an
increased focus on operating the restaurants more efficiently and, (iii) the
implementation of improved expense monitoring systems at the BJ's restaurants in
Southern California and Oregon. Operating expenses include restaurant-level
operating costs, the major components of which include marketing, repairs and
maintenance, supplies and utilities.
Preopening Costs. During the first quarter of 1999, the company adopted
Statement of Position 98-5 (SOP 98-5), Accounting for the Costs of Start-Up
Activities, which requires all costs of start-up activities that are not
otherwise capitalizable as long-lived assets to be expensed as incurred. The
Company previously deferred its restaurant preopening costs and amortized them
over the twelve-month period following the opening of each new restaurant. This
new accounting standard accelerates the Company's recognition of costs
associated with the opening of new restaurants. the Company wrote off $106,000
as a cumulative effect of change in accounting principle in the first quarter of
1999.
During the three-month period ended June 30, 1999 the Company incurred
costs of $127,000 related to the openings of its new restaurant in Woodland
Hills, California that, under previous accounting standards, would have been
capitalized and amortized over a 12-month period. These costs will fluctuate
from quarter to quarter, possibly significantly, depending upon, but not limited
to, the number of restaurants under development, the size and concept of the
restaurants being developed and the complexity of the staff hiring and training
process.
General and Administrative Expenses. General and administrative expenses
increased to $752,000 during the three-month period ended June 30, 1999 from
$614,000 during the comparable period in 1998, an increase of $138,000 or 22.5%.
As a percentage of revenues, general and administrative expenses decreased
slightly to 7.6% in 1999 from 7.8% during the comparable period of 1998. The
increase in general and administrative expenses in total was primarily due to
increases in overhead in anticipation of future expansion. The decrease in
general and administrative expenses as a percentage of revenues reflects the
increase in revenues for the period.
Depreciation and Amortization. Depreciation and amortization decreased to
$390,000 during the three-month period ended June 30, 1999 from $471,000 during
the comparable period in 1998, a decrease of $81,000 or 17.2%. The decrease was
primarily due to the change in accounting principle from the deferral and
amortization of preopening costs to the expensing of those costs as incurred.
Preopening costs amortized during the three-month period ending June 30, 1998
totaled $117,000. This factor was partially offset by the increase in
depreciation relating to the opening of the Arcadia, California restaurant in
January 1999 and the Woodland Hills, California restaurant in April 1999.
Interest Expense. Interest expense, net of interest income, decreased to
$66,000 during the three month period ended June 30, 1999 from $73,000 during
the comparable period in 1998, a decrease of $7,000 or 9.6%. The decrease was
primarily due to the maturity in May 1999 of a loan assumed when the Company was
formed, the conclusion of several capitalized equipment leases and the normal
amortization of the major acquisition loan held by an affiliate. The Company's
stronger cash position subsequent to the private placement in March 1999
contributed to higher interest income and a reduction of net interest for the
quarter ended June 30, 1999, compared to the comparable quarter of 1998.
Income Tax Expense. The Company historically experienced net losses
through 1997; for 1998 the Company had net income of $85,000. At the end of
1998, the Company had federal and California net operating loss carryovers of
approximately $4,770,000 and $1,636,000, respectively. While the net operating
loss carryovers should be adequate to offset any regular taxable income for
1999, a provision was made during the second quarter of 1999 for estimated
alternative minimum tax expense. The provision for minimum federal and state
taxes made at June 30, 1999 will be evaluated quarterly.
Six-Month Period Ended June 30, 1999 Compared to Six-Month Period Ended June 30,
1998.
Revenues. Total revenues for the six-month period ended June 30, 1999
increased to $18,040,000 from $14,713,000 for the comparable period in 1998, an
increase of $3,327,000 or 22.6%. The increase is primarily the result of:
The opening of the Arcadia, California and Woodland Hills restaurants on January
21, 1999 and April 10, 1999, respectively. These new restaurants generated
revenues of $2,712,000 during the first six months of 1999.
An increase in same store sales at the BJ's restaurants that were open both
periods of $902,000 or 8.3%. Management believes this increase was due to (i)
an increase in customer counts, (ii) an increase in check averages produced by a
price increase implemented in late May 1998 and (iii) the implementation of more
effective suggestive selling techniques at the restaurants.
The above-mentioned increases in revenues at the BJ's restaurants were
partially offset by a $232,000 decrease in sales at the at the BJ's restaurants
in Gresham, Oregon and The Dalles Oregon for the first six months of 1999,
compared to the same period of the prior year. A former Pietro's restaurant,
Gresham experienced a high level of sales during the second quarter of 1998
after its conversion to the BJ's format. During the second quarter of 1999 this
restaurant also was closed for two weeks to repair damage caused by a minor
fire. The Dalles, Oregon restaurant was closed at the end of May 1999.
Cost of Sales. Cost of food, beverages and paper (cost of sales) for the
restaurants increased to $5,015,000 for the six month period ended June 30, 1999
from $4,171,000 for the comparable period in 1998, an increase of $844,000 or
20.2%. Of the increase, however, $821,000 was attributable to the new stores at
Arcadia, California and Woodland Hills, California. As a percentage of revenues,
overall cost of sales decreased slightly to 27.8% during the 1999 period from
28.3% in the 1998 period. Management believes that this decrease as a percentage
of revenues indicates that efficiencies in food cost achieved at the existing
BJ's restaurants in Southern California, Hawaii, Colorado and Oregon during the
first quarter of 1999 were maintained through the second quarter of 1999.
Labor. Labor costs for the restaurants increased to $6,508,000 in the
six-month period ended June 30, 1999 from $5,293,000 for the comparable period
in 1998, an increase of $1,215,000 or 23.0%. Contributing to the increase was
the planned initial overstaffing of the Arcadia, California and Woodland Hills,
California restaurants which opened in January 1999 and April 1999,
respectively. Labor costs at these two restaurants totaled $1,107,000 from their
respective dates of opening to June 30, 1999. Despite the initial staffing
levels at the new stores, overall labor costs as a percentage of revenues
remained stable, increasing slightly to 36.1% in the 1999 period from 36.0% in
the 1998 period.
Occupancy. Occupancy costs increased to $1,460,000 during the six-month
period ended June 30, 1999 from $1,233,000 during the comparable period in 1998,
an increase of $227,000 or 18.4%. The new stores in Arcadia, California and
Woodland Hills, California accounted for $148,000 of the increase in occupancy
costs. As a percentage of revenues, occupancy costs decreased to 8.1% in the
1999 period from 8.4% in the 1998 period. The primary reasons for the decrease
in occupancy costs relative to revenues was annual lease escalations offset by
increases in comparable store sales, and higher revenues at restaurants with
lease provisions requiring rental payments based on a percentage of sales.
Operating Expenses. Operating expenses increased to $1,925,000 during the
six-month period ended June 30, 1999 from $1,740,000 during the comparable
period in 1998, an increase of $185,000 or 10.6%. However, as a percentage of
revenues, operating expenses decreased to 10.7% in the 1999 period from 11.8% in
the 1998 period. The primary reasons for the decrease in operating expenses as
a percentage of revenues were (i) the increase in same store sales, (ii) an
increased focus on operating the restaurants more efficiently and, (iii) the
implementation of improved expense monitoring systems at the BJ's restaurants in
Southern California and Oregon.
Preopening Costs. During the first quarter of 1999, the company adopted
Statement of Position 98-5 (SOP 98-5), Accounting for the Costs of Start-Up
Activities, which requires all costs of start-up activities that are not
otherwise capitalizable as long-lived assets to be expensed as incurred. The
Company previously deferred its restaurant preopening costs and amortized them
over the twelve-month period following the opening of each new restaurant. This
new accounting standard accelerates the Company's recognition of costs
associated with the opening of new restaurants. The Company wrote off $106,000
as a cumulative effect of change in accounting principle in the first quarter of
1999.
During the six-month period ended June 30, 1999 the Company incurred costs
of $322,000 related to the openings of its new restaurants in Arcadia,
California and Woodland Hills, California that, under previous accounting
standards, would have been capitalized and amortized over a 12-month period.
These costs will fluctuate from quarter to quarter, possibly significantly,
depending upon, but not limited to, the number of restaurants under development,
the size and concept of the restaurants being developed and the complexity of
the staff hiring and training process.
General and Administrative Expenses. General and administrative expenses
increased to $1,416,000 during the six-month period ended June 30, 1999 from
$1,207,000 during the comparable period in 1998, an increase of $209,000 or
17.3%. As a percentage of revenues, general and administrative expenses
decreased to 7.8% in 1999 from 8.2% during the comparable period of 1998. The
increase in general and administrative expenses in total was primarily due to
increases in overhead in anticipation of future expansion. The decrease in
general and administrative expenses as a percentage of revenues reflects the
increase in revenues for the period.
Depreciation and Amortization. Depreciation and amortization decreased to
$744,000 during the six-month period ended June 30, 1999 from $923,000 during
the comparable period in 1998, a decrease of $179,000 or 19.4%. The decrease was
primarily due to the change in accounting principle from the deferral and
amortization of preopening costs to the expensing of those costs as incurred.
Preopening costs amortized during the six-month period ending June 30, 1998
totaled $230,000. This factor was partially offset by the increase in
depreciation relating to the opening of the Arcadia, California restaurant in
January 1999 and the Woodland Hills, California restaurant in April 1999.
Interest Expense. Interest expense, net of interest income, increased to
$123,000 during the six-month period ended June 30, 1999 from $108,000 during
the comparable period in 1998, an increase of $15,000 or 13.9%. The increase
was primarily due to new equipment financing obtained for the development of the
Arcadia, California and Woodland Hills, California restaurants.
Income Tax Expense. At the end of 1998, the Company had federal and
California net operating loss carryovers of approximately $4,770,000 and
$1,636,000, respectively. While the net operating loss carryovers should be
adequate to offset any regular taxable income for 1999, a provision was made
during the second quarter of 1999 for estimated alternative minimum tax expense.
The provision for minimum federal and state taxes made at June 30, 1999 will be
evaluated quarterly.
LIQUIDITY AND CAPITAL RESOURCES
On January 15, 1999, the Company completed a financing agreement with a
lender to provide equipment financing up to $1,000,000 for equipment and
furnishings required in the Arcadia, Woodland Hills and other restaurant
developments. The note has a term of eighty-four months, and the interest rate
is fixed at the time of funding; to date funds provided for equipment financing
under this facility have been at effective interest rates ranging from 11.63% to
13.68%. At June 30, 1999, $671,000 was outstanding under this financing
agreement, and $300,000 remains available to the Company for future equipment
financing.
On March 1, 1999, the Company completed the sale of Company Common Stock to
ASSI, Inc. The Company issued 1,250,000 common shares to the shareholder in
exchange for a cash payment of $1,000,000, the cancellation of 3,200,000 of the
Company's Redeemable Warrants and other consideration. See Notes to Unaudited
Consolidated Financial Statements.
The Company's operating activities, as detailed in the Unaudited
Consolidated Statement of Cash Flows, provided $1,511,000 net cash during the
six-month period ending June 30, 1999, a $381,000, or 33.7%, increase over the
$1,130,000 generated in the comparable period of 1998. The Company used
$2,250,000 to acquire equipment and facilities during the six-month period
ending June 30, 1999, compared to the $796,000 used for this purpose during the
comparable period of 1998, an increase of $1,454,000, or 182.7%. These
expenditures were required to develop the two new California restaurants. An
additional $381,000 was used during the first two quarters of 1999 for the
repayment of debt and capital lease payments, compared to $424,000 used for that
purpose in the comparable periods of 1998.
Cash and cash equivalents during the first six months of 1999 increased to
$2,120,000, an increase of $629,000 from the amount at December 31, 1998, the
Company's 1998 fiscal year end. This increase, after the acquisition and
financing of equipment and facilities, was primarily due to the sale of the
Company's Common Stock to an existing shareholder, as mentioned above and
discussed later in this filing. The Company currently intends to utilize cash
and cash equivalents primarily for the development of additional restaurants, as
well as for working capital purposes. Management believes that cash and cash
equivalents available at June 30, 1999 and future operating cash flow will be
sufficient for the Company to fund its operations and continue to meet its
business plan over the next year. However, no assurance can be given that
management can successfully implement such objectives. Further, there can be no
assurance that future events, including problems, delays, additional expenses
and difficulties encountered in expansion and conversion of restaurants, will
not require additional financing, or that such financing will be available if
necessary.
IMPACT OF INFLATION
Impact of inflation on food, labor and occupancy costs can significantly
affect the Company's operations. Many of the Company's employees are paid
hourly rates related to the federal minimum wage, which has been increased
numerous times and remains subject to future increases.
SEASONALITY AND ADVERSE WEATHER
The Company's results of operations have historically been impacted by
seasonality, which directly impacts tourism at the Company's coastal locations.
The summer months (June through August) have traditionally been higher volume
periods than other periods of the year.
YEAR 2000 COMPLIANCE
The Company has completed a review of its computerized information systems
to identify the systems and applications that could be affected by Year 2000
issues. The Company primarily utilizes software and hardware offered by major
developers, and periodically purchases upgrades directly from those developers
or authorized resellers. The Company's policy since the beginning of 1998 is to
seek and purchase upgrades that include from the developer a Year 2000
compliance warranty. To date, the Company has spent approximately $30,000 in
upgrading its essential software and hardware.
As part of their support program, the vendor/developer of the Company's
point of sale system recently provided an upgrade to assist the Company in
making its POS system Year 2000 compliant. This upgrade has recently been
installed in our restaurants, and management is assessing the system's ability
to handle Year 2000 transactions. Management feels that its main data processing
systems are either now or very close to being Year 2000 compliant, and that any
additional expenditures will not be significant.
The Company's non-IT systems consist primarily of our telephone switching
equipment and restaurant operating equipment. We have upgraded our telephone
switching equipment where necessary. Our initial assessment of our restaurant
operating equipment has indicated that modification or replacement will not be
necessary as a result of the Year 2000 issue. Therefore we are not currently
remediating this operating equipment. However, the existence of non-compliant
embedded technology in this type of equipment is, by nature, more difficult to
identify and repair than in computer hardware and software.
The Company also plans to contact its major product vendors and request
statements as to their preparedness for the potential impact of Year 2000
issues. Their responses will be evaluated, and, based on the information
provided, decisions will be made as to their ability to continue to meet the
Company's need for product into Year 2000. Alternative sources for product will
be identified in cases where the Company feels there are major questions as to
the vendor's ability to conduct its normal business due to potential Year 2000
implications.
The Company has determined that the readiness of its customers is not
within its control even though the ability of its customers to purchase its
products may be affected by third parties (financial institutions). The Company
is not investigating this issue, and the impact is highly uncertain.
Despite our Year 2000 remediation, testing efforts and contingency
planning, there may be disruptions and unexpected business problems caused by IT
systems, non-IT systems or third party vendors during the early months of the
year 2000. The Company is making diligent efforts to assess the Year 2000
readiness of our significant business partners and will develop contingency
plans for critical areas where we believe our exposure to Year 2000 risk is the
greatest. However, despite our best efforts, we may encounter unanticipated
third party failures or a failure to have successfully concluded our systems
remediation efforts. Any of these unforeseen events could have a material
adverse impact on the Company's results of operations, financial condition or
cash flows. Additionally, any prolonged inability of a significant number of
our restaurants to operate could have a material adverse effect. The amount of
any potential losses related to these occurrences cannot be reasonably estimated
at this time.
The worst case scenario for the Company is that a significant number of our
restaurants will be unable to operate for a few days due to public
infrastructure failures and/or food supply problems. Some restaurants may have
longer-term problems lasting a few weeks. The failure of restaurants to operate
would result in reduced revenues and cash flows for the Company during the
period of disruption. Loss of restaurant revenues would be partially mitigated
by reduced costs.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in commodity prices,
since many of the food products purchased by the Company are affected by
commodity pricing, and, therefore, are vulnerable to unpredictable price
fluctuations. Over the recent past, the Company has experienced price volatility
in such products as cheese and produce. The Company buys a significant portion
of its product from a distributor, and has only minimal forward purchasing
agreements with other suppliers. Extreme changes in commodity prices could
negatively affect the Company's margins in the short-term.
Longer-term changes in commodity pricing would affect most of the
restaurant industry as well the Company. The Company most likely would be able
to mitigate increased commodity prices by increasing menu prices, thereby
passing them through to consumers, and by varying its menu product mix. However,
competitive circumstances could limit menu pricing and/or mix strategies, and,
in those circumstances, commodity price fluctuations would negatively impact the
Company's margins. Management believes, however, that were such circumstances to
occur, they would not materially impact the Company's results of operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Restaurants such as those operated by the Company are subject to litigation
in the ordinary course of business, most of which the Company expects to be
covered by its general liability insurance. Punitive damages awards, however,
are not covered by the Company's general liability insurance. To date, the
Company has not paid punitive damages with respect to any claims, but there can
be no assurance that punitive damages will not be awarded with respect to any
future claims or any other actions. The Company is currently not a party to any
pending legal proceedings which it believes will have a material adverse effect
on its consolidated financial position or consolidated results of operations.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
The Company's Board of Directors at their meeting held on July 20, 1999
appointed two new directors effective on that date. Allyn R. Burroughs, Chief
Executive Officer and Chairman of the Board of Directors of American Convenience
Corporation, and Mark James, a partner with the Las Vegas, Nevada law firm of
Driggs, Walch, Santoro, Kearney, Johnston and Thompson and a Nevada state
senator, were both elected to the Company's Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the Company,
as amended incorporated by reference to the Company's
Registration Statement on Form SB-2, effective October 8, 1996
(SEC File No. 333-5182-LA), referred to herein as the
"Registration Statement".
3.2 Bylaws of the Company, as amended, incorporated by reference to
Exhibit 3.2 of Form 10-Q dated March 31, 1999.
4.1 Specimen Common Stock Certificate of the Company (incorporated
by reference to Exhibit 4.1 of the Registration Statement).
4.2 Warrant Agreement (incorporated by reference to Exhibit 4.2 of
the Registration Statement).
4.3 Specimen Common Stock Purchase Warrant (incorporated by
reference to Exhibit 4.3 of the Registration Statement).
4.4 Form of Representative's Warrant (incorporated by reference to
Exhibit 4.4. of the Registration Statement).
10.1 Employment Agreement dated June 21, 1999 between the Company and
Ernest T. Klinger, employed as President and Co-Chairman of the
Board of Directors.
10.2 Real Estate Lease, dated June 7, 1999 between Chicago Pizza &
Brewery, Inc. and Newhall Land and Farming Company for a BJ's
Pizza & Grill restaurant.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
June 30, 1999.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHICAGO PIZZA & BREWERY, INC.
(Registrant)
August 12, 1999 By: /s/ PAUL A. MOTENKO
--------------------
Paul A. Motenko
Co-Chief Executive Officer, Vice
President, Secretary and Co-Chairman
of the Board of Directors
By: /s/ JEREMIAH J. HENNESSY
-------------------------
Jeremiah J. Hennessy
Co-Chief Executive Officer and
Co-Chairman of the Board of Directors
By: /s/ ERNEST T. KLINGER
----------------------
Ernest T. Klinger
President, Chief Financial Officer
and Co-Chairman of the Board of
Directors
LADOCS\2506196 1
EMPLOYMENT AGREEMENT
---------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of June 21, 1999,
between CHICAGO PIZZA & BREWERY, INC., a California corporation (the "Company"),
and ERNEST T. KLINGER ("Executive").
The Company wishes to employ Executive, and Executive wishes to accept such
employment, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants herein contained, the
parties hereto hereby agree as follows;
1. Employment. Executive is hereby employed as the President of the
----------
Company and Co-Chairman of the Board of Directors. Executive, along with the
Chief Executive Officers of the Company, shall have supervision and control
over, and responsibility for, the operations and affairs of the Company, and
shall have such other powers and duties as may be from time to time assigned to
him by the Board of Directors of the Company (the "Board"), and Executive hereby
accepts such employment, all subject to the terms and conditions herein
contained. Executive hereby agrees that during the period of his employment
hereunder he shall devote substantially all of his business time, attention and
skills to the business and affairs of the Company and its subsidiaries.
2. Place of Performance. In connection with his employment by the
----------------------
Company, Executive shall be officed at such location as is mutually agreed upon
by the Company and Executive.
3. Compensation.
------------
(a) Base Salary. The Company shall pay to Executive, and Executive
------------
shall accept, for all services which may be rendered by him pursuant to this
Agreement, a base salary ("Base Salary") as hereinafter set forth. The Base
Salary during the first year of the term of this Agreement shall be $145,000.
At the end of the first full year of this Agreement, the Base Salary shall be
increased by an amount equal to the Base Salary then in effect multiplied by a
fraction, the numerator of which shall be the difference between (i) the
Consumer Price Index (as hereinafter defined) as of the first anniversary of the
Effective Date (as hereinafter defined) and (ii) the Consumer Price Index as of
the Effective Date, and the denominator of which shall be the Consumer Price
Index as of the Effective Date; provided, that the "fraction" set forth in this
sentence shall never be zero or less. At the end of each succeeding full year
of this Agreement, the Base Salary shall be increased in a like manner.
Any increase in Base Salary or other compensation granted by the Company,
the Board or any committee thereof shall in no way limit or reduce any other
obligation of the Company hereunder and, once established at an increased
specified rate, Executive's Base Salary hereunder shall not thereafter be
reduced. Executive's salary shall be payable in accordance with the Company's
payroll practices as from time to time in effect.
<PAGE>
-12-
LADOCS\2506196 1
For purposes of this Agreement, the "Consumer Price Index" as of any
particular date means the Consumer Price Index for Urban Wage Earners and
Clerical Workers, Los Angeles/Anaheim/ Riverside SMSA, all items, in respect of
the month immediately preceding such particular date, published by the U.S.
Department of Labor, Bureau of Labor Statistics, or if such index is no longer
published, the U.S. Department of Labor's most comprehensive official index then
in use that most nearly corresponds to the index named above.
(b) Additional Cash Compensation. The Company shall pay Executive the
-----------------------------
following compensation in addition to Executive's Base Salary upon the Company's
attainment of one or more earnings or income levels (collectively, the
"Additional Cash Compensation"). This additional compensation shall be computed
on an annual basis at the close of the Company's fiscal year and paid to
Executive within ten days of completion of the annual audit, subject to
pro-ration for the partial year 1999 as provided below.
(i) Earnings. Commencing as of the fiscal year ending December 31,
--------
1999, the Company shall pay Executive a cash bonus if the Company realizes
certain earnings before interest, amortization, depreciation and income taxes
("EBITDA"). The cash bonus shall be based upon the following schedule:
Cumulative
EBITDA Attainment Cash Bonus
------------------ -----------
$ 2,000,000 $ 25,000
$ 3,000,000 $ 35,000
$ 6,000,000 $ 80,000
$ 9,000,000 $150,000
(ii) Pre-Tax Income. Commencing as of the fiscal year ending December
---------------
31, 1999, the Company shall pay Executive a cash bonus if the Company attains
certain pre-tax income levels. For purposes hereof, "pre-tax income" means
total pre-tax income amounts as determined by the Company's independent public
accountants in accordance with Generally Accepted Accounting Principles ("GAAP")
as consistently applied. The cash bonus shall be calculated based upon the
following performance schedule:
Cumulative
Pre-Tax Income Cash Bonus
--------------- -----------
$ 2,880,000 $ 25,000
$ 5,760,000 $ 75,000
$ 11,520,000 $ 150,000
The foregoing schedule shall apply in respect of the fiscal year ending December
31, 1999. The pre-tax income attainment levels set forth in the schedule shall
be increased annually by 20 percent per annum for each subsequent year during
the term of this Agreement.
<PAGE>
(iii) Pro-ration for 1999. The bonuses for the fiscal year 1999 shall
--------------------
be pro-rated for the number of days that the Executive was an employee of the
Company in 1999 ("Work Days") by multiplying the bonus otherwise payable by a
fraction, the numerator of which is the number of work days and the denominator
of which is 365, the result of which shall be the bonus payable to Executive in
respect of fiscal year 1999.
(iv) Separate Bonus Categories. Each of the two bonus categories set
---------------------------
forth above shall be independent of each other and Executive may obtain cash
bonuses from one or more of the categories in the same fiscal year.
(c) Stock Options. On the date the Executive shall first become an
--------------
employee of the Company the Executive shall receive options to purchase 400,000
shares of the Company's Common Stock at an exercise price equal to the market
closing price on the grant date or, if it is greater, at the Fair Market Value
determined under the terms of the Company's 1996 Stock Option Plan (the "Stock
Option Plan"). Such options shall consist of both Incentive Stock Options and
Nonqualified Stock Options granted pursuant to the terms and conditions of the
Stock Option Plan as authorized by the Stock Option Committee of the Board of
Directors. The number of shares subject to exercise as Incentive Stock Options
shall be the maximum number of whole shares that can be issued as Incentive
stock Options within the limits imposed by Code Section 422(d) based on initial
vesting (exercisability) of 25% of such Incentive Stock Option grant and an
additional 25% vesting on each of the next three anniversaries of the grant
date. The difference between 400,000 shares and the aggregate number of shares
that can be granted as Incentive Stock Options (as determined above) shall be
granted as Nonqualified Stock Options that are immediately vested and
exercisable. The Company agrees that it will take such steps and actions as are
required to authorize this option grant, to amend the Stock Option Plan to
increase the authorized shares and to amend the restriction on the maximum
number of shares that may be granted to any one employee in a calendar year.
Executive acknowledges that the grant of the stock options described herein is
contingent on shareholder approval of the above described amendments to the
Stock Option Plan within 12 months of the adoption of such amendments. All
existing Nonqualified Stock Options previously granted to Executive in his role
as a Director of the Company shall survive in their current form.
(d) Automobile. In order to facilitate travel by Executive in the
----------
performance of his duties hereunder, the Company shall furnish Executive, at no
expense to him, with an automobile owned or leased by the Company; provided,
that the total cost to the Company for lease/purchase payments shall not exceed
$1,000 per month. The manufacturer and type of such automobile shall be chosen
by the Company. The Company shall reimburse Executive for all expenses of
maintaining, insuring and operating such automobile upon the presentation of
appropriate vouchers and/or receipts (to the extent that the Company does not
pay such expenses directly). At the discretion of the Board, the Company may,
in lieu of furnishing Executive with an automobile owned or leased by the
Company and paying all maintenance, insurance and operation expenses in
connection therewith, reimburse Executive for all expenses he incurs in
maintaining, insuring and operating one automobile owned or leased by Executive
upon the presentation of appropriate vouchers and/or receipts (to the extent
that the Company does not pay such expenses directly).
<PAGE>
(e) Life Insurance. During the term of his employment hereunder, the
---------------
Company shall purchase and keep in effect life insurance in the amount of
$1,000,000 on the life of the Executive; provided, that the total cost to the
Company for such insurance shall not exceed $7,500 per annum. Such life
insurance will name as beneficiaries those individuals designated by the
Executive.
(f) Expenses. During the term of his employment hereunder, Executive
--------
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by him in performing services hereunder, provided that Executive
properly accounts therefor in accordance with the Company's policy relating
thereto. Without limiting the generality of the foregoing, the parties agree
that any travel Executive undertakes in connection with the performance of his
duties hereunder shall be in business class or better, and the Company shall
reimburse Executive for such expenses.
(g) Benefit Plans. Executive shall be entitled to participate in or
--------------
receive benefits under any employee benefit plan or arrangement currently
available, or made available by the Company in the future, to its executives
and/or key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plan or arrangement. If
Executive elects not to participate in any of the health plans sponsored by the
Company, then the Company shall reimburse Executive in an amount not to exceed
$1,000 per month for costs incurred by Executive in obtaining alternative health
care coverage for Executive and his family. The Company shall not make any
changes in any employee benefit plans or arrangements in effect on the date
hereof or during the term of this Agreement in which Executive participates
(including, without limitation, any pension and retirement plan, supplemental
pension and retirement plan, savings and profit sharing plan, stock ownership
plan, stock purchase plan, stock option plan, life insurance plan, medical
insurance plan, disability plan, dental plan, health-and-accident plan or
arrangement) which would adversely affect Executive's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of the Company and does not result in a proportionately greater
reduction in the rights of or benefits to Executive as compared with any other
executive of the Company. Any payments or benefits payable to Executive
hereunder in respect of any calendar year during which Executive is employed by
the Company for less than the entire such year shall, unless otherwise provided
in the applicable plan or arrangement, be prorated in accordance with the number
of calendar days in such calendar year during which he is so employed.
(h) Vacations, Holidays and Sick Leave. Executive shall be entitled to
----------------------------------
the number of paid holidays, personal days off, vacation days and sick leave
days in each calendar year as are determined by the Company from time to time
for its senior executive officers, but not less than four weeks in any calendar
year (prorated, in any calendar year during which Executive is employed under
this Agreement for less than the entire such year, in accordance with the number
of calendar days in such calendar year during which he is so employed).
Vacation may be taken in Executive's discretion, so long as it is not
inconsistent with the reasonable business needs of the Company. Executive shall
be entitled to accrue from year to year all vacation days not taken by him.
<PAGE>
(i) Perquisites. Executive shall be entitled to continue to receive
-----------
the perquisites and fringe benefits appertaining to the office of the President
of the Company in accordance with present practice and appropriate to the
industry.
(j) Key Man Life Insurance. If so elected by the Company at its sole
------------------------
option, Executive shall cooperate with the Company to secure, for the Company, a
key man life insurance policy on the life of Executive in the amount of
$2,000,000 to $5,000,000, to be paid to the Company upon Executive's death.
(k) Base Salary Not Effected by Other Benefits. None of the benefits
--------------------------------------------
to which Executive is entitled under any of the provisions of Sections 3(b) -
3(g) hereof shall in any manner reduce or be deemed to be in lieu of the Base
Salary payable to Executive pursuant to Section 3(a) hereof.
4. Term of Employment. The employment by the Company of Executive
--------------------
pursuant hereto shall commence as of the date hereof (the "Effective Date") and,
subject to the provisions of Section 5 hereof, shall terminate March 24, 2004
(the "Termination Date"). This Agreement shall automatically be extended for
additional one year terms beyond the Termination Date (the "Extended Termination
Date") or the then current Extended Termination Date unless at least 30 calendar
days prior to the Termination Date or the then current Extended Termination
Date, Executive or the Company shall have given notice that he or it does not
wish to extend this Agreement.
5. Premature Termination. Anything in this Agreement contained to the
----------------------
contrary notwithstanding:
(a) Death. Executive's employment hereunder shall terminate forthwith
-----
upon the death of Executive.
(b) Disability. Executive's employment hereunder shall terminate, at
----------
the option of the Company, in the event that the Board makes a good faith
determination that Executive suffers from Disability (as hereinafter defined) so
as to be unable to substantially perform his duties hereunder for an aggregate
of 180 calendar days during any period of 12 consecutive months. As used in
this Agreement, the term "Disability" shall mean the material inability, in the
opinion of three-fourths of the entire membership of the Board set forth in a
resolution giving the particulars thereof, of Executive to render his
agreed-upon services to the Company due to physical and/or mental infirmity,
which opinion is concurred in by a physician or psychiatrist selected by
Executive or his duly appointed representative or guardian and reasonably
acceptable to the Company.
<PAGE>
(c) Termination for Cause. The Company may terminate Executive's
-----------------------
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate Executive's employment hereunder upon (i) the
willful and continued failure by Executive to substantially perform his duties
hereunder (other than any such failure resulting from Executive's incapacity due
to physical or mental illness) after demand for substantial performance is
delivered by the Company specifically identifying the manner in which the
Company believes Executive has not substantially performed his duties, or (ii)
the Executive being convicted of a crime constituting a felony, or (iii) the
Executive intentionally committing acts or failing to act, either of which
involves willful malfeasance with the intent to maliciously harm the business of
the Company, or (iv) the willful violation by Executive of the provisions of
Section 8 hereof provided that such violation results in material injury to the
Company. No act, or failure to act, on Executive's part shall be considered
"willful" unless intentionally done, or intentionally omitted to be done, by him
not in good faith and without reasonable belief that his action or omission was
in the best interest of the Company. Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to Executive a copy of a resolution, duly adopted by
the affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, Executive conducted, or failed to conduct, himself in a manner set
forth above in clause (i), (ii), (iii), or (iv) of this Section 5(c), and
specifying the particulars thereof in detail. Any dispute as to whether Cause
to dismiss Executive exists, shall be resolved by arbitration conducted in Los
Angeles, California in accordance with the rules of the American Arbitration
Association and by a single arbitrator reasonably acceptable to Executive and
the Company.
(d) Termination by Executive. Executive may terminate his employment
--------------------------
hereunder (i) for Good Reason (as hereinafter defined) or (ii) if his physical
or mental health becomes impaired to an extent that makes the continued
performance of his duties hereunder hazardous to his physical or mental health
or his life, provided that Executive shall have furnished the Company with a
written statement from a physician or psychiatrist selected by Executive or his
duly appointed representative or guardian and reasonably acceptable to the
Company. Until Executive terminates his employment pursuant to clause (ii) of
this Section 5(d), he shall continue to receive his full Base Salary, payable at
the time such payments are due.
(e) "Good Reason" Defined. For purposes of this Agreement, "Good
-----------------------
Reason" shall mean (i) any removal of Executive as, or any failure to re-elect
Executive as, President of the Company except in connection with termination of
Executive's employment for Disability or Cause pursuant to Sections 5(b) and
5(c) hereof; provided, however, that any removal of Executive as, or any failure
-------- -------
to re-elect Executive as, President of the Company (except in connection with
termination of Executive's employment for Disability or Cause pursuant to
Sections 5(b) and 5(c) hereof) shall not diminish or reduce the Company's
obligations to Executive under this Agreement, or (ii) a reduction of ten
percent (10%) or more in Executive's then current Base Salary, or (iii) any
failure by the Company to comply with any of is obligations to Executive
hereunder, or (iv) within 120 days following the occurrence of a Change of
Control (as hereinafter defined), or (v) the failure of the Company to obtain
the assumption of the agreement to perform this Agreement by any successor to
the Company, as provided for in Section 9 hereof.
<PAGE>
(f) "Change of Control" Defined. For purposes of this Agreement a
------------------------------
"Change of Control" shall be deemed to have occurred if there shall be
consummated (i) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the Company's common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the Company's assets (except a sale and simultaneous leaseback of the same
assets), or (iii) the Company's shareholders approve any plan or proposal for
the liquidation or dissolution of the Company, or (iv) any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) ("Person"), other than an Excluded Person (as
hereinafter defined), shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of fifteen per cent (15%) or more of the
Company's outstanding Common Stock or (v) during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's shareholders, of each new director was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who were
directors at the beginning of the period. For purposes of this Agreement, an
"Excluded Person" shall be any Person who as of the Effective Date hereof owns
beneficially over 10% of the Common Stock of the Company (or would own
beneficially over 10% of the Common Stock of the Company if all warrants or
options held by such person were currently exercisable, unless such Person after
the date hereof acquires the beneficial ownership of an additional 2% of the
Common Stock of the Company (other than pursuant to options and warrants
outstanding on the date hereof) which was not approved by at least two-thirds
(2/3) of the directors then still in office who were directors as of the
Effective Date hereof. Provided, however, in recognition that the Company has
entered into a Stock Purchase Agreement (the "Agreement"), dated February 18,
1999, among the Company, ASSI, Inc., a Nevada corporation ("ASSI"), and Louis
Habash, pursuant to which the Company has agreed to sell an aggregate of
1,250,000 shares of its Common Stock (the "Shares") to ASSI, the Executive
hereby acknowledges and agrees that ASSI shall be deemed to be an "Excluded
Person" as such term is defined in this Agreement and waives any and all rights
he may have to terminate the Agreement for "Good Cause" as defined herein which
may result from any "Change of Control" caused by the issuance of the Shares to
ASSI or the issuance or purchase of any future additional securities by ASSI or
its affiliates or any changes in the Board related thereto.
(g) Notice of Termination. Any termination of Executive's employment
-----------------------
by the Company or by Executive (other than termination pursuant to Section 5(a)
hereof) shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice Of Termination" shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
<PAGE>
(h) Date of Termination. For purposes of this Agreement, "Date of
---------------------
Termination" shall mean (i) if Executive's employment is terminated by his
death, the date of his death, (ii) if Executive's employment is terminated
pursuant to Section 5(b) hereof, 30 calendar days after Notice of Termination is
given (provided that Executive shall not have returned to the performance of his
duties on a full-time basis during such 30-day period), and (iii) if Executive's
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
6. Payments and Benefits Upon Early Termination.
-------------------------------------------------
(a) Early Termination for Death or Disability. Upon the termination of
-----------------------------------------
this Agreement prior to the Termination Date (or, if this Agreement shall have
been extended to the Extended Termination Date, as provided in Section 4 hereof,
prior to the Extended Termination Date) (X) by the Company as a result of death
or Disability or (Y) by Executive for any of the reasons set forth in clause
(ii) of Section 5(d) hereof, the Company shall pay Executive:
(i) his Base Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, payable at the time such
payments are due;
(ii) any and all Additional Cash Compensation which would have been
earned by Executive during the year of the Date of termination pro rated in
accordance with the number of calendar days during which Executive is employed
in such calendar year; and
(iii) all other amounts to which Executive is entitled, including,
without limitation, expense reimbursement amounts or amounts due under any
benefit plan of the Company accrued to the Date of Termination, at the time such
payments are due.
(b) Early Termination Other than for Death or Disability. Upon the
--------------------------------------------------------
termination of this Agreement prior to the Termination Date (or, if this
Agreement shall have been extended to the Extended Termination Date, as provided
in Section 4 hereof, prior to the Extended Termination Date) (X) by the Company
other than for death or Disability or Cause or (Y) by Executive for Good Reason,
the Company shall pay to Executive:
(i) his Base Salary through the Termination Date at the rate in effect
at the time Notice of Termination is given, payable at the time such payments
are due (or, if this Agreement shall have been extended to the Extended
Termination Date, as provided in Section 4 hereof, his Base Salary through the
Extended Termination Date at the rate in effect at the time Notice of
Termination is given, payable at the time such payments are due);
(ii) any and all Additional Cash Compensation which Executive would
have received each year through the Termination Date or Extended Termination
Date if the Agreement has been extended pursuant to Section 4 hereof, had
Executive not been terminated. Such Additional Cash Compensation shall be
payable at the time such payments would have been due; and
<PAGE>
(iii) all other amounts to which Executive is entitled, including,
without limitation, expense reimbursement amounts or amounts due under any
benefit plan of the Company accrued to the Date of Termination, at the time such
payments are due.
In addition, for the 36-month period after termination for any of the
reasons specified in this Section 6(b), the Company shall arrange to provide
Executive with life and health insurance benefits substantially similar to those
which Executive was receiving immediately prior to the Notice of Termination.
(c) Payment of Damages. Upon the early termination of this Agreement
--------------------
pursuant to Section 6(b) hereof, the Company shall pay all other damages to
which Executive may be entitled as a result of the Company's termination of his
employment under this Agreement, including damages for any and all loss of
benefits to Executive under the Company's employee benefit plans which he would
have received if the Company had not breached this Agreement and had his
employment continued for the full term provided in Section 4 hereof, and
including all legal fees and expenses incurred by him in contesting or disputing
any such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement.
(d) Mitigation Not Required. Executive shall not be required to
-------------------------
mitigate the amount of any payment provided for in this Section 6 by seeking
other employment or otherwise. However, the amount of any payment provided for
in this Section 6 shall be reduced by any compensation earned by Executive as
the result of employment by another employer engaged in the restaurant business
after the Date of Termination, or otherwise.
7. Registration Rights.
--------------------
(a) At the request of Executive made at any time subsequent to a Date
of Termination pursuant to Sections 5(b) or 5 (d) hereof, the Company, on not
more than two occasions, will, as promptly as practicable (and in any event no
later than 120 days following the Executive's request): (i) prepare and file
under the Securities Act of 1933, as amended ("Securities Act"), using its
year-end financial statements for the preceding year, a registration statement
relating to all of the common stock of the Company held by or issuable to
Executive pursuant to any option or other agreement between the Company and
Executive (collectively, the "Registrable Securities"); and (ii) prepare and
file with the appropriate Blue Sky authorities the necessary documents to
register or qualify such Registrable Securities. Notwithstanding the foregoing,
Executive shall not be entitled to exercise his rights under this Section 7(a)
for a period of one year following the initial public offering of common stock
of the Company without the consent of the lead underwriter in the initial pubic
offering.
(b) As a condition for the inclusion of any Registrable Securities in
any registration statement pursuant to this Paragraph 7, at the request of the
Company, Executive shall enter into an underwriting agreement with the Company
and the underwriters with respect to the registration of the Registrable
Securities, in such form as may be reasonably agreed upon by the Company and
such underwriters, as long as such agreement is consistent with those then in
use by major underwriters and with the provisions hereof.
<PAGE>
(c) The Company shall pay all registration expenses relating to any
registration of Registrable Securities pursuant to this Paragraph 7. Executive
shall pay all brokerage fees, underwriting fees and discounts, transfer taxes,
if any, and the fees and expenses of Executive's legal counsel in connection
with the registration and sale of the Registrable Securities.
8. Nondisclosure.
-------------
(a) Confidential Information. Executive shall not, to the detriment of
------------------------
the Company, knowingly use for his own benefit or disclose or reveal to any
unauthorized person, any trade secret or other confidential information received
by Executive in the course of his employment or engagement in any capacity by
the Company which relates to the Company or to any of the businesses operated by
it, including, but not limited to, any customer lists, customer needs, price and
performance information, specifications, hardware, software, devices, supply
sources and characteristics, business opportunities, marketing, promotional,
pricing and financing techniques, or other information relating to the business
of the Company, and Executive confirms that such information constitutes the
exclusive property of the Company. However, said restriction on confidential
information shall not apply to information which is: (i) generally available in
the industry in which the Company operates, (ii) disclosed in published
literature or (iii) obtained by Executive from a third party without binder or
secrecy. Executive agrees that, except as otherwise expressly agreed to by the
Company, he will return to the Company, promptly upon the request of the Board
or any executive officer designated by the Board, any physical embodiment of
such confidential information.
(b) Remedies. Executive recognizes that the possible restrictions on
--------
his activities which may occur as a result of his performance of his obligations
under this Section 8 are required for the reasonable protection of the Company
and its investments, and Executive expressly acknowledges that damages alone
will be an inadequate remedy for any breach or violation of this Section 8, and
that the Company, in addition to all other remedies at law or in equity, shall
be entitled, as a matter of right, to injunctive relief, including specific
performance, with respect to any such breach or violation, in any court of
competent jurisdiction.
(c) Nonexclusivity. The undertakings of Executive contained in
--------------
Sections 8(a) and 8(b) hereof shall be in addition to, and not in lieu of, any
obligations which he may have with respect to the subject matter hereof, whether
by contract, as a matter of law or otherwise.
9. Successors; Benefits.
---------------------
<PAGE>
(a) Successors. The Company shall require any successor (whether
----------
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
9 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
(b) Benefits. This Agreement and all rights of Executive hereunder
--------
shall inure to the benefit of and be enforceable by Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any amounts
would still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's devisee, legatee, or other designee or,
if there be no such designee, to Executive's estate.
10. Miscellaneous Provisions.
-------------------------
(a) Execution in Counterparts. This Agreement may be executed in one
---------------------------
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
(b) Notices. Unless applicable law requires a different method of
-------
giving notice, any and all notices, demands or other communications required or
desired to be given hereunder by either party shall be in writing. Assuming
that the contents of a notice meet the requirements of the specific paragraph of
this Agreement which mandates the giving of that notice, a notice shall be
validly given or made to another party if served either personally or if
deposited in the United States mail, certified or registered, postage prepaid,
or if transmitted by telegraph, telecopy or other electronic written
transmission device or if sent by overnight courier service, and if addressed to
the applicable party as set forth below. If such notice, demand or other
communication is served personally, service shall be con-clusively deemed made
at the time of such personal service. If such notice, demand or other
communication is given by mail, ser-vice shall be conclusively deemed made
seventy-two (72) hours after the deposit thereof in the United States mail. If
such notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclu-sively deemed made at the time
of confirmation of delivery. The addresses for the parties are as follows:
If to the Company, to:
Chicago Pizza & Brewery, Inc.
26131 Marguerite Parkway
Suite A
Mission Viejo, CA 92692
Attention: Paul A. Motenko
<PAGE>
with a copy to: Jeffer, Mangels, Butler & Marmaro
2121 Avenue of the Stars
10th Floor
Los Angeles, CA 90067
Attention: Steven J. Insel, Esq.
If to Executive, to:
Ernest T. Klinger
39 Nuvola Court
Rancho Palos Verdes,
California 90275
or to such other address as either party hereto shall have designated by like
notice to the other party hereto (except that a notice of change of address
shall only be effective upon receipt).
(c) Amendment. This Agreement may only be amended by a written
---------
instrument executed by each of the parties hereto.
(d) Entire Agreement. This Agreement constitutes the entire agreement
-----------------
of the parties hereto with respect to the subject matter hereof, and supersedes
all prior agreements and understandings of the parties hereto, oral and written,
with respect to the subject matter hereof
(e) Applicable Law. This Agreement shall be governed by the laws of
---------------
the State of California applicable to contracts made and to be wholly performed
therein.
(f) Headings. The headings contained herein are for the sole purpose
--------
of convenience of reference and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
(g) No Waiver. The failure of either of the parties hereto to at any
----------
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Agreement or any provision hereof or the right of either of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach of any of the provisions of this Agreement shall be
effective unless set forth in a written instrument executed by the party against
whom or which enforcement of such waiver is sought; and no waiver of any such
breach shall be construed or deemed to be a waiver of any other or subsequent
breach.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
COMPANY:
CHICAGO PIZZA & BREWERY, INC.
By:_______________________________
Paul A. Motenko
Chief Executive Officer
EXECUTIVE:
__________________________________
Ernest T. Klinger
Doc No 32608 Ver.6 MRR
06/25/99
CENTER: TOWN CENTER DRIVE JMB 301 7/92
-------------------
TENANT: CHICAGO PIZZA & BREWERY, INC.
---------------------------------
SPACE: [TO BE ASSIGNED]
------------------
DATE:
TRADE NAME: B.J.'s Restaurant and Brewhouse
----------------------------------
SHOPPING CENTER LEASE
Page
----
Article 1 Basic Provisions 1
Article 2 Premises, Term and Commencement Date 3
Article 3 Minimum Rent and Percentage Rent 3
Article 4 Payment of Rent, Rent Taxes and Prorations 4
Article 5 Taxes and Center Expenses 5
Article 6 Condition of Premises; Opening for Business 6
Article 7 Trade Fixtures, Alterations and Liens 6
Article 8 Use and Operating Requirements 7
Article 9 Promotion of Center and Tenant's Business 8
Article 10 Utilities 9
Article 11 Maintenance and Repair of Premises 10
Article 12 Common Areas 11
Article 13 Insurance, Subrogation, and Waiver of Claims 12
Article 14 Casualty Damage 12
Article 15 Condemnation 13
Article 16 Return of Possession 13
Article 17 Holding Over 14
Article 18 Subordination, Attornment and Mortgagee Protection 14
Article 19 Estoppel Certificate 14
Article 20 Assignment and Subletting 15
Article 21 Rights Reserved by Landlord 16
Article 22 Landlord's Remedies 17
Article 23 Landlord's Right to Cure 20
Article 24 Indemnification 20
Article 25 Safety and Security Devices, Services and Programs 20
Article 26 Hazardous Materials 20
Article 27 Captions and Severability 21
Article 28 Definitions 21
Article 29 Rules 24
Article 30 No Waiver 24
Article 31 Attorneys' Fees, Counterclaims, Venue and Jury Trial 25
Article 32 Personal Property Taxes 25
Article 33 Conveyance by Landlord and Liability 25
Article 34 Notices 25
Article 35 Real Estate Brokers 26
Article 36 Security Deposit and Landlord's Lien 26
Article 37 Miscellaneous 26
Article 38 Offer 27
Article 39 Americans With Disabilities Act 27
Article 40 Entire Agreement 28
Rider One: Rules
Rider Two: California Rider
Rider Three: Town Center Drive Rider
Rider Four: Construction Allowance
Exhibit A: The Premises
Exhibit A-1: Town Center Drive
Exhibit A-2: The Patio Area
Exhibit A-3: Storefront Area
Exhibit B: Work Letter Agreement
Exhibit C: Sign Criteria
Exhibit D: Menu
TEXT BOX OPTION CODE ABOVE COMMENT BOX -- DO NOT DELETE!!!
<PAGE>
Doc No 32608 Ver.6 MRR
06/25/99
1
1
SHOPPING CENTER LEASE
THIS LEASE made as of the ____ day of ______________, 19__, between NEWHALL
LAND AND FARMING COMPANY (A CALIFORNIA LIMITED PARTNERSHIP) ("Landlord"), a
California limited partnership, having a place of business at 900 North Michigan
Avenue, Chicago, Illinois 60611-1957 and CHICAGO PIZZA & BREWERY, INC.
("Tenant"), a California corporation whose principal place of business is
located at 26131 Marguerite Parkway, Suite A, Mission Viejo, California 92692,
Attn: Paul Motenko.
ARTICLE 1
BASIC PROVISIONS
A. TENANT'S TRADE NAME: B.J.'s Restaurant and Brewhouse
----------------------------------
B. CENTER: Town Center Drive (as shown crosshatched on Exhibit A-1
-------------------------------------------------------------
hereto)
-------
ADDRESS: 24201 Valencia Boulevard
--------------------------
Valencia, California 91355
----------------------------
C. PREMISES: Space No. [To Be Assigned] at the Center,
------------------
consisting of approximately 7,000 rentable square feet plus approximately
-----
1,000 rentable square feet of Patio Area, the approximate location of which
is shown cross-hatched on Exhibit A hereto
(See Page 1A)
D. COMMENCEMENT DATE: See Page 1A
--------------
E. EXPIRATION DATE: January 31, 2009 (See Page 1A)
------------------------------------
F. PERMITTED USE: The operation of a first-class restaurant and
----------------------------------------------------
brewhouse serving those classes of items (e.g., "Appetizers," "Specialty
- --------------------------------------------------------------------------------
Salads," etc.) identified on the Menu, attached hereto and made a part hereof as
- ---------------------------------------------------------------- ------------
Exhibit D, and such other items of food and beverage as are sold by Tenant in
- --------------------------------------------------------------------------------
substantially all other restaurant and brewhouse operations operated by Tenant
- --------------------------------------------------------------------------------
under the "B.J.'s Restaurant and Brewhouse" tradename
- ------------------- --------------------------------------
, AND FOR NO OTHER PURPOSE WHATSOEVER. The Premises shall
have and maintain throughout the Term the appearance of a brewery.
G. MINIMUM RENT: (See Article 1C) (See Page 1B)
Period Monthly Amount Annual Amount
------ --------------- --------------
Commencement Date Through the 60th
full calendar month
of the term $14,000.00 $168,000.00
--------- -----------
The 61st full Through Expiration
calendar month of Date
the term $16,100.00 $193,200.00
---------- -----------
month of the Term
First Extension Period Through $18,515.00 $222,180.00
---------- -----------
Second Extension Period Through $21,292.25 $255,507.00
---------- -----------
<PAGE>
Doc No 32608 Ver.6 MRR
06/25/99
1A
1A
Article 1C.
- ------------
The patio area shown on Tenant's approved plans and specifications and indicated
on Exhibit A-2 hereto (the "Patio Area") is included in the amount of rentable
square footage of the Premises set forth in Article 1C, but is not included for
purposes of determining the Minimum Rent described in Article 1G, Percentage
Rent, Center Expense, Taxes, Promotion Fund, Media Fund and other such charges.
Additionally, for all other purposes under this Lease, including insurance and
indemnity obligations, the Patio Area shall be deemed included in the Premises.
Tenant agrees that if there is a court order or other legally binding directive
requiring the Tenant to cease using the Patio Area, Tenant shall no longer have
a right to use the Patio Area, and Tenant shall immediately cease using the
Patio Area and, at Tenant's expense, restore the Patio Area to a condition
reasonably acceptable to Landlord. Upon Tenant's restoration of the Patio Area,
Tenant's obligation to pay Minimum Rent for the Patio Area shall cease.
Article 1D.
- ------------
The Commencement Date shall be the earlier of (i) the date Tenant opens for
business or (ii) one hundred fifty (150) days after Landlord tenders possession
of the Premises to Tenant, irrespective of whether Tenant commences its Work at
the Premises at that time. Tenant understands that if Landlord tenders
possession, Tenant may not commence any Work until Tenant's plans and
specifications are approved and the other conditions in the Lease for Tenant
commencing Work are met.
Notwithstanding anything to the contrary set forth in this Lease, if by the
Commencement Date Landlord has not entered into a lease for a multi-screen and
IMAX theater complex in the Center, then Tenant shall have the right, upon
written notice to Landlord given no later than thirty (30) days after the
Commencement Date, to terminate this Lease effective as of sixty (60) days after
such notice and the obligations of Landlord and Tenant shall cease upon the
effective termination date; provided, that if Tenant commences construction of
Tenant's Initial Work in the Premises prior to the Commencement Date or prior to
the effective termination date, Tenant shall be deemed to have waived its right
to terminate this Lease as aforesaid, and any such notice of termination shall
be null and void and of no force or effect.
If by the Commencement Date a parking structure to be located behind the
Premises and adjacent to McBean Parkway is not open and accessible for parking
customers of the Center, then Tenant shall have the option (i) to not open the
Premises for business until the parking garage is open and accessible for
parking by customers of the Center, or (ii) to open in the Premises on the
Commencement Date and pay to Landlord, in lieu of Minimum Rent and Percentage
Rent, a monthly percentage rent ("Substitute Rent") in the amount of six percent
(6%) of Tenant's Gross Sales made in the Premises, until the parking garage is
open and accessible for parking by customers of the Center. Tenant shall also
pay all other Rent then due under the Lease. Substitute Rent shall be payable
in arrears on the 15th day of the following month, accompanied by Tenant's
monthly statement of Gross Sales for the previous month in accordance with
Article 3.
Article 1E.
- ------------
A. Tenant shall have two (2) options to extend the Term for two (2)
additional, successive periods of five (5) years each (the first such period
hereinafter referred to as the "First Extension Period," the second such period
hereinafter referred to as the "Second Extension Period," and each period
hereinafter sometimes referred to as the "Extension Period") upon all terms and
conditions of the Lease, except that Tenant shall have no further right to
extend the Term, and the Minimum Rent and Breakpoints, respectively, shall be
increased to the amounts set forth in Articles 1G and 1H, respectively. Each
option to extend may be exercised only by Tenant giving Landlord irrevocable and
unconditional written notice thereof no later than two hundred seventy (270)
days before the commencement of each Extension Period. Said exercise shall, at
Landlord's election, be null and void if Tenant has failed to faithfully,
diligently and consistently comply with all obligations under the Lease during
the Term, or if Tenant is in default under the Lease at the date of said notice
or at any time thereafter and prior to commencement of said Extension Period.
B. If Tenant shall fail to exercise either option herein provided in
accordance with the terms hereof, said option shall terminate and be null and
void, and if Tenant fails to exercise the first option, both the first and the
second options shall terminate and be null and void. Tenant's exercise of
either option shall not operate to cure any default by Tenant of any of the
terms or provisions in the Lease, nor to extinguish or impair any rights or
remedies of Landlord arising by virtue of such default. If the Lease or
Tenant's right to possession of the Premises shall terminate in any manner
whatsoever before Tenant shall exercise either option herein provided, or before
the commencement of either Extension Period, or if Tenant shall have assigned
the Lease or subleased all or any portion of the Premises before Tenant shall
have exercised either option herein provided (other than an assignment or
subletting permitted without Landlord's consent under this Lease), then
immediately upon such termination, sublease or assignment, the options herein
granted to extend the Term shall simultaneously terminate and become null and
void. Time is of the essence of this provision.
C. All other provisions contained in the Lease for annual or other
adjustment to charges shall remain in full force and effect during the Extension
Period.
<PAGE>
Doc No 32608 Ver.6 MRR
06/25/99
2B
2B
Article 1G.
- ------------
A. Subject to Subparagraph B. below, the first $14,000.00 of Minimum
Rent that would otherwise be due under the Lease ("Initial Abated Rent") shall
abate. Tenant shall pay Percentage Rent and all other charges during said
period. If prior to or during said period Tenant commits a default and does not
cure it within the time provided for cure, if any, the foregoing abatement shall
immediately cease and Tenant shall thereafter pay the full Minimum Rent, without
the abatement. If this Lease shall terminate prior to the scheduled Expiration
Date due to a Default by Tenant, Tenant shall reimburse Landlord the amount of
the abatement.
B. In the event that Tenant opens the Premises for business prior to
the date that is 150 days after the date Landlord tenders possession of the
Premises to Tenant, then an additional $7,000.00 of Minimum Rent that would
otherwise be due immediately after the Initial Abated Rent shall also abate.
Tenant shall pay Percentage Rent and all other charges during said period. If
prior to or during said period Tenant commits a default and does not cure it
within the time provided for cure, if any, the foregoing abatement shall
immediately cease and Tenant shall thereafter pay the full Minimum Rent, without
the abatement. If this Lease shall terminate prior to the scheduled Expiration
Date due to a Default by Tenant, Tenant shall reimburse Landlord the amount of
the abatement.
<PAGE>
<PAGE>
Doc No 32608 Ver.6 MRR
06/25/99
2
2
H. PERCENTAGE RENT:
PERIOD AMOUNT EACH LEASE YEAR
------ -------------------------
Through the 60th full
Commencement Date calendar month of the Term Six percent (6%)
----------------
of Gross Sales exceeding an unnatural Break-
point of $1,950,000.00
-------------
The 61st full calendar
month of the Term Through Expiration Date Six percent (6%)
------------------------- ----------------
of Gross Sales exceeding an unnatural Break-
point of $2,242,500.00
-------------
First Extension Period Six percent (6%)
------------------------ ----------------
of Gross Sales exceeding an unnatural Break-
point of $2,576,437.00
------------
Second Extension Period Six percent (6%)
----------------------- ----------------
of Gross Sales exceeding an unnatural Break-
point of $2,965,625.00
-------------
Prorations of Breakpoints for Partial Lease Years, and prorations for
Lease Years containing two different Breakpoints for different periods, shall be
as described in Article 3.
I. INITIAL ESTIMATED MONTHLY CENTER EXPENSES: $2,383.33
--------
J. INITIAL ESTIMATED MONTHLY TAXES: $1,354.17
--------
K. INITIAL MONTHLY PROMOTION FUND CHARGE: $666.67 (See Rider Three)
---------------------------
together with a non-recurring initial payment equal to $8,000.00 (See
Article 9A)
L. INITIAL MONTHLY MEDIA FUND CHARGE: $ (See Rider Three)
---------------------
M. OTHER INITIAL MONTHLY CHARGES: N/A
Lease Section/
Charge Amount Rider/Exhibit
------ ------ -------------
$
$
$
$
$
N. SECURITY DEPOSIT: $ N/A
-----
O. RADIUS RESTRICTION: Five (5) miles from the Center
----------
P. GUARANTOR: N/A
----
Q. RENT PAYMENT ADDRESS: Tenant shall forward all Rent, insurance
certificates and Gross Sales reports to Landlord at the following address, or
such other address or addresses as to which Landlord shall provide advance
notice:
c/o URBAN RETAIL PROPERTIES CO.
-----------------------------------
Town Center Management Office
--------------------------------
24201 Valencia Boulevard, Suite 150
---------------------------------------
Valencia, California 91355
----------------------------
R. RENT SHALL BE PAYABLE TO: Newhall Land and Farming Company (a
-----------------------------------------
California limited partnership)
------------------------
or such other entity as Landlord shall designate from time to time in
writing.
The foregoing provisions shall be interpreted and applied in accordance
with the other provisions of this Lease set forth below. The terms in this
Article, and the terms defined in Article 28, shall have the meanings specified
therefor, herein or therein, when used as capitalized terms in other provisions
of this Lease. The charges set forth in Article 1, Sections I and J are subject
to adjustment to be the actual amounts for the year in which the Commencement
Date occurs.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
3
3
ARTICLE 2
PREMISES, TERM AND COMMENCEMENT DATE
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Premises for a term ("Term") commencing on the Commencement Date and ending on
the Expiration Date set forth in Article 1, unless sooner terminated as provided
herein, subject to the provisions herein contained. The Commencement Date set
forth in Article 1 shall be advanced to such earlier date as Tenant opens the
Premises for business. If Landlord delays delivering possession of the Premises
or substantial completion of any Landlord's Work under Exhibit B, this Lease
shall not be void or voidable and Landlord shall have no liability for loss or
damage resulting therefrom. In such case, the Commencement Date shall be
postponed for a period equal to the delay, except to the extent that such delays
arise from the acts or omissions of Tenant or Tenant's employees, agents or
contractors. If the Commencement Date is advanced or postponed, the Rent and
other obligations of Tenant, and the Term and initial Lease Year hereunder,
shall all commence on the Commencement Date as advanced or postponed. However,
the Expiration Date set forth in Article 1 shall not be changed. Landlord and
Tenant shall confirm in writing any adjustment to the Commencement Date
hereunder upon written request by either party. In the event of any dispute
concerning such adjustment, Tenant shall pay Rent commencing on the Commencement
Date set forth in Article 1, subject to adjustment between the parties after
such dispute is resolved. Notwithstanding the foregoing to the contrary,
Landlord may delay delivery of the Premises and performance of any Landlord's
Work until this Lease has been mutually signed and delivered, and such delays
shall not postpone the Commencement Date set forth in Article 1 or the
commencement of Rent hereunder, except as the parties may expressly agree
otherwise in writing.
ARTICLE 3
MINIMUM RENT AND PERCENTAGE RENT
A. MINIMUM RENT. Tenant shall pay Landlord the monthly Minimum Rent
set forth in Article 1 in advance on or before the first day of each calendar
month during the Term, except that Minimum Rent for the first full and any
initial partial calendar month shall be paid when Tenant executes this Lease.
B. PERCENTAGE RENT. Tenant shall pay Landlord Percentage Rent each
Lease Year equal to the applicable percentage of the amount by which Gross Sales
exceed the applicable Breakpoint for such Lease Year set forth in Article 1.
Percentage Rent for each Lease Year shall be paid on a monthly basis commencing
with the first month in each Lease Year in which Tenant's Gross Sales for such
Lease Year exceed the applicable Breakpoint. Such payments shall be made on or
before the fifteenth (15th) day of each calendar month with respect to Gross
Sales made during each preceding month. The term "Lease Year" shall have the
meaning specified therefor in Article 28.
C. BREAKPOINT PRORATIONS. The Breakpoint for any Partial Lease Year
shall be prorated on a per diem basis. If Minimum Rent is abated or reduced for
any reason during any Lease Year, the Breakpoint for such period shall be
reduced proportionately. If two Breakpoint amounts are in effect during
different portions of a given Lease Year under Article 1, the Breakpoint for
such Lease Year shall be the weighted average of both Breakpoint amounts,
determined as follows: (a) each Breakpoint amount shall be multiplied by the
number of days during which it is in effect, and then divided by 365, and (b)
the amounts so computed shall be added to obtain the weighted average Breakpoint
for such Lease Year.
The first time after the third (3rd) full Lease Year of the Term
D. ADJUSTMENTS. If the Center is expanded during the Term by the
== ============
addition of one or more Majors, the Minimum Rent and the Breakpoint, including
each subsequent level thereof if either is scheduled to increase during the Term
under Article 1, shall be increased by five percent (5%) as of the date
such additional Major opens for business.
E. GROSS SALES RECORDS. Tenant shall ensure that the business of
Tenant and of any subtenant, licensee or concessionaire in, at or from the
Premises is operated such that the following books and records (collectively,
"Tenant's Records") are prepared, preserved and maintained in accordance with
generally accepted accounting principles: (i) daily dated sealed, continuous,
cash register tapes, (ii) serially numbered sales slips, (iii) settlement report
sheets of transactions with subtenants, concessionaires and licensees, (iv) bank
statements, (v) general ledger or summary record of all receipts and
disbursements from operations in, at or from the Premises, (vi) state and local
sales and use tax returns, and (vii) such other records that would normally be
kept pursuant to generally accepted accounting principles, or as the Landlord
may reasonably require in order to determine Gross Sales hereunder. A separate
bank account shall be maintained for all revenue from the Premises and no funds
from any other source shall be deposited in such account. Tenant shall retain
Tenant's Records at the Premises or at the home
or regional office of Tenant for at least three (3) years from the end of the
Lease Year to which they are applicable or, if any audit is required or a
controversy should arise between the parties regarding Percentage Rent, until
such audit or controversy is terminated, even though such retention period may
be after the expiration of the Term or earlier termination of this Lease.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
4
4
F. GROSS SALES STATEMENTS. Tenant shall provide Landlord with a
monthly statement of Gross Sales within fifteen (15) days after the end of each
calendar month, signed by an authorized representative, which shall show Gross
Sales and an itemization of any exclusions or deductions therefrom for such
month, as well as year-to-date amounts for the current Lease Year. If any
Percentage Rent is due for such month, the payment shall accompany such
statement. In addition to such regular monthly statements, Tenant shall provide
an annual statement within sixty (60) days after the end of each Lease Year,
which shall show the total amount of Gross Sales for such Lease Year, and shall
be certified to be true, complete and correct by an independent certified public
accountant reasonably satisfactory to Landlord, or at Tenant's option by
Tenant's chief financial officer. If such annual statement shows that Tenant
underpaid Percentage Rent for such Lease Year, Tenant shall include the
additional amount with such statement, and if such statement shows that Tenant
overpaid Percentage Rent, Landlord shall provide a credit or refund. Tenant
shall require that any subtenant, licensee or concessionaire furnish similar
statements.
G. AUDITS. Landlord may from time to time (but not more frequently
than once each calendar year), upon at least ten (10) days' notice to Tenant,
cause a complete audit or examination to be made of Tenant's Records and such
books and records of any subtenant, licensee or concessionaire for all or any
part of the three Lease Years immediately preceding such notice. During such
audit, Landlord or its authorized representatives shall have full and free
access to Tenant's Records and the right to require that Tenant, its agents and
employees furnish such information or explanation with respect to such items as
may be necessary for a proper examination and audit thereof. If such audit or
examination discloses that any of Tenant's statements of Gross Sales understates
Gross Sales made during any Lease Year by one percent (1%) or more, or if Tenant
shall have failed to furnish Landlord any monthly Gross Sales statements during
any Lease Year or shall have failed to prepare and maintain Tenant's Records as
required herein, Tenant shall pay Landlord the cost of such audit or
examination, including travel and related expenses, and any deficiency in
Percentage Rent, with interest at the Default Rate. If such audit or
examination shall disclose an understatement of more than five percent (5%),
Landlord shall also have the right to cancel this Lease by written notice given
to Tenant within six (6) months after such audit. Landlord's acceptance of
Percentage Rent shall be without prejudice to the Landlord's examination, audit
and other rights hereunder.
H. GROSS SALES DEFINED. "Gross Sales" shall mean the entire amount of
the actual sale price, whether for cash, credit or otherwise, of all sales of
goods and services and all other income and receipts whatsoever of all business
conducted at, on or from the Premises, including, without limitation: (i) mail,
telephone, facsimile and other orders received or filled at the Premises,
including but not limited to catalogue sales, (ii) deposits not refunded to
purchasers, (iii) orders taken at the Premises although filled elsewhere, (iv)
gross receipts from vending and game machines (not to be construed to authorize
vending or game machines unless specifically set forth in Article 1), (v) sale
price of gift and merchandise certificates, (vi) payments from other parties for
shelf or advertising space at or respecting the Premises, (vii) the full value
of all consideration other than money received, (viii) all other gross income or
receipts from any business or operation at, on or from the Premises, and (ix)
Gross Sales by any sublessee, concessionaire or licensee. However, Gross Sales
shall not include (but Tenant shall keep separate records therefor as part of
Tenant's Records): (a) returns to shippers or manufacturers, (b) proceeds from
the sale of used trade fixtures, (c) any cash or credit refunds made upon any
sale in or from the Premises where the merchandise is returned by the purchaser,
(d) any sales or excise tax imposed by any duly constituted governmental
authority (provided that no income or franchise tax, capital stock tax, tax
based upon gross receipts, assets or net worth, or similar tax shall be deducted
from Gross Sales), and (e) the exchange of merchandise between the stores and
warehouses of Tenant, if any, where such exchange of merchandise is made solely
for the convenient operation of the business of Tenant and not for the purpose
of consummating a sale that has theretofore been made in or from the Premises or
for the purpose of depriving Landlord of the benefit of a sale that otherwise
would be made in or from the Premises. No deduction shall be allowed for any
uncollected or uncollectible amounts or reserves therefor, nor for cost of
products or services sold, or other costs, charges or expenses of purchasing,
financing, selling, transportation, overhead or taxes except as expressly
provided herein. Trade-ins shall not reduce the sale price of the item sold for
purposes hereof. Layaway, credit and installment sales shall be included in the
month in which the goods or services are delivered or provided, or in which any
portion of the payment is received, whichever first occurs, regardless of when
or whether full payment is received.
ARTICLE 4
PAYMENT OF RENT, RENT TAXES AND PRORATIONS
A. RENT AND RENT TAXES. Minimum Rent, Percentage Rent, Taxes, Center
Expenses, Promotion Fund Charges, Media Fund Charges and any other amounts which
Tenant is or becomes obligated to pay Landlord under this Lease are sometimes
herein referred to collectively as "Rent", and all remedies applicable to the
non-payment of Rent shall be applicable thereto. Rent shall be paid without any
prior demand or notice therefor, and shall in all events be paid without any
deduction, recoupment, set-off or counterclaim, and without relief from any
valuation or appraisement laws. Tenant shall pay any rent tax, sales tax,
service tax, transfer tax, value added tax, or any other applicable tax on the
Rent, utilities or services herein or otherwise respecting this Lease or any
other document entered in connection herewith. Landlord may apply payments
received from Tenant to any obligations of Tenant then accrued, without regard
to such obligations as may be designated by Tenant.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
5
5
B. PRORATIONS. If the Term commences on a day other than the first day
of a calendar month or ends on a day other than the last day of a calendar
month, the Minimum Rent, monthly payments of estimated Taxes and Center
Expenses, Promotion Fund Charge, Media Fund Charge and any other amounts payable
on a monthly basis shall be prorated on a per diem basis for such partial
calendar months. If the Minimum Rent is scheduled to increase under Article 1
other than on the first day of a calendar month, the amount for such month shall
be prorated on a per diem basis to reflect the number of days of such month at
the then current and increased rates, respectively. If the Term commences other
than on January 1, or ends other than on December 31, Tenant's obligations to
pay amounts towards actual Taxes and Center Expenses for such first or final
calendar years shall be prorated on a per diem basis to reflect the portion of
such years included in the Term. Prorations of Breakpoints for Partial Lease
Years, and prorations for Lease Years containing two different Breakpoints for
different periods, shall be as described in Article 3.
ARTICLE 5
TAXES AND CENTER EXPENSES
A. TAXES. Tenant shall pay Landlord an amount equal to Tenant's
Proportionate Share of Taxes in the manner described below.
B. CENTER EXPENSES. Tenant shall pay Landlord an amount equal to
Tenant's Proportionate Share of Center Expenses in the manner described below.
See Page 5A
C. MANNER OF PAYMENT. Taxes and Center Expenses shall be paid in the
following manner:
(i) Landlord may reasonably estimate in advance the amounts
Tenant shall owe for Taxes and Center Expenses for any full or partial calendar
year of the Term. In such event, Tenant shall pay such estimated amounts, on a
monthly basis, on or before the first day of each calendar month, together with
Tenant's payment of Minimum Rent. Tenant shall pay initially and until further
notice by Landlord the estimated amounts set forth in Article 1. Landlord may
reasonably adjust the estimated amounts, including the initial estimated amounts
set forth in Article 1, from time to time prior to the Commencement Date and
during the Term.
(ii) Within 180 days after the end of each calendar year, or
as soon thereafter as practicable, Landlord shall provide a statement (the
"Statement") to Tenant showing: (a) the amount of actual Taxes and Center
Expenses for such calendar year, with a listing of amounts for major categories
of Center Expenses, (b) any amount paid by Tenant towards Taxes and Center
Expenses during such calendar year on an estimated basis, and (c) any revised
estimate of Tenant's obligations for Taxes and Center Expenses for the current
calendar year.
(iii) If the Statement shows that Tenant's estimated payments
were less than Tenant's actual obligations for Taxes and Center Expenses for
such year, Tenant shall pay the difference. If the Statement shows an increase
in Tenant's estimated payments for the current calendar year, Tenant shall pay
the difference between the new and former estimates for the period from January
1 of the current calendar year through the month in which the Statement is sent.
Tenant shall make such payments within ten (10) days after Landlord sends the
Statement.
(iv) If the Statement shows that Tenant's estimated payments
exceeded Tenant's actual obligations for Taxes and Center Expenses, Tenant shall
receive a credit for the difference against payments of Rent next due. If the
Term shall have expired and no further Rent shall be due, Landlord shall refund
such difference when Landlord sends the Statement.
D. TAX REFUNDS, SUPPLEMENTAL BILLINGS AND FISCAL TAX YEARS. Tax
refunds shall be deducted from Taxes in the year they are received by Landlord.
If Taxes for any period during the Term or any extension thereof shall be
increased after payment thereof by Landlord for any reason, including without
limitation error, reassessment, or supplemental billing by applicable
governmental or municipal authorities, Tenant shall pay Landlord within ten (10)
days after notice Tenant's Proportionate Share of such increased Taxes. If any
Taxes shall be paid based on assessments or bills by a governmental or municipal
authority using a fiscal year other than a calendar year, Landlord may elect
from time to time to bill Tenant and make adjustments: (i) based on such fiscal
year, or (ii) based on tax payments becoming due during the subject calendar
year without regard to such fiscal year.
E. FINALITY OF STATEMENTS. Unless Tenant takes exception to any
Statement by written notice to Landlord within thirty (30) days after Landlord
provides such Statement to Tenant, such Statement shall be considered final and
binding on Tenant. Tenant acknowledges that Landlord's ability to budget and
incur expenses depends on the finality of such Statement, and accordingly agrees
that time is of the essence of this Paragraph. If Tenant takes exception
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
5A
5A
Article 5B.
- ------------
Notwithstanding anything contained in this Lease to the contrary, during the
initial Term excluding any Extension Periods, the amount Tenant is obligated to
pay on an annualized basis for Center Expenses shall not increase by more than
four percent (4%) (the "Cap Percentage") from one Lease Year to the following
Lease Year, provided, however, if for any one Lease Year to the following Lease
Year the increase is less than the Cap Percentage, then the difference may be
applied to any future increase(s) from one year to the next year such that the
cap applicable to that future year-to-year increase(s) in Center Expenses may be
higher than the Cap Percentage and, further, the amount of Center Expenses that
falls outside the Cap Percentage for a year may be included in the unused
portion of a future year's Cap Percentage.
Notwithstanding anything to the contrary set forth herein, there shall be no Cap
Percentage on increases in Taxes included in Center Expenses, any insurance
charges included in Center Expenses, or any utilities included in Center
Expenses ("Excluded Costs"), such that Tenant shall pay increases in the
Excluded Costs in accordance with the other terms of this Lease without any cap.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
6
6
to any matter contained in any Statement as provided herein, Landlord may refer
the matter to an independent certified public accountant, whose certification as
========================
to the proper amount shall be final
=========================================
or professional property management firm
and binding as between Landlord and Tenant. Tenant shall promptly pay the cost
of such certification unless such certification determines that Tenant was
overbilled by more than 2%. Pending resolution of any such exceptions, Tenant
shall continue paying Tenant's Proportionate Share of Taxes and Center Expenses
in the amounts determined by Landlord, subject to adjustment between the parties
after any such exceptions are resolved.
F. GENERAL MATTERS. So long as Tenant's obligations hereunder are not
materially adversely affected thereby, Landlord reserves the right to reasonably
change, from time to time, the manner or timing of the foregoing payments.
Although this Lease contemplates the computation of Taxes and Center Expenses on
a cash basis, Landlord may make reasonable and appropriate accrual adjustments
and Landlord reserves the right to change to a full accrual system of
accounting. In lieu of providing one Statement covering Taxes and Center
Expenses, Landlord may provide separate statements at the same or different
times. No delay by Landlord in providing the Statement (or separate statements)
shall be deemed a default by Landlord or a waiver of Landlord's right to require
payment of Tenant's obligations for actual or estimated Taxes or Center
Expenses.
ARTICLE 6
CONDITION OF PREMISES; OPENING FOR BUSINESS
Tenant agrees to accept the Premises, Center, and any Systems and Equipment
serving the Premises "as is," without any agreements, representations,
understandings or obligations on the part of Landlord to perform any
alterations, repairs or improvements except as may be
set forth on Page 6A or
expressly provided in Exhibit B hereto or elsewhere in this Lease
===============================================
("Landlord's Work"). Tenant
=== =======
set forth on Page 6A or
expressly provided in Exhibit B hereto or elsewhere in this Lease
===============================================
("Landlord's Work"). Tenant
=== =======
See Page 6A
shall on or before the Commencement Date: (i) completely remodel the
Premises and install a new
storefronts on two exterior facades of the Premises, one facing the Patio Area
and one which will contain the main entrance into the Premises
storefront, storefront sign and trade fixtures in and for the same in
==========
accordance with the other provisions of this Lease, including, without
limitation, Article 7, Exhibits B and C and the Rules ("Tenant's Initial Work"),
and (ii) open the Premises for business to the public, fully stocked and staffed
and in compliance with all provisions of this Lease, including, without
limitation, Article 8. Landlord may require that Tenant accept possession of the
Premises and proceed with Tenant's Initial Work and/or the preparation and
submission of plans therefor prior to the Commencement Date upon ten (10) days'
advance notice. During any period that Tenant shall be permitted or
=============================================================
The Premises shall have and maintain through-out the Term the appearance of a
brewery.
required to enter the Premises prior to the Commencement Date (to plan or
perform Tenant's Initial Work), Tenant shall comply with all terms and
provisions of this Lease, except those provisions requiring the payment of Rent
(other than such charges as Landlord may impose under Article 7 or Exhibit B).
The parties agree that Tenant's obligations under this Article go to the essence
of the parties' agreement hereunder, and that any failure to perform such
obligations will result in damages to Landlord that are extremely difficult and
impractical to determine and for which Landlord's remedies at law will not be
adequate. Accordingly, as a fair and reasonable estimate
subject to Article 28R
and liquidation of Landlord's damages and not a penalty, if Tenant fails to
========================================================
complete Tenant's Initial Work and open the Premises for business in the manner
required herein by the
tenth (10th) day after the
Commencement Date, Tenant shall pay Landlord as additional Rent an amount
===========================================================================
equal to 20% of the Minimum Rent then in effect prorated on a per diem basis
========
until Tenant completes Tenant's Initial Work and so opens for business.
==
Acceptance by Landlord of such liquidated damages shall not be deemed permission
==
for Tenant to continue such violation, and shall not preclude Landlord from
seeking any other remedy (other than damages) for such violation including,
without limitation, specific performance or termination of this Lease or
Tenant's right to possession as described in Article 22.
ARTICLE 7
TRADE FIXTURES, ALTERATIONS AND LIENS
A. APPROVAL. Tenant shall not attach any fixtures, equipment or other
items to the Premises or make any additions, changes, alterations or
improvements to the Premises or the Systems and Equipment serving the Premises,
including without limitation Tenant's Initial Work described in Article 6 and
Exhibit B hereto (all such work referred to collectively herein as the "Work"),
without the prior written consent of Landlord. Landlord shall not unreasonably
withhold consent, except that Landlord reserves the right to withhold consent in
Landlord's sole discretion for Tenant's Initial Work, and Work affecting the
structure, safety or security of the Center or Premises, the Systems and
Equipment, or the appearance of the Premises from any Common Areas.
B. CONDITIONS. Landlord reserves the right to impose requirements as a
condition of such consent or otherwise in connection with the Work, including
without limitation, requirements that Tenant: (i) submit for Landlord's prior
written approval detailed plans and specifications prepared by licensed and
competent architects and engineers, (ii) submit for Landlord's prior written
approval the names, addresses and background information concerning all
contractors, subcontractors and suppliers, (iii) obtain and post permits, bonds,
and additional insurance, (iv)
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
6A
6A
Article 6.
- -----------
In addition to the Landlord's Work (and notwithstanding anything to
the contrary with respect to Tenant's Work and Landlord's Work) set forth in
Exhibit B, Landlord shall provide the following to the Premises prior to
delivering the Premises to Tenant, at Landlord's cost and expense:
1. Frame. The structural frame of the building shall be
------
complete (excluding pouring, grading, finishing and fireproofing the slab to
make it ready for floor coverings, which work shall be performed by Tenant).
2. Building Envelope. The building envelope shall be
-------------------
complete, including all exterior walls of the two (2) exterior facades described
in paragraph 4 below, windows in the two (2) exterior facades described in
paragraph 4 below, flashing, fire safing, thermal insulation, and roofing.
3. Heating, Ventilation, and Air Conditioning. A packaged
---------------------------------------------
rooftop unit, sized by Landlord's engineer (currently estimated to be
approximately 40-45 tons), with direct downshot, but Tenant shall supply and
install the duct work.
4. Exterior Facades. The two (2) exterior facades of the
-----------------
Premises, one (1) facing McBean Parkway and one (1) facing Town Center Drive,
will be constructed in accordance with the Working Drawings approved by
Landlord.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
7
7
submit contractor, subcontractor and supplier lien waivers, (v) use union labor,
=
and (vi) comply
=================
(if required by Law or required to avoid or end labor disputes, strikes or work
stoppages)
reasonable
with such other requirements as Landlord may impose concerning the manner and
=================
times in which such Work shall be done and other aspects of the Work. Landlord
==
may require that all Work be performed under Landlord's supervision. If
Landlord consents or supervises, or recommends any suppliers, contractors,
architects, or engineers, the same shall not be deemed a warranty as to the
adequacy of the design, workmanship or quality of materials, or compliance of
the Work with any Laws.
C. PERFORMANCE OF WORK. All Work shall be performed: (i) in a
thoroughly first class, professional and workmanlike manner, (ii) only with
materials that are new, high quality, and free of material defects, (iii)
strictly in accordance with plans and specifications approved by Landlord in
advance in writing, (iv) not to adversely affect the Systems and Equipment or
the structure of the Center, (v) diligently to completion and so as to cause the
least possible interference with other tenants and the operation of the Center,
and (vi) in compliance with all Laws and other provisions of this Lease,
including without limitation, Exhibit B and the Rules attached hereto as Rider
One. If Tenant fails to perform the Work as required herein or the materials
supplied fail to comply herewith or with the specifications approved by
Landlord, and Tenant fails to cure such
failure within 72 hours after notice by Landlord (except that notice shall
===============
not be required in emergencies), Landlord shall have the right to stop the Work
until such failure is cured (which shall not be in limitation of Landlord's
other remedies and shall not serve to abate the Rent or Tenant's other
obligations under this Lease).
D. LIENS. Tenant shall keep the Center, Premises and this Lease free
from any mechanic's, materialman's or similar liens or encumbrances, and any
claims therefor, in connection with any Work. Tenant shall give Landlord notice
at least ten (10) days prior to the commencement of any Work (or such additional
time as may be necessary under applicable Laws), to afford Landlord the
opportunity of posting and recording appropriate notices of non-responsibility.
Tenant shall remove any such claim, lien or encumbrance by bond or otherwise
within twenty (20) days after notice by Landlord. If Tenant fails to do so,
Landlord may pay the amount or take such other action as Landlord deems
necessary to remove such claim, lien or encumbrance, without being responsible
for investigating the validity thereof. The amount so paid and costs incurred
by Landlord shall be deemed additional Rent under this Lease payable upon
demand, without limitation as to other remedies available to Landlord. Nothing
contained in this Lease shall authorize Tenant to do any act which shall subject
Landlord's title to the Center or Premises to any such notices, liens or
encumbrances whether claimed by operation of statute or other Law or express or
implied contract. Any claim to a lien or encumbrance upon the Center or Premises
arising in connection with any Work shall be null and void, or at Landlord's
option shall attach only against Tenant's interest in the Premises and shall in
all respects be subordinate to Landlord's title to the Center and Premises.
E. LANDLORD'S FEES AND COSTS. Tenant shall pay Landlord a reasonable
fee to cover
for
Landlord's overhead and out-of-pocket costs, including the cost of any
===============================================
outside engineer,
===========
structural
architect or consultant, in reviewing Tenant's plans and specifications
and performing any
if Tenant's Work will affect the structure or life safety systems of the
Premises or Center
supervision of the Work, and such fees as Landlord may reasonably impose
==========================
for utilities, trash removal, temporary barricades and other matters in
connection with the Work, or such fees therefor (if any) set forth in Exhibit B
hereto.
ARTICLE 8
USE AND OPERATING REQUIREMENTS
A. USE; COMPLIANCE WITH LAWS. Tenant shall use the Premises for the
purposes specified in Article 1 (and Tenant shall use the Premises for all the
purposes specified therein),
==
, provided that with respect to the items listed on the Menu attached as Exhibit
D, Tenant shall not be required to serve all such menu items at one time, but
instead shall be permitted to serve only a majority of such items at any one
time
, provided that with respect to the items listed on the Menu attached as Exhibit
D, Tenant shall not be required to serve all such menu items at one time, but
instead shall be permitted to serve only a majority of such items at any one
time
and for no other purpose whatsoever, subject to and in compliance with all
other provisions of this Lease, including without limitation the Rules attached
as Rider One hereto. Tenant shall comply with all Laws relating to the Premises
and Tenant's use thereof, including without limitation, Laws requiring the
Premises to be closed on Sundays or any other days or hours, health, safety and
building codes, and any permit or license requirements. Landlord makes no
representation that the Premises are suitable for Tenant's purposes.
B. REQUIRED HOURS. Tenant agrees to continuously operate and conduct
its business in one hundred percent (100%) of the Premises during the Required
Hours. "Required Hours" herein shall mean those hours established from time to
time by Landlord for the Center in general, in Landlord's sole discretion;
provided, Landlord shall not require that Tenant open for business
before 11:00 a.m. or remain open after 10:00 p.m., except: (i) for holiday,
======
seasonal or other special sales or promotions, or (ii) when at least one Major
or a majority of the tenants at the
beyond 12:00 a.m.
Center will be open. If Tenant desires to operate the Premises during
====================================================================
additional hours beyond those required by Landlord hereunder, Tenant shall first
obtain Landlord's written approval (which may be withheld in Landlord's sole
discretion), and Tenant shall pay all additional costs and expenses and
Landlord's reasonable charges in connection therewith, including, without
limitation, any additional utilities, security services, cleaning and trash
removal. Without limiting the generality of the foregoing, Landlord reserves
the right to close the Center on holidays or certain hours of holidays,
including without limitation, New Year's Day, Easter, Thanksgiving and
Christmas.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
8
8
C. REQUIRED OPERATIONS. Tenant shall conduct its business at all times
in a first-class, professional and businesslike manner consistent with reputable
business standards and practices, and such that a high reputation of the Center
is developed and enhanced. Tenant shall operate the Premises continuously,
actively and diligently in a good faith manner designed to maximize Gross Sales.
Tenant shall keep the Premises adequately staffed with well-trained personnel
for efficient first class service, and adequately stocked with new "in season"
merchandise in good condition and displayed in a professional and tasteful
manner. Tenant agrees that storage and office space in the Premises shall be
limited to that necessary for, and used in conjunction with, the business
provided in Article 1 to be conducted in the Premises. Sales and services
permitted under Article 1 shall be provided only on a retail basis to the
general public. Tenant shall not use the Premises for catalogue sales.
D. TRADE NAME AND RADIUS RESTRICTIONS. Tenant shall conduct Tenant's
business only under the trade name set forth in Article 1. Tenant and Tenant's
affiliates, owners and subsidiaries shall not directly or indirectly own,
operate, control, engage or have a financial interest in any business similar to
that authorized to be conducted hereunder (including a department or concession
in another store), or use or permit the use of the same or similar trade names,
within the area set forth in Article 1, provided, however, that nothing herein
shall prevent the operation of any of Tenant's existing stores under their
present trade names, or require that Tenant violate any Law.
E. VIOLATION OF REQUIREMENTS. The parties agree that Tenant's
obligations under this Article go to the essence of the parties' agreement
hereunder, and that any failure to perform such obligations will result in
damages to Landlord that are extremely difficult and impractical to determine
and for which Landlord's remedies at law will not be adequate. Accordingly, as
a fair and reasonable estimate and liquidation of Landlord's damages and not a
penalty, if Tenant fails to perform any obligations under this Article during
any portion of any day of the Term, Tenant
shall pay Landlord as additional Rent an amount equal to 40% of the Minimum
========================================================
Rent then in effect prorated on a per diem basis. Acceptance by Landlord of
such liquidated damages shall not be deemed permission for Tenant to continue
such violation, and shall not preclude Landlord from seeking any other remedy
(other than damages) for such violation including, without limitation, specific
performance or termination of this Lease or Tenant's right to possession as
described in Article 22.
ARTICLE 9
PROMOTION OF CENTER AND TENANT'S BUSINESS
A. PROMOTION FUND. Tenant shall pay Landlord the monthly Promotion
Fund Charge set forth in Article 1, subject to increases as described below (the
fund created by such charges and any similar charges paid by other tenants or
parties shall be referred to herein as the "Promotion Fund"). Landlord shall
use the Promotion Fund to promote, advertise and market the Center through
television, radio, newspaper or other media, or through other non-media
promotions or events. Although Landlord may appoint a committee of
representatives from one or more tenants or Majors to advise Landlord concerning
the use of the Promotion Fund, Landlord reserves the right to use the Promotion
Fund for the foregoing purposes in Landlord's sole discretion. Tenant shall
also pay a non-recurring supplemental Promotion Fund Charge equal to
the amount set forth in Article 1K. upon Tenant's execution of this Lease
B. MERCHANTS' ASSOCIATION. Landlord may, from time to time in
Landlord's sole discretion, require that Tenant participate in a merchants'
association for the Center sponsored or designated by Landlord. In such case:
(a) Tenant shall participate as an active member in such association, (b) Tenant
shall continue to pay the Promotion Fund Charge to Landlord, and such Promotion
Fund Charge shall be deemed to satisfy any obligations of Tenant to pay regular
monthly dues to such association, (c) Landlord shall turn over such Promotion
Fund Charge to the association, or at Landlord's option shall continue to use
the same or a portion thereof in conjunction with or on behalf of the
association for the purpose of promoting, advertising and marketing the Center,
and (d) Tenant shall pay any special assessments and participate in any joint
at no additional cost to Tenant
advertising or promotional events sponsored by such association, and shall
================================================================
comply with all other requirements of such association.
C. MEDIA FUND; JOINT ADVERTISING. Tenant shall pay Landlord the
monthly Media Fund Charge set forth in Article 1, subject to increases as
described below (the fund created by such charges and any similar charges paid
by other tenants or parties shall be referred to herein as the "Media Fund").
Landlord shall use the Media Fund to supplement any Promotion Fund or in order
to promote, advertise and market the Center through television, radio, newspaper
or other electronic or print media, in Landlord's sole discretion. Landlord may,
from time to time in Landlord's sole discretion and until further notice, reduce
the Media Fund Charge and in lieu thereof require that Tenant spend an amount
not exceeding such reduction on joint advertising prepared, established,
sponsored or required for the Center by Landlord (with such design and content
as Landlord shall reasonably approve in advance).
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
9
9
D. PAYMENTS, INCREASES, AND UNUSED FUNDS. Tenant shall pay the
Promotion Fund Charge and Media Fund Charge in advance on or before the first
day of each calendar month during the Term. The Promotion Fund Charge and Media
Fund Charge shall be subject to increases effective each January 1 during the
Term or at such other times as Landlord may reasonably determine. Landlord
shall determine each increase based on the percentage increase in the CPI from
the Commencement Date through the latest date for which a current index is
available prior to the scheduled increase. Notwithstanding the foregoing, in
the case of the Media Fund Charge, Landlord may use the percentage increase in
the electronic, print and outdoor advertising rates of the media utilized by
Landlord over such rates for the preceding year in the media market in which the
Center is located. In no event shall the Promotion Fund Charge or Media Fund
Charge ever be reduced, even if the CPI or advertising rates decrease for any
given period. Any amounts of the respective Funds remaining after the end of
any calendar year shall be used by Landlord in subsequent years, and Landlord
shall have no obligation to refund any unused amounts to Tenant after expiration
of this Lease or otherwise whatsoever.
E. TENANT ADVERTISING. In order to help maximize Gross Sales, Tenant
agrees to spend an amount equal to at least two percent (2%) of Tenant's Gross
Sales to advertise Tenant's business in the Premises in the market area in which
the Center is located during each Lease Year. Such amount shall be in addition
to the Promotion Fund Charge and Media Fund Charge. Tenant shall provide
Landlord with evidence of such advertising costs as Landlord shall reasonably
request from time to time. In any of Tenant's advertising and publicity programs
in the market area in which the Center is located, Tenant shall include the
Premises so as to receive at least as much publicity as other stores owned or
operated by Tenant in such market area. All references to Landlord or the Center
in such programs shall be in good taste and shall identify the Center by the
name designated by Landlord from time to time.
F. LANDLORD'S EXPENSES. Landlord shall be reimbursed out of the
Promotion Fund or by any merchants' association for all costs and expenses
incurred by Landlord in administering such Funds or in providing services to
such association, including without limitation, costs for performing or
procuring services for audits, tax filings and bookkeeping, and the
compensation, benefits and related expenses for a marketing director and staff,
rental value of space in the Center used by the same, all office equipment,
utilities and supplies, postage and travel expenses in connection therewith, and
the cost of all Center advertisements and promotional and marketing activities
and events.
ARTICLE 10
UTILITIES
A. UTILITIES PROVIDED BY TENANT. Tenant shall: (i) make application
in Tenant's own name for all utilities not provided by Landlord, (ii) comply
with all utility company regulations for such utilities, including requirements
for the installation of meters, and (iii) obtain such utilities directly from,
and pay for the same when due directly to, the applicable utility company. The
term "utilities" for purposes hereof shall include but not be limited to
electricity, gas, water, sewer, steam, fire protection, telephone and other
communication and alarm services, HVAC, and all taxes or other charges thereon.
Tenant shall install and connect all equipment and lines required to supply such
utilities to the extent not already available at or serving the Premises, or at
Landlord's option shall repair, alter or replace any such existing items (or
Tenant shall share the costs thereof for any HVAC unit or hot water heater
shared with other tenants as described in Article 11). Tenant shall maintain,
repair and replace all such items, operate the same, and keep the same in good
working order and condition, as further provided in Article 11. Tenant shall
not install any equipment or fixtures, or use the same, so as to exceed the safe
and lawful capacity of any utility equipment or lines serving the same. The
installation, alteration, replacement or connection of any utility equipment and
lines shall be subject to the requirements for alterations of the Premises set
forth in Article 7. Tenant shall ensure that all HVAC equipment is installed
and operated at all times in a manner to prevent roof leaks, damage, or noise
due to vibrations or improper installation, maintenance or operation. Tenant
shall at all times keep the Premises sufficiently heated or air-conditioned such
that heated or chilled air is not drawn to or from the Premises.
B. UTILITIES PROVIDED BY LANDLORD. Landlord reserves the right from
time to time to provide any or all utilities to the Premises. In such case,
Tenant shall pay such charges as Landlord may establish from time to time, which
Landlord may determine on a per square foot basis applicable to the square
footage of the Premises as a monthly charge, or which Landlord may determine
based on the quantity of utilities used or consumed at the Premises on a monthly
or other regular basis. Such charges shall not exceed the rates, if any, that
Landlord is permitted to charge pursuant to applicable Law. In addition, if
Landlord establishes charges based on consumption or use: (i) such charges
shall not be in excess of the rate that Tenant would be charged directly by the
utility company serving the general area in which the Center is located, (ii) if
the Premises are separately metered for such utilities, Tenant shall pay for
amounts of such utilities based on such meters, and (iii) if the Premises are
not separately metered for such utilities, Tenant shall pay for amounts of such
utilities based on the reasonable estimates of Landlord's engineer or
consultant, or at Landlord's election, shall pay Landlord's cost for installing
separate meters, and shall thereafter pay based on such meters. If no such
charges are established by Landlord, then the cost of such utilities shall be
included as part of Center Expenses. Except to the extent prohibited by
applicable Law, Landlord may also impose a reasonable administrative
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
10
10
charge to cover meter-reading and other overhead expenses. All such charges
shall be payable as additional Rent ten (10) days after billed by Landlord.
Landlord may discontinue providing any utilities then being provided by Landlord
upon ten (10) days' advance written notice to Tenant (in which case Tenant shall
obtain such utilities directly from the applicable utility company). If
Landlord supplies ventilated air or chilled or heated air or water for
air-conditioning or heating of the Premises, Landlord may nevertheless require
that Tenant at Tenant's expense maintain, repair and replace any portion of the
systems and equipment therefor exclusively serving the Premises, including
without limitation any air handling equipment, ductwork and lines.
C. INTERRUPTIONS. Landlord does not warrant that any utilities
provided by Landlord will be free from shortages, failures, variations, or
interruptions caused by repairs, maintenance, replacements, improvements,
alterations, changes of service, strikes, lockouts, labor controversies,
accidents, inability to obtain services, fuel, steam, water or supplies,
governmental requirements or requests, or other causes beyond Landlord's
reasonable control. None of the same shall be deemed an eviction or disturbance
of Tenant's use and possession of the Premises or any part thereof, or render
Landlord liable to Tenant for abatement of Rent, or relieve Tenant from
performance of Tenant's obligations under this Lease. Landlord in no event
======================
shall be liable for
==================
See Page 10A
damages by reason of such shortage, failure, variation, or interruption,
including without limitation, loss of profits, business interruption or other
incidental or consequential damages.
ARTICLE 11
MAINTENANCE AND REPAIR OF PREMISES
A. TENANT MAINTENANCE AND REPAIRS. Tenant shall keep the Premises in
good working order, repair and condition (which condition shall also be clean,
sanitary, sightly and free of pests and rodents, and which repairs shall include
necessary replacements and capital expenditures and compliance with all Laws now
or hereafter adopted), except to the extent provided to the contrary in Article
14 respecting casualty damage. Tenant's obligations hereunder shall include but
not be limited to Tenant's trade fixtures and equipment, security gates,
ceilings, walls, storefront, entrances, signs, interior decorations,
floor-coverings, wall-coverings, entry and interior doors, exterior and interior
glass, plumbing fixtures, light fixtures and bulbs, keys and locks, fire
extinguishers and fire protection systems, and equipment and lines for water,
sewer (including free flow up to the common sewer line), HVAC, electrical, gas,
steam, sprinkler and mechanical facilities, and other systems and equipment
which serve the Premises exclusively whether located within or outside the
Premises, and all alterations and improvements to the Premises whether installed
by Landlord or Tenant. Tenant shall also at Landlord's option perform or
reimburse Landlord for any repairs, maintenance and replacements to areas of the
Center outside the Premises caused as a result of moving any furniture,
fixtures, or other property to or from the Premises, or otherwise caused by
Tenant or any other occupant of the Premises, or any of their employees, agents,
invitees or contractors. Any repairs or other work by Tenant hereunder shall be
deemed "Work" under Article 7, and shall be subject to all of the requirements
thereunder, including Landlord's prior written approval. Tenant shall provide
Landlord with evidence that any Work required hereunder has been performed from
time to time within five (5) days after Landlord's request therefor.
B. HVAC MAINTENANCE. If the Premises are served exclusively by any
HVAC units or other systems or equipment, Tenant shall enter annual, written
maintenance contracts with competent, licensed contractors reasonably approved
or designated by Landlord. Such contracts shall include, and Tenant shall
require that such contractors provide: (i) inspection, cleaning and testing at
least monthly for HVAC units and semi-annually for other systems and equipment
(or more frequently if required by applicable Law or if reasonably required by
Landlord), (ii) any servicing, maintenance, repairs and replacements of filters,
belts or other items determined to be necessary or appropriate as a result of
such inspections and tests, or by the manufacturers' warranty, service manual or
technical bulletins, or otherwise required to ensure proper and efficient
operation, including emergency work, (iii) all other work as shall be reasonably
required by Tenant, Landlord or Landlord's insurance carriers, (iv) a detailed
record of all services performed, and (v) an annual service report at the end of
each calendar year (Tenant shall provide Landlord with a copy of such annual
reports promptly upon Tenant's receipt thereof). Not later than thirty (30)
days prior to the Commencement Date and annually thereafter, Tenant shall
provide Landlord with a copy of all maintenance contracts required hereunder,
and written evidence reasonably satisfactory to Landlord that the annual fees
therefor have been paid. Such maintenance contracts represent part of Tenant's
obligations under this Article, and shall not be deemed to limit Tenant's
general obligations to keep any HVAC equipment and other systems and equipment
hereunder in good working order, repair and condition as further described in
Paragraph A, above.
C. SHARED EQUIPMENT. If the Premises are served by one or more HVAC
units or other such systems or equipment that also serve one or more other
tenants, Tenant shall at Landlord's option made by Landlord from time to time in
writing either: (a) make arrangements directly with such other tenant or
tenants to reasonably share responsibility and expenses for inspection,
maintenance, repairs, operation and replacements of such items, or (b) reimburse
Landlord for Tenant's reasonable share of all costs incurred by Landlord in
making such arrangements or performing such work (such share to be based on the
ratio of the square footage of the Premises to the square footage of the areas
leased to such other tenant or tenants, or at Landlord's option such other
factors as Landlord shall deem reasonable).
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
10A
10A
Article 10C.
- -------------
Notwithstanding anything to the contrary contained in Article 10C., if, as a
result of the negligence of Landlord, its agents or employees, there is an
interruption or discontinuance in the furnishing by Landlord of any utilities to
the Premises which results in Tenant being unable to operate at the Premises,
and Tenant is closed at the Premises, for a period in excess of three (3)
consecutive full days after notice to Landlord by Tenant, the Minimum Rent
required under this Lease shall abate from the end of such period until the
earlier of the date Tenant reopens at the Premises or such time as utility
service is restored such that Tenant is again reasonably able to operate at the
Premises, except such abatement shall not apply to the extent such Rent is
reimbursable by rent (or business interruption) insurance carried by, or
required to be carried by, Tenant.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
11
11
D. LANDLORD MAINTENANCE AND REPAIRS. Landlord shall keep the roof
above, foundation, exterior walls other than storefront, common utility lines to
the point of connection for Tenant, and structural portions of the Premises in
good working order and repair (the cost of which shall be included in Center
Expenses, to the extent described in Article 28), provided that Tenant shall
give Landlord reasonable prior notice of the necessity for such repairs, and
further provided that any damage thereto shall not have been caused by any act
or omission of, or violation of this Lease by, Tenant or any other occupant of
the Premises, or any of their employees, agents, invitees or contractors, in
which event Landlord may perform or require that Tenant perform such repairs as
provided above (without limiting Landlord's other remedies therefor).
ARTICLE 12
COMMON AREAS
A. USE OF COMMON AREAS. Tenant may use the Common Areas to which, and
for the purposes for which, other tenants at the Center are given access during
the Term, subject to the following conditions:
(1) The Common Areas shall be used by Tenant and Tenant's employees and
invitees on a non-exclusive basis in common with employees and invitees of
Landlord and other tenants and parties to whom the right to use the Common Areas
has been or is hereafter granted.
(2) Tenant shall not directly or indirectly conduct business in the
Common Areas or make any use of the Common Areas which interferes in any way
with the use of the Common Areas by other parties.
(3) Tenant's use of the Common Areas shall be subject to the other
provisions of this Lease, including without limitation, the Rules attached as
Rider One hereto.
(4) Tenant's right to use the Common Areas shall terminate upon the
expiration or earlier termination of this Lease or Tenant's right to possession
of the Premises.
B. COMMON AREA MAINTENANCE AND CONTROL. Landlord shall administer,
operate, clean, maintain and repair the Common Areas, and Tenant shall pay
Tenant's Proportionate Share of Landlord's costs therefor as part of Center
Expenses. Landlord reserves the right at all times to determine the nature and
extent of all Common Areas, and shall have exclusive control and management
thereof (except to the extent that Majors or other parties own or control
portions thereof). Landlord shall have the right to close all or a portion of
the Common Areas to discourage non-customer parking or prevent a dedication
thereof to public use or otherwise prevent the acquisition of public rights in
such areas, and shall have the right to take such other actions as are further
described in Article 21. Landlord reserves the right to use, permit or deny the
use of the Common Areas for any purpose which in Landlord's sole opinion may be
in the best interests of the Center, including without limitation promotions,
events, exhibits, displays, shows and other activities.
C. INTERRUPTION OF SERVICES OR USE. Landlord does not warrant that any
services to, or any use of, the Common Areas will be free from shortages,
failures, variations, or interruptions caused by repairs, maintenance,
replacements, improvements, alterations, changes of service, strikes, lockouts,
labor controversies, accidents, inability to obtain services, fuel, steam, water
or other utilities or supplies, governmental requirements or requests, or other
causes beyond Landlord's reasonable control. None of the same shall be deemed
an eviction or disturbance of Tenant's use and possession of the Premises or any
part thereof, or render Landlord liable to Tenant for abatement of Rent, or
relieve Tenant from performance of Tenant's obligations under this Lease.
Landlord in no event shall be liable for damages by reason of such shortages,
failures, variations or interruptions, including without limitation loss of
profits, business interruption or other incidental or consequential damages.
D. DEFINITION OF COMMON AREAS. The term "Common Areas" herein means
all areas of the Center which are now or hereafter made available by Landlord
from time to time for the general use or benefit of Landlord, any Majors, other
tenants at the Center, other parties to whom the right to use the Common Areas
has been or is hereafter granted, and their employees and invitees, as such
areas currently exist and as they may be changed from time to time. The Common
Areas may, at Landlord's election, include areas in adjoining properties which
are or become available to Landlord, tenants, employees and invitees of the
Center and which are maintained with the Common Areas under any reciprocal
easement agreement, operating agreement or other such agreement now or hereafter
in effect. Without limiting the generality of the foregoing, the Common Areas
may include, as designated by Landlord from time to time, any parking areas and
structures (whether in tiers or at, above or below grade), mall enclosures and
roofs covering Center buildings, entrances, sidewalks, streets or roadways,
passageways, concourses, courts, arcades, service corridors, loading platforms
and truck docks, delivery areas, escalators and elevators, ramps, stairs,
landscaped and vacant areas, public bathrooms, information and telephone booths,
directory signs and equipment, common lighting facilities, drainage areas,
lounges and shelters, package pick-up stations, drinking fountains, public
comfort and first aid stations, public meeting rooms, auditoriums, bus stops,
taxi stands, and all furniture, decorations, fixtures, improvements, Systems and
Equipment, and other facilities, located in or serving any of the foregoing,
except to the extent reserved for use by one or more designated tenants.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
12
12
ARTICLE 13
INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS
A. REQUIRED INSURANCE. Tenant shall maintain during the Term: (i)
commercial general liability insurance, with a contractual liability endorsement
covering Tenant's indemnity obligations under this Lease, and with limits of not
less than $2,000,000 combined single limit for personal injury, bodily injury or
death, or property damage or destruction (including loss of use thereof) per
occurrence, (ii) workers' compensation insurance as required by statute, and
employer's liability insurance in the amount of at least $500,000 per
occurrence, (iii) plate glass insurance covering all plate glass in the Premises
and the storefront therefor, and (iv) "all-risk" property damage insurance
covering Tenant's inventory, personal property, business records, furniture,
floor coverings, fixtures and equipment, and all Work installed by Tenant for
damage or other loss caused by fire or other casualty or cause including, but
not limited to, vandalism and malicious mischief, theft, explosion, business
interruption, and water damage of any type, including sprinkler leakage,
bursting and stoppage of pipes. All insurance required hereunder shall be
=============================================
provided by
=======
See Page 12A
responsible insurers rated at least A and 10 in the then current edition
of Best's Insurance Guide and shall be licensed in the State in which the Center
is located. Tenant's property damage insurance shall include full replacement
cost coverage and the amount shall satisfy any coinsurance requirements under
the applicable policy. Tenant's insurance shall be primary, and any insurance
maintained by Landlord or any other additional insureds hereunder shall be
excess and noncontributory. Landlord shall have the right to reasonably
increase the amount or expand the scope of insurance to be maintained by Tenant
hereunder from time to time.
B. CERTIFICATES, SUBROGATION AND OTHER MATTERS. Tenant shall provide
Landlord with certificates evidencing the coverage required hereunder (and, with
respect to liability coverage showing Landlord and Landlord's managing agent for
the Center and others designated by Landlord as additional insureds, and with
respect to leasehold improvements showing Landlord as an additional named
insured). Tenant shall provide such certificates prior to the Commencement Date
or Tenant's possession of the Premises or construction of improvements therein
(whichever first occurs). Tenant shall provide renewal certificates to Landlord
at least thirty (30) days prior to expiration of such policies. Such
certificates shall state that the coverage may not be changed or cancelled
without at least thirty (30) days' prior written notice to Landlord. The
parties mutually hereby waive all rights and claims against each other for all
losses covered by their respective insurance policies, and waive all rights of
subrogation of their respective insurers. The parties agree that their
respective insurance policies are now, or shall be, endorsed so that such
waivers of subrogation shall not affect their respective rights to recover
thereunder.
C. WAIVER OF CLAIMS. Except for claims arising from Landlord's
intentional or grossly negligent acts that are not covered by Tenant's insurance
hereunder, Tenant waives all claims against Landlord for injury or death to
persons, damage to property or to any other interest of Tenant sustained by
Tenant or any party claiming through Tenant resulting from: (i) any occurrence
in or upon the Premises, (ii) leaking of roofs, bursting, stoppage or leaking of
water, gas, sewer or steam pipes or equipment, including sprinklers, (iii) wind,
rain, snow, ice, flooding, freezing, fire, explosion, earthquake, excessive heat
or cold, fire or other casualty, (iv) the Center, Premises, Systems or Equipment
being defective, out of repair, or failing, and (v) vandalism, malicious
mischief, theft or other acts or omissions of any other parties including
without limitation, other tenants, contractors and invitees at the Center. To
the extent that Tenant is required to or does carry insurance hereunder, Tenant
agrees that Tenant's property loss risks shall be borne by such insurance, and
Tenant agrees to look solely to and seek recovery only from its insurance
carriers in the event of such losses; for purposes hereof, any deductible amount
shall be treated as though it were recoverable under such policies.
ARTICLE 14
CASUALTY DAMAGE
A. RESTORATION BY LANDLORD. If the Premises shall be damaged by fire
or other casualty, Landlord shall use available insurance proceeds to repair the
Premises, except that Landlord shall not be required to repair or replace any of
Tenant's furniture, furnishings, fixtures or equipment, or any alterations or
improvements in excess of any Landlord's Work under Exhibit B hereto, and
Landlord's obligations shall be subject to any governmental requirements or
requirements of any Lender and such Lender's right to control, apply or withhold
such insurance proceeds. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from such damage or the repair thereof.
B. RESTORATION BY TENANT. If Landlord repairs the Premises as provided
herein, Tenant shall repair and replace Tenant's Work, all items required to be
insured by Tenant hereunder, and all other items required to restore the
Premises to the condition required under Article 11 of this Lease. Tenant shall
commence such work within ten (10) days following substantial completion by
Landlord of any repairs required by Landlord hereunder and shall proceed
diligently therewith to completion. Tenant's work hereunder shall constitute
"Work" under Article 7 and shall be subject to all of the provisions thereof.
Tenant may close the Premises for business to the extent reasonably required in
connection with such Work.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
12A
12A
Article 13A.
- -------------
Tenant shall obtain at its expense all liquor licenses, and any other licenses
and permits, required by Law or otherwise necessary for serving and selling
alcoholic beverages at the Premises and shall maintain said licenses and permits
in full force and effect for as long as Tenant serves alcoholic beverages at the
Premises. During any periods that Tenant serves or sells alcoholic beverages at
the Premises, Tenant shall, in addition to all other insurance Tenant is
required to procure under this Lease, obtain and maintain in full force "dram
shop" or liquor liability insurance coverage in an amount of at least Two
Million Dollars ($2,000,000) naming Landlord, and such other parties as Landlord
designates, as additional insureds. Said insurance shall comply with all other
insurance requirements set forth in Article 13.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
13
13
C. ABATEMENT OF RENT. Landlord shall allow Tenant a proportionate
abatement of Minimum Rent from the date of the casualty through the date that
Landlord substantially completes Landlord's repair obligations hereunder (or the
date that Landlord would have substantially completed such repairs, but for
delays by Tenant, its agents, employees, invitees, Transferees and contractors),
provided such abatement: (i) shall apply only to the extent the Premises are
untenantable for the purposes permitted under this Lease and not used by Tenant
as a result thereof, based proportionately on the square footage of the Premises
so affected and not used, and (ii) shall not apply if Tenant or any other
occupant of the Premises, or any of their employees, agents, invitees or
contractors cause the damage.
D. TERMINATION OF LEASE. Notwithstanding the foregoing to the
contrary, Landlord may elect to terminate this Lease, if the Center is
materially damaged by Tenant or any other occupant of the Premises, or any of
their agents, employees, invitees or contractors, or if the Center is damaged by
fire or other casualty or cause such that: (a) more than 25% of the Premises is
affected by the damage, (b) the damage occurs less than one year prior to the
end of the Term, (c) any Lender requires that the insurance proceeds or any
portion thereof be applied to the Mortgage debt (or terminates the ground lease,
as the case may be), or the damage is not fully covered by Landlord's insurance
policies, or (d) in Landlord's reasonable opinion, the cost of the repairs,
alterations, restoration or improvement work would exceed 25% of the replacement
value of the Center or of the portion thereof owned or ground leased by Landlord
(whether or not the Premises are affected). In any such case, Landlord may
terminate this Lease by notice to Tenant within 120 days after the date of
damage (such termination notice to include a termination date providing at least
thirty (30) days for Tenant to vacate the Premises). Tenant agrees that
Landlord's obligation to restore, and the abatement of Rent provided herein,
shall be Tenant's sole recourse in the event of such damage, and waives any
other rights Tenant may have under any applicable Law to terminate this Lease by
reason of damage to the Premises or Center.
ARTICLE 15
CONDEMNATION
If at least 25% of the rentable area of the Premises shall be taken by
power of eminent domain or condemned by a competent authority or by conveyance
in lieu thereof for public or quasi-public use ("Condemnation"), including any
temporary taking for a period of one year or longer, this Lease shall terminate
on the date possession for such use is so taken. If: (i) less than 25% of the
Premises is taken, but the taking includes a material portion of the Center or
of the portion thereof owned or ground leased by Landlord, or (ii) the taking is
temporary and will be in effect for less than one year but more than thirty (30)
days, then in either such event, Landlord may elect to terminate this Lease upon
at least thirty (30) days' prior written notice to Tenant. The parties further
agree that: (a) if this Lease is terminated, all Rent shall be apportioned as
of the date of such termination or the date of such taking, whichever shall
first occur, (b) if the taking is temporary, Rent shall be abated for the period
of the taking (but the Term shall not be extended thereby), and (c) if this
Lease is not terminated but any part of the Premises is taken, the Minimum Rent,
Breakpoint, Taxes, Center Expenses, and Promotion Fund Charge shall be
proportionately abated based on the square footage of the Premises so taken.
Landlord shall be entitled to receive the entire award or payment in connection
with such Condemnation and Tenant hereby assigns to Landlord any interest
therein for the value of Tenant's unexpired leasehold estate or any other claim
and waives any right to participate therein, except that Tenant shall have the
right to file any separate claim available to Tenant for moving expenses and any
taking of Tenant's personal
==========
leasehold improvements installed by Tenant (minus the Construction Allowance set
forth in Rider Four),
property, provided such award is separately payable to Tenant and does not
diminish the award available to Landlord or any Lender.
ARTICLE 16
RETURN OF POSSESSION
At the expiration or earlier termination of this Lease or Tenant's right of
possession, Tenant shall surrender possession of the Premises in broom-clean
condition and good repair, free of debris, and otherwise in the condition
required under Article 11, and shall ensure that all signs, vaults, safes,
shelving, showcases, mirrors, and movable trade fixtures and personal property
have been removed therefrom (subject to Article 36) and that any damage caused
thereby has been repaired. All leasehold improvements and other fixtures, such
as light fixtures and HVAC equipment, plumbing fixtures, hot water heaters, fire
suppression and sprinkler systems, wall coverings, carpeting and drapes, in or
serving the Premises, whether installed by Tenant or Landlord, shall be
Landlord's property and shall remain, all without compensation, allowance or
credit to Tenant. However, if prior to such termination or within thirty (30)
days thereafter Landlord so directs by notice, Tenant shall promptly remove such
of the foregoing items as are designated in such notice and repair any damage to
the Premises caused by such removal. If Tenant shall fail to perform any
repairs or restoration, or fail to remove any items from the Premises as
required hereunder, Landlord may do so, and Tenant shall pay Landlord the cost
thereof upon demand. All property removed from the Premises by Landlord
hereunder may be handled, discarded or stored by Landlord at Tenant's expense,
and Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. All such property shall at Landlord's option be
conclusively deemed to have been conveyed by Tenant to Landlord as if by bill of
sale without payment by Landlord. If Landlord arranges for storage of any such
property, Landlord shall have a lien against such property for costs incurred in
removing and storing the same.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
14
14
ARTICLE 17
HOLDING OVER
Tenant shall pay Landlord 200% of the amount of Rent then applicable
prorated on a per diem basis for each day Tenant shall retain possession of the
Premises or any part thereof after expiration or earlier termination of this
Lease, together with all damages sustained by Landlord on account thereof. The
foregoing provisions shall not serve as permission for Tenant to hold-over, nor
serve to extend the Term (although Tenant shall remain a tenant at sufferance,
bound to comply with all provisions of this Lease until Tenant vacates the
Premises). Landlord shall have the right, at any time after expiration or
earlier termination of this Lease or Tenant's right to possession, to reenter
and possess the Premises and remove all property and persons therefrom, and
Landlord shall have such other remedies for holdover as may be available to
Landlord under other provisions of this Lease or applicable Laws.
ARTICLE 18
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages now or hereafter
placed upon the Center, and all other encumbrances and matters of public record
applicable to the Center, including without limitation, any reciprocal easement
or operating agreements, covenants, conditions and restrictions (and Tenant
shall not act or permit the Premises to be operated in violation thereof). If
any foreclosure or power of sale proceedings are initiated by any Lender or a
deed in lieu is granted (or if any ground lease is terminated), Tenant agrees,
upon written request of any such Lender or any purchaser at such sale, to attorn
and pay Rent to such party and to execute and deliver any instruments necessary
or appropriate to evidence or effectuate such attornment. In the event of
attornment, no Lender shall be: (i) liable for any act or omission of Landlord,
or subject to any offsets or defenses which Tenant might have against Landlord
(prior to such Lender becoming Landlord under such attornment), (ii) liable for
any security deposit or bound by any
prepaid more than thirty (30) days in advance and
prepaid Rent not actually received by such Lender, or (iii) bound by any
=============
future modification of this Lease not consented to by such Lender. Any Lender
may elect to make this Lease prior to the lien of its Mortgage, and if the
Lender under any prior Mortgage shall require, this Lease shall be prior to any
subordinate Mortgage; such elections shall be effective upon written notice to
Tenant. Tenant agrees to give any Lender by certified mail, return receipt
requested, a copy of any notice of default served by Tenant upon Landlord,
provided that prior to such notice Tenant has been notified in writing (by way
of service on Tenant of a copy of an assignment of leases, or otherwise) of the
name and address of such Lender. Tenant further agrees that if Landlord shall
have failed to cure such default within the time permitted Landlord for cure
under this Lease, any such Lender whose address has been so provided to Tenant
shall have an additional period of thirty (30) days in which to cure (or such
additional time as may be required due to causes beyond such Lender's control,
including time to obtain possession of the Center by power of sale or judicial
action). The provisions of this Article shall be self-operative; however,
Tenant shall execute such documentation as Landlord or any Lender may request
from time to time in order to confirm the matters set forth in this Article in
recordable form. To the extent not expressly prohibited by Law, Tenant waives
the provisions of any Law now or hereafter adopted which may give or purport to
give Tenant any right or election to terminate or otherwise adversely affect
this Lease or Tenant's obligations hereunder if such foreclosure or power of
sale proceedings are initiated, prosecuted or completed.
ARTICLE 19
ESTOPPEL CERTIFICATE
Tenant shall from time to time, within fifteen (15) days after written
request from Landlord, execute, acknowledge and deliver a statement: (i)
certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified, is in full force and effect (or if this Lease is claimed not to
be in force and effect, specifying the ground therefor) and the dates to which
the Minimum Rent, Percentage Rent and other charges hereunder have been paid,
and the amount of any Security Deposit, (ii) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or specifying such defaults if any are claimed, and (iii) certifying such other
matters as Landlord may reasonably request, or as may be requested by Landlord's
current or prospective Lenders, insurance carriers, auditors, and prospective
purchasers. Any such statement may be relied upon by any such parties. If
Tenant shall fail to execute and return such statement within the time required
herein, Tenant shall be deemed to have agreed with the matters set forth
therein, and Landlord acting in good faith shall be authorized as Tenant's
attorney-in-fact to execute such statement on behalf of Tenant (which shall not
be in limitation of Landlord's other remedies therefor).
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
15
15
ARTICLE 20
ASSIGNMENT AND SUBLETTING
A. TRANSFERS. Tenant acknowledges that Landlord has entered this Lease
in order to obtain the unique attraction of Tenant's trade name, the unique
services and/or merchandising mix and product lines associated with Tenant's
business and the unique combination of Tenant's apparent operating expertise and
financial integrity. Tenant shall not, without the prior written consent of
Landlord, which consent may be withheld in Landlord's sole discretion: (i)
assign, mortgage, pledge, hypothecate, encumber, permit any lien to attach to,
or otherwise transfer, this Lease or any interest hereunder, by operation of law
or otherwise, (ii) sublet the Premises or any part thereof, or extend, renew or
modify any sublease, or (iii) permit the use of the Premises by any parties
other than Tenant and its employees, whether as licensee, concessionaire,
franchisee or otherwise (all of the foregoing are hereinafter referred to
collectively as "Transfers" and any party to whom any Transfer is made or sought
to be made is hereinafter referred to as a "Transferee"). Any Transfer made
without complying with this Article shall, at Landlord's option, be null, void
and of no effect (which shall not be in limitation of Landlord's other
remedies). Whether or not Landlord grants consent, Tenant shall pay $750.00
towards Landlord's review and processing expenses, as well as any reasonable
legal fees incurred by Landlord in connection therewith.
B. PROCEDURE. If Tenant shall desire Landlord's consent to any
Transfer, Tenant shall notify Landlord, which notice shall include: (a) a
reference to the Center, Premises and this Lease, (b) the name and address of
the proposed Transferee and a detailed description of the business operation
proposed to be conducted in the Premises, (c) the proposed effective date (which
shall not be less than 45 nor more than 180 days after Tenant's notice), (d) the
terms of the proposed Transfer, a copy of all documentation pertaining thereto,
and a detailed description of any alterations to the Premises required in
connection with the Transfer, (e) current financial statements of the proposed
Transferee certified by an officer, partner or owner thereof, (f) names,
addresses, periods of ownership and operation, and reasonable description of all
other businesses owned and operated by the Transferee then or within the three
(3) previous years, and (g) business and character references and any other
information to enable Landlord to determine the retail business experience,
financial responsibility, character, and reputation of the proposed Transferee,
nature of such Transferee's business, and such other information as Landlord may
reasonably require.
C. CONSENT. If Landlord consents to a Transfer: (a) the terms and
conditions of this Lease shall in no way be deemed to have been waived or
modified, including without limitation, the purposes for which the Premises
shall be used under Article 1, (b) Tenant shall remain fully liable for all
obligations under this Lease, including without limitation, those obligations
arising before and after the Transfer, and any assignee shall expressly assume
all of Tenant's obligations, (c) such consent shall not be deemed consent to any
further Transfer by either Tenant or a Transferee, and (d) Tenant shall deliver
to Landlord promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord. Any sublease hereunder shall be subordinate and subject to the
provisions of this Lease, and if this Lease shall be terminated during the term
of any sublease, Landlord shall have the right to: (i) treat such sublease as
cancelled and repossess the Premises by any lawful means, or (ii) require that
such subtenant attorn to and recognize Landlord as its landlord under any such
sublease. If Tenant shall Default hereunder, Landlord is hereby irrevocably
authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to
make all payments under or in connection with the Transfer directly to Landlord
(which Landlord shall apply towards Tenant's obligations under this Lease).
D. RECAPTURE. Notwithstanding anything to the contrary contained in
this Article, Landlord shall have the option, by giving notice to Tenant within
thirty (30) days after receipt of Tenant's notice of any proposed Transfer, to
recapture the Premises. Such recapture notice shall cancel and terminate this
Lease as of the date stated in Tenant's notice as the effective date of the
proposed Transfer, unless Tenant revokes Tenant's notice of proposed Transfer by
notice to Landlord within ten (10) days after Landlord's notice of recapture.
Except with respect to Transfers permitted without Landlord's consent under this
Lease, if
E. INCREASE IN MINIMUM RENT. If Landlord consents to a Transfer, the
== ============================
monthly Minimum Rent shall be increased on the effective date of the Transfer to
the greater of: (i) an amount equal to the average total monthly Minimum Rent
and Percentage Rent payable by Tenant during the thirty-six (36) months prior
thereto (or such shorter period as may have occurred since the Commencement
Date), or (ii) an amount equal to the Minimum Rent then in effect multiplied by
a fraction, the numerator of which is the CPI then in effect and the denominator
of which is the CPI in effect on the Commencement Date; provided, in no event
shall the Minimum Rent ever be reduced below the rate of Minimum Rent then in
effect or otherwise payable under this Lease. If the Minimum Rent is increased
hereunder, there shall be a proportionate adjustment to the Breakpoint.
F. CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer"
shall also include the following, whether accomplished directly or indirectly:
(a) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary
or by operation of law, of a majority of the partners, or a transfer of a
majority of partnership interests, in the aggregate on a cumulative basis, or
the dissolution of the partnership, and (b) if Tenant is a closely held
corporation (i.e., whose stock is not publicly held and not traded through an
exchange or over the counter), the: (i) dissolution, merger, consolidation or
other reorganization of Tenant, (ii) sale or other transfer of more than a
cumulative aggregate of 50% of the voting shares of Tenant (other than to
immediate family members by reason of gift or death) or (iii) sale, mortgage,
hypothecation or pledge of more than a cumulative aggregate of 50% of Tenant's
net assets.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
16
16
ARTICLE 21
RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein, Landlord reserves full
rights to control the Center (which rights may be exercised without subjecting
Landlord to claims for constructive eviction, abatement of Rent, damages or
other claims of any kind), including more particularly, but without limitation,
the following rights:
A. ACCESS TO PREMISES. Landlord and its authorized representatives
may: (i) inspect the Premises, (ii) exhibit the Premises to current and
prospective tenants, purchasers, lenders, insurers, governmental authorities,
and brokers, (iii) place in and upon the Premises or such other places as may be
determined by Landlord "For Rent" signs or notices if Tenant shall abandon or
vacate the Premises, or at any time during the last 120 days of the Term, (iv)
enter or permit entry to the Premises in emergencies or for any other reasonable
purpose, or for the purpose of exercising any other rights or remedies expressly
granted or reserved to Landlord under this Lease or applicable Law, or to make
any repairs, maintenance, improvements or alterations, or other work in or about
the Center, and (v) in connection therewith, erect scaffolding and temporary
barricades and take into, upon or through the Premises, materials required to
perform the same, and if reasonably required, move Tenant's leasehold
improvements, fixtures, property and equipment. However, in connection with
entering the Premises to exercise any of the foregoing rights, Landlord shall
take reasonable steps to minimize any interference with Tenant's business, and
following completion of the work, return Tenant's leasehold improvements,
fixtures, property and equipment to the original locations and condition to the
fullest extent reasonably possible.
B. RESERVED AREAS. Landlord reserves all rights to use (or grant other
parties the right to use) and Tenant shall have no right, title or interest in:
(i) the roof of the Center, (ii) exterior non-storefront portions of the
Premises (including, without limitation, demising walls and outer walls of the
area of the Center in which the Premises are located), (iii) air rights above
the Premises and rights to the land and improvements below the floor level of
the Premises, and (iv) areas within the Premises necessary for utilities,
services, safety and operation of the Center that will not materially interfere
with Tenant's use of the Premises, including the Systems and Equipment, fire
stairways, and space between the suspended ceiling of the Premises and the slab
of the floor or roof of the Center thereabove. If the Premises does not contain
a suspended ceiling, the Premises shall extend vertically to the height where,
in Landlord's reasonable opinion, a suspended ceiling would otherwise exist, and
Landlord reserves the right to install a suspended ceiling and use the area
thereabove.
C. REMEASUREMENT. Landlord reserves the right to remeasure the
Premises at any time prior to the end of the second Lease Year. All
measurements shall be made from the outside of exterior walls, shaft walls or
corridors or the center of any common walls, without deduction for columns,
stairs or other interior construction or equipment, and shall include any
basements and mezzanines in the Premises. If any remeasurement determines that
the Premises contain a different number of square feet than set forth in Article
1, the Minimum Rent, Breakpoint, Center Expenses, Taxes, Promotion Fund Charge,
Media Fund Charge, and Security Deposit shall be adjusted retroactively and
prospectively on a prorata basis to reflect the number of square feet determined
by such remeasurement. Upon either party's request, the revised square footage
shall be confirmed in an amendment to this Lease signed by both parties.
D. ACCESS TO CENTER. Landlord may prevent or restrict access to the
Center or designated portions thereof by such security procedures as Landlord
may from time to time impose on days and hours when the Center is, or portions
thereof are, closed for business to the public. Landlord reserves the right to
control, prevent access by and remove, any person whose presence in the judgment
of Landlord shall be prejudicial to the safety, character, reputation and
interests of the Center, or who in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs.
E. EMERGENCY CLOSINGS. Landlord shall have the right (but not the
obligation) to limit or prevent access to all or any portion of the Center, shut
down elevator and escalator service, activate emergency controls or procedures,
or otherwise take such action or preventive measures deemed necessary by
Landlord for the safety of tenants or other occupants of the Center or the
protection of the Center or other property located thereon or therein, in case
of fire or other casualty, riot or other civil disorder, strike or labor unrest,
public excitement or other dangerous condition, or threat thereof.
F. OTHER TENANTS. Landlord reserves the right to lease any portion of
the Center to such other tenants as Landlord, in Landlord's sole discretion,
deems appropriate, whether or not engaged in the same or similar business for
which Tenant is permitted to use the Premises under this Lease. Tenant
acknowledges that Landlord has made no representations as to the presence of any
specific tenant or number or types of tenants at the Center as of or after the
Commencement Date, hours or days that such other tenants shall or may be open
for business, or gross sales which may be achieved by Tenant or any other
tenants at the Center. A vacation or abandonment of its premises or cessation of
business in the Center by any other tenant or occupant shall not release or
excuse Tenant from Tenant's obligations under any provision of this
See Page 16A
Lease.
======
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
16A
16A
Article 21F.
- -------------
A. If (i) at any time during the first forty-eight (48) full calendar months
--
of the Term ("Competing Period") a Competing Business (defined below) shall
operate for business at the Center with Landlord's consent in a location in the
Center with a storefront along that portion of Town Center Drive which is marked
"Storefront Area" on Exhibit A-3, and such Competing Business shall continue to
operate during the Competing Period after thirty (30) days notice from Tenant to
Landlord, and (ii) if Tenant's Gross Sales for the first six (6) months of the
Competing Period ("Trigger Period") declines by ten percent (10%) or more as
compared with the identical six (6) consecutive month period during the Term
immediately preceding the Competing Period ("Comparable Period") and provided
Tenant is open and operating for business at the Premises, then so long as the
----
Competing Business continues to operate during the Competing Period, Tenant
shall, after the Trigger Period and for the remainder of the Competing Period,
pay a monthly percentage rent of six percent (6%) of each month's Gross Sales
("Substitute Rent") until Tenant's Gross Sales for a consecutive six (6) months'
period equals or exceeds Tenant's Gross Sales for the Comparable Period. Such
Substitute Rent is in lieu only of the Minimum Rent and Percentage Rent provided
for in this Lease, and Tenant shall continue to pay all other Rent provided for
in this Lease. Such Substitute Rent for each month shall be payable on or
before the fifteenth (15th) day of the following month and shall be accompanied
by Tenant's statement of Gross Sales for the respective month. A "Competing
Business" shall mean a restaurant containing more than 4,000 rentable square
feet, the primary business of which is the operation of a microbrewery producing
and serving microbrewed beer.
B. A Competing Business shall be considered to be operating with Landlord's
consent only if: (i) Landlord after the date of this Lease entered into a lease
or other occupancy agreement with the tenant in question expressly permitting it
to engage in the Competing Business, or (ii) Landlord's consent is required for
any change to a tenant's permitted use and Landlord can withhold consent without
being required to be reasonable, and Landlord consents, after the date of this
Lease, to change such use to permit such tenant to be a Competing Business. A
Competing Business shall not be considered to be operating with Landlord's
consent if the Competing Business has been permitted to assume a lease or
operate its business based upon or as a result of a bankruptcy, insolvency, or
similar action or if the Competing Business has been permitted to operate as the
result of an action or order by a court.
C. Notwithstanding anything herein to the contrary, Tenant shall not be
entitled to the remedy set forth in this provision if Tenant shall have ceased
to operate, as its primary business in the Premises, a first-class restaurant
and brewhouse which has the appearance of a brewery, or if Tenant shall
otherwise not be operating for business at the Premises in accordance with the
provisions of this Lease, or if Tenant is otherwise in default under this Lease,
or if Tenant shall have assigned, sublet or otherwise transferred this Lease at
any time or if control of Tenant has changed.
D. Notwithstanding anything foregoing to the contrary, in no event shall a
Major, outparcel at the Center, or a parent, subsidiary or affiliate of Tenant,
be deemed to be a "Competing Business" under this provision.
E. The remedies set forth in this provision shall be Tenant's sole and
exclusive remedies on account of the operation of a Competing Business.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
17
17
H. CHANGES TO THE CENTER. Landlord reserves the right to: (i) change
the name of the Center and the address or designation of the Premises or the
building in which the Premises are located, (ii) install, maintain, alter and
remove signs on or about the exterior and interior of the Center, (iii) add
land, easements or other interests to or eliminate the same from the Center, and
grant easements and other interests and rights in the Center to other parties,
(iv) add, alter, expand, reduce, eliminate, relocate or change the shape, size,
location, character, design, appearance, use, number or height of any permanent
or temporary buildings, structures, improvements, surface parking, subterranean
and multiple level parking decks, kiosks, planters, pools, waterfalls, parking
areas, driveways, landscaped areas and other Common Areas, change the striping
of parking areas and direction and flow of traffic, and convert Common Areas to
leasable areas and leasable areas to Common Areas, (v) enclose any mall or other
area, or remove any such enclosure, or add one or more additional levels or
stories to the Center or any portion thereof, whether or not the Premises are
contained therein, and add structural support columns that may be required
within the Premises or Common Areas, (vi) relocate any HVAC equipment serving
the Premises installed on the roof or other area outside the Premises if
Landlord constructs an additional story or level or otherwise alters the Center,
and (vii) in connection with the foregoing matters, or with any other
inspections, repairs, maintenance, improvements or alterations in or about the
Center, or as a result of any casualty, incident, strike, condemnation, act of
God, Law or governmental requirement or request, or any other cause, erect
scaffolding, barricades, and other structures reasonably required in, or
otherwise close, Common Areas or portions thereof, including but not limited to
public entry ways and areas, restrooms, stairways, escalators, elevators and
corridors. However, in connection with exercising such rights, Landlord shall:
(a) take reasonable steps to minimize or avoid any denial of access to the
Premises except when necessary on a temporary basis, (b) take reasonable steps
to avoid materially changing the configuration or reducing the square footage of
the Premises, unless required by Laws or other causes beyond Landlord's
reasonable control (and in the event of any permanent material reduction, the
Minimum Rent, Breakpoint, Center Expenses, Taxes, and Promotion Fund Charge
shall be proportionately reduced), (c) at Landlord's expense, move Tenant's
entrance doorway if access thereto is materially impaired, and (d) if Landlord
enters the Premises in connection with any of the foregoing matters, comply with
Paragraph A above.
I. TERMINATION OR RELOCATION. Landlord reserves the right to terminate
this Lease if Landlord determines that such termination is required in order to
demolish or substantially renovate or change the use or character of the Center
or the building or portion thereof in which the Premises are located, provided:
(i) Landlord shall give Tenant at least ninety (90) days' prior notice, and (ii)
Landlord shall pay the direct, out-of-pocket, reasonable expenses of Tenant in
moving from the Premises to any other location of Tenant within five (5) miles
thereof, and an amount equal to the unamortized costs of Tenant's improvements
and non-removable fixtures in the Premises on the effective termination date
using straight-line amortization over ten (10) years. Landlord also reserves
the right to substitute for the Premises other premises (herein referred to as
the "new premises") at the Center, provided: (a) the new premises shall be
similar to the
and shall front on McBean Parkway and otherwise be located within a reasonable
proximity to the theater in the Center
Premises in square footage, and Landlord shall improve or reimburse
=============================
Tenant's direct, out-of-pocket reasonable expenses of improving the new premises
==
so that it is substantially similar to the Premises, (b) Landlord shall give
Tenant at least thirty (30) days' notice before making such change, and the
parties shall execute an amendment to the Lease confirming the change within
thirty (30) days after either party shall request the same, and (c) if Tenant
shall already have taken possession of the Premises, Landlord shall pay the
direct, out-of-pocket, reasonable expenses of Tenant in moving from the Premises
to the new premises. Landlord may also terminate this Lease if any rent control
law or ordinance is enacted which requires reductions in any Rent payable
hereunder or which prohibits, or reduces the amount of, any increase in Rent
provided for in this Lease.
ARTICLE 22
LANDLORD'S REMEDIES
A. DEFAULT. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant and shall give rise to Landlord's
remedies set forth in Paragraph (B), below: (i) failure to make when due any
payment of Rent, unless such failure is cured within
seven (7) days after notice, (ii) failure to observe or perform any term of
=========
condition of this Lease other than the payment of Rent, unless such failure is
cured within any period of time following notice expressly provided in other
Articles hereof, or otherwise within a reasonable time, but in
condition of this Lease other than the payment of Rent, unless such failure is
cured within any period of time following notice expressly provided in other
Articles hereof, or otherwise within a reasonable time, but in
twenty (20)
no event more than twenty (20) days following notice (or such additional
====================
time as may be required due to Unavoidable Delays as described in Article 28),
==
(iii) (a) making by Tenant or any guarantor
=================================================
, provided that (a) Tenant has notified Landlord of the Unavoidable Delay in
accordance with Article 28R, and (b) Tenant completes such cure within twenty
(20) days after the end of the Unavoidable Delay
of this Lease ("Guarantor") of any general assignment for the benefit of
creditors, (b) filing by or against Tenant or any Guarantor of a petition to
have Tenant or such Guarantor adjudged a bankrupt or a petition for
reorganization or arrangement under any Law relating to bankruptcy or insolvency
(unless, in the case of a petition filed against Tenant or such Guarantor, the
same is dismissed within sixty (60) days), (c) appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located in
the Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within thirty (30) days, (d) attachment, execution or other
judicial seizure of substantially all of Tenant's assets located on the Premises
or of Tenant's interest in this Lease, (e) Tenant's or any Guarantor's convening
of a meeting of its creditors or any class thereof for the purpose of effecting
a moratorium upon or composition of its debt, (f) Tenant's or any Guarantor's
insolvency or admission of an inability to pay its debts as they mature, or (iv)
a violation by Tenant or any affiliate of Tenant under any other lease or
agreement
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
18
18
with Landlord relating to the Center which is not cured within the time
permitted for cure
or (v) cessation of Tenant's business operations in the Premises, or a vacation
or abandonment of the Premises, in violation of this Lease for two (2) or more
days after notice from Landlord
thereunder. Failure by Tenant to comply with the same term or condition of this
==========
Lease on two occasions during any twelve month period shall cause any failure to
comply with such term or condition during the succeeding twelve month period, at
Landlord's option, to constitute an incurable Default. The notice and cure
periods provided herein are in lieu of, and not in addition to, any notice and
cure periods provided by Law; provided, Landlord may at any time and from time
to time elect to comply with such notice and cure periods as may be provided by
Law in lieu of the notice and cure periods provided herein.
B. REMEDIES. If a Default occurs, Landlord shall have the rights and
remedies hereinafter set forth to the extent permitted by Law, which shall be
distinct, separate and cumulative with and in addition to any other right or
remedy allowed under any Law or other provisions of this Lease:
(1) Landlord may terminate Tenant's right of possession, reenter and
repossess the Premises by detainer suit, summary proceedings or other lawful
means, with or without terminating this Lease (and if applicable Law permits,
and Landlord shall not have expressly terminated this Lease in writing, any such
action shall be deemed a termination of Tenant's right to possession only). In
such event, Landlord may recover from Tenant: (i) any unpaid Rent as of the
termination date, (ii) the amount by which: (a) any unpaid Rent which would
have accrued after the termination date during the balance of the Term exceeds
(b) the reasonable rental value of the Premises under a lease substantially
similar to this Lease for the balance of the Term, taking into account among
other things, the condition of the Premises, market conditions and the period of
time the Premises may reasonably remain vacant before Landlord is able to
re-lease the same to a suitable replacement tenant, and Costs of Reletting (as
defined in Paragraph l below) that Landlord may incur in order to enter such
replacement lease, and (iii) any other amounts necessary to compensate Landlord
for all damages proximately caused by Tenant's failure to perform its
obligations under this Lease. For purposes of computing the amount of Rent
herein that would have accrued after the termination date, Tenant's obligation
for Percentage Rent shall be projected based on Tenant's average annual Gross
Sales for the 36 months (or lesser period, if 36 months of the Term have not
expired) preceding Tenant's Default, and Tenant's obligations for Taxes, Center
Expenses, and Promotion and Media Fund Charges shall be projected, based upon
the average rate of increase, if any, in such items from the Commencement Date
through the termination date. The amounts computed in accordance with the
foregoing subclauses (a) and (b) shall both be discounted in accordance with
accepted financial practice at the rate of four percent (4%) per annum to the
then present value.
(2) Landlord may terminate Tenant's right of possession, reenter and
repossess the Premises by detainer suit, summary proceedings or other lawful
means, with or without terminating this Lease (and if applicable Law permits,
and Landlord shall not have expressly terminated this Lease in writing, any such
action shall be deemed a termination of Tenant's right of possession only). In
such event, Landlord may recover from Tenant: (i) any unpaid Rent as of the
date possession is terminated, (ii) any unpaid Rent which accrues during the
Term from the date possession is terminated through the time of judgment (or
which may have accrued from the time of any earlier judgment obtained by
Landlord), less any consideration received from replacement tenants as further
described and applied pursuant to Paragraph l, below, and (iii) any other
amounts necessary to compensate Landlord for all damages proximately caused by
Tenant's failure to perform its obligations under this Lease, including without
limitation, all Costs of Reletting (as defined in Paragraph l). Tenant shall
pay any such amounts to Landlord as the same accrue or after the same have
accrued from time to time upon demand. At any time after terminating Tenant's
right to possession as provided herein, Landlord may terminate this Lease as
provided in clause (1) above by written notice to Tenant, and Landlord may
pursue such other remedies as may be available to Landlord under this Lease or
applicable Law.
C. MITIGATION OF DAMAGES. If Landlord terminates this Lease or
Tenant's right to possession, Landlord shall mitigate
Landlord's damages.
If Landlord is required by applicable
Law to mitigate damages under this Lease: (a) Landlord shall be required only
to use reasonable efforts to mitigate, which shall not exceed such efforts as
Landlord generally uses to lease other space at the Center, (b) Landlord will
not be deemed to have failed to mitigate if Landlord leases any other portions
of the Center before reletting all or any portion of the Premises, and (c) any
failure to mitigate as described herein with respect to any period of time shall
only reduce the Rent and other amounts to which Landlord is entitled hereunder
by the reasonable rental value of the Premises during such period, taking into
account the factors described in clause B(1), above. In recognition that the
value of the Center depends on the rental rates and terms of leases therein,
Landlord's rejection of a prospective replacement tenant based on an offer of
rentals below Landlord's published rates for new leases of comparable space at
the Center at the time in question, or at Landlord's option, below the rates
provided in this Lease, or containing terms less favorable than those contained
herein, shall not give rise to a claim by Tenant that Landlord failed to
mitigate Landlord's damages.
D. RELETTING. If this Lease or Tenant's right to possession is
terminated, or Tenant vacates or abandons the Premises, Landlord may: (i) enter
and secure the Premises, change the locks, install barricades, remove any
improvements, fixtures or other property of Tenant therein, perform any
decorating, remodelling, repairs, alterations, improvements or additions and
take such other actions as Landlord shall determine in Landlord's sole
discretion to prevent damage or
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
19
19
deterioration to the Premises or prepare the same for reletting, and (ii) relet
all or any portion of the Premises (separately or as part of a larger space),
for any rent, use or period of time (which may extend beyond the Term hereof),
and upon any other terms as Landlord shall determine in Landlord's sole
discretion, directly or as Tenant's agent (if permitted or required by
applicable Law). The consideration received from such reletting shall be
applied pursuant to the terms of Paragraph l hereof, and if such consideration,
as so applied, is not sufficient to cover all Rent and damages to which Landlord
may be entitled hereunder, Tenant shall pay any deficiency to Landlord as the
same accrues or after the same has accrued from time to time upon demand,
subject to the other provisions hereof.
E. SPECIFIC PERFORMANCE, COLLECTION OF RENT AND ACCELERATION. Landlord
shall at all times have the right without prior demand or notice except as
required by applicable Law to: (i) seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease or restrain or enjoin a
violation of any provision hereof
and (ii) sue for and collect
any unpaid Rent which has accrued. Notwithstanding anything to the contrary
contained in this Lease, to the extent not expressly prohibited by applicable
Law, in the event of any Default by Tenant, Landlord may terminate this Lease or
Tenant's right to possession and accelerate and declare that all Rent reserved
for the remainder of the Term shall be immediately due and payable (in which
event, Tenant's obligations for Percentage Rent, Taxes, Center Expenses, and
Promotion and Media Fund Charges herein that would have accrued thereafter shall
be projected in the manner described in Section B(1), above); provided the Rent
so accelerated shall be discounted in accordance with accepted financial
practice at the rate of four percent (4%) per annum to the then present value,
and Landlord shall, after receiving payment of the same from Tenant, be
obligated to turn over to Tenant any actual net reletting proceeds (net of all
Costs of Reletting) thereafter received during the remainder of the Term, up to
the amount so received from Tenant pursuant to this provision.
F. LATE CHARGES AND INTEREST. Tenant shall pay, as additional Rent, a
service charge
equal to the greater of (i) six percent (6%) of the past due amount or (ii)
of Two Hundred Dollars ($200.00) for bookkeeping and administrative
==
expenses, if any portion of Rent is not received when due. If Landlord
==
rightfully issues a Notice of Default to Tenant, Tenant shall pay Landlord an
==
additional service charge in the amount of One Hundred Dollars ($100.00). In
addition, any Rent not paid when due shall accrue interest from the due date at
the Default Rate until payment is received by Landlord. Such service charges
and interest payments shall not be deemed consent by Landlord to late payments,
nor a waiver of Landlord's right to insist upon timely payments at any time, nor
a waiver of any remedies to which Landlord is entitled as a result of the late
payment of Rent.
G. LANDLORD'S CURE OF TENANT DEFAULTS. If Tenant fails to perform any
obligation under this Lease for five (5) days after notice thereof by Landlord
(except that no notice shall be required in emergencies), Landlord shall have
the right (but not the duty), to perform such obligation on behalf and for the
account of Tenant. In such event, Tenant shall reimburse Landlord upon demand,
as additional Rent, for all expenses incurred by Landlord in performing such
obligation together with an amount equal to fifteen percent (15%) thereof for
Landlord's overhead, and interest thereon at the Default Rate from the date such
expenses were incurred. Landlord's performance of Tenant's obligations
hereunder shall not be deemed a waiver or release of Tenant therefrom.
H. BAD RENT CHECKS. If during the Term, as it may be extended,
Landlord receives two (2) or more checks from Tenant which are returned by
Tenant's bank for insufficient funds, Landlord may require that all checks
thereafter be bank certified or cashier's checks (without limiting Landlord's
other remedies). All bank service charges resulting from any bad checks shall
be borne by Tenant.
I. OTHER MATTERS. No re-entry or repossession, repairs, changes,
alterations and additions, reletting, acceptance of keys from Tenant, or any
other action or omission by Landlord shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession, or accept a
surrender of the Premises, nor shall the same operate to release the Tenant in
whole or in part from any of the Tenant's obligations hereunder, unless express
written notice of such intention is sent by Landlord or its agent to Tenant.
Landlord may bring suits for amounts owed by Tenant hereunder or any portions
thereof, as the same accrue or after the same have accrued, and no suit or
recovery of any portion due hereunder shall be deemed a waiver of Landlord's
right to collect all amounts to which Landlord is entitled hereunder, nor shall
the same serve as any defense to any subsequent suit brought for any amount not
theretofore reduced to judgment. Landlord may pursue one or more remedies
against Tenant and need not make an election of remedies until findings of fact
are made by a court of competent jurisdiction. All rent and other consideration
paid by any replacement tenants shall be applied, at Landlord's option: first,
to the Costs of Reletting, second, to the payment of all costs of enforcing this
Lease against Tenant or any Guarantor, third, to the payment of all interest and
service charges accruing hereunder, fourth, to the payment of Rent theretofore
accrued, and the residue, if any, shall be held by Landlord and applied to the
payment of other obligations of Tenant to Landlord as the same become due (with
any remaining residue to be retained by Landlord). "Costs of Reletting" shall
include without limitation, all reasonable costs and expenses incurred by
Landlord for any repairs, maintenance, changes, alterations and improvements to
the Premises (whether to prevent damage or to prepare the Premises for
reletting), brokerage commissions, advertising costs, attorneys' fees, any
economic incentives given to enter leases with replacement tenants, and costs of
collecting rent from replacement tenants. Landlord shall be under no obligation
to observe or perform any provision of this Lease on its part to be observed or
performed which accrues after the date of any Default by Tenant. The times set
forth herein for the curing of violations by Tenant are of the essence of this
Lease. Tenant hereby irrevocably waives any right otherwise available under any
Law to redeem or reinstate this Lease or Tenant's right to possession after this
Lease or Tenant's right to possession is terminated based on a Default by
Tenant.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
20
20
ARTICLE 23
LANDLORD'S RIGHT TO CURE
If Landlord shall fail to perform any obligation under this Lease required
to be performed by Landlord, Landlord shall not be deemed to be in default
hereunder nor subject to claims for damages of any kind, unless such failure
shall have continued for a period of thirty (30) days after written notice
thereof by Tenant or such additional time as may be required due to Unavoidable
Delays. If Landlord shall fail to cure within the time permitted for cure
herein, Landlord shall be subject to such claims for damages and remedies as may
be available to Tenant (subject to the other provisions of this Lease);
provided, Tenant shall have no right of self-help to perform repairs or any
other obligation of Landlord, and shall have no right to withhold, set off, or
abate Rent.
=
(except as set forth on Page 14A and in Article 14C)
ARTICLE 24
INDEMNIFICATION
Except to the extent arising from the intentional or grossly negligent acts
of Landlord or Landlord's agents or employees, Tenant shall defend, indemnify
and hold harmless Landlord from and against any and all claims, demands,
liabilities, damages, judgments, orders, decrees, actions, proceedings, fines,
penalties, costs and expenses, including without limitation, court costs and
attorneys' fees arising from or relating to any violation of Law, loss of life,
diminution in value of the Center, damage or injury to persons, property or
business occurring in, about or from the Premises, or directly or indirectly
caused by or in connection with any violation of this Lease or use of the
Premises or Center by, or any other act or omission of, Tenant, any other
occupant of the Premises, or any of their respective agents, employees, invitees
or contractors. Without limiting the generality of the foregoing, Tenant
specifically acknowledges that the indemnity undertaking herein shall apply to
claims in connection with or arising out of any "Work" as described in Article
7, the use or consumption of any utilities in the Premises under Article 10, any
repairs or other work by or for Tenant under Article 11 and the transportation,
use, storage, maintenance, generation, manufacturing, handling, disposal,
release or discharge of any "Hazardous Material" as described in Article 26
(whether or not such matters shall have been theretofore approved by Landlord),
except to the extent that any of the same arises from the intentional or grossly
negligent acts of Landlord or Landlord's agents or employees.
ARTICLE 25
SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
Landlord shall have no obligation to provide any safety or security
devices, services or programs for Tenant or the Center and shall have no
liability for failure to provide the same or for inadequacy of any measures
provided. However, Landlord may institute or continue such safety or security
devices, services and programs as Landlord in its sole discretion deems
necessary. The costs and expenses of instituting and maintaining such devices,
services and programs shall be borne by Tenant as a part of Center Expenses, or
as a separate, additional charge to Tenant based on Tenant's Proportionate Share
or such other reasonable factors as Landlord shall determine. The parties
acknowledge that safety and security devices, services and programs provided by
Landlord, if any, while intended to deter crime and enhance safety, may not in
given instances prevent theft or other injurious acts or ensure safety of
parties or property. The risk that any safety or security device, service or
program may not be effective, or may malfunction, or be circumvented, is assumed
by Tenant with respect to Tenant's property and interests, and Tenant shall
obtain insurance coverage to the extent Tenant desires protection against such
acts and other losses, beyond that described in Article 13. Tenant agrees to
cooperate in any safety or security program developed by Landlord or required by
Law.
ARTICLE 26
HAZARDOUS MATERIALS
A. Tenant shall not transport, use, store, maintain, generate,
manufacture, handle, dispose, release or discharge any "Hazardous Material" (as
defined below) upon or about the Center, or permit Tenant's employees, agents,
contractors, invitees and other occupants of the Premises to engage in such
activities upon or about the Center. However, the foregoing provisions shall
not prohibit the transportation to and from, and use, storage, maintenance and
handling within, the Premises of substances customarily used in the business or
activity expressly permitted to be undertaken in the Premises under Article 1,
provided: (a) such substances shall be used and maintained only in such
quantities as are reasonably necessary for such permitted use of the Premises
and the ordinary course of Tenant's business therein, strictly in accordance
with applicable Law, highest prevailing standards, and the manufacturers'
instructions therefor, (b) such substances shall not be disposed of, released or
discharged in the Center, and shall be transported to and from the Premises in
compliance with all applicable Laws, and as Landlord shall reasonably require,
(c) if any applicable Law or Landlord's trash removal contractor requires that
any such
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
21
21
substances be disposed of separately from ordinary trash, Tenant shall make
arrangements at Tenant's expense for such disposal directly with a qualified and
licensed disposal company at a lawful disposal site (subject to scheduling and
approval by Landlord), (d) any remaining such substances shall be completely,
properly and lawfully removed from the Center upon expiration or earlier
termination of this Lease, and (e) for purposes of removal and disposal of any
such substances, Tenant shall be named as the owner and generator, obtain a
waste generator identification number, and execute all permit applications,
manifests, waste characterization documents and any other required forms.
B. Tenant shall promptly notify Landlord of: (i) any enforcement,
cleanup or other regulatory action taken or threatened by any governmental or
regulatory authority with respect to the presence of any Hazardous Material on
the Premises or the migration thereof from or to other property, (ii) any
demands or claims made or threatened by any party relating to any loss or injury
resulting from any Hazardous Material on the Premises, (iii) any release,
discharge or nonroutine, improper or unlawful disposal or transportation of any
Hazardous Material on or from the Premises or in violation of this Article, and
(iv) any matters where Tenant is required by Law to give a notice to any
governmental or regulatory authority respecting any Hazardous Material on the
Premises. Landlord shall have the right (but not the obligation) to join and
participate, as a party, in any legal proceedings or actions affecting the
Premises initiated in connection with any environmental, health or safety Law.
At such times as Landlord may reasonably request, Tenant shall provide Landlord
with a written list, certified to be true and complete, identifying any
Hazardous Material then used, stored, or maintained upon the Premises, the use
and approximate quantity of each such material, a copy of any material safety
data sheet ("MSDS") issued by the manufacturer therefor, and such other
information as Landlord may reasonably require or as may be required by Law.
The term "Hazardous Material" for purposes hereof shall mean any chemical,
substance, material or waste or component thereof which is now or hereafter
listed, defined or regulated as a hazardous or toxic chemical, substance,
material or waste or component thereof by any federal, state or local governing
or regulatory body having jurisdiction, or which would trigger any employee or
community "right-to-know" requirements adopted by any such body, or for which
any such body has adopted any requirements for the preparation or distribution
of an MSDS.
C. If any Hazardous Material is released, discharged or disposed of by
Tenant or any other occupant of the Premises, or their employees, agents or
contractors, on or about the Center in violation of the foregoing provisions,
Tenant shall immediately, properly and in compliance with applicable Laws clean
up and remove the Hazardous Material from the Center and any other affected
property and clean or replace any affected personal property (whether or not
owned by Landlord), at Tenant's expense (without limiting Landlord's other
remedies therefor). Such clean up and removal work shall be subject to
Landlord's prior written approval (except in emergencies),
and shall include, without limitation, any testing, investigation, and the
preparation and implementation of any remedial action plan required by any court
or governmental body having jurisdiction or reasonably required by Landlord. If
Landlord or any Lender or governmental body arranges for any tests or studies
showing that this Article has been violated, Tenant shall pay for the costs of
such tests. If any Hazardous Material is released, discharged or disposed of on
or about the Center and such release, discharge or disposal is not caused by
Tenant or other occupants of the Premises, or their employees, agents or
contractors, such release, discharge or disposal shall be deemed casualty damage
under Article 14 to the extent that the Premises are affected thereby; in such
case, Landlord and Tenant shall have the obligations and rights respecting such
casualty damage provided under such Article.
ARTICLE 27
CAPTIONS AND SEVERABILITY
The captions of the Articles and Paragraphs of this Lease are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation. If any term or provision of this Lease
or portion thereof shall be found invalid, void, illegal, or unenforceable
generally or with respect to any particular party, by a court of competent
jurisdiction, it shall not affect, impair or invalidate any other terms or
provisions or the remaining portion thereof, or its enforceability with respect
to any other party.
ARTICLE 28
DEFINITIONS
A. "Center" shall mean the building or structure in which the Premises
are located and any other buildings or structures owned or ground leased by
Landlord from time to time and operated in conjunction therewith, whether or not
shown on Exhibit A hereto, together with the Common Areas, and all parcels or
tracts of land owned or ground leased by Landlord from time to time on which all
or any portion of the foregoing items are located and any fixtures, Systems and
Equipment, furniture and other personal property owned or leased by Landlord
located thereon or therein and used in connection therewith. "Center" shall
also include, at Landlord's election from time to time, Majors and other
buildings, structures and parcels or tracts of land owned by other parties which
adjoin the other areas of the Center or the Common Areas.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
22
22
B. "Center Expenses" shall mean all expenses, costs and amounts of
every kind and nature which Landlord shall pay during any calendar year any
portion of which occurs during the Term in connection with the management,
repair, maintenance, replacement, insurance and operation of the Center,
including, without limitation, any amounts paid for: (a) utilities, including
but not limited to electricity, power, gas, steam, oil or other fuel, water,
sewer, lighting, heating, air conditioning and ventilating, (b) permits,
licenses and certificates necessary to operate and manage the Center, and costs
of complying with other legal requirements, including, without limitation, the
"ADA" (as described in Article 39), (c) insurance applicable to the Center,
which may include without limitation, commercial liability insurance for
personal injury, death, property damage, defamation and false arrest, "all risk"
insurance on the Center, including without limitation, earthquake, flood, boiler
and rent loss coverage, automobile, worker compensation and employer liability
insurance, (d) supplies, materials, tools, equipment, and vehicles used in the
operation, repair, maintenance and security, floor care and cleaning,
landscaping, and other services for the Center, including rental, installment
purchase and financing agreements therefor and interest thereunder, (e)
accounting, legal, inspection, consulting and other services, (f) wages,
salaries, bonuses, and other compensation and benefits for any manager,
personnel and other parties engaged in the operation, maintenance or security of
the Center, and employer's Social Security taxes, unemployment taxes or
insurance, and any other taxes which may be levied on such wages, salaries,
compensation and benefits, data or payroll processing expenses relating thereto
(if the manager or other personnel are located off-site and handle other
properties, the foregoing expenses shall be allocated appropriately between the
Center and such other properties), (g) payments under any easement, operating
agreement, declaration, restrictive covenant, or instrument pertaining to the
sharing of costs in any development of which the Center is part, (h) alarm
monitoring and security service, janitorial service, trash removal, removal of
ice and snow (and salting and sanding in connection therewith), (i) parking
surcharges or fees that may result from any environmental or other Law or
guideline, and the cost of obtaining, providing and operating public
transportation or shuttle bus systems to bring customers or workers to or from
the Center if required by such Laws or guidelines, or if otherwise deemed
desirable by Landlord, (j) the costs of operating and maintaining any on-site
office at the Center, including without limitation, the fair rental value
thereof, telephone charges, postage, stationery and photocopying expenses, (k)
music programs and equipment, whether rented or purchased, (l) telephone
directory listings for the Center, (m) appropriate reserves for operation of the
Center and for covering uninsured portions, including deductible amounts, of
casualty damage and general liability claims relating to the Center, (n)
operation, maintenance, repair, installation, replacement, inspection, testing,
painting, decorating and cleaning of: (i) elevators, escalators, fire exits and
stairways, (ii) sidewalks, curbs, gutters, guardrails, bumpers, fences,
flagpoles, flags, banners, bicycle racks, Center identification and pylon signs,
directional signs, traffic signals and markers, including those located off-site
but installed for the benefit of the Center, (iii) parking structures, parking
lots, loading and service areas and driveways (including sweeping, cleaning,
re-striping, repairing, sealing, re-surfacing and replacement), (iv) storm and
sanitary drainage systems, including disposal plants, lift stations and
detention ponds and basins, (v) irrigation systems, (vi) any Systems and
Equipment, (vii) interior and exterior planting, replanting and replacement of
flowers, shrubbery, plants, trees, grass, sod and other landscaping, (viii) all
portions of buildings, both interior and exterior, in the Center, including
without limitation, Common Areas and fixtures, equipment and other items therein
or thereon, including but not limited to floors, floor coverings, corridors,
ceilings, foundations, walls, wall-coverings, restrooms, lobbies, canopies,
skylights, trash and ash cans and receptacles, trash compactors, planters,
waterfalls, fountains, pools, benches, furniture, doors, locks and hardware,
windows, glass and glazing, (ix) gutters and downspouts, roof flashings and
roofs (including repairs and replacements), and (o) an amount equal to fifteen
percent (15%) of all of the foregoing costs and expenses as a liquidation of
Landlord's general off-site overhead (which amount shall be in addition to the
compensation and related expenses for the manager and other aforementioned
expenses). The foregoing provision is for definitional purposes only and shall
not be construed to impose any obligation upon Landlord to incur such expenses.
Landlord reserves the right to: (x) determine and bill Tenant's Proportionate
Share of insurance costs relating to the Center separately from other Center
Expenses, and (y) include Taxes attributable to the Common Areas as a part of
Center Expenses rather than determining and billing the same separately.
Notwithstanding the foregoing, Center Expenses shall not, however, include:
(i) interest and amortization on Mortgages, and other debt costs
or ground lease payments, if any, except as provided herein; depreciation of
buildings and other improvements (except permitted amortization of certain
capital expenditures as provided below); improvements, repairs or alterations to
spaces leased to other tenants; the cost of providing any service directly to
and paid directly by, any tenant; costs of any items to the extent Landlord
receives reimbursement from insurance proceeds or from a third party (such
proceeds to be deducted from Center Expenses in the year in which received); and
(ii) capital expenditures, except those: (a) made primarily to
reduce Center Expenses, or to comply with any Laws or other governmental
requirements, or (b) for repairs or replacements (as opposed to additions or new
improvements, except that Landlord shall be permitted to include new
improvements involving pylon or other signs for the Center or the upgrading or
addition of lights in the parking and other Common Areas); provided, all such
permitted capital expenditures (together with reasonable finance charges) shall
be amortized for purposes of this Lease over three (3) years. Tenant shall be
responsible for Tenant's Proportionate Share of such permitted amortization of
capital expenditures during the Term, including any remaining amortization of
permitted capital expenditures made prior to the Commencement Date.
C. "Common Areas" shall have the meaning specified therefor in Article
12.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
23
23
D. "CPI" shall mean the Consumer Price Index for All Urban Consumers,
All Items (Base year 1982-1984 = 100) published by the United States Department
of Labor, Bureau of Labor Statistics, All City Average. If the Bureau of Labor
Statistics substantially revises the manner in which the CPI is determined, an
adjustment shall be made in the revised index which would produce results
equivalent, as nearly as possible, to those which would be obtained hereunder if
the CPI were not so revised. If the CPI becomes unavailable to the public
because publication is discontinued, or otherwise, Landlord shall substitute
therefor a comparable index based upon changes in the cost of living or
purchasing power of the consumer dollar published by a governmental agency,
major bank, other financial institution, university or recognized financial
publisher.
E. "Default Rate" shall mean eighteen percent (18%) per annum, or the
highest rate permitted by applicable Law, whichever shall be less.
F. "Gross Sales" shall have the meaning specified therefor in Article
3.
G. "HVAC" shall mean heating, ventilating and air-conditioning.
H. "Landlord" and "Tenant" shall be applicable to one or more parties
as the case may be, and the singular shall include the plural, and the neuter
shall include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, Lenders, agents,
affiliates, successors and assigns.
I. "Law" or "Laws" shall mean all federal, state, county and local
governmental and municipal laws, statutes, ordinances, rules, regulations,
codes, decrees, orders and other such requirements, applicable equitable
remedies and decisions by courts in cases where such decisions are binding
precedents in the state in which the Center is located, and decisions of federal
courts applying the Laws of such state, at the time in question.
J. "Lease Year" shall mean each calendar year or portion thereof during
the Term, and any initial or final partial years are sometimes referred to
herein as "Partial Lease Years"; provided, Landlord reserves the right to change
the "Lease Year" to each consecutive twelve month period commencing on the
Commencement Date or such other date as Landlord shall designate by notice to
Tenant.
K. "Lender" shall mean the holder of any Mortgage at the time in
question, and where such Mortgage is a ground lease, such term shall refer to
the ground lessor.
L. "Major" shall mean any store of any type in excess of 25,000 square
feet of rentable area in, or at Landlord's election from time to time adjoining,
the Center, whether in buildings or on parcels owned by Landlord or other
parties.
M. "Mortgage" shall mean all mortgages, deeds of trust, ground leases
and other such encumbrances now or hereafter placed upon the Center or any part
thereof, and all renewals, modifications, consolidations, replacements or
extensions thereof, and all indebtedness now or hereafter secured thereby and
all interest thereon.
N. "Rent" shall have the meaning specified therefor in Article 4.
O. "Systems and Equipment" shall mean any plant, machinery,
transformers, ducts, cables, wires, and other equipment, facilities, and systems
designed to supply light, heat, ventilation, air conditioning and humidity or
any other services or utilities, or comprising or serving as any component or
portion of any electrical, gas, steam, plumbing, water, sewer, sprinkler,
communications, alarm, security, or fire/life/safety systems or equipment, or
any other mechanical, electrical, electronic, computer or other systems or
equipment for the Center, except to the extent that any of the same serves any
tenant exclusively or is subject to shared tenant use as described in Article
11.
P. "Taxes" shall mean all federal, state, county, or local
governmental, special district, improvement district, municipal or other
political subdivision taxes, fees, levies, assessments, charges or other
impositions of every kind and nature, whether foreseen or unforeseen, general,
special, ordinary or extraordinary (unless required to be paid by Tenant under
Article 4), respecting the Center, including without limitation, real estate and
other ad valorem taxes, general and special assessments, interest on any special
assessments paid in installments, transit taxes, water and sewer rents, taxes
based upon the receipt of rent including, without limitation, gross receipts
taxes applicable to the receipt of rent, personal property taxes imposed upon
the fixtures, machinery, equipment, apparatus, Systems and Equipment,
appurtenances, furniture and other personal property used in connection with the
Center which Landlord shall pay during any calendar year, any portion of which
occurs during the Term (without regard to any different fiscal year used by such
government or municipal authority except as provided in Article 5).
Notwithstanding the foregoing, Taxes shall not include excess profits taxes,
franchise taxes, gift taxes, capital stock taxes, inheritance and succession
taxes, estate taxes, federal and state income taxes, and other taxes to the
extent applicable to Landlord's general or net income (as opposed to rents,
receipts or income attributable to operations at the Center). If the method of
taxation of real estate prevailing to the time of execution hereof shall be, or
has been altered, so as to cause the whole or any part of the taxes now,
hereafter or theretofore levied, assessed or
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
24
24
imposed on real estate to be levied, assessed or imposed on Landlord, wholly or
partially, as a capital levy or otherwise, or on or measured by the rents
received therefrom, then such new or altered taxes attributable to the Center
shall be included within the term "Taxes", except that the same shall not
include any enhancement of said tax attributable to other income of Landlord.
Tenant shall pay increased Taxes whether Taxes are increased as a result of
increases in the assessment or valuation of the Center (whether based on a sale,
change in ownership or refinancing of the Center or otherwise), increases in tax
rates, reduction or elimination of any rollbacks or other deductions available
under current law, scheduled reductions of any tax abatement, elimination,
invalidity or withdrawal of any tax abatement, or for any other cause
whatsoever. In addition, Landlord may include in Taxes any actual,
out-of-pocket expenses incurred by Landlord in attempting to protest, reduce or
minimize Taxes (including without limitation, fees for attorneys, consultants,
appraisers and other experts) in the calendar year such expenses are paid.
Q. "Tenant's Proportionate Share" shall be a fraction equal to the
rentable square footage of the Premises set forth in Article 1 (as the same may
be remeasured pursuant to Article 21) divided by the total square footage of all
rentable floor space in the Center; provided Landlord may exclude from such
rentable floor space of the Center, at Landlord's option, any portions of the
Center: (i) not occupied and open for business during all or any portion of the
subject year,
provided that, for purposes of determining Tenant's Proportionate Share, in no
event shall less than eighty percent (80%) of the rentable floor area of the
Center (excluding, at Landlord's option, the areas included in (ii) and (iii)
below) be deemed occupied and open for business
(ii) leased to or used by other parties as Majors, theatres, restaurants,
kiosks, storage areas, or premises which do not front on any enclosed mall area
of the Center, where such parties are not required to pay a full prorata share
of Center Expenses or Taxes, as the case may be, pursuant to a lease or other
agreement with Landlord, and (iii) with respect to Taxes, areas of the Center
for which separate Tax bills are received and which are the sole responsibility
of separate parties pursuant to a lease or other agreement with Landlord;
provided, Landlord shall also deduct from Center Expenses or Taxes, as the case
may be, all amounts received from such excluded parties
See Rider Three
for Center Expenses or Taxes. If the Center shall be part of or shall
=================================
include a group of buildings or structures collectively owned or managed by
Landlord or its affiliates, or shall include any space used for office, medical,
dental or other non-retail purposes, Landlord may determine separately and
allocate Taxes or Center Expenses between such buildings and structures and the
parcels on which they are located, and between the retail and non-retail areas
of the Center, in accordance with sound accounting and management principles, in
which event Tenant's Proportionate Share shall be based on the ratio of the
rentable area of the Premises to the rentable floor space of the buildings,
structures or areas for which Landlord separately determines such Taxes or
Center Expenses, subject to the adjustments set forth above.
R. "Unavoidable Delays" shall mean delays due to strikes, lockouts,
labor troubles, inability to procure labor or materials or reasonable
substitutes therefor, failure of power, governmental requirements, restrictions
or Laws, fire or other casualty damage, war or civil disorder, or other causes
beyond the reasonable control of the party delayed; provided, Unavoidable Delays
hereunder shall not include delays resulting from changes in economic or market
conditions, or financial or internal problems of the parties or problems that
can be satisfied by the payment of money. As a condition to Tenant's right to
claim an Unavoidable Delay, Tenant shall notify Landlord within seven (7) days
after the delay occurs and on at least a weekly basis thereafter describing in
reasonable detail the nature and the status of Tenant's diligent efforts to end
the delay.
ARTICLE 29
RULES
Tenant shall comply with all of the rules which are set forth in Rider One
attached to this Lease, as the same may be amended or supplemented hereunder
(the "Rules"). Landlord shall have the right by notice to Tenant or by posting
at the Center to reasonably amend such Rules and supplement the same with other
reasonable Rules relating to the Center or the promotion of safety, care,
cleanliness or good order therein. Nothing herein shall be construed to give
Tenant or any other party any claim against Landlord arising out of the
violation of such Rules by any other tenant, occupant or visitor of the Center,
or out of the enforcement, modification or waiver of the Rules by Landlord in
any particular instance.
In the event of an inconsistency between the Rules and the other terms of this
Lease, the terms of this Lease shall control.
ARTICLE 30
NO WAIVER
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay or any other act or omission of either party. No waiver by
either party of any provision of this Lease shall be deemed a waiver of such
provision with respect to any subsequent matter relating to such provision, and
Landlord's consent respecting any action by Tenant shall not constitute a waiver
of the requirement for obtaining Landlord's consent respecting any subsequent
action. Acceptance of Rent by Landlord shall not constitute a waiver of any
breach by Tenant of any term or provision of this Lease. No acceptance of a
lesser amount than the Rent herein stipulated shall be deemed a waiver of
Landlord's right to receive the full amount due, nor shall any endorsement or
statement on any check or payment or any letter accompanying such check or
payment be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the full amount due.
The acceptance of Rent or of the performance of any other term or provision from
any party other than Tenant, including any Transferee, shall not constitute a
waiver of Landlord's right to approve any Transfer.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
25
25
ARTICLE 31
ATTORNEYS' FEES, COUNTERCLAIMS, VENUE AND JURY TRIAL
If Landlord or any of its officers, directors, trustees, beneficiaries,
partners, agents, affiliates or employees shall be made a party to any
litigation commenced by or against Tenant and are not found to be at fault,
Tenant shall pay all costs, expenses and reasonable attorneys' fees incurred by
Landlord or any such party in connection with such litigation. Tenant shall
also pay all costs, expenses and reasonable attorneys' fees that may be incurred
by Landlord in successfully enforcing this Lease. IN THE INTEREST OF OBTAINING
A SPEEDIER AND LESS COSTLY HEARING OF ANY DISPUTE, EACH OF LANDLORD AND TENANT
HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER PARTY AGAINST THE OTHER AND ANY RIGHTS TO A TRIAL BY JURY
UNDER ANY STATUTE, RULE OF LAW OR PUBLIC POLICY IN CONNECTION WITH ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATING TO THIS LEASE, THE PREMISES OR
THE CENTER. Although such jury waiver is intended to be self-operative and
irrevocable, Landlord and Tenant each further agree, if requested, to confirm
such waivers in writing at the time of commencement of any such action,
proceeding or counterclaim. If Landlord commences any detainer suit, summary
proceedings or other action seeking possession of the Premises, Tenant agrees
not to interpose by consolidation of actions, removal to chancery or otherwise,
any counterclaim, claim for set-off, recoupment or deduction of Rent, or other
claim seeking affirmative relief of any kind (except a mandatory or compulsory
counterclaim which Tenant would forfeit if not so interposed). Any action or
proceeding brought by either party against the other for any matter arising out
of or in any way relating to this Lease, the Premises or the Center, shall be
heard, at Landlord's option, in the County where the Center is located.
ARTICLE 32
PERSONAL PROPERTY TAXES
Tenant shall pay before delinquent all taxes, assessments, license fees,
charges or other governmental impositions assessed against or levied or imposed
upon Tenant's business operations, Tenant's leasehold interest, or based on
Tenant's use or occupancy of the Premises, or Tenant's fixtures, furnishings,
equipment, leasehold improvements, inventory, merchandise, and personal property
located in the Premises (whether or not title shall have vested in Landlord
pursuant to any provision hereof). Whenever possible, Tenant shall cause all
such items to be assessed and billed separately from the property of Landlord
and other parties. If any such items shall be assessed and billed with the
property of Landlord or another party, Landlord shall include the same or an
appropriate portion thereof in Center Expenses, or shall reasonably allocate the
same or an appropriate share thereof between Tenant and such other party (and
Tenant shall promptly pay the amount so allocated to Tenant).
ARTICLE 33
CONVEYANCE BY LANDLORD AND LIABILITY
In case Landlord or any successor owner of the Center shall convey or
otherwise dispose of any portion thereof in which the Premises are located to
another party (and nothing herein shall be construed to restrict or prevent such
conveyance or disposition), such other party shall thereupon be and become
landlord hereunder and shall be deemed to have fully assumed and be liable for
all obligations of this Lease to be performed by Landlord, including the return
of any Security Deposit. Tenant shall attorn to such other party, and Landlord
or such successor owner
shall, from and after the date of conveyance, be free of all liabilities and
obligations hereunder. The liability of Landlord to Tenant for any default by
Landlord under this Lease or arising in connection herewith or with Landlord's
operation, management, leasing, repair, renovation, alteration, or any other
matter relating to the Center or the Premises, shall be limited to the interest
of Landlord in the Center (and rental proceeds). Tenant agrees to look solely
to Landlord's interest in the Center (and rental proceeds) for the recovery of
any judgment against Landlord, and Landlord shall not be personally liable for
any such judgment or deficiency after execution thereon. Under no circumstances
shall any present or future general or limited partner of Landlord (if
=================================================
officers, directors, shareholders, unit holders, employees, agents or
or of any partner of Landlord
Landlord is a partnership), or trustee or beneficiary (if Landlord or any
=============================
partner of Landlord is a trust) have any liability for the performance of
======
Landlord's obligations under this Lease.
======
ARTICLE 34
NOTICES
Except as expressly provided to the contrary in this Lease, every notice,
demand or other communication given by either party to the other with respect
hereto or to the Premises or Center, shall be in writing and shall not be
effective for any purpose unless the same shall be served personally or by
national air courier service, or United States registered or certified mail,
return receipt requested, postage prepaid, addressed, if to Tenant, at the
address first set forth in the Lease, and if to Landlord, at the address at
which the last payment of Rent was required to be made and to Urban Retail
Properties Co. at 900 North Michigan Avenue, Chicago, Illinois, 60611,
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
26
26
Attn: Director of Lease Administration, or such other address or addresses as
======================================
Tenant or Landlord
===================
and to Newhall Land and Farming Company, 23823 Valencia Boulevard, Valencia, CA
91355-2194, Attn: Asset Management Department,
may from time to time designate by notice given as above provided. Every
notice or other communication hereunder shall be deemed to have been given as of
the second business day following the date of such mailing or dispatch by
national air courier service (or as of any earlier date evidenced by a receipt
from such national air carrier service or the United States Postal Service) or
immediately if personally delivered. Notices not sent in accordance with the
foregoing shall be of no force or effect until received by the foregoing parties
at such addresses required herein.
ARTICLE 35
REAL ESTATE BROKERS
Tenant shall defend, indemnify and hold Landlord harmless from all damages,
judgments, liabilities and expenses (including attorneys' fees) arising from any
claims or demands of any broker, agent or finder with whom Tenant has dealt for
any commission or fee alleged to be due in connection with its participation in
the procurement of Tenant or the negotiation with Tenant of this Lease, other
than a broker with whom Landlord has signed a written agreement relating to this
Lease.
ARTICLE 36
SECURITY DEPOSIT AND LANDLORD'S LIEN
Tenant shall deposit with Landlord the amount set forth in Article 1 as a
Security Deposit upon Tenant's execution and submission of this Lease. The
Security Deposit shall serve as security for the prompt, full and faithful
performance by Tenant of the terms and provisions of this Lease. If Tenant
commits a Default, or owes any amount to Landlord upon the expiration of this
Lease, Landlord may use or apply the whole or any part of the Security Deposit
for the payment of Tenant's obligations hereunder. The use or application of
the Security Deposit shall not prevent Landlord from exercising any other right
or remedy available to Landlord and shall not be construed as liquidated
damages. If the Security Deposit is reduced by such use or application, Tenant
shall deposit with Landlord within ten (10) days after written notice, an amount
sufficient to restore the full amount of the Security Deposit. In the event of
bankruptcy or other insolvency proceeding against Tenant or Tenant's guarantor,
the Security Deposit shall be deemed automatically applied to the payment of
overdue Rent from the earliest time such Rent became overdue prior to the filing
of such proceeding. Landlord shall not be required to keep the Security Deposit
separate from Landlord's general funds or pay interest on the Security Deposit.
Any remaining portion of the
Security Deposit shall be returned to Tenant within thirty (30) days after
================================================================
Tenant has vacated the Premises in accordance with Article 16.
As further security for Tenant's performance under this Lease, to the
extent not expressly prohibited by applicable Law, Tenant hereby grants Landlord
a lien and security interest in all existing and after-acquired property of
Tenant placed in or relating to Tenant's business at the Premises, including but
not limited to, accounts receivable, insurance proceeds, good will, contracts,
intangibles, fixtures, equipment, inventory, furnishings and personal property,
and all proceeds thereof, and all rents and other consideration from any
Transfer. Notwithstanding the
foregoing, Tenant may freely use, replace and dispose of such property (provided
Tenant immediately replaces the same with similar property of comparable or
better quality), and receive such rents and consideration, in the ordinary
course of Tenant's business, until such time as Tenant shall commit a Default;
upon such Default, Tenant's right to remove or use such property shall
terminate, and all other parties shall be entitled to rely on written
notification thereof given by Landlord without requiring any proof of such
Default or any other matter. Tenant agrees to execute such financing
statements, collateral assignment of rents and subleases, and other documents
necessary to perfect a security interest, as Landlord may now or hereafter
reasonably request in recordable form. Landlord may at its election at any time
execute such a financing statement and collateral assignment as Tenant's agent
and attorney-in-fact or file a copy of this Lease as such financing statement
and collateral assignment. Landlord shall be entitled hereunder to all of the
rights and remedies afforded a secured party under the Uniform Commercial Code
or other applicable Law in addition to any landlord's lien and rights provided
by applicable Law.
ARTICLE 37
MISCELLANEOUS
A. Each of the terms and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, guardians, custodians, successors and assigns,
subject to the provisions of Article 20 respecting Transfers. However, if
Tenant is an individual and dies or becomes incapacitated, Landlord reserves the
right to terminate this Lease upon thirty (30) days' advance notice to Tenant or
Tenant's legal representative.
B. Neither this Lease nor any memorandum of lease or short form lease
shall be recorded by Tenant.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
27
27
C. This Lease shall be construed in accordance with the Laws of the
state and county in which the Center is located.
D. All obligations (including indemnity obligations) or rights of
either party arising during or attributable to the period prior to expiration or
earlier termination of this Lease shall survive such expiration or earlier
termination, except as provided to the contrary in Article 33.
E. If the Commencement Date is delayed in accordance with Article 2
beyond March 1, 2001
Landlord or Tenant may declare this Lease terminated by notice to the other
Commencement Date is so delayed this Lease shall
===============================
thereupon be deemed terminated without further action by either party.
F. Landlord agrees that if Tenant timely pays the Rent and performs the
terms and provisions hereunder, Tenant shall hold and enjoy the Premises during
the Term, free of lawful claims by any party acting by or through Landlord,
subject to all other terms and provisions of this Lease.
G. The parties agree that they intend hereby to create only the
relationship of landlord and tenant. No provision hereof, or act of either
party hereunder, shall be construed as creating the relationship of principal
and agent, or as creating a partnership, joint venture or other enterprise, or
render either party liable for any of the debts or obligations of the other
party, except under any indemnity provisions of this Lease.
H. Tenant acknowledges that any site or lease plan of the Center
attached as an Exhibit hereto shall not be deemed a representation, warranty or
agreement by Landlord respecting the Center or any other matter shown thereon
other than the approximate location of the Premises, and that Majors and other
parties unrelated to Landlord may own or control portions of the Center shown on
such Exhibit.
I. If applicable Laws require that this Lease be in the form of a deed,
this Lease shall be deemed a deed of lease for all purposes, and Landlord shall
be deemed to have granted and demised the Premises to Tenant for the Term
hereof, subject to the other terms and provisions contained herein.
J. This Lease, and any Riders and Exhibits hereto, have been mutually
negotiated by Landlord and Tenant, and any ambiguities shall not be interpreted
in favor of either party. Any printed provisions that have been deleted shall
not be used to interpret the remaining provisions.
K. Landlord reserves exclusive rights to negotiate, license and lease the
Center for the purposes of television programs, motion pictures, video programs,
commercials and all other types of film or video documentaries or productions.
All royalties, fees and compensations received from such licenses and leases
shall belong exclusively to the Landlord.
L. Tenant shall not make any use, commercial or otherwise (except to the extent
necessary to identify the Premises), of the names or marks THE NEWHALL LAND AND
FARMING COMPANY, NEWHALL, VALENCIA, and/or any other similar names or marks
without the prior written consent of Landlord, nor shall Tenant otherwise engage
in conduct inconsistent with Landlord's sole and exclusive rights to its trade
names and trademarks, including but not limited to the foregoing marks.
ARTICLE 38
OFFER
The submission and negotiation of this Lease shall not be deemed an offer
to enter the same by Landlord, but the solicitation of such an offer by Tenant.
Tenant agrees that its execution of this Lease constitutes a firm offer to enter
the same which may not be withdrawn for a period of six (6) weeks after delivery
to Landlord. During such period and in reliance on the foregoing, Landlord may,
at Landlord's option, deposit any Security Deposit and Rent, proceed with any
alterations or improvements, and permit Tenant to enter the Premises and make
alterations or improvements. If Landlord shall fail to execute and mail or
deliver this Lease to Tenant within such period, Tenant may revoke its offer to
enter this Lease by sending notice thereof to Landlord before Landlord mails or
delivers an executed copy of this Lease to Tenant. In such case, Landlord shall
return any Security Deposit and Rent to Tenant, and Tenant shall promptly remove
any alterations, improvements, fixtures or personal property made or placed in
or upon the Premises by Tenant or its contractors, agents or employees and
restore the same to good condition as required under Article 16. If Tenant
shall seek to revoke its offer to enter this Lease in violation of the foregoing
provisions, Landlord shall have the options of forfeiting and retaining any
Security Deposit and Rent theretofore paid, as liquidated damages without
executing and delivering this Lease to Tenant, or executing and delivering this
Lease to Tenant and enforcing the same as a valid and binding lease agreement.
ARTICLE 39
AMERICANS WITH DISABILITIES ACT
The parties acknowledge that the Americans With Disabilities Act of 1990
(42 U.S.C. 12101 et seq.) and regulations and guidelines promulgated
thereunder, as all of the same may be amended and supplemented from time to time
(collectively referred to herein as the "ADA") establish requirements for
business operations, accessibility and barrier removal, and that such
requirements may or may not apply to the Premises and Center depending on, among
other things: (1) whether Tenant's business is deemed a "public accommodation"
or "commercial facility", (2) whether such requirements are "readily
achievable", and (3) whether a given alteration affects a "primary function
area" or triggers "path of travel" requirements. The parties hereby agree that:
(a) Landlord shall be responsible for ADA Title III compliance in the Common
Areas, except as provided below, (b) Tenant shall be responsible for ADA Title
III compliance in the Premises, including any leasehold improvements or other
work to be performed in the Premises under or in connection with this Lease, and
(c) Landlord may perform, or require that Tenant perform, and Tenant shall be
responsible for the cost of, ADA Title III "path of travel" requirements
triggered by alterations in the Premises. Tenant shall be solely responsible
for requirements under Title I of the ADA relating to Tenant's employees.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
29
29
ARTICLE 40
ENTIRE AGREEMENT
This Lease, together with Riders One through Four , and Exhibits A
------
through
D (WHICH COLLECTIVELY ARE HEREBY INCORPORATED WHERE REFERRED
- -----
TO HEREIN AND MADE A PART HEREOF AS THOUGH FULLY SET FORTH), contains all the
terms and provisions between Landlord and Tenant relating to the matters set
forth herein and no prior or contemporaneous agreement or understanding
pertaining to the same shall be of any force or effect. Without limiting the
generality of the foregoing, Tenant hereby acknowledges and agrees that
Landlord's leasing and field personnel are only authorized to show the Premises
and negotiate terms and conditions for leases subject to Landlord's final
approval, and are not authorized to make any agreements, representations,
understandings or obligations binding upon Landlord, respecting the present or
future condition of the Premises or Center, suitability of the same for Tenant's
business, or any other matter, and no such agreements, representations,
understandings or obligations not expressly contained herein shall be of any
force or effect. TENANT HAS RELIED ON TENANT'S INSPECTIONS AND DUE DILIGENCE IN
ENTERING THIS LEASE AND NOT ON ANY REPRESENTATIONS OR WARRANTIES MADE BY
LANDLORD CONCERNING THE CONDITION OR SUITABILITY OF THE PREMISES OR CENTER FOR
ANY PARTICULAR PURPOSE. Neither this Lease, nor any Riders or Exhibits referred
to above may be modified, except in writing signed by both parties.
IN TESTIMONY WHEREOF, the parties have caused this Lease to be signed under
seal by their respective representatives designated below, or if either party is
a corporation, it has caused these presents to be signed by its president or
other officer designated below, attested by its secretary, and its corporate
seal to be affixed, and if the Center is in Washington, D.C., does hereby
appoint such president or other officer its true and lawful attorney-in-fact to
acknowledge and deliver these presents as its act and deed as of the day and
year first above written.
WITNESS; ATTESTATION
(TWO FOR EACH SIGNATORY Witness Our Hands And Seals
REQUIRED IF CENTER IS
IN FLORIDA OR OHIO; ONE IF
CENTER IS IN D.C.):
LANDLORD: THE NEWHALL LAND AND FARMING COMPANY,
(a California Limited Partnership), a
California limited partnership
By: NEWHALL MANAGEMENT LIMITED PARTNERSHIP,
a California limited partnership,
its Managing General Partner
By: NEWHALL MANAGEMENT CORPORATION,
a California corporation, its
Managing General Partner
By:
Name:
Title:
By:
Name:
Title:
TENANT: CHICAGO PIZZA & BREWERY, INC.,
a California corporation
By:
Name:
Title:
By:
Name:
Title:
CERTIFICATE
(IF TENANT IS A CORPORATION)
I, , Secretary
of , Tenant, hereby certify that the officer(s)
executing the foregoing Lease on behalf of Tenant was/were duly authorized to
act in his/her/their capacities as and
and his/her/their action(s) are
the action of Tenant.
(Corporate Seal)
Secretary
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
29
29
THIS PAGE IS REQUIRED IF PROPERTY IS IN DELAWARE,
OHIO, UTAH, WASHINGTON D.C. OR WASHINGTON STATE
LANDLORD ACKNOWLEDGMENT
STATE OF )
) SS.:
COUNTY OF )
On this day of, 19, before me, a Notary Public in and for the County and
State aforesaid, personally appeared , known
to me to be the
of , a(n)
, and acknowledged that being authorized
so to do, (s)he executed the foregoing instrument on behalf of said entity, as a
free and voluntary act, and as the free and voluntary act and deed of said
entity, in its capacity described in the foregoing instrument for the Landlord
designated therein, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My Commission Expires:
TENANT ACKNOWLEDGMENTS
INDIVIDUAL
STATE OF )
) SS.:
COUNTY OF )
On this day of, 19, before me, a Notary Public in and for the County and
State aforesaid, personally appeared and
acknowledged that (s)he executed the foregoing instrument as a free and
voluntary act, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My Commission Expires:
CORPORATION
STATE OF )
) SS.:
COUNTY OF )
On this day of, 19, before me, a Notary Public in and for the County and
State aforesaid personally appeared known
to me to be President of , one
of the corporations described in the foregoing instrument, and acknowledged that
as such officer, being authorized so to do, (s)he executed the foregoing
instrument on behalf of said corporation and caused the corporate seal of said
corporation to be affixed thereto, as his/her free and voluntary act, and as the
free and voluntary act of said corporation for the uses and purposes therein set
forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My Commission Expires:
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
30
30
PARTNERSHIP
STATE OF )
) SS.:
COUNTY OF )
On this day of, 19, before me a Notary Public in and for the County and
State aforesaid personally appeared known to me to
be a general partner of the partnership known as ,
one of the partnerships described in the foregoing instrument, and acknowledged
that being authorized so to do, (s)he executed the foregoing instrument on
behalf of said partnership as a free and voluntary act, and as the free and
voluntary act of said partnership, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My Commission Expires:
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
Rider One - 3
Rider One - 3
RIDER ONE
RULES
(1) COMMON AREAS. Tenant shall not use the Common Areas, including
areas adjacent to the Premises, for any purpose other than ingress and egress,
and any such use thereof shall be subject to the other provisions of this Lease,
including these Rules. Without limiting the generality of the foregoing, Tenant
shall not use the Common Areas to canvass, solicit business or information from,
or distribute any article or material to, other tenants, occupants or invitees
of the Center. Tenant shall not allow anything to remain in any passageway,
sidewalk, court, corridor, stairway, entrance, exit, elevator, shipping area, or
other area outside the Premises. Janitorial closets, utility closets, telephone
closets, broom closets, electrical closets, storage closets, and other such
closets, rooms and areas shall be used only for the purposes and in the manner
designated by Landlord, and may not be used by Tenant, or its contractors,
agents, employees, or other parties without Landlord's prior written consent.
(2) DELIVERIES. Furniture, inventory and all other deliveries may be
brought into the Center only at times and in the manner designated by Landlord,
in compliance with all Laws, and always at Tenant's sole risk. Landlord may
inspect items brought into the Center or Premises with respect to weight or
dangerous nature or compliance with this Lease or applicable Laws. Tenant's use
of any freight elevators, loading and service areas at the Center shall be
subject to scheduling by Landlord. Tenant shall not take or permit to be taken
in or out of other entrances or elevators of the Center, any item normally
taken, or which Landlord otherwise requires to be taken, in or out through
service doors or on freight elevators. Tenant shall move all inventory,
supplies, furniture, equipment and other items as soon as received directly to
the Premises. Any hand-carts used at the Center shall have rubber wheels and
side guards and no other material handling equipment may be brought upon the
Center except as Landlord shall approve in writing in advance.
(3) TRASH. All garbage, refuse, trash and other waste shall be kept
in the kind of container, placed in the areas, and prepared for collection in
the manner and at the times and places specified by Landlord, subject to Article
26 respecting Hazardous Materials. If Landlord designates a service to pick up
such items, Tenant shall use the same at Tenant's cost. If Landlord shall
provide or arrange for such service, Tenant shall pay Tenant's Proportionate
Share of the cost thereof (or such other share as Landlord may fairly and
reasonably determine) to Landlord on or before the first day of each calendar
month in advance, or Landlord may include such charges in Center Expenses.
Landlord reserves the right to require that Tenant participate in any recycling
program designated by Landlord.
(4) FIRE PROTECTION. If Landlord installs or has heretofore installed
a supervised fire sprinkler and/or alarm system for the protection of the
Center, Tenant shall pay Tenant's Proportionate Share of the cost thereof (or
such other share as Landlord may fairly and reasonably determine) to Landlord on
or before the first day for each calendar month in advance, or Landlord may
include such charges in Center Expenses.
(5) PEST CONTROL. Tenant shall use, at Tenant's cost, such pest and
rodent extermination contractor as Landlord may direct and at such intervals as
Landlord may require. In the alternative, from time to time, Landlord may
arrange for pest control (in which case, Tenant shall pay Tenant's Proportionate
Share of the cost thereof, or such other share as Landlord may fairly and
reasonably determine to Landlord on or before the first day of each calendar
month in advance, or Landlord may include such charges in Center Expenses).
Tenant shall provide Landlord with evidence of Tenant's compliance with this
provision within five (5) days after Landlord's written request.
(6) SIGNS AND DISPLAY WINDOWS. Tenant shall not place any sign or
other thing of any kind outside the Premises (including without limitation,
exterior walls and roof), or on the interior or exterior surfaces of glass panes
or doors, except such single sign as Landlord shall expressly approve in writing
for or in connection with Tenant's storefront. Within the Premises, Tenant
==============================
, and except a sign on a silo-like architectural feature on the exterior of the
Premises (if such silo-like architectural feature is approved by Landlord in the
final Working Drawings) which sign is further subject to Lanldord's express
approval in writing
shall not: (i) install any sign that advertises any product, (ii) install
any sign within 24 inches of any window, or (iii) install any sign that is
visible from outside the Premises or that is illuminated, without Landlord's
prior written approval. If Landlord approves or requires illuminated signs,
Tenant shall keep the same illuminated each day of the Term during the hours
designated by Landlord from time to time. All Tenant's signs shall be
professionally designed, prepared and installed and in good taste so as not to
detract from the general appearance of the Premises or the Center and shall
comply with the sign criteria attached hereto as Exhibit C or otherwise
developed by Landlord from time to time. After the initial installation of
Tenant's storefront sign as approved in writing by Landlord in accordance with
these provisions, Landlord reserves the right to require from time to time that
Tenant change or replace such sign in order to comply with any new sign criteria
developed by Landlord, at Landlord's expense. The term "sign" in this Rule
shall mean any sign, placard, picture, name, direction, lettering, insignia or
trademark, advertising material, advertising display, awning or other such item,
except that Tenant's storefront sign shall be an actual sign. Blinds, shades,
drapes or other such items shall not be placed in or about the windows in the
Premises except to the extent, if any, that the character, shape, design, color,
material and make thereof is first approved by Landlord in writing.
(7) DISPLAY OF MERCHANDISE. Tenant shall not place or maintain any
permanent or temporary fixture or item or display any merchandise: (i) outside
the Premises, or (ii) anywhere inside the Premises within six (6) feet of any
entrance to the Premises (except that for any recessed entry of the Premises,
Tenant shall not so place or maintain fixtures within three (3) feet of such
entrance). All displays of merchandise shall be tasteful and professional.
<PAGE>
(8) PLUMBING EQUIPMENT. The toilet rooms, urinals, wash bowls, drains
and sewers and other plumbing fixtures, equipment and lines shall not be misused
or used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein, and Tenant
shall properly install, maintain, clean, repair and replace adequate grease
traps.
(9) ROOF; AWNINGS AND PROJECTIONS. Tenant shall not install any
aerial, antennae, satellite dish or any other device on the roof, exterior walls
or Common Areas of the Center. Tenant may install and have access to rooftop
HVAC equipment only to the extent approved or required by Landlord from time to
time in connection with Tenant's obligations under Articles 10 and 11 of this
Lease. No awning or other projection shall be attached by or for Tenant to the
exterior walls of the Premises or the building of which it is a part.
(10) OVERLOADING FLOORS. Tenant shall not overload any floor or part
thereof in the Premises or Center including any public corridors or elevators
therein, and Landlord may direct and control the location of safes, vaults and
all other heavy articles and require supplementary supports of such material and
dimensions as Landlord may deem necessary to properly distribute the weight at
Tenant's expense (including expenses for structural review and engineering).
(11) LOCKS AND KEYS. Upon termination of the Lease or Tenant's right
to possession, Tenant shall: (i) return to Landlord all keys, parking stickers
or key cards, and in the event of loss of any such items shall pay Landlord
therefor, and (ii) advise Landlord as to the combination of any vaults or locks
that Landlord permits to remain in the Premises.
(12) UNATTENDED PREMISES. Before leaving the Premises unattended,
Tenant shall close and securely lock all doors or other means of entry to the
Premises and shut off all lights (except signs required to be illuminated
hereunder), water faucets and other utilities in the Premises (except heat to
the extent necessary to prevent the freezing or bursting of pipes). This
provision shall not imply that Tenant may leave the Premises unattended in
violation of the operating requirements set forth elsewhere in this Lease.
(13) ENERGY CONSERVATION. Subject to Rule (6) concerning
illumination, Tenant shall not waste electricity, water, heat or air
conditioning, or other utilities or services, and agrees to cooperate fully with
Landlord and comply with any Laws to assure the most effective and energy
efficient operation of the Center.
(14) FOOD, BEVERAGES, GAME AND VENDING MACHINES. Except to the extent
expressly permitted under Article 1 of this Lease, Tenant shall not: (i) use
the Premises for the manufacture, preparation, display, sale, barter, trade,
gift or service of food or beverages, including without limitation, intoxicating
liquors, or (ii) install, operate or use any video, electronic or pinball game
or machine, or any coin or token operated vending machine or device to provide
products, merchandise, food, beverages, candy, cigarettes or other commodities
or services including, but not limited to, pay telephones, pay lockers, pay
toilets, scales, and amusement devices; provided, however, that Tenant may
install vending machines for the sale of non-alcoholic beverages, food, and
candy in an area not visible from the sale area or exterior of the Premises for
the exclusive use of Tenant's employees.
(15) GOING-OUT-OF-BUSINESS SALES AND AUCTIONS. Tenant shall not use,
or permit any other party to use, the Premises for any distress, fire,
bankruptcy, close-out, "lost our lease" or going-out-of-business sale or
auction. Tenant shall not display any signs advertising the foregoing anywhere
in or about the Premises. This prohibition shall also apply to Tenant's
creditors.
(16) LABOR RELATIONS. Tenant shall conduct its labor relations and
relations with employees so as to avoid strikes, picketing, and boycotts of, on
or about the Premises or Center. If any employees strike, or if picket lines or
boycotts or other visible activities objectionable to Landlord are established,
conducted or carried out against Tenant, its employees, agents, contractors, or
subcontractors in or about the Premises or Center, Tenant shall immediately
close the Premises and remove or cause to be removed all such employees, agents,
contractors, and subcontractors until the dispute has been settled.
(17) LANDLORD'S TRADENAME AND TRADEMARKS. No symbol, design, name,
mark or insignia adopted by Landlord for the Center or picture or likeness of
the Center shall be used by Tenant without the prior written consent of
Landlord, except as provided in Article 9 of this Lease.
(18) PROHIBITED ACTIVITIES. Tenant shall not: (i) use strobe or
flashing lights in or on the Premises or in any signs therefor, (ii) use, sell
or distribute any leaflets, handbills, bumper stickers, other stickers or
decals, balloons or other such articles in the Premises (or other areas of the
Center), (iii) operate any loudspeaker, television set, phonograph, radio, CD
player or other musical or sound producing instrument or device so as to be
heard outside the Premises, (iv) operate any electrical or other device which
interferes with or impairs radio, television, microwave, or other broadcasting
or reception from or in the Center or elsewhere, (v) bring or permit any bicycle
or other vehicle, or dog (except in the company of a blind party) or other
animal, fish or bird in the Center, (vi) make or permit objectionable noise,
vibration or odor to emanate from the Premises or any equipment serving the
same, (vii) do or permit anything in or about the Premises that is unlawful,
immoral, obscene, pornographic, or which tends to create or maintain a nuisance
or do any act tending to injure the reputation of the Center, (viii) use or
permit upon the Premises anything that violates the certificates of occupancy
issued for the Premises or the Center, or
<PAGE>
causes a cancellation of Landlord's insurance policies or increases Landlord's
insurance premiums (and Tenant shall comply with all requirements of Landlord's
insurance carriers, the American Insurance Association, and any board of fire
underwriters), (ix) use the Premises for any purpose, or permit upon the
Premises anything, that may be dangerous to parties or property (including but
not limited to flammable oils, fluids, paints, chemicals, firearms or any
explosive articles or materials), nor (x) do or permit anything to be done upon
the Premises in any way tending to disturb, bother or annoy any other tenant at
the Center or the occupants of neighboring property.
(19) PARKING. Tenant and Tenant's employees shall park their cars
only in those portions of the parking area designated by Landlord for tenant and
employee parking and shall use such areas only for parking cars (or at
Landlord's option, Landlord may require that any or all such employees park
off-site). Tenant shall furnish Landlord with a list containing the description
and automobile license numbers (and State of issuance) of the cars of Tenant and
its employees within five (5) days of any request by Landlord, and shall
thereafter advise Landlord of any changes, additions or deletions to such list.
Landlord reserves the right to: (i) adopt additional requirements pertaining to
parking, including without limitation, a parking system with charges favoring
carpooling for tenants and their employees, and any other parking system by
validation, metering or otherwise, (ii) assign specific spaces, and reserve
spaces for small cars, handicapped individuals, and other tenants, customers of
tenants or other parties (and Tenant and its employees and visitors shall not
park in any such assigned or reserved spaces) and (iii) restrict or prohibit
full size vans and other large vehicles. In case of any violation of these
provisions or any applicable Laws, Landlord may: (a) refuse to permit the
violator to park, and remove the vehicle owned or driven by the violator from
the Center without liability whatsoever, at such violator's risk and expense
and/or (b) charge Tenant such reasonable rates as Landlord may from time to time
establish for such violations, which shall be at least $50.00 per day for each
vehicle that is parked in violation of these Rules. These provisions shall be
in addition to any other remedies available to Landlord under this Lease or
otherwise.
(20) RESPONSIBILITY FOR COMPLIANCE. Tenant shall be responsible for
ensuring compliance with these Rules, as they may be amended, by Tenant's
employees and as applicable, by Tenant's agents, invitees, contractors,
subcontractors, and suppliers.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
Rider Two - 1
Rider Two - 1
JMB 350 (7/92)
CALIFORNIA RIDER
RIDER TWO
1. Tenant hereby waives the provisions of California Civil Code,
Sections 1932(2), 1933(4) and 1942, as the same may be modified or replaced
hereafter.
2. Tenant hereby waives the provisions of California Code of Civil
Procedure Section 1265.130 allowing it to petition the superior court to
terminate this Lease in the event of a partial taking of the Premises.
3. Landlord and Tenant acknowledge that Proposition 13 was adopted by
the voters of the State of California in 1978 to limit increases in real estate
taxes by limiting reassessments to events such as changes in ownership. The
parties hereby confirm and agree that "Taxes" for purposes of this Lease shall
include, without limitation, increases in real estate taxes resulting from
reassessments based on changes in ownership of the Center (as "change in
ownership" is defined in California Revenue and Taxation Code Sections 60
through 62), as well as taxes, assessments, fees, levies and charges that may be
imposed by governmental bodies for services, including, but not limited to, fire
protection, street, sidewalk and road maintenance, refuse removal and other
governmental services because of the limitation on increases in real estate
taxes under Proposition 13.
4. Landlord shall have the remedies provided under California Civil
Code, Section 1951.4, as the same may be modified or replaced hereafter
(Landlord may continue Lease in effect after Tenant's breach and abandonment and
recover Rent as it becomes due, if Tenant has right to sublet or assign subject
only to reasonable limitations), but only if this Lease contains reasonable
limitations on Landlord's approval of subleases and assignments; if this Lease
does not contain reasonable limitations on subleasing or assignment, then
Landlord, in Landlord's sole discretion, may elect to satisfy the requirements
under subdivision (b) of Section 1951.4 by sending notice to Tenant to the
effect that Landlord agrees not to unreasonably withhold consent to a sublease
or assignment, or both, or setting forth reasonable standards and conditions for
Landlord's approval of a sublease or assignment, or both (in which event, such
notice shall be and become a part of this Lease).
5. If a Tenant Default occurs under Article 22 of this Lease, Landlord
shall, in lieu of the remedies provided in Article 22.B(1) and (2), have the
right to terminate this Lease, reenter and repossess the Premises by detainer
suit or other lawful means, and recover from Tenant as damages a sum of money
equal to: (a) the worth at the time of award of the unpaid Rent which had been
earned at the time of termination; (b) the worth at the time of award of the
amount by which the unpaid Rent which would have been earned after termination
until the time of the award exceeds the amount of such Rent loss that Tenant
proves could have been reasonably avoided; (c) the worth at the time of award of
the amount by which the unpaid Rent for the balance of the Term after the time
of award exceeds the amount of such Rent loss that Tenant proves can reasonably
be avoided; and (d) any other amounts necessary to compensate Landlord for all
detriment or damages proximately caused by Tenant's failure to perform its
obligations under this Lease or that in the ordinary course would be likely to
result therefrom, including without limitation all Costs of Reletting (as
defined in Article 22.I). For purposes of computing the amount of Rent herein
that would have accrued after the time of award, Tenant's obligation for
Percentage Rent shall be projected based on Tenant's average annual Gross Sales
for the 36 months (or lesser period, if 36 months of the Term have not expired)
preceding Tenant's Default, and Tenant's Proportionate Share of Taxes and
Operating Expenses shall be projected based upon the average rate of increase,
if any, in such items from the Commencement Date through the time of award. The
"worth at the time of award" of the amounts referred to in clauses (a) and (b)
shall be computed by allowing interest at the Default Rate (as defined in
Article 28). The "worth at the time of award" of the amount referred to in
paragraph (c) shall be computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
Rider Three - 1
Rider Three - 1
TOWN CENTER DRIVE
(ENTERTAINMENT AREA RIDER) 10/97
RIDER THREE
1. CONSTRUCTION CONTINGENCIES. The parties acknowledge that Town
Center Drive shown as the cross-hatched area on Exhibit A-1, attached hereto and
made a part hereof, in which the Premises shall be located is not yet
constructed or open for business, and that certain contingencies (the
"Contingencies") must be met in order for Landlord to proceed with construction
of Town Center Drive. Such Contingencies include (without limitation) the
following: (i) obtaining a lender's commitment to finance the development and
construction of Town Center Drive, and a corresponding permanent financing
commitment; (ii) obtaining all zoning changes which may be needed in order to
develop and operate Town Center Drive; (iii) obtaining approval for construction
and operation of Town Center Drive from any and all owners and partners of
Landlord; and (iv) complying with restrictions and conditions of any and all
operating agreements, reciprocal easement agreements or such other agreements
which are now or hereafter may be in effect between Landlord and any adjoining
property owner(s) or tenant(s) at Town Center Drive or Valencia Town Center, or
their predecessors or successors. Notwithstanding anything in this Lease to the
contrary, Landlord shall have the option to terminate this Lease by notice to
Tenant if at any time prior to Tenant's commencement of construction in the
Premises Landlord shall determine that one or more of the Contingencies cannot
or will not be met within the foreseeable future. In such event, all deposits
or payments made to either party by the other shall be promptly returned and all
other obligations under this Lease shall cease and terminate.
2. ALLOCATION OF PROMOTION FUND CHARGE. Notwithstanding the fact that
the charge set forth in Article 1 K. is initially described as a Promotion Fund
Charge, Landlord may, from time to time in its sole discretion, allocate all or
any portion of such sum payable by Tenant as a contribution toward the Promotion
Fund and/or the Media Fund established by Landlord, and all provisions of this
Lease with respect to the Promotion Fund and the Media Fund shall be effective
as to Tenant.
3. TENANT'S SHARE OF TAXES FOR STREETS, VEHICULAR THOROUGHFARES, AND
PARKING AREAS. Notwithstanding anything to the contrary set forth in this
Lease, in addition to Tenant's Proportionate Share of Taxes as set forth in
Articles 28P and 28Q, Tenant shall pay Tenant's Share (as defined below) of
Taxes assessed on any and all streets, vehicular thoroughfares, and parking
areas (including but not limited to parking structures) in the Center.
"Tenant's Share" shall be a fraction, the numerator of which is the number of
parking spaces required by Law to be provided at the Center for the rentable
floor area of the Premises, and the denominator of which is the total number of
parking spaces required by Law to be provided at the Center for the total
rentable floor area open and occupied for business in the Center during all or
any portion of the subject year.
, provided that, for purposes of determining Tenant's Share, in no event shall
less than eighty percent (80%) of the rentable floor area of the Center be
deemed open and occupied for business
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
Rider Four - 2
Rider Four - 2
RIDER FOUR
Rider Four to Lease with
CHICAGO PIZZA & BREWERY, INC.,
a California corporation
for Space (TO BE ASSIGNED) at
TOWN CENTER DRIVE
VALENCIA, CALIFORNIA
A. Landlord shall furnish Tenant a construction allowance for Tenant's
initial improvement work at the Premises of Three Hundred Seventy-Five Thousand
and No/100 Dollars ($375,000.00) (the "Allowance") provided that in no event
shall the Allowance exceed the actual cost of the improvement work by Tenant at
the Premises. Landlord shall pay the Allowance to Tenant in three (3)
installments as follows:
a. Landlord shall pay Tenant an installment of
$125,000.00 within forty-five (45) days after all of the following conditions
are met:
(i) Tenant has obtained building permits
for all of the work with executed sign offs and furnished copies thereof to
Landlord;
(ii) Tenant has performed at least
thirty-three percent (33%) of all of the work, and all work has been performed
in accordance with the approved plans and specifications and in accordance with
all other applicable provisions of this Lease;
(iii) Tenant has furnished Landlord (a)
an affidavit from Tenant listing all contractors and suppliers whom Tenant has
contracted with in connection with the work, together with the cost of each
contract, and the dollar amount of work each contractor and supplier has
theretofore performed, and (b) an affidavit from Tenant's general contractor
listing all subcontractors and suppliers whom the general contractor has
contracted with in connection with the work, together with the cost of each
contract, and the dollar amount of work each subcontractor and supplier has
theretofore performed;
(iv) Tenant has paid for all the work
theretofore completed, which amount shall consist of at least the amount of the
installment being requested;
(v) Tenant has furnished Landlord
mechanic's lien releases from the general contractor and all other contractors
and suppliers who have theretofore performed work or furnished supplies for or
in connection with all of Tenant's work theretofore performed at the Premises
(including all parties listed in the affidavits referenced in (ii) above) and
such other evidence as Landlord may reasonably request to evidence that no liens
can arise from the work; and
(vi) Tenant is not in default under the
Lease.
b. Landlord shall pay Tenant an additional
installment of $125,000.00 within forty-five (45) days after all of the
following conditions are met:
(i) Tenant has obtained building permits
for all of the work with executed sign offs and furnished copies thereof to
Landlord;
(ii) Tenant has performed at least
sixty-six percent (66%) of all of the work, and all work has been performed in
accordance with the approved plans and specifications and in accordance with all
other applicable provisions of this Lease;
(iii) Tenant has furnished Landlord (a)
an affidavit from Tenant listing all contractors and suppliers whom Tenant has
contracted with in connection with the work, together with the cost of each
contract, and the dollar amount of work each contractor and supplier has
theretofore performed, and (b) an affidavit from Tenant's general contractor
listing all subcontractors and suppliers whom the general contractor has
contracted with in connection with the work, together with the cost of each
contract, and the dollar amount of work each subcontractor and supplier has
theretofore performed;
(iv) Tenant has paid for all the work
theretofore completed, which amount shall consist of at least the amount of the
installment being requested;
(v) Tenant has furnished Landlord
mechanic's lien releases from the general contractor and all other contractors
and suppliers who
<PAGE>
have theretofore performed work or furnished supplies for or
in connection with all of Tenant's work theretofore performed at the Premises
(including all parties listed in the affidavits referenced in (ii) above) and
such other evidence as Landlord may reasonably request to evidence that no liens
can arise from the work; and
(vi) Tenant is not in default under the
Lease.
c. Landlord shall pay Tenant the balance of the
Allowance within forty-five (45) days after the following conditions are met:
(i) Tenant has performed all of the work
(including punch list items) in accordance with the approved plans and
specifications and in accordance with all other applicable provisions of this
Lease;
(ii) Tenant has furnished Landlord (a) an
updated affidavit from Tenant listing all contractors and suppliers whom Tenant
has contracted with in connection with the work, together with the cost of each
contract, and (b) an updated affidavit from Tenant's general contractor listing
all subcontractors and suppliers whom the general contractor has contracted with
in connection with the work, together with the cost of each contract;
(iii) Tenant has fully paid for all of
the work and has furnished to Landlord a certificate from an officer of Tenant
stating that all of the work has been paid for and setting forth the total cost
of the work;
(iv) Tenant has furnished Landlord
mechanic's lien releases from the general contractor and all other contractors
and suppliers who have performed work or have furnished supplies for or in
connection with Tenant's work at the Premises (including all parties listed in
the affidavits referenced in (ii) above) and such other evidence as Landlord may
reasonably request to evidence that no liens can arise from the work; and
(v) Tenant has opened for business at the
Premises, Tenant has obtained a certificate of occupancy with respect to the
Premises, and Tenant is not in default under this Lease, and Tenant and its
subsidiaries, affiliated and related companies are not then in default under any
other leases at any properties managed by Landlord's managing agent for the
Center or such agent's subsidiaries and affiliated and related companies.
All documentation to be furnished by Tenant to Landlord herein shall be
sent to Landlord at the Management Office at the address set forth on Page 2 of
the Lease, or such other address of which Landlord shall notify Tenant.
B. Without limitation to any other rights or remedies Landlord may have on
account thereof, if at the time Landlord is prepared to pay the Allowance,
Tenant owes Landlord any sums under the Lease, Landlord may, at its election,
pay the Allowance but deduct therefrom the amount of any such sums owed by
Tenant.
C. If the Term should end prior to the scheduled expiration date due to a
default by Tenant, Tenant shall pay Landlord, within sixty (60) days after the
effective date of the early termination, the unamortized portion of the
Allowance, using straight-line amortization over the Term.
<PAGE>
JMB 7/92
JMB 7/92
Doc No 32608 Ver.6 MRR
06/25/99
C - 1
C - 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Unaudited Consolidated Balance Sheet and the Unaudited Consolidated Statement of
Operations found on pages 1 and 2 of Chicago Pizza & Brewery, Inc.'s Form 10-Q
for the three-month and six month periods ended June 30, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> APR-01-1999 JAN-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 2,120 2,120
<SECURITIES> 0 0
<RECEIVABLES> 193 193
<ALLOWANCES> 0 0
<INVENTORY> 393 393
<CURRENT-ASSETS> 2,885 2,885
<PP&E> 14,550 14,550
<DEPRECIATION> (3,546) (3,546)
<TOTAL-ASSETS> 19,529 19,529
<CURRENT-LIABILITIES> 3,749 3,749
<BONDS> 3,246 3,246
0 0
0 0
<COMMON> 16,076 16,076
<OTHER-SE> 1,036 1,036
<TOTAL-LIABILITY-AND-EQUITY> 19,529 19,529
<SALES> 9,947 18,040
<TOTAL-REVENUES> 9,947 18,040
<CGS> 2,790 5,015
<TOTAL-COSTS> 9,356 17,389
<OTHER-EXPENSES> 162 161
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 83 150
<INCOME-PRETAX> 353 347
<INCOME-TAX> 9 11
<INCOME-CONTINUING> 344 336
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 (106)
<NET-INCOME> 344 230
<EPS-BASIC> 0.04 0.03
<EPS-DILUTED> 0.04 0.03
</TABLE>
